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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 June 30, 2020
OR
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 Luxembourg001-3656300-0000000
(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 Sectio
n 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares, no par valueOECNew 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 60,487,117 shares of common stock outstanding as of August 4, 2020.



TABLE OF CONTENTS

PART I - Financial Information
Item 1. Financial Statements and Supplementary Data (Unaudited)
Consolidated Statements of Operations of Orion Engineered Carbons S.A. (Unaudited)
Consolidated Statements of Comprehensive Income of Orion Engineered Carbons S.A. (Unaudited)
Consolidated Balance Sheets of Orion Engineered Carbons S.A. (Unaudited)
Consolidated Statements of Cash Flows of Orion Engineered Carbons S.A. (Unaudited)
Consolidated Statements of Changes in Stockholders’ Equity of Orion Engineered Carbons S.A. (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other
Item 6. Exhibits
SIGNATURES






PART I - Financial Information
Item 1. Financial Statements and Supplementary Data (Unaudited)

Consolidated Statements of Operations of Orion Engineered Carbons S.A. (Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
(In thousands, except per share amounts)
Net sales$202,648  $399,016  $538,655  $783,730  
Cost of sales168,704  294,978  414,518  581,723  
Gross profit33,944  104,038  124,137  202,007  
Selling, general and administrative expenses38,547  52,117  83,066  107,694  
Research and development costs4,449  4,914  9,405  10,043  
Other expenses, net3,826  4,503  7,002  6,978  
Restructuring expenses  1,034    1,123  
Income/(loss) from operations(12,879) 41,470  24,664  76,169  
Interest and other financial expense, net8,277  7,566  17,888  14,009  
Reclassification of actuarial losses from AOCI2,654    5,052    
Income/(loss) from operations before income taxes and equity in earnings of affiliated companies(23,810) 33,904  1,724  62,160  
Income tax expense/(benefit)(5,879) 9,309  1,756  18,748  
Equity in earnings of affiliated companies, net of tax151  153  285  290  
Net income/(loss)$(17,780) $24,748  $253  $43,702  
Weighted-average shares outstanding (in thousands of shares):
Basic60,487  59,984  60,361  59,752  
Diluted61,263  61,125  61,307  61,119  
Earnings/(loss) per share:
Basic$(0.30) $0.41  $  $0.73  
Diluted$(0.29) $0.40  $  $0.72  
Dividends per share$  $0.20  $0.20  $0.40  

The accompanying notes are an integral part of these consolidated financial statements.


1



Consolidated Statements of Comprehensive Income of Orion Engineered Carbons S.A. (Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
(In thousands)
Net income/(loss)$(17,780) $24,748  $253  $43,702  
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments631  (4,844) (23,440) (3,381) 
Unrealized net gains/(losses) on hedges of a net investment in a foreign operation(31)   5    
Unrealized net losses on cash flow hedges(1,609) (4,375) (2,265) (6,600) 
Gains/(losses) on defined benefit plans1,595  (36) 3,442  17  
Other comprehensive income (loss)585  (9,255) (22,259) (9,964) 
Comprehensive income/(loss)$(17,195) $15,493  $(22,006) $33,738  

The accompanying notes are an integral part of these consolidated financial statements.

2



Consolidated Balance Sheets of Orion Engineered Carbons S.A. (Unaudited)
June 30, 2020December 31, 2019
(In thousands, except share amounts)
Current assets
Cash and cash equivalents$143,374  $63,726  
Accounts receivable, net of expected credit losses
of$6,379and$6,632145,305  212,565  
Other current financial assets9,434  11,347  
Inventories, net135,310  164,799  
Income tax receivables11,710  17,924  
Prepaid expenses and other current assets34,782  37,358  
Total current assets479,914  507,718  
Property, plant and equipment, net556,689  534,054  
Operating lease right-of-use assets28,943  27,532  
Goodwill77,093  77,341  
Intangible assets, net47,081  50,596  
Investment in equity method affiliates4,944  5,232  
Deferred income tax assets54,796  48,720  
Other financial assets715  2,501  
Other assets3,086  3,701  
Total non-current assets773,346  749,676  
Total assets$1,253,260  $1,257,394  

Current liabilities
Accounts payable$90,134  $156,298  
Current portion of long term debt and other financial liabilities136,969  36,410  
Current portion of employee benefit plan obligation905  908  
Accrued liabilities36,122  44,931  
Income taxes payable 15,339  14,154  
Other current liabilities35,639  32,509  
Total current liabilities315,108  285,211  
Long-term debt, net625,799  630,261  
Employee benefit plan obligation71,180  71,901  
Deferred income tax liabilities48,772  43,308  
Other liabilities41,583  40,701  
Commitments and contingenciesNote N
Total non-current liabilities787,333  786,171  
Stockholders' equity
Common stock
Authorized: 65,035,579 and 65,035,579 shares with no par value
Issued – 60,992,259 and 60,729,289 shares with no par value
Outstanding – 60,487,117 and 60,224,147 shares
85,323  85,032  
Less 505,142 and 505,142 shares of common treasury stock, at cost
(8,515) (8,515) 
Additional paid-in capital64,128  65,562  
Retained earnings66,504  78,296  
Accumulated other comprehensive loss(56,621) (34,362) 
Total stockholders' equity150,819  186,013  
Total liabilities and stockholders' equity$1,253,260  $1,257,394  

The accompanying notes are an integral part of these consolidated financial statements.
3



Consolidated Statements of Cash Flows of Orion Engineered Carbons S.A. (Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
(In thousands)
Cash flows from operating activities:
Net income/(loss)$(17,780) $24,748  $253  $43,702  
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 assets21,876  25,404  45,722  49,499  
Amortization of debt issuance costs500  555  1,001  1,090  
Share-based incentive compensation1,199  1,559  60  5,112  
Deferred tax (benefit)/provision(4,634) 839  (6,499) (2,074) 
Foreign currency transactions(988) (645) 231  290  
Reclassification of actuarial losses from AOCI2,654    5,052    
Other operating non-cash items548  3,264  908  4,292  
Changes in operating assets and liabilities, net of effects of businesses acquired:
(Increase)/decrease in trade receivables90,568  (6,550) 59,471  (19,173) 
(Increase)/decrease in inventories36,883  (847) 25,201  7,099  
Increase/(decrease) in trade payables(50,133) 2,996  (45,742) 6,864  
Increase/(decrease) in provisions3,833  5,995  (7,532) (14,826) 
Increase/(decrease) in tax liabilities(3,392) (4,084) 8,624  (2,336) 
Increase/(decrease) in other assets and liabilities that cannot be allocated to investing or financing activities4,576  (5,276) 3,865  (5,410) 
Net cash provided by operating activities$85,709  $47,958  $90,615  $74,129  
Cash flows from investing activities:
Cash paid for the acquisition of intangible assets and property, plant and equipment$(38,550) $(38,370) $(89,401) $(60,857) 
Net cash used in investing activities$(38,550) $(38,370) $(89,401) $(60,857) 
Cash flows from financing activities:
Payments for debt issue costs$  $(1,721) $  $(1,721) 
Repayments of long-term debt(2,015) (2,029) (4,022) (4,047) 
Cash inflows related to current financial liabilities41,538  41,605  151,351  78,687  
Cash outflows related to current financial liabilities(52,359) (36,509) (52,359) (59,332) 
Dividends paid to shareholders  (12,042) (12,045) (23,946) 
Taxes paid for shares issued under net settlement feature  (6,475) (1,202) (6,475) 
Net cash provided by/(used in) financing activities$(12,836) $(17,171) $81,723  $(16,834) 
Increase/(decrease) in cash, cash equivalents and restricted cash$34,323  $(7,583) $82,937  $(3,562) 
Cash, cash equivalents and restricted cash at the beginning of the period110,215  65,425  68,231  61,604  
Effect of exchange rate changes on cash1,570  (146) (5,060) (346) 
Cash, cash equivalents and restricted cash at the end of the period$146,108  $57,696  $146,108  $57,696  
Less restricted cash at the end of the period2,734  4,537  2,734  4,537  
Cash and cash equivalents at the end of the period$143,374  $53,159  $143,374  $53,159  
Cash paid for interest, net$(5,161) $(3,142) $(9,506) $(9,166) 
Cash (paid)/refund for income taxes$(2,260) $(9,116) $(1) $(17,880) 
Supplemental disclosure of non-cash activity:
Liabilities for leasing - current$(1,441) $1,782  $(446) $6,926  
Liabilities for leasing - non-current$446  $(1,632) $1,688  $23,955  

The accompanying notes are an integral part of these consolidated financial statements.
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Consolidated Statements of Changes in Stockholders’ Equity of Orion Engineered Carbons S.A. (Unaudited)

Common stock
(In thousands, except per share amounts)Number of common sharesAmountTreasury sharesAdditional paid-in capitalRetained earningsAccumulated other comprehensive lossTotal equity
Balance at January 1, 202060,224,147  $85,032  $(8,515) $65,562  $78,296  $(34,362) $186,013  
Net income—  —  —  —  18,032  —  18,032  
Other comprehensive loss, net of tax—  —  —  —  —  (22,844) (22,844) 
Dividends paid -$0.20per share—  —  —  —  (12,045) —  (12,045) 
Share based compensation—  —  —  (2,632) —  —  (2,632) 
Issuance of stock under equity compensation plans262,970  291  —  —  —  —  291  
Balance at March 31, 202060,487,117  $85,323  $(8,515) $62,930  $84,283  $(57,206) $166,815  
Net loss—  —  —  —  (17,780) —  (17,780) 
Other comprehensive income, net of tax—  —  —  —  —  585  585  
Share based compensation—  —  —  1,199  —  —  1,199  
Balance at June 30, 202060,487,117  $85,323  $(8,515) $64,128  $66,504  $(56,621) $150,819  

Common stock
(In thousands, except per share amounts)Number of common sharesAmountTreasury sharesAdditional paid-in capitalRetained earningsAccumulated other comprehensive lossTotal equity
Balance at January 1, 201959,518,498  $84,254  $(8,683) $63,544  $39,409  $(19,628) $158,896  
Net income—  —  —  —  18,954  —  18,954  
Other comprehensive loss, net of tax—  —  —  —  —  (709) (709) 
Dividends paid -$0.20per share—  —  —  —  (11,904) —  (11,904) 
Share based compensation—  —  —  3,553  —  —  3,553  
Balance at March 31, 201959,518,498  $84,254  $(8,683) $67,097  $46,459  $(20,337) $168,790  
Net income—  —  —  —  24,748  —  24,748  
Other comprehensive loss, net of tax—  —  —  —  —  (9,255) (9,255) 
Dividends paid -$0.20per share—  —  —  —  (12,042) —  (12,042) 
Share based compensation—  —  —  (5,737) —  —  (5,737) 
Issuance of stock under equity compensation plans693,710  778  —  43  —  —  821  
Balance at June 30, 201960,212,208  $85,032  $(8,683) $61,403  $59,165  $(29,592) $167,325  
The accompanying notes are an integral part of these consolidated financial statements.

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Notes to the Condensed Consolidated Financial Statements of Orion Engineered Carbons S.A. (Unaudited)
Note A. Organization, Description of the Business and Summary of Significant Accounting Policies 
        Orion Engineered Carbons S.A.’s unaudited condensed consolidated financial information include Orion Engineered Carbons S.A. and its subsidiaries (“Orion” or the “Company”). The unaudited condensed consolidated financial statements have been prepared in accordance with 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 on Form 10-K for the fiscal year ended December 31, 2019. 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. Results for interim periods are not necessarily indicative of results to be expected for the full year.
The Company is a leading global manufacturer of carbon black products and is incorporated in Luxembourg. Carbon black is a powdered form of carbon that is used to create the desired physical, electrical and optical qualities of various materials. Carbon black products are primarily used as consumables and additives for the production of polymers, printing inks and coatings (“Specialty Carbon Black” or “Specialties”) and in the reinforcement of rubber polymers (“Rubber Carbon Black” or “Rubber”).
The Company manufactures Specialty Carbon Black for a broad range of specialized applications such as polymers, printing systems and coatings applications. The various production processes result in a wide range of different Specialty Carbon Black pigment grades with respect to their primary particle size, structure and surface area/surface chemistry. These parameters affect jetness, tinting strength, undertone, dispersibility, oil absorption, electrical conductivity and other characteristics.
The types of Rubber Carbon Black used in the rubber industry are manufactured according to strict specifications and quality standards. Structure and specific surface area are the key factors in optimizing reinforcement properties in rubber polymers.
        As of June 30, 2020, the Company operates 13 wholly owned production facilities in Europe, North and South America, Asia and South Africa and three sales companies and another nine holding companies and six service companies, as well as two former operating entities in Portugal and France (currently in dissolution). Additionally, the Company operates a joint venture with one production facility in Germany.
The Company's global presence enables it to supply Specialty Carbon Black customers as well as international customers in the tire and rubber industry with the full range of carbon black grades and particle sizes. Sales activities are supported by sales and representative offices all around the globe. Integrated sales activities with key account managers and customer services are carried out in the United States, Brazil, South Korea and Germany and China.
Risks and Uncertainties

Our global operations expose us to risks associated with public health crises and outbreaks of epidemic, pandemic, or contagious diseases, such as the current outbreak of a novel strain of coronavirus (COVID-19). The COVID-19 pandemic has negatively impacted the global economy and created significant volatility and disruption of financial markets. We have experienced significant and unpredictable reductions in the demand for our products as a result of the COVID-19 pandemic and further economic uncertainty may cause additional delays, cancellation, or redirections of planned orders. Policymakers around the globe have responded with fiscal and economic policy actions to support the economy. The ultimate magnitude and overall effectiveness of these actions remains uncertain.

The ultimate severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers and suppliers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions, lower demand for our products, commodity price volatility, heightened price sensitivity among customers, higher competitive intensity, inventory revaluations, and the impact of any initiatives or programs that the Company may undertake to address financial and operations challenges faced by its customers. As of the date of issuance of these condensed consolidated financial statements, the ultimate extent to which the COVID-19 pandemic will impact the Company's financial condition, liquidity, or results of operations remains uncertain.

Summary of Significant Accounting Policies
Revenue and Income Recognition

        The Company recognizes revenue when or as it satisfies a performance obligation by transferring a good or a service to a customer. Revenue is only recognized when control is transferred to the customer. The amount of consideration we receive and revenue we recognize is based upon the terms stated in the sales contract, which may contain variable consideration such as discounts or rebates. We also give our customers a limited right to return product that has been damaged or does not satisfy their specifications, or for other specific reasons. Payment terms on product sales to our customers typically range from 30 to 90 days. Although certain exceptions exist where standard payment terms are exceeded, these instances are infrequent and do not exceed one year.

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Revenue is recognized according to the five-step model prescribed in ASC 606. Under the first step, the entity has to identify the contract entered with a customer granting the right to receive goods or service in exchange for consideration. The second step requires the identification of distinct performance obligations within a contract. The transaction price of the arrangement is defined in Step 3 of ASC 606. In addition to the contractual fixed price the entity has to take variable considerations into account. If the entity identified more than one separate performance obligation under step 2, it has to account for this contract as a multiple element arrangement resulting in an allocation of revenues to the obligations identified. If these conditions are satisfied, revenue from the sale of goods is recognized when control has been transferred to the buyer, either at a point in time, or over time.
        
The Company derives a substantial majority of revenues from selling carbon black to industrial customers for further processing. Revenue recognition and measurement is governed by the following principles. The amount of revenue and the transaction price is contractually specified between the parties and measured at the amount expected be received less value-added tax and any trade discounts and volume rebates granted. Discounts and volume rebates are accounted for as estimates of variable consideration and deducted from revenue.
        
With respect to the sale of goods, sales are recognized at the point in time control over the good transfers to the customer. The timing of the transfer of control varies depending on the individual terms of the sales agreement.

The Company's business is organized by its two carbon black product types. For corporate management purposes and all periods presented the Company had “Rubber” and “Specialty” as reportable operating segments. Rubber carbon black is used in the reinforcement of rubber in tires and mechanical rubber goods; Specialties are used as pigments and performance additives in coatings, polymers, printing and special applications.

Adoption of accounting standards
In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments (ASU 2020-03). The amendments in this update affect a wide variety of topics in the codification and represent changes to clarify or improve the codification. The amendments make the codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. Issues 1, 2, 4 and 5 within the standard are conforming amendments and are effective upon issuance of ASU 2020-03. Issue 3 is also a conforming amendment and is effective for fiscal years beginning after December 15, 2019. Issues 6 and 7 relate to ASU No. 2016-13 and are effective for fiscal years beginning after December 15, 2019 since Orion previously adopted ASU No. 2016-13 on January 1 2019. The Company adopted ASU 2020-03 as of January 1, 2020. The adoption of this guidance did not have any impact on the Company’s financial statements.
In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842)- Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update) (ASU 2020-02). The new standard as it relates to Topic 326 is effective upon a registrant’s adoption of FASB ASC Topic 326 (adopted by Orion on January 1, 2019). The new standard is as it relates to Topic 842 is not applicable. The adoption of ASU 2020-02 did not have any impact on the Company’s financial statements.
In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (ASU 2019-11). The amendments in this update represents changes to clarify, correct errors in, or improve the codification, and make the codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-11 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim period after the issuance of ASU 2019-11 as long as the entity has adopted the amendments in ASU No. 2016-13. The Company adopted ASU 2019-11 as of January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326) (ASU 2019-05). The amendments in this ASU provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments - Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. For entities that have adopted the amendments in ASU No. 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim period after the issuance of ASU 2019-05 as long as the entity has adopted the amendments in ASU No. 2016-13. The Company adopted ASU 2019-05 as of January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (ASU 2019-04). The updates contained in this ASU provide clarification and correction to ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, and is intended to improve the Codification or correct its unintended application. The amendments in ASU 2019-04 related to ASU No. 2016-01 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim period following the issuance of ASU 2019-04 as long as the entity has adopted all of the
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amendments in ASU No. 2016-01. For entities that have adopted the amendments in update 2016-13, the amendments in ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance of ASU 2019-04 as long as the entity has adopted the amendments in ASU No. 2016-13. For entities that have adopted the amendments in ASU No. 2017-12 as of the issuance date of ASU 2019-04, the effective date is as of the beginning of the first annual period beginning after the issuance of ASU 2019-04 (January 1, 2020 for Orion). For those entities, early adoption is permitted, including adoption on any date on or after the issuance of ASU 2019-04. The Company adopted ASU 2019-04 as of January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In August 2018, the FASB issued ASU No 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The guidance changes the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. It eliminates requirements for certain disclosures that are no longer considered cost beneficial and requires new ones that the FASB considers pertinent. The guidance is effective for financial statements issued for fiscal years ending after December 15, 2020 for public business entities and fiscal years ending after December 15, 2021 for all other entities. Early adoption is permitted. Entities will apply the amendments retrospectively. The Company adopted ASU No 2018-14 as of January 1, 2020 The adoption of this guidance did not have a significant impact on the Company's financial statements.

Principles of consolidation
The consolidated financial statements include all subsidiaries indirectly or directly controlled by Orion. Entities are consolidated from the date Orion obtains control, which generally is the acquisition date, and are deconsolidated when control is lost.
Control is achieved when Orion is exposed, or has the right, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Orion re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of these three elements of control.
The Company’s consolidated financial statements are prepared in accordance with uniform accounting policies. Income and expenses, intercompany profits and losses, and receivables and liabilities between consolidated subsidiaries are eliminated.
Use of estimates
The preparation of consolidated financial statements in conformity U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates.
Foreign currency translation
Foreign currency transactions are measured at the exchange rate at the date of initial recognition. Any gains or losses resulting from the valuation of foreign currency monetary assets and liabilities using the currency exchange rates as of the reporting date are recognized in other expenses, net.
Currency exchange differences relating to financing activities are recognized in interest and other financial income and interest and other financial expense.
The assets and liabilities of foreign operations with functional currencies different from the presentation currency U.S. dollars are translated using closing rates as of the reporting date. Income and expense items are translated at average monthly exchange rates for the respective period. The translation of equity is performed using historical exchange rates. The overall foreign currency impact from translating the statement of financial position and income statement of all the foreign entities is recognized in accumulated other comprehensive income (loss) ("AOCI").
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Note B. Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04). The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the potential impact the adoption of this standard will have on its financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this update clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The amendments in this update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the potential impact the adoption of this standard will have on its financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures