What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-01 · 111 added, 60 removed, 404 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,

2024 2023 2024 2023

5 unchanged sentences

Research and development costs 7.0 6.2 20.1 18.3

Loss due to misappropriation of assets, net 60.7 — 60.7 —

Other (income) expenses, net ( 2.8 ) 2.7 ( 0.1 ) ( 1.0 )

Income from operations 41.6 58.9 94.4 132.4

Income (loss) from operations ( 15.3 ) 45.7 79.1 178.1

Interest and other financial expense, net 15.9 12.9 40.8 41.6

Reclassification of actuarial gain from AOCI — ( 2.2 ) — ( 6.7 )

Income before earnings in affiliated companies and income taxes 29.4 47.7 69.5 108.2

Income tax expense 9.1 17.8 22.6 36.1

Income (loss) before earnings in affiliated companies and income taxes ( 31.2 ) 35.0 38.3 143.2

Income tax expense (benefit) ( 10.8 ) 8.9 11.8 45.0

Earnings in affiliated companies, net of tax 0.2 0.1 0.5 0.4

Net income $ 20.5 $ 30.1 $ 47.2 $ 72.4

Net income (loss) $ ( 20.2 ) $ 26.2 $ 27.0 $ 98.6

Weighted-average shares outstanding (in thousands):

1 unchanged sentence

Diluted 58,738 59,252 58,942 59,934

Earnings per share:

Earnings (loss) per share:

Basic $ ( 0.35 ) $ 0.45 $ 0.46 $ 1.66

2 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,

2024 2023 2024 2023

(In millions)

Net income $ 20.5 $ 30.1 $ 47.2 $ 72.4

Net income (loss) $ ( 20.2 ) $ 26.2 $ 27.0 $ 98.6

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments 3.3 0.3 ( 11.4 ) ( 12.2 )

Net losses on derivatives ( 1.2 ) ( 0.4 ) ( 1.7 ) ( 2.2 )

Net gains (losses) on derivatives ( 3.2 ) 0.9 ( 4.9 ) ( 1.3 )

Defined benefit plans, net — ( 1.7 ) 0.2 ( 4.6 )

Other comprehensive loss ( 9.4 ) ( 7.1 ) ( 16.2 ) ( 17.6 )

Comprehensive income $ 11.1 $ 23.0 $ 31.0 $ 54.8

Other comprehensive income (loss) 0.1 ( 0.5 ) ( 16.1 ) ( 18.1 )

Comprehensive income (loss) $ ( 20.1 ) $ 25.7 $ 10.9 $ 80.5

See accompanying Notes to these Condensed Consolidated Financial Statements.

Condensed Consolidated Balance Sheets

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(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)

8 unchanged sentences

Reclassification of actuarial gain from AOCI — ( 6.7 )

Other operating non-cash items, net — ( 0.5 )

Changes in operating assets and liabilities, net:

42 unchanged sentences

Balance at June 30, 2024 58,356,621 $ 85.3 $ ( 62.7 ) $ 76.2 $ 461.2 $ ( 56.1 ) $ 503.9

Net loss — — — — ( 20.2 ) — ( 20.2 )

Other comprehensive income, net of tax — — — — — 0.1 0.1

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

Repurchases of Common stock ( 636,402 ) — ( 11.1 ) — — — ( 11.1 )

Share based compensation — — — 4.8 — — 4.8

Balance at September 30, 2024 57,720,219 $ 85.3 $ ( 73.8 ) $ 81.0 $ 439.8 $ ( 56.0 ) $ 476.3

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

See accompanying Notes to these Condensed Consolidated Financial Statements.

43 unchanged sentences

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(In millions)

2 unchanged sentences

Accounts receivable, net $ 267.9 $ 241.0

Notes to the Condensed Consolidated Financial Statements—(continued)

Accounts Receivable Factoring Facilities ― For the three months ended June 30, 2024 and 2023 the gross amount of receivables sold were $ 110.8 million and $ 125.2 million, respectively.

For the six months ended June 30, 2024 and 2023 the gross amount of receivables sold were $ 218.4 million and $ 194.1 million, respectively.

Accounts Receivable Factoring Facilities ― For the three months ended September 30, 2024 and 2023 the gross amount of receivables sold were $ 104.7 million and $ 106.2 million, respectively.

For the nine months ended September 30, 2024 and 2023 the gross amount of receivables sold were $ 323.1 million and $ 300.4 million, respectively.

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

For the three months ended June 30, 2024 and 2023 the loss on receivables sold was approximately $ 1.3 million and $ 1.3 million, respectively.

For the six months ended June 30, 2024 and 2023 the loss on receivables sold was approximately $ 2.4 million and $ 1.8 million , respectively.

For the three months ended September 30, 2024 and 2023 the loss on receivables sold was approximately $ 1.3 million and $ 1.3 million, respectively.

Notes to the Condensed Consolidated Financial Statements—(continued)

the nine months ended September 30, 2024 and 2023 the loss on receivables sold was approximately $ 3.7 million and $ 3.1 million , respectively.

Inventories, net of reserves, are as follows:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(In millions)

5 unchanged sentences

Debt and other obligations are as follows:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(In millions)

10 unchanged sentences

Revolving credit facility

As of June 30, 2024, total capacity under our senior secured revolving credit facility (the “RCF”) and Ancillary facilities is € 280 million ($ 299.8 million).

As of June 30, 2024 and December 31, 2023, availability under the RCF and Ancillary facilities is $ 157.4 million and $ 221.6 million, respectively.

There were no borrowings under the RCF as of June 30, 2024 or December 31, 2023.

As of September 30, 2024, total capacity under our senior secured revolving credit facility (the “RCF”) and Ancillary facilities is € 300 million ($ 335.9 million).

As of September 30, 2024 and December 31, 2023, availability under the RCF and Ancillary facilities is $ 116.6 million and $ 221.6 million, respectively.

As of September 30, 2024, borrowings under the RCF were $ 28.0 million.

There were no borrowings under the RCF as of December 31, 2023.

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.

Notes to the Condensed Consolidated Financial Statements—(continued)

Other Short-Term Debt and Obligations

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(In millions)

3 unchanged sentences

OEC LLC outstanding borrowings 22.8 21.1

OEC Huaibei outstanding borrowings 6.7 —

Brazil Uncommitted Local Lines of Credit (capacity $ 2.9 million)

3 unchanged sentences

China Working Capital Loans 7.0 2.8

Qingdao (capacity $ 6.9 million)

Huaibei (capacity $ 21.4 million)

Repurchase Agreement 39.3 —

Total of Other Short-term Debt and Obligations $ 288.0 $ 134.7

3 unchanged sentences

Dollars $ 262.0 $ 236.5

As of June 30, 2024, we are in compliance with our debt covenants.

Repurchase Agreement —On August 23, 2024, we entered into a repurchase agreement to sell European Emission Allowance (“EUA”) certificates.

Under the agreement, we sold 500 thousand EUA certificates for € 35.1 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 June 25, 2025 for € 36.5 million.

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

At September 30, 2024, the amount outstanding, including accrued interest, was $ 39.3 million.

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

As of September 30, 2024, we are in compliance with our debt covenants.

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

6 unchanged sentences

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

No significant concentration of credit risk existed as of June 30, 2024 or December 31, 2023.

In July 2024 our interest rate swap expired and was not renewed.

There were no material transactions recorded as a result of the expiration.

No significant concentration of credit risk existed as of September 30, 2024 or December 31, 2023.

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, 2024 December 31, 2023 Balance Sheet Classification

September 30, 2024 December 31, 2023 Balance Sheet Classification

Notional Amount Fair Value Notional Amount Fair Value

8 unchanged sentences

There were no transfers of assets measured at fair value between Level 1 and Level 2 and there were no Level 3 investments during 2024 or 2023.

Notes to the Condensed Consolidated Financial Statements—(continued)

The following table presents the carrying value and estimated fair value of our financial instruments that are not measured at fair value on a recurring basis for the periods presented.

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Notional Amount Fair Value Notional Amount Fair Value

5 unchanged sentences

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

At both June 30, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, the fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings approximated their carrying values due to the short-term nature of these instruments.

The carrying amounts of our variable rate debt approximate the fair values due to variable interest rates with short reset periods.

Notes to the Condensed Consolidated Financial Statements—(continued)

The following tables summarize the pre-tax effect of derivative and non-derivative instruments recorded in Accumulated other comprehensive income (loss) (“AOCI”), the gains (losses) reclassified from AOCI to earnings and additional gains (losses) recognized directly in earnings:

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

5 unchanged sentences

Total $ ( 7.4 ) $ ( 2.6 ) $ ( 0.1 ) $ 1.2

Our cross currency swaps and interest rate swaps are designated as cash flow hedges of principal and interest payments related to our Term-Loan and mature in September 2028.

C ross currency swaps related to our Term-Loans, which mature in September 2028, are designated as cash flow hedges.

In the next twelve months, approximately $ 1.1 million recognized in AOCI related to cash flow hedges will be reclassified to the Condensed Consolidated Statement of Operations.

1 unchanged sentence

Financial Instruments and Fair Value Measurement” , included in our Annual Report in Form 10-K for the year ended December 31, 2023, for additional information relating to our derivatives instruments.

Notes to the Condensed Consolidated Financial Statements—(continued)

Employee Benefit Plans

3 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,

2024 2023 2024 2023

6 unchanged sentences

The amortization of actuarial (gain) losses, associated with the pension obligations recorded in prior years, in Accumulated other comprehensive income exceeding 10% of the defined benefit obligation are recorded ratably in the Condensed Consolidated Statements of Operations.

Notes to the Condensed Consolidated Financial Statements—(continued)

Accumulated Other Comprehensive Income (Loss)

3 unchanged sentences

Balance at January 1, 2024 $ ( 55.1 ) $ 16.1 $ ( 0.9 ) $ ( 39.9 )

Other comprehensive loss before reclassifications ( 6.3 ) ( 0.4 ) 0.2 ( 6.5 )

Other comprehensive income (loss) before reclassifications ( 6.3 ) ( 0.4 ) 0.2 ( 6.5 )

Income tax effects before reclassifications ( 0.1 ) 0.1 ( 0.1 ) ( 0.1 )

3 unchanged sentences

Balance at March 31, 2024 ( 61.5 ) 15.6 ( 0.8 ) ( 46.7 )

Other comprehensive loss before reclassifications ( 7.8 ) ( 1.4 ) — ( 9.2 )

Other comprehensive income (loss) before reclassifications ( 7.8 ) ( 1.4 ) — ( 9.2 )

Income tax effects before reclassifications ( 0.5 ) 0.5 0.1 0.1

3 unchanged sentences

Balance at June 30, 2024 $ ( 69.8 ) $ 14.4 $ ( 0.7 ) $ ( 56.1 )

Other comprehensive income (loss) before reclassifications 3.2 ( 5.7 ) — ( 2.5 )

Income tax effects before reclassifications 0.1 1.7 — 1.8

Amounts reclassified from AOCI — ( 0.9 ) — ( 0.9 )

Income tax effects on reclassifications — 0.3 — 0.3

Currency translation AOCI — 1.4 — 1.4

Balance at September 30, 2024 $ ( 66.5 ) $ 11.2 $ ( 0.7 ) $ ( 56.0 )

Notes to the Condensed Consolidated Financial Statements—(continued)

2 unchanged sentences

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

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

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

Income tax effects before reclassifications 0.5 1.0 — 1.5

9 unchanged sentences

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

Other comprehensive income (loss) 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 )

Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing Net income attributable to Orion by the weighted average number of common stock outstanding during the period.

Diluted EPS equals Net income attributable to Orion divided by the weighted average number of common stock outstanding during the period, adjusted for the dilutive effect of our stock–based and other equity compensation awards.

Basic earnings per share (“EPS”) is computed by dividing Net income (loss) attributable to Orion by the weighted average number of common stock outstanding during the period.

Diluted EPS equals Net income (loss) attributable to Orion divided by the weighted average number of common stock outstanding during the period, adjusted for the dilutive effect of our stock–based and other equity compensation awards.

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,

2024 2023 2024 2023

(In millions, except share and per share data)

Net income attributable to ordinary equity holders $ 20.5 $ 30.1 $ 47.2 $ 72.4

Net income (loss) attributable to ordinary equity holders $ ( 20.2 ) $ 26.2 $ 27.0 $ 98.6

Weighted average number of Common stock (in thousands) 58,191 58,572 58,406 59,284

Basic EPS $ 0.35 $ 0.51 $ 0.81 $ 1.21

Basic Earnings (loss) per share $ ( 0.35 ) $ 0.45 $ 0.46 $ 1.66

Dilutive effect of share based payments (in thousands) 547 680 536 650

Weighted average number of diluted Common stock (in thousands) 58,738 59,252 58,942 59,934

Diluted EPS $ 0.35 $ 0.51 $ 0.80 $ 1.20

Diluted Earnings (loss) per share $ ( 0.35 ) $ 0.44 $ 0.46 $ 1.65

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, 2024 and 2023 was $ 9.1 million and $ 17.8 million, respectively.

Income tax expense for the six months ended June 30, 2024 and 2023 was $ 22.6 million and $ 36.1 million, respectively.

The income tax benefit for the three months ended September 30, 2024 was $ 10.8 million compared to income tax expense of $ 8.9 million

Notes to the Condensed Consolidated Financial Statements—(continued)

for the three months ended September 30, 2023.

Income tax expense for the nine months ended September 30, 2024 and 2023 was $ 11.8 million and $ 45.0 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,

2024 2023 2024 2023

Effective income tax rates 34.6 % 25.4 % 30.8 % 31.4 %

The change in our effective tax rate for the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023 was primarily attributable to changes in projected pre-tax income mix in countries with varying statutory tax rates.

The change in our effective tax rate for the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023 was primarily attributable to changes in projected pre-tax income mix in countries with varying statutory tax rates.

The 2024 effective tax rate was further impacted by $ 18.2 million of tax benefit related to Loss due to misappropriation of assets, net.

For further discussion refer to Note J.

Commitments and Contingencies in the Condensed Consolidated Financial Statements.

Commitments and Contingencies

10 unchanged sentences

Based on 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 the Condensed Consolidated Financial Statements.

Loss due to misappropriation of assets, net —On August 10, 2024, the Company determined that a Company employee, who is not a Named Executive Officer, was the target of a criminal scheme that resulted in multiple fraudulently induced outbound wire transfers to accounts controlled by unknown third parties.

As a result of this incident, we recognized a one-time pre-tax charge of approximately $ 59.2 million for the unrecovered fraudulently induced wire transfers.

The Company has cooperated, and will continue to cooperate, with law enforcement as appropriate and is pursuing recovery of these funds through all legally available means, including potentially available insurance coverage.

The incident did not result in any unauthorized access to data or systems maintained by the Company.

The business and operations of the Company were not affected.

In addition, we incurred $ 1.5 million of professional fees in connection with our investigations.

Together, the amount of $ 60.7 million is reported in Loss due to misappropriation of assets, net in our Condensed Consolidated Statements of Operations.

We recognized $ 18.2 million of tax benefit related to Loss due to misappropriation of assets, net.

Pledges and guarantees

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

As of June 30, 2024, the Company had guarantees totaling $ 26.9 million issued by various financial institutions.

As of September 30, 2024, the Company had guarantees totaling $ 31.6 million issued by various financial institutions.

Notes to the Condensed Consolidated Financial Statements—(continued)

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.

Notes to the Condensed Consolidated Financial Statements—(continued)

Segment operating results for the three months ended June 30, 2024 and 2023 are as follows:

Segment operating results for the three months ended September 30, 2024 and 2023 are as follows:

Rubber Specialty Corporate Total

11 unchanged sentences

Adjusted EBITDA 51.2 26.1 — 77.3

Segment operating results for the six months ended June 30, 2024 and 2023:

Notes to the Condensed Consolidated Financial Statements—(continued)

Segment operating results for the nine months ended September 30, 2024 and 2023:

Rubber Specialty Corporate Total

11 unchanged sentences

Adjusted EBITDA 172.4 93.3 — 265.7

Notes to the Condensed Consolidated Financial Statements—(continued)

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,

2024 2023 2024 2023

(In millions)

Income before earnings in affiliated companies and income taxes $ 29.4 $ 47.7 $ 69.5 $ 108.2

Income (loss) before earnings in affiliated companies and income taxes $ ( 31.2 ) $ 35.0 $ 38.3 $ 143.2

Corporate charges 64.4 3.6 70.9 6.4

5 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,

2024 2023 2024 2023

(In millions)

Loss due to misappropriation of assets, net:

Misappropriation of assets, net $ 59.2 $ — $ 59.2 $ —

Professional fees related to misappropriation of assets $ 1.5 $ — $ 1.5 $ —

Long term incentive plan $ 4.8 $ 3.6 $ 11.3 $ 8.3

3 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