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Item 1. Financial Statements

2024-07-26 compared with 2024-04-26 · 187 added, 101 removed, 586 unchanged (33% of the section changed)

3 unchanged sentences

($ in millions, except per share data)

March 31, 2024 December 31, 2023 March 31, 2023

June 30, 2024 December 31, 2023 June 30, 2023

Current assets:

42 unchanged sentences

($ in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Sales $ 1,644.0 $ 1,702.7 $ 3,279.3 $ 3,547.0

23 unchanged sentences

($ in millions)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net income $ 72.3 $ 144.7 $ 120.1 $ 298.7

Other comprehensive income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation ( 2.5 ) ( 8.5 ) ( 4.8 ) ( 3.0 )

1 unchanged sentence

Pension and postretirement benefits 1.4 0.4 2.6 0.7

Total other comprehensive income, net of tax 6.6 13.2

Total other comprehensive income (loss), net of tax 15.7 ( 0.7 ) 22.3 12.5

Comprehensive income 88.0 144.0 142.4 311.2

5 unchanged sentences

($ in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Balance at beginning of period $ 119.4 $ 129.3 $ 120.2 $ 132.3

14 unchanged sentences

Balance at beginning of period $ ( 489.7 ) $ ( 482.7 ) $ ( 496.3 ) $ ( 495.9 )

Other comprehensive income 6.6 13.2

Other comprehensive income (loss) 15.7 ( 0.7 ) 22.3 12.5

Balance at end of period $ ( 474.0 ) $ ( 483.4 ) $ ( 474.0 ) $ ( 483.4 )

17 unchanged sentences

($ in millions)

Three Months Ended March 31,

Six Months Ended June 30,

Operating Activities

2 unchanged sentences

Depreciation and amortization 258.7 273.9

Gains on disposition of property, plant and equipment — ( 27.0 )

Stock-based compensation 6.4 8.4

3 unchanged sentences

Qualified pension plan income ( 11.7 ) ( 9.9 )

Change in assets and liabilities:

Receivables ( 37.4 ) 52.8

10 unchanged sentences

Payments under other long-term supply contracts ( 46.7 ) ( 29.6 )

Proceeds from disposition of property, plant and equipment — 28.8

Other investing activities ( 2.9 ) ( 1.0 )

11 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 0.5 ) ( 0.2 )

Net decrease in cash and cash equivalents ( 19.4 ) ( 18.0 )

Net increase (decrease) in cash and cash equivalents 11.8 ( 32.9 )

Cash and cash equivalents, beginning of year 170.3 194.0

30 unchanged sentences

RECENT ACCOUNTING PRONOUNCEMENTS

In March 2024, the SEC issued SEC Release No.

33-11042, Enhancement and Standardization of Climate-Related Disclosures for Investors , to enhance and standardize the climate-related disclosures provided by public companies.

The final rule will require the disclosure of greenhouse gas emissions, including Scope 1 and Scope 2 emissions, which will be subject to third-party assurance, as well as climate-related targets and goals, and how the Board of Directors and management oversee climate-related risks.

Within the notes to financial statements, the final rule requires disclosure of expenditures recognized, subject to certain thresholds, attributable to severe weather events.

The final rule follows a compliance phase-in timeline, with the first requirements required to be adopted with our fiscal year ending December 31, 2025, followed in later years by greenhouse gas-related requirements.

On April 4, 2024, the SEC voluntarily stayed the implementation of these disclosure requirements;

however, we are currently evaluating the impact of the final rule on our disclosures.

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740):

10 unchanged sentences

We are currently evaluating the impact of the standard on our consolidated financial statements and disclosures.

In March 2024, the SEC issued SEC Release No.

33-11042, Enhancement and Standardization of Climate-Related Disclosures for Investors , to enhance and standardize the climate-related disclosures provided by public companies.

Within the notes to financial statements, the final rule requires disclosure of expenditures recognized, subject to certain thresholds, attributable to severe weather events.

On April 4, 2024, the SEC voluntarily stayed the implementation of these disclosure requirements;

however, we are currently evaluating the impact of the final rule on our disclosures.

On October 1, 2023, Olin acquired the assets of White Flyer Targets, LLC (White Flyer) from Reagent Diversified Holdings, Inc.

13 unchanged sentences

During the fourth quarter of 2022, we committed to and completed a plan to close down one of our bisphenol production lines at our Stade, Germany site.

For the three months ended March 31, 2024 and 2023, we recorded pretax 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 $ 15 million related to these actions.

1 unchanged sentence

The closure was completed during the third quarter of 2022.

For the three months ended March 31, 2024 and 2023, we recorded pretax restructuring charges of $ 1.9 million and $ 1.4 million, respectively, for facility exit costs related to this action.

We expect to incur additional restructuring charges through 2027 of approximately $ 20 million related to these actions.

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

For the three months ended March 31, 2024 and 2023, we recorded pretax restructuring charges of $ 0.4 million and $ 0.7 million, respectively, for facility exit costs related to these actions.

We expect to incur additional restructuring charges through 2025 of approximately $ 5 million related to these actions.

1 unchanged sentence

The VDC facility and related chlor alkali plant were closed during the fourth quarter of 2020 and second quarter of 2021, respectively.

For the three months ended March 31, 2024 and 2023, we recorded pretax restructuring charges of $ 2.5 million and $ 1.0 million, respectively, for facility exit costs related to these actions.

We expect to incur additional restructuring charges through 2026 of approximately $ 15 million related to these actions.

The following table summarizes the 2024 and 2023 activities by major component of these restructuring actions and the remaining balances of accrued restructuring costs as of March 31, 2024 and 2023:

Pretax restructuring charges related to these actions include facility exit costs, lease and other contract termination costs, employee severance and related benefits costs and the write-off of equipment and facilities.

Pretax restructuring charges, by plan, for the three and six months ended June 30, 2024 and 2023, were as follows:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Pretax Restructuring Charges ($ in millions)

Epoxy Optimization Plan $ 5.8 $ 13.3 $ 9.3 $ 71.1

McIntosh Plan 0.1 2.5 2.0 3.9

Freeport 2021 Plan

0.3 1.4 0.7 2.1

Freeport 2019 Plan 0.6 2.0 3.1 3.0

Total restructuring charges $ 6.8 $ 19.2 $ 15.1 $ 80.1

The following table summarizes the 2024 and 2023 activities by major component of these restructuring actions and the remaining balances of accrued restructuring costs as of June 30, 2024 and 2023:

Employee Severance and Related Benefit Costs Lease and Other Contract Termination Costs Facility Exit Costs Write-off of Equipment and Facility Total

2 unchanged sentences

Restructuring charges:

First quarter — 39.7 8.4 12.8 60.9

Second quarter 3.3 1.7 9.3 4.9 19.2

Amounts utilized ( 1.4 ) ( 7.2 ) ( 17.7 ) ( 17.7 ) ( 44.0 )

Balance at March 31, 2023 $ 8.7 $ 40.4 $ — $ — $ 49.1

Balance at June 30, 2023 $ 11.3 $ 38.4 $ — $ — $ 49.7

Balance at January 1, 2024 $ 10.8 $ 16.7 $ — $ — $ 27.5

Restructuring charges:

First quarter — — 8.3 — 8.3

Second quarter — 1.7 5.1 — 6.8

Amounts utilized ( 7.4 ) ( 5.6 ) ( 13.4 ) — ( 26.4 )

Balance at March 31, 2024 $ 4.1 $ 13.4 $ — $ — $ 17.5

The following table summarizes the cumulative restructuring charges of these restructuring actions by major component through March 31, 2024:

Balance at June 30, 2024 $ 3.4 $ 12.8 $ — $ — $ 16.2

The following table summarizes the cumulative restructuring charges of these restructuring actions by major component through June 30, 2024:

Chlor Alkali Products and Vinyls Epoxy Total

6 unchanged sentences

Total cumulative restructuring charges $ 20.5 $ 13.8 $ 83.2 $ 90.8 $ 208.3

As of March 31, 2024, we have incurred cash expenditures of $ 104.1 million and non-cash charges of $ 79.9 million related to these restructuring actions.

As of June 30, 2024, we have incurred cash expenditures of $ 112.2 million and non-cash charges of $ 79.9 million related to these restructuring actions.

The remaining balance of $ 16.2 million is expected to be paid out through 2027.

2 unchanged sentences

Diluted net income attributable to Olin Corporation per share reflects the dilutive effect of stock-based compensation.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Computation of Net Income per Share ($ in millions, except per share data)

Net income $ 47.8 $ 154.0

Net loss attributable to noncontrolling interests ( 0.8 ) ( 2.3 )

Net income attributable to Olin Corporation $ 74.2 $ 146.9 $ 122.8 $ 303.2

6 unchanged sentences

Diluted net income attributable to Olin Corporation per share $ 0.62 $ 1.13 $ 1.01 $ 2.29

The computation of dilutive shares does not include 2.0 million and 1.4 million shares for the three months ended March 31, 2024 and 2023, respectively, as their effect would have been anti-dilutive.

The computation of dilutive shares does not include 2.0 million shares for both the three and six months ended June 30, 2024 and 1.3 million shares for both the three and six months ended June 30, 2023 as their effect would have been anti-dilutive.

ACCOUNTS RECEIVABLES

2 unchanged sentences

In addition, the Receivables Financing Agreement incorporates the net leverage ratio covenant that is contained in the $ 1,550.0 million 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.

As of June 30, 2024, December 31, 2023 and June 30, 2023, we had $ 298.8 million, $ 328.5 million and $ 234.8 million, respectively, drawn under the agreement.

As of June 30, 2024, $ 429.8 million of our trade receivables were pledged as collateral and we had $ 0.5 million 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.

2 unchanged sentences

The following table summarizes the AR Facilities activity:

Three Months Ended March 31,

Six Months Ended June 30,

AR Facilities ($ in millions)

4 unchanged sentences

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 had been recorded as of March 31, 2024.

Our condensed balance sheets included an allowance for doubtful accounts receivables of $ 12.6 million, $ 13.1 million and $ 13.1 million and other receivables of $ 89.4 million, $ 85.3 million and $ 67.7 million at March 31, 2024, December 31, 2023 and March 31, 2023, respectively, which were included in receivables, net.

The factoring discount was $ 1.1 million and $ 1.3 million for the three months ended June 30, 2024 and 2023, respectively, and $ 2.1 million and $ 2.5 million for the six months ended June 30, 2024 and 2023, respectively.

The agreements are without recourse and therefore no recourse liability had been recorded as of June 30, 2024.

Our condensed balance sheets included an allowance for doubtful accounts receivables of $ 12.6 million, $ 13.1 million and $ 13.0 million and other receivables of $ 91.1 million, $ 85.3 million and $ 81.7 million at June 30, 2024, December 31, 2023 and June 30, 2023, respectively, which were included in receivables, net.

Inventories consisted of the following:

March 31, 2024 December 31,

2023 March 31, 2023

June 30, 2024 December 31,

2023 June 30, 2023

Inventories ($ in millions)

7 unchanged sentences

Inventories under the LIFO method are based on annual estimates of quantities and costs as of year-end;

therefore, the condensed financial statements at March 31, 2024 reflect certain estimates relating to inventory quantities and costs at December 31, 2024.

The replacement cost of our inventories would have been approximately $ 145.7 million, $ 133.7 million and $ 176.8 million higher than reported at March 31, 2024, December 31, 2023 and March 31, 2023, respectively.

therefore, the condensed financial statements at June 30, 2024 reflect certain estimates relating to inventory quantities and costs at December 31, 2024.

The replacement cost of our inventories would have been approximately $ 166.1 million, $ 133.7 million and $ 173.8 million higher than reported at June 30, 2024, December 31, 2023 and June 30, 2023, respectively.

Included in other assets were the following:

March 31, 2024 December 31, 2023 March 31, 2023

June 30, 2024 December 31, 2023 June 30, 2023

Other Assets ($ in millions)

2 unchanged sentences

Other assets $ 1,144.8 $ 1,118.5 $ 1,108.6

For the three months ended March 31, 2024 and 2023, payments of $ 28.5 million and $ 9.3 million were made under other long-term supply contracts for energy modernization projects in the U.S.

Amortization expense of $ 18.3 million and $ 17.6 million for the three months ended March 31, 2024 and 2023, respectively, was recognized within cost of goods sold related to our long-term supply contracts and is reflected in depreciation and amortization on the condensed statements of cash flows.

For the six months ended June 30, 2024 and 2023, payments of $ 46.7 million and $ 29.6 million, respectively, were made under other long-term supply contracts for energy modernization projects in the U.S.

Amortization expense of $ 18.3 million and $ 17.8 million for the three months ended June 30, 2024 and 2023, respectively, and amortization expense of $ 36.6 million and $ 35.6 million for the six months ended June 30, 2024 and 2023, respectively, was recognized within cost of goods sold related to our long-term supply contracts and is reflected in depreciation and amortization on the condensed statements of cash flows.

GOODWILL AND INTANGIBLE ASSETS

5 unchanged sentences

Foreign currency translation adjustment — — — —

Balance at March 31, 2023 (1)

Balance at June 30, 2023 (1)

$ 1,275.8 $ 145.1 $ — $ 1,420.9

3 unchanged sentences

Foreign currency translation adjustment ( 0.2 ) ( 0.1 ) — ( 0.3 )

Balance at March 31, 2024 (1)

Balance at June 30, 2024 (1)

$ 1,275.9 $ 145.1 $ 2.4 $ 1,423.4

1 unchanged sentence

Intangible assets consisted of the following:

March 31, 2024 December 31, 2023 March 31, 2023

June 30, 2024 December 31, 2023 June 30, 2023

Gross Amount Accumulated Amortization Net Gross Amount Accumulated Amortization Net Gross Amount Accumulated Amortization Net

5 unchanged sentences

Total intangible assets $ 772.0 $ ( 545.7 ) $ 226.3 $ 774.6 $ ( 528.8 ) $ 245.8 $ 765.5 $ ( 509.6 ) $ 255.9

During the three months ended March 31, 2024 and 2023, activity of our outstanding debt included:

Long-term loans, notes and other financing obligations, consisted of the following:

June 30, 2024 December 31, 2023 June 30, 2023

Financing Obligations ($ in millions)

Variable-rate Term Loan Facility, due 2027 $ 336.9 $ 341.3 $ 345.6

Variable-rate Senior Revolving Credit Facility, due 2027 411.0 68.0 215.0

Variable-rate Recovery Zone bonds, due 2024-2035 83.0 103.0 103.0

Variable-rate Go Zone bonds, due 2024 — 50.0 50.0

Variable-rate industrial development and environmental improvement obligations, due 2025 2.9 2.9 2.9

9.50% senior notes, due 2025 108.6 108.6 108.6

5.625% senior notes, due 2029 669.3 669.3 669.3

5.125% senior notes, due 2027 500.0 500.0 500.0

5.00% senior notes, due 2030 515.3 515.3 515.3

Receivables Financing Agreement (See Note 6) 298.8 328.5 234.8

Finance lease obligations — — 0.2

Deferred debt issuance costs ( 14.8 ) ( 16.6 ) ( 18.2 )

Unamortized bond original issue discount ( 0.1 ) ( 0.2 ) ( 0.2 )

Total debt 2,910.9 2,670.1 2,726.3

Amounts due within one year 121.8 78.8 9.0

Total long-term debt $ 2,789.1 $ 2,591.3 $ 2,717.3

During the six months ended June 30, 2024 and 2023, activity of our outstanding debt included:

Long-term Debt Borrowings (Repayments)

for the Three Months Ended

March 31, 2024 March 31, 2023

for the Six Months Ended

June 30, 2024 June 30, 2023

Debt Instruments ($ in millions)

2 unchanged sentences

Total borrowings 511.5 415.0

Variable-rate Go Zone bonds, due 2024 ( 50.0 ) —

Variable-rate Recovery Zone bonds, due 2024 ( 20.0 ) —

Term Loan Facility ( 4.4 ) ( 4.4 )

10 unchanged sentences

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.

At June 30, 2024, we had $ 788.6 million available under our $ 1,200.0 million Senior Revolving Credit Facility because we had $ 411.0 million borrowed under the facility and issued $ 0.4 million of letters of credit.

During the second quarter of 2024, we utilized our Senior Revolving Credit Facility to repay $ 50.0 million of Go Zone and $ 20.0 million of Recovery Zone tax-exempt variable-rate bonds.

We were in compliance with all covenants and restrictions under all our outstanding credit agreements as of June 30, 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.

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, 2024, there were no covenants or other restrictions that limited our ability to borrow.

PENSION PLANS AND RETIREMENT BENEFITS

4 unchanged sentences

Our foreign subsidiaries maintain pension and other benefit plans, which are consistent with local statutory practices.

Our domestic qualified defined benefit pension plan provides that if, within three years following a change of control of Olin, any corporate action is taken or filing made in contemplation of, among other things, a plan termination or merger or other transfer of assets or liabilities of the plan, and such termination, merger, or transfer thereafter takes place, plan benefits would automatically be increased for affected participants (and retired participants) to absorb any plan surplus (subject to applicable collective bargaining requirements).

automatically be increased for affected participants (and retired participants) to absorb any plan surplus (subject to applicable collective bargaining requirements).

We also provide certain postretirement healthcare (medical) and life insurance benefits for eligible active and retired domestic employees.

1 unchanged sentence

Pension Benefits Other Postretirement Benefits

Three Months Ended March 31, Three Months Ended March 31,

Three Months Ended June 30, Three Months Ended June 30,

2024 2023 2024 2023

6 unchanged sentences

Net periodic benefit (income) cost $ ( 5.5 ) $ ( 4.7 ) $ 1.0 $ 0.9

We made cash contributions to our international qualified defined benefit pension plans of $ 0.3 million and $ 0.8 million for the three months ended March 31, 2024 and 2023, respectively.

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.

Pension Benefits Other Postretirement Benefits

Six Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Components of Net Periodic Benefit (Income) Cost ($ in millions)

Service cost $ 2.5 $ 2.8 $ 0.4 $ 0.4

Interest cost 50.6 52.7 0.9 0.9

Expected return on plans’ assets ( 67.7 ) ( 65.6 ) — —

Amortization of prior service cost ( 0.3 ) ( 0.2 ) — 0.1

Recognized actuarial loss 3.3 0.6 0.5 0.4

Net periodic benefit (income) cost $ ( 11.6 ) $ ( 9.7 ) $ 1.8 $ 1.8

We made cash contributions to our international qualified defined benefit pension plans of $ 0.8 million and $ 1.5 million for the six months ended June 30, 2024 and 2023, respectively.

The effective tax rate for the three months ended June 30, 2024 included a net $ 0.6 million tax benefit, primarily associated with stock-based compensation and U.S.

Federal tax credits purchased at a discount, partially offset by an expense from prior year tax positions and a change in tax contingencies.

Excluding these items, the effective tax rate for the three months ended June 30, 2024 of 25.8 % 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.

As of March 31, 2024, we had $ 49.9 million of gross unrecognized tax benefits, which would have a net $ 49.7 million impact on the effective tax rate, if recognized.

As of March 31, 2023, we had $ 54.8 million of gross unrecognized tax benefits, of which $ 53.2 million would have impacted the effective tax rate, if recognized.

The effective tax rate for the three months ended June 30, 2023 included a net $ 12.0 million tax benefit, primarily associated with stock-based compensation, 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 from a change in tax contingencies.

Excluding these items, the effective tax rate for the three months ended June 30, 2023 of 25.4 % was higher than the 21.0 % U.S.

federal statutory rate primarily due to state income tax 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, 2024 included a net $ 3.3 million tax benefit, primarily associated with stock-based compensation and U.S.

Federal tax credits purchased at a discount, partially offset by an expense from prior year tax positions and a change in tax contingencies.

Excluding these items, the effective tax rate for the six months ended June 30, 2024 of 25.6 % 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 six months ended June 30, 2023 included a net $ 17.2 million tax benefit, primarily associated with stock-based compensation, 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 from a change in tax contingencies.

Excluding these items, the effective tax rate for the six months ended June 30, 2023 of 24.5 % was higher than the 21.0 % U.S.

In August 2022, the Inflation Reduction Act (the "IRA") was enacted and provides various beneficial credits for energy efficient related manufacturing, transportation and fuels, hydrogen/carbon recapture and renewable energy, which we are evaluating in regard to planned projects.

We will continue to monitor the expected impacts of any new guidance on our filing positions and will record the impacts as discrete income tax expense adjustments in the period the guidance is finalized or becomes effective.

As of June 30, 2024, we had $ 51.2 million of gross unrecognized tax benefits, which would have a net $ 51.4 million impact on the effective tax rate, if recognized.

As of June 30, 2023, we had $ 58.7 million of gross unrecognized tax benefits, of which $ 56.8 million would have impacted the effective tax rate, if recognized.

The amounts of unrecognized tax benefits were as follows:

Three Months Ended March 31,

Six Months Ended June 30,

Unrecognized Tax Benefits ($ in millions)

Balance at beginning of period $ 50.3 $ 51.6

Balance at beginning of year $ 50.3 $ 51.6

Increases for prior year tax positions 2.7 1.3

Decreases for prior year tax positions ( 0.4 ) ( 0.3 )

Increases for current year tax positions 0.7 5.4

Decreases due to tax settlements ( 1.0 ) —

Foreign currency translation adjustments ( 1.1 ) 0.7

Balance at end of period $ 51.2 $ 58.7

As of March 31, 2024, we believe it is reasonably possible that our total amount of unrecognized tax benefits will decrease by approximately $ 36.3 million over the next twelve months.

As of June 30, 2024, we believe it is reasonably possible that our total amount of unrecognized tax benefits will decrease by approximately $ 36.3 million over the next twelve months.

The anticipated reduction primarily relates to expected settlements with tax authorities and the expiration of federal, state and foreign statutes of limitation.

20 unchanged sentences

Our contributions to the CEOP were as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

CEOP Expense ($ in millions)

5 unchanged sentences

Stock-based compensation expense was as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Stock Compensation Expense ($ in millions)

42 unchanged sentences

This program will terminate upon the purchase of $ 2.0 billion of common stock.

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.

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 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 six months ended June 30, 2024 and 2023, 3.9 million and 7.1 million shares, respectively, of common stock were repurchased and retired at a total value of $ 211.4 million and $ 393.0 million, respectively.

As of June 30, 2024, 23.2 million shares of common stock have been repurchased and retired at a total value of $ 1,213.0 million under the 2022 Repurchase Authorization program, and $ 787.0 million of common stock remained authorized to be repurchased under the program.

We issued 0.8 million and 0.4 million shares representing stock options exercised for the six months ended June 30, 2024 and 2023, respectively, with a total value of $ 21.7 million and $ 11.9 million, respectively.

The following table represents the activity included in accumulated other comprehensive loss:

3 unchanged sentences

Unrealized gains (losses)

First quarter 5.5 ( 20.8 ) — ( 15.3 )

Second quarter ( 8.5 ) ( 10.7 ) — ( 19.2 )

Reclassification adjustments of losses into income

First quarter — 30.7 0.4 31.1

Second quarter — 20.5 0.5 21.0

Tax provision

First quarter — ( 2.5 ) ( 0.1 ) ( 2.6 )

Second quarter — ( 2.4 ) ( 0.1 ) ( 2.5 )

Net change ( 3.0 ) 14.8 0.7 12.5

Balance at March 31, 2023 $ ( 33.1 ) $ ( 25.1 ) $ ( 424.5 ) $ ( 482.7 )

Balance at June 30, 2023 $ ( 41.6 ) $ ( 17.7 ) $ ( 424.1 ) $ ( 483.4 )

Balance at January 1, 2024 $ ( 39.7 ) $ ( 18.4 ) $ ( 438.2 ) $ ( 496.3 )

Unrealized losses ( 2.3 ) ( 3.0 ) — ( 5.3 )

Unrealized (losses) gains

First quarter ( 2.3 ) ( 3.0 ) — ( 5.3 )

Second quarter ( 2.5 ) 17.1 — 14.6

Reclassification adjustments of losses into income

First quarter — 13.3 1.6 14.9

Second quarter — 5.3 1.9 7.2

Tax provision

First quarter — ( 2.6 ) ( 0.4 ) ( 3.0 )

Second quarter — ( 5.6 ) ( 0.5 ) ( 6.1 )

Net change ( 4.8 ) 24.5 2.6 22.3

Balance at March 31, 2024 $ ( 42.0 ) $ ( 10.7 ) $ ( 437.0 ) $ ( 489.7 )

Balance at June 30, 2024 $ ( 44.5 ) $ 6.1 $ ( 435.6 ) $ ( 474.0 )

Net income and cost of goods sold included reclassification adjustments for realized gains and losses on derivative contracts from accumulated other comprehensive loss.

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Sales are attributed to geographic areas based on customer location.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Segment Detail ($ in millions)

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Income before taxes $ 96.6 $ 177.9 $ 156.9 $ 372.7

Three Months Ended March 31,

Other operating income for both the three and six months ended June 30, 2023 included a gain of $ 27.0 million for the sale of our domestic private trucking fleet and operations.

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Segment Sales by Geography ($ in millions)

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Total sales $ 1,644.0 $ 1,702.7 $ 3,279.3 $ 3,547.0

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Segment Sales by Product Line ($ in millions)

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Military and law enforcement (1)

184.0 167.2 350.6 333.2

Total Winchester 406.0 366.6 815.4 733.1

Total sales $ 1,644.0 $ 1,702.7 $ 3,279.3 $ 3,547.0

(1) For the three months ended March 31, 2024 and 2023, revenue recognized over time represented $ 19.8 million and $ 22.7 million, respectively, associated with governmental contracts within our Winchester business.

(1) For the three months ended June 30, 2024 and 2023, revenue recognized over time represented $ 37.8 million and $ 26.1 million, respectively, and for the six months ended June 30, 2024 and 2023, revenue recognized over time represented $ 57.6 million and $ 48.8 million, respectively, associated with governmental contracts within our Winchester business.

ENVIRONMENTAL

We are party to various government and private environmental actions associated with past manufacturing facilities and former waste disposal sites.

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 March 31, 2023, respectively, of which $ 122.8 million, $ 121.6 million and $ 121.7 million, respectively, were classified as other noncurrent liabilities.

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.

The condensed balance sheets included reserves for future environmental expenditures to investigate and remediate known sites amounting to $ 155.3 million, $ 153.6 million and $ 151.8 million at June 30, 2024,

December 31, 2023 and June 30, 2023, respectively, of which $ 123.3 million, $ 121.6 million and $ 126.8 million, respectively, were classified as other noncurrent liabilities.

Environmental provisions charged to income, which are included in costs of goods sold, were $ 6.4 million and $ 13.0 million for the three months ended June 30, 2024 and 2023, respectively, and $ 12.2 million and $ 16.2 million for the six months ended June 30, 2024 and 2023, respectively.

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.

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We, and our subsidiaries, are defendants in various legal actions (including proceedings based on alleged exposures to asbestos) incidental to our past and current business activities.

As of March 31, 2024, December 31, 2023 and March 31, 2023, our condensed balance sheets included accrued liabilities for these other legal actions of $ 17.7 million, $ 14.2 million and $ 14.1 million, respectively.

As of June 30, 2024, December 31, 2023 and June 30, 2023, our condensed balance sheets included accrued liabilities for these other legal actions of $ 12.5 million, $ 14.2 million and $ 15.9 million, respectively.

These liabilities do not include costs associated with legal representation.

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We are exposed to market risk in the normal course of our business operations due to our purchases of certain commodities, our ongoing investing and financing activities and our operations that use foreign currencies.

The risk of loss can

be assessed from the perspective of adverse changes in fair values, cash flows and future earnings.

The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings.

We have established policies and procedures governing our management of market risks and the use of financial instruments to manage exposure to such risks.

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We had the following notional amounts of outstanding forward contracts to buy and sell foreign currency:

March 31, 2024 December 31, 2023 March 31, 2023

June 30, 2024 December 31, 2023 June 30, 2023

Notional Value - Foreign Currency ($ in millions)

2 unchanged sentences

Cash Flow Hedges

For derivative instruments that are designated and qualify as a cash flow hedge, the change in fair value of the derivative is recognized as a component of other comprehensive income until the hedged item is recognized in earnings.

We had the following notional amounts of outstanding commodity contracts that were entered into to hedge forecasted purchases:

March 31, 2024 December 31, 2023 March 31, 2023

June 30, 2024 December 31, 2023 June 30, 2023

Notional Value - Commodity ($ in millions)

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Total notional $ 208.1 $ 191.0 $ 244.1

As of March 31, 2024, the counterparties to these commodity contracts were Wells Fargo Bank, N.A., Citibank, N.A., JPMorgan Chase Bank, National Association, Toronto Dominion Bank and Bank of America Corporation, all of which are major financial institutions.

As of June 30, 2024, the counterparties to these commodity contracts were Wells Fargo Bank, N.A., Citibank, N.A., JPMorgan Chase Bank, National Association, Toronto Dominion Bank and Bank of America Corporation, all of which are major financial institutions.

We use cash flow hedges for certain raw material and energy costs such as copper, zinc, lead, ethane, electricity and natural gas to provide a measure of stability in managing our exposure to price fluctuations associated with forecasted purchases of raw materials and energy used in our manufacturing process.

At March 31, 2024, we had open derivative contract positions through 2028.

If all open futures contracts had been settled on March 31, 2024, we would have recognized a pretax loss of $ 14.2 million.

If commodity prices were to remain at March 31, 2024 levels, approximately $ 14.0 million of deferred losses, net of tax, would be reclassified into earnings during the next twelve months.

At June 30, 2024, we had open derivative contract positions through 2028.

If all open futures contracts had been settled on June 30, 2024, we would have recognized a pretax gain of $ 8.0 million.

If commodity prices were to remain at June 30, 2024 levels, approximately $ 1.5 million of deferred gains, net of tax, would be reclassified into earnings during the next twelve months.

The actual effect on earnings will be dependent on actual commodity prices when the forecasted transactions occur.

1 unchanged sentence

We use interest rate swaps as a means of managing interest expense and floating interest rate exposure to optimal levels.

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the

offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.

We include the gain or loss on the hedged items (fixed-rate borrowings) in the same line item, interest expense, as the offsetting loss or gain on the related interest rate swaps.

There were no outstanding interest rate swaps at March 31, 2024, December 31, 2023 and March 31, 2023.

There were no outstanding interest rate swaps at June 30, 2024, December 31, 2023 and June 30, 2024.

Financial Statement Impacts

2 unchanged sentences

The following table summarizes the location and fair value of the derivative instruments on our condensed balance sheets:

March 31, 2024 December 31, 2023 March 31, 2023

June 30, 2024 December 31, 2023 June 30, 2023

Balance Sheet Location ($ in millions)

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Amount of Gain (Loss) for the

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Location of Gain (Loss) ($ in millions)

Cash Flow Hedges

Commodity contracts Other comprehensive income $ ( 3.0 ) $ ( 20.8 )

Commodity contracts Other comprehensive income (loss) $ 17.1 $ ( 10.7 ) $ 14.1 $ ( 31.5 )

Commodity contracts Cost of goods sold ( 5.3 ) ( 20.5 ) ( 18.6 ) ( 51.2 )

11 unchanged sentences

If the threshold is exceeded, cash is either provided by the counterparty to us if the value of the derivatives is our asset, or cash is provided by us to the counterparty if the value of the derivatives is our liability.

As of March 31, 2024, December 31, 2023 and March 31, 2023, this threshold was not exceeded.

As of June 30, 2024, December 31, 2023 and June 30, 2023, this threshold was not exceeded.

In all instances where we are party to a master netting agreement, we offset the receivable or payable recognized upon payment of cash collateral against the fair value amounts recognized for derivative instruments that have also been offset under such master netting agreements.

1 unchanged sentence

Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties or the amount that would be paid to transfer a liability to a new obligor, not the amount that would be paid to settle the liability with the creditor.

Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters.

Where available, fair value is based on observable market prices or parameters or derived

from such prices or parameters.

Where observable prices or inputs are not available, valuation models are applied.

These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.

Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Assets and liabilities recorded at fair value in the condensed balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels, defined by ASC 820 “Fair Value Measurement” (ASC 820), and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

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Consideration was given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

We are required to separately disclose assets and liabilities measured at fair value on a recurring basis, from those measured at fair value on a nonrecurring basis.

Nonfinancial assets measured at fair value on a nonrecurring basis are intangible assets and goodwill, which are reviewed for impairment annually in the fourth quarter and/or when circumstances or other events indicate that impairment may have occurred.

Commodity Contracts

We use commodity derivative contracts for certain raw materials and energy costs such as copper, zinc, lead, ethane, electricity and natural gas to provide a measure of stability in managing our exposure to price fluctuations.

Commodity contract financial instruments were valued primarily based on prices and other relevant information observable in market transactions involving identical or comparable assets or liabilities including both forward and spot prices for commodities.

1 unchanged sentence

Foreign Currency Contracts

We enter into forward sales and purchase contracts to manage currency risk resulting from purchase and sale commitments denominated in foreign currencies.

Foreign currency contract financial instruments were valued primarily based on relevant information observable in market transactions involving identical or comparable assets or liabilities including both forward and spot prices for currencies.

3 unchanged sentences

Since our long-term debt instruments may not be actively traded, the inputs used to measure the fair value of our long-term debt are based on current market rates for debt of similar risk and maturities and is classified as Level 2 in the fair value measurement hierarchy.

As of March 31, 2024, December 31, 2023 and March 31, 2023, the fair value measurements of debt were $ 2,725.7 million, $ 2,626.2 million and $ 2,627.5 million, respectively.

As of June 30, 2024, December 31, 2023 and June 30, 2023, the fair value measurements of debt were $ 2,717.3 million, $ 2,626.2 million and $ 2,661.1 million, respectively.

Nonrecurring Fair Value Measurements

In addition to assets and liabilities that are recorded at fair value on a recurring basis, we record assets and liabilities at fair value on a nonrecurring basis as required by ASC 820.

There were no assets measured at fair value on a nonrecurring basis as of March 31, 2024, December 31, 2023 or March 31, 2023.

There were no assets or liabilities measured at fair value on a nonrecurring basis as of June 30, 2024, December 31, 2023 or June 30, 2023.

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

What changed 10-Q

Item 1. Financial Statements