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Item 2. Management’s Discussion and Analysis

2024-07-26 compared with 2024-04-26 · 194 added, 120 removed, 167 unchanged (65% of the section changed)

7 unchanged sentences

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.

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.

1 unchanged sentence

EXECUTIVE SUMMARY

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.

Net income for the three and six months ended June 30, 2024 was $74.2 million and $122.8 million, respectively, compared to $146.9 million and $303.2 million, for the prior year periods, respectively.

The decrease of $72.7 million and $180.4 million, respectively, in net income from the prior year periods was primarily due to a decline in operating results across our chemicals business segments, partially offset by improved operating results from our Winchester segment.

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.

Diluted net income per share was $0.62 and $1.01 for the three and six months ended June 30, 2024, respectively, compared to $1.13 and $2.29 in the prior year periods, respectively, a decrease of $0.51 and $1.28 per share, or 45% and 56%, respectively.

Chlor Alkali Products and Vinyls reported segment income was $99.3 million and $175.9 million for the three and six months ended June 30, 2024, respectively.

Chlor Alkali Products and Vinyls segment results were lower than the comparable prior year periods due to lower caustic soda pricing, partially offset by lower costs associated with product purchased from other parties and lower raw material and operating costs.

Epoxy reported a segment loss of $3.0 million and $14.8 million for the three and six months ended June 30, 2024, respectively.

Epoxy segment results were lower than the comparable prior year periods primarily due to lower product pricing, partially offset by increased volumes.

Winchester reported segment income of $70.3 million and $142.5 million for the three and six months ended June 30, 2024, respectively.

Winchester segment results were higher than the comparable prior year periods due to higher sales volumes, which included White Flyer results, partially offset by lower product pricing.

Liquidity and Share Repurchases

During the six months ended June 30, 2024, we repurchased and retired 3.9 million shares of common stock at a total value of $211.4 million.

As of June 30, 2024, we had $787.0 million of remaining authorized common stock to be repurchased under our 2022 Repurchase Authorization Program.

During the six months ended June 30, 2024, we had net borrowings of $238.9 million with $343.0 million borrowed under our Senior Revolving Credit Facility, which was utilized to repay $70.0 million of tax-exempt variable-rate bonds and $29.7 million under our Receivables Financing Agreement.

On July 10, 2024, we announced a temporary disruption of operations at our Freeport, TX, facility as a result of Hurricane Beryl.

In response to this disruption, we declared a system-wide Force Majeure for our Chlor Alkali Products & Vinyls products and aromatics shipments for our Epoxy segment.

This disruption is a result of hurricane-related damage to Olin facilities in Freeport, TX, impacting Olin’s normal production and logistics capabilities including access to power, raw materials, and other essential feedstocks and services.

During July 2024, we safely returned many Freeport, TX plants to operation.

Wind damage to ancillary equipment has prevented some assets from returning to operation.

Once this critical equipment is restored, those remaining assets, including our vinyl chloride monomer and phenol/acetone plants, will be restarted.

We expect our third quarter 2024 Chemical businesses’ results to be reduced by approximately $100 million due to incremental costs to restore operations, unabsorbed fixed manufacturing costs, and reduced profit from lost sales.

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.

On April 3, 2024, we announced the filing of anti-dumping and countervailing duty petitions against China, India, South Korea, Taiwan and Thailand with the U.S.

Department of Commerce and the U.S.

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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.

from the subject countries over the past three years that have injured 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.

On July 1, 2024, we announced the initiation of an anti-dumping proceeding by the European Commission against China, the Republic of Korea, Taiwan and Thailand concerning low-priced imports of epoxy resins into the European Union (EU), as a result of a complaint lodged by the Ad Hoc Coalition of Epoxy Resin Producers.

The complaint alleges that

exporting producers in the four targeted countries have injured the European epoxy resin producers by selling their products on the EU market at unfairly low prices that significantly undercut the prices of European producers.

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.

The project will be the first new manufacturing plant built at the Lake City facility in decades.

The new manufacturing facility will provide safe, reliable, and advanced NGSW ammunition to the U.S.

Winchester will manage all aspects of the government-funded construction project, which commenced in the second quarter of 2024.

CONSOLIDATED RESULTS OF OPERATIONS

Three Months Ended March 31,

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

2024 2023 2024 2023

($ in millions, except per share data)

17 unchanged sentences

Diluted $ 0.62 $ 1.13 $ 1.01 $ 2.29

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.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Sales for the three months ended June 30, 2024 were $1,644.0 million compared to $1,702.7 million in the same period last year, a decrease of $58.7 million, or 3%.

Chlor Alkali Products and Vinyls sales decreased by $82.0 million primarily due to lower caustic soda pricing, partially offset by increased volumes which were primarily associated with products purchased from other parties.

Epoxy sales decreased by $16.1 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.

Winchester sales increased by $39.4 million, primarily due to second quarter 2024 sales from White Flyer and increased sales to international military customers.

Gross margin decreased $72.3 million for the three months ended June 30, 2024 compared to the prior year.

Chlor Alkali Products and Vinyls gross margin decreased by $77.8 million primarily due to lower caustic soda pricing.

Epoxy gross margin decreased by $4.4 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.

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.

Winchester gross margin increased by $2.9 million primarily due to higher sales volumes, including White Flyer, partially offset by lower product pricing.

Gross margin as a percentage of sales decreased to 14% in 2024 from 18% in 2023, across all segments.

Selling and administrative expenses for the three months ended June 30, 2024 were $94.6 million, a decrease of $6.6 million from the prior year.

The decrease was primarily due to lower stock-based compensation expense of $6.7 million, which includes mark-to-market adjustments.

Selling and administrative expenses as a percentage of sales was 6% for both the three months ended June 30, 2024 and 2023.

Restructuring charges for the three months ended June 30, 2024 and 2023 were $6.8 million and $19.2 million, respectively.

The decrease in charges was primarily due to a decline in charges associated with our 2023 actions to reconfigure 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 $5.8 million and $13.3 million for the three months ended June 30, 2024 and 2023, respectively.

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.

Interest expense increased by $1.3 million for the three months ended June 30, 2024 from the prior year, primarily due to higher average interest rates.

Non-operating pension income includes all components of pension and other postretirement net periodic benefit (income) cost, other than service costs.

Non-operating pension income was higher for the three months ended June 30, 2024 primarily due to a decrease in the discount rate used to determine interest costs, partially offset by higher actuarial losses recognized to income.

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.

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.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Sales for the six months ended June 30, 2024 were $3,279.3 million compared to $3,547.0 million in the same period last year, a decrease of $267.7 million, or 8%.

Chlor Alkali Products and Vinyls sales decreased by $314.5 million primarily due to lower caustic soda pricing, partially offset by increased sales volumes associated with product purchased from other parties.

Epoxy sales decreased by $35.5 million, primarily due to lower product pricing, partially offset by increased sales volumes.

Winchester sales increased by $82.3 million, primarily due to 2024 sales from White Flyer, higher commercial ammunition sales volumes, and increased sales to international military customers.

Gross margin decreased $267.6 million for the six months ended June 30, 2024 compared to the prior year.

Chlor Alkali Products and Vinyls gross margin decreased by $243.2 million primarily due to lower caustic soda pricing, partially offset by lower costs.

Epoxy gross margin decreased by $39.9 million primarily due to lower product pricing, partially offset by increased volumes.

Winchester gross margin increased by $11.0 million primarily due to higher sales volume, including White Flyer, partially offset by lower product pricing.

Gross margin as a percentage of sales decreased to 14% in 2024 from 20% in 2023, across all segments.

Selling and administration expenses for the six months ended June 30, 2024 were $196.5 million, a decrease of $16.5 million from the prior year.

The decrease was primarily due to lower stock-based compensation expense of $4.9 million, which includes mark-to-market adjustments, lower costs of $4.8 million associated with consulting and contract services and a favorable foreign currency impact of $3.8 million.

Selling and administration expenses as a percentage of sales was 6% for both the six months ended June 30, 2024 and 2023.

Restructuring charges for the six months ended June 30, 2024 and 2023 were $15.1 million and $80.1 million, respectively.

The decrease in charges was primarily due to a decline in charges associated with our 2023 actions to reconfigure 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 $9.3 million and $71.1 million for the six months ended June 30, 2024 and 2023, respectively.

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 $3.5 million for the six months ended June 30, 2024 from the prior year primarily due to higher average interest rates.

Non-operating pension income includes all components of pension and other postretirement net periodic benefit (income) cost, other than service costs.

Non-operating pension income was higher for the six months ended June 30, 2024 primarily due to a decrease in the discount rate used to determine interest costs, partially offset by higher actuarial losses recognized to income.

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.

SEGMENT RESULTS

4 unchanged sentences

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,

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

2024 2023 2024 2023

Segment Detail ($ in millions)

17 unchanged sentences

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).

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.

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%.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Chlor Alkali Products and Vinyls sales for the three months ended June 30, 2024 were $920.3 million compared to $1,002.3 million for the same period in 2023, a decrease of $82.0 million, or 8%.

The sales decrease was primarily due to

lower caustic soda pricing, partially offset by increased volumes which were primarily associated with products purchased from other parties.

Chlor Alkali Products and Vinyls segment income was $99.3 million for the three months ended June 30, 2024 compared to $180.1 million for the same period in 2023.

The decrease in segment results of $80.8 million was primarily due to lower caustic soda pricing ($243.4 million), partially offset by lower raw material and operating costs ($85.7 million), lower costs associated with product purchased from other parties ($40.5 million) and increased volumes ($36.4 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 $105.8 million and $113.3 million for the three months ended June 30, 2024 and 2023, respectively.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Chlor Alkali Products and Vinyls sales for the six months ended June 30, 2024 were $1,804.9 million compared to $2,119.4 million for the same period in 2023, a decrease of $314.5 million, or 15%.

The sales decrease was primarily due to lower caustic soda pricing, partially offset by increased sales volumes associated with products purchased from other parties.

Chlor Alkali Products and Vinyls segment income was $175.9 million for the six months ended June 30, 2024 compared to $426.0 million for the same period in 2023.

The decrease in segment results of $250.1 million was primarily due to lower caustic soda pricing ($396.6 million), and an unfavorable product mix ($82.7 million), partially offset by lower costs associated with products purchased from other parties ($117.7 million) and lower raw material and operating costs ($111.5 million).

Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $212.6 million and $227.7 million for the six months ended June 30, 2024 and 2023, respectively.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Epoxy sales for the three months ended June 30, 2024 were $317.7 million compared to $333.8 million for the same period in 2023, a decrease of $16.1 million, or 5%.

The sales decrease was primarily due to lower product prices ($35.5 million) and an unfavorable effect of foreign currency translation ($1.9 million), partially offset by increased sales volumes ($21.3 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).

Epoxy segment loss was $3.0 million for the three months ended June 30, 2024 compared to segment loss of $0.5 million for the same period in 2023.

The decrease in segment results of $2.5 million was primarily due to lower product prices ($35.5 million), which continue to be impacted by significant exports out of Asia into Europe and North America markets, partially offset by increased volumes and improved product mix ($25.1 million) and lower raw material and operating costs ($7.9 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.

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.

Epoxy segment results included depreciation and amortization expense of $13.4 million and $15.2 million for the three months ended June 30, 2024 and 2023, respectively.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Epoxy sales for the six months ended June 30, 2024 were $659.0 million compared to $694.5 million for the same period in 2023, a decrease of $35.5 million, or 5%.

The sales decrease was primarily due to lower product prices ($133.6 million) and an unfavorable effect of foreign currency translation ($2.4 million), partially offset by increased sales volumes ($100.5 million).

Epoxy segment loss was $14.8 million for the six months ended June 30, 2024 compared to segment income of $20.9 million for the same period in 2023.

The decrease in segment results of $35.7 million was primarily due to lower product prices ($133.6 million), which continues to be impacted by significant exports out of Asia into the European and North American markets, partially offset by increased volumes and improved product mix ($83.5 million) and lower raw material and operating costs ($14.4 million).

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

Epoxy segment results included depreciation and amortization expense of $26.9 million and $29.7 million for the six months ended June 30, 2024 and 2023, respectively.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Winchester sales were $406.0 million for the three months ended June 30, 2024 compared to $366.6 million for the same period in 2023, an increase of $39.4 million, or 11%.

The increase was due to higher sales to commercial customers ($22.6 million), higher sales to domestic and international military customers ($20.5 million), partially offset by lower sales to law enforcement agencies ($3.7 million).

Commercial sales were primarily impacted by 2024 sales from White Flyer, partially offset by lower ammunition volumes.

The increase in sales to military customers was due to international military sales more than doubling in 2024 compared to 2023.

Winchester segment income was $70.3 million for the three months ended June 30, 2024 compared to $64.7 million for the same period in 2023, an increase of $5.6 million.

The increase in segment results was due to higher sales volumes ($11.7 million), which includes White Flyer, partially offset by higher commodity and operating costs ($3.6 million) and lower product pricing ($2.5 million).

Winchester segment income included depreciation and amortization expense of $8.3 million and $6.3 million for the three months ended June 30, 2024 and 2023, respectively.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Winchester sales were $815.4 million for the six months ended June 30, 2024 compared to $733.1 million for the same period in 2023, an increase of $82.3 million, or 11%.

The increase was due to higher sales to commercial customers ($64.9 million), higher sales to domestic and international military customers ($26.6 million), partially offset by lower sales to law enforcement agencies ($9.2 million).

Commercial sales were primarily impacted by 2024 sales from White Flyer and increased ammunition volumes.

The increase in sales to military customers was primarily due to international military sales increasing 165% compared to 2023.

Winchester segment income was $142.5 million for the six months ended June 30, 2024 compared to $125.7 million for the same period in 2023, an increase of $16.8 million.

The increase in segment results was due to higher sales volumes ($23.0 million), which includes White Flyer, and lower commodity and operating costs ($0.4 million), partially offset by lower product pricing ($6.6 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.

Winchester segment income included depreciation and amortization expense of $16.2 million and $12.5 million for the six months ended June 30, 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.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

For the three months ended June 30, 2024, charges to income for environmental investigatory and remedial activities were $6.4 million compared to $13.0 million for the three months ended June 30, 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).

For the three months ended June 30, 2024, other corporate and unallocated costs were $17.0 million compared to $22.4 million for the three months ended June 30, 2023, a decrease of $5.4 million.

The decrease was primarily due to lower variable incentive compensation costs ($2.1 million), which includes mark-to-market adjustments on stock-based compensation expense, lower legal and legal-related settlement expenses ($1.3 million) and a favorable foreign currency impact ($1.3 million).

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

For the six months ended June 30, 2024, charges to income for environmental investigatory and remedial activities were $12.2 million compared to $16.2 million for the six months ended June 30, 2023.

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, 2024, other corporate and unallocated costs were $42.8 million compared to $56.7 million for the six months ended June 30, 2023, a decrease of $13.9 million.

The decrease was primarily due to lower variable incentive compensation costs ($6.6 million), which includes mark-to-market adjustments on stock-based compensation expense, a favorable foreign currency impact ($3.8 million) and lower legal and legal-related settlement expenses ($2.1 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.

In connection with the previously announced Epoxy Optimization Plan, for the three months ended June 30, 2024 and 2023, we recorded restructuring charges of $5.8 million and $13.3 million, respectively, and for the six month ended June 30, 2024 and 2023, we recorded restructuring charges of $9.3 million and $71.1 million, respectively.

We expect to incur additional restructuring charges through 2025 of approximately $15 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.

For the three months ended June 30, 2024 and 2023, we incurred charges of $1.0 million and $5.9 million, respectively, and for the six month ended June 30, 2024 and 2023, we incurred charges of $5.8 million and $9.0 million, respectively, associated with other previously disclosed restructuring plans.

We expect to incur additional restructuring charges through 2027 of approximately $40 million related to these actions.

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.

Discussion on our restructuring activity, including a description of each plan, is referenced under Item 1, within Note 4, “Restructuring Charges.” Pretax restructuring charges related to our 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.

In the second quarter 2024, we saw sequential improvement in our Chemical businesses.

As a result of the temporary disruption of operations at our Freeport, TX, facility from Hurricane Beryl, we expect our third quarter 2024 Chemical businesses’ results to be reduced by approximately $100 million due to incremental costs to restore operations, unabsorbed fixed manufacturing costs, and reduced profit from lost sales.

Before considering the effects of Hurricane Beryl, we had anticipated our Chemical businesses’ third quarter 2024 results to be comparable to second quarter 2024.

In the second quarter 2024, our Winchester business achieved significant military growth, offset by lower commercial ammunition volumes and increased costs.

We expect our Winchester business third quarter results to improve from second quarter levels with seasonally stronger commercial ammunition demand and continued military growth.

Other corporate and unallocated costs in 2024 are expected to be comparable with 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.

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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.

In 2024, we currently expect our capital spending to be in the $225 million range, including $10 million of additional capital associated with Hurricane Beryl, and we expect to make payments under other long-term supply contracts of approximately $50 million for energy modernization on the U.S.

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.

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 30% range.

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 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 were $12.2 million and $16.2 million for the six month ended June 30, 2024 and 2023, respectively.

The following table summarizes the environmental liability activity:

Six Months Ended June 30,

Environmental Liabilities ($ in millions)

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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.

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.

Our accrued liabilities for unasserted claims amounted to $11.7 million at June 30, 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.

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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

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

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.

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

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Cash Flow Data

Three Months Ended March 31,

Six Months Ended June 30,

Provided by (Used for) ($ in millions)

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

Proceeds from disposition of property, plant and equipment — 28.8

Net investing activities (150.4) (130.6)

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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.

For the six months ended June 30, 2024, cash provided by operating activities decreased by $171.4 million from the six months ended June 30, 2023, primarily due to a decrease in operating results, partially offset by a smaller increase in working capital compared with the prior year.

For the six months ended June 30, 2024, working capital increased $166.3 million compared to an increase of $213.7 million for the six months ended June 30, 2023.

Inventories increased by $19.3 million from December 31, 2023, which reflects normal seasonal growth, partially offset by inventory reduction efforts over the last year.

Accounts payable and accrued liabilities decreased $63.8 million from December 31, 2023, primarily as a result of timing of payments during the first half 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.

Capital spending was $100.8 million for the six months ended June 30, 2024 compared to $128.8 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.

For the full year 2024, we expect our capital spending to be in the $225 million range, including $10 million of additional capital associated with Hurricane Beryl.

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.

For the six months ended June 30, 2024, payments under other long-term supply contracts was $46.7 million for energy modernization on the U.S.

We expect to make payments for the full year 2024 of approximately $50 million.

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 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.

For the six months ended June 30, 2024, we had long-term debt borrowings, net of repayments of $238.9 million.

For the six months ended June 30, 2023, we had long-term debt borrowings, net of repayments of $143.7 million.

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.

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.

For the six months ended June 30, 2024, we withheld and paid $10.5 million for employee taxes on share-based payment arrangements.

For the six months ended June 30, 2023, we received $44.1 million of cash contributions from noncontrolling interests for BWA.

The percent of total debt to total capitalization increased to 57.3% as of June 30, 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 and second quarters of 2024 and 2023, we paid a quarterly dividend of $0.20 per share.

Dividends paid for the six months ended June 30, 2024 and 2023, were $47.6 million and $51.8 million, respectively.

On July 24th, 2024, our Board of Directors declared a dividend of $0.20 per share on our common stock, payable on September 13th, 2024, to shareholders of record on August 8th, 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.

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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 Term Loan Facility requires principal amortization payments 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.

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.

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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.

As of June 30, 2024, there were no covenants or other restrictions that limited our ability to borrow.

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.

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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.

For the six months ended June 30, 2024, 3.9 million shares of common stock have been repurchased and retired at a total value of $211.4 million.

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 maintain a $425.0 million Receivables Financing Agreement (Receivables Financing Agreement) that is scheduled to mature on October 14, 2025.

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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.

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.

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The following table summarizes the AR facilities activity:

Three Months Ended March 31,

Six Months Ended June 30,

AR Facilities ($ in millions)

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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 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 has been recorded as of June 30, 2024.

At June 30, 2024, we had total letters of credit of $135.2 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.

As of June 30, 2024, we had long-term borrowings, including the current installment, of $2,910.9 million, of which $1,132.6 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 $14.9 million as of June 30, 2024.

Commitments from banks under our Senior Revolving Credit Facility and AR Facilities are additional sources of liquidity.

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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:

Credit Ratings Long-term Rating Outlook

The following table summarizes our credit ratings as of June 30, 2024:

Credit Rating Agency Long-term Rating Outlook

Fitch Ratings BBB- Stable

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Standard & Poor’s BB+ Positive

On March 14, 2024, Fitch affirmed Olin’s BBB- rating and stable outlook.

On June 24, 2024, Moody’s affirmed Olin’s Ba1 rating and stable outlook.

On March 14, 2024, Fitch affirmed Olin’s BBB- rating and stable outlook.

On April 30, 2023, S&P affirmed Olin’s BB+ rating and positive outlook.

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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 2. Management’s Discussion and Analysis