SEC Info - Quaker Chemical Corp. - ‘10-Q’ for 9/30/22

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		Alternative Formats (Word, et al.) Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and September 30, 2021 Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2022 and September Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and September 30, 2021 Controls and Procedures Exhibits Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Notes to Condensed Consolidated Financial Statements Other Information Quantitative and Qualitative Disclosures about Market Risk Risk Factors September 30, 2021 Unregistered Sales of Equity Securities and Use of Proceeds 30, 2021
1	1st Page – Filing Submission
"	Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and September 30, 2021
"	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and
"	September 30, 2021
"	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021
"	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and September 30, 2021
"	Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2022 and September
"	30, 2021
"	Notes to Condensed Consolidated Financial Statements
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Quantitative and Qualitative Disclosures about Market Risk
"	Controls and Procedures
"	Other Information
"	Legal Proceedings
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Exhibits

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM

i 10-Q

i ☒

QUARTERLY

REPORT PURSUANT TO SECTION 13

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

For the quarterly period ended

i September 30, 2022

OR

i ☐

TRANSITION REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the transition period from

to

Commission file number

i 001-12019

i QUAKER CHEMICAL CORPORATION

(Exact name of registrant as specified in its charter)

i Pennsylvania

i 23-0993790

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

i 901 E. Hector Street

,

i Conshohocken

,

i Pennsylvania

i 19428 – 2380

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

i 610

-

i 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

i Common Stock, $1 par value

i KWR

i 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.

i Yes

☒

No

☐

Indicate by check mark whether the registrant has submitted

electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T

(§232.405 of this chapter) during the preceding 12 months (or for

such shorter period that the registrant was required

to submit such files).

i Yes

☒

No

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated

filer, a non-accelerated filer, a smaller reporting company, or an emerging

growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”,

and “emerging growth company” in Rule 12b-2 of

the Exchange Act.

i Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

i ☐

Emerging growth company

i ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use

the extended transition period for complying with any new

or revised

financial accounting standards provided pursuant to Section 13(a)

of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as

defined in Rule 12b-2 of the Exchange Act).

Yes

☐

No

☒

Indicate the number of shares outstanding of each of the

issuer’s classes of common stock, as of the latest practicable date.

Number of Shares of Common Stock

Outstanding on October 31, 2022

i 17,931,664

1

QUAKER CHEMICAL CORPORATION

AND CONSOLIDATED

SUBSIDIARIES

Page

PART

I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and September 30, 2021

2

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and

September 30, 2021

3

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and September 30, 2021

5

Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2022 and September

30, 2021

6

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

27

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

44

Item 4.

Controls and Procedures.

45

PART

II

OTHER INFORMATION.

Item 1.

Legal Proceedings.

46

Item 1A.

Risk Factors.

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

46

Item 6.

Exhibits.

47

Signatures

47

2

PART

I

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited).

Quaker Chemical Corporation

Condensed Consolidated Statements of Income

(Dollars in thousands, except per share data)

Unaudited

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Net sales

$

i 492,218

$

i 449,072

$

i 1,458,777

$

i 1,314,117

Cost of goods sold (

excluding amortization expense - See Note 13

)

i 331,469

i 303,941

i 1,002,393

i 858,341

Gross profit

i 160,749

i 145,131

i 456,384

i 455,776

Selling, general and administrative expenses

i 115,456

i 104,215

i 343,081

i 317,204

Restructuring and related (credits) charges, net

( i 1,423)

( i 880)

( i 604)

i 593

Combination, integration and other acquisition-related expenses

i 2,107

i 5,786

i 7,992

i 18,259

Operating income

i 44,609

i 36,010

i 105,915

i 119,720

Other income (expense), net

i 85

i 647

( i 10,520)

i 19,344

Interest expense, net

( i 8,389)

( i 5,637)

( i 20,228)

( i 16,725)

Income before taxes and equity in net income of

associated companies

i 36,305

i 31,020

i 75,167

i 122,339

Taxes on income before

equity in net income of associated

Companies

i 10,185

i 795

i 14,425

i 26,702

Income before equity in net income of associated

Companies

i 26,120

i 30,225

i 60,742

i 95,637

Equity in net (loss) income of associated companies

( i 212)

i 848

( i 642)

i 7,668

Net income

i 25,908

i 31,073

i 60,100

i 103,305

Less: Net income attributable to noncontrolling interest

i 41

i 15

i 74

i 62

Net income attributable to Quaker Chemical Corporation

$

i 25,867

$

i 31,058

$

i 60,026

$

i 103,243

Per share data:

Net income attributable to Quaker Chemical Corporation

common shareholders – basic

$

i 1.44

$

i 1.74

$

i 3.35

$

i 5.78

Net income attributable to Quaker Chemical Corporation

common shareholders – diluted

$

i 1.44

$

i 1.73

$

i 3.35

$

i 5.76

Dividends declared

$

i 0.435

$

i 0.415

$

i 1.265

$

i 1.205

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

3

Quaker Chemical Corporation

Condensed Consolidated Statements of Comprehensive Income

(Dollars in thousands)

Unaudited

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Net income

$

i 25,908

$

i 31,073

$

i 60,100

$

i 103,305

Other comprehensive (loss) income, net of tax

Currency translation adjustments

( i 71,986)

( i 19,905)

( i 155,284)

( i 29,201)

Defined benefit retirement plans

i 497

i 904

i 2,400

i 2,593

Current period change in fair value of derivatives

( i 140)

i 436

i 1,535

i 1,450

Unrealized loss on available-for-sale securities

( i 818)

( i 215)

( i 2,385)

( i 2,961)

Other comprehensive loss

( i 72,447)

( i 18,780)

( i 153,734)

( i 28,119)

Comprehensive (loss) income

( i 46,539)

i 12,293

( i 93,634)

i 75,186

Less: Comprehensive

loss attributable to

noncontrolling interest

( i 3)

( i 15)

( i 5)

( i 68)

Comprehensive (loss) income attributable to Quaker Chemical

Corporation

$

( i 46,542)

$

i 12,278

$

( i 93,639)

$

i 75,118

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

4

Quaker Chemical Corporation

Condensed Consolidated Balance Sheets

(Dollars in thousands, except par value)

Unaudited

September 30,

December 31,

2022

2021

ASSETS

Current assets

Cash and cash equivalents

$

i 138,891

$

i 165,176

Accounts receivable, net

i 461,912

i 430,676

Inventories

Raw materials and supplies

i 165,280

i 129,382

Work-in-process

and finished goods

i 151,860

i 135,149

Prepaid expenses and other current assets

i 66,760

i 59,871

Total current

assets

i 984,703

i 920,254

Property, plant and equipment,

at cost

i 425,650

i 434,344

Less: Accumulated depreciation

( i 237,276)

( i 236,824)

Property, plant and equipment,

net

i 188,374

i 197,520

Right of use lease assets

i 37,005

i 36,635

Goodwill

i 591,032

i 631,194

Other intangible assets, net

i 915,956

i 1,027,782

Investments in associated companies

i 76,748

i 95,278

Deferred tax assets

i 10,519

i 16,138

Other non-current assets

i 27,163

i 30,959

Total assets

$

i 2,831,500

$

i 2,955,760

LIABILITIES AND EQUITY

Current liabilities

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

$

i 20,471

$

i 56,935

Accounts payable

i 209,343

i 226,656

Dividends payable

i 7,800

i 7,427

Accrued compensation

i 32,993

i 38,197

Accrued restructuring

i 1,798

i 4,087

Accrued pension and postretirement benefits

i 1,536

i 1,548

Other accrued liabilities

i 91,790

i 95,617

Total current

liabilities

i 365,731

i 430,467

Long-term debt

i 931,491

i 836,412

Long-term lease liabilities

i 25,697

i 26,335

Deferred tax liabilities

i 151,208

i 179,025

Non-current accrued pension and postretirement benefits

i 38,222

i 45,984

Other non-current liabilities

i 39,521

i 49,615

Total liabilities

i 1,551,870

i 1,567,838

Commitments and contingencies (Note 18)

Equity

Common stock $

i 1

par value; authorized

i 30,000,000

shares; issued and

outstanding 2022 –

i 17,931,205

shares; 2021 –

i 17,897,033

shares

i 17,931

i 17,897

Capital in excess of par value

i 925,037

i 917,053

Retained earnings

i 553,685

i 516,334

Accumulated other comprehensive loss

( i 217,655)

( i 63,990)

Total Quaker

shareholders’ equity

i 1,278,998

i 1,387,294

Noncontrolling interest

i 632

i 628

Total equity

i 1,279,630

i 1,387,922

Total liabilities and equity

$

i 2,831,500

$

i 2,955,760

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

5

Quaker Chemical Corporation

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

Unaudited

Nine Months Ended

September 30,

2022

2021

Cash flows from operating activities

Net income

$

i 60,100

$

i 103,305

Adjustments to reconcile net income to net cash used in operating activities:

Amortization of debt issuance costs

i 2,589

i 3,562

Depreciation and amortization

i 60,692

i 65,440

Equity in undistributed earnings of associated companies, net of dividends

i 3,612

( i 7,563)

Acquisition-related fair value adjustments related to inventory

i —

i 801

Deferred compensation, deferred taxes and other,

net

( i 8,811)

( i 21,865)

Share-based compensation

i 8,635

i 8,441

Loss on extinguishment of debt

i 5,246

i —

Gain on disposal of property, plant,

equipment and other assets

( i 33)

( i 4,819)

Combination and other acquisition-related expenses, net of payments

( i 4,265)

( i 1,705)

Restructuring and related (credits) charges

( i 604)

i 593

Pension and other postretirement benefits

( i 6,556)

( i 5,638)

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

liabilities, net of acquisitions:

Accounts receivable

( i 65,256)

( i 68,664)

Inventories

( i 72,386)

( i 72,962)

Prepaid expenses and other current assets

( i 11,081)

( i 24,512)

Change in restructuring liabilities

( i 1,234)

( i 4,557)

Accounts payable and accrued liabilities

i 3,059

i 32,652

Net cash (used in) provided by operating activities

( i 26,293)

i 2,509

Cash flows from investing activities

Investments in property,

plant and equipment

( i 20,230)

( i 12,823)

Payments related to acquisitions, net of cash acquired

( i 9,421)

( i 31,975)

Proceeds from disposition of assets

i 65

i 14,744

Net cash used in investing activities

( i 29,586)

( i 30,054)

Cash flows from financing activities

Payments of long-term debt

( i 668,500)

( i 28,558)

Proceeds from long-term debt

i 750,000

i —

(Payments) borrowings on revolving credit facilities, net

( i 10,418)

i 39,143

Borrowings (payments) on other debt, net

i 2,131

( i 585)

Financing-related debt issuance costs

( i 3,734)

i —

Dividends paid

( i 22,302)

( i 21,175)

Stock options exercised, other

( i 616)

i 704

Net cash provided by (used in) financing activities

i 46,561

( i 10,471)

Effect of foreign exchange rate changes on cash

( i 16,967)

( i 2,486)

Net decrease in cash and cash equivalents

( i 26,285)

( i 40,502)

Cash and cash equivalents at the beginning of the period

i 165,176

i 181,895

Cash and cash equivalents at the end of the period

$

i 138,891

$

i 141,393

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

financial statements.

6

Quaker Chemical Corporation

Condensed Consolidated Statements of Changes in Equity

(Unaudited; Dollars in thousands, except per share amounts)

Accumulated

Capital in

Other

Common

Excess of

Retained

Comprehensive

Noncontrolling

Stock

Par Value

Earnings

Loss

Interest

Total

Balance at December 31, 2020

$

i 17,851

$

i 905,171

$

i 423,940

$

( i 26,598)

$

i 550

$

i 1,320,914

Net income

i —

i 38,615

i —

i 17

i 38,632

Amounts reported in other

comprehensive loss

i —

( i 26,630)

( i 2)

( i 26,632)

Dividends ($

i 0.395

per share)

i —

( i 7,062)

i —

( i 7,062)

Share issuance and equity-based

compensation plans

i 24

i 3,577

i —

i 3,601

Balance at March 31, 2021

$

i 17,875

$

i 908,748

$

i 455,493

$

( i 53,228)

$

i 565

$

i 1,329,453

Net income

i —

i 33,570

i —

i 30

i 33,600

Amounts reported in other

comprehensive gain

i —

i 17,285

i 8

i 17,293

Dividends ($

i 0.395

per share)

i —

( i 7,062)

i —

( i 7,062)

Share issuance and equity-based

compensation plans

i 3

i 2,114

i —

i 2,117

Balance at June 30, 2021

$

i 17,878

$

i 910,862

$

i 482,001

$

( i 35,943)

$

i 603

$

i 1,375,401

Net income

i —

i 31,058

i —

i 15

i 31,073

Amounts reported in other

comprehensive loss

i —

( i 18,780)

i —

( i 18,780)

Dividends ($

i 0.415

per share)

i —

( i 7,424)

i —

( i 7,424)

Share issuance and equity-based

compensation plans

i 11

i 3,415

i —

i 3,426

Balance at September 30, 2021

$

i 17,889

$

i 914,277

$

i 505,635

$

( i 54,723)

$

i 618

$

i 1,383,696

Balance at December 31, 2021

$

i 17,897

$

i 917,053

$

i 516,334

$

( i 63,990)

$

i 628

$

i 1,387,922

Net income

i —

i 19,816

i —

i 5

i 19,821

Amounts reported in other

comprehensive (loss) income

i —

( i 6,271)

i 1

( i 6,270)

Dividends ($

i 0.415

per share)

i —

( i 7,434)

i —

( i 7,434)

Share issuance and equity-based

compensation plans

i 15

i 1,646

i —

i 1,661

Balance at March 31, 2022

$

i 17,912

$

i 918,699

$

i 528,716

$

( i 70,261)

$

i 634

$

i 1,395,700

Net income

i —

i 14,343

i —

i 28

i 14,371

Amounts reported in other

comprehensive loss

i —

( i 74,985)

( i 33)

( i 75,018)

Dividends ($

i 0.415

per share)

i —

( i 7,438)

i —

( i 7,438)

Share issuance and equity-based

compensation plans

i 8

i 2,943

i —

i 2,951

Balance at June 30, 2022

$

i 17,920

$

i 921,642

$

i 535,621

$

( i 145,246)

$

i 629

$

i 1,330,566

Net income

i —

i 25,867

i —

i 41

i 25,908

Amounts reported in other

comprehensive loss

i —

i i — /

i —

( i 72,409)

( i 38)

( i 72,447)

Dividends ($

i 0.435

per share)

i —

( i 7,803)

i —

i i — /

( i 7,803)

Share issuance and equity-based

compensation plans

i 11

i 3,395

i —

i 3,406

Balance at September 30, 2022

$

i 17,931

$

i 925,037

$

i 553,685

$

( i 217,655)

$

i 632

$

i 1,279,630

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

7

i

Note 1 – Basis of Presentation and Description of Business

i

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, 2022 (the “Report”),

the terms “Quaker Houghton,”

the “Company,”

“we,” and “our” refer to Quaker Chemical

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

associated companies, unless the context otherwise requires.

As used in these Notes to Condensed Consolidated Financial Statements,

the “Combination” refers to the legacy Quaker combination

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

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, 2022 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, 2021 (the “2021 Form 10-K”).

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

i 25

countries, the Company’s customers

include thousands of

the world’s most advanced and specialized

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

mining, and metalworking

companies.

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

chemical specialty products and offers

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

TM

”) for various heavy industrial and manufacturing

applications throughout its

i four

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

Global Specialty

Businesses.

i

Hyper-inflationary economies

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

as well as economic instability,

Argentina’s and

Türkiye’s economies were

considered hyper-inflationary under U.S. GAAP effective

July 1, 2018 and April 1, 2022, respectively.

As

of, and for the three and nine months ended September 30, 2022,

the Company's Argentine

and Turkish subsidiaries represented a

combined

i i 1 /

% and

i i 2 /

% of the Company’s consolidated

total assets and net sales, respectively.

During the three and nine months ended

September 30, 2022, the Company recorded $

i 1.0

million and $

i 1.2

million, respectively,

of remeasurement losses associated with the

applicable currency conversions related to Argentina

and Türkiye.

Comparatively, during the three

and nine months ended September

30, 2021, the Company recorded less than $

i 0.1

million and $

i 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 (expense) income, net, in the Company’s

Condensed Consolidated Statements of Income.

/

i

Note 2 – Business Acquisitions

2022 Acquisitions

Subsequent to the date of these financial statements, in October 2022,

the Company acquired a business that provides pickling and

rinsing products and services, which is part of the EMEA reportable segment,

for approximately

i 3.5

million EUR or approximately

$

i 3.5

million.

This acquisition, along with the Company’s

January 2022 acquisition in the Americas (described below), which had

similar specializations and product offerings in pickling

inhibitor technologies, strengthens Quaker Houghton’s

position in pickling

inhibitors and additives, enabling the Company to better support

and optimize production processes for customers across the Metals

industry.

/

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

8

In January 2022, the Company acquired a business that provides pickling

inhibitor technologies, drawing lubricants and stamping

oil, and various other lubrication, rust preventative, and cleaner applications,

which is part of the Americas reportable segment for

approximately $

i 8.0

million.

This business broadens the Company’s

product offerings within its existing metals and metalworking

business in the Americas region.

The Company allocated $

i 5.6

million of the purchase price to intangible assets, comprised of $

i 5.1

million of customer relationships to be amortized over

i 14

years; and $

i 0.5

million of existing product technologies to be amortized

over

i 14

years.

In addition, the Company recorded $

i 1.8

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

the Company operates.

During the third quarter

of 2022 the Company finalized post-closing adjustments that resulted in

the Company paying less than $

i 0.1

million of additional

purchase consideration.

Factors contributing to the purchase price that resulted in goodwill included

the acquisition of business

processes and personnel that will allow Quaker Houghton to better serve

its customers.

In January 2022, the Company acquired a business related to the sealing

and impregnation of metal castings for the automotive

sector, as well as impregnation resin and

impregnation systems for metal parts, which is part of the Global Specialty Businesses

reportable segment for approximately

i 1.2

million EUR or approximately $

i 1.4

million.

This business expands the Company's

geographic presence in Germany as well as broadens its product offerings

and service capabilities within its existing impregnation

business.

The results of operations of the January 2022 acquisitions subsequent to

the respective acquisition dates are included in the

unaudited Condensed Consolidated Statements of Income for the nine month

period ended September 30, 2022.

Applicable

transaction expenses associated with these acquisitions are included

in Combination, integration and other acquisition-related

expenses in the Company’s unaudited

Condensed Consolidated Statements of Income.

Certain pro forma and other information is not

presented, as the operations of the acquisitions are not considered material

to the overall operations of the Company for the periods

presented.

The results of operations of the October acquisition is not included in the Consolidated Statements of

Operations because

the date of closing was subsequent to September 30, 2022.

Preliminary purchase price allocation of assets acquired and liabilities

assumed for this business acquired has not been presented as that information

is not available as of the date of these Condensed

Consolidated Financial Statements.

Previous Acquisitions

In November 2021, the Company acquired Baron Industries (“Baron”),

a privately held company that provides vacuum

impregnation services of castings, powder metals and electrical components

for its Global Specialty Businesses reportable segment for

$

i 11.0

million, including an initial cash payment of $

i 7.1

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

provisions that are payable at various times from 2022 through 2025.

The earn-out provisions could total a maximum of $

i 4.5

million.

In September 2022, the Company paid $

i 2.5

million related to certain of these earnout provisions.

The Company recorded an

incremental earn-out expense of $

i i 0.1 /

million during the three and nine months ended September 30, 2022 related to

these earnout

provisions, recorded within the financial

statement caption “Combination, integration and other acquisition-related

expenses” on the

Company’s Condensed Consolidated

Statements of Income.

As of September 30, 2022, the Company has remaining earnout liabilities

recorded on its Condensed Consolidated Balance Sheet of $

i 1.6

million.

The Company allocated $

i 8.0

million of the purchase price to

intangible assets, $

i 1.1

million of property, plant

and equipment and $

i 1.5

million of other assets acquired net of liabilities assumed,

which includes $

i 0.3

million of cash acquired.

In addition, the Company recorded $

i 0.4

million of goodwill, all of which is expected to

be tax deductible.

Intangible assets comprised $

i 7.2

million of customer relationships to be amortized over

i 15 years

; and $

i 0.8

million

of existing product technology to be amortized over

i 13 years

.

Factors contributing to the purchase price that resulted in goodwill

included the acquisition of business processes and personnel that will allow Quaker

Houghton to better serve its customers.

During

the third quarter of 2022 the Company finalized post-closing adjustments

that resulted in the Company receiving less than $

i 0.1

million.

In November 2021, the Company acquired a business that provides hydraulic

fluids, coolants, cleaners, and rust preventative oils

in Türkiye for its EMEA reportable segment for

i 3.2

million EUR or approximately $

i 3.7

million.

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 its Global Specialty Businesses reportable

segment for

i 2.4

million EUR or

approximately $

i 2.9

million, which is gross of approximately $

i 0.3

million of cash acquired.

Previously, in February

2021, the

Company acquired a

i 38

% ownership interest in Grindaix for

i 1.4

million EUR or approximately $

i 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 milling

maskants product line in the Global Specialty

Businesses reportable segment for

i 2.3

million EUR or approximately $

i 2.8

million.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

9

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

for the steel end market for $

i 25.0

million.

This

acquisition is part of each of the Company’s

geographic reportable segments.

The Company allocated $

i 19.6

million of the purchase

price to intangible assets, comprised of $

i 18.3

million of customer relationships, to be amortized over

i 19

years; $

i 0.9

million of existing

product technology to be amortized over

i 14

years; and $

i 0.4

million of a licensed trademark to be amortized over

i 3

years.

In addition,

the Company recorded $

i 5.0

million of goodwill, all of which is expected to be tax deductible in various jurisdictions

in which we

operate.

Factors contributing to the purchase price that resulted in goodwill included the

acquisition of business processes and

personnel that will allow Quaker Houghton to better serve its customers.

As of September 30, 2022, the allocation of the purchase price of all of the Company’s

2022 acquisitions, the acquisition in

Türkiye and Baron have 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 December 2020, the Company acquired Coral Chemical Company,

LLC (“Coral”), a privately held U.S.-based provider of

metal finishing fluid solutions.

Subsequent to the acquisition, the Company and the sellers of Coral (the

“Sellers”) have worked to

finalize certain post-closing adjustments.

During the second quarter of 2022, after failing to reach resolution,

the Sellers filed suit

asserting certain amounts owed related to tax attributes of the acquisition.

During the third quarter of 2022, there have been no

material changes to the facts and circumstances of the claim asserted by the

Sellers, and the Company continues to believe the

potential range of exposure for this claim is $

i 0

to $

i 1.5

million.

i

Note 3 – Recently Issued Accounting Standards

Recently Issued Accounting Standards

Adopted

The FASB issued ASU 2020

-04,

Reference Rate Reform (Topic

848): Facilitation of the Effects of Reference Rate Reform

on

Financial Reporting

in March 2020.

The FASB subsequently

issued ASU 2021-01,

Reference Rate Reform (Topic

848): Scope

in

January 2021 which clarified the guidance but did not materially change

the guidance or its applicability to the Company.

The

amendments provide temporary optional expedients and exceptions

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

relationships and other transactions to ease the potential accounting

and financial reporting burden associated with transitioning away

from reference rates that are expected to be discontinued, including

the London Interbank Offered Rate (“LIBOR”).

ASU 2020-04 is

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

be applied through December 31, 2022.

On June 17, 2022, the

Company entered into an amendment to its primary credit facility which,

among other things, provided for the use of a USD currency

LIBOR successor rate (the Secured Overnight Financing Rate (“SOFR”)).

See Note 14 of Notes to Condensed Consolidated Financial

Statements.

i

Note 4 – Business Segments

i

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

i 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.

The Global

Specialty Businesses segment 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 cost of goods sold (“COGS”) and selling, general and administrative

expenses (“SG&A”).

Operating expenses not directly

attributable to the net sales of each respective segment, such as certain corporate

and administrative costs, Combination, integration

and other acquisition-related expenses, and Restructuring and related charges,

are not included in segment operating earnings.

Other

items not specifically identified with the Company’s

reportable segments include Interest expense, net and Other (expense) income,

net.

/

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

10

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

reportable segments for the three and nine

months ended September 30, 2022 and 2021.

i

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Net sales

Americas

$

i 186,546

$

i 150,799

$

i 513,438

$

i 425,343

EMEA

i 113,367

i 122,241

i 362,107

i 365,491

Asia/Pacific

i 91,211

i 98,659

i 295,273

i 286,924

Global Specialty Businesses

i 101,094

i 77,373

i 287,959

i 236,359

Total net sales

$

i 492,218

$

i 449,072

$

i 1,458,777

$

i 1,314,117

Segment operating earnings

Americas

$

i 44,986

$

i 31,273

$

i 107,991

$

i 97,155

EMEA

i 9,883

i 20,153

i 39,932

i 68,802

Asia/Pacific

i 23,336

i 23,285

i 67,469

i 73,990

Global Specialty Businesses

i 30,746

i 20,663

i 83,622

i 69,041

Total segment operating

earnings

i 108,951

i 95,374

i 299,014

i 308,988

Combination, integration and other acquisition-related expenses

( i 2,107)

( i 5,786)

( i 7,992)

( i 18,259)

Restructuring and related credits (charges), net

i 1,423

i 880

i 604

( i 593)

Fair value step up of acquired inventory sold

i -

( i 801)

Non-operating and administrative expenses

( i 47,852)

( i 38,691)

( i 139,894)

( i 122,760)

Depreciation of corporate assets and amortization

( i 15,806)

( i 15,767)

( i 45,817)

( i 46,855)

Operating income

i 44,609

i 36,010

i 105,915

i 119,720

Other income (expense), net

i 85

i 647

( i 10,520)

i 19,344

Interest expense, net

( i 8,389)

( i 5,637)

( i 20,228)

( i 16,725)

Income before taxes and equity in net income of

associated companies

$

i 36,305

$

i 31,020

$

i 75,167

$

i 122,339

/

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

30, 2022, were $

i 2.6

million and $

i 8.8

million for

Americas, $

i 6.4

million and $

i 27.7

million for EMEA, $

i 0.3

million and $

i 0.7

million for Asia/Pacific, and $

i 2.3

million and $

i 6.0

million

for Global Specialty Businesses, respectively.

Inter-segment revenues

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

$

i 3.6

million and $

i 9.3

million for Americas, $

i 6.8

million and $

i 21.9

million for EMEA, $

i 0.8

million and $

i 1.3

million for Asia/Pacific,

and $

i 1.8

million and $

i 5.9

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.

i

Note 5 – Net Sales and Revenue Recognition

Arrangements Resulting in Net Reporting

As part of the Company’s Fluidcare

TM

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

Company.

The

Company transferred third-party products under arrangements recognized

on a net reporting basis of $

i 21.4

million and $

i 61.7

million

for the three and nine months ended September 30, 2022, respectively,

and $

i 18.9

million and $

i 53.4

million for the three and nine

months ended September 30, 2021, respectively.

/

Customer Concentration

A significant portion of the Company’s

revenues are realized from the sale of process fluids and services to manufacturers of

steel, aluminum, automobiles, aerospace,

industrial and agricultural equipment, and durable goods.

As previously disclosed in the

Company’s 2021 Form 10-K, for

the year ended December 31, 2021, the Company’s

five largest customers (each composed of

multiple subsidiaries or divisions with semiautonomous purchasing authority)

accounted for approximately

i 10

% of consolidated net

sales, with its largest customer accounting for approximately

i 3

% of consolidated net sales.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

11

Contract Assets and Liabilities

The Company had no material contract assets recorded on its Condensed

Consolidated Balance Sheets as of September 30, 2022

or December 31, 2021.

The Company had approximately $

i 6.0

million and $

i 7.0

million of deferred revenue as of September 30, 2022 and December 31,

2021, respectively.

For the nine months ended September 30, 2022, the Company satisfied all of the

associated performance

obligations and recognized into revenue the advance payments received

and recorded as of December 31, 2021.

Disaggregated Revenue

The Company sells its various industrial process fluids, its specialty chemicals

and its technical expertise as a global product

portfolio.

The Company generally manages and evaluates its performance by segment

first, and then by customer industry,

rather than

by individual product lines.

Also, net sales of each of the Company’s major product

lines are generally spread throughout all three of

the Company’s geographic

regions, and in most cases, are approximately proportionate to the level of

total sales in each region.

The following tables disaggregate the Company’s

net sales by segment, geographic region, customer industry,

and timing of

revenue recognized for the three and nine months ended September 30, 2022

and 2021.

i

Three Months Ended September 30, 2022

Consolidated

Americas

EMEA

Asia/Pacific

Total

Customer Industries

Metals

$

i 69,249

$

i 32,690

$

i 52,856

$

i 154,795

Metalworking and other

i 117,297

i 80,677

i 38,355

i 236,329

i 186,546

i 113,367

i 91,211

i 391,124

Global Specialty Businesses

i 67,469

i 20,185

i 13,440

i 101,094

$

i 254,015

$

i 133,552

$

i 104,651

$

i 492,218

Timing of Revenue Recognized

Product sales at a point in time

$

i 244,162

$

i 127,045

$

i 101,945

$

i 473,152

Services transferred over time

i 9,853

i 6,507

i 2,706

i 19,066

$

i 254,015

$

i 133,552

$

i 104,651

$

i 492,218

/

Three Months Ended September 30, 2021

Consolidated

Americas

EMEA

Asia/Pacific

Total

Customer Industries

Metals

$

i 56,954

$

i 38,483

$

i 53,994

$

i 149,431

Metalworking and other

i 93,845

i 83,758

i 44,665

i 222,268

i 150,799

i 122,241

i 98,659

i 371,699

Global Specialty Businesses

i 46,008

i 19,253

i 12,112

i 77,373

$

i 196,807

$

i 141,494

$

i 110,771

$

i 449,072

Timing of Revenue Recognized

Product sales at a point in time

$

i 188,340

$

i 131,982

$

i 108,559

$

i 428,881

Services transferred over time

i 8,467

i 9,512

i 2,212

i 20,191

$

i 196,807

$

i 141,494

$

i 110,771

$

i 449,072

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

12

Nine Months Ended September 30, 2022

Consolidated

Americas

EMEA

Asia/Pacific

Total

Customer Industries

Metals

$

i 188,782

$

i 107,115

$

i 163,739

$

i 459,636

Metalworking and other

i 324,656

i 254,992

i 131,534

i 711,182

i 513,438

i 362,107

i 295,273

i 1,170,818

Global Specialty Businesses

i 187,099

i 61,530

i 39,330

i 287,959

$

i 700,537

$

i 423,637

$

i 334,603

$

i 1,458,777

Timing of Revenue Recognized

Product sales at a point in time

$

i 670,581

$

i 400,870

$

i 326,760

$

i 1,398,211

Services transferred over time

i 29,956

i 22,767

i 7,843

i 60,566

$

i 700,537

$

i 423,637

$

i 334,603

$

i 1,458,777

Nine Months Ended September

30, 2021

Consolidated

Americas

EMEA

Asia/Pacific

Total

Customer Industries

Metals

$

i 155,546

$

i 108,391

$

i 151,944

$

i 415,881

Metalworking and other

i 269,797

i 257,100

i 134,980

i 661,877

i 425,343

i 365,491

i 286,924

i 1,077,758

Global Specialty Businesses

i 137,447

i 61,203

i 37,709

i 236,359

$

i 562,790

$

i 426,694

$

i 324,633

$

i 1,314,117

Timing of Revenue Recognized

Product sales at a point in time

$

i 537,161

$

i 400,982

$

i 316,222

$

i 1,254,365

Services transferred over time

i 25,629

i 25,712

i 8,411

i 59,752

$

i 562,790

$

i 426,694

$

i 324,633

$

i 1,314,117

i

Note 6 - Leases

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

and equipment with remaining lease terms up to

i 9 years

.

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

lease term. In addition, the Company has certain land

use leases with remaining lease terms up to

i 93 years

.

/

The Company has

i i i i no / / /

material variable lease costs, sublease income or finance leases for three and nine

months ended September

30, 2022 and 2021. The following table sets forth the components of

the Company’s lease cost for three and nine

months ended

September 30, 2022 and 2021:

i

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Operating lease expense

$

i 3,664

$

i 3,408

$

i 10,592

$

i 10,568

Short-term lease expense

i 201

i 221

i 625

i 755

/

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

13

Supplemental cash flow information related to the Company’s

leases is as follows:

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Cash paid for amounts included in the

measurement of lease liabilities:

Operating cash flows from operating leases

$

i 3,768

$

i 3,365

$

i 10,575

$

i 10,433

Non-cash lease liabilities activity:

Leased assets obtained in exchange for new

operating lease liabilities

i 2,599

i 1,711

i 10,672

i 5,587

Supplemental balance sheet information related to the Company’s

leases is as follows:

September 30,

December 31,

2022

2021

Right of use lease assets

$

i 37,005

$

i 36,635

Other current liabilities

i 11,143

i 9,976

Long-term lease liabilities

i 25,697

i 26,335

Total operating lease liabilities

$

i 36,840

$

i 36,311

Weighted average

remaining lease term (years)

i 5.4

i 5.6

Weighted average

discount rate

i 4.43%

i 4.22%

Maturities of operating lease liabilities were as follows:

i

September 30,

2022

For the remainder of 2022

$

i 3,262

For the year ended December 31, 2023

i 10,668

For the year ended December 31, 2024

i 8,429

For the year ended December 31, 2025

i 6,087

For the year ended December 31, 2026

i 4,512

For the year ended December 31, 2027 and beyond

i 6,785

Total lease payments

i 39,743

Less: imputed interest

( i 2,903)

Present value of lease liabilities

$

i 36,840

/

i

Note 7 – Restructuring and Related Activities

i 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 included restructuring and associated

severance costs to reduce total headcount by approximately i 400 people globally, as well as the closure of certain manufacturing and

non-manufacturing facilities. The exact timing to complete all actions and final costs associated with the QH Program depend on a

number of factors and are subject to change; however, the Company had reduction in headcount and site closures under the QH

Program in 2022 and expects final headcount reductions to continue into 2023. Employee separation benefits varied depending on

local regulations within certain foreign countries and included severance and other benefits.

/

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

14

All costs incurred related 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 are recorded

in Restructuring and related (credits) charges in

the Company’s Condensed

Consolidated Statements of Income.

The credits recognized in the nine months ended September 30, 2022

reflect customary and routine adjustments to initial estimates for

employee separation costs.

At this time, the Company does not

expect to incur material additional costs under the QH Program.

As described in Note 4 of the 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, 2022

is as

follows:

i

QH Program

Accrued restructuring as of December 31, 2021

$

i 4,087

Restructuring and related (credits)

( i 604)

Cash payments

( i 1,234)

Currency translation adjustments

( i 451)

Accrued restructuring as of September 30, 2022

$

i 1,798

/

i

Note 8 – Share-Based Compensation

The Company recognized the following share-based compensation expense

in its Condensed Consolidated Statements of Income

for the three and nine months ended September 30, 2022 and 2021:

i

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Stock options

$

i 533

$

i 298

$

i 1,269

$

i 938

Non-vested stock awards and restricted stock units

i 1,783

i 1,277

i 4,998

i 3,963

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

i —

i 1,553

Director stock ownership plan

i 9

i 241

i 53

i 660

Performance stock units

i 875

i 491

i 2,314

i 1,327

Total share-based

compensation expense

$

i 3,200

$

i 2,307

$

i 8,634

$

i 8,441

/

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

$

i 0.1

million and $

i 0.2

million for the three and nine

months ended September 30, 2022, respectively,

and $

i 0.2

million and $

i 0.7

million for the three and nine months ended September 30,

2021,

respectively, recorded within

Combination, integration and other acquisition-related expenses.

Stock Options

During the first nine months of 2022, the Company granted stock options

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

that are

subject only to time vesting over a

i three year

period.

For the purposes of determining the fair value of stock option awards, the

Company used a Black-Scholes option pricing model and the assumptions set forth

in the table below:

i

March 2022

July 2022

Grant

Number of options granted

i 27,077

i 4,837

Dividend yield

i 0.80

%

i 0.79

%

Expected volatility

i 38.60

%

i 40.47

%

Risk-free interest rate

i 2.07

%

i 2.87

%

Expected term (years)

i 4.0

/

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

vesting period.

As of September 30, 2022,

unrecognized compensation expense related to all stock options granted was $

i 2.0

million, to be recognized over a weighted average

remaining period of

i 1.5

years.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

15

Restricted Stock Awards

and Restricted Stock Units

During the nine months ended September 30, 2022, the Company granted

i 35,846

non-vested restricted shares and

i 4,490

non-

vested restricted stock units under its LTIP,

which are subject to time-based vesting, generally over a

i 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, 2022, unrecognized

compensation expense related to the non-vested restricted

shares was $

i 5.9

million, to be recognized over a weighted average

remaining period of

i 1.6

years, and unrecognized compensation expense related to non-vested restricted

stock units was $

i 1.0

million,

to be recognized over a weighted average remaining period of

i 1.9

years.

Performance Stock Units

The Company grants 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

i 0

% up to

i 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 generally

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 was estimated using a Monte Carlo

simulation on the grant date

and using the following assumptions set forth in the table below:

i

2022

Grants

Number of PSUs granted

i 18,462

Risk-free interest rate

i 2.11

%

Dividend yield

i 0.93

%

Expected term (years)

i 3.0

/

As of September 30, 2022, based on the conditions of the PSUs and performance

to date for each award, the Company estimates

that it will

i no

t issue any fully vested shares as of the applicable settlement date of all outstanding

PSUs awards.

As of September 30,

2022, there was approximately $

i 4.8

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

expects to

recognize over a weighted-average period of

i 2.0

years.

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

i 50

%

of the first

i 6

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

i 3

% of compensation.

Additionally, the plan

provides for non-elective nondiscretionary contributions on behalf of participants

who have completed one year

of service equal to

i 3

% 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.

There were

i i no /

matching contributions in stock for the three and nine months ended September 30, 2022.

For the nine

months ended September 30, 2021, total contributions were $

i 1.5

million.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

16

i

Note 9 – Pension and Other Postretirement

Benefits

The components of net periodic benefit (income) cost for the three and

nine months ended September 30, 2022 and 2021 are as

follows:

i

Three Months Ended September 30,

Nine Months Ended September 30,

Other

Postretirement

Pension Benefits

Benefits

Pension Benefits

Benefits

2022

2021

2022

2021

2022

2021

2022

2021

Service cost (income)

$

i 166

$

i 289

$

i 1

$

( i 2)

$

i 520

$

i 921

$

i 1

$

i 1

Interest cost (income)

i 1,272

i 1,078

i 8

( i 1)

i 3,949

i 3,262

i 19

i 20

Expected return on plan assets

( i 1,942)

( i 2,075)

i —

( i 6,038)

( i 6,250)

i —

Actuarial loss (gain)

amortization

i 238

i 737

( i 23)

( i 85)

i 743

i 2,449

( i 70)

( i 85)

Prior service cost (income)

amortization

i 3

( i 8)

i —

i 8

( i 17)

i —

Net periodic benefit (income)

cost

$

( i 263)

$

i 32

$

( i 22)

$

( i 88)

$

( i 818)

$

i 390

$

( i 67)

$

( i 64)

/

Employer Contributions

As of September 30, 2022, $

i i 5.5 /

million and $

i i 0.1 /

million of contributions have been made to the Company’s

U.S. and foreign

pension plans and its other postretirement benefit plans, respectively

.

Taking into consideration

current minimum cash contribution

requirements, the Company currently expects to make full year cash contributions

of approximately $

i 6.6

million to its U.S. and

foreign pension plans and approximately $

i 0.2

million to its other postretirement benefit plans in 2022

.

i

Note 10 – Other Income (Expense), Net

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

ended September 30, 2022 and 2021 are as

follows:

i

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Income from third party license fees

$

i 253

$

i 314

$

i 906

$

i 1,026

Foreign exchange (losses) gain, net

( i 1,928)

i 368

( i 5,859)

( i 1,948)

Gain (loss) on disposals of property,

plant, equipment and other

assets, net

i 48

( i 537)

i 33

i 4,819

Non-income tax refunds and other related credits (expense)

i 122

i 3

( i 1,617)

i 14,395

Pension and postretirement benefit income,

non-service components

i 452

i 343

i 1,406

i 596

Loss on extinguishment of debt

i —

( i 6,763)

i —

Gain on insurance recoveries

i 1,104

i —

i 1,104

i —

Other non-operating income, net

i 34

i 156

i 270

i 456

Total other income

(expense), net

$

i 85

$

i 647

$

( i 10,520)

$

i 19,344

/

Gain (loss) 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 property

damage.

See Note 18 of Notes to Condensed

Consolidated Financial Statements.

During the nine months ended September 30, 2021, this caption also includes

the gain on the sale

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

the Combination.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

17

Non-income tax refunds and other related credits (expense) during

the nine months ended September 30, 2022, includes

adjustments to Combination-related indemnification assets associated with the

settlement of certain income tax audits at certain of the

Company’s Italian and German

affiliates for tax periods prior to August 1, 2019.

See Note 11 of Notes to Condensed Consolidated

Financial Statements.

During the nine months ended September 30, 2021 this caption includes certain

non-income tax credits for the

Company’s Brazilian subsidiaries.

See Note 18 of Notes to Condensed Consolidated Financial Statements.

Loss on extinguishment of debt during the nine months ended September

30, 2022 includes the write-off of certain previously

unamortized deferred financing costs as well as a portion of the third

party and creditor debt issuance costs incurred to execute an

amendment to the Company’s primary

credit facility.

See Note 14 of Notes to the Condensed Consolidated Financial Statements.

Gain on insurance recoveries during the three and nine months ended September

30, 2022, reflects payments received from

insurers related to the property damage incurred during the three

months ended September 2021, noted above.

See Note 18 of Notes

to the Condensed Consolidated Financial Statements.

i

Note 11 – Income Taxes

and Uncertain Income Tax

Positions

The Company’s effective

tax rates for the three and nine months ended September 30, 2022 were

i 28.1

% and

i 19.2

%, respectively,

compared to

i 2.6

% and

i 21.8

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

The Company’s effective

tax

rate for the nine months ended September 30, 2022 was impacted by various

items including a decline in forecasted profits and

earnings mix, foreign tax inclusions, changes in the valuation allowance

for foreign tax credits, the impact of audit settlements reached

with Italian tax authorities, a reduction in reserves for uncertain tax positions

and withholding taxes.

In addition, the Company

incurred higher tax expense during the three and nine months ended

September 30, 2022 at one of its subsidiaries as it accrued taxes at

a statutory tax rate of

i 25

% while it awaits recertification of a concessionary

i 15

% tax rate, which was available to the Company during

all of 2021.

Comparatively, the prior 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.

As of December 31, 2021, the Company had a deferred tax liability of $

i 8.4

million on certain undistributed foreign earnings,

which primarily represents the Company’s

estimate of non-U.S. income taxes the Company will incur to ultimately remit certain

earnings to the U.S.

As of September 30, 2022 this deferred tax liability balance was $

i 6.9

million.

As of September 30, 2022, the

Company’s cumulative liability

for gross unrecognized tax benefits was $

i 16.2

million, a decrease of approximately $

i 6.3

million from

the cumulative liability accrued as of December 31, 2021.

The Company continues to recognize interest and penalties associated with uncertain

tax positions as a component of taxes on

income before equity in net income of associated companies in its Condensed

Consolidated Statements of Income.

The Company

recognized an expense for interest of $

i 0.1

million and a benefit for interest of $

i 0.2

million and a benefit of less than $

i 0.1

million and

$

i 1.6

million for penalties in its Condensed Consolidated Statement of Income for

the three and nine months ended September 30,

2022, respectively,

and recognized an expense for interest of approximately $

i 0.2

million and $

i 0.4

million and a benefit of less than

$

i 0.1

million and $

i 0.2

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

three and nine months ended

September 30, 2021, respectively.

As of September 30, 2022, the Company had accrued $

i 2.6

million for cumulative interest and $

i 1.4

million for cumulative penalties in its Condensed Consolidated

Balance Sheets, compared to $

i 3.1

million for cumulative interest and

$

i 3.1

million for cumulative penalties accrued at December 31, 2021.

During the nine months ended September 30, 2022 and 2021, the Company

recognized decreases of $

i 3.8

million and $

i 1.2

million, respectively,

in its cumulative liability for gross unrecognized tax benefits due to the settlement of

income tax audits with

both the Italian and German tax authorities, as well as the expiration of the

applicable statutes of limitations for certain tax years.

The Company estimates that during the year ending December 31, 202

2

it will reduce its cumulative liability for gross

unrecognized tax benefits by approximately $

i 4.1

million due to the settlement of income tax audits and 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, 2022.

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

i 2007

, Brazil from

i 2011

,

the Netherlands from

i 2016

, Canada, China, Mexico and the U.S. from

i i i i 2017 / / /

, Germany, Spain and the United

Kingdom from

i i i 2018 / /

,

India from fiscal year beginning April 1, 2017 and ending March 31,

i 2018

, and various U.S. state tax jurisdictions from

i 2011

.

/

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

18

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

i 2007

through

i 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 had accepted.

As of September 30, 2022, the Company received $

i 1.6

million in refunds from the

Netherlands and Spain.

In February 2022, the Company received a settlement notice from the Italian taxing

authorities confirming the

amount due of $

i 2.6

million, having granted the Company’s request

to utilize its remaining net operating losses to partially offset

the

liability.

As of September 30, 2022, the Company has paid the full settlement amount,

of which approximately $

i 0.2

million was

confirmed to be refundable.

Houghton Italia, S.r.l was involved

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

i 2014

through

i 2018

.

During the fourth quarter of 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 years 2014 and 2015.

During the nine months ended September 30, 2022, the Company settled

tax years 2016 through 2018 for a total of $

i 2.1

million.

In total, the Company has now settled all years 2014 through 2018 for $

i 3.7

million.

Accordingly, the Company has

released all reserves relating to this audit for the settled tax years.

As a result of the

settlement and reserve release the Company recognized a net benefit

to the tax provision of $

i 1.9

million during the first nine months

of 2022.

The Company has an indemnification receivable of approximately $

i 3.6

million in connection with its claim against the

former owners of Houghton for any pre-Combination tax

liabilities arising from this matter, as well as other audit

settlements.

i

Note 12 – Earnings Per Share

The following table summarizes earnings per share calculations for

the three and nine months ended September 30, 2022 and

2021:

i

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Basic earnings per common share

Net income attributable to Quaker Chemical Corporation

$

i 25,867

$

i 31,058

$

i 60,026

$

i 103,243

Less: income allocated to participating securities

( i 115)

( i 119)

( i 250)

( i 413)

Net income available to common shareholders

$

i 25,752

$

i 30,939

$

i 59,776

$

i 102,830

Basic weighted average common shares outstanding

i 17,847,305

i 17,812,216

i 17,835,976

i 17,800,082

Basic earnings per common share

$

i 1.44

$

i 1.74

$

i 3.35

$

i 5.78

Diluted earnings per common share

Net income attributable to Quaker Chemical Corporation

$

i 25,867

$

i 31,058

$

i 60,026

$

i 103,243

Less: income allocated to participating securities

( i 115)

( i 119)

( i 250)

( i 412)

Net income available to common shareholders

$

i 25,752

$

i 30,939

$

i 59,776

$

i 102,831

Basic weighted average common shares outstanding

i 17,847,305

i 17,812,216

i 17,835,976

i 17,800,082

Effect of dilutive securities

i 12,566

i 58,176

i 15,465

i 59,986

Diluted weighted average common shares outstanding

i 17,859,871

i 17,870,392

i 17,851,441

i 17,860,068

Diluted earnings per common share

$

i 1.44

$

i 1.73

$

i 3.35

$

i 5.76

/

Certain stock options, restricted stock units and PSUs are not included

in the diluted earnings per share calculation when the

effect would have been anti-dilutive.

The calculated amount of anti-diluted shares not included were

i 25,896

and

i 24,618

for the three

and nine months ended September 30, 2022, respectively,

and

i 5,531

and

i 3,722

for the three and nine months ended September 30,

2021, respectively.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

19

i

Note 13 – Goodwill and Other Intangible Assets

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

September 30, 2022 were as follows:

i

Global

Specialty

Americas

EMEA

Asia/Pacific

Businesses

Total

Balance as of December 31, 2021

$

i 214,023

$

i 135,520

$

i 162,458

$

i 119,193

$

i 631,194

Goodwill additions (reductions)

i 1,853

i —

( i 59)

i 1,794

Currency translation adjustments

( i 810)

( i 16,826)

( i 16,462)

( i 7,858)

( i 41,956)

Balance as of September 30, 2022

$

i 215,066

$

i 118,694

$

i 145,996

$

i 111,276

$

i 591,032

/

Gross carrying amounts and accumulated amortization for definite-lived

intangible assets as of September 30, 2022 and

December 31, 2021 were as follows:

i

Gross Carrying

Accumulated

Amount

Amortization

2022

2021

2022

2021

Customer lists and rights to sell

$

i 803,346

$

i 853,122

$

i 173,893

$

i 147,858

Trademarks, formulations and product

technology

i 150,164

i 163,974

i 42,484

i 38,747

Other

i 6,611

i 6,309

i 5,973

i 5,900

Total definite-lived

intangible assets

$

i 960,121

$

i 1,023,405

$

i 222,350

$

i 192,505

/

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

their useful lives.

The Company recorded

$

i 14.1

million and $

i 43.3

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

30, 2022, respectively.

Comparatively,

the Company recorded $

i 14.9

million and $

i 44.7

million of amortization expense for the three and nine months ended

September 30, 2021, respectively.

Estimated annual aggregate amortization expense for the current year

and subsequent five years and beyond is as follows:

i

For the year ended December 31, 2022

$

i 55,628

For the year ended December 31, 2023

i 55,454

For the year ended December 31, 2024

i 54,848

For the year ended December 31, 2025

i 54,027

For the year ended December 31, 2026

i 53,835

For the year ended December 31, 2027 and beyond

i 513,988

/

The Company had four indefinite-lived intangible assets totaling

$

i 178.2

million as of September 30, 2022, including $

i 177.1

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

with the Combination.

Comparatively, the

Company had four indefinite-lived intangible assets for trademarks and

tradenames totaling $

i 196.9

million as of December 31, 2021.

The Company completes its annual goodwill and indefinite-lived intangible

asset impairment test during the fourth quarter of

each year, or more frequently if triggering

events indicate a possible impairment.

The Company continually evaluates financial

performance, economic conditions and other recent developments in

assessing if a triggering event indicates that the carrying values

of goodwill, indefinite-lived, or long-lived assets are impaired.

The Company continues to monitor various financial, economic and

geopolitical conditions impacting the Company,

including the ongoing Russia-Ukraine war and the Company’s

decision to cease

operations in Russia, continued raw material cost escalation, supply chain

constraints and disruptions, as well as rising interest rates

and the cost of capital among other factors.

The Company concluded that these and other factors, which have and continue to

impact

the Company, did not

represent a triggering event during the third quarter of 2022, except for

the Company’s EMEA reporting unit

and the associated goodwill, as well as the related asset group.

The Company concluded that during the third quarter of 2022 the

escalation of these events adversely impacted EMEA’s

financial performance and represented a triggering event.

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

assessment for its EMEA reporting unit, as well as

the related asset group, during the third quarter of 2022.

The Company concluded that the undiscounted cash flows exceeded the

carrying value of the long-lived assets, and it is not more likely than not that

an impairment exists.

In completing a quantitative

goodwill impairment test, the Company compares the reporting unit

’s fair value, primarily based on future

discounted cash flows, to

its carrying value in order to determine if an impairment charge is warranted.

The estimates of future discounted cash flows involve

considerable management judgment and are based upon certain significant

assumptions including the weighted average cost of capital

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

20

as well as projected EBITDA, which includes assumptions related to revenue

growth rates, gross margin levels and operating

expenses.

As a result of this interim impairment assessment,

the estimated fair value of the EMEA reporting unit exceeded its

carrying value by approximately

i 22

% and the Company concluded no impairment was warranted.

Notwithstanding the results of the Company’s

interim impairment assessment, if the Company is unable to successfully

implement selling price increases aimed at more than offsetting

raw material costs and ongoing inflationary pressures and the financial

performance of the EMEA reporting unit declines further,

or interest rates continue to rise and this leads to an increase in the cost of

capital,

then it is possible these financial, economic and geopolitical conditions could

result in another triggering event for the EMEA

reporting unit in the future and could lead to a potential impairment

.

In addition, if any of these financial, economic or geopolitical

conditions has a more significant adverse effect on the Company,

these could lead to a potential impairment of the Company’s

goodwill or other indefinite-lived or long-lived assets.

i

Note 14 – Debt

Debt as of September 30, 2022 and December 31, 2021 includes the following:

i

As of September 30, 2022

As of December 31, 2021

Interest

Outstanding

Interest

Outstanding

Rate

Balance

Rate

Balance

Credit Facilities:

Original Revolver

i —

$

i —

i 1.62%

$

i 211,955

Original U.S. Term

Loan

i —

i 1.65%

i 540,000

Original Euro Term

Loan

i —

i 1.50%

i 137,616

Amended Revolver

i 4.12%

i 201,536

i —

Amended U.S. Term

Loan

i 4.26%

i 600,000

i —

Amended Euro Term

Loan

i 1.50%

i 139,627

i —

Industrial development bonds

i 5.26%

i 10,000

i 5.26%

i 10,000

Bank lines of credit and other debt obligations

i Various

i 2,903

i Various

i 1,777

Total debt

$

i 954,066

$

i 901,348

Less: debt issuance costs

( i 2,104)

( i 8,001)

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

( i 20,471)

( i 56,935)

Total long-term debt

$

i i 931,491 /

$

i i 836,412 /

/

Credit facilities

The Company, its wholly

owned subsidiary,

Quaker Chemical B.V.,

as borrowers, Bank of America, N.A., as administrative

agent, U.S. Dollar swing line lender and letter of credit issuer,

and the other lenders party thereto, entered into a credit agreement on

August 1, 2019, as amended (the “Original Credit Facility”).

The Original Credit Facility was comprised of a $

i 400.0

million

multicurrency revolver (the “Original Revolver”), a $

i 600.0

million term loan (the “Original U.S. Term

Loan”), each with the

Company as borrower, and a $

i 150.0

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

Loan”) with

Quaker Chemical B.V.,

a Dutch subsidiary of the Company as borrower,

each with a

i five year

term, maturing in

i August 2024

.

During June 2022, the Company,

and its wholly owned subsidiary,

Quaker Houghton B.V.,

as borrowers, Bank of America, N.A.,

as administrative agent, U.S. Dollar swing line lender and letter of credit

issuer, Bank of America Europe Designated Active

Company, as Euro

Swing Line Lender, certain guarantors and other lenders

entered into an amendment to the Original Credit Facility

(the “Amended Credit Facility”). The Amended Credit Facility established

(A) a new $

i 150.0

million Euro equivalent senior secured

term loan (the “Amended Euro Term

Loan”), (B) a new $

i 600.0

million senior secured term loan (the “Amended U.S. Term

Loan”),

and (C) a new $

i 500.0

million senior secured revolving credit facility (the “Amended Revolver”).

The Company has the right to

increase the amount of the Amended Credit Facility by an aggregate amount

not to exceed the greater of $

i 300.0

million or

i 100

% of

Consolidated EBITDA, subject to certain conditions including the agreement

to provide financing by any lender providing such

increase).

In addition, the Amended Credit Facility also:

(i) eliminated

the requirement that material foreign subsidiaries must guaranty the Original Euro

Term Loan;

(ii) replaced

the U.S. Dollar borrowings reference rate from LIBOR to SOFR;

(iii) extended the maturity date of the Original Credit Facility from

i August 2024

to

i June 2027

; and

(iv) effected certain other changes to the Original Credit

Facility as set forth in the Amended Credit Facility.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

21

The Company used the proceeds of the Amended Credit Facility to repay

all outstanding loans under the Original Credit Facility,

unpaid accrued interest and fees on the closing date under the Original

Credit Facility and certain expenses and fees.

U.S. Dollar-

denominated

borrowings under the Amended Credit Facility bear interest, at the Company’s

election, at the base rate or term SOFR

plus an applicable rate ranging from

i 1.00

% to

i 1.75

% for term SOFR loans and from

i 0.00

% to

i 0.75

% for base rate loans, depending

upon the Company’s consolidated

net leverage ratio.

Loans based on term SOFR also include a spread adjustment equal to

i 0.10

% per

annum.

Borrowings under the Amended Credit Facility denominated

in currencies other than U.S. Dollars bear interest at the

alternative currency term rate plus the applicable rate ranging from

i 1.00

% to

i 1.75

%.

The Amended Credit Facility contains affirmative

and negative covenants, financial covenants and events of default, including

without limitation restrictions on (a) the incurrence of additional

indebtedness;

(b) investments in and acquisitions of other businesses,

lines of business and divisions; (c) the making of dividends or capital stock

purchases;

and (d) dispositions of assets.

Dividends and

share repurchases are permitted in annual amounts not exceeding the greater

of $

i 75

million annually and

i 25

% of consolidated

EBITDA if there is no default.

If the consolidated net leverage ratio is less than

i 2.50

to

i 1.00

, then the Company is no longer subject to

restricted payments.

Financial covenants contained in the Amended Credit Facility include

a consolidated interest coverage ratio test and a

consolidated net leverage ratio test.

The consolidated net leverage ratio at the end of a quarter may not be

greater than

i 4.00

to

i 1.00

,

subject to a permitted increase during a four-quarter

period after certain acquisitions.

The Company has the option of replacing the

consolidated net leverage ratio test with a consolidated senior net leverage ratio

test if the Company issues certain types of unsecured

notes, subject to certain limitations.

Events of default in the Amended Credit Facility include without limitation

defaults for non-

payment, breach of representations and warranties, non-performance

of covenants, cross-defaults, insolvency,

and a change of control

in certain circumstances.

The occurrence of an event of default under the Amended Credit Facility could result

in all loans and other

obligations becoming immediately due and payable and the Amended

Credit Facility being terminated.

As of September 30, 2022, the

Company was in compliance with all of the Amended Credit Facility covenants.

The weighted average variable interest rate incurred on the outstanding

borrowings under the Original Credit Facility and the

Amended Credit Facility during the nine months ended September

30, 2022 was approximately

i 2.4

%. As of September 30, 2022, the

interest rate on the outstanding borrowings under the Amended Credit

Facility was approximately

i 3.8

%.

In addition to paying interest

on outstanding principal under the Original Credit Facility,

the Company was required to pay a commitment fee ranging from

i 0.2

% to

i 0.3

% depending on the Company’s consolidated

net leverage ratio under the Original Revolver in respect of the unutilized

commitments thereunder.

As part of the Amended Credit Facility,

the Company is required to pay a commitment fee ranging from

i 0.150

% to

i 0.275

% related to unutilized commitments under the Amended Revolver,

depending on the Company’s consolidated

net

leverage ratio.

The Company had unused capacity under the Amended Revolver of approximately

$

i 295

million, which is net of bank

letters of credit of approximately $

i 3

million, as of September 30, 2022.

The Company previously capitalized $

i 23.7

million of certain third-party debt issuance costs in connection with executing the

Original Credit Facility.

Approximately $

i 15.5

million of the capitalized costs were attributed to the Original Term

Loans and

recorded as a direct reduction of Long-term debt on the Condensed

Consolidated Balance Sheet.

Approximately $

i 8.3

million of the

capitalized costs were attributed to the Original Revolver and recorded

within Other assets on the Condensed Consolidated Balance

Sheet.

These capitalized costs were being amortized into Interest expense over

the

i five year

term of the Original Credit Facility.

As

of December 31, 2021, the Company had $

i 8.0

million of debt issuance costs recorded as a reduction of Long-term debt attributable

to

the Original Credit Facility.

As of December 31, 2021, the Company had $

i 4.3

million of debt issuance costs recorded within Other

assets attributable to the Original Credit Facility.

Prior to executing the Amended Credit Facility,

the Company had $

i 6.6

million of

debt issuance costs recorded as a reduction of Long-term debt attributable

to the Original Credit Facility and $

i 3.5

million of debt

issuance costs recorded within Other assets attributable to the Original

Credit Facility.

In connection with executing the Amended Credit Facility,

the Company recorded a loss on extinguishment of debt of

approximately $

i 6.8

million which includes the write-off of certain previously

unamortized deferred financing costs as well as a

portion of the third-party and creditor debt issuance costs incurred

to execute the Amended Credit Facility.

Also in connection with

executing the Amended Credit Facility,

during the second quarter of 2022, the Company capitalized $

i 2.2

million of certain third-party

and creditor debt issuance costs.

Approximately $

i i 0.7 /

million of the capitalized costs were attributed to the Amended Euro Term

Loan

and Amended U.S. Term

Loan.

These costs were recorded as a direct reduction of Long-term debt on the

Condensed Consolidated

Balance Sheet.

Approximately $

i 1.5

million of the capitalized costs were attributed to the Amended Revolver and

recorded within

Other assets on the Condensed Consolidated Balance Sheet.

These capitalized costs, as well as the previously capitalized costs that

were not written off will collectively be amortized into Interest expense

over the

i five year

term of the Amended Credit Facility.

As of

September 30, 2022, the Company had $

i 2.1

million of debt issuance costs recorded as a reduction of Long-term debt on the

Condensed Consolidated Balance Sheet and $

i 4.6

million of debt issuance costs recorded within Other assets on the Condensed

Consolidated Balance Sheet.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

22

The Original Credit Facility required the Company to fix its variable interest

rates on at least

i 20

% of its total Original 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 Original Credit Facility,

in November 2019, the Company entered into $

i 170.0

million notional amounts of three-year interest rate

swaps at a base rate of

i 1.64

% plus an applicable margin as provided in the Original 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,

2022, the aggregate interest

rate on the swaps, including the fixed base rate plus an applicable margin,

was

i 3.1

%.

The Amended Credit Facility does not require

the Company to fix variable interest rates on any portion of its borrowings.

As of September 30, 2022, the Company had not amended

its current interest rate swaps.

In October 2022, the Company’s interest

rate swap contracts expired.

Upon expiration, the Company is

entitled to a cash payment from the counterparties, which is materially consistent

with the fair value as of September 30, 2022.

See

Note 17 of Notes to Condensed Consolidated Financial Statements.

Industrial development bonds

As of September 30, 2022 and December 31, 2021, the Company had fixed

rate, industrial development authority bonds totaling

$

i i 10.0 /

million in principal amount due in

i 2028

.

These bonds have similar covenants to the Amended 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 certain foreign subsidiaries, which are not

collateralized.

The Company’s other debt obligations

primarily consist of certain domestic and foreign low interest rate or interest-

free municipality-related loans, local credit facilities of certain foreign subsidiaries

and capital lease obligations.

Total unused

capacity under these arrangements as of September 30, 2022 was approximately

$

i 12

million.

i In addition to the bank letters of credit described in the “Credit facilities” subsection above, the Company’s 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, 2022 were approximately $ i 5 million.

The Company incurred the following debt related expenses included

within Interest expense, net, in the Condensed Consolidated

Statements of Income:

i

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Interest expense

$

i 9,465

$

i 4,779

$

i 20,339

$

i 14,242

Amortization of debt issuance costs

i 353

i 1,187

i 2,589

i 3,562

Total

$

i 9,818

$

i 5,966

$

i 22,928

$

i 17,804

/

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

as of September 30, 2022 and the Original

Credit Facility as of December 31, 2021, the amounts at which the Company’s

total debt were recorded are not materially different

from their fair market value.

On September 30, 2022, annual maturities on the Amended Credit Facility in the

next five fiscal years (excluding the reduction to

long-term debt attributed to capitalized and unamortized debt issuance

costs) are as follows:

i

`

September 30,

2022

For the remainder of 2022

$

i 4,623

For the year ended December 31, 2023

i 18,491

For the year ended December 31, 2024

i 23,113

For the year ended December 31, 2025

i 36,981

For the year ended December 31, 2026

i 36,981

For the year ended December 31, 2027

i 820,974

Total payments

$

i 941,163

/

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

23

i

Note 15 – Accumulated Other Comprehensive Income

The following tables show the reclassifications from and resulting balances

of accumulated other comprehensive income

(“AOCI”) for the three and nine months ended September 30, 2022 and 2021:

i

Defined

Unrealized

Currency

Benefit

(Loss) Gain in

Translation

Pension

Available-for-

Derivative

Adjustments

Plans

Sale Securities

Instruments

Total

Balance at June 30, 2022

$

( i 133,110)

$

( i 11,269)

$

( i 1,170)

$

i 303

$

( i 145,246)

Other comprehensive (loss) income before

Reclassifications

( i 71,948)

i 453

( i 1,006)

( i 182)

( i 72,683)

Amounts reclassified from AOCI

i —

i 210

( i 30)

i —

i 180

Related tax amounts

i —

( i 166)

i 218

i 42

i 94

Balance at September 30, 2022

$

( i 205,058)

$

( i 10,772)

$

( i 1,988)

$

i 163

$

( i 217,655)

Balance at June 30, 2021

$

( i 12,177)

$

( i 21,778)

$

i 596

$

( i 2,584)

$

( i 35,943)

Other comprehensive (loss) income before

Reclassifications

( i 19,905)

i 488

( i 85)

i 567

( i 18,935)

Amounts reclassified from AOCI

i —

i 709

( i 176)

i —

i 533

Related tax amounts

i —

( i 293)

i 46

( i 131)

( i 378)

Balance at September 30, 2021

$

( i 32,082)

$

( i 20,874)

$

i 381

$

( i 2,148)

$

( i 54,723)

/

Defined

Unrealized

Currency

Benefit

Gain (Loss) in

Translation

Pension

Available-for-

Derivative

Adjustments

Plans

Sale Securities

Instruments

Total

Balance at December 31, 2021

$

( i 49,843)

$

( i 13,172)

$

i 397

$

( i 1,372)

$

( i 63,990)

Other comprehensive (loss) income before

reclassifications

( i 155,215)

i 2,535

( i 3,326)

i 1,993

( i 154,013)

Amounts reclassified from AOCI

i —

i 657

i 306

i —

i 963

Related tax amounts

i —

( i 792)

i 635

( i 458)

( i 615)

Balance at September 30, 2022

$

( i 205,058)

$

( i 10,772)

$

( i 1,988)

$

i 163

$

( i 217,655)

Balance at December 31, 2020

$

( i 2,875)

$

( i 23,467)

$

i 3,342

$

( i 3,598)

$

( i 26,598)

Other comprehensive (loss) income before

reclassifications

( i 29,207)

i 1,009

( i 489)

i 1,883

( i 26,804)

Amounts reclassified from AOCI

i —

i 2,423

( i 3,259)

i —

( i 836)

Related tax amounts

i —

( i 839)

i 787

( i 433)

( i 485)

Balance at September 30, 2021

$

( i 32,082)

$

( i 20,874)

$

i 381

$

( i 2,148)

$

( i 54,723)

All reclassifications related to unrealized gain (loss) in available-for-sale securities relate

to the Company’s equity

interest in a

captive insurance company and are recorded in equity in net income

of associated companies.

The amounts reported in other

comprehensive income for noncontrolling interest are related to currency

translation adjustments.

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

24

i

Note 16 – 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:

i

Fair Value

Measurements at September 30, 2022

Total

Using Fair Value

Hierarchy

Assets

Fair Value

Level 1

Level 2

Level 3

Company-owned life insurance

$

i 2,018

$

i —

$

i 2,018

$

i —

Total

$

i 2,018

$

i —

$

i 2,018

$

i —

/

Fair Value

Measurements at December 31, 2021

Total

Using Fair Value

Hierarchy

Assets

Fair Value

Level 1

Level 2

Level 3

Company-owned life insurance

$

i 2,533

$

i —

$

i 2,533

$

i —

Total

$

i 2,533

$

i —

$

i 2,533

$

i —

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

i i no /

t hold any Level 3 investments as of September 30, 2022 or December 31,

2021, respectively, so related

disclosures have not been included.

i

Note 17 – Hedging Activities

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

the Company’s exposure to

variable

interest rate risk associated with the Original Credit Facility,

in November 2019, the Company entered into $

i 170.0

million notional

amounts of

i three year

interest rate swaps.

See Note 14 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.

In June 2022, the Company amended the Original Credit Facility.

See Note 14 of Notes to the Condensed Consolidated Financial

Statements.

The Amended Credit Facility does not require the Company to fix variable

interest rates on any portion of its borrowings.

In October 2022, the Company’s

interest rate swap contracts expired.

Upon expiration, the Company is entitled to a cash payment

from the counterparties, which is materially consistent with the fair value as of

September 30, 2022.

The balance sheet classification and fair values of the Company’s

derivative instruments, which are Level 2 measurements, are as

follows:

/

i

Fair Value

Condensed Consolidated

September 30,

December 31,

Balance Sheet Location

2022

2021

Derivatives designated as cash flow hedges:

Interest rate swaps

Prepaid expenses and other current assets

$

i i 212 /

$

i —

Other accrued liabilities

i —

i 1,782

$

i 212

$

i 1,782

/

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

September 30,

December 31,

2022

2021

Derivatives designated as cash flow hedges:

Interest rate swaps

AOCI

$

i 163

$

i 1,372

$

i 163

$

i 1,372

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

25

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

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Amount and location of expense reclassified

Interest income

from AOCI into expense (effective portion)

(expense), net

$

i 134

$

( i 672)

$

( i 882)

$

( i 1,974)

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.

i

Note 18 – Commitments and Contingencies

The Company previously disclosed in its 2021 Form 10-K that AC Products, Inc.

(“ACP”), a wholly owned subsidiary,

in 2007,

agreed to operate two groundwater treatment systems, so as to hydraulically

contain groundwater contamination emanating from

ACP’s site until such time as the concentrations

of contaminants are below the current Federal maximum contaminant

level for four

consecutive quarterly sampling events. In 2014, ACP ceased operation

at one of its two groundwater treatment systems, as it had met

the above condition for closure. As of September 30, 2022, ACP continues

to operate the second groundwater treatment system, while

the Company discusses with the relevant authorities whether the second

groundwater treatment system meets the conditions for

closure.

In addition, the Santa Ana Regional Water

Quality Control Board requested that ACP conduct additional indoor

and outdoor

soil vapor testing on and near the ACP site to confirm that ACP continues to meet the applicable

local soil vapor standards.

As of

September 30, 2022, ACP performed such testing and is awaiting the review

of the results from the Santa Ana Regional Water

Quality

Control Board.

As of September 30, 2022, the Company believes that the range of pot

ential-known liabilities associated with the balance of the

ACP water remediation program is approximately $

i 0.1

million to $

i 1.0

million.

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

length of operation of the treatment system as determined by groundwater

modeling.

Costs of operation include the operation and

maintenance of the extraction well, groundwater monitoring and

program management.

The Company previously disclosed in its 2021 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, 2022, 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 $

i 0.3

million (excluding costs of

defense).

The Company previously disclosed in its 2021 Form 10-K that it is party to certain environmental

matters related to certain

domestic and foreign properties.

These environmental matters primarily require the Company

to perform long-term monitoring and

maintenance at each of the applicable sites.

During the three and nine months ended September 30, 2022, 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 approximately 30 years,

has estimated the range of costs for all of these environmental matters, on

a discounted basis, to be between approximately $

i 5.0

million and $

i 6.0

million as of September 30, 2022, for which $

i 5.2

million was accrued within other accrued liabilities and other non-

current liabilities on the Company’s

Condensed Consolidated Balance Sheet as of September 30, 2022.

Comparatively, as of

December 31, 2021, the Company had $

i 5.6

million accrued for with respect to these matters.

Although there can be no assurance regarding the outcome of other

unrelated environmental matters, the Company believes that it

has made adequate accruals for costs associated with other environmental matters

for which it is aware, and has accrued $

i i 0.4 /

million

as of both September 30, 2022 and December 31, 2021, respectively,

to provide for such anticipated future environmental assessments

and remediation costs.

/

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts,

unless otherwise stated)

(Unaudited)

26

The Company previously disclosed in its 2021 Form 10-K that during the first nine

months 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 related to companies’ rights to exclude the state tax on goods

circulation (a valued-added-tax or 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 five years preceding the

date of their legal claims.

As a result of these court

rulings in the first nine months of 2021, the Company recognized non-income

tax credits of

i 67.0

million BRL or approximately $

i 13.3

million, which includes approximately $

i 8.4

million for the PIS and COFINS tax credits as well as interest on these tax credits of $

i 4.9

million.

The tax credits to which the Company’s

Brazilian subsidiaries are entitled are claimable once registered with the Brazilian

tax authorities which the Company subsequently completed.

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.

In connection with obtaining regulatory approvals for the Combination,

certain steel and aluminum related product lines of

Houghton were divested in August 2019. The Company previously disclosed

in its 2021 Form 10-K that 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 responded to the subject matters of the

indemnification claim and during the first quarter of 2022, the

matter was resolved consistent with the Company’s

expectations and

position that there were

i no

amounts owed by the Company.

The Company previously disclosed in its 2021 Form 10-K that two of the Company’s

locations suffered property damages as a

result of flooding and electrical fire, respectively.

The Company maintains property and flood insurance for all of its facilities

globally.

During the nine months ended September 30, 2022, there have been no significant changes

to the facts or circumstances of

these previously disclosed matters, aside from the on-going restoration

of both sites.

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 were covered under the Company’s

property and flood insurance coverage, net of an aggregate deductible of $

i 2.0

million.

Through September 30, 2022, the Company has received payments from

its insurers of $

i 3.9

million associated with these events.

During the three months ended September 30, 2022, the Company recognized

a gain on insurance recoveries of $

i 1.1

million.

The

Company has recorded an insurance receivable of $

i 0.2

million as of September 30, 2022.

See Note 10 of Notes to the Condensed

Consolidated Financial Statements.

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

27

Item 2.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

.

As used in this Report, the terms “Quaker Houghton,”

the “Company,”

“we” and “our” refer to Quaker Chemical Corporation

(doing business as Quaker Houghton), its subsidiaries, and associated companies,

unless the context otherwise requires.

The term the

“Combination” refers to the legacy Quaker combination with Houghton

International, Inc. (“Houghton”) on August 1, 2019.

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, container, 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 U.S.

Overall, the Company delivered solid results in the third quarter of 2022

despite continued and persistent financial, economic and

geopolitical headwinds, including ongoing raw material cost escalation

and overall inflationary pressures, supply chain and logistics

challenges, the direct and indirect impacts of the ongoing war in Ukraine, Zero-COVID

policies in China, and foreign currency

volatility.

Notwithstanding these challenges, net sales in the third quarter of 2022

were $492.2 million, an increase of 10% compared

to $449.1 million in the third quarter of 2021.

This was primarily driven by an increase in selling price and product mix of

approximately 25% and additional net sales from acquisitions of 1%, partially

offset by a decline in organic sales volumes of 9% and

an unfavorable impact from foreign currency translation of 7%.

The increase in selling price and product mix was primarily the result

of strategic price increases implemented to offset the

ongoing inflationary pressures that began at the onset of 2021 and have escalated

throughout 2021 and into the first nine months of 2022.

The decline in organic sales volumes was primarily attributable to

softer end

market conditions, particularly in Europe and Asia/Pacific, the wind-down

of the tolling agreement for products previously divested

related to the Combination and the direct and indirect impacts of the ongoing

war in Ukraine.

The Company generated net income in the third quarter of 2022 of $25.9 million,

or $1.44 per diluted share, compared to net

income of $31.1 million, or $1.73 per diluted share in the third quarter

of 2021.

Excluding non-recurring items in each period, the

Company’s third quarter of 2022

non-GAAP earnings per diluted share were $1.74 compared to $1.63 in the prior

year quarter and the

Company’s current quarter

adjusted EBITDA was $70.3 million compared to $66.2 million in the third quarter

of 2021.

These results

were primarily driven by higher net sales in the current quarter coupled with

an improvement in gross margins compared to the prior

year quarter, partially offset

by the unfavorable impact of foreign currency translation and higher selling,

general and administrative

expenses (“SG&A”) as a result of significant year-over-year

inflationary pressures.

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 2022 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 as each of the Company’s

reportable segments net sales benefitted from double-digit year-over-year

increases in selling price and product mix, while those increases in net sales were

partially offset by the significant and unfavorable

impact of foreign currency translation.

All geographic segments had lower organic sales volumes, however

organic sales volumes for

the Global Speciality Businesses increased in the third quarter of

2022 compared to the prior year quarter due to continued end market

demand.

Operating earnings for the Global Specialty Businesses and Americas increased compared

to the prior year quarter, driven

by higher net sales and an improvement in margins.

Operating earnings for Asia/Pacific were relatively flat year-over-year

as lower

net sales were offset by an improvement in the segment’s

margins.

EMEA operating earnings declined compared to the prior year due

to the persistent and significant inflationary pressures on raw materials and

other costs and the negative impact of foreign currency

translation, partially offset by continued price

realization.

Additional details of each segment’s operating

performance are further

discussed in the Company’s Reportable

Segments Review, in the Operations

section of this Item, below.

The Company had a net operating cash outflow of $26.3 million in the first nine

months of 2022 compared to net operating cash

flow of $2.5 million in the first nine months of 2021.

The net operating cash outflow year-over-year reflects lower year-to-date

operating performance in 2022 compared to 2021 as well as the continued

significant current year working capital investment

primarily related to higher accounts receivable due to the increase in net

sales, higher inventory due to higher raw material costs and

lower levels of accounts payable.

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.

Quaker Chemical Corporation

Management’s Discussion and Analysis

28

Overall, the Company delivered another quarter of strong net sales growth,

driven by strong price realization, both sequentially

and year-over-year.

Coupled with an improvement in gross margin, these factors contributed

to the Company’s current quarter

earnings growth despite the ongoing inflationary pressures, unfavorable

foreign currency translation, macroeconomic and geopolitical

challenges and other disruptions that impacted the Company’s

customers and end markets. Looking at the remainder of 2022,

the

Company remains focused on executing on items within its control

as it manages through a continued uneven end market environment

and softer market conditions, primarily in Europe and Asia/Pacific.

The Company is encouraged by the resilience of its diversified

portfolio despite significant uncertainty caused by several macroeconomic

factors.

We continue

to expect to deliver further sequential

gross margin improvement in the fourth quarter

of 2022, as well as higher earnings in the second half of 2022 as compared to

the first

half of 2022 and second half of 2021.

On-going impact of COVID-19

The global outbreak of COVID-19 in March of 2020 has negatively impacted

all locations where the Company does business.

Although the Company has now operated in this COVID-19 environment

for more than two years, 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 and, at times during

the pandemic, the Company has experienced volume

declines as compared to pre-COVID-19 levels.

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

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 such as continuing restrictions in China,

as well as border controls or closures and transportation

disruptions,

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

To the extent that the Company’s

customers and

suppliers are 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

and adversely impacted by COVID-19.

While the

circumstances have presented and are expected to continue to 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 its financial reporting processes, internal

controls over financial reporting, or disclosure

controls and procedures.

The Company’s top priority

is to protect the health and safety of its employees and customers, while working to ensure business

continuity to meet customers’ needs.

During the pandemic, the Company has taken incremental steps to protect

the health and

wellbeing of its people in affected areas through various actions, including

enabling work at home where needed and practicable, 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 more than 30 production

facilities worldwide are open

and operating and are deemed as essential businesses in the jurisdictions where

they are operating.

The Company continues to expect

that the impacts from COVID-19 will gradually decline subject to the effective

containment of the virus and its variants and successful

distribution and acceptance of the available vaccines and treatments; however,

the incidence of reported cases of COVID-19 or a

variant in several geographies where the Company has significant operations

remains relatively high.

Differing government responses

to these reported cases continues to evolve and it therefore remains highly uncertain

as to how long the global pandemic and related

economic challenges will last in each of the jurisdictions where the Company conducts

business and when our customers’ businesses

will recover to pre-COVID-19 levels.

While the actions the Company has taken to date to protect our workforce, to

continue to serve

our customers with excellence and to conserve cash and reduce costs as applicable,

have been effective thus far,

further actions to

respond to the pandemic and its effects may be necessary as conditions

continue to evolve.

Impact of Political Conflicts

A significant portion of the Company’s

revenues and earnings are generated by non-U.S. operations.

This subjects the Company

to political and economic risks that could adversely affect the Company’s

business, liquidity, financial

position and results of

operations.

The existence of military conflicts, for example the Russian invasion of Ukraine, bring

inherent risks such as the potential

for supply chain disruptions, increased costs of resources including oil, decreased

trade activity and other consequences related to

economic or other sanctions.

The U.S. government and other nations have imposed significant restrictions

on most companies’ ability

to do business in Russia as a result of the military conflict between Russia and Ukraine.

It is not possible to predict the broader or

longer-term consequences of this conflict, which could include further sanctions,

embargoes, regional instability,

geopolitical shifts

and adverse effects on macroeconomic conditions,

security conditions, currency exchange rates and financial markets.

The military

conflict between Russia and Ukraine has had a negative impact on the Company’s

ability to sell to, ship products to, collect payments

from, and support customers in certain regions based on trade restrictions,

embargoes and export control law restrictions, and

logistics

restrictions including closures of air space.

If this conflict continues or expands, it could increase the costs, risks and adverse

impacts

from these new challenges.

The Company and its customers and suppliers may also be the subject of increased cyber-attacks.

Quaker Chemical Corporation

Management’s Discussion and Analysis

29

During the second quarter of 2022, the Company decided to cease its operations

in Russia.

The Company’s operations in the

conflict areas including Russia, Ukraine and Belarus historically represented

less than 2% of the Company’s consolidated net

sales

and less than 1% of the Company’s

consolidated total assets.

The Company’s primary exposure

in the conflict areas related to

outstanding customer accounts receivable.

The Company is actively monitoring its outstanding Russian receivables for collections

and has recorded incremental allowances

for doubtful accounts where warranted.

Liquidity and Capital Resources

At September 30, 2022, the Company had cash and cash equivalents of

$138.9 million.

Total cash and cash equivalents was

$165.2 million at December 31, 2021.

The $26.3 million decrease in cash and cash equivalents was the net result of

$46.6 million of

cash provided by financing activities offset by $26.3 million of

cash used in operating activities, $29.6

million of cash used in

investing activities and a $17.0 million negative impact due to the effect

of foreign currency translation.

Net cash flows used in operating activities were $26.3 million in the first nine

months of 2022 compared to net cash flows

provided by operating activities of $2.5 million in the first nine months

of 2021.

The decrease in net operating cash flow year-over-

year reflects lower first nine months of the year operating performance

in 2022 compared to 2021 as well as the continued significant

current year working capital investment primarily related to higher

accounts receivable due to the increase in net sales, higher

inventory due to an increase in costs and, to a lesser extent, a build in certain inventory

in response to global supply chain and logistics

challenges, as well as lower levels of accounts payable due to timing.

Net cash flows used in investing activities were $29.6 million in the

first nine months of 2022 compared to $30.1 million in the

first nine months of 2021.

The relatively consistent level of cash used in investing activities year-over-year

is the net result of lower

cash proceeds from the disposition of assets which included the sale of certain

held-for-sale real property assets related to the

Combination in the prior year period, and higher capital expenditures

in the current year largely related to certain infrastructure and

sustainability-related spending,

partially offset by lower cash payments related to acquisitions as a result

of the level of acquisition

activity in each year.

See Note 2 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report.

Net cash flows provided by financing activities were $46.6 million in the first

nine months of 2022 compared to net cash flows

used in financing activities of $10.5 million in the first nine months

of 2021.

The increase in net cash flows was primarily related to a

larger increase in borrowings in the current year under

the Company’s credit facility,

which was amended and extended, as further

described below, in

the second quarter of 2022.

In addition, the Company paid $22.3 million of cash dividends during the first nine

months of 2022, a $1.1 million or 5% increase in cash dividends compared

to the prior year.

The Company, its wholly

owned subsidiary,

Quaker Chemical B.V.,

as borrowers, Bank of America, N.A., as administrative

agent, U.S. Dollar swing line lender and letter of credit issuer,

and the other lenders party thereto, entered into a credit agreement on

August 1, 2019, as amended (the “Original Credit Facility”).

During June 2022, the

Company, and its wholly owned

subsidiary,

Quaker Houghton B.V.,

as borrowers, Bank of America, N.A., as administrative agent, U.S. Dollar swing

line lender and letter of

credit issuer, Bank of America Europe

Designated Active Company,

as Euro Swing Line Lender, certain guarantors

and other lenders

entered into an amendment to the Original Credit Facility (the “Amended

Credit Facility”).

The Company used the proceeds of the

Amended Credit Facility to repay all outstanding loans under the Original

Credit Facility, as well as accrued interest

and fees, and to

terminate the revolving credit commitments under the Original Credit

Facility.

The Company’s Amended Credit

Facility is comprised of a $500.0 million multicurrency revolver,

a $600.0 million term loan and

a $150.0 million (as of June 17, 2022) Euro equivalent term loan (collectively,

the “Amended Term Loans”)

with the Company and

Quaker Houghton B.V.,

as borrowers, each with a five-year term maturing in June 2027.

Subject to the consent of the Administrative

Agent and certain other

conditions, the Company may designate additional borrowers. The Company

has the right to increase the

amount of the Amended Credit Facility by an aggregate amount not

to exceed the greater of (i) $300 million and (ii) 100% of

Consolidated EBITDA, subject to certain conditions, including

the agreement to provide financing by any Lender providing any such

increase. U.S. Dollar-denominated borrowings

under the Amended Credit Facility bear interest, at the Company’s

election, at the base

rate or term Secured Overnight Financing Rate (“SOFR”) plus an applicable

rate ranging from 1.00% to 1.75% for term SOFR loans

and from 0.00% to 0.75% for base rate loans, depending upon the

Company’s consolidated net leverage

ratio.

Loans based on term

SOFR also include a spread adjustment equal to 0.10% per annum.

Borrowings under the Amended Credit Facility denominated in

currencies other than U.S. Dollars bear interest at the alternative currency

term rate plus the applicable rate ranging from 1.00% to

1.75%. In addition to paying interest on outstanding principal under

the Amended Credit Facility, the Company

is required to pay a

commitment fee ranging from 0.15% to 0.275% depending on the

Company’s consolidated net leverage

ratio to the Lenders under the

Amended Revolver in respect of the unutilized commitments thereunder.

Quaker Chemical Corporation

Management’s Discussion and Analysis

30

The Amended Credit Facility contains affirmative

and negative covenants, financial covenants and events of default that are

customary for agreements of this nature.

The Amended Credit Facility contains a number of customary business covenants,

including

without limitation restrictions on (a) the incurrence of additional

indebtedness by the Company or certain of its subsidiaries, (b)

investments in and acquisitions of other businesses, lines of business and

divisions by the Company or certain of its subsidiaries, (c)

the payment of dividends or capital stock purchases by the Company

or certain of its subsidiaries and (d) dispositions

of assets by the

Company or certain of its subsidiaries.

Dividends and share repurchases are permitted in annual amounts

not exceeding the greater of

$75 million annually and 25% of Consolidated EBITDA if there is no default.

If the Company’s consolidated

net leverage ratio is less

than 2.50 to 1.00 then the Company is no longer subject to restricted payments

.

Financial covenants contained in the Amended Credit Facility include

a consolidated interest coverage ratio test and a

consolidated net leverage ratio test.

The consolidated net leverage ratio at the end of a quarter may not be

greater than 4.00 to 1.00,

subject to a permitted increase during a four quarter period after certain

acquisitions.

The Company has the option of replacing the

consolidated net leverage ratio test with a consolidated senior net leverage ratio

test if the Company issues certain types of unsecured

debt, subject to certain customary limitations. Customary events of

default in the Amended Credit Facility include without limitation

defaults for non-payment, breach of representations and warranties, non

-performance of covenants, cross-defaults, insolvency,

and a

change of control of the Company in certain circumstances.

The occurrence of an event of default under the Amended Credit Facility

could result in all loans and other obligations becoming immediately

due and payable and the Amended Credit Facility being

terminated.

The Original Credit Facility required the Company to fix its variable interest

rates on at least 20% of its total Original 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 Original 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 Original 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,

2022, the aggregate interest

rate on the swaps, including the fixed base rate plus an applicable margin,

was 3.1%.

In October 2022, the Company’s interest rate

swap contracts expired.

Upon expiration, the Company is entitled to a cash payment from the counterparties, which

is materially

consistent with the fair value as of September 30, 2022.

The Amended Credit Facility does not require the Company to fix variable

interest rates on any portion of its borrowings.

The Company previously capitalized $23.7 million of certain third-party

debt issuance costs in connection with the Original

Credit Facility.

Approximately $15.5 million of the capitalized costs were attributed

to the Original Term Loans and recorded

as a

direct reduction of Long-term debt on the Condensed Consolidated

Balance Sheet.

Approximately $8.3 million of the capitalized

costs were attributed to the Original Revolver and recorded within Other

assets on the Condensed Consolidated Balance Sheet.

These

capitalized costs were being amortized into Interest expense over

the five-year term of the Original Credit Facility.

As of December

31, 2021, the Company had $8.0 million of debt issuance costs recorded

as a reduction of Long-term debt attributable to the Original

Credit Facility.

As of December 31, 2021, the Company had $4.3 million of debt issuance

costs recorded within Other assets

attributable to the Original Credit Facility.

Prior to executing the Amended Credit Facility,

the Company had $6.6 million of debt

issuance costs recorded as a reduction of Long-term debt attributable

to the Original Credit Facility and $3.5 million of debt issuance

costs recorded within Other assets attributable to the Original Credit Facility.

In connection with executing the Amended Credit

Facility, the Company

recorded a loss on extinguishment of debt of approximately $6.8 million which

includes the write-off of certain

previously unamortized deferred financing costs as well as a portion of

the third party and creditor debt issuance costs incurred to

execute the Amended Credit Facility.

Also in connection with executing the Amended Credit Facility,

during the third quarter of

2022, the Company capitalized $2.2 million of certain third-party

debt issuance costs.

Approximately $0.7 million of the capitalized

costs were attributed to the Amended Euro Term

Loan and Amended U.S. Term

Loan. These costs were recorded as a direct reduction

of Long-term debt on the Condensed Consolidated Balance Sheet.

Approximately $1.5 million of the capitalized costs were attributed

to the Amended Revolver and recorded within Other assets on the

Condensed Consolidated Balance Sheet.

These capitalized costs, as

well as the previously capitalized costs that were not written off

will collectively be amortized into Interest expense over the five-year

term of the Amended Credit Facility.

As of September 30, 2022, the Company had $2.1 million of debt issuance costs recorded

as a

reduction of Long-term debt on the Condensed Consolidated Balance Sheet

and $4.6 million of debt issuance costs recorded within

Other assets on the Condensed Consolidated Balance Sheet.

As of September 30, 2022, the Company had Amended Credit Facility borrowings

outstanding of $941.2 million.

As of

December 31, 2021, the Company had Original Credit Facility borrowings

outstanding of $889.6 million.

The Company has unused

capacity under the Amended Revolver of approximately $295

million, net of bank letters of credit of approximately $3 million, as

September 30, 2022.

The Company’s other debt obligations are

primarily industrial development bonds, bank lines of credit and

municipality-related loans, which totaled $12.9 million and $11.8

million as of September 30, 2022 and December 31, 2021,

respectively.

Total unused capacity under

these arrangements as of September 30, 2022 was approximately $12 million.

The

Company’s total net debt

as of September 30, 2022 was $815.2 million.

Quaker Chemical Corporation

Management’s Discussion and Analysis

31

The Company incurred $10.4 million of total Combination, integration

and other acquisition-related expenses in the first nine

months of 2022, which includes $2.4 million of other expenses related to

indemnification assets, described in the Non-GAAP

Measures section of this Item below.

Comparatively, in the first nine months

of 2021, the Company incurred $13.6 million of total

Combination, integration and other acquisition-related expenses, which

was net of a $5.4 million gain on the sale of certain held-for-

sale real property assets and also included $0.7 million of accelerated depreciation.

The Company had aggregate net cash outflows of

approximately $11.5 million related to the

Combination, integration and other acquisition-related expenses during

the first nine

months of 2022 as compared to $20.0 million during the first nine months

of 2021.

During the first nine months of 2022, the

Company incurred $10.7 million of strategic planning and transformation

expenses.

The Company expects that these additional

operating costs and associated cash flows, as well as higher capital expenditures

related to strategic planning, process optimization and

the next phase of the Company’s long

-term integration to further optimize its footprint, processes and other functions

will continue in

2022 and extend into the next several years.

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 included 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.

The exact timing to complete all actions and final costs associated with the QH

Program will depend on a number of factors and are subject to change; however,

the Company has had reduction in headcount and site

closures under the QH Program in 2022 and expects final headcount reductions

to continue into 2023.

At this time, the Company does

not expect to incur material additional costs under the QH Program.

The Company made cash payments related to the settlement of

restructuring liabilities under the QH Program during the first nine months

of 2022 of approximately $1.8 million compared to $4.6

million in the first nine months of 2021.

As of September 30, 2022, the Company’s

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

was $20.1

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 $6.4 million as a result of

offsetting benefits in other tax jurisdictions.

In 2021, two of the Company’s locations

suffered significant property damage as a result of flooding

and electrical fire.

The

Company maintains property and flood 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 2021 were covered under the Company’s

property and flood insurance coverage, net of an aggregate deductible

of $2.0 million.

Through September 30, 2022, the Company has received payments from its insurers of

$3.9 million associated with

these events.

The Company has recorded an insurance receivable of $0.2 million as of September

30, 2022.

See Note 18 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 ongoing

acquisition integration and optimization, pension plan

contributions, capital expenditures, other business opportunities (including

potential acquisitions), implementing actions to achieve the

Company’s sustainability

goals and other potential known or anticipated contingencies.

The Company believes it has sufficient

additional liquidity to support its operating requirements and to fund its business

obligations for the period beyond the next twelve

months as well, including the aforementioned items which are expected

to recur annually, as well as future principal

and interest

payments on the Company’s Amended

Credit Facility, tax obligations

and other long-term liabilities.

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 and other

global events 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 organic investments.

The timing

and amount of potential capital requirements cannot be determined

at this time and will depend on a number of factors, including the

actual and projected demand for our products, specialty chemical industry

conditions, competitive factors, and the condition of

financial markets, among others.

Critical Accounting Policies and Estimates

The Company’s critical accounting

policies and estimates, as set forth in its 2021

Form 10-K remain materially consistent.

However, due to the ongoing financial,

economic and geopolitical conditions impacting the Company,

the Company re-evaluated

certain of its estimates, most notably its estimates and assumptions with regards

to the fair value of its EMEA reporting unit during the

third quarter of 2022.

Quaker Chemical Corporation

Management’s Discussion and Analysis

32

Goodwill:

The Company accounts for business combinations under

the acquisition method of accounting.

This method requires

the recording of acquired assets, including separately identifiable intangible

assets, at their acquisition date fair values.

Any excess of

the purchase price over the estimated fair value of the

identifiable net assets acquired is recorded as goodwill.

The determination of

the estimated fair value of assets acquired requires management’s

judgment and often involves the use of significant estimates and

assumptions.

When necessary, the Company

consults with external advisors to help determine fair value.

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, or more frequently

if triggering events indicate a possible impairment.

The Company continually

evaluates

financial performance, economic conditions and other recent developments

in assessing if a triggering event indicates that the carrying

values of goodwill, indefinite-lived, or long-lived assets are impaired.

The Company continues to monitor various financial, economic

and geopolitical conditions impacting the Company,

including the ongoing Russia-Ukraine war and the Company’s

decision to cease

operations in Russia, continued raw material cost escalation, supply

chain constraints and disruptions, as well as rising interest rates

and the cost of capital among other factors.

The Company concluded that these and other factors, which have and continue

to impact

the Company, did not

represent a triggering event during the third quarter of 2022, except for the Company’s

EMEA reporting unit

and the associated goodwill,

as well as the related asset group.

The Company concluded that during the third quarter of 2022 the

escalation of these events adversely impacted EMEA’s

financial performance and represented a triggering event.

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

assessment for its EMEA reporting unit, as well as

the related asset group, during the third quarter of 2022.

The Company concluded that the undiscounted cash flows exceeded

the

carrying value of the long-lived assets and it is not more likely than not that

an impairment exists.

In completing a quantitative

goodwill impairment test, the Company compares the reporting

unit’s fair value, primarily based

on future discounted cash flows, to

its carrying value in order to determine if an impairment charge

is warranted.

The estimates of future discounted cash flows involve

considerable management judgment and are based upon certain significan

t

assumptions including the weighted average cost of capital

as well as projected EBITDA, which includes assumptions related to

revenue growth rates, gross margin levels and operating

expenses.

As a result of this interim impairment assessment, the estimated fair value of

the EMEA reporting unit exceeded its

carrying value by approximately 22% and the Company concluded

no impairment was warranted.

In completing the interim

quantitative impairment assessment, the Company used a WACC

assumption of approximately 10.0% and holding all other

assumptions constant, the WACC

would have to increase by approximately 1.8 percentage points

before the Company’s EMEA

reporting unit would be considered impaired.

In addition, holding EBITDA margins and all other assumptions constant,

the

Company’s compound

annual revenue growth rate during the entire projection period would need to decline

by approximately 3.0

percentage points before the Company’s

EMEA reporting unit would be considered impaired.

Similarly, holding reve

nue growth rates

and all other assumptions constant, the Company’s

average EBITDA margins throughout the entire projection

period would need to

decline by approximately 1.7 percentage points before the

Company’s EMEA reporting unit would be

considered impaired.

Notwithstanding the results of the Company’s

interim impairment assessment, if the Company is unable to successfully

implement selling price increases aimed at more than offsetting

raw material costs and ongoing inflationary pressures and the financial

performance of the EMEA reporting unit declines further,

or interest rates continue to rise and this leads to an increase in the cost of

capital, then it is possible these financial, economic and geopolitical conditions

could result in another triggering event for the EMEA

reporting unit in the future and could lead to a potential impairment.

In addition, if any of these financial, economic or geopolitical

conditions has a more significant adverse effect on

the Company, these could lead to a potential impairment

of the Company’s

goodwill or other indefinite-lived or long-lived assets.

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 meaningful

supplemental

information as they enhance a reader’s understanding

of the financial performance of the Company,

are indicative of future operating

performance of the Company,

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

measures exclude items

that are not considered indicative of future operating performance or not

considered core to the Company’s operations.

Non-GAAP

results are presented for supplemental informational purposes only

and should not be considered a substitute for the financial

information presented in accordance with GAAP.

Quaker Chemical Corporation

Management’s Discussion and Analysis

33

The Company presents EBITDA which is calculated as net income attributable

to the Company before depreciation and

amortization, interest expense, net, and taxes on income before equity

in net (loss) 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 investors, analysts,

and peers 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 (loss) 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 investors, analysts, and peers in

our industry as well as by management in assessing the operating performance

of the Company on a consistent basis.

Certain of the prior period non-GAAP financial measures presented

in the following tables have been adjusted to conform with

current period presentation.

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,

2022

2021

2022

2021

Operating income

$

44,609

$

36,010

$

105,915

$

119,720

Combination, restructuring and other

acquisition-related expenses (a)

717

5,083

7,421

20,371

Strategic planning and transformation expenses (b)

4,545

—

10,745

—

Executive transition costs (c)

913

285

2,097

1,097

Russia-Ukraine conflict related expenses (d)

88

—

2,183

—

Facility remediation costs, net (f)

—

1,490

—

1,490

Other charges (e)

70

320

546

613

Non-GAAP operating income

$

50,942

$

43,188

$

128,907

$

143,291

Non-GAAP operating margin (%) (m)

10.3%

9.6%

8.8%

10.9%

Quaker Chemical Corporation

Management’s Discussion and Analysis

34

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin

and Non-GAAP Net Income Reconciliations

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

Net income attributable to Quaker Chemical Corporation

$

25,867

$

31,058

$

60,026

$

103,243

Depreciation and amortization (a)(k)

19,908

21,542

61,491

66,334

Interest expense, net

8,389

5,637

20,228

16,725

Taxes on income before

equity in net (loss) income

of associated companies (l)

10,185

795

14,425

26,702

EBITDA

64,349

59,032

156,170

213,004

Equity loss (income) in a captive insurance company (i)

174

(108)

2,199

(4,071)

Combination, restructuring and other

acquisition-related expenses (a)

717

4,906

9,817

14,265

Strategic planning and transformation expenses (b)

4,545

—

10,745

—

Executive transition costs (c)

913

285

2,097

1,097

Russia-Ukraine conflict related expenses (d)

88

—

2,183

—

Facility remediation (recovery) costs, net (f)

(1,104)

2,019

(1,104)

2,019

Brazilian non-income tax credits (g)

—

(13,293)

Loss on extinguishment of debt (h)

—

6,763

—

Other charges (e)

609

35

356

353

Adjusted EBITDA

$

70,291

$

66,169

$

189,226

$

213,374

Adjusted EBITDA margin (%) (m)

14.3%

14.7%

13.0%

16.2%

Adjusted EBITDA

$

70,291

$

66,169

$

189,226

$

213,374

Less: Depreciation and amortization - adjusted (a)

19,908

21,365

61,491

65,616

Less: Interest expense, net

8,389

5,637

20,228

16,725

Less: Taxes on income

before equity in net income

of associated companies - adjusted (a)(l)

10,821

9,765

27,189

31,277

Non-GAAP net income

$

31,173

$

29,402

$

80,318

$

99,756

Non-GAAP Earnings per Diluted Share Reconciliations

Three Months Ended

Nine Months Ended

September 30,

2022

2021

2022

2021

GAAP earnings per diluted share attributable to

Quaker Chemical Corporation common shareholders

$

1.44

$

1.73

$

3.35

$

5.76

Equity loss (income) in a captive insurance company

per diluted share (i)

0.01

(0.01)

0.12

(0.23)

Combination, restructuring and other

acquisition-related expenses per diluted share (a)

0.04

0.22

0.45

0.64

Strategic planning and transformation expenses per

diluted share (b)

0.19

—

0.46

—

Executive transition costs per diluted share (c)

0.04

0.01

0.09

0.05

Russia-Ukraine conflict related expenses per diluted share (d)

0.01

—

0.11

—

Facility remediation (recovery) costs, net per diluted share (f)

(0.05)

0.09

(0.05)

0.09

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

—

(0.04)

—

(0.48)

Loss on extinguishment of debt per diluted share (h)

—

0.29

—

Other charges per diluted share (e)

0.04

—

0.03

0.02

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

0.02

(0.37)

(0.29)

Non-GAAP earnings per diluted share (n)

$

1.74

$

1.63

$

4.48

$

5.56

Quaker Chemical Corporation

Management’s Discussion and Analysis

35

(a)

Combination, restructuring and other acquisition-related expenses include

certain legal, financial, and other advisory and

consultant costs incurred in connection with the Combination integrat

ion activities including internal control readiness and

remediation as well as 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 amounts

also include expense associated with other of the Company’s

acquisitions, including certain legal, financial, and other advisory

and consultant costs incurred in connection with due diligence as well as costs associated

with selling inventory from acquired

businesses which was adjusted to fair value as part of purchase accounting.

These costs are not indicative of the future operating

performance of the Company.

Approximately $0.3 million and $0.5 million for the three and nine months

ended September 30,

2022, respectively,

and approximately $0.2 million and $0.7 million in the three and nine months ended September

30, 2021,

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 nine months ended September 30, 2022, the Company recorded

$2.4 million of other expense related to an

indemnification asset, which is included in the caption “Combination,

restructuring and other acquisition-related expenses” in the

reconciliation of GAAP earnings 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 attributable to Quaker Chemical Corporation to

Adjusted EBITDA and Non-GAAP net income.

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

recorded $0.2 million $0.7 million, respectively,

of accelerated depreciation related to certain of the Company’s

facilities, which

is included in the caption “Combination, restructuring 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 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 “Combination,

restructuring and other acquisition-related expenses” in the

reconciliation of GAAP earnings 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 attributable to Quaker Chemical Corporation to

Adjusted EBITDA and Non-GAAP net income.

During the three and nine months ended September 30, 2022, respectively,

the

Company recorded restructuring and related credits of $1.4 million

and $0.6 million, respectively,

and $0.9 million and net

charges of $0.6 million during the three and nine months ended September

30, 2021, respectively.

During the nine months ended

September 30, 2021, the Company recorded $0.8 million related to the sale of

inventory from acquired businesses which was

adjusted to fair value.

See Notes 2, 7, 10 and 11 of Notes to Condensed Consolidated

Financial Statements, which appear in Item

1 of this Report.

(b)

Strategic planning and transformation expenses include certain consultant

and advisory expenses for the Company’s

long-term

strategic planning, as well as process optimization and the next phase

of the Company’s long-term integration

to further optimize

its footprint, processes and other functions.

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

(c)

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

search, hiring and transition to a new CEO in connection

with the executive transition that took place in 2021 as well as the search,

hiring and transition for other officers during the first

nine months of 2022.

These expenses are one-time in nature and not indicative of the future operating

performance of the

Company.

(d)

Russia-Ukraine conflict related expenses represent the direct costs associated

with the Company’s

exit of operations in Russia

during 2022, primarily for employee separation benefits, as well as costs associated

with establishing specific reserves or changes

to existing reserves for trade accounts receivable within the Company’s

EMEA reportable segment due to the economic instability

associated with certain customer

accounts receivables which have been directly impacted by the current

economic conflict

between Russia and Ukraine or the Company’s

decision to end operations in Russia.

These expenses are not indicative of the

future operating performance of the Company.

(e)

Other charges include charges incurred

by an inactive subsidiary of the Company as a result of the termination of restrictions on

insurance settlement reserves, non-service components of the Company’s

pension and postretirement net periodic benefit income

and the foreign currency remeasurement impacts associated with the

Company’s affiliates whose

local economies are designated

as hyper-inflationary under U.S. GAAP.

These expenses are not indicative of the future operating performance

of the Company.

See Notes 1 and 9 of Notes to Condensed Consolidated Financial Statements,

which appear in Item 1 of this Report.

(f)

Facility remediation (recovery) costs, net presents the costs associated

with remediation, cleaning and subsequent restoration costs

associated with 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 18 of Notes to Condensed

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

36

(g)

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 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 18 of Notes to Condensed Consolidated Financial Statements, which

appears in Item 1 of this Report.

(h)

In connection with executing the Amended Credit Facility,

the Company recorded a loss on extinguishment of debt of

approximately $6.8 million which includes the write-off

of certain previously unamortized deferred financing costs as well as a

portion of the third-party and creditor debt issuance costs incurred

to execute the Amended Credit Facility.

These expenses are

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 loss (income) in a captive insurance company represents the after-tax

loss (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 loss (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)

The impacts of certain discrete tax items include changes in valuation

allowances recorded on certain Brazilian branch foreign tax

credits and the recording of deferred taxes on Brazilian branch income.

Both of these discrete items related to tax law changes in

the U.S. due to the issuance of final foreign tax credit regulations during the

period.

Additionally, the Company

has discrete

items related to the remeasurement of deferred taxes on the transfer

of intellectual property and the release of the reserves for

uncertain tax positions settled during the period and certain taxes, penalties,

and interest due as a result of the settlements.

See

Note 11 of Notes to Condensed Consolidated

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

(k)

Depreciation and amortization for the three and nine months ended

September 30, 2022 includes approximately $0.3 million and

$0.8 million, respectively,

and for the three and nine months ended September 30, 2021 includes $0.3 million

and $0.9 million,

respectively, of

amortization expense recorded within equity in net loss (income) of associated companies

in the Company’s

Condensed Consolidated Statements of income, which is attributable to

the amortization of the fair value step up for the

Company’s 50% interest in a joint venture

in Korea as a result of required purchase accounting.

(l)

Taxes on income

before equity in net loss (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

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.

Combination, restructuring and other acquisition-

related expenses described in (a) resulted in incremental taxes of approximately

$0.2

million and $1.8 million for the three and

nine months ended September 30, 2022, respectively,

compared to $1.2 million and $3.4 million for the three and nine months

ended September 30, 2021, respectively.

Strategic planning and transformation expenses describes in (b) above resulted in

incremental taxes of $1.0 million and $2.4 million for the three and

nine months ended September 30, 2022, respectively.

Executive transition costs described in (c) resulted in incremental taxes of

$0.2 million and $0.5 million for the three and nine

months ended September 30, 2022, respectively,

compared to $0.1 million and $0.3 million for the three and nine months ended

September 30, 2021, respectively.

Russia-Ukraine conflict related expenses described in (d) resulted in

incremental taxes of less

than $0.1 million and $0.5

million for the three and nine months ended September 30, 2022,

respectively.

Other charges

described in (e) resulted in a tax benefit of less than $0.1 million and $0.1 million

for the three and nine months ended September

30, 2022, respectively,

and incremental taxes of less than $0.1 million and $0.1 million in the three and nine months ended

September 30, 2021.

Facility remediation (recovery) costs, net described in (f) resulted in a tax benefit

of $0.3 million in the

three and nine months ended September 30, 2022, respectively and

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

ended September 30, 2021.

Brazilian non-income tax credits described in (g) 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, respectively.

Loss on

extinguishment of debt described in (h) resulted in incremental taxes of

$1.6 million during the nine months ended September 30,

2022.

The impact of certain discrete items described in (j) resulted in a tax benefit of $0.5 million

and an incremental expense of

$6.4 million for the three and nine months ended September 30,

2022, respectively, compared

to a benefit of $6.5 million and

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

2021, respectively.

(m)

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.

(n)

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.

Quaker Chemical Corporation

Management’s Discussion and Analysis

37

Off-Balance Sheet Arrangements

The Company had no material off-balance sheet commitments or

obligations as of September 30, 2022.

The Company’s off-

balance sheet items outstanding as of September 30, 2022 includes approximately

$5 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 14

of Notes to Condensed Consolidated Financial Statements in Item

1 of this Report.

Operations

Consolidated Operations Review – Comparison of the Third

Quarter of 2022 with the Third Quarter of 2021

Net sales were $492.2 million in the third quarter of 2022 compared

to $449.1 million in the third quarter of 2021.

The net sales

increase of $43.1 million or 10% quarter-over-quarter reflects an increase

in selling price and product mix of 25% and additional net

sales from acquisitions of 1%, partially offset by a decline

in organic sales volumes of approximately 9% and the unfavorable impact

from foreign currency translation of 7%.

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

increases

implemented to offset the significant increases in raw

material and other input costs that began during 2021 and has continued in 2022.

The decline in organic sales volumes was primarily

attributable to softer end market conditions, particularly in Europe and

Asia/Pacific, the wind-down of the tolling agreement for products previously

divested related to the Combination and the impact of

the ongoing war in Ukraine, partially offset by net new

business wins, including the impact of the Company’s

ongoing value-based

pricing initiatives.

COGS were $331.5 million in the third quarter of 2022 compared to

$303.9 million in the third quarter of 2021.

The increase in

COGS of $27.5 million or 9% was driven by the continued increases in the Company’s

global raw material, manufacturing and supply

chain and logistics costs compared to the prior year.

Gross profit in the third quarter of 2022 increased $15.6 million or 11%

from the third quarter of 2021.

The Company’s reported

gross margin in the third quarter of 2022 was 32.7%, an improvement

compared to 32.3% in the third quarter of 2021 as increases in

selling prices, due to the Company’s

value based pricing initiatives, helped offset the significant increase

in raw material and other

input costs experienced throughout the third quarter of 2022.

SG&A in the third quarter of 2022 increased $11.2

million or 11%

compared to the third quarter of 2021 due primarily to the

impact of sales increases on direct selling costs, inflation-driven higher

operating costs, costs associated with strategic planning and

transformation initiatives (see the Non-GAAP Measures section of

this Item, above), and additional SG&A from recent acquisitions

partially offset by lower SG&A due to foreign currency

translation compared to the prior year.

During the third quarter of 2022, the Company incurred $2.1 million of Combination,

integration and other acquisition-related

operating expenses primarily for professional fees related to the Houghton

integration and other acquisition-related activities.

Comparatively,

the Company incurred $5.8 million of expenses in the prior year third quarter,

primarily due to various professional

fees related to legal, financial and other advisory and consultant expenses

for integration activities including internal control readiness

and remediation.

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 (credits) charges

for reductions in headcount and

site closures under this program, net of adjustments to initial estimates for severance

of a credit of $1.4 million and $0.9 million

during the third quarters of 2022 and 2021, respectively.

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

Operating income in the third quarter of 2022 was $44.6 million compared

to $36.0 million in the third quarter of 2021.

Excluding non-recurring and non-core expenses that are not indicative

of the future operating performance of the Company described

in the Non-GAAP Measures section of this Item, above, the Company’s

current quarter non-GAAP operating income increased to

$50.9 million compared to $43.2 million in the prior year third quarter primarily

due to the lower gross profit and higher SG&A

described above.

The Company had other income, net, of $0.1 million in the third quarter

of 2022 compared to $0.6 million in the third quarter of

2021.

The third quarter of 2022 included a gain on insurance recoveries, see the Non-GAAP Measures

section of this Item, above.

In

addition, the Company incurred foreign exchange transaction losses in the third

quarter of 2022 compared to the foreign exchange

transaction gains in the prior year quarter.

Interest expense, net, increased $2.8 million compared to the third quarter

of 2021 as a result of increases in the average

borrowings outstanding in the third quarter of 2022 compared to

the third quarter of 2021 coupled with an increase in interest rates

quarter-over-quarter.

Quaker Chemical Corporation

Management’s Discussion and Analysis

38

The Company’s effective

tax rates for the third quarters of 2022 and 2021 were 28.1% and 2.6%, respectively.

The Company’s

effective tax rate for the third quarter of 2022

was largely driven by a decline in forecasted profits and earnings mix,

foreign tax

inclusions, changes in the valuation allowance for foreign tax credits,

a reduction in reserves for uncertain tax positions and

withholding taxes. In addition, the Company incurred higher tax expense

during the third quarter of 2022 primarily related to the

Company recording earnings in one of its subsidiaries at a statutory tax rate of

25% while it awaits recertification of a concessionary

15% tax rate, which was available to the Company during all of 2021.

Comparatively, the prior

year quarter effective tax rate was

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

intangible asset transfer. Excluding

the impact of non-

core items in each quarter, described

in the Non-GAAP Measures section of this Item, above, the Company estimates that its effective

tax rates for its third quarters of 2022 and 2021 would have been approximately

26% and 25%, respectively.

The Company expects

continued volatility in its effective tax rates due to several factors,

including the timing and scope 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, including the high technology incentive

at one of our subsidiaries based in China which is

currently up for triennial renewal, the treatment of certain acquisition-related

costs and the timing and amount of certain share-based

compensation-related tax benefits, among other factors.

Equity in net income of associated companies decreased $1.1 million

in the third quarter of 2022 compared to the third quarter of

2021, primarily due to lower current year income from the Company’s

interest in a captive insurance company due to lower market

performance on equity investments and from the Company’s

50% interest in a joint venture in Korea due to overall market challenges.

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 2022 and 2021.

Foreign exchange unfavorably impacted the Company’s

third quarter of 2022 results by approximately 7% driven by the impact

from foreign currency translation on earnings as well as higher foreign

exchange transaction losses in the current quarter as compared

to the prior year third quarter.

Consolidated Operations Review – Comparison of the First Nine Months of 2022

with the First Nine Months of 2021

Net sales were $1,458.8 million in the first nine months of 2022 compared to $1,314.1

million in the first nine months of 2021.

The net sales increase of $144.7 million or 11%

year-over-year reflects increases in selling price

and product mix of approximately

21% and additional net sales from acquisitions of 1% partially offset

by a decline in organic sales volumes of approximately 6% and

the unfavorable impact from foreign currency translation of 5%.

The increase in selling price and product mix was primarily driven

by price increases implemented to help offset the significant increases

in raw material and other input costs that began during 2021

and continued in 2022.

The decline in sales volumes was primarily attributable to the comparison

to a strong first half of 2021, and

primarily in the first quarter of 2021, where customers replenished their

supply chains.

Lower volumes were also due to softer end

market conditions, particularly in Europe and Asia/Pacific, the wind-down

of the tolling agreement for products previously divested

related to the Combination and the impact of the ongoing war in Ukraine,

partially offset by net new business wins, including the

impact of the Company’s ongoing

value-based pricing initiatives.

COGS were $1,002.4 million in the first nine months of 2022 compared

to $858.3 million in the first nine months of 2021.

The

increase in COGS of $144.1 million or 17% was driven by the significant

increase in the Company’s global raw

material,

manufacturing and supply chain and logistics costs compared to the prior

year.

Gross profit in the first nine months of 2022 increased $0.6 million or

less than 1% from the first nine months of 2021.

The

Company’s reported gross

margin in the first nine months of 2022 was 31.3% compared to 34.7% in

the first nine months of 2021.

The Company’s current year

gross margin reflects a significant increase in raw material

and other input costs and the impacts of

constraints on the global supply chain, partially offset by

the Company’s ongoing value

-based pricing initiatives.

SG&A in the first nine months of 2022 increased $25.9 million or 8% compared

to the first nine months of 2021 due primarily to

the impact of sales increases on direct selling costs, inflation driven higher

operating costs, costs associated with strategic planning

and transformation initiatives (see the Non-GAAP Measures section of

this Item, above), and additional SG&A from recent

acquisitions,

partially offset by lower SG&A due to foreign currency

translation compared to the prior year.

In addition, SG&A was

lower in the prior year period as a result of continued temporary cost saving

measures the Company implemented in response to the

onset of COVID-19.

During the first nine months of 2022, the Company incurred $8.0

million of Combination, integration and other acquisition-

related operating expenses primarily for professional fees related to the Houghton

integration and other acquisition-related activities.

Comparatively,

the Company incurred $18.3 million of expenses in the prior year’s

first nine months, primarily due to various

professional fees related to legal, financial and other advisory and

consultant expenses for integration activities including internal

control readiness and remediation.

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

39

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 credits for reductions in headcount and

site

closures under this program, net of adjustments to initial estimates for severance

of $0.6 million during the first nine months of 2022

compared to Restructuring and related charges for reductions in headcount

and site closures under this program, net of adjustments to

initial estimates for severance of $0.6 million during the first nine

months of 2021.

See the Non-GAAP Measures section of this Item,

above.

Operating income in the first nine months of 2022 was $105.9 million

compared to $119.7 million in the first nine months of

2021.

Excluding non-recurring and non-core expenses that are not indicative

of the future operating performance of the Company

described in the Non-GAAP Measures

section of this Item, above, the Company’s

current year non-GAAP operating income

decreased to $128.9 million for the first nine months of 2022 compared

to $143.3 million in the prior year’s first nine months

primarily due to the lower gross profit and higher SG&A described above.

The Company had other expense, net, of $10.5 million in the first nine months

of 2022 compared to other income, net of $19.3

million in the first nine months of 2021.

The first nine months of 2022’s results include

$6.8 million of loss on extinguishment of debt

related to the Company’s

refinancing the Original Credit Facility and also higher foreign currency transaction

losses year-over-year,

while the prior year’s first nine months of 2022 other income includes

$14.4 million of non-income tax credits recorded by the

Company’s Brazilian subsidiaries

as well as a $4.8 million gain on the sale of certain held-for-sale real property assets.

Interest expense, net, increased $3.5 million compared to the first nine

months of 2021, due to an increase in the average

borrowings outstanding in the first nine months of 2022 coupled

with an increase in interest rates in the current year as compared to

the prior year.

The Company’s effective

tax rates for the first nine months of 2022 and 2021 were 19.2% and 21.8%, respective

ly.

The

Company’s effective

tax rate for the nine months ended September 30, 2022 was largely driven

by a decline in forecasted profits and

earnings mix, foreign tax inclusions, changes in the valuation allowance

for foreign tax credits, the impact of audit settlements reached

with Italian tax authorities, a reduction in reserves for uncertain tax positions

and withholding taxes. In addition, the Company

incurred higher tax expense during the nine months ended September

30, 2022 primarily related to the Company recording earnings in

one of its subsidiaries at a statutory tax rate of 25% while it awaits recertification

of a concessionary 15% tax rate, which was

available to the Company during all of 2021. Comparatively,

the prior year nine-month effective tax rate 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.

Excluding the impact of non-core items in each period, described in

the

Non-GAAP Measures section of this Item, above, the Company estimates that

its effective tax rates for the first nine months of 2022

and 2021 would have been approximately 26% and 25%, respectively.

Equity in net income of associated companies decreased $8.3 million

in the first nine months of 2022 compared to the first nine

months of 2021, primarily due to lower current year income from

the Company’s interest in a captive insurance

company due to lower

market performance on equity investments (see the Non-GAAP Measures

section of this Item, above), as well as lower current year

income from the Company’s 50% interest

in a joint venture in Korea.

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

in both the first nine months of 2022 and 2021.

Foreign exchange unfavorably impacted the Company’s

first nine months of 2022 results by approximately 7% driven by the

impact from foreign currency translation on earnings as well as higher

foreign exchange transaction losses in the current year as

compared to the prior year’s first nine months.

Reportable Segments Review - Comparison of the Third

Quarter of 2022

with the Third Quarter of 2021

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 (expense) income, net.

Quaker Chemical Corporation

Management’s Discussion and Analysis

40

Americas

Americas represented approximately 38% of the Company’s

consolidated net sales in the third quarter of 2022.

The segment’s

net sales were $186.5 million, an increase of $35.7 million or 24% compared

to the third quarter of 2021.

The increase in net sales

was due to higher selling price and product mix of 30% and additional

net sales from acquisition of 1%, partially offset by a decrease

in organic sales volumes of 7%. The increase in selling price and

product mix was primarily driven by price increases implemented to

offset the significant increases in raw material and other input costs that

began during 2021 and continued through the third quarter of

2022.

The current quarter decline in organic sales volumes was primarily

driven by the wind-down of the tolling agreement for

products previously divested related to the Combination, the Company’s

ongoing value-based pricing initiatives and lower volumes

sold into the automotive industry due to the semiconductor supply constraints,

partially offset by net new business wins.

This

segment’s operating earnings were

$45.0 million, an increase of $13.7 million compared to the third quarter

of 2021 primarily driven

by higher net sales, which were partially offset by ongoing

inflationary pressures on the business.

EMEA

EMEA represented approximately 23% of the Company’s

consolidated net sales in the third quarter of 2022.

The segment’s net

sales were $113.4 million, a decrease of

$8.9 million, or 7%, compared to the third quarter of 2021.

This was driven by higher selling

price and product mix of 21% which was more than offset

by the unfavorable impact of foreign currency translation of 18% and a

decrease in sales volumes of 10%.

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

increases implemented

to offset the significant increases in raw material and other input

costs that began during 2021 and continued through the third quarter

of 2022.

The decline in sales volumes was primarily driven by the current geopolitical and macroeconomic

pressures including the

direct and indirect impacts of the ongoing war in Ukraine and the impact

of the economic and other sanctions by other nations on

Russia in response to the war, as well as lower volumes

associated with the Company’s ongoing

value-based pricing initiatives, the

wind-down of the tolling agreement for products previously divested related

to the Combination and softer economic conditions in the

region.

The significant and unfavorable foreign currency translation impact was primarily

due to the strengthening of the U.S. dollar

against the euro as this exchange rate averaged 1.01 in the third quarter

of 2022 compared to 1.18 in the third quarter of 2021.

This

segment’s operating earnings were

$9.9 million, a decrease of $10.3 million or 51% compared to the third quarter

of 2021.

The

decrease in segment operating earnings was primarily a result of lower

net sales and lower gross margins due to the significant

inflationary pressures on the Company’s

costs exceeding the impact of its value-based pricing actions.

Operating earnings in EMEA

were also negatively impacted by foreign currency translation.

Asia/Pacific

Asia/Pacific represented approximately 19% of the Company’s

consolidated net sales in the third quarter of 2022.

The segment’s

net sales were $91.2 million, a decrease of $7.4 million or 8% compared

to the third quarter of 2021.

The decrease in net sales was

driven by lower organic sales volumes of 20% and an unfavorable

impact from foreign currency translation of 6%, partially offset

by

higher selling price and product mix of 18%.

The increase in selling price and product mix was primarily driven by price increases

implemented to offset the significant increases in raw

material and other input costs that began during 2021 and continued through the

third quarter of 2022. The decline in organic sales volumes was primarily

driven by softer market conditions, primarily in China, as a

result of government imposed COVID-19 quarantines

and related production disruptions implemented at the end of March 2022

and

continued throughout the third quarter of 2022, partially offset by

net new business.

The unfavorable foreign exchange impact was

primarily due to the strengthening of the U.S. dollar against the Chinese renminbi

as this exchange rate averaged 6.85 in the third

quarter of 2022 compared to 6.47 in the third quarter of 2021.

This segment’s operating earnings were

$23.3 million, an increase of

$0.1 million compared to the third quarter of 2021 as lower net sales were offset

by improved margins.

Global Specialty Businesses

Global Specialty Businesses represented approximately 21% of the

Company’s consolidated net sales in the

third quarter of 2022.

The segment’s net sales were $101.1

million, an increase of $23.7 million or 31% compared to the third quarter

of 2021.

The increase

in net sales was driven by higher selling price and product mix of 20%,

an increase in organic sales volumes of 12% and additional net

sales from acquisitions of 2%, partially offset by an unfavorable

impact from foreign currency translation of 6%.

The increase in

selling price and product mix was primarily driven by price increases

implemented to help offset the significant increases in raw

material and other input costs that began during 2021 and continued through

the third quarter of 2022.

The increase in organic sales

volumes was primarily attributable to a continued favorable demand

environment for this segment’s products.

The unfavorable

foreign exchange impact was primarily due to the strengthening

of the U.S. dollar against the euro as described in the EMEA section

above.

This segment’s operating earnings

were $30.7 million, an increase of $10.1 million or 49% compared to the third quarter

of

2021.

The increase in segment operating earnings reflects the higher net sales and

gross margins in the current year despite slightly

higher raw materials costs due to continued inflationary pressures.

Quaker Chemical Corporation

Management’s Discussion and Analysis

41

Reportable Segments Review - Comparison of the First Nine months of 2022

with the First Nine months of 2021

Americas

Americas represented approximately 35% of the Company’s

consolidated net sales in the first nine months of 2022.

The

segment’s net sales were $513.4

million, an increase of $88.1 million or 21% compared to the first nine months of 2021.

The increase

in net sales was due to higher selling price and product mix of 27%

and additional net sales from acquisitions of 1%, partially offset

by a decrease in organic sales volumes of 7%.

The increase in selling price and product mix was primarily driven by price increases

implemented to help offset the significant increases in raw

material and other input costs that began during 2021 and have continued

into 2022.

The decline in organic sales volumes was primarily driven by lower sales volumes into

the automotive end market, the

wind-down of the tolling agreement for products previously divested related

to the Combination, the prior year period comparison

which included a strong rebound from COVID-19 impacts and the Company’s

ongoing value-based pricing initiatives, partially offset

by net new business wins.

This segment’s operating earnings were

$108.0 million, an increase of $10.8 million or 11%

compared to

the first nine months of 2021.

The increase in segment operating earnings was primarily a result of higher net

sales which more than

offset lower gross margins driven by inflationary

pressures.

EMEA

EMEA represented approximately 25% of the Company’s

consolidated net sales in the first nine months of 2022.

The segment’s

net sales were $362.1 million, a decrease of $3.4 million or 1% compared

to the first nine months of 2021.

The decrease in net sales

was a result of higher selling price and product mix of 20% and additional

net sales from acquisitions of 1%, more than offset by the

unfavorable impact of foreign currency translation of 15% and

a decrease in organic sales volumes of 7%.

The increase in selling

price and product mix was primarily driven by price increases implemented

to help offset the significant increases in raw material and

other input costs that began during 2021 and have continued into 2022.

The decline in organic sales volumes was primarily driven by

the current geopolitical and macroeconomic pressures including

the direct and indirect impacts of the ongoing war in Ukraine and the

impact of the economic and other sanctions by other nations on Russia in response

to the war, lower volumes

associated with the

Company’s ongoing value

-based pricing initiatives, the wind-down of the tolling agreement for products previously

divested related to

the Combination, the prior year period comparison which included

a strong rebound from COVID-19 impacts, and softer economic

conditions in the region in the current period, partially offset by

net new business wins.

The unfavorable foreign exchange impact was

primarily due to the strengthening of the U.S. dollar against the euro

as this exchange rate averaged 1.07 in the first nine months of

2022 compared to 1.20 in first nine months of 2021.

This segment’s operating earnings were $39.9

million, a decrease of $28.9

million or 42% compared to the first nine months of 2021.

The decrease in segment operating earnings was primarily a result of lower

gross margins driven by significant inflationary pressures

and the negative impact of foreign currency translation year-over-year.

Asia/Pacific

Asia/Pacific represented approximately 20% of the Company’s

consolidated net sales in the first nine months of 2022.

The

segment’s net sales were $295.3

million, an increase of $8.3 million or 3% compared to the first nine months of 2021.

The increase in

net sales was driven by higher selling price and product mix of 15%,

partially offset by lower organic sales volumes

of 9% and the

unfavorable impact of foreign currency translation of 3%.

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

increases implemented to help offset the significant

increases in raw material and other input costs that began during 2021 and

continued into 2022.

The decline in organic sales volumes was primarily driven by softer end

market conditions in China as a result

of the government imposed COVID-19 quarantine and related production

disruptions and the prior year comparison which included a

strong rebound from COVID-19 impacts as customers replenished

their supply chains, partially offset by net new business wins.

This

segment’s operating earnings were

$67.5 million, a decrease of $6.5 million or 9% compared to the first nine months of

2021.

The

decrease in segment operating earnings was primarily a result of higher

net sales, which was more than offset by lower gross margins

due to significant inflationary pressures and the unfavorable impact

of foreign currency translation.

Global Specialty Businesses

Global Specialty Businesses represented approximately 20% of the

Company’s consolidated net sales in the

first nine months of

2022.

The segment’s net sales were $288.0

million, an increase of $51.6 million or 22% compared to the first nine months of 2021.

The increase in net sales was driven by higher selling price and product

mix of 15%, an increase in organic sales volumes of 8% and

additional net sales from acquisitions of 3%, partially offset

by the unfavorable impact from foreign currency translation of

approximately 4%.

The increase in selling price and product mix was primarily driven by price increases

implemented to help offset

the significant increases in raw material and other input costs that began during

2021 and continued into 2022.

The increase in

organic sales volumes was primarily attributable

to a continued favorable demand environment for this segment’s

products.

The

unfavorable foreign exchange impact was primarily due to the strengthening

of the U.S. dollar against the euro described in the EMEA

section above.

This segment’s operating earnings

were $83.6 million, an increase of $14.6 million or 21% compared to the first

nine

months of 2021.

The increase in segment operating earnings reflects higher net sales and comparable gross

margins, partially offset

by the negative impact of foreign currency translation.

Quaker Chemical Corporation

Management’s Discussion and Analysis

42

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 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 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;

•

the timing and extent of the projected impacts on our business as a result of the Ukrainian

and Russian conflict and

actions taken by various governments and governmental organizations

in response;

•

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

chain;

•

the potential for a variety of macroeconomic events, including the possibility of global

or regional recessions, inflation

generally, cost increases in

prices of raw materials such as oil and increasing interest rates, to impact the value of our

assets or result in asset impairments;

•

our current and future results and plans including our sustainability goals; 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 2021 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

inflationary pressures, including the potential for continued significant

increases in raw material costs, supply chain disruptions,

customer financial instability,

rising interest rates and the possibility of economic recession, worldwide

economic and political

disruptions including the impacts of the military conflict between Russia and Ukraine,

the economic and other sanctions imposed by

other nations on Russia, suspensions of activities in Russia by many multinational

companies and the potential expansion of military

activity, 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 new variants, 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 parti

es 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 acquisitions and the

integration of acquired businesses.

Our forward-looking statements are subject to risks, uncertainties and

assumptions about the

Quaker Chemical Corporation

Management’s Discussion and Analysis

43

Company and its operations that are subject to change based on various important

factors, some of which are beyond our control.

These risks, uncertainties, and possible inaccurate assumptions relevant

to our business could cause our actual results to differ

materially from expected and historical results.

Therefore, we caution you not to place undue reliance on our forward-looking

statements.

For more information regarding these

risks and uncertainties as well as certain additional risks that we face,

refer to the Risk Factors section, which appears in Item 1A in

our 2021 Form 10-K and in our quarterly and other reports filed from time to

time with the SEC.

This discussion is provided as

permitted by the Private Securities Litigation Reform Act of 1995.

Quaker Houghton on the Internet

Financial results, news and other information about Quaker Houghton

can be accessed from the Company’s

website at

https://www.quakerhoughton.com.

This site includes important information on the Company’s

locations, products and services,

financial reports, news releases and career opportunities.

The Company’s periodic and current reports

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

other filings, including exhibits and supplemental schedules filed therewith,

and amendments to those reports, filed with the SEC are

available on the Company’s website,

free of charge, as soon as reasonably practicable after they

are electronically filed with or

furnished to the SEC.

Information contained on, or that may be accessed through,

the Company’s website is not incorporated

by

reference in this Report and, accordingly,

you should not consider that information part of this Report.

44

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, 2021, and we believe there has been

no material change to that information, except the interest

rate risk information noted below.

Interest Rate Risk

The Company’s exposure to

interest rate risk relates primarily to its outstanding borrowings under its credit facility.

During June

2022, the Company entered into an amendment to its primary credit facility

(the “Original Credit Facility”, or as amended, the

“Amended Credit Facility”). See Note 14 of Notes to Condensed Consolidated

Financial Statements, which appears in Item 1 of this

Report. As of September 30, 2022, borrowings under the Amended

Credit Facility bear interest at either term SOFR or a base rate, in

each case, plus an applicable margin based upon the Company’s

consolidated net leverage ratio, and, in the case of term SOFR, a

spread adjustment equal to 0.10% per annum. As a result of the variable interest rates applicable

under the Amended Credit Facility,

if

interest rates rise significantly,

the cost of debt to the Company will increase. This can have an adverse effect

on the Company,

depending on the extent of the Company’s

borrowings outstanding throughout a given year.

As of September 30, 2022, the Company

had outstanding borrowings under the Amended Credit Facility of approximately

$941.2 million. The interest rate applicable on

outstanding borrowings under the Amended Credit Facility was approximately

3.8% as of September 30, 2022. As of December 31,

2021, the Company had outstanding borrowings under the Original Credit

Facility of approximately $889.6 million. The variable

interest rate incurred on the outstanding borrowings under the Original Credit

Facility during the year ended December 31, 2021 was

approximately 1.6%. If interest rates had changed by 10% during 2021, the

Company’s interest expense for

the period ended

December 31, 2021 on its credit facilities, including the Original Credit Facility borrowings

outstanding post-closing of the

Combination, would have correspondingly increased or decreased by approximately

$1 million. Likewise, if interest rates had changed

by 10% during the nine month period ended September 30, 2022, the Company’s

interest expense for the nine month period ended

September 30, 2022 on its credit facilities, including the Amended Credit

Facility borrowings outstanding, would have

correspondingly increased or decreased by approximately $2.2

million. The Original 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 Original 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

Original 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, 2022, the aggregate interest rate on the swaps, including

the fixed base rate plus an applicable margin, was 3.1%.

In October 2022, the Company’s

interest rate swap contracts expired.

Upon expiration, the Company is entitled to a cash payment

from the counterparties, which is materially consistent with the fair value as of

September 30, 2022. The Amended Credit Facility

does not require the Company to fix variable interest rates on any portion of its borrowings.

45

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 September 30, 2022, 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 effective.

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, 2022 that have materially affected,

or are reasonably likely to materially affect, our internal

control over financial reporting.

Based on that evaluation, there were no changes that have materially affected,

or are

reasonably likely to materially affect, our internal control over

financial reporting during the quarter ended September 30,

2022.

46

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 18 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

condition, 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 2021 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

be

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

258

$

135.19

—

$

86,865,026

August 1 - August 31

2,853

$

160.22

—

$

86,865,026

September 1 - September 30

473

$

165.52

—

$

86,865,026

Total

3,584

$

159.12

—

$

86,865,026

(1)

All of these shares were acquired from employees related to the 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

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, 2022.

Limitation on the Payment of Dividends

The Amended Credit Facility has certain limitations on the payment of

dividends and other so-called restricted payments.

See

Note 14 of Notes to Condensed Consolidated Financial Statements, in Part

I, Item 1, of this Report.

47

Item 6.

Exhibits.

(a) Exhibits

3.1

–

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

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

3.2

–

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

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

31.1

–

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

1934.*

31.2

–

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

1934.*

32.1

–

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

32.2

–

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

101.INS

–

Inline XBRL Instance Document*

101.SCH

–

Inline XBRL Taxonomy

Schema Document*

101.CAL

–

Inline XBRL Taxonomy

Calculation Linkbase Document*

101.DEF

–

Inline XBRL Taxonomy

Definition Linkbase Document*

101.LAB

–

Inline XBRL Taxonomy

Label Linkbase Document*

101.PRE

–

Inline XBRL Taxonomy

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 3, 2022

Shane W. Hostetter,

Senior Vice President, Chief Financial

Officer (officer duly authorized on behalf of, and principal

financial officer of, the Registrant)

This ‘10-Q’ Filing	Date	Other Filings

	12/31/27
	12/31/26
	12/31/25
	12/31/24
	12/31/23
	12/31/22
Filed on:	11/3/22	8-K
	10/31/22
For Period end:	9/30/22
	6/30/22	10-Q
	6/17/22	8-K
	4/1/22
	3/31/22	10-Q, DEF 14A
	12/31/21	10-K, 11-K
	9/30/21	10-Q
	6/30/21	10-Q
	3/31/21	10-Q, DEF 14A
	12/31/20	10-K, 11-K, 4
	3/12/20
	8/1/19	10-Q, 3, 4, 8-K, 8-K/A
	7/1/18
	3/31/18	10-Q
	4/1/17
	5/6/15	8-K, DEF 14A
		List all Filings

Quaker Chemical Corp. – ‘10-Q’ for 9/30/22

On: Thursday, 11/3/22, at 4:42pm ET · For: 9/30/22 · Accession #: 81362-22-14 · File #: 1-12019

Previous ‘10-Q’: ‘10-Q’ on 8/4/22 for 6/30/22 · Next: ‘10-Q’ on 5/4/23 for 3/31/23 · Latest: ‘10-Q’ on 11/2/23 for 9/30/23 · 2 References:

Quarterly Report — Form 10-Q

Filing Table of Contents

‘10-Q’ — Quaker Chemical Corporation

Document Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

2 Previous Filings that this Filing References

Quaker Chemical Corp. – ‘10-Q’ for 9/30/22

On: Thursday, 11/3/22, at 4:42pm ET · For: 9/30/22 · Accession #: 81362-22-14 · File #: 1-12019

Previous ‘10-Q’: ‘10-Q’ on 8/4/22 for 6/30/22 · Next: ‘10-Q’ on 5/4/23 for 3/31/23 · Latest: ‘10-Q’ on 11/2/23 for 9/30/23 · 2 References: To: Quaker Chemical Corp. – ‘10-Q’ on 5/11/20 for 3/31/20 To: Quaker Chemical Corp. – ‘10-Q’ on 8/1/19 for 6/30/19

Quarterly Report — Form 10-QFiling Table of Contents

‘10-Q’ — Quaker Chemical CorporationDocument Table of Contents

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

2 Previous Filings that this Filing References

Previous ‘10-Q’: ‘10-Q’ on 8/4/22 for 6/30/22 · Next: ‘10-Q’ on 5/4/23 for 3/31/23 · Latest: ‘10-Q’ on 11/2/23 for 9/30/23 · 2 References:

Quarterly Report — Form 10-Q

Filing Table of Contents

‘10-Q’ — Quaker Chemical Corporation

Document Table of Contents