UNITED STATES SECURITIES
AND EXCHANGE COMMISSION Washington, D. C. 20549   
    FORM 10-Q   
    [X]
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934
 For the
quarterly period ended June 30, 2015  OR  [   ]
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934
  For the transition period fromto  Commission file number 001-12019   
    QUAKER CHEMICAL CORPORATION (Exact name of Registrant as specified in
its charter)   
    Pennsylvania
 
 23-0993790(State or other jurisdiction of
  incorporation or organization)
 
 (I.R.S. Employer
  Identification No.)
  One Quaker Park, 901 E. Hector Street,
  Conshohocken, Pennsylvania
 
 19428 – 2380(Address of principal executive offices)
 
 (Zip Code)
  Registrant’s telephone number, including
area code: 610-832-4000  Not Applicable Former name, former address and former
fiscal year, if changed since last report.   
  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[X]No[  ]  Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted 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 and post
such files).            Yes[X]No[  ]  Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.   Large accelerated filer[X]
 
 Accelerated filer[  ]Non-accelerated filer[  ](Do not check
  if smaller reporting company)
 Smaller reporting company[  ]
    Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act).    Yes[  ]No[X]  Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date.  Number of Shares of Common Stock
  Outstanding on June 30, 2015
 
 13,336,918


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QUAKER CHEMICAL CORPORATION AND
CONSOLIDATED SUBSIDIARIES  PagePART I.
 
 FINANCIAL INFORMATIONItem 1.
 
 Financial
  Statements (unaudited)Condensed Consolidated Statements of Income for the
  Three and Six Months Ended June 30, 2015 and June 30, 2014
 1Condensed Consolidated Statements of Comprehensive Income for the
  Three and Six Months Ended June 30, 2015 and June 30, 2014
 2Condensed
  Consolidated Balance Sheets at June 30, 2015 and December 31, 2014
 3Condensed
  Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015
  and June 30, 2014
 4Notes to
  Condensed Consolidated Financial Statements
 5Item 2.
 
 Management’s Discussion and Analysis of
  Financial Condition and Results of Operations
 22Item 3.
 
 Quantitative
  and Qualitative Disclosures about Market Risk
 29Item 4.
 
 Controls and
  Procedures
 30PART II.
 
 OTHER INFORMATION
 31Item 1.
 
 Legal Proceedings
 31Item 2.
 
 Unregistered
  Sales of Equity Securities and Use of Proceeds
 31Item 6.
 
 Exhibits
 32Signatures
 32


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PART I FINANCIAL INFORMATION  Item 1.                        Financial Statements
(Unaudited).  Quaker Chemical
Corporation Condensed
Consolidated Statements of Income (Dollars in thousands, except per share data)  UnauditedThree Months
  Ended June 30,
 
 Six Months
  Ended June 30,2015
 
 2014
 
 2015
 
 2014Net sales
 $
 183,726
 
 $
 191,286
 
 $
 365,056
 
 $
 372,960Cost of goods sold
 
 113,109
 
 
 123,070
 
 
 228,111
 
 
 239,630Gross profit
 
 70,617
 
 
 68,216
 
 
 136,945
 
 
 133,330Selling, general and administrative
  expenses
 
 49,172
 
 
 47,271
 
 
 97,636
 
 
 93,012Operating income
 
 21,445
 
 
 20,945
 
 
 39,309
 
 
 40,318Other (expense) income, net
 
 (88)
 
 
 117
 
 
 (282)
 
 
 (356)Interest expense
 
 (607)
 
 
 (581)
 
 
 (1,194)
 
 
 (1,106)Interest income
 
 375
 
 
 895
 
 
 695
 
 
 1,348Income before taxes and equity in net
  income of associatedcompanies
 
 21,125
 
 
 21,376
 
 
 38,528
 
 
 40,204Taxes on income before equity in net
  income of associatedcompanies
 
 5,724
 
 
 6,538
 
 
 11,083
 
 
 13,084Income before equity in net income of
  associated companies
 
 15,401
 
 
 14,838
 
 
 27,445
 
 
 27,120Equity in net income (loss) of
  associated companies
 
 11
 
 
 1,104
 
 
 (1,426)
 
 
 2,131Net income
 
 15,412
 
 
 15,942
 
 
 26,019
 
 
 29,251Less: Net income attributable to
  noncontrolling interest
 
 374
 
 
 515
 
 
 603
 
 
 1,094Net income attributable to Quaker
  Chemical Corporation
 $
 15,038
 
 $
 15,427
 
 $
 25,416
 
 $
 28,157Per share data:Net income attributable to Quaker
  Chemical CorporationCommon Shareholders – basic
 $
 1.13
 
 $
 1.17
 
 $
 1.91
 
 $
 2.13Net income attributable to Quaker
  Chemical CorporationCommon Shareholders – diluted
 $
 1.13
 
 $
 1.16
 
 $
 1.90
 
 $
 2.13Dividends declared
 $
 0.32
 
 $
 0.30
 
 $
 0.62
 
 $
 0.55
  The accompanying notes are an
integral part of these condensed consolidated financial statements. 1


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Quaker Chemical Corporation Condensed
Consolidated Statements of Comprehensive Income (Dollars in thousands)   UnauditedThree Months
  Ended June 30,
 
 Six Months
  Ended June 30,2015
 
 2014
 
 2015
 
 2014Net income
 $
 15,412
 
 $
 15,942
 
 $
 26,019
 
 $
 29,251Other comprehensive income (loss), net
  of taxCurrency translation adjustments
 
 2,468
 
 
 981
 
 
 (8,615)
 
 
 2,255Defined benefit retirement plans
 
 (51)
 
 
 613
 
 
 2,427
 
 
 1,159Unrealized gain on available-for-sale
  securities
 
 (341)
 
 
 (171)
 
 
 (271)
 
 
 (102)Other comprehensive income (loss)
 
 2,076
 
 
 1,423
 
 
 (6,459)
 
 
 3,312Comprehensive income
 
 17,488
 
 
 17,365
 
 
 19,560
 
 
 32,563Less: Comprehensive income attributable
  to noncontrollinginterest
 
 (250)
 
 
 (510)
 
 
 (509)
 
 
 (1,293)Comprehensive income attributable to
  Quaker ChemicalCorporation
 $
 17,238
 
 $
 16,855
 
 $
 19,051
 
 $
 31,270
  The accompanying notes are an integral
part of these condensed consolidated financial statements. 2


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Quaker Chemical Corporation Condensed
Consolidated Balance Sheets (Dollars in
thousands, except par value and share amounts)   UnauditedJune 30,  2015
 
 December 31, 2014ASSETSCurrent
  assetsCash
  and cash equivalents
 $
 65,784
 
 $
 64,731Accounts
  receivable, net
 
 187,415
 
 
 189,484InventoriesRaw
  materials and supplies
 
 38,050
 
 
 37,961Work-in-process
  and finished goods
 
 38,991
 
 
 39,747Prepaid
  expenses and other current assets
 
 20,614
 
 
 19,595Total
  current assets
 
 350,854
 
 
 351,518Property,
  plant and equipment, at cost
 
 228,741
 
 
 234,516Less
  accumulated depreciation
 
 (147,371)
 
 
 (148,753)Net
  property, plant and equipment
 
 81,370
 
 
 85,763Goodwill
 
 76,017
 
 
 77,933Other
  intangible assets, net
 
 66,034
 
 
 70,408Investments
  in associated companies
 
 20,078
 
 
 21,751Deferred
  income taxes
 
 20,740
 
 
 24,411Other
  assets
 
 32,971
 
 
 33,742Total
  assets
 $
 648,064
 
 $
 665,526LIABILITIES
  AND EQUITYCurrent
  liabilitiesShort-term
  borrowings and current portion of long-term debt
 $
 397
 
 $
 403Accounts
  and other payables
 
 74,762
 
 
 78,977Accrued
  compensation
 
 13,784
 
 
 19,853Other
  current liabilities
 
 24,997
 
 
 25,668Total
  current liabilities
 
 113,940
 
 
 124,901Long-term
  debt
 
 61,694
 
 
 75,328Deferred
  income taxes
 
 7,454
 
 
 8,584Other
  non-current liabilities
 
 86,450
 
 
 91,578Total
  liabilities
 
 269,538
 
 
 300,391Commitments
  and contingencies (Note 14)EquityCommon
  stock $1 par value; authorized 30,000,000 shares; issued andoutstanding
  2015 – 13,336,918 shares; 2014 – 13,300,891 shares
 
 13,337
 
 
 13,301Capital
  in excess of par value
 
 103,082
 
 
 99,056Retained
  earnings
 
 315,060
 
 
 299,524Accumulated
  other comprehensive loss
 
 (60,771)
 
 
 (54,406)Total
  Quaker shareholders’ equity
 
 370,708
 
 
 357,475Noncontrolling
  interest
 
 7,818
 
 
 7,660Total
  equity
 
 378,526
 
 
 365,135Total
  liabilities and equity
 $
 648,064
 
 $
 665,526
  The accompanying notes are an
integral part of these condensed consolidated financial statements. 3


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Quaker Chemical Corporation Condensed
Consolidated Statements of Cash Flows (Dollars in thousands)  UnauditedFor the Six
  Months EndedJune 30,2015
 
 2014Cash flows from operating activitiesNet income
 $
 26,019
 
 $
 29,251Adjustments to reconcile net income to
  net cash provided by operating activities:Depreciation
 
 6,117
 
 
 6,084Amortization
 
 3,247
 
 
 1,628Equity in undistributed earnings of
  associated companies, net of dividends
 
 1,487
 
 
 (1,931)Deferred compensation and other, net
 
 1,325
 
 
 3,340Stock-based compensation
 
 3,169
 
 
 2,732Gain on disposal of property, plant and equipment
  and other assets
 
 (69)
 
 
 (97)Insurance settlement realized
 
 (301)
 
 
 (980)Pension and other postretirement
  benefits
 
 1,019
 
 
 (926)(Decrease) increase in cash from changes
  in current assets and current liabilities, net of acquisitions:Accounts receivable
 
 (2,344)
 
 
 (20,563)Inventories
 
 (1,993)
 
 
 (7,568)Prepaid expenses and other current
  assets
 
 (4,057)
 
 
 1,157Accounts payable and accrued liabilities
 
 (6,301)
 
 
 (3,873)Net cash provided by operating
  activities
 
 27,318
 
 
 8,254Cash flows from investing activitiesInvestments in property, plant and
  equipment
 
 (4,277)
 
 
 (5,521)Payments related to acquisitions, net of
  cash acquired
 
 528
 
 
 —Proceeds from disposition of assets
 
 102
 
 
 128Insurance settlement interest earned
 
 20
 
 
 23Change in restricted cash, net
 
 281
 
 
 957Net cash used in investing activities
 
 (3,346)
 
 
 (4,413)Cash flows from financing activitiesProceeds from long-term debt
 
 —
 
 
 7,500Repayment of long-term debt
 
 (12,699)
 
 
 (248)Dividends paid
 
 (7,991)
 
 
 (6,607)Stock options exercised, other
 
 534
 
 
 (33)Payments for repurchase of common stock
 
 (1,630)
 
 
 —Excess tax benefit related to stock
  option exercises
 
 378
 
 
 267Purchase of a noncontrolling interest in
  an affiliate
 
 —
 
 
 (7,532)Payment of acquisition-related earnout
  liability
 
 —
 
 
 (4,709)Distributions to noncontrolling
  affiliate shareholders
 
 —
 
 
 (657)Net cash used in financing activities
 
 (21,408)
 
 
 (12,019)Effect of exchange rate changes on cash
 
 (1,511)
 
 
 (82)Net increase (decrease) in cash and cash
  equivalents
 
 1,053
 
 
 (8,260)Cash and cash equivalents at beginning
  of period
 
 64,731
 
 
 68,492Cash and cash equivalents at end of
  period
 $
 65,784
 
 $
 60,232
  The accompanying notes are an
integral part of these condensed consolidated financial statements.   4


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Quaker
Chemical Corporation Notes to Condensed Consolidated Financial Statements (Dollars
in thousands, except share and per share amounts) (Unaudited)  Note 1 – Condensed Financial
Information The condensed consolidated financial statements
included herein are unaudited and have been prepared in accordance with
generally accepted accounting principles in the United States (“U.S. GAAP”) for
interim financial reporting and the United States Securities and Exchange
Commission (“SEC”) regulations.  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with U.S. GAAP
have been condensed or omitted pursuant to such rules and regulations.  In the
opinion of management, the financial statements reflect all adjustments
(consisting only of normal recurring adjustments, except certain material
adjustments, as discussed below) which are necessary for a fair statement of
the financial position, results of operations and cash flows for the interim
periods.  The results for the six months ended June 30, 2015 are not
necessarily indicative of the results to be expected for the full year.  These
financial statements should be read in conjunction with the Company’s Annual
Report filed on Form 10-K for the year ended December 31, 2014. In 2003, the
Venezuelan government suspended the free exchange of Bolivar Fuerte (“BsF”) for
foreign currency and implemented certain foreign exchange controls that served
to centralize the purchase and sale of foreign currency within the country.  As
of December 31, 2014, there were three legally available exchange rates in
Venezuela, the CADIVI (or the official rate, 6.3 BsF per U.S. Dollar), the
SICAD I (approximately 12 BsF per U.S. Dollar) and the SICAD II (approximately
52 BsF per U.S. Dollar).  In the first quarter of 2015, the Company understood
that the Venezuelan government announced changes to its exchange controls.  The
Company understood that there continued to be three exchange mechanisms in
Venezuela; however, they now consisted of the CADIVI, a combined SICAD I and
SICAD II auction mechanism (the “SICAD”) and a newly created, marginal currency
system (the “SIMADI”).  The CADIVI exchange largely remained the same, except
that the government further restricted what products qualify and can,
therefore, legally be imported or traded under this exchange.  The government
has yet to fully disclose who can access or trade on the newly formed combined
SICAD market and minimal related auctions have occurred since late 2014. 
Finally, the newly created SIMADI is legally available to all parties, however,
at significantly higher exchange rates than the CADIVI or SICAD.  As ofJune 30, 2015, the published
rate for the SIMADI is approximately197BsF per U.S. Dollar. The Company has a Venezuelan equity affiliate, Kelko Quaker
Chemical, S.A. (“Kelko Venezuela”).  Venezuela’s economy has been considered
hyper inflationary under U.S. GAAP since 2010, at which time Kelko Venezuela’s
functional currency was changed to the U.S. Dollar.  Accordingly, all gains and
losses resulting from the remeasurement of Kelko Venezuela’s monetary assets
and liabilities to the CADIVI or other published exchange rates are required to
be recorded directly to the Condensed Consolidated Statement of Income.  As of
December 31, 2014, Kelko Venezuela had access to the CADIVI for imported goods,
had not been invited to participate in any SICAD I auctions and had limited
access to the SICAD II mechanism.  Accordingly, the Company measured its equity
investment and other related assets with Kelko Venezuela at the CADIVI exchange
rate at December 31, 2014.  In light of the first quarter of 2015 changes to
Venezuela’s foreign exchange controls and the on-going economic challenges in
Venezuela, the Company re-assessed Kelko Venezuela’s access to U.S. Dollars,
the impact on the operations of Kelko Venezuela, and the impact on the
Company’s equity investment and other related assets.  During the first quarter
of 2015, the Company determined that the CADIVI was no longer available to
Kelko Venezuela for import transactions and the government has yet to fully
disclose who can access or trade on the newly formed combined SICAD mechanism
and minimal related auctions have occurred to date.  As a result, the Company
revalued its equity investment in Kelko Venezuela and other related assets to
the SIMADI exchange rate of approximately193BsF per U.S. Dollar as ofMarch 31, 2015.  This resulted in
a charge of approximately$2,806, or $0.21per diluted share, recorded in the first quarter of
2015.  Comparatively, during the second quarter of 2014, the Company recorded a
charge of $321, or $0.02 per diluted share, related to the conversion of
certain Venezuelan Bolivar Fuerte to U.S. Dollars on the historical SICAD II
exchange.  As ofJune
30, 2015,the Company’s equity investment in Kelko Venezuela was$143, which continues to be
valued atthe SIMADI exchange rate. As part of the Company’s
chemical management services, certain third-party product sales to customers
are managed by the Company.  Where the Company acts as the principal, revenue
is recognized on a gross reporting basis at the selling price negotiated with
customers.  Where the Company acts as an agent, such revenue is recorded using
net reporting as service revenues, at the amount of the administrative fee
earned by the Company for ordering the goods.Third-party products transferred under
arrangements resulting in net reporting totaled $12,188 and $24,053 for the
three and six months ended June 30, 2015, respectively.  Comparatively, third-party
products transferred under arrangements resulting in net reporting totaled
$10,926 and $21,499 for the three and six months ended June 30, 2014, respectively.  5


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Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 Note 2 –Recently Issued Accounting Standards The
Financial Accounting Standards Board ("FASB") issued an accounting
standard update in May 2015 regarding the required disclosures for entities
that elect to measure the fair value of certain investments using the net asset
value per share (or its equivalent) practical expedient in accordance with the
fair value measurement authoritative guidance.  The update removes the
requirement to categorize within the fair value hierarchy, and, also, limits
the requirement to make certain other disclosures, for all such investments.
The amendments in this update are effective for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years, and should be
applied on a retrospective basis for the periods presented.  Early adoption is
permitted.  The Company is currently evaluating the effects of this guidance,but does not expect a material
impact. The
FASB issued an accounting standard update in April 2015 regarding the
presentation of debt issuance costs on the balance sheet.  The update requires
capitalized debt issuance costs be presented on the balance sheet as a
reduction to debt, rather than recorded as a separate asset.  The amendments in
this update are effective for annual and interim periods beginning after
December 15, 2015 and should be applied on a retrospective basis for the
periods presented.  Early adoption is permitted.  Also, in June 2015, the SEC
staff announced that the guidance within this accounting standard update was
not applicable to revolving debt arrangements or credit facilities.  The
Company is currently evaluating the effects of this guidance, and the SEC’s
recent announcement, but does not expect a material impact. The FASB issued an accounting standard
update in May 2014 regarding the accounting for and disclosure of revenue
recognition.  Specifically, the update outlined a single comprehensive model
for entities to use in accounting for revenue arising from contracts with
customers, which will be common to both U.S. GAAP and International Financial
Reporting Standards.  The guidance was effective for annual and interim periods
beginning after December 15, 2016, which allowed for full retrospective
adoption of prior period data or a modified retrospective adoption.  Early
adoption was not permitted.  In July 2015, the FASB issued an update to delay
the effective date of the new revenue standard by one year, or, in other words,
to be effective for annual and interim periods beginning after December 15,
2017.  Entities will be permitted to adopt the new revenue standard early, but
not before the original effective date.  The Company is currently evaluating
the effects of this guidance.  Note 3 – Business Segments The
Company’s reportable operating segments are organized by geography as follows:
(i) North America, (ii) Europe, Middle East and Africa (“EMEA”), (iii)
Asia/Pacific and (iv) South America.Operating earnings, excluding indirect operating expenses,
for the Company’s reportable operating segments are comprised of revenues less
costs of goods sold and selling, general and administrative expenses (“SG&A”)
directly related to the respective regions’ product sales.  The indirect
operating expenses consist of SG&A related expenses that are not directly
attributable to the product sales of each respective reportable operating
segment.  Other items not specifically identified with the Company’s reportable
operating segments include interest expense, interest income, license fees from
non-consolidated affiliates and other (expense) income.  6


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Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 The
following table presents information about the performance of the Company’s
reportable operating segments for thethree and six months ended June 30, 2015 and 2014: Three Months
  Ended
 
 Six Months
  EndedJune 30,
 
 June 30,2015
 
 2014
 
 2015
 
 2014Net salesNorth America
 $
 85,965
 
 $
 82,512
 
 $
 168,967
 
 $
 159,228EMEA
 
 41,171
 
 
 50,228
 
 
 84,356
 
 
 99,417Asia/Pacific
 
 47,846
 
 
 45,123
 
 
 92,846
 
 
 87,060South America
 
 8,744
 
 
 13,423
 
 
 18,887
 
 
 27,255Total net sales
 $
 183,726
 
 $
 191,286
 
 $
 365,056
 
 $
 372,960Operating earnings, excluding indirect
  operating expensesNorth America
 $
 20,220
 
 $
 17,868
 
 $
 38,045
 
 $
 33,579EMEA
 
 6,861
 
 
 8,109
 
 
 13,432
 
 
 16,205Asia/Pacific
 
 12,190
 
 
 10,221
 
 
 22,624
 
 
 20,139South America
 
 757
 
 
 889
 
 
 2,009
 
 
 2,398Total operating earnings, excluding
  indirect operating expenses
 
 40,028
 
 
 37,087
 
 
 76,110
 
 
 72,321Indirect operating expenses
 
 (16,963)
 
 
 (15,327)
 
 
 (33,554)
 
 
 (30,375)Amortization expense
 
 (1,620)
 
 
 (815)
 
 
 (3,247)
 
 
 (1,628)Consolidated operating income
 
 21,445
 
 
 20,945
 
 
 39,309
 
 
 40,318Other (expense) income, net
 
 (88)
 
 
 117
 
 
 (282)
 
 
 (356)Interest expense
 
 (607)
 
 
 (581)
 
 
 (1,194)
 
 
 (1,106)Interest income
 
 375
 
 
 895
 
 
 695
 
 
 1,348Consolidated income before taxes and
  equity in net income ofassociated companies
 $
 21,125
 
 $
 21,376
 
 $
 38,528
 
 $
 40,204
 Inter-segment revenue for thethree and six months ended
June 30, 2015 was $2,615 and $4,635 for North America, $4,595 and $9,374 for
EMEA, $162 and $256 for Asia/Pacific and $4 and $13 for South America,
respectively.Inter-segment
revenue for thethree
and six months ended June 30, 2014 was $1,856 and $3,806 for North America,
$5,455 and $10,781 for EMEA, $95 and $202 for Asia/Pacific and zero for South
America, respectively.However, all inter-segment transactions have been eliminated
from each reportable operating segment’s net sales and earnings for all periods
presented above. Note 4 – Stock-Based Compensation The
Company recognized the following share-based compensation expense in selling,
general and administrative expenses in its Condensed Consolidated Statements of
Income for the three and six months ended June 30, 2015 and 2014: Three Months
  Ended
 
 Six Months
  EndedJune 30,
 
 June 30,2015
 
 2014
 
 2015
 
 2014Stock options
 $
 199
 
 $
 171
 
 $
 384
 
 $
 321Nonvested stock awards and restricted
  stock units
 
 759
 
 
 609
 
 
 1,511
 
 
 1,165Employee stock purchase plan
 
 19
 
 
 19
 
 
 37
 
 
 36Non-elective and elective 401(k)
  matching contribution in stock
 
 476
 
 
 499
 
 
 1,175
 
 
 1,148Director stock ownership plan
 
 31
 
 
 46
 
 
 62
 
 
 62Total share-based compensation expense
 $
 1,484
 
 $
 1,344
 
 $
 3,169
 
 $
 2,732
 As of June 30, 2015 and 2014, the Company recorded $378 and
$267, respectively, of excess tax benefits in capital in excess of par value on
its Condensed Consolidated Balance Sheets related to stock option exercises.  The
Company’s estimated taxes payable was sufficient to fully recognize these
benefits as cash inflows from financing activities in its Condensed
Consolidated Statement of Cash Flows, which represented the Company’s estimate
of cash savings through the six months ended June 30, 2015 and 2014,
respectively. 7


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Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 Stock option activity under all plans is as follows: Weighted
  AverageWeighted
  Average
 
 RemainingNumber of
 
 Exercise
  Price
 
 ContractualOptions
 
 (per option)
 
 Term (years)Options outstanding at December 31, 2014
 87,075
 
 $
 59.09Options granted
 38,698
 
 
 87.30Options exercised
 (15,026)
 
 
 44.42Options outstanding at June 30, 2015
 110,747
 
 $
 70.94
 
 
 
 5.5Options exercisable at June 30, 2015
 37,588
 
 $
 55.73
 
 
 
 4.6
 As of June 30, 2015, the total
intrinsic value of options outstanding was approximately $2,027, and the total
intrinsic value of exercisable options was $1,260.  Intrinsic value is
calculated as the difference between the current market price of the underlying
security and the strike price of a related option. A summary of the Company’s
outstanding stock options at June 30, 2015 is as follows: Weighted
 
 Weighted
 
 
 
 WeightedNumber
 
 Average
 
 Average
 
 Number
 
 AverageRange of
 
 of Options
 
 Contractual
 
 Exercise
  Price
 
 of Options
 
 Exercise
  PriceExercise Prices
 
 Outstanding
 
 Term (years)
 
 (per option)
 
 Exercisable
 
 (per option)$
 —
 -
 
 $
 10.00
 
 —
 
 —
 
 $
 —
 
 —
 
 $
 —$
 10.01
 -
 
 $
 20.00
 
 2,367
 
 1.6
 
 
 18.82
 
 2,367
 
 
 18.82$
 20.01
 -
 
 $
 30.00
 
 —
 
 —
 
 
 —
 
 —
 
 
 —$
 30.01
 -
 
 $
 40.00
 
 7,557
 
 3.7
 
 
 38.13
 
 7,557
 
 
 38.13$
 40.01
 -
 
 $
 50.00
 
 2,192
 
 4.0
 
 
 46.21
 
 2,192
 
 
 46.21$
 50.01
 -
 
 $
 60.00
 
 23,622
 
 4.7
 
 
 58.26
 
 13,854
 
 
 58.26$
 60.01
 -
 
 $
 70.00
 
 —
 
 —
 
 
 —
 
 —
 
 
 —$
 70.01
 -
 
 $
 80.00
 
 36,311
 
 5.7
 
 
 73.47
 
 11,618
 
 
 73.47$
 80.01
 -
 
 $
 90.00
 
 38,698
 
 6.7
 
 
 87.30
 
 —
 
 
 —110,747
 
 5.5
 
 
 70.94
 
 37,588
 
 
 55.73
 As of June 30, 2015, unrecognized compensation expense
related to options granted during 2013 was $145, for options granted during
2014 was $454 and for options granted in 2015 was $785. During the first quarter of 2015, the Company granted
stock options under its LTIP plan that are subject only to time vesting over a
three-year period.  For the purposes of determining the fair value of stock
option awards, the Company uses the Black-Scholes option pricing model and the
assumptions set forth in the table below: 2015Number of options granted
 38,698Dividend Yield
 1.55
 %Expected Volatility
 36.32
 %Risk-free interest rate
 1.22
 %Expected term (years)
 4.0
  Approximately $74 and $101 of expense was recorded on
these options during the three and six months ended June 30, 2015, respectively. 
The fair value of these awards is amortized on a straight-line basis over the
vesting period of the awards.      8


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 Activity
of nonvested shares granted under the Company’s LTIP plan is shown below: WeightedAverage GrantNumber of
 
 Date Fair
  ValueShares
 
 (per share)Nonvested awards, December 31, 2014
 124,450
 
 $
 61.80Granted
 27,266
 
 $
 86.39Vested
 (32,931)
 
 $
 46.40Forfeited
 (3,421)
 
 $
 62.65Nonvested awards, June 30, 2015
 115,364
 
 $
 71.99
 The fair value of the nonvested stock is based on the
trading price of the Company’s common stock on the date of grant.  The Company
adjusts the grant date fair value for expected forfeitures based on historical
experience for similar awards.  As of June 30, 2015, unrecognized compensation
expense related to these awards was $4,941 to be recognized over a weighted
average remaining period of 2.08 years. Activity
of nonvested restricted stock units granted under the Company’s LTIP plan is
shown below: WeightedAverage GrantNumber of
 
 Date Fair
  ValueUnits
 
 (per unit)Nonvested awards, December 31, 2014
 7,158
 
 $
 61.03Granted
 1,450
 
 $
 87.30Vested
 (2,434)
 
 $
 43.45Nonvested awards, June 30, 2015
 6,174
 
 $
 74.14
 The fair value of the nonvested restricted stock units
is based on the trading price of the Company’s common stock on the date of
grant.  The Company adjusts the grant date fair value for expected forfeitures
based on historical experience for similar awards.  As of June 30, 2015,
unrecognized compensation expense related to these awards was $236 to be
recognized over a weighted average remaining period of 1.97 years. Employee Stock Purchase Plan In
2000, the Board adopted an Employee Stock Purchase Plan (“ESPP”) whereby
employees may purchase Company stock through a payroll deduction plan.  Purchases
are made from the plan and credited to each participant’s account at the end of
each month, the “Investment Date.”  The purchase price of the stock is 85% of the fair market value
on the Investment Date.  The plan is compensatory and the 15% discount is expensed on
the Investment Date.  All employees, including officers, are eligible to
participate in this plan.  A participant may withdraw all uninvested payment
balances credited to a participant’s account at any time.  An employee whose stock ownership of
the Company exceeds five percent of the outstanding common stock is not
eligible to participate in this plan. 2013 Director Stock Ownership
Plan In
2013, the Company adopted the 2013 Director Stock Ownership Plan (the “Plan”),to encourage the Directors to
increase their investment in the Company, which was approved at the Company’s
May 2013 shareholders’ meeting.  The Plan authorizes the issuance of up to 75,000 shares of Quaker common
stock in accordance with the terms of the Plan in payment of all or a portion
of the annual cash retainer payable to each of the Company’s non-employee
directors in 2013 and subsequent years during the term of the Plan.  Under the Plan, each director who, on
May 1 of the applicable calendar year, owns less than 400% of the annual cash
retainer for the applicable calendar year, divided by the average of the
closing price of a share of Quaker Common Stock as reported by the composite
tape of the New York Stock Exchange for the previous calendar year (the
“Threshold Amount”), is required to receive 75% of the annual cash retainer in
Quaker common stock and 25% of the retainer in cash, unless the director elects
to receive a greater percentage of Quaker common stock (up to 100%) of the
annual cash retainer for the applicable year.  Each director who owns more than
the Threshold Amount may elect to receive common stock in payment of a
percentage (up to 100%) of the annual cash retainer.  The annual retainer is
$50 and the retainer payment date is June 1.  9


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 Note 5 – Pension and Other
Postretirement Benefits The components of net periodic benefit cost for the
three and six months ended June 30, 2015 and 2014 are as follows: Three Months
  Ended June 30,
 
 Six Months
  Ended June 30,Other
 
 
 
 
 
 
 
 OtherPostretirement
 
 
 
 
 
 
 
 PostretirementPension
  Benefits
 
 Benefits
 
 Pension
  Benefits
 
 Benefits2015
 
 
 2014
 
 
 2015
 
 
 2014
 
 
 2015
 
 
 2014
 
 
 2015
 
 
 2014Service Cost
 $
 761
 
 $
 736
 
 $
 6
 
 $
 2
 
 $
 1,534
 
 $
 1,470
 
 $
 11
 
 $
 10Interest Cost and other
 
 1,254
 
 
 1,519
 
 
 49
 
 
 62
 
 
 2,516
 
 
 3,061
 
 
 99
 
 
 116Expected return on plan assets
 
 (1,396)
 
 
 (1,601)
 
 
 —
 
 
 —
 
 
 (2,798)
 
 
 (3,208)
 
 
 —
 
 
 —Actuarial loss amortization
 
 877
 
 
 759
 
 
 26
 
 
 26
 
 
 1,758
 
 
 1,548
 
 
 52
 
 
 32Prior service cost amortization
 
 (25)
 
 
 (15)
 
 
 —
 
 
 —
 
 
 (51)
 
 
 851
 
 
 —
 
 
 —Net periodic benefit cost
 $
 1,471
 
 $
 1,398
 
 $
 81
 
 $
 90
 
 $
 2,959
 
 $
 3,722
 
 $
 162
 
 $
 158
 During 2013, it was discovered that the
Company’s subsidiary in the United Kingdom (“U.K.”) did not appropriately amend
a trust for a legacy change in its pension scheme, as it related to a past
retirement age equalization law.  Given the lack of an official deed to the
pension trust, the effective date of the change to the Subsidiary’s pension
scheme differed from the Company’s historical beliefs, but the extent of the
potential exposure was not estimable.  In the first quarter of 2014, the Company
recorded costs of $902, or $0.05 per diluted share, related to prior service
cost and interest cost, to appropriately reflect the past plan amendment
related to the retirement age equalization law. Employer Contributions The Company
previously disclosed in its financial statements for the year ended
December 31, 2014, that it expected to make minimum cash contributions of
$4,176 to its pension plans and $568 to its other postretirement benefit plan
in 2015.  As of June 30, 2015, $1,565 and $354 of contributions have been made
to the Company’s pension plans and its postretirement benefit plans,
respectively. Note 6 – Other (expense) income, net The components of other
(expense) income, net for the three and six months ended June 30, 2015 and 2014
are as follows: Three Months
  Ended
 
 Six Months
  EndedJune 30,
 
 June 30,2015
 
 2014
 
 2015
 
 2014Income from third party license fees
 $
 204
 
 $
 257
 
 $
 458
 
 $
 555Foreign exchange losses, net
 
 (305)
 
 
 (185)
 
 
 (899)
 
 
 (984)Gain on fixed asset disposals, net
 
 3
 
 
 60
 
 
 55
 
 
 105Non-income tax and other related refunds
 
 —
 
 
 —
 
 
 69
 
 
 —Other non-operating income
 
 54
 
 
 32
 
 
 126
 
 
 69Other non-operating expense
 
 (44)
 
 
 (47)
 
 
 (91)
 
 
 (101)Total other (expense) income, net
 $
 (88)
 
 $
 117
 
 $
 (282)
 
 $
 (356)
 Note 7 – Income Taxes and Uncertain Income Tax
Positions The Company’s first six months of 2015 effective tax rate was 28.8%,
compared to the first six months of 2014 effective tax rate of 32.5%.  The
primary contributorsto the difference in the effective tax rate from the prior year
were lower changes in reserves related to uncertain tax positions and the
recognition of certain one time items that increased the first six months of
2014’s effective tax rate. As of June 30,
2015, the Company’s cumulative liability for gross unrecognized tax benefits
was $11,339.  At December 31, 2014, the Company’s cumulative liability for
gross unrecognized tax benefits was $11,845. The Company
continues to recognize interest and penalties associated with uncertain tax
positions as a component of taxes on income before equity in net income of
associated companies in its Condensed Consolidated Statements of Income.  The
Company recognized $57 and ($161) for interest and $114 and $187 for penalties
on its Condensed Consolidated Statement of Income for the three and six months
ended June 30, 2015, respectively, and recognized $154 and ($58) for interest
and $108 and $98 for penalties on 10


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 its Condensed
Consolidated Statement of Income during the three and six months ended June 30,
2014, respectively.  As of June 30, 2015, the Company had accrued $1,575 for
cumulative interest and $1,897 for cumulative penalties, compared to $1,868 for
cumulative interest and $1,845 for cumulative penalties accrued at December 31,
2014. During the three
months ended June 30, 2015 and 2014, respectively, there were no expirations of
statutes of limitations for uncertain tax positions. During thesix months endedJune 30,2015,
the Company recognized a decrease of approximately $741 in its cumulative
liability for gross unrecognized tax benefits due to the expiration of the
applicable statutes of limitations for certain tax years.  During thesix months endedJune 30,
2014, the Company recognized a decrease of approximately $1,075 in its
cumulative liability for gross unrecognized tax benefits due to the expiration
of the applicable statutes of limitations for certain tax years. The Company
estimates that during the year ending December 31, 2015 it will reduce its cumulative
liability for gross unrecognized tax benefits by approximately $1,800 to $1,900
due to the expiration of the statute of limitations with regard to certain tax
positions.  This estimated reduction in the cumulative liability for
unrecognized tax benefits does not consider any increase in liability for
unrecognized tax benefits with regard to existing tax positions or any increase
in cumulative liability for unrecognized tax benefits with regard to new tax
positions for the year ending December 31, 2015. The Company and
its subsidiaries are subject to U.S. Federal income tax, as well as the income
tax of various state and foreign tax jurisdictions.  Tax years that remain subject
to examination by major tax jurisdictions include Brazil from 2000, Italy from
2007, the Netherlands and the United Kingdom from 2009, Spain and China from
2010, the United States from 2011, and various domestic state tax jurisdictions
from 1993. During 2012, the
Italian tax authorities initiated a transfer pricing audit of the Company’s
Italian subsidiary, Quaker Italia S.r.l., relating to the tax years 2007, 2008,
2009 and 2010.  The Italian tax authorities had previously made assessments for
the tax years 2007, 2008 and 2009.  In the second quarter of 2015, the Italian
tax authorities made a formal assessment for the tax year 2010.  The Company is
pursuing its administrative remedies to appeal these assessments.  There have
been no significant developments during the second quarter of 2015 related to
these tax assessments.  With respect to the Italian income tax assessment for
2007, the Company has established a reserve for uncertain tax positions and
does not expect a material difference from this reserve as of June 30, 2015. 
Related to the assessments for 2008, 2009 and 2010, the Company and outside
counsel believe it should prevail on the merits of each
case.  Therefore, the Company does not believe it has exposure
warranting an uncertain tax position reserve as of June 30, 2015. During the second
quarter of 2015, the Italian tax authorities conducted an audit of the
Company’s Italian subsidiary, Quaker Chemical S.r.l. (formerly NP Coil Dexter
Industries, S.r.l.), relating to the tax years 2010, 2011, 2012 and 2013, and
proposed audit adjustments for those years.  As of June 30, 2015, the Company
established a reserve for uncertain tax positions related to these proposed
audit adjustments.   11


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 Note 8 – Earnings Per Share The following table summarizes earnings per share
calculations for the three and six months ended June 30, 2015 and 2014: Three Months
  Ended
 
 Six Months
  EndedJune 30,
 
 June 30,2015
 
 2014
 
 2015
 
 2014Basic earnings per common shareNet income attributable to Quaker
  Chemical Corporation
 $
 15,038
 
 $
 15,427
 
 $
 25,416
 
 $
 28,157Less: income allocated to participating
  securities
 
 (131)
 
 
 (134)
 
 
 (229)
 
 
 (245)Net income available to common
  shareholders
 $
 14,907
 
 $
 15,293
 
 $
 25,187
 
 $
 27,912Basic weighted average common shares
  outstanding
 
 13,220,264
 
 
 13,118,025
 
 
 13,204,599
 
 
 13,104,837Basic earnings per common share
 $
 1.13
 
 $
 1.17
 
 $
 1.91
 
 $
 2.13Diluted earnings per common shareNet income attributable to Quaker
  Chemical Corporation
 $
 15,038
 
 $
 15,427
 
 $
 25,416
 
 $
 28,157Less: income allocated to participating
  securities
 
 (131)
 
 
 (133)
 
 
 (229)
 
 
 (245)Net income available to common
  shareholders
 $
 14,907
 
 $
 15,294
 
 $
 25,187
 
 $
 27,912Basic weighted average common shares
  outstanding
 
 13,220,264
 
 
 13,118,025
 
 
 13,204,599
 
 
 13,104,837Effect of dilutive securities
 
 19,411
 
 
 21,388
 
 
 19,251
 
 
 20,449Diluted weighted average common shares
  outstanding
 
 13,239,675
 
 
 13,139,413
 
 
 13,223,850
 
 
 13,125,286Diluted earnings per common share
 $
 1.13
 
 $
 1.16
 
 $
 1.90
 
 $
 2.13
 The following aggregate numbers of stock options and
restricted stock units are not included in the diluted earnings per share
calculation since the effect would have been anti-dilutive: 7,559 and 6,579 for
the three months ended June 30, 2015 and 2014, respectively, and 5,856 and
4,824 for the six months ended June 30, 2015 and 2014, respectively. Note 9 – Goodwill and Other Intangible Assets The
Company completes its annual impairment test as of the end of the third quarter
of each year, or more frequently if triggering events indicate a possible
impairment in one or more of its reporting units.  The Company continually
evaluates the financial performance, economic conditions and other relevant
developments in assessing if an interim period impairment test for one or more
of its reporting units is necessary.  The Company has recorded no impairment
charges in the past.  Changes in the carrying amount of goodwill for the six
months ended June 30, 2015 were as follows: North
 
 
 
 
 
 
 
 SouthAmerica
 
 EMEA
 
 Asia/Pacific
 
 America
 
 TotalBalance as of December 31, 2014
 $
 42,677
 
 $
 16,050
 
 $
 16,006
 
 $
 3,200
 
 $
 77,933Goodwill additions (reductions)
 
 30
 
 
 (404)
 
 
 103
 
 
 —
 
 
 (271)Currency translation adjustments
 
 (107)
 
 
 (1,009)
 
 
 (74)
 
 
 (455)
 
 
 (1,645)Balance as of June 30, 2015
 $
 42,600
 
 $
 14,637
 
 $
 16,035
 
 $
 2,745
 
 $
 76,017
  12


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 Gross
carrying amounts and accumulated amortization for definite-lived intangible
assets as of June 30, 2015 and December 31, 2014 were as follows: Gross Carrying
 
 AccumulatedAmount
 
 Amortization2015
 
 2014
 
 2015
 
 2014Customer lists and rights to sell
 $
 62,582
 
 $
 63,502
 
 $
 14,540
 
 $
 12,681Trademarks and patents
 
 18,546
 
 
 18,944
 
 
 4,830
 
 
 4,066Formulations and product technology
 
 5,808
 
 
 5,808
 
 
 3,989
 
 
 3,896Other
 
 6,628
 
 
 6,647
 
 
 5,271
 
 
 4,950Total definite-lived intangible assets
 $
 93,564
 
 $
 94,901
 
 $
 28,630
 
 $
 25,593
 The Company recorded $1,620 and $3,247 of amortization
expense for the three and six months ended June 30, 2015, respectively. 
Comparatively, the Company recorded $815 and $1,628 of amortization expense for
the three and six months ended June 30, 2014, respectively.  Estimated annual
aggregate amortization expense for the current year and subsequent five years
is as follows: For the year ended December 31, 2015
 $
 6,494For the year ended December 31, 2016
 
 6,041For the year ended December 31, 2017
 
 5,605For the year ended December 31, 2018
 
 5,384For the year ended December 31, 2019
 
 5,306For the year ended December 31, 2020
 
 5,059
 The Company has two indefinite-lived intangible assets
totaling $1,100 for trademarks at June 30, 2015 and December 31, 2014. Note 10 – Debt The Company’s primary credit line is a $300,000 syndicated
multicurrency credit agreement with Bank of America, N.A. (administrative
agent) and certain other major financial institutions, which matures in June
2018.  The maximum amount available under this facility can be increased to
$400,000 at the Company’s option if the lenders agree and the Company satisfies
certain conditions.  Access to this
facility is dependent on meeting certain financial, acquisition and other
covenants, but primarily depends on the Company’s consolidated leverage ratio
calculation, which cannot exceed 3.50 to 1.At June 30,
2015 and December 31, 2014, the consolidated leverage ratio was below 1.0 to 1 and
the Company was also in compliance with all of the facility’s other covenants. 
At June 30, 2015 and December 31, 2014, the Company had approximately $42,863
and $58,421 outstanding under this facility. Note 11 – Equity and
Noncontrolling Interest In May 2015, the Board of
Directors of the Company authorized a share repurchase program authorizing the
repurchase of up to $100,000 of Quaker Chemical Corporation common stock (the
“2015 Share Repurchase Program”).  The 2015 Share Repurchase Program has no
expiration date.  The 2015 Share Repurchase Program provides a framework of
conditions under which management can repurchase shares of the Company’s common
stock.  The Company intends to repurchase shares to at least offset the
dilutive impact of shares issued each year as part of employee benefit and
share based compensation plans.  The purchases may be made in the open market
or in private and negotiated transactions, in accordance with applicable laws,
rules and regulations.  In connection with the 2015 Share Repurchase Program,
the remaining unutilized 1995 and 2005 Board of Directors authorized share
repurchase programs were terminated. In
connection with the 2015 Share Repurchase Program, the Company acquired 18,854
shares of common stock, for $1,630, during the second quarter of 2015.  The
Company has elected not to hold treasury shares, and, therefore, has retired
the shares as they are repurchased.  It is the Company’s accounting policy to
record the excess paid over par value as a reduction in retained earnings for
all shares repurchased.      13


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
  The
following tables present the changes in equity and noncontrolling interest, net
of tax, for the three and six months ended June 30, 2015 and 2014: AccumulatedCapital in
 
 
 
 
 otherCommon
 
 excess of
 
 Retained
 
 comprehensive
 
 Noncontrollingstock
 
 par value
 
 earnings
 
 loss
 
 interest
 
 TotalBalance at March 31, 2015
 $
 13,332
 
 $
 100,947
 
 $
 305,902
 
 $
 (62,971)
 
 $
 7,919
 
 $
 365,129Net income
 
 —
 
 
 —
 
 
 15,038
 
 
 —
 
 
 374
 
 
 15,412Amounts reported in other comprehensiveincome (loss)
 
 —
 
 
 —
 
 
 —
 
 
 2,200
 
 
 (124)
 
 
 2,076Repurchases of common stock
 
 (19)
 
 
 —
 
 
 (1,611)
 
 
 —
 
 
 —
 
 
 (1,630)Dividends ($0.32 per share)
 
 —
 
 
 —
 
 
 (4,269)
 
 
 —
 
 
 —
 
 
 (4,269)Disposition of noncontrolling interest
 
 —
 
 
 —
 
 
 —
 
 
 —
 
 
 (351)
 
 
 (351)Share issuance and equity-based
  compensationplans
 
 24
 
 
 2,044
 
 
 —
 
 
 —
 
 
 —
 
 
 2,068Excess tax benefit from stock option
  exercises
 
 —
 
 
 91
 
 
 —
 
 
 —
 
 
 —
 
 
 91Balance at June 30, 2015
 $
 13,337
 
 $
 103,082
 
 $
 315,060
 
 $
 (60,771)
 
 $
 7,818
 
 $
 378,526Balance at March 31, 2014
 $
 13,227
 
 $
 100,429
 
 $
 267,707
 
 $
 (33,015)
 
 $
 9,660
 
 $
 358,008Net income
 
 —
 
 
 —
 
 
 15,427
 
 
 —
 
 
 515
 
 
 15,942Amounts reported in other comprehensiveincome (loss)
 
 —
 
 
 —
 
 
 —
 
 
 1,428
 
 
 (5)
 
 
 1,423Dividends ($0.30 per share)
 
 —
 
 
 —
 
 
 (3,973)
 
 
 —
 
 
 —
 
 
 (3,973)Distributions to noncontrolling
  affiliateshareholders
 
 —
 
 
 —
 
 
 —
 
 
 —
 
 
 (657)
 
 
 (657)Acquisition of noncontrolling interest
 
 —
 
 
 (6,450)
 
 
 —
 
 
 —
 
 
 (1,127)
 
 
 (7,577)Share issuance and equity-based
  compensationplans
 
 15
 
 
 1,501
 
 
 —
 
 
 —
 
 
 —
 
 
 1,516Excess tax benefit from stock option
  exercises
 
 —
 
 
 28
 
 
 —
 
 
 —
 
 
 —
 
 
 28Balance at June 30, 2014
 $
 13,242
 
 $
 95,508
 
 $
 279,161
 
 $
 (31,587)
 
 $
 8,386
 
 $
 364,710
  14


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 AccumulatedCapital in
 
 
 
 
 otherCommon
 
 excess of
 
 Retained
 
 comprehensive
 
 Noncontrollingstock
 
 par value
 
 earnings
 
 loss
 
 interest
 
 TotalBalance at December 31, 2014
 $
 13,301
 
 $
 99,056
 
 $
 299,524
 
 $
 (54,406)
 
 $
 7,660
 
 $
 365,135Net income
 
 —
 
 
 —
 
 
 25,416
 
 
 —
 
 
 603
 
 
 26,019Amounts reported in other comprehensiveloss
 
 —
 
 
 —
 
 
 —
 
 
 (6,365)
 
 
 (94)
 
 
 (6,459)Repurchases of common stock
 
 (19)
 
 
 —
 
 
 (1,611)
 
 
 —
 
 
 —
 
 
 (1,630)Dividends ($0.62 per share)
 
 —
 
 
 —
 
 
 (8,269)
 
 
 —
 
 
 —
 
 
 (8,269)Disposition of noncontrolling interest
 
 —
 
 
 —
 
 
 —
 
 
 —
 
 
 (351)
 
 
 (351)Share issuance and equity-based
  compensationplans
 
 55
 
 
 3,648
 
 
 —
 
 
 —
 
 
 —
 
 
 3,703Excess tax benefit from stock option
  exercises
 
 —
 
 
 378
 
 
 —
 
 
 —
 
 
 —
 
 
 378Balance at June 30, 2015
 $
 13,337
 
 $
 103,082
 
 $
 315,060
 
 $
 (60,771)
 
 $
 7,818
 
 $
 378,526Balance at December 31, 2013
 $
 13,196
 
 $
 99,038
 
 $
 258,285
 
 $
 (34,700)
 
 $
 8,877
 
 $
 344,696Net income
 
 —
 
 
 —
 
 
 28,157
 
 
 —
 
 
 1,094
 
 
 29,251Amounts reported in other comprehensiveincome
 
 —
 
 
 —
 
 
 —
 
 
 3,113
 
 
 199
 
 
 3,312Dividends ($0.55 per share)
 
 —
 
 
 —
 
 
 (7,281)
 
 
 —
 
 
 —
 
 
 (7,281)Distributions to noncontrolling
  affiliateshareholders
 
 —
 
 
 —
 
 
 —
 
 
 —
 
 
 (657)
 
 
 (657)Acquisition of noncontrolling interest
 
 —
 
 
 (6,450)
 
 
 —
 
 
 —
 
 
 (1,127)
 
 
 (7,577)Share issuance and equity-based
  compensationplans
 
 46
 
 
 2,653
 
 
 —
 
 
 —
 
 
 —
 
 
 2,699Excess tax benefit from stock option
  exercises
 
 —
 
 
 267
 
 
 —
 
 
 —
 
 
 —
 
 
 267Balance at June 30, 2014
 $
 13,242
 
 $
 95,508
 
 $
 279,161
 
 $
 (31,587)
 
 $
 8,386
 
 $
 364,710
  15


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 The following
tables show the reclassifications from and resulting balances of accumulated
other comprehensive loss (“AOCI”) for the three and six months ended June 30,
2015 and 2014: UnrealizedCurrency
 
 Defined
 
 gain (loss)
  intranslation
 
 benefit
 
 available-for-adjustments
 
 pension plans
 
 sale
  securities
 
 TotalBalance at March 31, 2015
 
 $
 (25,425)
 
 $
 (39,073)
 
 $
 1,527
 
 $
 (62,971)Other comprehensive income (loss) beforereclassifications
 
 
 2,592
 
 
 (847)
 
 
 (365)
 
 
 1,380Amounts reclassified from AOCI
 
 
 —
 
 
 878
 
 
 (152)
 
 
 726Current period other comprehensive
  income (loss)
 
 
 2,592
 
 
 31
 
 
 (517)
 
 
 2,106Related tax amounts
 
 
 —
 
 
 (82)
 
 
 176
 
 
 94Net current period other comprehensive
  income (loss)
 
 
 2,592
 
 
 (51)
 
 
 (341)
 
 
 2,200Balance at June 30, 2015
 
 $
 (22,833)
 
 $
 (39,124)
 
 $
 1,186
 
 $
 (60,771)Balance at March 31, 2014
 
 $
 2,222
 
 $
 (36,887)
 
 $
 1,650
 
 $
 (33,015)Other comprehensive income beforereclassifications
 
 
 986
 
 
 120
 
 
 842
 
 
 1,948Amounts reclassified from AOCI
 
 
 —
 
 
 762
 
 
 (1,101)
 
 
 (339)Current period other comprehensive
  income (loss)
 
 
 986
 
 
 882
 
 
 (259)
 
 
 1,609Related tax amounts
 
 
 —
 
 
 (269)
 
 
 88
 
 
 (181)Net current period other comprehensive
  income (loss)
 
 
 986
 
 
 613
 
 
 (171)
 
 
 1,428Balance at June 30, 2014
 
 $
 3,208
 
 $
 (36,274)
 
 $
 1,479
 
 $
 (31,587)
  UnrealizedCurrency
 
 Defined
 
 gain (loss)
  intranslation
 
 benefit
 
 available-for-adjustments
 
 pension plans
 
 sale
  securities
 
 TotalBalance at December 31, 2014
 
 $
 (14,312)
 
 $
 (41,551)
 
 $
 1,457
 
 $
 (54,406)Other comprehensive (loss) income beforereclassifications
 
 
 (8,521)
 
 
 1,651
 
 
 (95)
 
 
 (6,965)Amounts reclassified from AOCI
 
 
 —
 
 
 1,759
 
 
 (316)
 
 
 1,443Current period other comprehensive
  (loss) income
 
 
 (8,521)
 
 
 3,410
 
 
 (411)
 
 
 (5,522)Related tax amounts
 
 
 —
 
 
 (983)
 
 
 140
 
 
 (843)Net current period other comprehensive
  (loss) income
 
 
 (8,521)
 
 
 2,427
 
 
 (271)
 
 
 (6,365)Balance at June 30, 2015
 
 $
 (22,833)
 
 $
 (39,124)
 
 $
 1,186
 
 $
 (60,771)Balance at December 31, 2013
 
 $
 1,152
 
 $
 (37,433)
 
 $
 1,581
 
 $
 (34,700)Other comprehensive income beforereclassifications
 
 
 2,056
 
 
 144
 
 
 1,505
 
 
 3,705Amounts reclassified from AOCI
 
 
 —
 
 
 1,531
 
 
 (1,659)
 
 
 (128)Current period other comprehensive
  income (loss)
 
 
 2,056
 
 
 1,675
 
 
 (154)
 
 
 3,577Related tax amounts
 
 
 —
 
 
 (516)
 
 
 52
 
 
 (464)Net current period other comprehensive
  income (loss)
 
 
 2,056
 
 
 1,159
 
 
 (102)
 
 
 3,113Balance at June 30, 2014
 
 $
 3,208
 
 $
 (36,274)
 
 $
 1,479
 
 $
 (31,587)
  16


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 Approximately 30% and 70% of the amounts
reclassified from accumulated other comprehensive loss to the Condensed
Consolidated Statement of Income for defined benefit retirement plans during
the three and six months ended June 30, 2015 and 2014 were recorded in cost of
goods sold and selling, general and administrative expenses, respectively.  See
Note 5 of Notes to Condensed Consolidated Financial Statements for further
information.  All reclassifications related to unrealized gain (loss) in
available-for-sale securities relate to the Company’s equity interest in a
captive insurance company and are recorded in equity in net income of
associated companies.  The amounts reported in other comprehensive income for
non-controlling interest are related to currency translation adjustments. Note 12 – Business
Acquisitions In December 2014, the Company acquired a business that is
principally concerned with safety fluid applications for mining sites in its
Asia/Pacific reportable operating segment for net consideration of
approximately 2,850 Australian Dollars, or approximately $2,355.  The Company
also assumed an additional 300 Australian Dollars, or approximately $248,
hold-back of consideration.  This acquisition provides a strategic opportunity
for Quaker in the core Australian mining market.  The Company allocated the purchase
price to $1,802 of intangible assets, comprised of trademarks and formulations,
to be amortized over 15 years; a non-competition agreement, to be amortized
over 5 years; and customer relationships, to be amortized over 15 years.  In
addition, the Company has recorded $1,178 of goodwill, related to expected
value outside its other acquired assets, all of which will not be tax
deductible. In November 2014, the Company acquired Binol
AB (“Binol”), a leading bio-lubricants producer primarily serving the Nordic
region for its EMEA reportable operating segment for approximately 136,500 SEK,
or approximately $18,536, which is net of 4,400 SEK, or approximately $528,
received by the Company as part of a post-closing adjustment in the first
quarter of 2015.  The post-closing adjustment recorded in the first quarter of
2015 adjusted the acquisition’s goodwill.  This acquisition provides a
strategic opportunity for Quaker to leverage Binol's environmentally friendly
technology and customer-aligned products, including neat oil technology for
metalworking applications and biodegradable hydraulic oils, across the
Company’s global footprint.  The Company allocated the purchase price to $11,805
of intangible assets, comprised of trademarks and formulations, to be amortized
over 15 years; a non-competition agreement, to be amortized over 5 years; and
customer relationships, to be amortized over 14 years.  In addition, the
Company has recorded $5,726 of goodwill, net of the $528 post-closing
adjustment mentioned above, related to expected value outside its other
acquired assets, all of which will not be tax deductible. In August 2014, the Company acquired ECLI
Products, LLC (“ECLI”), a specialty grease manufacturer for its North American
reportable operating segment for approximately $53,145, including certain
post-closing adjustments.  ECLI specializes in greases for OEM first-fill
customers across several industry sectors, including automotive, industrial,
aerospace/military, electronics, office automation and natural resources.  This
acquisition complements Quaker’s entry into the specialty grease market that
began in 2010, and, also, provides an opportunity to leverage Quaker's global
footprint with its current market expertise.  The Company allocated the
purchase price to $31,050 of intangible assets, comprised of trademarks and
formulations, to be amortized over 10 years; customer relationships, to be
amortized over 15 years; and a non-compete agreement, to be amortized over 5
years.  In addition, the Company has recorded $14,642 of goodwill, related to
expected value outside its other acquired assets, all of which will be tax
deductible. The results of operations of the acquired
businesses and assets are included in the consolidated statements of income
from their respective acquisition dates.  Transaction expenses associated with
these acquisitions are included in selling, general and administrative expenses
in the Company’s consolidated statements of income.  Certain pro forma and
other information is not presented, as the operations of the acquired
businesses are not material to the overall operations of the Company for the
periods presented.  17


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 During the
second quarter of 2015, the Company identified and recorded certain adjustments
to the allocations of the purchase price for certain 2014 acquisitions.  These
adjustments were the result of the Company assessing additional information
related to assets acquired and liabilities assumed during the one-year
measurement period following each acquisition.  As of June 30, 2015, the
allocations of the purchase price for all of the Company’s 2014 acquisitions
have not been finalized and the one-year measurement period for each
acquisition has not ended.  Further adjustments may be necessary as a result of
the Company’s assessment of additional information related to the fair values
of assets acquired and liabilities assumed.  The following table presents the
current allocation of the purchase price of the assets acquired and liabilities
assumed in all of the Company’s acquisitions in 2014: 2014 AcquisitionsCurrent assets
 $
 12,413Property, plant & equipment
 
 4,158IntangiblesCustomer lists and rights to sell
 
 30,924Trademarks and patents
 
 12,606Other intangibles
 
 1,127Goodwill
 
 21,546Other long-term assets
 
 198Total assets purchased
 
 82,972Current liabilities
 
 (4,562)Long-term liabilities
 
 (4,374)Total liabilities assumed
 
 (8,936)Cash paid for acquisitions
 $
 74,036
 Included in the 2014 acquisitions was approximately $1,037 of cash
acquired. Additionally, in June 2014, the Company
acquired the remaining 49% ownership interest in its Australian affiliate,
Quaker Chemical (Australasia) Pty. Limited ("QCA") for 8,000 Australian
Dollars, or approximately $7,577, from its joint venture partner, Nuplex
Industries.  QCA is a part of the Company’s Asia/Pacific reportable operating
segment.  This acquisition further strengthens Quaker’s position in Australia,
and allows the Company to simplify its overall corporate structure and improve
its organizational efficiencies. As this acquisition was a change in an
existing controlling ownership, the Company recorded $6,450 of excess purchase
price over the carrying value of the noncontrolling interest in Additional Paid
in Capital. In July 2015, subsequent to the date of
these financial statements, the Company acquired Verkol, S.A. (“Verkol”), a
leading specialty grease and other lubricants manufacturer based in Northern
Spain for its EMEA reportable operating segment for approximately 36,455 EUR,
or approximately $40,100, including net cash of approximately 9,563 EUR, or
approximately $10,519.  In addition, the Company expects to incur 2,590 EUR, or
approximately $2,849, of transaction-related expenses in the third quarter of
2015, in conjunction with this acquisition. Verkol is a market leader with
world-class grease manufacturing capabilities and state-of-the-art R&D
facilities, selling products into industrial end markets with a particular
strength serving the steel industry.  Also, Verkol brings unique technology in
continuous casting products that will provide the Company with cross-selling
opportunities to its global steel customer base.  As of the date of these
financial statements, the Company has not yet completed the allocation of the
purchase price to the fair value of assets acquired and liabilities assumed,
and, also, certain pro forma and other information are not presented as the
operations of the acquired business are not material to the Company for the
periods presented. Note 13 – Fair Value
Measurements The Company has valued its
company-owned life insurance policies and various deferred compensation assets
and liabilities at fair value.  The Company’s assets and liabilities subject to
fair value measurement were as follows: Fair Value
  Measurements at June 30, 2015Total
 
 Using Fair
  Value HierarchyAssets
 Fair Value
 
 Level 1
 
 Level 2
 
 Level 3Company-owned life insurance
 $
 1,360
 
 $
 —
 
 $
 1,360
 
 $
 —Total
 $
 1,360
 
 $
 —
 
 $
 1,360
 
 $
 —
 18


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 Fair Value
  Measurements at December 31, 2014Total
 
 Using Fair
  Value HierarchyAssets
 Fair Value
 
 Level 1
 
 Level 2
 
 Level 3Company-owned life insurance
 $
 1,361
 
 $
 —
 
 $
 1,361
 
 $
 —Company-owned life insurance - Deferred
  compensation assets
 
 310
 
 
 —
 
 
 310
 
 
 —Other deferred compensation assetsLarge capitalization registered
  investment companies
 
 71
 
 
 71
 
 
 —
 
 
 —Mid capitalization registered investment
  companies
 
 7
 
 
 7
 
 
 —
 
 
 —Small capitalization registered
  investment companies
 
 13
 
 
 13
 
 
 —
 
 
 —International developed and emerging
  markets registeredinvestment companies
 
 37
 
 
 37
 
 
 —
 
 
 —Fixed income registered investment
  companies
 
 6
 
 
 6
 
 
 —
 
 
 —Total
 $
 1,805
 
 $
 134
 
 $
 1,671
 
 $
 —
  Fair Value
  Measurements at December 31, 2014Total
 
 Using Fair
  Value HierarchyLiabilities
 Fair Value
 
 Level 1
 
 Level 2
 
 Level 3Deferred compensation liabilitiesLarge capitalization registered
  investment companies
 $
 404
 
 $
 404
 
 $
 —
 
 $
 —Mid capitalization registered investment
  companies
 
 108
 
 
 108
 
 
 —
 
 
 —Small capitalization registered
  investment companies
 
 90
 
 
 90
 
 
 —
 
 
 —International developed and emerging
  markets registeredinvestment companies
 
 179
 
 
 179
 
 
 —
 
 
 —Fixed income registered investment
  companies
 
 40
 
 
 40
 
 
 —
 
 
 —Fixed general account
 
 160
 
 
 —
 
 
 160
 
 
 —Total
 $
 981
 
 $
 821
 
 $
 160
 
 $
 —
 During the second quarter of 2015, the Company’s Board of
Directors authorized the termination of its Executive Deferred Compensation
Plan.  As a result, the Company had no deferred compensation assets or
liabilities subject to fair value measurement and accounting related to its
Executive Deferred Compensation Plan on its Condensed Consolidated Balance
Sheet as of June 30, 2015.  However, the Company did have $1,018 of associated
liabilities, no longer subject to fair value measurement, which will be paid
out by the Company during the third quarter of 2015. The fair values of Company-owned life
insurance (“COLI”) and COLI deferred compensation assets are based on quotes
for like instruments with similar credit ratings and terms.  The fair values of
other deferred compensation assets and liabilities are based on quoted prices
in active markets.  The Company did not hold Level 3 investments as of June 30,
2015 or December 31, 2014, respectively, so related disclosures have not been
included.  Note 14 – Commitments and Contingencies In 1992, the Company
identified certain soil and groundwater contamination at AC Products, Inc.
(“ACP”), a wholly owned subsidiary.  In voluntary coordination with the Santa
Ana California Regional Water Quality Board (“SACRWQB”), ACP has been
remediating the contamination, the principal contaminant of which is
perchloroethylene (“PERC”).  In 2004, the Orange County Water District (“OCWD”)
filed a civil complaint against ACP and other parties seeking to recover
compensatory and other damages related to the investigation and remediation of
the contamination in the groundwater.  Pursuant to the settlement agreement
with OCWD, ACP agreed, among other things, to operate the two groundwater
treatment systems to hydraulically contain groundwater contamination emanating
from ACP’s site until the concentrations of PERC released by ACP fell below the
current Federal maximum contaminant level for four consecutive quarterly
sampling events.  In February 2014, ACP, OCWD and SACRWQB, ceased operation at
one of its two groundwater treatment systems, as it had met the above condition
for closure.  Based on the most recent modeling, it is estimated that the
remaining system will operate for another six months to two years and six months. As of June 30, 2015, the
Company believes that the range of potential-known liabilities associated with
the balance of the ACP water remediation program is approximately $200 to $870,
for which the Company has sufficient reserves.  The low and high ends of the
range are based on the length of operation of the treatment system as determined
by groundwater modeling.  Costs of operation include the operation and
maintenance of the extraction well, groundwater monitoring and program
management. 19


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial
Statements- Continued (Dollars in thousands, except share and per
share amounts) (Unaudited)
 The
Company believes, although there can be no assurance regarding the outcome of
other unrelated environmental matters, that it has made adequate accruals for
costs associated with other environmental problems of which it is aware. 
Approximately $315 and $173 was accrued at June 30, 2015 and December 31, 2014,
respectively, to provide for such anticipated future environmental assessments
and remediation costs. An inactive subsidiary of the
Company that was acquired in 1978 sold certain products containing asbestos,
primarily on an installed basis, and is among the defendants in numerous
lawsuits alleging injury due to exposure to asbestos.  The subsidiary
discontinued operations in 1991 and has no remaining assets other than the
proceeds received from insurance settlements.  To date, the overwhelming
majority of these claims have been disposed of without payment and there have
been no adverse judgments against the subsidiary.  Based on a continued analysis
of the existing and anticipated future claims against this subsidiary, it is
currently projected that the subsidiary’s total liability over the next 50
years for these claims is less than $3,800 (excluding costs of defense). 
Although the Company has also been named as a defendant in certain of these
cases, no claims have been actively pursued against the Company, and the
Company has not contributed to the defense or settlement of any of these cases
pursued against the subsidiary.  These cases were handled by the subsidiary’s
primary and excess insurers who had agreed in 1997 to pay all defense costs and
be responsible for all damages assessed against the subsidiary arising out of
existing and future asbestos claims up to the aggregate limits of the policies. 
A significant portion of this primary insurance coverage was provided by an
insurer that is insolvent, and the other primary insurers asserted that the
aggregate limits of their policies have been exhausted.  The subsidiary
challenged the applicability of these limits to the claims being brought
against the subsidiary.  In response, two of the three carriers
entered into separate settlement and release agreements with the subsidiary in
2005 and 2007 for $15,000 and $20,000, respectively.  The proceeds of both
settlements are restricted and can only be used to pay claims and costs of
defense associated with the subsidiary’s asbestos litigation.  In 2007, the
subsidiary and the remaining primary insurance carrier entered into a Claim
Handling and Funding Agreement, under which the carrier is paying 27% of
defense and indemnity costs incurred by or on behalf of the subsidiary in
connection with asbestos bodily injury claims.  The agreement continues until
terminated and can only be terminated by either party by providing a minimum of
two years prior written notice.  As of June 30, 2015, no notice of termination
has been given under this agreement.  At the end of the term of the agreement,
the subsidiary may choose to again pursue its claim against this insurer
regarding the application of the policy limits.  The Company believes
that, if the coverage issues under the primary policies with the remaining
carrier are resolved adversely to the subsidiary and all settlement proceeds
were used, the subsidiary may have limited additional coverage from a state
guarantee fund established following the insolvency of one of the subsidiary’s
primary insurers.  Nevertheless, liabilities in respect of claims may exceed
the assets and coverage available to the subsidiary. If the subsidiary’s assets and
insurance coverage were to be exhausted, claimants of the subsidiary may
actively pursue claims against the Company because of the parent-subsidiary
relationship.  The Company does not believe that such claims would have merit
or that the Company would be held to have liability for any unsatisfied
obligations of the subsidiary as a result of such claims.  After evaluating the
nature of the claims filed against the subsidiary and the small number of such
claims that have resulted in any payment, the potential availability of
additional insurance coverage at the subsidiary level, the additional
availability of the Company’s own insurance and the Company’s strong defenses
to claims that it should be held responsible for the subsidiary’s obligations
because of the parent-subsidiary relationship, the Company believes it is not
probable that the Company will incur any material losses.  The Company has been
successful to date having claims naming it dismissed during initial
proceedings.  Since the Company may be in this early stage of litigation for
some time, it is not possible to estimate additional losses or range of loss,
if any. As initially disclosed in
2010, one of the Company’s subsidiaries may have paid certain value-added-taxes
(“VAT”) incorrectly and, in certain cases, may not have collected sufficient
VAT from certain customers.  The VAT rules and regulations at issue are
complex, vary among the jurisdictions and can be contradictory, in particular
as to how they relate to the subsidiary’s products and to sales between
jurisdictions. Since its inception, the
subsidiary had been consistent in its VAT collection and remittance practices
and had never been contacted by any tax authority relative to VAT.  The
subsidiary later determined that for certain products, a portion of the VAT was
incorrectly paid and that the total VAT due exceeds the amount originally
collected and remitted by the subsidiary.  In response, the subsidiary modified
its VAT invoicing and payment procedures to eliminate or mitigate future
exposure.  In 2010, three jurisdictions contacted the subsidiary and, since
then, the subsidiary has either participated in an amnesty program or entered
into a settlement whereby it paid a reduced portion of the amounts owed in
resolution of those jurisdictions’ claims, and no related accruals exist as of
June 30, 2015 or December 31, 2014.  In late 2013, an additional jurisdiction
issued an assessment against the subsidiary for certain tax years leading to anet charge of $796, which represented the
Company’s best estimate of the amount that ultimately may be paid.  The subsidiary has filed an appeal of the assessment
alleging certain errors by such jurisdiction related to the assessment. In analyzing the subsidiary’s
exposure, it is difficult to estimate both the probability and the amount of
any potential liabilities due to a number of factors, including: the decrease
in exposure over time due to applicable statutes of limitations and actions
taken by the subsidiary, the joint liability of customers and suppliers for a
portion of the VAT, the availability of a VAT refund for VAT incorrectly paid
through an administrative process, any amounts which may have been or will be
paid by customers, as well as the   20


---

Quaker Chemical Corporation Notes to Condensed Consolidated Financial Statements- Continued (Dollars
in thousands, except share and per share amounts) (Unaudited)  timing and structure of any
tax amnesties or settlements.  In addition, interest and penalties on any VAT
due can be a multiple of the base tax.  The subsidiary may contest any tax
assessment administratively and/or judicially for an extended period of time, but
may ultimately resolve its disputes through participation in tax amnesty
programs, which are a common practice for settling tax disputes in the
jurisdictions in question and which have historically occurred on a regular
basis, resulting in significant reductions of interest and penalties.  Also, the timing of
payments and refunds of VAT may not be contemporaneous, and, if additional VAT
is owed, it may not be fully recoverable from customers. The charges taken by the
Company in 2013 assume a successful recovery of the VAT incorrectly paid, as
well as reductions in interest and penalties from anticipated future amnesty
programs or settlements.  On a similar basis, if all other potentially impacted
jurisdictions were to initiate audits and issue assessments, the remaining
exposure, net of refunds, could be from $0 to $3,400 with one jurisdiction
representing approximately 85 percent of this additional exposure, assuming the
continued availability of future amnesty programs or settlements to reduce the
interest and penalties.  If there are future assessments but no such future
amnesty programs or settlements, the potential exposure could be higher. The Company is party to other
litigation which management currently believes will not have a material adverse
effect on the Company’s results of operations, cash flows or financial
condition.  21


---

Item 2.Management’s
Discussion and Analysis of Financial Condition and Results of Operations. Executive Summary Quaker Chemical
Corporation is a leading global provider of process
fluids, chemical specialties, and technical expertise to a wide range of
industries, including steel, aluminum, automotive, mining, aerospace, tube
and pipe, cans, and others.  For nearly 100 years, Quaker has helped
customers around the world achieve production efficiency, improve product
quality, and lower costs through a combination of innovative technology,
process knowledge, and customized services.  Headquartered in Conshohocken , Pennsylvania USA, Quaker serves businesses worldwide with a network
of dedicated and experienced professionals whose mission is to make a
difference. The Company had solid operating performance
in the second quarter of 2015, despite a significant impact from the effects of
foreign exchange.  Specifically, the decrease in the current quarter’s net
sales year over year of 7% from foreign currency translation was partially
offset by good volume growth of 4% when compared to the second quarter of
2014.  Gross profit for the second quarter of 2015 increased by 4% from the
second quarter of 2014, driven by increased product volume, on higher gross
margin of 38.4% for the second quarter of 2015 compared to 35.7% for the second
quarter of 2014 due to the timing of certain raw material cost decreases
compared to the prior year quarter.  Selling, general and administrative
expenses (“SG&A”) increased $1.9 million in the second quarter of 2015 compared
to the second quarter of 2014, due mainly to higher labor-related costs and
incremental costs associated with the Company’s 2014 acquisitions, partially
offset by decreases from foreign currency translation.  Overall, the Company’s
good sales volumes, gross margin expansion and controlled SG&A spending
drove a 2% increase in operating income during the second quarter of 2015,
which was supplemented by a lower tax rate and impacted by certain other items
discussed in the Company’s Consolidated Operations Review section of this Item,
below. From a regional perspective, the Company’s
second quarter of 2015 operating performance was primarily driven by its North
America and Asia/Pacific regions, which both experienced increased volumes and
higher gross margins.  The strong performances in North America and
Asia/Pacific were partially offset by lower operating results in the Company’s
other two regions, EMEA and South America.  EMEA’s decreased performance from
the second quarter of 2014 was primarily driven by negative impacts from
foreign currency translation due to the decline in the value of the Euro.However, the overall impact from foreign
exchange on EMEA’s results was partially offset by higher product volumes,
including contributions from the Company’s 2014 acquisition of Binol AB, and,
also, general improvement in the region’s gross margins.Finally, South America’s performance was
negatively impacted by the continued economic downturn and related effects on
end-user production in Brazil.  In addition, foreign exchange continues to
negatively impact South America’s results, due to the decline in the value of
the Brazilian Real and the Argentinian Peso.  These decreases to the region’s
performance were partially offset bythe positive effects of the cost streamlining initiatives taken in
this segment during 2013 and 2014 and improved gross margins.  See the
Reportable Operating Segment Review of this Item, below. The net result was earnings per diluted
share of $1.13 for the second quarter of 2015 compared to $1.16 for the second
quarter of 2014, with non-GAAP earnings per diluted share increasing 4% from
$1.11 for the second quarter of 2014 to $1.15 for the second quarter of 2015. 
Notably, the Company achieved these reported and non-GAAP results despite a
negative impact of $0.09 per diluted share, or 8%, from changes in foreign
exchange rates.  In addition, the Company’s adjusted EBITDA increased 2% to
$26.2 million for the second quarter of 2015 compared to $25.8 million in the
second quarter of 2014, despite the impact from changes in foreign currency
translation, mentioned above.  See the Non-GAAP Measures section of this Item,
below. The Company’s strong operating
performance, coupled with better working capital management, generated net
operating cash flows of approximately $19.2 million in the second quarter of
2015, which increased its year-to-date net operating cash flow to $27.3 million
compared to $8.3 million for the first six months of 2014.  Specifically, the
primary changes in the Company’s working capital were improved levels of
accounts receivable and inventory, partially offset by higher cash outflows
from prepaid expenses and other current assets and accounts payable and accrued
liabilities.  These working capital changes are further discussed in the
Company’s Liquidity and Capital Resources section in this Item, below. Overall, the Company is pleased with
another quarter of consistent earnings and strong cash flow despite a difficult
global market with varying economic challenges.  Foreign exchange headwinds
continue to have the most significant impact on the Company’s earnings as a
result of the strong U.S. Dollar, while the Company is also challenged by a
decline in global steel production.  In addition, the Company continues to see
weak economic conditions in several regional areas, especially in South
America.  The Company’s sales have also begun to see some impact from price
adjustments due to lower raw material costs.  However, despite these headwinds,
the Company was able to deliver non-GAAP earnings growth through margin
expansion, market share gains and the positive contributions from the Company’s
recent acquisitions.  Looking forward to the remainder of 2015, while the
Company anticipates a continued strong U.S. Dollar and generally weak market
conditions in most countries, the Company believes market share gains and
acquisitions will continue to compensate for these challenges.  The Company’s
strong cash flow generation and balance sheet continue to be a strength that
will allow it to continue to pursue key strategic initiatives and acquisitions,
similar to its recent acquisition of Verkol, S.A. (“Verkol”).  Overall, the
Company remains confident in its future and expects full year 2015 non-GAAP
earnings to increase modestly over 2014, leading to the Company’s sixth
consecutive year of earnings improvement. 22


---

Liquidity
and Capital Resources Quaker’s cash and cash equivalents
increased to $65.8 million at June 30, 2015 from $64.7 million at December 31,
2014.  The $1.1 million increase was the result of $27.3 million of cash
provided by operating activities offset by $3.3 million of cash used in
investing activities, $21.4 million of cash used in financing activities and a
$1.5 million negative impact due to the effect of exchange rates on cash. Net cash flows provided by operating
activities were $27.3 million in the first six months of 2015 compared to $8.3
million in the first six months of 2014.  The $19.0 million increase in cash
flows provided by operating activities was driven by stronger operating
performance and lower cash invested in the Company’s working capital during the
first six months of 2015 compared to the first six months of 2014. 
Specifically, the Company’s cash flows from its accounts receivables improved
due to better collection efforts and timing of sales during the quarter, and,
also, its cash flows from inventories improved due to more stable levels in the
first six months of 2015 compared to the first six months of 2014 when the
Company reestablished safety stock levels that were low at year-end 2013. 
Partially offsetting these increases to the current year’s operating cash flows
were higher cash outflows from prepaid expenses and other current assets,
primarily related to increased tax payments, and an increase in cash outflows
due to timing of payments related to the Company’s trade accounts payable and
accrued liabilities. Net cash flows used in investing
activities decreased from $4.4 million in the first six months of 2014 to $3.3
million in the first six months of 2015.  The $1.1 million decrease in cash
used in investing activities was primarily due to lower property, plant and
equipment expenditures, which primarily related to lower spending on
information technology development and other related initiatives primarily in
the Company’s EMEA segment.  In addition, the Company had a cash inflow of $0.5
million during the first six months of 2015 due to a post-closing adjustment
related to its 2014 acquisition of Binol AB.  These increases were partially
offset by lower cash inflow due to changes in the Company’s restricted cash,
which are dependent upon the timing of claims and payments associated with the
subsidiary’s asbestos litigation. Net cash flows used in financing
activities were $21.4 million in the first six months of 2015 compared to $12.0
million of cash used in financing activities in the first six months of 2014. 
The $9.4 million increase in cash used in financing activities was due to the
net impact of several factors.  Specifically, the current year’s strong
operating cash flow allowed it to fund repayments of external debt during the
first six months of 2015, whereas the prior year had net borrowings to fund the
purchase of the remaining interest in the Company’s Australian affiliate, a
payment of an acquisition-related earnout and a dividend to a noncontrolling
affiliate shareholder.  However, the current year also had increased dividend
payments in the first six months of 2015 as compared to the first six months of
2014, due to higher shares outstanding and the Company’s prior year increase in
its dividend declared per share.  Also, the Company had cash outflows of $1.6
million in the first six months of 2015, to repurchase 18,854 shares of the
Company’s common stock in connection with the Company’s share repurchase
program.In May 2015, the Board of Directors of the
Company authorized a share repurchase program authorizing the repurchase of up
to $100.0 million of Quaker Chemical Corporation common stock (the “2015 Share
Repurchase Program”).  The 2015 Share Repurchase Program provides a framework
of conditions under which management can repurchase shares of the Company’s
common stock.  The Company intends to repurchase shares to at least offset the
dilutive impact of shares issued each year as part of employee benefit and
share based compensation plans. The Company’s primary credit
line is a $300.0 million syndicated multicurrency credit agreement with Bank of
America, N.A. (administrative agent) and certain other major financial institutions. 
The facility matures in June 2018.  The maximum amount available under this
facility can be increased to $400.0 million at the Company’s option if the
lenders agree and the Company satisfies certain conditions.  Borrowings under
this facility generally bear interest at either a base rate or LIBOR rate plus
a margin.  At June 30, 2015 and December 31, 2014, the Company had $42.9
million and $58.4 million outstanding on this credit line, respectively. 
Access to this facility is dependent on meeting certain financial, acquisition
and other covenants, but primarily depends on the Company’s consolidated
leverage ratio calculation, which cannot exceed 3.50 to 1.  As of June 30, 2015
and December 31, 2014, the consolidated leverage ratio was below 1.0 to 1 and
the Company was also in compliance with all of the facility’s other covenants. At June 30, 2015, the
Company’s gross liability for uncertain tax positions, including interest and
penalties, was $14.8 million. The Company cannot determine a reliable estimate
of the timing of cash flows by period related to its uncertain tax position
liability. However, should the entire liability be paid, the amount of the
payment may be reduced by up to $10.3 million as a result of offsetting
benefits in other tax jurisdictions. Subsequent to the date of these financial
statements, the Company received a cash dividend of approximately $0.6 million
from its captive insurance equity affiliate in July 2015.  Additionally, in
July 2015, the Company acquired Verkol, a leading specialty grease and other
lubricants manufacturer based in Northern Spain for approximately $40.1
million, including net cash of approximately $10.5 million.  See Note 12 of
Notes to Condensed Consolidated Financial Statements. The Company believes it is
capable of supporting its operating requirements, including, but not limited
to, pension plan contributions, payments of dividends to shareholders,
potential share repurchases, possible acquisitions and business opportunities, capital
expenditures and possible resolution of contingencies, through internally
generated funds supplemented with debt or equity as needed. 23


---

Non-GAAP
Measures Included in this Form 10-Q filing are
non-GAAP (unaudited) financial measures of non-GAAP earnings per diluted share
and adjusted EBITDA.  The Company believes these non-GAAP financial measures
provide meaningful supplemental information as they enhance a reader’s
understanding of the financial performance of the Company, are more indicative
of future operating performance of the Company, and facilitate a better
comparison among fiscal periods, as the non-GAAP measures exclude items that
are not considered core to the Company’s operations.  These non-GAAP results
are presented for supplemental informational purposes only and should not be
considered a substitute for the financial information presented in accordance
with GAAP. The following is a reconciliation between
the non-GAAP (unaudited) financial measure of non-GAAP earnings per diluted
share to its most directly comparable GAAP (unaudited) financial measure: Three Months
  Ended
 
 Six Months
  EndedJune 30,
 
 June 30,2015
 
 2014
 
 2015
 
 2014GAAP earnings per diluted share
  attributable to Quaker Chemical Corporationcommon shareholders
 $
 1.13
 
 $
 1.16
 
 $
 1.90
 
 $
 2.13Equity loss (income) in a captive
  insurance company per diluted share
 
 0.01
 
 
 (0.09)
 
 
 (0.05)
 
 
 (0.15)U.K. pension plan amendment per diluted
  share
 
 —
 
 
 —
 
 
 —
 
 
 0.05U.S. customer bankruptcy per diluted
  share
 
 0.01
 
 
 —
 
 
 0.01
 
 
 —Cost streamlining initiatives per
  diluted share
 
 —
 
 
 0.02
 
 
 0.01
 
 
 0.02Currency conversion impact of the
  Venezuelan Bolivar Fuerte per diluted share
 
 —
 
 
 0.02
 
 
 0.21
 
 
 0.02Non-GAAP earnings per diluted share
 $
 1.15
 
 $
 1.11
 
 $
 2.08
 
 $
 2.07
 The following is a reconciliation between the non-GAAP (unaudited)
financial measure of adjusted EBITDA to its most directly comparable GAAP
(unaudited) financial measure: Three Months
  Ended
 
 Six Months
  EndedJune 30,
 
 June 30,2015
 
 2014
 
 2015
 
 2014Net income attributable to Quaker
  Chemical Corporation
 $
 15,038
 
 $
 15,427
 
 $
 25,416
 
 $
 28,157Depreciation and amortization
 
 4,666
 
 
 3,824
 
 
 9,364
 
 
 7,712Interest expense
 
 607
 
 
 581
 
 
 1,194
 
 
 1,106Taxes on income before equity in net
  income of associated companies
 
 5,724
 
 
 6,538
 
 
 11,083
 
 
 13,084Equity loss (income) in a captive
  insurance company
 
 100
 
 
 (1,225)
 
 
 (695)
 
 
 (2,071)U.K. pension plan amendment
 
 —
 
 
 —
 
 
 —
 
 
 902U.S. customer bankruptcy
 
 111
 
 
 —
 
 
 111
 
 
 —Cost streamlining initiatives
 
 —
 
 
 348
 
 
 173
 
 
 348Currency conversion impact of the
  Venezuelan Bolivar Fuerte
 
 —
 
 
 321
 
 
 2,806
 
 
 321Adjusted EBITDA
 $
 26,246
 
 $
 25,814
 
 $
 49,452
 
 $
 49,559
  Operations Consolidated Operations Review
– Comparison of the Second Quarter of 2015 with the Second Quarter of 2014 Net sales for the second quarter of 2015
of $183.7 million decreased 4% from net sales of $191.3 million for the second
quarter of 2014.  The decrease in net sales was largely due to impacts from
foreign currency translation of $14.2 million, or 7%, and changes due to price
and product mix of 1%, which were partially offset by 4% of product volume
growth, including $9.8 million, or 5%, of sales attributable to the Company’s
2014 acquisitions. Gross profit for the second quarter of
2015 increased $2.4 million, or 4%, from the second quarter of 2014, which was
primarily driven by increased product volume, noted above, on higher gross
margin of 38.4% for the second quarter of 2015 compared to 35.7% for the second
quarter of 2014.The current
quarter’s expansion in gross margin was primarily due to the timing of certain
raw material cost decreases compared to the prior year quarter,and also, lower manufacturing expenses
due to $0.3 million, or $0.02 per diluted share, of costs incurred in the
second quarter of 2014 to finalize a manufacturing cost streamlining initiative
in the Company’s EMEA segment that began in 2013. SG&A for the second quarter of 2015
increased $1.9 million compared to the second quarter of 2014, which was due to
the net impact of several factors.  Notably, SG&A increased due to
incremental costs associated with the Company’s 2014 acquisitions, 24


---

higher labor-related costs and a U.S. customer bankruptcy
charge of $0.1 million, or $0.01 per diluted share, in the second quarter of
2015.  These increases to SG&A were partially offset by decreases from
foreign currency translation. The Company had other expense of $0.1 million
in the second quarter of 2015 compared to other income of $0.1 million in the
second quarter of 2014.  In both periods, the Company’s other expense was
primarily driven by foreign exchange transactional losses, net of third party
license fee income, with higher foreign exchange transactional losses in the
second quarter of 2015 compared to the second quarter of 2014. Interest expense in the second quarter of
2015 was approximately $0.1 million higher than the second quarter of 2014,
which was driven by higher average borrowings outstanding in the current
quarter to fund the Company’s recent acquisition activity.  Interest income
decreased by $0.5 million in the second quarter of 2015 compared to the second
quarter of 2014, primarily due to interest received on several non-income
tax-related credits in the second quarter of 2014. The Company’s effective tax rates for the
second quarters of 2015 and 2014 were 27.1% and 30.6%, respectively.  The
primary contributors to the decrease in the current quarter’s effective tax
rate were lower changes to reserves for uncertain tax positions in the second
quarter of 2015and a shift
in current year earnings to lower tax jurisdictions. Equity in net income of associated
companies (“equity income”) decreased by $1.1 million in the second quarter of
2015 compared to the second quarter of 2014.  A primary component of the
Company’s equity income is its interest in a captive insurance company. 
Earnings attributable to this equity interest were $1.2 million, or $0.09 per
diluted share, for the second quarter of 2014 compared to a loss of $0.1
million, or $0.01 per diluted share, for the second quarter of 2015. 
Additionally, the Company’s second quarter of 2014 equity income includes a
currency charge of $0.3 million, or $0.02 per diluted share, related to the
conversion of certain Venezuela Bolivar Fuerte to U.S. Dollars. The $0.1 million decrease in net income
attributable to noncontrolling interest in the second quarter of 2015 compared
to the second quarter of 2014 was primarily due to the Company’s June 2014
acquisition of the noncontrolling interest in its Australian affiliate. Changes in foreign exchange rates
negatively impacted the second quarter of 2015 net income by $1.2 million, or
$0.09 per diluted share. Consolidated Operations Review
– Comparison of the First Six Months of 2015 with the First Six Months of 2014 Net sales for the first six months of 2015
of $365.1 million decreased 2% from net sales of $373.0 million for the first
six months of 2014.  The decrease in net sales was largely due to impacts fromforeign currency translation of$26.3 million, or 7%, andchanges due to price and product mix of
1%, which were partially offset by 6% of product volume growth, including $20.2 million, or 5%, related to
the Company’s 2014 acquisitions. Gross profit for the first six months of
2015 increased $3.6 million, or 3%, from the first six months of 2014, which
was primarily driven by increased product volumes, noted above, on highergross margin of 37.5% for the first six
months of 2015 compared to 35.7% for the first six months of 2014.The Company’s expansion in gross margin
was primarily due to the timing of certain raw material cost decreases compared
to the prior year period, and also, lower manufacturing expenses due to the costs incurred in the
prior year period to finalize a manufacturing cost streamlining initiative,
noted above. SG&A for the first six months of 2015
increased $4.6 million from the first six months of 2014, which was due to the
net impact of several factors.  Notably, SG&A increased due toincremental costs associated with the
Company’s 2014 acquisitions,
higher labor-related costs,a
current year U.S. customer bankruptcy charge, noted above, a current year charge
of$0.2 million, or $0.01 per diluted share,
related to a cost streamlining initiative in South America, and a current year
charge of $0.2 million, or $0.01 per diluted share, related to events at the
Company’s Venezuelan affiliate.  These increases in SG&A were partially
offset bydecreases from foreign currency
translation, and additional
costs of $0.9 million, or $0.05 per diluted share, related to an amendment to
the Company’s pension plan in the U.K. incurred in the prior year period. The Company had other expense of $0.3
million in the first six months of 2015 compared to $0.4 million in the first
six months of 2014.  In both periods, the Company’s other expensewas primarily driven by foreign exchange
transactional losses, net of third party license fee income, withlowerforeign exchange transactional losses in the first six months of
2015 compared to the first six months of 2014. Interest expense increased $0.1 million in
the first six months of 2015 compared to the first six months of 2014,
primarily due to higher average borrowings outstanding in the current period
due to the Company’s 2014 acquisitions.  Interest income decreased $0.7 million
in the first six months of 2015 compared to the first six months of 2014,
primarily due to interest received onseveral non-income tax-related credits in the first six months of
2014. The Company’s effective tax rates for the
first six months of 2015 and 2014 were 28.8% and 32.5%, respectively.  The
primary contributors to the decrease in the Company’s effective tax rate were
lower changes to reserves for uncertain tax positions in the current year and
certain one-time items that increased the first six months of 2014 effective
tax rate.The Company
continues to enjoy 25


---

a net reduction to its effective
tax rate arising from lower tax rates in foreign jurisdictions.  Also, the
Company has experienced and expects to further experience volatility in its
effective tax rates due to the varying timing of tax audits and the expiration
of applicable statutes of limitations as they relate to uncertain tax
positions, among other factors.  Finally, the Company estimates its full year
2015 effective tax rate will approximate 29%. Equity income decreased $3.6 million in
the first six months of 2015 compared to the first six months of 2014.  In the
first quarter of 2015, the Company recorded a currency related charge of $2.6
million, or $0.20 per diluted share, at the Company’s Venezuelan affiliate. 
See Note 1 of Notes to Condensed Consolidated Financial Statements.  This
current year currency related charge was partially offset by the prior year
expense related to the conversion of Venezuelan Bolivar Fuerte to the U.S.
Dollar of $0.3 million, or $0.02 per diluted share.  Outside of these charges,
the primary component of equity income is the Company’s interest in a captive
insurance company.  Earnings attributable to this equity interest were $0.7
million, or $0.05 per diluted share, for the first six months of 2015 compared
to $2.1 million, or $0.15 per diluted share, for the first six months of
2014. The $0.5 million decrease in net income
attributable to noncontrolling interest in the first six months of 2015
compared to the first six months of 2014 was primarily due to the Company’s
June 2014 acquisition of the noncontrolling interest in its Australian affiliate. Changes in foreign exchange rates,
excluding the currency conversion impacts of the Venezuelan Bolivar Fuerte,
noted above, negatively impacted the first six months of 2015 net income by
$2.2 million, or $0.17 per diluted share. Reportable Operating Segment Review The Company offers its industrial process
fluids, chemical specialties and technical expertise to a wide range of
industries in a global product portfolio throughout its four segments:  (i)
North America, (ii) Europe, Middle East and Africa (“EMEA”), (iii) Asia/Pacific
and (iv) South America. Comparison of the Second Quarter of 2015 with
the Second Quarter of 2014 North America North America represented approximately
47% of the Company’s consolidated net sales in the second quarter of 2015,
which increased $3.5 million, or 4%, compared to the second quarter of 2014. 
The increase in net sales was generally attributable to higher product volumes,
including acquisitions, of 3%, and an increase in price and product mix of 3%,
partially offset by a decrease from foreign currency translation of 2%.  The
foreign exchange impact was primarily due to a decrease in the Mexican Peso to
U.S. Dollar exchange rate, which averaged 0.07 in the second quarter of 2015
compared to an average of 0.08 in the second quarter of 2014.  This reportable segment’s
operating earnings, excluding indirect expenses, increased $2.4 million, or
13%, compared to the second quarter of 2014.  The second quarter of 2015
increase was mainly driven by higher gross profit on the increases in net
sales, noted above, and an increase in gross margindue to timing related to certain raw
material cost decreases,partially offset by higher labor-related costs on improved segment performance
and incremental SG&A from its 2014 acquisition activity. EMEA EMEA represented approximately 22% of the
Company’s consolidated net sales in the second quarter of 2015, which decreased
$9.1 million, or 18%, compared to the second quarter of 2014.  The decrease in
net sales was primarily due to a decrease in foreign currency translation of
18% and a decrease in price and product mix of 4%, partially offset by higher
product volumes, including acquisitions, of 4%.  The foreign exchange impact
was primarily due to a decrease in the Euro to U.S. Dollar exchange rate, which
averaged 1.11 in the second quarter of 2015 compared to an average of 1.37 in
the second quarter of 2014.  This reportable segment’s operating earnings,
excluding indirect expenses, decreased $1.2 million, or 15%, compared to the second
quarter of 2014.  The second quarter of 2015 decrease was mainly driven by
lower gross profit on the decreases in net sales, noted above, and incremental
SG&A from its 2014 acquisition activity, which was partially offset by an
increase in gross margindue
to timing related to certain raw material cost decreases,lower costs due to the decrease in the
Euro to U.S. Dollar exchange rate, and lower costs from decreased segment
performance. Asia/Pacific Asia/Pacific represented approximately 26%
of the Company’s consolidated net sales in the second quarter of 2015, which
increased $2.7 million, or 6%, compared to the second quarter of 2014.  The
increase in net sales was primarily due to higher product volumes of 12%,
partially offset by a decrease due to price and product mix of 4% and a
decrease from foreign currency translation of 2%.  The foreign exchange impact
was primarily due to a decrease in the Australian Dollar to U.S. Dollar
exchange rate, which averaged 0.78 in the second quarter of 2015 compared to
0.93 in the second quarter of 2014.  This reportable segment’s operating
earnings, excluding indirect expenses, increased $2.0 million, or 19%, compared
to the second quarter of 2014.  The second quarter of 2015 increase was mainly
driven by higher gross profit on the increases in net sales, noted above, and
an increase in gross margindue
to timing related to certain raw material cost decreases, partially offset by higher labor-related
costs on improved segment performance.  26


---

South America South America represented approximately 5%
of the Company’s consolidated net sales in the second quarter of 2015, which
decreased $4.7 million, or 35%, compared to the second quarter of 2014.  The
decrease in net sales was generally attributable to lower product volumes of
18% and a decrease from foreign currency translation of 21%, partially offset
by an increase in price and product mix of 4%.  The foreign exchange impact was
primarily due to a decrease in the Brazilian Real and Argentinian Peso to U.S.
Dollar exchange rates, which averaged 0.33 and 0.11 in the second quarter of
2015 compared to 0.45 and 0.12 in the second quarter of 2014, respectively. 
This reportable segment’s operating earnings, excluding indirect expenses,
decreased $0.1 million, or 15%, compared to the second quarter of 2014.  The
second quarter of 2015 decrease was mainly driven by lower gross profit on the
decreases in net sales, noted above, partially offset by an increase in gross
margin on a change in price and product mix and lower labor-related costs.  The
decrease in labor-related costs are due to the segment’s lower performance, the
positive effects from the cost streamlining initiatives taken in this segment
during 2013 and 2014, and the decrease in the Brazilian Real and Argentinian
Peso to U.S. Dollar exchange rates. Comparison
of the First Six Months of 2015 with the First Six Months of 2014 North America North America represented approximately
46% of the Company’s consolidated net sales in the first six months of 2015,
which increased $9.7 million, or 6%, compared to the first six months of 2014. 
The increase in net sales was generally attributable to higher product volumes,
including acquisitions, of 7%, and an increase in price and product mix of 1%,
partially offset by a decrease from foreign currency translation of 2%.  The
foreign exchange impact was primarily due to a decrease in the Mexican Peso to
U.S. Dollar exchange rate, which averaged 0.07 in the first six months of 2015
compared to an average of 0.08 in first six months of 2014.  This reportable
segment’s operating earnings, excluding indirect expenses, increased $4.5
million, or 13%, compared to the first six months of 2014.  The increase during
the first six months of 2015 was mainly driven by higher gross profit on the
increases in net sales, noted above, and an increase in gross margindue to timing related to certain raw
material cost decreases,
partially offset by higher labor-related costs on improved segment performance
and incremental SG&A from its 2014 acquisition activity. EMEA EMEA represented approximately 23% of the
Company’s consolidated net sales in the first six months of 2015, which
decreased $15.1 million, or 15%, compared to the first six months of 2014.  The
decrease in net sales was primarily due to a decrease in foreign currency
translation of 18% and a decrease in price and product mix of less than 1%,
partially offset by higher product volumes, including acquisitions, of 3%.  The
foreign exchange impact was primarily due to a decrease in the Euro to U.S.
Dollar exchange rate, which averaged 1.12 in the first six months of 2015
compared to an average of 1.37 in the first six months of 2014.  This
reportable segment’s operating earnings, excluding indirect expenses, decreased
$2.8 million, or 17%, compared to the first six months of 2014.  The decrease
in the first six months of 2015 was mainly driven by lower gross profit on the
decreases in net sales, noted above, on relatively consistent margins.  These
decreases were partially offset by lower costs in the current year due to the
decrease in the Euro to U.S. Dollar exchange rate and lower overall
labor-related costs on the segment’s performance, partially offset by
incremental SG&A from its 2014 acquisition activity. Asia/Pacific Asia/Pacific represented approximately 26%
of the Company’s consolidated net sales in the first six months of 2015, which
increased $5.8 million, or 7%, compared to the first six months of 2014.  The
increase in net sales was primarily due to higher product volumes of 14%,
partially offset by a decrease due to price and product mix of 6% and a
decrease from foreign currency translation of approximately 1%.  The foreign
exchange impact was primarily due to a decrease in the Australian Dollar to
U.S. Dollar exchange rates, which averaged 0.78 in the first six months of 2015
compared to 0.91 in the first six months of 2014.  This reportable segment’s
operating earnings, excluding indirect expenses, increased $2.5 million, or
12%, compared to the first six months of 2014.  The increase in the first six
months of 2015 was mainly driven by higher gross profit on the increases in net
sales, noted above, and higher gross margindue to timing related to certain raw material cost decreases.  These increases were partially offset
by higher labor-related costs on improved segment performance. South America South America represented approximately 5%
of the Company’s consolidated net sales in the first six months of 2015, which
decreased $8.4 million, or 31%, compared to the first six months of 2014.  The
decrease in net sales was generally attributable to lower product volumes of
16% and a decrease from foreign currency translation of 18%, partially offset
by an increase in price and product mix of 3%.  The foreign exchange impact was
primarily due to a decrease in the Brazilian Real and Argentinian Peso to U.S.
Dollar exchange rates, which averaged 0.34 and 0.11 in the first six months of
2015 compared to 0.44 and 0.13 in the first six months of 2014, respectively. 
This reportable segment’s operating earnings, excluding indirect expenses,
decreased $0.4 million, or 16%, compared to the first six months of 2014.  The
first six months of 2015 decrease was mainly driven by lower gross profit on
the decreases in net sales, noted above, partially offset by an increase in
gross margin on a change in price and product mix and lower 27


---

labor-related
costs.  The decrease in labor-related costs are due to the segment’s lower
performance, the positive effects from the cost streamlining initiatives taken
in this segment during 2013 and 2014, and the decrease in the Brazilian Real
and Argentinian Peso to U.S. Dollar exchange rates. 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 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:  ·statements relating to our business
strategy; ·our current and future results and
plans; and ·statements that include the words
“may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,”
“estimate,” “intend,” “plan” or similar expressions.  Such statements include information relating to such
matters as current and future business activities, operational matters, capital
spending and financing sources.  From time to time, forward-looking statements
are also included in Quaker’s other periodic reports on Forms 10-K, 10-Q and
8-K, as well as in press releases and other materials released to, or
statements made to, the public. Any or all of the forward-looking statements in this Report
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 Quaker’s subsequent reports
on Forms 10-K, 10-Q and 8-K should be consulted.  Our forward-looking
statements are subject to risks, uncertainties and assumptions about us and our
operations that are subject to change based on various important factors, some
of which are beyond our control.  A major risk is that demand for the Company’s
products and services is largely derived from the demand for its 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, worldwide economic and political conditions,
foreign currency fluctuations, terrorist attacks and other acts of violence. 
Furthermore, the Company is subject to the same business cycles as those
experienced by steel, automobile, aircraft, appliance, and durable goods
manufacturers.  These risks, uncertainties, and possible inaccurate assumptions
relevant to our business could cause our actual results to differ materially
from expected and historical results. Other factors beyond those discussed
could also adversely affect us.  Therefore, we caution you not to place undue
reliance on our forward-looking statements.  This discussion is provided as
permitted by the Private Securities Litigation Reform Act of 1995.  28


---

Item 3.  Quantitative and
Qualitative Disclosures About Market Risk. We have evaluated the information required under this Item
that was disclosed in Part II, Item 7A, of our Annual Report on Form 10-K for
the year ended December 31, 2014, and we believe there has been no material
change to that information.  29


---

Item 4.  Controls and
Procedures. Evaluation of disclosure controls and procedures.As required by Rule
13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), our management, including our principal executive officer and principal
financial officer, has evaluated the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this report.  Based on
that evaluation, our principal executive officer and our principal financial
officer have concluded that as of the end of the period covered by this report
our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) were effective. Changes in internal control
over financial reporting.As required by Rule 13a-15(d) under the Exchange Act, our
management, including our principal executive officer and principal financial
officer, has evaluated our internal control over financial reporting to
determine whether any changes to our internal control over financial reporting
occurred during the quarter ended June 30, 2015 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.  Based on that evaluation, no such changes to our internal
control over financial reporting occurred during the quarter ended June 30,
2015. 30


---

PART II. OTHER INFORMATION Items 1A, 3, 4 and 5 of Part II are inapplicable and have been
omitted. Item 1.  Legal Proceedings Incorporated
by reference is the information in Note 14 of the Notes to the Condensed
Consolidated Financial Statements in Part I, Item 1, of this Report. Item 2.  Unregistered
Sales of Equity Securities and Use of Proceeds. The following table sets
forth information concerning shares of the Company’s common stock acquired by
the Company during the period covered by this report: (d)(c)
 
 
 MaximumTotal Number
  of
 
 
 Number of
  Shares (orShares
  Purchased as
 
 
 Appropriate
  Dollar(a)
 
 
 (b)
 
 Part of
 
 
 Value ) that
  May YetTotal Number
 
 
 Average
 
 Publicly
  Announced
 
 
 Be Purchased
  Under theof Shares
 
 
 Price Paid
 
 Plans
 
 
 Plans orPeriod
 
 Purchased (1)
 
 
 Per Share (3)
 
 or Programs
 
 
 Programs
  (1)(4)April 1 - April 30
 
 —
 
 $
 —
 
 —
 
 
 252,600
  sharesMay 1 - May 31
 
 5,016
 
 $
 86.07
 
 5,016
 
 $
 99,568,289June 1 - June 30
 
 14,514 (2)
 
 $
 86.71
 
 13,838
 
 $
 98,370,151Total
 
 19,530
 
 $
 86.55
 
 18,854
 
 $
 98,370,151
  (1)On May 6,
2015, the Board of Directors of the Company approved, and the Company
announced, a new 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”).  The 2015 Share Repurchase
Program has no expiration date.  Except as otherwise indicated in note (2)
below, all of the shares acquired by the Company during the applicable
respective periods were acquired pursuant to the 2015 Share Repurchase Program. (2)Of these
shares,676were acquired from employees upon
their surrender of previously owned shares in payment of the exercise price of
employee stock options exercised, for the payment of taxes upon exercise of
employee stock options or for the vesting of restricted stock. (3)The price
paid for shares acquired from employees pursuant to employee benefit and share
based compensation plans, is based on the closing price of the Company’s common
stock on the date of exercise or vesting, as specified by the plans pursuant to
which the applicable option or restricted stock was granted. (4)In
connection with the 2015 Share Repurchase Program, as described in note (1)
above, share repurchase programs authorized by the Board of Directors in 1995
and 2005, pursuant to which an aggregate of 252,600 additional shares could
have been repurchased as of April 30, 2015, were terminated. 31


---

Item 6.  Exhibits (a) Exhibits31.1
 
 –
 
 Certification of Chief Executive
  Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange
  Act of 193431.2
 
 –
 
 Certification of Chief Financial
  Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange
  Act of 193432.1
 
 –
 
 Certification of Michael F. Barry
  Pursuant to 18 U.S. C. Section 135032.2
 
 –
 
 Certification of Margaret M. Loebl
  Pursuant to 18 U.S. C. Section 1350101.INS
 
 –
 
 XBRL Instance Document101.SCH
 
 –
 
 XBRL Extension Schema Document101.CAL
 
 –
 
 XBRL Calculation Linkbase Document101.DEF
 
 –
 
 XBRL Definition Linkbase Document101.LAB
 
 –
 
 XBRL Label Linkbase Document101.PRE
 
 –
 
 XBRL Presentation Linkbase
  Document
   *********  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.  QUAKER CHEMICAL CORPORATION
  (Registrant)/s/
  Margaret M. LoeblDate: July 30, 2015
 
 
 
 Margaret M. Loebl, Vice
  President, Chief Financial Officer and Treasurer (officer duly authorized on
  behalf of, and principal financial officer of, the Registrant)
  32


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