# OLIN Corp: Form 10-Q for the period ended Jun 30, 2021

- Company: [OLIN Corp](/companies/oln.md) (CIK 74303)
- Form: 10-Q
- Filed: 2021-07-28
- Accepted by EDGAR: Jul 28, 2021, 12:07 ET
- Period: 2021-06-30
- Accession: 0000074303-21-000141
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/74303/000007430321000141/oln-20210630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/74303/000007430321000141/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-04-01 to 2021-06-30 | $2.22bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2021-01-01 to 2021-06-30 | $4.14bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2021-04-01 to 2021-06-30 | $1.71bn | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2021-01-01 to 2021-06-30 | $3.14bn | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2021-04-01 to 2021-06-30 | $100.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2021-01-01 to 2021-06-30 | $207.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2021-04-01 to 2021-06-30 | $395.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2021-01-01 to 2021-06-30 | $776.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2021-04-01 to 2021-06-30 | $65.9m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2021-01-01 to 2021-06-30 | $150.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2021-04-01 to 2021-06-30 | −$18.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2021-01-01 to 2021-06-30 | $44.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-04-01 to 2021-06-30 | $355.8m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2021-01-01 to 2021-06-30 | $599.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-04-01 to 2021-06-30 | $2.17 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2021-01-01 to 2021-06-30 | $3.69 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-04-01 to 2021-06-30 | $2.23 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2021-01-01 to 2021-06-30 | $3.77 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-04-01 to 2021-06-30 | 163,800,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2021-01-01 to 2021-06-30 | 162,300,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2021-01-01 to 2021-06-30 | $707.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2021-01-01 to 2021-06-30 | $86.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2021-01-01 to 2021-06-30 | $63.7m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2021-06-30 | $272.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-06-30 | $2.22bn | us-gaap:AssetsCurrent |
| Total assets | at 2021-06-30 | $8.66bn | us-gaap:Assets |
| Current liabilities | at 2021-06-30 | $1.35bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2021-06-30 | $6.58bn | us-gaap:Liabilities |
| Long-term debt | at 2021-06-30 | $3.38bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2021-06-30 | $1.1m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2021-06-30 | $2.07bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2021-06-30 | 160,462,045 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 56,472 characters.

### Business Background

We are a leading vertically-integrated global manufacturer and distributor of chemical products and a leading United States (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.

Our Chlor Alkali Products and Vinyls segment is partially a commodity business where all supplier products are similar and price is the major supplier selection criterion. Pricing for these products is subject to a variety of factors, some of which are outside of our control. 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. 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 some products manufactured by the Chlor Alkali Products and Vinyls segment. The Epoxy segment’s upstream and midstream products are partially commodity markets. Pricing for these products is subject to a variety of factors, some of which are outside of our control. 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.

### Executive Summary

### Winter Storm Uri

Olin’s Freeport, TX facility was affected by Winter Storm Uri and was forced to halt production due to the lack of electrical power, natural gas, and other raw materials. All of Olin’s Freeport operations were impacted. In addition, production at Olin’s Plaquemine, LA; St. Gabriel, LA; Oxford, MS; and McIntosh, AL facilities were also negatively impacted. As a result, by February 18, 2021, Olin declared Force Majeure on all chemical product shipments from North America. As of March 31, 2021, our facilities had returned to operation.

The first quarter 2021 included a net pretax favorable impact of $99.9 million associated with Winter Storm Uri due to Olin’s customary financial hedges and contracts maintained to provide protection from rapid and dramatic changes in energy costs, partially offset by unabsorbed fixed manufacturing costs and storm-related maintenance costs. For the six months ended June 30, 2021, Chlor Alkali Products and Vinyls segment results included a favorable impact of $121.4 million and Epoxy segment results included an unfavorable impact of $21.5 million associated with Winter Storm Uri.

### 2021 Overview

Net income for the three and six months ended June 30, 2021 was $355.8 million and $599.4 million, respectively, compared to net loss of $120.1 million and $200.1 million, respectively, for the comparable prior year periods in 2020. The increase in results from the prior year was due to improved operating results across all our business segments.

Chlor Alkali Products and Vinyls reported segment income of $168.9 million and $440.0 million for the three and six months ended June 30, 2021, respectively. Without the impact of Winter Storm Uri, Chlor Alkali Products and Vinyls segment results were higher than in the comparable prior year periods primarily due to higher pricing across all products. During the second quarter, Chlor Alkali Products and Vinyls segment results were negatively impacted by higher raw material and operating costs compared to the prior year period. Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $114.5 million and $108.5 million for the three months ended June 30, 2021 and 2020, respectively, and $230.3 million and $227.0 million for the six months ended June 30, 2021 and 2020, respectively.

Epoxy reported segment income of $165.3 million and $230.5 million for the three and six months ended June 30, 2021, respectively. Without Winter Storm Uri, Epoxy segment results were higher than in the comparable prior year periods primarily due to higher product prices, partially offset by higher raw materials costs, primarily benzene and propylene. Epoxy segment results included depreciation and amortization expense of $20.3 million and $21.6 million for the three months ended June 30, 2021 and 2020, respectively, and $42.4 million and $43.1 million for the six months ended June 30, 2021 and 2020, respectively.

Winchester reported segment income of $109.9 million and $195.0 million for the three and six months ended June 30, 2021, respectively. On October 1, 2020, Winchester assumed full management and operational control of the Lake City U.S. Army Ammunition Plant (Lake City) in Independence, MO. Winchester segment results were higher than in the comparable prior year periods primarily due to higher volumes, which includes ammunition produced at Lake City, and higher commercial ammunition pricing. Winchester segment results included depreciation and amortization expense of $5.5 million and $4.7 million for the three months ended June 30, 2021 and 2020, respectively, and $11.1 million and $9.7 million for the six months ended June 30, 2021 and 2020, respectively.

During the six months ended June 30, 2021, we repaid $490.2 million of long-term debt. In connection with these financing transactions, we recognized a loss on extinguishment of debt of $15.4 million and $38.9 million for the three and six months ended June 30, 2021, respectively, which includes the payment of early redemption premiums of $12.3 million and $31.0 million for the three and six months ended June 30, 2021, respectively.

### Consolidated Results of Operations

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

|  | Three Months Ended June 30, 2021 | 2020 | Six Months Ended June 30, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Sales | $2,221.3 | $1,241.2 | $4,140.1 | $2,666.3 |
| Cost of goods sold | 1,712.2 | 1,235.7 | 3,136.0 | 2,609.9 |
| Gross margin | 509.1 | 5.5 | 1,004.1 | 56.4 |
| Selling and administration | 100.6 | 99.7 | 207.5 | 196.4 |
| Restructuring charges | 14.0 | 1.7 | 20.9 | 3.4 |
| Other operating income | 0.5 | 0.1 | 0.5 | 0.1 |
| Operating income (loss) | 395.0 | (95.8) | 776.2 | (143.3) |
| Interest expense | 65.9 | 69.4 | 150.4 | 132.5 |
| Interest income | — | 0.2 | 0.1 | 0.3 |
| Non-operating pension income | 8.2 | 4.9 | 17.5 | 9.5 |
| Income (loss) before taxes | 337.3 | (160.1) | 643.4 | (266.0) |
| Income tax (benefit) provision | (18.5) | (40.0) | 44.0 | (65.9) |
| Net income (loss) | $355.8 | $(120.1) | $599.4 | $(200.1) |
| Net income (loss) per common share: |  |  |  |  |
| Basic | $2.23 | $(0.76) | $3.77 | $(1.27) |
| Diluted | $2.17 | $(0.76) | $3.69 | $(1.27) |

### Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Sales for the three months ended June 30, 2021 were $2,221.3 million compared to $1,241.2 million in the same period last year, an increase of $980.1 million, or 79%. Chlor Alkali Products and Vinyls sales increased by $316.1 million, primarily due to higher pricing across all products and increased volumes. Epoxy sales increased by $452.6 million, primarily due to higher product prices and increased volumes. Winchester sales increased by $211.4 million, primarily due to higher commercial and military sales volumes, which included ammunition produced at Lake City, and increased commercial ammunition pricing.

Gross margin increased $503.6 million for the three months ended June 30, 2021 compared to the prior year. Chlor Alkali Products and Vinyls gross margin increased by $224.4 million, primarily due to higher pricing and volumes, partially offset by higher raw material and operating costs. Epoxy gross margin increased by $180.7 million, primarily due to higher product prices and volumes, partially offset by higher costs, primarily raw materials. Winchester gross margin increased by $100.9 million, primarily due to higher sales volumes, which included ammunition produced at Lake City, and increased commercial ammunition pricing. Gross margin as a percentage of sales increased to 23% in 2021 from 0% in 2020.

Selling and administration expenses for the three months ended June 30, 2021 were $100.6 million, an increase of $0.9 million from the prior year. The increase was primarily due to higher variable incentive compensation expense of $15.0 million, which includes mark-to-market adjustments on stock-based compensation expense, and selling and administration expenses associated with Lake City operations of $7.2 million. These increases were partially offset by the absence of costs associated with the implementation of new enterprise resource planning, manufacturing and engineering systems, and related infrastructure (Information Technology Project) of $20.4 million, which was completed in late 2020. Selling and administration expenses as a percentage of sales decreased to 5% in 2021 from 8% in 2020.

Restructuring charges for the three months ended June 30, 2021 and 2020 were $14.0 million and $1.7 million, respectively. The increase in charges was primarily due to a productivity initiative to align the organization with our new operating model and improve efficiencies which was completed during the second quarter of 2021.

Interest expense decreased by $3.5 million for the three months ended June 30, 2021. Interest expense for the three months ended June 30, 2021 included $12.3 million of bond redemption premiums and $3.1 million for write-off of deferred debt issuance costs and recognition of deferred fair value interest rate swap losses. Interest expense for the three months ended

June 30, 2020 included $1.6 million for the write-off of unamortized deferred debt issuance costs. Without these items, interest expense decreased by $17.3 million, primarily due to lower interest rates and a lower level of debt outstanding.

Non-operating pension income includes all components of pension and other postretirement income (costs) other than service costs. Non-operating pension income increased by $3.3 million for the three months ended June 30, 2021 compared to the prior year primarily due to a decrease in the discount rate used to determine interest costs.

The effective tax rate for the three months ended June 30, 2021 included a benefit from a net decrease in the valuation allowance related to deferred tax assets in foreign jurisdictions, a benefit associated with prior year tax positions, a benefit associated with stock-based compensation and an expense from a change in tax contingencies. These factors resulted in a net $93.9 million tax benefit. After giving consideration to these items, the effective tax rate for the three months ended June 30, 2021 of 22.4% was higher than the 21% U.S. federal statutory rate primarily due to state taxes, foreign income inclusions and foreign income taxes, partially offset by a net decrease in the valuation allowance related to utilization of losses in foreign jurisdictions and favorable permanent salt depletion deductions. The effective tax rate for the three months ended June 30, 2020 of 25.0% was higher than the 21% U.S. federal statutory rate primarily due to state taxes, foreign income taxes and favorable permanent salt depletion deductions, partially offset by foreign income inclusions and a net increase in the valuation allowance related to losses in foreign jurisdictions.

### Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Sales for the six months ended June 30, 2021 were $4,140.1 million compared to $2,666.3 million in the same period last year, an increase of $1,473.8 million, or 55%. Chlor Alkali Products and Vinyls sales increased by $423.2 million, primarily due to higher pricing across all products and increased volumes. Epoxy sales increased by $638.0 million, primarily due to higher product prices and volumes. Our chemicals businesses segment sales volumes in the first quarter 2021 were negatively impacted by Winter Storm Uri. Winchester sales increased by $412.6 million, primarily due to higher commercial and military sales volumes, which included ammunition produced at Lake City, and increased commercial ammunition pricing.

Gross margin increased $947.7 million for the six months ended June 30, 2021 compared to the prior year. Chlor Alkali Products and Vinyls gross margin increased by $529.5 million, primarily due to higher pricing and the effect of Winter Storm Uri. Epoxy gross margin increased by $235.3 million, primarily due to higher product prices, partially offset by higher raw material costs and the effect of Winter Storm Uri. Winchester gross margin increased by $181.9 million, primarily due to higher sales volumes, which included ammunition produced at Lake City, and increased commercial ammunition pricing. Gross margin as a percentage of sales increased to 24% in 2021 from 2% in 2020.

Selling and administration expenses for the six months ended June 30, 2021 were $207.5 million, an increase of $11.1 million from the prior year. The increase was primarily due to higher variable incentive compensation expense of $33.5 million, which includes mark-to-market adjustments on stock-based compensation expense, and selling and administration expenses associated with Lake City operations of $13.8 million. These increases were partially offset by the absence of costs associated with the Information Technology Project of $35.1 million, which was completed in late 2020. Selling and administration expenses as a percentage of sales decreased to 5% in 2021 from 7% in 2020.

Restructuring charges for the six months ended June 30, 2021 and 2020 were $20.9 million and $3.4 million, respectively. The increase in charges was primarily due to a productivity initiative to align the organization with our new operating model and improve efficiencies, which was completed during the second quarter of 2021, and the March 2021 decision to permanently close approximately 50% of our diaphragm-grade chlor alkali capacity, representing 200,000 tons, at our McIntosh, AL facility.

Interest expense increased by $17.9 million for the six months ended June 30, 2021. Interest expense for the six months ended June 30, 2021 included $31.0 million of bond redemption premiums and $7.9 million for write-off of deferred debt issuance costs and recognition of deferred fair value interest rate swap losses. Interest expense for the six months ended June 30, 2020 included $1.6 million for the write-off of unamortized deferred debt issuance costs and $4.0 million of accretion expense related to the 2020 ethylene payment discount. Interest expense for the six months ended June 30, 2021 and 2020 was reduced by capitalized interest of $1.9 million and $4.2 million, respectively. Without these items, interest expense decreased by $17.7 million, primarily due to lower interest rates and a lower level of debt outstanding.

Non-operating pension income includes all components of pension and other postretirement income (costs) other than service costs. Non-operating pension income increased by $8.0 million for the six months ended June 30, 2021 compared to the prior year primarily due to a decrease in the discount rate used to determine interest costs.

The effective tax rate for the six months ended June 30, 2021 included a benefit from a net decrease in the valuation allowance related to deferred tax assets in foreign jurisdictions, a benefit associated with prior year tax positions, a benefit associated with stock-based compensation, an expense from remeasurement of deferred taxes due to an increase in our state effective tax rates and an expense from a change in tax contingencies. These factors resulted in a net $95.2 million tax benefit. After giving consideration to these items, the effective tax rate for the six months ended June 30, 2021 of 21.6% was higher than the 21% U.S. federal statutory rate primarily due to state taxes, foreign income inclusions and foreign income taxes, partially offset by a net decrease in the valuation allowance related to utilization of losses in foreign jurisdictions and favorable permanent salt depletion deductions. The effective tax rate for the six months ended June 30, 2020 included an expense associated with stock-based compensation, an expense associated with prior year tax positions and an expense from a change in tax contingencies. These factors resulted in a net $1.0 million tax expense. After giving consideration to these items, the effective tax rate for the six months ended June 30, 2020 of 25.2% was higher than the 21% U.S. federal statutory rate primarily due to state taxes, foreign income taxes and favorable permanent salt depletion deductions, partially offset by foreign income inclusions and a net increase in the valuation allowance related to losses in foreign jurisdictions.

### Segment Results

We define segment results as income (loss) before interest expense, interest income, goodwill impairment charges, other operating income (expense), non-operating pension income, other income and income taxes. 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: | Three Months Ended June 30, 2021 | 2020 | Six Months Ended June 30, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Chlor Alkali Products and Vinyls | $967.3 | $651.2 | $1,834.3 | $1,411.1 |
| Epoxy | 850.0 | 397.4 | 1,512.6 | 874.6 |
| Winchester | 404.0 | 192.6 | 793.2 | 380.6 |
| Total sales | $2,221.3 | $1,241.2 | $4,140.1 | $2,666.3 |
| **Income (loss) before taxes:** |  |  |  |  |
| Chlor Alkali Products and Vinyls | $168.9 | $(57.0) | $440.0 | $(91.3) |
| Epoxy | 165.3 | (13.0) | 230.5 | (1.3) |
| Winchester | 109.9 | 16.0 | 195.0 | 26.5 |
| Corporate/other: |  |  |  |  |
| Environmental expense(1) | (4.7) | (2.8) | (5.0) | (5.4) |
| Other corporate and unallocated costs(2) | (30.9) | (37.4) | (63.9) | (68.5) |
| Restructuring charges | (14.0) | (1.7) | (20.9) | (3.4) |
| Other operating income | 0.5 | 0.1 | 0.5 | 0.1 |
| Interest expense(3) | (65.9) | (69.4) | (150.4) | (132.5) |
| Interest income | — | 0.2 | 0.1 | 0.3 |
| Non-operating pension income | 8.2 | 4.9 | 17.5 | 9.5 |
| Income (loss) before taxes | $337.3 | $(160.1) | $643.4 | $(266.0) |

(1) Environmental expense for the six months ended June 30, 2021 includes $2.2 million of insurance recoveries for environmental costs incurred and expensed in prior periods.

(2) Other corporate and unallocated costs included costs associated with the implementation of the Information Technology Project for the three and six months ended June 30, 2020 of $20.4 million and $35.1 million, respectively.

(3) Interest expense for the three and six months ended June 30, 2021 included a loss on extinguishment of debt of $15.4 million and $38.9 million, respectively, which includes bond redemption premiums, write-off of deferred debt issuance costs and recognition of deferred fair value interest rate swap losses associated with the optional prepayment of existing debt. Interest expense for both the three and six months ended June 30, 2020 included $1.6 million for write-off of deferred debt issuance costs and for the six months ended June 30, 2020 also included $4.0 million related to the 2020 ethylene payment discount.

### Chlor Alkali Products and Vinyls

### Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Chlor Alkali Products and Vinyls sales for the three months ended June 30, 2021 were $967.3 million compared to $651.2 million for the same period in 2020, an increase of $316.1 million, or 49%. The sales increase was primarily due to higher pricing across all products and increased volumes. Chlor Alkali Products and Vinyls sales increase was also due to higher VCM sales as a result of our primary VCM contract transitioning from a toll manufacturing arrangement to a direct customer sale agreement beginning on January 1, 2021.

Chlor Alkali Products and Vinyls segment income was $168.9 million for the three months ended June 30, 2021 compared to segment loss of $57.0 million for the same period in 2020, an increase of $225.9 million. The increase in Chlor Alkali Products and Vinyls segment results was primarily due to higher product prices ($223.9 million) and increased volumes ($38.6 million). These increases were partially offset by higher raw material and operating costs ($36.6 million). Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $114.5 million and $108.5 million for the three months ended June 30, 2021 and 2020, respectively.

### Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Chlor Alkali Products and Vinyls sales for the six months ended June 30, 2021 were $1,834.3 million compared to $1,411.1 million for the same period in 2020, an increase of $423.2 million, or 30%. The sales increase was primarily due to higher pricing across all product lines. Chlor Alkali Products and Vinyls sales increase was also due to higher VCM sales as a result of our primary VCM contract transitioning from a toll manufacturing arrangement to a direct customer sale agreement beginning on January 1, 2021. These increases were partially offset by lower volumes, which were impacted during the first quarter of 2021 by Winter Storm Uri.

Chlor Alkali Products and Vinyls segment income was $440.0 million for the six months ended June 30, 2021 compared to segment loss of $91.3 million for the same period in 2020, an increase of $531.3 million. The increase in Chlor Alkali Products and Vinyls segment results was primarily due to higher product prices ($351.1 million), the favorable impact of Winter Storm Uri ($121.4 million), increased volumes ($48.8 million) and lower raw material and operating costs ($10.0 million). The impact of Winter Storm Uri includes a net one-time benefit associated with Olin’s customary financial hedges and contracts maintained to provide protection from rapid and dramatic changes in energy costs, partially offset by unabsorbed fixed manufacturing costs and storm-related maintenance costs. Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $230.3 million and $227.0 million for the six months ended June 30, 2021 and 2020, respectively.

### Epoxy

### Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Epoxy sales for the three months ended June 30, 2021 were $850.0 million compared to $397.4 million for the same period in 2020, an increase of $452.6 million, or 114%. The sales increase was primarily due to higher product prices ($367.5 million), increased volumes and mix changes ($46.1 million) and a favorable effect of foreign currency translation ($39.0 million).

Epoxy segment income was $165.3 million for the three months ended June 30, 2021 compared to segment loss of $13.0 million for the same period in 2020, an increase of $178.3 million. The increase in segment results was primarily due to higher product prices ($367.5 million) and increased volumes and mix changes ($13.3 million), partially offset by higher raw material costs ($180.2 million), primarily benzene and propylene, and higher operating and maintenance turnaround costs ($22.3 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 $20.3 million and $21.6 million for the three months ended June 30, 2021 and 2020, respectively.

### Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Epoxy sales for the six months ended June 30, 2021 were $1,512.6 million compared to $874.6 million for the same period in 2020, an increase of $638.0 million, or 73%. The sales increase was primarily due to higher product prices ($471.1 million), increased volumes and mix changes ($100.8 million) and a favorable effect of foreign currency translation ($66.1 million). Sales volumes in the first quarter 2021 were negatively impacted by Winter Storm Uri.

Epoxy segment income was $230.5 million for the six months ended June 30, 2021 compared to segment loss of $1.3 million for the same period in 2020, an increase of $231.8 million. The increase in segment results was primarily due to higher product prices ($471.1 million) and increased volumes and mix changes ($11.4 million), partially offset by higher raw material costs ($208.8 million), primarily benzene and propylene. Epoxy segment results were also impacted by the unfavorable impact of Winter Storm Uri ($21.5 million) and higher operating costs ($20.4 million) compared to the prior year period. The impact of Winter Storm Uri includes unabsorbed fixed manufacturing costs and storm-related maintenance costs. 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 $42.4 million and $43.1 million for the six months ended June 30, 2021 and 2020, respectively.

### Winchester

### Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Winchester sales were $404.0 million for the three months ended June 30, 2021 compared to $192.6 million for the same period in 2020, an increase of $211.4 million, or 110%. The increase was due to higher ammunition sales to commercial customers ($145.9 million) and military customers ($60.0 million), both of which includes ammunition produced at Lake City, and law enforcement agencies ($5.5 million).

Winchester segment income was $109.9 million for the three months ended June 30, 2021 compared to $16.0 million for the same period in 2020, an increase of $93.9 million. The increase in segment results was due to higher product pricing ($52.6 million) and increased sales volumes ($45.1 million), which includes ammunition produced at Lake City, partially offset by higher commodity and operating costs ($7.6 million). Segment results in 2020 were also impacted by transition costs relating to the Lake City contract ($3.8 million). Winchester segment income included depreciation and amortization expense of $5.5 million and $4.7 million for the three months ended June 30, 2021 and 2020, respectively.

### Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Winchester sales were $793.2 million for the six months ended June 30, 2021 compared to $380.6 million for the same period in 2020, an increase of $412.6 million, or 108%. The increase was due to higher ammunition sales to commercial customers ($279.8 million) and military customers ($124.0 million), both of which includes ammunition produced at Lake City, and law enforcement agencies ($8.8 million).

Winchester segment income was $195.0 million for the six months ended June 30, 2021 compared to $26.5 million for the same period in 2020, an increase of $168.5 million. The increase in segment results was due to increased sales volumes ($91.5 million), which includes ammunition produced at Lake City, and higher product pricing ($84.7 million), partially offset by higher commodity and operating costs ($14.3 million). Segment results in 2020 were also impacted by transition costs relating to the Lake City contract ($6.6 million). Winchester segment income included depreciation and amortization expense of $11.1 million and $9.7 million for the six months ended June 30, 2021 and 2020, respectively.

### Corporate/Other

### Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

For the three months ended June 30, 2021, charges to income for environmental investigatory and remedial activities were $4.7 million compared to $2.8 million for the three months ended June 30, 2020. These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites.

For the three months ended June 30, 2021, other corporate and unallocated costs were $30.9 million compared to $37.4 million for the three months ended June 30, 2020, a decrease of $6.5 million. The decrease was primarily due to the absence of costs associated with the implementation of the Information Technology Project of $20.4 million, which was completed in late 2020, partially offset by higher variable incentive compensation costs of $14.0 million, which includes mark-to-market adjustments on stock-based compensation expense.

### Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

For the six months ended June 30, 2021, charges to income for environmental investigatory and remedial activities were $5.0 million, which includes $2.2 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 for the six months ended June 30, 2021 would have been $7.2 million, compared to $5.4 million for the six months ended June 30, 2020. These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites.

For the six months ended June 30, 2021, other corporate and unallocated costs were $63.9 million compared to $68.5 million for the six months ended June 30, 2020, a decrease of $4.6 million. The decrease was primarily due to the absence of costs associated with the implementation of the Information Technology Project of $35.1 million, which was completed in late 2020, partially offset by higher variable incentive compensation costs of $31.1 million, which includes mark-to-market adjustments on stock-based compensation expense.

### Outlook

In 2021, we expect to continue to implement and benefit from Olin’s new operating model of optimizing value across our chemicals businesses. Olin drove pricing improvement in the first half of 2021 for chlorine and almost all chlorine derivatives, including epoxy resins, and caustic soda. During 2021, we expect to deliver ECU pricing improvement compared to 2020, partially offset by higher raw material costs, primarily benzene and propylene. In 2021, we expect year over year improvement in both Chlor Alkali Products and Vinyls and Epoxy segment results.

Winchester 2021 segment income is expected to improve from 2020 segment income of $92.3 million due to higher commercial product pricing and increased sales volumes, which includes ammunition produced at Lake City. During 2020, Winchester segment results included transition costs related to the Lake City contract of $13.5 million.

Other Corporate and Unallocated costs in 2021 are expected to be lower than the $154.3 million in 2020, primarily due to 2020 results including $73.9 million of costs associated with the Information Technology Project. The Information Technology Project was concluded in late 2020. Partially offsetting these lower costs in 2021 will be higher variable incentive costs, including mark-to-market adjustments on stock-based compensation expense.

During 2021, we anticipate environmental expenses in the $20 million to $25 million range compared to $20.9 million in 2020.

We expect non-operating pension income in 2021 to be in the $30 million to $35 million range compared to $18.9 million in 2020. 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 2021. We have several international qualified defined benefit pension plans for which we anticipate cash contributions of less than $5 million in 2021.

In 2021, we currently expect our capital spending to be in the $200 million range, which would be approximately $100 million lower than 2020 levels. We expect 2021 depreciation and amortization expense to be in the $575 million to $600 million range.

We currently believe the 2021 effective tax rate will be in the 20% to 25% range, excluding the impact of the second quarter 2021 release of the valuation allowance related to deferred tax assets of our German operations. We expect cash taxes will be in the 10% to 15% range, which primarily reflects the utilization of tax loss carryforwards.

### Environmental Matters

Environmental provisions charged to income, which are included in costs of goods sold, were as follows:

*($ in millions)*

|  | Three Months Ended June 30, 2021 | 2020 | Six Months Ended June 30, 2021 | 2020 |
| --- | ---: | ---: | ---: | ---: |
| Provisions charged to income | $4.7 | $2.8 | $7.2 | $5.4 |
| Recoveries for costs incurred and expensed | — | — | (2.2) | — |
| Environmental expense | $4.7 | $2.8 | $5.0 | $5.4 |

Environmental expense for the six months ended June 30, 2021 includes $2.2 million of insurance recoveries for environmental costs incurred and expensed in prior periods.

Our liabilities for future environmental expenditures were as follows:

*($ in millions)*

|  | June 30, 2021 | 2020 |
| --- | ---: | ---: |
| **Balance at beginning of year** | $147.2 | $139.0 |
| Charges to income | 7.2 | 5.4 |
| Remedial and investigatory spending | (6.2) | (5.6) |
| Foreign currency translation adjustments | 0.2 | (0.2) |
| **Balance at end of period** | $148.4 | $138.6 |

Environmental investigatory and remediation activities spending was associated with former waste disposal sites and past manufacturing operations. Spending in 2021 for investigatory and remedial efforts, the timing of which is subject to regulatory approvals and other uncertainties, is estimated to be approximately $20 million. Cash outlays for remedial and investigatory activities associated with former waste disposal sites and past manufacturing operations were not charged to income, but instead, were charged to reserves established for such costs identified and expensed to income in prior periods. Associated costs of investigatory and remedial activities are provided for in accordance with generally accepted accounting principles 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 $9.0 million at June 30, 2021. 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. Charges to income for investigatory and remedial efforts were material to our operating results in 2020 and may be material to our operating results in 2021.

The condensed balance sheets included reserves for future environmental expenditures to investigate and remediate known sites amounting to $148.4 million, $147.2 million and $138.6 million at June 30, 2021, December 31, 2020 and June 30, 2020, respectively, of which $129.4 million, $128.2 million and $121.6 million, respectively, were classified as other noncurrent liabilities. These 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.

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 Potentially Responsible Parties (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.

### Legal Matters and Contingencies

Discussion of legal matters and contingencies can be referred to under Item 1, within Note 10, “Commitments and Contingencies.”

### Liquidity, Investment Activity and Other Financial Data

### Cash Flow Data

*($ in millions)*

| Provided By (Used For) | Six Months Ended June 30, 2021 | 2020 |
| --- | ---: | ---: |
| Net operating activities | $707.6 | $55.4 |
| Capital expenditures | (86.4) | (166.5) |
| Payments under long-term supply contracts | — | (536.8) |
| Net investing activities | (86.4) | (703.3) |
| Long-term debt (repayments) borrowings, net | (490.2) | 737.4 |
| Debt early redemption premium | (31.0) | — |
| Stock options exercised | 50.2 | 0.5 |
| Debt issuance costs | (3.1) | (9.6) |
| Net financing activities | (537.8) | 665.2 |

### Operating Activities

For the six months ended June 30, 2021, cash provided by operating activities increased by $652.2 million from the six months ended June 30, 2020, primarily due to an increase in operating results, partially offset by working capital increases to support operations. For the six months ended June 30, 2021, working capital increased $209.1 million compared to a decrease of $30.8 million for the six months ended June 30, 2020. The working capital increase reflects normal seasonal working capital growth and a higher sales level. Receivables increased by $274.5 million from December 31, 2020, primarily as a result of higher sales during 2021. For the six months ended June 30, 2021, our days sales outstanding (DSO), which was calculated by dividing period end accounts receivable by average daily sales for the period, improved from the comparable prior year period. Inventories increased by $67.6 million from December 31, 2020 and accounts payable and accrued liabilities increased $143.6 million, which were both primarily as a result of increased raw material costs.

### Investing Activities

Capital spending of $86.4 million for the six months ended June 30, 2021 was $80.1 million lower than the corresponding period in 2020. For the total year 2021, we expect our capital spending to be in the $200 million range, which would be approximately $100 million lower than 2020 levels. For the total year 2021, depreciation and amortization expense is forecast to be in the $575 million to $600 million range.

During 2017, we began a multi-year implementation of the Information Technology Project. The project standardizes business processes across the Chemicals businesses with the objective of maximizing cost effectiveness, efficiency and control across our global operations. The project was completed in late 2020. Our results for the six months ended June 30, 2020 included $32.8 million of capital spending and $35.1 million of expenses associated with this project.

For the six months ended June 30, 2020, a payment of $461.0 million was made associated with long-term supply contracts to reserve additional ethylene at producer economics from The Dow Chemical Company (Dow) and a payment of $75.8 million was made associated with the resolution of a dispute over the allocation to Olin of certain capital costs incurred at our Plaquemine, LA site after the October 5, 2015 closing date of the Dow acquisition.

### Financing Activities

For the six months ended June 30, 2021, we had long-term debt repayments, net of long-term debt borrowings of $490.2 million.

During the six months ended June 30, 2021, we repaid $150.0 million of the Senior Secured Term Loans, of which $10.2 million was a required quarterly installment. These repayments eliminated the required quarterly installments of the Senior Secured Term Loans through December 2023.

During the six months ended June 30, 2021, we repurchased, through open market transactions, a principal amount of $26.5 million of the outstanding aggregate principal amount of 5.625% senior notes due August 1, 2029 (2029 Notes) and $8.0 million of the outstanding aggregate principal amount of 5.00% senior notes due February 1, 2030 (2030 Notes). These actions resulted in a total redemption premium of $3.1 million for both the three and six months ended June 30, 2021.

On March 31, 2021, Olin redeemed $315.0 million of the outstanding 10.00% senior notes due October 15, 2025 (Blue Cube 2025 Notes) and on May 14, 2021, Olin redeemed the remaining $185.0 million of the outstanding Blue Cube 2025 Notes. The Blue Cube 2025 Notes were redeemed at 105.0% of the principal amount of the Blue Cube 2025 Notes, resulting in a redemption premium of $25.0 million. The Blue Cube 2025 Notes were redeemed by drawing $315.0 million of the Delayed Draw Term Loan along with utilizing cash on hand.

On January 15, 2021, Olin redeemed the remaining $120.0 million of the 9.75% senior notes due 2023 (2023 Notes). The 2023 Notes were redeemed at 102.438% of the principal amount of the 2023 Notes, resulting in a redemption premium of $2.9 million. The remaining 2023 Notes were redeemed by utilizing cash on hand.

For the six months ended June 30, 2020, we had long-term debt borrowings, net of long-term debt repayments of $737.4 million, which primarily included $497.5 million from the issuance of the 9.50% senior notes due June 1, 2025 (2025 Notes) and $240.7 million under our Receivables Financing Agreement.

On May 19, 2020, Olin issued $500.0 million aggregate principal amount of 9.50% senior notes due June 1, 2025. The 2025 Notes were issued at 99.5% of par value, the discount from which is included within long-term debt in the condensed balance sheet. Interest on the 2025 Notes is payable semi-annually beginning on December 1, 2020. Proceeds from the 2025 Notes were used for general corporate purposes.

For the six months ended June 30, 2021, we paid debt issuance costs of $3.1 million for the amendments to our Senior Secured Credit Facility. For the six months ended June 30, 2020, we paid debt issuance costs of $9.6 million for the issuance of the 2025 Notes and amendments to our Senior Secured Credit Facility and Receivables Financing Agreement.

We issued 2.4 million and less than 0.1 million shares representing stock options exercised for the six months ended June 30, 2021 and 2020, respectively, with a total value of $50.2 million and $0.5 million, respectively.

The percent of total debt to total capitalization decreased to 62.0% as of June 30, 2021 from 72.7% as of December 31, 2020 as a result of a lower level of debt outstanding and higher shareholders’ equity primarily resulting from our operating results.

In the first and second quarters of 2021 and 2020, we paid a quarterly dividend of $0.20 per share. Dividends paid for the six months ended June 30, 2021 and 2020, were $63.7 million and $63.1 million, respectively. On July 22, 2021, our board of directors declared a dividend of $0.20 per share on our common stock, payable on September 10, 2021 to shareholders of record on August 10, 2021.

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 Senior Revolving Credit Facility, Receivables Financing Agreement and AR Facilities. Additionally, we believe that we have access to the high-yield debt and equity markets.

In 2021, we are targeting a reduction in our outstanding debt of approximately $1.0 billion using cash generated from operations. During 2021, activity of our debt outstanding included:

*($ in millions)*

| Debt Instrument Borrowings: | Long-term Debt Borrowings (Repayments) Six Months Ended June 30, 2021 |
| --- | ---: |
| Senior Secured Term Loans | $315.0 |
| Receivables Financing Agreement | 50.0 |
| Total borrowings | $365.0 |
| **Repayments:** |  |
| 10.00% senior notes due 2025 | $(500.0) |
| 9.75% senior notes due 2023 | (120.0) |
| 5.625% senior notes due 2029 | (26.5) |
| 5.00% senior notes due 2030 | (8.0) |
| Senior Secured Term Loans | (150.0) |
| Receivables Financing Agreement | (50.0) |
| Finance leases | (0.7) |
| Total repayments | $(855.2) |
| Long-term debt repayments, net | $(490.2) |

On February 24, 2021, we entered into a $1,615.0 million senior secured credit facility (Senior Secured Credit Facility) that amended our existing $1,300.0 million senior secured credit facility. The Senior Secured Credit Facility includes a senior delayed-draw term loan facility with aggregate commitments of $315.0 million (Delayed Draw Term Loan), a senior secured term loan facility with aggregate commitments of $500.0 million (2020 Term Loan and together with the Delayed Draw Term Loan, the Senior Secured Term Loans) and a senior secured revolving credit facility with aggregate commitments in an amount equal to $800.0 million (Senior Revolving Credit Facility). The maturity date for the Senior Secured Credit Facility is July 16, 2024. The amendment modified the pricing grid for the Senior Secured Credit Facility by reducing applicable interest rates on the borrowings under the facility.

On March 30, 2021, Olin drew the entire $315.0 million of the Delayed Draw Term Loan and used the proceeds to fund the redemption of the Blue Cube 2025 Notes. The Senior Secured Term Loans include principal amortization amounts payable beginning June 30, 2021 at a rate of 1.25% per quarter through the end of 2022, 1.875% per quarter during 2023 and 2.50% per quarter thereafter until maturity. During the six months ended June 30, 2021, we repaid $150.0 million of the Senior Secured Term Loans, of which $10.2 million was a required quarterly installment. These repayments eliminated the required quarterly installments of the Senior Secured Term Loans through December 2023. The Senior Revolving Credit Facility includes a $100.0 million letter of credit subfacility. At June 30, 2021, we had $799.6 million available under our $800.0 million Senior Revolving Credit Facility because we had issued $0.4 million of letters of credit.

Under the Senior Secured Credit Facility, we may select various floating-rate borrowing options. The actual interest rate paid on borrowings under the Senior Secured Credit Facility is based on a pricing grid which is dependent upon the net leverage ratio as calculated under the terms of the applicable facility for the prior fiscal quarter. The Senior Secured Credit Facility includes various customary restrictive covenants, including restrictions related to the ratio of secured debt to earnings before interest expense, taxes, depreciation and amortization (secured leverage ratio) and the ratio of earnings before interest expense, taxes, depreciation and amortization to interest expense (coverage ratio). The calculation of secured debt in our secured leverage ratio excludes borrowings under the Receivables Financing Agreement, up to a maximum of $250.0 million. As of June 30, 2021, the only secured borrowings included in the secured leverage ratio were $665.0 million for our Senior Secured Term Loans and $153.0 million for our Go Zone and Recovery Zone bonds. Compliance with these covenants is determined quarterly. We were in compliance with all covenants and restrictions under all our outstanding credit agreements as of June 30, 2021, 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 a result of our restrictive covenant related to the secured leverage ratio, the maximum additional borrowings available to us could be limited in the future. The limitation, if an amendment or waiver from our lenders is not obtained, could restrict our ability to borrow the maximum amounts available under the Senior Revolving Credit Facility and the Receivables Financing Agreement. As of June 30, 2021, there were no covenants or other restrictions that limited our ability to borrow.

The overall increase in cash for the six months ended June 30, 2021 primarily reflects our operating results, partially offset by debt repayments, capital spending, and dividends paid. 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 Senior Revolving Credit 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 and our capital expenditure requirements.

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. There were no shares repurchased for both the six months ended June 30, 2021 and 2020. As of June 30, 2021, we had repurchased a total of $195.9 million of our common stock, representing 10.1 million shares, and $304.1 million of common stock remained authorized to be repurchased.

We maintain a $250.0 million Receivables Financing Agreement (Receivables Financing Agreement) that is scheduled to mature on July 15, 2022. The Receivables Financing Agreement includes a minimum borrowing requirement of 50% of the facility limit or available borrowing capacity, whichever is less. 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 secured leverage covenant that is contained in the $1,615.0 million senior secured credit facility. As of June 30, 2021, $457.9 million of our trade receivables were pledged as collateral. As of June 30, 2021, we had $125.0 million drawn with $125.0 million of additional borrowing capacity available under the Receivables Financing Agreement. As of December 31, 2020 and June 30, 2020, we had $125.0 million and $240.7 million, respectively, drawn 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 domestic subsidiaries may sell their accounts receivable up to a maximum of $228.0 million and certain of our foreign subsidiaries may sell their accounts receivable up to a maximum of €35.3 million. We will continue to service the outstanding accounts sold. These receivables qualify for sales treatment under ASC 860 and, accordingly, the proceeds are included in net cash provided by operating activities in the condensed statements of cash flows. The gross amount of receivables sold for the three months ended June 30, 2021 and 2020 totaled $487.3 million and $457.5 million, respectively. The factoring discount paid under the AR Facilities is recorded as interest expense on the condensed statements of operations. The factoring discount was $0.3 million and $0.4 million for the three months ended June 30, 2021 and 2020, respectively, and $0.7 million and $1.0 million for the six months ended June 30, 2021 and 2020, respectively. The agreements are without recourse and therefore no recourse liability has been recorded as of June 30, 2021, December 31, 2020 and June 30, 2020. As of June 30, 2021, December 31, 2020 and June 30, 2020, $85.7 million, $48.8 million and $61.7 million, respectively, of receivables qualifying for sales treatment were outstanding and will continue to be serviced by us.

At June 30, 2021, we had total letters of credit of $81.3 million outstanding, of which $0.4 million were issued under our 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, certain international payment obligations and certain international pension funding requirements.

Our current debt structure is used to fund our business operations. As of June 30, 2021, we had long-term borrowings, including the current installment and finance lease obligations, of $3,382.9 million, of which $945.9 million were at variable rates. Included within long-term borrowings on the condensed balance sheets were deferred debt issuance costs and unamortized bond original issue discount. Commitments from banks under our Senior Revolving Credit Facility, Receivables Financing Agreement and AR Facilities are additional sources of liquidity.

On May 14, 2021, following the redemption of the remaining Blue Cube 2025 Notes, all subsidiary guarantees of the 2025 Notes, 5.125% senior notes due 2027, 2029 Notes and 2030 Notes (collectively, the Senior Notes) were released in accordance with the terms of the indentures governing the Senior Notes. Our obligations under the Senior Notes are no longer guaranteed by any of Olin’s subsidiaries and there are no outstanding debt securities issued by any of Olin’s subsidiaries that are guaranteed by Olin or any other of Olin’s subsidiaries.

### Off-Balance Sheet Arrangements

Purchasing commitments are utilized in our normal course of business for our projected needs. We have supply contracts with various third parties for certain raw materials including ethylene, electricity, propylene and benzene. These agreements are maintained through long-term cost based contracts that provide us with a reliable supply of key raw materials.

### New Accounting Pronouncements

Discussion of new accounting pronouncements can be referred to under Item 1, within Note 2, “Recent Accounting Pronouncements.”

## Market risk

As filed, 3,944 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 June 30, 2021, we maintained open positions on commodity contracts with a notional value totaling $250.8 million ($214.1 million at December 31, 2020 and $225.1 million at June 30, 2020). Assuming a hypothetical 10% increase in commodity prices which are currently hedged, as of June 30, 2021, we would experience a $25.1 million ($21.4 million at December 31, 2020 and $22.5 million at June 30, 2020) 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 $37.0 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 Senior Revolving Credit Facility, Receivables Financing Agreement and AR Facilities are additional sources of liquidity. As of June 30, 2021, December 31, 2020 and June 30, 2020, we had long-term borrowings, including current installments and finance lease obligations, of $3,382.9 million, $3,863.8 million and $4,075.7 million, respectively, of which $945.9 million, $780.9 million and $396.6 million at June 30, 2021, December 31, 2020 and June 30, 2020, respectively, were issued at variable rates. Included within long-term borrowings on the condensed balance sheets were deferred debt issuance costs and unamortized bond original issue discount.

Assuming no changes in the $945.9 million of variable-rate debt levels from June 30, 2021, we estimate that a hypothetical change of 100-basis points in the LIBOR interest rates would impact annual interest expense by $9.5 million.

Our interest rate swaps increased interest expense by $0.6 million and $0.1 million for the three months ended June 30, 2021 and 2020, respectively, and $1.8 million and $0.2 million for the six months ended June 30, 2021 and 2020, 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.

## Controls and procedures

As filed, 6,321 characters.

Our chief executive officer and our chief financial officer evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021. 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.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Cautionary Statement Regarding Forward-Looking Statements

This quarterly report on Form 10-Q 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 quarterly report on Form 10-Q 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,” “project,” “estimate,” “forecast,” “optimistic,” and variations of such words and similar expressions in this quarterly 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 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 conditions, 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.

The risks, uncertainties and assumptions involved in our forward-looking statements, many of which are discussed in more detail in our filings with the SEC, including without limitation the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020, include, but are not limited to the following:

### Business, Industry and Operational Risks

- sensitivity to economic, business and market conditions in the United States and overseas, including economic instability or a downturn in the sectors served by us;
- declines in average selling prices in the chlor alkali industry and the supply/demand balance for our products, including the impact of excess industry capacity or an imbalance in demand for our chlor alkali products;
- unsuccessful implementation of our operating model, which prioritizes Electrochemical Unit (ECU) margins over sales volumes;
- our reliance on a limited number of suppliers for specified feedstock and services and our reliance on third-party transportation;
- failure to control costs or to achieve targeted cost reductions;
- higher-than-expected raw material, energy, transportation and/or logistics costs;
- the occurrence of unexpected manufacturing interruptions and outages, including those occurring as a result of labor disruptions and production hazards;
- the failure or an interruption of our information technology systems;
- our substantial amount of indebtedness and significant debt service obligations;
- the negative impact from the COVID-19 pandemic and the global response to the pandemic;
- weak industry conditions affecting our ability to comply with the financial maintenance covenants in our senior secured credit facility;
- the loss of a substantial customer for either chlorine or caustic soda could cause an imbalance in customer demand for these products;
- failure to attract, retain and motivate key employees;
- risks associated with our international sales and operations, including economic, political or regulatory changes;
- the effects of any declines in global equity markets on asset values and any declines in interest rates or other significant assumptions used to value the liabilities in our pension plan;
- adverse conditions in the credit and capital markets, limiting or preventing our ability to borrow or raise capital;
- our long-range plan assumptions not being realized causing a non-cash impairment charge of long-lived assets;

### Legal, Environmental and Regulatory Risks

- new regulations or public policy changes regarding the transportation of hazardous chemicals and the security of chemical manufacturing facilities;
- changes in, or failure to comply with, legislation or government regulations or policies, including changes within the international markets in which we operate;
- unexpected litigation outcomes;
- costs and other expenditures in excess of those projected for environmental investigation and remediation or other legal proceedings; and
- various risks associated with our Lake City U.S. Army Ammunition Plant contract, including performance and compliance with governmental contract provisions.

All of our forward-looking statements should be considered 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.

Filed Jul 28, 2021.
Source: SEC EDGAR, the filing index for accession 0000074303-21-000141. Last ingested by Listed: Nov 4, 2026, 19:33 ET. No prices; not investment advice.