Quaker(KWR) - 2022 Q3 - Quarterly Report

Financial Performance - Net sales for Q3 2022 were $492.2 million, a 9.6$449.1 million in Q3 2021[11]. - Gross profit for the nine months ended September 30, 2022, was $456.4 million, slightly up from$455.8 million in the same period of 2021[11]. - Operating income decreased to $44.6 million in Q3 2022 from$36.0 million in Q3 2021, while for the nine months it was $105.9 million, down from$119.7 million[11]. - Net income attributable to Quaker Chemical Corporation for Q3 2022 was $25.9 million, compared to$31.1 million in Q3 2021, reflecting a decline of 16.9%[11]. - For the nine months ended September 30, 2022, consolidated total revenue reached $1,458.8 million, a 10.9$1,314.1 million in the same period of 2021[54]. - Revenue from the Americas segment was $700.5 million, up 24.6$562.8 million in the prior year[54]. - The Company reported total segment operating earnings of $108.951 million for the three months ended September 30, 2022, compared to$95.374 million in Q3 2021, reflecting a 14.2% increase[44]. - The Company’s Global Specialty Businesses segment reported net sales of $101.094 million for Q3 2022, up from$77.373 million in Q3 2021, marking a 30.5% increase[44]. - Basic earnings per common share for Q3 2022 was $1.44, down from$1.74 in Q3 2021, representing a decrease of 17.3%[88]. - Non-GAAP earnings per diluted share for the third quarter of 2022 were $1.74, up from$1.63 in the prior year quarter[136]. Cash Flow and Assets - Cash and cash equivalents decreased to $138.9 million as of September 30, 2022, from$165.2 million at the end of 2021[16]. - Total assets decreased to $2.83 billion as of September 30, 2022, from$2.96 billion at the end of 2021[16]. - Cash flows from operating activities for the nine months ended September 30, 2022, resulted in a net cash used of $26.3 million, compared to a net cash provided of$2.5 million in the same period of 2021[19]. - The company experienced a net operating cash outflow of $26.3 million in the first nine months of 2022, compared to a net operating cash flow of$2.5 million in the same period of 2021[138]. - The Company had Amended Credit Facility borrowings outstanding of $941.2 million as of September 30, 2022, compared to$889.6 million under the Original Credit Facility as of December 31, 2021[157]. Debt and Liabilities - Long-term debt increased to $931.5 million as of September 30, 2022, compared to$836.4 million at the end of 2021[16]. - Total debt as of September 30, 2022, was $954.066 million, an increase of 5.9$901.348 million as of December 31, 2021[97]. - The Company recorded a loss on extinguishment of debt amounting to $6.763 million during the nine months ended September 30, 2022[77]. - The cumulative liability for gross unrecognized tax benefits decreased by approximately$6.3 million from December 31, 2021, to $16.2 million as of September 30, 2022[80]. Acquisitions and Investments - In January 2022, the company acquired a business for approximately$8.0 million, enhancing its product offerings in the Americas region[28]. - In October 2022, Quaker Chemical Corporation acquired a business for approximately $3.5 million, strengthening its position in pickling inhibitors and additives[26]. - The Company acquired a tin-plating solutions business for$25.0 million, allocating $19.6 million to intangible assets and recording$5.0 million of goodwill[36]. - The acquisition of Baron Industries in November 2021 was valued at $11.0 million, with potential earn-out provisions totaling up to$4.5 million[31]. Operational Challenges - The company continues to face challenges from ongoing inflationary pressures, supply chain issues, and geopolitical factors, impacting its operations and market conditions[135]. - The decline in organic sales volumes was 9%, attributed to softer end market conditions, particularly in Europe and Asia/Pacific[135]. - The Company continues to monitor various financial, economic, and geopolitical conditions that could impact future performance, including the ongoing Russia-Ukraine war[92]. Tax and Regulatory Matters - The company's effective tax rates for the three and nine months ended September 30, 2022, were 28.1% and 19.2%, respectively, compared to 2.6% and 21.8% for the same periods in 2021[79]. - The company recognized a net benefit to the tax provision of $1.9 million during the first nine months of 2022 due to the settlement of tax audits[87]. - The Company expects to reduce its cumulative liability for gross unrecognized tax benefits by approximately$4.1 million during the year ending December 31, 2022[83]. Strategic Initiatives - The QH Program aims to reduce total headcount by approximately 400 people globally, with ongoing reductions expected into 2023[59]. - The Company expects continued operating costs and cash flows related to strategic planning and transformation expenses in 2022 and extending into the next several years[159]. - The Company incurred strategic planning and transformation expenses of $4,545 thousand in Q3 2022, compared to no such expenses in Q3 2021[174]. Miscellaneous - The Company believes its existing cash and anticipated cash flows will be sufficient to support operations and fund business objectives for at least the next twelve months, including ongoing acquisition integration and capital expenditures[163]. - The Company recorded$10.4 million in total Combination, integration, and other acquisition-related expenses in the first nine months of 2022, down from $13.6 million in the same period of 2021[159].