UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
 
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
October 30, 2012
Date of Report (Date of earliest event reported)

QUAKER CHEMICAL CORPORATION
(Exact name of Registrant as specified in its charter)
  
Commission File Number 001-12019
  
PENNSYLVANIA	 	No. 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	
(Address of principal executive offices)	
(Zip Code)	

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

Not Applicable
(Former name or former address, if changed since last report)	

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
£ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
£ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
£ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
£ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 	
INFORMATION TO BE INCLUDED IN THE REPORT

 
Item 2.02. 	Results of Operations and Financial Condition.
 
On October 30, 2012, Quaker Chemical Corporation announced its results of operations for the third quarter ended September 30, 2012 in a press release, the text of which is included as Exhibit 99.1 hereto. Supplemental information related to the same period is also included as Exhibit 99.2 hereto.

 
Item 9.01.	Financial Statements and Exhibits.
 
The following exhibits are included as part of this report:
 
Exhibit No.	 	
99.1	Press Release of Quaker Chemical Corporation dated October 30, 2012. 	
 	 	
99.2	Supplemental Information related to third quarter ended September 30, 2012.	

 	
 
SIGNATURE

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 hereunto duly authorized.

 	 	QUAKER CHEMICAL CORPORATION	
 	 	Registrant	

Date:  October 30, 2012	 	By:	/S/ MARGARET M. LOEBL	
 	 	 	Margaret M. Loebl
Vice President, Chief Financial
Officer and Treasurer

 	

NEWS

Contact:
Margaret M. Loebl
Vice President, Chief Financial Officer & Treasurer
loeblm@quakerchem.com
T. 610.832.4160	 

 
For Release: Immediate	
 
QUAKER CHEMICAL CORPORATION ANNOUNCES THIRD QUARTER 2012 RESULTS
 
·         Acquisitions and business strategies drive Company to record product volumes
·         Revenue down slightly due to foreign exchange impacts
·         Strong balance sheet and net operating cash flow
·         Solid earnings despite challenging environment
 
October 30, 2012
 
CONSHOHOCKEN, PA - Quaker Chemical Corporation (NYSE: KWR) today announced net sales of $180.9 million for the third quarter of 2012, compared to third quarter 2011 net sales of $182.3 million. Earnings per diluted share were $0.80 for the third quarter of 2012, compared to earnings per diluted share of $1.03 for the third quarter of 2011 or $0.81 excluding a non-cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate of $0.22 per diluted share. The third quarter of 2012 includes certain uncommon expenses totaling $0.05 per diluted share largely consisting of severance and Brand launch costs. In addition, changes in foreign exchange rates negatively impacted the third quarter net sales by $10.6 million, or 6%, and net income by $0.04 per diluted share.
 
Michael F. Barry, Chairman, Chief Executive Officer and President, commented, “We are very pleased to announce record product volumes, solid earnings and strong cash flow again this quarter. The global markets remain challenging for us and we are being negatively impacted by a stronger dollar and weaker demand in several geographical areas such as Europe, China, Brazil and India. Despite these headwinds, we delivered record product volumes this quarter by continuing to grow through additional new business and our recent acquisitions.”
 
Mr. Barry continued, “As we look to the fourth quarter, we expect the challenging global economic environment to continue as well as some negative seasonality impacts around the holidays at year end. However, we remain committed to delivering good results through the execution of our business strategies. Overall, our expectations and guidance have not changed for our full year results and we expect 2012 to be another good year for Quaker.”
 
Mr. Barry also noted, “With our strong balance sheet, we are able to continue actively pursuing acquisitions consistent with our third quarter acquisition of NP Coil Dexter, closed in July. This is the fifth acquisition we have made during the past two years as we continue to add new adjacent product lines which we can leverage on our global platform. In addition, we launched a revised Brand for Quaker. Building on our 94-year history, we are committed to take the Company to the next level. Our revitalized Brand highlights this commitment by more clearly communicating our competitive advantage: formulating products and service solutions for our customers through the innovation, expertise and experience of our people.”

Quaker Chemical Corporation
One Quaker Park, 901 E. Hector Street, Conshohocken, PA 19428-2380 USA
P: 610.832.4000 F: 610.832.8682
quakerchem.com

 	
Third Quarter 2012 Summary
 
Net sales for the third quarter of 2012 were $180.9 million, a decrease of less than 1% from $182.3 million in the third quarter of 2011. Foreign exchange rate translation decreased revenues by approximately 6%, which more than offset increases due to product volumes of approximately 5%, including acquisitions.
 
Gross profit decreased by approximately $0.4 million, or less than 1%, from the third quarter of 2011. The third quarter of 2012 gross margin increased slightly to 32.7% from 32.6% for the third quarter of 2011. The decrease in gross profit is consistent with the decrease in net sales noted above.
 
Selling, general and administrative expenses (“SG&A”) increased approximately $1.3 million compared to the third quarter of 2011, primarily related to acquisitions and higher selling, inflationary and other labor related costs which were partially offset by decreases due to foreign exchange rate translation. SG&A for the third quarter of 2012 includes certain uncommon charges totaling $0.05 per diluted share largely consisting of severance and related items and costs related to the Company’s new Brand launch. As a result, the third quarter of 2012 SG&A, as a percentage of sales, increased to 23.9% compared to 23.0% for the third quarter of 2011.
 
The decrease in interest expense was due to lower average borrowings, partially offset by increases related to the accretion of certain acquisition-related liabilities.
 
The decrease in other income in the third quarter of 2012 was primarily due to a $2.7 million, or $0.22 per diluted share, non-cash gain recorded in the third quarter of 2011 due to the revaluation of the Company’s previously held ownership interest in its Mexican equity affiliate to its fair value, which was related to the Company’s third quarter of 2011 purchase of the remaining ownership interest in this entity.
 
Year-to-Date Summary
 
Net sales for the first nine months of 2012 were $535.4 million, an increase of 5% from $510.0 million for the first nine months of 2011. Product volumes, including acquisitions, were higher by approximately 6%, and selling price and mix increased revenues by 4%, while foreign exchange rate translation decreased revenues by approximately 5%.
 
Gross profit increased by approximately $13.6 million, or 8%, from the first nine months of 2011, with gross margin increasing to 33.5% from 32.5%, for the first nine months of 2011, reflecting the Company’s initiative to restore margins to more acceptable levels through price increases and the mix effects noted above.
 
SG&A increased by approximately $10.6 million compared to the first nine months of 2011, primarily related to acquisitions and higher selling, inflationary and other costs on increased business activity, which were partially offset by decreases due to foreign exchange rate translation. The first nine months of 2012 SG&A includes charges of $0.06 per diluted share for certain customer bankruptcies in the U.S., $0.03 per diluted share related to CFO transition costs and other certain charges of $0.05 per diluted share, noted above. SG&A, as a percentage of sales, increased to 24.3% from 23.4% for the first nine months of 2011.
 
The decrease in interest expense was due to lower average borrowings, partially offset by increases related to the accretion of certain acquisition-related liabilities.
 
Other income decreased in the first nine months of 2012 primarily due to the non-cash gain recorded in the first nine months of 2011 related to the revaluation of the Company’s previously held ownership interest in its Mexican affiliate to its fair value, as discussed above. In addition, the Company experienced higher foreign exchange losses in the first nine months of 2012 and, also, received lower third party license fees in the first nine months of 2012, primarily as a result of the prior year purchase of the remaining ownership interest in the Company’s Mexican affiliate, as discussed above.

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The Company’s year-to-date 2012 and 2011 effective tax rates of 26.9% and 27.1%, respectively, reflect decreases in reserves for uncertain tax positions due to the expiration of applicable statutes of limitations for certain tax years of approximately $0.15 and $0.14 per diluted share, respectively. 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.
 
The first nine months of 2012 earnings per diluted share of $2.52 reflect an approximate $0.11 per share dilutive effect as a result of the Company’s equity offering in May of 2011.
 
Balance Sheet and Cash Flow Items
 
In the first nine months of 2012, the Company’s net cash provided by operating activities was $41.8 million, which surpasses any previous full year result. Net operating cash flow of $19.8 million was generated in the third quarter of 2012, primarily led by the Company’s third quarter net income and an improved working capital position. The Company’s consolidated leverage ratio remains strong at less than one times EBITDA. In July 2012, the Company acquired NP Coil Dexter Industries, S.r.l. for net cash consideration of approximately $2.7 million.
 
Non-GAAP Measures
 
Included in this public release is a non-GAAP financial measure of earnings per diluted share excluding a non-cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate. The Company believes this non-GAAP measure enhances a reader’s understanding of the financial performance of the Company, is more indicative of the future performance of the Company and facilitates a better comparison among fiscal periods. 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 earnings per diluted share excluding a non-cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate to its most comparable GAAP measure (in thousands):

 	 	Three Months Ended
September 30,	 	Nine Months Ended
September 30,	
 	 	2012	 	2011	 	2012	 	2011	
Earnings per diluted share attributable to Quaker Chemical Corporation	 	$	0.80	 	 	$	1.03	 	 	$	2.52	 	 	$	2.73	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate per diluted share	 	 	- 	 	 	 	(0.22	)	 	 	- 	 	 	 	(0.22	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per diluted share excluding a non-cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate	 	$	0.80	 	 	$	0.81	 	 	$	2.52	 	 	$	2.51	 	

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Forward-Looking Statements
 
This release contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in such statements. A major risk is that the Company’s demand is largely derived from the demand for its customers’ products, which subjects the Company to downturns in a customer’s business and unanticipated customer production shutdowns. Other major risks and uncertainties include, but are not limited to, significant increases in raw material costs, customer financial stability, worldwide economic and political conditions, foreign currency fluctuations, future terrorist attacks and other acts of violence. Other factors 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.
 
Conference Call
 
As previously announced, Quaker Chemical’s investor conference call to discuss third quarter results is scheduled for October 31, 2012 at 8:30 a.m. (ET). A live webcast of the conference call, together with supplemental information, can be accessed through the Company’s Investor Relations Web site at http://www.quakerchem.com. You can also access the conference call by dialing 877-270-2148.
 
About Quaker
 
Quaker Chemical 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.

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Quaker Chemical Corporation	
Condensed Consolidated Statement of Income	
(Dollars in thousands, except per share data)	

 	 	(Unaudited)	
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended September 30,	 	Nine Months Ended September 30,	
 	 	2012	 	2011	 	2012	 	2011	
 	 	 	 	 	 	 	 	 	
Net sales	 	$	180,923	 	 	$	182,313	 	 	$	535,358	 	 	$	509,970	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of goods sold	 	 	121,797	 	 	 	122,827	 	 	 	355,801	 	 	 	343,984	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	59,126	 	 	 	59,486	 	 	 	179,557	 	 	 	165,986	 	
%	 	 	32.7	%	 	 	32.6	%	 	 	33.5	%	 	 	32.5	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling, general and administrative expenses	 	 	43,263	 	 	 	41,982	 	 	 	130,009	 	 	 	119,441	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	 	 	15,863	 	 	 	17,504	 	 	 	49,548	 	 	 	46,545	 	
%	 	 	8.8	%	 	 	9.6	%	 	 	9.3	%	 	 	9.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other income, net	 	 	322	 	 	 	2,740	 	 	 	529	 	 	 	4,070	 	
Interest expense	 	 	(1,034	)	 	 	(1,166	)	 	 	(3,359	)	 	 	(3,584	)	
Interest income	 	 	149	 	 	 	262	 	 	 	409	 	 	 	805	 	
Income before taxes and equity in net income of associated companies	 	 	15,300	 	 	 	19,340	 	 	 	47,127	 	 	 	47,836	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Taxes on income before equity in net income of associated companies	 	 	4,373	 	 	 	5,640	 	 	 	12,692	 	 	 	12,961	 	
 	 	 	10,927	 	 	 	13,700	 	 	 	34,435	 	 	 	34,875	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in net income of associated companies	 	 	257	 	 	 	105	 	 	 	612	 	 	 	715	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	11,184	 	 	 	13,805	 	 	 	35,047	 	 	 	35,590	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Less: Net income attributable to noncontrolling interest	 	 	698	 	 	 	447	 	 	 	2,075	 	 	 	1,791	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to Quaker Chemical Corporation	 	$	10,486	 	 	$	13,358	 	 	$	32,972	 	 	$	33,799	 	
%	 	 	5.8	%	 	 	7.3	%	 	 	6.2	%	 	 	6.6	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Per share data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to Quaker Chemical Corporation Common Shareholders - basic	 	$	0.80	 	 	$	1.04	 	 	$	2.54	 	 	$	2.77	 	
Net income attributable to Quaker Chemical Corporation Common Shareholders - diluted	 	$	0.80	 	 	$	1.03	 	 	$	2.52	 	 	$	2.73	 	

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Quaker Chemical Corporation	
Condensed Consolidated Balance Sheet	
(Dollars in thousands, except par value and share amounts)	
 	 	 	 	 	
 	 	(Unaudited)	
 	 	 	 	 	
 	 	September 30,	 	December 31,	
 	 	2012	 	2011	
ASSETS	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	30,172	 	 	$	16,909	 	
Accounts receivable, net	 	 	155,878	 	 	 	150,676	 	
Inventories, net	 	 	76,434	 	 	 	74,758	 	
Prepaid expenses and other current assets	 	 	18,576	 	 	 	17,206	 	
Total current assets	 	 	281,060	 	 	 	259,549	 	
 	 	 	 	 	 	 	 	 	
Property, plant and equipment, net	 	 	84,309	 	 	 	82,916	 	
Goodwill	 	 	59,461	 	 	 	58,152	 	
Other intangible assets, net	 	 	33,563	 	 	 	31,783	 	
Investments in associated companies	 	 	8,302	 	 	 	7,942	 	
Deferred income taxes	 	 	27,855	 	 	 	29,823	 	
Other assets	 	 	36,191	 	 	 	35,356	 	
Total assets	 	$	530,741	 	 	$	505,521	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES AND EQUITY	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	 	
Short-term borrowings and current portion of long-term debt	 	$	576	 	 	$	636	 	
Accounts and other payables	 	 	74,277	 	 	 	68,125	 	
Accrued compensation	 	 	14,390	 	 	 	16,987	 	
Other current liabilities	 	 	22,812	 	 	 	20,901	 	
Total current liabilities	 	 	112,055	 	 	 	106,649	 	
Long-term debt	 	 	37,980	 	 	 	46,701	 	
Deferred income taxes	 	 	9,319	 	 	 	7,094	 	
Other non-current liabilities	 	 	86,162	 	 	 	89,351	 	
Total liabilities	 	 	245,516	 	 	 	249,795	 	
 	 	 	 	 	 	 	 	 	
Equity	 	 	 	 	 	 	 	 	
Common stock, $1 par value; authorized 30,000,000 shares; issued 13,081,917 shares	 	 	13,082	 	 	 	12,912	 	
Capital in excess of par value	 	 	93,845	 	 	 	89,725	 	
Retained earnings	 	 	199,388	 	 	 	175,932	 	
Accumulated other comprehensive loss	 	 	(30,206	)	 	 	(29,820	)	
Total Quaker shareholders' equity	 	 	276,109	 	 	 	248,749	 	
Noncontrolling interest	 	 	9,116	 	 	 	6,977	 	
Total shareholders' equity	 	 	285,225	 	 	 	255,726	 	
Total liabilities and equity	 	$	530,741	 	 	$	505,521	 	

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Quaker Chemical Corporation	
Condensed Consolidated Statement of Cash Flows	
For the nine months ended September 30,	
(Dollars in thousands)	

 	 	(Unaudited)	
 	 	2012	 	2011	
Cash flows from operating activities	 	 	 	 	 	 	 	 	
Net income	 	$	35,047	 	 	$	35,590	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Depreciation	 	 	9,001	 	 	 	8,527	 	
Amortization	 	 	2,283	 	 	 	1,596	 	
Equity in undistributed earnings of associated companies, net of dividends	 	 	(428	)	 	 	(136	)	
Deferred compensation and other, net	 	 	1,848	 	 	 	6,987	 	
Stock-based compensation	 	 	2,954	 	 	 	2,675	 	
Non-cash gain from purchase of equity affiliate	 	 	-  	 	 	 	(2,718	)	
Gain on disposal of property, plant and equipment	 	 	(75	)	 	 	(61	)	
Insurance settlement realized	 	 	(1,074	)	 	 	(1,242	)	
Pension and other postretirement benefits	 	 	(1,823	)	 	 	(4,099	)	
(Decrease) increase in cash from changes in current assets and current liabilities, net of acquisitions:	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	(1,381	)	 	 	(29,390	)	
Inventories	 	 	(875	)	 	 	(16,334	)	
Prepaid expenses and other current assets	 	 	(1,976	)	 	 	(3,061	)	
Accounts payable and accrued liabilities	 	 	(1,731	)	 	 	6,196	 	
Net cash provided by operating activities	 	 	41,770	 	 	 	4,530	 	
 	 	 	 	 	 	 	 	 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	
Investments in property, plant and equipment	 	 	(8,757	)	 	 	(8,914	)	
Payments related to acquisitions, net of cash acquired	 	 	(2,635	)	 	 	(10,981	)	
Proceeds from disposition of assets	 	 	193	 	 	 	221	 	
Insurance settlement received and interest earned	 	 	53	 	 	 	61	 	
Change in restricted cash, net	 	 	1,021	 	 	 	1,181	 	
Net cash used in investing activities	 	 	(10,125	)	 	 	(18,432	)	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities	 	 	 	 	 	 	 	 	
Net decrease in short-term borrowings	 	 	-  	 	 	 	(185	)	
Proceeds from long-term debt	 	 	-  	 	 	 	-  	 	
Repayments of long-term debt	 	 	(9,672	)	 	 	(30,613	)	
Dividends paid	 	 	(9,410	)	 	 	(8,492	)	
Stock options exercised, other	 	 	(828	)	 	 	629	 	
Excess tax benefit related to stock option exercises	 	 	2,164	 	 	 	153	 	
Proceeds from sale of common stock, net of related expenses	 	 	-  	 	 	 	48,143	 	
Distributions to noncontrolling shareholders	 	 	(30	)	 	 	-  	 	
Net cash (used in) provided by financing activities	 	 	(17,776	)	 	 	9,635	 	
 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash	 	 	(606	)	 	 	(920	)	
Net increase (decrease) in cash and cash equivalents	 	 	13,263	 	 	 	(5,187	)	
Cash and cash equivalents at the beginning of the period	 	 	16,909	 	 	 	25,766	 	
Cash and cash equivalents at the end of the period	 	$	30,172	 	 	$	20,579	 	

October 31, 2012 Quaker Chemical Corporation Investor Conference Call Third Quarter 2012 October 31, 2012 Quaker Chemical Corporation Investor Conference Call Third Quarter 2012

 	

Risks and Uncertainties Statement Regulation G The attached charts include Company information that does not conform to generally accepted accounting principles (GAAP) . Management believes that an analysis of this data is meaningful to investors because it provides insight with respect to ongoing operating results of the Company and allows investors to better evaluate the financial results of the Company. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other Companies. This data should be read in conjunction with the Company’s third quarter earnings news release dated October 30, 2012, which has been furnished to the SEC on Form 8-K, and the Company’s Form 10- Q for the quarterly period ended September 30, 2012, which has been filed with the SEC. Forward-Looking Statements This presentation may contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in such statements. A major risk is that the Company’s demand is largely derived from the demand for its customers’ products, which subjects the Company to downturns in a customer’s business and unanticipated customer production shutdowns. Other major risks and uncertainties include, but are not limited to, significant increases in raw material costs, customer financial stability, worldwide economic and political conditions, foreign currency fluctuations, future terrorist attacks and other acts of violence. Other factors 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. Risks and Uncertainties Statement Regulation G The attached charts include Company information that does not conform to generally accepted accounting principles (GAAP) . Management believes that an analysis of this data is meaningful to investors because it provides insight with respect to ongoing operating results of the Company and allows investors to better evaluate the financial results of the Company. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other Companies. This data should be read in conjunction with the Company’s third quarter earnings news release dated October 30, 2012, which has been furnished to the SEC on Form 8-K, and the Company’s Form 10- Q for the quarterly period ended September 30, 2012, which has been filed with the SEC. Forward-Looking Statements This presentation may contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in such statements. A major risk is that the Company’s demand is largely derived from the demand for its customers’ products, which subjects the Company to downturns in a customer’s business and unanticipated customer production shutdowns. Other major risks and uncertainties include, but are not limited to, significant increases in raw material costs, customer financial stability, worldwide economic and political conditions, foreign currency fluctuations, future terrorist attacks and other acts of violence. Other factors 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.

 	

Third Quarter 2012 Headlines • Acquisitions and business strategies drive Company to record product volumes • Revenue down slightly due to foreign exchange impacts • Strong balance sheet and net operating cash flow • Solid earnings despite challenging environment • Closed NP Coil Dexter acquisition in Q3 2012 Third Quarter 2012 Headlines • Acquisitions and business strategies drive Company to record product volumes • Revenue down slightly due to foreign exchange impacts • Strong balance sheet and net operating cash flow • Solid earnings despite challenging environment • Closed NP Coil Dexter acquisition in Q3 2012

 	

Third Quarter 2012 Summary Results • $19.8 million of operating cash flow generated in Q3 2012 • Balance sheet remains strong despite global challenges - Paid down $9.7 million of debt since year-end; Leverage ratio of approximately 0.5 X at September 30, 2012, improved over prior quarter end and year end 2011 • Net Sales of $ 180.9 million down slightly compared to Q3 2011 - Foreign exchange rate decreases of 6% more than offset a 5% increase in product volumes, including acquisitions • Gross profit down less than 1% from Q3 2011, with gross margin slightly improving - Changes in gross profit and gross margin consistent with sales decreases noted above • SG& A % of sales of 23.9% up from Q3 2011 on higher acquisition related costs and additional selling and other labor related costs, net of decreases due to foreign exchange • EPS of $0.80 compared to $1.03 in Q3 2011 or $0.81, excluding a non-cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate of $0.22 Third Quarter 2012 Summary Results • $19.8 million of operating cash flow generated in Q3 2012 • Balance sheet remains strong despite global challenges - Paid down $9.7 million of debt since year-end; Leverage ratio of approximately 0.5 X at September 30, 2012, improved over prior quarter end and year end 2011 • Net Sales of $ 180.9 million down slightly compared to Q3 2011 - Foreign exchange rate decreases of 6% more than offset a 5% increase in product volumes, including acquisitions • Gross profit down less than 1% from Q3 2011, with gross margin slightly improving - Changes in gross profit and gross margin consistent with sales decreases noted above • SG& A % of sales of 23.9% up from Q3 2011 on higher acquisition related costs and additional selling and other labor related costs, net of decreases due to foreign exchange • EPS of $0.80 compared to $1.03 in Q3 2011 or $0.81, excluding a non-cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate of $0.22

 	

Product Volume by Quarter 25,000 30,000 35,000 40,000 45,000 50,000 55,000 4Q08 YTD Avg. 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Metalworking Process Chemicals Segment Acquisitions assisting with volume growth during 2012 Product Volume by Quarter 25,000 30,000 35,000 40,000 45,000 50,000 55,000 4Q08 YTD Avg. 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Metalworking Process Chemicals Segment Acquisitions assisting with volume growth during 2012

 	

Run Rate of Adjusted EBITDA 2012 Trailing Twelve Month EBITDA tracking ahead of Full Year 2011 Note: Excludes restructuring, transition costs related to key employees, equity affiliate out- of- period charge, non- cash gain from purchase of equity affiliate, non- income tax contingency charge and U. S. bankruptcy charges. 2012 Adjusted EBITDA is the total of the three months ended December 31, 2011 plus the nine months ended September 30, 2012. 0 30 60 90 2008 2009 2010 2011 2012 Run Rate of Adjusted EBITDA 2012 Trailing Twelve Month EBITDA tracking ahead of Full Year 2011 Note: Excludes restructuring, transition costs related to key employees, equity affiliate out- of- period charge, non- cash gain from purchase of equity affiliate, non- income tax contingency charge and U. S. bankruptcy charges. 2012 Adjusted EBITDA is the total of the three months ended December 31, 2011 plus the nine months ended September 30, 2012. 0 30 60 90 2008 2009 2010 2011 2012

 	

Adjusted EBITDA and Trailing Twelve Month Reconciliation A B A + B Three Months Ended Nine Months Ended Trailing Twelve 2008 2009 2010 2011 December 31, 2011 September 30, 2012 Months Net income attributable to Quaker Chemical Corporation 11,132 16,220 31,807 43,569 9,770 32,972 42,742 Add / ( subtract) : Depreciation 10,879 9,525 9,867 11,455 2,928 9,001 11,929 Amortization 1,177 1,078 988 2,338 742 2,283 3,025 Interest expense 5,509 5,533 5,225 4,666 1,082 3,359 4,441 Taxes on income 4,977 7,065 12,616 14,256 1,295 12,692 13,987 Restructuring and related activities 2,916 2,289 - - - - - Non- income tax contingency charge - - 4,132 - - - - Mexico out-of- period charge - - 564 - - - - Transition costs related to key employees 3,505 2,443 1,317 - - 558 558 Non- cash gain from purchase of equity affiliate - - - ( 2,718) - - - U. S. Customer Bankruptcies - - - - - 1,156 1,156 Adjusted EBITDA 40,095 44,153 66,516 73,566 15,817 62,021 77,838 Adjusted EBITDA and Trailing Twelve Month Reconciliation A B A + B Three Months Ended Nine Months Ended Trailing Twelve 2008 2009 2010 2011 December 31, 2011 September 30, 2012 Months Net income attributable to Quaker Chemical Corporation 11,132 16,220 31,807 43,569 9,770 32,972 42,742 Add / ( subtract) : Depreciation 10,879 9,525 9,867 11,455 2,928 9,001 11,929 Amortization 1,177 1,078 988 2,338 742 2,283 3,025 Interest expense 5,509 5,533 5,225 4,666 1,082 3,359 4,441 Taxes on income 4,977 7,065 12,616 14,256 1,295 12,692 13,987 Restructuring and related activities 2,916 2,289 - - - - - Non- income tax contingency charge - - 4,132 - - - - Mexico out-of- period charge - - 564 - - - - Transition costs related to key employees 3,505 2,443 1,317 - - 558 558 Non- cash gain from purchase of equity affiliate - - - ( 2,718) - - - U. S. Customer Bankruptcies - - - - - 1,156 1,156 Adjusted EBITDA 40,095 44,153 66,516 73,566 15,817 62,021 77,838

 	

Non- GAAP Diluted Earnings Per Share Reconciliation 2012 2011 2012 2011 Earnings per diluted share attributable to Quaker Chemical Corporation 0.80 1.03 2.52 2.73 Non- cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate per diluted share - ( 0.22) - (0.22) Earnings per diluted share excluding a non- cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate 0.80 0.81 2.52 2.51 Three Months Ended Nine Months Ended September 30, September 30, Non- GAAP Diluted Earnings Per Share Reconciliation 2012 2011 2012 2011 Earnings per diluted share attributable to Quaker Chemical Corporation 0.80 1.03 2.52 2.73 Non- cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate per diluted share - ( 0.22) - (0.22) Earnings per diluted share excluding a non- cash gain on the revaluation of a previously held ownership interest in a Mexican affiliate 0.80 0.81 2.52 2.51 Three Months Ended Nine Months Ended September 30, September 30,