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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 001-12019
QUAKER CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania23-0993790
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
901 E. Hector Street,
Conshohocken, Pennsylvania
19428 – 2380
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: 610-832-4000
Not Applicable
Former name, former address and former fiscal year, if changed since last report.
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1 par valueKWR
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes    x     No    o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   x     No    o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filero
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o   No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Number of Shares of Common Stock Outstanding on October 31, 2023
17,984,916


Quaker Chemical Corporation
Table of Contents
Page
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and September 30, 2022
Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and September 30, 2022
Item 5.
1

PART I
FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited).
Quaker Chemical Corporation
Condensed Consolidated Statements of Operations
(Unaudited; Dollars in thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net sales$490,612 $492,218 $1,486,204 $1,458,777 
Cost of goods sold (excluding amortization expense -
   See Note 13)
307,265 331,469 951,716 1,002,393 
Gross profit183,347 160,749 534,488 456,384 
Selling, general and administrative expenses122,810 115,456 362,212 343,081 
Restructuring and related charges (credits), net1,019 (1,423)6,034 (604)
Combination, integration and other acquisition-related expenses 2,107  7,992 
Operating income59,518 44,609 166,242 105,915 
Other (expense) income, net(2,713)85 (8,558)(10,520)
Interest expense, net(12,781)(8,389)(38,744)(20,228)
Income before taxes and equity in net income of associated companies44,024 36,305 118,940 75,167 
Taxes on income before equity in net income of associated companies13,593 10,185 36,956 14,425 
Income before equity in net income of associated companies30,431 26,120 81,984 60,742 
Equity in net income (loss) of associated companies3,279 (212)10,660 (642)
Net income33,710 25,908 92,644 60,100 
Less: Net income attributable to noncontrolling interest40 41 94 74 
Net income attributable to Quaker Chemical Corporation$33,670 $25,867 $92,550 $60,026 
Per share data:
Net income attributable to Quaker Chemical Corporation common shareholders – basic$1.87 $1.44 $5.15 $3.35 
Net income attributable to Quaker Chemical Corporation common shareholders – diluted$1.87 $1.44 $5.14 $3.35 
Dividends declared$0.455 $0.435 $1.325 $1.265 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2

Quaker Chemical Corporation
Condensed Consolidated Statements of Comprehensive Income
(Unaudited; Dollars in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net income$33,710 $25,908 $92,644 $60,100 
Other comprehensive (loss) income, net of tax
Currency translation adjustments(25,504)(71,986)(24,116)(155,284)
Defined benefit retirement plans281 497 852 2,400 
Current period change in fair value of derivatives1,241 (140)5,804 1,535 
Unrealized (loss) gain on available-for-sale securities(637)(818)938 (2,385)
Other comprehensive loss(24,619)(72,447)(16,522)(153,734)
Comprehensive income (loss)9,091 (46,539)76,122 (93,634)
Less: Comprehensive loss attributable to noncontrolling interest(36)(3)(55)(5)
Comprehensive income (loss) attributable to Quaker Chemical Corporation$9,055 $(46,542)$76,067 $(93,639)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

Quaker Chemical Corporation
Condensed Consolidated Balance Sheets
(Unaudited; Dollars in thousands, except par value)
September 30,
2023
December 31,
2022
ASSETS
Current assets
Cash and cash equivalents$198,358$180,963
Accounts receivable, net446,459472,888
Inventories
Raw materials and supplies129,204151,105
Work-in-process and finished goods121,566133,743
Prepaid expenses and other current assets70,72455,438
Total current assets966,311994,137
Property, plant and equipment, at cost431,565428,190
Less: Accumulated depreciation(235,125)(229,595)
Property, plant and equipment, net196,440198,595
Right of use lease assets38,59543,766
Goodwill504,457515,008
Other intangible assets, net890,464942,925
Investments in associated companies92,96588,234
Deferred tax assets9,56911,218
Other non-current assets33,70527,739
Total assets$2,732,506$2,821,622
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current portion of long-term debt$19,246$19,245
Accounts payable190,067193,983
Dividends payable8,1907,808
Accrued compensation43,64139,834
Accrued restructuring3,5905,483
Accrued pension and postretirement benefits1,5741,560
Other accrued liabilities85,79986,873
Total current liabilities352,107354,786
Long-term debt804,973933,561
Long-term lease liabilities22,16326,967
Deferred tax liabilities151,606160,294
Non-current accrued pension and postretirement benefits27,34428,765
Other non-current liabilities33,21238,664
Total liabilities1,391,4051,543,037
Commitments and contingencies (Note 18)
Equity
Common stock $1 par value; authorized 30,000,000 shares; issued and outstanding
September 30, 2023 – 18,000,855 shares; December 31, 2022 – 17,950,264 shares
18,00117,950
Capital in excess of par value938,473928,288
Retained earnings538,628469,920
Accumulated other comprehensive loss(154,724)(138,240)
Total Quaker shareholders’ equity1,340,3781,277,918
Noncontrolling interest723667
Total equity1,341,1011,278,585
Total liabilities and equity$2,732,506$2,821,622
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

Quaker Chemical Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited; Dollars in thousands)
Nine Months Ended
September 30,
20232022
Cash flows from operating activities
Net income$92,644 $60,100 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of debt issuance costs1,059 2,589 
Depreciation and amortization61,434 60,692 
Equity in undistributed earnings of associated companies, net of dividends(7,486)3,612 
Deferred compensation, deferred taxes and other, net(515)(8,844)
Share-based compensation11,189 8,635 
Loss on extinguishment of debt 5,246 
Combination and other acquisition-related expenses, net of payments (4,265)
Restructuring and related charges (credits), net6,034 (604)
Pension and other postretirement benefits(2,000)(6,556)
Increase (decrease) in cash from changes in current assets and current liabilities, net of acquisitions:
Accounts receivable22,133 (65,256)
Inventories30,607 (72,386)
Prepaid expenses and other current assets(9,771)(11,081)
Change in restructuring liabilities(7,914)(1,234)
Accounts payable and accrued liabilities2,046 3,059 
Net cash provided by (used in) operating activities199,460 (26,293)
Cash flows from investing activities
Investments in property, plant and equipment(25,794)(20,230)
Payments related to acquisitions, net of cash acquired (9,421)
Proceeds from disposition of assets 65 
Net cash used in investing activities(25,794)(29,586)
Cash flows from financing activities
Payments of long-term debt(14,075)(668,500)
Proceeds from long-term debt 750,000 
Payments on revolving credit facilities, net(112,835)(10,418)
Borrowings on other debt, net797 2,131 
Financing-related debt issuance costs (3,734)
Dividends paid(23,459)(22,302)
Other stock related activity(953)(616)
Net cash (used in) provided by financing activities(150,525)46,561 
Effect of foreign exchange rate changes on cash(5,746)(16,967)
Net increase (decrease) in cash and cash equivalents17,395 (26,285)
Cash and cash equivalents at the beginning of the period180,963 165,176 
Cash and cash equivalents at the end of the period$198,358 $138,891 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

Quaker Chemical Corporation
Condensed Consolidated Statements of Changes in Equity
(Unaudited; Dollars in thousands, except per share amounts)
Common
Stock
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interest
Total
Balance as of December 31, 2021$17,897 $917,053 $516,334 $(63,990)$628 $1,387,922 
Net income— — 19,816 — 5 19,821 
Amounts reported in other comprehensive (loss) income— — — (6,271)1 (6,270)
Dividends ($0.415 per share)
— — (7,434)— — (7,434)
Share issuance and equity-based compensation plans15 1,646 — — — 1,661 
Balance as of March 31, 2022$17,912 $918,699 $528,716 $(70,261)$634 $1,395,700 
Net income— — 14,343 — 28 14,371 
Amounts reported in other comprehensive loss— — — (74,985)(33)(75,018)
Dividends ($0.415 per share)
— — (7,438)— — (7,438)
Share issuance and equity-based compensation plans8 2,943 — — — 2,951 
Balance as of June 30, 2022$17,920 $921,642 $535,621 $(145,246)$629 $1,330,566 
Net income— — 25,867 — 41 25,908 
Amounts reported in other comprehensive loss— — — (72,409)(38)(72,447)
Dividends ($0.435 per share)
— — (7,803)— — (7,803)
Share issuance and equity-based compensation plans11 3,395 — — — 3,406 
Balance as of September 30, 2022$17,931 $925,037 $553,685 $(217,655)$632 $1,279,630 
Balance as of December 31, 2022$17,950 $928,288 $469,920 $(138,240)$667 $1,278,585 
Net income— — 29,534 — 7 29,541 
Amounts reported in other comprehensive income— — — 15,063 3 15,066 
Dividends ($0.435 per share)
— — (7,822)— — (7,822)
Share issuance and equity-based compensation plans32 1,386 — — — 1,418 
Balance as of March 31, 2023$17,982 $929,674 $491,632 $(123,177)$677 $1,316,788 
Net income— — 29,346 — 47 29,393 
Amounts reported in other comprehensive loss— — — (6,931)(38)(6,969)
Dividends ($0.435 per share)
— — (7,830)— — (7,830)
Share issuance and equity-based compensation plans17 5,267 — — — 5,284 
Balance as of June 30, 2023$17,999 $934,941 $513,148 $(130,108)$686 $1,336,666 
Net income— — 33,670 — 40 33,710 
Amounts reported in other comprehensive loss— — — (24,616)(3)(24,619)
Dividends ($0.455 per share)
— — (8,190)— — (8,190)
Share issuance and equity-based compensation plans2 3,532 — — — 3,534 
Balance as of September 30, 2023$18,001 $938,473 $538,628 $(154,724)$723 $1,341,101 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
Note 1 – Basis of Presentation and Description of Business
As used in these Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for the period ended September 30, 2023 (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. The “Combination” refers to the legacy Quaker combination with Houghton International, Inc. (“Houghton”).
Basis of Presentation
The condensed consolidated financial statements included herein are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial reporting and the United States Securities and Exchange Commission (“SEC”) regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments consisting only of normal recurring adjustments, which are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods. The results for the nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).
During the first quarter of 2023, the Company reorganized its executive management team to align with its new business structure. The Company’s new structure includes three reportable segments: (i) Americas; (ii) Europe, Middle East and Africa (“EMEA”); and (iii) Asia/Pacific. Prior to the Company’s reorganization, the Company’s historical reportable segments were: (i) Americas; (ii) EMEA; (iii) Asia/Pacific; and (iv) Global Specialty Businesses. Prior period information has been recast to align with the Company’s business structure as of January 1, 2023, including reportable segments and customer industry disaggregation. As a result of the Company’s new organizational structure effective January 1, 2023, the Company reallocated goodwill previously held by the former Global Specialty Businesses segment to the remaining business segments as of January 1, 2023. However, the Company did not recast the carrying amount of goodwill for the year ended December 31, 2022. See Notes 4, 5, and 13 of Notes to Condensed Consolidated Financial Statements.
Description of Business
The Company was organized in 1918 and incorporated as a Pennsylvania business corporation in 1930. Quaker Houghton is the global leader in industrial process fluids. With a presence around the world, including operations in over 25 countries, the Company’s customers include thousands of the world’s most advanced and specialized steel, aluminum, automotive, aerospace, offshore, container, mining, and metalworking companies. Quaker Houghton develops, produces, and markets a broad range of formulated chemical specialty products and offers chemical management services, which the Company refers to as “FluidcareTM”, for various heavy industrial and manufacturing applications.
Hyper-inflationary economies
Argentina’s and Türkiye’s economies were considered hyper-inflationary under U.S. GAAP effective July 1, 2018 and April 1, 2022, respectively. As of, and for the three and nine months ended September 30, 2023, the Company's Argentine and Turkish subsidiaries represented a combined 1% and 2% of the Company’s consolidated total assets and net sales, respectively. During the three and nine months ended September 30, 2023, the Company recorded $1.2 million and $2.9 million of remeasurement losses associated with the applicable currency conversions, respectively. Comparatively, during the three and nine months ended September 30, 2022, the Company recorded $1.0 million and $1.2 million of remeasurement losses associated with the applicable currency conversions, respectively. These losses were recorded within foreign exchange losses, net, which is a component of Other (expense) income, net, in the Company’s Condensed Consolidated Statements of Operations.
Note 2 – Business Acquisitions
Previous Acquisitions
In October 2022, the Company acquired a business that provides pickling and rinsing products and services, which is part of the EMEA reportable segment, for approximately 3.5 million EUR or approximately $3.5 million. This acquisition, along with the Company’s January 2022 acquisition in the Americas (described below), which had similar specializations and product offerings in pickling inhibitor technologies, strengthens Quaker Houghton’s position in pickling inhibitors and additives, enabling the Company to better support and optimize production processes for customers across the metals industry. As of September 30, 2023, the allocation of the purchase of this acquisition has been finalized.
7

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
In January 2022, the Company acquired a business that provides pickling inhibitor technologies, drawing lubricants and stamping oil, and various other lubrication, rust preventative, and cleaner applications, which is part of the Americas reportable segment, for approximately $8.0 million. This business broadens the Company’s product offerings within its existing metals and metalworking business in the Americas region. During the third quarter of 2022 the Company finalized post-closing adjustments that resulted in the Company paying less than $0.1 million of additional purchase consideration. Also in January 2022, the Company acquired a business related to the sealing and impregnation of metal castings for the automotive sector, as well as impregnation resin and impregnation systems for metal parts, which is part of the EMEA reportable segment, for approximately 1.2 million EUR or approximately $1.4 million. This business broadens its product offerings and service capabilities within its existing impregnation business. The allocation of the purchase prices of both of these January 2022 acquisitions have been finalized.
In November 2021, the Company acquired Baron Industries, a privately held company that provides vacuum impregnation services of castings, powder metals and electrical components for its Americas reportable segment for $11.0 million, including an initial cash payment of $7.1 million, subject to post-closing adjustments, as well as certain earn-out provisions that are payable at various times from 2022 through 2025. The earn-out provisions could total a maximum of $4.5 million. As of September 30, 2023, the Company has remaining earn-out liabilities recorded on its Condensed Consolidated Balance Sheet of $1.1 million. Additionally, during the third quarter of 2022 the Company finalized post-closing adjustments that resulted in the Company receiving a payment of less than $0.1 million.
In December 2020, the Company acquired Coral Chemical Company, LLC (“Coral”), a privately held U.S.-based provider of metal finishing fluid solutions. Subsequent to the acquisition, the Company and the sellers of Coral (the “Sellers”) have worked to finalize certain post-closing adjustments. During the second quarter of 2022, after failing to reach resolution, the Sellers filed suit asserting certain amounts owed related to tax attributes of the acquisition. During the first nine months of 2023, there have been no material changes to the facts and circumstances of the claim asserted by the Sellers, and the Company continues to believe the potential range of exposure for this claim is $0 to $1.5 million.
Note 3 – Recently Issued Accounting Standards
There have been no recently issued accounting standards that will have a material impact on the Company’s condensed consolidated financial statements and related footnote disclosures.
Note 4 – Business Segments
The Company has three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific. The three segments are composed of the net sales and operations in each respective region. All prior period information has been recast to reflect the Company’s new reportable segments. See Note 1 of Notes to Condensed Consolidated Financial Statements.
Segment operating earnings for each of the Company’s reportable segments are comprised of the segment’s net sales less directly related Cost of goods sold (“COGS”) and Selling, general and administrative expenses (“SG&A”). Operating expenses not directly attributable to the net sales of each respective segment, such as certain corporate and administrative costs, Combination, integration and other acquisition-related expenses, and Restructuring and related charges (credits), net, are not included in segment operating earnings. Other items not specifically identified with the Company’s reportable segments include Interest expense, net and Other (expense) income, net.
8

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
The following table presents information about the performance of the Company’s reportable segments:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net sales
Americas$245,899 $254,678 $750,531 $702,580 
EMEA139,620 134,386 435,602 426,739 
Asia/Pacific105,093 103,154 300,071 329,458 
Total net sales$490,612 $492,218 $1,486,204 $1,458,777 
Segment operating earnings
Americas$69,148 $66,749 $204,280 $164,065 
EMEA27,922 15,479 81,076 58,803 
Asia/Pacific30,963 26,723 86,604 76,146 
Total segment operating earnings128,033 108,951 371,960 299,014 
Combination, integration and other acquisition-related expenses (2,107) (7,992)
Restructuring and related (charges) credits, net(1,019)1,423 (6,034)604 
Non-operating and administrative expenses(52,280)(47,852)(154,001)(139,894)
Depreciation of corporate assets and amortization(15,216)(15,806)(45,683)(45,817)
Operating income59,518 44,609 166,242 105,915 
Other (expense) income, net(2,713)85 (8,558)(10,520)
Interest expense, net(12,781)(8,389)(38,744)(20,228)
Income before taxes and equity in net income of associated companies$44,024 $36,305 $118,940 $75,167 
The following table summarizes inter-segment revenues. All inter-segment transactions have been eliminated from each reportable segment’s net sales and earnings for all periods presented in the above tables.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Americas$1,772 $2,702 $6,778 $9,200 
EMEA5,161 9,448 18,718 37,259 
Asia/Pacific793 327 1,329 739 
Note 5 – Net Sales and Revenue Recognition
Arrangements Resulting in Net Reporting
As part of the Company’s FluidcareTM business, certain third-party product sales to customers are managed by the Company. The Company transferred third-party products under arrangements recognized on a net reporting basis of $21.6 million and $63.2 million for the three and nine months ended September 30, 2023, respectively, and $21.4 million and $61.7 million for the three and nine months ended September 30, 2022, respectively.
Customer Concentration
A significant portion of the Company’s revenues are realized from the sale of process fluids and services to manufacturers of steel, aluminum, automobiles, aerospace, industrial and agricultural equipment, and durable goods. As previously disclosed in the Company’s 2022 Form 10-K, the Company’s five largest customers combined (each composed of multiple subsidiaries or divisions with semiautonomous purchasing authority) accounted for approximately 11% of consolidated net sales, with its largest customer accounting for approximately 3% of consolidated net sales.
9

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
Contract Assets and Liabilities
The Company had no material contract assets recorded on its Condensed Consolidated Balance Sheets as of September 30, 2023 or December 31, 2022.
The Company had approximately $2.8 million and $5.7 million of deferred revenue as of September 30, 2023 and December 31, 2022, respectively. For the nine months ended September 30, 2023, the Company satisfied all of the associated performance obligations and recognized into revenue the advance payments received and recorded as of December 31, 2022.
Disaggregated Revenue
The Company sells its various industrial process fluids, its specialty chemicals and its technical expertise as a global product portfolio. The Company generally manages and evaluates its performance by reportable segment first, and then by customer industries. Net sales of each of the Company’s major product lines are generally spread throughout all three of the Company’s geographic regions, and in most cases, are approximately proportionate to the level of total sales in each region.
The following tables disaggregate the Company’s net sales by geographic region, customer industries, and timing of revenue recognized. Prior period information has been recast to reflect the Company’s current period customer industry disaggregation. See Note 1 of Notes to Condensed Consolidated Financial Statements.
Three Months Ended September 30, 2023
AmericasEMEAAsia/PacificConsolidated
Total
Customer Industries
Metals$67,957 $32,630 $49,320 $149,907 
Metalworking and other177,942 106,990 55,773 340,705 
$245,899 $139,620 $105,093 $490,612 
Timing of Revenue Recognized
Product sales at a point in time$235,209 $128,586 $102,305 $466,100 
Services transferred over time10,690 11,034 2,788 24,512 
$245,899 $139,620 $105,093 $490,612 
Nine Months Ended September 30, 2023
AmericasEMEAAsia/PacificConsolidated
Total
Customer Industries
Metals$204,834 $104,376 $144,109 $453,319 
Metalworking and other545,697 331,226 155,962 1,032,885 
$750,531 $435,602 $300,071 $1,486,204 
Timing of Revenue Recognized
Product sales at a point in time$718,187 $402,508 $291,740 $1,412,435 
Services transferred over time32,344 33,094 8,331 73,769 
$750,531 $435,602 $300,071 $1,486,204 
10

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
Three Months Ended September 30, 2022
AmericasEMEAAsia/PacificConsolidated
Total
Customer Industries
Metals$67,943 $32,748 $51,341 $152,032 
Metalworking and other186,735 101,638 51,813 340,186 
$254,678 $134,386 $103,154 $492,218 
Timing of Revenue Recognized
Product sales at a point in time$243,699 $124,566 $99,929 $468,194 
Services transferred over time10,979 9,820 3,225 24,024 
$254,678 $134,386 $103,154 $492,218 
Nine Months Ended September 30, 2022
AmericasEMEAAsia/PacificConsolidated
Total
Customer Industries
Metals$185,784 $107,163 $163,239 $456,186 
Metalworking and other516,796 319,576 166,219 1,002,591 
$702,580 $426,739 $329,458 $1,458,777 
Timing of Revenue Recognized
Product sales at a point in time$669,945 $396,944 $321,031 $1,387,920 
Services transferred over time32,635 29,795 8,427 70,857 
$702,580 $426,739 $329,458 $1,458,777 
Note 6 - Leases
The Company has operating leases for certain facilities, vehicles and machinery and equipment with remaining lease terms up to 8 years. Operating lease expense is recognized on a straight-line basis over the lease term. In addition, the Company has certain land use leases with remaining lease terms up to 92 years.
The Company had no material variable lease costs, sublease income, or finance leases for the three and nine months ended September 30, 2023 and 2022. The components of the Company’s lease expense are as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Operating lease expense$3,886 $3,664 $11,532 $10,592 
Short-term lease expense193 201 587 625 
11

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
Supplemental cash flow information related to the Company’s leases is as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$3,917 $3,768 $11,547 $10,575 
Non-cash lease liabilities activity:
Leased assets obtained in exchange for new operating lease liabilities2,910 2,599 6,566 10,672 
Supplemental balance sheet information related to the Company’s leases is as follows:
September 30,
2023
December 31,
2022
Right of use lease assets$38,595 $43,766 
Other current liabilities12,113 12,024 
Long-term lease liabilities22,163 26,967 
Total operating lease liabilities$34,276 $38,991 
Weighted average remaining lease term (years)4.825.10
Weighted average discount rate4.67 %4.36 %
Maturities of operating lease liabilities were as follows:
September 30,
2023
For the remainder of 2023$3,691 
For the year ended December 31, 202412,589 
For the year ended December 31, 20258,417 
For the year ended December 31, 20266,286 
For the year ended December 31, 20273,051 
For the year ended December 31, 2028 and beyond5,614 
Total lease payments39,648 
Less: imputed interest(5,372)
Present value of lease liabilities$34,276 
Note 7 – Restructuring and Related Activities
In the third quarter of 2019, the Company’s management approved a global restructuring plan (the “QH Program”) as part of its initial plan to realize certain cost synergies associated with the Combination. As of December 31, 2022, the Company substantially completed all of the initiatives under the QH Program with only an immaterial amount of remaining severance still to be paid, which has been paid as of September 30, 2023.
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. As of September 30, 2023, the program included restructuring and associated severance costs to reduce headcount by approximately 100 positions globally. These headcount reductions began in the fourth quarter of 2022 and are expected to continue throughout 2023. The exact timing to complete all actions and final costs associated will depend on a number of factors that are subject to change.
12

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
Employee separation benefits vary depending on local regulations within certain foreign countries and include severance and other benefits. Restructuring costs include severance costs to reduce headcount, including customary and routine adjustments to initial estimates for employee separation costs, as well as costs to close certain facilities under the QH Program. These costs are recorded in Restructuring and related charges in the Company’s Consolidated Statements of Operations. As described in Note 4 of Notes to Consolidated Financial Statements, Restructuring and related charges are not included in the Company’s calculation of reportable segments’ measure of operating earnings and therefore these costs are not reviewed by or recorded to reportable segments.
In connection with the plans for closure of certain manufacturing and non-manufacturing facilities, the Company has made available for sale certain facilities and property. During the three months ended September 30, 2023, the Company classified certain properties with aggregate book value of approximately $6.9 million as held-for-sale that are recorded in Prepaid expenses and other current assets on the Company’s Condensed Consolidated Balance Sheets. The Company expects to complete the sale of these properties over the next 12 months.
Changes in the Company’s accruals for its restructuring programs are as follows:
Restructuring Programs
Accrued restructuring as of December 31, 2022$5,483
Restructuring and related charges, net6,034 
Cash payments(7,914)
Currency translation adjustments(13)
Accrued restructuring as of September 30, 2023$3,590
Note 8 – Share-Based Compensation
The Company recognized the following share-based compensation expense in its Condensed Consolidated Statements of Operations:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Stock options$203$533$837$1,269
Non-vested stock awards and restricted stock units2,4291,7837,1924,998
Director stock ownership plan3095653
Performance stock units1,1138753,1042,314
Total share-based compensation expense$3,775$3,200$11,189$8,634
Share-based compensation expense is recorded in SG&A, except for $0.1 million and $0.2 million for the three and nine months ended September 30, 2022, respectively, recorded within Combination, integration and other acquisition-related expenses.
Stock Options
As of September 30, 2023, unrecognized compensation expense related to unvested stock options was $0.5 million, to be recognized over a weighted average remaining period of 0.9 years.
Restricted Stock Awards and Restricted Stock Units
During the nine months ended September 30, 2023, the Company granted 38,894 non-vested restricted shares and 6,675 non-vested restricted stock units under its long-term incentive plan (“LTIP”), which are subject to time-based vesting, generally over one to three years. The fair value of these grants is based on the last sale price of the Company’s common stock on the date of grant. As of September 30, 2023, unrecognized compensation expense related to the non-vested restricted shares was $8.0 million, to be recognized over a weighted average remaining period of 1.4 years, and unrecognized compensation expense related to non-vested restricted stock units was $1.6 million, to be recognized over a weighted average remaining period of 1.5 years.
13

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
Performance Stock Units
As a component of its LTIP, the Company grants performance-based stock unit awards (“PSUs”), which will be settled in a certain number of shares subject to market-based or performance-based and time-based vesting conditions. The number of fully vested shares that may ultimately be issued as settlement for each award may range from 0% up to 200% of the target award, subject to the achievement of the Company’s market-based total shareholder return (“TSR”) metric relative to the performance of the Company’s peer group, the S&P Midcap 400 Materials group, and separately the achievement of a performance-based return on invested capital (“ROIC”) measure. The service period required for the PSUs is generally three years and the measurement period of the market-based and performance objectives is generally from January 1 of the year of grant through December 31 of the year prior to issuance of the shares.
Compensation expense for PSUs is measured based on the grant date fair value and is recognized on a straight-line vesting method basis over the applicable vesting period. The fair value of PSUs granted with a ROIC condition is based on the trading price of the Company’s common stock on the date of grant. PSUs granted with a relative TSR condition are valued using a Monte Carlo simulation on the date of grant. The grant-date fair value of the PSUs valued using a Monte Carlo simulation, which included the following assumptions set forth in the table below:
2023
Grants
Number of PSUs granted16,861
Risk-free interest rate3.85%
Dividend yield0.96%
Expected term (years)3.0
Based on the conditions of the PSUs and performance to date for each of the outstanding PSU awards as of September 30, 2023, the Company estimates that it will issue 25,613 fully vested shares as of the applicable settlement date for such outstanding PSUs awards. As of September 30, 2023, there was approximately $8.0 million of total unrecognized compensation cost related to PSUs, which the Company expects to recognize over a weighted-average period of 2.2 years.
Note 9 – Pension and Other Postretirement Benefits
The components of net periodic benefit cost (income) are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
Pension BenefitsOther Postretirement BenefitsPension BenefitsOther Postretirement Benefits
20232022202320222023202220232022
Service cost$109$166$$1 $320$520$$1
Interest cost2,4871,272148 7,4523,9495119
Expected return on plan assets(2,033)(1,942)(6,056)(6,038)
Actuarial loss (gain) amortization103238(36)(23)308743(95)(70)
Prior service cost (income) amortization183(4)(8)268(12)(17)
Net periodic benefit cost (income)$684 $(263)$(26)$(22)$2,050 $(818)$(56)$(67)
In July 2023, one of the Company’s pension plans in the U.K. liquidated approximately $50 million of its invested assets and subsequently funded and entered into an insurance annuity contract, which will provide for the pension plan’s defined benefit obligations to participants.
Employer Contributions
As of September 30, 2023, $3.4 million and $0.1 million of contributions have been made to the Company’s U.S. and foreign pension plans and its other postretirement benefit plans, respectively. Taking into consideration current minimum cash contribution requirements, the Company currently expects to make full year cash contributions of approximately $5.2 million to its U.S. and foreign pension plans and approximately $0.2 million to its other postretirement benefit plans in 2023.
14

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
Note 10 – Other (expense) income, net
The components of Other (expense) income, net are as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Income from third party license fees$245$253$891$906
Foreign exchange losses, net(2,498)(1,928)(10,049)(5,859)
(Loss) gain on disposals of property, plant, equipment and other assets, net(25)48 (91)33
Non-income tax refunds and other related credits (expense)911221,339 (1,617)
Pension and postretirement benefit (costs) income, non-service components(549)452(1,674)1,406
Facility remediation recoveries, net1,1041,0141,104
Loss on extinguishment of debt (6,763)
Other non-operating income, net233412270
Total other (expense) income, net$(2,713)$85$(8,558)$(10,520)
Non-income tax refunds and other related credits (expense) during the nine months ended September 30, 2023 and nine months ended September 30, 2022 include adjustments to a Combination-related indemnification asset associated with the settlement of certain income tax audits for tax periods prior to August 1, 2019. See Note 11 of Notes to Condensed Consolidated Financial Statements.
Facility remediation recoveries, net, during the nine months ended September 30, 2023 and the three and nine months ended September 30, 2022, reflect gains recorded on the payments received from insurers related to previously incurred costs from the remediation and restoration of property damage incurred during the three months ended September 30, 2021. See Note 18 of Notes to the Condensed Consolidated Financial Statements.
Loss on extinguishment of debt during the nine months ended September 30, 2022, represents a write-off of certain previously unamortized deferred financing costs as well as a portion of third party and creditor debt issuance costs incurred to execute an amendment to the Company’s primary credit facility. See Note 14 of Notes to Condensed Consolidated Financial Statements.
Note 11 – Income Taxes and Uncertain Income Tax Positions
The Company’s effective tax rates for the three and nine months ended September 30, 2023 were 30.9% and 31.1%, respectively, compared to 28.1% and 19.2% for the three and nine months ended September 30, 2022, respectively. The Company’s effective tax rate for the three months ended September 30, 2023 was primarily impacted by foreign tax inclusions, withholding taxes, return to provision adjustments, the impact of U.S. Department of Treasury guidance on the usage of foreign tax credits, and the mix of earnings. The effective tax rate for the first nine months of 2023 was further impacted by various other items including changes to the valuation allowance for and the usage of foreign tax credits due to an enacted law change in Brazil, and share-based compensation. Comparatively, the prior year effective tax rates were largely impacted by foreign tax inclusions, changes in the valuation allowance for foreign tax credits, the impact of audit settlements, a reduction in reserves for uncertain tax positions, withholding taxes, and the impact of forecasted earnings and the mix of such earnings. In addition, the Company’s effective tax rates for three and nine months ended September 30, 2022 were impacted by the Company recording earnings of one of its subsidiaries at a statutory tax rate of 25% while the recertification of its concessionary 15% tax rate was pending receipt.
As previously reported, Houghton Italia, S.r.l was involved in a corporate income tax audit with the Italian tax authorities covering tax years 2014 through 2018. The Company settled all years 2014 through 2018 for $3.7 million and, accordingly, released all reserves relating to this audit for the settled tax years during the first quarter of 2022. The settlement is to be paid via installments through 2026 and, through September 30, 2023, the Company has paid $1.5 million of such installments. Having received approximately $1.2 million from escrow during the quarter, the Company has a remaining indemnification receivable of $3.2 million in connection with its claim against the former owners of Houghton for any pre-Combination tax liabilities arising from this matter, as well as other audit settlements and tax matters.
15

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
In the first quarter of 2023, the Company was notified by the Spanish tax authorities of audits to commence for several of its legal entities operating in Spain and spanning tax years 2018 through 2021. In addition, in July 2023, the Company was notified by the Italian tax authorities of an audit to commence for one of the Company’s Italian subsidiaries for tax year 2019. Both of these audit proceedings are ongoing and the Company has been providing documentation in response to all of their inquiries. The Company has not established any reserves for these matters at this time.
Note 12 – Earnings Per Share
The following table summarizes earnings per share calculations:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Basic earnings per common share
Net income attributable to Quaker Chemical Corporation$33,670 $25,867 $92,550 $60,026 
Less: income allocated to participating securities(164)(115)(464)(250)
Net income available to common shareholders$33,506 $25,752 $92,086 $59,776 
Basic weighted average common shares outstanding17,908,75417,847,30517,889,44417,835,976
Basic earnings per common share$1.87 $1.44 $5.15 $3.35 
Diluted earnings per common share
Net income attributable to Quaker Chemical Corporation$33,670 $25,867 $92,550 $60,026 
Less: income allocated to participating securities(164)(115)(464)(250)
Net income available to common shareholders$33,506 $25,752 $92,086 $59,776 
Basic weighted average common shares outstanding17,908,75417,847,30517,889,44417,835,976
Effect of dilutive securities12,52012,56616,70915,465
Diluted weighted average common shares outstanding17,921,27417,859,87117,906,15317,851,441
Diluted earnings per common share$1.87 $1.44 $5.14 $3.35 
Certain stock options, restricted stock units, and PSUs are not included in the diluted earnings per share calculation when the effect would have been anti-dilutive. The calculated amount of anti-diluted shares not included were 11,598 and 10,453 for the three and nine months ended September 30, 2023, respectively, and 25,896 and 24,618 for the three and nine months ended September 30, 2022, respectively.
Note 13 – Goodwill and Other Intangible Assets
The Company completes its annual goodwill and indefinite-lived intangible asset impairment test during the fourth quarter of each year, or more frequently if triggering events indicate a possible impairment. The Company continually evaluates financial performance, economic conditions and other recent developments, including rising interest rates and the cost of capital among other factors, in assessing if a triggering event indicates that the carrying values of goodwill, indefinite-lived, or long-lived assets are impaired. The Company concluded that during the third quarter the ongoing financial, economic or geopolitical conditions did not represent a triggering event.
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.
16

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited; Dollars in thousands, except per share amounts, unless otherwise stated)
Changes in the carrying amount of goodwill were as follows. Prior period information has been recast to reflect the Company’s current period reportable segments. See Note 1 of Notes to Condensed Consolidated Financial Statements.
AmericasEMEAAsia/PacificGlobal
Specialty
Businesses
Total
Balance as of December 31, 2022$215,899$34,567$150,375$114,167$515,008
Reallocation of reporting units63,697 31,711 18,759 (114,167)
Balance as of January 1, 2023279,596 66,278 169,134  515,008 
Currency translation adjustments2,561 (805)(12,307) (10,551)
Balance as of September 30, 2023$282,157$65,473$156,827$$504,457
Gross carrying amounts and accumulated amortization for definite-lived intangible assets were as follows:
Gross Carrying
Amount
Accumulated
Amortization
Net Book Value
September 30, 2023December 31, 2022September 30, 2023December 31, 2022September 30, 2023December 31, 2022
Customer lists and rights to sell$824,893$831,600$226,956$191,286$597,937$640,314
Trademarks, formulations and product technology157,362158,56452,53446,281104,828112,283
Other5,8547,5765,7346,3901201,186
Total definite-lived intangible assets$988,109$997,740$285,224$243,957$702,885$753,783
The Company amortizes definite-lived intangible assets on a straight-line basis over their useful lives. The Company recorded amortization expense as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Amortization expense$14,529 $14,102 $43,734 $43,343 
Estimated annual aggregate amortization expense for the current year and subsequent five years and beyond is as follows:
For the remainder of 2023$13,455
For the year ended December 31, 202456,630
For the year ended December 31, 202555,942
For the year ended December 31, 202655,650
For the year ended December 31, 202755,309
As of September 30, 2023 and December 31, 2022, the Company had indefinite-lived intangible assets for trademarks and tradenames totaling $187.6 million and $189.1 million, respectively.
17

Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued