What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-22 · 284 added, 401 removed, 343 unchanged (67% of the section changed)

1 unchanged sentence

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.

3 unchanged sentences

All of our business segments are capital intensive manufacturing businesses.

Chlor Alkali Products and Vinyls operating rates are closely tied to the general economy.

Each segment has a commodity element to it.

Our Chlor Alkali Products and Vinyls segment is partially a commodity business where all supplier products are similar and price is the major supplier selection criterion.

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

Our Chlor Alkali Products and Vinyls segment produces some of the most widely used chemicals in the world that can be upgraded into a wide variety of downstream chemical products used in many end-markets.

Changes in supply/demand, can be abrupt and significant and, given capacity in our Chlor Alkali Products and Vinyls segment, can lead to significant changes in our overall profitability.

The Epoxy segment consumes some products manufactured by the Chlor Alkali Products and Vinyls segment.

The Epoxy segment’s upstream and midstream products are partially commodity markets.

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

While competitive differentiation exists through downstream customization and product development opportunities, pricing is extremely competitive with a broad range of competitors across the globe.

Winchester also has a commodity element to its business, but a majority of Winchester ammunition is sold as a branded consumer product where there are opportunities to differentiate certain offerings through innovative new product development and enhanced product performance.

While competitive pricing versus other branded ammunition products is important, it is not the only factor in product selection.

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.

RECENT DEVELOPMENTS AND HIGHLIGHTS

Winter Storm Uri

Olin’s Freeport, TX facility was affected by Winter Storm Uri and was forced to halt production due to the lack of electrical power, natural gas, and other raw materials.

All of Olin’s Freeport operations were impacted.

In addition, production at Olin’s Plaquemine, LA;

and McIntosh, AL facilities were also negatively impacted.

As a result, by February 18, 2021, Olin declared Force Majeure on all chemical product shipments from North America.

Our facilities had returned to operation by March 31, 2021.

The 2021 results 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.

During 2021, Chlor Alkali Products and Vinyls segment results included a favorable impact of $121.4 million and Epoxy segment results included an unfavorable impact of $21.5 million associated with Winter Storm Uri.

2021 Overview

Net income was $1,296.7 million for the year ended 2021 compared to net loss of $969.9 million for 2020.

The increase in results from the prior year was due to improved operating results across all our business segments.

The prior year results were also impacted by a $699.8 million pretax goodwill impairment charge.

Chlor Alkali Products and Vinyls generated segment income of $997.8 million for 2021 compared to $3.5 million for 2020.

Chlor Alkali Products and Vinyls segment results were higher than in the prior year due to higher pricing across all products, partially offset by higher raw material and operating costs.

Epoxy reported segment income of $616.5 million for 2021 compared to $40.8 million for 2020.

Epoxy segment results were higher than in the prior year primarily due to higher product prices, partially offset by higher raw materials costs, primarily benzene and propylene.

Winchester reported segment income of $412.1 million for 2021 compared to $92.3 million for 2020.

On October 1, 2020, Winchester assumed full management and operational control of Lake City.

Winchester segment results were higher than in the prior year primarily due to increased commercial ammunition pricing and higher volumes, which includes ammunition produced at Lake City.

Winchester segment results were also negatively impacted by higher commodity costs compared to the prior year.

During 2021, we repaid approximately $1.1 billion of long-term debt.

In connection with these financing transactions, we recognized a loss on extinguishment of debt of $152.2 million, which includes the payment of early redemption premiums of $137.7 million.

During 2021, we repurchased and retired 4.7 million shares of common stock at a cost of $251.9 million.

As of December 31, 2021, we have $52.2 million of remaining authorized common stock to be purchased under our 2018 Repurchase

Authorization program and $1.0 billion of remaining authorized common stock to be purchased under our 2021 Repurchase Authorization program.

The 2019 Novel Coronavirus (COVID-19) global pandemic, and the various governmental, business and consumer responses to this pandemic, significantly impacted our results during 2020.

We have taken measures to protect the health and safety of our employees, work with our customers and suppliers to minimize potential disruptions and support our communities during this global pandemic.

Our operations are among businesses that have been considered “essential” by government and public health authorities.

Our operations are among businesses that were considered “essential” by government and public health authorities.

We are following all federal, state and local health department guidelines and the costs associated with these safety procedures were not material.

1 unchanged sentence

All Olin manufacturing facilities worldwide continue to operate, with the exception of those undergoing planned maintenance turnarounds.

The spread of the pandemic and the associated response has caused significant disruptions in the U.S.

The spread of the pandemic and the associated response has caused significant disruptions and increased volatility in the U.S.

and global economies, resulting in the disruption of the supply and demand fundamentals of our Chemicals businesses.

The various governmental, business and consumer responses to the pandemic 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.

We are monitoring the changing business environment, volatility and heightened degree of uncertainty resulting from the response to COVID-19.

During 2020, the various governmental, business and consumer responses to the pandemic 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.

We initiated several actions during 2020 that partially mitigated the impact of economic decline on our financial performance, but also enhanced our position, financially and structurally, to take advantage of the eventual global economic recovery.

These actions were primarily focused around liquidity and specific actions to reduce our costs in 2020.

We continue to monitor the changing business environment, volatility and heightened degree of uncertainty resulting from the response to COVID-19, including compliance with certain federal, state and local governmental mandates.

At the current time, we are unable to fully determine its future impact on our business.

We continue to work with our customers, employees, suppliers and communities to address the impacts of COVID-19 and we continue to assess possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences.

We have initiated several on-going actions that we believe will partially mitigate the impact of economic decline on our financial performance, but also enhance our position, financially and structurally, to take advantage of the eventual global economic recovery.

Several of these actions and our liquidity resources are summarized below:

• In May 2020, we entered into a $1,300.0 million senior secured credit facility (Senior Secured Credit Facility) that amended our existing senior credit facility, which provides additional flexibility under our restrictive compliance covenants.

The facility includes a $800.0 million senior secured revolving credit facility, of which we have $799.6 million available to us at December 31, 2020, and a $500.0 million senior secured delayed-draw term loan facility which was fully drawn in October 2020 and used to call a portion of the 9.75% senior notes due 2023.

• In May 2020, we issued $500.0 million 9.50% senior notes due 2025 (2025 Notes).

Proceeds from the 2025 Notes provided additional liquidity and were used for general corporate purposes.

• During 2020, we amended our Receivables Financing Agreement to expand the borrowing capacity to $250.0 million and had outstanding borrowings of $125.0 million as of December 31, 2020.

We also have the ability to increase our accounts receivable factoring arrangements, which ultimately can accelerate the timing of cash receipts and enhance our cash position.

The Receivables Financing Agreement and accounts receivable factoring arrangements do not impact our Senior Secured Credit Facility debt ratio covenants.

• We executed a strategy to improve our working capital and manage our balance sheet to maximize our financial flexibility.

During 2020, Olin reduced working capital by approximately $142 million, which included an approximately $67 million investment in working capital to support Lake City operations.

• During 2020, our capital expenditures were approximately $87 million lower than 2019 and we are forecasting capital spending to be in the $200 million range in 2021, which would be an additional $100 million lower than 2020 levels.

• As part of our ongoing productivity initiatives to reduce operating costs, during 2020, we reduced overall employee and contractor headcount in our chemicals businesses and corporate functions.

• During 2020, we suspended the defined contribution plan match on all salaried and non-bargaining hourly employees’ contributions.

• We believe that we have access to both the high-yield debt and equity markets at this time.

We still believe there is a high degree of economic uncertainty in the global markets in which we participate and we believe the steps we have taken and will continue to take to enhance our capital structure and liquidity have strengthened our ability to operate through the current conditions.

2020 Overview

Net loss was $969.9 million for the year ended December 31, 2020 compared to net loss of $11.3 million for 2019.

The decrease in results from the prior year was primarily due to a goodwill impairment charge of $699.8 million and lower Chlor Alkali Products and Vinyls segment results, primarily due to lower pricing and volumes.

Partially offsetting these declines were higher Winchester segment results.

Chlor Alkali Products and Vinyls generated segment income of $3.5 million for 2020 compared to $336.7 million for 2019.

Chlor Alkali Products and Vinyls segment results were lower than in the prior year primarily due to lower pricing, primarily caustic soda and ethylene dichloride (EDC), and lower volumes, primarily caustic soda.

These decreases were partially offset by lower costs, including raw materials and operating costs.

Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $451.4 million and $470.4 million in 2020 and 2019, respectively.

Epoxy reported segment income of $40.8 million for 2020 compared to $53.9 million for 2019.

Epoxy segment results were lower than in the prior year primarily due to lower product prices, partially offset by lower raw material costs.

Epoxy segment results included depreciation and amortization expense of $90.7 million and $100.1 million in 2020 and 2019, respectively.

On October 1, 2020, Winchester assumed full management and operational control of the Lake City facility in Independence, MO.

Army selected Winchester to operate and manage the Lake City facility in September 2019.

The contract has an initial term of seven years and may be extended by the U.S.

Army for up to three additional years.

Winchester reported segment income of $92.3 million for 2020 compared to $40.1 million for 2019.

The increase in segment results was due to increased sales volumes, which includes ammunition produced at Lake City, and higher product pricing, partially offset by transition costs relating to the Lake City contract and higher operating costs.

Winchester segment results included depreciation and amortization expense of $20.1 million in both 2020 and 2019.

On October 15, 2020, Olin redeemed $600.0 million of the outstanding 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 $14.6 million.

The 2023 Notes were redeemed by drawing on our $500.0 million senior secured delayed-draw term loan facility (Delayed Draw Term Loan Facility) along with utilizing $114.6 million of cash on hand.

Subsequent Event

On January 15, 2021, Olin redeemed the remaining $120.0 million of the outstanding 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 $122.9 million of cash on hand.

CONSOLIDATED RESULTS OF OPERATIONS

7 unchanged sentences

Restructuring charges 27.9 9.0 76.5

Acquisition-related costs — — 1.0

Goodwill impairment — 699.8 —

Other operating income 1.4 0.7 0.4

Operating (loss) income (746.7) 177.8 676.9

Losses of non-consolidated affiliates — — (19.7)

Operating income (loss) 1,850.8 (746.7) 177.8

Interest expense 348.0 292.7 243.2

3 unchanged sentences

Income (loss) before taxes 1,538.7 (1,020.0) (36.9)

Income tax (benefit) provision (50.1) (25.6) 109.4

Net (loss) income $ (969.9) $ (11.3) $ 327.9

Net (loss) income per common share:

Income tax provision (benefit) 242.0 (50.1) (25.6)

Net income (loss) $ 1,296.7 $ (969.9) $ (11.3)

Net income (loss) per common share:

Basic $ 8.15 $ (6.14) $ (0.07)

1 unchanged sentence

2021 Compared to 2020

Sales for 2021 were $8,910.6 million compared to $5,758.0 million in 2020, an increase of $3,152.6 million, or 55%.

Chlor Alkali Products and Vinyls sales increased by $1,180.9 million, primarily due to higher pricing across all products.

Epoxy sales increased by $1,315.5 million, primarily due to higher product prices.

Winchester sales increased by $656.2 million, primarily due to increased commercial ammunition pricing and higher commercial and military sales volumes, which included ammunition produced at Lake City.

Gross margin increased $1,910.8 million from 2020.

Chlor Alkali Products and Vinyls gross margin increased by $986.1 million, primarily due to higher pricing and the effect of Winter Storm Uri.

Epoxy gross margin increased by $578.6 million, primarily due to higher product prices, partially offset by higher raw material costs and the effect of Winter Storm Uri.

Winchester gross margin increased by $336.1 million, primarily due to increased commercial ammunition pricing and higher sales volumes, which included ammunition produced at Lake City.

Gross margin as a percentage of sales increased to 26% in 2021 from 7% in 2020.

Selling and administration expenses in 2021 decreased $5.1 million, or 1%, from 2020.

The decrease was primarily due to the absence of $73.9 million of costs associated with a multi-year implementation of new enterprise resource planning, manufacturing and engineering systems, and related infrastructure (collectively, the Information Technology Project), which was completed in late 2020.

This decrease was partially offset by higher variable incentive compensation expense of $49.4 million, which includes mark-to-market adjustments on stock-based compensation expense, and inclusion of a full year of selling and administration expenses associated with Lake City operations of $18.6 million.

Selling and administration expenses as a percentage of sales decreased to 5% in 2021 from 7% in 2020.

Restructuring charges for 2021 were $27.9 million compared to $9.0 million in 2020.

The increase in charges was primarily due to a productivity initiative to align the organization with our new operating model and improve efficiencies, which was completed during the second quarter of 2021, and the 2021 decisions to permanently close our diaphragm-grade chlor alkali capacity, representing 400,000 tons, at our McIntosh, AL facility.

Goodwill impairment includes non-cash pretax impairment charges of $557.6 million related to the Chlor Alkali Products and Vinyls segment and $142.2 million related to the Epoxy segment recorded during the third quarter of 2020.

Interest expense increased by $55.3 million for the year ended December 31, 2021.

Interest expense for 2021 included $137.7 million of bond redemption premiums and $14.5 million for write-off of deferred debt issuance costs, write-off of bond original issue discount, and recognition of deferred fair value interest rate swap losses.

Interest expense for 2020 included $14.6 million of bond redemption premiums, $5.8 million for write-off of deferred debt issuance costs and $4.0 million of accretion expense related to the 2020 ethylene payment discount.

Interest expense for 2021 and 2020 was reduced by capitalized interest of $3.2 million and $6.4 million, respectively.

Without these items, interest expense decreased by $75.7 million, primarily due to a lower level of debt outstanding and lower average interest rates.

Non-operating pension income includes all components of pension and other postretirement income (costs) other than service costs.

Non-operating pension income was higher for the year ended December 31, 2021 primarily due to a decrease in the discount rate used to determine interest costs.

The effective tax rate for 2021 included benefits from a net decrease in the valuation allowance related to deferred tax assets in foreign jurisdictions and domestic tax credits, a benefit associated with prior year tax positions, a benefit associated with stock-based compensation, an expense from remeasurement of deferred taxes due to an increase in our state effective tax rates and an expense from a change in tax contingencies.

These factors resulted in a net $103.6 million tax benefit.

After giving consideration to these items, the effective tax rate for 2021 of 22.5% was higher than the 21% U.S.

federal statutory rate primarily due to state taxes, foreign income inclusions and foreign income taxes, partially offset by a net decrease in the valuation allowance related to utilization of losses in foreign jurisdictions and favorable permanent salt depletion deductions.

The effective tax rate for 2020 included expenses associated with a net increase in the valuation allowance related to foreign and domestic tax credits and deferred tax assets in foreign jurisdictions, a remeasurement of deferred taxes due to an increase in our state effective tax rates and a change in tax contingencies, and stock-based compensation, partially offset by a benefit associated with prior year tax positions.

These factors resulted in a net $27.9 million tax expense.

For 2020, a tax benefit of $10.8 million was recognized associated with the $699.8 million goodwill impairment charge.

After giving consideration to these items, including the goodwill impairment charge on Olin’s loss before taxes, the effective tax rate for 2020 of 21.0% was equal to the 21.0% U.S.

federal statutory rate as foreign income taxes, foreign income inclusions and a net increase in the valuation allowance related to losses in foreign jurisdictions were offset by state taxes and favorable permanent salt depletion deductions.

2020 Compared to 2019

Sales for 2020 were $5,758.0 million compared to $6,110.0 million in 2019, a decrease of $352.0 million, or 6%.

Chlor Alkali Products and Vinyls sales decreased by $460.2 million, primarily due to lower caustic soda and EDC pricing and lower volumes, primarily caustic soda.

Chlor Alkali Products and Vinyls sales decreased by $460.2 million, primarily due to lower caustic soda and EDC pricing and lower caustic soda volumes.

Epoxy sales decreased by $153.9 million, primarily due to lower product prices.

Winchester sales increased by $262.1 million, primarily due to higher commercial and military sales volumes, which included ammunition produced at Lake City, and increased commercial ammunition pricing.

Gross margin decreased $287.4 million, or 43%, from 2019.

Chlor Alkali Products and Vinyls gross margin decreased by $327.2 million, primarily due to lower caustic soda and EDC pricing and lower volumes, partially offset by lower costs, primarily raw materials.

Gross margin for 2020 decreased $287.4 million, or 43%, from 2019.

Chlor Alkali Products and Vinyls gross margin decreased by $327.3 million, primarily due to lower caustic soda and EDC pricing and lower caustic soda volumes, partially offset by lower costs, primarily raw materials.

Epoxy gross margin decreased $9.5 million, primarily due to lower product prices, partially offset by lower raw material costs.

4 unchanged sentences

These increases were partially offset by lower salaries and benefits of $13.9 million, consulting and contract services of $7.9 million and travel-related expenses of $8.1 million.

In 2017, we began a multi-year implementation of new enterprise resource planning, manufacturing and engineering systems, and related infrastructure (collectively, the Information Technology Project).

Selling and administration expenses for the years ended December 31, 2020 and 2019 included costs associated with the Information Technology Project of $73.9 million and $77.0 million, respectively.

1 unchanged sentence

Restructuring charges in 2020 and 2019 were primarily associated with the March 2016 closure of 433,000 tons of chlor alkali capacity across three separate locations.

million of non-cash impairment charges for equipment and facilities for the year ended December 31, 2019.

Restructuring charges for the years ended December 31, 2020 and 2019 were also associated with the closure of a chlor alkali plant and a VDC production facility, both in Freeport, TX, and included $58.9 million of non-cash impairment charges for equipment and facilities for the year ended December 31, 2019.

Restructuring charges for the year ended December 31, 2019 also included costs associated with permanently closing the ammunition assembly operations at our Geelong, Australia facility in December 2018.

Goodwill impairment includes non-cash pretax impairment charges of $557.6 million related to the Chlor Alkali Products and Vinyls segment and $142.2 million related to the Epoxy segment.

Interest expense increased by $49.5 million for the year ended December 31, 2020, primarily due to a higher level of debt outstanding and higher interest rates.

9 unchanged sentences

The effective tax rate for 2019 included benefits associated with the finalization of the Internal Revenue Service (IRS) review of years 2013 to 2015 U.S.

income tax claims, stock-based compensation, prior year tax positions, foreign tax law changes, a remeasurement of deferred taxes due to a decrease in our state effective tax rates and a change in tax contingencies.

The effective tax rate also included expenses associated with a net increase in the valuation allowance primarily related to foreign deferred tax assets and liabilities.

These factors resulted in a net $19.4 million tax benefit.

After giving consideration to these items, the effective tax rate for 2019 of 16.8% was lower than the 21% U.S.

federal statutory rate primarily due to state taxes and a net increase in the valuation allowance related to losses in foreign jurisdictions, partially offset by foreign income taxes and favorable permanent salt depletion deductions.

2019 Compared to 2018

Sales for 2019 were $6,110.0 million compared to $6,946.1 million in 2018, a decrease of $836.1 million, or 12%.

Chlor Alkali Products and Vinyls sales decreased by $566.6 million primarily due to lower caustic soda pricing.

Epoxy sales decreased by $278.7 million primarily due to lower product prices and an unfavorable effect of foreign currency translation.

Winchester sales increased by $9.2 million primarily due to higher ammunition sales to commercial customers.

Gross margin decreased $453.2 million, or 40%, from 2018.

Chlor Alkali Products and Vinyls gross margin decreased by $342.1 million, primarily due to lower caustic soda pricing, partially offset by lower raw material and operating costs.

Epoxy gross margin decreased $20.6 million primarily due to lower product prices, partially offset by lower raw material costs, primarily benzene and propylene, and lower maintenance and unabsorbed fixed manufacturing costs associated with maintenance turnarounds.

Winchester gross margin increased $1.2 million primarily due to lower costs, partially offset by lower product prices.

Gross margin in 2018 was positively impacted by insurance recoveries for environmental costs incurred and expensed in prior periods of $111.0 million.

Gross margin as a percentage of sales decreased to 11% in 2019 from 16% in 2018.

Selling and administration expenses in 2019 decreased $13.7 million, or 3%, from 2018.

The years ended December 31, 2019 and 2018 included costs associated with the Information Technology Project of $77.0 million and $36.5 million, respectively, an increase of $40.5 million.

More than offsetting this increase were lower legal and legal-related settlement expenses of $19.3 million, primarily due to the legal fees associated with the environmental recovery actions in 2018, lower consulting and contract services of $13.7 million, lower management incentive compensation expense of $10.2 million, which includes mark-to-market adjustments on stock-based compensation expense, and a favorable foreign currency impact of $8.5 million.

Selling and administration expenses as a percentage of sales were 7% in 2019 and 6% in 2018.

Restructuring charges in 2019 included $58.9 million of non-cash impairment charges for equipment and facilities associated with the closure of a chlor alkali plant and a VDC production facility, both in Freeport, TX.

Restructuring charges in 2019 and 2018 were also associated with the March 2016 closure of 433,000 tons of chlor alkali capacity across three separate locations and the December 2018 decision to permanently close the ammunition assembly operations at our Winchester facility in Geelong, Australia.

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

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

Interest expense for the year ended December 31, 2019 was impacted by a lower level of average debt outstanding partially offset by higher interest rates compared to the year ended December 31, 2018.

Interest expense for the years ended December 31, 2019 and 2018 included $17.0 million and $16.0 million, respectively, of accretion expense related to the ethylene payment discount.

Interest expense was reduced by capitalized interest of $10.8 million and $6.0 million for 2019 and 2018, respectively.

Non-operating pension income includes all components of pension and other postretirement income (costs) other than service costs.

Non-operating pension income was lower for the year ended December 31, 2019, primarily due to an increase in Pension Benefit Guaranty Corporation fees associated with our domestic qualified defined benefit pension plan.

The effective tax rate for 2019 included benefits associated with the finalization of the IRS review of years 2013 to 2015 U.S.

4 unchanged sentences

The effective tax rate for 2018 included benefits associated with the U.S.

Tax Cuts & Jobs Act (2017 Tax Act), stock-based compensation, changes in tax contingencies, a foreign dividend payment, changes associated with prior year tax positions and the remeasurement of deferred taxes due to a decrease in our state effective tax rates.

The effective tax rate also included expenses associated with a net increase in the valuation allowance related to deferred tax assets in foreign jurisdictions and the remeasurement of deferred taxes due to changes in our foreign tax rates.

These factors resulted in a net $2.9 million tax benefit, of which $3.8 million related to the increase of the 2017 Tax Act benefit.

After giving consideration to these items, the effective tax rate for 2018 of 25.7% was higher than the 21% U.S.

federal statutory rate primarily due to state and foreign income taxes, foreign income inclusions and a net increase in the valuation allowance related to current year losses in foreign jurisdictions, partially offset by favorable permanent salt depletion deductions.

SEGMENT RESULTS

We define segment results as income (loss) before interest expense, interest income, goodwill impairment charges, other operating income (expense), non-operating pension income, other income and income taxes, and includes the operating results of non-consolidated affiliates.

Consistent with the guidance in ASC 280 “Segment Reporting,” we have determined it is appropriate to include the operating results of non-consolidated affiliates in the relevant segment financial results.

We have three operating segments:

2 unchanged sentences

Chlorine used in our Epoxy segment is transferred at cost from the Chlor Alkali Products and Vinyls segment.

Sales and profits are recognized in the Chlor Alkali Products and Vinyls segment for all caustic soda generated and sold by Olin.

Years ended December 31,

7 unchanged sentences

Chlor Alkali Products and Vinyls $ 997.8 $ 3.5 $ 336.7

$ 3.5 $ 336.7 $ 637.1

Epoxy 616.5 40.8 53.9

1 unchanged sentence

Corporate/Other:

Environmental (expense) income (2)

Environmental expense (1)

(14.0) (20.9) (20.5)

3 unchanged sentences

(27.9) (9.0) (76.5)

Acquisition-related costs — — (1.0)

Goodwill impairment — (699.8) —

6 unchanged sentences

Income (loss) before taxes $ 1,538.7 $ (1,020.0) $ (36.9)

(1) Losses of non-consolidated affiliates are included in the Chlor Alkali Products and Vinyls segment results consistent with management’s monitoring of the operating segment.

The losses of non-consolidated affiliates were $19.7 million for the year ended December 31, 2018, which reflected a $21.5 million non-cash impairment charge.

(2) Environmental (expense) income for the year ended December 31, 2019 included $4.8 million of an environmental insurance-related settlement gain.

Environmental (expense) income for the year ended December 31, 2018 included pre-tax insurance recoveries for environmental costs incurred and expensed in prior periods of $111.0 million.

Environmental (expense) income is included in cost of goods sold in the consolidated statements of operations.

(3) Other corporate and unallocated costs for the years ended December 31, 2020, 2019 and 2018 included costs associated with the implementation of the Information Technology Project of $73.9 million, $77.0 million and $36.5 million, respectively.

(4) Restructuring charges for the years ended December 31, 2020, 2019 and 2018 included costs associated with the March 2016 closure of 433,000 tons of chlor alkali capacity across three separate locations.

Restructuring charges for the years ended December 31, 2019 and 2018 also

included costs associated with permanently closing the ammunition assembly operations at our Geelong, Australia facility in December 2018.

Restructuring charges for the year ended December 31, 2018 also included charges associated with permanently closing a portion of the Becancour, Canada chlor alkali facility in 2014.

(1) Environmental expense for the years ended December 31, 2021 and 2019 included $2.2 million and $4.8 million, respectively, of insurance recoveries for environmental costs incurred and expensed in prior periods.

Environmental expense is included in cost of goods sold in the consolidated statements of operations.

(2) Other corporate and unallocated costs for the years ended December 31, 2020 and 2019 included costs associated with the implementation of the Information Technology Project of $73.9 million and $77.0 million, respectively.

(3) Restructuring charges for the year ended December 31, 2021 were primarily due to a productivity initiative to align the organization with our new operating model and improve efficiencies, which was completed during the second quarter of 2021, and the 2021 decisions to permanently close our diaphragm-grade chlor alkali capacity, representing 400,000 tons, at our McIntosh, AL facility.

Restructuring charges for the years ended December 31, 2020 and 2019 were primarily associated with the closure of a chlor alkali plant and a VDC production facility, both in Freeport, TX, and included $58.9 million of non-cash impairment charges for equipment and facilities for the year ended December 31, 2019.

(4) Other operating income for the year ended December 31, 2021 included a $1.4 million gain on the sale of a terminal facility.

Other operating income for the year ended December 31, 2020 included an $0.8 million gain on the sale of land.

(6) Interest expense for the year ended December 31, 2020 included $14.6 million of expense related to the 2023 Notes redemption premium and $5.8 million for the write-off of deferred debt issuance costs associated with financing transactions during 2020.

Interest expense for the years ended December 31, 2020, 2019 and 2018 included $4.0 million, $17.0 million and $16.0 million, respectively, of accretion expense related to the ethylene payment discount.

(5) Interest expense for the year ended December 31, 2021 included a loss on extinguishment of debt of $152.2 million which includes bond redemption premiums, write-off of deferred debt issuance costs, bond original issue discount, and recognition of deferred fair value interest rate swap losses associated with the optional prepayment of existing debt.

Interest expense for the year ended December 31, 2020 included a loss on extinguishment of debt of $20.4 million which includes bond redemption premiums and write-off of deferred debt issuance costs.

Interest expense for the years ended 2020 and 2019 included $4.0 million and $17.0 million, respectively, of accretion expense related to the ethylene

payment discount.

Interest expense was reduced by capitalized interest of $3.2 million, $6.4 million and $10.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

2 unchanged sentences

2021 Compared to 2020

Chlor Alkali Products and Vinyls sales for 2021 were $4,140.8 million compared to $2,959.9 million for 2020, an increase of $1,180.9 million, or 40%.

The sales increase was primarily due to higher pricing across all product lines.

Chlor Alkali Products and Vinyls sales increase was also due to higher VCM sales as a result of our primary VCM contract transitioning from a toll manufacturing arrangement to a direct customer sale agreement beginning on January 1, 2021.

Chlor Alkali Products and Vinyls generated segment income of $997.8 million for 2021 compared to $3.5 million for 2020, an increase of $994.3 million.

The increase in Chlor Alkali Products and Vinyls segment results was primarily due to higher product prices ($1,128.0 million) and the favorable impact of Winter Storm Uri ($121.4 million), partially offset by higher raw material and operating costs ($132.8 million) and increased costs associated with product purchased from other parties ($122.3 million).

The impact of Winter Storm Uri includes a net one-time benefit associated with Olin’s customary financial hedges and contracts maintained to provide protection from rapid and dramatic changes in energy costs, partially offset by unabsorbed fixed manufacturing costs and storm-related maintenance costs.

Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $466.4 million and $451.4 million in 2021 and 2020, respectively.

2020 Compared to 2019

Chlor Alkali Products and Vinyls sales for 2020 were $2,959.9 million compared to $3,420.1 million for 2019, a decrease of $460.2 million, or 13%.

5 unchanged sentences

2021 Compared to 2020

Chlor Alkali Products and Vinyls sales for 2019 were $3,420.1 million compared to $3,986.7 million for 2018, a decrease of $566.6 million, or 14%.

The sales decrease was primarily due to lower product pricing, primarily caustic soda, and lower volumes.

Chlor Alkali Products and Vinyls generated segment income of $336.7 million for 2019 compared to $637.1 million for 2018, a decrease of $300.4 million, or 47%.

The decrease in Chlor Alkali Products and Vinyls segment results was primarily due to lower product prices ($449.4 million), primarily caustic soda, and lower volumes ($53.0 million), partially offset by lower raw material and operating costs ($138.1 million) and lower maintenance turnaround costs ($42.4 million).

Chlor Alkali Products and Vinyls 2018 segment results were also negatively impacted by a non-cash impairment charge associated with our investment in a non-consolidated affiliate ($21.5 million).

Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $470.4 million and $473.1 million in 2019 and 2018, respectively.

Epoxy sales were $3,186.0 million for 2021 compared to $1,870.5 million for 2020, an increase of $1,315.5 million, or 70%.

The sales increase was primarily due to higher product prices ($1,211.0 million), a favorable effect of foreign currency translation ($74.9 million), and higher volumes ($29.6 million).

Epoxy reported segment income of $616.5 million for 2021 compared to $40.8 million for 2020, an increase of $575.7 million.

The increase in segment results was primarily due to higher product prices ($1,211.0 million) and increased volumes ($11.5 million), partially offset by higher raw material costs ($554.4 million), primarily benzene and propylene, higher operating and maintenance turnaround costs ($70.9 million) and the unfavorable impact of Winter Storm Uri ($21.5 million).

A significant percentage of our Euro denominated sales are of products manufactured within Europe.

As a result, the impact of foreign currency translation on revenue is primarily offset by the impact of foreign currency translation on raw materials and manufacturing costs also denominated in Euros.

Epoxy segment results included depreciation and amortization expense of $86.1 million and $90.7 million in 2021 and 2020, respectively.

2020 Compared to 2019

2 unchanged sentences

Epoxy reported segment income of $40.8 million for 2020 compared to $53.9 million for 2019, a decrease of $13.1 million, or 24%.

The decrease in segment results was primarily due to lower product prices ($180.0 million) and an unfavorable product mix ($24.4 million), partially offset by lower raw material costs ($162.5 million), primarily benzene and

propylene, and lower operating costs ($38.8 million).

Epoxy segment results were also negatively affected by a first quarter 2020 force majeure declaration by a European phenol supplier, which reduced epoxy resin and epoxy resin precursor production, and Epoxy manufacturing plant closures and operating reductions in Asia due to COVID-19 ($10.0 million).

3 unchanged sentences

2021 Compared to 2020

Epoxy sales were $2,024.4 million for 2019 compared to $2,303.1 million for 2018, a decrease of $278.7 million, or 12%.

The sales decrease was primarily due to lower product prices ($258.9 million) and an unfavorable effect of foreign currency translation ($62.5 million), partially offset by increased volumes ($42.7 million).

Epoxy reported segment income of $53.9 million for 2019 compared to $52.8 million for 2018, an increase of $1.1 million, or 2%.

The increase in segment results was primarily due to lower maintenance costs and unabsorbed fixed manufacturing costs associated with maintenance turnarounds ($40.0 million), decreased operating costs ($18.1 million) and lower raw material costs ($214.1 million), primarily benzene and propylene, partially offset by lower product prices ($258.9 million) and an unfavorable product mix ($12.2 million).

A significant percentage of our Euro denominated sales are of products manufactured within Europe.

Epoxy segment results included depreciation and amortization expense of $100.1 million and $102.4 million in 2019 and 2018, respectively.

Winchester sales were $1,583.8 million for 2021 compared to $927.6 million for 2020, an increase of $656.2 million, or 71%.

The increase was due to higher ammunition sales to commercial customers ($463.6 million) and military customers ($179.2 million), both of which include ammunition produced at Lake City, and law enforcement agencies ($13.4 million).

Winchester reported segment income of $412.1 million for 2021 compared to $92.3 million for 2020, an increase of $319.8 million.

The increase in segment results was due to higher product pricing ($221.6 million) and increased sales volumes ($134.1 million), which includes ammunition produced at Lake City, partially offset by higher commodity and operating costs ($49.4 million).

Segment results in 2020 were also impacted by transition costs relating to the Lake City contract ($13.5 million).

Winchester segment results included depreciation and amortization expense of $23.3 million and $20.1 million in 2021 and 2020, respectively.

2020 Compared to 2019

4 unchanged sentences

Winchester segment results included depreciation and amortization expense of $20.1 million in both 2020 and 2019.

2019 Compared to 2018

Winchester sales were $665.5 million for 2019 compared to $656.3 million for 2018, an increase of $9.2 million, or 1%.

The sales increase was primarily due to higher ammunition sales to commercial customers ($13.7 million), partially offset by decreased sales to military customers and law enforcement agencies ($4.5 million).

Winchester reported segment income of $40.1 million for 2019 compared to $38.4 million for 2018, an increase of $1.7 million, or 4%.

The increase in segment results was primarily due to lower costs ($8.7 million), primarily commodity and other material costs, partially offset by lower product prices ($6.6 million) and a less favorable product mix ($0.4 million).

Winchester segment results included depreciation and amortization expense of $20.1 million and $20.0 million in 2019 and 2018, respectively.

Corporate/Other

2021 Compared to 2020

For the year ended December 31, 2021, charges to income for environmental investigatory and remedial activities were $14.0 million, which includes $2.2 million of insurance recoveries for environmental costs incurred and expensed in prior periods.

Without these recoveries, charges to income for environmental investigatory and remedial activities for the year ended December 31, 2021 would have been $16.2 million, compared to $20.9 million for the year ended December 31, 2020.

These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites.

For 2021, other corporate and unallocated costs were $135.1 million compared to $154.3 million for 2020, a decrease of $19.2 million, or 12%.

The decrease was primarily due to the absence of $73.9 million of costs associated with the implementation of the Information Technology Project, which was completed in late 2020, partially offset by higher variable

incentive compensation costs of $45.7 million, which includes mark-to-market adjustments on stock-based compensation expense, and an unfavorable foreign currency impact of $7.0 million.

2020 Compared to 2019

For the year ended December 31, 2020, charges to income for environmental investigatory and remedial activities were $20.9 million compared to $20.5 million for the year ended December 31, 2019.

4 unchanged sentences

Other corporate and unallocated costs included costs associated with the implementation of the Information Technology Project for the year ended December 31, 2020 and 2019 of $73.9 million and $77.0 million, respectively.

2019 Compared to 2018

For the year ended December 31, 2019, net charges to income for environmental investigatory and remedial activities were $20.5 million, which include $4.8 million of an environmental insurance-related settlement gain.

For the year ended December 31, 2018, net credits to income for environmental investigatory and remedial activities were $103.7 million, which include $111.0 million of insurance recoveries for environmental costs incurred and expensed in prior periods.

Without these recoveries, charges to income for environmental investigatory and remedial activities in 2019 and 2018 would have been $25.3 million and $7.3 million, respectively.

The increase in environmental expense from the prior year primarily relates to a $20.0 million increase in costs at a former manufacturing site resulting from revised remediation estimates as a result of agency action.

These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites.

For 2019, other corporate and unallocated costs were $156.3 million compared to $158.3 million for 2018, a decrease of $2.0 million, or 1%.

The decrease was primarily due to lower legal and legal-related settlement expenses of $17.7 million, primarily due to the legal fees associated with the environmental recovery actions in 2018, decreased management incentive expense of $9.4 million, which includes mark-to-market adjustments on stock-based compensation expense, a favorable foreign currency impact of $8.2 million and lower consulting charges of $6.4 million.

These decreases were partially offset by higher costs associated with the Information Technology Project of $40.5 million.

Restructurings

On December 11, 2019, we announced that we had made the decision to permanently close a chlor alkali plant with a capacity of 230,000 tons and our VDC production facility, both in Freeport, TX.

The VDC facility was closed during the fourth quarter of 2020.

The related chlor alkali plant closure is expected to be completed in the second quarter of 2021.

For the year ended December 31, 2020, we recorded pretax restructuring charges of $3.8 million for facility exit costs and employee severance and related benefit costs related to these actions.

For the year ended December 31, 2019, we recorded pretax restructuring charges of $58.9 million for facility exit costs and non-cash impairment of equipment and facilities related to these actions.

On December 10, 2018, we announced that we had made the decision to permanently close the ammunition assembly operations at our Winchester facility in Geelong, Australia.

Subsequent to the facility’s closure, products for customers in the region are sourced from Winchester manufacturing facilities located in the United States.

For the years ended December 31, 2019 and 2018, we recorded pretax restructuring charges of $0.4 million and $4.1 million, respectively for the write-off of equipment and facility costs, employee severance and related benefit costs, lease and other contract termination costs and facility exit costs related to this action.

Subsequent Event

On January 18, 2021, we announced we had made the decision to permanently close our trichloroethylene and anhydrous hydrogen chloride liquefaction facilities in Freeport, TX, before the end of 2021.

We expect to incur restructuring charges through 2023 of approximately $23 million related to these actions, approximately $2 million of which is expected to be incurred in 2021.

These restructuring costs are expected to consist of $21 million of facility exit costs and $2 million of contract termination costs.

In 2021, we expect to continue to implement and benefit from Olin’s new operating model of optimizing value across our chemicals businesses.

Olin drove sequential pricing improvement in the fourth quarter 2020 for chlorine and almost all chlorine derivatives, including epoxy resins.

During 2021, we expect to deliver ECU pricing improvement compared to 2020, partially offset by lower volumes as we continue to selectively sell less into poor quality markets and remain disciplined in our approach to both sides of the ECU.

In 2021, we expect year over year improvement in both Chlor Alkali Products and Vinyls and Epoxy segment results.

During 2021, productivity efforts are also expected to result in lower operating costs across our chemical businesses.

Winchester 2021 segment income is expected to improve from 2020 segment income of $92.3 million due to higher commercial product pricing and increased sales volumes, which includes ammunition produced at Lake City.

During 2020, Winchester segment results included transition costs related to the Lake City contract of $13.5 million.

Other Corporate and Unallocated costs in 2021 are expected to be lower than the $154.3 million in 2020, primarily due to 2020 results including $73.9 million of costs associated with the Information Technology Project.

The Information Technology Project was substantially completed during 2020.

Partially offsetting these lower costs in 2021 will be higher management incentive expense, including mark-to-market adjustments on stock-based compensation expense.

Olin committed to a productivity initiative to align the organization with our new operating model and improve efficiencies (collectively, Productivity Plan).

These actions and related activities were completed during the second quarter of 2021.

For the year ended December 31, 2021, we recorded pretax restructuring charges of $10.3 million for employee severance and related benefit costs related to these actions.

We do not expect to incur additional restructuring charges related to these actions.

On May 18, 2021, we announced that we had made the decision to permanently close approximately 20% of our diaphragm-grade chlor alkali capacity, representing 225,000 tons, at our Plaquemine, LA facility (Plaquemine Plan).

The closure was completed in the second quarter of 2021.

We do not expect to incur restructuring charges related to this action.

On March 15, 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.

The closure was completed in the first quarter of 2021.

On October 21, 2021, we announced that we had made a decision to permanently cease operations of the remaining 50% of our diaphragm-grade chlor alkali capacity, representing an additional 200,000 tons, at our McIntosh, AL facility (collectively, McIntosh Plans).

The closure is expected to be completed by the end of the third quarter of 2022.

For the year ended December 31, 2021, we recorded pretax restructuring charges of $5.6 million for lease and other contract termination costs related to these actions.

We expect to incur additional restructuring charges through 2026 of approximately $35 million related to these actions.

On January 18, 2021, we announced we had made the decision to permanently close our trichloroethylene and anhydrous hydrogen chloride liquefaction facilities in Freeport, TX, which was completed in the fourth quarter of 2021.

For the year ended December 31, 2021, we recorded pretax restructuring charges of $6.5 million for facility exit costs related to these actions.

We expect to incur restructuring charges through 2024 of approximately $20 million related to these actions.

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.

In early 2022, we expect sequentially higher raw material and operating costs, mainly increased natural gas and electrical power costs.

As a result, we expect the first quarter 2022 results from our Chemicals businesses to be similar to fourth quarter 2021 levels.

We expect our Winchester business first quarter 2022 results to increase sequentially from fourth quarter 2021.

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.

2 unchanged sentences

We have several international qualified defined benefit pension plans for which we anticipate cash contributions of less than $5 million in 2022.

In 2021, we currently expect our capital spending to be in the $200 million range, which would be approximately $100 million lower than 2020 levels.

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 2021 effective tax rate will be in the 15% to 20% range, while we expect cash taxes will be in the range of $15 million, which primarily reflects the utilization of domestic tax loss carryforwards.

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

PENSION AND POSTRETIREMENT BENEFITS

Under ASC 715, we recorded an after-tax benefit of $14.8 million ($26.6 million pretax) to shareholders’ equity as of December 31, 2020 for our pension and other postretirement plans.

This benefit primarily reflected favorable performance on plan assets during 2020, partially offset by a 80-basis point decrease in the domestic pension plans’ discount rate.

We recorded an after-tax benefit of $188.5 million ($249.7 million pretax) to shareholders’ equity as of December 31, 2021 for our pension and other postretirement plans.

This benefit primarily reflected a 50-basis point increase in the domestic pension plans’ discount rate and favorable performance on plan assets during 2021.

In 2020, we recorded an after-tax benefit of $14.8 million ($26.6 million pretax) to shareholders’ equity as of December 31, 2020 for our pension and other postretirement plans.

This benefit primarily reflected favorable performance on plan assets during 2020, partially offset by an 80-basis point decrease in the domestic pension plans’ discount rate.

In 2019, we recorded an after-tax charge of $150.2 million ($183.9 million pretax) to shareholders’ equity as of December 31, 2019 for our pension and other postretirement plans.

This charge primarily reflected a 100-basis point decrease in the domestic pension plans’ discount rate, partially offset by favorable performance on plan assets during 2019.

In 2018, we recorded an after-tax charge of $74.9 million ($98.5 million pretax) to shareholders’ equity as of December 31, 2018 for our pension and other postretirement plans.

This charge primarily reflected unfavorable performance on plan assets during 2018, partially offset by a 60-basis point increase in the domestic pension plans’ discount rate.

These non-cash charges to shareholders’ equity do not affect our ability to borrow under our senior secured credit facility.

These non-cash charges to shareholders’ equity do not affect our ability to borrow under our senior credit facility.

During 2019, we made a discretionary cash contribution to our domestic qualified defined benefit pension plan of $12.5 million.

9 unchanged sentences

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

We have included additional information with respect our defined benefit pension plans and other postretirement benefit plans within Note 12 “Pension Plans” and Note 13 “Postretirement Benefits” of our Notes to Consolidated Financial Statements.

ENVIRONMENTAL MATTERS

8 unchanged sentences

Cash outlays for remedial and investigatory activities associated with former waste sites and past operations were not charged to income but instead were charged to reserves established for such costs identified and expensed to income in prior years.

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

Cash outlays for normal plant operations for the disposal of waste and the operation and maintenance of pollution

control equipment and facilities to ensure compliance with mandated and voluntarily imposed environmental quality standards were charged to income.

Total environmental-related cash outlays for 2022 are estimated to be approximately $215 million, of which approximately $25 million is expected to be spent on investigatory and remedial efforts, approximately $5 million on capital projects and approximately $185 million on normal plant operations.

23 unchanged sentences

Required site OM&M expenses are estimated and accrued in their entirety for required periods not exceeding 30 years, which reasonably approximates the typical duration of long-term site OM&M.

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

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

Years ended December 31,

3 unchanged sentences

Insurance recoveries for costs incurred and expensed (2.2) — (4.8)

Environmental expense (income) $ 20.9 $ 20.5 $ (103.7)

Environmental expense $ 14.0 $ 20.9 $ 20.5

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

During 2018, we settled certain disputes with respect to insurance coverage for costs at various environmental remediation sites for $121.0 million.

Environmental expense (income) for the year ended December 31, 2018 include insurance recoveries for environmental costs incurred and expensed in prior periods of $111.0 million.

The recoveries are reduced by estimated liabilities of $10.0 million associated with claims by subsequent owners of certain of the settled environmental sites.

Environmental expense (income) for the year ended December 31, 2019 included $4.8 million of recoveries associated with resolving the outstanding third party claims against the proceeds from the 2018 environmental insurance settlement.

Our total estimated environmental liability at December 31, 2020 was attributable to 58 sites, 14 of which were United States Environmental Protection Agency National Priority List sites.

Nine sites accounted for 82% of our environmental liability and, of the remaining 49 sites, no one site accounted for more than 3% of our environmental liability.

At seven of the nine sites, part of the site is in the long-term OM&M stage.

At six of the nine sites, we are implementing a remedial action plan for part of the site.

At five of the nine sites, a remedial design is being developed at part of the site and at four of the nine sites, part of the site is subject to a remedial investigation.

All nine sites are either associated with past manufacturing operations or former waste disposal sites.

None of the nine largest sites represents more than 23% of the liabilities reserved on our consolidated balance sheet at December 31, 2020 for future environmental expenditures.

Our consolidated balance sheets included liabilities for future environmental expenditures to investigate and remediate known sites amounting to $147.2 million at December 31, 2020, and $139.0 million at December 31, 2019, of which $128.2 million and $122.0 million, respectively, were classified as other noncurrent liabilities.

Our environmental liability amounts do not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology.

These liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and our estimate of related costs have changed.

As a result of these reassessments, future charges to income may be made for additional liabilities.

Of the $147.2 million included on our consolidated balance sheet at December 31, 2020 for future environmental expenditures, we currently expect to utilize $88.5 million of the reserve for future environmental expenditures over the next 5 years, $27.6 million for expenditures 6 to 10 years in the future, and $31.1 million for expenditures beyond 10 years in the future.

These estimates are subject to a number of risks and uncertainties, as described in “Environmental Costs” contained in Item 1A—“Risk Factors.”

Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, changes in regulatory authorities, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other PRPs, our ability to obtain contributions from other parties and the lengthy time periods over which site remediation occurs.

It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably to us, which could materially adversely affect our financial position or results of operations.

At December 31, 2020, we estimate it is reasonably possible that we may have

additional contingent environmental liabilities of $60 million in addition to the amounts for which we have already recorded as a reserve.

Environmental expense for the years ended December 31, 2021 and 2019 included $2.2 million and $4.8 million, respectively, of insurance recoveries for environmental costs incurred and expensed in prior periods.

Environmental expense is included in cost of goods sold in the consolidated statement of operations.

We have included additional information with respect to environmental matters within Note 20, “Environmental,” of our Notes to Consolidated Financial Statements.

LEGAL MATTERS AND CONTINGENCIES

Please see the discussion of legal matters and contingencies within Item 8, under the heading of “Legal Matters” within Note 23, “Commitments and Contingencies.”

LIQUIDITY, INVESTMENT ACTIVITY AND OTHER FINANCIAL DATA

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Data

7 unchanged sentences

Net investing activities (197.4) (835.7) (365.6)

Long-term debt borrowings (repayments), net 520.3 80.8 (376.1)

Long-term debt (repayments) borrowings, net (1,103.1) 520.3 80.8

Debt early redemption premium (137.7) (14.6) —

Stock options exercised 72.4 1.9 1.7

Common stock repurchased and retired (251.9) — (145.9)

Debt issuance costs (10.3) (16.6) (8.5)

Net financing activities (1,552.0) 371.0 (209.3)

Operating Activities

For 2021, cash provided by operating activities increased by $1,308.0 million from 2020, primarily due to an increase in operating results, partially offset by working capital increases to support operations.

For 2021, working capital increased $243.1 million, compared to a decrease of $141.6 million in 2020.

The working capital increase primarily reflects a higher sales level.

Receivables increased by $360.0 million from December 31, 2020, primarily as a result of higher sales in the fourth quarter of 2021.

For the year ended December 31, 2021, our days sales outstanding (DSO), which was calculated by dividing period end accounts receivable by average daily sales for the period, improved from the comparable prior year period.

Inventories increased by $206.0 million from December 31, 2020 and accounts payable and accrued liabilities increased $240.1 million, which were both primarily as a result of increased raw material costs.

For 2020, cash provided by operating activities decreased by $184.3 million from 2019, primarily due to a decrease in operating results, partially offset by a decrease in the investment in working capital from the prior year.

3 unchanged sentences

Accounts payable and accrued liabilities increased by $149.3 million as a result of specific actions taken by management to improve Olin’s working capital.

For 2019, cash provided by operating activities decreased by $290.5 million from 2018, primarily due to a decrease in operating results partially offset by a decrease in the investment in working capital from the prior year.

For 2019, working capital decreased $11.0 million compared to an increase of $71.6 million in 2018.

Receivables decreased from December 31, 2018 by $12.3 million primarily as a result of lower sales in the fourth quarter of 2019 compared to the fourth quarter of 2018 partially offset by a decrease in receivables sold under the accounts receivable factoring arrangement.

In 2019, inventories decreased by $13.0 million and accounts payable and accrued liabilities decreased by $11.0 million.

The decreases in inventories and accounts payable were primarily due to lower raw material costs.

Capital Expenditures

Investing Activities

Capital spending was $200.6 million and $298.9 million in 2021 and 2020, respectively.

Capital spending was 67% and 78% of depreciation in 2020 and 2019, respectively.

In 2022, we expect our capital spending to be in the $200.0 million to $250.0 million range.

In 2017, we began a multi-year implementation of the Information Technology Project.

1 unchanged sentence

The project was completed in 2020.

Our results for the years ended December 31, 2020, 2019 and 2018 include $41.0 million, $56.0 million and $84.5 million, respectively, of capital spending and $73.9 million, $77.0 million and $36.5 million, respectively, of expenses associated with this project.

In 2021, we expect our capital spending to be in the $200 million range.

Investing Activities

For the year ended December 31, 2020, a payment of $461.0 million was made associated with long-term supply contracts to reserve additional ethylene at producer economics from Dow and a payment of $75.8 million was made associated with the resolution of a dispute over the allocation to Olin of certain capital costs incurred at our Plaquemine, LA site after the October 5, 2015 closing date of the acquisition of Dow’s Chlorine Products business (the Acquisition).

On January 1, 2019, we sold our 9.1% limited partnership interest in Bay Gas for $20.0 million.

The sale closed on February 7, 2019 which resulted in a gain of $11.2 million.

Our results for the years ended December 31, 2020 and 2019 include $41.0 million and $56.0 million, respectively, of capital spending and $73.9 million and $77.0 million, respectively, of expenses associated with this project.

For the year ended December 31, 2020, a payment of $461.0 million was made associated with long-term supply contracts to reserve additional ethylene at producer economics and a payment of $75.8 million was made associated with the resolution of a dispute over the allocation to Olin of certain capital costs incurred at our Plaquemine, LA site.

Financing Activities

For the year ended December 31, 2020, our long-term debt borrowings, net of long-term debt repayments, were $520.3 million, which primarily included borrowings of $500.0 million from the Delayed Draw Term Loan Facility, $497.5 million from the issuance of the 2025 Notes and $125.0 million under our Receivables Financing Agreement, partially offset by repayments for the redemption of $600.0 million of the 2023 Notes.

On October 15, 2020, Olin redeemed $600.0 million of the outstanding 9.75% senior notes due 2023.

The 2023 Notes were redeemed at 102.438% of the principal amount of the 2023 Notes, resulting in a redemption premium of $14.6 million.

The 2023 Notes were redeemed by drawing $500.0 million of the Delayed Draw Term Loan Facility along with utilizing $114.6 million of cash on hand.

On May 19, 2020, Olin issued $500.0 million aggregate principal amount of 9.50% senior notes due June 1, 2025.

The 2025 Notes were issued at 99.5% of par value, the discount from which is included within long-term debt in the consolidated balance sheet.

Interest on the 2025 Notes is payable semi-annually beginning on December 1, 2020.

Proceeds from the 2025 Notes were used for general corporate purposes.

On May 8, 2020, we entered into a $1,300.0 million senior secured credit facility (Senior Secured Credit Facility) that amended our existing five-year, $2,000.0 million senior credit facility.

The Senior Secured Credit Facility included a $500.0 million senior secured delayed-draw term loan facility (Delayed Draw Term Loan Facility) and a $800.0 million senior secured revolving credit facility (Senior Revolving Credit Facility).

The maturity date for the Senior Secured Credit Facility is July 16, 2024.

The amendment modified the financial covenants of the Senior Secured Credit Facility to be less restrictive and expanded the permitted use of proceeds of the Delayed Draw Term Loan Facility to include general corporate purposes.

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

On July 16, 2019, Olin issued $750.0 million aggregate principal amount of 5.625% senior notes due August 1, 2029 (2029 Notes), which were registered under the Securities Act of 1933, as amended.

Proceeds from the 2029 Notes were used to redeem the remaining balance of the $1,375.0 million Term Loan Facility of $493.0 million and $150.0 million of the Receivables Financing Agreement.

On July 16, 2019, Olin entered into a five-year, $2,000.0 million senior credit facility (2019 Senior Credit Facility), which replaced the existing $1,975.0 million senior credit facility (2017 Senior Credit Facility).

In December 2019, Olin amended the 2019 Senior Credit Facility which amended the restrictive covenants of the agreement, including expanding the coverage and leverage ratios to be less restrictive over the next two and a half years.

The 2019 Senior Credit Facility included a senior unsecured delayed-draw term loan facility in an aggregate principal amount of up to $1,200.0 million and an $800.0 million senior unsecured revolving credit facility.

During 2021 and 2020, activity of our outstanding debt included:

Long-term Debt Borrowings (Repayments) Debt Early Redemption Premiums Paid Long-term Debt Borrowings (Repayments) Debt Early Redemption Premiums Paid

December 31, 2021 Year Ended

December 31, 2020

Debt Instrument ($ in millions)

Senior Term Loans $ 315.0 $ 675.0

Receivables Financing Agreement 225.0 655.0

9.50% senior notes due 2025 — 497.5

Total borrowings $ 540.0 $ 1,827.5

10.00% senior notes due 2025 $ (500.0) $ 25.0 $ — $ —

9.50% senior notes due 2025 (391.4) 99.4 — —

9.75% senior notes due 2023 (120.0) 2.9 (600.0) 14.6

5.625% senior notes due 2029 (80.7) 8.0 — —

5.00% senior notes due 2030 (34.7) 2.4 — —

Senior Term Loans (465.0) — (175.0) —

Receivables Financing Agreement (50.0) — (530.0) —

Finance leases (1.3) — (2.2) —

Total repayments $ (1,643.1) $ 137.7 $ (1,307.2) $ 14.6

Long-term debt (repayments) borrowings, net $ (1,103.1) $ 520.3

In 2021, we paid debt issuance costs of $3.9 million, primarily for the amendments to our Senior Credit Facility.

In 2020, we paid debt issuance costs of $10.3 million, primarily for the issuance of the 2025 Notes and amendments to our Senior Credit Facility and Receivables Financing Agreement.

In 2021, we repurchased and retired 4.7 million shares of common stock with a total value of $251.9 million.

In 2020, no shares were repurchased.

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

In 2020, we paid debt issuance costs of $10.3 million, primarily for the issuance of the 2025 Notes and amendments to our Senior Secured Credit Facility and Receivables Financing Agreement.

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

The percent of total debt to total capitalization increased to 72.7% at December 31, 2020 compared to 58.0% at

December 31, 2019, as a result of a higher level of debt outstanding and lower shareholders’ equity primarily resulting from the goodwill impairment charge.

We issued 3.4 million and 0.1 million shares representing stock options exercised for the year ended December 31, 2021 and 2020, respectively, with a total value of $72.4 million and $1.9 million, respectively.

The percent of total debt to total capitalization decreased to 51.2% at December 31, 2021 compared to 72.7% at December 31, 2020, as a result of a lower level of debt outstanding and higher shareholders’ equity primarily resulting from our operating results.

Dividends per common share were $0.80 in 2021 and 2020.

5 unchanged sentences

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 debt and equity markets.

The overall cash decrease of $31.2 million in 2020 primarily reflects our payments under long-term supply contracts, capital spending and dividends paid, partially offset by borrowings under the 2025 Notes and a decrease in working capital.

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 capital expenditure requirements and comply with the financial ratios in our debt agreements.

On April 26, 2018, our board of directors authorized a share repurchase program for the purchase of shares of common stock at an aggregate price of up to $500.0 million.

This program will terminate upon the purchase of $500.0 million of our common stock.

For the year ended December 31, 2020, there were no shares repurchased.

For the year ended December 31, 2019, 8.0 million shares were repurchased and retired at a cost of $145.9 million.

As of December 31, 2020, a total of 10.1 million shares were repurchased and retired at a cost of $195.9 million and $304.1 million of common stock remained authorized to be repurchased.

On October 15, 2020, Olin redeemed $600.0 million of the outstanding 2023 Notes.