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QUAKER CHEMICAL CORP

QUAKER CHEMICAL CORPKWREarnings & Financial Report

NYSE · Energy · Miscellaneous Products of Petroleum & Coal

Quaker Chemical Corporation, doing business as Quaker Houghton, is an American chemical company that was founded in 1918. It is headquartered in Conshohocken, Pennsylvania. With its global presence in 21 countries and 35 locations worldwide, the company has over 50% of net sales outside of the United States. Quaker Houghton manufactures process fluids for use in the steel, aluminum, metalworking, automotive, mining, aerospace, tube & pipe, can making, and other industrial processes. On August...

What changed in QUAKER CHEMICAL CORP's 10-K — 2022 vs 2023

Top changes in QUAKER CHEMICAL CORP's 2023 10-K

379 paragraphs added · 442 removed · 289 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

42 edited+24 added−22 removed31 unchanged
Additionally, our ELT is closely involved in our safety programs and conducts regular reviews of safety performance metrics and reviews the Company’s safety performance during Company-wide meetings. 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.
Additionally, our ELT is closely involved in our safety programs, conducts regular reviews of safety performance metrics and reviews the Company’s safety performance during Company-wide meetings. 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.
Competition The specialty chemical industry comprises a number of companies similar in size to the Company, as well as companies larger and smaller than Quaker Houghton. The Company cannot readily determine its precise competitive position in every industry it serves.
Competition The specialty chemical industry comprises a number of companies similar in size to Quaker Houghton, as well as companies larger and smaller in size. The Company cannot readily determine its precise competitive position in every industry it serves.
However, the Company estimates it holds a leading global position in the market for industrial process fluids including significant global positions in the markets for process fluids in portions of the automotive and industrial markets, and a leading position in the market for process fluids to produce sheet steel and aluminum.
However, the Company estimates it holds a leading global position in the market for industrial process fluids including leading global positions in the markets for process fluids in portions of the automotive and industrial markets, and a leading position in the market for process fluids to produce sheet steel and aluminum.
Any or all of the forward-looking statements in this Report, in the Company’s Annual Report to Shareholders for 2022 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.
Any or all of the forward-looking statements in this Report, in the Company’s Annual Report to Shareholders for 2023 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.
Associated companies of Quaker Houghton (in which it owns 50% or less and has significant influence) employed approximately 600 people on December 31, 2022. Core Values Quaker Houghton considers its employees as its greatest strength in differentiating our business and strengthening our market positions.
Associated companies of Quaker Houghton (in which it owns 50% or less and has significant influence) employed approximately 600 people on December 31, 2023. Core Values Quaker Houghton considers its employees as its greatest strength in differentiating our business and strengthening our market positions.
Our current Board composition includes two female and four racially diverse directors out of a total of twelve directors. For additional information on the Company’s leadership, refer to Item 4(a) Information about our Executive Officers and Item 10. Directors, Executive Officers and Corporate Governance.
Our current Board composition includes two female and four racially diverse directors out of a total of twelve directors. For additional information on the Company’s leadership, refer to Item 4(a) Information about our Executive Officers and Item 10.
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 Securities and Exchange Commission (“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.
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 Securities and Exchange Commission (“SEC”) are available on the Company’s website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.
Information in these sustainability reports and on our website are not incorporated by reference in this Report and, accordingly, should not be considered part of this Report. Talent and Culture We strive to make Quaker Houghton a great place to work for all employees.
Information in these sustainability reports and on our website are not incorporated by reference in this Report and, accordingly, should not be considered part of this Report. Talent Development, Culture and Total Rewards We strive to make Quaker Houghton a great place to work for all employees.
Quaker Houghton develops, produces, and markets a broad range of formulated chemical specialty products and offers chemical management services (which we refer to as “Fluidcare TM ”) for various heavy industrial and manufacturing applications throughout its four segments: Americas; Europe, Middle East and Africa (“EMEA”); Asia/Pacific; and Global Specialty Businesses.
Quaker Houghton develops, produces, and markets a broad range of formulated specialty chemical products and offers chemical management services (which we refer to as “Fluidcare TM ”) for various heavy industrial and manufacturing applications throughout its three segments: Americas; Europe, Middle East and Africa (“EMEA”); and Asia/Pacific.
The program includes periodic inspections of each facility by the Company and/or independent experts, as well as ongoing inspections and training by on-site personnel. Such inspections address operational matters, record keeping, reporting requirements and capital improvements.
The program includes periodic inspections of each facility by the Company and/or independent experts, as well as ongoing inspections and training by on-site personnel. Such inspections, among other things, address operational matters, record keeping, reporting requirements and capital improvements.
The following are the respective contributions to consolidated net sales of each of our principal product lines representing more than 10% of consolidated net sales for any of the past three years based on the Company’s current product line segmentation: 2022 2021 2020 Metal removal fluids 22.9 % 23.4 % 23.9 % Rolling lubricants 20.8 % 22.2 % 21.8 % Hydraulic fluids 14.1 % 13.6 % 13.3 % Sales Revenue A substantial portion of the Company’s sales worldwide are made directly through its own employees and its Fluidcare TM programs, with the balance sold through distributors and agents.
The following are the respective contributions to consolidated net sales of each of our principal product lines representing more than 10% of consolidated net sales for any of the past three years based on the Company’s current product line segmentation: Major Product Line 2023 2022 2021 Metal removal fluids 23.6 % 22.9 % 23.4 % Rolling lubricants 19.5 % 20.8 % 22.2 % Hydraulic fluids 14.1 % 14.1 % 13.6 % Sales Revenue A substantial portion of the Company’s sales worldwide are made directly through its own employees and its Fluidcare TM programs, with the balance sold through distributors and agents.
We seek to create an environment where every employee can feel their best allowing them to be their best. 5 Table of Contents Inclusion and diversity begin with the Board and ELT. The Board is comprised of twelve individuals with diverse experience and credentials, selected for their business acumen and ability to challenge and add value to management.
We seek to create an environment where every employee can feel their best allowing them to be their best. Inclusion and diversity begin with the Board and ELT. The Board is comprised of ten individuals with diverse experience and credentials, selected for their business acumen and ability to challenge and add value to management.
Major Customers and Markets In 2022, Quaker Houghton’s five largest customers (each composed of multiple subsidiaries or divisions with semi-autonomous purchasing authority) accounted for approximately 11% of consolidated net sales, with its largest customer accounting for approximately 3% of consolidated net sales.
Major Customers and Markets In 2023, Quaker Houghton’s five largest customers (each composed of multiple subsidiaries or divisions with semi-autonomous purchasing authority) accounted for approximately 12% of consolidated net sales, with its largest customer accounting for approximately 3% of consolidated net sales.
Additionally, we regularly evaluate our Total Rewards offerings for our employees, including health and wellness benefits, paid-time off policies, monetary compensation, and educational reimbursements, to ensure that our total compensation and benefits packages are aligned with our business strategy, organizational culture, and diversity and inclusion approach while ensuring that we remain competitive in the markets we serve and follow local statutory wage and benefits laws.
Additionally, we regularly evaluate our total rewards offerings for our employees, including health and wellness benefits, paid-time off policies, monetary compensation, and educational reimbursements, to ensure that our total compensation and benefits packages are aligned with our business strategy, organizational culture, and diversity and inclusion approach and allow us to remain competitive in the markets we serve and comply with local statutory wage and benefit laws.
Capital expenditures directed solely or primarily to regulatory compliance amounted to approximately $2.2 million, $4.2 million and $3.7 million during the years ended December 31, 2022, 2021 and 2020, respectively.
Capital expenditures directed solely or primarily to regulatory compliance amounted to approximately $3.5 million, $2.2 million and $4.2 million during the years ended December 31, 2023, 2022 and 2021, respectively.
Number of Employees On December 31, 2022, Quaker Houghton had approximately 4,600 full-time employees globally of whom approximately 1,100 were employed by the parent company and its U.S. subsidiaries, and approximately 3,500 were employed by its non-U.S. subsidiaries.
Number of Employees On December 31, 2023, Quaker Houghton had approximately 4,400 full-time employees globally of whom approximately 900 were employed by the parent company and its U.S. subsidiaries, and approximately 3,500 were employed by its non-U.S. subsidiaries.
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 us 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.
Factors that May Affect Our Future Results Certain information included in this Report and other materials filed or to be filed by us 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 that fall under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Securities Act of 1933, as amended.
As experienced during 2022, the Company’s earnings have been and could continue to be affected by market changes in raw material prices. Reference is made to the disclosure contained in Item 7A of this Report.
As experienced during 2022 and 2023, the Company’s earnings have been and could continue to be affected by market changes in raw material prices. Refer to the disclosure contained in Item 7A of this Report for additional information.
We believe that the achievement of superior safety performance is both an important short-term and long-term strategic goal in managing our operations. We emphasize ten “lifesaving” rules which make a significant difference in preventing serious injuries and fatalities.
We maintain policies and operational practices that communicate a culture where all levels of employees are responsible for safety. We believe that the achievement of superior safety performance is both an important short-term and long-term strategic goal in managing our operations. We emphasize ten “lifesaving” rules which make a significant difference in preventing serious injuries and fatalities.
The Company’s 2021 Sustainability Report reflects the most recent available data on a variety of topics, including specific information relating to the Company’s: (i) environmental footprint and climate change commitments; (ii) diversity initiatives; (iii) safety initiatives and performance; and (iv) training courses which our employees have completed.
The Company’s 2022 Sustainability Report reflects the most recent available data on a variety of topics, including specific information relating to the Company’s: (i) environmental footprint and climate change commitments; (ii) diversity initiatives; (iii) safety initiatives and performance; and (iv) sustainable solutions portfolio.
The Company’s core values are (i) live safe; (ii) act with integrity; (iii) drive results; (iv) exceed customer expectations; (v) embrace diversity; and (vi) do great things together. Our core values embody who we are as a company, guide our decisions and inspire us.
The Company’s core values are (i) live safe; (ii) act with integrity; (iii) drive results; (iv) exceed customer expectations; (v) embrace diversity; and (vi) do great things together.
We strive to create a culture where recognition is ingrained within it, and do so by utilization of an enterprise reward and recognition program celebrating and incentivizing the results and behaviors of our employees and their impacts on our teams and company.
We strive to create a culture where recognition is ingrained, including utilization of an enterprise reward and recognition program that celebrates and incentivizes the results and behaviors of our employees and their impacts on our teams and Company.
Our 15 long-term goals are closely aligned with the United Nations Sustainable Development Goals. We also identified short-term and medium-term milestones that may help support the achievement of our 2030 targets.
Our 15 long-term goals are closely aligned with the United Nations Sustainable Development Goals. We also identified short-term and medium-term milestones that may help support the achievement of our 2030 targets. In 2022, we made progress on certain of the Company’s identified 2030 goals in accordance with the baselines set during 2021.
The price of mineral oil and its derivatives can be affected by the price of crude oil and industry refining capacity. Animal fat and vegetable oil prices, as well as the prices of other raw materials, are impacted by their own unique supply and demand factors, and by biodiesel consumption which is affected by the price of crude oil.
Animal fat and vegetable oil prices, as well as the prices of other raw materials, are impacted by their own unique supply and demand factors, and by biodiesel consumption which can be affected by the price of crude oil and by government incentives for low-carbon fuels.
Competition in the industry is based primarily on the ability to supply products that meet the needs of the customer and provide technical services and laboratory assistance to the customer, and to a lesser extent, on price.
Competition in the industry is based primarily on the ability to supply products and provide technical services that meet the needs of the customer at an appropriate price and value to both the Company and the customer.
Our forward-looking statements are subject to risks, uncertainties and assumptions about the Company and its operations that are subject to change based on various important factors, some of which are beyond our control. These risks, uncertainties, and possible inaccurate assumptions relevant to our business could cause our actual results to differ materially from expected and historical results.
Our forward-looking statements are subject to risks, uncertainties and assumptions about the Company and its operations that are subject to change based on various important factors, some of which are beyond our control.
Company Segmentation 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.
Company Segmentation 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. 3 Table of Contents During the first quarter of 2023, the Company reorganized its executive management team to align with its new business structure.
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.
Other major risks and uncertainties include, but are not limited to, 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; economic and political disruptions including the impacts of the military conflicts between Russia and Ukraine and between Israel and Hamas; tariffs, trade restrictions and the economic and other sanctions imposed by other nations on Russia and/or other government or government organizations; 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; the impacts of consolidation in our industry, including loss or consolidation of a major customer; and the potential occurrence of cyber-security breaches, cyber-security attacks and other security incidents.
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. Other factors could also adversely affect us, including those related to acquisitions and the integration of acquired businesses.
Furthermore, the Company is subject to the same business cycles as those experienced by our customers in the steel, automobile, aircraft, industrial equipment, aluminum, and durable goods industries.
We pay particular attention to wellness and the well-being of our employees with specific investments on a variety of health related topics including forums for learning, dialogue, and enterprise collaboration.
Creating, fostering, and maintaining a culture in which every colleague can be their best self is a driving force in our engagement efforts. We pay particular attention to the wellness and well-being of our employees with specific investments in a variety of health-related topics including forums for learning, dialogue, and enterprise collaboration.
Sustainability Report We report our progress on Environmental, Social, and Governance (“ESG”) milestones in our sustainability report, which is published annually and is available free of charge on our corporate website at home.quakerhoughton.com/sustainability.
We will provide further updates on our short-term milestones in our 2023 Sustainability Report. 4 Table of Contents Sustainability Report We report our progress on our Sustainability strategy in our sustainability report, which is published annually and is available on our corporate website at home.quakerhoughton.com/sustainability.
We believe that diversity and inclusion are embodied by having working norms and cultural familiarities whereby employees feel included, engaged, and rewarded, regardless of their background or where they sit in the organization.
We believe diversity and inclusion are embodied by having working norms whereby employees feel included, engaged, and rewarded, regardless of their background or where they sit in the organization. When employees feel this way, we are a stronger, more inclusive organization and better equipped to utilize our colleagues’ diverse skills and talents to drive innovation and business success.
Our commitment to these values, in words and actions, builds a safer, stronger Quaker Houghton, and these values guide the Company’s internal conduct and its relationship with the outside world. By fostering a culture and environment that exemplifies our core values, we gain, as a company, unique perspectives, backgrounds and varying experiences to ensure continued long-term success.
Our core values embody who we are as a company, and these values, in words and actions, build a safer, stronger Quaker Houghton, and these values guide the Company’s internal conduct and its relationship with the outside world.
The Company respects and values all of its employees and believes inclusion, diversity and equality are essential pillars to drive the Company’s success. Aligned to our core values, in 2022 we evolved our enterprise-wide approach to volunteerism.
By fostering a culture and environment that exemplifies our core values, we gain, as a company, unique perspectives, backgrounds and varying experiences to ensure continued long-term success. The Company respects and values all of its employees and believes inclusion, diversity and equality are essential pillars to drive the Company’s success.
Diversity, Equity, and Inclusion (“DEI”) As a global company, we want to build an organization that is inclusive of all people and representative of the communities in which we operate. Quaker Houghton provides equal employment opportunities and does not discriminate based on age, ethnicity, gender identity, disability / medical condition, race, religion, or sexual orientation.
Accordingly, Quaker Houghton provides equal employment opportunities and does not discriminate based on age, ethnicity, sex, sexual identity, disability/medical condition, race, religion, or sexual orientation. Diversity is one of our core values, and our unwavering commitment to DEI is further reflected as a core element in our Code of Conduct.
Research and development expenses during the years ended December 31, 2022, 2021 and 2020 were $46.0 million, $44.9 million and $40.0 million, respectively. Recent Acquisition Activity The Company has completed several recent acquisitions that expand its strategic product offerings and increase the Company's presence in its core industries.
Research and development expenses during the years ended December 31, 2023, 2022 and 2021 were $50.3 million, $46.0 million and $44.9 million, respectively. Recent Acquisition Activity During February 2024, the Company acquired I.K.V.
We have based these forward-looking statements, including statements regarding the potential effects of the COVID-19 pandemic, the Russia and Ukraine conflict, inflation and global supply chain constraints on the Company’s business, results of operations, and financial condition, our expectation that we will maintain sufficient liquidity, remain in compliance with the terms of the Company’s credit facility, expectations about future demand and raw material costs, and statements regarding the impact of increased raw material costs and pricing initiatives on our current expectations about future events. 6 Table of Contents 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 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; • inflationary pressures, cost increases, and the impacts of constraints and disruptions in the global supply chain; • the potential benefits of acquisitions; • 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.
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, which may differ materially from expectations, estimates and projections because of many factors, including, but not limited to: • the timing and extent of the projected impacts on our business of acts of war or terrorism, including the conflicts in Ukraine and the Middle East, and actions taken by various governments and governmental organizations in response; • inflationary pressures, cost increases, and constraints and disruptions in the global supply chain; 6 Table of Contents • the potential timing, impacts, and other uncertainties of acquisitions and divestitures, including our ability to realize synergies, integrate acquisitions or separate divested assets and businesses; • the potential for changes in global and regional economic conditions and for a variety of macroeconomic events, including the possibility of global or regional slowdowns or recessions, inflation, deflation or stagflation and its impact on our business, raw materials purchases and/or profitability of our business, a global pandemic, and interest rate changes, to impact the value of our assets or result in asset impairments; and • our current and future results and plans including our sustainability goals and enterprise strategy.
Moving forward, all employees will be provided with access to two paid days off per year that can be leveraged to volunteer for local charity organizations, or local chapters of national charity organizations, that seek to improve the conditions and lives of the people living in the communities in which our employees live and work. 4 Table of Contents Sustainability Governance and Strategy In 2020, we established the Board Sustainability Committee, which has specific responsibility to assist the Board of Directors (the “Board”) in its assessment, evaluation, and oversight of the Company’s sustainability programs and initiatives pertaining to the Company’s business, operations, and employees.
Sustainability Governance and Strategy In 2020, we established the Board Sustainability Committee, which has specific responsibility to assist the Board of Directors (the “Board”) in its assessment, evaluation, and oversight of the Company’s sustainability programs and initiatives pertaining to the Company’s business, operations, and employees.
Workplace Safety We are committed to maintaining a strong safety culture and to emphasizing the importance of our employees’ role in identifying, mitigating and communicating safety risks. We maintain policies and operational practices that communicate a culture where all levels of employees are responsible for safety.
We continue to invest in women and diverse talent through partnership with external leadership development firms, providing opportunities to our talent that will accelerate their leadership development professionally and personally. Workplace Safety We are committed to maintaining a strong safety culture and to emphasizing the importance of our employees’ role in identifying, mitigating and communicating safety risks.
These statements can be identified by the fact that they do not relate strictly to historical or current facts.
These statements can be identified by the fact that they do not relate strictly to historical or current facts and can generally be identified by words such as “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “outlook,” “target,” “possible,” “potential,” “plan” or similar expressions, but these terms are not the exclusive means of identifying such statements.
Effective beginning in the first quarter of 2023, the Company’s new structure will include three reportable segments: (i) Americas; (ii) Europe, Middle East and Africa (“EMEA”); and (iii) Asia/Pacific. See Note 4 of Notes to Consolidated Financial Statements in Item 8 of this Report. Non-U.S.
See Notes 4, 5, and 15 of Notes to Consolidated Financial Statements in Item 8 of this Report. Non-U.S.
The reportable segments presented in this Annual Report reflect the business structure the Company operated with during the periods presented, which was four reportable segments: (i) Americas; (ii) EMEA; (iii) Asia/Pacific; and (iv) Global Specialty Businesses. In January 2023, the Company reorganized certain of its executive management team to align with a new business structure.
The Company’s new structure includes three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific. Prior to the Company’s reorganization, the Company’s historical reportable segments were: (i) Americas; (ii) EMEA; (iii) Asia/Pacific; and (iv) Global Specialty Businesses.
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The Company's 2022 acquisitions consist of: • In October 2022, the Company acquired a business that provides pickling and rinsing products and services, which is part of the EMEA reportable segment, for approximately $3.5 million.
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The price of mineral oil and its derivatives can be affected by the price of crude oil and industry refining capacity.
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This acquisition, along with the Company’s January 2022 acquisition in the Americas reportable segment (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. • In January 2022, the Company acquired a business that provides pickling inhibitor technologies, drawing lubricants and stamping oil, and various other lubrication, rust preventative, and cleaner applications, which is part of the Americas reportable segment for approximately $8.0 million.
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Tribologie IKVT and its subsidiaries (“IKVT”) for approximately 27.0 million EUR, or $29.1 million subject to routine and customary post-closing adjustments related to working capital and net indebtedness levels.
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This business broadens the Company’s product offerings within its existing metals and metalworking business in the Americas reportable segment. • 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 $1.4 million.
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IKVT will be part of the Company’s EMEA segment and specializes in high-performance lubricants and greases, including original equipment manufacturer first-fill greases that are primarily used in the automotive, aerospace, electronics, and other industrial markets. The acquisition of IKVT strengthens the Company’s position in first fill greases.
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This business broadens the Company’s product offerings and service capabilities within its existing impregnation business. Impact of COVID-19 During 2022, COVID-19 continued to negatively impact the Company's business operations, as well as those of its customers and suppliers, including increased costs and decreased availability of labor and raw materials.
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See Note 2 of Notes to Consolidated Financial Statements in Item 8 of this Report.
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The Company’s top priority, especially during this pandemic, has been to protect the health and safety of its employees and customers, while working to ensure business continuity to meet its customers’ needs.
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Prior period information has been recast to align with the Company’s business structure as of January 1, 2023, including reportable segments and customer industry disaggregation.
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In response, the Company implemented additional operational, health, and safety protocols, including enabling remote work where needed and practicable, employing social distancing standards, implementing travel restrictions where necessary, enhancing onsite hygiene practices, and instituting visitation restrictions at the Company’s facilities, where necessary these operational changes remain in place.
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As a result of the Company’s new organizational structure effective January 1, 2023, the Company reallocated goodwill previously held by the former Global Specialty Businesses segment to the remaining business segments as of January 1, 2023. However, the Company did not recast the carrying amount of goodwill for the years ended December 31, 2022 and 2021.
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Although restrictions imposed by governments around the world have largely been eliminated or loosened, management continues to monitor and respond to the impacts related to COVID-19 on the Company, the overall specialty chemical industry, and the economies and markets in which the Company operates. 3 Table of Contents Management continues to evaluate how COVID-19-related circumstances, such as remote work arrangements, illness or staffing shortages and travel restrictions, may impact financial reporting processes and systems, internal control over financial reporting, and disclosure controls and procedures.
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Aligned to our core values, in 2023, we evolved our enterprise-wide approach to volunteerism. All full-time employees are provided up to 16 hours per calendar year to volunteer for a non-profit or charity of their choice.
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At this time, management does not believe that COVID-19 has had a material impact on financial reporting processes, internal controls over financial reporting, or disclosure controls and procedures.
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The policy is supported by recommendations to our colleagues regarding volunteering opportunities, such as educational or cultural institutions, healthcare institutions, civic and community centers, and non-profit organizations focusing on science, technology, engineering, and math (“STEM”) learning.
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This change was made subsequent to December 31, 2022; therefore, the reportable segments presented in this Annual Report on Form 10-K reflect the business structure the Company operated with during the periods presented.
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During 2022, the Company launched Green Chemistry Guidelines globally that align with principles recommended by the American Chemical Society and the Company’s established sustainability goals. Additionally, the Company made investments in renewable energy certificates, and increased the percentage of raw materials that are renewable.
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We endeavor to ensure that our leaders of tomorrow are members of the Company today. Leadership capability is critical in supporting our culture of inclusion and collaboration. As such, leaders have access to various structured development and learning experiences.
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We place importance on developing our leaders at all levels, whether a colleague is leading themselves or providing for others, as wells as providing them with opportunities to enhance their effectiveness.
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This includes our global management program ("MAP") which provides guidance on applying sound and consistent management approaches to leading and developing teams. In addition, we provide custom development programs germane to the needs of our leaders today. Recent topics including Financial Acumen for Leaders, Building Resilient Teams and Leading Change.
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Our leaders have access to various learning and development experiences, including our Quaker Houghton internal leadership development program (“MAP”) for new or first-time managers, Performance and Rewards training, and specialized opportunities for external coaching, leadership assessments, or external development programs.
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We continue to invest in processes to help the organization assess and develop talent, including a formalized annual performance evaluation program, an annual critical skills and potential analysis, and succession planning for the organization’s most critical and senior roles.
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We continue to enable a robust Organization and Talent Review (“OTR”) process in which each department’s talent landscape is evaluated, potential of talent is assessed, critical roles are identified, and succession planning occurs for our most senior positions.
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In 2022, we focused on and dedicated investment in our talent acquisition, talent development, and succession planning efforts as a means to diversify our workforce.
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Output of these processes results in career development and other related talent plans designed to ensure we have the talent we need both now and in the future to deliver results.
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We have continually provided minority and female leaders the opportunity to attend targeted world-class external development programs that speak to the unique experiences these employees can face in the workplace while investing in their continued growth both personally and professionally.
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During 2023, we prioritized these efforts, with purpose driven investments in wellness and well-being. We launched a global well-being platform, Virgin Pulse, which provides access to activities, tools and resources on a variety of wellness topics. We celebrated World Mental Health Day with enterprise discussions and education on various topics.
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In addition, our core principles of a culture of inclusion are reflected in required employee training programs, which we offer on our policies against harassment and discrimination of any kind. In 2022 we began a multi-year investment in the Future of STEM Scholars Initiative (“FOSSI”).
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We also increased our benefits investments by providing paid parental leave for our U.S. colleagues regardless of birthing status, and we implemented a global family planning program to support the fertility-related healthcare needs of our colleagues. Diversity, Equity, and Inclusion (“DEI”) Quaker Houghton strives to cultivate a diverse, equitable, and inclusive culture that reflects the global nature of our organization.
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This program seeks to create pathways for under-represented groups to enter and succeed in the chemical industry.
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Directors, Executive Officers and Corporate Governance. 5 Table of Contents As part of our Human Capital strategy, we established a Culture and Engagement Taskforce (“Taskforce”) that represents the voice of our colleagues in focusing on the Company’s overall culture, as well as driving forward progress with specific DEI related initiatives. The Taskforce also functions as our Diversity and Inclusion Council.
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As part of this program, Quaker Houghton has committed to providing meaningful paid summer internships that build knowledge in the student’s chosen areas of study along with mentoring conversations with current Quaker Houghton leaders and opportunities for learning more about the industry and business.
Added
The Taskforce helped launch our Culture Survey, supported the implementation of our global framework for Colleague Resource Groups (“CRGs”) and launched two new CRGs at the Company. We remain on track to achieve the goals we have set for ourselves tied to diverse representation in our workforce.
Removed
We recognize that we are on a journey and, as such, we are working to formalize our DEI strategy as part of our broader investment in culture and engagement.
Added
In addition to providing learning and engagement opportunities to Company colleagues, we also recognize the importance of building an inclusive talent pipeline and external partnerships play a key role in how we do this.
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Through partnerships with thought leaders in diversity, equity and inclusion, we intend to continue the journey we have started by expanding our employee resource groups, building processes to support the attraction and development of historically underrepresented talent early in their careers, hosting inclusion training events for all employees, providing forums for feedback and engagement on inclusion and continuing to build on our talent processes that enable change.
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For example, the Company is a corporate member of Women in Manufacturing and a sponsor of the Women Automotive Network, both of which are organizations invested in supporting and promoting women in their respective industries.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

56 edited+9 added−13 removed135 unchanged
Because demand for our products and services is largely derived from the global demand for their products, we are subject to uncertainties related to downturns in our customers’ businesses and shutdowns or curtailments of our customers’ production, including as a result of adverse changes affecting national, regional and global economies or increased competitive pressure within our customers’ industries.
Because demand for our products and services is largely derived from the global demand for our customers’ products, we are subject to uncertainties related to downturns in our customers’ businesses and shutdowns or curtailments of our customers’ production, including as a result of adverse changes affecting national, regional and global economies or increased competitive pressure within our customers’ industries.
See Note 10 and Note 26 of Notes to Consolidated Financial Statements in Item 8 of this Report, which describes uncertain tax positions and tax audits and inspections, as well as certain information concerning pending asbestos-related litigation against an inactive subsidiary, amounts accrued associated with certain environmental, non-capital remediation costs and other potential commitments or contingencies.
See Note 10 and Note 25 of Notes to Consolidated Financial Statements in Item 8 of this Report, which describes uncertain tax positions and audits and inspections, as well as certain information concerning pending asbestos-related litigation against an inactive subsidiary, amounts accrued associated with certain environmental, non-capital remediation costs and other potential commitments or contingencies.
Some competitors may be able to offer more favorable or flexible pricing and service terms or, due to their larger size or greater access to resources, may be better able to adapt to changes in conditions in our industries, fluctuations in the costs of raw materials or changes in global economic conditions, potentially resulting in reduced profitability and/or a loss of market share for us.
Some competitors may be able to offer more favorable or flexible pricing and service terms or, due to their greater access to resources, may be better able to adapt to changes in conditions in our industries, fluctuations in the costs of raw materials or changes in global economic conditions, potentially resulting in reduced profitability and/or a loss of market share for us.
A decrease in demand due to these issues could have an adverse impact on our business and results of operation. Further, we are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.K. Bribery Act and other anti-bribery, anti-corruption and anti-money laundering laws in jurisdictions around the world.
A decrease in demand due to these issues could have an adverse impact on our business and results of operations. Further, we are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.K. Bribery Act and other anti-bribery, anti-corruption and anti-money laundering laws in jurisdictions around the world.
Rising interest rates could also cause credit market dislocations, which could have an impact on the Company and its customers' cost of capital. Risks Related to our International Operations Our global presence subjects us to political and economic risks that could adversely affect our business, liquidity, financial position and results of operations.
Rising interest rates could also cause credit market dislocations, which could have an impact on the Company’s and its customers' cost of capital. Risks Related to our International Operations Our global presence subjects us to political and economic risks that could adversely affect our business, liquidity, financial position and results of operations.
The costs of transporting our products could be negatively affected by factors outside of our control, including shipping container shortages or global imbalances in shipping capabilities, transportation disruptions or rate increases, increased border controls or closures, extreme weather events, tariffs, rising fuel costs and capacity constraints.
The costs of transporting our products could be negatively affected by factors outside of our control, including shipping container shortages or global imbalances in shipping capabilities, transportation disruptions or rate increases, increased border controls or closures, extreme weather events, tariffs, rising fuel costs, armed conflicts and capacity constraints.
Risks Relating to Domestic and Foreign Taxation and Government Regulation and Oversight Changes in tax laws could result in fluctuations in our effective tax rate and have a material effect on our liquidity, financial position and results of operation. We pay income taxes in the U.S. and various foreign jurisdictions.
Risks Relating to Domestic and Foreign Taxation and Government Regulation and Oversight Changes in tax laws could result in fluctuations in our effective tax rate and have a material effect on our liquidity, financial position and results of operations. We pay income taxes in the U.S. and various foreign jurisdictions.
The Company’s principal credit facility permits interest on certain borrowings to be calculated based on the Term Secured Overnight Financing Rate (“Term SOFR”), which exposes us to interest rate risk. See Note 20 of Notes to Consolidated Financial Statements included in Item 8 of this Report.
The Company’s principal credit facility permits interest on certain borrowings to be calculated based on the Term Secured Overnight Financing Rate (“Term SOFR”), which exposes us to interest rate risk. See Note 19 of Notes to Consolidated Financial Statements included in Item 8 of this Report.
The CCPA provides for civil penalties for violations, as well as for private rights of action for certain data breaches that result in the loss of personal information. In addition, the California Consumer Rights Act (“CPRA”) was recently enacted to strengthen elements of the CCPA and becomes effective January 1, 2023.
The CCPA provides for civil penalties for violations, as well as for private rights of action for certain data breaches that result in the loss of personal information. In addition, the California Consumer Rights Act (“CPRA”) was recently enacted to strengthen elements of the CCPA and became effective January 1, 2023.
Our ability to satisfy these obligations, finance acquisitions and pay dividends rely on our access to capital, which depends in large part on cash flow generated by our business and the availability of debt financing.
Our ability to satisfy these obligations, finance acquisitions, repurchase shares, and pay dividends rely on our access to capital, which depends in large part on cash flow generated by our business and the availability of debt financing.
Therefore, a failure to monitor, maintain or protect our information technology systems and data integrity effectively or to anticipate, plan for and recover from significant disruptions to these systems could have a material adverse effect on our business, results of operations or financial condition. Our business depends on attracting and retaining qualified management and other key personnel.
Therefore, a failure to monitor, maintain or protect our information technology systems and data integrity effectively or to anticipate, plan for and recover from significant disruptions to these systems could have a material adverse effect on our business, results of operations or financial condition. 16 Table of Contents Our business depends on attracting and retaining qualified management and other key personnel.
Epidemic diseases, similar to COVID-19, could negatively affect various aspects of our business, make it more difficult to meet our obligations to our customers, and could result in reduced demand from our customers. These could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
Epidemic diseases could negatively affect various aspects of our business, make it more difficult to meet our obligations to our customers, and could result in reduced demand from our customers. These could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
Our financial results are affected by currency fluctuations, particularly between the U.S. dollar and the euro, the Brazilian real, the Mexican peso, the Chinese renminbi, and the Indian rupee, and the impact of those currency fluctuations on the underlying economies.
Our financial results are affected by currency fluctuations, particularly between the U.S. dollar and the euro, the British pound sterling, the Brazilian real, the Mexican peso, the Chinese renminbi and the Indian rupee and the impact of those currency fluctuations on the underlying economies.
Implementing and complying with these laws and regulations may be more costly or take longer than we anticipate or could otherwise affect our business operations. 16 Table of Contents In addition, some U.S. state governments have enacted or are considering enacting more stringent laws and regulations protecting personal information and data.
Implementing and complying with these laws and regulations may be more costly or take longer than we anticipate or could otherwise affect our business operations. In addition, some U.S. state governments have enacted or are considering enacting more stringent laws and regulations protecting personal information and data.
Animal fat and vegetable oil prices, as well as the prices of other raw materials, are impacted by their own specific supply and demand factors, as well as by biodiesel consumption which is also affected by the price of crude oil.
Animal fat and vegetable oil prices, as well as the prices of other raw materials, are impacted by their own specific supply and demand factors, as well as by biodiesel consumption which can also be affected by the price of crude oil.
Failure to retain key employees, failure to successfully transition key roles, or the inability to hire, train, retain and manage qualified personnel could also adversely affect our business. Increasing scrutiny and changing expectations from stakeholders with respect to our ESG practices may impose additional costs on us or expose us to new or additional risks.
Failure to retain key employees, failure to successfully transition key roles, or the inability to hire, train, retain and manage qualified personnel could also adversely affect our business. Increasing scrutiny and changing expectations from stakeholders with respect to our Environmental, Social and Governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.
During 2022, the Company’s top five largest customers (each composed of multiple subsidiaries or divisions with semi-autonomous purchasing authority) together accounted for approximately 11% of our consolidated net sales, with the largest customer accounting for approximately 3% of our consolidated net sales.
During 2023, the Company’s top five largest customers (each composed of multiple subsidiaries or divisions with semi-autonomous purchasing authority) together accounted for approximately 12% of our consolidated net sales, with the largest customer accounting for approximately 3% of our consolidated net sales.
Risks inherent in our global operations include: • increased transportation and logistics costs, or restrictions on transportation of materials; • increased cost or decreased availability of raw materials; • trade protection measures including import and export controls, trade embargoes, and trade sanctions affecting countries or regions we serve that could result in our losing access to customers and suppliers in those countries or regions; • unexpected adverse changes in export duties, quotas and tariffs and difficulties in obtaining export licenses; • termination or substantial modification of international trade agreements that may adversely affect our access to raw materials and to markets for our products; • our agreements with counterparties in countries outside the U.S. may be difficult for us to enforce and related receivables may take longer or be difficult for us to collect; • difficulties of staffing and managing dispersed international operations; 10 Table of Contents • less protective foreign intellectual property laws, and more generally, legal systems that may be less developed and predictable than those in the U.S.; • limitations on ownership or participation in local enterprises as well as the potential for expropriation or nationalization of enterprises; • the impact of widespread public health crises, such as the COVID-19 pandemic; • instability in or adverse changes to the economic, political, social, legal or regulatory conditions in a country or region where we do business, including hyperinflationary conditions or as a result of terrorist activities, or as a result of political and/or military conflict; and • complex and dynamic local tax regulations, including changes in foreign laws and tax rates or U.S. laws and tax rates with respect to foreign income that may unexpectedly increase the rate at which our income is taxed, impose new and additional taxes on remittances, repatriation or other payments by subsidiaries, or cause the loss of previously recorded tax benefits.
Risks inherent in our global operations include: • trade protection measures including import and export controls, trade embargoes, and trade sanctions affecting countries or regions we serve that could result in our losing access to customers and suppliers in those countries or regions; • unexpected adverse changes in export duties, quotas and tariffs and difficulties in obtaining export licenses; • termination or substantial modification of international trade agreements that may adversely affect our access to raw materials and to markets for our products; • our agreements with counterparties in countries outside the U.S. may be difficult for us to enforce and related receivables may take longer or be difficult for us to collect; • less protective foreign intellectual property laws, and more generally, legal systems that may be less developed and predictable than those in the U.S.; 10 Table of Contents • limitations on ownership or participation in local enterprises as well as the potential for expropriation or nationalization of enterprises; • instability in or adverse changes to the economic, political, social, legal or regulatory conditions in a country or region where we do business, including hyperinflationary conditions or as a result of terrorist activities, or as a result of political and/or military conflict; and • complex and dynamic local tax regulations, including changes in foreign laws and tax rates or U.S. laws and tax rates with respect to foreign income that may unexpectedly increase the rate at which our income is taxed, impose new and additional taxes on remittances, repatriation or other payments by subsidiaries, or cause the loss of previously recorded tax benefits.
See Note 16 of Notes to Consolidated Financial Statements included in Item 8 of this Report.
See Note 24 of Notes to Consolidated Financial Statements included in Item 8 of this Report.
Rising interest rates, such as those we have recently been experiencing, not only increase our cost of capital but could also have a dampening effect on overall economic activity and the financial condition of the Company's customers, either or both of which could negatively affect customer demand for the Company's products and customers' ability to repay their obligations.
Rising interest rates not only increase our cost of capital but could also have a dampening effect on overall economic activity and the financial condition of the Company's customers, either or both of which could negatively affect customer demand for the Company's products and customers' ability to repay their obligations.
To the extent that the Company’s customers and suppliers are materially and adversely impacted by a widespread outbreak of contagious disease, this could reduce the availability, or result in delays, of materials or supplies to or from the Company, which in turn could materially interrupt the Company’s business operations.
To the extent that the Company’s customers and suppliers are materially and adversely impacted by a widespread outbreak of contagious disease, this could reduce the availability, or result in delays, of materials or supplies to or from the Company, which in turn could materially interrupt the Company’s business operations. Item 1B. Unresolved Staff Comments. None.
Fluctuations in foreign currency exchange rates may affect product demand and may adversely affect the profitability in U.S. dollars of the products and services we provide in international markets where payment for our products and services is made in the local currency.
Our non-U.S. operations generate significant revenues and earnings. Fluctuations in foreign currency exchange rates may affect product demand and may adversely affect the profitability in U.S. dollars of the products and services we provide in international markets where payment for our products and services is made in the local currency.
Disruptions at our suppliers have recently and could in the future lead to short term or long term increases in raw material or energy costs and/or reduced availability of materials or energy, potentially affecting our financial condition and results of operations.
Significant delays or increased costs affecting our supply chain could materially affect our financial condition and results of operations. Disruptions at our suppliers have recently and could in the future lead to short term or long term increases in raw material or energy costs and/or reduced availability of materials or energy, potentially affecting our financial condition and results of operations.
Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, similar to COVID-19, which impacted all locations in which the Company does business as well as the Company’s customers and suppliers.
Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, which could impact all or any locations in which the Company does business as well as the Company’s customers and suppliers.
In addition, we source some materials from a single supplier or from suppliers in jurisdictions that have experienced political or economic instability. Even if we have multiple suppliers of a particular raw material, there are occasionally shortages.
The specialty chemical industry periodically experiences supply shortages for certain raw materials. In addition, we source some materials from a single supplier or from suppliers in jurisdictions that have experienced political or economic instability. Even if we have multiple suppliers of a particular raw material, there are occasionally shortages.
Additionally, we may face reputational challenges in the event our ESG procedures or standards do not meet the standards set by certain constituencies. We have adopted certain practices as highlighted in the Company’s Sustainability Report, including with respect to environmental stewardship.
Additionally, we may face reputational challenges in the event our ESG procedures or standards do not meet the standards set by certain constituencies. We have adopted certain practices as highlighted in the Company’s Sustainability Report, including with respect to environmental stewardship. The Company’s Sustainability Report is published annually and is available on the Company’s corporate website at home.quakerhoughton.com/sustainability.
Any of these factors or similar tax-related risks could cause our effective tax rate and tax-related payments, including any such payments related to tax liabilities of businesses we have acquired, to significantly differ from previous periods and current or future expectations which could have a material effect on our liquidity, financial position and results of operations. 12 Table of Contents Pending and future legal proceedings including environmental matters could have a material adverse effect on our liquidity, financial position and results of operations, as well as our reputation in the markets it serves.
Any of these factors or similar tax-related risks could cause our effective tax rate and tax-related payments, including any such payments related to tax liabilities of businesses we have acquired, to significantly differ from previous periods and current or future expectations which could have a material effect on our liquidity, financial position and results of operations.
Terrorist attacks, other acts of armed conflicts or war, including cyber-attacks, and natural disasters, which may be amplified by ongoing global climate change and biodiversity loss, may directly impact our physical facilities and/or those of our suppliers or customers.
Also, other global events such as earthquakes, tornados, hurricanes, fires, floods, and tsunamis cannot be predicted. 17 Table of Contents Terrorist attacks, other acts of armed conflicts or war, including cyber-attacks, and natural disasters, which may be amplified by ongoing global climate change and biodiversity loss, may directly impact our physical facilities and/or those of our suppliers or customers.
While certain climate change initiatives may result in new business opportunities for us in the area of alternative fuel technologies and emissions control, compliance with these initiatives may also result in additional costs to us including, among other things, increased production costs, additional taxes, reduced emission allowances or additional restrictions on production or operations.
While certain climate change initiatives may result in new business opportunities for us in the area of alternative fuel technologies and emissions control, compliance with these initiatives may also result in additional costs to us including, among other things, increased production costs, additional taxes, reduced emission allowances or additional restrictions on production or operations. 13 Table of Contents In addition, the potential physical impacts of climate change and biodiversity loss are highly uncertain and will be particular to the circumstances developing in various geographical regions.
If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remains the same, which would require us to use more of our available cash to service our indebtedness.
Interest rate increases, which were experienced during 2022 and 2023, increase our debt service obligations on the variable rate indebtedness even though the amount borrowed remains the same, which requires us to use more of our available cash to service our indebtedness.
An adverse result in one or more pending or ongoing matters or any potential future matter of a similar nature could materially and adversely affect our liquidity, financial position, and results of operations, as well as our reputation in the markets we serve.
An adverse result in one or more pending or ongoing matters or any potential future matter of a similar nature could materially and adversely affect our liquidity, financial position, and results of operations, as well as our reputation in the markets we serve. 12 Table of Contents Failure to comply with the complex global regulatory environment in which we operate could have an adverse impact on our reputation and/or a material adverse effect on our liquidity, financial position and results of operations.
A significant change in margin or the loss of customers due to pricing actions could result in a material adverse effect on our liquidity, financial position and results of operations as described within Item 7 of this Report.
A significant change in margin or the loss of customers due to pricing actions could result in a material adverse effect on our liquidity, financial position and results of operations as described within Item 7 of this Report. 11 Table of Contents Lack of availability of raw materials and issues associated with sourcing from single suppliers and suppliers in volatile economic environments could have a material adverse effect on our liquidity, financial position and results of operations.
Though we are closely following developments in this area and changes in the regulatory landscape in the U.S. and across our other markets, we cannot predict how or when those challenges may ultimately impact our business.
There continues to be a lack of consistent legislation related to disclosure and operational matters, which creates economic and regulatory uncertainty. Though we are closely following developments in this area and changes in the regulatory landscape in the U.S. and across our other markets, we cannot predict how or when those challenges may ultimately impact our business.
There can be no assurance that there will not be terrorist attacks against the U.S. or other locations where we do business. Also, other global events such as earthquakes, hurricanes, fires and tsunamis cannot be predicted.
There can be no assurance that there will not be terrorist attacks against the U.S. or other locations where we do business.
Terrorist attacks, other acts of armed conflicts or war, including cyber-attacks, natural disasters, widespread public health crises, including the COVID-19 pandemic, or other uncommon global events such as the current war between Russia and Ukraine, may negatively affect our operations.
Terrorist attacks, other acts of armed conflicts or war, including cyber-attacks, natural disasters, widespread public health crises, or other uncommon global events, such as the current military conflicts between Russia and Ukraine and between Israel and Hamas, as well as responses to such events including sanctions, boycotts, protests or other restrictive actions by the United States and/or other countries or its residents, may negatively affect our operations.
Accordingly, significant fluctuations in the price of crude oil in the past have had and are expected to continue to have a material impact on the cost of our raw materials.
Accordingly, significant fluctuations in the prices of our raw materials in the past have had and are expected to continue to have a material impact on the cost of our raw materials. In addition, many of the raw materials we use are commodity chemicals, which have experienced significant price volatility in recent years.
The Company relies heavily on railroads, ships, and over-the-road shipping methods to transport raw materials to its manufacturing facilities and to transport finished products to customers.
We could be similarly adversely affected by other disruptions to our supply chain and transportation network. The Company relies heavily on railroads, ships, and over-the-road shipping methods to transport raw materials to its manufacturing facilities and to transport finished products to customers.
These potential risks to our proprietary information, trade brands and other intellectual property could subject us to increased competition and a failure to protect, defend or enforce our intellectual property rights could negatively impact our liquidity, financial position and results of operations. 14 Table of Contents General Risk Factors Our business could be adversely affected by environmental, health and safety laws and regulations or by potential product, service or other related liability claims.
These potential risks to our proprietary information, trade brands and other intellectual property could subject us to increased competition and a failure to protect, defend or enforce our intellectual property rights could negatively impact our liquidity, financial position and results of operations.
Any long-term material adverse effect on our customers or their industries could have a significant financial and operational adverse impact on our business. 17 Table of Contents Terrorist attacks, other acts of violence or war, natural disasters, widespread public health crises or other uncommon global events may affect the markets in which we operate and our profitability which could adversely affect our liquidity, financial position and results of operations.
We are closely monitoring these developments. Terrorist attacks, other acts of violence or war, natural disasters, widespread public health crises or other uncommon global events may affect the markets in which we operate and our profitability which could adversely affect our liquidity, financial position and results of operations.
We may not have insurance coverage for such indemnity obligations. Further, we cannot predict the nature or amount of any indemnity or other obligations we may have to pay the applicable purchaser.
We may not have insurance coverage for such indemnity obligations. Further, we cannot predict the nature or amount of any indemnity or other obligations we may have to pay the applicable purchaser. These payments may be costly and may adversely affect our financial condition and results of operations. Our insurance may not fully cover all potential exposures.
If the carrying values of goodwill or indefinite-lived intangible assets exceed their fair value, the goodwill or indefinite-lived intangible assets would be considered impaired. In addition, we perform a review of a definite-lived intangible asset or other long-lived asset when changes in circumstances or events indicate a possible impairment.
In addition, we perform a review of a definite-lived intangible asset or other long-lived asset when changes in circumstances or events indicate a possible impairment.
In addition, many of the raw materials we use are commodity chemicals, which have experienced significant price volatility in 2021 and 2022. 11 Table of Contents We generally attempt to pass through changes in the prices of raw materials to our customers, but we may be unable to do so (or may be delayed in doing so).
We generally attempt to pass through changes in the prices of raw materials to our customers, but we may be unable to do so (or may be delayed in doing so).
The physical risks of climate change and biodiversity loss may impact our facilities, our customers and suppliers, and the availability and costs of materials and natural resources, sources and supply of energy, product demand and manufacturing. In particular, climate change serves as a risk multiplier increasing both the frequency and severity of natural disasters that may affect our business operations.
In particular, climate change serves as a risk multiplier increasing both the frequency and severity of natural disasters that may affect our business operations.
In addition, investigations by governmental authorities as well as legal, social, economic and political issues in these countries could have a material adverse effect on our business, results of operations and financial condition.
In addition, investigations by governmental authorities as well as legal, social, economic and political issues in these countries could have a material adverse effect on our business, results of operations and financial condition. We are also subject to the risks that our employees, joint venture partners and agents outside of the U.S. may fail to comply with other applicable laws.
We test goodwill at the reporting unit level by comparing the carrying value of the net assets of the reporting unit, including goodwill, to the reporting unit's fair value. Similarly, we test indefinite-lived intangible assets by comparing the fair value of the assets to their carrying values.
Similarly, we test indefinite-lived intangible assets by comparing the fair value of the assets to their carrying values. If the carrying values of goodwill or indefinite-lived intangible assets exceed their fair value, the goodwill or indefinite-lived intangible assets would be considered impaired.
In addition, we are regularly under audit by tax authorities, and the final decisions of such audits could materially affect our current tax estimates and tax positions. See Note 10 and Note 26 of Notes to Consolidated Financial Statements in Item 8 of this Report for a discussion of certain income and non-income tax audits and inspections.
In addition, we are regularly under audit by tax authorities, and the final decisions of such audits could materially affect our current tax estimates and tax positions.
These regulations could mandate even more restrictive regulatory or industry standards than the voluntary goals that we have established or require changes to be adopted on a more accelerated time frame. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty.
These regulations could mandate even more restrictive regulatory or industry standards than the voluntary goals that we have established or require changes to be adopted on a more accelerated time frame. New disclosure requirements have been adopted in the EU and California and additional rule making is expected to be adopted by the SEC.
Any failure to comply with such specifications could result in claims or legal action against us. Any of the foregoing potential product or service risks could also result in substantial and unexpected expenditures and affect customer confidence in our products and services, which could have a material adverse effect on our liquidity, financial position and results of operations.
Any of the foregoing potential product or service risks could also result in substantial and unexpected expenditures and affect customer confidence in our products and services, which could have a material adverse effect on our liquidity, financial position and results of operations. 14 Table of Contents In addition, our business is subject to hazards associated with the manufacturing, handling, use, storage, and transportation of chemical materials and products, including historical operations at our current and former facilities.
If we identify material weaknesses in the future, it could negatively impact our operations or the market value of our common stock.
Furthermore, to the extent our business grows or significantly changes, our internal controls may become more complex, and we could require significantly more resources to ensure our internal controls remain effective. If we identify material weaknesses in the future, it could negatively impact our operations or the market value of our common stock.
We are also subject to the risks that our employees, joint venture partners and agents outside of the U.S. may fail to comply with other applicable laws. 13 Table of Contents Uncertainty related to environmental regulation and industry standards relating to, as well as physical risks of, climate change and biodiversity loss, could impact our results of operations and financial position.
Uncertainty related to environmental regulation and industry standards relating to, as well as physical risks of, climate change and biodiversity loss, could impact our results of operations and financial position.
In addition, the COVID-19 pandemic caused, and may in the future cause, significant travel disruptions, quarantines and/or closures, which could result in disruptions to our manufacturing and production operations at our facilities, as well as those of our suppliers and customers.
In addition, a widespread public health crisis may cause significant travel disruptions, quarantines and/or closures, which could result in disruptions to our manufacturing and production operations at our facilities, as well as those of our suppliers and customers. Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles.
If we are unable to successfully manage these and other risks associated with our international businesses, the risks could have a material adverse effect on our business, results of operations and financial condition. Additionally, on January 31, 2020, the United Kingdom’s (“U.K.”) ended its membership in the European Union (“EU”) (commonly referred to as “Brexit”).
If we are unable to successfully manage these and other risks associated with our international businesses, the risks could have a material adverse effect on our business, results of operations and financial condition. The scope of our international operations subjects us to risks from currency fluctuations that could adversely affect our liquidity, financial position and results of operations.
The development, manufacture and sale of specialty chemical products and other related services involve inherent exposure to potential product liability claims, service level claims, product recalls and related adverse publicity. Some customers have and may in the future require us to represent that our products conform to certain product specifications provided by them.
General Risk Factors Our business could be adversely affected by environmental, health and safety laws and regulations or by potential product, service or other related liability claims. The development, manufacture and sale of specialty chemical products and other related services involve inherent exposure to potential product liability claims, service level claims, product recalls and related adverse publicity.
Impairment evaluations of goodwill, intangible assets, investments or other long-lived assets could result in a reduction in our recorded asset values which could have a material adverse effect on our financial position and results of operation. We perform reviews of goodwill and indefinite-lived intangible assets on an annual basis, or more frequently if triggering events indicate a possible impairment.
In the future, we may not be able to obtain coverage at current levels, if at all, and our premiums may increase significantly on coverage that we maintain. 15 Table of Contents Impairment evaluations of goodwill, intangible assets, investments or other long-lived assets could result in a reduction in our recorded asset values which could have a material adverse effect on our financial position and results of operations.
In addition, the potential physical impacts of climate change and biodiversity loss are highly uncertain and will be particular to the circumstances developing in various geographical regions. These may include extreme weather events and long-term changes in temperature levels and water availability as well as damaged ecosystems.
These may include extreme weather events and long-term changes in temperature levels and water availability as well as damaged ecosystems. The physical risks of climate change and biodiversity loss may impact our facilities, our customers and suppliers, and the availability and costs of materials and natural resources, sources and supply of energy, product demand and manufacturing.
Failure to comply with the complex global regulatory environment in which we operate could have an adverse impact on our reputation and/or a material adverse effect on our liquidity, financial position and results of operations. We are subject to government regulation in all of the jurisdictions in which we conduct our business.
We are subject to government regulation in all of the jurisdictions in which we conduct our business.
Removed
In the past, we have entered into certain hedging transactions, such as interest rate swap agreements, to mitigate our exposure to adverse fluctuations in interest rates, and we may do so again in the future.
Added
In order to manage the Company’s exposure to variable interest rate risk associated with the Company’s principal credit facility, in the first quarter of 2023, the Company entered into three year interest rate swaps to convert a portion of the Company’s variable interest rate borrowings to an average fixed rate plus an applicable margin as provided in the Company’s principal credit facility, based on the Company’s consolidated net leverage ratio.
Removed
However, we do not currently utilize any such hedging arrangements with respect to interest rates and may not be able to enter into swap agreements or other hedging arrangements in the future.
Added
See Note 10 and Note 25 of Notes to Consolidated Financial Statements in Item 8 of this Report for a discussion of uncertain tax positions, tax years subject to examination, and audits and inspections.
Removed
Although the U.K. and the EU entered into a trade and cooperation agreement, uncertainty remains regarding its implications and implementation, and whether and how any new trade agreements with other countries or territories will be agreed and implemented and how they may impact our business.
Added
Pending and future legal proceedings including environmental matters could have a material adverse effect on our liquidity, financial position and results of operations, as well as our reputation in the markets we serve.
Removed
Brexit could adversely affect political, regulatory, economic or market conditions and contribute to instability in global political institutions, regulatory agencies, and financial markets. Any of these risks might have a materially adverse impact on our business operations and our financial position or results of operations.
Added
Some customers have and may in the future require us to represent that our products conform to certain product specifications provided by them. Any failure to comply with such specifications could result in claims or legal action against us.
Removed
Similar future trade disruptions or disputes could have a negative impact on our operations within the U.K., EU, and globally. The scope of our international operations subjects us to risks from currency fluctuations that could adversely affect our liquidity, financial position and results of operations. Our non-U.S. operations generate significant revenues and earnings.
Added
We perform reviews of goodwill and indefinite-lived intangible assets on an annual basis, or more frequently if triggering events indicate a possible impairment. We test goodwill at the reporting unit level by comparing the carrying value of the net assets of the reporting unit, including goodwill, to the reporting unit's fair value.
Removed
Lack of availability of raw materials and issues associated with sourcing from single suppliers and suppliers in volatile economic environments could have a material adverse effect on our liquidity, financial position and results of operations. The specialty chemical industry periodically experiences supply shortages for certain raw materials.
Added
See Note 15 of Notes to Consolidated Financial Statements included in Item 8 of this Report.
Removed
Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles. We could be similarly adversely affected by other disruptions to our supply chain and transportation network.
Added
Any long-term material adverse effect on our customers or their industries could have a significant financial and operational adverse impact on our business.
Removed
Significant delays or increased costs affecting our supply chain, such as we experienced in 2021, and to a lesser degree in 2022, could materially affect our financial condition and results of operations.
Added
Legislation requiring disclosure related to ESG matters is increasingly being adopted by governments in various jurisdictions, including the EU and California, which requirements are expected to be applicable to us or certain of our operations and which impose varying and differing requirements.
Removed
In addition, our business is subject to hazards associated with the manufacturing, handling, use, storage, and transportation of chemical materials and products, including historical operations at our current and former facilities.
Added
These developing requirements can significantly expand climate and other sustainability related disclosure requirements, which could require substantial time and attention of management and financial resources. Additionally, we could be subjected to negative responses by governmental actors, such as anti-ESG legislation, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Removed
These payments may be costly and may adversely affect our financial condition and results of operations. 15 Table of Contents Our insurance may not fully cover all potential exposures.
Removed
In the future, we may not be able to obtain coverage at current levels, if at all, and our premiums may increase significantly on coverage that we maintain.
Removed
Furthermore, to the extent our business grows or significantly changes, our internal controls may become more complex, and we could require significantly more resources to ensure our internal controls remain effective. In the past, we have identified certain material weaknesses in our internal control over financial reporting, all of which have been previously remediated as of December 31, 2021.
Removed
The full extent of the outbreak and business impact of COVID-19 continue to remain uncertain, and the ultimate impact on our business of a widespread outbreak of a contagious disease will depend on, among other things, the extent and duration of the outbreak, the severity of the disease and the number of people infected, the development and continued uncertainty regarding availability, administration and long-term efficacy of a vaccine or other treatments, the longer-term effects on the economy, including market volatility, and the measures taken by governmental authorities and other third parties restricting day-to-day life and the length of time that such measures remain in place, as well as laws and other governmental programs implemented to address the outbreak or assist impacted businesses, such as fiscal stimulus and other legislation designed to deliver monetary aid and other relief.

Item 2. Properties

Properties — owned and leased real estate

4 edited+2 added−3 removed1 unchanged
With the exception of the Conshohocken, Santa Fe Springs, Madison Heights, Lewisburg, Aurora, Karlshamn, Rayong, and Coventry sites, which are leased, the remaining principal facilities are owned by the Company and, as of December 31, 2022, were mortgage free.
With the exception of the Conshohocken, Santa Fe Springs, Madison Heights, Lewisburg, Monheim am Rhein, Aurora, Karlshamn, Songjiang, Rayong, and Coventry sites, which are leased, the remaining principal facilities are owned by the Company and, as of December 31, 2023, were mortgage free. Quaker Houghton also leases sales, laboratory, manufacturing, and warehouse facilities in other locations.
Most locations have raw material storage tanks, ranging from 1 to 155 at each location with capacities ranging from 300 to 65,000 gallons, and processing or manufacturing vessels ranging from 1 to 54 at each location with capacities ranging from 2 to 45,000 gallons.
Quaker Houghton’s principal facilities consist of various manufacturing, administrative, warehouse, and laboratory buildings. Most locations have raw material storage tanks, ranging from 1 to 155 at each location with capacities ranging from 300 to 70,000 gallons, and processing or manufacturing vessels ranging from 1 to 54 at each location with capacities ranging from 2 to 29,000 gallons.
Item 2. Properties. Quaker Houghton’s corporate headquarters and a laboratory facility are located in its Americas segment’s Conshohocken, Pennsylvania location. The Company’s other principal facilities in its America’s segment are located in Carrollton, Georgia; Zion, Illinois; Detroit, Michigan ; Dayton, Ohio; Middletown, Ohio; Strongsville, Ohio; Waterloo, Ontario; Monterrey, N.L., Mexico; Rio de Janeiro, Brazil and Sao Paulo, Brazil.
The Company’s other principal facilities in its Americas’ segment are located in Santa Fe Springs, California; Carrollton, Georgia; Aurora, Illinois; Zion, Illinois; Detroit, Michigan; Madison Heights, Michigan; Batavia, New York; Cleveland, Ohio; Dayton, Ohio; Middletown, Ohio; Strongsville, Ohio; Lewisburg, Tennessee; Waterloo, Ontario; Monterrey, N.L., Mexico; Rio de Janeiro, Brazil and Sao Paulo, Brazil.
The Company’s EMEA segment has principal facilities in Uithoorn, Netherlands; Dortmund, Germany; Barbera, Spain; Bera, Spain; Santa Perpetua de Mogoda, Spain; Karlshamn, Sweden; Tradate, Italy; and Turin, Italy. The Company’s Asia/Pacific segment operates out of its principal facilities located in Qingpu, China; Songjiang, China; Dahej, India; Rayong, Thailand; and Moorabbin, Australia.
The Company’s Asia/Pacific segment operates out of its principal facilities located in Chongqing, China; Qingpu, China; Shanghai, China; Songjiang, China; Dahej, India; Rayong, Thailand; Moorabbin, Australia; and Perth, Australia.
Removed
The Company’s Global Specialty Businesses segment operates out of its principal facilities in Aurora, Illinois; Cleveland, Ohio; Santa Fe Springs, California; Batavia, New York; Waukegan, Illinois; Zion, Illinois; Madison Heights, Michigan; Lewisburg, Tennessee; Coventry, U.K; Broms Grove, U.K.; Monheim am Rhein, Germany; Chongqing, China; Shanghai, China; and Perth, Australia.
Added
Item 2. Properties. Quaker Houghton’s corporate headquarters and a laboratory facility are located in Conshohocken, Pennsylvania, which is within the Americas’ segment.
Removed
Quaker Houghton also leases sales, laboratory, manufacturing, and warehouse facilities in other locations. 18 Table of Contents Quaker Houghton’s principal facilities consist of various manufacturing, administrative, warehouse, and laboratory buildings. Most of the buildings are of fire-resistant construction and are equipped with sprinkler systems.
Added
The Company’s EMEA segment has principal facilities in Uithoorn, Netherlands; Dortmund, Germany; Monheim am Rhein, Germany; Barbera, Spain; Bera, Spain; Santa Perpetua de Mogoda, Spain; Karlshamn, Sweden; Turin, Italy Coventry, U.K; and Broms Grove, U.K.
Removed
The Company has a program to identify needed capital improvements that are implemented as management considers necessary or desirable.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
For information concerning pending asbestos-related litigation against an inactive subsidiary, certain environmental non-capital remediation costs and other legal-related matters, reference is made to Note 26 of Notes to Consolidated Financial Statements, included in Item 8 of this Report, which is incorporated herein by this reference.
For information concerning pending certain environmental non-capital remediation costs and other legal-related matters, refer to Note 25 of Notes to Consolidated Financial Statements, included in Item 8 of this Report, which is incorporated herein by this reference.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

16 edited+5 added−4 removed0 unchanged
Bijlani, who has been employed by the Company since August 2019, has served as Chief Strategy Officer since January 1, 2023. Prior to that role, he served as Senior Vice President, Managing Director - Americas from August 2019 until December 2022. Prior to joining the Company, Mr.
Jeewat Bijlani, 47 Executive Vice President, Chief Strategy Officer Mr. Bijlani, who has been employed by the Company since August 2019, has served as Executive Vice President, Chief Strategy Officer since January 1, 2023. Prior to that role, he served as Senior Vice President, Managing Director - Americas from August 2019 until December 2022. Prior to joining the Company, Mr.
He served as Global Controller and Principal Accounting Officer from September 2014 until July 2019. 20 Table of Contents Name, Age, and Present Position with the Company Business Experience During the Past Five Years and Period Served as an Officer Melissa Leneis, 40 Senior Vice President, Chief Human Resources Officer Ms.
He served as Global Controller and Principal Accounting Officer from September 2014 until July 2019. 20 Table of Contents Name, Age, and Present Position with the Company Business Experience During the Past Five Years and Period Served as an Officer Melissa Leneis, 41 Executive Vice President, Chief Human Resources Officer Ms.
Tometich was Senior Vice President, Specialty Materials Business at Corning Incorporated from September 2017 until August 2019 and President, Performance Silicones Business Unit at The Dow Chemical Company from June 2016 until February 2017 after having positions of increasing responsibility at Dow Corning Corporation and its subsidiaries from 1989 through 2016. Joseph A. Berquist, 51 Chief Commercial Officer Mr.
Tometich was Senior Vice President, Specialty Materials Business at Corning Incorporated from September 2017 until August 2019 and President, Performance Silicones Business Unit at The Dow Chemical Company from June 2016 until February 2017 after having positions of increasing responsibility at Dow Corning Corporation and its subsidiaries from 1989 through 2016. Joseph A.
Berquist, who has been employed by the Company since 1997, has served as Chief Commercial Officer since January 1, 2023. Prior to that role, he served as Executive Vice President, Chief Strategy Officer, and Managing Director, Global Specialty Businesses from September 2021 until December 2022. Additionally, he served as Interim Managing Director of EMEA from August 2022 through December 2022.
Berquist, 52 Executive Vice President, Chief Commercial Officer Mr. Berquist, who has been employed by the Company since 1997, has served as Executive Vice President, Chief Commercial Officer since January 1, 2023. Prior to that role, he served as Executive Vice President, Chief Strategy Officer, and Managing Director, Global Specialty Businesses from September 2021 until December 2022.
Prior to joining InterDigital, Ms. Leneis was responsible for leading global teams of Human Resources business partners at Johnson Controls (formerly Tyco International), from October 2012 through September 2018. Her previous experience also includes Human Resources leadership positions with MEI, Inc. (formerly Mars) and Lockheed Martin Corporation.
Prior to that role, she served in various Human Resources leadership roles at InterDigital. Prior to joining InterDigital, Ms. Leneis was responsible for leading global teams of Human Resources business partners at Johnson Controls (formerly Tyco International), from October 2012 through September 2018. Her previous experience also includes Human Resources leadership positions with MEI, Inc.
Before that, he served as Senior Vice President, Global Specialty Businesses and Chief Strategy Officer from August 2019 to September 2021. Mr. Berquist served as Vice President and Managing Director – North America from April 2010 until July 2019. Jeewat Bijlani, 46 Chief Strategy Officer Mr.
Additionally, he served as Interim Managing Director of EMEA from August 2022 through December 2022. Before that, he served as Senior Vice President, Global Specialty Businesses and Chief Strategy Officer from August 2019 to September 2021. Mr. Berquist served as Vice President and Managing Director – North America from April 2010 until July 2019.
David Slinkman, 58 Senior Vice President, Chief Technology Officer Dr. Slinkman has served as Senior Vice President, Chief Technology Officer since he joined the Company in August 2019. Prior to joining the Company, Dr. Slinkman served as Vice President of Technology of Houghton from March 2012 until July 2019. Robert T.
Slinkman has served as Senior Vice President, Chief Technology Officer since he joined the Company in August 2019. Prior to joining the Company, Dr. Slinkman served as Vice President of Technology of Houghton from March 2012 until July 2019. Robert T. Traub, 59 Senior Vice President, General Counsel and Corporate Secretary Mr.
Traub, 58 Senior Vice President, General Counsel and Corporate Secretary Mr. Traub, who has been employed by the Company since 2000, has served as Senior Vice President, General Counsel and Corporate Secretary since August 2019. He previously served as Vice President, General Counsel and Corporate Secretary from April 2015 until July 2019. David A.
Traub, who has been employed by the Company since 2000, has served as Senior Vice President, General Counsel and Corporate Secretary since August 2019. He previously served as Vice President, General Counsel and Corporate Secretary from April 2015 until July 2019. Jeffrey J. Kutz, 64 Vice President, Chief Accounting Officer Mr.
Prior to that role, he served as Vice President, Finance and Chief Accounting Officer from August 2019 until April 2021.
Hostetter previously served as Senior Vice President, Chief Financial Officer from April 2021 through February 2023. Prior to that role, he served as Vice President, Finance and Chief Accounting Officer from August 2019 until April 2021.
Leneis has served as Senior Vice President, Chief Human Resources Officer since she joined the Company in July 2022. Prior to joining the Company, Ms. Leneis served as Executive Vice President and Chief Human Resources Officer at InterDigital, Inc. from October 2019 through June 2022. Prior to that role, she served in various Human Resources leadership roles at InterDigital.
Leneis has served as Executive Vice President, Chief Human Resources Officer since March 1, 2023. She previously served as Senior Vice President, Chief Human Resources Officer from July 2022 through February 2023. Prior to joining the Company, Ms. Leneis served as Executive Vice President and Chief Human Resources Officer at InterDigital, Inc. from October 2019 through June 2022.
Tometich, who has been employed by the Company since October 2021, has served as Chief Executive Officer and President since December 2021. Prior to joining the Company, Mr. Tometich served as Executive Vice President, Hygiene, Health and Consumable Adhesives at H.B. Fuller from August 2019 until September 2021. Before that, Mr.
Tometich served as Executive Vice President, Hygiene, Health and Consumable Adhesives at H.B. Fuller Company from August 2019 until September 2021. Before that, Mr.
Bijlani served as President, Americas and Global Strategic Businesses of Houghton from March 2015 until July 2019. Shane W. Hostetter, 41 Senior Vice President, Chief Financial Officer Mr. Hostetter, who has been employed by the Company since July 2011, has served as Senior Vice President, Chief Financial Officer since April 2021.
Bijlani served as President, Americas and Global Strategic Businesses of Houghton from March 2015 until July 2019. Jeffrey L. Fleck, 53 Senior Vice President, Chief Global Supply Chain Officer Mr. Fleck has served as Senior Vice President, Chief Global Supply Chain Officer since he joined the Company on February 27, 2023. Prior to joining the Company, Mr.
Will is considered an executive officer in his capacity as principal accounting officer for purposes of this Item 4(a). Name, Age, and Present Position with the Company Business Experience During the Past Five Years and Period Served as an Officer Andrew E. Tometich, 56 Chief Executive Officer and President Mr.
Name, Age, and Present Position with the Company Business Experience During the Past Five Years and Period Served as an Officer Andrew E. Tometich, 57 Chief Executive Officer and President Mr. Tometich, who has been employed by the Company since October 2021, has served as Chief Executive Officer and President since December 2021. Prior to joining the Company, Mr.
Prior to that role, Mr. Platzer served as Vice President and Managing Director – EMEA from January 2006 through March 2018. Dhruwa Rai, 53 Senior Vice President, Chief Information Digital Officer Mr. Rai has served as Senior Vice President, Chief Information Digital Officer since he joined the Company in July 2022. Prior to joining the Company, Mr.
(formerly Mars) and Lockheed Martin Corporation. Anna Ransley, 46 Senior Vice President, Chief Digital Information Officer Ms. Ransley has served as Senior Vice President, Chief Digital Information Officer since she joined the Company in July 2023. Prior to joining the Company, Ms. Ransley served as Global Chief Information Officer at Godiva Chocolatier from September 2021 through March 2023.
Item 4. Mine Safety Disclosures. Not applicable. 19 Table of Contents Item 4(a). Information about our Executive Officers. Set forth below is information regarding the executive officers of the Company, each of whom (with the exception of Andrew E.
Item 4. Mine Safety Disclosures. Not applicable. 19 Table of Contents Item 4(a). Information about our Executive Officers. Our executive officers as of February 29, 2024 are listed below with their respective ages, positions currently held at the Company, and principal occupation and business experience during at least the last five years.
Will, 38 Vice President, Chief Accounting Officer Mr. Will, who has been employed by the Company since 2014, has served as Vice President, Chief Accounting Officer since April 2022. Prior to that role, Mr. Will served as the Vice President, Global Controller and Principal Accounting Officer from April 2021 until March 2022.
Hostetter, 42 Executive Vice President, Chief Financial Officer Mr. Hostetter, who has been employed by the Company since July 2011, has served as Executive Vice President, Chief Financial Officer since March 1, 2023. In addition to his current position, he served as Chief Accounting Officer from October 2, 2023 to January 2, 2024. Mr.
Removed
Tometich, Melissa Leneis, and Dhruwa Rai) have been employed by the Company or by Houghton for at least five years, including the respective positions and offices with the Company (or Houghton) held by each over the respective periods indicated. Each of the executive officers, with the exception of David A. Will, is appointed annually to a one year term. Mr.
Added
Each of the executive officers, with the exception of Jeffrey Kutz, is appointed annually to a one year term. Mr. Kutz is considered an executive officer in his capacity as principal accounting officer for purposes of this Item 4(a).
Removed
Wilbert Platzer, 61 Senior Vice President, Global Operations, Environmental Health & Safety (“EHS”) and Procurement Mr. Platzer, who has been employed by the Company since 1995, has served as Senior Vice President, Global Operations, EHS and Procurement since August 2019. He previously served as Vice President, Global Operations, EHS and Procurement from April 2018 until July 2019.
Added
Fleck served as Senior Vice President, Chief Supply Chain Officer at Georgia-Pacific Consumer Products Company. Before that, he served as Senior Vice President, Chief Supply Chain and R&D Officer at Zep, Inc. from 2010 to 2015. Mr. Fleck’s previous experience also includes various supply chain management leadership positions at The Clorox Company, American Home Products, and Cargill Incorporated. Shane W.
Removed
Rai served as Chief Digital Technology Officer for the American Cancer Society from August 2021 to June 2022 and Goodwill Industries International from April 2020 to August 2021. Prior to these roles, Mr. Rai served as Chief Digital Officer and Global Chief Information Officer for Ball Aerospace & Packaging Corporation from May 2016 to January 2020. Dr.
Added
Prior to joining Godiva, she served as Vice President, Digital and Technology and US Chief Information Officer at Heineken from January 2017 through September 2021. Previously, Ms. Ransley held various IT leadership positions at companies such as Boehringer Ingelheim, Connolly, Inc. and Hyperion/Oracle. Dr. David Slinkman, 59 Senior Vice President, Chief Technology Officer Dr.
Removed
Previously, he served as Corporate Controller from August 2019 until April 2021 and Global Assistant Controller from December 2014 to August 2019. 21 Table of Contents PART II
Added
Kutz has served as the Vice President, Chief Accounting Officer since he joined the Company on January 2, 2024. Prior to joining the Company, Mr. Kutz served as Vice President, Corporate Controller & Principal Accounting Officer and Director, Technical Accounting & Reporting and Executive Director, Accounting Policy & Reporting at Air Products and Chemicals Inc. from 2012 until December 2023.
Added
He also held senior leadership roles at Exelon Corporation from 2008 to 2012, and Chatham Financial from 2001 to 2008. 21 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+6 added−2 removed3 unchanged
(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.
(3) On May 6, 2015, the Board 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.
Subsequently, our Board declared quarterly dividends of $0.435 per share of outstanding common stock in August and November 2022, respectively, payable to shareholders of record in October 2022 and January 2023, respectively. We currently expect to continue paying comparable cash dividends on a quarterly basis in the future.
Subsequently, our Board declared quarterly dividends of $0.455 per share of outstanding common stock in August and November 2023, respectively, payable to shareholders of record in October 2023 and January 2024, respectively. We currently expect to continue paying comparable cash dividends on a quarterly basis in the future.
In February and May 2022, our Board declared quarterly cash dividends of $0.415 per share of outstanding common stock, payable to shareholders of record in April 2022 and July 2022, respectively.
In February and May 2023, our Board declared quarterly cash dividends of $0.435 per share of outstanding common stock, payable to shareholders of record in April 2023 and July 2023, respectively.
Our Board declared cash dividends that totaled $1.70 per share of outstanding common stock or $30.5 million during the year ended December 31, 2022 and $1.62 per share of outstanding common stock or $29.0 million during the year ended December 31, 2021.
The Board declared cash dividends that totaled $1.78 per share of outstanding common stock or $32.0 million during the year ended December 31, 2023 and $1.70 per share of outstanding common stock or $30.5 million during the year ended December 31, 2022.
Reference is made to the information in Item 12 of this Report under the caption “Equity Compensation Plans,” which is incorporated herein by this reference.
Each share of common stock is entitled to one vote per share. Reference is made to the information in Item 12 of this Report under the caption “Equity Compensation Plans,” which is incorporated herein by this reference.
There were no shares acquired by the Company pursuant to the 2015 Share Repurchase Program during the quarter ended December 31, 2022. 22 Table of Contents Stock Performance Graph: The following graph compares the cumulative total return (assuming reinvestment of dividends) from December 31, 2017 to December 31, 2022 for (i) Quaker’s common stock, (ii) the S&P MidCap 400 Index (the “MidCap Index”), and (iii) the S&P 400 Materials Group Index (the “Materials Group Index”).
See Note 22 in Notes to Consolidated Financial Statements contained in Item 8 of this Report. 22 Table of Contents Stock Performance Graph The following graph compares the cumulative total return (assuming reinvestment of dividends) from December 31, 2018 to December 31, 2023 for (i) Quaker’s common stock, (ii) the S&P MidCap 400 Index (the “MidCap Index”), and (iii) the S&P 400 Materials Group Index (the “Materials Group Index”).
The following table sets forth information concerning shares of the Company’s common stock acquired by the Company during the fourth quarter of 2022 for the period covered by this report: Issuer Purchases of Equity Securities Period (a) Total Number of Shares Purchased (1) (b) Average Price Paid Per Share (2) (c) Total Number of Shares Purchased as part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3) October 1 - October 31, 2022 1,269 $ 138.89 — $ 86,865,026 November 1 - November 30, 2022 — $ — — $ 86,865,026 December 1 - December 31, 2022 253 $ 166.90 — $ 86,865,026 Total 1,522 $ 143.55 — $ 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.
The following table sets forth information concerning shares of the Company’s common stock acquired by the Company during the fourth quarter of 2023 for the period covered by this report: Issuer Purchases of Equity Securities Period (a) Total Number of Shares Purchased (1) (b) Average Price Paid Per Share (2) (c) Total Number of Shares Purchased as part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3) October 1 - October 31, 2023 15,038 $ 189.09 — $ 86,865,026 November 1 - November 30, 2023 30 $ 175.71 — $ 86,865,026 December 1 - December 31, 2023 111 $ 207.55 — $ 86,865,026 Total 15,179 $ 158.68 — $ 86,865,026 (1) During October 2023, 14,618 shares of the Company’s common stock that had been held in an indemnification escrow account established in connection with the Combination were released to the Company in satisfaction of Combination-related indemnification receivables associated with the settlement of certain income tax audits for tax periods prior to August 1, 2019.
The graph assumes the investment of $100 o n December 31, 2017 in each of Quaker’s common stock, the stocks comprising the MidCap Index and the Materials Group Index, respe ctively. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Quaker Chemical Corp. $ 100.00 $ 118.90 $ 110.99 $ 172.48 $ 158.13 $ 115.58 S&P MidCap 400 Index 100.00 88.92 112.21 127.54 159.12 138.34 S&P 400 Materials Group Index 100.00 79.63 96.25 106.50 140.82 136.97 Item 6.
The graph assumes the investment of $100 o n December 31, 2018 in each of Quaker’s common stock, the stocks comprising the MidCap Index and the Materials Group Index, respe ctively.
Removed
There are no restrictions that the Company believes are likely to materially limit the payment of future dividends. However, under the Credit Facility there are certain restrictions, including a limit on dividends paid not to exceed the greater of $75.0 million annually and 25% of consolidated EBITDA and there must be no default under the Credit Facility.
Added
There are currently no restrictions on the Company’s ability to pay dividends. However, in the event that our net leverage ratio were to rise above 2.5x, certain restrictions would apply.
Removed
Reference is made to the “Liquidity and Capital Resources” disclosure contained in Item 7 of this Report. As of January 17, 2023, 17,950,625 shares of Quaker common stock were issued and outstanding and were held by 621 shareholders of record. Each share of common stock is entitled to one vote per share.
Added
Refer to the description of the Company’s primary Credit Facility in Note 19 of Notes to Consolidated Financial Statements in Item 8 of this Report for more information about the covenants. As of January 17, 2024, 17,992,471 shares of Quaker common stock were issued and outstanding and were held by 605 shareholders of record.
Added
The Company subsequently retired the shares received from escrow, which did not reduce the total number of authorized shares.
Added
The remaining 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.
Added
There were no shares acquired by the Company pursuant to the 2015 Share Repurchase Program during the quarter ended December 31, 2023. On February 28, 2024, the 2015 Share Repurchase Program was terminated in connection with the Board’s approval of a new share repurchase program.
Added
Company / Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Quaker Chemical Corp. $ 100.00 $ 93.35 $ 145.07 $ 133.00 $ 97.21 $ 125.53 S&P MidCap 400 Index 100.00 126.19 143.43 178.94 155.57 181.14 S&P 400 Materials Group Index 100.00 120.87 133.74 176.84 172.01 200.44 Item 6. Reserved. 23 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

149 edited+42 added−109 removed61 unchanged
Operations Consolidated Operations Review – Comparison of 2022 with 2021 Net sales were a record $1,943.6 million in 2022 compared to $1,761.2 million in 2021.
Consolidated Operations Review – Comparison of 2022 with 2021 Net sales were a record $1,943.6 million in 2022 compared to $1,761.2 million in 2021.
Excluding the non-cash impairment charge, as well as other non-core items that are not indicative of future operating performance, the Company’s current year non-GAAP operating income was $177.9 million compared to $182.6 million in the prior year. The decline in non-GAAP operating income was primarily due to the higher SG&A, as described above.
Excluding the non-cash impairment charge, as well as other non-core items that are not indicative of future operating performance, the Company’s current year non-GAAP operating income was $177.9 million compared to $182.6 million in the prior year. The decline in non-GAAP operating income was primarily due to higher SG&A, as described above.
Other expense in 2022 includes $6.8 million of loss on extinguishment of debt related to the Company’s refinancing the Original Credit Facility, partially offset by $1.8 million of facility remediation insurance recoveries and $2.4 million of other income related to an indemnification asset.
Other expense in 2022 includes $6.8 million of loss on extinguishment of debt related to the Company’s refinancing the Original Credit Facility, partially offset by $1.8 million of facility remediation insurance recoveries and $2.4 million of income related to an indemnification asset.
The increase in selling price and product mix was primarily driven by price increases implemented to offset the significant increases in raw material, manufacturing and other input costs that began during 2021 and continued through 2022.
The increase in selling price and product mix was primarily driven by price increases implemented to offset the significant increases in raw material, manufacturing and other input costs that began during 2021 and continued through 2022.
The Company also evaluates uncertain tax positions on all income tax positions taken on previously filed tax returns or expected to be taken on a future tax return in accordance with FIN 48, which prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return and, also, whether the benefits of tax positions are probable or if they will be more likely than not to be sustained upon audit based upon the technical merits of the tax position.
The Company also evaluates uncertain tax positions on all income tax positions taken on previously filed tax returns or expected to be taken on a future tax return in accordance with FIN 48, which prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return and, also, whether the benefits of tax positions are probable or if they are more likely than not to be sustained upon audit based upon the technical merits of the tax position.
The decline in organic sales volumes was primarily attributable to softer end market demand, particularly in the EMEA and Asia/Pacific segments, 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.
The decline in sales volumes was primarily attributable to softer end market demand, particularly in the EMEA and Asia/Pacific segments, 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.
The increase in net sales of approximately $182.4 million or 10% year-over-year was primarily due to an increase in selling price and product mix of approximately 22% and additional net sales from acquisitions of 1%, partially offset by a decline in organic sales volumes of approximately 7% and the unfavorable impact from foreign currency translation of approximately 6%.
The increase in net sales of approximately $182.4 million or 10% year-over-year was primarily due to an increase in selling price and product mix of approximately 22% and additional net sales from acquisitions of 1%, partially offset by a decline in sales volumes of approximately 7% and the unfavorable impact from foreign currency translation of approximately 6%.
The decline in organic sales volumes was primarily driven by softer market conditions, primarily in China, in part as a result of the government imposed COVID-19 quarantine and related production disruptions implemented at the end of March 2022 and continued throughout 2022, partially offset by net new business wins.
The decline in sales volumes was primarily driven by softer market conditions, primarily in China, in part as a result of the government imposed COVID-19 quarantine and related production disruptions implemented at the end of March 2022 and continued throughout 2022, partially offset by net new business wins.
(k) Russia-Ukraine conflict related expenses represent the direct costs associated with the Company's exit of operations in Russia during 2022, primarily 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.
(j) Russia-Ukraine conflict related expenses represent the direct costs associated with the Company's exit of operations in Russia during 2022, primarily 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.
Pension and postretirement plan contributions beyond 2022 are not determinable since the amount of any contribution is heavily dependent on the future economic environment and investment returns on pension trust assets. The timing of payments related to other long-term liabilities which consists primarily of deferred compensation agreements and environmental reserves, also cannot be readily determined due to their uncertainty.
Pension and postretirement plan contributions beyond 2023 are not determinable since the amount of any contribution is heavily dependent on the future economic environment and investment returns on pension trust assets. The timing of payments related to other long-term liabilities which consists primarily of deferred compensation agreements and environmental reserves, also cannot be readily determined due to their uncertainty.
The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
GAAP”). The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
The decline in sales volumes was primarily driven by 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 the wind-down of the tolling agreement for products previously divested related to the Combination and softer economic conditions in the region.
The decrease in sales volumes was primarily driven by 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 the wind-down of the tolling agreement for products previously divested related to the Combination and softer economic conditions in the region.
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.
(k) In connection with executing the 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 Credit Facility.
As of December 31, 2022, the Company believes that the range of potential-known liabilities associated with the balance of ACP water remediation program is approximately $0.1 million to $1.0 million. The low and high ends of the range are based on the length of operation of the treatment system as determined by groundwater modeling.
As of December 31, 2023, the Company believes that the range of potential-known liabilities associated with the balance of the ACP water remediation program is approximately $0.1 million to $1.0 million. The low and high ends of the range are based on the length of operation of the treatment system as determined by groundwater modeling.
The site intervention plan primarily requires the site, among other actions, to conduct periodic monitoring for methane in soil vapors, source zone delineation, groundwater plume delineation, bedrock aquifer assessment, update the human health risk assessment, develop a current site conceptual model and conduct a remedial feasibility study and provide a revised intervention plan.
The site intervention plan primarily requires the site, amongst other actions, to conduct periodic monitoring for methane in soil vapors, source zone delineation, groundwater plume delineation, bedrock aquifer assessment, update the human health risk assessment, develop a current site conceptual model and conduct a remedial feasibility study and provide a revised intervention plan.
(i) 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 Brazil Supreme Court ruling on these non -income tax matters. The non-income tax credit is non-recurring and not indicative of the future operating performance of the Company.
(h) 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 Brazil Supreme Court ruling on these non -income tax matters. The non-income tax credit is non-recurring and not indicative of the future operating performance of the Company.
See Note 26 of Notes to Consolidated Financial Statements in Item 8 of this Report. 30 Table of Contents 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 and beyond, including but not limited to, payments of dividends to shareholders, payments for restructuring activities including further strategic and optimization initiatives, pension plan contributions, capital expenditures, other business opportunities (including potential acquisitions), implementing actions to achieve the Company’s sustainability goals and other potential contingencies.
See Note 25 of Notes to Consolidated Financial Statements in Item 8 of this Report. 28 Table of Contents 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 and beyond, including but not limited to, payments of dividends to shareholders, payments for restructuring activities including further strategic and optimization initiatives, pension plan contributions, capital expenditures, other business opportunities (including potential acquisitions), implementing actions to achieve the Company’s sustainability goals and other potential contingencies.
Similarly, holding revenue growth rates and all other assumptions constant, the Company’s average EBITDA margins throughout the discreet projection period would need to decline by approximately 2.3 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be fully impaired.
Similarly, holding revenue growth rates and all other assumptions constant, the Company’s average EBITDA margins throughout the discreet projection period would need to decline by approximately 7.3 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be fully impaired.
During the year ended December 31, 2022, there have been no significant changes to the facts or circumstances of these matters, aside from ongoing monitoring and maintenance activities and routine payments associated with each of these sites.
During the year ended December 31, 2023, there have been no significant changes to the facts or circumstances of these matters, aside from ongoing monitoring and maintenance activities and routine payments associated with each of these sites.
Interest obligations on the Company’s long-term debt and capital leases assume the current debt levels will be outstanding for the entire respective period and apply the interest rates in effect as of December 31, 2022.
Interest obligations on the Company’s long-term debt and capital leases assume the current debt levels will be outstanding for the entire respective period and apply the interest rates in effect as of December 31, 2023.
As of December 31, 2022, ACP believes it is close to meeting the conditions for closure of the remaining groundwater treatment system but continues to operate this system while in discussions with the relevant authorities.
As of December 31, 2023, ACP believes it is close to meeting the conditions for closure of the remaining groundwater treatment system but continues to operate this system while in discussions with the relevant authorities.
Approximately $0.2 million, $0.6 million and $1.5 million for the years ended December 31, 2022, 2021 and 2020, respectively, of these pre-tax costs were considered non-deductible for the purpose of determining the Company’s effective tax rate, and, therefore, taxes on income before equity in net income of associated companies - adjusted reflects the impact of these items.
Approximately $0.2 million and $0.6 million for the years ended December 31, 2022 and 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.
This was partially offset by lower amortization of debt issuance costs in 2022 as compared to 2021 due to the June 2022 credit facility amendment and write off of certain previously capitalized debt issuance costs. The Company’s effective tax rates for 2022 and 2021 were an expense of 350.2% and an expense of 23.8%, respectively.
This was partially offset by lower amortization of debt issuance costs in 2022 as compared to 2021 due to the June 2022 credit facility amendment and write off of certain previously capitalized debt issuance costs. 35 Table of Contents The Company’s effective tax rates for 2022 and 2021 were an expense of 350.2% and an expense of 23.8%, respectively.
The Company may experience continued volatility in its effective tax rates due to several factors, including the timing of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions, the unpredictability of the timing and amount of certain incentives in various tax jurisdictions, the treatment of certain acquisition-related costs and the timing and amount of certain share-based compensation-related tax benefits, among other factors.
The Company may experience continued volatility in its effective tax rates due to several factors, including the timing of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions, the unpredictability of the timing and amount of certain incentives in various tax jurisdictions, and the timing and amount of certain share-based compensation-related tax benefits, among other factors.
The increase in net sales was due to higher selling price and product mix of 28% and additional net sales from acquisition of 1%, partially offset by a decrease in organic sales volumes of approximately 7%.
The increase in net sales was due to higher selling price and product mix of 28% and additional net sales from acquisition of 1%, partially offset by a decrease in organic sales volumes of approximately 5%.
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 26 years, has estimated the present value range of costs for all of these environmental matters, on a discounted basis, to be between approximately $5.0 million and $6.0 million as of December 31, 2022, for which $5.3 million is accrued within other accrued liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheet as of December 31, 2022.
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 26 years, has estimated the present value range of costs for all of these environmental matters, on a discounted basis, to be between approximately $5.0 million and $6.0 million as of December 31, 2023, for which $5.1 million is accrued within other accrued liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheet as of December 31, 2023.
Quaker Houghton believes the following critical accounting policies describe the more significant judgments and estimates used in the preparation of its consolidated financial statements: 25 Table of Contents Accounts receivable and inventory exposures: The Company establishes allowances for credit losses for estimated losses resulting from the inability of its customers to make required payments.
Quaker Houghton believes the following critical accounting policies describe the more significant judgments and estimates used in the preparation of its consolidated financial statements: Accounts receivable and inventory exposures: The Company establishes allowances for credit losses for estimated losses resulting from the inability of its customers to make required payments.
We generally reserve for large and/or financially distressed customers on a specific review basis, while a general reserve is maintained for other customers based on historical experience. The Company’s consolidated allowance for credit losses was $13.5 million and $12.3 million as of December 31, 2022 and 2021, respectively.
We generally reserve for large and/or financially distressed customers on a specific review basis, while a general reserve is maintained for other customers based on historical experience. The Company’s consolidated allowance for credit losses was $13.3 million and $13.5 million as of December 31, 2023 and 2022, respectively.
These charges are non-recurring and are not indicative of the future operating performance of the Company. See Note 26 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report. (e) Impairment charges represents the non-cash charges taken to write down the value of goodwill and indefinite-lived intangible assets.
See Note 25 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report. (e) Impairment charges represents the non-cash charges taken to write down the value of goodwill and indefinite-lived intangible assets. These charges are not indicative of the future operating performance of the Company.
However, actual results may differ from these estimates under different assumptions or conditions.
However, actual results may differ materially from these estimates under different assumptions or conditions.
The following table summarizes the Company’s contractual obligations as of December 31, 2022, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.
The following table summarizes the Company’s contractual obligations as of December 31, 2023, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.
If different assumptions were used, additional pension expense or charges to equity might be required. Recently Issued Accounting Standards See Note 3 of Notes to the Consolidated Financial Statements in Item 8 of this Report for a discussion regarding recently issued accounting standards.
If different assumptions were used, additional pension expense or charges to equity might be required. 26 Table of Contents Recently Issued Accounting Standards See Note 3 of Notes to the Consolidated Financial Statements in Item 8 of this Report for a discussion regarding recently issued accounting standards.
Each of these items are included in the caption “Combination, restructuring and other acquisition-related expenses” in the reconciliation of GAAP earnings per diluted share attributable 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.
Each of these items are included in the caption “Combination, integration and other acquisition-related (credits) expenses” in the reconciliation of GAAP earnings per diluted share attributable 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.
Changing the amount of expense recorded to the Company’s provisions by 10% would have increased or decreased the Company’s pre-tax earnings by $0.4 million, $0.1 million and $0.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. See Note 13 of Notes to Consolidated Financial Statements in Item 8 of this Report.
Changing the amount of expense recorded to the Company’s provisions by 10% would have increased or decreased the Company’s pre-tax earnings by $0.1 million, $0.4 million and $0.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. See Note 12 of Notes to Consolidated Financial Statements in Item 8 of this Report.
Approximately $0.3 million and $0.4 million were accrued as of December 31, 2022 and 2021, respectively, to provide for such anticipated future environmental assessments and remediation costs. Notwithstanding the foregoing, the Company cannot be certain that future liabilities in the form of remediation expenses and damages will not exceed amounts reserved.
Approximately $0.2 million and $0.3 million were accrued as of December 31, 2023 and 2022, respectively, to provide for such anticipated future environmental assessments and remediation costs. Notwithstanding the foregoing, the Company cannot be certain that future liabilities in the form of remediation expenses and damages will not exceed amounts reserved.
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 1.6 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be fully 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 4.0 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be fully impaired.
Therefore, the Company has not recorded a gain contingency for a possible business interruption insurance claim as of December 31, 2022.
Therefore, the Company has not recorded a gain contingency for a possible business interruption insurance claim as of December 31, 2023.
During 2022, 2021 and 2020, the Company recorded a gain of $0.2 million, a gain of $5.4 million and a loss of $0.6 million, respectively, on the sale of certain held-for-sale real property assets related to the Combination.
During 2022 and 2021, the Company recorded a gain of $0.2 million and $5.4 million, respectively, on the sale of certain held-for-sale real property assets related to the Combination.
The decrease in segment operating earnings was primarily a result of lower net sales, lower gross margins, and inflationary pressures on other costs, including SG&A. 39 Table of Contents Asia/Pacific Asia/Pacific represented approximately 20% of the Company’s consolidated net sales in 2022.
The decrease in segment operating earnings was primarily a result of lower net sales, lower gross margins, and inflationary pressures on other costs, including SG&A. 37 Table of Contents Asia/Pacific Asia/Pacific represented approximately 22% of the Company’s consolidated net sales in 2022.
The decrease in net sales was a result of a 20% increase in selling price and product mix and additional net sales from acquisition of 2% which was more than offset by an unfavorable impact of foreign currency translation of 14% and a decrease in sales volumes of 9%.
The decrease in net sales was a result of a 20% increase in selling price and product mix and additional net sales from acquisition of 2% which was more than offset by an unfavorable impact of foreign currency translation of 15% and a decrease in sales volumes of 7%.
In completing the interim quantitative impairment assessment, the Company used a WACC assumption of approximately 12.0% and holding all other assumptions constant, the WACC would have to increase by approximately 0.8 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be fully impaired.
In completing the annual impairment assessment, the Company used a WACC assumption of approximately 12.0% and holding all other assumptions constant, the WACC would have to increase by approximately 3.0 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be fully impaired.
In 2022, the Company recorded a $93.0 million non-cash impairment charge to write down the value of goodwill associated with the Company’s EMEA reportable segment. This non-cash impairment charge is the result of the Company’s trigger based fourth quarter of 2022 impairment assessment. There were no similar impairment charges in 2022 and no charges in 2021.
In 2022, the Company recorded a $93.0 million non-cash impairment charge to write down the value of goodwill associated with the Company’s EMEA reportable segment. This non-cash impairment charge was the result of the Company’s trigger based fourth quarter of 2022 impairment assessment. There were no similar impairment charges in 2023.
As of December 31, 2022, the Company has a deferred tax liability of $6.8 million, which primarily represents the estimate of the non-U.S. taxes the Company will incur to remit certain previously taxed earnings to the U.S.
As of December 31, 2023, the Company has a deferred tax liability of $8.2 million, which primarily represents the estimate of the non-U.S. taxes the Company will incur to remit certain previously taxed earnings to the U.S.
During 2021 and 2020, the Company recorded $0.7 million and $0.8 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 2021, the Company recorded $0.7 million of accelerated depreciation related to certain of the Company’s facilities, which is included in the caption “Combination, integration and other acquisition-related (credits) 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.
See the Critical Accounting Policies and Estimates section as well as the Non-GAAP Measures section, of this Item, above. Operating income in 2022 was $52.3 million compared to $150.5 million in 2021.
See the Critical Accounting Policies and Estimates section as well as the Non-GAAP Measures section, of this Item, above. Operating income in 2023 was $214.5 million compared to $52.3 million in 2022.
The Company recorded expense to increase its provision for credit losses by $4.3 million, $0.7 million and $3.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company recorded expense to increase its provision for credit losses by $1.3 million, $4.3 million and $0.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
These expenses are not indicative of the future operating performance of the Company. See Note 20 of Notes to Consolidated Financial Statements, which appear in Item 8 of this Report.
These expenses are not indicative of the future operating performance of the Company. See Notes 1, 12 and 20 of Notes to Consolidated Financial Statements, which appear in Item 8 of this Report.
These expenses are not indicative of the future operating performance of the Company. See Note 13 of Notes to Consolidated Financial Statements, which appear in Item 8 of this Report.
These expenses are not indicative of the future operating performance of the Company. See Note 12 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
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 2022 and 2021, the Company incurred $8.8 million and $23.9 million, respectively, of Combination, integration and other acquisition-related expenses.
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 2022 and 2021, the Company incurred $8.8 million and $23.9 million, respectively, of Combination, integration and other acquisition-related expenses. See the Non-GAAP Measures section of this Item, above.
It is the Company’s current intention to reinvest its future undistributed earnings of non-U.S. subsidiaries to support working capital needs and certain other growth initiatives outside of the U.S. The amount of such undistributed earnings at December 31, 2022 was approximately $424.7 million .
It is the Company’s current intention to reinvest its future undistributed earnings of non-U.S. subsidiaries to support working capital needs and certain other growth initiatives outside of the U.S. The amount of such undistributed earnings at December 31, 2023 was approximately $379.2 million.
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”).
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 its primary credit facility (the “Credit Facility”).
Reportable Segments Review - Comparison of 2022 with 2021 As of December 31, 2022, and 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.
Reportable Segments Review - Comparison of 2023 with 2022 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.
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 7, below. The Company generated net operating cash flow of $41.8 million in 2022 compared to $48.9 million in 2021.
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 7, below. The Company generated net operating cash flow of $279.0 million in 2023 compared to $41.8 million in 2022.
As of December 31, 2022, the Company had $2.0 million of debt issuance costs recorded as a reduction of Long-term debt on the Consolidated Balance Sheet and $4.3 million of debt issuance costs recorded within Other assets on the Consolidated Balance Sheet.
Comparatively, as of December 31, 2022, the Company had $2.0 million of debt issuance costs recorded as an offset of Long-term debt on the Consolidated Balance Sheet and $4.3 million of debt issuance costs recorded within Other assets on the Consolidated Balance Sheet.
See Note 26 of Notes to Consolidated Financial Statements in Item 8 of this Report General See Item 7A of this Report, below, for further discussion of certain quantitative and qualitative disclosures about market risk.
See Note 25 of Notes to Consolidated Financial Statements in Item 8 of this Report. 38 Table of Contents General See Item 7A of this Report, below, for further discussion of certain quantitative and qualitative disclosures about market risk.
The segment’s net sales were $474.6 million, a decrease of $5.5 million or 1% compared to 2021.
The segment’s net sales were $562.5 million, a decrease of $1.6 million or less than 1% compared to 2021.
The segment’s net sales were $386.5 million, a decrease of less than 1% or approximately $1.7 million compared to 2021. The decrease in net sales was a result of a 16% increase in selling price and product mix offset by lower sales volumes of 11% and an unfavorable impact from foreign currency translation of 5%.
The segment’s net sales were $434.6 million, a decrease of less than 1% or approximately $0.3 million compared to 2021. The decrease in net sales was a result of a 15% increase in selling price and product mix offset by lower sales volumes of 10% and an unfavorable impact from foreign currency translation of 5%.
The Company’s consolidated goodwill at December 31, 2022 and 2021 was $515.0 million and $631.2 million, respectively. The Company has four indefinite-lived intangible assets totaling $189.1 million as of December 31, 2022, including $188.0 million of indefinite-lived intangible assets for trademarks and tradename associated with the Combination.
The Company’s consolidated goodwill at December 31, 2023 and 2022 was $512.5 million and $515.0 million, respectively. The Company has four indefinite-lived intangible assets totaling $193.2 million as of December 31, 2023, including $192.1 million of indefinite-lived intangible assets for trademarks and tradename associated with the Combination.
On an ongoing basis, the Company evaluates its estimates, including those related to customer sales incentives, product returns, credit losses, inventories, property, plant and equipment (“PP&E”), investments, goodwill, intangible assets, income taxes, business combinations, restructuring, incentive compensation plans (including equity-based compensation), pensions and other postretirement benefits, contingencies and litigation.
On an ongoing basis, the Company evaluates its estimates, including those related to customer sales incentives, product returns, credit losses, inventories, property, plant and equipment (“PP&E”), investments, goodwill, intangible assets, income taxes, business combinations, and restructuring.
This segment’s operating earnings were $148.2 million, an increase of $23.3 million or 19% compared to 2021 primarily driven by higher margins as the Company’s ongoing value-based pricing initiatives offset the ongoing inflationary pressures on the business. EMEA EMEA represented approximately 24% of the Company’s consolidated net sales in 2022.
This segment’s operating earnings were $223.6 million, an increase of $47.4 million or 27% compared to 2021 primarily driven by higher margins as the Company’s ongoing value-based pricing initiatives offset the ongoing inflationary pressures on the business. EMEA EMEA represented approximately 29% of the Company’s consolidated net sales in 2022.
Likewise, should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made. Both determinations could have a material impact on the Company’s financial statements.
Likewise, should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.
GAAP, perform the required valuations to determine benefit expense and, if necessary, non-cash charges to equity for additional minimum pension liabilities.
Independent actuaries, in accordance with U.S. GAAP, perform the required valuations to determine benefit expense and, if necessary, non-cash charges to equity for additional minimum pension liabilities.
These expenses are one-time in nature and are not indicative of the future operating performance of the Company. 34 Table of Contents (d) Facility remediation (recovery) costs, net, presents the gross costs associated with remediation, cleaning and subsequent restoration costs associated with the property damage to certain of the Company’s facilities, net of insurance recoveries received.
(d) Facility remediation (recovery) costs, net, presents the gross costs associated with remediation, cleaning and subsequent restoration costs associated with the property damage 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.
The Company has the right to increase the amount of the Amended Credit Facility by an aggregate amount not to exceed the greater of $300.0 million or 100% of Consolidated EBITDA, subject to certain conditions.
The Company has the right to increase the amount of the Credit Facility by an aggregate amount not to exceed the greater of $300.0 million or 100% of Consolidated EBITDA, subject to certain conditions including the agreement to provide financing by any lender providing such increase.
Net cash flows provided by financing activities were $24.7 million in 2022 compared to net cash flows used in financing activities of $13.5 million in 2021.
Net cash flows used in financing activities were $238.6 million in 2023 compared to net cash flows provided by financing activities of $24.7 million in 2022.
The Company’s 2022 operating performance in each of its four reportable segments: (i) Americas; (ii) 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 benefited 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 in the EMEA, Asia/Pacific and Global Specialties Businesses.
The Company’s 2023 operating performance in each of its three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific, reflect similar drivers to that of its consolidated performance as each of the Company’s reportable segments net sales benefited from year-over-year increases in selling price and product mix, partially offset by the unfavorable impact of foreign currency translation in the Asia/Pacific segment.
Liquidity and Capital Resources At December 31, 2022, the Company had cash, cash equivalents and restricted cash of $181.0 million. Total cash, cash equivalents and restricted cash was $165.2 million at December 31, 2021.
Liquidity and Capital Resources At December 31, 2023, the Company had cash and cash equivalents of $194.5 million. Total cash and cash equivalents was $181.0 million at December 31, 2022.
Comparatively, as of December 31, 2021, the Company had $5.6 million accrued for with respect to these matters. 41 Table of Contents The Company’s Sao Paulo, Brazil site was required under Brazilian environmental, health and safety regulations to perform an environmental assessment as part of a permit renewal process.
Comparatively, as of December 31, 2022, the Company had $5.3 million accrued with respect to these matters. These accrued amounts are inclusive of the Brazilian environmental matter discussed below. The Company’s Sao Paulo, Brazil site was required under Brazilian environmental, health and safety regulations to perform an environmental assessment as part of a permit renewal process.
Any tax liability which might result from ultimate remittance of these earnings is expected to be substantially offset by foreign tax credits (subject to certain limitations). It is currently impractical to estimate any such incremental tax expense.
Any tax liability which might result from ultimate remittance of these earnings is expected to be substantially offset by foreign tax credits (subject to certain limitations). It is currently impractical to estimate any such incremental tax expense. See Note 10 of Notes to Consolidated Financial Statements in Item 8 of this Report.
The Company incurred $11.0 million of total Combination, integration and other acquisition-related expenses in 2022, which includes $2.4 million of other expense related to an indemnification asset and is net of a $0.2 million gain on the sale of certain held-for-sale real property assets, described in the Non-GAAP Measures section of this Item below.
Comparatively, in 2022, the Company incurred $11.0 million of total Combination, integration and other acquisition-related expenses, which includes $2.4 million of other expense related to an indemnification asset partially offset by a $0.2 million gain on the sale of certain held-for-sale real property assets.
Looking ahead to 2023, we believe the business is well positioned to continue to outpace market growth rates by delivering value-added solutions and services to its customers.
Looking ahead to 2024, while the macroeconomic environment remains uncertain, we believe the business is well positioned to continue to outpace our market growth rates by earning new business by delivering value-added solutions and services to its customers.
In addition, the Company paid $30.1 million of cash dividends during 2022, a $1.5 million or 5.3% increase in cash dividends compared to the prior year due to cash dividend per share increases. The Company, its wholly owned subsidiary, Quaker Chemical B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S.
In addition, the Company paid $31.7 million of cash dividends to shareholders during 2023, a $1.5 million, or 5.1%, increase compared to the prior year. 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.
The weighted average variable interest rate incurred on the outstanding borrowings under the Original Credit Facility and the Amended Credit Facility during the twelve months ended December 31, 2022 was approximately 3.0%. As of December 31, 2022, the interest rate on the outstanding borrowings under the Amended Credit Facility was approximately 4.9%.
The weighted average variable interest rate incurred on the outstanding borrowings under the Credit Facility during the twelve months ended December 31, 2023 was approximately 6.2%. As of December 31, 2023, the weighted interest rate on the outstanding borrowings under the Credit Facility was approximately 6.3%.
These charges are not indicative of the future operating performance of the Company. See Note 16 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report. (f) Equity income in a captive insurance company represents the after-tax income attributable to the Company’s interest in Primex, Ltd. (“Primex”), a captive insurance company.
See Note 15 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report. 32 Table of Contents (f) Equity income (loss) in a captive insurance company represents the after-tax income attributable to the Company’s interest in Primex, Ltd. (“Primex”), a captive insurance company.
The $38.1 million increase in net cash inflows from financing activities was primarily driven by an increase in borrowings in the current year under the Company’s primary credit facility (described below), including the impact of new borrowings, net of repayments of old borrowings and current year debt issuance costs, related to the June 2022 credit facility amendment.
The $263.3 million increase in net cash outflows from financing activities was primarily related to net repayments of borrowings in the current year, primarily under the Company’s Credit Facility, described further below, as compared to net borrowings in 2022, which included the impact of new borrowings, net of repayments of old borrowings and debt issuance costs, related to the June 2022 credit facility amendment.
Excluding this and other non-recurring or non-core items in each period, the Company’s current year non-GAAP net income and non-GAAP earnings per diluted share were $105.3 million and $5.87, respectively, compared to $122.8 million and $6.85, respectively, in 2021. The Company generated adjusted EBITDA of $257.2 million compared to $274.1 million in 2021.
Excluding this and other non-recurring and non-core items, the Company’s current year non-GAAP net income and non-GAAP earnings per diluted share were $137.6 million and $7.65, respectively, compared to $105.3 million and $5.87, respectively, in 2022. The Company generated adjusted EBITDA of $320.4 million compared to $257.2 million in 2022, an increase of 25%.
Net sales of $1,943.6 million in 2022 increased 10% compared to $1,761.2 million in 2021, primarily due to increases from selling price and product mix of approximately 22% and additional net sales from acquisitions of 1%, partially offset by a 7% decline in organic sales volumes and an unfavorable impact from foreign currency translation of 6%.
Net sales of $1,953.3 million in 2023 increased 1% compared to $1,943.6 million in 2022, primarily due to increases in selling price and product mix of approximately 7% and favorable impacts from foreign currency translation of approximately 1%, partially offset by a 7% decline in sales volumes.
During 2021 and 2020, the Company recorded $0.8 million and $0.2 million, respectively, related to the sale of inventory from acquired businesses which was adjusted to fair value.
During 2023, 2022 and 2021, the Company recorded $0.5 million of other income, $2.4 million of other expense and $0.6 million of other income, respectively, related to an indemnification asset. During 2021, the Company recorded $0.8 million related to the sale of inventory from acquired businesses which was adjusted to fair value.
The Amended Credit Facility established (A) a new $150.0 million Euro equivalent senior secured term loan (the “Amended Euro Term Loan”), (B) a new $600.0 million senior secured term loan (the “Amended U.S. Term Loan”), and (C) a new $500.0 million senior secured revolving credit facility (the “Amended Revolver”).
The Credit Facility established (A) a new $150.0 million Euro equivalent senior secured term loan (the “Euro Term Loan”), (B) a new $600.0 million senior secured term loan (the “U.S. Term Loan”), and (C) a new $500.0 million senior secured revolving credit facility (the “Revolver”), each maturing in June 2027.
This other income is not indicative of the future operating performance of the Company. See Notes 9 and 26 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
These expenses are not indicative of the future operating performance of the Company. See Note 19 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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 may have an adverse effect on the Company, depending on the extent of the Company’s borrowings outstanding throughout a given year.
As a result of the variable interest rates applicable under the Credit Facility, if interest rates rise significantly, the cost of debt to the Company will increase. This may have an adverse effect on the Company, depending on the extent of the Company’s borrowings outstanding throughout a given year.
These contracts provide protection to Quaker Houghton if the prices for the contracted raw materials rise; however, in certain circumstances, the Company may not realize the benefit if such prices decline. A gross margin change of one percentage point would correspondingly have increased or decreased the Company’s pre-tax earnings by approximately $19.4 million. Credit Risk .
These contracts provide protection to Quaker Houghton if the prices for the contracted raw materials rise; however, in certain circumstances, the Company may not realize the benefit if such prices decline. A gross margin change of one percentage point would correspondingly have increased or decreased the Company’s pre-tax earnings by approximately $19.5 million. Credit Risk .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Quaker Houghton is exposed to the impact of interest rates, foreign currency fluctuations, changes in commodity prices, and credit risk. Except as otherwise disclosed below, the market risks discussed below did not change materially from December 31, 2021. Interest Rate Risk.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Quaker Houghton is exposed to the impact of interest rates, foreign currency fluctuations, changes in commodity prices, and credit risk. Except as otherwise disclosed below, the market risks discussed below did not change materially from December 31, 2022. Interest Rate Risk.
Foreign Exchange Risk . A significant portion of the Company’s revenues and earnings are generated by its foreign operations. These foreign operations also represent a significant portion of Quaker Houghton’s assets and liabilities. Generally, all of these foreign operations use the local currency as their functional currency.
A significant portion of the Company’s revenues and earnings are generated by its foreign operations. These foreign operations also represent a significant portion of Quaker Houghton’s assets and liabilities. Generally, all of these foreign operations use the local currency as their functional currency.
Though infrequent, when a bankruptcy occurs, Quaker Houghton must judge the amount of proceeds, if any, that may ultimately be received through the bankruptcy or liquidation process. In addition, as part of its terms of trade, Quaker Houghton may custom manufacture products for certain large customers and/or may ship product on a consignment basis.
Though infrequent, when a bankruptcy occurs, Quaker Houghton must judge the amount of proceeds, if any, that may ultimately be received through the bankruptcy or liquidation process. 39 Table of Contents In addition, as part of its terms of trade, Quaker Houghton may custom manufacture products for certain large customers and/or may ship product on a consignment basis.
As of December 31, 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 of December 31, 2023, borrowings under the 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.
In addition, the Company occasionally sources inventory among its worldwide operations. This practice can give rise to foreign exchange risk resulting from the varying cost of inventory to the receiving location, as well as from the revaluation of intercompany balances. The Company primarily mitigates this risk through local sourcing efforts. 42 Table of Contents Commodity Price Risk .
In addition, the Company occasionally sources inventory among its worldwide operations. This practice can give rise to foreign exchange risk resulting from the varying cost of inventory to the receiving location, as well as from the revaluation of intercompany balances. The Company primarily mitigates this risk through local sourcing efforts. Commodity Price Risk .
A change of 10% to the expense recorded to the Company’s provision would have increased or decreased the Company’s pre-tax earnings by $0.4 million, $0.1 million and $0.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. 43 Table of Contents
A change of 10% to the expense recorded to the Company’s provision would have increased or decreased the Company’s pre-tax earnings by $0.1 million, $0.4 million and $0.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. 40 Table of Contents
The Company recorded expense to its provision for credit losses by $4.3 million, $0.7 million and $3.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company recorded expense to its provision for credit losses by $1.3 million, $4.3 million and $0.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
If the euro, the British pound sterling, the Brazilian real, the Mexican peso, the Chinese renminbi and the Indian rupee had all weakened or strengthened by 10% against the U.S. dollar, the Company’s 2022 revenues would have correspondingly decreased or increased by approximately $103.0 million. Similarly, pre-tax earnings would increase or decrease by approximately $11.1 million.
If the euro, the British pound sterling, the Brazilian real, the Mexican peso, the Chinese renminbi and the Indian rupee had all weakened or strengthened by 10% against the U.S. dollar, the Company’s 2023 revenues would have correspondingly decreased or increased by approximately $100.7 million. Similarly, pre-tax earnings would increase or decrease by approximately $12.8 million.
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 20 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
During June 2022, the Company entered into an amendment to its primary credit facility (the “Credit Facility”). See Note 19 of Notes to Consolidated Financial Statements, which appears in Item 8 of this Report.
As of December 31, 2022, the Company had outstanding borrowings under the Amended Credit Facility of approximately $943.5 million. The weighted average interest rate applicable on outstanding borrowings under the Amended Credit Facility was approximately 4.9% as of December 31, 2022.
As of December 31, 2023, the Company had outstanding borrowings under the Credit Facility of approximately $744.5 million. The weighted average interest rate applicable on outstanding borrowings under the Credit Facility was approximately 6.3% as of December 31, 2023.
The weighted average interest rate applicable on outstanding borrowings under the Original Credit Facility and the Amended Credit Facility during the year ended December 31, 2022 was approximately 3.0%. An interest rate change of 100 basis points would result in an approximate $9.4 million increase or decrease to interest expense for the year ended December 31, 2022.
An interest rate change of 100 basis points would result in an approximate $7.4 million increase or decrease to interest expense for the year ended December 31, 2023.
Added
In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, such as SOFR, in the first quarter of 2023, the Company entered into $300.0 million notional amounts of three year interest rate swaps to convert a portion of the Company’s variable rate borrowings into an average fixed rate obligation of 3.64% plus an applicable margin as provided in the Credit Facility based on the Company’s consolidated net leverage ratio.
Added
As of December 31, 2023, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 5.3%. These interest rate swaps are designated and qualify as cash flow hedges. The Company has previously used derivative financial instruments primarily for the purpose of hedging exposures to fluctuations in interest rates. Foreign Exchange Risk .

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