PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including core financial statements and comprehensive notes on accounting, segments, and debt Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net income or loss over specific periods | Metric (in thousands) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------- | :------ | :------ | :------ | :------ | | Net sales | $483,400 | $463,567 | $926,314 | $933,326 | | Gross profit | $171,723 | $175,718 | $332,983 | $357,281 | | Operating (loss) income | $(52,510) | $58,449 | $(24,886) | $113,975 | | Net (loss) income | $(66,563) | $34,910 | $(53,646) | $70,168 | | Basic EPS | $(3.78) | $1.94 | $(3.04) | $3.90 | | Diluted EPS | $(3.78) | $1.94 | $(3.04) | $3.89 | | Dividends declared | $0.485 | $0.455 | $0.970 | $0.910 | - The significant net loss in Q2 2025 and 6M 2025 was primarily driven by an $88.840 million impairment charge10 Condensed Consolidated Statements of Comprehensive Income This statement presents net income alongside other comprehensive income items like currency translation adjustments | Metric (in thousands) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------- | :------ | :------ | :------ | :------ | | Net (loss) income | $(66,563) | $34,910 | $(53,646) | $70,168 | | Currency translation adjustments | $62,012 | $(18,840) | $89,141 | $(44,229) | | Other comprehensive income (loss) | $60,601 | $(18,774) | $86,569 | $(41,419) | | Comprehensive (loss) income | $(5,962) | $16,136 | $32,923 | $28,749 | - Currency translation adjustments significantly impacted comprehensive income, showing a gain of $62.012 million in Q2 2025 compared to a loss of $18.840 million in Q2 202413 Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $201,918 | $188,880 | | Total current assets | $974,107 | $876,417 | | Property, plant and equipment, net | $286,511 | $229,532 | | Goodwill | $502,438 | $518,894 | | Other intangible assets, net | $908,297 | $827,098 | | Total assets | $2,848,810 | $2,610,649 | | Total current liabilities | $380,059 | $379,768 | | Long-term debt | $897,953 | $669,614 | | Total liabilities | $1,503,355 | $1,256,466 | | Total equity | $1,345,455 | $1,354,183 | - Long-term debt increased by $228.339 million from December 31, 2024, to June 30, 202516 Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities | Metric (in thousands) | 6M 2025 | 6M 2024 | | :-------------------- | :------ | :------ | | Net cash provided by operating activities | $38,522 | $73,534 | | Net cash used in investing activities | $(180,720) | $(33,225) | | Net cash provided by (used in) financing activities | $147,554 | $(39,297) | | Net increase (decrease) in cash and cash equivalents | $13,038 | $(5,959) | | Cash and cash equivalents at the end of the period | $201,918 | $188,568 | - Payments related to acquisitions, net of cash acquired, increased from $24.899 million in 6M 2024 to $164.078 million in 6M 202519 - Borrowings on revolving credit facilities, net, increased significantly from $20.533 million in 6M 2024 to $216.000 million in 6M 202519 Condensed Consolidated Statements of Changes in Equity This statement tracks changes in the company's equity components, including common stock, retained earnings, and AOCI | Metric (in thousands) | Dec 31, 2024 | June 30, 2025 | | :-------------------- | :----------- | :------------ | | Common Stock | $17,674 | $17,394 | | Capital in Excess of Par Value | $903,781 | $876,969 | | Retained Earnings | $633,731 | $563,063 | | Accumulated Other Comprehensive Loss | $(201,619) | $(115,181) | | Total Quaker Shareholders' Equity | $1,353,567 | $1,342,245 | | Noncontrolling Interest | $616 | $3,210 | | Total Equity | $1,354,183 | $1,345,455 | - Retained earnings decreased by $70.668 million from December 31, 2024, to June 30, 2025, primarily due to the net loss and dividends22 - Shares purchased under share repurchase program, net of excise taxes, amounted to $32.982 million in Q2 202522 Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and additional information supporting the condensed consolidated financial statements Note 1 – Basis of Presentation and Description of Business This note outlines the company's business, reporting segments, and the basis for financial statement presentation - Quaker Houghton is a global leader in industrial process fluids, serving steel, aluminum, automotive, aerospace, offshore, container, mining, and metalworking industries26 - The company operates in three reportable segments: Americas, EMEA, and Asia/Pacific26 - Argentina's and Türkiye's economies are considered hyper-inflationary, resulting in remeasurement losses of $0.7 million (Q2 2025) and $1.2 million (6M 2025)27 Note 2 – Business Acquisitions This note details recent business acquisitions, including consideration paid, assets acquired, and liabilities assumed - Acquired Dipsol Chemicals Co., Ltd. in April 2025 for approximately $185.6 million, expanding surface treatment and plating solutions, primarily in Asia/Pacific28 | Dipsol Acquisition (in thousands) | Fair Value | | :-------------------------------- | :--------- | | Total Assets Acquired | $172,706 | | Total Liabilities Assumed | $37,504 | | Noncontrolling interest | $(2,451) | | Goodwill | $52,862 | | Total Consideration | $185,613 | - Recognized $55.0 million in intangible assets (customer relationships, product technologies, trademarks) and $52.9 million in goodwill from Dipsol acquisition32 - Acquired Natech, Ltd. (UK) for $6.5 million and CSI (South Africa) for $3.9 million in April and February 2025, respectively, strengthening EMEA surface treatment and market presence3637 - Acquisition-related expenses were $0.8 million (Q2 2025) and $4.1 million (6M 2025), up from $0.2 million (Q2 2024) and $0.5 million (6M 2024)41 Note 3 – Recently Issued Accounting Standards This note discusses the impact and evaluation of recently issued accounting standards on financial reporting - Adopted ASU 2023-07, Segment Reporting, enhancing disclosures on significant segment expenses like product costs43 - Evaluating ASU 2023-09, Income Taxes, which requires additional detail on effective tax rate reconciliation and disaggregated income taxes paid, effective after December 15, 202444 - Evaluating ASU 2024-03, Expense Disaggregation Disclosures, requiring additional information on inventory purchases, employee compensation, depreciation, and intangible asset amortization, effective after December 15, 202645 Note 4 – Business Segments This note provides financial information and performance metrics for the company's operating business segments - Segment performance is evaluated by the CEO based on segment operating earnings, which include net sales less directly related product costs and other operating expenses47 | Segment | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :------ | :------ | :------ | :------ | :------ | | Americas | $58,976 | $64,137 | $117,438 | $130,906 | | EMEA | $24,995 | $26,652 | $48,388 | $56,223 | | Asia/Pacific | $28,715 | $31,000 | $54,645 | $61,377 | | Totals | $112,686 | $121,789 | $220,471 | $248,506 | - Product costs for 6M 2025 include $6.0 million amortization of Dipsol's inventory step-up and a $3.6 million gain from an out-of-period inventory adjustment51 Note 5 – Net Sales and Revenue Recognition This note details the company's net sales by customer industry and its policies for revenue recognition - Top five customers accounted for approximately 12% of consolidated net sales in 2024, with the largest customer at 3%54 | Customer Industries | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :------------------ | :------ | :------ | :------ | :------ | | Metals | $154,955 | $149,210 | $302,078 | $298,967 | | Metalworking and other | $328,445 | $314,357 | $624,236 | $634,359 | | Consolidated Total | $483,400 | $463,567 | $926,314 | $933,326 | - Deferred revenue decreased from $4.2 million at December 31, 2024, to $2.3 million at June 30, 2025, as performance obligations were satisfied56 Note 6 – Leases This note outlines the company's lease arrangements, including lease expenses and liabilities | Lease Expense | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :------------ | :------ | :------ | :------ | :------ | | Operating lease expense | $4,302 | $3,727 | $8,010 | $7,470 | | Short-term lease expense | $140 | $193 | $284 | $392 | | Lease Liabilities | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Right-of-use lease assets | $40,610 | $34,120 | | Long-term lease liabilities | $24,315 | $20,028 | | Total operating lease liabilities | $37,145 | $30,647 | - A new lease agreement for global headquarters in Radnor, PA, with a total commitment of $79.7 million, is expected to commence in Q3 2025 and is not yet included in lease liabilities62 Note 7 – Restructuring and Related Activities This note describes the company's restructuring programs, associated charges, and accrued liabilities - Global cost and optimization program initiated in 2022 aims to reduce headcount by approximately 380 positions globally by end of 202563 | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :----- | :------ | :------ | :------ | :------ | | Restructuring and related charges, net | $8,793 | $320 | $23,383 | $2,177 | | Accrued Restructuring | Amount | | :-------------------- | :----- | | Balance as of Dec 31, 2024 | $2,297 | | Severance costs | $20,922 | | Asset-related and facility closure charges | $2,461 | | Cash payments | $(15,946) | | Balance as of June 30, 2025 | $7,646 | Note 8 – Share-Based Compensation This note details the company's share-based compensation plans, expenses, and unrecognized compensation | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :----- | :------ | :------ | :------ | :------ | | Share-based compensation expense | $3,700 | $4,200 | $6,900 | $8,100 | - Unrecognized compensation expense for restricted stock units was $12.1 million (weighted average remaining period of 1.7 years) and for PSUs was $9.4 million (weighted average remaining period of 2.3 years) as of June 30, 20256972 - PSUs are subject to market-based Total Shareholder Return (TSR) relative to the S&P Composite 1500 Chemicals index and performance-based Return on Invested Capital (ROIC) measures7071 Note 9 – Pension and Other Postretirement Benefits This note provides information on the company's pension and other postretirement benefit plans and costs | Metric | Q2 2025 (Pension) | Q2 2024 (Pension) | 6M 2025 (Pension) | 6M 2024 (Pension) | | :----- | :---------------- | :---------------- | :---------------- | :---------------- | | Net periodic benefit cost (income) | $568 | $586 | $1,116 | $1,174 | - Expected full-year cash contributions: $7.0 million to pension plans and $0.2 million to other postretirement benefit plans75 Note 10 – Other (Expense) Income, net This note details various non-operating income and expense items, including foreign exchange and disposals | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :----- | :------ | :------ | :------ | :------ | | Non-income tax refunds and other related credits | $132 | $868 | $300 | $3,023 | | (Loss) gain on disposals of property, plant, equipment and other assets, net | $(40) | $510 | $2,108 | $917 | | Foreign exchange losses, net | $(1,083) | $(727) | $(4,601) | $(1,175) | | Earnout liability adjustment | $(340) | — | $(340) | — | | Interest income | $752 | — | $1,412 | — | | Total other (expense) income, net | $(653) | $422 | $(1,362) | $1,502 | - Foreign exchange losses, net, increased significantly to $4.601 million for 6M 2025 from $1.175 million for 6M 202476 - A $2.2 million gain was recognized from the sale of certain property during the six months ended June 30, 202576 Note 11 – Income Taxes This note explains the company's effective tax rates, tax provisions, and the impact of tax law changes | Period | 2025 | 2024 | | :----- | :--- | :--- | | Q2 | (8.3)% | 32.8% | | 6M | (26.8)% | 30.1% | - The negative effective tax rates in 2025 were largely driven by goodwill impairment charges and the mix of pre-tax earnings80 - The "One Big Beautiful Bill Act" (OBBB), signed into law on July 4, 2025, includes significant changes to federal corporate tax provisions, which the company is currently assessing for future impact81 Note 12 – Earnings Per Share This note presents the calculation of basic and diluted earnings per share, including anti-dilutive shares | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :----- | :------ | :------ | :------ | :------ | | Net (loss) income attributable to Quaker Chemical Corporation | $(66,580) | $34,885 | $(53,658) | $70,112 | | Basic (loss) earnings per common share | $(3.78) | $1.94 | $(3.04) | $3.90 | | Diluted (loss) earnings per common share | $(3.78) | $1.94 | $(3.04) | $3.89 | - The number of anti-dilutive shares increased significantly to 60,117 (Q2 2025) and 67,575 (6M 2025) from 16,098 (Q2 2024) and 31,000 (6M 2024), reflecting the net loss82 Note 13 – Goodwill and Other Intangible Assets This note details the company's goodwill and other intangible assets, including acquisitions and impairment charges | Metric | Dec 31, 2024 | June 30, 2025 | | :----- | :----------- | :------------ | | Balance as of period end | $518,894 | $502,438 | | Goodwill recognized for Dipsol acquisition | — | $52,862 | | Goodwill impairments | — | $(88,840) | - A pre-tax, non-cash impairment charge of $88.8 million was recorded in Q2 2025 for the EMEA reporting unit's goodwill, driven by lower projected financial performance and increased cost of capital due to tariff uncertainty85 | Asset Type | June 30, 2025 | December 31, 2024 | | :--------- | :------------ | :---------------- | | Customer lists and rights to sell | $576,975 | $543,805 | | Trademarks, formulations and product technology | $130,014 | $97,884 | | Total definite-lived intangible assets | $707,076 | $641,785 | - Amortization expense for definite-lived intangible assets was $16.088 million for Q2 2025 and $30.325 million for 6M 202587 Note 14 – Debt This note provides information on the company's various debt instruments, interest rates, and credit facilities | Debt Type | June 30, 2025 | December 31, 2024 | | :-------- | :------------ | :---------------- | | Revolver | $277,063 | $48,820 | | U.S. Term Loan | $495,504 | $508,863 | | Euro Term Loan | $152,694 | $138,767 | | Total debt | $936,695 | $708,267 | | Total long-term debt | $897,953 | $669,614 | - The weighted average variable interest rate on the Credit Facility was approximately 5.2% for Q2 and 6M 202592 - The company has $300.0 million notional interest rate swaps to convert variable rate borrowings to a fixed rate of 3.64% plus applicable margin93 - Unused capacity under the Revolver was approximately $220 million as of June 30, 202592 Note 15 – Accumulated Other Comprehensive Income This note details the components of accumulated other comprehensive income, including currency translation adjustments | Component | Dec 31, 2024 | June 30, 2025 | | :-------- | :----------- | :------------ | | Currency Translation Adjustments | $(192,841) | $(103,831) | | Defined Benefit Pension Plans | $(10,313) | $(11,682) | | Unrealized Gain (Loss) in Available-for-Sale Securities | $287 | $(224) | | Derivative Instruments | $1,248 | $556 | | Total AOCI | $(201,619) | $(115,181) | - Other comprehensive income (loss) before reclassifications for 6M 2025 was $85.624 million, primarily due to currency translation adjustments102 Note 16 – Fair Value Measurements This note describes the company's fair value measurements for financial instruments and other assets - Company-owned life insurance policies are valued at fair value and are immaterial103 Note 17 – Hedging Activities This note explains the company's use of derivative instruments for hedging foreign currency and interest rate risks - Uses foreign exchange forward contracts to hedge currency variability on foreign currency-denominated assets/liabilities105 - Entered into $300.0 million notional interest rate swaps in Q1 2023 to convert variable-rate borrowings to fixed-rate, designated as cash flow hedges110 - Entered into cross-currency swaps totaling $175.0 million notional amount in Q2 2025 to hedge U.S. Dollar against European Euro and Japanese Yen, designated as net investment hedges111112 | Derivative Instrument | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------- | :------ | :------ | :------ | :------ | | Net investment hedges | $697 | — | $697 | — | | Interest rate swaps | $518 | $1,273 | $1,041 | $2,559 | | Foreign exchange forward contracts | $1,441 | $(1,675) | $(415) | $(732) | | Total | $2,656 | $(402) | $1,323 | $1,827 | Note 18 – Commitments and Contingencies This note outlines the company's commitments and potential liabilities, including environmental and legal matters - Accrued approximately $5.6 million for environmental matters and other litigation as of June 30, 2025116 - No new material adverse environmental matters or litigation during Q2 or 6M 2025117 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on the company's financial condition and results of operations, highlighting key performance drivers, liquidity, capital resources, and future outlook. It discusses the net loss in Q2 2025 due to an impairment charge, the impact of acquisitions, and ongoing soft market conditions Executive Summary This summary highlights key financial performance metrics, including net sales, net income, and cash flow - Net sales increased 4% to $483.4 million in Q2 2025, driven by 6% from acquisitions and 2% from sales volumes, partially offset by a 4% decline in selling price/product mix122 - Reported a net loss of $66.6 million ($3.78 diluted EPS) in Q2 2025, compared to net income of $34.9 million ($1.94 diluted EPS) in Q2 2024, primarily due to an $88.8 million non-cash goodwill impairment charge123 - Non-GAAP net income decreased to $30.0 million ($1.71 diluted EPS) in Q2 2025 from $38.2 million ($2.13 diluted EPS) in Q2 2024, due to lower gross margins and higher SG&A123 - Net cash flows provided by operating activities decreased to $38.5 million in 6M 2025 from $73.5 million in 6M 2024, reflecting lower operating performance and higher restructuring cash outflows125 Critical Accounting Policies and Estimates This section discusses the significant accounting policies and estimates that require management's judgment - No material changes to critical accounting policies and estimates since the 2024 Form 10-K129 Recently Issued Accounting Standards This section refers to Note 3 for details on recently issued accounting standards and their potential impact - Refer to Note 3 for information on recently adopted and issued accounting standards130 Liquidity and Capital Resources This section analyzes the company's cash position, debt, and ability to meet short-term and long-term obligations | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Cash and cash equivalents | $201,918 | $188,880 | - Net cash provided by operating activities decreased to $38.5 million in 6M 2025 from $73.5 million in 6M 2024132 - Net cash used in investing activities increased to $180.7 million in 6M 2025 (vs. $33.2 million in 6M 2024), primarily due to $164.1 million in acquisition payments133 - Net cash provided by financing activities increased to $147.5 million in 6M 2025 (vs. $39.3 million used in 6M 2024), driven by $216.0 million net borrowings on the revolving credit facility134 - Total net debt as of June 30, 2025, was approximately $734.8 million136 - The company repurchased approximately $32.7 million of common stock under its share repurchase program in 6M 2025134 Operations Review This review analyzes the company's consolidated and segment-level operational performance for the reporting periods Consolidated Operations Review – Comparison of the Second Quarter of 2025 with the Second Quarter of 2024 This review compares the company's consolidated operational performance for Q2 2025 against Q2 2024 | Segment | Sales volumes | Selling price & product mix | Foreign currency | Acquisition & other | Total | | :------ | :------------ | :-------------------------- | :--------------- | :------------------ | :---- | | Americas | (2)% | 1 % | (2)% | 2 % | (1)% | | EMEA | 1 % | (7)% | 4 % | 3 % | 1 % | | Asia/Pacific | 8 % | (5)% | — % | 17 % | 20 % | | Consolidated | 2 % | (4)% | — % | 6 % | 4 % | - COGS increased 8% to $311.7 million, reflecting higher sales volumes, raw material costs, manufacturing costs, and $6.0 million Dipsol inventory step-up amortization, partially offset by a $3.6 million inventory adjustment gain148 - Gross margin decreased to 35.5% (GAAP) and 36.0% (non-GAAP) in Q2 2025 from 37.9% in Q2 2024149 - SG&A increased 8% to $126.6 million, primarily due to acquisitions150 - Operating loss of $52.5 million in Q2 2025 was primarily due to an $88.8 million non-cash goodwill impairment charge in the EMEA segment153154 Consolidated Operations Review – Comparison of the First Six Months of 2025 with the First Six Months of 2024 This review compares the company's consolidated operational performance for 6M 2025 against 6M 2024 | Segment | Sales volumes | Selling price & product mix | Foreign currency | Acquisition & other | Total | | :------ | :------------ | :-------------------------- | :--------------- | :------------------ | :---- | | Americas | (2)% | — % | (3)% | 1 % | (4)% | | EMEA | (3)% | (3)% | 1 % | 2 % | (3)% | | Asia/Pacific | 4 % | (4)% | (1)% | 10 % | 9 % | | Consolidated | (1)% | (2)% | (2)% | 4 % | (1)% | - COGS increased 3% to $593.3 million, reflecting higher raw material and manufacturing costs, and $6.0 million Dipsol inventory step-up amortization, partially offset by a $3.6 million inventory adjustment gain163 - Gross margin decreased to 35.9% (GAAP) and 36.2% (non-GAAP) in 6M 2025 from 38.3% in 6M 2024164 - SG&A increased 2% to $245.6 million, primarily due to acquisitions, partially offset by lower incentive compensation165 - Operating loss of $24.9 million in 6M 2025 was primarily due to an $88.8 million non-cash goodwill impairment charge in the EMEA segment167168 Reportable Segments Review - Comparison of the Second Quarter of 2025 with the Second Quarter of 2024 This review analyzes the performance of each reportable segment for Q2 2025 compared to Q2 2024 - Americas: Net sales decreased 1% to $221.1 million, driven by 2% lower sales volumes (soft end markets, tariffs) and 2% unfavorable foreign currency, partially offset by 2% from acquisitions. Segment operating earnings decreased 8% to $59.0 million due to lower net sales and gross margins[177](index=
Quaker(KWR) - 2025 Q2 - Quarterly Report