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Business Combination
12 Months Ended
Dec. 31, 2021
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
Note 2 – Business Combinations
 
2021 Acquisitions
 
In November 2021, the Company acquired Baron Industries (“Baron”),
 
a privately held Company that provides vacuum
impregnation services of castings, powder metals and electrical components for
 
its Global Specialty Businesses reportable segment for
$
11.0
 
million, including an initial cash payment of $
7.1
 
million, subject to post-closing adjustments as well as certain earn-out
provisions currently estimated at $
3.9
 
million that are payable at different times from 2022 through
 
2025.
 
The earn-out provisions
could total a maximum of $
4.5
 
million.
 
The Company allocated $
8.0
 
million of the purchase price to intangible assets, $
1.1
 
million of
property, plant and
 
equipment and $
1.5
 
million of other assets acquired net of liabilities assumed, which includes $
0.3
 
million of cash
acquired.
 
In addition, the Company recorded $
0.4
 
million of goodwill, none of which is expected to be tax deductible.
 
Intangible
assets comprised $
7.2
 
million of customer relationships to be amortized over
15 years
; and $
0.8
 
million of existing product technology
to be amortized over
13 years
.
 
 
In November 2021, the Company acquired a business that provides
 
hydraulic fluids, coolants, cleaners, and rust preventative oils
in Turkey for its EMEA reportable segment
 
for
3.2
 
million EUR or approximately $
3.7
 
million.
 
In September 2021, the Company acquired the remaining interest in Grindaix
 
-GmbH (“Grindaix”), a Germany-based, high-tech
provider of coolant control and delivery systems for its Global Specialty Businesses reportable
 
segment for
2.4
 
million EUR or
approximately $
2.9
 
million, which is gross of approximately $
0.3
 
million of cash acquired.
 
Previously, in February
 
2021, the
Company acquired a
38
% ownership interest in Grindaix for
1.4
 
million EUR or approximately $
1.7
 
million.
 
The Company recorded
its initial investment as an equity method investment within the Condensed Consolidated
 
Financial Statements and accounted for the
purchase of the remaining interest as a step acquisition whereby the Company
 
remeasured the previously held equity method
investment to its fair value.
 
In June 2021, the Company acquired certain assets for its chemical milling
 
maskants product line in the Global Specialty
Businesses reportable segment for
2.3
 
million EUR or approximately $
2.8
 
million.
 
In February 2021, the Company acquired a tin-plating solutions business for
 
the steel end market for $
25.0
 
million.
 
This
acquisition is part of each of the Company’s
 
geographic reportable segments.
 
The Company allocated $
19.6
 
million of the purchase
price to intangible assets, comprised of $
18.3
 
million of customer relationships, to be amortized over
19 years
; $
0.9
 
million of existing
product technology to be amortized over
14 years
; and $
0.4
 
million of a licensed trademark to be amortized over
3 years
.
 
In addition,
the Company recorded $
5.0
 
million of goodwill, all of which is expected to be tax deductible in various jurisdictions
 
in which we
operate.
 
Factors contributing to the purchase price that resulted in goodwill included
 
the acquisition of business processes and
personnel that will allow Quaker Houghton to better serve its customers.
 
As of December 31, 2021, the allocation of the purchase price of the 2021
 
acquisitions has not been finalized and the one year
measurement period has not ended for any of these acquisitions.
 
Further adjustments may be necessary as a result of the Company’s
on-going assessment of additional information related to the fair value
 
of assets acquired and liabilities assumed.
 
The results of operations of the 2021 acquired assets and businesses subsequent
 
to the respective acquisition dates are included in
the Consolidated Statements of Income for the year ended December
 
31, 2021.
 
Applicable transaction expenses associated with these
acquisitions are included in Combination, integration and other acquisition
 
-related expenses in the Company’s Consolidated
Statements of Income.
 
Certain pro forma and other information is not presented, as the operations of the acquired
 
assets and
businesses are not considered material to the overall operations of the Company
 
for the periods presented.
2022 Acquisitions
 
In January 2022, the Company acquired a business related to the sealing and impregnation
 
of metal castings for the automotive
sector, as well as impregnation resin and
 
impregnation systems for metal parts, for its Global Specialty Business reporting segment for
approximately
1.2
 
million EUR or approximately $
1.4
 
million.
 
This business expands the Company's geographic presence in
Germany as well as broadens its product offerings and
 
service capabilities within its existing impregnation business that was initially
entered into as part of its past acquisition of Norman Hay.
 
Also in in January 2022, the Company acquired a business that provides
pickling inhibitor technologies for the steel industry,
 
drawing lubricants and stamping oil for metalworking, and various other
lubrication, rust preventative, and cleaner applications, for its Americas reportable
 
segment for approximately $
8.0
 
million.
 
This
business broadens the Company’s
 
product offerings within its existing metals and metalworking business
 
in the Americas region.
 
The results of operations of these two January 2022 acquisitions are not included
 
in the Consolidated Statements of Income
because the date of closing for each was subsequent to December 31, 2021.
 
Preliminary purchase price allocation of assets acquired
and liabilities assumed have not been presented as that information is not
 
available as of the date of these Consolidated Financial
Statements.
Houghton
In August 2019, the Company completed the Combination, whereby
 
the Company acquired all of the issued and outstanding
shares of Houghton from Gulf Houghton Lubricants, Ltd. and certain
 
other selling shareholders in exchange for a combination of cash
and shares of the Company’s common
 
stock in accordance with the Share Purchase Agreement dated April 4,
 
2017.
Commencing August 1, 2019, the Company’s
 
Consolidated Statements of Income included the results of Houghton.
 
Net sales of
Houghton subsequent to closing of the Combination and included in the Company’s
 
Consolidated Statements of Income for the year
ended December 31, 2019 were $
299.8
 
million.
 
The following unaudited pro forma consolidated financial information
 
has been
prepared as if the Combination had taken place on January 1, 2018.
 
The unaudited pro forma results include certain adjustments to
each company’s historical
 
actual results, including: (i) additional depreciation and amortization expense based
 
on the initial estimates
of fair value step up and estimated useful lives of depreciable fixed
 
assets, definite-lived intangible assets and investment in associated
companies acquired; (ii) adoption of required accounting
 
guidance and alignment of related accounting policies, (iii) elimination
 
of
transactions between Legacy Quaker and Houghton; (iv) elimination
 
of results associated with the divested product lines; (v)
adjustment to interest expense, net, to reflect the impact of the financing
 
and capital structure of the combined Company; and (vi)
adjustment for certain Combination,
 
integration and other acquisition-related costs to reflect such costs as if they were
 
incurred in the
period immediately following the pro-forma closing of the
 
Combination on January 1, 2018.
 
The adjustments described in (vi)
include an expense recorded in costs of goods sold (“COGS”) associated with selling
 
inventory acquired in the Combination which
was adjusted to fair value as part of purchase accounting, restructuring expense incurred
 
associated with the Company’s global
restructuring program initiated post-closing of the Combination
 
and certain other integration costs incurred post-closing included in
combination and other acquisition-related expenses.
 
These costs have been presented in the unaudited pro forma table below
 
as these
 
 
costs on a pro forma basis were incurred during the year ended December 31,
 
2018.
 
Unaudited pro forma results are not necessarily
indicative of the results that would have occurred if the acquisition had occurred
 
on the date indicated, or that may result in the future
for various reasons, including the potential impact of revenue and cost
 
synergies on the business.
For the
 
year ending
Unaudited Pro Forma
 
 
December 31,
(as if the Combination occurred on January 1,
 
2018)
2019
Net sales
$
1,562,427
Net income attributable to Quaker Chemical Corporation
94,537
Combination,
 
integration and other acquisition-related expenses have been and are expected to
 
continue to be significant.
 
The
Company incurred total costs of $
18.6
 
million, $
30.3
 
million and $
38.0
 
million for the years ended December 31, 2021, 2020 and
2019, respectively, related
 
to the Combination,
 
integration and other acquisition-related activities.
 
These costs included certain legal,
financial and other advisory and consultant costs incurred in connection with
 
post-closing integration activities including internal
control readiness and remediation,
 
as well as due diligence, regulatory approvals and closing the Combination.
 
These costs also
included
 
interest costs to maintain the bank commitment (“ticking fees”) for the Combination
 
during the year ended December 31,
2019,
 
accelerated depreciation charges during the years ended December
 
31, 2021, 2020 and 2019, a gain on the sale of a held-for-sale
real property during the year ended December 31, 2021, a loss on the sale of a held-for-sale
 
asset during the year ended December 31,
2020, and recorded income related to indemnification rights during the
 
years ended December 31, 2021 and 2020.
 
As of December
31, 2021 and 2020, the Company had current liabilities related to the Combination
 
and other acquisition-related activities of $
5.5
million and $
7.5
 
million, respectively, primarily
 
recorded within other accrued liabilities on its Consolidated Balance Sheets.
Other Previous Acquisitions
In December 2020, the Company completed its acquisition of Coral Chemical
 
Company (“Coral”), a privately held, U.S.-based
provider of metal finishing fluid solutions.
 
The acquisition provides technical expertise and product solutions for pre-treatment,
metalworking and wastewater treatment applications to the beverage
 
cans and general industrial end markets.
 
The acquired Coral
assets and liabilities were assigned to the Americas and Global Specialty Businesses reportable
 
segments.
 
The original purchase price
was approximately $
54.1
 
million, subject to routine and customary post-closing adjustments related to working
 
capital and net
indebtedness levels.
The following table presents the final estimated fair values of Coral net assets acquired:
Measurement
December 22,
December 22,
Period
2020
2020 (1)
Adjustments
(as adjusted)
Cash and cash equivalents
$
958
$
-
$
958
Accounts receivable
8,473
-
8,473
Inventories
4,527
-
4,527
Prepaid expenses and other assets
181
-
181
Property, plant and equipment
10,467
652
11,119
Intangible assets
30,300
(500)
29,800
Goodwill
2,814
804
3,618
Total assets purchased
57,720
956
58,676
Long-term debt including current portions and finance leases
183
556
739
Accounts payable, accrued expenses and other accrued liabilities
3,482
-
3,482
Total liabilities assumed
3,665
556
4,221
Total consideration
 
paid for Coral
54,055
400
54,455
Less: estimated purchase price settlement
-
400
400
Less: cash acquired
958
-
958
Net cash paid for Coral
$
53,097
$
-
$
53,097
(1)
 
As previously disclosed in the Company’s
 
2020 Form 10-K.
Measurement period adjustments recorded during the year ended December
 
31, 2021 include certain adjustments related to
refining original estimates for assets and liabilities for certain acquired finance
 
leases, as well as an adjustment to reflect the expected
settlement of post-closing working capital and net indebtedness true ups to the initial
 
purchase price.
 
The Company continues to work
with the seller to finalize certain post-closing adjustments and the above
 
table includes the Company’s best estimate
 
as of December
31, 2021.
 
As of December 31, 2021, the allocation of the purchase price for Coral has been finalized
 
and the
one year
 
measurement
period has ended.
In May 2020, the Company acquired Tel
 
Nordic ApS (“TEL”), a company that specializes in lubricants and engineering primaril
 
y
in high pressure aluminum die casting for its EMEA reportable segment.
 
Consideration paid was in the form of a convertible
promissory note in the amount of
20.0
 
million DKK, or approximately $
2.9
 
million, which was subsequently converted into shares of
the Company’s common stock.
 
An adjustment to the purchase price of approximately
0.4
 
million DKK, or less than $
0.1
 
million, was
made as a result of finalizing a post-closing settlement in the second
 
quarter of 2020.
 
The Company allocated approximately $
2.4
million of the purchase price to intangible assets to be amortized over
17 years
.
 
In addition, the Company recorded approximately
$
0.5
 
million of goodwill, related to expected value not allocated to other acquired
 
assets, none of which will be tax deductible.
 
As of
December 31, 2021, the allocation of the purchase price of TEL was finalized
 
and the one year measurement period ended.
 
In March 2020, the Company acquired the remaining
49
% ownership interest in one of its South African affiliates, Quaker
Chemical South Africa Limited (“QSA”) for
16.7
 
million ZAR, or approximately $
1.0
 
million, from its joint venture partner PQ
Holdings South Africa.
 
QSA is a part of the Company’s EMEA reportable
 
segment.
 
As this acquisition was a change in an existing
controlling ownership, the Company recorded $
0.7
 
million of excess purchase price over the carrying value of the noncontrolling
interest in Capital in excess of par value.
In October 2019, the Company completed its acquisition of the operating
 
divisions of Norman Hay plc (“Norman Hay”), a private
U.K. company that provides specialty chemicals, operating equipment, and
 
services to industrial end markets.
 
The original purchase
price was
80.0
 
million GBP,
 
on a cash-free and debt-free basis, subject to routine and customary
 
post-closing adjustments related to
working capital and net indebtedness levels.
 
The Company finalized its post-closing adjustments for the
 
Norman Hay acquisition and
paid approximately
2.5
 
million GBP during the first quarter of 2020 to settle such adjustments.