Orion Engineered Carbons S.A. | |||
By: | /s/ Charles Herlinger | ||
Name: | Charles Herlinger | ||
Title: | Chief Financial Officer | ||
Exhibit No. | Description | |
1.1 | Unaudited Interim Condensed Consolidated Financial Statements of Orion Engineered Carbons S.A. as at June 30, 2019 | |
June 30, 2019 | ||
Shareholding | ||
Orion Engineered Carbons S.A., Luxembourg | ||
Controlled entities | ||
Orion Engineered Carbons LLC, Kingwood, USA (Principal Executive Office) | 100 | % |
Orion Engineered Carbons Holdings GmbH, Frankfurt am Main, Germany | 100 | % |
Orion Engineered Carbons Bondco GmbH, Frankfurt am Main, Germany | 100 | % |
Orion Engineered Carbons International GmbH, Frankfurt am Main, Germany | 100 | % |
Orion Engineered Carbons Holdco S.R.L., Milano, Italy | 100 | % |
Orion Engineered Carbons Holdco S.A.S., Paris, France* | 100 | % |
Carbogal Engineered Carbons Holdco - Consultoria, Unipessoal Lda., Lisboa, Portugal* | 100 | % |
Orion Engineered Carbons USA Holdco, LLC, Kingwood, US | 100 | % |
Engineered Carbons Sweden Holdco AB., Malmö Sweden | 100 | % |
Orion Engineered Carbons (China) Investment Co., Ltd, Shanghai, China | 100 | % |
Orion Engineered Carbons S.r.l., Ravenna, Italy | 100 | % |
Orion Engineered Carbons S.A.S., Ambès, France* | 100 | % |
Carbogal Engineered Carbons S.A., Sines, Portugal* | 100 | % |
Orion Engineered Carbons France SAS; Berre-l'Etang; France | 100 | % |
Orion Engineered Carbons Co. Ltd., Yeosu-si, South Korea | 100 | % |
Orion Engineered Carbons Sp. z o.o., Jaslo, Poland | 100 | % |
Norcarb Engineered Carbons AB, Malmö, Sweden | 100 | % |
Orion Engineered Carbons Ltda., Paulinia, Brazil | 100 | % |
Orion Engineered Carbons Proprietary Limited, Port Elizabeth, South Africa | 100 | % |
Orion Engineered Carbons GmbH, Frankfurt am Main, Germany | 100 | % |
Orion Engineered Carbons KK, Tokyo, Japan | 100 | % |
Orion Engineered Carbons Pte. Ltd., Singapore, Singapore | 100 | % |
Orion Engineered Carbons Trading (Shanghai) Co. Ltd., Shanghai, China | 100 | % |
Orion Engineered Carbons Material Technology (Shanghai) Co., Ltd., Shanghai, China | 100 | % |
Orion Engineered Carbons Qingdao Co., Ltd., Qingdao, China | 100 | % |
CB International Services Company GmbH, Frankfurt am Main, Germany | 100 | % |
ORION Engineered Carbons India Private Limited, Thane West, India | 100 | % |
ORION ENGINEERED CARBONS TURKEY, Istanbul, Turkey | 100 | % |
ORION Engineered Carbons (Huaibei) Co., Ltd, Huaibei, China | 100 | % |
Associated entities | ||
Kommanditgesellschaft Deutsche Gasrusswerke GmbH & Co., Dortmund, Germany | 54 | % |
Deutsche Gasrusswerke Gesellschaft mit beschränkter Haftung, Dortmund, Germany | 50 | % |
PART I - FINANCIAL INFORMATION | ||
Item 1. | Orion Engineered Carbons S.A. Condensed Consolidated Financial Statements (Unaudited) | |
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018 | ||
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018 | ||
Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018 | ||
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2019 and 2018 | ||
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 | ||
Notes to the Condensed Consolidated Financial Statements | ||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
PART II - OTHER INFORMATION | ||
Item 3. | Exhibits | |
SIGNATURES | ||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In thousands) | |||||||||||||||
Net sales | $ | $ | $ | $ | |||||||||||
Cost of sales | |||||||||||||||
Gross profit | |||||||||||||||
Selling, general and administrative expenses | |||||||||||||||
Research and development costs | |||||||||||||||
Other expenses, net | |||||||||||||||
Restructuring income | |||||||||||||||
Restructuring expenses | |||||||||||||||
Income from operations | |||||||||||||||
Interest and other financial expense, net | |||||||||||||||
Income from operations before income tax expense and equity in earnings of affiliated companies | |||||||||||||||
Income tax expense | |||||||||||||||
Equity in earnings of affiliated companies, net of tax | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Weighted-average shares outstanding (in thousands of shares): | |||||||||||||||
Basic | |||||||||||||||
Diluted | |||||||||||||||
Earnings per share (USD per share): | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In thousands) | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Other comprehensive loss, net of tax | |||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Unrealized net gains/(losses) on hedges of a net investment in a foreign operation | ( | ) | ( | ) | |||||||||||
Unrealized net gains/(losses) on cash flow hedges | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Gains/(losses) on defined benefit plans | ( | ) | |||||||||||||
Other comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Comprehensive income | $ | $ | $ | $ | |||||||||||
June 30, 2019 | December 31, 2018 | |||||||||||||
(In thousands, except share data) | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Accounts receivable, net of reserve for doubtful accounts | ||||||||||||||
of | $5,594 | and | $5,081 | |||||||||||
Other current financial assets | ||||||||||||||
Inventories | ||||||||||||||
Income tax receivables | ||||||||||||||
Prepaid expenses and other current assets | ||||||||||||||
Total current assets | ||||||||||||||
Property, plant and equipment, net | ||||||||||||||
Operating lease right-of-use assets | — | |||||||||||||
Goodwill | ||||||||||||||
Intangible assets, net | ||||||||||||||
Investment in equity method affiliates | ||||||||||||||
Deferred income tax assets | ||||||||||||||
Other financial assets | ||||||||||||||
Other assets | ||||||||||||||
Total non-current assets | ||||||||||||||
Total assets | $ | $ | ||||||||||||
Current liabilities | ||||||||||
Accounts payable | $ | $ | ||||||||
Current portion of long term debt and other financial liabilities | ||||||||||
Current portion of employee benefit plan obligation | ||||||||||
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 | Note L | |||||||||
Stockholders' equity | ||||||||||
Common stock | ||||||||||
Authorized: 65,035,579 and 89,452,626 shares with no par value | ||||||||||
Issued – 60,729,289 and 60,035,579 shares with no par value | ||||||||||
Outstanding – 60,212,208 and 59,518,498 shares | ||||||||||
Less cost of 517,081 and 517,081 shares of common treasury stock | ( | ) | ( | ) | ||||||
Additional paid-in capital | ||||||||||
Retained earnings | ||||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||||
Total stockholders' equity | ||||||||||
Total liabilities and stockholders' equity | $ | $ | ||||||||
(In thousands, except per share amount) | Common stock | Treasury shares | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Total equity | ||||||||||||||||||||
Number of common shares | Amount | |||||||||||||||||||||||||
Balance at January 1, 2019 | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Dividends paid - $0.20 per share | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||
Share based compensation | — | — | — | — | — | |||||||||||||||||||||
Balance at March 31, 2019 | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Dividends paid - $0.20 per share | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||
Share based compensation | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Issuance of stock under equity compensation plans | — | 43 | — | — | ||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||
(In thousands, except per share amount) | Common stock | Treasury shares | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Total equity | ||||||||||||||||||||
Number of common shares | Amount | |||||||||||||||||||||||||
Balance at January 1, 2018 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Distributions from additional paid-in capital - $0.20 per share | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Share based compensation | — | — | — | — | — | |||||||||||||||||||||
Balance at March 31, 2018 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Distributions from additional paid-in capital - $0.20 per share | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Share based compensation | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Issuance of stock under equity compensation plans | — | — | — | |||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In thousands) | |||||||||||||||
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 | |||||||||||||||
Amortization of debt issuance costs | |||||||||||||||
Share-based incentive compensation | |||||||||||||||
Deferred tax benefit | ( | ) | ( | ) | ( | ) | |||||||||
Foreign currency transactions | ( | ) | |||||||||||||
Other operating non-cash expenses/(income) | ( | ) | ( | ) | |||||||||||
Changes in operating assets and liabilities | |||||||||||||||
(Increase)/decrease in trade receivables | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
(Increase)/decrease in inventories | ( | ) | ( | ) | ( | ) | |||||||||
Increase/(decrease) in trade payables | |||||||||||||||
Increase/(decrease) in provisions | ( | ) | ( | ) | |||||||||||
Increase/(decrease) in tax liabilities | ( | ) | ( | ) | |||||||||||
Increase/(decrease) in other assets and liabilities that cannot be allocated to investing or financing activities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net cash provided by operating activities | |||||||||||||||
Cash flows from investing activities: | |||||||||||||||
Cash received from the disposal of intangible assets and property, plant and equipment | |||||||||||||||
Cash paid for the acquisition of intangible assets and property, plant and equipment | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net cash (used in)/provided by investing activities | ( | ) | ( | ) | |||||||||||
Cash flows from financing activities: | |||||||||||||||
Payments for debt issue costs | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Repayments of long-term debt | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Cash inflows related to current financial liabilities | |||||||||||||||
Cash outflows related to current financial liabilities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Dividends paid to shareholders | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Taxes paid for shares issued under net settlement feature | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net cash 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 | $ | $ | $ | $ | |||||||||||
Cash paid for interest, net | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Cash paid for income taxes, net of refunds | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Supplemental disclosure of non-cash activity | |||||||||||||||
Liabilities under built-to-suit lease | $ | $ | $ | $ | |||||||||||
Liabilities for leasing - current | $ | $ | — | $ | $ | — | |||||||||
Liabilities for leasing - non-current | $ | ( | ) | $ | — | $ | $ | — | |||||||
June 30, 2019 | December 31, 2018 | ||||||
(In thousands) | |||||||
Raw materials, consumables and supplies, net | $ | $ | |||||
Work in process | |||||||
Finished goods, net | |||||||
Total | $ | $ | |||||
June 30, 2019 | |||
(In thousands) | |||
Next 12 months | |||
1 to 2 years | |||
2 to 3 years | |||
3 to 4 years | |||
4 to 5 years | |||
More than 5 years | |||
Total undiscounted minimum lease payments | |||
Discount | ( | ) | |
Lease liability (current and non-current) | |||
June 30, 2019 | December 31, 2018 | ||||||
(In thousands) | |||||||
Current | |||||||
Term loan | $ | $ | |||||
Deferred debt issuance costs - term loan(1) | ( | ) | ( | ) | |||
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(1) | ( | ) | ( | ) | |||
Long-term debt, net | |||||||
Total | $ | $ | |||||
(1) | According to ASU 2015-03, adopted on January 1, 2016, the Company presents debt issuance costs related to a recognized liability as a direct deduction from the carrying amount of that liability. |
June 30, 2019 | December 31, 2018 | ||||||||
Fair Value Hierarchy | (In thousands) | ||||||||
Receivables from hedges/ derivatives | Level 2 | $ | $ | ||||||
Other current financial assets | Level 2 | ||||||||
Other financial assets (non-current) | Level 2 | ||||||||
Liabilities from derivatives | Level 2 | $ | $ | ||||||
Other current liabilities | Level 2 | ||||||||
Other liabilities (non-current) | Level 2 | ||||||||
Term loan | Level 2 | $ | $ | ||||||
Local bank loans | Level 2 | $ | $ | ||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Non-U.S. | Non-U.S. | Non-U.S. | Non-U.S. | ||||||||||||
(In thousands) | |||||||||||||||
Service cost | $ | $ | $ | $ | |||||||||||
Interest cost | |||||||||||||||
Net periodic cost | $ | $ | $ | $ | |||||||||||
Period Granted | Performance Period | PSUs Outstanding at December 31, 2018 | Performance based adjustment | PSUs Vested | PSUs Forfeited | PSUs Outstanding at June 30, 2019 | Weighted Average Grant Date Fair Value | ||||||||||||||
2016 | 2016 - 2019 | ( | ) | $ | |||||||||||||||||
2017 | 2017 - 2020 | ( | ) | $ | |||||||||||||||||
2018 | 2018 - 2021 | ( | ) | $ | |||||||||||||||||
Total | ( | ) | ( | ) | |||||||||||||||||
(In thousands) | Personnel expenses | Demolition and Removal costs | Ground remediation costs | Other | Total | ||||||||||||||
Provision at January 1, 2019 | $ | $ | $ | $ | $ | ||||||||||||||
Charges | |||||||||||||||||||
Cash paid | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
Provision at March 31, 2019 | $ | $ | $ | $ | $ | ||||||||||||||
Charges | |||||||||||||||||||
Cash paid | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | |||||||||||||
Provision at June 30, 2019 | $ | $ | $ | $ | $ | ||||||||||||||
Currency Translation Adjustments | Hedging Activities Adjustments | Pension and Other Postretirement Benefit Liability Adjustments | Total | ||||||||||||
(In thousands) | |||||||||||||||
Balance at January 1, 2019 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | |||||||||||
Income tax effects before reclassifications | ( | ) | |||||||||||||
Currency translation AOCI | |||||||||||||||
Balance at March 31, 2019 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | ( | ) | |||||||||
Income tax effects before reclassifications | |||||||||||||||
Currency translation AOCI | ( | ) | ( | ) | ( | ) | |||||||||
Balance at June 30, 2019 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Currency Translation Adjustments | Hedging Activities Adjustments | Pension and Other Postretirement Benefit Liability Adjustments | Total | ||||||||||||
(In thousands) | |||||||||||||||
Balance at January 1, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | |||||||||||
Income tax effects before reclassifications | ( | ) | ( | ) | |||||||||||
Currency translation AOCI | ( | ) | ( | ) | |||||||||||
Balance at March 31, 2018 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | ( | ) | |||||||||
Income tax effects before reclassifications | ( | ) | |||||||||||||
Currency translation AOCI | ( | ) | |||||||||||||
Balance at June 30, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income for the period- attributable to ordinary equity holders of the parent (in USD k) | $ | $ | $ | $ | ||||||||||||
Weighted average number of ordinary shares (in thousands of shares) | ||||||||||||||||
Basic EPS | $ | $ | $ | $ | ||||||||||||
Dilutive effect of share based payments (in thousands of shares) | ||||||||||||||||
Weighted average number of diluted ordinary shares (in thousands of shares) | ||||||||||||||||
Diluted EPS | $ | $ | $ | $ | ||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||
2019 | 2018 | 2019 | 2018 | ||||
Rubber | |||||||
Specialty | |||||||
Rubber | Specialties | Corporate and other | Total | ||||||||||||
(In thousands) | |||||||||||||||
2019 | |||||||||||||||
Net sales from external customers | $ | $ | $ | $ | |||||||||||
Adjusted EBITDA | $ | $ | $ | $ | |||||||||||
Corporate charges | — | — | ( | ) | ( | ) | |||||||||
Depreciation and amortization of intangible assets and property, plant and equipment | ( | ) | ( | ) | — | ( | ) | ||||||||
Excluding equity in earnings of affiliated companies, net of tax | ( | ) | — | — | ( | ) | |||||||||
Income from operations before income tax expense and finance costs | ( | ) | |||||||||||||
Interest and other financial expense, net | — | — | ( | ) | ( | ) | |||||||||
Income tax expense | — | — | ( | ) | ( | ) | |||||||||
Equity in earnings of affiliated companies, net of tax | — | — | |||||||||||||
Net income | $ | ||||||||||||||
2018 | |||||||||||||||
Net sales from external customers | $ | $ | $ | $ | |||||||||||
Adjusted EBITDA | $ | $ | $ | $ | |||||||||||
Corporate charges | — | — | |||||||||||||
Depreciation and amortization of intangible assets and property, plant and equipment | ( | ) | ( | ) | — | ( | ) | ||||||||
Excluding equity in earnings of affiliated companies, net of tax | ( | ) | — | — | ( | ) | |||||||||
Income from operations before income tax expense and finance costs | |||||||||||||||
Interest and other financial expense, net | — | — | ( | ) | ( | ) | |||||||||
Income tax expense | — | — | ( | ) | ( | ) | |||||||||
Equity in earnings of affiliated companies, net of tax | — | — | |||||||||||||
Net income | $ | ||||||||||||||
Rubber | Specialties | Corporate and other | Total | ||||||||||||
(In thousands) | |||||||||||||||
2019 | |||||||||||||||
Net sales from external customers | $ | $ | $ | $ | |||||||||||
Adjusted EBITDA | $ | $ | $ | $ | |||||||||||
Corporate charges | — | — | ( | ) | ( | ) | |||||||||
Depreciation and amortization of intangible assets and property, plant and equipment | ( | ) | ( | ) | — | ( | ) | ||||||||
Excluding equity in earnings of affiliated companies, net of tax | ( | ) | — | — | ( | ) | |||||||||
Income from operations before income tax expense and finance costs | ( | ) | |||||||||||||
Interest and other financial expense, net | — | — | ( | ) | ( | ) | |||||||||
Income tax expense | — | — | ( | ) | ( | ) | |||||||||
Equity in earnings of affiliated companies, net of tax | — | — | |||||||||||||
Net income | $ | ||||||||||||||
2018 | |||||||||||||||
Net sales from external customers | $ | $ | $ | $ | |||||||||||
Adjusted EBITDA | $ | $ | $ | $ | |||||||||||
Corporate charges | — | — | |||||||||||||
Depreciation and amortization of intangible assets and property, plant and equipment | ( | ) | ( | ) | — | ( | ) | ||||||||
Excluding equity in earnings of affiliated companies, net of tax | ( | ) | — | — | ( | ) | |||||||||
Income from operations before income tax expense and finance costs | |||||||||||||||
Interest and other financial expense, net | — | — | ( | ) | ( | ) | |||||||||
Income tax expense | — | — | ( | ) | ( | ) | |||||||||
Equity in earnings of affiliated companies, net of tax | — | — | |||||||||||||
Net income | $ | ||||||||||||||
June 30, 2019 | December 31, 2018 | ||||||
(In thousands) | |||||||
Trade receivables from DGW KG | $ | $ | |||||
Trade payables to DGW KG | $ | $ | |||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In thousands) | |||||||||||||||
Purchased carbon black products from DGW KG | $ | $ | $ | $ | |||||||||||
Sales and services provided to DGW KG | $ | $ | $ | $ | |||||||||||
Specialty Carbon Black | Rubber Carbon Black | ||||||||||||||
Three months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In thousands, unless otherwise indicated) | |||||||||||||||
Adjusted EBITDA (1) | $ | 31,035 | $ | 45,225 | $ | 40,493 | $ | 35,923 | |||||||
Segment Adjusted EBITDA Margin (2) | 22.3 | % | 31.7 | % | 15.6 | % | 14.4 | % | |||||||
% of total net sales | 34.9 | % | 36.4 | % | 65.1 | % | 63.6 | % | |||||||
% of total Adjusted EBITDA | 43.4 | % | 55.7 | % | 56.6 | % | 44.3 | % | |||||||
% of total volume (in kmt) | 25.8 | % | 24.6 | % | 74.2 | % | 75.4 | % | |||||||
(1) | Defined as income from operations (EBIT) before depreciation and amortization, adjusted for acquisition related expenses, restructuring expenses, consulting fees related to Company strategy, share of profit or loss of joint venture and certain other items. |
(2) | Defined as Adjusted EBITDA for the relevant segment divided by the net sales for that segment. |
Specialty Carbon Black | Rubber Carbon Black | ||||||||||||||
Six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In thousands, unless otherwise indicated) | |||||||||||||||
Adjusted EBITDA (1) | $ | 60,437 | $ | 85,561 | $ | 75,658 | $ | 71,579 | |||||||
Segment Adjusted EBITDA Margin (2) | 22.3 | % | 30.1 | % | 14.8 | % | 13.9 | % | |||||||
% of total net sales | 34.6 | % | 35.6 | % | 65.4 | % | 64.4 | % | |||||||
% of total Adjusted EBITDA | 44.4 | % | 54.4 | % | 55.6 | % | 45.6 | % | |||||||
% of total volume (in kmt) | 25.1 | % | 24.4 | % | 74.9 | % | 75.6 | % | |||||||
(1) | Defined as income from operations (EBIT) before depreciation and amortization, adjusted for acquisition related expenses, restructuring expenses, consulting fees related to Company strategy, share of profit or loss of joint venture and certain other items. |
(2) | Defined as Adjusted EBITDA for the relevant segment divided by the net sales for that segment. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
unaudited (In millions, unless otherwise indicated) | |||||||||||||||
Net sales(1) | $ | 399.0 | $ | 391.6 | $ | 783.7 | $ | 798.3 | |||||||
Variable costs(2) | (255.6 | ) | (236.5 | ) | (504.0 | ) | (493.0 | ) | |||||||
Contribution margin | $ | 143.4 | $ | 155.1 | $ | 279.7 | $ | 305.3 | |||||||
Volume (in kmt) | 270.5 | 275.6 | 533.3 | 561.8 | |||||||||||
Contribution margin per metric ton | $ | 530.3 | $ | 562.8 | $ | 524.6 | $ | 543.4 | |||||||
(1) | Separate line item in the GAAP financial statements. |
(2) | Includes costs such as raw materials, packaging, utilities and distribution. |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
unaudited (In millions) | |||||||||||||||
Net income | $ | 24.7 | $ | 53.1 | $ | 43.7 | $ | 79.8 | |||||||
Add back income tax expense | 9.3 | 20.7 | 18.7 | 31.1 | |||||||||||
Add back equity in earnings of affiliated companies, net of tax | (0.2 | ) | (0.1 | ) | (0.3 | ) | (0.3 | ) | |||||||
Income from operations before income taxes and equity in earnings of affiliated companies | 33.9 | 73.7 | 62.2 | 110.6 | |||||||||||
Add back interest and other financial expense, net | 7.6 | 8.8 | 14.0 | 17.2 | |||||||||||
Income from operations (EBIT) | 41.5 | 82.5 | 76.2 | 127.8 | |||||||||||
Add back depreciation, amortization and impairment of intangible assets and property, plant and equipment | 25.4 | 24.2 | 49.5 | 49.0 | |||||||||||
EBITDA | 66.9 | 106.7 | 125.7 | 176.8 | |||||||||||
Equity in earnings of affiliated companies, net of tax | 0.2 | 0.1 | 0.3 | 0.3 | |||||||||||
Restructuring expenses (1) | 1.0 | (29.8 | ) | 1.1 | (28.5 | ) | |||||||||
Consulting fees related to Company strategy (2) | 1.0 | 0.2 | 2.2 | 1.0 | |||||||||||
Long term incentive plan | 1.6 | 2.9 | 5.1 | 6.0 | |||||||||||
Other adjustments (3) | 0.9 | 1.1 | 1.7 | 1.5 | |||||||||||
Adjusted EBITDA | $ | 71.5 | $ | 81.1 | $ | 136.1 | $ | 157.1 | |||||||
Thereof Adjusted EBITDA Specialty Carbon Black | $ | 31.0 | $ | 45.2 | $ | 60.4 | $ | 85.6 | |||||||
Thereof Adjusted EBITDA Rubber Carbon Black | $ | 40.5 | $ | 35.9 | $ | 75.7 | $ | 71.6 | |||||||
(1) | Restructuring expenses for the three and six months ended June 30, 2019 and 2018, respectively, are related to our strategic realignment of our worldwide Rubber footprint. |
(2) | Consulting fees related to the Orion strategy include external consulting for establishing and executing Company strategies relating to Rubber footprint realignment, conversion to US dollar and GAAP, as well as costs relating to our assessment of feasibility for inclusion in certain US indices. |
(3) | Other adjustments (from items with less bearing on the underlying performance of the Company's core business) in the three and six months ended June 30, 2019 and 2018, respectively, primarily relate to costs to meet the EPA requirements. |
A. | Operating Results |
Statement of Operations data | Three months ended June 30, | Six months ended June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions) | |||||||||||||||
Net sales | $ | 399.0 | $ | 391.6 | $ | 783.7 | $ | 798.3 | |||||||
Cost of sales | 295.0 | 278.8 | 581.7 | 573.1 | |||||||||||
Gross profit | 104.0 | 112.8 | 202.0 | 225.2 | |||||||||||
Selling, general and administrative expenses | 52.1 | 54.2 | 107.7 | 113.1 | |||||||||||
Research and development costs | 4.9 | 4.6 | 10.0 | 9.7 | |||||||||||
Other expenses, net | 4.5 | 1.3 | 7.0 | 3.1 | |||||||||||
Restructuring income | — | 40.3 | — | 40.3 | |||||||||||
Restructuring expenses | 1.0 | 10.5 | 1.1 | 11.8 | |||||||||||
Income from operations | 41.5 | 82.5 | 76.2 | 127.8 | |||||||||||
Interest and other financial expense, net | 7.6 | 8.8 | 14.0 | 17.2 | |||||||||||
Income from operations before income tax expense and equity in earnings of affiliated companies | 33.9 | 73.7 | 62.2 | 110.6 | |||||||||||
Income tax expense | 9.3 | 20.7 | 18.7 | 31.1 | |||||||||||
Equity in earnings of affiliated companies, net of tax | 0.2 | 0.1 | 0.3 | 0.3 | |||||||||||
Net income | $ | 24.7 | $ | 53.1 | $ | 43.7 | $ | 79.8 | |||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions, unless otherwise indicated) | |||||||||||||||
Specialty Carbon Black | |||||||||||||||
Net sales | $ | 139.3 | $ | 142.7 | $ | 270.9 | $ | 284.3 | |||||||
Cost of sales | 94.9 | 84.6 | 185.1 | 172.3 | |||||||||||
Gross profit | $ | 44.4 | $ | 58.0 | $ | 85.8 | $ | 112.0 | |||||||
Volume (kmt) | 69.9 | 67.8 | 133.8 | 136.9 | |||||||||||
Adjusted EBITDA | $ | 31.0 | $ | 45.2 | $ | 60.4 | $ | 85.6 | |||||||
Adjusted EBITDA Margin (%)(1) | 22.3 | 31.7 | 22.3 | 30.1 | |||||||||||
Rubber Carbon Black | |||||||||||||||
Net sales | $ | 259.7 | $ | 248.9 | $ | 512.9 | $ | 513.9 | |||||||
Cost of sales | 200.1 | 194.2 | 396.7 | 400.8 | |||||||||||
Gross profit | $ | 59.6 | $ | 54.7 | $ | 116.2 | $ | 113.1 | |||||||
Volume (kmt) | 200.6 | 207.8 | 399.4 | 424.9 | |||||||||||
Adjusted EBITDA | $ | 40.5 | $ | 35.9 | $ | 75.7 | $ | 71.6 | |||||||
Adjusted EBITDA Margin (%)(1) | 15.6 | 14.4 | 14.8 | 13.9 | |||||||||||
(1) | Defined as Adjusted EBITDA divided by net sales. |
B. | Liquidity and Capital Resources |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions) | |||||||||||||||
Net cash provided by operating activities | $ | 48.0 | $ | 17.5 | $ | 74.1 | $ | 38.8 | |||||||
Net cash (used in)/provided by investing activities | (38.4 | ) | 30.7 | (60.9 | ) | 4.8 | |||||||||
Net cash used in financing activities | (17.2 | ) | (29.3 | ) | (16.8 | ) | (38.2 | ) | |||||||
Cash, cash equivalents and restricted cash at the end of the period | $ | 57.7 | $ | 78.1 | $ | 57.7 | $ | 78.1 | |||||||
Less restricted cash at the end of the period | 4.5 | 4.6 | 4.5 | 4.6 | |||||||||||
Cash and cash equivalents at the end of the period | $ | 53.2 | $ | 73.5 | $ | 53.2 | $ | 73.5 | |||||||
June 30, 2019 | December 31, 2018 | |||||||
(In millions) | ||||||||
Inventories | $ | 174.4 | $ | 183.6 | ||||
Trade receivables | 280.5 | 262.8 | ||||||
Trade payables | 163.8 | 163.6 | ||||||
Net working capital | $ | 291.2 | $ | 282.9 | ||||
• | our strategies for (i) strengthening our position in specialty carbon blacks and rubber carbon blacks, (ii) increasing our rubber carbon black margins and (iii) strengthening the competitiveness of our operations; |
• | the installation of pollution control technology in our U.S. manufacturing facilities pursuant to the EPA consent decree described herein; |
• | the outcome of any in-progress, pending or possible litigation or regulatory proceedings; and |
• | our expectation that the markets we serve will continue to grow. |
• | negative or uncertain worldwide economic conditions; |
• | volatility and cyclicality in the industries in which we operate; |
• | operational risks inherent in chemicals manufacturing, including disruptions as a result of severe weather conditions and natural disasters; |
• | our dependence on major customers; |
• | our ability to compete in the industries and markets in which we operate; |
• | our ability to develop new products and technologies successfully and the availability of substitutes for our products; |
• | our ability to implement our business strategies; |
• | volatility in the costs and availability of raw materials and energy including but not limited to any and all effects from restrictions imposed by the MARPOL convention and respective International Maritime Organization (IMO) regulations in particular to reduce sulphur oxides (SOx) emissions from ships) |
• | our ability to realize benefits from investments, joint ventures, acquisitions or alliances; |
• | our ability to realize benefits from planned plant capacity expansions and site development projects and the potential delays to such expansions and projects; |
• | 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; |
• | our exposure to political or country risks inherent in doing business in some countries; |
• | geopolitical events in the European Union, and in particular a “no-deal Brexit” which may impact the Euro; |
• | environmental, health and safety regulations, including nanomaterial and greenhouse gas emissions regulations, and the related costs of maintaining compliance and addressing liabilities; |
• | possible future investigations and enforcement actions by governmental or supranational agencies; |
• | our operations as a company in the chemical sector, including the related risks of leaks, fires and toxic releases; |
• | market and regulatory changes that may affect our ability to sell or otherwise benefit from co-generated energy; |
• | litigation or legal proceedings, including product liability and environmental 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; |
• | fluctuations in foreign currency exchange and interest rates; |
• | the availability and efficiency of hedging; |
• | changes in international and local economic conditions, including with regard to the Euro, dislocations in credit and capital markets and inflation or deflation; |
• | potential impairments or write-offs of certain assets; |
• | required increases in our pension fund contributions; |
• | the adequacy of our insurance coverage; |
• | changes in our jurisdictional earnings mix or in the tax laws or accepted interpretations of tax laws in those jurisdictions; |
• | our indemnities to and from Evonik (as defined below); |
• | challenges to our decisions and assumptions in assessing and complying with our tax obligations, including tax audits; and |
• | potential difficulty in obtaining or enforcing judgments or bringing actions against us in the United States. |
Exhibit No. | Description | |
8.1 | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
August 1, 2019 | ORION ENGINEERED CARBONS S.A. | |
By | /s/ Charles Herlinger | |
Name: Charles Herlinger | ||
Title: Chief Financial Officer | ||
Document and Entity Information |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Cover page. | |
| Entity Central Index Key | 0001609804 |
| Current Fiscal Year End Date | --12-31 |
| Document Period End Date | Jun. 30, 2019 |
| Document Fiscal Year Focus | 2019 |
| Document Fiscal Period Focus | Q2 |
| Amendment Flag | false |
| Document Type | 6-K |
| Entity Registrant Name | Orion Engineered Carbons S.A. |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Income Statement [Abstract] | ||||
| Net sales | $ 399,016 | $ 391,586 | $ 783,730 | $ 798,285 |
| Cost of sales | 294,978 | 278,813 | 581,723 | 573,109 |
| Gross profit | 104,038 | 112,773 | 202,007 | 225,176 |
| Selling, general and administrative expenses | 52,117 | 54,158 | 107,694 | 113,069 |
| Research and development costs | 4,914 | 4,644 | 10,043 | 9,705 |
| Other expenses, net | 4,503 | 1,265 | 6,978 | 3,097 |
| Restructuring income | 0 | 40,253 | 0 | 40,253 |
| Restructuring expenses | 1,034 | 10,502 | 1,123 | 11,768 |
| Income from operations | 41,470 | 82,457 | 76,169 | 127,790 |
| Interest and other financial expense, net | 7,566 | 8,777 | 14,009 | 17,159 |
| Income from operations before income tax expense and equity in earnings of affiliated companies | 33,904 | 73,680 | 62,160 | 110,631 |
| Income tax expense | 9,309 | 20,743 | 18,748 | 31,089 |
| Equity in earnings of affiliated companies, net of tax | 153 | 144 | 290 | 293 |
| Net income | $ 24,748 | $ 53,081 | $ 43,702 | $ 79,835 |
| Weighted-average shares outstanding (in thousands of shares): | ||||
| Basic (in shares) | 59,984 | 59,590 | 59,752 | 59,456 |
| Diluted (in shares) | 61,125 | 60,743 | 61,119 | 60,866 |
| Earnings per share (USD per share): | ||||
| Basic (in USD per share) | $ 0.41 | $ 0.89 | $ 0.73 | $ 1.34 |
| Diluted (in USD per share) | $ 0.40 | $ 0.87 | $ 0.72 | $ 1.31 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Statement of Comprehensive Income [Abstract] | ||||
| Net income | $ 24,748 | $ 53,081 | $ 43,702 | $ 79,835 |
| Other comprehensive loss, net of tax | ||||
| Foreign currency translation adjustments | (4,844) | (7,367) | (3,381) | (13,402) |
| Unrealized net gains/(losses) on hedges of a net investment in a foreign operation | 0 | 0 | ||
| Unrealized net gains/(losses) on hedges of a net investment in a foreign operation | (3,252) | (8) | ||
| Unrealized net gains/(losses) on cash flow hedges | (4,375) | (6,600) | ||
| Unrealized net gains/(losses) on cash flow hedges | (2,510) | (1,557) | ||
| Gains/(losses) on defined benefit plans | (36) | 1,398 | 17 | 750 |
| Other comprehensive loss | (9,255) | (11,731) | (9,964) | (14,217) |
| Comprehensive income | $ 15,493 | $ 41,350 | $ 33,738 | $ 65,618 |
Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Reserve for doubtful accounts | $ 5,594 | $ 5,081 |
| Common stock, shares authorized (in shares) | 65,035,579 | 89,452,626 |
| Common stock, shares issued (in shares) | 60,729,289 | 60,035,579 |
| Common stock, shares outstanding (in shares) | 60,212,208 | 59,518,498 |
| Treasury stock (in shares) | 517,081 | 517,081 |
Condensed Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) (Unaudited) - $ / shares |
3 Months Ended | |||
|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2018 |
Mar. 31, 2018 |
|
| Statement of Stockholders' Equity [Abstract] | ||||
| Dividends paid (in dollars per share) | $ 0.20 | $ 0.20 | $ 0.20 | $ 0.20 |
Organization and Basis of Presentation |
6 Months Ended |
|---|---|
Jun. 30, 2019 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Basis of Presentation | Organization and Basis of Presentation Organization and Description of the Business Orion Engineered Carbons S.A.’s condensed consolidated financial information include Orion Engineered Carbons S.A. and its subsidiaries (the “Orion Group”, or the “Group” or the “Company”). The Company's fiscal year comprises the period from January 1 to December 31, 2019. 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”). Specialty Carbon Black are high-tech materials which are mainly used for 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 at June 30, 2019, the Company operates 13 wholly owned production facilities in Europe, North and South America, Asia and South Africa and five sales companies. Another ten holding companies and one service company, as well as two former operating entities in Portugal and France (currently in dissolution), are consolidated in the Orion Group. 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. Recently Adopted Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the amendments in ASU 2016-02, lessees are required to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term for all leases (with the exception of short-term leases) at the commencement date. This guidance is effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. Early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842-): Targeted Improvements, to provide an additional (and optional) transition method with which to adopt ASU 2016-02. In July 2018, the FASB also issued ASU 2018-10, Codification Improvements to Topic 842, Leases, to clarify the codification more generally and/or to correct unintended application of guidance. More recently, in March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements, which was also issued to clarify the codification more generally and/or to correct unintended application of guidance. ASU 2019-01 clarifies transition disclosure requirements upon adoption of Topic 842. We adopted ASUs 2016-02, 2018-11, 2018-10 and 2019-01 (“Lease ASUs”) as of January 1, 2019 using the optional transition method under ASU 2018-11 that allows for a cumulative-effect adjustment in the period of adoption without restating prior periods. Orion elected the practical expedients upon transition to retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. As a result of adopting these Lease ASUs we recorded additional lease assets and liabilities of approximately $30 million and $31 million on our condensed consolidated balance sheet as of March 31, 2019. Additionally, upon adoption of ASU 2016-02 we de-recognized one asset previously recorded under build-to-suit accounting and its associated liability of $29 million. A right-of-use asset will be capitalized upon subsequent commencement of the lease. We refer to Note C. Leases for further information about adoption of Topic 842. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, that amends the hedge accounting recognition and presentation requirements under hedge accounting. The new standard will make more financial and non-financial hedging strategies eligible for hedge accounting, amends the presentation and disclosure requirements, and simplifies how companies assess effectiveness. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those years, and early adoption is permitted. In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, to introduce an alternative reference rate in the United States because of concerns about the sustainability of LIBOR. The Company adopted ASUs 2017-12 and 2018-16 as of January 1, 2019. Adoption of the standard did not result in adjustments to amounts recognized in the financial statements. In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows for the elimination of the stranded income tax effects resulting from the enactment of the Tax Cuts and Jobs Act through a reclassification from accumulated other comprehensive income to retained earnings. The standard is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company adopted ASU 2018-02 as of January 1, 2019. The adoption of this guidance had no impact on the Company's financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses. The new guidance requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The new standard is effective for fiscal years beginning after December 15, 2019, including all interim periods within those years, and early adoption is permitted for fiscal years beginning after December 15, 2018. The Company adopted ASU 2016-13 as of January 1, 2019. The adoption of this guidance and recognition of a loss allowance at an amount equal to lifetime expected credit losses for trade receivables was immaterial and did not result in a transition adjustment on retained earnings. Recently Issued Accounting Pronouncements Not Yet Adopted 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. 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. For entities that have adopted the amendments in Update 2016-13, the amendments in ASU No. 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 No. 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 No. 2019-04, the effective date is as of the beginning of the first annual period beginning after the issuance date of ASU No. 2019-04. For those entities, early adoption is permitted, including adoption on any date on or after the issuance of ASU No. 2019-04. The amendments in ASU No. 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 No. 2019-04 as long as the entity has adopted all of the amendments in ASU No. 2016-01. The Company is currently evaluating the potential impact the adoption of this standard will have on its financial statements. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326). 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 No. 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 No. 2019-05 as long as an entity has adopted the amendments in ASU No. 2016-13. The Company is currently evaluating the potential impact the adoption of this standard will have on its financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, that modifies the disclosure requirements for fair value measurements made in accordance with Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The new guidance removes requirements to disclose the amount of and reason for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the potential impact the adoption of this standard will have on its 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 is currently evaluating the potential impact the adoption of this standard will have on its financial statements. Basis of Presentation The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information 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 20-F for the fiscal year ended December 31, 2018. 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. Use of Estimates The preparation of consolidated financial statements in conformity with 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.
|
Revenue and Income Recognition |
6 Months Ended |
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Jun. 30, 2019 | |
| Revenue from Contract with Customer [Abstract] | |
| Revenue and Income Recognition | Revenue and Income Recognition OEC 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, does not satisfy their specifications, or 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. Revenue is recognized according to the five-step model proscribed 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 have been transferred to the buyer, either at a point in time, or over time. The Company derives substantial majority of revenues by selling carbon black to industrial customers for further processing. Revenue recognition and measurement is governed by the following principles. The amount of revenue, the transactions price, is contractually specified between the parties and is 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.
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Inventories |
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| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories | Inventories Inventories, net of obsolete, unmarketable and slow moving reserves are as follows:
Orion periodically reviews inventories for both obsolescence and loss in value. In this review, Orion makes assumptions about the future demand for and the future market value of the inventory and, based on these assumptions, estimates the amount of obsolete, unmarketable or slow-moving inventory. The inventory reserve for obsolete, unmarketable and slow moving assets as of June 30, 2019 and December 31, 2018 amounted to $2,268k and $1,639k, respectively. For the three months ended June 30, 2019 and 2018, $361k and $404k, respectively, were recognized as an expense for damaged and lost inventories. For the six months ended June 30, 2019 and 2018, $500k and $1,275k, respectively, were recognized as an expense for damaged and lost inventories.
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Leases |
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| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | Leases Orion has entered into a limited number of lease contracts as a lessee and is not acting as a lessor. On January 1, 2019, Orion adopted Topic 842 (Leases). Orion adopted ASUs 2016-02, 2018-11, 2018-10 and 2019-01 (“Lease ASUs”) using the optional transition method under ASU 2018-11 that allows for a cumulative-effect adjustment in the period of adoption without restating prior periods. Orion elected the optional practical expedient upon transition to retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We have not recorded an adjustment to retained earnings due to materiality. In addition, the adoption did not materially impact our consolidated net income and had no impact on our cash flows. Orion’s vast majority of lease contracts are concerning operational items such as rail cars, company cars, offices, office equipment. The recorded right-of-use assets as of June 30, 2019 amounted to $29,979k, and the corresponding minimum lease liabilities amounted to $30,881k, of which $6,926k were recorded within other current liabilities and $23,955k as other liabilities. The weighted remaining average minimum lease period is 2.9 years. The undiscounted minimum lease payments are due in and reconcile to the discounted lease liabilities as follows:
The weighted average discount rate applied to the lease liabilities is 4.39%.
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Debt and Other Obligations |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt and Other Obligations | Debt and Other Obligations Debt and other obligations consist of the following:
(a) Term loan On May 8, 2018, Orion entered into the seventh amendment (the “Amendment”) to the credit agreement (the “Credit Agreement”), originally dated as of July 25, 2014, to reprice its EUR- and USD-denominated outstanding term loans. The repricing on the US dollar tranche reflects a 50 basis point reduction on margin from 2.50% to 2.00%, whereas on the euro tranche there is a 25 basis point reduction on margin from 2.50% to 2.25%. Other provisions of the Credit Agreement remained unchanged and maturity remains at July 25, 2024. In conjunction with the Amendment, on May 11, 2018, Orion entered into a $235.0 million cross currency swap to virtually convert its US dollar liabilities into EUR as part of a new hedging approach. This swap transaction impacts both principal and interest payments associated with debt service and will result in a further annual interest payments savings of approximately $4.7 million over and above the interest savings achieved by the Amendment itself. The swap became effective on May 15, 2018 and will expire on July 25, 2024, in line with maturity of the term loan. Transaction costs incurred directly in connection with the incurrence of the Euro and U.S. Dollar denominated term loans, thereby reducing their carrying amount, are amortized as finance costs over the term of the loans. For the three and six months ended June 30, 2019, an amount of $386k and $727k equivalent, respectively, related to capitalized transaction costs was amortized and recognized as finance costs in this regard (prior year: $185k and $680k equivalent, respectively). A portion of the USD-denominated term loan was designated as a hedge of the net investment in a foreign operation to reduce the Company's foreign currency exposure. Since January 1, 2015 the Company had designated $180 million of the total USD-denominated term loan held by a Germany based subsidiary as the hedging instrument to hedge the change in net assets of a US subsidiary, which is held by a Germany based subsidiary, to manage foreign currency risk. Due to the new hedging approach and the new cross currency swap as described above, hedge accounting for the net investment hedge was discontinued on May 15, 2018. An unrealized loss of $2.2 million remains within other comprehensive income as at June 30, 2019 until it is recycled through profit and loss upon divestment of the hedged item. The carrying value as at June 30, 2019 includes the nominal amount of the Term Loans plus accrued unpaid interest less deferred debt issuance costs of $6,957k (December 31, 2018: $7,738k). (b) Revolving credit facility (“RCF”) On April 2, 2019, the Company entered into the eighth amendment (the “Eighth Amendment”) to the Credit Agreement, among the Company and certain of its subsidiaries, as Borrowers or Guarantors, the Lenders from time to time party thereto and Goldman Sachs Bank US, as administrative agent for the Lenders. The Amendment relates to the revolving credit facility (“RCF”) provided by the Credit Agreement. The Eighth Amendment: (i) extends the maturity date for the RCF by three years to April 25, 2024, (ii) increases the aggregate amount of revolving credit commitments by EUR 75 million to EUR 250 million, and (iii) reduces significantly revolving credit interest expenses due to a new pricing grid (still based upon leverage ratio); initial margin of 190 basis points at leverage ratio ≤ 2.25x and > 1.75x (formerly 250 basis points at leverage ratio < 2.30x); commitment fee still at 35% of applicable margin. All other terms of the Credit Agreement remain substantially unchanged. The Eighth Amendment became effective on April 10, 2019. During the three and six months ended June 30, 2019, transaction costs of $185k and $373k, respectively, were amortized (prior year: $178k and $381k, respectively). Unamortized transaction costs that were incurred in conjunction with the RCF in July 2014, the Amendment on May 30, 2017, and the Amendment on April 2, 2019, amount to $3,756k as at June 30, 2019. Unamortized transaction costs as at December 31, 2018 amount to $2,394k and were incurred in conjunction the RCF in July 2014 and the Amendment on May 30, 2017. (c) Local bank loans and other short term borrowings In June 2019, OEC GmbH in Germany has drawn a local ancillary facility from Deutsche Bank in an amount of $31,815k and a local ancillary facility with Unicredit in an amount of $11,554k. In addition OEC LLC, United States has drawn a local ancillary facility with Citizens Bank in an amount of $9,648k.
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Financial Instruments and Fair Value Measurement |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Instruments and Fair Value Measurement | Financial Instruments and Fair Value Measurement Orion's financial instruments consist primarily of cash and cash equivalents, trade receivables, loans, miscellaneous financial assets, term loan, local bank loans, trade payables and derivative instruments. The carrying values of Orion's financial instruments approximate fair value with the exception of variable rate long-term debt, which is recorded at amortized cost. The Company measures financial instruments, such as derivatives, at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the following fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 — Unadjusted quoted market prices in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 — Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). For example, quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs. Level 3 — Unobservable inputs for the asset or liability. 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. The following table shows the fair value measurement at June 30, 2019 and December 31, 2018. All measurements are based on observable inputs such as interest rates and are classified as Level 2 within the fair value hierarchy:
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Employee Benefit Plans |
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| Employee Benefit Plans | 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 the various countries in which the Group companies operate. Generally, the level of benefit depends on the length of service and the remuneration. Net periodic defined benefit pension benefit costs include the:
Service cost were recorded within income from operations under Selling, general and administrative expenses, interest cost in Interest and other financial expense, net. There are also defined contribution pension plans in Germany and the United States for which our Group companies make regular contributions to off-balance sheet pension funds managed by third party insurance companies. In South Korea, the Company’s pension plan provides, at the option of employees for either projected benefit or defined contribution benefits. Plan assets relating to this plan reduce the pension provision.
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Stock-Based Compensation |
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| Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation | Stock-Based Compensation On July 25, 2015, the Company established the Long-Term Incentive Plan (“LTIP”) providing for the grant of performance share units (“PSUs”) to employees and officers selected by the Compensation Committee of the Board of Directors (the “Compensation Committee”). PSU awards are earned based on achievement against one or more performance metrics established by the Compensation Committee in respect of a specified performance period. Earned PSUs range from zero to a specified maximum percentage of a participant’s target award based on the performance of applicable performance metrics, and are also subject to vesting terms based on continued employment. The first performance period was settled at the beginning of the second quarter of 2018, with PSUs earned based on achievement of EBITDA metrics established by the Compensation Committee and total shareholder return relative to a peer group. The first vesting period ended March 31, 2018 (the “2015 Plan”) and earned and vested PSUs settled in one common share of the Company per vested PSU - issued to participants on April 30, 2018, except for certain PSUs settled in cash at fair market value to cover wage taxes or as substitute for share transfer restrictions. On August 2, 2016, the Compensation Committee established a consecutive LTIP (the “2016 Plan”) having consistent terms with those of the 2015 Plan. On March 31, 2019 the vesting period ended for the “2016 Plan” and earned and vested PSUs settled in one common share of the Company per vested PSU - issued to participants on April 30, 2019, except for certain PSUs settled in cash at fair market value to cover wage taxes or as substitute for share transfer restrictions. On July 31, 2017, the Compensation Committee established a consecutive LTIP (the “2017 Plan”). On July 12, 2018, the Compensation Committee established a consecutive LTIP (the “2018 Plan”). All PSUs are granted under, and are subject to the terms and conditions of, the Company’s 2014 Omnibus Incentive Compensation Plan. The following table summarizes the activity of our PSU's for the six months ended June 30, 2019:
We recognized $1,559k and $2,853k of total stock-based compensation expense related to outstanding PSUs for the three months ended June 30, 2019 and 2018, respectively. We recognized $5,112k and $5,953k of total stock-based compensation expense related to outstanding PSUs for the six months ended June 30, 2019 and 2018, respectively. At June 30, 2019, we had unrecognized compensation cost of $9.95 million, based on the target amount, related to unvested PSUs, which is expected to be recognized over a weighted average period of 1.5 years. The closing price of the Company's shares and therefore the intrinsic value of one PSU outstanding was $18.99 as of June 30, 2019 compared to $30.85 as of June 30, 2018. Total intrinsic value amounted to $15.7 million and $35.3 million as of June 30, 2019 and 2018, respectively.
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Restructuring Expenses |
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| Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring Expenses | Restructuring Expenses Details of all restructuring activities and the related reserves during the three and six months ended June 30, 2019 were as follows:
Orion's reserves for restructuring are reflected in accrued liabilities on the Condensed Consolidated Balance Sheets. The restructuring activity relate to the Company's effort to restructure its Rubber segment. As a first step the Company's German operating subsidiary terminated with effect as of December 31, 2016, the Contract Manufacturing Agreement then in place between the Company's German operating subsidiary and the Company's French subsidiary, Orion Engineered Carbons SAS ("OEC SAS"), which has a plant in Ambès with a maximum capacity of mostly standard rubber grades of 50 kmt per year. Consequently, the management of OEC SAS concluded consultations with the local works council at this facility to implement a restructuring and down staffing with a cessation of production at the site by the end of 2016. The restructuring of the South Korean footprint concluded in the second quarter of 2018 resulting in cessation of production at the Bupyeong plant and the sale of the land to a third party. For the three months ended June 30, 2019 and 2018, restructuring expenses, net amounted to $1,034k and restructuring income, net to $29,751k, respectively. For the six months ended June 30, 2019 and 2018 restructuring expenses, net amounted to $1,123k and restructuring income, net to $28,485k, respectively.
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Accumulated Other Comprehensive Loss |
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Changes in each component of AOCI, net of tax, are as follows during the three and six months ended June 30, 2019 and 2018:
For the three and six months ended June 30, 2019 and 2018, no amounts were reclassified out of AOCI and into the Condensed Consolidated Statement of Operations.
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Earnings Per Share |
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| Earnings Per Share | Earnings Per Share The following table reflects the income and share data used in the basic and diluted EPS computations for the periods presented below:
The dilutive effect of the share-based payment transaction is the weighted number of shares considering the grant date and forfeitures during the respective fiscal years. The effect is determined by using the treasury stock method.
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Income Taxes |
6 Months Ended |
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Jun. 30, 2019 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | 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 the future tax benefits that arise from the losses in jurisdictions for which no benefit can be recognized. The estimated annual effective tax rate may be significantly impacted by nondeductible expenses and the Company’s projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised. The development of deferred tax assets and liabilities relates to changes in temporary differences and tax loss carry forwards. Income tax receivables decreased from $24,342k at December 31, 2018 to $17,671k at June 30, 2019 due to tax refunds received from tax authorities. Income taxes payable decreased from $28,086k at December 31, 2018 to $19,160k at June 30, 2019 due to the tax calculation for the period. Income tax expense for the three months ended June 30, 2019 amounted to $9,309k compared to $20,743k for the three months ended June 30, 2018, reflecting profit in these periods. Income tax expense for the six months ended June 30, 2019 amounted to $18,748k compared to $31,089k for the six months ended June 30, 2018, reflecting profit in these periods. For the three months ended June 30, 2019, the impact of discrete tax items included a net discrete tax gain of $653k and is primarily due to tax return filings and other prior year adjustments. Therefore the effective tax rate of 27.3% for the three months ended June 30, 2019 deviated from the estimated annual tax rate of 29.6% for 2019. For the six months ended June 30, 2019, the impact of discrete tax items included a net discrete tax expense of $282k and is primarily due to tax return filings and other prior year adjustments. Therefore the effective tax rate of 30.0% for the six months ended June 30, 2019 deviated from the estimated annual tax rate of 29.6% for 2019.
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Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2019 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | Commitments and Contingencies Environmental Matters EPA Action During 2008 and 2009, the U.S. Environmental Protection Agency (“EPA”) contacted all U.S. carbon black producers as part of an industry-wide EPA initiative, requesting extensive and comprehensive information under Section 114 of the U.S. Clean Air Act. The EPA used that information to determine, for each facility, that either: (i) the facility has been in compliance with the Clean Air Act; (ii) violations have occurred and enforcement litigation may be undertaken; or (iii) violations have occurred and a settlement of an enforcement case is appropriate. In response to information requests received by the Company’s U.S. facilities, the Company furnished information to the EPA on each of its U.S. facilities. EPA subsequently sent notices under Section 113(a) of the Clean Air Act in 2010 alleging violations of Prevention of Significant Deterioration (“PSD”) and Title V permitting requirements under the Clean Air Act at the Company’s Belpre (Ohio) facility. In October 2012, the Company received a corresponding notice and finding of violation (an “NOV”) alleging the failure to obtain PSD and Title V permits reflecting Best Available Control Technology (“BACT”) at several units of the Company’s Ivanhoe (Louisiana) facility, and in January 2013 the Company also received an NOV issued by the EPA for its facility in Borger (Texas) alleging the failure to obtain PSD and Title V permits reflecting BACT during the years 1996 to 2008. A comparable NOV for the Company’s U.S. facility in Orange (Texas) was issued by the EPA in February 2013; and EPA issued an additional NOV in March 2016 alleging more recent non-PSD air emissions violations primarily at the dryers and the incinerator of the Orange facility. In 2013, Orion began discussions with the EPA and the U.S. Department of Justice (“DOJ”) about a potential settlement to resolve the NOVs received, which ultimately led to a consent decree executed between Orion Engineered Carbons LLC (for purpose of this Note L. “Orion”) and the United States (on behalf of the EPA), as well as the Louisiana Department of Environmental Quality. The consent decree (the “EPA CD”) became effective on June 7, 2018. The consent decree resolves and settles the EPA’s claims of noncompliance set forth in the NOVs and in a respective complaint filed in court against Orion by the United States immediately prior to the filing of the consent decree. All five U.S. carbon black producers have settled with the U.S. government. Orion was one of the two last carbon black companies to sign a consent decree. Under Orion’s EPA CD, Orion will install certain pollution control technology in order to further reduce SO2, NOx and particulate matter (“PM”) emissions at its four U.S. manufacturing facilities in Ivanhoe (Louisiana), Belpre (Ohio), Borger (Texas), and Orange (Texas) over approximately six years. The EPA CD also requires the continuous monitoring of emissions reductions that Orion will need to comply with over a number of years. Orion has commenced the installation works for its Ivanhoe facility, and expects to complete the installation in this facility over the next two years. Under the EPA CD, Orion can choose either its Belpre or Borger facilities as the next site for installation of pollution control equipment with comparable effectiveness. We expect the capital expenditures for installation of pollution control equipment in the remaining Orion facilities to decrease due to economies of scale and synergies from prior installations. We also expect that the third and fourth plants will require significantly less costly pollution control equipment given the requirements of the EPA CD. We estimate the installations of monitoring and pollution control equipment at all four Orion plants in the U.S. will require capital expenditures of up to $190 million. However, the actual total capital expenditures we might need to incur in order to fulfill the requirements of the EPA CD remain uncertain. The EPA CD allows some flexibility for Orion to choose among different technology solutions for reducing emissions and the locations where these solutions are implemented. The solutions Orion ultimately chooses to implement may differ in scope and operation from those it currently anticipates (including those discussed in the next paragraph) and factors, such as timing, locations, target levels, changing cost estimates and local regulations, could cause actual capital expenditures to significantly exceed current expectations or affect Orion’s ability to meet the agreed target emission levels or target dates for installing required equipment as anticipated or at all. Orion also agreed to and paid a civil penalty of $800,000 and agreed to perform environmental mitigation projects totaling $550,000. Noncompliance with applicable emissions limits could lead to further penalty payments to the EPA. As part of Orion’s compliance plan under the EPA CD, in April 2018 Orion signed a contract with Haldor Topsoe group to install its SNOXTM emissions control technology to remove SO2, NOx and dust particles from tail gases at Orion’s Ivanhoe, Louisiana Carbon Black production plant. The SNOXTM technology has not been used previously in the carbon black industry. Orion’s Share Purchase Agreement with Evonik in connection with the Acquisition provides for a partial indemnity from Evonik against various exposures, including, but not limited to, capital investments, fines and costs arising in connection with Clean Air Act violations that occurred prior to July 29, 2011. Except for certain less relevant allegations contained in the second NOV received for the Company’s facility in Orange (Texas) in March 2016, all of the other allegations made by the EPA with regard to all four of the Company’s U.S. facilities - as discussed above - relate to alleged violations before July 29, 2011. The indemnity provides for a recovery from Evonik of a share of the costs (including fines), expenses (including reasonable attorney’s fees, but excluding costs for maintenance and control in the ordinary course of business and any internal cost of monitoring the remedy), liabilities, damages and losses suffered and is subject to various contractual provisions including provisions set forth in the Share Purchase Agreement with Evonik, such as a de minimis clause, a basket, overall caps (which apply to all covered exposures and all covered environmental exposures, in the aggregate), damage mitigation and cooperation requirements, as well as a statute of limitations provision. Due to the cost-sharing and cap provisions in Evonik’s indemnity, the Company expects that substantial costs it has already incurred and will incur in this EPA enforcement initiative and the EPA CD likely will exceed the scope of the indemnity in the tens of millions of US dollars. In addition, Evonik signaled that it is not honoring Orion’s claims under the indemnity. In June 2019, Orion initiated arbitration proceedings to enforce its rights against Evonik. Evonik in turn has submitted certain counterclaims related to a tax indemnity and cost reimbursement against Orion, which counterclaims we do not believe to be material. Although Orion believes that it is entitled to the indemnity and that its rights thereunder are enforceable, there is no assurance that the Company will be able to recover costs or expenditures incurred under the indemnity as it expects or at all. Pledges and guarantees The Group pledges various assets (including but not limited to certain property, plant and equipment and cash) as collateral for claims arising under the finance documents including the Credit Agreement as amended from time to time. The current principal amounts of the outstanding term loans under the Credit Agreement are $283.1 million (U.S. Dollar Term Loan), and $368.8 million (Euro Term Loan). As at June 30, 2019 Orion Engineered Carbons GmbH has five guarantees issued by Euler Hermes S.A. with a total volume of $18,603k (at prior year end four guarantees by Euler Hermes S.A. of $15,222k); one guarantee insurance issued by Deutsche Bank AG with a volume of $2,276k (at prior year end one guarantee issued by Deutsche Bank AG with a volume of $2,900k). In addition, there is one cash collateral provided by Norcarb Engineered Carbons AB of $32k (at prior year end one cash collateral of $33k). None of these guarantees reduce the possible utilization limit of the current RCF.
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Financial Information by Segment |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Information by Segment | Financial Information by Segment Segment information 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. The following table shows the relative size of the net sales recognized in each of the Company’s reportable segments:
The senior management team, which is composed of the CEO, CFO and certain other senior management members is the chief operating decision maker (“CODM”). The senior management team monitors the operating segments’ results separately in order to facilitate decisions regarding the allocation of resources and determine the segments’ performance. Orion uses Adjusted EBITDA as the segments' performance measure. The CODM does not review reportable segment asset or liability information for purposes of assessing performance or allocating resources. Adjustment items are not allocated to the individual segments as they are managed on a group basis. Segment reconciliation for the three months ended June 30, 2019 and 2018:
Segment reconciliation for the six months ended June 30, 2019 and 2018:
The sales information noted above relates to external customers only. ‘Corporate and other’ includes income and expense that cannot be directly allocated to the business segments or are managed on corporate level and includes finance income and expenses, taxes and items with less bearing on the underlying core business.
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| Related Parties | Related Parties As of June 30, 2019, related parties include one associate of Orion that is accounted for using the equity method, namely "Deutsche Gaßrußwerke" (DGW) and one principal owner of more than 10%. Related parties include key management personnel having authority and responsibility for planning, directing and monitoring the activities of the Company directly or indirectly and their close family members. In the normal course of business Orion from time to time receives services from, or sells products to, related unconsolidated parties, in transactions that are either not material or approved in accordance with our Related Party Transaction Approval Policy.
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Organization and Basis of Presentation (Policies) |
6 Months Ended |
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Jun. 30, 2019 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Recently Adopted Accounting Standards / Recently Issued Accounting Pronouncements Note Yet Adopted | Recently Adopted Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the amendments in ASU 2016-02, lessees are required to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term for all leases (with the exception of short-term leases) at the commencement date. This guidance is effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years. Early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842-): Targeted Improvements, to provide an additional (and optional) transition method with which to adopt ASU 2016-02. In July 2018, the FASB also issued ASU 2018-10, Codification Improvements to Topic 842, Leases, to clarify the codification more generally and/or to correct unintended application of guidance. More recently, in March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements, which was also issued to clarify the codification more generally and/or to correct unintended application of guidance. ASU 2019-01 clarifies transition disclosure requirements upon adoption of Topic 842. We adopted ASUs 2016-02, 2018-11, 2018-10 and 2019-01 (“Lease ASUs”) as of January 1, 2019 using the optional transition method under ASU 2018-11 that allows for a cumulative-effect adjustment in the period of adoption without restating prior periods. Orion elected the practical expedients upon transition to retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. As a result of adopting these Lease ASUs we recorded additional lease assets and liabilities of approximately $30 million and $31 million on our condensed consolidated balance sheet as of March 31, 2019. Additionally, upon adoption of ASU 2016-02 we de-recognized one asset previously recorded under build-to-suit accounting and its associated liability of $29 million. A right-of-use asset will be capitalized upon subsequent commencement of the lease. We refer to Note C. Leases for further information about adoption of Topic 842. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, that amends the hedge accounting recognition and presentation requirements under hedge accounting. The new standard will make more financial and non-financial hedging strategies eligible for hedge accounting, amends the presentation and disclosure requirements, and simplifies how companies assess effectiveness. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those years, and early adoption is permitted. In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, to introduce an alternative reference rate in the United States because of concerns about the sustainability of LIBOR. The Company adopted ASUs 2017-12 and 2018-16 as of January 1, 2019. Adoption of the standard did not result in adjustments to amounts recognized in the financial statements. In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows for the elimination of the stranded income tax effects resulting from the enactment of the Tax Cuts and Jobs Act through a reclassification from accumulated other comprehensive income to retained earnings. The standard is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company adopted ASU 2018-02 as of January 1, 2019. The adoption of this guidance had no impact on the Company's financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses. The new guidance requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The new standard is effective for fiscal years beginning after December 15, 2019, including all interim periods within those years, and early adoption is permitted for fiscal years beginning after December 15, 2018. The Company adopted ASU 2016-13 as of January 1, 2019. The adoption of this guidance and recognition of a loss allowance at an amount equal to lifetime expected credit losses for trade receivables was immaterial and did not result in a transition adjustment on retained earnings. Recently Issued Accounting Pronouncements Not Yet Adopted 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. 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. For entities that have adopted the amendments in Update 2016-13, the amendments in ASU No. 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 No. 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 No. 2019-04, the effective date is as of the beginning of the first annual period beginning after the issuance date of ASU No. 2019-04. For those entities, early adoption is permitted, including adoption on any date on or after the issuance of ASU No. 2019-04. The amendments in ASU No. 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 No. 2019-04 as long as the entity has adopted all of the amendments in ASU No. 2016-01. The Company is currently evaluating the potential impact the adoption of this standard will have on its financial statements. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326). 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 No. 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 No. 2019-05 as long as an entity has adopted the amendments in ASU No. 2016-13. The Company is currently evaluating the potential impact the adoption of this standard will have on its financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, that modifies the disclosure requirements for fair value measurements made in accordance with Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The new guidance removes requirements to disclose the amount of and reason for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the potential impact the adoption of this standard will have on its 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 is currently evaluating the potential impact the adoption of this standard will have on its financial statements.
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| Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information 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.
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| Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with 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.
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| Revenue and Income Recognition | Revenue and Income Recognition OEC 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, does not satisfy their specifications, or 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. Revenue is recognized according to the five-step model proscribed 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 have been transferred to the buyer, either at a point in time, or over time. The Company derives substantial majority of revenues by selling carbon black to industrial customers for further processing. Revenue recognition and measurement is governed by the following principles. The amount of revenue, the transactions price, is contractually specified between the parties and is 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.
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Inventories (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventory, Net | Inventories, net of obsolete, unmarketable and slow moving reserves are as follows:
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Leases (Tables) |
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| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Minimum Lease Payments | The weighted remaining average minimum lease period is 2.9 years. The undiscounted minimum lease payments are due in and reconcile to the discounted lease liabilities as follows:
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Debt and Other Obligations (Tables) |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Debt Arrangements | Debt and other obligations consist of the following:
(1) According to ASU 2015-03, adopted on January 1, 2016, the Company presents debt issuance costs related to a recognized liability as a direct deduction from the carrying amount of that liability.
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Financial Instruments and Fair Value Measurement (Tables) |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value Measurements | The following table shows the fair value measurement at June 30, 2019 and December 31, 2018. All measurements are based on observable inputs such as interest rates and are classified as Level 2 within the fair value hierarchy:
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Employee Benefit Plans (Tables) |
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| Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Net Benefit Costs | Net periodic defined benefit pension benefit costs include the:
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Stock-Based Compensation (Tables) |
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| Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Activity of PSUs | The following table summarizes the activity of our PSU's for the six months ended June 30, 2019:
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Restructuring Expenses (Tables) |
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| Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Restructuring Activities and Related Reserves | Details of all restructuring activities and the related reserves during the three and six months ended June 30, 2019 were as follows:
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Accumulated Other Comprehensive Loss (Tables) |
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Changes in AOCI, Net of Tax | Changes in each component of AOCI, net of tax, are as follows during the three and six months ended June 30, 2019 and 2018:
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Earnings Per Share (Tables) |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Basic and Diluted EPS | The following table reflects the income and share data used in the basic and diluted EPS computations for the periods presented below:
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Financial Information by Segment (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of the Relative Size of Net Sales Recognized in each Reportable Segment | The following table shows the relative size of the net sales recognized in each of the Company’s reportable segments:
|
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| Schedule of Segment Information | Segment reconciliation for the three months ended June 30, 2019 and 2018:
Segment reconciliation for the six months ended June 30, 2019 and 2018:
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Related Parties (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Related Party Transactions |
|
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Organization and Basis of Presentation - Organization and Description of the Business (Details) $ in Thousands |
6 Months Ended | |
|---|---|---|
|
Jun. 30, 2019
USD ($)
facility
holding_company
sales_company
operating_entity
|
Mar. 31, 2019
USD ($)
asset
|
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Number of wholly owned production facilities | facility | 13 | |
| Number of sales companies | sales_company | 5 | |
| Number of holding companies | holding_company | 10 | |
| Number of service companies | operating_entity | 1 | |
| Number of former operating entities | operating_entity | 2 | |
| Number of production facilities operated in a joint venture | facility | 1 | |
| Operating lease right-of-use assets | $ 29,979 | $ 30,000 |
| Lease liability (current and non-current) | $ 30,881 | $ 31,000 |
| Number of assets derecognized under build-to-suit designation | asset | 1 | |
| Lease liability derecognized | $ 29,000 |
Revenue and Income Recognition - Narrative (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2019
segment
| |
| Revenue from Contract with Customer [Abstract] | |
| Number of reporting segments | 2 |
| Number of operating segments | 2 |
Inventories - Schedule of Inventory (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials, consumables and supplies, net | $ 81,027 | $ 73,460 |
| Work in process | 162 | 1,246 |
| Finished goods, net | 93,249 | 108,923 |
| Total | $ 174,438 | $ 183,629 |
Inventories - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
| Inventory Disclosure [Abstract] | |||||
| Reserve for obsolete, unmarketable and slow moving assets | $ 2,268 | $ 2,268 | $ 1,639 | ||
| Expense for damaged and lost inventories | $ 361 | $ 404 | $ 500 | $ 1,275 | |
Leases - Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
|
| Leases [Abstract] | ||
| Operating lease right-of-use assets | $ 29,979 | $ 30,000 |
| Minimum lease liabilities | 30,881 | $ 31,000 |
| Lease liabilities, recorded within other current liabilities | 6,926 | |
| Lease liabilities, recorded within other liabilities | $ 23,955 | |
| Weighted average minimum lease term | 2 years 10 months 24 days | |
| Weighted average discount rate | 4.39% |
Leases - Schedule of Minimum Lease Payments (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Mar. 31, 2019 |
|---|---|---|
| Leases [Abstract] | ||
| Next 12 months | $ 6,926 | |
| 1 to 2 years | 6,087 | |
| 2 to 3 years | 5,495 | |
| 3 to 4 years | 4,738 | |
| 4 to 5 years | 4,254 | |
| More than 5 years | 7,478 | |
| Total undiscounted minimum lease payments | 34,978 | |
| Discount | (4,097) | |
| Lease liability (current and non-current) | $ 30,881 | $ 31,000 |
Debt and Other Obligations - Schedule of Debt Arrangements (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Current | ||
| Other short-term debt and obligations | $ 53,017 | $ 34,343 |
| Current portion of long term debt and other financial liabilities | 59,693 | 41,020 |
| Non-current | ||
| Long-term debt, net | 638,300 | 643,748 |
| Total | 697,993 | 684,768 |
| Term Loan Facility | Term Loan | ||
| Current | ||
| Term loan | 8,121 | 8,149 |
| Deferred debt issuance costs - term loan | (1,445) | (1,472) |
| Non-current | ||
| Term loan | 643,812 | 650,014 |
| Deferred debt issuance costs - term loan | $ (5,512) | $ (6,266) |
Debt and Other Obligations - Revolving credit facility (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|---|
|
Apr. 02, 2019
EUR (€)
|
Apr. 01, 2019
EUR (€)
|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
|
| Debt Instrument [Line Items] | ||||||||
| Amortization of debt issuance costs | $ 555 | $ 1,180 | $ 1,090 | $ 1,835 | ||||
| Revolving Credit Facility | ||||||||
| Debt Instrument [Line Items] | ||||||||
| Extended expiration period | 3 years | |||||||
| Revolving credit commitments | € | € 250,000,000 | € 75,000,000 | ||||||
| Maximum leverage ratio | 2.25 | |||||||
| Minimum leverage ratio | 1.75 | |||||||
| Leverage ratio | 2.30 | |||||||
| Amortization of debt issuance costs | 185 | 373 | $ 178 | $ 381 | ||||
| Transaction costs | $ 3,756 | $ 3,756 | $ 2,394 | |||||
| Revolving Credit Facility | Eurodollar | ||||||||
| Debt Instrument [Line Items] | ||||||||
| Basis spread on variable rate | 190.00% | 250.00% | ||||||
| Commitment fee | 35.00% | |||||||
Debt and Other Obligations - Local bank loans and other short term borrowings (Details) $ in Thousands |
1 Months Ended |
|---|---|
|
Jun. 30, 2019
USD ($)
| |
| Deutsche Bank AG | |
| Debt Instrument [Line Items] | |
| Proceeds short term borrowings | $ 31,815 |
| Unicredit | |
| Debt Instrument [Line Items] | |
| Proceeds short term borrowings | 11,554 |
| Citizens Bank | |
| Debt Instrument [Line Items] | |
| Proceeds short term borrowings | $ 9,648 |
Financial Instruments and Fair Value Measurement - Fair Value Measurements (Details) - Fair Value, Inputs, Level 2 - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Receivables from hedges/ derivatives | $ 4,041 | $ 9,949 |
| Other current financial assets | 4,026 | 9,777 |
| Other financial assets (non-current) | 15 | 172 |
| Liabilities from derivatives | 10,494 | 7,032 |
| Other current liabilities | 745 | 2,302 |
| Other liabilities (non-current) | 9,749 | 4,730 |
| Term loan | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Fair value of loans | 651,933 | 658,163 |
| Local bank loans | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Fair value of loans | $ 53,017 | $ 28,618 |
Financial Instruments and Fair Value Measurement - Narrative (Details) |
Jun. 30, 2019
USD ($)
|
May 11, 2018
USD ($)
|
May 11, 2018
EUR (€)
|
|---|---|---|---|
| Designated as Hedging Instrument | Cash Flow Hedge | Cross Currency Interest Rate Contract | |||
| Derivative [Line Items] | |||
| Derivative, notional amount | $ 30,000,000.0 | $ 235,000,000.0 | € 235,000,000.0 |
Employee Benefit Plans - Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Retirement Benefits [Abstract] | ||||
| Service cost | $ 418 | $ 416 | $ 729 | $ 831 |
| Interest cost | 425 | 463 | 857 | 943 |
| Net periodic cost | $ 843 | $ 879 | $ 1,586 | $ 1,774 |
Stock-Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
| Unrecognized compensation cost, recognition period | 1 year 6 months | |||
| PSUs | ||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
| Stock-based compensation expense | $ 1,559 | $ 2,853 | $ 5,112 | $ 5,953 |
| Unrecognized compensation cost | $ 9,950 | $ 9,950 | ||
| Intrinsic value of PSU outstanding (in dollars per share) | $ 18.99 | $ 30.85 | $ 18.99 | $ 30.85 |
| Intrinsic value of PSU | $ 15,700 | $ 35,300 | $ 15,700 | $ 35,300 |
Restructuring Expenses - Narrative (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2018
USD ($)
|
Dec. 31, 2016
kmt
|
|
| Restructuring Cost and Reserve [Line Items] | |||||
| Restructuring expenses, net | $ 1,034 | $ 549 | $ 1,123 | $ 638 | |
| Restructuring income, net | $ 29,751 | $ (29,751) | $ 28,485 | $ (28,485) | |
| Rubber Carbon Black | |||||
| Restructuring Cost and Reserve [Line Items] | |||||
| Standard rubber grade (kmt) | kmt | 50 | ||||
Accumulated Other Comprehensive Loss - Narrative (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Equity [Abstract] | ||||
| Reclassified out of AOCI | $ 0 | $ 0 | $ 0 | $ 0 |
Earnings Per Share - Schedule of Earnings Per Calculation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Earnings Per Share [Abstract] | ||||||
| Net income for the period- attributable to ordinary equity holders of the parent (in USD k) | $ 24,748 | $ 18,954 | $ 53,081 | $ 26,754 | $ 43,702 | $ 79,835 |
| Weighted average number of ordinary shares (in thousands of shares) | 59,984 | 59,590 | 59,752 | 59,456 | ||
| Basic EPS (in USD per share) | $ 0.41 | $ 0.89 | $ 0.73 | $ 1.34 | ||
| Dilutive effect of share based payments (in thousands of shares) | 1,141 | 1,153 | 1,367 | 1,410 | ||
| Weighted average number of diluted ordinary shares (in thousands of shares) | 61,125 | 60,743 | 61,119 | 60,866 | ||
| Diluted EPS (in USD per share) | $ 0.40 | $ 0.87 | $ 0.72 | $ 1.31 | ||
Income Taxes - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
| Income Tax Disclosure [Abstract] | |||||
| Income tax receivables | $ 17,671 | $ 17,671 | $ 24,342 | ||
| Income taxes payable | 19,160 | 19,160 | $ 28,086 | ||
| Income tax expense | 9,309 | $ 20,743 | 18,748 | $ 31,089 | |
| Net discrete tax (gain) expense | $ (653) | $ 282 | |||
| Effective tax rate | 27.30% | 30.00% | |||
| Estimated effective tax rate | 29.60% | ||||
Commitments and Contingencies - Environmental Matters (Details) $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2019
USD ($)
defendant
facility
| |
| Loss Contingencies [Line Items] | |
| Number of facilities owned | facility | 13 |
| United States | |
| Loss Contingencies [Line Items] | |
| Number of facilities owned | facility | 4 |
| Settled with the U.S. government | Unfavorable Regulatory Action | |
| Loss Contingencies [Line Items] | |
| Number of carbon black producers (defendants) | defendant | 5 |
| Period to install pollution control technology | 6 years |
| Civil penalty | $ 800 |
| Cost of environmental mitigation projects | $ 550 |
| Settled with the U.S. government | Unfavorable Regulatory Action | Louisiana | |
| Loss Contingencies [Line Items] | |
| Period to install pollution control technology | 2 years |
| Settled with the U.S. government | Unfavorable Regulatory Action | Louisiana | Maximum | |
| Loss Contingencies [Line Items] | |
| Estimated capital expenditures to be incurred for installments over approximately six years | $ 190,000 |
Commitments and Contingencies - Pledges and Guarantees (Details) $ in Thousands, € in Millions |
Jun. 30, 2019
USD ($)
guarantee
|
Jun. 30, 2019
EUR (€)
guarantee
|
Dec. 31, 2018
USD ($)
guarantee
|
|---|---|---|---|
| Euler Hermes S.A. | |||
| Loss Contingencies [Line Items] | |||
| Number of guarantees issued by counterparty | guarantee | 5 | 5 | 4 |
| Guarantee obligation carrying amount | $ 18,603 | $ 15,222 | |
| Deutsche Bank AG | |||
| Loss Contingencies [Line Items] | |||
| Number of guarantees issued by counterparty | guarantee | 1 | 1 | 1 |
| Guarantee obligation carrying amount | $ 2,276 | ||
| HSBC AG | |||
| Loss Contingencies [Line Items] | |||
| Guarantee obligation carrying amount | $ 2,900 | ||
| Norcarb Engineered Carbons AB | |||
| Loss Contingencies [Line Items] | |||
| Number of guarantees issued by counterparty | guarantee | 1 | 1 | 1 |
| Guarantee obligation carrying amount | $ 32 | $ 33 | |
| Term Loan | Term Loan - USD | |||
| Loss Contingencies [Line Items] | |||
| Long-term debt | $ 283,100 | ||
| Term Loan | Term Loan - EUR | |||
| Loss Contingencies [Line Items] | |||
| Long-term debt | € | € 368.8 |
Financial Information by Segment - Narrative (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2019
segment
| |
| Segment Reporting [Abstract] | |
| Number of operating segments | 2 |
Financial Information by Segment - Schedule of the Relative Size of Revenue Recognized in each Reportable Segment (Details) - Product Concentration Risk - Revenue generated |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
| Rubber | ||||
| Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
| Concentration risk percentage | 65.00% | 64.00% | 65.00% | 64.00% |
| Specialty | ||||
| Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
| Concentration risk percentage | 35.00% | 36.00% | 35.00% | 36.00% |
Related Parties - Narrative and Schedule of Related Party Transactions (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
related_party
|
Jun. 30, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
| Equity Method Investee | |||||
| Related Party Transaction [Line Items] | |||||
| Number of related parties | related_party | 1 | ||||
| Principal Owner | |||||
| Related Party Transaction [Line Items] | |||||
| Number of related parties | related_party | 1 | ||||
| Affiliated Entity | |||||
| Related Party Transaction [Line Items] | |||||
| Trade receivables from DGW KG | $ 478 | $ 478 | $ 651 | ||
| Trade payables to DGW KG | 16,505 | 16,505 | $ 18,615 | ||
| Purchased carbon black products from DGW KG | 23,309 | $ 24,639 | 46,075 | $ 48,290 | |
| Sales and services provided to DGW KG | $ 829 | $ 694 | $ 1,491 | $ 1,401 | |