Company Quick10K Filing
Quick10K
Olin
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$27.12 165 $4,480
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-02-22 Officers, Exhibits
8-K 2019-02-12 Regulation FD, Exhibits
8-K 2019-02-04 Earnings, Exhibits
8-K 2019-01-30 Officers, Amend Bylaw, Exhibits
8-K 2019-01-11 Officers
8-K 2018-12-14 Officers, Exhibits
8-K 2018-10-29 Earnings, Exhibits
8-K 2018-09-20 Officers, Amend Bylaw, Exhibits
8-K 2018-09-06 Other Events
8-K 2018-08-22 Amend Bylaw, Exhibits
8-K 2018-07-31 Earnings, Exhibits
8-K 2018-07-26 Officers, Amend Bylaw, Regulation FD, Exhibits
8-K 2018-04-26 Officers, Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-02-06 Earnings, Exhibits
8-K 2018-01-16 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
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SEE Sealed Air
SHI Sinopec Shanghai Petrochemical
PAH Platform Specialty Products
GCP GCP Applied Technologies
OEC Orion Engineered Carbons
RYAM Rayonier Advanced Materials
VNTR Venator Materials
ADES Advanced Emissions Solutions
DELT Delta Technology Holdings
OLN 2018-09-30
Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-12 oln-ex12_2018930xq3.htm
EX-31.1 oln-ex311_2018930xq3.htm
EX-31.2 oln-ex312_2018930xq3.htm
EX-32 oln-ex32_2018930xq3.htm

Olin Earnings 2018-09-30

OLN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 oln-2018930x10q.htm FORM 10-Q Document

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018
OR

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

For the transition period from              to             
Commission file number 1-1070

Olin Corporation
(Exact name of registrant as specified in its charter)

Virginia
13-1872319
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
190 Carondelet Plaza, Suite 1530, Clayton, MO
63105
(Address of principal executive offices)
(Zip Code)

(314) 480-1400
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x Accelerated filer  ¨ Non-accelerated filer  ¨ Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨ No x

As of September 30, 2018, 166,835,332 shares of the registrant’s common stock were outstanding.

1


TABLE OF CONTENTS FOR FORM 10-Q
Page
Item 1.
 
 
 
 
 
 
Item 2.
 
 
 
 
     Segment Results
 
     Outlook
 
 
 
Item 3.
Item 4.
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 


2


Part I — Financial Information

Item 1.  Financial Statements.

OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Balance Sheets
(In millions, except per share data)
(Unaudited)

 
September 30, 2018
 
December 31, 2017
 
September 30, 2017
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
156.7

 
$
218.4

 
$
255.9

Receivables, net
1,009.2

 
733.2

 
729.5

Income taxes receivable
12.8

 
16.9

 
15.9

Inventories, net
724.4

 
682.6

 
689.5

Other current assets
35.2

 
48.1

 
27.1

Total current assets
1,938.3

 
1,699.2

 
1,717.9

Property, plant and equipment (less accumulated depreciation of $2,651.2, $2,333.1 and $2,222.8)
3,456.7

 
3,575.8

 
3,579.2

Deferred income taxes
24.8

 
36.4

 
141.1

Other assets
1,159.6

 
1,208.4

 
1,215.6

Intangible assets, net
528.3

 
578.5

 
592.9

Goodwill
2,119.6

 
2,120.0

 
2,119.8

Total assets
$
9,227.3

 
$
9,218.3

 
$
9,366.5

LIABILITIES AND SHAREHOLDERS’ EQUITY

 
 
 
 
Current liabilities:

 
 
 
 
Current installments of long-term debt
$
0.9

 
$
0.7

 
$
81.7

Accounts payable
709.4

 
669.8

 
613.5

Income taxes payable
22.1

 
9.4

 
9.6

Accrued liabilities
341.3

 
274.4

 
294.5

Total current liabilities
1,073.7

 
954.3

 
999.3

Long-term debt
3,336.4

 
3,611.3

 
3,663.5

Accrued pension liability
589.6

 
635.9

 
618.7

Deferred income taxes
548.6

 
511.2

 
1,055.5

Other liabilities
756.1

 
751.9

 
731.0

Total liabilities
6,304.4

 
6,464.6

 
7,068.0

Commitments and contingencies

 

 

Shareholders’ equity:
 
 
 
 
 
Common stock, par value $1 per share:  authorized, 240.0 shares;
   issued and outstanding, 166.8, 167.1 and 166.4 shares
166.8

 
167.1

 
166.4

Additional paid-in capital
2,276.9

 
2,280.9

 
2,267.7

Accumulated other comprehensive loss
(571.3
)
 
(484.6
)
 
(470.0
)
Retained earnings
1,050.5

 
790.3

 
334.4

Total shareholders’ equity
2,922.9

 
2,753.7

 
2,298.5

Total liabilities and shareholders’ equity
$
9,227.3

 
$
9,218.3

 
$
9,366.5


The accompanying notes to condensed financial statements are an integral part of the condensed financial statements.

3


OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Operations
(In millions, except per share data)
(Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Sales
$
1,872.4

 
$
1,554.9

 
$
5,311.1

 
$
4,648.5

Operating expenses:
 
 
 
 
 
 
 
Cost of goods sold
1,441.7

 
1,349.3

 
4,431.1

 
4,154.7

Selling and administration
110.8

 
91.1

 
321.6

 
268.8

Restructuring charges
3.3

 
9.2

 
13.7

 
25.9

Acquisition-related costs
0.4

 
1.1

 
1.0

 
12.5

Other operating (expense) income
(1.7
)
 

 
6.4

 
(0.1
)
Operating income
314.5

 
104.2

 
550.1

 
186.5

Earnings (losses) of non-consolidated affiliates
0.4

 
0.5

 
(20.2
)
 
1.5

Interest expense
59.2

 
53.1

 
184.0

 
158.0

Interest income
0.3

 
0.4

 
1.1

 
1.0

Non-operating pension income
5.4

 
8.4

 
16.2

 
25.5

Income before taxes
261.4

 
60.4

 
363.2

 
56.5

Income tax provision (benefit)
66.3

 
7.7

 
88.6

 
(3.7
)
Net income
$
195.1

 
$
52.7

 
$
274.6

 
$
60.2

Net income per common share:
 
 
 
 
 
 
 
Basic
$
1.17

 
$
0.32

 
$
1.64

 
$
0.36

Diluted
$
1.16

 
$
0.31

 
$
1.63

 
$
0.36

Dividends per common share
$
0.20

 
$
0.20

 
$
0.60

 
$
0.60

Average common shares outstanding:
 
 
 
 
 
 
 
Basic
167.0

 
166.3

 
167.1

 
166.0

Diluted
168.6

 
168.5

 
168.9

 
168.2


The accompanying notes to condensed financial statements are an integral part of the condensed financial statements.

4


OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
195.1

 
$
52.7

 
$
274.6

 
$
60.2

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments, net
(2.0
)
 
9.8

 
(15.7
)
 
31.7

Unrealized (losses) gains on derivative contracts, net
(3.6
)
 
1.3

 
(6.1
)
 
(4.4
)
Amortization of prior service costs and actuarial losses, net
7.5

 
4.3

 
21.0

 
12.7

Total other comprehensive income (loss), net of tax
1.9

 
15.4

 
(0.8
)
 
40.0

Comprehensive income
$
197.0

 
$
68.1

 
$
273.8

 
$
100.2


The accompanying notes to condensed financial statements are an integral part of the condensed financial statements.

5


OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Shareholders’ Equity
(In millions, except per share data)
(Unaudited)

 
Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Total
Shareholders’
Equity
 
Shares
Issued
 
Par
Value
Balance at January 1, 2017
165.4

 
$
165.4

 
$
2,243.8

 
$
(510.0
)
 
$
373.8

 
$
2,273.0

Net income

 

 

 

 
60.2

 
60.2

Other comprehensive income

 

 

 
40.0

 

 
40.0

Dividends paid:
 
 
 
 
 
 
 
 
 
 
 
Common stock ($0.60 per share)

 

 

 

 
(99.6
)
 
(99.6
)
Common stock issued for:
 
 
 
 
 
 
 
 
 
 
 
Stock options exercised
1.0

 
1.0

 
17.5

 

 

 
18.5

Other transactions

 

 
1.7

 

 

 
1.7

Stock-based compensation

 

 
4.7

 

 

 
4.7

Balance at September 30, 2017
166.4

 
$
166.4

 
$
2,267.7

 
$
(470.0
)
 
$
334.4

 
$
2,298.5

Balance at January 1, 2018
167.1

 
$
167.1

 
$
2,280.9

 
$
(484.6
)
 
$
790.3

 
$
2,753.7

Income tax reclassification adjustment

 

 

 
(85.9
)
 
85.9

 

Net income

 

 

 

 
274.6

 
274.6

Other comprehensive loss

 

 

 
(0.8
)
 

 
(0.8
)
Dividends paid:
 
 
 
 
 
 
 
 
 
 
 
Common stock ($0.60 per share)

 

 

 

 
(100.3
)
 
(100.3
)
Common stock repurchased and retired
(0.5
)
 
(0.5
)
 
(16.3
)
 

 

 
(16.8
)
Common stock issued for:
 
 
 
 
 
 
 
 
 
 
 
Stock options exercised
0.2

 
0.2

 
3.0

 

 

 
3.2

Other transactions

 

 
1.5

 

 

 
1.5

Stock-based compensation

 

 
7.8

 

 

 
7.8

Balance at September 30, 2018
166.8

 
$
166.8

 
$
2,276.9

 
$
(571.3
)
 
$
1,050.5

 
$
2,922.9


The accompanying notes to condensed financial statements are an integral part of the condensed financial statements.

6


OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Cash Flows
(In millions)
(Unaudited)

 
Nine Months Ended September 30,
 
2018
 
2017
Operating Activities
 
 
 
Net income
$
274.6

 
$
60.2

Adjustments to reconcile net income to net cash and cash equivalents provided by (used for) operating activities:
 
 
 
Losses (earnings) of non-consolidated affiliates
20.2

 
(1.5
)
Losses on disposition of property, plant and equipment
1.9

 
0.4

Stock-based compensation
9.2

 
6.4

Depreciation and amortization
451.0

 
411.4

Deferred income taxes
44.0

 
(17.5
)
Qualified pension plan contributions
(1.3
)
 
(1.2
)
Qualified pension plan income
(11.1
)
 
(20.3
)
Change in:
 
 
 
Receivables
(280.1
)
 
(48.5
)
Income taxes receivable/payable
17.1

 
10.6

Inventories
(44.5
)
 
(46.7
)
Other current assets
4.5

 
3.1

Accounts payable and accrued liabilities
110.1

 
92.9

Other assets
(2.0
)
 
7.7

Other noncurrent liabilities
(3.8
)
 
(13.6
)
Other operating activities
(3.5
)
 
11.7

Net operating activities
586.3

 
455.1

Investing Activities
 
 
 
Capital expenditures
(274.5
)
 
(210.0
)
Payments under long-term supply contracts

 
(209.4
)
Proceeds from disposition of property, plant and equipment
2.9

 
0.1

Net investing activities
(271.6
)
 
(419.3
)
Financing Activities
 
 
 
Long-term debt:
 
 
 
Borrowings
570.0

 
2,035.0

Repayments
(823.7
)
 
(1,907.4
)
Common stock repurchased and retired
(16.8
)
 

Stock options exercised
3.2

 
18.5

Dividends paid
(100.3
)
 
(99.6
)
Debt issuance costs
(8.5
)
 
(11.2
)
Net financing activities
(376.1
)
 
35.3

Effect of exchange rate changes on cash and cash equivalents
(0.3
)
 
0.3

Net (decrease) increase in cash and cash equivalents
(61.7
)
 
71.4

Cash and cash equivalents, beginning of period
218.4

 
184.5

Cash and cash equivalents, end of period
$
156.7

 
$
255.9

Cash paid for interest and income taxes:
 
 
 
Interest, net
$
153.9

 
$
138.7

Income taxes, net of refunds
$
31.9

 
$
11.2

Non-cash investing activities:
 
 
 
Decrease in capital expenditures included in accounts payable and accrued liabilities
$
7.0

 
$
25.0


The accompanying notes to condensed financial statements are an integral part of the condensed financial statements.

7


OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Financial Statements
(Unaudited)

DESCRIPTION OF BUSINESS

Olin Corporation (Olin) is a Virginia corporation, incorporated in 1892, having its principal executive offices in Clayton, MO.  We are a manufacturer concentrated in three business segments:  Chlor Alkali Products and Vinyls, Epoxy and Winchester.  The Chlor Alkali Products and Vinyls segment manufactures and sells chlorine and caustic soda, ethylene dichloride (EDC) and vinyl chloride monomer, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, perchloroethylene, trichloroethylene and vinylidene chloride, hydrochloric acid, hydrogen, bleach products and potassium hydroxide.  The Epoxy segment produces and sells a full range of epoxy materials, including allyl chloride, epichlorohydrin, liquid epoxy resins, solid epoxy resins and downstream products such as differentiated epoxy resins and additives. The Winchester segment produces and sells sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.

We have prepared the condensed financial statements included herein, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). The preparation of the financial statements requires estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. In our opinion, these financial statements reflect all adjustments (consisting only of normal accruals), which are necessary to present fairly the results for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, we believe that the disclosures are appropriate. We recommend that you read these condensed financial statements in conjunction with the financial statements, accounting policies and the notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2017. Certain reclassifications were made to prior year amounts to conform to the 2018 presentation.

ACCOUNTING POLICIES

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09), which amends Accounting Standards Codification (ASC) 605 “Revenue Recognition” and creates a new topic, ASC 606 “Revenue from Contracts with Customers” (ASC 606). Subsequent to the issuance of ASU 2014-09, ASC 606 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update. We adopted these updates on January 1, 2018 using the modified retrospective transition method. The cumulative effect of applying the updates did not have a material impact on our consolidated financial statements. The most significant impact the updates had was on our accounting policies and disclosures on revenue recognition.

We derive our revenues primarily from the manufacturing and delivery of goods to customers. Revenues are recognized on sales of goods at the time when control of those goods is transferred to our customers at an amount that reflects the consideration to which we expect to be entitled in exchange for those goods. We primarily sell our goods directly to customers, and to a lesser extent, through distributors. Payment terms are typically 30 to 90 days from date of invoice. Our contracts do not typically have a significant financing component. Right to payment is determined at the point in time in which control has transferred to the customer.

A performance obligation is a promise in a contract to transfer a distinct good to the customer. At contract inception, we assess the goods promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a good (or bundle of goods) that is distinct. A contract’s transaction price is based on the price stated in the contract and allocated to each distinct performance obligation and revenue is recognized when the performance obligation is satisfied. The majority of our contracts have a single distinct performance obligation or multiple performance obligations which are distinct and represent individual promises within the contract. Substantially all of our performance obligations are satisfied at a single point in time, when control is transferred, which is generally upon shipment or delivery as stated in the contract terms.


8


All taxes assessed by governmental authorities that are both imposed on and concurrent with our revenue-producing transactions and collected from our customers are excluded from the measurement of the transaction price. Shipping and handling fees billed to customers are included in revenue and are considered activities to fulfill the promise to transfer the good.  Allowances for estimated returns, discounts and rebates are considered variable consideration, which may be constrained, and are estimated and recognized when sales are recorded. The estimates are based on various market data, historical trends and information from customers.  Actual returns, discounts and rebates have not been materially different from estimates. For all contracts that have a duration of one year or less at contract inception, we do not adjust the promised amount of consideration for the effects of a significant financing component.

Substantially all of our revenue is derived from contracts with an original expected length of time of one year or less and for which we recognize revenue for the amount in which we have the right to invoice at the point in time in which control has transferred to the customer. However, a portion of our revenue is derived from long-term contracts which have contract periods that vary between one to multi-year. Certain of these contracts represent contracts with minimum purchase obligations, which can be substantially different than the actual revenue recognized. Such contracts consist of varying types of products across our chemical businesses. Certain contracts include variable volumes and/or variable pricing with pricing provisions tied to commodity, consumer price or other indices. The transaction price allocated to the remaining performance obligations related to our contracts was excluded from the disclosure of our remaining performance obligations based on the following practical expedients that we elected to apply: (i) contracts with index-based pricing or variable volume attributes in which such variable consideration is allocated entirely to a wholly unsatisfied performance obligation; and (ii) contracts with an original expected duration of one year or less.

Refer to the Note “Segment Information” for information regarding the disaggregation of revenue by primary geographical markets and major product lines.

ACQUISITION
On October 5, 2015 (the Closing Date), we completed the acquisition (the Acquisition) from DowDuPont Inc. (DowDuPont) (f/k/a The Dow Chemical Company) of its U.S. Chlor Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses (collectively, the Acquired Business), whose operating results are included in the accompanying financial statements since the Closing Date.

We incurred costs related to the integration of the Acquired Business which consisted of advisory, legal, accounting and other professional fees of $0.4 million and $1.1 million for the three months ended September 30, 2018 and 2017, respectively, and $1.0 million and $12.5 million for the nine months ended September 30, 2018 and 2017, respectively.

RESTRUCTURING CHARGES

On March 21, 2016, we announced that we had made the decision to close a combined total of 433,000 tons of chlor alkali capacity across three separate locations. Associated with this action, we have permanently closed our Henderson, NV chlor alkali plant with 153,000 tons of capacity and have reconfigured the site to manufacture bleach and distribute caustic soda and hydrochloric acid. Also, the capacity of our Niagara Falls, NY chlor alkali plant has been reduced from 300,000 tons to 240,000 tons and the chlor alkali capacity at our Freeport, TX facility was reduced by 220,000 tons. This 220,000 ton reduction was entirely from diaphragm cell capacity. For the three months ended September 30, 2018 and 2017, we recorded pretax restructuring charges of $3.3 million and $8.8 million respectively, for employee severance and related benefit costs, facility exit costs and lease and other contract termination costs related to these actions. For the nine months ended September 30, 2018 and 2017, we recorded pretax restructuring charges of $12.4 million and $23.7 million, respectively, for employee severance and related benefit costs, employee relocation costs, facility exit costs and lease and other contract termination costs related to these actions. We expect to incur additional restructuring charges through 2020 of approximately $14 million related to these capacity reductions.

9



On December 12, 2014, we announced that we had made the decision to permanently close the portion of the Becancour, Canada chlor alkali facility that has been shut down since late June 2014. This action reduced the facility’s chlor alkali capacity by 185,000 tons. Subsequent to the shut down, the plant predominantly focuses on bleach and hydrochloric acid, which are value-added products, as well as caustic soda. For the three months ended September 30, 2018 and 2017, we recorded pretax restructuring charges of zero and $0.4 million, respectively, for facility exit costs related to this action. For the nine months ended September 30, 2018 and 2017, we recorded pretax restructuring charges of $1.3 million and $2.2 million, respectively, for facility exit costs related to this action. We expect to incur additional restructuring charges through 2018 of less than $1 million related to the shut down of this portion of the facility.

On November 3, 2010, we announced that we made the decision to relocate the Winchester centerfire pistol and rifle ammunition manufacturing operations from East Alton, IL to Oxford, MS. Consistent with this decision in 2010, we initiated an estimated $110 million five-year project, which included approximately $80 million of capital spending. The capital spending was partially financed by $31 million of grants provided by the State of Mississippi and local governments. During 2016, the final rifle ammunition production equipment relocation was completed.

The following table summarizes the 2018 and 2017 activities by major component of these restructuring actions and the remaining balances of accrued restructuring costs as of September 30, 2018 and 2017:
 
Employee severance and related benefit costs
 
Lease and other contract termination costs
 
Employee relocation costs
 
Facility exit costs
 
Total
 
($ in millions)
Balance at January 1, 2017
$
3.4

 
$
7.5

 
$

 
$
1.8

 
$
12.7

Restructuring charges:
 
 
 
 
 
 
 
 
 
First quarter

 
5.7

 
0.2

 
2.3

 
8.2

Second quarter

 
5.8

 
0.1

 
2.6

 
8.5

  Third quarter

 
7.0

 

 
2.2

 
9.2

Amounts utilized
(3.0
)
 
(4.6
)
 
(0.3
)
 
(8.8
)
 
(16.7
)
Balance at September 30, 2017
$
0.4

 
$
21.4

 
$

 
$
0.1

 
$
21.9

Balance at January 1, 2018
$
1.8

 
$
3.3

 
$

 
$

 
$
5.1

Restructuring charges:
 
 
 
 
 
 
 
 
 
First quarter

 
0.4

 

 
3.6

 
4.0

Second quarter
0.1

 
3.7

 

 
2.6

 
6.4

  Third quarter
0.3

 
0.3

 

 
2.7

 
3.3

Amounts utilized
(1.8
)
 
(1.6
)
 

 
(7.9
)
 
(11.3
)
Balance at September 30, 2018
$
0.4

 
$
6.1

 
$

 
$
1.0

 
$
7.5



10


The following table summarizes the cumulative restructuring charges of these 2016, 2014 and 2010 restructuring actions by major component through September 30, 2018:
 
 
Chlor Alkali Products and Vinyls
 
Winchester
 
Total
 
 
Becancour
 
Capacity Reductions
 
 
 
 
($ in millions)
Write-off of equipment and facility
 
$
3.5

 
$
78.1

 
$

 
$
81.6

Employee severance and related benefit costs
 
2.7

 
5.9

 
14.7

 
23.3

Facility exit costs
 
5.9

 
30.7

 
2.3

 
38.9

Pension and other postretirement benefits curtailment
 

 

 
4.1

 
4.1

Employee relocation costs
 

 
1.7

 
6.0

 
7.7

Lease and other contract termination costs
 
5.3

 
40.0

 

 
45.3

Total cumulative restructuring charges
 
$
17.4

 
$
156.4

 
$
27.1

 
$
200.9


As of September 30, 2018, we have incurred cash expenditures of $107.3 million and non-cash charges of $86.1 million related to these restructuring actions. The remaining balance of $7.5 million is expected to be paid out through 2020.

ACCOUNTS RECEIVABLES

On December 20, 2016, we entered into a three-year, $250.0 million Receivables Financing Agreement with PNC Bank, National Association, as administrative agent (Receivables Financing Agreement). Under the Receivables Financing Agreement, our eligible trade receivables are used for collateralized borrowings and continue to be serviced by us. In addition, the Receivables Financing Agreement incorporates the leverage and coverage covenants that are contained in the senior revolving credit facility. As of September 30, 2018, $418.0 million of our trade receivables were pledged as collateral and we had $180.0 million drawn under the agreement. As of September 30, 2018, we had $70.0 million additional borrowing capacity under the Receivables Financing Agreement. As of December 31, 2017, $340.9 million of our trade receivables were pledged as collateral and $249.7 million was drawn under the agreement.

Olin also has trade accounts receivable factoring arrangements (AR Facilities) and pursuant to the terms of the AR Facilities, certain of our subsidiaries may sell their accounts receivable up to a maximum of $315.0 million. We will continue to service the outstanding accounts sold.  These receivables qualify for sales treatment under ASC 860 “Transfers and Servicing” and, accordingly, the proceeds are included in net cash provided by operating activities in the condensed statements of cash flows.  The following table summarizes the AR Facilities activity:

 
September 30,
 
2018
 
2017
 
($ in millions)
Balance at beginning of year
$
182.3

 
$
126.1

     Gross receivables sold
1,199.8

 
1,224.1

     Payments received from customers on sold accounts
(1,247.7
)
 
(1,162.9
)
Balance at end of period
$
134.4

 
$
187.3


The factoring discount paid under the AR Facilities is recorded as interest expense on the condensed statements of operations. The factoring discount was $1.1 million and $1.4 million for the three months ended September 30, 2018 and 2017, respectively, and $3.9 million and $2.9 million for the nine months ended September 30, 2018 and 2017, respectively. The agreements are without recourse and therefore no recourse liability has been recorded as of September 30, 2018

Receivables, net includes $120.0 million of insurance recoveries for environmental costs incurred and expensed in prior periods, which was collected in October 2018.


11


ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLES

We evaluate the collectibility of accounts receivable based on a combination of factors. We estimate an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience. This estimate is periodically adjusted when we become aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. While we have a large number of customers that operate in diverse businesses and are geographically dispersed, a general economic downturn in any of the industry segments in which we operate could result in higher than expected defaults, and, therefore, the need to revise estimates for the provision for doubtful accounts could occur.

Allowance for doubtful accounts receivable consisted of the following:
 
September 30,
 
2018
 
2017
 
($ in millions)
Balance at beginning of year
$
12.3

 
$
10.1

Provisions charged
1.6

 
1.3

Foreign currency translation adjustment
(0.4
)
 

Balance at end of period
$
13.5

 
$
11.4


Provisions charged (credited) to operations were $0.3 million and $(0.8) million for the three months ended September 30, 2018 and 2017, respectively.

INVENTORIES

Inventories consisted of the following:
 
September 30, 2018
 
December 31,
2017
 
September 30, 2017
 
($ in millions)
Supplies
$
63.7

 
$
66.1

 
$
60.3

Raw materials
70.1

 
75.3

 
85.4

Work in process
155.9

 
127.8

 
120.6

Finished goods
493.6

 
462.6

 
470.7

 
783.3

 
731.8

 
737.0

LIFO reserve
(58.9
)
 
(49.2
)
 
(47.5
)
Inventories, net
$
724.4

 
$
682.6

 
$
689.5


Inventories are valued at the lower of cost and net realizable value. For U.S. inventories, inventory costs are determined principally by the last-in, first-out (LIFO) method of inventory accounting while for international inventories, inventory costs are determined principally by the first-in, first-out (FIFO) method of inventory accounting. Cost for other inventories has been determined principally by the average-cost method (primarily operating supplies, spare parts and maintenance parts). Elements of costs in inventories included raw materials, direct labor and manufacturing overhead. Inventories under the LIFO method are based on annual estimates of quantities and costs as of year-end; therefore, the condensed financial statements at September 30, 2018 reflect certain estimates relating to inventory quantities and costs at December 31, 2018. The replacement cost of our inventories would have been approximately $58.9 million, $49.2 million and $47.5 million higher than reported at September 30, 2018, December 31, 2017 and September 30, 2017, respectively.


12


OTHER ASSETS

Included in other assets were the following:
 
September 30, 2018
 
December 31, 2017
 
September 30, 2017
 
($ in millions)
Investments in non-consolidated affiliates
$
8.3

 
$
28.5

 
$
28.2

Deferred debt issuance costs
2.1

 
2.5

 
2.7

Tax-related receivables
4.9

 
10.2

 
13.1

Derivative contracts
1.6

 
3.6

 
3.7

Supply contracts
1,108.9

 
1,137.1

 
1,146.3

Other
33.8

 
26.5

 
21.6

Other assets
$
1,159.6

 
$
1,208.4

 
$
1,215.6


For the nine months ended September 30, 2018, we recorded a $21.5 million non-cash impairment charge related to an adjustment to the value of our 9.1% limited partnership interest in Bay Gas Storage Company, Ltd. (BayGas). BayGas owns, leases and operates underground gas storage and related pipeline facilities which are used to provide storage in the McIntosh, AL area and delivery of natural gas. The general partner, Sempra Energy (Sempra), announced in the second quarter 2018 its plan to sell several assets including its 90.9% interest in BayGas.  In connection with this decision, Sempra recorded an impairment charge related to BayGas adjusting the related assets’ carrying values to an estimated fair value.  We recorded a reduction in our investment in the non-consolidated affiliate for the proportionate share of the non-cash impairment charge. Olin has no other non-consolidated affiliates.

In connection with the Acquisition, Olin and DowDuPont entered into arrangements for the long-term supply of ethylene by DowDuPont to Olin, pursuant to which, among other things, Olin made upfront payments in order to receive ethylene at producer economics and for certain reservation fees and for the option to obtain additional ethylene at producer economics. During 2016, we exercised one of the options to reserve additional ethylene at producer economics. In September 2017, DowDuPont’s new Texas 9 ethylene cracker in Freeport, TX became operational. As a result, during the three months ended September 30, 2017, a payment of $209.4 million was made in connection with this option which increased the value of the long-term asset.

On February 27, 2017, we exercised the remaining option to reserve additional ethylene at producer economics from DowDuPont. In connection with the exercise of this option, we also secured a long-term customer arrangement. As a result, an additional payment will be made to DowDuPont of between $440 million and $465 million on or about the fourth quarter of 2020. During 2017, as a result of DowDuPont’s new Texas 9 ethylene cracker becoming operational, Olin recognized a long-term asset and other liabilities of $389.2 million, which represents the present value of the additional estimated payment. The discounted amount of $51.8 million will be recorded as interest expense through the fourth quarter of 2020. For the three and nine months ended September 30, 2018, interest expense of $4.0 million and $11.9 million, respectively, was recorded for accretion on the 2020 payment discount.

Amortization expense of $9.4 million and $6.3 million for the three months ended September 30, 2018 and 2017, respectively, and $28.2 million and $18.9 million for the nine months ended September 30, 2018 and 2017, respectively, was recognized within cost of goods sold related to these supply contracts and is reflected in depreciation and amortization on the condensed statements of cash flows. The long-term supply contracts are monitored for impairment each reporting period.


13


GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying value of goodwill were as follows:

 
Chlor Alkali Products and Vinyls
 
Epoxy
 
Total
 
($ in millions)
Balance at January 1, 2017
$
1,831.3

 
$
286.7

 
$
2,118.0

Foreign currency translation adjustment
1.4

 
0.4

 
1.8

Balance at September 30, 2017
$
1,832.7

 
$
287.1

 
$
2,119.8

Balance at January 1, 2018
$
1,832.9

 
$
287.1

 
2,120.0

Foreign currency translation adjustment
(0.3
)
 
(0.1
)
 
(0.4
)
Balance at September 30, 2018
$
1,832.6

 
$
287.0

 
$
2,119.6


Intangible assets consisted of the following:

 
 
September 30, 2018
 
December 31, 2017
 
September 30, 2017
 
 
Gross Amount
 
Accumulated Amortization
 
Net
 
Gross Amount
 
Accumulated Amortization
 
Net
 
Gross Amount
 
Accumulated Amortization
 
Net
 
 
($ in millions)
Customers, customer contracts and relationships
 
$
676.2

 
$
(199.9
)
 
$
476.3

 
$
679.5

 
$
(163.6
)
 
$
515.9

 
$
678.0

 
$
(150.9
)
 
$
527.1

Trade name
 
7.0

 
(4.3
)
 
2.7

 
7.1

 
(3.2
)
 
3.9

 
7.1

 
(2.9
)
 
4.2

Acquired technology
 
85.6

 
(36.6
)
 
49.0

 
86.1

 
(27.7
)
 
58.4

 
85.8

 
(24.5
)
 
61.3

Other
 
2.3

 
(2.0
)
 
0.3

 
2.3

 
(2.0
)
 
0.3

 
2.3

 
(2.0
)
 
0.3

Total intangible assets
 
$
771.1

 
$
(242.8
)
 
$
528.3

 
$
775.0

 
$
(196.5
)
 
$
578.5

 
$
773.2

 
$
(180.3
)
 
$
592.9


EARNINGS PER SHARE

Basic and diluted net income per share are computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per share reflects the dilutive effect of stock-based compensation.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Computation of Income per Share
(In millions, except per share data)
Net income
$
195.1

 
$
52.7

 
$
274.6

 
$
60.2

Basic shares
167.0

 
166.3

 
167.1

 
166.0

Basic net income per share
$
1.17

 
$
0.32

 
$
1.64

 
$
0.36

Diluted shares:
 
 
 
 
 
 
 
Basic shares
167.0

 
166.3

 
167.1

 
166.0

Stock-based compensation
1.6

 
2.2

 
1.8

 
2.2

Diluted shares
168.6

 
168.5

 
168.9

 
168.2

Diluted net income per share
$
1.16

 
$
0.31

 
$
1.63

 
$
0.36


The computation of dilutive shares from stock-based compensation does not include 2.4 million and 1.6 million shares for the three months ended September 30, 2018 and 2017, respectively, and 2.4 million and 1.6 million shares for the nine months ended September 30, 2018 and 2017, respectively, as their effect would have been anti-dilutive.

14



ENVIRONMENTAL

We are party to various government and private environmental actions associated with past manufacturing facilities and former waste disposal sites. Environmental provisions (credited) charged to income, which are included in cost of goods sold, were as follows:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
($ in millions)
Provisions (credited) charged to income
$
(0.8
)
 
$
1.8

 
$
5.9

 
$
6.2

Insurance recoveries for costs incurred and expensed
(110.0
)
 

 
(110.0
)
 

Environmental (income) expense
$
(110.8
)
 
$
1.8

 
$
(104.1
)
 
$
6.2


During the third quarter of 2018, we settled certain disputes with respect to insurance coverage for costs at various environmental remediation sites for $120.0 million. Environmental income (expense) for both the three and nine months ended September 30, 2018 include insurance recoveries for environmental costs incurred and expensed in prior periods of $110.0 million.  The recoveries are reduced by estimated liabilities of $10.0 million associated with claims by subsequent owners of certain of the settled environmental sites. The condensed balance sheets included reserves for future environmental expenditures to investigate and remediate known sites amounting to $129.0 million, $131.6 million and $135.3 million at September 30, 2018, December 31, 2017 and September 30, 2017, respectively, of which $109.0 million, $111.6 million and $118.3 million, respectively, were classified as other noncurrent liabilities.

Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, changes in regulatory authorities, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other Potentially Responsible Parties (PRPs), our ability to obtain contributions from other parties and the lengthy time periods over which site remediation occurs. It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably to us, which could materially adversely affect our financial position or results of operations.

COMMITMENTS AND CONTINGENCIES

We, and our subsidiaries, are defendants in various legal actions (including proceedings based on alleged exposures to asbestos) incidental to our past and current business activities. As of September 30, 2018, December 31, 2017 and September 30, 2017, our condensed balance sheets included accrued liabilities for these legal actions of $14.8 million, $24.8 million and $15.9 million, respectively. These liabilities do not include costs associated with legal representation. In addition to the aforementioned legal actions, we are party to a dispute relating to a contract at our Plaquemine, LA facility. The other party to the contract has filed a demand for arbitration alleging, among other things, that Olin breached the related agreement and claiming damages in excess of the amount Olin believes it is obligated to pay under the contract. Any additional losses related to this contract dispute are not currently estimable because of unresolved questions of fact and law.

Based on our analysis, and considering the inherent uncertainties associated with litigation, we do not believe that it is reasonably possible that these legal actions will materially adversely affect our financial position, cash flows or results of operations.

During the ordinary course of our business, contingencies arise resulting from an existing condition, situation or set of circumstances involving an uncertainty as to the realization of a possible gain contingency. In certain instances such as environmental projects, we are responsible for managing the cleanup and remediation of an environmental site. There exists the possibility of recovering a portion of these costs from other parties. We account for gain contingencies in accordance with the provisions of ASC 450 “Contingencies” and, therefore, do not record gain contingencies and recognize income until it is earned and realizable.


15


SHAREHOLDERS’ EQUITY

On April 26, 2018, our board of directors authorized a share repurchase program for the purchase of shares of common stock at an aggregate price of up to $500.0 million.  This program will terminate upon the purchase of $500.0 million of our common stock. For the nine months ended September 30, 2018, 0.5 million shares were repurchased and retired at a cost of $16.8 million. As of September 30, 2018, we had repurchased a total of $16.8 million of our common stock, representing 0.5 million shares, and $483.2 million of common stock remained authorized to be repurchased.

We issued 0.2 million and 1.0 million shares representing stock options exercised for the nine months ended September 30, 2018 and 2017, respectively, with a total value of $3.2 million and $18.5 million, respectively.

In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (ASU 2018-02) which amends ASC 220 “Income Statement—Reporting Comprehensive Income.”  This update allows a reclassification from accumulated other comprehensive loss to retained earnings for the stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act (the 2017 Tax Act) during each fiscal year or quarter in which the effect of the lower tax rate is recorded.  We adopted this update in March 2018 and reclassified $85.9 million related to the provisional deferred gain resulting from the 2017 Tax Act from accumulated other comprehensive loss to retained earnings.


16


The following table represents the activity included in accumulated other comprehensive loss:
 
Foreign
Currency
Translation
Adjustment
(net of taxes)
 
Unrealized
Gains (Losses)
on Derivative
Contracts
(net of taxes)
 
Pension and Other
Postretirement
Benefits
(net of taxes)
 
Accumulated
Other Comprehensive
Loss
 
($ in millions)
Balance at January 1, 2017
$
(24.1
)
 
$
12.8

 
$
(498.7
)
 
$
(510.0
)
Unrealized gains (losses):
 
 
 
 
 
 
 
First quarter
8.3

 
(3.1
)
 

 
5.2

Second quarter
28.1

 
(3.7
)
 

 
24.4

Third quarter
16.0

 
3.2

 

 
$
19.2

Reclassification adjustments into income (gains) losses:
 
 
 
 
 
 
 
First quarter

 
(0.1
)
 
6.6

 
6.5

Second quarter

 
(2.3
)
 
6.8

 
4.5

Third quarter

 
(1.2
)
 
6.8

 
$
5.6

Tax (provision) benefit:
 
 
 
 
 
 
 
First quarter
(2.3
)
 
1.2

 
(2.7
)
 
(3.8
)
Second quarter
(12.2
)
 
2.3

 
(2.3
)
 
(12.2
)
Third quarter
(6.2
)
 
(0.7
)
 
(2.5
)
 
$
(9.4
)
Net change
31.7

 
(4.4
)
 
12.7

 
40.0

Balance at September 30, 2017
$
7.6

 
$
8.4

 
$
(486.0
)
 
$
(470.0
)
Balance at January 1, 2018
$
7.6

 
$
11.1

 
$
(503.3
)
 
$
(484.6
)
Unrealized gains (losses):
 
 
 
 
 
 
 
First quarter
12.4

 
2.1

 

 
14.5

Second quarter
(26.1
)
 
(0.4
)
 

 
(26.5
)
Third quarter
(2.0
)
 
(2.6
)
 

 
(4.6
)
Reclassification adjustments into income (gains) losses:
 
 
 
 
 
 
 
First quarter

 
(2.3
)
 
9.4

 
7.1

Second quarter

 
(2.7
)
 
9.1

 
6.4

Third quarter

 
(2.2
)
 
9.2

 
7.0

Tax benefit (provision):
 
 
 
 
 
 
 
First quarter

 
0.1

 
(4.0
)
 
(3.9
)
Second quarter

 
0.7

 
(1.0
)
 
(0.3
)
Third quarter

 
1.2

 
(1.7
)
 
(0.5
)
Net change
(15.7
)
 
(6.1
)
 
21.0

 
(0.8
)
Income tax reclassification adjustment
15.3

 
2.4

 
(103.6
)
 
(85.9
)
Balance at September 30, 2018
$
7.2

 
$
7.4

 
$
(585.9
)
 
$
(571.3
)

Net income and cost of goods sold included reclassification adjustments for realized gains and losses on derivative contracts from accumulated other comprehensive loss.

Net income and non-operating pension income included the amortization of prior service costs and actuarial losses from accumulated other comprehensive loss.


17


SEGMENT INFORMATION

We define segment results as income (loss) before interest expense, interest income, other operating income (expense), non-operating pension income and income taxes, and includes the operating results of non-consolidated affiliates. Consistent with the guidance in ASC 280 “Segment Reporting,” we have determined it is appropriate to include the operating results of non-consolidated affiliates in the relevant segment financial results. We have three operating segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. The three operating segments reflect the organization used by our management for purposes of allocating resources and assessing performance. Chlorine used in our Epoxy segment is transferred at cost from the Chlor Alkali Products and Vinyls segment. Sales and profits are recognized in the Chlor Alkali Products and Vinyls segment for all caustic soda generated and sold by Olin. Sales are attributed to geographic areas based on customer location.

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Sales:
($ in millions)
Chlor Alkali Products and Vinyls
$
1,051.1

 
$
881.2

 
$
3,005.9

 
$
2,583.2

Epoxy
647.3

 
489.9

 
1,794.4

 
1,549.5

Winchester
174.0

 
183.8

 
510.8

 
515.8

Total sales
$
1,872.4

 
$
1,554.9

 
$
5,311.1

 
$
4,648.5

Income (loss) before taxes:
 
 
 
 
 
 
 
Chlor Alkali Products and Vinyls
$
210.8

 
$
129.7

 
$
490.7

 
$
270.0

Epoxy
31.1

 
(1.7
)
 
33.8

 
(11.0
)
Winchester
10.3

 
17.2

 
34.1

 
61.3

Corporate/other:
 
 
 
 
 
 
 
Environmental income (expense)
110.8

 
(1.8
)
 
104.1

 
(6.2
)
Other corporate and unallocated costs
(42.7
)
 
(28.4
)
 
(124.5
)
 
(87.6
)
Restructuring charges
(3.3
)
 
(9.2
)
 
(13.7
)
 
(25.9
)
Acquisition-related costs
(0.4
)
 
(1.1
)
 
(1.0
)
 
(12.5
)
Other operating (expense) income
(1.7
)
 

 
6.4

 
(0.1
)
Interest expense
(59.2
)
 
(53.1
)
 
(184.0
)
 
(158.0
)
Interest income
0.3

 
0.4

 
1.1

 
1.0

Non-operating pension income
5.4

 
8.4

 
16.2

 
25.5

Income before taxes
$
261.4

 
$
60.4

 
$
363.2

 
$
56.5


Earnings (losses) of non-consolidated affiliates are included in the Chlor Alkali Products and Vinyls segment results consistent with management’s monitoring of the operating segments. The earnings of non-consolidated affiliates were $0.4 million and $0.5 million for the three months ended September 30, 2018 and 2017, respectively, and $1.5 million for the nine months ended September 30, 2017. The losses of non-consolidated affiliates were $20.2 million for the nine months ended September 30, 2018, which reflect a $21.5 million non-cash impairment charge recorded during the second quarter.

Environmental income (expense) for both the three and nine months ended September 30, 2018 included insurance recoveries for costs incurred and expensed in prior periods of $110.0 million.  Environmental income (expense) is included in cost of goods sold in the condensed statements of operations.

Other operating (expense) income for both the three and nine months ended September 30, 2018 included a $1.7 million loss on the sale of land. For the nine months ended September 30, 2018, we recognized an insurance recovery of $8.0 million in other operating (expense) income for a second quarter 2017 business interruption at our Freeport, TX vinyl chloride monomer facility.

 

18


 
Three Months Ended
 
September 30, 2018
 
Chlor Alkali Products and Vinyls
 
Epoxy
 
Winchester
 
Total
Primary geographical markets:
($ in millions)
     United States
$
682.8

 
$
209.1

 
$
155.5

 
$
1,047.4

     Europe
40.1

 
289.3

 
1.8

 
331.2

Other foreign
328.2

 
148.9

 
16.7

 
493.8

          Total Sales
$
1,051.1

 
$
647.3

 
$
174.0

 
$
1,872.4


 
Nine Months Ended
 
September 30, 2018
 
Chlor Alkali Products and Vinyls
 
Epoxy
 
Winchester
 
Total
Primary geographical markets:
($ in millions)
     United States
$
1,956.0

 
$
589.9

 
$
460.2

 
$
3,006.1

     Europe
136.2

 
763.0

 
7.0

 
906.2

     Other foreign
913.7

 
441.5

 
43.6

 
1,398.8

          Total Sales
$
3,005.9

 
$
1,794.4

 
$
510.8

 
$
5,311.1


 
Three Months Ended
 
September 30, 2017
 
Chlor Alkali Products and Vinyls
 
Epoxy
 
Winchester
 
Total
Primary geographical markets:
($ in millions)
     United States
$
589.5

 
$
159.8

 
$
166.5

 
$
915.8

     Europe
31.6

 
206.8

 
2.5

 
240.9

Other foreign
260.1

 
123.3

 
14.8

 
398.2

          Total Sales
$
881.2

 
$
489.9

 
$
183.8

 
$
1,554.9


 
Nine Months Ended
 
September 30, 2017
 
Chlor Alkali Products and Vinyls
 
Epoxy
 
Winchester
 
Total
Primary geographical markets:
($ in millions)
     United States
$
1,706.6

 
$
488.0

 
$
463.8

 
$
2,658.4

     Europe
92.7

 
685.1

 
8.2

 
786.0

     Other foreign
783.9

 
376.4

 
43.8

 
1,204.1

          Total Sales
$
2,583.2

 
$
1,549.5

 
$
515.8

 
$
4,648.5



19


 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Major product lines:
($ in millions)
     Chlor Alkali Products and Vinyls
 
 
 
 
 
 
 
          Caustic soda
$
539.2

 
$
442.7

 
$
1,571.1

 
$
1,272.5

          Chlorine, chlorine derivatives and other co-products
511.9

 
438.5

 
1,434.8

 
1,310.7

               Total Chlor Alkali Products and Vinyls
1,051.1

 
881.2

 
3,005.9

 
2,583.2

     Epoxy
 
 
 
 
 
 
 
          Phenolics and allylics
345.6

 
227.1

 
891.8

 
759.1

          Epoxy resins
301.7

 
262.8

 
902.6

 
790.4

               Total Epoxy
647.3

 
489.9

 
1,794.4

 
1,549.5

     Winchester
 
 
 
 
 
 
 
          Commercial
118.2

 
128.8

 
335.3

 
364.2

          Military and law enforcement
55.8

 
55.0

 
175.5

 
151.6

               Total Winchester
174.0

 
183.8

 
510.8

 
515.8

          Total Sales
$
1,872.4

 
$
1,554.9

 
$
5,311.1

 
$
4,648.5


STOCK-BASED COMPENSATION

Stock-based compensation granted includes stock options, performance stock awards, restricted stock awards and deferred directors’ compensation. Stock-based compensation expense was as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
($ in millions)
Stock-based compensation
$
4.1

 
$
3.0

 
$
15.0

 
$
14.5

Mark-to-market adjustments
(1.4
)
 
2.6

 
(5.7
)
 
3.9

Total expense
$
2.7

 
$
5.6

 
$
9.3

 
$
18.4


The fair value of each stock option granted, which typically vests ratably over three years, but not less than one year, was estimated on the date of grant, using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Grant date
2018
 
2017
Dividend yield
2.43
%
 
2.69
%
Risk-free interest rate
2.72
%
 
2.06
%
Expected volatility
32
%
 
34
%
Expected life (years)
6.0

 
6.0

Weighted-average grant fair value (per option)
$
8.89

 
$
7.78

Weighted-average exercise price
$
32.94

 
$
29.82

Shares granted
927,000

 
1,621,000


Dividend yield was based on our current dividend yield as of the option grant date. Risk-free interest rate was based on zero coupon U.S. Treasury securities rates for the expected life of the options. Expected volatility was based on our historical stock price movements, as we believe that historical experience is the best available indicator of the expected volatility. Expected life of the option grant was based on historical exercise and cancellation patterns, as we believe that historical experience is the best estimate of future exercise patterns.


20


DEBT

On January 19, 2018, Olin issued $550.0 million aggregate principal amount of 5.00% senior notes due February 1, 2030 (2030 Notes), which were registered under the Securities Act of 1933, as amended. Interest on the 2030 Notes began accruing from January 19, 2018 and is paid semi-annually beginning on August 1, 2018. Proceeds from the 2030 Notes were used to redeem $550.0 million of debt under the $1,375.0 million term loan facility (Term Loan Facility).

For the nine months ended September 30, 2018, we recognized interest expense of $2.6 million for the write-off of unamortized deferred debt issuance costs related to the redemption of $550.0 million of debt under the Term Loan Facility. For the nine months ended September 30, 2018, we paid debt issuance costs of $8.5 million for the issuance of the 2030 Notes.

On March 9, 2017, we entered into a five-year $1,975.0 million senior credit facility, which amended and restated the existing $1,850.0 million senior credit facility. Pursuant to the agreement, the aggregate principal amount under the term loan facility was increased to $1,375.0 million, and the aggregate commitments under the senior revolving credit facility were increased from $500.0 million to $600.0 million (Senior Revolving Credit Facility and, together with the Term Loan Facility, the Senior Credit Facility). At September 30, 2018, we had $596.5 million available under our $600.0 million Senior Revolving Credit Facility because we had issued $3.5 million of letters of credit. In March 2017, we drew the entire $1,375.0 million term loan and used the proceeds to redeem the remaining balance of the existing $1,350.0 million term loan facility of $1,282.5 million and a portion of the $800.0 million Sumitomo Credit Facility (Sumitomo Credit Facility). The maturity date for the Senior Credit Facility was extended from October 5, 2020 to March 9, 2022. The $600.0 million Senior Revolving Credit Facility includes a $100.0 million letter of credit subfacility. The Term Loan Facility includes amortization payable in equal quarterly installments at a rate of 5.0% per annum for the first two years, increasing to 7.5% per annum for the following year and to 10.0% per annum for the last two years. In connection with the $550.0 million prepayment of the Term Loan Facility in January 2018, the required quarterly installments of the Term Loan Facility were eliminated.

Under the Senior Credit Facility, we may select various floating rate borrowing options. The actual interest rate paid on borrowings under the Senior Credit Facility is based on a pricing grid which is dependent upon the leverage ratio as calculated under the terms of the applicable facility for the prior fiscal quarter.  The facility includes various customary restrictive covenants, including restrictions related to the ratio of debt to earnings before interest expense, taxes, depreciation and amortization (leverage ratio) and the ratio of earnings before interest expense, taxes, depreciation and amortization to interest expense (coverage ratio).  Compliance with these covenants is determined quarterly based on the operating cash flows. We were in compliance with all covenants and restrictions under all our outstanding credit agreements as of September 30, 2018, and no event of default had occurred that would permit the lenders under our outstanding credit agreements to accelerate the debt if not cured. In the future, our ability to generate sufficient operating cash flows, among other factors, will determine the amounts available to be borrowed under these facilities. As of September 30, 2018, there were no covenants or other restrictions that would have limited our ability to borrow under these facilities.

On March 9, 2017, Olin issued $500.0 million aggregate principal amount of 5.125% senior notes due September 15, 2027 (2027 Notes), which were registered under the Securities Act of 1933, as amended. Interest on the 2027 Notes began accruing from March 9, 2017 and is paid semi-annually beginning on September 15, 2017. Proceeds from the 2027 Notes were used to redeem the remaining balance of the Sumitomo Credit Facility.

For the nine months ended September 30, 2017, we recognized interest expense of $2.7 million for the write-off of unamortized deferred debt issuance costs related to the issuance of the Senior Credit Facility and the repayment of the Sumitomo Credit Facility. For the nine months ended September 30, 2017, we paid debt issuance costs of $11.2 million relating to the Senior Credit Facility and the 2027 Notes.


21


CONTRIBUTING EMPLOYEE OWNERSHIP PLAN

The Contributing Employee Ownership Plan (CEOP) is a defined contribution plan available to essentially all domestic employees.  We provide a contribution to an individual retirement contribution account maintained with the CEOP equal to an amount of between 5.0% and 7.5% of the employee’s eligible compensation.  The defined contribution plan expense for the three months ended September 30, 2018 and 2017 was $6.7 million and $7.0 million, respectively, and for the nine months ended September 30, 2018 and 2017 was $22.0 million and $22.4 million, respectively.

Company matching contributions are invested in the same investment allocation as the employee’s contribution.  Our matching contributions for eligible employees for the three months ended September 30, 2018 and 2017 was $3.9 million and $3.0 million, respectively, and for the nine months ended September 30, 2018 and 2017 was $11.3 million and $8.7 million, respectively.

PENSION PLANS AND RETIREMENT BENEFITS

We sponsor domestic and foreign defined benefit pension plans for eligible employees and retirees. Most of our domestic employees participate in defined contribution plans.  However, a portion of our bargaining hourly employees continue to participate in our domestic qualified defined benefit pension plans under a flat-benefit formula. Our funding policy for the qualified defined benefit pension plans is consistent with the requirements of federal laws and regulations. Our foreign subsidiaries maintain pension and other benefit plans, which are consistent with local statutory practices.

Our domestic qualified defined benefit pension plan provides that if, within three years following a change of control of Olin, any corporate action is taken or filing made in contemplation of, among other things, a plan termination or merger or other transfer of assets or liabilities of the plan, and such termination, merger, or transfer thereafter takes place, plan benefits would automatically be increased for affected participants (and retired participants) to absorb any plan surplus (subject to applicable collective bargaining requirements).


22


We also provide certain postretirement healthcare (medical) and life insurance benefits for eligible active and retired domestic employees. The healthcare plans are contributory with participants’ contributions adjusted annually based on medical rates of inflation and plan experience.

 
Pension Benefits
 
Other Postretirement
Benefits
 
Three Months Ended September 30,
 
Three Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Components of Net Periodic Benefit (Income) Cost
($ in millions)
Service cost
$
3.3

 
$
2.4

 
$
0.3

 
$
0.3

Interest cost
21.5

 
21.8

 
0.3

 
0.3

Expected return on plans’ assets
(36.5
)
 
(37.3
)
 

 

Amortization of prior service cost

 

 

 
(0.6
)
Recognized actuarial loss
8.6

 
6.8

 
0.6

 
0.6

Net periodic benefit (income) cost
$
(3.1
)
 
$
(6.3
)
 
$
1.2

 
$
0.6


 
Pension Benefits

Other Postretirement
Benefits
 
Nine Months Ended September 30,