UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K 

For the fiscal year ended December 31, 2019

or

For the transition period from to

Commission file number 001-12019

QUAKER CHEMICAL CORPORATION

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code: (610) 832-4000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒No ☐

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐No ☒

State the aggregate market value of the voting and non-voting common equity held by non-affiliates by reference to the price at which the common equity was last sold as of the last business day of the Registrant’s most recently completed second fiscal quarter. (The aggregate market value is computed by reference to the last reported sale on the New York Stock Exchange on June 30, 2019): $2,671,540,476

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: 17,732,818 shares of Common Stock, $1.00 Par Value, as of February 29, 2020.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement relating to the 2020 Annual Meeting of Shareholders are incorporated by reference into Part III.

1

PART I

As used in this Annual Report on Form 10-K (the “Report”), the terms “Quaker”, “Quaker Houghton”, the “Company”, “we”, and “our” refer to Quaker Chemical Corporation (doing business as Quaker Houghton), its subsidiaries, and associated companies, unless the context otherwise requires. As used in this Report, the term Legacy Quaker refers to the Company prior to the closing of its combination with Houghton International, Inc. (“Houghton”) (herein referred to as the “Combination”) on August 1, 2019. Throughout the Report, all figures presented, unless otherwise stated, reflect the results of operations of Legacy Quaker for the years ended, and as of, December 31, 2017 and 2018, and the first seven months of 2019, and includes the results of operations of Houghton, and therefore the combined company, Quaker Houghton, for the last five months of 2019, and as of December 31, 2019.

Item 1. Business.

Houghton Combination

On August 1, 2019, the Company completed the Combination and acquired all of the issued and outstanding shares of Houghton from Gulf Houghton Lubricants, Ltd. (“Gulf”) and certain other selling shareholders in exchange for a combination of cash and shares of the Company’s common stock in accordance with the share purchase agreement dated April 4, 2017 (the “Share Purchase Agreement”). Houghton is a leading global provider of specialty chemicals and technical services for metalworking and other industrial applications, and, the combination with Quaker creates a leading global supplier of industrial process fluids. The shares were bought for an aggregate purchase consideration consisting of: (i) $170.8 million in cash; (ii) the issuance of approximately 4.3 million shares of the Company’s common stock, $1.00 par value per share, comprising approximately 24.5% of the common stock outstanding upon the closing of the Combination; and (iii) the Company’s refinancing of Houghton’s net indebtedness as of the closing of the Combination of approximately $702.6 million.

The Combination was subject to certain regulatory and shareholder approvals. At a shareholder meeting held during 2017, the Company’s shareholders approved the issuance of new shares of the Company’s common stock at closing of the Combination. Also in 2017, the Company received regulatory approvals for the Combination from China and Australia. The Company received regulatory approval from the European Commission (“EC”) during the second quarter of 2019 and the U.S. Federal Trade Commission (“FTC”) in July 2019. The approvals from the FTC and the EC required the concurrent divestiture of certain steel and aluminum related product lines of Houghton, which were sold by Houghton on August 1, 2019 for approximately $37 million in cash. The final remedy agreed with the EC and the FTC was consistent with the Company’s previous expectation that the total divested product lines would be approximately 3% of the combined company’s net sales.

General Description

The Company was organized in 1918 and incorporated as a Pennsylvania business corporation in 1930. Quaker Houghton develops, produces, and markets a broad range of formulated specialty chemical products and offers chemical management services (“Fluidcare”) for various industrial and manufacturing applications throughout its four segments: Americas; Europe, Middle East and Africa (“EMEA”); Asia/Pacific; and Global Specialty Businesses. The Combination increased the Company’s addressable metalworking, metals and industrial end markets, which include steel, aluminum, aerospace, defense, transportation-original equipment manufacturer (“OEM”), transportation-components, offshore sub-sea energy, architectural aluminum, construction, tube and pipe, can and container, mining, specialty coatings and specialty greases. The Combination also strengthened the product portfolio of the combined Company. The major product lines of Quaker Houghton include metal removal fluids, cleaning fluids, corrosion inhibitors, metal drawing and forming fluids, die cast mold releases, heat treatment and quenchants, metal forging fluids, hydraulic fluids, specialty greases, offshore sub-sea energy control fluids, rolling lubricants, rod and wire drawing fluids and surface treatment chemicals. The following are the respective contributions to consolidated net sales of each product line based on the Company’s current major product line segmentation, representing approximately 10% or more of consolidated net sales for any of the past three years:

Other Acquisition Activity

On October 1, 2019, the Company completed its acquisition of the operating divisions of Norman Hay plc (“Norman Hay”), a private U.K. company that provides specialty chemicals, operating equipment, and services to industrial end markets. The original purchase price was 80.0 million GBP, on a cash-free and debt-free basis, subject to routine and customary post-closing adjustments related to working capital and net indebtedness levels. The Company expects to finalize its post-closing adjustments for the Norman Hay acquisition in the first half of 2020. Cash paid for Norman Hay in the fourth quarter of 2019 was approximately $95.3 million, net of cash acquired.

2

Sales Revenue

A substantial portion of the Company’s sales worldwide are made directly through its own employees and its Fluidcare programs, with the balance being handled through distributors and agents. The Company’s employees visit the plants of customers regularly, work on site, and, through training and experience, identify production needs which can be resolved or otherwise addressed either by utilizing the Company’s existing products or by applying new formulations developed in its laboratories.

The Company recognizes revenue in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the goods or services transferred to its customers. To do this, the Company applies a five-step model that requires the Company to: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the Company satisfies a performance obligation.

As part of the Company’s Fluidcare programs, certain third-party product sales to customers are managed by the Company. Where the Company acts as principal, revenues are recognized on a gross reporting basis at the selling price negotiated with its customers. Where the Company acts as an agent, such revenue is recorded using the net reporting method and generally reflects the administrative fee earned by the Company for ordering the goods. The Company transferred third-party products under arrangements resulting in net reporting of $48.0 million, $47.1 million and $44.5 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Competition

The specialty chemical industry comprises a number of companies similar in size to the Company, as well as companies larger and smaller than Quaker Houghton. The Company cannot readily determine its precise position in every industry it serves. However, the Company estimates it holds a leading global position in the market for industrial process fluids including significant global positions in the markets for process fluids in portions of the automotive and industrial markets, and a leading position in the market for process fluids to produce sheet steel and aluminum. The offerings of many of our competitors differ from those of Quaker Houghton. For example, some offer a broad portfolio of fluids, including general lubricants, while others have more specialized product ranges. All competitors provide different levels of technical services to individual customers. Competition in the industry is based primarily on the ability to supply products that meet the needs of the customer and provide technical services and laboratory assistance to the customer, and to a lesser extent on price.

Major Customers and Markets

In 2019, 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 6% of consolidated net sales. 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. The Company’s financial performance is generally correlated to the volume of global production within the industries it serves, rather than discretely related to the financial performance of its customers. 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.

Raw Materials

Quaker Houghton uses over 1,000 raw materials, including mineral oils, animal fats, vegetable oils, 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, along with various derivatives of the foregoing. The price of mineral oil and its derivatives can be affected by the price of crude oil and industry refining capacity. Animal fat and vegetable oil prices, as well as the prices of other raw materials, are impacted by their own unique supply and demand factors, as well as by biodiesel consumption which is also affected by the price of crude oil. Accordingly, significant fluctuations in the price of crude oil could have a material impact on the cost of these raw materials. In addition, many of the raw materials used by Quaker Houghton are commodity chemicals which can experience significant price volatility. Accordingly, the Company’s earnings could be affected by market changes in raw material prices. Reference is made to the disclosure contained in Item 7A of this Report.

Patents and Trademarks

Quaker Houghton has a limited number of patents and patent applications, including patents issued, applied for, or acquired in the United States and in various foreign countries, some of which may prove to be material to its business, and the earliest of which expires in 2021. Instead, the Company relies principally on its proprietary formulae and the application of its skills and experience to meet customer needs. Quaker Houghton products are identified by trademarks that are registered throughout its marketing area.

3

Research and Development—Laboratories

Quaker Houghton research and development laboratories are directed primarily toward applied research and development since the nature of the Company’s business requires continual modification and improvement of formulations to provide specialty chemicals to satisfy customer requirements. The Company maintains quality control laboratory facilities in each of its manufacturing locations. In addition, the Company maintains approximately thirty separate laboratory facilities worldwide that, in addition to quality control, are devoted to applied research and development. If problems are encountered which cannot be resolved by local laboratories, they would be referred to one of our ten principal laboratories 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. Research and development expenses during the years ended December 31, 2019, 2018 and 2017 were $32.1 million, $24.5 million and $23.9 million, respectively.

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 program includes periodic inspections of each facility by the Company and/or independent experts, as well as ongoing inspections and training by on-site personnel. Such inspections address operational matters, record keeping, reporting requirements and capital improvements. Capital expenditures directed solely or primarily to regulatory compliance amounted to approximately $4.4 million, $1.5 million and $1.6 million during the years ended December 31, 2019, 2018 and 2017, respectively.

Number of Employees

On December 31, 2019, Quaker Houghton had approximately 4,500 full-time employees globally of whom approximately 1,100 were employed by the parent company and its U.S. subsidiaries, and approximately 3,400 were employed by its non-U.S. subsidiaries. Associated companies of Quaker Houghton (in which it owns 50% or less and has significant influence) employed approximately 600 people on December 31, 2019.

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 Company and the chief operating decision maker assess performance. During the third quarter of 2019 and in connection with the Combination, the Company reorganized its executive management team to align with its new business structure, which reflects the method by which the Company assesses its performance and allocates its resources. The Company’s new reportable segments are: (i) Americas; (ii) EMEA; (iii) Asia/Pacific; and (iv) Global Specialty Businesses. See Note 4 of Notes to Consolidated Financial Statements in Item 8 of this Report, incorporated herein by this reference.

Non-U.S. 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. Incorporated by reference is (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.

Quaker Houghton on the Internet

Financial results, news and other information about Quaker Houghton can be accessed from the Company’s website at https://www.quakerhoughton.com. This site includes important information on the Company’s locations, products and services, financial reports, news releases and career opportunities. The Company’s periodic and current reports on Forms 10-K, 10-Q, 8-K, and other filings, including exhibits and supplemental schedules filed therewith, and amendments to those reports, filed with the Securities and Exchange Commission (“SEC”) are available on the Company’s website, free of charge, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Information contained on, or that may be accessed through, the Company’s website is not incorporated by reference in this Report and, accordingly, you should not consider that information part of this Report.

4

Factors that May Affect Our Future Results

(Cautionary Statements under the Private Securities Litigation Reform Act of 1995)

Certain information included in this Report and other materials filed or to be filed by Quaker Chemical Corporation with the SEC (as well as information included in oral statements or other written statements made or to be made by us) contain or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified by the fact that they do not relate strictly to historical or current facts. We have based these forward-looking statements on our current expectations about future events. These forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, intentions, financial condition, results of operations, future performance, and business, including:

Such statements include information relating to current and future business activities, operational matters, capital spending, and financing sources. From time to time, forward-looking statements are also included in the Company’s other periodic reports on Forms 10-K, 10-Q and 8-K, press releases, and other materials released to, or statements made to, the public.

Any or all of the forward-looking statements in this Report, in the Company’s Annual Report to Shareholders for 2019 and in any other public statements we make may turn out to be wrong. This can occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Many factors discussed in this Report will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in the Company’s subsequent reports on Forms 10-K, 10-Q, 8-K and other related filings should be consulted. A major risk is that demand for the Company’s products and services is largely derived from the demand for our customers’ products, which subjects the Company to uncertainties related to downturns in a customer’s business and unanticipated customer production shutdowns. Other major risks and uncertainties include, but are not limited to, significant increases in raw material costs, customer financial stability, worldwide economic and political conditions, the impact of widespread public health crises, including the recent spread of coronavirus, foreign currency fluctuations, significant changes in applicable tax rates and regulations, future terrorist attacks and other acts of violence, each of which is discussed in greater detail in Item 1A of this Report. Furthermore, the Company is subject to the same business cycles as those experienced by steel, automobile, aircraft, industrial equipment, and durable goods manufacturers. Other factors could also adversely affect us, including those related to the Combination and other acquisitions and the integration of the combined company as well as other acquired businesses. Our forward-looking statements are subject to risks, uncertainties and assumptions about the Company and its operations that are subject to change based on various important factors, some of which are beyond our control. These risks, uncertainties, and possible inaccurate assumptions relevant to our business could cause our actual results to differ materially from expected and historical results.

Therefore, we caution you not to place undue reliance on our forward-looking statements. For more information regarding these risks and uncertainties as well as certain additional risks that we face, refer to the Risk Factors section in Item 1A of this Report, and in our quarterly and other reports filed from time to time with the SEC. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

5

Item 1A. Risk Factors.

Changes to the industries and markets that we serve could have a material adverse effect on our liquidity, financial position and results of operations.

As a leader in industrial process fluids, the Company is subject to the same business cycles as those experienced by steel, automobile, aircraft, industrial equipment, aerospace, aluminum and durable goods manufacturers. Because demand for our products and services is largely derived from the global demand for our customers’ products, we are subject to uncertainties related to downturns in our customers’ businesses and unanticipated shutdowns or curtailments of our customers’ production. We have limited ability to adjust our costs contemporaneously with changes in sales; thus, a significant 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.

Changes in competition in the industries and markets we serve could have a material adverse effect on our liquidity, financial position and results of operations.

The specialty chemical industry is highly competitive, and a number of companies with significant financial resources and/or customer relationships compete with us to provide similar products and services. Some competitors may be positioned to offer more favorable pricing and service terms, potentially resulting in reduced profitability and/or a loss of market share for us. In addition, our competitors could potentially consolidate their businesses to gain scale to better position their product offerings, which could have a negative impact on our profitability and market share. Competition in the industry has historically been based primarily on the ability to provide products that meet the needs of the customer and render technical services and laboratory assistance to the customer and, to a lesser extent, on price. Factors critical to our business include successfully differentiating our offerings from those of our competitors, operating efficiently and profitably as a globally integrated business, and increasing market share and customer penetration through internally developed business programs and strategic acquisitions. Further, in connection with obtaining regulatory approval of the Combination, we divested certain of Houghton’s products and related assets to a competitor, which they may use to compete with us in certain areas where we continue to sell those products. If we are unsuccessful with differentiating ourselves, it could have a material adverse effect on our liquidity, financial position and results of operations.

Inability to obtain sufficient price increases or contract concessions to offset increases in the costs of raw materials 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. Conversely, an inability to implement timely price decreases to compensate for changes in raw material costs could also 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.

Quaker Houghton uses over 1,000 different raw materials, including mineral oils, animal fats, vegetable oils, 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, along with various derivatives of the foregoing. The price of mineral oils and their derivatives can be affected by the price of crude oil and industry refining capacity. Animal fat and vegetable oil prices, as well as the prices of other raw materials, are impacted by their own unique supply and demand factors, as well as by biodiesel consumption which is also affected by the price of crude oil. Accordingly, significant fluctuations in the price of crude oil in the past have had and are expected to continue to have a material impact on the cost of our raw materials. In addition, many of the raw materials we use are commodity chemicals, which can experience significant price volatility.

Although we have been successful in the past in recovering a substantial amount of raw material cost increases while retaining our customers, there can be no assurance that we will be able to continue to offset higher raw material costs or retain customers in the future. Conversely, there can be no assurance that we can continue to maintain our margins if raw material costs decline more rapidly than we expected. 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.

Lack of availability of raw materials and issues associated with sourcing from certain single suppliers and some suppliers in volatile economic environments could have a material adverse effect on our liquidity, financial position, and results of operations.

The specialty chemical industry periodically experiences tightness of supply for certain raw materials. In addition, in some cases, we source from a single supplier and/or suppliers in economies that have experienced political or economic instability. Any significant disruption in supply could affect our ability to obtain raw materials, or increase the cost of such raw materials, which could have a material adverse effect on our liquidity, financial position and results of operations. In addition, certain raw materials that we use are subject to various regulatory laws, and a change in our ability to legally use such raw materials may impact the products or services we are able to offer, which could negatively affect our ability to compete and could adversely affect our liquidity, financial position and results of operations.

6

Loss of a significant manufacturing facility could have a material adverse effect on our liquidity, financial position and results of operations.

We have manufacturing facilities located throughout the world. If one of our facilities is forced to shut down or curtail operations, because of damage or other factors, we may not be able to timely supply our customers. This could result in a loss of sales over an extended period, or permanently. The Company does take steps to mitigate against this risk, including business continuity and contingency planning and procuring property and casualty insurance (including business interruption insurance). Nevertheless, the loss of production in any one region over an extended period of time could have a material adverse effect on our liquidity, financial position and results of operations.

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.

During 2019, the Company’s top five largest customers (each composed of multiple subsidiaries or divisions with semi-autonomous purchasing authority) together account for approximately 12% of our consolidated net sales, with the largest customer accounting for approximately 6% of our consolidated net sales. The loss of a significant customer could have a material adverse effect on our liquidity, financial position and results of operations. Also, a significant portion of our revenues is derived from sales to customers in the steel, aerospace, aluminum and automotive industries; where bankruptcies have occurred in the past and where companies have periodically experienced financial difficulties. 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. Also, some of our customers, primarily in the steel, aluminum and aerospace industries, often have fewer manufacturing locations compared to other metalworking customers and generally use higher volumes of products at a single location. The loss, closure or significant reduction in production of one or more of these locations or other major sites of a significant customer, such as the current production slowdown of the Boeing 737 Max aircraft, could have a material adverse effect on our business.

Changes in tax laws could result in fluctuations in our effective tax rate and have a material effect on our liquidity, financial position and results of operation.

We pay income taxes in the U.S. and various foreign jurisdictions; with our U.S. and international tax liabilities being subject to the allocation of our income among these different 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. 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, including matters such as transfer pricing. One recent example is the impact of the U.S. Tax Cuts and Jobs Act, adopted in the U.S. in 2017 (“U.S. Tax Reform”). We have made various interpretations and assumptions with regard to uncertainties and ambiguities in the application of certain provisions of U.S. Tax Reform, which could turn out to be incorrect. In addition, we are regularly under audit by tax authorities, and the final decisions of such audits could materially affect our current tax estimates and tax positions. Any of these factors, or similar tax-related risks, could cause our effective tax rate and tax-related payments to significantly differ from previous periods and current or future expectations, which could have a material effect on our liquidity, financial position and results of operations.

The global nature of our operations subjects us to political and economic risks that could adversely affect our business, liquidity, financial position and results of operations.

A significant portion of our revenues and earnings are generated by non-U.S. operations. Risks inherent in our global operations include: instability in economic and political conditions in certain countries; changes in a country’s political situation; trade protection measures, including import and export controls and trade embargoes; longer customer payment cycles; different payment practices such as the use of bankers acceptance drafts or other similar credit instruments; licensing and other legal requirements; the difficulties of staffing and managing dispersed international operations; less protective foreign intellectual property laws; legal systems that may be less developed and predictable than those in the United States; limitations on ownership or participation in local enterprises; the potential for expropriation or nationalization of enterprises; the impact of widespread public health crises; and complex and dynamic local tax regulations. Also, the Company could be adversely impacted by changes in the perceived or actual global economic climate, such as from global or regional recessions, uncertainty resulting from the United Kingdom’s (“U.K.”) exit from the European Union (“EU”), existing or future trade restrictions or imposed tariffs, and heightened U.S. or global stock market volatility and potential changes in access to capital markets.

The current global geopolitical and trade environment creates the potential for increased escalation of domestic and international tariffs and retaliatory trade policies. Further changes in U.S. trade policy and additional retaliatory actions by U.S. trade partners could result in a worsening of economic conditions. If we are unable to successfully manage these and other risks associated with our international businesses, the risks could have a material adverse effect on our business, results of operations or financial condition.

Additionally, the U.K.’s exit (commonly referred to as Brexit) from the EU could cause disruptions to, and create uncertainty surrounding, our business in the U.K. and EU, including affecting our relationships with our existing and future customers, suppliers and employees. As a result, Brexit could have an adverse effect on our future business, financial results and operations. The political

7

and economic instability created by Brexit has caused and may continue to cause significant volatility in global financial markets and uncertainty regarding the regulation of data protection in the U.K., both during the transitional period and subsequently thereafter. Brexit could also disrupt the free movement of goods, services, and people between the U.K., the EU, and elsewhere. Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which EU laws to replace or replicate. Further, uncertainty around these and related issues could lead to adverse effects on the economy of the U.K. and the other economies in which we operate. There can be no assurance that any or all of these events will not have a material adverse effect on our business operations, results of operations and financial condition.

The scope of our international operations subjects us to risks from currency fluctuations that could adversely affect our liquidity, financial position and results of operations.

Significant revenues and earnings are generated by our non-U.S. operations, and so our financial results are affected by currency fluctuations, particularly between the U.S. dollar and the euro, the Brazilian real, the Mexican peso, the Chinese renminbi, and the Indian rupee, and the impact of those currency fluctuations on the underlying economies. During the past three years, sales by non-U.S. subsidiaries accounted for approximately 60% to 65% of our consolidated net sales. Generally, all of our non-U.S. subsidiaries use their local currency as their functional currency. We generally do not use financial instruments that expose us to significant risk involving foreign currency transactions; however, the relative size of our non-U.S. activities has a significant impact on reported operating results and our net assets. Therefore, as exchange rates change, our results can be materially affected. 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. We seek to mitigate this risk through local sourcing of raw materials in the majority of our locations.

Pending and future legal proceedings, including environmental matters, could have a material adverse effect on our liquidity, financial position, and results of operations, as well as our reputation in the markets it serves.

The Company and its subsidiaries are routinely 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. Note 26 of Notes to Consolidated Financial Statements in Item 8 of this Report describes 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, which is incorporated herein by reference. An adverse result in one or more pending or on-going 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.

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.

Changes in the regulatory environment in which we operate, particularly, but not limited to, the United States, Mexico, Brazil, China, India, Southeast Asia, the U.K. and the EU, could lead to heightened regulatory compliance costs and scrutiny, could adversely impact our ability to continue selling certain products in our U.S. or foreign markets, and/or could otherwise increase the cost of doing business. While we seek to mitigate these risks, including by receiving Responsible Care certification, on-going employee training and administering a comprehensive environmental, health and safety program, there is no guarantee these actions will prevent all potential regulatory compliance issues. For instance, failure to comply with the EU’s Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) or other similar laws and regulations, could result in our inability to sell certain non-compliant products, or we could incur fines, ongoing monitoring obligations or other future business consequences, which could have a material adverse effect on our liquidity, financial position and results of operations. Additionally, 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. The FCPA, the U.K. Bribery Act and similar laws generally prohibit companies, as well as their officers, directors, employees and third-party intermediaries, business partners and agents, from making improper payments or providing other improper things of value to government officials or other persons. While we have policies and procedures and internal controls designed to address compliance with such laws, we cannot assure you that our employees and third-party intermediaries, business partners and agents, will not take, or be alleged to have taken actions, in violation of such policies and laws, for which we may be ultimately held responsible. Detecting, investigating and resolving actual or alleged violations can be extensive and require a significant diversion of time, resources and attention from senior management. Any violation of the FCPA, the U.K. Bribery Act 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.

8

Uncertainty related to environmental regulation and industry standards, as well as physical risks of climate change, could impact our results of operations and financial position.

Increased public awareness and concern regarding global climate change and other environmental risks may result in more extensive international, regional and/or federal requirements or industry standards to reduce or mitigate global warming and other environmental risks and these regulations could mandate even more restrictive standards or industry standards than the voluntary goals that we have established or require changes to be adopted on a more accelerated time frame. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. In addition, the physical risks of climate change may impact the availability and costs of materials and natural resources, sources and supply of energy, product demand and manufacturing. 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, our business, capital expenditures, results of operations, financial condition and competitive position could be negatively impacted.

Potential product, service or other related liability claims could have a material adverse effect on our liquidity, financial position and results of operations.

The development, manufacture and sale of specialty chemical products and other related services involve inherent exposure to potential product liability claims, service level claims, product recalls and related adverse publicity. Any of these potential product or service risks could also result in substantial and unexpected expenditures and affect customer confidence in our products and services, which could have a material adverse effect on our liquidity, financial position and results of operations.

In addition, our business is subject to hazards associated with the manufacture, handling, storage, and transportation of chemical materials and products. These potential hazards could cause personal injury and loss of life, severe damage to, or destruction of, property or equipment and environmental contamination or other environmental damage, which could have an adverse effect on our business, financial condition or results of operations. In addition, the occurrence of disruptions, shutdowns or other material operating problems at our facilities or those of our customers due to any of these risks could adversely affect our reputation and have a material adverse effect on our operations as a whole, including our results of operations and cash flows, both during and after the period of operational difficulties. Although we maintain product and other general liability insurance, there can be no assurance that the types or levels of coverage maintained are adequate to cover these potential risks. In addition, we may not be able to continue to maintain our existing insurance coverage or obtain comparable or additional insurance coverage at a reasonable cost, if at all, in the event a significant product or service claim arises.

We may be unable to adequately protect our proprietary rights and trade brands, which may limit our ability to compete in our markets and could adversely affect our liquidity, financial position and results of operations.

We have a limited number of patents and patent applications, including patents issued, applied for, or acquired in the United States and in various foreign countries, some of which may prove to be material to our business. However, we rely principally on our proprietary formulae and the application of our skills and experience to meet customer needs. Also, our products are identified by trademarks that are registered throughout our marketing area. Despite our efforts to protect our proprietary information through patent and trademark filings, through the use of appropriate trade secret protections, and through the inability of certain products to be effectively replicated by others, it is possible that competitors or other unauthorized third parties may obtain, copy, use, disclose or replicate our technologies, products, and processes. In addition, the laws and/or judicial systems of foreign countries in which we design, manufacture, market and sell our products may afford little or no effective protection of our proprietary technology or trade brands. Also, security over our global information technology structure is subject to increasing risks associated with cyber-crime and other related cyber-security threats. These potential risks to our proprietary information and trade brands could subject us to increased competition and negatively impact our liquidity, financial position and results of operations.

We may not be able to timely develop, manufacture and gain market acceptance of new and enhanced products required to maintain or expand our business, which could adversely affect our liquidity, financial position and results of operations.

We believe that our continued success depends on our ability to continuously develop and manufacture new products and product enhancements on a timely and cost-effective basis in response to customer demands for higher performance process chemicals and other product offerings. An example of such evolving customer demands and industry trends is the movement towards light weight and/or electric vehicles. 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, as a consequence, we may lose business and/or significant market share. The development and commercialization of new products requires significant expenditures over an extended period of time, and some products that we seek to develop may never become profitable. In addition, we may not be able to develop and introduce products incorporating new technologies in a timely manner that will satisfy our customers’ future needs or achieve market acceptance.

9

We may not be able to profitably operate our consolidated company as anticipated after the Combination if we do not properly address our integration and consolidation risks. An inability to appropriately capitalize on growth, including organic growth, leveraging prior acquisitions, or integrating future acquisitions, could adversely affect our liquidity, financial position and results of operations.

The Combination presents the Company with significant integration and consolidation risks, and we may be unable to profitably operate the consolidated company, or may fail to achieve expected cost synergies or expand our combined business into new markets and geographies given the following risks, among others:

 diversion of management time and focus from operating our business to address challenges that may arise in integrating Houghton;

 transition of operations and customers of Houghton to the combined business;

 failure to realize anticipated operational or financial synergies;

 implementation or remediation of controls, procedures, and policies at Houghton;

 the need to integrate operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries; and

 possible liabilities for activities of Houghton before the acquisition, such as possible violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities that may not be sufficiently protected against in the Share Purchase Agreement.

In addition to the Combination, we have completed multiple acquisitions over the past several years, including Norman Hay in 2019, and we continue to grow organically through increased end-market growth, incremental market share gains, and extending previously acquired technologies through existing channels. The success of our growth depends on our ability to successfully integrate these acquisitions and any future acquisitions, including, but not limited to our ability to:

 successfully execute the integration or consolidation of the acquired or additional business into 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 take advantage of potential synergies, including cost reduction opportunities, while maintaining legacy business and other related attributes; and

 further penetrate existing, and expand into new, markets with the product capabilities acquired in acquisitions.

Despite our best efforts, we may fail to obtain the benefits we anticipate from the Combination or may not create the appropriate infrastructure to support such additional growth from organic or acquired businesses, which could have a material adverse effect on our liquidity, financial position and results of operations.

Impairment evaluations of goodwill, intangible assets, investments or other long-lived assets could result in a reduction in our recorded asset values, which could have a material adverse effect on our financial position and results of operation.

We perform reviews of goodwill and indefinite-lived intangible assets on an annual basis, or more frequently if triggering events indicate a possible impairment. We test goodwill at the reporting unit level by comparing the carrying value of the net assets of the reporting unit, including goodwill, to the reporting unit's fair value. Similarly, we test indefinite-lived intangible assets by comparing the fair value of the assets to their carrying values. If the carrying values of goodwill or indefinite-lived intangible assets exceed their fair value, the goodwill or indefinite-lived intangible assets may be considered impaired. In addition, we perform a review of a definite-lived intangible asset or other long-lived asset when changes in circumstances or events indicate a possible impairment. If any impairment or related charge is warranted, then our financial position and results of operations could be materially affected.

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 have agreed to indemnify the purchasers of such properties for certain types of matters, such as certain breaches of representations and warranties, taxes and certain environmental matters. With respect to environmental matters, the discovery of contamination arising from properties that we have divested may expose us to indemnity obligations under the sale agreements with the buyers of such properties or cleanup obligations and other damages under applicable environmental laws. We may not have insurance coverage for such indemnity obligations or cash flows to make such indemnity or other payments. Further, we cannot predict the nature of and the amount of any indemnity or other obligations we may have to the applicable purchaser. Such payments may be costly and may adversely affect our financial condition and results of operations.

10

The issuance of common stock to Gulf in the Combination provided it with an almost 24.5% ownership interest in the Company, and therefore, there is a risk that depending on the intentions of Gulf with respect to its common stock ownership and the timing of such decisions, a significant amount of the Company’s common stock could be made available for sale in one or more transactions. In addition, Gulf also has the contractual ability to nominate certain directors of the Company, which may enable Gulf to influence the direction of our business and significant corporate decisions.

As a result of the issuance, Gulf became our largest shareholder. Pursuant to the terms of the shareholders agreement it has entered into with the Company, for two years following the closing on August 1, 2019, Gulf is restricted from acquiring additional shares of Quaker Houghton common stock, subject to certain exceptions. Subject to certain restrictions over timing and amount, Gulf is permitted to make available for sale a certain number of shares of common stock. Given the number of shares currently held by Gulf, if it were to make available for sale a portion of its 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.

In addition, Gulf has substantial influence 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. The concentration of ownership of our shares held by Gulf may make some future actions more difficult without its support. Gulf will, however, be bound by the shareholders agreement it has entered into with the Company, which among other provisions requires that for so long as any of Gulf’s designees are on the Quaker Houghton Board of Directors (the “Board”), and for six months thereafter, Gulf will vote all Quaker Houghton shares consistent with the recommendations of the Board for each director nominee as reflected in each proxy statement of the Company, including in support of any Quaker Houghton directors nominated for election or re-election to the Board (except as would conflict with Gulf’s rights to designees on the Board) and Gulf will not, without obtaining the prior written consent of the Board, vote with, tender into or publicly support any hostile takeover activity or tender offer targeting Quaker Houghton and not supported by a majority of the Board or Quaker Houghton’s independent directors. Notwithstanding this, the interests of Gulf may conflict with our interests or the interests of our other shareholders, though we are not aware of any such existing conflicts of interest at this time.

Our business depends on attracting and retaining qualified management and other key 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 management, commercial, technical, and other key personnel. Competition for such personnel is intense, and we may be unable to continue to attract or retain such personnel. In an effort to mitigate such risks, the Company utilizes retention bonuses, offers competitive pay and maintains continuous succession planning, but there can be no assurance that these mitigating factors will be adequate to attract or retain qualified management or other key personnel. In addition, no assurance can be given that after the Combination, Quaker Houghton will continue to be able to attract or retain key management personnel and other key employees to the same extent that Quaker and Houghton had previously been able to attract or retain their own employees. Failure to retain key employees could diminish the benefits of the Combination and subject the Company to integration risks, which could have an adverse effect on our operations.

We are subject to stringent labor and employment laws in certain jurisdictions in which we operate, and our relationship with our employees could deteriorate, which could adversely impact our operations.

A majority of our full-time employees are employed outside the U.S. In certain jurisdictions where we operate, labor and employment laws grant significant job protection to certain employees, including rights on termination of employment. In addition, in certain countries where we operate, our employees are members of unions or are represented by works councils. We are often required to consult with and seek the consent or advice of these unions and/or works councils. These regulations and laws, coupled with the requirement 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.

Failure to comply with any material provision of our New Credit Facility or other debt agreements could have a material adverse effect on our liquidity, financial position and results of operations.

We significantly increased our level of indebtedness upon closing of the Combination and execution of the New Credit Facility (defined in Item 7 of this Report) which requires the Company to comply with certain provisions and covenants, and, while we do not currently anticipate the New Credit Facility provisions and covenants to be overly restrictive, they could become more difficult to comply with as business or financial conditions change. We will also be subject to interest rate risk due to the variable interest rates within the New Credit Facility and, if interest rates rise significantly, these interest costs could increase as well.

Our New Credit Facility contains covenants that impose certain restrictions, including limitations on investments, acquisitions and liens, as well as default provisions customary for facilities of its type. The New Credit Facility contains affirmative and negative covenants, financial covenants and events of default that are customary for agreements of this nature, including without limitation restrictions on (a) the incurrence of additional indebtedness by the Company or certain of its subsidiaries, (b) investments in and acquisitions of other businesses, lines of business and divisions by the Company or certain of its subsidiaries, (c) the making of dividends or capital stock purchases by the Company or certain of its subsidiaries and (d) dispositions of assets by the Company or certain of its subsidiaries. Dividends and share repurchases are permitted in annual amounts not exceeding the greater of $50 million

11

annually and 20% of consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) if there is no default under the New Credit Facility and also certain other amounts if the net leverage ratio is less than 2.0 to 1.0. Financial covenants contained in the New Credit Facility include a consolidated interest coverage test and a consolidated net leverage test. Customary events of default in the New Credit Facility include without limitation defaults for non-payment, breach of representations and warranties, non-performance of covenants, cross-defaults, insolvency, and a change of control of the Company in certain circumstances. If we are unable to comply with the financial and other provisions of the New Credit Facility, we could become in default. The occurrence of an event of default under the New Credit Facility could result in all loans and other obligations becoming immediately due and payable and the facility being terminated. In addition, deterioration in the Company’s results of operations or financial position could significantly increase borrowing costs.

Changes to the LIBOR calculation method or the replacement of LIBOR may have adverse consequences for the Company that cannot yet reasonably be predicted.

The Company’s New Credit Facility permits interest on swing line loans to be calculated based on LIBOR. The LIBOR benchmark has been subject of national, international, and other regulatory guidance and proposals for reform. On July 27, 2017, the U.K. Financial Conduct Authority announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021. The expected discontinuation of LIBOR after 2021 and the transition away from LIBOR presents various risks and challenges, including with respect to our borrowings and hedging arrangements that rely on the LIBOR benchmark. Further, the overall financial market may be disrupted as a result of the phase-out or replacement of LIBOR. Various parties are working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to LIBOR. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing LIBOR with the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements, backed by Treasury securities. At this time, the future of LIBOR remains uncertain. It is not possible to predict whether SOFR will attain market traction as a LIBOR replacement or to predict any other reforms to LIBOR that may be enacted in the U.K. or elsewhere. The potential effect of the phase-out or replacement of LIBOR on the Company’s financial position or results of operations cannot yet be predicted.

We have identified material weaknesses in our internal control over financial reporting that could, if not remediated, result in material misstatements in our financial statements and in the inability of our independent registered public accounting firm to provide an unqualified audit opinion, which could have a material adverse effect on us.

As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting.

As discussed in Part II, Item 9A, of this Report, during the course of preparing our audited financial statements for this Report, we, in conjunction with our independent registered public accounting firm, identified certain material weaknesses as of December 31, 2019. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Through the process of evaluating risks and corresponding changes to the design of existing or the implementation of new controls in light of the significant non-recurring transactions that occurred during 2019, including the Combination, we have identified certain deficiencies in our application of the principles associated with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013) that management has concluded in the aggregate constitute a material weakness. We did not effectively design and maintain controls in response to the risks of material misstatement. Specifically, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement to financial reporting. As a result of this deficiency in design and implementation of an effective risk assessment, this material weakness contributed to certain control deficiencies that management has concluded result in the following additional material weaknesses: (i) we did not design and maintain effective controls over the review of pricing, quantity and customer data to verify that revenue recognized at certain smaller locations was complete and accurate, and (ii) we did not design and maintain effective controls over the reliability of data used to support the reasonableness of certain assumptions in the accounting for business combinations. As a result of these material weaknesses, management determined that both our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2019 and our independent registered public accounting firm has likewise issued an opinion indicating that we have not maintained effective internal control over financial reporting as of December 31, 2019. Notwithstanding these material weaknesses, the Company has concluded that these control deficiencies did not result in a misstatement to the related balances and disclosures for the year ended December 31, 2019. However, these control deficiencies could have resulted in misstatements of interim or annual consolidated financial statements and disclosures that could have resulted in a material misstatement that would not be prevented or detected. In light of the material weaknesses identified, we have performed additional analysis and procedures to ensure that our consolidated financial statements presented in this Report were prepared in accordance with GAAP and fairly reflected our financial position and results of operations as of and for the year ended December 31, 2019.

12

Management has begun the process of evaluating the material weaknesses and developing its full remediation plan. Until the remediation plan is implemented, tested and deemed effective we cannot assure you that our actions will adequately remediate the material weaknesses or that additional material weaknesses in our internal controls will not be identified in the future. Any failure to identify and correct material weaknesses in a timely manner could have a material adverse effect on the financial condition of the Company.

Our management, including our chief executive officer and chief financial officer, does not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because of changes in circumstances or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Disruption of critical information systems or material breaches in the security of our systems could adversely affect our business and our customer relationships, and subject us to fines or other regulatory actions.

We rely on information technology systems to process, transmit, and store electronic information in our day-to-day operations. We also rely on our technology infrastructure, among other functions, to interact with customers and suppliers, fulfill orders and bill, collect and make payments, ship products, provide support to customers, fulfill contractual obligations and otherwise conduct business. 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. Cybersecurity incidents, such as these, are becoming more sophisticated and frequent, and there can be no assurance that our protective measures will prevent security breaches that could have a significant impact on our business, reputation and financial results. In addition, security breaches could result in unauthorized disclosure of confidential information or personal data belonging to our employees, partners, customers or suppliers. We are subject to the data privacy and protection laws and regulations adopted by federal, state and foreign legislatures and governmental agencies in various countries in which we operate, including the EU General Data Protection Regulation. 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.

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.

Terrorist attacks, other acts of violence or war, natural disasters, widespread public health crises, including the recent spread of coronavirus, or other uncommon global events may negatively affect our operations. There can be no assurance that there will not be terrorist attacks against the U.S. or other locations where we do business. Also, other uncommon global events such as earthquakes, hurricanes, fires and tsunamis cannot be predicted. Terrorist attacks, other acts of violence or armed conflicts, and natural disasters may directly impact our physical facilities and/or those of our suppliers or customers. Additional terrorist attacks or natural disasters may disrupt the global insurance and reinsurance industries with the result that we may not be able to obtain insurance at historical terms and levels, if at all, for all of our facilities. 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. Beginning in early 2020, there has been an outbreak of coronavirus (COVID-19), initially in China and which has spread to other jurisdictions, including locations where the Company does business. The full extent of the outbreak, related business and travel restrictions and changes to behavior intended to reduce its spread are uncertain as of the date of the Report as this continues to evolve globally. Therefore, the full extent to which coronavirus may impact the Company’s results of operations, liquidity or financial position is uncertain. This outbreak has already had a material disruption on the operations of the Company and its suppliers and customers. Management continues to monitor the impact that the COVID-19 pandemic is having on the Company, the specialty chemical industry and the economies in which the Company operates. The Company anticipates that its future results of operations, including the results for 2020, will be materially impacted by the coronavirus outbreak, but at this time does not currently expect that the impact from the coronavirus outbreak will have a material effect on the Company’s liquidity or financial position. However, given the speed and frequency of continuously evolving developments with respect to this pandemic, the Company cannot reasonably estimate the magnitude of the impact to its results of operations, and, if the outbreak continues on its current trajectory, such impacts could grow and become material to its liquidity or financial position. To the extent that the Company’s customers and suppliers continue to be materially and adversely impacted by the coronavirus outbreak 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. The consequences of terrorist attacks, other acts of violence or armed conflicts, 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.

13

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Quaker Houghton’s corporate headquarters and a laboratory facility are located in its America segment’s Conshohocken, Pennsylvania location. The Company’s other principal facilities in its America’s segment are located in Detroit, Michigan; Middletown, Ohio; Dayton, Ohio; Strongsville, Ohio; Carrollton, Georgia; Waterloo, Ontario; Monterrey, N.L., Mexico; Rio de Janeiro, Brazil and Sao Paulo, Brazil. The Company’s EMEA segment has principal facilities in Uithoorn, The Netherlands; Manchester, U.K.; Dortmund, Germany; Barcelona, Spain; Navarra, Spain; Rouen, France; Karlshamn, Sweden; Tradate, Italy; and Turin, Italy. The Company’s Asia/Pacific segment operates out of its principal facilities located in Qingpu, China; Songjiang, China; Kolkata, India; Rayong, Thailand; Sydney, Australia; and Moorabbin, Australia. The Company’s Global Specialty Businesses segment operates out of its principal facilities in Aurora, Illinois; Santa Fe Springs, California; Batavia, New York; and Coventry, U.K.. With the exception of the Conshohocken, Santa Fe Springs, Aurora, Karlshamn, Rayong, Coventry, and Sydney sites, which are leased, the remaining principal facilities are owned by the Company and, as of December 31, 2019, were mortgage free. Quaker Houghton also leases sales, laboratory, manufacturing, and warehouse facilities in other locations.

Quaker Houghton’s principal facilities (excluding Conshohocken) consist of various manufacturing, administrative, warehouse, and laboratory buildings. Substantially all of the buildings (including Conshohocken) are of fire-resistant construction and are equipped with sprinkler systems. The Company has a program to identify needed capital improvements that are implemented as management considers necessary or desirable. Most locations have raw material storage tanks, ranging from 1 to 100 at each location with capacities ranging from 1,000 to 82,000 gallons, and processing or manufacturing vessels ranging in capacity from 8 to 19,000 gallons.

Each of Quaker’s non-U.S. associated companies (in which it owns a 50% or less interest and has significant influence) owns or leases a plant and/or sales facilities in various locations, with the exception of Primex, Ltd.

Item 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 asbestos-related litigation against an inactive subsidiary, certain environmental non-capital remediation costs and other legal-related matters, reference is made to Note 26 of Notes to Consolidated Financial Statements, included in Item 8 of this Report, which is incorporated herein by this reference. The Company is a party to other litigation which management currently believes will not have a material adverse effect on the Company’s results of operations, cash flow or financial condition.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 4(a). Information about our Executive Officers.

Set forth below is information regarding the executive officers of the Company, each of whom (with the exception of Ms. Hall and Ms. Johnson) have been employed by the Company or by Houghton for more than five years, including the respective positions and offices with the Company (or Houghton) held by each over the respective periods indicated. Each of the executive officers, with the exception of Mr. Hostetter, is appointed annually to a one-year term. Mr. Hostetter is considered an executive officer in his capacity as principal accounting officer for purposes of this Item.

14

15

16

PART II

 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the trading symbol KWR. Our Board declared cash dividends that totaled $1.525 per share of outstanding common stock or $23.7 million during the year ended December 31, 2019 and $1.47 per share of outstanding common stock or $19.5 million during the year ended December 31, 2018. In February 2019 our Board declared a quarterly cash dividend of $0.37 per share of outstanding common stock, payable to shareholders of record in April 2019. Subsequently, our Board declared quarterly dividends of $0.385 per share of outstanding common stock in May, September and November 2019, respectively, payable to shareholders of record in July and October 2019 and January 2020, respectively. We currently expect to continue to pay comparable cash dividends on a quarterly basis in the future. Future declaration of dividends and the establishment of future record dates and payment dates are subject to the final determination of our Board, and will be based on our future financial condition, results of operations, capital requirements, capital expenditure requirements, contractual restrictions, anticipated cash needs, business prospects, provisions of applicable law and other factors our Board may deem relevant.

There are no restrictions that the Company believes are likely to materially limit the payment of future dividends. However, under the New Credit Facility there are certain restrictions, including a limit on dividends paid not to exceed the greater of $50.0 million annually and 20% of consolidated EBITDA so long as there is no default under the New Credit Facility. Reference is made to the “Liquidity and Capital Resources” disclosure contained in Item 7 of this Report.

As of February 29, 2020, there were 811 shareholders of record of the Company’s common stock, its only outstanding class of equity securities. As of February 29, 2020, 17,732,818 shares of Quaker common stock were issued, outstanding and entitled to one vote per share.

Reference is made to the information in Item 12 of this Report under the caption “Equity Compensation Plans,” which is incorporated herein by this reference.

The following table sets forth information concerning shares of the Company’s common stock acquired by the Company during the fourth quarter of 2019 for the period covered by this report:

(1) All of these shares were acquired from employees upon their surrender of Quaker Chemical Corporation shares in payment of the exercise price of employee stock options exercised or for the payment of taxes upon exercise of employee stock options or the vesting of restricted stock.

(2) The price paid for shares acquired from employees pursuant to employee benefit and share-based compensation plans is, in each case, based on the closing price of the Company’s common stock on the date of exercise or vesting as specified by the plan pursuant to which the applicable option or restricted stock was granted.

(3) On May 6, 2015, the Board of the Company approved a share repurchase program, pursuant to which the Company is authorized to repurchase up to $100,000,000 of Quaker Chemical Corporation common stock (the “2015 Share Repurchase Program”) and has no expiration date. There were no shares acquired by the Company pursuant to the 2015 Share Repurchase Program during the quarter ended December 31, 2019.

17

Stock Performance Graph: The following graph compares the cumulative total return (assuming reinvestment of dividends) from December 31, 2014 to December 31, 2019 for (i) Quaker’s common stock, (ii) the S&P SmallCap 600 Index (the “SmallCap Index”), (iii) the S&P MidCap 400 Index (the “MidCap Index”), and (iv) the S&P 600 Materials Group Index (the “Materials Group Index”). The graph assumes the investment of $100 on December 31, 2014 in each of Quaker’s common stock and the stocks comprising the SmallCap Index, the MidCap Index and the Materials Group Index, respectively. The comparison to the MidCap Index was added in 2019 as a result of the Company’s increased size post-closing of the Combination.

18

Item 6. Selected Financial Data.

The selected historical consolidated financial data for each of the years ended December 31, 2019, 2018 and 2017, and as of December 31, 2019 and 2018 was derived from the audited consolidated financial statements included in the Report. The selected historical consolidated financial data for each of the years ended December 31, 2016 and 2015 and as of December 31, 2017, 2016 and 2015 was derived from our audited consolidated financial statements not included in the Report.

The following table sets forth selected historical consolidated financial data for the Company and its consolidated subsidiaries: