Orion S.A 10-Q for FY2024 Q2
Orion S.A. (OEC)
10-Q
2024-08-01
For: 2024-06-30
View Original
Added on
April 06, 2026
About this 10-Q
Orion S.A filed this 10-Q on August 1, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $477M
- up 4.0% from $458.8M a year earlier
- Net income
- $20.5M
- down 31.9% from net income of $30.1M a year earlier
- Diluted EPS
- $0.35
- down 31.4% from $0.51 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from _______________ to _______________
Commission File Number: 001-36563
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||||||||
(281 ) 318-2959
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
x | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
The registrant had 58,356,621 shares of common stock outstanding as of July 26, 2024.
Orion S.A.
TABLE OF CONTENTS
Orion S.A.
PART I - Financial Information
Item 1. Financial Statements and Supplementary Data (Unaudited)
Condensed Consolidated Statements of Operations
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (In millions, except share and per share data) | ||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||
| Research and development costs | ||||||||||||||||||||||||||
| Other (income) expenses, net | ( | ( | ||||||||||||||||||||||||
| Income from operations | ||||||||||||||||||||||||||
| Interest and other financial expense, net | ||||||||||||||||||||||||||
| Reclassification of actuarial gain from AOCI | ( | ( | ||||||||||||||||||||||||
| Income before earnings in affiliated companies and income taxes | ||||||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||
| Earnings in affiliated companies, net of tax | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted-average shares outstanding (in thousands): | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
| Earnings per share: | ||||||||||||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||||||||||||
See accompanying Notes to these Condensed Consolidated Financial Statements.
1| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ( | ||||||||||||||||||||||
| Net losses on derivatives | ( | ( | ( | ( | ||||||||||||||||||||||
| Defined benefit plans, net | ( | ( | ||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | ( | ( | ||||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | ||||||||||||||||||||||
See accompanying Notes to these Condensed Consolidated Financial Statements.
2| June 30, 2024 | December 31, 2023 | |||||||||||||||||||
| (In millions, except share data) | ||||||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||||||||
| Accounts receivable, net | ||||||||||||||||||||
| Inventories, net | ||||||||||||||||||||
| Income tax receivables | ||||||||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||||||||
| Total current assets | ||||||||||||||||||||
| Property, plant and equipment, net | ||||||||||||||||||||
| Right-of-use assets | ||||||||||||||||||||
| Goodwill | ||||||||||||||||||||
| Intangible assets, net | ||||||||||||||||||||
| Investment in equity method affiliates | ||||||||||||||||||||
| Deferred income tax assets | ||||||||||||||||||||
| Other assets | ||||||||||||||||||||
| Total non-current assets | ||||||||||||||||||||
| Total assets | $ | $ | ||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Accounts payable | $ | $ | ||||||||||||||||||
| Current portion of long-term debt and other financial liabilities | ||||||||||||||||||||
| Accrued liabilities | ||||||||||||||||||||
| Income taxes payable | ||||||||||||||||||||
| Other current liabilities | ||||||||||||||||||||
| Total current liabilities | ||||||||||||||||||||
| Long-term debt, net | ||||||||||||||||||||
| Employee benefit plan obligation | ||||||||||||||||||||
| Deferred income tax liabilities | ||||||||||||||||||||
| Other liabilities | ||||||||||||||||||||
| Total non-current liabilities | ||||||||||||||||||||
| Commitments and contingencies | ||||||||||||||||||||
| Stockholders' equity | ||||||||||||||||||||
| Common stock | ||||||||||||||||||||
Authorized: | ||||||||||||||||||||
Issued – | ||||||||||||||||||||
Outstanding – | ||||||||||||||||||||
Treasury stock, at cost, | ( | ( | ||||||||||||||||||
| Additional paid-in capital | ||||||||||||||||||||
| Retained earnings | ||||||||||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||||||||
| Total stockholders' equity | ||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||||||||||||||
See accompanying Notes to these Condensed Consolidated Financial Statements.
37
| Six Months Ended June 30, | ||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| (In millions) | ||||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||
| 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 | ||||||||||||||||||||
| Amortization of debt issuance costs | ||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||
| Deferred tax provision | ( | |||||||||||||||||||
| Foreign currency transactions | ||||||||||||||||||||
| Reclassification of actuarial gain from AOCI | ( | |||||||||||||||||||
| Other operating non-cash items, net | ( | |||||||||||||||||||
| Changes in operating assets and liabilities, net: | ||||||||||||||||||||
| Trade receivables | ( | |||||||||||||||||||
| Inventories | ( | |||||||||||||||||||
| Trade payables | ( | |||||||||||||||||||
| Other provisions | ( | ( | ||||||||||||||||||
| Income tax liabilities | ( | ( | ||||||||||||||||||
| Other assets and liabilities, net | ( | ( | ||||||||||||||||||
| Net cash provided by operating activities | ||||||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Acquisition of property, plant and equipment | ( | ( | ||||||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Proceeds from long-term debt borrowings | ||||||||||||||||||||
| Repayments of long-term debt | ( | ( | ||||||||||||||||||
| Payments for debt issue costs | ( | ( | ||||||||||||||||||
| Cash inflows related to current financial liabilities | ||||||||||||||||||||
| Cash outflows related to current financial liabilities | ( | ( | ||||||||||||||||||
| Dividends paid to shareholders | ( | ( | ||||||||||||||||||
| Repurchase of common stock | ( | ( | ||||||||||||||||||
| Net cash provided by (used in) financing activities | ( | |||||||||||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | ( | |||||||||||||||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | ||||||||||||||||||||
| Effect of exchange rate changes on cash | ( | |||||||||||||||||||
| Cash, cash equivalents and restricted cash at the end of the period | ||||||||||||||||||||
Less restricted cash at the end of the period | ||||||||||||||||||||
| Cash and cash equivalents at the end of the period | $ | $ | ||||||||||||||||||
See accompanying Notes to these Condensed Consolidated Financial Statements.
4| 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 | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Dividends | $ | per share | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Repurchases of Common stock | ( | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Share based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock under equity compensation plans | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Dividends | $ | per share | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Share based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock under equity compensation plans | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
j
| Balance at January 1, 2023 | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Dividends | $ | per share | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Repurchases of Common stock | ( | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Share based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock under equity compensation plans | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Dividends | $ | per share | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Repurchases of Common stock | ( | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Share based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock under equity compensation plans | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
See accompanying Notes to these Condensed Consolidated Financial Statements.
5| Table of Contents—Notes | ||||||||
| Note A. | ||||||||
| Note B. | ||||||||
| Note C. | ||||||||
| Note D. | ||||||||
| Note E. | ||||||||
| Note F. | ||||||||
| Note G. | ||||||||
| Note H. | ||||||||
| Note I. | ||||||||
| Note J. | ||||||||
| Note K. | ||||||||
6Note 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:
| June 30, 2024 | December 31, 2023 | ||||||||||
| (In millions) | |||||||||||
| Accounts receivable | $ | $ | |||||||||
| Expected credit losses | ( | ( | |||||||||
| Accounts receivable, net | $ | $ | |||||||||
7Accounts 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.
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.
Note C. Inventories
Inventories, net of reserves, are as follows:
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Raw materials, consumables and supplies, net | $ | $ | |||||||||||||||||||||||||||||||||
| Work in process | |||||||||||||||||||||||||||||||||||
| Finished goods, net | |||||||||||||||||||||||||||||||||||
| Inventories, net | $ | $ | |||||||||||||||||||||||||||||||||
Note D. Debt and Other Obligations
Debt and other obligations are as follows:
| June 30, 2024 | December 31, 2023 | ||||||||||
| (In millions) | |||||||||||
| Current | |||||||||||
| Current portion of Term-Loan | $ | $ | |||||||||
| Deferred debt issuance costs - Term-Loan | ( | ( | |||||||||
| Current portion of China Term-Loan | |||||||||||
| Other short-term debt and obligations | |||||||||||
| Current portion of long-term debt and other financial liabilities | |||||||||||
| Non-current | |||||||||||
| Term-Loan | |||||||||||
| Deferred debt issuance costs - Term-Loan | ( | ( | |||||||||
| China Term-Loan | |||||||||||
| Long-term debt, net | |||||||||||
| Total | $ | $ | |||||||||
a.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
8b.Other Short-Term Debt and Obligations
| June 30, 2024 | December 31, 2023 | ||||||||||
| (In millions) | |||||||||||
| Revolving Credit Facility | $ | $ | |||||||||
| Ancillary Credit Facilities | |||||||||||
| OEC GmbH outstanding borrowings | |||||||||||
| OEC LLC outstanding borrowings | |||||||||||
Brazil Uncommitted Local Lines of Credit (capacity $ | |||||||||||
Korea Working Capital Loan (capacity $ | |||||||||||
| Uncommitted | |||||||||||
| Committed | |||||||||||
| China Working Capital Loans | |||||||||||
Qingdao (capacity $ | |||||||||||
Huaibei (capacity $ | |||||||||||
| Total of Other Short-term Debt and Obligations | $ | $ | |||||||||
| Supplemental information: | |||||||||||
| Total ancillary capacity - EUR | € | € | |||||||||
| Total ancillary capacity - U.S. Dollars | $ | $ | |||||||||
As of June 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.
No significant concentration of credit risk existed as of June 30, 2024 or December 31, 2023.
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 | |||||||||||||||||||||||||||
| Notional Amount | Fair Value | Notional Amount | Fair Value | ||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Derivatives designated as hedges: | |||||||||||||||||||||||||||||
| Cross currency swaps | $ | $ | $ | $ | Other financial assets (non-current) | ||||||||||||||||||||||||
| Interest rate swaps | Other financial assets (non-current) | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||
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.
9The 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 | ||||||||||||||||||||||
| Notional Amount | Fair Value | Notional Amount | Fair Value | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Non-derivatives: | |||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Term-Loan | $ | $ | $ | $ | |||||||||||||||||||
| China Term-Loan | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
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.
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, | |||||||||||||||||||||||||||||||||||
| 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 | $ | $ | ( | $ | $ | Interest and other financial expense, net | |||||||||||||||||||||||||||||
| Interest rate swaps | ( | Interest and other financial expense, net | |||||||||||||||||||||||||||||||||
| Total | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Effect of Financial Instruments | |||||||||||||||||||||||||||||||||||
| Six Months Ended June 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 | $ | $ | ( | $ | $ | Interest and other financial expense, net | |||||||||||||||||||||||||||||
| Interest rate swaps | ( | ( | Interest and other financial expense, net | ||||||||||||||||||||||||||||||||
| Total | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||
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.
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.
10Note 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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Amortization of actuarial (gain) | ( | ( | |||||||||||||||||||||
| Net periodic pension cost | $ | $ | ( | $ | $ | ( | |||||||||||||||||
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.
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 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive loss before reclassifications | ( | ( | ( | ||||||||||||||||||||
| Income tax effects before reclassifications | ( | ( | ( | ||||||||||||||||||||
| Amounts reclassified from AOCI | |||||||||||||||||||||||
| Income tax effects on reclassifications | ( | ( | |||||||||||||||||||||
| Currency translation AOCI | ( | ( | |||||||||||||||||||||
| Balance at March 31, 2024 | ( | ( | ( | ||||||||||||||||||||
| Other comprehensive loss before reclassifications | ( | ( | ( | ||||||||||||||||||||
| Income tax effects before reclassifications | ( | ||||||||||||||||||||||
| Amounts reclassified from AOCI | |||||||||||||||||||||||
| Income tax effects on reclassifications | ( | ( | |||||||||||||||||||||
| Currency translation AOCI | ( | ( | |||||||||||||||||||||
| Balance at June 30, 2024 | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
11| Currency Translation Adjustments | Hedging Activities Adjustments | Pension and Other Postretirement Benefit Liability Adjustment | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Balance at January 1, 2023 | $ | ( | $ | $ | $ | ( | |||||||||||||||||
| Other comprehensive income before reclassifications | ( | ( | ( | ||||||||||||||||||||
| Income tax effects before reclassifications | |||||||||||||||||||||||
| Amounts reclassified from AOCI | ( | ( | |||||||||||||||||||||
| Income tax effects on reclassifications | ( | ||||||||||||||||||||||
| Currency translation AOCI | |||||||||||||||||||||||
| Balance at March 31, 2023 | ( | ( | |||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | ||||||||||||||||||||
| Income tax effects before reclassifications | ( | ||||||||||||||||||||||
| Amounts reclassified from AOCI | ( | ( | |||||||||||||||||||||
| Income tax effects on reclassifications | ( | ||||||||||||||||||||||
| Currency translation AOCI | ( | ( | |||||||||||||||||||||
| Balance at June 30, 2023 | $ | ( | $ | $ | $ | ( | |||||||||||||||||
Note H. 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.
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, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
(In millions, except share and per share data) | |||||||||||||||||||||||
| Net income attributable to ordinary equity holders | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average number of Common stock (in thousands) | |||||||||||||||||||||||
| Basic EPS | $ | $ | $ | $ | |||||||||||||||||||
| Dilutive effect of share based payments (in thousands) | |||||||||||||||||||||||
| Weighted average number of diluted Common stock (in thousands) | |||||||||||||||||||||||
| Diluted EPS | $ | $ | $ | $ | |||||||||||||||||||
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.
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.
12Our effective income tax rates were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Effective income tax rates | % | % | % | % | |||||||||||||||||||
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.
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 $0.7 million (€0.7 million) in a convertible bond. We agreed to contribute an additional $6.4 million (€6.0 million) in convertible bonds to be paid in 12 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.
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.
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.
13Segment operating results for the three months ended June 30, 2024 and 2023 are as follows:
| Rubber | Specialty | Corporate | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| 2024 | |||||||||||||||||||||||
| Net sales from external customers | $ | $ | $ | $ | |||||||||||||||||||
| Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment | |||||||||||||||||||||||
| Equity in earnings of affiliated companies, net of tax | |||||||||||||||||||||||
| Interest and other financial expense, net | ( | ( | |||||||||||||||||||||
| Adjusted EBITDA | |||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||
| Net sales from external customers | $ | $ | $ | $ | |||||||||||||||||||
| Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment | |||||||||||||||||||||||
| Equity in earnings of affiliated companies, net of tax | |||||||||||||||||||||||
| Interest and other financial expense, net | ( | ( | |||||||||||||||||||||
| Reclassification of actuarial gain from AOCI | |||||||||||||||||||||||
| Adjusted EBITDA | |||||||||||||||||||||||
Segment operating results for the six months ended June 30, 2024 and 2023:
| Rubber | Specialty | Corporate | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| 2024 | |||||||||||||||||||||||
| Net sales from external customers | $ | $ | $ | $ | |||||||||||||||||||
| Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment | |||||||||||||||||||||||
| Equity in earnings of affiliated companies, net of tax | |||||||||||||||||||||||
| Interest and other financial expense, net | ( | ( | |||||||||||||||||||||
| Adjusted EBITDA | |||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||
| Net sales from external customers | $ | $ | $ | $ | |||||||||||||||||||
| Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment | |||||||||||||||||||||||
| Excluding equity in earnings of affiliated companies, net of tax | |||||||||||||||||||||||
| Interest and other financial expense, net | ( | ( | |||||||||||||||||||||
| Reclassification of actuarial losses from AOCI | |||||||||||||||||||||||
| Adjusted EBITDA | |||||||||||||||||||||||
14A 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, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Income before earnings in affiliated companies and income taxes | $ | $ | $ | $ | |||||||||||||||||||
| Corporate charges | |||||||||||||||||||||||
| Depreciation and amortization of intangible assets, right of use assets, and property, plant and equipment | |||||||||||||||||||||||
| Equity in earnings of affiliated companies, net of tax | |||||||||||||||||||||||
| Interest and other financial expense, net | |||||||||||||||||||||||
| Reclassification of actuarial gain from AOCI | ( | ( | |||||||||||||||||||||
| Adjusted EBITDA | $ | $ | $ | $ | |||||||||||||||||||
Corporate charges include the following:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Long term incentive plan | $ | $ | $ | $ | |||||||||||||||||||
| Other non-operating | ( | ( | |||||||||||||||||||||
| Corporate Charges | $ | $ | $ | $ | |||||||||||||||||||
15Orion S.A.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis summarizes the significant factors affecting our results of operations and financial condition during the three and six months ended June 30, 2024 and 2023 and should be read in conjunction with the information included under Item 1. Financial Statements and Supplementary Data (Unaudited) elsewhere in this report. We prepare our financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”).
PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION
Non-GAAP Financial Measures
We present certain financial measures that are not prepared in accordance with GAAP or the accounting standards of any other jurisdiction and may not be comparable to other similarly titled measures of other companies. For a reconciliation of these non-GAAP financial measures to their nearest comparable GAAP measures, see section Reconciliation of Non-GAAP Financial Measures below.
These non-GAAP measures include, but are not limited to, Gross profit per metric ton, Adjusted EBITDA, Net Working Capital, Capital Expenditures and Segment Adjusted EBITDA Margin (in percentage).
We define:
•Gross profit per metric ton—Gross profit divided by volume measured in metric tons.
•Adjusted EBITDA—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.
•Net Working Capital—Inventories, net plus Accounts receivable, net minus Accounts payable.
•Capital Expenditures—Cash paid for the acquisition of property, plant and equipment.
•Segment Adjusted EBITDA Margin (in percentage)—Segment Adjusted EBITDA divided by segment revenue.
Adjusted EBITDA is used by our chief operating decision maker (“CODM”) to evaluate our operating performance and to make decisions regarding allocation of capital, because it excludes the effects of items that have less bearing on the performance of our underlying core business. We use this measure, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing our business. We believe these measures are useful measures of financial performance in addition to Net income, Income from operations and other profitability measures under GAAP, because they facilitate operating performance comparisons from period to period. By eliminating potential differences in results of operations between periods caused by factors such as depreciation and amortization, historic cost and age of assets, financing and capital structures and taxation positions or regimes, we believe that Adjusted EBITDA provides a useful additional basis for evaluating and comparing the current performance of the underlying operations. In addition, we believe these non-GAAP measures aid investors by providing additional insight into our operational performance and help clarify trends affecting our business.
However, other companies and analysts may calculate non-GAAP financial measures differently, so making comparisons among companies on this basis should be done carefully. Non-GAAP measures are not performance measures under GAAP and should not be considered in isolation or construed as substitutes for Net sales, Net income, Income from operations, Gross profit and other GAAP measures as an indicator of our operations in accordance with GAAP.
16Orion S.A.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
Reconciliation of Non-GAAP Financial Measures
The following tables present a reconciliation of each Non-GAAP measure to the most directly comparable GAAP measure:
Reconciliation of Gross profit per metric ton:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Delta | 2024 | 2023 | Delta | ||||||||||||||||||||||||||||||||||||||||||
| (In millions) | % | (In millions) | % | ||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 477.0 | $ | 458.8 | $ | 18.2 | 4.0 | $ | 979.9 | $ | 959.5 | $ | 20.4 | 2.1 | |||||||||||||||||||||||||||||||||
| Cost of sales | (367.2) | (341.7) | (25.5) | 7.5 | (747.9) | (706.0) | (41.9) | 5.9 | |||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 109.8 | $ | 117.1 | $ | (7.3) | (6.2) | $ | 232.0 | $ | 253.5 | $ | (21.5) | (8.5) | |||||||||||||||||||||||||||||||||
| Volume (in kmt) | 233.1 | 227.3 | 5.8 | 2.6 | 481.5 | 460.8 | 20.7 | 4.5 | |||||||||||||||||||||||||||||||||||||||
| Gross profit per metric ton | $ | 471.0 | $ | 515.2 | $ | (44.2) | (8.6) | $ | 481.8 | $ | 550.1 | $ | (68.3) | (12.4) | |||||||||||||||||||||||||||||||||
Reconciliation of Net income to Adjusted EBITDA:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Delta | 2024 | 2023 | Delta | ||||||||||||||||||||||||||||||||||||||||||
| (In millions) | % | (In millions) | % | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | $ | 20.5 | $ | 30.1 | $ | (9.6) | (31.9) | $ | 47.2 | $ | 72.4 | $ | (25.2) | (34.8) | |||||||||||||||||||||||||||||||||
| Add back Income tax expense | 9.1 | 17.8 | (8.7) | (48.9) | 22.6 | 36.1 | (13.5) | (37.4) | |||||||||||||||||||||||||||||||||||||||
| Add back Equity in earnings of affiliated companies, net of tax | (0.2) | (0.2) | — | — | (0.3) | (0.3) | — | — | |||||||||||||||||||||||||||||||||||||||
| Income before earnings in affiliated companies and income taxes | 29.4 | 47.7 | (18.3) | (38.4) | 69.5 | 108.2 | (38.7) | (35.8) | |||||||||||||||||||||||||||||||||||||||
| Add back Interest and other financial expense, net | 12.2 | 13.5 | (1.3) | (9.6) | 24.9 | 28.7 | (3.8) | (13.2) | |||||||||||||||||||||||||||||||||||||||
| Add back Reclassification of actuarial gain from AOCI | — | (2.3) | 2.3 | (100.0) | — | (4.5) | 4.5 | (100.0) | |||||||||||||||||||||||||||||||||||||||
| Income from operations | 41.6 | 58.9 | (17.3) | (29.4) | 94.4 | 132.4 | (38.0) | (28.7) | |||||||||||||||||||||||||||||||||||||||
| Add back Depreciation of property, plant and equipment and amortization of intangible assets and right of use assets | 30.3 | 27.2 | 3.1 | 11.4 | 59.2 | 52.9 | 6.3 | 11.9 | |||||||||||||||||||||||||||||||||||||||
| EBITDA | 71.9 | 86.1 | (14.2) | (16.5) | 153.6 | 185.3 | (31.7) | (17.1) | |||||||||||||||||||||||||||||||||||||||
| Equity in earnings of affiliated companies, net of tax | 0.2 | 0.2 | — | — | 0.3 | 0.3 | — | — | |||||||||||||||||||||||||||||||||||||||
| Long term incentive plan | 3.0 | 2.6 | 0.4 | 15.4 | 6.5 | 4.7 | 1.8 | 38.3 | |||||||||||||||||||||||||||||||||||||||
| Other adjustments | — | (1.6) | 1.6 | (100.0) | — | (1.9) | 1.9 | (100.0) | |||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 75.1 | $ | 87.3 | $ | (12.2) | (14.0) | $ | 160.4 | $ | 188.4 | $ | (28.0) | (14.9) | |||||||||||||||||||||||||||||||||
Adjusted EBITDA Specialty Carbon Black | $ | 28.0 | $ | 29.9 | $ | (1.9) | (6.4) | $ | 55.9 | $ | 67.2 | $ | (11.3) | (16.8) | |||||||||||||||||||||||||||||||||
Adjusted EBITDA Rubber Carbon Black | $ | 47.1 | $ | 57.4 | $ | (10.3) | (17.9) | $ | 104.5 | $ | 121.2 | $ | (16.7) | (13.8) | |||||||||||||||||||||||||||||||||
17Orion S.A.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
Operating Results
The table below presents our historical results derived from our Condensed Consolidated Financial Statements for the periods indicated.
| Three Months Ended June 30, | Year-Over Year | ||||||||||||||||||||||
| 2024 | 2023 | Delta | |||||||||||||||||||||
| (In millions) | % | ||||||||||||||||||||||
| Net sales | $ | 477.0 | $ | 458.8 | $ | 18.2 | 4.0 | ||||||||||||||||
| Cost of sales | 367.2 | 341.7 | 25.5 | 7.5 | |||||||||||||||||||
| Gross profit | 109.8 | 117.1 | (7.3) | (6.2) | |||||||||||||||||||
| Selling, general and administrative expenses | 60.3 | 55.0 | 5.3 | 9.6 | |||||||||||||||||||
| Research and development costs | 6.5 | 5.9 | 0.6 | 10.2 | |||||||||||||||||||
| Other (income) expenses, net | 1.4 | (2.7) | 4.1 | (151.9) | |||||||||||||||||||
| Income from operations | 41.6 | 58.9 | (17.3) | (29.4) | |||||||||||||||||||
| Interest and other financial expense, net | 12.2 | 13.5 | (1.3) | (9.6) | |||||||||||||||||||
| Reclassification of actuarial gain from AOCI | — | (2.3) | 2.3 | (100.0) | |||||||||||||||||||
| Income before earnings in affiliated companies and income taxes | 29.4 | 47.7 | (18.3) | (38.4) | |||||||||||||||||||
| Income tax expense | 9.1 | 17.8 | (8.7) | (48.9) | |||||||||||||||||||
| Earnings in affiliated companies, net of tax | 0.2 | 0.2 | — | — | |||||||||||||||||||
| Net income | 20.5 | 30.1 | (9.6) | (31.9) | |||||||||||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
| Foreign currency translation adjustments | (8.3) | (5.2) | (3.1) | 59.6 | |||||||||||||||||||
| Net losses on derivatives | (1.2) | (0.4) | (0.8) | 200.0 | |||||||||||||||||||
| Defined benefit plans, net | 0.1 | (1.5) | 1.6 | (106.7) | |||||||||||||||||||
| Total other comprehensive (loss) income, net of tax | (9.4) | (7.1) | (2.3) | 32.4 | |||||||||||||||||||
| Comprehensive income | $ | 11.1 | $ | 23.0 | $ | (11.9) | (51.7) | ||||||||||||||||
Net sales
Volume for the three months ended June 30, 2024 increased in aggregate by 5.8 kmt to 233.1 kmt, year over year, due to higher volume in Specialty Carbon Black segment.
Net sales for the three months ended June 30, 2024 increased by $18.2 million, or 4.0%, to $477.0 million, year over year, primarily driven by higher volume in Specialty Carbon Black segment, the pass-through effect from higher oil prices and improved contractual pricing. Those were partially offset by unfavorable currency translation.
Cost of sales
Cost of sales for the three months ended June 30, 2024 increased by $25.5 million, or 7.5%, to $367.2 million year over year, primarily due to higher volume in Specialty Black Carbon segment and higher oil prices.
Gross profit
Gross profit for the three months ended June 30, 2024 decreased by $7.3 million, or 6.2%, to $109.8 million, year over year. The decrease was driven primarily by favorable impact from the pass-through of raw material costs in the prior year, higher fixed costs and lower cogeneration.
Gross profit per metric ton decreased by 8.6% to $471.0, year over year.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended June 30, 2024 increased by $5.3 million, or 9.6% to $60.3 million, year over year, driven by higher freight and personnel costs.
Provision for income taxes
For the three months ended June 30, 2024, and 2023 the Company recognized Income before earnings in affiliated companies and income taxes of $29.4 million, compared to $47.7 million, respectively. The provision for income taxes was an expense of $9.1 million and $17.8 million for the three months ended June 30, 2024 and 2023, respectively. The effective tax rate for the three months ended June 30, 2024, and 2023 was 31.0% and 37.3%, respectively. The decrease in effective tax rate for three months ended June 30, 2024, as compared
18Orion S.A.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
to the three months ended June 30, 2023, was primarily attributable to changes in projected pre-tax income mix in countries with varying statutory tax rates.
Adjusted EBITDA (A Non-GAAP Financial Measure)
Adjusted EBITDA decreased in the second quarter of 2024 by $12.2 million, or 14.0%, to $75.1 million, year over year.
The decrease was driven by favorable impact from the pass-through of raw material costs in the prior year, higher fixed costs and lower cogeneration. Those were partially offset by higher Specialty Carbon Black volume and improved contractual pricing.
Comprehensive Income
Comprehensive income decreased in the second quarter of 2024 by $11.9 million to $11.1 million, year over year. The components of Comprehensive income are discussed below:
Net income decreased by $9.6 million in the second quarter of 2024 compared to the second quarter of 2023.
The activities from the components of Other Comprehensive income are discussed below:
•$3.1 million of net unfavorable impact is related to unrealized loss due to foreign currency translation adjustments, and
•$0.8 million of net unfavorable impact is related to financial derivative instruments primarily driven by net periodic changes in cross currency and interest rate swaps, partially offset by
•$1.6 million of net favorable impact is related to changes in defined pension and other post-retirement benefits.
19Orion S.A.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
For the six months ended June 30, 2024 compared to six months ended June 30, 2023
| Condensed Consolidated Statement of Operations Data | Six Months Ended June 30, | Year-Over Year | |||||||||||||||||||||
| 2024 | 2023 | Delta | |||||||||||||||||||||
| (In millions) | % | ||||||||||||||||||||||
| Net sales | $ | 979.9 | $ | 959.5 | $ | 20.4 | 2.1 | ||||||||||||||||
| Cost of sales | 747.9 | 706.0 | 41.9 | 5.9 | |||||||||||||||||||
| Gross profit | 232.0 | 253.5 | (21.5) | (8.5) | |||||||||||||||||||
| Selling, general and administrative expenses | 121.8 | 112.7 | 9.1 | 8.1 | |||||||||||||||||||
| Research and development costs | 13.1 | 12.1 | 1.0 | 8.3 | |||||||||||||||||||
| Other (income) expenses, net | 2.7 | (3.7) | 6.4 | (173.0) | |||||||||||||||||||
| Income from operations | 94.4 | 132.4 | (38.0) | (28.7) | |||||||||||||||||||
| Interest and other financial expense, net | 24.9 | 28.7 | (3.8) | (13.2) | |||||||||||||||||||
| Reclassification of actuarial gain from AOCI | — | (4.5) | 4.5 | (100.0) | |||||||||||||||||||
| Income before earnings in affiliated companies and income taxes | 69.5 | 108.2 | (38.7) | (35.8) | |||||||||||||||||||
| Income tax expense | 22.6 | 36.1 | (13.5) | (37.4) | |||||||||||||||||||
| Earnings in affiliated companies, net of tax | 0.3 | 0.3 | — | — | |||||||||||||||||||
| Net income | 47.2 | 72.4 | (25.2) | (34.8) | |||||||||||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
| Foreign currency translation adjustments | (14.7) | (12.5) | (2.2) | 17.6 | |||||||||||||||||||
| Net losses on derivatives | (1.7) | (2.2) | 0.5 | (22.7) | |||||||||||||||||||
| Defined benefit plans, net | 0.2 | (2.9) | 3.1 | (106.9) | |||||||||||||||||||
| Total other comprehensive (loss) income, net of tax | (16.2) | (17.6) | 1.4 | (8.0) | |||||||||||||||||||
| Comprehensive income | $ | 31.0 | $ | 54.8 | $ | (23.8) | (43.4) | ||||||||||||||||
Net sales
Volume increased by 20.7 kmt to 481.5 kmt compared to the six months ended June 30, 2023, primarily due to higher volume in Specialty Carbon Black segment.
Net sales increased by $20.4 million, or 2.1%, in the six months ended June 30, 2024 to $979.9 million, year over year, primarily driven by higher volume in Specialty Carbon Black segment and improved contractual pricing. This was partially offset by the pass-through effect of lower raw material costs and lower cogeneration.
Cost of sales
Cost of sales increased by $41.9 million, or 5.9%, to $747.9 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to higher Specialty Carbon Black segment volume and associated costs.
Gross profit
Gross profit decreased by $21.5 million, or 8.5%, to $232.0 million, and gross profit per metric ton decreased by 12.4% to $481.8 year over year. The decrease was primarily driven by higher fixed costs, favorable impact from the pass-through of raw material costs in the prior year and lower cogeneration.
Selling, general and administrative expenses
Selling, general and administrative expenses increased by $9.1 million, or 8.1%, to $121.8 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily driven by higher freight and personnel costs.
Provision for income taxes
For the six months ended June 30, 2024, the Company recognized Income before earnings in affiliated companies and income taxes of $69.5 million, compared to $108.2 million in the six months ended June 30, 2023. The provision for income taxes was an expense of $22.6 million and $36.1 million for the six months ended June 30, 2024 and June 30, 2023, respectively. The effective tax rate for the six months ended June 30, 2024, was 32.5%, as compared to 33.4% for the six months ended June 30, 2023. The decrease in our effective tax rate for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to changes in
20Orion S.A.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
projected pre-tax income mix in countries with varying statutory tax rates.
Adjusted EBITDA (A Non-GAAP Financial Measure)
Adjusted EBITDA decreased by $28.0 million, or 14.9%, from $188.4 million in the six months ended June 30, 2023 to $160.4 million in the six months ended June 30, 2024. The decrease was primarily due to favorable impact from the pass-through of raw material costs in the prior year, higher fixed costs and lower cogeneration. Those were partially offset by higher Specialty Carbon Black volume and improved contractual pricing.
Comprehensive Income
Comprehensive income decreased by $23.8 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Net income decreased by $25.2 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
The activities from the components of Other Comprehensive income are discussed below:
•$2.2 million of net unfavorable impact is related to unrealized loss due to foreign currency translation adjustments.
•$0.5 million of net favorable impacts is related to financial derivative instruments primarily driven by net periodic changes in cross currency and interest rate swaps, and
•$3.1 million of net favorable changes is related to defined pension and other post-retirement benefits.
Segment Discussion
Our operations are managed through two reportable segments, Specialty Carbon Black and Rubber Carbon Black. We use Segment Adjusted EBITDA as the measure of segment performance and profitability.
The table below presents our segment results derived from our unaudited Condensed Consolidated Financial Statements for the periods indicated.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Delta | 2024 | 2023 | Delta | ||||||||||||||||||||||||||||||||||||||||||
| (In millions) | % | (In millions) | % | ||||||||||||||||||||||||||||||||||||||||||||
| Specialty Carbon Black | |||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 165.5 | $ | 149.5 | $ | 16.0 | 10.7 | $ | 336.4 | $ | 311.5 | $ | 24.9 | 8.0 | |||||||||||||||||||||||||||||||||
| Cost of sales | 126.0 | 106.9 | 19.1 | 17.9 | 255.2 | 216.8 | 38.4 | 17.7 | |||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 39.5 | $ | 42.6 | $ | (3.1) | (7.3) | $ | 81.2 | $ | 94.7 | $ | (13.5) | (14.3) | |||||||||||||||||||||||||||||||||
| Volume (kmt) | 62.9 | 53.6 | 9.3 | 17.4 | 126.2 | 106.6 | 19.6 | 18.4 | |||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 28.0 | $ | 29.9 | $ | (1.9) | (6.4) | $ | 55.9 | $ | 67.2 | $ | (11.3) | (16.8) | |||||||||||||||||||||||||||||||||
| Adjusted EBITDA margin (%) | 16.9 | 20.0 | (3.1) | (15.5) | 16.6 | 21.6 | (5.0) | (23.1) | |||||||||||||||||||||||||||||||||||||||
| Rubber Carbon Black | |||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 311.5 | $ | 309.3 | $ | 2.2 | 0.7 | $ | 643.5 | $ | 648.0 | $ | (4.5) | (0.7) | |||||||||||||||||||||||||||||||||
| Cost of sales | 241.2 | 234.8 | 6.4 | 2.7 | 492.7 | 489.2 | 3.5 | 0.7 | |||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 70.3 | $ | 74.5 | $ | (4.2) | (5.6) | $ | 150.8 | $ | 158.8 | $ | (8.0) | (5.0) | |||||||||||||||||||||||||||||||||
| Volume (kmt) | 170.2 | 173.7 | (3.5) | (2.0) | 355.3 | 354.2 | 1.1 | 0.3 | |||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 47.1 | $ | 57.4 | $ | (10.3) | (17.9) | $ | 104.5 | $ | 121.2 | $ | (16.7) | (13.8) | |||||||||||||||||||||||||||||||||
| Adjusted EBITDA margin (%) | 15.1 | 18.6 | (3.5) | (18.8) | 16.2 | 18.7 | (2.5) | (13.4) | |||||||||||||||||||||||||||||||||||||||
Specialty Carbon Black
Volume increased by 9.3 kmt, or 17.4%, year over year, to 62.9 kmt and increased by 19.6 kmt, or 18.4% year over year, to 126.2 kmt for the three and six months ended June 30, 2024, respectively, primarily due to volume recovery across all regions and end markets.
Net sales increased by $16.0 million, or 10.7%, year over year, to $165.5 million and increased by $24.9 million, or 8.0%, year over year, to $336.4 million for the three and six months ended June 30, 2024, respectively, primarily due to higher volume across all regions.
21Orion S.A.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
Gross profit decreased by $3.1 million, or 7.3%, year over year, to $39.5 million and decreased by $13.5 million, or 14.3%, year over year, to $81.2 million for the three and six months ended June 30, 2024, respectively, primarily driven by favorable impact from the pass-through of raw material costs in the prior year and lower cogeneration, partially offset by higher volume.
Adjusted EBITDA for the three months ended June 30, 2024 decreased by $1.9 million, or 6.4%, year over year, to $28.0 million. The decrease was primarily due to favorable impact from the pass-through of raw material costs in the prior year and lower cogeneration, partially offset by higher volume.
Adjusted EBITDA for the six months ended June 30, 2024 decreased by $11.3 million, or 16.8%, year over year, to $55.9 million. The decrease was primarily due to favorable impact from the pass-through of raw material costs in the prior year and higher fixed costs, partially offset by higher volume.
Adjusted EBITDA margin decreased by 310 basis points, year over year, to 16.9% and decreased by 500 basis points, year over year, to 16.6%, for the three and six ended June 30, 2024, respectively.
Rubber Carbon Black
Volume decreased by 3.5 kmt, or 2.0%, year over year, to 170.2 kmt, for the three months ended June 30, 2024, primarily due to lower demand in Americas and Asia.
Volume increased by 1.1 kmt, or 0.3%, year over year, to 355.3 kmt, for the six months ended June 30, 2024.
Net sales for the three months ended June 30, 2024 increased by $2.2 million, or 0.7%, year over year, to $311.5 million.
Net sales decreased by $4.5 million, or 0.7%, year over year, to $643.5 million for the six months ended June 30, 2024, primarily due to the pass-through effect of lower raw material costs, partially offset by improved contractual pricing.
Gross profit for the three and six months ended June 30, 2024 decreased by $4.2 million, or 5.6%, year over year, to $70.3 million and decreased by $8.0 million, or 5.0%, year over year, to $150.8 million, respectively. The decrease was primarily due to lower volume, partially offset by improved contractual pricing.
Adjusted EBITDA decreased by $10.3 million, or 17.9%, year over year, to $47.1 million for the three months ended June 30, 2024. The decrease was driven primarily by higher fixed costs, favorable impact from the pass-through of raw material costs in the prior year and lower cogeneration, partially offset by higher volume in Europe and improved contractual pricing.
Adjusted EBITDA decreased by $16.7 million, or 13.8%, to $104.5 million six months ended June 30, 2024. The decrease was driven primarily by higher fixed costs, favorable impact from the pass-through of raw material costs in the prior year, reduced volume in Americas and lower cogeneration, partially offset by higher volume in Europe and improved contractual pricing.
Adjusted EBITDA margin decreased 350 basis points to 15.1%, year over year and decreased 250 basis points to 16.2%, year over year for the three and six months ended June 30, 2024.
Liquidity and Capital Resources
Historical Cash Flows
The tables below present our historical cash flows derived from our unaudited Condensed Consolidated Financial Statements for the periods indicated.
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In millions) | |||||||||||
| Net cash provided by operating activities | $ | 61.7 | $ | 206.2 | |||||||
| Net cash used in investing activities | (87.8) | (69.1) | |||||||||
| Net cash provided by (used in) financing activities | 23.5 | (120.7) | |||||||||
2024
Net cash provided by operating activities during the six months ended June 30, 2024 was $61.7 million. The cash provided by operating activities primarily reflects changes in working capital. Change in working capital includes $218.4 million sale of certain accounts receivables, discussed in Note B. Accounts Receivable.
Net cash used in investing activities in the six months ended June 30, 2024 amounted to $87.8 million. The expenditures were primarily
22Orion S.A.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
related to safety, maintenance and growth investments.
Net cash provided by financing activities during the six months ended June 30, 2024 amounted to $23.5 million. These inflows primarily consisted of $52.7 million related to other short-term debt borrowings, partially offset by $17.7 million, net related to repayment of our ancillary credit facilities.
2023
Net cash provided by operating activities for the six months ended June 30, 2023, amounted to $206.2 million. The cash provided by operating activities primarily reflects changes in working capital and higher Net income. Change in working capital includes $194.1 million sale of certain accounts receivables, discussed in Note B. Accounts Receivable.
Net cash used in investing activities for the six months ended June 30, 2023, amounted to $69.1 million. These expenditures were comprised of a combination of safety, maintenance-related and growth investments, as well as $19.4 million of expenditures associated with our, now completed, installation of emissions reduction technology to meet EPA requirements in the U.S.
Net cash used in financing activities for the six months ended June 30, 2023, amounted to $120.7 million. These outflows primarily consisted of $62.8 million related to the reduction of other short-term debt, $49.5 million for repurchase of common stock under the Stock Repurchase Program and $12.0 million, net related to repayment of our ancillary credit facilities.
Sources of Liquidity
Our principal sources of liquidity are the net cash generated (i) from operating activities, primarily driven by our operating results and changes in working capital requirements and (ii) from financing activities, primarily driven by borrowing amounts available under our committed multicurrency, senior secured revolving credit facility (the “RCF”) and related ancillary facilities, various uncommitted local credit lines, and, from time to time, term loan borrowings and Accounts receivable factoring.
We believe our anticipated future operating cash flows, the capacity under our existing credit facilities and uncommitted bilateral lines of credit, along with access to surety bonds, will be sufficient to finance our planned Capital expenditures, settle our commitments and contingencies, and address our normal anticipated working capital needs for the foreseeable future.
As of June 30, 2024, the company had total liquidity of $229.2 million, including cash and equivalents of $34.2 million, $157.4 million availability under our revolving credit facility, including ancillary lines, and $37.6 million of capacity under other available credit lines. Net debt was $803.5 million, and Net leverage was 2.64x.
Net working capital (A Non-GAAP Financial Measure)
We define Net working capital as the sum total of current Accounts receivable, net and Inventories, net less Accounts payable. Net working capital is a non-GAAP financial measure and other companies may use a similarly titled financial measure that is calculated differently from the way we calculate Net working capital. The following table sets forth the principal components of our Net working capital as of the dates indicated.
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||
| (In millions) | ||||||||||||||||||||
| Accounts receivable, net | $ | 272.2 | $ | 241.0 | ||||||||||||||||
| Inventories, net | 284.5 | 287.1 | ||||||||||||||||||
| Accounts payable | (186.2) | (183.7) | ||||||||||||||||||
| Net working capital | $ | 370.5 | $ | 344.4 | ||||||||||||||||
Our Net working capital position can vary significantly from month to month, mainly due to fluctuations in oil prices and receipts of carbon black oil shipments. In general, increases in the cost of raw materials lead to an increase in our Net working capital requirements, as our inventories and trade receivables increase as a result of higher carbon black oil prices and related sales levels. These increases are partially offset by related increases in trade payables. Due to the quantity of carbon black oil that we typically keep in stock, such increases in Net working capital occur gradually over a period of two to three months. Conversely, decreases in the cost of raw materials lead to a decrease in our Net working capital requirements over the same period of time.
Our Net working capital increased from $344.4 million as of December 31, 2023, to $370.5 million as of June 30, 2024. The primary driver of the changes in working capital over the period was due to an increase in Accounts receivable, net. This increase was primarily driven by higher sales, partially offset by improved payment terms.
23Orion S.A.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
Capital expenditures (A Non-GAAP Financial Measure)
We define Capital expenditures as cash paid for the acquisition of property, plant and equipment. We plan to finance our Capital expenditures with cash generated by our operating activities and/or by utilizing existing debt capacity. We currently do not have any material commitments to make Capital expenditures and do not plan to make Capital expenditures outside the ordinary course of our business.
Off-Balance Sheet Arrangements
As of June 30, 2024, we did not have any off-balance sheet arrangements.
24Orion S.A.
Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995
This report contains and refers to certain forward-looking statements with respect to our financial condition, results of operations and business. These statements constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among others, statements concerning the potential exposure to market risks, statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions and statements that are not limited to statements of historical or present facts or conditions.
Forward-looking statements are typically identified by words such as “anticipate,” “assume,” “assure,” “believe,” “confident,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “objectives,” “outlook,” “probably,” “project,” “will,” “seek,” “target,” “to be” and other words of similar meaning. These forward-looking statements include, without limitation, statements about the following matters:
•our strategies for (i) maintaining or strengthening our position in Specialty Carbon Black or Rubber Carbon Black, (ii) maintaining or increasing our Specialty or Rubber Carbon Black margins and (iii) maintaining or strengthening the competitiveness of our operations;
•our profit and cash flow projections;
•the outcome of any in-progress, pending or possible litigation or regulatory proceedings;
•the expectations regarding environmental-related costs and liabilities;
•the expectations regarding the performance of our industry and the global economy, including foreign currency rate fluctuations;
•the sufficiency of our cash on hand, cash provided by operating activities and borrowings to pay our operating expenses, satisfy our debt obligations and fund capital expenditures;
•the ability to pay dividends;
•our anticipated spending on, and the timely completion and anticipated impacts of, capital projects including growth projects, and the construction of new plants;
•our projections and expectations for pricing, financial results and performance in 2024 and beyond;
•the status of contract negotiations with counterparties and the impact of new contracts on our business; and
•our expectation that the markets we serve will continue to demand our products.
All these forward-looking statements are based on estimates and assumptions that, although believed to be reasonable, are inherently uncertain. Therefore, undue reliance should not be placed upon any forward-looking statements. There are important factors that could cause actual results to differ materially from those contemplated by such forward-looking statements. These factors include, among others:
•possible negative or uncertain worldwide economic conditions and developments;
•the volatility and cyclicality of the industries in which we operate;
•the operational risks inherent in chemicals manufacturing, including disruptions due to technical facilities, severe weather conditions or natural disasters;
•our dependence on major customers and suppliers;
•unanticipated fluctuations in demand for our products, including due to factors beyond our control;
•our ability to compete in the industries and markets in which we operate;
•changes in the nature of transportation in the future, which may impact our customers and our business;
•our ability to successfully develop new products and technologies;
•the availability of substitutes for our products;
•our ability to implement our business strategies;
•our ability to respond to changes in feedstock prices and quality;
•our ability to realize benefits from investments, joint ventures, acquisitions or alliances;
•our ability to negotiate satisfactory terms with counterparties, the satisfactory performance by such counterparties of their obligations to us, as well as our ability to meet our performance obligations towards such counterparties;
•our ability to realize benefits from planned plant capacity expansions and planned and current site development projects, including our conductive additives facility at La Porte, Texas, and the impacts of potential delays to such expansions and development projects;
•any information technology systems failures, network disruptions and breaches of data security;
•our relationships with our workforce, including negotiations with labor unions, strikes and work stoppages;
•our ability to recruit or retain key management and personnel;
25Orion S.A.
•our exposure to political or country risks inherent in doing business globally;
•any and all impacts from the Russia-Ukraine war and the Hamas-Israel conflict and/or any escalation thereof related energy costs, raw material availability or other economic disruptions;
•geopolitical events in the United States (“U.S.”), Middle-East, European Union (“EU”) and China, relations amongst Western countries and their neighbors, as well as future relations between the U.S., EU, China, and other countries and organizations;
•all environmental, health and safety laws and regulations, including nanomaterial and greenhouse gas emissions regulations, and the related costs of maintaining compliance and addressing liabilities;
•any possible future investigations and enforcement actions by governmental, supranational agencies or other organizations;
•our operations as a company in the chemical sector, including the related risks of leaks, fires and toxic releases as well as other accidents;
•any market and regulatory changes that may affect our ability to sell or otherwise benefit from co-generated energy;
•any litigation or legal proceedings, including product liability, environmental or asbestos related claims;
•our ability to protect our intellectual property rights and know-how;
•our ability to generate the funds required to service our debt and finance our operations;
•any fluctuations in foreign currency exchange and interest rates;
•the availability and efficiency of hedging;
•any changes in international and local economic conditions, dislocations in credit and capital markets and inflation or deflation;
•any potential impairments or write-offs of certain assets;
•any required increases in our pension fund or retirement-related contributions;
•the adequacy of our insurance coverage;
•any changes in our jurisdictional earnings mix or in the tax laws or accepted interpretations of tax laws in those jurisdictions;
•any challenges to our decisions and assumptions in assessing and complying with our tax obligations;
•the potential difficulty in obtaining or enforcing judgments or bringing legal actions against Orion S.A. (a Luxembourg incorporated entity) in the U.S. or elsewhere outside Luxembourg; and
•any current or future changes to disclosure requirements and obligations, including but not limited to new ESG-related disclosures, related audit requirements and our ability to comply with such obligations and requirements.
Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include those factors detailed under the captions “Cautionary Statement for the Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995” and “Risk Factors” and in “Note Q. Commitments and Contingencies” to our audited Consolidated Financial Statements regarding contingent liabilities, including litigation in our Annual Report in Form 10-K for the year ended December 31, 2023 and in our quarterly reports in Form 10-Q and the unaudited Condensed Consolidated Financial Statements contained therein. It is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, as a result of new information, future events or other information, other than as required by applicable law.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information about market risks for the period ended June 30, 2024 does not differ materially from “Item 7A” in our Annual Report in Form 10-K for the year ended December 31, 2023.
Item 4. Controls and Procedures
As of June 30, 2024, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of that date.
There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26Orion S.A.
PART II
Item 1. Legal Proceedings
We become involved from time to time in various claims and lawsuits arising from special projects or in the ordinary course of our business, such as employment related claims or asbestos litigation. Some matters involve claims for large amounts of damages as well as other relief. We believe, based on currently available information, that the results of the proceedings we are subject to, in the aggregate, will not have a material adverse effect on our financial condition, but may be material to our operating results and cash flows for any particular period when the relevant costs are incurred. We note that 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.
Information regarding our litigation and legal proceedings can be found in Note J. Commitments and Contingencies to the Condensed Consolidated Financial Statements, which is incorporated into this Item 1 by reference.
Item 1A. Risk Factors
There have been no material changes to risk factors associated with our business previously disclosed in “Item A. Risk Factors” in our Annual Report in Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
We did not repurchase any shares of common stock during the three and six months ended June 30, 2024.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
None
Item 6. Exhibits
| Exhibit Number | Description | |||||||
| 31.1 | * | |||||||
| 31.2 | * | |||||||
| 32.1 | ** | |||||||
| 32.2 | ** | |||||||
| 101.INS | Inline XBRL Instance Document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema. | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase. | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase. | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase. | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Document. | |||||||
| 104.0 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
| * | Filed herewith | |||||||
| ** | Furnished herewith | |||||||
| † | Management compensatory arrangement | |||||||
27Orion S.A.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ORION S.A. | ||||||||
| August 1, 2024 | By | /s/ Jeffrey Glajch | ||||||
| Name: Jeffrey Glajch | ||||||||
| Title: Chief Financial Officer | ||||||||
28Exhibit 31.1 Certification by Corning F. Painter pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
I, Corning Painter, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Orion S.A.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 1, 2024 /s/ Corning Painter
Chief Executive Officer
Exhibit 31.2 Certification by Jeffrey Glajch pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
I, Jeffrey Glajch, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Orion S.A.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 1, 2024 /s/ Jeffrey Glajch
Chief Financial Officer
Exhibit 32.1 Certification by Corning F. Painter pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
CERTIFICATION
In connection with the Quarterly Report of Orion S.A. on Form 10-Q for the quarterly period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Corning Painter, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 1, 2024 /s/ Corning Painter
Chief Executive Officer
Exhibit 32.2 Certification by Jeffrey Glajch pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
CERTIFICATION
In connection with the Quarterly Report of Orion S.A. on Form 10-Q for the quarterly period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey Glajch, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 1, 2024 /s/ Jeffrey Glajch
Chief Financial Officer