What changed in this filing

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Item 1. Financial Statements

2024-08-05 compared with 2024-05-02 · 208 added, 124 removed, 471 unchanged (41% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net sales $ 463,567 $ 495,444 $ 933,326 $ 995,592

23 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net income $ 34,910 $ 29,393 $ 70,168 $ 58,934

3 unchanged sentences

Current period change in fair value of derivatives ( 15 ) 4,173 2,330 4,563

Unrealized gain on available-for-sale securities 45 334

Unrealized (loss) gain on available-for-sale securities ( 44 ) 1,241 1 1,575

Other comprehensive (loss) income ( 18,774 ) ( 6,969 ) ( 41,419 ) 8,097

Comprehensive income 16,136 22,424 28,749 67,031

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

Comprehensive (income) loss attributable to noncontrolling interest ( 26 ) ( 9 ) 16 ( 19 )

Comprehensive income attributable to Quaker Chemical Corporation $ 16,110 $ 22,415 $ 28,765 $ 67,012

42 unchanged sentences

issued and outstanding

March 31, 2024 – 17,989,801 shares;

June 30, 2024 – 17,940,532 shares;

December 31, 2023 – 17,991,988 shares

12 unchanged sentences

Dollars in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

8 unchanged sentences

Pension and other postretirement benefits ( 994 ) ( 308 )

Decrease 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 10,483 22,017

1 unchanged sentence

Prepaid expenses and other current assets ( 15,646 ) ( 8,925 )

Change in restructuring liabilities ( 3,666 ) ( 2,747 )

Accrued restructuring ( 4,442 ) ( 5,410 )

Accounts payable and accrued liabilities ( 25,021 ) ( 11,912 )

10 unchanged sentences

Dividends paid ( 16,372 ) ( 15,631 )

Shares purchased under share repurchase programs ( 7,760 ) —

Other stock related activity ( 1,492 ) ( 712 )

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

Net cash used in financing activities ( 39,297 ) ( 89,016 )

Effect of foreign exchange rate changes on cash ( 6,971 ) ( 1,554 )

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

Net (decrease) increase in cash and cash equivalents ( 5,959 ) 8,442

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

18 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

5 unchanged sentences

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

Net income — — 34,885 — 25 34,910

Amounts reported in other comprehensive loss — — — ( 18,775 ) 1 ( 18,774 )

Dividends ($ 0.455 per share)

— — ( 8,163 ) — — ( 8,163 )

Shares purchased under share repurchase program ( 49 ) ( 8,306 ) — — — ( 8,355 )

Share issuance and equity-based compensation plans — 4,196 — — — 4,196

Balance as of June 30, 2024 $ 17,941 $ 938,436 $ 604,404 $ ( 165,762 ) $ 587 $ 1,395,606

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 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.

As used in these Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for the period ended June 30, 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

3 unchanged sentences

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

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.

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

The results for the six months ended June 30, 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”).

10 unchanged sentences

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

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.

As of, and for the three and six months ended June 30, 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 and six months ended June 30, 2024, the Company recorded $ 0.6 million of remeasurement losses and $ 0.3 million of net remeasurement gains associated with the applicable currency conversions, respectively.

Comparatively, during the three and six months ended June 30, 2023, the Company recorded $ 1.1 million and $ 1.6 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

Subsequent to the date of these financial statements, in July 2024, the Company acquired Sutai Group (“Sutai”), for approximately 2.3 billion Japanese yen, or approximately $ 14.6 million, subject to routine and customary post-closing adjustments and earn-out provisions.

Sutai is based in Japan and provides impregnation treatment products and services to the automotive industry and a variety of other industries.

Sutai will be reported as part of the Asia/Pacific reportable segment.

This acquisition strengthens Quaker Houghton’s technology portfolio, enabling the Company to better support and optimize production processes for customers across the Japanese, Asia Pacific and global markets.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

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.

Tribologie IKVT and its subsidiaries (“IKV”) for 32.6 million EUR, or $ 35.2 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.

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.

IKV, which is 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.

4 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements - Continued

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

Subsequent to the date of these financial statements, the 2023 earnings were finalized and the Company made a payment of 5.0 million EUR, or $ 5.5 million, in connection with the post-closing adjustments and earn-out provision.

As of June 30, 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 and six months ended June 30, 2024.

Note 3 – Recently Issued Accounting Standards

2 unchanged sentences

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.

This ASU expands on reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, defined as those expenses that are regularly provided to the chief operating decision maker and included in the reported measure of segment profit or loss.

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

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

9 unchanged sentences

and (iii) Asia/Pacific.

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

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”).

1 unchanged sentence

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:

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

June 30, Six Months Ended

Net sales 2024 2023 2024 2023

15 unchanged sentences

Income before taxes and equity in net income of associated companies $ 48,117 $ 40,468 $ 93,899 $ 74,916

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

The following table summarizes inter-segment revenues.

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

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

Three Months Ended

June 30, Six Months Ended

Inter-segment revenues 2024 2023 2024 2023

5 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 $ 19.8 million and $ 20.7 million for the three months ended March 31, 2024 and 2023, respectively.

The Company transferred third-party products under arrangements recognized on a net reporting basis of $ 19.2 million and $ 39.0 million for the three and six months ended June 30, 2024, respectively, and $ 21.0 million and $ 41.7 million for the three and six months ended June 30, 2023, respectively.

Customer Concentration

2 unchanged sentences

Contract Assets and Liabilities

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.

The Company had no material contract assets recorded on its Condensed Consolidated Balance Sheets as of June 30, 2024 or December 31, 2023.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

The Company had approximately $ 3.2 million and $ 4.5 million of deferred revenue as of June 30, 2024 and December 31, 2023, respectively.

For the six months ended June 30, 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

3 unchanged sentences

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

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Customer Industries Americas EMEA Asia/Pacific Consolidated

2 unchanged sentences

$ 223,517 $ 138,001 $ 102,049 $ 463,567

Three Months Ended March 31, 2023

Six Months Ended June 30, 2024

Customer Industries Americas EMEA Asia/Pacific Consolidated

2 unchanged sentences

$ 453,271 $ 276,423 $ 203,632 $ 933,326

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

Three Months Ended June 30, 2023

Customer Industries Americas EMEA Asia/Pacific Consolidated

Metals $ 68,743 $ 32,643 $ 48,129 $ 149,515

Metalworking and other 184,476 110,890 50,563 345,929

$ 253,219 $ 143,533 $ 98,692 $ 495,444

Six Months Ended June 30, 2023

Customer Industries Americas EMEA Asia/Pacific Consolidated

Metals $ 136,877 $ 71,746 $ 94,789 $ 303,412

Metalworking and other 367,755 224,236 100,189 692,180

$ 504,632 $ 295,982 $ 194,978 $ 995,592

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 months ended March 31, 2024 and 2023.

The Company had no material variable lease costs, sublease income, or finance leases for the three and six months ended June 30, 2024 and 2023.

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

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Operating lease expense $ 3,727 $ 3,710 $ 7,470 $ 7,646

Short-term lease expense 193 183 392 394

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

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

June 30, Six Months Ended

2024 2023 2024 2023

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

10 unchanged sentences

Weighted average discount rate 5.32 % 4.91 %

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

Maturities of operating lease liabilities as of June 30, 2024 were as follows:

For the remainder of 2024 $ 6,994

9 unchanged sentences

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.

As of June 30, 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.

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

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 and six months ended June 30, 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.

Quaker Chemical Corporation

1 unchanged sentence

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

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

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:

3 unchanged sentences

Currency translation adjustments ( 37 )

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

Accrued restructuring as of June 30, 2024 $ 1,048

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.

As of June 30, 2024, the Company classified certain properties with aggregate book value of approximately $ 2.1 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.

During the three and six months ended June 30, 2024, the Company completed the sale of certain facilities previously classified as held for sale for a net gain of $ 0.5 million, which is recorded in Other income (expenses), net in the Company’s Condensed Consolidated Statements of Operations.

Note 8 – Share-Based Compensation

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:

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

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Stock options $ 39 $ 203 $ 214 $ 634

4 unchanged sentences

Stock Options

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.

As of June 30, 2024, unrecognized compensation expense related to unvested stock options was $ 0.1 million, to be recognized over a weighted average remaining period of 0.8 years.

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.

During the six months ended June 30, 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 June 30, 2024, unrecognized compensation expense related to non-vested restricted shares was $ 2.8 million, to be recognized over a weighted average remaining period of 1.2 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 .

During the six months ended June 30, 2024, the Company granted 55,227 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.

As of June 30, 2024, unrecognized compensation expense related to non-vested restricted stock units was $ 9.4 million, to be recognized over a weighted average remaining period of 1.7 years.

Performance Stock Units

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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.

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.

During the six months ended June 30, 2024, the Company granted 20,205 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.

4 unchanged sentences

Expected term (years) 3.0

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.

As of June 30, 2024, there was approximately $ 12.0 million of total unrecognized compensation cost related to PSUs, which the Company expects to recognize over a weighted-average period of 2.3 years.

Note 9 – Pension and 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

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

Three Months Ended June 30, Six Months Ended June 30,

Pension Benefits Other Postretirement Benefits Pension Benefits Other Postretirement Benefits

2024 2023 2024 2023 2024 2023 2024 2023

6 unchanged sentences

Employer Contributions

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.

During the six months ended June 30, 2024, $ 1.9 million of contributions have been made to the Company’s U.S.

and foreign pension plans.

Contributions to other postretirement benefit plans were not material.

Taking into consideration current minimum cash contribution requirements, the Company currently expects to make full year cash contributions of approximately $ 5.7 million to its U.S.

and foreign pension plans and approximately $ 0.2 million to its other postretirement benefit plans in 2024.

and foreign pension plans and approximately $ 0.2 million to its other postretirement benefit plans.

Quaker Chemical Corporation

2 unchanged sentences

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:

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

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Non-income tax refunds and other related credits $ 868 $ 888 3,023 1,248

Income from third party license fees 170 321 $ 395 $ 646

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

Gain on disposals of property, plant, equipment and other assets, net 510 — 917 —

Foreign exchange losses, net ( 727 ) ( 4,225 ) ( 1,175 ) ( 7,551 )

2 unchanged sentences

Product liability claim — — ( 896 ) —

Other non-operating income, net 102 146

Other non-operating income (expense), net 65 ( 204 ) 167 ( 77 )

Total other income (expense), net $ 422 $ ( 3,606 ) $ 1,502 $ ( 5,845 )

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.

Gain on disposals of property, plant, equipment and other assets, net includes the net gains recognized for the sale of certain facilities previously classified as held for sale during the three and six months ended June 30, 2024.

See Note 7 of Notes to the Condensed Consolidated Financial Statements.

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.

Facility remediation recoveries, net, during the three and six months ended June 30, 2023, reflect insurance recoveries of costs for remediation and restoration of property damage.

See Note 18 for discussion regarding the Company’s related business interruption claims.

Product liability claim represents expense related to the payments by the Company in connection with a product liability dispute with a customer during the six months ended June 30, 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.

The Company’s effective tax rates for the three and six months ended June 30, 2024 were 32.8 % and 30.1 %, respectively, compared to 34.2 % and 31.2 % for the three and six months ended June 30, 2023, respectively.

The Company’s effective tax rates for the three and six months ended June 30, 2024 were largely driven by the mix of pre-tax earnings, certain one-time charges related to an intercompany intangible asset transfer, and withholding taxes, offset by changes in uncertain tax positions.

Comparatively, the effective tax rates for the three and six months ended June 30, 2023 were largely impacted by the mix of pre-tax earnings, changes to the valuation allowance for and the usage of certain foreign tax credits, and withholding taxes, partially offset by changes in uncertain tax positions and favorable return to provision adjustments.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

Note 12 – Earnings Per Share

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

The following table summarizes earnings per share calculations:

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 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 39,066 and 15,327 for the three months ended March 31, 2024 and 2023, respectively .

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

The calculated amount of anti-diluted shares not included were 16,098 and 31,000 for the three and six months ended June 30, 2024, respectively, and 8,232 and 10,940 for the three and six months ended June 30, 2023, respectively .

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:

Changes in the carrying amount of goodwill for the six months ended June 30, 2024 were as follows:

Americas EMEA Asia/Pacific Total

2 unchanged sentences

Currency translation adjustments ( 2,927 ) ( 816 ) ( 7,641 ) ( 11,384 )

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

Balance as of June 30, 2024 $ 280,176 $ 81,572 $ 155,834 $ 517,582

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

2 unchanged sentences

Amortization Net Book Value

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

June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023

Customer lists and rights to sell $ 837,946 $ 841,562 $ 264,378 $ 243,872 $ 573,568 $ 597,690

2 unchanged sentences

Total definite-lived intangible assets $ 1,006,380 $ 1,009,067 $ 329,507 $ 305,527 $ 676,873 $ 703,540

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

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

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

The Company recorded amortization expense as follows:

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Amortization expense $ 14,744 $ 14,692 $ 29,215 $ 29,205

6 unchanged sentences

For the year ended December 31, 2029 56,020

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

Notes to Condensed Consolidated Financial Statements - Continued

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

As of June 30, 2024 and December 31, 2023, the Company had indefinite-lived intangible assets for trademarks and tradenames totaling $ 189.3 million and $ 193.2 million, respectively.

Note 14 – Debt

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

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

As of June 30, 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 March 31, 2024, the Company was in compliance with all of the Credit Facility covenants.

As of June 30, 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 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 %.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

The weighted average variable interest rate incurred on the outstanding borrowings under the Credit Facility during the three and six months ended June 30, 2024 were approximately 6.2 % and 6.3 %, respectively.

As of June 30, 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 $ 445 million, which is net of bank letters of credit of approximately $ 3 million, as of March 31, 2024.

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 June 30, 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 March 31, 2024, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 5.3 %.

As of June 30, 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.

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

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.

As of June 30, 2024, the Company had $ 1.3 million of debt issuance costs recorded as an offset of Long-term debt on the Condensed Consolidated Balance Sheets and $ 2.9 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

Notes to Condensed Consolidated Financial Statements - Continued

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

Industrial development bonds

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.

As of June 30, 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.

1 unchanged sentence

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 March 31, 2024 was approximately $ 34 million.

Total unused capacity under these arrangements as of June 30, 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 March 31, 2024 were approximately $ 5 million.

The Company’s total bank letters of credit and guarantees outstanding as of June 30, 2024 were approximately $ 4 million.

Interest expense, net

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:

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

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Interest expense $ 11,530 $ 14,389 $ 22,812 $ 28,265

1 unchanged sentence

Total $ 11,883 $ 14,742 $ 23,518 $ 28,971

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.

Based on the variable interest rates associated with the Credit Facility, as of June 30, 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.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

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

Note 15 – Accumulated Other Comprehensive Income

6 unchanged sentences

Instruments Total

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

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

Other comprehensive (loss) income before Reclassifications ( 18,841 ) 113 ( 58 ) ( 19 ) ( 18,805 )

1 unchanged sentence

Related tax amounts — ( 47 ) 11 4 ( 32 )

Balance as of June 30, 2024 $ ( 159,574 ) $ ( 10,259 ) $ 334 $ 3,737 $ ( 165,762 )

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

Other comprehensive (loss) income before Reclassifications ( 13,042 ) 854 979 5,420 ( 5,789 )

Amounts reclassified from AOCI — 78 591 — 669

Related tax amounts — ( 235 ) ( 329 ) ( 1,247 ) ( 1,811 )

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

Adjustments Defined

Plans Unrealized

(Loss) Gain in

Available-for-

Sale Securities Derivative

Instruments Total

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

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

Other comprehensive (loss) income before reclassifications ( 44,157 ) 433 5 3,026 ( 40,693 )

Amounts reclassified from AOCI — 209 ( 4 ) — 205

Related tax amounts — ( 163 ) — ( 696 ) ( 859 )

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

Balance as of June 30, 2024 $ ( 159,574 ) $ ( 10,259 ) $ 334 $ 3,737 $ ( 165,762 )

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

Other comprehensive income before reclassifications 1,423 611 1,442 5,926 9,402

Amounts reclassified from AOCI — 154 551 — 705

Related tax amounts — ( 194 ) ( 418 ) ( 1,363 ) ( 1,975 )

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

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.

Quaker Chemical Corporation

4 unchanged sentences

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

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.

As a result, the Company owns an immaterial amount of company-owned life insurance policies as of June 30, 2024 and December 31, 2023.

See Note 17 for a description of the Company’s derivative instruments.

Note 17 – Hedging Activities

7 unchanged sentences

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.

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.

Open foreign exchange forward contracts as of June 30, 2024 were entered into as hedges in Japanese yen, Mexican peso and Chinese yuan against the U.S.

As of June 30, 2024, the Company had open foreign exchange forward contracts with notional U.S.

dollar values of the following:

Currency March 31,

Currency June 30,

Mexican Peso $ 30,600

1 unchanged sentence

Chinese Yuan 4,200

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

Open foreign exchange forward contracts as of June 30, 2024 had maturities occurring over a period of one month .

Interest Rate Swaps

1 unchanged sentence

See Note 14 of Notes to Condensed 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 affects earnings or it becomes probable that the forecasted transaction will not occur.

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 these hedged transactions affect earnings or it 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 follows:

Derivatives instruments Condensed Consolidated Balance Sheets Location March 31,

Derivatives instruments Condensed Consolidated Balance Sheets Location June 30,

2024 December 31,

3 unchanged sentences

Other accrued liabilities 1,141 159

Prepaid expenses and other current assets 687 —

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

Derivatives designated as cash flow hedges June 30,

2024 December 31,

Interest rate swaps AOCI $ 3,737 $ 1,407

Quaker Chemical Corporation

1 unchanged sentence

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

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

The following table presents the location and the amount of net gain or loss recognized in the Company’s Condensed Consolidated Statements of Operations related to derivative instruments:

Three Months Ended

June 30, Six Months Ended

Derivative instruments Condensed Consolidated Statements of Operations 2024 2023 2024 2023

Interest rate swaps Interest expense, net $ 1,273 $ 1,061 $ 2,559 $ 1,061

Foreign exchange forward contracts Other income, net 943 293

Foreign exchange forward contracts Other income (expense), net ( 1,675 ) 1,843 ( 732 ) 2,135

Total $ ( 402 ) $ 2,904 $ 1,827 $ 3,196

2 unchanged sentences

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

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.

During the three and six months ended June 30, 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 has accrued approximately $ 5 million as of June 30, 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.

The Company and its insurance carrier reviewed the impact of the electrical fire on the production facility’s operations as it relates to a potential business interruption insurance claim.

Subsequent to the date of these financial statements, in July 2024, the Company and its insurance carrier settled this claim for $1.0 million.

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.

2 unchanged sentences

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.

In addition, during the three and six months ended June 30, 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