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Item 1A. Risk Factors

2025-02-24 compared with 2024-02-29 · 131 added, 105 removed, 238 unchanged (50% of the section changed)

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Changes to the industries and markets that we serve could have a material adverse effect on our liquidity, financial position and results of operations.

As the leader in industrial process fluids, the Company is subject to the same business cycles as those experienced by our customers that participate in the steel, automobile, aircraft, industrial equipment, aerospace, aluminum and durable goods industries.

As a leader in industrial process fluids, the Company is subject to the same business cycles as those experienced by our customers that participate in the steel, automotive, industrial equipment, aerospace, aluminum and durable goods industries.

Because demand for our products and services is largely derived from the global demand for our customers’ products, we are subject to uncertainties related to downturns in our customers’ businesses and shutdowns or curtailments of our customers’ production, including as a result of adverse changes affecting national, regional and global economies or increased competitive pressure within our customers’ industries.

Our customers may experience deterioration of their businesses, cash flow shortages and difficulty obtaining financing, leading them to delay or cancel plans to purchase products, and they may not be able to fulfill their obligations in a timely fashion.

We have limited ability to adjust our costs contemporaneously with changes in sales;

thus, a significant sudden downturn in sales due to reductions in global production within the industries we serve and/or weak end-user markets could have a material adverse effect on our liquidity, financial position and results of operations.

thus, a significant sudden downturn in sales or increased credit losses due to reductions in global production within the industries we serve and/or weak end-user markets could have a material adverse effect on our liquidity, financial position and results of operations.

Further, our suppliers and other business partners may experience similar conditions, which could impact their ability to fulfill their obligations to us and also result in material adverse effects on our liquidity, financial position and results of operations.

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The specialty chemical industry is highly competitive and there are many companies with significant financial resources and/or customer relationships that compete with us to provide similar products and services.

Some competitors may be able to offer more favorable or flexible pricing and service terms or, due to their greater access to resources, may be better able to adapt to changes in conditions in our industries, fluctuations in the costs of raw materials or changes in global economic conditions, potentially resulting in reduced profitability and/or a loss of market share for us.

Some competitors may be able to offer more favorable or flexible pricing and service terms or may be better able to adapt to changes in conditions in our industries, fluctuations in the costs of raw materials or to changes in global economic conditions, potentially resulting in reduced profitability and/or a loss of market share for us.

The pricing decisions of our competitors could lead us to decrease our prices which could negatively affect our margins and profitability.

In addition, our competitors could potentially consolidate their businesses and gain scale or better position their product offerings, which could have a negative impact on our profitability and market share.

Competition in our industry historically has also been based on the ability to provide products that meet the needs of the customer and render technical services and laboratory assistance, which our competitors may be able to accomplish more effectively than we are able to do.

If we are unsuccessful with differentiating ourselves, it could have a material adverse effect on our liquidity, financial position and results of operations and we could lose market share to our competitors.

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Also, a significant portion of our revenues is derived from sales to customers in the cyclical steel, aerospace, aluminum and automotive industries, where bankruptcies have occurred in the past and where companies have periodically experienced financial difficulties.

If a significant customer experiences financial difficulties or files for bankruptcy protection, we may be unable to collect on our receivables, and customer manufacturing sites may be closed, or contracts voided.

If a significant customer experiences financial difficulties or files for bankruptcy protection, we may be unable to collect on our receivables, customer manufacturing sites may be closed, or our contracts may be voided.

The bankruptcy of a major customer could therefore have a material adverse effect on our liquidity, financial position and results of operations.

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We believe that our continued success depends on our ability to continuously develop and manufacture new products and product enhancements on a timely and cost-effective basis in response to customer demands for higher performance process chemicals and other product offerings.

Our competitors may develop new products or enhancements to their products that offer performance, features and lower prices that may render our products less competitive or obsolete, and we may lose business and/or significant market share.

Our competitors may develop new products or enhancements to their products that offer performance, features and lower prices that may render our products less competitive or obsolete, and cause us to lose business and/or significant market share.

The development and commercialization of new products require significant expenditures over an extended period of time, and some products that we seek to develop may fail to gain traction or never become profitable.

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Customers may also adopt alternative materials or processes that do not require our products.

An example of such evolving customer demands and industry trends is the movement towards light weighting of materials and electric vehicles.

Examples of such evolving customer demands and industry trends are the movement towards lighter-weight materials and the growing prevalence of electric vehicles.

Should a customer decide to use a different material or technology due to price, performance or other considerations, we may not be able to supply a product that meets the customer’s new requirements.

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Risks Related to Business Operations, Including Internal and External Factors that May Impact Our Operational Continuity

Our ability to profitably operate our consolidated company as anticipated requires us to effectively identify and consummate the strategic acquisitions we identify and to successfully integrate these acquisitions into our consolidated operations.

An inability to appropriately capitalize on growth, including organic growth and future acquisitions, could adversely affect our liquidity, financial position and results of operations.

We have completed several acquisitions over the past several years.

Acquired companies may have significant latent liabilities that may not be discovered before they are acquired and may not be reflected in the price we pay.

Acquisitions also could have a dilutive effect on our financial results and while they generally result in goodwill, goodwill could be impaired in the future resulting in a charge to earnings.

Our ability to implement our growth strategy may be limited by our ability to identify appropriate acquisition or joint venture candidates, our financial resources, including available cash and borrowing capacity, and our ability to negotiate and complete suitable arrangements.

Further, the success of our growth depends on our ability to navigate risks such as those listed above and successfully integrate acquisitions, including, but not limited to, our ability to:

• successfully execute the integration or consolidation of the acquired or additional business into our existing processes and operations;

Our ability to successfully implement our business strategy requires that we effectively and efficiently execute and integrate the acquisitions we identify as strategic as well as successfully divest those operations that are no longer important to that strategy.

If we are unsuccessful, we may be unable to achieve our strategic objectives and could also be subject to unanticipated integration costs and claims for indemnification from the buyers of businesses we may divest, all of which could adversely impact our liquidity, financial position and results of operation.

Our business strategy includes making acquisitions and other investments that complement our existing businesses, and based on an evaluation of our business portfolio, sometimes divesting existing businesses that are not important to our strategy.

We continually analyze and evaluate acquisition opportunities with the potential to strengthen our industry position, enhance our existing product offerings or deepen our relationships with our customers.

We may not successfully identify suitable acquisition candidates or have sufficient financing and/or cash available to successfully complete acquisitions we identify, especially in a competitive sales process.

In addition, strategic acquisitions present operational, financial, and managerial challenges to integration, including diversion of management attention from existing businesses, difficulty with integrating or separating personnel and financial and other systems, increased expenses and raw material costs, assumption of unknown liabilities and indemnities that may not be discovered before an acquisition or fully reflected in the price we pay, and potential disputes with the sellers.

If we are unable to consummate such transactions, or successfully integrate and grow completed acquisitions and achieve contemplated revenue synergies and cost savings, our financial condition and results of operations could be adversely affected.

We may also need to finance future acquisitions, and the terms of any financing, and the need to ultimately repay or refinance any indebtedness, may have negative effects on us.

Acquisitions also could have a dilutive effect on our financial results.

Acquisitions also generally result in goodwill, which would need to be written off against earnings in the future if it becomes impaired.

Acquisitions and investments may involve significant cash expenditures, debt incurrences, equity issuances, operating losses, and expenses.

Further, the success of any acquisition we complete depends on our ability to navigate risks such as those listed above and successfully integrate acquisitions, including, but not limited to, our ability to:

• develop or modify financial reporting, information systems, and other related financial tools to ensure overall financial integrity and adequacy of internal control procedures;

• identify and capitalize on potential synergies, including cost reduction opportunities, while retaining legacy business and other related attributes;

• identify and capitalize on potential synergies, including cost reduction opportunities;

• adequately address challenges arising from the increased scope, geographic diversity and complexity of our operations;

• further penetrate existing, and expand into new, markets with the product capabilities acquired in acquisitions.

• further penetrate existing, and expand into new, markets with the products and capabilities acquired in acquisitions.

If we fail to successfully integrate acquisitions into our existing business, our financial condition and results of operations could be adversely affected.

We may fail to obtain the benefits we anticipate from our recently completed or future acquisitions or joint ventures and we may not create the appropriate infrastructure to support such additional growth from organic or acquired businesses, which could also have a material adverse effect on our liquidity, financial position and results of operations.

We may fail to obtain the benefits we anticipate from our recently completed or future acquisitions or joint ventures and we may not create the appropriate infrastructure to support the additional growth from organic or acquired businesses, which could also have a material adverse effect on our liquidity, financial position and results of operations.

Divestitures have inherent risks, including the possibility that we may not be able to achieve the proceeds we desire from a sale, potential post-closing liabilities and claims for indemnification, that may impact our ability to fully realize the anticipated benefits of a given divestiture.

In particular, in connection with the sale of certain properties and businesses, we agreed to indemnify the purchasers for certain types of matters, including certain breaches of representations and warranties, taxes and certain environmental matters.

With respect to environmental matters, the discovery of contamination arising from properties that we have divested may expose us to indemnity obligations under the sale agreements with the buyers of such properties or cleanup obligations and other damages under applicable environmental laws, even if we were not aware of the contamination.

We may not have insurance coverage for such indemnity obligations.

Further, we cannot predict the nature or amount of any indemnity or other obligations we may have to pay.

These payments may be costly and may adversely affect our financial position and results of operations.

If these or other post-closing risks materialize, the benefits of any divestiture may not be fully realized, if at all, and our business, financial condition, and results of operations could be negatively impacted.

Gulf and its wholly-owned subsidiary, QH Hungary Holdings Limited, have a significant minority stake in the Company and the contractual ability to nominate certain directors of the Company, which may enable them to influence the direction of our business and significant corporate decisions.

Gulf and its wholly-owned subsidiary, QH Hungary Holdings Limited (together, the “Gulf Affiliates”), remain our largest shareholders.

If they were to make available for sale a portion of their shares, that portion could represent a significant amount of common stock of the Company being sold which could have an adverse impact on the Company’s stock price.

In addition, the Gulf Affiliates currently have the right to designate three individuals for election to the Board and this right, together with their share ownership, gives them substantial influence over our business, including over matters submitted to a vote of our shareholders, including the election of directors, amendment of our organizational documents, acquisitions or other business combinations involving the Company, and potentially the ability to prevent extraordinary transactions such as a takeover attempt or business combination.

If they were to make available for sale a portion of their shares, that portion could represent a significant amount of common stock of the Company being sold and any such transaction (if it were to occur) could have an adverse impact on the Company’s stock price or otherwise cause price volatility.

In addition, under our shareholders agreement with the Gulf Affiliates, they currently have the right to designate three individuals for election to the Board and this right, together with their share ownership, gives them substantial influence over our business, including over matters submitted to a vote of our shareholders, including the election of directors, amendment of our organizational documents, acquisitions or other business combinations involving the Company, and potentially the ability to prevent extraordinary transactions such as a takeover attempt or business combination.

The concentration of ownership of our shares held by the Gulf Affiliates may make some future actions more difficult without their support.

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Nevertheless, the interests of Gulf may conflict with our interests or the interests of our other shareholders, though we are not aware of any such existing conflicts of interest at this time.

The timing and amount of the Company’s share repurchases are subject to a number of uncertainties, and there can be no assurance that we will continue to repurchase shares of our common stock.

On February 28, 2024, the Board 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.

The 2024 Share Repurchase Program replaced an earlier program, was effective immediately and has no expiration date.

Under the 2024 Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions, accelerated share repurchases or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

The Company continues to employ trading plans for the repurchase of shares pursuant to the 2024 Share Repurchase Program, which permit the Company to purchase shares, at predetermined price targets, when it may otherwise be precluded from doing so.

The 2024 Share Repurchase Program does not obligate us to acquire any particular amount of common stock, and it may be terminated at any time at the Company’s discretion.

The specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors.

Important factors that could cause the Company to limit, suspend or delay its share repurchases include unfavorable trading market conditions, the price of the Company’s common stock, the nature of other investment opportunities presented to us from time to time, the ability to obtain financing at attractive rates and the availability of U.S.

cash, all of which we cannot predict.

Repurchase activities could affect the price of our common stock and increase its volatility.

The existence of the 2024 Share Repurchase Program could also cause the price of our common stock to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our common stock.

There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock could decline below the levels at which we repurchased such shares, as we experienced in 2024.

Any failure to repurchase shares after we have announced our intention to do so could negatively impact our reputation and investor confidence in us and could negatively impact our stock price.

Although the 2024 Share Repurchase Program is intended to enhance long-term shareholder value, short-term stock price fluctuations could reduce the program’s effectiveness.

Failure to comply with any material provision of our principal credit facility or other debt agreements could have a material adverse effect on our liquidity, financial position and results of operations.

Our principal credit facility requires the Company to comply with certain provisions and covenants, and, while we do not currently consider these provisions and covenants to be overly restrictive, they could become more difficult to comply with as business or financial conditions change.

We are also subject to interest rate risk due to the variable interest rates within the credit facility and if interest rates continue to rise significantly, these interest costs would increase as well.

Our principal credit facility requires the Company to comply with certain provisions and covenants and while we do not currently consider these provisions and covenants to be overly restrictive, they could become more difficult to comply with as our business or financial conditions change.

We are also subject to interest rate risk due to the variable interest rates within the credit facility and if interest rates rise, interest costs would increase as well.

Our principal credit facility contains provisions that are customary for facilities of its type, including affirmative and negative covenants, financial covenants and events of default, including restrictions on (a) the incurrence of additional indebtedness, (b) investments in and acquisitions of other businesses, lines of business and divisions, (c) the making of dividends or capital stock purchases and (d) dispositions of assets.

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Additionally, rising interest rates could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

We carry, and will continue to carry for the foreseeable future, a substantial amount of debt and other fixed obligations.

We carry, and expect to continue to carry for the foreseeable future, a substantial amount of debt and other fixed obligations.

Our ability to satisfy these obligations, finance acquisitions, repurchase shares, and pay dividends rely on our access to capital, which depends in large part on cash flow generated by our business and the availability of debt financing.

The Company’s principal credit facility permits interest on certain borrowings to be calculated based on the Term Secured Overnight Financing Rate (“Term SOFR”), which exposes us to interest rate risk.

See Note 19 of Notes to Consolidated Financial Statements included in Item 8 of this Report.

Interest rate increases, which were experienced during 2022 and 2023, increase our debt service obligations on the variable rate indebtedness even though the amount borrowed remains the same, which requires us to use more of our available cash to service our indebtedness.

The Company’s principal credit facility permits interest on certain variable-rate borrowings to be calculated based on the Term Secured Overnight Financing Rate (“Term SOFR”), which exposes us to interest rate risk.

See Note 19, Debt , to the Consolidated Financial Statements for more information.

Interest rate increases, which we have experienced in the past and may experience again in the future, increase our debt service obligations on the variable-rate indebtedness even though the amount borrowed remains the same, which requires us to use more of our available cash to service our indebtedness.

In order to manage the Company’s exposure to variable interest rate risk associated with the Company’s principal credit facility, in the first quarter of 2023, the Company entered into three-year interest rate swaps to convert a portion of the Company’s variable interest rate borrowings to an average fixed rate plus an applicable margin as provided in the Company’s principal credit facility, based on the Company’s consolidated net leverage ratio.

See Note 24 of Notes to Consolidated Financial Statements included in Item 8 of this Report.

These swaps only cover a portion of our variable rate indebtedness.

See Note 24, Hedging Activities, to the Consolidated Financial Statements for more information.

Rising interest rates not only increase our cost of capital but could also have a dampening effect on overall economic activity and the financial condition of the Company's customers, either or both of which could negatively affect customer demand for the Company's products and customers' ability to repay their obligations.

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• limitations on ownership or participation in local enterprises as well as the potential for expropriation or nationalization of enterprises;

• instability in or adverse changes to the economic, political, social, legal or regulatory conditions in a country or region where we do business, including hyperinflationary conditions or as a result of terrorist activities, or as a result of political and/or military conflict;

• instability in or adverse changes to the economic, political, social, legal or regulatory conditions in a country or region where we do business, as a result of terrorist activities, political disruption and/or military conflict such as those that are being experienced in multiple areas around the world;

• complex and dynamic local tax regulations, including changes in foreign laws and tax rates or U.S.

laws and tax rates with respect to foreign income that may unexpectedly increase the rate at which our income is taxed, impose new and additional taxes on remittances, repatriation or other payments by subsidiaries, or cause the loss of previously recorded tax benefits.

The current global geopolitical and trade environment creates the potential for increased escalation of domestic and international tariffs and retaliatory trade policies.

Further changes in U.S.

trade policy and additional retaliatory actions by U.S.

trade partners could result in a worsening of economic conditions.

The current global geopolitical and trade environment creates the potential for increased escalation of domestic and international tariffs and retaliatory trade policies, including the possibility of a “trade war” involving the United States and one or more of its trading partners.

If tariffs are imposed or increased, materials and goods that U.S.

companies import and export may face higher prices, and this could lead to significant shortages or price increases in our raw materials, decreased international sales, reduced margins or increased prices.

Changes in U.S.

trade policy and retaliatory actions by U.S.

trade partners could also result in weakening economic conditions.

If we are unable to successfully manage these and other risks associated with our international businesses, the risks could have a material adverse effect on our business, results of operations and financial condition.

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operations generate significant revenues and earnings.

Fluctuations in foreign currency exchange rates may affect product demand and may adversely affect the profitability in U.S.

Fluctuations in foreign currency exchange rates, including hyperinflationary conditions, may affect product demand and may adversely affect the profitability in U.S.

dollars of the products and services we provide in international markets where payment for our products and services is made in the local currency.

Our financial results are affected by currency fluctuations, particularly between the U.S.

dollar and the euro, the British pound sterling, the Brazilian real, the Mexican peso, the Chinese renminbi and the Indian rupee and the impact of those currency fluctuations on the underlying economies.

dollar and the Euro, the British pound sterling, the Brazilian real, the Mexican peso, the Chinese renminbi and the Indian rupee.

During the past three years, sales by our non-U.S.

subsidiaries, which use their local currencies as their functional currency, accounted for approximately 60% to 70% of our consolidated net sales.

subsidiaries accounted for approximately 63% to 65% of our consolidated net sales.

We generally do not use financial instruments that expose us to significant risk involving foreign currency transactions;

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Therefore, as exchange rates change, our results can be materially affected.

Incorporated by reference is the foreign exchange risk information contained in Item 7A of this Report and the geographic information in Note 4 of Notes to Consolidated Financial Statements included in Item 8 of this Report.

Incorporated by reference is the foreign exchange risk information contained in Item 7A of this Report and the geographic information in Note 4, Business Segments , to the Consolidated Financial Statements included in Item 8 of this Report.

Also, we occasionally source inventory in a different country than that of the intended sale.

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Risks Relating to Our Supply Chain

If we are unable to obtain price increases or contract concessions sufficient to offset increases in the costs of raw materials, this can continue to result in a loss of sales, gross profit, and/or market share and can have a material adverse effect on our liquidity, financial position and results of operations.

If we are unable to obtain price increases or contract concessions sufficient to offset increases in the costs of raw materials, this could result in a loss of sales, gross profit, and/or market share and could have a material adverse effect on our liquidity, financial position and results of operations.

Conversely, if we fail to adjust prices in a declining raw material cost environment, we could lose sales, gross profit, and/or market share which could have a material adverse effect on our liquidity, financial position and results of operations.

Quaker Houghton uses approximately 3,000 different raw materials, including animal fats, vegetable oils, mineral oils, oleochemicals, ethylene, solvents, surfactant agents, various chemical compounds that act as additives to our base formulations, and a wide variety of other organic and inorganic compounds, and various derivatives of the foregoing.

The price of mineral oils and their derivatives can be affected by the price of crude oil and industry refining capacity.

Animal fat and vegetable oil prices, as well as the prices of other raw materials, are impacted by their own specific supply and demand factors, as well as by biodiesel consumption which can also be affected by the price of crude oil.

Accordingly, significant fluctuations in the prices of our raw materials in the past have had and are expected to continue to have a material impact on the cost of our raw materials.

In addition, many of the raw materials we use are commodity chemicals, which have experienced significant price volatility in recent years.

Quaker Houghton uses approximately 3,000 raw materials, including animal fats, vegetable oils, mineral oils, oleochemicals, ethylene, solvents, surfactant agents, and various chemical compounds that act as additives to our base formulations, and a wide variety of other organic and inorganic compounds and various derivatives of the foregoing.

The price of mineral oil and its derivatives can be affected by the price of crude oil and industry refining capacity.

Animal fat and vegetable oil prices, as well as the prices of other raw materials, are impacted by their own unique supply and demand factors, and by biodiesel consumption, which in turn can be affected by the price of crude oil and by government incentives for low-carbon fuels.

Accordingly, significant fluctuations in the price of crude oil can have a material impact on the cost of these raw materials.

In addition, many of the raw materials used by Quaker Houghton are commodity chemicals which can experience significant price volatility.

We generally attempt to pass through changes in the prices of raw materials to our customers, but we may be unable to do so (or may be delayed in doing so).

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In addition, we source some materials from a single supplier or from suppliers in jurisdictions that have experienced political or economic instability.

Even if we have multiple suppliers of a particular raw material, there are occasionally shortages.

Any significant disruption in supply could affect our ability to obtain raw materials or satisfactory substitutes or could increase the cost of such raw materials or substitutes, which could have a material adverse effect on our liquidity, financial position and results of operations.

Even where we have multiple suppliers of a particular raw material, there are occasionally shortages.

Any significant disruption in supply, such as was experienced several years ago, could affect our ability to obtain raw materials or satisfactory substitutes or could increase the cost of such raw materials or substitutes, which could have a material adverse effect on our liquidity, financial position and results of operations.

In addition, certain raw materials that we use are subject to various regulatory laws, and a change in our ability to legally use such raw materials may impact the products or services we are able to offer which could negatively affect our ability to compete and could adversely affect our liquidity, financial position and results of operations.

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Our manufacturing facilities are located throughout the world.

While we have some redundant capabilities, if one of our facilities is forced to shut down or curtail operations because of damage or other factors, including natural disasters, labor difficulties or widespread public health crises, we may not be able to timely supply our customers.

While we have some redundant capabilities, if one of our facilities is forced to shut down or curtail operations because of damage or other unforeseen factors, including natural disasters, labor difficulties or public health crises, we may not be able to timely supply our customers.

This could result in a loss of sales over an extended period or permanently.

While the Company seeks to mitigate this risk through business continuity and contingency planning and other measures, the loss of production in any one region over an extended period of time could have a material adverse effect on our liquidity, financial position and results of operations.

In addition, a widespread public health crisis may cause significant travel disruptions, quarantines and/or closures, which could result in disruptions to our manufacturing and production operations at our facilities, as well as those of our suppliers and customers.

Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles.

We could be similarly adversely affected by other disruptions to our supply chain and transportation network.

Any losses due to these events may not be covered by our existing insurance policies or may be subject to deductibles.

We could be similarly adversely affected by disruptions to our supply chain and transportation network.

The Company relies heavily on railroads, ships, and over-the-road shipping methods to transport raw materials to its manufacturing facilities and to transport finished products to customers.

The costs of transporting our products could be negatively affected by factors outside of our control, including shipping container shortages or global imbalances in shipping capabilities, transportation disruptions or rate increases, increased border controls or closures, extreme weather events, tariffs, rising fuel costs, armed conflicts and capacity constraints.

Significant delays or increased costs affecting our supply chain could materially affect our financial condition and results of operations.

Disruptions at our suppliers have recently and could in the future lead to short term or long term increases in raw material or energy costs and/or reduced availability of materials or energy, potentially affecting our financial condition and results of operations.

The costs of transporting our products could be negatively affected by factors outside of our control, including shipping container shortages or global imbalances in shipping capabilities, port strikes or other labor disruptions, transportation disruptions or rate increases, increased border controls or closures, extreme weather events, tariffs, rising fuel costs, armed conflicts and capacity constraints.

Significant delays or increased costs affecting our supply chain could materially affect our liquidity, financial condition and results of operations.

Disruptions at our suppliers could lead to increases in raw material or energy costs and/or reduced availability of materials or energy, potentially affecting our liquidity, financial condition and results of operations.

Risks Relating to Domestic and Foreign Taxation and Government Regulation and Oversight

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Our effective tax rate is derived from a combination of local tax rates and tax attributes applicable to our operations in the various countries, states and other jurisdictions in which we operate.

Our effective tax rate and respective tax liabilities could therefore be materially affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in tax rates, expiration or lapses of tax credits or incentives, changes in uncertain tax positions, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or in how they are interpreted or enforced, including matters such as transfer pricing.

Our effective tax rates and tax liabilities could therefore be materially affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in tax rates, expiration or lapses of tax credits or incentives, changes in uncertain tax positions, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or in how they are interpreted or enforced, including matters such as transfer pricing.

In addition, we are regularly under audit by tax authorities, and the final decisions of such audits could materially affect our current tax estimates and tax positions.

See Note 10 and Note 25 of Notes to Consolidated Financial Statements in Item 8 of this Report for a discussion of uncertain tax positions, tax years subject to examination, and audits and inspections.

See Note 10, Incomes Taxes , and Note 25, Commitments and Contingencies , to the Consolidated Financial Statements in Item 8 of this Report for a discussion of uncertain tax positions, tax years subject to examination, and audits and inspections.

Any of these factors or similar tax-related risks could cause our effective tax rate and tax-related payments, including any such payments related to tax liabilities of businesses we have acquired, to significantly differ from previous periods and current or future expectations which could have a material effect on our liquidity, financial position and results of operations.

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The Company and its subsidiaries are routinely party to proceedings, cases, and requests for information from, and negotiations with, various claimants and federal and state agencies relating to various legal matters, including tax and environmental matters.

See Note 10 and Note 25 of Notes to Consolidated Financial Statements in Item 8 of this Report, which describes uncertain tax positions and audits and inspections, as well as certain information concerning pending asbestos-related litigation against an inactive subsidiary, amounts accrued associated with certain environmental, non-capital remediation costs and other potential commitments or contingencies.

See Note 10, Incomes Taxes , and Note 25, Commitments and Contingencies , to the Consolidated Financial Statements in Item 8 of this Report, which describes uncertain tax positions and audits and inspections, as well as information concerning amounts accrued associated with certain environmental remediation costs and other potential commitments or contingencies.

An adverse result in one or more pending or ongoing matters or any potential future matter of a similar nature could materially and adversely affect our liquidity, financial position, and results of operations, as well as our reputation in the markets we serve.

Failure to comply with the complex global regulatory environment in which we operate could have an adverse impact on our reputation and/or a material adverse effect on our liquidity, financial position and results of operations.

We are subject to government regulation in all of the jurisdictions in which we conduct our business.

We are subject to government regulation in all jurisdictions in which we conduct business.

Changes in the regulatory environments in which we operate, particularly, but not limited to, the U.S., Mexico, Brazil, China, India, Thailand, Australia, the U.K.

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In addition, the U.S.

Toxic Substances Control Act (“TSCA”) requires chemicals to be assessed against a risk-based safety standard and that unreasonable risks identified during risk evaluation be eliminated.

Toxic Substances Control Act (“TSCA”) requires chemicals to be assessed against a risk-based safety standard and then requires that unreasonable risks that are identified be eliminated.

This regulation and other pending initiatives at the U.S.

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These concerns and additional requirements could also increase the cost incurred by our customers to use our chemical products and otherwise limit their use which could lead to a decrease in demand for these products.

A decrease in demand due to these issues could have an adverse impact on our business and results of operations.

A decrease in demand due to these issues could have an adverse impact on our liquidity, financial position, and results of operations.

Further, we are subject to the U.S.

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Moreover, any failure to comply with applicable legal and regulatory trading obligations could result in criminal and civil penalties and sanctions such as fines, imprisonment, debarment from governmental contracts, seizure of shipments and loss of import and export privileges.

In addition, investigations by governmental authorities as well as legal, social, economic and political issues in these countries could have a material adverse effect on our business, results of operations and financial condition.

In addition, investigations by government authorities as well as legal, social, economic and political issues in these countries could have a material adverse effect on our business, results of operations and financial condition.

We are also subject to the risks that our employees, joint venture partners and agents outside of the U.S.

may fail to comply with other applicable laws.

Uncertainty related to environmental regulation and industry standards relating to, as well as physical risks of, climate change and biodiversity loss, could impact our results of operations and financial position.

Increased public and stakeholder awareness and concern regarding global climate change, biodiversity loss, and other environmental risks may result in more extensive international, regional and/or federal requirements or industry standards to reduce or mitigate the effects of these changes.

Uncertainty related to environmental regulation and industry standards relating to, as well as physical risks of, climate change and biodiversity loss, could impact our liquidity, financial position, and results of operations.

Increased public and stakeholder awareness of global climate change, biodiversity loss, and other environmental risks have contributed to, and may result in, even more extensive, international, regional and/or federal requirements or industry standards to reduce or mitigate the effects of these changes.

These regulations could mandate even more restrictive regulatory or industry standards than the voluntary goals that we have established or require changes to be adopted on a more accelerated time frame.

New disclosure requirements have been adopted in the EU and California and additional rule making is expected to be adopted by the SEC.

There continues to be a lack of consistent legislation related to disclosure and operational matters, which creates economic and regulatory uncertainty.

There continues to be a lack of consistent legislation related to disclosure and operational matters, which creates complexity and economic and regulatory uncertainty.

Though we are closely following developments in this area and changes in the regulatory landscape in the U.S.

and across our other markets, we cannot predict how or when those challenges may ultimately impact our business.

While certain climate change initiatives may result in new business opportunities for us in the area of alternative fuel technologies and emissions control, compliance with these initiatives may also result in additional costs to us including, among other things, increased production costs, additional taxes, reduced emission allowances or additional restrictions on production or operations.

In addition, the potential physical impacts of climate change and biodiversity loss are highly uncertain and will be particular to the circumstances developing in various geographical regions.

and our other markets, we cannot predict how or when those challenges may ultimately impact our business.

While certain climate change initiatives may result in new business opportunities for us in the area of alternative fuel technologies and emissions control, compliance with these initiatives may also result in additional costs to us including, among other things, increased production costs, additional taxes and compliance costs, reduced emission allowances or additional restrictions on production or operations.

In addition, the potential physical impacts of climate change and biodiversity loss are highly uncertain.

These may include extreme weather events and long-term changes in temperature levels and water availability as well as damaged ecosystems.

The physical risks of climate change and biodiversity loss may impact our facilities, our customers and suppliers, and the availability and costs of materials and natural resources, sources and supply of energy, product demand and manufacturing.

In particular, climate change serves as a risk multiplier increasing both the frequency and severity of natural disasters that may affect our business operations.

If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon us or our products, or our operations are disrupted due to physical impacts of climate change or biodiversity loss, our business, capital expenditures, results of operations, financial condition and competitive position could be negatively impacted.

The physical risks of climate change and biodiversity loss may impact our facilities, customers and suppliers, and the availability and costs of materials and natural resources, sources and supply of energy, product demand and manufacturing.

In addition, climate change may increase both the frequency and severity of natural disasters that may affect our business operations.

If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon us or our products, or our operations are disrupted due to physical impacts of climate change or biodiversity loss, our business, capital expenditures, liquidity, results of operations, financial condition and competitive position could be negatively impacted.

We are subject to stringent labor and employment laws in many jurisdictions in which we operate, and our relationship with our employees could deteriorate which could adversely impact our operations.

A majority of our full-time employees are employed outside the U.S.

In many jurisdictions where we operate, labor and employment laws and regulations grant significant job protection to certain employees including rights on termination of employment.

In addition, in certain countries our employees are represented by works councils or are governed by collective bargaining agreements and we are often required to consult with and seek the consent or advice of such representatives.

These regulations and laws, together with our obligations to seek consent or consult with the relevant unions or works councils, could have a significant impact on our flexibility in managing costs and responding to market changes.

In many jurisdictions where we operate, labor and employment laws and regulations grant significant job protection to some employees including rights on termination of employment.

In addition, in some countries our employees are represented by works councils or are governed by collective bargaining agreements and we are often required to consult with and seek the consent or advice of such representatives.

These laws and regulations, together with our obligations to seek consent or consult with the relevant unions or works councils, could have a significant impact on our flexibility in managing costs and responding to market changes.

While the Company believes it has generally positive relations with its labor unions and employees, there is no guarantee the Company will be able to successfully negotiate new or renew labor agreements without work stoppages, labor difficulties or unfavorable terms.

If we were to experience any extended interruption of operations at any of our facilities because of strikes or other work stoppages, our results of operations and financial condition could be materially and adversely affected.

If we were to experience an extended interruption of operations at any of our facilities because of strikes or other work stoppages, our liquidity, results of operations and financial condition could be materially and adversely affected.

We may be unable to adequately protect our proprietary rights and trade brands, which may limit our ability to compete in our markets and could adversely affect our liquidity, financial position and results of operations.

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Our business could be adversely affected by environmental, health and safety laws and regulations or by potential product, service or other related liability claims.

The development, manufacture and sale of specialty chemical products and other related services involve inherent exposure to potential product liability claims, service level claims, product recalls and related adverse publicity.

The development, manufacture and sale of specialty chemicals and other services involve inherent exposure to potential product liability claims, service level claims, product recalls and related adverse publicity.

Some customers have and may in the future require us to represent that our products conform to certain product specifications provided by them.

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national, federal, state and local environmental, health and safety laws and regulations, including those governing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated properties.

We currently use, and in the past have used, hazardous substances at many of our facilities, and we have in the past been, and may in the future be, subject to claims relating to exposure to hazardous materials.

We also have generated, and continue to generate, hazardous wastes at a number of our facilities.

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We may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience interruptions in our operations, including as a result of revocation, non-renewal or modification of the Company’s operating permits and revocation of the Company’s product registrations, for violations arising under these laws or permit requirements.

Any such revocation, modification or non-renewal may require the Company to cease or limit the manufacture and sale of its products at one or more of its facilities, which may limit or prevent the Company’s ability to meet product demand or build new facilities and may have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.

Additional information may arise in the future concerning the nature or extent of our liability with respect to identified sites, and additional sites may be identified for which we are alleged to be liable, that could cause us to materially increase our environmental accrual or the upper range of the costs we believe we could reasonably incur for such matters.

Any such revocation, modification or non-renewal may require the Company to cease or limit the manufacture and sale of its products at one or more of its facilities, which may limit or prevent the Company’s ability to meet product demand or build new facilities and may have a material adverse effect on liquidity, financial position, and results of operations.

Additional information may arise in the future concerning the nature or extent of our liability with respect to identified sites, and additional sites may be identified for which we are alleged to be liable, which could cause us to materially increase our environmental accrual or the upper range of the costs we believe we could reasonably incur for such matters.

Increased compliance costs may not affect competitors in the same way that they affect us due to differences in product formulations, manufacturing locations or other factors, and we could be at a competitive disadvantage, which might adversely affect our financial performance.

We could be subject to indemnity claims and liable for other payments relating to properties or businesses we have divested.

In connection with the sale of certain properties and businesses, we agreed to indemnify the purchasers for certain types of matters, including certain breaches of representations and warranties, taxes and certain environmental matters.

We may not have insurance coverage for such indemnity obligations.

Further, we cannot predict the nature or amount of any indemnity or other obligations we may have to pay the applicable purchaser.

These payments may be costly and may adversely affect our financial condition and results of operations.

Our insurance may not fully cover all potential exposures.

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Additionally, severe disruptions in the domestic and global financial markets could adversely impact the ratings and survival of some of our insurers.

Future downgrades in the ratings of enough insurers could adversely impact both the availability of appropriate insurance coverage and its cost.

Future downgrades in the ratings of insurers could adversely impact both the availability of appropriate insurance coverage and its cost.

In the future, we may not be able to obtain coverage at current levels, if at all, and our premiums may increase significantly on coverage that we maintain.

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If the carrying values of goodwill or indefinite-lived intangible assets exceed their fair value, the goodwill or indefinite-lived intangible assets would be considered impaired.

In addition, we perform a review of a definite-lived intangible asset or other long-lived asset when changes in circumstances or events indicate a possible impairment.

In addition, we perform a review of a definite-lived intangible assets or other long-lived assets when changes in circumstances or events indicate a possible impairment.

If any impairment or related charge is warranted, as we determined to be the case in the fourth quarter of 2022 when we recognized a $93.0 million impairment charge related to our EMEA reportable segment, then our financial position and results of operations could be materially affected.

See Note 15 of Notes to Consolidated Financial Statements included in Item 8 of this Report.

See Note 15, Goodwill and Other Intangible Assets , to the Consolidated Financial Statements included in Item 8 of this Report.

If we identify a material weakness in internal control over financial reporting, or if we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud, either of which could have a material effect on us.

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Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting.

We cannot be certain that we will be successful in maintaining adequate internal control over our financial reporting and financial processes in the future.

We cannot be certain that we will be successful in maintaining adequate internal control over financial reporting and financial processes.

We may in the future discover areas of our internal controls that need improvement.

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Disruption of critical information systems or material breaches in the security of our systems could adversely affect our business and our customer relationships and subject us to fines or other regulatory actions.

We rely on information technology systems to obtain, process, analyze, manage, transmit, and store electronic information in our day-to-day operations.

We rely on information technology systems, digital telecommunications and other computer resources to obtain, process, analyze, manage, transmit, and store electronic information in our day-to-day operations.

We also rely on our technology infrastructure in all aspects of our business, including to interact with customers and suppliers, fulfill orders and bill, collect and make payments, ship products, provide support to customers, and fulfill contractual obligations.

Our information technology systems are subject to potential disruptions, including significant network or power outages, cyberattacks, computer viruses, other malicious codes, and/or unauthorized access attempts, any of which, if successful, could result in data leaks or otherwise compromise our confidential or proprietary information and disrupt our operations.

Further, we rely on our vendors and third-party service providers to maintain effective cybersecurity measures to keep our information secure.

Our information technology systems are subject to potential disruptions, including significant network or power outages, usage errors by our employees, business partners, or outside service providers, cyberattacks, ransomware attacks, computer viruses, other malicious codes, and/or unauthorized access attempts, any of which, if successful, could result in data leaks or otherwise compromise our confidential or proprietary information and disrupt our operations.

Security breaches could result in unauthorized disclosure of confidential information or personal data belonging to our employees, partners, customers or suppliers for which we may incur liability.

Cyberattacks and other security threats could originate from a wide variety of external sources, including cyber-criminals, nation-state hackers, hacktivists and other outside parties.

Cyberattacks and other security threats could also originate from the malicious or accidental acts of insiders, such as employees, and other business partners and outside service providers.

Cybersecurity threats, attempted intrusions and other incidents, such as these, are becoming more sophisticated and frequent.

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Although the breaches and cyber incidents experienced to date have not had a material impact, there can be no assurance that our protective measures will prevent security breaches that could have a significant impact on our business, reputation and financial results.

Additionally, the costs to combat cyber or other security threats can be significant, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions.

Media or other reports of perceived vulnerabilities in our network security, regardless of their immediacy or accuracy, could adversely impact our reputation and materially affect our business and financial results.

While we have implemented security measures and internal controls designed to protect against cyber and other security threats, such measures cannot provide absolute security and may not be successful in preventing future security breaches.

We are subject to the data privacy and protection laws and regulations adopted by federal, state and foreign legislatures and governmental agencies in various countries in which we operate, including the EU General Data Protection Regulation.

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A number of other states have considered similar privacy proposals, with states like Virginia and Colorado enacting their own privacy laws.

These privacy laws and the evolving regulatory environment related to personal data may impact our business activities.

Breaches, cyber incidents and disruptions, or failure to comply with laws and regulations related to information security or privacy could result in legal claims or proceedings against us by governmental entities or individuals, significant fines, penalties or judgements, disruption of our operations, remediation requirements, changes to our business practices, and damage to our reputation.

Therefore, a failure to monitor, maintain or protect our information technology systems and data integrity effectively or to anticipate, plan for and recover from significant disruptions to these systems could have a material adverse effect on our business, results of operations or financial condition.

These privacy laws and the evolving regulatory environment related to personal data may impact our business activities, and while we carry cyber insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

Breaches, cyber incidents and disruptions, or failure to comply with laws and regulations related to information security or privacy by us, our vendors and third-party service providers could result in legal claims or proceedings against us by governmental entities or individuals, significant fines, penalties or judgements, disruption of our operations, remediation requirements, changes to our business practices, and damage to our reputation.

Our business depends on attracting and retaining qualified management and other key personnel.

Due to the specialized and technical nature of our business, our future performance is dependent on our ability to attract, develop and retain qualified leadership, commercial, technical, and other key personnel.

Competition for such talent is intense, and we may be unable to continue to attract or retain such personnel.

Competition for such talent is intense and has further increased in light of evolving labor and employment trends, including the increase in remote, hybrid or other alternative flexible work arrangements and, in many jurisdictions, laws and regulations aimed at limiting or eliminating the enforceability of non-competition and other restrictive covenants with employees.

In the current labor and employment environment, we may be unable to continue to attract or retain such personnel.

In an effort to mitigate such risks, the Company utilizes retention bonuses, offers competitive total rewards and maintains continuous succession planning, including for our senior executive officers.

However, there can be no assurance that these mitigating factors will be adequate to attract or retain qualified management or other key personnel.

Failure to retain key employees, failure to successfully transition key roles, or the inability to hire, train, retain and manage qualified personnel could also adversely affect our business.

Failure to retain key employees, failure to effectively implement our succession planning efforts and successfully transition key roles, or the inability to hire, train, retain and manage qualified personnel could also adversely affect our business.

Increasing scrutiny and changing expectations from stakeholders with respect to our Environmental, Social and Governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.

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Any harm to our reputation resulting from setting these standards or our failure or perceived failure to meet such standards could adversely affect our business, financial performance, and growth.

Additionally, adverse effects upon our customers’ industries related to the worldwide social and political environment, including uncertainty or instability resulting from climate change or biodiversity loss, changes in political leadership and environmental policies, changes in geopolitical-social views toward fossil fuels and renewable energy, concern about the environmental impact of climate change or biodiversity loss, and investors’ expectations regarding ESG matters, may also adversely affect demand for our services.

Additionally, adverse effects upon our customers’ industries related to the worldwide social and political environment may also adversely affect demand for our services.

This includes the uncertainty or instability resulting from climate change or biodiversity loss, changes in political leadership and environmental policies, changes in geopolitical-social views toward fossil fuels and renewable energy, concern about the environmental impact of climate change or biodiversity loss, and investors’ expectations regarding ESG matters.

Any long-term material adverse effect on our customers or their industries could have a significant financial and operational adverse impact on our business.

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These developing requirements can significantly expand climate and other sustainability related disclosure requirements, which could require substantial time and attention of management and financial resources.

Additionally, we could be subjected to negative responses by governmental actors, such as anti-ESG legislation, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Additionally, we could be subjected to negative responses by governmental actors, such as anti-ESG legislation, which could have a material adverse effect on our business, liquidity, financial position, and results of operations.

We are closely monitoring these developments.

Terrorist attacks, other acts of violence or war, natural disasters, widespread public health crises or other uncommon global events may affect the markets in which we operate and our profitability which could adversely affect our liquidity, financial position and results of operations.

Terrorist attacks, other acts of armed conflicts or war, including cyber-attacks, natural disasters, widespread public health crises, or other uncommon global events, such as the current military conflicts between Russia and Ukraine and between Israel and Hamas, as well as responses to such events including sanctions, boycotts, protests or other restrictive actions by the United States and/or other countries or its residents, may negatively affect our operations.

Terrorist attacks, other acts of violence or war, natural disasters, widespread public health crises or other uncommon events may affect the markets in which we operate and our profitability which could adversely affect our business, liquidity, financial position, and results of operations.

Terrorist attacks, other acts of armed conflicts or war, cyber-attacks, natural disasters, widespread public health crises or an outbreak of a contagious disease, or other uncommon global events, such as the current military conflicts between Russia and Ukraine and in the Middle East, as well as responses to such events including sanctions, boycotts, protests or other restrictive actions by the United States and/or other countries or its residents, may negatively affect our operations.

There can be no assurance that there will not be terrorist attacks against the U.S.

or other locations where we do business.

Also, other global events such as earthquakes, tornados, hurricanes, fires, floods, and tsunamis cannot be predicted.

Terrorist attacks, other acts of armed conflicts or war, including cyber-attacks, and natural disasters, which may be amplified by ongoing global climate change and biodiversity loss, may directly impact our physical facilities and/or those of our suppliers or customers.

Also, natural disasters such as earthquakes, tornados, hurricanes, fires, floods, and tsunamis cannot be predicted.

Terrorist attacks, other acts of armed conflicts or war, cyber-attacks, and natural disasters, which may be amplified by ongoing global climate change and biodiversity loss, may directly impact our physical facilities and/or those of our suppliers or customers.

In addition, terrorist attacks or natural disasters may disrupt the global insurance and reinsurance industries with the result that we may not be able to obtain insurance at historical terms and levels, if at all, for all of our facilities.

In addition, available insurance coverage may not be sufficient to cover all of the damage incurred or, if available, may be prohibitively expensive.

Widespread public health crises could also disrupt operations of the Company, its suppliers and customers which could have a material adverse impact on our results of operations.

The consequences of terrorist attacks, other acts of armed conflicts or war, including cyber-attacks, natural disasters, widespread public health crises or other uncommon global events can be unpredictable, and we may not be able to foresee or effectively plan for these events, resulting in a material adverse effect on our business, results of operations or financial condition.

Epidemic diseases could negatively affect various aspects of our business, make it more difficult to meet our obligations to our customers, and could result in reduced demand from our customers.

These could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, which could impact all or any locations in which the Company does business as well as the Company’s customers and suppliers.

A significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and likely impact our operating results.

Widespread public health crises, including contagious diseases, could also disrupt operations of the Company, its suppliers and customers which could have a material adverse impact on our results of operations.

A significant outbreak of contagious diseases in the human population similar to the COVID-19 pandemic could also result in an economic downturn that could affect demand for our products and likely impact our operating results.

To the extent that the Company’s customers and suppliers are materially and adversely impacted by a widespread outbreak of contagious disease, this could reduce the availability, or result in delays, of materials or supplies to or from the Company, which in turn could materially interrupt the Company’s business operations.

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

What changed 10-K

Item 1A. Risk Factors