OLIN Corp

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.

(1)Environmental expense for the years ended December 31, 2023, 2022 and 2021, included $6.4 million, $1.0 million and $2.2 million, respectively, of insurance recoveries for environmental costs incurred and expensed in prior periods. Environmental expense is included in cost of goods sold in the consolidated statements of operations.

(2)Other operating income for the year ended December 31, 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 the year ended December 31, 2022, included $13.0 million of gains from the sale of two former manufacturing facilities. Other operating income for the year ended December 31, 2021, included a $1.4 million gain from the sale of a terminal facility.

(3)Interest expense for the year ended December 31, 2021, included a loss on extinguishment of debt of $152.2 million which includes bond redemption premiums, write-off of deferred debt issuance costs, bond original issue discount, and recognition of deferred fair value interest rate swap losses associated with the optional prepayment of existing debt. Interest expense was reduced by capitalized interest of $2.8 million, $3.1 million and $3.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Chlor Alkali Products and Vinyls

Chlor Alkali Products and Vinyls sales for 2023 were $3,995.1 million compared to $5,085.0 million in 2022, a decrease of $1,089.9 million, or 21%. The sales decrease was primarily due to lower volumes across all products and lower prices, primarily caustic soda and EDC, partially offset by products sold by BWA.

Chlor Alkali Products and Vinyls reported segment income of $664.2 million for 2023 compared to $1,181.3 million for 2022, a decrease of $517.1 million. Chlor Alkali Products and Vinyls operating results were negatively impacted by lower volumes across all products ($846.4 million) and lower prices, primarily caustic soda and EDC ($51.4 million), partially offset by lower raw material and operating costs ($341.0 million), primarily lower natural gas and electrical power costs, and decreased costs associated with product purchased from other parties ($39.7 million). The Chlor Alkali Products and Vinyls segment results were also negatively impacted by higher costs and reduced profit from lost sales associated with operating issues related to the second quarter’s maintenance turnaround at our vinyl chloride monomer plant at the Freeport, TX facility. Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $440.7 million and $482.2 million in 2023 and 2022, respectively.

Chlor Alkali Products and Vinyls sales for 2022 were $5,085.0 million compared to $4,140.8 million in 2021, an increase of $944.2 million, or 23%. The sales increase was primarily due to higher pricing across all products except vinyls intermediates, partially offset by lower volumes.

Chlor Alkali Products and Vinyls reported segment income of $1,181.3 million for 2022 compared to $997.8 million for 2021, an increase of $183.5 million. Chlor Alkali Products and Vinyls 2021 operating results were favorably impacted by Winter Storm Uri ($121.4 million), which includes a net one-time benefit associated with 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. Without the impact of Winter Storm Uri, the increase in segment results of $304.9 million was due to higher prices across all products, except vinyls intermediates ($1,495.9 million), partially offset by higher raw material and operating costs ($491.4 million), primarily increased natural gas and electrical power costs, lower volumes across all products ($479.2 million) and increased costs associated with product purchased from other parties ($220.4 million). Chlor Alkali Products and Vinyls segment results included depreciation and amortization expense of $482.2 million and $466.4 million in 2022 and 2021, respectively.

Epoxy

Epoxy sales were $1,329.2 million for 2023 compared to $2,690.5 million in 2022, a decrease of $1,361.3 million, or 51%. The sales decrease was primarily due to the closure of our cumene facility and one of our bisphenol production lines ($649.4 million), lower product prices ($419.6 million), lower volumes ($291.9 million) and an unfavorable effect of foreign currency translation ($0.4 million).

Epoxy reported segment loss of $31.0 million for 2023 compared to segment income of $388.5 million for 2022, a decrease of $419.5 million. The decrease in segment results was due to lower product prices ($419.6 million) and lower volumes ($138.6 million), which were both impacted by significant exports out of Asia into the European and North American markets, partially offset by lower raw material costs and operating costs ($138.7 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 $57.4 million and $83.3 million in 2023 and 2022, respectively.

Epoxy sales were $2,690.5 million for 2022 compared to $3,186.0 million for 2021, a decrease of $495.5 million, or 16%. The sales decrease was due to lower volumes ($942.1 million) and an unfavorable effect of foreign currency translation ($144.1 million), partially offset by higher product prices ($590.7 million).

Epoxy reported segment income of $388.5 million for 2022 compared to $616.5 million for 2021, a decrease of $228.0 million. Epoxy 2021 operating results were unfavorably impacted by Winter Storm Uri ($21.5 million), which included unabsorbed fixed manufacturing costs and storm-related maintenance costs. Without the impact of Winter Storm Uri, the decrease in segment results of $249.5 million was due to lower volumes ($460.5 million), higher raw material costs ($260.3 million), primarily benzene and propylene, higher operating costs ($106.5 million), primarily increased natural gas and electrical power costs, and a net unfavorable foreign currency impact ($12.9 million). These decreases were partially offset by higher product prices ($590.7 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 $83.3 million and $86.1 million in 2022 and 2021, respectively.

Winchester

Winchester sales were $1,508.7 million for 2023 compared to $1,600.7 million in 2022, a decrease of $92.0 million, or 6%. The decrease was due to lower ammunition sales to commercial customers ($272.6 million) and law enforcement agencies ($7.5 million), partially offset by higher sales to domestic and international military customers ($188.1 million). The lower commercial sales were primarily due to lower volumes, partially offset by fourth quarter 2023 sales from White Flyer.

Winchester reported segment income of $255.6 million for 2023 compared to $372.9 million for 2022, a decrease of $117.3 million. The decrease in segment results was due to lower volumes and an unfavorable product mix ($61.4 million), lower product pricing ($40.0 million), and higher commodity and operating costs ($15.9 million). Winchester segment results included depreciation and amortization expense of $27.2 million and $24.6 million in 2023 and 2022, respectively.

Winchester sales were $1,600.7 million for 2022 compared to $1,583.8 million for 2021, an increase of $16.9 million, or 1%. The increase was due to higher sales to military customers ($23.7 million) and law enforcement agencies ($18.2 million) partially offset by lower commercial sales ($25.0 million). The lower commercial sales were primarily due to lower volumes, partially offset by higher pricing. During 2022, Winchester experienced a transition in its commercial ammunition business from refilling depleted supply chains to filling inventories at the rate of its customers’ sales. In some cases, customers inventories became too high, so Winchester chose to preserve value by manufacturing and selling less commercial ammunition.

Winchester reported segment income of $372.9 million for 2022 compared to $412.1 million for 2021, a decrease of $39.2 million. The decrease in segment results was due to higher commodity and operating costs ($86.9 million) and lower volumes ($80.8 million), partially offset by higher product pricing ($128.4 million). Winchester segment results included depreciation and amortization expense of $24.6 million and $23.3 million in 2022 and 2021, respectively.

Corporate/Other

For the years ended December 31, 2023 and 2022, environmental expense included $6.4 million and $1.0 million, respectively, of insurance recoveries for environmental costs incurred and expensed in prior periods. Without these recoveries, charges to income for environmental investigatory and remedial activities for the year ended December 31, 2023, would have been $30.1 million, compared to $24.2 million for the year ended December 31, 2022. These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites.

For 2023, other corporate and unallocated costs were $106.3 million compared to $131.5 million for 2022, a decrease of $25.2 million, or 19%. The decrease was primarily due to lower legal and legal-related settlement expenses ($13.8 million), a favorable foreign currency impact ($5.5 million) and lower variable incentive compensation costs ($4.2 million), which includes mark-to-market adjustments on stock-based compensation expense.

For the years ended December 2022 and 2021, environmental expense included $1.0 million and $2.2 million, respectively, of insurance recoveries for environmental costs incurred and expensed in prior periods. Without these recoveries, charges to income for environmental investigatory and remedial activities for the year ended December 31, 2022, would have been $24.2 million, compared to $16.2 million for the year ended December 31, 2021. These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites.

For 2022, other corporate and unallocated costs were $131.5 million compared to $135.1 million for 2021, a decrease of $3.6 million, or 3%. The decrease was primarily due to lower variable incentive compensation costs ($27.9 million), which includes mark-to-market adjustments on stock-based compensation expense, partially offset by higher legal and legal-related settlement expenses ($7.6 million) and an unfavorable foreign currency impact ($7.1 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 half of 2023 (collectively, Epoxy Optimization Plan).

On June 20, 2023, we announced we had made the decision to cease all remaining operations at our Gumi, South Korea facility, reduce epoxy resin capacity at our Freeport, TX facility, and reduce our sales and support staffing across Asia. These actions were substantially completed by December 31, 2023. On March 21, 2023, we announced we had made the decision to cease operations at our cumene facility in Terneuzen, Netherlands and solid epoxy resin production at our facilities in Gumi, South Korea and Guaruja, Brazil. The closures were completed in the first quarter 2023. During the fourth quarter of 2022, we committed to and completed a plan to close down one of our bisphenol production lines at our Stade, Germany site. For the year ended December 31, 2023 and 2022, we recorded pretax restructuring charges of $73.4 million and $8.0 million, respectively, for the write-off of equipment and facility costs, employee severance and related benefit costs, contract termination costs and facility exit costs related to these actions. We expect to incur additional restructuring charges through 2025 of approximately $25 million related to these actions.

In 2023 and 2022, Olin incurred charges of $16.2 million and $17.3 million, respectively, associated with other previously disclosed restructuring plans. We expect to incur additional restructuring charges through 2027 of approximately $45 million related to these actions.