Item 1. Financial Statements
Item 1. Financial Statements and Supplementary Data (Unaudited)
Condensed Consolidated Statements of Operations
Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
(In millions, except share and per share data)
Net sales $ 463.4 $ 466.2 $ 1,443.3 $ 1,425.7
Cost of sales 355.9 356.0 1,103.8 1,062.0
Gross profit 107.5 110.2 339.5 363.7
Selling, general and administrative expenses 57.9 55.6 179.7 168.3
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 (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 (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 (loss) $ ( 20.2 ) $ 26.2 $ 27.0 $ 98.6
Weighted-average shares outstanding (in thousands):
Basic 58,191 58,572 58,406 59,284
Diluted 58,738 59,252 58,942 59,934
Earnings (loss) per share:
Basic $ ( 0.35 ) $ 0.45 $ 0.46 $ 1.66
Diluted $ ( 0.35 ) $ 0.44 $ 0.46 $ 1.65
See accompanying Notes to these Condensed Consolidated Financial Statements.
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Condensed Consolidated Statements of Comprehensive Income
Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
(In millions)
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 gains (losses) on derivatives ( 3.2 ) 0.9 ( 4.9 ) ( 1.3 )
Defined benefit plans, net — ( 1.7 ) 0.2 ( 4.6 )
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.
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Condensed Consolidated Balance Sheets
September 30, 2024 December 31, 2023
(In millions, except share data)
ASSETS
Current assets
Cash and cash equivalents $ 53.2 $ 37.5
Accounts receivable, net 267.9 241.0
Inventories, net 306.7 287.1
Income tax receivables 14.6 6.1
Prepaid expenses and other current assets 75.7 74.4
Total current assets 718.1 646.1
Property, plant and equipment, net 962.7 900.1
Right-of-use assets 124.3 110.6
Goodwill 77.1 76.1
Intangible assets, net 21.6 25.5
Investment in equity method affiliates 7.4 5.1
Deferred income tax assets 56.3 30.0
Other assets 28.8 39.9
Total non-current assets 1,278.2 1,187.3
Total assets $ 1,996.3 $ 1,833.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 174.7 $ 183.7
Current portion of long-term debt and other financial liabilities 293.8 137.0
Accrued liabilities 42.5 41.7
Income taxes payable 12.1 34.2
Other current liabilities 54.8 43.7
Total current liabilities 577.9 440.3
Long-term debt, net 676.7 677.3
Employee benefit plan obligation 62.9 60.4
Deferred income tax liabilities 78.8 66.3
Other liabilities 123.7 110.6
Total non-current liabilities 942.1 914.6
Commitments and contingencies
Stockholders' equity
Common stock
Authorized: 65,035,579 and 65,035,579 shares with no par value
Issued – 60,992,259 and 60,992,259 shares with no par value
Outstanding – 57,720,219 and 57,898,772 shares
85.3 85.3
Treasury stock, at cost, 3,272,040 and 3,093,487
( 73.8 ) ( 70.1 )
Additional paid-in capital 81.0 85.6
Retained earnings 439.8 417.6
Accumulated other comprehensive loss ( 56.0 ) ( 39.9 )
Total stockholders' equity 476.3 478.5
Total liabilities and stockholders' equity $ 1,996.3 $ 1,833.4
TY
See accompanying Notes to these Condensed Consolidated Financial Statements.
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Condensed Consolidated Statements of Cash Flows
7
Nine Months Ended September 30,
2024 2023
(In millions)
Cash flows from operating activities:
Net income $ 27.0 $ 98.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment and amortization of intangible assets and right of use assets 90.0 80.8
Amortization of debt issuance costs 1.1 2.0
Share-based compensation 11.3 8.3
Deferred tax provision ( 12.0 ) 5.5
Foreign currency transactions ( 7.4 ) 3.2
Reclassification of actuarial gain from AOCI — ( 6.7 )
Changes in operating assets and liabilities, net:
Trade receivables ( 26.2 ) 98.1
Inventories ( 17.6 ) ( 6.3 )
Trade payables ( 8.2 ) ( 3.8 )
Other provisions 2.6 0.2
Income tax liabilities ( 29.5 ) 2.5
Other assets and liabilities, net ( 0.3 ) ( 8.7 )
Net cash provided by operating activities 30.8 273.7
Cash flows from investing activities:
Acquisition of property, plant and equipment ( 135.7 ) ( 111.0 )
Net cash used in investing activities ( 135.7 ) ( 111.0 )
Cash flows from financing activities:
Proceeds from long-term debt borrowings — 12.6
Repayments of long-term debt ( 2.8 ) ( 2.3 )
Payments for debt issue costs ( 0.2 ) ( 0.2 )
Cash inflows related to current financial liabilities 242.1 103.2
Cash outflows related to current financial liabilities ( 98.3 ) ( 215.6 )
Dividends paid to shareholders ( 3.6 ) ( 3.7 )
Repurchase of Common stock ( 17.9 ) ( 58.9 )
Net cash provided by (used in) financing activities 119.3 ( 164.9 )
Increase (decrease) in cash, cash equivalents and restricted cash 14.4 ( 2.2 )
Cash, cash equivalents and restricted cash at the beginning of the period 40.2 63.4
Effect of exchange rate changes on cash 0.1 ( 0.6 )
Cash, cash equivalents and restricted cash at the end of the period 54.7 60.6
Less restricted cash at the end of the period
1.5 1.5
Cash and cash equivalents at the end of the period $ 53.2 $ 59.1
See accompanying Notes to these Condensed Consolidated Financial Statements.
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Condensed Consolidated Statements of Changes in Stockholders’ Equity
Common stock Treasury shares Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total
(In millions, except share and per share amounts) Number Amount
Balance at January 1, 2024 57,898,772 $ 85.3 $ ( 70.1 ) $ 85.6 $ 417.6 $ ( 39.9 ) $ 478.5
Net income — — — — 26.7 — 26.7
Other comprehensive loss, net of tax — — — — — ( 6.8 ) ( 6.8 )
Dividends $ 0.02 per share — — — — ( 1.2 ) — ( 1.2 )
Repurchases of Common stock ( 294,000 ) — ( 6.8 ) — — — ( 6.8 )
Share based compensation — — — 3.5 — — 3.5
Issuance of stock under equity compensation plans 703,161 — 13.4 ( 15.1 ) — — ( 1.7 )
Balance at March 31, 2024 58,307,933 85.3 ( 63.5 ) 74.0 443.1 ( 46.7 ) 492.2
Net income — — — — 20.5 — 20.5
Other comprehensive loss, net of tax — — — — — ( 9.4 ) ( 9.4 )
Dividends $ 0.04 per share — — — — ( 2.4 ) — ( 2.4 )
Share based compensation — — — 3.0 — — 3.0
Issuance of stock under equity compensation plans 48,688 — 0.8 ( 0.8 ) — — —
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
j
Balance at January 1, 2023 60,571,556 $ 85.3 $ ( 8.8 ) $ 76.4 $ 319.0 $ ( 12.5 ) $ 459.4
Net income — — — — 42.3 — 42.3
Other comprehensive loss, net of tax — — — — — ( 10.5 ) ( 10.5 )
Dividends $ 0.02 per share — — — — ( 1.3 ) — ( 1.3 )
Repurchases of Common stock ( 1,286,915 ) — ( 29.3 ) — — — ( 29.3 )
Share based compensation — — — 2.1 — — 2.1
Issuance of stock under equity compensation plans 131,550 — 2.9 ( 4.6 ) — — ( 1.7 )
Balance at March 31, 2023 59,416,191 85.3 ( 35.2 ) 73.9 360.0 ( 23.0 ) 461.0
Net income — — — — 30.1 — 30.1
Other comprehensive loss, net of tax — — — — — ( 7.1 ) ( 7.1 )
Dividends $ 0.04 per share — — — — ( 2.4 ) — ( 2.4 )
Repurchases of Common stock ( 822,595 ) — ( 20.2 ) — — — ( 20.2 )
Share based compensation — — — 2.6 — — 2.6
Issuance of stock under equity compensation plans 47,250 — 1.4 ( 1.2 ) — — 0.2
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.
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Notes to the Condensed Consolidated Financial Statement (Unaudited)
Table of Contents—Notes
Note A. Organization, Description of the Business and Summary of Significant Accounting Policies
7
Note B. Accounts Receivable
8
Note C. Inventories
7
Note D. Debt and Other Obligations
8
Note E. Financial Instruments and Fair Value Measurement
9
Note F. Employee Benefit Plans
11
Note G. Accumulated Other Comprehensive Income (Loss)
12
Note H. Earnings Per Share
13
Note I. Income Taxes
13
Note J. Commitments and Contingencies
14
Note K. Financial Information by Segment
15
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Notes to the Condensed Consolidated Financial Statements—(continued)
Note A. Organization, Description of the Business and Summary of Significant Accounting Policies
Orion S.A.’s unaudited Condensed Consolidated Financial Statements include Orion S.A. and its subsidiaries (“Orion” or the “Company”). The unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”) and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. These financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report in Form 10-K for the year ended December 31, 2023.
The accompanying unaudited Condensed Consolidated Financial Statements include all adjustments that are necessary for the fair presentation of our results for the interim periods presented. These statements contain some amounts that are based upon management estimates and judgments. Future actual results could differ from such current estimates. Results for interim periods are not necessarily indicative of results to be expected for the full year.
Summary of Significant Accounting Policies — Accounting Standards Not Yet Adopted
Income Taxes —In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures. This ASU:
• 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 Condensed Consolidated Financial Statements, however will require additional disclosures in future Annual Reports.
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 . This ASU:
• 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 Condensed Consolidated Financial Statements, however will require additional segment disclosures in future periods .
Note B. Accounts Receivable
Accounts receivable, net of allowance for credit losses, are as follows:
September 30, 2024 December 31, 2023
(In millions)
Accounts receivable $ 269.2 $ 242.2
Expected credit losses ( 1.3 ) ( 1.2 )
Accounts receivable, net $ 267.9 $ 241.0
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 September 30, 2024 and 2023 the loss on receivables sold was approximately $ 1.3 million and $ 1.3 million, respectively. For
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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.
Note C. Inventories
Inventories, net of reserves, are as follows:
September 30, 2024 December 31, 2023
(In millions)
Raw materials, consumables and supplies, net $ 120.6 $ 113.8
Work in process — 0.2
Finished goods, net 186.1 173.1
Inventories, net $ 306.7 $ 287.1
Note D. Debt and Other Obligations
Debt and other obligations are as follows:
September 30, 2024 December 31, 2023
(In millions)
Current
Current portion of Term-Loan $ 3.0 $ 3.1
Deferred debt issuance costs - Term-Loan ( 0.8 ) ( 0.8 )
Current portion of China Term-Loan 3.6 —
Other short-term debt and obligations 288.0 134.7
Current portion of long-term debt and other financial liabilities 293.8 137.0
Non-current
Term-Loan 623.9 621.8
Deferred debt issuance costs - Term-Loan ( 2.4 ) ( 3.1 )
China Term-Loan 55.2 58.6
Long-term debt, net 676.7 677.3
Total $ 970.5 $ 814.3
a. Revolving credit facility
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.
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Notes to the Condensed Consolidated Financial Statements—(continued)
b. Other Short-Term Debt and Obligations
September 30, 2024 December 31, 2023
(In millions)
Revolving Credit Facility $ 28.0 $ —
Ancillary Credit Facilities
OEC GmbH outstanding borrowings 155.5 88.8
OEC LLC outstanding borrowings 22.8 21.1
OEC Huaibei outstanding borrowings 6.7 —
Brazil Uncommitted Local Lines of Credit (capacity $ 2.9 million)
— —
Korea Working Capital Loan (capacity $ 55.3 million)
Uncommitted 1.9 1.9
Committed 26.8 20.1
China Working Capital Loans 7.0 2.8
Repurchase Agreement 39.3 —
Total of Other Short-term Debt and Obligations $ 288.0 $ 134.7
Supplemental information:
Total ancillary capacity - EUR € 234.0 € 214.0
Total ancillary capacity - U.S. Dollars $ 262.0 $ 236.5
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. Debt and Other Obligations” , included in our Annual Report in Form 10-K for the year ended December 31, 2023.
Note E. Financial Instruments and Fair Value Measurement
Risk management
We have policies governing the use of derivative instruments and do not enter into financial instruments for trading or speculative purposes.
By using derivative instruments, we are subject to credit and market risk. To minimize counterparty credit (or repayment) risk, we enter into transactions primarily with investment grade financial institutions. The market risk exposure is not hedged in a manner to completely eliminate the effects of changing market conditions on earnings or cash flow.
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.
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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:
September 30, 2024 December 31, 2023 Balance Sheet Classification
Notional Amount Fair Value Notional Amount Fair Value
(In millions)
Assets
Derivatives designated as hedges:
Cross currency swaps $ 197.0 $ 25.6 $ 197.0 $ 31.3 Other financial assets (non-current)
Interest rate swaps — — 303.9 4.6 Other financial assets (non-current)
Total $ 197.0 $ 25.6 $ 500.9 $ 35.9
All financial instruments in the table above are classified as Level 2. We present the gross assets and liabilities of our derivative financial instruments in the Condensed Consolidated Balance Sheets.
For financial assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period. 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.
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.
September 30, 2024 December 31, 2023
Notional Amount Fair Value Notional Amount Fair Value
(In millions)
Non-derivatives:
Liabilities:
Term-Loan $ 626.9 $ 626.9 $ 624.9 $ 617.0
China Term-Loan 58.8 59.1 58.6 57.1
Total $ 685.7 $ 686.0 $ 683.5 $ 674.1
The Term-Loan and China Term-Loan in the table above are classified as Level 2.
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.
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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 Sep 30,
Gain (Loss) Recognized in AOCI Gain (Loss) Reclassified from AOCI to Income Income Statement Classification
2024 2023 2024 2023
(In millions)
Derivatives designated as hedges:
Cross currency swaps $ ( 4.1 ) $ 3.0 $ ( 0.3 ) $ 0.4 Interest and other financial expense, net
Interest rate swaps — ( 1.7 ) ( 0.6 ) — Interest and other financial expense, net
Total $ ( 4.1 ) $ 1.3 $ ( 0.9 ) $ 0.4
Effect of Financial Instruments
Nine Months Ended September 30,
Gain (Loss) Recognized in AOCI Gain (Loss) Reclassified from AOCI to Income Income Statement Classification
2024 2023 2024 2023
(In millions)
Derivatives designated as hedges:
Cross currency swaps $ ( 3.3 ) $ — $ 0.5 $ 1.2 Interest and other financial expense, net
Interest rate swaps ( 4.1 ) ( 2.6 ) ( 0.6 ) — Interest and other financial expense, net
Total $ ( 7.4 ) $ ( 2.6 ) $ ( 0.1 ) $ 1.2
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.
See “ Note K. 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.
Note F. Employee Benefit Plans
Provisions for pensions are established to cover benefit plans for retirement, disability and surviving dependents’ pensions. The benefit obligations vary depending on the legal, tax and economic circumstances in various countries in which the Company operates. Generally, the level of benefit depends on the length of service and the remuneration.
Net periodic defined benefit pension costs include the following:
Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
(In millions)
Service cost $ 0.3 $ 0.3 $ 0.8 $ 0.8
Interest cost 0.7 0.6 1.9 1.9
Amortization of actuarial (gain) — ( 2.2 ) — ( 6.7 )
Net periodic pension cost $ 1.0 $ ( 1.3 ) $ 2.7 $ ( 4.0 )
Service costs were recorded in Income from operations in Selling, general and administrative expenses, and interest costs were recorded in Interest and other financial expense, net.
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.
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Notes to the Condensed Consolidated Financial Statements—(continued)
Note G. Accumulated Other Comprehensive Income (Loss)
Changes in each component of AOCI, net of tax, are as follows:
Currency Translation Adjustments Hedging Activities Adjustments Pension and Other Postretirement Benefit Liability Adjustment Total
(In millions)
Balance at January 1, 2024 $ ( 55.1 ) $ 16.1 $ ( 0.9 ) $ ( 39.9 )
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 )
Amounts reclassified from AOCI — 0.4 — 0.4
Income tax effects on reclassifications — ( 0.1 ) — ( 0.1 )
Currency translation AOCI — ( 0.5 ) — ( 0.5 )
Balance at March 31, 2024 ( 61.5 ) 15.6 ( 0.8 ) ( 46.7 )
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
Amounts reclassified from AOCI — 0.4 — 0.4
Income tax effects on reclassifications — ( 0.2 ) — ( 0.2 )
Currency translation AOCI — ( 0.5 ) — ( 0.5 )
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 )
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Notes to the Condensed Consolidated Financial Statements—(continued)
Currency Translation Adjustments Hedging Activities Adjustments Pension and Other Postretirement Benefit Liability Adjustment Total
(In millions)
Balance at January 1, 2023 $ ( 47.5 ) $ 24.4 $ 10.6 $ ( 12.5 )
Other comprehensive income (loss) before reclassifications ( 7.8 ) ( 3.3 ) — ( 11.1 )
Income tax effects before reclassifications 0.5 1.0 — 1.5
Amounts reclassified from AOCI — 0.4 ( 2.2 ) ( 1.8 )
Income tax effects on reclassifications — ( 0.1 ) 0.7 0.6
Currency translation AOCI — 0.2 0.1 0.3
Balance at March 31, 2023 ( 54.8 ) 22.6 9.2 ( 23.0 )
Other comprehensive income (loss) before reclassifications ( 5.1 ) ( 0.5 ) — ( 5.6 )
Income tax effects before reclassifications ( 0.1 ) 0.2 — 0.1
Amounts reclassified from AOCI — 0.4 ( 2.3 ) ( 1.9 )
Income tax effects on reclassifications — ( 0.2 ) 0.7 0.5
Currency translation AOCI — ( 0.3 ) 0.1 ( 0.2 )
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 )
Note H. Earnings Per Share
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 September 30, Nine Months Ended September 30,
2024 2023 2024 2023
(In millions, except share and per share data)
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 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 Earnings (loss) per share $ ( 0.35 ) $ 0.44 $ 0.46 $ 1.65
Note I. Income Taxes
The Company records its tax provision or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income to determine the income tax provision or benefit allocated to the interim period. Losses from jurisdictions for which no benefit can be recognized and the income tax effects of unusual and infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period as discrete items. Valuation allowances are provided against any future tax benefits that arise from losses in jurisdictions for which no benefit can be recognized. The estimated annual effective tax rate may be significantly impacted by nondeductible expenses and by the Company’s projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised.
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
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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 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 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.
Note J. Commitments and Contingencies
Commitments— In the second quarter of 2024, we invested in Alpha Carbone (“AC”), a French tire recycling company. This partnership will enable AC to produce commercial volumes of tire pyrolysis oil and recovered carbon black. In addition, we entered in a long-term supply agreement for the tire pyrolysis oil produced by AC. The tire pyrolysis oil will be used to manufacture circular carbon black for tire and rubber goods customers.
We invested approximately $ 0.3 million (€ 0.3 million) in shares of AC and $ 1.9 million (€ 1.7 million) in a convertible bond. We agreed to contribute an additional $ 5.6 million (€ 5.0 million) in convertible bonds to be paid in 10 installments through 2025.
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. We vigorously defend ourselves and prosecute these matters as appropriate. We regularly assess the adequacy of legal accruals based on our professional judgment, experience and the information available regarding our cases.
The outcome of legal proceedings is inherently uncertain, and we offer no assurances as to the outcome of any of these matters or their effect on the Company.
Based on 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 September 30, 2024, the Company had guarantees totaling $ 31.6 million issued by various financial institutions.
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Notes to the Condensed Consolidated Financial Statements—(continued)
Note K. Financial Information by Segment
Segment information
We disclose the results of each of our operating segments in accordance with ASC 280, Segment Reporting . We manage our business in two operating segments as follows:
• Rubber Carbon Black —Used in the reinforcement of rubber in tires and mechanical rubber goods, and
• Specialty Carbon Black —Used for protection, colorization and conductivity in coatings, polymers, batteries, printing and other special applications.
Corporate includes income and expenses that cannot be directly allocated to the business segments or that are managed at 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 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, legal settlements gains, 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.
Segment operating results for the three months ended September 30, 2024 and 2023 are as follows:
Rubber Specialty Corporate Total
(In millions)
2024
Net sales from external customers $ 300.9 $ 162.5 $ — $ 463.4
Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment 18.3 12.5 — 30.8
Equity in earnings of affiliated companies, net of tax 0.2 — — 0.2
Interest and other financial expense, net ( 15.9 ) ( 15.9 )
Adjusted EBITDA 52.9 27.2 — 80.1
2023
Net sales from external customers $ 315.8 $ 150.4 $ — $ 466.2
Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment 17.3 10.6 — 27.9
Equity in earnings of affiliated companies, net of tax 0.1 — — 0.1
Interest and other financial expense, net ( 12.9 ) ( 12.9 )
Reclassification of actuarial gain from AOCI 2.2 2.2
Adjusted EBITDA 51.2 26.1 — 77.3
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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
(In millions)
2024
Net sales from external customers $ 944.4 $ 498.9 $ — $ 1,443.3
Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment 53.1 36.9 — 90.0
Equity in earnings of affiliated companies, net of tax 0.5 — — 0.5
Interest and other financial expense, net ( 40.8 ) ( 40.8 )
Adjusted EBITDA 157.4 83.1 — 240.5
2023
Net sales from external customers $ 963.8 $ 461.9 $ — $ 1,425.7
Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment 51.0 29.8 — 80.8
Excluding equity in earnings of affiliated companies, net of tax 0.4 — — 0.4
Interest and other financial expense, net ( 41.6 ) ( 41.6 )
Reclassification of actuarial losses from AOCI 6.7 6.7
Adjusted EBITDA 172.4 93.3 — 265.7
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 September 30, Nine Months Ended September 30,
2024 2023 2024 2023
(In millions)
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
Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment 30.8 27.9 90.0 80.8
Equity in earnings of affiliated companies, net of tax 0.2 0.1 0.5 0.4
Interest and other financial expense, net 15.9 12.9 40.8 41.6
Reclassification of actuarial gain from AOCI — ( 2.2 ) — ( 6.7 )
Adjusted EBITDA $ 80.1 $ 77.3 $ 240.5 $ 265.7
Corporate charges include the following:
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
Other non-operating ( 1.1 ) — ( 1.1 ) ( 1.9 )
Corporate Charges $ 64.4 $ 3.6 $ 70.9 $ 6.4
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Management’s Discussion and Analysis of Financial Condition and Results of Operation
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.