EX-99.1 4 dex991.htm OLIN'S UNAUDITED PROFORMA STATEMENTS Prepared by R.R. Donnelley Financial -- OLIN'S UNAUDITED PROFORMA STATEMENTS
 
Exhibit 99.1
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
 
The following unaudited pro forma condensed combined balance sheet at June 30, 2002 reflects the merger as if it had occurred on the balance sheet date. The unaudited pro forma condensed combined statements of income for the year ended December 31, 2001 and the six months ended June 30, 2002 reflect the merger as if it had occurred on January 1, 2001, the beginning of the fiscal year presented.
 
The unaudited pro forma condensed combined financial statements are based on the historical financial statements of Olin and Chase and give effect to the merger under the purchase method of accounting and apply the assumptions and adjustments as discussed in the accompanying notes to such statements, including assumptions relating to the allocation of the consideration paid for the assets and liabilities of Chase based on preliminary estimates of their fair value. The actual allocation of such consideration may differ from that reflected in the pro forma financial statements after final valuation procedures are completed following the closing of the merger. In the opinion of Olin and Chase, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial statements have been made based on the proposed terms and structure of the merger.
 
The unaudited pro forma condensed combined financial data do not give effect to any potential cost savings or other synergies that could result from the merger. Olin is in the process of developing a plan to integrate the operations of Chase with the operations of Olin. On a combined basis, there were no material transactions between Olin and Chase during the periods presented. There are no material differences between the accounting policies of Olin and Chase.
 
The pro forma adjustments made in connection with the development of the pro forma information are preliminary and have been made solely for purposes of developing such pro forma information for illustrative purposes necessary to comply with the disclosure requirements and are not necessarily indicative of the operating results or financial position that would have occurred if the merger had been consummated on any of the assumed dates referred to in the first paragraph above, nor is it necessarily indicative of future operating results or financial position.
 
The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in Olin’s Form 10-K/A, as filed on August 13, 2002, for its fiscal year ended December 31, 2001 and Quarterly Report on Form 10-Q for its quarter ended June 30, 2002 and Chase’s Form 10-K for its fiscal year ended December 31, 2001 and Quarterly Report on Form 10-Q for its quarter ended June 30, 2002.
 

 
Unaudited Pro Forma Condensed Combined Balance Sheet
June 30, 2002
(Dollars in millions)
 
    
Olin
     
Chase
       
Pro Forma Adjust-ments
     
Pro Forma Combined
  
    
(a)
     
(a)
                  
Assets:
                                      
Cash and Cash Equivalents
   
$
89
 
   
$
10
 
     
$
—
 
   
$
99
 
Short-Term Investments
   
 
25
 
   
 
—
 
     
 
—
 
   
 
25
 
Accounts Receivable, Net
                                      
—Trade
   
 
163
 
   
 
28
 
     
 
—
 
   
 
191
 
—Other
   
 
9
 
   
 
—
 
     
 
—
 
   
 
9
 
Inventories, Net
   
 
227
 
   
 
12
 
     
 
—
 
   
 
239
 
Income Taxes Receivable
   
 
14
 
   
 
—
 
     
 
(3
)(c)
   
 
11
 
Other Current Assets
   
 
51
 
   
 
6
 
     
 
—
 
   
 
57
 
    
  
    
  
Total Current Assets
   
 
578
 
   
 
56
 
     
 
(3
)
   
 
631
 
Property, Plant and Equipment, Net
   
 
441
 
   
 
118
 
     
 
20
(d)
   
 
579
 
Goodwill
   
 
42
 
   
 
—
 
     
 
42
(b)
   
 
84
 
Other Assets
   
 
79
 
   
 
1
 
     
 
—
 
   
 
80
 
    
  
    
  
Total Assets
   
$
1,140
 
   
$
175
 
     
$
59
 
   
$
1,374
 
    
  
    
  
 
Liabilities and Shareholders’ Equity:
                                      
Current Installment—Long-Term Debt
   
$
2
 
   
$
—
 
     
$
—
 
   
$
2
 
Accounts Payable
   
 
98
 
   
 
14
 
     
 
—
 
   
 
112
 
Income Taxes Payable
   
 
—
 
   
 
3
 
     
 
(3
)(c)
   
 
—
 
Accrued Liabilities
   
 
126
 
   
 
5
 
     
 
6
(e)
   
 
137
 
    
  
    
  
Total Current Liabilities
   
 
226
 
   
 
22
 
     
 
3
 
   
 
251
 
Long-Term Debt
   
 
328
 
   
 
—
 
     
 
—
 
   
 
328
 
Deferred Taxes
   
 
76
 
   
 
12
 
     
 
—
 
   
 
88
 
Other Liabilities
   
 
210
 
   
 
11
 
     
 
—
 
   
 
221
 
    
  
    
  
Total Liabilities
   
 
840
 
   
 
45
 
     
 
3
 
   
 
888
 
    
  
    
  
Commitments and Contingencies
                                      
 
Shareholders’ Equity:
                                      
Common Stock
   
 
47
 
   
 
—
 
     
 
10
(f)
   
 
57
 
Additional Paid-In Capital
   
 
263
 
   
 
32
 
     
 
171
(f)
         
                        
 
5
(g)
         
                        
 
(32
)(h)
   
 
439
 
Accumulated Other Comprehensive Loss
   
 
(15
)
   
 
(1
)
     
 
1
(h)
   
 
(15
)
Retained Earnings
   
 
5
 
   
 
99
 
     
 
(99
)(h)
   
 
5
 
    
  
    
  
Total Shareholders’ Equity
   
 
300
 
   
 
130
 
     
 
56
 
   
 
486
 
    
  
    
  
Total Liabilities and Shareholders’ Equity
   
$
1,140
 
   
$
175
 
     
$
59
 
   
$
1,374
 
    
  
    
  
 
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

Unaudited Pro Forma Condensed Combined Statement of Income
Six Months Ended June 30, 2002
(Dollars and shares in millions, except per share data)
 
    
Olin
     
Chase
     
Pro Forma Adjust-ments
     
Pro Forma Combined
  
    
(a)
     
(a)
                
Sales
   
$
609
 
   
$
123
     
$
—
 
   
$
732
 
Operating Expenses:
                                    
Cost of Goods Sold
   
 
555
 
   
 
110
     
 
1
(i)
   
 
666
 
Selling and Administration
   
 
57
 
   
 
5
              
 
62
 
Research and Development
   
 
2
 
   
 
—
              
 
2
 
Earnings (Loss) of Non-Consolidated Affiliates
   
 
(8
)
   
 
—
              
 
(8
)
Interest Expense
   
 
15
 
   
 
—
              
 
15
 
Interest Income
   
 
2
 
   
 
—
              
 
2
 
Other Income
   
 
2
 
   
 
—
              
 
2
 
    
  
    
  
Income (Loss) from Continuing Operations Before Taxes
   
 
(24
)
   
 
8
     
 
(1
)
   
 
(17
)
Income Tax Provision (Benefit)
   
 
(6
)
   
 
3
     
 
—
 
   
 
(3
)
    
  
    
  
Income (Loss) from Continuing Operations
   
 
(18
)
   
 
5
     
 
(1
)
   
 
(14
)
Discontinued Operations
   
 
—
 
   
 
1
     
 
—
 
   
 
1
 
    
  
    
  
Net Income (Loss)
   
$
(18
)
   
$
6
     
$
(1
)
   
$
(13
)
    
  
    
  
Net Income (Loss) per Common Share:
                                    
Basic:
                                    
Continuing Operations
   
$
(0.40
)
   
$
0.32
              
$
(0.25
)
Discontinued Operations
   
 
—
 
   
 
0.07
              
 
0.02
 
    
  
             
Total Net Income (Loss)
   
$
(0.40
)
   
$
0.39
              
$
(0.23
)
    
  
             
Diluted:
                                    
Continuing Operations
   
$
(0.40
)
   
$
0.31
              
$
(0.25
)
Discontinued Operations
   
 
—
 
   
 
0.07
              
 
0.02
 
    
  
             
Total Net Income (Loss)
   
$
(0.40
)
   
$
0.38
              
$
(0.23
)
    
  
             
Average Common Shares Outstanding(j):
                                    
Basic
   
 
45.4
 
   
 
15.3
              
 
55.4
 
    
  
             
Diluted
   
 
45.4
 
   
 
15.6
              
 
55.4
 
    
  
             
 
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

Unaudited Pro Forma Condensed Combined Statement of Income
Year Ended December 31, 2001
(Dollars and shares in millions, except per share data)
 
    
Olin
     
Chase
     
Pro Forma Adjust-ments
     
Pro Forma Combined
  
    
(a)
     
(a)
                
Sales
   
$
1,271
 
   
$
232
              
$
1,503
 
Operating Expenses:
                                    
Cost of Goods Sold
   
 
1,122
 
   
 
208
     
$
1
(i)
   
 
1,331
 
Selling and Administration
   
 
116
 
   
 
11
              
 
127
 
Research and Development
   
 
5
 
   
 
—
              
 
5
 
Earnings (Loss) of Non-Consolidated Affiliates
   
 
(8
)
   
 
—
              
 
(8
)
Interest Expense
   
 
17
 
   
 
—
              
 
17
 
Interest Income
   
 
1
 
   
 
—
              
 
1
 
Other Income
   
 
22
 
   
 
—
              
 
22
 
Gain (Loss) on Sales and Restructurings of Businesses and Spin-off Costs
   
 
(39
)
   
 
—
              
 
(39
)
    
  
    
  
Income (Loss) from Continuing Operations Before Taxes
   
 
(13
)
   
 
13
     
 
(1
)
   
 
(1
)
Income Tax Provision (Benefit)
   
 
(4
)
   
 
5
     
 
—
 
   
 
1
 
    
  
    
  
Income (Loss) from Continuing Operations
   
$
(9
)
   
$
8
     
$
(1
)
   
$
(2
)
    
  
    
  
Income (Loss) from Continuing Operations per Common Share:
                                    
Basic
   
$
(0.22
)
   
$
0.53
              
$
(0.04
)
    
  
             
Diluted
   
$
(0.22
)
   
$
0.53
              
$
(0.04
)
    
  
             
Average Common Shares Outstanding(j):
                                    
Basic
   
 
43.6
 
   
 
15.3
              
 
53.6
 
    
  
             
Diluted
   
 
43.6
 
   
 
15.5
              
 
53.6
 
    
  
             
 
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements
 
(a) These columns represent historical results of operations and financial position.
 
(b) This adjustment reflects the initial estimate made by Olin’s management of the excess of the total merger consideration over the estimated fair value of tangible net assets of Chase to be acquired. The following is a calculation (for purposes of this note only, in millions except share price):
 
    
June 30,
2002
  
Consideration:
         
Shares of Olin common stock to be issued in the merger
   
 
10
 
Olin average price per share a few days before and after the merger agreement was announced on May 8, 2002
   
$
18.11
 
    
Value of Olin common stock to be issued in the merger
   
$
181
 
Estimated Olin transaction fees and expenses
   
 
6
 
Fair value of Chase options to be converted to Olin options
   
 
5
 
Estimated fair value of net assets acquired
   
 
(150
)
    
Preliminary goodwill
   
$
42
 
    
 
The total merger consideration will be allocated to the assets and liabilities of Chase based on their estimated fair value. The excess of the total merger consideration over the historical book value of Chase’s net assets has been allocated to goodwill and fixed assets. The final allocation of the merger consideration to the Chase assets acquired and liabilities assumed depends upon certain valuations and studies that have not progressed to a stage where there is sufficient information to make a final allocation in the accompanying pro forma condensed combined financial information. In accordance with Statement of Financial Accounting Standards No. 142,”Goodwill and Other Intangible Assets”, Olin ceased amortizing goodwill as of January 1, 2002. We anticipate that a portion of the purchase price up to $20 million will be allocated to fixed assets. The estimated life for these fixed assets, which includes buildings and machinery and equipment, is 20 years.
 
(c) Reflects the reclassification of the income tax payable to income tax receivable.
 
(d) Reflects the adjustment of Chase fixed assets to fair value.
 
(e) Reflects estimated merger fees and expenses of Olin. The impact of these fees and expenses have been reflected in the unaudited pro forma condensed combined unaudited balance sheet and statement of income as an increase in the merger consideration.
 
(f) Reflects the issuance of approximately 10 million shares of Olin common stock in connection with the merger pursuant to which each issued and outstanding share of Chase common stock will be converted into the right to receive 0.6400 shares of Olin common stock.

(g) Reflects the estimated fair value of the Chase options to be converted to Olin options.
 
(h) Reflects the elimination of Chase’s stockholders’ equity accounts including the elimination of accumulated other comprehensive loss.
 
(i) Reflects the depreciation of the fixed asset adjustment.
 
(j) Pro forma per share data is based on the number of shares of common stock and common equivalent shares that would have been outstanding had the merger occurred on the earliest date presented.