OLIN Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Business Background Olin Corporation (Olin) is a Virginia corporation, incorporated in 1892, having its principal executive offices in Clayton, MO. We are a leading vertically-integrated global manufacturer and distributor of chemical products and a leading U.S. manufacturer of ammunition. Our operations are concentrated in three business segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. All of our business segments are capital intensive manufacturing businesses. The Chlor Alkali Products and Vinyls segment manufactures and sells chlorine and caustic soda, ethylene dichloride and vinyl chloride monomer, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, perchloroethylene, hydrochloric acid, hydrogen, bleach products and potassium hydroxide. The Epoxy segment produces and sells a full range of epoxy materials and precursors, including aromatics (acetone and phenol), allyl chloride, epichlorohydrin, liquid epoxy resins, solid epoxy resins and systems and growth 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. 26 Table of Contents Executive Summary 2023 Overview Net income for the three months ended March 31, 2023 was $156.3 million compared to $393.0 million for the comparable prior year period in 2022. For the three months ended March 31, 2023, the decrease in net income from the prior year was primarily due to lower operating results across all of our business segments. On January 10, 2023, Blue Water Alliance (BWA), our joint venture with Mitsui & Co., Ltd. (Mitsui), began operations after receiving all necessary regulatory approvals. BWA is an independent global trader of ECU-based derivatives, focused on globally traded caustic soda and ethylene dichloride (EDC). Olin holds 51% interest and exercises control in BWA and the joint venture is consolidated in our consolidated financial statements with Mitsui’s 49% interest in BWA classified as noncontrolling interest. All intercompany accounts and transactions are eliminated in consolidation. Chlor Alkali Products and Vinyls reported segment income of $245.9 million for the three months ended March 31, 2023, respectively. Chlor Alkali Products and Vinyls segment results for first quarter 2023 were lower than in the comparable prior year period primarily due to lower volumes, partially offset by higher pricing across all products except vinyls intermediates. Epoxy reported segment income of $21.4 million for the three months ended March 31, 2023. Epoxy segment results were lower than in the comparable prior year period primarily due to lower volumes and lower pricing, which were both impacted by record exports out of Asia into Europe and North America markets. Partially offsetting the lower volumes and prices were lower raw material and operating costs. Winchester reported segment income of $61.0 million for the three months ended March 31, 2023. Winchester segment results were lower than in the comparable prior year period primarily due to lower commercial volumes and higher commodity and operating costs. Liquidity and Share Repurchases During the three months ended March 31, 2023, we repurchased and retired 3.6 million shares of common stock at a total value of $206.1 million. As of March 31, 2023, we have $1,497.2 million of remaining authorized common stock to be purchased under our 2022 Repurchase Authorization Program. During the three months ended March 31, 2023, we had net borrowings of $192.6 million with $140.0 million borrowed under our Senior Revolving Credit Facility and an incremental $55.0 million drawn under our Receivables Financing Agreement. The proceeds were used to fund inventory built in advance of a planned maintenance turnaround and our normal seasonal working capital growth during the first quarter. 27 Table of Contents Consolidated Results of Operations Three Months Ended March 31, 2023 2022 ($ in millions, except per share data) Sales $ 1,844.3 $ 2,461.4 Cost of goods sold 1,441.7 1,807.5 Gross margin 402.6 653.9 Selling and administration 111.8 104.3 Restructuring charges 60.9 3.1 Other operating income 0.5 — Operating income 230.4 546.5 Interest expense 42.4 32.9 Interest income 1.1 0.4 Non-operating pension income 5.7 9.6 Income before taxes 194.8 523.6 Income tax provision 40.8 130.6 Net income $ 154.0 $ 393.0 Net loss attributable to noncontrolling interests (2.3) — Net income attributable to Olin Corporation $ 156.3 $ 393.0 Net income attributable to Olin Corporation per common share: Basic $ 1.19 $ 2.54 Diluted $ 1.16 $ 2.48 Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022 Sales for the three months ended March 31, 2023 were $1,844.3 million compared to $2,461.4 million in the same period last year, a decrease of $617.1 million, or 25%. Epoxy sales decreased by $428.8 million, primarily due to lower volumes, including the closure of our Cumene facility and one of our bisphenol (BisA) production lines. Chlor Alkali Products and Vinyls sales decreased by $128.1 million primarily due to lower volumes, partially offset by product sold by BWA and higher prices across all products except vinyls intermediates. Winchester sales decreased by $60.2 million, primarily due to lower commercial sales volumes. Gross margin decreased $251.3 million for the three months ended March 31, 2023 compared to the prior year. Epoxy gross margin decreased by $120.4 million primarily due to lower volumes. Chlor Alkali Products and Vinyls gross margin decreased by $75.2 million primarily due to lower volumes partially offset by higher prices across all products except vinyls intermediates. Winchester gross margin decreased by $58.0 million primarily due to lower commercial volumes. Gross margin as a percentage of sales decreased to 22% in 2023 from 27% in 2022. Selling and administration expenses for the three months ended March 31, 2023 were $111.8 million, an increase of $7.5 million from the prior year. The increase was primarily due to higher stock-based compensation expense of $4.2 million, which includes mark-to-market adjustments and an unfavorable foreign currency impact of $2.5 million. Selling and administration expenses as a percentage of sales increased to 6% in 2023 from 4% in 2022. Restructuring charges for the three months ended March 31, 2023 and 2022 were $60.9 million and $3.1 million, respectively. The increase in charges was primarily due to our decision to cease operations at our Cumene facility in Terneuzen, Netherlands and solid epoxy resin production at our facilities in Gumi, South Korea and Guaruja, Brazil which resulted in pretax restructuring charges of $55.9 million for the three months ended March 31, 2023. Interest expense increased by $9.5 million for the three months ended March 31, 2023 from the prior year primarily due to higher average interest rates partially offset by lower level of debt outstanding. 28 Table of Contents The effective tax rate for the three months ended March 31, 2023 included a benefit associated with stock-based compensation, a benefit from remeasurement of deferred taxes due to a decrease in our state effective tax rates, a benefit associated with prior year tax positions, an expense from a net increase in the valuation allowance related to deferred tax assets in foreign jurisdictions, and an expense from a change in tax contingencies, resulting in a net $5.2 million tax benefit. After giving consideration to these items, the effective tax rate for the three months ended March 31, 2023 of 23.6% was higher than the 21% U.S. federal statutory rate primarily due to state and foreign income taxes and an increase in the valuation allowance related to losses in foreign jurisdictions, partially offset by favorable permanent salt depletion deductions. The effective tax rate for the three months ended March 31, 2022 included a benefit associated with prior year tax, stock-based compensation and a change in tax contingencies, resulting in a net $2.3 million tax benefit. After giving consideration to these items, the effective tax rate for the three months ended March 31, 2022 of 25.4% was higher than the 21% U.S. federal statutory rate primarily due to state and foreign income taxes, partially offset by foreign income exclusions and a favorable permanent salt depletion deductions. Segment Results We define segment results as income (loss) before interest expense, interest income, other operating income (expense), non-operating pension income, other income and income taxes. We have three operating segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. The three operating segments reflect the organization used by our management for purposes of allocating resources and assessing performance. Chlorine and caustic soda used in our Epoxy segment is transferred at cost from the Chlor Alkali Products and Vinyls segment. Three Months Ended March 31, 2023 2022 Sales: ($ in millions) Chlor Alkali Products and Vinyls $ 1,117.1 $ 1,245.2 Epoxy 360.7 789.5 Winchester 366.5 426.7 Total sales $ 1,844.3 $ 2,461.4 Income before taxes: Chlor Alkali Products and Vinyls $ 245.9 $ 328.6 Epoxy 21.4 138.0 Winchester 61.0 118.9 Corporate/other: Environmental expense (3.2) (5.6) Other corporate and unallocated costs (34.3) (30.3) Restructuring charges (60.9) (3.1) Other operating income 0.5 — Interest expense (42.4) (32.9) Interest income 1.1 0.4 Non-operating pension income 5.7 9.6 Income before taxes $ 194.8 $ 523.6 Chlor Alkali Products and Vinyls Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022 Chlor Alkali Products and Vinyls sales for the three months ended March 31, 2023 were $1,117.1 million compared to $1,245.2 million for the same period in 2022, a decrease of $128.1 million, or 10%. The sales decrease was primarily due to lower volumes, partially offset by product sold by BWA and higher prices across all products except vinyls intermediates. Chlor Alkali Products and Vinyls segment income was $245.9 million for the three months ended March 31, 2023 compared to $328.6 million for the same period in 2022. The decrease in segment results of $82.7 million was due to lower volumes across all products ($181.5 million) and increased costs associated with product purchased from other parties ($32.1 29 Table of Contents million), partially offset by higher prices across all products except vinyls intermediates ($123.0 million) and lower raw material and operating costs ($7.9 million). Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $114.4 million and $123.1 million for the three months ended March 31, 2023 and 2022, respectively. Epoxy Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022 Epoxy sales for the three months ended March 31, 2023 were $360.7 million compared to $789.5 million for the same period in 2022, a decrease of $428.8 million, or 54%. The sales decrease was primarily due to lower volumes ($194.0 million), the closure of our Cumene facility and one of our BisA production lines ($184.7 million), lower product prices ($42.6 million) and an unfavorable effect of foreign currency translation ($7.5 million). Epoxy segment income was $21.4 million for the three months ended March 31, 2023 compared to $138.0 million for the same period in 2022. The decrease in segment results of $116.6 million was primarily due to lower volumes ($117.5 million) and lower product prices ($42.6 million), which were both impacted by record exports out of Asia into Europe and North America markets, partially offset by lower raw material and operating costs ($43.5 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 $14.5 million and $20.4 million for the three months ended March 31, 2023 and 2022, respectively. Winchester Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022 Winchester sales were $366.5 million for the three months ended March 31, 2023 compared to $426.7 million for the same period in 2022, a decrease of $60.2 million, or 14%. The decrease was due to lower ammunition sales to commercial customers ($113.7 million), partially offset by higher sales to military customers ($45.9 million) and law enforcement agencies ($7.6 million). Commercial ammunition sales were primarily impacted by lower volumes. Winchester segment income was $61.0 million for the three months ended March 31, 2023 compared to $118.9 million for the same period in 2022, a decrease of $57.9 million. The decrease in segment results was due to lower volumes ($46.9 million), higher commodity and operating costs ($11.0 million). Winchester segment income included depreciation and amortization expense of $6.2 million for both the three months ended March 31, 2023 and 2022. Corporate/Other Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022 For the three months ended March 31, 2023, charges to income for environmental investigatory and remedial activities were $3.2 million compared to $5.6 million for the three months ended March 31, 2022. These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites. For the three months ended March 31, 2023, other corporate and unallocated costs were $34.3 million compared to $30.3 million for the three months ended March 31, 2022, an increase of $4.0 million. The increase was primarily due to higher stock-based compensation costs ($4.2 million), which includes mark-to-market adjustments, and an unfavorable foreign currency impact ($2.5 million), partially offset by lower legal and legal-related settlement expenses ($1.0 million). Restructurings As a result of weak global resin demand and higher cost structures within the European region, we began a review of our global Epoxy asset footprint to optimize the most productive and cost effective assets to support our strategic operating model. As part of this review we announced operational cessations in the fourth quarter of 2022 and the first quarter of 2023. 30 Table of Contents On March 21, 2023, we announced we had made the decision to cease operations at our Cumene facility in Terneuzen, Netherlands and solid epoxy resin production at our facilities in Gumi, South Korea and Guaruja, Brazil. The closures were completed in the first quarter 2023. During the fourth quarter of 2022, we committed to and completed a plan to close down one of our BisA production lines at our Stade, Germany site. For the three months ended March 31, 2023, we recorded pretax restructuring charges of $55.9 million for contract termination costs, the write-off of equipment and facility costs and facility exit costs related to the first quarter 2023 cessations. For the three months ended March 31, 2023, we recorded additional pretax restructuring charges of $1.9 million for facility exit costs related to the fourth quarter 2022 BisA closure. We expect to incur additional restructuring charges through 2026 of approximately $30 million related to these actions. Outlook In 2023, we expect the on-going challenging global economic conditions to continue as we expect operating results to decline across all our business segments compared to 2022. We expect our Chlor Alkali Products and Vinyls business to experience declining caustic soda market conditions and continued vinyls intermediates demand weakness. We expect our Epoxy business to continue to be challenged by European and North American demand weakness, aggravated by elevated Asian exports and a muted recovery of Chinese domestic demand. We expect the second quarter 2023 operating results from our Chemical businesses to be slightly lower than first quarter 2023 levels. We expect our Winchester business second quarter 2023 results to increase sequentially from first quarter 2023 levels as commercial customer inventories become more normalized. Overall, we expect Olin’s second quarter 2023 operating results to slightly decline from first quarter 2023 levels. Other Corporate and Unallocated costs in 2023 are expected to be comparable with the $131.5 million in 2022. During 2023, we anticipate environmental expenses in the $25 million to $30 million range, compared to $23.2 million in 2022. We expect non-operating pension income in 2023 to be in the $20 million to $25 million range compared to $38.7 million in 2022. Based on our plan assumptions and estimates, we will not be required to make any cash contributions to our domestic qualified defined benefit pension plan in 2023. We have several international qualified defined benefit pension plans for which we anticipate cash contributions of less than $5 million in 2023. In 2023, we currently expect our capital spending to be in the $200 million to $250 million range and we expect to make payments under other long-term supply contracts in the $50 million to $100 million range for energy modernization on the U.S. Gulf Coast. We expect 2023 depreciation and amortization expense to be in the $550 million to $575 million range. We currently believe the 2023 effective tax rates will be in the 25% to 30% range and our cash tax rate to be in the 30% to 35% range as a result of previously deferred international tax payments expected to be made in 2023. Environmental Matters Environmental provisions charged to income, which are included in costs of goods sold, were $3.2 million and $5.6 million for the three months ended March 31, 2023 and 2022, respectively. Our liabilities for future environmental expenditures were as follows: March 31, 2023 2022 ($ in millions) Balance at beginning of year $ 146.6 $ 147.3 Charges to income 3.2 5.6 Remedial and investigatory spending (3.1) (3.5) Foreign currency translation adjustments — 0.1 Balance at end of period $ 146.7 $ 149.5 31 Table of Contents Environmental investigatory and remediation activities spending was associated with former waste disposal sites and past manufacturing operations. Spending in 2023 for investigatory and remedial efforts, the timing of which is subject to regulatory approvals and other uncertainties, is estimated to be approximately $25 million. Cash outlays for remedial and investigatory activities associated with former waste disposal sites and past manufacturing operations were not charged to income, but instead, were charged to reserves established for such costs identified and expensed to income in prior periods. Associated costs of investigatory and remedial activities are provided for in accordance with generally accepted accounting principles governing probability and the ability to reasonably estimate future costs. Our ability to estimate future costs depends on whether our investigatory and remedial activities are in preliminary or advanced stages. With respect to unasserted claims, we accrue liabilities for costs that, in our experience, we expect to incur to protect our interests against those unasserted claims. Our accrued liabilities for unasserted claims amounted to $8.9 million at March 31, 2023. With respect to asserted claims, we accrue liabilities based on remedial investigation, feasibility study, remedial action and operation, maintenance and monitoring (OM&M) expenses that, in our experience, we expect to incur in connection with the asserted claims. Required site OM&M expenses are estimated and accrued in their entirety for required periods not exceeding 30 years, which reasonably approximates the typical duration of long-term site OM&M. Charges to income for investigatory and remedial efforts may be material to our operating results in 2023. The condensed balance sheets included reserves for future environmental expenditures to investigate and remediate known sites amounting to $146.7 million, $146.6 million and $149.5 million at March 31, 2023, December 31, 2022 and March 31, 2022, respectively, of which $121.7 million, $121.6 million and $124.5 million, respectively, were classified as other noncurrent liabilities. These amounts do not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology. These liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and our estimate of related costs have changed. As a result of these reassessments, future charges to income may be made for additional liabilities. Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, changes in regulatory authorities, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other Potentially Responsible Parties (PRPs), our ability to obtain contributions from other parties and the lengthy time periods over which site remediation occurs. It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably to us, which could materially adversely affect our financial position or results of operations. Legal Matters and Contingencies Discussion of legal matters and contingencies can be referred to under Item 1, within Note 10, “Commitments and Contingencies.” Liquidity and Capital Resources Cash Flow Data Three Months Ended March 31, 2023 2022 Provided By (Used For) ($ in millions) Net operating activities $ 37.5 $ 353.5 Capital expenditures (61.4) (47.3) Payments under other long-term supply contracts (9.3) — Long-term debt borrowings (repayments), net 192.6 (0.2) Common stock repurchased and retired (206.1) (263.2) Stock options exercised 11.2 5.2 Contributions received from noncontrolling interests 44.1 — Net financing activities 15.6 (289.0) 32 Table of Contents Operating Activities For the three months ended March 31, 2023, cash provided by operating activities decreased by $316.0 million from the three months ended March 31, 2022, primarily due to a decrease in operating results and an increase in working capital compared with the prior year. For the three months ended March 31, 2023, working capital increased $244.4 million compared to an increase of $195.5 million for the three months ended March 31, 2022. The working capital increase during the first quarter reflects inventory built in advance of a planned maintenance turnaround and normal seasonal working capital growth. Inventories increased by $146.0 million from December 31, 2022. Accounts payable and accrued liabilities decreased $66.1 million primarily as a result of timing of payments during the first quarter of 2023. Investing Activities Capital spending of $61.4 million for the three months ended March 31, 2023 compared to $47.3 million for the corresponding period in 2022. For the total year 2023, we currently expect our capital spending to be in the $200 million to $250 million range. We expect 2023 depreciation and amortization expense to be in the $550 million to $575 million range. For the three months ended March 31, 2023, payments under other long-term supply contracts was $9.3 million for energy modernization on the U.S. Gulf Coast and we expect to make payments for the total year 2023 in the $50 million to $100 million range. Financing Activities For the three months ended March 31, 2023, we had long-term debt borrowings, net of long-term debt repayments of $192.6 million. For the three months ended March 31, 2022, we had long-term debt repayments, net of long-term debt borrowings of $0.2 million. For the three months ended March 31, 2023 and 2022, 3.6 million and 5.2 million shares, respectively, of common stock were repurchased and retired at a total value of $206.1 million and $263.2 million, respectively. We issued 0.4 million and 0.2 million shares representing stock options exercised for the three months ended March 31, 2023 and 2022, respectively, with a total value of $11.2 million and $5.2 million, respectively. For the three months ended March 31, 2023, we received $44.1 million of cash contributions from noncontrolling interests for BWA. The percent of total debt to total capitalization increased to 52.3% as of March 31, 2023 from 50.4% as of December 31, 2022 as a result of a higher level of debt outstanding. In the first quarter of 2023 and 2022, we paid a quarterly dividend of $0.20 per share. Dividends paid for the three months ended March 31, 2023 and 2022, were $26.2 million and $30.8 million, respectively. On April 27, 2023, our Board of Directors declared a dividend of $0.20 per share on our common stock, payable on June 9, 2023 to shareholders of record on May 11, 2023. The payment of cash dividends is subject to the discretion of our Board of Directors and will be determined in light of then-current conditions, including our earnings, our operations, our financial condition, our capital requirements and other factors deemed relevant by our Board of Directors. In the future, our Board of Directors may change our dividend policy, including the frequency or amount of any dividend, in light of then-existing conditions. Liquidity and Other Financing Arrangements Our principal sources of liquidity are from cash and cash equivalents, cash flow from operations and borrowings under our Senior Revolving Credit Facility, Receivables Financing Agreement and AR Facilities. Additionally, we believe that we have access to the high-yield debt and equity markets. On October 11, 2022, we entered into a new $1,550.0 million senior credit facility (Senior Credit Facility) that replaced our previous senior credit facility (2021 Senior Credit Facility). The Senior Credit Facility includes a senior term loan facility with aggregate commitments of $350.0 million (Term Loan Facility) and a senior revolving credit facility with aggregate 33 Table of Contents commitments of $1,200.0 million (Senior Revolving Credit Facility). The Term Loan Facility was fully drawn on the closing date with the proceeds of the Term Loan Facility used to refinance the loans and commitments outstanding under the 2021 Senior Credit Facility. The Term Loan Facility requires principal amortization amounts payable beginning March 31, 2023 at a rate of 0.625% per quarter through the end of 2024, increasing to 1.250% per quarter thereafter until maturity. The maturity date for the Senior Credit Facility is October 11, 2027. The Senior Revolving Credit Facility includes a $100.0 million letter of credit subfacility. At March 31, 2023, we had $1,059.6 million available under our $1,200.0 million Senior Revolving Credit Facility because we had $140.0 million borrowed under the facility and issued $0.4 million of letters of credit. We were in compliance with all covenants and restrictions under all our outstanding credit agreements as of March 31, 2023, and no event of default had occurred that would permit the lenders under our outstanding credit agreements to accelerate the debt if not cured. In the future, our ability to generate sufficient operating cash flows, among other factors, will determine the amounts available to be borrowed under these facilities. As a result of our restrictive covenant related to the net leverage ratio, the maximum additional borrowings available to us could be limited in the future. The limitation, if an amendment or waiver from our lenders is not obtained, could restrict our ability to borrow the maximum amounts available under the Senior Revolving Credit Facility and the Receivables Financing Agreement. As of March 31, 2023, there were no covenants or other restrictions that limited our ability to borrow. The overall decrease in cash for the three months ended March 31, 2023 primarily reflects our share repurchases, capital spending, and dividends paid, partially offset by our debt borrowings, operating results and contributions from noncontrolling interests. We believe, based on current and projected levels of cash flow from our operations, together with our cash and cash equivalents on hand and the availability to borrow under our Senior Revolving Credit Facility, Receivables Financing Agreement and AR Facilities, we have sufficient liquidity to meet our short-term and long-term needs to make required payments of interest on our debt, fund our operating needs, working capital and our capital expenditure requirements, and comply with the financial ratios in our debt agreements. On July 28, 2022, our Board of Directors authorized a share repurchase program for the purchase of shares of common stock at an aggregate price of up to $2.0 billion. This program will terminate upon the purchase of $2.0 billion of common stock. For the three months ended March 31, 2023, 3.6 million shares of common stock have been repurchased and retired at a total value of $206.1 million. As of March 31, 2023, 9.6 million shares of common stock have been repurchased and retired at a total value of $502.8 million under the 2022 Repurchase Authorization program, and $1,497.2 million of common stock remained authorized to be repurchased under the program. We maintain a $425.0 million Receivables Financing Agreement (Receivables Financing Agreement) that is scheduled to mature on October 14, 2025 . Under the Receivables Financing Agreement, our eligible trade receivables are used for collateralized borrowings and continue to be serviced by us. In addition, the Receivables Financing Agreement incorporates the net leverage ratio covenant that is contained in the Senior Credit Facility. As of March 31, 2023, December 31, 2022 and March 31, 2022, we had $355.0 million, $300.0 million and $300.0 million, respectively, drawn under the agreement. As of March 31, 2023, $569.0 million of our trade receivables were pledged as collateral and we had $70.0 million of additional borrowing capacity under the Receivables Financing Agreement. Olin also has trade accounts receivable factoring arrangements (AR Facilities) and pursuant to the terms of the AR Facilities, certain of our domestic subsidiaries may sell their accounts receivable up to a maximum of $207.7 million and certain of our foreign subsidiaries may sell their accounts receivable up to a maximum of €42.9 million. We will continue to service the outstanding accounts sold. These receivables qualify for sales treatment under ASC 860 and, accordingly, the proceeds are included in net cash provided by operating activities in the condensed statements of cash flows. The gross amount of receivables sold for the three months ended March 31, 2023 and 2022 totaled $252.3 million and $281.4 million, respectively. The factoring discount paid under the AR Facilities is recorded as interest expense on the condensed statements of operations. The factoring discount was $1.2 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively. The agreements are without recourse and therefore no recourse liability has been recorded as of March 31, 2023, December 31, 2022 and March 31, 2022. As of March 31, 2023, December 31, 2022 and March 31, 2022, $77.1 million, $111.8 million and $97.9 million, respectively, of receivables qualifying for sales treatment were outstanding and will continue to be serviced by us. 34 Table of Contents At March 31, 2023, we had total letters of credit of $76.9 million outstanding, of which $0.4 million were issued under our Senior Revolving Credit Facility. The letters of credit were used to support certain long-term debt, certain workers compensation insurance policies, certain plant closure and post-closure obligations, certain international payment obligations and certain international pension funding requirements. Our current debt structure is used to fund our business operations. As of March 31, 2023, we had long-term borrowings, including the current installment and finance lease obligations, of $2,774.2 million, of which $998.7 million were at variable rates. Included within long-term borrowings on the condensed balance sheets were deferred debt issuance costs and unamortized bond original issue discount of $19.4 million as of March 31, 2023. Commitments from banks under our Senior Revolving Credit Facility, Receivables Financing Agreement and AR Facilities are additional sources of liquidity. Credit Ratings We receive ratings from three independent credit rating agencies: Fitch Ratings (Fitch), Moody's Investor Service (Moody's) and Standard & Poor's (S&P). The following table summarizes our credit ratings as of January 31, 2023: Credit Ratings Long-term Rating Outlook Fitch Ratings BBB- Stable Moody’s Investors Service Ba1 Stable Standard & Poor’s BB+ Positive On January 12, 2023, Fitch assigned a first-time inaugural rating of BBB- and a stable outlook. On June 10, 2022, Moody's upgraded Olin to Ba1 from Ba2, and changed its outlook from Positive to Stable. On April 4, 2023, S&P affirmed Olin’s BB+ rating and positive outlook. Contractual Obligations Purchasing commitments are utilized in our normal course of business for our projected needs. We have supply contracts with various third parties for certain raw materials including ethylene, electricity, propylene and benzene. These agreements are maintained through long-term cost based contracts that provide us with a reliable supply of key raw materials. There have been no material changes in our contractual obligations and commitments as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 other than those which occur in the ordinary course of business. New Accounting Pronouncements Discussion of new accounting pronouncements can be referred to under Item 1, within Note 2, “Recent Accounting Pronouncements.”