What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2023-11-02 · 196 added, 380 removed, 399 unchanged (59% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net sales $ 469,759 $ 500,148

Cost of goods sold (excluding amortization expense -

See Note 13) 307,265 331,469 951,716 1,002,393

Cost of goods sold (excluding amortization expense - See Note 13) 288,196 326,698

Gross profit 181,563 173,450

Selling, general and administrative expenses 124,180 119,549

Restructuring and related charges (credits), net 1,019 ( 1,423 ) 6,034 ( 604 )

Combination, integration and other acquisition-related expenses — 2,107 — 7,992

Restructuring and related charges, net 1,857 3,972

Operating income 55,526 49,929

Other (expense) income, net ( 2,713 ) 85 ( 8,558 ) ( 10,520 )

Other income (expense), net 1,080 ( 2,239 )

Interest expense, net ( 10,824 ) ( 13,242 )

2 unchanged sentences

Income before equity in net income of associated companies 33,274 24,915

Equity in net income (loss) of associated companies 3,279 ( 212 ) 10,660 ( 642 )

Equity in net income of associated companies 1,984 4,626

Net income 35,258 29,541

11 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 35,258 $ 29,541

3 unchanged sentences

Current period change in fair value of derivatives 2,345 390

Unrealized (loss) gain on available-for-sale securities ( 637 ) ( 818 ) 938 ( 2,385 )

Other comprehensive loss ( 24,619 ) ( 72,447 ) ( 16,522 ) ( 153,734 )

Comprehensive income (loss) 9,091 ( 46,539 ) 76,122 ( 93,634 )

Comprehensive loss attributable to noncontrolling interest ( 36 ) ( 3 ) ( 55 ) ( 5 )

Comprehensive income (loss) attributable to Quaker Chemical Corporation $ 9,055 $ ( 46,542 ) $ 76,067 $ ( 93,639 )

Unrealized gain on available-for-sale securities 45 334

Other comprehensive (loss) income ( 22,645 ) 15,066

Comprehensive income 12,613 44,607

Comprehensive loss (income) attributable to noncontrolling interest 42 ( 10 )

Comprehensive income attributable to Quaker Chemical Corporation $ 12,655 $ 44,597

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

3 unchanged sentences

Dollars in thousands, except par value)

September 30,

2024 December 31,

36 unchanged sentences

issued and outstanding

September 30, 2023 – 18,000,855 shares;

March 31, 2024 – 17,989,801 shares;

December 31, 2023 – 17,991,988 shares

12 unchanged sentences

Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

Net income $ 35,258 $ 29,541

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

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

Amortization of debt issuance costs 353 353

3 unchanged sentences

Share-based compensation 3,884 3,527

Loss on extinguishment of debt — 5,246

Combination and other acquisition-related expenses, net of payments — ( 4,265 )

Restructuring and related charges (credits), net 6,034 ( 604 )

Restructuring and related charges, net 1,857 3,972

Pension and other postretirement benefits ( 551 ) ( 415 )

Increase (decrease) in cash from changes in current assets and current liabilities, net of acquisitions:

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

Accounts receivable 1,431 ( 3,974 )

3 unchanged sentences

Accounts payable and accrued liabilities ( 23,400 ) 6,468

Net cash provided by (used in) operating activities 199,460 ( 26,293 )

Net cash provided by operating activities 27,231 37,782

Cash flows from investing activities

5 unchanged sentences

Payments of long-term debt ( 4,711 ) ( 4,703 )

Proceeds from long-term debt — 750,000

Payments on revolving credit facilities, net ( 112,835 ) ( 10,418 )

Borrowings on other debt, net 797 2,131

Financing-related debt issuance costs — ( 3,734 )

Borrowings (payments) on revolving credit facilities, net 20,902 ( 9,776 )

Payments on other debt, net — ( 469 )

Dividends paid ( 8,186 ) ( 7,809 )

Other stock related activity ( 1,442 ) ( 2,109 )

Net cash (used in) provided by financing activities ( 150,525 ) 46,561

Net cash provided by (used in) financing activities 6,563 ( 24,866 )

Effect of foreign exchange rate changes on cash ( 3,270 ) 2,154

Net increase (decrease) in cash and cash equivalents 17,395 ( 26,285 )

Net increase in cash and cash equivalents 1,223 8,909

Cash and cash equivalents at the beginning of the period 194,527 180,963

13 unchanged sentences

Net income — — 29,534 — 7 29,541

Amounts reported in other comprehensive (loss) income — — — ( 6,271 ) 1 ( 6,270 )

Dividends ($ 0.415 per share)

— — ( 7,434 ) — — ( 7,434 )

Share issuance and equity-based compensation plans 15 1,646 — — — 1,661

Balance as of March 31, 2022 $ 17,912 $ 918,699 $ 528,716 $ ( 70,261 ) $ 634 $ 1,395,700

Net income — — 14,343 — 28 14,371

Amounts reported in other comprehensive loss — — — ( 74,985 ) ( 33 ) ( 75,018 )

Dividends ($ 0.415 per share)

— — ( 7,438 ) — — ( 7,438 )

Share issuance and equity-based compensation plans 8 2,943 — — — 2,951

Balance as of June 30, 2022 $ 17,920 $ 921,642 $ 535,621 $ ( 145,246 ) $ 629 $ 1,330,566

Net income — — 25,867 — 41 25,908

Amounts reported in other comprehensive loss — — — ( 72,409 ) ( 38 ) ( 72,447 )

Dividends ($ 0.435 per share)

— — ( 7,803 ) — — ( 7,803 )

Share issuance and equity-based compensation plans 11 3,395 — — — 3,406

Balance as of September 30, 2022 $ 17,931 $ 925,037 $ 553,685 $ ( 217,655 ) $ 632 $ 1,279,630

Balance as of December 31, 2022 $ 17,950 $ 928,288 $ 469,920 $ ( 138,240 ) $ 667 $ 1,278,585

Net income — — 29,534 — 7 29,541

Amounts reported in other comprehensive income — — — 15,063 3 15,066

3 unchanged sentences

Balance as of March 31, 2023 $ 17,982 $ 929,674 $ 491,632 $ ( 123,177 ) $ 677 $ 1,316,788

Net income — — 29,346 — 47 29,393

Amounts reported in other comprehensive loss — — — ( 6,931 ) ( 38 ) ( 6,969 )

Dividends ($ 0.435 per share)

— — ( 7,830 ) — — ( 7,830 )

Share issuance and equity-based compensation plans 17 5,267 — — — 5,284

Balance as of June 30, 2023 $ 17,999 $ 934,941 $ 513,148 $ ( 130,108 ) $ 686 $ 1,336,666

Balance as of December 31, 2023 $ 17,992 $ 940,101 $ 550,641 $ ( 124,415 ) $ 603 $ 1,384,922

Net income — — 35,227 — 31 35,258

3 unchanged sentences

Share issuance and equity-based compensation plans ( 2 ) 2,445 — — — 2,443

Balance as of September 30, 2023 $ 18,001 $ 938,473 $ 538,628 $ ( 154,724 ) $ 723 $ 1,341,101

Balance as of March 31, 2024 $ 17,990 $ 942,546 $ 577,682 $ ( 146,987 ) $ 561 $ 1,391,792

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

3 unchanged sentences

Note 1 – Basis of Presentation and Description of Business

As used in these Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for the period ended September 30, 2023 (the “Report”), the terms “Quaker Houghton,” the “Company,” “we,” and “our” refer to Quaker Chemical Corporation (doing business as Quaker Houghton), its subsidiaries, and associated companies, unless the context otherwise requires.

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

(“Houghton”).

As used in these Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for the period ended March 31, 2024 (the “Report”), the terms “Quaker Houghton,” the “Company,” “we,” and “our” refer to Quaker Chemical Corporation (doing business as Quaker Houghton), its subsidiaries, and associated companies, unless the context otherwise requires.

Basis of Presentation

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GAAP have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the financial statements reflect all adjustments consisting only of normal recurring adjustments, which are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods.

The results for the nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year.

These financial statements should be read in conjunction with the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

During the first quarter of 2023, the Company reorganized its executive management team to align with its new business structure.

The Company’s new structure includes three reportable segments:

(i) Americas;

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

and (iii) Asia/Pacific.

Prior to the Company’s reorganization, the Company’s historical reportable segments were:

(i) Americas;

(iii) Asia/Pacific;

and (iv) Global Specialty Businesses.

Prior period information has been recast to align with the Company’s business structure as of January 1, 2023, including reportable segments and customer industry disaggregation.

As a result of the Company’s new organizational structure effective January 1, 2023, the Company reallocated goodwill previously held by the former Global Specialty Businesses segment to the remaining business segments as of January 1, 2023.

However, the Company did not recast the carrying amount of goodwill for the year ended December 31, 2022.

See Notes 4, 5, and 13 of Notes to Condensed Consolidated Financial Statements.

In the opinion of management, the financial statements reflect all adjustments consisting of normal recurring adjustments which are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods.

The results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year.

These financial statements should be read in conjunction with the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2023 (as amended, the “2023 Form 10-K”).

Description of Business

2 unchanged sentences

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

Quaker Houghton develops, produces, and markets a broad range of formulated chemical specialty products and offers chemical management services, which the Company refers to as “Fluidcare TM ”, for various heavy industrial and manufacturing applications.

Quaker Houghton develops, produces, and markets a broad range of formulated chemical specialty products and offers chemical management services, which the Company refers to as Fluidcare TM , for various heavy industrial and manufacturing applications sold in its three reportable segments:

(i) Americas;

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

and (iii) Asia/Pacific.

Hyper-inflationary economies

1 unchanged sentence

GAAP effective July 1, 2018 and April 1, 2022, respectively.

As of, and for the three and nine months ended September 30, 2023, the Company's Argentine and Turkish subsidiaries represented a combined 1 % and 2 % of the Company’s consolidated total assets and net sales, respectively.

During the three and nine months ended September 30, 2023, the Company recorded $ 1.2 million and $ 2.9 million of remeasurement losses associated with the applicable currency conversions, respectively.

Comparatively, during the three and nine months ended September 30, 2022, the Company recorded $ 1.0 million and $ 1.2 million of remeasurement losses associated with the applicable currency conversions, respectively.

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

As of, and for the three months ended March 31, 2024, the Company's Argentine and Turkish subsidiaries together represented 1 % and 2 % of the Company’s consolidated total assets and net sales, respectively.

During the three months ended March 31, 2024 and 2023, the Company recorded $ 0.9 million of remeasurement gains and $ 0.5 million of remeasurement losses associated with the applicable currency conversions, respectively.

These gains and losses were recorded within Other income (expense), net, in the Company’s Condensed Consolidated Statements of Operations.

Note 2 – Business Acquisitions

Previous Acquisitions

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 (described below), which had similar specializations and product offerings in pickling inhibitor technologies, strengthens Quaker Houghton’s position in pickling inhibitors and additives, enabling the Company to better support and optimize production processes for customers across the metals industry.

As of September 30, 2023, the allocation of the purchase of this acquisition has been finalized.

During February 2024, the Company acquired I.K.V.

Tribologie IKVT and its subsidiaries (“IKV”) for 32.2 million EUR, or $ 34.6 million, including an initial cash payment of 27.6 million EUR, or $ 29.7 million, subject to routine and customary post-closing adjustments related to working capital and net indebtedness levels as well as earn-out provisions related to the finalization of 2023 earnings currently estimated at 4.6 million EUR, or $ 4.9 million, that is payable during 2024.

Assets acquired included approximately $ 4.8 million of cash and cash equivalents.

IKV, which will be part of the Company’s EMEA segment, specializes in high-performance lubricants and greases, including original equipment manufacturer first-fill greases that are primarily used in the automotive, aerospace, electronics, and other industrial markets.

The acquisition of IKV strengthens the Company’s position in first-fill greases.

The Company preliminarily allocated $ 15.0 million of the purchase price to intangible assets, comprised of approximately $ 11.1 million of customer relationships to be amortized over 16 years;

$ 3.2 million of product technologies to be amortized over 14 years;

and $ 0.7 million of trademarks to be amortized over 5 years.

In addition, the Company recognized $ 16.0 million of goodwill in the EMEA segment, none of which is deductible for tax purposes.

The goodwill recognized on the transaction is primarily attributable to expected cost and growth synergies.

As of March 31, 2024, the allocation of the purchase price has not been finalized.

The results of operations of IKV subsequent to the acquisition date are included in the unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2024.

Quaker Chemical Corporation

1 unchanged sentence

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

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 region.

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.

Also 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 EMEA 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.

The allocation of the purchase prices of both of these January 2022 acquisitions have been finalized.

In November 2021, the Company acquired Baron Industries, a privately held company that provides vacuum impregnation services of castings, powder metals and electrical components for its Americas 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.

As of September 30, 2023, the Company has remaining earn-out liabilities recorded on its Condensed Consolidated Balance Sheet of $ 1.1 million.

Additionally, during the third quarter of 2022 the Company finalized post-closing adjustments that resulted in the Company receiving a payment of less than $ 0.1 million.

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

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

During the first nine months of 2023, 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.

Note 3 – Recently Issued Accounting Standards

There have been no recently issued accounting standards that will have a material impact on the Company’s condensed consolidated financial statements and related footnote disclosures.

Recently Issued Accounting Standards Not Yet Adopted

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures in November 2023.

This ASU expands on reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The disclosure specifies that significant segment expenses are expenses that are regularly provided to the chief operating decision maker and are used to evaluate performance by segment to make decisions about resource allocations.

ASU 2023-07 is effective for annual reports for fiscal years beginning after December 15, 2023, with early adoption permitted.

The Company is currently evaluating the disclosure requirements of this standard and the impact on its Consolidated Financial Statements and related disclosures.

The FASB issued ASU 2023-09, Income Taxes (Topic 740) :

Improvements to Income Tax Disclosures in December 2023.

This ASU requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the “rate reconciliation”) for federal, state, and foreign income taxes.

It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

The Company is currently evaluating the disclosure requirements of this standard and the impact on its 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 performance.

The Company has three reportable segments:

2 unchanged sentences

The three segments are composed of the net sales and operations in each respective region.

All prior period information has been recast to reflect the Company’s new reportable segments.

See Note 1 of Notes to Condensed Consolidated Financial Statements.

Segment operating earnings for each of the Company’s reportable segments are comprised of the segment’s net sales less directly related Cost of goods sold (“COGS”), and Selling, general and administrative expenses (“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 (credits), net, 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 Condensed Consolidated Financial Statements - Continued

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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

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

The following table presents information about the performance of the Company’s reportable segments for the three months ended March 31, 2024 and 2023:

Net sales 2024 2023

Americas $ 229,754 $ 251,413

7 unchanged sentences

Total segment operating earnings 126,718 121,348

Combination, integration and other acquisition-related expenses — ( 2,107 ) — ( 7,992 )

Restructuring and related (charges) credits, net ( 1,019 ) 1,423 ( 6,034 ) 604

Restructuring and related charges, net ( 1,857 ) ( 3,972 )

Non-operating and administrative expenses ( 54,177 ) ( 51,771 )

1 unchanged sentence

Operating income 55,526 49,929

Other (expense) income, net ( 2,713 ) 85 ( 8,558 ) ( 10,520 )

Other income (expense), net 1,080 ( 2,239 )

Interest expense, net ( 10,824 ) ( 13,242 )

Income before taxes and equity in net income of associated companies $ 45,782 $ 34,448

The following table summarizes inter-segment revenues.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

The following table summarizes inter-segment revenues for the three months ended March 31, 2024 and 2023:

Inter-segment revenues 2024 2023

Americas $ 2,513 $ 2,827

4 unchanged sentences

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 recognized on a net reporting basis of $ 21.6 million and $ 63.2 million for the three and nine months ended September 30, 2023, respectively, and $ 21.4 million and $ 61.7 million for the three and nine months ended September 30, 2022, respectively.

The Company transferred third-party products under arrangements recognized on a net reporting basis of $ 19.8 million and $ 20.7 million for the three months ended March 31, 2024 and 2023, 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, aerospace, industrial and agricultural equipment, and durable goods.

As previously disclosed in the Company’s 2022 Form 10-K, the Company’s five largest customers combined (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.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

As previously disclosed in the Company’s 2023 Form 10-K, the Company’s five largest customers combined (each composed of multiple subsidiaries or divisions with semiautonomous purchasing authority) accounted for approximately 12 % of consolidated net sales for 2023, 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 Condensed Consolidated Balance Sheets as of September 30, 2023 or December 31, 2022.

The Company had approximately $ 2.8 million and $ 5.7 million of deferred revenue as of September 30, 2023 and December 31, 2022, respectively.

For the nine months ended September 30, 2023, the Company satisfied all of the associated performance obligations and recognized into revenue the advance payments received and recorded as of December 31, 2022.

The Company had no material contract assets recorded on its Condensed Consolidated Balance Sheets as of March 31, 2024 or December 31, 2023.

The Company had approximately $ 4.0 million and $ 4.5 million of deferred revenue as of March 31, 2024 and December 31, 2023, respectively.

For the three months ended March 31, 2024, the Company satisfied materially all of the associated performance obligations and recognized into revenue materially all advance payments received and recorded as of December 31, 2023.

Disaggregated Revenue

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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, are approximately proportionate to the level of total sales in each region.

The following tables disaggregate the Company’s net sales by geographic region, customer industries, and timing of revenue recognized.

Prior period information has been recast to reflect the Company’s current period customer industry disaggregation.

See Note 1 of Notes to Condensed Consolidated Financial Statements.

Three Months Ended September 30, 2023

Americas EMEA Asia/Pacific Consolidated

Customer Industries

The following tables disaggregate the Company’s net sales by segment and customer industry.

Three Months Ended March 31, 2024

Customer Industries Americas EMEA Asia/Pacific Consolidated

Metals $ 66,026 $ 32,820 $ 50,911 $ 149,757

1 unchanged sentence

$ 229,754 $ 138,422 $ 101,583 $ 469,759

Timing of Revenue Recognized

Product sales at a point in time $ 235,209 $ 128,586 $ 102,305 $ 466,100

Services transferred over time 10,690 11,034 2,788 24,512

$ 245,899 $ 139,620 $ 105,093 $ 490,612

Nine Months Ended September 30, 2023

Americas EMEA Asia/Pacific Consolidated

Customer Industries

Three Months Ended March 31, 2023

Customer Industries Americas EMEA Asia/Pacific Consolidated

Metals $ 68,134 $ 39,103 $ 46,660 $ 153,897

1 unchanged sentence

$ 251,413 $ 152,449 $ 96,286 $ 500,148

Timing of Revenue Recognized

Product sales at a point in time $ 718,187 $ 402,508 $ 291,740 $ 1,412,435

Services transferred over time 32,344 33,094 8,331 73,769

$ 750,531 $ 435,602 $ 300,071 $ 1,486,204

Quaker Chemical Corporation

1 unchanged sentence

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

Three Months Ended September 30, 2022

Americas EMEA Asia/Pacific Consolidated

Customer Industries

Metals $ 67,943 $ 32,748 $ 51,341 $ 152,032

Metalworking and other 186,735 101,638 51,813 340,186

$ 254,678 $ 134,386 $ 103,154 $ 492,218

Timing of Revenue Recognized

Product sales at a point in time $ 243,699 $ 124,566 $ 99,929 $ 468,194

Services transferred over time 10,979 9,820 3,225 24,024

$ 254,678 $ 134,386 $ 103,154 $ 492,218

Nine Months Ended September 30, 2022

Americas EMEA Asia/Pacific Consolidated

Customer Industries

Metals $ 185,784 $ 107,163 $ 163,239 $ 456,186

Metalworking and other 516,796 319,576 166,219 1,002,591

$ 702,580 $ 426,739 $ 329,458 $ 1,458,777

Timing of Revenue Recognized

Product sales at a point in time $ 669,945 $ 396,944 $ 321,031 $ 1,387,920

Services transferred over time 32,635 29,795 8,427 70,857

$ 702,580 $ 426,739 $ 329,458 $ 1,458,777

Note 6 - Leases

2 unchanged sentences

In addition, the Company has certain land use leases with remaining lease terms up to 91 years.

The Company had no material variable lease costs, sublease income, or finance leases for the three and nine months ended September 30, 2023 and 2022.

The Company had no material variable lease costs, sublease income, or finance leases for the three months ended March 31, 2024 and 2023.

The components of the Company’s lease expense are as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Operating lease expense $ 3,743 $ 3,936

Short-term lease expense 199 211

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Supplemental cash flow information related to the Company’s leases for the three months ended March 31, 2024 and 2023 is as follows:

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

3 unchanged sentences

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

September 30,

2024 December 31,

5 unchanged sentences

Weighted average discount rate 5.21 % 4.91 %

Maturities of operating lease liabilities were as follows:

September 30,

Maturities of operating lease liabilities as of March 31, 2024 were as follows:

For the remainder of 2024 $ 10,341

8 unchanged sentences

Note 7 – Restructuring and Related Activities

In the third quarter of 2019, 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.

As of December 31, 2022, the Company substantially completed all of the initiatives under the QH Program with only an immaterial amount of remaining severance still to be paid, which has been paid as of September 30, 2023.

In the fourth quarter of 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.

As of September 30, 2023, the program included restructuring and associated severance costs to reduce headcount by approximately 100 positions globally.

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

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

In 2022, the Company initiated a global cost and optimization program to improve its cost structure and drive a more profitable and productive organization.

As of March 31, 2024, the program included restructuring and associated severance costs to reduce headcount by approximately 120 positions globally.

These headcount reductions began in the fourth quarter of 2022 and are expected to be completed in 2024.

Quaker Chemical Corporation

2 unchanged sentences

Employee separation benefits vary depending on local regulations within certain foreign countries and include severance and other benefits.

Restructuring costs 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 under the QH Program.

These costs are recorded in Restructuring and related charges in the Company’s Consolidated Statements of Operations.

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.

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 three months ended September 30, 2023, the Company classified certain properties with aggregate book value of approximately $ 6.9 million as held-for-sale that are recorded in Prepaid expenses and other current assets on the Company’s Condensed Consolidated Balance Sheets.

The Company expects to complete the sale of these properties over the next 12 months.

Changes in the Company’s accruals for its restructuring programs are as follows:

Restructuring Programs

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

Restructuring costs incurred during the three months ended March 31, 2024 and 2023 include employee severance and facility closure costs that are recorded in Restructuring and related charges, net in the Company’s Condensed Consolidated Statements of Operations.

Changes in the Company’s accruals for its restructuring program are as follows:

Accrued restructuring as of December 31, 2023 $ 3,350

2 unchanged sentences

Currency translation adjustments ( 25 )

Accrued restructuring as of September 30, 2023 $ 3,590

Accrued restructuring as of March 31, 2024 $ 1,516

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.

As of March 31, 2024, the Company classified certain properties with aggregate book value of approximately $ 3.7 million as held-for-sale.

These assets are recorded in Prepaid expenses and other current assets on the Company’s Condensed Consolidated Balance Sheets.

The Company expects to complete the sale of these properties over the next 12 months.

Note 8 – Share-Based Compensation

The Company recognized the following share-based compensation expense in its Condensed Consolidated Statements of Operations:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

The Company recognized the following share-based compensation expense in its Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023:

Stock options $ 175 $ 431

3 unchanged sentences

Total share-based compensation expense $ 3,884 $ 3,527

Share-based compensation expense is recorded in SG&A, except for $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2022, respectively, recorded within Combination, integration and other acquisition-related expenses.

Stock Options

As of September 30, 2023, unrecognized compensation expense related to unvested stock options was $ 0.5 million, to be recognized over a weighted average remaining period of 0.9 years.

Restricted Stock Awards and Restricted Stock Units

During the nine months ended September 30, 2023, the Company granted 38,894 non-vested restricted shares and 6,675 non-vested restricted stock units under its long-term incentive plan (“LTIP”) , which are subject to time-based vesting, generally over one to three years .

The fair value of these grants is based on the last sale price of the Company’s common stock on the date of grant.

As of September 30, 2023, unrecognized compensation expense related to the non-vested restricted shares was $ 8.0 million, to be recognized over a weighted average remaining period of 1.4 years, and unrecognized compensation expense related to non-vested restricted stock units was $ 1.6 million, to be recognized over a weighted average remaining period of 1.5 years.

As of March 31, 2024, unrecognized compensation expense related to unvested stock options was $ 0.1 million, to be recognized over a weighted average remaining period of 1.0 year.

Restricted Stock Awards

During the three months ended March 31, 2024, the Company granted 872 non-vested restricted share awards under its long-term incentive plan (“LTIP”) , which are subject to time-based vesting, generally over one to three years .

As of March 31, 2024, unrecognized compensation expense related to the non-vested restricted shares was $ 4.3 million, to be recognized over a weighted average remaining period of 1.3 years.

Restricted Stock Units

During the three months ended March 31, 2024, the Company granted 41,093 restricted stock units under its LTIP , which are subject to time-based vesting, generally over one to three years .

The fair value of these grants is based on the closing price of the Company’s common stock on the date of grant.

As of March 31, 2024, unrecognized compensation expense related to non-vested restricted stock units was $ 8.8 million, to be recognized over a weighted average remaining period of 1.9 years.

Performance Stock Units

As a component of its LTIP, the Company grants performance-based stock unit awards (“PSUs”).

The number of 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 market-based total shareholder return (“TSR”) metric relative to the performance of a selected peer group, and separately the achievement of a performance-based return on invested capital (“ROIC”) measure.

The service vesting period required for the PSUs is generally three years and the measurement period of the market-based and performance objectives is generally from January 1 of the year of grant through December 31 of the year prior to issuance of the shares.

Quaker Chemical Corporation

1 unchanged sentence

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

Performance Stock Units

As a component of its LTIP, the Company grants performance-based stock unit awards (“PSUs”), which will be settled in a certain number of shares subject to market-based or performance-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 market-based total shareholder return (“TSR”) metric relative to the performance of the Company’s peer group, the S&P Midcap 400 Materials group, and separately the achievement of a performance-based return on invested capital (“ROIC”) measure.

The service period required for the PSUs is generally three years and the measurement period of the market-based and performance objectives is generally from January 1 of the year of grant through December 31 of the year prior to issuance of the shares.

As mentioned above, a portion of the Company’s PSU valuation is subject to the achievement of the Company’s TSR relative to the performance of a selected peer group.

For PSUs granted prior to 2024, the Company’s peer group was the S&P Midcap 400 Materials group.

For the 2024 annual LTIP grants, the Company made an election to change peer groups to the S&P 1500 Chemical group to measure the Company’s relative TSR.

Compensation expense for PSUs is measured based on the grant date fair value and is recognized on a straight-line vesting method basis over the applicable vesting period.

The fair value of PSUs granted with a ROIC condition is based on the trading price of the Company’s common stock on the date of grant.

In the first quarter of 2024, the Company granted 17,970 PSUs with a ROIC condition at a grant date fair value of $ 200.16 per unit, which was based on the closing trading price of the Company’s common stock on the date of grant.

PSUs granted with a relative TSR condition are valued using a Monte Carlo simulation on the date of grant.

The grant-date fair value of the PSUs valued using a Monte Carlo simulation, which included the following assumptions set forth in the table below:

The grant-date fair value of the PSUs valued using a Monte Carlo simulation was $ 234.19 per unit, which incorporated the assumptions set forth in the table below:

Number of PSUs granted 17,850

2 unchanged sentences

Expected term (years) 3.0

Based on the conditions of the PSUs and performance to date for each of the outstanding PSU awards as of September 30, 2023, the Company estimates that it will issue 25,613 fully vested shares as of the applicable settlement date for such outstanding PSUs awards.

As of September 30, 2023, there was approximately $ 8.0 million of total unrecognized compensation cost related to PSUs, which the Company expects to recognize over a weighted-average period of 2.2 years.

As of March 31, 2024, there was approximately $ 13.4 million of total unrecognized compensation cost related to PSUs, which the Company expects to recognize over a weighted-average period of 2.5 years.

Note 9 – Pension and Other Postretirement Benefits

The components of net periodic benefit cost (income) are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Pension Benefits Other Postretirement Benefits Pension Benefits Other Postretirement Benefits

The components of net periodic benefit cost (income) are as follows for the three months ended March 31, 2024 and 2023:

Pension Benefits Other Postretirement Benefits

2024 2023 2024 2023

5 unchanged sentences

Net periodic benefit cost (income) $ 588 $ 671 $ ( 14 ) $ ( 15 )

In July 2023, one of the Company’s pension plans in the U.K.

liquidated approximately $ 50 million of its invested assets and subsequently funded and entered into an insurance annuity contract, which will provide for the pension plan’s defined benefit obligations to participants.

Employer Contributions

As of September 30, 2023, $ 3.4 million and $ 0.1 million of contributions have been made to the Company’s U.S.

As of March 31, 2024, $ 0.9 million and less than $0.1 million of contributions have been made to the Company’s U.S.

and foreign pension plans and its other postretirement benefit plans, respectively.

4 unchanged sentences

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

Note 10 – Other (expense) income, net

The components of Other (expense) income, net are as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Note 10 – Other income (expense), net

The components of Other income (expense), net are as follows for the three months ended March 31, 2024 and 2023:

Non-income tax refunds and other related credits $ 2,155 $ 360

Income from third party license fees 225 325

Gain (loss) on disposals of property, plant, equipment and other assets, net 407 ( 19 )

Foreign exchange losses, net ( 448 ) ( 3,326 )

(Loss) gain on disposals of property, plant, equipment and other assets, net ( 25 ) 48 ( 91 ) 33

Non-income tax refunds and other related credits (expense) 91 122 1,339 ( 1,617 )

Pension and postretirement benefit (costs) income, non-service components ( 549 ) 452 ( 1,674 ) 1,406

Pension and postretirement benefit costs, non-service components ( 465 ) ( 552 )

Facility remediation recoveries, net — 827

Loss on extinguishment of debt — — — ( 6,763 )

Product liability claim ( 896 ) —

Other non-operating income, net 102 146

Total other (expense) income, net $ ( 2,713 ) $ 85 $ ( 8,558 ) $ ( 10,520 )

Non-income tax refunds and other related credits (expense) during the nine months ended September 30, 2023 and nine months ended September 30, 2022 include adjustments to a Combination-related indemnification asset associated with the settlement of certain income tax audits for tax periods prior to August 1, 2019.

See Note 11 of Notes to Condensed Consolidated Financial Statements.

Facility remediation recoveries, net, during the nine months ended September 30, 2023 and the three and nine months ended September 30, 2022, reflect gains recorded on the payments received from insurers related to previously incurred costs from the remediation and restoration of property damage incurred during the three months ended September 30, 2021.

Total other income (expense), net $ 1,080 $ ( 2,239 )

During 2021, two of the Company’s locations suffered property damages as a result of flooding and electrical fire, respectively.

Facility remediation recoveries, net, during the three months ended March 31, 2023, reflect recoveries recorded on the payments received from insurers related to previously incurred costs from the remediation and restoration of property damage.

See Note 18 of Notes to the Condensed Consolidated Financial Statements.

Loss on extinguishment of debt during the nine months ended September 30, 2022, represents a write-off of certain previously unamortized deferred financing costs as well as a portion of third party and creditor debt issuance costs incurred to execute an amendment to the Company’s primary credit facility.

See Note 14 of Notes to Condensed Consolidated Financial Statements.

Note 11 – Income Taxes and Uncertain Income Tax Positions

The Company’s effective tax rates for the three and nine months ended September 30, 2023 were 30.9 % and 31.1 %, respectively, compared to 28.1 % and 19.2 % for the three and nine months ended September 30, 2022, respectively.

The Company’s effective tax rate for the three months ended September 30, 2023 was primarily impacted by foreign tax inclusions, withholding taxes, return to provision adjustments, the impact of U.S.

Department of Treasury guidance on the usage of foreign tax credits, and the mix of earnings.

The effective tax rate for the first nine months of 2023 was further impacted by various other items including changes to the valuation allowance for and the usage of foreign tax credits due to an enacted law change in Brazil, and share-based compensation.

Comparatively, the prior year effective tax rates were largely impacted by foreign tax inclusions, changes in the valuation allowance for foreign tax credits, the impact of audit settlements, a reduction in reserves for uncertain tax positions, withholding taxes, and the impact of forecasted earnings and the mix of such earnings.

In addition, the Company’s effective tax rates for three and nine months ended September 30, 2022 were impacted by the Company recording earnings of one of its subsidiaries at a statutory tax rate of 25% while the recertification of its concessionary 15% tax rate was pending receipt.

As previously reported, Houghton Italia, S.r.l was involved in a corporate income tax audit with the Italian tax authorities covering tax years 2014 through 2018.

The Company settled all years 2014 through 2018 for $ 3.7 million and, accordingly, released all reserves relating to this audit for the settled tax years during the first quarter of 2022.

The settlement is to be paid via installments through 2026 and, through September 30, 2023, the Company has paid $ 1.5 million of such installments.

Having received approximately $ 1.2 million from escrow during the quarter, the Company has a remaining indemnification receivable of $ 3.2 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.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

In the first quarter of 2023, the Company was notified by the Spanish tax authorities of audits to commence for several of its legal entities operating in Spain and spanning tax years 2018 through 2021.

In addition, in July 2023, the Company was notified by the Italian tax authorities of an audit to commence for one of the Company’s Italian subsidiaries for tax year 2019.

Both of these audit proceedings are ongoing and the Company has been providing documentation in response to all of their inquiries.

The Company has not established any reserves for these matters at this time.

Product liability claim costs includes recorded expense related to the payment of a product liability dispute with one of the Company’s customers during the three months ended March 31, 2024.

Note 11 – Income Taxes

The Company’s effective tax rates for the three months ended March 31, 2024 and 2023 were 27.3 % and 27.7 %, respectively.

The Company’s effective tax rate for the three months ended March 31, 2024 was largely driven by a mix of earnings and withholding taxes, offset by changes in uncertain tax positions.

Comparatively, the effective tax rate for the first three months of 2023 was largely impacted by foreign tax inclusions, withholding taxes, and foreign tax credits, partially offset with changes in uncertain tax positions and favorable return to provision adjustments.

Note 12 – Earnings Per Share

The following table summarizes earnings per share calculations:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

The following table summarizes earnings per share calculations for the three months ended March 31, 2024 and 2023:

Basic earnings per common share

13 unchanged sentences

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 11,598 and 10,453 for the three and nine months ended September 30, 2023, respectively, and 25,896 and 24,618 for the three and nine months ended September 30, 2022, respectively.

Note 13 – Goodwill and Other Intangible Assets

The Company completes its annual goodwill and indefinite-lived intangible asset impairment test during the fourth quarter of each year, or more frequently if triggering events indicate a possible impairment.

The Company continually evaluates financial performance, economic conditions and other recent developments, including rising interest rates and the cost of capital among other factor s, in assessing if a triggering event indicates that the carrying values of goodwill, indefinite-lived, or long-lived assets are impaired.

The Company concluded that during the third quarter the ongoing financial, economic or geopolitical conditions did not represent a triggering event.

In connection with the Company’s reorganization and the associated change in reportable segments and reporting units during the first quarter of 2023, the Company performed the required impairment assessments directly before and immediately after the change in reporting units and concluded that it was not more likely than not that the fair values of any of the Company’s previous or new reporting units were less than their respective carrying amounts.

The calculated amount of anti-diluted shares not included were 39,066 and 15,327 for the three months ended March 31, 2024 and 2023, respectively .

Quaker Chemical Corporation

1 unchanged sentence

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

Changes in the carrying amount of goodwill were as follows.

Prior period information has been recast to reflect the Company’s current period reportable segments.

See Note 1 of Notes to Condensed Consolidated Financial Statements.

Americas EMEA Asia/Pacific Global

Businesses Total

Note 13 – Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the three months ended March 31, 2024 were as follows:

Americas EMEA Asia/Pacific Total

Balance as of December 31, 2023 $ 283,103 $ 65,940 $ 163,475 $ 512,518

Reallocation of reporting units 63,697 31,711 18,759 ( 114,167 ) —

Balance as of January 1, 2023 279,596 66,278 169,134 — 515,008

Goodwill additions — 16,011 — 16,011

Currency translation adjustments ( 115 ) ( 663 ) ( 5,176 ) ( 5,954 )

Balance as of September 30, 2023 $ 282,157 $ 65,473 $ 156,827 $ — $ 504,457

Balance as of March 31, 2024 $ 282,988 $ 81,288 $ 158,299 $ 522,575

Gross carrying amounts and accumulated amortization for definite-lived intangible assets were as follows:

2 unchanged sentences

Amortization Net Book Value

September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023

Customer lists and rights to sell $ 843,295 $ 841,562 $ 253,464 $ 243,872 $ 589,831 $ 597,690

3 unchanged sentences

The Company amortizes definite-lived intangible assets on a straight-line basis over their useful lives.

The Company recorded amortization expense as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

The Company recorded amortization expense for the three months ended March 31, 2024 and 2023 as follows:

Amortization expense $ 14,472 $ 14,513

Estimated annual aggregate amortization expense for the current year and subsequent five years and beyond is as follows:

Estimated annual aggregate amortization expense for the current year and subsequent five years is as follows:

For the remainder of 2024 $ 43,248

3 unchanged sentences

For the year ended December 31, 2028 55,835

As of September 30, 2023 and December 31, 2022, the Company had indefinite-lived intangible assets for trademarks and tradenames totaling $ 187.6 million and $ 189.1 million, respectively.

For the year ended December 31, 2029 55,373

As of March 31, 2024 and December 31, 2023, the Company had indefinite-lived intangible assets for trademarks and tradenames totaling $ 190.2 million and $ 193.2 million, respectively.

Quaker Chemical Corporation

3 unchanged sentences

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

As of September 30, 2023 As of December 31, 2022

As of March 31, 2024 As of December 31, 2023

Rate Outstanding

17 unchanged sentences

The Company has the right to increase the amount of the 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.

As of September 30, 2023, the Company was in compliance with all of the Credit Facility covenants.

As of March 31, 2024, the Company was in compliance with all of the Credit Facility covenants.

See Note 19 of Notes to Consolidated Financial Statements in the Company’s 2023 Form 10-K.

The weighted average variable interest rates incurred on the outstanding borrowings under the Credit Facility during the three and nine months ended September 30, 2023 were approximately 6.4 % and 6.1 %, respectively.

As of September 30, 2023, the interest rate on the outstanding borrowings under the Credit Facility was approximately 6.3 %.

The weighted average variable interest rate incurred on the outstanding borrowings under the Credit Facility during the three months ended March 31, 2024 was approximately 6.4 %.

As of March 31, 2024, the interest rate on the outstanding borrowings under the Credit Facility was approximately 6.1 %.

As part of the Credit Facility, in addition to paying interest on outstanding principal, the Company is also required to pay an annual commitment fee ranging from 0.150 % to 0.275 % related to unutilized commitments under the Revolver, depending on the Company’s consolidated net leverage ratio.

The Company had unused capacity under the Revolver of approximately $ 414 million, which is net of bank letters of credit of approximately $ 3 million, as of September 30, 2023.

The Company had unused capacity under the Revolver of approximately $ 445 million, which is net of bank letters of credit of approximately $ 3 million, as of March 31, 2024.

In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, in the first quarter of 2023, the Company entered into $ 300.0 million notional amounts of three year interest rate swaps to convert a portion of the Company’s variable rate borrowings to an average fixed rate of 3.64 % plus an applicable margin as provided in the Credit Facility based on the Company’s consolidated net leverage ratio.

As of September 30, 2023, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 5.3 %.

As of March 31, 2024, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 5.3 %.

See Note 17 of Notes to Condensed Consolidated Financial Statements.

4 unchanged sentences

These capitalized costs will collectively be amortized into Interest expense over the five year term of the Credit Facility.

As of September 30, 2023, the Company had $ 1.7 million of debt issuance costs recorded as an offset of Long-term debt on the Condensed Consolidated Balance Sheet and $ 3.6 million of debt issuance costs recorded within Other assets on the Condensed Consolidated Balance Sheet.

Comparatively, as of December 31, 2022, the Company had $ 2.0 million of debt issuance costs recorded as an offset of Long-term debt on the Condensed Consolidated Balance Sheet and $ 4.3 million of debt issuance costs recorded within Other assets on the Condensed Consolidated Balance Sheet.

As of March 31, 2024, the Company had $ 1.4 million of debt issuance costs recorded as an offset of Long-term debt on the Condensed Consolidated Balance Sheets and $ 3.1 million of debt issuance costs recorded within Other assets on the Condensed Consolidated Balance Sheet.

Comparatively, as of December 31, 2023, the Company had $ 1.5 million of debt issuance costs recorded as an offset of Long-term debt on the Condensed Consolidated Balance Sheets and $ 3.3 million of debt issuance costs recorded within Other assets on the Condensed Consolidated Balance Sheets.

Quaker Chemical Corporation

2 unchanged sentences

Industrial development bonds

As of September 30, 2023 and December 31, 2022, the Company had fixed rate, industrial development authority bonds totaling $ 10.0 million in principal amount due in 2028.

As of March 31, 2024 and December 31, 2023, 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 Credit Facility noted above.

2 unchanged sentences

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 September 30, 2023 was approximately $ 34 million.

Total unused capacity under these arrangements as of March 31, 2024 was approximately $ 34 million.

In addition to the bank letters of credit described in the “Credit facilities” subsection above, the Company’s other off-balance sheet arrangements include certain financial and other guarantees.

The Company’s total bank letters of credit and guarantees outstanding as of September 30, 2023 were approximately $ 5 million.

The Company’s total bank letters of credit and guarantees outstanding as of March 31, 2024 were approximately $ 5 million.

Interest expense, net

The Company incurred the following debt related expenses included within Interest expense, net, in the Condensed Consolidated Statements of Operations:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

The Company incurred the following debt related expenses included within Interest expense, net, in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023:

Interest expense $ 11,282 $ 13,876

1 unchanged sentence

Total $ 11,635 $ 14,229

Based on the variable interest rates associated with the Credit Facility, as of September 30, 2023 and as of December 31, 2022, the amounts at which the Company’s total debt were recorded are not materially different from their fair market value.

Based on the variable interest rates associated with the Credit Facility, as of March 31, 2024 and as of December 31, 2023, the amounts at which the Company’s total debt were recorded are not materially different from their fair market value.

Note 15 – Accumulated Other Comprehensive Income

6 unchanged sentences

Instruments Total

Balance at June 30, 2023 $ ( 130,738 ) $ ( 4,024 ) $ 91 $ 4,563 $ ( 130,108 )

Balance as of December 31, 2023 $ ( 115,417 ) $ ( 10,738 ) $ 333 $ 1,407 $ ( 124,415 )

Other comprehensive (loss) income before Reclassifications ( 25,316 ) 320 63 3,045 ( 21,888 )

1 unchanged sentence

Related tax amounts — ( 116 ) ( 11 ) ( 700 ) ( 827 )

Balance at September 30, 2023 $ ( 156,239 ) $ ( 3,743 ) $ ( 546 ) $ 5,804 $ ( 154,724 )

Balance at June 30, 2022 $ ( 133,110 ) $ ( 11,269 ) $ ( 1,170 ) $ 303 $ ( 145,246 )

Other comprehensive (loss) income before Reclassifications ( 71,948 ) 453 ( 1,006 ) ( 182 ) ( 72,683 )

Balance as of March 31, 2024 $ ( 140,733 ) $ ( 10,384 ) $ 378 $ 3,752 $ ( 146,987 )

Balance as of December 31, 2022 $ ( 132,161 ) $ ( 4,595 ) $ ( 1,484 ) $ — $ ( 138,240 )

Other comprehensive income (loss) before Reclassifications 14,465 ( 243 ) 462 506 15,190

Amounts reclassified from AOCI — 76 ( 40 ) — 36

Related tax amounts — 41 ( 88 ) ( 116 ) ( 163 )

Balance at September 30, 2022 $ ( 205,058 ) $ ( 10,772 ) $ ( 1,988 ) $ 163 $ ( 217,655 )

Balance as of March 31, 2023 $ ( 117,696 ) $ ( 4,721 ) $ ( 1,150 ) $ 390 $ ( 123,177 )

Quaker Chemical Corporation

1 unchanged sentence

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

Adjustments Defined

Plans Unrealized

(Loss) Gain in

Available-for-

Sale Securities Derivative

Instruments Total

Balance as of December 31, 2022 $ ( 132,161 ) $ ( 4,595 ) $ ( 1,484 ) $ — $ ( 138,240 )

Other comprehensive income (loss) before reclassifications ( 24,078 ) 915 640 7,538 ( 14,985 )

Amounts reclassified from AOCI — 225 547 772

Related tax amounts — ( 288 ) ( 249 ) ( 1,734 ) ( 2,271 )

Balance as of September 30, 2023 $ ( 156,239 ) $ ( 3,743 ) $ ( 546 ) $ 5,804 $ ( 154,724 )

Balance as of December 31, 2021 $ ( 49,843 ) $ ( 13,172 ) $ 397 $ ( 1,372 ) $ ( 63,990 )

Other comprehensive (loss) income before reclassifications ( 155,215 ) 2,535 ( 3,326 ) 1,993 ( 154,013 )

Amounts reclassified from AOCI — 657 306 — 963

Related tax amounts — ( 792 ) 635 ( 458 ) ( 615 )

Balance as of September 30, 2022 $ ( 205,058 ) $ ( 10,772 ) $ ( 1,988 ) $ 163 $ ( 217,655 )

All reclassifications related to unrealized (loss) gain 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 noncontrolling interest are related to currency translation adjustments.

Note 16 – Fair Value Measurements

The Company has valued its company-owned life insurance policies at fair value.

The Company values its company-owned life insurance policies at fair value.

During June 2023, the Company surrendered and liquidated $ 1.9 million of these life insurance policies.

The fair values of Company-owned life insurance assets are based on quotes for like instruments with similar credit ratings and terms.

These assets are subject to fair value measurement as follows:

Fair Value Fair Value Measurements as of September 30, 2023

Using Fair Value Hierarchy

Assets Level 1 Level 2 Level 3

Company-owned life insurance $ 285 $ — $ 285 $ —

Total $ 285 $ — $ 285 $ —

Fair Value Fair Value Measurements as of December 31, 2022

Using Fair Value Hierarchy

Assets Level 1 Level 2 Level 3

Company-owned life insurance $ 2,114 $ — $ 2,114 $ —

Total $ 2,114 $ — $ 2,114 $ —

As a result, the Company owns an immaterial amount of company-owned life insurance policies as of March 31, 2024 and December 31, 2023.

Additionally, see Note 17 for a description of the Company’s derivative instruments.

Note 17 – Hedging Activities

2 unchanged sentences

The Company does not hold or enter into financial instruments for trading or speculative purposes.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

Foreign Exchange Forward Contracts

A significant portion of the Company’s revenues and earnings are generated by its foreign operations.

These foreign operations also represent a significant portion of the Company’s assets and liabilities.

Generally, all of these foreign operations use the local currency as their functional currency and many have operations in currencies other than their functional currency, which creates foreign exchange risk.

The Company uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on certain assets and/or liabilities denominated in certain foreign currencies.

These forward contracts are marked-to-market at each reporting date.

Changes in the fair value of the underlying instrument and settlements are recognized in earnings in Other (expense) income, net.

Changes in the fair value of the underlying instrument and settlements are recognized in earnings in Other income (expense), net.

The fair value of the forward contract is determined from sources independent of the Company, including the financial institutions which are party to the derivative instruments.

All open foreign exchange forward contracts as of September 30, 2023 were entered into as hedges against the U.S.

As of September 30, 2023, the Company had open foreign exchange forward contracts with a notional U.S.

dollar value of the following:

Currency September 30,

Open foreign exchange forward contracts as of March 31, 2024 were entered into as hedges in Japanese yen and Mexican peso against the U.S.

dollar and Chinese yuan against the Euro.

As of March 31, 2024, the Company had open foreign exchange forward contracts with notional U.S.

dollar values of the following:

Currency March 31,

Mexican Peso $ 41,000

Japanese Yen 7,200

Open foreign exchange forward contracts as of September 30, 2023 had maturities occurring over a period of one month .

Chinese Yuan 7,800

Open foreign exchange forward contracts as of March 31, 2024 had maturities occurring over a period of one month .

Interest Rate Swaps

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These interest rate swaps are designated as cash flow hedges and, as such, the contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in AOCI to the extent effective and reclassified to interest expense in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.

Interest rate swaps are entered into with a limited number of counterparties within several tranches, each of which allows for net settlement of all contracts through a single payment to participating counterparties 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 are recorded on a net basis within the Condensed Consolidated Balance Sheets.

The balance sheet classification and fair values of the Company’s derivative instruments, which are Level 2 measurements, are as follows:

Condensed Consolidated

Balance Sheet Location September 30,

2023 December 31,

Derivatives designated as cash flow hedges:

Interest rate swaps Other non-current Assets $ 7,538 $ —

Foreign currency forward contracts Other current liabilities ( 564 ) $ —

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

September 30,

Derivatives instruments Condensed Consolidated Balance Sheets Location March 31,

2024 December 31,

Derivatives designated as cash flow hedges:

Interest rate swaps AOCI $ 5,804 $ —

Interest rate swaps:

Other non-current assets $ 4,873 $ 1,828

Foreign currency forward contracts:

Other accrued liabilities — 159

Prepaid expenses and other current assets 687 —

Quaker Chemical Corporation

1 unchanged sentence

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

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

Location and Amount of Gain (Loss) Recognized in

Statements of Operations

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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

Derivatives designated as cash flow hedges March 31,

2024 December 31,

Interest rate swaps AOCI $ 3,752 $ 1,407

The following table presents the location and the amount of net gain recognized in the Company’s Condensed Consolidated Statements of Operations related to derivative instruments for the three months ended March 31, 2024 and 2023:

Derivative instruments Condensed Consolidated Statements of Operations Location 2024 2023

Interest rate swaps Interest expense, net $ 1,286 $ —

Foreign exchange forward contracts Other (expense) income, net ( 29 ) — 2,107 —

$ 1,169 $ 134 $ 4,366 $ ( 882 )

Foreign exchange forward contracts Other income, net 943 293

Total $ 2,229 $ 293

Note 18 – Commitments and Contingencies

The Company previously disclosed in its 2022 Form 10-K that two of the Company’s locations suffered property damage as a result of flooding and electrical fire, respectively.

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

During the three and nine months ended September 30, 2023, there have been no significant changes to the facts or circumstances of this previously disclosed matter, other than ongoing work with the Company’s insurance adjuster and insurance carrier regarding the insurance claims submitted.

Through September 30, 2023, the Company has received cumulative payments from its insurers of $ 5.9 million associated with these events.

During the nine months ended September 30, 2023, the Company recognized a gain on insurance recoveries of $ 1.0 million.

See Note 10 of Notes to the Condensed Consolidated Financial Statements.

As previously disclosed in its 2023 Form 10-K, the Company is party to certain environmental matters and other litigation.

See Note 25 of Notes to Consolidated Financial Statements in the Company’s 2023 Form 10-K.

During the three and nine months ended September 30, 2023, there have been no significant changes to the facts or circumstances of any of the previously disclosed matters.

In addition, during the three and nine months ended September 30, 2023, there are no new environmental matters or litigation that the Company believes will have a material adverse effect on the Company’s results of operations, cash flows, or financial condition.

Although there can be no assurance regarding the outcome of any of the ongoing environmental matters or litigation the Company is party to, the Company believes that it has made adequate accruals for costs and liabilities associated with environmental matters or provisions for ongoing litigation for which it is aware.

The Company has accrued approximately $ 6 million as of both September 30, 2023 and December 31, 2022, respectively, for these ongoing matters.

During the three months ended March 31, 2024, there have been no significant changes to the facts or circumstances of any of the previously disclosed matters.

Although there can be no assurance regarding the outcome of any of the ongoing environmental matters or litigation, the Company believes that it has made adequate accruals for costs and liabilities associated with these matters.

The Company has accrued approximately $ 5 million as of both March 31, 2024 and December 31, 2023, respectively, for these ongoing matters.

The Company previously disclosed in its 2023 Form 10-K that one of its locations suffered property damage as a result of an electrical fire.

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 March 31, 2024.

In December 2021, the Company completed its acquisition of Coral Chemical Company (“Coral”), a privately held, U.S.-based provider of metal finishing fluid solutions.

Subsequent to the acquisition, the Company and the sellers of Coral (the “Sellers”) have worked to finalize 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 addition, during the three months ended March 31, 2024, there are no new environmental matters or litigation that the Company believes will have a material adverse effect on the Company’s results of operations, cash flows, or financial condition.

Quaker Chemical Corporation

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements