What changed in this filing

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Item 1. Financial Statements

2020-08-04 compared with 2020-05-07 · 260 added, 147 removed, 590 unchanged (41% of the section changed)

1 unchanged sentence

Consolidated Statements of Operations of Orion Engineered Carbons S.A.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands, except per share amounts)

6 unchanged sentences

Restructuring expenses — 1,034 — 1,123

Income from operations 37,543 34,699

Income/(loss) from operations ( 12,879 ) 41,470 24,664 76,169

Interest and other financial expense, net 8,277 7,566 17,888 14,009

Reclassification of actuarial losses from AOCI 2,654 — 5,052 —

Income from operations before income taxes and equity in earnings of affiliated companies 25,534 28,256

Income tax expense 7,635 9,439

Income/(loss) from operations before income taxes and equity in earnings of affiliated companies ( 23,810 ) 33,904 1,724 62,160

Income tax expense/(benefit) ( 5,879 ) 9,309 1,756 18,748

Equity in earnings of affiliated companies, net of tax 151 153 285 290

Net income $ 18,032 $ 18,954

Net income/(loss) $ ( 17,780 ) $ 24,748 $ 253 $ 43,702

Weighted-average shares outstanding (in thousands of shares):

1 unchanged sentence

Diluted 61,263 61,125 61,307 61,119

Earnings per share:

Earnings/(loss) per share:

Basic $ ( 0.30 ) $ 0.41 $ — $ 0.73

3 unchanged sentences

Consolidated Statements of Comprehensive Income of Orion Engineered Carbons S.A.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

Net income $ 18,032 $ 18,954

Other comprehensive loss, net of tax

Net income/(loss) $ ( 17,780 ) $ 24,748 $ 253 $ 43,702

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments 631 ( 4,844 ) ( 23,440 ) ( 3,381 )

Unrealized net gains/(losses) on hedges of a net investment in a foreign operation ( 31 ) — 5 —

Unrealized net gains/(losses) on cash flow hedges ( 656 ) ( 2,225 )

Unrealized net losses on cash flow hedges ( 1,609 ) ( 4,375 ) ( 2,265 ) ( 6,600 )

Gains/(losses) on defined benefit plans 1,595 ( 36 ) 3,442 17

Other comprehensive loss ( 22,844 ) ( 709 )

Comprehensive income $ ( 4,811 ) $ 18,245

Other comprehensive income (loss) 585 ( 9,255 ) ( 22,259 ) ( 9,964 )

Comprehensive income/(loss) $ ( 17,195 ) $ 15,493 $ ( 22,006 ) $ 33,738

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

Consolidated Balance Sheets of Orion Engineered Carbons S.A.

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

(In thousands, except share amounts)

4 unchanged sentences

Other current financial assets 9,434 11,347

Inventories 168,481 164,799

Inventories, net 135,310 164,799

Income tax receivables 11,710 17,924

23 unchanged sentences

Other liabilities 41,583 40,701

Commitments and contingencies Note M

Commitments and contingencies Note N

Total non-current liabilities 787,333 786,171

13 unchanged sentences

Consolidated Statements of Cash Flows of Orion Engineered Carbons S.A.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

Cash flows from operating activities:

Net income $ 18,032 $ 18,954

Adjustments to reconcile net income to net cash provided by operating activities:

Net income/(loss) $ ( 17,780 ) $ 24,748 $ 253 $ 43,702

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

Depreciation of property, plant and equipment and amortization of intangible assets 21,876 25,404 45,722 49,499

17 unchanged sentences

Cash flows from financing activities:

Payments for debt issue costs $ — $ ( 1,721 ) $ — $ ( 1,721 )

Repayments of long-term debt ( 2,015 ) ( 2,029 ) ( 4,022 ) ( 4,047 )

3 unchanged sentences

Taxes paid for shares issued under net settlement feature — ( 6,475 ) ( 1,202 ) ( 6,475 )

Net cash used in financing activities $ 94,560 $ 337

Net cash provided by/(used in) financing activities $ ( 12,836 ) $ ( 17,171 ) $ 81,723 $ ( 16,834 )

Increase/(decrease) in cash, cash equivalents and restricted cash $ 34,323 $ ( 7,583 ) $ 82,937 $ ( 3,562 )

19 unchanged sentences

Balance at March 31, 2020 60,487,117 $ 85,323 $ ( 8,515 ) $ 62,930 $ 84,283 $ ( 57,206 ) $ 166,815

Net loss — — — — ( 17,780 ) — ( 17,780 )

Other comprehensive income, net of tax — — — — — 585 585

Share based compensation — — — 1,199 — — 1,199

Balance at June 30, 2020 60,487,117 $ 85,323 $ ( 8,515 ) $ 64,128 $ 66,504 $ ( 56,621 ) $ 150,819

(In thousands, except per share amounts) Number of common shares Amount Treasury shares Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total equity

5 unchanged sentences

Balance at March 31, 2019 59,518,498 $ 84,254 $ ( 8,683 ) $ 67,097 $ 46,459 $ ( 20,337 ) $ 168,790

Net income — — — — 24,748 — 24,748

Other comprehensive loss, net of tax — — — — — ( 9,255 ) ( 9,255 )

Dividends paid - $ 0.20 per share — — — — ( 12,042 ) — ( 12,042 )

Share based compensation — — — ( 5,737 ) — — ( 5,737 )

Issuance of stock under equity compensation plans 693,710 778 — 43 — — 821

Balance at June 30, 2019 60,212,208 $ 85,032 $ ( 8,683 ) $ 61,403 $ 59,165 $ ( 29,592 ) $ 167,325

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

17 unchanged sentences

Structure and specific surface area are the key factors in optimizing reinforcement properties in rubber polymers.

As at March 31, 2020, the Company operates 13 wholly owned production facilities in Europe, North and South America, Asia and South Africa and three sales companies and another nine holding companies and six service companies, as well as two former operating entities in Portugal and France (currently in dissolution).

As of June 30, 2020, the Company operates 13 wholly owned production facilities in Europe, North and South America, Asia and South Africa and three sales companies and another nine holding companies and six service companies, as well as two former operating entities in Portugal and France (currently in dissolution).

Additionally, the Company operates a joint venture with one production facility in Germany.

3 unchanged sentences

Risks and Uncertainties

We are subject to risks and uncertainties as a result of the current outbreak of a novel strain of coronavirus (COVID-19).

The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict.

Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession.

Such economic disruption could have a material adverse effect on our business.

Policymakers around the globe have responded with fiscal policy actions to support the chemical industry and economy as a whole.

The magnitude and overall effectiveness of these actions remains uncertain.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers and suppliers, all of which are uncertain and cannot be predicted.

Our global operations expose us to risks associated with public health crises and outbreaks of epidemic, pandemic, or contagious diseases, such as the current outbreak of a novel strain of coronavirus (COVID-19).

The COVID-19 pandemic has negatively impacted the global economy and created significant volatility and disruption of financial markets.

We have experienced significant and unpredictable reductions in the demand for our products as a result of the COVID-19 pandemic and further economic uncertainty may cause additional delays, cancellation, or redirections of planned orders.

Policymakers around the globe have responded with fiscal and economic policy actions to support the economy.

The ultimate magnitude and overall effectiveness of these actions remains uncertain.

The ultimate severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers and suppliers, all of which are uncertain and cannot be predicted.

The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions, lower demand for our products, commodity price volatility, heightened price sensitivity among customers, higher competitive intensity, inventory revaluations, and the impact of any initiatives or programs that the Company may undertake to address financial and operations challenges faced by its customers.

As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

As of the date of issuance of these condensed consolidated financial statements, the ultimate extent to which the COVID-19 pandemic will impact the Company's financial condition, liquidity, or results of operations remains uncertain.

Summary of Significant Accounting Policies

12 unchanged sentences

If the entity identified more than one separate performance obligation under step 2, it has to account for this contract as a multiple element arrangement resulting in an allocation of revenues to the obligations identified.

If these conditions are satisfied, revenue from the sale of goods is recognized when control have been transferred to the buyer, either at a point in time, or over time.

If these conditions are satisfied, revenue from the sale of goods is recognized when control has been transferred to the buyer, either at a point in time, or over time.

The Company derives a substantial majority of revenues from selling carbon black to industrial customers for further processing.

66 unchanged sentences

Entities will apply the amendments retrospectively.

The Company adopted ASU No 2018-14 as of January 1, 2020 The adoption of this guidance will not have a significant impact on the Company's financial statements.

The Company adopted ASU No 2018-14 as of January 1, 2020 The adoption of this guidance did not have a significant impact on the Company's financial statements.

Principles of consolidation

3 unchanged sentences

Orion re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of these three elements of control.

Orion consolidated financial statements are prepared in accordance with uniform accounting policies.

The Company’s consolidated financial statements are prepared in accordance with uniform accounting policies.

Income and expenses, intercompany profits and losses, and receivables and liabilities between consolidated subsidiaries are eliminated.

5 unchanged sentences

Foreign currency transactions are measured at the exchange rate at the date of initial recognition.

Any gains or losses resulting from the valuation of foreign currency monetary assets and liabilities using the currency exchange rates as at the reporting date are recognized in other expenses, net.

Any gains or losses resulting from the valuation of foreign currency monetary assets and liabilities using the currency exchange rates as of the reporting date are recognized in other expenses, net.

Currency exchange differences relating to financing activities are recognized in interest and other financial income and interest and other financial expense.

The assets and liabilities of foreign operations with functional currencies different from the presentation currency U.S.

dollars are translated using closing rates as at the reporting date.

dollars are translated using closing rates as of the reporting date.

Income and expense items are translated at average monthly exchange rates for the respective period.

21 unchanged sentences

The vast majority of Orion’s lease contracts are concerning operational items such as rail cars, company cars, offices and office equipment.

The recorded right-of-use assets as of March 31, 2020 amounted to $ 29.7 million, and the corresponding lease liabilities amounted to $ 31.3 million, of which $ 8.6 million were recorded within other current liabilities and $ 22.7 million as other liabilities.

The recorded right-of-use assets as of June 30, 2020 amounted to $ 28.9 million, and the corresponding lease liabilities amounted to $ 30.3 million, of which $ 7.2 million were recorded within other current liabilities and $ 23.2 million as other liabilities.

The weighted remaining average minimum lease period is 2.5 years.

The undiscounted minimum lease payments are due in and reconcile to the discounted lease liabilities as follows:

March 31, 2020

June 30, 2020

(In thousands)

9 unchanged sentences

The weighted average discount rate applied to the lease liabilities is 5.97 %.

Finance lease costs were immaterial for the three months ended March 31, 2020.

Operating lease costs amounted in total to $ 3.2 million for the three months ended March 31, 2020 and were recorded as operating expenses under cost of sales, selling, general and administrative expenses and under research and development cost.

Cash paid for amounts included in the measurement of lease liabilities from operating leases was $ 2.2 million for March 31, 2020 and $ 2.7 million for the three months ended March 31, 2019 and was immaterial for finance leases during the same periods.

Finance lease costs were immaterial for the three and six months ended June 30, 2020 and June 30, 2019, respectively.

Operating lease costs for the three and six months ended June 30, 2020 amounted in total to $ 2.4 million and to $ 5.5 million, respectively, and were recorded as operating expenses under cost of sales, selling, general and administrative expenses and under research and development cost.

The operating lease costs for the three and six months ended June 30, 2019 recorded as operating expenses amounted in total to $ 2.7 million and $ 5.3 million, respectively, and were recorded under cost of sales, selling, general and administrative expenses and under research and development cost.

Cash paid for amounts included in the measurement of lease liabilities from operating leases was $ 2.1 million and $ 2.6 million for the three months June 30, 2020 and 2019, respectively, and $ 4.4 million and $ 5.2 million for the six months ended June 30, 2020 and 2019, respectively.

Cash paid for finance leases was immaterial during the same periods.

In addition to the above, we entered into a forward-starting lease agreement in October 2016, for a district heating facility in Cologne, Germany, where we plan to operate the equipment to generate the required heat energy.

The lessor, the public utility of our neighbor city and its agents, is currently constructing the facilities at our location, with the lease scheduled to commence by the end of 2020 after construction is completed.

The lease agreement will have a total of approximately $ 35 million in undiscounted future lease payments over a 20 -year term.

In May 2020, after a building permit was obtained by the lessor, we entered into a forward-starting lease agreement for a new warehouse at our facility in Cologne, Germany.

The lessor, a logistics and distribution service provider, is currently constructing the warehouse at our location, with the lease scheduled to commence by the end of 2020 after construction is completed.

The lease agreement will have a total of approximately $ 6 million in undiscounted future lease payments over the 10 -year term of the lease.

Inventories, net of obsolete, unmarketable and slow-moving reserves are as follows:

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

(In thousands)

5 unchanged sentences

In this review, Orion makes assumptions about the future demand for and the future market value of the inventory and, based on these assumptions, estimates the amount of obsolete, unmarketable or slow-moving inventory.

The balance of the reserve for obsolete, unmarketable and slow moving inventories amounted to $ 6.7 million as of December 31, 2019.

The additions, net to the reserve during the quarter ended March 31, 2020 amounted to $ 3.4 million (prior year:

$ 0.1 million), of which $ 2.9 million were related to adjust inventories to net realizable value (prior year:

The balance of the reserve as of March 31, 2020 increased therefore to $ 10.0 million.

The adjustment to net realizable values was recorded on raw materials, consumables and supplies and on finished goods.

Accounts Receivable

The company had the following accounts receivable as of June 30, 2020 and December 31, 2019:

June 30, 2020 December 31, 2019

(In thousands)

Accounts receivable $ 151,684 $ 219,197

Expected credit losses ( 6,379 ) ( 6,632 )

Accounts receivable, net of expected credit losses $ 145,305 $ 212,565

The expected credit losses developed as follows in the periods indicated:

Fiscal Year 2020 Fiscal Year 2019

(In thousands)

Allowance for credit losses as of January 1, $ ( 6,632 ) $ ( 5,081 )

Credit loss expense ( 1,929 ) ( 1,633 )

Credit loss income and utilization 1,989 601

Foreign currency translation effects 193 519

Allowance for credit losses as of June 30, $ ( 6,379 ) $ ( 5,594 )

Debt and Other Obligations

The company had the following debt arrangements in place as of March 31, 2020 and December 31, 2019:

March 31, 2020 December 31, 2019

The company had the following debt arrangements in place as of June 30, 2020 and December 31, 2019:

June 30, 2020 December 31, 2019

(In thousands)

12 unchanged sentences

On July 25, 2014, Orion entered into a refinancing of its indebtedness.

The initial term loan credit facility in USD of $ 895.0 million was allocated to a term loan facility denominated in USD of $ 358.0 million and a term loan facility denominated in Euro of € 399.0 million with both having an original maturity date of July 25, 2021 (the “Term Loans”).

The initial term loan credit facility in U.S.

Dollars of $ 895.0 million was allocated to a term loan facility denominated in U.S.

Dollars of $ 358.0 million and a term loan facility denominated in Euros of € 399.0 million with both having an original maturity date of July 25, 2021 (the “Term Loans”).

Initial interest was calculated based on three-month EURIBOR (for the Euro denominated loan), or three-month USD-LIBOR (for the USD denominated loan) plus a 3.75 % - 4.00 % margin depending on leverage ratio.

3 unchanged sentences

In the years 2015 to 2017 Orion executed several voluntary repayments totaling € 56.0 million and $ 58.0 million.

After several amendments to the credit agreement Orion repriced its EUR- and USD-denominated outstanding term loans during the years 2016 to 2018 and achieved a significant reduction of both interest margins to currently 2.00 % for the USD term loan and 2.25 % for the Euro term loan.

The margin is no longer linked to Orion's net leverage ratio.

In addition the EURIBOR and USD-LIBOR floors were reduced to 0.00 %.

Moreover the durations of both term loans were extended by another three years resulting in a new maturity date of July 25, 2024 (previously July 25, 2021).

Other provisions of this credit agreement remained unchanged.

After several amendments to the Credit Agreement, dated as of July 25, 2014, among the Company, Orion Engineered Carbons Holdings GmbH, Orion Engineered Carbons Bondco GmbH, Orion Engineered Carbons GmbH, OEC Finance US LLC, the revolving borrowers named therein, the guarantors named on the signature page thereto, the lenders named therein, and Goldman Sachs Bank USA as administrative agent, as amended (the Credit Agreement”), Orion repriced the Term Loans during the years 2016 to 2018, achieving a

significant reduction of both interest margins to currently 2.00 % for the U.S.

Dollar term loan and 2.25 % for the Euro term loan.

In addition, the interest margin is no longer linked to Orion's net leverage ratio and the EURIBOR and USD-LIBOR floors were reduced to 0.00 %.

Moreover the durations of both term loans were extended by another three years to July 25, 2024.

Other provisions of the Credit Agreement relating to the Term Loans remained unchanged.

Transaction costs incurred directly in connection with the incurrence of the Euro and U.S.

2 unchanged sentences

In connection with the repricing described above further transaction costs of $ 0.7 million in 2018 and $ 3.5 million equivalent in 2017 and $ 2.1 million equivalent in 2016 were incurred and directly expensed.

In 2020, an amount of $ 0.3 million equivalent related to capitalized transaction costs was amortized and recognized as finance costs in this regard (prior year:

$ 0.3 million equivalent).

On May 11, 2018, Orion entered into a $ 235.0 million cross currency swap to synthetically convert its US dollar liabilities into EUR to mitigate foreign currency risk.

This swap transaction impacts both principal and interest payments associated with debt service and results in a further annual interest payments savings of approximately $ 4.7 million.

For the three and six months ended June 30, 2020, an amount of $ 0.3 million and $ 0.7 million equivalent, respectively, related to capitalized transaction costs was amortized and recognized as finance costs in this regard (prior year:

$ 0.4 million and $ 0.7 million equivalent, respectively).

On May 11, 2018, Orion entered into a $ 235.0 million cross currency swap to synthetically convert its U.S.

Dollar liabilities into Euros to mitigate foreign currency risk.

This swap transaction impacted both principal and interest payments associated with debt service and resulted in annual interest savings of approximately $ 4.7 million.

The swap became effective on May 15, 2018 and will expire on July 25, 2024, in line with maturity of the term loan.

A portion of the USD-denominated term loan was designated as a hedge of the net investment in a foreign operation to reduce the Company's foreign currency exposure.

Since January 1, 2015 the Company had designated $ 180.0 million of the total USD-denominated term loan held by a Germany based subsidiary as the hedging instrument to hedge the change in net assets of a US subsidiary, which is held by a Germany based subsidiary, to manage foreign currency risk.

Due to the new hedging approach utilizing cross currency swap as described above, hedge accounting for the net investment hedge was discontinued on May 15, 2018.

A portion of the U.S.

Dollar-denominated term loan was designated as a hedge of the net investment in a foreign operation to reduce the Company's foreign currency exposure.

Since January 1, 2015 the Company had designated $ 180.0 million of the total U.S.

Dollar-denominated term loan held by a Germany based subsidiary as the hedging instrument to hedge the change in net assets of a US subsidiary, which is held by a Germany based subsidiary, to manage foreign currency risk.

Due to the new hedging approach utilizing cross currency swap as described above, hedge accounting for the net investment hedge was discontinued in May, 2018.

An unrealized loss of $ 2.2 million remains within other comprehensive income until it is recycled through profit and loss upon divestment of the hedged item.

The carrying value as at March 31, 2020 includes the nominal amount of the Term Loans plus accrued unpaid interest less deferred debt issuance costs - term loan of $ 5.7 million (December 31, 2019:

The carrying value of the Term Loans as of June 30, 2020 includes their nominal amounts plus accrued unpaid interest less deferred debt issuance costs of $ 5.4 million (December 31, 2019:

$ 6.1 million).

(b) Revolving credit facility

To generally safeguard the Company’s liquidity, the Company has entered into a revolving credit facility (“RCF”).

As part of the July 25, 2014 refinancing the then-existing revolving facility was replaced by a € 115.0 million multicurrency revolving credit facility with an original maturity date July 25, 2019.

To fund operating activities and generally safeguard the Company’s liquidity, the Company has entered into a revolving credit facility (“RCF”).

As part of the July 25, 2014 refinancing the then-existing revolving facility was replaced by a € 115.0 million multicurrency RCF with an original maturity date July 25, 2019.

Interest is calculated based on EURIBOR (for EUR drawings), and USD-LIBOR (for USD drawings) plus 2.5 % - 3.0 % margin (depending on leverage ratio).

The RCF was not drawn on the respective reporting dates while certain local ancillary facilities reduced the available commitment.

Transaction costs in the amount of $ 3.3 million originally incurred in connection with the RCF are also recorded as deferred expenses and are amortized as finance costs on a straight-line basis over the term of the facility (until July 25, 2019).

An amendment to the Credit Agreement entered into on May 5, 2017 (i) reduced the commitment fee paid on the unused commitments from 40 % of the Applicable Rate (as defined in the Credit Agreement) to 35 % of the Applicable Rate, (ii) extended the maturity date for the revolving credit facility to April 25, 2021 and (iii) increased the aggregate amount of revolving credit commitments to € 175.0 million.

Transaction costs in the amount of $ 3.3 million originally incurred in connection with the RCF were recorded as deferred expenses and amortized as finance costs on a straight-line basis over the term of the facility (until July 25, 2019).

An amendment to the Credit Agreement entered into on May 5, 2017 (i) reduced the commitment fee paid on the unused commitments from 40 % of the Applicable Rate (as defined in the Credit Agreement) to 35 % of the Applicable Rate, (ii) extended the maturity date for the RCF to April 25, 2021 and (iii) increased the aggregate amount of revolving credit commitments to € 175.0 million.

All other terms of the Credit Agreement remained unchanged.

Additional Transaction costs in conjunction with the RCF in the amount of $ 2.3 million incurred in connection with the 2017 amendment to the Credit Agreement are also recorded as deferred expenses and are amortized as finance costs on a straight-line basis over the term of the facility (until April 25, 2021).

Transaction costs in conjunction with the RCF of $ 2.3 million related to the 2017 amendment to the Credit Agreement are recorded as deferred expenses and amortized as finance costs on a straight-line basis over the term of the facility (until April 25, 2021).

On April 2, 2019, the Company entered into the eighth amendment (the “Eighth Amendment”) to the Credit Agreement, among the Company and certain of its subsidiaries, as Borrowers or Guarantors, the Lenders from time to time party thereto and Goldman Sachs Bank US, as administrative agent for the Lenders.

The Amendment relates to the revolving credit facility (“RCF”) provided by the Credit Agreement.

The Eighth Amendment became effective on April 10, 2019.

The Eighth Amendment related to the RCF provided by the Credit Agreement and became effective on April 10, 2019.

The Eighth Amendment:

(i) extended the maturity date for the RCF by three years to April 25, 2024,

(ii) increased the aggregate amount of revolving credit commitments in Euro by € 75.0 million to EUR € 250.0 million, and

(ii) increased the aggregate amount of revolving credit commitments in Euro by € 75.0 million to € 250.0 million, and

(iii) reduced revolving credit interest expense by way of a new pricing grid that entitles an initial margin of 0.019 when the Company's leverage ratio is between 2.25 x and 1.75 x (formerly 2.5 % w hen leverage ratio was < 2.30 x);

currently margin is 2.15 % as the Company’s leverage ratio is between 2.75 x and 2.25 x.

All other terms of the Credit Agreement remain substantially unchanged, including the commitment fee, which remains at 35 % of applicable margin.

During the first quarter of 2020, transaction costs of $ 0.2 million were amortized compared to $ 0.2 million in the first quarter of 2019.

Unamortized transaction costs that were incurred in conjunction with the RCF in July 2014, the Amendment on May 30, 2017 and the Amendment on April 2, 2019, amount to $ 3.2 million as of March 31, 2020.

Unamortized transaction costs as at December 31, 2019 amount to $ 3.4 million and were incurred in conjunction with the RCF in July 2014 and the Amendment on May 30, 2017.

during the second quarter of 2020 the margin was 2.15 % as the Company’s leverage ratio was between 2.75 x and 2.25 x.

As of June 30, 2020 the leverage ratio increased to levels greater than 2.75 x which will lead to an increase of the margin by another 25 bps to 2.40 % effective after provision of the quarterly compliance certificate to the administrative agent under the Credit Agreement.

All other terms of the Credit Agreement relating to the RCF remained substantially unchanged, including the commitment fee, which remains at 35 % of applicable margin.

As of June 30, 2020, $ 44.8 million was drawn under the RCF while $ 44.9 million in

borrowings under ancillary facilities further reduced the overall amount available under the RCF.

For further details see Note F.

Orion has established additional local ancillary credit facilities for OEC GmbH and OEC LLC by using overall RCF commitments.

As of March 31, 2020, the OEC GmbH facilities had $ 67.2 million (as of December 31, 2019:

$ 26.4 million) outstanding and the OEC LLC facilities had $ 27.2 million (prior year:

During the three and six months ended June 30, 2020, transaction costs of $ 0.2 million and $ 0.3 million, respectively, were amortized (prior year:

$ 0.2 million and $ 0.4 million, respectively).

Unamortized transaction costs that were incurred in conjunction with the RCF in July 2014, the amendment on May 30, 2017 and the amendment on April 2, 2019, amount to $ 3.1 million as of June 30, 2020.

Unamortized transaction costs as of December 31, 2019 amounted to $ 3.4 million and were incurred in conjunction with the RCF in July 2014 and the amendment on May 30, 2017.

Orion has fully drawn its uncommitted local credit lines in Korea of $ 39.5 million (as of December 31, 2019:

zero ) and Brazil amounting to $ 1.1 million (as of December 31, 2019:

Orion has also established ancillary credit facilities by converting the commitments of select lenders under the € 250 million RCF into bilateral credit agreements (usually overdraft facilities).

Borrowings under ancillary lines reduce availability under the RCF but do not count toward debt drawn under the RCF for the purposes of determining whether the financial covenant under the Credit Agreement must be tested.

As of June 30, 2020, the ancillary facilities had $ 44.9 million (as of December 31, 2019:

$ 28.6 million) outstanding.

The general terms of those ancillary credit facilities are linked to those terms in RCF which is in particular applicable to the interest rates applied.

The general terms of these ancillary credit facilities are linked to the terms in the RCF.

During the quarter ended June 30, 2020 the Company established two additional ancillary facilities in an aggregate amount of € 40 million (bringing the number of banks included in the RCF bank group with whom ancillary facilities have been established to six out of the ten banks and amounting to € 170 million).

By establishing such ancillary credit facilities the Company is able to borrow 100 % of its revolver capacity (currently composed of 68 % ancillary credit facilities as of June 30, 2020, with 32 % additional RCF commitments) without violating its sole financial covenant.

Using exchange rates applicable for the quarter ended June 30, 2020, the € 250 million RCF amounted to approximately $ 280 million.

(d) Covenant Compliance

The Credit Agreement maturing April 25, 2024, contains certain non-financial covenants that, among other things, limit the Company’s ability and the ability of certain of its subsidiaries to (i) incur additional debt, (ii) pay dividends, repurchase shares or make certain other restricted payments or investments, (iii) incur liens, (iv) sell assets, (v) to pay dividends or to make other payments to the Company, (vi) enter into affiliate transactions, (vii) engage in sale and leaseback transactions, and (viii) consolidate, merge, sell or otherwise dispose of all or substantially all of the Company’s assets.

These covenants are subject to significant exceptions and qualifications.

In addition, there is one financial covenant under the Credit Agreement, the First Lien Leverage Ratio (“FLLR”), defined as Consolidated First Lien Debt divided by Consolidated Adjusted EBITDA for the trailing twelve months (“TTM”).

The FLLR is not allowed to exceed 5.5 x TTM EBITDA and is tested each quarter RCF utilization exceeds 35 %, as defined in the Credit Agreement (the “Covenant Trigger”).

Notably, not all debt counts toward RCF utilization for purposes of calculating the Covenant Trigger, namely, term debt, debt drawn under ancillary credit facility lines and debt drawn under any uncommitted local lines of credit are excluded.

FLLR, Consolidated First Lien Debt and Consolidated Adjusted EBITDA have the meanings given to them in the Credit Agreement.

Financial Instruments and Fair Value Measurement

9 unchanged sentences

For financial assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.

The following table shows the fair value measurement at March 31, 2020 and December 31, 2019.

The following table shows the fair value measurement at June 30, 2020 and December 31, 2019.

All measurements are based on observable inputs such as interest rates and are classified as Level 2 within the fair value hierarchy:

Fair Value Hierarchy March 31, 2020 December 31, 2019

Fair Value Hierarchy June 30, 2020 December 31, 2019

(In thousands)

12 unchanged sentences

Net periodic defined benefit pension benefit costs include the following:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

4 unchanged sentences

Service costs were recorded within income from operations under selling, general and administrative expenses, interest cost in interest and other financial expense, net.

The actuarial losses associated with the pension obligations recorded in prior years in accumulated other comprehensive income exceeding 10% of the defined benefit obligation are recorded ratably over the current year through profit and loss separately from income from operations and amounted to $ 2.4 million in the three months ended March 31, 2020.

The actuarial losses associated with the pension obligations recorded in prior years in accumulated other comprehensive income exceeding 10 % of the defined benefit obligation are recorded ratably over the current year through profit and loss separately from income from operations and amounted to $ 5.1 million in the six months ended June 30, 2020.

There are also defined contribution pension plans in Germany and the United States for which our Group companies make regular contributions to off-balance sheet pension funds managed by third party insurance companies.

16 unchanged sentences

All PSUs are granted under, and are subject to the terms and conditions of, the Company’s 2014 Omnibus Incentive Compensation Plan (the “Omnibus Plan”).

In its “2019 Plan” the company issued beside PSUs ("2019 Plan PSU") also a tranche of restricted share units (“RSUs”) for its selected employees and officers ("2019 Plan RSU").

RSUs vest by one-third on each of the first, second and third anniversary of the grant date.

In its 2019 Plan, in addition to PSUs, the Company also issued a tranche of restricted share units (“RSUs”) for select employees and officers.

The RSUs vest by one-third on each of the first, second and third anniversary of the grant date.

The RSUs are subject to certain further restrictions after vesting.

4 unchanged sentences

The following table provides detail as to expenses recorded within operating income with respect to stock-based compensation:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

$ — $ — $ — $ 1,083

— ( 94 ) — 1,101

Stock compensation plan for Board of Directors

763 901 ( 479 ) 2,176

Sign on RSU incentive

134 264 268 264

Total expenses

$ 1,199 $ 1,559 $ 60 $ 5,112

Due to lowered expectations for EBITDA and ROCE in the full year 2020 and upcoming year 2021 performance condition of 2018 Plan and 2019 Plan are no longer expected to be met.

Expenses recorded in prior years for 2018 Plan and 2019 Plan were partly reversed for the three months ended March, 31, 2020.

In the following table summarizes the activity of our PSUs within the three months ended March 31, 2020:

Due to lowered expectations for EBITDA and ROCE for the full year 2020 and upcoming year 2021, performance conditions of the 2018 Plan and the 2019 Plan are no longer expected to be met.

As a result, expenses recorded in prior years for the 2018 Plan and the 2019 Plan were partly reversed for the six months ended June 30, 2020.

The following table summarizes the activity of our PSUs for the six months ended June 30, 2020:

Period granted Performance period

2 unchanged sentences

outstanding at

March 31, PSUs expected to vest Weighted average grant date fair value

June 30, PSUs expected to vest Weighted average grant date fair value

2017 2017 - 2019 418,252 — ( 40,087 ) ( 378,165 ) — — — $ 24.89

2 unchanged sentences

Total 2020 1,003,745 — ( 40,087 ) ( 378,165 ) ( 7,447 ) 578,046 279,962

In the following table summarizes the activity of our RSUs within the three months ended March 31, 2020:

The following table summarizes the activity of our RSUs for the six months ended June 30, 2020:

Period granted Vesting period RSUs outstanding January 1, RSUs granted Performance based adjustment RSUs settled RSUs forfeited RSUs

outstanding at

March 31, RSUs expected to vest Weighted average grant date fair value

June 30, RSUs expected to vest Weighted average grant date fair value

Sign-on RSUs:

4 unchanged sentences

Certain members of our Board of Directors receive compensation in form of restricted shares (“RSs”) in accordance with the 2014 Non-employee Director Plan.

Under this plan 24,080 RSs are currently outstanding.

The RSs vested on April 30, 2020, the first anniversary of the grant date.

At March 31, 2020, we had unrecognized compensation cost of $ 5.6 million, based on the target amounts, related to unvested PSUs, RSUs and RSs, which is expected to be recognized over a weighted average period of 1.3 years.

The closing price of the Company's shares and therefore the intrinsic value of one PSU or RSU outstanding was $ 7.46 as of March 31, 2020, $ 18.99 as of March 31, 2019 and $ 27.10 as of March 31, 2018.

Total intrinsic value of PSUs and RSUs amounted to $ 5.8 million as of March 31, 2020, $ 31.0 million as of March 31, 2019.

Under this plan no RSs are currently outstanding.

At June 30, 2020, we had unrecognized compensation cost of $ 4.5 million, based on the target amounts, related to unvested PSUs, RSUs and RSs, which is expected to be recognized over a weighted average period of 1.2 years.

The closing price of the Company's shares and therefore the intrinsic value of one PSU or RSU outstanding was $ 10.59 as of June 30, 2020, $ 21.41 as of June 30, 2019 and $ 30.85 as of June 30, 2018.

Total intrinsic value of PSUs and RSUs amounted to $ 8.2 million and $ 18.5 million as of June 30, 2020 and June 30, 2019, respectively.

The following table lists the inputs to the valuation model used for calculating the grant date fair values under the 2019, 2018 and 2017 Plans:

8 unchanged sentences

Weighted average fair value of PSUs granted $ 24.89 $ 39.24 $ 11.48

In March 2020, 378,165 PSUs (including a performance adjustment reduction of 40,087 PSUs) were settled for the 2017 Plan.

In March 2020, 378,165 PSUs (after a performance adjustment reduction of 40,087 PSUs) were settled for the 2017 Plan.

In April 2019, 977,106 PSUs (including performance adjustment of 299,499 PSUs) were settled for the 2016 Plan.

5 unchanged sentences

Stock-based compensation expense is comprised of the following line items:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

Cost of sales

$ 62 $ ( 1 ) $ 92 $ 11

Selling expenses

142 122 ( 29 ) 859

General and administrative expenses

1 unchanged sentence

Research and development costs

78 52 ( 9 ) 258

Stock-based compensation expense

$ 1,199 $ 1,559 $ 60 $ 5,112

The assumption for estimating expected forfeitures is based on previous experience and based on 3 % leavers rate per year.

The assumption for estimating expected forfeitures is based on previous experience and based on a 3 % leavers rate per year.

Actual forfeitures are recorded as they occur.

For the three months ended March, 31, 2020 expenses recorded in prior years for 2018 and 2019 Plan were partly reversed as the performance condition for the EBITDA and ROCE metrics are no longer expected to be met.

For the six months ended June 30, 2020 expenses recorded in prior years for 2018 and 2019 Plan were partly reversed as the performance condition for the EBITDA and ROCE metrics are no longer expected to be met.

Restructuring Expenses

Details of restructuring activities and the related reserves for March 31, 2020 were as follows:

Details of restructuring activities and the related reserves for June 30, 2020 were as follows:

expenses Demolition and

8 unchanged sentences

Provision at March 31, 2020 $ 2,805 $ 147 $ 221 $ 48 $ 3,221

Orion's reserves for restructuring are reflected in accrued liabilities on the Consolidated Balance Sheets.

The expenses relate to the Company’s effort to restructure its Rubber segment with a cessation of production at the Company’s French subsidiary and production site by the end of 2016 followed by restructuring of the South Korean footprint in the second quarter of 2018 resulting in cessation of production at the Bupyeong plant and the sale of the land to a third party.

In the period ending March 31, 2020 no restructuring expenses, net were recognized compared to restructuring expense, net of $ 0.1 million in the prior year period ending March 31, 2019 .

Charges — — — — —

Cost charged against liabilities (assets) — — — — —

Cash paid ( 486 ) ( 74 ) ( 148 ) — ( 708 )

Foreign currency translation adjustment 53 2 2 1 59

Provision at June 30, 2020 $ 2,373 $ 75 $ 75 $ 49 $ 2,572

Orion's reserves for restructuring are reflected in accrued liabilities on the Consolidated Balance Sheets while the expenses related to the Company’s effort to restructure its Rubber segment in particular in the years 2016 and 2018 .

Accumulated Other Comprehensive Income/(Loss)

Comprehensive income (loss) combines net income (loss) and other comprehensive income items, which are reported as components of stockholders’ equity in the accompanying Consolidated Balance Sheets.

Changes in each component of AOCI, net of tax, are as follows for the three months ended March 31, 2020 and 2019.

Changes in each component of AOCI, net of tax, are as follows for the three months ended June 30, 2020 and 2019.

Currency Translation Adjustments Hedging Activities Adjustments Pension and Other Postretirement Benefit Liability Adjustment Total

1 unchanged sentence

Balance at January 1, 2020 $ ( 12,281 ) $ ( 10,891 ) $ ( 11,189 ) $ ( 34,362 )

Other comprehensive income (loss) before reclassifications ( 22,735 ) ( 1,241 ) — ( 23,976 )

Other comprehensive loss before reclassifications ( 22,735 ) ( 1,241 ) — ( 23,976 )

Income tax effects before reclassifications ( 1,336 ) 426 — ( 910 )

3 unchanged sentences

Balance at March 31, 2020 ( 36,353 ) ( 11,511 ) ( 9,342 ) ( 57,206 )

Other comprehensive income/(loss) before reclassifications 800 ( 2,224 ) — ( 1,424 )

Income tax effects before reclassifications ( 169 ) 708 — 539

Amounts reclassified from AOCI — — 2,654 2,654

Income tax effects on reclassifications — — ( 904 ) ( 904 )

Currency translation AOCI — ( 125 ) ( 155 ) ( 280 )

Balance at June 30, 2020 $ ( 35,722 ) $ ( 13,152 ) $ ( 7,747 ) $ ( 56,621 )

Currency Translation Adjustments Hedging Activities Adjustments Pension and Other Postretirement Benefit Liability Adjustment Total

3 unchanged sentences

Income tax effects before reclassifications ( 69 ) 1,462 — 1,393

Amounts reclassified from AOCI — — — —

Income tax effects on reclassifications — — — —

Currency translation AOCI — 80 53 133

Balance at March 31, 2019 ( 9,187 ) ( 8,372 ) ( 2,778 ) ( 20,337 )

The amounts reclassified out of AOCI and into the Consolidated Statement of Operations for the three months ended March 31, 2020 and 2019 are as follows:

Other comprehensive loss before reclassifications ( 4,954 ) ( 5,951 ) — ( 10,905 )

Income tax effects before reclassifications 110 1,730 — 1,840

Currency translation AOCI — ( 154 ) ( 36 ) ( 190 )

Balance at June 30, 2019 $ ( 14,031 ) $ ( 12,747 ) $ ( 2,814 ) $ ( 29,592 )

The amounts reclassified out of AOCI and into the Consolidated Statement of Operations for the three and six months ended June 30, 2020 and 2019 are as follows:

Affected Line Item in the Consolidated

Statements of Operations Three Months Ended March 31,

Statements of Operations Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

3 unchanged sentences

Total after tax $ 1,750 $ — $ 3,372 $ —

The amounts recorded in prior years in AOCI exceeding 10% of the defined benefit obligation are recorded ratably as reclassification of actuarial losses over the current year through profit and loss separately from income from operations and amounted to $ 2.4 million in the three months ended March 31, 2020.

The amounts recorded in prior years in AOCI exceeding 10 % of the defined benefit obligation are recorded ratably as reclassification of actuarial losses over the current year through profit and loss separately from income from operations and amounted to $ 5.1 million for the six months ended June 30, 2020.

Earnings Per Share

2 unchanged sentences

The following table reflects the income and share data used in the basic and diluted EPS computations:

Three Months Ended March 31,

Net income for the period - attributable to ordinary equity holders of the parent (in thousands) $ 18,032 $ 18,954

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Net income/(loss) for the period - attributable to ordinary equity holders of the parent (in thousands) $ ( 17,780 ) $ 24,748 $ 253 $ 43,702

Weighted average number of ordinary shares (in thousands of shares) 60,487 59,984 60,361 59,752

13 unchanged sentences

The development of deferred tax assets and liabilities relates to changes in temporary differences and tax loss carry forwards.

Income tax receivables decreased from $ 17.9 million at December 31, 2019 to $ 7.8 million at March 31, 2020 due to tax refunds received from tax authorities.

Income taxes payable increased from $ 14.2 million at December 31, 2019 to $ 14.9 million at March 31, 2020 mainly due to the current tax expense for the period ended March 31, 2020, less payments to the tax authorities.

Income tax expense for the three months ended March 31, 2020 amounted to $ 7.6 million compared to $ 9.4 million for the three months ended March 31, 2019, reflecting profit in these periods.

For the three months ended March 31, 2020, the impact of discrete tax items included a net discrete tax gain of $ 0.7 million and is primarily due to the refund of prior year taxes in connection with the land sale in South Korea during 2018, offset by the unfavorable deferred tax expense of $ 0.8 million due to the revaluation of the realizability of deferred tax assets.

Therefore, the effective tax rate of 29.75 % for the three months ended March 31, 2020 deviated from the estimated annual tax rate of 29.19 % for 2020.

For the three months ended March 31, 2019, the impact of discrete tax items included a net discrete tax expense of $ 0.9 million and is primarily due to various provision adjustments related to tax return filings.

Therefore the effective tax rate of 33.40 %for the three months ended March 31, 2019 deviated from the estimated annual tax rate of 30.1 % for 2019.

Income tax receivables decreased from $ 17.9 million at December 31, 2019 to $ 11.7 million at June 30, 2020 due to tax refunds received from tax authorities.

Income taxes payable increased from $ 14.2 million at December 31, 2019 to $ 15.3 million at June 30, 2020 mainly due to the current tax expense for the period ended June 30, 2020, less payments to the tax authorities.

Income tax expense for the six months ended June 30, 2020 amounted to $ 1.8 million compared to $ 18.7 million for the six months ended June 30, 2019, reflecting the income in these periods.

Income tax benefit for the three months ended June 30, 2020 amounted to $ 5.9 million compared to the income tax expense of $ 9.3 million for the three months ended June 30, 2019, reflecting the income in these periods.

For the six months ended June 30, 2020, the impact of discrete tax items included discrete tax expense of $ 0.5 million, due to tax return filings and deferred tax expense of $ 0.7 million due to the revaluation of realizability of certain deferred tax assets.

The discrete tax items compared to the low income from operations before taxes resulted in an effective tax rate of 87.4 % for the six months ended June 30, 2020.

The estimated annual tax rate is 28.91 % for 2020.

For the three months ended June 30, 2020, the impact of discrete tax items included a net discrete tax expense of $ 1.2 million primarily due to tax return filings and other prior year adjustments, offset by the favorable deferred tax gain of $ 0.2 million due to the reassessment of recoverability of deferred tax assets.

Therefore, the effective tax rate of 24.85 % for the three months ended June 30, 2020 deviated from the estimated annual tax rate of 28.91 % for 2020.

For the six months ended June 30, 2019, the impact of discrete tax items included a net discrete tax expense of $ 0.3 million and is primarily due to tax return filings and other prior year adjustments.

Therefore the effective tax rate of 30.0 % for the six months ended June 30, 2019 deviated from the estimated annual tax rate of 29.6 % for 2019.

For the three months ended June 30, 2019, the impact of discrete tax items included a net discrete tax gain of $ 0.7 million and is primarily due to tax return filings and other prior year adjustments.

Therefore the effective tax rate of 27.3 % for the three months ended June 30, 2019 deviated from the estimated annual tax rate of 29.6 % for 2019.

Commitments and Contingencies

1 unchanged sentence

To safeguard the supply of raw materials, contractual purchase commitments under long-term supply agreements for raw materials, primarily oil and gas, are in place with the following maturities:

Maturity March 31, 2020

Maturity June 30, 2020

(In thousands)

2021 $ 71,630

2022 to 2025 61,659

2026 and thereafter —

Less than one year $ 110,836

One to five years 85,736

More than five years —

Total $ 196,572

For details regarding lease obligations see Note C.

Environmental Matters

17 unchanged sentences

“Orion”) and the United States (on behalf of the EPA), as well as the Louisiana Department of Environmental Quality.

The consent decree (the “EPA CD”) became effective on June 7, 2018.

The consent decree

(the “EPA CD”) became effective on June 7, 2018.

The consent decree resolves and settles the EPA’s claims of noncompliance set forth in the NOVs and in a respective complaint filed in court against Orion by the United States immediately prior to the filing of the consent decree.

5 unchanged sentences

Orion has commenced the installation works for its Ivanhoe and Orange facilities.

However, construction at these facilities has been subject to COVID-19-related delays, and as a result we have declared force majeure towards EPA and requested an extension of the timelines for completion of installations.

While the construction at Orange has been completed according to schedule despite COVID-19 related impacts, the construction at the Ivanhoe facility has been subject to COVID-19-related delays, and as a result we have declared force majeure with respect to the EPA CD and requested an extension of the timeline for completion of installations.

The EPA has not confirmed our extension request, at this time.

We continue to provide the EPA regular updates.

Under the EPA CD, Orion can choose either its Belpre or Borger facilities as the next site for installation of pollution control equipment with comparable effectiveness.

6 unchanged sentences

The EPA CD allows some flexibility for Orion to choose among different technology solutions for reducing emissions and the locations where these solutions are implemented.

The solutions Orion ultimately chooses to implement at its facilities other than Ivanhoe (Louisiana), may differ in scope and operation from those it currently anticipates (including those discussed in the next paragraph) and, for any and all of its four facilities, factors, such as timing, locations, target levels, changing cost estimates and local regulations, could cause actual capital expenditures to exceed or be lower than current expectations or affect Orion’s ability to meet the agreed target emission levels or target dates for installing required equipment as anticipated or at all.

The solutions Orion ultimately chooses to implement at its facilities other than Ivanhoe (Louisiana) and Orange (Texas), may differ in scope and operation from those it currently anticipates (including those discussed in the next paragraph) and, for any and all of its three facilities, factors, such as timing, locations, target levels, changing cost estimates and local regulations, could cause actual capital expenditures to exceed or be lower than current expectations or affect Orion’s ability to meet the agreed target emission levels or target dates for installing required equipment as anticipated or at all.

Orion also agreed to and paid a civil penalty of $ 0.8 million and agreed to perform environmental mitigation projects totaling $ 0.6 million.

12 unchanged sentences

Pledges and guarantees

The Company has pledged the majority of its assets (amongst others shares in affiliates, bank accounts and receivables) within the different regions excluding China serving as collateral under the credit agreement dated July 25, 2014 as amended from time to time.

As of March 31, 2020 the principal amounts of the outstanding term loans under the Credit Agreement were $ 280.4 million (U.S.

Dollar Term Loan), and € 351.7 million (Euro Term Loan) while the amount drawn under the revolving credit facility was $ 43.8 million.

As at March 31, 2020 Orion Engineered Carbons GmbH had five guarantees issued by Euler Hermes S.A.

with a total volume of $ 9.4 million (as at December 31, 2019 three guarantees by Euler Hermes S.A.

The current principal amounts of the outstanding term loans under the Credit Agreement are $ 279.5 million (U.S.

Dollar Term Loan), and € 358.4 million (Euro Term Loan).

As of June 30, 2020 Orion Engineered Carbons GmbH has five guarantees issued by Euler Hermes S.A.

with a total volume of $ 9.6 million (as of December 31, 2019 three guarantees by Euler Hermes S.A.

of $ 9.2 million);

one guarantee insurance issued by Deutsche Bank AG with a volume of $ 2.2 million ( one guarantee issued by Deutsche Bank AG with a volume of $ 2.2 million as at December 31, 2019).

None of these guarantees reduce the possible utilization limit of the current RCF.

one guarantee issued by Liberty Mutual Insurance with a volume of $ 3.1 million ( December 31, 2019:

none) and one guarantee insurance issued by Deutsche Bank AG with a volume of $ 2.2 million ( one guarantee issued by Deutsche Bank AG with a volume of $ 2.2 million as of December 31, 2019).

None of these guarantees reduce RCF utilization available.

Orion also has four guarantees issued by UniCredit AG amounting to $ 0.3 million that reduce RCF utilization available.

Financial Information by Segment

4 unchanged sentences

The following table shows the percent of revenue recognized in each of the Company’s reportable segment:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Rubber 53 % 65 % 60 % 65 %

5 unchanged sentences

Adjustment items are not allocated to the individual segments as they are managed on a group basis.

Segment reconciliation for the three months ended March 31, 2020 and 2019:

Segment reconciliation for the three months ended June 30, 2020 and 2019:

Rubber Specialties Corporate Total segments

5 unchanged sentences

Excluding equity in earnings of affiliated companies, net of tax ( 151 ) — — ( 151 )

Income from operations before income tax expense and finance costs 20,342 19,524 ( 2,323 ) 37,543

Income/(loss) from operations before income tax expense and finance costs ( 13,645 ) 6,855 ( 6,089 ) ( 12,879 )

Interest and other financial expense, net — — ( 8,277 ) ( 8,277 )

Reclassification of actuarial losses from AOCI — — ( 2,654 ) ( 2,654 )

Income tax expense — — ( 7,635 ) ( 7,635 )

Income tax expense/(benefit) — — 5,879 5,879

Equity in earnings of affiliated companies, net of tax 151 — — 151

Net income/(loss) $ ( 17,780 )

Net sales from external customers $ 259,731 $ 139,285 $ — $ 399,016

Adjusted EBITDA $ 40,493 $ 31,035 $ — $ 71,528

Corporate charges — — ( 4,501 ) ( 4,501 )

Depreciation and amortization of intangible assets and property, plant and equipment ( 14,213 ) ( 11,191 ) — ( 25,404 )

Excluding equity in earnings of affiliated companies, net of tax ( 153 ) — — ( 153 )

Income/(loss) from operations before income tax expense and finance costs 26,127 19,844 ( 4,501 ) 41,470

Interest and other financial expense, net — — ( 7,566 ) ( 7,566 )

Reclassification of actuarial losses from AOCI — — — —

Income tax expense/(benefit) — — ( 9,309 ) ( 9,309 )

Equity in earnings of affiliated companies, net of tax 153 — — 153

Net income/(loss) $ 24,748

Segment reconciliation for the six months ended June 30, 2020 and 2019:

Rubber Specialties Corporate Total segments

(In thousands)

Net sales from external customers $ 324,489 $ 214,167 $ — $ 538,655

Adjusted EBITDA $ 34,535 $ 44,547 $ — $ 79,082

Corporate charges — — ( 8,412 ) ( 8,412 )

Depreciation and amortization of intangible assets and property, plant and equipment ( 27,554 ) ( 18,168 ) — ( 45,722 )

Excluding equity in earnings of affiliated companies, net of tax ( 285 ) — — ( 285 )

Income/(loss) from operations before income tax expense and finance costs 6,697 26,379 ( 8,412 ) 24,664

Interest and other financial expense, net — — ( 17,888 ) ( 17,888 )

Reclassification of actuarial losses from AOCI — — ( 5,052 ) ( 5,052 )

Income tax expense/(benefit) — — ( 1,756 ) ( 1,756 )

Equity in earnings of affiliated companies, net of tax 285 — — 285

Net income $ 253

4 unchanged sentences

Excluding equity in earnings of affiliated companies, net of tax ( 290 ) — — ( 290 )

Income from operations before income tax expense and finance costs 21,263 19,072 ( 5,636 ) 34,699

Income/(loss) from operations before income tax expense and finance costs 47,390 38,916 ( 10,137 ) 76,169

Interest and other financial expense, net — — ( 14,009 ) ( 14,009 )

Reclassification of actuarial losses from AOCI — — — —

Income tax expense — — ( 9,439 ) ( 9,439 )

Income tax expense/(benefit) — — ( 18,748 ) ( 18,748 )

Equity in earnings of affiliated companies, net of tax 290 — — 290

3 unchanged sentences

Income from operations before income taxes and finance costs of the segment 'Corporate and other' comprises the following:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

Restructuring expenses/(income) $ — $ 89

Restructuring expenses $ — $ 1,034 $ — $ 1,123

Consulting fees related to Company strategy — 589 — 1,505

Extraordinary expense items related to COVID-19 2,725 — 2,725 —

Long Term Incentive Plan 1,199 1,559 60 5,112

EPA-related expense 2,589 718

EPA-related expenses 977 690 3,566 1,408

Other non-operating 1,188 629 2,061 989

1 unchanged sentence

Related Parties

As of March 31, 2020 related parties include one associate of Orion that is accounted for using the equity method, namely "Deutsche Gasrusswerke" (DGW) and one principal owner of more than 10%.

As of June 30, 2020 related parties include one associate of Orion that is accounted for using the equity method, namely "Deutsche Gasrusswerke" (DGW) and one principal owner of more than 10%.

Related parties include key management personnel having authority and responsibility for planning, directing and monitoring the activities of the Company directly or indirectly and their close family members.

In the normal course of business Orion from time to time receives services from, or sells products to, related unconsolidated parties, in transactions that are either not material or approved in accordance with our Related Party Transaction Approval Policy.

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

(In thousands)

1 unchanged sentence

Trade payables to DGW KG $ 9,412 $ 16,505

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

(In thousands)

Purchased carbon black products from DGW KG $ 10,671 $ 23,309 $ 31,993 $ 46,075

Sales and services provided to DGW KG $ 634 $ 663

Sales and services/(refund) provided to DGW KG $ ( 654 ) $ 829 $ ( 21 ) $ 1,491

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements