QUAKER CHEMICAL CORP 10-Q

Item 1. Financial Statements (Unaudited). Quaker Chemical Corporation Condensed Consolidated Statements of Operations (Unaudited; Dollars in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net sales $ 463,567 $ 495,444 $ 933,326 $ 995,592 Cost of goods sold (excluding amortization expense - See Note 13) 287,849 317,753 576,045 644,451 Gross profit 175,718 177,691 357,281 351,141 Selling, general and administrative expenses 116,949 119,853 241,129 239,402 Restructuring and related charges, net 320 1,043 2,177 5,015 Operating income 58,449 56,795 113,975 106,724 Other income (expense), net 422 ( 3,606 ) 1,502 ( 5,845 ) Interest expense, net ( 10,754 ) ( 12,721 ) ( 21,578 ) ( 25,963 ) Income before taxes and equity in net income of associated companies 48,117 40,468 93,899 74,916 Taxes on income before equity in net income of associated companies 15,778 13,830 28,286 23,363 Income before equity in net income of associated companies 32,339 26,638 65,613 51,553 Equity in net income of associated companies 2,571 2,755 4,555 7,381 Net income 34,910 29,393 70,168 58,934 Less: Net income attributable to noncontrolling interest 25 47 56 54 Net income attributable to Quaker Chemical Corporation $ 34,885 $ 29,346 $ 70,112 $ 58,880 Per share data: Net income attributable to Quaker Chemical Corporation common shareholders – basic $ 1.94 $ 1.63 $ 3.90 $ 3.28 Net income attributable to Quaker Chemical Corporation common shareholders – diluted $ 1.94 $ 1.63 $ 3.89 $ 3.27 Dividends declared $ 0.455 $ 0.435 $ 0.910 $ 0.870 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 Table of Content Quaker Chemical Corporation Condensed Consolidated Statements of Comprehensive Income (Unaudited; Dollars in thousands) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income $ 34,910 $ 29,393 $ 70,168 $ 58,934 Other comprehensive (loss) income, net of tax Currency translation adjustments ( 18,840 ) ( 13,080 ) ( 44,229 ) 1,388 Defined benefit retirement plans 125 697 479 571 Current period change in fair value of derivatives ( 15 ) 4,173 2,330 4,563 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 Less: 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 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 Table of Content Quaker Chemical Corporation Condensed Consolidated Balance Sheets (Unaudited; Dollars in thousands, except par value) June 30, 2024 December 31, 2023 ASSETS Current assets Cash and cash equivalents $ 188,568 $ 194,527 Accounts receivable, net 423,906 444,950 Inventories Raw materials and supplies 116,026 119,047 Work-in-process and finished goods 123,115 114,810 Prepaid expenses and other current assets 67,485 54,555 Total current assets 919,100 927,889 Property, plant and equipment, at cost 447,808 453,419 Less: Accumulated depreciation ( 246,985 ) ( 245,608 ) Property, plant and equipment, net 200,823 207,811 Right-of-use lease assets 36,693 38,614 Goodwill 517,582 512,518 Other intangible assets, net 866,167 896,721 Investments in associated companies 96,090 101,151 Deferred tax assets 12,903 10,737 Other non-current assets 22,834 18,770 Total assets $ 2,672,192 $ 2,714,211 LIABILITIES AND EQUITY Current liabilities Short-term borrowings and current portion of long-term debt $ 32,448 $ 23,444 Accounts payable 185,351 184,813 Dividends payable 8,163 8,186 Accrued compensation 31,595 55,194 Accrued restructuring 1,048 3,350 Accrued pension and postretirement benefits 2,191 2,208 Other accrued liabilities 89,281 90,315 Total current liabilities 350,077 367,510 Long-term debt 703,655 730,623 Long-term lease liabilities 21,671 22,937 Deferred tax liabilities 147,100 146,957 Non-current accrued pension and postretirement benefits 28,109 29,457 Other non-current liabilities 25,974 31,805 Total liabilities 1,276,586 1,329,289 Commitments and contingencies (Note 18) Equity Common stock $ 1 par value; authorized 30,000,000 shares; issued and outstanding June 30, 2024 – 17,940,532 shares; December 31, 2023 – 17,991,988 shares 17,941 17,992 Capital in excess of par value 938,436 940,101 Retained earnings 604,404 550,641 Accumulated other comprehensive loss ( 165,762 ) ( 124,415 ) Total Quaker shareholders’ equity 1,395,019 1,384,319 Noncontrolling interest 587 603 Total equity 1,395,606 1,384,922 Total liabilities and equity $ 2,672,192 $ 2,714,211 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 Table of Content Quaker Chemical Corporation Condensed Consolidated Statements of Cash Flows (Unaudited; Dollars in thousands) Six Months Ended June 30, 2024 2023 Cash flows from operating activities Net income $ 70,168 $ 58,934 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of debt issuance costs 706 706 Depreciation and amortization 41,984 40,824 Equity in undistributed earnings of associated companies, net of dividends ( 4,221 ) ( 4,207 ) Deferred compensation, deferred taxes and other, net ( 647 ) 154 Share-based compensation 8,128 7,414 Restructuring and related charges, net 2,177 5,015 Pension and other postretirement benefits ( 994 ) ( 308 ) (Decrease) increase in cash from changes in current assets and current liabilities, net of acquisitions: Accounts receivable 10,483 22,017 Inventories ( 9,141 ) 11,750 Prepaid expenses and other current assets ( 15,646 ) ( 8,925 ) Accrued restructuring ( 4,442 ) ( 5,410 ) Accounts payable and accrued liabilities ( 25,021 ) ( 11,912 ) Net cash provided by operating activities 73,534 116,052 Cash flows from investing activities Investments in property, plant and equipment ( 11,124 ) ( 17,040 ) Payments related to acquisitions, net of cash acquired ( 24,899 ) — Proceeds from disposition of assets 2,798 — Net cash used in investing activities ( 33,225 ) ( 17,040 ) Cash flows from financing activities Payments of long-term debt ( 34,169 ) ( 9,439 ) Borrowings (payments) on revolving credit facilities, net 20,533 ( 62,778 ) Payments on other debt, net ( 37 ) ( 456 ) Dividends paid ( 16,372 ) ( 15,631 ) Shares purchased under share repurchase programs ( 7,760 ) — Other stock related activity ( 1,492 ) ( 712 ) Net cash used in financing activities ( 39,297 ) ( 89,016 ) Effect of foreign exchange rate changes on cash ( 6,971 ) ( 1,554 ) 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 Cash and cash equivalents at the end of the period $ 188,568 $ 189,405 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Content Quaker Chemical Corporation Condensed Consolidated Statements of Changes in Equity (Unaudited; Dollars in thousands, except per share amounts) Common Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Balance as of December 31, 2022 $ 17,950 $ 928,288 $ 469,920 $ ( 138,240 ) $ 667 $ 1,278,585 Net income — — 29,534 — 7 29,541 Amounts reported in other comprehensive income — — — 15,063 3 15,066 Dividends ($ 0.435 per share) — — ( 7,822 ) — — ( 7,822 ) Share issuance and equity-based compensation plans 32 1,386 — — — 1,418 Balance as of March 31, 2023 $ 17,982 $ 929,674 $ 491,632 $ ( 123,177 ) $ 677 $ 1,316,788 Net income — — 29,346 — 47 29,393 Amounts reported in other comprehensive loss — — — ( 6,931 ) ( 38 ) ( 6,969 ) Dividends ($ 0.435 per share) — — ( 7,830 ) — — ( 7,830 ) Share issuance and equity-based compensation plans 17 5,267 — — — 5,284 Balance as of June 30, 2023 $ 17,999 $ 934,941 $ 513,148 $ ( 130,108 ) $ 686 $ 1,336,666 Balance as of December 31, 2023 $ 17,992 $ 940,101 $ 550,641 $ ( 124,415 ) $ 603 $ 1,384,922 Net income — — 35,227 — 31 35,258 Amounts reported in other comprehensive loss — — — ( 22,572 ) ( 73 ) ( 22,645 ) Dividends ($ 0.455 per share) — — ( 8,186 ) — — ( 8,186 ) Share issuance and equity-based compensation plans ( 2 ) 2,445 — — — 2,443 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. 6 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements (Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated) 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 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 The condensed consolidated financial statements included herein are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial reporting and the United States Securities and Exchange Commission (“SEC”) regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. 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”). Description of Business The Company was organized in 1918 and incorporated as a Pennsylvania business corporation in 1930. Quaker Houghton is the global leader in industrial process fluids. With a presence around the world, including operations in over 25 countries, the Company’s customers include thousands of the world’s most advanced and specialized steel, aluminum, automotive, aerospace, offshore, container, mining, and metalworking companies. Quaker Houghton develops, produces, and markets a broad range of formulated chemical specialty products and offers chemical management services, which the Company refers to as Fluidcare TM , for various heavy industrial and manufacturing applications sold in its three reportable segments: (i) Americas; (ii) Europe, Middle East and Africa (“EMEA”); and (iii) Asia/Pacific. Hyper-inflationary economies Argentina’s and Türkiye’s economies were considered hyper-inflationary under U.S. GAAP effective July 1, 2018 and April 1, 2022, 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. 7 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; 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 32.6 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 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. The Company preliminarily allocated $ 15.0 million of the purchase price to intangible assets, comprised of approximately $ 11.1 million of customer relationships to be amortized over 16 years; $ 3.2 million of product technologies to be amortized over 14 years; and $ 0.7 million of trademarks to be amortized over 5 years. In addition, the Company recognized $ 16.4 million of goodwill in the EMEA segment, none of which is deductible for tax purposes. The goodwill recognized on the transaction is primarily attributable to expected cost and growth synergies. 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 Recently Issued Accounting Standards Not Yet Adopted The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures in November 2023. This ASU expands on reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, 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. The FASB issued ASU 2023-09, Income Taxes (Topic 740) : Improvements to Income Tax Disclosures in December 2023. This ASU requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the “rate reconciliation”) for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the disclosure requirements of this standard and the impact on its Consolidated Financial Statements. Note 4 – Business Segments The Company’s operating segments, which are consistent with its reportable segments, reflect the structure of the Company’s internal organization, the method by which the Company’s resources are allocated, and the manner by which the chief operating decision maker assesses the Company’s performance. The Company has three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific. Segment operating earnings for each of the Company’s reportable segments are comprised of the segment’s net sales less directly related Cost of goods sold (“COGS”), and Selling, general and administrative expenses (“SG&A”). Operating expenses not directly attributable to the net sales of each respective segment, such as certain corporate and administrative costs and Restructuring and related charges, net, are not included in segment operating earnings. Other items not specifically identified with the Company’s reportable segments include Interest expense, net and Other income (expense), net. 8 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; 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 June 30, Net sales 2024 2023 2024 2023 Americas $ 223,517 $ 253,219 $ 453,271 $ 504,632 EMEA 138,001 143,533 276,423 295,982 Asia/Pacific 102,049 98,692 203,632 194,978 Total net sales $ 463,567 $ 495,444 $ 933,326 $ 995,592 Segment operating earnings Americas $ 64,137 $ 69,007 $ 130,906 $ 135,132 EMEA 26,652 25,583 56,223 53,154 Asia/Pacific 31,000 27,989 61,377 55,641 Total segment operating earnings 121,789 122,579 248,506 243,927 Restructuring and related charges, net ( 320 ) ( 1,043 ) ( 2,177 ) ( 5,015 ) Non-operating and administrative expenses ( 47,584 ) ( 49,950 ) ( 101,760 ) ( 101,721 ) Depreciation of corporate assets and amortization ( 15,436 ) ( 14,791 ) ( 30,594 ) ( 30,467 ) Operating income 58,449 56,795 113,975 106,724 Other income (expense), net 422 ( 3,606 ) 1,502 ( 5,845 ) Interest expense, net ( 10,754 ) ( 12,721 ) ( 21,578 ) ( 25,963 ) Income before taxes and equity in net income of associated companies $ 48,117 $ 40,468 $ 93,899 $ 74,916 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. Three Months Ended June 30, Six Months Ended June 30, Inter-segment revenues 2024 2023 2024 2023 Americas $ 2,385 $ 2,179 $ 4,898 $ 5,006 EMEA 5,479 7,463 12,539 13,556 Asia/Pacific 1,945 476 3,076 536 Note 5 – Net Sales and Revenue Recognition Arrangements Resulting in Net Reporting 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 $ 19.2 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 A significant portion of the Company’s revenues are realized from the sale of process fluids and services to manufacturers of steel, aluminum, automobiles, aerospace, industrial and agricultural equipment, and durable goods. As previously disclosed in the Company’s 2023 Form 10-K, the Company’s five largest customers combined (each composed of multiple subsidiaries or divisions with semiautonomous purchasing authority) accounted for approximately 12 % of consolidated net sales for 2023, with its largest customer accounting for approximately 3 % of consolidated net sales. Contract Assets and Liabilities The Company had no material contract assets recorded on its Condensed Consolidated Balance Sheets as of June 30, 2024 or December 31, 2023. 9 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; 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 The Company sells its various industrial process fluids, its specialty chemicals and its technical expertise as a global product portfolio. The Company generally manages and evaluates its performance by reportable segment first, and then by customer industries. Net sales of each of the Company’s major product lines are generally spread throughout all three of the Company’s geographic regions, and in most cases, are approximately proportionate to the level of total sales in each region. The following tables disaggregate the Company’s net sales by segment and customer industry. Three Months Ended June 30, 2024 Customer Industries Americas EMEA Asia/Pacific Consolidated Total Metals $ 63,753 $ 35,307 $ 50,150 $ 149,210 Metalworking and other 159,764 102,694 51,899 314,357 $ 223,517 $ 138,001 $ 102,049 $ 463,567 Six Months Ended June 30, 2024 Customer Industries Americas EMEA Asia/Pacific Consolidated Total Metals $ 129,779 $ 68,127 $ 101,061 $ 298,967 Metalworking and other 323,492 208,296 102,571 634,359 $ 453,271 $ 276,423 $ 203,632 $ 933,326 Three Months Ended June 30, 2023 Customer Industries Americas EMEA Asia/Pacific Consolidated Total 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 Total 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 The Company has operating leases for certain facilities, vehicles, and machinery and equipment with remaining lease terms up to 11 years. Operating lease expense is recognized on a straight-line basis over the lease term. In addition, the Company has certain land use leases with remaining lease terms up to 91 years. The Company had no material variable lease costs, sublease income, or finance leases for the three and 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 June 30, 2024 2023 2024 2023 Operating lease expense $ 3,727 $ 3,710 $ 7,470 $ 7,646 Short-term lease expense 193 183 392 394 10 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; 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 June 30, 2024 2023 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 3,736 $ 3,773 $ 7,397 $ 7,630 Non-cash lease liabilities activity: Leased assets obtained in exchange for new operating lease liabilities 2,130 823 5,364 3,656 Supplemental balance sheet information related to the Company’s leases is as follows: June 30, 2024 December 31, 2023 Right-of-use lease assets $ 36,693 $ 38,614 Other current liabilities 11,477 11,965 Long-term lease liabilities 21,671 22,937 Total operating lease liabilities $ 33,148 $ 34,902 Weighted average remaining lease term (years) 4.9 5.1 Weighted average discount rate 5.32 % 4.91 % Maturities of operating lease liabilities as of June 30, 2024 were as follows: For the remainder of 2024 $ 6,994 For the year ended December 31, 2025 10,747 For the year ended December 31, 2026 8,088 For the year ended December 31, 2027 4,420 For the year ended December 31, 2028 2,486 For the year ended December 31, 2029 and beyond 5,288 Total lease payments 38,023 Less: imputed interest ( 4,875 ) Present value of lease liabilities $ 33,148 Note 7 – Restructuring and Related Activities 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 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. 11 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated) Changes in the Company’s accruals for its restructuring program are as follows: Accrued restructuring as of December 31, 2023 $ 3,350 Restructuring and related charges, net 2,177 Cash payments ( 4,442 ) Currency translation adjustments ( 37 ) 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 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: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Stock options $ 39 $ 203 $ 214 $ 634 Non-vested stock awards and restricted stock units 2,593 2,592 5,128 4,763 Director stock ownership plan 30 16 60 26 Performance stock units 1,582 1,076 2,726 1,991 Total share-based compensation expense $ 4,244 $ 3,887 $ 8,128 $ 7,414 Stock Options 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 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 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 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 As a component of its LTIP, the Company grants performance-based stock unit awards (“PSUs”). The number of shares that may ultimately be issued as settlement for each award may range from 0 % up to 200 % of the target award, subject to the achievement of the Company’s market-based total shareholder return (“TSR”) metric relative to the performance of a selected peer group, and separately the achievement of a performance-based return on invested capital (“ROIC”) measure. The service vesting period required for the PSUs is generally three years and the measurement period of the market-based and performance objectives is generally from January 1 of the year of grant through December 31 of the year prior to issuance of the shares. 12 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated) As mentioned above, a portion of the Company’s PSU valuation is subject to the achievement of the Company’s TSR relative to the performance of a selected peer group. For PSUs granted prior to 2024, the Company’s peer group was the S&P Midcap 400 Materials group. For the 2024 annual LTIP grants, the Company made an election to change peer groups to the S&P 1500 Chemical group to measure the Company’s relative TSR. Compensation expense for PSUs is measured based on the grant date fair value and is recognized on a straight-line vesting method basis over the applicable vesting period. 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. The grant-date fair value of the PSUs valued using a Monte Carlo simulation was $ 234.19 per unit, which incorporated the assumptions set forth in the table below: 2024 Grants Number of PSUs granted 20,078 Risk-free interest rate 4.55 % Dividend yield 0.91 % Expected term (years) 3.0 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: 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 Service cost $ 108 $ 107 $ — $ — $ 217 $ 211 $ — $ — Interest cost 2,364 2,511 15 19 4,738 4,973 31 38 Expected return on plan assets ( 2,020 ) ( 2,026 ) — — ( 4,050 ) ( 4,023 ) — — Actuarial loss (gain) amortization 127 103 ( 29 ) ( 30 ) 255 205 ( 59 ) ( 60 ) Prior service cost (income) amortization 7 — — ( 4 ) 14 — — ( 8 ) Net periodic benefit cost (income) $ 586 $ 695 $ ( 14 ) $ ( 15 ) $ 1,174 $ 1,366 $ ( 28 ) $ ( 30 ) Employer Contributions 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. 13 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated) Note 10 – Other income (expense), net The components of Other income (expense), net are as follows: Three Months Ended June 30, Six Months Ended June 30, 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 on disposals of property, plant, equipment and other assets, net 510 — 917 — Foreign exchange losses, net ( 727 ) ( 4,225 ) ( 1,175 ) ( 7,551 ) Pension and postretirement benefit costs, non-service components ( 464 ) ( 573 ) ( 929 ) ( 1,125 ) Facility remediation recoveries, net — 187 — 1,014 Product liability claim — — ( 896 ) — Other non-operating income (expense), net 65 ( 204 ) 167 ( 77 ) Total other income (expense), net $ 422 $ ( 3,606 ) $ 1,502 $ ( 5,845 ) 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. 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 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. 14 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated) Note 12 – Earnings Per Share The following table summarizes earnings per share calculations: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Basic earnings per common share Net income attributable to Quaker Chemical Corporation $ 34,885 $ 29,346 $ 70,112 $ 58,880 Less: income allocated to participating securities ( 118 ) ( 154 ) ( 276 ) ( 299 ) Net income available to common shareholders $ 34,767 $ 29,192 $ 69,836 $ 58,581 Basic weighted average common shares outstanding 17,921,395 17,892,444 17,915,104 17,879,629 Basic earnings per common share $ 1.94 $ 1.63 $ 3.90 $ 3.28 Diluted earnings per common share Net income attributable to Quaker Chemical Corporation $ 34,885 $ 29,346 $ 70,112 $ 58,880 Less: income allocated to participating securities ( 118 ) ( 154 ) ( 276 ) ( 299 ) Net income available to common shareholders $ 34,767 $ 29,192 $ 69,836 $ 58,581 Basic weighted average common shares outstanding 17,921,395 17,892,444 17,915,104 17,879,629 Effect of dilutive securities 18,761 28,970 19,846 30,277 Diluted weighted average common shares outstanding 17,940,156 17,921,414 17,934,950 17,909,906 Diluted earnings per common share $ 1.94 $ 1.63 $ 3.89 $ 3.27 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 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 six months ended June 30, 2024 were as follows: Americas EMEA Asia/Pacific Total Balance as of December 31, 2023 $ 283,103 $ 65,940 $ 163,475 $ 512,518 Goodwill additions — 16,448 — 16,448 Currency translation adjustments ( 2,927 ) ( 816 ) ( 7,641 ) ( 11,384 ) 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: Gross Carrying Amount Accumulated Amortization Net Book Value 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 Trademarks, formulations and product technology 162,620 161,613 59,421 55,879 103,199 105,734 Other 5,814 5,892 5,708 5,776 106 116 Total definite-lived intangible assets $ 1,006,380 $ 1,009,067 $ 329,507 $ 305,527 $ 676,873 $ 703,540 15 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; 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 as follows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Amortization expense $ 14,744 $ 14,692 $ 29,215 $ 29,205 Estimated annual aggregate amortization expense for the current year and subsequent five years is as follows: For the remainder of 2024 $ 28,986 For the year ended December 31, 2025 57,855 For the year ended December 31, 2026 57,168 For the year ended December 31, 2027 56,875 For the year ended December 31, 2028 56,535 For the year ended December 31, 2029 56,020 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 June 30, 2024 As of December 31, 2023 Interest Rate Outstanding Balance Interest Rate Outstanding Balance Credit Facilities: Revolver 4.75 % $ 51,437 5.13 % $ 30,904 U.S. Term Loan 6.55 % 529,008 6.71 % 561,250 Euro Term Loan 4.75 % 146,024 5.13 % 152,366 Industrial development bonds 5.26 % 10,000 5.26 % 10,000 Bank lines of credit and other debt obligations Various 956 Various 1,092 Total debt $ 737,425 $ 755,612 Less: debt issuance costs ( 1,322 ) ( 1,545 ) Less: short-term and current portion of long-term debts ( 32,448 ) ( 23,444 ) Total long-term debt $ 703,655 $ 730,623 Credit facilities During June 2022, the Company, and its wholly owned subsidiary, Quaker Houghton B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S. dollar swing line lender and letter of credit issuer, Bank of America Europe Designated Active Company, as Euro Swing Line Lender, certain guarantors and other lenders entered into an amendment to its primary credit facility. The amended credit facility (the “Credit Facility”) established (A) a $ 150.0 million Euro equivalent senior secured term loan (the “Euro Term Loan”), (B) a $ 600.0 million senior secured term loan (the “U.S. Term Loan”), and (C) a $ 500.0 million senior secured revolving credit facility (the “Revolver”), each maturing in June 2027. 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 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. 16 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; 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 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 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 connection with executing the original credit facility in 2019 and the amended Credit Facility during the second quarter of 2022, the Company capitalized an aggregate of $ 2.2 million of certain third-party and creditor debt issuance costs. Approximately $ 0.7 million of the capitalized costs were attributed to the Euro Term Loan and U.S. Term Loan. These costs were recorded as a direct offset of Long-term debt on the Condensed Consolidated Balance Sheet. Approximately $ 1.5 million of the capitalized costs were attributed to the Revolver and recorded within Other assets on the Condensed Consolidated Balance Sheet. These capitalized costs will collectively be amortized into Interest expense over the five-year term of the Credit Facility. 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. Industrial development bonds 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. Bank lines of credit and other debt obligations The Company has certain unsecured bank lines of credit and discounting facilities in certain foreign subsidiaries, which are not collateralized. The Company’s other debt obligations primarily consist of certain domestic and foreign low interest rate or interest-free municipality-related loans, local credit facilities of certain foreign subsidiaries, and finance lease obligations. 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 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: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Interest expense $ 11,530 $ 14,389 $ 22,812 $ 28,265 Amortization of debt issuance costs 353 353 706 706 Total $ 11,883 $ 14,742 $ 23,518 $ 28,971 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. 17 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated) Note 15 – Accumulated Other Comprehensive Income The following tables show the reclassifications from and resulting balances of accumulated other comprehensive income (“AOCI”): Currency Translation Adjustments Defined Benefit Pension Plans Unrealized (Loss) Gain in Available-for- Sale Securities Derivative Instruments Total 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 ) Amounts reclassified from AOCI — 59 3 — 62 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 ) Currency Translation Adjustments Defined Benefit Pension 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 (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 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. 18 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated) Note 16 – Fair Value Measurements The Company values its company-owned life insurance policies at fair value. During June 2023, the Company surrendered and liquidated $ 1.9 million of these life insurance policies. 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 The Company’s ongoing business operations expose it to various risks, including fluctuating foreign exchange rates and interest rate risk. To manage these risks, the Company periodically enters into derivative financial instruments, such as foreign exchange forward contracts and interest rate swap agreements. The Company does not hold or enter into financial instruments for trading or speculative purposes. Foreign Exchange Forward Contracts The Company uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on certain assets and/or liabilities denominated in certain foreign currencies. These forward contracts are marked-to-market at each reporting date. Changes in the fair value of the underlying instrument and settlements are recognized in earnings in Other income (expense), net. The fair value of the forward contract is determined from sources independent of the Company, including the financial institutions which are party to the derivative instruments. 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. dollar. As of June 30, 2024, the Company had open foreign exchange forward contracts with notional U.S. dollar values of the following: Currency June 30, 2024 Mexican Peso $ 30,600 Japanese Yen 5,000 Chinese Yuan 4,200 $ 39,800 Open foreign exchange forward contracts as of June 30, 2024 had maturities occurring over a period of one month . Interest Rate Swaps In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, such as the Secured Overnight Financing Rate (“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 a fixed rate obligation. 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 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 June 30, 2024 December 31, 2023 Interest rate swaps: Other non-current assets $ 4,854 $ 1,828 Foreign currency forward contracts: Other accrued liabilities 1,141 159 The following table presents the net unrealized gain deferred to AOCI: Derivatives designated as cash flow hedges June 30, 2024 December 31, 2023 Interest rate swaps AOCI $ 3,737 $ 1,407 19 Table of Contents Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements - Continued (Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated) 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 June 30, 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 (expense), net ( 1,675 ) 1,843 ( 732 ) 2,135 Total $ ( 402 ) $ 2,904 $ 1,827 $ 3,196 Note 18 – Commitments and Contingencies As previously disclosed in its 2023 Form 10-K, the Company is party to certain environmental matters and other litigation. See Note 25 of Notes to Consolidated Financial Statements in the Company’s 2023 Form 10-K. During the three and 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 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 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. Subsequent to the acquisition, the Company and the sellers of Coral (the “Sellers”) have worked to finalize certain post-closing adjustments. During the second quarter of 2022, after failing to reach resolution, the Sellers filed suit asserting certain amounts owed related to tax attributes of the acquisition. Since the second quarter of 2022, there have been no material changes to the facts and circumstances of the claim asserted by the Sellers, and the Company continues to believe the potential range of exposure for this claim is $ 0 to $ 1.5 million. In addition, during the three 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. 20 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis