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As used in this Annual Report on Form 10-K (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.
−Removed: The “Combination” refers to the Quaker combination with Houghton International, Inc.
−Removed: (“Houghton”).
Executive Summary
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Quaker Houghton is headquartered in Conshohocken, Pennsylvania, located near Philadelphia in the U.S.
−Removed: Overall, 2023 was a successful year as the Company achieved substantial earnings growth led by its value-based pricing and margin improvement initiatives while navigating through a challenging macroeconomic and geopolitical environment, which included the direct and indirect impacts of the ongoing global conflicts, raw material cost fluctuations, inflationary pressures, supply chain and logistics challenges, and foreign currency volatility.
−Removed: Net sales of $1,953.3 million in 2023 increased 1% compared to $1,943.6 million in 2022, primarily due to increases in selling price and product mix of approximately 7% and favorable impacts from foreign currency translation of approximately 1%, partially offset by a 7% decline in sales volumes.
−Removed: The increase in selling price and product mix was primarily driven by the year-over-year impact of our value-based pricing initiatives.
−Removed: The decline in sales volumes compared to 2022 was primarily attributable to softer end market conditions across all regions, the Company’s value-based pricing initiatives and customer order patterns, as well as impacts of the ongoing war in Ukraine in the EMEA segment, the direct and indirect impacts of the United Auto Workers (“UAW”) strike in the Americas segment, and the wind-down of the tolling agreement for products previously divested related to the Combination, partially offset by new business wins in all segments.
−Removed: The Company generated net income of $112.7 million or $6.26 per diluted share in 2023, compared to a net loss of $15.9 million or $0.89 per diluted share in 2022.
−Removed: The Company’s reported net income in 2023 primarily reflects a recovery in gross margins compared to prior year and the impacts of certain non-recurring items during 2022.
−Removed: Excluding this and other non-recurring and non-core items, the Company’s current year non-GAAP net income and non-GAAP earnings per diluted share were $137.6 million and $7.65, respectively, compared to $105.3 million and $5.87, respectively, in 2022.
−Removed: The Company generated adjusted EBITDA of $320.4 million compared to $257.2 million in 2022, an increase of 25%.
−Removed: The higher year-over-year adjusted EBITDA was primarily a result of an increase in net sales and an increase in gross margins, partially offset by higher selling, general and administrative expenses (“SG&A”) as a result of year-over-year inflationary pressures and higher labor-related costs.
+Added: Net sales of $1,839.7 million in 2024 decreased 6% compared to $1,953.3 million in 2023, primarily due to a decrease in selling price and product mix of approximately 4%, a decrease in sales volumes of approximately 2%, and an unfavorable impact from foreign currency translation of approximately 1%, partially offset by an increase in sales from acquisitions of approximately 1%.
+Added: The decrease in selling price and product mix was attributable to the impact of our index-based customer contracts and the mix of products and services.
+Added: The decline in sales volumes was primarily a result of the continuation of soft end market conditions compared to the prior year in the Americas and Europe, Middle East and Africa (“EMEA”) segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, continued business wins across all segments and a contribution from acquisitions in the EMEA and Asia/Pacific segments.
+Added: The Company generated net income of $116.6 million or $6.51 per diluted share in 2024, compared to a net income of $112.7 million or $6.26 per diluted share in 2023.
+Added: The increase in current year earnings was primarily driven by lower interest expense and lower foreign exchange losses, partially offset by lower operating income.
+Added: Excluding non-recurring and non-core items, the Company’s current year non-GAAP net income and non-GAAP earnings per diluted share were $133.5 million and $7.44, respectively, compared to $137.6 million and $7.65, respectively, in 2023.
+Added: The decrease in current year non-GAAP earnings was primarily driven by a decrease in net sales, partially offset by an improvement in gross margins, lower interest expense, and an increase in other income (expense), net.
+Added: The Company generated adjusted EBITDA of $310.9 million compared to $320.4 million in 2023, a decrease of 3%.
+Added: The decrease in adjusted EBITDA was primarily a result of a decrease in net sales, partially offset by an increase in other income (expense), net.
See the Non-GAAP Measures section of this Item below.
−Removed: The Company’s 2023 operating performance in each of its three reportable segments:
−Removed: (i) Americas;
−Removed: and (iii) Asia/Pacific, reflect similar drivers to that of its consolidated performance as each of the Company’s reportable segments net sales benefited from year-over-year increases in selling price and product mix, partially offset by the unfavorable impact of foreign currency translation in the Asia/Pacific segment.
−Removed: All geographic segments had lower sales volumes.
−Removed: Operating earnings increased across all segments due to higher net sales in the EMEA and Americas and an improvement in segment operating margins, driven by favorable pricing and product mix as well as operating improvements.
+Added: The Company’s 2024 operating performance in the Americas and EMEA reportable segments reflect similar drivers to that of the Company’s consolidated performance.
+Added: Operating earnings for the Americas and EMEA segments decreased compared to the prior year, primarily driven by a decrease in net sales, partially offset by an increase in segment operating margins.
+Added: Asia/Pacific segment operating earnings increased compared to the prior year, primarily driven by an increase in net sales, partially offset by a decrease in segment operating margins.
Additional details of each segment’s operating performance are further discussed in the Company’s reportable segments review, in the Operations section of this Item 7, below.
−Removed: The Company generated net operating cash flow of $279.0 million in 2023 compared to $41.8 million in 2022.
−Removed: The increase in net operating cash flow year-over-year reflects improved operating performance in 2023 as well as an improvement in net working capital.
+Added: Net cash flows provided by operating activities were $204.6 million in 2024 compared to $279.0 million in 2023.
+Added: The decrease in net operating cash flows was primarily driven by a reduction in cash inflow from working capital in the current year.
The key drivers of the Company’s operating cash flow and overall liquidity are further discussed in the Company’s Liquidity and Capital Resources section of this Item 7, below.
−Removed: Overall, the Company delivered strong results in 2023 including an increase in net sales, an improvement in gross margins, an increase in operating cash flow.
−Removed: Looking ahead to 2024, while the macroeconomic environment remains uncertain, we believe the business is well positioned to continue to outpace our market growth rates by earning new business by delivering value-added solutions and services to its customers.
−Removed: The Company is committed to its margin improvement initiatives in 2024, while balancing customer relationships and the cost to serve with the value we provide to customers.
−Removed: Additionally, the Company expects to continue to make progress with its enterprise growth strategy, including investing in its long-term growth initiatives, advancing its customer intimate strategy, progressing with its sustainability program and positioning the Company to deliver continued earnings growth in 2024 and beyond.
+Added: Overall, the Company’s results in 2024 reflect the Company’s continued execution on its financial and operational priorities despite a continuation of soft end market conditions that have impacted the Company’s customers.
+Added: Looking ahead to 2025, we believe Quaker Houghton is well positioned to continue to deliver above market growth rates through new business wins, by delivering value-added solutions and services to its customers.
+Added: The Company expects to continue to advance its enterprise growth strategy, including investing in its long-term growth initiatives, further strengthening its focus on customer intimacy, progressing with its sustainability program and positioning the Company to deliver earnings growth in 2025 and beyond.
Critical Accounting Policies and Estimates
−Removed: Quaker Houghton’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.
+Added: Quaker Houghton’s discussion and analysis of its financial condition and results of operations are based on its consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.
The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
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The Company establishes allowances for credit losses for estimated losses resulting from the inability of its customers to make required payments.
−Removed: If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
+Added: If the financial condition of the Company’s customers was to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
As part of our terms of trade, we may custom manufacture products for certain large customers and/or may ship products on a consignment basis.
−Removed: Further, a significant portion of our revenue is derived from sales to customers in industries where companies have experienced past financial difficulties.
+Added: Further, a significant portion of our revenue is derived from sales to customers in industries where companies have previously experienced financial difficulties.
If a significant customer bankruptcy occurs, then we must judge the amount of proceeds, if any, that may ultimately be received through the bankruptcy or liquidation process.
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The Company recorded expense to increase its provision for credit losses by $2.1 million, $1.3 million and $4.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
−Removed: Changing the amount of expense recorded to the Company’s provisions by 10% would have increased or decreased the Company’s pre-tax earnings by $0.1 million, $0.4 million and $0.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.
−Removed: See Note 12 of Notes to Consolidated Financial Statements in Item 8 of this Report.
Tax exposures, uncertain tax positions and valuation allowances:
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subsidiaries.
−Removed: As of December 31, 2023, $8.5 million in installments have been paid with the remaining $7.0 million to be paid through installments in future years.
+Added: As of December 31, 2024, $11.6 million in installments have been paid with the remaining $3.9 million to be paid in 2025.
However, the Company may also be subject to other taxes, such as withholding taxes and dividend distribution taxes, if certain undistributed earnings are ultimately remitted to the U.S.
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The amount of such undistributed earnings at December 31, 2024 was approximately $359.8 million.
−Removed: Any tax liability which might result from ultimate remittance of these earnings is expected to be substantially offset by foreign tax credits (subject to certain limitations).
+Added: Any tax liability which might result from ultimate remittance of these earnings is expected to be substantially offset by foreign tax credits (subject to certain limitations), however, certain withholding taxes could apply.
It is currently impractical to estimate any such incremental tax expense.
−Removed: See Note 10 of Notes to Consolidated Financial Statements in Item 8 of this Report.
+Added: See Note 10, Income Taxes , to the Consolidated Financial Statements for more information.
Goodwill and other intangible assets:
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Any excess of the purchase price over the estimated fair value of the identifiable net assets acquired is recorded as goodwill.
−Removed: The determination of the estimated fair value of assets acquired requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, the weighted average cost of capital (“WACC”), royalty rates, asset lives and market multiples, among other items.
+Added: The determination of the estimated fair value of assets acquired requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to projected revenue growth rates, gross margins, and operating margins, the weighted average cost of capital (“WACC”), royalty rates, asset lives and market multiples, among other items.
When necessary, the Company consults with external advisors to help determine fair value.
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The Company’s consolidated goodwill at December 31, 2024 and 2023 was $518.9 million and $512.5 million, respectively.
−Removed: The Company has four indefinite-lived intangible assets totaling $193.2 million as of December 31, 2023, including $192.1 million of indefinite-lived intangible assets for trademarks and tradename associated with the Combination.
−Removed: Comparatively, the Company had four indefinite-lived intangible assets for trademarks and tradename totaling $189.1 million as of December 31, 2022.
+Added: As of December 31, 2024 and 2023, the Company had indefinite-lived intangible assets for trademarks and intangibles totaling $185.3 million and $193.2 million, respectively.
During the fourth quarter of 2022, the Company recorded a non-cash impairment charge of $93.0 million to write down the carrying value of the EMEA reporting unit goodwill to its estimated fair values.
In connection with the Company’s reorganization and the associated change in reportable segments and reporting units during the first quarter of 2023, the Company performed the required impairment assessments directly before and immediately after the change in reporting units and concluded that it was not more likely than not that the fair values of any of the Company’s previous or new reporting units were less than their respective carrying amounts.
−Removed: Additionally, the Company completed its annual impairment assessment as of October 1, 2023 and concluded no impairment existed.
−Removed: In completing the annual impairment assessment, the Company used a WACC assumption of approximately 12.0% and holding all other assumptions constant, the WACC would have to increase by approximately 3.0 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be fully impaired.
−Removed: In addition, holding EBITDA margins and all other assumptions constant, the Company’s compound annual revenue growth rate during the entire projection period would need to decline by approximately 4.0 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be fully impaired.
−Removed: Similarly, holding revenue growth rates and all other assumptions constant, the Company’s average EBITDA margins throughout the discreet projection period would need to decline by approximately 7.3 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be fully impaired.
−Removed: The Company continually evaluates financial performance, economic conditions and other recent developments in assessing if a triggering event indicates that the carrying values of goodwill, indefinite-lived, or long-lived assets might be impaired.
−Removed: Notwithstanding the results of the Company’s impairment assessments during 2023, if the Company is unable to maintain the actions aimed at improving the financial performance of the EMEA reporting unit, or interest rates continue to rise, which leads to an increase in the cost of capital, then these conditions could result in a triggering event for the EMEA reporting unit.
+Added: Additionally, the Company completed its annual impairment assessment as of October 1, 2023 and October 1, 2024 and concluded in each case that no impairment existed.
+Added: In completing the annual impairment assessment, the Company used a WACC assumption of approximately 10.5% and holding all other assumptions constant, the WACC would have to increase by approximately 2.6 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be impaired.
+Added: In addition, holding EBITDA margins and all other assumptions constant, the Company’s compound annual revenue growth rate during the entire projection period would need to decline by approximately 1.9 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be impaired.
+Added: Similarly, holding revenue growth rates and all other assumptions constant, the Company’s average EBITDA margins throughout the discreet projection period would need to decline by approximately 9.8 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be impaired.
+Added: The Company continually evaluates financial performance, economic conditions and other recent developments in assessing if a triggering event indicates that the carrying value of goodwill, indefinite-lived, or long-lived assets might be impaired.
+Added: Notwithstanding the results of the Company’s impairment assessments during 2023 and 2024, if the Company is unable to maintain the actions aimed at improving the financial performance of the EMEA reporting unit, or interest rates rise, which leads to an increase in the cost of capital, then these conditions could result in a triggering event for the EMEA reporting unit.
This assessment could result in an impairment of the EMEA reporting unit’s remaining goodwill, indefinite-lived intangible assets, or long-lived assets.
−Removed: See Note 15 of Notes to Consolidated Financial Statements in Item 8 of this Report.
+Added: See Note 15, Goodwill and Other Intangible Assets , to the Consolidated Financial Statements for more information.
Pension and Postretirement benefits:
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plans and certain foreign plans, rates of increase in compensation levels, and expected long-term rates of return on assets.
−Removed: If different assumptions were used, additional pension expense or charges to equity might be required.
Recently Issued Accounting Standards
−Removed: See Note 3 of Notes to the Consolidated Financial Statements in Item 8 of this Report for a discussion regarding recently issued accounting standards.
+Added: See Note 3, Recently Issued Accounting Standards , to the Consolidated Financial Statements for more information for a discussion regarding recently adopted accounting standards and recently issued accounting standards not yet adopted.
Liquidity and Capital Resources
−Removed: At December 31, 2023, the Company had cash and cash equivalents of $194.5 million.
−Removed: Total cash and cash equivalents was $181.0 million at December 31, 2022.
−Removed: The $13.5 million increase in cash and cash equivalents was the net result of $279.0 million of cash provided by operating activities and approximately $0.7 million of favorable impacts due to the effect of foreign currency translation on cash, largely offset by $238.6 million of cash used in financing activities and $27.6 million of cash used in investing activities.
+Added: The Company had cash and cash equivalents of $188.9 million and $194.5 million at December 31, 2024 and 2023, respectively.
+Added: Cash held by subsidiaries in foreign countries was approximately $180.6 million and $177.1 million at December 31, 2024 and 2023, respectively.
+Added: The $5.6 million decrease in cash and cash equivalents was the net result of $204.6 million of cash provided by operating activities, largely offset by $122.7 million of cash used in financing activities, $76.4 million of cash used in investing activities, and an unfavorable impact of foreign currency translation of approximately $11.1 million.
Net cash flows provided by operating activities were $204.6 million in 2024 compared to $279.0 million in 2023.
−Removed: The increase in net operating cash flow year-over-year reflects higher year-over-year operating performance as well as a cash inflow from working capital, notably reductions in accounts receivable and inventory, in the current year, demonstrating the Company’s ongoing focus on cash conversion.
−Removed: Comparatively, during 2022, operating cash flow was negatively impacted by a significant working capital investment due to inflationary impacts on inventory and related pricing impacts on accounts receivable.
+Added: The decrease in net operating cash flow year-over-year reflects a decrease in cash inflow from working capital, notably due to an approximately $53.0 million decrease in cash flow associated with inventory, as inventory purchases returned to normalized levels after inventory reductions in 2023 due to customer destocking.
Net cash flows used in investing activities were $76.4 million in 2024 compared to $27.6 million in 2023.
−Removed: This $12.6 million decrease in cash outflows used in investing activities is the result of higher current year proceeds from asset dispositions and higher acquisition-related payments in the prior year, partially offset by higher capital expenditures in the current year.
−Removed: Net cash flows used in financing activities were $238.6 million in 2023 compared to net cash flows provided by financing activities of $24.7 million in 2022.
−Removed: The $263.3 million increase in net cash outflows from financing activities was primarily related to net repayments of borrowings in the current year, primarily under the Company’s Credit Facility, described further below, as compared to net borrowings in 2022, which included the impact of new borrowings, net of repayments of old borrowings and debt issuance costs, related to the June 2022 credit facility amendment.
−Removed: In addition, the Company paid $31.7 million of cash dividends to shareholders during 2023, a $1.5 million, or 5.1%, increase compared to the prior year.
+Added: The increase in cash used in investing activities year-over-year is primarily the result of $39.3 million of payments in the current year related to the acquisitions of the Sutai Group (“Sutai”) and I.K.V.
+Added: Tribologie IKVT and its subsidiaries (“IKV”), a $3.0 million increase in capital expenditures, and a reduction of proceeds from asset dispositions of $6.5 million.
+Added: See Note 2, Business Combinations , to the Consolidated Financial Statements for further information about business acquisitions.
+Added: Net cash flows used in financing activities were $122.7 million in 2024 compared to $238.6 million in 2023.
+Added: The decrease in net cash outflows was primarily related to $17.9 million of net borrowings on the Company’s revolving credit facility in the current year compared to $164.8 million of net repayments in the prior year.
+Added: This was offset by payments of approximately $49.2 million for repurchases of the Company’s common stock under its share repurchase program in the current year and payments of $57.2 million to reduce long-term debt in the current year, an $18.3 million increase compared to the prior year.
+Added: In addition, the Company paid $33.2 million of cash dividends to shareholders during 2024, a $1.5 million increase compared to the prior year.
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.
−Removed: 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 “Credit Facility”).
−Removed: The Credit Facility established (A) a new $150.0 million Euro equivalent senior secured term loan (the “Euro Term Loan”), (B) a new $600.0 million senior secured term loan (the “U.S.
+Added: 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 “ Original Credit Facility”).
+Added: The amended credit facility (“Credit Facility”) established (A) a new $150.0 million Euro equivalent senior secured term loan (the “Euro Term Loan”), (B) a new $600.0 million senior secured term loan (the “U.S.
Term Loan”), and (C) a new $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.
+Added: In addition, the Credit Facility also:
+Added: (i) eliminated the requirement that material foreign subsidiaries must guaranty the Original Euro Term Loan;
+Added: (ii) replaced the U.S.
+Added: Dollar borrowings reference rate from LIBOR to SOFR;
+Added: (iii) extended the maturity date of the Original Credit Facility from August 2024 to June 2027;
+Added: (iv) effected other less significant changes to the Original Credit Facility.
As of December 31, 2024, the Company had Credit Facility borrowings outstanding of $696.5 million.
−Removed: The Company had unused capacity under the Revolver of approximately $465.7 million, which is net of bank letters of credit of approximately $3.4 million, as of December 31, 2023.
The Company’s other debt obligations are primarily industrial development bonds, bank lines of credit and municipality-related loans, which totaled $11.8 million as of December 31, 2024.
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As of December 31, 2024, the Company was in compliance with all of the Credit Facility covenants.
−Removed: Refer to the description of the Company’s primary Credit Facility in Note 19 of Notes to Consolidated Financial Statements in Item 8 of this Report for more information about the covenants and events of default.
+Added: Refer to the description of the Company’s primary Credit Facility in Note 19, Debt , to the Consolidated Financial Statements for more information about the covenants and events of default.
The weighted average variable interest rate incurred on the outstanding borrowings under the Credit Facility during the twelve months ended December 31, 2024 was approximately 6.1%.
−Removed: As of December 31, 2023, the weighted interest rate on the outstanding borrowings under the Credit Facility was approximately 6.3%.
−Removed: As part of the Credit Facility, the Company is required to pay a 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.
+Added: As of December 31, 2024, the interest rate on the outstanding borrowings under the Credit Facility was approximately 5.2%.
+Added: As part of the Credit Facility, the Company is 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 $448.7 million, which is net of bank letters of credit of approximately $2.4 million, as of December 31, 2024.
−Removed: In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, such as SOFR, in the first quarter of 2023, the Company entered into $300.0 million notional amounts of three-year interest rate swaps to convert a portion of the Company’s variable rate borrowings into an average fixed rate obligation of 3.64% plus an applicable margin as provided in the Credit Facility based on the Company’s consolidated net leverage ratio.
+Added: In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, in the first quarter of 2023, the Company entered into $300.0 million notional amounts of three-year interest rate swaps to convert a portion of the Company’s variable rate borrowings into an average fixed rate obligation of 3.64% plus an applicable margin as provided in the Credit Facility based on the Company’s consolidated net leverage ratio.
As of December 31, 2024, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 4.9%.
−Removed: See Note 24 of Notes to Consolidated Financial Statements in Item 8 of this Report.
−Removed: In connection with executing the original credit facility in 2019 (“Original Credit Facility”) and the amended Credit Facility during the second quarter of 2022, the Company capitalized certain third-party and creditor debt issuance costs.
−Removed: Costs attributed to the Euro Term Loan and U.S.
−Removed: Term Loan were recorded as a direct reduction of Long-term debt on the Consolidated Balance Sheet.
−Removed: These capitalized costs, as well as the previously capitalized costs that were not written off will collectively be amortized into Interest expense over the five year term of the Credit Facility.
−Removed: As of December 31, 2023, the Company had $1.5 million of debt issuance costs recorded as a reduction of Long-term debt on the Consolidated Balance Sheet and $3.3 million of debt issuance costs recorded within Other assets on the Consolidated Balance Sheet.
−Removed: Comparatively, as of December 31, 2022, the Company had $2.0 million of debt issuance costs recorded as an offset of Long-term debt on the Consolidated Balance Sheet and $4.3 million of debt issuance costs recorded within Other assets on the Consolidated Balance Sheet.
+Added: See Note 24, Hedging Activities , to the Consolidated Financial Statements for more information.
+Added: In connection with executing the Credit Facility, the Company recorded a loss on extinguishment of debt of approximately $6.8 million in Other income (expense), net on the Consolidated Statement of Operations during the year ended December 31, 2022.
+Added: The loss on extinguishment of debt included the write-off of certain previously unamortized deferred financing costs as well as a portion of the third-party and creditor debt issuance costs incurred to execute the Credit Facility.
+Added: The Company capitalized third-party and credit debt issuance costs attributed to the Euro Term Loan, U.S.
+Added: Term Loan and Revolver in connection to the amended Credit Facility during the second quarter of 2022.
+Added: Capitalized costs attributed to the Euro Term Loan and U.S.
+Added: Term Loan are recorded as a direct offset to Long-term debt on the Consolidated Balance Sheets.
+Added: Capitalized costs attributed to the Revolver are recorded within Other assets on the Consolidated Balance Sheets.
+Added: These capitalized costs will collectively be amortized into Interest expense over the five year term of the Credit Facility.
+Added: As of December 31, 2024 and 2023, the Company had $1.1 million and $1.5 million, respectively, of debt issuance costs recorded as a reduction of Long-term debt and $2.4 million and $3.3 million, respectively, of debt issuance costs recorded within Other assets.
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.
−Removed: During the year ended December 31, 2023, the Company entered into and settled forward contracts resulting in cash proceeds of $2.1 million.
−Removed: See Note 24 of Notes to Consolidated Financial Statements in Item 8 of this Report.
−Removed: The Company had no Combination, integration and other acquisition-related expenses during 2023, except for $0.5 million in other income related to changes for an indemnification asset related to the Combination.
−Removed: Comparatively, in 2022, the Company incurred $11.0 million of total Combination, integration and other acquisition-related expenses, which includes $2.4 million of other expense related to an indemnification asset partially offset by a $0.2 million gain on the sale of certain held-for-sale real property assets.
−Removed: The Company incurred $4.7 million of strategic planning expenses for the year ended December 31, 2023 as compared to $14.4 million for the year ended December 31, 2022.
−Removed: The Company expects to incur minimal additional operating costs and associated cash flows related to strategic planning expenses through the beginning of 2024.
−Removed: Quaker Houghton’s management approved, and the Company initiated, a global restructuring plan (the “QH Program”) in 2019 as part of its planned cost synergies associated with the Combination.
−Removed: The QH Program included restructuring and associated severance costs to reduce total headcount by approximately 400 people globally and plans for the closure of certain manufacturing and non-manufacturing facilities.
−Removed: The Company had substantially completed all of the initiatives under the QH Program in 2022 with an immaterial amount of remaining severance paid in 2023.
−Removed: In the fourth quarter of 2022, the Company’s management initiated a global cost and optimization program to improve its cost structure and drive a more profitable and productive organization.
−Removed: The exact timing to complete all actions and final costs associated will depend on a number of factors and are subject to change.
−Removed: The Company expects additional headcount reductions and restructuring costs may be incurred in the future.
−Removed: The Company expects to generate full annualized run-rate cost savings from the global cost and optimization program of approximately $20 million by the end of 2024.
−Removed: The Company expects total cash costs of this program to be approximately 1 to 1.5 times annualized savings.
−Removed: The Company recognized $7.6 million, $3.2 million and $1.4 million of restructuring and related charges for the years ended December 31, 2023, 2022 and 2021, respectively, as a result of these programs.
−Removed: The Company made cash payments related to the settlement of restructuring liabilities for these programs of $9.8 million and $1.5 million during the years ended December 31, 2023 and 2022, respectively.
−Removed: The Company has remaining restructuring accruals, as of December 31, 2023, for this program of $3.4 million, which the Company expects to settle over the next twelve months.
−Removed: See Note 7 of Notes to Consolidated Financial Statements in Item 8 of this Report.
+Added: During the year ended December 31, 2024, the Company entered into and settled forward contracts resulting in other expense of $2.0 million compared to other income of $2.1 million in the prior year.
+Added: See Note 24, Hedging Activities , to the Consolidated Financial Statements for more information.
+Added: During 2022, the Company’s management initiated a global cost and optimization program to improve its cost structure and drive a more profitable and productive organization.
+Added: The Company has achieved its initial full run-rate cost savings goal from the global cost and optimization program of approximately $20 million.
+Added: In the first quarter of 2025, the Company approved additional actions under the program, which are expected to generate additional run-rate cost savings of at least $20 million.
+Added: The program is expected to be substantially complete in the first half of 2025.
+Added: The Company recognized $6.5 million, $7.6 million and $3.2 million of restructuring and related charges for the years ended December 31, 2024, 2023 and 2022, respectively, as a result of these programs and other facility closure actions.
+Added: The Company made cash payments related to the settlement of restructuring liabilities under the program of $7.6 million and $9.8 million during the years ended December 31, 2024 and 2023, respectively.
+Added: The Company expects total one-time cash costs of this program to be approximately 1 to 1.5 times annualized savings.
+Added: See Note 7, Restructuring and Related Activities , to the Consolidated Financial Statements for more information.
As of December 31, 2024, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $17.3 million.
1 unchanged sentence
However, should the entire liability be paid, the amount of the payment may be reduced by up to $5.6 million as a result of offsetting benefits in other tax jurisdictions.
−Removed: During 2021, the Company recorded $13.1 million of non-income tax credits for certain of its Brazilian subsidiaries.
−Removed: The Company utilized these credits to offset certain Brazilian federal tax payments during 2022.
−Removed: See Note 25 of Notes to Consolidated Financial Statements in Item 8 of this Report.
−Removed: During 2021, two of the Company’s locations suffered property damage as a result of flooding and electrical fire, respectively.
−Removed: The Company maintains property insurance for all of its locations globally.
−Removed: The Company, its insurance adjuster, and insurance carrier actively managed the remediation and restoration activities associated with each of these events and have settled on both claims.
−Removed: In total, the Company received payments from its insurers of $7.2 million, after an aggregate deductible of $2.0 million.
−Removed: The Company and its insurance carrier continue to review the impact of the electrical fire on the production facility’s operations as it relates to a potential business interruption insurance claim;
−Removed: however, as of the date of this Report, the Company cannot reasonably estimate any probable amount of business interruption insurance claim recoverable.
−Removed: Therefore, the Company has not recorded a gain contingency for a possible business interruption insurance claim as of December 31, 2023.
−Removed: See Note 25 of Notes to Consolidated Financial Statements in Item 8 of this Report.
−Removed: The Company believes that its existing cash, anticipated cash flows from operations and available additional liquidity will be sufficient to support its operating requirements and fund its business objectives for at least the next twelve months and beyond, including but not limited to, payments of dividends to shareholders, payments for restructuring activities including further strategic and optimization initiatives, pension plan contributions, capital expenditures, other business opportunities (including potential acquisitions), implementing actions to achieve the Company’s sustainability goals and other potential contingencies.
+Added: See Note 10, Income Taxes , to the Consolidated Financial Statements for more information.
+Added: 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 and replacing the prior share repurchase program, under which no repurchases were made in 2024.
+Added: The 2024 Share Repurchase Program was effective immediately upon approval and has no expiration date.
+Added: The Company made certain repurchases under the 2024 Repurchase Program during the year ended December 31, 2024, as mentioned above.
+Added: As of December 31, 2024, there was approximately $100.8 million of capacity remaining under the 2024 Share Repurchase Program.
+Added: See Note 8, Equity , to the Consolidated Financial Statements for more information.
+Added: The Company previously disclosed in its 2023 Form 10-K that one of its North American production facilities experienced an electrical fire in 2021 that resulted in property damage and the temporary shutdown of production.
+Added: 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.
+Added: In July 2024, the Company and its insurance carrier settled this claim for $1.0 million.
+Added: See Note 25, Commitments and Contingencies , to the Consolidated Financial Statements for more information.
+Added: The Company believes that its existing cash, anticipated cash flows from operations and available liquidity will be sufficient to support its operating requirements and fund its business objectives for at least the next twelve months, including but not limited to, payments of dividends to shareholders, share repurchases, capital expenditures, other growth opportunities (including potential acquisitions), pension plan contributions, implementing actions to achieve the Company’s sustainability goals and other potential known or anticipated contingencies.
The Company also believes it has sufficient additional liquidity to support its operating requirements and to fund its business obligations for the period beyond the next twelve months, including the aforementioned items which are expected to recur annually, as well as future principal and interest payments on the Company’s Credit Facility, tax obligations and other long-term liabilities.
−Removed: The Company’s liquidity is affected by many factors, some based on normal operations of our business and others related to the impact of the pandemic and other events on our business and on global economic conditions as well as industry uncertainties, which we cannot predict.
+Added: The Company’s liquidity is affected by many factors, some based on normal operations of our business and others related to the impact of global events on our business and on global economic conditions as well as industry uncertainties, which we cannot predict.
We also cannot predict economic conditions and industry downturns or the timing, strength or duration of recoveries.
−Removed: We may seek, as we believe appropriate, additional debt or equity financing which would provide capital for corporate purposes, working capital funding, additional liquidity needs or to fund future growth opportunities, including possible acquisitions and investments.
+Added: We may seek, as we believe appropriate, additional debt or equity financing that would provide capital for corporate purposes, working capital funding, additional liquidity needs or to fund future growth opportunities, including possible acquisitions and organic investments.
The timing and amount of potential capital requirements cannot be determined at this time and will depend on a number of factors, including the actual and projected demand for our products, specialty chemical industry conditions, competitive factors, and the condition of financial markets, among others.
−Removed: 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.
−Removed: The 2024 Share Repurchase Program is effective immediately and has no expiration date.
−Removed: In connection with the 2024 Share Repurchase Program, the Company’s previous share repurchase program (“2015 Share Repurchase Program”), which was approved by the Board in 2015 and had no expiration date, was terminated.
−Removed: See further information in Note 22 of Notes to Consolidated Financial Statements in Item 8 of this Report.
The following table summarizes the Company’s contractual obligations as of December 31, 2024, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.
15 unchanged sentences
Non-GAAP Measures
−Removed: The information in this Form 10-K filing includes non-GAAP (unaudited) financial information that includes EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per diluted share.
−Removed: The Company believes these non-GAAP financial measures provide meaningful supplemental information as they enhance a reader’s understanding of the financial performance of the Company, are indicative of future operating performance of the Company, and facilitate a comparison among fiscal periods, as the non-GAAP financial measures exclude items that are not indicative of future operating performance or not considered core to the Company’s operations.
+Added: The information in this Report includes non-GAAP (unaudited) financial information that includes EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per diluted share.
+Added: The Company believes these non-GAAP financial measures provide meaningful supplemental information as they enhance a reader’s understanding of the financial performance of the Company, facilitate a comparison among fiscal periods, and exclude items that management believes are not indicative of future operating performance or core to the Company’s operations.
Non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the financial information presented in accordance with GAAP.
−Removed: In addition, our definitions of EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per share as discussed and reconciled below to the more comparable GAAP measures, may not be comparable to similarly named measures reported by other companies.
+Added: In addition, our definitions of EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP earnings per share, as discussed and reconciled below to the most comparable GAAP measures, may not be comparable to similarly named measures reported by other companies.
The Company presents EBITDA which is calculated as net income attributable to the Company before depreciation and amortization, interest expense, net, and taxes on income before equity in net income of associated companies.
−Removed: The Company also presents adjusted EBITDA which is calculated as EBITDA plus or minus certain items that are not indicative of future operating performance or not considered core to the Company’s operations.
−Removed: In addition, the Company presents non-GAAP operating income which is calculated as operating income plus or minus certain items that are not indicative of future operating performance or not considered core to the Company’s operations.
+Added: The Company also presents adjusted EBITDA which is calculated as EBITDA plus or minus certain items that management believes are not indicative of future operating performance or not considered core to the Company’s operations.
+Added: In addition, the Company presents non-GAAP operating income which is calculated as operating income plus or minus certain items that management believes are not indicative of future operating performance or considers core to the Company’s operations.
Adjusted EBITDA margin and non-GAAP operating margin are calculated as the percentage of adjusted EBITDA and non-GAAP operating income to consolidated net sales, respectively.
2 unchanged sentences
Non-GAAP net income is calculated as adjusted EBITDA, defined above, less depreciation and amortization, interest expense, net, and taxes on income before equity in net income of associated companies, in each case adjusted, as applicable, for any depreciation, amortization, interest or tax impacts resulting from the non-core items identified in the reconciliation of net income attributable to the Company to adjusted EBITDA.
−Removed: Non-GAAP earnings per diluted share is calculated as non-GAAP net income per diluted share as accounted for under the “two-class share method.” The Company believes that non-GAAP net income and non-GAAP earnings per diluted share provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the operating performance of the Company on a consistent basis.
+Added: Non-GAAP earnings per diluted share is calculated as non-GAAP net income per diluted share as accounted for under the “two-class share method.” The Company believes that non-GAAP net income and non-GAAP earnings per diluted share provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the performance of the Company on a consistent basis.
Certain of the prior period non-GAAP financial measures presented in the following tables have been adjusted to conform with current period presentation.
3 unchanged sentences
Operating income $ 194,706 $ 214,495 $ 52,304
−Removed: Combination, integration and other acquisition-related (credits) expenses (a) — 8,812 25,412
+Added: Acquisition-related expenses (a) 1,854 — 8,812
Restructuring and related charges, net (b) 6,530 7,588 3,163
−Removed: Strategic planning expenses (c) 4,704 14,446 —
−Removed: Russia-Ukraine conflict related expenses (j) — 2,487 —
−Removed: Facility remediation (recovery) costs, net (d) — — 1,509
−Removed: Impairment charges (e) — 93,000 —
−Removed: Other charges (i) 987 3,679 3,805
+Added: Strategic planning (credits) expenses (c) (290) 4,704 14,446
+Added: Executive transition costs (d) 7,288 688 2,813
+Added: Customer insolvency costs (e) 3,213 — —
+Added: Impairment charges (k) — — 93,000
+Added: Russia-Ukraine conflict related expenses (l) — — 2,487
+Added: Other charges (n) 399 299 866
Non-GAAP operating income $ 213,700 $ 227,774 $ 177,891
−Removed: Non-GAAP operating margin (%) (o) 11.7 % 9.2 % 10.4 %
+Added: Non-GAAP operating margin (%) (r) 11.6 % 11.7 % 9.2 %
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Non-GAAP Net Income Reconciliations For the years ended December 31,
1 unchanged sentence
Net income (loss) attributable to Quaker Chemical Corporation $ 116,644 $ 112,748 $ (15,931)
−Removed: Depreciation and amortization (a)(m) 83,020 81,514 87,728
+Added: Depreciation and amortization (p) 85,108 83,020 81,514
Interest expense, net 41,002 50,699 32,579
−Removed: Taxes on income (loss) before equity in net income of associated companies 55,585 24,925 34,939
+Added: Taxes on income (loss) before equity in net income of associated companies (q) 49,300 55,585 24,925
EBITDA 292,054 302,052 123,087
−Removed: Equity (income) loss in a captive insurance company (f) (2,090) 1,427 (4,993)
−Removed: Combination, integration and other acquisition-related (credits) expenses (a) (475) 10,990 18,718
+Added: Equity (income) loss in a captive insurance company (h) (2,930) (2,090) 1,427
+Added: Acquisition-related expenses (credits) (a) 1,454 (475) 10,990
Restructuring and related charges, net (b) 6,530 7,588 3,163
−Removed: Strategic planning expenses (c) 4,704 14,446 —
−Removed: Facility remediation (recovery) costs, net (d) (2,141) (1,804) 2,066
−Removed: Impairment charges (e) — 93,000 —
−Removed: Currency conversion impacts of hyper-inflationary economies (g) 7,849 1,617 564
−Removed: Brazilian non-income tax credits (h) — — (13,087)
−Removed: Russia-Ukraine conflict related expenses (j) — 2,487 —
−Removed: Loss on extinguishment of debt (k) — 6,763 —
−Removed: Other charges (i) 2,892 1,974 3,046
+Added: Strategic planning (credits) expenses (c) (290) 4,704 14,446
+Added: Executive transition costs (d) 7,288 688 2,813
+Added: Customer insolvency costs (e) 3,213 — —
+Added: Facility remediation recoveries, net (f) — (2,141) (1,804)
+Added: Product liability claim costs, net (g) 2,040 — —
+Added: Business interruption insurance proceeds (i) (1,000) — —
+Added: Currency conversion impacts of hyper-inflationary economies (j) 811 7,849 1,617
+Added: Impairment charges (k) — — 93,000
+Added: Russia-Ukraine conflict related expenses (l) — — 2,487
+Added: Loss on extinguishment of debt (m) — — 6,763
+Added: Other charges (credits) (n) 1,748 2,204 (839)
Adjusted EBITDA $ 310,918 $ 320,379 $ 257,150
−Removed: Adjusted EBITDA margin (%) (o) 16.4 % 13.2 % 15.6 %
+Added: Adjusted EBITDA margin (%) (r) 16.9 % 16.4 % 13.2 %
Adjusted EBITDA $ 310,918 $ 320,379 $ 257,150
−Removed: Depreciation and amortization - adjusted (a) 83,020 81,514 87,002
+Added: Depreciation and amortization - adjusted (p) 85,108 83,020 81,514
Interest expense, net 41,002 50,699 32,579
−Removed: Taxes on income (loss) before equity in net income of associated companies - adjusted (l)(n) 49,017 37,737 41,976
+Added: Taxes on income (loss) before equity in net income of associated companies - adjusted (o)(q) 51,352 49,017 37,737
Non-GAAP net income $ 133,456 $ 137,643 $ 105,320
2 unchanged sentences
GAAP earnings (loss) per diluted share attributable to Quaker Chemical Corporation common shareholders $ 6.51 $ 6.26 $ (0.89)
−Removed: Equity (income) loss in a captive insurance company per diluted share (f) (0.12) 0.08 (0.28)
−Removed: Combination, integration and other acquisition-related (credits) expenses per diluted share (a) (0.03) 0.49 0.82
+Added: Equity (income) loss in a captive insurance company per diluted share (h) (0.16) (0.12) 0.08
+Added: Acquisition-related expenses (credits) per diluted share (a) 0.06 (0.03) 0.49
Restructuring and related charges, net per diluted share (b) 0.28 0.32 0.13
−Removed: Strategic planning expenses per diluted share (c) 0.21 0.63 —
−Removed: Facility remediation (recovery) costs, net per diluted share (d) (0.09) (0.08) 0.09
−Removed: Impairment charges per diluted share (e) — 5.19 —
−Removed: Currency conversion impacts of hyper-inflationary economies per diluted share (g) 0.44 0.09 0.03
−Removed: Brazilian non-income tax credits per diluted share (h) — — (0.46)
−Removed: Russia-Ukraine conflict related expenses per diluted share (j) — 0.12 —
−Removed: Loss on extinguishment of debt per diluted share (k) — 0.29 —
−Removed: Other charges per diluted share (i) 0.12 0.08 0.13
−Removed: Impact of certain discrete tax items per diluted share (l) 0.54 (0.26) (0.32)
−Removed: Non-GAAP earnings per diluted share (p) $ 7.65 $ 5.87 $ 6.85
−Removed: (a) Combination, integration and other acquisition-related (credits) expenses include certain legal, financial, and other advisory and consultant costs incurred in connection with the Combination integration activities including internal control readiness and remediation.
−Removed: These amounts also include expense associated with the Company's other recent acquisitions, including certain legal, financial, and other advisory and consultant costs incurred in connection with due diligence as well as costs associated with selling inventory from acquired businesses which was adjusted to fair value as part of purchase accounting.
−Removed: These costs are not indicative of the future operating performance of the Company.
−Removed: Approximately $0.2 million and $0.6 million for the years ended December 31, 2022 and 2021, respectively, of these pre-tax costs were considered non-deductible for the purpose of determining the Company’s effective tax rate, and, therefore, taxes on income before equity in net income of associated companies - adjusted reflects the impact of these items.
−Removed: During 2021, the Company recorded $0.7 million of accelerated depreciation related to certain of the Company’s facilities, which is included in the caption “Combination, integration and other acquisition-related (credits) expenses” in the reconciliation of operating income to non-GAAP operating income and included in the caption “Depreciation and amortization” in the reconciliation of net income attributable to the Company to EBITDA, but excluded from the caption “Depreciation and amortization – adjusted” in the reconciliation of adjusted EBITDA to non-GAAP net income attributable to the Company.
−Removed: During 2023, 2022 and 2021, the Company recorded $0.5 million of other income, $2.4 million of other expense and $0.6 million of other income, respectively, related to an indemnification asset.
−Removed: During 2021, the Company recorded $0.8 million related to the sale of inventory from acquired businesses which was adjusted to fair value.
−Removed: During 2022 and 2021, the Company recorded a gain of $0.2 million and $5.4 million, respectively, on the sale of certain held-for-sale real property assets related to the Combination.
−Removed: Each of these items are included in the caption “Combination, integration and other acquisition-related (credits) expenses” in the reconciliation of GAAP earnings per diluted share attributable to Quaker Chemical Corporation common shareholders to Non-GAAP earnings per diluted share as well as the reconciliation of Net Income attributable to Quaker Chemical Corporation to Adjusted EBITDA and Non-GAAP net income.
−Removed: See Notes 2, 9 and 10 of Notes to Consolidated Financial Statements, which appear in Item 8 of this Report.
−Removed: (b) Restructuring and related charges, net represent the costs incurred by the Company associated with the Company’s restructuring programs.
−Removed: These costs are not indicative of the future operating performance of the Company.
+Added: Strategic planning (credits) expenses per diluted share (c) (0.01) 0.21 0.63
+Added: Executive transition costs per diluted share (d) 0.31 0.03 0.12
+Added: Customer insolvency costs per diluted share (e) 0.13 — —
+Added: Facility remediation recoveries, net per diluted share (f) — (0.09) (0.08)
+Added: Product liability claim costs, net per diluted share (g) 0.09 — —
+Added: Business interruption insurance proceeds per diluted share (i) (0.04) — —
+Added: Currency conversion impacts of hyper-inflationary economies per diluted share (j) 0.05 0.44 0.09
+Added: Impairment charges per diluted share (k) — — 5.19
+Added: Russia-Ukraine conflict related expenses per diluted share (l) — — 0.12
+Added: Loss on extinguishment of debt per diluted share (m) — — 0.29
+Added: Other charges (credits) per diluted share (n) 0.05 0.09 (0.04)
+Added: Impact of certain discrete tax items per diluted share (o) 0.17 0.54 (0.26)
+Added: Non-GAAP earnings per diluted share (s) $ 7.44 $ 7.65 $ 5.87
+Added: (a) Acquisition-related expenses (credits) include expense associated with the Company's recent and potential acquisitions, including legal, financial, consulting and other costs.
+Added: For the year ended December 31, 2022, these amounts also include costs incurred in connection with integration activities relating to the Houghton acquisition.
+Added: See Note 2, Business Combinations , to the Consolidated Financial Statements for additional information.
+Added: (b) Restructuring and related charges, net represent the costs incurred by the Company associated with the Company’s restructuring program and facility closures.
During 2024, 2023 and 2022, the Company recorded restructuring and related charges of $6.5 million, $7.6 million and $3.2 million, respectively.
−Removed: See Note 7 of Notes to Consolidated Financial Statements, which appear in Item 8 of this Report.
−Removed: (c) Strategic planning expenses include certain consultant and advisory expenses for the Company's long-term strategic planning, as well as process optimization and the next phase of the Company's long-term integration to further optimize its footprint, processes and other functions.
−Removed: These costs are not indicative of the future operating performance of the Company.
−Removed: (d) Facility remediation (recovery) costs, net, presents the gross costs associated with remediation, cleaning and subsequent restoration costs associated with the property damage to certain of the Company’s facilities, net of insurance recoveries received.
−Removed: These charges are non-recurring and are not indicative of the future operating performance of the Company.
−Removed: See Note 25 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
−Removed: (e) Impairment charges represents the non-cash charges taken to write down the value of goodwill and indefinite-lived intangible assets.
−Removed: These charges are not indicative of the future operating performance of the Company.
−Removed: See Note 15 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
−Removed: (f) Equity income (loss) in a captive insurance company represents the after-tax income attributable to the Company’s interest in Primex, Ltd.
+Added: See Note 7, Restructuring and Related Activities , to the Consolidated Financial Statements for additional information.
+Added: (c) Strategic planning (credits) expenses include certain consultant and advisory expenses for the Company's long-term strategic planning, as well as process optimization and the next phase of the Company's long-term integration to further optimize its footprint, processes and other functions.
+Added: (d) Executive transition costs represent the costs related to the Company’s transition of executive officers.
+Added: (e) Customer insolvency costs represent charges associated with specific reserves for trade accounts receivable within the Company’s EMEA and America’s reportable segments related to two specific customers that filed for bankruptcy protection.
+Added: (f) Facility remediation recoveries, net represent insurance recoveries received for remediation and restoration of property damage to certain of the Company’s facilities and are recorded in Other income (expense).
+Added: There were no gains recognized during the year ended December 31, 2024.
+Added: See Note 25, Commitments and Contingencies , to the Consolidated Financial Statements for additional information.
+Added: (g) Product liability claim costs, net represents expenses related to the payments by the Company in connection with product liability disputes with customers, net of insurance recoveries during 2024.
+Added: See Note 9, Other Income (Expense), net to the Consolidated Financial Statements for additional information.
+Added: (h) Equity income (loss) in a captive insurance company represents the after-tax income attributable to the Company’s equity interest in Primex, Ltd.
(“Primex”), a captive insurance company.
The Company holds a 32% investment in and has significant influence over Primex, and therefore accounts for this investment under the equity method of accounting.
−Removed: The income attributable to Primex is not indicative of the future operating performance of the Company and is not considered core to the Company’s operations.
−Removed: See Note 16 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
−Removed: (g) Currency conversion impacts of hyper-inflationary economies represents the foreign currency remeasurement impacts associated with the Company’s affiliates whose local economies are designated as hyper-inflationary under U.S.
−Removed: During the years ended December 31, 2023, 2022 and 2021, the Company incurred non-deductible, pre-tax charges related to the Company’s Argentina and Türkiye affiliates.
−Removed: The charges incurred related to the immediate recognition of foreign currency remeasurement in the Consolidated Statements of Income associated with these entities are not indicative of the future operating performance of the Company See Note 1 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
−Removed: (h) Brazilian non-income tax credits represent indirect tax credits related to certain of the Company’s Brazilian subsidiaries prevailing in a legal claim as well as the Brazil Supreme Court ruling on these non -income tax matters.
−Removed: The non-income tax credit is non-recurring and not indicative of the future operating performance of the Company.
−Removed: See Note 25 of Note to Consolidated Financial Statements, which appears in Item 8 of this Report.
−Removed: (i) Other charges include executive transition costs, pension and postretirement benefit costs (income), non-service components and charges incurred by an inactive subsidiary of the Company as a result of the termination of restrictions on insurance settlement reserves.
−Removed: These expenses are not indicative of the future operating performance of the Company.
−Removed: See Notes 1, 12 and 20 of Notes to Consolidated Financial Statements, which appear in Item 8 of this Report.
−Removed: (j) Russia-Ukraine conflict related expenses represent the direct costs associated with the Company's exit of operations in Russia during 2022, primarily employee separation benefits, as well as costs associated with establishing specific reserves or changes to existing reserves for trade accounts receivable within the Company's EMEA reportable segment due to the economic instability associated with certain customer accounts receivables which have been directly impacted by the current economic conflict between Russia and Ukraine or the Company's decision to end operations in Russia.
−Removed: These expenses are not indicative of the future operating performance of the Company.
−Removed: See Note 12 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
−Removed: (k) In connection with executing the Credit Facility, the Company recorded a loss on extinguishment of debt of approximately $6.8 million which includes the write-off of certain previously unamortized deferred financing costs as well as a portion of the third-party and creditor debt issuance costs incurred to execute the Credit Facility.
−Removed: These expenses are not indicative of the future operating performance of the Company.
−Removed: See Note 19 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
−Removed: (l) The impacts of certain discrete tax items include certain impacts of tax law changes, valuation allowance adjustments, uncertain tax positions and prior year true-ups, and the impact on certain intercompany asset transfers.
−Removed: For 2023 the impacts also include $6.7 million of withholding taxes for the repatriation of non-U.S.
−Removed: The Company does not believe these items are core or indicative of future performance and has adjusted them as a Non-GAAP measure.
−Removed: See Note 10 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
−Removed: (m) Depreciation and amortization includes $1.0 million for both of the years ended December 31, 2023 and 2022, respectively, and $1.2 million for the year ended December 31, 2021, of amortization expense recorded within equity in net income of associated companies in the Company’s Consolidated Statements of Operations, which is attributable to the amortization of the fair value step up for the Company’s 50% interest Korea Houghton Corporation as a result of required purchase accounting.
−Removed: (n) Taxes on income before equity in net income of associated companies – adjusted presents the impact of any current and deferred income tax expense (benefit), as applicable, of the reconciling items presented in the reconciliation of net income attributable to Quaker Chemical Corporation to adjusted EBITDA and was determined utilizing the applicable rates in the taxing jurisdictions in which these adjustments occurred, subject to deductibility.
−Removed: (o) The Company calculates adjusted EBITDA margin and non-GAAP operating margin as the percentage of adjusted EBITDA and non-GAAP operating income to consolidated net sales.
−Removed: (p) The Company calculates non-GAAP earnings per diluted share as non-GAAP net income attributable to the Company per weighted average diluted shares outstanding using the “two-class share method” to calculate such in each given period.
+Added: See Note 16, Investments in Associated Companies , to the Consolidated Financial Statements for additional information.
+Added: (i) Business interruption insurance proceeds reflects an insurance claim settlement receipt for the for the year ended December 31, 2024 related to production losses due to an electrical fire in 2021 that resulted in the temporary shutdown of production at one of the Company’s production facilities.
+Added: See Note 25, Commitments and Contingencies , to the Consolidated Financial Statements for additional information.
+Added: (j) Currency conversion impacts of hyper-inflationary economies represent the foreign currency remeasurement impacts associated with the Company’s affiliates in Argentina and Türkiye whose local economies are designated as hyper-inflationary under U.S.
+Added: These pre-tax foreign currency remeasurement impacts are not deductible for tax purposes for each of the years ended December 31, 2024 and 2023 and 2022.
+Added: The charges incurred related to the immediate recognition of foreign currency remeasurement in the Consolidated Statements of Operations.
+Added: See Note 1, Basis of Presentation and Significant Accounting Policies , to the Consolidated Financial Statements for additional information.
+Added: (k) Impairment charges represent the non-cash charges taken to write down the value of goodwill for the year ended December 31, 2022.
+Added: See Note 15, Goodwill and Other Intangible Assets , to the Consolidated Financial Statements for additional information.
+Added: (l) Expenses related to the Russia-Ukraine conflict represent the direct costs associated with the Company's exit of operations in Russia during 2022.
+Added: These costs included employee separation benefits, as well as costs associated with reserves for trade accounts receivable within the Company's EMEA reportable segment, where certain customers were impacted by the conflict between Russia and Ukraine or the Company's decision to end operations in Russia.
+Added: (m) In connection with executing the Credit Facility, the Company recorded a loss on extinguishment of debt of approximately $6.8 million which includes the write-off of certain previously unamortized deferred financing costs as well as a portion of the third-party and creditor debt issuance costs incurred to execute the Credit Facility.
+Added: See Note 19, Debt , to the Consolidated Financial Statements for additional information.
+Added: (n) Other charges (credits) include charges incurred by an inactive subsidiary of the Company as a result of the termination of restrictions on insurance settlement reserves, non-service components of the Company’s pension and postretirement net periodic benefit income and expense and net gains recognized for the sale of certain facilities previously classified as held-for-sale.
+Added: See Note 1, Basis of Presentation and Significant Accounting Policies , Note 7, Restructuring and Related Activities , and Note 20, Pension and Other Postretirement Benefits , to the Consolidated Financial Statements for additional information.
+Added: (o) The impacts of certain discrete tax items include certain impacts of tax law changes, valuation allowance adjustments, uncertain tax positions, provision to return and other adjustments, and the impact of certain intercompany asset transfers.
+Added: For the year ended December 31, 2023, the impacts also included $6.7 million of withholding taxes for the repatriation of non-U.S.
+Added: See Note 10, Income Taxes , to the Consolidated Financial Statements for additional information.
+Added: (p) Depreciation and amortization includes $1.0 million for each of the years ended December 31, 2024, 2023 and 2022, respectively, of amortization expense recorded within equity in net income of associated companies in the Company’s Consolidated Statements of Operations, which is attributable to amortization of the fair value purchase accounting step-up in connection with acquisition of the Company’s 50% equity interest in Korea Houghton Corporation.
+Added: (q) Taxes on income before equity in net income of associated companies – adjusted presents the impact of any current and deferred income tax expense (benefit), as applicable, of the reconciling items presented in the reconciliation of net income attributable to Quaker Chemical Corporation to adjusted EBITDA and was determined utilizing the applicable rates in the taxing jurisdictions in which these adjustments occurred, subject to deductibility.
+Added: (r) The Company calculates adjusted EBITDA margin and non-GAAP operating margin as the percentage of adjusted EBITDA and non-GAAP operating income, respectively, to consolidated net sales.
+Added: (s) The Company calculates non-GAAP earnings per diluted share as non-GAAP net income attributable to the Company per weighted average diluted shares outstanding using the “two-class share method” to calculate such in each given period.
Off-Balance Sheet Arrangements
1 unchanged sentence
The bank letters of credit and guarantees are not significant to the Company’s liquidity or capital resources.
−Removed: See Note 19 of Notes to Consolidated Financial Statements in Item 8 of this Report.
Consolidated Operations Review – Comparison of 2024 with 2023
+Added: The following table summarizes the sales variances by reportable segment and consolidated operations from the prior year:
+Added: Sales volumes Selling price & product mix Foreign currency Acquisition & other Total
+Added: Americas (5) % (4) % (1) % — % (10) %
+Added: EMEA (5) % (4) % — % 3 % (6) %
+Added: Asia/Pacific 7 % (3) % (2) % 2 % 4 %
+Added: Consolidated (2) % (4) % (1) % 1 % (6) %
+Added: Net sales of $1,839.7 million in 2024 decreased 6% compared to $1,953.3 million in 2023, primarily due to a decrease in selling price and product mix of approximately 4%, a decrease in sales volumes of approximately 2%, and unfavorable impacts from foreign currency translation of approximately 1%, partially offset by an increase in sales from acquisitions of approximately 1%.
+Added: The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts and the mix of products and services.
+Added: The decline in sales volumes was primarily a result of continuation of soft end market conditions compared to the prior year, primarily in the Americas and EMEA segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, continued business wins across all segments and a contribution from acquisitions in the EMEA and Asia/Pacific segments.
+Added: Cost of goods sold (“COGS”) were $1,153.7 million in 2024 compared to $1,247.7 million in 2023.
+Added: The decrease of COGS of $94.0 million, or 8%, reflects lower spend on the decline in current year sales volumes and a modest decline in the Company’s global raw material costs.
+Added: Gross profit was $686.0 million in 2024 compared to $705.6 million in 2023, a decrease of approximately $19.6 million, or 3%, primarily as a result of the decline in sales mentioned above, partially offset by a modest reduction in the Company’s global raw material costs.
+Added: The Company’s reported gross margin in 2024 was 37.3% compared to 36.1% in 2023.
+Added: The Company’s current year improvement in gross margin was primarily driven by our value-based pricing model and modest improvements in raw material costs.
+Added: SG&A was $484.8 million in 2024 compared to $483.6 million in 2023, an increase of $1.2 million, or 0.3%, primarily as a result of higher executive transition costs, higher customer insolvency costs, and SG&A relating to the IKV and Sutai acquisitions, partially offset by lower strategic planning expenses and favorable foreign currency translation compared to the prior year.
+Added: The Company incurred Restructuring and related charges of $6.5 million and $7.6 million during 2024 and 2023, respectively, related to reductions in headcount and facility closure costs under the Company’s restructuring program.
+Added: See the Non-GAAP Measures section of this Item above and Note 7, Restructuring and Related Activities , to the Consolidated Financial Statements for additional information.
+Added: Operating income in 2024 was $194.7 million compared to $214.5 million in 2023.
+Added: Excluding non-core items that are not indicative of future operating performance, as detailed above, the Company’s current year non-GAAP operating income was $213.7 million compared to $227.8 million in the prior year.
+Added: The decrease in non-GAAP operating income was primarily due to lower gross profit, as described above.
+Added: The Company had Other income, net of $1.4 million in 2024 compared to Other expense, net of $10.7 million in 2023 due to lower foreign exchange losses of $1.8 million in the current year compared to losses of $14.8 million in the prior year.
+Added: Additionally, the Company had higher non-income tax refunds of $3.7 million in the current year compared to non-income tax refunds of $1.3 million in the prior year.
+Added: Other income, net in 2024 also included a business interruption insurance recovery of $1.0 million, other income of $0.4 million relating to adjustments to the earnout provisions for the Sutai acquisition, and $2.0 million of product liability claim costs.
+Added: Prior year’s Other expense, net included $2.1 million of facility remediation recoveries, net.
+Added: Interest expense, net, of $41.0 million decreased $9.7 million in 2024 compared to $50.7 million in 2023, primarily as a result of lower outstanding borrowings and decreases in interest rates.
+Added: The Company’s effective tax rates for 2024 and 2023 were 31.8% and 36.3%, respectively.
+Added: The Company’s current year effective tax rate was primarily impacted by the mix of pre-tax earnings, certain one-time charges related to an intercompany intangible asset transfer, provision to return and other adjustments, and withholding taxes, offset by changes in uncertain tax positions.
+Added: The Company’s 2023 effective tax rate was primarily impacted by changes to the valuation allowance for and the usage of certain foreign tax credits, withholding taxes and deferred taxes on unremitted earnings, and the mix of pre-tax earnings.
+Added: Excluding the impact of all non-core items in each year, described in the Non-GAAP Measures section of this Item, above, the Company estimates that the 2024 and 2023 effective tax rates would have been approximately 29% and 28%, respectively.
+Added: In 2023, the Company recognized $6.7 million of withholding taxes for the repatriation of non-U.S.
+Added: earnings that the Company does not believe is core or indicative of future performance and has adjusted these withholding taxes as a Non-GAAP measure.
+Added: The Company may experience continued volatility in its effective tax rates due to several factors, including the timing of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions, the unpredictability of the timing and amount of certain incentives in various tax jurisdictions, and the timing and amount of certain share-based compensation-related tax benefits, among other factors.
+Added: In addition, the foreign tax credit valuation allowance, or absence thereof, is based on a number of variables, including forecasted earnings, which may vary.
+Added: Equity in net income of associated companies was $11.0 million in 2024 compared to $15.3 million in 2023.
+Added: The decrease of $4.3 million was primarily due to lower current year income from the Company’s 50% equity interest in a joint venture in Korea offset by higher current year income from the Company’s equity interest in Primex.
+Added: Net income attributable to noncontrolling interest was approximately $0.1 million for both 2024 and 2023.
+Added: Consolidated Operations Review – Comparison of 2023 with 2022
+Added: The following table summarizes sales variances by segment and consolidated operations from the prior year:
+Added: Sales volumes Selling price & product mix Foreign currency Acquisition & other Total
+Added: Americas (6) % 8 % 1 % — % 3 %
+Added: EMEA (9) % 9 % 2 % — % 2 %
+Added: Asia/Pacific (7) % 4 % (4) % — % (7) %
+Added: Consolidated (7) % 7 % 1 % — % 1 %
Net sales were a record $1,953.3 million in 2023 compared to $1,943.6 million in 2022.
1 unchanged sentence
The increase in selling price and product mix was primarily driven by year-over-year impact of our value-based pricing initiatives.
−Removed: The decline in sales volumes was primarily attributable to softer end market conditions across all regions, including the direct and indirect impacts of the UAW strike, the Company’s value-based pricing initiatives and customer order patterns, as well as the impacts of the ongoing war in Ukraine in the EMEA segment, and the wind-down of the tolling agreement for products previously divested related to the Combination, partially offset by new business wins in all segments, as mentioned above.
+Added: The decline in sales volumes was primarily attributable to softer end market conditions across all regions, including the direct and indirect impacts of the UAW strike, the Company’s value-based pricing initiatives and customer order patterns, as well as the impacts of the ongoing war in Ukraine in the EMEA segment, and the wind-down of the tolling agreement for products previously divested related to the Quaker combination with Houghton International, Inc.
+Added: (“Houghton”), partially offset by new business wins in all segments, as mentioned above.
COGS were $1,247.7 million in 2023 compared to $1,330.9 million in 2022.
4 unchanged sentences
SG&A in 2023 increased $28.2 million compared to 2022 driven by higher labor-related costs including year-over-year inflationary increases and higher levels of incentive compensation on improved Company performance, partially offset by lower SG&A due to foreign currency translation compared to the prior year.
−Removed: During 2022, the Company incurred $8.8 million of Combination, integration and other acquisition-related expenses.
+Added: During 2022, the Company incurred $8.8 million of Acquisition-related expenses (credits).
See the Non-GAAP Measures section of this Item, above.
9 unchanged sentences
The increase in non-GAAP operating income was primarily due to higher gross profit partially offset by higher SG&A, as described above.
−Removed: The Company had Other expense of $10.7 million in 2023 compared to $12.6 million in 2022.
−Removed: The 2023 and 2022 results include $2.1 million and $1.8 million, respectively of facility remediation recoveries, while prior year’s Other expense also includes $6.8 million of loss on extinguishment of debt related to the Company’s refinancing the Original Credit Facility and $2.4 million of expense related to an indemnification asset.
+Added: The Company had Other expense, net of $10.7 million in 2023 compared to $12.6 million in 2022.
+Added: The 2023 and 2022 results include $2.1 million and $1.8 million, respectively of facility remediation recoveries, net, while prior year’s Other expense, net also includes $6.8 million of loss on extinguishment of debt related to the Company’s refinancing the Original Credit Facility and $2.4 million of expense related to an indemnification asset.
Also, there were higher foreign currency transaction losses in 2023 compared to 2022.
1 unchanged sentence
The Company’s effective tax rates for 2023 and 2022 were an expense of 36.3% and 350.2%, respectively.
−Removed: The Company’s current year effective tax rate was primarily impacted by changes to the valuation allowance for and the usage of certain foreign tax credits, withholding taxes and deferred taxes on unremitted earnings, and the impact of the mix of pre-tax earnings.
−Removed: The Company’s 2022 effective tax rate was driven by the non-cash impairment charge, the impact of pre-tax earnings and the mix of such earnings, foreign tax inclusions and withholding taxes, partially offset by a reduction in reserves for uncertain tax positions and changes in the valuation allowance for foreign tax credits.
+Added: The Company’s 2023 effective tax rate was primarily impacted by changes to the valuation allowance for and the usage of certain foreign tax credits, withholding taxes and deferred taxes on unremitted earnings, and the mix of pre-tax earnings.
+Added: The Company’s 2022 effective tax rate was driven by the non-cash impairment charge, the mix of pre-tax earnings, foreign tax inclusions and withholding taxes, partially offset by a reduction in reserves for uncertain tax positions and changes in the valuation allowance for foreign tax credits.
Excluding the impact of all non-core items in each year, described in the Non-GAAP Measures section of this Item, above, the Company estimates that the 2023 and 2022 effective tax rates would have been approximately 28% and 27%, respectively.
−Removed: The higher estimated current year effective tax rate was primarily driven by pre-tax earnings and the mix of such earnings.
In 2023, the Company recognized $6.7 million of withholding taxes for the repatriation of non-U.S.
4 unchanged sentences
Net income attributable to noncontrolling interest was approximately $0.1 million for both 2023 and 2022.
−Removed: Foreign exchange negatively impacted the Company’s yearly results by approximately 1% driven by the impact from foreign currency translation on earnings as well as higher foreign exchange transaction losses in the current year as compared to the prior year.
−Removed: Consolidated Operations Review – Comparison of 2022 with 2021
−Removed: Net sales were a record $1,943.6 million in 2022 compared to $1,761.2 million in 2021.
−Removed: The increase in net sales of approximately $182.4 million or 10% year-over-year was primarily due to an increase in selling price and product mix of approximately 22% and additional net sales from acquisitions of 1%, partially offset by a decline in sales volumes of approximately 7% and the unfavorable impact from foreign currency translation of approximately 6%.
−Removed: The increase in selling price and product mix was primarily driven by price increases implemented to offset the significant increases in raw material and other input costs that began during 2021 and continued throughout 2022.
−Removed: The decline in sales volumes was primarily attributable to softer end market demand, particularly in the EMEA and Asia/Pacific segments, the wind-down of the tolling agreement for products previously divested related to the Combination and the impact of the ongoing war in Ukraine, partially offset by net new business wins, including the impact of the Company’s ongoing value-based pricing initiatives.
−Removed: The impact from foreign currency translation is primarily the result of the year-over-year strengthening of the U.S.
−Removed: Dollar compared to major world currencies including the Euro and the Chinese renminbi.
−Removed: COGS were $1,330.9 million in 2022 compared to $1,166.5 million in 2021.
−Removed: The increase in COGS of 14% was driven by the continued increases in the Company’s global raw material, manufacturing and supply chain and logistics costs compared to the prior year.
−Removed: Gross profit in 2022 of $612.7 million increased $18.0 million or approximately 3% from 2021.
−Removed: The Company’s reported gross margin in 2022 was 31.5% compared to 33.8% in 2021.
−Removed: The Company’s current year gross margin reflects a significant increase in raw material and other input costs and the impacts of constraints on the global supply chain, partially offset by the Company’s ongoing value-based pricing initiatives.
−Removed: SG&A in 2022 increased $36.6 million compared to 2021 due primarily to the impact of sales increases on direct selling costs, higher operating costs due to inflationary pressures, costs associated with strategic planning initiatives (see the Non-GAAP Measures section of this Item, above), and additional SG&A from recent acquisitions, partially offset by lower SG&A due to foreign currency translation compared to the prior year.
−Removed: In addition, SG&A was lower in the prior year period as a result of continued temporary cost saving measures the Company implemented in response to the onset of COVID-19.
−Removed: During 2022 and 2021, the Company incurred $8.8 million and $23.9 million, respectively, of Combination, integration and other acquisition-related expenses.
−Removed: See the Non-GAAP Measures section of this Item, above.
−Removed: The Company incurred restructuring expenses of $3.2 million and $1.4 million during 2022 and 2021, respectively, related to the Company’s restructuring programs.
−Removed: See the Non-GAAP Measures section of this Item, above.
−Removed: In 2022, the Company recorded a $93.0 million non-cash impairment charge to write down the value of goodwill associated with the Company’s EMEA reportable segment.
−Removed: This non-cash impairment charge is the result of the Company’s trigger based fourth quarter of 2022 impairment assessment.
−Removed: There were no similar impairment charges in 2021.
−Removed: See the Critical Accounting Policies and Estimates section as well as the Non-GAAP Measures section, of this Item, above.
−Removed: Operating income in 2022 was $52.3 million compared to $150.5 million in 2021.
−Removed: Excluding the non-cash impairment charge, as well as other non-core items that are not indicative of future operating performance, the Company’s current year non-GAAP operating income was $177.9 million compared to $182.6 million in the prior year.
−Removed: The decline in non-GAAP operating income was primarily due to higher SG&A, as described above.
−Removed: Other expense in 2022 includes $6.8 million of loss on extinguishment of debt related to the Company’s refinancing the Original Credit Facility, partially offset by $1.8 million of facility remediation insurance recoveries and $2.4 million of income related to an indemnification asset.
−Removed: Other income in 2021 includes $13.1 million of non-income tax credits recorded by the Company’s Brazilian subsidiaries as well as a $4.8 million gain on the sale of certain held-for-sale real property assets.
−Removed: See the Non-GAAP Measures section of this Item, above.
−Removed: In addition, foreign exchange losses, net, were higher in 2022 as compared to 2021.
−Removed: Interest expense, net, increased $10.3 million compared to 2021, primarily driven by increases in the average borrowings outstanding coupled with an increase in interest rates year-over-year as the weighted average interest rate incurred on borrowings under the Company’s primary credit facility was approximately 3.0% during 2022 compared to approximately 1.6% during 2021.
−Removed: This was partially offset by lower amortization of debt issuance costs in 2022 as compared to 2021 due to the June 2022 credit facility amendment and write off of certain previously capitalized debt issuance costs.
−Removed: The Company’s effective tax rates for 2022 and 2021 were an expense of 350.2% and an expense of 23.8%, respectively.
−Removed: The Company’s current year effective tax rate was largely driven by the non-cash impairment charge described above and to a lesser extent a decline in profits, earnings mix, foreign tax inclusions and withholding taxes, partially offset by a reduction in reserves for uncertain tax positions and changes in the valuation allowance for foreign tax credits.
−Removed: The Company’s 2021 effective tax rate was driven by a higher level of pre-tax earnings and mix of earnings, as well as deferred taxes on unremitted earnings.
−Removed: In addition, the rate was impacted by certain one-time charges and benefits related to an intercompany intangible asset transfer and related royalty income recognition offset by changes in the valuation allowance for foreign tax credits.
−Removed: Excluding the impact of all non-core items in each year, described in the Non-GAAP Measures section of this Item, above, the Company estimates that the 2022 and 2021 effective tax rates would have been approximately 27% and 26%, respectively.
−Removed: The higher estimated current year tax rate was primarily driven by a lower level of pre-tax earnings and the impact of changes in mix of earnings.
−Removed: The Company may experience continued volatility in its effective tax rates due to several factors, including the timing of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions, the unpredictability of the timing and amount of certain incentives in various tax jurisdictions, the treatment of certain acquisition-related costs and the timing and amount of certain share-based compensation-related tax benefits, among other factors.
−Removed: In addition, the foreign tax credit valuation allowance, or absence thereof, is based on a number of variables, including forecasted earnings, which may vary.
−Removed: Equity in net income of associated companies decreased $7.4 million in 2022 compared to 2021, primarily due to lower current year income from the Company’s interest in a captive insurance company (see the Non-GAAP Measures section of this Item, above) due to lower market performance on equity investments and from the Company’s 50% interest in a joint venture in Korea due to overall market challenges.
−Removed: Net income attributable to noncontrolling interest was less than $0.1 million for both 2022 and 2021.
−Removed: Foreign exchange negatively impacted the Company’s yearly results by approximately 8% driven by the negative impact from foreign currency translation on earnings as well as higher foreign exchange transaction losses in the current year as compared to the prior year.
Reportable Segments Review - Comparison of 2024 with 2023
The Company’s reportable segments reflect the structure of the Company’s internal organization, the method by which the Company’s resources are allocated and the manner by which the Chief Operating Decision Maker of the Company assesses its performance.
−Removed: During the first quarter of 2023, the Company reorganized its executive management team to align with its new business structure.
−Removed: The Company’s new structure includes three reportable segments:
+Added: During the first quarter of 2023, the Company reorganized certain of its executive management team to align with its new business structure, which reflects the method by which the Company currently assesses its performance and allocates its resources.
+Added: The Company has three reportable segments:
(i) Americas;
and (iii) Asia/Pacific.
−Removed: The three segments are comprised of the assets and operations in each respective region, including assets and operations formerly included in the Global Specialty Businesses segment.
−Removed: Prior to the Company’s reorganization, the Company’s historical reportable segments were:
−Removed: (i) Americas;
−Removed: (iii) Asia/Pacific;
−Removed: and (iv) Global Specialty Businesses.
−Removed: Prior period information has been recast to reflect the Company’s new reportable segments.
−Removed: However, the Company did not recast the carrying amount of goodwill for the years ended December 31, 2022 and 2021.
See Notes 1, 4, 5, and 15 of Notes to Consolidated Financial Statements in Item 8 of this Report.
−Removed: Segment operating earnings for the Company’s reportable segments are comprised of net sales less COGS and SG&A directly related to the respective segment’s sales of products and services.
−Removed: Operating expenses not directly attributable to the net sales of each respective segment, such as certain corporate and administrative costs, Combination, integration and other acquisition-related expenses and Restructuring and related charges, are not included in segment operating earnings.
+Added: Segment operating earnings for each of the Company’s reportable segments are comprised of the segment’s net sales less directly related product costs and other operating expenses.
+Added: Operating expenses not directly attributable to the net sales of each respective segment, such as certain corporate and administrative costs, impairment charges, and restructuring charges, 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.
Americas represented approximately 48% of the Company’s consolidated net sales in 2024.
+Added: The segment’s net sales were $882.1 million, a decrease of $95.0 million or 10% compared to 2023.
+Added: This was driven by a decline in sales volumes of 5%, a decline in selling price and product mix of 4% and unfavorable foreign currency impacts of 1%.
+Added: The decline in sales volumes was primarily driven by softer market conditions broadly across the portfolio, partially offset by new business wins.
+Added: The decline in selling price and product mix was primarily attributable to the impact of our index-based customer contacts and the mix of products and services.
+Added: The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S.
+Added: dollar against the Mexican peso and Brazilian real.
+Added: Segment operating earnings in the Americas were $244.0 million, a decrease of $22.1 million or 8% compared to 2023 primarily driven by the decrease in net sales, partially offset by an improvement in segment operating margins driven by the Company’s margin improvement initiatives.
+Added: EMEA represented approximately 29% of the Company’s consolidated net sales in 2024.
+Added: The segment’s net sales were $536.4 million, a decrease of $34.9 million or 6% compared to 2023.
+Added: This was driven by a decline in sales volumes of 5% and a decline in selling price and product mix of 4%, partially offset by a contribution of sales from the acquisition of IKV of 3%.
+Added: The decline in sales volumes was driven by the continuation of soft end market conditions in the region, partially offset by new business wins.
+Added: The decline in selling price and product mix was primarily attributable to the impact of our index-based customer contracts and the mix of products and services.
+Added: Segment operating earnings in EMEA were $99.4 million, a decrease of $5.4 million or 5% compared to 2023 primarily driven by the decrease in net sales, partially offset by an improvement in segment operating margins driven by the Company’s margin improvement initiatives.
+Added: Asia/Pacific represented approximately 23% of the Company’s consolidated net sales in 2024.
+Added: The segment’s net sales were $421.1 million, an increase of 4% or approximately $16.2 million compared to 2023.
+Added: This was driven by an increase in sales volumes of 7%, a contribution of sales from the acquisition of Sutai of 2%, partially offset by a decline in selling price and product mix of 3% and unfavorable impact from foreign currency translation of 2%.
+Added: The increase in sales volumes was primarily driven by new business wins coupled with a modest improvement in the end market environment.
+Added: The decline in selling price and product mix was primarily attributable to the impact of our index-based customer contracts and mix of products and services.
+Added: The unfavorable foreign currency translation was primarily due to the strengthening of the U.S.
+Added: dollar against the Chinese renminbi.
+Added: Segment operating earnings in Asia/Pacific were $122.7 million, an increase of $4.3 million, or 4%, compared to 2023 as a result of improvement in net sales, partially offset by a decrease in segment operating margins.
+Added: Reportable Segments Review – Comparison of 2023 with 2022
+Added: Americas represented approximately 50% of the Company’s consolidated net sales in 2023.
The segment’s net sales were $977.1 million, an increase of $30.6 million or 3% compared to 2022.
22 unchanged sentences
This segment’s operating earnings were $118.5 million, an increase of $12.6 million or 12% compared to 2022 as a result of higher gross margins reflecting the Company’s value-based pricing initiatives and the Company’s ongoing margin improvement initiatives.
−Removed: Reportable Segments Review – Comparison of 2022 with 2021
−Removed: Americas represented approximately 49% of the Company’s consolidated net sales in 2022.
−Removed: The segment’s net sales were $946.5 million, an increase of $184.3 million or 24% compared to 2021.
−Removed: The increase in net sales was due to higher selling price and product mix of 28% and additional net sales from acquisition of 1%, partially offset by a decrease in organic sales volumes of approximately 5%.
−Removed: The increase in selling price and product mix is primarily driven by price increases implemented to offset the significant increases in raw material, manufacturing and other input costs that began during 2021 and continued through 2022.
−Removed: The current year decline in organic sales volumes was primarily driven by softer end market conditions, primarily in the automotive industry, due to the semiconductor supply constraints and to a lesser extent the primary metals markets, the wind-down of the tolling agreement for products previously divested related to the Combination, the Company’s ongoing value-based pricing initiatives, partially offset by net new business wins.
−Removed: This segment’s operating earnings were $223.6 million, an increase of $47.4 million or 27% compared to 2021 primarily driven by higher margins as the Company’s ongoing value-based pricing initiatives offset the ongoing inflationary pressures on the business.
−Removed: EMEA represented approximately 29% of the Company’s consolidated net sales in 2022.
−Removed: The segment’s net sales were $562.5 million, a decrease of $1.6 million or less than 1% compared to 2021.
−Removed: The decrease in net sales was a result of a 20% increase in selling price and product mix and additional net sales from acquisition of 2% which was more than offset by an unfavorable impact of foreign currency translation of 15% and a decrease in sales volumes of 7%.
−Removed: The increase in selling price and product mix was primarily driven by price increases implemented to offset the significant increases in raw material, manufacturing and other input costs that began during 2021 and continued through 2022.
−Removed: The decrease in sales volumes was primarily driven by current geopolitical and macroeconomic pressures including the direct and indirect impacts of the ongoing war in Ukraine and the impact of the economic and other sanctions by other nations on Russia in response to the war, as well as the wind-down of the tolling agreement for products previously divested related to the Combination and softer economic conditions in the region.
−Removed: The significant and unfavorable foreign currency translation impact was primarily due to the strengthening of the U.S.
−Removed: dollar against the euro.
−Removed: This segment’s operating earnings were $76.4 million, a decrease of $34.6 million or 31% compared to 2021.
−Removed: The decrease in segment operating earnings was primarily a result of lower net sales, lower gross margins, and inflationary pressures on other costs, including SG&A.
−Removed: Asia/Pacific represented approximately 22% of the Company’s consolidated net sales in 2022.
−Removed: The segment’s net sales were $434.6 million, a decrease of less than 1% or approximately $0.3 million compared to 2021.
−Removed: The decrease in net sales was a result of a 15% increase in selling price and product mix offset by lower sales volumes of 10% and an unfavorable impact from foreign currency translation of 5%.
−Removed: The increase in selling price and product mix was primarily driven by price increases implemented to offset the significant increases in raw material, manufacturing and other input costs that began during 2021 and continued through 2022.
−Removed: The decline in sales volumes was primarily driven by softer market conditions, primarily in China, in part as a result of the government imposed COVID-19 quarantine and related production disruptions implemented at the end of March 2022 and continued throughout 2022, partially offset by net new business wins.
−Removed: The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S.
−Removed: dollar against the Chinese renminbi.
−Removed: This segment’s operating earnings were $105.8 million, a decrease of $3.4 million or 3% compared to 2021 as a result of lower net sales, lower gross margins, and inflationary pressures on other costs, including SG&A.
Environmental Clean-up Activities
2 unchanged sentences
(“ACP”), a wholly owned subsidiary.
−Removed: In voluntary coordination with the Santa Ana California Regional Water Quality Board, ACP has been remediating the contamination.
−Removed: In 2007, ACP agreed to operate two groundwater treatment systems, so as to hydraulically contain groundwater contamination emanating from ACP’s site until such time as the concentrations of contaminants are below the current Federal maximum contaminant level for four consecutive quarterly sampling events.
+Added: In voluntary coordination with the Santa Ana California Regional Water Quality Board, ACP has been remediating the contamination, the principal contaminant of which is perchloroethylene (“PERC”).
+Added: In 2004, the Orange County Water District (“OCWD”) filed a civil complaint against ACP and other parties seeking to recover compensatory and other damages related to the investigation and remediation of the contamination in the groundwater.
+Added: Pursuant to a settlement agreement with OCWD, ACP agreed, among other things, to operate the two groundwater treatment systems to hydraulically contain groundwater contamination emanating from ACP’s site until the concentrations of PERC released by ACP fell below the current Federal maximum contaminant level for four consecutive quarterly sampling events.
In 2014, ACP ceased operation at one of its two groundwater treatment systems, as it had met the above condition for closure.
−Removed: In 2020, the Santa Ana Regional Water Quality Control Board asked that ACP conduct some additional indoor and outdoor soil vapor testing on and near the ACP site to confirm that ACP continues to meet the applicable local standards and ACP has begun the testing program.
−Removed: Such testing began in 2020 and continued into 2021.
+Added: In 2020, the Santa Ana Regional Water Quality Control Board asked that ACP conduct some additional indoor and outdoor soil vapor testing on and near the ACP site to confirm that ACP continues to meet the applicable local standards.
+Added: ACP began to perform such testing program work in 2022, and an additional round of testing is expected to commence in 2025.
As of December 31, 2024, ACP believes it is close to meeting the conditions for closure of the remaining groundwater treatment system but continues to operate this system while in discussions with the relevant authorities.
2 unchanged sentences
Costs of operation include the operation and maintenance of the extraction well, groundwater monitoring, program management, and soil vapor testing.
−Removed: The Company is also party to environmental matters related to certain domestic and foreign properties.
−Removed: These environmental matters primarily require the Company to perform long-term monitoring as well as operating and maintenance at each of the applicable sites.
−Removed: During the year ended December 31, 2023, there have been no significant changes to the facts or circumstances of these matters, aside from ongoing monitoring and maintenance activities and routine payments associated with each of these sites.
−Removed: The Company continually evaluates its obligations related to such matters, and based on historical costs incurred and projected costs to be incurred over the next 26 years, has estimated the present value range of costs for all of these environmental matters, on a discounted basis, to be between approximately $5.0 million and $6.0 million as of December 31, 2023, for which $5.1 million is accrued within other accrued liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheet as of December 31, 2023.
−Removed: Comparatively, as of December 31, 2022, the Company had $5.3 million accrued with respect to these matters.
+Added: The Company is also party to other environmental matters related to certain domestic and foreign properties.
+Added: These environmental matters primarily require the Company to perform ongoing monitoring and maintenance at each of the applicable sites.
+Added: During the year ended December 31, 2024, there have been no significant changes to the facts or circumstances of these matters.
+Added: Based on the Company’s current obligations, historical costs incurred, and projected costs to be incurred over the next 24 years, the Company estimated the present value range of costs for all of these environmental matters, on a discounted basis, to be between approximately $3.5 million and $6.0 million as of December 31, 2024, for which $3.6 million is accrued within other accrued liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheets as of December 31, 2024.
+Added: Comparatively, as of December 31, 2023, the Company had $5.1 million accrued for these matters.
These accrued amounts are inclusive of the Brazilian environmental matter discussed below.
10 unchanged sentences
Notwithstanding the foregoing, the Company cannot be certain that future liabilities in the form of remediation expenses and damages will not exceed amounts reserved.
−Removed: See Note 25 of Notes to Consolidated Financial Statements in Item 8 of this Report.
+Added: See Note 25, Commitments and Contingencies , to the Consolidated Financial Statements for additional details.
See Item 7A of this Report, below, for further discussion of certain quantitative and qualitative disclosures about market risk.
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.