What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-24 · 228 added, 282 removed, 1030 unchanged (33% of the section changed)

2 unchanged sentences

Reports of Independent Registered Public Accounting Firms (PCAOB ID:

42 and PCAOB ID:

Consolidated Statements of Operations

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Notes to the Consolidated Financial Statements

Orion Engineered Carbons S.A.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Orion Engineered Carbons S.A.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Orion Engineered Carbons S.A.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with the U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (2013 framework) and our report dated February 23, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Inventory Reserves- Valuation

Description of the Matter

As discussed in Note A and D of the financial statements, the Company records an adjustment to the cost basis of inventory when evidence exists that the net realizable value of inventory is lower than its cost, which occurs when the Company has excess or obsolete inventory.

The Company's model to estimate excess or obsolete inventory is based on an analysis of existing inventory quantities compared to historical and expected future consumption.

Expected future consumption is estimated based upon historical consumption, recent purchase volumes, product age and condition, and market factors.

Auditing management's reserves for excess or obsolete inventories associated with spare parts and finished goods involved significant auditor judgement because write-downs of inventories are based on subjective factors including inventory condition and projected sales and usage of inventory which are affected by market and economic conditions outside the Company’s control.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's inventory reserve process.

This included management's assessment of the assumptions and data underlying the inventory reserve.

Our substantive audit procedures included, among others, evaluating the significant assumptions stated above and the accuracy and completeness of the underlying data management used to value excess or obsolete inventory.

We compared inventories on-hand to historical usage and forecasts of future demand obtained from entity-specific and available market information.

We also performed sensitivity analyses over the significant assumptions to evaluate the changes in the excess and obsolete inventory estimates that would result from changes in the underlying assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2021.

February 23, 2023

Orion Engineered Carbons S.A.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Orion Engineered Carbons S.A.

To the Shareholders and the Board of Directors of Orion S.A.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive income, changes in stockholders' equity and cash flows of Orion Engineered Carbons S.A.

(the Company) for the year ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated results of the Company’s operations and its cash flows for the year ended December 31, 2020 in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Orion S.A.

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 14, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young GmbH

We have served as the Company’s auditor from 2011 to 2021

Cologne, Germany

Critical Audit Matter

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

Valuation of Cross-Currency Swaps

Description of the Matter As discussed in notes A and K to the consolidated financial statements, the Company’s financial instruments held a fair value of $35.9 million as of December 31, 2023, of which financial instruments related to cross-currency swaps totaled $31.3 million for the year ended December 31, 2023.

The fair value of the cross-currency swaps are calculated using the present value of future cash flows discounted using observable inputs (level 2) including notional value amounts, yield curves, basis curves, and various spot and forward foreign exchange rates on the valuation date.

We identified the valuation of the cross-currency swaps as a critical audit matter.

The nature of the arrangement is such that there are multiple legs, with multiple payments, in several periods that creates complexity in the fair value model and requires the use of valuation specialists.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s derivatives process.

This included key controls related to the authorization of transactions and management's independent assessment of fair values.

Our substantive audit procedures to test the Company’s cross-currency swaps included, among others, confirmation of existence and key terms with the counterparty.

Testing the valuation of cross currency swaps, including, an evaluation of the methodologies and significant inputs used by the Company.

With the assistance of our valuation specialists, we performed an independent valuation of the cross-currency swaps to assess the appropriateness of the model used by the Company and its specialist to estimate the fair value, which involved independently obtaining significant inputs from external sources.

We also assessed the adequacy of the disclosures related to the fair value measurement.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2021.

February 14, 2024

Orion Engineered Carbons S.A

Consolidated Statements of Operations

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Gain related to litigation settlement — — ( 82.9 )

Other expenses, net 2.9 8.6 21.6

Other expenses/(income) ( 0.7 ) 2.9 8.6

Income from operations 205.3 197.1 228.5

Interest and other financial expense, net 50.9 39.9 38.0

Reclassification of actuarial losses from AOCI — 4.8 9.9

Reclassification of actuarial (gains)/losses from AOCI ( 8.9 ) — 4.8

Income before earnings in affiliated companies and income taxes 163.3 157.2 185.7

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The accompanying notes are an integral part of these Consolidated Financial Statements.

Orion Engineered Carbons S.A

Consolidated Statements of Comprehensive Income

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The accompanying notes are an integral part of these Consolidated Financial Statements.

Orion Engineered Carbons S.A

Consolidated Balance Sheets

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The accompanying notes are an integral part of these Consolidated Financial Statements.

Orion Engineered Carbons S.A

Consolidated Statements of Cash Flows

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Amortization of debt issuance costs 2.7 1.9 4.1

Share-based incentive compensation 7.7 5.2 4.4

Deferred tax (benefit) provision 7.2 20.3 ( 12.2 )

Stock-based incentive compensation 15.4 7.7 5.2

Deferred tax provision 6.3 7.2 20.3

Foreign currency transactions 5.0 ( 8.4 ) ( 11.5 )

Reclassification of actuarial losses from AOCI — 4.8 9.9

Reclassification of actuarial (gains)/losses from AOCI ( 8.9 ) — 4.8

Other operating non-cash items, net 0.8 ( 0.3 ) ( 1.8 )

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Cash outflows related to current financial liabilities ( 417.9 ) ( 107.7 ) ( 112.6 )

Dividends paid to shareholders ( 5.0 ) — ( 12.0 )

Dividends paid to stockholders ( 4.9 ) ( 5.0 ) —

Repurchase of common stock under Stock Repurchase Program ( 65.6 ) ( 4.3 ) —

Other financing activities — ( 0.2 ) ( 2.9 )

Net cash provided by financing activities 149.3 73.3 13.5

Net cash provided by (used in) financing activities ( 197.1 ) 149.3 73.3

Increase (decrease) in cash, cash equivalents and restricted cash ( 24.0 ) ( 2.5 ) 3.8

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The accompanying notes are an integral part of these Consolidated Financial Statements.

Orion Engineered Carbons S.A

Consolidated Statements of Changes in Stockholders’ Equity

(In millions, except share and per share data) Number Amount Treasury shares Additional

(In millions, except share and per share data) Number Amount Treasury stock Additional

capital Retained

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Net income — — — — 134.7 — 134.7

Other comprehensive loss, net of tax — — — — — ( 14.4 ) ( 14.4 )

Other comprehensive income, net of tax — — — — — 0.2 0.2

Dividends - $ 0.02 per share

— — — — ( 1.3 ) — ( 1.3 )

Share based compensation — — — 2.9 — — 2.9

Stock based compensation — — — 5.1 — — 5.1

Issuance of stock under equity compensation plans 168,959 — 2.2 ( 2.2 ) — — —

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Dividends - $ 0.08 per share — — — — ( 5.0 ) — ( 5.0 )

Share based compensation — — — 5.1 — — 5.1

Repurchases of Common stock ( 244,032 ) — ( 4.3 ) — — — ( 4.3 )

Stock based compensation — — — 7.7 — — 7.7

Issuance of stock under equity compensation plans 159,512 — 1.8 ( 2.7 ) — — ( 0.9 )

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Net income — — — — 103.5 — 103.5

Other comprehensive income, net of tax — — — — — 36.0 36.0

Other comprehensive loss, net of tax — — — — — ( 27.4 ) ( 27.4 )

Dividends - $ 0.08 per share — — — — ( 4.9 ) — ( 4.9 )

Repurchases of Common stock ( 2,895,664 ) — ( 65.6 ) — — — ( 65.6 )

Share based compensation — — — 7.7 — — 7.7

Stock based compensation — — — 15.4 — — 15.4

Issuance of stock under equity compensation plans 222,880 — 4.3 ( 6.2 ) — — ( 1.9 )

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The accompanying notes are an integral part of these Consolidated Financial Statements.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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Related Parties

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

Significant Accounting Policies

Orion Engineered Carbons S.A.

(“Orion”, the “Company”, “we”, “us”, “our”, or “OEC”) is a Luxembourg joint stock corporation (société anonyme or S.A.), incorporated on July 28, 2014 as a Luxembourg limited liability company (société à responsabilité limitée).

Orion S.A.’s (formerly, Orion Engineered Carbons S.A.) Consolidated Financial Statements include Orion S.A.

and its subsidiaries (“Orion”, the “Company”, “we”, “us”, “our”, or “OEC”).

Orion is a Luxembourg joint stock corporation (société anonyme or S.A.), incorporated in 2014 as a Luxembourg limited liability company (société à responsabilité limitée).

Principles of Consolidation

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GAAP” or “GAAP”).

The Consolidated Financial Statements include the accounts of Orion Engineered Carbons S.A.

The Consolidated Financial Statements include the accounts of Orion S.A.

and its wholly-owned subsidiaries and majority–owned and controlled entities.

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Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents comprise bank balances, checks and cash on hand and include highly liquid investments with maturities of three-months or less at the date of purchase.

Cash and cash equivalents comprise bank balances and cash on hand and include highly liquid investments with maturities of three-months or less at the date of purchase.

We record cash and cash equivalents as restricted when we are unable to freely use such cash and cash equivalents for our general operating purposes.

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Past due balances are written-off against credit loss allowance when the accounts are deemed no longer to be collectible.

We enter into agreements with various third-party financial institutions for the sale of certain Accounts receivable.

We have concluded that there would generally be no risk of loss to us from non-payment of the sold receivables because:

• The transferred financial assets are isolated beyond the reach of our creditors, even in bankruptcy or other receivership;

• The party purchasing accounts receivables has the right to pledge and or exchange the transferred assets without restrictions;

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

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

The Company values inventory at the lower of cost or net realizable value using the average cost method.

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Routine maintenance costs are expensed as incurred.

Notes to the Consolidated Financial Statements

Depreciation is computed using the straight-line method over the estimated useful lives of assets.

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We evaluate property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Long-lived assets are grouped at the lowest level for which there are identifiable cash flows that are

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

largely independent of the cash flows of other groups of assets, which, for us, is generally at the plant group level.

Long-lived assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which, for us, is generally at the plant group level.

If it is determined that an asset or asset group’s undiscounted future cash flows will not be sufficient to recover the carrying amount, the asset is written down to its estimated fair value.

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We have investments in Kommanditgesellschaft Deutsche Gasrußwerke GmbH & Co and Kommanditgesellschaft Deutsche Gasrußwerke GmbH & Co , (together “DGW”), which are accounted for using the equity method.

Notes to the Consolidated Financial Statements

The income tax for the period comprises current and deferred tax.

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Valuation allowances are provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

We recognize uncertain income tax positions in our financial statements when we believe it is more likely than not, based on the technical merits, that the position or a portion thereof will be sustained upon examination.

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Exchange gains and losses, resulting from the settlement of such transactions and from remeasurement of monetary assets and liabilities denominated in foreign currencies at period-end exchange rates, are recognized in Interest and other financial expense, net in the Consolidated Statements of Operations.

Notes to the Consolidated Financial Statements

Revenue Recognition

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Shipping and handling activities that occur after the transfer of control to the customer are billed to customers and are recorded as sales revenue, as we consider these to be fulfillment costs.

Shipping and handling costs are expensed in the period incurred and included in Selling, general and administration expenses in our Consolidated Statements of Operations.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

Shipping and handling costs are expensed in the period incurred and are included in Selling, general and administration expenses in our Consolidated Statements of Operations.

Payment terms on product sales to our customers typically range from 30 to 90 days.

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Stock-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards.

We use a Monte Carlo model to determine the fair value of certain share-based awards that contain market and performance-based conditions.

We use a Monte Carlo model to determine the fair value of certain stock-based awards that contain market and performance-based conditions.

The use of these models requires highly subjective assumptions, such as assumptions about the expected life of the award, vesting probability, expected dividend yield and the volatility of our stock price.

Compensation expense for liability-classified share-based awards are recognized on a straight-line basis over the vesting period as a liability and remeasured, at fair value, at the balance sheet date.

Compensation expense for liability-classified stock-based awards are recognized on a straight-line basis over the vesting period as a liability and remeasured, at fair value, at the balance sheet date.

At inception of a contract, we determine if the contract contains a lease.

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Cash flows for derivatives with a significant financing element are classified as Cash flows from financing activities.

Notes to the Consolidated Financial Statements

Cash Flow Hedges —We enter into accounting cash flow hedges to manage the variability in cash flows of a future transaction.

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dollars from our counterparties.

Net Investment Hedges —We enter into foreign currency derivatives and foreign currency denominated debt to reduce the volatility in shareholders’ equity resulting from changes in currency exchange rates of our foreign subsidiaries with respect to the U.S.

Net Investment Hedges —We enter into foreign currency derivatives and foreign currency denominated debt to reduce the volatility in stockholders’ equity resulting from changes in currency exchange rates of our foreign subsidiaries with respect to the U.S.

Our foreign currency derivatives consist of cross-currency contracts and forward exchange contracts.

For derivatives designated as accounting net investment hedges, gains or losses attributable to changes in spot foreign exchange rates over the designation period are reflected in foreign currency translation adjustments within Other comprehensive income (loss).

Recognition in

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

earnings is delayed until the net investment is sold or substantially liquidated.

Recognition in earnings is delayed until the net investment is sold or substantially liquidated.

At that time, the amount recognized is reported in the same line item as the gain or loss on the liquidation of the hedged foreign operations.

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The carrying amounts that we have reported for financial instruments, including Cash and cash equivalents, Restricted cash and cash equivalents, Accounts receivable, Accounts payable and Short-term debts, approximate their fair values due to the short maturity of those instruments.

Notes to the Consolidated Financial Statements

Employee Benefits

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An asset or liability may result from advance payments or payments due, respectively, to a defined contribution fund.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

Classification

Certain prior year amounts have been reclassified to conform with the current year presentation.

Previously reported financial statements presentation have been adjusted to reflect the following changes:

Income Taxes, Uncertain tax position was previously reported in Rate reconciliation table as component of Other tax effects.

In addition, Deferred compensation and Other Deferred tax assets were previously reported in Significant components of deferred income taxes table as component of Others.

During the fourth quarter of 2023, we concluded that separate classification of those items better reflects the Rate reconciliation and Significant components of deferred income taxes tables.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Government Assistance —On November 17, 2021, the FASB issued Accounting Standards Update (ASU) No.

2021-10, Disclosures by Business Entities About Government Assistance, which requires business entities to provide certain disclosures when they have received government assistance and use a grant or contribution accounting model by analogy to other accounting guidance (e.g., a grant model under IAS 20, Accounting for Government Grants and Disclosure of Government Assistance ;

ASC 958-605, Not-for-Profit Entities—Revenue Recognition ).

The guidance is effective for financial statements issued for annual periods beginning after December 15, 2021.

Entities may apply the ASU’s provisions either (1) prospectively to all transactions within the scope of ASC 832 that are reflected in the financial statements as of the adoption date and all new transactions entered into after the date of adoption or (2) retrospectively.

We adopted this standard on January 1, 2022.

The adoption of this standard did not materially impact our Consolidated Financial Statements.

Recently Issued Accounting Standards Not Yet Adopted

Segment— In November 2023, the Financial Account Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment.

• Introduces a new requirement to disclose significant segment expenses regularly provided to the chief operating decision maker (“CODM”),

• Extends certain annual disclosures to interim periods,

• Permits more than one measure of segment profit or loss to be reported under certain conditions, and

• Requires disclosure of the title and position of the CODM.

However, but does not change how the CODM is identified.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We believe, the adoption of this ASU will not materially impact our Consolidated Financial Statements, however will require additional segment disclosures in Note R.

Segment Financial Information.

Income Taxes— In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures .

• Establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements.

• Requires disaggregated information about a reporting entity’s effective tax rate reconciliation.

• Requires disaggregated information about a reporting entity’s information on income taxes paid.

• Requires all entities to disclose annually income taxes paid (net of refunds received) disaggregated by federal (national), state and foreign taxes and to disaggregate the information by jurisdiction based on a quantitative threshold.

• Is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We believe, the adoption of this ASU will not materially impact our Consolidated Financial Statements, however will require additional disclosures in Note P.

Income Taxes.

Notes to the Consolidated Financial Statements

Accounts Receivable

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Allowance for credit losses as of December 31, $ ( 1.2 ) $ ( 2.6 )

Accounts Receivable Factoring ―For the fiscal year ended December 31, 2023, the gross amount of receivables sold was $ 427.2 million.

For the fiscal year ended December 31, 2023 the loss on receivables sale was $ 4.4 million.

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

No sales were made in 2022.

Inventories, net of reserves, at December 31, are as follows:

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As of December 31, 2023 and 2022, inventory reserves were approximately $ 25.4 million and $ 21.4 million, respectively.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

The inventory reserve primarily relates to spare-parts and finished goods.

Prepaid Expenses and Other Current Assets and Other Assets

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Total $ 74.4 $ 66.8

Notes to the Consolidated Financial Statements

Other assets, at December 31, consist of the following components:

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Total $ 23.3 $ 18.8 $ 17.8

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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$ 30.5 $ 45.6 $ 76.1

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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Total $ 43.7 $ 34.4

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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(a) Term Loan

In 2014, Orion entered into Credit Agreement, which included an $ 895.0 million term loan, which was allocated to a term loan facility denominated in U.S.

In 2014, Orion entered into credit agreement (the “Credit Agreement”), which included an $ 895.0 million term loan, which was allocated to a term loan facility denominated in U.S.

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

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At least 1 % of the principal amount is required to be repaid per annum.

Subsequent to 2014, Orion entered into a number of amendments, achieving a significant reduction of both interest margins to 2.00 % for the U.S.

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

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

In 2017, the duration of the Prior Term Loans was extended to July 25, 2024.

In September 2021, Orion entered into the Ninth Amendment to the Credit Agreement, which includes an amended and restated term loan agreement (the "Term Loans").

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1 % of the principal amount is required to be repaid per annum in respect to the USD-denominated loans, whereas there is no scheduled amortization for the Euro-denominated loans.

The Credit Agreement was also amended to include LIBOR replacement language in preparation for the eventual phase out of the London Interbank Offered Rate (LIBOR).

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 to update the referenced floating benchmark rate.

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

The Term Loans include a sustainability-linked margin adjustment that applies to both the Euro and U.S.

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Starting in 2022 and continuing through 2025, the Company reviews annually whether both interim targets have been met.

The review of 2022 is in process.

If the Company achieves both targets, it will benefit from up to a 10 -basis point credit spread reduction for the prospective 12 months period following the submission of the annual ESG compliance certificate.

For the period from 2026 to 2028, a margin step-up by 5 or 10 basis points would occur if Orion does not maintain the reduced emissions profile of one or both targets.

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

Orion Engineered Carbons S.A

During 2023, the Company received a 10 basis point interest rate reduction on its sustainability linked Term-Loan because it met 2022 emissions target.

Notes to the Consolidated Financial Statements

In connection with the September 2021 modification of the Term Loan, Orion incurred approximately $ 7.8 million of refinancing costs of which $ 2.8 million of loan origination costs were capitalized and $ 5.0 million of other fees were directly expensed.

The Term Loan interest rates as of December 31, 2022 and 2021 were as follows:

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

The Term Loan interest rates as of December 31 were as follows:

Euro-denominated Term Loan 5.60 % 2.80 %

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To partially finance the construction of our Huaibei facility in China, on March 16, 2022, our wholly owned subsidiary, Orion Engineered Carbons (Huaibei) Co., Ltd.

(“OECCL”), entered into a 4.5 % fixed interest rate, CNY 500 million (approximately $ 72 million), eight-year term-loan agreement with The Bank of China (“BOC Term-Loan”) maturing on December 21, 2029.

OECCL is required to repay the BOC Term-Loan principal in semi-annual payments beginning June 2024.

(“OECCL”), entered into a 4.5 % fixed interest rate, CNY 500 million (approximately $ 70 million), eight-year term-loan agreement with The Bank of China (“China Term-Loan”) maturing on December 21, 2029.

OECCL is required to repay the China Term-Loan principal in semi-annual payments beginning June 2024.

Interest is payable quarterly, beginning June 2022.

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2 % in 2024, 10 % in 2025 and 22 % each year thereafter, concluding in June 2029.

The BOC Term-Loan is secured with the Huaibei facility’s land, construction in progress, and buildings as collateral.

The China Term-Loan is secured with the Huaibei facility’s land, construction in progress, and buildings as collateral.

As of December 31, 2023, we have drawn $ 58.6 million on the facility.

Other short-term debt and obligations, at December 31, 2022 and 2021, as follows :

Other short-term debt and obligations, at December 31 were as follows:

(In millions)

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OEC LLC outstanding borrowings 21.1 5.4

Uncommitted Local Lines of Credit:

Korea (capacity $ 45.6 million)

Brazil (capacity $ 2.9 million)

Korea Working Capital Loan 7.9 —

Brazil Uncommitted Local Lines of Credit (capacity $ 3.2 million)

Korea Working Capital Loan (capacity $ 40.5 million)

Uncommitted 1.9 —

Committed 20.1 7.9

China Working Capital Loan 2.8 1.5

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Revolving Credit Facility

In 2014, under the Credit Agreement, we entered into a € 115.0 million multicurrency revolving credit facility (“RCF”) with an original maturity date of July 25, 2019.

In 2014, under the Credit Agreement, we entered into a € 115.0 million multicurrency revolving credit facility (“Prior RCF”) with an original maturity date of July 25, 2019.

Interest is calculated based on EURIBOR (for euro drawings), and USD-LIBOR (for U.S.

Dollar drawings) plus a 2.5 % - 3.0 % margin (depending on leverage ratio).

Subsequent to 2014, Orion entered into a number of amendments, which largely were made to increase the RCF capacity.

The RCF amendment completed in April 2019, extended the RCF maturity date to April 25, 2024, increased the aggregate amount of revolving credit commitments in Euro by € 75.0 million and reduced the interest margin to a 1.7 % to 2.7 % range, using a revised pricing grid.

In May 2022, we added an additional € 100 million of capacity to our RCF which expands our facility to € 350.0 million.

All other terms of the RCF remained substantially unchanged, including the commitment fee, which remains at 35 % of the interest margin or 0.8 % at December 31, 2022.

As of and for the year ended December 31, 2022, $ 53.3 million and RCF borrowings, as defined in the RCF agreement, had been drawn.

There were no amounts drawn during 2021.

We classify amounts outstanding under the RCF as current in our 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.

Subsequent to 2014, Orion entered into a number of amendments, which largely were made to increase the Prior RCF capacity.

The Prior RCF amendment completed in April 2019, extended the Prior RCF maturity date to April 25, 2024, increased the aggregate amount of revolving credit commitments in Euro by € 75.0 million and reduced the interest margin to a 1.7 % to 2.7 % range, using a revised pricing grid.

In May 2022, we added an additional € 100 million of capacity to our Prior RCF which expands our facility to € 350.0 million.

In October 2023, Orion entered into the Thirteenth Amendment to the Credit Agreement, which amended and restated our revolving credit facility (as amended and restated, the “RCF”) and extended the maturity to September 2028.

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

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

Notes to the Consolidated Financial Statements

The RCF includes a sustainability-linked margin adjustment.

Starting in 2024 continuing through 2028, 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.

Other provisions of the Credit Agreement relating to the RCF remained unchanged, including the commitment fee, which remains at 35 % of the interest margin or 0.8 % at December 31, 2023.

As of December 31, 2023, there were no borrowings under the RCF.

As of December 31, 2022, the borrowing under the Prior RCF was $ 53.3 million .

Letters of credit can be issued for the amount available under the RCF and ancillary facilities.

The weighted average interest rates on the RCF as of December 31, 2023 and 2022 were 6.2 % and 4.8 %, respectively.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

For the year ended December 31, 2023 , amortized transaction costs were $ 1.9 million which included the release of $ 0.5 million from Prior RCF.

For the years ended December 31, 2022 and 2021, amortized transaction costs were immaterial.

Unamortized transaction costs included in the Consolidated Balance Sheets, as of December 31, 2023 and 2022, were approximately $ 3.6 million and $ 2.2 million, respectively.

As of December 31, 2022, the Company’s net leverage ratio was 2.8 x, which corresponds to an interest margin of 2.40 for both USD and Euro denominated borrowings.

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.

During the second quarter 2020, the Company increased the number of RCF banks and total converted ancillary borrowings from € 130 million to € 170 million.

During 2022, the Company further increased the number of RCF banks and total converted ancillary borrowings to € 268 million.

Full RCF utilization will not trigger the 35 % covenant threshold (for discussion see Covenant Compliance, First Lien Leverage Ratio covenant section below).

As of December 31, 2022, the total commitment of € 350 million (approximately $ 373 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 December 31, 2023, the Company’s net leverage ratio, as defined under the Credit Agreement, was 2.63 x which corresponds to an interest margin of 2.30 for both USD and Euro denominated borrowings.

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 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 December 31, 2023, the total commitment was reduced to € 300 million (approximately $ 332 million) and was split between an € 86 million RCF tranche and € 214 million of bilateral ancillary facilities established directly with several banks under the RCF.

As of December 31, 2023 and 2022, committed ancillary credit facilities totaled $ 236.5 million and $ 286.1 million, respectively.

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Uncommitted Local Lines of Credit — The uncommitted local lines of credit in Brazil and Korea are with local banks that are not lenders under the Credit Agreement and were negotiated bilaterally.

Korea Working Capital Loan — For working capital flexibility, in June 2022, we entered in a one-year term-loan agreement for ₩ 10.0 billion Korean won ($ 7.9 million) with Hana Bank.

The interest rate on this loan at inception is 4.3 %.

Korea Working Capital Loans — For working capital flexibility, we have entered into various credit facility agreements with Hana Bank totaling ₩ 47.5 billion ($ 36.6 million) availability.

As of December 31, 2023, we have outstanding borrowings of ₩ 26.1 billion ($ 20.1 million).

The weighted average interest rate is 5.1 %.

For early repayment, we are required to pay a 1 % prorated early repayment fee.

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As of December 31, 2023, we have drawn CNY 20 million ($ 2.8 million) as a one-year term-loan.

There were no drawings in 2021.

In 2022, drawings totaled CNY 10.0 million ($ 1.5 million).

The 2023 weighted average interest rate was 4.0 %.

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

Repurchase Agreement —On March 15, 2022, we entered into a repurchase agreement to sell European Emission Allowance (“EUA”) certificates.

Under the agreement, we sold 450 thousand EUA certificates for € 33.5 million cash to a counterparty.

The same counterparty has an obligation to resell, and we have the obligation to purchase, the same or substantially the same EUA certificates on January 27, 2023 for € 34.0 million.

In January 2023, we resold 450 thousand EUA certificates for € 34.7 million cash to a counterparty.

The same counterparty is obligated to resell, and we have the obligation to purchase, the same or substantially the same EUA certificates on April 5, 2023 for € 35.0 million.

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

At December 31, 2022, the amount outstanding was $ 36.3 million.

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

Accounts Receivable Factoring Facilities ―During the fourth quarter of 2022, for sale of certain Accounts receivable, we entered into an agreement with third-party financial institutions.

No sales were made during 2022.

We have concluded that there would generally be no risk of loss to us from non-payment of the sold receivables.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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Covenant Compliance

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

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

These covenants are subject to significant exceptions and qualifications.

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

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

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

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

As of December 31, 2022, we are in compliance with our debt covenants.

In addition, 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%, which is that net leverage, as defined in the Credit Agreement, is not permitted to exceed 4.0x.

As of December 31, 2023, and 2022, we were in compliance with our debt covenants.

Financial Instruments and Fair Value Measurement

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On November 14, 2017 the Company acquired floored forward interest rate swaps to hedge interest rate risk on current Euro-denominated term loan financing.

On May 15, 2018 the Company entered into a $ 235.0 million cross-currency swap to hedge interest rate risk on current USD-denominated term loan financing which replaced the USD-denominated Caps terminated on May 14, 2018.

In December 2020, the Company unwound $ 38.0 million of the $ 235.0 million cross currency swap maturing in 2024 at a realized loss of approximately $ 2.4 million.

In a separate transaction occurring in December 2020, the Company unwound a $ 30 million swap maturing in 2021 at a realized loss of approximately $ 3.9 million.

We designated the Euro-denominated interest rate swap at closing in November 2017 and the cross-currency swaps at closing in May 2018 in the same manner as an accounting hedge.

We performed a hedge effectiveness test based on the critical terms match method (prospectively) and the dollar offset test (retrospectively).

On May 15, 2018 the Company entered into a $ 235.0 million cross-currency swap to hedge both foreign exchange rate and interest rate risk on current USD-denominated term loan financing which replaced the USD-denominated Caps terminated on May 14, 2018.

Both of these instruments were designated as accounting hedges at the time we entered into the transactions.

We performed a hedge effectiveness test based on the critical terms match method (prospectively) and the dollar offset test (retrospectively) for each.

In September 2021, the Company restructured its previously existing cross-currency swaps in the amount of $ 197 million, to align them with the new U.S.

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This cross-currency swap was determined to be highly effective, continues to qualify for hedge accounting and was cost-neutral.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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Term loan $ 624.9 $ 617.0 $ 616.2 $ 596.8

BOC Term-loan 47.5 42.9 — —

China Term-loan 58.6 57.1 47.5 42.9

Total $ 683.5 $ 674.1 $ 663.7 $ 639.7

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

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

At both December 31, 2023 and 2022, the fair values of Cash and cash equivalents and restricted cash, Accounts receivable, net, Accounts payable and Accrued liabilities, and short term borrowings approximated their carrying values due to the short-term nature of these instruments.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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Plan assets relating to this plan reduce the pension provision disclosed.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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Net liability recognized - pension plans $ 61.8 $ 51.6

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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Future pension increase 2.4 % 2.1 %

Mortality Heubeck

2018G Heubeck

Mortality is based on Heubeck guidelines, the generally accepted biometric calculation bases for the balance sheet valuation of pension obligations in Germany.

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We do not anticipate making funding contributions to the Pension Plan in 2024.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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$ 7.7 $ ( 19.5 ) $ ( 1.7 )

The estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic cost in 2023:

(In millions)

Net actuarial (gain) loss $ ( 9.2 )

Prior service cost (credit) —

Net amount recognized $ ( 9.2 )

No amount is estimated to be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2024.

The fair value (all Level 2) of Orion's pension plan assets, at December 31, are as follows:

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Certain PSU awards are based on the relative Total Shareholder Return (“TSR”).

TSR is an objective calculation that takes into account our TSR rank within our peer group and whether our specific TSR is positive or negative.

TSR is an objective calculation that takes into account our TSR as compared to the average of Total Shareholder Return percentage results for the Performance Period of two published indices (S&P SmallCap 600 Index, and the S&P 600 Chemicals Index) and whether our specific TSR is positive or negative.

The fair value of PSUs is estimated on the grant date using a Monte-Carlo simulation.

Under the LTIP plans, the PSU vesting period is three years with cliff vesting occurring on December 31 of the second full year subsequent to the date of the grant.

For example, if a PSU grant was issued in June 2020, the PSUs would fully vest on December 31, 2022 with no ratable vesting during the vesting period.

Under the LTIP plans, the PSU vesting period is three years with cliff vesting occurring on December 31 of the third year.

Restricted Stock Units— RSUs entitle the recipient to be paid out an equal number of common stocks upon vesting.

The RSUs vesting period is ratably over three years starting on January 1 in the year of the grant.

For example, the employee would earn one third of the RSU on December 31 starting in the year of the grant and the remaining two thirds each December 31 for 2 years immediately subsequent to the year of the grant.

In certain instances, we issue RSU as sign-on incentives and one-time grants for employees.

These RSUs vest ratably over a three-year period, and vesting occurs on the anniversary of the grant.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

These RSUs vest over a three-year period and on a cliff vesting basis vesting occurs on the anniversary of the grant.

Restricted Stock— Certain members of our Board of Directors receive compensation in form of Restricted Stock (“RS”) in accordance with our 2014 Non-employee Director Plan.

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The RS vest and become non-forfeitable on the first anniversary of the grant date.

Notes to the Consolidated Financial Statements

Performance-based Restricted Stock Units

In the following table summarizes PSU activity:

In the following table summarizes PSU activity assuming payout at 100% of target shares for unvested awards:

Number of units Weighted-average grant-date fair value per unit

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During 2022 and 2021 we granted 312,538 and 360,178 performance-based units, respectively, with a per unit weighted-average grant-date fair value of $ 16.14 and $ 19.01 , respectively.

The 2020 PSU awards based on relative TSR expired as the performance conditions were not met.

The 2021 PSU awards based on relative TSR and other metrics will be paid out at a multiple of 1.7X.

Restricted Stock Units

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During 2023, 2022 and 2021 weighted average RSU grant-date fair value was $ 26.14 , $ 15.83 and $ 18.46 , respectively.

Total grant date fair value of RSU’s were approximately $ 3.8 million, $ 4.0 million and $ 2.3 million during 2022, 2021 and 2020, respectively.

Total fair value of RSU vested was approximately $ 7.4 million, $ 3.0 million and $ 1.3 million during 2022, 2021 and 2020, respectively.

Total grant date fair value of RSUs were approximately $ 5.9 million, $ 3.8 million and $ 4.0 million during 2023, 2022 and 2021, respectively.

Total fair value of RSUs vested was approximately $ 3.3 million, $ 7.4 million and $ 3.0 million during 2023, 2022 and 2021, respectively.

As of December 31, 2023, we had unrecognized compensation cost of $ 18.7 million, based on the target amounts, related to unvested PSU, RSU and RS, which is expected to be recognized over a weighted average period of 2.31 years.

During 2022, 2021 and 2020 fiscal years, we recognized compensation expenses of $ 7.7 million, $ 5.2 million and $ 4.4 million, respectively, in our Consolidated Statements of Operations.

Orion Engineered Carbons S.A

During 2023, 2022 and 2021 fiscal years, we recognized compensation expenses of $ 15.4 million, $ 7.7 million and $ 5.2 million, respectively, in the Consolidated Statements of Operations.

Notes to the Consolidated Financial Statements

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Balance at December 31, 2021 ( 34.1 ) ( 10.8 ) ( 3.6 ) ( 48.5 )

Other comprehensive loss before reclassifications ( 7.3 ) 2.3 2.0 ( 3.0 )

Income tax effects before reclassifications ( 0.3 ) ( 0.7 ) ( 0.7 ) ( 1.7 )

Other comprehensive income (loss) before reclassification ( 13.6 ) 46.9 20.3 53.6

Income tax effects 0.2 ( 15.2 ) ( 6.3 ) ( 21.3 )

Amounts reclassified from AOCI — 1.7 — 1.7

Income tax effects on reclassifications — — ( 1.6 ) ( 1.6 )

Income tax effects — ( 0.5 ) — ( 0.5 )

Currency translation AOCI — 2.3 0.2 2.5

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Balance at December 31,2023 $ ( 55.1 ) $ 16.1 $ ( 0.9 ) $ ( 39.9 )

In prior years, the amounts recorded in AOCI exceeding 10 % of the defined benefit obligation are recorded ratably as reclassification of actuarial losses over the current year through profit and loss separately from income from operations and amounted to $ 4.8 million and $ 9.9 million for the years end December 31, 2021 and 2020, respectively.

We were not outside of the 10 % corridor for 2022.

The amounts recorded in AOCI exceeding 10% of the defined benefit obligation are recorded ratably as reclassification of actuarial gains or losses over the current year through profit and loss separately from income from operations and amounted to $ 8.9 million income and $ 4.8 million loss for the years ended December 31, 2023 and 2021, respectively.

We were no t outside of the 10% corridor for 2022.

Earnings Per Share

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The Company operates in multiple jurisdictions with complex tax and regulatory environments and our income tax returns are periodically audited or subjected to review by tax authorities.

We monitor tax law changes and the potential impact to our results of operations including potential proposals in the U.S.

as a result of a new administration.

Orion Engineered Carbons S.A

We monitor tax law changes and the potential impact to our results of operations.

Notes to the Consolidated Financial Statements

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Our effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, changes in valuation allowances, the amount of tax-free income, and impact of non-deductible expenses.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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Change in valuation allowance 5.0 1.8 ( 6.0 )

Change in the tax rate and tax laws — — ( 0.1 )

Income taxes for prior years 3.3 — —

Uncertain tax position 1.6 0.3 0.2

Non-deductible interest expenses 0.1 1.9 1.2

Non-deductible expenses, and non-deductible taxes 2.1 3.5 5.4

Effects of changes in permanent differences 0.7 — —

Tax effect on tax-free income ( 1.5 ) ( 1.4 ) ( 0.4 )

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Effective tax rate 36.9 % 32.7 % 27.7 %

The increase in the effective tax rate was mainly due to an increase of non-deductible business and interest expenses.

The 2023 effective income tax rate was 36.9 % compared with 32.7 % in 2022.

The increase in the effective tax rate was mainly due to the increase of valuation allowance, income taxes for prior years and the increase of non-deductible business expenses and taxes.

Those were partially offset by the effects of earnings in various countries with lower statutory tax rates and tax-free income.

The deferred tax effects of tax loss, credit and interest carryforwards (“tax attributes”) and the tax effects of temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements, reduced by a valuation allowance where appropriate, are presented below.

For the tax year ended December 31, 2023, additional valuation allowance was established primarily related to certain foreign net operating losses and other deferred tax assets.

As part of the process of preparing the consolidated financial statements, we are required to determine the provision for income taxes.

This process involves measuring temporary and permanent differences resulting from differing treatment of items for tax and accounting purposes.

Non-deductible expenses and non-deductible taxes were analyzed and resulted in additional income tax.

These differences were partially offset by the effects of earnings in various countries with lower statutory tax rates and tax-free income.

Notes to the Consolidated Financial Statements

Differences resulting from differing treatment of items for tax and accounting purpose, the net operating loss, and tax credit carryforwards result in deferred tax assets and liabilities.

The deferred tax effects of tax losses, credit and interest carryforwards (“tax attributes”) and the tax effects of temporary differences between the tax basis of assets and liabilities and their amounts reported in the Consolidated Financial Statements, reduced by a valuation allowance where appropriate, are presented below.

(In millions)

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Deferred Compensation 4.1 2.6

Provisions 13.0 15.1

Liabilities including leases liabilities 40.3 39.0

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Tax credits 8.1 7.7

Other 3.2 2.0

Total deferred tax assets 129.9 122.2

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Financial assets 10.3 14.8

Inventories — —

Receivables, other assets 9.0 15.0

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Net deferred tax assets / (liabilities) $ ( 36.3 ) $ ( 40.9 )

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

Our net deferred tax assets and liabilities reflected in our balance sheet are as follows:

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Net deferred tax asset / (liability) positions $ ( 36.3 ) $ ( 40.9 )

Notes to the Consolidated Financial Statements

As of each reporting date, management considers the weight of all evidence, both positive and negative, to determine if a valuation allowance is necessary for each jurisdiction's deferred tax assets.

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Additions for Loss carryforwards 6.0 5.2 —

Additions for Interest carryforwards — — 1.3

Additions Other 0.2 0.8 0.4

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The following table provides detail surrounding the expiration dates of the gross amount of tax loss carryforwards and tax credits:

December 31, 2023

Net operating loss carryforwards Tax Credits

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$ 0.7 million) were recognized for certain subsidiaries for which we are not indefinitely reinvested, and a dividend distribution is expected in the future.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

Tax uncertainties

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Balance at end of the year $ 13.3 $ 11.6 $ 12.1

We recognize interest and penalties associated with unrecognized tax benefits in income tax expense.

Income tax expense includes a benefit of interest and penalties of $ 0.4 million and $ 0.7 million in 2022 and 2021, respectively, and an expense of interest and penalties totaling $ 1.1 million in 2020.

We recognize interest and penalties associated with unrecognized tax positions in income tax expense.

Income tax expense includes a benefit of interest and penalties of $ 0.4 million, $ 0.4 million and $ 0.7 million in 2023, 2022 and 2021, respectively.

We had accrued $ 4.4 million, $ 4.0 million and $ 4.4 million for interest and penalties as of December 31, 2023, 2022 and 2021, respectively.

The majority of the unrecognized tax benefits for the fiscal years ended December 31, 2022, 2021 and 2020, respectively would affect our effective income tax rate.

The majority of the unrecognized tax benefits for the fiscal years ended December 31, 2023, 2022 and 2021, respectively would favorably affect our effective income tax rate if recognized.

Notes to the Consolidated Financial Statements

Orion and certain subsidiaries are under audit in several jurisdictions, and in particular in Germany, for periods 2011-2017.

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2029 and thereafter

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 costs remaining as of December 31, 2022 are $ 46.5 million and $ 3.8 million, respectively.

Orion's reserves for restructuring of its Rubber segment in 2022 are reflected in Accrued liabilities on the Consolidated Balance Sheets.

Orion has accrued liabilities for personnel expenses of $ 3.2 million and $ 2.6 million, and ground remediation costs of $ 0.6 million and $ 6.7 million, as of December 31, 2022 and 2021 respectively.

In the periods ending December 31, 2022, 2021 and 2020, restructuring expense, net including Ambes, amounted to $ 1.9 million, $ 2.2 million, and $ 7.5 million, respectively.

Environmental Reserves —Our accrued liability for future environmental reserves at our current and former plant sites and other sites totaled $ 4.8 million and $ 7.8 million as of December 31, 2022 and 2021, respectively.

During the fourth quarter of 2021, we recognized an additional reserve of $ 7.2 million reflected in the Consolidated Statement of Operations in the Other expense, net.

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

In our opinion, it is reasonably possible that losses in excess of the liabilities recorded may have been incurred.

However, we cannot estimate any amount or range of such possible additional losses.

New information about sites, new technology or future developments, such as involvement in investigations by regulatory agencies, could require us to reassess our potential exposure related to environmental matters.

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

Total $ 613.5

Legal Proceedings —We are subject to various lawsuits and claims, including but not limited to, matters involving contract disputes, environmental damages, personal injury and property damage.

1 unchanged sentence

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

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 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 entered into a long-term steam supply contract.

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 has open receivables from the City of Hürth totaling $ 9.8 million and $ 5.5 million as of December 31, 2022 and 2021, respectively.

The City of Hürth argues it has open claims of approximately $ 7.0 million and $ 3.3 million related to lease payments as of December 31, 2022 and 2021, respectively.

Orion is in negotiations with the City of Hürth but is prepared to pursue its rights vigorously through legal enforcement if necessary.

EPA Action — During 2008 and 2009, the U.S.

Environmental Protection Agency (“EPA”) contacted all U.S.

carbon black producers as part of an industry-wide EPA initiative, requesting extensive and comprehensive information under Section 114 of the U.S.

Clean Air Act.

The EPA used that information to determine, for each facility, that either:

(i) the facility has been in compliance with the Clean Air Act;

(ii) violations have occurred and enforcement litigation may be undertaken;

or (iii) violations have occurred and a settlement of an enforcement case is appropriate.

In response to information requests received by the Company’s U.S.

facilities, the Company furnished information to the EPA on each of its U.S.

The EPA subsequently sent notices under Section 113(a) of the Clean Air Act in 2010 alleging violations of Prevention of Significant Deterioration (“PSD”) and Title V permitting requirements under the Clean Air Act at the Company’s Belpre (Ohio) facility.

In October 2012, the Company received a corresponding notice and finding of violation (a “NOV”) alleging the failure to obtain PSD and Title V permits reflecting Best Available Control Technology (“BACT”) at several units of the Company’s Ivanhoe (Louisiana) facility, and in January 2013, the Company also received an NOV issued by the EPA for its facility in Borger (Texas) alleging the failure to obtain PSD and Title V permits reflecting BACT during the years 1996 to 2008.

A comparable NOV for the Company’s U.S.

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.

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

Department of Justice (“DOJ”) about a potential settlement to resolve the NOVs received, which ultimately led to a consent decree executed between Orion Engineered Carbons LLC (for purpose of this Note Q.

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

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

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

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

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 an adverse effect upon our operations, financial condition or impact the Consolidated Financial Statements.

EPA Action — Under a consent decree between Orion LLC and the United States on behalf of the U.S.

Environmental Protection Agency (“EPA”) as well as the Louisiana Department of Environmental Quality entered into in 2018 (the “EPA CD”) 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 SO 2 , NOx and dust particles from tail gases at its Ivanhoe (Louisiana) facility in 2021 and emissions controls were installed in accordance with the EPA CD at Orion’s facility in Orange (Texas) in 2020.

In fourth quarter of 2022, Orion LLC reached mechanical completion for the installation of emissions control technology to remove SO 2 , NOx and dust particles from tail gases at its Borger (Texas) facility.

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

manufacturing facility in Belpre (Ohio) has started and is scheduled to complete in 2023, in line with the EPA CD terms.

In line therewith, Orion LLC completed the installation of emissions control technology to remove SO 2 , NOx and dust particles from tail gases at all of its US facilities by the end of 2023, in accordance with the EPA CD.

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 December 31, 2022, we have spent $ 277 million of capital expenditures related to the EPA CD of which approximately $ 80 million was received as an indemnity from Evonik.

As of December 31, 2023, in aggregate we incurred $ 306 million of capital expenditures on EPA CD projects of which approximately $ 80 million was received as an indemnity from Evonik.

Pledges and guarantees

6 unchanged sentences

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

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

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

Corporate includes income and expense that cannot be directly allocated to the business segments or are managed on the corporate level.

This includes finance income and expenses, taxes and items with less bearing on the underlying core business.

Discrete financial information is available for each of the segments, and the chief operating decision maker (“CODM”) uses operating results of each operating segments for performance evaluation and resource allocation.

This includes Interest and other financial expense, net, taxes and items with less bearing on the underlying core business.

Notes to the Consolidated Financial Statements

Our operations are managed by senior executives who report to our Chief Executive Officer (“CEO”), the chief operating decision maker (“CODM”).

Discrete financial information is available for each of the segments, and the CODM uses operating results of each operating segment for performance evaluation and resource allocation.

Our CODM uses Adjusted EBITDA as the primary measure for reviewing our segment profitability.

We define Adjusted EBITDA as Income from operations before depreciation and amortization, share-based compensation, and non-recurring items (such as, restructuring expenses, consulting fees related to Company strategy, legal settlement gain, etc.) plus Earnings in affiliated companies, net of tax.

We define Adjusted EBITDA as Income from operations before depreciation and amortization, stock-based compensation, and non-recurring items (such as, restructuring expenses, legal settlement gain, etc.) plus Earnings in affiliated companies, net of tax.

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

11 unchanged sentences

Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment 65.1 40.6 — 105.7

Gain related to litigation settlement — — ( 82.9 ) ( 82.9 )

Equity in earnings of affiliated companies, net of tax 0.5 — — 0.5

Interest and other financial expense, net — — 39.9 39.9

Reclassification of actuarial losses from AOCI — — 4.8 4.8

Adjusted EBITDA 168.4 143.9 — $ 312.3

3 unchanged sentences

Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment 59.0 45.1 — 104.1

Gain related to litigation settlement — — ( 82.9 ) ( 82.9 )

Equity in earnings of affiliated companies, net of tax 0.7 — — 0.7

Interest and other financial expense, net — — 38.0 38.0

Reclassification of actuarial losses from AOCI — — 9.9 9.9

Reclassification of actuarial (gains)/losses from AOCI — — 4.8 4.8

Adjusted EBITDA 120.0 148.4 — $ 268.4

1 unchanged sentence

Capital expenditures 149.1 65.6 — 214.7

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

8 unchanged sentences

Interest and other financial expense, net 50.9 39.9 38.0

Reclassification of actuarial losses from AOCI — 4.8 9.9

Reclassification of actuarial (gains)/losses from AOCI ( 8.9 ) — 4.8

Adjusted EBITDA $ 332.3 $ 312.3 $ 268.4

2 unchanged sentences

(In millions)

Expense related to COVID-19 — — 3.9

Long Term Incentive Plan 15.4 7.7 5.2

EPA-related expenses — — 2.3

Environmental reserve accrual ( 0.4 ) 7.2 —

Environmental reserve ( 2.2 ) ( 0.4 ) 7.2

Other non-operating 0.3 1.7 3.3

1 unchanged sentence

Ge ographic information:

Net sales Years Ended December 31,

We are a global producer and supplier of carbon black and an industry leader in many of our product lines.

Our businesses consist primarily of large processing plants that convert carbon black oil into powdered form carbon black.

Our carbon black products are primarily used as additives for the production of polymers, batteries, printing inks and coatings and in the reinforcement of rubber polymers.

We have operations in several geographical locations.

Our holding company, Orion S.A., is located in Luxembourg and generates no revenue.

In the fourth quarter of 2023, we made certain changes to our disaggregated Net sales by country disclosure.

We now disclose disaggregated Net sales by Country in which the Customer is located .

This change had no impact on our historical Consolidated Financial Statements.

We believe this presentation better reflects our business.

Comparative Net sales disaggregated based on legal entity billing to the customer , reported in prior periods, is also included in this Footnote.

Notes to the Consolidated Financial Statements

We make the following geographic disclosures.

Net sales disaggregated based upon customer location, is as follows:

Net sales by Country in which the Customer is Located Years Ended December 31,

2023 2022 2021

(In millions)

Americas $ 657.4 $ 714.3 $ 494.8

USA 470.4 514.6 360.8

Brazil 145.4 157.9 101.2

Rest of Americas 41.6 41.8 32.8

EMEA 804.5 854.6 636.9

Germany 189.5 227.9 176.7

South Africa 69.5 71.4 54.4

Italy 84.8 90.8 59.0

Spain 52.8 61.0 $ 44.0

Turkey 47.7 56.4 41.3

France 46.2 52.8 39.9

Rest of EMEA 314.0 294.3 221.6

APAC 432.0 462.0 415.1

China 178.3 173.2 152.8

Republic of Korea 139.0 169.6 151.8

Rest of Asia 114.7 119.2 110.5

Total $ 1,893.9 $ 2,030.9 $ 1,546.8

Net sales disaggregated based on legal entity billing to the customer, is as follows:

Net sales by Legal Entity Billing to the Customer Years Ended December 31,

2023 2022 2021

(In millions)

Germany $ 778.0 $ 829.4 $ 648.6

United States 515.3 564.9 405.1

5 unchanged sentences

Rest of Europe 25.8 33.4 13.2

33.4 13.2 8.5

Total $ 1,893.9 $ 2,030.9 $ 1,546.8

(1) Only a holding company is located in Luxembourg;

no revenue is generated in the country of domicile.

For the year ended December 31, 2022, two customers accounted for 10% or more revenue in the Rubber segment aggregating to approximately $ 480.2 million in combined sales.

For the years ended December 31, 2021 and 2020, one customer accounted for 10% or more revenue in the Rubber segment totaling approximately $ 218.6 million and $ 170.3 million, respectively.

For the years ended December 31, 2023 and 2022, two customers accounted for 10% or more revenues in the Rubber segment aggregating to approximately $ 466.5 million and $ 480.2 million, respectively.

For the year ended December 31, 2021, one customer accounted for 10% or more revenues in the Rubber segment totaling approximately $ 218.6 million.

Net sales to top ten customers Years Ended December 31,

3 unchanged sentences

Specialty segment 161.4 177.0 148.7

Orion Engineered Carbons S.A

Notes to the Consolidated Financial Statements

16 unchanged sentences

Related Parties

As of December 31, 2022, related parties primarily includes one joint venture that is accounted for using the equity method, “Deutsche Gaßrußwerke” (DGW).

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

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

As of December 31, 2023, related parties primarily include one joint venture that is accounted for using the equity method, “Deutsche Gaßrußwerke” (DGW).

(In millions)

6 unchanged sentences

Sales and services 2.5 5.6 5.7

Orion Engineered Carbons S.A

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data