Quaker Houghton - 10-Q quarterly report FY2020 Q3

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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, 2020

☐

TRANSITION REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from

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

☒

☐

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

☒

☐

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

☐

☒

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, 2020

17,831,576

QUAKER CHEMICAL CORPORATION

AND CONSOLIDATED

SUBSIDIARIES

Page

PART

FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and September 30, 2019

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2020 and

September 30, 2019

Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and September 30, 2019

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

Item 4.

Controls and Procedures.

PART

OTHER INFORMATION.

Item 1.

Legal Proceedings.

Item 1A.

Risk Factors.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

Item 6.

Exhibits.

Signatures

PART

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,

2020

2019

2020

2019

Net sales

367,224

325,130

1,031,825

742,209

Cost of goods sold (

excluding amortization expense - See Note 14

)

227,032

220,073

660,396

486,224

Gross profit

140,192

105,057

371,429

255,985

Selling, general and administrative expenses

97,037

80,812

282,405

182,293

Indefinite-lived intangible asset impairment

—

38,000

—

Restructuring and related charges

1,383

24,045

3,585

24,045

Combination, integration and other acquisition-related

expenses

6,913

14,702

22,786

23,789

Operating income (loss)

34,859

(14,502)

24,653

25,858

Other (expense) income, net

(239)

203

(22,407)

(389)

Interest expense, net

(6,837)

(6,102)

(22,109)

(7,611)

Income (loss) before taxes and equity in net income of

associated companies

27,783

(20,401)

(19,863)

17,858

Taxes on income

(loss) before equity in net income of associated

companies

2,245

(5,633)

(7,603)

4,096

Income (loss) before equity in net income of associated

companies

25,538

(14,768)

(12,260)

13,762

Equity in net income of associated companies

1,804

1,787

3,536

2,806

Net income (loss)

27,342

(12,981)

(8,724)

16,568

Less: Net income attributable to noncontrolling interest

186

Net income (loss) attributable to Quaker Chemical Corporation

27,304

(13,053)

(8,812)

16,382

Per share data:

Net income (loss) attributable to Quaker Chemical Corporation

common shareholders – basic

1.53

(0.80)

(0.50)

1.15

Net income (loss) attributable to Quaker Chemical Corporation

common shareholders – diluted

1.53

(0.80)

(0.50)

1.14

Dividends declared

0.395

0.385

1.165

1.140

The accompanying notes are an integral part of these condensed consolidated financial statements.

Quaker Chemical Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Dollars in thousands)

Unaudited

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

Net income (loss)

27,342

(12,981)

(8,724)

16,568

Other comprehensive income (loss), net of tax

Currency translation adjustments

33,618

(28,305)

(10,582)

(29,256)

Defined benefit retirement plans

(257)

1,126

16,913

2,354

Current period change in fair value of derivatives

354

—

(3,738)

—

Unrealized gain (loss) on available-for-sale securities

556

(81)

453

1,499

Other comprehensive income (loss)

34,271

(27,260)

3,046

(25,403)

Comprehensive income (loss)

61,613

(40,241)

(5,678)

(8,835)

Less: Comprehensive (income) loss attributable to

noncontrolling interest

(56)

(115)

Comprehensive income (loss) attributable to Quaker Chemical

Corporation

61,557

(40,219)

(5,653)

(8,950)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Quaker Chemical Corporation

Condensed Consolidated Balance

Sheets

(Dollars in thousands, except par value and share amounts)

Unaudited

September 30,

December 31,

2020

2019

ASSETS

Current assets

Cash and cash equivalents

155,750

123,524

Accounts receivable, net

338,875

375,982

Inventories

Raw materials and supplies

77,893

82,058

Work-in-process

and finished goods

93,434

92,892

Prepaid expenses and other current assets

52,612

41,516

Total current

assets

718,564

715,972

Property, plant and

equipment, at cost

394,286

398,834

Less accumulated depreciation

(206,406)

(185,365)

Property, plant and

equipment, net

187,880

213,469

Right of use lease assets

39,781

42,905

Goodwill

612,144

607,205

Other intangible assets, net

1,045,040

1,121,765

Investments in associated companies

92,163

93,822

Deferred tax assets

13,085

14,745

Other non-current assets

44,531

40,433

Total assets

2,753,188

2,850,316

LIABILITIES AND EQUITY

Current liabilities

Short-term borrowings and current portion of long-term debt

38,630

38,332

Accounts and other payables

165,582

170,929

Accrued compensation

36,994

45,620

Accrued restructuring

8,893

18,043

Other current liabilities

87,041

87,010

Total current

liabilities

337,140

359,934

Long-term debt

846,070

882,437

Long-term lease liabilities

28,061

31,273

Deferred tax liabilities

189,439

211,094

Other non-current liabilities

126,047

123,212

Total liabilities

1,526,757

1,607,950

Commitments and contingencies (Note 19)

Equity

Common stock $

par value; authorized

30,000,000

shares; issued and

outstanding 2020 –

17,830,541

shares; 2019 –

17,735,162

17,831

17,735

Capital in excess of par value

900,602

888,218

Retained earnings

382,521

412,979

Accumulated other comprehensive loss

(75,010)

(78,170)

Total Quaker

shareholders’ equity

1,225,944

1,240,762

Noncontrolling interest

487

1,604

Total equity

1,226,431

1,242,366

Total liabilities and

equity

2,753,188

2,850,316

The accompanying notes are an integral part of these condensed consolidated financial statements.

Quaker Chemical Corporation

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

Unaudited

Nine Months Ended

September 30,

2020

2019

Cash flows from operating activities

Net (loss) income

(8,724)

16,568

Adjustments to reconcile net (loss) income to net cash provided

by operating activities:

Amortization of debt issuance costs

3,562

792

Depreciation and amortization

62,818

23,868

Equity in undistributed earnings of associated companies,

net of dividends

1,415

(129)

Acquisition-related fair value adjustments related to inventory

229

10,214

Deferred compensation, deferred taxes and other,

net

(30,657)

(17,204)

Share-based compensation

17,820

3,042

Loss (gain) on disposal of property,

plant, equipment and other assets

105

(111)

Insurance settlement realized

(818)

(624)

Indefinite-lived intangible asset impairment

38,000

—

Combination and other acquisition-related expenses, net of

payments

2,498

(14,218)

Restructuring and related charges

3,585

24,045

Pension and other postretirement benefits

16,219

434

Increase (decrease) in cash from changes in current assets and current

liabilities, net of acquisitions:

Accounts receivable

30,225

2,655

Inventories

2,137

1,376

Prepaid expenses and other current assets

(113)

(10,931)

Change in restructuring liabilities

(12,772)

(4,645)

Accounts payable and accrued liabilities

(13,481)

344

Net cash provided by operating activities

112,048

35,476

Cash flows from investing activities

Investments in property,

plant and equipment

(12,184)

(10,112)

Payments related to acquisitions, net of cash acquired

(3,132)

(798,064)

Proceeds from disposition of assets

Insurance settlement interest earned

185

Net cash used in investing activities

(15,264)

(807,916)

Cash flows from financing activities

Payments of term loan debt

(28,132)

—

Proceeds from long-term debt

—

750,000

(Repayments) borrowings on revolving credit facilities,

net

(16,485)

85,966

(Repayments) borrowings on other debt, net

(527)

415

Financing-related debt issuance costs

—

(23,747)

Dividends paid

(20,520)

(15,003)

Stock options exercised, other

2,385

733

Purchase of noncontrolling interest in affiliates

(1,047)

—

Distributions to noncontrolling affiliate shareholders

(751)

—

Net cash (used in) provided by financing activities

(65,077)

798,364

Effect of foreign exchange rate changes on

cash

(529)

(1,889)

Net increase in cash, cash equivalents and restricted cash

31,178

24,035

Cash, cash equivalents and restricted cash at the beginning

of the period

143,555

124,425

Cash, cash equivalents and restricted cash at the end of

the period

174,733

148,460

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)

Note 1 – Condensed Financial Information

As used in these Notes to Condensed Consolidated

Financial Statements, 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 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 three and nine months ended September 30,

2020 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, 2019 (the “2019 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, respectively.

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.

Hyper-inflationary economies

Economies that have a cumulative three-year rate of inflation

exceeding

100

% are considered hyper-inflationary in accordance

with U.S. GAAP.

A legal entity that operates within an economy deemed

to be hyper-inflationary is required to remeasure its

monetary assets and liabilities to the applicable published

exchange rates and record the associated gains or losses resulting

from the

remeasurement directly to the Condensed Consolidated

Statements of Operations.

Based on various indices or index compilations currently

being used to monitor inflation in Argentina as well as

recent economic

instability, effective

July 1, 2018, Argentina’s

economy was considered hyper-inflationary under U.S. GAAP.

As a result, the

Company began applying hyper-inflationary

accounting with respect to the Company's wholly owned

Argentine subsidiary beginning

July 1, 2018.

In addition, Houghton has an Argentina subsidiary to

which hyper-inflationary accounting also is applied.

As of, and

for the three and nine months ended September 30,

2020 and 2019, the Company's Argentine subsidiaries represented

less than

% of

the Company’s consolidated

total assets and net sales, respectively.

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.

Comparatively, during

the three and nine months ended September 30, 2019,

the Company recorded

0.7

million and $

0.9

million of remeasurement losses associated with the applicable

currency conversion related to Argentina.

These

losses were recorded within foreign exchange (losses) gains,

net, which is a component of other (expense) income,

net, in the

Company’s Condensed

Consolidated Statements of Operations.

Note 2 – Business Combinations

Houghton

August 1, 2019

, the Company completed the Combination, whereby the Company

acquired all of the issued and outstanding

shares of

Houghton

from Gulf Houghton Lubricants, Ltd. and certain other selling

shareholders in exchange for a combination of cash

and shares of the Company’s

common stock in accordance with the Share Purchase Agreement,

dated April 4, 2017.

Houghton is a

leading global provider of specialty chemicals and technical

services for metalworking and other industrial applications.

The

Company believes that combining the Legacy Quaker

and Houghton products and service offerings allows Quaker

Houghton to better

serve its customers in its various end markets.

The Combination was subject to certain regulatory

and shareholder approvals.

At a shareholder meeting held during 2017, the

Company’s shareholders

approved the issuance of new shares of the Company’s

common stock at closing of the Combination.

Also

in 2017, the Company received regulatory approvals for

the Combination from China and Australia.

The Company received

regulatory approvals from the European Commission

(“EC”) during the second quarter of 2019 and the U.S. Federal

Trade

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Commission (“FTC”) in July 2019.

The approvals from the FTC and the EC required the concurrent

divestiture of certain steel and

aluminum related product lines of Houghton, which

were sold by Houghton on August 1, 2019 for approximately

million in cash.

The final remedy agreed with the EC and the FTC was consistent

with the Company’s

previous expectation that the total divested

product lines would be approximately

% of the combined company’s

net sales.

The following table summarizes the fair value of consideration

transferred in the Combination:

Cash transferred to Houghton shareholders (a)

170,829

Cash paid to extinguish Houghton debt obligations

702,556

Fair value of common stock issued as consideration (b)

789,080

Total fair value

of consideration transferred

1,662,465

(

A portion is held in escrow by a third party,

subject to indemnification rights that lapse upon the achievement

of certain

milestones.

(b)

Amount was determined based on approximately

4.3

million shares, comprising

24.5

% of the common stock of the Company

immediately after the closing, and the closing price per

share of Quaker Chemical Corporation common stock

of $

182.27

August 1, 2019.

The Company accounted for the Combination under the

acquisition method of accounting.

This method requires the recording of

acquired assets, including separately identifiable

intangible assets, at their fair value on the acquisition date.

Any excess of the

purchase price over the estimated fair value of

the identifiable net assets acquired is recorded as goodwill.

The determination of the

estimated fair value of assets acquired,

including indefinite and definite-lived intangible assets,

requires management’s

judgment

and

often involves the use of significant estimates and assumptions,

including assumptions with respect to future cash inflows and

outflows, discount rates, customer attrition rates, royalty

rates, asset lives and market multiples, among other items.

Fair values were

determined by management using a variety of methodologies

and resources, including external independent valuation

experts.

The

valuation methods included physical appraisals, discounted

cash flow analyses, excess earnings, relief from royal

ty, and other

appropriate valuation techniques to determine the fair value

of assets acquired and liabilities assumed.

The following table presents the final estimated fair

values of Houghton net assets acquired:

Measurement

August 1,

Period

August 1, 2019

2019 (1)

Adjustments

(as adjusted)

Cash and cash equivalents

75,821

—

75,821

Accounts receivable, net

178,922

—

178,922

Inventories, net

95,193

—

95,193

Prepaid expenses and other assets

10,652

666

11,318

Property, plant and

equipment

115,529

(66)

115,463

Right of use lease assets

10,673

—

10,673

Investments in associated companies

66,447

—

66,447

Other non-current assets

4,710

1,553

6,263

Intangible assets

1,028,400

—

1,028,400

Goodwill

494,915

4,625

499,540

Total assets purchased

2,081,262

6,778

2,088,040

Short-term borrowings, not refinanced at closing

9,297

—

9,297

Accounts payable, accrued expenses and other accrued liabilities

150,078

1,127

151,205

Deferred tax liabilities

205,082

4,098

209,180

Long-term lease liabilities

6,607

—

6,607

Other non-current liabilities

47,733

1,553

49,286

Total liabilities assumed

418,797

6,778

425,575

Total consideration

paid for Houghton

1,662,465

—

1,662,465

Less: cash acquired

75,821

—

75,821

Less: fair value of common stock issued as consideration

789,080

—

789,080

Net cash paid for Houghton

797,564

—

797,564

(1) As

previously disclosed in the Company’s

2019 Form 10-K.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

As of September 30, 2020, the allocation of the purchase

price for the Combination has been finalized and the

one-year

measurement period has ended.

Houghton assets acquired and liabilities assumed have been assigned

to each of the Company’s

reportable segments on a specific identification or allocated

basis, as applicable.

Measurement period adjustments recorded during

2020 related primarily to increasing the valuation allowances

against the deferred tax assets associated with foreign

tax credits

acquired as part of the Combination as additional information

became available and was used to update the Company’s

initial

estimates of expenses allocated to foreign source income

and expected creditable foreign taxes.

In addition, measurement period

adjustments included

the recognition of additional other non-current assets and other non-current

liabilities based on additional

information

obtained regarding certain tax audits and associated rights to

indemnification, and certain non-income tax liabilities

payable upon closing of the Combination in certain

countries.

Commencing August 1, 2019, the Company’s

Consolidated Statements of Operations included the results of

Houghton.

Net sales

of Houghton subsequent to closing of the Combination

and included in the Company’s

Consolidated Statements of Operations for the

three and nine months ending September 30, 2019

were $

119.5

million.

The following unaudited pro forma consolidated financial

information has been prepared as if the Combination

had taken place on January 1, 2018.

The unaudited pro forma results include

certain adjustments to each company’s

historical actual results, including: (i) additional depreciation

and amortization expense based

on the initial estimates of fair value step up and estimated

useful lives of depreciable fixed assets, definite-lived intangible assets and

investment in associated companies acquired; (ii)

adoption of required accounting guidance and alignment of related

accounting

policies, (iii) elimination of transactions between Legacy

Quaker and Houghton; (iv) elimination of results associated with the

divested product lines; (v) adjustment to interest expense,

net, to reflect the impact of the financing and capital structure of

the

combined Company; and (vi) adjustment for certain

Combination, integration and other acquisition-related costs to

reflect such costs

as if they were incurred in the period immediately following

the pro-forma closing of the Combination on January

1, 2018.

The

adjustments described in (vi) include an expense recorded

in COGS associated with selling inventory acquired in the

Combination

which was adjusted to fair value as part of purchase accounting,

restructuring expense incurred associated with the Company’s

global

restructuring program initiated post-closing of the Combination

and certain other integration costs incurred post-closing included

combination and other acquisition-related expenses.

These costs have not been presented in the unaudited pro forma

table below as

these costs on a pro forma basis were incurred during the

three and nine months ended September 30, 2018.

Unaudited pro forma

results are not necessarily indicative of the results that would

have occurred if the acquisition had occurred on the

date indicated, or

that may result in the future for various reasons, including

the potential impact of revenue and cost synergies on

the business.

Three

Nine

Months Ended

Unaudited Pro Forma

September 30,

(as if the Combination occurred on

January 1, 2018)

2019

Net sales

386,396

1,170,981

Net income attributable to Quaker Chemical Corporation

22,491

70,533

Combination, integration and other acquisition-related

expenses have been and are expected to continue to be significant.

The

Company incurred total costs of approximately $

6.9

million and $

23.4

million for the three and nine months ended September 30,

2020,

respectively, primarily

for professional fees related to Houghton integration activities.

Comparatively,

the Company incurred

total costs of approximately $

15.1

million and $

25.9

million during the three and nine months ended September 30,

2019,

respectively, primarily

for various professional fees and integration planning and

regulatory approval as well as professional fees

associated with closing the Combination.

These costs also include $

0.8

million of accelerated depreciation charges during

the nine

months ended September 30, 2020 and $

0.4

million and $

2.1

million of interest costs to maintain the bank commitment

(“ticking

fees”) for the Combination during the three and nine

months ended September 30, 2019, respectively.

The Company had current

liabilities related to the Combination, integration and

other acquisition-related activities of $

9.1

million and $

6.6

million as of

September 30, 2020,

and December 31, 2019,

respectively, primarily recorded

within other accrued liabilities on its Condensed

Consolidated Balance Sheets.

Norman Hay

October 1, 2019

, the Company completed its acquisition of the operating divisions

Norman Hay plc

(“Norman Hay”), a

private U.K. company that provides specialty chemicals, operating

equipment, and services to industrial end markets.

The acquisition

adds new technologies in automotive, original equipment

manufacturer (“OEM”), and aerospace, as well as engineering expertise

which is expected to strengthen the Company’s

existing equipment solutions platform.

The acquired Norman Hay assets and

liabilities were assigned to the Global Specialty Businesses reportable

segment.

The original purchase price was

80.0

million GBP,

a cash-free and debt-free basis, subject to routine and customary

post-closing adjustments related to working capital and net

indebtedness levels.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

The following table presents the final estimated fair

values of Norman Hay net assets acquired:

Measurement

October 1,

Period

October 1, 2019

2019 (1)

Adjustments

(as adjusted)

Cash and cash equivalents

18,981

—

18,981

Accounts receivable, net

15,471

—

15,471

Inventories, net

8,213

(49)

8,164

Prepaid expenses and other assets

4,203

138

4,341

Property, plant and

equipment

14,981

—

14,981

Right of use lease assets

10,608

—

10,608

Intangible assets

51,088

—

51,088

Goodwill

29,384

(82)

29,302

Total assets purchased

152,929

152,936

Long-term debt included current portions

485

—

485

Accounts payable, accrued expenses and other accrued liabilities

13,488

(732)

12,756

Deferred tax liabilities

12,746

905

13,651

Long-term lease liabilities

8,594

—

8,594

Total liabilities assumed

35,313

173

35,486

Total consideration

paid for Norman Hay

117,616

(166)

117,450

Less: estimated purchase price settlement (2)

3,287

(3,287)

—

Less: cash acquired

18,981

—

18,981

Net cash paid for Norman Hay

95,348

3,121

98,469

(1)

As previously disclosed in the Company’s

2019 Form 10-K.

(2)

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.

As of September 30, 2020, the allocation of the purchase

price for Norman Hay has been finalized.

Other Acquisitions

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 Europe,

Middle East and Africa (“EMEA”) reportable segment.

Consideration paid was

in the form of a convertible promissory note in the amount

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

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.

The allocation of the purchase price of TEL 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 March 2020, the Company acquired the remaining

% 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 2018 the Company purchased certain formulations and product

technology for the mining

industry for $

1.0

million, with $

0.5

million of the purchase price paid at signing and the remaining

0.5

million of the purchase price

paid during the first quarter of 2019.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Note 3 – Recently Issued Accounting Standards

Recently Issued Accounting Standards

Adopted

The Financial Accounting Standards Board (“FASB”)

issued Account Standards Update (“ASU”)

2020-04,

Reference Rate

Reform (Topic

848): Facilitation of the Effects of Reference

Rate Reform on Financial Reporting

in March 2020.

The amendments

provide temporary optional expedients and exceptions for

applying 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, 2020, the expedients

provided in ASU 2020-04 do not impact the Company;

however, the Company will continue to

monitor for potential impacts on its

consolidated financial statements.

The FASB issued

ASU 2018-15

, Customer’s

Accounting for Implementation Costs Incurred

in a Cloud Computing Arrangement

That Is a Service Contract

in August 2018 that clarifies the accounting for implementation

costs incurred in a cloud computing

arrangement under a service contract.

This guidance generally aligns the requirements for capitalizing

implementation costs incurred

in a hosting arrangement under a service contract with the

requirements for capitalizing implementation costs related

to internal-use

software.

The guidance within this accounting standard update is effective

for annual periods beginning after December 15, 2019 and

should be applied either retrospectively or prospectively

to all implementation costs incurred after the date of

adoption.

Early

adoption was permitted.

The Company adopted this standard on a prospective basis, effective

January 1, 2020.

There was no

cumulative effect of adoption recorded within

retained earnings on January 1, 2020.

The FASB issued

ASU 2018-14,

Disclosure Framework — Changes to

the Disclosure Requirements

for Defined Benefit Plans

August 2018 that modifies certain disclosure requirements

for fair value measurements.

The guidance removes certain disclosure

requirements regarding transfers between levels of

the fair value hierarchy as well as certain disclosures related to

the valuation

processes for certain fair value measurements.

Further, the guidance added certain disclosure

requirements including unrealized gains

and losses and significant unobservable inputs used to

develop certain fair value measurements.

The guidance

within this accounting

standard update is effective for annual and interim

periods beginning after December 15, 2019, and should be applied

prospectively in

the initial year of adoption or prospectively to all periods

presented, depending on the amended disclosure requirement.

Early

adoption was permitted.

The Company adopted this standard on a prospective basis, effective

January 1, 2020.

ASU 2018-14

addresses disclosures only and will not have an impact

on the Company’s consolidated

financial statements.

The FASB issued

ASU 2016-13,

Financial Instruments - Credit Losses (Topic

326): Measurement of Credit

Losses on Financial

Instruments

in June 2016 related to the accounting for and disclosure of

credit losses.

The FASB subsequently

issued several

additional accounting standard updates which amended

and clarified the guidance, but did not materially change

the guidance or its

applicability to the Company.

This accounting guidance introduces a new model for

recognizing credit losses on financial

instruments, including customer accounts receivable,

based on an estimate of current expected credit losses.

The guidance within this

accounting standard update is effective for annual

and interim periods beginning after December 15, 2019.

Early adoption was

permitted.

The Company did not early adopt, but did adopt the guidance in

this accounting standard update, including all applicable

subsequent updates to this accounting guidance, as required,

on a modified retrospective basis, effective January

1, 2020.

Adoption

did not have a material impact to the Company’s

financial statements as expected.

However, as a result of this adoption, the Company

recorded a cumulative effect of accounting change

that resulted in an increase to its allowance for doubtful accounts

of approximately

1.1

million, a decrease to deferred tax liabilities of $

0.2

million and a decrease to retained earnings of $

0.9

million.

In accordance with this guidance, the Company recognizes

an allowance for credit losses reflecting the net amount expected to

collected from its financial assets, primarily trade accounts

receivable.

This allowance represents the portion of the receivable that the

Company does not expect to collect over its 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 receivable 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.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Recently Issued Accounting Standards

Not Yet Adopted

The FASB

issued ASU 2020-01,

Investments – Equity Securities (To

pic 321), Investments – Equity Method and Joint Ventures

(Topic

323), and Derivatives and Hedging (Topic

815) –Clarifying the Interactions between Topic

321, Topic

323, and Topic

815

January 2020 clarifying the interaction among the

accounting standards related to equity securities, equity method investments,

and

certain derivatives.

The new guidance, among other things, states that a company

should consider observable transactions that require

a company to either apply or discontinue the equity method

of accounting, for the purposes of applying the fair val

ue measurement

alternative immediately before applying or upon discontinuing

the equity method.

The new guidance also addresses the measurement

of certain purchased options and forward contracts used

to acquire investments.

The guidance within this accounting standard update

is effective for annual and interim periods beginning

after December 15, 2020 and is to be applied prospectively.

Early adoption is

permitted.

The Company has not early adopted the guidance and is currently

evaluating its implementation.

The FASB issued

ASU 2019-12

, Income Taxes

(Topic

740): Simplifying the Accounting for Income Taxes

in December 2019.

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 interi

periods beginning after December 15, 2020.

Early

adoption is permitted.

The Company has not early adopted the guidance and is currently evaluating

its implementation.

The FASB issued

ASU 2018-13

, Fair Value

Measurement (Topic

820):

Disclosure Framework – Changes to the

Disclosure

Requirements for Fair Value

Measurement

in August 2018 that modifies certain disclosure

requirements for employers that sponsor

defined benefit pension or other postretirement plans.

The amendments in this accounting standard update remove

disclosures that are

no longer considered cost beneficial, clarify the specific

requirements of certain disclosures, and add new disclosure requirements

relevant.

The guidance within this accounting standard update is effective

for annual periods beginning after December 15, 2020,

and

should be applied retrospectively to all periods presented.

Early adoption is permitted.

The Company has not early adopted the

guidance and is currently evaluating its implementation.

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 Company and the

chief operating decision maker assess its performance.

During the third quarter of 2019 and in connection with the Combination,

the

Company reorganized its executive management

team to align with its new business structure, which reflects the

method by which the

chief operating decision maker of the Company assesses its performance

and allocates its resources.

The Company’s current

reportable segment structure includes

four

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.

Although the Company changed its reportable segments in

the third quarter of 2019, the calculation of the reportable

segments’

measures of earnings remains otherwise generally

consistent with past practices.

Segment operating earnings for the Company’s

reportable segments are comprised of net sales less COGS and

selling, general and administrative expenses (“SG&A”) directly related

to the respective segment’s

product sales.

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 (expense) income, net.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

The following table presents information about the performance

of the Company’s reportable segments

for the three and nine

months ended September 30, 2020 and 2019.

Certain immaterial reclassifications within the segment disclosures

for the three and

nine months ended September 30, 2019 have been

made to conform with the Company’s

current customer industry segmentation.

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

Net sales

Americas

119,540

116,691

330,012

260,663

EMEA

94,005

82,369

276,546

183,806

Asia/Pacific

84,877

74,266

226,850

165,234

Global Specialty Businesses

68,802

51,804

198,417

132,506

Total net sales

367,224

325,130

1,031,825

742,209

Segment operating earnings

Americas

31,099

23,765

70,590

52,069

EMEA

17,439

13,303

46,269

31,034

Asia/Pacific

27,304

20,404

66,106

45,375

Global Specialty Businesses

21,161

15,245

58,114

36,819

Total segment operating

earnings

97,003

72,717

241,079

165,297

Combination, integration and other acquisition-related

expenses

(6,913)

(14,702)

(22,786)

(23,789)

Restructuring and related charges

(1,383)

(24,045)

(3,585)

(24,045)

Fair value step up of inventory sold

—

(10,214)

(226)

(10,214)

Indefinite-lived intangible asset impairment

—

(38,000)

—

Non-operating and administrative expenses

(39,786)

(29,203)

(110,282)

(68,621)

Depreciation

of corporate assets and amortization

(14,062)

(9,055)

(41,547)

(12,770)

Operating income (loss)

34,859

(14,502)

24,653

25,858

Other (expense) income, net

(239)

203

(22,407)

(389)

Interest expense, net

(6,837)

(6,102)

(22,109)

(7,611)

Income (loss) before taxes and equity in net income of

associated companies

27,783

(20,401)

(19,863)

17,858

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.

Inter-segment revenues for the three and nine

months ended September 30, 2019 were $

2.1

million and $

4.8

million for Americas, $

5.3

million and $

15.4

million for EMEA, less than $

0.1

million and $

0.1

million for

Asia/Pacific, and $

1.4

million and $

4.1

million for Global Specialty Businesses, respectively.

However, all inter-segment

transactions

have been eliminated from each reportable 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.

The

Combination increased the Company’s

addressable metalworking, metals and industrial end markets, including

steel, aluminum,

aerospace, defense, transportation-OEM, transportation

-components, offshore sub-sea energy,

architectural aluminum, construction,

tube and pipe, can and container,

mining, specialty coatings and specialty greases.

The Combination also strengthened the product

portfolio of the combined Company.

The major product lines of Quaker Houghton include metal removal

fluids, cleaning fluids,

corrosion inhibitors, metal drawing and forming fluids, die

cast mold releases, heat treatment and quenchants, metal forging

fluids,

hydraulic fluids, specialty greases, offshore

sub-sea energy control fluids, rolling lubricants, rod

and wire drawing fluids and surface

treatment chemicals.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

A substantial portion of the Company’s

sales worldwide are made directly through its own employees

and its Fluidcare programs,

with the balance being handled through distributors and

agents.

The Company’s employees typically

visit the plants of customers

regularly, work

on site, and, through training and experience, identify production

needs,

which can be resolved or otherwise addressed

either by adapting the Company’s

existing products or by applying new formulations developed

in its laboratories.

The specialty

chemical industry comprises many companies similar in

size to the Company,

as well as companies larger and smaller than Quaker

Houghton.

The offerings of many of the Company’s

competitors differ from those of Quaker Houghton;

some offer a broad portfolio

of fluids, including general lubricants, while others have

a more specialized product range.

All competitors provide different levels of

technical services to individual customers.

Competition in the industry is based primarily on the ability to

provide products that meet

the needs of the customer, render

technical services and laboratory assistance to the customer and,

to a lesser extent, on price.

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

the Company for ordering the goods.

In determining whether the Company is acting as a principal

or an agent in each arrangement,

the Company considers whether it is primarily responsible

for the obligation to provide the specified good, has inventory

risk before

the specified good has been transferred to the customer

and has discretion in establishing the prices for the specified

goods.

The

Company transferred third-party products under arrangements

recognized on a net reporting basis of $

11.1

million and $

29.9

million

for the three and nine months ended September 30,

2020, respectively, and

13.6

million and $

34.4

million for the three and nine

months ended September 30, 2019,

respectively.

A significant portion of the Company’s

revenues are realized from the sale of process fluids and services

to manufacturers of

steel, aluminum, automobiles, aircraft, industrial equipment,

and durable goods, and, therefore, the Company is subject

to the same

business cycles as those experienced by these manufacturers and

their customers.

The Company’s financial performance

is generally

correlated to the volume of global production within the

industries it serves, rather than discretely related to the financial performance

of such industries.

Furthermore, steel and aluminum customers typically have

limited manufacturing locations compared to

metalworking customers and generally use higher

volumes of products at a single location.

As previously disclosed in its 2019 Form

10-K, during 2019, the Company’s

five largest customers (each composed of multiple

subsidiaries or divisions with semiautonomous

purchasing authority) accounted for approximately

% of consolidated net sales, with its largest customer

accounting for

approximately

% of consolidated net sales.

Revenue Recognition Model

The Company applies the FASB’s

guidance on revenue recognition which requires the

Company to recognize revenue in an

amount that reflects the consideration to which the Company

expects to be entitled in exchange for goods or services transferred

to its

customers.

To do this, 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.

The Company identifies a contract with a customer when a

sales agreement indicates approval and commitment of the parties;

identifies the rights of the parties; identifies the payment

terms; has commercial substance; and it is probable that the

Company will

collect the consideration to which it will be entitled in

exchange for the goods or services that will be transferred to

the customer.

most instances, the Company’s

contract with a customer is the customer’s

purchase order.

For certain customers, the Company may

also enter into a sales agreement which outlines a

framework of terms and conditions which apply to all future and

subsequent

purchase orders for that customer.

In these situations, the Company’s

contract with the customer is both the sales agreement as well as

the specific customer purchase order.

Because the Company’s contract

with a customer is typically for a single transaction or

customer purchase order, the duration

of the contract is almost always one year or less.

As a result, the Company has elected to apply

certain practical expedients and omit certain disclosures of

remaining performance obligations for contracts that have an

initial term of

one year or less as permitted by the FASB.

The Company identifies a performance obligation in a

contract for each promised good or service that is separately identifiable

from other obligations in the contract and for which the

customer can benefit from the good or service either on its own or together

with other resources that are readily available to

the customer.

The Company determines the transaction price as the amount

consideration it expects to be entitled to in exchange

for fulfilling the performance obligations, including the

effects of any variable

consideration, significant financing elements, amounts

payable to the customer or noncash consideration.

For any contracts that have

more than one performance obligation, the Company

allocates the transaction price to each performance obligation

in an amount that

depicts the amount of consideration to which the Company

expects to be entitled in exchange for satisfying each performance

obligation.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

In accordance with the last step of the FASB’s

guidance, the Company recognizes revenue when,

or as, it satisfies the

performance obligation in a contract by transferring control

of a promised good or providing the service to the customer.

The

Company recognizes revenue over time as the customer

receives and consumes the benefits provided by the Company’s

performance;

the Company’s performance

creates or enhances an asset that the customer controls as the

asset is created or enhanced; or the

Company’s performance

does not create an asset with an alternative use to the entity,

and the entity has an enforceable right to

payment, including a profit margin, for performance

completed to date.

For performance obligations not satisfied over time, the

Company determines the point in time at which a customer

obtains control of an asset and the Company satisfies a performance

obligation by considering when the Company has a right

to payment for the asset; the customer has legal title to the

asset; the

Company has transferred physical possession of the asset; the

customer has the significant risks and rewards of ownership

of the asset;

or the customer has accepted the asset.

The Company typically satisfies its performance obligations

and recognizes revenue at a point in time for product

sales, generally

when products are shipped or delivered to the customer,

depending on the terms underlying each arrangement.

In circumstances

where the Company’s

products are on consignment, revenue is generally recognized

upon usage or consumption by the customer.

For

any Fluidcare or other services provided by the Company

to the customer, the Company typically satisfies its

performance obligations

and recognizes revenue over time, as the promised services

are performed.

The Company uses input methods to recognize revenue

over time related to these services, including labor costs

and time incurred.

The Company believes that these input methods represent

the most indicative measure of the Fluidcare or other service

work performed by the Company.

Other Considerations

The Company does not have standard payment terms for

all customers;

however the Company’s

general payment terms require

customers to pay for products or services provided after

the performance obligation is satisfied.

The Company does not have

significant financing arrangements with its customers.

The Company does not have significant amounts of variable

consideration in

its contracts with customers and where applicable,

the Company’s estimates of variable

consideration are not constrained.

The

Company records certain third-party license fees in

other (expense) income, net, in its Condensed Consolidated

Statements of

Operations,

which generally include sales-based royalties in exchange for

the license of intellectual property.

These license fees are

recognized in accordance with their agreed-upon

terms and when performance obligations are satisfied, which is generally

when the

third party has a subsequent sale.

Practical Expedients and Accounting Policy Elections

The Company has made certain accounting policy

elections and elected to use certain practical expedients as permitted

by the

FASB in applying

the guidance on revenue recognition.

It is the Company’s policy

to not adjust the promised amount of

consideration for the effects of a significant

financing component as the Company expects, at contract

inception, that the period

between when the Company transfers a promised good or service

to the customer and when the customer pays for that good

or service

will be one year or less.

In addition, it is the Company’s

policy to expense costs to obtain a contract as incurred when

the expected

period of benefit, and therefore the amortization period,

is one year or less.

It is also the Company’s accounting

policy to exclude

from the measurement of the transaction price all

taxes assessed by a governmental authority that are both imposed

on and concurrent

with a specific revenue-producing transaction and

collected by the entity from a customer, including

sales, use, value added, excise

and various other taxes.

Lastly, the Company

has elected to account for shipping and handling activities that occur

after the customer

has obtained control of a good as a fulfilment cost rather than

an additional promised service.

Contract Assets and Liabilities

The Company recognizes a contract asset or receivable

on its Condensed Consolidated Balance Sheet when the Company

provides a good or service 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

material contract assets recorded on its Condensed Consolidated

Balance Sheets as of September 30, 2020 or December

31, 2019.

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 $

3.6

million and $

2.2

million of deferred

revenue as of September 30, 2020 and December 31, 2019

respectively.

During the nine months ended September 30, 2020,

the

Company satisfied all of the associated performance

obligations and recognized into revenue the advanced

payments received and

recorded as of December 31, 2019.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

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 segment first, and then by customer industry,

rather than

by individual product lines.

The Company has provided annual net sales information by

major product lines that represent

approximately 10% or more of consolidated net sales in its 2019

Form 10-K, and those annual percentages are generally consistent

with the current quarter’s net sales by product

line.

Also, 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, approximately proportionate

to the level of total sales in

each region.

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, 2020 and 2019.

Certain immaterial reclassifications within the

disaggregated customer industry disclosures for the

three and nine months ended September 30, 2019 have been

made to conform with

the Company’s current

customer industry segmentation.

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

Three Months Ended September 30, 2019

Consolidated

Americas

EMEA

Asia/Pacific

Total

Customer Industries

Metals

48,600

26,377

43,264

118,241

Metalworking and other

68,091

55,992

31,002

155,085

116,691

82,369

74,266

273,326

Global Specialty Businesses

38,834

5,169

7,801

51,804

155,525

87,538

82,067

325,130

Timing of Revenue Recognized

Product sales at a point in time

150,904

85,579

80,359

316,842

Services transferred over time

4,621

1,959

1,708

8,288

155,525

87,538

82,067

325,130

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

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

Nine Months Ended September 30, 2019

Consolidated

Americas

EMEA

Asia/Pacific

Total

Customer Industries

Metals

129,031

75,578

100,868

305,477

Metalworking and other

131,632

108,228

64,366

304,226

260,663

183,806

165,234

609,703

Global Specialty Businesses

102,149

13,170

17,187

132,506

362,812

196,976

182,421

742,209

Timing of Revenue Recognized

Product sales at a point in time

352,504

194,911

177,416

724,831

Services transferred over time

10,308

2,065

5,005

17,378

362,812

196,976

182,421

742,209

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

years.

In addition, the Company has certain land use leases with remaining

lease terms up to

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.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

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, 2020 was $

3.7

million and $

10.6

million, respectively.

Comparatively, operating lease

expense for the

three and nine months ended September 30, 2019 was

2.5

million and $

6.0

million, respectively.

Short-term lease expense for the

three and nine months ended September 30, 2020 was

0.2

million and $

1.1

million, respectively.

Comparatively, short-term

lease

expense for the three and nine months ended September

30, 2019 was $

0.5

million and $

0.8

million, respectively.

The Company has

material variable lease costs or sublease income for the three or

nine months ended September 30, 2020 and 2019.

Cash paid for operating leases during the nine months ended September

30, 2020 and 2019 was $

10.5

million and $

5.9

million,

respectively.

The Company recorded new right of use lease assets and associated lease liabilities

of $

6.1

million during the nine

months ended September 30, 2020.

Supplemental balance sheet information related to the Company’s

leases is as follows:

September 30,

December 31,

2020

2019

Right of use lease assets

39,781

42,905

Other current liabilities

11,185

11,177

Long-term lease liabilities

28,061

31,273

Total operating

lease liabilities

39,246

42,450

Weighted average

remaining lease term (years)

6.0

6.2

Weighted average

discount rate

4.21%

Maturities of operating lease liabilities as of September

30, 2020 were as follows:

September 30,

2020

For the remainder of 2020

4,689

For the year ended December 31, 2021

11,584

For the year ended December 31, 2022

8,019

For the year ended December 31, 2023

5,912

For the year ended December 31, 2024

4,387

For the year ended December 31, 2025 and beyond

11,583

Total lease payments

46,174

Less: imputed interest

(6,928)

Present value of lease liabilities

39,246

Note 7 – Restructuring and Related Activities

As previously disclosed in its 2019 Form 10-K, in the third quarter of 2019, 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. The QH

Program includes restructuring and associated severance costs to reduce total headcount by approximately 350 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 during 2020 and into 2021 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 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.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Activity in the Company’s

accrual for restructuring under the QH Program for the nine months ended

September 30, 2020 is as

follows:

QH Program

Accrued restructuring as of December 31, 2019

18,043

Restructuring and related charges

3,585

Cash payments

(12,772)

Currency translation adjustments

Accrued restructuring as of September 30, 2020

8,893

In connection with the plans for closure of certain

manufacturing and non-manufacturing facilities, the Company

made a decision

to make available for sale certain facilities during the second

quarter of 2020.

As a result, certain buildings and land with an aggregate

book value of approximately $

12.8

million have been reclassified to other current assets from property,

plant and equipment as of

September 30, 2020.

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, 2020 and 2019:

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

Stock options

353

455

1,138

888

Non-vested restricted stock awards and restricted stock

units

1,259

867

3,782

2,005

Non-elective and elective 401(k) matching contribution in

stock

910

—

2,072

—

Employee stock purchase plan

—

Director stock ownership plan

243

337

Performance stock units

280

—

560

—

Annual incentive plan

7,102

—

9,931

—

Total share-based

compensation expense

10,147

1,370

17,820

3,042

Share-based compensation expense is recorded in SG&A,

except for approximately $

0.4

million and $

1.2

million for the three

and nine months ended September 30, 2020, respectively,

and $

0.3

million and $

0.4

million for the three and nine months ended

September 30, 2019,

respectively, recorded

within Combination, integration and other acquisition-related expenses.

The increase in

total share-based compensation expense for the nine months

ended September 30, 2020 includes performance stock unit

s, annual

incentive

plan accruals, and non-elective and elective 401(k) matching

contributions

in stock as components

of share-based

compensation beginning in 2020, described further

below.

Stock Options

During the first quarter of 2020, the Company granted

stock options under its long-term incentive plan (“LTIP”)

that are subject

only to time-based vesting over a

three

-year period.

For the purposes of determining the fair value of stock option

awards, the

Company used a Black-Scholes option pricing model and

the assumptions set forth in the table below:

Number of options granted

49,115

Dividend yield

0.99

Expected volatility

31.57

Risk-free interest rate

0.36

Expected term (years)

4.0

The fair value of these options is amortized on a straight

-line basis over the vesting period.

As of September 30, 2020,

unrecognized compensation expense related to all stock options

granted was $

1.8

million, to be recognized over a weighted average

remaining period of

2.0

years.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Restricted Stock Awards

and Restricted Stock Units

During the nine months ended September 30, 2020, the

Company granted

27,841

non-vested restricted shares and

6,030

non-

vested restricted stock units under its LTIP

subject to time-based vesting, generally over a three-year period.

The fair value of these

grants is based on the trading price of the Company’s

common stock on the date of grant. The Company adjusts the

grant date fair

value of these awards for expected forfeitures based

on historical experience.

As of September 30, 2020, unrecognized compensation

expense related to the non-vested restricted shares was $

5.7

million, to be recognized over a weighted average remaining

period of

1.7

years, and unrecognized compensation expense

related to non-vested restricted stock units was $

1.0

million, to be recognized over a

weighted average remaining period of

2.1

years.

Performance Stock Units

In March 2020, the Company included performance

-dependent stock awards (“PSUs”) as a component of its LTIP,

which will be

settled in a certain number of shares subject to market

-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

% up to

200

% of the target award, subject to the

achievement of the Company’s

total shareholder return (“TSR”) relative to the performance

of the Company’s peer

group, the S&P

Midcap 400 Materials group.

The service period required for the PSUs is three years and

the TSR measurement period for the PSUs is

from January 1, 2020 through December 31, 2022.

Compensation expense for PSUs is measured based on

their grant date fair value and is recognized on a straight-line basis over

the three-year vesting period.

The grant-date fair value of the PSUs was estimated using a

Monte Carlo simulation on the grant date

and using the following assumptions: (i) a risk-free

rate of

0.28

%; (ii) an expected term of

3.0

years; and (iii) a three-year daily

historical volatility for each of the companies in the

peer group, including Quaker Houghton.

As of September 30, 2020, the Company estimates that it will

issue approximately

28,000

fully vested shares as of the settlement

date of the award based on the conditions of the

PSUs and Company’s closing

stock price on September 30, 2020.

As of September

30, 2020, there was approximately $

2.8

million of total unrecognized compensation cost related to PSUs which

the Company expects

to recognize over a weighted-average period of

2.5

years.

Annual Incentive Plan

The Company maintains an Annual Incentive Plan

(“AIP”), which may be settled in cash or a certain number of

shares subject to

performance-based and time-based vesting conditions.

It is the Company’s current

intention to settle the 2020 AIP in shares, and

therefore, expense associated with the AIP in 2020 is recorded

as a component of share-based compensation expense.

The number of

fully vested shares that may ultimately be issued as settlement

for each award is subject to the achievement of the Company’s

performance against certain internal financial and non-financial

metrics and approval by the Company’s

Compensation Committee.

Compensation expense for the AIP is measured based on the estimated

total value of the award.

The number of shares that will

ultimately be issued under the AIP award will be equal

to the final value of the award converted into a number of shares based on

the

trading price of the Company’s

common stock on the date of settlement.

As of September 30, 2020, the Company estimates that it

will issue approximately

74,000

fully vested shares as of the settlement date of the award

based on the conditions of the AIP,

the

Company’s projected

performance against its performance metrics and Company’s

closing stock price on September 30, 2020.

Defined Contribution Plan

The Company has a 401(k) plan with an employer

match covering a majority of its U.S. employees.

The Company matches

of the first

% of compensation that is contributed to the plan, with a maximum

matching contribution of

% of compensation.

Additionally, the

plan provides for non-elective nondiscretionary contributions

on behalf of participants who have completed one year

of service equal to

% of the eligible participant's compensation.

The Company’s matching contributions

and non-elective

contributions may be made in cash or in fully vested shares

of the Company’s common

stock.

Beginning in April 2020,

the Company

began matching both non-elective and elective 401(k)

contributions in fully vested shares of its common stock rather than

cash.

For

the three and nine months ended September 30, 2020,

total contributions were $

0.9

million and $

2.1

million, respectively.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Note 9 – Pension and Other Postretirement

Benefits

The components of net periodic benefit (income) cost for

the three and nine months ended September 30, 2020 and

2019 are as

follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Other

Postretirement

Pension Benefits

Benefits

Pension Benefits

Benefits

2020

2019

2020

2019

2020

2019

2020

2019

Service cost

1,227

993

3,565

2,956

Interest cost

1,527

1,852

4,782

4,068

107

Expected return on plan assets

(3,526)

(2,140)

—

(7,246)

(4,102)

—

Settlement charge

—

22,667

—

Actuarial loss amortization

626

799

—

2,288

2,348

—

Prior service cost amortization

(42)

(34)

—

(123)

(117)

—

Net periodic benefit (income)

cost

(188)

1,470

25,933

5,153

128

112

In the fourth quarter of 2018, the Company began the process of terminating its Legacy Quaker non-contributory U.S. pension

plan (“Legacy Quaker U.S. Pension Plan”). During the third quarter of 2019, the Company received a favorable termination

determination letter from the Internal Revenue Service (“I.R.S.”) and amended the Legacy Quaker U.S. Pension Plan to comply with

final regulations of the Internal Revenue Code. The Company completed the Legacy Quaker U.S. Pension Plan termination during the

first quarter of 2020. In order to terminate the Legacy Quaker U.S. Pension Plan in accordance with I.R.S. and Pension Benefit

Guaranty Corporation requirements, the Company was required to fully fund the Legacy Quaker U.S. Pension Plan on a termination

basis and the amount necessary to do so was approximately $1.8 million, subject to final true up adjustments. In the third quarter of

2020, the Company finalized the amount of the liability and related annuity payments and received a refund in premium of

approximately $1.6 million. In addition, the Company recorded a non-cash pension settlement charge at plan termination of

approximately $22.7 million. This settlement charge included the immediate recognition into expense of the related unrecognized

losses within accumulated other comprehensive income (loss) (“AOCI”) on the balance sheet as of the plan termination date.

Employer Contributions

The Company previously disclosed in its 2019 Form 10-K

that it expected to make minimum cash contributions of $

10.0

million

to its U.S. and foreign pension plans and approximately

0.4

million to its other postretirement benefit plans in 2020.

As of

September 30, 2020, $

6.9

million and $

0.2

million of contributions have been made to the Company’s

U.S. and foreign pension plans

and its other postretirement benefit plans, respectively.

This excludes the $

1.8

million of additional funding made in the first quarter

of 2020, as required, to terminate the Legacy Quaker U.S.

Pension Plan, noted above.

Note 10 – Other (Expense) Income, Net

The components of other (expense) income, net, for the

three and nine months ended September 30, 2020 and 2019 are

follows:

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

Income from third party license fees

190

242

702

655

Foreign exchange (losses) gains, net

(1,897)

376

(3,080)

(5)

(Loss) gain on fixed asset disposals, net

(24)

(105)

111

Non-income tax refunds and other related credits

—

2,131

1,047

Pension and postretirement benefit income (costs),

non-service components

1,375

(513)

(22,491)

(2,304)

Other non-operating income, net

117

(56)

436

107

Total other

(expense) income, net

(239)

203

(22,407)

(389)

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Pension and postretirement benefit income (costs), non-service

components during both the three and nine months

ended

September 30, 2020 includes the $

1.6

million refund in premium described in Note 9 of Notes to Condensed

Consolidated Financial

Statements.

In addition, this line also includes $

22.7

million related to the Legacy Quaker U.S. Pension Plan non-cash

settlement

charge during the nine months ended September

30, 2020, also described in Note 9 of Notes to Condensed Consolidated

Financial

Statements.

Note 11 – Income Taxes

and Uncertain Income Tax

Positions

The Company’s effective

tax rate for the three and nine months ended September 30, 2020

was an expense of

8.1

% and a benefit

38.3

%, respectively, compared

to a benefit of

27.6

% and an expense of

22.9

%, respectively, for the

three and nine months ended

September 30, 2019.

The Company’s effective

tax rate for the three and nine months ended September 30,

2020 was impacted by the

pre-tax loss for the nine months ended September

30, 2020, the tax effect of certain one-time pre

-tax costs as well as certain tax

charges and benefits in the current period related

to the impact of recently issued tax regulations and other changes

in foreign tax

credit valuation allowances, discussed below,

tax law changes in foreign jurisdictions, and the tax impact

of the Company’s

termination of its Legacy Quaker U.S. Pension Plan.

Applying the recently issued tax regulations resulted in a $

5.0

million discrete

benefit on the foreign tax credit valuation allowance

and a $

2.1

million benefit on the 2019 return to provision adjustment,

both

recognized in the third quarter of 2020.

Comparatively, the

three and nine months ended September 30, 2019 effectiv

tax rates were

impacted by certain non-deductible costs associated with the

Combination and withholding tax expense associated with the

assumed

repatriation of previously untaxed current earnings and profits of

certain of the Company’s foreign

subsidiaries, partially offset by

favorable return to provision adjustments in the current

year and certain share-based compensation-related tax benefits for

deductions

in excess of compensation costs associated with stock option exercises.

Additionally, in the third

quarter of 2019, the Company

recorded a cumulative year-to-date tax benefit

as a result of one of its subsidiaries receiving approval

for the renewal of the

concessionary

% tax rate compared to its

% statutory tax rate.

On March 27, 2020, in response to COVID-19 and its detrimental

impact to the global economy,

the Coronavirus Aid, Relief and

Economic Security Act (the “CARES Act”) was enacted into

law, providing a stimulus

to the U.S. economy in the form of various

individual and business assistance programs as well as temporary

changes to existing tax law.

The changes include a postponement of

certain tax payments, deferral of the employer’s

portion of the social security tax and certain other payroll-related

incentives, and an

increase in the interest expense limitation under Section

163(j) of the Internal Revenue Code from

% to

% for the 2019 and 2020

tax years.

ASC 740 requires the tax effects of changes in tax laws or

rates to be recorded in the period of enactment.

Under the

CARES Act, the Company has the option to use its 2019

adjusted taxable income in determining its interest expense

limitation under

Section 163(j).

While the Company is still considering whether to make this election

for 2020, the current year tax provision takes

into account this potential election and associated tax

benefit, which offsets an increase to the Company’s

foreign tax credit valuation

allowance recognized during the current quarter primarily

driven by changes in current year projected taxable income

due to the

negative impacts from COVID-19.

In addition, the Company reviewed its existing deferred tax assets in

light of COVID-19 and

determined that, at this time, no change in valuation

allowance is required except with regard to its foreign tax credits as

noted below.

While the ultimate impact of COVID-19 on the Company’s

results of operations is still uncertain, the Company will continue

to assess

future changes in projected taxable income to determine

if they result in additional changes to any of the Company’s

valuation

allowances.

As previously disclosed in its 2019 Form 10-K, the Company

had a deferred tax liability of $

8.2

million at December 31, 2019,

which primarily represents the Company’s

estimate of non-U.S. taxes it will incur to repatriate certain foreign

earnings to the U.S.

During the first nine months of 2020, the Company

made certain adjustments to the deferred tax liability to

take into account a tax law

change enacted in the first quarter in a certain foreign

jurisdiction, the inclusion of other earnings to be repatriated,

and the actual

repatriation of earnings, resulting in a deferred tax liability

of $

6.4

million as of September 30, 2020.

As previously disclosed in its 2019 Form 10-K, in conjunction with the Combination, the Company acquired foreign tax credit

deferred tax assets of $41.8 million expiring between 2019 and 2028. Foreign tax credits may be carried forward for 10 years. The

Company analyzes the expected impact of the utilization of foreign tax credits based on projected U.S. taxable income, overall

domestic loss recapture, annual limitations due to the ownership change limitations provided by the Internal Revenue Code, and

enacted tax law amongst other factors.

As of December 31, 2019, the Company had net realizable foreign

tax credits of $

32.7

million

on its balance sheet expected to be utilized between

2020 and 2026

As of September 30, 2020, the Company had net realizable

foreign tax credits of $

26.0

million on its balance sheet expected to be utilized between

2020 and 2026

The change in net realizable

foreign tax credits during the first nine months of 2020

was primarily driven by the Company's update to its initial opening balance

sheet estimate with respect to acquired Houghton foreign

tax credit deferred tax assets, described in Note 2 of Notes

to Condensed

Consolidated Financial Statements, as well as approximately

0.5

million of tax benefit for the nine months ended September 30, 2020

based on revised taxable income projections and changes

to the interest expense limitation under the CARES Act amongst

other

factors.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

The Company continues to recognize interest and penaltie

associated with uncertain tax positions as a component of

taxes on

income (loss) before equity in net income of associated

companies in its Condensed Consolidated Statements of Operations.

The

Company recognized a credit for interest of $

0.2

million and an expense of $

0.4

million and an expense for penalties of less than $

0.1

million and $

0.5

million in its Condensed Consolidated Statement of Operations for

the three and nine months ended September 30,

2020, respectively.

Comparatively, the Company

recognized an expense for interest of $

0.1

million and $

0.4

million and an expense

for penalties of less than $

0.1

million and $

0.1

million for the three and nine months ended September 30,

2019, respectively.

As of

September 30, 2020, the Company had accrued $

2.7

million for cumulative interest and $

4.2

million for cumulative penalties in its

Condensed Consolidated Balance Sheets, compared

to $

2.3

million for cumulative interest and $

3.1

million for cumulative penalties

accrued at December 31, 2019.

As of September 30, 2020, the Company’s

cumulative liability for gross unrecognized tax benefits was $

21.7

million, an increase

of $

2.6

million from the $

19.1

million cumulative liability accrued as of December

31, 2019.

During the nine months ended September 30, 2020

and 2019, the Company recognized a decrease of $

1.9

million and $

1.5

million, respectively,

in its cumulative liability for gross unrecognized tax benefits due

to the expiration of the applicable statutes of

limitations for certain tax years.

The Company estimates that during the year ending December

31, 2020 it will reduce its cumulative liability for gross

unrecognized tax benefits by approximately $

2.3

million due to the expiration of the statute of limitations with regard

to certain tax

positions.

This estimated reduction in the cumulative liability for unrecognized

tax benefits does not consider any increase in liability

for unrecognized tax benefits with regard to existing tax

positions or any increase in cumulative liability for unrecognized

tax benefits

with regard to new tax positions for the year ending December

31, 2020.

The Company and its subsidiaries are subject to U.S. Federal income

tax, as well as the income tax of various state and foreign

tax jurisdictions.

Tax years that remain

subject to examination by major tax jurisdictions include Brazil from

2000

, Italy from

2006

China from

2010

, Canada from

2011

, the Netherlands and the United Kingdom from

2014

, Spain from

2015

, Mexico, Germany,

and

the U.S. from

2016

, India from fiscal year beginning April 1, 2017 and ending

March 31,

2018

, and various U.S. state tax jurisdictions

from

2009

As previously reported, the Italian tax authorities have

assessed additional tax due from the Company’s

subsidiary, Quaker Italia

S.r.l., relating to the tax

years

2007 through 2015

The Company has filed for competent authority relief related to

these assessments

under the Mutual Agreement Procedures (“MAP”) of the

Organization for Economic Co-Operation and Development

(“OECD”) for

all years except

2007.

During the second quarter of 2020, the Company received notification

that the Italian and Dutch competent

authorities reached an agreement as part of the MAP involving

tax years 2008 through 2015.

The Company has tentatively agreed to

the reduced tax assessments and has recorded $

1.3

million of additional reserves for uncertain tax positions for the

open tax years that

is consistent with the tentative agreement reached involving

tax years 2008 through 2015.

As of September 30, 2020, the Company

believes it has adequate reserves for uncertain tax

positions with respect to this matter.

Houghton Italia, S.r.l

is also currently involved in a corporate income tax audit with the

Italian tax authorities covering tax years

2014 through 2018.

As part of the purchase accounting related to the Combination,

the Company has established a $

5.4

million

reserve for uncertain tax positions relating to this audit.

Since this reserve relates to tax periods prior to the Combination,

the

Company has submitted an indemnification claim

against funds held in escrow by Houghton’s

former owners for certain tax liabilities

arising pre-Combination.

As a result, a corresponding $

5.4

million indemnification receivable has also been established

through

purchase accounting that would offset the

5.4

million in tax liabilities booked through purchase accounting.

These amounts relate to

the 2014 to 2018 audit periods as well as the seven-month

period in 2019 prior to the Combination.

As of September 30, 2020, the

Company believes it has adequate reserves for uncertain

tax positions.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Note 12 – Earnings Per Share

The following table summarizes earnings per share calculations

for the three and nine months ended September 30, 2020 and

2019:

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

Basic earnings (loss) per common share

Net income (loss) attributable to Quaker Chemical Corporation

27,304

(13,053)

(8,812)

16,382

Less: (income) loss allocated to participating securities

(113)

(40)

Net income (loss) available to common shareholders

27,191

(13,007)

(8,768)

16,342

Basic weighted average common shares outstanding

17,743,538

16,185,724

17,704,662

14,271,121

Basic earnings (loss) per common share

1.53

(0.80)

(0.50)

1.15

Diluted earnings (loss) per common share

Net income (loss) attributable to Quaker Chemical Corporation

27,304

(13,053)

(8,812)

16,382

Less: (income) loss allocated to participating securities

(113)

(40)

Net income (loss) available to common shareholders

27,191

(13,007)

(8,768)

16,342

Basic weighted average common shares outstanding

17,743,538

16,185,724

17,704,662

14,271,121

Effect of dilutive securities

57,327

—

42,850

Diluted weighted average common shares outstanding

17,800,865

16,185,724

17,704,662

14,313,971

Diluted earnings (loss) per common share

1.53

(0.80)

(0.50)

1.14

During the third quarter of 2019, the Company issued

approximately

4.3

million shares of common stock, comprising

24.5

% of

the common stock of the Company immediately after

the closing, as a component of the consideration transferred in the Combination.

Certain stock options and restricted stock units are not included

in the diluted earnings (loss) per share calculation because

the effect

would have been anti-dilutive.

All of the Company’s potentially

dilutive shares for the nine months ended September

30, 2020 and

the three months ended September 30, 2019 are anti-dilutive

and not included in the dilutive earnings (loss) per share

calculations

because of the Company’s

net loss for the periods.

There were

anti-dilutive shares excluded from the diluted earnings per share

calculations for the three months ending September 30,

2020 and the nine months ended September 30, 2019.

Note 13 – Restricted Cash

The Company has restricted cash recorded in other assets related to proceeds from an inactive subsidiary of the Company which

previously executed separate settlement and release agreements with two of its insurance carriers for an original total value of $35.0

million.

The proceeds of both settlements are restricted and can only be

used to pay claims and costs of defense associated with the

subsidiary’s asbestos litigation.

The proceeds of the settlement and release agreements

have been deposited into interest bearing

accounts that earned less than $

0.1

million in the nine months ended September 30, 2020, compared

to $

0.2

million in the nine months

ended September 30, 2019.

The interest was offset by $

0.8

million of payments during the nine months ended September

30, 2020,

compared to $

0.6

million of payments in the nine months ended September 30, 2019.

Due to the restricted nature of the proceeds, a

corresponding deferred credit was established in other

non-current liabilities for an equal and offsetting amount,

and will remain until

the restrictions lapse or the funds are exhausted via payments of

claims and costs of defense.

The following table provides a reconciliation of cash,

cash equivalents and restricted cash as of September 30, 2020 and

2019,

and December 31, 2019 and 2018:

September 30,

December 31,

2020

2019

2018

Cash and cash equivalents

155,750

128,161

123,524

104,147

Restricted cash included in other current assets

460

353

—

Restricted cash included in other assets

18,901

19,839

19,678

20,278

Cash, cash equivalents and restricted cash

174,733

148,460

143,555

124,425

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Note 14 – Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the

nine months ended September 30, 2020 were as follows:

Global

Specialty

Americas

EMEA

Asia/Pacific

Businesses

Total

Balance as of December 31, 2019

216,385

133,018

141,727

116,075

607,205

Goodwill acquired

—

531

—

531

Currency translation and other adjustments

(7,262)

725

10,907

4,408

Balance as of September 30, 2020

209,123

134,274

152,634

116,113

612,144

Other adjustments in the table above include updates

to the Company’s allocation

of the Houghton purchase price and associated

goodwill to each of the Company’s

reportable segments during the first nine months of 2020, including

a $

2.6

million decrease in the

Americas, a $

1.4

million decrease in EMEA, a $

8.0

million increase in Asia/Pacific and a $

0.5

million increase in Global Specialty

Business.

Gross carrying amounts and accumulated amortization

for definite-lived intangible assets as of September 30, 2020 and

December 31, 2019 were as follows:

Gross Carrying

Accumulated

Amount

Amortization

2020

2019

2020

2019

Customer lists and rights to sell

796,163

792,362

85,751

49,932

Trademarks, formulations and product

technology

156,837

157,049

27,872

21,299

Other

6,288

6,261

5,725

5,776

Total definite

-lived intangible assets

959,288

955,672

119,348

77,007

The Company amortizes definite-lived intangible assets on

a straight-line basis over their useful lives.

The Company recorded

14.0

million and $

41.7

million of amortization expense for the three and nine

months ended September 30, 2020, respectively.

Comparatively,

the Company recorded $

9.2

million and $

12.8

million of amortization expense for the three and nine months

ended

September 30, 2019, respectively.

Estimated annual aggregate amortization expense for

the current year and subsequent five years is as follows:

For the year ended December 31, 2020

55,447

For the year ended December 31, 2021

55,830

For the year ended December 31, 2022

55,673

For the year ended December 31, 2023

55,451

For the year ended December 31, 2024

55,025

For the year ended December 31, 2025

54,354

Goodwill and intangible assets that have indefinite lives are

not amortized and are required to be assessed at least annually

for

impairment.

The Company completes its annual goodwill and indefinite-lived

intangible asset impairment test during the fourth

quarter of each year.

The Company continuously evaluates if triggering events indicate

a possible impairment in one or more of its

reporting units or indefinite-lived or long-lived assets.

As of March 31, 2020, the Company evaluated the initial impact

of COVID-19 on the Company’s

operations, and the volatility

and uncertainty in the economic outlook as a result of

COVID-19 to determine if they indicated it was more likely

than not that the

carrying value of any of the Company’s

reporting units or indefinite-lived or long-lived assets was not recoverable.

The Company

concluded that the impact of COVID-19 did not represent

a triggering event as of March 31, 2020 with regards to the Company’s

reporting units or indefinite-lived and long-lived assets, except

for the Company’s Houghton

and Fluidcare trademark and tradename

indefinite-lived intangible assets.

The determination of estimated fair value of the Houghton

and Fluidcare trademark and tradename indefinite-lived assets was

based on a relief from royalty valuation method which

requires management’s

judgment and often involves the use of significant

estimates and assumptions, including assumptions with respect

to the weighted average cost of capital (“WACC”)

as well as projected

net sales.

In the first quarter of 2020, as a result of the impact of

COVID-19 driving a decrease in projected legacy Houghton

net sales

in the current year and the impact of the current year

decline on projected future legacy Houghton net sales as well as an increase

the WACC

assumption utilized in the quantitative impairment assessment, the

Company concluded that the estimated fair values of

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

the Houghton and Fluidcare trademark and tradename

intangible assets were less than their carrying values.

As a result, an

impairment charge of $

38.0

million to write down the carrying values of these intangible

assets to their estimated fair values was

recorded in the first quarter of 2020.

The Company’s estimate of fair

value and the carrying value of these Houghton and Fluidcare

trademark and tradename indefinite-lived intangible assets as of

September 30, 2020 was $

204.0

million.

Comparatively, these

indefinite-lived intangible assets totaled $

242.0

million as of December 31, 2019.

In addition, the Company has other indefinite-lived

intangible assets totaling $

1.1

million as of both September 30, 2020 and December 31,

2019.

As of September 30, 2020, the Company continued to

evaluate the on-going impact of COVID-19 on the Company’s

operations,

and the volatility and uncertainty in the economic outlook

as a result of COVID-19, to determine if this indicated it was more

likely

than not that the carrying value of any of the Company’s

reporting units or indefinite-lived or long-lived intangible

assets were not

recoverable.

The Company concluded that the impact of COVID-19 did not represent

a triggering event as of September 30, 2020

with regards to any of the Company’s

reporting units or indefinite-lived and long-lived intangible

assets.

While the Company concluded that the impact of COVID-19

did not represent a triggering event as of September 30,

2020 for

any of its other long-lived or indefinite-lived assets or reporting

units, the Company will continue to evaluate the impact of COVID-19

on the Company’s current

and projected results.

If the current economic conditions worsen or projections

of the timeline for recovery

are significantly extended, then the Company may conclude

in the future that the impact from COVID-19 requires

the need to perform

further interim quantitative impairment tests, which could

result in additional impairment charges in the future.

Note 15 – Debt

Debt as of September 30, 2020 and December 31,

2019 includes the following:

As of September 30, 2020

As of December 31, 2019

Interest

Outstanding

Interest

Outstanding

Rate

Balance

Rate

Balance

Credit Facilities:

Revolver

1.65%

155,000

3.20%

171,169

U.S. Term Loan

1.65%

577,500

3.20%

600,000

EURO Term Loan

1.50%

152,123

1.50%

151,188

Industrial development bonds

5.26%

10,000

5.26%

10,000

Bank lines of credit and other debt obligations

Various

1,950

Various

2,608

Total debt

896,573

934,965

Less: debt issuance costs

(11,873)

(14,196)

Less: short-term and current portion of long-term debts

(38,630)

(38,332)

Total long

-term debt

846,070

882,437

Credit facilities

The Company’s primary

credit facility (as amended, the “New Credit Facility”) is comprised

of a $

400.0

million multicurrency

revolver (the “Revolver”), a $

600.0

million term loan (the “U.S. Term

Loan”), each with the Company as borrower,

and a $

150.0

million (as of August 1, 2019) Euro equivalent term loan (the

“EURO Term Loan”

and together with the “U.S. Term

Loan”, the

“Term Loans”

)

with Quaker Chemical B.V.,

a Dutch subsidiary of the Company as borrower,

each with a five-year term maturing in

August 2024.

Subject to the consent of the administrative agent and certain other

conditions, the Company may designate additional

borrowers.

The maximum amount available under the New Credit Facility can be

increased by up to $

300.0

million at the Company’s

request if there are lenders who agree to accept additional

commitments and the Company has satisfied certain other

conditions.

Borrowings under the New Credit Facility bear interest at a

base rate or LIBOR plus an applicable margin

based upon the Company’s

consolidated net leverage ratio.

There are LIBOR replacement provisions that contemplate a further

amendment if and when LIBOR

ceases to be reported.

The interest rate incurred on the outstanding borrowings under

the New Credit Facility during the nine months

ended September 30, 2020 was approximately

2.2

As of September 30, 2020, the interest rate on the outstanding borrowings

under

the New Credit Facility was approximately

1.9

In addition to paying interest on outstanding principal under

the New Credit

Facility, the Company

is required to pay a commitment fee ranging from

0.2

% to

0.3

% depending on the Company’s

consolidated net

leverage ratio to the lenders under the Revolver in

respect of the unutilized commitments thereunder.

The Company has unused

capacity under the Revolver of approximately $

239

million, net of bank letters of credit of approximately $

million, as of September

30, 2020.

The New Credit Facility is subject to certain financial

and other covenants.

The Company’s initial consolidated net debt to

consolidated adjusted EBITDA ratio cannot exceed 4.25 to 1, with step downs in the permitted ratio over the course of the New Credit

Facility. The Company’s consolidated adjusted EBITDA to interest expense ratio cannot be less than 3.0 to 1. The New Credit

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Facility also prohibits the payment of cash dividends if the Company is in default or if the amount of the dividend paid annually

exceeds the greater of $50.0 million and 20% of consolidated adjusted EBITDA unless the ratio of consolidated net debt to

consolidated adjusted EBITDA is less than 2.0 to 1, in which case there is no such limitation on amount.

As of September 30, 2020

and December 31, 2019, the Company was in compliance with all of the New Credit Facility covenants.

The Term Loans have

quarterly principal amortization during their respective

five-year maturities, with

5.0

% amortization of the principal balance due in

years 1 and 2,

7.5

% in year 3, and

10.0

% in years 4 and 5, with the remaining principal amount due

at maturity.

During the nine

months ended September 30, 2020,

the Company made three quarterly amortization payments

related to the Ter

Loans totaling

28.1

million.

The New Credit Facility is guaranteed by certain of the Company’s

domestic subsidiaries and is secured by first

priority liens on substantially all of the assets of the Company

and the domestic subsidiary guarantors, subject to certain

customary

exclusions.

The obligations of the Dutch borrower are guaranteed only

by certain foreign subsidiaries on an unsecured basis.

The New Credit Facility required the Company to fix its variable

interest rates on at least

% of its total Term

Loans.

In order to

satisfy this requirement as well as to manage the

Company’s exposure to variable

interest rate risk associated with the New Credit

Facility, in November

2019, the Company entered into $

170.0

million notional amounts of three-year interest rate swaps at a base

rate

1.64

% plus an applicable margin as provided in the

New Credit Facility, based on

the Company’s consolidated

net leverage ratio.

At the time the Company entered into the swaps, and

as of September 30, 2020, the aggregate interest rate on the

swaps, including the

fixed base rate plus an applicable margin, was

3.1

See Note 18 of Notes to Condensed Consolidated Financial Statements.

The Company capitalized $

23.7

million of certain third-party debt issuance costs in connection

with executing the New Credit

Facility.

Approximately $

15.5

million of the capitalized costs were attributed to the Term

Loans and recorded as a direct reduction of

long-term debt on the Company’s

Condensed Consolidated Balance Sheet.

Approximately $

8.3

million of the capitalized costs were

attributed to the Revolver and recorded within other assets on

the Company’s Condensed Consolidated

Balance Sheet.

These

capitalized costs are being amortized into interest expense

over the five-year term of the New Credit Facility.

As of September 30,

2020 and December 31, 2019, the Company had $

11.9

million and $

14.2

million, respectively, of debt

issuance costs recorded as a

reduction of long-term debt.

As of September 30, 2020 and December 31, 2019, the

Company had $

6.3

million and $

7.6

million,

respectively, of

debt issuance costs recorded within other assets.

Industrial development bonds

As of September 30, 2020 and December 31, 2019

the Company had fixed rate, industrial development authority

bonds totaling

10.0

million in principal amount due in 2028.

These bonds have similar covenants to the New Credit Facility noted

above.

Bank lines of credit and other

debt obligations

The Company has certain unsecured bank lines of credit

and discounting facilities in one of its foreign subsidiaries, which

are not

collateralized.

The Company’s other debt

obligations primarily consist of certain domestic and foreign

low interest rate or interest-

free municipality-related loans, local credit facilities of

certain foreign subsidiaries and capital lease obligations.

Total unused

capacity under these arrangements as of September

30, 2020 was approximately $

million.

In addition to the bank letters of credit described in the “Credit facilities” subsection above, the Company’s only other off-balance

sheet arrangements include certain financial and other guarantees. The Company’s total bank letters of credit and guarantees

outstanding as of September 30, 2020 were approximately $12 million.

For the three and nine months ended September 30, 2020

the Company incurred the following debt related expenses included

within Interest expense, net, in the Condensed Consolidated

Statements of Operations:

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

Interest expense

5,957

5,761

19,621

8,258

Amortization of debt issuance costs

1,188

792

3,562

792

Total

7,145

6,553

23,183

9,050

Based on the variable interest rates associated with the New

Credit Facility, as of September

30, 2020 and December 31, 2019,

the amounts at which the Company’s

total debt were recorded are not materially different

from their fair market value.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Note 16 – Equity

The following tables present the changes in equity,

net of tax, for the three and nine months ended September 30,

2020 and 2019:

Accumulated

Capital in

Other

Common

Excess of

Retained

Comprehensive

Noncontrolling

Stock

Par Value

Earnings

Loss

Interest

Total

Balance at June 30, 2020

17,800

896,108

362,265

(109,264)

432

1,167,341

Net income (loss)

—

27,304

—

27,342

Amounts reported in other comprehensive

income

—

34,254

34,271

Dividends ($

0.395

per share)

—

(7,048)

—

(7,048)

Share issuance and equity-based

compensation plans

4,494

—

4,525

Balance at September 30, 2020

17,831

900,602

382,521

(75,010)

487

1,226,431

Balance at June 30, 2019

13,338

97,602

424,448

(78,881)

1,454

457,961

Net (loss) income

—

(13,053)

—

(12,981)

Amounts reported in other comprehensive

loss

—

(27,166)

(94)

(27,260)

Dividends ($

0.385

per share)

—

(6,826)

—

(6,826)

Shares issued related to the Combination

4,329

784,751

—

789,080

Share issuance and equity-based

compensation plans

3,412

—

3,476

Balance at September 30, 2019

17,731

885,765

404,569

(106,047)

1,432

1,203,450

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Accumulated

Capital in

Other

Common

Excess of

Retained

Comprehensive

Noncontrolling

Stock

Par Value

Earnings

Loss

Interest

Total

Balance at December 31, 2019

17,735

888,218

412,979

(78,170)

1,604

1,242,366

Cumulative effect of an accounting change

—

(911)

—

(911)

Balance at January 1, 2020

17,735

888,218

412,068

(78,170)

1,604

1,241,455

Net (loss) income

—

(8,812)

—

(8,724)

Amounts reported in other comprehensive

income (loss)

—

3,160

(114)

3,046

Dividends ($

1.165

per share)

—

(20,735)

—

(20,735)

Acquisition of noncontrolling interest

—

(707)

—

(340)

(1,047)

Distribution to noncontrolling interest

affiliate shareholders

—

(751)

Share issuance and equity-based

compensation plans

13,091

—

13,187

Balance at September 30, 2020

17,831

900,602

382,521

(75,010)

487

1,226,431

Balance at December 31, 2018

13,338

97,304

405,125

(80,715)

1,317

436,369

Cumulative effect of an accounting change

—

(44)

—

(44)

Balance at January 1, 2019

13,338

97,304

405,081

(80,715)

1,317

436,325

Net income

—

16,382

—

186

16,568

Amounts reported in other comprehensive

loss

—

(25,332)

(71)

(25,403)

Dividends ($

1.140

0 per share)

—

(16,894)

—

(16,894)

Shares issued related to the Combination

4,329

784,751

—

789,080

Share issuance and equity-based

compensation plans

3,710

—

3,774

Balance at September 30, 2019

17,731

885,765

404,569

(106,047)

1,432

1,203,450

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

The following tables show the reclassifications from and

resulting balances of AOCI for the three and nine months

ended

September 30, 2020 and 2019:

Defined

Unrealized

Currency

Benefit

Gain (Loss) in

Translation

Pension

Available-for

Derivative

Adjustments

Plans

Sale Securities

Instruments

Total

Balance at June 30, 2020

(88,637)

(17,363)

1,148

(4,412)

(109,264)

Other comprehensive income (loss) before

reclassifications

33,601

(901)

810

460

33,970

Amounts reclassified from AOCI

—

584

(104)

—

480

Current period other comprehensive income (loss)

33,601

(317)

706

460

34,450

Related tax amounts

—

(150)

(106)

(196)

Net current period other comprehensive income (loss)

33,601

(257)

556

354

34,254

Balance at September 30, 2020

(55,036)

(17,620)

1,704

(4,058)

(75,010)

Balance at June 30, 2019

(50,296)

(29,323)

738

—

(78,881)

Other comprehensive (loss) income before

reclassifications

(28,211)

679

(6)

—

(27,538)

Amounts reclassified from AOCI

—

728

(96)

—

632

Current period other comprehensive (loss) income

(28,211)

1,407

(102)

—

(26,906)

Related tax amounts

—

(281)

—

(260)

Net current period other comprehensive (loss) income

(28,211)

1,126

(81)

—

(27,166)

Balance at September 30, 2019

(78,507)

(28,197)

657

—

(106,047)

Defined

Unrealized

Currency

Benefit

Gain (Loss) in

Translation

Pension

Available-for

Derivative

Adjustments

Plans

Sale Securities

Instruments

Total

Balance at December 31, 2019

(44,568)

(34,533)

1,251

(320)

(78,170)

Other comprehensive (loss) income before

reclassifications

(10,468)

(409)

802

(4,855)

(14,930)

Amounts reclassified from AOCI

—

25,550

(229)

—

25,321

Current period other comprehensive (loss) income

(10,468)

25,141

573

(4,855)

10,391

Related tax amounts

—

(8,228)

(120)

1,117

(7,231)

Net current period other comprehensive (loss) income

(10,468)

16,913

453

(3,738)

3,160

Balance at September 30, 2020

(55,036)

(17,620)

1,704

(4,058)

(75,010)

Balance at December 31, 2018

(49,322)

(30,551)

(842)

—

(80,715)

Other comprehensive (loss) income before

reclassifications

(29,185)

760

2,133

—

(26,292)

Amounts reclassified from AOCI

—

2,192

(235)

—

1,957

Current period other comprehensive (loss) income

(29,185)

2,952

1,898

—

(24,335)

Related tax amounts

—

(598)

(399)

—

(997)

Net current period other comprehensive (loss) income

(29,185)

2,354

1,499

—

(25,332)

Balance at September 30, 2019

(78,507)

(28,197)

657

—

(106,047)

All reclassifications related to unrealized gain (loss) in

available-for-sale securities relate to the Company’s

equity interest in a

captive insurance company and are recorded in equity

in net income of associated companies.

The amounts reported in other

comprehensive income for noncontrolling interest are

related to currency translation adjustments.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Note 17 – Fair Value

Measurements

The Company has valued its company-owned life insurance

policies at fair value.

These assets are subject to fair value

measurement as follows:

Fair Value

Measurements at September 30, 2020

Total

Using Fair Value

Hierarchy

Assets

Fair Value

Level 1

Level 2

Level 3

Company-owned life insurance

1,803

—

1,803

—

Total

1,803

—

1,803

—

Fair Value

Measurements at December 31, 2019

Total

Using Fair Value

Hierarchy

Assets

Fair Value

Level 1

Level 2

Level 3

Company-owned life insurance

1,782

—

1,782

—

Total

1,782

—

1,782

—

The fair values of Company-owned life insurance assets are based

on quotes for like instruments with similar credit ratings and

terms.

The Company did not hold any Level 3 investments as of

September 30, 2020 or December 31, 2019, respectively,

so related

disclosures have not been included.

Note 18 – Hedging Activities

As previously disclosed in its 2019 Form 10-K, in order to

satisfy certain requirements of the New Credit Facility as well as to

manage the Company’s exposure

to variable interest rate risk associated with the New Credit Facility,

in November 2019, the

Company entered into $

170.0

million notional amounts of three-year interest rate swaps.

See Note 15 of Notes to Condensed

Consolidated Financial Statements.

These interest rate swaps are designated as cash flow

hedges and, as such, the contracts are

marked-to-market at each reporting date and any unrealized gains

or losses are included in AOCI to the extent effective

and

reclassified to interest expense in the period during

which the transaction affects earnings or it becomes

probable that the forecasted

transaction will not occur.

The Company has previously used derivative financial instruments primarily

for the purposes of hedging

exposures to fluctuations in interest rates.

The Company did not utilize derivatives designated as cash

flow hedges during the three

and nine months ended September 30, 2019.

The balance sheet classification and fair values of the

Company’s derivative instruments,

which are Level 2 measurements, are as

follows:

Fair Value

Condensed Consolidated

September 30,

December 31,

Balance Sheet Location

2020

2019

Derivatives designated as cash flow hedges:

Interest rate swaps

Other non-current liabilities

5,271

415

5,271

415

The following table presents the net unrealized loss deferred to

AOCI:

September 30,

December 31,

2020

2019

Derivatives designated as cash flow hedges:

Interest rate swaps

AOCI

4,058

320

4,058

320

The following table presents the net loss reclassified from

AOCI to earnings:

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

Amount and location of expense reclassified

from AOCI into Expense (Effective Portion)

Interest expense, net

(640)

—

(1,105)

—

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Interest rate swaps are entered into with a limited number

of counterparties, each of which allows for net settlement

of all

contracts through a single payment in a single currency

in the event of a default on or termination of any one contract.

As such, in

accordance with the Company’s

accounting policy,

these derivative instruments are recorded on a net basis within

the Condensed

Consolidated Balance Sheets.

Note 19 – Commitments and Contingencies

The Company previously disclosed in its 2019 Form 10-K

that AC Products, Inc. (“ACP”), a wholly owned subsidiary,

has been

operating a groundwater treatment system to hydraulically

contain groundwater contamination emanating from ACP’s

site, the

principal contaminant of which is perchloroethylene.

As of September 30, 2020, ACP believes it is close to meeting

the conditions for

closure of the groundwater treatment system, but continues

to operate

this system while in discussions with the relevant authorities.

As of September 30, 2020, the Company believes that the

range of potential-known liabilities associated with the balance

of the ACP

water remediation program is approximately $

0.1

million to $

1.0

million.

The low and high ends of the range are based on the length

of operation of the treatment system as determined

by groundwater modeling.

Costs of operation include the operation and

maintenance of the extraction well, groundwater monitoring

and program management.

The Company previously disclosed in its 2019 Form 10-K

that an inactive subsidiary of the Company that was acquired

in 1978

sold certain products containing asbestos, primarily

on an installed basis, and is among the defendants in numerous

lawsuits alleging

injury due to exposure to asbestos.

During the three and nine months ended September

30, 2020,

there have been no significant

changes to the facts or circumstances of this previously

disclosed matter, aside from on-going

claims and routine payments associated

with this litigation.

Based on a continued analysis of the existing and anticipated

future claims against this subsidiary,

it is currently

projected that the subsidiary’s

total liability over the next 50 years for these claims is approximately

0.5

million (excluding costs of

defense).

The Company previously disclosed in its 2019 Form 10-K

that as a result of the closing of the Combination, the Company

is now

party to Houghton environmental matters related to certain

domestic and foreign properties currently or previously

owned.

These

environmental matters primarily require the Company

to perform long-term monitoring as well as operating and maintenance

at each

of the applicable sites.

During the three and nine months ended September 30,

2020, there have been no significant changes to the

facts or circumstances of these previously disclosed matters,

aside from on-going monitoring and maintenance activities

and routine

payments associated with each of the sites.

The Company continually evaluates its obligations related

to such matters, and based on

historical costs incurred and projected costs to be incurred

over the next 28 years, has estimated the present value

range of costs for all

of the Houghton environmental matters, on a discounted

basis, to be between approximately $

million and $

million as of

September 30, 2020, for which $

5.7

million was accrued within other accrued liabilities and other non-current

liabilities on the

Company’s Condensed

Consolidated Balance Sheet as of September 30, 2020.

Comparatively, as of

December 31, 2019, the

Company had $

6.6

million accrued for with respect to these matters.

The Company believes, although there can be no assurance

regarding the outcome of other unrelated environmental matters, that

it has made adequate accruals for costs associated with other

environmental problems of which it is aware.

Approximately $

0.1

million and $

0.2

million were accrued as of September 30, 2020 and December

31, 2019, respectively, to

provide for such anticipated

future environmental assessments and remediation

costs.

The Company is party to other litigation which management

currently believes will not have a material adverse

effect on the

Company’s results of

operations, cash flows or financial condition.

In addition, the Company has an immaterial amount of contractual

purchase obligations.

Note 20 – COVID-19 Global Pandemic

In early 2020, a global outbreak of COVID-19 occurred

initially in China and then across all locations where the Company does

business, and which continued into the third quarter.

In March 2020, the World

Health Organization formally identified the COVID-

19 outbreak as a pandemic.

In an effort to halt the outbreak of COVID-19,

the governments of impacted countries, including but not

limited to the United States, the European Union, and China, have

taken various actions to reduce its spread, including travel

restrictions, shutdowns of businesses deemed nonessential,

and stay-at-home or similar orders.

This outbreak and associated

measures to reduce its spread have caused significant disruption

to the operations of the Company and its suppliers and customers.

The disruptions and negative impact to the Company

include significant volume declines and lower net sales initially at its China

subsidiaries in the first quarter of 2020 and subsequently,

beginning late March and continuing into the third quarter,

at almost all of

its other sites as the global economy slowed significantly

in response to the pandemic.

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.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

- Continued

(Dollars in thousands, except share and per share amounts

unless otherwise stated)

(Unaudited)

Further, management continues to

evaluate how COVID-19-related circumstances, such as remote

work arrangements, have

affected 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 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 this Report as COVID-19 and the responses of governmental

authorities continue to evolve globally.

The Company cannot reasonably estimate the magnitude of the effects

these conditions will

have on the Company’s

operations as they are subject to significant uncertainties relating

to the ultimate geographic spread of the

virus, the incidence and severity of the disease, the duration

or resurgence of the outbreak, the length of the

travel restrictions and

business closures imposed by governments of impacted

countries, and the economic response by governments of impacted countries.

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 speed and frequency of continuously

evolving 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.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Item 2.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

As used in this 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 term

Legacy Quaker refers to the Company prior to closing

its combination with Houghton International, Inc. (“Houghton”)

(herein

referred to as the “Combination”) on August 1, 2019.

Throughout this Quarterly Report on Form 10-Q (the “Report”),

all figures

presented, unless otherwise stated, reflect the results of

operations of the combined company for the three and nine

months ended

September 30, 2020 and for the three and nine months

ended September 30, 2019 include the results of two months

of Houghton’s

operations post-closing of the Combination on August 1,

2019.

Executive Summary

Quaker Houghton is a global leader in industrial process

fluids.

With a presence around the world,

including operations in over

25 countries, our customers include thousands of the world’s

most advanced and specialized steel, aluminum, automotive, aerospace,

offshore, can, mining, and metalworking

companies.

Our high-performing, innovative and sustainable solutions are

backed by best-

in-class technology,

deep process knowledge, and customized services. Quaker

Houghton is headquartered in Conshohocken,

Pennsylvania, located near Philadelphia in the United

States.

The Company’s third

quarter of 2020 performance continued to be affected

by the COVID-19 pandemic and its impact on the

global economy,

including most of the Company’s

end customers.

However, the Company is pleased with its third

quarter

performance as it showed 28% sequential growth in

net sales compared to the second quarter of 2020.

Compared to the prior year,

third quarter net sales of $367.2 million increased 13% compared

to $325.1 million in the third quarter of 2019 due primarily to

the

inclusion of $74.6 million of Houghton and Norman Hay

plc (“Norman Hay”) net sales.

Excluding Houghton and Norman Hay net

sales, the Company’s net

sales would have declined approximately 10% quarter-over-quarter,

primarily driven by a decrease in sales

volumes of 8% due to the negative impacts of COVID-19

on global production levels in the current quarter.

The Company’s gross

profit and selling, general and administrative expenses (“SG&A”)

also increased due to the inclusion of Houghton and Norman

Hay,

but both also benefited from the realization of cost savings

associated with synergies achieved with the

Combination as well as the

impact of lower SG&A due to further cost saving measures

put in place to help offset the impacts of COVID-19.

The Company reported third quarter of 2020 net

income of $27.3 million or $1.53 per diluted share compared

to third quarter of

2019 net loss of $13.1 million or $0.80 per diluted share.

The third quarter of 2019 net loss was impacted by initial

inventory fair

value adjustments, restructuring charges and

Combination costs that were high due to the Combination’s

August 1, 2019 completion.

Excluding costs associated with the Combination and

other

non-core items in each period, the Company’s

adjusted EBITDA of $63.9

million in the third quarter of 2020 increased 24% compared to

$51.4 million in the prior year quarter,

primarily due to the

Combination, the inclusion of Norman Hay and the benefits of

cost savings realized from the Combination, which were

partially offset

by the current quarter negative impacts of COVID-19.

The Company’s non-GAAP earnings

per diluted share were $1.56 in both the

third quarters of 2020 and 2019, as higher net income was offset

by an additional 4.3 million shares issued as part of

the consideration

for the Combination.

See the Non-GAAP Measures section of this Item below,

as well as other items discussed in the Company’s

Consolidated Operations Review in the Operations

section of this Item, below.

During the third quarter of 2019 and in connection with the

Combination, the Company established a new reportable

segment

structure that consists of four segments: (i) Americas; (ii)

Europe, Middle East and Africa (“EMEA”); (iii) Asia/Pacific;

and (iv)

Global Specialty Businesses.

The Company’s 2020

operating performance by reportable segment reflected the positive

impact of

Houghton’s performance

in all of its segments and Norman Hay in its Global Specialty

Businesses segment.

Without the inclusion of

Houghton and Norman Hay,

net sales would have been lower in all segments compared

to the prior year, primarily driven by declines

in volume due to the negative impacts of COVID-19 on

the Company’s end markets.

As reported, all of the Company’s

segment

operating earnings were higher compared to the third

quarter of 2019 driven by the inclusion of Houghton and

Norman Hay and cost

synergies achieved with the Combination partially

offset by the negative impacts of COVID-19.

Additional details of each segment’s

operating performance are further discussed in the Company’s

reportable segments review,

in the Operations section of this Item,

below.

The Company had net operating cash flow of approximately

$67.3 million in the third quarter of 2020 compared

to $13.1 million

in the third quarter of 2019, resulting in an increase in

its current year-to-date net operating cash flow to $112.0

million compared to

$35.5 million in the first nine months of 2019.

The increase in net operating cash flow year-over-year

was driven by the inclusion of

Houghton and Norman Hay earnings, releases in working

capital primarily due to the volume declines related to COVID-19

and lower

cash outflows associated with the Combination.

The key drivers of the Company’s

operating cash flow and working capital are

further discussed in the Company’s

Liquidity and Capital Resources section of this Item,

below.

Overall, the Company’s

third quarter results were negatively impacted by the continuing

effects of COVID-19, but the

Company’s performance

also showed good positive trends across the globe when compared

sequentially to the second quarter of

2020.

Notably, the Company

continues to see lower production in most of its end markets

compared to the prior year with the most

significant reductions in the automotive and aerospace

industries.

Despite these challenges, the Company was able

to generate

Quaker Chemical Corporation

Management’s Discussion and Analysis

significant net operating cash flow,

continue to pay its regular dividends, pay down its debt and continue

to execute its integration

plans for the Combination.

The current global economic slowdown and other impacts

due to COVID-19 pose an unprecedented challenge, but the

Company

expects to successfully navigate this downturn

as the Company has demonstrated the ability,

now and in the past, to respond quickly

to changing market conditions.

The Company also expects to maintain sufficient

liquidity and to remain in compliance with all of its

debt covenants despite these difficult economic

times.

The Company expects that its integration synergies

and additional cost savings

actions as well as continuing share gains in the marketplace

will help the Company during these challenging times.

These factors,

coupled with the benefit of a projected gradual rebound

in demand in the Company’s end

markets, are expected to drive significant

adjusted EBITDA growth in 2021 and 2022.

Impact of COVID-19

In early 2020, the global outbreak of COVID-19

negatively impacted all locations where the Company does

business.

Although

the Company has now operated during several quarters

in this COVID-19 environment, the full extent of the outbreak

and related

business impacts remain uncertain and volatile, and

therefore the full extent to which COVID-19 may impact the Company’s

future

results of operations or financial condition is uncertain.

This outbreak has significantly disrupted the operations of

the Company and

its suppliers and customers.

The Company has experienced significant volume declines and

lower net sales as further described in this

section, initially at its China subsidiaries

in the first quarter of 2020 and, subsequently,

beginning in late March and continuing into the

third quarter, throughout the rest of

the business due to the global economic slowdown brought

on by 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.

Given the speed and frequency of the continuously evolving developments

with respect to this pandemic, the Company cannot, as

of the date of this Report, reasonably estimate the

magnitude or the full extent of the impact to its future results of

operations or to the

ability of it or its customers to resume more normal

operations, even as certain restrictions are lifted. The prolonged

pandemic and a

resurgence in outbreak, and continued restrictions

on day-to-day life and business operations may result in volume

declines and lower

net sales in future periods as compared to pre-COVID-19

levels.

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.

Given this ongoing

uncertainty,

the Company cautions that its future results of operations, including

the results for the remainder of 2020, could be

significantly adversely impacted by COVID-19.

Further, management continues to

evaluate how COVID-19-related circumstances, such as remote

work arrangements, have

affected financial reporting processes and systems, 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 controls over financial reporting,

and disclosure

controls and procedures.

For additional information regarding the potential impact of COVID-19,

see Item 1A of Part II of this

Report.

The Company’s top

priority is, and especially during this pandemic remains, to protect the health

and safety of its employees and

customers, while working to ensure business continuity

to meet customers’ needs:

●

Our People

– The Company has taken steps to protect the health and wellbeing

of its people in affected areas through various

actions, including enabling work at home where needed and

possible, and employing social distancing standards,

implementing travel restrictions where applicable, enhancing

onsite hygiene practices, and instituting visitation restrictions

the Company’s facilities.

The Company does not expect that it will incur material

expenses implementing health and safety

policies for employees, contractors, and customers.

●

Our Operations

– Currently, all of

the Company’s 34 production

facilities worldwide are open and operating and are

deemed

as essential businesses in the jurisdictions where they are

operating.

The Company believes it has been able to meet the

needs of all its customers across the globe despite the

current economic challenges.

●

Our Business Conditions

– The Company’s third

quarter of 2020 results showed solid improvement over the second

quarter

of 2020, which was consistent with expectations that

April and May would be the worst months of the year and

that the

Company would show gradual quarterly improvement

sequentially throughout the remainder of the year.

However, demand

still remained somewhat deflated compared to pre-COVID-19

levels as many customers maintained reduced production

levels during the third quarter of 2020.

Excluding Houghton and Norman Hay net sales, all four of the

Company’s reportable

segments showed declines in net sales due to COVID-19

during the third quarter of 2020 compared to the prior year,

with the

Americas and EMEA being the most impacted and Asia/Pacific being

the least impacted.

The Company currently still

expects that the impact from COVID-19 will gradually

improve sequentially each quarter subject to the effective

containment

Quaker Chemical Corporation

Management’s Discussion and Analysis

of the virus and its effects.

However, the incidence of reported cases of

COVID-19 appears to be again increasing in several

geographies where we have significant operations and

it remains highly uncertain as to how long the global pandemic

and

related economic challenges will last and when our customers’

businesses will recover.

●

Our Actions

– The Company has taken actions to conserve cash and

reduce costs.

Some of the actions taken include

eliminating all discretionary expenditures, delaying or

freezing salary increases where legally permitted, reducing executives’

salaries, lowering targeted capital expenditures

by approximately 30%, and accelerating and fine-tuning the Company’s

integration plan.

These initiatives have been designed and implemented so that

the Company can successfully manage

through this challenging situation while continuing

to protect the health of its employees, meet customers’ needs,

maintain

the Company’s long

-term competitive advantages and above-market growth,

and enable it to continue to effectively integrate

Houghton.

While the Company has taken a number of actions to protect

our workforce, to continue to serve our customers

with excellence and to conserve cash and reduce costs, which

have been effective thus far, further

actions to respond to the

pandemic and its effects may be necessary as

conditions continue to evolve.

Liquidity and Capital Resources

At September 30, 2020, the Company had cash, cash equivalents

and restricted cash of $174.7 million, including

approximately

$19.0 million of restricted cash.

Total cash, cash

equivalents and restricted cash was $143.6 million at December 31,

2019, which

included $20.0 million of restricted cash.

The $31.1 million increase in cash, cash equivalents and restricted

cash was the net result of

112.0

million of cash provided by operating activities partially offset

by $

65.0

million of cash used in financing activities and $15.3

million of cash used in investing activities as well as a $0.5

million negative impact due to the effect of foreign

currency translation on

cash.

Net cash flows provided by operating activities were $112.0

million in the first nine months of 2020 compared to $35.5

million in

the first nine months of 2019.

The Company’s current

year net operating cash flow increase was largely due to

the inclusion of

Houghton and Norman Hay earnings, r

eleases in working capital primarily due to the volume declines

related to COVID-19, lower

cash outflows associated with the Combination

and higher cash dividends received from its associated companies

year-over-year

including $

5.0

million received from the Company’s

joint venture in Korea in the first quarter of 2020.

Net cash flows used in investing activities were $

15.3

million in the first nine months of 2020 compared to $807.9 million

in the

first nine months of 2019.

This significant decrease in cash outflows used in investing activities was due

to the prior year payments

related to the closing of the Combination on August 1,

2019.

In addition, the Company had higher investments in property,

plant and

equipment due to the inclusion of Houghton and Norman

Hay capital expenditures in 2020 including higher expenditures related

integrating the companies during the nine months ended

September 30, 2020.

Also, in the current year, the Company

finalized the

post-closing adjustment related to Norman Hay and

made an additional payment of approximately $

3.2

million.

Net cash flows used in financing activities were $65.0

million in the first nine months of 2020 compared to cash provided in

financing activities of $798.4 million in the first nine

months of 2019.

The $863.4 million decrease in net cash flows was due

primarily to additional term loan and revolving credit facility

borrowings in the prior year to close the Combination compared

to $

28.1

million of current year debt repayments in accordance with

its term loan agreements and a net $16.5 million reduction

in borrowings

under the Company’s revolving

credit facilities in the current year.

The net reduction in borrowings in the current year includes the

drawdown in March 2020 of most of the available capacity

under the Revolver as a precautionary measure to supplement

cash on

hand at the onset of the pandemic which was subsequently

repaid in September 2020.

Also, as part of the Combination, the Company

incurred and paid debt issuance costs of approximately

$23.7 million in the prior year.

In addition, the Company paid $

20.5

million of

cash dividends during the first nine months of 2020, a

5.5

million or

% increase in cash dividends compared to the prior year,

primarily due to the approximately 4.3 million shares issued

at closing of the Combination, as well as both the current

year and prior

year cash dividend per share increases.

Finally, during the

first nine months of 2020, the Company used $1.0 million

to purchase the

remaining noncontrolling interest in one of its South African

affiliates.

Prior to this buyout, this South African affiliate

made a

distribution to the prior noncontrolling affiliate

shareholder of approximately $0.8 million in the first nine

months of 2020.

There

were no similar noncontrolling interest activities in the first

nine months of 2019.

As previously disclosed in its Annual Report on Form 10

-K for the year ended December 31, 2019 (the “2019 Form

10-K”), on

August 1, 2019, the Company completed the Combination,

whereby the Company acquired all of the issued and

outstanding shares of

Houghton from Gulf Houghton Lubricants, Ltd. in accordance with

the Share Purchase Agreement dated April 4, 2017.

The final

purchase consideration was comprised of: (i) $170.8 million

in cash; (ii) the issuance of approximately 4.3 million shares of

common

stock of the Company with par value of $1.00, comprising

24.5% of the common stock of the Company

at closing; and (iii) the

Company’s refinancing

of $702.6 million of Houghton’s

indebtedness at closing.

Cash acquired in the Combination was $75.8

million.

Prior to the Combination, the Company secured commitments

from certain banks for a new credit facility (as amended,

the

“New Credit Facility”).

Concurrent with the closing of the Combination on August

1, 2019, the New Credit Facility became effective,

replacing the Company’s

previous credit facility.

See Note 2 and Note 15 of Notes to Condensed Consolidated

Financial Statements.

Quaker Chemical Corporation

Management’s Discussion and Analysis

As of September 30, 2020, the Company had New Credit

Facility borrowings outstanding of $884.6 million.

As of December 31,

2019, the Company had New Credit Facility borrowings

outstanding of $922.4 million.

The Company has unused capacity under the

Revolver of approximately $239 million, net of bank letters

of credit of approximately $6 million, as of September 30,

2020.

The

Company’s other debt obl

igations are primarily industrial development bonds, bank lines of credit

and municipality-related loans,

which totaled $12.0 million as of September 30, 2020

and $12.6 million as of December 31, 2019, respectively.

Total unused capacity

under these arrangements as of September 30, 2020 was approximately

$38 million.

The Company’s total net debt as

of September

30, 2020 was $740.8 million.

As of September 30, 2020 and December 31, 2019, the

Company was in compliance with all of its bank

covenants, including those under the New Credit Facility.

The New Credit Facility required the Company to fix its variable

interest rates on at least 20% of its total Term

Loans. In order to

satisfy this requirement as well as to manage the

Company’s exposure to variable

interest rate risk associated with the New Credit

Facility, in November

2019, the Company entered into $170.0 million notional

amounts of three-year interest rate swaps at a base rate

of 1.64% plus an applicable margin as provided

in the New Credit Facility, based

on the Company’s consolidated

net leverage ratio.

At the time the Company entered into the swaps, and

as of September 30, 2020, this aggregate rate was 3.1%.

The Company currently expects to realize Combination

cost synergies on a pro forma combined company basis

of $58 million in

2020, $75 million in 2021 and $80 million in 2022, which

are increases from the Company’s

previous expectations of $53 million,

$65 million and $75 million, respectively.

The Company estimates that it realized approximately $40 million

of cost savings during

the first nine months of 2020 on a combined company

pro forma basis.

The Company expects to incur additional costs and

make associated cash payments to integrate Quaker and

Houghton and

continue realizing the Combination’s

total anticipated cost synergies.

The Company expects cash payments,

including those pursuant

to the QH Program, described below,

but excluding incremental capital expenditures related to the

Combination, will be between

approximately 1.0 and 1.2 times its total anticipated 2022

cost synergies of $80 million.

The Company expects to incur these costs

over a three-year period following the closing of the Combination,

with a significant portion of these costs incurred or expected

to be

incurred in 2019 and the current year.

The Company incurred $23.4 million of total Combination,

integration and other acquisition-

related expenses in the first nine months of 2020, including

$0.8 million of accelerated depreciation, described in

the Non-GAAP

measures of this Item below.

The Company had aggregate net cash outflows of

approximately $20.9 million related to the

Combination, integration and other acquisition-related

expenses during the first nine months of 2020.

Comparatively, during

the first

nine months of 2019, the Company incurred $25.9

million of total Combination, integration and other acquisition

-related expenses,

including $2.1 million of ticking fees, described in the Non

-GAAP Measures of this Item below,

and aggregate net cash outflows

related to these costs were $40.1 million.

Quaker Houghton’s management

approved, and the Company initiated, a global restructuring

plan (the “QH Program”) in the

third quarter of 2019 as part of its planned cost synergies

associated with the Combination and recorded a $24.0

million charge.

The

QH Program includes restructuring and associated

severance costs to reduce total headcount by approximately

350 people globally

and plans for the closure of certain manufacturing and

non-manufacturing facilities.

In connection with the plans for closure of certain

manufacturing and non-manufacturing facilities, the

Company made a decision to make available for sale certain

facilities during

the

second quarter of 2020 resulting in the reclassification of

approximately $

12.8

million of buildings and land to other current assets

from property,

plant and equipment as of September 30, 2020.

The Company expects to receive amounts in excess of net book

value

for the properties held for sale.

Additionally, as a result

of the QH Program, the Company recognized $

3.6

million of restructuring

and related charges in the first nine months

of 2020.

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 will

continue to occur during 2020 and into 2021 under the QH Prog

ram and estimates that the anticipated cost synergies

realized under

this program will approximate one-times restructuring costs

incurred.

The Company made cash payments related to the settlement of

restructuring liabilities under the QH Program during the

first nine months of 2020 of approximately $

12.8

million compared to $4.6

million in the first nine months of 2019.

In the fourth quarter of 2018, the Company began the

process of terminating its non-contributory U.S. pension plan (“the Legacy

Quaker U.S. Pension Plan”).

The Company completed the Legacy Quaker U.S. Pension

Plan termination during the first quarter of

2020.

In order to terminate the Legacy Quaker U.S. Pension Plan in accordance

with I.R.S. and Pension Benefit Guaranty

Corporation requirements, the Company was required

to fully fund the Legacy Quaker U.S. Pension Plan on a termination

basis and

the amount necessary to do so was approximately

$1.8 million, subject to final true up adjustments.

In the third quarter of 2020, the

Company finalized the amount of liability and related

annuity payments and received a refund in premium of $1.6 million.

addition, the Company recorded a non-cash pension settlement

charge at plan termination of approximately $22.7

million in the first

quarter of 2020.

As of September 30, 2020, the Company’s

gross liability for uncertain tax positions, including interest and

penalties, was $

28.6

million.

The Company cannot determine a reliable estimate of the

timing of cash flows by period related to its uncertain tax position

liability.

However, should the entire liability

be paid, the amount of the payment may be reduced by up

to $

8.3

million as a result of

offsetting benefits in other tax jurisdictions.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company believes that its existing cash, anticipated

cash flows from operations and available additional liquidity

will be

sufficient to support its operating requirements

and fund its business objectives for at least the next twelve months,

including but not

limited to, payments of dividends to shareholders, costs related

to the Combination and integration, pension plan contributions,

capital

expenditures, other business opportunities and other

potential contingencies.

The Company’s liquidity is affected

by many factors,

some based on normal operations of our business and

others related to the impact of the pandemic on our business

and on global

economic conditions as well as industry uncertainties, which we cannot

predict.

We also cannot predict

economic conditions and

industry downturns or the timing, strength or duration

of recoveries.

We may seek,

as we believe appropriate, additional debt or

equity financing which would provide capital for corporate

purposes, working capital funding, additional liquidity needs

or to fund

future growth opportunities, including possible acquisitions

and investments.

The timing and amount of potential capital requirements

cannot be determined at this time and will depend

on a number of factors, including the actual and projected

demand for our products,

specialty chemical industry conditions, competitive factors,

and the condition of financial markets, among others.

Critical Accounting Policies and Estimates

The Company’s critical accounting

policies and estimates, as set forth in its 2019 Form 10-K remain

materially consistent.

However, due to the current impact

as well as the volatility and uncertainty in the economic outlook

as a result of COVID-19, the

Company re-evaluated certain of its estimates, most notably

its estimates and assumptions with regards to goodwill and

other

intangible assets during the first quarter of 2020.

Goodwill and other intangible assets:

The Company accounts for business combinations under

the acquisition method of

accounting.

This method requires the recording of acquired assets, including separately

identifiable intangible assets, at their

acquisition date fair values.

Any excess of the purchase price over the estimated fair value of

the identifiable net assets acquired is

recorded as goodwill.

The determination of the estimated fair value of assets acquired

requires management’s judgment

and often

involves the use of significant estimates and assumptions,

including assumptions with respect to future cash inflows

and outflows,

discount rates, royalty rates, asset lives and market multiples, among

other items.

When necessary, the Company

consults with

external advisors to help determine fair value.

For non-observable market values, the Company may determine

fair value using

acceptable valuation principles, including the excess earnings,

relief from royalty,

lost profit or cost methods.

The Company amortizes definite-lived intangible assets on

a straight-line basis over their useful lives.

Goodwill and intangible

assets that have indefinite lives are not amortized and are

required to be assessed at least annually for impairment.

The Company

completes its annual goodwill and indefinite-lived intangible asset impairment

test during the fourth quarter of each year.

The

Company continuously evaluates if triggering events indicate

a possible impairment in one or more of its indefinite

-lived or long-lived

assets.

As of March 31, 2020, the Company evaluated the initial impact

of COVID-19 on the Company’s

operations, as well as the

volatility and uncertainty in the economic outlook as a

result of COVID-19, to determine if this indicated it was more likely

than not

that the carrying value of any of the Company’s

indefinite-lived or long-lived assets was not recoverable.

While the impact of

COVID-19 has already had a negative effect

on the Company’s operations

and was expected to significantly impact the Company’s

full year 2020 results, in evaluating if a triggering

event was present for one or more of the Company indefinite-lived

or long-lived

assets, the Company also considered the carrying value

and estimated fair value for each asset, as well as the Company’s

expected

impact from COVID-19 on each specific asset.

The Company concluded that the impact of COVID-19

did not represent a triggering

event as of March 31, 2020 with regards to the Company’s

indefinite-lived and long-lived assets, except for the Company’s

Houghton

and Fluidcare trademark and tradename indefinite

-lived intangible assets.

Given the relatively short period of time between the

fair value determination for the acquired Houghton and

Fluidcare trademark

and tradename indefinite-lived intangible assets as of the

closing of the Combination on August 1, 2019, and the 2019 annual

impairment testing date of October 1, the Company’s

2019 annual impairment assessment concluded that the $242.0

million carrying

value of acquired Houghton and Fluidcare indefinite-lived

intangible assets generally approximated fair value, with excess fair value

of less than 5%.

Because of the previously concluded relatively narrow gap between

fair value and carrying value, the Company

concluded in the first quarter of 2020 that the expected

current year impact from COVID-19 on the Company’s

net sales represented a

triggering event.

As a result of the conclusion, the Company completed an interim

quantitative indefinite-lived intangible asset

impairment assessment as of March 31, 2020.

The determination of estimated fair value of the Houghton

and Fluidcare trademark and tradename indefinite-lived assets was

based on a relief from royalty valuation method which

requires management’s

judgment and often involves the use of significant

estimates and assumptions, including assumptions with respect

to the weighted average cost of capital (“WACC”)

as well as projected

net sales.

In completing the interim quantitative impairment

assessment as of March 31, 2020, the Company used a WACC

assumption of approximately 10% as well as current year

forecasted net sales and management’s

estimates with respect to future net

sales growth rates specific to legacy Houghton’s

net sales.

As a result of an increase in the WACC

assumption as of March 31, 2020,

compared to the prior year fourth quarter annual impairment

assessment, and the significant current year decline in projected

legacy

Houghton net sales due to the impact of COVID-19,

the Company concluded that the estimated fair values of these intangible

assets

were less than their carrying values and that an

impairment charge to write down their carrying values

to their estimated fair values

Quaker Chemical Corporation

Management’s Discussion and Analysis

was warranted.

This resulted in a first quarter of 2020 non-cash impairment

charge of $38.0 million for these indefinite-lived

intangible assets.

The Company performed a qualitative assessment over these

indefinite-lived intangible assets as of September 30,

2020 and concluded that no further impairment indicators existed.

The book value of these assets as of September 30,

2020 was

$204.0 million.

As of September 30, 2020, the Company continued to

evaluate the on-going impact of COVID-19 on the Company’s

operations,

and the volatility and uncertainty in the economic outlook

as a result of COVID-19 to determine if again this indicated

it was more

likely than not that the carrying value of any of the Company’s

reporting units or indefinite-lived or long-lived assets was not

recoverable.

The Company concluded that the impact of COVID-19 did not represent

a triggering event as of September 30, 2020

with regards to any of the Company’s

reporting units or indefinite-lived and long-lived assets.

If the current economic conditions

worsen or projections of the timeline for recovery are

significantly extended, then the Company may conclude in the

future that the

impact from COVID-19 requires

the need to perform further interim quantitative impairment tests, which

could result in additional

impairment charges in the future.

Non-GAAP Measures

The information in this Report includes non-GAAP (unaudited)

financial information that includes EBITDA, adjusted EBITDA,

adjusted EBITDA margin, non-GAAP operating

income, non-GAAP operating margin, non-GAAP net income

and non-GAAP

earnings per diluted share.

The Company believes these non-GAAP financial measures

provide meaningful supplemental information

as they enhance a reader’s understanding of the

financial performance of the Company,

are indicative of future operating performance

of the Company,

and facilitate a comparison among fiscal periods, as the non-GAAP financial

measures exclude items that are not

considered indicative of future operating performance

or not considered core to the Company’s

operations.

Non-GAAP results are

presented for supplemental informational purposes only

and should not be considered a substitute for the financial information

presented in accordance with GAAP.

The Company presents EBITDA which is calculated as net income

(loss) attributable to the Company before depreciation and

amortization, interest expense, net, and taxes on (loss) income

before equity in net income of associated companies.

The Company

also presents adjusted EBITDA which is calculated as EBITDA

plus or minus certain items that are not considered indicative of

future

operating performance or not considered core to the Company’s

operations.

In addition, the Company presents non-GAAP operating

income which is calculated as operating income (loss) plus

or minus certain items that are not considered indicative of future operating

performance or not considered core to the Company’s

operations.

Adjusted EBITDA margin and non-GAAP operating

margin are

calculated as the percentage of adjusted EBITDA and

non-GAAP operating income to consolidated net sales, respectively.

The

Company believes these non-GAAP measures provide

transparent and useful information and are widely used by analysts, investors,

and competitors in our industry as well as by management

in assessing the operating performance of the Company on

a consistent

basis.

Additionally, the

Company presents non-GAAP net income and non-GAAP earnings

per diluted share as additional performance

measures.

Non-GAAP net income is calculated as adjusted EBITDA, defined

above, less depreciation and amortization, interest

expense, net, and taxes on income (loss) before equity

in net income of associated companies, in each cash adjusted,

as applicable, for

any depreciation, amortization, interest or tax impacts resulting

from the non-core items identified in the reconciliation

of net income

(loss) attributable to the Company to adjusted EBITDA.

Non-GAAP earnings per diluted share is calculated as non

-GAAP net

income per diluted share as accounted for under the

“two-class share method.”

The Company believes that non-GAAP net income

and non-GAAP earnings per diluted share provide

transparent and useful information and are widely used by analysts, investors,

and

competitors in our industry as well as by management in

assessing the operating performance of the Company on a consistent

basis.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The following tables reconcile the Company’s

non-GAAP financial measures (unaudited) to their most

directly comparable

GAAP (unaudited) financial measures (dollars in thousands unless

otherwise noted, except per share amounts):

Non-GAAP Operating Income and Margin Reconciliations

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

Operating income (loss)

34,859

(14,502)

24,653

25,858

Fair value step up of inventory sold (a)

—

10,214

226

10,214

Houghton combination, integration and other

acquisition-related expenses (b)

6,913

14,702

23,442

23,789

Restructuring and related charges (c)

1,383

24,045

3,585

24,045

Customer bankruptcy costs (d)

—

463

—

Charges related to the settlement of a non-core

equipment sale (e)

—

384

Indefinite-lived intangible asset impairment (f)

—

38,000

—

Non-GAAP operating income

43,155

34,459

90,369

84,290

Non-GAAP operating margin (%) (n)

11.8%

10.6%

8.8%

11.4%

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin

and Non-GAAP Net Income Reconciliations

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

Net income (loss) attributable to Quaker Chemical Corporation

27,304

(13,053)

(8,812)

16,382

Depreciation and amortization (b)(l)

21,022

14,312

63,764

24,014

Interest expense, net (b)

6,837

6,102

22,109

7,611

Taxes on income

(loss) before equity in net income

of associated companies (m)

2,245

(5,633)

(7,603)

4,096

EBITDA

57,408

1,728

69,458

52,103

Equity income in a captive insurance company (g)

(542)

(524)

(697)

(1,260)

Fair value step up of inventory sold (a)

—

10,214

226

10,214

Houghton combination, integration and other

acquisition-related expenses (b)

6,913

14,702

22,679

23,789

Restructuring and related charges (c)

1,383

24,045

3,585

24,045

Customer bankruptcy costs (d)

—

463

—

Charges related to the settlement of a non-core

equipment sale (e)

—

384

Indefinite-lived intangible asset impairment (f)

—

38,000

—

Pension and postretirement benefit (income) costs,

non-service components (h)

(1,375)

513

22,491

2,304

Currency conversion impacts of hyper-inflationary economies (i)

154

728

278

891

Adjusted EBITDA

63,941

51,406

156,483

112,470

Adjusted EBITDA margin (%) (n)

17.4%

15.8%

15.2%

Adjusted EBITDA

63,941

51,406

156,483

112,470

Less: Depreciation and amortization (b)

21,022

14,312

63,002

24,014

Less: Interest expense, net - adjusted (b)

6,837

5,747

22,109

5,531

Less: Taxes on income

(loss) before equity in net income

of associated companies - adjusted (j)(k)(m)

8,337

6,086

15,473

17,913

Non-GAAP net income

27,745

25,261

55,899

65,012

Quaker Chemical Corporation

Management’s Discussion and Analysis

Non-GAAP Earnings per Diluted Share Reconciliations

Three Months Ended

Nine Months Ended

September 30,

2020

2019

2020

2019

GAAP earnings (loss) per diluted share attributable to

Quaker Chemical Corporation common shareholders

1.53

(0.80)

(0.50)

1.14

Equity income in a captive insurance company

per diluted share (g)

(0.03)

(0.04)

(0.09)

Fair value step up of inventory sold per diluted share (a)

—

0.47

0.01

0.53

Houghton combination, integration and other

acquisition-related expenses per diluted share (b)

0.30

0.75

1.03

1.50

Restructuring and related charges per diluted

share (c)

0.06

1.13

0.15

1.28

Customer bankruptcy costs per diluted share (d)

—

0.02

—

Charges related to the settlement of a non-core

equipment

sale per diluted share (e)

—

0.02

Indefinite-lived intangible asset impairment per diluted

share (f)

—

1.65

—

Pension and postretirement benefit (income) costs,

non-service components per diluted share (h)

(0.06)

0.02

0.83

0.12

Currency conversion impacts of hyper-inflationary

economies per diluted share (i)

0.01

0.05

0.02

0.06

Transition tax adjustments per diluted

share (j)

—

(0.03)

—

(0.03)

Impact of certain discrete tax items per diluted share (k)

(0.25)

—

(0.02)

—

Non-GAAP earnings per diluted share (o)

1.56

3.15

4.53

(a)

Fair value step up of inventory sold relates to expense

associated with selling inventory of acquired businesses which

was

adjusted to fair value as a part of purchase accounting.

This increase to COGS is not indicative of the future operating

performance of the Company.

(b)

Houghton combination, integration and other acquisition-related

expenses include certain legal, financial, and other advisory

and

consultant costs incurred in connection with due diligence,

regulatory approvals, integration planning, and closing

the

Combination, as well as certain one-time labor costs associated

with the Company’s acquisition-related

activities.

These costs are

not indicative of the future operating performance of the

Company.

Approximately $0.3 million and $1.5 million in the three and

nine months ended September 30, 2020, respectively,

and approximately $3.4 million and $6.9 million in the three

and nine

months ended September 30, 2019, respectively,

of these pre-tax costs were considered non-deductible for the

purpose of

determining the Company’s

effective tax rate, and, therefore, taxes on income (loss)

before equity in net income of associated

companies - adjusted reflects the impact of these items.

During the nine months ended September 30, 2020, the

Company

recorded

$0.8 million of accelerated depreciation related to certain of

the Company’s facilities, which is included

in the caption

“Houghton combination, integration and other acquisition

-related expenses” in the reconciliation of operating income

(loss) to

non-GAAP operating income and included in the caption

“Depreciation and amortization” in the reconciliation of

net income

(loss) attributable to the Company to EBITDA, but excluded

from the caption “Depreciation and amortization” in the

reconciliation of adjusted EBITDA to non-GAAP net

income attributable to the Company.

During the three and nine months

ended September 30, 2019, the Company incurred $0.4

million and $2.1 million, respectively,

of ticking fees to maintain the bank

commitment related to the Combination.

These interest costs are included in the caption “Interest expense,

net” in the

reconciliation of net income (loss) attributable to the

Company to EBITDA, but are excluded from the caption “Interest

expense,

net – adjusted” in the reconciliation of adjusted EBITDA

to non-GAAP net income.

See Note 2 of Notes to Condensed

Consolidated Financial Statements, which appears in Item

1 of this Report.

(c)

Restructuring and related charges represent

the costs incurred by the Company associated with the QH restructuring

program

which was initiated in the third quarter of 2019 as part

of the Company’s plan

to realize cost synergies associated with the

Combination.

These costs are not indicative of the future operating performance

of the Company.

See Note 7 of Notes to

Condensed Consolidated Financial Statements, which appears

in Item 1 of this Report.

(d)

Customer bankruptcy costs represent the cost associated

with a specific reserve for trade accounts receivable related

to a customer

who filed for bankruptcy protection.

These expenses are not indicative of the future operating

performance of the Company.

(e)

Charges related to the settlement of a non-core

equipment sale represent the pre-tax charge related to

a one-time, uncommon,

customer settlement associated with a prior sale of non

-core equipment.

These charges are not indicative of the future operating

performance of the Company.

Quaker Chemical Corporation

Management’s Discussion and Analysis

(f)

Indefinite-lived intangible asset impairment represents the

non-cash charge taken to write down

the value of certain indefinite-

lived intangible assets associated with the Houghton

Combination.

The Company has no prior history of goodwill or intangible

asset impairments and this charge is not indicative

of the future operating performance of the Company.

See Note 14 of Notes to

Condensed Consolidated Financial Statements, which appears

in Item 1 of this Report.

(g)

Equity income in a captive insurance company represents the

after-tax income attributable to the Company’s

interest in Primex,

Ltd. (“Primex”), a captive insurance company.

The Company holds a 33% investment in and has significant

influence over

Primex, and therefore accounts for this interest under the

equity method of accounting.

The income attributable to Primex is not

indicative of the future operating performance of the

Company and is not considered core to the Company’s

operations.

(h)

Pension and postretirement benefit (income) costs, non-service

components represent the pre-tax, non-service component of

the

Company’s pension and

postretirement net periodic benefit cost in each period.

These costs are not indicative of the future

operating performance of the Company.

The nine months ended September 30, 2020 includes the

$22.7 million settlement charge

for the Company’s termination

of the Legacy Quaker U.S. Pension Plan.

See Note 9 of Notes to Condensed Consolidated

Financial Statements, which appears in Item 1 of this Report.

(i)

Currency conversion impacts of hyper-inflationary economies represents

the foreign currency remeasurement impacts associated

with the Company’s affiliates

whose local economies are designated as hyper-inflationary

under U.S. GAAP.

During the three

and nine

months ended September 30, 2020 and 2019, the Company

incurred non-deductible, pre-tax charges related to the

Company’s Argentine

affiliates.

These charges related to the immediate recognition

of foreign currency remeasurement in the

Condensed Consolidated Statements of Operations associated with

these entities are not indicative of the future operating

performance of the Company.

See Note 1 of Notes to Condensed Consolidated Financial

Statements, which appears in Item 1 of

this Report.

(j)

The impacts of certain discrete tax items included the impact of

changes in the valuation allowance for foreign tax credits

acquired with the Combination, changes in withholding

tax rates and the associated impact on previously accrued

for distributions

at certain of the Company’s

Asia/Pacific subsidiaries, additional reserves for uncertain

tax positions related to tax audits at certain

of the Company’s EMEA

subsidiaries, as well as the offsetting impact and

amortization of a deferred tax benefit the Company

recorded in the fourth quarter of 2019 related to an intercompany

intangible asset transfer.

See Note 11 of Notes to Condensed

Consolidated Financial Statements, which appears in Item

1 of this Report.

(k)

Transition tax adjustments include

certain tax adjustments recorded by the Company as a result of changes

to the Company’s

initial fourth quarter of 2017 estimates associated with U.S. Tax

Reform in December 2017.

Specifically, the

Company had

adjusted the initial amount estimated for the one-time charge

on the gross deemed repatriation on previously un

taxed accumulated

and current earnings and profits of certain of the Company’s

foreign subsidiaries.

In addition, the Company had adjusted its

initial estimate of the impact from certain internal revenue

code changes associated with the deductibility of certain executive

compensation.

These adjustments were based on guidance issued during 2018

and 2019 by the I.R.S., the U.S. Treasury and

various state taxing authorities and were the result of

specific one-time events that are not indicative of the future operating

performance of the Company.

See Note 11 of Notes to Condensed

Consolidated Financial Statements, which appears in Item 1

this Report.

(l)

Depreciation and amortization for the three and nine

months ended September 30, 2020 includes approximately

$0.2 million and

$0.9 million, respectively,

and for both the three and nine months ended September 30,

2019 includes $0.1 million of

amortization expense recorded within equity in net income

of associated companies in the Company’s

Condensed Consolidated

Statements of Operations, which is attributable to the

amortization of the fair value step up for the Company’s

50% interest in a

Houghton joint venture in Korea as a result of required

purchase accounting.

(m)

Taxes on income

(loss) before equity in net income of associated companies – adjusted

presents the impact of any current and

deferred income tax expense (benefit), as applicable, of the

reconciling items presented in the reconciliation of net income (loss)

attributable to Quaker Chemical Corporation to adjusted

EBITDA, and was determined utilizing the applicable rates in the taxing

jurisdictions in which these adjustments occurred, subject

to deductibility.

Fair value step up of inventory sold described in (a)

resulted in incremental taxes of less than $0.1 million during

the nine months ended September 30, 2020 and $2.6 million

for both

the three and nine months ended September 30, 2019.

Houghton combination, integration and other acquisition-related

expenses

described in (b) resulted in incremental taxes of approximately

$1.7 million and $5.1 million for the three and nine months ended

September 30, 2020, respectively,

and $2.8 million and $4.5 million for the three and nine

months ended September 30, 2019,

respectively.

Restructuring and related charges described in (c) resulted

in incremental taxes of $0.4 million and $0.9 million for

the three and nine months ended September 30, 2020,

respectively, and $5.6 million

for both the three and nine months ended

September 30, 2019.

Customer bankruptcy costs described in (d) resulted in

incremental taxes of $0.1 million during the nine

months ended September 30, 2020.

Charges related to the settlement of a non-core equipment sale described

in (e) resulted in

incremental taxes of $0.1 million for the nine months

ended September 30, 2019.

Indefinite-lived intangible asset impairment

described in (f) resulted in incremental taxes of $8.7 million

during the nine months ended September 30, 2020.

Pension and

Quaker Chemical Corporation

Management’s Discussion and Analysis

postretirement benefit (income) costs, non-service components described

in (h) resulted in a reduction of taxes of $0.3 million for

the three months ended September 30, 2020 and incremental taxes

of $7.7 million for the nine months ended September 30,

2020,

and incremental taxes of $0.1 million and $0.5 million for

the three and nine months ended September 30, 2019, respectively.

Transition tax adjustments described

in (k) resulted in incremental taxes of $0.4 million for both

the three and nine months ended

September 30, 2019.

Tax impact of certain

discrete items described in (j) resulted in a tax benefit of $4.5

million and $0.4 million

for the three and nine months ended September 30,

2020.

(n)

The Company calculates adjusted EBITDA margin

and non-GAAP operating margin as the percentage

of adjusted EBITDA and

non-GAAP operating income to consolidated net sales.

(o)

The Company calculates non-GAAP earnings per diluted share

as non-GAAP net income attributable to the Company

per

weighted average diluted shares outstanding using the “two-class share

method” to calculate such in each given period.

The

calculation of GAAP and non-GAAP earnings (loss) per

diluted share for the three and nine months ended September

30, 2019

was impacted by the 4.3 million share issuance in connection

with the Combination.

Therefore, the per diluted share result for

each of the first three quarters of 2019, as reported on

a standalone basis, may not sum to the per diluted share

result for the nine

months ended September 30, 2019.

Off-Balance Sheet Arrangements

The Company had no material off-balance

sheet items, as defined under Item 303(a)(4) of Regulation S-K as of

September 30,

2020.

The Company’s only off

-balance sheet items outstanding as of September 30,

2020 represented approximately $

million of

total bank letters of credit and guarantees.

The bank letters of credit and guarantees are not significant to

the Company’s liquidity or

capital resources.

See also Note 15 of Notes to Condensed Consolidated Financial

Statements, which appears in Item 1 of this Report.

Operations

Consolidated Operations Review – Comparison of the Third

Quarter of 2020 with the Third Quarter

of 2019

Net sales were $367.2 million in the third quarter of 2020

compared to $325.1 million in the third quarter of 2019.

The net sales

increase of 13% quarter-over-quarter includes

net sales from acquisitions, primarily Houghton and Norman Hay,

of $74.6 million.

Excluding net sales related to acquisitions, the Company’s

current quarter net sales would have declined approximately

10%, which

reflects a decrease

in sales volumes of 8%, a negative impact from foreign currency

translation of 1% and a decrease from selling

price and product mix of 1%.

The primary driver of the volume decline in the current

quarter was the negative impact of COVID-19

on global production levels.

COGS were $227.0 million in the third quarter of 2020 compared

to $220.1 million in the third quarter of 2019.

The increase in

COGS of 3% was primarily due to the inclusion of Houghton

and Norman Hay sales and associated COGS, partially offset

by the

prior year charge of $10.2 million to increase

acquired Houghton inventory to its fair value described in the Non

-GAAP Measures

section of this Item above, as well as lower COGS on the decline

in Legacy Quaker net sales, described above.

Gross profit in the third quarter of 2020 of $140.2 million

increased $35.1 million or 33% from the third quarter of 2019, due

primarily to additional gross profit from Houghton and

Norman Hay.

The Company’s reported gross margin

in the current quarter

was 38.2% compared to 32.3% in the third quarter of 2019

which includes the inventory fair value step up described

above.

Excluding the one-time increase to COGS in the prior

year, the Company estimates that its gross margin

for the third quarter of 2019

would have been approximately 35.5%.

The estimated increase in gross margin quarter

-over-quarter was primarily due to lower

COGS as a result of the Company’s

progress on Combination-related logistics, procurement and

manufacturing cost savings

initiatives, as well as a benefit from certain price and product mix

in the Company’s raw

materials.

SG&A in the third quarter of 2020 increased $16.2 million

compared to the third quarter of 2019 due primarily

to additional

SG&A from Houghton and Norman Hay.

This increase was partially offset by lower SG&A due

to the impact of COVID-19 cost

savings actions, including lower travel expenses, and

the benefits of realized cost savings associated with the Combination.

During the third quarter of 2020, the Company incurred

$6.9 million of Combination, integration and other acquisition-related

expenses, primarily for professional fees related to Houghton

integration activities.

Comparatively, the Company

incurred $14.7

million of similar expenses in the prior year third

quarter, primarily due to various professional

fees related to integration planning and

regulatory approval as well as professional fees associated

with closing the Combination.

See the Non-GAAP Measures section of

this Item, above.

The Company initiated a restructuring program during

the third quarter of 2019 as part of its global plan to realize cost

synergies

associated with the Combination and recorded an initial

$24.0 million restructuring charge.

The Company expects reductions in

headcount and site closures under this program to continue

during 2020 and into 2021.

The Company recorded additional

restructuring and related charges of $1.4 million

related to this program during the third quarter of 2020.

See the Non-GAAP

Measures section of this Item, above.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Operating income in the third quarter of 2020 was $34.9

million compared to an

operating loss of $14.5 million in the third

quarter of 2019.

Excluding Combination, integration and other acquisition-related

expenses, restructuring and related charges and

other

non-core items, the Company’s

current quarter non-GAAP operating income increased 25%

to $43.2 million compared to $34.5

million in the prior year quarter, primarily

due to additional operating income from Houghton and Norman Hay

and the benefits from

cost savings related to the Combination partially offset

by the negative impact of COVID-19.

The Company had other expense, net, of $0.2 million

in the third quarter of 2020 compared to other income, net,

of less than $0.2

million in the third quarter of 2019.

The quarter-over-quarter change was primarily driven

by higher foreign currency transaction

losses in the third quarter of 2020 as compared to the

prior year third quarter partially offset by lower

expenses from the non-service

components of pension and postretirement benefit costs in

the current quarter.

Interest expense, net, increased $0.7 million compared to

the third quarter of 2019 primarily due to an additional month

borrowings in the current quarter under the Company’s

term loans and revolving credit facility to finance the closing

of the

Combination on August 1, 2019, as well as higher

current quarter borrowings outstanding as a result of the additional

revolver

borrowings in March 2020 at the onset of the pandemic,

partially offset by a decline in overall interest rates during

the current quarter.

The Company’s effective

tax rates for the third quarters of 2020 and 2019 were an expense of 8.1%

compared to a benefit of

27.6%, respectively.

The Company’s current

quarter effective tax rate was impacted by certain one

-time items including benefits

related to the impact of recently issued U.S. tax regulations

and other changes in foreign tax credit valuation allowances,

a change in a

foreign subsidiary’s statutory

rate and impacts related to the Combination.

Similarly, the prior year third

quarter tax rate was impacted

by the pre-tax losses driven by Combination costs, restructuring

charges and inventory fair value expense previously

mentioned.

Excluding the impact of these items as well as all other non-core

items in each quarter, described in

the Non-GAAP Measures section

of this Item, above, the Company estimates that its third quarters

of 2020 and 2019 effective tax rates would have

been approximately

24% and 20%, respectively.

The higher estimated current quarter tax rate was driven

by a change in the current quarter earnings

footprint to entities with higher statutory tax rates as well as a

cumulative year-to-date tax benefit recorded

during the third quarter of

2019 as a result of one of its subsidiaries receiving approval for

the renewal of a concessionary 15% tax rate compared to its 25%

statutory tax rate.

The concessionary tax rate was available to the Company’s

subsidiary during all quarters of 2020.

The Company

may experience continued volatility in its effective

tax rates due to several factors, including the timing

of tax audits and the expiration

of applicable statutes of limitations as they relate to uncertain

tax positions, the unpredictability of the timing and amount of

certain

incentives in various tax jurisdictions, the treatment of certain

acquisition-related costs and the timing and amount of certain share-

based compensation-related tax benefits, among other

factors.

In addition, the foreign tax credit valuation allowance

is based on a

number of variables, including forecasted earnings, which

may vary.

Equity in net income of associated companies was consistent

at $1.8 million in both the third quarters of 2020 and

2019.

Net income attributable to noncontrolling interest was consistent

at less than $0.1 million in both the third quarters of 2020 and

2019.

Foreign exchange negatively impacted the Company’s

third quarter results by approximately $0.18 per diluted share,

primarily

due to higher foreign exchange transaction losses quarter

-over-quarter and to a lesser extent, an aggregate negative

impact from

foreign currency translation on earnings.

Consolidated Operations Review – Comparison of the First Nine

Months of 2020 with the First Nine Months of 2019

Net sales were $1,031.8 million in the first nine months of

2020 compared to $742.2 million in the first nine months of 2019.

The

net sales increase of 39% year-over-year includes net

sales from acquisitions, primarily Houghton and Norman Hay,

of $407.4

million.

Excluding net sales related to acquisitions, the Company’s

current year net sales would have declined approximately 16%,

which reflects a decrease in sales volumes of 13%, a negative impact

from foreign currency translation of 2 % and a decrease from

selling price and product mix of 1%.

Consistent with the third quarter of 2020 description above, the primary

driver of the volume

decline in the current year was the negative impact of COVID-19

on global production levels.

COGS were $660.4 million in the first nine months of

2020 compared to $486.2 million in the first nine months

of 2019.

The

increase in COGS of 36%

was primarily due to the inclusion of Houghton and Norman

Hay sales and associated COGS and the

current year $0.8 million of accelerated depreciation

charges partially offset by the prior

year $10.2 million of an inventory fair value

step up charge described in the Non-GAAP Measures

section of this Item above, and lower COGS on the decline

in legacy Quaker net

sales, described above.

Gross profit in the first nine months of 2020 increased

$115.4 million or 45%

from the first nine months of 2019, due primarily to

additional gross profit from Houghton and Norman Hay.

The Company’s reported gross

margin in the current period was 36.0%

compared to 34.5% in the first nine months of 2019,

which included the inventory fair value step up described

above.

Excluding this

one-time increase to COGS in the prior year,

the Company estimates that its gross margin for

the first nine months of 2019 would

have been relatively consistent with the current year

at 35.9%.

Quaker Chemical Corporation

Management’s Discussion and Analysis

SG&A in the first nine months of 2020 increased

$100.1 million compared to the first nine months of 2019

due primarily to

additional SG&A from Houghton and Norman Hay,

partially offset by the same drivers described in

the third quarter description

above.

During the first nine months of 2020, the Company

incurred $22.8 million of Combination, integration and other acquisition-

related expenses, primarily for professional fees related

to Houghton integration activities.

Comparatively,

the Company incurred

$23.8 million of similar expenses in the prior year,

primarily due to various professional fees related to integration

planning and

regulatory approval as well as professional fees associated

with closing the Combination.

See the Non-GAAP Measures section of

this Item, above.

As described above,

the Company initiated

a restructuring program

during the third

quarter of 2019

as part of

its global plan

realize cost synergies

associated with

the Combination.

The Company recorded

additional restructuring

and related charges

of $3.6

million during

the first

nine months

of 2020

compared to

$24.0 million

first nine

months of

2019.

See the

Non-GAAP Measures

section of this Item, above.

During the first quarter of 2020, the Company recorded

a $38.0 million non-cash impairment charge to write

down the value of

certain indefinite-lived intangible assets associated with the

Combination.

This non-cash impairment charge is related to certain

acquired Houghton trademarks and tradenames and

is primarily the result of the current year negative impacts of

COVID-19 on their

estimated fair values.

There were no impairment charges in the second or third

quarters of 2020 or in the prior year.

See the Critical

Accounting Policies and Estimates section as well as the Non

-GAAP Measures section, of this Item, above.

Operating income in the first nine months of 2020 was $24.7

million compared to $25.9 million in the first nine months of

2019.

Excluding Combination, integration and other acquisition

-related expenses, restructuring and related charges,

the non-cash indefinite-

lived intangible asset impairment charge, and

other non-core items, the Company’s

current year non-GAAP operating income of $90.4

million increased compared

to $84.3 million in the prior year, primarily

due to additional operating income from Houghton and

Norman Hay and the benefits from costs savings related to

the Combination partially offset by the negative

impact of COVID-19.

The Company’s other

expense, net, was $22.4 million in the first nine months of 2020 compared

to $0.4 million in the prior year

period.

The year-over-year increase in other expense,

net was primarily due to the first quarter of 2020 non-cash

settlement charge of

$22.7 million associated with the termination of the

Legacy Quaker U.S. Pension Plan, described in the Non

-GAAP Measures section

of this Item, above, as well as higher foreign currency

transaction losses in the current year.

Interest expense, net, increased $14.5 million in the first nine months

of 2020 compared to the first nine months of 2019 primarily

due to additional borrowings under the Company’s

term loans and revolving credit facility to finance the closing

of the Combination

on August 1, 2019.

The Company’s effective

tax rates for the first nine months of 2020 and 2019 were a benefit of

38.3% and an expense of 22.9%,

respectively.

The Company’s current year

effective tax rate was impacted by the pre-tax loss for

the nine months ended September

30, 2020, the tax effect of certain one-time

pre-tax costs as well as certain one-time tax charges and

benefits in the current period,

including those mentioned in the three months analysis

above as well as those related to the impact of recently issued U.S. tax

regulations and other changes in the valuation allowances

for foreign tax credits acquired with the Combination, additional

charges

taken for uncertain tax positions related to certain

foreign tax audits, and the tax impact of the Company’s

termination of its Legacy

Quaker U.S. Pension Plan.

Comparatively, the prior

year effective tax rate was primarily impacted by certain

non-deductible costs

associated with the Combination.

Excluding the impact of these items as well as all other non-core

items in each year, described in

the Non-GAAP Measures section of this Item, above, the

Company estimates that its first nine months of 2020 and 2019

effective tax

rates were relatively consistent at approximately 23%

and 22%, respectively.

Equity in net income of associated companies increased $

0.7

million in the first nine months of 2020 compared to the

first nine

months of 2019, primarily due to additional earnings

from Houghton’s 50% interest

in a joint venture in Korea partially offset by

lower earnings as compared to the prior year period from

the Company’s interest in

a captive insurance company.

See the Non-GAAP

Measures section of this Item, above.

Net income attributable to noncontrolling interest was $0.1

million in the first nine months of 2020 compared to $0.2

million in

the first nine months of 2019.

Foreign exchange negatively impacted the Company’s

first nine months of 2020 results by approximately $0.27 per diluted

share,

primarily due to higher foreign exchange transaction

losses year-over-year and to a lesser extent, an aggregate

negative impact from

foreign currency translation on earnings.

Reportable Segments Review - Comparison of the Third

Quarter of 2020 with the Third Quarter of 2019

The Company’s reportable

segments reflect the structure of the Company’s

internal organization, the method by which the

Company’s resources are

allocated and the manner by which the chief operating decision

maker of the Company assesses its

performance.

During the third quarter of 2019 and in connection with the Combination,

the Company reorganized its executive

Quaker Chemical Corporation

Management’s Discussion and Analysis

management team to align with its new business structure,

which reflects the method by which the Company assesses its performance

and allocates its resources.

The Company’s current

reportable segment structure includes four 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 the Company’s

reportable segments are comprised of net sales less COGS and SG&A directly

related to the respective segment’s

product sales.

Operating expenses not directly attributable to the net

sales of each respective

segment are not included in segment operating earnings,

such as certain corporate and administrative costs, Combination, integration

and other acquisition-related expenses, Restructuring and

related charges, and COGS related to acquired inventory

sold, which is

adjusted to fair value as part of purchase accounting.

Other items not specifically identified with the Company’s

reportable segments

include interest expense, net, and other (expense) income,

net.

Americas

Americas represented approximately 32% of the Company

’s consolidated net sales in the

third quarter of 2020.

The segment’s

net sales were $119.5 million,

an increase of $2.8 million or 2% compared to the third

quarter of 2019.

The increase in net sales

reflects the inclusion of one additional month of Houghton

net sales of $18.6 million, as the Combination closed on

August 1 in the

prior year.

Excluding Houghton net sales, the segment’s

net sales decrease quarter-over-quarter of approximately

13% was due to

lower volumes of 11% and a negative

impact of foreign currency translation of 4%, partially offset

by increases in selling price and

product mix of 2%.

The current quarter volume decline was driven by the economic slowdown

due to the impacts of COVID-19.

The

foreign exchange impact was primarily due to the weakening

of the Brazilian real and the Mexican peso against the U.S. dollar,

these exchange rates averaged 5.38 and 22.06, respectively,

in the third quarter of 2020 compared to 3.97 and 19.43,

respectively, in

the third quarter of 2019.

This segment’s operating

earnings were $31.1 million, an increase of $7.3 million or 31% compared

to the

third quarter of 2019.

The increase in segment operating earnings reflects the

higher net sales with the inclusion of Houghton, noted

above, as well as an increase in gross margin

due to the Company’s progress on

Combination-related logistics, procurement and

manufacturing cost savings initiatives, and lower SG&A

as a result of cost savings actions in response to COVID-19,

including lower

travel expenses, and the benefits of realized cost savings

associated with the Combination, partially offset by

the inclusion of one

additional month of Houghton SG&A.

EMEA

EMEA represented approximately 26% of the Company’s

consolidated net sales in the third quarter of 2020.

The segment’s net

sales were $94.0 million, an increase of $11.6

million or 14% compared to the third quarter of 2019.

The increase in net sales reflects

the inclusion of one additional month of Houghton net

sales of $19.1 million, as the Combination closed on August 1

in the prior year.

Excluding Houghton net sales, the segment’s

net sales decrease quarter-over-quarter of 9% was due to lower

volumes of 15%,

partially offset by a positive impact of foreign

currency translation of 4% and increases in selling price and

product mix of 2%.

The

current quarter volume decline was driven by the economic

slowdown due to the impacts of COVID-19.

The foreign exchange impact

was primarily due to the strengthening of the euro against

the U.S. dollar as this exchange rate averaged 1.17 in the third

quarter of

2020 compared to 1.11 in the

third quarter of 2019.

This segment’s operating earnings

were $17.4 million, an increase of $4.1 million

or 31% compared to the third quarter of 2019, which

reflects the inclusion of Houghton net sales, noted above, coupled

with an

increase in gross margin due to the Company’s

progress on Combination-related logistics, procurement and

manufacturing cost

savings initiatives.

These drivers of the increase in segment operating

earnings were partially offset by higher SG&A, including

one

additional month of Houghton SG&A, partially offset

by cost savings actions in response to COVID-19, including

lower travel

expenses, and the benefits of realized cost savings associated

with the Combination.

Asia/Pacific

Asia/Pacific represented approximately 23% of the

Company’s consolidated net

sales in the third quarter of 2020.

The segment’s

net sales were $84.9 million, an increase of $10.6 million

or 14% compared to the third quarter of 2019.

The increase in net sales

reflects the inclusion of one additional month of Houghton

net sales of $13.0 million, as the Combination closed on

August 1 in the

prior year.

Excluding Houghton net sales, the segment’s

net sales decrease of 3% quarter-over-quarter was driven

by a decrease in

selling price and product mix of 5%, partially offset

by higher volumes of 1% and a positive impact of foreign currency

translation of

1%.

The foreign exchange impact was primarily due to the

strengthening of the Chinese renminbi against the U.S. dollar as this

exchange rate averaged 6.92 in the third quarter of 2020

compared to 7.02 in the third quarter of 2019.

This segment’s operating

earnings were $27.3 million, an increase of $6.9 million

or 34% compared to the third quarter of 2019.

The increase in segment

operating earnings reflects the inclusion of Houghton

net sales noted above, and an increase in gross margin

due to the Company’s

progress on Combination-related logistics and

procurement and manufacturing cost savings initiatives.

Segment SG&A was relatively

consistent quarter-over-quarter as increases from

one additional month of Houghton SG&A were largely

offset by cost savings actions

in response to COVID-19, including lower travel expenses,

and the benefits of realized cost savings associated with the Combination.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Global Specialty Businesses

Global Specialty Businesses represented approximately

19% of the Company’s consolidated

net sales in the third quarter of 2020.

The segment’s net sales were

$68.8 million, an increase of $17.0 million or 33% compared

to the third quarter of 2019.

The increase

in net sales reflects the inclusion of one additional month

of Houghton net sales and the entire quarter of Norman

Hay net sales,

totaling $23.8 million, as the Combination closed on August

1 and the Norman Hay acquisition occurred on October

1 in the prior

year.

Excluding Houghton and Norman Hay net sales, the segment’s

net sales decrease of 13% quarter-over-quarter

was driven by

lower volumes of 5%, decreases in selling price and

product mix of 6% and a negative impact from foreign currency

translation of

2%.

The current quarter volume decline was primarily due

to a decrease in the Company’s specialty

coatings business driven by

Boeing’s decision to

temporarily stop production of the 737 Max aircraft and continued

volume declines due to the economic

slowdown due to the impacts of COVID-19.

The foreign exchange impact was primarily due to the weakening of

the Brazilian real

against the U.S. dollar described in the Americas section,

above.

This segment’s operating earnings

were $21.2 million, an increase of

$5.9 million or 39% compared to the third quarter of 2019.

The increase in segment operating earnings reflects the

inclusion of

incremental Houghton and Norman Hay net sales, noted

above, on relatively consistent gross margin levels, partially

offset by higher

SG&A, including one additional month of Houghton SG&A

and the entire quarter of Norman Hay SG&A.

Reportable Segments Review - Comparison of the First Nine Months

of 2020 with the First Nine Months of 2019

Americas

Americas represented approximately 32% of the Company’s

consolidated net sales in the first nine months of 2020.

The

segment’s net sales were $330.0

million, an increase of $69.3 million or 27% compared to the first

nine months of 2019.

The increase

in net sales reflects the inclusion of seven additional months

of Houghton net sales of $119.9 million,

as the Combination closed on

August 1 in the prior year.

Excluding Houghton net sales, the segment’s

net sales decrease year-over-year of 19% was

due to lower

volumes of 17% and a negative impact of foreign currency

translation of 4%, partially offset by increases in selling

price and product

mix of 2%.

The current year volume decline was driven by the economic

slowdown that began in late March and continued

into the

third quarter of 2020 due to the impacts of COVID-19.

The foreign exchange impact was primarily due to the weakening

of the

Brazilian real and the Mexican peso against the

U.S. dollar, as these exchange rates averaged

5.01 and 21.62, respectively,

in the first

nine months of 2020 compared to 3.88 and 19.25, respectively

in the first nine months of 2019.

This segment’s operating earnings

were $70.6 million, an increase of $18.5 million or 36%

compared to the first nine months of 2019.

The increase in segment operating

earnings reflects the inclusion of incremental Houghton

net sales, noted, above, and relatively consistent gross margins

year-over-year,

partially offset by higher SG&A, including seven

additional months of Houghton SG&A in the current year.

EMEA

EMEA represented approximately 27% of the Company’s

consolidated net sales in the first nine months of 2020.

The segment’s

net sales were $276.5 million, an increase of $92.7

million or 50% compared to the first nine months of 2019.

The increase in net

sales reflects the inclusion of seven additional months

of Houghton net sales of $117.2 million,

as the Combination closed on August

1 in the prior year.

Excluding Houghton net sales, the segment’s

net sales decrease year-over-year of 13% was due

to lower volumes

of 15%, partially offset by a positive impact of

foreign currency translation of 1% and increases in selling price

and product mix of

1%.

The current year volume decline was driven by the economic

slowdown that began in late March due to the impacts of COVID-

19 and an overall reduced production in certain EMEA

countries that began in the second half of 2019 and continued

into the third

quarter of 2020 due to the impacts of COVID-19.

The foreign exchange impact was primarily due to the strengthening

of the euro

against the U.S. dollar in the third quarter of 2020,

noted in the quarter-over-quarter comparison above,

which reflected the results of

Houghton in both the current and prior year reported

figures.

This segment’s operating

earnings were $46.3 million, an increase of

$15.2 million or 49% compared to the first nine months

of 2019.

The increase in segment operating earnings reflects the inclusion

incremental Houghton net sales, noted, above,

and relatively consistent gross margins year-over-year,

partially offset by higher

SG&A, including seven additional months of Houghton

SG&A in the current year.

Asia/Pacific

Asia/Pacific represented approximately 22% of the

Company’s consolidated net

sales in the first nine months of 2020.

The

segment’s net sales were $226.9

million, an increase of $61.6 million or 37% compared to the first

nine months of 2019.

The increase

in net sales reflects the inclusion of seven additional months

of Houghton net sales of $79.7 million, as the Combination

closed on

August 1 in the prior year.

Excluding Houghton net sales, the segment’s

net sales decrease of 11% year-over-year

was driven by

lower volumes of 8%, a negative impact of foreign currency

translation of 1% and decreases in selling price and

product mix of 2%.

The current year volume decline was driven by the

economic slowdown that began in the first quarter in China

and in late March

throughout the region due to the impacts of COVID-19.

The foreign exchange impact was primarily due to the

weakening of the

Chinese renminbi and Indian rupee against the U.S.

dollar as these exchange rates averaged 6.99 and 74.01,

respectively, in the

first

nine months of 2020 compared to 6.86 and 70.11,

respectively, in the first nine

months of 2019.

This segment’s operating earnings

were $66.1 million, an increase of $20.7 million or 46%

compared to the first nine months of 2019.

The increase in segment operating

earnings reflects the inclusion of incremental Houghton

net sales, noted, above, and relatively consistent gross margins

year-over-year,

partially offset by higher SG&A, including seven

additional months of Houghton SG&A in the current year.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Global Specialty Businesses

Global Specialty Businesses represented approximately

19% of the Company’s consolidated

net sales in the first nine months of

2020.

The segment’s net sales were $198.4

million, an increase of $65.9 million or 50% compared to the

first nine months of 2019.

The increase in net sales reflects the inclusion of seven

additional months of Houghton net sales and the full year-to-date

nine months

of Norman Hay net sales, totaling $90.6 million, as the

Combination closed on August 1 and the Norman Hay acquisition closed

October 1 in the prior year.

Excluding Houghton and Norman Hay net sales, the segment’s

net sales decrease of 19% year-over-year

was driven by lower volumes of 6%, decreases in selling price

and product mix of 10% and a negative impact from foreign

currency

translation of 3%.

The current year volume decline was primarily due to a decrease

in the Company’s specialty

coatings business

driven by Boeing’s decision

to temporarily stop production of the 737 Max aircraft and

continued volume declines due to the

economic slowdown due to the impacts of COVID-19.

Partially offsetting these volume declines, and contributing

to the decrease in

selling price and product mix were higher shipments

of a lower priced product in the Company’s

mining business compared to the

prior year.

The foreign exchange impact was primarily due to the weakening of

the Brazilian real against the U.S. dollar described in

the Americas section, above.

This segment’s operating

earnings were $58.1 million, an increase of $21.3 million

or 58% compared to

the first nine months of 2019.

The increase in segment operating earnings reflects the inclusion

of incremental Houghton and Norman

Hay net sales, noted, above, partially offset by

higher SG&A, including seven additional months of Houghton

and nine months of

Norman Hay SG&A in the current year.

Factors That May Affect Our Future Results

(Cautionary Statements Under the Private Securities Litigation

Reform Act of 1995)

Certain information included in this Report and other

materials filed or to be filed by Quaker Chemical Corporation

with the

Securities and Exchange Commission (“SEC”) (as well as information

included in oral statements or other written statements made

to be made by us) contain or may contain forward-looking

statements within the meaning of Section 27A of the Securities Act

1933, as amended, and Section 21E of the Securities Exchange

Act of 1934, as amended.

These statements can be identified by the

fact that they do not relate strictly to historical or

current facts.

We have based

these forward-looking statements, including statements

regarding the potential effects of the COVID-19

pandemic on the Company’s

business, results of operations, or financial condition

and our expectations to maintain sufficient liquidity

and remain compliant with the terms of the Company’s

credit facility on our

current expectations about future events.

These forward-looking statements include statements with respect

to our beliefs, plans, objectives, goals, expectations,

anticipations, intentions, financial condition, results of operations,

future performance, and business, including:

•

the potential benefits of the Combination;

•

the impacts on our business as a result of the COVID-19

pandemic and any projected global economic rebound

anticipated positive results due to Company actions taken

in response to the pandemic;

•

our current and future results and plans; and

•

statements that include the words “may,”

“could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,”

“intend,” “plan” or similar expressions.

Such statements include information relating to current and

future business activities, operational matters, capital spending,

and

financing sources.

From time to time, forward-looking statements are also included in

the Company’s other periodic

reports on Forms

10-K, 10-Q and 8-K, press releases, and other materials released

to, or statements made to, the public.

Any or all of the forward-looking statements in this Report,

in the Company’s 2019

Form 10-K and in any other public statements

we make may turn out to be wrong.

This can occur as a result of inaccurate assumptions or as a consequence

of known or unknown

risks and uncertainties.

Many factors discussed in this Report will be important in

determining our future performance.

Consequently,

actual results may differ materially from those that might

be anticipated from our forward-looking statements.

We undertake

no obligation to publicly update any forward-looking statements,

whether as a result of new information, future

events or otherwise.

However, any further disclosures made

on related subjects in the Company’s

subsequent reports on Forms 10-K,

10-Q, 8-K and other related filings should be consulted.

A major risk is that demand for the Company’s

products and services is

largely derived from the demand for our customers’

products, which subjects the Company to uncertainties related

to downturns in a

customer’s business and unanticipated customer

production shutdowns.

Other major risks and uncertainties include, but are not

limited to, the primary and secondary impacts of the COVID-19

pandemic, including actions taken in response to the pandemic by

various governments, which could exacerbate some

or all of the other risks and uncertainties faced by the Company,

including the

potential for significant increases in raw material costs, supply

chain disruptions, customer financial stability,

worldwide economic

and political conditions, foreign currency fluctuations,

significant changes in applicable tax rates and regulations, future

terrorist

attacks and other acts of violence.

Furthermore, the Company is subject to the same business cycles as those

experienced by steel,

automobile, aircraft, industrial equipment, and durable

goods manufacturers.

The ultimate significance of COVID-19 on our business

will depend on, among other things, the extent, duration

and strength of resurgence of the pandemic, the severity

of the disease and the

Quaker Chemical Corporation

Management’s Discussion and Analysis

number of people infected with the virus, the continued

uncertainty regarding widespread availability of a vaccine,

the effects on the

economy by the pandemic, including the resulting

market volatility, and by

the measures taken by governmental authorities and other

third parties restricting day-to-day life and business operations

and the length of time that such measures remain in place, and

governmental programs implemented to assist businesses impacted

by the COVID-19 pandemic.

Other factors could also adversely

affect us, including those related to the Combination

and other acquisitions and the integration of the combined

company as well as

other acquired businesses.

Our forward-looking statements are subject to risks, uncertainties

and assumptions about the Company and

its operations that are subject to change based on various

important factors, some of which are beyond our control.

These risks,

uncertainties, and possible inaccurate assumptions relevant

to our business could cause our actual results to differ

materially from

expected and historical results.

Therefore, we caution you not to place undue reliance

on our forward-looking statements.

For more information regarding these

risks and uncertainties as well as certain additional

risks that we face, refer to the Risk Factors section, which appears

in Item 1A of

this Report, as well as Item 1A in our 2019 Form

10-K and in our quarterly and other reports filed from

time to time with the SEC.

This discussion is provided as permitted by the Private

Securities Litigation Reform Act of 1995.

Quaker Houghton on the Internet

Financial results, news and other information about

Quaker Houghton can be accessed from the Company’s

website at

https://www.quakerhoughton.com

. This site includes important information on the Company’s

locations, products and services,

financial reports, news releases and career opportunities.

The Company’s periodic

and current reports on Forms 10-K, 10-Q, 8-K, and

other filings, including exhibits and supplemental

schedules filed therewith, and amendments to those reports, filed with

the SEC are

available on the Company’s

website, free of charge, as soon as reasonably

practicable after they are electronically filed with or

furnished to the SEC.

Information contained on, or that may be accessed through,

the Company’s website is not

incorporated by

reference in this Report and, accordingly,

you should not consider that information part of this Report.

Item 3.

Quantitative and Qualitative Disclosures About Market

Risk.

Quaker Houghton is exposed to the impact of interest

rates, foreign currency fluctuations, changes in commodity prices

and credit

risk.

The current economic environment associated with COVID-19

has led to significant volatility and uncertainty with each of

these

market risks.

Other than the impact of the COVID-19 pandemic on market risks

generally, we believe

there has been no other

material change to the information disclosed in Part II,

Item 7A, of our 2019 Form 10-K.

See Item 1A, “Risk Factors”, of this Report

for additional discussion of the current and potential risks associated

with the COVID-19 pandemic.

Item 4.

Controls and Procedures.

Evaluation of disclosure controls

and procedures.

As required by Rule 13a-15(b) under the Securities Exchange

Act of 1934, as

amended (the “Exchange Act”), our management,

including our principal executive officer and principal financial

officer, has

evaluated the effectiveness of our disclosure

controls and procedures (as defined in Rule 13a-15(e) under the Exchange

Act ) as of the

end of the period covered by this Report.

Based on that evaluation, our principal executive officer

and our principal financial officer

have concluded that, as of the end of the period covered by

this Report, our disclosure controls and procedures (as defined

in Rule

13a-15(e) under the Exchange Act) were not effective

as of September 30, 2020 because of the material weaknesses

in our internal

control over financial reporting, as described below.

As previously disclosed in “Item 9A. Controls and Procedures.”

in the Company’s 2019

Form 10-K, through the process of

evaluating risks and corresponding changes to the

design of existing or the implementation of new controls in

light of the significant

non-recurring transactions that occurred during 2019,

including the Combination, the Company identified certain deficiencies in

its

application of the principles associated with the Committee

of Sponsoring Organization of the Treadway

Commission in Internal

Control – Integrated Framework (2013) that management

has concluded in the aggregate constitute a material weakness.

A material

weakness is a deficiency,

or combination of deficiencies, in internal control over financial reporting,

such that there is a reasonable

possibility that a material misstatement of annual or interim

financial statements will not be prevented or detected on

a timely basis.

Specifically, management

concluded that changes to existing controls or the implementation

of new controls were not sufficient to

respond to changes to the risks of material misstatement to

financial reporting.

As a result of this deficiency in the design and

implementation of an effective risk assessment, this material

weakness contributed to certain control deficiencies that

management

concluded result in the following additional material weaknesses: (i)

we did not design and maintain effective

controls over the review

of pricing, quantity and customer data to verify that revenue

recognized at certain locations was complete and accurate,

and (ii) we did

not design and maintain effective controls over

the reliability of data used to support the reasonableness of certain

assumptions in the

accounting for business combinations.

Notwithstanding these material weaknesses, the Company

has concluded that the unaudited condensed consolidated financial

statements included in this Report present fairly,

in all material respects, the financial position of the Company as of

September 30,

2020 and December 31, 2019, and the results of its operations

and its cash flows and changes in equity for both the three and

nine

month periods ended September 30, 2020 and 2019, are in

conformity with accounting principles generally accepted in

the United

States of America.

However, these control deficiencies

could have resulted in misstatements of interim condensed consolidated

financial statements and disclosures that could

have resulted in a material misstatement that would not

be prevented or detected.

Remediation Plan Activities.

As previously disclosed in “Item 9A. Controls and Procedures.”

in the Company’s 2019

Form 10-K,

the Company and its Board of Directors are committed

to maintaining a strong internal control environment.

During the first nine

months of 2020, management began developing its full remediation

plan and executing what will be a multi-step remediation process

to completely and fully remediate the material weaknesses identified

and described above.

The initial steps the Company has taken

include identifying dedicated internal resources supplemented

with third-party specialists to assist with formalizing a robust and

detailed remediation plan, which is in the process of

being implemented, and specifically completing an updated

risk assessment,

including identifying and assessing those risks attendant to

the significant changes within the Company as a result of becoming

larger, more complex

global organization as a result of the Combination.

The Company is conducting a comprehensive review,

and,

as appropriate, is updating its existing internal control

framework to ensure that it has identified, developed and deployed the

appropriate business process and information technology

general controls to meet the objectives and address the risks identified

through the updated risk assessment process.

In undertaking this process and carrying out our remediation

plan, the Company has

further supplemented its internal resources that are

focused on internal control over financial reporting by

hiring additional personnel

dedicated to financial and information technology compliance

during 2020.

Further, the Company is identifying

and implementing

further modifications to strengthen its internal control

environment.

During the quarter ended September 30, 2020, as a result of

initial remediation activities related to the Company’s

previously identified material weaknesses, the Company has modi

fied certain

existing controls, or designed and in some instances implemented

new controls.

It is the Company’s goal to remediate

all of the

previously identified material weaknesses as quickly and

effectively as possible, however,

the impact of COVID-19, including travel

restrictions and remote work arrangements has required

the Company to adapt and make changes to its internal controls

integration

plans as well as its remediation plans, and has presented

and is expected to continue to present challenges with regards

to the timing of

the Company’s remediation

and integration plan activities.

Changes in internal control over financial

reporting.

As required by Rule 13a-15(d) under the Exchange Act,

our management,

including our principal executive officer

and principal financial officer,

has evaluated our internal control over financial reporting to

determine whether any changes to our internal control over

financial reporting occurred during the quarter ended September 30,

2020

that have materially affected, or are reasonably

likely to materially affect, our internal control over financial

reporting.

Based on that

evaluation,

other than the changes discussed above in connection with the

changes designed and implemented as a result of the

Company’s remediation

plan activities for the previously identified material weakne

sses,

there were no changes that have materially

affected, or are reasonably likely to materially

affect, our internal control over financial reporting during

the quarter ended September

30, 2020.

PART

II.

OTHER INFORMATION

Items 3, 4 and 5 of Part II are inapplicable and have been

omitted.

Item 1.

Legal Proceedings.

Incorporated by reference is the information in Note

19 of the Notes to the Condensed Consolidated Financial

Statements in Part

I, Item 1, of this Report.

Item 1A. Risk Factors.

In addition to the other information set forth in this Report,

you should carefully consider the risk set forth below,

which updates

the risk factors previously disclosed in Part I, Item 1A

of our 2019 Form 10-K, as well as the other risk factors

described in the 2019

Form 10-K, which could materially affect our

business, financial condition or future results.

The risk described below,

and the risks

described in our 2019 Form 10-K are not the only risks we

face.

Additional risks and uncertainties not currently known

to us or that

we currently deem to be immaterial also may materially

and adversely affect our business, financial condition

or operating results.

The outbreak of COVID-19 and its impact on business and

economic conditions have negatively affected our

business, results of

operations and financial condition and the extent and

duration of those effects is uncertain.

Beginning in early 2020, there has been an outbreak

of COVID-19, initially in China and which has spread

globally, including

generally all locations where the Company does business.

In March 2020, the World

Health Organization formally identified the

COVID-19 outbreak as a pandemic.

The COVID-19 pandemic, including the fear of exposure

to and the actual effects of the illness,

together with the measures implemented to reduce its spread,

including travel restrictions, shutdowns of businesses deemed

nonessential, and large gatherings and shelter

-in-place or similar orders, have significantly impacted the global

economy.

The

pandemic has disrupted global supply chains, lowered

equity market valuations, created significant volatility and disruption

financial markets, and increased unemployment levels.

In addition, it has resulted in temporary closures of many businesses, and

although many of the businesses have subsequently re-opened,

they may be operating at reduced capacity or subject to additional

temporary shutdowns, while other closures may be prolonged

or become permanent.

The scale and scope of the COVID-19 outbreak, the resulting

pandemic, and the primary and secondary impacts on

the economy

and financial markets have had a significant disruption

on the operations of the Company and its suppliers and

customers and have

adversely affected the Company’s

results of operations and financial condition during the first nine

months of 2020 as further

described in Management’s

Discussion and Analysis of Financial Condition and Results of

Operations included in this Report.

The

Company has experienced disruptions as a result of COVID-19,

initially at its China subsidiaries in the first quarter of 2020

and,

subsequently,

beginning in late March and continuing into the third quarter

of 2020, throughout the rest of the business due to the

global economic slowdown.

We have experienced,

and may experience in the future, temporary site or facility closures

at our own

facilities or those of our customers in response to

government mandates in certain jurisdictions in which we operate.

We may also be

required to close certain of our facilities for the safety

of our employees in response to positive diagnoses for COVID-19.

Even in

facilities that are not closed, we could be affected

by reductions in employee availability and productivity,

changes in operating

procedures, and increased costs

The Company anticipates that its future results of

operations, including the results for the remainder

of 2020 may continue to be adversely impacted by

COVID-19.

In particular, the spread of COVID-19 and

efforts to contain the virus

have had the following additional effects, which

are likely to increase or become exacerbated the longer the

crisis continues:

●

reduced the demand for our products and services as many

customers have reduced production levels;

●

driven declines in volume and net sales across all reportable

segments;

●

required us to adjust certain of our facility operating procedures

and to take steps to reduce costs and preserve liquidity;

and

●

negatively affected the estimated fair value of

certain of the Company’s reporting

units or other indefinite-lived or long-lived

assets, namely the Company’s

Houghton and Fluidcare trademark and tradename indefinite-lived

intangible assets, such that

their estimated fair values were less than their carrying

values and required adjustments.

The spread of COVID-19, a further prolonged outbreak,

and efforts to contain the virus in some cases have already

or could in the

future also:

●

limit the availability and reduce the productivity of our

employees;

●

impact our financial reporting systems and processes, internal control

over financial reporting, and disclosure controls and

procedures, including our ability to ensure information

required to be disclosed in our reports under the Exchange Act

recorded, processed, summarized and reported within the

time periods specified in the SEC’s rules

and forms and that such

information is accumulated and communicated to our

management, including our chief executive officer

and chief financial

officer, as appropriate,

to allow for timely decisions regarding required disclosure;

●

present challenges as a result of travel restrictions and remote work

arrangements, including impacting the timing of our ERP

system implementations which are an integral part of

our integration activities, the timing of the Company’s

remediation plan

activities as described in Item 4 Controls and Procedures, of

this Report, and the Company’s

first year assessment of internal

control over financial reporting for Houghton and Norman

Hay, including the

implementation of new or enhanced business

process and information technology general controls,

as necessary, to meet the

objectives and address the risks identified

once the Company completes its initial design assessment;

●

increase our costs as a result of emergency

measures that we may take or that may be imposed on us by regulatory

authorities;

●

cause a delay in customer payments or cause a deterioration

of the credit quality of other counterparties that could

result in

credit losses or force both customer and supplier bankruptcies;

●

cause delays and disruptions in the availability of and timely

delivery of materials and components used in our operations;

●

result in our inability to meet the requirements of the covenants

in our existing credit facility,

including covenants regarding

our consolidated interest coverage ratio and consolidated

net leverage ratio, or increase our cost of capital or make additional

capital, including the refinancing of our credit facility,

more difficult or available only on terms less favorable

to us;

●

impact our liquidity position and cost of and ability to access funds

from financial institutions and capital markets;

●

negatively affect the estimated fair values of the

Company’s reporting units or other

indefinite-lived or long-lived assets; and

●

cause other risks to impact us, including the risks described

in the “Risk Factors” section of the 2019 Form 10-K.

Although the Company has implemented business continuity

and emergency response plans to permit it to continue

to provide

services and products to customers and support the

Company’s operations, while also taking

health and safety measures such as

implementing worker distancing measures, enhancing

on-site hygiene measures, and using a remote workforce where

possible, there

can be no assurance that the continued spread of COVID-19 and

efforts to contain the virus (including, but not limited

to, voluntary

and mandatory quarantines, restrictions on travel, limiting

gatherings of people, and reduced operations and extended

closures of

many businesses and institutions) will not further impact

our business, results of operations and financial condition.

However, given

the unprecedented and continually evolving developments

with respect to this pandemic, the Company cannot, as of the

date of this

Report, reasonably estimate the magnitude or full extent

of the impact to its future results of operations or to the

ability of it or its

customers to resume more normal operations.

A further prolonged outbreak or resurgence and period

of continued restrictions on day-

to-day life and business operations would likely result in

volume declines and lower net sales into the fourth quarter

of 2020 as well,

when compared to the prior year.

The ultimate significance of COVID-19 on our business

will depend on, among other things, the extent, duration and

strength of

resurgence of the pandemic, the severity of the

disease and the number of people infected with the virus, the

ultimate geographic

spread of the virus, the continued uncertainty regarding

widespread availability of a vaccine, the effects on

the economy by the

pandemic, including market volatility,

and by the measures taken by governmental authorities and

other third parties restricting day-

to-day life and the length of time that such measures remain in

place, and laws or governmental programs implemented to assist

businesses impacted by the COVID-19 pandemic, such as fiscal

stimulus and other legislation designed to deliver

monetary aid and

other relief.

The likelihood of a further impact on the Company that could

be material increases the longer the virus impacts economic

activity levels in the United States and across the world.

Item 2.

Unregistered Sales of Equity Securities and Use of

Proceeds.

Purchases of Equity Securities by

the Company

The following table sets forth information concerning

shares of the Company’s

common stock acquired by the Company during

the period covered by this Report:

(c)

(d)

Total

Number of

Approximate Dollar

(a)

(b)

Shares Purchased

Value of

Shares that

Total

Number

Average

as part of

May Yet

of Shares

Price Paid

Publicly Announced

Purchased Under the

Period

Purchased (1)

Per Share (2)

Plans or Programs

Plans or Programs (3)

July 1 - July 31

29,963

200.31

—

86,865,026

August 1 - August 31

514

194.00

—

86,865,026

September 1 - September 30

—

86,865,026

Total

30,477

200.20

—

86,865,026

(1)

All of these shares were acquired from employees upon

their surrender of Quaker Chemical Corporation shares in payment

the exercise price of employee stock options exercised or

for the payment of taxes upon exercise of employee stock

options

or the vesting of restricted stock.

(2)

The price paid for shares acquired from employees pursuant

to employee benefit and share-based compensation

plans is, in

each case, based on the closing price of the Company’s

common stock on the date of exercise or vesting as specified by the

plan pursuant to which the applicable option or restricted

stock was granted.

(3)

On May 6, 2015, the Board of Directors of the Company

approved, and the Company announced, a share repurchase

program, pursuant to which the Company is authorized

to repurchase up to $100,000,000 of Quaker Chemical Corporation

common stock (the “2015 Share Repurchase Program”)

and has no expiration date.

There were no shares acquired by the

Company pursuant to the 2015 Share Repurchase Program

during the quarter ended September 30, 2020.

Limitation on the Payment of Dividends

The New Credit Facility has limitations on the payment

of dividends and other so-called restricted payments.

See Note 15 of

Notes to Condensed Consolidated Financial Statements, in

Part I, Item I, of this Report.

Item 6.

Exhibits.

(a) Exhibits

3.1

–

Amended and Restated Articles of Incorporation (as amended through July 24, 2019). Incorporated by reference to

Exhibit 3.1 as filed by the Registrant with its quarterly report on Form 10-Q filed on August 1, 2019.

3.2

–

Restated By-laws (effective May 6, 2015, as amended through March 27, 2020). Incorporated by reference to Exhibit

3.2 as filed by the Registrant within its quarterly report on Form 10-Q filed on May 11, 2020.

31.1

–

Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of

1934.*

31.2

–

Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of

1934.*

32.1

–

Certification of Chief Executive Officer of the Company Pursuant to 18 U.S. C. Section 1350

.**

32.2

–

Certification of Chief Financial Officer of the Company Pursuant to 18 U.S. C. Section 1350

.**

101.INS

–

Inline XBRL Instance Document*

101.SCH

–

Inline XBRL Taxonomy

Extension Schema Document*

101.CAL

–

Inline XBRL Taxonomy

Extension Calculation Linkbase Document*

101.DEF

–

Inline XBRL Taxonomy

Extension Definition Linkbase Document*

101.LAB

–

Inline XBRL Taxonomy

Extension Label Linkbase Document*

101.PRE

–

Inline XBRL Taxonomy

Extension Presentation Linkbase Document*

104

–

Cover Page Interactive Data File (formatted as Inline XBRL and

contained in Exhibit 101.INS)*

* Filed herewith.

** Furnished herewith.

*********

Pursuant to the requirements of the Securities Exchange Act

of 1934, the registrant has duly caused this report to be signed

on its behalf by the undersigned thereunto duly authorized.

QUAKER CHEMICAL CORPORATION

(Registrant)

/s/ Mary Dean Hall

Date: November 5, 2020

Mary Dean Hall, Senior Vice President,

Chief Financial

Officer and Treasurer

(officer duly authorized on behalf

of, and principal financial officer of, the Registrant)

Quaker Houghton - 10-Q quarterly report FY2020 Q3

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