UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number 1-1070
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(314 ) 480-1400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading symbol: | Name of each exchange on which registered: | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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 ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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 ☒
As of June 30, 2024, 117,541,168 shares of the registrant’s common stock were outstanding.
1
| TABLE OF CONTENTS FOR FORM 10-Q | Page | |||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| 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)
| June 30, 2024 | December 31, 2023 | June 30, 2023 | |||||||||||||||
| Assets | |||||||||||||||||
| Current assets: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Receivables, net | |||||||||||||||||
| Income taxes receivable | |||||||||||||||||
| Inventories, net | |||||||||||||||||
| Other current assets | |||||||||||||||||
| Total current assets | |||||||||||||||||
| Property, plant and equipment (less accumulated depreciation of $5,009.8, $4,826.4 and $4,636.9) | |||||||||||||||||
| Operating lease assets, net | |||||||||||||||||
| Deferred income taxes | |||||||||||||||||
| Other assets | |||||||||||||||||
| Intangible assets, net | |||||||||||||||||
| Goodwill | |||||||||||||||||
| Total assets | $ | $ | $ | ||||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||
| Current liabilities: | |||||||||||||||||
| Current installments of long-term debt | $ | $ | $ | ||||||||||||||
| Accounts payable | |||||||||||||||||
| Income taxes payable | |||||||||||||||||
| Current operating lease liabilities | |||||||||||||||||
| Accrued liabilities | |||||||||||||||||
| Total current liabilities | |||||||||||||||||
| Long-term debt | |||||||||||||||||
| Operating lease liabilities | |||||||||||||||||
| Accrued pension liability | |||||||||||||||||
| Deferred income taxes | |||||||||||||||||
| Other liabilities | |||||||||||||||||
| Total liabilities | |||||||||||||||||
| Commitments and contingencies | |||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||
| Common stock, $1.00 par value per share: authorized, 240.0 shares; issued and outstanding, 117.5, 120.2 and 125.8 shares | |||||||||||||||||
| Additional paid-in capital | |||||||||||||||||
| Accumulated other comprehensive loss | ( | ( | ( | ||||||||||||||
| Retained earnings | |||||||||||||||||
| Olin Corporation’s shareholders’ equity | |||||||||||||||||
| Noncontrolling interests | |||||||||||||||||
| Total equity | |||||||||||||||||
| Total liabilities and equity | $ | $ | $ | ||||||||||||||
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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Sales | $ | $ | $ | $ | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Selling and administrative | |||||||||||||||||||||||
| Restructuring charges | |||||||||||||||||||||||
| Other operating income | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Non-operating pension income | |||||||||||||||||||||||
| Income before taxes | |||||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Net loss attributable to noncontrolling interests | ( | ( | ( | ( | |||||||||||||||||||
| Net income attributable to Olin Corporation | $ | $ | $ | $ | |||||||||||||||||||
| Net income attributable to Olin Corporation per common share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
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
($ in millions)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation | ( | ( | ( | ( | |||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||
| Pension and postretirement benefits | |||||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | ( | ||||||||||||||||||||||
| Comprehensive income | |||||||||||||||||||||||
| Comprehensive loss attributable to noncontrolling interests | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive income attributable to Olin Corporation | $ | $ | $ | $ | |||||||||||||||||||
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)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Common stock repurchased and retired | ( | ( | ( | ( | |||||||||||||||||||
| Common stock issued for: | |||||||||||||||||||||||
| Stock options exercised | |||||||||||||||||||||||
| Other transactions | |||||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||
| Additional Paid-In Capital | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Common stock repurchased and retired | ( | ( | ( | ( | |||||||||||||||||||
| Common stock issued for: | |||||||||||||||||||||||
| Stock options exercised | |||||||||||||||||||||||
| Other transactions | ( | ||||||||||||||||||||||
| Stock-based compensation | ( | ||||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||
| Accumulated Other Comprehensive Loss | |||||||||||||||||||||||
| Balance at beginning of period | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) | ( | ||||||||||||||||||||||
| Balance at end of period | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Retained Earnings | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Common stock dividends paid | ( | ( | ( | ( | |||||||||||||||||||
| Common stock repurchased and retired | ( | ( | |||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||
| Olin Corporation’s Shareholders’ Equity | $ | $ | $ | $ | |||||||||||||||||||
| Noncontrolling Interests | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Net loss | ( | ( | ( | ( | |||||||||||||||||||
| Contributions from noncontrolling interests | |||||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||
| Total Equity | $ | $ | $ | $ | |||||||||||||||||||
| Dividends declared per share of common stock | $ | $ | $ | $ | |||||||||||||||||||
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)
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating Activities | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash and cash equivalents provided by (used for) operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Gains on disposition of property, plant and equipment | ( | ||||||||||
| Stock-based compensation | |||||||||||
| Write-off of equipment and facility included in restructuring charges | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Qualified pension plan contributions | ( | ( | |||||||||
| Qualified pension plan income | ( | ( | |||||||||
| Change in assets and liabilities: | |||||||||||
| Receivables | ( | ||||||||||
| Income taxes receivable/payable | ( | ||||||||||
| Inventories | ( | ( | |||||||||
| Other current assets | ( | ( | |||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||
| Other assets | ( | ( | |||||||||
| Other noncurrent liabilities | |||||||||||
| Other operating activities | ( | ||||||||||
| Net operating activities | |||||||||||
| Investing Activities | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Payments under other long-term supply contracts | ( | ( | |||||||||
| Proceeds from disposition of property, plant and equipment | |||||||||||
| Other investing activities | ( | ( | |||||||||
| Net investing activities | ( | ( | |||||||||
| Financing Activities | |||||||||||
| Long-term debt: | |||||||||||
| Borrowings | |||||||||||
| Repayments | ( | ( | |||||||||
| Common stock repurchased and retired | ( | ( | |||||||||
| Stock options exercised | |||||||||||
| Employee taxes paid for share-based payment arrangements | ( | ||||||||||
| Dividends paid | ( | ( | |||||||||
| Contributions received from noncontrolling interests | |||||||||||
| Net financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents, beginning of year | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
| Cash paid for interest and income taxes: | |||||||||||
| Interest, net | $ | $ | |||||||||
| Income taxes, net of refunds | |||||||||||
| Non-cash investing activities: | |||||||||||
| Decrease in capital expenditures included in accounts payable and accrued liabilities | |||||||||||
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)
NOTE 1. DESCRIPTION OF BUSINESS
Olin Corporation (Olin) is a Virginia corporation, incorporated in 1892, having its principal executive offices in Clayton, MO. We are a leading vertically integrated global manufacturer and distributor of chemical products and a leading U.S. manufacturer of ammunition. Our operations are concentrated in three business segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. All of our business segments are capital-intensive manufacturing businesses. The Chlor Alkali Products and Vinyls segment manufactures and sells chlorine and caustic soda, ethylene dichloride and vinyl chloride monomer, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, perchloroethylene, hydrochloric acid, hydrogen, bleach products and potassium hydroxide. The Epoxy segment produces and sells a full range of epoxy materials and precursors, including aromatics (acetone and phenol), allyl chloride, epichlorohydrin, liquid epoxy resins, solid epoxy resins and systems and growth products such as converted epoxy resins and additives. The Winchester segment produces and sells sporting ammunition, reloading components, small caliber military ammunition and components, industrial cartridges and clay targets.
On January 10, 2023, Blue Water Alliance (BWA), our joint venture with Mitsui & Co., Ltd. (Mitsui), began operations. BWA is an independent global trader of Electrochemical Unit (ECU)-based derivatives, focused on globally traded caustic soda and ethylene dichloride. Olin holds 51 % interest and exercises control in BWA and the joint venture is consolidated in our consolidated financial statements in our Chlor Alkali Products and Vinyls segment, with Mitsui’s 49 % interest in BWA classified as noncontrolling interest. All intercompany accounts and transactions are eliminated in consolidation.
We have prepared the condensed financial statements included herein, without audit, pursuant to the rules and regulations of the United States (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, 2023.
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
In March 2024, the SEC issued SEC Release No. 33-11042, Enhancement and Standardization of Climate-Related Disclosures for Investors, to enhance and standardize the climate-related disclosures provided by public companies. The final rule will require the disclosure of greenhouse gas emissions, including Scope 1 and Scope 2 emissions, which will be subject to third-party assurance, as well as climate-related targets and goals, and how the Board of Directors and management oversee climate-related risks. Within the notes to financial statements, the final rule requires disclosure of expenditures recognized, subject to certain thresholds, attributable to severe weather events. The final rule follows a compliance phase-in timeline, with the first requirements required to be adopted with our fiscal year ending December 31, 2025, followed in later years by greenhouse gas-related requirements. On April 4, 2024, the SEC voluntarily stayed the implementation of these disclosure requirements; however, we are currently evaluating the impact of the final rule on our disclosures.
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024, with the option to early adopt at any time before the effective date. ASU 2023-09 allows for adoption on a prospective or retrospective basis. We will adopt this standard beginning with our fiscal year ending December 31, 2025. We are currently evaluating the impact of the standard on our consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures. ASU 2023-07 will improve reportable segment disclosure requirements, primarily through enhanced segment expense disclosures on an interim and annual basis. The update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with the option to early adopt at any time before the effective date. ASU 2023-07 requires adoption on a retrospective basis. We will adopt this standard beginning with our fiscal year ending December 31, 2024 and for interim periods beginning with our first quarter fiscal year 2025. We are currently evaluating the impact of the standard on our consolidated financial statements and disclosures.
8
NOTE 3. ACQUISITIONS
On October 1, 2023, Olin acquired the assets of White Flyer Targets, LLC (White Flyer) from Reagent Diversified Holdings, Inc. for $63.5 million. The acquisition was financed with cash on hand. White Flyer designs, manufactures and sells recreational trap, skeet, international and sporting clay targets and has been included in Olin’s Winchester segment. We recorded the aggregate excess purchase price over identifiable net tangible and intangible assets acquired and liabilities assumed, which included a final allocation of $2.4 million of goodwill allocated to our Winchester segment and $4.5 million of intangible assets subject to amortization. The final total assets acquired, excluding goodwill and intangibles, and liabilities assumed amounted to $66.6 million and $10.0 million, respectively. The acquisition is not material, and therefore, supplemental pro forma financial information is not provided.
NOTE 4. RESTRUCTURING CHARGES
As a result of weak global resin demand and higher cost structures within the European region, we began a review of our global Epoxy asset footprint to optimize the most productive and cost-effective assets to support our strategic operating model. As part of this review, we announced operational cessations in the fourth quarter of 2022 and the first half of 2023 (collectively, Epoxy Optimization Plan).
On June 20, 2023, we announced we had made the decision to cease all remaining operations at our Gumi, South Korea facility, reduce epoxy resin capacity at our Freeport, TX facility, and reduce our sales and support staffing across Asia. These actions were substantially completed by December 31, 2023. On March 21, 2023, we announced we had made the decision to cease operations at our cumene facility in Terneuzen, Netherlands and solid epoxy resin production at our facilities in Gumi, South Korea and Guaruja, Brazil. The closures were completed in the first quarter 2023. During the fourth quarter of 2022, we committed to and completed a plan to close down one of our bisphenol production lines at our Stade, Germany site. We expect to incur additional restructuring charges through 2025 of approximately $15 million related to these actions.
During 2021, we announced that we had made the decision to permanently close our diaphragm-grade chlor alkali capacity, representing 400,000 tons, at our McIntosh, AL facility (McIntosh Plan). The closure was completed during the third quarter of 2022. We expect to incur additional restructuring charges through 2027 of approximately $20 million related to these actions.
On January 18, 2021, we announced we had made the decision to permanently close our trichloroethylene and anhydrous hydrogen chloride liquefaction facilities in Freeport, TX (collectively, Freeport 2021 Plan), which were completed in the fourth quarter of 2021. We expect to incur additional restructuring charges through 2025 of approximately $5 million related to these actions.
On December 11, 2019, we announced that we had made the decision to permanently close a chlor alkali plant with a capacity of 230,000 tons and our vinylidene chloride (VDC) production facility, both in Freeport, TX (collectively, Freeport 2019 Plan). The VDC facility and related chlor alkali plant were closed during the fourth quarter of 2020 and second quarter of 2021, respectively. We expect to incur additional restructuring charges through 2026 of approximately $15 million related to these actions.
Pretax restructuring charges related to these actions include facility exit costs, lease and other contract termination costs, employee severance and related benefits costs and the write-off of equipment and facilities. Pretax restructuring charges, by plan, for the three and six months ended June 30, 2024 and 2023, were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Pretax Restructuring Charges | ($ in millions) | ||||||||||||||||||||||
| Epoxy Optimization Plan | $ | $ | $ | $ | |||||||||||||||||||
| McIntosh Plan | |||||||||||||||||||||||
Freeport 2021 Plan | |||||||||||||||||||||||
| Freeport 2019 Plan | |||||||||||||||||||||||
| Total restructuring charges | $ | $ | $ | $ | |||||||||||||||||||
9
The following table summarizes the 2024 and 2023 activities by major component of these restructuring actions and the remaining balances of accrued restructuring costs as of June 30, 2024 and 2023:
| Employee Severance and Related Benefit Costs | Lease and Other Contract Termination Costs | Facility Exit Costs | Write-off of Equipment and Facility | Total | |||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Restructuring charges: | |||||||||||||||||||||||||||||
| First quarter | |||||||||||||||||||||||||||||
| Second quarter | |||||||||||||||||||||||||||||
| Amounts utilized | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Restructuring charges: | |||||||||||||||||||||||||||||
| First quarter | |||||||||||||||||||||||||||||
| Second quarter | |||||||||||||||||||||||||||||
| Amounts utilized | ( | ( | ( | ( | |||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
The following table summarizes the cumulative restructuring charges of these restructuring actions by major component through June 30, 2024:
| Chlor Alkali Products and Vinyls | Epoxy | Total | |||||||||||||||||||||||||||
| McIntosh Plan | Freeport 2021 Plan | Freeport 2019 Plan | Epoxy Optimization Plan | ||||||||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||||||||
| Write-off of equipment and facility | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Employee severance and related benefit costs | |||||||||||||||||||||||||||||
| Facility exit costs | |||||||||||||||||||||||||||||
| Lease and other contract termination costs | |||||||||||||||||||||||||||||
| Total cumulative restructuring charges | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
As of June 30, 2024, we have incurred cash expenditures of $112.2 million and non-cash charges of $79.9 million related to these restructuring actions. The remaining balance of $16.2 million is expected to be paid out through 2027.
NOTE 5. EARNINGS PER SHARE
Basic and diluted net income attributable to Olin Corporation per share are computed by dividing net income attributable to Olin Corporation by the weighted-average number of common shares outstanding. Diluted net income attributable to Olin Corporation per share reflects the dilutive effect of stock-based compensation.
10
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Computation of Net Income per Share | ($ in millions, except per share data) | ||||||||||||||||||||||
| Net income attributable to Olin Corporation | $ | $ | $ | $ | |||||||||||||||||||
| Basic shares | |||||||||||||||||||||||
| Basic net income attributable to Olin Corporation per share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted shares: | |||||||||||||||||||||||
| Basic shares | |||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||
| Diluted shares | |||||||||||||||||||||||
| Diluted net income attributable to Olin Corporation per share | $ | $ | $ | $ | |||||||||||||||||||
NOTE 6. ACCOUNTS RECEIVABLES
We maintain a $425.0 million Receivables Financing Agreement (Receivables Financing Agreement) that is scheduled to mature on October 14, 2025. 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 net leverage ratio covenant that is contained in the $1,550.0 million Senior Credit Facility. As of June 30, 2024, December 31, 2023 and June 30, 2023, we had $298.8 million, $328.5 million and $234.8 million, respectively, drawn under the agreement. As of June 30, 2024, $429.8 million of our trade receivables were pledged as collateral and we had $0.5 million additional borrowing capacity under the Receivables Financing Agreement, which was limited by our borrowing base.
Olin also has trade accounts receivable factoring arrangements (AR Facilities) and pursuant to the terms of the AR Facilities, certain of our domestic subsidiaries may sell their accounts receivable up to a maximum of $175.5 million and certain of our foreign subsidiaries may sell their accounts receivable up to a maximum of €22.0 million. We will continue to service the outstanding accounts sold. These receivables qualify for sales treatment under ASC 860 “Transfers and Servicing” and, accordingly, the proceeds are included in net cash provided by operating activities in the condensed statements of cash flows.
The following table summarizes the AR Facilities activity:
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| AR Facilities | ($ in millions) | ||||||||||
| Balance at beginning of year | $ | $ | |||||||||
| Gross receivables sold | |||||||||||
| Payments received from customers on sold accounts | ( | ( | |||||||||
| Balance at end of period | $ | $ | |||||||||
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 $1.3 million for the three months ended June 30, 2024 and 2023, respectively, and $2.1 million and $2.5 million for the six months ended June 30, 2024 and 2023, respectively. The agreements are without recourse and therefore no recourse liability had been recorded as of June 30, 2024.
Our condensed balance sheets included an allowance for doubtful accounts receivables of $12.6 million, $13.1 million and $13.0 million and other receivables of $91.1 million, $85.3 million and $81.7 million at June 30, 2024, December 31, 2023 and June 30, 2023, respectively, which were included in receivables, net.
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NOTE 7. INVENTORIES
Inventories consisted of the following:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | |||||||||||||||
| Inventories | ($ in millions) | ||||||||||||||||
| Supplies | $ | $ | $ | ||||||||||||||
| Raw materials | |||||||||||||||||
| Work in process | |||||||||||||||||
| Finished goods | |||||||||||||||||
| Inventories excluding LIFO reserve | |||||||||||||||||
| LIFO reserve | ( | ( | ( | ||||||||||||||
| Inventories, net | $ | $ | $ | ||||||||||||||
Inventories under the LIFO method are based on annual estimates of quantities and costs as of year-end; therefore, the condensed financial statements at June 30, 2024 reflect certain estimates relating to inventory quantities and costs at December 31, 2024. The replacement cost of our inventories would have been approximately $166.1 million, $133.7 million and $173.8 million higher than reported at June 30, 2024, December 31, 2023 and June 30, 2023, respectively.
NOTE 8. OTHER ASSETS
Included in other assets were the following:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | |||||||||||||||
| Other Assets | ($ in millions) | ||||||||||||||||
| Supply contracts | $ | $ | $ | ||||||||||||||
| Other | |||||||||||||||||
| Other assets | $ | $ | $ | ||||||||||||||
For the six months ended June 30, 2024 and 2023, payments of $46.7 million and $29.6 million, respectively, were made under other long-term supply contracts for energy modernization projects in the U.S. Gulf Coast.
Amortization expense of $18.3 million and $17.8 million for the three months ended June 30, 2024 and 2023, respectively, and amortization expense of $36.6 million and $35.6 million for the six months ended June 30, 2024 and 2023, respectively, was recognized within cost of goods sold related to our long-term supply contracts and is reflected in depreciation and amortization on the condensed statements of cash flows.
NOTE 9. GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying value of goodwill were as follows:
| Chlor Alkali Products and Vinyls | Epoxy | Winchester | Total | ||||||||||||||||||||
| Goodwill | ($ in millions) | ||||||||||||||||||||||
Balance at January 1, 2023(1) | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency translation adjustment | |||||||||||||||||||||||
Balance at June 30, 2023(1) | $ | $ | $ | $ | |||||||||||||||||||
Balance at January 1, 2024(1) | $ | $ | $ | $ | |||||||||||||||||||
| Acquisition activity | ( | ( | |||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ( | ||||||||||||||||||||
Balance at June 30, 2024(1) | $ | $ | $ | $ | |||||||||||||||||||
(1)Includes cumulative goodwill impairment of $557.6 million and $142.2 million in Chlor Alkali Products and Vinyls and Epoxy, respectively.
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Intangible assets consisted of the following:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Amount | Accumulated Amortization | Net | Gross Amount | Accumulated Amortization | Net | Gross Amount | Accumulated Amortization | Net | |||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets | ($ in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Customers, customer contracts and relationships | $ | $ | ( | $ | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
| Trade names | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquired technology | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
NOTE 10. DEBT
Long-term loans, notes and other financing obligations, consisted of the following:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | |||||||||||||||
| Financing Obligations | ($ in millions) | ||||||||||||||||
| Variable-rate Term Loan Facility, due 2027 | $ | $ | $ | ||||||||||||||
| Variable-rate Senior Revolving Credit Facility, due 2027 | |||||||||||||||||
| Variable-rate Recovery Zone bonds, due 2024-2035 | |||||||||||||||||
| Variable-rate Go Zone bonds, due 2024 | |||||||||||||||||
| Variable-rate industrial development and environmental improvement obligations, due 2025 | |||||||||||||||||
| 9.50% senior notes, due 2025 | |||||||||||||||||
| 5.625% senior notes, due 2029 | |||||||||||||||||
| 5.125% senior notes, due 2027 | |||||||||||||||||
| 5.00% senior notes, due 2030 | |||||||||||||||||
| Receivables Financing Agreement (See Note 6) | |||||||||||||||||
| Finance lease obligations | |||||||||||||||||
| Other: | |||||||||||||||||
| Deferred debt issuance costs | ( | ( | ( | ||||||||||||||
| Unamortized bond original issue discount | ( | ( | ( | ||||||||||||||
| Total debt | |||||||||||||||||
| Amounts due within one year | |||||||||||||||||
| Total long-term debt | $ | $ | $ | ||||||||||||||
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During the six months ended June 30, 2024 and 2023, activity of our outstanding debt included:
| Long-term Debt Borrowings (Repayments) for the Six Months Ended | ||||||||||||||
| June 30, 2024 | June 30, 2023 | |||||||||||||
| Debt Instruments | ($ in millions) | |||||||||||||
| Borrowings | ||||||||||||||
| Senior Revolving Credit Facility | $ | $ | ||||||||||||
| Receivables Financing Agreement | ||||||||||||||
| Total borrowings | ||||||||||||||
| Repayments | ||||||||||||||
| Variable-rate Go Zone bonds, due 2024 | ( | |||||||||||||
| Variable-rate Recovery Zone bonds, due 2024 | ( | |||||||||||||
| Term Loan Facility | ( | ( | ||||||||||||
| Senior Revolving Credit Facility | ( | |||||||||||||
| Receivables Financing Agreement | ( | ( | ||||||||||||
| Finance leases | ( | |||||||||||||
| Total repayments | ( | ( | ||||||||||||
| Long-term debt borrowings, net | $ | $ | ||||||||||||
Senior Credit Facility
We maintain a $1,550.0 million senior credit facility (Senior Credit Facility) which includes a senior term loan facility with aggregate commitments of $350.0 million (Term Loan Facility) and a senior revolving credit facility with aggregate commitments of $1,200.0 million (Senior Revolving Credit Facility). The Term Loan Facility was fully drawn on the closing date with the proceeds of the Term Loan Facility used to refinance the loans and commitments outstanding under the existing facility. The Term Loan Facility requires principal amortization payments which began on March 31, 2023, at a rate of 0.625 % per quarter through the end of 2024, increasing to 1.250 % per quarter thereafter until maturity. The maturity date for the Senior Credit Facility is October 11, 2027.
The Senior Revolving Credit Facility includes a $100.0 million letter of credit subfacility. At June 30, 2024, we had $788.6 million available under our $1,200.0 million Senior Revolving Credit Facility because we had $411.0 million borrowed under the facility and issued $0.4 million of letters of credit. During the second quarter of 2024, we utilized our Senior Revolving Credit Facility to repay $50.0 million of Go Zone and $20.0 million of Recovery Zone tax-exempt variable-rate bonds.
We were in compliance with all covenants and restrictions under all our outstanding credit agreements as of June 30, 2024, 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 a result of our restrictive covenant related to the net leverage ratio, the maximum additional borrowings available to us could be limited in the future. The limitation, if an amendment or waiver from our lenders is not obtained, could restrict our ability to borrow the maximum amounts available under the Senior Revolving Credit Facility and the Receivables Financing Agreement. As of June 30, 2024, there were no covenants or other restrictions that limited our ability to borrow.
NOTE 11. 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
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automatically be increased for affected participants (and retired participants) to absorb any plan surplus (subject to applicable collective bargaining requirements).
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 June 30, | Three Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Components of Net Periodic Benefit (Income) Cost | ($ in millions) | ||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plans’ assets | ( | ( | |||||||||||||||||||||
| Amortization of prior service cost | ( | ( | |||||||||||||||||||||
| Recognized actuarial loss | |||||||||||||||||||||||
| Net periodic benefit (income) cost | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Pension Benefits | Other Postretirement Benefits | ||||||||||||||||||||||
| Six Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Components of Net Periodic Benefit (Income) Cost | ($ in millions) | ||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plans’ assets | ( | ( | |||||||||||||||||||||
| Amortization of prior service cost | ( | ( | |||||||||||||||||||||
| Recognized actuarial loss | |||||||||||||||||||||||
| Net periodic benefit (income) cost | $ | ( | $ | ( | $ | $ | |||||||||||||||||
We made cash contributions to our international qualified defined benefit pension plans of $0.8 million and $1.5 million for the six months ended June 30, 2024 and 2023, respectively.
NOTE 12. INCOME TAXES
The effective tax rate for the three months ended June 30, 2024 included a net $0.6 million tax benefit, primarily associated with stock-based compensation and U.S. Federal tax credits purchased at a discount, partially offset by an expense from prior year tax positions and a change in tax contingencies. Excluding these items, the effective tax rate for the three months ended June 30, 2024 of 25.8 % was higher than the 21.0 % U.S. federal statutory rate primarily due to state income tax and foreign income inclusions, partially offset by favorable permanent salt depletion deductions. The effective tax rate for the three months ended June 30, 2023 included a net $12.0 million tax benefit, primarily associated with stock-based compensation, and prior year tax positions, partially offset by an expense from a net increase in the valuation allowance related to deferred tax assets in foreign jurisdictions and from a change in tax contingencies. Excluding these items, the effective tax rate for the three months ended June 30, 2023 of 25.4 % was higher than the 21.0 % U.S. federal statutory rate primarily due to state income tax and an increase in the valuation allowance related to losses in foreign jurisdictions, partially offset by favorable permanent salt depletion deductions.
The effective tax rate for the six months ended June 30, 2024 included a net $3.3 million tax benefit, primarily associated with stock-based compensation and U.S. Federal tax credits purchased at a discount, partially offset by an expense from prior year tax positions and a change in tax contingencies. Excluding these items, the effective tax rate for the six months ended June 30, 2024 of 25.6 % was higher than the 21.0 % U.S. federal statutory rate primarily due to state income tax and foreign income inclusions, partially offset by favorable permanent salt depletion deductions. The effective tax rate for the six months ended June 30, 2023 included a net $17.2 million tax benefit, primarily associated with stock-based compensation, remeasurement of deferred taxes due to a decrease in our state effective tax rates and prior year tax positions, partially offset by an expense from a net increase in the valuation allowance related to deferred tax assets in foreign
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jurisdictions and from a change in tax contingencies. Excluding these items, the effective tax rate for the six months ended June 30, 2023 of 24.5 % was higher than the 21.0 % U.S. federal statutory rate primarily due to state income tax and an increase in the valuation allowance related to losses in foreign jurisdictions, partially offset by favorable permanent salt depletion deductions.
In August 2022, the Inflation Reduction Act (the "IRA") was enacted and provides various beneficial credits for energy efficient related manufacturing, transportation and fuels, hydrogen/carbon recapture and renewable energy, which we are evaluating in regard to planned projects. We will continue to monitor the expected impacts of any new guidance on our filing positions and will record the impacts as discrete income tax expense adjustments in the period the guidance is finalized or becomes effective.
As of June 30, 2024, we had $51.2 million of gross unrecognized tax benefits, which would have a net $51.4 million impact on the effective tax rate, if recognized. As of June 30, 2023, we had $58.7 million of gross unrecognized tax benefits, of which $56.8 million would have impacted the effective tax rate, if recognized. The amounts of unrecognized tax benefits were as follows:
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Unrecognized Tax Benefits | ($ in millions) | ||||||||||
| Balance at beginning of year | $ | $ | |||||||||
| Increases for prior year tax positions | |||||||||||
| Decreases for prior year tax positions | ( | ( | |||||||||
| Increases for current year tax positions | |||||||||||
| Decreases due to tax settlements | ( | ||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
| Balance at end of period | $ | $ | |||||||||
As of June 30, 2024, we believe it is reasonably possible that our total amount of unrecognized tax benefits will decrease by approximately $36.3 million over the next twelve months. The anticipated reduction primarily relates to expected settlements with tax authorities and the expiration of federal, state and foreign statutes of limitation.
We operate globally and file income tax returns in numerous jurisdictions. Our tax returns are subject to examination by various federal, state and local tax authorities. Additionally, examinations are ongoing in various states and foreign jurisdictions. We believe we have adequately provided for all tax positions; however, amounts asserted by taxing authorities could be greater than our accrued position.
For our primary tax jurisdictions, the tax years that remain subject to examination are as follows:
| Tax Years | |||||
| U.S. federal income tax | 2020 - 2023 | ||||
| U.S. state income tax | 2012 - 2023 | ||||
| Canadian federal income tax | 2017 - 2023 | ||||
| Brazil | 2017 - 2023 | ||||
| Germany | 2015 - 2023 | ||||
| China | 2014 - 2023 | ||||
| The Netherlands | 2017 - 2023 | ||||
NOTE 13. 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 (Company Contributions) maintained with the CEOP equal to an amount between 5.0 % and 7.5 % of the employee’s eligible compensation. Employees generally vest in the value of the Company Contribution according to a schedule based on service. Participants vest 50 % after 2 years of service and 100 % after 3 years of service.
We also match a percentage of our employees CEOP contributions (Company Match), which are invested in the same investment allocation as the employee’s contributions. Employees immediately vest in company matching contributions.
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Our contributions to the CEOP were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| CEOP Expense | ($ in millions) | ||||||||||||||||||||||
| Company Contribution | $ | $ | $ | $ | |||||||||||||||||||
| Company Match | |||||||||||||||||||||||
| Total expense | $ | $ | $ | $ | |||||||||||||||||||
NOTE 14. STOCK-BASED COMPENSATION
Stock-based compensation granted includes stock options, performance share awards, restricted stock awards and deferred directors’ compensation. Stock-based compensation expense was as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Stock Compensation Expense | ($ in millions) | ||||||||||||||||||||||
| Stock-based compensation | $ | $ | $ | $ | |||||||||||||||||||
| Mark-to-market adjustments | ( | ( | ( | ( | |||||||||||||||||||
| Total expense | $ | $ | $ | $ | |||||||||||||||||||
Stock Options
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 Assumptions - Stock Options | 2024 | 2023 | |||||||||
| Dividend yield | % | % | |||||||||
| Risk-free interest rate | % | % | |||||||||
| Expected volatility of Olin common stock | % | % | |||||||||
| Expected life (years) | |||||||||||
| Weighted-average grant fair value (per option) | $ | $ | |||||||||
| Weighted-average exercise price | $ | $ | |||||||||
| Stock options granted | |||||||||||
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 for future exercise patterns.
Performance Shares
Performance share awards are denominated in shares of our stock and are paid half in cash and half in stock. Payouts for performance share awards are based on two criteria: (1) 50 % of the award is based on Olin’s total shareholder returns (TSR) over the applicable three -year performance cycle in relation to the TSR over the same period among a portfolio of public companies which are selected in concert with outside compensation consultants and (2) 50 % of the award is based on Olin’s net income over the applicable three -year performance cycle in relation to the net income goal for such period as set by the Compensation Committee of Olin’s Board of Directors. The expense associated with performance shares is recorded based on our estimate of our performance relative to the respective target. If an employee leaves the company before the end of the performance cycle, the performance shares may be prorated based on the number of months of the performance cycle worked and are settled in cash instead of half in cash and half in stock when the three-year performance cycle is completed.
The fair value of each performance share award based on net income was estimated on the date of grant, using the current stock price. The fair value of each performance share award based on TSR was estimated on the date of grant, using a Monte Carlo simulation model with the following weighted average assumptions:
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| Grant Date Assumptions - Performance Shares | 2024 | 2023 | |||||||||
| Risk-free interest rate | % | % | |||||||||
| Expected volatility of Olin common stock | % | % | |||||||||
| Expected average volatility of peer companies | % | % | |||||||||
| Average correlation coefficient of peer companies | |||||||||||
| Expected life (years) | |||||||||||
| Grant date fair value (TSR-based award) | $ | $ | |||||||||
| Grant date fair value (net income-based award) | $ | $ | |||||||||
| Performance share awards granted | |||||||||||
The risk-free interest rate was based on zero coupon U.S. Treasury securities rates for the expected life of the performance share awards. The expected volatility of Olin common stock and peer companies was based on historical stock price movements, as we believe that historical experience is the best available indicator of the expected volatility. The average correlation coefficient of peer companies was determined based on historical trends of Olin’s common stock price compared to the peer companies. Expected life of the performance share award grant was based on historical exercise and cancellation patterns, as we believe that historical experience is the best estimate of future exercise patterns.
NOTE 15. SHAREHOLDERS’ EQUITY
On July 28, 2022, our Board of Directors authorized a share repurchase program for the purchase of shares of common stock at an aggregate price of up to $2.0 billion (the 2022 Repurchase Authorization). This program will terminate upon the purchase of $2.0 billion of common stock.
For the six months ended June 30, 2024 and 2023, 3.9 million and 7.1 million shares, respectively, of common stock were repurchased and retired at a total value of $211.4 million and $393.0 million, respectively. As of June 30, 2024, 23.2 million shares of common stock have been repurchased and retired at a total value of $1,213.0 million under the 2022 Repurchase Authorization program, and $787.0 million of common stock remained authorized to be repurchased under the program.
We issued 0.8 million and 0.4 million shares representing stock options exercised for the six months ended June 30, 2024 and 2023, respectively, with a total value of $21.7 million and $11.9 million, respectively.