What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-03-01 · 1302 added, 3017 removed, 592 unchanged (88% of the section changed)

1 unchanged sentence

QUAKER CHEMICAL CORPORATION

INDEX TO CONSOLIDATED

FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Statements of Operations

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Balance Sheets

3 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Board of

Directors and Shareholders of Quaker Chemical Corporation

Opinions on the Financial Statements and Internal Control over

Financial Reporting

We have audited

the accompanying consolidated balance sheets of Quaker Chemical Corporation

and its subsidiaries (the

“Company”) as of December 31, 2021 and 2020, and the related consolidated

statements of income, of comprehensive income, of

changes in equity and of cash flows for each of the three years in the period ended December

31, 2021, including the related notes

(collectively referred to as the “consolidated financial statements”).

We also have audited

the Company's internal control over

financial reporting as of December 31, 2021, based on criteria established in Internal

Control - Integrated Framework (2013) issued by

the Committee of Sponsoring Organizations of

the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present

fairly, in all material respects, the financial

the Company as of December 31, 2021 and 2020, and the results of its operations

and its cash flows for each of the three years in the

period ended December 31, 2021 in conformity with accounting principles

generally accepted in the United States of America.

in our opinion, the Company maintained, in all material respects, effective

internal control over financial reporting as of December 31,

2021, based on criteria established in Internal Control - Integrated Framework

(2013) issued by the COSO.

To the Board of Directors and Shareholders of Quaker Chemical Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Quaker Chemical Corporation and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated

financial statements, for maintaining effective internal control

financial reporting, and for its assessment of the effectiveness of

internal control over financial reporting, included in Management's

Report on Internal Control over Financial Reporting appearing under

Our responsibility is to express opinions on the

Company’s consolidated

financial statements and on the Company's internal control over financial reporting based

on our audits.

are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (PCAOB) and are

required to be independent with respect to the Company in accordance with

federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the

audits to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether

due to error or fraud, and whether effective

internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures

to assess the risks of material misstatement of the

consolidated financial statements, whether due to error or fraud, and

performing procedures that respond to those risks.

procedures included examining, on a test basis, evidence regarding the amounts

and disclosures in the consolidated financial

Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well

as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting

included obtaining an understanding of internal control over financial reporting,

assessing the risk that a material weakness exists, and

testing and evaluating the design and operating effectiveness of

internal control based on the assessed risk.

Our audits also included

performing such other procedures as we considered necessary in the circumstances.

We believe that our

audits provide a reasonable

basis for our opinions.

As described in Management’s Report

on Internal Control over Financial Reporting, management has excluded

Baron Industries and

Grindaix GmbH from its assessment of internal control over financial reporting

as of December 31, 2021 because they were acquired

by the Company in purchase business combinations during 2021.

We have also excluded Baron

Industries and Grindaix from our

audit of internal control over financial reporting.

Baron Industries and Grindaix are wholly-owned subsidiaries whose total assets and

total revenues excluded from management’s

assessment and our audit of internal control over financial reporting for each entity

represent less than 1% of the related consolidated financial statement amounts

as of and for the year ended December 31, 2021.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over

financial reporting is a process designed to provide reasonable assurance regarding

the reliability of

financial reporting and the preparation of financial statements for external

purposes in accordance with generally accepted accounting

A company’s internal control over financial

reporting includes those policies and procedures that (i) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect

the transactions and dispositions of the assets of the

(ii) provide reasonable assurance that transactions are recorded

as necessary to permit preparation of financial statements in

accordance with generally accepted accounting principles, and that receipts

and expenditures of the company are being made only in

accordance with authorizations of management and directors of the

and (iii) provide reasonable assurance regarding

prevention or timely detection of unauthorized acquisition, use, or disposition

of the company’s assets that could have

a material effect

on the financial statements.

Because of its inherent limitations, internal control over financial reporting

may not prevent or detect misstatements.

Also, projections

of any evaluation of effectiveness to future periods are subject

to the risk that controls may become inadequate because of changes

conditions, or that the degree of compliance with the policies or procedures

may deteriorate.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period

audit of the consolidated financial statements

that was communicated or required to be communicated to the audit committee and

that (i) relates to accounts or disclosures that are

material to the consolidated financial statements and (ii) involved our especially

challenging, subjective, or complex judgments.

communication of critical audit matters does not alter in any way our opinion

on the consolidated financial statements, taken as a

whole, and we are not, by communicating the critical audit matter below,

providing a separate opinion on the critical audit matter or

on the accounts or disclosures to which it relates.

Houghton Trademarks and

Tradename – Annual Impairment Assessment

As described in Note 16 to the consolidated financial statements, the Company’s

consolidated other intangible assets, net balance was

$1,027.8 million as of December 31, 2021, and the indefinite-lived

intangible asset was $196.9 million, which substantially relates to

the Houghton trademarks and tradename.

Management completes its annual indefinite-lived intangible asset impairment test during

the fourth quarter of each year, or more frequently

if triggering events indicate a possible impairment.

Management completed its

annual impairment assessment during the fourth quarter of 2021 for the Houghton

trademarks and tradename and concluded no

impairment charge was warranted.

The determination of estimated fair value of the Houghton trademarks and

tradename is based on a

relief from royalty valuation method, which requires management’s

judgment and often involves the use of significant estimates and

assumptions with respect to the weighted average cost of capital and royalty rates,

as well as revenue growth rates and terminal growth

The principal considerations for our determination that performing procedures

relating to the Houghton trademarks and tradename

annual impairment assessment is a critical audit matter are (i) the significant

judgment by management when determining the fair

value of the Houghton trademarks and tradename;

(ii) a high degree of

auditor judgment, subjectivity,

and effort in performing

procedures and evaluating management’s

significant assumptions related to the royalty rate, revenue growth rates, and terminal

growth rates;

and (iii) the audit effort involved the use of professionals with specialized

skill and knowledge.

Addressing the matter involved performing procedures and evaluating

audit evidence in connection with forming our overall opinion

on the consolidated financial statements.

These procedures included testing the effectiveness of controls

relating to management’s

indefinite-lived intangible assets annual impairment assessment, including

controls over the valuation of the Houghton trademarks and

These procedures also included, among others (i) testing management’s

process for determining the fair value estimate;

(ii) evaluating the appropriateness of the relief from royalty valuation

(iii) testing the completeness and accuracy of

underlying data used in the method;

and (iv) evaluating the reasonableness

of significant assumptions related to the royalty rate,

revenue growth rates and terminal growth rates.

Evaluating management’s assumptions

related to the royalty rate, revenue growth

rates, and terminal growth rates involved evaluating whether the

assumptions used by management were reasonable considering (i) the

current and past performance of the legacy Houghton business;

(ii) the consistency

with external market and industry data;

whether these assumptions were consistent with evidence obtained in other

areas of the audit.

Professionals with specialized skill and

knowledge were used to assist in the evaluation of the relief from royalty valuation

method and the royalty rate assumption.

PricewaterhouseCoopers LLP

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessments for the EMEA Reporting Unit

As described in Note 16 to the consolidated financial statements, the Company’s consolidated goodwill balance was $515 million as of December 31, 2022, of which $35 million relates to the EMEA reporting unit.

Management completes its annual goodwill impairment test during the fourth quarter of each year, or more frequently if triggering events indicate a possible impairment in one or more of its reporting units.

Management monitors various financial, economic and geopolitical conditions impacting the Company and concluded that during the third and fourth quarters of 2022 these events adversely impacted the EMEA reporting unit and represented triggering events.

In completing a quantitative goodwill impairment test, management 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 significant assumptions including the weighted average cost of capital (WACC) as well as projected EBITDA, which includes assumptions related to revenue growth rates, gross margin levels and operating expenses.

Management completed its interim impairment assessment in the third quarter and its annual assessment as of October 1, 2022 and concluded no impairment charge was warranted.

As a result of the interim impairment assessment performed in the fourth quarter, an impairment charge of $93 million was recorded to write down the carrying value of the EMEA reporting unit.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments for the EMEA reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the EMEA reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to weighted average cost of capital, revenue growth rates, gross margin levels, and operating expenses;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Company’s EMEA reporting unit.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimates of the EMEA reporting unit;

(ii) evaluating the appropriateness of the discounted cash flow model;

(iii) testing the completeness and accuracy of underlying data used in the discounted cash flow model;

and (iv) evaluating the reasonableness of management’s significant assumptions related to weighted average cost of capital, revenue growth rates, gross margin levels, and operating expenses.

Evaluating management’s assumptions related to revenue growth rates, gross margin levels, and operating expenses involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the EMEA reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s discounted cash flow model and (ii) the reasonableness of the weighted average cost of capital assumption.

/s/ PricewaterhouseCoopers, LLP

Philadelphia, Pennsylvania

March 1, 2022

We have served

as the Company’s auditor since at least 1972.

We have not been able

to determine the specific year we began serving

as auditor of the Company.

February 23, 2023

We have served as the Company’s auditor since at least 1972.

We have not been able to determine the specific year we began serving as auditor of the Company.

QUAKER CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

( Dollars in thousands, except per share data )

Ended December 31,

Year Ended December 31,

2022 2021 2020

Net sales $ 1,943,585 $ 1,761,158 $ 1,417,677

Cost of goods sold (excluding amortization expense - See Note 16) 1,330,931 1,166,518 904,234

Gross profit 612,654 594,640 513,443

Selling, general and administrative expenses 455,408 418,856 380,752

Indefinite-lived intangible asset impairment

Impairment charges 93,000 — 38,000

Restructuring and related charges 3,163 1,433 5,541

1 unchanged sentence

Operating income 52,304 150,466 59,360

Other income (expense), net

Other (expense) income, net ( 12,607 ) 18,851 ( 5,618 )

Interest expense, net ( 32,579 ) ( 22,326 ) ( 26,603 )

Income before taxes and equity in net income of associated companies 7,118 146,991 27,139

Taxes on income

before equity in net income of associated companies

Income before equity in net income of associated companies

Taxes on income (loss) before equity in net income of associated companies 24,925 34,939 ( 5,296 )

(Loss) income before equity in net income of associated companies ( 17,807 ) 112,052 32,435

Equity in net income of associated companies 1,965 9,379 7,352

Net (loss) income ( 15,842 ) 121,431 39,787

Net income attributable to noncontrolling interest 89 62 129

Net income attributable to Quaker Chemical Corporation

Net (loss) income attributable to Quaker Chemical Corporation $ ( 15,931 ) $ 121,369 $ 39,658

Per share data:

Net income attributable to Quaker Chemical Corporation

shareholders – basic

Net income attributable to Quaker Chemical Corporation common

shareholders – diluted

The accompanying notes are an integral part

of these consolidated financial statements.

Net (loss) income attributable to Quaker Chemical Corporation common shareholders – basic $ ( 0.89 ) $ 6.79 $ 2.23

Net (loss) income attributable to Quaker Chemical Corporation common shareholders – diluted $ ( 0.89 ) $ 6.77 $ 2.22

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

QUAKER CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

( Dollars in thousands )

Ended December 31,

Year Ended December 31,

2022 2021 2020

Net (loss) income $ ( 15,842 ) $ 121,431 $ 39,787

Other comprehensive (loss) income, net of tax

3 unchanged sentences

Amortization of actuarial loss 628 1,078 2,308

Amortization of prior service gain

Amortization of prior service (gain) cost ( 228 ) 7 ( 69 )

Current period change in fair value of derivatives 1,372 2,226 ( 3,278 )

1 unchanged sentence

Other comprehensive (loss) income ( 74,300 ) ( 37,376 ) 51,480

Comprehensive income

Comprehensive income attributable to noncontrolling

Comprehensive income attributable to Quaker Chemical Corporation

The accompanying notes are an integral part

of these consolidated financial statements.

Comprehensive (loss) income ( 90,142 ) 84,055 91,267

Comprehensive income attributable to noncontrolling interest ( 39 ) ( 78 ) ( 37 )

Comprehensive (loss) income attributable to Quaker Chemical Corporation $ ( 90,181 ) $ 83,977 $ 91,230

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

QUAKER CHEMICAL CORPORATION

BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

( Dollars in thousands, except par value )

4 unchanged sentences

Prepaid expenses and other current assets 55,438 59,871

Total current

Property, plant and equipment,

Total current assets 994,137 920,254

Property, plant and equipment, net 198,595 197,520

Right of use lease assets 43,766 36,635

Goodwill 515,008 631,194

Other intangible assets, net 942,925 1,027,782

2 unchanged sentences

Other non-current assets 27,739 30,959

Total assets $ 2,821,622 $ 2,955,760

LIABILITIES AND EQUITY

7 unchanged sentences

Other accrued liabilities 86,873 95,617

Total current

Total current liabilities 354,786 430,467

Long-term debt 933,561 836,412

5 unchanged sentences

Commitments and contingencies (Note 26)

Common stock, $

issued and outstanding

Common stock, $ 1 par value;

authorized 30,000,000 shares;

issued and outstanding 2022 – 17,950,264 shares;

2021 – 17,897,033 shares

17,950 17,897

Capital in excess of par value 928,288 917,053

1 unchanged sentence

Accumulated other comprehensive loss ( 138,240 ) ( 63,990 )

shareholders’ equity

Total Quaker shareholders’ equity 1,277,918 1,387,294

Noncontrolling interest 667 628

Total equity 1,278,585 1,387,922

Total liabilities and equity $ 2,821,622 $ 2,955,760

The accompanying notes are an integral part

of these consolidated financial statements.

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

QUAKER CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS

OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

Year Ended December 31,

2022 2021 2020

Cash flows from operating activities

Net (loss) income $ ( 15,842 ) $ 121,431 $ 39,787

Adjustments to reconcile net income to net cash provided by operating activities:

5 unchanged sentences

Uncertain tax positions (non-deferred portion) ( 6,398 ) ( 922 ) 1,075

Non-current income taxes payable

Deferred compensation and other, net 2,613 ( 5,325 ) ( 471 )

Share-based compensation 11,666 11,038 10,996

Loss on extinguishment of debt 5,246 — —

(Gain) loss on disposal of property, plant, equipment and other assets ( 168 ) ( 4,695 ) 871

Insurance settlement realized — — ( 1,035 )

Indefinite-lived intangible asset impairment

Impairment charges 93,000 — 38,000

Gain on inactive subsidiary litigation and settlement reserve — — ( 18,144 )

2 unchanged sentences

Pension and other postretirement benefits ( 7,964 ) ( 6,330 ) 16,535

(Decrease) increase in cash from changes in current assets and current

liabilities, net of acquisitions:

(Decrease) increase in cash from changes in current assets and current liabilities, net of acquisitions:

Accounts receivable ( 59,112 ) ( 67,473 ) 17,170

Inventories ( 29,858 ) ( 84,428 ) ( 3,854 )

Prepaid expenses and other current assets 3,705 ( 21,174 ) 927

1 unchanged sentence

Accounts payable and accrued liabilities ( 23,439 ) 37,998 22,308

Estimated taxes on income

Estimated taxes on (loss) income ( 2,688 ) 3,997 8,763

Net cash provided by operating activities 41,794 48,933 178,389

7 unchanged sentences

Payments of long-term debt ( 673,203 ) ( 38,011 ) ( 37,615 )

Proceeds from term loan debt

Borrowings (repayments) on revolving credit facilities, net

Proceeds from long-term debt 750,000 — —

(Repayments) borrowings on revolving credit facilities, net ( 16,281 ) 53,031 ( 11,485 )

Repayments on other debt, net ( 1,629 ) ( 776 ) ( 661 )

4 unchanged sentences

Distributions to noncontrolling affiliate shareholders — — ( 751 )

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities 24,672 ( 13,465 ) ( 75,255 )

Effect of foreign exchange rate changes on cash ( 10,488 ) ( 3,057 ) 6,591

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash 15,787 ( 16,719 ) 38,340

Cash, cash equivalents and restricted cash at the beginning of the period 165,176 181,895 143,555

3 unchanged sentences

Income taxes, net of refunds $ 35,327 $ 34,775 $ 20,253

Interest 29,074 19,298 23,653

Non-cash activities:

Change in accrued purchases of property, plant and equipment, net $ 278 $ 2,132 $ ( 1,376 )

The accompanying notes are an integral part

of these consolidated financial statements.

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

QUAKER CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS

OF CHANGES IN EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Dollars in thousands, except per share amounts)

stock Capital in

par value Retained

earnings Accumulated

comprehensive

Noncontrollin

loss Noncontrolling

interest Total

Balance as of December 31, 2019 $ 17,735 $ 888,218 $ 412,979 $ ( 78,170 ) $ 1,604 $ 1,242,366

1 unchanged sentence

Balance as of January 1, 2020 17,735 888,218 412,068 ( 78,170 ) 1,604 1,241,455

Amounts reported in other comprehensive

Dividends declared ($

Shares issued related to the Combination

Shares issued upon exercise of stock options

Shares issued for employee stock purchase plan

Net income — — 39,658 — 129 39,787

Amounts reported in other comprehensive income (loss) — — — 51,572 ( 92 ) 51,480

Dividends declared ($ 1.56 per share)

— — ( 27,786 ) — — ( 27,786 )

Acquisition of noncontrolling interest — ( 707 ) — — ( 340 ) ( 1,047 )

Distributions to noncontrolling affiliate shareholders — — — — ( 751 ) ( 751 )

Shares issued upon exercise of stock options and other 66 6,714 — — — 6,780

Share-based compensation plans 50 10,946 — — — 10,996

Balance as of December 31, 2020 17,851 905,171 423,940 ( 26,598 ) 550 1,320,914

Cumulative effect of an accounting change

Balance as of January 1, 2020

Amounts reported in other comprehensive

income (loss)

Dividends declared ($

Acquisition of noncontrolling interest

Distributions to noncontrolling affiliate

Shares issued upon exercise of stock options

Net income — — 121,369 — 62 121,431

Amounts reported in other comprehensive (loss) income — — — ( 37,392 ) 16 ( 37,376 )

Dividends declared ($ 1.62 per share)

— — ( 28,975 ) — — ( 28,975 )

Shares issued upon exercise of stock options and other 17 1,677 — — — 1,694

Share-based compensation plans 29 10,205 — — — 10,234

Balance as of December 31, 2021 17,897 917,053 516,334 ( 63,990 ) 628 1,387,922

Amounts reported in other comprehensive

(loss) income

Dividends declared ($

Shares issued upon exercise of stock options

Net (loss) income — — ( 15,931 ) — 89 ( 15,842 )

Amounts reported in other comprehensive (loss) income — — — ( 74,250 ) ( 50 ) ( 74,300 )

Dividends declared ($ 1.70 per share)

— — ( 30,483 ) — — ( 30,483 )

Shares issued upon exercise of stock options and other 1 ( 355 ) — — — ( 354 )

Share-based compensation plans 52 11,590 — — — 11,642

2 unchanged sentences

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts, unless otherwise stated)

Note 1 – Significant Accounting Policies

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

“Quaker,” “Quaker Houghton,” the “Company,”

and “our” refer to Quaker Chemical Corporation (doing business as Quaker Houghton),

its subsidiaries, and associated companies,

unless the context otherwise requires.

As used in these Notes to Consolidated Financial Statements, the term Legacy Quaker

the Company prior to the closing of its combination with Houghton International,

(“Houghton”) (herein referred to as the

“Combination”).

As used in these Notes to Consolidated Financial Statements, the terms “Quaker,” “Quaker Houghton,” the “Company,” “we,” and “our” refer to Quaker Chemical Corporation (doing business as Quaker Houghton), its subsidiaries, and associated companies, unless the context otherwise requires.

The “Combination” refers to the Quaker combination with Houghton International, Inc.

(“Houghton”).

Principles of consolidation:

All majority-owned subsidiaries are included in the Company’s

consolidated financial statements,

with appropriate elimination of intercompany balances and transactions.

Investments in associated companies (less than majority-

owned and in which the Company has significant influence) are accounted

for under the equity method.

The Company’s share of net

income or losses in these investments in associated companies is included in

the Consolidated Statements of Income.

periodically reviews these investments for impairments and, if necessary,

would adjust these investments to their fair value when a

decline in market value or other impairment indicators are deemed to be other

than temporary.

See Note 17 of Notes to Consolidated

Financial Statements.

The Company is not the primary beneficiary of any variable interest entities (“VIEs”)

and therefore the

Company’s consolidated

financial statements do not include the accounts of any VIEs.

Translation of foreign

All majority-owned subsidiaries are included in the Company’s consolidated financial statements, with appropriate elimination of intercompany balances and transactions.

Investments in associated companies (less than majority-owned and in which the Company has significant influence) are accounted for under the equity method.

The Company’s share of net income or losses in these investments in associated companies is included in the Consolidated Statements of Operations.

The Company periodically reviews these investments for impairments and, if necessary, would adjust these investments to their fair value when a decline in market value or other impairment indicators are deemed to be other than temporary.

See Note 17 of Notes to Consolidated Financial Statements.

The Company is not the primary beneficiary of any variable interest entities (“VIEs”) and therefore the Company’s consolidated financial statements do not include the accounts of any VIEs.

Translation of foreign currency:

Assets and liabilities of non-U.S.

subsidiaries and associated companies are translated into

subsidiaries and associated companies are translated into U.S.

dollars at the respective rates of exchange prevailing at the end of the year.

Income and expense accounts are translated at

average exchange rates prevailing during the year.

Translation adjustments resulting from this process are

recorded directly in equity

as accumulated other comprehensive (loss) income (“AOCI”) and

will be included as income or expense only upon sale or liquidation

of the underlying entity or asset.

Generally, all of the Company’s

subsidiaries use their local currency as their functional

Income and expense accounts are translated at average exchange rates prevailing during the year.

Translation adjustments resulting from this process are recorded directly in equity as accumulated other comprehensive (loss) income (“AOCI”) and will be included as income or expense only upon sale or liquidation of the underlying entity or asset.

Generally, all of the Company’s non-U.S.

subsidiaries use their local currency as their functional currency.

Cash and cash equivalents:

The Company invests temporary and excess funds in money market securities and financial

instruments having maturities within 90 days.

The Company considers all highly liquid investments with original maturities of three

months or less to be cash equivalents.

The Company has not experienced losses from the aforementioned

Accounts receivable and allowance for doubtful accounts:

The Company invests temporary and excess funds in money market securities and financial instruments having maturities within 90 days.

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

The Company has not experienced losses from the aforementioned investments.

Accounts receivable and allowance for credit losses:

Trade accounts receivable subject the Company to credit risk.

Trade accounts receivable are recorded at the

invoiced amount and generally do not bear interest.

The allowance for doubtful

accounts is the Company’s best estimate of

the amount of expected credit losses with its existing accounts receivable.

adopted ASU 2016-13,

Financial Instruments - Credit Losses (Topic

Measurement of Credit

Losses on Financial Instruments

a modified retrospective basis, effective January 1, 2020.

The Company recognizes an allowance for credit losses, which represents

the portion of the receivable that the Company does not

expect to collect over its contractual life, considering past events and reasonable

and supportable forecasts of future economic

The Company’s allowance for credit losses on

its trade accounts receivable is based on specific collectability facts and

circumstances for each outstanding receivable and customer,

the aging of outstanding receivables, and the associated collection risk

the Company estimates for certain past due aging categories, and also,

the general risk to all outstanding accounts receivable based on

historical amounts determined to be uncollectible.

The Company does not have any off-balance-sheet credit exposure related

Trade accounts receivable are recorded at the invoiced amount and generally do not bear interest.

The Company recognizes an allowance for credit losses, which represents the portion of the receivable that the Company does not expect to collect over its contractual life, considering past events and reasonable and supportable forecasts of future economic conditions.

The Company’s allowance for credit losses on its trade accounts receivable is based on specific collectability facts and circumstances for each outstanding receivable and customer, the aging of outstanding receivables, and the associated collection risk the Company estimates for certain past due aging categories, and also, the general risk to all outstanding accounts receivable based on historical amounts determined to be uncollectible.

The Company does not have any off-balance-sheet credit exposure related to its customers.

See Note 13 of Notes to Consolidated Financial Statements.

Inventories are valued at the lower of cost or net realizable value,

and are valued using the first-in, first-out method.

Inventories are valued at the lower of cost or net realizable value, and are valued using the first-in, first-out method.

See Note 14 of Notes to Consolidated Financial Statements.

1 unchanged sentence

The Company determines if an arrangement is a lease at its inception.

determination generally depends on whether the arrangement conveys

the right to control the use of an identified fixed asset explicitly

or implicitly for a period of time in exchange for consideration.

Control of an underlying asset is conveyed if the Company obtains

the rights to direct the use of, and obtains substantially all of the economic benefits from

the use of, the underlying asset.

expense for variable leases and short-term leases is recognized when

the obligation is incurred.

The lease term for all of the Company’s

leases includes the non-cancellable period of the lease plus any additional periods

covered by an option to extend the lease that the Company is reasonably certain

it will exercise.

Operating leases are included in right

of use lease assets, other accrued liabilities and long-term lease liabilities on the Consolidated

Balance Sheet.

Right of use lease assets

and liabilities are recognized at each lease’s

commencement date based on the present value of its lease payments over its respective

This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration.

Control of an underlying asset is conveyed if the Company obtains the rights to direct the use of, and obtains substantially all of the economic benefits from the use of, the underlying asset.

Lease expense for variable leases and short-term leases is recognized when the obligation is incurred.

The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by an option to extend the lease that the Company is reasonably certain it will exercise.

Operating leases are included in right of use lease assets, other accrued liabilities and long-term lease liabilities on the Consolidated Balance Sheet.

Right of use lease assets and liabilities are recognized at each lease’s commencement date based on the present value of its lease payments over its respective lease term.

Operating lease expense is recognized on a straight-line basis over the lease term.

The Company uses the stated borrowing rate for a lease when readily determinable.

When a stated borrowing rate is not available in a lease agreement, the Company uses its incremental borrowing rate based on information available at the lease’s commencement date to determine the present value of its lease payments.

In determining the incremental borrowing rate used to present value each of its leases, the Company considers certain information including fully secured borrowing rates readily available to the Company and its subsidiaries.

The Company includes finance leases in Property, plant and equipment (“PP&E”), current portion of long-term debt and long-term debt on the Consolidated Balance Sheet.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

The Company uses the stated borrowing rate for a lease when readily determinable.

When a stated borrowing rate is not available

in a lease agreement, the Company uses its incremental borrowing rate

based on information available at the lease’s

date to determine the present value of its lease payments.

In determining the incremental borrowing rate used to present value each

its leases, the Company considers certain information including fully

secured borrowing rates readily available to the Company and its

subsidiaries.

The Company has immaterial finance leases, which are included in

Property, plant and equipment (“PP&E”)

portion of long-term debt and long-term debt on the Consolidated Balance

Long-lived assets:

PP&E is stated at gross cost, less accumulated depreciation.

Depreciation is computed using the straight-

line method on an individual asset basis over the following estimated useful lives:

and improvements,

machinery and equipment,

The carrying values of long-lived assets are evaluated whenever changes in circumstances

current events indicate the carrying amount of such assets may not be

An estimate of undiscounted cash flows produced

by the asset, or the appropriate group of assets, is compared with the carrying value to

determine whether an impairment exists.

necessary, the Company

recognizes an impairment loss for the difference between the carrying

amount of the assets and their

estimated fair value.

Depreciation is computed using the straight-line method on an individual asset basis over the following estimated useful lives:

buildings and improvements, 10 to 33 years, or the remaining term of the lease;

and machinery and equipment, 4 to 10 years, or the remaining term of the lease.

The carrying values of long-lived assets are evaluated whenever changes in circumstances or current events indicate the carrying amount of such assets may not be recoverable.

An estimate of undiscounted cash flows produced by the asset, or the appropriate group of assets, is compared with the carrying value to determine whether an impairment exists.

If necessary, the Company recognizes an impairment loss for the difference between the carrying amount of the assets and their estimated fair value.

Fair value is based on current and anticipated future cash flows.

Upon sale or other dispositions of long-lived

assets, the applicable amounts of asset cost and accumulated depreciation

are removed from the accounts and the net amount, less

proceeds from disposals, is recorded in the Consolidated Statements of Income.

Expenditures for renewals or improvements that

increase the estimated useful life or capacity of the assets are capitalized, whereas

expenditures for repairs and maintenance are

expensed when incurred.

Upon sale or other dispositions of long-lived assets, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount, less proceeds from disposals, is recorded in the Consolidated Statements of Operations.

Expenditures for renewals or improvements that increase the estimated useful life or capacity of the assets are capitalized, whereas expenditures for repairs and maintenance are expensed when incurred .

See Notes 9 and 15 of Notes to Consolidated Financial Statements.

Capitalized software:

The Company capitalizes certain costs in connection with developing or obtaining

software for internal

use, depending on the associated project.

These costs are amortized over a period of

years once the assets are ready for their

intended use.

In connection with the implementations and upgrades to the Company’s

global transaction, consolidation and other

related systems, approximately $

million and $

million of net costs were capitalized in PP&E on the Company’s

Balance Sheets at December 31, 2021 and 2020, respectively.

The Company capitalizes certain costs in connection with developing or obtaining software for internal use, depending on the associated project.

These costs are amortized over a period of 3 to 5 years once the assets are ready for their intended use.

In connection with the implementations and upgrades to the Company’s global transaction, consolidation and other related systems, approximately $ 3.5 million and $ 3.6 million of net costs were capitalized in PP&E on the Company’s Consolidated Balance Sheets at December 31, 2022 and 2021, respectively.

Goodwill and other intangible assets:

The Company records goodwill, definite-lived intangible

assets and indefinite-lived

intangible assets at fair value at the date of acquisition.

Goodwill and indefinite-lived intangible assets are not amortized but

impairment at least annually.

These tests will be performed more frequently if triggering events indicate

potential impairment.

Definite-lived intangible assets are amortized on a straight-line basis over their estimated

useful lives, generally for periods ranging

The Company continually evaluates the reasonableness of the useful lives of these assets, consistent

discussion of long-lived assets, above.

The Company records goodwill, definite-lived intangible assets and indefinite-lived intangible assets at fair value at the date of acquisition.

Goodwill and indefinite-lived intangible assets are not amortized but tested for impairment at least annually.

These tests will be performed more frequently if triggering events indicate potential impairment.

Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, generally for periods ranging from 3 to 24 years.

The Company continually evaluates the reasonableness of the useful lives of these assets, consistent with the discussion of long-lived assets, above.

See Note 16 of Notes to Consolidated Financial Statements.

Revenue recognition:

The Company applies the Financial Accounting Standards Board’s

guidance on revenue

recognition which requires the Company to recognize revenue in an amount

that reflects the consideration to which the Company

expects to be entitled in exchange for goods or services transferred

to its customers.

To do this, the Company

applies the five-step

model in the FASB’s

guidance, which requires the Company to:

(i) identify the contract

with a customer;

(ii) identify the performance

obligations in the contract;

The Company recognizes revenue in an amount that reflects the consideration to which the Company expects to be entitled in exchange for goods or services transferred to its customers.

To do this, the Company applies a five-step model, which requires the Company to:

(i) identify the contract with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate

the transaction price to the performance obligations in the

and (v) recognize revenue when, or as, the Company satisfies a performance

The Company identifies a contract with a customer when a sales agreement indicates

approval and commitment of the parties;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when, or as, the Company satisfies a performance obligation.

The Company identifies a contract with a customer when a sales agreement indicates approval and commitment of the parties;

identifies the rights of the parties;

identifies the payment terms;

has commercial

and it is probable that the Company will

collect the consideration to which it will be entitled in exchange for the goods

or services that will be transferred to the customer.

The Company identifies a performance obligation in a contract for each promised

good or service that is separately identifiable

from other obligations in the contract and for which the customer can benefit

from the good or service either on its own or together

with other resources that are readily available to the customer.

The Company determines the transaction price as the amount of

consideration it expects to be entitled to in exchange for fulfilling the performance

obligations, including the effects of any variable

consideration, significant financing elements, amounts payable to the customer

or noncash consideration.

For any contracts that have

more than one performance obligation, the Company allocates the transaction

price to each performance obligation in an amount that

depicts the amount of consideration to which the Company expects to be entitled

in exchange for satisfying each performance

In accordance with the last step of the FASB’s

guidance, the Company recognizes revenue when, or as, it satisfies the

performance obligation in a contract by transferring control of a promised

good or providing the service to the customer.

Company typically satisfies its performance obligations and recognizes

revenue at a point in time for product sales, generally when

products are shipped or delivered to the customer,

depending on the terms underlying each arrangement.

In circumstances where the

Company’s products are on

consignment, revenue is generally recognized upon usage or consumption by the customer.

or other services provided by the Company to the customer,

the Company typically satisfies its performance obligations

has commercial substance;

and it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

The Company identifies a performance obligation in a contract for each promised good or service that is separately identifiable from other obligations in the contract and for which the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer.

The Company determines the transaction price as the amount of consideration it expects to be entitled to in exchange for fulfilling the performance obligations, including the effects of any variable consideration, significant financing elements, amounts payable to the customer or noncash consideration.

For any contracts that have more than one performance obligation, the Company allocates the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Company expects to be entitled in exchange for satisfying each performance obligation.

In accordance with the last step of the five-step model, the Company recognizes revenue when, or as, it satisfies the performance obligation in a contract by transferring control of a promised good or providing the service to the customer.

The Company typically satisfies its performance obligations and recognizes revenue at a point in time for product sales, generally when products are shipped or delivered to the customer, depending on the terms underlying each arrangement.

In circumstances where the Company’s products are on consignment, revenue is generally recognized upon usage or consumption by the customer.

For any Fluidcare TM or other services provided by the Company to the customer, the Company typically satisfies its performance obligations and recognizes revenue over time, as the promised services are performed.

The Company uses input methods to recognize revenue over time related to these services, including labor costs and time incurred.

The Company believes that these input methods represent the most indicative measure of the Fluidcare TM or other service work performed by the Company.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

and recognizes revenue over time, as the promised services are performed.

The Company uses input methods to recognize revenue

over time related to these services, including labor costs and time incurred.

The Company believes that these input methods represent

the most indicative measure of the Fluidcare

or other service work performed by the Company.

The Company does not have standard payment terms for all customers,

however the Company’s general

payment terms require

customers to pay for products or services provided after the performance

obligation is satisfied.

The Company does not have

significant financing arrangements with its customers.

Therefore, the Company does not adjust the promised amount of consideration

for the effects of a significant financing component as the Company

expects, at contract inception, that the period between when the

Company transfers a promised good or service to the customer and when the

customer pays for that good or service will be one year or

In addition, the Company expenses costs to obtain a contract as incurred

when the expected period of benefit, and therefore the

amortization period, is one year or less.

In addition, the Company excludes from the measurement of the transaction price all taxes

assessed by a governmental authority that are both imposed on and concurrent

with a specific revenue-producing transaction and

collected by the entity from a customer,

including sales, use, value added, excise and various other taxes.

Lastly, the Company has

elected to account for shipping and handling activities that occur after the

customer has obtained control of a good as a fulfilment cost,

rather than an additional promised service.

The Company does not have significant amounts of variable consideration in

its contracts

with customers and where applicable, the Company’s

estimates of variable consideration are not constrained.

The Company records certain third-party license fees in other income

(expense), net, in its Consolidated Statement of Income,

which generally include sales-based royalties in exchange for the license of

intellectual property.

These license fees are recognized in

accordance with their agreed-upon terms and when performance obligations are

satisfied, which is generally when the third party has a

subsequent sale.

The Company recognizes a contract asset or receivable on its Consolidated Balance Sheet

when the Company performs a service

or transfers a good in advance of receiving consideration.

A receivable is the Company’s right to consideration

that is unconditional

and only the passage of time is required before payment of that consideration

A contract asset is the Company’s right

consideration in exchange for goods or services that the Company has transferred

to a customer.

A contract liability is recognized when the Company receives consideration,

or if it has the unconditional right to receive

consideration, in advance of performance.

A contract liability is the Company’s

obligation to transfer goods or services to a customer

for which the Company has received consideration, or a specified amount

of consideration is due, from the customer.

The Company does not have standard payment terms for all customers, however the Company’s general payment terms require customers to pay for products or services provided after the performance obligation is satisfied.

The Company does not have significant financing arrangements with its customers.

Therefore, the Company does not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service will be one year or less.

In addition, the Company expenses costs to obtain a contract as incurred when the expected period of benefit, and therefore the amortization period, is one year or less.

In addition, the Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer, including sales, use, value added, excise and various other taxes.

Lastly, the Company has elected to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost, rather than an additional promised service.

The Company does not have significant amounts of variable consideration in its contracts with customers and where applicable, the Company’s estimates of variable consideration are not constrained.

The Company records certain third-party license fees in other income (expense), net, in its Consolidated Statement of Operations, which generally include sales-based royalties in exchange for the license of intellectual property.

These license fees are recognized in accordance with their agreed-upon terms and when performance obligations are satisfied, which is generally when the third party has a subsequent sale.

The Company recognizes a contract asset or receivable on its Consolidated Balance Sheet when the Company performs a service or transfers a good in advance of receiving consideration.

A receivable is the Company’s right to consideration that is unconditional and only the passage of time is required before payment of that consideration is due.

A contract asset is the Company’s right to consideration in exchange for goods or services that the Company has transferred to a customer.

A contract liability is recognized when the Company receives consideration, or if it has the unconditional right to receive consideration, in advance of performance.

A contract liability is the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration, or a specified amount of consideration is due, from the customer.

See Note 5 of Notes to Consolidated Financial Statements.

Research and development costs:

Research and development costs are expensed as incurred and are included

in selling, general

and administrative expenses (“SG&A”).

Research and development expenses were $

million and $

the years ended December 31, 2021, 2020 and 2019, respectively.

Research and development costs are expensed as incurred and are included in selling, general and administrative expenses (“SG&A”).

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

Environmental liabilities and expenditures:

Accruals for environmental matters are recorded when it is probable

that a liability

has been incurred and the amount of the liability can be reasonably estimated.

If there is a range of estimated liability and no amount

in that range is considered more probable than another,

then the Company records the lowest amount in the range in accordance with

generally accepted accounting principles in the United States (“U.S.

Environmental costs and remediation costs are

capitalized if the costs extend the life, increase the capacity or improve

safety or efficiency of the property from the date acquired or

constructed, and/or mitigate or prevent contamination in the future.

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

If there is a range of estimated liability and no amount in that range is considered more probable than another, then the Company records the lowest amount in the range.

Environmental costs and remediation costs are capitalized if the costs extend the life, increase the capacity or improve safety or efficiency of the property from the date acquired or constructed, and/or mitigate or prevent contamination in the future.

See Note 26 of Notes to Consolidated Financial Statements.

Asset retirement obligations:

The Company follows the FASB’s

guidance regarding asset retirement obligations, which

addresses the accounting and reporting for obligations associated with the

retirement of tangible long-lived assets and the associated

retirement costs.

Also, the Company follows the FASB’s

guidance for conditional asset retirement obligations (“CARO”),

relates to legal obligations to perform an asset retirement activity in which

the timing and (or) method of settlement are conditional on

a future event that may or may not be within the control of the entity.

In accordance with this guidance, the Company records a

liability when there is enough information regarding the timing of the CARO to perform

a probability-weighted discounted cash flow

As of December 31, 2021 and 2020, the Company had limited exposure

to such obligations and had immaterial liabilities

recorded for such on its Consolidated Balance Sheets.

The Company assesses whether it has legal or conditional obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction, or development and/or the normal operation of a long-lived asset, including any legal obligations that require disposal of a replaced part that is a component of a tangible long-lived asset.

As of December 31, 2022 and 2021, the Company had no significant exposure or liabilities recorded on its Consolidated Balance Sheets.

Pension and other postretirement benefits:

The Company maintains various noncontributory retirement plans,

portion of its employees in the U.S.

and certain other countries, including

the Netherlands, the United Kingdom (“U.K.”), Mexico,

Sweden, Germany and France.

These retirement plans are subject to the provisions of FASB’s

guidance regarding employers’

accounting for defined benefit pension plans.

The Company maintains various noncontributory retirement plans, covering a portion of its employees in the U.S.

and certain other countries, including the Netherlands, the United Kingdom (“U.K.”), Mexico, Sweden, Germany and France.

The plans of the remaining non-U.S.

subsidiaries are, for the most part, either

insured or integrated with the local governments’ plans and are not subject

to the provisions of the guidance.

The guidance requires

subsidiaries are, for the most part, either fully insured or integrated with the local governments’ plans.

The Company recognizes on a prospective basis the funded status of the defined benefit pension and other postretirement plans on its Consolidated Balance Sheets and, also, recognize as a component of AOCI, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost.

In addition, the Company recognizes a settlement charge in its Consolidated Statements of Operations when certain events occur, including plan termination or the settlement of certain plan liabilities.

A settlement charge represents the immediate recognition into expense of a portion of the unrecognized loss within AOCI on the balance sheet in proportion to the share of the projected benefit obligation that was settled.

The measurement date for the Company’s postretirement benefits plan is December 31.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

that employers recognize on a prospective basis the funded status of their

defined benefit pension and other postretirement plans on

their consolidated balance sheet and, also, recognize as a component of AOCI,

net of tax, the gains or losses and prior service costs or

credits that arise during the period but are not recognized as components of

net periodic benefit cost.

In addition, the guidance

requires that an employer recognize a settlement charge in

their consolidated statement of income when certain events occur,

including plan termination or the settlement of certain plan liabilities.

A settlement charge represents the immediate recognition

expense of a portion of the unrecognized loss within AOCI on the balance sheet in

proportion to the share of the projected benefit

obligation that was settled.

The measurement date for the Company’s

postretirement benefits plan is December 31.

The Company’s global pension

investment policies are designed to ensure that pension assets are invested in a manner

with meeting the future benefit obligations of the pension plans and maintaining

compliance with various laws and regulations

including the Employee Retirement Income Security Act of 1974.

The Company establishes strategic asset allocation percentage

targets and benchmarks for significant asset classes with the aim of

achieving a prudent balance between return and risk.

Company’s investment horizon

is generally long term, and, accordingly,

the target asset allocations encompass a long-term

perspective of capital markets, expected risk and return and perceived future

economic conditions while also considering the profile of

plan liabilities.

To the extent feasible,

the short-term investment portfolio is managed to match the short

-term obligations, the

intermediate portfolio duration is matched to reduce the risk of volatility in

intermediate plan distributions, and the total return

portfolio is managed to maximize the long-term real growth of plan

The critical investment principles of diversification,

assessment of risk and targeting the optimal expected returns for

given levels of risk are applied.

The Company’s investment

guidelines prohibit the use of securities such as letter stock and other unregistered

securities, commodities or commodity contracts,

short sales, margin transactions, private placements

(unless specifically addressed by addendum), or any derivatives, options or futures

for the purpose of portfolio leveraging.

The target asset allocation is reviewed periodically and is determined

based on a long-term projection of capital market outcomes,

inflation rates, fixed income yields, returns, volatilities and correlation

relationships.

The interaction between plan assets and benefit

obligations is periodically studied to assist in establishing such strategic asset allocation

Asset performance is monitored with

an overall expectation that plan assets will meet or exceed benchmark performance

over rolling five year periods.

The Company’s

pension committee, as authorized by the Company’s

Board of Directors (the “Board”), has discretion to manage the assets within

established asset allocation ranges approved by senior management

of the Company.

See Note 21 of Notes to Consolidated Financial

The Company’s global pension investment policies are designed to ensure that pension assets are invested in a manner consistent with meeting the future benefit obligations of the pension plans and maintaining compliance with various laws and regulations including the Employee Retirement Income Security Act of 1974.

The Company establishes strategic asset allocation percentage targets and benchmarks for significant asset classes with the aim of achieving a prudent balance between return and risk.

The Company’s investment horizon is generally long term, and, accordingly, the target asset allocations encompass a long-term perspective of capital markets, expected risk and return and perceived future economic conditions while also considering the profile of plan liabilities.

To the extent feasible, the short-term investment portfolio is managed to match the short-term obligations, the intermediate portfolio duration is matched to reduce the risk of volatility in intermediate plan distributions, and the total return portfolio is managed to maximize the long-term real growth of plan assets.

The critical investment principles of diversification, assessment of risk and targeting the optimal expected returns for given levels of risk are applied.

The Company’s investment guidelines prohibit the use of securities such as letter stock and other unregistered securities, commodities or commodity contracts, short sales, margin transactions, private placements (unless specifically addressed by addendum), or any derivatives, options or futures for the purpose of portfolio leveraging.

The target asset allocation is reviewed periodically and is determined based on a long-term projection of capital market outcomes, inflation rates, fixed income yields, returns, volatilities and correlation relationships.

The interaction between plan assets and benefit obligations is periodically studied to assist in establishing such strategic asset allocation targets.

Asset performance is monitored with an overall expectation that plan assets will meet or exceed benchmark performance over rolling five year periods.

The Company’s pension committee, as authorized by the Company’s Board of Directors (the “Board”), has discretion to manage the assets within established asset allocation ranges approved by senior management of the Company.

See Note 21 of Notes to Consolidated Financial Statements.

Comprehensive income (loss):

The Company presents other comprehensive income (loss) in its Statements of Comprehensive

The Company follows the FASB’s

guidance regarding the disclosure of reclassifications from AOCI

which requires the

disclosure of significant amounts reclassified from each component of

AOCI, the related tax amounts and the income statement line

items affected by such reclassifications.

The Company presents Other comprehensive (loss) income in its Statements of Comprehensive (Loss) Income.

The Company discloses significant amounts reclassified from each component of AOCI, the related tax amounts and the income statement line items affected by such reclassifications.

See Note 23 of Notes to Consolidated Financial Statements.

Income taxes and uncertain tax positions:

The provision for income taxes is determined using the asset and liability approach

of accounting for income taxes.

Under this approach, deferred taxes represent the future tax consequences expected

to occur when the

reported amounts of assets and liabilities are recovered or paid.

The provision for income taxes represents income taxes paid or

payable for the current year and the change in deferred taxes during the year.

Deferred taxes result from differences between the

financial and tax bases of the Company’s

assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are

allowances are recorded to reduce deferred tax assets when it is more likely than not

that a tax benefit will not be

guidance regarding accounting for uncertainty in income taxes prescribes the

recognition threshold and

measurement attributes for financial statement recognition and measurement

of tax positions taken or expected to be taken on a tax

The guidance further requires the determination of whether the benefits

of tax positions are probable or more likely than not

sustained upon audit based upon the technical merits of the tax position.

For tax positions that are determined to be more likely than

not sustained upon audit, a company recognizes the largest amount

of benefit that is greater than

% likely of being realized upon

ultimate settlement in the financial statements.

For tax positions that are not determined to be more likely than not sustained upon

audit, a company does not recognize any portion of the benefit in the financial statements.

Additionally, the

Company monitors and

adjusts for derecognition, classification, and penalties and interest in interim

periods, with appropriate disclosure and transition

Also, the amount of interest expense and income related to uncertain tax positions is computed

by applying the applicable

statutory rate of interest to the difference between the

tax position recognized, including timing differences, and the amount previously

taken or expected to be taken in a tax return.

The Company recognizes

interest and/or penalties related to income tax matters in

income tax expense.

Finally, when applicable, the

Company nets its liability for unrecognized tax benefits against deferred

related to net operating losses or other tax credit carryforwards that would apply

if the uncertain tax position were settled for the

presumed amount at the balance sheet date.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

Pursuant to the Tax Cuts and

Jobs Act (“U.S.

specifically the one-time tax on deemed repatriation (the “Transition

the Company has provided for U.S.

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes.

Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid.

The provision for income taxes represents income taxes paid or payable for the current year and the change in deferred taxes during the year.

Deferred taxes result from differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

The Company accounts for uncertainty in income taxes by applying the recognition threshold and measurement attributes for financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return.

The Company determines whether the benefits of tax positions are probable or more likely than not sustained upon audit based upon the technical merits of the tax position.

For tax positions that are determined to be more likely than not sustained upon audit, the Company recognizes the largest amount of benefit that is greater than 50 % likely of being realized upon ultimate settlement in the financial statements.

For tax positions that are not determined to be more likely than not sustained upon audit, the Company does not recognize any portion of the benefit in the financial statements.

Additionally, the Company monitors and adjusts for derecognition, classification, and penalties and interest in interim periods, with appropriate disclosure and transition thereto.

Also, the amount of interest expense and income related to uncertain tax positions is computed by applying the applicable statutory rate of interest to the difference between the tax position recognized, including timing differences, and the amount previously taken or expected to be taken in a tax return.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Finally, when applicable, the Company nets its liability for unrecognized tax benefits against deferred tax assets related to net operating losses or other tax credit carryforwards that would apply if the uncertain tax position were settled for the presumed amount at the balance sheet date.

Pursuant to the Tax Cuts and Jobs Act (“U.S.

Tax Reform”), specifically the one-time tax on deemed repatriation (the “Transition Tax”), the Company has provided for U.S.

income tax on its undistributed earnings of non-U.S.

subsidiaries, however, the Company

subject to and will incur other taxes, such as withholding taxes and dividend

distribution taxes, if these undistributed earnings were

ultimately remitted to the U.S.

The Company currently intends to reinvest its future undistributed

earnings of non-U.S.

subsidiaries to

support working capital needs and certain other growth initiatives of

those subsidiaries.

However, in certain cases the Company has

and may in the future change its indefinite reinvestment assertion for any or

all of these undistributed earnings.

In this case, the

Company would estimate and record a tax liability and corresponding

tax expense for the amount of non-U.S.

income taxes it would

incur to ultimately remit these earnings to the U.S.

subsidiaries, however, the Company is subject to and will incur other taxes, such as withholding taxes and dividend distribution taxes, if these undistributed earnings were ultimately remitted to the U.S.

The Company currently intends to reinvest its future undistributed earnings of non-U.S.

subsidiaries to support working capital needs and certain other growth initiatives of those subsidiaries.

However, in certain cases the Company has and may in the future change its indefinite reinvestment assertion for any or all of these undistributed earnings.

In this case, the Company would estimate and record a tax liability and corresponding tax expense for the amount of non-U.S.

income taxes it would incur to ultimately remit these earnings to the U.S.

See Note 10 of Notes to Consolidated Financial Statements.

The Company is exposed to the impact of changes in interest rates, foreign currency fluctuations,

commodity prices and credit risk.

The Company utilizes interest rate swap agreements to enhance its ability to manage

risk, including

exposure to variability in interest payments associated with its variable rate debt.

Derivative instruments are entered into for periods

consistent with the related underlying exposures and do not constitute positions

independent of those exposures.

As of December 31,

2021 and 2020, the Company had certain interest rate swap agreements

that were designated as cash flow hedges.

Interest rate swaps

are entered into with a limited number of counterparties, each of which allows for net

settlement of all contracts through a single

payment in a single currency in the event of a default on or termination of any one

The Company records these instruments

on a net basis within the Consolidated Balance Sheets.

The effective portion of the change in fair value of the agreement is recorded

in AOCI and will be recognized in the Consolidated Statements of Income when the

hedge item affects earnings or losses or it

becomes probable that the forecasted transaction will not occur.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

The Company is exposed to the impact of changes in interest rates, foreign currency fluctuations, changes in commodity prices and credit risk.

Historically, the Company has utilized interest rate swap agreements to enhance its ability to manage risk, including exposure to variability in interest payments associated with its variable rate debt.

Derivative instruments are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures.

In October 2022, the Company’s interest rate swap contracts expired.

As of December 31, 2022, the Company has not entered into any similar interest rate swap contracts.

The Company previously recorded these instruments on a net basis within the Consolidated Balance Sheets.

The effective portion of the change in fair value of the agreement was recorded in AOCI and was recognized in the Consolidated Statements of Operations when cash was paid from the counterparties.

See Note 25 of Notes to Consolidated Financial Statements.

Fair value measurements:

The Company utilizes the FASB’s

guidance regarding fair value measurements, which establishes a

common definition for fair value to be applied to guidance requiring use

of fair value, establishes a framework for measuring fair

value and expands disclosure about such fair value measurements.

Specifically, the guidance utilizes

a fair value hierarchy that

prioritizes the inputs to valuation techniques used to measure fair value

into three broad levels.

See Notes 21 and 24 of Notes to

Consolidated Financial Statements.

The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.

See Notes 21 and 24 of Notes to Consolidated Financial Statements.

The following is a brief description of those three levels:

Observable inputs such as quoted prices (unadjusted) in active markets for identical

assets or liabilities.

Inputs other than quoted prices that are observable for the asset or liability,

either directly or indirectly.

include quoted prices for similar assets or liabilities in active markets and quoted

prices for identical or similar assets or

liabilities in markets that are not active.

Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.

These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Unobservable inputs that reflect the reporting entity's own assumptions.

Share-based compensation:

The Company applies the FASB’s

guidance regarding share-based payments, which

recognition of the fair value of share-based compensation as a component

The Company has a long-term incentive

program (“LTIP”)

for key employees which provides for the granting of options to purchase stock at prices not

less than its market

value on the date of the grant.

Most options become exercisable within

after the date of the grant for a period of time

determined by the Company,

but not to exceed

from the date of grant.

Restricted stock awards and restricted stock units

issued under the LTIP

program are subject to time vesting generally over a

In addition, as part of the

Company’s Annual Incentive Plan,

nonvested shares may be issued to key employees, which generally would

In addition, while the FASB’s

guidance permits the Company to make an accounting policy election

to account for forfeitures as

they occur for service condition aspects of certain share-based awards, the

Company has decided not to elect this accounting policy

and instead has elected to continue utilizing a forfeiture rate assumption.

Based on historical experience, the Company has assumed a

forfeiture rate of

% on certain of its nonvested stock awards.

The Company will record additional expense if the actual forfeiture

rate is lower than estimated and will record a recovery of prior expense if the

actual forfeiture is higher than estimated.

The Company also issues performance-dependent stock awards as a component

The fair value of the performance-

dependent stock awards is based on their grant-date market value adjusted

for the likelihood of attaining certain pre-determined

performance goals and is calculated by utilizing a Monte Carlo simulation

Compensation expense is recognized on a straight-

line basis over the vesting period, generally

The Company recognizes the fair value of share-based compensation as a component of expense.

The Company has a long-term incentive program (“LTIP”) for key employees which provides for the granting of options to purchase stock at prices not less than its market value on the date of the grant.

Most options become exercisable within three years after the date of the grant for a period of time determined by the Company, but not to exceed seven years from the date of grant.

Restricted stock awards and restricted stock units issued under the LTIP program are subject to time vesting generally over a one to three year period.

In addition, as part of the Company’s Annual Incentive Plan, nonvested shares may be issued to key employees, which generally would vest over a two to five year period.

In addition, while the Company is permitted to make an accounting policy election to account for forfeitures as they occur for service condition aspects of certain share-based awards, the Company has decided not to elect this accounting policy and instead has elected to continue utilizing a forfeiture rate assumption.

Based on historical experience, the Company generally has assumed a forfeiture rate of 13 % on certain of its nonvested stock awards.

The Company will record additional expense if the actual forfeiture rate is lower than estimated and will record a recovery of prior expense if the actual forfeiture is higher than estimated.

The Company also issues performance-dependent stock awards as a component of its LTIP.

The fair value of the performance-dependent stock awards is based on their grant-date market value adjusted for the likelihood of attaining certain predetermined performance goals and is calculated by utilizing a Monte Carlo simulation model.

Compensation expense is recognized on a straight-line basis over the vesting period, generally three years .

See Note 8 of the Notes to Consolidated Financial Statements.

Earnings per share:

The Company follows the FASB’s

guidance regarding the calculation of earnings per share for nonvested

stock awards with rights to non-forfeitable dividends.

The guidance requires nonvested stock awards with rights to non-forfeitable

dividends to be included as part of the basic weighted average share calculation

under the two-class method.

See Note 11 of Notes to

Consolidated Financial Statements.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

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

The Company calculates earnings per share for nonvested stock awards with rights to non-forfeitable dividends, which requires nonvested stock awards with rights to non-forfeitable dividends to be included as part of the basic weighted average share calculation under the two-class method.

See Note 11 of Notes to Consolidated Financial Statements.

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.

See Note 4 of Notes to Consolidated Financial Statements.

Hyper-inflationary accounting:

Economies that have a cumulative three year rate of inflation exceeding

% are considered

hyper-inflationary in accordance with U.S.

A legal entity that operates within an economy deemed to be hyper-inflationary

required to remeasure its monetary assets and liabilities to the applicable published

exchange rates and record the associated gains or

losses resulting from the remeasurement directly to the Consolidated Statements of

Based on various indices or index compilations being used to monitor inflation

in Argentina as well as recent economic

instability, effective

July 1, 2018, Argentina’s

economy was considered hyper-inflationary under U.S.

As of, and for the year

ended December 31, 2021, the Company's Argentine subsidiaries represented

% of the Company’s consolidated total assets

and net sales, respectively.

During the years ended December 31, 2021, 2020 and 2019, the Company recorded

million, and $

million, respectively, of remeasurement

losses associated with the applicable currency conversions related to

Economies that have a cumulative three year rate of inflation exceeding 100 % are considered hyper-inflationary.

A legal entity that operates within an economy deemed to be hyper-inflationary is required to remeasure its monetary assets and liabilities to the applicable published exchange rates and record the associated gains or losses resulting from the remeasurement directly to the Consolidated Statements of Operations.

Argentina’s and Türkiye’s economies were considered hyper-inflationary effective July 1, 2018 and April 1, 2022, respectively.

As of, and for the year ended December 31, 2022, the Company's Argentine and Turkish subsidiaries represented a combined 1 % and 2 % of the Company’s consolidated total assets and net sales, respectively.

For the years ended December 31, 2022, 2021 and 2020, the Company recorded $ 1.6 million, $ 0.6 million, and $ 0.4 million, respectively, of remeasurement losses associated with the applicable currency conversions related to Argentina and Türkiye.

These losses were recorded within foreign exchange losses, net, which is a component of Other (expense) income, net, in the Company’s Consolidated Statements of Operations.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Business combinations:

The Company accounts for business combinations under the acquisition method

of accounting.

method requires the recording of acquired assets, including separately

identifiable intangible assets, and assumed liabilities at their

respective acquisition date estimated fair values.

Any excess of the purchase price over the estimated fair value of the identifiable

assets acquired is recorded as goodwill.

The determination of the estimated fair value of assets acquired and liabilities assumed

requires significant estimates and assumptions.

Based on the assessment of additional information during the measurement period,

which may be up to one year from the acquisition date, the Company may record

adjustments to the estimated fair value of assets

acquired and liabilities assumed.

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, and assumed liabilities at their respective acquisition date estimated 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 and liabilities assumed requires significant estimates and assumptions.

Based on the assessment of additional information during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the estimated fair value of assets acquired and liabilities assumed.

See Note 2 of Notes to Consolidated Financial Statements.

Restructuring activities:

Restructuring programs consist of employee severance, rationalization of

manufacturing or other

facilities and other related items.

To account for such programs,

the Company applies FASB’s

guidance regarding exit or disposal

cost obligations.

This guidance requires that a liability for a cost associated with an exit or disposal activity

be recognized when the

liability is incurred, is estimable, and payment is probable.

Restructuring programs consist of employee severance, rationalization of manufacturing or other facilities and other related items.

To account for such programs, the Company recognizes a liability for a cost associated with an exit or disposal activity, when the liability is incurred, is estimable, and payment is probable.

See Note 7 of Notes to Consolidated Financial Statements.

2 unchanged sentences

Accounting estimates:

The preparation of financial statements in conformity with generally accepted

accounting principles

requires management to make estimates and assumptions that affect

the reported amounts of assets, liabilities and disclosure of

contingencies at the date of the financial statements and the reported amounts

of net sales and expenses during the reporting period.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingencies at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period.

Actual results could differ from such estimates.

1 unchanged sentence

2022 Acquisitions

In November 2021, the Company acquired Baron Industries (“Baron”),

a privately held Company that provides vacuum

impregnation services of castings, powder metals and electrical components for

its Global Specialty Businesses reportable segment for

million, including an initial cash payment of $

million, subject to post-closing adjustments as well as certain earn-out

provisions currently estimated at $

million that are payable at different times from 2022 through

The earn-out provisions

could total a maximum of $

The Company allocated $

million of the purchase price to intangible assets, $

property, plant and

equipment and $

million of other assets acquired net of liabilities assumed, which includes $

million of cash

In addition, the Company recorded $

million of goodwill, none of which is expected to be tax deductible.

assets comprised $

million of customer relationships to be amortized over

million of existing product technology

to be amortized over

In November 2021, the Company acquired a business that provides

hydraulic fluids, coolants, cleaners, and rust preventative oils

in Turkey for its EMEA reportable segment

million EUR or approximately $

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 its Global Specialty Businesses reportable

million EUR or

approximately $

million, which is gross of approximately $

million of cash acquired.

Previously, in February

Company acquired a

% ownership interest in Grindaix for

million EUR or approximately $

The Company recorded

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

Financial Statements and accounted for the

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

remeasured the previously held equity method

investment to its fair value.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

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

maskants product line in the Global Specialty

Businesses reportable segment for

million EUR or approximately $

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

the steel end market for $

acquisition is part of each of the Company’s

geographic reportable segments.

The Company allocated $

million of the purchase

price to intangible assets, comprised of $

million of customer relationships, to be amortized over

million of existing

product technology to be amortized over

million of a licensed trademark to be amortized over

the Company recorded $

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

Factors contributing to the purchase price that resulted in goodwill included

the acquisition of business processes and

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

As of December 31, 2021, the allocation of the purchase price of the 2021

acquisitions has not been finalized and the one year

measurement period has not ended for any of these acquisitions.

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

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

of assets acquired and liabilities assumed.

The results of operations of the 2021 acquired assets and businesses subsequent

to the respective acquisition dates are included in

the Consolidated Statements of Income for the year ended December

Applicable transaction expenses associated with these

acquisitions are included in Combination, integration and other acquisition

-related expenses in the Company’s Consolidated

Statements of Income.

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

businesses are not considered material to the overall operations of the Company

for the periods presented.

2022 Acquisitions

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 its Global Specialty Business reporting segment for

approximately

million EUR or approximately $

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 Hay.

Also in 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 its Americas reportable

segment for approximately $

business broadens the Company’s

product offerings within its existing metals and metalworking business

in the Americas region.

The results of operations of these two January 2022 acquisitions are not included

in the Consolidated Statements of Income

because the date of closing for each was subsequent to December 31, 2021.

Preliminary purchase price allocation of assets acquired

and liabilities assumed have not been presented as that information is not

available as of the date of these Consolidated Financial

In August 2019, the Company completed the Combination, whereby

the Company acquired all of the issued and outstanding

shares of Houghton from Gulf Houghton Lubricants, Ltd.

other selling shareholders in exchange for a combination of cash

and shares of the Company’s common

stock in accordance with the Share Purchase Agreement dated April 4,

Commencing August 1, 2019, the Company’s

Consolidated Statements of Income included the results of Houghton.

Houghton subsequent to closing of the Combination and included in the Company’s

Consolidated Statements of Income for the year

ended December 31, 2019 were $

The following unaudited pro forma consolidated financial information

prepared as if the Combination had taken place on January 1, 2018.

The unaudited pro forma results include certain adjustments to

each company’s historical

actual results, including:

(i) additional depreciation and amortization expense based

on the initial estimates

of fair value step up and estimated useful lives of depreciable fixed

assets, definite-lived intangible assets and investment in associated

companies acquired;

(ii) adoption of required accounting

guidance and alignment of related accounting policies, (iii) elimination

transactions between Legacy Quaker and Houghton;

(iv) elimination

of results associated with the divested product lines;

adjustment to interest expense, net, to reflect the impact of the financing

and capital structure of the combined Company;

adjustment for certain Combination,

integration and other acquisition-related costs to reflect such costs as if they were

incurred in the

period immediately following the pro-forma closing of the

Combination on January 1, 2018.

The adjustments described in (vi)

include an expense recorded in costs of goods sold (“COGS”) associated with selling

inventory acquired in the Combination which

was adjusted to fair value as part of purchase accounting, restructuring expense incurred

associated with the Company’s global

restructuring program initiated post-closing of the Combination

and certain other integration costs incurred post-closing included in

combination and other acquisition-related expenses.

These costs have been presented in the unaudited pro forma table below

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 EUR or 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, 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.

The Company allocated $ 2.8 million of the purchase price to intangible assets, comprised of $ 2.3 million of customer relationships to be amortized over 10 years;

$ 0.2 million of existing product technologies to be amortized over 10 years;

and $ 0.3 million of licensed trademarks to be amortized over 10 years.

In addition, the Company recorded $ 0.8 million of goodwill related to expected value not allocated to other acquired assets.

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.

The Company allocated $ 5.6 million of the purchase price to intangible assets, comprised of $ 5.1 million of customer relationships to be amortized over 14 years;

and $ 0.5 million of existing product technologies to be amortized over 14 years.

In addition, the Company recorded $ 1.8 million of goodwill related to expected value not allocated to other acquired assets, all of which is expected to be tax deductible in various jurisdictions in which the Company operates.

During the third quarter of 2022 the Company finalized post-closing adjustments that resulted in the Company paying less than $ 0.1 million of additional purchase consideration.

Factors contributing to the purchase price that resulted in goodwill included the acquisition of business processes and personnel that will allow Quaker Houghton to better serve its customers.

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 1.2 million EUR or approximately $ 1.4 million.

This business broadens its product offerings and service capabilities within its existing impregnation business.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

costs on a pro forma basis were incurred during the year ended December 31,

Unaudited pro forma results are not necessarily

indicative of the results that would have occurred if the acquisition had occurred

on the date indicated, or that may result in the future

for various reasons, including the potential impact of revenue and cost

synergies on the business.

Unaudited Pro Forma

(as if the Combination occurred on January 1,

Net income attributable to Quaker Chemical Corporation

integration and other acquisition-related expenses have been and are expected to

continue to be significant.

Company incurred total costs of $

million and $

million for the years ended December 31, 2021, 2020 and

2019, respectively, related

to the Combination,

integration and other acquisition-related activities.

These costs included certain legal,

financial and other advisory and consultant costs incurred in connection with

post-closing integration activities including internal

control readiness and remediation,

as well as due diligence, regulatory approvals and closing the Combination.

These costs also

interest costs to maintain the bank commitment (“ticking fees”) for the Combination

during the year ended December 31,

accelerated depreciation charges during the years ended December

31, 2021, 2020 and 2019, a gain on the sale of a held-for-sale

real property during the year ended December 31, 2021, a loss on the sale of a held-for-sale

asset during the year ended December 31,

2020, and recorded income related to indemnification rights during the

years ended December 31, 2021 and 2020.

As of December

31, 2021 and 2020, the Company had current liabilities related to the Combination

and other acquisition-related activities of $

million and $

million, respectively, primarily

recorded within other accrued liabilities on its Consolidated Balance Sheets.

Other Previous Acquisitions

In December 2020, the Company completed its acquisition of Coral Chemical

Company (“Coral”), a privately held, U.S.-based

provider of metal finishing fluid solutions.

The acquisition provides technical expertise and product solutions for pre-treatment,

metalworking and wastewater treatment applications to the beverage

cans and general industrial end markets.

The acquired Coral

assets and liabilities were assigned to the Americas and Global Specialty Businesses reportable

The original purchase price

was approximately $

million, subject to routine and customary post-closing adjustments related to working

capital and net

indebtedness levels.

The following table presents the final estimated fair values of Coral net assets acquired:

(as adjusted)

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other assets

Property, plant and equipment

Intangible assets

Total assets purchased

Long-term debt including current portions and finance leases

Accounts payable, accrued expenses and other accrued liabilities

Total liabilities assumed

Total consideration

paid for Coral

estimated purchase price settlement

cash acquired

Net cash paid for Coral

As previously disclosed in the Company’s

2020 Form 10-K.

Measurement period adjustments recorded during the year ended December

31, 2021 include certain adjustments related to

refining original estimates for assets and liabilities for certain acquired finance

leases, as well as an adjustment to reflect the expected

settlement of post-closing working capital and net indebtedness true ups to the initial

purchase price.

The Company continues to work

In November 2021, the Company acquired Baron Industries (“Baron”), a privately held company that provides vacuum impregnation services of castings, powder metals and electrical components for its Global Specialty Businesses reportable segment for $ 11.0 million, including an initial cash payment of $ 7.1 million, subject to post-closing adjustments as well as certain earn-out provisions that are payable at various times from 2022 through 2025.

The earn-out provisions could total a maximum of $ 4.5 million.

In September 2022, the Company paid $ 2.5 million related to certain of these earnout provisions.

The Company recorded an incremental earn-out expense of $ 0.1 million during the year ended December 31, 2022 related to these earnout provisions, recorded within the financial statement caption “Combination, integration and other acquisition-related expenses” on the Company’s Condensed Consolidated Statements of Operations.

As of December 31, 2022, the Company has remaining earnout liabilities recorded on its Condensed Consolidated Balance Sheet of $ 1.6 million.

The Company allocated $ 8.0 million of the purchase price to intangible assets, $ 1.1 million of property, plant and equipment and $ 1.5 million of other assets acquired net of liabilities assumed, which includes $ 0.3 million of cash acquired.

In addition, the Company recorded $ 0.4 million of goodwill, none of which is expected to be tax deductible.

Intangible assets comprised $ 7.2 million of customer relationships to be amortized over 15 years;

and $ 0.8 million of existing product technology to be amortized over 13 years.

Factors contributing to the purchase price that resulted in goodwill included the acquisition of business processes and personnel that will allow Quaker Houghton to better serve its customers.

During the third quarter of 2022 the Company finalized post-closing adjustments that resulted in the Company receiving less than $ 0.1 million.

In November 2021, the Company acquired a business that provides hydraulic fluids, coolants, cleaners, and rust preventative oils in Türkiye for its EMEA reportable segment for 3.2 million EUR or approximately $ 3.7 million.

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 its Global Specialty Businesses reportable segment for 2.4 million EUR or approximately $ 2.9 million, which is gross of approximately $ 0.3 million of cash acquired.

Previously, in February 2021, the Company acquired a 38 % ownership interest in Grindaix for 1.4 million EUR or approximately $ 1.7 million.

The Company recorded its initial investment as an equity method investment within the Consolidated Financial Statements and accounted for the purchase of the remaining interest as a step acquisition whereby the Company remeasured the previously held equity method investment to its fair value.

In June 2021, the Company acquired certain assets for its chemical milling maskants product line in the Global Specialty Businesses reportable segment for 2.3 million EUR or approximately $ 2.8 million.

In February 2021, the Company acquired a tin-plating solutions business for the steel end market for $ 25.0 million.

This acquisition is part of each of the Company’s geographic reportable segments.

The Company allocated $ 19.6 million of the purchase price to intangible assets, comprised of $ 18.3 million of customer relationships, to be amortized over 19 years;

$ 0.9 million of existing product technology to be amortized over 14 years;

and $ 0.4 million of a licensed trademark to be amortized over 3 years.

In addition, the Company recorded $ 5.0 million of goodwill, all of which is expected to be tax deductible in various jurisdictions in which we operate.

Factors contributing to the purchase price that resulted in goodwill included the acquisition of business processes and personnel that will allow Quaker Houghton to better serve its customers.

In December 2020, the Company completed its acquisition of Coral Chemical Company (“Coral”), a privately held, U.S.-based provider of metal finishing fluid solutions.

The acquisition provides technical expertise and product solutions for pre-treatment, metalworking and wastewater treatment applications to the beverage cans and general industrial end markets.

The acquired assets and liabilities were assigned to the Americas and Global Specialty Businesses reportable segments.

The original purchase price was approximately $ 54.1 million, subject to routine and customary post-closing adjustments related to working capital and net indebtedness levels.

Subsequent to the acquisition, the Company and the sellers of Coral (the “Sellers”) have worked to finalize certain post-closing adjustments.

During the second quarter of 2022, after failing to reach resolution, the Sellers filed suit asserting certain amounts owed related to tax attributes of the acquisition.

Since the second quarter of 2022, there have been no material changes to the facts and circumstances of the claim asserted by the Sellers, and the Company continues to believe the potential range of exposure for this claim is $ 0 to $ 1.5 million.

In May 2020, the Company acquired Tel Nordic ApS (“TEL”), a company that specializes in lubricants and engineering primarily in high pressure aluminum die casting for its EMEA reportable segment.

Consideration paid was in the form of a convertible promissory note in the amount of 20.0 million DKK, or approximately $ 2.9 million, which was subsequently converted into shares of the Company’s common stock.

An adjustment to the purchase price of approximately 0.4 million DKK, or less than $ 0.1 million, was made as a result of finalizing a post-closing settlement in the second quarter of 2020.

The Company allocated approximately $ 2.4 million of the purchase price to intangible assets to be amortized over 17 years.

In addition, the Company recorded approximately $ 0.5 million of goodwill, related to expected value not allocated to other acquired assets, none of which will be tax deductible.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

with the seller to finalize certain post-closing adjustments and the above

table includes the Company’s best estimate

as of December

As of December 31, 2021, the allocation of the purchase price for Coral has been finalized

period has ended.

In May 2020, the Company acquired Tel

Nordic ApS (“TEL”), a company that specializes in lubricants and engineering primaril

in high pressure aluminum die casting for its EMEA reportable segment.

Consideration paid was in the form of a convertible

promissory note in the amount of

million DKK, or approximately $

million, which was subsequently converted into shares of

the Company’s common stock.

An adjustment to the purchase price of approximately

million DKK, or less than $

made as a result of finalizing a post-closing settlement in the second

quarter of 2020.

The Company allocated approximately $

million of the purchase price to intangible assets to be amortized over

In addition, the Company recorded approximately

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

assets, none of which will be tax deductible.

December 31, 2021, the allocation of the purchase price of TEL was finalized

and the one year measurement period ended.

In March 2020, the Company acquired the remaining

% ownership interest in one of its South African affiliates, Quaker

Chemical South Africa Limited (“QSA”) for

million ZAR, or approximately $

million, from its joint venture partner PQ

Holdings South Africa.

QSA is a part of the Company’s EMEA reportable

As this acquisition was a change in an existing

controlling ownership, the Company recorded $

million of excess purchase price over the carrying value of the noncontrolling

interest in Capital in excess of par value.

In October 2019, the Company completed its acquisition of the operating

divisions of Norman Hay plc (“Norman Hay”), a private

company that provides specialty chemicals, operating equipment, and

services to industrial end markets.

The original purchase

on a cash-free and debt-free basis, subject to routine and customary

post-closing adjustments related to

working capital and net indebtedness levels.

The Company finalized its post-closing adjustments for the

Norman Hay acquisition and

paid approximately

million GBP during the first quarter of 2020 to settle such adjustments.

In March 2020, the Company acquired the remaining 49 % ownership interest in one of its South African affiliates, Quaker Chemical South Africa Limited (“QSA”) for 16.7 million ZAR, or approximately $ 1.0 million, from its joint venture partner PQ Holdings South Africa.

QSA is a part of the Company’s EMEA reportable segment.

As this acquisition was a change in an existing controlling ownership, the Company recorded $ 0.7 million of excess purchase price over the carrying value of the noncontrolling interest in Capital in excess of par value.

During the first quarter of 2020, the Company finalized its post-closing adjustments for the Norman Hay plc (“Norman Hay”) acquisition and paid approximately 2.5 million GBP to settle post-closing adjustments.

As of December 31, 2022, the allocation of the purchase price of each of the 2022 acquisitions has not been finalized and the one year measurement period has not ended for any of these acquisitions.

Further adjustments may be necessary as a result of the Company’s on-going assessment of additional information related to the fair value of assets acquired and liabilities assumed.

As of December 31, 2022, the allocation of the purchase price for all other previous acquisitions was finalized and the one year measurement period ended.

The results of operations of each acquisition subsequent to the respective acquisition dates are included in the Consolidated Statements of Operations.

Applicable transaction expenses associated with these acquisitions are included in Combination, integration and other acquisition-related expenses in the Company’s Consolidated Statements of Operations.

Certain pro forma and other information is not presented, as the operations of the acquired assets and businesses are not considered material to the overall operations of the Company for the periods presented.

Note 3 – Recently Issued Accounting Standards

Recently Issued Accounting Standards

The Financial Accounting Standards Board (“FASB”)

issued Account Standards Update (“ASU”)

, Income Taxes

Simplifying the Accounting for Income Taxes

in December 2019 to simplify the accounting for income taxes.

guidance within this accounting standard update removes

certain exceptions, including the exception to the incremental approach for

certain intra-period tax allocations, to the requirement to recognize

or not recognize certain deferred tax liabilities for equity method

investments and foreign subsidiaries, and to the general methodology for

calculating income taxes in an interim period when a year-to-

date loss exceeds the anticipated loss for the year.

Further, the guidance simplifies the accounting related

to franchise taxes, the step

up in tax basis for goodwill, current and deferred tax expense, and codification

improvements for income taxes related to employee

stock ownership plans.

The guidance is effective for annual and interim periods beginning

after December 15, 2020.

adopted this standard,

as required, effective January 1, 2021.

There was no cumulative effect of adoption recorded within retained

earnings on January 1, 2021.

The FASB issued ASU 2020

, Reference Rate Reform (Topic

Facilitation of the Effects of Reference Rate Reform

Financial Reporting

in March 2020.

The FASB subsequently

issued ASU 2021-01

, Reference Rate Reform (Topic

January 2021 which clarified the guidance but did not materially change

the guidance or its applicability to the Company.

amendments provide temporary optional expedients and exceptions

for applying U.S.

GAAP to contract modifications, hedging

relationships and other transactions to ease the potential accounting

and financial reporting burden associated with transitioning away

from reference rates that are expected to be discontinued, including

the London Interbank Offered Rate (“LIBOR”).

ASU 2020-04 is

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

be applied through December 31, 2022.

On December 10, 2021,

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

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

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

elected to apply the expedients provided in ASU

2020-04 with respect to the Second Amendment.

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

based LIBOR rates.

Recently Issued Accounting Standards Adopted

The FASB issued ASU 2020-04 , Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting in March 2020.

The FASB subsequently issued ASU 2021-01 , Reference Rate Reform (Topic 848):

Scope in January 2021, which clarified the guidance, and ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848, which defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

Neither ASU materially changed the guidance or its applicability to the Company.

The amendments provide temporary optional expedients and exceptions for applying U.S.

GAAP to contract modifications, hedging relationships, and other transactions to ease the potential accounting and financial reporting burden associated with transitioning away from reference rates that are expected to be discontinued, including the London Interbank Offered Rate (“LIBOR”).

ASU 2020-04 is effective for the Company as of March 12, 2020 and generally can be applied through December 31, 2024.

On June 17, 2022, the Company entered into an amendment to its primary credit facility, which, among other things, provided for the use of a USD currency LIBOR successor rate (the Term Secured Overnight Financing Rate (“Term SOFR”)).

See Note 20 of Notes to Consolidated Financial Statements.

Note 4 – Business 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

The Company has

reportable segments:

The Company has four reportable segments:

(i) Americas;

Asia/Pacific;

(iii) Asia/Pacific;

and (iv) Global Specialty Businesses.

The three geographic segments are composed of the net sales and operations in

each respective region, excluding net sales and operations managed globally

by the Global Specialty Businesses segment, which

includes the Company’s container,

metal finishing, mining, offshore, specialty coatings, specialty grease

and Norman Hay businesses.

The three geographic segments are composed of the net sales and operations in each respective region, excluding net sales and operations managed globally by the Global Specialty Businesses segment, which includes the Company’s container, metal finishing, mining, offshore, specialty coatings, specialty grease and Norman Hay businesses.

Segment operating earnings for each of the Company’s reportable segments are comprised of the segment’s net sales less directly related COGS and SG&A.

Operating expenses not directly attributable to the net sales of each respective segment, such as certain corporate and administrative costs, Combination, integration and other acquisition-related expenses, and Restructuring and related charges, are not included in segment operating earnings.

Other items not specifically identified with the Company’s reportable segments include Interest expense, net and Other (expense) income, net.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Segment operating earnings for each of the Company’s

reportable segments are comprised of the segment’s

net sales less directly

related COGS and SG&A.

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

segment, such as certain

corporate and administrative costs, Combination, integration and other

acquisition-related expenses, and Restructuring and related

charges, are not included in segment operating earnings.

Other items not specifically identified with the Company’s

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

The following tables present information about the performance of the Company’s

reportable segments for the years ended

December 31, 2021, 2020 and 2019.

The following tables present information about the performance of the Company’s reportable segments for the years ended December 31, 2022, 2021 and 2020.

2022 2021 2020

Americas $ 696,102 $ 572,643 $ 450,161

EMEA 474,604 480,126 383,187

Asia/Pacific 386,450 388,160 315,299

Global Specialty Businesses 386,429 320,229 269,030

Total net sales $ 1,943,585 $ 1,761,158 $ 1,417,677

2022 2021 2020

Segment operating earnings

Americas $ 148,181 $ 124,863 $ 96,379

EMEA 50,708 85,209 69,163

Asia/Pacific 92,995 96,318 88,356

Global Specialty Businesses 113,940 90,632 79,690

segment operating earnings

Total segment operating earnings 405,824 397,022 333,588

Combination, integration and other acquisition-related expenses ( 8,779 ) ( 23,885 ) ( 29,790 )

1 unchanged sentence

Fair value step up of acquired inventory sold — ( 801 ) ( 226 )

Indefinite-lived intangible asset impairment

Impairment charges ( 93,000 ) — ( 38,000 )

Non-operating and administrative expenses ( 187,830 ) ( 157,864 ) ( 143,202 )

1 unchanged sentence

Operating income 52,304 150,466 59,360

Other income (expense), net

Other (expense) income, net ( 12,607 ) 18,851 ( 5,618 )

Interest expense, net ( 32,579 ) ( 22,326 ) ( 26,603 )

Income before taxes and equity in net income of

associated companies

The following tables present information regarding the Company’s

reportable segments’ assets and long-lived assets, including

certain identifiable assets as well as an allocation of shared assets, as of December

31, 2021, 2020 and 2019:

Income before taxes and equity in net income of associated companies $ 7,118 $ 146,991 $ 27,139

The following tables present information regarding the Company’s reportable segments’ assets and long-lived assets, including certain identifiable assets as well as an allocation of shared assets, as of December 31, 2022, 2021 and 2020:

2022 2021 2020

Segment assets

Americas $ 1,014,115 $ 983,521 $ 969,551

EMEA 602,289 714,659 697,821

Asia/Pacific 685,607 750,970 713,004

Global Specialty Businesses 519,611 506,610 511,458

Total segment assets $ 2,821,622 $ 2,955,760 $ 2,891,834

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

2022 2021 2020

Segment long-lived assets

Americas $ 118,525 $ 129,321 $ 122,302

EMEA 66,151 69,990 69,344

Asia/Pacific 113,476 123,130 119,233

Global Specialty Businesses 60,182 37,951 59,091

Total segment long-lived

The following tables present information regarding the Company’s

reportable segments’ capital expenditures and depreciation for

identifiable assets for the years ended December 31, 2021, 2020 and 2019:

Total segment long-lived assets $ 358,334 $ 360,392 $ 369,970

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

The following tables present information regarding the Company’s reportable segments’ capital expenditures and depreciation for identifiable assets for the years ended December 31, 2022, 2021 and 2020:

2022 2021 2020

Capital expenditures

Americas $ 18,188 $ 9,678 $ 6,451

EMEA 5,628 6,767 3,844

Asia/Pacific 3,245 2,264 5,688

Global Specialty Businesses 1,478 2,748 1,918

Total segment capital

Total segment capital expenditures $ 28,539 $ 21,457 $ 17,901

2022 2021 2020

Americas $ 8,858 $ 12,074 $ 12,322

EMEA 4,897 6,936 6,813

Asia/Pacific 4,060 4,596 4,672

Global Specialty Businesses 5,109 3,043 3,544

Total segment depreciation $ 22,924 $ 26,649 $ 27,351

During the years ended December 31, 2021, 2020 and 2019, the Company

had approximately $

million of net sales, respectively,

attributable to non-U.S.

As of December 31, 2021, 2020 and 2019, the

Company had approximately $

million and $

million of long-lived assets, respectively,

attributable to non-

Inter-segment revenue for the years ended December

31, 2021, 2020 and 2019 was $

million and $

for Americas, $

million and $

million for EMEA, $

million and $

million for Asia/Pacific

million and $

million for Global Specialty Businesses, respectively.

However, all inter-segment transactions

have been eliminated from each reportable operating segment’s

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

During the years ended December 31, 2022, 2021 and 2020, the Company had approximately $ 1,246.7 million, $ 1,198.4 million and $ 963.2 million of net sales, respectively, attributable to non-U.S.

As of December 31, 2022, 2021 and 2020, the Company had approximately $ 156.4 million, $ 155.2 million and $ 176.6 million of long-lived assets, respectively, attributable to non-U.S.

Inter-segment revenue for the years ended December 31, 2022, 2021 and 2020 was $ 11.9 million, $ 12.2 million and $ 9.1 million for Americas, $ 32.4 million, $ 29.0 million and $ 22.0 million for EMEA, $ 0.9 million, $ 1.6 million and $ 0.6 million for Asia/Pacific and $ 8.5 million, $ 7.4 million and $ 4.7 million for Global Specialty Businesses, respectively.

However, all inter-segment transactions have been eliminated from each reportable operating segment’s net sales and earnings for all periods presented in the above tables.

In January 2023, the Company reorganized certain of its executive management team to align with its new business structure, which reflects the method by which the Company will assess its performance and allocate its resources going forward.

This change was made subsequent to December 31, 2022 and therefore, the reportable segments presented in the preceding tables represented the business structure the Company operated 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.

The three geographic segments are composed of the net sales and operations in each respective region, including net sales and operations formerly included in the Global Specialty Businesses segment.

Note 5 – Net Sales and Revenue Recognition

Arrangements Resulting in Net Reporting

As part of the Company’s Fluidcare

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

Company transferred third-party products under arrangements resulting

in net reporting of $

million and $

million for the years ended December 31, 2021, 2020 and 2019, respectively.

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

The Company transferred third-party products under arrangements resulting in net reporting of $ 83.8 million, $ 71.7 million and $ 42.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Customer Concentration

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

During the year ended December 31, 2021, the

Company’s five largest

customers (each composed of multiple subsidiaries or divisions with semiautonomous

purchasing authority)

accounted for approximately

% of consolidated net sales, with its largest customer accounting

for approximately

% of consolidated

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.

During the year ended December 31, 2022, the Company’s five largest customers (each composed of multiple subsidiaries or divisions with semiautonomous purchasing authority) accounted for approximately 11 % of consolidated net sales, with its largest customer accounting for approximately 3 % of consolidated net sales.

Contract Assets and Liabilities

The Company had no material contract assets recorded on its Consolidated

Balance Sheets as of December 31, 2021 and 2020.

The Company had no material contract assets recorded on its Consolidated Balance Sheets as of December 31, 2022 and 2021.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

The Company had approximately $

million and $

million of deferred revenue as of December 31, 2021 and 2020,

respectively.

During the years ended December 31, 2021 and 2020, respectively,

the Company satisfied all of the associated

performance obligations and recognized into revenue the advance payments

received and recorded as of December 31, 2020 and 2019,

respectively.

The Company had approximately $ 5.7 million and $ 7.0 million of deferred revenue as of December 31, 2022 and 2021, respectively.

During the years ended December 31, 2022 and 2021, respectively, the Company satisfied all of the associated performance obligations and recognized into revenue the advance payments received and recorded as of December 31, 2021 and 2020, respectively.

Disaggregated Revenue

The Company sells its various industrial process fluids, its specialty chemicals

and its technical expertise as a global product

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

then by customer industry,

by individual product lines.

Also, net sales of each of the Company’s major product

lines are generally spread throughout all three of

the Company’s geographic

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

sales in each region.

The following tables present disaggregated information regarding

the Company’s net sales, first by major product

represent more than

% of the Company’s consolidated net sales for any

of the years ended December 31, 2021, 2020 and 2019, and

followed then by a disaggregation of the Company’s

net sales by segment, geographic region, customer industry,

and timing of

revenue recognized for the years ended December 31, 2021, 2020 and

The Company sells its various industrial process fluids, its specialty chemicals and its technical expertise as a global product portfolio.

The Company generally manages and evaluates its performance by segment first, and then by customer industry, rather than by individual product lines.

Also, net sales of each of the Company’s major product lines are generally spread throughout all three of the Company’s geographic regions, and in most cases, approximately proportionate to the level of total sales in each region.

The following tables present disaggregated information regarding the Company’s net sales, first by major product lines that represent more than 10 % of the Company’s consolidated net sales for any of the years ended December 31, 2022, 2021 and 2020, and followed then by a disaggregation of the Company’s net sales by segment, geographic region, customer industry, and timing of revenue recognized for the years ended December 31, 2022, 2021 and 2020.

2022 2021 2020

Metal removal fluids 22.9 % 23.4 % 23.9 %

2 unchanged sentences

Net sales for the year ending December 31, 2022

Americas EMEA Asia/Pacific Consolidated

Customer Industries

Metals $ 252,513 $ 137,767 $ 214,377 $ 604,657

Metalworking and other 443,589 336,837 172,073 952,499

696,102 474,604 386,450 1,557,156

Global Specialty Businesses 247,646 83,738 55,045 386,429

$ 943,748 $ 558,342 $ 441,495 $ 1,943,585

Timing of Revenue Recognized

1 unchanged sentence

Services transferred over time 40,138 31,365 10,638 82,141

$ 943,748 $ 558,342 $ 441,495 $ 1,943,585

Net sales for the year ending December 31, 2021

Americas EMEA Asia/Pacific Consolidated

Customer Industries

Metals $ 210,340 $ 141,950 $ 207,160 $ 559,450

Metalworking and other 362,303 338,176 181,000 881,479

572,643 480,126 388,160 1,440,929

Global Specialty Businesses 186,859 80,541 52,829 320,229

$ 759,502 $ 560,667 $ 440,989 $ 1,761,158

Timing of Revenue Recognized

1 unchanged sentence

Services transferred over time 35,145 33,584 11,859 80,588

$ 759,502 $ 560,667 $ 440,989 $ 1,761,158

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Net sales for the year ending December 31, 2020

Americas EMEA Asia/Pacific Consolidated

Customer Industries

Metals $ 163,135 $ 107,880 $ 168,096 $ 439,111

Metalworking and other 287,026 275,307 147,203 709,536

450,161 383,187 315,299 1,148,647

Global Specialty Businesses 154,796 68,164 46,070 269,030

$ 604,957 $ 451,351 $ 361,369 $ 1,417,677

Timing of Revenue Recognized

1 unchanged sentence

Services transferred over time 24,294 16,802 8,452 49,548

$ 604,957 $ 451,351 $ 361,369 $ 1,417,677

Note 6 – Leases

The Company has operating leases for certain facilities, vehicles and machinery

and equipment with remaining lease terms up to

In addition, the Company has certain land use leases with remaining lease terms up

Operating lease expense is recognized on a straight-line basis over the

Operating lease expense for the years ended

December 31, 2021, 2020 and 2019 was $

million, and $

million, respectively.

Short-term lease expense for the

years ended December 31, 2021, 2020 and 2019 was $

million and $

million, respectively.

The Company has

material variable lease costs or sublease income for the years ended

December 31, 2021, 2020 and 2019.

Cash paid for operating leases during the years ended December 31, 2021, 2020

and 2019 was $

million, respectively.

The Company recorded new right of use lease assets and associated lease liabilities of

million during

the year ended December 31, 2021.

Supplemental balance sheet information related to the Company’s

leases is as follows:

The Company has operating leases for certain facilities, vehicles and machinery and equipment with remaining lease terms up to 9 years.

In addition, the Company has certain land use leases with remaining lease terms up to 93 years.

The Company’s finance leases are included in PP&E on the Consolidated Balance Sheet.

See Note 15 of Notes to Consolidated Financial Statements.

The Company has no material variable lease costs or sublease income for the years ended December 31, 2022, 2021 and 2020.

The following table sets forth the components of the Company’s lease cost for the years ended December 31, 2022, 2021 and 2020:

December 31, 2022 December 31, 2021 December 31, 2020

Operating lease expense $ 15,171 $ 14,061 $ 14,247

Short-term lease expense 816 861 1,308

Supplemental cash flow information related to the Company’s leases is as follows:

2022 December 31,

2021 December 31,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 19,215 $ 13,859 $ 14,101

Non-cash lease liabilities activity:

Leased assets obtained in exchange for new operating lease liabilities

23,356 11,142 6,949

Supplemental balance sheet information related to the Company’s leases is as follows:

December 31, 2022 December 31, 2021

Right of use lease assets $ 43,766 $ 36,635

2 unchanged sentences

Total operating lease liabilities $ 38,991 $ 36,311

Weighted average

remaining lease term (years)

Weighted average

discount rate

Maturities of operating lease liabilities as of December 31, 2021 were

Weighted average remaining lease term (years) 5.1 5.6

Weighted average discount rate 4.36 % 4.22 %

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

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

December 31, 2022

For the year ended December 31, 2023 $ 13,551

7 unchanged sentences

Present value of lease liabilities $ 38,991

Note 7 – Restructuring and Related Activities

The Company’s Management approved a global restructuring plan (the “QH Program”) as part of its initial plan to realize certain cost synergies associated with the Combination in the third quarter of 2019.

The QH Program included restructuring and associated severance costs to reduce total headcount by approximately 400 people globally, as well as plans for the closure of certain manufacturing and non-manufacturing facilities.

As of December 31, 2022, the Company has substantially completed all of the initiatives under the QH Program with only an immaterial amount of remaining severance still to be paid, which is expected to be completed during 2023.

In response to current macroeconomic headwinds and softer operating conditions, in 2022, the Company’s Management initiated a global cost and optimization program to improve its cost structure and drive a more profitable and productive organization.

This program has and will include certain restructuring activities as part of the plan to further optimize and strengthen the Company’s footprint, optimize the go-to-market strategy, simplify the portfolio and organization, and enable the Company to deliver on its strategic plan.

During the fourth quarter of 2022, initial actions under this program included restructuring and associated severance costs to reduce headcount by approximately 40 positions globally.

These headcount reductions began in the fourth quarter of 2022 and are expected to be completed in 2023.

Under the Company’s restructuring programs, employee separation benefits varied depending on local regulations within certain foreign countries and included severance and other benefits.

The exact timing to complete all actions and final costs associated will depend on a number of factors and are subject to change.

Restructuring costs incurred during the years ended December 31, 2022, 2021 and 2020 include severance costs to reduce headcount, including customary and routine adjustments to initial estimates for employee separation costs, as well as costs to close certain facilities and are recorded in Restructuring and related charges in the Company’s Consolidated Statements of Operations.

In connection with the plans for closure of certain manufacturing and non-manufacturing facilities, the Company has made available for sale certain facilities and property.

During the years ended December 31, 2022, 2021 and 2020, certain of these facilities were sold and the Company recognized a gain of $ 0.2 million in 2022 and $ 5.4 million in 2021 and a loss of approximately $ 0.6 million in 2020, which is included within Other (expense) income, net on the Consolidated Statements of Operations.

Additionally, certain land with an aggregate book value of approximately $ 0.6 million continues to be held-for-sale as of December 31, 2022 and is recorded in Prepaid expenses and other current assets on the Company’s Consolidated Balance Sheets.

The Company expects to complete the sale of this land in 2023.

The Company will continue to evaluate actions to strengthen and optimize its existing facilities and footprint and this may include making certain other facilities or property available for sale in the future.

As described in Note 4 of Notes to Consolidated Financial Statements, Restructuring and related charges are not included in the Company’s calculation of reportable segments’ measure of operating earnings and therefore these costs are not reviewed by or recorded to reportable segments.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Note 7 – Restructuring and Related Activities

The Company’s management approved

a global restructuring plan (the “QH Program”) as part of its plan to realize certain cost

synergies associated with the Combination in

the third quarter of 2019.

The QH Program includes restructuring and associated

severance costs to reduce total headcount by approximately

people globally, as well as plans for

the closure of certain

manufacturing and non-manufacturing facilities.

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

number of factors and is subject to change;

the Company currently expects reduction in headcount and site closures to

continue to occur into 2022 under the QH Program.

Employee separation benefits will vary depending on local regulations within

certain foreign countries and will include severance and other benefits.

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

including customary and routine adjustments to initial

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

and are recorded in Restructuring and related

charges in the Company’s

Consolidated Statements of Income.

As described in Note 4 of Notes to Consolidated Financial Statements,

Restructuring and related charges are not included

in the Company’s calculation of reportable

segments’ measure of operating

earnings and therefore these costs are not reviewed by or recorded

to reportable segments.

Activity in the Company’s accrual

for restructuring under the QH Program for the years ended December 31, 2021 and 2020

Activity in the Company’s accrual for restructuring for the years ended December 31, 2022 and 2021 are as follows:

Restructuring Programs

Accrued restructuring as of December 31, 2020 $ 8,248

7 unchanged sentences

Accrued restructuring as of December 31, 2022 $ 5,483

In connection with the plans for closure of certain manufacturing

and non-manufacturing facilities, the Company has made a

decision to make available for sale certain facilities.

During the years ended December 31, 2021 and 2020, certain of these facilities

were sold and the Company recognized a gain of $

million in 2021 and a loss of approximately $

million in 2020 which is

included within other income (expense), net on the Consolidated Statement of

Additionally, certain buildings

and land with

an aggregate book value of approximately $

million continues to be held-for-sale as of December 31, 2021

and are recorded in

prepaid expenses and other current assets on the Company’s

Consolidated Balance Sheet.

The Company will continue to evaluate for

future decisions about making certain other facilities available for

Note 8 – Share-Based Compensation

The Company recognized the following share-based compensation expense

in its Consolidated Statements

of Income for the years

ended December 31, 2021, 2020 and 2019:

The Company recognized the following share-based compensation expense in its Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020:

2022 2021 2020

Stock options $ 1,774 $ 1,235 $ 1,491

1 unchanged sentence

Non-elective and elective 401(k) matching contribution in stock — 1,553 3,112

Employee stock purchase plan

Director stock ownership plan 63 901 541

Performance stock units 3,150 1,911 840

Total share-based

compensation expense

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

million and $

million during the years

ended December 31, 2021, 2020 and 2019, respectively,

recorded within Combination,

integration and other acquisition-related

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

Total share-based compensation expense $ 11,666 $ 11,038 $ 10,996

Share-based compensation expense is recorded in SG&A, except for $ 0.2 million, $ 0.9 million and $ 1.5 million during the years ended December 31, 2022, 2021 and 2020, respectively, recorded within Combination, integration and other acquisition-related expenses.

Stock Options

Stock option activity under all plans is as follows:

Options Weighted

(per option) Weighted

Term (years) Aggregate

Options outstanding as of January 1, 2022 109,684 $ 165.47

5 unchanged sentences

Options exercisable as of December 31, 2022 65,237 $ 159.93 3.9 $ 455

The total intrinsic value of options exercised during the years ended December

31, 2021, 2020 and 2019 was approximately $

million and $

million, respectively.

Intrinsic value is calculated as the difference between the current

market price of

the underlying security and the strike price of a related option.

A summary of the Company’s outstanding

stock options as of December 31, 2021 is as follows:

The total intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 was approximately $ 0.8 million, $ 2.7 million and $ 6.5 million, respectively.

Intrinsic value is calculated as the difference between the current market price of the underlying security and the strike price of a related option.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

A summary of the Company’s outstanding stock options as of December 31, 2022 is as follows:

Exercise Prices Number

Outstanding Weighted

Term (years) Weighted

Exercise Price

(per option) Number

Exercisable Weighted

Exercise Price

Exercise Prices

As of December 31, 2021, unrecognized compensation expense related

to options granted in 2021, 2020 and 2019 was $

million and $

million, respectively,

to be recognized over a weighted average period of

The Company granted stock options under its LTIP

plan that are subject only to time vesting generally over a

during 2021, 2020, 2019 and 2018.

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

used a Black-

Scholes option pricing model

and primarily used the assumptions set forth in the table below:

$ 120.01 - $ 150.00 40,781 4.5 137.28 23,262 136.64

$ 150.01 - $ 180.00 56,834 4.6 164.63 33,833 155.35

$ 220.01 - $ 250.00 21,867 5.2 245.10 8,142 245.49

119,482 4.7 183.39 65,237 159.93

As of December 31, 2022, unrecognized compensation expense related to options granted during the years ended December 31, 2022, 2021 and 2020 was $ 0.8 million, $ 0.5 million and $ 0.1 million, respectively, to be recognized over a weighted average period of 1.3 years.

The Company granted stock options under its LTIP plan that are subject only to time vesting generally over a three year period during 2022, 2021, 2020 and 2019.

For the purposes of determining the fair value of stock option awards, the Company used a Black-Scholes option pricing model and primarily used the assumptions set forth in the table below:

July 2022 Grant March 2022 Grant 2021 2020 2019

Number of stock options granted 4,837 27,077 25,250 49,115 51,610

3 unchanged sentences

Expected term (years) 4.0 4.0 4.0 4.0 4.0

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

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

the respective vesting period of each award.

compensation expense recorded on each award during the years ended

December 31, 2021, 2020 and 2019, respectively,

is as follows:

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

The compensation expense recorded on each award during the years ended December 31, 2022, 2021 and 2020, respectively, is as follows:

2022 2021 2020

2022 Stock option awards $ 783 $ — $ —

4 unchanged sentences

Restricted Stock Awards

Activity of non-vested restricted stock awards granted under the Company’s

plan is shown below:

Weighted Average

Date Fair Value

Activity of non-vested restricted stock awards granted under the Company’s LTIP plan is shown below:

Shares Weighted Average Grant Date Fair Value (per share)

Nonvested awards, December 31, 2021 68,693 $ 179.26

Granted 54,433 166.07

Vested ( 38,583 ) 175.80

Forfeited ( 5,088 ) 184.64

Nonvested awards, December 31, 2022 79,455 $ 171.61

The fair value of the non-vested stock is based on the trading price of the Company’s

common stock on the date of grant.

Company adjusts the grant date fair value for expected forfeitures based

on historical experience for similar awards.

As of December

31, 2021, unrecognized compensation expense related to these awards was $

million, to be recognized over a weighted average

remaining period of

The fair value of the non-vested stock is based on the trading price of the Company’s common stock on the date of grant.

The Company adjusts the grant date fair value for expected forfeitures based on historical experience for similar awards.

As of December 31, 2022, unrecognized compensation expense related to these awards was $ 7.4 million, to be recognized over a weighted average remaining period of 1.6 years.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Restricted Stock Units

Activity of non-vested restricted stock units granted under the Company’s

plan is shown below:

Weighted Average

Date Fair Value

Activity of non-vested restricted stock units granted under the Company’s LTIP plan is shown below:

Units Weighted Average Grant Date Fair Value (per unit)

Nonvested awards, December 31, 2021 10,977 $ 170.82

Granted 10,703 169.29

Vested ( 3,009 ) 158.09

Forfeited ( 171 ) 190.37

Nonvested awards, December 31, 2022 18,500 $ 171.83

The fair value of the non-vested restricted stock units is based on the trading price

of the Company’s common

stock on the date of

The Company adjusts the grant date fair value for expected forfeitures based on

historical experience for similar awards.

December 31, 2021, unrecognized compensation expense related

to these awards was $

million, to be recognized over a weighted

average remaining period of

The fair value of the non-vested restricted stock units is based on the trading price of the Company’s common stock on the date of grant.

The Company adjusts the grant date fair value for expected forfeitures based on historical experience for similar awards.

As of December 31, 2022, unrecognized compensation expense related to these awards was $ 1.7 million, to be recognized over a weighted average remaining period of 1.9 years.

Performance Stock Units

The Company grants performance-dependent stock awards (“PSUs”) as a component

which will be settled in a

certain number of shares subject to market-based and time-based vesting conditions.

The number of fully vested shares that may

ultimately be issued as settlement for each award may range from

% of the target award, subject to the achievement of

the Company’s total shareholder

return (“TSR”) relative to the performance of the Company’s

peer group, the S&P Midcap 400

Materials group.

The service period required for the PSUs is

and the TSR measurement period for the PSUs is generally

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

to issuances of the shares upon settlement.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

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

and is recognized on a straight-line basis over

vesting period.

The grant-date fair value of the PSUs was estimated using a Monte Carlo

simulation on the grant date

and using the following assumptions

set forth in the table below:

Fully vested shares

The Company grants performance-dependent stock awards (“PSUs”) as a component of its LTIP, which will be settled in a certain number of shares subject to market-based and time-based vesting conditions.

The number of fully vested shares that may ultimately be issued as settlement for each award may range from 0 % up to 200 % of the target award, subject to the achievement of the Company’s total shareholder return (“TSR”) relative to the performance of the Company’s peer group, the S&P Midcap 400 Materials group.

The service period required for the PSUs is three years and the TSR measurement period for the PSUs is generally from January 1 of the year of grant through December 31 of the year prior to issuances of the shares upon settlement.

Compensation expense for PSUs is measured based on their grant date fair value and is recognized on a straight-line basis over the three year vesting period.

The grant-date fair value of the PSUs was estimated using a Monte Carlo simulation on the grant date and using the following assumptions set forth in the table below:

2022 CEO Grant 2021 (1) 2021 2020

Number of PSUs granted 18,462 3,775 12,103 18,485

Risk-free interest rate 2.11 % 0.65 % 0.29 % 0.28 %

1 unchanged sentence

Expected term (years) 3.0 3.0 3.0 3.0

On September 2, 2021, the Board appointed Andrew Tometich

to serve as CEO and entered into an Employment Agreement,

and granted an equity award consisting of a mix of time-based restricted

stock and PSUs.

As of December 31, 2021, there was approximately $

million of total unrecognized compensation cost related to PSUs which

the Company expects to recognize over a weighted-average period

(1) On September 2, 2021, the Board appointed Andrew Tometich to serve as CEO and entered into an Employment Agreement, and granted an equity award consisting of a mix of time-based restricted stock and PSUs.

As of December 31, 2022, there was approximately $ 4.0 million of total unrecognized compensation cost related to PSUs which the Company expects to recognize over a weighted-average period of 1.8 years.

Defined Contribution Plan

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

The Company matches

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

% of compensation.

Additionally, the plan

provides for non-elective nondiscretionary contributions on behalf of participants

who have completed one year

of service equal to

% of the eligible participant's compensation.

Beginning in April 2020 and continuing through March 2021, the

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

in fully vested shares of the Company’s

common stock rather

For the years ended December 31, 2021, and 2020, total contributions were $

million and $

million, respectively.

Employee Stock Purchase Plan

In 2000, the Board adopted an Employee Stock Purchase Plan (“ESPP”) whereby

employees may purchase Company stock

through a payroll deduction plan.

Purchases were made from the plan and credited to each participant’s

account on the last day of

each calendar month in which the organized securities

trading markets in the U.S.

were open for business (the “Investment

The purchase price of the stock was

% of the fair market value on the Investment Date.

The plan was compensatory, and

discount was expensed on the Investment Date.

All employees, including officers, were eligible to participate

in this plan.

participant could withdraw all uninvested payment balances credited

to a participant’s account at any time.

An employee whose stock

ownership of the Company exceeds

of the outstanding common stock was not eligible to participate in this plan.

Effective January 1, 2020, the Company discontinued

2013 Director Stock Ownership Plan

In 2013, the Company adopted the 2013 Director Stock Ownership Plan (the

“Plan”), to encourage the Directors to increase their

investment in the Company,

which was approved at the Company’s May 2013

shareholders’ meeting.

The Plan authorizes the

issuance of up to

shares of Quaker common stock in accordance with the terms of the Plan in payment

of all or a portion of the

annual cash retainer payable to each of the Company’s

non-employee directors in 2013 and subsequent years during the term of the

Under the Plan, each director who, on May 1

of the applicable calendar year, owns less than

% of the annual cash retainer

for the applicable calendar year, divided

by the average of the closing price of a share of Quaker Common Stock as reported by

composite tape of the New York

Stock Exchange for the previous calendar year (the “Threshold Amount”), is required

of the annual cash retainer in Quaker common stock and

% of the retainer in cash, unless the director elects to receive a greater

percentage of Quaker common stock, up to

% of the annual cash retainer for the applicable year.

Each director who owns more

than the Threshold Amount may elect to receive common stock in payment

of a percentage (up to

%) of the annual cash retainer.

The annual retainer is $

million and the retainer payment date is June 1.

Beginning in April 2020 and continuing through March 2021, the Company matched both non-elective and elective 401(k) contributions in fully vested shares of the Company’s common stock rather than cash.

There were no matching contributions in stock for the year ended December 31, 2022.

For the years ended December 31, 2021 and 2020, total contributions in stock were $ 1.5 million and $ 3.1 million, respectively.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Note 9 – Other Income (Expense), net

Other income (expense), net, for the years ended December 31,

2021, 2020 and 2019 are as follows:

2013 Director Stock Ownership Plan

In 2013, the Company adopted the 2013 Director Stock Ownership Plan (the “Plan”), to encourage the Directors to increase their investment in the Company, which was approved at the Company’s May 2013 shareholders’ meeting.

The Plan authorizes the issuance of up to 75,000 shares of Quaker common stock in accordance with the terms of the Plan in payment of all or a portion of the annual cash retainer payable to each of the Company’s non-employee directors in 2013 and subsequent years during the term of the Plan.

Under the Plan, each director who, on May 1 of the applicable calendar year, owns less than 400 % of the annual cash retainer for the applicable calendar year, divided by the average of the closing price of a share of Quaker Common Stock as reported by the composite tape of the New York Stock Exchange for the previous calendar year (the “Threshold Amount”), is required to receive 75 % of the annual cash retainer in Quaker common stock and 25 % of the retainer in cash, unless the director elects to receive a greater percentage of Quaker common stock, up to 100 % of the annual cash retainer for the applicable year.

Each director who owns more than the Threshold Amount may elect to receive common stock in payment of a percentage (up to 100 %) of the annual cash retainer.

The annual retainer is $ 0.1 million and the retainer payment date is June 1.

Note 9 – Other (Expense) Income, net

Other (expense) income, net, for the years ended December 31, 2022, 2021 and 2020 are as follows:

2022 2021 2020

Income from third party license fees $ 1,268 $ 1,367 $ 999

Foreign exchange (losses) gains, net

Gain (loss) on disposals of property,

plant, equipment and other

tax refunds and other related credits

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

Gain on changes in insurance settlement restrictions of an inactive

subsidiary and related insurance insolvency recovery

Foreign exchange losses, net ( 9,399 ) ( 3,821 ) ( 6,082 )

Gain (loss) on disposals of property, plant, equipment and other assets, net 168 4,695 ( 871 )

Non-income tax refunds and other related (expense) credits ( 1,613 ) 15,155 3,345

Pension and postretirement benefit income (costs), non-service components 1,704 759 ( 21,592 )

Loss on extinguishment of debt ( 6,763 ) — —

Gain on insurance recoveries 1,804 — 18,144

Other non-operating income, net 224 696 439

Total other income

(expense), net

Gain (loss) on disposals of property,

plant, equipment and other assets, net, includes losses related to certain fixed

assets disposals

resulting from the property damage caused by flooding of the Company’s

Conshohocken, Pennsylvania headquarters in 2021,

described in Note 26 of Notes to Consolidated Financial Statements, as well as a gain

in 2021 and a loss in 2020 on the sale of certain

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

described in Note 7 of Notes to Consolidated Financial Statements.

income tax refunds and other related credits during the year ended

December 31, 2021 includes certain non-income tax credits for the

Company’s Brazilian subsidiaries

described in Note 26 of Notes to Consolidated Financial Statements.

Pension and postretirement

benefit income (costs), non-service components during the year ended December

31, 2020 include a $

million refund in premium

million non-cash settlement charge related to the Legacy Quaker

Pension Plan, as described in Note 21 of Notes to

Consolidated Financial Statements.

Gain on changes in insurance settlement restrictions of an inactive subsidiary

insurance insolvency recovery relate to the termination of restrictions over

certain cash that was previously designated solely to be

used for settlement of asbestos claims at an inactive subsidiary of the Company

and cash proceeds from an insolvent insurance carrier

with respect to previously filed recovery claims.

See Note 12, Note 19 and Note 26 of Notes to Consolidated Financial Statements.

Foreign exchange (losses) gains, net, during the years ended December

31, 2021, 2020 and 2019, include foreign currency transaction

losses of approximately $

million and $

million, respectively,

related to hyper-inflationary accounting for the

Company’s Argentine

subsidiaries.

Total other (expense) income, net $ ( 12,607 ) $ 18,851 $ ( 5,618 )

Foreign exchange losses, net, during the years ended December 31, 2022, 2021 and 2020, include foreign currency transaction losses of approximately $ 1.6 million, $ 0.6 million and $ 0.4 million, respectively, related to hyper-inflationary accounting.

See Note 1 of Notes to Consolidated Financial Statements.

Note 10 – Taxes

Gain (loss) on disposals of property, plant, equipment and other assets, net, includes losses related to certain fixed asset disposals resulting from the property damage caused by flooding of the Company’s Conshohocken, Pennsylvania headquarters in 2021, described in Note 26 of Notes to Consolidated Financial Statements.

This caption also includes a gain in 2022 and 2021 and a loss in 2020 on the sale of certain held-for-sale real property assets related to the Combination, described in Note 7 of Notes to Consolidated Financial Statements.

Non-income tax refunds and other related (expense) credits during the year ended December 31, 2022 includes adjustments to Combination-related indemnification assets associated with the settlement of certain income tax audits at certain of the Company’s Italian and German affiliates for tax periods prior to August 1, 2019, whereas during the year ended December 31, 2021 this includes certain non-income tax credits for the Company’s Brazilian subsidiaries described in Note 26 of Notes to Consolidated Financial Statements.

Pension and postretirement benefit income (costs), non-service components during the year ended December 31, 2020 include a $ 1.6 million refund in premium and a $ 22.7 million non-cash settlement charge related to the termination of a noncontributory U.S.

pension plan, as described in Note 21 of Notes to Consolidated Financial Statements.

Loss on extinguishment of debt during the year ended December 31, 2022 includes the write-off of certain previously unamortized deferred financing costs as well as a portion of the third party and creditor debt issuance costs incurred to execute an amendment to the Company’s primary credit facility.

See Note 20 of Notes to Consolidated Financial Statements.

Gain on insurance recoveries for the year ended December 31, 2022 reflects payments received from insurers related to the property damage incurred during 2021, noted above, whereas for the year ended December 31, 2020, this amount relates to the termination of restrictions over certain cash that was previously designated solely to be used for settlement of asbestos claims at an inactive subsidiary of the Company and cash proceeds from an insolvent insurance carrier with respect to previously filed recovery claims.

See Note 12, Note 19 and Note 26 of Notes to Consolidated Financial Statements.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Note 10 – Taxes on Income

On December 22, 2017, the U.S.

government enacted comprehensive

tax legislation commonly referred to as U.S.

implemented a new system of taxation for non-U.S.

government enacted comprehensive tax legislation which we refer to as U.S.

Tax Reform implemented a new system of taxation for non-U.S.

earnings which eliminated U.S.

income taxes on

dividends from certain foreign subsidiaries and imposed a one-time transition

tax on the deemed repatriation of undistributed earnings

of certain foreign subsidiaries that is payable over eight years.

Following numerous regulations, notices, and other formal guidance

published by the Internal Revenue Service (“I.R.S.”), U.S.

Department of Treasury,

and various state taxing authorities, the Company completed its accounting

for the transition tax and has

elected to pay its $

million transition tax in installments over eight years as permitted under

As of December

million in installments have been paid with the remaining $

million to be paid through installments in future years.

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

million on certain undistributed foreign earnings,

which primarily represents the Company’s

estimate of the non-U.S.

income taxes the Company will incur to ultimately remit certain

earnings to the U.S.

The Company’s reinvestment

assertions are further explained below.

federal income taxes on dividends from certain foreign subsidiaries and imposed a one-time transition tax on the deemed repatriation of undistributed earnings of certain foreign subsidiaries that is payable over eight years.

Following numerous regulations, notices, and other formal guidance published by the Internal Revenue Service (“IRS”), U.S.

Department of Treasury, and various state taxing authorities, the Company completed its accounting for the transition tax and has elected to pay its $ 15.5 million transition tax in installments over eight years as permitted under U.S.

As of December 31, 2022, $ 6.9 million in installments have been paid with the remaining $ 8.6 million to be paid through installments in future years.

As of December 31, 2022, the Company has a deferred tax liability of $ 6.8 million on certain undistributed foreign earnings, which primarily represents the Company’s estimate of the non-U.S.

income taxes the Company will incur to ultimately remit certain earnings to the U.S.

The Company’s reinvestment assertions as further explained below.

Taxes on income before equity in net income of associated companies for the years ended December 31, 2022, 2021 and 2020 are as follows:

2022 2021 2020

Federal $ ( 708 ) $ 955 $ ( 1,359 )

State 1,450 2,115 1,171

Foreign 34,735 44,375 33,173

35,477 47,445 32,985

Federal ( 2,798 ) ( 3,863 ) ( 28,437 )

State ( 713 ) ( 3,117 ) ( 3,087 )

Foreign ( 7,041 ) ( 5,526 ) ( 6,757 )

Total $ 24,925 $ 34,939 $ ( 5,296 )

The components of earnings before income taxes for the years ended December 31, 2022, 2021 and 2020 are as follows:

2022 2021 2020

$ ( 4,933 ) $ 7,263 $ ( 66,585 )

Foreign 12,051 139,728 93,724

Total $ 7,118 $ 146,991 $ 27,139

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Taxes on income

before equity in net income of associated companies for the years ended December

31, 2021, 2020 and 2019 are

The components of earnings before income taxes for the years ended December

31, 2021, 2020 and 2019 are as follows:

Total deferred

tax assets and liabilities are composed of the following as of December

31, 2021 and 2020:

Total deferred tax assets and liabilities are composed of the following as of December 31, 2022 and 2021:

Retirement benefits $ 8,469 $ 11,860

Allowance for doubtful accounts

Allowance for credit losses 2,246 2,155

Insurance and litigation reserves 716 675

4 unchanged sentences

Foreign tax credit and other credits 5,506 16,285

Interest 9,928 9,940

Restructuring reserves 791 631

2 unchanged sentences

Research and development 11,936 8,832

Total deferred tax

Other 4,307 2,846

82,361 88,292

Valuation allowance ( 11,730 ) ( 17,400 )

Total deferred tax assets, net $ 70,631 $ 70,892

Depreciation 11,935 11,580

Foreign pension and other 2,691 2,332

Intangibles 182,838 197,066

Lease liabilities 9,590 8,421

1 unchanged sentence

Unremitted Earnings 6,766 8,381

Total deferred tax

Total deferred tax liabilities $ 219,706 $ 233,779

The Company has $ 7.4 million of deferred tax assets related to state net operating losses.

Management analyzed the expected impact of the reversal of existing taxable temporary differences, considered expiration dates, analyzed current state tax laws, and determined that $ 1.7 million of state net operating loss carryforwards is expected to be realized as a future benefit based on the reversal of deferred tax liabilities.

Accordingly, a partial valuation allowance of $ 5.7 million has been established.

These state net operating losses are subject to various carryforward periods of 5 years to 20 years or an indefinite carryforward period.

An additional $ 0.9 million of valuation allowance was established for other net state deferred tax assets.

The Company has $ 13.1 million of deferred tax assets related to foreign net operating loss carryforwards.

A partial valuation allowance of $ 2.3 million has been established against this amount resulting in a net $ 10.8 million expected future benefit.

These foreign net operating losses are subject to various carryforward periods with the majority having an indefinite carryforward period.

An additional partial valuation allowance of $ 1.5 million has been established against certain other foreign deferred tax assets.

In conjunction with the Combination, the Company acquired foreign tax credit deferred tax assets of $ 41.8 million expiring between 2019 and 2028.

Foreign tax credits may be carried forward for 10 years.

Management analyzed the expected impact of the utilization of foreign tax credits based on certain assumptions such as projected U.S.

taxable income, overall domestic loss recapture, and annual limitations due to the ownership change under the Internal Revenue Code.

The Company had a foreign tax credit carry forward of $ 5.2 million and $ 15.9 million as of December 31, 2022 and 2021, respectively, with a $ 1.3 million and $ 5.8 million valuation allowance as of December 31, 2022 and 2021, respectively, reflecting the amount of credits that are not expected to be utilized before expiration.

The Company also acquired disallowed interest deferred tax assets of $ 14.0 million as part of the Combination.

Disallowed interest may be carried forward indefinitely.

Management analyzed the expected impact of the utilization of disallowed interest carryforwards based on projected US taxable income and determined that the Company will utilize all expected future benefits by 2028.

As of December 31, 2022, the Company had a net realizable disallowed interest carryforward of $ 10.1 million on its balance sheet related to its US operations and $ 0.6 million related to non-US operations.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

The Company has $

million of deferred tax assets related to state net operating losses.

A partial valuation allowance of $

million has been established against this amount resulting in a net $

million expected future benefit.

Management analyzed the

expected impact of the reversal of existing taxable temporary differences,

considered expiration dates, analyzed current state tax laws,

and determined that $

million of state net operating loss carryforwards will be realized based on

the reversal of deferred tax

These state net operating losses are subject to various carryforward

years or an indefinite

carryforward period.

An additional $

million of valuation allowance was established for other net state deferred tax assets.

The Company has $

million of deferred tax assets related to foreign net operating loss carryforwards.

A partial valuation

allowance of $

million has been established against the $

million due to the expected expiration of these losses before they are

able to be utilized.

These foreign net operating losses are subject to various carryforward periods with the

majority having an

indefinite carryforward period.

An additional partial valuation allowance of $

million has been established against certain other

foreign deferred tax assets.

In conjunction with the Combination, the Company acquired foreign tax

credit deferred tax assets of $

million expiring

between 2019 and 2028.

Foreign tax credits may be carried forward for

Management analyzed the expected impact of the

utilization of foreign tax credits based on certain assumptions such as projected

taxable income, overall domestic loss recapture,

and annual limitations due to the ownership change under the Internal Revenue

The Company had a foreign tax credit carry

forward of $15.9 million and $

million as of December 31, 2021 and 2020, respectively,

with a $5.8 million and $

valuation allowance as of December 31, 2021 and 2020, respectively,

reflecting the amount of credits that are not expected to be

utilized before expiration.

The Company also acquired disallowed interest deferred tax assets of $

million as part of the Combination.

interest may be carried forward indefinitely.

Management analyzed the expected impact of the utilization of disallowed interest

carryforwards based on projected US taxable income and determined

that the Company will utilize all expected future benefits by

As of December 31, 2021, the Company had a net realizable disallowed interest carryforward

million on its balance

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

million primarily related to the step-up in

intangibles resulting from the Combination and Norman Hay acquisition.

As part of the Combination, the Company acquired a

% interest in the Korea Houghton Corporation joint venture and has

million deferred tax liability for its outside basis difference.

The following are the changes in the Company’s

deferred tax asset valuation allowance for the years ended December 31, 2021,

2020 and 2019:

ended December 31, 2021

ended December 31, 2020

ended December 31, 2019

The Company’s net deferred

tax assets and liabilities are classified in the Consolidated Balance Sheets as of December

and 2020 as follows:

As of December 31, 2022, the Company had deferred tax liabilities of $ 169.4 million primarily related to the step-up in intangibles resulting from the Combination and Norman Hay acquisition.

As part of the Combination, the Company acquired a 50 % interest in the Korea Houghton Corporation joint venture and has recorded a $ 5.9 million deferred tax liability for its outside basis difference.

The following are the changes in the Company’s deferred tax asset valuation allowance for the years ended December 31, 2022, 2021 and 2020:

of Period Purchase

Adjustments Additional

Allowance Allowance

and Other Effect of

Changes Balance

Valuation Allowance

Year ended December 31, 2022 $ 17,400 $ — $ 1,326 $ ( 6,789 ) $ ( 207 ) $ 11,730

Year ended December 31, 2021 $ 21,511 $ — $ 29 $ ( 4,470 ) $ 330 $ 17,400

Year ended December 31, 2020 $ 13,834 $ 7,148 $ 2,738 $ ( 2,153 ) $ ( 56 ) $ 21,511

The Company’s net deferred tax assets and liabilities are classified in the Consolidated Balance Sheets as of December 31, 2022 and 2021 as follows:

Non-current deferred tax assets $ 11,218 $ 16,138

1 unchanged sentence

Net deferred tax liability $ ( 149,076 ) $ ( 162,887 )

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

The following is a reconciliation of income taxes at the Federal statutory rate with income taxes

recorded by the Company for the

years ended December 31, 2021, 2020 and 2019.

Certain immaterial reclassifications within the presentation of the reconciliation

income taxes have been made to the years ended December 31, 2020

The following is a reconciliation of income taxes at the Federal statutory rate with income taxes recorded by the Company for the years ended December 31, 2022, 2021 and 2020.

Certain immaterial reclassifications within the presentation of the reconciliation of income taxes have been made to the years ended December 31, 2021 and 2020:

2022 2021 2020

Income tax provision at the Federal statutory tax rate $ 1,495 $ 30,868 $ 5,699

Unremitted earnings ( 1,839 ) 1,841 ( 2,308 )

Tax law changes

Tax law changes / reform 823 1,955 ( 1,059 )

tax on foreign operations 4,864 10,479 5,140

7 unchanged sentences

Research and development credit ( 1,757 ) ( 1,685 ) ( 1,018 )

Audit Settlements 2,697 1,378 807

Uncertain tax positions ( 6,375 ) 519 1,990

2 unchanged sentences

Intercompany transfer of intangible assets ( 1,932 ) 4,347 ( 4,384 )

Goodwill Impairment 19,550 — —

Miscellaneous items, net ( 258 ) 655 ( 2,530 )

Taxes on income before

equity in net income of associated companies

Pursuant to U.S.

Reform, the Company recorded a $

million transition tax liability for U.S.

income taxes on the

undistributed earnings of non-U.S.

subsidiaries.

However, the Company may also be subject to other

taxes, such as withholding taxes

and dividend distribution taxes, if these undistributed earnings are

ultimately remitted to the U.S.

As a result of the Combination,

additional third-party debt was incurred resulting in the Company re-evaluating

its global cash strategy in order to meet its goal of

reducing leverage in upcoming years.

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

million, which

primarily represents the estimate of the non-U.S.

taxes the Company

will incur to ultimately remit these earnings to the U.S.

Company’s current intention

to reinvest its additional undistributed earnings of non-U.S.

subsidiaries to support

working capital needs

and certain other growth initiatives outside of the U.S.

The amount of such undistributed earnings at December 31, 2021 was

approximately $

Any tax liability which might result from ultimate remittance of these earnings

is expected to be

substantially offset by foreign tax credits (subject to certain limitations).

It is currently impractical to estimate any such incremental

As of December 31, 2021, the Company’s

cumulative liability for gross unrecognized tax benefits was $

Company had accrued approximately $

million for cumulative penalties and $

million for cumulative interest as of December

As of December 31, 2020, the Company’s

cumulative liability for gross unrecognized tax benefits was $

Company had accrued approximately $

million for cumulative penalties and $

million for cumulative interest as of December

The Company continues to recognize interest and penalties associated with uncertain

tax positions as a component of tax expense

on income before equity in net income of associated companies in its Consolidated

Statements of Income.

The Company recognized a

million for penalties and an expense of $

million for interest (net of expirations and settlements) in its Consolidated

Statement of Income for the year ended December 31, 2021, an expense of

million for penalties and $

interest (net of expirations and settlements) in its Consolidated Statement

of Income for the year ended December 31, 2020, and a

million for penalties and an expense of $

million for interest (net of expirations and settlements) in its Consolidated

Statement of Income for the year ended December 31, 201

The Company estimates that during the year ending December 31, 2022,

it will reduce its cumulative liability for gross

unrecognized tax benefits by approximately $

million due to the expiration of the statute of limitations with regard to certain tax

This estimated reduction in the cumulative liability for unrecognized tax

benefits does not consider any increase in liability

for unrecognized tax benefits with regard to existing tax positions or any increase

in cumulative liability for unrecognized tax benefits

with regard to new tax positions for the year ending December 31, 2022.

Taxes on income before equity in net income of associated companies $ 24,925 $ 34,939 $ ( 5,296 )

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

A reconciliation of the beginning and ending amounts of unrecognized

tax benefits for the years ended December 31, 2021, 2020

and 2019, respectively,

is as follows:

Pursuant to U.S.

Tax Reform, the Company recorded a $ 15.5 million transition tax liability for U.S.

income taxes on the undistributed earnings of non-U.S.

subsidiaries.

However, the Company may also be subject to other taxes, such as withholding taxes and dividend distribution taxes, if these undistributed earnings are ultimately remitted to the U.S.

As a result of the Combination, additional third-party debt was incurred resulting in the Company re-evaluating its global cash strategy in order to meet its goal of reducing leverage in upcoming years.

As of December 31, 2022, the Company has a deferred tax liability $ 6.8 million, which primarily represents the estimate of the non-U.S.

taxes the Company will incur to ultimately remit these earnings to the U.S.

It is the Company’s current intention to reinvest its additional undistributed earnings of non-U.S.

subsidiaries to support working capital needs and certain other growth initiatives outside of the U.S.

The amount of such undistributed earnings at December 31, 2022 was approximately $ 424.7 million.

Any tax liability which might result from ultimate remittance of these earnings is expected to be substantially offset by foreign tax credits (subject to certain limitations).

It is currently impractical to estimate any such incremental tax expense.

As of December 31, 2022, the Company’s cumulative liability for gross unrecognized tax benefits was $ 16.3 million.

The Company had accrued approximately $ 1.3 million for cumulative penalties and $ 2.7 million for cumulative interest as of December 31, 2022.

As of December 31, 2021, the Company’s cumulative liability for gross unrecognized tax benefits was $ 22.5 million.

The Company had accrued approximately $ 3.1 million for cumulative penalties and $ 3.1 million for cumulative interest as of December 31, 2021.

The Company continues to recognize interest and penalties associated with uncertain tax positions as a component of tax expense on income before equity in net income of associated companies in its Consolidated Statements of Operations.

The Company recognized a benefit of $ 1.7 million for penalties and a benefit of $ 0.3 million for interest (net of expirations and settlements) in its Consolidated Statement of Income for the year ended December 31, 2022, a benefit of $ 0.5 million for penalties and an expense of $ 0.3 million for interest (net of expirations and settlements) in its Consolidated Statement of Income for the year ended December 31, 2021, and an expense of less than $ 0.1 million for penalties and an expense of $ 0.6 million for interest (net of expirations and settlements) in its Consolidated Statement of Income for the year ended December 31, 2020.

The Company estimates that during the year ending December 31, 2022, it will reduce its cumulative liability for gross unrecognized tax benefits by approximately $ 4.9 million due to the expiration of the statute of limitations with regard to certain tax positions.

This estimated reduction in the cumulative liability for unrecognized tax benefits does not consider any increase in liability for unrecognized tax benefits with regard to existing tax positions or any increase in cumulative liability for unrecognized tax benefits with regard to new tax positions for the year ending December 31, 2022.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2022, 2021 and 2020, respectively, is as follows:

2022 2021 2020

Unrecognized tax benefits as of January 1 $ 22,464 $ 22,152 $ 19,097

Increase (decrease) in unrecognized tax benefits taken in prior periods

(Decrease) increase in unrecognized tax benefits taken in prior periods ( 1,174 ) 1,002 2,025

Increase in unrecognized tax benefits taken in current period 953 2,915 3,095

Decrease in unrecognized tax benefits due to lapse of statute of limitations ( 2,378 ) ( 1,527 ) ( 2,024 )

Decrease in unrecognized tax benefits due to audit settlements ( 2,509 ) ( 1,104 ) ( 1,635 )

Increase in unrecognized tax benefits due to acquisition — — 597

1 unchanged sentence

Unrecognized tax benefits as of December 31 $ 16,340 $ 22,464 $ 22,152

The amount of net unrecognized tax benefits above that, if recognized, would

impact the Company’s tax expense

and effective tax

million and $

million for the years ended December 31, 2021, 2020 and 2019, respectively.

The amount of net unrecognized tax benefits above that, if recognized, would impact the Company’s tax expense and effective tax rate is $ 10.2 million, $ 15.2 million and $ 14.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

Federal income tax,

as well as the income tax of various state and foreign

tax jurisdictions.

Tax years that remain

subject to examination by major tax jurisdictions include Italy from 2007, Brazil from

the Netherlands, Mexico and China from

, Mexico, Canada, Germany,

and the United Kingdom from

from fiscal year beginning April 1,

and ending March 31, 2020, and various U.S.

Federal income tax, as well as the income tax of various state and foreign tax jurisdictions.

Tax years that remain subject to examination by major tax jurisdictions include Italy from 2007, Brazil from 2011, the Netherlands from 2016, Canada, China, Mexico, Germany, Spain and the U.S.

from 2018, the United Kingdom from 2019, India from fiscal year beginning April 1, 2017 and ending March 31, 2018, and various U.S.

state tax jurisdictions from 2011.

As previously reported, the Italian tax authorities have assessed additional

tax due from the Company’s subsidiary,

Quaker Italia

S.r.l., relating to the tax years 2007

through 2015.

The Company has filed for competent authority relief from these assessments under

the Mutual Agreement Procedures (“MAP”) of the Organization

for Economic Co-Operation and Development for all years except

In 2020, the respective tax authorities in Italy,

Spain, and Netherland reached agreement with respect to the MAP proceedings,

which the Company has accepted.

As of December 31, 2021, the Company has received $

million in refunds from the Netherlands

and Spain and has an accrual for $

million due to Italy.

In February 2022, the Company received a settlement notice from the

Italian taxing authorities confirming the amount due of $

million, having granted the Company’s

request to utilize its remaining net

operating losses to partially offset the liability.

This amendment to the tax assessment is expected to result in the Company

recognizing tax expense of $

million in Q1 2022.

Houghton Italia, S.r.l is also involved

in a corporate income tax audit with the Italian tax authorities covering tax years 2014

through 2018.

As of December 31, 2021, the Company has a $

million reserve for uncertain tax positions relating to matters

related to this audit.

Because the reserve relates to the tax periods prior to August 1, 2019, the tax liability

was established through

purchase accounting related to the Combination.

The Company has also submitted an indemnification claim against funds held in

escrow by Houghton’s former owners

and as a result, a corresponding $

million indemnification receivable has also been

established through purchase accounting.

During the fourth quarter of 2021, the Company settled a portion of the

Houghton Italia,

corporate income tax

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

The Company remains under audit

for tax years 2016 through 2018 and believes it has adequate reverses

for the remaining uncertain tax positions.

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

tax years 2015 through 2017.

preliminary audit findings, primarily related to transfer pricing,

the Company has recorded a reserve for $

million as of December

Of this amount, $

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

has submitted an

indemnification claim with Houghton’s

former owners for any tax liabilities arising pre-Combination.

As a result, a corresponding

indemnification receivable has also been established.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

As previously reported, the Italian tax authorities have assessed additional tax due from the Company’s subsidiary, Quaker Italia S.r.l., relating to the tax years 2007 through 2015.

The Company has filed for competent authority relief from these assessments under the Mutual Agreement Procedures (“MAP”) of the Organization for Economic Co-Operation and Development for all years except 2007.

In 2020, the respective tax authorities in Italy, Spain, and the Netherlands reached agreement with respect to the MAP proceedings, which the Company has accepted.

As of December 31, 2022, the Company has received $ 1.6 million in refunds from the Netherlands and Spain.

In February 2022, the Company received a settlement notice from the Italian taxing authorities confirming the amount due of $ 2.6 million, having granted the Company’s request to utilize its remaining net operating losses to partially offset the liability.

As of December 31, 2022, the Company has paid the full settlement, of which approximately $ 0.2 million was refunded.

Houghton Italia, S.r.l is also involved in a corporate income tax audit with the Italian tax authorities covering tax years 2014 through 2018.

During the fourth quarter of 2021, the Company settled a portion of the Houghton Italia, S.r.l.

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

During the year ended December 31, 2022, the Company settled tax years 2016 through 2018 for a total of $ 2.0 million.

In total, the Company has now settled all years 2014 through 2018 for $ 3.7 million.

Accordingly, the Company has released all reserves relating to this audit for the settled tax years.

As a result of the settlement and reserve release the Company recognized a net benefit to the tax provision of $ 1.9 million during the year ended December 31, 2022.

The Company has an indemnification receivable of $ 3.6 million in connection with its claim against the former owners of Houghton for any pre-Combination tax liabilities arising from this matter, as well as other audit settlements and tax matters.

Houghton Deutschland GmbH was also under audit by the German tax authorities for tax years 2015 through 2017.

In the second quarter of 2022, the Company settled the corporate tax audit for the tax years 2015-2017 with the German tax authorities for a total of $ 0.3 million.

The Company has an indemnification receivable of $ 0.3 million in connection with its claim against the former owners of Houghton for any pre-Combination tax liabilities arising from this matter.

Note 11 – Earnings Per Share

The following table summarizes earnings per share calculations for

the years ended December 31, 2021, 2020 and 2019:

The following table summarizes earnings per share calculations for the years ended December 31, 2022, 2021 and 2020:

2022 2021 2020

Basic earnings per common share

Net income attributable to Quaker Chemical Corporation

income allocated to participating securities

Net income available to common shareholders

Net (loss) income attributable to Quaker Chemical Corporation $ ( 15,931 ) $ 121,369 $ 39,658

loss (income) allocated to participating securities 92 ( 480 ) ( 148 )

Net (loss) income available to common shareholders $ ( 15,839 ) $ 120,889 $ 39,510

Basic weighted average common shares outstanding 17,841,487 17,805,034 17,719,792

Basic earnings per common share

Basic (loss) earnings per common share $ ( 0.89 ) $ 6.79 $ 2.23

Diluted earnings per common share

Net income attributable to Quaker Chemical Corporation

income allocated to participating securities

Net income available to common shareholders

Net (loss) income attributable to Quaker Chemical Corporation $ ( 15,931 ) $ 121,369 $ 39,658

loss (income) allocated to participating securities 92 ( 479 ) ( 148 )

Net (loss) income available to common shareholders $ ( 15,839 ) $ 120,890 $ 39,510

Basic weighted average common shares outstanding 17,841,487 17,805,034 17,719,792

1 unchanged sentence

Diluted weighted average common shares outstanding 17,856,492 17,855,124 17,750,879

Diluted earnings per common share

The Company’s calculation

of earnings per diluted share attributable to Quaker Chemical Corporation common

shareholders for

the year ended December 31, 2019 was impacted by the variability of

its reported earnings during the year and the approximately

million shares issued as a component of the consideration transferred in

the Combination, comprising

% of the common stock of

the Company immediately after the closing.

Certain stock options, restricted stock units and PSUs are not included in the diluted

earnings per share calculation when the effect would

have been anti-dilutive.

The calculated amount of anti-diluted shares not

included were

Diluted (loss) earnings per common share $ ( 0.89 ) $ 6.77 $ 2.22

Certain stock options, restricted stock units and PSUs are not included in the diluted earnings per share calculation when the effect would have been anti-dilutive.

The calculated amount of anti-diluted shares not included were 28,222 in 2022, 4,070 in 2021 and 945 in 2020.

Note 12 – Restricted Cash

Prior to December 2020, the Company had restricted cash recorded in other assets related to proceeds from an inactive subsidiary

of the Company which previously executed separate settlement and release agreements with two of its insurance carriers for an

original total value of $ 35.0 million.

The proceeds of both settlements were restricted and could only be used

to pay claims and costs

of defense associated with the subsidiary’s

asbestos litigation.

The proceeds of the settlement and release agreements were deposited

into interest bearing accounts which earned less then $

million and $

million in the years ended December 31, 2020, and 2019,

respectively, offset

million and $

million of net payments during 2020 and 2019, respectively.

Due to the restricted nature

of the proceeds, a corresponding deferred credit was established in other

non-current liabilities for an equal and offsetting amount that

continued until the restrictions lapsed.

During December 2020, the restrictions ended on these previously received

settlements and the Company transferred

the cash into an operating account.

In connection with the termination in restrictions, the Company recognized

on its Consolidated Statement of Income in Other income (expense

), net, for the amount of previously restricted cash, net of the

estimated liability to pay claims and associated with the inactive subsidiary’s

asbestos litigation as of December 31, 2020.

due to these restrictions ending, there is

restricted cash for the year ended December 31, 2021.

See Notes 18, 22 and 26 of Notes to

Consolidated Financial Statements.

The following table provides a reconciliation of cash, cash equivalents

and restricted cash as December 31, 2021, 2020, 2019 and

Prior to December 2020, the Company had restricted cash recorded in other assets related to proceeds from an inactive subsidiary of the Company which previously executed separate settlement and release agreements with two of its insurance carriers for an original total value of $ 35.0 million.

The proceeds of both settlements were restricted and could only be used to pay claims and costs of defense associated with the subsidiary’s asbestos litigation.

The proceeds of the settlement and release agreements were deposited into interest bearing accounts which earned less than $ 0.1 million for the year ended December 31, 2020, offset by $ 1.0 million of net payments during 2020.

Due to the restricted nature of the proceeds, a corresponding deferred credit was established in other non-current liabilities for an equal and offsetting amount that continued until the restrictions lapsed.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

During December 2020, the restrictions ended on these previously received insurance settlements and the Company transferred the cash into an operating account.

In connection with the termination in restrictions, the Company recognized a $ 35.0 million gain on its Consolidated Statement of Income in Other income (expense), net, for the amount of previously restricted cash, net of the estimated liability to pay claims and associated with the inactive subsidiary’s asbestos litigation as of December 31, 2020.

Therefore, due to these restrictions ending, there was no restricted cash for the years ended December 31, 2021 and 2022, respectively.

See Notes 18, 22 and 26 of Notes to Consolidated Financial Statements.

The following table provides a reconciliation of cash, cash equivalents and restricted cash as December 31, 2022, 2021, 2020 and 2019:

2022 2021 2020 2019

Cash and cash equivalents $ 180,963 $ 165,176 $ 181,833 $ 123,524

2 unchanged sentences

Cash, cash equivalents and restricted cash $ 180,963 $ 165,176 $ 181,895 $ 143,555

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

Note 13 – Accounts Receivable and Allowance for Doubtful Accounts

As of December 31, 2021 and 2020, the Company had gross trade accounts receivable

million and $

respectively.

The following are changes in the allowance for doubtful accounts during the years

ended December 31, 2021, 2020 and 2019:

Exchange Rate

Allowance for Doubtful Accounts

ended December 31, 2021

ended December 31, 2020

ended December 31, 2019

Included in exchange rate changes and other adjustments for the year

ended December 31, 2019 are the allowance for doubtful

accounts of $

million related to the acquired receivables in connection with the Combination and

Norman Hay acquisition.

Note 13 – Accounts Receivable and Allowance for Credit Losses

As of December 31, 2022 and 2021, the Company had gross trade accounts receivable totaling $ 486.4 million and $ 443.0 million, respectively.

The following are changes in the allowance for credit losses during the years ended December 31, 2022, 2021 and 2020:

of Period Changes

Expenses Write-Offs

Allowance Exchange Rate

Adjustments Balance

Allowance for Credit Losses

Year ended December 31, 2022 $ 12,334 $ 4,319 $ ( 2,441 ) $ ( 685 ) $ 13,527

Year ended December 31, 2021 $ 13,145 $ 653 $ ( 946 ) $ ( 518 ) $ 12,334

Year ended December 31, 2020 $ 11,716 $ 3,582 $ ( 2,187 ) $ 34 $ 13,145

Note 14 – Inventories

1 unchanged sentence

Raw materials and supplies $ 151,105 $ 129,382

Work in process,

finished goods and reserves

Work in process, finished goods and reserves 133,743 135,149

Total inventories, net $ 284,848 $ 264,531

Note 15 – Property,

Plant and Equipment

Property, plant and equipment

as of December 31, 2021 and 2020 were as follows:

Note 15 – Property, Plant and Equipment

Property, plant and equipment as of December 31, 2022 and 2021 were as follows:

Land $ 29,010 $ 30,793

Building and improvements 138,759 134,313

1 unchanged sentence

Construction in progress 20,324 16,459

Property, plant and equipment,

Property, plant and equipment, at cost 428,190 434,344

accumulated depreciation ( 229,595 ) ( 236,824 )

Total property,

plant and equipment, net

As of December 31, 2021, PP&E includes $

million of finance lease assets and future minimum lease payments.

In connection

with the plans for closure of certain facilities, certain buildings and land with an aggregate book value of approximately $ 0.7 million

continue to be held-for-sale as of December 31, 2021 and are recorded in prepaid expenses and other current assets on the Company’s

Consolidated Balance Sheet.

Total property, plant and equipment, net $ 198,595 $ 197,520

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

As of December 31, 2022, PP&E includes $ 0.6 million of finance lease assets and future minimum lease payments.

Land with an aggregate book value of approximately $ 0.6 million is held-for-sale as of December 31, 2022 and is recorded in Prepaid expenses and other current assets on the Company’s Consolidated Balance Sheets.

Note 16 – Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the years ended December 31,

2021 and 2020 were as follows:

Changes in the carrying amount of goodwill for the years ended December 31, 2022 and 2021 were as follows:

Americas EMEA Asia/Pacific Global Specialty Businesses Total

Balance as of December 31, 2020 $ 213,242 $ 140,162 $ 158,090 $ 119,718 $ 631,212

Goodwill additions 1,490 3,380 1,308 2,624 8,802

Currency translation and other

Currency translation and other adjustments ( 709 ) ( 8,022 ) 3,060 ( 3,149 ) ( 8,820 )

Balance as of December 31, 2021 214,023 135,520 162,458 119,193 631,194

Goodwill additions

Currency translation and other

Goodwill additions (reductions) 1,853 251 — ( 59 ) 2,045

Goodwill impairments — ( 93,000 ) — — ( 93,000 )

Currency translation and other adjustments 23 ( 8,204 ) ( 12,083 ) ( 4,967 ) ( 25,231 )

Balance as of December 31, 2022 $ 215,899 $ 34,567 $ 150,375 $ 114,167 $ 515,008

Other adjustments in the table above includes updates to the Company’s

allocation of the Houghton purchase price and associated

goodwill to each of the Company’s

reportable segments during the year ended December 31, 2020, including

million decrease

in the Americas, a $

million decrease in EMEA, a $

million increase in Asia/Pacific and a $

million increase in Global

Specialty Businesses.

Gross carrying amounts and accumulated amortization for definite-lived

intangible assets as of December 31, 2021 and 2020 were

Gross carrying amounts and accumulated amortization for definite-lived intangible assets as of December 31, 2022 and 2021 were as follows:

Gross Carrying

Amount Accumulated

Amortization Net Book Value

2022 2021 2022 2021 2022 2021

Customer lists and rights to sell $ 831,600 $ 853,122 $ 191,286 $ 147,858 $ 640,314 $ 705,264

Trademarks, formulations and product

Total definite-lived

intangible assets

The Company recorded $

million and $

million of amortization expense during the years ended December

31, 2021, 2020 and 2019, respectively.

Amortization is recorded within SG&A in the Company’s

Consolidated Statements of Income.

Estimated annual aggregate amortization expense for the subsequent

five years is as follows:

Trademarks, formulations and product technology 158,564 163,974 46,281 38,747 112,283 125,227

Other 7,576 6,309 6,390 5,900 1,186 409

Total definite-lived intangible assets $ 997,740 $ 1,023,405 $ 243,957 $ 192,505 $ 753,783 $ 830,900

The Company recorded $ 57.5 million, $ 59.9 million and $ 55.9 million of amortization expense during the years ended December 31, 2022, 2021 and 2020, respectively.

Amortization is recorded within SG&A in the Company’s Consolidated Statements of Operations.

Estimated annual aggregate amortization expense for the subsequent five years is as follows:

For the year ended December 31, 2023 $ 57,822

3 unchanged sentences

For the year ended December 31, 2027 55,897

The Company has four indefinite-lived intangible assets totaling $

million as of December 31, 2021, including $

million of indefinite-lived intangible assets for trademarks and tradename associated

with the Combination.

Comparatively, the

Company had four indefinite-lived intangible assets for trademarks and

tradename totaling $

million as of December 31, 2020.

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 in one or more of its reporting units.

completed its annual impairment assessment during the fourth quarter

of 2021 and concluded

impairment charge was warranted.

The Company continually evaluates financial performance, economic

conditions and other relevant developments in assessing if an

interim period impairment test for one or more of its reporting units is necessary.

As of March 31, 2020, the Company evaluated the initial impact of COVID-19

on the Company’s operations,

and the volatility

and uncertainty in the economic outlook as a result of COVID-19 to determine

if they indicated it was more likely than not that the

carrying value of any of the Company’s

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

concluded that the impact of COVID-19 did not represent a triggering

event as of March 31, 2020 with regards to the Company’s

The Company has four indefinite-lived intangible assets totaling $ 189.1 million as of December 31, 2022, including $ 188.0 million of indefinite-lived intangible assets for trademarks and tradename associated with the Combination.

Comparatively, the Company had four indefinite-lived intangible assets for trademarks and tradename totaling $ 196.9 million as of December 31, 2021.

During the first quarter of 2020, the Company recorded a $ 38.0 million non-cash impairment charge to write down the value of certain indefinite-lived intangible assets related to certain acquired Houghton trademarks and tradenames and is primarily the result of the negative impacts of COVID-19 on their estimated fair values.

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 in one or more of its reporting units.

The Company completed its annual impairment assessment as of October 1, 2022 and concluded no impairment charge was warranted.

The Company continually evaluates 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.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

reporting units or indefinite-lived and long-lived assets, except for the Company’s

Houghton and Fluidcare

tradename indefinite-lived intangible assets.

The determination of estimated fair value of the Houghton and Fluidcare

trademarks and tradename indefinite-lived assets was

based on a relief from royalty valuation method which requires management’s

judgment and often involves the use of significant

estimates and assumptions, including assumptions with respect to the

weighted average cost of capital (“WACC”)

and royalty rates, as

well as revenue growth rates and terminal growth rates.

In the first quarter of 2020, as a result of the impact of COVID-19 driving

decrease in projected legacy Houghton net sales in the current year

and the impact of the current year decline on projected future

legacy Houghton net sales as well as an increase in the WACC

assumption utilized in the quantitative impairment assessment,

Company concluded that the estimated fair values of the Houghton and

trademarks and tradename intangible assets were

less than their carrying values.

As a result, an impairment charge of $

million, primarily related to the Houghton trademarks and

tradename, to write down the carrying values of these intangible assets to their estimated

fair values was recorded in the first quarter

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 Company’s cost of capital, among other factors.

During the third quarter of 2022, the Company concluded that the escalation of these events adversely impacted the Company’s EMEA reporting unit’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 the carrying value of the long-lived assets, and it was 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 judgment and are based upon certain significant assumptions including the weighted average cost of capital (“WACC”) as well as projected EBITDA, which includes assumptions related to revenue growth rates, gross margin levels and operating expenses.

The estimated fair value of the EMEA reporting unit as of this interim impairment assessment exceeded its carrying value and the Company concluded no impairment was warranted.

During the fourth quarter of 2022, subsequent to the Company completing its annual impairment test as of October 1, 2022, the Company concluded that the continued negative impacts of the aforementioned events, most notably the continued rise in interest rates which led to an increase in the Company’s cost of capital, as well as lower than expected financial performance driven by the ongoing lag in margin recovery represented an additional triggering event for the Company’s EMEA reporting unit and the associated goodwill, as well as the related asset group.

As a result of this conclusion, the Company completed an interim impairment assessment as of December 31, 2022 for its EMEA reporting unit and the related asset group.

The Company concluded that the undiscounted cash flows exceeded the carrying value of the long-lived assets, and it was not more likely than not that an impairment exists.

The estimates of future discounted cash flows involve considerable judgment and are based upon certain significant assumptions including the WACC as well as projected EBITDA, which includes assumptions related to revenue growth rates, gross margin levels and operating expenses.

As a result of the impact of financial, economic, and geopolitical conditions driving a decrease in EMEA earnings in the current year, the impact of the current year decline on projected future earnings, as well as an increase in the WACC assumption utilized in this fourth quarter interim quantitative impairment assessment, the Company concluded that the estimated fair value of the EMEA reporting unit was less than its carrying value.

As a result, a non-cash impairment charge of $ 93.0 million to write down the carrying value of the EMEA reporting unit Goodwill to its estimated fair values was recorded in the fourth quarter of 2022.

Notwithstanding the results of the Company’s annual and trigger based interim impairment assessments during 2022 and the goodwill impairment charge taken in the fourth quarter of 2022, if the Company is unable to successfully implement actions 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 potentially lead to an additional impairment of the EMEA reporting unit’s remaining goodwill or other indefinite-lived or long-lived assets.

Note 17 – Investments in Associated Companies

As of December 31, 2021, the Company held a

% investment in and had significant influence over Nippon Quaker Chemical,

As of December 31, 2022, the Company held a 50 % investment in and had significant influence over Nippon Quaker Chemical, Ltd.

(“Nippon Japan”), Kelko Quaker Chemical, S.A.

(“Kelko Panama”)

and Houghton Korea acquired in 2019 in connection with the

Combination, and held a

% investment in and had significant influence over Primex, Ltd.

The carrying amount of the Company’s

equity investments as of December 31, 2021 was $

million, which includes

investments of $

million in Houghton Korea;

(“Kelko Panama”) and Houghton Korea, and held a 32 % investment in and had significant influence over Primex, Ltd.

The carrying amount of the Company’s equity investments as of December 31, 2022 was $ 88.2 million, which includes investments of $ 62.9 million in Houghton Korea;

$ 18.1 million in Primex;

$ 6.6 million in Nippon Japan;

million in Kelko

The Company also has a

% equity interest in Kelko Venezuela.

Due to heightened foreign exchange controls, deteriorating

economic circumstances and other restrictions in Venezuela,

during 2018 the Company concluded that it no longer had significant

influence over this affiliate.

Prior to this determination, the Company historically accounted for this affiliate

under the equity method.

As of December 31, 2021 and 2020, the Company had

remaining carrying value for its investment in Kelko Venezuela.

The following table is a summary of equity income in associated companies by

investment for the years ending December 31,

2021, 2020 and 2019:

Ended December 31,

Houghton Korea

Total equity in net

income of associated companies

(1) In February 2021, the Company acquired a

% ownership interest in Grindaix.

From that date through September 2021

when the Company purchased the remaining interest of Grindaix, the

Company accounted for its

% interest under the

equity method of accounting and recorded equity in net income of associated

See Note 2 of Notes to

Consolidated Financial Statements.

As the Combination closed on August 1, 2019, the Company included five

months of equity income from Houghton Korea in its

December 31, 2019 Consolidated Statement of Income.

and $ 0.6 million in Kelko Panama.

The Company also has a 50 % equity interest in Kelko Venezuela.

Due to heightened foreign exchange controls, deteriorating economic circumstances and other restrictions in Venezuela, during 2018 the Company concluded that it no longer had significant influence over this affiliate.

Prior to this determination, the Company historically accounted for this affiliate under the equity method.

As of December 31, 2022 and 2021, the Company had no remaining carrying value for its investment in Kelko Venezuela.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

The following table is a summary of equity income in associated companies by investment for the years ending December 31, 2022, 2021 and 2020:

Year Ended December 31,

2022 2021 2020

Houghton Korea $ 2,644 $ 3,808 $ 5,241

Nippon Japan 323 461 853

Kelko Panama 425 154 107

Grindaix (1) — ( 37 ) —

Primex ( 1,427 ) 4,993 1,151

Total equity in net income of associated companies $ 1,965 $ 9,379 $ 7,352

(1) In February 2021, the Company acquired a 38 % ownership interest in Grindaix.

From that date through September 2021 when the Company purchased the remaining interest of Grindaix, the Company accounted for its 38 % interest under the equity method of accounting and recorded equity in net income of associated companies.

See Note 2 of Notes to Consolidated Financial Statements.

Note 18 – Other Non-Current Assets

Other non-current assets as of December 31, 2022 and 2021 were as follows:

Pension assets

Uncertain tax positions

Pension assets (See Note 21) $ 8,639 $ 7,916

Uncertain tax positions (See Note 10) 5,803 6,931

Debt issuance costs (See Note 20) 4,305 4,267

Indemnification assets 3,909 6,630

Debt issuance costs

Supplemental retirement income program

Total other non

-current assets

As of December 31, 2021 and 2020, indemnification assets relates to certain

Houghton foreign subsidiaries for which the

Company expects it will incur additional tax amounts which are subject

to indemnification under the terms of the Combination share

and purchase agreement.

These indemnification assets have a corresponding uncertain tax position recorded

in other non-current

As of December 31, 2021 and 2020, one of the Company’s

foreign pension plan’s fair value of

plan assets exceeded its

gross benefit obligation and was therefore over-funded,

which is represented by the line Pension assets in the table above.

10, 12, 21 and 22 of Notes to Consolidated Financial Statements.

Supplemental retirement income program (See Notes 21 and 24) 2,114 2,269

Other 2,969 2,946

Total other non -current assets $ 27,739 $ 30,959

As of December 31, 2022 and 2021, indemnification assets relates to certain Houghton foreign subsidiaries for which the Company expects it will incur additional tax amounts which are subject to indemnification under the terms of the Combination share and purchase agreement.

A portion of these indemnification assets have a corresponding uncertain tax position recorded in other non-current liabilities.

As of December 31, 2022 and 2021, one of the Company’s foreign pension plan’s fair value of plan assets exceeded its gross benefit obligation and was therefore over-funded, which is represented by the line Pension assets in the table above.

See Notes 10, 12, 21 and 22 of Notes to Consolidated Financial Statements.

Note 19 – Other Accrued Liabilities

1 unchanged sentence

Non-income taxes $ 25,525 $ 23,725

Current income taxes payable

Professional fees, legal, and acquisition-related accruals

Current income taxes payable (See Note 10) 12,966 16,642

Short-term lease liabilities (See Note 6) 12,024 9,976

Selling expenses and freight accruals 9,822 11,695

Short-term lease liabilities

Customer advances and sales return reserves 6,585 7,965

Interest rate swap

Total other accrued

Professional fees, legal, and acquisition-related accruals 5,415 12,264

Accrued interest (See Note 20) 2,749 2,129

Interest rate swap (See Note 25) — 1,782

Other 11,787 9,439

Total other accrued liabilities $ 86,873 $ 95,617

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Note 20 – Debt

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

As of December 31, 2021

As of December 31, 2020

As of December 31, 2022 As of December 31, 2021

Rate Outstanding

Balance Interest

Rate Outstanding

Credit Facilities:

EURO Term Loan

Original Revolver — % $ — 1.62 % $ 211,955

Original U.S.

Term Loan — % — 1.65 % 540,000

Original EURO Term Loan — % — 1.50 % 137,616

Amended Revolver 5.17 % 195,673 — % —

Term Loan 5.70 % 596,250 — % —

Amended EURO Term Loan 1.50 % 151,572 — % —

Industrial development bonds 5.26 % 10,000 5.26 % 10,000

Bank lines of credit and other debt obligations

Bank lines of credit and other debt obligations Various 1,303 Various 1,777

Total debt $ 954,798 $ 901,348

debt issuance costs ( 1,992 ) ( 8,001 )

1 unchanged sentence

Total long-term debt $ 933,561 $ 836,412

Credit facilities

The Company, its wholly owned subsidiary, Quaker Chemical B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S.

Dollar swing line lender and letter of credit issuer, and the other lenders party thereto, entered into a credit agreement on August 1, 2019, as amended (the “Original Credit Facility”).

The Original Credit Facility was comprised of a $ 400.0 million multicurrency revolver (the “Original Revolver”), a $ 600.0 million term loan (the “Original U.S.

Term Loan”), each with the Company as borrower, and a $ 150.0 million (as of August 1, 2019) Euro equivalent term loan (the “Original EURO Term Loan”) with Quaker Chemical B.V., a Dutch subsidiary of the Company as borrower, each with a five year term, maturing in August 2024.

During June 2022, the Company, and its wholly owned subsidiary, Quaker Houghton B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S.

Dollar swing line lender and letter of credit issuer, Bank of America Europe Designated Active Company, as Euro Swing Line Lender, certain guarantors and other lenders entered into an amendment to the Original Credit Facility (the “Amended Credit Facility”).

The Amended Credit Facility established (A) a new $ 150.0 million Euro equivalent senior secured term loan (the “Amended Euro Term Loan”), (B) a new $ 600.0 million senior secured term loan (the “Amended U.S.

Term Loan”), and (C) a new $ 500.0 million senior secured revolving credit facility (the “Amended Revolver”).

The Company has the right to increase the amount of the Amended Credit Facility by an aggregate amount not to exceed the greater of $ 300.0 million or 100 % of Consolidated EBITDA, subject to certain conditions including the agreement to provide financing by any lender providing such increase.

In addition, the Amended Credit Facility also:

(i) eliminated the requirement that material foreign subsidiaries must guaranty the Original Euro Term Loan;

(ii) replaced the U.S.

Dollar borrowings reference rate from LIBOR to SOFR;

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

(iv) effected certain other changes to the Original Credit Facility as set forth in the Amended Credit Facility.

The Company used the proceeds of the Amended Credit Facility to repay all outstanding loans under the Original Credit Facility, unpaid accrued interest and fees on the closing date under the Original Credit Facility and certain expenses and fees.

Dollar-denominated borrowings under the Amended Credit Facility bear interest, at the Company’s election, at the base rate or term SOFR plus an applicable rate ranging from 1.00 % to 1.75 % for term SOFR loans and from 0.00 % to 0.75 % for base rate loans, depending upon the Company’s consolidated net leverage ratio.

Loans based on term SOFR also include a spread adjustment equal to 0.10 % per annum.

Borrowings under the Amended Credit Facility denominated in currencies other than U.S.

Dollars bear interest at the alternative currency term rate plus the applicable rate ranging from 1.00 % to 1.75 %

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Credit facilities

The Company’s primary credit facility

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

million multicurrency

revolver (the “Revolver”), a $

million term loan (the “U.S.

Loan”), each with the Company as borrower,

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

Loan” and together with the “U.S.

“Term Loans”)

with Quaker Chemical B.V.,

a Dutch subsidiary of the Company as borrower, each

term maturing in

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

may designate additional

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

million at the Company’s

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

the Company has satisfied certain other conditions.

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

applicable margin based upon the Company’s

consolidated net leverage ratio.

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

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

currency LIBOR successor rate.

The variable interest

rate incurred on the outstanding borrowings under the Credit Facility as of and

during the year ended December 31, 2021 was

approximately

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

the Company is required to pay

a commitment fee ranging from

% depending on the Company’s consolidated

net leverage ratio to the lenders under the

Revolver in respect of the unutilized commitments thereunder.

The Company has unused capacity under the Revolver of

approximately $

million, net of bank letters of credit of approximately $

million, as of December 31, 2021.

The Credit Facility is subject to certain financial and other covenants

The Company’s initial consolidated net

consolidated adjusted EBITDA ratio could not exceed

to 1, with step downs in the permitted ratio over the term of the Credit

As of December 31, 2021, the consolidated net debt to adjusted EBITDA

may not exceed

The Company’s

consolidated adjusted EBITDA to interest expense ratio cannot be less than

to 1 over the term of the agreement.

Facility also prohibits the payment of cash dividends if the Company

is in default or if the amount of the dividend paid annually

exceeds the greater of $

% of consolidated adjusted EBITDA unless the ratio of consolidated net debt

consolidated adjusted EBITDA is less than

to 1, in which case there is no such limitation on amount.

As of December 31, 2021

and December 31, 2020, the Company was in compliance with all of the Credit Facility covenants.

The Term Loans have quarterly

principal amortization during their five year terms, with

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

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

During the year ended December 31, 2021, the

Company made four quarterly amortization payments related to the

Term Loans totaling $

The Credit Facility is

guaranteed by certain of the Company’s

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

the Company and the domestic subsidiary guarantors, subject to certain

customary exclusions.

The obligations of the Dutch borrower

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

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

% of its total Term Loans.

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

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

in November 2019, the Company entered into $

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

plus an applicable margin as provided in the Credit Facility,

based on the Company’s consolidated

net leverage ratio.

At the time the

Company entered into the swaps, and as of December 31, 2021,

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

plus an applicable margin, was

The Amended Credit Facility contains affirmative and negative covenants, financial covenants and events of default, including without limitation restrictions on (a) the incurrence of additional indebtedness;

(b) investments in and acquisitions of other businesses, lines of business and divisions;

and (d) dispositions of assets.

Dividends and share repurchases are permitted in annual amounts not exceeding the greater of $ 75 million annually and 25 % of consolidated EBITDA if there is no default.

If the 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 a consolidated interest coverage ratio test and a consolidated net leverage ratio test.

The consolidated net leverage ratio at the end of a quarter may not be greater than 4.00 to 1.00, subject to a permitted increase during a four-quarter period after certain acquisitions.

The Company has the option of replacing the consolidated net leverage ratio test with a consolidated senior net leverage ratio test if the Company issues certain types of unsecured notes, subject to certain limitations.

Events of default in the Amended Credit Facility include without limitation defaults for non-payment, breach of representations and warranties, non-performance of covenants, cross-defaults, insolvency, and a change of control in certain circumstances.

The occurrence of an event of default under the Amended Credit Facility could result in all loans and other obligations becoming immediately due and payable and the Amended Credit Facility being terminated.

As of December 31, 2022 and December 31, 2021, the Company was in compliance with all of the Amended and Original Credit Facility covenants.

The weighted average variable interest rate incurred on the outstanding borrowings under the Original Credit Facility and the Amended Credit Facility during the twelve months ended December 31, 2022 was approximately 3.0 %.

As of December 31, 2022, the interest rate on the outstanding borrowings under the Amended Credit Facility was approximately 4.9 %.

In addition to paying interest on outstanding principal under the Original Credit Facility, the Company was required to pay a commitment fee ranging from 0.2 % to 0.3 % depending on the Company’s consolidated net leverage ratio under the Original Revolver in respect of the unutilized commitments thereunder.

As part of the Amended Credit Facility, the Company is required to pay a commitment fee ranging from 0.150 % to 0.275 % related to unutilized commitments under the Amended Revolver, depending on the Company’s consolidated net leverage ratio.

The Company had unused capacity under the Amended Revolver of approximately $ 301.1 million, which is net of bank letters of credit of approximately $ 3 million, as of December 31, 2022.

The Company previously capitalized $ 23.7 million of certain third-party debt issuance costs in connection with executing the Original Credit Facility.

Approximately $ 15.5 million of the capitalized costs were attributed to the Original Term Loans and recorded as a direct reduction of Long-term debt on the Company’s Consolidated Balance Sheet.

Approximately $ 8.3 million of the capitalized costs were attributed to the Original Revolver and recorded within Other assets on the Company’s Consolidated Balance Sheet.

These capitalized costs are being amortized into interest expense over the five year term of the Original Credit Facility.

Prior to executing the Amended Credit Facility, as of December 31, 2021, the Company had $ 8.0 million of debt issuance costs recorded as a reduction of Long-term debt attributable to the Original Credit Facility and $ 4.3 million of debt issuance costs recorded within Other assets attributable to the Original Credit Facility.

In connection with executing the Amended Credit Facility, the Company recorded a loss on extinguishment of debt of approximately $ 6.8 million which includes the write-off of certain previously unamortized deferred financing costs as well as a portion of the third-party and creditor debt issuance costs incurred to execute the Amended Credit Facility.

Also in connection with executing the Amended Credit Facility, during the second quarter of 2022, the Company capitalized $ 2.2 million of certain third-party and creditor debt issuance costs.

Approximately $ 0.7 million of the capitalized costs were attributed to the Amended Euro Term Loan and Amended U.S.

These costs were recorded as a direct reduction of Long-term debt on the Consolidated Balance Sheet.

Approximately $ 1.5 million of the capitalized costs were attributed to the Amended Revolver and recorded within Other assets on the Consolidated Balance Sheet.

These capitalized costs, as well as the previously capitalized costs that were not written off will collectively be amortized into Interest expense over the five year term of the Amended Credit Facility.

As of December 31, 2022, the Company had $ 2.0 million of debt issuance costs recorded as a reduction of Long-term debt on the Consolidated Balance Sheet and $ 4.3 million of debt issuance costs recorded within Other assets on the Consolidated Balance Sheet.

The Original Credit Facility required the Company to fix its variable interest rates on at least 20 % of its total Term Loans.

In order to satisfy this requirement as well as to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, in November 2019, the Company entered into $ 170.0 million notional amounts of three year interest rate swaps at a base rate of 1.64 % plus an applicable margin as provided in the Credit Facility, based on the Company’s consolidated net leverage ratio.

At the time the Company entered into the swaps, the aggregate interest rate on the swaps, including the fixed base rate plus an applicable margin, was 3.1 %.

The Amended Credit Facility does not require the Company to fix variable interest rates on any portion of its borrowings.

In October 2022, the Company’s interest rate swap contracts expired.

Upon expiration, the Company received a cash payment from the counterparties of $ 0.2 million.

See Note 25 of Notes to Consolidated Financial Statements.

The Company capitalized $

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

the Credit Facility.

Approximately $

million of the capitalized costs were attributed to the Term

Loans and recorded as a direct reduction of long-

term debt on the Company’s Consolidated

Balance Sheet.

Approximately $

million of the capitalized costs were attributed to the

Revolver and recorded within other assets on the Company’s

Consolidated Balance Sheet.

These capitalized costs are being

amortized into interest expense over the

term of the Credit Facility.

As of December 31, 2021 and 2020, the Company had

million and $

million, respectively, of debt

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

As of December 31,

2021 and 2020, the Company had $

million and $

million, respectively, of

debt issuance costs recorded within other non-current

Industrial development bonds

As of December 31, 2021 and 2020, the Company had fixed rate, industrial

development authority bonds totaling $

principal amount due in

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

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Industrial development bonds

As of December 31, 2022 and 2021, the Company had fixed rate, industrial development authority bonds totaling $ 10.0 million in principal amount due in 2028.

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

Bank lines of credit and other debt obligations

The Company has certain unsecured bank lines of credit and discounting

facilities in certain foreign subsidiaries, which are not

collateralized.

The Company’s other debt obligations

primarily consist of certain domestic and foreign low interest rate or interest-

free municipality-related loans, local credit facilities of certain foreign subsidiaries

and capital lease obligations.

capacity under these arrangements as of December 31, 2021, was approximately

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

above, the Company’s only other

sheet arrangements include certain financial and other guarantees.

The Company’s total bank letters

of credit and guarantees

outstanding as of December 31, 2021 were approximately $

The Company incurred the following debt related expenses included

within Interest expense, net, in the Consolidated Statements

Ended December 31,

The Company has certain unsecured bank lines of credit and discounting facilities in certain foreign subsidiaries, which are not collateralized.

The Company’s other debt obligations primarily consist of certain domestic and foreign low interest rate or interest-free municipality-related loans, local credit facilities of certain foreign subsidiaries and capital lease obligations.

Total unused capacity under these arrangements as of December 31, 2022, was approximately $ 35 million.

In addition to the bank letters of credit described in the “Credit facilities” subsection above, the Company’s only other off-balance sheet arrangements include certain financial and other guarantees.

The Company’s total bank letters of credit and guarantees outstanding as of December 31, 2022 were approximately $ 5 million.

The Company incurred the following debt related expenses included within Interest expense, net, in the Consolidated Statements of Operations:

Year Ended December 31,

2022 2021 2020

Interest expense $ 33,691 $ 19,089 $ 23,552

Amortization of debt issuance costs 2,942 4,749 4,749

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

as of December 31, 2021 and 2020, the amounts at which

the Company’s total debt were recorded

are not materially different from their fair market value.

At December 31, 2021, annual maturities on long-term borrowings maturing

in the next five fiscal years (excluding the reduction

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

are as follows:

Note 21 – Pension and Other Postretirement

The following table shows the funded status of the Company’s

plans’ reconciled

with amounts reported in the Consolidated

Balance Sheets as of December 31, 2021 and 2020:

Pension Benefits

Total $ 36,633 $ 23,838 $ 28,301

Based on the variable interest rates associated with the Amended Credit Facility and the Original Credit Facility, as of December 31, 2022 and 2021, the amounts at which the Company’s total debt were recorded are not materially different from their fair market value.

At December 31, 2022, annual maturities on long-term borrowings maturing in the next five fiscal years (excluding the reduction to long-term debt attributed to capitalized and unamortized debt issuance costs) are as follows:

For the year ended December 31, 2023 $ 19,063

For the year ended December 31, 2024 23,740

For the year ended December 31, 2025 37,745

For the year ended December 31, 2026 37,705

For the year ended December 31, 2027 825,964

Total maturities on debt in the next five fiscal years 944,217

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Note 21 – Pension and Other Postretirement Benefits

The following table shows the funded status of the Company’s plans’ reconciled with amounts reported in the Consolidated Balance Sheets as of December 31, 2022 and 2021:

Pension Benefits Other Post-

Retirement Benefits

2022 2021 2022 2021

Total Foreign U.S.

Change in benefit obligation

Gross benefit obligation at beginning

Gross benefit obligation at beginning of year $ 228,752 $ 103,420 $ 332,172 $ 247,675 $ 109,969 $ 357,644 $ 2,010 $ 3,234

Service cost 465 47 512 698 547 1,245 — 1

Interest cost 3,079 2,145 5,224 2,594 1,737 4,331 37 27

10 unchanged sentences

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Pension Benefits

Pension Benefits Other Post-

Retirement Benefits

2022 2021 2022 2021

Total Foreign U.S.

Change in plan assets

Fair value of plan assets at

beginning of year

Fair value of plan assets at beginning of year $ 216,886 $ 77,680 $ 294,566 $ 228,789 $ 73,481 $ 302,270 $ — $ —

Actual return on plan assets ( 65,396 ) ( 14,871 ) ( 80,267 ) 915 7,201 8,116 — —

7 unchanged sentences

Net benefit obligation recognized $ ( 610 ) $ ( 19,495 ) $ ( 20,105 ) $ ( 11,866 ) $ ( 25,740 ) $ ( 37,606 ) $ ( 1,606 ) $ ( 2,010 )

Amounts recognized in the balance

sheet consist of:

Amounts recognized in the balance sheet consist of:

Non-current assets $ 8,639 $ — $ 8,639 $ 7,916 $ — $ 7,916 $ — $ —

2 unchanged sentences

Net benefit obligation recognized $ ( 610 ) $ ( 19,495 ) $ ( 20,105 ) $ ( 11,866 ) $ ( 25,740 ) $ ( 37,606 ) $ ( 1,606 ) $ ( 2,010 )

Amounts not yet reflected in net

periodic benefit costs and included in

accumulated other comprehensive loss:

Amounts not yet reflected in net periodic benefit costs and included in accumulated other comprehensive loss:

Prior service (cost) credit ( 333 ) ( 36 ) ( 369 ) ( 22 ) 43 21 16 46

Accumulated (loss) gain ( 10,387 ) 2,532 ( 7,855 ) ( 19,163 ) ( 9,763 ) ( 28,926 ) 1,218 1,034

Cumulative employer contributions

in excess of or (below) net

periodic benefit cost

AOCI ( 10,720 ) 2,496 ( 8,224 ) ( 19,185 ) ( 9,720 ) ( 28,905 ) 1,234 1,080

Cumulative employer contributions in excess of or (below) net periodic benefit cost 10,110 ( 21,991 ) ( 11,881 ) 7,319 ( 16,020 ) ( 8,701 ) ( 2,840 ) ( 3,090 )

Net benefit obligation recognized $ ( 610 ) $ ( 19,495 ) $ ( 20,105 ) $ ( 11,866 ) $ ( 25,740 ) $ ( 37,606 ) $ ( 1,606 ) $ ( 2,010 )

The accumulated benefit obligation for all defined benefit pension plans was

million Foreign) and $

and approximately $

million Foreign) as of December 31, 2021 and

2020, respectively.

Information for pension plans with an accumulated benefit obligation

in excess of plan assets:

Projected benefit obligation

The accumulated benefit obligation for all defined benefit pension plans was $ 204.5 million ($ 79.1 million U.S.

and $ 125.4 million Foreign) and $ 321.5 million ($ 103.4 million U.S.

and approximately $ 218.1 million Foreign) as of December 31, 2022 and 2021, respectively.

Information for pension plans with an accumulated benefit obligation in excess of plan assets:

Total Foreign U.S.

Accumulated benefit obligation 5,983 79,086 85,069 128,268 103,420 231,688

Fair value of plan assets 1,842 59,591 61,433 119,181 77,680 196,861

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts, unless otherwise stated

Information for pension plans with a projected benefit obligation

in excess of plan assets:

Information for pension plans with a projected benefit obligation in excess of plan assets:

Total Foreign U.S.

Projected benefit obligation $ 71,318 $ 79,086 $ 150,404 $ 138,963 $ 103,420 $ 242,383

Fair value of plan assets 61,805 59,591 121,396 119,181 77,680 196,861

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Components of net periodic benefit costs – pension plans:

Total Foreign U.S.

Service cost $ 465 $ 47 $ 512 $ 698 $ 547 $ 1,245

Interest cost 3,079 2,145 5,224 2,594 1,737 4,331

3 unchanged sentences

Actuarial loss amortization 658 323 981 996 2,252 3,248

Prior service cost (credit)

Prior service cost (credit) amortization 3 7 10 3 7 10

Net periodic benefit (income) cost $ ( 131 ) $ ( 987 ) $ ( 1,118 ) $ ( 360 ) $ 932 $ 572

Service cost $ 4,340 $ 491 $ 4,831

Interest cost 3,416 2,923 6,339

Expected return on plan assets ( 4,262 ) ( 4,810 ) ( 9,072 )

Settlement loss

Settlement (gain) loss ( 88 ) 22,667 22,579

Curtailment charge ( 1,155 ) — ( 1,155 )

Actuarial loss amortization 886 2,110 2,996

1 unchanged sentence

Net periodic benefit cost $ 2,970 $ 23,381 $ 26,351

Other changes recognized in other comprehensive

income – pension plans:

Net (gain) loss arising during

Effect of plan amendment

Recognition of amortization in net

periodic benefit cost

Other changes recognized in other comprehensive income – pension plans:

Total Foreign U.S.

Net (gain) loss arising during the period $ ( 7,008 ) $ ( 3,555 ) $ ( 10,563 ) $ ( 388 ) $ ( 448 ) $ ( 836 )

Settlement loss — ( 323 ) ( 323 ) ( 83 ) ( 2,252 ) ( 2,335 )

2 unchanged sentences

Curtailment Recognition ( 3 ) — ( 3 ) ( 3 ) — ( 3 )

Effect of exchange rates on amounts

included in AOCI

Total recognized

comprehensive (income) loss

Total recognized

in net periodic

benefit cost and other

comprehensive (income) loss

Effect of exchange rates on amounts included in AOCI ( 1,169 ) — ( 1,169 ) ( 1,390 ) — ( 1,390 )

Total recognized in other comprehensive (income) loss ( 8,464 ) ( 2,638 ) ( 11,102 ) ( 2,818 ) ( 9,632 ) ( 12,450 )

Total recognized in net periodic benefit cost and other comprehensive (income) loss $ ( 8,595 ) $ ( 3,625 ) $ ( 12,220 ) $ ( 3,178 ) $ ( 8,700 ) $ ( 11,878 )

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Net loss arising during period

Recognition of amortization in net periodic benefit

Net (gain) loss arising during period $ ( 1,594 ) $ 1,536 $ ( 58 )

Recognition of amortization in net periodic benefit cost

Settlement loss ( 39 ) ( 22,667 ) ( 22,706 )

Prior service credit 1,325 50 1,375

Actuarial loss

Effect of exchange rates on amounts included

Total recognized

in other comprehensive loss

Total recognized

in net periodic benefit cost and

other comprehensive loss

Components of net periodic benefit costs – other postretirement

Actuarial (loss) gain ( 758 ) 3,967 3,209

Curtailment Recognition ( 3 ) — ( 3 )

Effect of exchange rates on amounts included in AOCI 1,535 — 1,535

Total recognized in other comprehensive loss 466 ( 17,114 ) ( 16,648 )

Total recognized in net periodic benefit cost and other comprehensive loss $ 3,436 $ 6,267 $ 9,703

Components of net periodic benefit costs – other postretirement plan:

2022 2021 2020

Service cost $ — $ 1 $ 5

Interest cost 37 27 77

2 unchanged sentences

Net periodic benefit costs $ ( 74 ) $ ( 85 ) $ 77

Other changes recognized in other comprehensive

income – other postretirement benefit plans:

Other changes recognized in other comprehensive income – other postretirement benefit plans:

2022 2021 2020

Net (gain) loss arising during period $ ( 263 ) $ ( 992 ) $ ( 864 )

Recognition of amortizations in net periodic

Recognition of amortizations in net periodic benefit cost ( 2 ) ( 78 ) —

Prior service credit 32 31 —

Actuarial gain amortization 79 82 5

Total recognized

in other comprehensive (income)

Total recognized

in net periodic benefit cost and

other comprehensive (income) loss

Weighted-average

assumptions used to determine benefit obligations as of December 31, 2021 and 2020:

Other Postretirement

Pension Benefits

Weighted-average assumptions used to determine net periodic benefit costs for the years ended December 31, 2022, 2021 and 2020:

Pension Benefits Other Postretirement

2022 2021 2020 2022 2021 2020

Discount rate 2.67 % 2.67 % 3.11 % 2.45 % 1.90 % 2.99 %

Expected long-term return on

Rate of compensation increase

Expected long-term return on plan assets 5.75 % 5.75 % 6.50 % N/A N/A N/A

Rate of compensation increase N/A 6.00 % 6.00 % N/A N/A N/A

Foreign Plans:

Discount rate

Expected long-term return on

Rate of compensation increase

The long-term rates of return on assets were selected from within the reasonable

range of rates determined by (a) historical real

returns for the asset classes covered by the investment policy and (b) projections

of inflation over the long-term period during which

benefits are payable to plan participants.

See Note 1 of Notes to Consolidated Financial Statements for further

Assumed health care cost trend rates as of December

31, 2021 and 2020:

Discount rate 3.97 % 1.38 % 2.30 % N/A N/A N/A

Expected long-term return on plan assets 2.26 % 2.06 % 2.20 % N/A N/A N/A

Rate of compensation increase 3.21 % 2.52 % 2.79 % N/A N/A N/A

The long-term rates of return on assets were selected from within the reasonable range of rates determined by (a) historical real returns for the asset classes covered by the investment policy and (b) projections of inflation over the long-term period during which benefits are payable to plan participants.

See Note 1 of Notes to Consolidated Financial Statements for further information.

Assumed health care cost trend rates as of December 31, 2022, 2021 and 2020:

2022 2021 2020

Health care cost trend rate for next year 5.60 % 5.65 % 5.70 %

Rate to which the cost trend rate is assumed to decline (the

ultimate trend rate)

that the rate reaches the ultimate trend rate

Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 4.00 % 4.00 % 4.50 %

Year that the rate reaches the ultimate trend rate 2047 2046 2037

Plan Assets and Fair Value

The Company’s pension plan

target asset allocation and the weighted-average asset allocations as of December

31, 2021 and 2020

by asset category were as follows:

Asset Category

The Company’s pension plan target asset allocation and the weighted-average asset allocations as of December 31, 2022 and 2021 by asset category were as follows:

Asset Category Target 2022 2021

Equity securities 32 % 32 % 46 %

Debt securities 60 % 60 % 48 %

Other 8 % 8 % 6 %

Total 100 % 100 % 100 %

Foreign Plans

1 unchanged sentence

Debt securities 79 % 79 % 43 %

Other 6 % 13 % 21 %

Total 100 % 100 % 100 %

As of December 31, 2022 and 2021, “Other” consisted principally of cash and cash equivalents, and investments in real estate funds.

The following is a description of the valuation methodologies used for the investments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, where applicable:

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and money market funds and are classified as Level 1 investments.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

As of December 31, 2021 and 2020, “Other” consisted principally of cash

and cash equivalents, and investments in real estate

The following is a description of the valuation methodologies used for

the investments measured at fair value, including the

general classification of such instruments pursuant to the valuation

where applicable:

Cash Equivalents

cash equivalents

are classified

1 investments.

Commingled Funds

plan commingled

funds represent

pooled institutional

These commingled funds are not available on an exchange or in an active market

and these investments are valued using

(“NAV”), which is

the underlying

As of December 31, 2021, the foreign pension plan commingled funds

included approximately

percent of investments in

equity securities,

percent of investments in fixed income securities, and

percent of other non-related investments, primarily

Pooled Separate

on the reported

are not traded

on an exchange

active market;

however, valuation

the underlying

pooled separate

2 investments.

As of December 31,

2021, the U.S.

pension plan pooled separate accounts included approximately 49 percent of investments in equity securities and 51

percent of investments in fixed income securities.

Investments in foreign pension plans fixed income government securities were

valued using third party pricing services

which are based on a combination of quoted market prices on an exchange

in an active market as well as proprietary pricing

using observable

2 investments.

Investments in the foreign pension plan insurance contract are valued at

the highest value available for the Company at year

end, either the reported cash surrender value of the contract or the vested benefit

Both the cash surrender value and

the vested benefit obligation are determined based on unobservable inputs, which

are contractually or actuarially determined,

regarding returns, fees, the present value of the future cash flows of the contract

and benefit obligations.

The contract is classified

as a Level 3 investment.

in the foreign

plans diversified

equity securities

of registered

quoted redemption

on an exchange

active market;

is determined

the underlying

are classified

2 investments.

– Foreign Registered

in the foreign

income securities

quoted redemption

on an exchange

active market;

is determined

the underlying

are classified

2 investments.

Investments in the U.S.

pooled separate accounts consist primarily of mutual funds, each of which follows a separate investment strategy, and are valued based on the reported unit value at year end.

Foreign pension plan commingled funds represent pooled institutional investments, including primarily collective investment trusts.

These commingled funds are not available on an exchange or in an active market and these investments are valued using their net asset value (“NAV”), which is generally based on the underlying asset values of the investments held in the trusts.

As of December 31, 2022, the foreign pension plan commingled funds included approximately 34 percent of investments in equity securities, 50 percent of investments in fixed income securities, and 16 percent of other non-related investments, primarily real estate.

As of December 31, 2021, the foreign pension plan commingled funds included approximately 35 percent of investments in equity securities, 51 percent of investments in fixed income securities, and 14 percent of other non-related investments, primarily real estate.

Pooled Separate Accounts

Investments in the U.S.

pension plan pooled separate accounts consist of annuity contracts and are valued based on the reported unit value at year end.

Units of the pooled separate account are not traded on an exchange or in an active market;

however, valuation is based on the underlying investments of each pooled separate account and are classified as Level 2 investments.

As of December 31, 2022, the U.S.

pension plan pooled separate accounts included approximately 35 percent of investments in equity securities and 65 percent of investments in fixed income securities.

Fixed Income Government Securities

Investments in foreign pension plans fixed income government securities were valued using third party pricing services which are based on a combination of quoted market prices on an exchange in an active market as well as proprietary pricing models and inputs using observable market data and are classified as Level 2 investments.

Insurance Contract

Investments in the foreign pension plan insurance contract are valued at the highest value available for the Company at year end, either the reported cash surrender value of the contract or the vested benefit obligation.

Both the cash surrender value and the vested benefit obligation are determined based on unobservable inputs, which are contractually or actuarially determined, regarding returns, fees, the present value of the future cash flows of the contract and benefit obligations.

The contract is classified as a Level 3 investment.

Diversified Equity Securities - Registered Investment Companies

Investments in the foreign pension plans diversified equity securities of registered investment companies are based upon the quoted redemption value of shares in the fund owned by the plan at year end.

The shares of the fund are not available on an exchange or in an active market;

however, the fair value is determined based on the underlying investments in the fund as traded on an exchange in an active market and are classified as Level 2 investments.

Fixed Income – Foreign Registered Investment Companies

Investments in the foreign pension plans fixed income securities of foreign registered investment companies are based upon the quoted redemption value of shares in the fund owned by the plan at year end.

The shares of the fund are not available on an exchange or in an active market;

however, the fair value is determined based on the underlying investments in the fund as traded on an exchange in an active market and are classified as Level 2 investments.

Diversified Investment Fund - Registered Investment Companies

Investments in the foreign pension plan diversified investment fund of registered investment companies are based upon the quoted redemption value of shares in the fund owned by the plan at year end.

This fund is not available on an exchange or in an active market and this investment is valued using its NAV, which is generally based on the underlying asset values of the investments held.

As of December 31, 2021, the diversified investment funds included approximately 62 percent of investments in equity securities, 20 percent of investments in fixed income securities, and 18 percent of other alternative investments.

There were no such investments as of December 31, 2022.

Other – Alternative Investments

Investments in the foreign pension plans include certain other alternative investments such as inflation and interest rate swaps.

These investments are valued based on unobservable inputs, which are contractually or actuarially determined, regarding returns, fees, the present value of future cash flows of the contract and benefit obligations.

These alternative investments are classified as Level 3 investments.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Diversified Investment Fund - Registered Investment

in the foreign

plan diversified

is not available

on an exchange

active market

the underlying

of the investments

the diversified

funds included

approximately

of investments

Other – Alternative Investments

in the foreign

plans include

certain other

These investments

contractually

or actuarially

These alternative

are classified

and foreign pension plans’

investment in real estate consists of investments

in property funds.

underlying investments consist of real property which are valued using unobservable

These property

funds are classified

as a Level 3 investment.

and foreign pension plans’ investment in real estate consists of investments in property funds.

The funds’ underlying investments consist of real property which are valued using unobservable inputs.

These property funds are classified as a Level 3 investment.

As of December 31, 2022 and 2021, the U.S.

and foreign plans’ investments

measured at fair value on a recurring basis were as

Measurements at December 31, 2021

Using Fair Value

Pension Assets

and foreign plans’ investments measured at fair value on a recurring basis were as follows:

Fair Value Measurements at December 31, 2022

Fair Value Using Fair Value Hierarchy

Pension Assets Level 1 Level 2 Level 3

Pooled separate accounts $ 54,596 $ — $ 54,596 $ —

Real estate 4,995 — — 4,995

Subtotal U.S.

pension plan assets in fair value hierarchy $ 59,591 $ — $ 54,596 $ 4,995

pension plan assets $ 59,591

Foreign Pension Assets

3 unchanged sentences

Fixed income – foreign registered investment companies 54,098 — 54,098 —

Fixed income government securities

Other - alternative investments

Real estate 3,907 — — 3,907

Sub-total of foreign pension assets in fair value hierarchy $ 128,102 $ 4,923 $ 59,309 $ 63,870

Commingled funds measured at NAV 1,842

Diversified investment fund -

registered investment

companies measured at NAV

Total foreign pension

Total pension

assets in fair value hierarchy

Total pension

assets measured at NAV

Total pension

Total foreign pension assets $ 129,944

Total pension assets in fair value hierarchy $ 187,693 $ 4,923 $ 113,905 $ 68,865

Total pension assets measured at NAV 1,842

Total pension assets $ 189,535

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Measurements at December 31, 2020

Using Fair Value

Pension Assets

Fair Value Measurements at December 31, 2021

Fair Value Using Fair Value Hierarchy

Pension Assets Level 1 Level 2 Level 3

Pooled separate accounts $ 72,721 $ — $ 72,721 $ —

Real estate 4,959 — — 4,959

Subtotal U.S.

pension plan assets in fair value hierarchy $ 77,680 $ — $ 72,721 $ 4,959

pension plan assets $ 77,680

Foreign Pension Assets

4 unchanged sentences

Fixed income government securities 35,339 — 35,339 —

Real estate 6,588 — — 6,588

Other - alternative investments 6,979 — — 6,979

1 unchanged sentence

Commingled funds measured at NAV 2,300

Diversified investment fund -

registered investment

companies measured at NAV

Total foreign pension

Total pension

assets in fair value hierarchy

Total pension

assets measured at NAV

Total pension

Certain investments that are measured at fair value using the NAV

per share (or its equivalent) have not been classified in the fair

value hierarchy.

The fair value amounts presented for these investments in the preceding

tables are intended to permit reconciliation

of the fair value hierarchies to the line items presented in the statements of net assets available

for benefits.

Changes in the fair value of the plans’ Level 3 investments during the years

ended December 31, 2021 and 2020 were as follows:

Diversified investment fund - registered investment companies measured at NAV 49,572

Total foreign pension assets $ 216,886

Total pension assets in fair value hierarchy $ 242,694 $ 1,989 $ 122,652 $ 118,053

Total pension assets measured at NAV 51,872

Total pension assets $ 294,566

Certain investments that are measured at fair value using the NAV per share (or its equivalent) have not been classified in the fair value hierarchy.

The fair value amounts presented for these investments in the preceding tables are intended to permit reconciliation of the fair value hierarchies to the line items presented in the statements of net assets available for benefits.

Changes in the fair value of the plans’ Level 3 investments during the years ended December 31, 2022 and 2021 were as follows:

Contract Real Estate Alternative

Investments Total

Balance as of December 31, 2020 $ 112,920 $ 9,775 $ 10,638 $ 133,333

Unrealized gains (losses)

Purchases 1,722 ( 78 ) ( 334 ) 1,310

Settlements ( 1,812 ) — — ( 1,812 )

Unrealized (losses) gains ( 5,031 ) 1,926 ( 3,282 ) ( 6,387 )

Currency translation adjustment ( 8,272 ) ( 76 ) ( 43 ) ( 8,391 )

Balance as of December 31, 2021 99,527 11,547 6,979 118,053

Unrealized (losses) gains

Purchases ( 1,136 ) ( 122 ) ( 6,979 ) ( 8,237 )

Unrealized losses ( 32,305 ) ( 1,842 ) — ( 34,147 )

Currency translation adjustment ( 6,123 ) ( 681 ) — ( 6,804 )

1 unchanged sentence

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

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

its Legacy Quaker noncontributory U.S.

plan (“Legacy Quaker U.S.

In 2018, the Company began the process of terminating a noncontributory U.S.

pension plan.

During the third quarter of 2019, the Company received a favorable termination

determination letter from the I.R.S.

and completed the Legacy Quaker

Pension Plan termination during the first quarter of 2020.

In order to terminate the Legacy Quaker U.S.

Pension Plan in accordance

and Pension Benefit Guaranty Corporation

requirements, the Company was required to fully fund the Legacy Quaker

Pension Plan on a termination basis and the amount

necessary to do so was approximately $

million, subject to final true up adjustments.

In the third quarter of 2020, the Company

finalized the amount of the liability and related annuity payments and

received a refund in premium of approximately $

addition, the Company recorded a non-cash pension settlement charge

at plan termination of approximately $

settlement charge included the immediate recognition

into expense of the related unrecognized losses within AOCI on the balance

sheet as of the plan termination date.

In connection with the Combination, the Company indirectly acquired all of

Houghton’s defined benefit pension

plans, which are

included in the tables set forth above.

The pension plans cover certain U.S.

salaried and hourly employees

as well as certain

employees in the U.K., France and Germany.

The Houghton U.S.

plans provide benefits based on an employee’s

years of service and

compensation received for the highest five consecutive years of

The foreign plans provide benefits based on a formula of

years and service and a percentage of compensation which varies among

the various countries.

The Company contributes to a multiemployer defined benefit pension

plan under terms of a collective bargaining union contract

(the Cleveland Bakers and Teamsters

Pension Fund, Employer Identification Number:

During 2019, the Company received a favorable termination determination letter from the I.R.S.

and completed the termination during 2020.

In order to terminate the plan in accordance with I.R.S.

and Pension Benefit Guaranty Corporation requirements, the Company was required to fully fund the plan on a termination basis and the amount necessary to do so was approximately $ 1.8 million, subject to final true up adjustments.

In 2020, the Company finalized the amount of the liability and related annuity payments and received a refund in premium of approximately $ 1.6 million.

In addition, the Company recorded a non-cash pension settlement charge at plan termination of approximately $ 22.7 million.

This settlement charge included the immediate recognition into expense of the related unrecognized losses within AOCI on the balance sheet as of the plan termination date.

The Company contributes to a multiemployer defined benefit pension plan under terms of a collective bargaining union contract (the Cleveland Bakers and Teamsters Pension Fund, Employer Identification Number:

34-0904419-001).

The expiration date of the

collective bargaining contract is

As of January 1, 2020, the last valuation date available for the multiemployer plan,

total plan liabilities were approximately $

As of December 31, 2020, the multiemployer pension plan had total plan assets

of approximately $

The Company’s contribution

rate to the multiemployer pension plan is specified in the collective

bargaining union contract and contributions are made

to the plan based on its union employee payroll.

The Company contributed $

million during the year ended December 31, 2021.

The Employee Retirement Income Security Act of 1974, as amended by

Employer Pension Plan Amendments Act of 1980, imposes certain contingent

liabilities upon an employer who is a contributor to a

multiemployer pension plan if the employer withdraws from the plan

or the plan is terminated or experiences a mass withdrawal.

While the Company may also have additional liabilities imposed by

law as a result of its participation in the multiemployer defined

benefit pension plan, there is

liability as of December 31, 2021.

The Pension Protection Act of 2006 (the “PPA”)

also added special funding and operational rules generally applicable to plan

years beginning after 2007 for multiemployer plans with certain classifications based

on a multitude of factors (including, for

example, the plan’s funded

percentage, cash flow position and whether the plan is projected to experience

a minimum funding

The expiration date of the collective bargaining contract is May 1, 2025.

As of January 1, 2021, the last valuation date available for the multiemployer plan, total plan liabilities were approximately $ 583 million.

As of December 31, 2021, the multiemployer pension plan had total plan assets of approximately $ 427 million.

The Company’s contribution rate to the multiemployer pension plan is specified in the collective bargaining union contract and contributions are made to the plan based on its union employee payroll.

The Company contributed $ 0.1 million during the year ended December 31, 2022.

The Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer Pension Plan Amendments Act of 1980, imposes certain contingent liabilities upon an employer who is a contributor to a multiemployer pension plan if the employer withdraws from the plan or the plan is terminated or experiences a mass withdrawal.

While the Company may also have additional liabilities imposed by law as a result of its participation in the multiemployer defined benefit pension plan, there is no liability as of December 31, 2022.

The Pension Protection Act of 2006 (the “PPA”) also added special funding and operational rules generally applicable to plan years beginning after 2007 for multiemployer plans with certain classifications based on a multitude of factors (including, for example, the plan’s funded percentage, cash flow position and whether the plan is projected to experience a minimum funding deficiency).

The plan to which the Company contributes is in “critical” status.

Plans in the “critical” status classification must adopt

measures to improve their funded status through a funding improvement

or rehabilitation plan which may require additional

contributions from employers (which may take the form of a surcharge

on benefit contributions) and/or modifications to retiree

The amount of additional funds that the Company may be obligated to contribute to the

plan in the future cannot be

estimated as such amounts will be likely based on future levels of work

that require the specific use of those union employees covered

by the plan, and the amount of that future work and the number of affected

employees that may be needed is not reasonably estimable.

Plans in the “critical” status classification must adopt measures to improve their funded status through a funding improvement or rehabilitation plan which may require additional contributions from employers (which may take the form of a surcharge on benefit contributions) and/or modifications to retiree benefits.

The amount of additional funds that the Company may be obligated to contribute to the plan in the future cannot be estimated as such amounts will be likely based on future levels of work that require the specific use of those union employees covered by the plan, and the amount of that future work and the number of affected employees that may be needed is not reasonably estimable.

Contributions

The Company expects to make minimum cash contributions of approximately$

million to its pension plans (approximately

million Foreign) and approximately $

million to its other postretirement benefit plan in 2022.

The Company expects to make minimum cash contributions of approximately $ 5.2 million to its pension plans (approximately $ 2.6 million U.S.

and $ 2.6 million Foreign) and approximately $ 0.2 million to its other postretirement benefit plan in 2023.

Estimated Future Benefit Payments

Excluding any impact related to the PPA

noted above, the following benefit payments, which reflect expected

future service, as

appropriate, are expected to be paid:

Pension Benefits

Excluding any impact related to the PPA noted above, the following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Pension Benefits Other Post-

2023 $ 6,097 $ 6,868 $ 12,965 $ 222

2024 5,935 6,290 12,225 203

2025 6,423 6,271 12,694 190

2026 7,117 6,272 13,389 174

2027 6,844 6,254 13,098 151

2028 to 2032 41,304 29,868 71,172 597

The Company maintains a plan under which supplemental retirement benefits are provided to certain officers.

Benefits payable under the plan are based on a combination of years of service and existing postretirement benefits.

Included in total pension costs are charges of $ 0.7 million, $ 3.0 million and $ 2.5 million for the years ended December 31, 2022, 2021 and 2020, respectively, representing the annual accrued benefits under this plan.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

The Company maintains a plan under which supplemental retirement benefits

are provided to certain officers.

Benefits payable

under the plan are based on a combination of years of service and existing

postretirement benefits.

Included in total pension costs are

million and $

million for the years ended December 31, 2021, 2020 and 2019, respectively,

representing the annual accrued benefits under this plan.

Defined Contribution Plan

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

a majority of its U.S.

The plan allows for and the

Company previously paid a nonelective contribution on behalf of participants

who have completed one year of service equal to 3% of

the eligible participants’ compensation in the form of Company common

During 2019 and 2018, the Company made both non-

elective and elective 401(k) matching contributions in cash, rather than stock.

Beginning in April 2020 and continuing through March

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

in fully vested shared of the Company’s common

stock rather than cash.

The Company sponsors various defined contribution plans in both its U.S.

subsidiaries, under which eligible participants may defer a portion of their compensation up to the allowable amount as determined by the plan.

All contributions and Company matches are invested at the direction of the participant.

The most significant plan is the Company's primary U.S.

401(k) plan with an employer match covering a majority of its U.S.

Beginning in April 2020 and continuing through March 2021, the Company matched both non-elective and elective 401(k) contributions in fully vested shared of the Company’s common stock rather than cash.

See Note 8 of Notes to Consolidated Financial Statements.

Total Company

contributions were $

million and $

million for the years ended December 31, 2021, 2020 and 2019, respectively.

Total Company contributions under this U.S.

401(k) plan were $ 7.2 million, $ 4.8 million and $ 5.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Annual cash contributions to all other of the Company’s defined contribution plans is approximately $ 1 million.

Note 22 – Other Non-Current Liabilities

Other non-current liabilities as of December 31, 2021 and 2020 were

Uncertain tax positions (includes interest and penalties)

Non-current income taxes payable

Other non-current liabilities as of December 31, 2022 and 2021 were as follows:

Uncertain tax positions (includes interest and penalties - See Note 10) $ 20,322 $ 28,665

Non-current income taxes payable (See Note 10) 8,883 8,500

Environmental reserves (See Note 26) 4,342 4,424

Deferred and other long-term compensation 3,132 4,820

Environmental reserves

Inactive subsidiary litigation and settlement reserve

Fair value of interest rate swaps

Total other non

-current liabilities

The Fair value of interest rate swaps as of December 31, 2021 has been reclassified to

other accrued liabilities in connection with

the expiration of the swap contract in November 2022.

See Notes 19 and 25 of Notes to Consolidated Financial Statements.

Acquisition-related earnout liability (See Note 2) 1,024 1,568

Inactive subsidiary litigation and settlement reserve (See Note 26) 311 410

Other 650 1,228

Total other non-current liabilities $ 38,664 $ 49,615

Note 23 – Equity and Accumulated Other Comprehensive Loss

The Company has

shares of common stock authorized with a par value of $

issued and outstanding as of December 31, 2021 and 2020, respectively.

The change in shares issued and outstanding during 2021

was primarily related to

shares issued for share-based compensation plans and

shares issued for the exercise of stock

options and other share activity.

The Company is authorized to issue

shares of preferred stock with $

par value, subject to approval by the Board.

The Board may designate one or more series of preferred stock and

the number of shares, rights, preferences, and limitations of each

As of December 31, 2021,

preferred stock had been issued.

The Company has a share repurchase program that was approved by its Board

in 2015 for the repurchase of up to $

of Quaker Chemical Corporation common stock.

The Company has

t repurchased any shares under the program for the years ended

December 31, 2021, 2020 and 2019.

As of December 31, 2021, there was approximately $

million of common stock remaining to

be purchased under this share repurchase program.

The Company has 30,000,000 shares of common stock authorized with a par value of $ 1 , and 17,950,264 and 17,897,033 shares issued and outstanding as of December 31, 2022 and 2021, respectively.

The change in shares issued and outstanding during 2022 was primarily related to 52,653 shares issued for share-based compensation plans and 578 shares issued for the exercise of stock options and other share activity.

The Company is authorized to issue 10,000,000 shares of preferred stock with $ 1 par value, subject to approval by the Board.

The Board may designate one or more series of preferred stock and the number of shares, rights, preferences, and limitations of each series.

As of December 31, 2022, no preferred stock had been issued.

The Company has a share repurchase program that was approved by its Board in 2015 for the repurchase of up to $ 100.0 million of Quaker Chemical Corporation common stock.

The Company has not repurchased any shares under the program for the years ended December 31, 2022, 2021 and 2020.

As of December 31, 2022, there was approximately $ 86.9 million of common stock remaining to be purchased under this share repurchase program.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

The following table shows the reclassifications from and resulting balances

of AOCI for the years ended December 31, 2021,

2020 and 2019:

The following table shows the reclassifications from and resulting balances of AOCI for the years ended December 31, 2022, 2021 and 2020:

Adjustments Defined

Plans Unrealized

Gain (Loss) in

Available-for-

Sale Securities

Sale Securities Derivative

Instruments Total

Balance as of December 31, 2019 $ ( 44,568 ) $ ( 34,533 ) $ 1,251 $ ( 320 ) $ ( 78,170 )

Other comprehensive income (loss) before

reclassifications

Other comprehensive income (loss) before reclassifications 41,693 ( 6,617 ) 2,848 ( 4,257 ) 33,667

Amounts reclassified from AOCI — 24,141 ( 202 ) — 23,939

1 unchanged sentence

Balance as of December 31, 2020 ( 2,875 ) ( 23,467 ) 3,342 ( 3,598 ) ( 26,598 )

Other comprehensive income (loss) before

reclassifications

Other comprehensive (loss) income before reclassifications ( 46,968 ) 11,948 ( 531 ) 2,890 ( 32,661 )

Amounts reclassified from AOCI — 1,459 ( 3,197 ) — ( 1,738 )

1 unchanged sentence

Balance as of December 31, 2021 ( 49,843 ) ( 13,172 ) 397 ( 1,372 ) ( 63,990 )

Other comprehensive (loss) income before

reclassifications

Other comprehensive (loss) income before reclassifications ( 82,318 ) 10,789 ( 3,276 ) — ( 74,805 )

Amounts reclassified from AOCI — 479 895 1,372 2,746

1 unchanged sentence

Balance as of December 31, 2022 $ ( 132,161 ) $ ( 4,595 ) $ ( 1,484 ) $ — $ ( 138,240 )

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

to the Company’s equity

interest in a

captive insurance company and are recorded in equity in net income

of associated companies.

The amounts reported in other

comprehensive income for non-controlling interest are related to

currency translation adjustments.

Note 24 – Fair Value

All reclassifications related to Unrealized gain (loss) in available-for-sale securities relate to the Company’s equity interest in a captive insurance company and are recorded in Equity in net income of associated companies.

The amounts reported in Other comprehensive (loss) income for non-controlling interest are related to Currency translation adjustments.

Note 24 – Fair Value Measures

The Company has valued its company-owned life insurance policies at fair value.

These assets are subject to fair value

measurement as follows:

Measurements at December 31, 2021

Using Fair Value

These assets are subject to fair value measurement as follows:

Fair Value Measurements at December 31, 2022

Total Fair Value Using Fair Value Hierarchy

Assets Level 1 Level 2 Level 3

Company-owned life insurance $ 2,114 $ — $ 2,114 $ —

Measurements at December 31, 2020

Using Fair Value

Total $ 2,114 $ — $ 2,114 $ —

Fair Value Measurements at December 31, 2021

Total Fair Value Using Fair Value Hierarchy

Assets Level 1 Level 2 Level 3

Company-owned life insurance $ 2,533 $ — $ 2,533 $ —

The fair values of Company-owned life insurance assets are based on quotes

for like instruments with similar credit ratings and

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

2021 or 2020, respectively,

so related disclosures have

not been included.

Total $ 2,533 $ — $ 2,533 $ —

The fair values of Company-owned life insurance assets are based on quotes for like instruments with similar credit ratings and terms.

The Company did not hold any Level 3 investments as of December 31, 2022 or 2021, respectively.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

Items Measured at Fair Value on Nonrecurring Basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company is also required to measure certain items at fair value on a nonrecurring basis.

The Company recorded non-cash impairment charges on goodwill and trademarks of $ 93.0 million and $ 38.0 million in the years ended December 31, 2022 and 2020, respectively.

The determination of the estimated fair values requires Management’s judgment and involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, the WACC, royalty rates, asset lives and market multiples, among other items.

For non-observable market values, the Company determines fair value using acceptable valuation principles, including the excess earnings, relief from royalty, lost profit or cost methods.

Significant unobservable inputs used to estimate the fair values of the EMEA reporting unit as of December 31, 2022 included a WACC of 12.0 %.

See Note 16 of Notes to Consolidated Financial Statements.

Note 25 – Hedging Activities

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

Company’s exposure to variable

rate risk associated with the Credit Facility,

in November 2019, the Company entered into $

million notional amounts of three

year interest rate swaps.

In order to satisfy certain requirements of the Original Credit Facility as well as to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, in November 2019, the Company entered into $ 170.0 million notional amounts of three year interest rate swaps.

See Note 20 of Notes to Consolidated Financial Statements.

These interest rate swaps are designated as cash

flow hedges and, as such, the contracts are marked-to-market at each reporting

date and any unrealized gains or losses are included in

AOCI to the extent effective and reclassified to interest

expense in the period during which the transaction effects earnings or

becomes probable that the forecasted transaction will not occur.

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

derivative instruments, which are Level 2 measurements, are as

These interest rate swaps were designated as cash flow hedges and, as such, the contracts were marked-to-market at each reporting date and any unrealized gains or losses were included in AOCI to the extent effective and reclassified to interest expense in the period during which the transaction effects earnings or it becomes probable that the forecasted transaction will not occur.

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

See Note 20 of Notes to the Consolidated Financial Statements.

The Amended Credit Facility does not require the Company to fix variable interest rates on any portion of its borrowings.

In October 2022, the Company’s interest rate swap contracts expired.

Upon expiration, the Company received a cash payment from the counterparties for approximately $ 0.2 million.

As of December 31, 2022, the Company has not entered into any similar interest rate swap contracts.

The balance sheet classification and fair values of the Company’s derivative instruments, which are Level 2 measurements, are as follows:

Derivatives designed as

Cash flow hedges:

Consolidated Balance Sheet

Derivatives designated as cash flow hedges:

Interest rate swaps

Other accrued liabilities

Location December 31,

Interest rate swaps Prepaid expenses and other current assets $ — $ —

Other non-current liabilities — 1,782

1 unchanged sentence

Derivatives designated as cash flow hedges:

Interest rate swaps

Interest rate swaps AOCI $ — $ 1,372

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

For the Years

Amount and location of (expense) income reclassified

from AOCI into (expense) income (Effective Portion)

Interest expense, net

Interest rate swaps are entered into with a limited number of counterparties,

each of which allows for net settlement of all

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

or termination of any one contract.

accordance with the Company’s accounting

policy, these derivative instruments

are recorded on a net basis within the Consolidated

Balance Sheets.

Note 26 – Commitments and Contingencies

In 1992, the Company identified certain soil and groundwater contamination

at AC Products, Inc.

(“ACP”), a wholly owned

In voluntary coordination with the Santa Ana California Regional Water

Quality Board, ACP has been remediating the

contamination, the principal contaminant of which is perchloroethylene

In 2004, the Orange County Water

(“OCWD”) filed a civil complaint against ACP and other parties seeking

to recover compensatory and other damages related to the

investigation and remediation of the contamination in the groundwater.

Pursuant to a settlement agreement with OCWD, ACP agreed,

among other things, to operate the two groundwater treatment systems to hydraulically

contain groundwater contamination emanating

from ACP’s site until the concentrations

of PERC released by ACP fell below the current Federal maximum contaminant level for

four consecutive quarterly sampling events.

In 2014, ACP ceased operation at one of its two groundwater treatment systems,

met the above condition for closure.

In 2020, the Santa Ana Regional Water

Quality Control Board asked that ACP conduct some

additional indoor and outdoor soil vapor testing on and near the ACP site to confirm

that ACP continues to meet the applicable local

standards and ACP performed such testing program

work in 2021 and will continue into 2022.

As of December 31, 2021, ACP

believes it is close to meeting the conditions for closure of the remaining groundwater

treatment system but continues to operate this

system while in discussions with the relevant authorities.

For the Years Ended

2022 2021 2020

Amount and location of expense reclassified from AOCI into expense (Effective Portion) Interest expense, net $ — $ ( 2,649 ) $ ( 1,754 )

Prior to expiration in October 2022, interest rate swaps were entered into with a limited number of counterparties, each of which allowed for net settlement of all contracts through a single payment in a single currency in the event of a default on or termination of any one contract.

As such, in accordance with the Company’s accounting policy, these derivative instruments were recorded on a net basis within the Consolidated Balance Sheets.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

As of December 31, 2021, the Company believes that the range of potential

-known liabilities associated with the balance of ACP

water remediation program is approximately $

The low and high ends of the range are based on the length

of operation of the treatment system as determined by groundwater modeling.

Costs of operation include the operation and

maintenance of the extraction well, groundwater monitoring and

program management.

An inactive subsidiary of the Company that was acquired in 1978

sold certain products containing asbestos, primarily on an

installed basis, and is among the defendants in numerous lawsuits alleging injury

due to exposure to asbestos.

The subsidiary

discontinued operations in 1991 and has no remaining assets other than

proceeds received from insurance settlements.

overwhelming majority of these claims have been disposed of without

payment and there have been no adverse judgments against the

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

it is currently projected

that the subsidiary’s total liability over

the next 50 years for these claims is approximately $

million (excluding costs of defense).

Although the Company has also been named as a defendant in certain of these

cases, no claims have been actively pursued against the

Company, and the

Company has not contributed to the defense or settlement of any of these cases pursued against

the subsidiary.

These cases were originally handled by the subsidiary’s

primary and excess insurers who had agreed in 1997 to pay all defense

costs and be responsible for all damages assessed against the subsidiary arising

out of existing and future asbestos claims up to the

aggregate limits of their policies.

A significant portion of this primary insurance coverage was provided

by an insurer that is

insolvent, and the other primary insurers asserted that the aggregate limits

of their policies had been exhausted.

The subsidiary

challenged the applicability of these limits to the claims being brought

against the subsidiary.

In response, two of the three carriers

entered into separate settlement and release agreements with the subsidiary

in 2005 and 2007 for $

million and $

respectively.

In 2007, the subsidiary and the remaining primary insurance carrier

entered into a Claim Handling and Funding Agreement, under

which the carrier is paying

% of defense and indemnity costs incurred by or on behalf of the subsidiary

in connection with asbestos

bodily injury claims.

The agreement continues until terminated and can only be terminated by either party

by providing a minimum of

two years prior written notice.

As of December 31, 2021, no notice of termination has been given under

this agreement.

At the end of the term of the agreement, the subsidiary

may choose to again pursue its claim against this insurer regarding the

application of the policy limits.

The Company believes that, if the coverage issues under the primary policies with

the remaining

carrier are resolved adversely to the subsidiary and

all settlement proceeds were used, the subsidiary may have limited additional

coverage from a state guarantee fund established following the insolvency

of one of the subsidiary’s primary

Nevertheless,

liabilities in respect of claims may exceed

the assets and coverage available to the subsidiary.

If the subsidiary’s assets and insurance

coverage were to be exhausted, claimants of the subsidiary may actively pursue claims

against the Company because of the parent-subsidiary relationship.

The Company does not believe that such claims would have merit

or that the Company would be held to have liability for any unsatisfied obligations

of the subsidiary as a result of such claims.

evaluating the nature of the claims filed against the subsidiary

and the small number of such claims that have resulted in any payment,

the potential availability of additional insurance coverage at the subsidiary

level, the additional availability of the Company’s

insurance and the Company’s strong

defenses to claims that it should be held responsible for the subsidiary’s

obligations because of

the parent-subsidiary relationship, the Company believes it is not probable

that the Company will incur losses.

The Company has

been successful to date having claims naming it dismissed during

initial proceedings.

Since the Company may be in this stage of

litigation for some time, it is not possible to estimate additional losses or range of

loss, if any.

The Company is party to environmental matters related to certain domestic

and foreign properties.

These environmental matters

primarily require the Company to perform long-term monitoring

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

During the year ended December 31, 2021, there have been no significant

changes to the facts or circumstances of these matters, aside

from ongoing monitoring and maintenance activities and routine payments

associated with each of these sites.

continually evaluates its obligations related to such matters, and

based on historical costs incurred and projected costs to be incurred

over the next 27 years, has estimated the present value range of costs for

all of these environmental matters, on a discounted basis, to

be between approximately $

million and $

million as of December 31, 2021, for which $

million is accrued within other

accrued liabilities and other non-current liabilities on the Company’s

Consolidated Balance Sheet as of December 31, 2021.

Comparatively,

as of December 31, 2020, the Company had $

million accrued for with respect to these matters.

The Company’s Sao Paulo,

Brazil site was required under Brazilian environmental, health and safety regulations

to perform an

environmental assessment as part of a permit renewal process.

Initial investigations identified soil and ground water contamination

select areas of the site.

The site has conducted a multi-year soil and groundwater investigation and corresponding

risk assessments

based on the result of the investigations.

In 2017, the site had to submit a new 5-year permit renewal request and was asked to

complete additional investigations to further delineate the site based on review

of the technical data by the local regulatory agency,

Companhia Ambiental do Estado de São Paulo (“CETESB”).

Based on review of the updated investigation data, CETESB issued a

Technical Opinion

regarding the investigation and remedial actions taken to date.

The site developed an action plan and submitted it

Note 26 – Commitments and Contingencies

In the early 1990s, the Company identified certain soil and groundwater contamination at AC Products, Inc.

(“ACP”), a wholly owned subsidiary.

In voluntary coordination with the Santa Ana California Regional Water Quality Board, ACP has been remediating the contamination, the principal contaminant of which is perchloroethylene (“PERC”).

In 2004, the Orange County Water District (“OCWD”) filed a civil complaint against ACP and other parties seeking to recover compensatory and other damages related to the investigation and remediation of the contamination in the groundwater.

Pursuant to a settlement agreement with OCWD, ACP agreed, among other things, to operate the two groundwater treatment systems to hydraulically contain groundwater contamination emanating from ACP’s site until the concentrations of PERC released by ACP fell below the current Federal maximum contaminant level for four consecutive quarterly sampling events.

In 2014, ACP ceased operation at one of its two groundwater treatment systems, as it had met the above condition for closure.

In 2020, the Santa Ana Regional Water Quality Control Board asked that ACP conduct some additional indoor and outdoor soil vapor testing on and near the ACP site to confirm that ACP continues to meet the applicable local standards and ACP performed such testing program work in 2022 and will continue into 2023.

As of December 31, 2022, ACP believes it is close to meeting the conditions for closure of the remaining groundwater treatment system but continues to operate this system while in discussions with the relevant authorities.

As of December 31, 2022, the Company believes that the range of potential-known liabilities associated with the balance of ACP water remediation program is approximately $ 0.1 million to $ 1.0 million.

The low and high ends of the range are based on the length of operation of the treatment system as determined by groundwater modeling.

Costs of operation include the operation and maintenance of the extraction well, groundwater monitoring, program management, and soil vapor testing.

An inactive subsidiary of the Company that was acquired in the late 1970s sold certain products containing asbestos, primarily on an installed basis, and is among the defendants in numerous lawsuits alleging injury due to exposure to asbestos.

The subsidiary discontinued operations in 1991 and has no remaining assets other than proceeds received from insurance settlements.

To date, the overwhelming majority of these claims have been disposed of without payment and there have been no adverse judgments against the subsidiary.

Based on a continued analysis of the existing and anticipated future claims against this subsidiary, it is currently projected that the subsidiary’s total liability over the next 50 years for these claims is approximately $ 0.2 million (excluding costs of defense).

Although the Company has also been named as a defendant in certain of these cases, no claims have been actively pursued against the Company, and the Company has not contributed to the defense or settlement of any of these cases pursued against the subsidiary.

These cases were originally handled by the subsidiary’s primary and excess insurers who had agreed in 1997 to pay all defense costs and be responsible for all damages assessed against the subsidiary arising out of existing and future asbestos claims up to the aggregate limits of their policies.

A significant portion of this primary insurance coverage was provided by an insurer that is insolvent, and the other primary insurers asserted that the aggregate limits of their policies had been exhausted.

The subsidiary challenged the applicability of these limits to the claims being brought against the subsidiary.

In response, two of the three carriers entered into separate settlement and release agreements with the subsidiary in 2005 and 2007 for $ 15.0 million and $ 20.0 million, respectively.

In 2007, the subsidiary and the remaining primary insurance carrier entered into a Claim Handling and Funding Agreement, under which the carrier is paying 27 % of defense and indemnity costs incurred by or on behalf of the subsidiary in connection with asbestos bodily injury claims.

The agreement continues until terminated and can only be terminated by either party by providing a minimum of two years prior written notice.

As of December 31, 2022, no notice of termination has been given under this agreement.

At the end of the term of the agreement, the subsidiary may choose to again pursue its claim against this insurer regarding the application of the policy limits.

The Company believes that, if the coverage issues under the primary policies with the remaining carrier are resolved adversely to the subsidiary and all settlement proceeds were used, the subsidiary may have limited additional coverage from a state guarantee fund established following the insolvency of one of the subsidiary’s primary insurers.

Nevertheless, liabilities in respect of claims may exceed the assets and coverage available to the subsidiary.

If the subsidiary’s assets and insurance coverage were to be exhausted, claimants of the subsidiary may actively pursue claims against the Company because of the parent-subsidiary relationship.

The Company does not believe that such claims would have merit or that the Company would be held to have liability for any unsatisfied obligations of the subsidiary as a result of such claims.

After evaluating the nature of the claims filed against the subsidiary and the small number of such claims that have resulted in any payment, the potential availability of additional insurance coverage at the subsidiary level, the additional availability of the Company’s own insurance and the Company’s strong defenses to claims that it should be held responsible for the subsidiary’s obligations because of the parent-subsidiary relationship, the Company believes it is not probable that the Company will incur losses.

The Company has been successful to date having claims naming it dismissed during initial proceedings.

Since the Company may be in this stage of litigation for some time, it is not possible to estimate additional losses or range of loss, if any.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

to CETESB in 2018 based on CETESB requirements.

The site intervention plan primarily requires the site, amongst other actions,

conduct periodic monitoring for methane in soil vapors, source zone

delineation, groundwater plume delineation, bedrock aquifer

assessment, update the human health risk assessment, develop a current

site conceptual model and conduct a remedial feasibility study

and provide a revised intervention plan.

In 2019, the site submitted a report on the activities completed including the revised site

conceptual model and results of the remedial feasibility study and recommended

remedial strategy for the site.

Other environmental matters include participation in certain payments

in connection with four currently active environmental

consent orders related to certain hazardous waste cleanup activities under

The Company is party to environmental matters related to certain domestic and foreign properties.

These environmental matters primarily require the Company to perform long-term monitoring as well as operating and maintenance at each of the applicable sites.

During the year ended December 31, 2022, there have been no significant changes to the facts or circumstances of these matters, aside from ongoing monitoring and maintenance activities and routine payments associated with each of these sites.

The Company continually evaluates its obligations related to such matters, and based on historical costs incurred and projected costs to be incurred over the next 26 years, has estimated the present value range of costs for all of these environmental matters, on a discounted basis, to be between approximately $ 5.0 million and $ 6.0 million as of December 31, 2022, for which $ 5.3 million is accrued within other accrued liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheet as of December 31, 2022.

Comparatively, as of December 31, 2021, the Company had $ 5.6 million accrued for with respect to these matters.

The Company’s Sao Paulo, Brazil site was required under Brazilian environmental, health and safety regulations to perform an environmental assessment as part of a permit renewal process.

Initial investigations identified soil and ground water contamination in select areas of the site.

The site has conducted a multi-year soil and groundwater investigation and corresponding risk assessments based on the result of the investigations.

In 2017, the site had to submit a new 5-year permit renewal request and was asked to complete additional investigations to further delineate the site based on review of the technical data by the local regulatory agency, Companhia Ambiental do Estado de São Paulo (“CETESB”).

Based on review of the updated investigation data, CETESB issued a Technical Opinion regarding the investigation and remedial actions taken to date.

The site developed an action plan and submitted it to CETESB in 2018 based on CETESB requirements.

The site intervention plan primarily requires the site, amongst other actions, to conduct periodic monitoring for methane in soil vapors, source zone delineation, groundwater plume delineation, bedrock aquifer assessment, update the human health risk assessment, develop a current site conceptual model and conduct a remedial feasibility study and provide a revised intervention plan.

In 2020, the site submitted a report on the activities completed including the revised site conceptual model and results of the remedial feasibility study and recommended remedial strategy for the site.

Other environmental matters include participation in certain payments in connection with four currently active environmental consent orders related to certain hazardous waste cleanup activities under the U.S.

Federal Superfund statute.

The Company has been

designated a potentially responsible party (“PRP”) by the Environmental

Protection Agency along with other PRPs depending on the

site, and has other obligations to perform cleanup activities at certain

other foreign subsidiaries.

These environmental matters

primarily require the Company to perform long-term monitoring

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

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

outcome of other unrelated environmental matters, that

it has made adequate accruals for costs associated with other environmental

problems of which it is aware.

Approximately $

million and $

million were accrued as of December 31, 2021 and 2020, respectively,

to provide for such anticipated future

environmental assessments and remediation costs.

During the fourth quarter of 2020, one of the Company’s

subsidiaries received a notice of inspection from a taxing authority in a

country where certain of its subsidiaries operate which related to a non-income

(indirect) tax that may be applicable to certain products

the subsidiary sells.

During the third quarter of 2021, the Company’s

subsidiary received notice from the

taxing authority that the

inspection was closed, with no tax assessment issued.

Based on this development, during the third quarter of 2021, the Company

reversed its previously recorded $

million liability related to this matter.

The Company also reversed the associated $

indemnification receivable, as the asserted tax liability in part related

to a Houghton entity acquired in the Combination and for the

periods prior to the Combination, for which the Company would have rights to indemnification

from Houghton’s former owners.

Based on all available information as of the date of this report, the Company

does not anticipate further tax liabilities related to this

matter to be asserted by the taxing authority.

During 2021, one of the Company’s

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

legal claim in

regard to certain non-income (indirect) taxes that had been previously

charged and paid.

The matter specifically relates to companies’

rights to exclude the state tax on goods circulation

(a valued-added-tax or

equivalent, known in Brazil as “ICMS”) from the

calculation of certain additional indirect taxes (specifically the program of

social integration (“PIS”) and contribution for the financing

of social security (“COFINS”)) levied by the Brazilian States on the sale of goods.

In May 2021, the Brazilian Supreme Court

concluded that ICMS should not be included in the tax base of PIS and

COFINS, and confirmed the methodology for calculating the

PIS and COFINS tax credit claims to which taxpayers are entitled.

The Company’s Brazilian entities had

previously filed legal or

administrative disputes on this matter and are entitled to receive tax credits and

interest dating back to five years preceding the date of

their legal claims.

As a result of these court rulings, during the second quarter of 2021,

the Company recognized non-income tax

million BRL or approximately $

million, which included approximately $

million for the PIS and COFINS tax

credits as well as interest on these tax credits of $

million, and is recorded within prepaid and other current assets on the

Company’s Consolidated

Balance Sheet.

The tax credits to which the Company’s

Brazilian subsidiaries are entitled are claimable

once registered with the Brazilian tax authorities.

The Company submitted its formal claim for tax credits in October 2021.

credits can be used to offset future Brazilian federal taxes and

the Company currently anticipates using the full amount of credits

during the five year period of time permitted.

During the third quarter of 2021, the Brazilian Supreme Court ruled that interest income

to which companies are entitled for matters such as this claim should not be

taxable, which resulted in a reduction to the estimated

income tax expense associated with the tax credits recorded.

In connection with obtaining regulatory approvals for the Combination,

certain steel and aluminum related product lines of

Houghton were divested in August 2019.

In July 2021, the entity that acquired these divested product lines submitted an

indemnification claim for certain alleged breaches of representation made

by Houghton in the agreement pursuant to which such assets

had been divested.

The Company and the acquirer have agreed to extend the period for

a possible negotiated resolution of this claim

through March 31, 2022 so that both parties can evaluate the other’s

positions with respect to the subject matters of the claim.

Company is evaluating the merits of the alleged losses in the indemnification

claim received.

As of the date of this Report, the

Company does not believe it is reasonably possible to determine or quantify

any possible exposure.

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

locations suffered property damages as a result of flooding and fire,

respectively.

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

In Conshohocken, Pennsylvania, the

Company’s global headquarters

as well as its laboratory experienced property damages as a result of flooding from

Hurricane Ida.

Also, one of the Company’s North

American production facilities in its Global Specialty Businesses segment experienced an

fire that resulted in damage and the temporary shutdown of production,

and also required remediation, cleaning and subsequent

The Company, its insurance

adjuster and insurance carrier are actively managing the remediation and restoration activities

associated with these events and at this time the Company has concluded, based

on all available information and discussions with its

The Company has been designated a potentially responsible party (“PRP”) by the Environmental Protection Agency along with other PRPs depending on the site, and has other obligations to perform cleanup activities at certain other foreign subsidiaries.

These environmental matters primarily require the Company to perform long-term monitoring as well as operating and maintenance at each of the applicable sites.

The Company believes, although there can be no assurance regarding the outcome of other unrelated environmental matters, that it has made adequate accruals for costs associated with other environmental problems of which it is aware.

Approximately $ 0.3 million and $ 0.4 million were accrued as of December 31, 2022 and 2021, respectively, to provide for such anticipated future environmental assessments and remediation costs.

During 2020, one of the Company’s subsidiaries received a notice of inspection from a taxing authority in a country where certain of its subsidiaries operate which related to a non-income (indirect) tax that may be applicable to certain products the subsidiary sells.

During 2021, the Company’s subsidiary received notice from the taxing authority that the inspection was closed, with no tax assessment issued.

Based on this development, during 2021, the Company reversed its previously recorded $ 1.8 million liability related to this matter.

The Company also reversed the associated $ 1.1 million indemnification receivable, as the asserted tax liability in part related to a Houghton entity acquired in the Combination and for the periods prior to the Combination, for which the Company would have rights to indemnification from Houghton’s former owners.

Based on all available information as of the date of this report, the Company does not anticipate further tax liabilities related to this matter to be asserted by the taxing authority.

During 2021, one of the Company’s Brazilian subsidiaries received a notice that it had prevailed on an existing legal claim in regard to certain non-income (indirect) taxes that had been previously charged and paid.

The matter specifically relates to companies’ rights to exclude the state tax on goods circulation (a valued-added-tax or VAT equivalent, known in Brazil as “ICMS”) from the calculation of certain additional indirect taxes (specifically the program of social integration (“PIS”) and contribution for the financing of social security (“COFINS”)) levied by the Brazilian States on the sale of goods.

In May 2021, the Brazilian Supreme Court concluded that ICMS should not be included in the tax base of PIS and COFINS, and confirmed the methodology for calculating the PIS and COFINS tax credit claims to which taxpayers are entitled.

The Company’s Brazilian entities had previously filed legal or administrative disputes on this matter and are entitled to receive tax credits and interest dating back to five years preceding the date of their legal claims.

As a result of these court rulings, during 2021, the Company recognized non-income tax credits of 67.0 million BRL or approximately $ 13.3 million, which included approximately $ 8.4 million for the PIS and COFINS tax credits as well as interest on these tax credits of $ 4.9 million, and is recorded within prepaid and other current assets on the Company’s Consolidated Balance Sheet.

The tax credits to which the Company’s Brazilian subsidiaries are entitled are claimable once registered with the Brazilian tax authorities.

The Company submitted its formal claim for tax credits in 2021.

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

As of December 31, 2022, the Company has used the full amount of credits.

Also during 2021, the Brazilian Supreme Court ruled that interest income to which companies are entitled for matters such as this claim should not be taxable, which resulted in a reduction to the estimated income tax expense associated with the tax credits recorded.

QUAKER CHEMICAL CORPORATION

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

insurance adjuster and insurance carrier,

that the losses incurred during the third quarter of 2021 will be covered under

the Company’s

property insurance coverage, net of an aggregate deductible of $

The Company has received payments from its insurers of

million and has recorded an insurance receivable associated with these events

(and a gain on insurance recoveries for losses

incurred) of $

million as of December 31, 2021.

The Company and its insurance carrier are in early stages of reviewing the impact

of the electrical fire on the production facility’s

operations as it relates to a potential business interruption insurance claim;

as of the date of this Report, the Company cannot reasonably estimate any probable

amount of business interruption insurance claim

recoverable, therefore the Company has not recorded a gain contingency

for a possible business interruption insurance claim as of

December 31, 2021.

The Company is party to other litigation which management currently

believes will not have a material adverse effect on the

Company’s results of operations,

cash flows or financial condition.

In addition, the Company has an

immaterial amount of contractual

purchase obligations.

Changes in and Disagreements With Accountants on

Accounting and Financial Disclosure.

In connection with obtaining regulatory approvals for the Combination, certain steel and aluminum related product lines of Houghton were divested in August 2019.

In 2021, the entity that acquired these divested product lines submitted an indemnification claim for certain alleged breaches of representation made by Houghton in the agreement pursuant to which such assets had been divested.

The Company responded to the subject matters of the indemnification claim and during 2022, the matter was resolved consistent with the Company’s expectations and position that there were no amounts owed by the Company.

During 2021, two of the Company’s locations suffered property damages as a result of flooding and electrical fire, respectively.

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

In Conshohocken, Pennsylvania, the Company’s global headquarters as well as its laboratory experienced property damages as a result of flooding from Hurricane Ida.

Also, one of the Company’s North American production facilities in its Global Specialty Businesses segment experienced a electrical fire that resulted in damage and the temporary shutdown of production, and also required remediation, cleaning and subsequent restoration.

The Company, its insurance adjuster and insurance carrier are actively managing the remediation and restoration activities associated with these events and at this time the Company has concluded, based on all available information and discussions with its insurance adjuster and insurance carrier, that the losses incurred during 2021 will be covered under the Company’s property insurance coverage, net of an aggregate deductible of $ 2.0 million.

Through December 31, 2022, the Company has received payments from its insurers of $ 4.6 million associated with these events.

During 2022, the Company recognized a gain on insurance recoveries of $ 1.8 million.

The Company has recorded an insurance receivable associated with these events of $ 0.2 million as of December 31, 2022.

The Company and its insurance carrier continue to review the impact of the electrical fire on the production facility’s operations as it relates to a potential business interruption insurance claim;

however, as of the date of this Report, the Company cannot reasonably estimate any probable amount of business interruption insurance claim recoverable.

Therefore, the Company has not recorded a gain contingency for a possible business interruption insurance claim as of December 31, 2022.

The Company is party to other litigation which management currently believes will not have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

In addition, the Company has an immaterial amount of contractual purchase obligations.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not Applicable.

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 8. Financial Statements and Supplementary Data