What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 75 added, 55 removed, 455 unchanged (22% of the section changed)

1 unchanged sentence

Condensed Consolidated Statements of Operations

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

23 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

3 unchanged sentences

Foreign currency translation adjustments ( 7.7 ) ( 10.6 ) ( 14.7 ) ( 8.1 )

Net gains on derivatives 8.5 0.6 21.5 1.8

Net gains (losses) on derivatives 10.6 ( 1.8 ) 32.1 —

Defined benefit plans, net 0.2 0.9 0.4 2.9

4 unchanged sentences

Condensed Consolidated Balance Sheets

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(In millions, except share amounts)

43 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions)

48 unchanged sentences

Other comprehensive loss, net of tax — — — — — ( 10.2 ) ( 10.2 )

Dividends paid - $ 0.04 per share — — — — ( 2.5 ) — ( 2.5 )

Dividends $ 0.04 per share — — — — ( 2.5 ) — ( 2.5 )

Share based compensation — — — 1.6 — — 1.6

1 unchanged sentence

Balance at June 30, 2022 60,749,265 $ 85.3 $ ( 4.7 ) $ 72.1 $ 276.3 $ ( 33.8 ) $ 395.2

Net income — — — — 31.8 — 31.8

Other comprehensive income, net of tax — — — — — 3.1 3.1

Dividends $ 0.02 per share — — — — ( 1.3 ) — ( 1.3 )

Share based compensation — — — 1.9 — — 1.9

Issuance of stock under equity compensation plans 66,323 — — — — — —

Balance at September 30, 2022 60,815,588 $ 85.3 $ ( 4.7 ) $ 74.0 $ 306.8 $ ( 30.7 ) $ 430.7

Balance at January 1, 2021 60,487,117 $ 85.3 $ ( 8.5 ) $ 68.5 $ 84.4 $ ( 48.7 ) $ 181.0

8 unchanged sentences

Balance at June 30, 2021 60,590,526 $ 85.3 $ ( 7.3 ) $ 69.5 $ 197.0 $ ( 42.4 ) $ 302.1

Net income — — — — 21.0 — 21.0

Other comprehensive loss, net of tax — — — — — ( 11.5 ) ( 11.5 )

Share based compensation — — — 1.1 — — 1.1

Issuance of stock under equity compensation plans 42,776 — 0.8 ( 0.8 ) — — —

Balance at September 30, 2021 60,633,302 $ 85.3 $ ( 6.5 ) $ 69.8 $ 218.0 $ ( 53.9 ) $ 312.7

See accompanying Notes to these Condensed Consolidated Financial Statements

34 unchanged sentences

Accounts receivable, net of allowance for credit losses, are as follows:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(In millions)

3 unchanged sentences

Inventories, net of reserves, are as follows:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(In millions)

6 unchanged sentences

Debt and Other Obligations

The company financing arrangements are as follows:

June 30, 2022 December 31, 2021

The company’s financing arrangements are as follows:

September 30, 2022 December 31, 2021

(In millions)

10 unchanged sentences

In July 2014, Orion Group Holdings, Inc.

(the “Company”) entered in a credit agreement to establish long-term financing (“Term-Loan”) and in a multicurrency revolving credit facility (“RCF”) for the consolidated group.

(the “Company”) entered in a credit agreement to establish long-term financing (“Term-Loan”) and a multicurrency revolving credit facility (“RCF”) for the consolidated group.

Subsequent to 2014, we entered into a number of amendments related to Term-Loan and RCF.

In May of 2022, we added € 100 million of capacity to our RCF, which expands our facility to € 350 million ($ 363.5 million).

In May 2022, we added € 100 million of capacity to our RCF, which expands our facility to € 350 million ($ 341.2 million).

As part of the RCF, the Company can establish ancillary credit facilities by converting the commitments of select lenders under the € 350 million RCF into bilateral credit agreements.

1 unchanged sentence

Borrowings under ancillary credit facilities do not count toward debt drawn under the RCF for the purposes of determining whether the financial covenant under the Credit Agreement related to the RCF must be tested.

As of June 30, 2022 and December 31, 2021, committed ancillary credit facilities totaled $ 218.1 million and $ 192.5 million, respectively.

As of June 30, 2022, the total commitment of € 350 million was split between an € 140 million RCF tranche and € 210 million of bilateral ancillary facilities established directly with several banks under the RCF.

As of June 30, 2022, $ 51.9 million was outstanding under the RCF, and there were no borrowings under the RCF as of December 31, 2021.

During the third quarter of 2022, we increased our ancillary facility capacity by € 58 million.

As of September 30, 2022, the total commitment of € 350 million was split between an € 82 million RCF tranche and € 268 million of bilateral ancillary facilities established directly with several banks under the RCF.

As of September 30, 2022 and December 31, 2021, committed ancillary credit facilities totaled $ 261.5 million and $ 192.5 million, respectively.

As of September 30, 2022, $ 48.7 million was outstanding under the RCF, and there were no borrowings under the RCF as of December 31, 2021.

We classify amounts outstanding under the RCF as current in our Condensed Consolidated Balance Sheets as the borrowings are for short-term working capital needs, typically for one-month periods, and based on management’s intention to repay the amounts outstanding within one year from the date of drawing.

As of June 30, 2022 and December 31, 2021, availability under the RCF was $ 155.6 million and $ 166.7 million, respectively.

As of September 30, 2022 and December 31, 2021, availability under the RCF was $ 130.3 million and $ 166.7 million, respectively.

Orion Engineered Carbons S.A

2 unchanged sentences

The local credit lines in Brazil and Korea are with local banks that are not lenders under the RCF and were negotiated bilaterally.

The ancillary facilities (under RCF commitments) and uncommitted lines of credit outstanding is as follows:

June 30, 2022 December 31, 2021

The ancillary facilities (under RCF commitments) and uncommitted lines of credit outstanding are as follows:

September 30, 2022 December 31, 2021

(In millions)

15 unchanged sentences

The difference between the consideration received and the amount of consideration to be paid will be recognized as interest expense.

At June 30, 2022, the amount outstanding was $ 35.3 million.

At September 30, 2022, the amount outstanding was $ 33.1 million.

Due to the short maturity, the carrying value approximates the fair value.

11 unchanged sentences

In the Condensed Consolidated Statements of Cash Flows, this loan is reflected in Cash inflows related to current financial liabilities .

As of June 30, 2022, we are in compliance with our debt covenants.

Due to the short maturity, the carrying value approximates the fair value.

As of September 30, 2022, we are in compliance with our debt covenants.

For additional information relating to our debt, see “ Note J.

6 unchanged sentences

The market risk exposure is not hedged in a manner to completely eliminate the effects of changing market conditions on earnings or cash flow.

No significant concentration of credit risk existed as of June 30, 2022 or December 31, 2021.

No significant concentration of credit risk existed as of September 30, 2022 or December 31, 2021.

Orion Engineered Carbons S.A

2 unchanged sentences

The following table summarizes outstanding financial instruments that are measured at fair value on a recurring basis:

June 30, 2022 December 31, 2021 Balance Sheet Classification

September 30, 2022 December 31, 2021 Balance Sheet Classification

Notional Amount Fair Value Notional Amount Fair Value

13 unchanged sentences

Short-term and long-term debt are recorded at amortized cost in the Consolidated Balance Sheets.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Notional Amount Fair Value Notional Amount Fair Value

3 unchanged sentences

Term Loan in the table above is classified as Level 2.

At both June 30, 2022 and December 31, 2021, the fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and short term borrowings and variable rate debt approximated their carrying values due to the short-term nature of these instruments.

At both September 30, 2022 and December 31, 2021, the fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and short term borrowings and variable rate debt approximated their carrying values due to the short-term nature of these instruments.

Orion Engineered Carbons S.A

2 unchanged sentences

Effect of Financial Instruments

Three Months Ended Jun 30,

Three Months Ended Sep 30,

Gain (Loss) Recognized in AOCI Gain (Loss) Reclassified from AOCI to Income Income Statement Classification

6 unchanged sentences

Effect of Financial Instruments

Six Months Ended June 30,

Nine Months Ended September 30,

Gain (Loss) Recognized in AOCI Gain (Loss) Reclassified from AOCI to Income Income Statement Classification

14 unchanged sentences

Net periodic defined benefit pension costs include the following:

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

13 unchanged sentences

Balance at January 1, 2022 $ ( 34.1 ) $ ( 10.8 ) $ ( 3.6 ) $ ( 48.5 )

Other comprehensive income before reclassifications 11.2 18.7 — 29.9

Income tax effects before reclassifications 0.6 ( 6.0 ) — ( 5.4 )

Other comprehensive income 11.2 18.7 — 29.9

Income tax effects 0.6 ( 6.0 ) — ( 5.4 )

Currency translation AOCI — 0.3 0.1 0.4

Balance at March 31, 2022 $ ( 22.3 ) $ 2.2 $ ( 3.5 ) $ ( 23.6 )

Other comprehensive (loss) before reclassifications ( 18.5 ) 12.5 — ( 6.0 )

Income tax effects before reclassifications ( 0.3 ) ( 4.0 ) — ( 4.3 )

Other comprehensive (loss) ( 18.5 ) 12.5 — ( 6.0 )

Income tax effects ( 0.3 ) ( 4.0 ) — ( 4.3 )

Currency translation AOCI — — 0.1 0.1

Balance at June 30, 2022 ( 41.1 ) 10.7 ( 3.4 ) ( 33.8 )

Other comprehensive income (loss) ( 8.1 ) 16.5 — 8.4

Income tax effects 0.4 ( 5.2 ) — ( 4.8 )

Currency translation AOCI — ( 0.7 ) 0.2 ( 0.5 )

Balance at September 30, 2022 ( 48.8 ) 21.3 ( 3.2 ) ( 30.7 )

Balance at January 1, 2021 $ ( 26.5 ) $ ( 13.5 ) $ ( 8.7 ) $ ( 48.7 )

11 unchanged sentences

Balance at June 30, 2021 ( 23.9 ) ( 11.7 ) ( 6.8 ) ( 42.4 )

Other comprehensive income (loss) before reclassifications ( 10.4 ) ( 3.2 ) — ( 13.6 )

Income tax effects before reclassifications ( 0.3 ) 1.1 — 0.8

Amounts reclassified from AOCI — — 1.2 1.2

Income tax effects on reclassifications — — ( 0.4 ) ( 0.4 )

Currency translation AOCI — 0.3 0.2 0.5

Balance at September 30, 2021 $ ( 34.6 ) $ ( 13.5 ) $ ( 5.8 ) $ ( 53.9 )

Orion Engineered Carbons S.A

Notes to the Condensed Consolidated Financial Statements—(continued)

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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

6 unchanged sentences

Diluted EPS $ 0.52 $ 0.35 $ 1.53 $ 2.20

Orion Engineered Carbons S.A

Notes to the Condensed Consolidated Financial Statements—(continued)

The Company records its tax provision or benefit on an interim basis using an estimated annual effective tax rate.

4 unchanged sentences

Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised.

Income tax expense for the three months ended June 30, 2022 and 2021 were $ 12.8 million and $ 33.5 million, respectively.

Income tax expense for the six months ended June 30, 2022 and 2021 were $ 26.6 million and $ 41.8 million, respectively.

Income tax expense for the three months ended September 30, 2022 and 2021 were $ 11.7 million and $ 6.7 million, respectively.

Income tax expense for the nine months ended September 30, 2022 and 2021 were $ 38.3 million and $ 48.5 million, respectively.

Our effective income tax rates were as follows:

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Effective income tax rates 27.0 % 24.3 % 29.0 % 26.7 %

The increase in our effective tax rate for both the three and six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021, were primarily attributable to the projected earnings mix by geography and tax jurisdiction.

The increase in our effective tax rate for both the three and nine months ended September 30, 2022 as compared to the three and nine months ended September 30, 2021 were primarily attributable to the projected earnings mix by geography and tax jurisdiction.

Commitments and Contingencies

Environmental Matters

Restructuring— In 2016, the Company ceased operations at its plant in Ambes, France as part of the restructuring of its Rubber business segment.

Expenses related to the closing include personnel costs, demolition, removal costs and remediation costs.

Total estimated and recognized costs and total remaining costs to be paid as of June 30, 2022 are $ 46.1 million and $ 7.1 million, respectively.

Total estimated and recognized costs and total remaining costs to be paid as of September 30, 2022 are $ 46.1 million and $ 4.6 million, respectively.

Orion's reserves for the ceased operation at Ambes are reflected in Accrued liabilities on the Condensed Consolidated Balance Sheets.

Orion has accrued liabilities for personnel expenses of $ 3.1 million and $ 2.6 million, and for ground remediation costs of $ 4.0 million and $ 6.7 million, as of June 30, 2022 and December 31, 2021, respectively.

Environmental Reserves— Our accrued liability for future environmental reserves at our current and former plant sites and other sites totaled $ 5.3 million and $ 7.8 million as of June 30, 2022 and December 31, 2021, respectively.

Orion has accrued liabilities for personnel expenses of $ 2.9 million and $ 2.6 million, and for ground remediation costs of $ 1.7 million and $ 6.7 million, as of September 30, 2022 and December 31, 2021, respectively.

Environmental Reserves— Our accrued liability for future environmental reserves at our current and former plant sites and other sites totaled $ 4.9 million and $ 7.8 million as of September 30, 2022 and December 31, 2021, respectively.

Environmental-related costs are expected to occur over a number of years and are not concentrated in any single year.

5 unchanged sentences

We regularly assess the adequacy of legal accruals based on our professional judgment, experience and the information available regarding our cases.

Orion Engineered Carbons S.A

Notes to the Condensed Consolidated Financial Statements—(continued)

Based on a consideration of all relevant facts and circumstances, we do not believe the ultimate outcome of any currently pending lawsuit against us will have a material adverse effect upon our operations, financial condition or Condensed Consolidated Financial Statements.

13 unchanged sentences

facility in Orange (Texas) was issued by the EPA in February 2013, and the EPA issued an additional NOV in March 2016 alleging more recent non-PSD air emissions violations primarily at the dryers and the incinerator of the Orange facility.

Orion Engineered Carbons S.A

Notes to the Condensed Consolidated Financial Statements—(continued)

In 2013, Orion began discussions with the EPA and the U.S.

6 unchanged sentences

In addition, the EPA CD required Orion LLC to pay a fine of $ 0.8 million and perform other environmental mitigation projects that are not anticipated to be material.

As part of Orion LLC’s compliance plan under the EPA CD, Orion LLC installed SNOX TM emissions control technology to remove SO2, NOx and dust particles from tail gases at the Ivanhoe (Louisiana) facility.

Less stringent emissions controls were installed in accordance with the EPA CD at Orange (Texas).

The new emissions control equipment was successfully installed at Orange (in 2020) and in Ivanhoe (in 2021).

We have started construction on the two remaining sites in Belpre and Borger.

As of June 30, 2022, we have spent $ 256 million on Capital expenditures related to the EPA CD of which approximately $ 80 million was received as an indemnity payment from Evonik.

Less stringent emissions controls were installed in accordance with the EPA CD at Orange (Texas) in 2020.

We have started installation at the two remaining sites, Belpre and Borger.

As of September 30, 2022, we have spent $ 264 million on capital expenditures related to the EPA CD of which approximately $ 80 million was received as an indemnity payment from Evonik.

For further discussion refer to “Note Q.

2 unchanged sentences

The Company has pledged the majority of its assets (amongst others shares in affiliates, bank accounts and receivables) within the different regions excluding China as collateral under the debt agreements.

As of June 30, 2022, the Company had guarantees totaling $ 14.5 million issued by various financial institutions.

As of September 30, 2022, the Company had guarantees totaling $ 13.6 million issued by various financial institutions.

Financial Information by Segment

3 unchanged sentences

• Rubber Carbon Black —Used in the reinforcement of rubber in tires and mechanical rubber goods.

• Specialties —Used as pigments and performance additives in coatings, polymers, batteries, printing and special applications.

• Specialty Black Carbon —Used for protection, colorization and conductivity in coatings, polymers, batteries, printing and special applications.

Corporate includes income and expenses that cannot be directly allocated to the business segments or that are managed at the corporate level including:

6 unchanged sentences

Notes to the Condensed Consolidated Financial Statements—(continued)

Segment operating results for the three months ended June 30, 2022 and 2021 are as follows:

Segment operating results for the three months ended September 30, 2022 and 2021 are as follows:

Rubber Specialties Corporate Total Segments

11 unchanged sentences

Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment ( 13.3 ) ( 10.5 ) — ( 23.8 )

Gain related to litigation settlement — — 82.9 82.9

Excluding equity in earnings of affiliated companies, net of tax ( 0.1 ) — — ( 0.1 )

2 unchanged sentences

Income before earnings in affiliated companies and income taxes $ 27.6

Segment reconciliation for the six months ended June 30, 2022 and 2021:

Segment reconciliation for the nine months ended September 30, 2022 and 2021:

Rubber Specialties Corporate Total Segments

19 unchanged sentences

Expense from operations before income taxes and finance costs of the segment “ Corporate” comprises the following:

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

6 unchanged sentences

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