Olin Announces First Quarter Earnings
CLAYTON, Mo., April 26, 2012 /PRNewswire/ – Olin Corporation (NYSE: OLN) announced today that its first quarter 2012 net income was $38.7 million, or $0.48 per diluted share, which compares to $133.7 million, or $1.66 per diluted share in the first quarter of 2011. First quarter 2012 net income included a $1.9 million pretax restructuring charge primarily associated with our ongoing Winchester centerfire relocation project and first quarter 2011 net income included a one-time, pretax, non-cash gain of $181.4 million, associated with the remeasurement of the Olin owned 50% interest in the SunBelt Partnership. In conjunction with this remeasurement a discrete deferred tax expense of $76.0 million was recorded. Sales in the first quarter of 2012 were $507.2 million, compared to $436.0 million in the first quarter of 2011.
Joseph D. Rupp, Chairman, President, and Chief Executive Officer said, “In the first quarter of 2012 Olin generated adjusted EBITDA of $94.9 million, which represents the highest level of first quarter adjusted EBITDA ever. First quarter 2012 adjusted EBITDA increased 38% compared to the first quarter of 2011.
“Chlor Alkali first quarter 2012 segment earnings increased 65% compared to the first quarter 2011 and represent a record level of first quarter Chlor Alkali segment earnings. The year-over-year improvement in Chlor Alkali earnings reflects improved pricing, the 100% ownership of SunBelt for the full quarter, and increased contributions from bleach and hydrochloric acid. First quarter 2012 Winchester segment earnings declined compared to the first quarter of 2011 as improved volumes were more than offset by higher commodity costs and transition costs associated with our ongoing centerfire ammunition relocation project.
“Second quarter 2012 net income is forecast to be in the $0.50 to $0.55 per diluted share range. Second quarter 2012 Chlor Alkali segment earnings are expected to improve compared to the first quarter of 2012 reflecting seasonally stronger chlorine and bleach demand, partially offset by lower prices. Second quarter 2012 earnings in the Winchester segment are expected to improve compared to the first quarter of 2012, as improved pricing and lower centerfire relocation transition costs more than offset seasonally lower volumes.”
SEGMENT REPORTING
We define segment earnings as income (loss) before interest expense, interest income, other (expense) income, and income taxes and include the earnings of non-consolidated affiliates in segment results consistent with management’s monitoring of the operating segments.
CHLOR ALKALI PRODUCTS
Chlor Alkali Products sales for the first quarter of 2012 were $359.7 million compared to $299.4 million in the first quarter of 2011. First quarter 2012 chlorine and caustic soda volumes increased 13% compared to the first quarter 2011 levels. The year-over-year increase in chlorine and caustic soda volumes was due to the impact of owning 100% of the SunBelt Partnership for the entire first quarter of 2012. Bleach volumes increased 8% during the first quarter of 2012 compared to the first quarter of 2011, while volumes for hydrochloric acid in the first quarter of 2012 increased by 10% compared to the first quarter of 2011. First quarter 2012 Chlor Alkali segment earnings of $74.4 million increased compared to the $45.2 million earned in the first quarter of 2011, due to higher volumes and higher prices.
WINCHESTER
Winchester first quarter 2012 sales were $147.5 million compared to $136.6 million in the first quarter of 2011. First quarter 2012 domestic commercial sales increased approximately 13% compared to the first quarter of 2011, due to higher volumes and improved pricing. First quarter 2012 military sales increased slightly compared to the first quarter of 2011. Winchester’s first quarter 2012 segment earnings were $10.8 million compared to $12.5 million in the first quarter of 2011. The decrease in segment earnings reflects the impact of higher commodity metal costs and transition costs associated with our ongoing relocation of the centerfire operations to Mississippi, which more than offset the impact of higher commercial volumes and improved commercial pricing.
CORPORATE AND OTHER COSTS
Pension income included in the first quarter 2012 Corporate and Other segment was $6.3 million compared to income of $6.7 million in the first quarter of 2011.
First quarter charges to income for environmental investigatory and remedial activities were $2.8 million in 2012 compared to $1.5 million in the first quarter of 2011. First quarter of 2012 and 2011 environmental charges included $0.1 million and $0.5 million, respectively, of pretax recoveries of costs incurred and expensed in prior periods. Without these recoveries, charges to income for environmental investigatory and remedial activities would have been $2.9 million in the first quarter of 2012 compared to $2.0 million in the first quarter of 2011. These charges relate primarily to remedial and investigatory activities associated with former waste sites and past operations.
Other corporate and unallocated costs in the first quarter of 2012 decreased $0.7 million compared to the first quarter of 2011, primarily due to SunBelt transaction costs that were incurred in the first quarter of 2011.
RESTRUCTURING CHARGE
During the first quarter of 2012, a pretax restructuring charge of $1.9 million was recorded. This charge was associated with employee and employee relocation expenses associated with our ongoing Winchester centerfire relocation project and the Chlor Alkali mercury cell technology conversion and reconfiguration projects.
CASH FLOW
Olin’s cash balance, including restricted cash, declined from $356.5 million at December 31, 2011 to $254.7 million at March 31, 2012. This decline reflects $75.9 million of capital spending in the first quarter of 2012 and a $71.1 million increase in working capital. The capital spending was primarily associated with the Charleston, Tennessee mercury cell conversion project and the construction of three low salt, high strength bleach plants. The increase in working capital reflects normal seasonal growth in both Chlor Alkali Products and Winchester. The seasonality of the Winchester business, which is normally driven by the fall hunting season, and the seasonality of the vinyls and bleach business, which are stronger in periods of warmer weather, typically causes working capital to fluctuate between $50 million to $100 million over the course of a year.
DIVIDEND
Today, Olin’s Board of Directors declared a dividend of $0.20 on each share of Olin common stock. The dividend is payable on June 11, 2012 to shareholders of record at the close of business on May 10, 2012. This is the 342(nd) consecutive quarterly dividend to be paid by the Company.
CONFERENCE CALL INFORMATION
The Company’s first quarter earnings conference call with securities analysts is scheduled for 10:00 A.M. Eastern Time, Friday, April 27(th). The call will feature remarks by Joseph D. Rupp, Olin’s Chairman, President and Chief Executive Officer; John E. Fischer, Olin’s Senior Vice President and Chief Financial Officer; John L. McIntosh, Olin’s Senior Vice President, Operations; and Larry P. Kromidas, Olin’s Assistant Treasurer and Director, Investor Relations. Anyone wishing to listen to the call may do so via the Internet by following the instructions posted under the Conference Call icon on Olin’s website, www.olin.com. Listeners should log on to the website at least 10 minutes before the call. The call will also be audio archived on the Olin website for future replay beginning at 1:00 P.M. Eastern Time. A final transcript of the conference call will be available on the website in the Investor section the following day.
COMPANY DESCRIPTION
Olin Corporation is a manufacturer concentrated in two business segments: Chlor Alkali Products and Winchester. Chlor Alkali Products manufactures chlorine and caustic soda, hydrochloric acid, hydrogen, potassium hydroxide and bleach products. Winchester products include sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.
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FORWARD-LOOKING STATEMENTS
This communication 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 communication 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,” and variations of such words and similar expressions in this communication 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. Relative to the dividend, 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, 2011, include, but are not limited to, the following:
- 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, such as ammunition, housing, vinyls, and pulp and paper, and the migration by United States customers to low-cost foreign locations;
- the cyclical nature of our operating results, particularly 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;
- economic and industry downturns that result in diminished product demand and excess manufacturing capacity in any of our segments and that, in many cases, result in lower selling prices and profits;
- costs and other expenditures in excess of those projected for environmental investigation and remediation or other legal proceedings;
- unexpected litigation outcomes;
- new regulations or public policy changes regarding the transportation of hazardous chemicals and the security of chemical manufacturing facilities;
- changes in legislation or government regulations or policies;
- adverse conditions in the credit and capital markets, limiting or preventing our ability to borrow or raise capital;
- 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;
- higher-than-expected raw material and energy, transportation, and/or logistics costs;
- weak industry conditions could affect our ability to comply with the financial maintenance covenants in our senior revolving credit facility and certain tax-exempt bonds;
- the effects of any declines in global equity markets on asset values and any declines in interest rates used to value the liabilities in our pension plan; and
- an increase in our indebtedness or higher-than-expected interest rates, affecting our ability to generate sufficient cash flow for debt service.
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.
2012-08
Olin Corporation
Consolidated Statements of Income(a)
-----------------------------------
Three Months
Ended March 31,
(In millions, except per share amounts) 2012 2011
-------------------------------------- ---- ----
Sales $507.2 $436.0
Operating Expenses:
Cost of Goods Sold 392.9 359.2
Selling and Administration 43.7 39.5
Restructuring Charges (b) 1.9 0.1
Other Operating Income 0.5 1.4
---------------------- --- ---
Operating Income 69.2 38.6
Earnings of Non-consolidated Affiliates 0.2 7.0
Interest Expense (c) 6.5 7.2
Interest Income 0.2 0.2
Other (Expense) Income (d) (2.6) 181.2
------------------------- ---- -----
Income before Taxes 60.5 219.8
Income Tax Provision 21.8 86.1
-------------------- ---- ----
Net Income $38.7 $133.7
---------- ----- ------
Net Income Per Common Share:
Basic $0.48 $1.68
Diluted $0.48 $1.66
------- ----- -----
Dividends Per Common Share $0.20 $0.20
-------------------------- ----- -----
Average Common Shares Outstanding - Basic 80.1 79.6
-----------------------------------------
Average Common Shares Outstanding - Diluted 80.9 80.4
------------------------------------------- ---- ----
(a) Unaudited.
(b) Restructuring
charges for the
three months ended
March 31, 2012 and
2011 were
associated with
exiting the use of
mercury cell
technology in the
chlor alkali
manufacturing
process by the end
of 2012 and our
ongoing relocation
of our Winchester
centerfire
ammunition
manufacturing
operations from
East Alton, IL to
Oxford, MS.
(c) Interest expense
was reduced by
capitalized
interest of $1.1
million and $0.2
million for the
three months ended
March 31, 2012 and
2011,
respectively.
(d) Other (expense)
income for the
three months ended
March 31, 2012 and
2011 included $2.6
million and $0.2
million,
respectively, of
expense for our
earn out liability
from the SunBelt
acquisition.
Other (expense)
income for the
three months ended
March 31, 2011
also included a
pretax gain of
$181.4 million as
a result of
remeasuring our
previously held
50% equity
interest in
SunBelt. The
income tax
provision for the
three months ended
March 31, 2011
included a $76.0
million discrete
deferred tax
expense as a
result of the
remeasurement of
the SunBelt
investment.
Olin Corporation
Segment
Information(a)
Three Months
Ended March 31,
(In
millions) 2012 2011
---------- ---- ----
Sales:
Chlor Alkali Products $359.7 $299.4
Winchester 147.5 136.6
---------- ----- -----
Total Sales $507.2 $436.0
----------- ------ ------
Income
before
Taxes:
Chlor Alkali Products (b) $74.4 $45.2
Winchester 10.8 12.5
Corporate/Other:
Pension Income (c) 6.3 6.7
Environmental Expense (d) (2.8) (1.5)
Other Corporate and Unallocated
Costs (17.9) (18.6)
Restructuring Charges (e) (1.9) (0.1)
Other Operating Income 0.5 1.4
Interest Expense (f) (6.5) (7.2)
Interest Income 0.2 0.2
Other (Expense) Income (g) (2.6) 181.2
Income before
Taxes $60.5 $219.8
-------------- ----- ------
(a) Unaudited.
(b) Earnings of non-consolidated affiliates are
included in the Chlor Alkali Products
segment results consistent with
management's monitoring of the operating
segments. The earnings from non-
consolidated affiliates were $0.2 million
and $7.0 million for the three months ended
March 31, 2012 and 2011, respectively. On
February 28, 2011, we acquired the
remaining 50% interest in SunBelt. Since
the date of acquisition, SunBelt's results
are no longer included in earnings of non-
consolidated affiliates but are
consolidated in our financial statements.
(c) The service cost and the amortization of
prior service cost components of pension
expense related to the employees of the
operating segments are allocated to the
operating segments based on their
respective estimated census data. All other
components of pension costs are included in
Corporate/Other and include items such as
the expected return on plan assets,
interest cost and recognized actuarial
gains and losses.
Environmental expense for the three months
ended March 31, 2012 and 2011 included $0.1
million and $0.5 million, respectively, of
recoveries from third parties for costs
(d) incurred and expensed in prior periods.
(e) Restructuring charges for the three months
ended March 31, 2012 and 2011 were
associated with exiting the use of mercury
cell technology in the chlor alkali
manufacturing process by the end of 2012
and our ongoing relocation of our
Winchester centerfire ammunition
manufacturing operations from East Alton,
IL to Oxford, MS.
(f) Interest expense was reduced by capitalized
interest of $1.1 million and $0.2 million
for the three months ended March 31, 2012
and 2011, respectively.
(g) Other (expense) income for the three months
ended March 31, 2012 and 2011 included $2.6
million and $0.2 million, respectively, of
expense for our earn out liability from the
SunBelt acquisition. Other (expense) income
for the three months ended March 31, 2011
also included a pretax gain of $181.4
million as a result of remeasuring our
previously held 50% equity interest in
SunBelt.
Olin Corporation
Consolidated Balance Sheets
(a)
March 31, December 31, March 31,
(In millions, except per share
data) 2012 2011 2011
------------------------------ ---- ---- ----
Assets:
Cash & Cash Equivalents $220.6 $304.8 $280.4
Accounts Receivable, Net 279.9 237.1 256.7
Income Taxes Receivable - 0.7 5.5
Inventories 186.0 176.6 179.7
Current Deferred Income Taxes 51.3 50.9 46.3
Other Current Assets 14.1 10.2 28.8
-------------------- ---- ---- ----
Total Current Assets 751.9 780.3 797.4
Property, Plant and Equipment
(Less Accumulated Depreciation
of $1,168.8, $1,144.0 and
$1,089.8) 914.7 885.4 763.2
Prepaid Pension Costs 28.7 19.2 26.9
Restricted Cash 34.1 51.7 99.1
Other Assets 83.1 85.6 76.5
Goodwill 627.4 627.4 628.2
-------- ----- ----- -----
Total Assets $2,439.9 $2,449.6 $2,391.3
------------ -------- -------- --------
Liabilities and Shareholders'
Equity:
Current Installments of Long-
Term Debt $23.6 $12.2 $89.3
Accounts Payable 125.9 149.7 118.5
Income Taxes Payable 0.5 - -
Accrued Liabilities 219.6 237.2 220.0
------------------- ----- ----- -----
Total Current Liabilities 369.6 399.1 427.8
Long-Term Debt 512.0 524.2 491.9
Accrued Pension Liability 58.4 59.1 58.4
Deferred Income Taxes 117.2 99.6 107.7
Other Liabilities 366.4 381.8 355.6
----------------- ----- ----- -----
Total Liabilities 1,423.6 1,463.8 1,441.4
----------------- ------- ------- -------
Commitments and Contingencies
Shareholders' Equity:
Common Stock, Par Value $1 Per
Share, Authorized 120.0
Shares:
Issued and Outstanding 80.1
Shares (80.1 and 79.7 in
2011) 80.1 80.1 79.7
Additional Paid-In Capital 852.0 852.0 843.0
Accumulated Other
Comprehensive Loss (286.4) (294.2) (260.8)
Retained Earnings 370.6 347.9 288.0
Total Shareholders' Equity 1,016.3 985.8 949.9
-------------------------- ------- ----- -----
Total Liabilities and
Shareholders' Equity $2,439.9 $2,449.6 $2,391.3
--------------------- -------- -------- --------
(a) Unaudited.
Olin Corporation
Consolidated Statements of Cash Flows(a)
Three Months
Ended March 31,
(In millions) 2012 2011
------------ ---- ----
Operating Activities:
Net Income $38.7 $133.7
Gain on Remeasurement of Investment in
SunBelt - (181.4)
Earnings of Non-consolidated Affiliates (0.2) (7.0)
Gains on Disposition of Property, Plant and
Equipment (0.1) (1.0)
Stock-Based Compensation 1.4 1.4
Depreciation and Amortization 25.5 23.2
Deferred Income Taxes 12.6 84.5
Qualified Pension Plan Contributions (0.2) (0.2)
Qualified Pension Plan Income (5.9) (6.6)
Changes in:
Receivables (42.8) (45.8)
Inventories (9.4) (20.1)
Other Current Assets (3.9) (2.1)
Accounts Payable and Accrued Liabilities (16.2) 3.4
Income Taxes Payable 1.2 0.2
Other Assets 1.5 (0.6)
Other Noncurrent Liabilities 2.5 0.5
Other Operating Activities (0.3) (2.3)
-------------------------- ---- ----
Net Operating Activities 4.4 (20.2)
------------------------ --- -----
Investing Activities:
Capital Expenditures (75.9) (25.6)
Business Acquired in Purchase Transaction,
Net of Cash Acquired - (123.4)
Proceeds from Sale/Leaseback of Equipment 1.0 -
Proceeds from Disposition of Property, Plant
and Equipment 0.2 1.8
Distributions from Affiliated Companies, Net - 0.6
Restricted Cash Activity 17.6 2.9
Other Investing Activities 0.3 1.3
-------------------------- --- ---
Net Investing Activities (56.8) (142.4)
------------------------ ----- ------
Financing Activities:
Earn Out Payment - SunBelt (15.3) -
Common Stock Repurchased and Retired (1.2) -
Stock Options Exercised 0.3 0.3
Excess Tax Benefits from Stock-Based
Compensation 0.4 -
Dividends Paid (16.0) (15.9)
Net Financing Activities (31.8) (15.6)
------------------------ ----- -----
Net Decrease in Cash and Cash Equivalents (84.2) (178.2)
Cash and Cash Equivalents, Beginning of Year 304.8 458.6
-------------------------------------------- ----- -----
Cash and Cash Equivalents, End of Period $220.6 $280.4
---------------------------------------- ------ ------
(a) Unaudited.
Olin Corporation
Non-GAAP Financial Measures(a)
Olin's definition of Adjusted EBITDA (Earnings before
interest, taxes, depreciation, and amortization) is net
income plus an add-back for deprecation and amortization,
interest expense (income), and income tax expense less a
deduction for other (expense) income. Adjusted EBITDA is a
non-GAAP financial measure. Management believes that this
measure is meaningful to investors as a supplemental
financial measure to assess the financial performance of our
assets without regard to financing methods, capital
structures, taxes, or historical cost basis. The use of non-
GAAP financial measures is not intended to replace any
--------------------------------------------------------------
Three Months
Ended March
31,
(In millions) 2012 2011
------------ ---- ----
Reconciliation of Net Income to Adjusted EBITDA:
Net Income $38.7 $133.7
Add Back:
Interest Expense 6.5 7.2
Interest Income (0.2) (0.2)
Income Tax Expense 21.8 86.1
Depreciation and Amortization 25.5 23.2
----------------------------- ---- ----
EBITDA 92.3 250.0
Deduct:
Other (Expense) Income (b) (2.6) 181.2
------------------------- ---- -----
Adjusted EBITDA $94.9 $68.8
--------------- ----- -----
(a) Unaudited.
(b) Other (expense) income for
the three months ended
March 31, 2012 and 2011
included $2.6 million and
$0.2 million,
respectively, of expense
for our earn out
liability from the
SunBelt acquisition.
Other (expense) income
for the three months
ended March 31, 2011 also
included a pretax gain of
$181.4 million as a
result of remeasuring our
previously held 50%
equity interest in
SunBelt.
SOURCE Olin Corporation
