oec-20210331

UNITED STATES
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 March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

ORION ENGINEERED CARBONS S.A.

(Exact name of registrant as specified in its charter)

Grand Duchy of Luxembourg

001-36563

00-0000000

(State or other jurisdiction of incorporation or organization)

(Commission file number)

(I.R.S. Employer Identification No.)

4501 Magnolia Cove Drive Suite 106

Houston,

Texas

77345

(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
Common Shares, no par value	OEC	New York Stock Exchange

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 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.


Large accelerated filer	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 60,590,526 shares of common stock outstanding as of May 4, 2021.

Orion Engineered Carbons S.A.

TABLE OF CONTENTS


PART I - Financial Information						1
Item 1. Financial Statements and Supplementary Data (Unaudited)						1
Condensed Consolidated Statements of Operations						1
Condensed Consolidated Statements of Comprehensive Income (Loss)						2
Condensed Consolidated Balance Sheets						3
Condensed Consolidated Statements of Cash Flows						4
Condensed Consolidated Statements of Changes in Stockholders’ Equity						5
Notes to the Condensed Consolidated Financial Statements						6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations						17
Item 3. Quantitative and Qualitative Disclosures About Market Risk						24
Item 4. Controls and Procedures						24

PART II - Other Information						25
Item 1. Legal Proceedings						26
Item 1A. Risk Factors						26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						26
Item 3. Defaults Upon Senior Securities						26
Item 4. Mine Safety Disclosures						26
Item 5. Other						26
Item 6. Exhibits						26
Signatures						27

Orion Engineered Carbons S.A.

PART I - Financial Information

Item 1. Financial Statements and Supplementary Data (Unaudited)

Condensed Consolidated Statements of Operations


	Three Months Ended March 31,
		2021		2020
		(In thousands, except per share amounts)
Net sales		$	360,077	$	336,007
Cost of sales		257,557		245,815
Gross profit		102,520		90,193

Selling, general and administrative expenses		52,353		44,519
Research and development costs		4,760		4,956
Other expenses, net		2,554		3,175


Income from operations		42,853		37,543

Interest and other financial expense, net		9,959		9,610
Reclassification of actuarial losses from AOCI		1,228		2,398
Pre-tax income before equity in earnings of affiliated companies		31,666		25,534

Income tax expense		8,274		7,635
Equity in earnings of affiliated companies, net of tax		146		133
Net income		$	23,538	$	18,032

Weighted-average shares outstanding:
Basic		60,648		60,276
Diluted		60,812		61,391
Earnings/(loss) per share:
Basic		$	0.39	$	0.30
Diluted		$	0.39	$	0.29

See accompanying Notes to these Condensed Consolidated Financial Statements

Orion Engineered Carbons S.A.

Consolidated Statements of Comprehensive Income (Loss)


	Three Months Ended March 31,
		2021		2020
		(In thousands)
Net income		$	23,538	$	18,032
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		(5,095)		(24,071)
Unrealized net gains/(losses) on hedges of a net investment in a foreign operation		70		36
Unrealized net gains/(losses) on cash flow hedges		1,089		(656)
Gains on defined benefit plans		1,209		1,847
Other comprehensive loss		(2,728)		(22,844)
Comprehensive income/(loss)		$	20,810	$	(4,811)

See accompanying Notes to these Condensed Consolidated Financial Statements

Orion Engineered Carbons S.A.

Condensed Consolidated Balance Sheets


	March 31, 2021		December 31, 2020
	(In thousands, except share amounts)
Current assets
Cash and cash equivalents	$	62,632	$	64,869
Accounts receivable, net	257,697		234,796
Other current financial assets	2,978		3,630
Inventories, net	157,504		141,461
Income tax receivables	11,415		11,249
Prepaid expenses and other current assets	45,334		44,452
Total current assets	537,560		500,456
Property, plant and equipment, net	605,069		610,530
Right-of-use assets	92,794		85,639
Goodwill	80,721		84,480
Intangible assets, net	42,974		46,772
Investment in equity method affiliates	5,528		5,637
Deferred income tax assets	58,028		52,563
Other financial assets	699		761
Other assets	2,438		2,956
Total non-current assets	888,249		889,337
Total assets	$	1,425,809	$	1,389,793


Current liabilities
Accounts payable		$	141,529	$	131,250
Current portion of long term debt and other financial liabilities		107,843		82,618
Current portion of employee benefit plan obligation		948		1,118
Accrued liabilities		39,424		49,176
Income taxes payable		28,228		23,906
Other current liabilities		38,700		36,676
Total current liabilities		356,672		324,745
Long-term debt, net		637,127		655,826
Employee benefit plan obligation		79,930		83,310
Deferred income tax liabilities		44,619		38,770
Other liabilities		104,614		106,131
Total non-current liabilities		866,290		884,036
Commitments and contingencies	Note M
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 – 60,590,526 and 60,487,117 shares		85,323		85,323
Less 401,733 and 505,142 shares of common treasury stock, at cost		(7,345)		(8,515)
Additional paid-in capital		68,356		68,502
Retained earnings		107,945		84,407
Accumulated other comprehensive loss		(51,432)		(48,705)
Total stockholders' equity		202,846		181,013
Total liabilities and stockholders' equity		$	1,425,809	$	1,389,793

See accompanying Notes to these Condensed Consolidated Financial Statements

Orion Engineered Carbons S.A.

Condensed Consolidated Statements of Cash Flows


	Three Months Ended March 31,
		2021		2020
		(In thousands)
Cash flows from operating activities:
Net income		$	23,538	$	18,032
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation of property, plant and equipment and amortization of intangible assets and right of use assets		25,627		23,845

Amortization of debt issuance costs		539		501
Share-based incentive compensation		1,060		(1,139)
Deferred tax (benefit)/provision		(2,068)		(1,865)

Foreign currency transactions		3,641		1,219
Reclassification of actuarial losses from AOCI		1,228		2,398
Other operating non-cash items		204		360
Changes in operating assets and liabilities, net of effects of businesses acquired:
Trade receivables		(30,535)		(31,097)
Inventories		(19,845)		(11,681)
Trade payables		11,383		4,391
Other provisions		(7,946)		(11,365)
Income tax liabilities		4,206		12,016
Other assets and liabilities		(9,226)		(711)
Net cash provided by operating activities		1,805		4,905
Cash flows from investing activities:
Acquisition of intangible assets and property, plant and equipment		(27,227)		(50,851)


Net cash used in investing activities		(27,227)		(50,851)
Cash flows from financing activities:


Repayments of long-term debt		(2,072)		(2,006)
Cash inflows related to current financial liabilities		35,465		109,813
Cash outflows related to current financial liabilities		(7,734)		—
Dividends paid to shareholders		—		(12,045)

Taxes paid for shares issued under net settlement feature		(36)		(1,202)
Net cash provided by financing activities		25,623		94,560
Increase/(decrease) in cash, cash equivalents and restricted cash		202		48,614
Cash, cash equivalents and restricted cash at the beginning of the period		67,865		68,231
Effect of exchange rate changes on cash		(2,572)		(6,630)
Cash, cash equivalents and restricted cash at the end of the period		65,495		110,215
Less restricted cash at the end of the period		2,863		2,675
Cash and cash equivalents at the end of the period		$	62,632	$	107,540

SEC Form 10-Q filed by Orion Engineered Carbons S.A