Quaker Houghton - 10-Q quarterly report FY2021 Q3

FALSE--12-3132021130000000Q300000813621788857717850616☒00000813622021-01-012021-09-300000081362kwr:StockOptionsCompensationExpenseMember2021-01-012021-09-300000081362kwr:NonvestedStockAwardsCompensationExpenseMember2021-01-012021-09-300000081362kwr:MatchingStockContribution401KPlanCompensationExpenseMember2021-01-012021-09-300000081362kwr:DirectorsStockOwnershipPlanCompensationExpenseMember2021-01-012021-09-300000081362us-gaap:PensionPlansDefinedBenefitMember2021-01-012021-09-300000081362us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-01-012021-09-300000081362us-gaap:EMEAMember2021-01-012021-09-300000081362srt:AsiaPacificMember2021-01-012021-09-3000000813622021-10-3100000813622020-07-012020-09-3000000813622020-01-012020-09-3000000813622021-09-3000000813622020-12-3100000813622019-12-3100000813622020-09-300000081362us-gaap:TransferredAtPointInTimeMember2020-01-012020-09-300000081362us-gaap:TransferredAtPointInTimeMembersrt:AmericasMember2020-01-012020-09-300000081362us-gaap:EMEAMemberus-gaap:TransferredAtPointInTimeMember2020-01-012020-09-300000081362srt:AsiaPacificMemberus-gaap:TransferredAtPointInTimeMember2020-01-012020-09-300000081362us-gaap:TransferredOverTimeMember2020-01-012020-09-300000081362srt:AmericasMemberus-gaap:TransferredOverTimeMember2020-01-012020-09-300000081362us-gaap:EMEAMemberus-gaap:TransferredOverTimeMember2020-01-012020-09-300000081362srt:AsiaPacificMemberus-gaap:TransferredOverTimeMember2020-01-012020-09-300000081362kwr:StockOptionsCompensationExpenseMember2020-07-012020-09-300000081362kwr:NonvestedStockAwardsCompensationExpenseMember2020-07-012020-09-300000081362kwr:DirectorsStockOwnershipPlanCompensationExpenseMember2020-07-012020-09-300000081362kwr:StockOptionsCompensationExpenseMember2020-01-012020-09-300000081362kwr:NonvestedStockAwardsCompensationExpenseMember2020-01-012020-09-300000081362kwr:DirectorsStockOwnershipPlanCompensationExpenseMember2020-01-012020-09-300000081362us-gaap:RestrictedStockMember2021-09-300000081362us-gaap:RestrictedStockUnitsRSUMember2021-09-300000081362us-gaap:RestrictedStockMember2021-01-012021-09-300000081362us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300000081362us-gaap:PensionPlansDefinedBenefitMember2021-07-012021-09-300000081362us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-07-012021-09-300000081362us-gaap:CustomerListsMember2020-12-310000081362us-gaap:OtherIntangibleAssetsMember2020-12-310000081362us-gaap:CustomerListsMember2021-09-300000081362us-gaap:OtherIntangibleAssetsMember2021-09-300000081362us-gaap:FairValueInputsLevel1Member2021-09-300000081362us-gaap:FairValueInputsLevel2Member2021-09-300000081362us-gaap:FairValueInputsLevel3Member2021-09-300000081362us-gaap:FairValueInputsLevel1Member2020-12-310000081362us-gaap:FairValueInputsLevel2Member2020-12-310000081362us-gaap:FairValueInputsLevel3Member2020-12-310000081362srt:MinimumMemberkwr:AcpMember2021-09-300000081362kwr:AcpMembersrt:MaximumMember2021-09-300000081362kwr:SbDeckingMember2021-09-300000081362us-gaap:CommonStockMember2020-12-310000081362us-gaap:AdditionalPaidInCapitalMember2020-12-310000081362us-gaap:RetainedEarningsMember2020-12-310000081362us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000081362us-gaap:NoncontrollingInterestMember2020-12-310000081362us-gaap:CommonStockMember2021-01-012021-09-300000081362us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-300000081362us-gaap:RetainedEarningsMember2021-01-012021-09-300000081362us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-09-300000081362us-gaap:NoncontrollingInterestMember2021-01-012021-09-300000081362us-gaap:CommonStockMember2021-09-300000081362us-gaap:AdditionalPaidInCapitalMember2021-09-300000081362us-gaap:RetainedEarningsMember2021-09-300000081362us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300000081362us-gaap:NoncontrollingInterestMember2021-09-300000081362us-gaap:CommonStockMember2019-12-310000081362us-gaap:AdditionalPaidInCapitalMember2019-12-310000081362us-gaap:RetainedEarningsMember2019-12-310000081362us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000081362us-gaap:NoncontrollingInterestMember2019-12-310000081362us-gaap:CommonStockMember2020-01-012020-09-300000081362us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300000081362us-gaap:RetainedEarningsMember2020-01-012020-09-300000081362us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300000081362us-gaap:NoncontrollingInterestMember2020-01-012020-09-300000081362us-gaap:CommonStockMember2020-09-300000081362us-gaap:AdditionalPaidInCapitalMember2020-09-300000081362us-gaap:RetainedEarningsMember2020-09-300000081362us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300000081362us-gaap:NoncontrollingInterestMember2020-09-300000081362us-gaap:AccumulatedTranslationAdjustmentMember2021-09-300000081362us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-09-300000081362us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-09-300000081362us-gaap:AccumulatedTranslationAdjustmentMember2020-09-300000081362us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-09-300000081362us-gaap:AccumulatedTranslationAdjustmentMember2020-07-012020-09-300000081362us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-07-012020-09-300000081362us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-07-012020-09-300000081362us-gaap:AccumulatedTranslationAdjustmentMember2020-12-310000081362us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-12-310000081362us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-12-310000081362us-gaap:AccumulatedTranslationAdjustmentMember2019-12-310000081362us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-12-310000081362us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-12-310000081362us-gaap:AccumulatedTranslationAdjustmentMember2021-01-012021-09-300000081362us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-01-012021-09-300000081362us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-01-012021-09-300000081362us-gaap:AccumulatedTranslationAdjustmentMember2020-01-012020-09-300000081362us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-01-012020-09-300000081362us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-01-012020-09-300000081362us-gaap:OtherNoncurrentLiabilitiesMember2020-12-310000081362us-gaap:OtherNoncurrentLiabilitiesMember2021-09-300000081362us-gaap:InterestExpenseMember2020-07-012020-09-300000081362us-gaap:InterestExpenseMember2021-01-012021-09-300000081362us-gaap:InterestExpenseMember2020-01-012020-09-3000000813622020-01-012020-12-310000081362kwr:MatchingStockContribution401KPlanCompensationExpenseMember2020-07-012020-09-300000081362kwr:MatchingStockContribution401KPlanCompensationExpenseMember2020-01-012020-09-300000081362kwr:HoughtonCombinationMember2021-09-300000081362kwr:HoughtonCombinationMember2020-12-310000081362us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-09-3000000813622021-07-012021-09-300000081362us-gaap:EmployeeStockOptionMember2021-01-012021-09-300000081362us-gaap:EmployeeStockOptionMember2021-09-300000081362srt:MaximumMemberkwr:HoughtonEnvironmentalMattersMember2021-09-300000081362srt:MinimumMemberkwr:HoughtonEnvironmentalMattersMember2021-09-300000081362kwr:DefinedContributionPlanMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMemberkwr:MetalsMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMemberus-gaap:EMEAMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMembersrt:AsiaPacificMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMemberkwr:MetalworkingMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMemberus-gaap:EMEAMemberkwr:MetalworkingMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AsiaPacificMemberkwr:MetalworkingMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalworkingMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMembersrt:AmericasMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMemberus-gaap:EMEAMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMembersrt:AsiaPacificMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMemberkwr:MetalsMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMemberus-gaap:EMEAMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMembersrt:AsiaPacificMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMemberkwr:MetalworkingMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMemberus-gaap:EMEAMemberkwr:MetalworkingMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMembersrt:AsiaPacificMemberkwr:MetalworkingMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalworkingMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMembersrt:AmericasMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMemberus-gaap:EMEAMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMembersrt:AsiaPacificMember2020-07-012020-09-300000081362srt:ScenarioPreviouslyReportedMemberkwr:CoralChemicalCompanyMember2020-12-220000081362kwr:CoralChemicalCompanyMembersrt:RestatementAdjustmentMember2020-12-220000081362kwr:CoralChemicalCompanyMember2020-12-220000081362kwr:CoralChemicalCompanyMembersrt:RestatementAdjustmentMember2020-12-222020-12-220000081362srt:ScenarioPreviouslyReportedMemberkwr:CoralChemicalCompanyMember2020-12-222020-12-220000081362kwr:CoralChemicalCompanyMember2020-12-222020-12-220000081362kwr:TinplatingsolutionsMember2021-02-012021-02-280000081362kwr:TinplatingsolutionsMember2021-02-280000081362kwr:TinplatingsolutionsMemberus-gaap:CustomerListsMember2021-02-280000081362kwr:TinplatingsolutionsMemberus-gaap:PatentedTechnologyMember2021-02-280000081362kwr:TinplatingsolutionsMemberus-gaap:TrademarksMember2021-02-280000081362kwr:TinplatingsolutionsMemberus-gaap:CustomerListsMember2021-02-012021-02-280000081362kwr:TinplatingsolutionsMemberus-gaap:PatentedTechnologyMember2021-02-012021-02-280000081362kwr:TinplatingsolutionsMemberus-gaap:TrademarksMember2021-02-012021-02-280000081362kwr:TinplatingsolutionsMember2021-01-012021-09-300000081362kwr:CoralChemicalCompanyMember2020-01-012020-12-310000081362kwr:CoralChemicalCompanyMember2021-01-012021-09-300000081362kwr:TelnordicMember2020-05-012020-05-310000081362kwr:TelnordicMember2020-07-012020-09-300000081362kwr:TelnordicMember2020-09-300000081362kwr:TelnordicMember2021-01-012021-09-300000081362kwr:SouthAfricaEquityAffiliateMember2020-03-310000081362kwr:SouthAfricaEquityAffiliateMember2020-03-012020-03-310000081362kwr:NormanHayMember2019-10-012019-10-310000081362kwr:NormanHayMember2020-01-012020-03-310000081362srt:AmericasMemberus-gaap:IntersegmentEliminationMember2021-07-012021-09-300000081362srt:AmericasMemberus-gaap:IntersegmentEliminationMember2021-01-012021-09-300000081362us-gaap:EMEAMemberus-gaap:IntersegmentEliminationMember2021-07-012021-09-300000081362us-gaap:EMEAMemberus-gaap:IntersegmentEliminationMember2021-01-012021-09-300000081362srt:AsiaPacificMemberus-gaap:IntersegmentEliminationMember2021-07-012021-09-300000081362srt:AsiaPacificMemberus-gaap:IntersegmentEliminationMember2021-01-012021-09-300000081362kwr:GlobalSpecialtyBusinessesMemberus-gaap:IntersegmentEliminationMember2021-07-012021-09-300000081362kwr:GlobalSpecialtyBusinessesMemberus-gaap:IntersegmentEliminationMember2021-01-012021-09-300000081362srt:AmericasMemberus-gaap:IntersegmentEliminationMember2020-07-012020-09-300000081362srt:AmericasMemberus-gaap:IntersegmentEliminationMember2020-01-012020-09-300000081362us-gaap:EMEAMemberus-gaap:IntersegmentEliminationMember2020-07-012020-09-300000081362us-gaap:EMEAMemberus-gaap:IntersegmentEliminationMember2020-01-012020-09-300000081362srt:AsiaPacificMemberus-gaap:IntersegmentEliminationMember2020-07-012020-09-300000081362srt:AsiaPacificMemberus-gaap:IntersegmentEliminationMember2020-01-012020-09-300000081362kwr:GlobalSpecialtyBusinessesMemberus-gaap:IntersegmentEliminationMember2020-07-012020-09-300000081362kwr:GlobalSpecialtyBusinessesMemberus-gaap:IntersegmentEliminationMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMemberkwr:MetalsMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMemberus-gaap:EMEAMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMembersrt:AsiaPacificMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMemberkwr:MetalworkingMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberus-gaap:EMEAMemberkwr:MetalworkingMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AsiaPacificMemberkwr:MetalworkingMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalworkingMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMemberus-gaap:EMEAMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AsiaPacificMember2021-07-012021-09-300000081362srt:AmericasMember2021-07-012021-09-300000081362us-gaap:EMEAMember2021-07-012021-09-300000081362srt:AsiaPacificMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMemberus-gaap:EMEAMember2020-07-012020-09-300000081362us-gaap:OperatingSegmentsMembersrt:AsiaPacificMember2020-07-012020-09-300000081362srt:AmericasMember2020-07-012020-09-300000081362us-gaap:EMEAMember2020-07-012020-09-300000081362srt:AsiaPacificMember2020-07-012020-09-300000081362srt:AmericasMemberus-gaap:TransferredAtPointInTimeMember2020-07-012020-09-300000081362us-gaap:EMEAMemberus-gaap:TransferredAtPointInTimeMember2020-07-012020-09-300000081362srt:AsiaPacificMemberus-gaap:TransferredAtPointInTimeMember2020-07-012020-09-300000081362srt:AmericasMemberus-gaap:TransferredOverTimeMember2020-07-012020-09-300000081362us-gaap:EMEAMemberus-gaap:TransferredOverTimeMember2020-07-012020-09-300000081362srt:AsiaPacificMemberus-gaap:TransferredOverTimeMember2020-07-012020-09-300000081362us-gaap:TransferredAtPointInTimeMember2020-07-012020-09-300000081362us-gaap:TransferredOverTimeMember2020-07-012020-09-300000081362srt:AmericasMemberus-gaap:TransferredAtPointInTimeMember2021-07-012021-09-300000081362us-gaap:EMEAMemberus-gaap:TransferredAtPointInTimeMember2021-07-012021-09-300000081362srt:AsiaPacificMemberus-gaap:TransferredAtPointInTimeMember2021-07-012021-09-300000081362srt:AmericasMemberus-gaap:TransferredOverTimeMember2021-07-012021-09-300000081362us-gaap:EMEAMemberus-gaap:TransferredOverTimeMember2021-07-012021-09-300000081362srt:AsiaPacificMemberus-gaap:TransferredOverTimeMember2021-07-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberus-gaap:EMEAMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AsiaPacificMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMembersrt:AmericasMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMemberus-gaap:EMEAMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMembersrt:AsiaPacificMember2021-01-012021-09-300000081362srt:AmericasMember2021-01-012021-09-300000081362srt:AmericasMemberus-gaap:TransferredAtPointInTimeMember2021-01-012021-09-300000081362us-gaap:EMEAMemberus-gaap:TransferredAtPointInTimeMember2021-01-012021-09-300000081362srt:AsiaPacificMemberus-gaap:TransferredAtPointInTimeMember2021-01-012021-09-300000081362srt:AmericasMemberus-gaap:TransferredOverTimeMember2021-01-012021-09-300000081362us-gaap:EMEAMemberus-gaap:TransferredOverTimeMember2021-01-012021-09-300000081362srt:AsiaPacificMemberus-gaap:TransferredOverTimeMember2021-01-012021-09-300000081362us-gaap:TransferredAtPointInTimeMember2021-01-012021-09-300000081362us-gaap:TransferredOverTimeMember2021-01-012021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMemberkwr:MetalsMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMemberus-gaap:EMEAMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMembersrt:AsiaPacificMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMemberkwr:MetalworkingMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMemberus-gaap:EMEAMemberkwr:MetalworkingMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMembersrt:AsiaPacificMemberkwr:MetalworkingMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalsMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:MetalworkingMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMemberus-gaap:EMEAMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMembersrt:AsiaPacificMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMembersrt:AmericasMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMemberus-gaap:EMEAMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMembersrt:AsiaPacificMember2020-01-012020-09-300000081362srt:AmericasMember2020-01-012020-09-300000081362us-gaap:EMEAMember2020-01-012020-09-300000081362srt:AsiaPacificMember2020-01-012020-09-300000081362kwr:QhProgramMember2020-12-310000081362kwr:QhProgramMember2021-01-012021-09-300000081362kwr:QhProgramMember2021-09-300000081362kwr:StockOptionsCompensationExpenseMember2021-07-012021-09-300000081362kwr:NonvestedStockAwardsCompensationExpenseMember2021-07-012021-09-300000081362kwr:DirectorsStockOwnershipPlanCompensationExpenseMember2021-07-012021-09-300000081362kwr:MatchingStockContribution401KPlanCompensationExpenseMember2021-07-012021-09-300000081362us-gaap:PerformanceSharesMember2021-07-012021-09-300000081362us-gaap:PerformanceSharesMember2020-07-012020-09-300000081362us-gaap:PerformanceSharesMember2021-01-012021-09-300000081362us-gaap:PerformanceSharesMember2020-01-012020-09-300000081362us-gaap:StockCompensationPlanMember2021-07-012021-09-300000081362us-gaap:StockCompensationPlanMember2020-07-012020-09-300000081362us-gaap:StockCompensationPlanMember2021-01-012021-09-300000081362us-gaap:StockCompensationPlanMember2020-01-012020-09-300000081362us-gaap:OperatingSegmentsMembersrt:AmericasMember2020-12-310000081362us-gaap:OperatingSegmentsMemberus-gaap:EMEAMember2020-12-310000081362us-gaap:OperatingSegmentsMembersrt:AsiaPacificMember2020-12-310000081362us-gaap:OperatingSegmentsMembersrt:AmericasMember2021-09-300000081362us-gaap:OperatingSegmentsMemberus-gaap:EMEAMember2021-09-300000081362us-gaap:OperatingSegmentsMembersrt:AsiaPacificMember2021-09-300000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMember2020-12-310000081362us-gaap:OperatingSegmentsMemberkwr:GlobalSpecialtyBusinessesMember2021-09-300000081362kwr:TrademarksFormulationsandproducttechnologymemberMember2021-09-300000081362kwr:TrademarksFormulationsandproducttechnologymemberMember2020-12-310000081362us-gaap:LineOfCreditMember2021-09-300000081362us-gaap:DomesticLineOfCreditMember2021-09-300000081362us-gaap:ForeignLineOfCreditMember2021-09-300000081362kwr:IndustrialDevelopmentBondsMember2021-09-300000081362kwr:BankLinesOfCreditAndOtherDebtObligationsMember2021-09-300000081362us-gaap:LineOfCreditMember2020-12-310000081362us-gaap:DomesticLineOfCreditMember2020-12-310000081362us-gaap:ForeignLineOfCreditMember2020-12-310000081362kwr:IndustrialDevelopmentBondsMember2020-12-310000081362kwr:BankLinesOfCreditAndOtherDebtObligationsMember2020-12-310000081362kwr:BankLinesOfCreditAndOtherDebtObligationsMember2021-01-012021-09-300000081362kwr:BankLinesOfCreditAndOtherDebtObligationsMember2020-01-012020-12-310000081362us-gaap:RevolvingCreditFacilityMember2021-09-300000081362us-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2021-01-012021-09-300000081362us-gaap:RevolvingCreditFacilityMembersrt:MinimumMember2021-01-012021-09-300000081362srt:MinimumMember2021-09-300000081362srt:MaximumMember2021-09-300000081362kwr:TermLoanMember2021-01-012021-09-300000081362kwr:TermLoanMember2021-09-300000081362kwr:TermLoanMember2019-11-300000081362us-gaap:OtherAssetsMember2021-09-300000081362us-gaap:OtherAssetsMember2020-12-310000081362us-gaap:CorporateBondSecuritiesMember2021-09-300000081362us-gaap:CorporateBondSecuritiesMember2020-12-310000081362us-gaap:CorporateBondSecuritiesMember2021-01-012021-09-300000081362us-gaap:CommonStockMember2020-07-012020-09-300000081362us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300000081362us-gaap:RetainedEarningsMember2020-07-012020-09-300000081362us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300000081362us-gaap:NoncontrollingInterestMember2020-07-012020-09-3000000813622020-06-300000081362us-gaap:CommonStockMember2020-06-300000081362us-gaap:AdditionalPaidInCapitalMember2020-06-300000081362us-gaap:RetainedEarningsMember2020-06-300000081362us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300000081362us-gaap:NoncontrollingInterestMember2020-06-300000081362us-gaap:CommonStockMember2021-07-012021-09-300000081362us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300000081362us-gaap:RetainedEarningsMember2021-07-012021-09-300000081362us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300000081362us-gaap:NoncontrollingInterestMember2021-07-012021-09-300000081362us-gaap:CommonStockMember2021-06-300000081362us-gaap:AdditionalPaidInCapitalMember2021-06-300000081362us-gaap:RetainedEarningsMember2021-06-300000081362us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300000081362us-gaap:NoncontrollingInterestMember2021-06-3000000813622021-06-300000081362us-gaap:CommonStockMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310000081362us-gaap:AdditionalPaidInCapitalMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310000081362us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310000081362us-gaap:AccumulatedOtherComprehensiveIncomeMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310000081362us-gaap:NoncontrollingInterestMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310000081362srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310000081362us-gaap:CommonStockMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310000081362us-gaap:AdditionalPaidInCapitalMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310000081362us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310000081362us-gaap:AccumulatedOtherComprehensiveIncomeMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310000081362us-gaap:NoncontrollingInterestMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310000081362srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310000081362us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-12-310000081362us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2021-01-012021-09-300000081362us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2021-09-300000081362us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2019-12-310000081362us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-01-012020-09-300000081362us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-09-300000081362us-gaap:AccumulatedTranslationAdjustmentMember2021-06-300000081362us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-06-300000081362us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-06-300000081362us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-07-012021-09-300000081362us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-07-012021-09-300000081362us-gaap:AccumulatedTranslationAdjustmentMember2021-07-012021-09-300000081362us-gaap:AccumulatedTranslationAdjustmentMember2020-06-300000081362us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-06-300000081362us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-06-300000081362us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2021-06-300000081362us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2021-07-012021-09-300000081362us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-06-300000081362us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember2020-07-012020-09-3000000813622020-01-012020-03-310000081362kwr:CombinationAndOtherAcquisitionRelatedMember2021-07-012021-09-300000081362kwr:CombinationAndOtherAcquisitionRelatedMember2021-01-012021-09-300000081362kwr:CombinationAndOtherAcquisitionRelatedMember2020-07-012020-09-300000081362kwr:CombinationAndOtherAcquisitionRelatedMember2020-01-012020-09-300000081362kwr:DefinedbenefitplansettlementMember2020-07-012020-09-300000081362us-gaap:PensionPlansDefinedBenefitMember2021-09-300000081362us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-09-300000081362country:IT2021-01-012021-09-300000081362country:ITus-gaap:ForeignCountryMemberkwr:HoughtonMember2021-09-300000081362country:DE2021-09-300000081362us-gaap:ForeignCountryMemberkwr:NetherlandsAndSpainMember2021-09-300000081362country:ITus-gaap:ForeignCountryMember2021-09-300000081362us-gaap:PensionPlansDefinedBenefitMember2020-07-012020-09-300000081362us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-07-012020-09-300000081362us-gaap:PensionPlansDefinedBenefitMember2020-01-012020-09-300000081362us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-01-012020-09-300000081362us-gaap:InterestExpenseMember2021-07-012021-09-300000081362kwr:BrazilianIndirectTaxesMember2021-01-012021-09-300000081362us-gaap:InterestRateSwapMember2019-11-300000081362us-gaap:InterestRateSwapMember2021-01-012021-09-300000081362srt:ScenarioForecastMember2021-12-310000081362srt:MaximumMemberkwr:FacilitiesVehiclesAndMachineryAndEquipmentMember2021-09-300000081362srt:MaximumMemberus-gaap:LandMember2021-09-300000081362srt:MinimumMembercountry:ITus-gaap:ForeignCountryMemberkwr:HoughtonMember2021-01-012021-09-300000081362srt:MaximumMembercountry:ITus-gaap:ForeignCountryMemberkwr:HoughtonMember2021-01-012021-09-300000081362srt:MinimumMemberus-gaap:ForeignCountryMemberkwr:HoughtonMembercountry:DE2021-01-012021-09-300000081362srt:MaximumMemberus-gaap:ForeignCountryMemberkwr:HoughtonMembercountry:DE2021-01-012021-09-300000081362srt:SubsidiariesMembercountry:AR2020-07-012020-09-300000081362srt:SubsidiariesMembercountry:AR2020-01-012020-09-300000081362kwr:GlobalSpecialtyBusinessesMemberkwr:ChemicalMaskantsProductLineMember2021-01-012021-09-300000081362kwr:HoughtonMembercountry:DE2021-09-300000081362srt:SubsidiariesMembercountry:ARus-gaap:AssetsTotalMemberus-gaap:GeographicConcentrationRiskMember2021-07-012021-09-300000081362srt:SubsidiariesMembercountry:ARus-gaap:AssetsTotalMemberus-gaap:GeographicConcentrationRiskMember2021-01-012021-09-300000081362us-gaap:PerformanceSharesMember2021-09-300000081362us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberkwr:LargestCustomerMember2020-01-012020-12-310000081362us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberkwr:TopFiveMember2020-01-012020-12-310000081362srt:SubsidiariesMembercountry:ARus-gaap:GeographicConcentrationRiskMemberus-gaap:SalesRevenueNetMember2021-01-012021-09-300000081362srt:SubsidiariesMembercountry:ARus-gaap:GeographicConcentrationRiskMemberus-gaap:SalesRevenueNetMember2020-01-012020-09-300000081362srt:SubsidiariesMembercountry:ARus-gaap:AssetsTotalMemberus-gaap:GeographicConcentrationRiskMember2020-01-012020-09-300000081362srt:SubsidiariesMembercountry:ARus-gaap:GeographicConcentrationRiskMemberus-gaap:SalesRevenueNetMember2021-07-012021-09-300000081362srt:SubsidiariesMembercountry:ARus-gaap:GeographicConcentrationRiskMemberus-gaap:SalesRevenueNetMember2020-07-012020-09-300000081362srt:SubsidiariesMembercountry:ARus-gaap:AssetsTotalMemberus-gaap:GeographicConcentrationRiskMember2020-07-012020-09-300000081362kwr:DefinedContributionPlanMember2021-07-012021-09-300000081362kwr:HoughtonCombinationMember2021-01-012021-03-310000081362kwr:HoughtonCombinationMember2020-12-310000081362kwr:HoughtonCombinationMember2021-09-300000081362srt:MaximumMemberus-gaap:ForeignCountryMembercountry:IT2021-01-012021-09-300000081362srt:MinimumMemberus-gaap:ForeignCountryMembercountry:IT2021-01-012021-09-300000081362us-gaap:ForeignCountryMembercountry:IT2021-01-012021-09-300000081362us-gaap:ForeignCountryMembercountry:BR2021-01-012021-09-300000081362us-gaap:ForeignCountryMembercountry:NL2021-01-012021-09-300000081362us-gaap:ForeignCountryMembercountry:CN2021-01-012021-09-300000081362us-gaap:ForeignCountryMembercountry:MX2021-01-012021-09-300000081362us-gaap:ForeignCountryMembercountry:GB2021-01-012021-09-300000081362country:CAus-gaap:StateAndLocalJurisdictionMember2021-01-012021-09-300000081362us-gaap:InternalRevenueServiceIRSMember2021-01-012021-09-300000081362us-gaap:StateAndLocalJurisdictionMember2021-01-012021-09-300000081362us-gaap:ForeignCountryMembercountry:IN2021-01-012021-09-300000081362kwr:DefinedContributionPlanMember2020-07-012020-09-300000081362kwr:DefinedContributionPlanMember2020-01-012020-09-300000081362kwr:ForeignconsumptiontaxMember2021-07-012021-09-300000081362kwr:GlobalSpecialtyBusinessesMemberkwr:GrindaixGmbhMember2021-09-012021-09-300000081362kwr:GlobalSpecialtyBusinessesMemberkwr:GrindaixGmbhMember2021-02-280000081362kwr:GlobalSpecialtyBusinessesMemberkwr:GrindaixGmbhMember2021-02-012021-02-280000081362us-gaap:InsuranceClaimsMember2021-09-300000081362us-gaap:InsuranceClaimsMember2021-01-012021-09-300000081362us-gaap:InterestRateSwapMember2020-01-012020-12-310000081362us-gaap:ErrorCorrectionOtherMember2020-07-012020-09-300000081362us-gaap:ErrorCorrectionOtherMember2020-01-012020-09-300000081362us-gaap:ErrorCorrectionOtherMember2020-01-012020-03-310000081362us-gaap:ErrorCorrectionOtherMember2020-04-012020-06-300000081362us-gaap:TransferredAtPointInTimeMember2021-07-012021-09-300000081362us-gaap:TransferredOverTimeMember2021-07-012021-09-300000081362us-gaap:SubsequentEventMemberkwr:TwentyTwentyOneAcquisitionMember2021-11-012021-11-300000081362us-gaap:SubsequentEventMemberkwr:TwentyTwentyOneAcquisitionMember2021-11-300000081362kwr:DefinedbenefitplansettlementMember2020-01-012020-09-300000081362srt:SubsidiariesMembercountry:AR2021-07-012021-09-300000081362srt:SubsidiariesMemberus-gaap:GeographicConcentrationRiskMember2021-01-012021-09-30iso4217:BRLiso4217:DKKiso4217:EURiso4217:GBPiso4217:USDiso4217:ZARxbrli:purexbrli:sharesiso4217:USDxbrli:sharesdummy:Peopledummy:Segmentsdummy:Countries

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM

10-Q

☒

QUARTERLY

REPORT PURSUANT TO SECTION 13

OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2021

☐

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, 2021

17,894,480

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, 2021 and September 30, 2020

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and

September 30, 2020

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and September 30, 2020

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,

2021

2020

2021

2020

Net sales

449,072

367,224

1,314,117

1,031,825

Cost of goods sold (

excluding amortization expense - See Note 14

)

303,941

227,032

858,341

660,396

Gross profit

145,131

140,192

455,776

371,429

Selling, general and administrative expenses

104,215

97,037

317,204

282,405

Indefinite-lived intangible asset impairment

—

38,000

Restructuring and related charges

(880)

1,383

593

3,585

Combination, integration and other acquisition-related expenses

5,786

6,913

18,259

22,786

Operating income

36,010

34,859

119,720

24,653

Other income (expense), net

647

(239)

19,344

(22,407)

Interest expense, net

(5,637)

(6,837)

(16,725)

(22,109)

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

associated companies

31,020

27,783

122,339

(19,863)

Taxes on income (loss)

before equity in net income of associated

companies

795

2,245

26,702

(7,603)

Income (loss) before equity in net income of associated

companies

30,225

25,538

95,637

(12,260)

Equity in net income of associated companies

848

1,804

7,668

3,536

Net income (loss)

31,073

27,342

103,305

(8,724)

Less: Net income attributable to noncontrolling interest

Net income (loss) attributable to Quaker Chemical Corporation

31,058

27,304

103,243

(8,812)

Per share data:

Net income (loss) attributable to Quaker Chemical Corporation

common shareholders – basic

1.74

1.53

5.78

(0.50)

Net income (loss) attributable to Quaker Chemical Corporation

common shareholders – diluted

1.73

1.53

5.76

(0.50)

Dividends declared

0.415

0.395

1.205

1.165

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

Quaker Chemical Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Dollars in thousands)

Unaudited

Three Months Ended

Nine Months Ended

September 30,

2021

2020

2021

2020

Net income (loss)

31,073

27,342

103,305

(8,724)

Other comprehensive (loss) income, net of tax

Currency translation adjustments

(19,905)

33,618

(29,201)

(10,582)

Defined benefit retirement plans

904

(257)

2,593

16,913

Current period change in fair value of derivatives

436

354

1,450

(3,738)

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

(215)

556

(2,961)

453

Other comprehensive (loss) income

(18,780)

34,271

(28,119)

3,046

Comprehensive income (loss)

12,293

61,613

75,186

(5,678)

Less: Comprehensive (income) loss attributable to

noncontrolling interest

(15)

(56)

(68)

Comprehensive income (loss) attributable to Quaker Chemical

Corporation

12,278

61,557

75,118

(5,653)

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

Quaker Chemical Corporation

Condensed Consolidated Balance Sheets

(Dollars in thousands, except par value)

Unaudited

September 30,

December 31,

2021

2020

ASSETS

Current assets

Cash and cash equivalents

141,393

181,833

Accounts receivable, net

433,631

372,974

Inventories

Raw materials and supplies

121,951

86,148

Work-in-process

and finished goods

132,943

101,616

Prepaid expenses and other current assets

63,278

50,156

Total current

assets

893,196

792,727

Property, plant and equipment,

at cost

423,469

423,253

Less accumulated depreciation

(232,636)

(219,370)

Property, plant and equipment,

net

190,833

203,883

Right of use lease assets

34,314

38,507

Goodwill

630,669

631,212

Other intangible assets, net

1,048,688

1,081,358

Investments in associated companies

94,110

95,785

Deferred tax assets

18,409

16,566

Other non-current assets

31,608

31,796

Total assets

2,941,827

2,891,834

LIABILITIES AND EQUITY

Current liabilities

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

52,611

38,967

Accounts and other payables

219,601

198,872

Accrued compensation

40,655

43,300

Accrued restructuring

4,050

8,248

Other current liabilities

93,042

93,573

Total current

liabilities

409,959

382,960

Long-term debt

839,275

849,068

Long-term lease liabilities

24,599

27,070

Deferred tax liabilities

174,405

192,763

Other non-current liabilities

109,893

119,059

Total liabilities

1,558,131

1,570,920

Commitments and contingencies (Note 19)

Equity

Common stock $

par value; authorized

30,000,000

shares; issued and

outstanding 2021 –

17,888,577

shares; 2020 –

17,850,616

17,889

17,851

Capital in excess of par value

914,277

905,171

Retained earnings

505,635

423,940

Accumulated other comprehensive loss

(54,723)

(26,598)

Total Quaker

shareholders’ equity

1,383,078

1,320,364

Noncontrolling interest

618

550

Total equity

1,383,696

1,320,914

Total liabilities and equity

2,941,827

2,891,834

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

Quaker Chemical Corporation

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

Unaudited

Nine Months Ended

September 30,

2021

2020

Cash flows from operating activities

Net income (loss)

103,305

(8,724)

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

activities:

Amortization of debt issuance costs

3,562

Depreciation and amortization

65,440

62,818

Equity in undistributed earnings of associated companies, net of dividends

(7,563)

1,415

Acquisition-related fair value adjustments related to inventory

801

229

Deferred compensation, deferred taxes and other,

net

(21,865)

(30,657)

Share-based compensation

8,441

17,820

(Gain) loss on disposal of property,

plant, equipment and other assets

(4,819)

105

Insurance settlement realized

—

(818)

Indefinite-lived intangible asset impairment

—

38,000

Combination and other acquisition-related expenses, net of payments

(1,705)

2,498

Restructuring and related charges

593

3,585

Pension and other postretirement benefits

(5,638)

16,219

(Decrease) increase in cash from changes in current assets and current

liabilities, net of acquisitions:

Accounts receivable

(68,664)

30,225

Inventories

(72,962)

2,137

Prepaid expenses and other current assets

(24,512)

(113)

Change in restructuring liabilities

(4,557)

(12,772)

Accounts payable and accrued liabilities

32,652

(13,481)

Net cash provided by operating activities

2,509

112,048

Cash flows from investing activities

Investments in property,

plant and equipment

(12,823)

(12,184)

Payments related to acquisitions, net of cash acquired

(31,975)

(3,132)

Proceeds from disposition of assets

14,744

Insurance settlement interest earned

—

Net cash used in investing activities

(30,054)

(15,264)

Cash flows from financing activities

Payments of term loan debt

(28,558)

(28,132)

Borrowings (repayments) on revolving credit facilities, net

39,143

(16,485)

Repayments on other debt, net

(585)

(527)

Dividends paid

(21,175)

(20,520)

Stock options exercised, other

704

2,385

Purchase of noncontrolling interest in affiliates

—

(1,047)

Distributions to noncontrolling affiliate shareholders

—

(751)

Net cash used in financing activities

(10,471)

(65,077)

Effect of foreign exchange rate changes on cash

(2,486)

(529)

Net (decrease) increase in cash, cash equivalents and restricted cash

(40,502)

31,178

Cash, cash equivalents and restricted cash at the beginning of the period

181,895

143,555

Cash, cash equivalents and restricted cash at the end of the period

141,393

174,733

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

statements.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

Note 1 – Basis of Presentation and Description of Business

Basis of Presentation

As used in these Notes to Condensed Consolidated Financial Statements of

this Quarterly Report on Form 10-Q for the period

ended September 30, 2021 (the “Report”),

the terms “Quaker,”

“Quaker Houghton,”

the “Company,”

“we,” and “our” refer to Quaker

Chemical Corporation (doing business as Quaker Houghton), its subsidiaries, and

associated companies, unless the context otherwise

requires.

As used in these Notes to Condensed Consolidated Financial Statements,

the term Legacy Quaker refers to the Company

prior to the closing of its combination with Houghton International, Inc. (“Houghton”)

(herein referred to as the “Combination”).

The

condensed consolidated financial statements included herein are

unaudited and have been prepared in accordance with generally

accepted accounting principles in the United States (“U.S. GAAP”) for interim

financial reporting and the United States Securities and

Exchange Commission (“SEC”) regulations.

Certain information and footnote disclosures normally included in financial statements

prepared in accordance with U.S. GAAP have been condensed or omitted

pursuant to such rules and regulations.

In the opinion of

management, the financial statements reflect all adjustments consisting

only of normal recurring adjustments which are necessary for a

fair statement of the financial position, results of operations and cash

flows for the interim periods.

The results for the nine months

ended September 30, 2021 are not necessarily indicative of the results to be expected

for the full year.

These financial statements

should be read in conjunction with the Company’s

Annual Report filed on Form 10-K for the year ended December

31, 2020 (the

“2020 Form 10-K”).

During the three months ended September 30, 2020, the Company

identified and corrected certain immaterial adjustments relating

to the three months ended March 31, 2020 as well as the three and six months

ended June 30, 2020.

These adjustments related to the

Company’s over-recognition

of cost of goods sold (“COGS”) and corresponding under-recognition

of inventory, as well as the

associated tax impact of these adjustments, in the Company’s

previously issued interim financial statements for the three months

ended March 31, 2020 and the three and six months ended June 30, 2020.

These adjustments impact the Company’s

Americas

reportable segment.

The cumulative amount of reduction to COGS recorded in the three and nine months ended

September 30, 2020

was approximately $

1.7

million, with approximately $

0.7

million related to the three months ended March 31, 2020 and

approximately $

1.0

million related to the three months ended June 30, 2020.

Description of Business

The Company was organized in 1918, incorporated as a Pennsylvania

business corporation in 1930, and in August 2019

completed the Combination with Houghton to form Quaker Houghton.

Quaker Houghton is the global leader in industrial process

fluids.

With a presence around the world, including

operations in over

countries, the Company’s customers

include thousands of

the world’s most advanced and specialized

steel, aluminum, automotive, aerospace, offshore, can,

mining, and metalworking

companies.

Quaker Houghton develops, produces, and markets a broad range of formulated

chemical specialty products and offers

chemical management services (which the Company refers to as “Fluidcare”)

for various heavy industrial and manufacturing

applications throughout its

four

segments: Americas; Europe, Middle East and Africa (“EMEA”); Asia/Pacific; and

Global Specialty

Businesses.

Hyper-inflationary economies

Based on various indices or index compilations being used to monitor inflation

in Argentina as well as economic instability,

effective July 1, 2018, Argentina’s

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

As of, and for the three and nine

months ended September 30, 2021, the Company's Argentine

subsidiaries represented less than

% of the Company’s consolidated

total assets and net sales, respectively.

During the three and nine months ended September 30, 2021, the Company

recorded less than

0.1

million and $

0.3

million, respectively,

of remeasurement losses associated with the applicable currency conversions

related to

Argentina.

Comparatively, during the

three and nine months ended September 30, 2020, the Company recorded $

0.2

million and $

0.3

million, respectively,

of remeasurement losses associated with the applicable currency conversions

related to Argentina.

These losses

were recorded within foreign exchange losses, net, which is a component

of other income (expense), net, in the Company’s

Condensed Consolidated Statements of Operations.

COVID-19

Management continues to monitor the impact that the COVID-19 pandemic

is having on the Company, the overall

specialty

chemical industry, and

the economies and markets in which the Company operates.

The full extent of the COVID-19 pandemic

related business and travel restrictions and changes to business and consumer behavior

intended to reduce its spread are uncertain as of

the date of the Report as COVID-19 and the responses of governmental

authorities continue to evolve globally.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

Further, management continues to evaluate

how COVID-19-related circumstances, such as remote work arrangements, affect

financial reporting processes, internal control over financial reporting,

and disclosure controls and procedures.

While the

circumstances have presented and are expected to continue to present challenges,

at this time, Management does not believe that

COVID-19 has had a material impact on financial reporting processes, internal

control over financial reporting, and disclosure

controls and procedures.

The Company cannot reasonably estimate the magnitude of the effects

these conditions will have on the Company’s

operations in

the future as they are subject to significant uncertainties relating to the ultimate

geographic spread of the virus, the incidence and

severity of the symptoms, the duration or resurgences

of the outbreak including the impact of new variants, the global availability,

acceptance and efficacy of vaccines, the length of the travel restrictions

and business closures imposed by governments of impacted

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

all of which continue to evolve.

To the extent

that the Company’s customers and suppliers continue

to be significantly and adversely impacted by COVID-19, this

could reduce the availability,

or result in delays, of materials or supplies to or from the Company,

which in turn could significantly

interrupt the Company’s business operations.

Such impacts could grow and become more significant to the Company’s

operations

and the Company’s liquidity

or financial position.

Therefore, given the continuously evolving global developments with respect to

this pandemic, the Company cannot reasonably estimate the magnitude or

the full extent to which COVID-19 may impact the

Company’s results of operations,

liquidity or financial position.

Note 2 – Business Acquisitions

2021 Acquisitions

In September 2021, the Company acquired the remaining interest in Grindaix-GmbH

(“Grindaix”), a Germany-based, high-tech

provider of coolant control and delivery systems for approximately

2.4

million EUR or approximately $

2.9

million for its Global

Specialty Businesses reportable segment.

Previously, in February 2021,

the Company acquired a

% ownership interest in Grindaix

for approximately

1.4

million EUR or approximately $

1.7

million.

The Company recorded its initial investment as an equity method

investment within the Condensed Consolidated Financial Statements and

accounted for the purchase of the remaining interest as a step

acquisition whereby the Company remeasured the previously held

equity method investment to its fair value.

In June 2021, the Company acquired certain assets for its chemical maskants

product line in the Global Specialty Businesses

reportable segment for

2.3

million EUR or approximately $

2.8

million.

The Company accounted for the acquisition using the asset

acquisition method under ASC 805,

Business Combinations

In February 2021, the Company acquired a tin-plating solutions business

for the steel end market for approximately $

million.

This acquisition is part of each of the Company’s

geographic reportable segments.

The Company allocated $

19.6

million of the

purchase price to intangible assets, comprised of $

18.3

million of customer relationships, to be amortized over

19 years

; $

0.9

million

of existing product technology to be amortized over

14 years

; and $

0.4

million of a licensed trademark to be amortized over

3 years

In addition, the Company recorded $

5.0

million of goodwill related to expected value not allocated to other acquired

assets, all of

which is expected to be tax deductible in various jurisdictions in which we

operate.

As of September 30, 2021, the allocation of the

purchase price has not been finalized and the

one year

measurement period has not ended.

Further adjustments may be necessary as a

result of the Company’s on-going

assessment of additional information related to the fair value of assets acquired

and liabilities

assumed.

The results of operations of the acquired assets and businesses subsequent to the

respective acquisition dates are included in the

Condensed Consolidated Statements of Operations as of September 30, 2021.

Applicable transaction expenses associated with these

acquisitions are included in Combination, integration and other acquisition

-related expenses in the Company’s Condensed

Consolidated Statements of Operations.

Certain pro forma and other information is not presented, as the operations of the acquired

assets and businesses are not considered material to the overall operations of the

Company for the periods presented.

In November 2021, the Company closed two additional acquisitions that expand

its strategic product offerings and increase the

Company’s presence in its core metalworking

industries.

The total initial purchase price for these acquisitions was approximately $

million, subject to post-closing adjustments as well as certain earn-out

provisions that could total approximately $

million.

Transaction expenses associated with these

acquisitions are included in Combination, integration and other acquisition-related

expenses in the Condensed Consolidated Statements of Operations.

The results of operations of these two acquisitions are not

included in the Consolidated Statements of Operations because the date of

closing for each was subsequent to September 30, 2021.

Preliminary purchase price allocation of assets acquired and liabilities assumed

have not been presented as that information is not

available as of the date of these Condensed Consolidated Financial Statements.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

Previous Acquisitions

In December 2020, the Company completed its acquisition of Coral Chemical

Company (“Coral”), a privately held, U.S.-based

provider of metal finishing fluid solutions.

The acquisition provides technical expertise and product solutions for pre-treatment,

metalworking and wastewater treatment applications to the beverage

cans and general industrial end markets.

The original purchase

price was approximately $

54.1

million, subject to routine and customary post-closing adjustments related to working

capital and net

indebtedness levels.

The Company anticipates finalizing its post-closing adjustments for the Coral acquisition

during the fourth

quarter of 2021.

The following table presents the preliminary estimated fair values of

Coral net assets acquired:

Measurement

December 22,

Period

2020

2020 (1)

Adjustments

(as adjusted)

Cash and cash equivalents

958

—

958

Accounts receivable

8,473

—

8,473

Inventories

4,527

—

4,527

Prepaid expenses and other assets

181

—

181

Property, plant and equipment

10,467

652

11,119

Intangible assets

30,300

(500)

29,800

Goodwill

2,814

270

3,084

Total assets purchased

57,720

422

58,142

Long-term debt including current portions and finance leases

183

556

739

Accounts payable, accrued expenses and other accrued liabilities

3,482

—

3,482

Total liabilities assumed

3,665

556

4,221

Total consideration

paid for Coral

54,055

(134)

53,921

Less: estimated purchase price settlement

—

(134)

Less: cash acquired

958

—

958

Net cash paid for Coral

53,097

—

53,097

(1) As previously disclosed in the Company’s

2020 Form 10-K

Measurement period adjustments recorded during the first nine months of

2021 include certain adjustments related to refining

original estimates for assets and liabilities for certain acquired finance

leases, as well the adjustment to reflect the expected settlement

of post-closing working capital and net indebtedness true ups to the original purchase

price.

As of September 30, 2021, the allocation

of the purchase price for Coral has not been finalized and the

one year

measurement period has not ended.

Further adjustments may

be necessary as a result of the Company’s

on-going assessment of additional information related to the fair value of assets acquired

and liabilities assumed.

In May 2020, the Company acquired Tel

Nordic ApS (“TEL”), a company that specializes in lubricants and engineering primarily

in high pressure aluminum die casting for its EMEA reportable segment.

Consideration paid was in the form of a convertible

promissory note in the amount of

20.0

million DKK, or approximately $

2.9

million, which was subsequently converted into shares of

the Company’s common stock.

An adjustment to the purchase price of approximately

0.4

million DKK, or less than $

0.1

million, was

made as a result of finalizing a post-closing settlement in the second

quarter of 2020.

The Company allocated approximately $

2.4

million of the purchase price to intangible assets to be amortized over

17 years

In addition, the Company recorded approximately

0.5

million of goodwill, related to expected value not allocated to other acquired

assets, none of which will be tax deductible.

As of

September 30, 2021, the allocation of the purchase price of TEL was finalized

and the

one year

measurement period ended.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

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 October 2019, the Company completed its acquisition of the operating

divisions of Norman Hay plc (“Norman Hay”), a private

U.K. company that provides specialty chemicals, operating equipment, and

services to industrial end markets.

The original purchase

price was

80.0

million GBP,

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

adjustments related to

working capital and net indebtedness levels.

The Company finalized its post-closing adjustments for the

Norman Hay acquisition and

paid approximately

2.5

million GBP during the first quarter of 2020 to settle such adjustments.

Note 3 – Recently Issued Accounting Standards

Recently Issued Accounting Standards

Adopted

The Financial Accounting Standards Board (“FASB”)

issued Account Standards Update (“ASU”)

ASU 2019-12

, Income Taxes

(Topic

740): Simplifying the Accounting for Income Taxes

in December 2019 to simplify the accounting for income taxes.

The

guidance within this accounting standard update removes

certain exceptions, including the exception to the incremental approach for

certain intra-period tax allocations, to the requirement to recognize

or not recognize certain deferred tax liabilities for equity method

investments and foreign subsidiaries, and to the general methodology for

calculating income taxes in an interim period when a year-to-

date loss exceeds the anticipated loss for the year.

Further, the guidance simplifies the accounting related

to franchise taxes, the step

up in tax basis for goodwill, current and deferred tax expense, and codification

improvements for income taxes related to employee

stock ownership plans.

The guidance is effective for annual and interim periods beginning

after December 15, 2020.

The Company

adopted this standard on a prospective basis, effective January

1, 2021.

There was no cumulative effect of adoption recorded within

retained earnings on January 1, 2021.

The FASB issued ASU 2020

-04,

Reference Rate Reform (Topic

848): Facilitation of the Effects of Reference Rate Reform

Financial Reporting

in March 2020.

The FASB subsequently

issued ASU 2021-01,

Reference Rate Reform (Topic

848): Scope

January 2021 which clarified the guidance but did not materially change

the guidance or its applicability to the Company.

The

amendments provide temporary optional expedients and exceptions

for applying U.S. GAAP to contract modifications, hedging

relationships and other transactions to ease the potential accounting

and financial reporting burden associated with transitioning away

from reference rates that are expected to be discontinued, including

the London Interbank Offered Rate (“LIBOR”).

ASU 2020-04 is

effective for the Company as of March 12, 2020 and generally can

be applied through December 31, 2022.

As of September 30, 2021,

the expedients provided in ASU 2020-04 do not presently impact

the Company; however, the Company will continue

to monitor for

potential impacts on its consolidated financial statements.

Note 4 – Business Segments

The Company’s operating

segments, which are consistent with its reportable segments, reflect the structure of the

Company’s

internal organization, the method by which the Company’s

resources are allocated and the manner by which the chief operating

decision maker assesses the Company’s

performance.

The Company has

four

reportable segments: (i) Americas; (ii) EMEA; (iii)

Asia/Pacific; and (iv) Global Specialty Businesses.

The three geographic segments are composed of the net sales and operations in

each respective region, excluding net sales and operations managed globally

by the Global Specialty Businesses segment, which

includes the Company’s container,

metal finishing, mining, offshore, specialty coatings, specialty grease

and Norman Hay businesses.

Segment operating earnings for each of the Company’s

reportable segments are comprised of the segment’s

net sales less directly

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

Operating expenses not directly attributable to the net

sales of each respective segment, such as certain corporate and administrative costs, Combination,

integration and other acquisition-

related expenses, and Restructuring and related charges,

are not included in segment operating earnings.

Other items not specifically

identified with the Company’s reportable

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

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

The following table presents information about the performance of the Company’s

reportable segments for the three and nine

months ended September 30, 2021 and 2020.

Three Months Ended

Nine Months Ended

September 30,

2021

2020

2021

2020

Net sales

Americas

150,799

119,540

425,343

330,012

EMEA

122,241

94,005

365,491

276,546

Asia/Pacific

98,659

84,877

286,924

226,850

Global Specialty Businesses

77,373

68,802

236,359

198,417

Total net sales

449,072

367,224

1,314,117

1,031,825

Segment operating earnings

Americas

31,273

31,099

97,155

70,590

EMEA

20,153

17,439

68,802

46,269

Asia/Pacific

23,285

27,304

73,990

66,106

Global Specialty Businesses

20,663

21,161

69,041

58,114

Total segment operating

earnings

95,374

97,003

308,988

241,079

Combination, integration and other acquisition-related expenses

(5,786)

(6,913)

(18,259)

(22,786)

Restructuring and related charges

880

(1,383)

(593)

(3,585)

Fair value step up of acquired inventory sold

—

(801)

(226)

Indefinite-lived intangible asset impairment

—

(38,000)

Non-operating and administrative expenses

(38,691)

(39,786)

(122,760)

(110,282)

Depreciation

of corporate assets and amortization

(15,767)

(14,062)

(46,855)

(41,547)

Operating income

36,010

34,859

119,720

24,653

Other income (expense), net

647

(239)

19,344

(22,407)

Interest expense, net

(5,637)

(6,837)

(16,725)

(22,109)

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

associated companies

31,020

27,783

122,339

(19,863)

Inter-segment revenues for the three and nine months ended September

30, 2021 were $

3.6

million and $

9.3

million for Americas,

6.8

million and $

21.9

million for EMEA, $

0.8

million and $

1.3

million for Asia/Pacific, and $

1.8

million and $

5.9

million for Global

Specialty Businesses, respectively.

Inter-segment revenues for the three and nine months ended

September 30, 2020 were $

1.7

million and $

7.0

million for Americas, $

5.3

million and $

16.1

million for EMEA, $

0.2

million and $

0.5

million for Asia/Pacific, and

1.1

million and $

3.4

million for Global Specialty Businesses, respectively.

However, all inter-segment

transactions have been

eliminated from each reportable operating segment’s

net sales and earnings for all periods presented in the above tables.

Note 5 – Net Sales and Revenue Recognition

Business Description

The Company develops, produces, and markets a broad range of formulated

chemical specialty products and offers chemical

management services (“Fluidcare”) for various heavy industrial and

manufacturing applications throughout its four segments.

significant portion of the Company’s

revenues are realized from the sale of process fluids and services made directly

to manufacturers

through its own employees and its Fluidcare programs, with the balance

being handled through distributors and agents.

As part of the Company’s Fluidcare

business, certain third-party product sales to customers are managed by

the Company.

Where

the Company acts as a principal, revenues are recognized on a gross reporting

basis at the selling price negotiated with its customers.

Where the Company acts as an agent, revenue is recognized on a net reporting

basis at the amount of the administrative fee earned by

the Company for ordering the goods.

The Company transferred third-party products under arrangements recognized

on a net reporting

basis of $

18.9

million and $

53.4

million for the three and nine months ended September 30, 2021, respectively,

and $

11.1

million and

29.9

million for the three and nine months ended September 30, 2020, respectively.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

As previously disclosed in the Company’s

2020 Form 10-K, during 2020, the Company’s

five largest customers (each composed

of multiple subsidiaries or divisions with semiautonomous purchasing

authority) accounted for approximately

% of consolidated net

sales, with its largest customer accounting for approximately

% of consolidated net sales.

Revenue Recognition Model

The Company applies the five-step model in the FASB’s

guidance, which requires the Company to: (i) identify the

contract with a

customer; (ii) identify the performance obligations in the contract; (iii)

determine the transaction price; (iv) allocate the transaction

price to the performance obligations in the contract; and (v) recognize

revenue when, or as, the Company satisfies a performance

obligation.

Refer to the Company’s 2020 Form 10-K

for additional information on the Company’s

revenue recognition policies,

including its practical expedients and accounting policy elections.

Allowance for Doubtful Accounts

As previously disclosed in the Company’s

2020 Form 10-K, during 2020, the Company adopted, as required, an accounting

standard update related to the accounting and disclosure of credit losses effective

January 1, 2020.

The Company recognizes an

allowance for credit losses, which represents the portion of its trade accounts

receivable that the Company does not expect to collect

over the contractual life, considering past events and reasonable and

supportable forecasts of future economic conditions.

The

Company’s allowance for

credit losses on its trade accounts receivables is based on specific collectability facts and circumstances

for

each outstanding receivable and customer,

the aging of outstanding receivables, and the associated collection risk the

Company

estimates for certain past due aging categories, and also, the general risk

to all outstanding accounts receivable based on historical

amounts determined to be uncollectible.

The Company does not have any off-balance-sheet credit exposure

related to its customers.

Contract Assets and Liabilities

The Company recognizes a contract asset or receivable on its Condensed

Consolidated Balance Sheet when the Company

performs a service or transfers a good in advance of receiving consideration.

A receivable is the Company’s right to

consideration that

is unconditional and only the passage of time is required before payment

of that consideration is due.

A contract asset is the

Company’s right to consideration

in exchange for goods or services that the Company has transferred to a customer.

The Company

had no material contract assets recorded on its Condensed Consolidated

Balance Sheets as of September 30, 2021 or December 31,

2020.

A contract liability is recognized when the Company receives consideration,

or if it has the unconditional right to receive

consideration, in advance of performance.

A contract liability is the Company’s

obligation to transfer goods or services to a customer

for which the Company has received consideration, or a specified amount

of consideration is due, from the customer.

The Company’s

contract liabilities primarily represent deferred revenue recorded

for customer payments received by the Company prior to the

Company satisfying the associated performance obligation.

Deferred revenues are presented within other current liabilities in the

Company’s Condensed Consolidated

Balance Sheets.

The Company had approximately $

4.4

million and $

4.0

million of deferred

revenue as of September 30, 2021 and December 31, 2020, respectively.

For the nine months ended September 30, 2021, the

Company satisfied all of the associated performance obligations

and recognized into revenue the advance payments received and

recorded as of December 31, 2020.

Disaggregated Revenue

The following tables disaggregate the Company’s

net sales by segment, geographic region, customer industry,

and timing of

revenue recognized for the three and nine months ended September 30, 2021

and 2020.

Three Months Ended September 30, 2021

Consolidated

Americas

EMEA

Asia/Pacific

Total

Customer Industries

Metals

56,954

38,483

53,994

149,431

Metalworking and other

93,845

83,758

44,665

222,268

150,799

122,241

98,659

371,699

Global Specialty Businesses

46,008

19,253

12,112

77,373

196,807

141,494

110,771

449,072

Timing of Revenue Recognized

Product sales at a point in time

188,340

131,982

108,559

428,881

Services transferred over time

8,467

9,512

2,212

20,191

196,807

141,494

110,771

449,072

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

Three Months Ended September 30, 2020

Consolidated

Americas

EMEA

Asia/Pacific

Total

Customer Industries

Metals

42,098

25,362

45,001

112,461

Metalworking and other

77,442

68,643

39,876

185,961

119,540

94,005

84,877

298,422

Global Specialty Businesses

39,197

17,429

12,176

68,802

158,737

111,434

97,053

367,224

Timing of Revenue Recognized

Product sales at a point in time

153,820

107,093

94,660

355,573

Services transferred over time

4,917

4,341

2,393

11,651

158,737

111,434

97,053

367,224

Nine Months Ended September 30, 2021

Consolidated

Americas

EMEA

Asia/Pacific

Total

Customer Industries

Metals

155,546

108,391

151,944

415,881

Metalworking and other

269,797

257,100

134,980

661,877

425,343

365,491

286,924

1,077,758

Global Specialty Businesses

137,447

61,203

37,709

236,359

562,790

426,694

324,633

1,314,117

Timing of Revenue Recognized

Product sales at a point in time

537,161

400,982

316,222

1,254,365

Services transferred over time

25,629

25,712

8,411

59,752

562,790

426,694

324,633

1,314,117

Nine Months Ended September 30, 2020

Consolidated

Americas

EMEA

Asia/Pacific

Total

Customer Industries

Metals

121,458

80,174

122,006

323,638

Metalworking and other

208,554

196,372

104,844

509,770

330,012

276,546

226,850

833,408

Global Specialty Businesses

115,722

49,603

33,092

198,417

445,734

326,149

259,942

1,031,825

Timing of Revenue Recognized

Product sales at a point in time

431,266

313,511

254,011

998,788

Services transferred over time

14,468

12,638

5,931

33,037

445,734

326,149

259,942

1,031,825

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

Note 6 – Leases

The Company determines if an arrangement is a lease at its inception.

This determination generally depends on whether the

arrangement conveys the right to control the use of an identified fixed asset explicitly

or implicitly for a period of time in exchange for

consideration.

Control of an underlying asset is conveyed if the Company obtains the rights to direct the

use of, and obtains

substantially all of the economic benefits from the use of, the underlying

asset.

Lease expense for variable leases and short-term

leases is recognized when the obligation is incurred.

The Company has operating leases for certain facilities, vehicles and machinery

and equipment with remaining lease terms up to

10 years

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

94 years

The lease term for all of the

Company’s leases includes the non

-cancellable period of the lease plus any additional periods covered by an option

to extend the lease

that the Company is reasonably certain it will exercise.

Operating leases are included in right of use lease assets, other current

liabilities and long-term lease liabilities on the Condensed Consolidated

Balance Sheet.

Right of use lease assets and liabilities are

recognized at each lease’s commencement

date based on the present value of its lease payments over its respective lease term.

The

Company uses the stated borrowing rate for a lease when readily determinable.

When a stated borrowing rate is not available in a

lease agreement, the Company uses its incremental borrowing rate based on

information available at the lease’s commencement

date

to determine the present value of its lease payments.

In determining the incremental borrowing rate used to present value each of its

leases, the Company considers certain information including fully

secured borrowing rates readily available to the Company and its

subsidiaries.

The Company has immaterial finance leases, which are included in property,

plant and equipment, current portion of

long-term debt and long-term debt on the Condensed Consolidated Balance

Sheet.

Operating lease expense is recognized on a straight-line basis over the

lease term.

Operating lease expense for the three and nine

months ended September 30, 2021 was $

3.4

million and $

10.6

million, respectively.

Comparatively, operating

lease expense for the

three and nine months ended September 30, 2020 was $

3.7

million and $

10.6

million, respectively.

Short-term lease expense for the

three and nine months ended September 30, 2021 was $

0.2

million and $

0.8

million, respectively.

Comparatively, short-term

lease

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

was $

0.2

million and $

1.1

million, respectively.

The Company has

material variable lease costs or sublease income for the three or nine months ended September

30, 2021 and 2020.

Cash paid for operating leases during the nine months ended September 30, 2021

and 2020 was $

10.4

million and $

10.5

million,

respectively.

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

5.6

million during the nine

months ended September 30, 2021.

Supplemental balance sheet information related to the Company’s

leases is as follows:

September 30,

December 31,

2021

2020

Right of use lease assets

34,314

38,507

Other current liabilities

9,356

10,901

Long-term lease liabilities

24,599

27,070

Total operating lease liabilities

33,955

37,971

Weighted average

remaining lease term (years)

5.7

6.0

Weighted average

discount rate

4.26%

4.20%

Maturities of operating lease liabilities as of September 30, 2021 were

as follows:

September 30,

2021

For the remainder of 2021

2,978

For the year ended December 31, 2022

9,695

For the year ended December 31, 2023

7,564

For the year ended December 31, 2024

5,623

For the year ended December 31, 2025

4,340

For the year ended December 31, 2026 and beyond

8,104

Total lease payments

38,304

Less: imputed interest

(4,349)

Present value of lease liabilities

33,955

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

Note 7 – Restructuring and Related Activities

The Company’s management approved a global restructuring plan (the “QH Program”) as part of its plan to realize certain cost

synergies associated with the Combination in the third quarter of 2019. The QH Program includes restructuring and associated

severance costs to reduce total headcount by approximately 400 people globally, as well as plans for the closure of certain

manufacturing and non-manufacturing facilities. The exact timing and total costs associated with the QH Program will depend on a

number of factors and is subject to change; however, the Company currently expects reduction in headcount and site closures to

continue to occur throughout 2021 and into 2022 under the QH Program and estimates that anticipated cost synergies realized from the

QH Program will approximate one-times the restructuring costs incurred. Employee separation benefits will vary depending on local

regulations within certain foreign countries and will include severance and other benefits.

All costs incurred to date relate to severance costs to reduce headcount,

including customary and routine adjustments to initial

estimates for employee separation costs, as well as costs to close certain facilities and

are recorded in Restructuring and related

charges in the Company’s

Condensed Statements of Operations.

As described in Note 4 of Notes to Condensed Consolidated

Financial Statements, restructuring and related charges

are not included in the Company’s calculation of

reportable segments’ measure

of operating earnings and therefore these costs are not reviewed by

or recorded to reportable segments.

Activity in the Company’s accrual

for restructuring under the QH Program for the nine months ended September 30, 2021

is as

follows:

QH Program

Accrued restructuring as of December 31, 2020

8,248

Restructuring and related charges

593

Cash payments

(4,557)

Currency translation adjustments

(234)

Accrued restructuring as of September 30, 2021

4,050

Note 8 – Share-Based Compensation

The Company recognized the following share-based compensation expense

in its Condensed Consolidated Statements of

Operations for the three and nine months ended September 30, 2021

and 2020:

Three Months Ended

Nine Months Ended

September 30,

2021

2020

2021

2020

Stock options

298

353

938

1,138

Non-vested stock awards and restricted stock units

1,277

1,259

3,963

3,782

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

—

910

1,553

2,072

Director stock ownership plan

241

243

660

337

Performance stock units

491

280

1,327

560

Annual incentive plan

—

7,102

—

9,931

Total share-based

compensation expense

2,307

10,147

8,441

17,820

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

0.2

million and $

0.7

million for the three and nine months

ended September 30, 2021, respectively,

and $

0.4

million and $

1.2

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

respectively, recorded

within Combination, integration and other acquisition-related expenses.

Stock Options

During the first nine months of 2021, 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 which primarily used

the assumptions set forth in the table below:

Number of options granted

25,250

Dividend yield

0.85

Expected volatility

37.33

Risk-free interest rate

0.60

Expected term (years)

4.0

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

The fair value of these options is amortized on a straight-line basis over the

vesting period.

As of September 30, 2021,

unrecognized compensation expense related to all stock options granted was $

2.1

million, to be recognized over a weighted average

remaining period of

2.1

years.

Restricted Stock Awards

and Restricted Stock Units

During the nine months ended September 30, 2021, the Company granted

17,692

non-vested restricted shares and

2,791

non-

vested restricted stock units under its LTIP,

which are 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, 2021, unrecognized

compensation expense related to the non-vested restricted

shares was $

5.1

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 $

0.9

million,

to be recognized over a weighted average remaining period of

2.0

years.

Performance Stock Units

During the first nine months of 2021, the Company granted 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 of the year of grant through December 31 of the year prior

to issuance of the shares upon

settlement.

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 granted during the first nine months

of 2021 was estimated using

a Monte Carlo simulation on the grant date and using the following assumptions:

(i) a risk-free rate of

0.29

%; (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, 2021, the Company estimates that it will issue approximately

23,756

fully vested shares as of the applicable

settlement date of all outstanding PSUs awards based on the conditions

of the PSUs and performance to date for each award.

As of

September 30, 2021, there was approximately $

3.7

million of total unrecognized compensation cost related to PSUs, which the

Company expects to recognize over a weighted-average period of

2.1

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.

As of September 30, 2020, it had been the Company’s

intention to settle the

2020 AIP in shares, and therefore, expense associated with the AIP in 2020

was recorded as a component of share-based

compensation expense.

In the fourth quarter of 2020, the Company determined that it would settle the 2020

AIP in cash.

Therefore,

the share-based compensation associated with the AIP during the

year ended December 31, 2020 was reclassified from a component

of share-based compensation expense to incentive compensation.

This determination and conclusion had no impact on the

classification of AIP expense within the Company’s

Condensed Consolidated Statement of Operations for the periods as both are

component of SG&A.

As of September 30, 2021, it is the Company’s

intention to settle the 2021 AIP in cash.

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 participants’ compensation.

Beginning in April 2020 and continuing through March 2021, the

Company matched both non-elective and elective 401(k) contributions

in fully vested shares of the Company’s common

stock rather

than cash.

For the three months ended September 30, 2021, there were

matching contributions in stock.

For the nine months ended

September 30, 2021, total contributions were $

1.5

million. Comparatively,

total contributions for the three and nine months ended

September 30, 2020 were $

0.9

million and $

2.1

million, respectively.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

Note 9 – Pension and Other Postretirement

Benefits

The components of net periodic benefit cost for the three and nine months

ended September 30, 2021 and 2020 are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Other

Postretirement

Pension Benefits

Benefits

Pension Benefits

Benefits

2021

2020

2021

2020

2021

2020

2021

2020

Service cost

289

1,227

(2)

921

3,565

Interest cost

1,078

1,527

(1)

3,262

4,782

Expected return on plan assets

(2,075)

(3,526)

—

(6,250)

(7,246)

—

Settlement charge

—

22,667

—

Actuarial loss amortization

737

626

(85)

2,449

2,288

(85)

Prior service cost amortization

(42)

—

(123)

—

Net periodic benefit cost

(188)

(88)

390

25,933

(64)

128

As disclosed in the Company’s 2020

Form 10-K, 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 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,

which were completed in the third quarter of 2020 resulting in a refund in premium received

in the third

quarter of 2020 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 (loss) income

(“AOCI”) on the balance sheet as of the plan termination

date.

Employer Contributions

As of September 30, 2021, $

5.7

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

Taking into consideration

current minimum cash contribution

requirements, the Company expects to make full year cash contributions

of approximately $

million to its U.S. and foreign pension

plans and less than $

million to its other postretirement benefit plans in 2021

Note 10 – Other Income (Expense), Net

The components of other income (expense), net, for the three and nine months

ended September 30, 2021 and 2020 are as

follows:

Three Months Ended

Nine Months Ended

September 30,

2021

2020

2021

2020

Income from third party license fees

314

190

1,026

702

Foreign exchange gains (losses), net

368

(1,897)

(1,948)

(3,080)

(Loss) gain on disposals of property,

plant, equipment and other

assets, net

(537)

(24)

4,819

(105)

Non-income tax refunds and other related credits

—

14,395

2,131

Pension and postretirement benefit income (costs),

non-service components

343

1,375

596

(22,491)

Other non-operating income, net

156

117

456

436

Total other income

(expense), net

647

(239)

19,344

(22,407)

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

The (Loss) gain on disposals of property,

plant, equipment and other assets, net, during the three months ended

September 30,

2021,

includes losses related to certain fixed asset disposals resulting from the

property damage caused by flooding of the Company’s

Conshohocken, Pennsylvania headquarters, described in Note 19 of Notes

to Condensed Consolidated Financial Statements, and

during the nine months ended September 30, 2021, includes the gain on the

sale of certain held-for-sale real property assets related to

the Combination.

Non-income tax refunds and other related credits during the nine months ended September

30, 2021 includes

certain non-income tax credits for the Company’s

Brazilian subsidiaries described in Note 19 of Notes to Condensed Consolidated

Financial Statements.

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

components during both the three and nine

months ended September 30, 2020 includes the refund in premium described

in Note 9 of Notes to Condensed Consolidated Financial

Statements.

In addition, this line also includes 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 rates for the three and nine months ended September 30, 2021 were an expense

2.6

% and

21.8

respectively, compared

to an expense of

8.1

% and a benefit of

38.3

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

respectively.

The Company’s current year

effective tax rates were largely impacted by changes in permanent

reinvestment assertions,

changes in foreign tax credit valuation allowances, tax law changes in a foreign

jurisdiction, deferred tax benefits related to an

intercompany intangible asset transfer and the income tax impacts of certain

non-income tax credits recorded by the Company’s

Brazilian subsidiaries described in Note 19 of Notes to Condensed Consolidated

Financial Statements.

Comparatively,

the prior year

effective tax rates were impacted by the tax effect

of certain one-time pre-tax losses as well as certain tax charges and benefits

in the

prior year period including those related to changes in tax regulations and

other changes in foreign tax credit valuation allowances, tax

law changes in foreign jurisdictions and the tax impacts of the Company’s

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

As of December 31, 2020, the Company had a deferred tax liability of $

5.9

million, which primarily represents the Company’s

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

the U.S.

The balance as of September 30, 2021 was

5.8

million. As of September 30, 2021, the Company’s

cumulative liability for gross unrecognized tax benefits was $

24.0

million, an

increase of $

1.9

million from the cumulative liability accrued as of December 31, 2020.

The Company continues to recognize interest and penalties 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 an expense for interest of approximately $

0.2

million and $

0.4

million and a benefit of less than $

0.1

million and

0.2

million for penalties in its Condensed Consolidated Statement of Operations for the

three and nine months ended September 30,

2021, respectively,

and 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.

As of September 30, 2021, the Company had accrued $

3.3

million for cumulative interest and $

3.5

million for cumulative penalties in its Condensed Consolidated

Balance Sheets, compared to $

3.0

million for cumulative interest and

3.9

million for cumulative penalties accrued at December 31, 2020.

During the nine months ended September 30, 2021 and 2020,

the Company recognized decreases of $

1.2

million and $

1.9

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, 2021

it will reduce its cumulative liability for gross

unrecognized tax benefits by approximately $

1.5

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, 2021.

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 Italy from

2006

, Brazil from

2011

the Netherlands and China from

2015

, Mexico, Spain, Germany and the United Kingdom from

2016

, Canada and the U.S. from

2018

India from fiscal year beginning April 1, 2018 and ending March 31,

2019

, and various U.S. state tax jurisdictions from

2011

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 from these assessments under

the Mutual Agreement Procedures (“MAP”) of the Organization for Economic Co-Operation and Development for all years except

2007. In 2020, the respective tax authorities in Italy, Spain and the Netherlands reached agreement with respect to the MAP

proceedings which the Company has accepted.

As of September 30, 2021, the Company has received $

1.6

million in refunds from the

Netherlands and Spain and currently expects to pay $

2.6

million due to Italy in the fourth quarter of 2021.

As of September 30, 2021,

the Company believes it has adequate reserves for the remaining uncertain

tax positions related to 2007.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

Houghton Italia, S.r.l is also involved

in a corporate income tax audit with the Italian tax authorities covering tax years

2014

through

2018

As of September 30, 2021, the Company has a $

6.0

million reserve for uncertain tax positions relating to matters

related to this audit.

Because the reserve relates to the tax periods prior to August 1, 2019, the tax liability was established

through

purchase accounting related to the Combination.

The Company has also submitted an indemnification claim against funds held in

escrow by Houghton’s former

owners and as a result, a corresponding $

5.4

million indemnification receivable has also been

established through purchase accounting.

In October 2021, the Company settled a portion of the Houghton Italia

S.r.l corporate

income tax audit with the Italian tax authorities for the tax year 2015.

The Company remains under audit for tax years 2014 and 2016

through 2018 and believes it has adequate reserves for the remaining uncertain

tax positions.

Houghton Deutschland GmbH is also under audit by the German tax authorities for

the tax years

2015

through

2017

Based on

preliminary audit findings, primarily related to transfer pricing,

the Company has recorded reserves for $

0.9

million as of September

30, 2021.

Of this amount, $

0.8

million relates to tax periods prior to the Combination and therefore

the Company has submitted an

indemnification claim with Houghton’s

former owners for any tax liabilities arising pre-Combination.

As a result, a corresponding

0.8

million indemnification receivable has also been established to offset

the $

0.8

million tax liability.

In October 2021 the

Company received a settlement proposal from the German

tax authorities and is currently reviewing the proposal with Houghton’s

former owners.

Note 12 – Earnings Per Share

The following table summarizes earnings per share calculations for

the three and nine months ended September 30, 2021 and

2020:

Three Months Ended

Nine Months Ended

September 30,

2021

2020

2021

2020

Basic earnings (loss) per common share

Net income (loss) attributable to Quaker Chemical Corporation

31,058

27,304

103,243

(8,812)

Less: (income) loss allocated to participating securities

(119)

(113)

(413)

Net income (loss) available to common shareholders

30,939

27,191

102,830

(8,768)

Basic weighted average common shares outstanding

17,812,216

17,743,538

17,800,082

17,704,662

Basic earnings (loss) per common share

1.74

1.53

5.78

(0.50)

Diluted earnings (loss) per common share

Net income (loss) attributable to Quaker Chemical Corporation

31,058

27,304

103,243

(8,812)

Less: (income) loss allocated to participating securities

(119)

(113)

(412)

Net income (loss) available to common shareholders

30,939

27,191

102,831

(8,768)

Basic weighted average common shares outstanding

17,812,216

17,743,538

17,800,082

17,704,662

Effect of dilutive securities

58,176

57,327

59,986

—

Diluted weighted average common shares outstanding

17,870,392

17,800,865

17,860,068

17,704,662

Diluted earnings (loss) per common share

1.73

1.53

5.76

(0.50)

Certain stock options and restricted stock units are not included in the diluted

earnings (loss) per share calculation when the effect

would have been anti-dilutive.

The calculated amount of anti-diluted shares not included was

5,531

and

3,722

for the three and nine

months ended September 30, 2021,

respectively.

All of the Company’s potentially

dilutive shares for the nine months ended

September 30, 2020 are anti-dilutive and not included in the dilutive loss per

share calculations because of the Company’s net

loss

during the period.

There were

anti-dilutive shares excluded from the diluted earnings per share calculation for the three months

ended September 30, 2020.

Note 13 – Restricted Cash

Prior to December 2020, the Company had 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 were restricted and could 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 were deposited

into interest bearing accounts that earned less than $

0.1

million offset by $

0.8

million of net payments during the nine months ended

September 30, 2020.

Due to the restricted nature of the proceeds, a corresponding deferred credit was established

in other non-current

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

liabilities for an equal and offsetting amount that continued

until the restrictions lapsed.

As disclosed in the Company’s 2020

Form

10-K, during December 2020, the restrictions ended on these previously

received insurance settlements and the Company transferred

the cash into an operating account.

The following table provides a reconciliation of cash, cash equivalents

and restricted cash as of September 30, 2021 and 2020,

well as December 31, 2020 and 2019:

September 30,

December 31,

2021

2020

2019

Cash and cash equivalents

141,393

155,750

181,833

123,524

Restricted cash included in other current assets

—

353

Restricted cash included in other assets

—

18,901

—

19,678

Cash, cash equivalents and restricted cash

141,393

174,733

181,895

143,555

Note 14 – Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended

September 30, 2021 were as follows:

Global

Specialty

Americas

EMEA

Asia/Pacific

Businesses

Total

Balance as of December 31, 2020

213,242

140,162

158,090

119,718

631,212

Goodwill additions

1,208

2,626

1,308

1,951

7,093

Currency translation and other adjustments

(621)

(5,530)

1,109

(2,594)

(7,636)

Balance as of September 30, 2021

213,829

137,258

160,507

119,075

630,669

Gross carrying amounts and accumulated amortization for definite-lived

intangible assets as of September 30, 2021 and

December 31, 2020 were as follows:

Gross Carrying

Accumulated

Amount

Amortization

2021

2020

2021

2020

Customer lists and rights to sell

847,909

839,551

135,571

99,806

Trademarks, formulations and product

technology

167,682

166,448

36,871

30,483

Other

6,325

6,372

5,886

5,824

Total definite-lived

intangible assets

1,021,916

1,012,371

178,328

136,113

The Company amortizes definite-lived intangible assets on a straight-line basis over

their useful lives.

The Company recorded

14.9

million and $

44.7

million of amortization expense for the three and nine months ended September

30, 2021, respectively.

Comparatively,

the Company recorded $

14.0

million and $

41.7

million of amortization expense for the three and nine months ended

September 30, 2020, respectively.

Estimated annual aggregate amortization expense for the current year

and subsequent five years is as follows:

For the year ended December 31, 2021

58,852

For the year ended December 31, 2022

59,173

For the year ended December 31, 2023

59,005

For the year ended December 31, 2024

58,338

For the year ended December 31, 2025

57,653

For the year ended December 31, 2026

57,346

The Company has four indefinite-lived intangible assets totaling $

205.1

million as of both September 30, 2021 and December 31,

2020, including $

204.0

million of indefinite-lived intangible assets for trademarks and tradename associated

with the Combination.

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.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

The Company previously disclosed in its 2020 Form 10-K that as of March 31, 2020,

the Company concluded that the impact of

COVID-19 did not represent a triggering event with regards to the Company’s

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

except for the Company’s Houghton

and Fluidcare trademarks and tradename indefinite-lived intangible assets.

The determination of

estimated fair value of the Houghton and Fluidcare trademarks 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”)

and royalty rates, as well as revenue growth

rates and terminal growth rates.

In the first quarter of 2020, as a result of the impact of COVID-19 driving

a decrease in projected

legacy Houghton net sales during that year and the impact of the sales decline on

projected future legacy Houghton net sales as well as

an increase in the WACC

assumption utilized in the quantitative impairment assessment, the

Company concluded that the estimated

fair values of the Houghton and Fluidcare trademarks and tradename

intangible assets were less than their carrying values.

As a

result, an impairment charge of $

38.0

million was recorded in the first quarter of 2020 to write down the carrying values of

these

intangible assets to their estimated fair values.

As of September 30, 2021, the Company continued to evaluate all potential triggering

events, including 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,

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

triggering event as of September 30, 2021.

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

triggering

event as of September 30, 2021, 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, 2021 and December 31, 2020 includes the following:

As of September 30, 2021

As of December 31, 2020

Interest

Outstanding

Interest

Outstanding

Rate

Balance

Rate

Balance

Credit Facilities:

Revolver

1.58%

198,543

1.65%

160,000

U.S. Term Loan

1.58%

547,500

1.65%

570,000

EURO Term Loan

1.50%

142,559

1.50%

157,062

Industrial development bonds

5.26%

10,000

5.26%

10,000

Bank lines of credit and other debt obligations

Various

2,060

Various

2,072

Total debt

900,662

899,134

Less: debt issuance costs

(8,776)

(11,099)

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

(52,611)

(38,967)

Total long-term debt

839,275

849,068

Credit facilities

The Company’s primary credit facility

(as amended, the “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 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 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

when LIBOR ceases

to be reported.

The variable interest rate incurred on the outstanding borrowings under

the Credit Facility as of and during the nine

months ended September 30, 2021 was approximately

1.6

In addition to paying interest on outstanding principal under the 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 $

197

million, net of bank letters of credit of approximately $

million, as of September

30, 2021.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

The Credit Facility is subject to certain financial and other covenants. The Company’s initial consolidated net debt to

consolidated adjusted EBITDA ratio could not exceed 4.25 to 1, with step downs in the permitted ratio over the term of the Credit

Facility.

As of September 30, 2021, the consolidated net debt to adjusted EBITDA

may not exceed

4.00

to 1.

The Company’s

consolidated adjusted EBITDA to interest expense ratio cannot be less than

3.0

to 1 over the term of the agreement.

The Credit

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

% of consolidated adjusted EBITDA unless the ratio of consolidated net debt

consolidated adjusted EBITDA is less than

2.0

to 1, in which case there is no such limitation on amount.

As of September 30, 2021

and December 31, 2020, the Company was in compliance with all of the Credit Facility covenants.

The Term Loans have quarterly

principal amortization during their

five year

terms, 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,

2021, the Company made quarterly amortization payments related to the

Term Loans totaling $

28.6

million.

The 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 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 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 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, 2021, 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 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 Credit Facility.

As of September 30, 2021

and December 31, 2020, the Company had $

8.8

million and $

11.1

million, respectively, of debt

issuance costs recorded as a reduction

of long-term debt.

As of September 30, 2021 and December 31, 2020, the Company had $

4.7

million and $

5.9

million, respectively,

of debt issuance costs recorded within other assets.

Industrial development bonds

As of September 30, 2021 and December 31, 2020, 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 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 obligat

ions 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, 2021 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, 2021 were approximately $7 million.

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,

2021

2020

2021

2020

Interest expense

4,779

5,957

14,242

19,621

Amortization of debt issuance costs

1,187

1,188

3,562

Total

5,966

7,145

17,804

23,183

Based on the variable interest rates associated with the Credit Facility,

as of September 30, 2021 and December 31, 2020, 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 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, 2021 and 2020:

Accumulated

Capital in

Other

Common

Excess of

Retained

Comprehensive

Noncontrolling

Stock

Par Value

Earnings

Loss

Interest

Total

Balance at June 30, 2021

17,878

910,862

482,001

(35,943)

603

1,375,401

Net income

—

31,058

—

31,073

Amounts reported in other comprehensive

loss

—

(18,780)

—

(18,780)

Dividends ($

0.415

per share)

—

(7,424)

—

(7,424)

Share issuance and equity-based

compensation plans

3,415

—

3,426

Balance at September 30, 2021

17,889

914,277

505,635

(54,723)

618

1,383,696

Balance at June 30, 2020

17,800

896,108

362,265

(109,264)

432

1,167,341

Net income

—

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

Accumulated

Capital in

Other

Common

Excess of

Retained

Comprehensive

Noncontrolling

Stock

Par Value

Earnings

Loss

Interest

Total

Balance at December 31, 2020

17,851

905,171

423,940

(26,598)

550

1,320,914

Net income

—

103,243

—

103,305

Amounts reported in other comprehensive

(loss) income

—

(28,125)

(28,119)

Dividends ($

1.205

per share)

—

(21,548)

—

(21,548)

Share issuance and equity-based

compensation plans

9,106

—

9,144

Balance at September 30, 2021

17,889

914,277

505,635

(54,723)

618

1,383,696

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)

Distributions to noncontrolling 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

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except 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, 2021 and 2020:

Defined

Unrealized

Currency

Benefit

Gain (Loss) in

Translation

Pension

Available-for-

Derivative

Adjustments

Plans

Sale Securities

Instruments

Total

Balance at June 30, 2021

(12,177)

(21,778)

596

(2,584)

(35,943)

Other comprehensive (loss) income before

reclassifications

(19,905)

488

(85)

567

(18,935)

Amounts reclassified from AOCI

—

709

(176)

—

533

Related tax amounts

—

(293)

(131)

(378)

Balance at September 30, 2021

(32,082)

(20,874)

381

(2,148)

(54,723)

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

Related tax amounts

—

(150)

(106)

(196)

Balance at September 30, 2020

(55,036)

(17,620)

1,704

(4,058)

(75,010)

Defined

Unrealized

Currency

Benefit

Gain (Loss) in

Translation

Pension

Available-for-

Derivative

Adjustments

Plans

Sale Securities

Instruments

Total

Balance at December 31, 2020

(2,875)

(23,467)

3,342

(3,598)

(26,598)

Other comprehensive (loss) income before

reclassifications

(29,207)

1,009

(489)

1,883

(26,804)

Amounts reclassified from AOCI

—

2,423

(3,259)

—

(836)

Related tax amounts

—

(839)

787

(433)

(485)

Balance at September 30, 2021

(32,082)

(20,874)

381

(2,148)

(54,723)

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

Related tax amounts

—

(8,228)

(120)

1,117

(7,231)

Balance at September 30, 2020

(55,036)

(17,620)

1,704

(4,058)

(75,010)

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.

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, 2021

Total

Using Fair Value

Hierarchy

Assets

Fair Value

Level 1

Level 2

Level 3

Company-owned life insurance

2,135

—

2,135

—

Total

2,135

—

2,135

—

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

Fair Value

Measurements at December 31, 2020

Total

Using Fair Value

Hierarchy

Assets

Fair Value

Level 1

Level 2

Level 3

Company-owned life insurance

1,961

—

1,961

—

Total

1,961

—

1,961

—

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,

2021 or December 31, 2020, respectively,

so related

disclosures have not been included.

Note 18 – Hedging Activities

In order to satisfy certain requirements of the Credit Facility as well as to manage

the Company’s exposure to variable

interest

rate risk associated with the 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 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

2021

2020

Derivatives designated as cash flow hedges:

Interest rate swaps

Other non-current liabilities

2,789

4,672

2,789

4,672

The following table presents the net unrealized loss deferred to AOCI:

September 30,

December 31,

2021

2020

Derivatives designated as cash flow hedges:

Interest rate swaps

AOCI

2,148

3,598

2,148

3,598

The following table presents the net loss reclassified from AOCI to earnings:

Three Months Ended

Nine Months Ended

September 30,

2021

2020

2021

2020

Amount and location of expense reclassified

from AOCI into expense (effective portion)

Interest expense, net

(672)

(640)

(1,974)

(1,105)

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 2020 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, 2021, 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, 2021, 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.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

The Company previously disclosed in its 2020 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, 2021, 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 $

0.4

million (excluding costs of

defense).

The Company previously disclosed in its 2020 Form 10-K that it is party to certain environmental

matters related to certain

domestic and foreign properties currently or previously owned by Houghton.

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, 2021, 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,

a discounted basis, to be between approximately $

5.5

million and $

6.5

million as of September 30, 2021, 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, 2021.

Comparatively, as of December

31, 2020, the Company had $

6.0

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 $

0.3

million and $

0.1

million was accrued as of September 30, 2021 and December 31, 2020,

respectively, to provide for

such anticipated

future environmental assessments and remediation costs.

The Company previously disclosed in its 2020 Form 10-K that during the fourth

quarter of 2020, one of the Company’s

subsidiaries received a notice of inspection from a taxing authority

in a country where certain of its subsidiaries operate which related

to a non-income (indirect) tax that may be applicable to certain products the

subsidiary sells.

During the third quarter of 2021, the

Company’s subsidiary received

notice from the taxing authority that the inspection was closed, with no tax

assessment issued.

Based

on this development, during the third quarter of 2021, the Company reversed

its previously recorded $

1.8

million liability related to

this matter.

The Company also reversed the associated $

1.1

million indemnification receivable, as the asserted tax liability in

part

related to a Houghton entity acquired in the Combination and for

the periods prior to the Combination, for which the Company would

be indemnified by Houghton’s

former owners.

Based on all available information as of the date of this Report, the Company does not

anticipate further tax inspection or liabilities related to this matter to be

asserted by the taxing authority.

During the first half of 2021, one of the Company’s

Brazilian subsidiaries received a notice that it had prevailed on an existing

legal claim in regard to certain non-income (indirect) taxes that had been

previously charged and paid.

The matter specifically relates

to companies’ rights to exclude the state tax on goods circulation (a valued-added-tax

VAT

equivalent, known in Brazil as “ICMS”)

from the calculation of certain additional indirect taxes (specifically the program

of social integration (“PIS”) and contribution for the

financing of social security (“COFINS”)) levied by the Brazilian States on the sale of

goods.

In May 2021, the Brazilian Supreme

Court concluded that ICMS should not be included in the tax base of PIS

and COFINS, and confirmed the methodology for

calculating the PIS and COFINS tax credit claims to which taxpayers are

entitled.

The Company’s Brazilian entities had

previously

filed legal or administrative disputes on this matter and are entitled to receive

tax credits and interest dating back to five years

preceding the date of their legal claims.

As a result of these court rulings, during the second quarter of 2021, the

Company recognized

non-income tax credits of

67.0

million BRL or approximately $

13.3

million, which included approximately $

8.4

million for the PIS

and COFINS tax credits as well as interest on these tax credits of $

4.9

million.

The tax credits to which the Company’s Brazilian

subsidiaries are entitled are claimable once registered with the

Brazilian tax authorities.

The Company submitted its formal claim for

tax credits in October 2021.

These tax credits can be used to offset future Brazilian federal taxes and

the Company currently

anticipates using the full amount of credits during the five year period of

time permitted.

During the third quarter of 2021, the

Brazilian Supreme Court ruled that interest income to which companies are

entitled for matters such as this claim should not be

taxable, which resulted in a reduction to the estimated income tax expense

associated with the tax credits recorded.

In connection with obtaining regulatory approvals for the Combination,

certain steel and aluminum related product lines of

Houghton were divested on August 1, 2019. In July 2021, the entity that acquired

these divested product lines submitted an

indemnification claim for certain alleged breaches of representation made

by Houghton in the agreement pursuant to which such assets

had been divested.

The Company and the acquirer have agreed to extend the period for

a possible negotiated resolution of this claim

through November 30, 2021 so that both parties can evaluate the other’s

positions with respect to the subject matters of the claim.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts, unless otherwise stated)

(Unaudited)

The Company is evaluating the merits of the alleged losses in the indemnification

claim received.

As of the date of this Report, the

Company does not believe it is reasonably possible to determine or quantify

any possible exposure.

During the third quarter of 2021, two of the Company’s

locations suffered property damages as a result of flooding and fire.

The

Company maintains property insurance for all of its facilities globally.

In Conshohocken, Pennsylvania, the Company’s

global

headquarters as well as its laboratory experienced property damages

as a result of flooding from Hurricane Ida.

Also, one of the

Company’s North American

production facilities in its Global Specialty Businesses segment experienced an

electrical fire that

resulted in damage and the temporary shutdown of production,

and also required remediation, cleaning and subsequent restoration.

The Company, its insurance

adjuster and insurance carrier are actively managing the remediation and restoration

activities associated

with these events and at this time the Company has concluded, based on all available

information and discussions with its insurance

adjuster and insurance carrier, that the losses incurred

during the third quarter of 2021 will be covered under the Company’s

property

insurance coverage, net of an aggregate deductible of $

2.0

million.

The Company has received advance payments from its insurers of

1.0

million and has recorded an insurance receivable associated with these events

(and a gain on insurance recoveries for losses

incurred) of $

1.7

million as of September 30, 2021.

The Company and its insurance carrier are in early stages of reviewing the impact

of the electrical fire on the production facility’s

operations as it relates to a potential business interruption insurance claim; however,

as of the date of this Report, the Company cannot reasonably estimate any

probable amount of business interruption insurance claim

recoverable, therefore the Company has not recorded a gain contingency

for a possible business interruption insurance claim as of

September 30, 2021.

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.

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.

As used in

this Report, 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”) on August 1, 2019.

Throughout 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, 2021

and 2020.

Executive Summary

Quaker Houghton is the 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

results were highlighted by record net sales as well as the on-going execution of

integration

activities and synergy realization, but these positive

financial impacts were partially offset by continued raw material

cost headwinds

and global supply chain pressures.

Specifically, net sales of $449.1

million in the third quarter of 2021 increased 22% compared to

$367.2 million in the third quarter of 2020, primarily due to higher volumes

of approximately 10%, including additional net sales from

acquisitions of 4%, increases from selling price and product mix of

approximately 10% and the positive impact from foreign currency

translation of 2%.

The increase in sales volumes compared to the third quarter of 2020 was primarily a

result of continued market

share gains and the year-over-year improvement

in end market conditions since the beginning of the COVID-19 pandemic.

The

increase in selling price and product mix is primarily the result of

the Company’s price increases implemented

during 2021 to help

offset the unprecedented increases in raw material

costs the Company has experienced throughout 2021.

The Company’s current

quarter gross margin of 32.3% declined sequentially

compared to 35.5% in the second quarter of 2021

which, as the Company had

expected,

was lower than the 38.2% in the prior year third quarter,

driven by the continued increase in raw material costs and logistics

pressures.

The Company had net income in the third quarter of 2021 of $31.1 million, or $1.73 per diluted

share, compared to a third quarter

of 2020 net income of $27.3 million, or $1.53 per diluted share.

The current quarter results reflect the gross margin headwinds noted

above while the prior year third quarter net income was affected by

the COVID-19 pandemic and its impact on the global economy,

including most of the Company’s

end customers.

Excluding non-recurring items including costs associated with the Combination

and

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

third quarter of 2021 non-GAAP earnings per diluted share were $1.63 compared

to $1.56 in the prior year third quarter.

The Company’s current quarter adjusted

EBITDA of $66.2 million increased 3% compared to

$63.9 million in the third quarter of 2020 primarily due to the significant

increase in net sales quarter-over-quarter as well as higher

realized cost synergies from the Combination and foreign

currency transaction gains in the current quarter compared to foreign

currency transaction losses in the third quarter of 2020, partially offset

by lower gross margins driven by higher raw material costs and

the impacts of disruptions in the global supply chain experienced in 2021

as well as higher selling, general and administrative

expenses (“SG&A”) including the impact

of higher sales on direct selling expenses and additional SG&A from recent acquisitions.

The Company estimates that it realized cost synergies associated

with the Combination of approximately $19 million during the

third

quarter of 2021 compared to approximately $17 million during

the third quarter of 2020.

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.

The Company’s third quarter

of 2021 operating performance in each of its four reportable segments: (i) Americas;

(ii) Europe,

Middle East and Africa (“EMEA”); (iii) Asia/Pacific; and (iv) Global Specialty

Businesses, reflect similar drivers to that of its

consolidated performance.

All four segments had higher net sales compared to the third quarter of 2020 reflecting

the continued

rebound in 2021 from the negative impacts

of COVID-19 on the Company’s

end markets during 2020 as well as continued success of

taking market share in each of the Company’s

segments during the third quarter of 2021.

All of the Company’s segments benefited

from higher organic sales volumes,

which excludes the benefits of recent acquisitions, as compared

to the prior year quarter, additional

net sales from acquisitions, the positive impact from foreign currency

translation due to the strengthening of most major currencies

against the U.S. dollar, and from increases in

selling price and product mix.

As reported, the Company’s Americas and

EMEA

segment operating earnings were higher compared to the third quarter of 2020

reflecting the increase in net sales including the benefits

of acquisitions; however, all of the Company’s

segment’s operating earnings were negatively

impacted by the unprecedented raw

material cost increases and the impacts of disruptions in the global supply

chain that continued throughout the third quarter of 2021 as

well as higher SG&A which were a result of an increase in direct selling expenses

associated with year-over-year inflation increases

and increases due to the increase in net sales as well as the lower levels of prior year SG&A

as a result of temporary cost saving

measures implemented in response to COVID-19.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company had a net operating cash flow of $2.5 million in the first nine

months of 2021 as compared to net operating cash

flow of $112.0 million in the first nine

months of 2020.

The decrease in net operating cash flow year-over-year was primarily driven

by a significant change in working capital compared to the prior year,

mainly increases in accounts receivable, due to higher net sales

and inventory, due to

higher costs as well as building inventories in response to global supply chain

and logistics pressures.

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 good, despite being negatively impacted by

the automotive semiconductor

shortage and continued supply chain challenges.

Increases in net sales in all segments were driven by the continued year-over

-year

improvement in the Company’s

end-markets and increased customer demand from lower levels experienced

during 2020 as a result of

COVID-19; however, each segment was negatively

impacted by the significant escalation of raw material costs as well as higher

SG&A.

While sequential operating performance as compared to the second

quarter of 2021 was slightly lower, continued strong

customer demand in the third quarter of 2021 coupled with on-going

market share gains and the execution of integration activities and

synergy realization helped offset the negative

impacts from the continued escalation of raw material costs and continued supply

chain

pressures.

As the Company looks to the rest of 2021, it expects gross margins

to continue to be challenged by increased raw material costs

and supply chain headwinds, although it also expects to have sequential improvement

in product margins from current quarter levels

as it continues to implement price increases.

In addition, although the Company expects customer demand for most of its businesses

to remain strong, it also anticipates some near-term headwinds

due to the power restrictions in China, the global semiconductor

shortages in the automotive industry,

and some seasonality trends which the Company typically experiences in the last quarter

of the

year.

Looking ahead to 2022, the Company expects another strong year with net sales and earnings

growth to be above normal long-

term trends as the Company expects good growth in end markets, continued

market share gains and higher gross margins as pricing

initiatives catch up from the lag experienced in 2021 due to significant raw

material inflation.

On-going impact of COVID-19

The global outbreak of COVID-19 has negatively impacted all locations where

the Company does business.

Although the

Company has now operated in this COVID-19 environment for

over a year, the full extent of the outbreak and related

business

impacts continue to 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

those of its suppliers and customers.

During the pandemic, the Company has experienced volume declines and

lower net sales as

compared to pre-COVID-19 levels, as further described in this section.

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 continuously evolving global 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

resurgences

of the outbreak including as new variants continue to emerge,

and continued restrictions on day-to-day life and business

operations may result in volume declines and lower net sales in future periods.

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 could be significantly adversely

impacted by

COVID-19.

Further, management continues to evaluate

how COVID-19-related circumstances, such as remote work arrangements,

illness or staffing shortages and travel restrictions 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

present challenges, and have necessitated additional time and resources

to be deployed to sufficiently address the challenges brought

on by the pandemic, at this time, management does not believe that COVID-19

has had a material impact on financial reporting

processes, internal controls over financial reporting, or disclosure controls

and procedures.

The Company’s top priority,

especially during this pandemic, is to protect the health and safety of its employees

and customers,

while working to ensure business continuity to meet customers’ needs.

The Company continues to take 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 at the Company’s

facilities.

The Company has not and does not expect that it will incur material

expenses implementing these health and safety policies.

All of the Company’s 31 production

facilities worldwide are open and

operating and are deemed as essential businesses in the jurisdictions where

they are operating.

The Company believes that to date it

has been able to meet the needs of all its customers across the globe despite the

current economic challenges.

The Company’s third

quarter of 2021 showed year-over-year

improvement from the prior year third quarter and continued a trend of gradual

volume

improvement which began in the second half of 2020.

The Company continues to expect that the impact from COVID-19 will

gradually improve subject to the effective containment

of the virus and its variants and successful distribution and acceptance of the

Quaker Chemical Corporation

Management’s Discussion and Analysis

available vaccines.

However, the incidence of reported cases of COVID-19

or a variant in several geographies where the Company

has significant operations remains high and continues to evolve 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 to pre-COVID-19 levels.

The Company

took various actions to temporarily conserve cash and reduce costs since the

onset of the pandemic and these temporary initiatives

were designed and implemented so that the Company could successfully manage

through the challenging COVID-19 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 effec

tively integrate Houghton.

While the actions taken to date to protect our

workforce, to continue to serve our customers with excellence and to conserve

cash and reduce costs, 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, 2021, the Company had cash, cash equivalents and restricted

cash of $141.4 million.

Total cash, cash

equivalents and restricted cash was $181.9 million at December

31, 2020.

The $40.5 million decrease in cash, cash equivalents and

restricted cash was the net result of approximately $30.1 million of

cash used in investing activities, $10.5 million of cash used in

financing activities, and a $2.5 million negative impact due to the effect

of foreign currency translation,

partially offset by $2.5 million

of cash provided by operating activities.

Net cash flows provided by operating activities were $2.5 million in the

first nine months of 2021 compared to $112.0 million in

the first nine months of 2020.

The decrease in net operating cash flows of $109.5 million was primarily

driven by a significant change

in working capital.

The significant increase in current year net sales resulted in a large increase in

accounts receivable in the first nine

months of 2021 as compared to accounts receivable being a cash inflow in

the prior year as sales and the associated accounts

receivables significantly declined during the first nine months of 2020

due to the negative impact from COVID-19.

In addition, the

Company has experienced an increase in inventory in the first nine months

of 2021 as a result of continued rising raw material costs as

well as a build in inventory to ensure the Company has appropriate stock

to meet customer demands in response to ongoing stress on

the global supply chain.

In addition, the Company had higher cash dividends received from its associated companies

in the first nine

months of 2020, primarily due to $5.0 million received from the Company’s

joint venture in Korea with no similar dividend received

in the first nine months of 2021 related to the timing of dividends received.

Net cash flows used in investing activities were $30.1 million in the

first nine months of 2021 compared to $15.3 million in the

first nine months of 2020.

This increase in cash outflows was driven by higher cash payments related to acquisitions

during the first

nine months of 2021, including $25.0 million for certain assets related to tin-plating

solutions primarily for steel end markets.

These

higher cash outflows were partially offset by cash proceeds

of approximately $14.7 million from the disposition of assets, which

includes the sale of certain held-for-sale real property assets related to the Combination.

Capital expenditures were relatively

consistent at $12.8 million in the first nine months of 2021 compared to $12.2

million in the first nine months of 2020.

Net cash flows used in financing activities were $10.5 million in the first nine

months of 2021 compared to $65.1 million in the

first nine months of 2020.

The decrease in net cash flows used in financing activities of $54.6 million

was primarily driven an

increase in borrowings in the current year under the Company’s

revolving credit facility compared to repayments in the prior year

which was primarily driven by the significant working capital investment

in the current year described above.

In addition, the

Company paid $21.2 million of cash dividends during the first nine months

of 2021, a $0.7 million or 3% increase in cash dividends

compared to the prior year.

Finally, during the first nine

months of 2020, the Company used $1.0 million to purchase the remaining

noncontrolling interest in a South Africa affiliate.

Prior to this buyout,

this South Africa 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 2021.

The Company’s primary credit facility

(the “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 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

Credit Facility bear interest at a base rate or LIBOR plus an applicable margin

based on the Company’s consolidated

net leverage

ratio.

There are LIBOR replacement provisions that contemplate a further amendment

when LIBOR ceases to be reported.

The

weighted average interest rate incurred on the outstanding borrowings

under the Credit Facility during both the first nine months of

2021 and as of September 30, 2021 was approximately 1.6%.

In addition to paying interest on outstanding principal under the 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.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Credit Facility is subject to certain financial and other covenants.

The Company’s initial consolidated net

debt to

consolidated adjusted EBITDA ratio could not exceed 4.25 to 1,

with step downs in the permitted ratio over the term of the Credit

Facility.

As of September 30, 2021,

the consolidated net debt to consolidated adjusted EBITDA ratio may

not exceed 4.00 to 1.

The

Company’s consolidated

adjusted EBITDA to interest expense ratio may not be less than 3.0 to 1 over the

term of the agreement.

The

Credit Facility also prohibits the payment of cash dividends if the Company

is in default or if the amount of the dividends 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, 2021,

and December 31, 2020, the Company was in compliance with all of the

Credit Facility covenants.

The Term Loans have quarterly

principal amortization during their five year terms, 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.

The 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 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 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 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, 2021, the

aggregate interest rate on the swaps, including the fixed base rate

plus an applicable margin, was 3.1%.

The Company capitalized $23.7 million of certain third-party debt issuance

costs in connection with executing the 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 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 Credit

Facility.

As of September 30, 2021, the Company had Credit Facility borrowings

outstanding of $888.6 million.

As of December 31,

2020, the Company had Credit Facility borrowings outstanding of $887.1

million.

The Company has unused capacity under the

Revolver of approximately $197 million, net of bank letters of credit

of approximately $4 million, as September 30, 2021.

The

Company’s other debt obligations

are primarily industrial development bonds, bank lines of credit and municipality-related

loans,

which totaled $12.1 million as of both September 30, 2021 and December

31, 2020.

Total unused capacity under

these arrangements

as of September 30, 2021 was approximately $39 million.

The Company’s total net debt as of September

30, 2021 was $759.3

million.

The Company estimates that it realized cost synergies in the first nine

months of 2021 of approximately $56 million compared to

approximately $40 million in the first nine months of 2020.

The Company continues to expect to realize Combination cost synergies

of approximately $75 million in 2021 and $80 million in 2022.

The Company continues to expect 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 total cash payments, including those pursuant

to the QH Program, described below,

but excluding incremental

capital expenditures related to the Combination, will be approximately

1.3 times its total anticipated 2022 cost synergies of $80

million.

A significant portion of these costs were already incurred in 2019, 2020 and the

first nine months of 2021, but the Company

expects to continue to incur such costs throughout the remainder

of 2021 and into 2022.

The Company incurred $13.6 million of total

Combination, integration and other acquisition-related expenses in the first

nine months of 2021, which includes $0.7 million of

accelerated depreciation and is net of a $5.4 million gain on the sale of

certain held-for-sale real property assets, described in the

Non-

GAAP Measures section of this Item below.

Comparatively, in the first nine months

of 2020, the Company incurred $23.4 million of

total Combination, integration and other acquisition-related expenses

including $0.8 million of accelerated depreciation, described in

the Non-GAAP Measures section of this Item below.

The Company had aggregate net cash outflows of approximately $20.0

million

related to the Combination, integration and other acquisition-related

expenses during the first nine months of 2021 as compared to

$20.9 million during the first nine months of 2020.

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.

The QH Program includes restructuring

and associated severance costs to reduce total headcount by approximately

400 people globally and plans for the closure of certain

manufacturing and non-manufacturing facilities.

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.

During the first quarter of 2021, certain of these facilities were sold

and the Company recognized a gain on disposal of $5.4 million

included within other income (expense), net on the Condensed

Consolidated Statement of Operations.

The exact timing and total

costs associated with the QH Program will depend on a number of factors

and is subject to change; however, reductions in headcount

and site closures have continued into 2021.

The Company currently expects additional headcount reductions and site closures

to occur

Quaker Chemical Corporation

Management’s Discussion and Analysis

into 2022 and estimates that the anticipated cost synergies

realized under the QH 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 2021 of approximately $4.6 million compared

to $12.8 million in the first nine months of 2020.

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”) and in this process, which was completed

during the first quarter of 2020, the Company was required to

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

amount of 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.

In 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, 2021, the Company’s

gross liability for uncertain tax positions, including interest and penalties,

was $30.8

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 $7.6 million as a result of

offsetting benefits in other tax jurisdictions.

During the first nine months of 2021, the Company recorded $13.3 million of non-

income tax credits for certain of its Brazilian subsidiaries.

The Company expects to utilize these credits to offset

certain Brazilian

federal tax payments over approximately two years beginning in the

fourth quarter of 2021.

See Note 19 of Notes to Condensed

Consolidated Financial Statements in Item 1 of this Report.

During the third quarter of 2021, two of the Company’s

locations suffered property damage as a result of flooding and fire.

The

Company maintains property insurance for all of its facilities globally.

The Company, its insurance

adjuster and insurance carrier are

actively managing the remediation and restoration activities associated

with both of these events and at this time the Company has

concluded, based on all available information and discussions with its insurance

adjuster and insurance carrier, that the losses incurred

during the third quarter of 2021 will be covered under the Company’s

property insurance coverage, net of an aggregate deductible

$2.0 million.

The Company has received advance payments from its insurers of $1.0 million and

has recorded an insurance receivable

associated with these events of $1.7 million as of September 30, 2021.

The Company and its insurance carrier are in early stages of

reviewing the impact on operations as it relates to a potential business interruption

insurance claim; however, as of the date of

this

report, the Company cannot reasonably estimate any probable amount

of business interruption insurance claim recoverable, therefore

the Company has not recorded a gain contingency for a possible business interruption

insurance claim as of September 30, 2021.

See

Note 19 of Notes to Condensed Consolidated Financial Statements in Item

1 of this Report.

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 (including potential acquisitions)

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.

Non-GAAP Measures

The information in this Form 10-Q 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 meani

ngful 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.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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 income (loss) 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 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 before equity in net income of associated

companies, in each case adjusted, as applicable, for any

depreciation, amortization, interest or tax impacts resulting from the non

-core items identified in the reconciliation of net income

attributable to the Company to adjusted EBITDA.

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.

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,

2021

2020

2021

2020

Operating income

36,010

34,859

119,720

24,653

Houghton combination, integration and other

acquisition-related expenses (a)

5,963

6,913

18,977

23,442

Restructuring and related charges (b)

(880)

1,383

593

3,585

Fair value step up of acquired inventory sold (c)

—

801

226

CEO transition costs (d)

285

—

1,097

—

Inactive subsidiary's non-operating litigation costs (e)

320

—

613

—

Customer bankruptcy costs (f)

—

463

Facility remediation costs, net (g)

1,490

—

1,490

—

Indefinite-lived intangible asset impairment (h)

—

38,000

Non-GAAP operating income

43,188

43,155

143,291

90,369

Non-GAAP operating margin (%) (p)

9.6%

11.8%

10.9%

8.8%

Quaker Chemical Corporation

Management’s Discussion and Analysis

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin

and Non-GAAP Net Income Reconciliations

Three Months Ended

Nine Months Ended

September 30,

2021

2020

2021

2020

Net income (loss) attributable to Quaker Chemical Corporation

31,058

27,304

103,243

(8,812)

Depreciation and amortization (a)(m)

21,542

21,022

66,334

63,764

Interest expense, net

5,637

6,837

16,725

22,109

Taxes on income (loss)

before equity in net income

of associated companies

795

2,245

26,702

(7,603)

EBITDA

59,032

57,408

213,004

69,458

Equity income in a captive insurance company (i)

(108)

(542)

(4,071)

(697)

Houghton combination, integration and other

acquisition-related expenses (a)

5,786

6,913

12,871

22,679

Restructuring and related charges (b)

(880)

1,383

593

3,585

Fair value step up of acquired inventory sold (c)

—

801

226

CEO transition costs (d)

285

—

1,097

—

Inactive subsidiary's non-operating litigation costs (e)

320

—

613

—

Customer bankruptcy costs (f)

—

463

Facility remediation costs, net (g)

2,019

—

2,019

—

Indefinite-lived intangible asset impairment (h)

—

38,000

Pension and postretirement benefit (income) costs,

non-service components (j)

(343)

(1,375)

(596)

22,491

Brazilian non-income tax credits (k)

—

(13,293)

—

Currency conversion impacts of hyper-inflationary economies (l)

154

336

278

Adjusted EBITDA

66,169

63,941

213,374

156,483

Adjusted EBITDA margin (%) (p)

14.7%

17.4%

16.2%

15.2%

Adjusted EBITDA

66,169

63,941

213,374

156,483

Less: Depreciation and amortization - adjusted (a)

21,365

21,022

65,616

63,002

Less: Interest expense, net

5,637

6,837

16,725

22,109

Less: Taxes on income

before equity in net income

of associated companies - adjusted (a)(o)

9,765

8,337

31,277

15,473

Non-GAAP net income

29,402

27,745

99,756

55,899

Quaker Chemical Corporation

Management’s Discussion and Analysis

Non-GAAP Earnings per Diluted Share Reconciliations

Three Months Ended

Nine Months Ended

September 30,

2021

2020

2021

2020

GAAP earnings (loss) per diluted share attributable to

Quaker Chemical Corporation common shareholders

1.73

1.53

5.76

(0.50)

Equity income in a captive insurance company

per diluted share (i)

(0.01)

(0.03)

(0.23)

(0.04)

Houghton combination, integration and other

acquisition-related expenses per diluted share (a)

0.26

0.30

0.58

1.03

Restructuring and related charges per diluted share (b)

(0.04)

0.06

0.03

0.15

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

—

0.03

0.01

CEO transition costs per diluted share (d)

0.01

—

0.05

—

Inactive subsidiary's non-operating litigation costs per

diluted share (e)

0.02

—

0.03

—

Customer bankruptcy costs per diluted share (f)

—

0.02

Facility remediation costs, net, per diluted share (g)

0.09

—

0.09

—

Indefinite-lived intangible asset impairment per diluted share (h)

—

1.65

Pension and postretirement benefit (income) costs,

non-service components per diluted share (j)

(0.02)

(0.06)

(0.03)

0.83

Brazilian non-income tax credits per diluted share (k)

(0.04)

—

(0.48)

—

Currency conversion impacts of hyper-inflationary

economies per diluted share (l)

0.00

0.01

0.02

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

(0.37)

(0.25)

(0.29)

(0.02)

Non-GAAP earnings per diluted share (q)

1.63

1.56

5.56

3.15

(a)

Houghton combination, integration and other acquisition-related

expenses include certain legal, financial, and other advisory and

consultant costs incurred in connection with post-closing integration

activities including internal control readiness and

remediation.

These

costs are not indicative of the future operating performance of the Company.

Approximately $0.2 million

and $0.7 million in the three and nine months ended September 30, 2021, respectively,

and approximately $0.3 million and $1.5

million in the three and nine months ended September 30, 2020, respectively,

of these pre-tax costs were considered non-

deductible for the purpose of determining the Company’s

effective tax rate, and, therefore, taxes on income before equity in

net

income of associated companies - adjusted reflects the impact of these

items.

During the three and nine months ended September

30, 2021, the Company recorded $0.2 million and $0.7 million, respectively,

of accelerated depreciation related to certain of the

Company’s facilities compared

to $0.8 million during the nine months ended September 30, 2020, which is included

in the

caption “Houghton combination, integration and other acquisition-related

expenses” in the reconciliation of operating income to

non-GAAP operating income and included in the caption “Depreciation

and amortization” in the reconciliation of net income

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

“Depreciation and amortization - adjusted” in the

reconciliation of adjusted EBITDA to non-GAAP net income attributable

to the Company.

During the nine months ended

September 30, 2021, the Company recorded a $5.4 million gain on the sale of

certain held-for-sale real property assets related to

the Combination which is included in the caption “Houghton combination,

integration and other acquisition-related expenses” in

the reconciliation of GAAP earnings (loss) per diluted share attributed

to Quaker Chemical Corporation common shareholders to

Non-GAAP earnings per diluted share as well as the reconciliation of net

income (loss) attributable to Quaker Chemical

Corporation to Adjusted EBITDA and Non-GAAP net income.

See Note 2 of Notes to Condensed Consolidated Financial

Statements, which appears in Item 1 of this Report.

(b)

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.

(c)

Fair value step up of acquired 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.

Quaker Chemical Corporation

Management’s Discussion and Analysis

(d)

CEO transition costs represent the costs related to the Company’s

search and hiring of a new CEO in connection with the

previously announced executive transition planned for the end of 2021.

These expenses are not indicative of the future operating

performance of the Company.

(e)

Inactive subsidiary’s non

-operating litigation costs represents the charges incurred by

an inactive subsidiary of the Company and

are a result of the termination of restrictions on insurance settlement reserves as previously

disclosed in the Company’s 2020

Form 10-K.

These charges are not indicative of the future operating performance

of the Company.

See Note 9 of Notes to

Condensed Consolidated Financial Statements, which appears in Item

1 of this Report.

(f)

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.

(g)

Facility remediation costs, net, presents the gross costs associated with remediation,

cleaning and subsequent restoration costs

associated with the property damages to certain of the Company’s

facilities, net of insurance recoveries received.

These charges

are non-recurring and are not indicative of the future operating performance

of the Company.

See Note 19 of Notes to Condensed

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

(h)

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.

(i)

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 32% 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.

(j)

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 amount in 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.

(k)

Brazilian non-income tax credits represent indirect tax credits related to certain

of the Company’s Brazilian subsidiaries

prevailing in a legal claim as well as the Brazilian Supreme Court ruling

on these non-income tax matters.

The third quarter of

2021 impact to Non-GAAP earnings per diluted share reflects the tax only

adjustment related to the Brazilian Supreme Court

ruling on the taxability of interest income.

The non-income tax credit is non-recurring and not indicative of the future operating

performance of the Company.

See Note 19 of Notes to Condensed Consolidated Financial Statements, which

appears in Item 1 of

this Report.

(l)

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, 2021 and 2020, 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.

(m)

The impact of certain discrete tax items includes the impact of changes

in certain valuation allowance recorded on certain of the

Company’s foreign

tax credits, tax law changes in a foreign jurisdiction, changes in withholding rates,

the tax impacts of non-

income tax credits associated with certain of the Company’s

Brazilian subsidiaries and the associated impact on previously

accrued for distributions at certain of the Company’s

Asia/Pacific subsidiaries, the one-time deferred tax benefit recorded on the

transfer of additional intangible assets between the Company’s

subsidiaries as well as the offsetting impact and amortization

of a

deferred tax benefit the Company recorded in the fourth quarters of

2019 and 2020 related to a similar intercompany intangible

asset transfer.

See Note 11 of Notes to Condensed Consolidated Financial

Statements, which appears in Item 1 of this Report.

(n)

Depreciation and amortization for the three and nine months ended

September 30, 2021 includes approximately $0.3 million and

$0.9 million, respectively,

and for the three and nine months ended September 30, 2020 includes $0.2 million

and $0.9 million,

respectively, 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.

Quaker Chemical Corporation

Management’s Discussion and Analysis

(o)

Taxes on income

before equity in net income of associated companies – adjusted presents the impact

of any current and deferred

income tax expense (benefit), as applicable, of the reconciling items presented

in the reconciliation of net income (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.

Houghton combination, integration and other

acquisition-related expenses described in (a) resulted in incremental taxes of $1.4 million

and $3.1 million during the three and

nine months ended September 30, 2021, and $1.7

million and $5.1 million during the three and nine months ended September 30,

2020,

respectively.

Restructuring and related charges described in (b) resulted in

a tax benefit of $0.2 million and incremental

taxes of $0.1 million during the three and nine months ended September

30, 2021, respectively, and

$0.4 million and $0.9

million

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

Fair value step up of acquired inventory sold described in

ended September 30, 2021 and less than $0.1 million

during

the nine months ended September 30, 2020.

CEO transition expenses described in (d) resulted in incremental taxes of $0.1

million and $0.3 million during the three and nine months ended September

30, 2021, respectively.

Inactive subsidiary litigation

described in (e) resulted in incremental taxes of $0.1 million and approximately

$0.2 million during the three and nine months

ended September 30, 2021, respectively.

Customer bankruptcy costs described in (f) resulted in incremental taxes of $0.1 million

during the nine months ended September 30, 2020.

Facility fire and flood remediation costs described in (g) resulted in

incremental taxes of $0.5 million in each of the three and nine months

ended September 30, 2021.

Indefinite-lived intangible

asset impairment described in (h) resulted in incremental taxes of $8.7 million

during the nine months ended September 30, 2020.

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

described in (j) resulted in a tax benefit of

approximately $0.1 million during each of the three and nine months

ended September 30, 2021,

and a reduction of taxes of $0.3

million and incremental taxes of $7.7 million for the three and nine months

ended September 30, 2020, respectively.

Brazilian

non-income tax credits described in (k) resulted in incremental taxes of

approximately $0.6 million and a tax benefit of $4.7

million during the three and nine months ended September 30, 2021.

Tax impact of certain discrete

items described in (m) above

resulted in a tax benefit of approximately $6.5 million and $5.1 million

during three and nine months ended September 30, 2021,

respectively, and resulted

in a tax benefit of $4.5 million and $0.4 million for the three and nine months ended

September 30,

2020,

respectively.

(p)

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.

(q)

The Company calculates non-GAAP earnings per diluted share as non

-GAAP net income attributable to the Company per

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

to calculate such in each given period.

Off-Balance Sheet Arrangements

The Company had no material off-balance sheet items, as defined

under Item 303(a)(4) of Regulation S-K as of September 30,

2021.

The Company’s only off-balance

sheet items outstanding as of September 30, 2021 represented approximately

$7 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 Note 15 of Notes to Condensed Consolidated Financial Statements in Item 1 of

this Report.

Operations

Consolidated Operations Review – Comparison of the Third

Quarter of 2021 with the Third Quarter of 2020

Net sales were $449.1 million in the third quarter

of 2021

compared to $367.2 million in the third quarter of 2020.

The net sales

increase of approximately $81.8 million or 22% quarter-over-quarter

was primarily due to higher sales volumes of 10%, which

includes additional net sales from recent acquisitions of 4%, increases

from selling price and product mix of 10% and the positive

impact of foreign currency translation of 2%.

The increase in organic sales volumes compared to the third quarter

of 2020 was

primarily the result of the continued year-over-year

improvement in end market conditions and continued market share gains realized

in the current quarter.

Sales from acquisitions is driven by the Company’s

acquisition of Coral Chemical Company (“Coral”) in

December 2020 as well as the tin-plating solutions business acquired

in February 2021.

The increase from selling price and product

mix includes the impact of current year selling price increases implemented

in response to the increases in raw material costs

experienced in 2021.

The positive impact from foreign currency translation is primarily the result of the

strengthening of the Chinese

renminbi,

euro, and Mexican peso against the U.S. dollar quarter-over-quarter.

COGS were $303.9 million in the third quarter of 2021 compared to

$227.0 million in the third quarter of 2020.

The increase in

COGS of 34% was driven by the associated COGS on the increase in net

sales described above and continued increases in the

Company’s global raw material costs compared

to the prior year quarter and the impacts of supply constraints in the current year.

Gross profit in the third quarter of 2021 of $145.1 million increased $4.9 million

or approximately 4% from the third quarter of

2020, due primarily to the increase in net sales noted above.

The Company’s reported

gross margin in the third quarter of 2021 was

32.3%

compared to 38.2% in the third quarter of 2020.

The lower current quarter gross margin is driven by significant raw material

cost increases that began in the fourth quarter of 2020 and have continued throughout

2021 and the impacts of constraints on the

world’s global supply

chain.

Quaker Chemical Corporation

Management’s Discussion and Analysis

SG&A in the third quarter of 2021 increased $7.2 million compared

to the third quarter of 2020 due primarily to the impact of

sales increases on direct selling costs, year-over-year

inflation increases,

additional SG&A from recent acquisitions and higher SG&A

due to foreign currency translation, partially offset by

lower incentive compensation quarter-over-quarter as well as the benefits of

additional realized cost savings associated with the Combination quarter-over-quarter.

In addition, SG&A was lower in the prior year

period as a result of temporary cost saving measures the Company

implemented in response to COVID-19.

While the Company

continues to manage costs during the on-going pandemic, it has incurred

higher SG&A quarter-over-quarter as the

global economy

continues to gradually rebound.

The Company estimates that it realized cost synergies associated with the

Combination of

approximately $19 million during the third quarter of 2021 compared

to approximately $17 million during the third quarter of 2020.

During the third quarter of 2021 and 2020, the Company incurred $5.8

million and $6.9 million, respectively,

of Combination,

integration and other acquisition-related expenses primarily for professional

fees related to Houghton integration and other

acquisition-related activities.

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.

The Company incurred restructuring and related charges for reductions

in headcount and site

closures under this program,

net of adjustments to initial estimates for severance, of a credit of $0.8 million

and expense $1.4 million

during the third quarters of 2021 and 2020, respectively.

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

Operating income in the third quarter of 2021 was $36.0 million compared

to $34.9 million in the third quarter of 2020.

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 was consistent at $43.2 million in each of the current quarter

and

the prior year quarter primarily due to the increase in net sales described

above and the benefits from cost savings related to the

Combination offset by an increase in SG&A as well as the significant

increases in raw material costs quarter-over-quarter.

The Company had other income, net, of $0.6 million in the third quarter

of 2021 compared to other expense, net, of $0.2 million

in the third quarter of 2020.

The third quarter of 2021 included foreign currency transaction gains compared

to foreign currency

transaction losses incurred in the prior year quarter.

In addition, the Company had lower non-service components of pension and

postretirement benefit costs in the current quarter,

partially offset by higher losses on fixed asset disposals related to the events

mentioned as facility remediation activities above.

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

Interest expense, net, decreased $1.2 million compared to the third

quarter of 2020 driven by lower current quarter borrowings

outstanding as a result of the additional revolver borrowings drawn

down in March 2020 at the onset of the pandemic which were

subsequently repaid in September 2020 and, to a lesser extent, a slight decline

in overall interest rates quarter-over-quarter.

The Company’s effective

tax rates for the third quarters of 2021 and 2020 were 2.6% and 8.1%, respectively.

The Company’s

lower current quarter effective tax rate is primarily driven

by a one-time deferred tax benefit related to an intercompany intangible

asset transfer, described in the Non-GAAP

measures section of this Item, above.

Comparatively, the prior

year third quarter effective

tax rate was impacted by the tax effect of certain one-time

items including benefits related to the impact of 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.

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 2021 and 2020 effective tax rates would have

been approximately 25% and 24%, respectively.

The higher estimated current quarter tax rate was primarily driven by the impact

changes in mix of earnings and provision to return adjustments in the prior period,

partially offset with a change in permanent

reinvestment assertions.

Equity in net income of associated companies decreased $1.0 million

in the third quarter of 2021 compared to the third quarter of

2020, primarily due to lower current year quarter income from the Company’s

interest in a captive insurance company as well as from

its 50% interest in a joint venture in Korea compared to the prior year quarter.

See the Non-GAAP Measures section of this Item,

above.

Net income attributable to noncontrolling interest was less than $0.1 million

in both the third quarters of 2021 and 2020.

Foreign exchange positively impacted the Company’s

third quarter results by approximately 10% driven by the positive impact

from foreign currency translation on earnings as well as foreign exchange

transaction gains in the current year quarter as compared to

foreign exchange transaction losses in the prior year third quarter.

Consolidated Operations Review – Comparison of the First Nine Months of 202

with the First Nine Months of 2020

Net sales were $1,314.1 million in the first nine months of 2021 compared to $1,031.8

million in the first nine months of 2020.

The net sales increase of $282.3 million or 27% period-over-period

reflects a benefit from higher sales volumes of 18%, which

includes additional net sales from recent acquisitions of 4%, increases

in selling price and product mix of 5%, and the positive impact

from foreign currency translation of 4%.

The increase in sales volumes compared to the first nine months of 2020 was primarily

due

to improved end market conditions from the prior year impacts of COVID-19 and

continued market share gains.

Additional net sales

Quaker Chemical Corporation

Management’s Discussion and Analysis

from acquisitions relate primarily to the acquisitions of a tin-plating solutions

business and Coral, acquired in February 2021 and

December 2020, respectively.

The increase from selling price and product mix includes the benefits of

current year selling price

increases implemented to date to help offset the rising

raw material and input costs.

The positive impact from foreign currency

translation is primarily the result of the strengthening of the euro

and Chinese Renminbi against the U.S. dollar year-over-year.

COGS were $858.3 million in the first nine months of 2021 compared to

$660.4 million in the first nine months of 2020.

The

increase in COGS of 30% was driven by the associated COGS on the increase

in net sales as described above, and the higher raw

material costs noted in the quarterly discussion.

Gross profit in the first nine months of 2021 increased $84.3 million

or 23% from the first nine months of 2020, due primarily to

the increase in net sales described above.

The Company’s reported gross margin

in the first nine months of 2021 was 34.7%

compared to 36.0% in the first nine months of 2020.

The Company’s lower current year gross margin

was primarily due to the

significant raw material increases described in the third quarter discussion

above.

SG&A in the first nine months of 2021 increased $34.8 million compared

to the first nine months of 2020 due primarily to the

same drivers described in the third quarter discussion above.

During the first nine months of 2021 and 2020, the Company incurred

$18.3 million and $22.8 million, respectively,

Combination, integration and other acquisition-related expenses primarily

for professional fees related to Houghton integration and

other acquisition-related activities.

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 to

realize cost synergies associated with the Combination.

The Company recorded restructuring and related charges of $0.6 million

during the first nine months of 2021 compared to $3.6 million during the first nine

months of 2020 under this program.

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 was primarily

the result of the projected negative impacts of COVID-19 as of

March 31, 2020 on their estimated fair values.

There was no similar impairment charges recorded during the first nine

months of

2021.

Operating income in the first nine months of 2021 was $119.7

million compared to $24.7 million in the first nine months of 2020.

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

$143.3 million increased compared to $90.4 million in the prior

year period, primarily due to the increase in net sales described above

and the continued benefits from cost savings related to the Combination

partially offset by higher SG&A and the negative impact of

significant increases in raw material costs due to constraints on the overall

global supply chain.

The Company’s other

income, net, was $19.3 million in the first nine months of 2021 compared to other

expense, net of $22.4

million in the prior year period.

The year-over-year change was primarily due to other income related to certain non-income

tax

credits recorded by the Company’s

Brazilian subsidiaries during the second quarter of 2021 as well as the gain on

the sale of certain

held-for-sale real property assets during the first quarter of 2021

compared to a first quarter of 2020 pension plan settlement charge

associated with the termination of the Legacy Quaker U.S. Pension Plan.

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

Interest expense, net, decreased $5.4 million in the first nine months

of 2021 compared to the first nine months of 2020 driven by

lower current year borrowings outstanding as a result of the additional

revolver borrowings drawn down in March 2020 at the onset of

the pandemic as well as a decline in overall interest rates year-over-year,

as the weighted average interest rate incurred on borrowings

under the Company’s credit

facility was approximately 1.6% during the first nine months of 2021 compared to approximately

2.2%

during the first nine months of 2020.

The Company’s effective

tax rates for the first nine months of 2021 and 2020 were an expense of 21.8% compared to a benefit of

38.3%, respectively.

The Company’s effective

tax rate for the nine months ended September 30, 2021 was impacted by certain

U.S.

tax law changes, the tax impact of certain non-income tax credits recorded by

the Company’s Brazilian subsidiaries, and a deferred

tax

benefit related to an intercompany intangible asset transfer.

Comparatively,

the prior year first nine months effective tax rate was

impacted by the tax effect of certain one-time pre-tax losses as well as certain tax

charges and benefits in the period including those

related to changes in foreign tax credit valuation allowances, tax law changes

in a foreign jurisdiction, the tax impacts of the

Company’s termination

of its Legacy Quaker U.S. Pension Plan and the Houghton indefinite-lived trademarks

and tradename

intangible asset impairment.

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 2021 and 2020 effective tax

rates were relatively consistent at approximately 25% and 23%, respectively.

The year-over-year increase was largely

driven by the

impact of changes in pre-tax income levels on certain tax adjustments in each

period and the mix of earnings,

as well as withholding

taxes on repatriations and provision to return adjustments in the prior

period, partially offset with a change in permanent reinvestment

Quaker Chemical Corporation

Management’s Discussion and Analysis

assertions.

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 increased $4.1 million in

the first nine months of 2021 compared to the first nine

months of 2020, primarily due to higher current year earnings from the

Company’s interest in a captive insurance

company.

See the

Non-GAAP Measures section of this Item, above.

In addition, the Company had slightly higher earnings year-over-year

from the

Company’s 50% interest in its joint

venture in Korea.

Net income attributable to noncontrolling interest was less than $0.1 million

in both the first nine months of 2021 and 2020.

Foreign exchange positively impacted the Company’s

first nine months of 2021 results by approximately 6% driven by the

positive impact from foreign currency translation on earnings as well as lower foreign

exchange transaction losses in the current year

as compared to the prior year period.

Reportable Segments Review - Comparison of the Third

Quarter of 2021

with the Third Quarter of 2020

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.

The Company has four reportable segments: (i) Americas; (ii) EMEA; (iii)

Asia/Pacific; and (iv) Global Specialty

Businesses.

The three geographic segments are composed of the net sales and operations

in each respective region, excluding net

sales and operations managed globally by the Global Specialty Businesses

segment, which includes the Company’s

container, metal

finishing, mining, offshore, specialty coatings, specialty

grease and Norman Hay businesses.

Segment operating earnings for 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,

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,

are not included in segment operating earnings.

Other items not specifically identified with the Company’s

reportable

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

net.

Americas

Americas represented approximately 34% of the Company’s

consolidated net sales in the third quarter of 2021.

The segment’s

net sales were $150.8 million, an increase of $31.3 million or 26% compared

to the third quarter of 2020.

Excluding sales from

acquisitions, the segment’s

net sales increase quarter-over-quarter of approximately 21% was driven

by higher volumes of 9%, a

benefit in selling price and product mix of 10% and the positive impact

of foreign currency translation of 2%.

The current quarter

organic volume increase was driven by the

continued improvement in end market conditions compared to the prior year quarter

which

was impacted by COVID-19.

The increase in selling price and product mix is primarily driven by price

increases implemented to help

offset the significant increases in raw material

and other input costs incurred during 2021.

The foreign exchange impact was primarily

driven by the strengthening of the Mexican peso against the U.S. dollar,

as this exchange rate averaged 20.02 in the third quarter of

2021 compared to 22.06 during the third quarter of 2020.

This segment’s operating earnings were

$31.3 million, an increase of $0.2

million or 1% compared to the third quarter of 2020.

The relatively consistent segment operating earnings quarter-over-quarter

is the

net result of increases in net sales, described above, offset by lower

gross margins driven by the continued raw material cost increases

and global supply chain and logistics pressures coupled with higher

SG&A including an increase in direct selling costs associated with

higher net sales, SG&A from acquisitions and an increase in SG&A as the prior

year third quarter included temporary cost savings

measures implemented in response to the onset of the COVID-19 pandemic.

EMEA

EMEA represented approximately 27% of the Company’s

consolidated net sales in the third quarter of 2021.

The segment’s net

sales were $122.2 million, an increase of $28.3 million or 30% compared

to the third quarter of 2020.

The increase in net sales was

driven by a benefit from selling price and product mix of 19%, increases in organic

volumes of approximately 9%, the positive impact

of foreign currency translation of 1%, and additional net sales from acquisitions of

1%.

The increase in selling price and product mix

is primarily driven by price increases implemented to offset

the significant increase in raw material and other input costs incurred

during 2021.

The current quarter volume increase was driven by the continued improvement in end market

conditions compared to

the prior year quarter which was heavily impacted by COVID-19.

The foreign exchange impact was primarily driven by the

strengthening of the euro against the U.S. dollar as this exchange rate averaged

1.18 in the third quarter of 2021 compared to 1.17 in

the third quarter of 2020.

This segment’s operating earnings were $20.2

million, an increase of $2.7 million or 16% compared to the

third quarter of 2020.

The increase in segment operating earnings reflects the higher net

sales described above, partially offset by

Quaker Chemical Corporation

Management’s Discussion and Analysis

lower current quarter gross margins driven by the continued

raw material cost increases and global supply chain and logistics

pressures as well as higher SG&A including increases in direct selling costs associated with

higher net sales as well as increases as the

prior year third quarter included temporary cost savings measures implemented

in response to the onset of the COVID-19 pandemic.

Asia/Pacific

Asia/Pacific represented approximately 22% of the Company’s

consolidated net sales in the third quarter of 2021.

The segment’s

net sales were $98.7 million, an increase of approximately $13.8 million

or 16% compared to the third quarter of 2020.

The increase

in net sales quarter-over-quarter was driven by increases in volumes

of 7%, the positive impact of foreign currency translation of 5%,

increases from selling price and product mix of 3% and additional net sales from

acquisitions of 1%.

The current quarter volume

increase was driven by the continued improvement in end market conditions

compared to the prior year quarter which was impacted

by COVID-19.

The foreign exchange impact was primarily due to the strengthening of the Chinese renminbi

against the U.S. dollar as

this exchange rate averaged 6.47 in the third quarter of 2021 compared

to 6.92 in the third quarter of 2020.

This segment’s operating

earnings were $23.3 million, a decrease of $4.0 million or 15% compared

to the third quarter of 2020.

The decrease in segment

operating earnings was largely driven by the continued

raw material cost increases and global supply chain and logistics pressures as

well as higher direct selling costs associated with higher net sales.

Global Specialty Businesses

Global Specialty Businesses represented approximately 17% of the

Company’s consolidated net sales in the

third quarter of 2021.

The segment’s net sales were $77.4

million, an increase of $8.6 million or 12% compared to the third quarter of 2020.

Excluding net

sales from acquisitions, the segment’s

net sales would have increased 5% quarter-over-quarter

driven by increases in selling price and

product mix, including Norman Hay,

of 13% and the positive impact of foreign currency translation of 2% partially offset

by volume

declines of 10%.

Both the changes in selling price and product mix and sales volumes were primarily

driven by higher amounts of

shipments of a lower priced product in the Company’s

mining business in the prior year period.

The foreign exchange impact was a

result of similar strengthening of certain currencies in EMEA and

Americas as described above.

This segment’s operating earnings

were $20.7 million, a decrease of $0.5 million or 2% compared to the third quarter

of 2020.

The decrease in segment operating

earnings was driven by the continued raw material cost increases and global

supply chain and logistics pressures as well as higher

SG&A, including SG&A from acquisitions in the current year quarter.

Reportable Segments Review - Comparison of the First Nine months of 2021

with the First Nine months of 2020

Americas

Americas represented approximately 32% of the Company’s

consolidated net sales in the first nine months of 2021.

The

segment’s net sales were $425.3

million, an increase of $95.3 million or 29% compared to the first nine months of 2020.

The increase

in net sales was due to higher sales volumes of approximately

16%, additional net sales from acquisitions of 6% primarily resulting

from Coral, benefits from selling price and product mix of 6%, and

the positive impact of foreign currency translation of 1%.

The

current year volume increase was driven by the continued economic

rebound from the COVID-19 slowdown that began in late March

and continued throughout the third quarter of 2020.

This segment’s operating earnings were $97.2

million, an increase of $26.6

million or 38% compared to the first nine months of 2020.

The increase in segment operating earnings reflects the higher net

sales

described above, partially offset by lower gross margins

in the current year period coupled with higher SG&A, including SG&A from

acquisitions primarily due to the same drivers as described in the third quarter

discussion above.

EMEA

EMEA represented approximately 28% of the Company’s

consolidated net sales in the first nine months of 2021.

The segment’s

net sales were $365.5 million, an increase of $88.9 million or 32% compared

to the first nine months of 2020.

The increase in net

sales was due to higher sales volumes of 15%, increases in selling price and product

mix of 8%, the positive impacts from foreign

exchange translation of 7% and additional net sales from acquisitions of

2%.

The current year volume increase was driven by the

continued economic rebound from the COVID-19 slowdown.

The foreign exchange impact was primarily due to the strengthening of

the euro and British pound against the U.S. dollar as these exchange rates averaged

1.20 and 1.39, respectively,

during the first nine

months of 2021 compared to 1.12 and 1.27, respectively,

during the first nine months of 2020.

This segment’s operating earnings

were $68.8 million, an increase of $22.5 million or 49% compared

to the first nine months of 2020.

The increase in segment operating

earnings reflect the higher net sales described above partially offset

lower gross margins in the current year period coupled with

higher

direct selling expenses on the increase in net sales primarily due to the same

drivers as described in the third quarter discussion above.

Asia/Pacific

Asia/Pacific represented approximately 22% of the Company’s

consolidated net sales in the first nine months of 2021.

The

segment’s net sales were $286.9

million, an increase of $60.1 million or 26% compared to the first nine months of 2020.

The increase

in net sales was driven by higher sales volumes of approximately 19% and

the positive impact of foreign currency translation of 7%.

The current year volume increase was driven by the

continued gradual economic rebound from the COVID-19 slowdown as the

pandemic notably impacted China beginning in the first quarter of 2020 and then

the rest of the region through the third quarter of

Quaker Chemical Corporation

Management’s Discussion and Analysis

2020.

The foreign exchange impact was primarily due to the strengthening

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

exchange rate averaged 6.47 during the first nine months of 2021

compared to 6.99 during the first nine months of 2020.

This

segment’s operating earnings were

$74.0 million, an increase of $7.9 million or 12% compared to the first nine

months of 2020.

The

increase in segment operating earnings reflect the higher net sales described

above partially offset lower gross margins

in the current

year period coupled with higher direct selling expenses on the increase

in net sales primarily due to the same drivers as described in

the third quarter discussion above.

Global Specialty Businesses

Global Specialty Businesses represented 18% of the Company’s

consolidated net sales in the first nine months of 2021.

The

segment’s net sales were $236.4

million, an increase of $37.9 million or 19% compared to the first nine months of 2020.

The increase

in net sales was driven by benefits from selling price and product mix, including

Norman Hay, of 16%, additional

net sales from

acquisitions of 7% primarily driven by Coral, and the positive impact of

foreign currency transaction of 3%, partially offset by

decreases in volumes of 7%.

The foreign exchange impact was a result of similar strengthening of

certain currencies in EMEA and

Americas as described above.

Both the changes in selling price and product mix and sales volumes were

primarily driven by higher

shipments of a lower priced product in the Company’s

mining business in the period year period.

This segment’s operating earnings

were $69.0 million, an increase of $10.9 million or 19% compared

to the first nine months of 2020.

The increase in segment operating

earnings reflects the higher net sales described above, partially offset

by lower gross margins in the current year period coupled with

higher SG&A, including SG&A from acquisitions primarily due

to the same drivers as described in the third quarter discussion above.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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 or

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

meaning of Section 27A of the Securities Act of

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

and global supply chain constraints on the Company’s

business, results of

operations, and financial condition, our expectation that we will maintain sufficient

liquidity and remediate any of our material

weaknesses in internal control over financial reporting, and statements regarding

the impact of increased raw material costs and

pricing initiatives 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 and other acquisitions;

•

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

any projected global economic rebound or

anticipated positive results due to Company actions taken in response;

•

cost increases in prices of raw materials and the impacts of constraints and

disruptions in the global supply chain;

•

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

Annual Report to Shareholders for 2020 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

slowdowns and shutdowns, including as is currently being experienced by

many automotive industry companies as a result of supply chain disruption.

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,

as well as the

potential for significant increases in raw material costs, supply chain

disruptions, customer financial instability,

worldwide economic

and political disruptions, 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 our

customers in the steel, automobile, aircraft, industrial equipment, and durable

goods industries.

The ultimate impact of COVID-19 on

our business will depend on, among other things, the extent and duration of

the pandemic, the severity of the disease and the number

of people infected with the virus including as new variants emerge,

the continued uncertainty regarding global availability,

administration, acceptance and long-term efficacy

of vaccines, or other treatments for COVID-19 or its variants, the longer-term

effects on the economy of 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, as well as laws and other governmental programs implemented

to address the pandemic or assist impacted businesses, such

as fiscal stimulus and other legislation designed to deliver monetary

aid and other relief.

Other factors could also adversely affect us,

including those related to the Combination and other acquisitions and the

integration of 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.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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 in

our 2020 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

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.

We have evaluated

the information required under this Item that was disclosed in Part II, Item 7A, of our Annual Report on

Form

10-K for the year ended December 31, 2020, and we believe there has been no material

change to that information.

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, 2021 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

2020 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.

We did not

design and maintain effective controls in response to the risks of material

misstatement.

Specifically, changes to existing

controls or the implementation of new controls were not sufficient

to respond to changes to the risks of material misstatement in

financial reporting as a result of becoming a larger,

more complex global organization due to the Combination.

This material

weakness also contributed to an additional material weakness as we did not design

and maintain effective controls over the review of

pricing, quantity and customer data to verify that revenue recognized was complete

and accurate.

These material weaknesses did not

result in material misstatements to the interim or annual consolidated financial

statements.

However, these material weaknesses could

result in misstatements to our account balances and disclosures that could

result in a material misstatement to the interim or annual

consolidated financial statements that would not be prevented or detected.

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,

2021 and December 31, 2020, and that the results of its operations and its cash flows

and changes in equity for both the three and nine

month periods ended September 30, 2021 and 2020, are in conformity with

accounting principles generally accepted in the United

States of America.

Progress on Remediation

of Material Weaknesses

The Company and its Board of Directors, including the Audit Committee of the Board

of Directors, are committed to maintaining

a strong internal control environment.

Since identifying the material weaknesses, the Company has dedicated

a significant amount of

time and resources to remediate all of the previously identified material weaknesses as quickly

and effectively as possible. During

2020 and into 2021, the Company dedicated multiple internal resources and

supplemented those internal resources with various third-

party specialists to assist with the formalization of a robust and detailed

remediation plan.

In undertaking remediation activities, the

Company has hired additional personnel dedicated to financial and information

technology compliance to further supplement its

internal resources.

In addition, the Company has established a global network of personnel to assist local management

understanding control performance and documentation requirements.

In order to sustain this network, the Company conducts periodic

trainings and hosts discussions to address questions on a current basis.

However, the impact of COVID-19,

including travel

restrictions and remote work arrangements 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.

Despite the challenges brought on by COVID-19 and driven by the

Company’s priority of creating a

long-term sustainable control

structure to ensure stability for a company that has more than doubled in

size since August 2019, the Company continues to make

substantial strides towards remediating the underlying causes of the

previously disclosed material weaknesses in our risk assessment

process and within our revenue process, as further discussed below.

Risk Assessment –

We previously determined

that our risk assessment process was not designed adequately to respond

to changes

to the risks of material misstatement to financial reporting.

In order to remediate this material weakness, we have designed and

implemented an improved risk assessment process, including identifying

and assessing those risks attendant to the significant changes

within the Company as a result of becoming a larger,

more complex global organization due to the Combination.

During 2020, a full

review was performed of our processes and controls across significant

locations in order to identify and address potential design gaps.

In addition to individual transactional-level control enhancements, this review

resulted in (i) an enhanced financial statement risk

assessment, (ii) the standardization of existing legal entity and newly

implemented segment quarterly analytics and quarterly closing

packages completed by key financial reporting personnel, (iii) a global

account reconciliation review program and (iv) enhancements

to our quarterly identification and reassessment of new and existing business

and information technology risks that could affect our

financial reporting.

Monitoring is also performed through our enhanced quarterly controls certification

process, whereby changes in

business or information technology processes or control owners are identified

and addressed timely.

Although we have implemented

and tested the additional controls as noted in our remediation plan and found them

to be effective, this material weakness will not be

considered remediated due to the Revenue – Price and Quantity material weakness,

discussed below.

Once the Revenue – Price and

Quantity material weakness is remediated, we expect the Risk Assessment material

weakness will also be remediated.

Revenue – Price and Quantity –

We previously determined

that we did not design and maintain effective controls over the review

of pricing, quantity and customer data to verify that revenue recognized

was complete and accurate.

In order to remediate this

material weakness, the Company made significant progress in its redesign

of certain aspects of its revenue process and related

controls.

The Company has identified and agreed upon design enhancements and requirements for

each revenue sub-process.

The

design includes enhancements to entity-level and transactional-level

manual controls as well as IT general and application controls.

During the third quarter of 2021 and through the date of this Form 10-Q filing

for the period ended September 30, 2021, the Company

has implemented these design changes.

While the Company believes that the enhancements to these entity-level, transactional

and IT

general and application controls will sufficiently address the material

weakness previously identified, because the additional controls

have not been fully tested, this material weakness is not yet remediated.

The existing material weakness will not be considered

remediated until the applicable remedial controls have been operat

ing for a sufficient period of time and management has concluded,

through testing, that the controls are operating effectively.

Given the significant resources the Company has dedicated to remediation

of its material weaknesses, the Company is committed

to remediation and expects that in 2021 it will successfully remediate its price

and quantity and its risk assessment material

weaknesses.

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, 2021 that have materially affected,

or are reasonably likely to materially affect, our internal

control over financial reporting.

Based on that evaluation, as described above, there were changes that have materially

affected, or are reasonably likely to materially affect,

our internal control over financial reporting during the quarter ended

September 30, 2021.

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.

The Company’s business, financial

conditions, results of operations and cash flows are subject to various risks

that could cause

actual results to vary materially from recent results or from anticipated future

results.

In addition to the other information set forth in

this Report, you should carefully consider the risk factors previously disclosed

in Part I, Item 1A of our 2020 Form 10-K.

There have

been no material changes to the risk factors described therein.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

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

—

86,865,026

August 1 - August 31

491

251.74

—

86,865,026

September 1 - September 30

240.64

—

86,865,026

Total

525

251.02

—

86,865,026

(1)

All of these shares were acquired from employees upon their surrender

of Quaker Chemical Corporation shares in payment of

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 awards or units.

(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, restricted stock award, or

restricted stock unit 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 it 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, 2021.

Limitation on the Payment of Dividends

The Credit Facility has certain 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

1, 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.

10.1

–

Employment Agreement by and between Registrant and Andrew Tometich dated September 2, 2021, effective on

October 11, 2021. *†

10.2

–

Change in Control Agreement by and between Registrant and Andrew Tometich dated September 2, 2021, effective on

October 11, 2021. *†

10.3

–

Employment Agreement by and between Registrant and Joseph Berquist dated August 18, 2021, effective on

September 9, 2021. *†

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.

† Management contract or compensatory plan.

*********

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/ Shane W. Hostetter

Date: November 4, 2021

Shane W. Hostetter,

Senior Vice President, Chief Financial

Officer (officer duly authorized on behalf of, and principal

financial officer of, the Registrant)

Quaker Houghton - 10-Q quarterly report FY2021 Q3

What is the market capitalization of a company?

DISCLAIMER

Contact

Links