# OLIN Corp: Form 10-K for the period ended Dec 31, 2019

- Company: [OLIN Corp](/companies/oln.md) (CIK 74303)
- Form: 10-K
- Filed: 2020-02-25
- Accepted by EDGAR: Feb 24, 2020, 18:07 ET
- Period: 2019-12-31
- Accession: 0000074303-20-000072
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/74303/000007430320000072/oln-2019x1231x10xk.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/74303/000007430320000072/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2019-10-01 to 2019-12-31 | $1.39bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 12 months, 2019-01-01 to 2019-12-31 | $6.11bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2019-10-01 to 2019-12-31 | $1.27bn | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 12 months, 2019-01-01 to 2019-12-31 | $5.44bn | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 12 months, 2019-01-01 to 2019-12-31 | $416.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 12 months, 2019-01-01 to 2019-12-31 | $177.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 12 months, 2019-01-01 to 2019-12-31 | $243.2m | us-gaap:InterestExpense |
| Income tax | 12 months, 2019-01-01 to 2019-12-31 | −$25.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2019-10-01 to 2019-12-31 | −$77.2m | us-gaap:NetIncomeLoss |
| Net income | 12 months, 2019-01-01 to 2019-12-31 | −$11.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2019-10-01 to 2019-12-31 | −$0.49 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 12 months, 2019-01-01 to 2019-12-31 | −$0.07 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2019-10-01 to 2019-12-31 | −$0.49 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 12 months, 2019-01-01 to 2019-12-31 | −$0.07 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 12 months, 2019-01-01 to 2019-12-31 | 162,300,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2019-01-01 to 2019-12-31 | $617.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 12 months, 2019-01-01 to 2019-12-31 | $385.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 12 months, 2019-01-01 to 2019-12-31 | $129.3m | us-gaap:PaymentsOfDividends |
| Share repurchases | 12 months, 2019-01-01 to 2019-12-31 | $145.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2019-12-31 | $220.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2019-12-31 | $1.71bn | us-gaap:AssetsCurrent |
| Total assets | at 2019-12-31 | $9.19bn | us-gaap:Assets |
| Current liabilities | at 2019-12-31 | $1.08bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2019-12-31 | $6.77bn | us-gaap:Liabilities |
| Long-term debt | at 2019-12-31 | $3.34bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2019-12-31 | $2.1m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2019-12-31 | $2.42bn | us-gaap:StockholdersEquity |

## Business

As filed, 42,948 characters.

### GENERAL

Olin Corporation (Olin) is a Virginia corporation, incorporated in 1892, having its principal executive offices in Clayton, MO. We are a manufacturer concentrated in three business segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. The Chlor Alkali Products and Vinyls segment manufactures and sells chlorine and caustic soda, ethylene dichloride and vinyl chloride monomer, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, perchloroethylene, trichloroethylene and vinylidene chloride, hydrochloric acid, hydrogen, bleach products and potassium hydroxide, which represent 56% of 2019 sales. The Epoxy segment produces and sells a full range of epoxy materials, including allyl chloride, epichlorohydrin, liquid epoxy resins, solid epoxy resins and downstream products such as differentiated epoxy resins and additives, which represent 33% of 2019 sales. The Winchester segment produces and sells sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges, which represent 11% of 2019 sales. See our discussion of our segment disclosures contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

### GOVERNANCE

We maintain an Internet website at www.olin.com. Our reports on Form 10-K, Form 10-Q and Form 8-K, as well as amendments to those reports, are available free of charge on our website, as soon as reasonably practicable after we file the reports with the Securities and Exchange Commission (SEC). Also, a copy of our electronically filed materials can be obtained at www.sec.gov. Our Principles of Corporate Governance, Committee Charters and Code of Conduct are available on our website at www.olin.com in the Leadership & Governance Section under Governance Documents and Committees.

In May 2019, our Chief Executive Officer executed the annual Section 303A.12(a) CEO Certification required by the New York Stock Exchange (NYSE), certifying that he was not aware of any violation of the NYSE’s corporate governance listing standards by us. Additionally, our Chief Executive Officer and Chief Financial Officer executed the required Sarbanes-Oxley Act of 2002 Sections 302 and 906 certifications relating to this Annual Report on Form 10-K, which are filed with the SEC as exhibits to this Annual Report on Form 10-K.

### PRODUCTS, SERVICES AND STRATEGIES

### Chlor Alkali Products and Vinyls

### Products and Services

We have been involved in the chlor alkali industry for more than 125 years and are a major participant in the global chlor alkali industry. Chlorine, caustic soda and hydrogen are co-produced commercially by the electrolysis of salt. These co-produced products are produced simultaneously, and in a fixed ratio of 1.0 ton of chlorine to 1.1 tons of caustic soda and 0.03 tons of hydrogen. The industry refers to this as an Electrochemical Unit or ECU. With a demonstrated capacity of 5.8 million ECUs as of the end of 2019, we have the largest global chlor alkali capacity, according to data from IHS Markit (IHS). IHS is a global information consulting company established in 1959 that provides information to a variety of industries.

Chlorine is used as a raw material in the production of thousands of products, including vinyls, urethanes, epoxy, water treatment chemicals and a variety of other organic and inorganic chemicals. A significant portion of chlorine production is consumed in the manufacture of ethylene dichloride (EDC) and vinyl chloride monomer (VCM), both of which our Chlor Alkali Products and Vinyls segment produces. A large portion of our EDC production is utilized in the production of VCM, but we are also one of the largest global participants in merchant EDC sales. EDC and VCM are precursors for polyvinyl chloride (PVC). PVC is a plastic used in applications such as vinyl siding, pipe, pipe fittings and automotive parts.

Our Chlor Alkali Products and Vinyls segment is one of the largest global marketers of caustic soda, including caustic soda produced by The Dow Chemical Company (Dow) in Brazil. The off-take arrangement with Dow in Brazil entitles the Chlor Alkali Products and Vinyls segment the right to market and sell the caustic soda produced at Dow’s Aratu, Brazil site. The diversity of caustic soda sourcing allows us to cost effectively supply customers worldwide. Caustic soda has a wide variety of end-use applications, the largest of which includes water treatment, alumina, pulp and paper, urethanes, detergents and soaps and a variety of other organic and inorganic chemicals.

Our Chlor Alkali Products and Vinyls segment also includes our chlorinated organics business which is the largest global producer of chlorinated organic products that include chloromethanes (methyl chloride, methylene chloride, chloroform and carbon tetrachloride) and chloroethenes (perchloroethylene, trichloroethylene, and vinylidene chloride). Chlorinated organics participates in both the solvent segment, as well as the intermediate segment of the global chlorocarbon industry with a focus on sustainable applications and in applications where we can benefit from our cost advantages. Intermediate products are used as feedstocks in the production of fluoropolymers, fluorocarbon refrigerants and blowing agents, silicones, cellulosics and agricultural chemicals. Solvent products are sold into end uses such as surface preparation, dry cleaning, pharmaceuticals and regeneration of refining catalysts. This business’s unique technology allows us to utilize both hydrochloric acid and chlorinated hydrocarbon byproducts (RCls), produced by our other production processes, as raw materials in an integrated system. These manufacturing facilities also consume chlorine, which generates caustic soda production and sales.

We also manufacture and sell other chlor alkali-related products, including hydrochloric acid, sodium hypochlorite (bleach) and potassium hydroxide, which we refer to as co-products. The production of co-products, chlorinated organics products and epoxy resins generally consume chlorine as a raw material creating downstream applications that upgrade the value of chlorine and enable caustic soda production. Our industry leadership in the production of chlorinated organics and epoxy resins, as well as other co-products, offer us nineteen integrated outlets for our captive chlorine.

The Chlor Alkali Products and Vinyls segment’s products are delivered by pipeline, marine vessel, deep-water and coastal barge, railcar and truck. Our logistics and terminal infrastructure provides us with geographically advantaged storage capacity and provides us with a private fleet of trucks, tankers and trailers that expands our geographic coverage and enhances our service capabilities. At our largest integrated product sites, our deep-water access enables us to reach global markets.

Our Chlor Alkali Products and Vinyls segment maintains strong relationships with Dow as both a customer and supplier. These relationships are maintained through long-term cost based contracts that provide us with a reliable supply of key raw materials and predictable and consistent demand for our end use products. Key products sold to Dow include chlorine, caustic soda, chlorinated organics and VCM. Key raw materials received from Dow include ethylene and electricity. Ethylene is supplied for the vinyls business under a long-term supply arrangement with Dow whereby we receive ethylene at integrated producer economics.

Electricity, salt, ethylene and methanol are the major purchased raw materials for our Chlor Alkali Products and Vinyls segment. Electricity is the single largest raw material component in the production of Chlor Alkali Products and Vinyls’ products. Approximately 74% of our electricity is generated from natural gas or hydroelectric sources. Approximately 66% of our salt requirements are met by internal supply. Methanol is sourced domestically and internationally primarily from large producers. The high volume nature of the chlor alkali industry places an emphasis on cost management and we believe that our scale, integration and raw material positions make us one of the low cost producers in the industry.

The following table lists principal products and services of our Chlor Alkali Products and Vinyls segment.

| Products & Services | Major End Uses | Plants & Facilities | Major Raw Materials & Components for Products/Services |
| --- | --- | --- | --- |
| Chlorine/caustic soda | Pulp & paper processing, chemical manufacturing, water purification, vinyl chloride manufacturing, bleach, swimming pool chemicals and urethane chemicals | Becancour, Canada Charleston, TN Freeport, TX McIntosh, AL Niagara Falls, NY Plaquemine, LA St. Gabriel, LA | salt, electricity |
| Ethylene dichloride/vinyl chloride monomer | Precursor to polyvinyl chloride used in vinyl siding, plumbing and automotive parts | Freeport, TX Plaquemine, LA | chlorine, ethylene, ethylene dichloride |
| Chlorinated organics intermediates | Used as feedstocks in the production of fluoropolymers, fluorocarbon refrigerants and blowing agents, silicones, cellulosics and agricultural chemicals | Freeport, TX Plaquemine, LA Stade, Germany | chlorine, ethylene dichloride, hydrochloric acid, methanol, RCls |
| Chlorinated organics solvents | Surface preparation, dry cleaning and pharmaceuticals | Freeport, TX Plaquemine, LA Stade, Germany | chlorine, ethylene dichloride, hydrochloric acid, RCls |
| Sodium hypochlorite (bleach) | Household cleaners, laundry bleaching, swimming pool sanitizers, semiconductors, water treatment, textiles, pulp & paper and food processing | Augusta, GA Becancour, Canada Charleston, TN Freeport, TX Henderson, NV Lemont, IL McIntosh, AL\* Niagara Falls, NY\* Santa Fe Springs, CA Tracy, CA | caustic soda, chlorine |
| Hydrochloric acid | Steel, oil & gas, plastics, organic chemical synthesis, water & wastewater treatment, brine treatment, artificial sweeteners, pharmaceuticals, food processing and ore & mineral processing | Becancour, Canada Charleston, TN Freeport, TX McIntosh, AL Niagara Falls, NY | chlorine, hydrogen |
| Potassium hydroxide | Fertilizer manufacturing, soaps, detergents & cleaners, battery manufacturing, food processing chemicals and deicers | Charleston, TN | electricity, potassium chloride |
| Hydrogen | Fuel source, hydrogen peroxide and hydrochloric acid | Becancour, Canada Charleston, TN Freeport, TX McIntosh, AL Niagara Falls, NY Plaquemine, LA St. Gabriel, LA | electricity, salt |
| \* Includes low salt, high strength bleach manufacturing. |  |  |  |

### Strategies

*Strengthen Our Role as Preferred Supplier in North America.* Take maximum advantage of our world-scale integrated facilities on the U.S. Gulf Coast, our geographically-advantaged plants across North America and our extensive logistics and terminal network to provide a reliable and preferred supply position to our North American customers.

*Capitalize on Our Low Cost Position.* Our advantaged cost position is derived from low cost energy, scale, integration, and deep-water ports. We expect to maximize our low cost position to ship our products to customers worldwide.

*Optimize the Breadth of Products and Pursue Incremental Expansion Opportunities.* Fully utilize the portfolio of co-products and integrated derivatives to continually upgrade chlorine and caustic soda to the highest value applications and provide expansion opportunities.

### Epoxy

### Products and Services

The Epoxy business was one of the first major manufacturers of epoxy products, and has continued to build on more than half a century of history through product innovation and technical excellence. According to data from IHS, the Epoxy segment is one of the largest fully integrated global producers of epoxy resins, curing agents and intermediates. The Epoxy segment has a favorable manufacturing cost position which is driven by a combination of scale and integration into low cost feedstocks (including chlorine, caustic soda, allylics and aromatics). With its advantaged cost position, the Epoxy segment is among the lowest cost producers in the world. The Epoxy segment produces and sells a full range of epoxy materials, including upstream products such as allyl chloride (Allyl) and epichlorohydrin (EPI), midstream products such as liquid epoxy resins (LER) and solid epoxy resins (SER) and downstream products such as differentiated epoxy resins and additives.

The Epoxy segment serves a diverse array of applications, including wind energy, electrical laminates, consumer goods and composites, as well as numerous applications in civil engineering and protective coatings. The Epoxy segment has important relationships with established customers, some of which span decades. The Epoxy segment’s primary geographies are North America and Western Europe. The segment’s product is delivered primarily by marine vessel, deep-water and coastal barge, railcar and truck.

Allyl is used not only as a feedstock in the production of EPI, but also as a chemical intermediate in multiple industries and applications, including water purification chemicals. EPI is primarily produced as a feedstock for use in the business’s epoxy resins, and also sold to epoxy producers globally who produce their own resins for end use segments such as coatings and adhesives. LER is manufactured in liquid form and cures with the addition of a hardener into a thermoset solid material offering a distinct combination of strength, adhesion and chemical resistance that is well-suited to coatings and composites applications. SER is processed further with bisphenol (BisA) to meet specific end market applications. While LER and SER are sold externally, a significant portion of LER production is further converted into differentiated epoxy resins where value-added modifications produce higher margin resins.

Our Epoxy segment maintains strong relationships with Dow as both a customer and supplier. These relationships are maintained through long-term cost based contracts that provide us with a reliable supply of key raw materials. Key products sold to Dow include aromatics and key raw materials received from Dow include benzene and propylene.

The Epoxy segment’s production economics benefit from its integration into chlor alkali and aromatics which are key inputs in epoxy production. This fully integrated structure provides both access to low cost materials and significant operational flexibility. The Epoxy segment operates an integrated aromatics production chain producing cumene, phenol, acetone and BisA for internal consumption and external sale. The Epoxy segment’s consumption of chlorine enables the Chlor Alkali Products and Vinyls segment to generate caustic soda production and sales. Chlorine used in our Epoxy segment is transferred at cost from the Chlor Alkali Products and Vinyls segment.

The following table lists principal products and services of our Epoxy segment.

| Products & Services | Major End Uses | Plants & Facilities | Major Raw Materials & Components for Products/Services |
| --- | --- | --- | --- |
| Allylics (allyl chloride and epichlorohydrin) & aromatics (acetone, bisphenol, cumene and phenol) | Manufacturers of polymers, resins and other plastic materials, water purification, and pesticides | Freeport, TX Stade, Germany Terneuzen, Netherlands | benzene, caustic soda, chlorine, propylene |
| Liquid epoxy resin/solid epoxy resin | Adhesives, paint and coatings, composites and flooring | Freeport, TX Guaruja, Brazil Stade, Germany | bisphenol, caustic soda, epichlorohydrin |
| Differentiated epoxy resins | Electrical laminates, paint and coatings, wind blades, electronics and construction | Baltringen, Germany Freeport, TX Guaruja, Brazil Gumi, South Korea Pisticci, Italy Rheinmunster, Germany Roberta, GA Stade, Germany Zhangjiagang, China | liquid epoxy resins, solid epoxy resins |

### Strategies

*Continue to Focus on Capturing the Full Value of Our Asset Base.* The Epoxy segment continues to focus on fully utilizing our integrated asset base. We expect to optimize our production capabilities allowing us to more fully benefit from our access to low cost materials and significant operational flexibility.

*Focus on Upgrading Our Sales Portfolio and Product Mix.* The Epoxy segment will focus on improving product mix to drive more value-added product introductions and modifications that produce higher margin sales. This leverages our leading technology and quality positions.

*Drive Productivity to Sustain Our Cost Advantage.* The Epoxy segment continues to drive productivity cost improvements through the entire supply chain, enhancing reliability and delivering yield improvements.

### Winchester

### Products and Services

In 2020, Winchester is in its 154th year of operation and its 90th year as part of Olin. Winchester is a premier developer and manufacturer of small caliber ammunition for sale to domestic and international retailers (commercial customers), law enforcement agencies and domestic and international militaries. We believe we are a leading U.S. producer of ammunition for recreational shooters, hunters, law enforcement agencies and the U.S. Armed Forces. Winchester also manufacturers industrial products that have various applications in the construction industry.

On September 27, 2019, Winchester was notified that it had been selected by the United States Army to operate and manage the Lake City Army Ammunition Plant (Lake City Plant) in Independence, MO. Following a one-year transition period, Winchester will assume full operational control of the Lake City Plant on October 1, 2020. The contract has an initial term of seven years and may be extended by the United States Army for up to three additional years. The contract is expected to increase Winchester’s annual revenue by $450 million to $550 million.

In September 2019, U.S. Customs and Border Protection, Department of Homeland Security awarded Winchester a $10 million, one-year sole source contract for 9mm handgun duty ammunition.

In April 2019, Winchester was awarded a $5 million, four-year contract from the U.S. Secret Service for 5.56mm rifle training ammunition.

In March 2019, the Canadian Border Services Agency awarded Winchester a $5 million, four-year contract for 9mm handgun training ammunition.

In September 2018, the U.S. Immigration and Customs Enforcement, Department of Homeland Security awarded Winchester a $12 million, five-year contract for 9mm “Readily Identifiable Training Ammunition.”

In April 2018, Winchester was awarded a $5 million, five-year contract from the Federal Bureau of Investigation for 9mm duty and frangible training ammunition.

In May 2017, Winchester was awarded, along with one other company, a shared contract to provide small caliber ammunition non-recurring engineering services for the U.S. Army. The contract has the potential to generate approximately $65 million of sales over the five-year contract.

In January 2017, SIG Sauer, Inc. was awarded a $580 million, ten-year contract for the modular handgun system pistol contract by the U.S. Army. Winchester will supply the pistol ammunition as a subcontractor to SIG Sauer, Inc.

Our legendary Winchester® product line includes all major gauges and calibers of shotgun shells, rimfire and centerfire ammunition for pistols and rifles, reloading components and industrial cartridges. We believe we are a leading U.S. supplier of small caliber commercial ammunition.

Winchester has strong relationships throughout the sales and distribution chain and strong ties to traditional dealers and distributors. Winchester has also built its business with key high-volume mass merchants and specialty sporting goods retailers. Winchester has consistently developed industry-leading ammunition, which is recognized in the industry for manufacturing excellence, design innovation and consumer value. Winchester’s new ammunition products continue to receive awards from major industry publications and organizations, with recent awards including: *National Association of Sporting Goods Wholesalers* in partnership with the *Professional Outdoor Media Association’*s Caliber Award for “Best New Ammunition” in 2019; *American Hunter* magazine’s Golden Bullseye Award as “Ammunition Product of the Year” in 2018; *Guns & Ammo* magazine’s “Ammunition of the Year” award in 2019 and 2017; and *American Rifleman* magazine’s Golden Bullseye Award as “Ammunition Product of the Year” in 2017.

Winchester purchases raw materials such as copper-based strip and ammunition cartridge case cups and lead from vendors based on a conversion charge or premium. These conversion charges or premiums are in addition to the market prices for metal as posted on exchanges such as the Commodity Exchange, or COMEX, and London Metals Exchange, or LME. Winchester’s other main raw material is propellant, which is purchased predominantly from one of the U.S.’s largest propellant suppliers.

The following table lists principal products and services of our Winchester segment.

| Products & Services | Major End Uses | Plants & Facilities | Major Raw Materials & Components for Products/Services |
| --- | --- | --- | --- |
| Winchester® sporting ammunition (shotshells, small caliber centerfire & rimfire ammunition) | Hunters & recreational shooters, law enforcement agencies | East Alton, IL Oxford, MS | brass, lead, steel, plastic, propellant, explosives |
| Small caliber military ammunition | Infantry and mounted weapons | East Alton, IL Oxford, MS | brass, lead, propellant, explosives |
| Industrial products (8 gauge loads & powder-actuated tool loads) | Maintenance applications in power & concrete industries, powder-actuated tools in construction industry | East Alton, IL Oxford, MS | brass, lead, plastic, propellant, explosives |

### Strategies

*Maximize Existing Strengths.* Winchester plans to seek new opportunities to fully utilize the legendary Winchester brand name and will continue to offer a full line of ammunition products to the markets we serve, with specific focus on investments that make Winchester ammunition the retail brand of choice.

*Focus on Product Line Growth.* With a long record of pioneering new product offerings, Winchester has built a strong reputation as an industry innovator. This includes the introduction of reduced-lead and non-lead products, which are growing in popularity for use in indoor shooting ranges and for outdoor hunting.

*Cost Reduction Strategy.* Winchester plans to continue to focus on strategies that will lower our costs. During 2018, we initiated a cost reduction plan which has permanently closed the ammunition assembly operations at our Winchester facility in Geelong, Australia. Subsequent to the facility’s closure, product for customers in the region are sourced from Winchester manufacturing facilities located in the United States.

### INTERNATIONAL OPERATIONS

Olin has an international presence, including the geographic regions of Europe, Asia Pacific and Latin America. Approximately 41% of Olin’s 2019 sales were generated outside of the U.S., including 32% of our Chlor Alkali Products and Vinyls 2019 segment sales, 67% of our Epoxy 2019 segment sales and 9% of our Winchester 2019 segment sales. See Note 21 “Segment Information” of the notes to consolidated financial statements contained in Item 8, for geographic segment data. We are incorporating our segment information from that Note into this section of our Form 10-K.

### CUSTOMERS AND DISTRIBUTION

Products we sell to industrial or commercial users or distributors for use in the production of other products constitute a major part of our total sales. We sell some of our products, such as epoxy resins, caustic soda and sporting ammunition, to a large number of users or distributors, while we sell other products, such as chlorine and chlorinated organics, in substantial quantities to a relatively small number of industrial users. Olin has significant relationships with a few customers including Dow, who was our largest customer by revenue in 2019, representing approximately 15% of our total sales. We expect this relationship to continue to be significant to Olin and to represent more than 10% of our annual sales in the future. No other single customer accounted for more than 5% of sales. We discuss the customers for each of our three business segments in more detail above under “Products and Services.”

We market most of our products and services primarily through our sales force and sell directly to various industrial customers, mass merchants, retailers, wholesalers, other distributors and the U.S. Government and its prime contractors.

Sales to all U.S. Government agencies and sales under U.S. Government contracting activities in total accounted for approximately 3% of sales in 2019. Because we engage in some government contracting activities and make sales to the U.S. Government, we are subject to extensive and complex U.S. Government procurement laws and regulations. These laws and regulations provide for ongoing government audits and reviews of contract procurement, performance and administration.

Failure to comply, even inadvertently, with these laws and regulations and with laws governing the export of munitions and other controlled products and commodities could subject us or one or more of our businesses to civil and criminal penalties, and under certain circumstances, suspension and debarment from future government contracts and the exporting of products for a specified period of time.

### BACKLOG

The total amount of estimated backlog was approximately $151 million and $224 million as of January 31, 2020 and 2019, respectively. The backlog orders are associated with contractual orders in our Winchester business. Backlogs in our other businesses are not significant. Backlog is comprised of all open customer orders which have been received, but not yet shipped. The backlog was estimated based on expected volume to be shipped from firm contractual orders, which are subject to customary terms and conditions, including cancellation and modification provisions. Approximately 96% of contracted backlog as of January 31, 2020 is expected to be fulfilled during 2020, with the remainder expected to be fulfilled during 2021.

### COMPETITION

We are in active competition with businesses producing or distributing the same or similar products, as well as, in some instances, with businesses producing or distributing different products designed for the same uses.

Chlor alkali manufacturers in North America, with approximately 17 million tons of chlorine and 18 million tons of caustic soda capacity, accounted for approximately 17% of worldwide chlor alkali production capacity. In 2019, according to IHS, we have the largest chlor alkali capacity in North America and globally. While the technologies to manufacture and transport chlorine and caustic soda are widely available, the production facilities require large capital investments, and are subject to significant regulatory and permitting requirements. Approximately 76% of the total North American chlor alkali capacity is located in the U.S. Gulf Coast region. There is a worldwide market for caustic soda, which attracts imports and allows exports depending on market conditions. Other large chlor alkali producers in North America include The Occidental Petroleum Corporation (Oxy) and Westlake Chemical Corporation (Westlake).

We are also a leading integrated global producer of chlorinated organic products with a strong cost position due to our scale and access to chlor alkali feedstocks. This industry includes large diversified producers such as Oxy, Westlake and Solvay S.A., as well as multiple producers located in China.

We are a major global fully integrated epoxy producer, with access to key low cost feedstocks and a cost advantaged infrastructure. With its advantaged cost position, the Epoxy segment is among the lowest cost producers in the world. The markets in which our Epoxy segment operates are highly competitive and are dependent on significant capital investment, the development of proprietary technology and maintenance of product research and development. Among our competitors are Huntsman Corporation (Huntsman) and Hexion, Inc., as well as multiple producers located in Asia.

We are among the largest manufacturers in the U.S. of commercial small caliber ammunition based on independent market research sponsored by the National Shooting Sports Foundation (NSSF). Formed in 1961, NSSF has a membership of more than 12,000 manufacturers, distributors, firearms retailers, shooting ranges, sportsmen’s organizations and publishers. According to NSSF-sponsored research, our Winchester business, Vista Outdoor Inc. (Vista), and Remington Outdoor Company, Inc. (Remington) are the three largest commercial ammunition manufacturers in the U.S. The ammunition industry is highly competitive with Olin, Vista, Remington, numerous smaller domestic manufacturers and foreign producers competing for sales to the commercial ammunition customers. Many factors influence our ability to compete successfully, including price, delivery, service, performance, product innovation and product recognition and quality, depending on the product involved.

### EMPLOYEES

As of December 31, 2019, we had approximately 6,500 employees, with 5,300 working in the U.S. and 1,200 working in foreign countries. Various labor unions represent a significant number of our hourly-paid employees for collective bargaining purposes.

The following labor contract will be required to be negotiated in 2020:

| Location | Number of Employees | Expiration Date |
| --- | --- | --- |
| Lake City Army Ammunition Plant (Winchester) | 1,447\* | October 2020 |

\*Lake City Plant personnel are not employees of Olin as of December 31, 2019.

While we believe our relations with our employees and their various representatives are generally satisfactory, we cannot assure that we can conclude this labor contract or any other labor agreements without work stoppages and cannot assure that any work stoppages will not have a material adverse effect on our business, financial condition or results of operations.

### RESEARCH ACTIVITIES; PATENTS

Our research activities are conducted on a product-group basis at a number of facilities. Company-sponsored research expenditures were $16.5 million in 2019, $14.9 million in 2018 and $14.5 million in 2017.

We own or license a number of patents, patent applications and trade secrets covering our products and processes. We believe that, in the aggregate, the rights under our patents and licenses are important to our operations, but we do not consider any individual patent, license or group of patents and licenses related to a specific process or product to be of material importance to our total business.

### SEASONALITY

Our sales are affected by the cyclicality of the economy and the seasonality of several industries we serve, including building and construction, coatings, infrastructure, electronics, automotive, bleach, refrigerants and ammunition. The seasonality of the ammunition business is typically driven by the U.S. fall hunting season. Our chlor alkali businesses generally experience their highest level of activity during the spring and summer months, particularly when construction, refrigerants, coatings and infrastructure activity is higher. The chlor alkali industry is cyclical, both as a result of changes in demand for each of the co-produced products and as a result of the large increments in which new capacity is added and removed. Because chlorine and caustic soda are produced in a fixed ratio, the supply of one product can be constrained both by the physical capacity of the production facilities and/or by the ability to sell the co-produced product. Prices for both products respond rapidly to changes in supply and demand. The cyclicality of the chlor alkali industry has further impacts on downstream products. We have significant diversification of our chlorine outlets, which allow us to better manage the cyclical nature of the industry.

### RAW MATERIALS AND ENERGY

Basic raw materials are processed through an integrated manufacturing process to produce a number of products that are sold at various points throughout the process. We purchase a portion of our raw material requirements and also utilize internal resources, co-products and finished goods as raw materials for downstream products. We believe we have reliable sources of supply for our raw materials under normal market conditions. However, we cannot predict the likelihood or impact of any future raw material shortages.

The principal basic raw materials for our production of Chlor Alkali Products and Vinyls’ products are electricity, salt, ethylene and methanol. Electricity is the predominant energy source for our manufacturing facilities. Approximately 74% of our electricity is generated from natural gas or hydroelectric sources. We have long-term power supply contracts with Dow in addition to utilizing our own power assets, which allow for cost differentiation at specific U.S. manufacturing sites. A portion of our purchases of raw materials, including ethylene, are made under long-term supply agreements, while approximately 66% of the salt used in our Chlor Alkali Products and Vinyls segment is produced from internal resources. Methanol is sourced domestically and internationally primarily from large producers.

The Epoxy segment’s principal raw materials are chlorine, benzene, propylene and aromatics, which consist of cumene, phenol, acetone and BisA. A portion of our purchases of raw materials, including benzene, propylene and a portion of our aromatics requirements, are made under long-term supply agreements, while a portion of our aromatics requirements are produced from our integrated production chain. Chlorine is predominately sourced from our Chlor Alkali Products and Vinyls segment.

Lead, brass and propellant are the principal raw materials used in the Winchester business. We typically purchase our ammunition cartridge case cups and copper-based strip, and propellants pursuant to multi-year contracts.

We provide additional information with respect to specific raw materials in the tables set forth under “Products and Services.”

### ENVIRONMENTAL AND TOXIC SUBSTANCES CONTROLS

As is common in our industry, we are subject to environmental laws and regulations related to the use, storage, handling, generation, transportation, emission, discharge, disposal and remediation of, and exposure to, hazardous and non-hazardous substances and wastes in all of the countries in which we do business.

The establishment and implementation of national, state or provincial and local standards to regulate air, water and land quality affect substantially all of our manufacturing locations around the world. Laws providing for regulation of the manufacture, transportation, use and disposal of hazardous and toxic substances, and remediation of contaminated sites have imposed additional regulatory requirements on industry, particularly the chemicals industry. In addition, implementation of environmental laws has required and will continue to require new capital expenditures and will increase operating costs.

We are a party to various government and private environmental actions associated with former waste disposal sites and past manufacturing facilities. Charges to income for investigatory and remedial efforts were $25.3 million, $7.3 million and $10.3 million for the years ended December 31, 2019, 2018 and 2017, respectively. These charges may be material to operating results in future years. These charges do not include insurance recoveries for costs incurred and expensed in prior periods.

In connection with the October 5, 2015 acquisition of Dow’s U.S. Chlor Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses, the prior owner of the businesses retained liabilities relating to releases of hazardous materials and violations of environmental law to the extent arising prior to October 5, 2015.

See our discussion of our environmental matters contained in Item 3—“Legal Proceedings” below, Note 22 “Environmental” of the notes to consolidated financial statements contained in Item 8 and Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

### CORPORATE RESPONSIBILITY

At Olin, we are committed to corporate responsibility to ensure the long-term success of our business, our collective global society and the well-being of our environment. We focus our corporate responsibility efforts on the areas of: (1) environment, health, safety and security, (2) sustainability and responsibility and (3) product responsibility. We value collaboration and commit to working with other organizations to encourage collective action for improving corporate responsibility. Additional information related to our corporate responsibility initiatives, practices, activities, goals and related information, as well as future updates, can be found in the Corporate Responsibility section of our website at www.olin.com.

#### Environment, Health, Safety and Security

Olin is strongly committed to excellence in protecting the environment, health, safety and security of our employees and those who live and work around our plants. Our operations worldwide comply with all local requirements and implement other standards as required to protect the environment, health, safety and security of our operations. We are committed to the guiding principles of the chemical industry's Responsible Care® initiative around the globe to drive continuous improvement and achieve excellence in environmental, health, safety and security performance. Our safety, health and environmental strategy and goals are designed to sustain our drive to zero incidents. Relentlessly and responsibly, we constantly emphasize the importance of monitoring the safety, security and environmental impact of our plants. Through our day-to-day vigilance, Olin strives to continue to be recognized as one of the industry’s best performers.

Our corporate values of Integrity, Helping Customers Succeed, Continuous Improvement and our People are part of our culture. These values are also reflected in our Environment, Health, Safety and Security (EHS&S) policy and practice. Olin leadership visibly performs and guides the organization to conduct business in a manner that protects and increasingly benefits our employees, business partners and the communities in which we live. All employees have responsibilities within our management systems necessary to sustain our drive to zero incidents. Full year 2019 was the second consecutive year that Olin achieved a decline for total safety and environmental events, which includes reportable injuries, process safety events, environmental events, and distribution events. We also experienced a decline for the third consecutive year for recordable injuries and the third consecutive year with zero severity safety events.

#### Sustainability and Responsibility

We strongly believe in meeting the needs of the present without compromising the needs of future generations. We recognize the impact our company has on our natural resources and are committed to the guiding principles of Responsible Care®. This also means striving for a company culture responsible to the ongoing economic goals of our employees and shareholders.

At Olin, we integrate sustainability in everything we do as a Responsible Corporate Citizen. We value and respect our people, the communities in which we operate, our customers and the environment. We commit to making a contribution to the protection of the world and its future condition through the safety and efficiency of our business practices - from supply to manufacture to delivery and ultimately the end-use of our products. Our focus on continuous improvement throughout our history drives our business. Focused on four sustainability pillars, we are challenging ourselves to advance those opportunities where our impact on the planet, our operations and our people and communities is most meaningful:

#### Energy and Climate Mindfulness

Olin systematically and strategically manages our energy and carbon footprint, driving greater efficiency and increasing utilization of renewable resources.

#### Resource Efficiency

Olin effectively manages critical resources to minimize consumption and waste, increase reuse and recycle of materials and drive operations efficiency.

#### Product Sustainability and Commercial Outreach

Olin’s products and processes contribute to sustainable opportunities and innovation, enabling safe handling and distribution throughout the supply chain.

#### Employee and Community Care

Olin provides equal opportunities to employees and ensures the ongoing safety and livelihood of our people and communities.

We have developed a strategy and global initiative to track our greenhouse gas (GHG) emissions, water usage, waste disposal and energy consumption and efficiency at our facilities. We are committed to improving our use of resources, acting on opportunities to reduce our environmental footprint and setting targets for improvement. We understand that maintaining safe, sustainable operations has an impact on us, our communities, the environment and our collective future. We continue to invest to develop safer, cleaner and more efficient products and processes.

#### Product Responsibility

We take great pride in distributing and handling our products safely and enabling our customers to do the same. Our product stewardship and quality practices are aligned with our core values, the American Chemistry Council’s Product Safety Code under Responsible Care®, and other globally recognized standards. We apply these standards to our chemical business segments and relevant subsidiaries to ensure compliance with applicable global regulations, evaluation, continuous improvement and transparency of relevant production information. Additionally, Winchester ammunition is designed and manufactured in accordance with the voluntary industry standards published by the Sporting Arms and Ammunition Manufacturers’ Institute. We are deeply committed to ammunition education and advocate strongly for the belief that it is important to take the necessary steps to be trained and educated when handling and using a firearm for recreational purposes, both for experienced and novice participants. Our goal is to meet or exceed guidelines in every instance. Olin Leadership demonstrates its commitment to these standards through active participation and communication concerning product safety, within our organization and to external stakeholders.

## Risk factors

As filed, 41,039 characters.

In addition to the other information in this Form 10-K, the following factors should be considered in evaluating Olin and our business. All of our forward-looking statements should be considered in light of these factors. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial also may become important factors that affect us.

***Sensitivity to Global Economic Conditions and Cyclicality—Our operating results could be negatively affected during economic and industry downturns.***

The businesses of most of our customers, particularly our vinyls, urethanes and pulp and paper customers are, to varying degrees, cyclical and have historically experienced periodic downturns. These economic and industry downturns have been characterized by diminished product demand, excess manufacturing capacity and, in some cases, lower average selling prices. Therefore, any significant downturn in our customers’ businesses or in global economic conditions could result in a reduction in demand for our products and could adversely affect our results of operations or financial condition.

Although a majority of our sales are within North America, a large part of our financial performance is dependent upon a healthy economy beyond North America because we have a significant amount of sales abroad and our customers sell their products abroad. As a result, our business is and will continue to be affected by general economic conditions and other factors in Europe, Asia Pacific, particularly China, and Latin America, including fluctuations in interest rates, customer demand, labor and energy costs, currency changes and other factors beyond our control, such as public health epidemics. The demand for our products and our customers’ products is directly affected by such fluctuations. In addition, our customers could decide to move some or all of their production to locations that are more remote from our facilities, and this could reduce demand for our products. We cannot assure you that events having an adverse effect on the industries in which we operate will not occur or continue, such as a downturn in the European, Asian Pacific, particularly Chinese, Latin American, or world economies, increases in interest rates or unfavorable currency fluctuations. Economic conditions in other regions of the world, predominantly Asia and Europe, can increase the amount of caustic soda produced and available for export to North America. The increased caustic soda supply can put downward pressure on our caustic soda prices, negatively impacting our profitability.

***Cyclical Pricing Pressure—Our profitability could be reduced by declines in average selling prices of our products, particularly chlorine and caustic soda.***

Our historical operating results reflect the cyclical and sometimes volatile nature of the chemical and ammunition industries. We experience cycles of fluctuating supply and demand in each of our business segments, particularly in our Chlor Alkali Products and Vinyls segment, which result in changes in selling prices. Periods of high demand, tight supply and increasing operating margins tend to result in increases in capacity and production until supply exceeds demand, generally followed by periods of oversupply and declining prices. Another factor influencing demand and pricing for chlorine and caustic soda is the price of natural gas. Higher natural gas prices increase our customers’ and competitors’ manufacturing costs, and depending on the ratio of crude oil to natural gas prices, could make them less competitive in world markets.

In the chlor alkali industry, price is the major supplier selection criterion. We have little or no ability to influence prices in these large commodity markets. Decreases in the average selling prices of our products could have a material adverse effect on our profitability. While we strive to maintain or increase our profitability by reducing costs through improving production efficiency, emphasizing higher margin products and by controlling transportation, selling and administration expenses, we cannot assure you that these efforts will be sufficient to fully offset the effect of possible decreases in pricing on operating results.

Because of the cyclical nature of our businesses, we cannot assure you that pricing or profitability in the future will be comparable to any particular historical period, including the most recent period shown in our operating results. We cannot assure you that the chlor alkali industry will not experience adverse trends in the future, or that our business, financial condition and results of operations will not be adversely affected by them.

Our Winchester and Epoxy segments are also subject to changes in operating results as a result of cyclical pricing pressures, but to a lesser extent than our Chlor Alkali Products and Vinyls segment. Selling prices of ammunition and epoxy materials are affected by changes in raw material costs and availability, customer demand, industry production capacity and declines in average selling prices of products of our Winchester and Epoxy segments could adversely affect our profitability.

***Suppliers—We rely on a limited number of third-party suppliers for specified feedstocks and services.***

We obtain a significant portion of our raw materials from a few key suppliers. If any of these suppliers fail to meet their obligations under present or any future supply agreements, we may be forced to pay higher prices or incur higher costs to obtain the necessary raw materials. Any interruption of supply or any price increase of raw materials could have a material adverse effect on our business, financial condition and results of operations. We have entered into long-term agreements with Dow to provide specified feedstocks and services for a number of our facilities. These facilities are dependent upon Dow’s infrastructure for services such as wastewater and ground water treatment. Any failure of Dow to perform its obligations under those agreements could adversely affect the operation of the affected facilities and our business, financial condition and results of operations. Most of these agreements are automatically renewable after their initial terms, but may be terminated by us or Dow after specified notice periods. If we are required to obtain an alternate source for these feedstocks or services, we may not be able to obtain pricing on as favorable terms. Additionally, we may be forced to pay additional transportation costs or to invest in capital projects for pipelines or alternate facilities to accommodate railcar or other delivery methods or to replace other services.

A vendor may choose, subject to existing contracts, to modify its relationship due to general economic concerns or concerns relating to the vendor or us, at any time. Any significant change in the terms that we have with our key suppliers could materially and adversely affect our business, financial condition and results of operations, as could significant additional requirements from suppliers that we provide them additional security in the form of prepayments or posting letters of credit.

***Raw Materials—Availability of purchased feedstocks and energy, and the volatility of these costs, impact our operating costs and add variability to earnings.***

Purchased feedstock and energy costs account for a substantial portion of our total production costs and operating expenses. We purchase certain raw materials as feedstocks.

Feedstock and energy costs generally follow price trends in crude oil and natural gas, which are sometimes volatile. Ultimately, the ability to pass on underlying cost increases in a timely manner or at all is dependent on market conditions. Conversely, when feedstock and energy costs decline, selling prices generally decline as well. As a result, volatility in these costs could impact our business, financial condition and results of operations.

If the availability of any of our principal feedstocks is limited or we are unable to obtain natural gas or energy from any of our energy sources, we may be unable to produce some of our products in the quantities demanded by our customers, which could have a material adverse effect on plant utilization and our sales of products requiring such raw materials. We have long-term supply contracts with various third parties for certain raw materials, including ethylene, electricity, propylene and benzene. As these contracts expire, we may be unable to renew these contracts or obtain new long-term supply agreements on terms comparable or as favorable to us, depending on market conditions, which may have a material adverse effect on our business, financial condition and results of operations. In addition, many of our long-term contracts contain provisions that allow our suppliers to limit the amount of raw materials shipped to us below the contracted amount in force majeure or similar circumstances. If we are required to obtain alternate sources for raw materials because our suppliers are unwilling or unable to perform under raw material supply agreements or if a supplier terminates its agreements with us, we may not be able to obtain these raw materials from alternative suppliers or obtain new long-term supply agreements on terms comparable or as favorable to us.

***Cost Control—Our profitability could be reduced if we experience increasing raw material, utility, transportation or logistics costs, or if we fail to achieve targeted cost reductions.***

Our operating results and profitability are dependent upon our continued ability to control, and in some cases reduce, our costs. If we are unable to do so, or if costs outside of our control, particularly our costs of raw materials, utilities, transportation and similar costs, increase beyond anticipated levels, our profitability will decline.

For example, if our feedstock and energy costs increase, and we are unable to control those costs or pass the increased costs on to customers, our profitability in our Chlor Alkali Products and Vinyls and Epoxy segments would be negatively affected. Similarly, costs of commodity metals and other materials used in our Winchester business, such as copper and lead, can vary. If we experience significant increases in these costs and are unable to raise our prices to offset the higher costs, the profitability in our Winchester business would be negatively affected.

***Third-Party Transportation—We rely heavily on third-party transportation, which subjects us to risks and costs that we cannot control, and which risks and costs may have a material adverse effect on our financial position or results of operations.***

We rely heavily on railroad, truck, marine vessel, barge and other shipping companies to transport finished products to customers and to transport raw materials to the manufacturing facilities used by each of our businesses. These transport operations are subject to various hazards and risks, including extreme weather conditions, work stoppages and operating hazards, as well as domestic and international transportation and maritime regulations. In addition, the methods of transportation we utilize, including shipping chlorine and other chemicals by railroad and by barge, may be subject to additional, more stringent and more costly regulations in the future. If we are delayed or unable to ship finished products or unable to obtain raw materials as a result of any such new or modified regulations or public policy changes related to transportation safety, or these transportation companies’ failure to operate properly, or if there are significant changes in the cost of these services due to new additional regulations, or otherwise, we may not be able to arrange efficient alternatives and timely means to obtain raw materials or ship goods, which could result in a material adverse effect on our business, financial position or results of operations. If any third-party railroad that we utilize to transport chlorine and other chemicals ceases to transport certain hazardous materials, or if there are significant changes in the cost of shipping hazardous materials by rail or otherwise, we may not be able to arrange efficient alternatives and timely means to deliver our products or at all, which could result in a material adverse effect on our business, financial position or results of operations.

***Security and Chemicals Transportation—New regulations on the transportation of hazardous chemicals and/or the security of chemical manufacturing facilities and public policy changes related to transportation safety could result in significantly higher operating costs.***

The transportation of our products and feedstocks, including transportation by pipeline, and the security of our chemical manufacturing facilities are subject to extensive regulation. Government authorities at the local, state and federal levels could implement new or stricter regulations that would impact the security of chemical plant locations and the transportation of hazardous chemicals. Our Chlor Alkali Products and Vinyls and Epoxy segments could be adversely impacted by the cost of complying with any new regulations. Our business also could be adversely affected if an incident were to occur at one of our facilities or while transporting products. The extent of the impact would depend on the requirements of future regulations and the nature of an incident, which are unknown at this time.

***Production Hazards—Our facilities are subject to operating hazards, which may disrupt our business.***

We are dependent upon the continued safe and reliable operation of our production facilities. Our production facilities are subject to hazards associated with the manufacture, handling, storage and transportation of chemical materials and products and ammunition, including leaks and ruptures, explosions, fires, inclement weather and natural disasters, unexpected utility disruptions or outages, unscheduled downtime, equipment failure, terrorism, transportation interruptions, transportation accidents involving our chemical products, chemical spills and other discharges or releases of toxic or hazardous substances or gases and environmental hazards. Due to the integrated nature of our large chemical sites, an incident at one plant could impact production across multiple plants at a facility. From time to time in the past, we have had incidents that have temporarily shut down or otherwise disrupted our manufacturing, causing production delays and resulting in liability for workplace injuries and fatalities. Some of our products involve the manufacture and/or handling of a variety of explosive and flammable materials. Use of these products by our customers could also result in liability if an explosion, fire, spill or other accident were to occur. We cannot assure you that we will not experience these types of incidents in the future or that these incidents will not result in production delays or otherwise have a material adverse effect on our business, financial condition or results of operations. Major hurricanes have caused significant disruption in our operations on the U.S. Gulf Coast, logistics across the region and the supply of certain raw materials, which have had an adverse impact on volume and cost for some of our products. Due to the substantial presence we have on the U.S. Gulf Coast, similar severe weather conditions or other natural phenomena in the future could negatively affect our results of operations, for which we may not be fully insured.

***Credit Facility—Weak industry conditions could affect our ability to comply with the financial maintenance covenants in our senior credit facility.***

Our senior credit facility includes certain financial maintenance covenants requiring us to not exceed a maximum leverage ratio and to maintain a minimum coverage ratio.

Depending on the magnitude and duration of economic or industry downturns affecting our businesses, including deterioration in prices and volumes, there can be no assurance that we will continue to be in compliance with these ratios. If we failed to comply with either of these covenants in a future period and were not able to obtain waivers from the lenders, we would need to refinance our current senior credit facility. However, there can be no assurance that such refinancing would be available to us on terms that would be acceptable to us or at all.

***Information Security—A failure of our information technology systems, or an interruption in their operation due to internal or external factors including cyber-attacks, could have a material adverse effect on our business, financial condition or results of operations.***

Our operations are dependent on our ability to protect our information systems, computer equipment and information databases from systems failures. We rely on both internal information technology systems and certain external services and service providers to manage the day-to-day operation of our business, operate elements of our manufacturing facilities, manage relationships with our employees, customers and suppliers, fulfill customer orders and maintain our financial and accounting records. Failure of any one or more than one of our information technology systems could be caused by internal or external events, such as incursions by intruders or hackers, computer viruses, cyber-attacks, failures in hardware or software, or power or telecommunication fluctuations or failures. The failure of our information technology systems to perform as anticipated for any reason or any significant breach of security could disrupt our business and result in numerous adverse consequences, including reduced effectiveness and efficiency of operations, increased costs or loss of important information, any of which could have a material adverse effect on our business, financial condition or results of operations. We have technology and information security processes, periodic external service and service provider reviews, insurance policies and disaster recovery plans in place to mitigate our risk to these vulnerabilities. However, these measures may not be adequate to ensure that our operations will not be disrupted or our financial impact minimalized, should such an event occur.

***Integration of Information Technology Systems—Operation on multiple Enterprise Resource Planning (ERP) information systems, and the conversion to a new system, may negatively impact our operations.***

We are highly dependent on our information systems infrastructure in order to process orders, track inventory, ship products in a timely manner, prepare invoices to our customers, make payments to our suppliers, maintain regulatory compliance and otherwise carry on our business in the ordinary course. We currently operate on multiple ERP information systems. Since we are required to process and reconcile our information from multiple systems, the chance of errors is greater. Inconsistencies in the information from multiple ERP systems could adversely impact our ability to manage our business efficiently and may result in heightened risk to our ability to maintain our books and records and comply with regulatory requirements. In 2017, we began a multi-year implementation of new enterprise resource planning, manufacturing, and engineering systems. The project includes the required information technology infrastructure (collectively, the Information Technology Project). The project is planned to standardize business processes across the chemicals businesses with the objective of maximizing cost effectiveness, efficiency and control across our global operations. At the end of 2019, Olin had successfully converted approximately 35% of our chemical business users to the new enterprise resource planning systems. The project is anticipated to be substantially completed during 2020. The transition to a new ERP system involves numerous risks, including:

- diversion of management’s attention away from normal daily business operations;
- loss of, or delays in accessing, data;
- increased demand on our operations support personnel;
- increased costs;
- initial dependence on unfamiliar systems while training personnel to use new systems; and
- increased operating expenses resulting from training, conversion and transition support activities.

Any of the foregoing could result in a material increase in information technology compliance or other related costs, and could materially and negatively impact our business, financial condition or results of operations.

***Imbalance in Demand for Our Chlor Alkali Products—A loss of a substantial customer for either our chlorine or caustic soda could cause an imbalance in customer demand for these products, which could have an adverse effect on our results of operations.***

Chlorine and caustic soda are produced simultaneously and in a fixed ratio of 1.0 ton of chlorine to 1.1 tons of caustic soda. The loss of a substantial chlorine or caustic soda customer could cause an imbalance in customer demand for either our chlorine and caustic soda products. An imbalance in customer demand may require Olin to reduce production of both chlorine and caustic soda or take other steps to correct the imbalance. Since Olin cannot store large quantities of chlorine, we may not be able to respond to an imbalance in customer demand for these products quickly or efficiently. If a substantial imbalance occurred, we would need to reduce prices or take other actions that could have a material adverse impact on our business, results of operations and financial condition.

### Indebtedness—Our indebtedness could adversely affect our financial condition.

As of December 31, 2019, we had $3,340.8 million of indebtedness outstanding. Outstanding indebtedness does not include amounts that could be borrowed under our $800.0 million senior revolving credit facility, under which $796.5 million was available for borrowing as of December 31, 2019 because we had issued $3.5 million of letters of credit. As of December 31, 2019, our indebtedness represented 58.0% of our total capitalization. At December 31, 2019, $2.1 million of our indebtedness was due within one year. Despite our level of indebtedness, we expect to continue to have the ability to borrow additional debt.

Our indebtedness could have important consequences, including but not limited to:

- limiting our ability to fund working capital, capital expenditures, and other general corporate purposes;
- limiting our ability to accommodate growth by reducing funds otherwise available for other corporate purposes and to compete, which in turn could prevent us from fulfilling our obligations under our indebtedness;
- limiting our operational flexibility due to the covenants contained in our debt agreements;
- to the extent that our debt is subject to floating interest rates, increasing our vulnerability to fluctuations in market interest rates;
- limiting our ability to pay cash dividends;
- limiting our flexibility for, or reacting to, changes in our business or industry or economic conditions, thereby limiting our ability to compete with companies that are not as highly leveraged; and
- increasing our vulnerability to economic downturns.

Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt will depend on a range of economic, competitive and business factors, many of which are outside our control. There can be no assurance that our business will generate sufficient cash flow from operations to make these payments. If we are unable to meet our expenses and debt obligations, we may need to refinance all or a portion of our indebtedness before maturity, sell assets or issue additional equity. We may not be able to refinance any of our indebtedness, sell assets or issue additional equity on commercially reasonable terms or at all, which could cause us to default on our obligations and impair our liquidity. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our debt obligations on commercially reasonable terms, would have a material adverse effect on our business, financial condition and results of operations, as well as on our ability to satisfy our debt obligations.

***Litigation and Claims—We are subject to litigation and other claims, which could cause us to incur significant expenses.***

We are regularly a defendant in legal proceedings relating to our present and former operations. These include contract disputes, product liability claims, including ammunition and firearms, and proceedings alleging injurious exposure of plaintiffs to various chemicals and other substances (including proceedings based on alleged exposures to asbestos). Frequently, the proceedings alleging injurious exposure involve claims made by numerous plaintiffs against many defendants. Because of the inherent uncertainties of litigation, we are unable to predict the outcome of these proceedings and therefore cannot determine whether the financial impact, if any, will be material to our financial position, cash flows or results of operations.

***Effects of Regulation—Changes in or failure to comply with legislation or government regulations or policies could have a material adverse effect on our financial position or results of operations.***

Legislation or regulations that may be adopted or modified by U.S. or foreign governments, including legislation or regulations intended to address climate change, import and export duties and quotas, anti-dumping measures and related tariffs, and tax regulation could significantly affect the sales, costs and profitability of our business. The chemical and ammunition industries are subject to legislative and regulatory actions, which could have a material adverse effect on our business, financial position or results of operations. Existing and future government regulations and laws may reduce the demand for our products or impact our ability to use or manufacture certain products, which could have a material adverse effect on our business, financial condition and results of operations. A material change in tax laws, treaties or regulations in the jurisdictions in which we operate or a change in their interpretation or application could have a material adverse effect on our business, financial condition and results of operations.

***Environmental Costs—We have ongoing environmental costs, which could have a material adverse effect on our financial position or results of operations.***

Our operations and assets are subject to extensive environmental, health and safety regulations, including laws and regulations related to air emissions, water discharges, waste disposal and remediation of contaminated sites. The nature of our operations and products, including the raw materials we handle, exposes us to the risk of liabilities, obligations or claims under these laws and regulations due to the production, storage, use, transportation and sale of materials that can adversely impact the environment or cause personal injury, including, in the case of chemicals, unintentional releases into the environment. Environmental laws may have a significant effect on the costs of use, transportation, handling and storage of raw materials and finished products, as well as the costs of storage, handling, treatment, transportation and disposal of wastes. In addition, we are party to various government and private environmental actions associated with past manufacturing facilities and former waste disposal sites. We have incurred, and expect to incur, significant costs and capital expenditures in complying with environmental laws and regulations.

The ultimate costs and timing of environmental liabilities are difficult to predict. Liabilities under environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis. One liable party could be held responsible for all costs at a site, regardless of fault, percentage of contribution to the site or the legality of the original disposal. We could incur significant costs, including clean-up costs, natural resource damages, civil or criminal fines and sanctions and third-party lawsuits claiming, for example, personal injury and/or property damage, as a result of past or future violations of, or liabilities under, environmental or other laws.

In addition, future events, such as changes to or more rigorous enforcement of environmental laws or new information about the extent of remediation required, could require us to make additional expenditures, modify or curtail our operations and/or install additional pollution control equipment. It is possible that regulatory agencies may identify new chemicals of concern or enact new or more stringent clean-up standards for existing chemicals of concern. This could lead to expenditures for environmental remediation in the future that are additional to existing estimates.

Accordingly, it is possible that some of the matters in which we are involved or may become involved may be resolved unfavorably to us, which could materially and adversely affect our business, financial position, cash flows or results of operations. See “Environmental Matters” contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

***Ability to Attract and Retain Qualified Employees—We must attract, retain and motivate key employees, and the failure to do so may adversely affect our business, financial condition or results of operations.***

We feel our success depends on hiring, retaining and motivating key employees, including executive officers. We may have difficulty locating and hiring qualified personnel. In addition, we may have difficulty retaining such personnel once hired, and key people may leave and compete against us. The loss of key personnel or our failure to attract and retain other qualified and experienced personnel could disrupt or materially adversely affect our business, financial condition or results of operations. In addition, our operating results could be adversely affected by increased costs due to increased competition for employees or higher employee turnover, which may result in the loss of significant customer business or increased costs.

***Pension Plans—The impact of declines in global equity and fixed income markets on asset values and any declines in interest rates and/or improvements in mortality assumptions used to value the liabilities in our pension plans may result in higher pension costs and the need to fund the pension plans in future years in material amounts.***

We sponsor domestic and foreign defined benefit pension plans for eligible employees and retirees. Substantially all domestic defined benefit pension plan participants are no longer accruing benefits. However, a portion of our bargaining hourly employees continue to participate in our domestic qualified defined benefit pension plans under a flat-benefit formula. Our funding policy for the qualified defined benefit pension plans is consistent with the requirements of federal laws and regulations. Our foreign subsidiaries maintain pension and other benefit plans, which are consistent with local statutory practices. The determinations of pension expense and pension funding are based on a variety of rules and regulations. Changes in these rules and regulations could impact the calculation of pension plan liabilities and the valuation of pension plan assets. They may also result in higher pension costs, additional financial statement disclosure, and the need to fund the pension plan.

At December 31, 2019, the projected benefit obligation of $2,992.0 million exceeded the market value of assets in our qualified defined benefit pension plans by $792.7 million, as calculated under Accounting Standards Codification (ASC) 715 “Compensation—Retirement Benefits” (ASC 715). During 2019, we made a discretionary cash contribution to our domestic qualified defined benefit pension plan of $12.5 million. Based on our plan assumptions and estimates, we will not be required to make any cash contributions to the domestic qualified defined benefit pension plan at least through 2020.

We have international qualified defined benefit pension plans to which we made cash contributions of $2.4 million, $2.6 million and $1.7 million in 2019, 2018 and 2017, respectively, and we anticipate less than $5 million of cash contributions to international qualified defined benefit pension plans in 2020.

The impact of declines in global equity and fixed income markets on asset values may result in higher pension costs and may increase and accelerate the need to fund the pension plans in future years. For example, holding all other assumptions constant, a 100-basis point decrease or increase in the assumed long-term rate of return on plan assets for our domestic qualified defined benefit pension plan would have decreased or increased, respectively, the 2019 defined benefit pension plan income by approximately $19.8 million. Holding all other assumptions constant for our domestic qualified defined benefit pension plan, a 50-basis point decrease in the discount rate used to calculate pension income for 2019 and the projected benefit obligation as of December 31, 2019 would have decreased pension income by $0.4 million and increased the projected benefit obligation by $160.0 million. A 50-basis point increase in the discount rate used to calculate pension income for 2019 and the projected benefit obligation as of December 31, 2019 for our domestic qualified defined benefit pension plan would have increased pension income by $0.6 million and decreased the projected benefit obligation by $145.0 million.

***International Sales and Operations—We are subject to risks associated with our international sales and operations that could have a material adverse effect on our business or results of operations.***

Olin has an international presence, including the geographic regions of Europe, Asia Pacific and Latin America. In 2019, approximately 41% of our sales were generated outside of the United States. These international sales and operations expose us to risks, including:

- difficulties and costs associated with complying with complex and varied laws, treaties, and regulations;
- tariffs and trade barriers;
- outbreaks of pandemic disease, such as coronavirus, which could cause us and our suppliers and/or customers to temporarily suspend operations in affected areas, restrict the ability of Olin to distribute our products or cause economic downturns that could affect demand for our products;
- changes in laws and regulations, including the imposition of economic or trade sanctions affecting international commercial transactions;
- risk of non-compliance with anti-bribery laws and regulations, such as the U.S. Foreign Corrupt Practices Act;
- restrictions on, or difficulties and costs associated with, the repatriation of cash from foreign countries to the United States;
- unfavorable currency fluctuations;
- changes in local economic conditions;
- unexpected changes in political or regulatory environments;
- labor compliance and costs associated with a global workforce;
- data privacy regulations;
- difficulties in maintaining overseas subsidiaries and international operations; and
- challenges in protecting intellectual property rights.

Any one or more of the above factors could have a material adverse effect on our business, financial condition or results of operations.

***Asset Impairment—If our goodwill, other intangible assets or property, plant and equipment become impaired in the future, we may be required to record non-cash charges to earnings, which could be significant.***

The process of impairment testing for our goodwill involves a number of judgments and estimates made by management including future cash flows, discount rates, profitability assumptions and terminal growth rates with regards to our reporting units. Our internally generated long-range plan includes cyclical assumptions regarding pricing and operating forecasts for the chlor alkali industry. If the judgments and estimates used in our analysis are not realized or are affected by external factors, then actual results may not be consistent with these judgments and estimates, and we may be required to record a goodwill impairment charge in the future, which could be significant and have an adverse effect on our financial position and results of operations.

We review long-lived assets, including property, plant and equipment and identifiable amortizing intangible assets, for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. If the fair value is less than the carrying amount of the asset, an impairment is recognized for the difference. Factors which may cause an impairment of long-lived assets include significant changes in the manner of use of these assets, negative industry or market trends, a significant underperformance relative to historical or projected future operating results, extended period of idleness or a likely sale or disposal of the asset before the end of its estimated useful life. If our property, plant and equipment and identifiable amortizing intangible assets are determined to be impaired in the future, we may be required to record non-cash charges to earnings during the period in which the impairment is determined, which could be significant and have an adverse effect on our financial position and results of operations.

***Credit and Capital Market Conditions—Adverse conditions in the credit and capital markets may limit or prevent our ability to borrow or raise capital.***

While we believe we have facilities in place that should allow us to borrow funds as needed to meet our ordinary course business activities, adverse conditions in the credit and financial markets could prevent us from obtaining financing, if the need arises. Our ability to invest in our businesses and refinance or repay maturing debt obligations could require access to the credit and capital markets and sufficient bank credit lines to support cash requirements. If we are unable to access the credit and capital markets on commercially reasonable terms, we could experience a material adverse effect on our business, financial position or results of operations.

***Lake City Plant Contract—Various risks associated with our transition and subsequent operation of the Lake City Army Ammunition Plant could adversely affect our business, financial condition and results of operations.***

In 2019, our Winchester business was selected by the United States Army to operate and manage the Lake City Army Ammunition Plant in Independence, MO. Our bid for this contract was developed using assumptions about the operating conditions of the facility and the future demand of ammunition produced from that facility. These assumptions were based upon our knowledge of the facility and the market at the time of the bid as well as information that was provided to us by the United States Army during the solicitation process. If our assumptions were incorrect, we may experience additional costs or lower revenues than expected as a result of this contract.

The Lake City Plant contract is a fixed-price contract under which we have limited ability to pass along cost overruns.

Beginning on October 1, 2019 and continuing until October 1, 2020, we are working with the incumbent contractor at the Lake City Plant to transition the plant to our management and control. We have developed a transition plan that involves transition of the workforce, negotiation of new labor contracts, implementation of information technology and operating systems and start-up of manufacturing processes. If we do not meet our timelines or otherwise fail to complete portions of our transition plan, we may incur additional costs or fail to meet the anticipated financial results associated with this contract.

***Labor Matters—We cannot assure that we can conclude future labor contracts or any other labor agreements without work stoppages.***

Various labor unions represent a significant number of our hourly paid employees for collective bargaining purposes. The following labor contract will be required to be negotiated in 2020:

| Location | Number of Employees | Expiration Date |
| --- | ---: | --- |
| Lake City Army Ammunition Plant (Winchester) | 1,447 | October 2020 |

While we believe our relations with our employees and their various representatives are generally satisfactory, we cannot assure that we can conclude any labor agreements without work stoppages and cannot assure that any work stoppages will not have a material adverse effect on our business, financial condition or results of operations.

## Properties

As filed, 759 characters.

Information concerning our principal locations from which our products and services are manufactured, distributed or marketed are included in the tables set forth under the caption “Products and Services” contained in Item 1—“Business.” Generally, these facilities are well maintained, in good operating condition, and suitable and adequate for their use. Our two largest facilities are co-located with Dow. The land in which these facilities are located is leased with a 99-year initial term that commenced in 2015. Additionally, we lease warehouses, terminals and distribution offices and space for executive and branch sales offices and service departments. We believe our current facilities are adequate to meet the requirements of our present operations.

## Legal proceedings

As filed, 3,424 characters.

#### Saltville

We have completed all work in connection with remediation of mercury contamination at the site of our former mercury cell chlor alkali plant in Saltville, VA required to date. In mid-2003, the Trustees for natural resources in the North Fork Holston River, the Main Stem Holston River and associated floodplains, located in Smyth and Washington Counties in Virginia and in Sullivan and Hawkins Counties in Tennessee notified us of, and invited our participation in, an assessment of alleged damages to natural resources resulting from the release of mercury. The Trustees also notified us that they had made a preliminary determination that we are potentially liable for natural resource damages in said rivers and floodplains. We agreed to participate in the assessment. We and the Trustees have entered into discussions concerning a resolution of this matter. In light of the ongoing discussions and inherent uncertainties of the assessment, we cannot at this time determine whether the financial impact, if any, of this matter will be material to our financial position or results of operations. See “Environmental Matters” contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

#### Other

As part of the continuing environmental investigation by federal, state and local governments of waste disposal sites, we have entered into a number of settlement agreements requiring us to participate in the investigation and cleanup of a number of sites. Under the terms of such settlements and related agreements, we may be required to manage or perform one or more elements of a site cleanup, or to manage the entire remediation activity for a number of parties, and subsequently seek recovery of some or all of such costs from other Potentially Responsible Parties (PRPs). In many cases, we do not know the ultimate costs of our settlement obligations at the time of entering into particular settlement agreements, and our liability accruals for our obligations under those agreements are often subject to significant management judgment on an ongoing basis. Those cost accruals are provided for in accordance with generally accepted accounting principles and our accounting policies set forth in “Environmental Matters” contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We, and our subsidiaries, are defendants in various legal actions (including proceedings based on alleged exposures to asbestos) incidental to our past and current business activities. At December 31, 2019 and 2018, our consolidated balance sheets included liabilities for these legal actions of $12.4 million and $15.6 million, respectively. These liabilities do not include costs associated with legal representation. Based on our analysis, and considering the inherent uncertainties associated with litigation, we do not believe that it is reasonably possible that these legal actions will materially and adversely affect our financial position, cash flows or results of operations.

In connection with the October 5, 2015 acquisition of Dow’s U.S. Chlor Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses, the prior owner of the businesses retained liabilities relating to litigation, releases of hazardous materials and violations of environmental law to the extent arising prior to October 5, 2015.

## Management's discussion and analysis

As filed, 110,028 characters.

### BUSINESS BACKGROUND

We are a leading vertically-integrated global manufacturer and distributor of chemical products and a leading U.S. manufacturer of ammunition. Our operations are concentrated in three business segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. All of our business segments are capital intensive manufacturing businesses. Chlor Alkali Products and Vinyls operating rates are closely tied to the general economy. Each segment has a commodity element to it, and therefore, our ability to influence pricing is quite limited on the portion of the segment’s business that is strictly commodity.

Our Chlor Alkali Products and Vinyls segment is a commodity business where all supplier products are similar and price is the major supplier selection criterion. We have little or no ability to influence prices in the large, global commodity markets. Our Chlor Alkali Products and Vinyls segment produces some of the most widely used chemicals in the world that can be upgraded into a wide variety of downstream chemical products used in many end-markets. Cyclical price swings, driven by changes in supply/demand, can be abrupt and significant and, given capacity in our Chlor Alkali Products and Vinyls segment, can lead to significant changes in our overall profitability.

The Epoxy segment consumes products manufactured by the Chlor Alkali Products and Vinyls segment. The Epoxy segment’s upstream and midstream products are predominately commodity markets. We have little or no ability to influence prices in these large, global commodity markets. While competitive differentiation exists through downstream customization and product development opportunities, pricing is extremely competitive with a broad range of competitors across the globe.

Winchester also has a commodity element to its business, but a majority of Winchester ammunition is sold as a branded consumer product where there are opportunities to differentiate certain offerings through innovative new product development and enhanced product performance. While competitive pricing versus other branded ammunition products is important, it is not the only factor in product selection.

### RECENT DEVELOPMENTS AND HIGHLIGHTS

### 2019 Overview

Net loss was $11.3 million for the year ended December 31, 2019 compared to net income of $327.9 million for 2018. The decrease in results from the prior year was primarily due to lower Chlor Alkali Products and Vinyls segment results, non-cash restructuring charges of $58.9 million, the 2018 pretax insurance recoveries of $111.0 million for environmental costs incurred and expensed in prior years and increased costs associated with the Information Technology Project. In 2017, we began a multi-year implementation of new enterprise resource planning, manufacturing and engineering systems, and related infrastructure (collectively, the Information Technology Project).

On December 11, 2019, we announced that we had made the decision to permanently close a chlor alkali plant with a capacity of 230,000 tons and our Vinylidene Chloride (VDC) production facility, both in Freeport, TX. These closures are expected to be completed before the end of 2020. For the year ended December 31, 2019, we recorded pretax restructuring charges of $58.9 million for the impairment of equipment and facilities related to these actions.

Chlor Alkali Products and Vinyls generated segment income of $336.7 million for 2019 compared to $637.1 million for 2018. Chlor Alkali Products and Vinyls segment income was lower than in the prior year primarily due to lower caustic soda pricing partially offset by lower raw material and operating costs. The year ended December 31, 2019 also included lower maintenance turnaround costs. Chlor Alkali Products and Vinyls segment income included depreciation and amortization expense of $470.4 million and $473.1 million in 2019 and 2018, respectively.

During 2018, North America caustic soda price contract indices increased $40 per ton while the caustic soda export price indices decreased approximately $270 per metric ton. During 2019, North America caustic soda price contract indices decreased $90 per ton and caustic soda export price indices decreased $160 per metric ton.

Epoxy reported segment income of $53.9 million for 2019 compared to $52.8 million for 2018. Epoxy segment income was higher than in the prior year primarily due to lower maintenance costs and unabsorbed fixed manufacturing costs associated with maintenance turnarounds and lower raw material costs, primarily benzene and propylene, substantially offset by lower product prices. Epoxy segment income included depreciation and amortization expense of $100.1 million and $102.4 million in 2019 and 2018, respectively.

Winchester reported segment income of $40.1 million for 2019 compared to $38.4 million for 2018. Winchester segment income was higher than in the prior year primarily due to higher sales volumes and lower costs, primarily commodity and other material costs, partially offset by lower product prices. Winchester segment income included depreciation and amortization expense of $20.1 million and $20.0 million in 2019 and 2018, respectively.

On January 1, 2019, we sold our 9.1% limited partnership interest in Bay Gas for $20.0 million. The sale closed on February 7, 2019 which resulted in a pretax gain of approximately $11.2 million for the year ended December 31, 2019. For the year ended December 31, 2018, Chlor Alkali Products and Vinyls recorded a $21.5 million non-cash impairment charge related to an adjustment to the value of our interest in Bay Gas.

On July 16, 2019, Olin issued $750.0 million aggregate principal amount of 5.625% senior notes due August 1, 2029 (2029 Notes), which were registered under the Securities Act of 1933, as amended. Proceeds from the 2029 Notes were used to redeem the remaining balance of the $1,375.0 million Term Loan Facility of $493.0 million and $150.0 million of the Receivables Financing Agreement.

On July 16, 2019, Olin also entered into a new five-year, $2,000.0 million senior credit facility (2019 Senior Credit Facility), which replaces the existing $1,975.0 million senior credit facility. The 2019 Senior Credit Facility will mature in July 2024. In December 2019, Olin amended the 2019 Senior Credit Facility which amended the restrictive covenants of the agreement, including expanding the coverage and leverage ratios to be less restrictive over the next two and a half years. The 2019 Senior Credit Facility includes a senior unsecured delayed-draw term loan facility in an aggregate principal amount of up to $1,200.0 million (Delayed Draw Term Loan Facility) and an $800.0 million senior unsecured revolving credit facility (2019 Senior Revolving Credit Facility). The Delayed Draw Term Loan Facility will be available on a delayed basis in up to three draws to be made on or prior to November 29, 2020. We expect the proceeds from the Delayed Draw Term Loan Facility will be used to redeem the 9.75% senior notes due 2023 and the 10.00% senior notes due 2025 on or about October 15, 2020.

On September 27, 2019, Winchester was notified that it had been selected by the United States Army to operate and manage the Lake City Plant in Independence, MO. Following a one-year transition period, Winchester will assume full operational control of the Lake City Plant on October 1, 2020. The contract has an initial term of seven years and may be extended by the United States Army for up to three additional years. The contract is expected to increase Winchester’s annual revenue by $450 million to $550 million.

### CONSOLIDATED RESULTS OF OPERATIONS

*($ in millions, except per share data)*

|  | Years ended December 31, 2019 | 2018 | 2017 |
| --- | ---: | ---: | ---: |
| Sales | $6,110.0 | $6,946.1 | $6,268.4 |
| Cost of goods sold | 5,439.2 | 5,822.1 | 5,554.9 |
| Gross margin | 670.8 | 1,124.0 | 713.5 |
| Selling and administration | 416.9 | 430.6 | 369.8 |
| Restructuring charges | 76.5 | 21.9 | 37.6 |
| Acquisition-related costs | — | 1.0 | 12.8 |
| Other operating income | 0.4 | 6.4 | 3.3 |
| Operating income | 177.8 | 676.9 | 296.6 |
| Earnings (losses) of non-consolidated affiliates | — | (19.7) | 1.8 |
| Interest expense | 243.2 | 243.2 | 217.4 |
| Interest income | 1.0 | 1.6 | 1.8 |
| Non-operating pension income | 16.3 | 21.7 | 34.4 |
| Other income | 11.2 | — | — |
| Income (loss) before taxes | (36.9) | 437.3 | 117.2 |
| Income tax (benefit) provision | (25.6) | 109.4 | (432.3) |
| Net (loss) income | $(11.3) | $327.9 | $549.5 |
| Net (loss) income per common share: |  |  |  |
| Basic | $(0.07) | $1.97 | $3.31 |
| Diluted | $(0.07) | $1.95 | $3.26 |

#### 2019 Compared to 2018

Sales for 2019 were $6,110.0 million compared to $6,946.1 million in 2018, a decrease of $836.1 million, or 12%. Chlor Alkali Products and Vinyls sales decreased by $566.6 million primarily due to lower caustic soda pricing. Epoxy sales decreased by $278.7 million primarily due to lower product prices and an unfavorable effect of foreign currency translation. Winchester sales increased by $9.2 million primarily due to higher ammunition sales to commercial customers.

Gross margin decreased $453.2 million, or 40%, from 2018. Chlor Alkali Products and Vinyls gross margin decreased by $342.1 million, primarily due to lower caustic soda pricing, partially offset by lower raw material and operating costs. Epoxy gross margin decreased $20.6 million primarily due to lower product prices, partially offset by lower raw material costs, primarily benzene and propylene, and lower maintenance and unabsorbed fixed manufacturing costs associated with maintenance turnarounds. Winchester gross margin increased $1.2 million primarily due to lower costs, partially offset by lower product prices. Gross margin in 2018 was positively impacted by insurance recoveries for environmental costs incurred and expensed in prior periods of $111.0 million. Gross margin as a percentage of sales decreased to 11% in 2019 from 16% in 2018.

Selling and administration expenses in 2019 decreased $13.7 million, or 3%, from 2018. The years ended December 31, 2019 and 2018 included costs associated with the Information Technology Project of $77.0 million and $36.5 million, respectively, an increase of $40.5 million. More than offsetting this increase were lower legal and legal-related settlement expenses of $19.3 million, primarily due to the legal fees associated with the environmental recovery actions in 2018, lower consulting and contract services of $13.7 million, lower management incentive compensation expense of $10.2 million, which includes mark-to-market adjustments on stock-based compensation expense, and a favorable foreign currency impact of $8.5 million. Selling and administration expenses as a percentage of sales were 7% in 2019 and 6% in 2018.

Restructuring charges in 2019 included $58.9 million of non-cash impairment charges for equipment and facilities associated with the closure of a chlor alkali plant and a VDC production facility, both in Freeport, TX. Restructuring charges in 2019 and 2018 were also associated with the March 2016 closure of 433,000 tons of chlor alkali capacity across three separate locations and the December 2018 decision to permanently close the ammunition assembly operations at our Winchester facility in Geelong, Australia.

Other operating income for the year ended December 31, 2018 included an $8.0 million insurance recovery for a second quarter 2017 business interruption at our Freeport, TX vinyl chloride monomer facility partially offset by a $1.7 million loss on the sale of land.

Earnings (losses) of non-consolidated affiliates for the year ended December 31, 2018 reflect a $21.5 million non-cash impairment charge.

Interest expense for the year ended December 31, 2019 was impacted by a lower level of average debt outstanding partially offset by higher interest rates compared to the year ended December 31, 2018. Interest expense for the years ended December 31, 2019 and 2018 included $17.0 million and $16.0 million, respectively, of accretion expense related to the ethylene payment discount expected to be paid on or about the fourth quarter of 2020. Interest expense was reduced by capitalized interest of $10.8 million and $6.0 million for 2019 and 2018, respectively.

Non-operating pension income includes all components of pension and other postretirement income (costs) other than service costs. Non-operating pension income was lower for the year ended December 31, 2019, primarily due to an increase in Pension Benefit Guaranty Corporation fees associated with our domestic qualified defined benefit pension plan.

The effective tax rate for 2019 included benefits associated with the finalization of the Internal Revenue Service (IRS) review of years 2013 to 2015 U.S. income tax claims, stock-based compensation, prior year tax positions, foreign tax law changes, a remeasurement of deferred taxes due to a decrease in our state effective tax rates and a change in tax contingencies. The effective tax rate also included expenses associated with a net increase in the valuation allowance primarily related to foreign deferred tax assets and liabilities. These factors resulted in a net $19.4 million tax benefit. After giving consideration to these items, the effective tax rate for 2019 of 16.8% was lower than the 21% U.S. federal statutory rate primarily due to state taxes and a net increase in the valuation allowance related to losses in foreign jurisdictions, partially offset by foreign income taxes and favorable permanent salt depletion deductions. The effective tax rate for 2018 included benefits associated with the U.S. Tax Cuts & Jobs Act (2017 Tax Act), stock-based compensation, changes in tax contingencies, a foreign dividend payment, changes associated with prior year tax positions and the remeasurement of deferred taxes due to a decrease in our state effective tax rates. The effective tax rate also included expenses associated with a net increase in the valuation allowance related to deferred tax assets in foreign jurisdictions and the remeasurement of deferred taxes due to changes in our foreign tax rates. These factors resulted in a net $2.9 million tax benefit, of which $3.8 million related to the increase of the 2017 Tax Act benefit. After giving consideration to these items, the effective tax rate for 2018 of 25.7% was higher than the 21% U.S. federal statutory rate primarily due to state and foreign income taxes, foreign income inclusions and a net increase in the valuation allowance related to current year losses in foreign jurisdictions, partially offset by favorable permanent salt depletion deductions.

#### 2018 Compared to 2017

Sales for 2018 were $6,946.1 million compared to $6,268.4 million in 2017, an increase of $677.7 million, or 11%. Chlor Alkali Products and Vinyls sales increased by $485.9 million primarily due to increased pricing for caustic soda, EDC, chlorine and other chlorine-derivatives, partially offset by lower caustic soda volumes and a less favorable product mix. Epoxy sales increased by $216.7 million primarily due to higher product prices, partially offset by lower volumes and a less favorable product mix. Winchester sales decreased by $24.9 million primarily due to lower sales to commercial customers, partially offset by higher sales to military customers and law enforcement agencies.

Gross margin increased $410.5 million, or 58%, from 2017. Gross margin was positively impacted by insurance recoveries for environmental costs incurred and expensed in prior periods of $111.0 million. Chlor Alkali Products and Vinyls gross margin increased by $263.8 million, primarily due to higher product pricing partially offset by increased costs, lower caustic soda volumes and a less favorable product mix. Epoxy gross margin increased $78.3 million primarily due to higher product prices partially offset by increased raw material costs, primarily benzene and propylene. Epoxy gross margin was also negatively impacted by the cost of an approximately two-month planned maintenance turnaround at our production facilities in Freeport, TX, which also reduced volumes. Both Chlor Alkali Products and Vinyls and Epoxy 2017 gross margins were negatively impacted by incremental costs to continue operations and unabsorbed fixed manufacturing costs associated with Hurricane Harvey. Winchester gross margin decreased $34.0 million primarily due to increased commodity and other material costs, lower commercial sales volumes and a less favorable product mix and lower selling prices. Gross margin as a percentage of sales increased to 16% in 2018 from 11% in 2017.

Selling and administration expenses in 2018 increased $60.8 million, or 16%, from 2017. The increase was primarily due to higher costs associated with the Information Technology Project of $31.2 million, higher legal and legal-related settlement expenses of $15.6 million, primarily associated with environmental recovery actions, increased incentive compensation expense of $11.6 million, an unfavorable foreign currency impact of $10.9 million and higher consulting and contract services of $10.4 million, which include transition service fees from Dow. These increased costs were partially offset by lower stock-based compensation expense of $15.0 million, which includes mark-to-market adjustments. Selling and administration expenses as a percentage of sales were 6% in both 2018 and 2017.

Restructuring charges in 2018 and 2017 were primarily associated with the March 2016 closure of 433,000 tons of chlor alkali capacity across three separate locations. Restructuring charges in 2018 were also associated with a December 2018 decision to permanently close the ammunition assembly operations at our Winchester facility in Geelong, Australia.

Acquisition-related costs for the years ended December 31, 2018 and 2017 were related to the integration of the Acquired Business, and consisted of advisory, legal, accounting and other professional fees.

Other operating income for the year ended December 31, 2018 included an $8.0 million insurance recovery for a second quarter 2017 business interruption at our Freeport, TX vinyl chloride monomer facility partially offset by a $1.7 million loss on the sale of land. Other operating income for the year ended December 31, 2017 included a gain of $3.3 million from the sale of a former manufacturing facility.

Earnings (losses) of non-consolidated affiliates decreased by $21.5 million for the year ended December 31, 2018, which reflect a $21.5 million non-cash impairment charge recorded during 2018.

Interest expense increased by $25.8 million for the year ended December 31, 2018 primarily due to higher interest rates and an increase of $12.1 million of accretion expense related to the ethylene payment discount expected to be paid on or about the fourth quarter of 2020, partially offset by a lower level of debt outstanding for the year ended December 31, 2018 compared to 2017.

Non-operating pension income includes all components of pension and other postretirement income (costs) other than service costs. Non-operating pension income was lower for the year ended December 31, 2018, primarily due to an increase in the amortization of actuarial losses and higher Pension Benefit Guaranty Corporation fees associated with our domestic qualified defined benefit pension plan.

The effective tax rate for 2018 included benefits associated with the 2017 Tax Act, stock-based compensation, changes in tax contingencies, a foreign dividend payment, changes associated with prior year tax positions and the remeasurement of deferred taxes due to a decrease in our state effective tax rates. The effective tax rate also included expenses associated with a net increase in the valuation allowance related to deferred tax assets in foreign jurisdictions and the remeasurement of deferred taxes due to changes in our foreign tax rates. These factors resulted in a net $2.9 million tax benefit, of which $3.8 million related to the increase of the 2017 Tax Act benefit. After giving consideration to these items, the effective tax rate for 2018 of 25.7% was higher than the 21% U.S. federal statutory rate primarily due to state and foreign income taxes, foreign income inclusions and a net increase in the valuation allowance related to current year losses in foreign jurisdictions, partially offset by favorable permanent salt depletion deductions. The effective tax rate for 2017 included benefits associated with the 2017 Tax Act, an agreement with the Internal Revenue Service on prior period tax examinations, stock based compensation, U.S. federal tax credits, changes to prior year tax positions and a reduction to the deferred tax liability on unremitted foreign earnings. The effective tax rate also included an expense associated with a net increase in the valuation allowance, primarily related to foreign net operating losses and remeasurement of deferred taxes due to an increase in our state effective tax rates. These factors resulted in a net $452.3 million tax benefit, of which $437.9 million was a provisional benefit from the 2017 Tax Act. After giving consideration to these items, the effective tax rate for 2017 of 17.1% was lower than the 35% U.S. federal statutory rate, primarily due to favorable permanent salt depletion deductions.

### SEGMENT RESULTS

We define segment results as income (loss) before interest expense, interest income, other operating income (expense), non-operating pension income, other income (expense) and income taxes, and includes the operating results of non-consolidated affiliates. Consistent with the guidance in ASC 280 “Segment Reporting,” we have determined it is appropriate to include the operating results of non-consolidated affiliates in the relevant segment financial results. We have three operating segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. The three operating segments reflect the organization used by our management for purposes of allocating resources and assessing performance. Chlorine used in our Epoxy segment is transferred at cost from the Chlor Alkali Products and Vinyls segment. Sales and profits are recognized in the Chlor Alkali Products and Vinyls segment for all caustic soda generated and sold by Olin.

*($ in millions)*

| Sales: | Years ended December 31, 2019 | 2018 | 2017 |
| --- | ---: | ---: | ---: |
| Chlor Alkali Products and Vinyls | $3,420.1 | $3,986.7 | $3,500.8 |
| Epoxy | 2,024.4 | 2,303.1 | 2,086.4 |
| Winchester | 665.5 | 656.3 | 681.2 |
| Total sales | $6,110.0 | $6,946.1 | $6,268.4 |
| Income (loss) before taxes: |  |  |  |
| Chlor Alkali Products and Vinyls(1) | $336.7 | $637.1 | $405.8 |
| Epoxy | 53.9 | 52.8 | (11.8) |
| Winchester | 40.1 | 38.4 | 72.4 |
| Corporate/Other: |  |  |  |
| Environmental (expense) income (2) | (20.5) | 103.7 | (8.5) |
| Other corporate and unallocated costs(3) | (156.3) | (158.3) | (112.4) |
| Restructuring charges(4) | (76.5) | (21.9) | (37.6) |
| Acquisition-related costs(5) | — | (1.0) | (12.8) |
| Other operating income(6) | 0.4 | 6.4 | 3.3 |
| Interest expense(7) | (243.2) | (243.2) | (217.4) |
| Interest income | 1.0 | 1.6 | 1.8 |
| Non-operating pension income(8) | 16.3 | 21.7 | 34.4 |
| Other income(9) | 11.2 | — | — |
| Income (loss) before taxes | $(36.9) | $437.3 | $117.2 |

(1) Earnings (losses) of non-consolidated affiliates are included in the Chlor Alkali Products and Vinyls segment results consistent with management’s monitoring of the operating segment. The losses of non-consolidated affiliates were $19.7 million for the year ended December 31, 2018, which reflect a $21.5 million non-cash impairment charge recorded during 2018. The earnings of non-consolidated affiliates were $1.8 million for the year ended December 31, 2017.

(2) Environmental (expense) income for the year ended December 31, 2019 included $4.8 million of an environmental insurance-related settlement gain. Environmental (expense) income for the year ended December 31, 2018 included pre-tax insurance recoveries for environmental costs incurred and expensed in prior periods of $111.0 million. Environmental (expense) income is included in cost of goods sold in the consolidated statements of operations.

(3) Other corporate and unallocated costs for the years ended December 31, 2019, 2018 and 2017 included costs associated with the implementation of the Information Technology Project of $77.0 million, $36.5 million and $5.3 million, respectively.

(4) Restructuring charges for the year ended December 31, 2019 included $58.9 million of non-cash impairment charges for equipment and facilities associated with the closure of a chlor alkali plant and a VDC production facility, both in Freeport, TX. Restructuring charges for the year ended December 31, 2019 and 2018 included costs associated with permanently closing the ammunition assembly operations at our Geelong, Australia facility in December 2018. Restructuring charges for the years ended December 31, 2019, 2018 and 2017 also included costs associated with the

March 2016 closure of 433,000 tons of chlor alkali capacity across three separate locations and permanently closing a portion of the Becancour, Canada chlor alkali facility in 2014.

(5) Acquisition-related costs for the years ended December 31, 2018 and 2017 were related to the integration of the Acquired Business and consisted of advisory, legal, accounting and other professional fees.

(6) Other operating income for the year ended December 31, 2018 included an $8.0 million insurance recovery for a second quarter 2017 business interruption at our Freeport, TX vinyl chloride monomer facility partially offset by a $1.7 million loss on the sale of land. Other operating income for the year ended December 31, 2017 included a gain of $3.3 million from the sale of a former manufacturing facility.

(7) Interest expense for the years ended December 31, 2019, 2018 and 2017 included $17.0 million, $16.0 million and $3.9 million, respectively, of accretion expense related to the ethylene payment discount expected to be paid on or about the fourth quarter of 2020. Interest expense was reduced by capitalized interest of $10.8 million, $6.0 million and $3.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

(8) Non-operating pension income reflects the adoption of ASU 2017-07 and includes all components of pension and other postretirement income (costs) other than service costs, which are allocated to the operating segments based on their respective estimated census data. Operating segment results for 2017 have been restated to reflect this accounting change.

(9) Other income for the year ended December 31, 2019 included a gain of $11.2 million on the sale of our equity interest in a non-consolidated affiliate.

### Chlor Alkali Products and Vinyls

#### 2019 Compared to 2018

Chlor Alkali Products and Vinyls sales for 2019 were $3,420.1 million compared to $3,986.7 million for 2018, a decrease of $566.6 million, or 14%. The sales decrease was primarily due to lower product pricing, primarily caustic soda, and lower volumes.

Chlor Alkali Products and Vinyls generated segment income of $336.7 million for 2019 compared to $637.1 million for 2018, a decrease of $300.4 million, or 47%. The decrease in Chlor Alkali Products and Vinyls segment income was primarily due to lower product prices ($449.4 million), primarily caustic soda, and lower volumes ($53.0 million), partially offset by lower raw material and operating costs ($138.1 million) and lower maintenance turnaround costs ($42.4 million). Chlor Alkali Products and Vinyls 2018 segment income was also negatively impacted by a non-cash impairment charge associated with our investment in a non-consolidated affiliate ($21.5 million). Chlor Alkali Products and Vinyls segment income included depreciation and amortization expense of $470.4 million and $473.1 million in 2019 and 2018, respectively.

2018 *Compared to 2017*

Chlor Alkali Products and Vinyls sales for 2018 were $3,986.7 million compared to $3,500.8 million for 2017, an increase of $485.9 million, or 14%. The sales increase was primarily due to increased caustic soda, EDC, chlorine and other chlorine-derivatives pricing. The higher product prices were partially offset by lower caustic soda volumes and a less favorable product mix. Chlor Alkali Products and Vinyls 2017 sales volumes were negatively impacted by lost sales associated with Hurricane Harvey.

Chlor Alkali Products and Vinyls generated segment income of $637.1 million for 2018 compared to $405.8 million for 2017, an increase of $231.3 million, or 57%. The increase in Chlor Alkali Products and Vinyls segment income was primarily due to higher product prices ($502.9 million) and lower ethylene costs associated with the acquisition of additional cost-based ethylene from Dow in late September 2017, partially offset by higher ethane prices ($8.0 million). Partially offsetting these benefits were higher raw material and freight costs ($147.5 million), lower volumes, primarily caustic soda, and a less favorable product mix ($71.1 million), increased depreciation and amortization expense ($40.9 million) and increased operating costs ($25.6 million), primarily maintenance to improve reliability. Chlor Alkali Products and Vinyls 2018 segment income was also negatively impacted by a non-cash impairment charge associated with our investment in a non-consolidated affiliate ($21.5 million). Chlor Alkali Products and Vinyls 2017 segment income was negatively impacted by incremental costs to continue operations and unabsorbed fixed manufacturing costs associated with Hurricane Harvey ($27.0 million). Chlor Alkali Products and Vinyls segment income included depreciation and amortization expense of $473.1 million and $432.2 million in 2018 and 2017, respectively.

### Epoxy

#### 2019 Compared to 2018

Epoxy sales were $2,024.4 million for 2019 compared to $2,303.1 million for 2018, a decrease of $278.7 million, or 12%. The sales decrease was primarily due to lower product prices ($258.9 million) and an unfavorable effect of foreign currency translation ($62.5 million), partially offset by increased volumes ($42.7 million).

Epoxy reported segment income of $53.9 million for 2019 compared to $52.8 million for 2018, an increase of $1.1 million, or 2%. The increase in segment income was primarily due to lower maintenance costs and unabsorbed fixed manufacturing costs associated with maintenance turnarounds ($40.0 million), decreased operating costs ($18.1 million) and lower raw material costs ($214.1 million), primarily benzene and propylene, partially offset by lower product prices ($258.9 million) and an unfavorable product mix ($12.2 million). A significant percentage of our Euro denominated sales are of products manufactured within Europe. As a result, the impact of foreign currency translation on revenue is primarily offset by the impact of foreign currency translation on raw materials and manufacturing costs also denominated in Euros. Epoxy segment results included depreciation and amortization expense of $100.1 million and $102.4 million in 2019 and 2018, respectively.

2018 *Compared to 2017*

Epoxy sales were $2,303.1 million for 2018 compared to $2,086.4 million for 2017, an increase of $216.7 million, or 10%. The sales increase was primarily due to higher product prices ($322.4 million) and a favorable effect of foreign currency translation ($48.2 million), partially offset by lower volumes ($153.9 million). Epoxy 2018 sales volumes were negatively impacted by lost sales associated with planned maintenance turnarounds, while 2017 Epoxy sales volumes were negatively impacted by Hurricane Harvey.

Epoxy reported segment income of $52.8 million for 2018 compared to a segment loss of $11.8 million for 2017, an increase of $64.6 million. The increase in Epoxy segment results was primarily due to higher product prices ($322.4 million) partially offset by higher raw material costs ($190.8 million), primarily benzene and propylene. Epoxy results were also negatively impacted by lower volumes and a less favorable product mix ($42.2 million), higher maintenance costs and unabsorbed fixed manufacturing costs associated with turnarounds and outages ($23.1 million), increased operating costs, including utilities ($21.3 million) and higher depreciation and amortization expense ($8.1 million). Additionally, Epoxy 2017 segment results were negatively impacted by incremental costs to continue operations and unabsorbed fixed manufacturing costs associated with Hurricane Harvey ($27.7 million). Epoxy segment results included depreciation and amortization expense of $102.4 million and $94.3 million in 2018 and 2017, respectively.

### Winchester

#### 2019 Compared to 2018

Winchester sales were $665.5 million for 2019 compared to $656.3 million for 2018, an increase of $9.2 million, or 1%. The sales increase was primarily due to higher ammunition sales to commercial customers ($13.7 million), partially offset by decreased sales to military customers and law enforcement agencies ($4.5 million).

Winchester reported segment income of $40.1 million for 2019 compared to $38.4 million for 2018, an increase of $1.7 million, or 4%. The increase in segment income was primarily due to lower costs ($8.7 million), primarily commodity and other material costs, partially offset by lower product prices ($6.6 million) and a less favorable product mix ($0.4 million). Winchester segment income included depreciation and amortization expense of $20.1 million and $20.0 million in 2019 and 2018, respectively.

#### 2018 Compared to 2017

Winchester sales were $656.3 million for 2018 compared to $681.2 million for 2017, a decrease of $24.9 million, or 4%. The sales decrease was primarily due to lower ammunition sales to commercial customers ($43.4 million), partially offset by higher sales to military customers and law enforcement agencies ($18.5 million).

Winchester reported segment income of $38.4 million for 2018 compared to $72.4 million for 2017, a decrease of $34.0 million, or 47%. The decrease in segment income was due to higher commodity and other material costs ($19.6 million), lower commercial sales volumes and a less favorable product mix ($9.4 million) and lower product prices ($8.0 million). These decreases were partially offset by lower operating costs ($3.0 million), including depreciation and amortization expense. Winchester segment income included depreciation and amortization expense of $20.0 million and $19.5 million in 2018 and 2017, respectively.

### Corporate/Other

#### 2019 Compared to 2018

For the year ended December 31, 2019, net charges to income for environmental investigatory and remedial activities were $20.5 million, which include $4.8 million of an environmental insurance-related settlement gain. For the year ended December 31, 2018, net credits to income for environmental investigatory and remedial activities were $103.7 million, which include $111.0 million of insurance recoveries for environmental costs incurred and expensed in prior periods. Without these recoveries, charges to income for environmental investigatory and remedial activities in 2019 and 2018 would have been $25.3 million and $7.3 million, respectively. The increase in environmental expense from the prior year primarily relates to a $20.0 million increase in costs at a former manufacturing site resulting from revised remediation estimates as a result of agency action. These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites.

For 2019, other corporate and unallocated costs were $156.3 million compared to $158.3 million for 2018, a decrease of $2.0 million, or 1%. The decrease was primarily due to lower legal and legal-related settlement expenses of $17.7 million, primarily due to the legal fees associated with the environmental recovery actions in 2018, decreased management incentive expense of $9.4 million, which includes mark-to-market adjustments on stock-based compensation expense, a favorable foreign currency impact of $8.2 million and lower consulting charges of $6.4 million. These decreases were partially offset by higher costs associated with the Information Technology Project of $40.5 million.

#### 2018 Compared to 2017

Net credits to income for environmental investigatory and remedial activities were $103.7 million for 2018, which include $111.0 million of insurance recoveries for environmental costs incurred and expensed in prior periods. Without these recoveries, charges to income for environmental investigatory and remedial activities would have been $7.3 million for the year ended December 31, 2018 compared with $8.5 million for the year ended December 31, 2017. These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites.

For 2018, other corporate and unallocated costs were $158.3 million compared to $112.4 million for 2017, an increase of $45.9 million, or 41%. The increase was primarily due to higher costs associated with the Information Technology Project of $31.2 million, higher legal and legal-related settlement expenses of $18.0 million and an unfavorable foreign currency impact of $10.6 million. The increases were partially offset by lower stock-based compensation expense of $15.0 million, which includes mark-to-market adjustments. The higher legal and legal-related settlement expenses were primarily due to legal fees associated with environmental recovery actions.

### Restructurings

On December 11, 2019, we announced that we had made the decision to permanently close a chlor alkali plant with a capacity of 230,000 tons and our VDC production facility, both in Freeport, TX. These closures are expected to be completed before the end of 2020. For the year ended December 31, 2019, we recorded pretax restructuring charges of $58.9 million for non-cash impairment of equipment and facilities related to these actions.

On December 10, 2018, we announced that we had made the decision to permanently close the ammunition assembly operations at our Winchester facility in Geelong, Australia. Subsequent to the facility’s closure, products for customers in the region are sourced from Winchester manufacturing facilities located in the United States. For the years ended December 31, 2019 and 2018, we recorded pretax restructuring charges of $0.4 million and $4.1 million, respectively for the write-off of equipment and facility costs, employee severance and related benefit costs and lease and other contract termination costs related to this action.

### 2020 OUTLOOK

Olin continues to face a challenging pricing environment as we enter 2020 within our chemicals businesses. In 2019, the Chlor Alkali Products and Vinyls business experienced weaker demand from urethane, agricultural, refrigerant, alumina, and pulp and paper customers. The Epoxy business also has experienced weaker product demand from automotive, electrical laminate, and industrial coatings customers throughout 2019. The lower demand environment put downward pressure on pricing in both chemical businesses. We expect the weak underlying demand and pricing fundamentals in our chemical businesses to persist through at least first quarter 2020. We expect lower raw material costs in both our Chlor Alkali Products and Vinyls and Epoxy segments in 2020 compared to 2019 to partially offset the pricing impact of lower demand.

We expect our Winchester segment to benefit from the Lake City U.S. Army Ammunition Plant contract beginning in the fourth quarter of 2020. We expect to incur approximately $25 million in transition costs and $80 million associated with an initial working capital investment in 2020 for the Lake City Plant contract. The contract is expected to increase Winchester’s annual revenue by $450 million to $550 million.

Other Corporate and Unallocated costs in 2020 are expected to be higher than the $156.3 million in 2019, primarily due to higher management incentive expense, including mark-to-market adjustments on stock-based compensation expense. Costs associated with the Information Technology Project in 2020 are expected to be comparable to 2019. The Information Technology Project will be substantially completed during 2020.

During 2020, we anticipate environmental expenses in the $25 million to $30 million range compared to $25.3 million, excluding the $4.8 million of insurance recoveries, in 2019. We do not believe that there will be additional recoveries of environmental costs incurred and expensed in prior periods during 2020.

We expect non-operating pension income in 2020 to be in the $13 million to $18 million range compared to $16.3 million in 2019. Based on our plan assumptions and estimates, we will not be required to make any cash contributions to our domestic qualified defined benefit pension plan in 2020. We have several international qualified defined benefit pension plans for which we anticipate cash contributions of less than $5 million in 2020.

In 2020, we currently expect our capital spending to be in the $250 million to $300 million range, including the investment associated with the Information Technology Project of approximately $40 million. We expect 2020 depreciation and amortization expense to be in the $550 million to $575 million range.

We currently believe the 2020 effective tax rate will be in the 27% to 33% range, while we expect cash taxes will be in the range of $30 million to $40 million, which primarily relates to earnings in foreign jurisdictions.

### PENSION AND POSTRETIREMENT BENEFITS

Under ASC 715, we recorded an after-tax charge of $150.2 million ($183.9 million pretax) to shareholders’ equity as of December 31, 2019 for our pension and other postretirement plans. This charge primarily reflected a 100-basis point decrease in the domestic pension plans’ discount rate, partially offset by favorable performance on plan assets during 2019. In 2018, we recorded an after-tax charge of $74.9 million ($98.5 million pretax) to shareholders’ equity as of December 31, 2018 for our pension and other postretirement plans. This charge primarily reflected unfavorable performance on plan assets during 2018, partially offset by a 60-basis point increase in the domestic pension plans’ discount rate. In 2017, we recorded an after-tax charge of $21.6 million ($27.3 million pretax) to shareholders’ equity as of December 31, 2017 for our pension and other postretirement plans. This charge primarily reflected a 50-basis point decrease in the domestic pension plans’ discount rate, partially offset by favorable performance on plan assets during 2017. These non-cash charges to shareholders’ equity do not affect our ability to borrow under our senior credit facility.

During 2019, we made a discretionary cash contribution to our domestic qualified defined benefit pension plan of $12.5 million. Based on our plan assumptions and estimates, we will not be required to make any cash contributions to the domestic qualified defined benefit pension plan at least through 2020.

In connection with international qualified defined benefit pension plans, we made cash contributions of $2.4 million, $2.6 million and $1.7 million in 2019, 2018 and 2017, respectively, and we anticipate less than $5 million of cash contributions to international qualified defined benefit pension plans in 2020.

At December 31, 2019, the projected benefit obligation of $2,992.0 million exceeded the market value of assets in our qualified defined benefit pension plans by $792.7 million, as calculated under ASC 715.

Components of net periodic benefit (income) costs were:

*($ in millions)*

|  | Years ended December 31, 2019 | 2018 | 2017 |
| --- | ---: | ---: | ---: |
| Pension benefits | $(8.8) | $(14.5) | $(26.4) |
| Other postretirement benefit costs | 4.9 | 5.2 | 2.5 |

The service cost component of net periodic benefit (income) costs related to employees of the operating segments are allocated to the operating segments based on their respective estimated census data.

### ENVIRONMENTAL MATTERS

*($ in millions)*

| Cash outlays: | Years ended December 31, 2019 | 2018 | 2017 |
| --- | ---: | ---: | ---: |
| Remedial and investigatory spending (charged to reserve) | $12.2 | $13.0 | $16.5 |
| Capital spending | 1.2 | 2.3 | 1.7 |
| Plant operations (charged to cost of goods sold) | 188.4 | 197.6 | 199.7 |
| Total cash outlays | $201.8 | $212.9 | $217.9 |

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 years. Cash outlays for normal plant operations for the disposal of waste and the operation and maintenance of pollution control equipment and facilities to ensure compliance with mandated and voluntarily imposed environmental quality standards were charged to income.

Total environmental-related cash outlays for 2020 are estimated to be approximately $210 million, of which approximately $17 million is expected to be spent on investigatory and remedial efforts, approximately $3 million on capital projects and approximately $190 million on normal plant operations. Remedial and investigatory spending is anticipated to be higher in 2020 than 2019 due to the timing of continuing remedial action plans and investigations. Historically, we have funded our environmental capital expenditures through cash flow from operations and expect to do so in the future.

Annual environmental-related cash outlays for site investigation and remediation, capital projects and normal plant operations are expected to range between $200 million to $220 million over the next several years, $15 million to $25 million of which is for investigatory and remedial efforts, which are expected to be charged against reserves recorded on our consolidated balance sheet. While we do not anticipate a material increase in the projected annual level of our environmental-related cash outlays for site investigation and remediation, there is always the possibility that such an increase may occur in the future in view of the uncertainties associated with environmental exposures.

Our liabilities for future environmental expenditures were as follows:

*($ in millions)*

|  | December 31, 2019 | 2018 | 2017 |
| --- | ---: | ---: | ---: |
| **Beginning balance** | $125.6 | $131.6 | $137.3 |
| Charges to income | 25.3 | 7.3 | 10.3 |
| Remedial and investigatory spending | (12.2) | (13.0) | (16.5) |
| Foreign currency translation adjustments | 0.3 | (0.3) | 0.5 |
| **Ending balance** | $139.0 | $125.6 | $131.6 |

As is common in our industry, we are subject to environmental laws and regulations related to the use, storage, handling, generation, transportation, emission, discharge, disposal and remediation of, and exposure to, hazardous and non-hazardous substances and wastes in all of the countries in which we do business.

The establishment and implementation of national, state or provincial and local standards to regulate air, water and land quality affect substantially all of our manufacturing locations around the world. Laws providing for regulation of the manufacture, transportation, use and disposal of hazardous and toxic substances, and remediation of contaminated sites, have imposed additional regulatory requirements on industry, particularly the chemicals industry. In addition, implementation of environmental laws has required and will continue to require new capital expenditures and will increase plant operating costs. We employ waste minimization and pollution prevention programs at our manufacturing sites.

In connection with the October 5, 2015 acquisition of Dow’s U.S. Chlor Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses, the prior owner of the businesses retained liabilities relating to releases of hazardous materials and violations of environmental law to the extent arising prior to October 5, 2015.

We are party to various government and private environmental actions associated with past manufacturing facilities and former waste disposal sites. Associated costs of investigatory and remedial activities are provided for in accordance with generally accepted accounting principles governing probability and the ability to reasonably estimate future costs. Our ability to estimate future costs depends on whether our investigatory and remedial activities are in preliminary or advanced stages. With respect to unasserted claims, we accrue liabilities for costs that, in our experience, we expect to incur to protect our interests against those unasserted claims. Our accrued liabilities for unasserted claims amounted to $8.6 million at December 31, 2019. With respect to asserted claims, we accrue liabilities based on remedial investigation, feasibility study, remedial action and operation, maintenance and monitoring (OM&M) expenses that, in our experience, we expect to incur in connection with the asserted claims. Required site OM&M expenses are estimated and accrued in their entirety for required periods not exceeding 30 years, which reasonably approximates the typical duration of long-term site OM&M.

Environmental provisions charged (credited) to income, which are included in cost of goods sold, were as follows:

*($ in millions)*

|  | Years ended December 31, 2019 | 2018 | 2017 |
| --- | ---: | ---: | ---: |
| Provisions charged to income | $25.3 | $7.3 | $10.3 |
| Insurance recoveries for costs incurred and expensed | (4.8) | (111.0) | (1.8) |
| Environmental expense (income) | $20.5 | $(103.7) | $8.5 |

These charges relate primarily to remedial and investigatory activities associated with past manufacturing operations and former waste disposal sites and may be material to operating results in future years.

Provisions charged to income for the year ended December 31, 2019 include a $20.0 million increase in costs at a former manufacturing site resulting from revised remediation estimates as a result of agency action during the second quarter of 2019.

During 2018, we settled certain disputes with respect to insurance coverage for costs at various environmental remediation sites for $121.0 million. Environmental expense (income) for the year ended December 31, 2018 include insurance recoveries for environmental costs incurred and expensed in prior periods of $111.0 million. The recoveries are reduced by estimated liabilities of $10.0 million associated with claims by subsequent owners of certain of the settled environmental sites. Environmental expense (income) for the year ended December 31, 2019 included $4.8 million of recoveries associated with resolving the outstanding third party claims against the proceeds from the 2018 environmental insurance settlement.

Our total estimated environmental liability at the end of 2019 was attributable to 59 sites, 14 of which were United States Environmental Protection Agency National Priority List sites. Nine sites accounted for 81% of our environmental liability and, of the remaining 50 sites, no one site accounted for more than 3% of our environmental liability. At seven of the nine sites, part of the site is in the long-term OM&M stage. At six of the nine sites, a remedial action plan is being developed for part of the site. At five of the nine sites, a remedial design is being developed at part of the site and at four of the nine sites, part of the site is subject to a remedial investigation. All nine sites are either associated with past manufacturing operations or former waste disposal sites. None of the nine largest sites represents more than 20% of the liabilities reserved on our consolidated balance sheet at December 31, 2019 for future environmental expenditures.

Our consolidated balance sheets included liabilities for future environmental expenditures to investigate and remediate known sites amounting to $139.0 million at December 31, 2019, and $125.6 million at December 31, 2018, of which $122.0 million and $108.6 million, respectively, were classified as other noncurrent liabilities. Our environmental liability amounts do not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology. These liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and our estimate of related costs have changed. As a result of these reassessments, future charges to income may be made for additional liabilities. Of the $139.0 million included on our consolidated balance sheet at December 31, 2019 for future environmental expenditures, we currently expect to utilize $87.3 million of the reserve for future environmental expenditures over the next 5 years, $20.5 million for expenditures 6 to 10 years in the future, and $31.2 million for expenditures beyond 10 years in the future. These estimates are subject to a number of risks and uncertainties, as described in “Environmental Costs” contained in Item 1A—“Risk Factors.”

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, changes in regulatory authorities, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other PRPs, our 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 to us, which could materially adversely affect our financial position or results of operations. At December 31, 2019, we estimate it is reasonably possible that we may have additional contingent environmental liabilities of $80 million in addition to the amounts for which we have already recorded as a reserve.

### LEGAL MATTERS AND CONTINGENCIES

We are party to a dispute relating to a contract at our Plaquemine, LA facility. The other party to the contract filed a demand for arbitration alleging, among other things, that Olin breached the contract, and claims damages in excess of the amount Olin believes it is obligated to pay under the contract. Olin asserted a counterclaim alleging it has been charged a fee in excess of what the contract permits. The arbitration hearing was held during the fourth quarter 2019. Although the timing is uncertain, we currently anticipate receiving a ruling during the first half of 2020. Any additional losses related to this contract dispute are not currently estimable because of unresolved questions of fact and law but, if resolved unfavorably to Olin, they could have a material adverse effect on our financial position, cash flows or results of operations.

Olin and Oxy Vinyls, L.P. (Oxy) have a long-term chlorine supply agreement, which is the subject of a pricing dispute. The dispute is pending in the United States District Court for the Southern District of Texas. Although the timing is uncertain, we currently anticipate that the case will proceed to trial during 2020. Any additional losses related to this contract dispute are not currently estimable because of unresolved questions of fact and law but, if resolved unfavorably to Olin, they could have a material adverse effect on our financial position, cash flows or results of operations.

Olin, K.A. Steel Chemicals (a wholly owned subsidiary of Olin) and other caustic soda producers were named as defendants in six purported class action civil lawsuits filed March 22, 25 and 26, 2019 and April 12, 2019 in the U.S. District Court for the Western District of New York on behalf of the respective named plaintiffs and a putative class comprised of all persons and entities who purchased caustic soda in the U.S. directly from one or more of the defendants, their parents, predecessors, subsidiaries or affiliates at any time between October 1, 2015 and the present. Olin, K.A. Steel Chemicals and other caustic soda producers were also named as defendants in two purported class action civil lawsuits filed July 25 and 29, 2019 in the U.S. District Court for the Western District of New York on behalf of the respective named plaintiffs and a putative class comprised of all persons and entities who purchased caustic soda in the U.S. indirectly from distributors at any time between October 1, 2015 and the present. The other defendants named in the lawsuits are Occidental Petroleum Corporation, Occidental Chemical Corporation d/b/a OxyChem, Westlake Chemical Corporation, Shin-Etsu Chemical Co., Ltd., Shintech Incorporated, Formosa Plastics Corporation, and Formosa Plastics Corporation, U.S.A. The lawsuits allege the defendants conspired to fix, raise, maintain and stabilize the price of caustic soda, restrict domestic (U.S.) supply of caustic soda and allocate caustic soda customers. Plaintiffs seek an unspecified amount of damages and injunctive relief. We believe we have meritorious legal positions and will continue to represent our interests vigorously in this matter. Any losses related to this matter are not currently estimable because of unresolved questions of fact and law, but, if resolved unfavorably to Olin, could have a material adverse effect on our financial position, cash flows or results of operations.

We, and our subsidiaries, are defendants in various other legal actions (including proceedings based on alleged exposures to asbestos) incidental to our past and current business activities. We describe some of these matters in Item 3—“Legal Proceedings.” At December 31, 2019 and 2018, our consolidated balance sheets included liabilities for these other legal actions of $12.4 million and $15.6 million, respectively. These liabilities do not include costs associated with legal representation. Based on our analysis, and considering the inherent uncertainties associated with litigation, we do not believe that it is reasonably possible that these other legal actions will materially adversely affect our financial position, cash flows or results of operations. In connection with the October 5, 2015 acquisition of Dow’s U.S. Chlor Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses, the prior owner of the businesses retained liabilities related to litigation to the extent arising prior to October 5, 2015.

During the ordinary course of our business, contingencies arise resulting from an existing condition, situation or set of circumstances involving an uncertainty as to the realization of a possible gain contingency. In certain instances such as environmental projects, we are responsible for managing the clean-up and remediation of an environmental site. There exists the possibility of recovering a portion of these costs from other parties. We account for gain contingencies in accordance with the provisions of ASC 450 “Contingencies” and therefore do not record gain contingencies and recognize income until it is earned and realizable.

For the year ended December 31, 2018, we recognized an insurance recovery of $8.0 million in other operating income for a second quarter 2017 business interruption at our Freeport, TX vinyl chloride monomer facility.

### LIQUIDITY, INVESTMENT ACTIVITY AND OTHER FINANCIAL DATA

### Cash Flow Data

*($ in millions)*

| Provided by (used for) | Years ended December 31, 2019 | 2018 | 2017 |
| --- | ---: | ---: | ---: |
| Net operating activities | $617.3 | $907.8 | $648.8 |
| Capital expenditures | (385.6) | (385.2) | (294.3) |
| Payments under long-term supply contracts | — | — | (209.4) |
| Proceeds from disposition of non-consolidated affiliate | 20.0 | — | — |
| Net investing activities | (365.6) | (382.3) | (498.5) |
| Long-term debt borrowings (repayments), net | 80.8 | (376.1) | (2.4) |
| Common stock repurchased and retired | (145.9) | (50.0) | — |
| Stock options exercised | 1.7 | 3.4 | 29.8 |
| Debt issuance costs | (16.6) | (8.5) | (11.2) |
| Net financing activities | (209.3) | (564.8) | (116.8) |

39

#### Operating Activities

For 2019, cash provided by operating activities decreased by $290.5 million from 2018, primarily due to a decrease in operating results partially offset by a decrease in the investment in working capital from the prior year. For 2019, working capital decreased $11.0 million compared to an increase of $71.6 million in 2018. Receivables decreased from December 31, 2018 by $12.3 million primarily as a result of lower sales in the fourth quarter of 2019 compared to the fourth quarter of 2018 partially offset by a decrease in receivables sold under the accounts receivable factoring arrangement. In 2019, inventories decreased by $13.0 million and accounts payable and accrued liabilities decreased by $11.0 million. The decreases in inventories and accounts payable were primarily due to lower raw material costs.

For 2018, cash provided by operating activities increased by $259.0 million from 2017, primarily due to an increase in operating results, partially offset by an increase in working capital. For 2018, working capital increased $71.6 million compared to a decrease of $9.8 million in 2017. Receivables increased from December 31, 2017 by $46.3 million primarily as a result of higher sales in the fourth quarter of 2018 compared to the fourth quarter of 2017 and a decrease in receivables sold under the accounts receivable factoring arrangement. In 2018, inventories increased by $35.5 million and accounts payable and accrued liabilities increased by $14.5 million. The increases in inventories and accounts payable were primarily due to higher raw material costs. The increase in accrued liabilities was primarily related to the Information Technology Project.

#### Capital Expenditures

Capital spending was $385.6 million and $385.2 million in 2019 and 2018, respectively. Capital spending was 78% and 77% of depreciation in 2019 and 2018, respectively.

In 2017, we began a multi-year implementation of the Information Technology Project. The project is planned to standardize business processes across the chemicals businesses with the objective of maximizing cost effectiveness, efficiency and control across our global operations. At the end of 2019, Olin had successfully converted approximately 35% of our chemical business users to the new enterprise resource planning systems. The project is anticipated to be substantially completed during 2020. Total capital spending is forecast to be $220 million and associated expenses are forecast to be $190 million, including duplicate information technology costs being incurred during the transition. Our results for the years ended December 31, 2019, 2018 and 2017 include $56.0 million, $84.5 million and $35.8 million, respectively, of capital spending and $77.0 million, $36.5 million and $5.3 million, respectively, of expenses associated with this project.

In 2020, we expect our capital spending to be in the $250 million to $300 million range, which includes approximately $40 million of capital spending related to the Information Technology Project.

#### Investing Activities

On January 1, 2019, we sold our 9.1% limited partnership interest in Bay Gas for $20.0 million. The sale closed on February 7, 2019 which resulted in a gain of $11.2 million.

#### Financing Activities

For the year ended December 31, 2019, our long-term debt borrowings, net of long-term repayments, were $80.8 million, which included repayments of $543.0 million related to the $1,375.0 million Term Loan Facility and $150.0 million related to the Receivables Financing Agreement.

On July 16, 2019, Olin issued $750.0 million aggregate principal amount of 5.625% senior notes due August 1, 2029, which were registered under the Securities Act of 1933, as amended. Proceeds from the 2029 Notes were used to redeem the remaining balance of the $1,375.0 million Term Loan Facility of $493.0 million and $150.0 million of the Receivables Financing Agreement.

On July 16, 2019, Olin entered into a new five-year, $2,000.0 million senior credit facility, which replaces the existing $1,975.0 million senior credit facility. The 2019 Senior Credit Facility will mature in July 2024. In December 2019, Olin amended the 2019 Senior Credit Facility which amended the restrictive covenants of the agreement, including expanding the coverage and leverage ratios to be less restrictive over the next two and a half years. The 2019 Senior Credit Facility includes a senior unsecured delayed-draw term loan facility in an aggregate principal amount of up to $1,200.0 million and an $800.0 million senior unsecured revolving credit facility. The Delayed Draw Term Loan Facility will be available on a delayed basis in up to three draws to be made on or prior to November 29, 2020. We expect the proceeds from the Delayed Draw Term

Loan Facility will be used to redeem the 9.75% senior notes due 2023 and the 10.00% senior notes due 2025 on or about October 15, 2020.

For the year ended December 31, 2018, our long-term debt repayments, net of long-term debt borrowings, were $376.1 million, which included $780.4 million related to the $1,375.0 million Term Loan Facility, $124.7 million related to the Receivables Financing Agreement and $20.0 million related to the 2017 Senior Revolving Credit Facility.

On January 19, 2018, Olin issued $550.0 million aggregate principal amount of 5.00% senior notes due February 1, 2030 (2030 Notes), which were registered under the Securities Act of 1933, as amended. Interest on the 2030 Notes began accruing from January 19, 2018 and is paid semi-annually beginning on August 1, 2018. Proceeds from the 2030 Notes were used to redeem $550.0 million of debt under the $1,375.0 million Term Loan Facility.

In 2019 and 2018, we repurchased and retired 8.0 million and 2.1 million shares, respectively, with a total value of $145.9 million and $50.0 million, respectively.

In 2019 and 2018, we issued 0.1 million and 0.2 million shares, respectively, with a total value of $1.7 million and $3.4 million, respectively, representing stock options exercised.

In 2019, we paid debt issuance costs of $16.6 million, primarily for the issuance of the 2029 Notes and the 2019 Senior Credit Facility. In 2018, we paid debt issuance costs of $8.5 million relating to the 2030 Notes.

The percent of total debt to total capitalization increased to 58.0% at December 31, 2019 compared to 53.3% at December 31, 2018, primarily resulting from lower shareholders’ equity as a result of the payment of quarterly cash dividends and share repurchases.

Dividends per common share were $0.80 in 2019 and 2018. Total dividends paid on common stock amounted to $129.3 million and $133.6 million in 2019 and 2018, respectively. On January 24, 2020, our board of directors declared a dividend of $0.20 per share on our common stock, payable on March 10, 2020 to shareholders of record on February 10, 2020.

The payment of cash dividends is subject to the discretion of our board of directors and will be determined in light of then-current conditions, including our earnings, our operations, our financial condition, our capital requirements and other factors deemed relevant by our board of directors. In the future, our board of directors may change our dividend policy, including the frequency or amount of any dividend, in light of then-existing conditions.

### LIQUIDITY AND OTHER FINANCING ARRANGEMENTS

Our principal sources of liquidity are from cash and cash equivalents, cash flow from operations and borrowings under our Delayed Draw Term Loan Facility, 2019 Senior Revolving Credit Facility, Receivables Financing Agreement and AR Facilities. Additionally, we believe that we have access to the debt and equity markets.

The overall cash increase of $42.1 million in 2019 primarily reflects our operating results and long-term debt borrowings, net of repayments, partially offset by dividend payments, capital spending and share repurchases. We believe, based on current and projected levels of cash flow from our operations, together with our cash and cash equivalents on hand and the availability to borrow under our 2019 Senior Revolving Credit Facility, Delayed Draw Term Loan Facility, Receivables Financing Agreement and AR Facilities, we have sufficient liquidity to meet our short-term and long-term needs to make required payments of interest on our debt, fund our operating needs, working capital, the payment to Dow for our ethylene investment on or about the fourth quarter of 2020, and capital expenditure requirements and comply with the financial ratios in our debt agreements.

On April 26, 2018, our board of directors authorized a share repurchase program for the purchase of shares of common stock at an aggregate price of up to $500.0 million. This program will terminate upon the purchase of $500.0 million of our common stock. For the years ended December 31, 2019 and 2018, 8.0 million and 2.1 million shares, respectively, were repurchased and retired at a cost of $145.9 million and $50.0 million, respectively. As of December 31, 2019, a total of 10.1 million shares were repurchased and retired at a cost of $195.9 million and $304.1 million of common stock remained authorized to be repurchased.

For the year ended December 31, 2019, our long-term debt borrowings, net of long-term repayments, were $80.8 million, which included repayments of $543.0 million related to the $1,375.0 million Term Loan Facility and $150.0 million related to the Receivables Financing Agreement.

On July 16, 2019, Olin issued $750.0 million aggregate principal amount of 5.625% senior notes due August 1, 2029, which were registered under the Securities Act of 1933, as amended. Proceeds from the 2029 Notes were used to redeem the remaining balance of the $1,375.0 million Term Loan Facility of $493.0 million and $150.0 million of the Receivables Financing Agreement.

On July 16, 2019, Olin also entered into a new five-year, $2,000.0 million senior credit facility, which replaces the existing 2017 Senior Credit Facility. The 2019 Senior Credit Facility will mature in July 2024. In December 2019, Olin amended the 2019 Senior Credit Facility which amended the restrictive covenants of the agreement, including expanding the coverage and leverage ratios to be less restrictive over the next two and a half years. The 2019 Senior Credit Facility includes a senior unsecured delayed-draw term loan facility in an aggregate principal amount of up to $1,200.0 million and an $800.0 million senior unsecured revolving credit facility. The 2019 Senior Revolving Credit Facility includes a $100.0 million letter of credit subfacility. For the year ended December 31, 2019, we had $796.5 million available under our $800.0 million 2019 Senior Revolving Credit Facility because we had issued $3.5 million of letters of credit. The Delayed Draw Term Loan Facility will be available on a delayed basis in up to three draws to be made on or prior to November 29, 2020. We expect the proceeds from the Delayed Draw Term Loan Facility will be used to redeem the 9.75% senior notes due 2023 and the 10.00% senior notes due 2025 on or about October 15, 2020. If redeemed, Olin will be required to pay a call premium associated with the 2023 and 2025 senior notes of approximately $42 million.

Under the 2019 Senior Credit Facility, we may select various floating rate borrowing options. The actual interest rate paid on borrowings under the 2019 Senior Credit Facility is based on a pricing grid which is dependent upon the leverage ratio as calculated under the terms of the applicable facility for the prior fiscal quarter. The facility includes various customary restrictive covenants, including restrictions related to the ratio of debt to earnings before interest expense, taxes, depreciation and amortization (leverage ratio) and the ratio of earnings before interest expense, taxes, depreciation and amortization to interest expense (coverage ratio). Compliance with these covenants is determined quarterly based on operating cash flows. We were in compliance with all covenants and restrictions under all our outstanding credit agreements as of December 31, 2019, and no event of default had occurred that would permit the lenders under our outstanding credit agreements to accelerate the debt if not cured. In the future, our ability to generate sufficient operating cash flows, among other factors, will determine the amounts available to be borrowed under these facilities. As of December 31, 2019, there were no covenants or other restrictions that would have limited our ability to borrow under these facilities.

On January 19, 2018, Olin issued $550.0 million aggregate principal amount of 5.00% senior notes due February 1, 2030, which were registered under the Securities Act of 1933, as amended. Interest on the 2030 Notes began accruing from January 19, 2018 and is paid semi-annually beginning on August 1, 2018. Proceeds from the 2030 Notes were used to redeem $550.0 million of debt under the $1,375.0 million Term Loan Facility.

For the year ended December 31, 2018, long-term debt repayments included $780.4 million related to the $1,375.0 million Term Loan Facility, $124.7 million related to the Receivables Financing Agreement and $20.0 million related to the 2017 Senior Revolving Credit Facility.

In connection with the Acquisition, Olin and Dow entered into arrangements for the long-term supply of ethylene by Dow to Olin, pursuant to which, among other things, Olin made upfront payments in order to receive ethylene at producer economics and for certain reservation fees and for the option to obtain additional future ethylene supply at producer economics. On February 27, 2017, we exercised the remaining option to obtain additional ethylene at producer economics from Dow. In connection with the exercise of this option, we also secured a long-term customer arrangement. As a result, an additional payment will be made to Dow that is not to exceed $493 million on or about the fourth quarter of 2020.

On July 16, 2019, our existing $250.0 million Receivables Financing Agreement was extended to July 15, 2022 and downsized to $10.0 million with the option to expand to $300.0 million. The administrative agent for our Receivables Financing Agreement is PNC Bank, National Association. Under the Receivables Financing Agreement, our eligible trade receivables are used for collateralized borrowings and continue to be serviced by us. In addition, the Receivables Financing Agreement incorporates the leverage and coverage covenants that are contained in the $2,000.0 million senior credit facility. As of December 31, 2019 and 2018, we had zero and $125.0 million, respectively, drawn under the agreement. As of December 31, 2019, we had $10.0 million of additional borrowing capacity under the Receivables Financing Agreement.

Olin also has trade accounts receivable factoring arrangements (AR Facilities) and pursuant to the terms of the AR Facilities, certain of our subsidiaries may sell their accounts receivable up to a maximum of $315.0 million. We will continue to service the outstanding accounts sold. These receivables qualify for sales treatment under ASC 860 “Transfers and Servicing” and, accordingly, the proceeds are included in net cash provided by operating activities in the consolidated statements of cash flows. The gross amount of receivables sold for the years ended December 31, 2019 and 2018 totaled $984.8 million and $1,372.3 million, respectively. The factoring discount paid under the AR Facilities is recorded as interest expense on the consolidated statements of operations. The factoring discount for the years ended December 31, 2019 and 2018 was $2.9 million and $4.3 million, respectively. The agreements are without recourse and therefore no recourse liability has been recorded as of December 31, 2019. As of December 31, 2019 and 2018, $63.1 million and $132.4 million, respectively, of receivables qualifying for sales treatment were outstanding and will continue to be serviced by us.

Cash flow from operations is variable as a result of both the seasonal and the cyclical nature of our operating results, which have been affected by seasonal and economic cycles in many of the industries we serve, such as vinyls, urethanes, bleach, ammunition and pulp and paper. Cash flow from operations is affected by changes in chlorine, caustic soda and EDC selling prices caused by the changes in the supply/demand balance of these products, resulting in the Chlor Alkali Products and Vinyls segment having significant leverage on our earnings and cash flow. For example, assuming all other costs remain constant, internal consumption remains approximately the same and we are operating at full capacity, a $10 selling price change per ton of chlorine equates to an approximate $10 million annual change in our revenues and pretax profit, a $10 selling price change per ton of caustic soda equates to an approximate $30 million annual change in our revenues and pretax profit, and a $0.01 selling price change per pound of EDC equates to an approximate $20 million annual change in our revenues and pretax profit.

For 2019, cash provided by operating activities decreased by $290.5 million from 2018, primarily due to a decrease in operating results partially offset by a decrease in the investment in working capital from the prior year. For 2019, working capital decreased $11.0 million compared to an increase of $71.6 million in 2018. Receivables decreased from December 31, 2018 by $12.3 million primarily as a result of lower sales in the fourth quarter of 2019 compared to the fourth quarter of 2018 partially offset by a decrease in receivables sold under the accounts receivable factoring arrangement. In 2019, inventories decreased by $13.0 million and accounts payable and accrued liabilities decreased by $11.0 million. The decreases in inventories and accounts payable were primarily due to lower raw material costs.

Capital spending was $385.6 million and $385.2 million in 2019 and 2018, respectively. Capital spending was 78% and 77% of depreciation in 2019 and 2018, respectively.

In 2017, we began a multi-year implementation of the Information Technology Project. The project is planned to standardize business processes across the chemicals businesses with the objective of maximizing cost effectiveness, efficiency and control across our global operations. At the end of 2019, Olin had successfully converted approximately 35% of our chemical business users to the new enterprise resource planning systems. The project is anticipated to be substantially completed during 2020. Total capital spending is forecast to be $220 million and associated expenses are forecast to be $190 million, including duplicate information technology costs being incurred during the transition. Our results for the years ended December 31, 2019, 2018 and 2017 include $56.0 million, $84.5 million and $35.8 million, respectively, of capital spending and $77.0 million, $36.5 million and $5.3 million, respectively, of expenses associated with this project.

In 2020, we expect our capital spending to be in the $250 million to $300 million range, which includes approximately $40 million of capital spending related to the Information Technology Project.

At December 31, 2019, we had total letters of credit of $68.7 million outstanding, of which $3.5 million were issued under our 2019 Senior Revolving Credit Facility. The letters of credit were used to support certain long-term debt, certain workers compensation insurance policies, certain plant closure and post-closure obligations and certain international pension funding requirements.

Our current debt structure is used to fund our business operations. As of December 31, 2019, we had long-term borrowings, including the current installment and finance lease obligations, of $3,340.8 million, of which $155.9 million was at variable rates. Annual maturities of long-term debt, including capital lease obligations, are $2.1 million in 2020, $1.0 million in 2021, $200.7 million in 2022, $720.6 million in 2023, $70.7 million in 2024 and a total of $2,386.1 million thereafter. Commitments from banks under our Delayed Draw Term Loan Facility, 2019 Senior Revolving Credit Facility, Receivables Financing Agreement and AR Facilities are an additional source of liquidity. Included within the $3,340.8 million of long-term borrowings on the consolidated balance sheet as of December 31, 2019 were unamortized deferred debt issuance costs and deferred losses on fair value interest rate swaps of $40.4 million.

We use interest rate swaps as a means of minimizing cash flow fluctuations that may arise from volatility in interest rates of our variable-rate borrowings. In April 2016, we entered into three tranches of forward starting interest rate swaps whereby we agreed to pay fixed rates to the counterparties who, in turn, pay us floating rates on $1,100.0 million, $900.0 million and $400.0 million of our underlying floating-rate debt obligations. Each tranche’s term length was for twelve months beginning on December 31, 2016, 2017 and 2018, respectively. The swaps were designated as cash flow hedges of the risk of changes in interest payments associated with our variable-rate borrowings. In July 2019, we terminated the remaining interest rate swap which resulted in a gain of $1.8 million that was recognized in interest expense. For the years ended December 31, 2019 and 2018, $4.3 million and $8.9 million, respectively, of income was recorded to interest expense on the accompanying consolidated statements of operations related to these swap agreements.

In April 2016, we entered into interest rate swaps on $250.0 million of our underlying fixed-rate debt obligations, whereby we agreed to pay variable rates to the counterparties who, in turn, pay us fixed rates. In October 2016, we entered into interest rate swaps on an additional $250.0 million of our underlying fixed-rate debt obligations, whereby we agreed to pay variable rates to the counterparties who, in turn, pay us fixed rates. We designated the April 2016 and October 2016 interest rate swap agreements as fair value hedges of the risk of changes in the value of fixed rate debt due to changes in interest rates for a portion of our fixed rate borrowings. In August 2019, we terminated the April 2016 and October 2016 interest rate swaps which resulted in a loss of $2.3 million that will be deferred as an offset to the carrying value of the related debt and will be recognized to interest expense through October 2025. As of December 31, 2019, $2.2 million of this loss was included in long-term debt. For the years ended December 31, 2019 and 2018, $2.6 million and $2.1 million, respectively, of expense was recorded to interest expense on the accompanying consolidated statements of operations related to these swap agreements.

We have registered an undetermined amount of securities with the SEC, so that, from time-to-time, we may issue debt securities, preferred stock and/or common stock and associated warrants in the public market under that registration statement.

### CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

Our long-term contractual commitments, including the on and off-balance sheet arrangements, consisted of the following:

*($ in millions)*

| Contractual Obligations | Payments Due by Period Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years |
| --- | ---: | ---: | ---: | ---: | ---: |
| Debt obligations, including finance lease obligations(1) | $3,381.2 | $2.1 | $201.7 | $791.3 | $2,386.1 |
| Interest payments under debt obligations(2) | 1,513.3 | 230.9 | 457.7 | 353.7 | 471.0 |
| Contingent tax liability | 22.4 | 3.8 | 8.6 | 4.4 | 5.6 |
| Domestic qualified pension plan contributions(3) | — | — | — | — | — |
| International qualified pension plan contributions(4) | 298.4 | 4.5 | 13.3 | 14.4 | 266.2 |
| Non-qualified pension plan payments | 5.8 | 0.8 | 0.9 | 0.6 | 3.5 |
| Postretirement benefit payments | 52.7 | 3.7 | 6.6 | 6.0 | 36.4 |
| Long-term supply contracts | 493.0 | — | 493.0 | — | — |
| Operating leases | 446.1 | 88.8 | 126.0 | 77.7 | 153.6 |
| Off-Balance Sheet Commitments: |  |  |  |  |  |
| Purchasing commitments: |  |  |  |  |  |
| Raw materials | 5,962.2 | 623.6 | 1,312.2 | 1,260.2 | 2,766.2 |
| Capital expenditures | 4.0 | 4.0 | — | — | — |
| Utilities | 0.7 | 0.4 | 0.3 | — | — |
| Total | $12,179.8 | $962.6 | $2,620.3 | $2,508.3 | $6,088.6 |

(1) Excludes unamortized debt issuance costs and deferred losses on fair value interest rate swaps of $40.4 million at December 31, 2019. All debt obligations are assumed to be held until maturity.

(2) For the purposes of this table, we have assumed for all periods presented that there are no changes in the rates from those in effect at December 31, 2019 which ranged from 1.70% to 10.00% and excludes $15.7 million of remaining accretion expense related to the ethylene payment discount expected to be paid on or about the fourth quarter of 2020.

(3) Given the inherent uncertainty as to actual minimum funding requirements for qualified defined benefit pension plans, no amounts are included in this table for any period beyond one year. Based on the current funding requirements, we will not be required to make any cash contributions to the domestic qualified defined benefit pension plan at least through 2020. During 2019, we made a discretionary cash contribution to our domestic qualified defined benefit pension plan of $12.5 million.

(4) These amounts are only estimated payments assuming for our foreign qualified pension plans a weighted average annual expected rate of return on pension plan assets of 5.2% and a discount rate on pension plan obligations of 1.4%. These estimated payments are subject to significant variation and the actual payments may be more than the amounts estimated. In connection with international qualified defined benefit pension plans we made cash contributions of $2.4 million, $2.6 million and $1.7 million in 2019, 2018 and 2017, respectively, and we anticipate less than $5 million of cash contributions to international qualified defined benefit pension plans in 2020.

Non-cancelable operating leases and purchasing commitments are utilized in our normal course of business for our projected needs. Our operating lease commitments are primarily for railroad cars, but also include logistics, manufacturing, office and storage facilities and equipment, information technology equipment and land. Virtually none of our lease agreements contain escalation clauses or step rent provisions. We have supply contracts with various third parties for certain raw materials, including ethylene, electricity, propylene and benzene. These contracts have initial terms ranging from several to 20 years. For losses that we believe are probable and which are estimable, we have accrued for such amounts in our consolidated balance sheets. In addition to the table above, we have various commitments and contingencies including: defined benefit and postretirement healthcare plans (as described below), environmental matters (see discussion above under “Environmental Matters”) and litigation claims (see Item 3—“Legal Proceedings”).

We have several defined benefit pension and defined contribution plans, as described in Note 14 “Pension Plans” and Note 18 “Contributing Employee Ownership Plan” in the notes to consolidated financial statements contained in Item 8. We fund the defined benefit pension plans based on the minimum amounts required by law plus such amounts we deem appropriate. We have postretirement healthcare plans that provide health and life insurance benefits to certain retired employees and their beneficiaries, as described in Note 15 “Postretirement Benefits” in the notes to consolidated financial statements contained in Item 8. The defined contribution and other postretirement plans are not pre-funded and expenses are paid by us as incurred.

We also have standby letters of credit of $68.7 million of which $3.5 million have been issued through our 2019 Senior Revolving Credit Facility. At December 31, 2019, we had $796.5 million available under our 2019 Senior Revolving Credit Facility because we had issued $3.5 million of letters of credit.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. Significant estimates in our consolidated financial statements include goodwill recoverability, environmental, restructuring and other unusual items, litigation, income tax reserves including deferred tax asset valuation allowances, pension, postretirement and other benefits and allowance for doubtful accounts. We base our estimates on prior experience, current facts and circumstances and other assumptions. Actual results may differ from these estimates.

We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of the consolidated financial statements.

#### Goodwill

Goodwill is not amortized, but is reviewed for impairment annually in the fourth quarter and/or when circumstances or other events indicate that impairment may have occurred. ASC 350 “Intangibles—Goodwill and Other” (ASC 350) permits entities to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. Circumstances that are considered as part of the qualitative assessment and could trigger the two-step impairment test include, but are not limited to: a significant adverse change in the business climate; a significant adverse legal judgment; adverse cash flow trends; an adverse action or assessment by a government agency; unanticipated competition; sustained decline in our stock price; and a significant restructuring charge within a reporting unit. We define reporting units at the business segment level or one level below the business segment level. For purposes of testing goodwill for impairment, goodwill has been allocated to our reporting units to the extent it relates to each reporting unit.

It is our practice, at a minimum, to perform a quantitative goodwill impairment test in the fourth quarter every three years. In the fourth quarter of 2019, we performed our triennial quantitative goodwill impairment test for our reporting units. We use a discounted cash flow approach to develop the estimated fair value of a reporting unit when a quantitative review is performed. Management judgment is required in developing the assumptions for the discounted cash flow model. We also corroborate our discounted cash flow analysis by evaluating a market-based approach that considers earnings before interest, taxes, depreciation and amortization (EBITDA) multiples from a representative sample of comparable public companies. As a further indicator that each reporting unit has been valued appropriately using a discounted cash flow model, the aggregate fair value of all reporting units is reconciled to the total market value of Olin. An impairment would be recorded if the carrying amount of a reporting unit exceeded the estimated fair value. Based on the aforementioned analysis, the estimated fair value of our reporting units exceeded the carrying value of the reporting units. No impairment charges were recorded for 2019, 2018 or 2017.

The discount rate, profitability assumptions and terminal growth rate of our reporting units and the cyclical nature of the chlor alkali industry were the material assumptions utilized in the discounted cash flow model used to estimate the fair value of each reporting unit. The discount rate reflects a weighted-average cost of capital, which is calculated based on observable market data. Some of this data (such as the risk free or treasury rate and the pretax cost of debt) are based on the market data at a point in time. Other data (such as the equity risk premium) are based upon market data over time for a peer group of companies in the chemical manufacturing or distribution industries with a market capitalization premium added, as applicable.

The discounted cash flow analysis requires estimates, assumptions and judgments about future events. Our analysis uses our internally generated long-range plan. Our discounted cash flow analysis uses the assumptions in our long-range plan about terminal growth rates, forecasted capital expenditures and changes in future working capital requirements to determine the implied fair value of each reporting unit. The long-range plan reflects management judgment, supplemented by independent chemical industry analyses which provide multi-year chlor alkali industry operating and pricing forecasts.

We believe the assumptions used in our goodwill impairment analysis are appropriate and result in reasonable estimates of the implied fair value of each reporting unit. However, given the economic environment and the uncertainties regarding the impact on our business, there can be no assurance that our estimates and assumptions, made for purposes of our goodwill impairment testing, will prove to be an accurate prediction of the future. In order to evaluate the sensitivity of the fair value calculation on the goodwill impairment test, we applied a hypothetical 10% decrease to the fair value of each reporting unit. We also applied a hypothetical decrease of 100-basis points in our terminal growth rate or an increase of 100-basis points in our weighted-average cost of capital to test the fair value calculation. In all cases, the estimated fair value of our reporting units derived in these sensitivity calculations exceeded the carrying value in excess of 10%. If our assumptions regarding future performance are not achieved, we may be required to record goodwill impairment charges in future periods. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

#### Environmental

Accruals (charges to income) for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based upon current law and existing technologies. These amounts, which are not discounted and are exclusive of claims against third parties, are adjusted periodically as assessments and remediation efforts progress or additional technical or legal information becomes available. Environmental costs are capitalized if the costs increase the value of the property and/or mitigate or prevent contamination from future operations. Environmental costs and recoveries are included in costs of goods sold.

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, changes in regulatory authorities, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other PRPs and our 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 to us, which could materially adversely affect our financial position, cash flows or results of operations.

### NEW ACCOUNTING PRONOUNCEMENTS

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, “Simplifying the Accounting for Income Taxes” which amends ASC 740 “Income Taxes” (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. We adopted this update on January 1, 2020 which did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment” which amends ASC 350. This update will simplify the measurement of goodwill impairment by eliminating Step 2 from the goodwill impairment test. This update will require an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The update does not modify the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The guidance in this update is applied on a prospective basis, with earlier application permitted. We adopted this update on January 1, 2020 which did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” (ASU 2016-13) which amends ASC 326 “Financial Instruments—Credit Losses” (ASC 326). Subsequent to the issuance of ASU 2016-13, ASC 326 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update. The new guidance introduces the current expected credit loss (CECL) model, which will require an entity to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. This update is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis, with earlier application permitted. We adopted this update on January 1, 2020 which did not have a material impact on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02 “Leases,” (ASU 2016-02) which supersedes ASC 840 “Leases” and creates a new topic, ASC 842 “Leases” (ASC 842). Subsequent to the issuance of ASU 2016-02, ASC 842 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update. These updates require lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. Upon initial application, the provisions of these updates are required to be applied using the modified retrospective method which requires retrospective adoption to each prior reporting period presented with the cumulative effect of adoption recorded to the earliest reporting period presented. An optional transition method can be utilized which requires application of these updates beginning on the date of adoption with the cumulative effect of initially applying these updates recognized at the date of initial adoption. These updates also expand the required quantitative and qualitative disclosures surrounding leases. These updates are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier application permitted. We adopted these updates on January 1, 2019 using the optional transition method. Accordingly, prior periods were not retrospectively adjusted. Adoption of these updates resulted in the recording of operating lease assets and lease liabilities on our consolidated balance sheet of $291.9 million as of January 1, 2019. Our assets and liabilities for finance leases remained unchanged. We also recognized the cumulative effect of applying these updates as an adjustment to retained earnings of $11.2 million, net of tax, which was primarily related to the recognition of previously deferred sale/leaseback gains. Our consolidated statements of operations and cash flows, along with our compliance with all covenants and restrictions under all our outstanding credit agreements, were not impacted by this adoption. These updates also impacted our accounting policies, internal controls and disclosures related to leases. Expanded disclosures regarding leases are included in Note 23 “Leases” in the notes to the consolidated financial statements contained in Item 8.

### DERIVATIVE FINANCIAL INSTRUMENTS

We are exposed to market risk in the normal course of our business operations due to our purchases of certain commodities, our ongoing investing and financing activities and our operations that use foreign currencies. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies and procedures governing our management of market risks and the use of financial instruments to manage exposure to such risks. ASC 815 requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheets and measure those instruments at fair value. In accordance with ASC 815, we designate derivative contracts as cash flow hedges of forecasted purchases of commodities and forecasted interest payments related to variable-rate borrowings and designate certain interest rate swaps as fair value hedges of fixed-rate borrowings. We do not enter into any derivative instruments for trading or speculative purposes.

Energy costs, including electricity and natural gas, and certain raw materials used in our production processes are subject to price volatility. Depending on market conditions, we may enter into futures contracts, forward contracts, commodity swaps and put and call option contracts in order to reduce the impact of commodity price fluctuations. The majority of our commodity derivatives expire within one year.

For derivative instruments that are designated and qualify as a cash flow hedge, the change in fair value of the derivative is recognized as a component of other comprehensive income (loss) until the hedged item is recognized in earnings.

We use cash flow hedges for certain raw material and energy costs such as copper, zinc, lead, ethane, electricity and natural gas to provide a measure of stability in managing our exposure to price fluctuations associated with forecasted purchases of raw materials and energy used in our manufacturing process. Settlements on commodity derivative contracts resulted in (losses) gains of $(31.1) million, $5.4 million, and $1.5 million in 2019, 2018, and 2017, respectively which were included in cost of goods sold. At December 31, 2019, we had open derivative notional contract positions through 2027 totaling $174.6 million (2018—$116.5 million). If all open futures contracts had been settled on December 31, 2019, we would have recognized a pretax loss of $17.6 million.

If commodity prices were to remain at December 31, 2019 levels, approximately $12.7 million of deferred losses, net of tax, would be reclassified into earnings during the next twelve months. The actual effect on earnings will be dependent on actual commodity prices when the forecasted transactions occur.

We use interest rate swaps as a means of minimizing cash flow fluctuations that may arise from volatility in interest rates of our variable-rate borrowings. In April 2016, we entered into three tranches of forward starting interest rate swaps whereby we agreed to pay fixed rates to the counterparties who, in turn, pay us floating rates on $1,100.0 million, $900.0 million and $400.0 million of our underlying floating-rate debt obligations. Each tranche’s term length was for twelve months beginning on December 31, 2016, 2017 and 2018, respectively. We have designated the swaps as cash flow hedges of the risk of changes in interest payments associated with our variable-rate borrowings. In July 2019, we terminated the remaining interest rate swap agreement which resulted in a gain of $1.8 million that was recognized in interest expense for the year ended December 31, 2019. For the years ended December 31, 2019, 2018 and 2017, $4.3 million, $8.9 million and $3.1 million, respectively, of income was recorded to interest expense on the accompanying consolidated statements of operations related to these swap agreements.

We also use interest rate swaps as a means of managing interest expense and floating interest rate exposure to optimal levels. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. We include the gain or loss on the hedged items (fixed-rate borrowings) in the same line item, interest expense, as the offsetting loss or gain on the related interest rate swaps.

In April 2016, we entered into interest rate swaps on $250.0 million of our underlying fixed-rate debt obligations, whereby we agreed to pay variable rates to the counterparties who, in turn, pay us fixed rates. In October 2016, we entered into interest rate swaps on an additional $250.0 million of our underlying fixed-rate debt obligations, whereby we agreed to pay variable rates to the counterparties who, in turn, pay us fixed rates. We designated the April 2016 and October 2016 interest rate swap agreements as fair value hedges of the risk of changes in the value of fixed-rate debt due to changes in interest rates for a portion of our fixed-rate borrowings. In August 2019, we terminated the April 2016 and October 2016 interest rate swaps which resulted in a loss of $2.3 million that will be deferred as an offset to the carrying value of the related debt and will be recognized to interest expense through October 2025. As of December 31, 2019, $2.2 million of this loss was included in long-term debt in the consolidated balance sheet. For the years ended December 31, 2019 and 2018, $2.6 million and $2.1 million, respectively, of expense and for the year ended December 31, 2017, $2.9 million of income was recorded to interest expense on the accompanying consolidated statements of operations related to these swap agreements.

We actively manage currency exposures that are associated with net monetary asset positions, currency purchases and sales commitments denominated in foreign currencies and foreign currency denominated assets and liabilities created in the normal course of business. We enter into forward sales and purchase contracts to manage currency risk to offset our net exposures, by currency, related to the foreign currency denominated monetary assets and liabilities of our operations. At December 31, 2019, we had outstanding forward contracts to buy foreign currency with a notional value of $140.6 million and to sell foreign currency with a notional value of $99.2 million. All of the currency derivatives expire within one year and are for U.S. dollar (USD) equivalents. The counterparties to the forward contracts are large financial institutions; however, the risk of loss to us in the event of nonperformance by a counterparty could be significant to our financial position or results of operations. At December 31, 2018, we had outstanding forward contracts to buy foreign currency with a notional value of $123.7 million and to sell foreign currency with a notional value of $82.6 million.

Our foreign currency forward contracts and certain commodity derivatives did not meet the criteria to qualify for hedge accounting. The effect on operating results of items not qualifying for hedge accounting was a (loss) gain of $(4.0) million, $(5.4) million and $1.8 million in 2019, 2018 and 2017, respectively.

The fair value of our derivative asset and liability balances were:

*($ in millions)*

|  | December 31, 2019 | 2018 |
| --- | ---: | ---: |
| Other current assets | $1.9 | $5.7 |
| Other assets | 0.7 | 0.7 |
| Total derivative asset | $2.6 | $6.4 |
| Accrued liabilities | $19.0 | $3.5 |
| Other liabilities | 1.8 | 34.1 |
| Total derivative liability | $20.8 | $37.6 |

## Market risk

As filed, 5,411 characters.

We are exposed to market risk in the normal course of our business operations due to our purchases of certain commodities, our ongoing investing and financing activities and our operations that use foreign currencies. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies and procedures governing our management of market risks and the use of financial instruments to manage exposure to such risks.

Energy costs, including electricity and natural gas, and certain raw materials used in our production processes are subject to price volatility. Depending on market conditions, we may enter into futures contracts, forward contracts, commodity swaps and put and call option contracts in order to reduce the impact of commodity price fluctuations. As of December 31, 2019, we maintained open positions on commodity contracts with a notional value totaling $174.6 million ($116.5 million at December 31, 2018). Assuming a hypothetical 10% increase in commodity prices, which are currently hedged, as of December 31, 2019, we would experience an $17.5 million ($11.7 million at December 31, 2018) increase in our cost of inventory purchased, which would be substantially offset by a corresponding increase in the value of related hedging instruments.

We transact business in various foreign currencies other than the USD which exposes us to movements in exchange rates which may impact revenue and expenses, assets and liabilities and cash flows. Our significant foreign currency exposure is denominated with European currencies, primarily the Euro, although exposures also exist in other currencies of Asia Pacific, Latin America, Middle East and Africa. For all derivative positions, we evaluated the effects of a 10% shift in exchange rates between those currencies and the USD, holding all other assumptions constant. Unfavorable currency movements of 10% would negatively affect the fair values of the derivatives held to hedge currency exposures by $21.3 million. These unfavorable changes would generally have been offset by favorable changes in the values of the underlying exposures.

We are exposed to changes in interest rates primarily as a result of our investing and financing activities. Our current debt structure is used to fund business operations, and commitments from banks under our Delayed Draw Term Loan Facility, 2019 Senior Revolving Credit Facility, Receivables Financing Agreement and AR Facilities are sources of liquidity. As of December 31, 2019, we had long-term borrowings, including current installments of long-term debt and finance lease obligations, of $3,340.8 million ($3,230.3 million at December 31, 2018) of which $155.9 million ($823.9 million at December 31, 2018) was issued at variable rates. Included within long-term borrowings on the consolidated balance sheets were deferred debt issuance costs and deferred losses on fair value interest rate swaps.

Assuming no changes in the $155.9 million of variable-rate debt levels from December 31, 2019, we estimate that a hypothetical change of 100-basis points in the LIBOR interest rates from 2019 would impact annual interest expense by $1.6 million.

Our interest rate swaps reduced interest expense by $1.7 million, $6.8 million and $6.1 million in 2019, 2018 and 2017, respectively.

If the actual changes in commodities, foreign currency or interest pricing is substantially different than expected, the net impact of commodity risk, foreign currency risk or interest rate risk on our cash flow may be materially different than that disclosed above.

We do not enter into any derivative financial instruments for speculative purposes.

### CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements. These statements relate to analyses and other information that are based on management’s beliefs, certain assumptions made by management, forecasts of future results and current expectations, estimates and projections about the markets and economy in which we and our various segments operate. The statements contained in this report that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties.

We have used the words “anticipate,” “intend,” “may,” “expect,” “believe,” “should,” “plan,” “estimate,” “project,” “forecast,” “optimistic” and variations of such words and similar expressions in this report to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.

The risks, uncertainties and assumptions involved in our forward-looking statements include those discussed under Item 1A—“Risk Factors.” You should consider all of our forward-looking statements in light of these factors. In addition, other risks and uncertainties not presently known to us or that we consider immaterial could affect the accuracy of our forward-looking statements.

## Controls and procedures

As filed, 2,488 characters.

Our chief executive officer and our chief financial officer evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2019. Based on that evaluation, our chief executive officer and chief financial officer have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information Olin is required to disclose in the reports that it files or submits with the SEC under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and to ensure that information we are required to disclose in such reports is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

In 2017, we began a multi-year implementation of new enterprise resource planning, manufacturing, and engineering systems. The project includes the required information technology infrastructure (collectively, the Information Technology Project). Implementing the Information Technology Project involves significant changes in business processes and extensive organizational training. During the second and third quarters of 2019, we implemented portions of the Information Technology Project to support and integrate significant processes, some of which relate to internal control over financial reporting and disclosure controls and procedures. We believe we have taken and will continue to take the necessary steps to implement, monitor and maintain appropriate internal controls during the Information Technology Project transition period. In connection with the Information Technology Project, we expect there will be a significant redesign of our business processes, some of which relate to internal control over financial reporting and disclosure controls. Other than the aforementioned Information Technology Project, there have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s report on internal control over financial reporting and the related report of Olin’s independent registered public accounting firm, KPMG LLP, are included in Item 8—“Consolidated Financial Statements and Supplementary Data.”

Filed Feb 25, 2020.
Source: SEC EDGAR, the filing index for accession 0000074303-20-000072. Last ingested by Listed: Nov 4, 2026, 19:33 ET. No prices; not investment advice.