What changed in this filing

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Item 1A. Risk Factors

2022-02-24 compared with 2021-02-22 · 118 added, 97 removed, 148 unchanged (59% of the section changed)

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

The businesses of most of our customers are, to varying degrees, cyclical and have historically experienced periodic downturns.

These economic and industry downturns have been characterized by diminished product demand, excess manufacturing capacity and, in some cases, lower average selling prices.

Our industries and the businesses of most of our customers have historically experienced periodic downturns.

These economic, seasonal and industry downturns have been characterized by diminished product demand, excess manufacturing capacity and, in some cases, lower average selling prices.

Therefore, any significant downturn in our customers’ businesses or in global economic conditions could result in a reduction in demand for our products and could adversely affect our results of operations or financial condition.

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In addition, our customers could decide to move some or all of their production to locations that are more remote from our facilities, and this could reduce demand for our products.

We cannot assure you that events having an adverse effect on the industries in which we operate will not occur or continue, such as a downturn in the European, Asian Pacific, particularly Chinese, Latin American, or world economies, increases in interest rates, unfavorable currency fluctuations or prolonged effects of the 2019 Novel Coronavirus (COVID-19) pandemic.

Economic conditions in other regions of the world, predominantly Asia and Europe, can increase the amount of caustic soda produced and available for export to North America.

The increased caustic soda supply can put downward pressure on our caustic soda prices, negatively impacting our profitability.

We cannot assure you that events having an adverse effect on the industries in which we operate will not occur or continue, such as a downturn in the European, Asian Pacific, particularly Chinese, Latin American, or other world economies, increases in interest rates, unfavorable currency fluctuations or prolonged effects of the 2019 Novel Coronavirus (COVID-19) pandemic.

Economic conditions in other regions of the world, predominantly Asia and Europe, can adversely impact the balance between global supply and demand for our chemical products and increase the amount of products produced and made available for export to North America.

Any significant increased product supply could put downward pressure on our product pricing, negatively impacting our profitability.

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

We experience cycles of fluctuating supply and demand in each of our business segments, particularly in our Chlor Alkali Products and Vinyls segment, which result in changes in selling prices.

Our industries and each of our business segments experience fluctuating supply and demand, particularly in our Chlor Alkali Products and Vinyls segment, which can result in changes in selling prices.

Periods of high demand, tight supply and increasing operating margins tend to result in increases in capacity and production until supply exceeds demand, generally followed by periods of oversupply and declining prices.

Another factor influencing demand and pricing for chlorine and caustic soda is the price of natural gas.

We believe our strategic operating model will mitigate pricing pressure historically experienced during periods of supply exceeding demand.

Nevertheless, we cannot assure you that increased pricing pressure will not impact our operating results in the future during these periods.

Another factor influencing demand and pricing for chemical products is the price of natural gas.

Higher natural gas prices increase our customers’ and competitors’ manufacturing costs, and depending on the ratio of crude oil to natural gas prices, could make our customers less competitive in world markets.

In the chlor alkali industry, price is the major supplier selection criterion.

In the chemical industries in which we operate, price is one of the major supplier selection criterion.

Pricing is subject to a variety of factors, some of which are outside of our control.

Decreases in the average selling prices of our products could have a material adverse effect on our profitability.

While we strive to maintain or increase our profitability by reducing costs through improving production efficiency, emphasizing higher margin products and by controlling transportation, selling and administration expenses, we cannot assure you that these efforts will be sufficient to fully offset the effect of possible decreases in pricing on operating results.

While we strive to maintain or increase our profitability by executing our strategic operating model and by reducing costs through improving production efficiency, emphasizing higher margin products and by controlling transportation, selling and administration expenses, we cannot assure you that these efforts will be sufficient to fully offset the effect of possible decreases in pricing on operating results.

Chlorine and caustic soda are produced simultaneously and in a fixed ratio of 1.0 ton of chlorine to 1.1 tons of caustic soda.

An imbalance in customer demand may require Olin to reduce production of both chlorine and caustic soda or take other steps to correct the imbalance.

Since we cannot store large quantities of chlorine, we may not be able to respond to an imbalance in customer demand for these products quickly or efficiently.

To mitigate exposure and maximize value from the entire ECU, we continually take a number of actions, including, managing our production rates to the prevailing weaker side of the ECU, leveraging our portfolio of chlorine and chlorine derivatives outlets and entering into purchase for re-sale transactions.

If our efforts are not successful and a substantial imbalance occurred, we might need to take actions that could have a material adverse impact on our business, results of operations and financial condition.

We cannot assure you that pricing or profitability in the future will be comparable to any particular historical period, including the most recent period shown in our operating results.

We cannot assure you that the chlor alkali industry will not experience adverse trends in the future, or that our business, financial condition and results of operations will not be adversely affected by them.

Our Winchester and Epoxy segments are also subject to pricing pressures.

Selling prices of ammunition and epoxy materials are affected by changes in raw material costs and availability, customer demand and industry production capacity.

Declines in average selling prices of products of our Winchester and Epoxy segments could adversely affect our profitability.

Change in Operating Model — Our operating results could be negatively impacted if we do not successfully implement our operating model in our chemicals businesses.

We have adopted a strategic operating model in our chemicals businesses that prioritizes ECU margins over sales volume.

We cannot assure you that the chemical industry will not

experience adverse trends in the future, or that our business, financial condition, and results of operations will not be adversely affected by them.

Our Winchester segment is also subject to pricing pressures.

Selling prices of ammunition are affected by changes in raw material costs and availability, customer demand and industry production capacity.

Declines in average selling prices of products of our Winchester segment could adversely affect our business, financial condition, and results of operations.

Change in Operating Model—Our operating results could be negatively impacted if we do not successfully execute our operating model in our chemicals businesses.

In late 2020, we adopted a strategic operating model in our chemicals businesses that prioritizes ECU margins over sales volume.

This model represents a change to our Chlor Alkali Products and Vinyls and Epoxy businesses.

The model necessitates managing production rates to mitigate exposure to the weaker demand side of the ECU and maximize value from

the stronger side of the ECU.

The implementation of the model may not be successful.

To mitigate exposure and maximize value from the entire ECU, the model necessitates managing production rates to the weaker side of the ECU.

The execution of the model may not be successful.

For example, we may not be able to consistently achieve higher margins or the margin improvement achieved might be more than offset by the impact from lower sales volumes, either of which could have a material adverse effect on our operating results and cash flows.

In addition, we take actions from time to time designed to complement our operating model, such as purchase for re-sale transactions (which we sometimes refer to as “parlaying activities”) that may not improve our operating results and could adversely impact our business if these activities are not successfully implemented.

Some of our assets were designed to operate at consistently high operating rates.

If we operate at lower operating rates for extended periods or make frequent changes to operating rates, our assets may become less reliable or may require additional maintenance or capital investment, which could have a material adverse impact on our operating results and cash flows.

Additionally, we may not be able to attract, develop, or retain the skills necessary to effectively implement the model.

Additionally, we may not be able to attract, develop, or retain the skills necessary to effectively execute the strategic operating model.

Our model is dependent on implementing changes to the way we transact business with customers and other third parties.

Customers or third parties may not be willing to transact with us on terms acceptable to us or at all.

If we fail to effectively execute our model, our operating results may fail to meet expectations and our business, financial condition, and results of operations could be adversely impacted.

If we fail to effectively execute our strategic operating model, our operating results may fail to meet expectations and our business, financial condition, and results of operations could be adversely impacted.

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

Our operating results and profitability are dependent upon our continued ability to control, and in some cases reduce, our costs.

If we are unable to do so, or if costs outside of our control, particularly our costs of raw materials, utilities, transportation and similar costs, increase beyond anticipated levels, our profitability will decline.

In addition, an increase in costs generally as a result of rising inflation, or in a particular sector such as the energy or transportation sector, could result in rising costs which we cannot fully mitigate through product price increases or cost reductions, which could also adversely affect our profitability.

For example, if our feedstock and energy costs increase, and we are unable to pass the increased costs on to customers, our profitability in our Chlor Alkali Products and Vinyls and Epoxy segments would be negatively affected.

Similarly, costs of commodity metals and other materials used in our Winchester business, such as copper and lead, can vary.

If we experience significant increases in these costs and are unable to raise our prices to offset the higher costs, the profitability in our Winchester business would be negatively affected.

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

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Any interruption of supply or any price increase of raw materials could have a material adverse effect on our business, financial condition and results of operations.

We have entered into long-term agreements with Dow to provide specified feedstocks and services for a number of our facilities.

These facilities are dependent upon Dow’s infrastructure for services such as wastewater and ground water treatment.

Any failure of Dow to perform its obligations under those agreements could adversely affect the operation of the affected facilities and our business, financial condition and results of operations.

Most of these agreements are automatically renewable after their initial terms, but may be terminated by us or Dow after specified notice periods.

If we are required to obtain an alternate source for these feedstocks or services, we may not be able to obtain pricing on as favorable terms.

Certain of our facilities are dependent on feedstocks, services, and related infrastructure provided by third parties, which are provided pursuant to long-term contracts.

Any failure of those third parties to perform their obligations under those agreements or disagreements regarding the performance under those agreements could adversely affect the operation of the affected facilities and our business, financial condition and results of operations, or result in diversion of management’s attention or our resources from other business matters.

If we are required to obtain an alternate source for these feedstocks or services, we may not be able to obtain equally favorable pricing and terms.

Additionally, we may be forced to pay additional transportation costs or to invest in capital projects for pipelines or alternate facilities to accommodate railcar or other delivery methods or to replace other services.

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Any significant change in the terms that we have with our key suppliers could materially and adversely affect our business, financial condition and results of operations, as could significant additional requirements from suppliers that we provide them additional security in the form of prepayments or posting letters of credit.

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

Our operating results and profitability are dependent upon our continued ability to control, and in some cases reduce, our costs.

Similarly, costs of commodity metals and other materials used in our Winchester business, such as copper and lead, can vary.

If we experience significant increases in these costs and are unable to raise our prices to offset the higher costs, the profitability in our Winchester business would be negatively affected.

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

Purchased feedstock and energy costs account for a substantial portion of our total production costs and operating expenses.

Purchased feedstock, including propylene and benzene, and energy costs account for a substantial portion of our total production costs and operating expenses.

We purchase certain raw materials as feedstocks.

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We are dependent upon the continued safe and reliable operation of our production facilities.

Our production facilities are subject to hazards associated with the manufacture, handling, storage and transportation of chemical materials and products and ammunition, including leaks and ruptures, explosions, fires, inclement weather and natural disasters, unexpected utility disruptions or outages, unscheduled downtime, equipment failure, terrorism, transportation interruptions, transportation accidents involving our chemical products, chemical spills and other discharges or releases of toxic or hazardous substances or gases and environmental hazards.

Due to the integrated nature of our large chemical sites, an incident at one plant could impact production across multiple plants at a facility.

Our production facilities are subject to hazards associated with the manufacture, handling, storage and transportation of chemical materials and products and ammunition, including leaks and ruptures, explosions, fires, inclement weather and natural disasters, unexpected utility disruptions or outages, unscheduled downtime, equipment failure, information technology systems interruptions or failures, terrorism, transportation interruptions, transportation incidents involving our chemical products, chemical spills and other discharges or releases of toxic or hazardous substances or gases and environmental hazards.

Due to the integrated nature of our large chemical sites, an event at one plant could impact production across multiple plants at a facility.

From time to time in the past, we have had incidents that have temporarily shut down or otherwise disrupted our manufacturing, causing production delays and resulting in liability for workplace injuries and fatalities.

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We cannot assure you that we will not experience these types of incidents in the future or that these incidents will not result in production delays or otherwise have a material adverse effect on our business, financial condition or results of operations.

Major hurricanes have caused significant disruption in our operations on the U.S.

Major hurricanes, or other weather-related events, have caused significant disruption in our operations on the U.S.

Gulf Coast, logistics across the region and the supply of certain raw materials, which have had an adverse impact on volume and cost for some of our products.

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We have technology and information security processes, periodic external service and service provider reviews, insurance policies and disaster recovery plans in place to mitigate our risk to these vulnerabilities.

However, these measures may not be adequate to ensure that our operations will not be disrupted or our financial impact minimalized, should such an event occur.

However, these measures may not be adequate to ensure that our operations will not be disrupted or our financial impact minimized, should such an event occur.

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

We feel our success depends on hiring, retaining and motivating key employees, including executive officers.

Our future success depends in part on our ability to identify and develop talent throughout the organization who adopt and successfully execute our strategic operating model.

The development and retention of key personnel and appropriate senior management succession planning will continue to be important to the successful execution of our strategies.

We may have difficulty locating and hiring qualified personnel.

In addition, we may have difficulty retaining such personnel once hired, and key people may leave and compete against us.

The loss of key personnel or our failure to attract and retain other qualified and experienced personnel could disrupt or materially adversely affect our business, financial condition or results of operations.

In addition, our operating results could be adversely affected by increased costs due to increased competition for employees or higher employee turnover, which may result in the loss of significant customer business or increased costs.

Acquisitions and Joint Ventures—We may not be able to complete future acquisitions or joint venture transactions or successfully integrate them into our business, which could adversely affect our business or results of operations.

As part of our growth strategy, we intend to pursue acquisitions and joint venture opportunities consistent with or complementary to our existing business strategies.

Successful accomplishment of this objective may be limited by the availability and suitability of acquisition candidates, the ability to obtain regulatory approvals necessary to complete a planned transaction, and by our financial resources.

Acquisitions and joint venture transactions involve numerous risks, including difficulty determining appropriate valuation, integrating operations, technologies, services and products of the acquired businesses, personnel turnover and the diversion of management’s attention from other business matters.

In addition, we may be unable to achieve anticipated benefits from these transactions in the time frame that we anticipate, or at all, which could adversely impact our business, financial condition and results of operations.

Indebtedness—Our indebtedness could adversely affect our financial condition.

As of December 31, 2021, we had $2,779.3 million of indebtedness outstanding.

Outstanding indebtedness does not include amounts that could be borrowed under our $800.0 million senior secured revolving credit facility, under which $799.6 million was available for borrowing as of December 31, 2020 because we had issued $0.4 million of letters of credit.

As of December 31, 2020, our indebtedness represented 72.7% of our total capitalization.

At December 31, 2020, $26.3 million of our indebtedness was due within one year.

Outstanding indebtedness does not include amounts that could be borrowed under our $800.0 million senior revolving credit facility, under which $799.6 million was available for borrowing as of December 31, 2021 because we had issued $0.4 million of letters of credit.

As of December 31, 2021, our indebtedness represented 51.2% of our total capitalization and $201.1 million of our indebtedness was due within one year.

Despite our level of indebtedness, we expect to continue to have the ability to borrow additional debt, but we cannot be certain that additional debt will be available on terms acceptable to us or at all.

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Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our debt obligations on commercially reasonable terms, would have a material adverse effect on our business, financial condition and results of operations, as well as on our ability to satisfy our debt obligations.

COVID-19 Pandemic—The COVID-19 pandemic and the global response to the pandemic could have a material adverse impact on our business, financial condition, or results of operations.

The COVID-19 global pandemic, and the various governmental, business, and consumer responses to this pandemic, have caused significant disruptions in the U.S.

and global economies, which has negatively impacted the demand for several of the products produced by our Chlor Alkali Products and Vinyls and Epoxy businesses resulting in lower volumes and pricing.

As a result, the COVID-19 pandemic has significantly impacted our results of operations and could continue to have negative impacts on our business.

These impacts could include plant closures or operating reductions, volatility and decrease in demand for our products, and supply chain interruptions.

These impacts could become more widespread or prolonged as the pandemic continues.

The extent to which the COVID-19 pandemic impacts our results will depend on future developments that are outside of our control and highly uncertain, including the severity and duration of the pandemic, the domestic and international actions that are taken in response, and the extent and severity of any resulting economic or industry downturn.

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

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

Depending on the magnitude and duration of economic or industry downturns affecting our businesses, including deterioration in prices and volumes, there can be no assurance that we will continue to be in compliance with these ratios.

If we fail to comply with either of these covenants in a future period and are not able to obtain waivers from the lenders, we would need to refinance our current senior secured credit facility.

However, there can be no assurance that such refinancing would be available to us on terms that would be acceptable to us or at all.

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

Chlorine and caustic soda are produced simultaneously and in a fixed ratio of 1.0 ton of chlorine to 1.1 tons of caustic soda.

The loss of a substantial chlorine or caustic soda customer could cause an imbalance in customer demand for either our chlorine and caustic soda products.

An imbalance in customer demand may require Olin to reduce production of both chlorine and caustic soda or take other steps to correct the imbalance.

Since Olin cannot store large quantities of chlorine, we may not be able to respond to an imbalance in customer demand for these products quickly or efficiently.

If a substantial imbalance occurred, we might need to take actions that could have a material adverse impact on our business, results of operations and financial condition.

We feel our success depends on hiring, retaining and motivating key employees, including executive officers.

We may have difficulty locating and hiring qualified personnel.

In addition, we may have difficulty retaining such personnel once hired, and key people may leave and compete against us.

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

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• tariffs and trade barriers;

• outbreaks of pandemics, such as COVID-19, which could cause us and our suppliers and/or customers to temporarily suspend operations in affected areas, restrict the ability of Olin to distribute our products or cause economic downturns that could affect demand for our products;

• outbreaks of serious disease, such as COVID-19, which could cause us and our suppliers and/or customers to temporarily suspend operations in affected areas, restrict the ability of Olin to distribute our products or cause economic downturns that could affect demand for our products;

• changes in laws and regulations, including the imposition of economic or trade sanctions affecting international commercial transactions;

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Foreign Corrupt Practices Act;

• restrictions on, or difficulties and costs associated with, the repatriation of cash from foreign countries to

the United States;

• restrictions on, or difficulties and costs associated with, the repatriation of cash from foreign countries to the United States;

• unfavorable currency fluctuations;

• changes in local economic conditions;

• changes in local economic conditions, including inflation levels exceeding that of the U.S.;

• unexpected changes in political or regulatory environments;

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

COVID-19 Pandemic—The COVID-19 pandemic and the global response to the pandemic, including without limitation complying with governmental mandates, could have a material adverse impact on our business, financial condition, or results of operations.

The COVID-19 global pandemic, and the various governmental, business, and consumer responses to this pandemic, have caused significant disruptions in the U.S.

and global economies, which negatively impacted the demand for several of the products produced by our Chlor Alkali Products and Vinyls and Epoxy businesses during 2020 resulting in lower volumes and pricing.

As a result, the COVID-19 pandemic has significantly impacted our results of operations and could continue to have negative impacts on our business.

These impacts could include plant closures or operating reductions, volatility and decrease in demand for our products, and supply chain interruptions.

These impacts could become more widespread or prolonged as the pandemic continues.

The extent to which the COVID-19 pandemic impacts our results will depend on future developments that are outside of our control and highly uncertain, including the severity and duration of the pandemic, emerging variants, vaccine and booster effectiveness, the domestic and international actions that are taken in response, including mandates implemented at the local, state and federal levels, and the extent and severity of any resulting economic or industry downturn.

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

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

If we fail to comply with either of these covenants in a future period and are not able to obtain waivers from the lenders, we would need to refinance our current senior credit facility.

However, there can be no assurance that such refinancing would be available to us on terms that would be acceptable to us or at all.

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

While we believe we have facilities in place that should allow us to borrow funds as needed to meet our ordinary course business activities, adverse conditions in the credit and financial markets could prevent us from obtaining financing, if the need arises, or result in our creditors terminating their funding commitments.

Our ability to invest in our businesses and refinance or repay maturing debt obligations could require access to the credit and capital markets and sufficient bank credit lines to support cash requirements.

Our ability to access credit and capital markets can also depend on our credit rating as determined by reputable credit rating agencies.

A significant downgrade in our credit rating could affect our ability to refinance or repay maturing debt obligations, result in increased borrowing costs, decrease the availability of capital from financial institutions or require our subsidiaries to post letters of credit, cash or other assets as collateral with certain counterparties.

If we are unable to access the credit and capital markets on commercially reasonable terms, we could experience a material adverse effect on our business, financial position or results of operations.

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

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Changes in these rules and regulations or unfavorable changes to the factors which are used to value the assets and liabilities in our pension plans could impact the calculation of funded status of our pension plans.

They may also result in higher pension costs, additional financial statement disclosure, and the need to fund the pension plan.

At December 31, 2020, the projected benefit obligation of $3,199.4 million exceeded the market value of assets in our qualified defined benefit pension plans by $730.3 million, as calculated under Accounting Standards Codification (ASC) 715 “Compensation—Retirement Benefits” (ASC 715).

Based on our plan assumptions and estimates, we will not be required to make any cash contributions to the domestic qualified defined benefit pension plan at least through 2021 and we anticipate less than $5 million of cash contributions to international qualified defined benefit pension plans in 2021.

The impact of declines in global equity and fixed income markets on asset values may result in higher pension costs and may increase and accelerate the need to fund the pension plans in future years.

For example, holding all other assumptions constant, a 100-basis point decrease or increase in the assumed long-term rate of return on plan assets for our domestic qualified defined benefit pension plan would have decreased or increased, respectively, the 2020 defined benefit pension plan income by approximately $19.8 million.

Holding all other assumptions constant for our domestic qualified defined benefit pension plan, a 50-basis point decrease in the discount rate used to calculate pension income for 2020 and the projected benefit obligation as of December 31, 2020 would have decreased pension income by $0.4 million and increased the projected benefit obligation by $174.0 million.

A 50-basis point increase in the discount rate used to calculate pension income for 2020 and the projected benefit obligation as of December 31, 2020 for our domestic qualified defined benefit pension plan would have increased pension income by $0.1 million and decreased the projected benefit obligation by $157.0 million.

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

Our ability to access credit and capital markets can also depend on our credit rating as determined by reputable credit rating agencies.

If we are unable to access the credit and capital markets on commercially reasonable terms, we could experience a material adverse effect on our business, financial position or results of operations.

They may also result in higher pension costs and the need for additional pension plan funding.

See “Pension and Postretirement Benefits” contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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

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Legal, Environmental and Regulatory Risks

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

The transportation of our products and feedstocks, including transportation by pipeline, and the security of our chemical manufacturing facilities are subject to extensive regulation.

Government authorities at the local, state and federal levels could implement new or stricter regulations that would impact the security of chemical plant locations and the transportation of hazardous chemicals.

Our Chlor Alkali Products and Vinyls and Epoxy segments could be adversely impacted by the cost of complying with any new regulations.

Our business also could be adversely affected if an incident were to occur at one of our facilities or while transporting products.

The extent of the impact would depend on the requirements of future regulations and the nature of an incident, which are unknown at this time.

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

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The chemical and ammunition industries are subject to legislative and regulatory actions, which could have a material adverse effect on our business, financial position or results of operations.

Changes to government regulations and laws or changes in their interpretation may reduce the demand for our products, impact our ability to use or manufacture certain products, or limit our ability to implement our strategies, any of which could have a material adverse effect on our business, financial condition and results of operations.

Many of our products and operations are subject to chemical control laws of the countries in which they are located.

These laws include regulation of chemical substances and inventories under the U.S.

Toxic Substances Control Act of 1976 (TSCA) in the U.S.

and the Registration, Evaluation and Authorization of Chemicals (REACH) regulation in Europe.

TSCA was amended in 2016, and the EPA is currently evaluating several of our products for additional regulation under the amended law.

Certain of our products, or inputs into our manufacturing process, are subject to regulation under current TSCA regulations, and other chemicals or ingredients may be regulated under the law in the future.

Under REACH, additional testing requirements, documentation, risk assessments and registrations are occurring and will continue to occur and may adversely affect our costs of products produced in or imported into the European Union.

Compliance with current or future TSCA, REACH, or other regulations may limit or hinder our ability to manufacture our products and/or cause us to incur expenditures that are material to our business, financial condition or results of operations.

Additionally, changes to government regulations and laws, including TSCA and REACH, or changes in their interpretation may reduce the demand for our products, impact our ability to use or manufacture certain products, or limit our ability to implement our strategies, any of which could have a material adverse effect on our business, financial condition and results of operations.

A material change in tax laws, treaties or regulations in the jurisdictions in which we operate or a change in their interpretation or application could have a material adverse effect on our business, financial condition and results of operations.

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

We are subject to litigation and other claims relating to our present and former operations and could become subject to additional claims in the future, some of which could be material.

These proceedings could include contract disputes, antitrust claims, product liability claims, including ammunition and firearms, and proceedings alleging injurious exposure of plaintiffs to various chemicals and other substances (including proceedings based on alleged exposures to asbestos).

The transportation of our products and feedstocks, including transportation by pipeline, and the security of our chemical manufacturing facilities are subject to extensive regulation.

Government authorities at the local, state and federal levels could implement new or stricter regulations, or change their interpretations of existing regulations, that would impact the security of chemical plant locations and the transportation of hazardous chemicals.

Our Chlor Alkali Products and Vinyls and Epoxy segments could be adversely impacted by the cost of complying with any new regulations.

Our business also could be adversely affected if an incident were to occur at one of our facilities or while transporting products.

The extent of the impact would depend on the requirements of future regulations and the nature of an incident, which are unknown at this time.

Legal and Regulatory Claims and Proceedings—We are subject to legal and regulatory claims and proceedings, which could cause us to incur significant expenses.

We are subject to legal and regulatory claims and proceedings relating to our present and former operations and could become subject to additional claims in the future, some of which could be material.

These proceedings may be brought by the government or private parties and may arise out of a number of matters, including, antitrust claims, contract disputes, product liability claims, including ammunition and firearms, and proceedings alleging injurious exposure of plaintiffs to various chemicals and other substances (including proceedings based on alleged exposures to asbestos).

Frequently, the proceedings alleging injurious exposure involve claims made by numerous plaintiffs against many defendants.

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Because of the inherent uncertainties of legal proceedings, we are unable to predict their outcome and therefore cannot determine whether the financial impact, if any, will be material to our financial position, cash flows or results of operations.

We have included additional information with respect to pending legal and regulatory proceedings in Part II, Item 8, under the heading of “Legal Matters” within Note 22, “Commitments and Contingencies,” of our Notes to Consolidated Financial Statements.

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

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See “Environmental Matters” contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Lake City Contract Compliance and Deliverables—Various risks associated with our Lake City contract and performance under other government contracts could adversely affect our business, financial condition and results of operations.

Our Winchester business currently operates and manages the Lake City Army Ammunition Plant in Independence, MO

under a seven year contract with the United States Army.

Governmental Contract Compliance and Deliverables—Various risks associated with our Lake City contract and performance under other government contracts could adversely affect our business, financial condition and results of operations.

Our Winchester business currently operates and manages the Lake City Army Ammunition Plant in Independence, MO under a multi-year contract with the United States Army.

The contract has an initial term of seven years, starting on October 1, 2020, and may be extended for up to three additional years.

Additionally, our Winchester business is engaged to perform various deliverables under other government contract arrangements.

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A large portion of our government contracts contain fixed-price deliverables while a smaller portion are performed under cost-plus arrangements.

While certain of these contracts contain price escalation and other price adjustment provisions, if we are unable to control costs related to these contracts or if our assumptions regarding the fixed pricing on one or multiple of these contracts is incorrect, we may experience additional unrecovered costs and lower profitability.

While certain of these contracts contain price escalation and other price adjustment provisions, if we are unable to control costs related to these contracts or if our assumptions regarding the fixed pricing on one or multiple of these contracts is incorrect, we may experience lower profitability, adversely affecting our business, financial condition and results of operations.

Environmental, Social and Governance (ESG)—ESG issues and related regulation, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition and results of operations and damage our reputation.

Companies across all industries are facing increased scrutiny related to their ESG policies.

Increased focus and activism related to ESG may hinder our access to credit and capital markets, as investors may reconsider their investment as a result of their assessment of our ESG practices.

In particular, customers, consumers, investors and other stakeholders are increasingly focusing on environmental issues, including climate change, energy and water use, greenhouse gas (GHG) emissions and other sustainability concerns.

Change in public sentiment may result in changing demands for our customers’ products and the products which we produce in light of their perceived environmental impacts or other related issues.

These demand changes could cause changes in the market dynamics of our existing products, impacting pricing, or we may incur additional costs to make changes to our operations to comply with such demand changes.

Concern over climate change, greenhouse gas (GHG) emissions in particular, may result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment.

Increased regulatory requirements or demands for enhanced mitigation of environmental impacts may result in increased compliance costs, higher energy and raw materials input costs or compliance with more stringent emissions standards, which may cause disruptions in the manufacture of our products or an increase in operating costs.

Any failure to achieve our ESG goals, or a perception of our failure to act responsibly with respect to the environment or to effectively respond to new, or updated, legal or regulatory requirements concerning environmental or other ESG matters, or increased operating or manufacturing costs due to increased regulation or efforts to mitigate environmental impacts could adversely affect our business, financial condition, results of operations and reputation.

If we do not adapt to or comply with new regulations or fail to meet the ESG goals or evolving investor, industry or stakeholder expectations and standards, or if we are perceived to have not responded appropriately to the growing concern for ESG issues, customers may choose to stop purchasing our products or purchase products from a competitor, and our reputation, financial condition and results of operations may be adversely affected.

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

Various labor unions represent a significant number of our hourly paid employees for collective bargaining purposes.

The following labor contract will be required to be negotiated in 2021:

Location Number of Employees Expiration Date

East Alton (Winchester) 573 December 2021

No significant labor contracts are expected to be negotiated during 2022 or early 2023.

In addition, a large number of our employees are located in countries in which employment laws provide greater bargaining or other rights to employees than the laws of the U.S.

Such employment rights require us to work collaboratively with the legal representatives of those employees to effect any changes to labor arrangements.

For example, most of our employees in Europe are represented by works councils that must approve any changes in conditions of employment, including salaries and benefits and staff changes, and may impede efforts to restructure our workforce.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors