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Item 1A. Risk Factors

2021-02-18 compared with 2020-02-20 · 114 added, 170 removed, 348 unchanged (45% of the section changed)

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Risks Related to Our Business

The COVID-19 pandemic has had and could continue to have an adverse effect on our business and results of operations.

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 to financial markets.

Many state and local jurisdictions have periodically imposed “lock down” orders to businesses and schools, personal or collective quarantines, restrictions on travel and mass gatherings as well as other measures to slow the spread of the virus.

In particular many “non-essential” businesses had to temporarily close operations or shift office workers to a remote working environment.

To date, the COVID-19 pandemic has adversely impacted our operations in a number of ways, including the temporary suspension of production at our customer’s and our own manufacturing facilities, disruptions to our supply chain, restrictions on the ability of many of our employees to work at optimal efficiency due to government actions, facility closures and other restrictions.

If we experience operational or supply chain disruptions, or such disruptions are exacerbated or prolonged in the future, our business, results of operations and liquidity may be adversely impacted.

In particular, the inability of our suppliers to meet our supply needs in a timely manner or our quality standards could cause delays in delivery to our customers, which could result in the cancellation of orders, customers’ refusal to accept deliveries, a reduction in purchase prices, and termination of customer relationships, any of which could have a material adverse effect on our business, financial condition, results of operations and liquidity.

Even if we are able to find alternate sources for our supply needs, they may cost more, which could adversely impact our profitability and financial condition.

In addition, we have experienced significant and unpredictable reductions in the demand for our products as a result of the COVID-19 pandemic.

Further economic uncertainty may cause additional delays, cancellation, or redirections of planned orders.

The foregoing and other continued disruptions to our business as a result of COVID-19 could have an adverse effect on our business, financial condition and results of operations.

The extent of the impact of COVID-19 on our operational and financial performance will depend on future developments, including the duration and spread of the COVID-19 outbreak, which is highly uncertain and cannot be predicted at this time.

Negative or uncertain worldwide economic conditions may result in business volatility and may adversely impact our business, financial condition, results of operations and cash flows.

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In periods with significant market turmoil and tightened credit availability, we expect to experience difficulties in collecting accounts receivable, pricing pressure and reduced global or local business activity.

Structural changes in the industries in which we operate may result in business volatility and may adversely affect our business, financial condition, results of operations and cash flows.

Our business is influenced by structural changes in the industries in which we operate, such as the entry of new suppliers, product substitution, changing technologies, industry consolidation and the migration of customers to lower-cost countries.

Some of our customers have shifted, and may continue to shift, manufacturing capacity from mature regions, such as North America and Europe, to emerging regions, such as Asia and South America or Africa.

Although we have developed and implemented strategies to meet these changes in demand, we cannot be certain that we will be able to successfully expand capacity in emerging regions.

Our ability to expand in these regions depends in part on their economic, regulatory and political conditions and on our ability to establish and finance operations, construct additional manufacturing capacity or form strategic business alliances including acquisitions and joint ventures.

In addition, we may not be successful in adapting capacity in mature regions commensurate with industry demand.

Similarly, demand for our customers’ products and our competitors’ reactions to market conditions could affect our results.

Our business is also sensitive to changes in industry capacity utilization.

Prices tend to decrease when capacity utilization decreases, which could adversely affect our business, financial condition, results of operations and cash flows.

The COVID-19 pandemic has adversely affected, and may continue to adversely affect, the economies and financial markets of many countries, as well as unemployment levels, resulting in a period of regional, national, and global economic recession that has curtailed or delayed spending by our customers’ customers, in particular in the automotive industry and increased the risk of customer defaults or delays in payments.

Our customers may terminate or attempt to amend their agreements for the purchase of our products due to decline in their demand and production, bankruptcy, lack of liquidity, lack of funding, operational failures, or other reasons.

COVID-19 and the current financial, economic, and capital markets environment, and future developments in these and other areas present material uncertainty and risk with respect to our performance, financial condition, volume of business, results of operations, and cash flows.

Our business is subject to operational risks, which could adversely affect our business, financial condition, results of operations and cash flows.

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We could incur significant expenditures in connection with such operational risks.

These may be caused both by external factors, such as natural disasters, pandemics or epidemics, war, acts of terrorism, strikes, official orders,

technical interruptions or material defects and accidents or mistakes in internal procedures, such as fire, explosion or release of toxic or hazardous substances.

These may be caused both by external factors, such as natural disasters, pandemics or epidemics, war, acts of terrorism, strikes, official orders, technical interruptions or material defects and accidents or mistakes in internal procedures, such as fire, explosion or release of toxic or hazardous substances.

In all of these cases, our property, third-party property or the environment may sustain damage, or there may be human exposure to hazardous substances, personal injuries or fatalities.

Such events could result in material financial liabilities, civil or criminal law consequences, the temporary or permanent closure of the relevant production or administrative sites or power plant and a negative impact on our financial condition, results of operations and cash flows.

Such events could result in material financial liabilities, civil or criminal law consequences, the temporary or permanent closure of the relevant production or administrative sites or power plants and a negative impact on our financial condition, results of operations and cash flows.

We are dependent on major customers for a significant portion of our sales, and a significant adverse change in a customer relationship could adversely affect our business, financial condition, results of operations and cash flows.

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We may be unable to implement our business strategies in an effective manner.

Our future financial performance and success largely depend on our ability to maintain our current position and to implement our business strategies for growth successfully.

We cannot guarantee that we will successfully implement our business strategies or that

implementing these strategies will sustain or improve and not harm our results of operations.

Our future financial performance and success largely depend on our ability to maintain our current competitive position and to implement our business strategies for growth successfully.

We cannot guarantee that we will successfully implement our business strategies or that implementing these strategies will sustain or improve and not harm our results of operations.

We may not be able to increase or sustain our manufacturing efficiency or asset utilization, enhance our current portfolio of products or achieve other fixed or variable cost savings.

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Our manufacturing processes consume significant amounts of raw materials and energy, the costs of which are subject to fluctuations in worldwide supply and demand as well as other factors beyond our control.

In 2019, raw materials accounted for 75% of our cost of sales.

Approximately 79% of the cost of raw material used in the production of carbon black is related to petroleum-based or coal-based feedstock known as carbon black oil, with some limited use of other raw materials, such as acetylene, nitrogen tetroxide, hydrogen and natural gas.

The preponderance of the cost of raw material used in the production of carbon black is related to petroleum-based or coal-based feedstock known as carbon black oil, with some limited use of other raw materials, such as acetylene, nitrogen tetroxide, hydrogen and natural gas.

We obtain a considerable portion of our raw materials and energy from selected key suppliers.

Although we maintain raw material reserves, if any of these suppliers is unable to meet its obligations under supply agreements with us on a timely basis or at all, or if we cannot source sufficient supply, we may be forced to incur higher costs to obtain the necessary raw materials and energy elsewhere or, in certain limited cases, we may not be able to obtain carbon black oil or raw materials at all.

Additionally, raw material sourcing and related infrastructure (like harbor access, cargo or ship availability, pipeline-, tank- or road-access), may be subject to local developments or regulations in certain jurisdictions where we operate that may reduce, delay or halt the physical supply of raw materials.

incur higher costs to obtain the necessary raw materials and energy elsewhere or, in certain limited cases, we may not be able to obtain carbon black oil or raw materials at all.

Additionally, raw material sourcing and related infrastructure (e.g.

harbor access, cargo or ship availability, pipeline-, tank- or road-access), may be subject to local developments or regulations in certain jurisdictions where we operate that may reduce, delay or halt the physical supply of raw materials.

Our inability to source quality raw materials or energy in a timely fashion and pass through cost increases to our customers could have an adverse impact on our business, financial condition, results of operations and cash flows.

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Such increases may not be accepted by our customers, may not be fully reflected in the indices used in our pricing formulas, may not be sufficient to compensate for increased raw material and energy costs or may decrease demand for our products and our volume of sales.

Rapid and significant oil or energy price fluctuations have had and are likely to continue to have significant and varying effects on our earnings and results of operations, partly because oil price changes affect our sales prices and our cost of raw materials and energy at different times and amounts, and partly due to other factors, such as differentials affecting the ultimate carbon black oil price paid by us (versus a particular reference price index), carbon black oil usage amounts and ongoing efficiency initiatives.

Oil and energy price fluctuations have had and are likely to continue to have significant and varying effects on our earnings and results of operations, partly because oil price changes affect our sales prices and our cost of raw materials and energy at different times and amounts, and partly due to other factors, such as differentials affecting the ultimate carbon black oil price paid by us (versus a particular reference price index), carbon black oil usage amounts and ongoing efficiency initiatives, the value of which fluctuates with oil prices.

Failure to fully offset the effects of fluctuating raw material or energy costs could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Significant movements in the market price for crude oil tend to create volatility in our carbon black feedstock costs, which can affect our Net Working Capital, cash requirements and operating results.

Most recently the International Maritime Organization introduced regulatory changes, known as “MARPOL”, to further restrict the sulfur emissions for the shipping industry beginning January 1, 2020.

This has and could impact the prices and the availability of certain types of oil we use as feedstock for our products.

Changes in raw material and energy prices have a direct impact on our Net Working Capital levels.

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timing, locations, target levels and other factors could also affect our ability to meet target emission levels and target dates under the EPA consent decree.

On June 7, 2018, a consent decree (the “EPA CD”) between Orion Engineered Carbons LLC (for purposes of this risk factor, “Orion”) and the United States on behalf of U.S.

On June 7, 2018, a consent decree (the “EPA CD”) between Orion Engineered Carbons LLC and the United States on behalf of U.S.

Environmental Protection Agency (“EPA”), as well as the Louisiana Department of Environmental Quality became effective.

The consent decree resolves and settles the EPA’s claims of noncompliance set forth in the notices and finding of violations from the EPA with respect to the Company's U.S.

Under Orion’s EPA CD, Orion will install certain pollution control technology in order to further reduce emissions at its four U.S.

manufacturing facilities in Ivanhoe (Louisiana), Belpre (Ohio), Borger (Texas), and Orange (Texas) over approximately six years.

The EPA CD also requires the continuous monitoring of emissions reductions that Orion will need to comply with over a number of years.

The installations for the Orange facility need to be in operation in 2020 and installations for the Ivanhoe facility in 2021.

Orion has commenced the installation works for its Ivanhoe facility, and expects to complete the installation in this facility over the next year.

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 to Ivanhoe.

We expect the capital expenditures for installation of pollution control equipment in the remaining Orion facilities to decrease due to economies of scale and synergies from prior installations.

Commitments and Contingencies” to the Company’s audited financial statements included in this Annual Report on Form 10-K for a description of the EPA CD.

We estimate the installations of monitoring and pollution control equipment at all four Orion plants in the U.S.

will require capital expenditures of approximately $190 million, subject to the results of further scope design and estimation efforts presently underway.

will require capital expenditures in an approximate range between $230 million to $270 million subject to the results of further scope design and estimation efforts presently underway.

However, the actual total capital expenditures we might need to incur in order to fulfill the requirements of the EPA CD remain uncertain.

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 for any and all of its four facilities, and factors, such as timing, locations, target levels, changing cost estimates and local regulations, could cause actual capital expenditures to significantly exceed 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 for any and all of such facilities, and factors, such as timing, locations, target levels, changing cost estimates and local regulations, could cause actual capital expenditures to significantly exceed 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.

Noncompliance with applicable emissions limits could lead to payments to the EPA or other penalties.

We may be subject to information technology systems failures, network disruptions, cybersecurity attacks and breaches of data security.

We rely on information technology systems to manage and operate our production facilities, business, process transactions, and summarize our operating results.

We rely on information technology systems to manage and operate our production facilities, business, process transactions, and to summarize our operating results.

Our information technology systems are an important element for effectively operating our business.

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We have experienced non-material cybersecurity attacks in the past, and may experience them in the future, potentially with more frequency or sophistication.

Based on information known to date, past

attacks have not had a material impact on our financial condition or results of operations.

However, due to the evolving nature of cybersecurity threats, the scope and impact of any future incident cannot be predicted.

Due to the evolving nature of cybersecurity threats, the scope and impact of any future incident cannot be predicted.

While we continually work to safeguard our systems and mitigate potential risks, there is no assurance that such actions will be sufficient to prevent cybersecurity attacks or security breaches that manipulate or improperly use our systems or networks, compromise confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt our operations.

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We also are required to consult with our employee representatives, such as works councils, on certain matters such as restructuring, acquisitions and divestitures.

Although we believe that our relations with our employees are good, there can be no assurance that current agreements may be terminated, new agreements will be reached or consultations will be completed without union or works council actions or on terms satisfactory to us.

Although we believe that our relations with our employees are good, there can be no assurance that current agreements may not be terminated, new agreements will be reached or consultations will be completed without union or works council actions or on terms satisfactory to us.

Current and future negotiations and consultations with employee representatives could have a material adverse effect on our business.

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The loss of any member of our key leadership team and personnel or an inability to attract, retain, develop and maintain additional personnel could prevent us from implementing our business strategy.

The loss of one or more member of our key management or operating personnel, or the failure to attract, retain and develop additional key personnel, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The loss of one or more members of our key management or operating personnel, or the failure to attract, retain and develop additional key personnel, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are exposed to political or country risk inherent in doing business in some countries.

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Risks inherent in international operations include the following:

changes in the rate of economic growth, unsettled political or economic conditions, expropriation or other governmental actions;

changes in the rate of economic growth;

unsettled political or economic conditions;

expropriation or other governmental actions;

social unrest, war, terrorist activities or other armed conflict;

national and regional labor strikes, confiscatory taxation or other adverse tax policies, trade and or tariff disputes between countries, deprivation of contract rights, trade regulations affecting production, pricing and marketing of products;

national and regional labor strikes;

confiscatory taxation or other adverse tax policies, trade and or tariff disputes between countries;

deprivation of contract rights;

trade regulations affecting production, pricing and marketing of products;

reduced protection of intellectual property rights;

restrictions on the repatriation of income or capital, exchange controls, inflation, deflation, currency fluctuations and devaluation, the effect of global environmental, health and safety issues, pandemics or epidemics, on economic conditions, market opportunities and operating restrictions, changes in foreign laws and tax rates, changes in trade sanctions or embargoes that result in losing access to customers and suppliers in those countries, costs associated with compliance with anti-bribery and anti-corruption laws, nationalization of private enterprises by foreign governments, and changes in financial policy and availability of credit or financing sources.

restrictions on the repatriation of income or capital;

exchange controls;

inflation, deflation, and currency fluctuations and devaluation;

the effect of global environmental, health and safety issues;

pandemics or epidemics;

economic conditions, market opportunities and operating restrictions;

changes in foreign laws and tax rates;

changes in trade sanctions or embargoes that result in losing access to customers and suppliers in those countries;

costs associated with compliance with anti-bribery and anti-corruption laws;

nationalization of private enterprises by foreign governments;

and changes in financial policy and availability of credit or financing sources.

These factors could adversely affect our business, financial condition, results of operations and cash flows.

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remediation of soil or buildings and operation, maintenance and closure of landfills.

If we violate, or are found to have violated or otherwise fail to comply with these laws, regulations or permits or other approvals, or fail to receive the timely renewal of and due application for required permits, we may have to limit production, we may incur fines or other sanctions, be required to undertake significant capital expenditures to achieve compliance, or be subject to other obligations by one or more regulatory authorities.

If we violate, or are found to have violated or otherwise fail to comply with these laws, regulations or permits or other approvals, or fail to receive the timely renewal of and due application for required permits, we may have to limit production, incur fines or other sanctions, be required to undertake significant capital expenditures to achieve compliance, or be subject to other obligations by one or more regulatory authorities.

If environmental harm to soil, groundwater, surface water or natural resources is found to have occurred as a result of our current or historical operations, we may be required to incur significant remediation costs at our current or former production facilities or at third-party sites.

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Further, we may also incur additional closure and cleanup costs in connection with the closure of plants or separate feedstock storage sites, including costs relating to decommissioning of equipment, asbestos removal and closure of features such as storage tanks, wastewater treatment systems, ponds and landfills.

We store carbon black oil and other substances in underground and above ground storage tanks.

Our operations are also subject to significant hazards and risks inherent in storing carbon black oil and carbon black products.

These hazards and risks include fires, explosions, spills, discharges and other releases, any of which could result in distribution difficulties and disruptions, environmental pollution, governmentally imposed fines or clean up obligations, personal injury or wrongful death claims and other damage to our properties and the properties of others.

These hazards and risks include fires, explosions, spills, discharges and other releases, any of which could result in distribution difficulties and disruptions, environmental pollution, government imposed fines or clean up obligations, personal injury or wrongful death claims and other damage to our properties and the properties of others.

Environmental and safety regulations are subject to frequent change, as are the priorities of those who enforce them, and we could incur substantial costs to comply with future laws and regulations.

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new or increased compliance obligations relating to GHG emissions;

stricter requirements for noise, waste handling, storage, transport, disposal, wastewater and storm water discharges;

stricter requirements for noise, waste handling, storage, transport,

disposal, wastewater and storm water discharges;

and more stringent cleanup and remediation standards, which, in each case, could have a material adverse effect on our operations and financial condition.

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Regulations requiring a reduction of or additional taxes of fees on greenhouse gas emissions could adversely affect our business, financial condition, results of operations and cash flows and increased awareness and adverse publicity about potential impacts on the climate change by us or other companies in our industry could harm our reputation.

Significant volumes of carbon dioxide (“CO 2 ”), a GHG, are emitted in carbon black manufacturing processes.

Significant volumes of CO 2 , a GHG, are emitted in carbon black manufacturing processes.

Over the past few decades, concerns about the relationship between GHGs and global climate change have resulted in increased levels of scrutiny from regulators, investors and the public alike, and have led to proposed and enacted regulations on both national and supranational levels, to monitor, regulate, control and tax emissions of CO 2 and other GHGs.

Investors have also begun to voice concern about sustainability and

climate change as it relates to their investment decisions.

Investors have also begun to voice concern about sustainability and climate change as it relates to their investment decisions.

Increased awareness in the investment community and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation.

The international community continues to negotiate a binding treaty that would require reductions in GHG emissions by developed countries.

In addition, a number of further measures addressing GHG emissions may be implemented, such as a successor international agreement, if any, to the Kyoto Protocol and the European Union’s proposal to consider raising its commitment to reduce carbon emissions by 20% to a 40% reduction by 2030 (compared to 1990 emission levels).

In addition, a number of further measures addressing GHG emissions may be implemented, such as a successor international agreement, if any, to the Kyoto Protocol and the EU’s proposal to consider raising its commitment to reduce carbon emissions by 20% to a 40% reduction by 2030 (compared to 1990 emission levels).

The United Nations Conference on Climate Change in December 2015 led to the creation of the Paris Agreement and encourages countries to continuously review and improve their GHG emission reduction goals.

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In the United States, Congress has from time to time considered legislation to reduce emissions of GHGs, but no comprehensive legislation has been enacted to date, and significant uncertainty currently exists as to how any such GHG legislation or regulations would impact large stationary sources, such as our facilities in Belpre (Ohio), Borger (Texas), Orange (Texas) and Ivanhoe (Louisiana), and what costs or operational changes these regulations may require in the future.

The current administration has withdrawn from the Paris Agreement.

There are currently no efforts within the US Congress or the EPA to proceed with additional GHG regulations on a national level.

There are currently no efforts within the U.S.

Congress or the EPA to proceed with additional GHG regulations on a national level.

However, almost one-half of the U.S.

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There is no assurance that, in the future, the current level of regulation will continue in the jurisdictions where we operate.

In addition several countries, including the European Union, are currently evaluating further and more restrictive regulations to reduce GHG emissions.

Compliance with current or future GHG regulations governing our operations may result in significantly increased capital expenditures for measures such as the installation of more environmentally efficient technology or the purchase of allowances to emit carbon dioxide or other GHGs.

In addition, several countries, including the EU, are currently evaluating further and more restrictive regulations to reduce GHG emissions.

While their potential effect on our manufacturing operations or financial results cannot be estimated, it could be substantial.

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The EPA and other governmental agencies are currently developing a regulatory approach under which they will collect further data on nano-scale materials, including carbon black, under the Toxic Substances Control Act (“TSCA”).

The EPA has proposed rules that would require manufacturers of nano-scale materials to submit additional manufacturing information, exposure and release information and available health and safety data.

Based on a review of the Rule and the Working Guidance issued by the EPA, it is the determination of the International Carbon Black Association (ICBA) that carbon black is not subject to reporting under the TSCA 8(a) Reporting Rule.

However, the EPA and other nations’ environmental regulatory authorities, including the European Commission, are also conducting extensive environmental health and safety testing of nano-scale materials.

In addition, the EPA and other nations’ environmental regulatory authorities, including the European Commission, are also conducting extensive environmental health and safety testing of nano-scale materials.

If carbon black is found to be harmful to humans and/or to the environment, it could be subject to more stringent regulatory control, which could require us to incur significantly higher costs to comply with new environmental, health and safety laws and could adversely affect our reputation and business.

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According to its recommendation of October 18, 2011 (2011/696/EU) carbon black is defined as a nano-material.

In a similar approach, the International Organization for Standardization (“ISO”) developed the ISO TC 229 “Nanotechnologies,” which considers carbon black a “nano-structured material.” The industry is not yet generally affected by these definitions.

industry is not yet generally affected by these definitions.

However, certain regulations regarding cosmetics applications or articles which are intended for food contact have already been implemented, and other regulations are being discussed which may affect the use of carbon black in the future.

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The European Union REACh legislation or similar legislation in other countries may affect our ability to manufacture and sell certain products.

In December 2006, the European Union signed the REACh (Registration, Evaluation, Authorization and Restriction of Chemicals) legislation.

This legislation requires chemical manufacturers and importers in the European Union to demonstrate the safety of the chemical substances contained in their products through a substance registration process.

We have registered under REACh, which is a functional prerequisite to the continued sale of our products in the European Union markets.

REACh presents a risk to the continued sale of our products in the European Union should our existing classification registration no longer apply as a result of changes in the interpretation of REACh by the authorities, changes in our product mix or purity, or if the European Union seeks to ban or materially restrict the production or importation of the chemical substances used in our products.

In December 2006, the EU signed the REACh (Registration, Evaluation, Authorization and Restriction of Chemicals) legislation.

This legislation requires chemical manufacturers and importers in the EU to demonstrate the safety of the chemical substances contained in their products through a substance registration process.

We have registered under REACh, which is a functional prerequisite to the continued sale of our products in the EU markets.

REACh presents a risk to the continued sale of our products in the EU should our existing classification registration no longer apply as a result of changes in the interpretation of REACh by the authorities, changes in our product mix or purity, or if the EU seeks to ban or materially restrict the production or importation of the chemical substances used in our products.

In March 2016, the European Chemical Agency (ECHA) announced a carbon black substance evaluation, and carbon black was included in the Community Rolling Action Plan (CoRAP).

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Some matters are not covered by an indemnity and involve claims for large amounts of damages as well as other relief.

Additional claims by (former) employees based on alleged past exposure to asbestos have been received by the Company and may be received in the future.

Additional claims by (former) employees based on alleged past exposure to asbestos or other substances with negative health effects may be received in the future.

The outcome of legal proceedings is extremely difficult to predict and we offer no assurances in this regard.

Adverse rulings, judgments or settlements in pending or future litigation, including employment-related litigation, contract litigation, intellectual property disputes, product liability claims, personal injury claims, claims based on alleged exposure to asbestos, chemicals or to carbon black, environmental permitting disputes or in connection with environmental remediation activities, could have an adverse effect on our business, financial condition, results of operations and cash flows.

Adverse rulings, judgments or settlements in pending or future litigation, including employment-related litigation, contract litigation, intellectual property disputes, product liability claims, personal injury claims, claims based on alleged exposure to asbestos, chemicals or to carbon black, environmental permitting disputes or in connection with environmental remediation activities or contamination, could have an adverse effect on our business, financial condition, results of operations and cash flows.

Because many of our products provide critical performance attributes to our customers’ applications and products, the sale of these products involves a risk of product liability claims against us, including claims arising in connection with the use of, or exposure to, our products.

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We make careful assessments with respect to production process improvements and decide whether to apply for patents or retain and protect them as trade secrets.

In some of the countries in which we operate or sell products, such as China, the laws protecting patent holders are significantly weaker than in the United States, the European Union and certain other countries.

In some of the countries in which we operate or sell products, such as China, the laws protecting patent holders are significantly weaker than in the U.S., the EU and certain other regions.

When we file a patent application, it is usually filed for all countries with active competition, where we have existing customers.

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These claims, even if without merit, can be expensive and time consuming to litigate.

We are, for example, currently in a dispute with Haldor Topsoe in which we may not ultimately prevail.

In such proceedings, we have asserted certain patent and contractual rights against Haldor Topsoe seeking monetary and injunctive relief, and Haldor Topsoe has asserted certain patent, contractual and common law claims seeking monetary and declaratory relief.

If we were to suffer an adverse ruling, we could be subject to injunctions, obliged to pay damages or enter into licensing agreements requiring royalty payments and use restrictions, all of which could adversely affect our business, financial condition, results of operations and cash flows.

If we were to suffer an adverse ruling, we could be subject to injunctions, obligated to pay damages or enter into licensing agreements requiring royalty payments and use restrictions, all of which could adversely affect our business, financial condition, results of operations and cash flows.

In addition, licensing agreements may not be available to us, and, if available, may not be available to us on acceptable terms.

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We are leveraged with recurring debt service obligations and expect to continue to have comparable leverage for the foreseeable future.

We may as well incur more debt in the future.

We may also incur more debt in the future.

This may have negative consequences for our business and investors, including requiring that a substantial portion of the cash flows from our operations be dedicated to debt service obligations;

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Dollar relative to other currencies, in particular the Euro, the Korean Won and Chinese Renminbi.

Generally, a depreciation of Euro against the U.S.

Dollar has a negative impact on (by increasing) our Net Working Capital, because a large part of our raw material are purchased by and held at entities using the Euro.

In addition, 56.3% of our outstanding debt obligations are denominated, pay interest in and must be repaid in Euro (and certain of our future debt obligations may be denominated in Euro), and therefore expose us to additional exchange rate risks.

In addition, certain of our outstanding debt obligations are denominated, pay interest in and must be repaid in Euro (and certain of our future debt obligations may be denominated in Euro), and therefore expose us to additional exchange rate risks.

An appreciation of the Euro would make our financing under Euro-denominated instruments more expensive.

Significant changes in the value of the U.S.

Dollar relative to the other currencies could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, we are exposed to adverse changes in interest rates.

We manage our foreign exchange risk through normal operating and financing activities and, when deemed appropriate, through the selective use of derivative transactions, the effectiveness of which is dependent, in part, upon the counterparties to these contracts honoring their financial obligations to us.

We are also exposed to adverse changes in interest rates.

these contracts honoring their financial obligations to us.

We cannot be certain that we will be successful in reducing the risks inherent in exposures to foreign currency and interest rate fluctuations, and our financial results could be adversely affected.

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Any failure by a hedging counterparty to perform its obligations could adversely affect our business, financial condition, results of operations and cash flows.

Geopolitical events in the EU, and in particular ultimate future relations between the EU and UK following the “Brexit,” may impact the Euro and as a result, our business, financial condition, results of operations and cash flows.

On February 1, 2020 the EU membership of United Kingdom (the “U.K.”) formally ceased, as a direct result of a referendum held on June 23, 2016 in the U.K.

in which a majority voted to exit the EU.

This referendum has come to be known as “Brexit”.

At this time, the U.K.’s future relationship to the EU is not yet formally agreed upon.

During a transition period until December 31, 2020 previously existing membership regulations remain effective.

If no mutual agreements were to be reached by December 31, 2020, this could result in a considerable uncertainty as to the ongoing terms of the U.K’s relationship with the EU, including the terms of trade between the U.K.

and the EU, and a likely negative impact on all parties.

The Brexit vote has given rise to calls for the governments of other European Union member states to consider withdrawal.

These developments, or the perception that any of them could occur, have caused and may continue to cause significant volatility in global financial markets as well as adversely affect the exchange rate of the Euro with respect to the U.S.

Dollar, which as described under “— Fluctuations in foreign currency exchange and interest rates could adversely affect our business, financial condition, results of operations and cash flows ” above, could have an adverse effect on us.

Political, social and economic uncertainty and changes arising from Brexit, may have a negative impact not only on the economy of the U.K.

but also on the economies of non-U.K.

EU and EEA countries and the overall stability of the Euro.

Should the Euro dissolve entirely, the legal and contractual consequences for holders of Euro-denominated obligations and for parties subject to other contractual provisions referencing the Euro would be determined by laws in effect at such time.

These potential developments, or market perceptions concerning these and related issues, could have adverse consequences for us with respect to our outstanding Euro-denominated debt obligations and, as we have a substantial amount of debt denominated in Euro, could adversely affect our business, financial condition, results of operations and cash flows.

Dislocations in credit and capital markets may make it more difficult for us and our suppliers and customers to borrow money or raise capital.

Dislocations in the credit markets may result in less credit being made available by banks and other lending institutions.

Disruptions in credit and capital markets may make it more difficult for us and our suppliers and customers to borrow money or raise capital.

Disruptions in the credit markets may result in less credit being made available by banks and other lending institutions.

As a result, we may not be able to obtain financing for our business and acquisitions or to pursue other business plans or make necessary investments, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Furthermore, a number of our customers and suppliers rely on access to credit to adequately fund their operations, which may also be limited due to dislocations in the credit markets.

The inability of our customers to obtain credit facilities or capital market financing may adversely affect our business by reducing our sales and increasing our exposure to bad debt, while the inability of our suppliers to access adequate financing may adversely affect our business by increasing prices for raw materials, energy and transportation.

In addition, payments received from customers that later enter into insolvency or comparable proceedings under applicable laws may be subject to claw back risks.

Furthermore, the inability of our customers to obtain credit facilities or capital market financing may adversely affect our business by reducing our sales and increasing our exposure to bad debt, while the inability of our suppliers to access adequate financing may adversely affect our business by increasing prices for raw materials, energy and transportation.

We may be required to impair or write off certain assets if our assumptions about future sales and profitability prove incorrect.

In analyzing the value of our inventory, property, plant and equipment, investments and intangible assets, we have made assumptions about future sales (prices and volume), costs and cash generation.

These assumptions are based on management’s best estimates and, if the actual results differ significantly from these assumptions, we may not be able to realize the value of the assets recorded, which could lead to an impairment or write-off of certain of these assets and that could have a material adverse effect on our business, financial condition and results of operations.

These assumptions are based on management’s best estimates and, if the actual results differ significantly from these assumptions, we may not be able to realize the value of the assets recorded, which could lead to an impairment or write-off of certain of these assets which could have a material adverse effect on our business, financial condition and results of operations.

We may be required to increase our pension fund contributions.

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Actual results deviating from these assumptions could result in a considerable increase of our pension commitments and liabilities and higher allocations to the pension reserves in future years, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

For a more detailed description of our defined benefit plans see our consolidated financial statements and the related notes included in “ Item 8.

Financial Statements and Supplementary Data” of this report.

Our insurance coverage may not be adequate to cover all the risks we may face and it may be difficult to obtain replacement insurance on acceptable terms or at all.

Our plants, equipment and other assets are insured for property damage and business interruption risks, and our business as a whole is insured for public and products liability risks as well as certain bad debt losses in Europe under insurance policies with reputable insurance companies.

We believe these insurance policies are generally in accordance with customary industry practices, including deductibles and coverage limits.

However, we cannot be fully insured against all potential hazards incident to our business, including losses resulting from war risks or terrorist acts, or all potential losses, including damage to our reputation.

If we were to incur a significant

liability for which we were not fully insured, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable at a reasonable cost or available only for certain risks.

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Our future tax rates may be adversely affected by a number of factors, including the enactment of new tax legislation such as the U.S.

tax reform, other changes in tax laws or the interpretation of such tax laws, changes in the estimated realization of our net deferred tax assets (arising, among other things, from tax loss carry forwards and the Acquisition), the jurisdictions in which profits are determined to be earned and taxed, adjustments to estimated taxes upon finalization of various tax returns, increases in expenses that are not deductible for tax purposes, including write-offs of acquired in process R&D and impairment of goodwill in connection with acquisitions, changes in available tax credits and additional tax or interest payments resulting from tax audits with various tax authorities.

for tax purposes, including write-offs of acquired in process R&D and impairment of goodwill in connection with acquisitions, changes in available tax credits and additional tax or interest payments resulting from tax audits with various tax authorities.

Losses for which no tax benefits can be recorded could materially impact our tax rate and its volatility from period to period.

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Due to the cost-sharing and cap provisions in Evonik’s indemnity, we expect that substantial costs we will incur in the EPA enforcement initiative and its respective settlement could exceed the scope of the indemnity in the tens of millions of dollars.

In addition, Evonik has signaled that it may likely defend itself against claims under the indemnity;

while we intend to enforce our rights vigorously and we have initiated arbitration proceedings, there is no assurance that we will be able to recover costs or expenditures incurred under the indemnity as we expect or at all.

In addition, Evonik signaled that it is not honoring Orion’s claims under the indemnity.

In June 2019, Orion initiated arbitration proceedings to enforce its rights against Evonik.

Evonik in turn has submitted certain counterclaims related to a tax indemnity and cost reimbursement against Orion, which counterclaims we do not believe to be material.

Although Orion believes that it is entitled to the indemnity and that its rights thereunder are enforceable, there is no assurance that the Company will be able to recover costs or expenditures incurred under the indemnity as it expects or at all.

We could experience a material adverse effect on our financial condition if the tax authorities were to successfully challenge decisions and assumptions we have made in assessing and complying with our tax obligations.

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Risks Related to Ownership of our Common Shares

Business dynamics and exchange rate fluctuations may reduce the amount of U.S.

Dollars shareholders receive in respect of any dividends or other distributions we may pay in the future in connection with our common shares.

Under Luxembourg law, the determination of whether we have sufficient distributable profits to pay dividends is made on the basis of our unconsolidated annual financial statements prepared under the Luxembourg Company Law in accordance with accounting principles generally accepted in Luxembourg and in Euros.

Exchange rate fluctuations may affect the amount in Euro that we are able to distribute, and the amount in U.S.

Dollars that our shareholders receive upon the payment of cash dividends or other distributions if we declare and pay in Euro, if any.

Such fluctuations could adversely affect the value of our common shares, and, in turn, the U.S.

Dollar proceeds that holders receive from the sale of our common shares.

We cannot assure investors that we will continue to pay dividends on our common shares at historical rates or at all.

Our ability to continue to pay dividends on our common shares at historical rates or at all is subject to the discretion of our board of directors and will depend on a number of factors, including, among others, our financial condition and results of future operations, growth opportunities and restrictive covenants in our debt instruments.

If we do not maintain or periodically increase the dividend on our common shares, it may have an adverse effect on the market price of our common shares.

Failure to maintain effective internal controls in accordance with Section 404 of Sarbanes-Oxley could have a material adverse effect on our business and share price.

As a public company, we are required to document and test our internal control over financial reporting in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), which requires, an annual report on management’s assessment of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm that addresses the effectiveness of internal control over financial reporting.

During this process, we may identify deficiencies that we may not be able to remediate in a timely manner to meet our deadline for compliance with Section 404 or that constitute a material weakness, which could require a restatement or other revision of our financial statements.

Testing and maintaining internal control could divert our management’s attention from other matters that are important to the operation of our business, increase our legal and financial compliance costs and make some management activities more difficult, time consuming and costly.

We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 or our independent registered public accounting firm may not issue an unqualified report on the effectiveness of our internal control over financial reporting.

In such an event, we could not be certain that our financial statements will be accurate and investors could lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our common shares.

In addition, if we do not maintain effective internal controls, we may not be able to accurately report our financial information on a timely basis, which could harm the trading price of our common shares, impair our ability to raise additional capital, or jeopardize our stock exchange listing.

If securities or industry analysts do not continue to publish research or reports about our business, or if they adversely change their recommendations regarding our common shares, the market price and trading volume of our common shares could decline.

The trading market for our common shares will be influenced by research or reports that industry or securities analysts publish about our business.

If one or more analysts who cover us downgrade our common shares, the market price for our common shares would likely decline.

If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our common shares to decline.

We are required to comply with the Exchange Act’s domestic reporting regime.

We lost our “foreign private issuer” status as such term is defined in Rule 405 under the Securities Act.

As a result, as of January 1, 2020, we are required to comply with the Exchange Act reporting and other requirements applicable to U.S.

domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers.

We have been required to make changes in our corporate governance practices in accordance with various SEC and NYSE rules.

In addition, our officers and directors are no longer exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchase and sales of our securities.

Our loss of foreign private issuer status caused transitory costs, may increase our legal and financial compliance costs in the future and has made some activities highly time consuming and costly.

We cannot assure investors that we will pay dividends on our common shares at historical rates or at all.

Our ability to pay dividends on our common shares at historical rates, or at all, is generally dependent on a proposal by our Board of Directors subject to approval by our shareholders and will depend on a number of factors, including, among others, our financial condition and results of future operations, growth opportunities and restrictive covenants in our debt instruments.

The rights of our shareholders may differ from the rights they would have as shareholders of a U.S.

corporation, which could adversely affect trading in our common shares and our ability to conduct equity financings.

Our corporate affairs are governed by our Articles of Association and the laws of Luxembourg, including the Luxembourg Company Law ( loi du 10 août 1915 concernant les sociétés commerciales, telle quelle a été modifiée ).

The rights of our shareholders and the responsibilities of our directors and officers under Luxembourg law are different from those applicable to a corporation incorporated in the United States.

Luxembourg laws may not be as extensive as those in effect in the United States, and Luxembourg law and regulations in respect of corporate governance matters might not be as protective of minority shareholders as state corporation laws in the United States.

As a result, our shareholders may have more difficulty in protecting their interests in connection with actions taken by our directors and officers than they would as shareholders of a corporation incorporated in the United States.

We are organized under the laws of the Grand Duchy of Luxembourg and it may be difficult to obtain or enforce judgments or bring original actions against us or the members of our Board of Directors in the United States.

We are organized under the laws of the Grand Duchy of Luxembourg and the majority of our assets are located outside the United States.

Furthermore, some of the members of our Board of Directors and officers reside outside the United States and a substantial portion of their assets are located outside the United States.

Investors may not be able to effect service of process within the United States upon us or these persons or to enforce judgments obtained against us or these persons in U.S.

courts, including judgments in actions predicated upon the civil liability provisions of the U.S.

federal securities laws.

Our corporate affairs are governed by our Articles of Association and the laws of Luxembourg, including the Luxembourg Company Law.

The rights of our shareholders and the responsibilities of our directors and officers under Luxembourg law are different from those applicable to a corporation incorporated in the U.S.

Luxembourg laws may not be as extensive as those in effect in the U.S., and Luxembourg law and regulations in respect of corporate governance matters might not be as protective of minority shareholders as state

corporation laws in the U.S.

We are organized under the laws of Luxembourg and it may be difficult to obtain or enforce judgments or bring original actions against us or the members of our Board of Directors in the United States.

We are organized under the laws of Luxembourg and the majority of our assets are located outside the U.S.

Furthermore, some of the members of our Board of Directors and officers reside outside the U.S.

and a substantial portion of their assets are located outside the U.S.

Investors may not be able to effect service of process within the U.S.

upon us or these persons or to enforce judgments obtained against us or these persons in U.S.

Likewise, it may also be difficult for an investor to enforce in U.S.

courts judgments obtained against us or these persons in courts located in jurisdictions outside the United States, including judgments predicated upon the civil liability provisions of the U.S.

courts judgments obtained against us or these persons in courts located in jurisdictions outside the U.S., including judgments predicated upon the civil liability provisions of the U.S.

federal securities laws.

Awards of punitive damages in actions brought in the United States or elsewhere are generally not enforceable in Luxembourg.

As there is no treaty in force on the reciprocal recognition and enforcement of judgments in civil and commercial matters between the United States and the Grand Duchy of Luxembourg, courts in Luxembourg will not automatically recognize and enforce a final judgment rendered by a U.S.

Awards of punitive damages in actions brought in the U.S.

or elsewhere are generally not enforceable in Luxembourg.

As there is no treaty in force on the reciprocal recognition and enforcement of judgments in civil and commercial matters between the U.S.

and Luxembourg, courts in Luxembourg will not automatically recognize and enforce a final judgment rendered by a U.S.

The enforceability in Luxembourg courts of judgments rendered by U.S.

courts will be subject, prior to any enforcement in Luxembourg, to the procedure and the conditions set forth in the Luxembourg procedural code, which conditions may include the following as of the date of this report (which may change):

• the judgment of the U.S.

court is final and enforceable ( exécutoire ) in the United States;

court had jurisdiction over the subject matter leading to the judgment (that is, its jurisdiction was in compliance both with Luxembourg private international law rules and with the applicable domestic U.S.

federal or state jurisdictional rules);

court applied to the dispute the substantive law that would have been applied by Luxembourg courts (based on recent case law and legal doctrine, it is not certain that this condition would still be required for enforcement ( exequatur) to be granted by a Luxembourg court);

• the judgment was granted following proceedings where the counterparty had the opportunity to appear and, if it appeared, to present a defense, and the decision of the foreign court must not have been obtained by fraud, but in compliance with the rights of the defendant;

court acted in accordance with its own procedural laws;

• the decisions and the considerations of the U.S.

court must not be contrary to Luxembourg international public policy rules or have been given in proceedings of a tax or criminal nature or rendered subsequent to an evasion of Luxembourg law ( fraude à la loi ).

Awards of damages made under civil liability provisions of the U.S.

federal securities laws, or other laws, which are classified by Luxembourg courts as being of a penal or punitive nature (for example, fines or punitive damages), might not be recognized by Luxembourg courts.

Ordinarily, an award of monetary damages would not be considered as a penalty, but if the monetary damages include punitive damages, such punitive damages may be considered a penalty.

In addition, actions brought in a Luxembourg court against us or the members of our Board of Directors and our officers to enforce liabilities based on U.S.

federal securities laws may be subject to certain restrictions.

In particular, Luxembourg courts generally do not award punitive damages.

courts will be subject to the procedure and the conditions set forth in the Luxembourg procedural code.

Litigation in Luxembourg is also subject to rules of procedure that differ from the U.S.

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The right to indemnification does not exist in the case of gross negligence, fraud or wrongful misconduct.

The rights and obligations among or between us and any of our current or former directors and officers are generally governed by the laws of the Grand Duchy of Luxembourg and are subject to the jurisdiction of the Luxembourg courts, unless such rights or obligations do not relate to or arise out of such persons’ capacities listed above.

The rights and obligations among or between us and any of our current or former directors and officers are generally governed by the laws of Luxembourg and are subject to the jurisdiction of the Luxembourg courts, unless such rights or obligations do not relate to or arise out of such persons’ capacities listed above.

Although there is doubt as to whether U.S.

courts would enforce this indemnification provision in an action brought in the United States under U.S.

courts would enforce this indemnification provision in an action brought in the U.S.

federal or state securities laws, this provision could make judgments obtained outside Luxembourg more difficult to enforce against our assets in Luxembourg or in jurisdictions that would apply Luxembourg law.

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insolvency and bankruptcy laws.

As a joint stock corporation organized under the laws of Luxembourg with its registered office in Luxembourg, we are subject to Luxembourg insolvency and bankruptcy laws in the event any insolvency proceedings are initiated against us including, among other things, Council Regulation (EC) No.

1346/2000 of May 29, 2000 on insolvency proceedings.

Should courts in another European country

determine that the insolvency and bankruptcy laws of that country apply to us in accordance with and subject to such EU regulations, the courts in that country could have jurisdiction over the insolvency proceedings initiated against us.

We are subject to Luxembourg insolvency and bankruptcy laws.

Should courts in another European country determine that the insolvency and bankruptcy laws of that country apply to us in accordance with and subject to such EU regulations, the courts in that country could have jurisdiction over the insolvency proceedings initiated against us.

Insolvency and bankruptcy laws in Luxembourg or the relevant other European country, if any, may offer our shareholders less protection than they would have under U.S.

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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-K

Item 1A. Risk Factors