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What changed in QUAKER CHEMICAL CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of QUAKER CHEMICAL CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+430 added−456 removedSource: 10-K (2025-02-24) vs 10-K (2023-12-31)

Top changes in QUAKER CHEMICAL CORP's 2024 10-K

430 paragraphs added · 456 removed · 334 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

48 edited+11 added−29 removed20 unchanged
Biggest changeThese 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.
Biggest changeThese 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 impacts on our business from acts of war, terrorism and military conflicts, including those in Ukraine and the Middle East, as well as related economic, political and governmental actions taken by various governments and governmental organizations in response; • inflationary pressures, increases in raw material costs, supply chain constraints and other impacts of economic downturns, as well as high interest rates and their impact on our and our customers’ business operations; • the potential timing, impacts, benefits and other uncertainties of acquisitions and divestitures, including our ability to realize synergies, integrate acquisitions and acquired businesses or separate divested assets and businesses; • broader macroeconomic factors, including potential for changes in global and regional economic conditions, the possibility of global or regional slowdowns or recessions, a global pandemic, interest rate fluctuations, tariffs, deflation or stagflation and the potential for an economic recession; and • our future results and plans including our sustainability goals and enterprise strategy.
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.
However, the Company estimates it holds the 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.
Activities Since significant revenues and earnings are generated by non-U.S. operations, the Company’s 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.
Activities Since significant revenues and earnings are generated by non-U.S. operations, the Company’s 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, the British pound sterling and the Indian rupee, and the impact of those currency fluctuations on the underlying economies.
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.
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. 5 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.
If problems are encountered which cannot be resolved by local laboratories, the problem is referred to one of our ten principal laboratories, located in Conshohocken, Pennsylvania; Valley Forge, Pennsylvania; Aurora, Illinois; Santa Fe Springs, California; Uithoorn, the Netherlands; Coventry, United Kingdom; Dortmund, Germany; Barcelona, Spain; Turin, Italy or Qingpu, China. Research and development costs are expensed as incurred.
If problems are encountered which cannot be resolved by local laboratories, the problem is referred to one of our 10 principal laboratories, located in Conshohocken, Pennsylvania; Valley Forge, Pennsylvania; Aurora, Illinois; Santa Fe Springs, California; Uithoorn, Netherlands; Coventry, United Kingdom; Dortmund, Germany; Barcelona, Spain; Turin, Italy or Qingpu, China. Research and development costs are expensed as incurred.
The Company principally relies on its proprietary formulae and its applications know-how and experience to meet customer needs. Quaker Houghton products are identified by numerous trademarks that are registered throughout its marketing area. Research and Development - Laboratories The Company maintains approximately thirty separate laboratory facilities worldwide that are primarily devoted to applied research and development.
The Company principally relies on its proprietary formulae and its applications know-how and experience to meet customer needs. Quaker Houghton products are identified by numerous trademarks that are registered throughout its marketing area. Research and Development- Laboratories The Company maintains approximately 30 separate laboratory facilities worldwide that are primarily devoted to applied research and development.
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.
Associated companies of Quaker Houghton (in which it owns 50% or less and has significant influence) employed approximately 600 people on December 31, 2024. Core Values Quaker Houghton considers its employees as its greatest strength in differentiating our business and strengthening our market positions.
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.
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 in turn can be affected by the price of crude oil and by government incentives for low-carbon fuels.
Patents and Trademarks Quaker Houghton has a limited number of patents and patent applications including patents issued, applied for, or acquired in the U.S. and in various foreign countries, some of which may be material to its business, with the earliest patent expiry in 2024.
Patents and Trademarks Quaker Houghton has a limited number of patents and patent applications including patents issued, applied for, or acquired in the U.S. and in various foreign countries, some of which may be material to its business, with the earliest patent expiry in 2026.
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.
As experienced during 2024 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.
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.
Major Customers and Markets In 2024, 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.
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.
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 2024 2023 2022 Metal removal fluids 22.4 % 23.6 % 22.9 % Rolling lubricants 20.5 % 19.5 % 20.8 % Hydraulic fluids 14.2 % 14.1 % 14.1 % Sales Revenue 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.
With a presence around the world, including operations in over 25 countries, the Company’s customers include thousands of the world’s most advanced and specialized steel, aluminum, automotive, aerospace, offshore, container, mining, and metalworking companies.
With a robust presence around the world, including operations in over 25 countries, the Company’s customers include thousands of the world’s most advanced and specialized steel, aluminum, automotive, aerospace, offshore, can, mining, and metalworking companies.
A significant portion of the Company’s revenues are realized from the sale of process fluids and services to manufacturers of steel, aluminum, automobiles, aircraft, industrial equipment, and durable goods and, therefore, Quaker Houghton is subject to the same business cycles as those experienced by these manufacturers and their customers.
A significant portion of the Company’s revenues are realized from the sale of process fluids and services to manufacturers of steel, aluminum, automotive, aerospace, industrial equipment, and durable goods and, therefore, Quaker Houghton is subject to the same business cycles as those experienced by these manufacturers and their customers.
Reference is made to (i) the foreign exchange risk information contained in Item 7A of this Report, (ii) the geographic information in Note 4 of Notes to Consolidated Financial Statements included in Item 8 of this Report, and (iii) information regarding risks attendant to foreign operations included in Item 1A of this Report.
Reference is made to (i) the foreign exchange risk information contained in Item 7A of this Report, (ii) the geographic information in Note 4, Business Segments , to the Consolidated Financial Statements and (iii) information regarding risks attendant to foreign operations included in Item 1A of this Report.
We have based these forward-looking statements on assumptions, projections and expectations about future events that we believe are reasonable based on currently available information, including statements regarding the potential effects of the conflicts in Ukraine and the Middle East, 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 and 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.
We have based these forward-looking statements on assumptions, projections and expectations about future events that we believe are reasonable based on currently available information, including statements regarding the potential effects of economic downturns, tariffs, including uncertainty surrounding changes in tariffs, 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 and 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.
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.
IKV, which is part of the Company’s EMEA segment, 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 IKV strengthens the Company’s position in first-fill greases.
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.
Capital expenditures directed solely or primarily to regulatory compliance amounted to approximately $6.0 million, $3.5 million and $2.2 million during the years ended December 31, 2024, 2023 and 2022, respectively.
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.
Number of Employees On December 31, 2024, Quaker Houghton had approximately 4,400 full-time employees globally of whom approximately 1,000 were employed by the parent company and its U.S. subsidiaries, and approximately 3,400 were employed by its non-U.S. subsidiaries.
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, the Company 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.
Furthermore, steel and aluminum customers typically have limited manufacturing locations compared to metalworking customers and generally use higher volumes of products at a single location. 2 Table of Contents Raw Materials Quaker Houghton uses approximately 3,000 raw materials, including animal fats, vegetable oils, mineral oils, oleochemicals, ethylene, solvents, surfactant agents, various chemical compounds that act as additives to our base formulations, and a wide variety of other organic and inorganic compounds and various derivatives of the foregoing.
Furthermore, steel and aluminum customers typically have limited manufacturing locations compared to metalworking customers and generally use higher volumes of products at a single location. 2 Raw Materials Quaker Houghton uses approximately 3,000 raw materials, including animal fats, vegetable oils, mineral oils, oleochemicals, surfactant agents, and various chemical compounds that act as additives to our base formulations.
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.
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, including the Company’s other periodic reports on Forms 10-K, 10-Q and 8-K, press releases, and other materials released to, or statements made to, the public, 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.
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.
We strive to create a culture where recognition is ingrained, including utilization of an enterprise reward and recognition program that incentivizes the results and behaviors of our employees and their impacts on our teams and business. Inclusion Quaker Houghton strives to cultivate an inclusive culture.
Where the Company acts as an agent for its customers, revenue is recognized on a net reporting basis at the amount of the administrative fee earned by the Company for ordering the goods. See Note 5 of Notes to Consolidated Financial Statements in Item 8 of this Report.
Where the Company acts as an agent for its customers, revenue is recognized on a net reporting basis at the amount of the administrative fee earned by the Company for ordering the goods. See Note 5, Net Sales and Revenue Recognition , to the Consolidated Financial Statements for more information.
In formulating our sustainability strategy, our Executive Leadership Team (“ELT”) and Board consider certain risks and uncertainties that may materially impact our financial condition and results of operations. These risks and uncertainties are further described in Item 1A of this Report.
In formulating our sustainability strategy, our Executive Leadership Team (“ELT”) and Board consider certain risks and uncertainties that may materially impact our financial condition and results of operations.
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.
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.
Regulatory Matters In order to facilitate compliance with applicable federal, state, and local statutes and regulations relating to occupational health and safety and protection of the environment, the Company has an ongoing program of site assessment for the purpose of identifying capital expenditures or other actions that may be necessary to comply with such requirements.
The results of operations of Sutai and IKV subsequent to the acquisition dates are included in the Consolidated Statements of Operations for the year ended December 31, 2024. 3 Regulatory Matters In order to facilitate compliance with applicable federal, state, and local statutes and regulations relating to occupational health and safety and protection of the environment, the Company has an ongoing program of site assessments for the purpose of identifying capital expenditures or other actions that may be necessary to comply with such requirements.
A major risk is that demand for the Company’s products and services is largely derived from the demand for our customers’ products, which subjects the Company to uncertainties related to downturns in a customer’s business and unanticipated customer production slowdowns and shutdowns, including as is currently being experienced by many automotive industry companies as a result of supply chain disruptions.
A major risk is that demand for the Company’s products and services is largely derived from the demand for our customers’ products, which subjects the Company to uncertainties related to downturns in a customer’s business and unanticipated customer production slowdowns and shutdowns.
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.
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.
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.
The Company’s goal is to have an organization that is inclusive of all of its people and is representative of the communities in which we operate. 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.
The price of mineral oil and its derivatives can be affected by the price of crude oil and industry refining capacity.
Quaker Houghton utilizes a significant number of raw materials derived from crude oil and natural gas. The price of mineral oil and its derivatives can be affected by the price of crude oil and industry refining capacity.
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.
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 Our Compensation and Human Resources Committee is responsible for overseeing our policies and strategies related to culture and human capital.
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.
During the first quarter of 2023, the Company reorganized its executive management team to align with its new business structure. The Company’s new structure includes three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific. 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.
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.
We continue to utilize a robust process in which each department’s talent landscape is evaluated, talent is assessed, critical roles are identified, and succession planning occurs. Output of these processes results in career development and other related talent plans designed to ensure we have the talent we need to deliver results both now and in the future.
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.
Other major risks and uncertainties include, but are not limited to, legislative and regulatory developments including changes to existing laws and regulations, or the way they are interpreted, applied or enforced; tariffs, trade restrictions and the economic and other sanctions imposed by other nations on Russia and Belarus and/or other governments or government organizations; suspensions of activities in Russia by many multinational companies; foreign currency fluctuations; significant changes in applicable tax rates and regulations; terrorist attacks and other acts of violence; the impacts of consolidation in our industry, including loss or consolidation of a major customer; the effects of climate change, fire or other natural disasters; and the potential occurrence of cyber-security breaches, cyber-security attacks, other technology outages and security incidents.
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.
Our core values embody who we are as a company, build a safer, stronger Quaker Houghton, and guide the Company’s internal conduct and 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.
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.
Aligned to our core values, all full-time employees are provided up to 16 hours per calendar year to volunteer for a non-profit or charity of their choice. The approach is supported by recommendations to our employees regarding volunteering opportunities, such as environmental conservation, STEM education, community health, safety and development opportunities for underrepresented groups.
However, any further disclosures made on related subjects in the Company’s subsequent reports on Forms 10-K, 10-Q, 8-K and other related filings should be consulted.
However, additional disclosures on related subjects can be found in the Company’s subsequent reports on Forms 10-K, 10-Q, 8-K and other related filings. We caution you not to place undue reliance on our forward-looking statements.
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.
Research and development expenses during the years ended December 31, 2024, 2023 and 2022 were $57.3 million, $50.3 million and $46.0 million, respectively. Recent Acquisition Activity Subsequent to the date of these financial statements, in February 2025, the Company acquired Chemical Solutions & Innovations (Pty) Ltd. (“CSI”), for approximately $3.9 million, subject to routine and customary post-closing adjustments.
Many factors discussed in this Report will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
These risks, uncertainties, and possible inaccurate assumptions relevant to our business could materially impact our future performance and cause our actual results to differ materially from expected and historical results. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.
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.
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 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.
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 https://home.quakerhoughton.com/sustainability. The Company’s 2023 Sustainability Report reflects the most recent data on a variety of topics, including specific information relating to the Company’s environmental, social, and governance initiatives.
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.
Additionally, we regularly evaluate our total rewards offerings to ensure that our total compensation and benefits packages are aligned with our business strategy and organizational culture.
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.
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. Inclusion begins with the Board and ELT. 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.
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.
Furthermore, the Company is subject to the same business cycles as those experienced by our customers in the steel, automotive, aerospace, industrial equipment, aluminum, and durable goods industries. 6 Any or all of the forward-looking statements in this Report, in the Company’s Annual Report to Shareholders for 2024 or in any other public statements we make may prove to be incorrect due to inaccurate assumptions or unforeseen risks and uncertainties.
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.
We place importance on developing our leaders at all levels. Our leaders have access to training on coaching, performance and rewards, development planning and change management, as well as specialized opportunities for external coaching, leadership assessments, or external development programs.
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.
Tribologie IKVT and its subsidiaries (“IKV”) for $35.2 million, including an initial cash payment of $29.7 million, subject to routine and customary post-closing adjustments related to working capital and net indebtedness levels as well as earn-out provisions related to the finalization of 2023 earnings. Assets acquired included approximately $4.8 million of cash and cash equivalents.
Such statements include information relating to current and future business activities, operational matters, capital spending, and financing sources. From time to time, forward-looking statements are also included in the Company’s other periodic reports on Forms 10-K, 10-Q and 8-K, press releases, and other materials released to, or statements made to, the public.
Such statements include information relating to current and future business activities, operational matters, capital spending, and financing sources.
Removed
See Note 2 of Notes to Consolidated Financial Statements in Item 8 of this Report.
Added
CSI is based in South Africa and is a supplier of metalworking fluids and lubricants to the South African market. CSI will be reported as part of the EMEA reportable segment. This acquisition strengthens Quaker Houghton’s position in South Africa and expands the Company’s presence in that region.
Removed
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.
Added
In July 2024, the Company acquired the Sutai Group (“Sutai”), for approximately $16.2 million, including an initial cash payment of $14.6 million, subject to routine and customary post-closing adjustments related to working capital and net indebtedness levels, as well as earn-out provisions with an initial estimated payout of $1.6 million related to the finalization of 2024 and 2025 earnings.
Removed
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.
Added
Assets acquired included cash and cash equivalents of $5.5 million. Sutai is based in Japan and provides impregnation treatment products and services to the automotive and other industries. Sutai is reported as part of the Asia/Pacific reportable segment.
Removed
We have established core values that are inclusive of embracing diversity and creating a culture where we learn from and are inspired by the many cultures, backgrounds and knowledge of our team members. The Company’s goal is to have an organization that is inclusive of all its people and is representative of the communities in which we operate.
Added
This acquisition strengthens Quaker Houghton’s technology portfolio, enabling the Company to better support and optimize production processes for customers across the Japanese, Asia Pacific and global markets. During February 2024, the Company acquired I.K.V.
Removed
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.
Added
In addition, trade policies and tariffs, including those affecting the Company’s key markets, could further impact exchange rates and economic stability, influencing both the cost of raw materials and the competitiveness of the Company’s products in international markets.
Removed
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.
Added
In 2024, we expanded our donation-matching and grantmaking programs to impact our local communities globally with matching and grants available to eligible organizations across the globe.
Removed
In 2021, we set a target to achieve carbon neutrality in our global operations by 2030 and net zero emissions across our entire value chain by 2050. In addition, the Company established 15 long-term environmental and social goals, based on the results of the Company's 2020 materiality assessment, which was completed with input from customers, investors, suppliers, and internal stakeholders.
Added
These risks and uncertainties are further described in Item 1A of this Report. 4 In 2020, we completed an impact materiality assessment identifying critical environmental, social, and governance topics that our sustainability program was founded on in 2021.
Removed
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.
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Since then we have made significant progress towards our strategy to Innovate Together for a Better Tomorrow, Protect Our Planet, Empower Our Colleagues and Communities, and Source Our Materials Responsibly. Details of that progress can be found in our Sustainability Report.
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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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In 2024, the Company initiated its first double materiality assessment to identify its material sustainability impacts, risks and opportunities as a part of Corporate Sustainability Responsibility Directive (“CSRD”) compliance. The potential impacts of this assessment are still being evaluated. In 2024, we achieved eighteen of the twenty internal sustainability goals set to support our strategy.
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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.
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The Company increased its renewable electricity usage by approximately 5% compared to 2023 and implemented over 167 projects to reduce waste, water and energy usage. The Company consumes approximately 76% of its electricity consumption from renewable and zero carbon sources.
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We are committed to creating a workplace where employees feel valued, respected and challenged, while fostering an environment that attracts and engages a talented workforce that contributes to the Company’s growth and sustained success. Our Compensation and Human Resources Committee is responsible for overseeing our policies and strategies related to culture and human capital, including diversity, equity and inclusion.
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Additionally, the Company launched its See Beyond™ portfolio of sustainable solutions and avoided or eliminated over 23,000 metric tons of waste at Fluidcare TM customer locations. Finally, we achieved zero serious injury recordables and exceeded our industry’s standard for volunteering. We plan to provide further progress updates in our 2024 Sustainability Report.
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Our Quaker Houghton University is available to all employees and provides a library of tools and resources for career development and growth. Through ongoing dialogue with leaders, employees are encouraged to plan for their development and leverage the tools available to create meaningful and actionable development plans that drive personal and company growth.
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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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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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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.
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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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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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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.
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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.
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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.
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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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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe consequences of terrorist attacks, other acts of armed conflicts or war, including cyber-attacks, natural disasters, widespread public health crises or other uncommon global events can be unpredictable, and we may not be able to foresee or effectively plan for these events, resulting in a material adverse effect on our business, results of operations or financial condition.
Biggest changeTo 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. 18 The consequences of terrorist attacks, other acts of armed conflicts or war, including cyber-attacks, natural disasters, widespread public health crises or other uncommon global events can be unpredictable, and we may not be able to foresee or effectively plan for these events, resulting in a material adverse effect on our business, liquidity, financial position, and results of operations.
If a significant customer experiences financial difficulties or files for bankruptcy protection, we may be unable to collect on our receivables, and customer manufacturing sites may be closed, or contracts voided. The bankruptcy of a major customer could therefore have a material adverse effect on our liquidity, financial position and results of operations.
If a significant customer experiences financial difficulties or files for bankruptcy protection, we may be unable to collect on our receivables, customer manufacturing sites may be closed, or our contracts may be voided. The bankruptcy of a major customer could therefore have a material adverse effect on our liquidity, financial position and results of operations.
Our principal credit facility requires the Company to comply with certain provisions and covenants, and, while we do not currently consider these provisions and covenants to be overly restrictive, they could become more difficult to comply with as business or financial conditions change.
Our principal credit facility requires the Company to comply with certain provisions and covenants and while we do not currently consider these provisions and covenants to be overly restrictive, they could become more difficult to comply with as our business or financial conditions change.
These regulations and laws, together with our obligations to seek consent or consult with the relevant unions or works councils, could have a significant impact on our flexibility in managing costs and responding to market changes.
These laws and regulations, together with our obligations to seek consent or consult with the relevant unions or works councils, could have a significant impact on our flexibility in managing costs and responding to market changes.
If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon us or our products, or our operations are disrupted due to physical impacts of climate change or biodiversity loss, our business, capital expenditures, results of operations, financial condition and competitive position could be negatively impacted.
If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon us or our products, or our operations are disrupted due to physical impacts of climate change or biodiversity loss, our business, capital expenditures, liquidity, results of operations, financial condition and competitive position could be negatively impacted.
We may fail to obtain the benefits we anticipate from our recently completed or future acquisitions or joint ventures and we may not create the appropriate infrastructure to support such additional growth from organic or acquired businesses, which could also have a material adverse effect on our liquidity, financial position and results of operations.
We may fail to obtain the benefits we anticipate from our recently completed or future acquisitions or joint ventures and we may not create the appropriate infrastructure to support the additional growth from organic or acquired businesses, which could also have a material adverse effect on our liquidity, financial position and results of operations.
Additional information may arise in the future concerning the nature or extent of our liability with respect to identified sites, and additional sites may be identified for which we are alleged to be liable, that could cause us to materially increase our environmental accrual or the upper range of the costs we believe we could reasonably incur for such matters.
Additional information may arise in the future concerning the nature or extent of our liability with respect to identified sites, and additional sites may be identified for which we are alleged to be liable, which could cause us to materially increase our environmental accrual or the upper range of the costs we believe we could reasonably incur for such matters.
Quaker Houghton uses approximately 3,000 different raw materials, including animal fats, vegetable oils, mineral oils, oleochemicals, ethylene, solvents, surfactant agents, various chemical compounds that act as additives to our base formulations, and a wide variety of other organic and inorganic compounds, and various derivatives of the foregoing.
Quaker Houghton uses approximately 3,000 raw materials, including animal fats, vegetable oils, mineral oils, oleochemicals, ethylene, solvents, surfactant agents, and various chemical compounds that act as additives to our base formulations, and a wide variety of other organic and inorganic compounds and various derivatives of the foregoing.
Additionally, severe disruptions in the domestic and global financial markets could adversely impact the ratings and survival of some of our insurers. Future downgrades in the ratings of enough insurers could adversely impact both the availability of appropriate insurance coverage and its cost.
Additionally, severe disruptions in the domestic and global financial markets could adversely impact the ratings and survival of some of our insurers. Future downgrades in the ratings of insurers could adversely impact both the availability of appropriate insurance coverage and its cost.
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.
In addition, investigations by government 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.
While we have some redundant capabilities, if one of our facilities is forced to shut down or curtail operations because of damage or other factors, including natural disasters, labor difficulties or widespread public health crises, we may not be able to timely supply our customers. This could result in a loss of sales over an extended period or permanently.
While we have some redundant capabilities, if one of our facilities is forced to shut down or curtail operations because of damage or other unforeseen factors, including natural disasters, labor difficulties or public health crises, we may not be able to timely supply our customers. This could result in a loss of sales over an extended period or permanently.
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 liquidity, financial position, and results of operations.
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 continues to be a lack of consistent legislation related to disclosure and operational matters, which creates complexity and economic and regulatory uncertainty. Though we are closely following developments in this area and changes in the regulatory landscape in the U.S. and our other markets, we cannot predict how or when those challenges may ultimately impact our business.
Our effective tax rate and respective tax liabilities could therefore be materially affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in tax rates, expiration or lapses of tax credits or incentives, changes in uncertain tax positions, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or in how they are interpreted or enforced, including matters such as transfer pricing.
Our effective tax rates and tax liabilities could therefore be materially affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in tax rates, expiration or lapses of tax credits or incentives, changes in uncertain tax positions, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or in how they are interpreted or enforced, including matters such as transfer pricing.
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 are closely monitoring these developments. Terrorist attacks, other acts of violence or war, natural disasters, widespread public health crises or other uncommon events may affect the markets in which we operate and our profitability which could adversely affect our business, liquidity, financial position, and results of operations.
In addition, the Gulf Affiliates currently have the right to designate three individuals for election to the Board and this right, together with their share ownership, gives them substantial influence over our business, including over matters submitted to a vote of our shareholders, including the election of directors, amendment of our organizational documents, acquisitions or other business combinations involving the Company, and potentially the ability to prevent extraordinary transactions such as a takeover attempt or business combination.
In addition, under our shareholders agreement with the Gulf Affiliates, they currently have the right to designate three individuals for election to the Board and this right, together with their share ownership, gives them substantial influence over our business, including over matters submitted to a vote of our shareholders, including the election of directors, amendment of our organizational documents, acquisitions or other business combinations involving the Company, and potentially the ability to prevent extraordinary transactions such as a takeover attempt or business combination.
Additionally, rising interest rates could have a material adverse effect on our business, financial condition, results of operations, or cash flows. We carry, and will continue to carry for the foreseeable future, a substantial amount of debt and other fixed obligations.
Additionally, rising interest rates could have a material adverse effect on our business, financial condition, results of operations, or cash flows. We carry, and expect to continue to carry for the foreseeable future, a substantial amount of debt and other fixed obligations.
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.
During 2024, 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.
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.
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 results of operations or financial condition. Our business depends on attracting and retaining qualified management and other key personnel.
In addition, in certain countries our employees are represented by works councils or are governed by collective bargaining agreements and we are often required to consult with and seek the consent or advice of such representatives.
In addition, in some countries our employees are represented by works councils or are governed by collective bargaining agreements and we are often required to consult with and seek the consent or advice of such representatives.
We have limited ability to adjust our costs contemporaneously with changes in sales; thus, a significant sudden downturn in sales due to reductions in global production within the industries we serve and/or weak end-user markets could have a material adverse effect on our liquidity, financial position and results of operations.
We have limited ability to adjust our costs contemporaneously with changes in sales; thus, a significant sudden downturn in sales or increased credit losses due to reductions in global production within the industries we serve and/or weak end-user markets could have a material adverse effect on our liquidity, financial position and results of operations.
In addition, available insurance coverage may not be sufficient to cover all of the damage incurred or, if available, may be prohibitively expensive. Widespread public health crises could also disrupt operations of the Company, its suppliers and customers which could have a material adverse impact on our results of operations.
In addition, available insurance coverage may not be sufficient to cover all of the damage incurred or, if available, may be prohibitively expensive. Widespread public health crises, including contagious diseases, could also disrupt operations of the Company, its suppliers and customers which could have a material adverse impact on our results of operations.
In any event, ongoing investments in research and development for the future do not yield an immediate beneficial impact on our operating results and therefore could result in higher costs without a proportional increase in revenues. 8 Table of Contents In addition, our customers use our specialty chemicals for a broad range of applications.
In any event, ongoing investments in research and development for the future do not yield an immediate beneficial impact on our operating results and therefore could result in higher costs without a proportional increase in revenues. In addition, our customers use our specialty chemicals for a broad range of applications.
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.
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 chemicals and other services involve inherent exposure to potential product liability claims, service level claims, product recalls and related adverse publicity.
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.
Our non-U.S. operations generate significant revenues and earnings. Fluctuations in foreign currency exchange rates, including hyperinflationary conditions, 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 customers may experience deterioration of their businesses, cash flow shortages and difficulty obtaining financing, leading them to delay or cancel plans to purchase products, and they may not be able to fulfill their obligations in a timely fashion.
Our customers may experience deterioration of their businesses, cash flow shortages and difficulty obtaining financing, leading them to delay or cancel plans to purchase products, and they may not be able to pay our bills or fulfill their other obligations in a timely fashion.
In many jurisdictions where we operate, labor and employment laws and regulations grant significant job protection to certain employees including rights on termination of employment.
In many jurisdictions where we operate, labor and employment laws and regulations grant significant job protection to some employees including rights on termination of employment.
Any such revocation, modification or non-renewal may require the Company to cease or limit the manufacture and sale of its products at one or more of its facilities, which may limit or prevent the Company’s ability to meet product demand or build new facilities and may have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.
Any such revocation, modification or non-renewal may require the Company to cease or limit the manufacture and sale of its products at one or more of its facilities, which may limit or prevent the Company’s ability to meet product demand or build new facilities and may have a material adverse effect on liquidity, financial position, and results of operations.
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.
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.; • 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, as a result of terrorist activities, political disruption and/or military conflict such as those that are being experienced in multiple areas around the world; 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.
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.
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, port strikes or other labor disruptions, transportation disruptions or rate increases, increased border controls or closures, extreme weather events, tariffs, rising fuel costs, armed conflicts and capacity constraints.
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.
A decrease in demand due to these issues could have an adverse impact on our liquidity, financial position, 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.
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.
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, liquidity, financial position, and results of operations.
Competition in our industry historically has also been based on the ability to provide products that meet the needs of the customer and render technical services and laboratory assistance, which our competitors may be able to accomplish more effectively than we are able to do.
Competition in our industry historically has also been based on the ability to provide products that meet the needs of the customer and render technical services and laboratory assistance, which our competitors may be able to accomplish more effectively than us.
Our competitors may develop new products or enhancements to their products that offer performance, features and lower prices that may render our products less competitive or obsolete, and we may lose business and/or significant market share.
Our competitors may develop new products or enhancements to their products that offer performance, features and lower prices that may render our products less competitive or obsolete, and cause us to lose business and/or significant market share.
Breaches, cyber incidents and disruptions, or failure to comply with laws and regulations related to information security or privacy could result in legal claims or proceedings against us by governmental entities or individuals, significant fines, penalties or judgements, disruption of our operations, remediation requirements, changes to our business practices, and damage to our reputation.
Breaches, cyber incidents and disruptions, or failure to comply with laws and regulations related to information security or privacy by us, our vendors and third-party service providers could result in legal claims or proceedings against us by governmental entities or individuals, significant fines, penalties or judgements, disruption of our operations, remediation requirements, changes to our business practices, and damage to our reputation.
We currently use, and in the past have used, hazardous substances at many of our facilities, and we have in the past been, and may in the future be, subject to claims relating to exposure to hazardous materials. We also have generated, and continue to generate, hazardous wastes at a number of our facilities.
We currently use, and in the past have used, hazardous substances at many of our facilities, and we have in the past been, and may in the future be, subject to claims relating to exposure to or contamination caused by hazardous materials. We also have generated, and continue to generate, hazardous wastes at a number of our facilities.
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.
Some competitors may be able to offer more favorable or flexible pricing and service terms or may be better able to adapt to changes in conditions in our industries, fluctuations in the costs of raw materials or to changes in global economic conditions, potentially resulting in reduced profitability and/or a loss of market share for us.
We are also subject to interest rate risk due to the variable interest rates within the credit facility and if interest rates continue to rise significantly, these interest costs would increase as well.
We are also subject to interest rate risk due to the variable interest rates within the credit facility and if interest rates rise, interest costs would increase as well.
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.
Failure to retain key employees, failure to effectively implement our succession planning efforts and successfully transition key roles, or the inability to hire, train, retain and manage qualified personnel could also adversely affect our business. 17 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.
As the leader in industrial process fluids, the Company is subject to the same business cycles as those experienced by our customers that participate in the steel, automobile, aircraft, industrial equipment, aerospace, aluminum and durable goods industries.
As a leader in industrial process fluids, the Company is subject to the same business cycles as those experienced by our customers that participate in the steel, automotive, industrial equipment, aerospace, aluminum and durable goods industries.
In addition, the U.S. Toxic Substances Control Act (“TSCA”) requires chemicals to be assessed against a risk-based safety standard and that unreasonable risks identified during risk evaluation be eliminated.
In addition, the U.S. Toxic Substances Control Act (“TSCA”) requires chemicals to be assessed against a risk-based safety standard and then requires that unreasonable risks that are identified be eliminated.
Increased public and stakeholder awareness and concern regarding global climate change, biodiversity loss, and other environmental risks may result in more extensive international, regional and/or federal requirements or industry standards to reduce or mitigate the effects of these changes.
Increased public and stakeholder awareness of global climate change, biodiversity loss, and other environmental risks have contributed to, and may result in, even more extensive, international, regional and/or federal requirements or industry standards to reduce or mitigate the effects of these changes.
Increased compliance costs may not affect competitors in the same way that they affect us due to differences in product formulations, manufacturing locations or other factors, and we could be at a competitive disadvantage, which might adversely affect our financial performance.
Increased compliance costs may not affect competitors in the same way that they affect us due to differences in product formulations, manufacturing locations or other factors, and we could be at a competitive disadvantage, which might adversely affect our financial performance. Our insurance may not fully cover all potential exposures.
Any significant disruption in supply could affect our ability to obtain raw materials or satisfactory substitutes or could increase the cost of such raw materials or substitutes, which could have a material adverse effect on our liquidity, financial position and results of operations.
Any significant disruption in supply, such as was experienced several years ago, could affect our ability to obtain raw materials or satisfactory substitutes or could increase the cost of such raw materials or substitutes, which could have a material adverse effect on our liquidity, financial position and results of operations.
Incorporated by reference is the foreign exchange risk information contained in Item 7A of this Report and the geographic information in Note 4 of Notes to Consolidated Financial Statements included in Item 8 of this Report. Also, we occasionally source inventory in a different country than that of the intended sale. This practice can give rise to foreign exchange risk.
Incorporated by reference is the foreign exchange risk information contained in Item 7A of this Report and the geographic information in Note 4, Business Segments , to the Consolidated Financial Statements included in Item 8 of this Report. Also, we occasionally source inventory in a different country than that of the intended sale.
The price of mineral oils and their derivatives can be affected by the price of crude oil and industry refining capacity.
The price of mineral oil and its derivatives can be affected by the price of crude oil and industry refining capacity.
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.
Terrorist attacks, other acts of armed conflicts or war, cyber-attacks, natural disasters, widespread public health crises or an outbreak of a contagious disease, or other uncommon global events, such as the current military conflicts between Russia and Ukraine and in the Middle East, 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.
Our effective tax rate is derived from a combination of local tax rates and tax attributes applicable to our operations in the various countries, states and other jurisdictions in which we operate.
We pay income taxes in the U.S. and various foreign jurisdictions. Our effective tax rate is derived from a combination of local tax rates and tax attributes applicable to our operations in the various countries, states and other jurisdictions in which we operate.
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.
See Note 10, Incomes Taxes , and Note 25, Commitments and Contingencies , to the 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.
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.
See Note 24, Hedging Activities, to the Consolidated Financial Statements for more information. 10 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.
Further, the success of our growth depends on our ability to navigate risks such as those listed above and successfully integrate acquisitions, including, but not limited to, our ability to: • successfully execute the integration or consolidation of the acquired or additional business into our existing processes and operations; • develop or modify financial reporting, information systems, and other related financial tools to ensure overall financial integrity and adequacy of internal control procedures; • identify and capitalize on potential synergies, including cost reduction opportunities, while retaining legacy business and other related attributes; • adequately address challenges arising from the increased scope, geographic diversity and complexity of our operations; and • further penetrate existing, and expand into new, markets with the product capabilities acquired in acquisitions.
Further, the success of any acquisition we complete depends on our ability to navigate risks such as those listed above and successfully integrate acquisitions, including, but not limited to, our ability to: • develop or modify financial reporting, information systems, and other related financial tools to ensure overall financial integrity and adequacy of internal control procedures; • identify and capitalize on potential synergies, including cost reduction opportunities; • adequately address challenges arising from the increased scope, geographic diversity and complexity of our operations; and • further penetrate existing, and expand into new, markets with the products and capabilities acquired in acquisitions.
Our information technology systems are subject to potential disruptions, including significant network or power outages, cyberattacks, computer viruses, other malicious codes, and/or unauthorized access attempts, any of which, if successful, could result in data leaks or otherwise compromise our confidential or proprietary information and disrupt our operations.
Our information technology systems are subject to potential disruptions, including significant network or power outages, usage errors by our employees, business partners, or outside service providers, cyberattacks, ransomware attacks, computer viruses, other malicious codes, and/or unauthorized access attempts, any of which, if successful, could result in data leaks or otherwise compromise our confidential or proprietary information and disrupt our operations.
Risks Relating to Our Supply Chain If we are unable to obtain price increases or contract concessions sufficient to offset increases in the costs of raw materials, this can continue to result in a loss of sales, gross profit, and/or market share and can have a material adverse effect on our liquidity, financial position and results of operations.
We seek to mitigate this risk through local sourcing of raw materials in the majority of our locations. 11 Risks Relating to Our Supply Chain If we are unable to obtain price increases or contract concessions sufficient to offset increases in the costs of raw materials, this could result in a loss of sales, gross profit, and/or market share and could have a material adverse effect on 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. 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.
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. These payments may be costly and may adversely affect our financial position and results of operations.
An example of such evolving customer demands and industry trends is the movement towards light weighting of materials and electric vehicles. Should a customer decide to use a different material or technology due to price, performance or other considerations, we may not be able to supply a product that meets the customer’s new requirements.
Examples of such evolving customer demands and industry trends are the movement towards lighter-weight materials and the growing prevalence of electric vehicles. Should a customer decide to use a different material or technology due to price, performance or other considerations, we may not be able to supply a product that meets the customer’s new requirements.
Ongoing compliance with environmental laws, regulations and permits that impact registration/approval requirements, transportation and storage of raw materials and finished products, and storage and disposal of wastes could require us to make changes in manufacturing processes or product formulations and could have a material adverse effect on our results of operations.
Due to the nature of these requirements and changes in our operations, our operations may exceed limits under permits or we may not have the proper permits to conduct our operations. 15 Ongoing compliance with environmental laws, regulations and permits that impact registration/approval requirements, transportation and storage of raw materials and finished products, and storage and disposal of wastes could require us to make changes in manufacturing processes or product formulations and could have a material adverse effect on our results of operations.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. We cannot be certain that we will be successful in maintaining adequate internal control over financial reporting and financial processes.
If they were to make available for sale a portion of their shares, that portion could represent a significant amount of common stock of the Company being sold which could have an adverse impact on the Company’s stock price.
If they were to make available for sale a portion of their shares, that portion could represent a significant amount of common stock of the Company being sold and any such transaction (if it were to occur) could have an adverse impact on the Company’s stock price or otherwise cause price volatility.
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.
See Note 10, Incomes Taxes , and Note 25, Commitments and Contingencies , to the Consolidated Financial Statements in Item 8 of this Report, which describes uncertain tax positions and audits and inspections, as well as information concerning amounts accrued associated with certain environmental remediation costs and other potential commitments or contingencies.
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.
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 in turn can be affected by the price of crude oil and by government incentives for low-carbon fuels.
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.
In addition, we source some materials from a single supplier or from suppliers in jurisdictions that have experienced political or economic instability. Even where we have multiple suppliers of a particular raw material, there are occasionally shortages.
There are many factors that may affect our business and results of operations, including the following risks relating to: (1) the demand for our products and services and our ability to grow our customer base; (2) our business operations, including internal and external factors that may impact our operational continuity; (3) our international operations; (4) our supply chain; (5) domestic and foreign taxation and government regulation and oversight; and (6) more general risk factors that may impact our business. 7 Table of Contents Risks Related to the Demand for our Products and Services and our Customer Base Changes to the industries and markets that we serve could have a material adverse effect on our liquidity, financial position and results of operations.
There are many factors that may affect our business and results of operations, including the following risks relating to: (1) the demand for our products and services and our ability to grow our customer base; (2) our business operations, including internal and external factors that may impact our operational continuity; (3) our international operations; (4) our supply chain; (5) domestic and foreign taxation and government regulation and oversight; and (6) more general risk factors that may impact our business.
Any violation of these or other applicable anti-bribery, anti-corruption and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, and criminal or civil sanctions, penalties and fines, any of which could adversely affect our business and financial condition.
Any violation of these or other applicable anti-bribery, anti-corruption and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, and criminal or civil sanctions, penalties and fines, any of which could adversely affect our business and financial condition. 13 The shipment of goods, services and technology across international borders subjects us to extensive trade laws and regulations.
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.
Interest rate increases, which we have experienced in the past and may experience again in the future, 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.
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 Company’s principal credit facility permits interest on certain variable-rate borrowings to be calculated based on the Term Secured Overnight Financing Rate (“Term SOFR”), which exposes us to interest rate risk. See Note 19, Debt , to the Consolidated Financial Statements for more information.
We also rely on our technology infrastructure in all aspects of our business, including to interact with customers and suppliers, fulfill orders and bill, collect and make payments, ship products, provide support to customers, and fulfill contractual obligations.
We also rely on our technology infrastructure in all aspects of our business, including to interact with customers and suppliers, fulfill orders and bill, collect and make payments, ship products, provide support to customers, and fulfill contractual obligations. Further, we rely on our vendors and third-party service providers to maintain effective cybersecurity measures to keep our information secure.
Due to the specialized and technical nature of our business, our future performance is dependent on our ability to attract, develop and retain qualified leadership, commercial, technical, and other key personnel. Competition for such talent is intense, and we may be unable to continue to attract or retain such personnel.
Due to the specialized and technical nature of our business, our future performance is dependent on our ability to attract, develop and retain qualified leadership, commercial, technical, and other key personnel.
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.
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 and compliance costs, reduced emission allowances or additional restrictions on production or operations.
If we are unsuccessful with differentiating ourselves, it could have a material adverse effect on our liquidity, financial position and results of operations and we could lose market share to our competitors.
If we are unsuccessful with differentiating ourselves, it could have a material adverse effect on our liquidity, financial position and results of operations and we could lose market share to our competitors. 7 Loss of a significant customer, bankruptcy of a major customer, or the closure of or significant reduction in production at a customer site could have a material adverse effect on our liquidity, financial position and results of operations.
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.
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.
See Note 15 of Notes to Consolidated Financial Statements included in Item 8 of this Report.
See Note 15, Goodwill and Other Intangible Assets , to the Consolidated Financial Statements included in Item 8 of this Report.
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.
Terrorist attacks, other acts of armed conflicts or war, 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.
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.
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.
We could be subject to indemnity claims and liable for other payments relating to properties or businesses we have divested. In connection with the sale of certain properties and businesses, we agreed to indemnify the purchasers for certain types of matters, including certain breaches of representations and warranties, taxes and certain environmental matters.
In particular, in connection with the sale of certain properties and businesses, we agreed to indemnify the purchasers for certain types of matters, including certain breaches of representations and warranties, taxes and certain environmental matters.
Moreover, many countries, including the U.S., control the export and re-export of certain goods, services and technology and impose related export record-keeping and reporting obligations, which can be burdensome.
Our import activities are governed by the unique customs laws and regulations in each of the countries where we operate. Moreover, many countries, including the U.S., control the export and re-export of certain goods, services and technology and impose related export record-keeping and reporting obligations, which can be burdensome.
A significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and likely impact our operating results.
A significant outbreak of contagious diseases in the human population similar to the COVID-19 pandemic could also result in an economic downturn that could affect demand for our products and likely impact our operating results.
Additionally, adverse effects upon our customers’ industries related to the worldwide social and political environment, including uncertainty or instability resulting from climate change or biodiversity loss, changes in political leadership and environmental policies, changes in geopolitical-social views toward fossil fuels and renewable energy, concern about the environmental impact of climate change or biodiversity loss, and investors’ expectations regarding ESG matters, may also adversely affect demand for our services.
This includes the uncertainty or instability resulting from climate change or biodiversity loss, changes in political leadership and environmental policies, changes in geopolitical-social views toward fossil fuels and renewable energy, concern about the environmental impact of climate change or biodiversity loss, and investors’ expectations regarding ESG matters.
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 may in the future discover areas of our internal controls that need improvement. 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.
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.
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.
There can be no assurance that there will not be terrorist attacks against the U.S. or other locations where we do 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, natural disasters such as earthquakes, tornados, hurricanes, fires, floods, and tsunamis cannot be predicted.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRefer to the “Risk Factors” section, which appears in Item 1A of this Report for more information regarding these risks.
Biggest changeRefer to the “Risk Factors” section, which appears in Item 1A of this Report for more information regarding these risks. In response to these risks, we have implemented cybersecurity processes, technologies, and controls detailed below to aid in our efforts to assess, identify, and manage cybersecurity risks.
Collectively this team has decades of dedicated cybersecurity experience with personnel experienced and certified in various disciplines, including data privacy, enterprise risk management, cloud security and ethical hacking. The Global Cyber Security team reports to the Chief Digital Information Officer (“CDIO”), who in turn reports to the Chief Executive Officer (“CEO”).
Collectively this team has decades of dedicated cybersecurity experience with personnel experienced and certified in various disciplines, including data security and privacy, enterprise risk management, cloud security and ethical hacking. The Global Cyber Security team reports to the Chief Digital Information Officer (“CDIO”), who in turn reports to the Chief Executive Officer (“CEO”).
Management provides cybersecurity updates to the Audit Committee, at least quarterly, and material cybersecurity incidents are reported to the Board. Quaker Houghton has a dedicated Global Cyber Security team led by the Director, Global Security that is responsible for identifying, assessing, monitoring, managing and communicating the Company’s cybersecurity risks.
Management provides cybersecurity updates to the Audit Committee, at least quarterly, and material cybersecurity incidents are reported to the Board. Quaker Houghton has a dedicated Global Cyber Security team led by the Senior Director, Cybersecurity and Compliance that is responsible for identifying, assessing, monitoring, managing and communicating the Company’s cybersecurity risks.
We assess third party cybersecurity controls through a cybersecurity questionnaire and include security and privacy addendums to our contracts where applicable.
We assess third party cybersecurity controls through a cybersecurity questionnaire and include security and privacy addendums to our contracts where applicable. 19
In the event of an alert, our cybersecurity operations centers coordinates the investigation and remediation of such alerts. • Partnerships with Cybersecurity Companies - We partner with specialized cybersecurity companies and organizations, leveraging third-party technology and expertise.
In the event of an alert, our cybersecurity operations centers coordinate the investigation and remediation of such alerts. • Partnerships with Cybersecurity Companies - We partner with specialized cybersecurity companies and organizations, leveraging third-party technology and expertise.
Our cybersecurity risk management program leverages the National Institute of Standards and Technology (“NIST”) framework, which organizes cybersecurity risk management actions into five categories: identify, protect, detect, respond, and recover.
Our cybersecurity risk management program leverages the National Institute of Standards and Technology (“NIST”) framework, which organizes cybersecurity risk management actions into six categories: govern, identify, protect, detect, respond, and recover.
These partnerships help monitor and maintain the performance and effectiveness of our cybersecurity products. 18 Table of Contents • Annual and Periodic Assessments by Third Parties - Our cyber risk management program undergoes periodic assessments by third parties and including annual penetration and disaster recovery tests. • Policies and Training - We maintain company-wide policies and procedures concerning cybersecurity, which are reviewed and approved by appropriate management members.
These partnerships help monitor and maintain the performance and effectiveness of our cybersecurity tools and program. • Annual and Periodic Assessments by Third Parties - Our cyber risk management program undergoes periodic assessments by third parties including annual penetration and disaster recovery tests. • Policies and Training - We maintain company-wide policies and procedures concerning cybersecurity, which are reviewed and approved by appropriate management members.
Added
Our Global Cyber Security team works to identify, assess and manage cybersecurity threat risks, their severity, and potential mitigations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe 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.
Biggest changeThe Company’s EMEA segment has principal facilities in Uithoorn, the Netherlands; Dortmund, Germany; Monheim am Rhein, Germany; Barbera, Spain; Bera, Spain; Santa Perpetua de Mogoda, Spain; Karlshamn, Sweden; Moncalieri, Italy; Coventry, U.K; Broms Grove, U.K, and Saint-Donat, France.
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.
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, 2024, were mortgage free. Quaker Houghton also leases sales, laboratory, manufacturing, and warehouse facilities in other locations.
Item 2. Properties. Quaker Houghton’s corporate headquarters and a laboratory facility are located in Conshohocken, Pennsylvania, which is within the Americas’ segment.
Item 2. Properties. Quaker Houghton’s corporate headquarters and a laboratory facility are located in Conshohocken, Pennsylvania. The laboratory facility is within the Americas’ segment.
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.
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; Perth, Australia, and Gamagori, Japan.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. The Company is a party to proceedings, cases, and requests for information from, and negotiations with, various claimants and Federal and state agencies relating to various matters, including environmental matters.
Biggest changeItem 3. Legal Proceedings. The Company is a party to proceedings, cases, and requests for information from, and negotiations with, various claimants and Federal and state agencies relating to various matters, including environmental matters. For information concerning pending certain environmental non-capital remediation costs and other legal-related matters, refer to Note 25, Commitments and Contingencies , to the Consolidated Financial Statements.
Removed
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

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Biggest changeLeneis 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.
Biggest changeShe previously served as Vice President, HR Business Partner from September 2024 through December 2024 and Sr. Director, HR Business Partner from January 2023 through September 2024. Prior to joining the Company, Ms.
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.
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, 60 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. Traub, 59 Senior Vice President, General Counsel and Corporate Secretary Mr.
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, 60 Senior Vice President, General Counsel and Corporate Secretary Mr.
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.
Kutz has served as the Vice President, Chief Accounting Officer since he joined the Company in January 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.
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.
Berquist, who has been employed by the Company since 1997, served as Executive Vice President, Chief Commercial Officer from January 2023 to November 2024. 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.
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.
Item 4. Mine Safety Disclosures. Not applicable. 20 Item 4(a). Information about our Executive Officers. Our executive officers as of February 24, 2025 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.
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.
Jeewat Bijlani, 48 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 April 2023. Prior to that role, he served as Senior Vice President, Managing Director - Americas from August 2019 until March 2023. 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.
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.
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.
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. Jeffrey J. Kutz, 65 Vice President, Chief Accounting Officer 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. Jeffrey J. Kutz, 64 Vice President, Chief Accounting Officer 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. 22 PART II
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.
Bijlani served as President, Americas and Global Strategic Businesses of Houghton from March 2015 until July 2019. Thomas Coler, 51 Executive Vice President, Chief Financial Officer Mr. Coler has served as Executive Vice President and Chief Financial Officer since he joined the Company on June 10, 2024. 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, 41 Executive Vice President, Chief Human Resources Officer Ms.
Rokosky served as a Global Human Resources Director at FMC from February 2017 to January 2023. 21 Name, Age, and Present Position with the Company Business Experience During the Past Five Years and Period Served as an Officer Anna Ransley, 47 Senior Vice President, Chief Digital Information Officer Ms.
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.
Name, Age, and Present Position with the Company Business Experience During the Past Five Years and Period Served as an Officer Joseph A. Berquist, 53 Chief Executive Officer and President Mr. Berquist was named Chief Executive Officer and President of Quaker Houghton and appointed to the Board as a director on November 18, 2024. Mr.
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
He also held leadership roles at Exelon Corporation from 2008 to 2012 and Chatham Financial from 2001 to 2008. Kristin M. Rokosky, 54 Senior Vice President, Chief Human Resources Officer Ms. Rokosky, who has been employed by the Company since January 2023, has served as Senior Vice President, Chief Human Resources Officer since January 2025.
Removed
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.
Added
Coler served as Executive Vice President and Chief Financial Officer at Savage Companies from October 2022 until May 2024. Preceding his role at Savage, he served as Vice President, Finance and Chief Financial Officer for the Health, Hygiene & Consumables business unit at H.B. Fuller Corporation from September 2019 to October 2022.
Removed
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.
Added
Before that, he served as Vice President, Corporate Finance at H.B. Fuller Corporation from February 2017 to August 2019. Mr. Coler’s previous experience also includes various finance leadership positions at Polaris Industries, Ecolab and Boston Scientific. Jeffrey L. Fleck, 54 Senior Vice President, Chief Global Supply Chain Officer Mr.
Removed
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.
Added
Fleck has served as Senior Vice President, Chief Global Supply Chain Officer since he joined the Company in February 2023. Prior to joining the Company, Mr. Fleck served as Senior Vice President, Chief Supply Chain Officer at Georgia-Pacific Consumer Products Company.
Removed
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.
Removed
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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.
Biggest changeThe following table sets forth information concerning shares of the Company’s common stock acquired by the Company during the fourth quarter of 2024 for the period covered by this report: Issuer Purchases of Equity Securities Period (a) Total Number of Shares Purchased (1)(2) (b) Average Price Paid Per Share (1) (2) (c) Total Number of Shares Purchased as part of Publicly Announced Plans or Programs (2) (d) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (2) October 1 - October 31, 2024 72,200 $ 157.45 72,033 $ 115,756,544 November 1 - November 30, 2024 3,353 $ 167.15 — $ 115,756,544 December 1 - December 31, 2024 103,068 $ 145.80 102,876 $ 100,758,700 Total 178,621 $ 150.91 174,909 $ 100,758,700 (1) 3,712 of these shares were acquired from employees related to the surrender of shares in payment of the vesting of restricted stock awards or units.
(2) The price paid for shares acquired from employees pursuant to employee benefit and share-based compensation plans is based on the closing price of the Company’s common stock on the date of exercise or vesting as specified by the plan pursuant to which the applicable option, restricted stock award, or restricted stock unit was granted.
The price paid for shares acquired from employees pursuant to employee benefit and equity compensation plans is based on the closing price of the Company’s common stock on the date of vesting as specified by the plan pursuant to which the applicable option, restricted stock award, or restricted stock unit was granted.
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.
The graph assumes the investment of $100 o n December 31, 2019 in each of Quaker’s common stock, the stocks comprising the MidCap Index, Materials Group Index and the Chemicals Index, respe ctively.
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.
In February and May 2024, our Board declared quarterly cash dividends of $0.455 per share of outstanding common stock, payable to shareholders of record in April 2024 and July 2024, respectively.
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.
Subsequently, our Board declared quarterly dividends of $0.485 per share of outstanding common stock in July and November 2024, payable to shareholders of record in October 2024 and January 2025, respectively. We currently expect to continue paying comparable cash dividends on a quarterly basis in the future.
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.
Refer to the description of the Company’s primary Credit Facility in Note 19, Debt , to the Consolidated Financial Statements in Item 8 of this Report for more information about the covenants. As of January 17, 2025, 17,673,437 shares of Quaker common stock were issued and outstanding and were held by 549 shareholders of record.
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.
The Board declared cash dividends that totaled $1.88 per share of outstanding common stock or $33.6 million during the year ended December 31, 2024 and $1.78 per share of outstanding common stock or $32.0 million during the year ended December 31, 2023.
(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.
(2) On February 28, 2024, 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 $150 million of Quaker Chemical Corporation common stock (“2024 Share Repurchase Program”), which replaced a prior authorization and has no expiration date.
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”).
See Note 8, Equity , to the Consolidated Financial Statements for more information. 23 Stock Performance Graph The following graph compares the cumulative total return (assuming reinvestment of dividends) from December 31, 2019 to December 31, 2024 for (i) Quaker’s common stock, (ii) the S&P MidCap 400 Index (the “MidCap Index”), (iii) the S&P 400 Materials Group Index (the “Materials Group Index”) and (iv) S&P Composite 1500 Chemicals Index (the “Chemicals Index”), the new published industry index we have selected to use.
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The Company subsequently retired the shares received from escrow, which did not reduce the total number of authorized shares.
Added
The number of shares to be repurchased and the timing of such transactions will depend on a variety of factors, including market conditions.
Removed
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.
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We included the Chemicals Index this year because the Chemicals Index was also the peer group used to assess the 2024 performance stock unit’s total shareholder return relative to the performance of our peer group.
Removed
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.
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Company / Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Quaker Chemical Corp. $ 100.00 $ 155.43 $ 142.48 $ 104.16 $ 134.50 $ 89.60 S&P MidCap 400 Index 100.00 113.66 141.80 123.28 143.54 163.54 S&P 400 Materials Group Index 100.00 110.65 146.30 142.31 165.83 161.74 S&P Composite 1500 Chemicals Index 100.00 118.22 148.89 131.59 146.19 144.62 Item 6. Reserved. 24
Removed
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

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Biggest changeThe following tables reconcile the Company’s non-GAAP financial measures (unaudited) to their most directly comparable GAAP financial measures (dollars in thousands, unless otherwise noted, except per share amounts): Non-GAAP Operating Income and Margin Reconciliations For the years ended December 31, 2023 2022 2021 Operating income $ 214,495 $ 52,304 $ 150,466 Combination, integration and other acquisition-related (credits) expenses (a) — 8,812 25,412 Restructuring and related charges, net (b) 7,588 3,163 1,433 Strategic planning expenses (c) 4,704 14,446 — Russia-Ukraine conflict related expenses (j) — 2,487 — Facility remediation (recovery) costs, net (d) — — 1,509 Impairment charges (e) — 93,000 — Other charges (i) 987 3,679 3,805 Non-GAAP operating income $ 227,774 $ 177,891 $ 182,625 Non-GAAP operating margin (%) (o) 11.7 % 9.2 % 10.4 % 30 Table of Contents EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Non-GAAP Net Income Reconciliations For the years ended December 31, 2023 2022 2021 Net income (loss) attributable to Quaker Chemical Corporation $ 112,748 $ (15,931) $ 121,369 Depreciation and amortization (a)(m) 83,020 81,514 87,728 Interest expense, net 50,699 32,579 22,326 Taxes on income (loss) before equity in net income of associated companies 55,585 24,925 34,939 EBITDA 302,052 123,087 266,362 Equity (income) loss in a captive insurance company (f) (2,090) 1,427 (4,993) Combination, integration and other acquisition-related (credits) expenses (a) (475) 10,990 18,718 Restructuring and related charges, net (b) 7,588 3,163 1,433 Strategic planning expenses (c) 4,704 14,446 — Facility remediation (recovery) costs, net (d) (2,141) (1,804) 2,066 Impairment charges (e) — 93,000 — Currency conversion impacts of hyper-inflationary economies (g) 7,849 1,617 564 Brazilian non-income tax credits (h) — — (13,087) Russia-Ukraine conflict related expenses (j) — 2,487 — Loss on extinguishment of debt (k) — 6,763 — Other charges (i) 2,892 1,974 3,046 Adjusted EBITDA $ 320,379 $ 257,150 $ 274,109 Adjusted EBITDA margin (%) (o) 16.4 % 13.2 % 15.6 % Adjusted EBITDA $ 320,379 $ 257,150 $ 274,109 Less: Depreciation and amortization - adjusted (a) 83,020 81,514 87,002 Less: Interest expense, net 50,699 32,579 22,326 Less: Taxes on income (loss) before equity in net income of associated companies - adjusted (l)(n) 49,017 37,737 41,976 Non-GAAP net income $ 137,643 $ 105,320 $ 122,805 31 Table of Contents Non-GAAP Earnings per Diluted Share Reconciliations For the years ending December 31, 2023 2022 2021 GAAP earnings (loss) per diluted share attributable to Quaker Chemical Corporation common shareholders $ 6.26 $ (0.89) $ 6.77 Equity (income) loss in a captive insurance company per diluted share (f) (0.12) 0.08 (0.28) Combination, integration and other acquisition-related (credits) expenses per diluted share (a) (0.03) 0.49 0.82 Restructuring and related charges, net per diluted share (b) 0.32 0.13 0.07 Strategic planning expenses per diluted share (c) 0.21 0.63 — Facility remediation (recovery) costs, net per diluted share (d) (0.09) (0.08) 0.09 Impairment charges per diluted share (e) — 5.19 — Currency conversion impacts of hyper-inflationary economies per diluted share (g) 0.44 0.09 0.03 Brazilian non-income tax credits per diluted share (h) — — (0.46) Russia-Ukraine conflict related expenses per diluted share (j) — 0.12 — Loss on extinguishment of debt per diluted share (k) — 0.29 — Other charges per diluted share (i) 0.12 0.08 0.13 Impact of certain discrete tax items per diluted share (l) 0.54 (0.26) (0.32) Non-GAAP earnings per diluted share (p) $ 7.65 $ 5.87 $ 6.85 (a) Combination, integration and other acquisition-related (credits) expenses include certain legal, financial, and other advisory and consultant costs incurred in connection with the Combination integration activities including internal control readiness and remediation.
Biggest changeThe following tables reconcile the Company’s non-GAAP financial measures (unaudited) to their most directly comparable GAAP financial measures (dollars in thousands, unless otherwise noted, except per share amounts): Non-GAAP Operating Income and Margin Reconciliations For the years ended December 31, 2024 2023 2022 Operating income $ 194,706 $ 214,495 $ 52,304 Acquisition-related expenses (a) 1,854 — 8,812 Restructuring and related charges, net (b) 6,530 7,588 3,163 Strategic planning (credits) expenses (c) (290) 4,704 14,446 Executive transition costs (d) 7,288 688 2,813 Customer insolvency costs (e) 3,213 — — Impairment charges (k) — — 93,000 Russia-Ukraine conflict related expenses (l) — — 2,487 Other charges (n) 399 299 866 Non-GAAP operating income $ 213,700 $ 227,774 $ 177,891 Non-GAAP operating margin (%) (r) 11.6 % 11.7 % 9.2 % 31 EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Non-GAAP Net Income Reconciliations For the years ended December 31, 2024 2023 2022 Net income (loss) attributable to Quaker Chemical Corporation $ 116,644 $ 112,748 $ (15,931) Depreciation and amortization (p) 85,108 83,020 81,514 Interest expense, net 41,002 50,699 32,579 Taxes on income (loss) before equity in net income of associated companies (q) 49,300 55,585 24,925 EBITDA 292,054 302,052 123,087 Equity (income) loss in a captive insurance company (h) (2,930) (2,090) 1,427 Acquisition-related expenses (credits) (a) 1,454 (475) 10,990 Restructuring and related charges, net (b) 6,530 7,588 3,163 Strategic planning (credits) expenses (c) (290) 4,704 14,446 Executive transition costs (d) 7,288 688 2,813 Customer insolvency costs (e) 3,213 — — Facility remediation recoveries, net (f) — (2,141) (1,804) Product liability claim costs, net (g) 2,040 — — Business interruption insurance proceeds (i) (1,000) — — Currency conversion impacts of hyper-inflationary economies (j) 811 7,849 1,617 Impairment charges (k) — — 93,000 Russia-Ukraine conflict related expenses (l) — — 2,487 Loss on extinguishment of debt (m) — — 6,763 Other charges (credits) (n) 1,748 2,204 (839) Adjusted EBITDA $ 310,918 $ 320,379 $ 257,150 Adjusted EBITDA margin (%) (r) 16.9 % 16.4 % 13.2 % Adjusted EBITDA $ 310,918 $ 320,379 $ 257,150 Less: Depreciation and amortization - adjusted (p) 85,108 83,020 81,514 Less: Interest expense, net 41,002 50,699 32,579 Less: Taxes on income (loss) before equity in net income of associated companies - adjusted (o)(q) 51,352 49,017 37,737 Non-GAAP net income $ 133,456 $ 137,643 $ 105,320 32 Non-GAAP Earnings per Diluted Share Reconciliations For the years ending December 31, 2024 2023 2022 GAAP earnings (loss) per diluted share attributable to Quaker Chemical Corporation common shareholders $ 6.51 $ 6.26 $ (0.89) Equity (income) loss in a captive insurance company per diluted share (h) (0.16) (0.12) 0.08 Acquisition-related expenses (credits) per diluted share (a) 0.06 (0.03) 0.49 Restructuring and related charges, net per diluted share (b) 0.28 0.32 0.13 Strategic planning (credits) expenses per diluted share (c) (0.01) 0.21 0.63 Executive transition costs per diluted share (d) 0.31 0.03 0.12 Customer insolvency costs per diluted share (e) 0.13 — — Facility remediation recoveries, net per diluted share (f) — (0.09) (0.08) Product liability claim costs, net per diluted share (g) 0.09 — — Business interruption insurance proceeds per diluted share (i) (0.04) — — Currency conversion impacts of hyper-inflationary economies per diluted share (j) 0.05 0.44 0.09 Impairment charges per diluted share (k) — — 5.19 Russia-Ukraine conflict related expenses per diluted share (l) — — 0.12 Loss on extinguishment of debt per diluted share (m) — — 0.29 Other charges (credits) per diluted share (n) 0.05 0.09 (0.04) Impact of certain discrete tax items per diluted share (o) 0.17 0.54 (0.26) Non-GAAP earnings per diluted share (s) $ 7.44 $ 7.65 $ 5.87 (a) Acquisition-related expenses (credits) include expense associated with the Company's recent and potential acquisitions, including legal, financial, consulting and other costs.
Non-GAAP earnings per diluted share is calculated as non-GAAP net income per diluted share as accounted for under the “two-class share method.” The Company believes that non-GAAP net income and non-GAAP earnings per diluted share provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the operating performance of the Company on a consistent basis.
Non-GAAP earnings per diluted share is calculated as non-GAAP net income per diluted share as accounted for under the “two-class share method.” The Company believes that non-GAAP net income and non-GAAP earnings per diluted share provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the performance of the Company on a consistent basis.
The Company believes these non-GAAP measures provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the operating performance of the Company on a consistent basis. Additionally, the Company presents non-GAAP net income and non-GAAP earnings per diluted share as additional performance measures.
The Company believes these non-GAAP measures provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the operating performance of the Company on a consistent basis. 30 Additionally, the Company presents non-GAAP net income and non-GAAP earnings per diluted share as additional performance measures.
The 2023 and 2022 results include $2.1 million and $1.8 million, respectively of facility remediation recoveries, while prior year’s Other expense also includes $6.8 million of loss on extinguishment of debt related to the Company’s refinancing the Original Credit Facility and $2.4 million of expense related to an indemnification asset.
The 2023 and 2022 results include $2.1 million and $1.8 million, respectively of facility remediation recoveries, net, while prior year’s Other expense, net also includes $6.8 million of loss on extinguishment of debt related to the Company’s refinancing the Original Credit Facility and $2.4 million of expense related to an indemnification asset.
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.
See the Critical Accounting Policies and Estimates section as well as the Non-GAAP Measures section, of this Item, above. 36 Operating income in 2023 was $214.5 million compared to $52.3 million in 2022.
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.
In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, 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.
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.
Pension and postretirement plan contributions beyond 2025 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.
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 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.
(n) Taxes on income before equity in net income of associated companies – adjusted presents the impact of any current and deferred income tax expense (benefit), as applicable, of the reconciling items presented in the reconciliation of net income attributable to Quaker Chemical Corporation to adjusted EBITDA and was determined utilizing the applicable rates in the taxing jurisdictions in which these adjustments occurred, subject to deductibility.
(q) Taxes on income before equity in net income of associated companies – adjusted presents the impact of any current and deferred income tax expense (benefit), as applicable, of the reconciling items presented in the reconciliation of net income attributable to Quaker Chemical Corporation to adjusted EBITDA and was determined utilizing the applicable rates in the taxing jurisdictions in which these adjustments occurred, subject to deductibility.
Further, a significant portion of our revenue is derived from sales to customers in industries where companies have experienced past financial difficulties. If a significant customer bankruptcy occurs, then we must judge the amount of proceeds, if any, that may ultimately be received through the bankruptcy or liquidation process.
Further, a significant portion of our revenue is derived from sales to customers in industries where companies have previously experienced financial difficulties. If a significant customer bankruptcy occurs, then we must judge the amount of proceeds, if any, that may ultimately be received through the bankruptcy or liquidation process.
If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. As part of our terms of trade, we may custom manufacture products for certain large customers and/or may ship products on a consignment basis.
If the financial condition of the Company’s customers was to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. As part of our terms of trade, we may custom manufacture products for certain large customers and/or may ship products on a consignment basis.
(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.
(m) 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, 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.
As of December 31, 2024, 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 Company believes these non-GAAP financial measures provide meaningful supplemental information as they enhance a reader’s understanding of the financial performance of the Company, are indicative of future operating performance of the Company, and facilitate a comparison among fiscal periods, as the non-GAAP financial measures exclude items that are not indicative of future operating performance or not considered core to the Company’s operations.
The Company believes these non-GAAP financial measures provide meaningful supplemental information as they enhance a reader’s understanding of the financial performance of the Company, facilitate a comparison among fiscal periods, and exclude items that management believes are not indicative of future operating performance or core to the Company’s operations.
The Company’s 2022 effective tax rate was driven by the non-cash impairment charge, the impact of pre-tax earnings and the mix of such earnings, foreign tax inclusions and withholding taxes, partially offset by a reduction in reserves for uncertain tax positions and changes in the valuation allowance for foreign tax credits.
The Company’s 2022 effective tax rate was driven by the non-cash impairment charge, the mix of pre-tax earnings, foreign tax inclusions and withholding taxes, partially offset by a reduction in reserves for uncertain tax positions and changes in the valuation allowance for foreign tax credits.
In addition, our definitions of EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per share as discussed and reconciled below to the more comparable GAAP measures, may not be comparable to similarly named measures reported by other companies.
In addition, our definitions of EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP earnings per share, as discussed and reconciled below to the most comparable GAAP measures, may not be comparable to similarly named measures reported by other companies.
The Company had Other expense of $10.7 million in 2023 compared to $12.6 million in 2022.
The Company had Other expense, net of $10.7 million in 2023 compared to $12.6 million in 2022.
The Company continually evaluates financial performance, economic conditions and other recent developments in assessing if a triggering event indicates that the carrying values of goodwill, indefinite-lived, or long-lived assets might be impaired.
The Company continually evaluates financial performance, economic conditions and other recent developments in assessing if a triggering event indicates that the carrying value of goodwill, indefinite-lived, or long-lived assets might be impaired.
Notwithstanding the results of the Company’s impairment assessments during 2023, if the Company is unable to maintain the actions aimed at improving the financial performance of the EMEA reporting unit, or interest rates continue to rise, which leads to an increase in the cost of capital, then these conditions could result in a triggering event for the EMEA reporting unit.
Notwithstanding the results of the Company’s impairment assessments during 2023 and 2024, if the Company is unable to maintain the actions aimed at improving the financial performance of the EMEA reporting unit, or interest rates rise, which leads to an increase in the cost of capital, then these conditions could result in a triggering event for the EMEA reporting unit.
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.
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, 2024.
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.
Reportable Segments Review - Comparison of 2024 with 2023 The Company’s reportable segments reflect the structure of the Company’s internal organization, the method by which the Company’s resources are allocated and the manner by which the Chief Operating Decision Maker of the Company assesses its performance.
The Company also presents adjusted EBITDA which is calculated as EBITDA plus or minus certain items that are not indicative of future operating performance or not considered core to the Company’s operations.
The Company also presents adjusted EBITDA which is calculated as EBITDA plus or minus certain items that management believes are not indicative of future operating performance or not considered core to the Company’s operations.
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.
Financial covenants contained in the Credit Facility include a consolidated interest coverage ratio test and a consolidated net leverage ratio test. As of December 31, 2023, the Company was in compliance with all of the Credit Facility covenants.
Financial covenants contained in the Credit Facility include a consolidated interest coverage ratio test and a consolidated net leverage ratio test. As of December 31, 2024, the Company was in compliance with all of the Credit Facility covenants.
The Company’s effective tax rates for 2023 and 2022 were an expense of 36.3% and 350.2%, respectively. The Company’s current year effective tax rate was primarily impacted by changes to the valuation allowance for and the usage of certain foreign tax credits, withholding taxes and deferred taxes on unremitted earnings, and the impact of the mix of pre-tax earnings.
The Company’s effective tax rates for 2023 and 2022 were an expense of 36.3% and 350.2%, respectively. The Company’s 2023 effective tax rate was primarily impacted by changes to the valuation allowance for and the usage of certain foreign tax credits, withholding taxes and deferred taxes on unremitted earnings, and the mix of pre-tax earnings.
This segment’s operating earnings were $266.0 million, an increase of $42.4 million or 19% compared to 2022 primarily driven by an increase in net sales and an improvement in segment operating margins driven by the Company’s ongoing margin improvement initiatives. 36 Table of Contents EMEA EMEA represented approximately 29% of the Company’s consolidated net sales in 2023.
This segment’s operating earnings were $266.0 million, an increase of $42.4 million or 19% compared to 2022 primarily driven by an increase in net sales and an improvement in segment operating margins driven by the Company’s ongoing margin improvement initiatives. EMEA EMEA represented approximately 29% of the Company’s consolidated net sales in 2023.
SG&A in 2023 increased $28.2 million compared to 2022 driven by higher labor-related costs including year-over-year inflationary increases and higher levels of incentive compensation on improved Company performance, partially offset by lower SG&A due to foreign currency translation compared to the prior year. During 2022, the Company incurred $8.8 million of Combination, integration and other acquisition-related expenses.
SG&A in 2023 increased $28.2 million compared to 2022 driven by higher labor-related costs including year-over-year inflationary increases and higher levels of incentive compensation on improved Company performance, partially offset by lower SG&A due to foreign currency translation compared to the prior year. During 2022, the Company incurred $8.8 million of Acquisition-related expenses (credits).
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”).
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 “ Original Credit Facility”).
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.
The amended credit facility (“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.
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.
Approximately $0.6 million and $0.2 million were accrued as of December 31, 2024 and 2023, 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.
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.
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 $13.6 million and $13.3 million as of December 31, 2024 and 2023, respectively.
In addition, the Company presents non-GAAP operating income which is calculated as operating income plus or minus certain items that are not indicative of future operating performance or not considered core to the Company’s operations. Adjusted EBITDA margin and non-GAAP operating margin are calculated as the percentage of adjusted EBITDA and non-GAAP operating income to consolidated net sales, respectively.
In addition, the Company presents non-GAAP operating income which is calculated as operating income plus or minus certain items that management believes are not indicative of future operating performance or considers core to the Company’s operations. Adjusted EBITDA margin and non-GAAP operating margin are calculated as the percentage of adjusted EBITDA and non-GAAP operating income to consolidated net sales, respectively.
Excluding the impact of all non-core items in each year, described in the Non-GAAP Measures section of this Item, above, the Company estimates that the 2022 and 2021 effective tax rates would have been approximately 27% and 26%, respectively.
Excluding the impact of all non-core items in each year, described in the Non-GAAP Measures section of this Item, above, the Company estimates that the 2023 and 2022 effective tax rates would have been approximately 28% and 27%, respectively.
Operating expenses not directly attributable to the net sales of each respective segment, such as certain corporate and administrative costs, Combination, integration and other acquisition-related expenses and Restructuring and related charges, are not included in segment operating earnings. Other items not specifically identified with the Company’s reportable segments include interest expense, net, and other income (expense), net.
Operating expenses not directly attributable to the net sales of each respective segment, such as certain corporate and administrative costs, impairment charges, and restructuring charges, are not included in segment operating earnings. Other items not specifically identified with the Company’s reportable segments include Interest expense, net and Other income (expense), net.
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.
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 1.9 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be impaired.
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.
As of December 31, 2024, the Company has a deferred tax liability of $8.4 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.
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.
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 9.8 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be impaired.
Costs of operation include the operation and maintenance of the extraction well, groundwater monitoring, program management, and soil vapor testing. The Company is also party to environmental matters related to certain domestic and foreign properties. These environmental matters primarily require the Company to perform long-term monitoring as well as operating and maintenance at each of the applicable sites.
Costs of operation include the operation and maintenance of the extraction well, groundwater monitoring, program management, and soil vapor testing. The Company is also party to other environmental matters related to certain domestic and foreign properties. These environmental matters primarily require the Company to perform ongoing monitoring and maintenance at each of the applicable sites.
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.
Comparatively, as of December 31, 2023, the Company had $5.1 million accrued for 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.
The “Combination” refers to the Quaker combination with Houghton International, Inc. (“Houghton”). Executive Summary Quaker Houghton is the global leader in industrial process fluids. With a presence around the world, including operations in over 25 countries, our customers include thousands of the world’s most advanced and specialized steel, aluminum, automotive, aerospace, offshore, container, mining, and metalworking companies.
Executive Summary Quaker Houghton is the global leader in industrial process fluids. With a presence around the world, including operations in over 25 countries, our customers include thousands of the world’s most advanced and specialized steel, aluminum, automotive, aerospace, offshore, container, mining, and metalworking companies.
This assessment could result in an impairment of the EMEA reporting unit’s remaining goodwill, indefinite-lived intangible assets, or long-lived assets. See Note 15 of Notes to Consolidated Financial Statements in Item 8 of this Report. Pension and Postretirement benefits: The Company provides certain defined benefit pension and other postretirement benefits to current employees, former employees and retirees.
This assessment could result in an impairment of the EMEA reporting unit’s remaining goodwill, indefinite-lived intangible assets, or long-lived assets. See Note 15, Goodwill and Other Intangible Assets , to the Consolidated Financial Statements for more information. Pension and Postretirement benefits: The Company provides certain defined benefit pension and other postretirement benefits to current employees, former employees and retirees.
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.
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, 2024 was approximately $359.8 million.
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.
In addition, the Company paid $33.2 million of cash dividends to shareholders during 2024, a $1.5 million 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.
Americas Americas represented approximately 50% of the Company’s consolidated net sales in 2023. The segment’s net sales were $977.1 million, an increase of $30.6 million or 3% compared to 2022.
Reportable Segments Review – Comparison of 2023 with 2022 Americas Americas represented approximately 50% of the Company’s consolidated net sales in 2023. The segment’s net sales were $977.1 million, an increase of $30.6 million or 3% compared to 2022.
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.
The Company recorded expense to increase its provision for credit losses by $2.1 million, $1.3 million and $4.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
The Company’s other debt obligations are primarily industrial development bonds, bank lines of credit and municipality-related loans, which totaled $11.1 million as of December 31, 2023. Total unused capacity under these arrangements as of December 31, 2023 was approximately $35 million.
The Company’s other debt obligations are primarily industrial development bonds, bank lines of credit and municipality-related loans, which totaled $11.8 million as of December 31, 2024. Total unused capacity under these arrangements as of December 31, 2024 was approximately $32.9 million.
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 completing the annual impairment assessment, the Company used a WACC assumption of approximately 10.5% and holding all other assumptions constant, the WACC would have to increase by approximately 2.6 percentage points before the Company’s EMEA reporting unit’s remaining goodwill would be impaired.
Equity in net income of associated companies decreased $7.4 million in 2022 compared to 2021, primarily due to lower current year income from the Company’s interest in a captive insurance company (see the Non-GAAP Measures section of this Item, above) due to lower market performance on equity investments and from the Company’s 50% interest in a joint venture in Korea due to overall market challenges.
Equity in net income of associated companies increased $13.4 million in 2023 compared to 2022, primarily due to higher current year income from the Company’s interest in a captive insurance company (see the Non-GAAP Measures section of this Item, above) due to higher market performance on equity investments and from the Company’s 50% interest in a joint venture in Korea due to overall market improvement.
In 2020, the Santa Ana Regional Water Quality Control Board asked that ACP conduct some additional indoor and outdoor soil vapor testing on and near the ACP site to confirm that ACP continues to meet the applicable local standards and ACP has begun the testing program. Such testing began in 2020 and continued into 2021.
In 2020, the Santa Ana Regional Water Quality Control Board asked that ACP conduct some additional indoor and outdoor soil vapor testing on and near the ACP site to confirm that ACP continues to meet the applicable local standards.
The Company’s liquidity is affected by many factors, some based on normal operations of our business and others related to the impact of the pandemic and other events on our business and on global economic conditions as well as industry uncertainties, which we cannot predict.
The Company’s liquidity is affected by many factors, some based on normal operations of our business and others related to the impact of global events on our business and on global economic conditions as well as industry uncertainties, which we cannot predict. We also cannot predict economic conditions and industry downturns or the timing, strength or duration of recoveries.
The determination of the estimated fair value of assets acquired requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, the weighted average cost of capital (“WACC”), royalty rates, asset lives and market multiples, among other items.
The determination of the estimated fair value of assets acquired requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to projected revenue growth rates, gross margins, and operating margins, the weighted average cost of capital (“WACC”), royalty rates, asset lives and market multiples, among other items.
The Company had unused capacity under the Revolver of approximately $465.7 million, which is net of bank letters of credit of approximately $3.4 million, as of December 31, 2023.
The Company had unused capacity under the Revolver of approximately $448.7 million, which is net of bank letters of credit of approximately $2.4 million, as of December 31, 2024.
The decline in sales volumes was primarily attributable to softer end market conditions across all regions, including the direct and indirect impacts of the UAW strike, the Company’s value-based pricing initiatives and customer order patterns, as well as the impacts of the ongoing war in Ukraine in the EMEA segment, and the wind-down of the tolling agreement for products previously divested related to the Combination, partially offset by new business wins in all segments, as mentioned above.
The decline in sales volumes was primarily attributable to softer end market conditions across all regions, including the direct and indirect impacts of the UAW strike, the Company’s value-based pricing initiatives and customer order patterns, as well as the impacts of the ongoing war in Ukraine in the EMEA segment, and the wind-down of the tolling agreement for products previously divested related to the Quaker combination with Houghton International, Inc.
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.
Based on the Company’s current obligations, historical costs incurred, and projected costs to be incurred over the next 24 years, the Company estimated the present value range of costs for all of these environmental matters, on a discounted basis, to be between approximately $3.5 million and $6.0 million as of December 31, 2024, for which $3.6 million is accrued within other accrued liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheets as of December 31, 2024.
Additionally, the Company completed its annual impairment assessment as of October 1, 2023 and concluded no impairment existed.
Additionally, the Company completed its annual impairment assessment as of October 1, 2023 and October 1, 2024 and concluded in each case that no impairment existed.
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.
However, actual results may differ materially from these estimates under different assumptions or conditions. 25 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.
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.
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.
As of December 31, 2023, the Company had $1.5 million of debt issuance costs recorded as a reduction of Long-term debt on the Consolidated Balance Sheet and $3.3 million of debt issuance costs recorded within Other assets on the Consolidated Balance Sheet.
As of December 31, 2024 and 2023, the Company had $1.1 million and $1.5 million, respectively, of debt issuance costs recorded as a reduction of Long-term debt and $2.4 million and $3.3 million, respectively, of debt issuance costs recorded within Other assets.
(m) Depreciation and amortization includes $1.0 million for both of the years ended December 31, 2023 and 2022, respectively, and $1.2 million for the year ended December 31, 2021, of amortization expense recorded within equity in net income of associated companies in the Company’s Consolidated Statements of Operations, which is attributable to the amortization of the fair value step up for the Company’s 50% interest Korea Houghton Corporation as a result of required purchase accounting.
(p) Depreciation and amortization includes $1.0 million for each of the years ended December 31, 2024, 2023 and 2022, respectively, of amortization expense recorded within equity in net income of associated companies in the Company’s Consolidated Statements of Operations, which is attributable to amortization of the fair value purchase accounting step-up in connection with acquisition of the Company’s 50% equity interest in Korea Houghton Corporation.
The Company recognized $7.6 million, $3.2 million and $1.4 million of restructuring and related charges for the years ended December 31, 2023, 2022 and 2021, respectively, as a result of these programs.
The Company recognized $6.5 million, $7.6 million and $3.2 million of restructuring and related charges for the years ended December 31, 2024, 2023 and 2022, respectively, as a result of these programs and other facility closure actions.
As of December 31, 2023, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 5.3%.
As of December 31, 2024, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 4.9%.
Gross profit in 2023 of $705.6 million increased $93.0 million or approximately 15% from 2022. The Company’s reported gross margin in 2023 was 36.1% compared to 31.5% in 2022. The Company’s current year improvement in gross margin was primarily driven by the year-over-year impact of our value-based pricing and margin improvement initiatives.
The Company’s reported gross margin in 2023 was 36.1% compared to 31.5% in 2022. The Company’s current year improvement in gross margin was primarily driven by the year-over-year impact of our value-based pricing and margin improvement initiatives.
See Note 7 of Notes to Consolidated Financial Statements in Item 8 of this Report. As of December 31, 2023, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $19.7 million. The Company cannot determine a reliable estimate of the timing of cash flows by period related to its uncertain tax position liability.
See Note 7, Restructuring and Related Activities , to the Consolidated Financial Statements for more information. As of December 31, 2024, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $17.3 million. The Company cannot determine a reliable estimate of the timing of cash flows by period related to its uncertain tax position liability.
COGS were $1,247.7 million in 2023 compared to $1,330.9 million in 2022. The decrease in COGS of 6% reflects lower spend on the decline in current year sales volumes, which more than offset higher costs due to inflationary pressures in the Company’s global raw material, manufacturing and supply chain and logistics costs compared to the prior year.
The decrease in COGS of 6% reflects lower spend on the decline in current year sales volumes, which more than offset higher costs due to inflationary pressures in the Company’s global raw material, manufacturing and supply chain and logistics costs compared to the prior year. Gross profit in 2023 of $705.6 million increased $93.0 million or approximately 15% from 2022.
(l) The impacts of certain discrete tax items include certain impacts of tax law changes, valuation allowance adjustments, uncertain tax positions and prior year true-ups, and the impact on certain intercompany asset transfers. For 2023 the impacts also include $6.7 million of withholding taxes for the repatriation of non-U.S. earnings.
(o) The impacts of certain discrete tax items include certain impacts of tax law changes, valuation allowance adjustments, uncertain tax positions, provision to return and other adjustments, and the impact of certain intercompany asset transfers. For the year ended December 31, 2023, the impacts also included $6.7 million of withholding taxes for the repatriation of non-U.S. earnings.
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.
See Note 25, Commitments and Contingencies , to the Consolidated Financial Statements for additional details. General See Item 7A of this Report, below, for further discussion of certain quantitative and qualitative disclosures about market risk.
During the first quarter of 2023, the Company reorganized its executive management team to align with its new business structure. The Company’s new structure includes three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific.
During the first quarter of 2023, the Company reorganized certain of its executive management team to align with its new business structure, which reflects the method by which the Company currently assesses its performance and allocates its resources. The Company has three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific.
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.
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. Net cash flows provided by operating activities were $204.6 million in 2024 compared to $279.0 million in 2023.
As part of the Credit Facility, the Company is required to pay a commitment fee ranging from 0.150% to 0.275% related to unutilized commitments under the Revolver, depending on the Company’s consolidated net leverage ratio.
As of December 31, 2024, the interest rate on the outstanding borrowings under the Credit Facility was approximately 5.2%. As part of the Credit Facility, the Company is required to pay an annual commitment fee ranging from 0.150% to 0.275% related to unutilized commitments under the Revolver, depending on the Company’s consolidated net leverage ratio.
On February 28, 2024, the Board approved a new share repurchase program (“2024 Share Repurchase Program”), authorizing the Company to repurchase up to an aggregate of $150 million of the Company’s outstanding common stock. The 2024 Share Repurchase Program is effective immediately and has no expiration date.
On February 28, 2024, the Board approved a new share repurchase program (“2024 Share Repurchase Program”), authorizing the Company to repurchase up to an aggregate of $150 million of the Company’s outstanding common stock and replacing the prior share repurchase program, under which no repurchases were made in 2024.
(c) Strategic planning expenses include certain consultant and advisory expenses for the Company's long-term strategic planning, as well as process optimization and the next phase of the Company's long-term integration to further optimize its footprint, processes and other functions. These costs are not indicative of the future operating performance of the Company.
(c) Strategic planning (credits) expenses include certain consultant and advisory expenses for the Company's long-term strategic planning, as well as process optimization and the next phase of the Company's long-term integration to further optimize its footprint, processes and other functions. (d) Executive transition costs represent the costs related to the Company’s transition of executive officers.
Excluding the impact of all non-core items in each year, described in the Non-GAAP Measures section of this Item, above, the Company estimates that the 2023 and 2022 effective tax rates would have been approximately 28% and 27%, respectively. The higher estimated current year effective tax rate was primarily driven by pre-tax earnings and the mix of such earnings.
Excluding the impact of all non-core items in each year, described in the Non-GAAP Measures section of this Item, above, the Company estimates that the 2024 and 2023 effective tax rates would have been approximately 29% and 28%, respectively.
We also cannot predict economic conditions and industry downturns or the timing, strength or duration of recoveries. We may seek, as we believe appropriate, additional debt or equity financing which would provide capital for corporate purposes, working capital funding, additional liquidity needs or to fund future growth opportunities, including possible acquisitions and investments.
We may seek, as we believe appropriate, additional debt or equity financing that would provide capital for corporate purposes, working capital funding, additional liquidity needs or to fund future growth opportunities, including possible acquisitions and organic investments.
The Company’s total net debt as of December 31, 2023 was $561.1 million, which consists of total borrowings of $755.6 million less cash and cash equivalents of $194.5 million. The Credit Facility contains affirmative and negative covenants, financial covenants and events of default.
The Company’s total net debt as of December 31, 2024 was $519.4 million, which consists of total borrowings of $708.3 million less cash and cash equivalents of $188.9 million. The Credit Facility contains affirmative and negative covenants, financial covenants and events of default.
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.
The Company believes that its existing cash, anticipated cash flows from operations and available liquidity will be sufficient to support its operating requirements and fund its business objectives for at least the next twelve months, including but not limited to, payments of dividends to shareholders, share repurchases, capital expenditures, other growth opportunities (including potential acquisitions), pension plan contributions, implementing actions to achieve the Company’s sustainability goals and other potential known or anticipated contingencies.
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.
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), however, certain withholding taxes could apply. It is currently impractical to estimate any such incremental tax expense.
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.
ACP began to perform such testing program work in 2022, and an additional round of testing is expected to commence in 2025. As of December 31, 2024, 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.
Comparatively, the Company had four indefinite-lived intangible assets for trademarks and tradename totaling $189.1 million as of December 31, 2022. During the fourth quarter of 2022, the Company recorded a non-cash impairment charge of $93.0 million to write down the carrying value of the EMEA reporting unit Goodwill to its estimated fair values.
During the fourth quarter of 2022, the Company recorded a non-cash impairment charge of $93.0 million to write down the carrying value of the EMEA reporting unit goodwill to its estimated fair values.
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%.
Net sales of $1,839.7 million in 2024 decreased 6% compared to $1,953.3 million in 2023, primarily due to a decrease in selling price and product mix of approximately 4%, a decrease in sales volumes of approximately 2%, and an unfavorable impact from foreign currency translation of approximately 1%, partially offset by an increase in sales from acquisitions of approximately 1%.
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%.
This was driven by an increase in sales volumes of 7%, a contribution of sales from the acquisition of Sutai of 2%, partially offset by a decline in selling price and product mix of 3% and unfavorable impact from foreign currency translation of 2%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Company generally does not use financial instruments that expose it to significant risk involving foreign currency transactions. However, the size of its non-U.S. activities has a significant impact on reported operating results and the attendant net assets. During the past three years, sales by its non-U.S. subsidiaries accounted for approximately 60% to 70% of its consolidated net sales.
Biggest changeDuring the past three years, sales by its non-U.S. subsidiaries accounted for approximately 63% to 65% of its consolidated net sales. These foreign operations also represent a significant portion of Quaker Houghton’s assets and liabilities. In addition, the Company occasionally sources inventory among its worldwide operations.
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.
In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility 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.
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.
As of December 31, 2024, 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.
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 .
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 $18.4 million. Credit Risk .
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.
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 may also ship products on a consignment basis.
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
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 $0.2 million, $0.1 million and $0.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. 40
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.
An interest rate change of 100 basis points would result in an approximate $7.0 million increase or decrease to interest expense for the year ended December 31, 2024.
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.
The Company recorded expense to increase its provision for credit losses by $2.1 million, $1.3 million and $4.3 million for the years ended December 31, 2024, 2023 and 2022, 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 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.
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 2024 revenues would have correspondingly decreased or increased by approximately $97.6 million. Similarly, pre-tax earnings would increase or decrease by approximately $14.3 million. Commodity Price Risk .
These practices may increase the Company’s exposure should a bankruptcy occur and may require a write-down or disposal of certain inventory due to its estimated obsolescence or limited marketability as well as of accounts receivable. Customer returns of products or disputes may also result in similar issues related to the realizability of recorded accounts receivable or returned inventory.
These practices may increase the Company’s exposure to customer credit risk, including bankruptcy and may require a write-down or disposal of inventory due to obsolescence or limited marketability as well as a reserve for accounts receivable. Customer product returns or disputes may also result in similar issues related to the realizability of accounts receivable or inventory.
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.
As of December 31, 2024, the Company had outstanding borrowings under the Credit Facility of approximately $696.5 million. The interest rate applicable on outstanding borrowings under the Credit Facility was approximately 5.2% as of December 31, 2024.
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 .
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. Generally, these foreign operations use the local currency as their functional currency.
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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Quaker Houghton’s earnings, cash flows and financial position are exposed to the impact of fluctuations in interest rates, foreign currency exchange rates, and commodity prices, as well as credit risk.
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 .
As of December 31, 2024, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 4.9%. These interest rate swaps are designated and qualify as cash flow hedges. Foreign Exchange Risk . A significant portion of the Company’s revenues and earnings are generated by its foreign operations.
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.
Except as otherwise disclosed below, the market risks discussed below did not change materially from December 31, 2023. 39 Interest Rate Risk. During June 2022, the Company entered into an amendment to its primary credit facility (the “Credit Facility”). See Note 19, Debt, to the Consolidated Financial Statements for additional details.
Removed
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.

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