-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ChDiZXCIVYySbIhxW7VfLeF/KevWzRie4p1dUTDVmIontI8ZsOrx2EnrgafMBXfP Jvy6dS2L5uPcfSyuoYbRdA== /in/edgar/work/0000950130-00-005961/0000950130-00-005961.txt : 20001114 0000950130-00-005961.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950130-00-005961 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLIN CORP CENTRAL INDEX KEY: 0000074303 STANDARD INDUSTRIAL CLASSIFICATION: [2800 ] IRS NUMBER: 131872319 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01070 FILM NUMBER: 759519 BUSINESS ADDRESS: STREET 1: 501 MERRITT 7 STREET 2: P O BOX 4500 CITY: NORWALK STATE: CT ZIP: 06856 BUSINESS PHONE: 2037503000 MAIL ADDRESS: STREET 1: OLIN CORP STREET 2: 501 MERRITT 7 PO BOX 4500 CITY: NORWALK STATE: CT ZIP: 06851 FORMER COMPANY: FORMER CONFORMED NAME: OLIN MATHIESON CHEMICAL CORP DATE OF NAME CHANGE: 19691008 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 --------------------------------------------- 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 -------------------------------------------------------- Olin Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Virginia 13-1872319 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 501 Merritt 7, Norwalk, CT 06851 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (203) 750-3000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, address, and former fiscal year, if changed since last report 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 X No -------- ---------- As of October 31, 2000, there were outstanding 44,736,409 shares of the registrant's common stock. Part I - Financial Information Item 1. Financial Statements. OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Balance Sheets (In millions, except per share data) Unaudited September 30, December 31, 2000 1999 -------- -------- ASSETS - ------ Cash and cash equivalents $ 42.2 $ 21.0 Short-term investments 25.0 25.0 Accounts receivable, net 255.2 196.4 Inventories 195.4 208.4 Income taxes receivable 19.7 32.7 Other current assets 17.2 20.4 -------- -------- Total current assets 554.7 503.9 Property, plant and equipment (less accumulated depreciation of $1,166.0 and $1,127.2) 467.0 467.8 Other assets 87.8 91.7 -------- -------- Total assets $1,109.5 $1,063.4 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Short-term borrowings and current installments of long-term debt $ 1.0 $ 1.0 Accounts payable 107.1 115.2 Income taxes payable 8.6 4.2 Accrued liabilities 150.0 131.9 -------- -------- Total current liabilities 266.7 252.3 Long-term debt 228.1 229.2 Deferred income taxes 59.4 50.7 Other liabilities 207.6 221.7 Commitments and contingencies Shareholders' equity: Common stock, par value $1 per share: Authorized 120.0 shares Issued 45.1 shares 45.1 45.1 Additional paid-in capital 235.0 233.7 Accumulated other comprehensive loss (11.5) (9.5) Retained earnings 79.1 40.2 -------- -------- Total shareholders' equity 347.7 309.5 -------- -------- Total liabilities and shareholders' equity $1,109.5 $1,063.4 ======== ======== - ----------------------------------- The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements. OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Statements of Income (Unaudited) (In millions, except per share amounts)
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Sales $ 392.8 $ 354.1 $ 1,133.3 $ 973.7 Cost of goods sold 319.8 309.7 923.7 843.9 Selling and administration 31.2 31.8 90.8 95.1 Research and development 1.3 1.6 4.1 4.9 Earnings(loss) of non-consolidated affiliates 0.7 (2.9) 1.1 (8.8) Interest expense 3.9 4.2 11.8 12.1 Interest income 0.4 0.2 0.7 1.8 Other income 0.1 0.3 2.1 1.0 --------- --------- --------- --------- Income from continuing operations before taxes 37.8 4.4 106.8 11.7 Income taxes 14.4 1.8 40.8 4.7 --------- --------- --------- --------- Income from continuing operations 23.4 2.6 66.0 7.0 Income from discontinued operations, net of taxes - - - 4.4 --------- --------- --------- --------- Net income $ 23.4 $ 2.6 $ 66.0 $ 11.4 ========= ========= ========= ========= Net income per common share: Basic: Continuing operations $ 0.52 $ 0.06 $ 1.46 $ 0.16 Discontinued operations - - - 0.09 --------- --------- --------- --------- Total net income $ 0.52 $ 0.06 $ 1.46 $ 0.25 ========= ========= ========= ========= Diluted: Continuing operations $ 0.52 $ 0.06 $ 1.46 $ 0.16 Discontinued operations - - - 0.09 --------- --------- --------- --------- Total net income $ 0.52 $ 0.06 $ 1.46 $ 0.25 ========= ========= ========= ========= Dividends per common share $ 0.20 $ 0.20 $ 0.60 $ 0.70 Average common shares outstanding: Basic 45.1 45.2 45.1 45.5 Diluted 45.2 45.2 45.2 45.5
- ----------------------------------- The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements. OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Statements of Cash Flows (Unaudited) (In millions)
Nine Months Ended September 30, ------------------- 2000 1999 ----- ----- Operating activities - -------------------- Income from continuing operations $66.0 $ 7.0 Adjustments to reconcile income from continuing operations to net cash and cash equivalents provided by operating activities (Earnings)loss of non-consolidated affiliates (1.1) 8.8 Depreciation and amortization 59.4 58.4 Deferred income taxes 8.7 (4.1) Change in: Receivables (58.8) (44.3) Inventories 13.0 2.0 Other current assets 3.2 0.2 Accounts payable and accrued liabilities 10.0 (25.0) Income taxes payable 17.4 16.5 Noncurrent liabilities (13.5) (22.8) Other operating activities (7.3) (3.5) ----- ----- Net cash and cash equivalents provided(used) by operating activities from continuing operations 97.0 (6.8) Discontinued operations: Net income - 4.4 Change in net assets - (7.3) ----- ----- Net operating activities 97.0 (9.7) ----- ----- Investing activities - -------------------- Capital expenditures (57.1) (44.0) Purchases of short-term investments - (28.4) Proceeds from sale of short-term investments - 33.9 Investments and advances-affiliated companies at equity 10.7 1.7 Other investing activities (1.8) 1.9 ----- ----- Net investing activities (48.2) (34.9) ----- ----- Financing activities - -------------------- Long-term debt repayments (1.1) (1.0) Purchases of Olin common stock - (11.3) Borrowings under line of credit assumed by Arch Chemicals, Inc. - 75.0 Stock options exercised 1.0 - Dividends paid (27.1) (31.9) Other financing activities (0.4) - ----- ----- Net financing activities (27.6) 30.8 ----- ----- Net increase(decrease) in cash and cash equivalents 21.2 (13.8) Cash and cash equivalents, beginning of period 21.0 50.2 ----- ----- Cash and cash equivalents, end of period $42.2 $36.4 ===== =====
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS (Tabular amounts in millions, except per share data) 1. The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of the Company, 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, the Company believes that the disclosures are adequate to make the information presented not misleading. Certain reclassifications were made to prior year amounts to conform to the 2000 presentation. It is suggested that these condensed financial statements be read 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 the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 2. Inventory consists of the following: September 30, December 31, 2000 1999 ------ ----- Raw materials and supplies $123.3 $120.1 Work in process 96.0 111.4 Finished goods 55.2 50.2 ------ ------ 274.5 281.7 LIFO reserve (79.1) (73.3) ------ ------ Inventory, net $195.4 $208.4 ====== ====== Inventories are valued principally by the dollar value last-in, first-out (LIFO) method of inventory accounting; such valuations are not in excess of market. Cost for other inventories has been determined principally by the average cost and first-in, first-out (FIFO) methods. Elements of costs in inventories include raw materials, direct labor and manufacturing overhead. Inventories under the LIFO method are based on annual estimates of quantities and costs as of the year-end; therefore, the condensed financial statements at September 30, 2000, reflect certain estimates relating to inventory quantities and costs at December 31, 2000. 3. Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share reflect the dilutive effect of stock options.
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- Basic Earnings Per Share 2000 1999 2000 1999 - ------------------------ ---- ---- ---- ---- Basic earnings: Income from continuing operations $ 23.4 $ 2.6 $ 66.0 $ 7.0 Net income $ 23.4 $ 2.6 $ 66.0 $ 11.4 Basic shares 45.1 45.2 45.1 45.5 Basic earnings per share: Continuing operations $ 0.52 $ 0.06 $ 1.46 $ 0.16 Net income $ 0.52 $ 0.06 $ 1.46 $ 0.25
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- Diluted Earnings Per Share 2000 1999 2000 1999 - -------------------------- ------ ------ ---- ------ Diluted earnings: Income from continuing operations $ 23.4 $ 2.6 $ 66.0 $ 7.0 Net income $ 23.4 $ 2.6 $ 66.0 $ 11.4 Diluted shares: Basic shares 45.1 45.2 45.1 45.5 Stock options .1 - .1 - ------ ------ ---- ------ Diluted shares 45.2 45.2 45.2 45.5 ====== ====== ==== ====== Diluted earnings per share: $ 0.52 $ 0.06 $ 1.46 $ 0.16 Continuing operations $ 0.52 $ 0.06 $ 1.46 $ 0.25 Net income
4. The Company is party to various governmental and private environmental actions associated with waste disposal sites and manufacturing facilities. Environmental provisions charged to income amounted to $4 million in each of the three-month periods ended September 30, 2000 and 1999, and $11 million and $12 million for the nine-month periods ended September 30, 2000 and 1999, respectively. Charges to income for investigatory and remedial efforts were material to operating results in 1999 and may be material to operating results in 2000. The consolidated balance sheets include reserves for future environmental expenditures to investigate and remediate known sites amounting to $117 million at September 30, 2000 and $125 million at December 31, 1999, of which $92 million and $100 million were classified as other noncurrent liabilities, respectively. Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other potentially responsible parties and the Company's ability to obtain contributions from other parties and the length of time over which site remediation occurs. It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably against the Company. 5. In October 1996, the Board of Directors authorized a share repurchase program of up to 5 million shares of Olin common stock and in April 1998, approved an additional share repurchase program of up to an additional 5 million shares of Olin common stock, from time to time, as market conditions warrant. Since January 1997 the Company has repurchased 7,844,600 shares, of which 2,844,600 were under the April 1998 program. During the first nine months of 2000, no shares of the Company's common stock were repurchased. 6. Segment operating income is defined as earnings before interest expense, interest income, other income and income taxes and includes the operating results of non-consolidated affiliates. Segment operating results include an allocation of corporate operating expenses. Intersegment sales are not material.
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- Sales: 2000 1999 2000 1999 ------ ------ -------- ------ Chlor Alkali Products $ 85.9 $ 65.0 $ 250.0 $194.5 Metals 216.3 193.6 666.3 566.8 Winchester 90.6 95.5 217.0 212.4 ------ ------ -------- ------ Total sales $392.8 $354.1 $1,133.3 $973.7 ====== ====== ======== ====== Operating income (loss): Chlor Alkali Products $ 8.3 $(17.4) $ 20.1 $(49.9) Metals 21.7 15.9 75.2 55.6 Winchester 11.2 9.6 20.5 15.3 ------ ------ -------- ------ Total operating income 41.2 8.1 115.8 21.0 Interest expense 3.9 4.2 11.8 12.1 Interest income 0.4 0.2 0.7 1.8 Other income 0.1 0.3 2.1 1.0 ------ ------ -------- ------ Income from continuing operations before taxes $ 37.8 $ 4.4 $ 106.8 $ 11.7 ====== ====== ======== ======
7. The Company does not provide for U.S. income taxes on foreign currency translation adjustments since it does not provide for such taxes on undistributed earnings of foreign subsidiaries. The components of comprehensive income for the three-month and nine-month periods ended September 30, 2000 and 1999 are as follows:
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2000 1999 2000 1999 ----- ----- ----- ----- Net income $23.4 $ 2.6 $66.0 $11.4 Other comprehensive income: Cumulative translation adjustment -- (0.2) (2.0) 1.4 ----- ----- ----- ----- Comprehensive income $23.4 $ 2.4 $64.0 $12.8 ===== ===== ===== =====
8. On February 8, 1999, the Company completed the Spin-Off of its specialty chemicals businesses as Arch Chemicals, Inc. For the first nine months of 1999, net income from discontinued operations includes one month of operating results. 9. In June, 2000, the Company signed a letter of intent with Occidental Petroleum Corporation to combine the companies' chlor alkali and related businesses in a partnership. In October 2000, the Company announced that its letter of intent had expired, and that the partnership negotiations were discontinued primarily due to regulatory issues and certain other matters on which the parties could not agree. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- CONSOLIDATED RESULTS OF OPERATIONS
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- ($ in millions, except per share data) 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------ Sales $392.8 $354.1 $1,133.3 $973.7 Gross Margin 73.0 44.4 209.6 129.8 Selling and Administration 31.2 31.8 90.8 95.1 Interest Expense, net 3.5 4.0 11.1 10.3 Income from Continuing Operations 23.4 2.6 66.0 7.0 Net Income 23.4 2.6 66.0 11.4 Diluted Earnings Per Common Share: Income From Continuing Operations $0.52 $0.06 $1.46 $0.16 Net Income $0.52 $0.06 $1.46 $0.25 - -------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO 1999 Sales increased 11% due to higher selling prices and increased metal values, offset in part by reduced volumes. The increase in selling prices was primarily related to higher Electrochemical Unit ("ECU") netbacks in the Chlor Alkali Products segment. Lower sales volumes in Winchester and Chlor Alkali more than offset increased Metals shipments. Gross margin percentage increased from 13% in 1999 to 19% in 2000 primarily due to higher ECU prices. Selling and administration as a percentage of sales was 8% in 2000 down from 9% in 1999 due to the higher sales base in 2000 as a result of the factors noted above. Selling and administration was $0.6 million lower than last year as lower administration expenses, primarily pension expense, offset fees associated with the chlor alkali partnership negotiations with Occidental Petroleum Corporation ("Occidental"). The partnership negotiations were discontinued in October, 2000. The increase in operating results from the non-consolidated affiliates was due primarily to the improved operating results from the Sunbelt joint venture, which was favorably impacted by the higher ECU pricing. Interest expense, net of interest income, decreased from 1999 due to interest expense capitalized in connection with the expansion of high performance alloys in Metals and higher interest income in 2000 due to higher average cash, cash equivalents and short-term investment balances. The effective tax rate decreased to 38.1% from 40.9% due to lower non-deductible expenses related to Company-owned life insurance programs. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO 1999 Sales increased 16% due to increased selling prices and volumes and higher metal values. The increase in selling prices was primarily related to higher ECU netbacks in the Chlor Alkali Products segment. Sales volumes were higher across all segments with the biggest impact coming from the Metals segment. Gross margin percentage increased from 13% in 1999 to 18% in 2000 primarily due to higher ECU prices. Selling and administration as a percentage of sales was 8% in 2000 down from 10% in 1999 due to the higher sales base in 2000 as a result of the factors noted above. Selling and administration was $4.3 million lower than in 1999 due to lower administration expenses, primarily pension expense, offset in part by fees incurred in 2000 and associated with the chlor alkali partnership negotiations with Occidental. The increase in operating results from the non-consolidated affiliates was due primarily to the improved operating results from the Sunbelt joint venture, which was favorably impacted by the higher ECU pricing. Interest expense, net of interest income, increased from 1999 due primarily to lower interest income in 2000 due to lower average cash, cash equivalents and short-term investment balances. The effective tax rate decreased to 38.2% from 40.2% due to lower non-deductible expenses related to Company-owned life insurance programs. CHLOR ALKALI PARTNERSHIP In June 2000, the Company signed a letter of intent with Occidental to combine the companies' chlor alkali and related businesses in a partnership. In October 2000, the Company announced that its letter of intent had expired. The partnership negotiations were discontinued primarily due to regulatory issues and certain other matters on which the parties could not agree. SEGMENT OPERATING RESULTS Segment operating results are defined as earnings before interest expense, interest income, other income and income taxes and include the operating results of non-consolidated affiliates. Segment operating results include an allocation of corporate operating expenses.
CHLOR ALKALI PRODUCTS Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- ($ in millions) 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------- Sales $ 85.9 $ 65.0 $ 250.0 $ 194.5 Operating Income (Loss) 8.3 (17.4) 20.1 (49.9)
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO 1999 Sales and operating results were higher than 1999 primarily due to higher ECU netbacks, offset in part by lower volumes. Average ECU netbacks in the third quarter of 2000 were approximately $300, compared to $210 in the third quarter of 1999. The volume shortfall was primarily due to lower demand for chlorine from the vinyls market, caused primarily by the slowdown in the general economy, weaker exports, seasonality and inventory adjustments. Demand for caustic had been less affected and therefore, caustic inventories had continued to shrink, thereby increasing caustic prices. Higher selling prices and improved operating results from the Sunbelt joint venture due to the increase in ECU prices, more than offset the impact of lower volumes and fees associated with the proposed chlor alkali partnership, resulting in a $25.7 million increase in operating income. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO 1999 Sales and operating results were higher than 1999 primarily due to higher ECU netbacks and ongoing cost reduction initiatives. Average ECU netbacks in the first nine months of 2000 were approximately $290, compared to $215 in the first nine months of 1999. Higher selling prices, lower operating costs and improved operating results in 2000 from the Sunbelt joint venture due to the increase in ECU prices offset the fees associated with the proposed chlor alkali partnership and contributed to the 2000 year-to-date improvement in operating income.
METALS Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- ($ in millions) 2000 1999 2000 1999 - ----------------------------------------------------------------------------------- Sales $ 216.3 $ 193.6 $ 666.3 $ 566.8 Operating Income 21.7 15.9 75.2 55.6
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO 1999 Sales increased 12% with higher metal values, selling prices and volumes each accounting for one-third of the total improvement. Strip shipments to the electronics, building products and coinage markets were higher this year, as were A.J. Oster ("Oster") volumes to the distributor market. Aegis' shipments to the telecommunications industry were ahead of last year. Shipments to the automotive and ammunition markets were lower than the previous year. Higher volumes and a favorable product mix increased Metals operating income. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO 1999 Sales increased 18% due to increased volumes and higher metal values and selling prices. Higher volumes increased sales by 10%, while higher metal values and selling prices accounted for the remaining 8% improvement. Strip shipments for coinage products were higher than the first nine months of 1999. Distributor market (Oster) shipments were higher as well as those to the telecommunications market served by Aegis. Shipments for building products were lower in 2000. Higher volumes, improved pricing and a favorable product mix contributed to the improvement in operating income.
WINCHESTER Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- ($ in millions) 2000 1999 2000 1999 - --------------------------------------------------------------------------------- Sales $ 90.6 $ 95.5 $ 217.0 $ 212.4 Operating Income 11.2 9.6 20.5 15.3
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO 1999 Sales in 2000 were 5% lower than 1999 primarily due to lower volumes of domestic commercial ammunition offset in part by higher domestic commercial prices and increased military and international shipments. Operating income improved due to higher domestic commercial selling prices and lower operating expenses. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO 1999 Sales in 2000 were slightly higher than 1999 primarily due to higher domestic commercial ammunition selling prices. Operating income improved significantly from 1999 due to higher selling prices, an improved product mix and higher fees from the Lake City Army Ammunition Plant. These improvements more than offset higher manufacturing costs and consulting expenses. 2000 FOURTH QUARTER OUTLOOK The Company believes fourth quarter earnings per share will be in the $.40 range. The Company expects the slowing economy will affect demand in some segments of the Metals and Chlor Alkali businesses in the fourth quarter, and that the Company will experience a reduction in Winchester's sales, in part due to normal seasonality. The sequential decline in Winchester's profits is the reason for the lower fourth quarter EPS, when compared to the third quarter of 2000. The Company believes that fourth quarter 2000 market conditions in the Chlor Alkali segment will not be as strong as the third quarter from a volume point of view, but will show some improvement from an ECU price point of view. Lower demand for chlorine in the vinyls segment, caused primarily by the slowdown in the general economy, weaker exports, seasonality and inventory adjustments, is expected to lead to reduced chlor alkali industry operating rates in the fourth quarter. The Company expects that higher caustic prices will slightly more than offset the impact of lower chlorine pricing in the fourth quarter for a net increase in the overall ECU price. The net effect of the price and volume changes is that fourth quarter Chlor Alkali profits may be somewhat lower than the third quarter of 2000, but nevertheless substantially higher than the fourth quarter results in 1999. The current outlook for the Metals business and its downstream markets is somewhat mixed. Many of the factors which affected third quarter 2000 performance are expected to continue into the fourth quarter of 2000. However, there will be some differences. For example, it is anticipated that stronger performance from the Aegis operations will mitigate the effect of sequentially lower demand for brass in ammunition and building products. Overall, the Company expects that Metals profits in the fourth quarter will be in the same general range as the third quarter. Because of the seasonal characteristics of the Winchester business, sales and profits in the fourth quarter are the lowest of the year and especially low when compared with the third quarter, which is usually the highest of the year. Relative to the fourth quarter of 1999, the Company is projecting that Winchester's sales will be lower in the fourth quarter of 2000. In addition, in the fourth quarter last year, Winchester recorded significant fee income from the Lake City Army Ammunition plant. This will result in lower fourth quarter earnings in 2000 in comparison to the fourth quarter of 1999. 2001 FULL YEAR OUTLOOK The Company's preliminary forecast for 2001 indicates that the Company will post stronger earnings growth over 2000 with earnings per share increasing about 35% to the $2.50 range. The primary driver of the Company's earnings is the selling price of chlor alkali products, which are expected to increase in 2001. The forecast is based on the latest CMAI projections and an analysis of the escalation provisions of the Company's contracts, particularly as it applies to the caustic soda increases which have been announced. It also assumes a recovery in chlorine demand from the vinyl industry by the middle of the year, which affects the assumed operating rates. The current spike in energy costs is not as much of an issue for the Company as it is for some competitors. The Company's cost structure is not particularly sensitive to natural gas prices, and the Company's electricity is purchased from utilities that are primarily coal, nuclear and hydro-power based. DISCONTINUED OPERATIONS On February 8, 1999, the Company completed the Spin-Off of its specialty chemicals businesses as Arch Chemicals, Inc. ("Arch Chemicals") (the "Spin-Off"). For the first nine months of 1999, net income includes one month of operating results. ENVIRONMENTAL MATTERS In the nine months ended September 30, 2000 and 1999, the Company spent approximately $19 million and $10 million, respectively, for investigatory and remediation activities associated with former waste sites and past operations. Spending for environmental, investigatory and remedial efforts for the full year 2000 is estimated to be $30 million. Cash outlays for remedial and investigatory activities associated with former waste sites and past operations were not charged to income but instead were charged to reserves established for such costs identified and expensed to income in prior periods. Associated costs of investigatory and remedial activities are provided for in accordance with generally accepted accounting principles considering probability and the ability to reasonably estimate future costs. Charges to income for investigatory and remedial activities were $11 million and $12 million for the nine months ended September 30, 2000 and 1999, respectively. Charges to income for investigatory and remedial efforts were material to operating results in 1999 and may be material to net income in 2000 and future years. The Company's consolidated balance sheets included liabilities for future environmental expenditures to investigate and remediate known sites amounting to $117 million at September 30, 2000 and $125 million at December 31, 1999, of which $92 million and $100 million were classified as other noncurrent liabilities, respectively. Those amounts did not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology. Those liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and their costs can be better estimated. As a result of these reassessments, future charges to income may be made for additional liabilities. Annual environmental-related cash outlays for site investigation and remediation, capital projects, and normal plant operations are expected to range between $40 - $50 million over the next several years. While the Company does not anticipate a material increase in the projected annual level of its environmental-related costs, there is always the possibility that such increases may occur in the future in view of the uncertainties associated with environmental exposures. Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other potentially responsible parties and the Company's ability to obtain contributions from other parties and the lengthy time periods over which site remediation occurs. It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably against the Company. LIQUIDITY, INVESTMENT ACTIVITY AND OTHER FINANCIAL DATA CASH FLOW DATA Nine Months Ended September 30, ------------------- Provided By (Used For) ($ in millions) 2000 1999 - ---------------------------------------------------------------------------- Net Cash and Cash Equivalents Provided/(Used) By Operating Activities from Continuing Operations $ 97.0 $ (6.8) Net Operating Activities 97.0 (9.7) Capital Expenditures (57.1) (44.0) Net Investing Activities (48.2) (34.9) Purchases of Olin Common Stock -- (11.3) Net Financing Activities (27.6) 30.8 In 2000, income from continuing operations exclusive of non-cash charges and cash and cash equivalents on hand were used to finance the Company's working capital requirements, capital projects and dividends. OPERATING ACTIVITIES The increase in cash provided by operating activities from continuing operations was primarily attributable to higher operating income and a lower investment in working capital. The lower investment in working capital in 2000 was due to higher cash expenditures in 1999 which were accrued at December 31, 1998 and related to the Spin-Off of Arch Chemicals and lower inventory levels in 2000. Higher accounts receivable in 2000 were attributable to higher metal values and ECU prices and increased volumes primarily in Metals. CAPITAL EXPENDITURES Capital spending of $57.1 million in 2000 was $13.1 million higher than 1999. For the total year, capital spending is expected to be in the $90 million range. The increase in capital spending in the first nine months of 2000 and for the total year 2000 over the comparable 1999 periods is primarily in the Metals segment to expand production capacity in its higher value added product categories, in particular high performance alloys. FINANCING ACTIVITIES At September 30, 2000, the Company had available a $165 million line of credit under an unsecured revolving credit agreement with a group of banks. At September 30, 2000, the Company had no outstanding borrowings under the credit facility. The Company may select various floating rate borrowing options. The Company believes that the credit facility is adequate to satisfy its liquidity needs for the foreseeable future. The credit facility includes various customary restrictive covenants including restrictions related to the ratio of debt to earnings before interest, taxes, depreciation and amortization and the ratio of earnings before interest, taxes, depreciation and amortization to interest. During the first nine months of 2000, no shares of the Company's common stock were repurchased. During the first nine months of 1999, the Company used $11.3 million to repurchase 921,400 shares of the Company's common stock. In October 2000, the Company resumed its share repurchase program upon the discontinuation of the chlor alkali partnership negotiations with Occidental. Prior to the Spin-Off in February 1999, the Company borrowed $75 million under a credit facility, which liability was assumed by Arch Chemicals. The Company used these funds for general corporate purposes, which included share repurchases. The percent of total debt to total capitalization decreased to 40% at September 30, 2000, from 43% at year-end 1999. The decrease from year-end 1999 was due to an increase in equity resulting from improved operating profits. In 2000, the Company paid first, second and third quarter dividends of $0.20 per share. Prior to the Spin-Off, the Company paid a first quarter 1999 dividend of $0.30 per share. Following the distribution of Arch Chemicals, the quarterly dividend was reduced to $0.20 per share to reflect the effect of the distribution. In October 2000, the Company's Board of Directors declared a quarterly dividend of $0.20 per share on its common stock, which is payable on December 11, 2000, to shareholders of record on November 10, 2000. NEW ACCOUNTING STANDARDS In 1998, the Financial Accounting Standards Board ("FASB") issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The FASB has postponed the implementation date of this statement, which will now be effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company will adopt FASB No. 133 on January 1, 2001 and expects to achieve hedge accounting treatment for substantially all of the Company's business transactions whose risks are covered using derivative instruments. The hedge accounting treatment provides for the deferral of gains or losses on derivative instruments until such time as the related transactions occur. The Company estimates that if it had accounted for its derivatives in accordance with the new standard as of September 30, 2000, assets totaling $1.9 million would have been recorded on the balance sheet with offsetting entries to other liabilities and Other Comprehensive Income. The new standard does not allow for the special accounting treatment on the portion of any hedge that is not effective. At this time the Company does not believe that gains or losses as a result of an ineffective hedge would have a material effect on the Company's financial statements as of September 30, 2000. Effective July 1, 2000, the Company adopted FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation." Adoption of this interpretation did not have a material effect on the Company's results of operations or financial position. CAUTIONARY STATEMENT UNDER FEDERAL SECURITIES LAWS: The information contained in the 2000 Fourth Quarter Outlook and the 2001 Full Year Outlook sections, the Environmental Matters section, the Liquidity, Investment Activity and Other Financial Data section (and subsections thereof), and Notes to Condensed Financial Statements contains forward-looking statements that are based on management's beliefs, certain assumptions made by management and current expectations, estimates and projections about the markets and economy in which the Company and its respective divisions operate. Words such as "anticipates," "expects," "believes," "should," "plans," "will," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expected or forecasted in such forward-looking statements. The Company does not undertake any obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. Future Factors which could cause actual results to differ materially from those discussed in these sections and notes include but are not limited to: general economic and business and market conditions; lack of moderate growth in the U.S. economy or even a slight recession in any period or year; competitive pricing pressures; changes in Chlor Alkali's ECU prices from expected levels; Chlor Alkali operating rates below anticipated levels; higher-than-expected raw material costs; higher-than-expected transportation and/or logistics costs; a protracted work stoppage in connection with collective bargaining negotiations with labor unions; a downturn in any of the markets the Company serves such as electronics, automotive, ammunition and housing; the supply/demand balance for the Company's products, including the impact of excess industry capacity; efficacy of new technologies; changes in U.S. laws and regulations; failure to achieve targeted cost reduction programs; capital expenditures, such as cost overruns, in excess of those scheduled; environmental costs in excess of those projected; and the occurrence of unexpected manufacturing interruptions/outages. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk in the normal course of its business operations due to its operations in different foreign currencies, its purchases of certain commodities and its ongoing investing and financing activities. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. The Company has established policies and procedures governing its management of market risks and the uses of financial instruments to manage exposure to such risks. The primary purpose of the Company's foreign currency hedging activities is to manage currency risks resulting from purchase and sale commitments in foreign currencies (principally Australian dollar and Canadian dollar) and relating to particular anticipated purchases and sales expected to be denominated in those same foreign currencies. Foreign currency hedging activity is not material to the Company's consolidated financial position, results of operations or cash flow. Certain materials, namely copper, lead and zinc, used primarily in the Company's Metals and Winchester segments products are subject to price volatility. Depending on market conditions, the Company may enter into futures contracts and put and call option contracts in order to reduce the impact of metal price fluctuations. As of September 30, 2000, the Company maintained open positions on futures contracts totaling $36 million. Assuming a hypothetical 10% increase in commodity prices which are currently hedged, the Company would experience a $3.6 million increase in its cost of inventory purchased, which would be offset by a corresponding increase in the value of related hedging instruments. The Company is exposed to changes in interest rates primarily as a result of its investing and financing activities. Investing activity is not material to the Company's consolidated financial position, results of operations or cash flow. The current debt structure of the Company includes primarily long-term fixed-rate debt utilized to fund business operations and maintain liquidity. As of September 30, 2000, the Company had long-term borrowings of $228 million of which $35 million was at variable rates. The Company has interest rate swaps to hedge underlying debt obligations. Interest rate swap activity is not material to the Company's consolidated financial position, results of operations or cash flow. If the actual change in interest rates or commodities pricing is substantially different than expected, the net impact of interest rate risk or commodity risk on the Company's cash flow may be materially different than that disclosed above. The Company does not enter into any derivative financial instruments for trading purposes. Part II - Other Information Item 1. Legal Proceedings. ----------------- Not Applicable. Item 2. Changes in Securities and Use of Proceeds. ----------------------------------------- Not Applicable. Item 3. Defaults Upon Senior Securities. ------------------------------- Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders. --------------------------------------------------- Not Applicable. Item 5. Other Information. ----------------- Not Applicable. Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits -------- 10(d) Olin Senior Executive Pension Plan amended as of July 27, 2000. 12. Computation of Ratio of Earnings to Fixed Charges (Unaudited). 27. Financial Data Schedule. (b) Reports on Form 8-K ------------------- Form 8-K filed September 6, 2000 with respect to extension of the June 28, 2000 Letter of Intent between Olin Corporation and Occidental Petroleum Corporation to combine their chlor-alkali and related businesses in a partnership between Olin Corporation and Occidental's Occidental Chemical Corporation subsidiary. Form 8-K filed July 18, 2000 with respect to June 28, 2000 Letter of Intent between Olin Corporation and Occidental Petroleum Corporation to combine their chlor-alkali and related businesses in a partnership between Olin Corporation and Occidental's Occidental Chemical Corporation subsidiary. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OLIN CORPORATION (Registrant) By: /s/ A. W. Ruggiero ------------------ Executive Vice President and Chief Financial Officer (Authorized Officer) Date: November 13, 2000 EXHIBIT INDEX Exhibit No. Description - ------- ----------- 10(d) Olin Senior Executive Pension Plan amended as of July 27, 2000. 12. Computation of Ratio of Earnings to Fixed Charges (Unaudited). 27. Financial Data Schedule. EX-10.(D) 2 0002.txt OLIN SR. EXEC. PENSION PLAN AMEND. AS OF 07/27/00 Exhibit 10(d) OLIN SENIOR EXECUTIVE PENSION PLAN (Amended as of July 27, 2000) Article I. The Plan -------------------- 1.1 Establishment of Plan. Olin Corporation (the "Company" or ---------------------- "Olin") hereby restates its Olin Senior Executive Pension Plan, originally adopted by the Board of Directors on September 27, 1984. The Effective Date of this restatement is February 8, 1999. 1.2 Purpose. The purpose of this Plan is to attract and retain a -------- management group capable of assuring Olin's future success by providing them with supplemental retirement income under this Plan. This Plan is intended to be an unfunded, nonqualified deferred compensation plan for select management employees. Article II. Eligibility ------------------------ 2.1 Participation. Any employee of the Company or its subsidiaries -------------- (collectively referred to as "Employing Companies") whose job is rated at 2,000 Hay Points or more or who is a Section 16(b) reporting officer, and who is selected by the Compensation Committee (referred to in this Plan as the "Selection Committee"), shall participate in the Plan. As provided hereinafter, the Selection Committee shall also have the power to remove any Participant from the Plan, whether or not he or she has begun to receive benefits hereunder. 2.2. Transfer of Arch Employees and Reserves. As of February 8, ---------------------------------------- 1999, the effective date of the spin-off of Arch Chemicals, Inc. ("Arch") from the Company (the "Arch Spin-off Date"), the employment of certain Company employees, who were defined as "Arch Employees" within the meaning of the Employee Benefits Allocation Agreement as of the same date, was transferred to Arch or its affiliated companies. Those Arch Employees who had been participating in this Plan immediately commenced participation in the Arch Senior Executive Pension Plan (the "Arch Plan"), and Olin transferred to Arch the reserves reflecting the value of the accrued liabilities of such employees under this Plan. From and after the Arch Spin-off Date, neither Olin nor this Plan shall have any liability with respect to the former participation by such Arch Employees in this Plan. -1- Article III. Benefits --------------------- 3.1 Benefit Formula. --------------- Upon retirement, as hereinafter provided, a Participant shall be entitled to receive an annual "Retirement Allowance" equal to the lesser of ------------- (a) and (b) below: (a) three percent (3%) of the Participant's Average Compensation, multiplied by his Years of Benefit Service credited while the employee was a Participant in this Plan, plus one and one-half percent (1%) of the Participant's Average Compensation multiplied by his Years of Benefit Service credited under all qualified plans of Olin Corporation or its affiliates while the employee was not a Participant in this Plan, provided that the resulting percentage of Average Compensation shall be reduced by one-third of one percent (1/3%) for each month by which the Participant's benefits begin prior to his sixty-second (62nd) birthday; reduced by the sum of (i) the Participant's annual retirement allowance payable from all Olin qualified and nonqualified defined benefit pension plans of the Company and all Employing Companies, including, without limitation, the Olin Corporation Employees Pension Plan which was previously known as the Nonbargaining Employees' Pension Plan of Olin Corporation and prior to that as the Olin Salaried Pension Plan (all such plans being collectively referred to in this Plan as the "Olin Employees Pension Plan"), and the equivalent actuarial value of any other arrangement with the Company or an Employing Company which the Plan Administrator, in its sole discretion, determines to be a pension supplement (collectively referred to hereinafter as the "Other Olin Plans"); and (ii) fifty percent (50%) of the Participant's Primary Social Security Benefit. (b) fifty percent (50%) of the Participant's Average Compensation, reduced by the sum of (i) the amount of annual retirement benefits from the Olin Employees Pension Plan and all Other Olin Plans (as previously defined) and all qualified and non-qualified deferred compensation plans of the Participant's previous and subsequent employers; and (ii) fifty percent (50%) of the Participant's Primary Social Security Benefit. (c) For purposes of this benefit formula, "Average Compensation", "Years of Benefit Service", "Retirement Allowance" and "Primary Social Security Benefit" shall -2- have the same definition as that contained in the Olin Employees Pension Plan; provided, however, that (i) "Average Compensation" under this Plan shall include deferred amounts of regular salary and deferrals under management incentive plans (other than the Performance Unit Plan, the EVA Bonus Bank and other long-term incentive and long-term bonus plans); (ii) Average Compensation of Participants whose employment is being transferred directly to Primex Technologies, Inc. or its affiliates ("Primex") (or who transfer directly within five (5) years following the spin-off of Primex) shall be determined taking into account reasonable compensation paid by Primex (as determined by the Plan Administrator of this Plan); (iii) in calculating Average Compensation, executive severance which is payable to certain Participants under employment agreements shall be treated as if paid over the number of months used to calculate the amount of such severance, even if such severance is received in a lump sum; (iv) Average Compensation shall be calculated without regard to the dollar limitations imposed by Section 401(a)(17) of the Internal Revenue Code; and (v) "Years of Benefit Service" shall include service imputed as a result of treating executive severance as having been received over the number of months used to calculate such severance. (d) The annual retirement allowances payable under the Olin Employees Pension Plan, Other Olin Plans and from pension plans of the Participant's previous employers, which are to be used to reduce the benefit payable under (a) or (b) above, shall be determined assuming (i) that the Participant selected a 50% joint and survivor annuity under such plans, (ii) began receiving benefits thereunder at their actual commencement date (rather than the commencement date for benefits under this Plan), and (iii) using the actuarial equivalent factors specified in the plans which are the subject of the offset or, if such factors are not reasonably available, such factors as may, from time to time, be elected by the Plan Administrator. 3.2 Early Retirement. ---------------- (a) Except as otherwise provided in Section 4.2(a), a Participant may retire from active service with all Employing Companies and commence benefits under this Plan at any time after reaching his fifty-fifth (55th) birthday, provided, however, that Accelerated Benefits (as provided for in Section 4.2(b) of the Plan) may not commence until at least twelve (12) full months following the Participant's actual retirement. In the case of Participants who transfer directly to Arco Chemical Company ("Arco") or Primex (or who, in the case of Primex only, transfer directly to Primex within five (5) years of the spin-off of Primex), and in the case of Arch only, who transfer directly to Arch after the Arch Spin-off Date and on or before February 8, 2000, (i) "actual retirement" shall be construed to mean retirement or termination of service from Arco, Primex or Arch and their affiliates, as the case may be, and (ii) service with Primex, Arco, or Arch (and their affiliates) shall be credited in enabling the Participant to attain his early retirement age (but not in determining Years of Benefit Service) under this Plan. -3- (b) For purposes of (i) determining whether a Participant has reached his fifty-fifth (55th) birthday and, thus, is eligible to commence benefits under this Section 3.2 instead of on a deferred vested basis, and (ii) calculating the annual retirement allowance from the Olin Employees Pension Plan which is to be used as an offset, any Participant who has completed at least seven (7) Years of Creditable Service (as defined in the Olin Employees Pension Plan) and who is at least age fifty-two (52) and less than age fifty-five (55) on the date his service is terminated (without taking into account any severance period) other than (i) for cause or (ii) as a result of a voluntary termination, shall be treated as continuing as an active Employee until age fifty-five (55). In the case of Participants who transfer directly to Arco, or to Primex within five (5) years of the spin-off of Primex, and in the case of Arch only, who transfer directly to Arch after the Arch Spin-off Date and on or before February 8, 2000, service with Arco, Primex and Arch, respectively, shall be credited in determining whether the Participant has reached age 55 under this paragraph (b). Such service shall be imputed for the sole purposes of determining whether the Participant qualifies for subsidized early retirement benefits, and shall not be treated as "Benefit Service" for the purpose of calculating the amount of the Participant's Retirement Allowance. A Participant may not commence benefits hereunder until he actually reaches age fifty-five (55). 3.3 Deferred Vested Employees. Any Participant who terminates active ------------------------- service with all Employing Companies prior to having reached age fifty-five (55) may commence benefits under this Plan only after having reached age sixty-five (65); provided however that, in the case of Participants who transfer directly to Primex, Arco, or Arch within the timeframes specified above, service with those respective companies and their affiliates shall be counted in enabling such Participants to retire on or after attaining age fifty-five (55) and actually retiring from Primex, Arco, or Arch as the case may be, in accordance with Section 3.2 above. In the case of a deferred vested Participant, benefits paid from this Plan will assume that the Participant did not commence benefits under the Olin Employees Pension Plan until he or she reached age sixty-five (65), even though the Participant may actually commence benefits under the Olin Employees Pension Plan prior to that date. In the event that an Olin Employee transfers to and becomes an Employee of Arch on or prior to February 8, 2000, no separation from service shall be deemed to occur permitting a distribution to such individual of benefits under this, or any other, provision of this Plan. 3.4 Calculation of Benefit if Participant is Disabled. In the event ------------------------------------------------- that a Participant becomes Totally Disabled as that term is defined in the Olin Employees Pension Plan, the Participant shall continue to receive the same service credit under this Plan as would be applicable to Totally Disabled nonbargaining employees covered by the Olin Employees Pension Plan. The disabled Participant's benefit under this Plan shall be calculated in accordance with 3.1(a) and (b), and shall be payable as of the date that the Participant is no longer Totally Disabled (if such date occurs after age fifty-five (55)) or at age sixty-five (65), if the Employee is still then Disabled. If a Participant is no longer Disabled prior to reaching age fifty-five (55), then his entitlement to benefits shall be determined under Section 3.3, if he terminates service prior to reaching age 55, or under -4- the other applicable provisions of this Plan, if he returns to active service. No Participant shall qualify for Disability Benefits hereunder once he or she is no longer actively employed by Olin Corporation or its affiliates. 3.5 Transfers between Olin and Arch. It is contemplated that Plan -------------------------------- Participants may transfer their employment after the Arch Spin-off Date and ----- on or before February 8, 2000 from Olin to Arch and vice versa and ---- ----- commence, or resume participation in the Senior Executive Pension Plan of their then new employer. (a) Transfer to Arch from Olin. In the event that a Plan Participant --------------------------- transfers employment to Arch after the Arch Spin-off Date and on or prior to February 8, 2000, his or her benefit accrual under this Plan shall cease and Olin shall remain liable for payment of any benefits accrued under this Plan to the date of such transfer. As provided in Section 3.3, no separation from service shall be deemed to occur under this Plan permitting a distribution under any provision of this Plan, and benefits hereunder shall not commence until the Participant has terminated his employment with Arch and its affiliates and has otherwise qualified for benefits hereunder. When commenced, benefits payable hereunder shall be based upon the Participant's service with Olin to the date of transfer; provided, however that Olin shall continue to recognize a Participant's service with Arch and its affiliates subsequent to his transfer to Arch solely for purposes of determining the Participant's vesting and attainment of retirement dates under this Plan. (b) Transfer to Olin from Arch. In the event that an Arch Employee --------------------------- transfers employment to Olin from Arch after the Arch Spin-off Date and on or prior to February 8, 2000, benefit accrual under the Arch Plan shall cease and Arch shall remain liable for payment of any benefits accrued under the Arch Plan to the employees date of transfer to Olin. Benefits shall not commence under the Arch Plan until the former Arch employee terminates service with Olin and its affiliates and has otherwise qualified for benefits under the Arch Plan. In computing benefit under this Plan and determining attainment of retirement ages under this Plan, Olin shall recognize the compensation received, and service rendered by such Participant while employed by Arch and its affiliates up to the Participant's date of transfer to Olin. When benefits commence under this Plan, they shall be offset by the benefit that would be payable to the Participant from the Arch Plan, as of the date benefits commence hereunder, regardless of when such benefit under the Arch Plan actually commences. Article IV. Payment of Benefits ------------------------------- 4.1 Payment Provisions for Current and Future Retirees. In the --------------------------------------------------- event that the Participant (i) does not elect to establish an employee- grantor trust in accordance with Section 4.2(a), (ii) does not elect to receive Accelerated Benefits in accordance with Section 4.2(a), and (iii) elects to commence his benefits under this Plan at the same time that he commences his Qualified Plan Benefit, then the Retirement Allowance payable hereunder shall be paid commencing at the same time and in the same form as that in which the Qualified Plan Benefit is payable to the Participant. If the Participant elects an -5- actuarially equivalent form of benefit payment with respect to his Qualified Plan Benefits, that same form of payment shall apply to payment of his Retirement Allowance hereunder. Any election to receive regular monthly benefits under this Section 4.3 must be made at least one full year prior to the Participant's Accelerated Benefit Commencement Date. 4.2 Payment Provisions for Active Employees. ---------------------------------------- (a) As of October 31 of the calendar year following the year in which an actively employed Participant meets the Minimum Benefit Accumulation threshold provided for in Section 4.4, the Actuarial Present Value (determined as hereinafter provided) of the after-tax amount of an actively employed Participant's Retirement Allowance shall be deposited in an employee-grantor trust established by the Participant unless, at least one full year prior to the funding of such employee-grantor trust, the Participant shall instead have elected to receive "Accelerated Benefits" as hereinafter provided. If a Participant elects to receive Accelerated Benefits, then the Actuarial Present Value of such Benefits shall be paid, at the election of the Chairman of the Board of Directors of the Company, either in a single sum or in up to three (3) annual installments (such single sum or annual installments being referred to in this Plan as "Accelerated Benefits"). The Participant's Accelerated Benefits shall commence on his Accelerated Benefit Commencement Date, which shall be twelve full months following a Participant's actual retirement at age fifty-five (55) or later (the Participant's "Accelerated Benefit Commencement Date"). In the case of Participants who transfer directly to Primex or Arco (or who, in the case of Primex only, transfer directly to Primex within five (5) years of the spin-off of Primex), and in the case of Arch only, who transfer directly to Arch after the Arch Spin-off Date and on or before February 8, 2000, "actual retirement" shall be construed to mean retirement or termination of service from the transferee employer. Service with Primex, Arco or Arch (and their affiliates) shall be credited in enabling the Participant to attain his early retirement age (but not in determining his Years of Benefit Service) under this Plan. (b) In the event that an actively employed Participant elects not to establish an employee-grantor trust, but instead to receive Accelerated Benefits, regular monthly benefits shall commence to be paid upon such Participant's actual retirement in accordance with Section 4.3 until such Participant reaches his Accelerated Benefit Commencement Date, at which time "Accelerated Benefits" shall be paid in the form and manner determined by the Chairman of the Board of Directors of the Company, and in the case of the Chairman, the Selection Committee, either in a single sum, in up to three (3) annual installments, or in a combination of annuity payments and either a single sum or annual installments, provided, however, that no monthly benefits shall be paid to Participants who transfer to Primex, Arco or Arch until they separate from service with Primex, Arco, or Arch, respectively. (c) Alternatively, the actively employed Participant may elect, at least one full year prior to such Accelerated Benefit Commencement Date, to receive his entire benefit in the form of an annuity in accordance with Section 4.3 of this Plan. -6- 4.3 Payment of Regular Monthly Benefits. ------------------------------------ (a) Participants retiring from active service from all Employing Companies may elect to receive regular monthly benefits in lieu of receiving Accelerated Benefits or establishing an employee-grantor trust. Such monthly benefits shall be calculated and payable in the form of a joint and 50% survivor annuity with the Participant's Spouse as the joint annuitant, without actuarial reduction for the death benefit protection. (b) Any Participant who terminates service with all Employing Companies before reaching age 55 may not commence benefits under this Plan prior to reaching age 65 unless (i) he is eligible for "lay-off credit" pursuant to Section 3.2(b) and, thus, is deemed to qualify for early retirement benefits or (ii) he receives service credit for purposes of enabling him to retire on or after age 55 as provided in the next sentence. In the case of Participants who transfer directly to Primex, Arco, or Arch within the timeframes previously specified in this Plan, service with those respective companies and their affiliates shall be counted in enabling such Participants to retire on or after attaining age fifty-five (55). Any benefits payable under this Plan with respect to a Participant who terminates service prior to reaching age 55, and who is not eligible for any imputed service under the foregoing provisions of Section 4.3(b), will be calculated assuming that the Participant did not commence benefits under the Olin Employees' Pension Plan until reaching age 65, even though his actual commencement date under the Olin Employees Pension Plan may have been earlier. 4.4 Assumptions used for Determining Amount to be contributed to ------------------------------------------------------------ Employee-grantor Trust; Threshold for Accelerated Benefits. ----------------------------------------------------------- (a) Actuarial Assumptions for Employee-Grantor Trust. In determining ------------------------------------------------ the Actuarial Present Value of the Participant's Plan benefit to be used for purposes funding an employee-grantor trust, the benefit shall be determined: (i) as of the close of the Plan Year (i.e., December 31) prior to the year in which the employee grantor trust is being funded; (ii) using an annuity purchase rate based upon a discount rate equal to the rate for a zero coupon Treasury strip (determined approximately at the time of the deposit to the employee-grantor trust) with a maturity that approximates the Participant's life expectancy determined as of the date the payment to the trust is scheduled to be made; and (iii) assuming that the benefit commences under this Plan -7- (a) on the Participant's 65th birthday, if the Participant terminates service (or is treated as terminating service) prior to age 55; (b) on the Participant's 62nd birthday, if the Participant terminates service on or after reaching age 55 and before reaching age 62; and (c) on the Participant's 65th birthday, if the Participant terminates service on or after reaching age 62. (b) Actuarial Assumptions for Determining Accelerated Benefits. In ---------------------------------------------------------- determining the Actuarial Present Value of the Participant's Accelerated Benefit, the benefit shall be determined: (i) as of the close of the Participant's retirement or termination of service; (ii) using an annuity purchase rate based upon a discount rate equal to the rate for a zero coupon Treasury strip (determined approximately at the time the Accelerated Benefit is scheduled to commence) with a maturity that approximates the Participant's life expectancy determined as of the date the payment is scheduled to be made; and (iii) assuming that the benefit commences under this Plan (a) on the Participant's 65th birthday, if the Participant terminates service (or is treated as terminating service) prior to age 55; (b) on the Participant's 62nd birthday, if the Participant terminates service on or after reaching age 55 and before reaching age 62; and (c) on the Participant's 65th birthday, if the Participant terminates service on or after reaching age 62. (c) Minimum Benefit Accumulation Threshold. No Accelerated Benefits --------------------------------------- shall commence to be paid, and no Participant shall be given the opportunity to fund an employee-grantor trust, until the Participant has accumulated benefits under this Plan, the Olin Supplementary Pension Plan and the Olin Deferral Benefit Pension Plan which, in the aggregate, have an actuarial present value of at least One Hundred Thousand Dollars ($100,000.00). 4.5 Surviving Spouse Benefit. ------------------------- (a) The Surviving Spouse of a Participant who dies after commencing ----- regular monthly benefits shall receive a survivor benefit for his or her lifetime equal to 50% of the monthly payments that were being paid to the Participant under the Plan as of his death. The Surviving Spouse of a Participant who dies after having elected to receive -8- Accelerated Benefits, but who as of the date of his death has not received the entire value of his Accelerated Benefits, shall receive the remainder of any Accelerated Benefits not yet paid in the form in effect with respect to the Participant. (b) The Surviving Spouse of any Participant who dies prior to benefit ----- commencement shall be entitled to receive a benefit equal to 50% of the benefit that the Participant would have been entitled to had he survived to the earliest date on which he could commence benefits hereunder, retired and commenced monthly regular benefits under the Plan, and then died the next day. (c) Notwithstanding (a) or (b) above, if the Surviving Spouse is more than four years younger than the Participant, then the "joint and survivor" benefit payable to the Participant (and the Surviving Spouses's portion of such Benefit) shall be calculated by using the Participant's actual age, and the Spouses's actual age increased by four (4) years. (d) For purposes of this Plan, the term "Spouse" shall mean the person to whom a Participant is validly married at the date of his death, as evidenced by a marriage certificate issued in accordance with state law; provided however, that (i) if a Participant's Spouse at his or her death was not the Participant's Spouse at least 12 months prior to the Participant's death, no Surviving Spouse's retirement allowance shall be paid, and (ii) common law marriages shall not be recognized hereunder. 4.6 Benefit Upon a Change of Control. -------------------------------- (a) Lump Sum Payment Upon a Change of Control. The spin-off of ----------------------------------------- Primex and Arch from Olin shall not be deemed to be a change of control entitling any Participant herein to benefits under this Plan. Notwithstanding any other provision of the Plan, upon a Change in Control, each Participant covered by the Plan shall automatically be paid a lump sum amount in cash by the Company sufficient to purchase an annuity which, together with the monthly payment, if any, under a Rabbi or other trust arrangement established by the Company to make payments hereunder in the event of a Change in Control and/or pursuant to any other annuity purchased by the Company for the Participant to make payments hereunder, shall provide the Participant with the same monthly after-tax benefit as he would have received under the Plan based on the benefits accrued to the Participant hereunder as of the date of the Change in Control. Payment under this Section shall not in and of itself terminate the Plan, but such payment shall be taken into account in calculating benefits under the Plan which may otherwise become due the Participant thereafter. (b) No Divestment Upon a Change of Control. If a Participant is -------------------------------------- removed from participation in the Plan after a Change of Control has occurred, in no event shall his years of Benefit Service accrued prior to such removal, and the benefit accrued prior thereto, be adversely affected. -9- (c) Change of Control Defined. ------------------------- For purposes of the Plan, a "Change in Control" shall be deemed to have occurred if (i) the Company ceases to be, directly or indirectly, owned of record by at least 1,000 stockholders; or (ii) a person, partnership, joint venture, corporation or other entity, or two or more of any of the foregoing acting as "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Act"), other than the Company, a majority- owned subsidiary of the Company or an employee benefit plan of the Company or such subsidiary (or such plan's related trust), become(s) the "beneficial owner" (as defined in Rule 13d-3 of the Act) of 20% or more of the then outstanding voting stock of the Company; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Company's Board of Directors (together with any new Director whose election by the Company's Board or whose nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds of the Directors of the Company then still in office who either were Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Directors then in office; or (iv) all or substantially all of the business of the Company is disposed of pursuant to a merger, consolidation or other transaction in which the Company is not the surviving corporation or the Company combines with another company and is the surviving corporation (unless the shareholders of the Company immediately following such merger, consolidation, combination, or other transaction beneficially own, directly or indirectly, more than 50% of the aggregate voting stock or other ownership interests of (x) the entities, if any, that succeed to the business of the Company or (y) the combined company); or (v) the shareholders of the Company approve a sale of all or substantially all of the assets of the Company or a liquidation or dissolution of the Company. (d) Arbitration. Any dispute or controversy arising under or in ----------- connection with the Plan subsequent to a Change in Control shall be settled exclusively by arbitration in Connecticut, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. -10- 4.7 Removal from the Plan; Non-Payment of Benefits. ----------------------------------------------- (a) Any Participant may be removed from the Plan by the Selection Committee at any time "for cause", as determined by the Selection Committee in its sole discretion, whether or not the Participant has begun to receive payments under the Plan, and whether or not the Participant's employment has been terminated. "Cause" shall include, without limitation, rendering services in any capacity to a competitor of the Company or Employing Company without the consent of the Selection Committee. Neither the Participant nor his or her Spouse shall be entitled to receive any payments from the Plan from and after the date of the removal of the Participant nor have any cause of action as a result of such removal. The Participant or Spouse shall not be required to return any payments made prior to removal of the Participant from the Plan. (b) The Selection Committee may notify a Participant that he or she is being suspended from the Plan as a result of job performance which the Selection Committee in its sole discretion deems unsatisfactory. From and after the date of such notification and notwithstanding the Participant's actual Hay Points, he or she will not be deemed to have 2,000 or more Hay Points for purposes of calculating the Participant's Retirement Allowance. Any prior Years of Benefit Service shall not be affected by such suspension. ARTICLE V. Funding 5.1 Unfunded Plan. This Plan shall be unfunded. All payments under ------------- this Plan shall be made from the general assets of the Employing Company of the Participant. 5.2 Liability for Payment. Each Employing Company shall pay the --------------------- benefits provided under this Plan with respect to Participants who are employed, or were formerly employed by it during their participation in the Plan. In the case of a Participant who was employed by more than one Employing Company, the Committee shall allocate the cost of such benefits among such Employing Companies in such manner as it deems equitable. The obligations of the Employing Company shall not be funded in any manner. The rights of any person to receive benefits under this Plan are limited to those of a general creditor of the Employing Company liable for payment hereunder. 5.3 Anti-alienation. No Participant or beneficiary shall have the --------------- right to assign, transfer, encumber or otherwise subject to any lien any payment or any other interest under this Plan, nor shall such payment or interest be subject to attachment, execution or levy of any kind. Article VI. Plan Administration ------------------------------- 6.1 Plan Administrator. The Company hereby appoints the Benefit Plan ------------------- Review Committee as the Plan Administrator (the "Plan Administrator" or "Committee"). Any -11- person, including, but not limited to, the directors, shareholders, officers and employees of the Company, shall be eligible to serve on the Committee. Any person so appointed shall signify his acceptance by undertaking the duties assigned. Any member of the Committee may resign by delivering written resignation to the Company. The Company may also remove any member of the Committee by delivery of a written notice of removal, which shall take effect upon delivery or on a date specified. Upon resignation or removal of a Committee member, the Company shall promptly designate in writing such other person or persons as a successor. 6.2 Allocation and Delegation. The Committee members may allocate ------------------------- the responsibilities among themselves, and shall notify the Company in writing of such action and the responsibilities allocated to each member. 6.3 Powers, Duties and Responsibilities. Except for those powers ----------------------------------- expressly reserved to the Selection Committee, the Plan Administrator shall have all power to administer the Plan for the exclusive benefit of the Participants and their Beneficiaries, in accordance with the terms of the Plan. The Plan Administrator shall have the absolute discretion and power to determine all questions arising in connection with the administration, interpretation and application of the Plan. Any such determination by the Plan Administrator shall be conclusive and binding upon all persons. The Plan Administrator may correct any defect or reconcile any inconsistency in such manner and to such extent as shall be deemed necessary or advisable to carry out the purposes of the Plan; provided, however, that such interpretation or construction shall be done in a non-discriminatory manner and shall be consistent with the intent of the Plan. The Plan Administrator shall: (a) compute the amount and kind of benefits to which any Participant shall be entitled hereunder; (b) maintain all necessary records for the administration of the Plan; (c) interpret the provisions of the Plan and make and publish such rules for regulation of the Plan as are consistent with the terms hereof; (d) assist any Participant regarding his rights, benefits or elections available under the Plan; and (e) communicate to Participants and their Beneficiaries concerning the provisions of the Plan. -12- 6.4 Records and Reports. The Plan Administrator shall keep a record -------------------- of all actions taken and shall keep such other books of account, records and other information that may be necessary for proper administration of the Plan. The Plan Administrator shall file and distribute all reports that may be required by the Internal Revenue Service, Department of Labor or others, as required by law. 6.5 Appointment of Advisors. The Plan Administrator may appoint ------------------------ accountants, actuaries, counsel, advisors and other persons that it deems necessary or desirable in connection with the administration of the Plan. 6.6 Majority Actions. The Committee shall act by a majority of their ---------------- numbers, but may authorize one or more of them to sign all papers on their behalf. 6.7 Indemnification of Members. The Company shall indemnify and hold --------------------------- harmless any member of the Committee from any liability incurred in his or her capacity as such for acts which he or she undertakes in good faith as a member of such Committee. Article VII. Termination and Amendment -------------------------------------- 7.1 Amendment or Termination. The Company may amend or terminate the ------------------------ Plan at any time, in whole or in part, by action of its Board of Directors or any duly authorized committee or officer. Any Employing Company may withdraw from participation in the Plan at any time. No amendment or termination of the Plan or withdrawal therefrom by an Employing Company shall adversely affect the vested benefits payable hereunder to any Participant for service rendered prior to the effective date of such amendment, termination or withdrawal. Article VIII. Miscellaneous ---------------------------- 8.1 Gender and Number. Whenever any words are used herein in the ----------------- masculine, feminine or neuter gender, they shall be construed as though they were also used in another gender in all cases where such would apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in another form in all cases where they would so apply. 8.2 Action by the Company. Whenever the Company under the terms of --------------------- this Plan is permitted or required to do or perform any act or thing, it shall be done and performed by an officer or committee duly authorized by the Board of Directors of the Company. 8.3 Headings. The headings and subheadings of this Plan have been --------- inserted for convenience of reference only and shall not be used in the construction of any of the provisions hereof. -13- 8.4 Uniformity and Non Discrimination. All provisions of this Plan ---------------------------------- shall be interpreted and applied in a uniform nondiscriminatory manner. 8.5 Governing Law. To the extent that state law has not been -------------- preempted by the provisions of ERISA or any other laws of the United States heretofore or hereafter enacted, this Plan shall be construed under the laws of the State of Connecticut. 8.6 Employment Rights. Nothing in this Plan shall confer any right ------------------ upon any Employee to be retained in the service of the Company or any of its affiliates. 8.7 Incompetency. In the event that the Plan Administrator ------------- determines that a Participant is unable to care for his affairs because of illness or accident or any other reason, any amounts payable under this Plan may, unless claim shall have been made therefor by a duly appointed guardian, conservator, committee or other legal representative, be paid by the Plan Administrator to the spouse, child, parent or other blood relative or to any other person deemed by the Plan Administrator to have incurred expenses for such Participant, and such payment so made shall be a complete discharge of the liabilities of the Plan therefor. OLIN CORPORATION By:___________________________ Its -14- EX-12 3 0003.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12 OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES Computation of Ratio of Earnings to Fixed Charges (Unaudited) (In millions) Nine Months Ended September 30, ------------------- 2000 1999 ------ ------ Earnings: Income from continuing operations before taxes $106.8 $ 11.7 Add (deduct): Equity in income of non-consolidated affiliates (1.1) - Amortization of capitalized interest 0.2 0.3 Capitalized interest (0.4) - Fixed charges as described below 20.4 20.1 ------ ------ Total $125.9 $ 32.1 ====== ====== Fixed Charges: Interest expensed and capitalized $ 12.2 $ 12.1 Estimated interest factor in rent expense 8.2 8.0 ------ ------ Total $ 20.4 $ 20.1 ====== ====== Ratio of earnings to fixed charges 6.2 1.6 ====== ====== EX-27 4 0004.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Financial Statements contained in Item 1 of Form 10-Q for the period ended September 30, 2000 and is qualified in its entirety by reference to such financial statements. Figures are rounded to the nearest 100,000 (except EPS). 1000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 42,200 25,000 255,200 0 195,400 554,700 1,633,000 (1,166,000) 1,109,500 266,700 228,100 0 0 45,100 302,600 1,109,500 1,133,300 1,133,300 923,700 923,700 0 0 11,800 106,800 40,800 66,000 0 0 0 66,000 1.46 1.46
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