Business Background
We are a leading vertically-integrated global manufacturer and distributor of
chemical products and a leading United States (U.S.) manufacturer of ammunition.
Our operations are concentrated in three business segments: Chlor Alkali
Products and Vinyls, Epoxy and Winchester. All of our business segments are
capital intensive manufacturing businesses. Chlor Alkali Products and Vinyls
operating rates are closely tied to the general economy. Each segment has a
commodity element to it.
Our Chlor Alkali Products and Vinyls segment is partially a commodity business
where all supplier products are similar and price is the major supplier
selection criterion. Pricing for these products is subject to a variety of
factors, some of which are outside of our control. Our Chlor Alkali Products and
Vinyls segment produces some of the most widely used chemicals in the world that
can be upgraded into a wide variety of downstream chemical products used in many
end-markets. Changes in supply/demand can be abrupt and significant and, given
capacity in our Chlor Alkali Products and Vinyls segment, can lead to
significant changes in our overall profitability.
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The Epoxy segment consumes some products manufactured by the Chlor Alkali
Products and Vinyls segment. The Epoxy segment's upstream and midstream products
are partially commodity markets. Pricing for these products is subject to a
variety of factors, some of which are outside of our control. While competitive
differentiation exists through downstream customization and product development
opportunities, pricing is extremely competitive with a broad range of
competitors across the globe.
Winchester also has a commodity element to its business, but a majority of
Winchester ammunition is sold as a branded consumer product where there are
opportunities to differentiate certain offerings through innovative new product
development and enhanced product performance. While competitive pricing versus
other branded ammunition products is important, it is not the only factor in
product selection.
Executive Summary
Winter Storm Uri
Olin's Freeport, TX facility was affected by Winter Storm Uri and was forced to
halt production due to the lack of electrical power, natural gas, and other raw
materials. All of Olin's Freeport operations were impacted. In addition,
production at Olin's Plaquemine, LA; St. Gabriel, LA; Oxford, MS; and McIntosh,
AL facilities were also negatively impacted. As a result, by February 18, 2021,
Olin declared Force Majeure on all chemical product shipments from North
America. As of March 31, 2021, our facilities had returned to operation.
The first quarter 2021 included a net pretax favorable impact of $99.9 million
associated with Winter Storm Uri due to Olin's customary financial hedges and
contracts maintained to provide protection from rapid and dramatic changes in
energy costs, partially offset by unabsorbed fixed manufacturing costs and
storm-related maintenance costs. For the nine months ended September 30, 2021,
Chlor Alkali Products and Vinyls segment results included a favorable impact of
$121.4 million and Epoxy segment results included an unfavorable impact of $21.5
million associated with Winter Storm Uri.
2021 Overview
Net income for the three and nine months ended September 30, 2021 was $390.7
million and $990.1 million, respectively, compared to net loss of $736.8 million
and $936.9 million, respectively, for the comparable prior year periods in 2020.
The increase in results from the prior year was due to improved operating
results across all our business segments. The 2020 results were also impacted by
a $699.8 million goodwill impairment charge.
Chlor Alkali Products and Vinyls reported segment income of $263.0 million and
$703.0 million for the three and nine months ended September 30, 2021,
respectively. Chlor Alkali Products and Vinyls segment results were higher than
in the comparable prior year periods primarily due to higher pricing across all
products, partially offset by higher raw material and operating costs.
Epoxy reported segment income of $215.2 million and $445.7 million for the three
and nine months ended September 30, 2021, respectively. Epoxy segment results
were higher than in the comparable prior year periods primarily due to higher
product prices, partially offset by higher raw materials costs, primarily
benzene and propylene.
Winchester reported segment income of $115.3 million and $310.3 million for the
three and nine months ended September 30, 2021, respectively. On October 1,
2020, Winchester assumed full management and operational control of the Lake
City U.S. Army Ammunition Plant (Lake City) in Independence, MO. Winchester
segment results were higher than in the comparable prior year periods primarily
due to increased commercial ammunition pricing and higher volumes, which
includes ammunition produced at Lake City. Winchester segment results were also
negatively impacted by higher commodity costs compared to the prior year
periods.
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During the nine months ended September 30, 2021, we repaid $851.1 million of
long-term debt. In connection with these financing transactions, we recognized a
loss on extinguishment of debt of $8.7 million and $47.6 million for the three
and nine months ended September 30, 2021, respectively, which includes the
payment of early redemption premiums of $6.7 million and $37.7 million for the
three and nine months ended September 30, 2021, respectively.
During the nine months ended September 30, 2021, we repurchased and retired 1.5
million shares at a cost of $68.3 million. As of September 30, 2021, we have
$235.8 million of remaining authorized common stock to be purchased under our
April 26, 2018 share repurchase program.
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