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, industrial cartridges and clay targets. EXECUTIVE SUMMARY Overview Net income for the three months ended March 31, 2024 and 2023 was $48.6 million and $156.3 million, respectively, a decrease of $107.7 million, or 69%. The decrease in net income from the comparable prior year period was primarily due to lower operating results across our chemicals business segments partially offset by improved operating results from our Winchester segment. Diluted net income per share was $0.40 for the three months ended March 31, 2024 compared to $1.16 for 2023, a decrease of $0.76 per share, or 66%. Chlor Alkali Products and Vinyls reported segment income was $76.6 million and $245.9 million for the three months ended March 31, 2024 and 2023, respectively. Chlor Alkali Products and Vinyls segment results decreased from the comparable prior year period due to lower pricing, primarily caustic soda, and lower volumes. Epoxy reported a segment loss of $11.8 million for the three months ended March 31, 2024 compared to segment income of $21.4 million during the comparable prior year period in 2023. Epoxy segment results were lower than in the comparable prior year period primarily due to lower product pricing partially offset by increased volumes. Epoxy segment results in 2024 continue to be impacted by significant exports out of Asia into the European and North American markets, negatively impacting pricing and volumes. On April 3, 2024, we announced the filing of antidumping and countervailing duty petitions against China, India, South Korea, Taiwan and Thailand with the U.S. Department of Commerce and the U.S. International Trade Commission relating to certain epoxy resins, as part of the U.S. Epoxy Resin Producers Ad Hoc Coalition. The petitions were filed in response to large volumes of low-priced imports of epoxy resins into the U.S. from the subject countries over the past three years that have injured the U.S. domestic epoxy resin producers. Winchester reported segment income of $72.2 million and $61.0 million for the three months ended March 31, 2024 and 2023, respectively. Winchester segment results were higher than the comparable prior year period due to higher sales volumes, which includes White Flyer, partially offset by lower product pricing. During 2024, the U.S. Army awarded Winchester a contract for the construction of the Next Generation Squad Weapon (NGSW) manufacturing facility at Lake City Army Ammunition Plant. The project will be the first new manufacturing facility built at the Lake City facility in decades. The new manufacturing facility will provide safe, reliable, and advanced NGSW to the joint warfighter. Winchester will manage all aspects of the construction process, which is projected to start in the second quarter of 2024. Liquidity and Share Repurchases During the three months ended March 31, 2024, we repurchased and retired 2.0 million shares of common stock at a total value of $105.4 million. As of March 31, 2024, we had $892.0 million of remaining authorized common stock to be purchased under our 2022 Repurchase Authorization Program. During the three months ended March 31, 2024, we had net borrowings of $94.7 million with $93.0 million borrowed under our Senior Revolving Credit Facility and $3.9 million under our Receivables Financing Agreement. 23 Table of Contents CONSOLIDATED RESULTS OF OPERATIONS Three Months Ended March 31, 2024 2023 ($ in millions, except per share data) Sales $ 1,635.3 $ 1,844.3 Cost of goods sold 1,428.0 1,441.7 Gross margin 207.3 402.6 Selling and administrative 101.9 111.8 Restructuring charges 8.3 60.9 Other operating income 0.2 0.5 Operating income 97.3 230.4 Interest expense 44.6 42.4 Interest income 0.8 1.1 Non-operating pension income 6.8 5.7 Income before taxes 60.3 194.8 Income tax provision 12.5 40.8 Net income 47.8 154.0 Net loss attributable to noncontrolling interests (0.8) (2.3) Net income attributable to Olin Corporation $ 48.6 $ 156.3 Net income attributable to Olin Corporation per common share: Basic $ 0.41 $ 1.19 Diluted $ 0.40 $ 1.16 Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 Sales for the three months ended March 31, 2024 were $1,635.3 million compared to $1,844.3 million in the same period last year, a decrease of $209.0 million, or 11%. Chlor Alkali Products and Vinyls sales decreased by $232.5 million primarily due to lower pricing, primarily caustic soda, and lower volumes. Epoxy sales decreased by $19.4 million, primarily due to lower product pricing partially offset by increased sales volumes. Winchester sales increased by $42.9 million, primarily due to higher commercial ammunition sales volumes and first quarter 2024 sales from White Flyer. Gross margin decreased $195.3 million for the three months ended March 31, 2024 compared to the prior year. Chlor Alkali Products and Vinyls gross margin decreased by $165.4 million primarily due to lower pricing, primarily caustic soda, and lower volumes. Epoxy gross margin decreased by $35.5 million primarily due to lower product pricing partially offset by increased volumes. Winchester gross margin increased by $8.1 million primarily due to higher sales volumes, partially offset by lower product pricing. Gross margin as a percentage of sales decreased to 13% in 2024 from 22% in 2023. Selling and administrative expenses for the three months ended March 31, 2024 was $101.9 million, a decrease of $9.9 million from the prior year. The decrease was primarily due to lower variable incentive compensation expense of $4.0 million, a favorable foreign currency impact of $2.5 million and lower costs of $2.0 million associated with consulting and contract services. Selling and administrative expenses as a percentage of sales was 6% in both 2024 and 2023. Restructuring charges for the three months ended March 31, 2024 and 2023 were $8.3 million and $60.9 million, respectively. The decrease in charges was primarily due to our 2023 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 $57.8 million in the first quarter 2023. Interest expense increased by $2.2 million for the three months ended March 31, 2024 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 higher for the three months ended March 31, 2024 primarily due to a decrease in the discount rate used to determine interest costs, partially offset by higher actuarial losses recognized to income. 24 Table of Contents The effective tax rate for the three months ended March 31, 2024 included a net $2.6 million tax benefit, primarily associated with stock-based compensation and prior year tax positions, partially offset by an expense from a change in tax contingencies. Excluding these items, the effective tax rate for the three months ended March 31, 2024 of 25.0% was higher than the 21.0% U.S. federal statutory rate primarily due to state income tax and foreign income inclusions, partially offset by favorable permanent salt depletion deductions. The effective tax rate for the three months ended March 31, 2023 included a net $5.2 million tax benefit, primarily associated with stock-based compensation, a remeasurement of deferred taxes due to a decrease in our state effective tax rates, and prior year tax positions, partially offset by an expense from a net increase in the valuation allowance related to deferred tax assets in foreign jurisdictions and an expense from a change in tax contingencies. Excluding these items, the effective tax rate for the three months ended March 31, 2023 of 23.6% was higher than the 21.0% U.S. federal statutory rate primarily due to state and foreign income taxes and an increase in the valuation allowance related to losses in foreign jurisdictions, partially offset by favorable permanent salt depletion deductions. SEGMENT RESULTS We define segment results as income (loss) before interest expense, interest income, other operating income (expense), non-operating pension income, other income and income taxes. We have three operating segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. The three operating segments reflect the organization used by our management for purposes of allocating resources and assessing performance. Chlorine and caustic soda used in our Epoxy segment is transferred at cost from the Chlor Alkali Products and Vinyls segment. Three Months Ended March 31, 2024 2023 Segment Detail ($ in millions) Sales Chlor Alkali Products and Vinyls $ 884.6 $ 1,117.1 Epoxy 341.3 360.7 Winchester 409.4 366.5 Total sales $ 1,635.3 $ 1,844.3 Income before taxes Chlor Alkali Products and Vinyls $ 76.6 $ 245.9 Epoxy (11.8) 21.4 Winchester 72.2 61.0 Corporate/other: Environmental expense (5.8) (3.2) Other corporate and unallocated costs (25.8) (34.3) Restructuring charges (8.3) (60.9) Other operating income 0.2 0.5 Interest expense (44.6) (42.4) Interest income 0.8 1.1 Non-operating pension income 6.8 5.7 Income before taxes $ 60.3 $ 194.8 Chlor Alkali Products and Vinyls Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 Chlor Alkali Products and Vinyls sales for the three months ended March 31, 2024 were $884.6 million compared to $1,117.1 million for the same period in 2023, a decrease of $232.5 million, or 21%. The sales decrease was primarily due to lower pricing, primarily caustic soda, and lower volume. Chlor Alkali Products and Vinyls segment income was $76.6 million for the three months ended March 31, 2024 compared to $245.9 million for the same period in 2023. The decrease in segment results of $169.3 million was due to lower pricing ($149.9 million), primarily caustic soda, and lower volumes ($88.2 million), partially offset by lower costs associated with products purchased from other parties ($62.6 million) and lower raw material and operating costs ($6.2 million). Chlor 25 Table of Contents Alkali Products and Vinyls segment results included depreciation and amortization expense of $106.8 million and $114.4 million for the three months ended March 31, 2024 and 2023, respectively. Epoxy Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 Epoxy sales for the three months ended March 31, 2024 were $341.3 million compared to $360.7 million for the same period in 2023, a decrease of $19.4 million, or 5%. The sales decrease was primarily due to lower product prices ($98.1 million) and an unfavorable effect of foreign currency translation ($0.5 million), partially offset by increased sales volumes ($79.2 million). Epoxy segment loss was $11.8 million for the three months ended March 31, 2024 compared to segment income of $21.4 million for the same period in 2023. The decrease in segment results of $33.2 million was primarily due to lower product prices ($98.1 million), which continues to be impacted by significant exports out of Asia into the European and North American markets, partially offset by increased volumes ($58.4 million) and lower raw material and operating costs ($6.5 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 $13.5 million and $14.5 million for the three months ended March 31, 2024 and 2023, respectively. Winchester Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 Winchester sales were $409.4 million for the three months ended March 31, 2024 compared to $366.5 million for the same period in 2023, an increase of $42.9 million, or 12%. The increase was due to higher ammunition sales to commercial customers ($42.3 million), higher sales to domestic and international military customers ($6.1 million), partially offset by lower sales to law enforcement agencies ($5.5 million). Commercial ammunition sales were primarily impacted by increased sales volumes and first quarter 2024 sales from White Flyer. Winchester segment income was $72.2 million for the three months ended March 31, 2024 compared to $61.0 million for the same period in 2023, an increase of $11.2 million. The increase in segment results was due to higher sales volumes ($11.3 million), which includes White Flyer, and lower commodity and operating costs ($4.0 million), partially offset by lower product pricing ($4.1 million). Winchester segment income included depreciation and amortization expense of $7.9 million and $6.2 million for the three months ended March 31, 2024 and 2023, respectively. Corporate/Other Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 For the three months ended March 31, 2024, charges to income for environmental investigatory and remedial activities were $5.8 million compared to $3.2 million for the three months ended March 31, 2023. 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, 2024, other corporate and unallocated costs were $25.8 million compared to $34.3 million for the three months ended March 31, 2023, a decrease of $8.5 million. The decrease was primarily due to lower variable incentive compensation expense ($4.3 million) and a favorable foreign currency impact ($2.5 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 and second quarters of 2023 (collectively, Epoxy Optimization Plan). For the three months ended March 31, 2024 and 2023, we recorded restructuring charges of $3.5 million and $57.8 million, respectively, for contract termination costs, the write-off of equipment and facility costs and facility exit costs related to these actions. We expect to incur additional restructuring charges through 2025 of approximately $20 million related to these actions. For the three months ended March 31, 2024 and 2023, Olin incurred charges of $4.8 million and $3.1 million, respectively, associated with other previously disclosed restructuring plans. We expect to incur additional restructuring charges through 2027 of approximately $45 million related to these actions. 26 Table of Contents OUTLOOK Starting in the fourth quarter 2023 and continuing through the majority of first quarter 2024, we successfully executed an initiative which lowered our participation in ECU markets and adjusted our operating rates to mitigate the declining pricing environment we experienced during the second half of 2023. As a result, we believe we have accelerated the positive inflection point within our Chlor Alkali Products and Vinyls segment. In the first quarter 2024, we saw positive sequential improvement in all three of our business segments. We expect this momentum to continue with second quarter 2024 results. We expect the second quarter 2024 operating results from our Chemical businesses to be higher than the first quarter 2024. We also expect our Winchester business second quarter 2024 results to be comparable with first quarter 2024 results. Overall, we expect Olin’s second quarter 2024 operating results to be higher than the first quarter 2024 levels. Other corporate and unallocated costs in 2024 are expected to be higher than the $106.3 million in 2023. During 2024, we anticipate environmental expenses in the $25 million to $35 million range, compared to $23.7 million in 2023. We expect non-operating pension income in 2024 to be similar to the $24.0 million in 2023. 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 2024. We have several international qualified defined benefit pension plans for which we anticipate cash contributions of less than $5 million in 2024. In 2024, we currently expect our capital spending to be in the $225 million to $250 million range and we expect to make payments under other long-term supply contracts of approximately $50 million for energy modernization on the U.S. Gulf Coast. We expect 2024 depreciation and amortization expense to be in the $500 million to $525 million range. We currently believe the 2024 effective tax rate will be in the 25% to 30% 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 2024. ENVIRONMENTAL MATTERS Environmental provisions charged to income, which are included in costs of goods sold, were $5.8 million and $3.2 million for the three months ended March 31, 2024 and 2023, respectively. Our liabilities for future environmental expenditures were as follows: March 31, 2024 March 31, 2023 Environmental Liabilities ($ in millions) Balance at beginning of year $ 153.6 $ 146.6 Charges to income 5.8 3.2 Remedial and investigatory spending (4.6) (3.1) Other — — Balance at end of period $ 154.8 $ 146.7 Environmental investigatory and remediation activities spending was associated with former waste disposal sites and past manufacturing operations. Spending in 2024 for investigatory and remedial efforts, the timing of which is subject to regulatory approvals and other uncertainties, is estimated to be approximately $30 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 $11.7 million at March 31, 2024. 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 2024. The condensed balance sheets included reserves for future environmental expenditures to investigate and remediate known sites amounting to $154.8 million, $153.6 million and $146.7 million at March 31, 2024, December 31, 2023 and 27 Table of Contents March 31, 2023, respectively, of which $122.8 million, $121.6 million and $121.7 million, respectively, were classified as other noncurrent liabilities. These amounts do not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology. These liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and our estimate of related costs have changed. As a result of these reassessments, future charges to income may be made for additional liabilities. Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, changes in regulatory authorities, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other Potentially Responsible Parties (PRPs), our ability to obtain contributions from other parties and the lengthy time periods over which site remediation occurs. It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably to us, which could materially adversely affect our financial position or results of operations. LEGAL MATTERS AND CONTINGENCIES Discussion of legal matters and contingencies can be referred to under Item 1, within Note 18, “Commitments and Contingencies.” LIQUIDITY AND CAPITAL RESOURCES Cash Flow Data Three Months Ended March 31, 2024 2023 Provided by (Used for) ($ in millions) Net operating activities $ 81.0 $ 37.5 Capital expenditures (44.3) (61.4) Payments under other long-term supply contracts (28.5) (9.3) Net investing activities (74.7) (71.1) Long-term debt borrowings, net 94.7 192.6 Common stock repurchased and retired (105.4) (206.1) Stock options exercised 19.8 11.2 Dividends paid (23.9) (26.2) Contributions received from noncontrolling interests — 44.1 Net financing activities (25.3) 15.6 Operating Activities For the three months ended March 31, 2024, cash provided by operating activities increased by $43.5 million from the three months ended March 31, 2023, primarily due to a smaller increase in working capital compared with the prior year partially offset by a decrease in operating results. For the three months ended March 31, 2024, working capital increased $89.0 million compared to an increase of $244.4 million for the three months ended March 31, 2023. Inventories decreased by $31.2 million from December 31, 2023 primarily due to inventory reduction efforts over the last year. Accounts payable and accrued liabilities decreased $95.9 million from December 31, 2023, primarily as a result of timing of payments during the first quarter of 2024. Investing Activities Capital spending was $44.3 million for the three months ended March 31, 2024 compared to $61.4 million for the comparable period in 2023. Our capital spending forecast represents normal capital spending to maintain our current operating facilities. For the total year 2024, we currently expect our capital spending to be in the $225 million to $250 million range. We expect 2024 depreciation and amortization expense to be in the $500 million to $525 million range. For the three months ended March 31, 2024, payments under other long-term supply contracts was $28.5 million for energy modernization on the U.S. Gulf Coast and we expect to make payments for the total year 2024 of approximately $50 million. 28 Table of Contents Financing Activities For the three months ended March 31, 2024, we had long-term debt borrowings, net of long-term debt repayments of $94.7 million. 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, 2024 and 2023, 2.0 million and 3.6 million shares, respectively, of common stock were repurchased and retired at a total value of $105.4 million and $206.1 million, respectively. We issued 0.8 million and 0.4 million shares representing stock options exercised for the three months ended March 31, 2024 and 2023, respectively, with a total value of $19.8 million and $11.2 million, respectively. For the three months ended March 31, 2024, we withheld and paid $10.5 million for employee taxes on share-based payment arrangements. 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 55.6% as of March 31, 2024 from 54.1% as of December 31, 2023, 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 quarter of 2024 and 2023, we paid a quarterly dividend of $0.20 per share. Dividends paid for the three months ended March 31, 2024 and 2023, were $23.9 million and $26.2 million, respectively. On April 24, 2024, our Board of Directors declared a dividend of $0.20 per share on our common stock, payable on June 14, 2024, to shareholders of record on May 9, 2024. 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 (as defined below) and AR Facilities (as defined below). Additionally, we believe that we have access to the high-yield debt and equity markets. We maintain a $1,550.0 million senior credit facility (Senior Credit Facility) which 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 existing facility. The Term Loan Facility requires principal amortization amounts payable which began on 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, 2024, we had $1,038.6 million available under our $1,200.0 million Senior Revolving Credit Facility because we had $161.0 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, 2024, 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, 2024, there were no covenants or other restrictions that limited our ability to borrow. 29 Table of Contents 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 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, 2024, 2.0 million shares of common stock have been repurchased and retired at a total value of $105.4 million. As of March 31, 2024, 21.2 million shares of common stock have been repurchased and retired at a total value of $1,108.0 million under the 2022 Repurchase Authorization program, and $892.0 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, 2024, December 31, 2023 and March 31, 2023, we had $332.4 million, $328.5 million and $355.0 million, respectively, drawn under the agreement. As of March 31, 2024, $477.6 million of our trade receivables were pledged as collateral and we had no 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 $175.5 million and certain of our foreign subsidiaries may sell their accounts receivable up to a maximum of €22.0 million. We will continue to service the outstanding accounts sold. These receivables qualify for sales treatment under ASC 860 and, accordingly, the proceeds are included in net cash provided by operating activities in the condensed statements of cash flows. The following table summarizes the AR facilities activity: Three Months Ended March 31, 2024 2023 AR Facilities ($ in millions) Balance at beginning of period $ 63.3 $ 111.8 Gross receivables sold 176.6 252.3 Payments received from customers on sold accounts (176.7) (287.0) Balance at end of period $ 63.2 $ 77.1 The factoring discount paid under the AR Facilities is recorded as interest expense on the condensed statements of operations. The factoring discount was $1.0 million and $1.2 million for the three months ended March 31, 2024 and 2023, respectively. The agreements are without recourse and therefore no recourse liability has been recorded as of March 31, 2024. At March 31, 2024, we had total letters of credit of $128.8 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 obligations, workers compensation insurance policies, plant closure and post-closure obligations, international payment obligations and international pension funding requirements. Our current debt structure is used to fund our business operations. As of March 31, 2024, we had long-term borrowings, including the current installment, of $2,765.7 million, of which $988.4 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 $15.9 million as of March 31, 2024. Commitments from banks under our Senior Revolving Credit Facility and AR Facilities are additional sources of liquidity. We have registered an undetermined amount of securities with the SEC, so that, from time-to-time we may issue debt securities, preferred stock and/or common stock and associated warrants in the public market under that registration statement. 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 March 31, 2024: 30 Table of Contents Credit Ratings Long-term Rating Outlook Fitch Ratings BBB- Stable Moody’s Investors Service Ba1 Stable Standard & Poor’s BB+ Positive On March 14, 2024, Fitch affirmed Olin’s BBB- rating and 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, 2023 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.”