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. Executive Summary 2023 Overview Net income for the three and six months ended June 30, 2023 was $146.9 million and $303.2 million, respectively, compared to $422.1 million and $815.1 million, respectively, for the comparable prior year periods in 2022. The decrease in net income from the prior year periods was primarily due to lower operating results across all of our business segments. Net income for both the three and six months ended June 30, 2023 also reflects a gain of $27.0 million for the sale of our domestic private trucking fleet and operations for cash proceeds of $28.5 million. 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. 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 $180.1 million and $426.0 million for the three and six months ended June 30, 2023, respectively. Chlor Alkali Products and Vinyls segment results were lower than in the comparable prior year periods primarily due to lower volumes, partially offset by higher pricing across all products except vinyls intermediates. The Chlor Alkali Products and Vinyls second quarter 2023 segment results were also negatively impacted by $78.9 million for the maintenance turnaround and subsequent operating issues with the vinyl chloride monomer plant at the Freeport, TX facility resulting in higher costs and reduced profit from lost sales. Epoxy reported segment loss of $0.5 million for the three months ended June 30, 2023 and segment income of $20.9 million for the six months ended June 30, 2023. Epoxy segment results were lower than in the comparable prior year periods primarily due to lower volumes and lower product pricing, which were both impacted by record exports out of Asia into Europe and North America markets. Partially offsetting the lower volumes and pricing were lower raw material and operating costs. Winchester reported segment income of $64.7 million and $125.7 million for the three and six months ended June 30, 2023, respectively. Winchester segment results were lower than in the comparable prior year periods primarily due to lower commercial volumes and pricing, and higher commodity and operating costs, partially offset by higher domestic and international military sales. Liquidity and Share Repurchases During the six months ended June 30, 2023, we repurchased and retired 7.1 million shares of common stock at a total value of $393.0 million. As of June 30, 2023, we had $1,312.2 million of remaining authorized common stock to be purchased under our 2022 Repurchase Authorization Program. During the six months ended June 30, 2023, we had net borrowings of $143.7 million with $215.0 million borrowed under our Senior Revolving Credit Facility and repayments of $65.2 million under our Receivables Financing Agreement. The net borrowings were used to fund our normal seasonal working capital growth. 28 Table of Contents Consolidated Results of Operations Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 ($ in millions, except per share data) Sales $ 1,702.7 $ 2,616.1 $ 3,547.0 $ 5,077.5 Cost of goods sold 1,392.6 1,951.4 2,834.3 3,758.9 Gross margin 310.1 664.7 712.7 1,318.6 Selling and administration 101.2 99.0 213.0 203.3 Restructuring charges 19.2 3.6 80.1 6.7 Other operating income 27.0 3.3 27.5 3.3 Operating income 216.7 565.4 447.1 1,111.9 Interest expense 45.3 34.5 87.7 67.4 Interest income 1.1 0.3 2.2 0.7 Non-operating pension income 5.4 9.5 11.1 19.1 Income before taxes 177.9 540.7 372.7 1,064.3 Income tax provision 33.2 118.6 74.0 249.2 Net income $ 144.7 $ 422.1 $ 298.7 $ 815.1 Net loss attributable to noncontrolling interests (2.2) — (4.5) — Net income attributable to Olin Corporation $ 146.9 $ 422.1 $ 303.2 $ 815.1 Net income attributable to Olin Corporation per common share: Basic $ 1.15 $ 2.83 $ 2.35 $ 5.37 Diluted $ 1.13 $ 2.76 $ 2.29 $ 5.24 Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022 Sales for the three months ended June 30, 2023 were $1,702.7 million compared to $2,616.1 million in the same period last year, a decrease of $913.4 million, or 35%. Epoxy sales decreased by $438.9 million, primarily due to lower volumes, including the closure of our cumene facility and one of our bisphenol (BisA) production lines, and lower product pricing. Chlor Alkali Products and Vinyls sales decreased by $401.2 million primarily due to lower volumes, partially offset by products sold by BWA and higher prices across all products except vinyls intermediates. Winchester sales decreased by $73.3 million, primarily due to lower commercial sales volumes, partially offset by higher domestic and international military sales. Gross margin decreased $354.6 million for the three months ended June 30, 2023 compared to the prior year. Chlor Alkali Products and Vinyls gross margin decreased by $157.3 million primarily due to lower volumes. Epoxy gross margin decreased by $139.9 million primarily due to lower volumes and lower product pricing. Winchester gross margin decreased by $53.1 million primarily due to lower commercial volumes. Gross margin as a percentage of sales decreased to 18% in 2023 from 25% in 2022. Selling and administration expenses for the three months ended June 30, 2023 were $101.2 million, an increase of $2.2 million from the prior year. The increase was primarily due to higher stock-based compensation expense of $2.7 million, which includes mark-to-market adjustments. 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 June 30, 2023 and 2022 were $19.2 million and $3.6 million, respectively. The increase in charges was primarily due to our actions to configure our global Epoxy asset footprint to optimize the most productive and cost effective assets to support our strategic operating model, which resulted in pretax restructuring charges of $13.3 million. Other operating income for the three months ended June 30, 2023 included a gain of $27.0 million for the sale of our domestic private trucking fleet and operations. 29 Table of Contents Interest expense increased by $10.8 million for the three months ended June 30, 2023 from the prior year primarily due to higher 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 lower for the three months ended June 30, 2023 primarily due to an increase in the discount rate used to determine interest costs, partially offset by lower actuarial losses recognized to income. The effective tax rate for the three months ended June 30, 2023 included a benefit associated with stock-based compensation, 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 $12.0 million tax benefit. After giving consideration to these items, the effective tax rate for the three months ended June 30, 2023 of 25.4% was higher than the 21% U.S. federal statutory rate primarily due to state 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 June 30, 2022 included a benefit associated with prior year tax positions and stock-based compensation, resulting in a net $8.5 million tax benefit. After giving consideration to these items, the effective tax rate for the three months ended June 30, 2022 of 23.5% was higher than the 21% U.S. federal statutory rate primarily due to state and foreign income taxes, partially offset by foreign income exclusions and favorable permanent salt depletion deductions. Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022 Sales for the six months ended June 30, 2023 were $3,547.0 million compared to $5,077.5 million in the same period last year, a decrease of $1,530.5 million, or 30%. Epoxy sales decreased by $867.7 million, primarily due to lower volumes, including the closure of our cumene facility and one of our BisA production lines, and lower product pricing. Chlor Alkali Products and Vinyls sales decreased by $529.3 million primarily due to lower volumes, partially offset by products sold by BWA and higher prices across all products except vinyls intermediates. Winchester sales decreased by $133.5 million, primarily due to lower commercial sales volumes, partially offset by higher domestic and international military sales. Gross margin decreased $605.9 million for the six months ended June 30, 2023 compared to the prior year. Epoxy gross margin decreased by $260.3 million primarily due to lower volumes and lower product pricing. Chlor Alkali Products and Vinyls gross margin decreased by $232.5 million primarily due to lower volumes, partially offset by higher prices across all products except vinyls intermediates. Winchester gross margin decreased by $111.1 million primarily due to lower commercial volumes. Gross margin as a percentage of sales decreased to 20% in 2023 from 26% in 2022. Selling and administration expenses for the six months ended June 30, 2023 were $213.0 million, an increase of $9.7 million from the prior year. The increase was primarily due to higher stock-based compensation expense of $7.0 million, which includes mark-to-market adjustments. Selling and administration expenses as a percentage of sales increased to 6% in 2023 from 4% in 2022. Restructuring charges for the six months ended June 30, 2023 and 2022 were $80.1 million and $6.7 million, respectively. The increase in charges was primarily due to our actions to configure our global Epoxy asset footprint to optimize the most productive and cost effective assets to support our strategic operating model, which resulted in pretax restructuring charges of $71.1 million. Other operating income for the six months ended June 30, 2023 included a gain of $27.0 million for the sale of our domestic private trucking fleet and operations. Interest expense increased by $20.3 million for the six months ended June 30, 2023 from the prior year primarily due to higher 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 lower for the six months ended June 30, 2023 primarily due to an increase in the discount rate used to determine interest costs, partially offset by lower actuarial losses recognized to income. The effective tax rate for the six months ended June 30, 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 $17.2 million tax benefit. After giving consideration to these items, the effective tax rate for the six months ended June 30, 2023 of 24.5% was higher than 30 Table of Contents 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 six months ended June 30, 2022 included a benefit associated with prior year tax positions and stock-based compensation, resulting in a net $10.8 million tax benefit. After giving consideration to these items, the effective tax rate for the six months ended June 30, 2022 of 24.4% was higher than the 21% U.S. federal statutory rate primarily due to state and foreign income taxes, partially offset by foreign income exclusions and favorable permanent salt depletion deductions. Segment Results We define segment results as income (loss) before interest expense, interest income, other operating income (expense), non-operating pension income, other income and income taxes. We have three operating segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. The three operating segments reflect the organization used by our management for purposes of allocating resources and assessing performance. Chlorine and caustic soda used in our Epoxy segment is transferred at cost from the Chlor Alkali Products and Vinyls segment. BWA is consolidated in our Chlor Alkali Products and Vinyls segment. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Sales: ($ in millions) Chlor Alkali Products and Vinyls $ 1,002.3 $ 1,403.5 $ 2,119.4 $ 2,648.7 Epoxy 333.8 772.7 694.5 1,562.2 Winchester 366.6 439.9 733.1 866.6 Total sales $ 1,702.7 $ 2,616.1 $ 3,547.0 $ 5,077.5 Income (loss) before taxes: Chlor Alkali Products and Vinyls $ 180.1 $ 346.5 $ 426.0 $ 675.1 Epoxy (0.5) 139.9 20.9 277.9 Winchester 64.7 119.3 125.7 238.2 Corporate/other: Environmental expense (13.0) (5.0) (16.2) (10.6) Other corporate and unallocated costs (22.4) (35.0) (56.7) (65.3) Restructuring charges (19.2) (3.6) (80.1) (6.7) Other operating income 27.0 3.3 27.5 3.3 Interest expense (45.3) (34.5) (87.7) (67.4) Interest income 1.1 0.3 2.2 0.7 Non-operating pension income 5.4 9.5 11.1 19.1 Income before taxes $ 177.9 $ 540.7 $ 372.7 $ 1,064.3 Chlor Alkali Products and Vinyls Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022 Chlor Alkali Products and Vinyls sales for the three months ended June 30, 2023 were $1,002.3 million compared to $1,403.5 million for the same period in 2022, a decrease of $401.2 million, or 29%. The sales decrease was primarily due to lower volumes, partially offset by products sold by BWA and higher prices across all products except vinyls intermediates. Chlor Alkali Products and Vinyls segment income was $180.1 million for the three months ended June 30, 2023 compared to $346.5 million for the same period in 2022. The decrease in segment results of $166.4 million was due to lower volumes across all products ($276.3 million), partially offset by lower raw material and operating costs ($65.7 million), higher prices across all products except vinyls intermediates ($28.3 million) and lower costs associated with product purchased from other parties ($15.9 million). Chlor Alkali Products and Vinyls second quarter 2023 segment results were negatively impacted by the maintenance turnaround and subsequent operating issues with the vinyl chloride monomer plant at the Freeport, TX facility, resulting in higher costs and reduced profit from lost sales. Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $113.3 million and $120.4 million for the three months ended June 30, 2023 and 2022, respectively. 31 Table of Contents Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022 Chlor Alkali Products and Vinyls sales for the six months ended June 30, 2023 were $2,119.4 million compared to $2,648.7 million for the same period in 2022, a decrease of $529.3 million, or 20%. The sales decrease was primarily due to lower volumes, partially offset by products sold by BWA and higher prices across all products except vinyls intermediates. Chlor Alkali Products and Vinyls segment income was $426.0 million for the six months ended June 30, 2023 compared to $675.1 million for the same period in 2022. The decrease in segment results of $249.1 million was due to lower volumes across all products ($457.8 million) and increased costs associated with product purchased from other parties ($16.2 million), partially offset by higher prices across all products except vinyls intermediates ($151.3 million) and lower raw material and operating costs ($73.6 million). Chlor Alkali Products and Vinyls second quarter 2023 segment results were negatively impacted by the maintenance turnaround and subsequent operating issues with the vinyl chloride monomer plant at the Freeport, TX facility, resulting in higher costs and reduced profit from lost sales. Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $227.7 million and $243.5 million for the six months ended June 30, 2023 and 2022, respectively. Epoxy Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022 Epoxy sales for the three months ended June 30, 2023 were $333.8 million compared to $772.7 million for the same period in 2022, a decrease of $438.9 million, or 57%. The sales decrease was primarily due to the closure of our cumene facility and one of our BisA production lines ($206.9 million), lower volumes ($118.7 million), lower product prices ($110.8 million) and an unfavorable effect of foreign currency translation ($2.5 million). Epoxy segment loss was $0.5 million for the three months ended June 30, 2023 compared to segment income of $139.9 million for the same period in 2022. The decrease in segment results of $140.4 million was primarily due to lower product prices ($110.8 million) and lower volumes ($75.6 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 ($46.0 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 $15.2 million and $20.4 million for the three months ended June 30, 2023 and 2022, respectively. Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022 Epoxy sales for the six months ended June 30, 2023 were $694.5 million compared to $1,562.2 million for the same period in 2022, a decrease of $867.7 million, or 56%. The sales decrease was primarily due to the closure of our cumene facility and one of our BisA production lines ($391.6 million), lower volumes ($312.7 million), lower product prices ($153.4 million) and an unfavorable effect of foreign currency translation ($10.0 million). Epoxy segment income was $20.9 million for the six months ended June 30, 2023 compared to $277.9 million for the same period in 2022. The decrease in segment results of $257.0 million was primarily due to lower volumes ($193.1 million) and lower product prices ($153.4 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 ($89.5 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 $29.7 million and $40.8 million for the six months ended June 30, 2023 and 2022, respectively. 32 Table of Contents Winchester Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022 Winchester sales were $366.6 million for the three months ended June 30, 2023 compared to $439.9 million for the same period in 2022, a decrease of $73.3 million, or 17%. The decrease was due to lower ammunition sales to commercial customers ($121.2 million), partially offset by higher sales to domestic and international military customers ($46.9 million) and law enforcement agencies ($1.0 million). Commercial ammunition sales were primarily impacted by lower volumes. Winchester segment income was $64.7 million for the three months ended June 30, 2023 compared to $119.3 million for the same period in 2022, a decrease of $54.6 million. The decrease in segment results was due to lower volumes ($43.8 million), lower product pricing ($7.7 million) and higher commodity and operating costs ($3.1 million). Winchester segment income included depreciation and amortization expense of $6.3 million and $5.9 million for the three months ended June 30, 2023 and 2022, respectively. Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022 Winchester sales were $733.1 million for the six months ended June 30, 2023 compared to $866.6 million for the same period in 2022, a decrease of $133.5 million, or 15%. The decrease was due to lower ammunition sales to commercial customers ($234.9 million), partially offset by higher sales to domestic and international military customers ($92.8 million) and law enforcement agencies ($8.6 million). Commercial ammunition sales were primarily impacted by lower volumes. Winchester segment income was $125.7 million for the six months ended June 30, 2023 compared to $238.2 million for the same period in 2022, a decrease of $112.5 million. The decrease in segment results was due to lower volumes ($89.7 million), higher commodity and operating costs ($14.1 million) and lower product pricing ($8.7 million). Winchester segment income included depreciation and amortization expense of $12.5 million and $12.1 million for the six months ended June 30, 2023 and 2022, respectively. Corporate/Other Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022 For the three months ended June 30, 2023, charges to income for environmental investigatory and remedial activities were $13.0 million compared to $5.0 million for the three months ended June 30, 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 June 30, 2023, other corporate and unallocated costs were $22.4 million compared to $35.0 million for the three months ended June 30, 2022, a decrease of $12.6 million. The decrease was primarily due to lower variable incentive compensation costs ($6.4 million), which includes mark-to-market adjustments on stock-based compensation expense, and lower legal and legal-related settlement expenses ($4.5 million). Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022 For the six months ended June 30, 2023, charges to income for environmental investigatory and remedial activities were $16.2 million compared to $10.6 million for the six months ended June 30, 2022. These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites. For the six months ended June 30, 2023, other corporate and unallocated costs were $56.7 million compared to $65.3 million for the six months ended June 30, 2022, a decrease of $8.6 million. The decrease was primarily due to lower legal and legal-related settlement expenses ($5.5 million) and lower variable incentive compensation costs ($2.0 million), which includes mark-to-market adjustments on stock-based compensation expense. 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. 33 Table of Contents As part of this review we announced operational cessations in the fourth quarter of 2022 and the first and second quarters of 2023 (collectively, Epoxy Optimization Plan). The foregoing actions will complete the rightsizing plan of our Epoxy business. On June 20, 2023, we announced we had made the decision to cease all remaining operations at our Gumi, South Korea facility, reduce epoxy resin capacity at our Freeport, TX facility, and reduce our sales and support staffing across Asia. These actions are expected to be substantially completed by December 31, 2023. 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 and six months ended June 30, 2023, we recorded pretax restructuring charges of $13.3 million and $71.1 million, respectively, for the write-off of equipment and facility costs, employee severance and related benefit costs, contract termination costs and facility exit costs related to these actions. We expect to incur additional restructuring charges through 2026 of approximately $50 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 continue to be negatively impacted during the third quarter 2023 by the operating issues with the vinyl chloride monomer plant at the Freeport, TX facility. We also expect Chlor Alkali Products and Vinyls to experience declining caustic soda market conditions and continued vinyls intermediates demand weakness in the third quarter 2023. 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 third quarter 2023 operating results from our Chemical businesses to be lower than second quarter 2023 levels. We expect our Winchester business third quarter 2023 results to increase sequentially from second quarter 2023 levels as we anticipate international and domestic military growth. Overall, we expect Olin’s third quarter 2023 operating results to decline from second 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 $525 million to $550 million range. We currently believe the 2023 effective tax rates will be in the 25% range and our cash tax rate to be in the 35% to 40% 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 $13.0 million and $5.0 million for the three months ended June 30, 2023 and 2022, respectively, and were $16.2 million and $10.6 million for the six months ended June 30, 2023 and 2022, respectively. 34 Table of Contents Our liabilities for future environmental expenditures were as follows: June 30, 2023 2022 ($ in millions) Balance at beginning of year $ 146.6 $ 147.3 Charges to income 16.2 10.6 Remedial and investigatory spending (11.0) (9.0) Foreign currency translation adjustments — — Balance at end of period $ 151.8 $ 148.9 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 June 30, 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 $151.8 million, $146.6 million and $148.9 million at June 30, 2023, December 31, 2022 and June 30, 2022, respectively, of which $126.8 million, $121.6 million and $123.9 million, respectively, were classified as other noncurrent liabilities. These amounts do not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology. These liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and our estimate of related costs have changed. As a result of these reassessments, future charges to income may be made for additional liabilities. Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, changes in regulatory authorities, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other Potentially Responsible Parties (PRPs), our ability to obtain contributions from other parties and the lengthy time periods over which site remediation occurs. It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably to us, which could materially adversely affect our financial position or results of operations. Legal Matters and Contingencies Discussion of legal matters and contingencies can be referred to under Item 1, within Note 17, “Commitments and Contingencies.” 35 Table of Contents Liquidity and Capital Resources Cash Flow Data Six Months Ended June 30, 2023 2022 Provided By (Used For) ($ in millions) Net operating activities $ 343.0 $ 959.2 Capital expenditures (128.8) (103.9) Payments under other long-term supply contracts (29.6) — Proceeds from disposition of property, plant and equipment 28.8 — Long-term debt borrowings (repayments), net 143.7 (0.5) Common stock repurchased and retired (393.0) (689.7) Stock options exercised 11.9 20.9 Contributions received from noncontrolling interests 44.1 — Net financing activities (245.1) (730.2) Operating Activities For the six months ended June 30, 2023, cash provided by operating activities decreased by $616.2 million from the six months ended June 30, 2022, primarily due to a decrease in operating results and an increase in working capital compared with the prior year. For the six months ended June 30, 2023, working capital increased $213.7 million compared to an increase of $183.6 million for the six months ended June 30, 2022. The working capital increase reflects normal seasonal working capital growth and incremental working capital associated with BWA. Inventories increased by $137.9 million from December 31, 2022. Accounts payable and accrued liabilities decreased $141.1 million primarily as a result of timing of payments during the first half of 2023. Investing Activities Capital spending of $128.8 million for the six months ended June 30, 2023 compared to $103.9 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 $525 million to $550 million range. For the six months ended June 30, 2023, payments under other long-term supply contracts was $29.6 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. For the six months ended June 30, 2023, we received $28.5 million of cash proceeds for the sale of our domestic private trucking fleet and operations. Financing Activities For the six months ended June 30, 2023, we had long-term debt borrowings, net of long-term debt repayments of $143.7 million. For the six months ended June 30, 2022, we had long-term debt repayments, net of long-term debt borrowings of $0.5 million. For the six months ended June 30, 2023 and 2022, 7.1 million and 12.6 million shares, respectively, of common stock were repurchased and retired at a total value of $393.0 million and $689.7 million, respectively. We issued 0.4 million and 0.9 million shares representing stock options exercised for the six months ended June 30, 2023 and 2022, respectively, with a total value of $11.9 million and $20.9 million, respectively. For the six months ended June 30, 2023, we received $44.1 million of cash contributions from noncontrolling interests for BWA. 36 Table of Contents The percent of total debt to total capitalization increased to 52.5% as of June 30, 2023 from 50.4% as of December 31, 2022, primarily as a result of a higher level of debt outstanding, partially offset by lower shareholders’ equity, primarily due to common stock repurchases partially offset by our operating results. In the first and second quarters of 2023 and 2022, we paid a quarterly dividend of $0.20 per share. Dividends paid for the six months ended June 30, 2023 and 2022, were $51.8 million and $60.9 million, respectively. On July 27, 2023, our Board of Directors declared a dividend of $0.20 per share on our common stock, payable on September 8, 2023 to shareholders of record on August 10, 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 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 June 30, 2023, we had $984.6 million available under our $1,200.0 million Senior Revolving Credit Facility because we had $215.0 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 June 30, 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 June 30, 2023, there were no covenants or other restrictions that limited our ability to borrow. The overall decrease in cash for the six months ended June 30, 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 six months ended June 30, 2023, 7.1 million shares of common stock have been repurchased and retired at a total value of $393.0 million. As of June 30, 2023, 13.0 million shares of common stock have been repurchased and retired at a total value of $687.8 million under the 2022 Repurchase Authorization program, and $1,312.2 million of common stock remained authorized to be repurchased under the program. 37 Table of Contents 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 June 30, 2023, December 31, 2022 and June 30, 2022, we had $234.8 million, $300.0 million and $300.0 million, respectively, drawn under the agreement. As of June 30, 2023, $478.6 million of our trade receivables were pledged as collateral and we had $120.0 million of additional borrowing capacity under the Receivables Financing Agreement, which was limited by our borrowing base. 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 six months ended June 30, 2023 and 2022 totaled $532.6 million and $477.2 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 $1.3 million and $0.4 million for the three months ended June 30, 2023 and 2022, respectively, and $2.5 million and $0.9 million for the six months ended June 30, 2023 and 2022, respectively. The agreements are without recourse and therefore no recourse liability has been recorded as of June 30, 2023, December 31, 2022 and June 30, 2022. As of June 30, 2023, December 31, 2022 and June 30, 2022, $77.2 million, $111.8 million and $109.9 million, respectively, of receivables qualifying for sales treatment were outstanding and will continue to be serviced by us. At June 30, 2023, we had total letters of credit of $79.0 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 June 30, 2023, we had long-term borrowings, including the current installment and finance lease obligations, of $2,726.3 million, of which $951.3 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 $18.5 million as of June 30, 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 June 30, 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 30, 2023, Moody’s affirmed Olin’s Ba1 rating and stable outlook. 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. 38 Table of Contents New Accounting Pronouncements Discussion of new accounting pronouncements can be referred to under Item 1, within Note 2, “Recent Accounting Pronouncements.”