OLIN Corp

Sales for 2023 were $6,833.0 million compared to $9,376.2 million in 2022, a decrease of $2,543.2 million, or 27%. Epoxy sales decreased by $1,361.3 million, primarily due to lower volumes, including the closure of our cumene facility and one of our bisphenol production lines, and lower product pricing. Chlor Alkali Products and Vinyls sales decreased by $1,089.9 million, primarily due to lower volumes, partially offset by products sold by BWA. Winchester sales decreased by $92.0 million, primarily due to lower commercial sales volumes, partially offset by higher domestic and international military sales.

Gross margin in 2023 decreased $1,016.4 million from 2022. Chlor Alkali Products and Vinyls gross margin decreased by $483.0 million primarily due to lower volumes. Epoxy gross margin decreased by $425.4 million primarily due to lower volumes and lower product pricing. Winchester gross margin decreased by $112.5 million, primarily due to lower commercial volumes. Gross margin as a percentage of sales decreased to 17% in 2023 from 23% in 2022.

Selling and administrative expenses in 2023 increased $12.8 million, or 3%, from 2022. The increase was primarily due to higher costs associated with BWA of $23.9 million, partially offset by lower legal and legal-related settlement expenses of $7.4 million and a favorable foreign currency impact of $5.5 million. Selling and administrative expenses as a percentage of sales increased to 6% in 2023 from 4% in 2022.

Restructuring charges for 2023 were $89.6 million compared to $25.3 million in 2022. The increase in charges was primarily due to our 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 restructuring charges of $73.4 million for 2023.

Other operating income for 2023 included a gain of $27.0 million from the sale of our domestic private trucking fleet and operations and an insurance recovery of $15.6 million associated with a second quarter 2022 business interruption at our Plaquemine, LA Chlor Alkali Products and Vinyls facility. Other operating income for 2022 included $13.0 million of gains from the sale of two former manufacturing facilities.

Interest expense in 2023 increased $37.2 million from 2022, primarily due to higher average interest rates. Interest expense for 2023 and 2022 was reduced by capitalized interest of $2.8 million and $3.1 million, respectively.

Non-operating pension income includes all components of pension and other postretirement income (costs) other than service costs. Non-operating pension income was lower in 2023 from the prior year primarily due to an increase in the discount rate used to determine interest costs, partially offset by lower actuarial losses recognized to income.

The effective tax rate for 2023 included benefits associated with a legal entity liquidation, prior year tax positions, stock-based compensation, remeasurement of deferred taxes due to a decrease in our state effective tax rates and foreign rate changes, and from a change in tax contingencies, and an expense from a net increase in the valuation allowance related to deferred tax assets in foreign jurisdictions. These factors resulted in a net $29.4 million tax benefit. Excluding these items, the effective tax rate for 2023 of 24.4% was higher than the 21.0% U.S. federal statutory rate primarily due to state taxes, an increase in the valuation allowance related to losses in foreign jurisdictions and foreign income inclusions, partially offset by foreign rate differential and favorable permanent salt depletion deductions. The effective tax rate for 2022 included benefits associated with a legal entity liquidation, prior year tax positions, stock-based compensation, and remeasurement of deferred taxes due to a decrease in our state effective tax rates, and expenses associated with a net increase in the valuation allowance related to state tax credits and a change in tax contingencies. These factors resulted in a net $60.2 million tax benefit. Excluding these items, the effective tax rate for 2022 of 24.4% was higher than the 21.0% U.S. federal statutory rate primarily due to state taxes, an increase in the valuation allowance related to losses in foreign jurisdictions and foreign income taxes, partially offset by foreign income exclusions and favorable permanent salt depletion deductions.

Sales for 2022 were $9,376.2 million compared to $8,910.6 million in 2021, an increase of $465.6 million, or 5%. Chlor Alkali Products and Vinyls sales increased by $944.2 million, primarily due to higher pricing across all products, except vinyls intermediates, partially offset by lower volumes. Winchester sales increased by $16.9 million, primarily due to increased commercial ammunition pricing partially offset by lower volumes. Epoxy sales decreased by $495.5 million, primarily due to lower volumes partially offset by higher product prices.

Gross margin in 2022 decreased $112.3 million from 2021. Epoxy gross margin decreased by $238.4 million, and Winchester gross margin decreased by $36.2 million, primarily due to lower volumes and higher raw material and operating costs, partially offset by higher product pricing. Chlor Alkali Products and Vinyls gross margin increased by $185.2 million, primarily due to higher pricing, partially offset by higher raw material and operating costs and lower volumes. Gross margin as a percentage of sales decreased to 23% in 2022 from 26% in 2021.

Selling and administrative expenses in 2022 decreased $23.0 million, or 6%, from 2021. The decrease was primarily due to the lower variable incentive compensation expense of $35.4 million, which includes mark-to-market adjustments on stock-based compensation expense, partially offset by higher legal and legal-related settlement expense of $7.1 million and an unfavorable foreign currency impact of $7.5 million. Selling and administrative expenses as a percentage of sales decreased to 4% in 2022 from 5% in 2021.

Restructuring charges for 2022 were $25.3 million compared to $27.9 million in 2021. The decrease in charges was primarily due to a productivity initiative to align the organization with our new operating model and improve efficiencies, which was completed during the second quarter of 2021, which resulted in pretax restructuring charges of $10.1 million for 2021. Partially offsetting this action, during the fourth quarter 2022, we committed and completed a plan to close down one of our bisphenol production lines at our Stade, Germany site. This action resulted in pretax restructuring charges of $8.0 million for 2022.

Other operating income for 2022 included $13.0 million of gains from the sale of two former manufacturing facilities.

Interest expense in 2022 decreased by $204.1 million from 2021. Interest expense for 2021 included $137.7 million of bond redemption premiums and $14.5 million for write-off of deferred debt issuance costs, write-off of bond original issue discount, and recognition of deferred fair value interest rate swap losses. Interest expense for 2022 and 2021 was reduced by capitalized interest of $3.1 million and $3.2 million, respectively. Without these items, interest expense decreased by $52.0 million, primarily due to a lower level of debt outstanding and lower average interest rates.

Non-operating pension income includes all components of pension and other postretirement income (costs) other than service costs.

The effective tax rate for 2022 included benefits associated with a legal entity liquidation, prior year tax positions, stock-based compensation, and remeasurement of deferred taxes due to a decrease in our state effective tax rates, and expenses associated with a net increase in the valuation allowance related to state tax credits and a change in tax contingencies. These factors resulted in a net $60.2 million tax benefit. Excluding these items, the effective tax rate for 2022 of 24.4% was higher than the 21.0% U.S. federal statutory rate primarily due to state taxes, an increase in the valuation allowance related to losses in foreign jurisdictions and foreign income taxes, partially offset by foreign income exclusions and favorable permanent salt depletion deductions. The effective tax rate for 2021 included benefits from a net decrease in the valuation allowance related to deferred tax assets in foreign jurisdictions, domestic tax credits, prior year tax positions, stock-based compensation, and expenses from remeasurement of deferred taxes due to an increase in our state effective tax rates and a change in tax contingencies. These factors resulted in a net $103.6 million tax benefit. Excluding these items, the effective tax rate for 2021 of 22.5% was higher than the 21.0% U.S. federal statutory rate primarily due to state taxes, foreign income inclusions and foreign rate differential, partially offset by a net decrease in the valuation allowance related to utilization of losses in foreign jurisdictions and favorable permanent salt depletion deductions.