What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-05 compared with 2024-05-02 · 191 added, 135 removed, 184 unchanged (64% of the section changed)

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Quaker Houghton is headquartered in Conshohocken, Pennsylvania, located near Philadelphia in the U.S.

Quaker Houghton delivered strong results in the first quarter of 2024.

Net sales in the first quarter of 2024 were $469.8 million, a decrease of 6% compared to $500.1 million in the first quarter of 2023.

This was primarily driven by a decrease in selling price and product mix of approximately 5% and a 1% decrease in sales volumes.

Quaker Houghton delivered solid results in the second quarter of 2024.

Net sales in the second quarter of 2024 were $463.6 million, a decrease of 6% compared to $495.4 million in the second quarter of 2023.

This was primarily driven by a decrease in selling price and product mix of approximately 4%, a 1% decrease in sales volumes, and an unfavorable impact from foreign currency translation of 1%.

The decrease in selling price and product mix was primarily attributable to our index-based customer contracts.

The decline in sales volumes was a result of soft end market conditions compared to the prior year, primarily in the Americas and EMEA segments, partially offset by a broad improvement in end market activity in the Asia/Pacific segment as well as new business wins across all segments.

The Company generated net income in the first quarter of 2024 of $35.2 million, or $1.95 per diluted share, compared to net income of $29.5 million, or $1.64 per diluted share in the first quarter of 2023.

Excluding non-recurring and non-core items in each period, the Company’s first quarter 2024 non-GAAP earnings per diluted share was $2.09 compared to $1.89 in the prior year quarter and the Company’s current quarter adjusted EBITDA was $83.3 million compared to $78.8 million in the first quarter of 2023.

The increase in current quarter earnings was primarily driven by an improvement in gross margins related to a reduction in raw material costs compared to the prior year quarter, partially offset by lower net sales and higher selling, general and administrative expenses (“SG&A”) as a result of year-over-year inflationary pressures and higher labor-related costs.

The decline in sales volumes was a result of a continuation of soft end market conditions compared to the prior year, primarily in the Americas and EMEA segments, partially offset by an increase in end market activity in the Asia/Pacific segment as well as new business wins across all segments.

The Company generated net income in the second quarter of 2024 of $34.9 million, or $1.94 per diluted share, compared to net income of $29.3 million, or $1.63 per diluted share in the second quarter of 2023.

Excluding non-recurring and non-core items in each period, the Company’s second quarter 2024 non-GAAP earnings per diluted share was $2.13 compared to $1.93 in the prior year quarter and the Company’s current quarter adjusted EBITDA was $84.3 million compared to $80.2 million in the second quarter of 2023.

The increase in current quarter earnings was primarily driven by an improvement in gross margins related to pricing actions, lower raw material costs and selling, general and administrative expenses (“SG&A”), and favorable impacts from foreign exchange, partially offset by higher professional fees.

See the Non-GAAP Measures section of this Item below, as well as other items discussed in the Company’s Consolidated Operations Review in the Operations section of this Item, below.

The Company’s first quarter 2024 operating performance in each of its three reportable segments:

The Company’s second quarter 2024 operating performance in each of its three reportable segments:

(i) Americas;

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

and (iii) Asia/Pacific, reflects similar drivers to that of its consolidated performance.

Operating earnings for all segments increased compared to the prior year quarter, driven by an improvement in margins in all three segments.

and (iii) Asia/Pacific, reflects similar drivers to that of the Company’s consolidated performance.

Operating earnings for the Asia/Pacific and EMEA segments increased compared to the prior year quarter, primarily driven by an improvement in operating margins in each segment.

Operating earnings for the Americas segment decreased compared to the prior year quarter, primarily driven by lower sales partially offset by improved segment operating margins.

Additional details of each segment’s operating performance are further discussed in the Company’s Reportable Segments Review, in the Operations section of this Item, below.

Net cash flows provided by operating activities were $27.2 million in the first three months of 2024 compared to $37.8 million in the first three months of 2023.

The lower operating cash flow year-over-year reflects an increase in the net cash outflows from working capital in the first three months of 2024 partially offset by higher operating performance in the first three months of 2024 compared to 2023.

Net cash flows provided by operating activities were $73.5 million in the first six months of 2024 compared to $116.1 million in the first six months of 2023.

The lower operating cash flow year-over-year reflects an increase in the net cash outflows from working capital in the first six months of 2024 partially offset by higher operating performance in the first six months of 2024 compared to 2023.

The key drivers of the Company’s operating cash flow and working capital are further discussed in the Company’s Liquidity and Capital Resources section of this Item, below.

Overall, the Company delivered strong results in the first quarter of 2024 highlighted by margin improvement and earnings growth, notwithstanding the macroeconomic and geopolitical challenges, continued soft end market conditions and other factors that have impacted the Company’s customers and end markets.

Looking at the remainder of 2024, the Company remains focused on executing on items within its control as it manages through a dynamic end market environment.

The Company is encouraged by its continued execution on its financial and operational priorities.

Overall, the Company delivered solid results in the second quarter of 2024 highlighted by an improvement in margins which translated into earnings growth, notwithstanding the persistent macroeconomic and geopolitical challenges, continued soft end market conditions and other factors that have impacted the Company’s customers and end markets.

Critical Accounting Policies and Estimates

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Liquidity and Capital Resources

As of March 31, 2024, we had cash and cash equivalents of $195.8 million.

As of June 30, 2024, we had cash and cash equivalents of $188.6 million.

Total cash and cash equivalents were $194.5 million as of December 31, 2023.

The approximately $1.2 million increase in cash and cash equivalents was the net result of $27.2 million of cash provided by operating activities and $6.6 million of cash provided financing activities, offset by $29.3 million of cash used in investing activities and an unfavorable impact due to the effect of foreign currency translation of approximately $3.3 million.

Net cash flows provided by operating activities were $27.2 million in the first three months of 2024 compared to $37.8 million in the first three months of 2023.

The decrease in net operating cash flow year-over-year reflects higher cash outflows from working capital in 2024, driven by higher Accounts payable and accrued liabilities outflows due primarily to higher incentive compensation payments in the current year due to our improved 2023 results and a lower inflow from accounts payable due to timing of spend and payments.

The approximately $6.0 million decrease in cash and cash equivalents was the net result of $73.5 million of cash provided by operating activities, offset by $39.3 million of cash used in financing activities, $33.2 million of cash used in investing activities and an unfavorable impact of foreign currency translation of approximately $7.0 million.

Net cash flows provided by operating activities were $73.5 million in the first six months of 2024 compared to $116.1 million in the first six months of 2023.

The decrease in net operating cash flow year-over-year reflects higher cash outflows from working capital in 2024, driven by an outflow from Inventory due to timing of sales and orders and higher Accounts payable and accrued liabilities outflows due primarily to higher incentive compensation payments in the current year.

The decrease in net operating cash flows was partially offset by higher operating performance in 2024 compared to 2023.

Net cash flows used in investing activities were $29.3 million in the first three months of 2024 compared to $6.2 million in the first three months of 2023.

The increase in cash used in investing activities year-over-year is the result of increased payments in the current year related to the IKV acquisition.

Net cash flows used in investing activities were $33.2 million in the first six months of 2024 compared to $17.0 million in the first six months of 2023.

The increase in cash used in investing activities year-over-year is the result of payments in the current year related to the IKV acquisition.

See Note 2 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report for further information about business acquisitions.

Net cash flows provided by financing activities were $6.6 million in the first three months of 2024 compared to net cash flows used in financing activities of $24.9 million in the first three months of 2023.

The increase in cash inflows was primarily related to net borrowings on the Company’s revolving credit facility in the first three months of 2024, primarily under the Company’s Credit Facility as described further below, as compared to net repayments in the first three months of 2023.

In addition, the Company paid $8.2 million of cash dividends during the first three months of 2024, a $0.4 million, or 5% increase compared to the prior year quarter.

Net cash flows used in financing activities were $39.3 million in the first six months of 2024 compared to net cash flows used in financing activities of $89.0 million in the first six months of 2023.

The decrease in net cash outflows was primarily related to net borrowings on the Company’s revolving credit facility in the first six months of 2024 compared to net repayments in the first six months of 2023.

In addition, during the first six months of 2024, the Company made payments of approximately $7.8 million for repurchases of its common stock under its share repurchase program.

Also, the Company paid $16.4 million of cash dividends during the first six months of 2024, a $0.7 million, or 5%, increase compared to the prior year period.

During June 2022, the Company, and its wholly owned subsidiary, Quaker Houghton B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S.

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Financial covenants contained in the Credit Facility include a consolidated interest coverage ratio test and a consolidated net leverage ratio test.

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

Refer to the description of the Company’s primary Credit Facility in Note 19 of Notes to Consolidated Financial Statements in its 2023 Form 10-K and in Note 14 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report for more information about the covenants and events of default.

As of March 31, 2024 , the Company had Credit Facility borrowings outstanding of $757.3 million .

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

Refer to the description of the Company’s primary Credit Facility in Note 19 of Notes to Consolidated Financial Statements in its 2023 Form 10-K.

As of June 30, 2024 , the Company had Credit Facility borrowings outstanding of $726.5 million .

As of December 31, 2023 , the Company had Credit Facility borrowings outstanding of $744.5 million.

The Company’s other debt obligations are primarily industrial development bonds, bank lines of credit and municipality-related loans, which totaled $12.3 million as of March 31, 2024 and $11.1 million as of December 31, 2023 .

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

The Company’s total net debt as of March 31, 2024, which consists of total borrowings of $769.6 million less cash and cash equivalents of $195.8 million, was approximately $573.8 million.

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%.

The Company’s other debt obligations are primarily industrial development bonds, bank lines of credit and municipality-related loans, which totaled $11.0 million as of June 30, 2024 and $11.1 million as of December 31, 2023 .

Total unused capacity under these arrangements as of June 30, 2024 was approximately $34 million .

The Company’s total net debt as of June 30, 2024, which consists of total borrowings of $737.4 million less cash and cash equivalents of $188.6 million, was approximately $548.9 million .

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 the 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.

In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, such as SOFR, 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 into an average fixed rate obligation 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%.

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 into an average fixed rate obligation of 3.64% plus an applicable margin as provided in the Credit Facility based on the Company’s consolidated net leverage ratio.

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 in Item 1 of this Report for further information.

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These capitalized costs are collectively being 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 Sheet in Item 1 of this Report.

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.

During the first three months of 2024, the Company entered into and settled forward contracts resulting in other income of $0.9 million as compared to $0.3 million during first three months of 2023 .

During the first six months of 2024, the Company entered into and settled forward contracts resulting in other expense of $0.7 million as compared to other income of $2.1 million during the first six months of 2023 .

See Note 17 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report for further information .

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.

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

The Company is continuing to evaluate and expects to implement further actions under this program, and as a result, additional headcount reductions and restructuring costs may be incurred in the future.

During 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.

The Company expects to generate full run-rate cost savings from the global cost and optimization program of approximately $20 million by the end of 2024.

The Company expects total cash costs of this program to be approximately 1 to 1.5 times annualized savings.

The Company recognized Restructuring and related charges of $1.9 million and $4.0 million for the three months ended March 31, 2024, and 2023, respectively, under this program.

The Company made cash payments related to the settlement of restructuring liabilities under the restructuring program during the first three months of 2024 of approximately $3.7 million compared to $2.7 million in the first three months of 2023.

The Company has remaining restructuring accruals, as of March 31, 2024, for this program of $1.5 million, which the Company expects to settle over the next twelve months.

The Company recognized Restructuring and related charges of $2.2 million and $5.0 million for the six months ended June 30, 2024, and 2023, respectively, under this program.

The Company made cash payments related to the settlement of restructuring liabilities under the restructuring program during the first six months of 2024 of approximately $4.4 million compared to $5.4 million in the first six months of 2023.

The Company has remaining restructuring accruals, as of June 30, 2024, for this program of $1.0 million, which the Company expects to settle during 2024.

See Note 7 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report for further information.

As of March 31, 2024, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $18.4 million.

As of June 30, 2024, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $19.6 million.

The Company cannot determine a reliable estimate of the timing of cash flows by period related to its uncertain tax position liability.

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As previously disclosed in the Company’s 2023 Form 10-K, on February 28, 2024, the Board of Directors of the Company approved a new share repurchase program (“2024 Share Repurchase Program”), authorizing the Company to repurchase up to an aggregate of $150 million of the Company’s outstanding common stock and replacing the prior share repurchase program.

The 2024 Share Repurchase Program is effective immediately and has no expiration date.

There were no shares repurchased during the first three months of 2024.

The 2024 Share Repurchase Program was effective immediately and has no expiration date.

The Company made certain repurchases under the 2024 Repurchase Program during the six months ended June 30, 2024, as mentioned above.

See Item 2 within Part II of this Report for further information.

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.

however, as of the date of this Report, the Company cannot reasonably estimate the probable amount of business interruption insurance claim recoverable, if any.

Therefore, the Company has not recorded a gain contingency for a possible business interruption insurance claim as of March 31, 2024.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company believes that its existing cash, anticipated cash flows from operations and available liquidity will be sufficient to support its operating requirements and fund its business objectives for at least the next twelve months, including but not limited to, payments of dividends to shareholders, capital expenditures, other growth opportunities (including potential acquisitions), pension plan contributions, implementing actions to achieve the Company’s sustainability goals and other potential known or anticipated contingencies.

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, and the Company has not recorded a gain contingency for a possible business interruption insurance claim as of June 30, 2024.

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

The Company believes that its existing cash, anticipated cash flows from operations and available liquidity will be sufficient to support its operating requirements and fund its business objectives for at least the next twelve months, including but not limited to, payments of dividends to shareholders, share repurchases, capital expenditures, other growth opportunities (including potential acquisitions), pension plan contributions, implementing actions to achieve the Company’s sustainability goals and other potential known or anticipated contingencies.

The Company also believes it has sufficient additional liquidity to support its operating requirements and to fund its business obligations for the period beyond the next twelve months, including the aforementioned items which are expected to recur annually, as well as future principal and interest payments on the Company’s Credit Facility, tax obligations and other long-term liabilities.

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The timing and amount of potential capital requirements cannot be determined at this time and will depend on a number of factors, including the actual and projected demand for our products, specialty chemical industry conditions, competitive factors, and the condition of financial markets, among others.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Non-GAAP Measures

The information in this Form 10-Q includes non-GAAP (unaudited) financial information that includes EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per diluted share.

The Company believes these non-GAAP financial measures provide meaningful supplemental information as they enhance a reader’s understanding of the financial performance of the Company, are indicative of future operating performance of the Company, and facilitate a comparison among fiscal periods, as the non-GAAP financial measures exclude items that are not considered indicative of future operating performance or not considered core to the Company’s operations.

The information in this Form 10-Q includes non-GAAP financial information that includes EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, taxes on income before equity in net income of associated companies – adjusted, non-GAAP net income and non-GAAP earnings per diluted share.

The Company believes these non-GAAP financial measures provide meaningful supplemental information as they enhance a reader’s understanding of the Company’s financial performance and facilitate a comparison among fiscal periods, as the non-GAAP financial measures exclude items that are not considered indicative of future operating performance or not considered core to the Company’s operations.

Non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the financial information presented in accordance with GAAP.

In addition, our definitions of EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per diluted share, as discussed and reconciled below to the most comparable respective GAAP measures, may not be comparable to similarly named measures reported by other companies.

In addition, our definitions of EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, taxes on income before equity in net income of associated companies – adjusted, non-GAAP net income and non-GAAP earnings per diluted share, as discussed and reconciled below to the most comparable respective GAAP measures, may not be comparable to similarly named measures reported by other companies.

The Company presents EBITDA, which is calculated as net income attributable to the Company before depreciation and amortization, interest expense, net, and taxes on income before equity in net income of associated companies.

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Non-GAAP earnings per diluted share is calculated as non-GAAP net income per diluted share as accounted for under the “two-class share method.” The Company believes that non-GAAP net income and non-GAAP earnings per diluted share provide transparent and useful information and are widely used by investors, analysts, and peers in our industry as well as by management in assessing the operating performance of the Company on a consistent basis.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Certain of the prior period non-GAAP financial measures presented in the following tables have been adjusted to conform with current period presentation.

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Non-GAAP Operating Income and Margin Reconciliations Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Operating income $ 58,449 $ 56,795 $ 113,975 $ 106,724

Restructuring and related charges, net (a) 320 1,043 2,177 5,015

Strategic planning (credits) expenses (b) (109) 2,087

Strategic planning expenses (credits) (b) — 579 (109) 2,666

Customer insolvency costs (g) — — 1,522 —

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Non-GAAP operating margin (%) (l) 12.9 % 11.9 % 12.8 % 11.6 %

Quaker Chemical Corporation

Management’s Discussion and Analysis

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Non-GAAP Net Income Reconciliations Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net income attributable to Quaker Chemical Corporation $ 34,885 $ 29,346 $ 70,112 $ 58,880

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EBITDA 82,845 76,731 162,460 149,550

Equity income in a captive insurance company (e) (506) (422)

Equity (income) loss in a captive insurance company (e) (475) 430 (981) 8

Restructuring and related charges, net (a) 320 1,043 2,177 5,015

Strategic planning (credits) expenses (b) (109) 2,087

Strategic planning expenses (credits) (b) — 579 (109) 2,666

Customer insolvency costs (g) — — 1,522 —

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Non-GAAP net income $ 38,232 $ 34,774 $ 75,905 $ 68,766

Quaker Chemical Corporation

Management’s Discussion and Analysis

Non-GAAP Earnings per Diluted Share Reconciliations Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

GAAP earnings per diluted share attributable to Quaker Chemical Corporation common shareholders $ 1.94 $ 1.63 $ 3.89 $ 3.27

Equity income in a captive insurance company per diluted share (e) (0.03) (0.02)

Equity (income) loss in a captive insurance company per diluted share (e) (0.02) 0.02 (0.05) 0.00

Restructuring and related charges, net per diluted share (a) 0.01 0.04 0.09 0.21

Strategic planning (credits) expenses per diluted share (b) — 0.10

Strategic planning expenses (credits) per diluted share (b) — 0.03 — 0.13

Customer insolvency costs per diluted share (g) — — 0.06 —

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These costs are not indicative of the future operating performance of the Company.

See Note 7 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report.

(b) Strategic planning (credits) expenses include certain consultant and advisory expenses and credits for the Company’s long-term strategic planning, as well as process optimization and the next phase of the Company’s long-term integration to further optimize its footprint, processes and other functions.

These credits and costs are not indicative of the future operating performance of the Company.

(c) Facility remediation recoveries represent the net gain associated with the insurance receipts from remediation, cleaning and subsequent restoration of property damage to certain of the Company’s facilities.

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

There were no such gains recognized for the three months ended March 31, 2024.

See Note 7 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report, for additional information.

(b) Strategic planning expenses (credits) include consultant and advisory costs (credits) incurred in connection with long-term strategic planning, as well as planning to further optimize the Company’s footprint, processes and functions.

These credits and costs recorded in SG&A are not indicative of the future operating performance of the Company.

Quaker Chemical Corporation

Management’s Discussion and Analysis

(c) Facility remediation recoveries represent insurance recoveries of costs incurred for remediation and restoration of property damage to certain of the Company’s facilities.

These costs and recoveries recorded in Other income (expense), net, are non-recurring and are not indicative of the future operating performance of the Company.

There were no such gains recognized for the three and six months ended June 30, 2024.

See Note 10 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report.

(d) Other charges include executive transition costs incurred during 2023, charges incurred by an inactive subsidiary of the Company as a result of the termination of restrictions on insurance settlement reserves, non-service components of the Company’s pension and postretirement net periodic benefit income and expense, and certain legal, financial, and other advisory and consultant costs incurred in connection with the Company's recent acquisitions.

(d) Other charges include executive transition costs, charges incurred by an inactive subsidiary of the Company as a result of the termination of restrictions on insurance settlement reserves, net gains recognized for the sale of certain facilities previously classified as held for sale, non-service components of the Company’s pension and postretirement net periodic benefit income and expense, and certain legal, financial, and other advisory and consultant costs and indemnification asset related adjustments incurred in connection with the Company's recent acquisitions.

See Notes 2, 9, and 10 of Notes to Condensed Consolidated Financial Statements, which appear in Item 1 of this Report.

(e) Equity income in a captive insurance company represents the after-tax income attributable to the Company’s interest in Primex, Ltd.

(e) Equity (income) loss in a captive insurance company represents the after-tax income attributable to the Company’s interest in Primex, Ltd.

(“Primex”), a captive insurance company.

The Company holds a 32% investment in and has significant influence over Primex, and therefore accounts for this interest under the equity method of accounting.

The income attributable to Primex is not indicative of the future operating performance of the Company and is not considered core to the Company’s operations.

The (income) loss attributable to Primex is not indicative of the future operating performance of the Company and is not considered core to the Company’s operations.

(f) Currency conversion impacts of hyper-inflationary economies represents the foreign currency remeasurement impacts associated with the Company’s affiliates in Argentina and Türkiye whose local economies are designated as hyper-inflationary under U.S.

These pre-tax foreign currency remeasurement impacts are not deductible for tax purposes for both the three months ended March 31, 2024 and 2023.

The (credits) charges incurred relate to the immediate recognition of foreign currency remeasurement in the Condensed Consolidated Statements of Operations and are not indicative of the future operating performance of the Company.

These pre-tax foreign currency remeasurement impacts are not deductible for tax purposes for both the three and six months ended June 30, 2024 and 2023.

The charges (credits) incurred relate to the immediate recognition of foreign currency remeasurement in the Condensed Consolidated Statements of Operations and are not indicative of the future operating performance of the Company.

See Note 1 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report.

(g) Customer insolvency costs represent charges associated with a specific reserve for trade accounts receivable within the Company’s EMEA reportable segment related to a specific customer who filed for bankruptcy protection.

These expenses are not indicative of the future operating performance of the Company.

(h) 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.

(h) 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.

See Note 10 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report.

Quaker Chemical Corporation

Management’s Discussion and Analysis

(i) The impacts of certain discrete tax items include certain impacts of tax law changes, valuation allowance adjustments, uncertain tax positions and prior year true-ups, and the impact on certain intercompany asset transfers.

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See Note 11 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report.

(j) Depreciation and amortization for both the three months ended March 31, 2024 and 2023 includes approximately $0.3 million of amortization expense recorded within equity in net income of associated companies in the Company’s Condensed Consolidated Statements of Operations, which is attributable to the amortization of the fair value step up for the Company’s 50% interest in a joint venture in Korea as a result of required purchase accounting adjustments.

(k) Taxes on income before equity in net income of associated companies – adjusted presents the impact of any current and deferred income tax expense (benefit), as applicable, of the reconciling items presented in the reconciliation of net income attributable to Quaker Chemical Corporation to adjusted EBITDA and was determined utilizing the applicable rates in the taxing jurisdictions in which these adjustments occurred, subject to deductibility.

(j) Depreciation and amortization for the three and six months ended June 30, 2024 and 2023 includes approximately $0.2 million and $0.5 million, respectively, of amortization expense recorded within equity in net income of associated companies in the Company’s Condensed Consolidated Statements of Operations, which is attributable to the amortization of the fair value step up for the Company’s 50% interest in a joint venture in Korea as a result of required purchase accounting adjustments.

(l) The Company calculates adjusted EBITDA margin and non-GAAP operating margin as the percentage of adjusted EBITDA and non-GAAP operating income to consolidated net sales.

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Off-Balance Sheet Arrangements

The Company had no material off-balance sheet commitments or obligations as of March 31, 2024.

The Company’s off-balance sheet items outstanding as of March 31, 2024 includes approximately $5 million of total bank letters of credit and guarantees.

The Company’s off-balance sheet items outstanding as of June 30, 2024 include approximately $4 million of bank letters of credit and guarantees.

The bank letters of credit and guarantees are not significant to the Company’s liquidity or capital resources.

See Note 14 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report.

Consolidated Operations Review – Comparison of the First Quarter of 2024 with the First Quarter of 2023

Net sales were $469.8 million in the first quarter of 2024 compared to $500.1 million in the first quarter of 2023.

The net sales decrease of $30.3 million, or 6%, year-over-year reflects a decrease in selling price and product mix of approximately 5%, and a decline in sales volumes of approximately 1%.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Consolidated Operations Review – Comparison of the Second Quarter of 2024 with the Second Quarter of 2023

Net sales were $463.6 million in the second quarter of 2024 compared to $495.4 million in the second quarter of 2023.

The net sales decrease of $31.8 million, or 6%, year-over-year reflects a decrease in selling price and product mix of approximately 4%, a decline in sales volumes of approximately 1%, and an unfavorable impact from foreign currency translation of 1%.

The decrease in selling price and product mix was primarily attributable to our index-based customer contracts.

The decline in sales volumes was primarily attributable to a continuation of soft end market conditions across the Company’s EMEA and Americas segments, partially offset by an increase in sales volumes in the Asia/Pacific segment and a positive contribution from new business wins in all segments .

COGS was $288.2 million in the first quarter of 2024 compared to $326.7 million in the first quarter of 2023, a decrease of $38.5 million or 12%.

The decline in sales volumes was primarily attributable to a continuation of soft end market conditions across the Company’s EMEA and Americas segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, the IKV acquisition and new business wins in all segments .

Cost of goods sold (“COGS”) was $287.8 million in the second quarter of 2024 compared to $317.8 million in the second quarter of 2023, a decrease of approximately $30.0 million, or 9%.

The decrease in COGS reflects lower spend on the decline in current year sales volumes and a decline in the Company’s global raw material costs.

Gross profit was $181.6 million in the first quarter of 2024 compared to $173.5 million in the first quarter of 2023, an increase of approximately $8.1 million or 5%.

The Company’s reported gross margin in the first quarter of 2024 was 38.7% compared to 34.7% in the first quarter of 2023 primarily driven by a reduction in raw material costs.

SG&A was $124.2 million in the first quarter of 2024 compared to $119.5 million in the first quarter of 2023, an increase of approximately $4.7 million or 4%, driven by higher labor-related costs and higher incentive compensation due to improved Company performance and a charge related to a customer insolvency.

The Company incurred Restructuring and related charges of $1.9 million and $4.0 million during the first quarters of 2024 and 2023, respectively, related to reductions in headcount and site closures under the Company’s restructuring program.

Gross profit was $175.7 million in the second quarter of 2024 compared to $177.7 million in the second quarter of 2023, a decrease of $2.0 million, or 1%.

The Company’s reported gross margin in the second quarter of 2024 was 37.9% compared to 35.9% in the second quarter of 2023 primarily driven by a reduction in raw material costs.

SG&A expense was $116.9 million in the second quarter of 2024 compared to $119.9 million in the second quarter of 2023, a decrease of approximately $3.0 million, or 3%, driven by lower incentive compensation costs.

The Company incurred Restructuring and related charges of $0.3 million and $1.0 million during the second quarters of 2024 and 2023, respectively, related to reductions in headcount and site closures under the Company’s restructuring program.

See the Non-GAAP Measures section of this Item above for additional information.

Operating income in the second quarter of 2024 was $58.4 million compared to $56.8 million in the second quarter of 2023.

Excluding non-recurring and non-core expenses that are not indicative of the future operating performance of the Company described in the Non-GAAP Measures section of this Item, above, the Company’s non-GAAP operating income increased to $59.8 million in the second quarter of 2024 as compared to $58.8 million in the second quarter of 2023 primarily due to lower SG&A expense, as described above.

The Company had Other income, net of $0.4 million in the second quarter of 2024 as compared to Other expense, net of $3.6 million in the second quarter of 2023.

Both the second quarter of 2024 and 2023 included foreign exchange transaction losses, which were higher in the prior year.

The second quarter of 2024 also included a gain on disposal of property, plant, equipment and other assets of $0.5 million from the sale of certain facilities previously classified as held for sale.

Additionally, the Company had Other income from non-income tax credits of $0.9 million in both the second quarter of 2024 and 2023.

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

Operating income in the first quarter of 2024 was $55.5 million compared to $49.9 million in the first quarter of 2023.

Excluding non-recurring and non-core expenses that are not indicative of the future operating performance of the Company described in the Non-GAAP Measures section of this Item, above, the Company’s non-GAAP operating income increased to $59.2 million in the first quarter of 2024 as compared to $56.3 million in the first quarter of 2023 primarily due to higher gross profit partially offset by higher SG&A, as described above.

Interest expense, net, was $10.8 million in the second quarter of 2024 compared to $12.7 million in the second quarter of 2023, a decrease of approximately $1.9 million, primarily as a result of lower outstanding borrowings.

The Company’s effective tax rates for the second quarters of 2024 and 2023 were 32.8% and 34.2%, respectively.

The Company’s effective tax rate for the second quarter of 2024 was largely driven by the mix of pre-tax earnings, certain one-time charges related to an intercompany intangible asset transfer, and withholding taxes.

Comparatively, the effective tax rate for the second quarter of 2023 was largely driven by the mix of pre-tax earnings, changes to the valuation allowance for and the usage of certain foreign tax credits, and withholding taxes.

Excluding the impact of non-core items in each quarter, described in the Non-GAAP Measures section of this Item above, the Company estimates that its effective tax rates for the second quarters of 2024 and 2023 would have been approximately 28% and 27%, respectively.

The Company may experience continued volatility in its effective tax rates due to several factors, including the timing of tax audits, the expiration of applicable statutes of limitations as they relate to uncertain tax positions, the unpredictability of timing and amount of certain incentives in various tax jurisdictions, and the timing and amount of certain share-based compensation-related tax benefits, among other factors.

In addition, the foreign tax credit valuation allowance, or absence thereof, is based on a number of factors, including forecasted mix of earnings, which may vary.

Equity in net income of associated companies was $2.6 million in the second quarter of 2024 compared to $2.8 million in the second quarter of 2023, a decrease of $0.2 million, primarily due to lower current year income from the Company’s 50% interest in a joint venture in Korea.

Net income attributable to noncontrolling interest was less than $0.1 million in both the second quarter of 2024 and 2023.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company had Other income, net of $1.1 million in the first quarter of 2024 as compared to Other expense of $2.2 million in the first quarter of 2023.

Both the first quarter of 2024 and 2023 included foreign exchange transaction losses, which were higher in the prior year.

The first quarter of 2023 also included facility remediation recoveries, net of $0.8 million.

The Company had no such facility remediation recoveries during the first quarter of 2024.

Additionally, the Company had Other income from non-income tax credits, partially offset by a non-recurring product liability claim expense in the first quarter of 2024.

Consolidated Operations Review – Comparison of the First Six Months of 2024 with the First Six Months of 2023

Net sales were $933.3 million in the first six months of 2024 compared to $995.6 million in the first six months of 2023.

The net sales decrease of $62.3 million, or 6%, year-over-year reflects decreases in selling price and product mix of approximately 5% and a decline in sales volumes of approximately 1%.

The decrease in selling price and product mix was primarily attributable to our index-based customer contracts.

The decline in sales volumes was primarily attributable to a continuation of soft end market conditions across the Company’s EMEA and Americas segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, the IKV acquisition and new business wins in all segments, as mentioned above .

COGS were $576.0 million in the first six months of 2024 compared to $644.5 million in the first six months of 2023.

The decrease in COGS of approximately $68.5 million, or 11%, reflects lower spend on the decline in current year sales volumes and a decline in the Company’s global raw material costs.

Gross profit was $357.3 million in the first six months of 2024 compared to $351.1 million in the first six months of 2023, an increase of approximately $6.2 million, or 2%.

The Company’s reported gross margin in the first six months of 2024 was 38.3% compared to 35.3% in the first six months of 2023.

The Company’s current year-to-date improvement in gross margin was driven primarily by lower raw material costs compared to the prior year.

SG&A was $241.1 million in the first six months of 2024 compared to $239.4 million in to the first six months of 2023, an increase of $1.7 million, or 1%, driven by higher levels of incentive compensation on improved Company performance, partially offset by lower SG&A due to foreign currency translation compared to the prior year.

The Company incurred Restructuring and related charges of $2.2 million and $5.0 million during the first six months of 2024 and 2023, respectively, related to reductions in headcount and site closures under the Company’s restructuring program.

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

Interest expense, net, was $10.8 million in the first quarter of 2024 compared to $13.2 million in the first quarter of 2023, a decrease of $2.4 million as a result of lower borrowings outstanding in 2024 as compared to 2023.

The Company’s effective tax rates for the first quarters of 2024 and 2023 were 27.3% and 27.7%, respectively.

The Company’s effective tax rate for the first quarter of 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 quarter of 2023 was largely driven by foreign tax inclusions, withholding taxes, foreign tax credits, and net tax expense related to share-based compensation, partially offset by changes in uncertain tax positions and favorable return to provision adjustments.

Excluding the impact of non-core items in each quarter, described in the Non-GAAP Measures section of this Item above, the Company estimates that its effective tax rate for both the first quarters of 2024 and 2023 was approximately 27%.

In addition, the foreign tax credit valuation allowance, or absence thereof, is based on a number of variables, including forecasted mix of earnings, which may vary.

Equity in net income of associated companies was $2.0 million in the first quarter of 2024 compared to $4.6 million in the first quarter of 2023, a decrease of $2.6 million, primarily due to lower current year income from the Company’s 50% interest in a joint venture in Korea.

Net income attributable to noncontrolling interest was less than $0.1 million in both the first quarter of 2024 and 2023.

Foreign exchange negatively impacted the Company’s first quarter of 2024 results by approximately 1% compared to the first quarter of 2023 driven by the impact from foreign currency translation on earnings as well as higher foreign exchange transaction losses in the current quarter as compared to the prior year first quarter.

Reportable Segments Review - Comparison of the First Quarter of 2024 with the First Quarter of 2023

Operating income in the first six months of 2024 was $114.0 million compared to $106.7 million in the first six months of 2023.

Excluding non-recurring and non-core expenses that are not indicative of the future operating performance of the Company described in the Non-GAAP Measures section of this Item, above, the Company’s current year non-GAAP operating income increased to $119.1 million for the first six months of 2024 compared to $115.1 million in the prior year’s first six months primarily due to higher gross profit, partially offset by higher SG&A, described above.

The Company had Other income, net of $1.5 million in the first six months of 2024 compared to Other expense, net of $5.8 million in the first six months of 2023, as the Company had lower foreign exchange losses of $1.2 million in the current year compared to losses of $7.6 million in the prior year period.

The first six months of 2024 results also included $3.0 million of non-income tax refunds and other related credits partially offset by a $0.9 million expense associated with a payment related to a product liability dispute with one of the Company’s customers, whereas the prior year’s first six months of 2023 included $1.0 million of insurance reimbursements related to remediation and restoration of property damage to certain of the Company’s facilities.

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

Interest expense, net, decreased $4.4 million in the first six months of 2024 compared to the first six months of 2023 as a result of lower outstanding borrowings.

The Company’s effective tax rates for the first six months of 2024 and 2023 were 30.1% and 31.2%, respectively.

The Company’s effective tax rate for the six months ended June 30, 2024 was primarily impacted 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 rate for the six months ended June 30, 2023 was largely driven 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 with changes in uncertain tax positions and favorable return to provision adjustments.

Excluding the impact of non-core items in each period, described in the Non-GAAP Measures section of this Item, above, the Company estimates that its effective tax rates for the first six months of 2024 and 2023 would have been approximately 28% and 27%, respectively.

The Company expects continued volatility in its effective tax rates due to several factors, including the timing and scope of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions, the unpredictability of the timing and amount of certain incentives in various tax jurisdictions, the treatment of certain acquisition-related costs and the timing and amount of certain share-based compensation-related tax benefits, among other factors.

In addition, the foreign tax credit valuation allowance, or absence thereof, is based on a number of factors, including forecasted mix of earnings, which may vary.

Equity in net income of associated companies decreased $2.8 million in the first six months of 2024 compared to the first six months of 2023, primarily due to lower current year income from the Company’s 50% interest in a joint venture in Korea.

Net income attributable to noncontrolling interest was less than $0.1 million in both the first six months of 2024 and 2023.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Reportable Segments Review - Comparison of the Second Quarter of 2024 with the Second Quarter of 2023

The Company’s 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 of the Company assesses performance.

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and (iii) Asia/Pacific.

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

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

Operating expenses not directly attributable to the segments, such as certain corporate and administrative costs and Restructuring and related charges, net, are excluded from segment results.

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

Americas represented approximately 49% of the Company’s consolidated net sales in the first quarter of 2024.

The segment’s net sales were $229.8 million, a decrease of $21.7 million or 9%, compared to the first quarter of 2023.

This was driven by a decrease in sales volumes of approximately 5% and lower selling price and product mix of approximately 5%, partially offset by a favorable impact from foreign currency translation of 1%.

The current quarter decline in sales volumes compared to the prior year was primarily driven by softer market conditions and customer order patterns, partially offset by new business win s.

Americas represented approximately 48% of the Company’s consolidated net sales in the second quarter of 2024.

This segment’s net sales were $223.5 million, a decrease of $29.7 million, or 12%, compared to the second quarter of 2023.

This was driven by a decrease in sales volumes of approximately 5%, lower selling price and product mix of approximately 6%, and an unfavorable impact from foreign currency translation of 1%.

The current quarter decline in sales volumes compared to the prior year was primarily driven by softer market conditions and customer outages, partially offset by new business win s.

The decrease in selling price and product mix was primarily attributable to our index-based customer contracts.

The favorable foreign exchange impact was primarily due to the weakening of the U.S.

dollar against the Mexican peso in the first quarter of 2024 compar ed to the first quarter of 2023.

This segment’s operating earnings were $66.8 million, an increase of $0.6 million or 1% compared to the first quarter of 2023, primarily driven by improvement in the segment’s operating margins for the reasons described in our consolidated results.

Quaker Chemical Corporation

Management’s Discussion and Analysis

EMEA represented approximately 29% of the Company’s consolidated net sales in the first quarter of 2024 .

The segment’s net sales were $138.4 million, a decrease of $14.0 million or 9%, compared to the first quarter of 2023 .

This was driven by lower selling price and product mix of approximately 6% and a decrease in sales volumes of 4%, partially offset by a favorable impact from foreign currency translation of 1%.

The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S.

dollar against the Mexican peso.

Segment o perating earnings were $64.1 million, a decrease of $4.9 million, or 7%, compared to the second quarter of 2023, primarily driven by lower sales partially offset by improved segment operating margins, driven primarily by lower raw material costs and lower SG&A expense.

EMEA represented approximately 30% of the Company’s consolidated net sales in the second quarter of 2024 .

This segment’s net sales were $138.0 million, a decrease of $5.5 million, or 4%, compared to the second quarter of 2023 .

This was driven by lower selling price and product mix of approximately 3% and an unfavorable impact from foreign currency translation of 1%.

Sales volumes were flat compared to the prior year quarter.

The decrease in selling price and product mix was primarily attributable to our index-based customer contracts.

Th e decline in sales volumes was primarily driven by softer market conditions and customer order patterns, partially offset by new business wins.

The favorable foreign curren cy translation impact was primarily due to the weakening of the U.S.

dollar against the euro in the first quarter of 2024 compared to the first quarter of 2023.

This segment’s operating earnings were $29.6 million, an increase of $2.0 million or 7%, compared to the first quarter of 2023 primarily driven by an improvement in operating margins for the reasons described in our consolidated results.

Asia/Pacific represented approximately 22% of the Company’s consolidated net sales in the first quarter of 2024.

The segment’s net sales were $101.6 million, an increase of $5.3 million or 6%, compared to the first quarter of 2023.

Th e stable sales volumes reflect new business wins and the IKV acquisition, partially offset by softer market conditions compared to the prior year.

The unfavorable foreign curren cy translation impact was primarily due to the strengthening of the U.S.

dollar against the Euro .

Segment operating earnings were $26.7 million, an increase of $1.1 million, or 4%, compared to the second quarter of 2023, as higher segment operating margins driven by lower raw material costs and lower SG&A expenses more than offset lower sales.

Asia/Pacific represented approximately 22% of the Company’s consolidated net sales in the second quarter of 2024.

This segment’s net sales were $102.0 million, an increase of $3.4 million, or 3%, compared to the second quarter of 2023.

This was driven by higher sales volumes of 7%, partially offset by a decrease in selling price and product mix of 1% and an unfavorable impact from foreign currency translation of 3%.

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The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S.

dollar against the Chinese renminbi in the first quarter of 2024 compared to the first quarter of 2023.

This segment’s operating earnings were $30.4 million, an increase of $2.7 million or 10% compared to the first quarter of 2023 primarily driven by an increase in net sales and an improvement in operating margins for the reasons described in our consolidated results.

dollar against the Chinese renminbi.

Segment operating earnings were $31.0 million, an increase of $3.0 million, or 11%, compared to the second quarter of 2023 primarily driven by an increase in net sales and an improvement in segment operating margins.

Reportable Segments Review - Comparison of the First Six Months of 2024 with the First Six Months of 2023

Americas represented approximately 49% of the Company’s consolidated net sales in the first six months of 2024.

This segment’s net sales were $453.3 million , a decrease of $51.4 million, or 10%, compared to the first six months of 2023 .

This was driven by a decrease in selling price and product mix of 6% and a decrease in sales volumes of 5%, partially offset by a favorable impact of foreign currency translation of 1%.

The decrease in selling price and product mix was primarily attributable to the year-over-year impact our index-based customer contracts .

The decline in sales volumes compared to the prior year was primarily driven by softer market conditions and customer order patterns and outages, partially offset by new business win s, as mentioned above.

The favorable foreign exchange impact was primarily due to the weakening of the U.S.

dollar against the Mexican peso during the first six months of 2024 compared to 2023.

This segment’s operating earnings were $130.9 million , a decrease of $4.2 million, or 3%, compared to the first six months of 2023 primarily driven by lower net sales partially offset by an improvement in segment operating margins.

Quaker Chemical Corporation

Management’s Discussion and Analysis

EMEA represented approximately 29% of the Company’s consolidated net sales in the first six months of 2024 .

This segment’s net sales were $276.4 million, a decrease of $19.6 million, or 7%, compared to the first six months of 2023.

This was a result of a decrease in selling price and product mix of 5% and a decrease in sales volumes of 2%.

The decrease in selling price and product mix was primarily attributable to the year-over-year impact of our index-based customer contracts.

The decline in sales volumes was primarily driven by softer market conditions, partially offset by new business wins and the IKV acquisition.

This segment’s operating earnings were $56.2 million, an increase of $3.1 million, or 6%, compared to the first six months of 2023 primarily driven by an improvement in segment operating margins.

Asia/Pacific represented approximately 22% of the Company’s consolidated net sales in the first six months of 2024.

This segment’s net sales were $203.6 million, an increase of $8.7 million, or 4%, compared to the first six months of 2023 .

This was driven by higher sales volumes of 11%, partially offset by an unfavorable impact of foreign currency translation of 4% and lower selling price and product mix of 3%.

The higher sales volumes were primarily driven by a broad-based increase in end market activity compared to the prior year period and new business wins.

The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S.

dollar against the Chinese renminbi.

The decrease in selling price and product mix was primarily attributable to the year-over-year impact of our index-based customer contracts , as mentioned above .

This segment’s operating earnings were $61.4 million , an increase of $5.7 million, or 10%, compared to the first six months of 2023 .

This was primarily driven by an improvement in segment operating margins coupled with the increase in net sales.

Factors That May Affect Our Future Results

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customer financial instability;

rising interest rates and the possibility of economic recession;

economic and political disruptions including the impacts of the military conflicts between Russia and Ukraine and between Israel and Hamas;

tariffs, trade restrictions and the economic and other sanctions imposed by other nations on Russia and/or other government organizations;

high interest rates and the possibility of economic recession;

economic and political disruptions particularly in light of numerous elections globally and the possibility of regime changes and including the impacts of the military conflicts between Russia and Ukraine and between Israel and Hamas;

legislative and regulatory developments including changes to existing laws and regulations, or the way they are interpreted, applied or enforced;

tariffs, trade restrictions and the economic and other sanctions imposed by other nations on Russia and Belarus and/or other government organizations;

suspensions of activities in Russia by many multinational companies and the potential expansion of military activity;

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the impacts of consolidation in our industry, including loss or consolidation of a major customer;

and the potential occurrence of cyber-security breaches, cyber-security attacks and other security incidents.

and the potential occurrence of cyber-security breaches, cyber-security attacks and other technology outages and security incidents.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis