<PAGE>
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, 1999
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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
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(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
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(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, 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
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As of July 31, 1999, there were outstanding 45,248,494 shares of the
registrant's common stock.
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<TABLE>
<CAPTION>
Part I - Financial Information
Item 1. Financial Statements.
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Balance Sheets
(In millions, except per share amounts)
Unaudited
June 30, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 53.6 $ 50.2
Short-term investments 39.1 25.5
Accounts receivable, net 200.3 192.0
Inventories 208.8 198.8
Income taxes receivable 3.2 33.2
Other current assets 18.1 18.1
-------- --------
Total current assets 523.1 517.8
Investments and advances - affiliated companies at equity 6.2 11.9
Property, plant and equipment
(less accumulated depreciation
of $1,123.1 and $1,074.7) 462.7 475.0
Other assets 63.4 67.8
Net assets of discontinued operations - 504.5
-------- --------
Total assets $1,055.4 $1,577.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Short-term borrowings and current
installments of long-term debt $ 1.0 $ 1.0
Accounts payable 100.7 118.1
Income taxes payable 5.8 5.1
Accrued liabilities 157.1 168.1
-------- --------
Total current liabilities 264.6 292.3
Long-term debt 229.8 230.2
Other liabilities 227.7 264.3
Commitments and contingencies
Shareholders' equity:
Common stock, par value $1 per share:
Authorized 120.0 shares
Issued 45.3 shares (45.9 in 1998) 45.3 45.9
Additional paid-in capital 236.0 242.8
Accumulated other comprehensive loss (9.7) (24.8)
Retained earnings 61.7 526.3
-------- --------
Total shareholders' equity 333.3 790.2
-------- --------
Total liabilities and
shareholders' equity $1,055.4 $1,577.0
======== ========
</TABLE>
___________________________________
The accompanying Notes to Condensed Financial Statements are an integral
part of the condensed financial statements.
<PAGE>
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Income (Unaudited)
(In millions, except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $314.8 $348.2 $619.6 $707.3
Cost of goods sold 271.3 283.9 534.2 572.1
Selling and administration 31.6 31.5 62.5 64.6
Research and development 2.1 3.1 4.1 4.7
Earnings(loss) of non-consolidated affiliates (3.4) 1.3 (5.9) 3.3
Interest expense 4.1 4.7 7.9 9.5
Interest income 0.9 0.2 1.6 1.4
Other income 0.6 0.6 0.7 0.9
------- ------- ------- -------
Income from continuing operations before taxes 3.8 27.1 7.3 62.0
Income taxes 1.5 9.6 2.9 21.7
------- ------- ------- -------
Income from continuing operations 2.3 17.5 4.4 40.3
Income from discontinued operations, net of taxes - 21.1 4.4 37.4
------- ------- ------- -------
Net income $ 2.3 $ 38.6 $ 8.8 $ 77.7
======= ======= ======= =======
Net income per common share:
Basic:
Continuing operations $ 0.05 $ 0.37 $ 0.10 $ 0.84
Discontinued operations - 0.44 0.09 0.77
------- ------- ------- -------
Total net income $ 0.05 $ 0.81 $ 0.19 $ 1.61
======= ======= ======= =======
Diluted:
Continuing operations $ 0.05 $ 0.37 $ 0.10 $ 0.83
Discontinued operations - 0.43 0.09 0.77
------- ------- ------- -------
Total net income $ 0.05 $ 0.80 $ 0.19 $ 1.60
======= ======= ======= =======
Dividends per common share $ 0.20 $ 0.30 $ 0.50 $ 0.60
Average common shares outstanding:
Basic 45.5 47.9 45.7 48.3
Diluted 45.5 48.3 45.7 48.7
</TABLE>
___________________________________
The accompanying Notes to Condensed Financial Statements are an integral
part of the condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Cash Flows (Unaudited)
(In millions)
Six Months
Ended June 30,
--------------
1999 1998
---- ----
<S> <C> <C>
Operating activities
- --------------------
Income from continuing operations $ 4.4 $ 40.3
Adjustments to reconcile income from continuing operations to
net cash and cash equivalents provided by operating activities
Loss(earnings) of non-consolidated affiliates 5.9 (3.3)
Depreciation and amortization 38.1 38.9
Deferred taxes (4.2) 2.8
Change in:
Receivables (8.3) (3.5)
Inventories (10.0) (21.1)
Other current assets (1.2) 1.6
Accounts payable and accrued liabilities (39.1) (43.1)
Income taxes payable 17.6 2.9
Noncurrent liabilities (7.3) (8.2)
Other operating activities 4.0 (12.3)
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Net cash and cash equivalents used by operating
activities from continuing operations (0.1) (5.0)
Discontinued operations:
Net income 4.4 37.4
Change in net assets (7.3) (44.2)
-------- --------
Net operating activities (3.0) (11.8)
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Investing activities
- --------------------
Capital expenditures (24.5) (22.2)
Purchases of short-term investments (27.9) (9.4)
Proceeds from sale of short-term investments 14.3 17.5
Investments and advances-affiliated companies at equity (0.2) (1.5)
Other investing activities 1.6 (2.5)
-------- --------
Net investing activities (36.7) (18.1)
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Financing activities
- --------------------
Long-term debt repayments (0.4) (37.5)
Short-term debt repayments - (0.9)
Purchases of Olin common stock (8.6) (59.3)
Borrowings under line of credit assumed by Arch Chemicals, Inc. 75.0 -
Stock options exercised - 2.5
Dividends paid (22.9) (29.0)
-------- ---------
Net financing activities 43.1 (124.2)
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Net increase(decrease) in cash and cash equivalents 3.4 (154.1)
Cash and cash equivalents, beginning of period 50.2 156.8
-------- --------
Cash and cash equivalents, end of period $ 53.6 $ 2.7
======== ========
</TABLE>
___________________________________
The accompanying Notes to Condensed Financial Statements are an
integral part of the condensed financial statements.
<PAGE>
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Tabular amounts in millions, except per share data)
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, 1998.
2. Inventory consists of the following:
June 30, December 31,
1999 1998
---- ----
Raw materials and supplies $ 122.1 $ 113.1
Work in process 81.8 102.4
Finished goods 67.7 46.5
-------- --------
271.6 262.0
LIFO reserve (62.8) (63.2)
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Inventory, net $ 208.8 $ 198.8
======== ========
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. Costs of other inventories have been determined
principally by the average cost and first-in, first-out (FIFO) methods.
Elements of costs in inventories include raw material, direct labor and
manufacturing overhead. Inventories under the LIFO method are based on
annual estimates of quantities and costs as of the year-end; therefore, the
condensed financial statements at June 30, 1999, reflect certain estimates
relating to inventory quantities and costs at December 31, 1999.
3. Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
share reflect the dilutive effect of stock options.
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Basic Earnings Per Share 1999 1998 1999 1998
- ------------------------ ---- ---- ---- ----
Basic earnings:
Income from continuing operations $ 2.3 $ 17.5 $ 4.4 $ 40.3
Net income $ 2.3 $ 38.6 $ 8.8 $ 77.7
Basic shares 45.5 47.9 45.7 48.3
Basic earnings per share:
Continuing operations $ 0.05 $ 0.37 $ 0.10 $ 0.84
Net income $ 0.05 $ 0.81 $ 0.19 $ 1.61
<PAGE>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
Diluted Earnings Per Share 1999 1998 1999 1998
- -------------------------- ---- ---- ---- ----
Diluted earnings:
Income from continuing operations $ 2.3 $17.5 $ 4.4 $40.3
Net income $ 2.3 $38.6 $ 8.8 $77.7
Diluted shares:
Basic shares 45.5 47.9 45.7 48.3
Stock options --- 0.4 --- 0.4
Diluted shares ----- ----- ----- -----
45.5 48.3 45.7 48.7
===== ===== ===== =====
Diluted earnings per share:
Continuing operations $ 0.05 $ 0.37 $ 0.10 $ 0.83
Net income $ 0.05 $ 0.80 $ 0.19 $ 1.60
4. The Company is party to various governmental and private environmental
actions associated with waste disposal sites and manufacturing facilities.
Environmental provisions charged to income amounted to $4 million and $8
million for the three-month and six-month periods ended June 30, 1999 and
1998, respectively. Charges to income for investigatory and remedial
efforts were material to operating results in 1998 and may be material to
operating results in 1999. The consolidated balance sheets include
reserves for future environmental expenditures to investigate and remediate
known sites amounting to $130 million at June 30, 1999 and $129 million at
December 31, 1998, of which $105 million and $99 million were classified as
other noncurrent liabilities, respectively.
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 financial capability of other potentially responsible
parties and the Company's ability to obtain contributions from other
parties and the length of time 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.
5. In April 1998, the Board of Directors authorized an additional share
repurchase program of up to 5 million shares of Olin common stock, from
time to time, as conditions warrant. Since January 1997 the Company has
repurchased 7,647,300 shares, of which 2,647,300 were under the April 1998
program. During the first half of 1999, the Company repurchased 724,100
shares for $8.6 million.
<PAGE>
6. Segment operating income is defined as earnings before interest income,
interest expense, other income and income taxes and includes earnings
(losses) of non-consolidated affiliates. Segment operating results include
an allocation of corporate operating expenses. Intersegment sales are not
material.
Three Months Six Months
Ended June 30, Ended June 30,
-------------- ---------------
Sales 1999 1998 1999 1998
---- ---- ---- ----
Chlor Alkali Products $ 62.6 $ 94.6 $129.5 $190.7
Metals 190.9 196.4 373.2 407.7
Winchester 61.3 57.2 116.9 108.9
------ ------ ------ ------
Total Sales $314.8 $348.2 $619.6 $707.3
====== ====== ====== ======
Operating income (loss):
Chlor Alkali Products $(19.7) $ 14.2 $(32.5) $ 35.9
Metals 21.7 14.1 39.7 32.3
Winchester 4.4 2.7 5.7 1.0
------ ------ ------ ------
Total operating income $ 6.4 $ 31.0 $ 12.9 $ 69.2
====== ====== ====== ======
Operating income $ 6.4 $ 31.0 $ 12.9 $ 69.2
Interest expense 4.1 4.7 7.9 9.5
Interest income 0.9 0.2 1.6 1.4
Other income 0.6 0.6 0.7 0.9
------ ------ ------ ------
Income from continuing operations
before taxes $ 3.8 $ 27.1 $ 7.3 $ 62.0
====== ====== ====== ======
7. As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which established standards for the reporting and
display of comprehensive income and its components in the financial
statements. The Company does not provide for U.S. income taxes on foreign
currency translation adjustments since it does not provide for such taxes
on undistributed earnings of foreign subsidiaries. The components of
comprehensive income for the three-month and six-month periods ended June
30, 1999 and 1998 are as follows:
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
Net income $ 2.3 $ 38.6 $ 8.8 $ 77.7
Other comprehensive income (loss):
Cumulative translation adjustment 0.5 (0.6) 1.6 (3.3)
----- ------ ----- ------
Comprehensive income $ 2.8 $ 38.0 $10.4 $ 74.4
===== ====== ===== ======
8. On February 8, 1999, the Company completed the Spin-Off of its specialty
chemicals businesses as Arch Chemicals, Inc. ("Arch Chemicals"). Under
the terms of the Spin-Off, the Company distributed to its holders of common
stock of record at the close of business on February 1, 1999, one Arch
Chemicals common share for every two shares of Olin common stock. The
results of operations have been restated to reflect Arch Chemicals as
discontinued operations for all periods presented. For the first half of
1999, net income from discontinued operations includes one month of
operating results while the comparable six-month period in 1998 includes
six months of operating results.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- -----------------
($ in millions, except per share data) 1999 1998 1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $314.8 $348.2 $619.6 $707.3
Gross Margin 43.5 64.3 85.4 135.2
Selling and Administration 31.6 31.5 62.5 64.6
Interest Expense, net 3.2 4.5 6.3 8.1
Income from Continuing Operations 2.3 17.5 4.4 40.3
Net Income 2.3 38.6 8.8 77.7
Net Income Per Common Share:
Diluted
Continuing Operations $ 0.05 $ 0.37 $ 0.10 $ 0.83
Net Income $ 0.05 $ 0.80 $ 0.19 $ 1.60
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO 1998
Sales decreased 10% due to lower selling prices and metal values, which were
partially offset by increased volumes. The decrease in selling prices was
primarily related to lower Electrochemical Unit ("ECU") prices in the Chlor
Alkali Products segment. Also, sales were lower due to the shutdown of the rod,
wire and tube business at Indianapolis, IN, in the fourth quarter of 1998.
Sales volumes were higher across all segments.
Gross margin percentage decreased from 18% in 1998 to 14% in 1999 primarily due
to lower ECU prices.
Selling and Administration as a percentage of sales was 10% in 1999 up from 9%
in 1998 due to the lower sales base in 1999 as a result of the factors noted
above.
The decrease in operating results from the non-consolidated affiliates was due
primarily to the operating loss from the Sunbelt joint venture, which was
negatively impacted by the lower ECU pricing.
Interest expense, net of interest income, decreased from 1998 due to lower
interest expense as a result of the repayment in May of 1998 of $38 million of
7.97% notes and higher interest income in 1999 due to higher average cash, cash
equivalent and short-term investment balances.
The effective tax rate increased to 40.0% from 35.1% due to higher non-
deductible expenses related to company-owned life insurance programs.
<PAGE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO 1998
Sales decreased 12% due to lower ECU prices and metal values, the shutdown of
the rod, wire and tube business and the sale of the microelectronics packaging
operation in Manteca, CA, offset in part by higher strip and commercial
ammunition volumes.
Gross margin percentage decreased from 19% in 1998 to 14% in 1999 primarily due
to lower ECU prices.
Selling and Administration as a percentage of sales was 10% in 1999 up from 9%
in 1998 due to the lower sales base in 1999 due to the factors noted above.
Selling and Administration was $2.1 million lower than in 1998 due to lower
administrative expenses, primarily pension and management incentive compensation
expenses.
The decrease in operating results from the non-consolidated affiliates was due
primarily to the operating loss from the Sunbelt joint venture, which was
negatively impacted by the lower ECU pricing.
Interest expense, net of interest income, decreased from 1998 due to lower
interest expense as a result of the repayment of the $38 million of 7.97% notes
in May 1998 and slightly higher interest income in 1999 due to higher average
cash, cash equivalent and short-term investment balances.
The effective tax rate increased to 40.0% from 34.7% due to higher non-
deductible expenses related to company-owned life insurance programs.
SEGMENT OPERATING RESULTS
Segment operating results are defined as earnings (losses) before interest
income, interest expense, other income and income taxes and include earnings
(losses) of non-consolidated affiliates. Segment operating results include an
allocation of corporate operating expenses.
CHLOR ALKALI PRODUCTS Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
($ in millions) 1999 1998 1999 1998
- ----------------------------------------------------------------------------
Sales $ 62.6 $94.6 $129.5 $190.7
Operating (Loss) Income (19.7) 14.2 (32.5) 35.9
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO 1998
Sales and operating results were lower than 1998 primarily due to lower ECU
pricing, offset in part by higher volumes and cost reduction initiatives. The
economic slowdown in Asia and Latin America and new chlor-alkali industry
capacity additions have caused an oversupply of chlorine and caustic, thereby
exerting downward pressure on pricing. Average ECU prices in the second quarter
of 1999 were approximately $210, compared to $360 in the second quarter of 1998.
In addition to the lower pricing, the equity losses in 1999 (compared to profits
in 1998) from the
<PAGE>
Sunbelt joint venture due to the decline in ECU prices, contributed to the
decline in operating results.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO 1998
Sales and operating results were lower than 1998 primarily due to lower ECU
pricing, offset in part by higher volumes and cost reduction initiatives.
Average ECU prices for the first half of 1999 were approximately $220, compared
to $360 in the first half of 1998. The factors mentioned above, which impacted
the 1999 second quarter's operating results, were also responsible for adversely
impacting the 1999 year-to-date operating results. The Company believes that
ECU prices over the balance of the year will improve slightly over second
quarter levels; however, this will be offset by the normal increase in
electricity costs in the summer.
METALS Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
($ in millions) 1999 1998 1999 1998
- ---------------------------------------------------------------
Sales $190.9 $196.4 $373.2 $407.7
Operating Income 21.7 14.1 39.7 32.3
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO 1998
Sales decreased 3% due to lower metal values and the shutdown of the rod, wire
and tube business at Indianapolis, IN in the fourth quarter of 1998, offset in
part by increased volumes from brass strip operations and the A.J. Oster
Company. Also, sales to the coinage and ammunition markets were ahead of last
year. Strong demand from the automotive, housing and ammunition markets
resulted in higher brass strip volumes, while increased demand from the
distribution market improved A.J. Oster's performance. Operating income
improved from 1998 due to higher volumes, cost reductions and the successful
shutdown of the unprofitable rod, wire and tube business.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO 1998
Sales decreased 8% due primarily to lower metal values and the shutdown of the
rod, wire and tube business. The lower demand in the distribution markets that
adversely impacted A.J. Oster's sales in the first quarter had rebounded in the
second quarter with A.J. Oster posting record shipments in the month of June.
This resulted in slightly higher overall volumes in 1999. Operating income
improved due to the shutdown of the unprofitable rod, wire and tube business,
favorable sales mix, and lower administrative and operating expenses.
WINCHESTER Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
($ in millions) 1999 1998 1999 1998
- --------------------------------------------------------------
Sales $61.3 $57.2 $116.9 $108.9
Operating Income 4.4 2.7 5.7 1.0
<PAGE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO 1998
Sales in 1999 were 7% higher than 1998 due to higher volumes of commercial
ammunition, which more than offset lower selling prices in some product lines
and a decline in military sales. Operating income improved significantly from
1998 due to higher sales volumes and lower commodity costs.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO 1998
Sales in 1999 were 7% higher than 1998 due to higher commercial ammunition
volumes partially offset by lower military sales. Operating income improved
significantly from 1998 due to higher sales volumes, manufacturing cost
reductions and lower commodity costs.
Winchester is the operator of the U.S. Army's Lake City small caliber ammunition
plant in Independence, MO. The current five-year contract expires at the end of
this year and represents approximately $5 million in annual pretax profits. The
Company was one of several bidders for a new ten-year, fixed price contract to
commence at the end of the existing contract with Olin. On July 30, 1999, the
Department of the Army awarded this contract to a competitor. Olin has filed a
protest to this award which should be resolved during the fourth quarter of
1999.
1999 OUTLOOK
Lingering effects of the economic difficulties in Asia and Latin America and new
Chlor-Alkali industry capacity additions have significantly impacted the
Company's Chlor-Alkali Products business. The Company expects these influences
to continue for several more quarters, resulting in quarterly earnings per share
in the 5 cent range, assuming the Company's ECU prices improve slightly over
second-quarter levels.
DISCONTINUED OPERATIONS
On February 8, 1999, the Company completed the Spin-Off of its specialty
chemicals businesses as Arch Chemicals, Inc. ("Arch Chemicals") (the "Spin-
Off"). Under the terms of the Spin-Off, the Company distributed to its holders
of common stock of record at the close of business on February 1, 1999, one Arch
Chemicals common share for every two shares of Olin common stock. For the first
half of 1999, net income includes one month of operating results of the
specialty chemicals business while the comparable six-month period in 1998
includes six months of operating results.
ENVIRONMENTAL MATTERS
In the six months ended June 30, 1999 and 1998, the Company spent approximately
$7 million and $9 million, respectively, for investigatory and remediation
activities associated with former waste sites and past operations. Spending for
environmental investigatory and remedial efforts for the full year 1999 is
estimated to be $25 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
<PAGE>
reasonably estimate future costs. Charges to income for investigatory and
remedial activities were $8 million for the six months ended June 30, 1999 and
1998. Charges to income for investigatory and remedial efforts were material to
operating results in 1998 and may be material to net income in 1999 and future
years.
The Company's consolidated balance sheets included liabilities for future
environmental expenditures to investigate and remediate known sites amounting to
$130 million at June 30, 1999 and $129 million at December 31, 1998, of which
$105 million and $99 million were 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 $50 to $60 million over the next several years. While the Company does
not anticipate a material increase in the projected annual level of its
environmental-related costs, there is always the possibility that such increases
may occur in the future in view of the uncertainties associated with
environmental exposures. Environmental exposures are difficult to assess for
numerous reasons, including the identification of new sites, developments at
sites resulting from investigatory studies, advances in technology, changes in
environmental laws and regulations and their application, the scarcity of
reliable data pertaining to identified sites, the difficulty in assessing the
involvement and financial capability of other potentially responsible parties
and the Company's ability to obtain contributions from other parties and the
lengthy time periods over which site remediation occurs. It is possible that
some of these matters (the outcomes of which are subject to various
uncertainties) may be resolved unfavorably against the Company.
LIQUIDITY, INVESTMENT ACTIVITY AND OTHER FINANCIAL DATA
CASH FLOW DATA
Six Months
Ended June 30,
--------------
Provided By (Used For) ($ in millions) 1999 1998
- ----------------------------------------------------------
Net Cash and Cash Equivalents
Used for Operating Activities
from Continuing Operations $ (0.1) $ (5.0)
Net Operating Activities (3.0) (11.8)
Capital Expenditures (24.5) (22.2)
Net Investing Activities (36.7) (18.1)
Purchases of Olin Common Stock (8.6) (59.3)
Net Financing Activities 43.1 (124.2)
<PAGE>
In 1999, income from continuing operations exclusive of non-cash charges,
borrowings under a line of credit assumed by Arch Chemicals and cash and cash
equivalents on hand were used to finance the Company's working capital
requirements, capital and investment projects, dividends and the purchase of the
Company's common stock.
OPERATING ACTIVITIES
In 1999, the decrease in cash used by operating activities of continuing
operations was primarily attributable to a lower investment in working capital
(including an income tax refund), offset in part by lower operating income.
Metals' inventory levels were unusually low at June 30, 1999 due to lower metal
prices and higher levels of customer-owned inventory. This lower spending level
for working capital in the first half of 1999 included certain cash expenditures
which were accrued at December 31, 1998 and related to the Spin-Off of Arch
Chemicals, primarily legal and investment banking fees.
CAPITAL EXPENDITURES
Capital spending of $24.5 million in 1999 was $2.3 million higher than 1998.
For the total year, capital spending is expected to be in the $75 million range
and should approximate annual depreciation expense.
FINANCING ACTIVITIES
At June 30, 1999, the Company has available a $165 million line of credit under
an unsecured revolving credit agreement with a group of banks. As a result of
the Spin-Off in February of 1999, the Company amended its revolving credit
agreement reducing the aggregate commitments from $250 million to $165 million.
The Company may select various floating rate borrowing options. The Company
believes that the credit facility is adequate to satisfy its liquidity needs for
the foreseeable future. The credit facility includes various customary
restrictive covenants including restrictions related to the ratio of debt to
earnings before interest, taxes, depreciation and amortization and the ratio of
earnings before interest, taxes, depreciation and amortization to interest.
During 1999, the Company used $8.6 million to repurchase 724,100 shares of the
Company's common stock, bringing the cumulative total shares repurchased to
7,647,300 since January 1997.
Prior to the Spin-Off in February, 1999, the Company borrowed $75 million under
a credit facility which liability was assumed by Arch Chemicals. The Company
has used a portion of and intends to use the balance of these funds for general
corporate purposes, which may include share repurchases and future acquisitions.
The percent of total debt to total capitalization increased to 41% at June 30,
1999, from 29% at year-end 1998 and 21% at June 30, 1998, primarily due to the
reduction to equity resulting from the Spin-Off.
In 1999, the Company paid first and second quarter dividends of $0.30 and $0.20
per share, respectively. As announced previously, following the Spin-Off, the
Company's quarterly dividend is expected to be $0.20 per share. In July 1999,
the Company's Board of Directors
<PAGE>
declared a quarterly dividend of $.20 per share on its common stock, which is
payable on September 10, 1999, to shareholders of record on August 10, 1999.
NEW ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standards Board ("FASB") issued Statement No.
133 "Accounting for Derivative Instruments and Hedging Activities." It requires
an entity to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
FASB has postponed the implementation date of this statement, which will now be
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Effective January 1, 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" and Statement of Position 98-5, "Reporting on the Costs of Start-
up Activities." Adoption of these statements did not have a material effect on
the Company's results of operations or financial position.
EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European Union
adopted the Euro as their common legal currency and established fixed conversion
rates between their existing sovereign currencies and the Euro. The Company
does not expect the conversion to the Euro to have a material impact on its
business, operations, or financial position.
YEAR 2000 COMPUTER SYSTEMS
The Company views the impact of the Year 2000 as a critical business issue. It
manages the process by having each business segment identify its own Year 2000
issues and develop appropriate corrective action steps, while instituting a
series of management processes that coordinate and manage the process across
business segment boundaries and the corporate center. The process includes
corporate oversight and provides for consistent attention to progress made
against planned activities and a forum for issue resolution at the business
segment and corporate levels with periodic assessments made by independent
parties which are reported to the Board. As a result of the Spin-Off of Arch
Chemicals, the Company entered into an Information Technology Services Agreement
with Arch Chemicals stipulating that Arch Chemicals will provide various
information technology related services including maintenance of the centralized
computer center and the wide area network as well as provide services in support
of the Company's Year 2000 initiative.
The Company recognizes that the Year 2000 issue is not limited to computer
programs normally associated with the processing of business information, but
can also be found in certain equipment and processes used in manufacturing and
operation of facilities. It also recognizes that the potential exists for Year
2000 issues within the supply chain. The Company's approach was to subdivide
the program into four distinct segments: 1) Business Systems; 2) Manufacturing;
3) Supply Chain; and 4) Infrastructure.
In the business systems area, the Company has positioned itself very favorably
with respect to software and equipment that is Year 2000 compliant. In 1994,
the Company began
<PAGE>
implementing a Year 2000 compliant client-server system, Peoplesoft, to address
payroll and human resource needs and it presently uses such system in all
businesses. In 1993, the Company began implementing for all domestic businesses,
except the Metals segment, a client-server system, SAP, for core business
requirements as a vehicle to obtain certain improvements in the business
processes. With the exception of the Metals segment, SAP is currently utilized
in a majority of its domestic businesses. Since SAP was also a certified Year
2000 compliant solution, migration plans were adjusted to take advantage of the
business benefit while eliminating the cost of remediating old legacy system
code. Deployment has been aggressive with most domestic functions and locations
(except Metals) transferred to SAP. In the few instances where SAP was not
utilized, replacement systems were implemented in the first half of 1999.
Offshore processing systems will continue using existing systems. All systems
have been examined; and those requiring Year 2000 upgrades were substantially
completed by the end of the second quarter of 1999.
The Metals segment is addressing the Year 2000 issue by converting existing
programs to be compliant. The conversion and testing was substantially
completed in June 1999.
In the manufacturing area, plant level employees and independent assessments
were used to identify places where embedded systems exist and categorize them by
the potential impact to the business. All major items, identified as having a
Year 2000 compliance issue, have been remediated, tested and placed in
operations.
The supply chain area has seen much activity in terms of assessing vendor Year
2000 preparedness, identifying alternate sources, as well as insertion of
certain Year 2000 compliance language in all purchase orders issued. The Company
has completed a review of single source and critical suppliers. During 1999,
the Company will continue to re-evaluate its suppliers on a periodic basis.
Personal computers, networks, and PBXs represent the majority of items in the
Company's infrastructure segment. The Company has deployed new Pentium Year
2000 compliant equipment in large numbers to support its SAP deployment program
and for internal standards compliance. In addition, the Company utilized
software tools to test the entire PC inventory for Year 2000 compliance. This
test work was completed during the second quarter of 1999. The Company's wide
area network is Year 2000 compliant as are all of its PBX and voice mail
systems.
The Company believes its Year 2000 initiative is on track and has addressed all
significant Year 2000 issues. Additional assessments of all significant issues
will continue throughout 1999.
Plans for a worst case scenario in the unlikely event of a major failure due to
a Year 2000 problem which causes significant disruptions to business operations
have been formulated. In the area of business systems, management believes that
the Company, with most of its operating units already migrated to Year 2000
compliant solutions, has already significantly reduced its potential risk.
<PAGE>
The Company will continue to monitor progress against plans in the business
systems, manufacturing, infrastructure, and supply chain areas, and take
corrective action as required.
Nonetheless, in the unlikely occurrence of some unforeseen event, emergency
teams skilled in each of the disciplines will be formed during the last half of
1999. They will be deployed to assist local personnel in the event of a Year
2000 issue at the turn of the millennium.
The Company does not expect Year 2000 initiative costs to exceed $5 million
inclusive of the cost for deploying SAP and Peoplesoft and related
infrastructure during 1999.
The dates on which the Company believes the Year 2000 Project will be completed
and the SAP computer systems will be implemented are based on management's best
estimates, which are derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third-party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved, or that there will not be a delay in, or
increased costs associated with, the implementation of the Year 2000 Project.
Specific factors that might cause differences between the estimates and actual
results include, but are not limited to, the availability and cost of personnel
trained in these areas, the ability to locate and correct all relevant computer
codes, timely responses to and corrections by third-parties and suppliers, the
ability to implement interfaces between the new systems and the systems not
being replaced, and similar uncertainties. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of third parties and the interconnection of global
businesses, the Company cannot ensure its ability to timely and cost-effectively
resolve the problems associated with the Year 2000 issue that may affect its
operations and business, or expose it to third-party liability. If a broad
interruption of rail or utility services were to occur, it would likely have a
material adverse effect on the Company's operations, as it would interfere with
the Company's ability to produce products, ship materials and finished goods
and fulfill customer orders.
CAUTIONARY STATEMENT UNDER FEDERAL SECURITIES LAWS: The information contained in
the 1999 Outlook section, the Environmental Matters section, the Liquidity,
Investment Activity and Other Financial Data section (and subsections thereof),
and Notes to Condensed Financial Statements 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 respective divisions operate. Words such as
"anticipates," "expects," "believes," "should," "plans," "will," "forecasts,"
"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 does not undertake any obligation to
update publicly any forward-looking statements, whether as a result of future
events, new information or otherwise. Future Factors which could cause actual
results to differ materially from those discussed in these sections and notes
include but are not limited to: general economic and business and market
conditions; lack of moderate growth in the U.S. economy or even a slight
recession in 1999; worsening business conditions as a result of the Asian and
Latin American financial turmoil; competitive pricing pressures; declines in
Chlor Alkali's ECU prices below current levels; Chlor Alkali operating rates
below current levels; higher-than-expected raw material costs; a downturn in
many of the markets the Company serves such as electronics, automotive,
ammunition and
<PAGE>
housing; the supply/demand balance for the Company's products, including the
impact of excess industry capacity; efficacy of new technologies; changes in
U.S. laws and regulations; failure to achieve targeted cost reduction programs;
capital expenditures, such as cost overruns, in excess of those scheduled;
environmental costs in excess of those projected; and the occurrence of
unexpected manufacturing interruptions/outages.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk in the normal course of its business
operations due to its operations in different foreign currencies, its purchases
of certain commodities and its ongoing investing and financing activities. The
risk of loss can be assessed from the perspective of adverse changes in fair
values, cash flows and future earnings. The Company has established policies
and procedures governing its management of market risks and the uses of
financial instruments to manage exposure to such risks.
The primary purpose of the Company's foreign currency hedging activities is to
manage currency risks resulting from purchase and sale commitments in foreign
currencies (principally Australian dollar and Canadian dollar) and relating to
particular anticipated purchases and sales expected to be denominated in those
same foreign currencies. Foreign currency hedging activity is not material to
the Company's consolidated financial position, results of operations or cash
flow.
Certain materials, namely copper, lead and zinc, used primarily in the Company's
Metals and Winchester segments' products are subject to price volatility.
Depending on market conditions, the Company may enter into futures contracts and
put and call option contracts in order to reduce the impact of metal price
fluctuations. As of June 30, 1999, the Company maintained open positions on
futures contracts totalling $64 million. Assuming a hypothetical 10% increase
in commodity prices which are currently hedged, the Company would experience a
$6.4 million increase in its cost of inventory purchased, which would be offset
by a corresponding increase in the value of related hedging instruments.
The Company is exposed to changes in interest rates primarily as a result of its
investing and financing activities. Investing activity is not material to the
Company's consolidated financial position, results of operations or cash flow.
The financing activities of the Company are comprised primarily of long-term
fixed-rate debt utilized to fund business operations and to maintain liquidity.
As of June 30, 1999, the Company had long-term borrowings of $231 million
outstanding at varying fixed rates. The Company has interest rate swaps to
hedge underlying debt obligations. Interest rate swap activity is not material
to the Company's consolidated financial position, results of operations or cash
flow.
If the actual change in interest rates or commodities pricing is substantially
different than expected, the net impact of interest rate risk or commodity risk
on the Company's cash flow may be materially different than that disclosed
above.
The Company does not enter into any derivative financial instruments for trading
purposes.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings.
-----------------
Not Applicable.
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
Not Applicable.
Item 3. Defaults Upon Senior Securities.
-------------------------------
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
The Company held its Annual Meeting of Shareholders on April 29,
1999. Of the 45,963,259 shares of Common Stock entitled to vote at such meeting,
at least 43,094,710 shares were present for purposes of a quorum. At the
meeting, shareholders elected to the Board of Directors A. W. Ruggiero as a
Class I director with a term expiring in 2001 and D. W. Griffin, G. J.
Ratcliffe, Jr. and R. M. Rompala as Class II directors with terms expiring in
2002. Votes cast for and votes withheld in the election of Directors were as
follows:
Votes For Votes Withheld
---------- --------------
A. W. Ruggiero 41,284,083 1,810,627
D. W. Griffin 42,653,935 440,775
G. J. Ratcliffe, Jr. 41,606,497 1,488,213
R. M. Rompala 41,599,986 1,494,724
There were no abstentions or broker nonvotes.
The shareholders also ratified the appointment of KPMG LLP as
independent auditors for the Corporation for 1999. Voting for the resolution
ratifying the appointment were 42,240,204 shares. Voting against were 612,367
shares. Abstaining were 242,140 shares. There were no broker nonvotes.
<PAGE>
Item 5. Other Information.
-----------------
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
--------
10(n) 1997 Stock Plan for Non-Employee Directors as Amended
Effective July 28, 1999.
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, 1999.
<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: /s/ A. W. Ruggiero
-----------------------------
Executive Vice President and
Chief Financial Officer
(Authorized Officer)
Date: August 13, 1999
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- --------- -----------
10(n) 1997 Stock Plan for Non-Employee Directors as Amended
Effective July 28, 1999.
12. Computation of Ratio of Earnings to Fixed Charges (Unaudited).
27. Financial Data Schedule.
<PAGE>
EXHIBIT 10(n)
OLIN CORPORATION
1997 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
(As Amended Effective July 28, 1999)
1. Purpose. The purpose of the Olin Corporation 1997 Stock Plan for Non-
employee Directors the ("Plan") is to promote the long-term growth and financial
success of Olin Corporation by attracting and retaining non-employee directors
of outstanding ability and by promoting a greater identity of interest between
its non-employee directors and its shareholders. The Plan is amended and
restated to reflect the distribution to Olin's shareholders of all of the
outstanding shares of common stock of Arch Chemicals, Inc., effective as of the
date of such distribution.
2. Definitions. The following capitalized terms utilized herein have the
following meanings:
"Annual Grant Participant" means a Non-employee Director who is not
eligible for any other pension benefits from the Company, including, but not
limited to, benefits from the Olin Employees Pension Plan, the Olin Senior
Executive Pension Plan or another pension plan of the Company.
"Arch" means Arch Chemicals, Inc., a Virginia corporation and any
successor.
"Arch Common Stock" means shares of common stock of Arch, par value
$1.00 per share.
"Arch Director" means a non-employee director of the board of
directors of Arch.
"Arch Stock Account" means the Stock Account to which phantom shares
of Arch Common Stock are credited.
"Arch Directors' Plan" means the Arch Chemicals, Inc. 1999 Stock Plan
for Non-employee Directors.
"Board" means the Board of Directors of the Company.
"Cash Account" means an account established under the Plan for a Non-
employee Director to which cash meeting fees and retainers have been or are to
be credited in the form of cash.
"Change in Control" means any of the following: (i) the Company
ceases to be, directly or indirectly, owned by at least 1,000 shareholders; (ii)
a person, partnership, joint venture, corporation or other entity, or two or
more of any of the
<PAGE>
2
foregoing acting as a "person" within the meaning of Section 13(d)(3) of the
1934 Act, other than the Company, a majority-owned subsidiary of the Company or
an employee benefit plan of the Company or such subsidiary (or such plan's
related trust), become(s) the "beneficial owner" (as defined in Rule 13d-3 under
the 1934 Act) of 20% or more of the then outstanding voting stock of the
Company; and (iii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board (together with any new
director whose election by the Board or whose nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors then in
office.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means the Compensation Committee (or its successor) of the
Board.
"Common Stock" means the Company's Common Stock, $1.00 par value per
share.
"Company" means Olin Corporation, a Virginia corporation, and any
successor.
"Credit Date" means the first day of each calendar quarter, beginning
with January 1, 1998.
"Distribution" means the distribution of all outstanding shares of
Arch Common Stock to the shareholders of the Company.
"Distribution Date" means the dividend payment date fixed by the Board
for the Distribution.
"Excess Retainer" means with respect to a Non-employee Director the
amount of the full annual cash retainer payable to such Non-employee Director
from time to time by the Company for service as a director in excess of $25,000,
if any; provided that in the event the annual cash retainer is prorated to
reflect that such Non-employee Director did not serve as such for the full
calendar year, the $25,000 shall be similarly prorated.
"Fair Market Value" means, with respect to a date, on a per share
basis, with respect to phantom shares of Common Stock or Arch Common Stock, the
average of the high and the low price of a share of Common Stock or Arch Common
Stock, as the case may be, as reported on the consolidated tape of the New York
Stock Exchange on such date or if the
<PAGE>
3
New York Stock Exchange is closed on such date, the next succeeding date on
which it is open.
"Interest Rate" means the rate of interest equal to the Company's
before-tax cost of borrowing as determined from time to time by the Chief
Financial Officer, the Treasurer or the Controller of the Company (or in the
event there is no such borrowing, the Federal Reserve A1/P1 Composite rate for
90-day commercial paper plus 10 basis points, as determined by any such officer)
or such other rate as determined from time to time by the Board or the
Committee.
"l934 Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"1994 Plan" means the 1994 Stock Plan for Non-employee Directors as in
effect on October 1, 1997.
"Non-employee Director" means a member of the Board who is not an
employee of the Company or any subsidiary thereof.
"Olin Stock Account" means the Stock Account to which phantom shares
of Common Stock are credited from time to time.
"One-time Grant Participant" means a Director with an accrued benefit
under the Retirement Plan, as shown on Exhibit 1 hereto; provided such Director
waives his or her rights with respect to the Retirement Plan. (See Exhibit 1
for the present value of each such Director's accrued benefit as of December 31,
1996.)
"Plan" means this Olin Corporation 1997 Stock Plan for Non-employee
Directors as amended from time to time.
"Prior Plans" means the 1994 Plan and all of the Corporation's other
directors' compensation plans, programs, or arrangements which provided for a
deferred cash or stock account.
"Retirement Date" means the date the Non-employee Director ceases to
be a member of the Board for any reason; provided that a Non-employee Director
will not be considered to have incurred a Retirement Date if he ceases to be a
Non-employee Director to become an Arch Director.
"Retirement Plan" means the Retirement Plan for Non-employee Directors
of Olin Corporation as in effect on December 31, 1996.
"Stock Account" means an account established under the Plan for a Non-
employee Director to which shares of Common Stock and Arch Common Stock have
been or are to be credited in the form of phantom stock, which shall include the
Olin Stock Account and the Arch Stock Account.
<PAGE>
4
3. Term. The Plan became effective January 1, 1997. Once effective, the
Plan shall operate and shall remain in effect until terminated by action of the
Board as provided in Section 9 hereof. The Plan was amended and restated
effective October 2, 1997, and again effective as of the Distribution Date.
4. Administration. Full power and authority to construe, interpret and
administer the Plan shall be vested in the Committee. Decisions of the
Committee shall be final, conclusive and binding upon all parties.
5. Participation. All Non-employee Directors shall participate in the
Plan.
6. Grants and Deferrals.
(a) Annual Stock Grant. Subject to the terms and conditions of the
Plan, on January 1 of each year, each Non-employee Director shall be credited
with a number of shares of Common Stock with an aggregate Fair Market Value, as
of the last trading day prior to such January 1, equal to $24,000, rounded to
the nearest 100 shares. To be entitled to such credit in any calendar year, a
Non-employee Director or an Annual Grant Participant, as the case may be, must
be serving as such on January 1 of such year; provided, however, that in the
event a person becomes an Annual Grant Participant subsequent to January 1 of a
calendar year, such Annual Grant Participant, on the first day of the calendar
month following his or her becoming such, shall be credited with that number of
shares (rounded up to the next whole share in the event of a fractional share)
of Common Stock equal to one-twelfth of 500 times the number of whole calendar
months remaining in such calendar year following the date he or she becomes an
Annual Grant Participant. Actual receipt of shares shall be deferred and each
eligible Non-employee Director or Annual Grant Participant, as the case may be,
shall receive a credit to his or her Olin Stock Account in the amount of such
shares and on the date of such credit. A Non-employee Director may elect in
accordance with Section 6(f) to defer to his or her Olin Stock Account receipt
of all or any portion of such shares to a date or dates on or following such
Non-employee Director's or Annual Grant Participant's Retirement Date. Except
with respect to any shares the director has so elected to defer, certificates
representing such shares shall be delivered to the Non-employee Director (or in
the event of death, to his or her beneficiary designated pursuant to Section
6(i)) as soon as practicable following his or her Retirement Date.
(b) Annual Retainer Stock Grant. Subject to the terms and conditions
---------------------------
of the Plan, on each January 1 of each year beginning with 1998, each Non-
employee Director who is such on such date shall receive that number of shares
(rounded up to the next whole share) of Common Stock having an aggregate Fair
Market Value on such date of $25,000. In the event a person becomes in a
calendar year a Non-employee Director subsequent to January 1 and has not
received the annual stock retainer for such calendar year, such person, on the
first day of the calendar month following his or her becoming such, shall
receive that number of shares (rounded up to the next whole share in the event
<PAGE>
5
of a fractional share) of Common Stock having an aggregate Fair Market Value on
such first day of an amount equal to $2,084 times the number of whole calendar
months remaining in such calendar year following the date he or she becomes a
Non-employee Director. The annual cash retainer payable to the Non-employee
Director shall be reduced by the aggregate Fair Market Value of the shares the
Non-employee Director receives or defers as the annual retainer stock grant
(excluding any rounding of fractional shares) on the date the Non-employee
Director becomes entitled to receive shares under this Section 6(b) for such
calendar year. A Non-employee Director may elect to defer receipt of all or any
portion of such shares in accordance with Section 6(f). Except with respect to
any shares the director has so elected to defer, certificates representing such
shares shall be delivered to such Non-employee Director as soon as practicable
following the date as of which the shares are awarded.
(c) One-time Stock Grant. Subject to the terms and conditions of the
--------------------
Plan, each One-time Grant Participant shall be credited as of January 15, 1997,
with that number of shares (rounded up to the next whole share in the event of a
fractional share) of Common Stock equal to the present value of his or her
accrued benefit under the Retirement Plan, divided by the Fair Market Value per
share on January 15, 1997. Actual receipt of all shares credited under this
Section 6(c) shall be deferred and each One-time Grant Participant shall receive
a credit to his or her Olin Stock Account in the amount of such credit on
January 15, 1997. A One-time Grant Participant may elect in accordance with
Section 6(f) to defer receipt of all or any portion of such shares to a date or
dates following such One-time Grant Participant's Retirement Date. Except with
respect to any shares so deferred, certificates representing such shares shall
be delivered to the One-time Grant Participant (or in the event of death, to his
or her beneficiary designated pursuant to Section 6(i)) as soon as practicable
following his or her Retirement Date.
(d) Election to Receive Meeting Fees and Excess Retainer in Stock in
----------------------------------------------------------------
Lieu of Cash. Subject to the terms and conditions of the Plan, a Non-employee
- ------------
Director may elect to receive all or a portion of the director meeting fees and
all or a portion of the Excess Retainer payable in cash by the Company for his
or her service as a director for the calendar year in the form of shares of
Common Stock. Such election shall be made in accordance with Section 6(f). The
number of shares (rounded up to the next whole share in the event of a
fractional share) for a calendar year payable to a Non-employee Director who so
elects to receive all or a portion of the Excess Retainer in the form of shares
for such year shall be paid on January 1 (or in the case of proration, when the
annual stock retainer is to be paid or credited) equal to the amount of Excess
Retainer which has been elected to be paid in shares divided by the Fair Market
Value per share on January 1 of such calendar year (or in the case of a Non-
employee Director who becomes such after January 1, on the first day of the
calendar month following the day such new Non-employee Director became such).
The number of shares (rounded up to the next whole share in the event of a
fractional share) for a calendar quarter payable to a Non-employee Director who
so elects to receive meeting fees in the form of shares shall be equal to the
aggregate Fair Market Value on the Credit Date following such quarter of the
director meeting fees which have been earned in such quarter and which are
elected to be paid in
<PAGE>
6
shares. Except with respect to any shares the director has elected to defer,
certificates representing such shares shall be delivered to the Non-employee
Director as soon as practicable following the date as of which the Excess
Retainer and/or meeting fees would have been paid in cash absent an election
hereunder.
(e) Deferral of Meeting Fees and Excess Retainer. Subject to the
--------------------------------------------
terms and conditions of the Plan, a Non-employee Director may elect to defer all
or a portion of the shares payable under Section 6(d) and all or a portion of
the director meeting fees and Excess Retainer payable in cash by the Company for
his or her service as a director for the calendar year. The amount of the
Excess Retainer deferred in cash shall be credited on January 1 (or in the case
of proration, on the first day of the next calendar month following the day such
new Non-employee Director becomes such). Such election shall be made in
accordance with Section 6(f). A Non-employee Director who elects to so defer
shall have any deferred shares deferred in the form of shares of Common Stock
and any deferred cash fees and retainer deferred in the form of cash.
(f) Elections.
---------
(1) Deferrals. All elections under Sections 6(a), 6(b), 6(c), 6(d),
6(e), 6(f)(2) and 6(f)(3) shall (A) be made in writing and delivered to the
Secretary of the Company and (B) be irrevocable. All Non-employee Director
elections for payments in cash or stock or for deferrals shall be made before
January 1 of the year in which the shares of Common Stock or director's fees and
retainer are to be earned (or, in the case of an individual who becomes a Non-
employee Director during a calendar year, prior to the date of his or her
election as a director). All One-time Grant Participant elections shall be made
before December 31 of the year prior to the year in which the shares of Common
Stock are to be granted (or, in the case of an individual who becomes an Annual
Grant Participant during a calendar year, before the last day of the calendar
month of his or her becoming such). Deferral elections shall also (A) specify
the portions (in 25% increments) to be deferred and (B) specify the future date
or dates on which deferred amounts are to be paid, or the future event or events
upon the occurrence of which the deferred amounts are to be paid, and the method
of payment (lump sum or annual installments (up to 10)). However, Non-employee
Directors may elect to defer all of his or her cash dividends on the Stock
Account in whole and not in part and all of his or her interest on the Cash
Account in whole but not in part. Installment payments from an Account shall be
equal to the Account balance (expressed in shares in the case of the Stock
Account, otherwise the cash value of the Account) at the time of the installment
payment times a fraction, the numerator of which is one and the denominator of
which is the number of installments not yet paid. Fractional shares to be paid
in any installment shall be rounded up to the next whole share. In the event of
an election under Section 6(d) for director meeting fees or Excess Retainer to
be paid in shares of Common Stock, the election shall specify the portion (in
25% increments) to be so paid. Any change with respect to the terms of a Non-
employee Director's election for (A) amount or form of any
<PAGE>
7
future deferral or the form of payment of any director compensation hereunder
may be made at any time prior to such compensation being earned (and in the case
of quarterly fees, prior to the start of the quarter in which the fees are to be
earned) and (B) the timing (which timing may not accelerate a distribution date)
or amount of payments from any Account shall only be effective if made at least
six months prior to the payout and in the calendar year prior to the calendar
year payout is to occur.
(2) Olin Stock Account. On the Credit Date (or in the case of a
proration, on the first day of the appropriate calendar month), a Non-employee
Director who has elected to defer shares under Sections 6(b) or 6(e) shall
receive a credit to his or her Olin Stock Account. The amount of such credit
shall be the number of shares so deferred (rounded to the next whole share in
the event of a fractional share). A Non-employee Director may elect to defer
the cash dividends paid on his or her Stock Account in accordance with Section
6(f)(4).
(3) Cash Account. On the Credit Date or in the case of the Excess
Retainer, on the day on which the Non-employee Director is entitled to receive
such Excess Retainer, a Non-employee Director who has elected to defer cash fees
and/or the Excess Retainer under Section 6(e) in the form of cash shall receive
a credit to his or her Cash Account. The amount of the credit shall be the
dollar amount of such Director's meeting fees earned during the immediately
preceding quarterly period or the amount of the Excess Retainer to be paid for
the calendar year, as the case may be, and in each case, specified for deferral
in cash. A Non-employee Director may elect to defer interest paid on his or her
Cash Account in accordance with Section 6(f)(4).
(4) Dividends and Interest. Each time a cash dividend is paid on
Common Stock or Arch Common Stock, a Non-employee Director who has shares of
such stock credited to his or her Stock Account shall be paid on the dividend
payment date such cash dividend in an amount equal to the product of the number
of shares credited to the Non-employee Director's Olin Stock Account or Arch
Stock Account, as the case may be, on the record date for such dividend times
the dividend paid per applicable share unless the director has elected to defer
such dividend to his or her applicable Stock Account as provided herein. If the
Non-employee Director has elected to defer such dividend, he or she shall
receive a credit for such dividends on the dividend payment date to his or her
Olin Stock Account or Arch Stock Account, as the case may be. The amount of the
dividend credit shall be the number of shares (rounded to the nearest one-
thousandth of a share) determined by multiplying the dividend amount per share
by the number of shares credited to such director's applicable Stock Account as
of the record date for the dividend and dividing the product by the Fair Market
Value per share of Common Stock or Arch Common Stock, as the case may be, on the
dividend payment date. A Non-employee Director who has a Cash Account shall be
paid directly on each Credit Date interest on such account's balance at the end
<PAGE>
8
of the preceding quarter, payable at a rate equal to the Interest Rate in effect
for such preceding quarter unless such Non-employee Director has elected to
defer such interest to his or her Cash Account, in which case such interest
shall be credited to such Cash Account on the Credit Date.
(5) Payouts. Cash Accounts and the Arch Stock Account will be paid
out in cash and Olin Stock Accounts shall be paid out in shares of Common Stock
unless the Non-employee Director elects at the time the payment is due to take
the Olin Stock Account in cash. Cash amounts and certificates representing
shares credited to the Olin Stock Account shall be delivered to the Non-employee
Director as soon as practicable following the termination of the deferral and
consistent therewith.
(g) No Stock Rights. Except as expressly provided herein, the
---------------
deferral of shares of Common Stock or Arch Common Stock into a Stock Account
shall confer no rights upon such Non-employee Director, as a shareholder of the
Company or of Arch or otherwise, with respect to the shares held in such Stock
Account, but shall confer only the right to receive such shares credited as and
when provided herein.
(h) Change in Control. Notwithstanding anything to the contrary in
-----------------
this Plan or any election, in the event a Change in Control occurs, amounts and
shares credited to Cash Accounts (including interest accrued to the date of
payout) and Stock Accounts shall be promptly distributed to Non-employee
Directors except the Olin Stock Account shall be paid out in cash and not in the
form of shares of Common Stock. For this purpose, the cash value of the amount
in the Stock Account shall be determined by multiplying the number of shares
held in the Olin Stock Account or Arch Stock Account by the higher of (i) the
highest Fair Market Value of Common Stock or Arch Common Stock, as appropriate,
on any date within the period commencing 30 days prior to such Change in Control
and ending on the date of the Change in Control, or (ii) if the Change in
Control occurs as a result of a tender or exchange offer or consummation of a
corporate transaction, then the highest price paid per share of Common Stock or
Arch Common Stock, as appropriate, pursuant thereto.
(i) Beneficiaries. A Non-employee Director may designate at any time
-------------
and from time to time a beneficiary for his or her Stock and Cash Accounts in
the event his or her Stock or Cash Account may be paid out following his or her
death. Such designation shall be in writing and must be received by the Company
prior to the death to be effective.
(j) Prior Plan Accounts. As of October 2, 1997, a Participant or any
-------------------
former Non-employee Director who had an existing account under any Prior Plan
shall automatically have such account transferred, in the case of an account
denominated in cash, to the Cash Account, and in the case of an account
denominated in Olin Common Stock, to the Olin Stock Account, to be maintained
and administered pursuant to the terms and conditions of this Plan; provided
that prior annual 100- or 204-share grant
<PAGE>
9
deferrals shall be treated as deferrals of 204-share grants under this Plan, the
$25,000 annual share grant under the 1994 Plan shall be treated as deferrals
under Paragraph 6(b) hereof and deferrals of meeting fees under all Prior Plans
and of the Excess Retainer under the 1994 Plan shall be treated as deferrals
under Paragraph 6(d) hereof. Prior elections and beneficiary designations under
the 1994 Plan and this Plan shall govern this Plan unless changed subsequent to
October 2, 1997.
(k) Adjustment for Distribution. Immediately prior to the
---------------------------
Distribution, the terms of the phantom shares of Common Stock held in the Olin
Stock Account of each Non-Employee Director who will become an Arch Director
shall be amended to provide that such shares shall be paid out in cash based on
the Fair Market Value of such shares at the time of distribution to the Arch
Director. As of the Distribution Date, the Arch Stock Account of each Non-
Employee Director on such date shall be credited with the number of shares of
Arch Common Stock that the Non-Employee Director would have received in the
Distribution Date had the Non-Employee Director owned directly the number of
shares of Common Stock held in his or her Olin Stock Account. As of the
Distribution Date, the Cash Account and Stock Account of each Arch Director
(after giving effect to the adjustment described in this Section 6(k)) shall be
transferred to the Arch Directors' Plan provided that the Arch Director provides
the Company with a release, acceptable to the Committee, waiving all rights to
benefits under this Plan.
With respect to a Non-Employee Director who does not become an Arch
Director, shares credited to his or her Arch Stock Account shall be treated as
follows: (i) to the extent such shares represent a dividend on shares of Common
Stock credited pursuant to paragraph 6(a) of the Plan (or shares arising from
dividend equivalents thereon), such shares shall be deemed credited pursuant to
paragraph 6(a) of the Plan, (ii) to the extent such shares represent a dividend
on shares of Common Stock credited pursuant to paragraph 6(b) of the Plan (or
shares arising from dividend equivalents thereon), such shares shall be deemed
credited pursuant to paragraph 6(b) of the Plan, and (iii) to the extent such
shares represent a dividend on shares of Common Stock credited under paragraph
6(c) of the Plan (or shares arising from dividend equivalents thereon), such
shares shall be deemed credited pursuant to paragraph 6(c) of the Plan.
(l) Stock Account Transfers. A Non-Employee Director may elect from
-----------------------
time to time to transfer all or a portion (in 25% increments) of his or her Arch
Stock Account to his or her Olin Stock Account. The amount of phantom shares of
Common Stock to be credited to a Non-Employee Director's Olin Stock Account
shall be equal to the number of shares of Common Stock that could be purchased
if the number of phantom shares of Arch Common Stock in his or her Arch Stock
Account being transferred were sold and the proceeds reinvested in Common Stock
based on the Fair Market Value of each. Except as provided in Section 6(f)(4)
with respect to dividends or in Section 8, no additional contributions or
additions may be made to a Non-Employee Director's Arch Stock Account after the
Distribution Date.
<PAGE>
10
7. Limitations and Conditions.
(a) Total Number of Shares. The total number of shares of Common
----------------------
Stock that may be issued to Non-employee Directors under the Plan is 150,000.
Such total number of shares may consist, in whole or in part, of authorized but
unissued shares. The foregoing number may be increased or decreased by the
events set forth in Section 8 below. No fractional shares shall be issued
hereunder. In the event a Non-employee Director is entitled to a fractional
share, such share amount shall be rounded upward to the next whole share amount.
(b) No Additional Rights. Nothing contained herein shall be deemed
--------------------
to create a right in any Non-employee Director to remain a member of the Board,
to be nominated for reelection or to be reelected as such or, after ceasing to
be such a member, to receive any cash or shares of Common Stock under the Plan
which are not already credited to his or her accounts.
8. Stock Adjustments. In the event of any merger, consolidation, stock or
other non-cash dividend, extraordinary cash dividend, split-up, spin-off,
combination or exchange of shares or recapitalization or change in
capitalization, or any other similar corporate event, the Committee may make
such adjustments in (i) the aggregate number of shares of Common Stock that may
be issued under the Plan as set forth in Section 7(a) and the number of shares
that may be issued to a Non-employee Director with respect to any year as set
forth in Section 6(a) and the number of shares of Olin Common Stock or Arch
Common Stock, as the case may be, held in a Stock Account, (ii) the class of
shares that may be issued under the Plan and (iii) the amount and type of
payment that may be made in respect of unpaid dividends on shares of Arch Common
Stock or Common Stock whose receipt has been deferred pursuant to Section 6(f),
as the Committee shall deem appropriate in the circumstances. The determination
by the Committee as to the terms of any of the foregoing adjustments shall be
final, conclusive and binding for all purposes of the Plan.
9. Amendment and Termination. This Plan may be amended, suspended or
terminated by action of the Board. No termination of the Plan shall adversely
affect the rights of any Non-employee Director with respect to any amounts
otherwise payable or credited to his or her Cash Account or Stock Account.
10. Nonassignability. No right to receive any payments under the Plan or
any amounts credited to a Non-employee Director's Cash or Stock Account shall be
assignable or transferable by such Non-employee Director other than by will or
the laws of descent and distribution or pursuant to a domestic relations order.
The designation of a beneficiary under Section 6(i) by a Non-employee Director
does not constitute a transfer.
11. Unsecured Obligation. Benefits payable under this Plan shall be an
unsecured obligation of the Company.
<PAGE>
11
12. Rule 16b-3 Compliance. It is the intention of the Company that all
transactions under the Plan be exempt from liability imposed by Section 16(b) of
the 1934 Act. Therefore, if any transaction under the Plan is found not to be
in compliance with an exemption from such Section 16(b), the provision of the
Plan governing such transaction shall be deemed amended so that the transaction
does so comply and is so exempt, to the extent permitted by law and deemed
advisable by the Committee, and in all events the Plan shall be construed in
favor of its meeting the requirements of an exemption.
<PAGE>
12
Exhibit 1
Accrued Benefits Under the Retirement Plan
------------------------------------------
for Non-Employee Directors of Olin Corporation
----------------------------------------------
===========================================================================
Present Value of Accrued Benefit as of
Non-employee Director December 31, 1996
---------------------------------------------------------------------------
Richard E. Cavanagh $74,000
---------------------------------------------------------------------------
William W. Higgins $144,000
---------------------------------------------------------------------------
Suzanne Denbo Jaffe $90,000
---------------------------------------------------------------------------
Jack D. Kuehler $181,000
---------------------------------------------------------------------------
H. William Lichtenberger $144,000
---------------------------------------------------------------------------
G. Jackson Ratcliffe $138,000
---------------------------------------------------------------------------
William L. Read $253,000
---------------------------------------------------------------------------
John P. Schaefer $155,000
===========================================================================
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges (Unaudited)
(In millions)
Six Months
Ended June 30,
--------------
1999 1998
---- ----
<S> <C> <C>
Earnings:
Income from continuing operations before taxes $ 7.3 $ 62.0
Add (deduct):
Equity in income of non-consolidated affiliates -- (3.3)
Interest capitalized, net of amortization 0.2 (0.1)
Fixed charges as described below 13.3 15.8
------ ------
Total $ 20.8 $ 74.4
====== ======
Fixed Charges:
Interest expense $ 7.9 $ 9.5
Estimated interest factor in rent expense 5.4 6.3
------ ------
Total $ 13.3 $ 15.8
====== ======
Ratio of earnings to fixed charges 1.6 4.7
=== ===
</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, 1999 and is qualified in its entirety be 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 53,600
<SECURITIES> 39,100
<RECEIVABLES> 200,300
<ALLOWANCES> 0
<INVENTORY> 208,800
<CURRENT-ASSETS> 523,100
<PP&E> 1,585,800
<DEPRECIATION> (1,123,100)
<TOTAL-ASSETS> 1,055,400
<CURRENT-LIABILITIES> 264,600
<BONDS> 229,800
0
0
<COMMON> 45,300
<OTHER-SE> 288,000
<TOTAL-LIABILITY-AND-EQUITY> 1,055,400
<SALES> 619,600
<TOTAL-REVENUES> 619,600
<CGS> 534,200
<TOTAL-COSTS> 534,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,900
<INCOME-PRETAX> 7,300
<INCOME-TAX> 2,900
<INCOME-CONTINUING> 4,400
<DISCONTINUED> 4,400
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,800
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.19
</TABLE>
