ACQUISITION

12 Months Ended

Dec. 31, 2011

ACQUISITION [Abstract]

ACQUISITION

ACQUISITION

On February 28, 2011, we acquired PolyOne's 50% interest in SunBelt for $132.3 million in cash plus the assumption of a PolyOne guarantee related to the SunBelt Notes.  With this acquisition, Olin now owns 100% of SunBelt.  The SunBelt chlor alkali plant, which is located within our McIntosh, AL facility, has approximately 350,000 tons of membrane technology capacity.  We also agreed to a three year earn out, which has no guaranteed minimum or maximum, based on the performance of SunBelt.  In addition, during the second quarter of 2011, we remitted to PolyOne $6.0 million, which represented 50% of distributable cash generated by SunBelt from January 1, 2011 through February 28, 2011.

Pursuant to a note purchase agreement dated December 22, 1997, SunBelt sold $97.5 million of Guaranteed Senior Secured Notes due 2017, Series O, and $97.5 million of Guaranteed Senior Secured Notes due 2017, Series G.  The SunBelt Notes bear interest at a rate of 7.23% per annum, payable semi-annually in arrears on each June 22 and December 22.  Beginning on December 22, 2002 and each year through 2017, SunBelt is required to repay $12.2 million of the SunBelt Notes, of which $6.1 million is attributable to the Series O Notes and of which $6.1 million is attributable to the Series G Notes.  In conjunction with the acquisition, we consolidated the SunBelt Notes with a fair value of $87.3 million for the remaining principal balance of $85.3 million as of February 28, 2011.

We have guaranteed the Series O Notes, and PolyOne, our former SunBelt partner, has guaranteed the Series G Notes, in both cases pursuant to customary guaranty agreements.  We have agreed to indemnify PolyOne for any payments or other costs under the guarantee in favor of the purchasers of the Series G Notes, to the extent any payments or other costs arise from a default or other breach under the SunBelt Notes.  If SunBelt does not make timely payments on the SunBelt Notes, whether as a result of a failure to pay on a guarantee or otherwise, the holders of the SunBelt Notes may proceed against the assets of SunBelt for repayment.

From January 1, 2011 to February 28, 2011, we recorded $6.3 million of equity earnings of non-consolidated affiliates for our 50% ownership in SunBelt.  The value of our investment in SunBelt was $(0.8) million.  We remeasured our equity interest in SunBelt to fair value upon the close of the transaction.  As a result, we recognized a pretax gain of $181.4 million, which was classified in other income in our consolidated statement of operations.  In conjunction with this remeasurement, a discrete deferred tax expense of $76.0 million was recorded.

The transaction has been accounted for using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.  We finalized our purchase price allocation during the second quarter of 2011.  The following table summarizes the final allocation of the purchase price to SunBelt's assets and liabilities:

	February 28, 2011
	($ in millions)
Total current assets	$	37.6
Property, plant and equipment		87.4
Deferred income taxes		0.4
Other assets		5.8
Total assets acquired		131.2
Total current liabilities		42.7
Long-term debt		75.1
Other liabilities		27.6
Total liabilities assumed		145.4
Less:  Investment in SunBelt		(0.8	)
Net liabilities assumed		(13.4	)
Liabilities for uncertainties		48.3
Gain on remeasurement of investment in SunBelt		(181.4	)
Goodwill		327.1
Fair value of assets acquired	$	180.6

Included in total current assets are cash and cash equivalents of $8.9 million.  Included in total current liabilities is $12.2 million of current installments of long-term debt.

Based on final valuations, we allocated $5.8 million of the purchase price to intangible assets relating to customers, customer contracts and relationships, which management estimates to have a useful life of fifteen years.  These identifiable intangible assets were included in other assets.  Based on final valuations, $327.1 million was assigned to goodwill.  For tax purposes, $163.7 million of the goodwill is deductible.  The goodwill represents the fair value of SunBelt that is in addition to the fair values of the other net assets acquired.  The primary reason for the acquisition and the principal factors that contributed to a SunBelt purchase price that resulted in the recognition of goodwill is the strategic fit with our Chlor Alkali operations and SunBelt's low cost membrane capacity.

For segment reporting purposes, SunBelt has been included in Chlor Alkali Products.  The SunBelt results of operations have been included in our consolidated results for the period subsequent to the effective date of the acquisition.  Our consolidated results for the year ended December 31, 2011 included $170.5 million of SunBelt sales and $27.2 million of additional SunBelt pretax income ($38.7 million included in Chlor Alkali Products segment income; less $0.8 million of acquisition costs, $4.0 million of interest expense and $6.7 million of expense for our earn out liability) on the 50% interest we acquired.  The following pro forma summary presents the condensed statements of income as if the acquisition of SunBelt had occurred on January 1, 2009 (unaudited).

	Years Ended December 31,
	2011		2010		2009
	($ in millions, except per share data)
Sales	$	1,987.4	$	1,743.2	$	1,698.9
Net income		140.6		80.4		154.7
Net income per common share:
Basic	$	1.76	$	1.02	$	1.98
Diluted	$	1.74	$	1.01	$	1.98

The pro forma statements of income were prepared based on historical financial information and have been adjusted to give effect to pro forma adjustments that are (i) directly attributable to the transaction, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results.  The pro forma statements of income use estimates and assumptions based on information available at the time.  Management believes the estimates and assumptions to be reasonable; however, actual results may differ significantly from this pro forma financial information.  The pro forma information does not reflect any cost savings that might be achieved from operating the business under a single owner and is not intended to reflect the actual results that would have occurred had the companies actually been combined during the periods presented.  The pro forma data reflect the application of the following adjustments:

�   Elimination of the pretax gain resulting from the remeasurement of our previously held 50% equity interest in SunBelt, which is considered non-recurring ($181.4 million for the year ended December 31, 2011).

�   Additional amortization expense related to the fair value of acquired identifiable intangible assets ($0.1 million, $0.3 million and $0.3 million for the years ended December 31, 2011, 2010 and 2009, respectively).

�   Reduction of depreciation expense related to the fair value adjustment to property, plant and equipment ($1.0 million, $5.8 million and $5.9 million for the years ended December 31, 2011, 2010 and 2009, respectively).

�   Reduction in interest expense as a result of increasing the carrying value of acquired debt obligations to its estimated fair value ($0.1 million, $0.5 million and $0.5 million for the years ended December 31, 2011, 2010 and 2009, respectively).

�   Additional accretion expense for the earn out liability that was recorded as a result of the acquisition ($0.4 million, $2.7 million and $2.7 million for the years ended December 31, 2011, 2010 and 2009, respectively).

�   Elimination of transaction costs incurred in 2011 that are directly related to the transaction, and do not have a continuing impact on our combined operating results ($0.8 million for the year ended December 31, 2011).

In addition, the pro forma data reflect the tax effect of all of the above adjustments.  The pro forma tax provision for the year ended December 31, 2011 reflects a reduction of $76.0 million related to the elimination of the gain resulting from the remeasurement of our previously held 50% equity interest in SunBelt.  The pro forma tax provision reflects an increase of $2.3 million, $7.3 million and $10.6 million for the years ended December 31, 2011, 2010 and 2009, respectively, associated with the incremental pretax income and the fair value adjustments for acquired intangible assets, property, plant and equipment and the SunBelt Notes, which reflects the marginal tax of the adjustments in the various jurisdictions where such adjustments occurred.