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 ~~September 30, 2013~~March 31, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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~~.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 x¨
	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 ~~September 30, 2013~~March 31, 2014		~~13,187,320~~13,226,717

QUAKER CHEMICAL CORPORATION AND CONSOLIDATED SUBSIDIARIES


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Statement of Income for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2014 and March 31, 2013 ~~and September 30, 2012~~	3
	Condensed Consolidated Statement of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2014 and March 31, 2013 ~~and September 30, 2012~~	4
	Condensed Consolidated Balance Sheet at ~~September 30, 2013~~March 31, 2014 and December 31, ~~2012~~2013	5
	Condensed Consolidated Statement of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2014 and March 31, 2013 ~~and September 30, 2012~~	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2319
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3024
Item 4.	Controls and Procedures	3125
PART II.	OTHER INFORMATION	3226
Item 1.	Legal Proceedings	3226
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3226
Item 6.	Exhibits	3327
Signatures		3327

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

Quaker Chemical Corporation

Condensed Consolidated Statement of Income

(Dollars in thousands, except per share amounts)

	Unaudited
	(Dollars in thousands, except per share amounts)												Unaudited
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2013			2012			2013			2012			2014			2013
Net sales	$	184,059		$	180,923		$	545,098		$	535,358		$	181,674		$	176,193
Cost of goods sold		118,069			121,797			349,186			355,801			116,560			113,585
Gross profit		65,990			59,126			195,912			179,557			65,114			62,608
Selling, general and administrative expenses		47,183			43,263			139,901			130,009			45,741			45,197
Operating income		18,807			15,863			56,011			49,548			19,373			17,411
Other (expense) income, net		(685	)		322			1,962			529			(473	)		346
Interest expense		(717	)		(1,034	)		(2,223	)		(3,359	)		(525	)		(744	)
Interest income		267			149			665			409			453			169
Income before taxes and equity in net income of associated companies		17,672			15,300			56,415			47,127			18,828			17,182
Taxes on income before equity in net income of associated companies		5,972			4,373			16,933			12,692			6,546			4,133
Income before equity in net income of associated companies		11,700			10,927			39,482			34,435			12,282			13,049
Equity in net income of associated companies		1,605			696			4,689			2,038			1,027			1,142
Net income		13,305			11,623			44,171			36,473			13,309			14,191
Less: Net income attributable to noncontrolling interest		754			698			1,918			2,075			579			572
Net income attributable to Quaker Chemical Corporation	$	12,551		$	10,925		$	42,253		$	34,398		$	12,730		$	13,619
Per share data:
Net income attributable to Quaker Chemical Corporation Common
Shareholders – basic	$	0.95		$	0.84		$	3.21		$	2.65
Net income attributable to Quaker Chemical Corporation Common
Shareholders – diluted	$	0.95		$	0.83		$	3.21		$	2.63
Net income attributable to Quaker Chemical Corporation Common Shareholders – basic													$	0.96		$	1.04
Net income attributable to Quaker Chemical Corporation Common Shareholders – diluted													$	0.96		$	1.04
Dividends declared	$	0.25		$	0.245		$	0.745		$	0.73		$	0.25		$	0.245

The accompanying notes are an integral part of these condensed consolidated financial statements.

Condensed Consolidated Statement of Comprehensive Income

(Dollars in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Condensed Consolidated Balance Sheet

(Dollars in thousands, except par value and share amounts)

		~~Unaudited~~
		~~(Dollars in thousands,~~
		~~except par value~~
		~~and share amounts)~~
		~~September 30, 2013~~			~~December 31, 2012~~

	Unaudited
	March 31, 2014			December 31, 2013
ASSETS
Current assets
Cash and cash equivalents	$	60,450		$	68,492
Accounts receivable, net		178,945			165,629
Inventories
Raw materials and supplies		39,573			37,063
Work-in-process and finished goods		38,441			34,494
Prepaid expenses and other current assets		22,735			23,169
Total current assets		340,144			328,847
Property, plant and equipment, at cost		235,402			233,865
Less accumulated depreciation		(151,548	)		(148,377	)
Net property, plant and equipment		83,854			85,488
Goodwill		58,633			58,151
Other intangible assets, net		30,472			31,272
Investments in associated companies		20,494			19,397
Deferred income taxes		19,936			24,724
Other assets		36,174			36,267
Total assets	$	589,707		$	584,146

LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current portion of long-term debt	$	1,267		$	1,395
Accounts and other payables		81,367			75,580
Accrued compensation		12,188			20,801
Other current liabilities		33,141			33,080
Total current liabilities		127,963			130,856
Long-term debt		17,215			17,321
Deferred income taxes		6,459			6,729
Other non-current liabilities		80,062			84,544
Total liabilities		231,699			239,450
Equity
Common stock $1 par value; authorized 30,000,000 shares; issued and outstanding
2014 – 13,226,717 shares; 2013 – 13,196,140 shares		13,227			13,196
Capital in excess of par value		100,429			99,038
Retained earnings		267,707			258,285
Accumulated other comprehensive loss		(33,015	)		(34,700	)
Total Quaker shareholders’ equity		348,348			335,819
Noncontrolling interest		9,660			8,877
Total equity		358,008			344,696
Total liabilities and equity	$	589,707		$	584,146

ASSETS
Current assets
        Cash and cash equivalents $ 53,945 $ 32,547
        Accounts receivable, net 166,584 154,197
        Inventories
                Raw materials and supplies 40,599 40,417
                Work-in-process and finished goods 36,071 32,054
        Prepaid expenses and other current assets 16,870 18,595
                Total current assets 314,069 277,810
Property, plant and equipment, at cost 229,384 225,177
        Less accumulated depreciation (145,116) (140,065)
                Net property, plant and equipment 84,268 85,112
Goodwill 58,511 59,169
Other intangible assets, net 32,028 32,809
Investments in associated companies 17,789 16,603
Deferred income taxes 27,284 30,673
Other assets 36,038 34,458
                Total assets $ 569,987 $ 536,634

LIABILITIES AND EQUITY
Current liabilities
        Short-term borrowings and current portion of long-term debt $ 1,432 $ 1,468
        Accounts and other payables 81,289 70,794
        Accrued compensation 17,027 16,842
        Other current liabilities 27,399 18,688
               Total current liabilities 127,147 107,792
Long-term debt 17,765 30,000
Deferred income taxes 6,127 6,383
Other non-current liabilities 94,105 102,783
               Total liabilities 245,144 246,958
Equity
         Common stock $1 par value; authorized 30,000,000 shares; issued and outstanding
            2013 – 13,187,320 shares; 2012 – 13,094,901 shares 13,187 13,095
         Capital in excess of par value 97,816 94,470
         Retained earnings 247,833 215,390
         Accumulated other comprehensive loss (43,238) (41,855)
               Total Quaker shareholders’ equity 315,598 281,100
Noncontrolling interest 9,245 8,576
Total equity 324,843 289,676
         Total liabilities and equity $ 569,987 $ 536,634

The accompanying notes are an integral part of these condensed consolidated financial statements.

Condensed Consolidated Statement of Cash Flows

(Dollars in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements ~~- Continued~~

(Dollars in thousands, except per share amounts)

(Unaudited)

Note 1 – Condensed Financial Information

~~Table of Contents~~

~~Quaker Chemical Corporation~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Note 2 – Out of Period Adjustment

Note 3 – Business Segments

~~The following table presents information about the Company’s reportable operating segments for the three and nine months ended September 30, 2013 and September 30, 2012:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Net sales
  North America
$ 79,602 $ 78,690 $ 231,111 $ 236,079
    EMEA 44,452 43,376 140,314 131,353
    Asia Pacific 44,063 42,503 124,593 117,379
    South America 15,942 16,354 49,080 50,547
Total net sales $ 184,059 $ 180,923 $ 545,098 $ 535,358

Operating earnings, excluding indirect operating expenses
North America $ 15,203 $ 13,650 $ 46,238 $ 44,959
EMEA 6,781 5,554 22,332 19,604
Asia Pacific 11,214 10,078 31,612 27,413
South America 2,598 584 7,830 5,021
Total operating earnings, excluding indirect operating expenses 35,796 29,866 108,012 96,997
Indirect operating expenses (16,131 ) (13,185 ) (49,380 ) (45,166 )
Amortization expense (858 ) (818 ) (2,621 ) (2,283 )
Consolidated operating income 18,807 15,863 56,011 49,548
Other (expense) income, net (685 ) 322 1,962 529
Interest expense (717 ) (1,034 ) (2,223 ) (3,359 )
Interest income 267 149 665 409
Consolidated income before taxes and equity in net income of associated companies $ 17,672 $ 15,300 $ 56,415 $ 47,127

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 31,
	2014			2013
Net sales
North America	$	76,716		$	74,758
EMEA		49,189			46,707
Asia/Pacific		41,937			37,988
South America		13,832			16,740
Total net sales	$	181,674		$	176,193

Operating earnings, excluding indirect operating expenses
North America	$	15,711		$	15,039
EMEA		8,096			6,970
Asia/Pacific		9,918			9,628
South America		1,509			2,875
Total operating earnings, excluding indirect operating expenses		35,234			34,512
Indirect operating expenses		(15,048	)		(16,222	)
Amortization expense		(813	)		(879	)
Consolidated operating income		19,373			17,411
Other (expense) income, net		(473	)		346
Interest expense		(525	)		(744	)
Interest income		453			169
Consolidated income before taxes and equity in net income of associated companies	$	18,828		$	17,182

Note 4 – Stock-Based Compensation

	March 31,
	2014		2013
Stock options	$	150	$	100
Nonvested stock awards and restricted stock units		556		383
Employee stock purchase plan		17		12
Non-elective and elective 401(k) matching contribution in stock		649		525
Director stock ownership plan		16		20
Total share-based compensation expense	$	1,388	$	1,040

For the Nine Months Ended
September 30,
2013 2012
Stock options $ 378 $ 403
Nonvested stock awards and restricted stock units 1,372 1,120
Employee stock purchase plan 43 35
Non-elective and elective 401(k) matching contribution in stock 1,283 1,351
Director stock ownership plan 57 45
Total share-based compensation expense $ 3,133 $ 2,954

~~Stock option activity under all plans is as follows:~~

Weighted
Average
Weighted Average Remaining
Number of Exercise Price per Contractual
Shares Share Term (years)
Options outstanding at December 31, 2012 107,455 $ 31.23
    Options granted
29,302 58.26
    Options exercised
(54,245) 26.56
    Options forfeited
(3,601) 37.81
    Options expired
(768) 37.37
Options outstanding at September 30, 2013 78,143 $ 44.24 5.5
Options exercisable at September 30, 2013 14,732 $ 30.23 4.3

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

				Weighted
				Average
		Weighted Average		Remaining
	Number of	Exercise Price per		Contractual
	Shares	Share		Term (years)
Options outstanding at December 31, 2013	75,251	$	44.49
Options granted	37,048		73.47
Options exercised	(3,292)		42.24
Options outstanding at March 31, 2014	109,007	$	54.41	5.6
Options exercisable at March 31, 2014	39,897	$	39.64	4.5

	~~2013~~2014
Number of options granted	~~29,302~~37,048
Dividend ~~yield~~Yield	~~2.49~~2.00	%
Expected ~~volatility~~Volatility	~~57.28~~43.34	%
Risk-free interest rate	~~0.63~~1.22	%
Expected term (years)	4.0

		Weighted
		Average Grant
	Number of	Date Fair Value
	Shares	(per share)
Nonvested awards, December 31, 2013	115,984	$	47.27
Granted	22,656	$	73.37
Vested	(22,325)	$	38.44
Nonvested awards, March 31, 2014	116,315	$	54.05

Weighted
Average Grant
Number of Date Fair Value
Shares (per share)
Nonvested awards, December 31, 2012 122,944 $ 31.98
    Granted
51,659 $ 61.56
    Vested
(51,981) $ 26.02
    Forfeited
(6,638) $ 41.70
Nonvested awards, September 30, 2013 115,984 $ 47.27

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

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 ~~September 30, 2013,~~March 31, 2014, unrecognized compensation expense related to these awards was ~~$3,285~~$3,711 to be recognized over a weighted average remaining period of ~~2.43~~2.45 years.

		Weighted
		Average Grant
	Number of	Date Fair Value
	units	(per unit)
Nonvested awards, December 31, 2013	4,018	$	49.71
Granted	2,140	$	74.89
Nonvested awards, March 31, 2014	6,158	$	58.46

Weighted
Average Grant
Number of Date Fair Value
units (per unit)
Nonvested awards, December 31, 2012 2,100 $ 38.13
Granted
1,418 $ 58.26
Nonvested awards, September 30, 2013 3,518 $ 46.24

~~Table of Contents~~

~~Quaker Chemical Corporation~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Employee Stock Purchase Plan

2013 Director Stock Ownership Plan

In March 2013, the Company adopted the 2013 Director Stock Ownership Plan (the “Plan”), subject to the approval by the Company’s shareholders at the annual meeting, to encourage the Directors to increase their investment in the Company. The Plan 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 1st 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. The Plan was adopted in order to replace the 2003 Director Stock Ownership Plan, which expired in May 2013.

Note 5 – Pension and Other Postretirement Benefits

~~Employer Contributions:~~

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

Note 6 – Other (expense) income

Other (expense) income includes:

	2014			2013
Income from third party license fees	$	298		$	265
Net foreign exchange (losses) gains		(799	)		33
Other non-operating income		83			97
Other non-operating expense		(55	)		(49	)

Total other (expense) income, net	$	(473	)	$	346

Note 67 – Income Taxes and Uncertain Income Tax Positions

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 Statement of Income. The Company recognized ~~$39 and $(294)~~($212) for interest and ~~$101 and $342~~($9) for penalties on its Condensed Consolidated Statement of Income for the three ~~and nine~~ months ended ~~September 30, 2013, respectively,~~March 31, 2014, and ~~recognized $57 and $6~~($477) for interest and ~~$70 and $264~~$93 for penalties on its Condensed Consolidated Statement of Income ~~for~~during the three ~~and nine~~ months ended ~~September 30, 2012, respectively.~~March 31, 2013. As of ~~September 30, 2013,~~March 31, 2014, the Company had accrued ~~$2,036~~$1,895 for cumulative interest and ~~$2,015~~$2,088 for cumulative penalties, compared to ~~$2,288~~$2,108 for cumulative interest and ~~$1,630~~$2,100 for cumulative penalties accrued at December 31, ~~2012.~~2013.

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, the Netherlands and the United Kingdom ~~from 2007, Brazil~~ from 2008, Spain from 2009, the United States, China and Italy from 2010, and various domestic state tax jurisdictions from 1993.

In March of 2013, certain tax authorities in Asia Pacific announced they would review the original applications of all companies that received a certain concessionary tax rate. If the tax authorities had found issues with the application, they could disallow the benefits of such tax rate retroactively. The Company currently understands that a retroactive disallowance of this concessionary tax rate would affect only 2012. Currently, no appointment with the tax auditor has been scheduled. The Company does not believe that its past status is at risk and, as a result, no uncertain tax position has been recorded.

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

Note 78 – Earnings Per Share

Note 89 – Goodwill and Other Intangible Assets

	North						South
	America		EMEA		Asia/Pacific		America		Total
Balance as of December 31, 2013	$	28,127	$	11,184	$	15,018	$	3,822	$	58,151
Currency translation adjustments		193		108		144		37		482
Balance as of March 31, 2014	$	28,320	$	11,292	$	15,162	$	3,859	$	58,633

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

	Gross Carrying				Accumulated
	Amount				Amortization
	2014		2013		2014		2013
Definite-lived intangible assets
Customer lists and rights to sell	$	33,589	$	33,559	$	10,730	$	10,221
Trademarks and patents		6,837		6,838		3,366		3,202
Formulations and product technology		5,808		5,808		3,756		3,709
Other		5,544		5,544		4,554		4,445
Total	$	51,778	$	51,749	$	22,406	$	21,577

The Company recorded $813 and $879 of amortization expense in the three months ended March 31, 2014 and March 31, 2013, respectively. Estimated annual aggregate amortization expense for the current year and subsequent five years is as follows:

For the year ended December 31, 2014	$	3,252
For the year ended December 31, 2015	$	3,252
For the year ended December 31, 2016	$	2,778
For the year ended December 31, 2017	$	2,119
For the year ended December 31, 2018	$	2,095
For the year ended December 31, 2019	$	2,095

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

~~The changes in carrying amount of goodwill for the nine months ended September 30, 2013 are as follows:~~

North South
America EMEA Asia Pacific America Total
Balance as of December 31, 2012 $ 28,535 $ 11,411 $ 15,323 $ 3,900 $ 59,169
Goodwill additions 277 — — — 277
Currency translation adjustments (541 ) (147 ) (197 ) (50 ) (935 )
Balance as of September 30, 2013 $ 28,271 $ 11,264 $ 15,126 $ 3,850 $ 58,511

~~Gross carrying amounts and accumulated amortization for definite-lived intangible assets as of September 30, 2013 and December 31, 2012 are as follows:~~

Gross Carrying Accumulated
Amount Amortization
2013 2012 2013 2012
Definite-lived intangible assets
     Customer lists and rights to sell $ 33,543 $ 32,356 $ 9,733 $ 8,192
     Trademarks and patents 6,785 6,760 3,029 2,548
     Formulations and product technology 5,808 5,278 3,655 3,423
     Other 5,541 5,467 4,332 3,989
     Total $ 51,677 $ 49,861 $ 20,749 $ 18,152

The Company recorded $2,621 and $2,283 of amortization expense in the nine months ended September 30, 2013 and September 30, 2012, respectively. Estimated annual aggregate amortization expense for the current year and subsequent five years is as follows:

For the year ended December 31, 2013 $ 3,445
For the year ended December 31, 2014 $ 3,253
For the year ended December 31, 2015 $ 3,253
For the year ended December 31, 2016 $ 2,774
For the year ended December 31, 2017 $ 2,110
For the year ended December 31, 2018 $ 2,087

~~The Company has two indefinite-lived intangible assets totaling $1,100 for trademarks at September 30, 2013.~~

~~Note 9 – Debt~~

As discussed in the Current Report on Form 8-K filed on June 17, 2013, the Company entered into a revised syndicated multicurrency credit facility on June 14, 2013, which amended and replaced the Company’s previous credit facility with Bank of America, N.A. and certain other major financial institutions. The revised facility increased the maximum principal amount available for revolving credit borrowings under this facility from $175,000 to $300,000, which can be increased to $400,000 at the Company’s option if the lenders agree and the Company satisfies certain conditions. This facility matures in June 2018. In addition, the revised facility amended certain financial, acquisition and other covenants, but the consolidated leverage ratio calculation, for which access to credit under the former facility largely depended upon, remains relatively consistent and cannot exceed 3.50 to 1. At September 30, 2013 and December 31, 2012, the consolidated leverage ratio was below 1.0 to 1 and the Company was also in compliance with all of the current and former facilities' other covenants, respectively. At September 30, 2013, the Company had no amounts outstanding under this revised facility. At December 31, 2012, the Company had approximately $12,200 outstanding under its former facility.

~~Table of Contents~~

~~Quaker Chemical Corporation~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Note 1011 – Equity and Noncontrolling Interest

The following table presents the changes in equity and noncontrolling interest, net of tax, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2014 and March 31, 2013:

								Accumulated
			Capital in					Other
	Common		excess of		Retained			Comprehensive			Noncontrolling
	stock		par value		earnings			Loss			interest			Total

Balance at December 31, 2013	$	13,196	$	99,038	$	258,285		$	(34,700	)	$	8,877		$	344,696
Net income		—		—		12,730			—			579			13,309
Amounts reported in other comprehensive income		—		—		—			1,685			204			1,889
Dividends ($0.25 per share)		—		—		(3,308	)		—			—			(3,308	)
Share issuance and equity-based compensation plans		31		1,152		—			—			—			1,183
Excess tax benefit from stock option exercises		—		239		—			—			—			239
Balance at March 31, 2014	$	13,227	$	100,429	$	267,707		$	(33,015	)	$	9,660		$	358,008

Balance at December 31, 2012	$	13,095	$	94,470	$	215,390		$	(41,855	)	$	8,576		$	289,676
Net income		—		—		13,619			—			572			14,191
Amounts reported in other comprehensive income (loss)		—		—		—			108			(133	)		(25	)
Dividends ($0.245 per share)		—		—		(3,219	)		—			—			(3,219	)
Share issuance and equity-based compensation plans		45		936		—			—			—			981
Excess tax benefit from stock option exercises		—		369		—			—			—			369
Balance at March 31, 2013	$	13,140	$	95,775	$	225,790		$	(41,747	)	$	9,015		$	301,973

The following tables show the reclassifications from and resulting balances of accumulated other comprehensive loss (“AOCI”) at March 31, 2014 and March 31, 2013:

							Unrealized
	Currency			Defined			gain (loss) in
	translation			benefit			available-for-
	adjustments			pension plans			sale securities			Total
Balance at December 31, 2013	$	1,152		$	(37,433	)	$	1,581		$	(34,700	)
Other comprehensive income before reclassifications		1,070			25			663			1,758
Amounts reclassified from AOCI		—			769			(558	)		211
Current period other comprehensive income		1,070			794			105			1,969
Related tax amounts		—			(248	)		(36	)		(284	)
Net current period other comprehensive income		1,070			546			69			1,685
Balance at March 31, 2014	$	2,222		$	(36,887	)	$	1,650		$	(33,015	)

Balance at December 31, 2012	$	3,336		$	(46,914	)	$	1,723		$	(41,855	)
Other comprehensive (loss) income before reclassifications		(1,630	)		762			1,148			280
Amounts reclassified from AOCI		—			1,056			(494	)		562
Current period other comprehensive (loss) income		(1,630	)		1,818			654			842
Related tax amounts		—			(512	)		(222	)		(734	)
Net current period other comprehensive (loss) income		(1,630	)		1,306			432			108
Balance at March 31, 2013	$	1,706		$	(45,608	)	$	2,155		$	(41,747	)

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 first quarters of 2014 and 2013 were recorded in cost of goods sold and ~~September 30, 2012:~~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.

Accumulated
Capital in Other
Common Excess of Retained Comprehensive Noncontrolling
Stock Par Value Earnings Loss Interest Total
Balance at June 30, 2013 $ 13,168 $ 97,085 $ 238,580 $ (45,252 ) $ 8,776 $ 312,357
Net income — — 12,551 — 754 13,305
Amounts reported in other comprehensive income — — — 2,014 (255 ) 1,759
Dividends ($0.25 per share) — — (3,298 ) — — (3,298 )
Dvidends paid to noncontrolling shareholders — — — — (30 ) (30 )
Share issuance and equity-based compensation plans 19 368 — — — 387
Excess tax benefit from stock option exercises — 363 — — — 363
Balance at September 30, 2013 $ 13,187 $ 97,816 $ 247,833 $ (43,238 ) $ 9,245 $ 324,843

Balance at June 30, 2012 $ 13,011 $ 92,199 $ 197,881 $ (30,536 ) $ 8,190 $ 280,745
Net income — — 10,925 — 698 11,623
Amounts reported in other comprehensive income — — — 2,311 228 2,539
Dividends ($0.245 per share) — — (3,214 ) — — (3,214 )
Share issuance and equity-based compensation plans 71 902 — — — 973
Excess tax benefit from stock option exercises — 744 — — — 744
Balance at September 30, 2012 $ 13,082 $ 93,845 $ 205,592 $ (28,225 ) $ 9,116 $ 293,410

Accumulated
Capital in Other
Common Excess of Retained Comprehensive Noncontrolling
Stock Par Value Earnings Loss Interest Total
Balance at December 31, 2012 $ 13,095 $ 94,470 $ 215,390 $ (41,855 ) $ 8,576 $ 289,676
Net income — — 42,253 — 1,918 44,171
Amounts reported in other comprehensive loss — — — (1,383 ) (1,219 ) (2,602 )
Dividends ($0.745 per share) — — (9,810 ) — — (9,810 )
Dividends paid to noncontrolling interests — — — — (30 ) (30 )
Share issuance and equity-based compensation plans 92 2,531 — — — 2,623
Excess tax benefit from stock option exercises — 815 — — — 815
Balance at September 30, 2013 $ 13,187 $ 97,816 $ 247,833 $ (43,238 ) $ 9,245 $ 324,843

Balance at December 31, 2011 $ 12,912 $ 89,725 $ 180,710 $ (28,967 ) $ 6,977 $ 261,357
Net income — — 34,398 — 2,075 36,473
Amounts reported in other comprehensive income — — — 742 94 836
Dividends ($0.73 per share) — — (9,516 ) — — (9,516 )
Dividends paid to noncontrolling interests — — — — (30 ) (30 )
Share issuance and equity-based compensation plans 170 1,956 — — — 2,126
Excess tax benefit from stock option exercises — 2,164 — — — 2,164
Balance at September 30, 2012 $ 13,082 $ 93,845 $ 205,592 $ (28,225 ) $ 9,116 $ 293,410

1514

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

~~The following tables show the reclassifications from and resulting balances of accumulated other comprehensive loss for the three and nine months ended September 30, 2013 and September 30, 2012:~~

Unrealized
Currency Defined Change in gain (loss) in
translation benefit fair value of available-for-
adjustments pension plans derivatives sale securities Total
Balance at June 30, 2013 $ (1,646 ) $ (45,046 ) $ — $ 1,440 $ (45,252 )
Other comprehensive income (loss) before reclassifications 2,527 (1,016 ) — 494 2,005
Amounts reclassified from accumulated other comprehensive loss — 1,019 — (998 ) 21
Current period other comprehensive income (loss) 2,527 3 — (504 ) 2,026
Related tax amounts — (183 ) — 171 (12 )
Net current period other comprehensive income (loss) 2,527 (180 ) — (333 ) 2,014

Balance at September 30, 2013 $ 881 $ (45,226 ) $ — $ 1,107 $ (43,238 )

Balance at June 30, 2012 $ 1,182 $ (33,206 ) $ (73 ) $ 1,561 $ (30,536 )
Other comprehensive income (loss) before reclassifications 1,604 (312 ) 38 774 2,104
Amounts reclassified from accumulated other comprehensive loss — 746 74 (122 ) 698
Current period other comprehensive income 1,604 434 112 652 2,802
Related tax amounts — (230 ) (39 ) (222 ) (491 )
Net current period other comprehensive income 1,604 204 73 430 2,311

Balance at September 30, 2012 $ 2,786 $ (33,002 ) $ — $ 1,991 $ (28,225 )

Unrealized
Currency Defined Change in gain (loss) in
translation benefit fair value of available-for-
adjustments pension plans derivatives sale securities Total
Balance at December 31, 2012 $ 3,336 $ (46,914 ) $ — $ 1,723 $ (41,855 )
Other comprehensive (loss) income before reclassifications (2,455 ) (468 ) — 1,353 (1,570 )
Amounts reclassified from accumulated other comprehensive loss — 3,140 — (2,286 ) 854
Current period other comprehensive (loss) income (2,455 ) 2,672 — (933 ) (716 )
Related tax amounts — (984 ) — 317 (667 )
Net current period other comprehensive (loss) income (2,455 ) 1,688 — (616 ) (1,383 )

Balance at September 30, 2013 $ 881 $ (45,226 ) $ — $ 1,107 $ (43,238 )

Balance at December 31, 2011 $ 4,709 $ (34,260 ) $ (272 ) $ 856 $ (28,967 )
Other comprehensive (loss) income before reclassifications (1,923 ) (204 ) 26 2,363 262
Amounts reclassified from accumulated other comprehensive loss — 2,243 392 (644 ) 1,991
Current period other comprehensive (loss) income (1,923 ) 2,039 418 1,719 2,253
Related tax amounts — (781 ) (146 ) (584 ) (1,511 )
Net current period other comprehensive (loss) income (1,923 ) 1,258 272 1,135 742

Balance at September 30, 2012 $ 2,786 $ (33,002 ) $ — $ 1,991 $ (28,225 )

Approximately 27% and 73% 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 nine months ended September 30, 2013 and September 30, 2012 were recorded in cost of goods sold and SG&A, respectively. See Note 5 of Notes to Condensed Consolidated Financial Statements for further information. All reclassifications are recorded in interest expense for changes in fair value of derivatives and, also, reclassifications related to unrealized gain (loss) in available-for-sale securities relate to the Company’s equity interest in a captive insurance company and, therefore, are recorded in equity in net income of associated companies. The amounts reported in other comprehensive income for the Company’s non-controlling interests are related to currency translation adjustments.

~~Table of Contents~~

~~Quaker Chemical Corporation~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Note 1112 – Business Acquisitions

In May 2013, the Company acquired a business that primarily related to tin plating for its North ~~America~~American reportable operating segment for net consideration of approximately $1,831. The Company allocated the purchase price to $830 of intangible assets, comprised of formulations, to be amortized over 10 years; a non-competition agreement, to be amortized over 4 years; and a customer list, to be amortized over 10 years. In addition, the Company recorded $277 of goodwill, all of which will be tax deductible. The remaining purchase price was allocated between the acquisition date fair value of inventory purchased of $454 and fixed assets purchased of $270.

In January 2013, the Company acquired a chemical milling maskants distribution network for net consideration of approximately $647, which was assigned to the North American reportable operating segment. The Company also assumed an additional $100 hold-back of consideration ~~liability to be~~for potential indemnity obligations, which was paid to the former ~~owners at one year from~~shareholders during the ~~acquisition date.~~first quarter of 2014. The acquired intangible was ~~included with~~allocated to the Company’s customer lists and rights to sell intangible assets and will be amortized over 5 years.

In July 2012, the Company acquired NP Coil Dexter Industries, S.r.l. for approximately $2,748, including short-term debt and long-term debt of approximately $1,186 and $854, respectively. NP Coil Dexter is a manufacturer and supplier of metal surface treatment products. The Company allocated $3,825 of intangible assets, comprised of trademarks and formulations, to be amortized over 10 years; two customer lists to be amortized over 8 and 4 years, respectively; and a non-competition agreement to be amortized over 5 years. In addition, the Company recorded $1,786 of goodwill, none of which will be tax deductible and was assigned to the European reportable operating segment. At June 30, 2013, the valuation of the assets acquired and the liabilities assumed at the acquisition date was finalized. Liabilities assumed include a hold-back of consideration to be paid to the former shareholders at eighteen months from the acquisition date. During the fourth quarter of 2012, the Company recorded an increase to other income of approximately $1,033 on its Consolidated Statement of Income related to a change in the fair value of this hold-back of consideration liability.

~~The following table shows the allocation of the purchase price of the assets and liabilities:~~

NP Coil Dexter
2012 Acquisition Industries S.r.l.
Current assets $ 5,536
Fixed assets 1,211
Intangibles 3,825
Goodwill 1,786
Other long-term assets 783
Total assets purchased 13,141
Short-term debt (1,186 )
Other current liabilties (6,168 )
Long-term debt (854 )
Other long-term liabilities (1,258 )
Present value of hold-back (927 )
Total liabilities assumed (10,393 )
Cash paid for an acquisition $ 2,748

~~Included in the 2012 acquisition of NP Coil Dexter Industries, S.r.l. was approximately $113 of cash acquired.~~

Certain pro forma and other disclosures have not been provided for these acquisitions because the effects were not material.

~~Table of Contents~~

~~Quaker Chemical Corporation~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Note 1213 – Fair Value Measurements

The Company values its company-owned life insurance policies, various deferred compensation assets and liabilities, acquisition-related consideration and an obligation related to a non-competition agreement at fair value. The Company’s assets and liabilities subject to fair value measurement are as ~~follows (in thousands):~~follows:

			Fair Value Measurements at March 31, 2014
	Fair Value		Using Fair Value Hierarchy
	as of
Assets	March 31, 2014		Level 1		Level 2		Level 3
Company-owned life insurance	$	1,913	$	—	$	1,913	$	—
Company-owned life insurance - Deferred compensation assets		334		—		334		—
Other deferred compensation assets
Large capitalization registered investment companies		65		65		—		—
Mid capitalization registered investment companies		6		6		—		—
Small capitalization registered investment companies		13		13		—		—
International developed and emerging markets registered investment
companies		39		39		—		—
Fixed income registered investment companies		7		7		—		—

Total	$	2,377	$	130	$	2,247	$	—

			Fair Value Measurements at September 30, 2013								Fair Value Measurements at March 31, 2014
	Fair Value		Using Fair Value Hierarchy						Fair Value		Using Fair Value Hierarchy
	as of								as of
Assets	September 30, 2013		Level 1		Level 2		Level 3
Company-owned life insurance	$	1,795	$	—	$	1,795	$	—
Company-owned life insurance - Deferred compensation assets		396		—		396		—
Other deferred compensation assets
Liabilities									March 31, 2014		Level 1		Level 2		Level 3
Deferred compensation liabilities
Large capitalization registered investment companies		67		67		—		—	$	370	$	370	$	—	$	—
Mid capitalization registered investment companies		6		6		—		—		103		103		—		—
Small capitalization registered investment companies		12		12		—		—		87		87		—		—
International developed and emerging markets registered investment
companies		37		37		—		—		190		190		—		—
Fixed income registered investment companies		8		8		—		—		40		40		—		—
Fixed general account										155		—		155		—
Acquisition-related consideration										4,830		—		—		4,830

Total	$	2,321	$	130	$	2,191	$	—	$	5,775	$	790	$	155	$	4,830

Fair Value Measurements at September 30, 2013
Fair Value Using Fair Value Hierarchy
as of
Liabilities September 30, 2013 Level 1 Level 2 Level 3
Deferred compensation liabilities
Large capitalization registered investment companies $ 369 $ 369 $ — $ —
Mid capitalization registered investment companies 102 102 — —
Small capitalization registered investment companies 87 87 — —
International developed and emerging markets registered investment
companies 193 193 — —
Fixed income registered investment companies 44 44 — —
Fixed general account 165 — 165 —
Acquisition-related consideration 5,921 — — 5,921

Total $ 6,881 $ 795 $ 165 $ 5,921

Fair Value Measurements at December 31, 2012
Fair Value Using Fair Value Hierarchy
as of
Assets December 31, 2012 Level 1 Level 2 Level 3
Company-owned life insurance $ 1,653 $ — $ 1,653 $ —
Company-owned life insurance - Deferred compensation assets 437 — 437 —
Other deferred compensation assets
Large capitalization registered investment companies 62 62 — —
Mid capitalization registered investment companies 6 6 — —
Small capitalization registered investment companies 9 9 — —
International developed and emerging markets registered investment
companies 37 37 — —
Fixed income registered investment companies 8 8 — —

Total $ 2,212 $ 122 $ 2,090 $ —

1815

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

			Fair Value Measurements at December 31, 2013
	Fair Value		Using Fair Value Hierarchy
	as of
Liabilities	December 31, 2013		Level 1		Level 2		Level 3
Deferred compensation liabilities
Large capitalization registered investment companies	$	405	$	405	$	—	$	—
Mid capitalization registered investment companies		109		109		—		—
Small capitalization registered investment companies		95		95		—		—
International developed and emerging markets registered investment
companies		205		205		—		—
Fixed income registered investment companies		43		43		—		—
Fixed general account		167		—		167		—
Acquisition-related consideration		4,876		—		—		4,876

Total	$	5,900	$	857	$	167	$	4,876

Non-competition
Summit Agreement
Earnout Obligation Total
Balance at December 31, 2012 $ 4,497 $ 404 $ 4,901
Interest accretion 512 21 533
Change in fair value estimate 675 — 675
Payments — (188 ) (188 )
Balance at September 30, 2013 $ 5,684 $ 237 $ 5,921

				Non-competition
	Earnout			Agreement
	Summit			Obligation				Total
Balance at December 31, 2013		$	4,697		$	179			$	4,876
Interest accretion			12			4				16
Payments			—			(62	)			(62	)
Balance at March 31, 2014		$	4,709		$	121			$	4,830

The fair value of the Summit earnout is based on the weighted average probability of the outcome of different payout scenarios. As of September 30, 2013, the probabilities applied to the payout scenarios ranged from 15% to 70%, depending on the Company’s estimate of the likelihood of each payout scenario. During the second quarter of 2013, the Company updated the fair value of the Summit earnout, which resulted in other expense and an increase to the liability of approximately $675.

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

~~Note 13 – Hedging Activities~~

Note 14 – Commitments and Contingencies

~~Table of Contents~~

~~Quaker Chemical Corporation~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

Table of Contents

Quaker Chemical Corporation

Notes to Condensed Consolidated Financial Statements - Continued

(Dollars in thousands, except per share amounts)

(Unaudited)

~~Table of Contents~~

~~Quaker Chemical Corporation~~

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~(Dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

2218

Table of Contents

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

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’s ~~revenue increase~~operating performance remained strong during the first quarter of ~~approximately 2% in~~2014, with net sales continuing to show growth compared to the ~~third~~first quarter of 2013 on improved product volumes generally across all regions. These increased sales volumes drove the Company’s gross profit increase of 4% on stable gross margins of 35.8% and 35.5% in the first quarters of 2014 and 2013, respectively. Overall, the Company’s first quarter of 2014 operating income reflects the higher gross profit on increased volume levels as compared to the third quarter of 2012 was primarily due to volume increases. Gross profit increased approximately $6.9 million, or approximately 12%, from the third quarter of 2012, with gross margin improving from 32.7% in the third quarter of 2012 to 35.9% in the thirdfirst quarter of 2013, ~~which reflects the return~~but was slightly impacted by $0.5 million of ~~the Company’s product margins to more acceptable levels. Selling,~~additional selling, general and administrative expenses (“SG&A”) ~~increased approximately $3.9 million compared to the third quarter of 2012, primarily~~ due to ~~higher selling related costs on improved Company performance and~~ higher labor related costs ~~on general year over year merit increases.~~

~~During~~and, also, additional costs related to an amendment to the Company’s UK pension plan. The Company’s increased operating income during the first ~~nine months~~quarter of ~~2013, the Company incurred costs~~2014 was more than offset by certain non-operating expenses, primarily related to ~~streamline certain operations~~foreign currency exchange and income tax expense, which are further discussed in the Company’s Europe, Middle East and Africa (“EMEA”) and South America regions, which resulted in SG&A expense of approximately $1.1 million, or $0.06 per diluted share, and other expense of approximately $0.2 million, or $0.01 per diluted share.

The Company’s net operating cash flow for the third quarter of 2013 was $24.5 million, which increased its year-to-date 2013 net operating cash flow to $51.9 million as compared to $41.8 million for the first nine months of 2012. The improvement in the Company’s net operating cash flow during the first nine months of 2013 was primarily driven by increased net income and better working capital management.operations sections below.

The net result was ~~an increase in~~ earnings per diluted share ~~from $0.83~~of $0.96 for the ~~third~~first quarter of ~~2012~~2014 compared to ~~$0.95~~earnings per diluted share of $1.04 for the ~~third~~first quarter of 2013, with non-GAAP earnings per diluted share ~~increasing from $0.80~~of $0.95 for the ~~third~~first quarter of ~~2012 to $0.91~~2014 being slightly lower than $0.96 for the ~~third~~first quarter of 2013. However, the Company’s first quarter of 2014 adjusted EBITDA of $23.7 million increased $2.4 million, or 11%, from $21.4 million in the first quarter of 2013, consistent with the operating income trends discussed above. See the Non-GAAP Measures section in this Item, below.

The Company had net operating cash outflows of approximately $1.8 million for the first quarter of 2014 compared to net operating cash inflows of $11.3 million in the first quarter of 2013. The main driver of the change in cash flow was an increase in cash invested in the Company’s working capital during the current quarter, which was primarily the result of increased sales at the end of the first quarter of 2014, reestablishing inventory safety stock levels that were low at year-end 2013 and higher annual incentive compensation payouts related to an improvement in the Company’s prior year performance.

Overall, the Company ~~performed well in the third quarter of 2013,~~is pleased with another quarter of strong earnings and cash flow generation. Also, results for the third quarter of 2013 were impacted by the timing of the recertification of a prior concessionary tax rate in the Company’s Asia Pacific region, which, had it been received in the third quarter, would have resulted in an estimated $0.08 per diluted share of additional earnings in the quarter from decreased tax expense. See the Recent Developments section in this Item below. As it relates to the first nine months of 2013, the Company’s results have been positively impacted by the Company’s market share gains and recent acquisitions, which have contributed to its ~~increased volumes and revenues. The Company is further encouraged by its solid~~ performance in the first ~~nine months~~quarter of ~~2013~~2014, given the ~~weak~~continued economic ~~conditions that numerous parts of~~challenges across the world ~~have been experiencing. Looking~~and the severe U.S. weather conditions. Specifically, the Company’s adjusted EBITDA growth is an indication that its business model and competitive positioning continue to serve the Company well. Furthermore, the Company’s liquidity remains its strength, as its cash position continued to exceed its debt at March 31, 2014, with no borrowings outstanding on its credit facility, and, also, the Company’s consolidated leverage ratio continued to be less than one times EBITDA. Going forward, ~~to the fourth quarter of 2013,~~ the Company expects to see modest growth in most of its major markets, although some countries such as India and Brazil could continue to ~~produce good operating results, subject~~be challenging. Also, the Company is beginning to experience an increase in some raw material costs. However, the ~~typical negative seasonality around~~Company believes its track record of increasing market share and leveraging recent acquisitions will continue and help offset the ~~holidays. Further,~~market issues that may occur. Overall, the ~~Company’s expectations have not changed for~~Company remains confident in its ~~full year results~~future and ~~it still~~ expects ~~2013~~2014 to be another ~~strong~~good year for ~~Quaker. In addition, the Company’s strong liquidity~~Quaker as it strives to increase revenue and ~~balance sheet position continue to provide opportunities~~earnings for the ~~Company to pursue strategic growth opportunities, including acquisitions.~~fifth consecutive year.

~~CMS Discussion~~

The Company currently has numerous CMS contracts around the world. Under its traditional CMS approach, the Company effectively acts as an agent, and the revenues and costs from these sales are reported on a net sales or “pass-through” basis. Under an alternative structure for certain contracts, the contracts are structured differently in that the Company’s revenue received from the customer is a fee for products and services provided to the customer, which are indirectly related to the actual costs incurred. Profit is dependent on how well the Company controls product costs and achieves product conversions from other third-party suppliers’ products to its own products. As a result, under the alternative structure, the Company recognizes, in reported revenue, the gross revenue received from the CMS site customer and in cost of goods sold the third-party product purchases, which substantially offset each other until the Company achieves significant product conversions. This may result in a decrease in reported gross margin as a percentage of sales.

The Company has maintained a mix of CMS contracts with both the traditional product pass-through structure and the alternative structure, including fixed price contracts that cover all services and products. Since the global economic downturn and its impact on the automotive sector, the Company has experienced shifts in customer requirements and business circumstances, but the Company’s offerings continue to include both approaches to CMS.

~~Table of Contents~~

Liquidity and Capital Resources

Quaker’s cash and cash equivalents ~~increased~~decreased to ~~$53.9~~$60.5 million at ~~September 30, 2013~~March 31, 2014 from ~~$32.5~~$68.5 million at December 31, ~~2012.~~2013. The ~~$21.4~~$8.0 million ~~increase~~decrease was the result of ~~$51.9~~$1.8 million ~~provided by~~of cash used in operating activities, ~~partially offset by $8.7~~$2.7 million of cash used in investing activities ~~$21.7~~and $3.5 million of cash used in financing ~~activities and a $0.1 million decrease from the effect of exchange rates on cash.~~activities.

Net cash flows ~~provided by~~used in operating activities were ~~$51.9~~$1.8 million in the first ~~nine months~~quarter of ~~2013~~2014 compared to ~~$41.8~~$11.3 million provided by operating activities in the first ~~nine months~~quarter of ~~2012.~~2013. The ~~$10.1~~Company’s $13.1 million ~~increase in~~lower operating cash flow was primarily ~~driven by~~due to higher working capital investment during the first quarter of 2014 compared to the first quarter of 2013. Specifically, the Company had higher cash outflows from accounts receivable due to increased sales at the end of the first quarter of 2014, higher cash outflows from inventory due to reestablishing safety stock levels that were low at year-end 2013 and higher cash outflows from accounts payable and accrued liabilities related to higher annual incentive compensation payouts on the Company’s ~~increased net income,~~ improved ~~working capital management and~~performance in the ~~Company’s first~~prior year. In addition, the Company received a dividend distribution in the prior year from its captive insurance equity affiliate of $2.0 million, ~~partially offset by fees related to~~which also affected the ~~Company’s revised credit facility, discussed below.~~operating cash flow comparison.

Net cash flows used in investing activities ~~were $8.7~~decreased from $3.3 million in the first ~~nine months~~quarter of 2013 ~~compared~~ to ~~$10.1~~$2.7 million ~~used~~ in the first ~~nine months~~quarter of ~~2012.~~2014. The ~~$1.4~~$0.6 million decrease inof cash used in investing activities was primarily the result of lower ~~investments in property, plant and equipment, as there were higher~~ payments related to the Company’s information technology infrastructure in the first nine months of 2012, partially offset by increased investments in the Company’s Asia Pacific facilities in the first nine months of 2013. Also, there were slightly lower payments related tofor acquisitions and ~~lower cash inflow from~~ a change in the Company’s restricted cash, ~~which was due~~net of an increase in payments for property, plant and equipment. Related to acquisitions, the Company acquired a chemical milling maskants distribution network for the Company’s North American segment

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during the first quarter of 2013, with no corresponding payment in 2014. Changes to the Company’s restricted cash depend upon the timing of claims and payments associated with athe subsidiary’s asbestos litigation. The Company’s property, plant and equipment expenditures increased during the first quarter of 2014 for information technology development and other related initiatives primarily in its EMEA segment, partially offset by higher payments during the first quarter of 2013 for the expansion of the Company’s Asia/Pacific facilities.

Net cash flows used in financing activities were ~~$21.7~~$3.5 million in the first ~~nine months~~quarter of ~~2013~~2014 compared to ~~$17.8~~$4.7 million of cash used in financing activities in the first ~~nine months~~quarter of ~~2012. In both~~2013. Generally, the ~~first nine months of 2013 and the first nine months of 2012,~~$1.2 million decrease in cash used for financing activities was caused by lower repayments on external debt, as the Company was able to leverage strong operating cash flow to fund its investing and financing activities, and, also, repay portions of its revolving credit line. However, the Company’s increased net operating cash flow in the first nine months of 2013 provided it the ability to repay approximately $3.7 million morehad no borrowings on its revolving credit line ~~compared~~as of December 31, 2013 to ~~the amount repaid in~~repay during the first ~~nine months~~quarter of ~~2012. Also,~~2014. In addition, changes in stock option exercises and other related activity and higher dividend payments ~~and stock option activity~~ affected the financing cash flow comparisons.

~~As discussed in the Current Report on Form 8-K filed on June 17, 2013, the Company entered into~~The Company’s primary credit line is a ~~revised~~$300.0 million syndicated multicurrency credit ~~facility on June 14, 2013, which amended and replaced the Company’s previous credit facility~~agreement with Bank of America, N.A. (administrative agent) and certain other major financial ~~institutions. The revised facility increased~~institutions, which matures in June 2018. At the ~~maximum~~Company’s option, the principal amount available ~~for revolving credit borrowings under this facility from $175.0 million to $300.0 million, which~~ can be increased to $400.0 million ~~at the Company’s option~~ if the lenders agree to increase their commitments and the Company satisfies certain conditions. ~~This facility matures in June 2018. In addition,~~At March 31, 2014 and December 31, 2013, the ~~revised facility amended certain financial, acquisition and other covenants, but the~~Company had no outstanding borrowings under this facility. The Company’s access to this credit is largely dependent on its consolidated leverage ratio ~~calculation, for~~covenant, which ~~access to credit under the former facility largely depended upon, remains relatively consistent and~~ cannot exceed 3.50 to 1. At ~~September 30, 2013~~March 31, 2014 and December 31, ~~2012,~~2013, the consolidated leverage ratio was below 1.0 to 1 and the Company was also in compliance with all of the ~~current and former facilities'~~facility’s other covenants, respectively. At September 30, 2013, the Company had no outstanding borrowings under this revised facility. At December 31, 2012, the Company had approximately $12.2 million outstanding under its former facility.

During 2002 and 2003, the Company’s Netherlands and Italian subsidiaries paid excise taxes on mineral oil sales in Italy in the total amount of approximately $2.0 million. Alleging that the mineral oil excise tax was contrary to European Union directives, the subsidiaries filed with the Customs’ Authority of Milan (“Customs Office” or “Office”) requests to obtain a refund of the above-mentioned amount. The parties appealed rulings to various levels of tax courts up through the Supreme Court of Italy. In March 2012, the Supreme Court rejected the appeal of the Customs Office, ruling in favor of the subsidiaries and granting a refund for the amounts requested. After filing an enforcement action, the Company ultimately collected the $2.0 million, along with approximately $0.5 million of interest, in the second quarter of 2013. This amount was recorded as other income on the Company’s Condensed Consolidated Statement of Income for the first nine months of 2013.covenants.

At ~~September 30, 2013,~~March 31, 2014, the Company’s gross liability for uncertain tax positions, including interest and penalties, was ~~$16.4~~$16.3 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 ~~$10.9~~$10.5 million as a result of offsetting benefits in other tax jurisdictions.

Subsequent to the first quarter of 2014, the Company paid approximately $4.7 million to the former shareholders of Summit Lubricants, Inc. as settlement of an earnout liability assumed in the Company’s 2010 acquisition.

The Company believes it is capable of supporting its operating requirements, including pension plan contributions, payments of dividends to shareholders, possible acquisitions and business opportunities, capital expenditures and possible resolution of contingencies, through internally generated funds supplemented with debt or equity as needed.

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~~Critical Accounting Policies~~

The Company’s critical accounting policies set forth in its Annual Report on Form 10-K for the year ended December 31, 2012 remain materially consistent. However, in the third quarter of 2013, certain internal shifts in the Company’s management and changes to the structure of internally reported information occurred. The Company currently believes its structure, its resource allocation and its performance assessment are now more closely aligned with its four geographical regions: the North America region, the EMEA region, the Asia Pacific region and the South America region. Therefore, the Company changed its reportable operating segments from ones categorized by product nature to ones organized by geography. See Note 3 of Notes to Condensed Consolidated Financial Statements for further information. Similarly, the Company reassessed and changed its reporting units for goodwill testing purposes during the third quarter of 2013 to adhere to its geographical orientation. Based on such change, the following is an update to the Company’s related critical accounting policy:

Goodwill and other intangible assets— The Company records goodwill and intangible assets at fair value as of the acquisition date and amortizes definite-lived intangible assets on a straight-line basis over the useful lives of the intangible assets based on third-party valuations of the assets. Goodwill and intangible assets, which have indefinite lives, are not amortized and are required to be assessed at least annually for impairment. The Company compares the assets’ fair value to their carrying value, primarily based on future discounted cash flows, in order to determine if an impairment charge is warranted. The estimates of future cash flows involve considerable management judgment and are based upon assumptions about expected future operating performance. Assumptions used in these forecasts are consistent with internal planning, but the actual cash flows could differ from management’s estimates due to changes in business conditions, operating performance, and economic conditions. The Company’s assumptions of weighted average cost of capital (“WACC”) and estimated future net operating profit after tax (“NOPAT”) continue to be particularly important in estimating future cash flows. During the third quarter of 2013, the Company revised its calculation for its step one impairment model to include an estimate of future growth and cash flows in perpetuity, among other, less significant, changes.

Based on its revised reporting units, the Company completed its annual impairment test as of the end of the third quarter of 2013 and no impairment charge was warranted. Furthermore, the estimated fair value of each of the Company’s reporting units substantially exceeded its carrying value, with none of the Company’s reporting units at risk for failing step one of the goodwill impairment test. The Company currently uses a WACC of 12% and, at September 30, 2013, this assumption would have had to increase by more than 73.2 percentage points before any of the Company’s reporting units would fail step one of the impairment analysis. Further, at September 30, 2013, the Company’s estimate of NOPAT would have had to decrease by more than 70.3% before any of the Company’s reporting units would be considered potentially impaired.

~~Recent Developments~~

In June 2013, a subsidiary in the Company’s Asia Pacific region applied for recertification of a prior concessionary tax rate with its respective tax authorities, which would renew the subsidiary’s tax rate at 15% compared to its statutory tax rate of 25%. In September 2013, the Company’s subsidiary was listed as one of the companies which received approval for the tax rate by its government’s respective administrating agency for tax years 2013, 2014, and 2015. This publication marks the commencement of a 15 business day period of public notice and comment, which ended during October 2013. The Company recorded tax expense at the current statutory rate of 25% through the third quarter of 2013, as the Company’s recertification of its concessionary tax rate remained contingent on receiving no adverse public comment during the comment period. If the Company had recognized the renewal of this tax rate in the third quarter of 2013, then the reduced effective tax rate would have yielded an estimated $0.08 per diluted share of additional earnings in the quarter. As of the filing of this Report on Form 10-Q, the period for comment has expired and the Company has not received a public notice or comment challenging the approval status. Assuming there are no other significant developments related to this event, the Company will recognize the change to its effective tax rate in its financial statements in the fourth quarter of 2013.

Non-GAAP Measures

Included in this Form 10-Q filing ~~is a~~are non-GAAP financial ~~measure~~measures of non-GAAP earnings per diluted ~~share.~~share and adjusted EBITDA. The Company believes ~~this~~these non-GAAP financial ~~measure provides~~measures provide meaningful supplemental information as ~~it enhances~~they enhance a reader’s understanding of the financial performance of the Company, isare more indicative of future operating performance of the Company, and ~~facilitates~~facilitate a better comparison among fiscal periods, as the non-GAAP ~~financial measure excludes~~measures exclude items that are not considered core to the Company’s operations. ~~Non-GAAP~~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.

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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) measure:

	Three Months Ended
	March 31,
	2014			2013
GAAP earnings per diluted share attributable to Quaker Chemical Corporation Common Shareholders	$	0.96		$	1.04

Equity income in a captive insurance company per diluted share		(0.06	)		(0.11	)
UK pension plan amendment per diluted share		0.05			—
Devaluation of the Venezuelan Bolivar Fuerte per diluted share		—			0.03

Non-GAAP earnings per diluted share	$	0.95		$	0.96

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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 Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
GAAP earnings per diluted share attributable to Quaker Chemical Corporation
Common Shareholders $ 0.95 $ 0.83 $ 3.21 $ 2.63
CFO transition costs per diluted share — — — 0.03
Customer bankruptcy costs per diluted share — — — 0.06
Mineral oil excise tax refund per diluted share — — (0.14 ) —
Change in fair value of an acquisition-related earnout liability per diluted share — — 0.03 —
Cost streamlining initiatives per diluted share 0.05 — 0.07 —
Devaluation of the Venezuelan Bolivar Fuerte per diluted share — — 0.03 —
Equity income in a captive insurance company per diluted share (0.09 ) (0.03 ) (0.33 ) (0.11 )

Non-GAAP earnings per diluted share $ 0.91 $ 0.80 $ 2.87 $ 2.61

	Three Months Ended
	March 31,
	2014			2013
Net income attributable to Quaker Chemical Corporation	$	12,730		$	13,619
Depreciation and amortization		3,888			3,935
Interest expense		525			744
Taxes on income before equity in net income of associated companies		6,546			4,133
Equity income in a captive insurance company		(846	)		(1,435	)
UK pension plan amendment		902			—
Devaluation of the Venezuelan Bolivar Fuerte		—			357

Adjusted EBITDA	$	23,745		$	21,353

~~Out of Period~~Out-of-Period Adjustment

~~As previously disclosed in~~During 2012, the ~~Company’s 2012 Annual Report on Form 10-K, the~~ Company ~~had~~ reassessed its ability to significantly influence the operating and financial policies of its captive insurance equity affiliate, Primex. Based on its ownership percentage and other factors, the Company determined that, during 2012, the Company obtained the ability to significantly influence Primex and, as a result, changed its method of accounting from the cost to equity method. During the first quarter of 2013, the Company identified errors in Primex’s estimated 2012 financial statements, which primarily related to a reinsurance contract held by Primex. The identified errors resulted in a cumulative $1.0 million understatement of the Company’s equity in net income from associated companies for the year ended December 31, 2012. The Company corrected the errors related to Primex in the first quarter of 2013, which had the net effect of increasing equity in net income from associated companies by $1.0 million for the three months ended March 31, ~~2013 and the nine months ended September 30,~~ 2013. The Company ~~does~~did not believe this adjustment iswas material to ~~the~~its consolidated financial statements for the ~~year~~years ended December 31, 2012 or ~~to the Company’s projected results for the current year~~December 31, 2013 and, therefore, ~~has~~did not ~~restated~~restate any prior period amounts. ~~As the Company’s assessment was based on projected full year 2013 results, the Company will update its assessment at year-end based upon actual 2013 results.~~ See Note 2 of Notes to Condensed Consolidated Financial ~~Statements in Item 1 of this Part I.~~Statements.

Consolidated Operations Review

– Comparison of the ~~Third~~First Quarter of ~~2013~~2014 with the ~~Third~~First Quarter of ~~2012~~2013

Net sales for the ~~third~~first quarter of ~~2013 were $184.1~~2014 of $181.7 million ~~an increase of~~increased approximately 2%3% from net sales of ~~$180.9~~$176.2 million in the ~~third~~first quarter of ~~2012.~~2013. Product volumes, including acquisitions, increased revenues by approximately 2%6%, which ~~were~~was partially offset by a decrease ~~due~~of $2.7 million, or 2%, related to foreign exchange rate translation ~~of less than~~and a 1%. ~~The change in net sales attributable~~ decrease due to price and product ~~mix in the third quarter of 2013 was consistent with the third quarter of 2012.~~mix.

Gross profit increased approximately ~~$6.9~~$2.5 million, or approximately ~~12%~~4%, from the ~~third~~first quarter of ~~2012.~~2013. The increase in gross profit was ~~primarily~~ driven by ~~an improvement in~~the increased sales volumes, noted above, on stable gross ~~margin to 35.9% from 32.7%~~margins in the ~~third quarter~~first quarters of ~~2012. The increase in gross margin reflects the return~~2014 and 2013 of ~~the Company’s product margins to more acceptable levels.~~35.8% and 35.5%, respectively.

SG&A increased ~~$3.9~~approximately $0.5 million ~~or approximately 9%,~~ from the ~~third~~first quarter of ~~2012, which was~~2013, primarily driven by higher ~~selling~~labor related costs on improved Company performance and ~~higher labor related costs on~~ general ~~year over year~~year-over-year merit increases. In addition, non-operating related SG&A expenses increased due to certain uncommon costs. For instance, the third quarter of 2013 SG&A includes approximately $0.7 million, or $0.04 per diluted share, ofincreases and, also, additional costs related to ~~streamlining certain operations in~~an amendment to the Company’s ~~EMEA region. Partially offsetting these~~UK pension plan of approximately $0.9 million, or $0.05 per diluted share. The additional pension related costs are non-recurring. These increases to SG&A were ~~decreases due to~~net of lower impacts from foreign exchange rate translation.

~~Other expense for~~The change from other income of $0.3 million in the ~~third~~first quarter of 2013 ~~was $0.7~~to other expense of $0.5 million ~~which~~in the first quarter of 2014 was primarily ~~driven by~~the result of approximately $0.8 million of net foreign exchange ~~transaction~~ losses ~~of approximately $0.6 million and a charge of approximately $0.2 million, or $0.01 per diluted share, related to~~in the cost streamlining initiative, noted above, net of earnings from third party license fees. Comparatively, other income for the third quarter of 2012 was $0.3 million, which was primarily caused by third party license fees, net of foreign exchange transaction losses of $0.2 million.current quarter.

The decrease in interest expense was primarily due to lower average borrowings and lower interest rates experienced in the ~~third~~first quarter of ~~2013~~2014 as compared to the ~~third~~first quarter of ~~2012.~~

~~The Company’s effective tax rates for~~2013. Interest income was higher in the ~~third~~first quarter of 2014 compared to the first quarter of 2013, and the third quarter of 2012 were 33.8% and 28.6%, respectively. The primary contributor to the higher effective tax rate in the current quarter was an increase in Asia Pacific’s effective tax rate, which relates to the events described in the Recent Developments section above.

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~~The increase in equity in net income of associated companies from the third quarter of 2012 was~~ primarily due to higher earnings related to the Company’s equity interest in a captive insurance company. Earnings from this affiliate were $1.2 million, or $0.09 per diluted share, in the third quarter of 2013 compared to $0.4 million, or $0.03 per diluted share, in the third quarter of 2012.

~~Comparison of the First Nine Months of 2013 with the First Nine Months of 2012~~

Net sales for the first nine months of 2013 were $545.1 million, an increase of approximately 2% from $535.4 million in the first nine months of 2012. Product volumes, including acquisitions, increased revenues by approximately 2%, which were partially offset by a decrease due to foreign exchange rate translation of less than 1%. ~~The change in net sales attributable to price and product mix in the first nine months of 2013 was consistent with the first nine months of 2012.~~

Gross profit increased by approximately $16.4 million, or approximately 9%, from the first nine months of 2012. The increase in gross profit was driven by an improvement in gross margin to 35.9% from 33.5% in the first nine months of 2012, reflective of the return of the Company’s product margins to more acceptable levels, as noted above.

SG&A increased approximately $9.9 million, or approximately 8%, from the first nine months of 2012, which was primarily driven by higher selling related costs on improved Company performance, higher labor related costs on general year over year merit increases and costs added with our recent acquisitions. In addition, non-operating SG&A expenses increased due to certain uncommon costs. For instance, the nine months of 2013 SG&A includes approximately $1.1 million, or $0.06 per diluted share, of costs related to streamlining certain operations in the Company’s EMEA and South America regions. Partially offsetting these increases to SG&A were the prior year costs associated with the bankruptcies of certain U.S customers of $1.2 million, or $0.06 per diluted share, the prior year costs associated with the Company’s CFO transition of $0.6 million, or $0.03 per diluted share, and lower translation due to changes in foreign exchange rates.

Other income for the first nine months of 2013 was $2.0 million, which was primarily driven by a refund of $2.5 million, or $0.14 per diluted share, related to past excise taxes paid on certain mineral oil sales and, also, earnings from third party license fees. Partially offsetting these contributors to other income were expenses related to an increase in the ~~fair value~~level of ~~an acquisition earnout liability of $0.7 million, or $0.03 per diluted share,~~ the cost streamlining initiative, noted above, and foreign exchange transaction losses of $0.8 million. Comparatively, other income for the first nine months of 2012 was $0.5 million, which relates primarily to third party license fees, net of foreign exchange transaction losses of $0.8 million.

~~Interest expense was lower in the first nine months of 2013 compared to the first nine months of 2012 primarily due to lower interest rates and lower average borrowings.~~Company’s cash on hand.

The Company’s effective tax rates for the first ~~nine months~~quarters of 2014 and 2013 were 34.8% and ~~2012 of 30.0% and 26.9%~~24.1%, ~~respectively, reflect decreases~~respectively. The primary contributors to the increase in the current quarter’s effective tax rate were lower changes in reserves ~~for~~related to uncertain tax positions ~~due~~and certain one-time items that increased the current quarter’s effective tax rate. Although the tax rate is inflated in the first quarter of 2014, the Company continues to estimate the ~~expiration of applicable statutes of limitations for certain tax years of approximately $0.13 and $0.15 per diluted share, respectively. Also, contributing to the higher~~full year 2014 effective tax rate ~~was an increase in Asia Pacific’s effective tax rate, which relates~~ to ~~the events described in the Recent Developments section above.~~approximate 30%. 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.

Equity in net income of associated companies ~~increased due to higher earnings related~~(“equity income”) was generally consistent for the first quarter of 2014 compared to the first quarter of 2013. The primary component of equity income is the Company’s ~~equity~~ interest in a captive insurance ~~company in the first nine months of 2013 compared to the first nine months of 2012.~~company. Earnings attributable to this equity interest ~~increased from~~were approximately $0.8 million, or $0.05 per diluted share, in the first quarter of 2014 compared to $1.4 million, or $0.11 per diluted share, for the first ~~nine months of 2012 to approximately $4.4 million, or $0.33 per diluted share, for the first nine months~~quarter of 2013, which includes a non-cash out-of-period adjustment of approximately $1.0 ~~million recorded in 2013.~~million. See the ~~Out of Period~~Out-of-Period Adjustment section in this Item, above. Partially offsetting ~~this increase~~the higher earnings attributable to the captive insurance company in ~~equity in net income~~the first quarter of ~~associated companies~~2013 was a charge due to the devaluation of ~~approximately~~the Venezuelan

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Bolivar Fuerte of $0.4 million, or $0.03 per diluted ~~share, related~~share. See Notes 1 and 2 of Notes to Condensed Consolidated Financial Statements.

Changes in foreign exchange rates negatively impacted the ~~devaluation~~first quarter of ~~the Venezuelan Bolivar Fuerte during 2013.~~2014 net income by approximately $0.6 million or $0.05 per diluted share.

Reportable Operating Segment Review

~~The Company’s reportable operating segments evidence the structure~~ – Comparison of the ~~Company’s internal organization,~~First Quarter of 2014 with the ~~method by which the Company’s resources are allocated and the manner by which the Company assesses its performance. In the third quarter~~First Quarter of 2013 certain internal shifts in the Company’s management and changes to the structure of internally reported information occurred. The Company currently believes its structure, its resource allocation and its performance assessment are now more closely aligned with its four geographical regions: North America, EMEA, Asia Pacific and South America. Therefore, the Company changed its reportable operating segments from ones categorized by product nature to ones organized by geography. All prior period information has been recast to reflect these four regions as the Company’s new reportable operating segments. See Note 3 of Notes to Condensed Consolidated Financial Statements in Item I of this Report for further information.

The Company ~~continues to offer~~offers its industrial process fluids, chemical specialties and technical expertise to a wide range of industries in a global product ~~portfolio. Overall, the Company experienced improved product margins in each of~~portfolio throughout its four reportable operating segments in the third quarter of 2013 and the first nine months of 2013 compared to the prior year periods, as product margins have returned to more acceptable levels globally, within each regional segment. The following is further analysis by reportable operating segment for each respective period.

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~~Comparison of the Third Quarter of 2013 with the Third Quarter of 2012~~

~~North America~~

segments: (i) North America, ~~represented approximately 43% of the Company’s third quarter net sales, which increased approximately $0.9 million, or 1%~~(ii) Europe, Middle East and Africa (“EMEA”), ~~from the third quarter of 2012. The increase in net sales from the third quarter of 2012 was caused by an increase of approximately 1% from acquisitions~~(iii) Asia/Pacific and approximately 1% from price and product mix, which were partially offset by a decrease of approximately 1% in base product volumes. This reportable segment’s operating earnings, excluding indirect expenses, increased approximately $1.6 million, or 11%, from the third quarter of 2012, which reflects the increased net sales and the increase in the reportable segment’s product margins, noted above.

~~EMEA~~

EMEA represented approximately 24% of the Company’s third quarter net sales, which increased approximately $1.1 million, or 2%, from the third quarter of 2012. Product volumes and foreign currency translation increased net sales by approximately 3% and 5%, respectively, which were partially offset by a decrease from price and product mix of approximately 6%. The foreign currency translation impact was primarily driven by the E.U. Euro to U.S Dollar exchange rate, which averaged 1.33 in the third quarter of 2013 compared to 1.25 during the third quarter of 2012. This reportable segment’s operating earnings, excluding indirect expenses, increased approximately $1.2 million, or 22%, from the third quarter of 2012, which reflects the increased net sales and the increase in the reportable segment’s product margins, noted above.

~~Asia Pacific~~

Asia Pacific represented approximately 24% of the Company’s third quarter net sales, which increased approximately $1.6 million, or 4%, from the third quarter of 2012. Product volumes and price and product mix increased net sales by approximately 2% and 4%, respectively, which were partially offset by a decrease from foreign currency translation of approximately 2%. The foreign currency translation impact was primarily driven by decreases in the Indian Rupee and Australian Dollar to U.S. Dollar exchange rates, which averaged 0.016 and 0.92 in the third quarter of 2013 compared to 0.018 and 1.04 in the third quarter of 2012, respectively. This reportable segment’s operating earnings, excluding indirect expenses, increased approximately $1.1 million, or 11%, from the third quarter of 2012, which reflects the increased net sales and the increase in the reportable segment’s product margins, noted above.

(iv) South ~~America~~

South America represented approximately 9% of the Company’s third quarter net sales, which decreased approximately $0.4 million, or 2%, from the third quarter of 2012. Product volumes and price and product mix increased net sales by approximately 9% and 3%, respectively, which were more than offset by a decrease from foreign currency translation of approximately 14%. The foreign currency translation impact was primarily driven by the Brazilian Real to U.S. Dollar exchange rate, which averaged 0.44 in the third quarter of 2013 compared to 0.49 during the third quarter of 2012. This reportable segment’s operating earnings, excluding indirect expenses, increased approximately $2.0 million, or 345%, from the third quarter of 2012, which reflects the increase in the reportable segment’s product margins, noted above, and the favorable impact of cost streamlining initiatives implemented in the second quarter of 2013.

~~Comparison of the First Nine Months of 2013 with the First Nine Months of 2012~~America.

North America

North America represented approximately 42% of the Company’s consolidated net sales in the first ~~nine months~~quarter of ~~2013,~~2014, which ~~decreased~~increased approximately ~~$5.0~~$2.0 million, or 2%3%, from the first ~~nine months~~quarter of ~~2012.~~2013. The ~~decrease~~increase in net sales ~~from the first nine months~~was generally attributable to higher base product volumes of ~~2012 was mainly caused~~6% and acquisitions of 1%, partially offset by a decrease ~~of approximately 3%~~ in ~~base product volumes, which was partially offset by an increase of 1% due to acquisitions. The impact on net sales from~~ price and product mix ~~remained comparable to the first nine months~~ of ~~2012.~~4%. This reportable segment’s operating earnings, excluding indirect expenses, increased approximately ~~$1.3~~$0.7 million, or 3%4%, from the first ~~nine months~~quarter of ~~2012, which reflects~~2013. The first quarter of 2014 increase was mainly driven by higher gross profit on the ~~increase~~increases to net sales, noted above, and a slight margin improvement on a change in ~~the reportable segment’s~~ product ~~margins, noted above.~~mix, partially offset by higher labor-related costs on improved segment performance and general year-over-year merit increases.

EMEA

EMEA represented approximately ~~26%~~27% of the Company’s consolidated net sales in the first ~~nine months~~quarter of ~~2013,~~2014, which increased approximately ~~$9.0~~$2.5 million, or 7%5%, from the first ~~nine months~~quarter of ~~2012.~~2013. The increase in net sales ~~from the first nine months of 2012~~ was ~~mainly caused by increases of approximately 4% from acquisitions, approximately 4% from base~~primarily due to higher product volumes of 6% and 2%an increase from foreign currency exchange rate translation ~~which were~~of 3%, partially offset by a decrease ~~from~~in price and product mix of ~~approximately 3%~~4%. The foreign currency exchange rate translation impact was primarily due to an increase in the E.U. Euro to ~~U.S~~U.S. Dollar exchange rate, which averaged 1.37 in the first quarter of 2014 compared to an average of 1.32 in the first ~~nine months~~quarter of ~~2013 compared to 1.28 during the first nine months of 2012.~~2013. This reportable segment’s operating earnings, excluding indirect expenses, increased approximately ~~$2.7~~$1.1 million, or ~~14%~~16%, from the first ~~nine months~~quarter of ~~2012, which reflects~~2013. The first quarter of 2014 increase was mainly driven by higher gross profit on the ~~increased~~increases to net sales, noted above, and ~~the increase~~a slight margin improvement on a change in ~~the reportable segment’s~~ product ~~margins, noted above.~~mix, partially offset by higher labor-related costs on improved segment performance and general year-over-year merit increases.

~~Table of Contents~~

~~Asia~~ Asia/Pacific

~~Asia~~ Asia/Pacific represented approximately 23% of the Company’s net sales in the first ~~nine months~~quarter of ~~2013,~~2014, which increased approximately ~~$7.2~~$3.9 million, or 6%10%, from the first ~~nine months~~quarter of ~~2012. Product~~2013. The increase in net sales was primarily due to higher product volumes of 9% and an increase due to price and product mix ~~increased net sales by approximately 5% and 2%, respectively, from the first nine months~~ of ~~2012, which were~~3%, partially offset by a decrease from foreign currency exchange rate translation of ~~approximately 1%~~2%. The foreign currency exchange rate translation impact was primarily due to ~~decreases~~a decrease in the Indian Rupee ~~and Australian Dollar~~ to U.S. Dollar exchange ~~rates,~~rate, which averaged ~~0.017 and 0.98, respectively,~~0.0162 in the first ~~nine months~~quarter of ~~2013~~2014 compared to ~~0.019 and 1.04, respectively,~~0.0185 in the first ~~nine months~~quarter of ~~2012.~~2013. This reportable segment’s operating earnings, excluding indirect expenses, increased approximately ~~$4.2~~$0.3 million, or ~~15%~~3%, from the first ~~nine months~~quarter of ~~2012, which reflects~~2013. The first quarter of 2014 increase was mainly driven by higher gross profit on the ~~increased~~increases to net sales, noted above, partially offset by higher labor-related costs on improved segment performance and ~~the increase in the reportable segment’s product margins, noted above.~~general year-over-year merit increases.

South America

South America represented approximately 9%8% of the Company’s net sales in the first ~~nine months~~quarter of ~~2013,~~2014, which decreased approximately ~~$1.5~~$2.9 million, or 3%17%, from the first ~~nine months~~quarter of ~~2012. Product volumes and price and product mix increased~~2013. The decrease in net sales ~~by approximately 3%~~was generally attributable to lower product volumes of 6% and ~~5%, respectively, from the first nine months of 2012, which were more than offset by~~ a decrease from foreign currency exchange rate translation of ~~approximately 11%~~18%, partially offset by an increase in price and product mix of 7%. The foreign currency exchange rate translation impact was primarily due to a decrease in the Brazilian Real and Argentinian Peso to U.S. Dollar exchange ~~rate,~~rates, which averaged ~~0.47~~0.42 and 0.13 in the first ~~nine months~~quarter of 2014 compared to 0.50 and 0.20 in the first quarter of 2013, ~~compared to 0.52 during the first nine months of 2012.~~respectively. This reportable segment’s operating earnings, excluding indirect expenses, ~~increased~~decreased approximately ~~$2.8~~$1.4 million, or ~~56%~~48%, from the first ~~nine months~~quarter of ~~2012, which reflects~~2013. The first quarter of 2014 decrease was mainly driven by lower gross profit on the ~~increase in the reportable segment’s product margins,~~decreases to net sales, noted above, and a gross margin decline on a change in product mix, partially offset by the ~~favorable impact of~~positive impacts from the cost streamlining initiatives ~~implemented~~taken in ~~the second quarter of~~this segment during 2013.

Factors That May Affect Our Future Results

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

Certain information included in this ~~report~~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

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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 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~~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~~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. These 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 the Company’s demand 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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~Quantitative and Qualitative Disclosures About Market Risk.~~

We have evaluated the information required under this ~~Item~~item that was disclosed in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2012,~~2013, and we believe there has been no material change to that information.

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~~Item 4.~~

~~Controls and Procedures.~~

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~~cover 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 ~~September 30, 2013~~March 31, 2014 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 ~~September 30, 2013.~~March 31, 2014.

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PART II.

OTHER INFORMATION

Items 1A, 3, 4 and 5 of Part II are inapplicable and have been omitted.

Item 1.1. Legal ~~Proceedings.~~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.~~report:

(c) (d)
Total Number of Maximum
Shares Purchased as Number of Shares that
(a) (b) Part of May Yet
Total Number Average Publicly Announced Be Purchased Under the
of Shares Price Paid Plans Plans or
Period Purchased (1) Per Share (2) or Programs (3) Programs (3)
July 1 - July 31 1,726 $ 62.98 — 252,600
August 1 - August 31 20,118 $ 71.05 — 252,600
September 1 - September 30 — $ — — 252,600

Total 21,844 $ 70.41 — 252,600

					(c)		(d)
					Total Number of		Maximum
					Shares Purchased as		Number of Shares that
	(a)		(b)		Part of		May Yet
	Total Number		Average		Publicly Announced		Be Purchased Under the
	of Shares		Price Paid		Plans		Plans or
Period	Purchased (1)		Per Share (2)		or Programs (3)		Programs (3)
January 1 - January 31		—	$	—		—		252,600
February 1 - February 28		—	$	—		—		252,600
March 1 - March 31		5,708	$	77.28		—		252,600

Total		5,708	$	77.28		—		252,600

(1)

All of the ~~21,844~~5,708 shares acquired by the Company during the period covered by this report were ~~shares previously owned by employees, that were~~ acquired from ~~such~~ employees upon their surrender of ~~such~~previously owned shares in payment of the exercise price of employee stock options exercised, or for the payment of taxes upon exercise of employee stock options or for the vesting of restricted stock.

(2)

The price per share, ~~represents~~in each case, represented the closing price of the Company’s common stock on the date of ~~stock option~~ exercise or ~~the~~ vesting, ~~date of restricted stock,~~ as specified by the plan pursuant to which the ~~stock~~applicable option or restricted stock was granted.

(3)

On February 15, 1995, the Board of Directors of the Company authorized a share repurchase program authorizing the repurchase of up to 500,000 shares of Quaker common stock, and, on January 26, 2005, the Board authorized the repurchase of up to an additional 225,000 shares. Under the 1995 action of the Board, 27,600 shares may yet be purchased. ��Under the 2005 action of the Board, none of the shares authorized ~~have~~has been purchased and, accordingly, all of those shares may yet be purchased. Neither of the share repurchase authorizations has an expiration date.

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~~Item 6.~~

~~Exhibits.~~

(a) Exhibits

10.1 – Articles of Incorporation, as amended through July 31, 2013. Incorporated by reference to Exhibit 3.1 as filed by Registrant with Form 8-K filed on July 31, 2013.
31.1 –
Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2 –
Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1 –
Certification of Michael F. Barry Pursuant to 18 U.S. C. Section 1350
32.2 –
Certification of Margaret M. Loebl Pursuant to 18 U.S. C. Section 1350
101.INS – XBRL Instance Document
101.SCH – XBRL Extension Schema Document
101.CAL – XBRL Calculation Linkbase Document
101.DEF – XBRL Definition Linkbase Document
101.LAB – XBRL Label Linkbase Document
101.PRE – XBRL Presentation Linkbase Document
Item 6. Exhibits

(a) Exhibits

10.1	–	Expatriate Agreement by and between the Registrant and Dieter Laininger, dated and effective February 27, 2014. *
31.1	–	Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2	–	Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1	–	Certification of Michael F. Barry Pursuant to 18 U.S. C. Section 1350
32.2	–	Certification of Margaret M. Loebl Pursuant to 18 U.S. C. Section 1350
101.INS	–	XBRL Instance Document
101.SCH	–	XBRL Extension Schema Document
101.CAL	–	XBRL Calculation Linkbase Document
101.DEF	–	XBRL Definition Linkbase Document
101.LAB	–	XBRL Label Linkbase Document
101.PRE	–	XBRL Presentation Linkbase Document

*	This exhibit is a management contract or compensation plan or arrangement required to be filed as an exhibit.

*********

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. Loebl
Date: ~~October~~April 29, ~~2013~~2014				Margaret M. Loebl, Vice President, Chief Financial Officer and Treasurer ~~(Officer~~ (officer duly authorized on behalf of, and ~~Principal Financial Officer~~principal financial officer of, the Registrant)

	Unaudited
	(Dollars in thousands)						Unaudited
	For the Nine Months Ended						For the Three Months Ended
	September 30,						March 31,
	2013			2012			2014			2013
Cash flows from operating activities
Net income	$	44,171		$	36,473		$	13,309		$	14,191
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		9,219			9,001			3,075			3,056
Amortization		2,621			2,283			813			879
Equity in undistributed earnings of associated companies, net of dividends		(2,525	)		(1,854	)		(927	)		921
Deferred compensation and other, net		(50	)		1,848			2,944			(861	)
Stock-based compensation		3,133			2,954			1,388			1,040
Loss (gain) on disposal of property, plant and equipment		193			(75	)
Gain on disposal of property, plant and equipment								(48	)		(2	)
Insurance settlement realized		(731	)		(1,074	)		(337	)		—
Pension and other postretirement benefits		(561	)		(1,823	)		(1,665	)		(2,521	)
(Decrease) increase in cash from changes in current assets and current liabilities, net of acquisitions:
Accounts receivable		(13,222	)		(1,381	)		(13,387	)		(3,977	)
Inventories		(4,569	)		(875	)		(6,389	)		(1,837	)
Prepaid expenses and other current assets		1,017			(1,976	)		(29	)		(457	)
Accounts payable and accrued liabilities		13,256			(1,731	)		(544	)		874
Net cash provided by operating activities		51,952			41,770
Net cash (used in) provided by operating activities								(1,797	)		11,306

Cash flows from investing activities
Investments in property, plant and equipment		(7,330	)		(8,757	)		(3,057	)		(2,723	)
Payments related to acquisitions, net of cash acquired								—			(647	)
Proceeds from disposition of assets		391			193			58			13
Payments related to acquisitions, net of cash acquired		(2,478	)		(2,635	)
Insurance settlement interest earned		40			53			11			14
Change in restricted cash, net		691			1,021			326			(14	)
Net cash used in investing activities		(8,686	)		(10,125	)		(2,662	)		(3,357	)

Cash flows from financing activities
Net increase in short-term borrowings								—			594
Repayment of long-term debt		(12,289	)		(9,672	)		(232	)		(2,438	)
Dividends paid		(9,721	)		(9,410	)		(3,300	)		(3,208	)
Stock options exercised, other		(510	)		(828	)		(205	)		(59	)
Excess tax benefit related to stock option exercises		815			2,164			239			369
Distributions to noncontrolling shareholders		(30	)		(30	)
Net cash used in financing activities		(21,735	)		(17,776	)		(3,498	)		(4,742	)
Effect of exchange rate changes on cash		(133	)		(606	)		(85	)		(498	)
Net increase in cash and cash equivalents		21,398			13,263
Net (decrease) increase in cash and cash equivalents								(8,042	)		2,709
Cash and cash equivalents at beginning of period		32,547			16,909			68,492			32,547
Cash and cash equivalents at end of period	$	53,945		$	30,172		$	60,450		$	35,256

Supplemental cash flow disclosures:
Non-cash activities:
Accrued property, plant and equipment purchases	$	1,178		$	—

	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended March 31,
	2013			2012			2013			2012			2014			2013
Basic earnings per common share

Net income attributable to Quaker Chemical Corporation	$	12,551		$	10,925		$	42,253		$	34,398		$	12,730		$	13,619
Less: income allocated to participating securities		(109	)		(103	)		(358	)		(402	)		(112	)		(111	)
Net income available to common shareholders	$	12,442		$	10,822		$	41,895		$	33,996		$	12,618		$	13,508
Basic weighted average common shares outstanding		13,062,417			12,937,417			13,034,289			12,840,029			13,091,503			13,001,963

Basic earnings per common share	$	0.95		$	0.84		$	3.21		$	2.65		$	0.96		$	1.04

Diluted earnings per common share

Net income attributable to Quaker Chemical Corporation	$	12,551		$	10,925		$	42,253		$	34,398		$	12,730		$	13,619
Less: income allocated to participating securities		(109	)		(102	)		(357	)		(401	)		(112	)		(111	)
Net income available to common shareholders	$	12,442		$	10,823		$	41,896		$	33,997		$	12,618		$	13,508
Basic weighted average common shares outstanding		13,062,417			12,937,417			13,034,289			12,840,029			13,091,503			13,001,963
Effect of dilutive securities and employee stock options		22,488			33,892			25,909			70,265
Effect of dilutive securities														19,649			29,937
Diluted weighted average common shares outstanding		13,084,905			12,971,309			13,060,198			12,910,294			13,111,152			13,031,900

Diluted earnings per common share	$	0.95		$	0.83		$	3.21		$	2.63		$	0.96		$	1.04

	Fair value at September 30, 2013	Valuation technique	Unobservable input	Input value	Fair value at March 31, 2014		Valuation technique	Unobservable input	Input value
Summit earnout	5,684	Discounted cash flow	Discount rate	14.5%	$	4,709	Discounted cash flow	Discount rate	14.5	%
Non-competition agreement obligation	237	Discounted cash flow	Discount rate	14.0%	$	121	Discounted cash flow	Discount rate	14.0	%

						Weighted	Weighted		Number	Weighted							Weighted	Weighted		Number	Weighted
					Number	Average	Average		Exercisable	Average						Number	Average	Average		Exercisable	Average
Range of	Range of				Outstanding	Contractual	Exercise		at	Exercise		Range of				Outstanding	Contractual	Exercise		at	Exercise
Exercise Prices	Exercise Prices				at 9/30/2013	Life	Price		9/30/2013	Price		Exercise Prices				at 3/31/2014	Life	Price		3/31/2014	Price
$	0.00	-	$	10.00	—	—	$	—	—	$	—	0.00	-	$	10.00	—	—	$	—	—	$	—
$	10.01	-	$	20.00	6,155	3.3		18.82	6,155		18.82	10.01	-	$	20.00	6,155	2.8		18.82	6,155		18.82
$	20.01	-	$	30.00	—	—		—	—		—	20.01	-	$	30.00	—	—		—	—		—
$	30.01	-	$	40.00	40,494	5.1		37.85	7,846		37.68	30.01	-	$	40.00	35,020	4.6		37.87	23,954		37.75
$	40.01	-	$	50.00	2,192	5.7		46.21	731		46.21	40.01	-	$	50.00	2,192	5.2		46.21	731		46.21
$	50.01	-	$	60.00	29,302	6.4		58.26	—		—	50.01	-	$	60.00	28,592	5.9		58.26	9,057		58.26
$												60.01	-	$	70.00	—	—		—	—		—
$												70.01	-	$	80.00	37,048	6.9		73.47	—		—
					78,143	5.5		44.24	14,732		30.23					109,007	5.6		54.41	39,897		39.64

For the year ended December 31, 2013	$	3,445
For the year ended December 31, 2014	$	3,253
For the year ended December 31, 2015	$	3,253
For the year ended December 31, 2016	$	2,774
For the year ended December 31, 2017	$	2,110
For the year ended December 31, 2018	$	2,087

	NP Coil Dexter
2012 Acquisition	Industries S.r.l.
Current assets	$	5,536
Fixed assets		1,211
Intangibles		3,825
Goodwill		1,786
Other long-term assets		783
Total assets purchased		13,141
Short-term debt		(1,186	)
Other current liabilties		(6,168	)
Long-term debt		(854	)
Other long-term liabilities		(1,258	)
Present value of hold-back		(927	)
Total liabilities assumed		(10,393	)
Cash paid for an acquisition	$	2,748

Cash Flow Hedges
Interest Rate Swaps

		Three Months Ended							Nine Months Ended
		September 30,							September 30,
		2013			2012				2013			2012
Amount of Gain Recognized in Accumulated OCI on Derivative
(Effective Portion)			$	—		$	73			$	—		$	272

Amount and Location of Gain Reclassified from Accumulated OCI into
Income (Effective Portion)	Interest Expense		$	—		$	(74	)		$	—		$	(392	)

Amount and Location of Gain Recognized in Income on Derivative
(Ineffective Portion and Amount Excluded from Effectiveness Testing)	Other Income		$	—		$	—			$	—		$	—

(a) Exhibits

10.1	–	Articles of Incorporation, as amended through July 31, 2013. Incorporated by reference to Exhibit 3.1 as filed by Registrant with Form 8-K filed on July 31, 2013.
31.1	–	Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2	–	Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1	–	Certification of Michael F. Barry Pursuant to 18 U.S. C. Section 1350
32.2	–	Certification of Margaret M. Loebl Pursuant to 18 U.S. C. Section 1350
101.INS	–	XBRL Instance Document
101.SCH	–	XBRL Extension Schema Document
101.CAL	–	XBRL Calculation Linkbase Document
101.DEF	–	XBRL Definition Linkbase Document
101.LAB	–	XBRL Label Linkbase Document
101.PRE	–	XBRL Presentation Linkbase Document