OLIN Corp 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS BACKGROUND Olin Corporation (Olin) is a Virginia corporation, incorporated in 1892, having its principal executive offices in Clayton, MO. We are a leading vertically integrated global manufacturer and distributor of chemical products and a leading U.S. manufacturer of ammunition. Our operations are concentrated in three business segments: Chlor Alkali Products and Vinyls, 25 Table of Contents Epoxy and Winchester. All of our business segments are capital-intensive manufacturing businesses. The Chlor Alkali Products and Vinyls segment manufactures and sells chlorine and caustic soda, ethylene dichloride and vinyl chloride monomer, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, perchloroethylene, hydrochloric acid, hydrogen, bleach products and potassium hydroxide. The Epoxy segment produces and sells a full range of epoxy materials and precursors, including aromatics (acetone and phenol), allyl chloride, epichlorohydrin, liquid epoxy resins, solid epoxy resins and systems and growth products such as converted epoxy resins and additives. The Winchester segment produces and sells sporting ammunition, reloading components, small caliber military ammunition and components, industrial cartridges and clay targets. EXECUTIVE SUMMARY Overview Net (loss) income for the three and nine months ended September 30, 2024, was $(24.9) million and $97.9 million, respectively, compared to $104.1 million and $407.3 million, for the prior year periods, respectively. The decrease of $129.0 million and $309.4 million, respectively, in net (loss) income from the prior year periods was primarily due to a decline in operating results across our Chemicals businesses. The operating results from our Winchester segment were lower for the three months ended September 30, 2024 but were higher for the nine months ended September 30, 2024 compared to the comparable prior year periods. Net income for the nine months ended September 30, 2023 also reflects a gain of $27.0 million for the sale of our domestic private trucking fleet and operations. Diluted net (loss) income per share was $(0.21) and $0.81 for the three and nine months ended September 30, 2024, respectively, compared to $0.82 and $3.12 in the prior year periods, respectively, a decrease of $1.03 and $2.31 per share. Chlor Alkali Products and Vinyls reported segment income was $45.3 million and $221.2 million for the three and nine months ended September 30, 2024, respectively. Chlor Alkali Products and Vinyls segment results were lower than the comparable prior year periods due to the impact of Hurricane Beryl and lower pricing, primarily caustic soda. The nine months ended September 30, 2024 benefited from lower raw material and operating costs, and costs associated with products purchased from other parties, compared to last year. The Chlor Alkali and Vinyls segment results for the three and nine months ended September 30, 2023 were negatively impacted by higher costs and reduced profit from lost sales of $25.3 million and $104.2 million, respectively, associated with operating issues related to a 2023 second quarter maintenance turnaround at our vinyl chloride monomer plant at the Freeport, TX facility. Epoxy reported a segment loss of $42.8 million and $57.6 million for the three and nine months ended September 30, 2024, respectively. Epoxy segment results for the three months ended September 30, 2024 were lower than the comparable prior year period primarily due to the impact of Hurricane Beryl, partially offset by lower raw material and operating costs. Epoxy segment results for the nine months ended September 30, 2024 were lower than the comparable prior year period primarily due to lower product pricing and the impact of Hurricane Beryl, partially offset by increased volumes and lower raw material and operating costs. Winchester reported segment income of $53.4 million and $195.9 million for the three and nine months ended September 30, 2024, respectively. Winchester segment results for the three months ended September 30, 2024 were lower than the comparable prior year period due to higher commodity and operating costs, including propellant costs. Winchester segment results for the nine months ended September 30, 2024 were higher than the comparable prior year period due to higher sales volumes, which included White Flyer results, partially offset by higher commodity and operating costs, including propellant costs. Higher international military sales, military project revenue, and White Flyer sales were partially offset by lower commercial ammunition sales. Liquidity and Share Repurchases During the nine months ended September 30, 2024, we repurchased and retired 4.9 million shares of common stock at a total value of $256.8 million. As of September 30, 2024, we had $742.0 million of remaining authorized common stock to be repurchased under our 2022 Repurchase Authorization Program. During the nine months ended September 30, 2024, we had net borrowings of $216.7 million with $282.0 million borrowed under our Senior Revolving Credit Facility, which was partially utilized to repay $70.0 million of tax-exempt variable-rate bonds, and $11.3 million under our Receivables Financing Agreement. 26 Table of Contents Other Items 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 was 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 the third quarter, we safely returned many Freeport, TX plants to operation and on August 28, 2024, we lifted the system wide force majeure on Chlor Alkali Products and Vinyls products. However, persistent operating limitations necessitated an additional outage, w hich we commenced in late September and successfully completed during October. The third quarter 2024 results included a negative pretax impact of $109.4 million associated with Hurricane Beryl for incremental costs to restore operations, unabsorbed fixed manufacturing costs, and reduced profit from lost sales. The Hurricane Beryl impact included in our Chlor Alkali Products and Vinyls and Epoxy segment results was $76.7 million and $32.7 million, respectively. We expect a residual fourth quarter Hurricane Beryl impact of approximately $25 million in our Chemicals businesses’ results. Epoxy segment results in 2024 continue to be impacted by significant exports out of Asia into the European and North American markets, negatively impacting pricing and volumes. On April 3, 2024, we announced the filing of anti-dumping and countervailing duty petitions against China, India, South Korea, Taiwan and Thailand with the U.S. Department of Commerce and the U.S. International Trade Commission relating to certain epoxy resins, as part of the U.S. Epoxy Resin Producers Ad Hoc Coalition. The petitions were filed in response to large volumes of low-priced imports of epoxy resins into the U.S. from the subject countries over the past three years that have injured U.S. domestic epoxy resin producers. On July 1, 2024, we announced the initiation of an anti-dumping proceeding by the European Commission against China, the Republic of Korea, Taiwan and Thailand concerning low-priced imports of epoxy resins into the European Union (EU), as a result of a complaint lodged by the Ad Hoc Coalition of Epoxy Resin Producers. The complaint alleges that exporting producers in the four targeted countries have injured the European epoxy resin producers by selling their products on the EU market at unfairly low prices that significantly undercut the prices of European producers. During 2024, the U.S. Army awarded Winchester a contract for the construction of the Next Generation Squad Weapon (NGSW) manufacturing facility at Lake City Army Ammunition Plant. The project will be the first new manufacturing plant built at the Lake City facility in decades. The new manufacturing facility will provide safe, reliable, and advanced NGSW ammunition to the U.S. warfighter. Winchester will manage all aspects of the government-funded construction project, which commenced in the second quarter of 2024. 27 Table of Contents CONSOLIDATED RESULTS OF OPERATIONS Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 ($ in millions, except per share data) Sales $ 1,589.5 $ 1,671.4 $ 4,868.8 $ 5,218.4 Cost of goods sold 1,455.0 1,402.3 4,289.2 4,236.6 Gross margin 134.5 269.1 579.6 981.8 Selling and administrative 111.7 90.9 308.2 303.9 Restructuring charges 7.9 11.9 23.0 92.0 Other operating income (expense) 0.6 (0.3) 0.8 27.2 Operating income 15.5 166.0 249.2 613.1 Interest expense 48.4 46.2 139.6 133.9 Interest income 1.0 1.0 2.7 3.2 Non-operating pension income 6.7 5.9 19.4 17.0 Income (loss) before taxes (25.2) 126.7 131.7 499.4 Income tax provision — 22.2 36.8 96.2 Net (loss) income $ (25.2) $ 104.5 94.9 403.2 Net (loss) income attributable to noncontrolling interests (0.3) 0.4 (3.0) (4.1) Net (loss) income attributable to Olin Corporation $ (24.9) $ 104.1 $ 97.9 $ 407.3 Net (loss) income attributable to Olin Corporation per common share: Basic $ (0.21) $ 0.84 $ 0.83 $ 3.19 Diluted $ (0.21) $ 0.82 $ 0.81 $ 3.12 Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023 Sales for the three months ended September 30, 2024 were $1,589.5 million compared to $1,671.4 million in the same period last year, a decrease of $81.9 million, or 5%. Chlor Alkali Products and Vinyls sales decreased by $98.0 million primarily due to lower pricing, primarily caustic soda. Epoxy sales decreased by $36.5 million, primarily due to lower sales volumes, primarily as a result of Hurricane Beryl. Winchester sales increased by $52.6 million, primarily due to third quarter 2024 sales from White Flyer and increased sales to international military customers and military project revenue, partially offset by lower commercial ammunition sales. Gross margin decreased $134.6 million for the three months ended September 30, 2024 compared to the prior year. Chlor Alkali Products and Vinyls gross margin decreased by $117.7 million primarily due to the impact of Hurricane Beryl and lower pricing, primarily caustic soda. Epoxy gross margin decreased by $11.0 million primarily due to the impact of Hurricane Beryl, partially offset by lower raw material and operating costs. Winchester gross margin decreased by $6.9 million primarily due to higher commodity and operating costs, including propellant costs. Gross margin as a percentage of sales decreased to 8% in 2024 from 16% in 2023, across all segments. Selling and administrative expenses for the three months ended September 30, 2024 were $111.7 million, an increase of $20.8 million from the prior year. The increase was primar ily due to higher legal and legal-related settlement expense of $11.9 million, consulting and contract services of $2.3 million, and stock-based compensation expense of $2.2 million, which includes mark-to-market adjustments. Selling and administrative expenses as a percentage of sales increased to 7% in 2024 from 5% in 2023. Restructuring charges for the three months ended September 30, 2024 and 2023 were $7.9 million and $11.9 million, respectively. Restructuring charges were primarily 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 $6.3 million and $8.6 million for the three months ended September 30, 2024 and 2023, respectively. Interest expense increased by $2.2 million for the three months ended September 30, 2024 from the prior year, primarily due to higher average interest rates. 28 Table of Contents 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 September 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 September 30, 2024 included a net $2.9 million tax expense, primarily associated with a change in tax contingencies and remeasurement of deferred taxes due to an increase in our state effective tax rates, partially offset by a benefit from prior year tax positions. Excluding these items, the effective tax rate for the three months ended September 30, 2024 of 11.5% was lower than the 21.0% U.S. federal statutory rate primarily due to state income tax, foreign income inclusions and an increase in the estimated annual effective tax rate, partially offset by favorable permanent salt depletion deductions. The effective tax rate for the three months ended September 30, 2023 included a net $7.2 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 September 30, 2023 of 23.2% 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 and foreign income taxes. Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023 Sales for the nine months ended September 30, 2024 were $4,868.8 million compared to $5,218.4 million in the same period last year, a decrease of $349.6 million, or 7%. Chlor Alkali Products and Vinyls sales decreased by $412.5 million primarily due to lower pricing, primarily caustic soda. Epoxy sales decreased by $72.0 million, primarily due to lower product pricing, partially offset by increased sales volumes. Winchester sales increased by $134.9 million, primarily due to 2024 sales from White Flyer and increased sales to international military customers and military project revenue. Gross margin decreased $402.2 million for the nine months ended September 30, 2024 compared to the prior year. Chlor Alkali Products and Vinyls gross margin decreased by $360.9 million primarily due to lower pricing, primarily caustic soda, partially offset by lower costs. Epoxy gross margin decreased by $50.9 million primarily due to lower product pricing, partially offset by increased volumes. Winchester gross margin increased by $4.1 million primarily due to higher sales volume, including White Flyer, partially offset by higher commodity and operating costs, including propellant costs. Gross margin as a percentage of sales decreased to 12% in 2024 from 19% in 2023, across all segments. Selling and administration expenses for the nine months ended September 30, 2024 were $308.2 million, an increase of $4.3 million from the prior year. The increase was primarily due to higher legal and legal-related settlement expense of $13.6 million, partially offset by a favorable foreign currency impact of $3.0 million and lower stock-based compensation expense of $2.7 million, which includes mark-to-market adjustments. Sellin g and administration expenses as a percentage of sales was 6% for both the nine months ended September 30, 2024 and 2023. Restructuring charges for the nine months ended September 30, 2024 and 2023 were $23.0 million and $92.0 million, respectively. The decrease was primarily due to 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 $15.6 million and $79.7 million for the nine months ended September 30, 2024 and 2023, respectively. Other operating income for the nine months ended September 30, 2023 included a gain of $27.0 million for the sale of our domestic private trucking fleet and operations. Interest expense increased by $5.7 million for the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2024 included a net $0.4 million tax benefit, primarily associated with stock-based compensation, U.S. Federal tax credits purchased at a discount, and a benefit from prior year tax positions, partially offset by a change in tax contingencies and remeasurement of deferred taxes due to an increase in our state effective tax rates. Excluding these items, the effective tax rate for the nine months ended September 30, 2024 of 28.2% 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 nine months ended September 30, 2023 included a net $24.4 million tax benefit, primarily associated with stock-based compensation and prior year tax positions, partially offset by an expense from a change in tax contingencies. Excluding these items, the effective tax rate for 29 Table of Contents the nine months ended September 30, 2023 of 24.1% was higher than the 21.0% U.S. federal statutory rate primarily due to state income tax and an increase in the valuation allowance related to losses in foreign jurisdictions, partially offset by favorable permanent salt depletion deductions and foreign income taxes. SEGMENT RESULTS We define segment results as income (loss) before interest expense, interest income, other operating income (expense), non-operating pension income, other income and income taxes. We have three operating segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. The three operating segments reflect the organization used by our management for purposes of allocating resources and assessing performance. Chlorine and caustic soda used in our Epoxy segment is transferred at cost from the Chlor Alkali Products and Vinyls segment. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Segment Detail ($ in millions) Sales Chlor Alkali Products and Vinyls $ 871.6 $ 969.6 $ 2,676.5 $ 3,089.0 Epoxy 285.1 321.6 944.1 1,016.1 Winchester 432.8 380.2 1,248.2 1,113.3 Total sales $ 1,589.5 $ 1,671.4 $ 4,868.8 $ 5,218.4 Income (loss) before taxes Chlor Alkali Products and Vinyls $ 45.3 $ 172.3 $ 221.2 $ 598.3 Epoxy (42.8) (28.8) (57.6) (7.9) Winchester 53.4 64.5 195.9 190.2 Corporate/other: Environmental expense (7.2) (6.9) (19.4) (23.1) Other corporate and unallocated costs (25.9) (22.9) (68.7) (79.6) Restructuring charges (7.9) (11.9) (23.0) (92.0) Other operating income (expense) 0.6 (0.3) 0.8 27.2 Interest expense (48.4) (46.2) (139.6) (133.9) Interest income 1.0 1.0 2.7 3.2 Non-operating pension income 6.7 5.9 19.4 17.0 Income (loss) before taxes $ (25.2) $ 126.7 $ 131.7 $ 499.4 Chlor Alkali Products and Vinyls Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023 Chlor Alkali Products and Vinyls sales for the three months ended September 30, 2024 were $871.6 million compared to $969.6 million for the same period in 2023, a decrease of $98.0 million, or 10%. The sales decrease was primarily due to lower pricing, primarily caustic soda. Chlor Alkali Products and Vinyls segment income was $45.3 million for the three months ended September 30, 2024 compared to $172.3 million for the same period in 2023. The decrease in segment results of $127.0 million was due to the negative impact of Hurricane Beryl resulting in incremental costs to restore operations, unabsorbed fixed manufacturing costs, and reduced profit from lost sales ($76.7 million), lower pricing ($79.5 million), primarily caustic soda, and higher raw material and operating costs ($17.6 million), partially offset by increased volumes ($43.6 million) and lower costs associated with product purchased from other parties ($3.2 million). Chlor Alkali Products and Vinyls third quarter 2023 segment results were negatively impacted by a 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 $106.5 million and $107.6 million for the three months ended September 30, 2024 and 2023, respectively. 30 Table of Contents Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023 Chlor Alkali Products and Vinyls sales for the nine months ended September 30, 2024 were $2,676.5 million compared to $3,089.0 million for the same period in 2023, a decrease of $412.5 million, or 13%. The sales decrease was primarily due to lower pricing, primarily caustic soda, partially offset by increased sales volumes associated with products purchased from other parties. Chlor Alkali Products and Vinyls segment income was $221.2 million for the nine months ended September 30, 2024 compared to $598.3 million for the same period in 2023. The decrease in segment results of $377.1 million was due to lower pricing ($476.1 million), primarily caustic soda, the negative impact of Hurricane Beryl resulting in incremental costs to restore operations, unabsorbed fixed manufacturing costs, and reduced profit from lost sales ($76.7 million), and an unfavorable product mix ($39.9 million), partially offset by lower costs associated with products purchased from other parties ($120.9 million) and lower raw material and operating costs ($94.7 million). Chlor Alkali Products and Vinyls third quarter 2023 segment results were negatively impacted by a 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 $319.1 million and $335.3 million for the nine months ended September 30, 2024 and 2023, respectively. Epoxy Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023 Epoxy sales for the three months ended September 30, 2024 were $285.1 million compared to $321.6 million for the same period in 2023, a decrease of $36.5 million, or 11%. The sales decrease was due to lower sales volumes ($35.4 million), primarily as a result of Hurricane Beryl and an unfavorable effect of foreign currency translation ($2.1 million), partially offset by higher product prices ($1.0 million). Epoxy segment loss was $42.8 million for the three months ended September 30, 2024 compared to segment loss of $28.8 million for the same period in 2023. The decrease in segment results of $14.0 million was due to the negative impact of Hurricane Beryl resulting in incremental costs to restore operations, unabsorbed fixed manufacturing costs, and reduced profit from lost sales ($32.7 million) and decreased volumes ($1.3 million), partially offset by lower raw material and operating costs ($20.0 million). A significant percentage of our Euro denominated sales are of products manufactured within Europe. As a result, the impact of foreign currency translation on revenue is primarily offset by the impact of foreign currency translation on raw materials and manufacturing costs also denominated in Euros. Epoxy segment results included depreciation and amortization expense of $13.7 million and $14.7 million for the three months ended September 30, 2024 and 2023, respectively. Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023 Epoxy sales for the nine months ended September 30, 2024 were $944.1 million compared to $1,016.1 million for the same period in 2023, a decrease of $72.0 million, or 7%. The sales decrease was due to lower product prices ($132.6 million) and an unfavorable effect of foreign currency translation ($4.5 million), partially offset by increased sales volumes ($65.1 million), which were negatively impacted by Hurricane Beryl. Epoxy segment loss was $57.6 million for the nine months ended September 30, 2024 compared to segment loss of $7.9 million for the same period in 2023. The decrease in segment results of $49.7 million was due to lower product prices ($133.4 million), which continues to be impacted by significant exports out of Asia into the European and North American markets, and the negative impact of Hurricane Beryl resulting in incremental costs to restore operations, unabsorbed fixed manufacturing costs, and reduced profit from lost sales ($32.7 million), partially offset by increased volumes and improved product mix ($82.2 million) and lower raw material and operating costs ($34.2 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 $40.6 million and $44.4 million for the nine months ended September 30, 2024 and 2023, respectively. Winchester Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023 Winchester sales were $432.8 million for the three months ended September 30, 2024 compared to $380.2 million for the same period in 2023, an increase of $52.6 million, or 14%. The increase was due to higher sales to domestic and international military customers ($43.5 million), higher sales to commercial customers ($10.4 million), partially offset by lower sales to law enforcement agencies ($1.3 million). Commercial sales were primarily impacted by 2024 sales from White Flyer, partially 31 Table of Contents offset by lower ammunition volumes. Winchester segment income was $53.4 million for the three months ended September 30, 2024 compared to $64.5 million for the same period in 2023, a decrease of $11.1 million. The decrease in segment results was due to higher commodity and operating costs ($17.2 million), including propellant costs, partially offset by higher sales volumes ($4.1 million), which includes White Flyer, and higher product pricing ($2.0 million). Winchester segment income included depreciation and amortization expense of $8.5 million and $6.6 million for the three months ended September 30, 2024 and 2023, respectively. Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023 Winchester sales were $1,248.2 million for the nine months ended September 30, 2024 compared to $1,113.3 million for the same period in 2023, an increase of $134.9 million, or 12%. The increase was due to higher sales to commercial customers ($75.3 million) and higher sales to domestic and international military customers ($70.1 million), partially offset by lower sales to law enforcement agencies ($10.5 million). Commercial sales were primarily impacted by 2024 sales from White Flyer. Winchester segment income was $195.9 million for the nine months ended September 30, 2024 compared to $190.2 million for the same period in 2023, an increase of $5.7 million. The increase in segment results was due to higher sales volumes ($27.1 million), which includes White Flyer, partially offset by higher commodity and operating costs ($16.8 million), including propellant costs, and lower product pricing ($4.6 million). Winchester segment income included depreciation and amortization expense of $24.7 million and $19.1 million for the nine months ended September 30, 2024 and 2023, respectively. Corporate/Other Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023 For the three months ended September 30, 2024, charges to income for environmental investigatory and remedial activities were $7.2 million compared to $6.9 million for the three months ended September 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 September 30, 2024, other corporate and unallocated costs were $25.9 million compared to $22.9 million for the three months ended September 30, 2023, an increase of $3.0 million. The increase was primarily due to higher stock-based compensation ($2.2 million), which includes mark-to-market adjustments, and higher legal and legal-related settlement expenses ($1.6 million). Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023 For the nine months ended September 30, 2024, charges to income for environmental investigatory and remedial activities were $19.4 million compared to $23.1 million for the nine months ended September 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 nine months ended September 30, 2024, other corporate and unallocated costs were $68.7 million compared to $79.6 million for the nine months ended September 30, 2023, a decrease of $10.9 million. The decrease was primarily due to lower variable incentive compensation costs ($6.3 million), which includes mark-to-market adjustments on stock-based compensation expense, and a favorable foreign currency impact ($3.0 million). Restructurings In connection with the previously announced Epoxy Optimization Plan, for the three months ended September 30, 2024 and 2023, we recorded restructuring charges of $6.3 million and $8.6 million, respectively, and for the nine months ended September 30, 2024 and 2023, we recorded restructuring charges of $15.6 million and $79.7 million, respectively. We expect to incur additional restructuring charges through 2025 of approximately $10 million related to these actions. For the three months ended September 30, 2024 and 2023, we incurred charges of $1.6 million and $3.3 million, respectively, and for the nine months ended September 30, 2024 and 2023, we incurred charges of $7.4 million and $12.3 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. 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. 32 Table of Contents OUTLOOK In the third quarter 2024, our Chemicals businesses were able to safely return multiple Freeport, TX, plants to operation after Hurricane Beryl, completing our efforts during October. In the third quarter 2024, we incurred a negative $109.4 million impact from Hurricane Beryl, and we anticipate a residual negative fourth quarter impact of approximately $25 million on our Chemicals businesses’ results. Excluding the Hurricane Beryl impact, we expect our Chemicals businesses’ fourth quarter 2024 results to seasonally decline from the third quarter 2024. We expect our Winchester business fourth quarter results to decline from third quarter levels with seasonally weaker commercial ammunition demand and inventory destocking by our retail customers. 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 $30 million range, compared to $23.7 million in 2023. We expect non-operating pension income in 2024 to be similar to the $24.0 million in 2023. Based on our plan assumptions and estimates, we will not be required to make any cash contributions to our domestic qualified defined benefit pension plan in 2024. We have several international qualified defined benefit pension plans for which we anticipate cash contributions of less than $5 million in 2024. In 2024, we currently expect our capital spending to be approximately $200 million, including approximately $10 million of additional capital associated with Hurricane Beryl. Our payments under other long-term supply contracts for energy modernization on the U.S. Gulf Coast will be $58.6 million as we made our final payment during the third quarter 2024. We expect 2024 depreciation and amortization expense to be approximately $525 million. We currently believe the 2024 effective tax rate will be in the 25% to 30% range and cash taxes paid to be approximately $110 million. ENVIRONMENTAL MATTERS Environmental provisions charged to income, which are included in costs of goods sold, were $7.2 million and $6.9 million for the three months ended September 30, 2024 and 2023, respectively, and were $19.4 million and $23.1 million for the nine months ended September 30, 2024 and 2023, respectively. The following table summarizes the environmental liability activity: Nine Months Ended September 30, 2024 2023 Environmental Liabilities ($ in millions) Balance at beginning of year $ 153.6 $ 146.6 Charges to income 19.4 23.1 Remedial and investigatory spending (18.8) (16.2) Balance at end of period $ 154.2 $ 153.5 Environmental investigatory and remediation activities spending was associated with former waste disposal sites and past manufacturing operations. Spending in 2024 for investigatory and remedial efforts, the timing of which is subject to regulatory approvals and other uncertainties, is estimated to be approximately $30 million. Cash outlays for remedial and investigatory activities associated with former waste disposal sites and past manufacturing operations were not charged to income, but instead, were charged to reserves established for such costs identified and expensed to income in prior periods. Associated costs of investigatory and remedial activities are provided for in accordance with generally accepted accounting principles governing probability and the ability to reasonably estimate future costs. Our ability to estimate future costs depends on whether our investigatory and remedial activities are in preliminary or advanced stages. With respect to unasserted claims, we accrue liabilities for costs that, in our experience, we expect to incur to protect our interests against those unasserted claims. Our accrued liabilities for unasserted claims amounted to $11.7 million at September 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. Required site OM&M expenses are estimated and accrued in their entirety for required periods not exceeding 30 years, which reasonably approximates the typical duration of long-term site OM&M. Charges to income for investigatory and remedial efforts may be material to our operating results in 2024. 33 Table of Contents The condensed balance sheets included reserves for future environmental expenditures to investigate and remediate known sites amounting to $154.2 million, $153.6 million and $153.5 million at September 30, 2024, December 31, 2023 and September 30, 2023, respectively, of which $122.2 million, $121.6 million and $128.5 million, respectively, were classified as other noncurrent liabilities. These amounts do not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology. These liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and our estimate of related costs have changed. As a result of these reassessments, future charges to income may be made for additional liabilities. Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, changes in regulatory authorities, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other Potentially Responsible Parties (PRPs), our ability to obtain contributions from other parties and the lengthy time periods over which site remediation occurs. It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably to us, which could materially adversely affect our financial position or results of operations. LEGAL MATTERS AND CONTINGENCIES Discussion of legal matters and contingencies can be referred to under Item 1, within Note 18, “Commitments and Contingencies.” LIQUIDITY AND CAPITAL RESOURCES Cash Flow Data Nine Months Ended September 30, 2024 2023 Cash Provided by (Used for) ($ in millions) Net operating activities $ 361.5 $ 557.7 Capital expenditures (144.1) (173.0) Payments under other long-term supply contracts (58.6) (46.2) Proceeds from disposition of property, plant and equipment — 28.8 Net investing activities (207.0) (194.0) Long-term debt borrowings, net 216.7 206.6 Common stock repurchased and retired (256.8) (595.1) Stock options exercised 22.6 22.3 Dividends paid (70.9) (76.6) Contributions received from noncontrolling interests — 44.1 Net financing activities (98.9) (398.7) Operating Activities For the nine months ended September 30, 2024, cash provided by operating activities decreased by $196.2 million from the nine months ended September 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 nine months ended September 30, 2024, working capital increased $58.7 million compared to an increase of $172.6 million for the nine months ended September 30, 2023. Accounts payable and accrued liabilities decreased $77.2 million from December 31, 2023, primarily as a result of timing of payments during the third quarter of 2024. Investing Activities Capital spending was $144.1 million for the nine months ended September 30, 2024, compared to $173.0 million for the comparable period in 2023. Our capital spending forecast represents normal capital spending to maintain our current operating facilities. For the full year 2024, we expect our capital spending to be approximately $200 million, including $10 million of additional capital associated with Hurricane Beryl. We expect 2024 depreciation and amortization expense to be approximately $525 million. 34 Table of Contents For the nine months ended September 30, 2024, payments under other long-term supply contracts were $58.6 million for energy modernization on the U.S. Gulf Coast. Our payments for this project were completed in the third quarter. For the nine months ended September 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 nine months ended September 30, 2024 and 2023, we had long-term debt borrowings, net of repayments, of $216.7 million and $206.6 million, respectively. For the nine months ended September 30, 2024 and 2023, 4.9 million and 10.8 million shares, respectively, of common stock were repurchased and retired at a total value of $256.8 million and $595.1 million, respectively. We issued 0.9 million and 0.8 million shares representing stock options exercised for the nine months ended September 30, 2024 and 2023, respectively, with a total value of $22.6 million and $22.3 million, respectively. For the nine months ended September 30, 2024, we withheld and paid $10.5 million for employee taxes on share-based payment arrangements. For the nine months ended September 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 58.0% as of September 30, 2024 from 54.1% as of December 31, 2023, primarily as a result of a higher level of debt outstanding and lower shareholders’ equity, primarily due to common stock repurchases partially offset by our operating results. In the first three quarters of 2024 and 2023, we paid a quarterly dividend of $0.20 per share. Dividends paid for the nine months ended September 30, 2024 and 2023, were $70.9 million and $76.6 million, respectively. On October 24rd, 2024, our Board of Directors declared a dividend of $0.20 per share on our common stock, payable on December 13th, 2024, to shareholders of record on November 14th, 2024. The payment of cash dividends is subject to the discretion of our Board of Directors and will be determined in light of then-current conditions, including our earnings, our operations, our financial condition, our capital requirements and other factors deemed relevant by our Board of Directors. In the future, our Board of Directors may change our dividend policy, including the frequency or amount of any dividend, in light of then-existing conditions. Liquidity and Other Financing Arrangements Our principal sources of liquidity are from cash and cash equivalents, cash flow from operations and borrowings under our Senior Revolving Credit Facility, Receivables Financing Agreement (as defined below) and AR Facilities (as defined below). Additionally, we believe that we have access to the high-yield debt and equity markets. We maintain a $1,550.0 million senior credit facility (Senior Credit Facility) which includes a senior term loan facility with aggregate commitments of $350.0 million (Term Loan Facility) and a senior revolving credit facility with aggregate commitments of $1,200.0 million (Senior Revolving Credit Facility). The Term Loan Facility was fully drawn on the closing date with the proceeds of the Term Loan Facility used to refinance the loans and commitments outstanding under the existing facility. The Term Loan Facility requires principal amortization 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 September 30, 2024, we had $849.6 million available under our $1,200.0 million Senior Revolving Credit Facility because we had $350.0 million borrowed under the facility and issued $0.4 million of letters of credit. During 2024, the Senior Revolving Credit Facility borrowings were partially utilized 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 September 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 September 30, 2024, there were no covenants or other restrictions that limited our ability to borrow. 35 Table of Contents We believe, based on current and projected levels of cash flow from our operations, together with our cash and cash equivalents on hand and the availability to borrow under our Senior Revolving Credit Facility and AR Facilities, we have sufficient liquidity to meet our short-term and long-term needs, to make required payments of interest on our debt, fund our operating needs, working capital and our capital expenditure requirements, and comply with the financial ratios in our debt agreements. On July 28, 2022, our Board of Directors authorized a share repurchase program for the purchase of shares of common stock at an aggregate price of up to $2.0 billion. This program will terminate upon the purchase of $2.0 billion of common stock. For the nine months ended September 30, 2024, 4.9 million shares of common stock have been repurchased and retired at a total value of $256.8 million. As of September 30, 2024, 24.2 million shares of common stock have been repurchased and retired at a total value of $1,258.0 million under the 2022 Repurchase Authorization program, and $742.0 million of common stock remained authorized to be repurchased under the program. We maintain a $425.0 million Receivables Financing Agreement (Receivables Financing Agreement) that is scheduled to mature on October 14, 2025. Under the Receivables Financing Agreement, our eligible trade receivables are used for collateralized borrowings and continue to be serviced by us. In addition, the Receivables Financing Agreement incorporates the net leverage ratio covenant that is contained in the Senior Credit Facility. As of September 30, 2024, December 31, 2023 and September 30, 2023, we had $339.8 million, $328.5 million and $350.0 million, respectively, drawn under the agreement. As of September 30, 2024, $473.9 million of our trade receivables were pledged as collateral and we had $0.3 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 $134.5 million and certain of our foreign subsidiaries may sell their accounts receivable up to a maximum of €16.5 million. We will continue to service the outstanding accounts sold. These receivables qualify for sales treatment under ASC 860 and, accordingly, the proceeds are included in net cash provided by operating activities in the condensed statements of cash flows. The following table summarizes the AR facilities activity: Nine Months Ended September 30, 2024 2023 AR Facilities ($ in millions) Balance at beginning of period $ 63.3 $ 111.8 Gross receivables sold 528.5 749.5 Payments received from customers on sold accounts (539.5) (788.6) Balance at end of period $ 52.3 $ 72.7 The factoring discount paid under the AR Facilities is recorded as interest expense on the condensed statements of operations. The factoring discount was $0.8 million and $1.3 million for the three months ended September 30, 2024 and 2023, respectively, and $2.9 million and $3.8 million for the nine months ended September 30, 2024 and 2023, respectively. The agreements are without recourse and therefore no recourse liability has been recorded as of September 30, 2024. 36 Table of Contents At September 30, 2024, we had total letters of credit of $167.3 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 September 30, 2024, we had long-term borrowings, including the current installment, of $2,889.5 million, of which $1,110.4 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 $14.1 million as of September 30, 2024. Commitments from banks under our Senior Revolving Credit Facility and AR Facilities are additional sources of liquidity. We have registered an undetermined number of securities with the SEC, so that, from time-to-time we may issue debt securities, preferred stock and/or common stock and associated warrants in the public market under that registration statement. Credit Ratings We receive ratings from three independent credit rating agencies: Fitch Ratings (Fitch), Moody's Investor Service (Moody's) and Standard & Poor's (S&P). The following table summarizes our credit ratings as of September 30, 2024: Credit Rating Agency Long-term Rating Outlook Fitch Ratings BBB- Stable Moody’s Investors Service Ba1 Stable Standard & Poor’s BB+ Stable On August 8, 2024, S&P affirmed Olin’s BB+ rating and revised its outlook from positive to stable. 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. Contractual Obligations Purchasing commitments are utilized in our normal course of business for our projected needs. We have supply contracts with various third parties for certain raw materials including ethylene, electricity, propylene and benzene. These agreements are maintained through long-term cost based contracts that provide us with a reliable supply of key raw materials. There have been no material changes in our contractual obligations and commitments as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, other than those which occur in the ordinary course of business. New Accounting Pronouncements Discussion of new accounting pronouncements can be referred to under Item 1, within Note 2, “Recent Accounting Pronouncements.”