Virginia | 1-1070 | 13-1872319 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
190 Carondelet Plaza, Suite 1530 Clayton, MO (Address of principal executive offices) | 63105 (Zip Code) |
(314) 480-1400 (Registrant's telephone number, including area code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) Exhibit No. | Exhibit |
99.1 | Press Release announcing third quarter 2015 earnings, dated November 2, 2015. |
OLIN CORPORATION | |||
By: | /s/ George H. Pain | ||
Name: | George H. Pain | ||
Title: | Senior Vice President, General Counsel and Secretary |
Exhibit No. | Exhibit |
99.1 | Press Release announcing third quarter 2015 earnings, dated November 2, 2015. |
• | Olin is evaluating idling or permanently closing approximately 250,000 tons to 450,000 tons of its chlor alkali capacity. We expect to provide more specifics in the first quarter of 2016. |
• | The fourth quarter 2015 outlook assumes a slight improvement in caustic soda prices from third quarter 2015 levels. The full implementation of the $30 per ton caustic soda price increase now reflected in the price indices would increase future quarterly EBITDA by approximately $20 million. |
• | We began to realize synergies in October associated with the shipment of chlorine by rail from one of the newly acquired facilities. We have begun the process of installing bleach production capacity in Freeport, Texas and expect to be able to deliver bleach from that site in 2016. |
• | Fourth quarter 2015 forecasted results: |
▪ | $185 million to $205 million of adjusted EBITDA, which excludes acquisition-related costs; |
▪ | A reported net loss in the $0.25 to $0.30 per diluted share range, including approximately $0.50 per share of acquisition-related costs, acquisition financing expenses and estimated acquisition step-up depreciation and amortization; |
▪ | Pretax acquisition-related costs of approximately $75 million (includes approximately $45 million of expense related to change of control acceleration of non-qualified pension benefits, approximately $17 million of investment banking and legal costs, and approximately $13 million of integration and other costs); |
▪ | Acquisition-related one-time financing expenses of approximately $11 million; |
▪ | One-time income tax expense of approximately $10 million, as a portion of the acquisition-related costs are not deductible; and |
▪ | Estimated step-up acquisition depreciation and amortization of approximately $30 million. |
• | Winchester fourth quarter 2015 earnings are expected to be higher than fourth quarter 2014 levels, primarily due to improved sales volumes and cost savings. |
• | The fourth quarter 2015 outlook includes the normal seasonal weakness in EBITDA totaling approximately $40 million to $50 million, from ammunition sales, bleach sales, chlorine sales to agriculture and pool chemical customers, chlorinated organics sales to support refrigerants, and epoxy sales. |
• | Since 2008, Olin has historically generated 20% of its full year adjusted EBITDA in the fourth quarter. |
• | Capital spending for fourth quarter 2015 is expected to be approximately $60 million. |
• | sensitivity to economic, business and market conditions in the United States and overseas, including economic instability or a downturn in the sectors served by us, such as ammunition, vinyls, urethanes, and pulp and paper, and the migration by United States customers to low-cost foreign locations; |
• | the cyclical nature of our operating results, particularly declines in average selling prices in the chlor alkali industry and the supply/demand balance for our products, including the impact of excess industry capacity or an imbalance in demand for our chlor alkali products; |
• | economic and industry downturns that result in diminished product demand and excess manufacturing capacity in any of our segments and that, in many cases, result in lower selling prices and profits; |
• | new regulations or public policy changes regarding the transportation of hazardous chemicals and the security of chemical manufacturing facilities; |
• | changes in legislation or government regulations or policies; |
• | higher-than-expected raw material and energy, transportation, and/or logistics costs; |
• | costs and other expenditures in excess of those projected for environmental investigation and remediation or other legal proceedings; |
• | unexpected litigation outcomes; |
• | the failure or an interruption of our information technology systems; |
• | the occurrence of unexpected manufacturing interruptions and outages, including those occurring as a result of labor disruptions and production hazards; |
• | adverse conditions in the credit and capital markets, limiting or preventing our ability to borrow or raise capital; |
• | weak industry conditions could affect our ability to comply with the financial maintenance covenants in our senior credit facilities and certain tax-exempt bonds; |
• | the effects of any declines in global equity markets on asset values and any declines in interest rates used to value the liabilities in our pension plan; |
• | an increase in our indebtedness or higher-than-expected interest rates, affecting our ability to generate sufficient cash flow for debt service; |
• | fluctuations in foreign currency exchange rates; |
• | complications resulting from our multiple enterprise resource planning (ERP) systems; |
• | our reliance on a limited number of suppliers for specified feedstock and services and our reliance on third-party transportation; |
• | failure to attract, retain and motivate key employees; |
• | the possibility that we may be unable to achieve expected synergies and operating efficiencies in connection with the transaction with TDCC within the expected time-frames or at all; |
• | the integration of the Acquired Business being more difficult, time-consuming or costly than expected; |
• | the effect of any changes resulting from the transaction with TDCC in customer, supplier and other business relationships; and |
• | exposure to lawsuits and contingencies associated with the Acquired Business. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(In millions, except per share amounts) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Sales | $ | 533.6 | $ | 593.6 | $ | 1,587.0 | $ | 1,741.4 | ||||||||
Operating Expenses: | ||||||||||||||||
Cost of Goods Sold | 460.0 | 492.3 | 1,338.7 | 1,431.3 | ||||||||||||
Selling and Administration | 35.8 | 41.8 | 122.7 | 127.0 | ||||||||||||
Restructuring Charges(b) | 0.3 | 1.2 | 2.2 | 4.5 | ||||||||||||
Acquisition-related Costs(c) | 14.5 | 1.0 | 35.4 | 1.4 | ||||||||||||
Other Operating (Expense) Income(d) | (0.1 | ) | — | 42.1 | 0.8 | |||||||||||
Operating Income | 22.9 | 57.3 | 130.1 | 178.0 | ||||||||||||
Earnings of Non-consolidated Affiliates | 0.5 | 0.5 | 1.3 | 1.4 | ||||||||||||
Interest Expense(e) | 14.4 | 17.7 | 39.7 | 37.0 | ||||||||||||
Interest Income | 0.3 | 0.2 | 0.9 | 0.9 | ||||||||||||
Income from Continuing Operations before Taxes | 9.3 | 40.3 | 92.6 | 143.3 | ||||||||||||
Income Tax Provision | 3.4 | 14.2 | 31.3 | 51.1 | ||||||||||||
Income from Continuing Operations, Net | 5.9 | 26.1 | 61.3 | 92.2 | ||||||||||||
Income from Discontinued Operations, Net(f) | — | — | — | 0.7 | ||||||||||||
Net Income | $ | 5.9 | $ | 26.1 | $ | 61.3 | $ | 92.9 | ||||||||
Net Income Per Common Share: | ||||||||||||||||
Basic Income per Common Share: | ||||||||||||||||
Income from Continuing Operations, Net | $ | 0.08 | $ | 0.33 | $ | 0.79 | $ | 1.17 | ||||||||
Income from Discontinued Operations, Net | — | — | — | 0.01 | ||||||||||||
Net Income | $ | 0.08 | $ | 0.33 | $ | 0.79 | $ | 1.18 | ||||||||
Diluted Income per Common Share: | ||||||||||||||||
Income from Continuing Operations, Net | $ | 0.08 | $ | 0.33 | $ | 0.78 | $ | 1.15 | ||||||||
Income from Discontinued Operations, Net | — | — | — | 0.01 | ||||||||||||
Net Income | $ | 0.08 | $ | 0.33 | $ | 0.78 | $ | 1.16 | ||||||||
Dividends Per Common Share | $ | 0.20 | $ | 0.20 | $ | 0.60 | $ | 0.60 | ||||||||
Average Common Shares Outstanding - Basic | 77.6 | 78.4 | 77.5 | 78.8 | ||||||||||||
Average Common Shares Outstanding - Diluted | 78.3 | 79.5 | 78.5 | 80.0 |
(a) | Unaudited. |
(b) | Restructuring charges for the three and nine months ended September 30, 2015 were associated with permanently closing a portion of the Becancour, Canada chlor alkali facility and the ongoing relocation of our Winchester centerfire ammunition manufacturing operations from East Alton, IL to Oxford, MS. Restructuring charges for the three and nine months ended September 30, 2014 were associated with exiting the use of mercury cell technology in the chlor alkali manufacturing process and the ongoing relocation of our Winchester centerfire ammunition manufacturing operations from East Alton, IL to Oxford, MS. |
(c) | Acquisition-related costs for the three and nine months ended September 30, 2015 and 2014 were associated with our acquisition of the Acquired Business. |
(d) | Other operating (expense) income for the nine months ended September 30, 2015 included $42.3 million of insurance recoveries for property damage and business interruption related to the portion of the Becancour, Canada chlor alkali facility that has been shut down since late June 2014. Other operating (expense) income for the nine months ended September 30, 2014 included a gain of $1.0 million for the resolution of a contract matter. |
(e) | Interest expense for the three and nine months ended September 30, 2015 included acquisition financing expenses of $7.7 million and $19.7 million, respectively, for the bridge financing associated with our acquisition of the Acquired Business. Interest expense for the three and nine months ended September 30, 2014 included $9.5 million for the call premium and the write-off of unamortized deferred debt issuance costs associated with the redemption of our $150 million 8.875% senior notes, which would have matured on August 15, 2019. |
(f) | Income from discontinued operations, net for the nine months ended September 30, 2014 included a $0.7 million after tax gain for the favorable resolution of certain indemnity obligations related to our Metals business sold in 2007. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(In millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Sales: | ||||||||||||||||
Chlor Alkali Products | $ | 299.7 | $ | 329.2 | $ | 887.1 | $ | 996.0 | ||||||||
Chemical Distribution | 72.6 | 76.6 | 212.7 | 221.4 | ||||||||||||
Winchester | 181.8 | 209.6 | 554.7 | 591.2 | ||||||||||||
Intersegment Sales Elimination(b) | (20.5 | ) | (21.8 | ) | (67.5 | ) | (67.2 | ) | ||||||||
Total Sales | $ | 533.6 | $ | 593.6 | $ | 1,587.0 | $ | 1,741.4 | ||||||||
Income (Loss) from Continuing Operations before Taxes: | ||||||||||||||||
Chlor Alkali Products(c) | $ | 14.1 | $ | 26.2 | $ | 62.2 | $ | 101.3 | ||||||||
Chemical Distribution | 3.3 | 0.8 | 6.7 | — | ||||||||||||
Winchester | 30.1 | 38.5 | 93.8 | 109.9 | ||||||||||||
Corporate/Other: | ||||||||||||||||
Pension Income(d) | 7.3 | 8.8 | 21.8 | 24.2 | ||||||||||||
Environmental Expense | (7.3 | ) | (1.6 | ) | (13.1 | ) | (6.3 | ) | ||||||||
Other Corporate and Unallocated Costs | (9.2 | ) | (12.7 | ) | (44.5 | ) | (44.6 | ) | ||||||||
Restructuring Charges(e) | (0.3 | ) | (1.2 | ) | (2.2 | ) | (4.5 | ) | ||||||||
Acquisition-related Costs(f) | (14.5 | ) | (1.0 | ) | (35.4 | ) | (1.4 | ) | ||||||||
Other Operating (Expense) Income(g) | (0.1 | ) | — | 42.1 | 0.8 | |||||||||||
Interest Expense(h) | (14.4 | ) | (17.7 | ) | (39.7 | ) | (37.0 | ) | ||||||||
Interest Income | 0.3 | 0.2 | 0.9 | 0.9 | ||||||||||||
Income from Continuing Operations before Taxes | $ | 9.3 | $ | 40.3 | $ | 92.6 | $ | 143.3 |
(a) | Unaudited. |
(b) | Intersegment sales elimination represents the sale of caustic soda, bleach, potassium hydroxide, and hydrochloric acid between Chemical Distribution and Chlor Alkali Products, at prices that approximate market. |
(c) | Earnings of non-consolidated affiliates are included in the Chlor Alkali Products segment results consistent with management's monitoring of the operating segments. The earnings from non-consolidated affiliates were $0.5 million for both the three months ended September 30, 2015 and 2014 and $1.3 million and $1.4 million for the nine months ended September 30, 2015 and 2014, respectively. |
(d) | The service cost and the amortization of prior service cost components of pension expense related to the employees of the operating segments are allocated to the operating segments based on their respective estimated census data. All other components of pension costs are included in Corporate/Other and include items such as the expected return on plan assets, interest cost and recognized actuarial gains and losses. |
(e) | Restructuring charges for the three and nine months ended September 30, 2015 were associated with permanently closing a portion of the Becancour, Canada chlor alkali facility and the ongoing relocation of our Winchester centerfire ammunition manufacturing operations from East Alton, IL to Oxford, MS. Restructuring charges for the three and nine months ended September 30, 2014 were associated with exiting the use of mercury cell technology in the chlor alkali manufacturing process and the ongoing relocation of our Winchester centerfire ammunition manufacturing operations from East Alton, IL to Oxford, MS. |
(f) | Acquisition-related costs for the three and nine months ended September 30, 2015 and 2014 were associated with our acquisition of the Acquired Business. |
(g) | Other operating (expense) income for the nine months ended September 30, 2015 included $42.3 million of insurance recoveries for property damage and business interruption related to the portion of the Becancour, Canada chlor alkali facility that has been shut down since late June 2014. Other operating (expense) income for the nine months ended September 30, 2014 included a gain of $1.0 million for the resolution of a contract matter. |
(h) | Interest expense for the three and nine months ended September 30, 2015 included acquisition financing expenses of $7.7 million and $19.7 million, respectively, for the bridge financing associated with our acquisition of the Acquired Business. Interest expense for the three and nine months ended September 30, 2014 included $9.5 million for the call premium and the write-off of unamortized deferred debt issuance costs associated with the redemption of our $150 million 8.875% senior notes, which would have matured on August 15, 2019. |
September 30, | December 31, | September 30, | ||||||||||
(In millions, except per share data) | 2015 | 2014 | 2014 | |||||||||
Assets: | ||||||||||||
Cash & Cash Equivalents | $ | 254.0 | $ | 256.8 | $ | 263.6 | ||||||
Accounts Receivable, Net | 300.4 | 263.1 | 333.4 | |||||||||
Income Taxes Receivable | — | 21.6 | 4.3 | |||||||||
Inventories | 232.5 | 210.1 | 198.8 | |||||||||
Current Deferred Income Taxes | 69.1 | 54.2 | 45.8 | |||||||||
Other Current Assets | 12.4 | 10.3 | 11.1 | |||||||||
Total Current Assets | 868.4 | 816.1 | 857.0 | |||||||||
Property, Plant and Equipment (Less Accumulated Depreciation of $1,411.9, $1,330.7 and $1,324.6) | 913.7 | 931.0 | 936.4 | |||||||||
Prepaid Pension Costs | — | — | 1.6 | |||||||||
Restricted Cash | — | — | 2.0 | |||||||||
Deferred Income Taxes | 11.9 | 12.5 | 11.2 | |||||||||
Other Assets | 167.7 | 191.4 | 197.7 | |||||||||
Goodwill | 747.1 | 747.1 | 747.1 | |||||||||
Total Assets | $ | 2,708.8 | $ | 2,698.1 | $ | 2,753.0 | ||||||
Liabilities and Shareholders' Equity: | ||||||||||||
Current Installments of Long-Term Debt | $ | 143.3 | $ | 16.4 | $ | 16.4 | ||||||
Accounts Payable | 158.7 | 146.8 | 165.5 | |||||||||
Income Taxes Payable | 10.4 | 0.2 | 0.5 | |||||||||
Accrued Liabilities | 272.8 | 214.3 | 209.2 | |||||||||
Total Current Liabilities | 585.2 | 377.7 | 391.6 | |||||||||
Long-Term Debt | 526.9 | 658.7 | 672.7 | |||||||||
Accrued Pension Liability | 97.2 | 182.0 | 64.7 | |||||||||
Deferred Income Taxes | 118.0 | 107.1 | 139.0 | |||||||||
Other Liabilities | 335.4 | 359.3 | 363.8 | |||||||||
Total Liabilities | 1,662.7 | 1,684.8 | 1,631.8 | |||||||||
Commitments and Contingencies | ||||||||||||
Shareholders' Equity: | ||||||||||||
Common Stock, Par Value $1 Per Share, Authorized 120.0 Shares: Issued and Outstanding 77.6 Shares (77.4 and 78.2 in 2014) | 77.6 | 77.4 | 78.2 | |||||||||
Additional Paid-In Capital | 796.2 | 788.3 | 805.9 | |||||||||
Accumulated Other Comprehensive Loss | (433.2 | ) | (443.1 | ) | (356.4 | ) | ||||||
Retained Earnings | 605.5 | 590.7 | 593.5 | |||||||||
Total Shareholders' Equity | 1,046.1 | 1,013.3 | 1,121.2 | |||||||||
Total Liabilities and Shareholders' Equity | $ | 2,708.8 | $ | 2,698.1 | $ | 2,753.0 |
(a) | Unaudited. |
Nine Months Ended September 30, | ||||||||
(In millions) | 2015 | 2014 | ||||||
Operating Activities: | ||||||||
Net Income | $ | 61.3 | $ | 92.9 | ||||
Earnings of Non-consolidated Affiliates | (1.3 | ) | (1.4 | ) | ||||
Gains on Disposition of Property, Plant and Equipment | (23.6 | ) | (0.6 | ) | ||||
Stock-Based Compensation | 5.5 | 3.5 | ||||||
Depreciation and Amortization | 104.9 | 104.3 | ||||||
Deferred Income Taxes | (11.5 | ) | 17.9 | |||||
Qualified Pension Plan Contributions | (0.5 | ) | (0.6 | ) | ||||
Qualified Pension Plan Income | (21.0 | ) | (21.4 | ) | ||||
Changes in: | ||||||||
Receivables | (37.3 | ) | (46.7 | ) | ||||
Income Taxes Receivable/Payable | 31.8 | (10.2 | ) | |||||
Inventories | (22.4 | ) | (12.3 | ) | ||||
Other Current Assets | (2.7 | ) | 0.9 | |||||
Accounts Payable and Accrued Liabilities | 11.1 | (12.0 | ) | |||||
Other Assets | 25.7 | 5.1 | ||||||
Other Noncurrent Liabilities | (5.4 | ) | (20.0 | ) | ||||
Other Operating Activities | 0.5 | 0.1 | ||||||
Net Operating Activities | 115.1 | 99.5 | ||||||
Investing Activities: | ||||||||
Capital Expenditures | (79.7 | ) | (49.7 | ) | ||||
Proceeds from Disposition of Property, Plant and Equipment | 24.8 | 4.0 | ||||||
Proceeds from Disposition of Affiliated Companies | 6.6 | — | ||||||
Restricted Cash Activity | — | 2.2 | ||||||
Other Investing Activities | (2.8 | ) | (0.5 | ) | ||||
Net Investing Activities | (51.1 | ) | (44.0 | ) | ||||
Financing Activities: | ||||||||
Long-Term Debt: | ||||||||
Borrowings | — | 150.0 | ||||||
Repayments | (3.2 | ) | (149.2 | ) | ||||
Earn Out Payment – SunBelt | — | (14.8 | ) | |||||
Common Stock Repurchased and Retired | — | (44.7 | ) | |||||
Stock Options Exercised | 2.2 | 6.5 | ||||||
Excess Tax Benefits from Stock-Based Compensation | 0.4 | 1.1 | ||||||
Dividends Paid | (46.5 | ) | (47.4 | ) | ||||
Debt Issuance Costs | (19.7 | ) | (1.2 | ) | ||||
Net Financing Activities | (66.8 | ) | (99.7 | ) | ||||
Net Decrease in Cash and Cash Equivalents | (2.8 | ) | (44.2 | ) | ||||
Cash and Cash Equivalents, Beginning of Year | 256.8 | 307.8 | ||||||
Cash and Cash Equivalents, End of Period | $ | 254.0 | $ | 263.6 |
(a) | Unaudited. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(In millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Reconciliation of Income from Continuing Operations, Net to Adjusted EBITDA: | ||||||||||||||||
Income from Continuing Operations, Net | $ | 5.9 | $ | 26.1 | $ | 61.3 | $ | 92.2 | ||||||||
Add Back: | ||||||||||||||||
Interest Expense(b) | 14.4 | 17.7 | 39.7 | 37.0 | ||||||||||||
Interest Income | (0.3 | ) | (0.2 | ) | (0.9 | ) | (0.9 | ) | ||||||||
Income Tax Expense | 3.4 | 14.2 | 31.3 | 51.1 | ||||||||||||
Depreciation and Amortization | 35.8 | 34.9 | 104.9 | 104.3 | ||||||||||||
EBITDA | 59.2 | 92.7 | 236.3 | 283.7 | ||||||||||||
Add Back: | ||||||||||||||||
Acquisition-related Costs(c) | 14.5 | 1.0 | 35.4 | 1.4 | ||||||||||||
Adjusted EBITDA | $ | 73.7 | $ | 93.7 | $ | 271.7 | $ | 285.1 |
(a) | Unaudited. |
(b) | Interest expense for the three and nine months ended September 30, 2015 included acquisition financing expenses of $7.7 million and $19.7 million, respectively, for the bridge financing associated with our acquisition of the Acquired Business. Interest expense for the three and nine months ended September 30, 2014 included $9.5 million for the call premium and the write-off of unamortized deferred debt issuance costs associated with the redemption of our $150 million 8.875% senior notes, which would have matured on August 15, 2019. |
(c) | Acquisition-related costs for the three and nine months ended September 30, 2015 and 2014 were associated with our acquisition of the Acquired Business. |