What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-09 · 101 added, 73 removed, 399 unchanged (30% 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,

2023 2022 2023 2022

5 unchanged sentences

Research and development costs 6.2 4.5 18.3 15.9

Other (income) expenses, net ( 2.7 ) 1.3 ( 3.7 ) 1.6

Other expenses, net 2.7 0.3 ( 1.0 ) 1.9

Income from operations 45.7 53.6 178.1 161.1

13 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,

2023 2022 2023 2022

9 unchanged sentences

Condensed Consolidated Balance Sheets

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions, except share data)

42 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions)

4 unchanged sentences

Amortization of debt issuance costs 2.0 1.4

Share-based incentive compensation 4.7 3.1

Share-based compensation 8.3 5.0

Deferred tax provision 5.5 2.8

22 unchanged sentences

Net cash provided by (used in) financing activities ( 164.9 ) 167.4

Increase (decrease) in cash, cash equivalents and restricted cash 16.4 ( 21.5 )

Decrease in cash, cash equivalents and restricted cash ( 2.2 ) ( 16.4 )

Cash, cash equivalents and restricted cash at the beginning of the period 63.4 68.5

5 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Common stock Total

(In millions, except share and per share amounts) Number Amount Treasury shares Additional paid-in capital Retained earnings Accumulated other comprehensive loss

Common stock Treasury shares Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total

(In millions, except share and per share amounts) Number Amount

Balance at January 1, 2023 60,571,556 $ 85.3 $ ( 8.8 ) $ 76.4 $ 319.0 $ ( 12.5 ) $ 459.4

13 unchanged sentences

Balance at June 30, 2023 58,640,846 $ 85.3 $ ( 54.0 ) $ 75.3 $ 387.7 $ ( 30.1 ) $ 464.2

Net income — — — — 26.2 — 26.2

Other comprehensive loss, net of tax — — — — — ( 0.5 ) ( 0.5 )

Dividends $ 0.02 per share — — — — ( 1.2 ) — ( 1.2 )

Repurchases of Common stock ( 432,710 ) — ( 9.4 ) — — — ( 9.4 )

Share based compensation — — — 3.6 — — 3.6

Balance at September 30, 2023 58,208,136 $ 85.3 $ ( 63.4 ) $ 78.9 $ 412.7 $ ( 30.6 ) $ 482.9

Balance at January 1, 2022 60,656,076 $ 85.3 $ ( 6.3 ) $ 71.4 $ 217.8 $ ( 48.5 ) $ 319.7

4 unchanged sentences

Balance at March 31, 2022 60,656,076 85.3 ( 6.3 ) 72.9 249.1 ( 23.6 ) 377.4

Net loss — — — — 29.7 — 29.7

Net income — — — — 29.7 — 29.7

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

3 unchanged sentences

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

See accompanying Notes to these Condensed Consolidated Financial Statements

14 unchanged sentences

and its subsidiaries (“Orion” or the “Company”).

The unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S.

Generally Accepted Accounting Principles (“GAAP”) and Article 10 of Regulation S-X.

The unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”) and Article 10 of Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements.

1 unchanged sentence

The accompanying unaudited Condensed Consolidated Financial Statements include all adjustments that are necessary for the fair presentation of our results for the interim periods presented.

These statements contain some amounts that are based upon management estimates and judgments.

Future actual results could differ from such current estimates.

Results for interim periods are not necessarily indicative of results to be expected for the full year.

1 unchanged sentence

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions)

1 unchanged sentence

Expected credit losses ( 1.6 ) ( 2.6 )

Accounts receivable, net of expected credit losses $ 269.6 $ 367.8

Accounts receivable, net $ 267.3 $ 367.8

Inventories, net of reserves, are as follows:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions)

Raw materials, consumables and supplies, net $ 115.9 $ 108.3

Work in process 0.1 —

Finished goods, net 160.9 169.6

2 unchanged sentences

Debt and other obligations are as follows:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions)

12 unchanged sentences

Interest is calculated based on three months EURIBOR (for the Euro-denominated loan) plus a margin of 2.50 %, or three-month USD-LIBOR (for the USD-denominated loan) plus a margin of 2.25 %.

Due to cessation of US dollar LIBOR after June 30, 2023 (“LIBOR cessation date”), in May 2023, the Company entered into the Eleventh Amendment to the Credit Agreement (the “Term-Loan”) to update the referenced floating benchmark rate.

dollar loan, 3-M USD-Libor will be replaced by USD Term SOFR 3M + CAS (Credit Adjustment Spread) effective for all interest rate periods after June 30, 2023.

Due to cessation of U.S.

dollar LIBOR after June 30, 2023 (“LIBOR cessation date”), in May 2023, the Company entered into the Eleventh Amendment to the Credit Agreement (the “Term-Loan”) to update the referenced floating benchmark rate.

dollar loan, 3-M USD-Libor was replaced by USD Term SOFR 3M + CAS (Credit Adjustment Spread) effective for all interest rate periods after June 30, 2023.

In August 2023, we entered into the 12th amendment, which primarily approved the merger of two of our wholly owned subsidiaries.

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

Revolving credit facility

The capacity under our revolving credit facility (“RCF”) is € 350 million.

In October 2023, Orion entered into the 13th Amendment, which amended and restated our revolving credit facility (“RCF”).

We voluntarily reduced the borrowing capacity under our amended RCF from € 350 million to € 300 million.

Interest is calculated based on EURIBOR plus a 1.65 % - 3.30 % margin (depending on leverage ratio).

At current leverage ratio (between 2.25 x and 2.75 x), the margin is at 2.30 %.

The amended RCF includes a sustainability-linked margin adjustment.

The credit spread will increase or decrease up to 5 basis points depending on two key performance indicators:

greenhouse gas intensity and environmental, social and governance rating from EcoVadis, a provider of corporate sustainability rating.

Covenant Compliance — There is one financial covenant under the amended RCF that will be tested when RCF utilization (including debt drawn under ancillary credit facility lines) exceeds 50 %.

Net Leverage, as defined in the Credit Agreement (the “Covenant Trigger”), is not permitted to exceed 4.0 x.

Other provisions of the Credit Agreement relating to the RCF remained unchanged.

As of September 30, 2023, the capacity under our RCF was € 350 million.

Interest is calculated based on EURIBOR (for euro drawings), and USD Term SOFR + CAS (for U.S.

Dollar drawings) plus a 1.65 % - 2.70 % margin (depending on leverage ratio).

As of June 30, 2023 and December 31, 2022, borrowings under the RCF were $ 27.2 million and $ 53.3 million, respectively.

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, 2023 and December 31, 2022, availability under the RCF was $ 205.0 million and $ 165.9 million, respectively.

Ancillary Credit Facilities —As part of the RCF, the Company can also establish ancillary credit facilities by converting the commitments of select lenders under the € 350.0 million RCF into bilateral credit agreements.

Original borrowings under ancillary credit facilities reduce availability under the RCF.

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, 2023 and December 31, 2022, committed ancillary credit facilities totaled $ 291.5 million and $ 286.1 million, respectively.

There were no borrowings under the RCF as of September 30, 2023.

As of December 31, 2022, borrowings under the RCF were $ 53.3 million.

As of September 30, 2023 and December 31, 2022, availability under the RCF was $ 234.4 million and $ 165.9 million, respectively.

Ancillary Credit Facilities —As part of the RCF, the Company may also establish ancillary credit facilities by converting the commitments of select lenders under the RCF into bilateral credit agreements.

Borrowings under the ancillary credit facilities reduce RCF availability.

For RCF financial covenant testing, borrowing under ancillary credit facilities are considered debt drawn under the RCF, as discussed elsewhere in this footnote.

As of September 30, 2023 and December 31, 2022, committed ancillary credit facilities totaled $ 284.2 million and $ 286.1 million, respectively.

Notes to the Condensed Consolidated Financial Statements—(continued)

Other Short-Term borrowings and Obligations

Other short-term debt and obligations are as follows:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In millions)

14 unchanged sentences

$ $ 284.2 $ 286.1

Notes to the Condensed Consolidated Financial Statements—(continued)

As of June 30, 2023, we are in compliance with our debt covenants.

As of September 30, 2023, we are in compliance with our debt covenants.

Accounts Receivable Factoring Facilities ― We entered into agreements with various third-party financial institutions for the sale of certain Accounts receivable.

3 unchanged sentences

• We do not retain effective control over the transferred financial assets.

For the three and nine months ended September 30, 2023, the gross amount of receivables sold were as $ 106.2 million and $ 300.4 million, respectively.

No sales were made in 2022.

In the Condensed Consolidated Statements of Operations, the loss on receivables sale is reflected in Other expenses, net.

For the three and six months ended June 30, 2023 the loss on receivables sale were not material.

No sales were made during 2022.

For the three and six months ended June 30, 2023, the gross amount of receivables sold were as $ 125.2 million and $ 194.1 million, respectively.

For the three and nine months ended September 30, 2023 the loss on receivables sale were $ 1.3 million and $ 3.1 million, respectively.

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, 2023 or December 31, 2022.

No significant concentration of credit risk existed as of September 30, 2023 or December 31, 2022.

Cash flow hedge

Due to LIBOR cessation, the Company in May 2023 amended its previously existing cross-currency swaps in the amount of $ 197 million to update the referenced floating benchmark rate.

The effective date to transition from US dollar LIBOR 3M to US dollar Term SOFR 3M + CAS (Credit Adjustment Spread) will be on September 29, 2023.

We transitioned from US dollar LIBOR 3M to US dollar Term SOFR 3M + CAS (Credit Adjustment Spread) on September 29, 2023.

Other terms of the cross-currency swaps remained unchanged.

The cross-currency swap will expire on September 30, 2028, in line with the maturity of the term loan.

Notes to the Condensed Consolidated Financial Statements—(continued)

In 2021 we adopted Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 848, Reference Rate Reform (“ASC 848 ”).

3 unchanged sentences

• The cross-currency swaps in cash-flow hedging relationships were not de-designated as a result of the modifications and continue to be highly effective and qualify for hedge accounting.

Notes to the Condensed Consolidated Financial Statements—(continued)

Fair value measurement

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

June 30, 2023 December 31, 2022 Balance Sheet Classification

September 30, 2023 December 31, 2022 Balance Sheet Classification

Notional Amount Fair Value Notional Amount Fair Value

10 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Notional Amount Fair Value Notional Amount Fair Value

5 unchanged sentences

Term-Loan and China Term-Loan in the table above are classified as Level 2.

At both June 30, 2023 and December 31, 2022, the fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, short term borrowings and variable rate debt approximated their carrying values due to the short-term nature of these instruments.

At both September 30, 2023 and December 31, 2022, the fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, short term borrowings and variable rate debt approximated their carrying values due to the short-term nature of these instruments.

Notes to the Condensed Consolidated Financial Statements—(continued)

1 unchanged sentence

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,

2023 2022 2023 2022

12 unchanged sentences

Balance at January 1, 2023 $ ( 47.5 ) $ 24.4 $ 10.6 $ ( 12.5 )

Other comprehensive income (loss) before reclassifications ( 7.8 ) ( 3.3 ) — ( 11.1 )

Income tax effects 0.5 1.0 — 1.5

Other comprehensive loss before reclassifications ( 7.8 ) ( 3.3 ) — ( 11.1 )

Income tax effects before reclassifications 0.5 1.0 — 1.5

Amounts reclassified from AOCI — 0.4 ( 2.2 ) ( 1.8 )

2 unchanged sentences

Balance at March 31, 2023 ( 54.8 ) 22.6 9.2 ( 23.0 )

Other comprehensive (loss) ( 5.1 ) ( 0.5 ) — ( 5.6 )

Income tax effects ( 0.1 ) 0.2 — 0.1

Other comprehensive loss before reclassifications ( 5.1 ) ( 0.5 ) — ( 5.6 )

Income tax effects before reclassifications ( 0.1 ) 0.2 — 0.1

Amounts reclassified from AOCI — 0.4 ( 2.3 ) ( 1.9 )

2 unchanged sentences

Balance at June 30, 2023 ( 60.0 ) 22.2 7.7 ( 30.1 )

Other comprehensive income before reclassifications 0.5 2.3 — 2.8

Income tax effects before reclassifications ( 0.2 ) ( 0.7 ) — ( 0.9 )

Amounts reclassified from AOCI — 0.4 ( 2.2 ) ( 1.8 )

Income tax effects on reclassifications — ( 0.1 ) 0.7 0.6

Currency translation AOCI — ( 1.0 ) ( 0.2 ) ( 1.2 )

Balance at September 30, 2023 $ ( 59.7 ) $ 23.1 $ 6.0 $ ( 30.6 )

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

Other comprehensive loss before reclassifications 11.2 18.7 — 29.9

Other comprehensive income before reclassifications 11.2 18.7 — 29.9

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

1 unchanged sentence

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

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

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

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

1 unchanged sentence

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

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

Income tax effects before reclassifications 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 )

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,

2023 2022 2023 2022

6 unchanged sentences

Diluted EPS $ 0.44 $ 0.52 $ 1.65 $ 1.53

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, 2023 and 2022 were $ 17.8 million and $ 12.8 million, respectively.

Income tax expense for the six months ended June 30, 2023 and 2022 were $ 36.1 million and $ 26.6 million, respectively.

Income tax expense for the three months ended September 30, 2023 and 2022 were $ 8.9 million and $ 11.7 million, respectively.

Income tax expense for the nine months ended September 30, 2023 and 2022 were $ 45.0 million and $ 38.3 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,

2023 2022 2023 2022

Effective income tax rates 25.4 % 27.0 % 31.4 % 29.0 %

The increase in our effective tax rate for the three and six months ended June 30, 2023 as compared to the three and six months ended June 30, 2022 was primarily attributable to the projected earnings mix by geography and tax jurisdiction.

The change in our effective tax rate for the three and nine months ended September 30, 2023 as compared to the three and nine months ended September 30, 2022 was primarily attributable to changes in projected pre-tax income mix in countries with varying statutory tax rates.

Commitments and Contingencies

2 unchanged sentences

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

The outcome of legal proceedings is inherently uncertain, and we offer no assurances as to the outcome of any of these matters or their effect on the Company.

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.

City of Hürth, Germany (Stadtwerke Hürth/Hürth municipal utilities) —In 2020, one of our wholly-owned subsidiaries and the City of Hürth started a long-term steam supply to the City of Hürth.

The Hürth municipality financed certain turbines and infrastructure, which are operated by us under a finance lease agreement.

In addition, we entered into a long-term supply agreement with the City of Hürth for delivery of heat.

Since the fourth quarter of 2020, the City of Hürth has not fully honored the contractually stipulated calculation for heat deliveries, amongst other stipulations.

As a result, Orion had open receivables from the City of Hürth totaling $ 7.2 million and $ 9.8 million as of June 30, 2023 and December 31, 2022, respectively.

Open lease payments to the City of Hürth accrued to approximately $ 5.2 million and $ 7.0 million as of June 30, 2023 and December 31, 2022, respectively.

In June 2023, we and the City of Hürth resolved the disagreement and net settled outstanding receivables and lease liabilities for the years ended 2020 and 2021.

In addition, we and the City of Hürth resolved the disagreement on certain contract terms for periods after the year 2021.

The settlement did not materially impact the Condensed Consolidated Statements of Operations.

EPA Action— Under the EPA CD, Orion LLC had to install certain pollution control technology in order to further reduce emissions at its four U.S.

manufacturing facilities.

In line therewith, Orion LLC installed emissions control technology to remove SO2, NOx and dust particles from tail gases at its Borger (Texas) facility beginning of 2023, and its Ivanhoe (Louisiana) facility in 2021.

Further emissions controls were installed in accordance with the EPA CD at Orion’s facility in Orange (Texas) in 2020.

In line therewith, Orion LLC completed installation of emissions control technology to remove SO2, NOx and dust particles from tail gases at its Borger (Texas) facility since the beginning of 2023, Ivanhoe (Louisiana) facility in 2021 and Orange (Texas) facility in 2020.

The installation of pollution control technology at its fourth and last U.S.

manufacturing facility in Belpre (Ohio) is ongoing and is scheduled to be completed in 2023, in line with the EPA CD terms.

manufacturing facility in Belpre

Notes to the Condensed Consolidated Financial Statements—(continued)

(Ohio) is ongoing and is scheduled to be completed late 2023, in line with the EPA CD terms.

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

As of June 30, 2023, we have spent $ 296 million on Capital expenditures related to the EPA CD of which approximately $ 80 million was received as an indemnity payment from Evonik.

As of September 30, 2023, we have spent $ 303 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 on EPA Action 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 in which it operates excluding China as collateral under its debt agreements.

As of June 30, 2023, the Company had guarantees totaling $ 25.9 million issued by various financial institutions.

Notes to the Condensed Consolidated Financial Statements—(continued)

As of September 30, 2023, the Company had guarantees totaling $ 25.2 million issued by various financial institutions.

Financial Information by Segment

10 unchanged sentences

The CODM does not review reportable segment asset or liability information for purposes of assessing performance or allocating resources.

Segment operating results for the three months ended June 30, 2023 and 2022 are as follows:

Segment operating results for the three months ended September 30, 2023 and 2022 are as follows:

Rubber Specialty Corporate Total

12 unchanged sentences

Notes to the Condensed Consolidated Financial Statements—(continued)

Segment operating results for the six months ended June 30, 2023 and 2022:

Rubber Specialty Corporate Total Segments

Segment operating results for the nine months ended September 30, 2023 and 2022:

Rubber Specialty Corporate Total

(In millions)

11 unchanged sentences

A reconciliation of Income before earnings in affiliated companies and income taxes to Adjusted EBITDA for each of the periods presented is as follows:

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

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

2023 2022 2023 2022

8 unchanged sentences

Corporate charges include the following:

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

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

2023 2022 2023 2022

5 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