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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM
10-Q
 
 
☒
QUARTERLY
 
REPORT PURSUANT TO SECTION 13
 
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2021
OR
 
☐
TRANSITION 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)
 
 
Pennsylvania
 
23-0993790
(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 class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $1 par value
KWR
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
 
☒
 
No
 
☐
 
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
 
☒
 
No
 
☐
 
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 filer
 
☒
Accelerated filer
 
☐
 
Non-accelerated filer
 
☐
 
Smaller reporting company
☐
Emerging growth company
 
☐
 
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.
 
☐
Indicate by check mark whether the Registrant is a shell
 
company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes
 
☐
 
No
 
☒
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, 2021
 
17,894,480
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2
PART
 
I
FINANCIAL INFORMATION
Item 1.
 
Financial Statements (Unaudited).
Quaker Chemical Corporation
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
Unaudited
Three Months Ended
Nine Months Ended
September 30,
 
September 30,
 
2021
2020
2021
2020
Net sales
$
449,072
$
367,224
$
1,314,117
$
1,031,825
Cost of goods sold (
excluding amortization expense - See Note 14
)
 
303,941
 
227,032
 
858,341
 
660,396
Gross profit
 
145,131
 
140,192
 
455,776
 
371,429
Selling, general and administrative expenses
 
104,215
 
97,037
 
317,204
 
282,405
Indefinite-lived intangible asset impairment
—
—
—
38,000
Restructuring and related charges
(880)
1,383
593
3,585
Combination, integration and other acquisition-related expenses
5,786
6,913
18,259
22,786
Operating income
 
36,010
34,859
 
119,720
 
24,653
Other income (expense), net
 
647
 
(239)
 
19,344
 
(22,407)
Interest expense, net
(5,637)
(6,837)
(16,725)
(22,109)
Income (loss) before taxes and equity in net income of
associated companies
 
31,020
 
27,783
 
122,339
 
(19,863)
Taxes on income (loss)
 
before equity in net income of associated
companies
 
795
 
2,245
 
26,702
 
(7,603)
Income (loss) before equity in net income of associated
companies
 
30,225
 
25,538
 
95,637
 
(12,260)
Equity in net income of associated companies
 
848
 
1,804
 
7,668
 
3,536
Net income (loss)
31,073
27,342
103,305
(8,724)
Less: Net income attributable to noncontrolling interest
15
38
62
88
Net income (loss) attributable to Quaker Chemical Corporation
$
31,058
$
27,304
$
103,243
$
(8,812)
Per share data:
 
 
 
 
Net income (loss) attributable to Quaker Chemical Corporation
common shareholders – basic
$
1.74
$
1.53
$
5.78
$
(0.50)
Net income (loss) attributable to Quaker Chemical Corporation
 
common shareholders – diluted
$
1.73
$
1.53
$
5.76
$
(0.50)
Dividends declared
$
0.415
$
0.395
$
1.205
$
1.165
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
Quaker Chemical Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
 
(Dollars in thousands)
Unaudited
Three Months Ended
Nine Months Ended
September 30,
 
September 30,
 
2021
2020
2021
2020
Net income (loss)
 
$
31,073
$
27,342
$
103,305
$
(8,724)
Other comprehensive (loss) income, net of tax
Currency translation adjustments
(19,905)
33,618
(29,201)
(10,582)
Defined benefit retirement plans
904
(257)
2,593
16,913
Current period change in fair value of derivatives
436
354
1,450
(3,738)
Unrealized (loss) gain on available-for-sale securities
(215)
556
(2,961)
453
Other comprehensive (loss) income
(18,780)
34,271
(28,119)
3,046
Comprehensive income (loss)
12,293
61,613
75,186
(5,678)
Less: Comprehensive (income) loss attributable to
noncontrolling interest
(15)
(56)
(68)
25
Comprehensive income (loss) attributable to Quaker Chemical
Corporation
$
12,278
$
61,557
$
75,118
$
(5,653)
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Quaker Chemical Corporation
Condensed Consolidated Balance Sheets
(Dollars in thousands, except par value)
Unaudited
September 30,
December 31,
2021
2020
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
$
141,393
$
181,833
Accounts receivable, net
 
433,631
 
372,974
Inventories
 
 
Raw materials and supplies
 
121,951
 
86,148
Work-in-process
 
and finished goods
 
132,943
 
101,616
Prepaid expenses and other current assets
 
63,278
 
50,156
Total current
 
assets
 
893,196
 
792,727
Property, plant and equipment,
 
at cost
 
423,469
 
423,253
Less accumulated depreciation
 
(232,636)
 
(219,370)
Property, plant and equipment,
 
net
 
190,833
 
203,883
Right of use lease assets
34,314
38,507
Goodwill
 
630,669
 
631,212
Other intangible assets, net
 
1,048,688
 
1,081,358
Investments in associated companies
 
94,110
 
95,785
Deferred tax assets
 
18,409
 
16,566
Other non-current assets
 
31,608
 
31,796
Total assets
$
2,941,827
$
2,891,834
LIABILITIES AND EQUITY
 
 
Current liabilities
 
 
Short-term borrowings and current portion of long-term debt
$
52,611
$
38,967
Accounts and other payables
 
219,601
 
198,872
Accrued compensation
 
40,655
 
43,300
Accrued restructuring
4,050
8,248
Other current liabilities
 
93,042
 
93,573
Total current
 
liabilities
 
409,959
 
382,960
Long-term debt
 
839,275
 
849,068
Long-term lease liabilities
24,599
27,070
Deferred tax liabilities
 
174,405
 
192,763
Other non-current liabilities
 
109,893
 
119,059
Total liabilities
 
1,558,131
 
1,570,920
Commitments and contingencies (Note 19)
Equity
 
 
Common stock $
1
 
par value; authorized
30,000,000
 
shares; issued and
 
 
outstanding 2021 –
17,888,577
 
shares; 2020 –
17,850,616
 
shares
17,889
17,851
Capital in excess of par value
 
914,277
 
905,171
Retained earnings
 
505,635
 
423,940
Accumulated other comprehensive loss
 
(54,723)
 
(26,598)
Total Quaker
 
shareholders’ equity
 
1,383,078
 
1,320,364
Noncontrolling interest
 
618
550
Total equity
1,383,696
1,320,914
Total liabilities and equity
$
2,941,827
$
2,891,834
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
Quaker Chemical Corporation
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
Unaudited
Nine Months Ended
September 30,
2021
2020
Cash flows from operating activities
 
 
 
 
 
Net income (loss)
 
$
103,305
$
(8,724)
Adjustments to reconcile net income (loss) to net cash provided by operating
 
activities:
 
 
Amortization of debt issuance costs
 
3,562
 
3,562
Depreciation and amortization
 
65,440
 
62,818
Equity in undistributed earnings of associated companies, net of dividends
 
(7,563)
 
1,415
Acquisition-related fair value adjustments related to inventory
801
229
Deferred compensation, deferred taxes and other,
 
net
 
(21,865)
 
(30,657)
Share-based compensation
 
8,441
 
17,820
(Gain) loss on disposal of property,
 
plant, equipment and other assets
 
(4,819)
 
105
Insurance settlement realized
 
—
 
(818)
Indefinite-lived intangible asset impairment
—
38,000
Combination and other acquisition-related expenses, net of payments
(1,705)
2,498
Restructuring and related charges
593
3,585
Pension and other postretirement benefits
 
(5,638)
 
16,219
(Decrease) increase in cash from changes in current assets and current
 
 
liabilities, net of acquisitions:
Accounts receivable
 
(68,664)
 
30,225
Inventories
 
(72,962)
 
2,137
Prepaid expenses and other current assets
 
(24,512)
 
(113)
Change in restructuring liabilities
(4,557)
(12,772)
Accounts payable and accrued liabilities
 
32,652
 
(13,481)
 
Net cash provided by operating activities
 
2,509
 
112,048
Cash flows from investing activities
 
 
Investments in property,
 
plant and equipment
 
(12,823)
 
(12,184)
Payments related to acquisitions, net of cash acquired
 
(31,975)
 
(3,132)
Proceeds from disposition of assets
14,744
11
Insurance settlement interest earned
 
—
 
41
 
Net cash used in investing activities
 
(30,054)
 
(15,264)
Cash flows from financing activities
 
 
Payments of term loan debt
 
(28,558)
 
(28,132)
Borrowings (repayments) on revolving credit facilities, net
 
39,143
 
(16,485)
Repayments on other debt, net
(585)
 
(527)
Dividends paid
 
(21,175)
 
(20,520)
Stock options exercised, other
 
704
 
2,385
Purchase of noncontrolling interest in affiliates
—
(1,047)
Distributions to noncontrolling affiliate shareholders
—
(751)
 
Net cash used in financing activities
 
(10,471)
 
(65,077)
 
Effect of foreign exchange rate changes on cash
 
(2,486)
 
(529)
Net (decrease) increase in cash, cash equivalents and restricted cash
 
(40,502)
 
31,178
Cash, cash equivalents and restricted cash at the beginning of the period
 
181,895
 
143,555
Cash, cash equivalents and restricted cash at the end of the period
$
141,393
$
174,733
The accompanying notes are an integral part of these condensed consolidated financial
 
statements.
Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share amounts,
 
unless otherwise stated)
(Unaudited)
6
Note 1 – Basis of Presentation and Description of Business
 
Basis of Presentation
As used in these Notes to Condensed Consolidated Financial Statements of
 
this Quarterly Report on Form 10-Q for the period
ended September 30, 2021 (the “Report”),
 
the terms “Quaker,”
 
“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.
 
As used in these Notes to Condensed Consolidated Financial Statements,
 
the term Legacy Quaker refers to the Company
prior to the closing of its combination with Houghton International, Inc. (“Houghton”)
 
(herein referred to as the “Combination”).
 
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, 2021 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, 2020 (the
“2020 Form 10-K”).
 
During the three months ended September 30, 2020, the Company
 
identified and corrected certain immaterial adjustments relating
to the three months ended March 31, 2020 as well as the three and six months
 
ended June 30, 2020.
 
These adjustments related to the
Company’s over-recognition
 
of cost of goods sold (“COGS”) and corresponding under-recognition
 
of inventory, as well as the
associated tax impact of these adjustments, in the Company’s
 
previously issued interim financial statements for the three months
ended March 31, 2020 and the three and six months ended June 30, 2020.
 
These adjustments impact the Company’s
 
Americas
reportable segment.
 
The cumulative amount of reduction to COGS recorded in the three and nine months ended
 
September 30, 2020
was approximately $
1.7
 
million, with approximately $
0.7
 
million related to the three months ended March 31, 2020 and
approximately $
1.0
 
million related to the three months ended June 30, 2020.
Description of Business
The Company was organized in 1918, incorporated as a Pennsylvania
 
business corporation in 1930, and in August 2019
completed the Combination with Houghton to form Quaker Houghton.
 
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, can,
 
mining, and metalworking
companies.
 
Quaker Houghton develops, produces, and markets a broad range of formulated
 
chemical specialty products and offers
chemical management services (which the Company refers to as “Fluidcare”)
 
for various heavy industrial and manufacturing
applications throughout its
four
 
segments: Americas; Europe, Middle East and Africa (“EMEA”); Asia/Pacific; and
 
Global Specialty
Businesses.
Hyper-inflationary economies
Based on various indices or index compilations being used to monitor inflation
 
in Argentina as well as economic instability,
effective July 1, 2018, Argentina’s
 
economy was considered hyper-inflationary under U.S. GAAP.
 
As of, and for the three and nine
months ended September 30, 2021, the Company's Argentine
 
subsidiaries represented less than
1
% of the Company’s consolidated
total assets and net sales, respectively.
 
During the three and nine months ended September 30, 2021, the Company
 
recorded less than
$
0.1
 
million and $
0.3
 
million, respectively,
 
of remeasurement losses associated with the applicable currency conversions
 
related to
Argentina.
 
Comparatively, during the
 
three and nine months ended September 30, 2020, the Company recorded $
0.2
 
million and $
0.3
million, respectively,
 
of remeasurement losses associated with the applicable currency conversions
 
related to Argentina.
 
These losses
were recorded within foreign exchange losses, net, which is a component
 
of other income (expense), net, in the Company’s
Condensed Consolidated Statements of Operations.
COVID-19
Management continues to monitor the impact that the COVID-19 pandemic
 
is having on the Company, the overall
 
specialty
chemical industry, and
 
the economies and markets in which the Company operates.
 
The full extent of the COVID-19 pandemic
related business and travel restrictions and changes to business and consumer behavior
 
intended to reduce its spread are uncertain as of
the date of the Report as COVID-19 and the responses of governmental
 
authorities continue to evolve globally.
Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Dollars in thousands, except per share amounts, unless otherwise stated)
(Unaudited)
7
Further, management continues to evaluate
 
how COVID-19-related circumstances, such as remote work arrangements, affect
financial reporting processes, internal control over financial reporting,
 
and disclosure controls and procedures.
 
While the
circumstances have presented and are expected to continue to present challenges,
 
at this time, Management does not believe that
COVID-19 has had a material impact on financial reporting processes, internal
 
control over financial reporting, and disclosure
controls and procedures.
The Company cannot reasonably estimate the magnitude of the effects
 
these conditions will have on the Company’s
 
operations in
the future as they are subject to significant uncertainties relating to the ultimate
 
geographic spread of the virus, the incidence and
severity of the symptoms, the duration or resurgences
 
of the outbreak including the impact of new variants, the global availability,
acceptance and efficacy of vaccines, the length of the travel restrictions
 
and business closures imposed by governments of impacted
countries, and the economic response by governments of impacted countries,
 
all of which continue to evolve.
To the extent
 
that the Company’s customers and suppliers continue
 
to be significantly and adversely impacted by COVID-19, this
could reduce the availability,
 
or result in delays, of materials or supplies to or from the Company,
 
which in turn could significantly
interrupt the Company’s business operations.
 
Such impacts could grow and become more significant to the Company’s
 
operations
and the Company’s liquidity
 
or financial position.
 
Therefore, given the continuously evolving global developments with respect to
this pandemic, the Company cannot reasonably estimate the magnitude or
 
the full extent to which COVID-19 may impact the
Company’s results of operations,
 
liquidity or financial position.
Note 2 – Business Acquisitions
2021 Acquisitions
In September 2021, the Company acquired the remaining interest in Grindaix-GmbH
 
(“Grindaix”), a Germany-based, high-tech
provider of coolant control and delivery systems for approximately
2.4
 
million EUR or approximately $
2.9
 
million for its Global
Specialty Businesses reportable segment.
 
Previously, in February 2021,
 
the Company acquired a
38
% ownership interest in Grindaix
for approximately
1.4
 
million EUR or approximately $
1.7
 
million.
 
The Company recorded its initial investment as an equity method
investment within the Condensed Consolidated Financial Statements and
 
accounted for the purchase of the remaining interest as a step
acquisition whereby the Company remeasured the previously held
 
equity method investment to its fair value.
In June 2021, the Company acquired certain assets for its chemical maskants
 
product line in the Global Specialty Businesses
reportable segment for
2.3
 
million EUR or approximately $
2.8
 
million.
 
The Company accounted for the acquisition using the asset
acquisition method under ASC 805,
Business Combinations
.
 
In February 2021, the Company acquired a tin-plating solutions business
 
for the steel end market for approximately $
25
 
million.
 
This acquisition is part of each of the Company’s
 
geographic reportable segments.
 
The Company allocated $
19.6
 
million of the
purchase price to intangible assets, comprised of $
18.3
 
million of customer relationships, to be amortized over
19 years
; $
0.9
 
million
of existing product technology to be amortized over
14 years
; and $
0.4
 
million of a licensed trademark to be amortized over
3 years
.
 
In addition, the Company recorded $
5.0
 
million of goodwill related to expected value not allocated to other acquired
 
assets, all of
which is expected to be tax deductible in various jurisdictions in which we
 
operate.
 
As of September 30, 2021, the allocation of the
purchase price has not been finalized and the
one year
 
measurement period has not ended.
 
Further adjustments may be necessary as a
result of the Company’s on-going
 
assessment of additional information related to the fair value of assets acquired
 
and liabilities
assumed.
The results of operations of the acquired assets and businesses subsequent to the
 
respective acquisition dates are included in the
Condensed Consolidated Statements of Operations as of September 30, 2021.
 
Applicable transaction expenses associated with these
acquisitions are included in Combination, integration and other acquisition
 
-related expenses in the Company’s Condensed
Consolidated Statements of Operations.
 
Certain pro forma and other information is not presented, as the operations of the acquired
assets and businesses are not considered material to the overall operations of the
 
Company for the periods presented.
In November 2021, the Company closed two additional acquisitions that expand
 
its strategic product offerings and increase the
Company’s presence in its core metalworking
 
industries.
 
The total initial purchase price for these acquisitions was approximately $
10
million, subject to post-closing adjustments as well as certain earn-out
 
provisions that could total approximately $
4
 
million.
 
Transaction expenses associated with these
 
acquisitions are included in Combination, integration and other acquisition-related
expenses in the Condensed Consolidated Statements of Operations.
 
The results of operations of these two acquisitions are not
included in the Consolidated Statements of Operations because the date of
 
closing for each was subsequent to September 30, 2021.
 
Preliminary purchase price allocation of assets acquired and liabilities assumed
 
have not been presented as that information is not
available as of the date of these Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Dollars in thousands, except per share amounts, unless otherwise stated)
(Unaudited)
8
Previous Acquisitions
In December 2020, the Company completed its acquisition of Coral Chemical
 
Company (“Coral”), a privately held, U.S.-based
provider of metal finishing fluid solutions.
 
The acquisition provides technical expertise and product solutions for pre-treatment,
metalworking and wastewater treatment applications to the beverage
 
cans and general industrial end markets.
 
The original purchase
price was approximately $
54.1
 
million, subject to routine and customary post-closing adjustments related to working
 
capital and net
indebtedness levels.
 
The Company anticipates finalizing its post-closing adjustments for the Coral acquisition
 
during the fourth
quarter of 2021.
The following table presents the preliminary estimated fair values of
 
Coral net assets acquired:
Measurement
December 22,
December 22,
Period
2020
2020 (1)
Adjustments
(as adjusted)
Cash and cash equivalents
$
958
$
—
$
958
Accounts receivable
8,473
—
8,473
Inventories
4,527
—
4,527
Prepaid expenses and other assets
181
—
181
Property, plant and equipment
10,467
652
11,119
Intangible assets
30,300
(500)
29,800
Goodwill
2,814
270
3,084
Total assets purchased
57,720
422
58,142
Long-term debt including current portions and finance leases
183
556
739
Accounts payable, accrued expenses and other accrued liabilities
3,482
—
3,482
Total liabilities assumed
3,665
556
4,221
Total consideration
 
paid for Coral
54,055
(134)
53,921
Less: estimated purchase price settlement
—
(134)
(134)
Less: cash acquired
958
—
958
Net cash paid for Coral
$
53,097
$
—
$
53,097
(1) As previously disclosed in the Company’s
 
2020 Form 10-K
.
Measurement period adjustments recorded during the first nine months of
 
2021 include certain adjustments related to refining
original estimates for assets and liabilities for certain acquired finance
 
leases, as well the adjustment to reflect the expected settlement
of post-closing working capital and net indebtedness true ups to the original purchase
 
price.
 
As of September 30, 2021, the allocation
of the purchase price for Coral has not been finalized and the
one year
 
measurement period has not ended.
 
Further adjustments may
be necessary as a result of the Company’s
 
on-going assessment of additional information related to the fair value of assets acquired
and liabilities assumed.
 
In May 2020, the Company acquired Tel
 
Nordic ApS (“TEL”), a company that specializes in lubricants and engineering primarily
in high pressure aluminum die casting for its EMEA reportable segment.
 
Consideration paid was in the form of a convertible
promissory note in the amount of
20.0
 
million DKK, or approximately $
2.9
 
million, which was subsequently converted into shares of
the Company’s common stock.
 
An adjustment to the purchase price of approximately
0.4
 
million DKK, or less than $
0.1
 
million, was
made as a result of finalizing a post-closing settlement in the second
 
quarter of 2020.
 
The Company allocated approximately $
2.4
million of the purchase price to intangible assets to be amortized over
17 years
.
 
In addition, the Company recorded approximately
$
0.5
 
million of goodwill, related to expected value not allocated to other acquired
 
assets, none of which will be tax deductible.
 
As of
September 30, 2021, the allocation of the purchase price of TEL was finalized
 
and the
one year
 
measurement period ended.
 
Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Dollars in thousands, except per share amounts, unless otherwise stated)
(Unaudited)
9
In March 2020, the Company acquired the remaining
49
% ownership interest in one of its South African affiliates, Quaker
Chemical South Africa Limited (“QSA”) for
16.7
 
million ZAR, or approximately $
1.0
 
million, from its joint venture partner PQ
Holdings South Africa.
 
QSA is a part of the Company’s EMEA
 
reportable segment.
 
As this acquisition was a change in an existing
controlling ownership, the Company recorded $
0.7
 
million of excess purchase price over the carrying value of the noncontrolling
interest in Capital in excess of par value.
 
In October 2019, the Company completed its acquisition of the operating
 
divisions of Norman Hay plc (“Norman Hay”), a private
U.K. company that provides specialty chemicals, operating equipment, and
 
services to industrial end markets.
 
The original purchase
price was
80.0
 
million GBP,
 
on a cash-free and debt-free basis, subject to routine and customary post-closing
 
adjustments related to
working capital and net indebtedness levels.
 
The Company finalized its post-closing adjustments for the
 
Norman Hay acquisition and
paid approximately
2.5
 
million GBP during the first quarter of 2020 to settle such adjustments.
 
Note 3 – Recently Issued Accounting Standards
 
Recently Issued Accounting Standards
 
Adopted
The Financial Accounting Standards Board (“FASB”)
 
issued Account Standards Update (“ASU”)
ASU 2019-12
, Income Taxes
(Topic
 
740): Simplifying the Accounting for Income Taxes
 
in December 2019 to simplify the accounting for income taxes.
 
The
guidance within this accounting standard update removes
 
certain exceptions, including the exception to the incremental approach for
certain intra-period tax allocations, to the requirement to recognize
 
or not recognize certain deferred tax liabilities for equity method
investments and foreign subsidiaries, and to the general methodology for
 
calculating income taxes in an interim period when a year-to-
date loss exceeds the anticipated loss for the year.
 
Further, the guidance simplifies the accounting related
 
to franchise taxes, the step
up in tax basis for goodwill, current and deferred tax expense, and codification
 
improvements for income taxes related to employee
stock ownership plans.
 
The guidance is effective for annual and interim periods beginning
 
after December 15, 2020.
 
The Company
adopted this standard on a prospective basis, effective January
 
1, 2021.
 
There was no cumulative effect of adoption recorded within
retained earnings on January 1, 2021.
The FASB issued ASU 2020
 
-04,
Reference Rate Reform (Topic
 
848): Facilitation of the Effects of Reference Rate Reform
 
on
Financial Reporting
 
in March 2020.
 
The FASB subsequently
 
issued ASU 2021-01,
Reference Rate Reform (Topic
 
848): Scope
 
in
January 2021 which clarified the guidance but did not materially change
 
the guidance or its applicability to the Company.
 
The
amendments provide temporary optional expedients and exceptions
 
for applying U.S. GAAP to contract modifications, hedging
relationships and other transactions to ease the potential accounting
 
and financial reporting burden associated with transitioning away
from reference rates that are expected to be discontinued, including
 
the London Interbank Offered Rate (“LIBOR”).
 
ASU 2020-04 is
effective for the Company as of March 12, 2020 and generally can
 
be applied through December 31, 2022.
 
As of September 30, 2021,
the expedients provided in ASU 2020-04 do not presently impact
 
the Company; however, the Company will continue
 
to monitor for
potential impacts on its consolidated financial statements.
Note 4 – Business Segments
The Company’s operating
 
segments, which are consistent with its reportable segments, reflect the structure of the
 
Company’s
internal organization, the method by which the Company’s
 
resources are allocated and the manner by which the chief operating
decision maker assesses the Company’s
 
performance.
 
The Company has
four
 
reportable segments: (i) Americas; (ii) EMEA; (iii)
Asia/Pacific; and (iv) Global Specialty Businesses.
 
The three geographic segments are composed of the net sales and operations in
each respective region, excluding net sales and operations managed globally
 
by the Global Specialty Businesses segment, which
includes the Company’s container,
 
metal finishing, mining, offshore, specialty coatings, specialty grease
 
and Norman Hay businesses.
Segment operating earnings for each of the Company’s
 
reportable segments are comprised of the segment’s
 
net sales less directly
related 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,
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Dollars in thousands, except per share amounts, unless otherwise stated)
(Unaudited)
10
The following table presents information about the performance of the Company’s
 
reportable segments for the three and nine
months ended September 30, 2021 and 2020.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net sales
 
 
 
 
 
 
 
 
 
 
Americas
$
150,799
$
119,540
$
425,343
$
330,012
EMEA
 
122,241
 
94,005
 
365,491
 
276,546
Asia/Pacific
 
98,659
 
84,877
 
286,924
 
226,850
Global Specialty Businesses
 
77,373
 
68,802
 
236,359
 
198,417
Total net sales
$
449,072
$
367,224
$
1,314,117
$
1,031,825
Segment operating earnings
Americas
$
31,273
$
31,099
$
97,155
$
70,590
EMEA
20,153
17,439
68,802
46,269
Asia/Pacific
23,285
27,304
73,990
66,106
Global Specialty Businesses
 
20,663
 
21,161
 
69,041
 
58,114
Total segment operating
 
earnings
 
95,374
 
97,003
 
308,988
 
241,079
Combination, integration and other acquisition-related expenses
(5,786)
(6,913)
(18,259)
(22,786)
Restructuring and related charges
880
(1,383)
(593)
(3,585)
Fair value step up of acquired inventory sold
 
—
—
(801)
(226)
Indefinite-lived intangible asset impairment
—
—
—
(38,000)
Non-operating and administrative expenses
(38,691)
(39,786)
(122,760)
(110,282)
Depreciation
 
of corporate assets and amortization
 
(15,767)
 
(14,062)
 
(46,855)
 
(41,547)
Operating income
36,010
34,859
119,720
24,653
Other income (expense), net
647
(239)
19,344
(22,407)
Interest expense, net
 
(5,637)
 
(6,837)
 
(16,725)
 
(22,109)
Income (loss) before taxes and equity in net income of
associated companies
$
31,020
$
27,783
$
122,339
$
(19,863)
Inter-segment revenues for the three and nine months ended September
 
30, 2021 were $
3.6
 
million and $
9.3
 
million for Americas,
$
6.8
 
million and $
21.9
 
million for EMEA, $
0.8
 
million and $
1.3
 
million for Asia/Pacific, and $
1.8
 
million and $
5.9
 
million for Global
Specialty Businesses, respectively.
 
Inter-segment revenues for the three and nine months ended
 
September 30, 2020 were $
1.7
million and $
7.0
 
million for Americas, $
5.3
 
million and $
16.1
 
million for EMEA, $
0.2
 
million and $
0.5
 
million for Asia/Pacific, and
$
1.1
 
million and $
3.4
 
million for Global Specialty Businesses, respectively.
 
However, all inter-segment
 
transactions have been
eliminated from each reportable operating segment’s
 
net sales and earnings for all periods presented in the above tables.
Note 5 – Net Sales and Revenue Recognition
Business Description
The Company develops, produces, and markets a broad range of formulated
 
chemical specialty products and offers chemical
management services (“Fluidcare”) for various heavy industrial and
 
manufacturing applications throughout its four segments.
 
A
significant portion of the Company’s
 
revenues are realized from the sale of process fluids and services made directly
 
to manufacturers
through its own employees and its Fluidcare programs, with the balance
 
being handled through distributors and agents.
As part of the Company’s Fluidcare
 
business, certain third-party product sales to customers are managed by
 
the Company.
 
Where
the Company acts as a principal, revenues are recognized on a gross reporting
 
basis at the selling price negotiated with its customers.
Where the Company acts as an agent, revenue is recognized on a net reporting
 
basis at the amount of the administrative fee earned by
the Company for ordering the goods.
 
The Company transferred third-party products under arrangements recognized
 
on a net reporting
basis of $
18.9
 
million and $
53.4
 
million for the three and nine months ended September 30, 2021, respectively,
 
and $
11.1
 
million and
$
29.9
 
million for the three and nine months ended September 30, 2020, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Dollars in thousands, except per share amounts, unless otherwise stated)
(Unaudited)
11
As previously disclosed in the Company’s
 
2020 Form 10-K, during 2020, the Company’s
 
five largest customers (each composed
of multiple subsidiaries or divisions with semiautonomous purchasing
 
authority) accounted for approximately
10
% of consolidated net
sales, with its largest customer accounting for approximately
3
% of consolidated net sales.
Revenue Recognition Model
The Company applies the five-step model in the FASB’s
 
guidance, which requires the Company to: (i) identify the
 
contract with a
customer; (ii) identify the performance obligations in the contract; (iii)
 
determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v) recognize
 
revenue when, or as, the Company satisfies a performance
obligation.
 
Refer to the Company’s 2020 Form 10-K
 
for additional information on the Company’s
 
revenue recognition policies,
including its practical expedients and accounting policy elections.
 
Allowance for Doubtful Accounts
As previously disclosed in the Company’s
 
2020 Form 10-K, during 2020, the Company adopted, as required, an accounting
standard update related to the accounting and disclosure of credit losses effective
 
January 1, 2020.
 
The Company recognizes an
allowance for credit losses, which represents the portion of its trade accounts
 
receivable that the Company does not expect to collect
over the contractual life, considering past events and reasonable and
 
supportable forecasts of future economic conditions.
 
The
Company’s allowance for
 
credit losses on its trade accounts receivables is based on specific collectability facts and circumstances
 
for
each outstanding receivable and customer,
 
the aging of outstanding receivables, and the associated collection risk the
 
Company
estimates for certain past due aging categories, and also, the general risk
 
to all outstanding accounts receivable based on historical
amounts determined to be uncollectible.
 
The Company does not have any off-balance-sheet credit exposure
 
related to its customers.
Contract Assets and Liabilities
The Company recognizes a contract asset or receivable on its Condensed
 
Consolidated Balance Sheet when the Company
performs a service or transfers a good in advance of receiving consideration.
 
A receivable is the Company’s right to
 
consideration that
is unconditional and only the passage of time is required before payment
 
of that consideration is due.
 
A contract asset is the
Company’s right to consideration
 
in exchange for goods or services that the Company has transferred to a customer.
 
The Company
had no material contract assets recorded on its Condensed Consolidated
 
Balance Sheets as of September 30, 2021 or December 31,
2020.
A contract liability is recognized when the Company receives consideration,
 
or if it has the unconditional right to receive
consideration, in advance of performance.
 
A contract liability is the Company’s
 
obligation to transfer goods or services to a customer
for which the Company has received consideration, or a specified amount
 
of consideration is due, from the customer.
 
The Company’s
contract liabilities primarily represent deferred revenue recorded
 
for customer payments received by the Company prior to the
Company satisfying the associated performance obligation.
 
Deferred revenues are presented within other current liabilities in the
Company’s Condensed Consolidated
 
Balance Sheets.
 
The Company had approximately $
4.4
 
million and $
4.0
 
million of deferred
revenue as of September 30, 2021 and December 31, 2020, respectively.
 
For the nine months ended September 30, 2021, the
Company satisfied all of the associated performance obligations
 
and recognized into revenue the advance payments received and
recorded as of December 31, 2020.
Disaggregated Revenue
The following tables disaggregate the Company’s
 
net sales by segment, geographic region, customer industry,
 
and timing of
revenue recognized for the three and nine months ended September 30, 2021
 
and 2020.
Three Months Ended September 30, 2021
Consolidated
Americas
EMEA
Asia/Pacific
Total
Customer Industries
Metals
$
56,954
$
38,483
$
53,994
$
149,431
Metalworking and other
93,845
83,758
44,665
222,268
150,799
122,241
98,659
371,699
Global Specialty Businesses
46,008
19,253
12,112
77,373
$
196,807
$
141,494
$
110,771
$
449,072
Timing of Revenue Recognized
Product sales at a point in time
$
188,340
$
131,982
$
108,559
$
428,881
Services transferred over time
8,467
9,512
2,212
20,191
$
196,807
$
141,494
$
110,771
$
449,072
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Dollars in thousands, except per share amounts, unless otherwise stated)
(Unaudited)
12
Three Months Ended September 30, 2020
Consolidated
Americas
EMEA
Asia/Pacific
Total
Customer Industries
Metals
$
42,098
$
25,362
$
45,001
$
112,461
Metalworking and other
77,442
68,643
39,876
185,961
119,540
94,005
84,877
298,422
Global Specialty Businesses
39,197
17,429
12,176
68,802
$
158,737
$
111,434
$
97,053
$
367,224
Timing of Revenue Recognized
Product sales at a point in time
$
153,820
$
107,093
$
94,660
$
355,573
Services transferred over time
4,917
4,341
2,393
11,651
$
158,737
$
111,434
$
97,053
$
367,224
Nine Months Ended September 30, 2021
Consolidated
Americas
EMEA
Asia/Pacific
Total
Customer Industries
Metals
$
155,546
$
108,391
$
151,944
$
415,881
Metalworking and other
269,797
257,100
134,980
661,877
425,343
365,491
286,924
1,077,758
Global Specialty Businesses
137,447
61,203
37,709
236,359
$
562,790
$
426,694
$
324,633
$
1,314,117
Timing of Revenue Recognized
Product sales at a point in time
$
537,161
$
400,982
$
316,222
$
1,254,365
Services transferred over time
25,629
25,712
8,411
59,752
$
562,790
$
426,694
$
324,633
$
1,314,117
Nine Months Ended September 30, 2020
Consolidated
Americas
EMEA
Asia/Pacific
Total
Customer Industries
Metals
$
121,458
$
80,174
$
122,006
$
323,638
Metalworking and other
208,554
196,372
104,844
509,770
330,012
276,546
226,850
833,408
Global Specialty Businesses
115,722
49,603
33,092
198,417
$
445,734
$
326,149
$
259,942
$
1,031,825
Timing of Revenue Recognized
Product sales at a point in time
$
431,266
$
313,511
$
254,011
$
998,788
Services transferred over time
14,468
12,638
5,931
33,037
$
445,734
$
326,149
$
259,942
$
1,031,825
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Dollars in thousands, except per share amounts, unless otherwise stated)
(Unaudited)
13
Note 6 – Leases
The Company determines if an arrangement is a lease at its inception.
 
This determination generally depends on whether the
arrangement conveys the right to control the use of an identified fixed asset explicitly
 
or implicitly for a period of time in exchange for
consideration.
 
Control of an underlying asset is conveyed if the Company obtains the rights to direct the
 
use of, and obtains
substantially all of the economic benefits from the use of, the underlying
 
asset.
 
Lease expense for variable leases and short-term
leases is recognized when the obligation is incurred.
The Company has operating leases for certain facilities, vehicles and machinery
 
and equipment with remaining lease terms up to
10 years
.
 
In addition, the Company has certain land use leases with remaining lease terms up
 
to
94 years
.
 
The lease term for all of the
Company’s leases includes the non
 
-cancellable period of the lease plus any additional periods covered by an option
 
to extend the lease
that the Company is reasonably certain it will exercise.
 
Operating leases are included in right of use lease assets, other current
liabilities and long-term lease liabilities on the Condensed Consolidated
 
Balance Sheet.
 
Right of use lease assets and liabilities are
recognized at each lease’s commencement
 
date based on the present value of its lease payments over its respective lease term.
 
The
Company uses the stated borrowing rate for a lease when readily determinable.
 
When a stated borrowing rate is not available in a
lease agreement, the Company uses its incremental borrowing rate based on
 
information available at the lease’s commencement
 
date
to determine the present value of its lease payments.
 
In determining the incremental borrowing rate used to present value each of its
leases, the Company considers certain information including fully
 
secured borrowing rates readily available to the Company and its
subsidiaries.
 
The Company has immaterial finance leases, which are included in property,
 
plant and equipment, current portion of
long-term debt and long-term debt on the Condensed Consolidated Balance
 
Sheet.
Operating lease expense is recognized on a straight-line basis over the
 
lease term.
 
Operating lease expense for the three and nine
months ended September 30, 2021 was $
3.4
 
million and $
10.6
 
million, respectively.
 
Comparatively, operating
 
lease expense for the
three and nine months ended September 30, 2020 was $
3.7
 
million and $
10.6
 
million, respectively.
 
Short-term lease expense for the
three and nine months ended September 30, 2021 was $
0.2
 
million and $
0.8
 
million, respectively.
 
Comparatively, short-term
 
lease
expense for the three and nine months ended September 30, 2020
 
was $
0.2
 
million and $
1.1
 
million, respectively.
 
The Company has
no
 
material variable lease costs or sublease income for the three or nine months ended September
 
30, 2021 and 2020.
 
Cash paid for operating leases during the nine months ended September 30, 2021
 
and 2020 was $
10.4
 
million and $
10.5
 
million,
respectively.
 
The Company recorded new right of use lease assets and associated lease liabilities of $
5.6
 
million during the nine
months ended September 30, 2021.
 
Supplemental balance sheet information related to the Company’s
 
leases is as follows:
September 30,
December 31,
2021
2020
Right of use lease assets
$
34,314
$
38,507
Other current liabilities
9,356
10,901
Long-term lease liabilities
24,599
27,070
Total operating lease liabilities
$
33,955
$
37,971
Weighted average
 
remaining lease term (years)
5.7
6.0
Weighted average
 
discount rate
4.26%
4.20%
Maturities of operating lease liabilities as of September 30, 2021 were
 
as follows:
September 30,
2021
For the remainder of 2021
$
2,978
For the year ended December 31, 2022
9,695
For the year ended December 31, 2023
7,564
For the year ended December 31, 2024
5,623
For the year ended December 31, 2025
4,340
For the year ended December 31, 2026 and beyond
8,104
Total lease payments
38,304
Less: imputed interest
(4,349)
Present value of lease liabilities
$
33,955
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quaker Chemical Corporation
Notes to Condensed Consolidated Financial Statements - Continued
(Dollars in thousands, except per share amounts, unless otherwise stated)
(Unaudited)
14
Note 7 – Restructuring and Related Activities
The Company’s management approved a global restructuring plan (the “QH Program”) as part of its plan to realize certain cost
synergies associated with the Combination in the third quarter of 2019. The QH Program includes restructuring and associated
severance costs to reduce total headcount by approximately 400 people globally, as well as plans for the closure of certain
manufacturing and non-manufacturing facilities. The exact timing and total costs associated with the QH Program will depend on a
number of factors and is subject to change; however, the Company currently expects reduction in headcount and site closures to
continue to occur throughout 2021 and into 2022 under the QH Program and estimates that anticipated cost synergies realized from the
QH Program will approximate one-times the restructuring costs incurred. Employee separation benefits will vary depending on local
regulations within certain foreign countries and will include severance and other benefits.
All costs incurred to date relate to 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 and
 
are recorded in Restructuring and related
charges in the Company’s
 
Condensed Statements of Operations.
 
As described in Note 4 of Notes to Condensed 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.
Activity in the Company’s accrual
 
for restructuring under the QH Program for the nine months ended September 30, 2021
 
is as
follows:
QH Program
Accrued restructuring as of December 31, 2020
$
8,248
Restructuring and related charges
593
Cash payments
(4,557)
Currency translation adjustments
 
(234)
Accrued restructuring as of September 30, 2021
$
4,050
Note 8 – Share-Based Compensation
The Company recognized the following share-based compensation expense
 
in its Condensed Consolidated Statements of
Operations for the three and nine months ended September 30, 2021
 
and 2020:
 
Three Months Ended
Nine Months Ended
September 30,
 
September 30,
 
2021
2020
20