SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-1070
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Olin Corporation
----------------
(Exact name of registrant as specified in its charter)
Virginia 13-1872319
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Merritt 7, Norwalk, CT 06851
-------------------------- -----
(Address of principal executive offices) (Zip Code)
(203) 750-3000
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(Registrant's telephone number, including area code)
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(Former name, former address, and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
----- -----
As of July 31, 1997 there were outstanding 50,135,536 shares of the
registrant's common stock.
<PAGE>
Part I - Financial Information
Item 1. Financial Statements.
<TABLE>
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Balance Sheets
(In millions)
<CAPTION> Unaudited
June 30, December 31,
1997 1996
----------- ------------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 22.0 $ 523.5
Short-term investments 58.7 87.3
Accounts receivable, net 413.5 320.5
Inventories 341.3 314.9
Other current assets 94.7 89.6
------- -------
Total current assets 930.2 1,335.8
Investments and advances 104.4 173.8
Property, plant and equipment
(less accumulated depreciation
of $1,476.0 and $1,353.1) 741.6 657.3
Other assets 153.3 172.5
------- -------
Total assets $1,929.5 $2,339.4
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Short-term borrowings and current
installments of long-term debt $ 7.8 $ 138.8
Accounts payable 209.1 267.9
Income taxes payable 1.0 127.4
Accrued liabilities 254.1 292.3
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Total current liabilities 472.0 826.4
Long-term senior debt 268.6 276.3
Other liabilities 273.9 290.7
Commitments and contingencies
Shareholders' equity:
Common stock, par value $1 per share:
Authorized 120.0 shares.
Issued 50.3 shares (52.2 in 1996) 50.3 52.2
Additional paid-in capital 414.5 493.8
Guaranteed ESOP obligations - (5.0)
Cumulative translation adjustment (12.7) (8.6)
Retained earnings 462.9 413.6
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Total shareholders' equity 915.0 946.0
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Total liabilities and
shareholders' equity $1,929.5 $2,339.4
======= =======
<FN>
- --------------------
The accompanying Notes to Condensed Financial Statements are an integral
part of the condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Income (Unaudited)
(In millions, except per share amounts)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $632.4 $701.7 $1,223.6 $1,394.6
Operating expenses:
Cost of goods sold 491.6 529.2 941.5 1,057.6
Selling and administration 75.0 83.0 147.4 163.9
Research and development 7.2 9.8 14.6 19.8
------ ------ ------- -------
Operating income 58.6 79.7 120.1 153.3
Interest expense 7.0 8.0 14.5 15.9
Interest income 2.7 0.6 8.7 0.9
Other income 4.6 5.6 8.4 16.1
------ ------ ------- -------
Income from continuing 58.9 77.9 122.7 154.4
operations before taxes
Income taxes 20.3 27.2 42.3 53.0
------ ------ ------- -------
Income from continuing operations 38.6 50.7 80.4 101.4
Income (loss) from discontinued - 1.0 - (4.7)
operations, net of taxes ------ ------ ------- -------
Net income 38.6 51.7 80.4 96.7
Preferred dividends - 1.4 - 2.9
------ ------ ------- -------
Net income available to $ 38.6 $ 50.3 $ 80.4 $ 93.8
common shareholders ==== ==== ==== ====
Net income (loss) per
common share:
Primary:
Continuing operations $0.75 $0.99 $1.56 $ 1.98
Discontinued operations - 0.02 - (0.10)
----- ----- ----- ------
Total net income $0.75 $1.01 $1.56 $ 1.88
----- ----- ----- ------
Fully diluted:
Continuing operations $0.75 $0.96 $1.55 $ 1.92
Discontinued operations - 0.02 - (0.09)
----- ----- ----- ------
Total net income $0.75 $0.98 $1.55 $ 1.83
----- ----- ----- ------
Dividends $0.30 $0.30 $0.60 $0.60
Average common shares
outstanding--primary 50.9 49.8 51.5 49.7
Average common shares
outstanding--fully diluted 51.2 52.1 51.7 52.0
<FN>
- ----------------------
The accompanying Notes to Condensed Financial Statements are an integral
part of the condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Cash Flows (Unaudited)
(In millions)
<CAPTION>
Six Months
Ended June 30,
--------------
1997 1996
---- ----
<S> <C> <C>
Operating activities
- --------------------
Income from continuing operations $ 80.4 $101.4
Earnings of non-consolidated affiliates (5.1) (4.9)
Depreciation and amortization 59.5 63.9
Deferred taxes 11.4 1.4
Change in assets and liabilities net of
sale and purchase of businesses:
Receivables (97.7) (69.0)
Inventories (22.7) (30.3)
Other current assets (5.1) (0.6)
Accounts payable and accrued liabilities (107.6) (55.4)
Noncurrent liabilities (7.4) 2.6
Other operating activities 14.4 (1.9)
----- -----
Net cash and cash equivalents (used for) provided by
operating activities of continuing operations (79.9) 7.2
Discontinued operations:
Net loss - (4.7)
Change in net assets - 7.8
----- -----
Net operating activities (79.9) 10.3
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Investing activities
- --------------------
Capital expenditures (37.7) (37.3)
Disposition of property, plant and equipment - 24.5
Business acquired in purchase transaction (2.0) -
Proceeds from sale of business - 5.5
Taxes paid on sale of business (116.4) -
Purchase of short-term investments (79.4) -
Proceeds from sale of short-term investments 107.9 -
Investments and advances-affiliated companies at equity (43.8) (4.7)
Other investing activities (2.2) (1.0)
----- -----
Net investing activities (173.6) (13.0)
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Financing activities
- --------------------
Long-term debt repayments (138.5) (18.2)
Short-term debt borrowings (repayments) (0.2) 32.1
Purchase of Olin common stock (85.9) -
Repayment from ESOP 5.0 12.0
Stock options exercised 4.1 6.3
Dividends paid (31.0) (32.7)
Other financing activities (1.5) 0.2
----- -----
Net financing activities (248.0) (0.3)
----- -----
Net decrease in cash and cash equivalents (501.5) (3.0)
Cash and cash equivalents, beginning of period 523.5 7.5
----- -----
Cash and cash equivalents, end of period $ 22.0 $ 4.5
===== =====
<FN>
- --------------------
The accompanying Notes to Condensed Financial Statements are an
integral part of the condensed financial statements.
</FN>
</TABLE>
<PAGE>
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The condensed financial statements included herein have been prepared by
the company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and, in the opinion of the company,
reflect all adjustments (consisting only of normal accruals) which are
necessary to present fairly the results for interim periods. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations; however, the company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements, accounting policies and the notes thereto and
management's discussion and analysis of financial condition and results of
operations included in the company's Annual Report on Form 10-K for the
year ended December 31, 1996.
2. Inventory consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
Raw materials and supplies $162.4 $152.9
Work in process 145.7 144.6
Finished goods 198.0 171.8
----- -----
506.1 469.3
LIFO reserve (164.8) (154.4)
----- -----
Inventory, net $341.3 $314.9
===== =====
</TABLE>
Inventories are valued principally by the dollar value last-in, first-out
(LIFO) method of inventory accounting; in aggregate, such valuations are
not in excess of market. Elements of costs in inventories include raw
material, direct labor and manufacturing overhead. Inventories under the
LIFO method are based on annual determination of quantities and costs as of
the year-end; therefore, the consolidated financial statements at June 30,
1997, reflect certain estimates relating to inventory quantities and costs
at December 31, 1997.
3. Primary earnings per share are computed by dividing net income less the
ESOP preferred dividend requirement (to the date of its redemption in 1996)
and the redemption adjustment (excess of fair value over book value of ESOP
shares redeemed) by the weighted average number of common shares
outstanding. In December 1996, the company reacquired the ESOP preferred
stock with shares of common stock of equivalent value. Fully diluted
earnings per share reflect the dilutive effect of stock options and assume
the conversion of outstanding ESOP preferred stock, until its redemption in
December 1996, into an equivalent number of common shares at the date of
issuance. Net income was reduced by an additional ESOP contribution
(differential between the common and the ESOP preferred dividend rates
under an assumed conversion) necessary to satisfy the debt service
requirement.
<PAGE>
4. In December 1996, all outstanding shares of ESOP preferred stock were
reacquired with common stock of equivalent value. The notes guaranteed by
the company have been repaid in full and the related guarantee of this debt
has expired as of March 31, 1997.
5. In February 1997, the company completed its purchase of the remaining 50%
of Niachlor with a final payment of $2 million to E.I. du Pont de Nemours
and Company (DuPont). In December 1996, the company made an advance
payment of $75 million to DuPont. This acquisition was accounted for as a
purchase in 1997 and consists primarily of property, plant and equipment.
6. In January 1996, the company sold its corporate headquarters. This
transaction generated a gain of approximately $7 million, which was
reported in Other Income. In March 1996, the company sold its
electrostatics business. This transaction did not have a material impact
on the company's results of operations.
7. On December 31, 1996, the company completed the spin-off of its Ordnance
and Aerospace businesses as Primex Technologies, Inc. ("Primex"). Under
the terms of the spin-off, the company distributed to its holders of common
stock as of the close of business on December 19, 1996, one Primex common
share for every ten shares of Olin common stock. The historical operating
results of these businesses are shown net of tax as discontinued operations
in the condensed statements of income.
8. In December 1996, the company sold its isocyanates businesses for $565
million in cash. The company's results of operations for the three and six
months ended June 30, 1996 include sales of $76.5 million and $158.0
million and operating income of $9.5 million and $29.0 million,
respectively, from the isocyanates businesses.
9. At the annual shareholders' meeting in April 1997, the shareholders
approved an amendment to the Restated Articles of Incorporation to increase
the number of authorized shares of common stock from 60 million shares to
120 million shares. The board of directors had approved this amendment in
January 1997. The amendment was effective May 8, 1997.
10. The company enters into forward sales and purchase contracts and currency
options to manage currency risk resulting from purchase and sale
commitments denominated in foreign currencies (principally Australian
dollar, Belgian franc, Canadian dollar and Japanese yen) and relating to
particular anticipated but not yet committed sales expected to be
denominated in those currencies. All of the currency derivatives expire
within one year and are for United States dollar equivalents. The
counterparties to the options and contracts are major financial
institutions. In accordance with Statement of Financial Accounting
Standards No. 52, Foreign Currency Translation (SFAS 52), a transaction is
classified as a hedge when the foreign currency transaction is designated
as, and is effective as, a hedge of a foreign currency commitment and the
foreign currency commitment is firm. If a transaction does not meet the
criteria to qualify as a hedge, it is considered to be speculative. For
foreign currency commitments that are classified as a hedge, any gain or
loss on the commitment is deferred until it matures. Any gains or losses
associated with foreign currency commitments that are classified as
speculative are recognized in the current period. Foreign currency gains
and losses realized
<PAGE>
are included in the income statement in Selling and Administration. If
a foreign currency transaction previously considered as a hedge is
terminated before the transaction date of the related commitment, any
deferred gain or loss shall continue to be deferred until the transaction
date of the commitment.
During 1992, the company swapped interest payments on $50 million principal
amount of its 8% notes due 2002 to a floating rate (5.961% at June 30,
1997). In June 1995, the company offset this transaction by swapping
interest payments to a fixed rate of 6.485%. Counterparties to the
interest rate swap contracts are major financial institutions. The risk of
loss to the company in the event of nonperformance by a counterparty is not
significant. The company records the net difference between the interest
spreads as Interest Expense in the income statement.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
-------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
(in millions, except per share data)
<TABLE>
<CAPTION>
CONSOLIDATED Three Months Six Months
Ended June 30, Ended June 30,
--------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $632.4 $701.7 $1,223.6 $1,394.6
Gross Margin 140.8 172.5 282.1 337.0
Selling & Administration 75.0 83.0 147.4 163.9
Interest Income 2.7 0.6 8.7 0.9
Other Income 4.6 5.6 8.4 16.1
Income from Continuing
Operations, Net of Taxes 38.6 50.7 80.4 101.4
Net Income 38.6 51.7 80.4 96.7
Per Common Share:
Primary
Income from Continuing
Operations 0.75 0.99 1.56 1.98
Net Income 0.75 1.01 1.56 1.88
Fully Diluted
Income from Continuing
Operations 0.75 0.96 1.55 1.92
Net Income 0.75 0.98 1.55 1.83
</TABLE>
Three Months Ended June 30, 1997 Compared to 1996
- --------------------------------------------------
Sales decreased 10%. On a comparable basis, excluding the sales contributed by
the isocyanates businesses which were sold in December 1996, sales increased 1%
due to a 2% increase from the inclusion of the sales from the Niachlor
acquisition (February 1997) and a 1% increase in volumes offset by a 1%
decrease in both metal values and selling prices.
Gross margin percentage was 22%, a decrease of 3% excluding the impact of the
isocyanates businesses in 1996. Lower caustic prices and an unfavorable
product mix in Microelectronic Materials more than offset higher pool prices
and the impact of cost reduction programs.
Selling and administration expenses as a percentage of sales was 12% in 1997
and 1996. Selling and administrative expenses, excluding the selling and
administration expense of the isocyanates businesses ($4.5), decreased in
amount due to lower corporate administration expenses.
Research and development expenses, excluding the research and development
expense of the isocyanates businesses ($2.5), were about equal.
The increase in interest income is due to the income earned on the proceeds
from the sale of the isocyanates businesses.
Other income in 1996 included a gain on the sale of certain investment
securities.
The effective tax rate decreased slightly to 34.5% from 34.9% in 1996.
Six Months Ended June 30, 1997 Compared to 1996
- -----------------------------------------------
Sales decreased 12%. On a comparable basis, excluding the sales contributed by
the isocyanates businesses, sales decreased 1% due to a 1% decrease each in
metal values, volumes and selling prices, partially offset by a 2% increase
from the inclusion of the sales from the Niachlor acquisition.
Gross margin percentages in 1997 and 1996 were about equal excluding the impact
of the isocyanates businesses in 1996.
Selling and administration expenses as a percentage of sales was 12% in 1997
and 1996. Selling and administrative expenses, excluding the selling and
administration expense of the isocyanates businesses ($9.0), decreased in
amount due to lower corporate administration expenses.
<PAGE>
Research and development expenses, excluding the impact of the sale of the
isocyanates businesses ($4.0), decreased slightly.
The increase in interest income is due to the income earned on the proceeds
from the sale of the isocyanates businesses.
Other income in 1996 includes the $7 million gain on the sale of the company's
corporate headquarters.
The effective tax rate approximated 34.5% in 1997 and 1996.
<TABLE>
<CAPTION>
CHEMICALS Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales
Continuing Businesses $365.0 $363.4 $692.2 $696.4
Businesses Sold (a) - 76.5 - 158.0
----- ----- ----- -----
Total Sales $365.0 $439.9 $692.2 $854.4
===== ===== ===== =====
Operating Income
Continuing Businesses $ 46.0 $ 56.2 $ 95.4 $ 97.1
Businesses Sold (a) - 9.5 - 29.0
----- ----- ----- -----
Total Operating Income $ 46.0 $ 65.7 $ 95.4 $126.1
===== ===== ===== =====
<FN>
(a) Represents the sales and operating income of the isocyanates
businesses which were sold on December 4, 1996.
</FN>
</TABLE>
Three Months Ended June 30, 1997 Compared
to 1996 on a Continuing Business Basis
- -----------------------------------------
Sales were about equal to last year as lower selling prices and volumes were
offset by the inclusion of the sales from the Niachlor acquisition. Operating
income decreased 18% due to lower pricing in Chlor-Alkali as well as lower
volumes for certain higher-margin products, higher manufacturing costs and
slower than anticipated industry recovery in certain product sectors in
Microelectronic Materials. In pool products, sales and operating income were
equal to last year as higher pricing was offset by lower volumes due to
unseasonably cool spring weather. In Biocides, higher sales volumes of
antidandruff agents and lower operating expenses resulted in improved financial
performance. Improved product mix contributed to hydrazine and propellants'
sales increase, but the profit impact from these additional sales was offset by
increased raw material costs and higher manufacturing costs due to a plant
maintenance turnaround. In sulfuric acid, unfavorable manufacturing costs due
to higher raw material usage and additional plant turnaround costs more than
offset the additional profits from increased sales.
Six Months Ended June 30, 1997 Compared
to 1996 on a Continuing Business Basis
- ---------------------------------------
Sales were about equal to last year as lower selling prices and volumes were
offset by the inclusion of the sales from the Niachlor acquisition. Operating
income decreased slightly due to lower caustic prices in Chlor Alkali and an
unfavorable product mix and higher manufacturing costs in Microelectronic
Materials, which more than offset the improved pricing in pool products. In
Chlor-Alkali, sales and operating income decreased from last year as lower
caustic prices more than offset the impact of the additional sales from
Niachlor and the impact of lower utility costs. Improved pricing contributed
to pool products' increased operating income. For the total year, estimated
higher prices, offset in part by lower volumes, are expected to enhance pool
products' operating performance and more than offset the impact of expected
higher raw material and packaging costs. Biocides' improved performance was
primarily due to higher volumes of antidandruff agents and marine antifoulant
agents. Hydrazine and propellants' sales and operating income were equal to
last year, while sulfuric acid's operating income was behind last year's due to
lower volumes and higher manufacturing costs.
<PAGE>
<TABLE>
<CAPTION>
METALS AND AMMUNITION Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $267.4 $261.8 $531.4 $540.2
Operating Income 12.6 14.0 24.7 27.2
</TABLE>
Three Months Ended June 30, 1997 Compared to 1996
- -------------------------------------------------
Sales increased slightly while operating income decreased 10%. Sales increased
2% as higher volumes and a favorable product mix more than offset a decrease in
metal values. Lower shipments and higher maintenance costs due in part to the
shutdown taken in the second quarter this year compared with the third quarter
in 1996 at the Indianapolis operations, contributed to the decrease in Brass'
operating income. In addition, lower shipments of Fineweld tube more than
offset the higher earnings from A.J. Oster Company. Winchester's sales and
operating results were below last year due to lower commercial export sales
volumes. The reduced volumes also offset the benefits of lower manufacturing
costs.
Six Months Ended June 30, 1997 Compared to 1996
- -----------------------------------------------
Sales and operating income decreased 2% and 9%, respectively. Sales decreased
due to lower metal values and reduced ammunition shipments in Winchester.
Brass' lower shipments of cupping and strip products along with the start-up
costs associated with its new tube mill at Indianapolis, IN more than offset
the higher earnings at A.J. Oster and contributed to the decline in operating
income. Winchester's sales and operating results were behind last year. Lower
commercial export volumes and reduced military shipments were the main
contributors to the decrease in Winchester's financial performance.
ENVIRONMENTAL
In the first six months of 1997, the company spent approximately $11 million
for investigatory and remediation activities associated with former waste sites
and past operations. Spending for environmental investigatory and remedial
efforts for the full year 1997 is estimated to be $35 million. Cash outlays
for remedial and investigatory activities associated with former waste sites
and past operations were not charged to income but instead were charged to
reserves established for such costs identified and expensed to income in prior
periods. Associated costs of investigatory and remedial activities are
provided for in accordance with generally accepted accounting principles
governing probability and the ability to reasonably estimate future costs.
Charges to income for investigatory and remedial activities were $8 million for
the six months ended June 30, 1997. Charges to income for investigatory and
remedial efforts were material to operating results in 1996 and may be material
to operating results in 1997 and future years.
The company's consolidated balance sheets included liabilities for future
environmental expenditures to investigate and remediate known sites amounting
to $145 million and $148 million at June 30, 1997 and December 31, 1996, of
which $110 million and $113 million was classified as other noncurrent
liabilities, respectively. Those amounts did not take into account any
discounting of future expenditures or any consideration of insurance recoveries
or advances in technology. Those liabilities are reassessed periodically to
determine if environmental circumstances have changed and/or remediation
efforts and their costs can be better estimated. As a result of these
reassessments, future charges to income may be made for additional liabilities.
Annual environmental-related cash outlays for site investigation and
remediation, capital projects and normal plant operations are expected to range
between $75-$90
<PAGE>
million over the next several years. While the company does
not anticipate a material increase in the projected annual level of its
environmental-related costs, there is always the possibility that such
increases may occur in the future in view of the uncertainties associated with
environmental exposures. Environmental exposures are difficult to assess for
numerous reasons, including the identification of new sites, developments at
sites resulting from investigatory studies, advances in technology, changes in
environmental laws and regulations and their application, the scarcity of
reliable data pertaining to identified sites, the difficulty in assessing the
involvement and the financial capability of other potentially responsible
parties and the company's ability to obtain contributions from other parties
and the lengthy time periods over which site remediation occurs. It is
possible that some of these matters (the outcomes of which are subject to
various uncertainties) may be resolved unfavorably against the company.
LIQUIDITY, INVESTMENT ACTIVITY AND OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
CASH FLOW DATA Six Months
Provided by(used for)(in millions) Ended June 30,
--------------
1997 1996
---- ----
<S> <C> <C>
Net Operating Activities $ (79.9) $ 10.3
Capital Expenditures (37.7) (37.3)
Net Investing Activities (173.6) (13.0)
Net Financing Activities (248.0) (0.3)
</TABLE>
Operating income and cash and cash equivalents on hand were used to finance the
company's seasonal working capital requirements, long-term debt repayments,
capital and investment projects, dividends, the purchase of Olin common stock
and tax payments on the sale of the isocyanates businesses.
Operating Activities
- --------------------
The increase in cash used for operating activities was due to lower operating
income and an increased investment in working capital. Higher receivable
levels associated with the Niachlor acquisition, an unusually low Brass
accounts receivable level at year-end 1996, and the lower levels of accounts
payable and accrued liabilities in 1997 were the major contributors to the
increased investment in working capital.
Investing Activities
- --------------------
Capital spending of $37.7 million in 1997 was 10% higher than 1996, excluding
$2.9 million of capital spending of the isocyanates businesses which were sold
in December 1996. For the full year 1997, capital spending is estimated to
increase approximately 30-35% from 1996 (excluding $10.2 million of capital
spending of the isocyanates businesses) to provide additional capacity for
certain Chemicals product lines. In Microelectronic Materials, there are two
major projects: an ultra high-purity chemical plant and distribution center in
Zwijndrecht, Belgium to better serve the semiconductor industry in Europe and a
photoresist facility in North Kingston, RI to support the rapid
commercialization of advanced photoresists products. Both projects are
expected to be completed in 1998. In May 1997, the company announced plans to
construct a new biocides facility in China to support increasing demand in
China and the rest of Asia for antidandruff shampoos and other personal care
products that use biocides. This plant is scheduled to be on-stream by 2000.
In February 1997, the company completed its purchase of the remaining 50% of
Niachlor with a final payment of $2 million to E.I. du Pont de Nemours and
Company (DuPont). In December 1996, the company made an advance payment of $75
million to
<PAGE>
DuPont. This acquisition was accounted for as a purchase in 1997 and consists
primarily of property, plant and equipment.
Investment spending in 1997 was primarily attributable to the Sunbelt project
(a joint venture formed by the Geon Company and the company in 1996). The
plant start-up associated with this venture is estimated to be in late 1997.
The company and its venture partner are pursuing a financing by the joint
venture of approximately $200 million.
During the first six months of 1997, the company paid taxes of approximately
$116 million relating to the sale of its isocyanates businesses in December
1996.
After an extensive review of a variety of options regarding its ethylene
oxide/propylene oxide derivative products businesses at its Doe Run facility in
Brandenburg, KY, the company has concluded that the maximum economic value
would be realized from the retention of the non-foam polyol business, and re-
positioning or selling some of the other businesses (surfactants, glycols,
flexible polyols and disulfonates).
Proceeds in 1996 from the sale of assets including the corporate headquarters
and the divestment of the electrostatics business approximated $30 million.
Financing Activities
- --------------------
At June 30, 1997, the company maintained committed credit facilities with banks
of $259 million, of which $257 million was available. The company believes
that these credit facilities are adequate to satisfy its liquidity needs for
the near future.
In 1996, the board of directors authorized the company to purchase up to 10% of
the company's common stock. A portion of the proceeds from the 1996 sales of
businesses will be used for this program which began in January 1997. During
the first six months of 1997, the company used $86 million to repurchase
approximately 2,135,000 shares of its common stock.
At June 30, 1997, the percent of total debt to total capitalization (excluding
the reduction in equity for the Contributing Employee Ownership Plan at year-
end 1996 and June 30, 1996) was 23.2%, down from 30.4% at year-end 1996 and
36.9% at June 30, 1996. The decrease from June 30, 1996 was due to the
reduction in domestic short-term borrowings and the repayment of the 9.5%
subordinated notes ($125 million).
New Accounting Standards
- ------------------------
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," which specifies the computation, presentation and disclosure
requirements for earnings per share. This statement is effective for both
interim and annual periods ending after December 15, 1997. The company does
not expect that the application of this standard will have a material effect on
its present method of calculating and reporting earnings per share.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which established standards for the way
that segment information is to be disclosed in the financial statements along
with additional information on products and services, geographic areas and
major customers. The company is in the early stages of assessing the
disclosure requirements of this standard which is effective for periods
beginning after December 15, 1997.
<PAGE>
Cautionary Statement
- --------------------
Cautionary Statement under Federal Securities Laws: The information in the
Results of Operations section, Environmental Matters section and the Liquidity,
Investment Activity and Other Financial Data sections contains forward-looking
statements that are based on management's beliefs, certain assumptions made by
management and current expectations, estimates and projections about the
markets and economy in which the company and its various divisions operate.
Words such as "expects," "believes," "should," "plans," "will," "estimates,"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions ("Future
Factors") which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expected or forecasted in such
forward-looking statements. The company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of future events,
new information or otherwise. Information on Future Factors which could cause
actual results to differ materially from those discussed in these sections
appears within such sections and in the last sentence of the section "1997
Outlook -- Cautionary Statement under Federal Securities Laws" contained in
Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations of the company's 1996 Form 10-K (page 20 of the 1996
Annual Report to Shareholders), such last sentence being incorporated by
reference herein.
<PAGE>
Part II -- Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Shareholders on April 24, 1997. Of
the 52,082,729 shares of Common Stock entitled to vote at such meeting, at least
48,580,615 shares were present for purposes of a quorum. At the meeting,
shareholders elected to the Board of Directors Richard E. Cavanagh as a Class I
director with a term expiring in 1998, and William W. Higgins, Robert Holland,
Jr., Suzanne D. Jaffe, and John P. Schaefer as Class III directors with terms
expiring in 2000. Votes cast for and votes withheld in the election of
Directors were as follows:
Votes For Votes Withheld
Richard E. Cavanagh 48,396,957 184,645
William W. Higgins 48,408,324 173,278
Robert Holland, Jr. 48,372,498 209,104
Suzanne D. Jaffe 48,409,053 172,549
John P. Schaefer 48,411,788 169,814
There were no abstentions or broker nonvotes.
The shareholders also voted on and approved a resolution to amend Article
Fourth of the Corporation's Restated Articles of Incorporation. As so amended,
Article Fourth gives authority to the Corporation to issue 10,000,000 shares of
Preferred Stock, par value $1 per share, and 120,000,000 shares of Common Stock,
par value $1 per share. Voting for the resolution amending the article were
44,863,862 shares. Voting against were 3,244,282 shares. Abstaining were
473,458 shares. There were no broker nonvotes.
The shareholders also ratified the appointment of KPMG Peat Marwick LLP as
independent auditors for the Corporation for 1997. Voting for the resolution
ratifying the appointment were 48,011,481 shares. Voting against were 320,418
shares. Abstaining were 249,703 shares. There were no broker nonvotes.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
--------
11. Computation of Per Share Earnings (Unaudited).
12. Computation of Ratio of Earnings to Fixed Charges (Unaudited).
27. Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended June 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OLIN CORPORATION
(Registrant)
By: A.W. Ruggiero
----------------------
A.W. Ruggiero
Senior Vice President and
Chief Financial Officer
(Authorized Officer)
Date: August 13, 1997
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
11. Computation of Per Share Earnings (Unaudited).
12. Computation of Ratio of Earnings to Fixed Charges (Unaudited).
27. Financial Data Schedule.
<PAGE>
Exhibit 11
<TABLE>
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Computation of Per Share Earnings (Unaudited)
(In millions, except per share data)
<CAPTION>
Six Months
Ended June 30,
--------------
1997 1996
---- ----
<S> <C> <C>
Primary earnings per share
- --------------------------
Primary earnings:
Continuing operations:
Income from continuing operations $ 80.4 $101.4
Less ESOP preferred dividend, net of tax benefit
and other - (3.3)
----- -----
Income from continuing operations $ 80.4 $ 98.1
===== =====
Loss from discontinued operations $ - $ (4.7)
===== =====
Primary shares:
Weighted average shares outstanding 51.5 49.7
===== =====
Primary earnings (loss) per share:
Continuing operations $ 1.56 $ 1.98
Discontinued operations - (0.10)
----- -----
Total $ 1.56 $ 1.88
===== =====
Fully diluted earnings per share
- --------------------------------
Fully diluted earnings:
Income from continuing operations $ 80.4 $101.4
Less additional ESOP contribution - (1.7)
----- -----
Income from continuing operations $ 80.4 $ 99.7
===== =====
Loss from discontinued operations $ - $ (4.7)
===== =====
Fully diluted shares:
Weighted average number of common
shares outstanding and common
stock equivalents 51.5 49.7
Dilutive effect of:
Stock options 0.2 0.4
ESOP preferred stock - 1.9
----- -----
Fully diluted shares 51.7 52.0
===== =====
Fully diluted earnings (loss) per share
Continuing operations $1.55 $ 1.92
Discontinued operations - $(0.09)
===== =====
Total $1.55 $ 1.83
===== =====
</TABLE>
<PAGE>
Exhibit 12
<TABLE>
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges (Unaudited)
(In millions)
<CAPTION>
Six Months
Ended June 30,
--------------
1997 1996(a)
---- ----
<S> <C> <C>
Earnings:
Income from continuing operations before taxes $122.7 $154.4
Add (deduct):
Income taxes of 50% owned affiliates 1.4 1.8
Equity in income of less than
50% owned affiliates (1.8) (1.3)
Dividends received from less than 50%
owned affiliates 1.7 1.6
Interest capitalized, net of amortization (0.4) 0.1
Fixed charges as described below 22.9 25.2
------ ------
Total $146.5 $181.8
====== ======
Fixed Charges:
Interest expense $ 15.1 $ 16.2
Estimated interest factor in rent expense 7.8 9.0
------ ------
Total $ 22.9 $ 25.2
====== ======
Ratio of earnings to fixed charges 6.4 7.2
=== ===
<FN>
(a) Computation of ratio of earnings to fixed charges has been
restated to reflect the spin-off of Primex Technologies, Inc.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Financial Statements contained in Item 1 of Form 10-Q for the period ended
June 30, 1997 and is qualified in its entirety by reference to such
financial statements. Figures are rounded to the nearest 100,000 (except EPS).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 22,000
<SECURITIES> 58,700
<RECEIVABLES> 413,500
<ALLOWANCES> 0
<INVENTORY> 341,300
<CURRENT-ASSETS> 930,200
<PP&E> 2,217,600
<DEPRECIATION> (1,476,000)
<TOTAL-ASSETS> 1,929,500
<CURRENT-LIABILITIES> 472,000
<BONDS> 268,600
0
0
<COMMON> 50,300
<OTHER-SE> 864,700
<TOTAL-LIABILITY-AND-EQUITY> 1,929,500
<SALES> 1,223,600
<TOTAL-REVENUES> 1,223,600
<CGS> 941,500
<TOTAL-COSTS> 941,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,500
<INCOME-PRETAX> 122,700
<INCOME-TAX> 42,300
<INCOME-CONTINUING> 80,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,400
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.55
</TABLE>
