# OLIN Corp: Form 10-Q for the period ended Mar 31, 2022

- Company: [OLIN Corp](/companies/oln.md) (CIK 74303)
- Form: 10-Q
- Filed: 2022-04-29
- Accepted by EDGAR: Apr 29, 2022, 12:34 ET
- Period: 2022-03-31
- Accession: 0000074303-22-000065
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/74303/000007430322000065/oln-20220331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/74303/000007430322000065/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $2.46bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-01-01 to 2022-03-31 | $1.81bn | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2022-01-01 to 2022-03-31 | $104.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | $546.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $32.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $130.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | $393.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | $2.48 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | $2.54 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 158,600,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | $353.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $47.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2022-01-01 to 2022-03-31 | $30.8m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2022-01-01 to 2022-03-31 | $263.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | at 2022-03-31 | $2.44bn | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $8.57bn | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $1.64bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-03-31 | $5.79bn | us-gaap:Liabilities |
| Long-term debt | at 2022-03-31 | $2.58bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-03-31 | $201.2m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-03-31 | $2.79bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2022-03-31 | 151,832,528 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 37,979 characters.

### Business Background

Olin Corporation (Olin) is a Virginia corporation, incorporated in 1892, having its principal executive offices in Clayton, MO. 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. 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, hydrochloric acid, hydrogen, bleach products and potassium hydroxide. The Epoxy segment produces and sells a full range of epoxy materials and precursors, including aromatics (acetone, bisphenol, cumene and phenol), allyl chloride, epichlorohydrin, liquid epoxy resins, solid epoxy resins and downstream products such as converted epoxy resins and additives. The Winchester segment produces and sells sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.

### Executive Summary

### 2022 Overview

Net income for the three months ended March 31, 2022 was $393.0 million compared to $243.6 million for the comparable prior year period in 2021. The increase in results from the prior year was due to improved operating results across all our business segments. 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 three months ended March 31, 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.

Chlor Alkali Products and Vinyls reported segment income of $328.6 million for the three months ended March 31, 2022. Chlor Alkali Products and Vinyls segment results were higher than in the comparable prior year period primarily due to higher pricing, primarily chlorine, caustic soda and ethylene dichloride, partially offset by higher raw material and operating costs and lower volumes.

Epoxy reported segment income of $138.0 million for the three months ended March 31, 2022. Epoxy segment results were higher than in the comparable prior year period primarily due to higher product prices, partially offset by higher raw material costs, primarily benzene and propylene, lower volumes and higher operating costs. Our Epoxy segment experienced weaker European epoxy resin demand in our system, which caused us to temporarily curtail epoxy resin production at our Stade, Germany facility and refrain from selling incremental volume into a poor-quality market.

Winchester reported segment income of $118.9 million for the three months ended March 31, 2022. Winchester segment results were higher than in the comparable prior year period primarily due to increased commercial ammunition pricing, partially offset by higher commodity and operating costs.

During the three months ended March 31, 2022, we repurchased and retired 5.2 million shares of common stock at a total value of $263.2 million. As of March 31, 2022, we have $789.0 million of remaining authorized common stock to be purchased under our 2021 $1.0 billion share repurchase program.

### Other Events

The invasion of Ukraine by Russia and the sanctions imposed in response to this crisis have increased the level of economic and political uncertainty. Russia sales represented less than 0.5% of our total sales for the full year 2021 and were minimal sales for the first quarter of 2022. During the first quarter of 2022, we ceased all sales to and purchases from Russia. Additionally, sanctions from the U.S., and the European Union continue to evolve, along with the overall impact the invasion has on the global economic and political environment. We continue to closely monitor the changing environment, including the increased volatility and heightened degree of uncertainty resulting from the invasion. As of now, the direct impact on our operations has not been significant, but we are unable to fully determine the future impact the invasion and the corresponding global response will have on our business.

### Consolidated Results of Operations

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

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Sales | $2,461.4 | $1,918.8 |
| Cost of goods sold | 1,807.5 | 1,423.8 |
| Gross margin | 653.9 | 495.0 |
| Selling and administration | 104.3 | 106.9 |
| Restructuring charges | 3.1 | 6.9 |
| Operating income | 546.5 | 381.2 |
| Interest expense | 32.9 | 84.5 |
| Interest income | 0.4 | 0.1 |
| Non-operating pension income | 9.6 | 9.3 |
| Income before taxes | 523.6 | 306.1 |
| Income tax provision | 130.6 | 62.5 |
| Net income | $393.0 | $243.6 |
| Net income per common share: |  |  |
| Basic | $2.54 | $1.54 |
| Diluted | $2.48 | $1.51 |

### Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Sales for the three months ended March 31, 2022 were $2,461.4 million compared to $1,918.8 million in the same period last year, an increase of $542.6 million, or 28%. Chlor Alkali Products and Vinyls sales increased by $378.2 million due to higher product pricing, primarily chlorine, caustic soda and ethylene dichloride, partially offset by lower volumes. Epoxy sales increased by $126.9 million due to higher product prices, partially offset by lower volumes. Winchester sales increased by $37.5 million, primarily due to increased commercial ammunition pricing.

Gross margin increased $158.9 million for the three months ended March 31, 2022 compared to the prior year. Chlor Alkali Products and Vinyls gross margin increased by $55.3 million, Epoxy gross margin increased by $73.4 million and Winchester gross margin increased by $36.6 million. Gross margin across all of our businesses increased due to higher product pricing, partially offset by higher raw material and operating costs. Gross margin as a percentage of sales increased to 27% in 2022 from 26% in 2021.

Selling and administration expenses for the three months ended March 31, 2022 were $104.3 million, a decrease of $2.6 million from the prior year. The decrease was primarily due to lower variable incentive compensation expense of $8.5 million, which includes mark-to-market adjustments on stock-based compensation expense, partially offset by higher legal and legal related settlement costs of $2.9 million. Selling and administration expenses as a percentage of sales decreased to 4% in 2022 from 6% in 2021.

Restructuring charges for the three months ended March 31, 2022 and 2021 were $3.1 million and $6.9 million, respectively. In March 2021, we announced that we had made the decision to permanently close approximately 50% of our diaphragm-grade chlor alkali capacity, representing 200,000 tons, at our McIntosh, AL facility which resulted in pretax restructuring charges of $4.4 million.

Interest expense decreased by $51.6 million for the three months ended March 31, 2022. Interest expense for the three months ended March 31, 2021 included $18.7 million of bond redemption premiums and $4.8 million for write-off of deferred debt issuance costs and recognition of deferred fair value interest rate swap losses related to financing transactions during first quarter 2021. Without these items, interest expense decreased by $28.1 million, primarily due to a lower level of debt outstanding and lower average interest rates.

The effective tax rate for the three months ended March 31, 2022 included a benefit associated with prior year tax, stock-based compensation and a change in tax contingencies, resulting in a net $2.3 million tax benefit. After giving consideration to these items, the effective tax rate for the three months ended March 31, 2022 of 25.4% was higher than the 21% U.S. federal statutory rate primarily due to state and foreign income taxes, partially offset by foreign income exclusions and favorable permanent salt depletion deductions. The effective tax rate for the three months ended March 31, 2021 included a benefit associated with prior year tax positions, an expense associated with stock-based compensation, an expense from a net increase in the valuation allowance related to foreign tax credits and an expense from a change in tax contingencies. These factors resulted in a net $1.3 million tax benefit. After giving consideration to these items, the effective tax rate for the three months ended March 31, 2021 of 20.8% was lower than the 21% U.S. federal statutory rate primarily due to a net decrease in the valuation allowance related to utilization of losses in foreign jurisdictions and favorable permanent salt depletion deductions, partially offset by state taxes, foreign income inclusions and foreign income taxes.

### Segment Results

We define segment results as income (loss) before interest expense, interest income, 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.

*($ in millions)*

| Sales: | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Chlor Alkali Products and Vinyls | $1,245.2 | $867.0 |
| Epoxy | 789.5 | 662.6 |
| Winchester | 426.7 | 389.2 |
| Total sales | $2,461.4 | $1,918.8 |
| **Income before taxes:** |  |  |
| Chlor Alkali Products and Vinyls | $328.6 | $271.1 |
| Epoxy | 138.0 | 65.2 |
| Winchester | 118.9 | 85.1 |
| Corporate/other: |  |  |
| Environmental expense(1) | (5.6) | (0.3) |
| Other corporate and unallocated costs | (30.3) | (33.0) |
| Restructuring charges | (3.1) | (6.9) |
| Interest expense(2) | (32.9) | (84.5) |
| Interest income | 0.4 | 0.1 |
| Non-operating pension income | 9.6 | 9.3 |
| Income before taxes | $523.6 | $306.1 |

(1) Environmental expense for the three months ended March 31, 2021 includes $2.2 million of insurance recoveries for environmental costs incurred and expensed in prior periods.

(2) Interest expense for the three months ended March 31, 2021 included a loss on extinguishment of debt of $23.5 million, 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.

### Chlor Alkali Products and Vinyls

### Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Chlor Alkali Products and Vinyls sales for the three months ended March 31, 2022 were $1,245.2 million compared to $867.0 million for the same period in 2021, an increase of $378.2 million, or 44%. The sales increase was primarily due to higher pricing, primarily chlorine, caustic soda and ethylene dichloride, partially offset by lower volumes.

Chlor Alkali Products and Vinyls segment income was $328.6 million for the three months ended March 31, 2022 compared to $271.1 million for the same period in 2021. Chlor Alkali Products and Vinyls first quarter 2021 operating results were favorably impacted by Winter Storm Uri ($121.4 million), which 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. Without the impact of Winter Storm Uri, the increase in segment results of $178.9 million was primarily due to higher product prices ($384.4 million), primarily chlorine, caustic soda and ethylene dichloride, partially offset by higher raw material and operating costs ($94.2 million), primarily increased natural gas and electrical power costs, lower volumes ($73.1 million) and increased costs associated with product purchased from other parties ($38.2 million). Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $123.1 million and $115.8 million for the three months ended March 31, 2022 and 2021, respectively.

### Epoxy

### Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Epoxy sales for the three months ended March 31, 2022 were $789.5 million compared to $662.6 million for the same period in 2021, an increase of $126.9 million, or 19%. The sales increase was primarily due to higher product prices ($281.5 million), partially offset by lower volumes ($127.4 million), primarily liquid epoxy resins, solid epoxy resins and downstream products and an unfavorable effect of foreign currency translation ($27.1 million).

Epoxy segment income was $138.0 million for the three months ended March 31, 2022 compared to $65.2 million for the same period in 2021. Epoxy first quarter 2021 operating results were unfavorably impacted by Winter Storm Uri ($21.5 million), which included unabsorbed fixed manufacturing costs and storm-related maintenance costs. Without the impact of Winter Storm Uri, the increase in segment results of $51.3 million was primarily due to higher product prices ($281.5 million), partially offset by higher raw material costs ($129.3 million), primarily benzene and propylene, lower volumes ($55.2 million) and higher operating costs ($45.7 million), primarily increased natural gas and electrical power 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 $20.4 million and $22.1 million for the three months ended March 31, 2022 and 2021, respectively.

### Winchester

### Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Winchester sales were $426.7 million for the three months ended March 31, 2022 compared to $389.2 million for the same period in 2021, an increase of $37.5 million, or 10%. The increase was due to higher ammunition sales to commercial customers ($53.2 million) and law enforcement agencies ($1.5 million), partially offset by lower sales to military customers ($17.2 million). Commercial ammunition sales benefited from improved commercial pricing and a favorable product mix partially offset by lower volumes.

Winchester segment income was $118.9 million for the three months ended March 31, 2022 compared to $85.1 million for the same period in 2021, an increase of $33.8 million. The increase in segment results was due to higher product pricing ($56.5 million) and a favorable product mix ($1.1 million), partially offset by higher commodity and operating costs ($23.8 million). Winchester segment income included depreciation and amortization expense of $6.2 million and $5.6 million for the three months ended March 31, 2022 and 2021, respectively.

### Corporate/Other

### Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

For the three months ended March 31, 2022, charges to income for environmental investigatory and remedial activities were $5.6 million compared to $0.3 million for the three months ended March 31, 2021, which included $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 three months ended March 31, 2021 would have been $2.5 million. 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 March 31, 2022, other corporate and unallocated costs were $30.3 million compared to $33.0 million for the three months ended March 31, 2021, a decrease of $2.7 million. The decrease was primarily due to lower variable incentive compensation costs ($8.5 million), which includes mark-to-market adjustments on stock-based compensation expense, partially offset by higher legal and legal-related settlement expenses ($2.9 million).

### Outlook

In 2022, we expect to continue to benefit from Olin’s strategic operating model of optimizing value across our Chemicals and Winchester businesses. In 2022, we expect operating results to improve across all our business segments compared to 2021.

We expect operating income for the second quarter 2022 to be higher than first quarter 2022 of $546.5 million. We expect sequentially higher raw material and operating costs, mainly increased natural gas and electrical power costs, to be more than offset by increased product pricing across our entire chemicals value chain. We expect the second quarter 2022 results from our Chemicals businesses to be higher than first quarter 2022. Our Chlor Alkali Products and Vinyls second quarter 2022 results are expected to improve sequentially despite reduced margin from lost sales and production volumes, increased maintenance expense and other costs, as a result of the unplanned production outage at our Plaquemine, Louisiana facility. During the second quarter, we expect the Epoxy business to continue to experience weaker epoxy resin demand and operate at low rates. We expect our Winchester business second quarter 2022 results to be comparable with first quarter 2022 as higher product pricing is expected to be offset by higher commodity and other materials costs.

Other Corporate and Unallocated costs in 2022 are expected to be lower than the $135.1 million in 2021.

During 2022, we anticipate environmental expenses in the $25 million to $30 million range compared to $14.0 million in 2021.

We expect non-operating pension income in 2022 to be in the $40 million range compared to $35.7 million in 2021. 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 2022. We have several international qualified defined benefit pension plans for which we anticipate cash contributions of less than $5 million in 2022.

In 2022, we currently expect our capital spending to be in the $200 million to $250 million range. We expect 2022 depreciation and amortization expense to be in the $575 million to $600 million range.

We currently believe the 2022 effective and cash tax rates will be in the 25% to 30% range.

### Environmental Matters

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

*($ in millions)*

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Provisions charged to income | $5.6 | $2.5 |
| Recoveries for costs incurred and expensed | — | (2.2) |
| Environmental expense | $5.6 | $0.3 |

Environmental expense for the three months ended March 31, 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)*

|  | March 31, 2022 | 2021 |
| --- | ---: | ---: |
| **Balance at beginning of year** | $147.3 | $147.2 |
| Charges to income | 5.6 | 2.5 |
| Remedial and investigatory spending | (3.5) | (2.5) |
| Foreign currency translation adjustments | 0.1 | — |
| **Balance at end of period** | $149.5 | $147.2 |

32

Environmental investigatory and remediation activities spending was associated with former waste disposal sites and past manufacturing operations. Spending in 2022 for investigatory and remedial efforts, the timing of which is subject to regulatory approvals and other uncertainties, is estimated to be approximately $25 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 March 31, 2022. 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 may be material to our operating results in 2022.

The condensed balance sheets included reserves for future environmental expenditures to investigate and remediate known sites amounting to $149.5 million, $147.3 million and $147.2 million at March 31, 2022, December 31, 2021 and March 31, 2021, respectively, of which $124.5 million, $122.3 million and $128.2 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 and Capital Resources

### Cash Flow Data

*($ in millions)*

| Provided By (Used For) | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net operating activities | $353.5 | $269.8 |
| Capital expenditures | (47.3) | (51.2) |
| Long-term debt repayments, net | (0.2) | (120.2) |
| Debt early redemption premium | — | (18.7) |
| Common stock repurchased and retired | (263.2) | — |
| Stock options exercised | 5.2 | 25.7 |
| Debt issuance costs | — | (3.1) |
| Net financing activities | (289.0) | (148.0) |

33

### Operating Activities

For the three months ended March 31, 2022, cash provided by operating activities increased by $83.7 million from the three months ended March 31, 2021, primarily due to an increase in operating results. For the three months ended March 31, 2022, working capital increased $195.5 million compared to an increase of $204.3 million for the three months ended March 31, 2021. The working capital increase during the first quarter reflects normal seasonal working capital growth, along with reflecting higher raw material costs. Receivables increased by $85.6 million from December 31, 2021, primarily as a result of higher sales during the first quarter of 2022. For the three months ended March 31, 2022, 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 $45.0 million from December 31, 2021 primarily as a result of increased raw material cost and accounts payable and accrued liabilities decreased $132.6 million primarily as a result of timing of payments during the first quarter of 2022.

### Investing Activities

Capital spending of $47.3 million for the three months ended March 31, 2022 was $3.9 million lower than the corresponding period in 2021. For the total year 2022, we currently expect our capital spending to be in the $200 million to $250 million range. We expect 2022 depreciation and amortization expense to be in the $575 million to $600 million range.

### Financing Activities

For the three months ended March 31, 2022 and 2021, we had long-term debt repayments, net of long-term debt borrowings of $0.2 million and $120.2 million, respectively.

On March 31, 2021, Olin redeemed $315.0 million of the outstanding 10.00% senior notes due October 15, 2025 (2025 Notes). The 2025 Notes were redeemed at 105.0% of the principal amount of the 2025 Notes, resulting in a redemption premium of $15.8 million. The 2025 Notes were redeemed by drawing $315.0 million of the Delayed Draw Term Loan along with utilizing $15.8 million of 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 three months ended March 31, 2022, 5.2 million shares of common stock were repurchased and retired at a total value of $263.2 million.

We issued 0.2 million and 1.2 million shares representing stock options exercised for the three months ended March 31, 2022 and 2021, respectively, with a total value of $5.2 million and $25.7 million, respectively.

For the three months ended March 31, 2021, we paid debt issuance costs of $3.1 million for the amendments to our Senior Credit Facility.

The percent of total debt to total capitalization decreased to 49.9% as of March 31, 2022 from 51.2% as of December 31, 2021 as a result of higher shareholders’ equity primarily resulting from our operating results.

In the first quarters of 2022 and 2021, we paid a quarterly dividend of $0.20 per share. Dividends paid for the three months ended March 31, 2022 and 2021, were $30.8 million and $31.7 million, respectively. On April 27, 2022, our board of directors declared a dividend of $0.20 per share on our common stock, payable on June 10, 2022 to shareholders of record on May 10, 2022.

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.

On February 24, 2021, we entered into a $1,615.0 million senior secured credit facility (Senior Credit Facility) that amended our existing $1,300.0 million senior secured credit facility. On July 28, 2021, the liens on the collateral provided under the Senior Credit Facility were released based on the achievement of a net leverage ratio below 3.50 for the prior two consecutive fiscal quarters. The Senior Credit Facility includes a senior delayed-draw term loan facility with aggregate commitments of $315.0 million (Delayed Draw Term Loan), a senior term loan facility with aggregate commitments of $500.0 million (2020 Term Loan and together with the Delayed Draw Term Loan, the Senior Term Loans) and a senior revolving credit facility with aggregate commitments in an amount equal to $800.0 million (Senior Revolving Credit Facility). The maturity date for the Senior Credit Facility is July 16, 2024. The amendment modified the pricing grid for the Senior 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 2025 Notes. During 2021, we repaid $465.0 million of the Senior Term Loans. These repayments satisfied all future required quarterly installments of the Senior Term Loans. The Senior Revolving Credit Facility includes a $100.0 million letter of credit subfacility. At March 31, 2022, 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 Credit Facility, we may select various floating-rate borrowing options. The actual interest rate paid on borrowings under the Senior 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 Credit Facility includes various customary restrictive covenants, including restrictions related to the ratio of debt to earnings before interest expense, taxes, depreciation and amortization (net leverage ratio) and the ratio of earnings before interest expense, taxes, depreciation and amortization to interest expense (coverage ratio). The calculation of debt in our net leverage ratio excludes borrowings under the Receivables Financing Agreement, up to a maximum of $250.0 million, and is reduced by all unrestricted cash and cash equivalents. Compliance with these covenants is determined quarterly. We were in compliance with all covenants and restrictions under all our outstanding credit agreements as of March 31, 2022, 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 net 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 March 31, 2022, there were no covenants or other restrictions that limited our ability to borrow.

The overall increase in cash for the three months ended March 31, 2022 primarily reflects our operating results, partially offset by share repurchases, 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 terminated during the first quarter of 2022 upon the purchase of $500.0 million of our common stock. On November 1, 2021, our board of directors authorized an additional share repurchase program for the purchase of shares of common stock at an aggregate price of up to $1.0 billion. This program will terminate upon the purchase of $1.0 billion of our common stock.

For the three months ended March 31, 2022, 5.2 million shares of common stock have been repurchased and retired at a total value of $263.2 million. As of March 31, 2022, a total of 15.7 million shares of common stock were repurchased and retired at a total value of $500.0 million under the 2018 Repurchase Authorization program, terminating the program. As of March 31, 2022, 4.3 million shares of common stock have been repurchased and retired at a total value of $211.0 million under the 2021 Repurchase Authorization program, and $789.0 million of common stock remained authorized to be repurchased under the program.

We maintain a $300.0 million Receivables Financing Agreement (Receivables Financing Agreement) that is scheduled to mature on September 28, 2024. The Receivables Financing Agreement includes a minimum borrowing requirement of 50% of the facility limit or available borrowing capacity, whichever is less. 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 net leverage ratio covenant that is contained in the Senior Credit Facility. As of March 31, 2022, $642.4 million of our trade receivables were pledged as collateral and we had $300.0 million drawn with no additional borrowing capacity available under the Receivables Financing Agreement. As of December 31, 2021 and March 31, 2021, we had $300.0 million and $125.0 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 $250.0 million and certain of our foreign subsidiaries may sell their accounts receivable up to a maximum of €43.4 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 March 31, 2022 and 2021 totaled $281.4 million and $312.0 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 $0.5 million and $0.4 million for the three months ended March 31, 2022 and 2021, respectively. The agreements are without recourse and therefore no recourse liability has been recorded as of March 31, 2022, December 31, 2021 and March 31, 2021. As of March 31, 2022, December 31, 2021 and March 31, 2021, $97.9 million, $83.3 million and $142.5 million, respectively, of receivables qualifying for sales treatment were outstanding and will continue to be serviced by us.

At March 31, 2022, we had total letters of credit of $82.7 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 March 31, 2022, we had long-term borrowings, including the current installment and finance lease obligations, of $2,780.1 million, of which $805.9 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 of $21.9 million as of March 31, 2022. Commitments from banks under our Senior Revolving Credit Facility, Receivables Financing Agreement and AR Facilities are additional sources of liquidity.

### Contractual Obligations

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.

There have been no material changes in our contractual obligations and commitments as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 other than those which occur in the ordinary course of business.

### 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, 3,708 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 March 31, 2022, we maintained open positions on commodity contracts with a notional value totaling $204.7 million ($224.3 million at December 31, 2021 and $238.1 million at March 31, 2021). Assuming a hypothetical 10% increase in commodity prices which are currently hedged, as of March 31, 2022, we would experience a $20.5 million ($22.4 million at December 31, 2021 and $23.8 million at March 31, 2021) 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 $34.8 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 March 31, 2022, December 31, 2021 and March 31, 2021, we had long-term borrowings, including current installments and finance lease obligations, of $2,780.1 million, $2,779.3 million and $3,748.1 million, respectively, of which $805.9 million, $805.9 million and $1,095.9 million at March 31, 2022, December 31, 2021 and March 31, 2021, 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 $805.9 million of variable-rate debt levels from March 31, 2022, we estimate that a hypothetical change of 100-basis points in the LIBOR interest rates would impact annual interest expense by $8.1 million.

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, 6,830 characters.

Our chief executive officer and our chief financial officer evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022. 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 March 31, 2022, 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,” “outlook,” “project,” “estimate,” “forecast,” “optimistic,” “target,” 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, 2021, and our Quarterly Reports on Form 10-Q and other reports furnished or filed with the SEC, 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 for our products 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 execution of our strategic operating model, which prioritizes Electrochemical Unit (ECU) margins over sales volumes;
- failure to control costs and inflation impacts or failure to achieve targeted cost reductions;
- our reliance on a limited number of suppliers for specified feedstock and services and our reliance on third-party transportation;
- 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, production hazards and weather-related events;
- the failure or an interruption of our information technology systems;
- failure to identify, attract, develop, retain and motivate qualified employees throughout the organization;
- our inability to complete future acquisitions or successfully integrate them into our business;
- our substantial amount of indebtedness and significant debt service obligations;
- risks associated with our international sales and operations, including economic, political or regulatory changes;
- the negative impact from the COVID-19 pandemic and the global response to the pandemic, including without limitation adverse impacts in complying with governmental mandates;
- weak industry conditions affecting our ability to comply with the financial maintenance covenants in our senior credit facility;
- adverse conditions in the credit and capital markets, limiting or preventing our ability to borrow or raise capital;
- 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, and funding of, our pension plans;
- our long-range plan assumptions not being realized causing a non-cash impairment charge of long-lived assets;

### Legal, Environmental and Regulatory Risks

- changes in, or failure to comply with, legislation or government regulations or policies, including changes regarding our ability to manufacture or use certain products and changes within the international markets in which we operate;
- new regulations or public policy changes regarding the transportation of hazardous chemicals and the security of chemical manufacturing facilities;
- unexpected outcomes from legal or regulatory claims and proceedings;
- costs and other expenditures in excess of those projected for environmental investigation and remediation or other legal proceedings;
- various risks associated with our Lake City U.S. Army Ammunition Plant contract and performance under other governmental contracts; and
- failure to effectively manage environmental, social and governance (ESG) issues and related regulations, including climate change and sustainability.

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 Apr 29, 2022.
Source: SEC EDGAR, the filing index for accession 0000074303-22-000065. Last ingested by Listed: Nov 4, 2026, 19:33 ET. No prices; not investment advice.