Olin Announces Fourth Quarter 2020 Results
Olin Corporation reported a fourth quarter 2020 net loss of $33 million but an adjusted EBITDA of $246.2 million, up from $173.2 million in the prior year. Sales increased to $1.6541 billion from $1.3871 billion in Q4 2019. The ECU Profit Contribution Index improved by 6%, supported by strong chlorine pricing. Winchester achieved record segment earnings of $44.8 million, driven by commercial and military sales. The cash balance was $189.7 million, and net debt stood at $3.6741 billion. Olin expects improved first quarter 2021 results.
- Increased adjusted EBITDA to $246.2 million, up from $173.2 million in Q4 2019.
- Sales rose to $1.6541 billion, an increase from $1.3871 billion in Q4 2019.
- Winchester segment achieved record earnings of $44.8 million due to higher sales.
- Reported net loss of $33 million compared to a larger loss of $77.2 million in Q4 2019.
- Net debt increased to $3.6741 billion with a high debt-to-EBITDA ratio of 5.8 times.
CLAYTON, Mo., Jan. 28, 2021 /PRNewswire/ --
Fourth Quarter 2020 Highlights
- Fourth quarter 2020 net loss of
$33.0 million and adjusted EBITDA of$246.2 million - ECU Profit Contribution Index improved by
6% in fourth quarter compared to third quarter - Winchester achieved record quarterly segment earnings
Olin Corporation (NYSE: OLN) announced financial results for the fourth quarter ended December 31, 2020.
Fourth quarter 2020 reported net loss was
Scott Sutton, President and Chief Executive Officer, said, "I am proud of the Olin team for their success in implementing our unique winning model and leading by prioritizing 'value first' across the ECU (Electrochemical Unit), even in a sub-optimal market configuration for Olin. As predicted, we increased the ECU Profit Contribution Index (ECU PCI) in the face of softening caustic values. Olin drove sequential pricing improvement in the fourth quarter 2020 for chlorine and almost all chlorine derivatives, including epoxy resins. Our Winchester business delivered the strongest quarterly earnings in its history due to outstanding execution by the team, with even higher performance expected in 2021.
"Looking ahead to first quarter 2021 in our Chemicals businesses, and particularly in Epoxy, we expect our winning model to push the ECU PCI higher, with Olin's recent price increase announcements for chlorine, epichlorohydrin, epoxy resins, bleach, ethylene dichloride and chlorinated organics forecast to positively contribute. We expect some volume offsets as Olin continues to selectively sell less into poor quality markets, as we remain disciplined in our approach to caustic soda. Additionally, productivity actions are expected to favorably contribute to first quarter 2021 results. Overall, we expect first quarter 2021 adjusted EBITDA to improve sequentially from fourth quarter 2020."
SEGMENT REPORTING
Olin defines segment earnings as income (loss) before interest expense, interest income, goodwill impairment charges, other operating income (expense), non-operating pension income, other income, and income taxes.
CHLOR ALKALI PRODUCTS AND VINYLS
Chlor Alkali Products and Vinyls sales for the fourth quarter 2020 were
EPOXY
Epoxy sales for the fourth quarter 2020 were
WINCHESTER
On October 1st, Winchester began operating the Lake City U.S. Army Ammunition Plant (Lake City). Winchester sales for the fourth quarter 2020 were
CORPORATE AND OTHER COSTS
Other corporate and unallocated costs in the fourth quarter of 2020 increased
CASH AND LIQUIDITY
The cash balance on December 31, 2020 was
On January 15, 2021, Olin redeemed the remaining
CONFERENCE CALL INFORMATION
Olin senior management will host a conference call to discuss fourth quarter 2020 financial results at 9:00 a.m. Eastern time on Friday, January 29, 2021. Remarks will be followed by a question and answer session. Associated slides, which will be available the evening before the call, and the conference call will be accessible via webcast through Olin's website, www.olin.com, under the fourth quarter conference call icon. An archived replay of the webcast will also be available in the Investor Relations section of Olin's website beginning at 12:00 p.m. Eastern time. A final transcript of the call will be posted the day following the event.
COMPANY DESCRIPTION
Olin Corporation is a leading vertically-integrated global manufacturer and distributor of chemical products and a leading U.S. manufacturer of ammunition. The chemical products produced include chlorine and caustic soda, vinyls, epoxies, chlorinated organics, bleach and hydrochloric acid. Winchester's principal manufacturing facilities produce and distribute sporting ammunition, law enforcement ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.
Visit www.olin.com for more information on Olin.
FORWARD-LOOKING STATEMENTS
This communication includes forward-looking statements. These statements relate to analyses and other information that are based on management's beliefs, certain assumptions made by management, forecasts of future results, and current expectations, estimates and projections about the markets and economy in which we and our various segments operate. The statements contained in this communication that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties.
We have used the words "anticipate," "intend," "may," "expect," "believe," "should," "plan," "project," "estimate," "forecast," "optimistic," and variations of such words and similar expressions in this communication to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. 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 conditions, 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.
The risks, uncertainties and assumptions involved in our forward-looking statements, many of which are discussed in more detail in our filings with the SEC, including without limitation the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, include, but are not limited to, the following:
- sensitivity to economic, business and market conditions in the United States and overseas, including economic instability or a downturn in the sectors served by us, such as vinyls, urethanes, and pulp and paper;
- the cyclical nature of our operating results, particularly declines in average selling prices in the chlor alkali industry and the supply/demand balance for our products, including the impact of excess industry capacity or an imbalance in demand for our chlor alkali products;
- our reliance on a limited number of suppliers for specified feedstock and services and our reliance on third-party transportation;
- higher-than-expected raw material, energy, transportation, and/or logistics costs;
- failure to control costs or to achieve targeted cost reductions;
- new regulations or public policy changes regarding the transportation of hazardous chemicals and the security of chemical manufacturing facilities;
- the occurrence of unexpected manufacturing interruptions and outages, including those occurring as a result of labor disruptions and production hazards;
- weak industry conditions affecting our ability to comply with the financial maintenance covenants in our senior secured credit facility;
- the negative impact from the COVID-19 pandemic and the global response to the pandemic;
- the failure or an interruption of our information technology systems;
- complications resulting from our multiple enterprise resource planning systems and the conversion to a new system;
- the loss of a substantial customer for either chlorine or caustic soda could cause an imbalance in customer demand for these products;
- our substantial amount of indebtedness and significant debt service obligations;
- unexpected litigation outcomes;
- changes in, or failure to comply with, legislation or government regulations or policies;
- costs and other expenditures in excess of those projected for environmental investigation and remediation or other legal proceedings;
- failure to attract, retain and motivate key employees;
- the effects of any declines in global equity markets on asset values and any declines in interest rates used to value the liabilities in our pension plan;
- adverse changes in international markets, including economic, political or regulatory changes;
- our long range plan assumptions not being realized causing a non-cash impairment charge of long-lived assets;
- adverse conditions in the credit and capital markets, limiting or preventing our ability to borrow or raise capital; and
- various risks associated with our transition and subsequent operation of the Lake City U.S. Army Ammunition Plant.
All of our forward-looking statements should be considered in light of these factors. In addition, other risks and uncertainties not presently known to us or that we consider immaterial could affect the accuracy of our forward-looking statements.
2021-04
Olin Corporation | ||||||
Consolidated Statements of Operations (a) | ||||||
Three Months | Years Ended | |||||
Ended December 31, | December 31, | |||||
(In millions, except per share amounts) | 2020 | 2019 | 2020 | 2019 | ||
Sales | $ 1,654.1 | $ 1,387.1 | $ 5,758.0 | $ 6,110.0 | ||
Operating Expenses: | ||||||
Cost of Goods Sold | 1,457.3 | 1,270.6 | 5,374.6 | 5,439.2 | ||
Selling and Administration | 112.9 | 102.1 | 422.0 | 416.9 | ||
Restructuring Charges (b) | 4.3 | 63.8 | 9.0 | 76.5 | ||
Goodwill Impairment | - | - | 699.8 | - | ||
Other Operating Income (c) | 0.8 | 0.1 | 0.7 | 0.4 | ||
Operating Income (Loss) | 80.4 | (49.3) | (746.7) | 177.8 | ||
Interest Expense (d) | 85.6 | 64.0 | 292.7 | 243.2 | ||
Interest Income | 0.1 | 0.3 | 0.5 | 1.0 | ||
Non-operating Pension Income | 4.5 | 4.1 | 18.9 | 16.3 | ||
Other Income (e) | - | - | - | 11.2 | ||
Loss before Taxes | (0.6) | (108.9) | (1,020.0) | (36.9) | ||
Income Tax Provision (Benefit) | 32.4 | (31.7) | (50.1) | (25.6) | ||
Net Loss | $ (33.0) | $ (77.2) | $ (969.9) | $ (11.3) | ||
Net Loss Per Common Share: | ||||||
Basic | $ (0.21) | $ (0.49) | $ (6.14) | $ (0.07) | ||
Diluted | $ (0.21) | $ (0.49) | $ (6.14) | $ (0.07) | ||
Dividends Per Common Share | $ 0.20 | $ 0.20 | $ 0.80 | $ 0.80 | ||
Average Common Shares Outstanding - Basic | 157.9 | 158.2 | 157.9 | 162.3 | ||
Average Common Shares Outstanding - Diluted | 157.9 | 158.2 | 157.9 | 162.3 | ||
(a) | Unaudited. | |||||
(b) | Restructuring charges for both the three months and year ended December 31, 2019 were primarily associated with the closure of a chlor alkali plant and a vinylidene chloride production facility, both in Freeport, Texas, of which | |||||
(c) | Other operating income for both the three months and year ended December 31, 2020 included an | |||||
(d) | Interest expense for both the three months and year ended December 31, 2020 included a | |||||
(e) | ||||||
Other income for the year ended December 31, 2019 included a gain of | ||||||
Olin Corporation | ||||||||
Segment Information (a) | ||||||||
Three Months | Years Ended | |||||||
Ended December 31, | December 31, | |||||||
(In millions) | 2020 | 2019 | 2020 | 2019 | ||||
Sales: | ||||||||
Chlor Alkali Products and Vinyls | $ 793.7 | $ 762.4 | $ 2,959.9 | |||||
Epoxy | 519.8 | 470.0 | 1,870.5 | 2,024.4 | ||||
Winchester | 340.6 | 154.7 | 927.6 | 665.5 | ||||
Total Sales | $ 5,758.0 | |||||||
Income (Loss) before Taxes: | ||||||||
Chlor Alkali Products and Vinyls | $ 57.0 | $ 32.9 | $ 3.5 | $ 336.7 | ||||
Epoxy | 27.2 | 15.3 | 40.8 | 53.9 | ||||
Winchester | 44.8 | 7.0 | 92.3 | 40.1 | ||||
Corporate/Other: | ||||||||
Environmental Expense (b) | (3.0) | (2.3) | (20.9) | (20.5) | ||||
Other Corporate and Unallocated Costs (c) | (42.1) | (38.5) | (154.3) | (156.3) | ||||
Restructuring Charges (d) | (4.3) | (63.8) | (9.0) | (76.5) | ||||
Goodwill Impairment | - | - | (699.8) | - | ||||
Other Operating Income (e) | 0.8 | 0.1 | 0.7 | 0.4 | ||||
Interest Expense (f) | (85.6) | (64.0) | (292.7) | (243.2) | ||||
Interest Income | 0.1 | 0.3 | 0.5 | 1.0 | ||||
Non-operating Pension Income | 4.5 | 4.1 | 18.9 | 16.3 | ||||
Other Income (g) | - | - | - | 11.2 | ||||
Loss before Taxes | $ (0.6) | $ (108.9) | $ (36.9) | |||||
(a) | Unaudited. | |||||||
(b) | Environmental expense for the year ended December 31, 2019 included | |||||||
(c) | Other corporate and unallocated costs included charges of | |||||||
(d) | Restructuring charges for both the three months and year ended December 31, 2019 were primarily associated with the closure of a chlor alkali plant and a vinylidene chloride production facility, both in Freeport, Texas, of which | |||||||
(e) | Other operating income for both the three months and year ended December 31, 2020 included an | |||||||
(f) | Interest expense for both the three months and year ended December 31, 2020 included a | |||||||
(g) | ||||||||
Other income for the year ended December 31, 2019 included a gain of | ||||||||
Olin Corporation | |||
Consolidated Balance Sheets (a) | |||
December 31, | |||
(In millions, except per share data) | 2020 | 2019 | |
Assets: | |||
Cash & Cash Equivalents | $ 189.7 | $ 220.9 | |
Accounts Receivable, Net | 770.9 | 760.4 | |
Income Taxes Receivable | 15.1 | 13.9 | |
Inventories, Net | 674.7 | 695.7 | |
Other Current Assets | 66.7 | 23.1 | |
Total Current Assets | 1,717.1 | 1,714.0 | |
Property, Plant and Equipment | |||
(Less Accumulated Depreciation of | 3,171.0 | 3,323.8 | |
Operating Lease Assets, Net | 360.7 | 377.8 | |
Deferred Income Taxes | 11.2 | 35.3 | |
Other Assets | 1,191.3 | 1,169.1 | |
Intangibles, Net | 399.4 | 448.1 | |
Goodwill | 1,420.2 | 2,119.7 | |
Total Assets | $ 8,270.9 | $ 9,187.8 | |
Liabilities and Shareholders' Equity: | |||
Current Installments of Long-term Debt | $ 26.3 | $ 2.1 | |
Accounts Payable | 729.2 | 651.9 | |
Income Taxes Payable | 10.7 | 19.8 | |
Current Operating Lease Liabilities | 74.7 | 79.3 | |
Accrued Liabilities | 356.0 | 329.1 | |
Total Current Liabilities | 1,196.9 | 1,082.2 | |
Long-term Debt | 3,837.5 | 3,338.7 | |
Operating Lease Liabilities | 291.6 | 303.4 | |
Accrued Pension Liability | 733.8 | 797.7 | |
Deferred Income Taxes | 443.7 | 454.5 | |
Other Liabilities | 315.1 | 793.8 | |
Total Liabilities | 6,818.6 | 6,770.3 | |
Commitments and Contingencies | |||
Shareholders' Equity: | |||
Common Stock, | |||
Issued and Outstanding 158.0 Shares (157.7 in 2019) | 158.0 | 157.7 | |
Additional Paid-in Capital | 2,137.8 | 2,122.1 | |
Accumulated Other Comprehensive Loss | (688.4) | (803.4) | |
Retained Earnings (Accumulated Deficit) | (155.1) | 941.1 | |
Total Shareholders' Equity | 1,452.3 | 2,417.5 | |
Total Liabilities and Shareholders' Equity | $ 8,270.9 | $ 9,187.8 | |
(a) | Unaudited. | ||
Olin Corporation | ||||
Consolidated Statements of Cash Flows (a) | ||||
Years Ended | ||||
December 31, | ||||
(In millions) | 2020 | 2019 | ||
Operating Activities: | ||||
Net Loss | $ (969.9) | $ (11.3) | ||
Goodwill Impairment | 699.8 | - | ||
Gain on Disposition of Non-consolidated Affiliate | - | (11.2) | ||
Stock-based Compensation | 13.6 | 10.7 | ||
Depreciation and Amortization | 568.4 | 597.4 | ||
Deferred Income Taxes | (18.4) | (45.5) | ||
Write-off of Equipment and Facility Included in Restructuring Charges | - | 58.9 | ||
Qualified Pension Plan Contributions | (2.1) | (14.9) | ||
Qualified Pension Plan Income | (11.4) | (9.3) | ||
Changes in: | ||||
Receivables | (0.3) | 12.3 | ||
Income Taxes Receivable/Payable | (11.2) | (10.7) | ||
Inventories | 28.6 | 13.0 | ||
Other Current Assets | (24.8) | 7.4 | ||
Accounts Payable and Accrued Liabilities | 149.3 | (11.0) | ||
Other Assets | (18.6) | (1.3) | ||
Other Noncurrent Liabilities | 12.8 | 30.5 | ||
Other Operating Activities | 2.6 | 2.3 | ||
Net Operating Activities | 418.4 | 617.3 | ||
Investing Activities: | ||||
Capital Expenditures | (298.9) | (385.6) | ||
Payments under Ethylene Long-Term Supply Contracts | (461.0) | - | ||
Payments under Other Long-Term Supply Contracts | (75.8) | - | ||
Proceeds from Disposition of Non-consolidated Affiliate | - | 20.0 | ||
Net Investing Activities | (835.7) | (365.6) | ||
Financing Activities: | ||||
Long-term Debt Borrowings, Net | 520.3 | 80.8 | ||
Common Stock Repurchased and Retired | - | (145.9) | ||
Stock Options Exercised | 1.9 | 1.7 | ||
Dividends Paid | (126.3) | (129.3) | ||
Debt Issuance Costs | (10.3) | (16.6) | ||
Net Financing Activities | 385.6 | (209.3) | ||
Net (Decrease) Increase in Cash and Cash Equivalents | (31.7) | 42.4 | ||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | 0.5 | (0.3) | ||
Cash and Cash Equivalents, Beginning of Year | 220.9 | 178.8 | ||
Cash and Cash Equivalents, End of Year | $ 189.7 | $ 220.9 | ||
(a) | Unaudited. | |||
Olin Corporation | ||||||
Non-GAAP Financial Measures - Adjusted EBITDA (a) | ||||||
Olin's definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net income (loss) plus an add-back for depreciation and amortization, interest expense (income), income tax expense (benefit), other expense (income), restructuring charges, goodwill impairment charges and certain other non-recurring items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors as a supplemental financial measure to assess the financial performance without regard to financing methods, capital structures, taxes or historical cost basis. The use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP and Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies. | ||||||
Three Months | Years Ended | |||||
Ended December 31, | December 31, | |||||
(In millions) | 2020 | 2019 | 2020 | 2019 | ||
Reconciliation of Net Loss to Adjusted EBITDA: | ||||||
Net Loss | $ (33.0) | $ (77.2) | $ (969.9) | $ (11.3) | ||
Add Back: | ||||||
Interest Expense | 85.6 | 64.0 | 292.7 | 243.2 | ||
Interest Income | (0.1) | (0.3) | (0.5) | (1.0) | ||
Income Tax Provision (Benefit) | 32.4 | (31.7) | (50.1) | (25.6) | ||
Depreciation and Amortization | 143.3 | 137.1 | 568.4 | 597.4 | ||
EBITDA | 228.2 | 91.9 | (159.4) | 802.7 | ||
Add Back: | ||||||
Restructuring Charges (b) | 4.3 | 63.8 | 9.0 | 76.5 | ||
Environmental Recoveries, Net (c) | - | - | - | (4.8) | ||
Information Technology Integration Project (d) | 13.3 | 16.9 | 73.9 | 77.0 | ||
Goodwill Impairment | - | - | 699.8 | - | ||
Certain Non-recurring Items (e) | 0.4 | 0.6 | 12.7 | (10.6) | ||
Adjusted EBITDA | $ 246.2 | $ 173.2 | $ 636.0 | $ 940.8 | ||
(a) | Unaudited. | |||||
(b) | Restructuring charges for both the three months and year ended December 31, 2019 were primarily associated with the closure of a chlor alkali plant and a vinylidene chloride production facility, both in Freeport, Texas, of which | |||||
(c) | Environmental recoveries, net for the year ended December 31, 2019 included | |||||
(d) | Information technology integration project charges for the three months and years ended December 31, 2020 and 2019 were associated with the implementation of new enterprise resource planning, manufacturing, and engineering systems, and related infrastructure costs. | |||||
(e) | ||||||
Certain non-recurring items for the three months ended December 31, 2020 and 2019 included | ||||||
Olin Corporation |
Non-GAAP Financial Measures - Net Debt to Adjusted EBITDA (a) |
Olin's definition of Net Debt to Adjusted EBITDA is Net Debt divided by Adjusted EBITDA. Net Debt at the end of any reporting period is defined as the sum of our current installments of long-term debt and long-term debt less cash and cash equivalents. Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net income (loss) plus an add-back for depreciation and amortization, interest expense (income), income tax expense (benefit), other expense (income), restructuring charges, goodwill impairment charges and certain other non-recurring items. Net Debt to Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors as a measure of our ability to manage our indebtedness. The use of non-GAAP financial measures is not intended to replace any measures of indebtedness or liquidity determined in accordance with GAAP and Net Debt or Net Debt to Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies. |
December 31, | ||||
(In millions) | 2020 | 2019 | ||
Current Installments of Long-term Debt | $ 26.3 | $ 2.1 | ||
Long-term Debt | 3,837.5 | 3,338.7 | ||
Total Debt | 3,863.8 | 3,340.8 | ||
Less: Cash and Cash Equivalents | (189.7) | (220.9) | ||
Net Debt | $ 3,674.1 | $ 3,119.9 | ||
Adjusted EBITDA | $ 636.0 | $ 940.8 | ||
Net Debt to Adjusted EBITDA | 5.8 | 3.3 | ||
(a) | Unaudited. |
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SOURCE Olin Corporation
