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) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | |
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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | |
o | Emerging growth company |
o | 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. |
(d) Exhibit No. | Exhibit |
99.1 |
OLIN CORPORATION | |||
By: | /s/ Eric A. Blanchard | ||
Name: | Eric A. Blanchard | ||
Title: | Vice President, General Counsel and Secretary |
• | Net Income - fourth quarter of $489.3 million and full year of $549.5 million |
• | Adjusted EBITDA - fourth quarter of $277.9 million and full year of $944.1 million |
• | Announced full year 2018 adjusted EBITDA forecast of $1.25 billion |
• | Higher domestic and export caustic soda pricing compared to 2017; |
• | Higher chlorine and chlorine-derivatives pricing compared to 2017; |
• | Lower ethylene dichloride pricing compared to 2017; |
• | Incremental cost synergy realizations of approximately $75 million to $100 million; |
• | Lower planned maintenance turnaround costs of approximately $30 million; |
• | Lower ethylene costs associated with the acquisition of additional cost-based ethylene from DowDupont in late September 2017, partially offset by anticipated higher ethane costs; |
• | Higher Epoxy volumes and pricing, which are expected to more than offset higher raw material costs and maintenance turnaround expense; |
• | Higher corporate and other costs of approximately $30 million, reflecting lower pension income and higher legacy environmental costs compared to 2017; |
• | Pre-tax acquisition related integration, including the information technology project, and restructuring costs of approximately $70 million; |
• | Capital spending in the $375 million to $425 million range, including the investment associated with the information technology project of approximately $100 million; |
• | Depreciation and amortization costs comparable with 2017; and |
• | Effective income tax rate of approximately 25%, with a cash tax rate of 10% to 15%. |
• | 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; |
• | higher-than-expected raw material and energy, transportation, and/or logistics costs; |
• | 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 and certain tax-exempt bonds; |
• | our reliance on a limited number of suppliers for specified feedstock and services and our reliance on third-party transportation; |
• | failure to control costs or to achieve targeted cost reductions; |
• | the occurrence of unexpected manufacturing interruptions and outages, including those occurring as a result of labor disruptions and production hazards; |
• | new regulations or public policy changes regarding the transportation of hazardous chemicals and the security of chemical manufacturing facilities; |
• | changes in, or failure to comply with, legislation or government regulations or policies; |
• | 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; |
• | complications resulting from our multiple enterprise resource planning (ERP) systems; |
• | the failure or an interruption of our information technology systems; |
• | unexpected litigation outcomes; |
• | costs and other expenditures in excess of those projected for environmental investigation and remediation or other legal proceedings; |
• | the integration of the Acquired Business may not be successful in realizing the benefits of the anticipated synergies; |
• | 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; |
• | fluctuations in foreign currency exchange rates; |
• | adverse conditions in the credit and capital markets, limiting or preventing our ability to borrow or raise capital; |
• | failure to attract, retain and motivate key employees; |
• | our assumptions included in long range plans not realized causing a non-cash impairment charge of long-lived assets; and |
• | differences between the historical financial information of Olin and the Acquired Business and our future operating performance. |
Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
(In millions, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Sales | $ | 1,619.9 | $ | 1,385.7 | $ | 6,268.4 | $ | 5,550.6 | ||||||||
Operating Expenses: | ||||||||||||||||
Cost of Goods Sold | 1,396.2 | 1,227.0 | 5,539.6 | 4,923.7 | ||||||||||||
Selling and Administration(b) | 96.1 | 73.8 | 350.7 | 323.2 | ||||||||||||
Restructuring Charges(c) | 11.7 | 6.7 | 37.6 | 112.9 | ||||||||||||
Acquisition-related Costs(d) | 0.3 | 9.2 | 12.8 | 48.8 | ||||||||||||
Other Operating Income(e) | 3.4 | 0.1 | 3.3 | 10.6 | ||||||||||||
Operating Income | 119.0 | 69.1 | 331.0 | 152.6 | ||||||||||||
Earnings of Non-consolidated Affiliates | 0.3 | 0.6 | 1.8 | 1.7 | ||||||||||||
Interest Expense | 59.4 | 48.3 | 217.4 | 191.9 | ||||||||||||
Interest Income | 0.8 | 2.1 | 1.8 | 3.4 | ||||||||||||
Income (Loss) before Taxes | 60.7 | 23.5 | 117.2 | (34.2 | ) | |||||||||||
Income Tax (Benefit) Provision(f) | (428.6 | ) | 6.0 | (432.3 | ) | (30.3 | ) | |||||||||
Net Income (Loss) | $ | 489.3 | $ | 17.5 | $ | 549.5 | $ | (3.9 | ) | |||||||
Net Income (Loss) Per Common Share: | ||||||||||||||||
Basic | $ | 2.93 | $ | 0.11 | $ | 3.31 | $ | (0.02 | ) | |||||||
Diluted | $ | 2.89 | $ | 0.10 | $ | 3.26 | $ | (0.02 | ) | |||||||
Dividends Per Common Share | $ | 0.20 | $ | 0.20 | $ | 0.80 | $ | 0.80 | ||||||||
Average Common Shares Outstanding - Basic | 167.1 | 165.3 | 166.2 | 165.2 | ||||||||||||
Average Common Shares Outstanding - Diluted | 169.5 | 166.7 | 168.5 | 165.2 |
(a) | Unaudited. |
(b) | Selling and administration expense for both the three months and year ended December 31, 2017 included costs associated with the implementation of new enterprise resource planning, manufacturing, and engineering systems, and related infrastructure costs of $2.4 million and $5.3 million, respectively. |
(c) | Restructuring charges for the three months and years ended December 31, 2017 and 2016 were primarily associated with the closure of 433,000 tons of chlor alkali capacity across three separate Olin locations. For the year ended December 31, 2016, $76.6 million of these charges were non-cash impairment charges for equipment and facilities. |
(d) | Acquisition-related costs for the three months and years ended December 31, 2017 and 2016 were associated with our integration of the Acquired Business. |
(e) | Other operating income for both the three months and year ended December 31, 2017 included a gain of $3.3 million on the sale of a former manufacturing facility. Other operating income for the year ended December 31, 2016 included an $11.0 million insurance recovery for property damage and business interruption related to a 2008 chlor alkali facility incident. |
(f) | Income tax (benefit) provision for both the three months and year ended December 31, 2017 reflects the tax benefit of $437.9 million from the Tax Cuts & Jobs Act. |
Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Sales: | ||||||||||||||||
Chlor Alkali Products and Vinyls | $ | 917.6 | $ | 782.6 | $ | 3,500.8 | $ | 2,999.3 | ||||||||
Epoxy | 536.9 | 441.7 | 2,086.4 | 1,822.0 | ||||||||||||
Winchester | 165.4 | 161.4 | 681.2 | 729.3 | ||||||||||||
Total Sales | $ | 1,619.9 | $ | 1,385.7 | $ | 6,268.4 | $ | 5,550.6 | ||||||||
Income (Loss) before Taxes: | ||||||||||||||||
Chlor Alkali Products and Vinyls | $ | 135.8 | $ | 72.4 | $ | 405.8 | $ | 224.9 | ||||||||
Epoxy | (0.8 | ) | (3.1 | ) | (11.8 | ) | 15.4 | |||||||||
Winchester | 11.1 | 25.0 | 72.4 | 120.9 | ||||||||||||
Corporate/Other: | ||||||||||||||||
Pension Income(b) | 10.6 | 13.4 | 42.7 | 53.6 | ||||||||||||
Environmental Expense | (2.3 | ) | (3.7 | ) | (8.5 | ) | (9.2 | ) | ||||||||
Other Corporate and Unallocated Costs(c) | (26.5 | ) | (18.5 | ) | (120.7 | ) | (100.2 | ) | ||||||||
Restructuring Charges(d) | (11.7 | ) | (6.7 | ) | (37.6 | ) | (112.9 | ) | ||||||||
Acquisition-related Costs(e) | (0.3 | ) | (9.2 | ) | (12.8 | ) | (48.8 | ) | ||||||||
Other Operating Income(f) | 3.4 | 0.1 | 3.3 | 10.6 | ||||||||||||
Interest Expense | (59.4 | ) | (48.3 | ) | (217.4 | ) | (191.9 | ) | ||||||||
Interest Income | 0.8 | 2.1 | 1.8 | 3.4 | ||||||||||||
Income (Loss) before Taxes | $ | 60.7 | $ | 23.5 | $ | 117.2 | $ | (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) | Other corporate and unallocated costs for both the three months and year ended December 31, 2017 included costs associated with the implementation of new enterprise resource planning, manufacturing, and engineering systems, and related infrastructure costs of $2.4 million and $5.3 million, respectively. |
(d) | Restructuring charges for the three months and years ended December 31, 2017 and 2016 were primarily associated with the closure of 433,000 tons of chlor alkali capacity across three separate Olin locations. For the year ended December 31, 2016, $76.6 million of these charges were non-cash impairment charges for equipment and facilities. |
(e) | Acquisition-related costs for the three months and years ended December 31, 2017 and 2016 were associated with our integration of the Acquired Business. |
(f) | Other operating income for both the three months and year ended December 31, 2017 included a gain of $3.3 million on the sale of a former manufacturing facility. Other operating income for the year ended December 31, 2016 included an $11.0 million insurance recovery for property damage and business interruption related to a 2008 chlor alkali facility incident. |
December 31, | ||||||||
(In millions, except per share data) | 2017 | 2016 | ||||||
Assets: | ||||||||
Cash & Cash Equivalents | $ | 218.4 | $ | 184.5 | ||||
Accounts Receivable, Net | 733.2 | 675.0 | ||||||
Income Taxes Receivable | 16.9 | 25.5 | ||||||
Inventories | 682.6 | 630.4 | ||||||
Other Current Assets | 48.1 | 30.8 | ||||||
Total Current Assets | 1,699.2 | 1,546.2 | ||||||
Property, Plant and Equipment (Less Accumulated Depreciation of $2,333.1 and $1,891.6) | 3,575.8 | 3,704.9 | ||||||
Deferred Income Taxes | 36.4 | 119.5 | ||||||
Other Assets | 1,208.4 | 644.4 | ||||||
Intangibles, Net | 578.5 | 629.6 | ||||||
Goodwill | 2,120.0 | 2,118.0 | ||||||
Total Assets | $ | 9,218.3 | $ | 8,762.6 | ||||
Liabilities and Shareholders' Equity: | ||||||||
Current Installments of Long-term Debt | $ | 0.7 | $ | 80.5 | ||||
Accounts Payable | 669.8 | 570.8 | ||||||
Income Taxes Payable | 9.4 | 7.5 | ||||||
Accrued Liabilities | 274.4 | 263.8 | ||||||
Total Current Liabilities | 954.3 | 922.6 | ||||||
Long-term Debt | 3,611.3 | 3,537.1 | ||||||
Accrued Pension Liability | 635.9 | 638.1 | ||||||
Deferred Income Taxes | 511.2 | 1,032.5 | ||||||
Other Liabilities | 751.9 | 359.3 | ||||||
Total Liabilities | 6,464.6 | 6,489.6 | ||||||
Commitments and Contingencies | ||||||||
Shareholders' Equity: | ||||||||
Common Stock, Par Value $1 Per Share, Authorized 240.0 Shares: Issued and Outstanding 167.1 Shares (165.4 in 2016) | 167.1 | 165.4 | ||||||
Additional Paid-in Capital | 2,280.9 | 2,243.8 | ||||||
Accumulated Other Comprehensive Loss | (484.6 | ) | (510.0 | ) | ||||
Retained Earnings | 790.3 | 373.8 | ||||||
Total Shareholders' Equity | 2,753.7 | 2,273.0 | ||||||
Total Liabilities and Shareholders' Equity | $ | 9,218.3 | $ | 8,762.6 |
(a) | Unaudited. |
Years Ended December 31, | ||||||||
(In millions) | 2017 | 2016 | ||||||
Operating Activities: | ||||||||
Net Income (Loss) | $ | 549.5 | $ | (3.9 | ) | |||
Earnings of Non-consolidated Affiliates | (1.8 | ) | (1.7 | ) | ||||
Losses (Gains) on Disposition of Property, Plant and Equipment | (3.1 | ) | 0.7 | |||||
Stock-based Compensation | 9.1 | 7.5 | ||||||
Depreciation and Amortization | 558.9 | 533.5 | ||||||
Deferred Income Taxes | (452.7 | ) | (32.7 | ) | ||||
Write-off of Equipment and Facility Included in Restructuring Charges | 1.4 | 76.6 | ||||||
Qualified Pension Plan Contributions | (1.7 | ) | (7.3 | ) | ||||
Qualified Pension Plan Income | (26.9 | ) | (37.5 | ) | ||||
Changes in: | ||||||||
Receivables | (49.9 | ) | 38.5 | |||||
Income Taxes Receivable/Payable | 9.6 | 10.7 | ||||||
Inventories | (37.8 | ) | 23.9 | |||||
Other Current Assets | (12.1 | ) | 20.9 | |||||
Accounts Payable and Accrued Liabilities | 100.0 | (13.1 | ) | |||||
Other Assets | 5.8 | (4.3 | ) | |||||
Other Noncurrent Liabilities | (5.9 | ) | (12.1 | ) | ||||
Other Operating Activities | 6.4 | 3.5 | ||||||
Net Operating Activities | 648.8 | 603.2 | ||||||
Investing Activities: | ||||||||
Capital Expenditures | (294.3 | ) | (278.0 | ) | ||||
Business Acquired in Purchase Transaction, Net of Cash Acquired | — | (69.5 | ) | |||||
Payments Under Long-term Supply Contracts | (209.4 | ) | (175.7 | ) | ||||
Proceeds from Sale/Leaseback of Equipment | — | 40.4 | ||||||
Proceeds from Disposition of Property, Plant and Equipment | 5.2 | 0.5 | ||||||
Proceeds from Disposition of Affiliated Companies | — | 8.8 | ||||||
Net Investing Activities | (498.5 | ) | (473.5 | ) | ||||
Financing Activities: | ||||||||
Long-term Debt Repayments, Net | (2.4 | ) | (205.3 | ) | ||||
Stock Options Exercised | 29.8 | 0.5 | ||||||
Excess Tax Benefits from Stock-based Compensation | — | 0.4 | ||||||
Dividends Paid | (133.0 | ) | (132.1 | ) | ||||
Debt Issuance Costs | (11.2 | ) | (1.0 | ) | ||||
Net Financing Activities | (116.8 | ) | (337.5 | ) | ||||
Net Increase (Decrease) in Cash and Cash Equivalents | 33.5 | (207.8 | ) | |||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | 0.4 | 0.3 | ||||||
Cash and Cash Equivalents, Beginning of Year | 184.5 | 392.0 | ||||||
Cash and Cash Equivalents, End of Year | $ | 218.4 | $ | 184.5 |
(a) | Unaudited. |
Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA: | ||||||||||||||||
Net Income (Loss) | $ | 489.3 | $ | 17.5 | $ | 549.5 | $ | (3.9 | ) | |||||||
Add Back: | ||||||||||||||||
Interest Expense | 59.4 | 48.3 | 217.4 | 191.9 | ||||||||||||
Interest Income | (0.8 | ) | (2.1 | ) | (1.8 | ) | (3.4 | ) | ||||||||
Income Tax (Benefit) Provision(b) | (428.6 | ) | 6.0 | (432.3 | ) | (30.3 | ) | |||||||||
Depreciation and Amortization | 147.5 | 136.1 | 558.9 | 533.5 | ||||||||||||
EBITDA | 266.8 | 205.8 | 891.7 | 687.8 | ||||||||||||
Add Back: | ||||||||||||||||
Restructuring Charges(c) | 11.7 | 6.7 | 37.6 | 112.9 | ||||||||||||
Acquisition-related Costs(d) | 0.3 | 9.2 | 12.8 | 48.8 | ||||||||||||
Information Technology Integration Project(e) | 2.4 | — | 5.3 | — | ||||||||||||
Certain Non-recurring Items(f) | (3.3 | ) | — | (3.3 | ) | (11.0 | ) | |||||||||
Adjusted EBITDA | $ | 277.9 | $ | 221.7 | $ | 944.1 | $ | 838.5 |
(a) | Unaudited. |
(b) | Income tax (benefit) provision for both the three months and year ended December 31, 2017 reflects the tax benefit of $437.9 million from the Tax Cuts & Jobs Act. |
(c) | Restructuring charges for the three months and years ended December 31, 2017 and 2016 were primarily associated with the closure of 433,000 tons of chlor alkali capacity across three separate Olin locations. For the year ended December 31, 2016, $76.6 million of these charges were non-cash impairment charges for equipment and facilities. |
(d) | Acquisition-related costs for the three months and years ended December 31, 2017 and 2016 were associated with our integration of the Acquired Business. |
(e) | Information technology integration project for both the three months and year ended December 31, 2017 included costs associated with the implementation of new enterprise resource planning, manufacturing, and engineering systems, and related infrastructure costs of $2.4 million and $5.3 million, respectively. |
(f) | Certain non-recurring items for both the three months and year ended December 31, 2017 included a gain of $3.3 million on the sale of a former manufacturing facility. 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 chlor alkali facility incident. |
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