Quantitative and Qualitative Disclosures About Market Risk.
−Removed: Quaker Houghton is exposed to the impact of interest rates, foreign currency fluctuations, changes in commodity prices, and credit risk.
+Added: Quaker Houghton’s earnings, cash flows and financial position are exposed to the impact of fluctuations in interest rates, foreign currency exchange rates, and commodity prices, as well as credit risk.
Except as otherwise disclosed below, the market risks discussed below did not change materially from December 31, 2023.
1 unchanged sentence
During June 2022, the Company entered into an amendment to its primary credit facility (the “Credit Facility”).
−Removed: See Note 19 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
+Added: See Note 19, Debt, to the Consolidated Financial Statements for additional details.
As of December 31, 2024, borrowings under the Credit Facility bear interest at either term SOFR or a base rate, in each case, plus an applicable margin based upon the Company’s consolidated net leverage ratio, and, in the case of term SOFR, a spread adjustment equal to 0.10% per annum.
2 unchanged sentences
As of December 31, 2024, the Company had outstanding borrowings under the Credit Facility of approximately $696.5 million.
−Removed: The weighted average interest rate applicable on outstanding borrowings under the Credit Facility was approximately 6.3% as of December 31, 2023.
+Added: The interest rate applicable on outstanding borrowings under the Credit Facility was approximately 5.2% as of December 31, 2024.
An interest rate change of 100 basis points would result in an approximate $7.0 million increase or decrease to interest expense for the year ended 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%.
These interest rate swaps are designated and qualify as cash flow hedges.
−Removed: The Company has previously used derivative financial instruments primarily for the purpose of hedging exposures to fluctuations in interest rates.
Foreign Exchange Risk .
A significant portion of the Company’s revenues and earnings are generated by its foreign operations.
+Added: During the past three years, sales by its non-U.S.
+Added: subsidiaries accounted for approximately 63% to 65% of its consolidated net sales.
These foreign operations also represent a significant portion of Quaker Houghton’s assets and liabilities.
−Removed: Generally, all of these foreign operations use the local currency as their functional currency.
+Added: In addition, the Company occasionally sources inventory among its worldwide operations.
+Added: This practice can give rise to foreign exchange risk resulting from the varying cost of inventory to the receiving location, as well as from the revaluation of intercompany balances.
+Added: The Company primarily mitigates this risk through local sourcing efforts.
+Added: Generally, these foreign operations use the local currency as their functional currency.
Accordingly, Quaker Houghton’s financial results are affected by foreign currency fluctuations, particularly between the U.S.
4 unchanged sentences
Similarly, pre-tax earnings would increase or decrease by approximately $14.3 million.
−Removed: The Company generally does not use financial instruments that expose it to significant risk involving foreign currency transactions.
−Removed: However, the size of its non-U.S.
−Removed: activities has a significant impact on reported operating results and the attendant net assets.
−Removed: During the past three years, sales by its non-U.S.
−Removed: subsidiaries accounted for approximately 60% to 70% of its consolidated net sales.
−Removed: In addition, the Company occasionally sources inventory among its worldwide operations.
−Removed: This practice can give rise to foreign exchange risk resulting from the varying cost of inventory to the receiving location, as well as from the revaluation of intercompany balances.
−Removed: The Company primarily mitigates this risk through local sourcing efforts.
Commodity Price Risk .
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Though infrequent, when a bankruptcy occurs, Quaker Houghton must judge the amount of proceeds, if any, that may ultimately be received through the bankruptcy or liquidation process.
−Removed: In addition, as part of its terms of trade, Quaker Houghton may custom manufacture products for certain large customers and/or may ship product on a consignment basis.
−Removed: These practices may increase the Company’s exposure should a bankruptcy occur and may require a write-down or disposal of certain inventory due to its estimated obsolescence or limited marketability as well as of accounts receivable.
−Removed: Customer returns of products or disputes may also result in similar issues related to the realizability of recorded accounts receivable or returned inventory.
−Removed: The Company recorded expense to its provision for credit losses by $1.3 million, $4.3 million and $0.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
+Added: In addition, as part of its terms of trade, Quaker Houghton may custom manufacture products for certain large customers and may also ship products on a consignment basis.
+Added: These practices may increase the Company’s exposure to customer credit risk, including bankruptcy and may require a write-down or disposal of inventory due to obsolescence or limited marketability as well as a reserve for accounts receivable.
+Added: Customer product returns or disputes may also result in similar issues related to the realizability of accounts receivable or inventory.
+Added: 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.
A change of 10% to the expense recorded to the Company’s provision would have increased or decreased the Company’s pre-tax earnings by $0.2 million, $0.1 million and $0.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.
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.