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 fourth quarter 2016 earnings, dated January 31, 2017. |
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 fourth quarter 2016 earnings, dated January 31, 2017. |
• | Net income of $17.5 million and adjusted EBITDA of $221.7 million |
• | Full year net loss of $3.9 million and adjusted EBITDA of $838.5 million |
• | Announced full year 2017 adjusted EBITDA forecast of $1 billion |
• | Higher domestic and export caustic soda pricing compared to 2016; |
• | Lower ethylene costs associated with the acquisition of additional cost-based ethylene from Dow at mid-year; |
• | Improved ethylene dichloride pricing; |
• | Increased bleach sales resulting from the new bleach facility in Freeport, Texas; |
• | Incremental cost synergy realizations of approximately $50 million to $75 million; |
• | Higher electricity costs, primarily driven by higher natural gas costs; |
• | Higher planned maintenance turnaround costs; |
• | Higher corporate costs reflecting lower pension income and higher legacy environmental costs compared to 2016; |
• | Pre-tax acquisition related integration and restructuring costs of approximately $50 million; |
• | Capital spending in the $300 million to $350 million range, excluding the investment associated with acquiring additional ethylene; and |
• | Depreciation and amortization costs comparable with 2016. |
• | 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; |
• | our substantial amount of indebtedness and significant debt service obligations; |
• | weak industry conditions could affect our ability to comply with the financial maintenance covenants in our senior credit facilities; |
• | the integration of the Acquired Business being more difficult, time-consuming or costly than expected; |
• | higher-than-expected raw material and energy, transportation, and/or logistics costs; |
• | our reliance on a limited number of suppliers for specified feedstock and services and our reliance on third-party transportation; |
• | 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; |
• | failure to control costs or to achieve targeted cost reductions; |
• | adverse conditions in the credit and capital markets, limiting or preventing our ability to borrow or raise capital; |
• | costs and other expenditures in excess of those projected for environmental investigation and remediation or other legal proceedings; |
• | unexpected litigation outcomes; |
• | complications resulting from our multiple enterprise resource planning (ERP) systems; |
• | 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; |
• | 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; |
• | future funding obligations to our qualified defined benefit pension plan attributable to assumed pension liabilities; |
• | fluctuations in foreign currency exchange rates; |
• | failure to attract, retain and motivate key employees; |
• | our ability to provide the same types and levels of benefits, services and resources to the Acquired Business that historically have been provided by TDCC at the same cost; |
• | differences between the historical financial information of Olin and the Acquired Business and our future operating performance; |
• | the effect of any changes resulting from the transaction with TDCC in customer, supplier and other business relationships; and |
• | the effects of restrictions imposed on our business following the transaction with TDCC in order to avoid significant tax-related liabilities. |
Three Months Ended | Year Ended | |||||||||||
(In millions, except per share amounts) | December 31, 2016 | September 30, 2016 | December 31, 2016 | |||||||||
Sales | $ | 1,385.7 | $ | 1,452.7 | $ | 5,550.6 | ||||||
Operating Expenses: | ||||||||||||
Cost of Goods Sold | 1,227.0 | 1,284.4 | 4,923.7 | |||||||||
Selling and Administration | 73.8 | 82.0 | 323.2 | |||||||||
Restructuring Charges(b) | 6.7 | 5.2 | 112.9 | |||||||||
Acquisition-related Costs(c) | 9.2 | 13.1 | 48.8 | |||||||||
Other Operating Income (Expense)(d) | 0.1 | (0.2 | ) | 10.6 | ||||||||
Operating Income | 69.1 | 67.8 | 152.6 | |||||||||
Earnings of Non-consolidated Affiliates | 0.6 | 0.5 | 1.7 | |||||||||
Interest Expense | 48.3 | 47.5 | 191.9 | |||||||||
Interest Income | 2.1 | 0.5 | 3.4 | |||||||||
Income (Loss) before Taxes | 23.5 | 21.3 | (34.2 | ) | ||||||||
Income Tax Provision (Benefit) | 6.0 | 3.8 | (30.3 | ) | ||||||||
Net Income (Loss) | $ | 17.5 | $ | 17.5 | $ | (3.9 | ) | |||||
Net Income (Loss) Per Common Share: | ||||||||||||
Basic | $ | 0.11 | $ | 0.11 | $ | (0.02 | ) | |||||
Diluted | $ | 0.10 | $ | 0.11 | $ | (0.02 | ) | |||||
Dividends Per Common Share | $ | 0.20 | $ | 0.20 | $ | 0.80 | ||||||
Average Common Shares Outstanding - Basic | 165.3 | 165.2 | 165.2 | |||||||||
Average Common Shares Outstanding - Diluted | 166.7 | 166.5 | 165.2 |
(a) | Unaudited. |
(b) | Restructuring charges were primarily associated with the closure of 433,000 tons of chlor alkali capacity across three separate Olin locations, of which $76.6 million was non-cash impairment charges for equipment and facilities for the year ended December 31, 2016. |
(c) | Acquisition-related costs were associated with our acquisition of the Acquired Business. |
(d) | Other operating income (expense) for the year ended December 31, 2016 included an $11.0 million insurance recovery for property damage and business interruption related to a 2008 Henderson, NV chlor alkali facility incident. |
Three Months Ended | Year Ended | |||||||||||
(In millions) | December 31, 2016 | September 30, 2016 | December 31, 2016 | |||||||||
Sales: | ||||||||||||
Chlor Alkali Products and Vinyls | $ | 782.6 | $ | 779.4 | $ | 2,999.3 | ||||||
Epoxy | 441.7 | 470.1 | 1,822.0 | |||||||||
Winchester | 161.4 | 203.2 | 729.3 | |||||||||
Total Sales | $ | 1,385.7 | $ | 1,452.7 | $ | 5,550.6 | ||||||
Income (Loss) before Taxes: | ||||||||||||
Chlor Alkali Products and Vinyls | $ | 72.4 | $ | 53.7 | $ | 224.9 | ||||||
Epoxy | (3.1 | ) | 10.3 | 15.4 | ||||||||
Winchester | 25.0 | 36.0 | 120.9 | |||||||||
Corporate/Other: | ||||||||||||
Pension Income(b) | 13.4 | 15.4 | 53.6 | |||||||||
Environmental Expense | (3.7 | ) | (0.4 | ) | (9.2 | ) | ||||||
Other Corporate and Unallocated Costs | (18.5 | ) | (28.2 | ) | (100.2 | ) | ||||||
Restructuring Charges(c) | (6.7 | ) | (5.2 | ) | (112.9 | ) | ||||||
Acquisition-related Costs(d) | (9.2 | ) | (13.1 | ) | (48.8 | ) | ||||||
Other Operating Income (Expense)(e) | 0.1 | (0.2 | ) | 10.6 | ||||||||
Interest Expense | (48.3 | ) | (47.5 | ) | (191.9 | ) | ||||||
Interest Income | 2.1 | 0.5 | 3.4 | |||||||||
Income (Loss) before Taxes | $ | 23.5 | $ | 21.3 | $ | (34.2 | ) |
(a) | Unaudited. |
(b) | 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. |
(c) | Restructuring charges were primarily associated with the closure of 433,000 tons of chlor alkali capacity across three separate Olin locations, of which $76.6 million was non-cash impairment charges for equipment and facilities for the year ended December 31, 2016. |
(d) | Acquisition-related costs were associated with our acquisition of the Acquired Business. |
(e) | Other operating income (expense) for the year ended December 31, 2016 included an $11.0 million insurance recovery for property damage and business interruption related to a 2008 Henderson, NV chlor alkali facility incident. |
December 31, | December 31, | |||||||
(In millions, except per share data) | 2016 | 2015 | ||||||
Assets: | ||||||||
Cash & Cash Equivalents | $ | 184.5 | $ | 392.0 | ||||
Accounts Receivable, Net | 675.0 | 783.4 | ||||||
Income Taxes Receivable | 25.5 | 32.9 | ||||||
Inventories | 630.4 | 685.2 | ||||||
Other Current Assets | 30.8 | 39.9 | ||||||
Total Current Assets | 1,546.2 | 1,933.4 | ||||||
Property, Plant and Equipment (Less Accumulated Depreciation of $1,891.6 and $1,499.4) | 3,704.9 | 3,953.4 | ||||||
Deferred Income Taxes | 119.5 | 95.9 | ||||||
Other Assets | 644.4 | 454.6 | ||||||
Intangibles, Net | 629.6 | 677.5 | ||||||
Goodwill | 2,118.0 | 2,174.1 | ||||||
Total Assets | $ | 8,762.6 | $ | 9,288.9 | ||||
Liabilities and Shareholders' Equity: | ||||||||
Current Installments of Long-term Debt | $ | 80.3 | $ | 205.0 | ||||
Accounts Payable | 570.8 | 608.2 | ||||||
Income Taxes Payable | 7.5 | 4.9 | ||||||
Accrued Liabilities | 263.8 | 328.1 | ||||||
Total Current Liabilities | 922.4 | 1,146.2 | ||||||
Long-term Debt | 3,537.3 | 3,643.8 | ||||||
Accrued Pension Liability | 640.4 | 648.9 | ||||||
Deferred Income Taxes | 1,031.7 | 1,095.2 | ||||||
Other Liabilities | 359.3 | 336.0 | ||||||
Total Liabilities | 6,491.1 | 6,870.1 | ||||||
Commitments and Contingencies | ||||||||
Shareholders' Equity: | ||||||||
Common Stock, Par Value $1 Per Share, Authorized 240.0 Shares: Issued and Outstanding 165.4 Shares (165.1 in 2015) | 165.4 | 165.1 | ||||||
Additional Paid-in Capital | 2,243.8 | 2,236.4 | ||||||
Accumulated Other Comprehensive Loss | (511.5 | ) | (492.5 | ) | ||||
Retained Earnings | 373.8 | 509.8 | ||||||
Total Shareholders' Equity | 2,271.5 | 2,418.8 | ||||||
Total Liabilities and Shareholders' Equity | $ | 8,762.6 | $ | 9,288.9 |
(a) | Unaudited. |
(In millions) | Year Ended December 31, 2016 | |||
Operating Activities: | ||||
Net Loss | $ | (3.9 | ) | |
Earnings of Non-consolidated Affiliates | (1.7 | ) | ||
Losses on Disposition of Property, Plant and Equipment | 0.7 | |||
Stock-Based Compensation | 7.5 | |||
Depreciation and Amortization | 533.5 | |||
Deferred Income Taxes | (32.7 | ) | ||
Write-off of Equipment and Facility Included in Restructuring Charges | 76.6 | |||
Qualified Pension Plan Contributions | (7.3 | ) | ||
Qualified Pension Plan Income | (37.5 | ) | ||
Changes in: | ||||
Receivables | 38.5 | |||
Income Taxes Receivable/Payable | 10.7 | |||
Inventories | 23.9 | |||
Other Current Assets | 20.9 | |||
Accounts Payable and Accrued Liabilities | (13.1 | ) | ||
Other Assets | (4.3 | ) | ||
Other Noncurrent Liabilities | (12.1 | ) | ||
Other Operating Activities | 3.5 | |||
Net Operating Activities | 603.2 | |||
Investing Activities: | ||||
Capital Expenditures | (278.0 | ) | ||
Business Acquired in Purchase Transaction, Net of Cash Acquired | (69.5 | ) | ||
Payments under Long-term Supply Contract | (175.7 | ) | ||
Proceeds from Sale/Leaseback of Equipment | 40.4 | |||
Proceeds from Disposition of Property, Plant and Equipment | 0.5 | |||
Proceeds from Disposition of Affiliated Companies | 8.8 | |||
Net Investing Activities | (473.5 | ) | ||
Financing Activities: | ||||
Long-term Debt: | ||||
Borrowings | 230.0 | |||
Repayments | (435.3 | ) | ||
Stock Options Exercised | 0.5 | |||
Excess Tax Benefit form Stock-Based Compensation | 0.4 | |||
Dividends Paid | (132.1 | ) | ||
Debt Issuance Costs | (1.0 | ) | ||
Net Financing Activities | (337.5 | ) | ||
Net Decrease in Cash and Cash Equivalents | (207.8 | ) | ||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | 0.3 | |||
Cash and Cash Equivalents, Beginning of Year | 392.0 | |||
Cash and Cash Equivalents, End of Year | $ | 184.5 |
(a) | Unaudited. |
Three Months Ended | Year Ended | |||||||||||
(In millions) | December 31, 2016 | September 30, 2016 | December 31, 2016 | |||||||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA: | ||||||||||||
Net Income (Loss) | $ | 17.5 | $ | 17.5 | $ | (3.9 | ) | |||||
Add Back: | ||||||||||||
Interest Expense | 48.3 | 47.5 | 191.9 | |||||||||
Interest Income | (2.1 | ) | (0.5 | ) | (3.4 | ) | ||||||
Income Tax Provision (Benefit) | 6.0 | 3.8 | (30.3 | ) | ||||||||
Depreciation and Amortization | 136.1 | 135.3 | 533.5 | |||||||||
EBITDA | 205.8 | 203.6 | 687.8 | |||||||||
Add Back: | ||||||||||||
Restructuring Charges(b) | 6.7 | 5.2 | 112.9 | |||||||||
Acquisition-related Costs(c) | 9.2 | 13.1 | 48.8 | |||||||||
Certain Non-recurring Items(d) | — | — | (11.0 | ) | ||||||||
Adjusted EBITDA | $ | 221.7 | $ | 221.9 | $ | 838.5 |
(a) | Unaudited. |
(b) | Restructuring charges were primarily associated with the closure of 433,000 tons of chlor alkali capacity across three separate Olin locations, of which $76.6 million was non-cash impairment charges for equipment and facilities for the year ended December 31, 2016. |
(c) | Acquisition-related costs were associated with our acquisition of the Acquired Business. |
(d) | Certain non-recurring items for the year ended December 31, 2016 included an $11.0 million insurance recovery for property damage and business interruption related to a 2008 Henderson, NV chlor alkali facility incident. |
Three Months Ended | Year Ended | |||||||||||
December 31 2016 | September 30 2016 | December 31 2016 | ||||||||||
Reconciliation of Net Income (Loss) Per Share to Adjusted Net Income from Operations Per Share: | ||||||||||||
Net Income (Loss) Per Share | $ | 0.10 | $ | 0.11 | $ | (0.02 | ) | |||||
Add Back: | ||||||||||||
Restructuring Charges(b) | 0.04 | 0.03 | 0.68 | |||||||||
Acquisition-related Costs(c) | 0.06 | 0.08 | 0.30 | |||||||||
Certain Non-recurring Items(d) | — | — | (0.07 | ) | ||||||||
Step-Up Depreciation and Amortization(e) | 0.24 | 0.24 | 0.98 | |||||||||
Income Tax Impact(f) | (0.13 | ) | (0.13 | ) | (0.71 | ) | ||||||
Adjusted Net Income from Operations Per Share | $ | 0.31 | $ | 0.33 | $ | 1.16 |
(a) | Unaudited. |
(b) | Restructuring charges were primarily associated with the closure of 433,000 tons of chlor alkali capacity across three separate Olin locations, of which $76.6 million was non-cash impairment charges for equipment and facilities for the year ended December 31, 2016. |
(c) | Acquisition-related costs were associated with our acquisition of the Acquired Business. |
(d) | Certain non-recurring items for the year ended December 31, 2016 included an $11.0 million insurance recovery for property damage and business interruption related to a 2008 Henderson, NV chlor alkali facility incident. |
(e) | Step-up depreciation and amortization of $40.3 million for both the three months ended December 31, 2016 and September 30, 2016 and $161.4 million for the year ended December 31, 2016 was associated with the increase to fair value of property, plant and equipment, acquired intangible assets and long-term supply contracts at the acquisition date related to the purchase accounting of the Acquired Business. |
(f) | The effective tax rate on the pretax adjustments from net income (loss) per share to adjusted net income from operations per share is approximately 37%. |
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