|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Virginia
|
13-1872319
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
190
Carondelet Plaza, Suite 1530, Clayton, MO
|
63105-3443
|
(Address
of principal executive offices)
|
(Zip
Code)
|
September
30,
2009
|
December
31,
2008
|
September
30,
2008
|
||||||||||
ASSETS
|
||||||||||||
Current
Assets:
|
||||||||||||
Cash
and Cash Equivalents
|
$
|
376.6
|
$
|
246.5
|
$
|
200.2
|
||||||
Receivables,
Net
|
263.6
|
213.0
|
264.4
|
|||||||||
Inventories
|
126.0
|
131.4
|
146.1
|
|||||||||
Current
Deferred Income Taxes
|
66.0
|
68.5
|
60.4
|
|||||||||
Other
Current Assets
|
21.7
|
10.9
|
12.9
|
|||||||||
Total
Current Assets
|
853.9
|
670.3
|
684.0
|
|||||||||
Property,
Plant and Equipment (less Accumulated Depreciation of $987.4, $956.0 and
$950.3)
|
688.9
|
629.9
|
592.1
|
|||||||||
Prepaid
Pension Costs
|
21.4
|
—
|
160.9
|
|||||||||
Deferred
Income Taxes
|
—
|
48.4
|
—
|
|||||||||
Other
Assets
|
71.2
|
70.8
|
66.2
|
|||||||||
Goodwill
|
300.3
|
300.3
|
303.7
|
|||||||||
Total
Assets
|
$
|
1,935.7
|
$
|
1,719.7
|
$
|
1,806.9
|
||||||
LIABILITIES AND SHAREHOLDERS’
EQUITY
|
||||||||||||
Current
Liabilities:
|
||||||||||||
Accounts
Payable
|
$
|
113.2
|
$
|
145.6
|
$
|
138.5
|
||||||
Income
Taxes Payable
|
—
|
0.6
|
0.1
|
|||||||||
Accrued
Liabilities
|
209.1
|
253.6
|
237.6
|
|||||||||
Total
Current Liabilities
|
322.3
|
399.8
|
376.2
|
|||||||||
Long-Term
Debt
|
399.6
|
252.4
|
249.7
|
|||||||||
Accrued
Pension Liability
|
47.7
|
51.5
|
51.2
|
|||||||||
Deferred
Income Taxes
|
27.7
|
6.5
|
13.8
|
|||||||||
Other
Liabilities
|
307.8
|
304.5
|
334.4
|
|||||||||
Total
Liabilities
|
1,105.1
|
1,014.7
|
1,025.3
|
|||||||||
Commitments
and Contingencies
|
||||||||||||
Shareholders’
Equity:
|
||||||||||||
Common
Stock, Par Value $1 Per Share: Authorized, 120.0
Shares;
|
||||||||||||
Issued
and Outstanding 78.5, 77.3 and 76.9 Shares
|
78.5
|
77.3
|
76.9
|
|||||||||
Additional
Paid-In Capital
|
818.9
|
801.6
|
794.4
|
|||||||||
Accumulated
Other Comprehensive Loss
|
(229.5
|
)
|
(269.4
|
)
|
(153.5
|
)
|
||||||
Retained
Earnings
|
162.7
|
95.5
|
63.8
|
|||||||||
Total
Shareholders’ Equity
|
830.6
|
705.0
|
781.6
|
|||||||||
Total
Liabilities and Shareholders’ Equity
|
$
|
1,935.7
|
$
|
1,719.7
|
$
|
1,806.9
|
Three Months Ended
September
30,
|
Nine Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Sales
|
$
|
397.0
|
$
|
502.9
|
$
|
1,180.6
|
$
|
1,330.3
|
||||||||
Operating
Expenses:
|
||||||||||||||||
Cost
of Goods Sold
|
316.4
|
380.0
|
934.6
|
1,041.2
|
||||||||||||
Selling
and Administration
|
31.2
|
35.6
|
106.5
|
104.5
|
||||||||||||
Other
Operating Income (Expense)
|
1.2
|
(0.3
|
) |
6.9
|
0.7
|
|||||||||||
Operating
Income
|
50.6
|
87.0
|
146.4
|
185.3
|
||||||||||||
Earnings
of Non-consolidated Affiliates
|
7.1
|
12.0
|
32.9
|
31.1
|
||||||||||||
Interest
Expense
|
1.9
|
3.3
|
5.2
|
11.5
|
||||||||||||
Interest
Income
|
0.1
|
1.0
|
0.9
|
5.2
|
||||||||||||
Other
Income (Expense)
|
—
|
(26.4
|
)
|
0.1
|
(26.1
|
)
|
||||||||||
Income
before Taxes
|
55.9
|
70.3
|
175.1
|
184.0
|
||||||||||||
Income
Tax Provision
|
16.5
|
32.6
|
61.2
|
73.5
|
||||||||||||
Net
Income
|
$
|
39.4
|
$
|
37.7
|
$
|
113.9
|
$
|
110.5
|
||||||||
Net
Income per Common Share:
|
||||||||||||||||
Basic
|
$
|
0.50
|
$
|
0.49
|
$
|
1.46
|
$
|
1.47
|
||||||||
Diluted
|
$
|
0.50
|
$
|
0.49
|
$
|
1.46
|
$
|
1.46
|
||||||||
Dividends
per Common Share
|
$
|
0.20
|
$
|
0.20
|
$
|
0.60
|
$
|
0.60
|
||||||||
Average
Common Shares Outstanding:
|
||||||||||||||||
Basic
|
78.4
|
76.3
|
78.0
|
75.4
|
||||||||||||
Diluted
|
78.6
|
76.7
|
78.1
|
75.7
|
Additional
Paid-In
Capital
|
Accumulated
Other
Comprehensive
Loss
|
Retained
Earnings
(Accumulated
Deficit)
|
Total
Shareholders’
Equity
|
|||||||||||||||||||||
Common
Stock
|
||||||||||||||||||||||||
Shares
Issued
|
Par
Value
|
|||||||||||||||||||||||
Balance
at January 1, 2008
|
74.5
|
$
|
74.5
|
$
|
742.0
|
$
|
(151.2
|
)
|
$
|
(1.6
|
)
|
$
|
663.7
|
|||||||||||
Comprehensive
Income:
|
||||||||||||||||||||||||
Net
Income
|
—
|
—
|
—
|
—
|
110.5
|
110.5
|
||||||||||||||||||
Translation
Adjustment
|
—
|
—
|
—
|
(0.6
|
)
|
—
|
(0.6
|
)
|
||||||||||||||||
Net
Unrealized Loss
|
—
|
—
|
—
|
(8.8
|
)
|
—
|
(8.8
|
)
|
||||||||||||||||
Amortization
of Prior Service Costs and Actuarial Losses, Net
|
—
|
—
|
—
|
7.1
|
—
|
7.1
|
||||||||||||||||||
Comprehensive
Income
|
108.2
|
|||||||||||||||||||||||
Dividends
Paid:
|
||||||||||||||||||||||||
Common
Stock ($0.60 per share)
|
—
|
—
|
—
|
—
|
(45.1
|
)
|
(45.1
|
)
|
||||||||||||||||
Common
Stock Issued for:
|
||||||||||||||||||||||||
Stock
Options Exercised
|
1.8
|
1.8
|
36.3
|
—
|
—
|
38.1
|
||||||||||||||||||
Employee
Benefit Plans
|
0.5
|
0.5
|
10.8
|
—
|
—
|
11.3
|
||||||||||||||||||
Other
Transactions
|
0.1
|
0.1
|
2.0
|
—
|
—
|
2.1
|
||||||||||||||||||
Stock-Based
Compensation
|
—
|
—
|
3.3
|
—
|
—
|
3.3
|
||||||||||||||||||
Balance
at September 30, 2008
|
76.9
|
$
|
76.9
|
$
|
794.4
|
$
|
(153.5
|
)
|
$
|
63.8
|
$
|
781.6
|
||||||||||||
Balance
at January 1, 2009
|
77.3
|
$
|
77.3
|
$
|
801.6
|
$
|
(269.4
|
)
|
$
|
95.5
|
$
|
705.0
|
||||||||||||
Comprehensive
Income:
|
||||||||||||||||||||||||
Net
Income
|
—
|
—
|
—
|
—
|
113.9
|
113.9
|
||||||||||||||||||
Translation
Adjustment
|
—
|
—
|
—
|
3.2
|
—
|
3.2
|
||||||||||||||||||
Net
Unrealized Gain
|
—
|
—
|
—
|
32.8
|
—
|
32.8
|
||||||||||||||||||
Amortization
of Prior Service Costs and Actuarial Losses, Net
|
—
|
—
|
—
|
3.9
|
—
|
3.9
|
||||||||||||||||||
Comprehensive
Income
|
153.8
|
|||||||||||||||||||||||
Dividends
Paid:
|
||||||||||||||||||||||||
Common
Stock ($0.60 per share)
|
—
|
—
|
—
|
—
|
(46.7
|
)
|
(46.7
|
)
|
||||||||||||||||
Common
Stock Issued for:
|
||||||||||||||||||||||||
Stock
Options Exercised
|
—
|
—
|
0.2
|
—
|
—
|
0.2
|
||||||||||||||||||
Employee
Benefit Plans
|
1.1
|
1.1
|
12.7
|
—
|
—
|
13.8
|
||||||||||||||||||
Other
Transactions
|
0.1
|
0.1
|
2.4
|
—
|
—
|
2.5
|
||||||||||||||||||
Stock-Based
Compensation
|
—
|
—
|
2.0
|
—
|
—
|
2.0
|
||||||||||||||||||
Balance
at September 30, 2009
|
78.5
|
$
|
78.5
|
$
|
818.9
|
$
|
(229.5
|
)
|
$
|
162.7
|
$
|
830.6
|
Nine Months Ended
September
30,
|
||||||||
2009
|
2008
|
|||||||
Operating Activities
|
||||||||
Net
Income
|
$
|
113.9
|
$
|
110.5
|
||||
Adjustments
to Reconcile Net Income to Net Cash and Cash Equivalents Provided by (Used
for) Operating Activities:
|
||||||||
Earnings
of Non-consolidated Affiliates
|
(32.9
|
)
|
(31.1
|
)
|
||||
Other
Operating Income – (Gains) Losses on Disposition of Property, Plant and
Equipment
|
(5.5
|
)
|
0.6
|
|||||
Stock-Based
Compensation
|
4.3
|
4.9
|
||||||
Depreciation
and Amortization
|
50.5
|
52.2
|
||||||
Deferred
Income Taxes
|
51.1
|
(0.5
|
)
|
|||||
Qualified
Pension Plan Contributions
|
(2.0
|
)
|
—
|
|||||
Qualified
Pension Plan Income
|
(16.4
|
)
|
(11.0
|
)
|
||||
Impairment
of Investment in Corporate Debt Securities
|
—
|
26.6
|
||||||
Common
Stock Issued under Employee Benefit Plans
|
1.6
|
2.2
|
||||||
Change
in:
|
||||||||
Receivables
|
(50.6
|
)
|
(60.9
|
)
|
||||
Inventories
|
5.4
|
(39.7
|
)
|
|||||
Other
Current Assets
|
0.9
|
1.3
|
||||||
Accounts
Payable and Accrued Liabilities
|
(21.2
|
)
|
(60.8
|
)
|
||||
Income
Taxes Payable
|
(5.6
|
)
|
(1.5
|
)
|
||||
Other
Assets
|
2.5
|
1.6
|
||||||
Other
Noncurrent Liabilities
|
5.7
|
11.1
|
||||||
Other
Operating Activities
|
(1.5
|
)
|
(1.4
|
)
|
||||
Net
Operating Activities
|
100.2
|
4.1
|
||||||
Investing Activities
|
||||||||
Capital
Expenditures
|
(122.3
|
)
|
(123.4
|
)
|
||||
Proceeds
from Disposition of Property, Plant and Equipment
|
7.1
|
0.9
|
||||||
Distributions
from Affiliated Companies, Net
|
29.1
|
20.9
|
||||||
Other
Investing Activities
|
3.3
|
(0.6
|
)
|
|||||
Net
Investing Activities
|
(82.8
|
)
|
(102.2
|
)
|
||||
Financing Activities
|
||||||||
Long-Term
Debt:
|
||||||||
Borrowings
|
150.3
|
—
|
||||||
Repayments
|
—
|
(9.8
|
)
|
|||||
Issuance
of Common Stock
|
12.2
|
9.1
|
||||||
Stock
Options Exercised
|
0.1
|
31.9
|
||||||
Excess
Tax Benefits from Stock Options Exercised
|
0.1
|
6.2
|
||||||
Dividends
Paid
|
(46.7
|
)
|
(45.1
|
)
|
||||
Deferred
Debt Issuance Cost
|
(3.3
|
)
|
—
|
|||||
Net
Financing Activities
|
112.7
|
(7.7
|
)
|
|||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
130.1
|
(105.8
|
)
|
|||||
Cash
and Cash Equivalents, Beginning of Period
|
246.5
|
306.0
|
||||||
Cash
and Cash Equivalents, End of Period
|
$
|
376.6
|
$
|
200.2
|
||||
Cash
Paid for Interest and Income Taxes:
|
||||||||
Interest
|
$
|
7.3
|
$
|
8.7
|
||||
Income
Taxes, Net of Refunds
|
$
|
17.5
|
$
|
60.8
|
||||
Non-Cash
Investing Activities:
|
||||||||
Capital
Expenditures included in Accounts Payable and Accrued
Liabilities
|
$
|
2.4
|
$
|
17.7
|
Nine
Months Ended
September
30,
|
||||||||
2009
|
2008
|
|||||||
($
in millions)
|
||||||||
Balance
at beginning of year
|
$
|
5.0
|
$
|
3.0
|
||||
Provisions
charged
|
7.3
|
2.9
|
||||||
Write-offs,
net of recoveries
|
(6.5
|
)
|
0.1
|
|||||
Pioneer
acquisition
|
—
|
(1.5
|
)
|
|||||
Currency
translation adjustments
|
—
|
(0.1
|
)
|
|||||
Balance
at end of period
|
$
|
5.8
|
$
|
4.4
|
September
30,
2009
|
December 31,
2008
|
September
30,
2008
|
||||||||||
($
in millions)
|
||||||||||||
Supplies
|
$
|
28.0
|
$
|
27.2
|
$
|
25.3
|
||||||
Raw
materials
|
53.7
|
56.4
|
53.2
|
|||||||||
Work
in process
|
25.6
|
26.6
|
31.9
|
|||||||||
Finished
goods
|
75.4
|
90.7
|
104.7
|
|||||||||
182.7
|
200.9
|
215.1
|
||||||||||
LIFO
reserve
|
(56.7
|
)
|
(69.5
|
)
|
(69.0
|
)
|
||||||
Inventories,
net
|
$
|
126.0
|
$
|
131.4
|
$
|
146.1
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Computation of Basic Income per
Share
|
($
and shares in millions, except per share data)
|
|||||||||||||||
Net
income
|
$
|
39.4
|
$
|
37.7
|
$
|
113.9
|
$
|
110.5
|
||||||||
Basic
shares
|
78.4
|
76.3
|
78.0
|
75.4
|
||||||||||||
Basic
net income per share
|
$
|
0.50
|
$
|
0.49
|
$
|
1.46
|
$
|
1.47
|
||||||||
Computation of Diluted Income per
Share
|
||||||||||||||||
Diluted
shares:
|
||||||||||||||||
Basic
shares
|
78.4
|
76.3
|
78.0
|
75.4
|
||||||||||||
Stock-based
compensation
|
0.2
|
0.4
|
0.1
|
0.3
|
||||||||||||
Diluted
shares
|
78.6
|
76.7
|
78.1
|
75.7
|
||||||||||||
Diluted
net income per share
|
$
|
0.50
|
$
|
0.49
|
$
|
1.46
|
$
|
1.46
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
($
in millions)
|
||||||||||||||||
Charges
to income
|
$
|
5.5
|
$
|
6.4
|
$
|
18.3
|
$
|
21.2
|
||||||||
Recoveries
from third parties of costs incurred and expensed in prior
periods
|
(44.3
|
)
|
—
|
(45.1
|
)
|
—
|
||||||||||
Total
environmental (income) expense
|
$
|
(38.8
|
)
|
$
|
6.4
|
$
|
(26.8
|
)
|
$
|
21.2
|
Foreign
Currency Translation Adjustment
|
Unrealized
Gains (Losses) on Derivative Contracts
(net
of taxes)
|
Amortization
of Prior Service Costs and Actuarial Losses
(net
of taxes)
|
Accumulated
Other Comprehensive Loss
|
||||||||||||||
($
in millions)
|
|||||||||||||||||
Balance
at January 1, 2008
|
$
|
(1.2
|
)
|
$
|
1.0
|
$
|
(151.0
|
)
|
$
|
(151.2
|
)
|
||||||
Unrealized
gains (losses)
|
(0.6
|
)
|
(6.7
|
)
|
7.1
|
(0.2
|
)
|
||||||||||
Gains
reclassified into income
|
—
|
(2.1
|
)
|
—
|
(2.1
|
)
|
|||||||||||
Balance
at September 30, 2008
|
$
|
(1.8
|
)
|
$
|
(7.8
|
)
|
$
|
(143.9
|
)
|
$
|
(153.5
|
)
|
|||||
Balance
at January 1, 2009
|
$
|
(5.1
|
)
|
$
|
(25.0
|
)
|
$
|
(239.3
|
)
|
$
|
(269.4
|
)
|
|||||
Unrealized
gains
|
3.2
|
18.3
|
3.9
|
25.4
|
|||||||||||||
Losses
reclassified into income
|
—
|
14.5
|
—
|
14.5
|
|||||||||||||
Balance
at September 30, 2009
|
$
|
(1.9
|
)
|
$
|
7.8
|
$
|
(235.4
|
)
|
$
|
(229.5
|
)
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Sales:
|
($
in millions)
|
|||||||||||||||
Chlor
Alkali Products
|
$
|
228.8
|
$
|
362.1
|
$
|
738.9
|
$
|
962.6
|
||||||||
Winchester
|
168.2
|
140.8
|
441.7
|
367.7
|
||||||||||||
Total
sales
|
$
|
397.0
|
$
|
502.9
|
$
|
1,180.6
|
$
|
1,330.3
|
||||||||
Income
before taxes:
|
||||||||||||||||
Chlor
Alkali Products(1)
|
$
|
3.9
|
$
|
104.3
|
$
|
120.2
|
$
|
241.8
|
||||||||
Winchester
|
23.0
|
9.8
|
59.1
|
29.3
|
||||||||||||
Corporate/Other:
|
||||||||||||||||
Pension
income(2)
|
6.3
|
5.2
|
16.8
|
13.3
|
||||||||||||
Environmental
income (expense)(3)
|
38.8
|
(6.4
|
)
|
26.8
|
(21.2
|
)
|
||||||||||
Other
corporate and unallocated costs
|
(15.5
|
)
|
(13.6
|
)
|
(50.5
|
)
|
(47.5
|
)
|
||||||||
Other
operating income (expense)(4)
|
1.2
|
(0.3
|
) |
6.9
|
0.7
|
|||||||||||
Interest
expense(5)
|
(1.9
|
)
|
(3.3
|
)
|
(5.2
|
)
|
(11.5
|
)
|
||||||||
Interest
income
|
0.1
|
1.0
|
0.9
|
5.2
|
||||||||||||
Other
income (expense)(6)
|
—
|
(26.4
|
)
|
0.1
|
(26.1
|
)
|
||||||||||
Income
before taxes
|
$
|
55.9
|
$
|
70.3
|
$
|
175.1
|
$
|
184.0
|
(1)
|
Earnings
of non-consolidated affiliates were included in the Chlor Alkali Products
segment results consistent with management’s monitoring of the operating
segments. The earnings from non-consolidated affiliates were $7.1 million
and $12.0 million for the three months ended September 30, 2009 and 2008,
respectively, and $32.9 million and $31.1 million for the nine months
ended September 30, 2009 and 2008,
respectively.
|
(2)
|
The
service cost and the amortization of prior service cost components of
pension expense related to the employees of the operating segments are
allocated to the operating segments based on their respective estimated
census data. All other components of pension costs are included in
Corporate/Other and include items such as the expected return on plan
assets, interest cost, and recognized actuarial gains and
losses. Pension income for the nine months ended September 30,
2008 included a curtailment charge of $0.8 million resulting from the
conversion of our McIntosh, AL Chlor Alkali hourly workforce from a
defined benefit pension plan to a defined contribution pension
plan.
|
(3)
|
Environmental
income (expense) for the three and nine months ended September 30, 2009
included $44.3 million and $45.1 million, respectively, of recoveries from
third parties for costs incurred and expensed in prior
periods.
|
(4)
|
Other
operating income (expense) for the nine months ended September 30, 2009
included a $3.7 million gain on the sale of land and $1.8 million of gains
on the disposal of assets primarily associated with the St. Gabriel, LA
facility conversion and expansion
project.
|
(5)
|
Interest
expense was reduced by capitalized interest of $3.6 million and $1.1
million for the three months ended September 30, 2009 and 2008,
respectively, and $9.1 million and $2.2 million for the nine months ended
September 30, 2009 and 2008,
respectively.
|
(6)
|
Other
income (expense) for the three and nine months ended September 30, 2008
included an impairment charge of the full value of a $26.6 million
investment in corporate debt securities. We are currently
unable to utilize the capital loss resulting from the impairment of these
corporate debt securities; therefore, no tax benefit was recognized during
the period for the impairment loss.
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
($
in millions)
|
||||||||||||||||
Stock-based
compensation
|
$
|
1.9
|
$
|
3.1
|
$
|
6.8
|
$
|
8.2
|
||||||||
Mark-to-market
adjustments
|
2.7
|
(2.7
|
)
|
0.5
|
(0.3
|
)
|
||||||||||
Total
expense
|
$
|
4.6
|
$
|
0.4
|
$
|
7.3
|
$
|
7.9
|
Grant date
|
2009
|
2008
|
||||||
Dividend
yield
|
4.26
|
%
|
4.34
|
%
|
||||
Risk-free
interest rate
|
2.32
|
%
|
3.21
|
%
|
||||
Expected
volatility
|
40
|
%
|
32
|
%
|
||||
Expected
life (years)
|
7.0
|
7.0
|
||||||
Grant
fair value (per option)
|
$
|
3.85
|
$
|
4.52
|
||||
Exercise
price
|
$
|
14.28
|
$
|
20.29
|
||||
Shares
granted
|
866,250
|
523,350
|
100% Basis
|
September
30,
2009
|
December
31,
2008
|
September
30,
2008
|
|||||||||
Condensed
Balance Sheet Data:
|
($
in millions)
|
|||||||||||
Current
assets
|
$
|
36.4
|
$
|
22.4
|
$
|
41.6
|
||||||
Noncurrent
assets
|
97.6
|
107.7
|
112.1
|
|||||||||
Current
liabilities
|
22.0
|
19.7
|
20.3
|
|||||||||
Noncurrent
liabilities
|
97.5
|
97.5
|
109.8
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Condensed
Income Statement Data:
|
($
in millions)
|
|||||||||||||||
Sales
|
$
|
36.9
|
$
|
47.0
|
$
|
135.1
|
$
|
136.5
|
||||||||
Gross
profit
|
14.9
|
25.4
|
68.5
|
69.9
|
||||||||||||
Net
income
|
9.6
|
20.3
|
53.2
|
53.6
|
September
30,
2009
|
December
31,
2008
|
September
30,
2008
|
||||||||||
($
in millions)
|
||||||||||||
SunBelt
|
$
|
(0.3
|
)
|
$
|
(3.7
|
)
|
$
|
5.2
|
||||
Bay
Gas
|
11.8
|
10.7
|
0.5
|
|||||||||
Bleach
joint venture
|
11.3
|
12.0
|
11.7
|
|||||||||
Investments
in equity affiliates
|
$
|
22.8
|
$
|
19.0
|
$
|
17.4
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
($
in millions)
|
||||||||||||||||
SunBelt
|
$
|
5.8
|
$
|
11.1
|
$
|
29.3
|
$
|
30.0
|
||||||||
Bay
Gas
|
0.5
|
0.5
|
1.2
|
1.0
|
||||||||||||
Bleach
joint venture
|
0.8
|
0.4
|
2.4
|
0.1
|
||||||||||||
Equity
earnings of non-consolidated affiliates
|
$
|
7.1
|
$
|
12.0
|
$
|
32.9
|
$
|
31.1
|
Pension
Benefits
|
Other Postretirement
Benefits
|
|||||||||||||||
Three Months Ended
September
30,
|
Three Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Components of Net Periodic Benefit (Income)
Cost
|
($
in millions)
|
|||||||||||||||
Service
cost
|
$
|
1.2
|
$
|
1.7
|
$
|
—
|
$
|
0.2
|
||||||||
Interest
cost
|
24.9
|
25.2
|
0.9
|
0.8
|
||||||||||||
Expected
return on plans’ assets
|
(33.1
|
)
|
(32.6
|
)
|
—
|
—
|
||||||||||
Amortization
of prior service cost
|
0.1
|
0.4
|
—
|
—
|
||||||||||||
Recognized
actuarial loss
|
2.3
|
2.4
|
0.4
|
0.5
|
||||||||||||
Net
periodic benefit (income) cost
|
$
|
(4.6
|
)
|
$
|
(2.9
|
)
|
$
|
1.3
|
$
|
1.5
|
Pension
Benefits
|
Other Postretirement
Benefits
|
|||||||||||||||
Nine Months Ended
September
30,
|
Nine Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Components of Net Periodic Benefit (Income)
Cost
|
($
in millions)
|
|||||||||||||||
Service
cost
|
$
|
3.7
|
$
|
5.0
|
$
|
0.8
|
$
|
1.0
|
||||||||
Interest
cost
|
74.9
|
75.6
|
2.9
|
3.0
|
||||||||||||
Expected
return on plans’ assets
|
(99.3
|
)
|
(97.8
|
)
|
—
|
—
|
||||||||||
Amortization
of prior service cost
|
0.4
|
1.2
|
(0.1
|
)
|
(0.1
|
)
|
||||||||||
Recognized
actuarial loss
|
7.0
|
7.4
|
1.8
|
2.0
|
||||||||||||
Curtailment
|
—
|
0.8
|
—
|
—
|
||||||||||||
Net
periodic benefit (income) cost
|
$
|
(13.3
|
)
|
$
|
(7.8
|
)
|
$
|
5.4
|
$
|
5.9
|
September
30, 2009
|
||||
($
in millions)
|
||||
Balance
at beginning of year
|
$
|
50.2
|
||
Increases
for prior year tax positions
|
0.9
|
|||
Decrease
for prior year tax positions
|
(0.3
|
)
|
||
Increases
for current year tax positions
|
0.4
|
|||
Settlements
with taxing authorities
|
0.1
|
|||
Reductions
due to statute of limitations
|
(2.3
|
)
|
||
Balance
at end of period
|
$
|
49.0
|
September
30,
2009
|
December
31,
2008
|
September
30,
2008
|
||||||||||
($
in millions)
|
||||||||||||
Copper
|
$
|
36.1
|
$
|
49.8
|
$
|
46.5
|
||||||
Zinc
|
3.2
|
5.4
|
5.2
|
|||||||||
Lead
|
13.7
|
26.8
|
26.1
|
|||||||||
Natural
gas
|
4.4
|
2.0
|
—
|
Asset
Derivatives
|
Liability
Derivatives
|
||||||||||||||||||||||||||
Fair
Value
|
Fair
Value
|
||||||||||||||||||||||||||
($
in millions)
|
($
in millions)
|
||||||||||||||||||||||||||
Derivatives
Designated as Hedging Instruments
|
Balance
Sheet
Location
|
September
30, 2009
|
December
31, 2008
|
September
30, 2008
|
Balance
Sheet
Location
|
September
30, 2009
|
December
31, 2008
|
September
30, 2008
|
|||||||||||||||||||
Interest
rate contracts
|
Other
assets
|
$
|
2.0
|
$
|
11.3
|
$
|
7.0
|
Long-term
debt
|
$
|
8.2
|
$
|
11.3
|
$
|
7.0
|
|||||||||||||
Commodity
contracts – gains
|
Other
current assets
|
13.0
|
—
|
1.0
|
Accrued
liabilities
|
(0.2
|
)
|
(0.3
|
)
|
(0.7
|
)
|
||||||||||||||||
Commodity
contracts – losses
|
Other
current assets
|
(1.3
|
)
|
—
|
—
|
Accrued
liabilities
|
—
|
41.2
|
13.2
|
||||||||||||||||||
$
|
13.7
|
$
|
11.3
|
$
|
8.0
|
$
|
8.0
|
$
|
52.2
|
$
|
19.5
|
Derivatives
Not Designated as Hedging Instruments
|
||||||||||||||||||||||||||
Interest
rate contracts
|
Other
assets
|
$
|
6.6
|
$
|
—
|
$
|
—
|
Accrued
liabilities
|
$
|
0.8
|
$
|
—
|
$
|
—
|
||||||||||||
Commodity
contracts – losses
|
Other
current assets
|
—
|
—
|
—
|
Accrued
liabilities
|
0.2
|
—
|
—
|
||||||||||||||||||
Foreign
currency contracts
|
Other
current assets
|
—
|
—
|
—
|
Accrued
liabilities
|
0.1
|
—
|
0.1
|
||||||||||||||||||
$
|
6.6
|
$
|
—
|
$
|
—
|
$
|
1.1
|
$
|
—
|
$
|
0.1
|
|||||||||||||||
Total
Derivatives(1)
|
$
|
20.3
|
$
|
11.3
|
$
|
8.0
|
$
|
9.1
|
$
|
52.2
|
$
|
19.6
|
Amount
of Gain (Loss)
|
Amount
of Gain (Loss)
|
|||||||||||||||||||
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||||||
Location
of Gain (Loss)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||||||
Derivatives
– Cash Flow Hedges
|
($
in millions)
|
|||||||||||||||||||
Recognized
in other comprehensive loss (effective portion)
|
———
|
$
|
14.0
|
$
|
(5.3
|
)
|
$
|
29.8
|
$
|
(10.9
|
)
|
|||||||||
Reclassified
from accumulated other comprehensive loss into income (effective
portion)
|
Cost
of goods sold
|
$
|
(1.0
|
)
|
$
|
0.5
|
$
|
(23.9
|
)
|
$
|
3.5
|
|||||||||
Recognized
in income (ineffective portion)
|
Cost
of goods sold
|
—
|
(0.1
|
)
|
—
|
(0.5
|
)
|
|||||||||||||
$
|
(1.0
|
)
|
$
|
0.4
|
$
|
(23.9
|
)
|
$
|
3.0
|
|||||||||||
Derivatives
– Fair Value Hedges
|
||||||||||||||||||||
Interest
rate contracts
|
Interest
expense
|
$
|
0.9
|
$
|
0.6
|
$
|
2.5
|
$
|
1.5
|
|||||||||||
$
|
0.9
|
$
|
0.6
|
$
|
2.5
|
$
|
1.5
|
|||||||||||||
Derivatives
Not Designated as Hedging Instruments
|
||||||||||||||||||||
Interest
rate contracts
|
Interest
expense
|
$
|
0.1
|
$
|
—
|
$
|
(0.3
|
)
|
$
|
—
|
||||||||||
Commodity
contracts
|
Cost
of goods sold
|
(0.2
|
)
|
—
|
(2.2
|
)
|
—
|
|||||||||||||
Foreign
currency contracts
|
Selling
and administration
|
—
|
(0.1
|
)
|
—
|
(0.5
|
)
|
|||||||||||||
$
|
(0.1
|
)
|
$
|
(0.1
|
)
|
$
|
(2.5
|
)
|
$
|
(0.5
|
)
|
Fair
Value Measurements
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
Assets
|
($
in millions)
|
|||||||||||||||
Interest
rate swaps
|
$
|
—
|
$
|
8.6
|
$
|
—
|
$
|
8.6
|
||||||||
Commodity
forward contracts
|
2.3
|
9.4
|
—
|
11.7
|
||||||||||||
Liabilities
|
||||||||||||||||
Interest
rate swaps
|
$
|
—
|
$
|
9.0
|
$
|
—
|
$
|
9.0
|
||||||||
Commodity
forward contracts
|
—
|
—
|
—
|
—
|
||||||||||||
Foreign
currency contracts
|
0.1
|
—
|
—
|
0.1
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
($
in millions, except per share data)
|
||||||||||||||||
Sales
|
$
|
397.0
|
$
|
502.9
|
$
|
1,180.6
|
$
|
1,330.3
|
||||||||
Cost
of goods sold
|
316.4
|
380.0
|
934.6
|
1,041.2
|
||||||||||||
Gross
margin
|
80.6
|
122.9
|
246.0
|
289.1
|
||||||||||||
Selling
and administration
|
31.2
|
35.6
|
106.5
|
104.5
|
||||||||||||
Other
operating income (expense)
|
1.2
|
(0.3
|
) |
6.9
|
0.7
|
|||||||||||
Operating
income
|
50.6
|
87.0
|
146.4
|
185.3
|
||||||||||||
Earnings
of non-consolidated affiliates
|
7.1
|
12.0
|
32.9
|
31.1
|
||||||||||||
Interest
expense
|
1.9
|
3.3
|
5.2
|
11.5
|
||||||||||||
Interest
income
|
0.1
|
1.0
|
0.9
|
5.2
|
||||||||||||
Other
income (expense)
|
—
|
(26.4
|
)
|
0.1
|
(26.1
|
)
|
||||||||||
Income
before taxes
|
55.9
|
70.3
|
175.1
|
184.0
|
||||||||||||
Income
tax provision
|
16.5
|
32.6
|
61.2
|
73.5
|
||||||||||||
Net
income
|
$
|
39.4
|
$
|
37.7
|
$
|
113.9
|
$
|
110.5
|
||||||||
Net
Income per Common Share:
|
||||||||||||||||
Basic
|
$
|
0.50
|
$
|
0.49
|
$
|
1.46
|
$
|
1.47
|
||||||||
Diluted
|
$
|
0.50
|
$
|
0.49
|
$
|
1.46
|
$
|
1.46
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Sales:
|
($
in millions)
|
|||||||||||||||
Chlor
Alkali Products
|
$
|
228.8
|
$
|
362.1
|
$
|
738.9
|
$
|
962.6
|
||||||||
Winchester
|
168.2
|
140.8
|
441.7
|
367.7
|
||||||||||||
Total
sales
|
$
|
397.0
|
$
|
502.9
|
$
|
1,180.6
|
$
|
1,330.3
|
||||||||
Income
before taxes:
|
||||||||||||||||
Chlor
Alkali Products(1)
|
$
|
3.9
|
$
|
104.3
|
$
|
120.2
|
$
|
241.8
|
||||||||
Winchester
|
23.0
|
9.8
|
59.1
|
29.3
|
||||||||||||
Corporate/Other:
|
||||||||||||||||
Pension
income(2)
|
6.3
|
5.2
|
16.8
|
13.3
|
||||||||||||
Environmental
income (expense)(3)
|
38.8
|
(6.4
|
)
|
26.8
|
(21.2
|
)
|
||||||||||
Other
corporate and unallocated costs
|
(15.5
|
)
|
(13.6
|
)
|
(50.5
|
)
|
(47.5
|
)
|
||||||||
Other
operating income (expense)(4)
|
1.2
|
(0.3
|
) |
6.9
|
0.7
|
|||||||||||
Interest
expense(5)
|
(1.9
|
)
|
(3.3
|
)
|
(5.2
|
)
|
(11.5
|
)
|
||||||||
Interest
income
|
0.1
|
1.0
|
0.9
|
5.2
|
||||||||||||
Other
income (expense)(6)
|
—
|
(26.4
|
)
|
0.1
|
(26.1
|
)
|
||||||||||
Income
before taxes
|
$
|
55.9
|
$
|
70.3
|
$
|
175.1
|
$
|
184.0
|
(1)
|
Earnings
of non-consolidated affiliates were included in the Chlor Alkali Products
segment results consistent with management’s monitoring of the operating
segments. The earnings from non-consolidated affiliates were $7.1 million
and $12.0 million for the three months ended September 30, 2009 and 2008,
respectively, and $32.9 million and $31.1 million for the nine months
ended September 30, 2009 and 2008,
respectively.
|
(2)
|
The
service cost and the amortization of prior service cost components of
pension expense related to the employees of the operating segments are
allocated to the operating segments based on their respective estimated
census data. All other components of pension costs are included in
Corporate/Other and include items such as the expected return on plan
assets, interest cost, and recognized actuarial gains and
losses. Pension income for the nine months ended September 30,
2008 included a curtailment charge of $0.8 million resulting from the
conversion of our McIntosh, AL Chlor Alkali hourly workforce from a
defined benefit pension plan to a defined contribution pension
plan.
|
(3)
|
Environmental
income (expense) for the three and nine months ended September 30, 2009
included $44.3 million and $45.1 million, respectively, of recoveries from
third parties for costs incurred and expensed in prior
periods.
|
(4)
|
Other
operating income (expense) for the nine months ended September 30, 2009
included a $3.7 million gain on the sale of land and $1.8 million of gains
on the disposal of assets primarily associated with the St. Gabriel, LA
facility conversion and expansion
project.
|
(5)
|
Interest
expense was reduced by capitalized interest of $3.6 million and $1.1
million for the three months ended September 30, 2009 and 2008,
respectively, and $9.1 million and $2.2 million for the nine months ended
September 30, 2009 and 2008,
respectively.
|
(6)
|
Other
income (expense) for the three and nine months ended September 30, 2008
included an impairment charge of the full value of a $26.6 million
investment in corporate debt securities. We are currently
unable to utilize the capital loss resulting from the impairment of these
corporate debt securities; therefore, no tax benefit was recognized during
the period for the impairment loss.
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
($
in millions)
|
||||||||||||||||
Charges
to income
|
$
|
5.5
|
$
|
6.4
|
$
|
18.3
|
$
|
21.2
|
||||||||
Recoveries
from third parties of costs incurred and expensed in prior
periods
|
(44.3
|
)
|
—
|
(45.1
|
)
|
—
|
||||||||||
Total
environmental (income) expense
|
$
|
(38.8
|
)
|
$
|
6.4
|
$
|
(26.8
|
)
|
$
|
21.2
|
September
30,
|
||||||||
2009
|
2008
|
|||||||
Reserve
for Environmental Liabilities:
|
($
in millions)
|
|||||||
Balance
at beginning of year
|
$
|
158.9
|
$
|
155.6
|
||||
Charges
to income
|
18.3
|
21.2
|
||||||
Remedial
and investigatory spending
|
(11.9
|
)
|
(16.8
|
)
|
||||
Pioneer
acquisition
|
—
|
2.1
|
||||||
Currency
translation adjustments
|
1.8
|
(1.0
|
)
|
|||||
Balance
at end of period
|
$
|
167.1
|
$
|
161.1
|
Nine Months Ended
September
30,
|
||||||||
2009
|
2008
|
|||||||
Provided by (Used For)
|
($
in millions)
|
|||||||
Net
operating activities
|
$
|
100.2
|
$
|
4.1
|
||||
Capital
expenditures
|
(122.3
|
)
|
(123.4
|
)
|
||||
Net
investing activities
|
(82.8
|
)
|
(102.2
|
)
|
||||
Long-term
debt borrowings
|
150.3
|
—
|
||||||
Net
financing activities
|
112.7
|
(7.7
|
)
|
Underlying Debt Instrument
|
Swap
Amount
|
Date of Swap
|
September
30, 2009
|
||||||
($ in million)
|
|||||||||
Olin
Pays Floating Rate:
|
|||||||||
9.125%,
due 2011
|
$
|
50.0
|
December
2001
|
4.68%
|
|||||
9.125%,
due 2011
|
$
|
25.0
|
March
2002
|
3-4%
|
(a)
|
||||
Industrial
development and environmental improvement obligations at fixed interest
rates of 6.625% to 6.75%, due 2016-2017
|
$
|
21.1
|
March
2002
|
2.01%
|
|||||
5.5
|
March
2002
|
2.15%
|
|||||||
Olin
Receives Floating
Rate:
|
|||||||||
9.125%,
due 2011
|
$
|
75.0
|
January
2009
|
8.11%
|
|
•
|
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 ammunition, housing, vinyls and pulp and paper, and
the migration by United States customers to low-cost foreign
locations;
|
|
•
|
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;
|
|
•
|
economic
and industry downturns that result in diminished product demand and excess
manufacturing capacity in any of our segments and that, in many cases,
result in lower selling prices and
profits;
|
|
•
|
costs
and other expenditures in excess of those projected for environmental
investigation and remediation or other legal
proceedings;
|
|
•
|
changes
in legislation or government regulations or policies, including proposed
legislation that would phase out the use of mercury in the manufacture of
chlorine, caustic soda, and related
products;
|
|
•
|
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;
|
|
•
|
unexpected
litigation outcomes;
|
|
•
|
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;
|
|
•
|
higher-than-expected
raw material and energy, transportation, and/or logistics
costs;
|
|
•
|
an
increase in our indebtedness or higher-than-expected interest rates,
affecting our ability to generate sufficient cash flow for debt
service;
|
|
•
|
continuing
weak industry conditions could affect our ability to comply with the
financial maintenance covenants in our senior revolving credit facility
and our accounts receivable facility;
and
|
|
•
|
adverse
conditions in the credit and capital markets, limiting or preventing our
ability to borrow or raise capital.
|
Period
|
Total Number of
Shares (or Units)
Purchased(1)
|
Average Price
Paid per Share
(or
Unit)
|
Total Number of
Shares (or Units)
Purchased as
Part of
Publicly
Announced
Plans
or Programs
|
Maximum
Number of
Shares
(or Units) that
May Yet Be
Purchased
Under the Plans or
Programs
|
|||||||||
July
1-31, 2009
|
—
|
N/A
|
—
|
||||||||||
August
1-31, 2009
|
—
|
N/A
|
—
|
||||||||||
September
1-30, 2009
|
—
|
N/A
|
—
|
||||||||||
Total
|
|
154,076
|
(1)
|
(1)
|
On
April 30, 1998, the issuer announced a share repurchase program
approved by the board of directors for the purchase of up to
5 million shares of common stock. Through September 30, 2009,
4,845,924 shares had been repurchased, and 154,076 shares remain available
for purchase under that program, which has no termination
date.
|
4.1
|
Indenture
dated as of August 19, 2009, between Olin Corporation and The Bank of New
York Mellon Trust Company—Exhibit 4.1 to Form 8-K dated August 19,
2009.*
|
4.2
|
First
Supplemental Indenture dated as of August 19, 2009, between Olin
Corporation and The Bank of New York Mellon Trust Company—Exhibit 4.2 to
Form 8-K dated August 19, 2009.*
|
4.3
|
Form
of 8.875% Senior Note due 2019-Exhibit 4.3 to Form 8-K dated August 19,
2009.*
|
10.1
|
Performance
Share Program
|
12
|
Computation
of Ratio of Earnings to Fixed Charges (Unaudited)
|
31.1
|
Section
302 Certification Statement of Chief Executive Officer
|
31.2
|
Section
302 Certification Statement of Chief Financial Officer
|
32
|
Section
906 Certification Statement of Chief Executive Officer and Chief Financial
Officer
|
OLIN
CORPORATION
|
||
(Registrant)
|
||
By:
|
/s/ John E. Fischer
|
|
Vice President and Chief Financial Officer
(Authorized
Officer)
|
Exhibit
No.
|
Description
|
4.1
|
Indenture
dated as of August 19, 2009, between Olin Corporation and The Bank of New
York Mellon Trust Company—Exhibit 4.1 to Form 8-K dated August 19,
2009.*
|
4.2
|
First
Supplemental Indenture dated as of August 19, 2009, between Olin
Corporation and The Bank of New York Mellon Trust Company—Exhibit 4.2 to
Form 8-K dated August 19, 2009.*
|
4.3
|
Form
of 8.875% Senior Note due 2019-Exhibit 4.3 to Form 8-K dated August 19,
2009.*
|
10.1
|
Performance
Share Program
|
12
|
Computation
of Ratio of Earnings to Fixed Charges (Unaudited)
|
31.1
|
Section
302 Certification Statement of Chief Executive Officer
|
31.2
|
Section
302 Certification Statement of Chief Financial Officer
|
32
|
Section
906 Certification Statement of Chief Executive Officer and Chief Financial
Officer
|