<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Form 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-1070
Olin Corporation
(Exact name of registrant as specified in its charter)
Virginia 13-1872319
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
06856-4500
501 Merritt 7 (Zip Code)
P.O. Box 4500
Norwalk, CT
(Address of principal executive
offices)
Registrant's telephone number, including area code: (203) 750-3000
---------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- -----------------------
<S> <C>
Common Stock, New York Stock Exchange
par value $1 per share Chicago Stock Exchange
Pacific Exchange, Inc.
Series A Participating Cumulative Preferred New York Stock Exchange
Stock Purchase Rights Chicago Stock Exchange
Pacific Exchange, Inc.
</TABLE>
---------------
Securities registered pursuant to Section 12(g) of the Act: None
---------------
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 .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---------------
As of January 31, 2000, the aggregate market value of registrant's common
stock, par value $1 per share ("Common Stock") held by non-affiliates of
registrant was approximately $781,856,000.
As of January 31, 2000, 45,080,744 shares of the registrant's common stock
were outstanding.
---------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference in this Form
10-K as indicated herein:
<TABLE>
<CAPTION>
Part of 10-K
Document into which incorporated
-------- -----------------------
<S> <C>
Proxy Statement relating to Olin's 2000
Annual Meeting of Shareholders Part III
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART I
Item 1. Business
General
Olin Corporation is a Virginia corporation, incorporated in 1892, having its
principal executive offices in Norwalk, Connecticut. It is a manufacturer
concentrated in three business segments: Chlor Alkali Products, Metals and
Winchester. Chlor Alkali Products include chlorine and caustic soda, sodium
hydrosulfite and high strength bleach products. Metals products include copper
and copper alloy sheet, strip, welded tube and fabricated parts, and stainless
steel strip. The Metals segment also includes a network of metals service
centers in the continental U.S. and Puerto Rico. Winchester products include
sporting ammunition, canister powder, reloading components, small caliber
military ammunition and industrial cartridges.
The terms "Olin" and the "Company" mean Olin Corporation and its
subsidiaries, unless the context indicates otherwise.
Effective February 8, 1999, Olin distributed to its shareholders all of the
outstanding common stock of Arch Chemicals, Inc. ("Arch Chemicals"), a
Virginia corporation formed to hold all of Olin's specialty chemical
businesses (the "Spin-Off").
Products and Services
The following is a list of the principal and certain other products and
services provided by Olin and its affiliates after the Spin-Off within each
industry segment. Principal products on the basis of annual sales are
highlighted in bold face.
CHLOR ALKALI PRODUCTS
<TABLE>
<CAPTION>
Major Raw Materials
Products & Plants & & Components for
Services Major End Uses Facilities* Products/Services
---------- --------------------------------- ---------------- -------------------
<S> <C> <C> <C>
Chlorine/ Pulp & paper processing, chemical Augusta, GA salt,
caustic soda manufacturing, water Charleston, TN electricity
purification, manufacture of McIntosh, AL
vinyl chloride, bleach, swimming Niagara Falls,
pool chemicals & urethane NY
chemicals
- ------------------------------------------------------------------------------------------
Sodium Paper, textile & clay bleaching Augusta, GA caustic soda,
Hydrosulfite Charleston, TN sulfur dioxide
Salto, Brazil
- ------------------------------------------------------------------------------------------
HyPure(TM) Industrial & institutional Charleston, TN chlorine,
products cleaners, textile bleaching caustic soda
</TABLE>
- -------------------------------------------------------------------------------
* If site is not operated by Olin or a majority-owned, direct or indirect
subsidiary, name of joint venture, affiliate or operator is indicated.
Sites manufacture, distribute or market one or more of the identified
products or services.
2
<PAGE>
METALS
<TABLE>
<CAPTION>
Major Raw
Materials
Products & Plants & & Components for
Services Major End Uses Facilities* Products/Services
---------- --------------------------------- ---------------- -----------------
<S> <C> <C> <C>
Copper & copper Electronic connectors, lead Bryan, OH copper, zinc &
alloy sheet & frames, electrical components, East Alton, IL other nonferrous
strip (standard & communications, automotive, Indianapolis, IN metals
high performance) builders' hardware, coinage, Waterbury, CT
ammunition Iwata, Japan
(Yamaha-Olin
Metal
Corporation)
- -----------------------------------------------------------------------------------------
Network of metals Electronic connectors, electrical Allentown, PA copper & copper
service centers components, communications, Alliance, OH alloy sheet,
automotive, builders' hardware, Caguas, PR strip, tube &
household products Carol Stream, IL steel & aluminum
Warwick, RI strip
Watertown, CT
Yorba Linda, CA
- -----------------------------------------------------------------------------------------
Posit-bond(R) clad Coinage strip & blanks East Alton, IL cupronickel,
metal copper &
aluminum
- -----------------------------------------------------------------------------------------
Rolled copper Printed circuit boards, Waterbury, CT copper, zinc &
foil, electrical & electronic, other nonferrous
Copperbond(R) automotive metals,
foil, stainless stainless steel
steel strip
- -----------------------------------------------------------------------------------------
Copper alloy Utility condensers, industrial Cuba, MO copper, zinc &
welded tube heat exchangers, refrigeration & other nonferrous
air conditioning, builders' metals
hardware, automotive
- -----------------------------------------------------------------------------------------
Fabricated Builders' hardware, cartridge East Alton, IL brass &
products cases, shaped charge cones, stainless steel
transportation, household & strip
recreational products
- -----------------------------------------------------------------------------------------
High performance, All industry market segments; New Bedford, MA all metals,
high reliability, computer, communications, metal alloys,
hermetic metal medical, industrial, metal matrix
packages for instrumentation, automotive, composites,
Microelectronics consumer, aerospace and military special alloys
Industry and glasses
</TABLE>
- --------------------------------------------------------------------------------
* If site is not operated by Olin or a majority-owned, direct or indirect
subsidiary, name of joint venture, affiliate or operator is indicated. Sites
manufacture, distribute or market one or more of the identified products or
services.
3
<PAGE>
WINCHESTER
<TABLE>
<CAPTION>
Major Raw
Materials
Products & Plants & & Components for
Services Major End Uses Facilities* Products/Services
---------- --------------------------------- ---------------- -----------------
<S> <C> <C> <C>
Winchester(R) Hunters & recreational shooters, East Alton, IL brass, lead,
sporting law enforcement agencies Geelong, steel, plastic,
ammunition Australia propellant,
(shot-shells, explosives
small caliber
centerfire &
rimfire
ammunition)
- ----------------------------------------------------------------------------------------
Small caliber Infantry and mounted weapons East Alton, IL brass, lead,
military propellant,
ammunition explosives
- ----------------------------------------------------------------------------------------
Government-owned Maintenance and operation of U.S. Independence, MO brass, lead,
arsenal Army small caliber military propellant,
operation (GOCO) ammunition production plant explosives,
government-
supplied
components
------------------------------------------------------------------------
Maintenance of U.S. Army laid- Baraboo, WI subcontracted &
away production plant government-
supplied
components
- ----------------------------------------------------------------------------------------
Industrial Maintenance applications in power East Alton, IL brass, lead,
products (8 & concrete industries, powder- Geelong, plastic,
gauge loads & actuated tools in construction Australia propellant,
powder-actuated industry explosives
tool loads)
</TABLE>
- --------------------------------------------------------------------------------
* If site is not operated by Olin or a majority-owned, direct or indirect
subsidiary, name of joint venture, affiliate or operator is indicated. Sites
manufacture, distribute or market one or more of the identified products or
services.
4
<PAGE>
1999 Developments
As noted above, Olin distributed its specialty chemical businesses to its
shareholders as a separate public company, Arch Chemicals, effective on
February 8, 1999, when Olin distributed to its shareholders one share of Arch
Chemicals Common Stock for each two shares of Olin Common Stock held of record
on February 1, 1999. The businesses transferred by Olin to Arch Chemicals fell
within three segments: microelectronic chemicals, water chemicals and
performance chemicals.
Winchester has operated the U.S. Army's Lake City small caliber ammunition
plant in Independence, Missouri under a five-year contract that expired at the
end of 1999. The contract represented approximately $5 million in annual
pretax profits during 1999. The Company was one of several bidders for a new
ten-year, fixed-price contract. On July 30, 1999, the Department of the Army
awarded this contract to a competitor. Olin has appealed this award, and a
decision is expected during the first quarter of 2000. If the Company
ultimately loses the appeal, it will continue operating the plant until at
least the end of the first quarter of 2000.
International Operations
Olin has sales offices and subsidiaries in various countries which support
the worldwide export of products from the United States as well as overseas
production facilities. In addition, Olin has manufacturing interests in
Brazil.
Yamaha-Olin Metal Corporation, a joint venture with Yamaha Corporation,
manufactures high-performance copper alloys in Japan for sale to the
electronics industry throughout the Far East. An Olin subsidiary loads and
packs sporting and industrial ammunition in Australia. See the Note "Segment
Information" of the Notes to Consolidated Financial Statements in Item 8, for
geographic segment data which are incorporated by reference.
Customers and Distribution
During 1999, no single customer accounted for more than 3.4% of Olin's total
consolidated sales. Products which Olin sells to industrial or commercial
users or distributors for use in the production of other products constitute a
major part of Olin's total sales. Some of its products, such as sporting
ammunition and brass, are sold to a large number of users or distributors,
while others, such as chlorine and caustic soda, are sold in substantial
quantities to a relatively small number of industrial users.
Most of Olin's products and services are marketed primarily through its
sales force and sold directly to various industrial customers, the U.S.
Government and its prime contractors, to wholesalers and other distributors.
Chlor Alkali Products. Principal customers of Olin's Chlor Alkali products
include the pulp and paper industries, vinyl chloride and urethane
manufacturers and household and industrial cleaner suppliers.
Metals. Principal customers of Olin's copper and copper alloy strip, sheet
and welded tube include producers of electrical and electronic equipment,
builders' hardware and appliances, the plumbing, automotive and air-
conditioning industries and manufacturers of a variety of consumer goods.
Olin manufactures cartridge brass for its ammunition business and for other
ammunition makers. Olin also serves numerous high-technology markets through a
thin-gauge reroll operation that produces stainless steels, high-temperature
alloys and glass sealing alloys, in addition to copper and copper alloys.
Posit-Bond(R) clad metal has made Olin a major supplier of metal to the U.S.
Mint. Olin also sells various alloys to foreign governments for coinage
purposes.
5
<PAGE>
The Metals business is also focused on the electronics market, providing
high performance and high-quality materials needed by the electronics industry
and other advanced technology customers. These materials include Olin-
developed proprietary alloys and Copperbond(R) treated copper foil marketed to
the printed circuit industry.
Fabricated products are principally sold to ammunition manufacturers, the
U.S. Armed Forces, building product suppliers, household product manufacturers
and automotive manufacturers.
Winchester. The principal users of the Winchester products are recreational
shooters, hunters, law enforcement agencies, the power and concrete
industries, the construction industry, the U.S. Armed Forces and certain
allied governments.
Because Olin engages in some government contracting activities and makes
sales to the U.S. Government, it is subject to extensive and complex U.S.
Government procurement laws and regulations. These laws and regulations
provide for ongoing government audits and reviews of contract procurement,
performance and administration. Failure to comply, even inadvertently, with
these laws and regulations and with laws governing the export of munitions and
other controlled products and commodities could subject Olin or one or more of
its businesses to civil and criminal penalties, and under certain
circumstances, suspension and debarment from future government contracts and
the exporting of products for a specified period of time.
Competition
Olin is in active competition with businesses producing the same or similar
products, as well as, in some instances, with businesses producing different
products designed for the same uses. With respect to certain product groups,
such as ammunition and copper alloys, and with respect to certain chlor alkali
products, Olin is among the large manufacturers or distributors in the United
States. Olin encounters competition in price, delivery, service, performance,
product innovation, product recognition and quality, depending on the product
involved.
Employees
As of December 31, 1999, Olin had approximately 6,700 employees (excluding
approximately 1,000 employees at Government-owned, contractor-operated
facilities), approximately 6,500 of whom were working in the United States and
approximately 200 of whom were working in foreign countries. A majority of the
hourly-paid employees are represented, for purposes of collective bargaining,
by various labor unions. Although some labor contracts extend for as long as
five years, others are for shorter periods and therefore must be re-negotiated
more frequently. Five labor contracts expire in December 2000 for employees at
the Company's East Alton, Illinois facility, the headquarters of the Brass and
Winchester Divisions. While relations between Olin and its employees and their
various representatives are generally considered satisfactory, and no major
work stoppages have occurred in the last three years, there can be no
assurance that new labor contracts can be concluded without work stoppages.
Research Activities; Patents
Olin's research activities are conducted on a product-group basis at a
number of facilities. Company-sponsored research expenditures were
approximately $9 million during 1999, $10 million during 1998 and $8 million
during 1997.
Olin owns, or licenses, a number of patents, patent applications and trade
secrets covering its products and processes. Olin believes that, in the
aggregate, the rights under such patents and licenses are important to its
operations, but does not consider any patent or license or group thereof
6
<PAGE>
related to a specific process or product to be of material importance when
viewed from the standpoint of Olin's total business.
Raw Materials and Energy
Olin purchases the major portion of its raw material requirements. The
principal basic raw materials purchased by Olin for its production of chlor
alkali products are salt, electricity, and sulfur. Copper, zinc and various
other nonferrous metals are required for the metals business. Lead, brass and
propellant are the principal raw materials used in the Winchester business.
Olin's principal basic raw materials are typically purchased pursuant to
multiyear contracts. In the manufacture of ammunition, Olin uses a substantial
percentage of its own output of cartridge brass. Additional information with
respect to specific raw materials is set forth in the table above under the
caption "Products and Services."
Electricity is the predominant energy source for Olin's manufacturing
facilities. Most of Olin's facilities are served by utilities which generate
electricity principally from coal, hydro and nuclear power.
Environmental and Toxic Substances Controls
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
($ in
millions)
<S> <C> <C> <C>
Cash Outlays:
Remedial and Investigatory Spending (Charged to Reserve). $21 $20 $31
Capital Spending......................................... 3 2 2
Plant Operations......................................... 17 17 15
--- --- ---
Total Cash Outlays......................................... $41 $39 $48
=== === ===
</TABLE>
The establishment and implementation of federal, state and local standards
to regulate air, water and land quality has affected and will continue to
affect substantially all of Olin's manufacturing locations. Federal
legislation providing for regulation of the manufacture, transportation, use
and disposal of hazardous and toxic substances has imposed additional
regulatory requirements on industry, particularly the chemicals industry. In
addition, implementation of environmental laws, such as the Resource
Conservation and Recovery Act and the Clean Air Act, has required and will
continue to require new capital expenditures and will increase operating
costs. Olin is enrolled in the United States Environmental Protection Agency's
Voluntary Industrial Toxics Reduction Program. Olin employs waste minimization
and pollution prevention programs at its manufacturing sites.
Olin is party to various governmental and private environmental actions
associated with waste disposal sites and manufacturing facilities. 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 efforts were material to operating results in the
past three years and may be material to net income in future years. Such
charges to income were $17 million, $16 million and $17 million in 1999, 1998
and 1997, respectively.
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 years. Cash outlays for normal plant operations for the
disposal of waste and the operation and maintenance of pollution control
equipment and facilities to ensure compliance with mandated and voluntarily
imposed environmental quality standards were charged to income. Historically,
Olin has funded its environmental capital expenditures through cash flow from
operations and expects to do so in the future.
7
<PAGE>
Olin's estimated environmental liability is attributable to 51 sites, 16 of
which were on the National Priority List ("NPL"). Ten sites accounted for
approximately 80% of such liability and, of the remaining sites, no one site
accounted for more than 2% of such liability. One of these ten sites is in the
investigatory stage of the remediation process. In this stage, remedial
investigation and feasibility studies are conducted by either Olin, the United
States Environmental Protection Agency ("EPA") or other potentially
responsible parties ("PRPs") and a Record of Decision ("ROD") or its
equivalent has not yet been issued. At another six of the ten sites, a ROD or
its equivalent has been issued by either the EPA or responsible state agency
and Olin, either alone or as a member of a PRP group, was engaged in
performing the remedial measures required by that ROD. At the remaining three
of the ten sites, part of the site is subject to a ROD and another part is
still in the investigative stage of remediation. All ten sites were either
former manufacturing facilities or waste sites containing contamination
generated by those facilities.
The Company's consolidated balance sheets included liabilities for future
environmental expenditures to investigate and remediate known sites amounting
to $125 million at December 31, 1999 and $129 million at December 31, 1998, of
which $100 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.
Total environmental-related cash outlays for 2000 are estimated to be $47
million, of which $25 million is expected to be spent on remedial and
investigatory efforts, $5 million on capital projects and $17 million on
normal plant operations.
Annual environmental-related cash outlays for site investigation and
remediation, capital projects and normal plant operations are expected to
range between $40-$50 million over the next several years. While Olin 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 Olin'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 Olin. At December 31, 1999, Olin had estimated
additional environmental contingent liabilities of $40 million.
See also Item 3, "Legal Proceedings" below, the Note "Environmental" of the
Notes to Consolidated Financial Statements contained in Item 8, and Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Item 2. Properties
Olin has manufacturing sites at 17 separate locations in 13 states and
Puerto Rico and two manufacturing sites in two foreign countries. Most
manufacturing sites are owned although a number of small sites are leased.
Listed in the table set forth under the caption "Products and Services" are
the locations at or from which Olin's products and services are manufactured,
distributed or marketed by segment.
Olin leases warehouses, terminals and distribution offices and space for
executive and branch sales offices and service departments throughout the
country and overseas.
8
<PAGE>
Item 3. Legal Proceedings
(a) In 1987, the EPA issued a ROD recommending remedial actions and
ecological studies with respect to mercury contamination at the site of Olin's
former mercury cell Chlor Alkali plant in Saltville, Virginia. The EPA, under
Section 122 of CERCLA, asked Olin to undertake the work called for in the ROD,
and Olin agreed to do so. In November 1988, Olin submitted to the EPA a work
plan for remedial action, including additional stormwater run-off control
around Pond #5 and construction of a wastewater treatment plant for the
outfall from Pond #5. Olin then implemented that remedial action.
Olin completed the remedial investigation and feasibility study of the
former chlorine plant site, including Ponds # 5 and 6, in 1994. The EPA issued
a ROD in 1995, calling for covering the former waste ponds, treatment of run-
off from the ponds, and additional monitoring and investigation. In 1997, Olin
negotiated a consent decree with the EPA under which Olin is implementing the
ROD. The ROD does not address remediation of the former chlorine plant site or
the Holston River, which are the subject of the additional studies.
Olin has completed clean-up activities at two small locations near Olin's
former plant site, the Graveyard Dump Site and the former power plant.
In October 1996, Olin met with the site's Natural Resources Trustees at the
Trustee's request. At that time, Olin indicated a willingness to cooperate in
assessing whether there are any natural resource damages to the Holston River
associated with releases from the site.
Olin believes that any liability incurred by it in this matter will not be
materially adverse to its financial condition or liquidity. See "Environmental
Matters" contained in Item 7--Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(b) As part of the continuing environmental investigation by federal, state
and local governments of waste disposal sites, Olin has entered into a number
of settlement agreements requiring it to contribute to the cost of the
investigation and cleanup of a number of sites. This process of investigation
and cleanup is expected to continue. See "Environmental Matters" contained in
Item 7 --Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(c) Olin and its subsidiaries are defendants in various other legal actions
arising out of their normal business activities, none of which is considered
by management to be material.
9
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the three
months ended December 31, 1999.
Executive Officers of Olin Corporation as of March 1, 2000
<TABLE>
<CAPTION>
Served as
an Olin
Officer
Name and Age Office Since
------------ ------ ---------
<S> <C> <C>
Donald W. Griffin (63)... Chairman of the Board, President and Chief 1983
Executive Officer
Anthony W. Ruggiero (58). Executive Vice President and Chief 1995
Financial Officer
Peter C. Kosche (57)..... Senior Vice President, Corporate Affairs 1993
George B. Erensen (56)... Vice President and General Tax Counsel 1990
Thomas M. Gura (54)...... Vice President and President, Winchester 1997
Division
Johnnie M. Jackson, Jr. Vice President, General Counsel and 1995
(54).................... Secretary
John L. McIntosh (45).... Vice President and President, Chlor Alkali 1999
Products Division
Janet M. Pierpont (52)... Vice President and Treasurer 1990
Joseph D. Rupp (49)...... Vice President and President, Brass 1996
Division
Mary E. Gallagher (34)... Controller 1999
</TABLE>
No family relationship exists between any of the above named executive
officers or between any of them and any Director of Olin. Such officers were
elected to serve as such, subject to the By-laws, until their respective
successors are chosen.
Each of the above-named executive officers, except M.E. Gallagher, T.M.
Gura, J.L. McIntosh, and J.D. Rupp, has served Olin as an executive officer
for not less than the past five years.
Mary E. Gallagher was elected Controller on April 29, 1999. Prior to that
time, and since she joined the Corporation in May 1996, she served as
Director, Accounting and Financial Reporting. Prior to joining the
Corporation, she served as a Senior Manager with KPMG LLP.
Thomas M. Gura was elected a Corporate Vice President on September 25, 1997.
He was appointed President of the Winchester Division on August 19, 1997.
Prior to that time, he served as Vice President, Marketing and Sales of the
Brass Division.
John L. McIntosh was elected a Corporate Vice President on February 1, 1999
and also serves as President, Chlor Alkali Products Division. Prior to that
time, since 1997, he served as Vice President, Operations for Olin's specialty
chemicals operations. He also served as Vice President, Manufacturing and
Engineering for Chlor Alkali and was Director of Manufacturing, Engineering
and Purchasing for that division from 1991 through 1997.
Joseph D. Rupp was elected a Corporate Vice President on January 1, 1996 and
also serves as President, Brass Division. Prior to that time, since 1985, he
served as Vice President, Manufacturing and Engineering for the Brass
Division.
10
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
As of January 31, 2000, there were approximately 8,570 record holders of
Olin Common Stock.
Olin Common Stock is traded on the New York Stock Exchange, Chicago Stock
Exchange and Pacific Exchange, Inc.
Set forth in the Note "Other Financial Data" to the Notes to Consolidated
Financial Statements in Item 8 is information concerning the high and low
sales prices of Olin Common Stock and dividends paid on Olin Common Stock
during each quarterly period in 1999 and 1998.
11
<PAGE>
Item 6. Selected Financial Data
Seven-Year Financial Summary
<TABLE>
<CAPTION>
($ and shares in millions, 1999 1998 1997 1996 1995 1994 1993
except per share data) ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations
Sales...................... $ 1,315 $ 1,426 $ 1,499 $ 1,758 $ 1,827 $ 1,620 $ 1,446
Cost of Goods Sold......... 1,135 1,161 1,203 1,396 1,482 1,359 1,386
Selling and Administration. 120 123 132 155 153 139 135
Research and Development... 9 10 8 20 17 18 21
Interest Expense........... 16 17 24 27 33 27 29
Interest and Other Income
(Expense)................. (8) 7 15 13 (5) -- --
Gain (Loss) on Sales and
Restructurings of
Businesses and Spin-Off
Costs..................... -- (63) -- 179 -- -- (26)
------- ------- ------- ------- ------- ------- -------
Income (Loss) from
Continuing Operations
Before Taxes.............. 27 59 147 352 137 77 (151)
Income Tax Provision
(Benefit)................. 10 21 50 125 47 26 (60)
------- ------- ------- ------- ------- ------- -------
Income (Loss) from
Continuing Operations..... 17 38 97 227 90 51 (91)
Discontinued Operations.... 4 40 56 53 50 40 (1)
------- ------- ------- ------- ------- ------- -------
Net Income (Loss).......... 21 78 153 280 140 91 (92)
======= ======= ======= ======= ======= ======= =======
Financial Position
Working Capital............ 252(/1/) 225(/1/) 273(/1/) 385(/1/) 24 88 (15)
Property, Plant and
Equipment, Net............ 468 475 517 400 580 540 534
Total Assets............... 1,063 1,589 1,707 2,118 1,963 1,749 1,685
Capitalization:
Short-Term Debt........... 1(/1/) 1(/1/) 8(/1/) 137(/1/) 122 29 113
Long-Term Debt............ 229(/1/) 230(/1/) 262(/1/) 271(/1/) 406 418 449
Shareholders' Equity...... 309 790 879 946 841 749 596
------- ------- ------- ------- ------- ------- -------
Total Capitalization....... 539 1,021 1,149 1,354 1,369 1,196 1,158
======= ======= ======= ======= ======= ======= =======
Per Share Data
Net Income (Loss):
Basic:
Continuing Operations... 0.36 0.79 1.91 4.30 1.71 0.87 (2.82)
Discontinued Operations. 0.09 0.85 1.11 1.04 1.04 0.96 (0.03)
------- ------- ------- ------- ------- ------- -------
Net Income (Loss)....... 0.45 1.64 3.02 5.34 2.75 1.83 (2.85)
======= ======= ======= ======= ======= ======= =======
Diluted:
Continuing Operations... 0.36 0.79 1.90 4.26 1.70 0.87 (2.82)
Discontinued Operations. 0.09 0.84 1.10 1.01 0.97 0.96 (0.03)
------- ------- ------- ------- ------- ------- -------
Net Income (Loss)....... 0.45 1.63 3.00 5.27 2.67 1.83 (2.85)
======= ======= ======= ======= ======= ======= =======
Cash Dividends:
Common.................... 0.90 1.20 1.20 1.20 1.20 1.10 1.10
ESOP Preferred (annual
rate).................... -- -- -- 5.97 5.97 5.97 5.97
Series A Preferred
(annual rate)............ -- -- -- -- 3.64 3.64 3.64
Shareholders' Equity(/2/).. 6.87 17.25 17.98 18.13 17.03 15.43 13.62
Market Price of Common
Stock:
High...................... 19 7/8 49 5/16 51 3/8 48 38 5/8 30 1/8 25 1/4
Low....................... 9 1/2 23 7/8 35 3/8 34 7/8 24 1/4 23 20
Year End.................. 19 13/16 28 5/16 46 7/8 37 5/8 37 1/8 25 3/4 24 3/4
Other
Capital Expenditures....... 73 78 76 74 116 80 80
Depreciation............... 78 76 76 84 77 78 74
Common Dividends Paid...... 41 58 61 60 57 44 42
Purchases of Common Stock.. 11 112 163 -- -- -- --
Current Ratio.............. 2.0 1.8 1.8 1.6 1.0 1.2 1.0
Total Debt to Total
Capitalization(/3/)....... 42.7% 22.6% 23.5% 30.0% 37.9% 36.5% 46.8%
Effective Tax Rate......... 37.0% 35.6% 34.0% 35.5% 34.3% 33.2% 40.0%
Average Common Shares
Outstanding............... 45.4 47.9 50.5 50.0 47.6 41.0 38.2
Shareholders............... 8,600 9,200 10,600 11,300 12,000 12,100 13,000
Employees(/4/)............. 6,700 6,400 6,600 6,200 7,200 7,500 7,100
</TABLE>
- --------
In December 1996, the Company sold its isocyanates business for $565 in
cash. 1996 and prior include the operating results of the isocyanates
business.
(1) Working Capital includes $21 ($50 in 1998, $157 in 1997, $518 in 1996) of
Cash and Cash Equivalents and $25 ($25 in 1998, $28 in 1997, $87 in 1996)
of Short-Term Investments in 1999.
(2) In 1994 and 1993, calculation is based on common shares and Series A
Conversion Preferred Stock outstanding.
(3) Excluding reduction to equity for the Employee Stock Ownership Plan from
1993 through 1996.
(4) Employee data exclude employees who work at government-owned/contractor-
operated facilities.
12
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Consolidated Results of Operations
<TABLE>
<CAPTION>
1999 1998(/1/) 1997
------------ ------------ ------------
($ in millions, except per share data)
<S> <C> <C> <C>
Sales................................. $ 1,315 $ 1,426 $ 1,499
Gross Margin.......................... 180 265 296
Selling and Administration............ 120 123 132
Interest Expense, net................. 14 14 14
Loss on Sale and Restructurings of
Businesses and Spin-Off Costs........ -- (63) --
Income from Continuing Operations..... 17 38 97
Net Income............................ 21 78 153
Diluted Earnings Per Common Share:
Income from Continuing Operations... $ 0.36 $ 0.79 $ 1.90
Net Income.......................... $ 0.45 $ 1.63 $ 3.00
</TABLE>
- --------
(1) Includes the charge for the sale of the microelectronic packaging unit at
Manteca, CA and the restructuring of the rod, wire and tube businesses at
Indianapolis, IN ($42 pretax, $26 after tax and $0.55 diluted earnings per
share) and non-recurring costs associated with the Spin-Off of Arch
Chemicals ($21 pretax, $15 after tax and $0.32 diluted earnings per
share).
Business Background
The Company's operations are concentrated in three businesses: Chlor Alkali,
Metals and Winchester. All three are capital intensive manufacturing
businesses with growth rates closely tied to the general economy. While each
segment has a commodity element to it, where the Company's ability to
influence pricing is quite limited, the portion of the business that is
strictly commodity varies by Division. Chlor Alkali is a commodity business
where all supplier products are identical and price is the major supplier
selection criteria. The Company has little or no ability to influence prices
in this large, global commodity market. Cyclical price swings, driven by
changes in supply/demand, can be abrupt and significant and, given Olin's
Chlor Alkali capacity, can lead to very significant changes in overall Company
profitability. While a majority of Metals sales are of a commodity nature,
this business has a significant volume of specialty engineered products
targeted for specific end use markets. In these applications, technical
capability and performance differentiate the product and play a significant
role in product selection and thus price is not the only selection criteria.
Winchester also has a commodity element to its business but a majority of
Winchester ammunition is sold as consumer branded product where there is the
opportunity to differentiate certain offerings through innovative new product
development and enhanced product performance. While competitive pricing versus
other branded ammunition products is important, it is again not the only
factor in product selection.
1999 Compared to 1998
Sales decreased 8% due to lower Electrochemical Unit ("ECU") prices and
lower metal values, which were offset in part by higher volumes across all
business segments. Also, sales were lower due to the shutdown of the rod, wire
and tube businesses at Indianapolis, IN, in the fourth quarter of 1998.
The gross margin percentage in 1999 was 14% compared to 19% in 1998. The
decrease in the gross margin percentage was due to the lower ECU prices offset
in part by higher volumes and improved product mix in the Brass and Winchester
segments.
13
<PAGE>
Selling and Administration as a percentage of sales was 9% in 1999 and 1998.
Selling and Administration decreased $3 million from $123 million in 1998 to
$120 million in 1999, primarily due to lower pension related costs.
In 1999, losses of non-consolidated affiliates were $11 million compared to
break-even in 1998 due to the impact of lower ECU prices on the Company's
Sunbelt Chlor Alkali joint venture.
Interest expense, net of interest income in 1999, was equal to 1998. Lower
interest expense as a result of the repayment of debt in June of 1998 was
offset by lower interest income on lower average cash, cash equivalents and
short-term investment balances.
The effective tax rate increased from 35.6% to 37.0%. This increase was
attributable to higher non-deductible expenses related to the Company-owned
life insurance programs and unrealized state income tax benefits, partially
offset by increased benefits related to foreign sales.
In the third quarter of 1998, the Company recorded a $42 million pretax
charge ($0.55 diluted EPS) related to the sale of the microelectronic
packaging unit at Manteca, CA for $4 million in cash, and the restructuring of
the rod, wire and tube businesses at Indianapolis, IN.
On February 8, 1999, the Company completed the Spin-Off of its specialty
chemicals businesses as 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.
In the fourth quarter of 1998, the Company recorded a $21 million pretax
charge ($0.32 diluted EPS) for non-recurring costs associated with the Spin-
Off (primarily severance, investment banking and legal fees).
1998 Compared to 1997
Sales decreased 5% due to a decrease in selling prices and lower metal
values. The decrease in selling prices was primarily related to lower ECU
prices in the Chlor Alkali products segment.
Gross margin percentage was 19% in 1998 compared to 20% in 1997 due to the
decrease in Chlor Alkali margins as a result of lower ECU prices.
Selling and Administration as a percentage of sales in 1998 and 1997 was 9%.
Selling and Administration was $9 million lower than in 1997 due to lower
corporate administrative expenses, primarily pension costs and management
incentive compensation.
Interest expense, net of interest income, was equal to 1997. Lower interest
expense was due to the repayment of debt in 1997 and 1998 offset by less
interest income due to lower average cash, cash equivalents and short-term
investment balances.
The effective tax rate increased to 35.6% from 34.0% due to lower foreign
tax credits and higher non-deductible expenses related to the spin-off costs.
In 1998, the Company recorded a $63 million pretax charge for the loss on
the sale and restructuring of business and spin-off costs, described above.
Segment Operating Results
Segment operating income is defined as earnings before interest, other
income and income taxes and includes the operating results of non-consolidated
affiliates. Segment operating income includes an allocation of corporate
operating expenses. Segment operating results in 1998 exclude the charge
14
<PAGE>
for the sale of the microelectronic packaging unit at Manteca, CA and the
restructuring of the rod, wire and tube businesses at Indianapolis, IN ($42
million pretax) and non-recurring costs associated with the Spin-Off of Arch
Chemicals ($21 million pretax).
Chlor Alkali Products
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
($ in
millions)
<S> <C> <C> <C>
Sales..................................................... $273 $366 $411
Operating (Loss) Income................................... (58) 55 99
</TABLE>
1999 Compared to 1998
Sales and operating results in 1999 were lower than 1998 due to lower ECU
pricing offset in part by higher volumes. ECU prices in 1999 were in the $225
range compared to the $340 range in 1998. Sales volumes were higher and
operating rates in 1999 averaged about 95% compared with about 90% in 1998.
Lower demand as a result of the Asian and the Latin American financial crisis
and increased worldwide capacity resulted in a severe downturn in the industry
pricing cycle beginning in late 1997, reaching a 25 year low in the third
quarter of 1999, and then moving up in the fourth quarter of 1999.
1998 Compared to 1997
Sales were lower than 1997 due to lower pricing and lower volumes. Including
the Company's share of the sales volumes from the Sunbelt joint venture, which
is accounted for on an equity basis, total volumes were higher than 1997.
Operating income decreased due to the lower pricing, lower operating rates,
and higher manufacturing costs. Average ECU prices in 1998 were in the $340
range compared to the $360 range in 1997. Operating rates in 1998 were in the
90% range compared with the 100% range in 1997. Lower operating rates were a
result of lower demand for chlorine as a result of the Asian financial crisis,
unusually hot weather in the southeast, which caused higher electricity costs,
and restricted salt availability. Manufacturing costs were higher as a result
of the lower operating rates, higher depreciation and higher power costs.
Metals
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
($ in
millions)
<S> <C> <C> <C>
Sales....................................................... $761 $799 $836
Operating Income............................................ 77 64 62
</TABLE>
1999 Compared to 1998
Sales in 1999 were down 5% due to lower metal values and the loss of sales
associated with the shutdown of the rod, wire and tube businesses at the end
of 1998 offset in part by higher volumes. Strip volumes were higher as a
result of the strength in the automotive, housing, ammunition and coinage
markets. Higher demand from the distribution market improved A.J. Oster
Company's ("Oster") performance. Operating income increased due to the
shutdown of the unprofitable rod, wire and tube businesses, overall higher
volumes in the retained businesses and favorable sales mix.
15
<PAGE>
1998 Compared to 1997
Sales were down 4% due to lower metal values offset in part by higher
volumes. Strip volumes were up as a result of strong housing, automotive, and
coinage markets. Operating income was higher due to lower administrative
expenses, higher strip volumes and improved earnings at Oster. At
Indianapolis, profits were lower due to higher costs in the rod, wire and tube
businesses.
Winchester
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
($ in
millions)
<S> <C> <C> <C>
Sales...................................................... $281 $261 $252
Operating Income (Loss).................................... 21 13 (4)
</TABLE>
1999 Compared to 1998
Sales were up 8% due to higher volumes offset in part by lower selling
prices. Commercial sales were higher due to higher industry-wide consumer
demand partially driven by Y2K concerns and improved market share. Contract
sales were lower than the prior year due to reduced demand in the military
product categories. Operating income was higher due to increased sales volumes
and lower material costs offset in part by the lower selling prices.
In 1999, Winchester was the operator of the U.S. Army's Lake City small
caliber ammunition plant in Independence, MO. The five-year contract expired
at the end of 1999 and represented approximately $5 million in annual pretax
profits during the year. The Company was one of several bidders on a new ten-
year, fixed-price contract to commence at the end of the current contract. On
July 30, 1999, the Department of the Army awarded this contract to a
competitor. Olin has filed a protest to this award. A decision is expected
during the first quarter of 2000. If the Company ultimately loses the contract
award, it will continue operating the plant until at least the end of the
first quarter of 2000.
1998 Compared to 1997
Sales in 1998 were 4% higher than 1997 due to higher volumes offset slightly
by lower prices in the centerfire rifle category. Domestic commercial volume
growth was driven by improved market share in a modestly growing overall
market. Domestic and international military sales were lower as were sales in
Australia which has been negatively impacted by the implementation of
restrictive government legislation on the sales of firearms and ammunition.
Operating income improved significantly from 1997 due to the impact of the
higher commercial volumes, lower manufacturing costs, lower commodity costs
and lower selling and administrative expenses. In Australia, profits were
lower due to the impact of the lower volumes as a result of the restrictive
legislation.
2000 First Quarter Outlook
For the three months ending March 31, 2000 diluted earnings per share are
expected to be in the 40 cent range, assuming rising ECU prices and continuing
strong performance from the Metals and Winchester segments.
2000 Full Year Outlook
Consolidated
The Company's full year operating results in 2000 are expected to be
significantly higher than 1999 due to the expected rise in ECU prices,
continuing strong demand in the Brass and Winchester segments and cost
reduction initiatives across all segments.
16
<PAGE>
Chlor Alkali Products
Sales and operating income are expected to increase significantly due to
higher ECU pricing and cost reduction initiatives. The Chlor Alkali industry
pricing, which was at a 25 year low in the third quarter of 1999 improved in
the fourth quarter of 1999 and is expected to improve further in 2000 as
demand for both chlorine and caustic soda is expected to remain strong.
Metals
Sales are expected to be higher in 2000 due to higher volumes and metal
values. The market outlook is favorable and the Company believes that there
will continue to be strong demand from the automotive, housing, electronic
connectors and coinage markets worldwide. Operating income is expected to be
higher due to higher volumes and improved product sales mix.
Winchester
Sales in 2000 are expected to be slightly higher due to modest selling price
increases, which will be partially offset by slightly lower volumes.
Commercial volumes are expected to be down slightly as consumer demand returns
to more normalized levels post Y2K. Contract sales are expected to improve due
to increased international demand. Assuming the Company does not prevail in
its appeal to retain the contract to operate the U.S. Army's Lake City
ammunition plant, operating income will be lower in 2000 as higher selling
prices are expected to offset only a portion of the lost fees from Lake City.
Cautionary Statement under Federal Securities Laws: The information
contained in the 2000 First Quarter and Full Year Outlook sections (and
subsections thereof), the Environmental Matters section, the Liquidity,
Investment Activity and Other Financial Data section, and the Environmental
and Commitments and Contingencies notes to the Consolidated 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 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. 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 2000; competitive pricing
pressures; changes in Chlor Alkali's ECU prices from expected levels; Chlor
Alkali operating rates below current levels; higher-than-expected raw material
costs; higher-than-expected transportation and/or logistics costs; a downturn
in any of the markets the Company serves such as the electronics, automotive,
ammunition and 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.
Discontinued Operations
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
($ in
millions)
<S> <C> <C> <C>
Sales....................................................... $73 $863 $930
Net Income.................................................. 4 40 56
</TABLE>
17
<PAGE>
1999 Compared to 1998
On February 8, 1999, the Company completed the Spin-Off of its specialty
chemicals business as Arch Chemicals. Accordingly, 1999 includes the operating
results of Arch Chemicals for the month of January. The years 1998 and 1997
include twelve months of operating results.
1998 Compared to 1997
Sales decreased 7% due to a decrease in prices and lower volumes due to the
sale of the surfactants business in 1997 and the conversion of the flexible
polyol business to a tolling operation. Net income decreased due to the lower
volumes and higher selling and administrative expenses. Selling and
administrative expenses were higher due to an increase in information
technology spending related to the SAP implementation and increased
international operating expenses.
Environmental Matters
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
($ in
millions)
<S> <C> <C> <C>
Cash Outlays:
Remedial and Investigatory Spending (Charged to Reserve). $21 $20 $31
Capital Spending......................................... 3 2 2
Plant Operations......................................... 17 17 15
--- --- ---
Total Cash Outlays......................................... $41 $39 $48
=== === ===
</TABLE>
The establishment and implementation of federal, state and local standards
to regulate air, water and land quality has affected and will continue to
affect substantially all of the Company's manufacturing locations. Federal
legislation providing for regulation of the manufacture, transportation, use
and disposal of hazardous and toxic substances has imposed additional
regulatory requirements on industry, particularly the chemicals industry. In
addition, implementation of environmental laws, such as the Resource
Conservation and Recovery Act and the Clean Air Act, has required and will
continue to require new capital expenditures and will increase operating
costs. The Company employs waste minimization and pollution prevention
programs at its manufacturing sites.
The Company is party to various governmental and private environmental
actions associated with waste disposal sites and manufacturing facilities.
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 efforts were material to operating results in 1999,
1998, and 1997 and may be material to net income in future years. Such charges
to income were $17 million, $16 million and $17 million in 1999, 1998, and
1997 respectively.
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 years. Cash outlays for normal plant operations for the
disposal of waste and the operation and maintenance of pollution control
equipment and facilities to ensure compliance with mandated and voluntarily
imposed environmental quality standards were charged to income. Historically,
the Company has funded its environmental capital expenditures through cash
flow from operations and expects to do so in the future.
The Company's estimated environmental liability at the end of 1999 was
attributable to 51 sites, 16 of which were on the NPL. Ten sites accounted for
approximately 80% of such liability and, of the remaining sites, no one site
accounted for more than 2% of such liability. One of these ten sites is in
18
<PAGE>
the investigatory stage of the remediation process. In this stage, remedial
investigation and feasibility studies are conducted by either the Company, EPA
or other PRPs and a ROD or its equivalent has not been issued. At six of the
ten sites, a ROD or its equivalent has been issued by either the EPA or
responsible state agency and the Company either alone, or as a member of a PRP
group, was engaged in performing the remedial measures required by that ROD.
At the remaining three of the ten sites, part of the site is subject to a ROD
and another part is still in the investigative stage of remediation. All ten
sites were either former manufacturing facilities or waste sites containing
contamination generated by those facilities.
The Company's consolidated balance sheets included liabilities for future
environmental expenditures to investigate and remediate known sites amounting
to $125 million at December 31, 1999 and $129 million at December 31, 1998, of
which $100 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.
Total environmental-related cash outlays for 2000 are estimated to be $47
million, of which $25 million is expected to be spent on investigatory and
remedial efforts, $5 million on capital projects and $17 million on normal
plant operations.
Annual environmental-related cash outlays for site investigation and
remediation, capital projects, and normal plant operations are expected to
range between $40-$50 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. At December
31, 1999, the Company had estimated additional contingent environmental
liabilities of $40 million.
Liquidity, Investment Activity and Other Financial Data
Cash Flow Data
<TABLE>
<CAPTION>
Provided By (Used For) 1999 1998 1997
---------------------- ---- ----- -----
($ in millions)
<S> <C> <C> <C>
Net Cash and Cash Equivalents
Provided by (Used for) Operating
Activities from Continuing Operations.............. $ 42 $ 178 $ (33)
Net Operating Activities.............................. 23 180 (12)
Capital Expenditures.................................. (73) (78) (76)
Net Investing Activities.............................. (74) (78) (4)
Purchases of Olin Common Stock........................ (11) (112) (163)
Net Financing Activities.............................. 22 (209) (345)
</TABLE>
In 1999, cash flows from operations, cash and cash equivalents on hand and
borrowings under a revolving credit facility assumed by Arch Chemicals, were
used to finance the Company's working capital requirements, capital and
investment projects, dividends, the payment of a liability resulting from the
sale of a former business and the purchase of the Company's common stock.
19
<PAGE>
Operating Activities
In 1999, net cash flow from operating activities was lower than 1998 due to
the lower level of operating income and the tax refund received in 1998 of
approximately $80 million related to taxes paid on capital gains in prior
years.
In 1998, the increase in cash flow from operating activities of continuing
operations from 1997 was primarily attributable to lower investment in working
capital and lower tax payments. In 1997, the Company paid approximately $110
million of tax related to the sale of the isocyanates business. In 1998, the
Company received approximately $80 million as a result of a tax refund.
Capital Expenditures
Capital spending of $73 million in 1999 was lower than 1998 due to lower
levels of capital spending associated with the implementation of the client-
server system (SAP) and certain capital expenditures in 1998 to facilitate the
Spin-Off of Arch Chemicals, primarily in the information technology area.
Capital spending in 1999 was approximately 95% of depreciation compared with
about 100% in 1998.
Capital spending of $78 million in 1998 was $2 million lower than 1997 and
approximated depreciation in both years. Capital spending in 2000 is expected
to be in the $100 million range. The increase in spending expected in 2000 is
primarily in the Metals segment to expand production capacity in their higher
value added product categories, in particular high performance alloys. These
products are patented specialty copper alloys that provide value-added
benefits to global customers in the computer, telecommunications and
automotive industries.
Investing Activities
During 1999, the Company completed the purchase of a manufacturer of
microelectronic packages in England and a metal distribution company in Puerto
Rico for a total of $3 million.
In 1998, the Company sold its microelectronic packaging unit at Manteca, CA,
for $4 million in cash.
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). Previously, 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.
In October 1997 the Company and Asahi Glass Company established separate
ownership of two former joint ventures the companies had previously formed in
polyols and microelectronic packaging systems. The Company became the sole
owner of Aegis, Inc., a manufacturer of metal hermetic packages that was
established in 1986. Conversely, Asahi Glass Company became the sole owner of
the Asahi-Olin joint venture in polyols that was established in 1974. The net
proceeds of this transaction were $5 million and did not have a material
effect on the Company's results of operations.
Investment spending in 1997 was primarily attributable to the Sunbelt
project, a joint venture formed by the Geon Company and the Company in 1996 to
construct and operate a Chlor Alkali facility at the Company's McIntosh, AL
site. The facility started operations in December 1997. Also in December, the
Company was repaid $98 million of its original advances to the venture, as a
result of a long-term financing undertaken by this venture. The Company has
guaranteed its share of the venture's long-term debt.
Financing Activities
Prior to the Spin-Off of Arch Chemicals in February 1999, the Company
borrowed $75 million under a credit facility which liability was assumed by
Arch Chemicals. The Company has used these funds for general corporate
purposes, which included share repurchases.
20
<PAGE>
As a result of the Spin-Off in February of 1999, the Company amended its
unsecured revolving credit agreement with a group of banks reducing the
aggregate commitments from $250 million to $165 million. The Company may
select various floating rate borrowing options. This agreement expires October
15, 2002. At December 31, 1999, the Company had $165 million available under
this facility. 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.
In May of 1998, the Company repaid $38 million of 7.97% notes. In June 1997,
the Company repaid $125 million of 9.5% subordinated notes.
During 1999, 1998 and 1997, the Company used $11 million, $112 million and
$163 million to repurchase .9 million, 3.1 million and 3.8 million shares of
the Company's stock, respectively. The Board of Directors has approved two
share repurchase programs to repurchase a total of 10 million shares of the
Company's stock. It is expected that this program will be completed during
2000.
The percent of total debt to total capitalization increased to 43% at
December 31, 1999, from 23% at year-end 1998 and 24% at year-end 1997.
Contributing to the increase in 1999 was the reduction to equity resulting
from the Spin-Off of Arch Chemicals.
Dividends per common share were $0.90 in 1999 and $1.20 in 1997 and 1998.
Total dividends paid on common stock amounted to $41 million in 1999, $58
million in 1998 and $61 million in 1997. The Company paid a first quarter 1999
dividend of $0.30 per share on March 10, 1999 to shareholders of record on
January 19, 1999. Following the distribution of Arch Chemicals, the quarterly
dividend was reduced to $0.20 per share to reflect the effect of the
distribution. The quarterly Arch Chemicals dividend was $0.10 per equivalent
Olin common share ($0.20 per Arch Chemicals common share). This resulted in
the same total dividend of $1.20 per Olin equivalent share in 1999.
During 1992, the Company swapped interest payments on $50 million principal
amount of its 8% notes due 2002, to a floating rate (6.0975% at December 31,
1999). In June 1995, the Company offset this transaction by swapping interest
payments to a fixed rate of 6.485%.
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. The Company is currently evaluating the
effect this statement will have on its financial position and results of
operations in the period of adoption.
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.
Derivative Financial Instruments
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 and Canadian
dollar) and relating to particular anticipated but not yet
21
<PAGE>
committed purchases and sales expected to be denominated in those currencies.
All of the currency derivatives expire within one year and are for United
States dollar equivalents. At December 31, 1999, the Company had forward
contracts to sell foreign currencies with face values of $7 million (1998
$4 million) and no forward contracts to buy foreign currencies. The fair
market value of the forward contracts to sell at December 31, 1999 and 1998
approximated the carrying value. The Company had no outstanding option
contracts at December 31, 1999 and 1998.
In accordance with Statement of Financial Accounting Standards No. 52,
("SFAS 52"), "Foreign Currency Translation," a transaction is classified as a
hedge when the foreign currency is designated as, and is effective as, a hedge
of a foreign currency commitment and the foreign currency commitment is firm.
A hedge is considered by the Company to be effective when the transaction
reduces the currency risk on its foreign currency commitments. If a
transaction does not meet the criteria to qualify as a hedge, it is considered
to be speculative. For a foreign currency commitment that is classified as a
hedge, any gain or loss on the commitment is deferred and included in the
basis of the underlying instrument. Any realized and unrealized gains or
losses associated with foreign currency commitments that are classified as
speculative are recognized in the current period and are included in Selling
and Administration in the consolidated statements of income. 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 and included in the basis of the underlying
investment. Premiums paid for currency options and gains or losses on forward
sales and purchase contracts are not material to operating results.
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, principally in copper, lead and zinc. In accordance with SFAS
No. 80, "Accounting for Futures Contracts," futures contracts are classified
as a hedge when the item to be hedged exposes the Company to price risk and
the futures contract reduces that risk exposure. Futures contracts that relate
to transactions that are expected to occur are accounted for as a hedge when
the significant characteristics and expected terms of the anticipated
transaction are identified and it is probable that the anticipated transaction
will occur. If a transaction does not meet the criteria to qualify as a hedge,
it is considered to be speculative. Any gains or losses associated with
futures contracts which are classified as speculative are recognized in the
current period. If a futures contract that has been accounted for as a hedge
is closed or matures before the date of the anticipated transaction, the
accumulated change in value of the contract is carried forward and included in
the measurement of the related transaction.
Year 2000 Computer Systems
The Company implemented a program over the past several years to define and
minimize the risks related to transitioning to the Year 2000 and beyond. The
program had each business segment identify its own Year 2000 issues and
develop appropriate 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 included corporate oversight
and provided for consistent attention to progress made against planned
activities and a forum for issue resolution with periodic assessments made by
independent parties which were reported to the Board of Directors. The
Company's approach was to subdivide the program into four distinct areas: 1)
Business Systems; 2) Manufacturing; 3) Supply Chain; and 4) Infrastructure.
To date the program has been successful and the Company has transitioned all
of its systems to the new millennium. No significant problems were identified
in any of the four areas, and the Company believes the risk related to future
exposure of Year 2000 issues is minimal. The costs associated with the Year
2000 initiative in 1999 were less than $5 million including the cost for
deploying SAP and PeopleSoft and related infrastructure.
22
<PAGE>
Risk Management
The Company periodically evaluates risk retention and insurance levels for
product liability, property damage and other potential areas of risk. Based on
the cost and availability of insurance and the likelihood of a loss occurring,
management decides the amount of insurance coverage to purchase from
unaffiliated companies and the appropriate amount of risk to retain. The
current levels of risk retention are believed to be appropriate and are
consistent with those of other companies in the various industries in which
the Company operates.
Item 7A. 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 use of financial instruments to manage exposure to such risks.
The primary purpose of the Company's foreign currency hedging activities is
to manage currency risk resulting from purchase and sale commitments
denominated 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 raw 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 December 31, 1999, the Company maintained open
positions on futures contracts totaling $36 million. Assuming a hypothetical
10% increase in commodity prices which are currently hedged, the Company would
experience a $3.6 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 current debt structure of the Company is comprised primarily of
long-term fixed rate debt utilized to fund business operations and maintain
liquidity. As of December 31, 1999, the Company had long-term borrowings of
$229 million of which $35 million was at variable rates. Assuming a decrease
of 100 basis points in the interest rate for borrowings of a similar nature,
which the Company becomes unable to capitalize on in the short-term as a
result of the structure of its fixed rate financing, future cash flows would
be affected by approximately $1.9 million. Assuming an increase of 100 basis
points in the interest rate for borrowings on Industrial Development and
Environmental Improvement Obligations, future cash flows would be negatively
affected by approximately $0.4 million. 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 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.
23
<PAGE>
Item 8. Consolidated Financial Statements and Supplementary Data
Management Report on Financial Statements
Management is responsible for the preparation and integrity of the
accompanying consolidated financial statements. These financial statements
have been prepared in conformity with generally accepted accounting principles
and, where necessary, involve amounts based on management's best judgments and
estimates. Management also prepared the other information in this annual
report and is responsible for its accuracy and consistency with the financial
statements.
The Company's system of internal controls is designated to provide
reasonable assurance as to the integrity and reliability of the financial
statements, the protection of assets from unauthorized use or disposition, and
the prevention and detection of fraudulent financial reporting. This system,
which is reviewed regularly, consists of written policies and procedures, an
organizational structure providing delegation of authority and segregation of
responsibility and is monitored by an internal audit department. The Company's
independent auditors also review and test the internal control system along
with tests of accounting procedures and records to the extent that they
consider necessary in order to issue their opinion on the financial
statements. Management believes that the system of internal accounting
controls meets the objectives noted above.
Management also recognizes its responsibility for fostering a strong ethical
climate so that the Company's affairs are conducted according to the highest
standards of personal and corporate conduct. This responsibility is
communicated to all employees in a variety of ways, including personal
training sessions.
The Ethics Program is based upon a document called "The Standards of Ethical
Business Practices." The standards address, among other things, the necessity
of ensuring open communication within the Company; potential conflicts of
interest; compliance with all domestic and foreign laws, including those
relating to financial disclosure; and the confidentiality of proprietary
information. The Company maintains a systematic program to assess compliance
with these standards and has established confidential ways, including a
confidential telephone help-line (1-800-362-8348), for employees and suppliers
to ask questions and share concerns.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with the independent auditors, management and
the Company's internal auditors to review the work of each and to evaluate
accounting, auditing, internal controls and financial reporting matters. The
Audit Committee annually recommends to the Board of Directors the appointment
of independent auditors, subject to shareholder approval. The independent
auditors and the Company's internal audit department have independent and free
access to the Audit Committee.
/s/ Donald W. Griffin /s/ Anthony W. Rugglero
Donald W. Griffin Anthony W. Ruggiero
Chairman, Executive Vice President and
President and Chief Financial Officer
Chief Executive Officer
24
<PAGE>
Independent Auditors' Report
To the Board of Directors and Shareholders of Olin Corporation
We have audited the accompanying consolidated balance sheets of Olin
Corporation and subsidiaries as of December 31, 1999 and 1998 and the related
consolidated statements of income, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the financial position of Olin
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1999 in conformity with generally accepted
accounting principles.
KPMG LLP
Stamford, Connecticut
January 27, 2000
25
<PAGE>
Consolidated Balance Sheets
December 31
($ in millions, except share data)
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents.................................... $ 21 $ 50
Short-Term Investments....................................... 25 25
Receivables, Net:
Trade...................................................... 176 162
Other...................................................... 20 30
Inventories, Net of LIFO Reserve of $73 ($63 in 1998)........ 208 199
Income Taxes Receivable...................................... 33 33
Other Current Assets......................................... 21 18
------ ------
Total Current Assets....................................... 504 517
Investments and Advances--Affiliated Companies at Equity....... 3 12
Property, Plant and Equipment, Net............................. 468 475
Other Assets................................................... 88 80
Net Assets of Discontinued Operations.......................... -- 505
------ ------
Total Assets................................................... $1,063 $1,589
====== ======
Liabilities and Shareholders' Equity
Current Liabilities:
Current Installments of Long-Term Debt....................... $ 1 $ 1
Accounts Payable............................................. 115 118
Income Taxes Payable......................................... 4 5
Accrued Liabilities.......................................... 132 168
------ ------
Total Current Liabilities.................................. 252 292
Long-Term Debt................................................. 229 230
Deferred Income Taxes.......................................... 51 37
Other Liabilities.............................................. 222 240
------ ------
Total Liabilities.......................................... 754 799
------ ------
Commitments and Contingencies
Shareholders' Equity:
Common Stock, Par Value $1 Per Share:
Authorized, 120,000,000 Shares
Issued and Outstanding 45,061,896 Shares (45,922,864 in
1998) .................................................... 45 46
Additional Paid-In Capital................................... 234 243
Accumulated Other Comprehensive Loss......................... (10) (25)
Retained Earnings............................................ 40 526
------ ------
Total Shareholders' Equity................................. 309 790
------ ------
Total Liabilities and Shareholders' Equity..................... $1,063 $1,589
====== ======
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of the consolidated financial statements.
26
<PAGE>
Consolidated Statements of Income
Years ended December 31
($ in millions, except per share data)
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Sales................................................... $1,315 $1,426 $1,499
Operating Expenses:
Cost of Goods Sold.................................... 1,135 1,161 1,203
Selling and Administration............................ 120 123 132
Research and Development.............................. 9 10 8
Earnings (Loss) of Non-consolidated Affiliates.......... (11) -- 1
Interest Expense........................................ 16 17 24
Interest Income......................................... 2 3 10
Other Income............................................ 1 4 4
Loss on Sale and Restructurings of Businesses and Spin-
off Costs.............................................. -- (63) --
------ ------ ------
Income from Continuing Operations Before Taxes.......... 27 59 147
Income Taxes............................................ 10 21 50
------ ------ ------
Income from Continuing Operations....................... 17 38 97
Income from Discontinued Operations, Net of Taxes....... 4 40 56
------ ------ ------
Net Income.............................................. $ 21 $ 78 $ 153
====== ====== ======
Net Income Per Common Share:
Basic:
Continuing Operations................................. $ 0.36 $ 0.79 $ 1.91
Discontinued Operations............................... 0.09 0.85 1.11
------ ------ ------
Total Net Income.................................... $ 0.45 $ 1.64 $ 3.02
====== ====== ======
Diluted:
Continuing Operations................................. $ 0.36 $ 0.79 $ 1.90
Discontinued Operations............................... 0.09 0.84 1.10
------ ------ ------
Total Net Income.................................... $ 0.45 $ 1.63 $ 3.00
====== ====== ======
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of the consolidated financial statements.
27
<PAGE>
Consolidated Statements of Shareholders' Equity
($ in millions, except share data)
<TABLE>
<CAPTION>
Common Stock Accumulated
----------------- Additional Other Total
Shares Par Paid-In Comprehensive Retained ESOP Shareholders'
Issued Value Capital Loss Earnings Obligations Equity
---------- ----- ---------- ------------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1997................... 52,202,759 $52 $ 494 $ (9) $ 414 $(5) $ 946
Comprehensive Income:
Net Income............ -- -- -- -- 153 -- 153
Translation
Adjustment........... -- -- -- (15) -- -- (15)
Comprehensive Income.. -- -- -- -- -- -- 138
Dividends Paid:
Common Stock ($1.20
per share)........... -- -- -- -- (61) -- (61)
Reduction in ESOP
Obligations............ -- -- -- -- -- 5 5
Stock Options Exercised. 413,258 -- 13 -- -- -- 13
Stock Repurchase........ (3,827,100) (3) (160) -- -- -- (163)
Other Transactions...... 51,317 -- 1 -- -- -- 1
---------- --- ----- ---- ----- --- -----
Balance at December 31,
1997................... 48,840,234 49 348 (24) 506 -- 879
Comprehensive Income:
Net Income............ -- -- -- -- 78 -- 78
Translation
Adjustment........... -- -- -- 1 -- -- 1
Minimum Pension
Liability Adjustment. -- -- -- (2) -- -- (2)
Comprehensive Income.. -- -- -- -- -- -- 77
Dividends Paid:
Common Stock ($1.20
per share)........... -- -- -- -- (58) -- (58)
Stock Options Exercised. 84,528 -- 3 -- -- -- 3
Stock Repurchase........ (3,096,100) (3) (109) -- -- -- (112)
Other Transactions...... 94,202 -- 1 -- -- -- 1
---------- --- ----- ---- ----- --- -----
Balance at December 31,
1998................... 45,922,864 46 243 (25) 526 -- 790
Comprehensive Income:
Net Income............ -- -- -- -- 21 -- 21
Translation
Adjustment........... -- -- -- 2 -- -- 2
Comprehensive Income.. -- -- -- -- -- -- 23
Dividends Paid:
Common Stock ($.90 per
share)............... -- -- -- -- (41) -- (41)
Spin-off of Arch
Chemicals, Inc......... -- -- -- 13 (466) -- (453)
Stock Repurchase........ (921,400) (1) (10) -- -- -- (11)
Other Transactions...... 60,432 -- 1 -- -- -- 1
---------- --- ----- ---- ----- --- -----
Balance at December 31,
1999................... 45,061,896 $45 $ 234 $(10) $ 40 $-- $ 309
========== === ===== ==== ===== === =====
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of the consolidated financial statements.
28
<PAGE>
Consolidated Statements of Cash Flows
Years ended December 31 ($ in millions)
<TABLE>
<CAPTION>
1999 1998 1997
---- ----- -----
<S> <C> <C> <C>
Operating Activities
Income from Continuing Operations......................... $ 17 $ 38 $ 97
Adjustments to Reconcile Income from Continuing Operations
to Net Cash and Cash Equivalents Provided by Operating
Activities:
Loss (Earnings) of Non-consolidated Affiliates.......... 11 -- (1)
Depreciation............................................ 78 76 76
Amortization of Intangibles............................. 2 2 2
Deferred Taxes.......................................... 11 104 41
Loss on Sale and Restructurings of Businesses and Spin-
off Costs.............................................. -- 63 --
Change in Assets and Liabilities Net of Purchases and
Sales of Businesses:
Receivables........................................... (4) (5) (19)
Inventories........................................... (7) 7 (14)
Other Current Assets.................................. (1) 4 (5)
Accounts Payable and Accrued Liabilities.............. (34) (57) (45)
Income Taxes Payable.................................. (1) (33) (122)
Other Noncurrent Liabilities.......................... (21) 4 (36)
Other Operating Activities................................ (9) (25) (7)
---- ----- -----
Net Cash and Cash Equivalents Provided by Operating
Activities from Continuing Operations.................... 42 178 (33)
Discontinued Operations:
Net Income.............................................. 4 40 56
Change in Net Assets.................................... (23) (38) (35)
---- ----- -----
Net Operating Activities.............................. 23 180 (12)
---- ----- -----
Investing Activities
Capital Expenditures...................................... (73) (78) (76)
Businesses Acquired in Purchase Transactions.............. (3) -- (2)
Proceeds from Sales of Businesses......................... -- 4 5
Purchases of Short-Term Investments....................... (34) (25) (126)
Proceeds from Sale of Short-Term Investments.............. 34 28 185
Investments and Advances--Affiliated Companies at Equity.. (3) (3) (84)
Repayments of Advances From a Joint Venture............... -- -- 98
Other Investing Activities................................ 5 (4) (4)
---- ----- -----
Net Investing Activities.............................. (74) (78) (4)
---- ----- -----
Financing Activities
Long-Term Debt Repayments................................. (1) (39) (137)
Borrowings under Line of Credit Assumed by Arch Chemicals,
Inc................................................... 75 -- --
Purchase of Olin Common Stock............................. (11) (112) (163)
Repayment from ESOP....................................... -- -- 5
Stock Options Exercised................................... -- 3 13
Dividends Paid............................................ (41) (58) (61)
Other Financing Activities................................ -- (3) (2)
---- ----- -----
Net Financing Activities.............................. 22 (209) (345)
---- ----- -----
Net Decrease in Cash and Cash Equivalents............. (29) (107) (361)
Cash and Cash Equivalents, Beginning of Year.............. 50 157 518
---- ----- -----
Cash and Cash Equivalents, End of Year................ $ 21 $ 50 $ 157
==== ===== =====
Cash Paid (Received) for Interest and Income Taxes:
Interest.............................................. $ 16 $ 17 $ 27
Income Taxes, Net of Refunds.......................... $ (6) $ (31) $ 166
==== ===== =====
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of the consolidated financial statements.
29
<PAGE>
Notes to Consolidated Financial Statements
($ in millions, except share data)
Accounting Policies
The preparation of the consolidated financial statements requires estimates
and assumptions that affect amounts reported and disclosed in the financial
statements and related notes. Actual results could differ from those
estimates. Certain reclassifications were made to prior year amounts to
conform to the 1999 presentation.
Basis of Presentation
The consolidated financial statements include the accounts of Olin
Corporation ("Olin" or "Company") and all majority-owned subsidiaries.
Investments in 20-50% owned affiliates are accounted for on the equity method.
Accordingly, the Company's share of earnings or losses of these affiliates is
included in consolidated net income.
Foreign Currency Translation
Foreign affiliates' balance sheet amounts are translated at the exchange
rates in effect at year-end, and income statement amounts are translated at
the average rates of exchange prevailing during the year. Translation
adjustments are included in Accumulated Other Comprehensive Loss. Where
foreign affiliates operate in highly inflationary economies, non-monetary
amounts are translated at historical exchange rates while monetary assets and
liabilities are translated at the current rate with the related adjustments
reflected in the Consolidated Statements of Income.
Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less at the
date of purchase are considered to be cash equivalents.
Short-Term Investments
Marketable securities are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company has classified its
marketable debt securities as available-for-sale which are reported at fair
market value with unrealized gains and losses included in Shareholders' Equity
net of applicable taxes. The fair value of marketable securities is determined
by quoted market prices. Unrealized gains and losses in 1999 and 1998 were
insignificant. Realized gains and losses on sales of investments, as
determined on the specific identification method and declines in value of
securities judged to be other-than-temporary are included in Other Income in
the Consolidated Statements of Income. Interest and dividends on all
securities are included in Interest Income and Other Income, respectively.
All investments that have original maturities between three and twelve
months are considered short-term investments and consist of debt securities
such as commercial paper, time deposits, certificates of deposit, bankers
acceptances, repurchase agreements, and marketable direct obligations of the
United States Treasury and its agencies.
Inventories
Inventories are valued principally by the dollar value last-in, first-out
(LIFO) method of inventory accounting; such valuations are not in excess of
market. Cost for other inventories has been determined principally by the
average-cost and first-in, first out (FIFO) methods. Elements of costs in
inventories include raw materials, direct labor and manufacturing overhead.
30
<PAGE>
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is computed
on a straight-line basis over the estimated useful lives of the related
assets. Leasehold improvements are amortized over the term of the lease or the
estimated useful life of the improvement, whichever is shorter. Start-up costs
are expensed as incurred.
Comprehensive Income
The Company calculated comprehensive income in accordance with SFAS No. 130,
"Reporting Comprehensive Income." Accumulated Other Comprehensive Loss at
December 31, 1999 includes cumulative translation adjustments of $8 ($23 at
December 31, 1998) and minimum pension liability of $2 ($2 at December 31,
1998). 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.
Goodwill
Goodwill, the excess of the purchase price of the acquired businesses over
the fair value of the respective net assets, is amortized principally over 30
years on a straight-line basis. The Company periodically reviews the value of
its goodwill to determine if any impairment has occurred. The Company assesses
the potential impairment of recorded goodwill and other long-lived assets by
comparing the undiscounted value of expected future operating cash flows in
relation to the book value of the goodwill and related long-lived assets. An
impairment would be recorded based on the estimated fair value.
Environmental Liabilities and Expenditures
Accruals for environmental matters are recorded when it is probable that a
liability has been incurred and the amount of the liability can be reasonably
estimated, based upon current law and existing technologies. These amounts,
which are not discounted and are exclusive of claims against third parties,
are adjusted periodically as assessment and remediation efforts progress or
additional technical or legal information becomes available. Environmental
remediation costs are charged to expense. Environmental costs are capitalized
if the costs increase the value of the property and/or mitigate or prevent
contamination from future operations.
Income Taxes
Deferred taxes are provided for differences between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
Derivative Financial Instruments
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 and Canadian
dollar) and relating to particular anticipated but not yet committed purchases
and sales expected to be denominated in those currencies. All of the currency
derivatives expire within one year and are for United States dollar
equivalents. At December 31, 1999, the Company had forward contracts to sell
foreign currencies with face values of $7 (1998-$4) and no forward contracts
to buy foreign currencies. The fair market value of the forward contracts to
sell at December 31, 1999 and 1998 approximated the carrying value. The
Company had no outstanding option contracts at December 31, 1999 and 1998. The
counterparties to the options and contracts are major financial institutions.
The risk of loss to the Company in the event of nonperformance by a
counterparty is not significant.
31
<PAGE>
In accordance with SFAS No. 52, "Foreign Currency Translation," a
transaction is classified as a hedge when it is designated as, and is
effective as, a hedge of a foreign currency commitment and the foreign
currency commitment is firm. A hedge is considered by the Company to be
effective when the transaction reduces the currency risk on its foreign
currency commitments. If a transaction does not meet the criteria to qualify
as a hedge, it is considered to be speculative. For a foreign currency
commitment that is classified as a hedge, any gain or loss on the commitment
is deferred and included in the basis of the underlying item. Any unrealized
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 are included in the Consolidated Statements
of Income 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 and included in the basis of the underlying item. Premiums paid for
currency options and gains or losses on forward sales and purchase contracts
were not material to operating results.
Foreign currency exchange gains (losses), net of taxes, were less than $(1)
in 1999, $(1) in 1998 and $1 in 1997.
Depending on market conditions, the Company may enter into futures contracts
in order to reduce the impact of metal price fluctuations, principally in
copper, lead and zinc. In accordance with SFAS No. 80, "Accounting for Futures
Contracts," futures contracts are classified as a hedge when the item to be
hedged exposes the Company to price risk and the futures contract reduces that
risk exposure. Futures contracts that relate to transactions that are expected
to occur are accounted for as a hedge when the significant characteristics and
expected terms of the anticipated transaction are identified and it is
probable that the anticipated transaction will occur. If a transaction does
not meet the criteria to qualify as a hedge, it is considered to be
speculative. Any gains or losses associated with futures contracts, which are
classified as speculative, are recognized in the current period. If a futures
contract that has been accounted for as a hedge is closed or matures before
the date of the anticipated transaction, the accumulated change in value of
the contract is carried forward and included in the measurement of the related
transaction. At December 31, 1999, the Company has open positions in futures
contracts totaling $36 (1998--$44). If the futures contracts had been settled
on December 31, 1999, the Company would have recognized a gain of $1. Gains
(losses) on futures contracts, net of taxes, were $1 in 1999 and 1997 and $(2)
in 1998.
Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable and
accounts payable approximated fair values due to the short-term maturities of
these instruments. The fair value of the Company's long-term debt was
determined based on current market rates for debt of the same risk and
maturities. At December 31, 1999, the estimated fair value of debt was $228
(1998-$235). The fair values of currency forward contracts were estimated
based on quoted market prices for contracts with similar terms.
Stock-Based Compensation
The Company accounts for stock-based compensation under SFAS No. 123,
"Accounting for Stock-Based Compensation." As allowed under SFAS No. 123, the
Company has chosen to continue to account for stock-based compensation cost in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." Under this option, compensation cost is recorded
when the fair market value of the Company's stock at the date of grant for
fixed options exceeds the exercise price of the stock option. The Company's
policy is to grant stock options at a value equal to its common stock's fair
market value on the date of the grant. Compensation cost for restricted stock
awards is accrued over the life of the award based on the quoted market price
of the Company's stock at the date of the award.
32
<PAGE>
Earnings Per Share
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.
<TABLE>
<CAPTION>
Computation of Earnings per Share 1999 1998 1997
- --------------------------------- ----- ----- -----
<S> <C> <C> <C>
Basic earnings per share
Income from continuing operations............................ $ 17 $ 38 $ 97
----- ----- -----
Basic shares................................................. 45.4 47.6 50.5
----- ----- -----
Basic earnings per share-continuing operations............... $0.36 $0.79 $1.91
===== ===== =====
Diluted earnings per share
Income from continuing operations............................ $ 17 $ 38 $ 97
Diluted shares: ----- ----- -----
Basic shares............................................... 45.4 47.6 50.5
Stock options.............................................. -- .3 .4
----- ----- -----
45.4 47.9 50.9
----- ----- -----
Diluted earnings per share-continuing operations............. $0.36 $0.79 $1.90
===== ===== =====
</TABLE>
The Board of Directors has authorized the Company to purchase up to 10
million shares of common stock of the Company under two share repurchase
programs which began in January of 1997. During 1999, 1998 and 1997 the
Company repurchased .9 million, 3.1 million and 3.8 million shares,
respectively. It is expected that the programs will be completed during 2000.
Short-Term Investments
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Tax exempt...................................................... $25 $20
Certificates of deposit......................................... -- 4
U.S. Government and government agencies......................... -- 1
--- ---
Total......................................................... $25 $25
=== ===
</TABLE>
Trade Receivables
Allowance for doubtful items was $6 at December 31, 1999 and 1998,
respectively. Provisions charged to operations were less than $1 in 1999, 1998
and 1997. Bad debt write-offs, net of recoveries were less than $1 in 1999, $1
in 1998 and $2 in 1997.
Inventories
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Raw materials and supplies.................................... $120 $113
Work in process............................................... 111 102
Finished goods................................................ 50 47
---- ----
281 262
LIFO reserves................................................. (73) (63)
---- ----
Inventory, net.............................................. $208 $199
==== ====
</TABLE>
Inventories valued using the LIFO method comprised 78% and 79% of the total
inventories at December 31, 1999 and 1998, respectively. During 1998, LIFO
inventory quantities were reduced resulting in the liquidation of one LIFO
layer and part of another layer. The effect of this liquidation increased net
income by $1.
33
<PAGE>
Property, Plant and Equipment
<TABLE>
<CAPTION>
Useful Lives 1999 1998
------------ ------ ------
<S> <C> <C> <C>
Land and improvements to land................. 10--20 Years $ 58 $ 51
Buildings and building equipment.............. 10--25 Years 187 172
Machinery and equipment....................... 3--12 Years 1,278 1,249
Leasehold improvements........................ 3 3
Construction in progress...................... 69 75
------ ------
Property, plant and equipment............... 1,595 1,550
Less accumulated depreciation................. 1,127 1,075
------ ------
Property, plant and equipment, net.......... $ 468 $ 475
====== ======
</TABLE>
Leased assets capitalized and included above are not significant.
Maintenance and repairs charged to operations amounted to $116, $109 and $92
in 1999, 1998 and 1997 respectively.
Short-Term Borrowings
As a result of the Spin-Off of Arch Chemicals in February 1999, the Company
amended its unsecured revolving credit agreement reducing the aggregate
commitments from $250 to $165. At December 31, 1999 and 1998, the Company
maintained committed credit facilities with banks of $165 and $254,
respectively, all of which were available in each year. The $165 line of
credit was available under an unsecured revolving credit agreement. This
agreement expires October 15, 2002. The Company may select various floating
rate borrowing options. 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.
Long-Term Debt
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Notes payable:
7.11%, due 2005.............................................. $ 50 $ 50
7.75%, due 2005.............................................. 11 11
8%, due 2002................................................. 100 100
Industrial development and environmental improvement
obligations:
Payable at interest rates of 1.45% to 5.05% which vary with
short-term tax exempt rates, due 2004-2017.................. 35 35
Payable at interest rates of 6% to 7%, due 2000-2008......... 34 35
---- ----
Total senior debt.......................................... 230 231
Amounts due within one year.................................... 1 1
---- ----
Total long-term debt....................................... $229 $230
==== ====
</TABLE>
At December 31, 1999, there remained $248 unissued under the medium-term
note program registered in May 1994.
During 1992, the Company swapped interest payments on $50 principal amount
of its 8% notes due 2002 to a floating rate (6.0975% at December 31, 1999). In
June 1995, the Company offset this transaction by swapping interest payments
to a fixed rate of 6.485%. The difference between interest paid and interest
received is included as an adjustment to interest expense. A settlement of the
fair
34
<PAGE>
market value of the interest rate swaps as of December 31, 1999 would result
in a receipt of approximately $1. Counterparties to 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.
Annual maturities of long-term debt for the next five years are $1 in 2000
and 2001, $101 in 2002, $1 in 2003 and $27 in 2004.
Interest expense incurred on short-term borrowings and long-term debt
totaled $16 in 1999, $18 in 1998 and $25 in 1997; of which $1 was capitalized
in 1998 and 1997.
Pension Plans and Retirement Benefits
Essentially all of the Company's domestic pension plans are non-contributory
final-average-pay or flat-benefit plans and all domestic employees are
covered. The Company's funding policy is consistent with the requirements of
federal laws and regulations. The Company provides certain postretirement
health care and life insurance benefits for eligible active and retired
domestic employees.
<TABLE>
<CAPTION>
Other
Postretirement
Pension Benefits Benefits
---------------- ----------------
Change in Benefit Obligation 1999 1998 1999 1998
- ---------------------------- ------ ------ ------- -------
<S> <C> <C> <C> <C>
Benefit obligation at beginning of year..... $1,180 $1,155 $ 71 $ 71
Service cost................................ 15 15 1 1
Interest cost............................... 79 79 5 5
Amendments.................................. -- 1 -- --
Actuarial loss (gain)....................... (123) 8 (3) 2
Benefits paid............................... (83) (78) (9) (8)
------ ------ ------- -------
Benefit obligation at end of year........... $1,068 $1,180 $ 65 $ 71
====== ====== ======= =======
<CAPTION>
Pension Benefits
----------------
Change in Plan Assets 1999 1998
- --------------------- ------ ------
<S> <C> <C> <C> <C>
Fair value of plan assets at beginning of
year....................................... $1,295 $1,224
Actual return on plan assets................ 230 146
Employer contribution....................... 4 3
Asset transfers to Arch Chemicals........... (22) --
Benefits paid............................... (83) (78)
------ ------
Fair value of plan assets at end of year.... $1,424 $1,295
====== ======
<CAPTION>
Other
Postretirement
Pension Benefits Benefits
---------------- ----------------
1999 1998 1999 1998
------ ------ ------- -------
<S> <C> <C> <C> <C>
Funded status............................... $ 356 $ 115 $ (65) $ (71)
Unrecognized actuarial (gain) loss.......... (377) (146) 10 13
Unrecognized transition obligation (asset).. (6) (13) -- --
Unrecognized prior service cost............. 26 29 (4) (4)
------ ------ ------- -------
Net amount recognized....................... $ (1) $ (15) $ (59) $ (62)
====== ====== ======= =======
Amounts recognized in the consolidated
balance sheet consist of:
Prepaid benefit cost...................... $ 27 $ 12 $ -- $ --
Accrued benefit liability................. (28) (29) (59) (62)
Accumulated other comprehensive income.... -- 2 -- --
------ ------ ------- -------
Net amount recognized..................... $ (1) $ (15) $ (59) $ (62)
====== ====== ======= =======
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Principal Assumptions for Pension and Postretirement Benefits 1999 1998
- ------------------------------------------------------------- ---- ----
<S> <C> <C>
Weighted average discount rate...................................... 8.0% 7.0%
Weighted average rate of compensation increase...................... 4.6% 4.6%
Long-term rate of return on assets.................................. 9.5% 9.5%
</TABLE>
<TABLE>
<CAPTION>
Other
Postretirement
Pension Benefits Benefits
----------------- ---------------
Components of Net Periodic Benefit Cost
(Income) 1999 1998 1997 1999 1998 1997
- --------------------------------------- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost............................... $ 15 $ 15 $ 21 $ 1 $ 1 $ 1
Interest cost.............................. 79 79 79 5 5 5
Expected return on plan assets............. (103) (99) (92) -- -- --
Amortization of prior service cost......... 4 4 3 -- (1) (1)
Recognized actuarial loss (gain)........... (6) (6) (6) -- 1 1
----- ---- ---- --- --- ---
Net periodic benefit cost (income)......... $ (11) $ (7) $ 5 $ 6 $ 6 $ 6
===== ==== ==== === === ===
</TABLE>
The Company's common stock represented approximately 1% and 2% of the plan
assets at December 31, 1999 and 1998, respectively.
The Company's foreign subsidiaries maintain pension and other benefit plans
which are consistent with statutory practices and are not significant.
The Pension Plan of Olin Corporation provides that if, within three years
following a change of control of the Company, any corporate action is taken or
filing made in contemplation of, among other things, a plan termination or
merger or other transfer of assets or liabilities of the plan, and such
termination, merger or transfer thereafter takes place, plan benefits would
automatically be increased for affected participants (and retired
participants) to absorb any plan surplus.
The accumulated postretirement benefit obligation was determined using the
projected unit credit method and an assumed discount rate of 8% in 1999, 7% in
1998 and 7.25% in 1997. The assumed health care cost trend rate used for pre-
65 retirees was 7.5% in 1999, 8% in 1998 and 9.7% in 1997, declining one-half
percent per annum to 5.0%. For post-65 retirees, the Company provides a fixed
dollar benefit which is not subject to escalation.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the postretirement health care plan. A one-percentage-
point increase (decrease) in assumed health care cost trend rates would have a
less than $1 increase (decrease) in total service and interest cost components
and a $3 increase (decrease) in the postretirement benefit obligation.
Subsequent to the spin-off of Arch Chemicals on February 8, 1999, Arch
Chemicals became liable for the payment of all pension plan benefits earned by
Arch Chemicals employees prior to and following the spin-off who retire after
the spin-off. The Olin pension plan transferred assets to the Arch Chemicals
pension plan and the amount of the assets were calculated based on the
relative percentage of the Projected Benefit Obligation. Olin remains liable
for postretirement, medical and death benefits provided to all employees who
retired prior to the spin-off. Arch Chemicals is liable for the payment of all
retiree medical and death benefits earned by Arch Chemicals employees prior to
and following the spin-off who retire after the spin-off. The postretirement
plan is an unfunded plan, therefore no assets were transferred.
In connection with the Spin-Off of Arch Chemicals on February 8, 1999, the
Company transferred $7 of postretirement benefit liability to Arch Chemicals.
36
<PAGE>
Income Taxes
<TABLE>
<CAPTION>
Components of Pretax Income from Continuing Operations 1999 1998 1997
- ------------------------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Domestic...................................................... $ 24 $ 54 $144
Foreign....................................................... 3 5 3
---- ---- ----
Pretax income................................................. $ 27 $ 59 $147
==== ==== ====
<CAPTION>
Components of Income Tax Expense (Benefit)
- ------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal..................................................... $ (9) $(88) $ 12
State....................................................... 5 3 (4)
Foreign..................................................... 3 2 1
---- ---- ----
(1) (83) 9
Deferred...................................................... 11 104 41
---- ---- ----
Income tax expense............................................ $ 10 $ 21 $ 50
==== ==== ====
</TABLE>
The following table accounts for the difference between the actual tax
provision and the amounts obtained by applying the statutory U.S. federal
income tax rate of 35% to the income from continuing operations before taxes.
<TABLE>
<CAPTION>
Effective Tax Rate Reconciliation (Percent) 1999 1998 1997
- ------------------------------------------- ----- ---- ----
<S> <C> <C> <C>
Statutory federal tax rate................................... 35.0 35.0 35.0
Foreign income tax........................................... 0.5 (0.3) (0.9)
Foreign sales corporation.................................... (9.0) (0.9) (0.5)
Company-owned life insurance programs........................ 6.9 (5.4) (1.6)
State income taxes, net...................................... (13.0) 1.7 0.2
Change in valuation reserve.................................. 22.2 -- --
Equity in net income of affiliates........................... (2.2) (0.9) (0.4)
Other, net................................................... (3.4) 6.4 2.2
----- ---- ----
Effective tax rate........................................... 37.0 35.6 34.0
===== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Components of Deferred Tax Assets and Liabilities 1999 1998
- ------------------------------------------------- ---- ----
<S> <C> <C>
Deferred tax assets:
Pension and postretirement benefits................................. $ 23 $ 30
Environmental reserves.............................................. 49 50
Non-deductible reserves............................................. 37 46
Alternative minimum tax............................................. 15 4
State net operating losses.......................................... 10 --
Other miscellaneous items........................................... 10 18
---- ----
Total deferred tax assets............................................. 144 148
Valuation allowance................................................... (6) --
---- ----
Net deferred tax assets............................................... 138 148
---- ----
Deferred tax liabilities:
Property, plant and equipment....................................... 59 69
Capital loss........................................................ 80 80
Other miscellaneous items........................................... 35 24
---- ----
Total deferred tax liabilities........................................ 174 173
---- ----
Net deferred tax liability............................................ $ 36 $ 25
==== ====
</TABLE>
37
<PAGE>
Included in Other Current Assets at December 31, 1999 and 1998 are $15 and
$12, respectively, of net current deferred assets.
The Company has state net operating loss carryforwards of approximately $167
which are available to offset future state taxable income, if any, through
2014. The Company also has alternative minimum tax credit carryforwards of
approximately $15 which are available to reduce future federal regular income
taxes, if any, over an indefinite period.
At December 31, 1999, the Company's share of the cumulative undistributed
earnings of foreign subsidiaries was approximately $10. No provision has been
made for U.S. or additional foreign taxes on the undistributed earnings of
foreign subsidiaries since the Company intends to continue to reinvest these
earnings. Foreign tax credits would be available to substantially reduce or
eliminate any amount of additional U.S. tax that might be payable on these
foreign earnings in the event of distributions or sale.
Accrued Liabilities
Included in accrued liabilities are the following items:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Accrued compensation and employee benefits..................... $ 36 $ 43
Environmental.................................................. 25 30
Accrued costs for sale and restructurings of businesses and
spin-off costs................................................ 3 30
Accrued insurance.............................................. 14 21
Other.......................................................... 54 44
---- ----
$132 $168
==== ====
</TABLE>
Contributing Employee Ownership Plan
The Contributing Employee Ownership Plan is a defined contribution plan
available to essentially all domestic employees which provides a match of
employee contributions. The Company is matching employee contributions with
common stock. Expenses related to the plan are based on common stock allocated
to participants. These costs (primarily the Company's contributions) amounted
to $5, $8 and $9 in 1999, 1998 and 1997, respectively.
38
<PAGE>
Stock Options
Under the stock option plans, options may be granted to purchase shares of
the Company's common stock at not less than fair market value at the date of
grant, and are exercisable for a period not exceeding ten years from that
date. Options granted under the 1996 Stock Option Plan vest over three years.
The 1996 Stock Option Plan and the 1991 Long Term Incentive Plan are the only
plans with stock options available for future grants. At December 31, 1999,
approximately 2,254,000 shares were available for future grants. As a result
of the Spin-Off of Arch Chemicals the outstanding Olin options as of February
8, 1999 were converted into both an option to purchase Olin common stock and
an option to purchase Arch Chemicals common stock with an adjustment of the
exercise price designed to preserve the "intrinsic value" at the time of the
spin-off. Olin will be responsible for delivering shares of the Olin common
stock upon exercise, and Arch Chemicals will be responsible for delivering
shares of Arch Chemicals stock upon exercise. The options maintain their
original vesting schedule. The following table has been restated to reflect
the new option price of the Olin options as a result of the transaction
described above.
<TABLE>
<CAPTION>
Weighted Average
Option Price Option Price
Shares Per Share Per Share
--------- -------------- ----------------
<S> <C> <C> <C>
Outstanding at January 1, 1997....... 2,397,719 $13.34--$25.49 $20.20
Granted............................ 599,200 24.34--29.69 24.43
Exercised.......................... (413,258) 13.34--24.68 18.08
Canceled........................... (137,198) 24.38--24.68 24.57
--------- -------------- ------
Outstanding at December 31, 1997..... 2,446,463 13.34--29.69 21.36
Granted............................ 835,700 18.33--29.38 27.12
Exercised.......................... (84,528) 13.34--24.68 19.12
Canceled........................... (84,486) 16.04--29.38 25.75
--------- -------------- ------
Outstanding at December 31, 1998..... 3,113,149 13.34--29.69 22.85
Granted............................ 784,150 12.72--15.85 15.84
Exercised.......................... -- -- -- -- --
Canceled........................... (218,049) 15.85--29.69 21.09
--------- -------------- ------
Outstanding at December 31, 1999..... 3,679,250 $12.72--$27.17 $21.46
========= ============== ======
</TABLE>
Of the outstanding options at December 31, 1999, options covering 2,298,584
shares are currently exercisable at a weighted average exercise price of
$21.92 and options covering 730,000 shares are held by Arch Chemicals
employees.
At December 31, 1999, common shares reserved for issuance under these plans
were 6,081,813 and under additional remuneration agreements were estimated to
be 100,000.
39
<PAGE>
In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation". As allowed by SFAS No. 123, the Company has not recognized
compensation cost for stock-based compensation arrangements. Pro forma net
income and earnings per share were calculated based on the following
assumptions as if the Company had recorded compensation expense for the stock
options granted during the year. The fair value of each option granted during
1999, 1998 and 1997 was estimated on the date of grant, using the Black-
Scholes option-pricing model with the following weighted-average assumptions
used: dividend yield of 5.35% in 1999, 3.2% in 1998 and 2.8% in 1997, risk-
free interest rate of 6.25% in 1999, 5.5% in 1998 and 1997, expected
volatility of 29% in 1999, 27% in 1998 and 21% in 1997 and an expected life of
7 years. The fair value of options granted during 1999, 1998 and 1997 was
$3.85, $11.77 and $9.53, respectively. The following table shows the
difference between reported and pro forma net income and earnings per share as
if the Company had recorded compensation expense for the stock options granted
during the year.
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
($ in millions, except per share data)
- --------------------------------------
<S> <C> <C> <C>
Net Income
As reported................................................... $ 21 $ 78 $ 153
Pro forma..................................................... 17 72 149
Per Share Data:
Basic
As reported................................................. 0.45 1.64 3.02
Pro forma................................................... 0.38 1.52 2.96
Diluted
As reported................................................. 0.45 1.63 3.00
Pro forma................................................... 0.38 1.52 2.95
</TABLE>
Shareholder Rights Plan
Effective February 1996, the Board of Directors adopted a new Shareholder
Rights Plan to replace the prior plan which had been adopted in 1986. This
plan is designed to prevent an acquirer from gaining control of the Company
without offering a fair price to all shareholders. Each right entitles a
shareholder (other than the acquirer) to buy one-five hundredth share of
Series A Participating Cumulative Preferred Stock at an exercise price of one
hundred twenty dollars. The rights are exercisable only if a person acquires
more than 15% of the Company's common stock or if the Board of Directors so
determines following the commencement of a tender or exchange offer to acquire
more than 15% of the Company's common stock. If any person acquires more than
15% of the Company's common stock and in the event of a subsequent merger or
combination, each right will entitle the holder (other than the acquirer) to
purchase stock or other property of the acquirer having a value of twice the
exercise price. The Company can redeem the rights at $.005 per right for a
certain period of time. The rights will expire on February 27, 2006, unless
redeemed earlier by the Company.
40
<PAGE>
Segment Information
Segment operating income is defined as earnings before interest, other income
and income taxes and includes earnings of non-consolidated affiliates. Segment
operating results in 1998 exclude the charge for the sale of the
microelectronic packaging unit at Manteca, CA and the restructuring of the rod,
wire and tube businesses at Indianapolis, IN ($42 pretax); and non-recurring
costs associated with the spin-off of Arch Chemicals ($21 pretax).
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Sales:
Chlor Alkali Products............................... $ 273 $ 366 $ 411
Metals.............................................. 761 799 836
Winchester.......................................... 281 261 252
------ ------ ------
Total sales........................................... $1,315 $1,426 $1,499
====== ====== ======
Operating Income (Loss) Before Loss on Sale and
Restructuring of Businesses and Spin-off Costs:
Chlor Alkali Products............................... $ (58) $ 55 $ 99
Metals.............................................. 77 64 62
Winchester.......................................... 21 13 (4)
------ ------ ------
Total Operating Income................................ $ 40 $ 132 $ 157
====== ====== ======
Equity Income (Loss) in Affiliated Companies, Included
in Operating Income:
Chlor Alkali Products............................... $ (13) $ (1) $ (2)
Metals.............................................. 2 1 3
------ ------ ------
Total Equity Income in Affiliated Companies........... $ (11) $ -- $ 1
====== ====== ======
Depreciation Expense:
Chlor Alkali Products............................... $ 36 $ 33 $ 33
Metals.............................................. 30 32 32
Winchester.......................................... 12 11 11
------ ------ ------
Depreciation Expense.................................. $ 78 $ 76 $ 76
====== ====== ======
Amortization Expense:
Metals.............................................. $ 2 $ 2 $ 2
====== ====== ======
Capital Spending:
Chlor Alkali Products............................... $ 27 $ 31 $ 22
Metals.............................................. 33 25 28
Winchester.......................................... 13 12 9
Other............................................... -- 10 17
------ ------ ------
Total Capital Spending................................ $ 73 $ 78 $ 76
====== ====== ======
Investments in and Advances to Affiliated Companies at
Equity:
Chlor Alkali Products............................... $ 3 $ 3 $ 84
====== ====== ======
Assets:
Chlor Alkali Products............................... $ 263 $ 297 $ 290
Metals.............................................. 461 440 487
Winchester.......................................... 165 161 155
Other............................................... 174 186 319
Net Assets of Discontinued Operations............... -- 505 456
------ ------ ------
Total Consolidated Assets............................. $1,063 $1,589 $1,707
====== ====== ======
Investments & Advances--Affiliated Companies at
Equity:
Chlor Alkali Products............................... $ (3) $ 7 $ 7
Metals.............................................. 6 5 3
------ ------ ------
Total Investments & Advances--Affiliated Companies.... $ 3 $ 12 $ 10
====== ====== ======
</TABLE>
41
<PAGE>
Segment operating income includes an allocation of corporate charges based
on various allocation methodologies. Segment assets include only those assets
which are directly identifiable to a segment and do not include such items as
cash, deferred taxes and other assets. Sales by segment substantially
represent sales for the three product lines of the Company.
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
Geographic Data:
- ----------------
<S> <C> <C> <C>
Sales
United States......................................... $1,267 $1,388 $1,456
Foreign............................................... 48 38 43
Transfers between areas
United States......................................... 11 10 9
Eliminations.......................................... (11) (10) (9)
------ ------ ------
Total Sales............................................. $1,315 $1,426 $1,499
====== ====== ======
Assets
United States......................................... $1,016 $1,039 $1,216
Foreign............................................... 44 45 35
Investments........................................... 6 4 10
Eliminations.......................................... (3) (4) (10)
Net Assets of Discontinued Operations................. -- 505 456
------ ------ ------
Total Assets............................................ $1,063 $1,589 $1,707
====== ====== ======
</TABLE>
Transfers between geographic areas are priced generally at prevailing market
prices. Export sales from the United States to unaffiliated customers were
$72, $82, and $86 in 1999, 1998, and 1997, respectively.
Acquisitions
During 1999, the Company completed the purchase of a manufacturer of
microelectronic packages in England and a metal distribution company in Puerto
Rico for a total of $3 million. In February 1997, the Company completed its
purchase of the remaining 50% of Niachlor with a final payment of $2 to E.I.
du Pont de Nemours and Company (DuPont). In December 1996, the Company made an
advance payment of $75 to DuPont. These acquisitions were accounted for as
purchases and accordingly, the results of operations, which were not material,
are included in the consolidated financial statements from the dates of
acquisition.
Supplemental cash flow information on businesses acquired is as follows:
<TABLE>
<CAPTION>
1999 1997
---- ----
<S> <C> <C>
Working capital................................................ $ 2 $ (5)
Property, plant and equipment.................................. -- 112
Other liabilities.............................................. -- (5)
Investments and advances--affiliated companies................. -- (25)
Other Assets................................................... 1 --
--- ----
Purchase price................................................. $ 3 $ 77
=== ====
</TABLE>
Dispositions and Restructurings
During 1998 the Company recorded a pretax loss of $63 related to the sale of
Olin Interconnect Technologies ($8), the restructuring of the rod, wire, and
tube businesses at Indianapolis, IN ($34) and non-recurring costs associated
with the spin-off of Arch Chemicals ($21).
42
<PAGE>
In October 1997, the Company and Asahi Glass Company established separate
ownership of two joint ventures the companies had previously formed in polyols
and microelectronic packaging systems. The Company became the sole owner of
Aegis, Inc., a manufacturer of metal hermetic packages that was established in
1986. Conversely, Asahi Glass Company became the sole owner of the former
Asahi-Olin joint venture in polyols that was established in 1974.
Supplemental cash flow information on businesses disposed is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Proceeds....................................................... $ 4 $ 5
Working capital................................................ (4) --
Property, plant and equipment.................................. (8) --
Investments and advances....................................... -- (11)
Other assets................................................... -- 3
Other liabilities.............................................. -- 3
--- ----
Loss on disposition of businesses.............................. $(8) $ --
=== ====
</TABLE>
The following table summarizes the major components of the 1998 charges and
the remaining balances as of December 31, 1999 excluding the non-cash asset
writedown:
<TABLE>
<CAPTION>
Accrued
Beginning Amounts Restructuring
of Year Utilized Adjustments Costs
--------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Employee Termination and
Severance........................ $14 $ (8) $(5) $ 1
Legal and Investment Banker Fees.. 8 (8) -- --
Exit Costs........................ 5 (1) (2) 2
Other............................. 5 (5) -- --
--- ---- --- ---
$32 $(22) $(7) $ 3
=== ==== === ===
</TABLE>
The adjustments represent changes in estimates of the cash expenditures for
the major components of the 1998 charges. The adjustments will be utilized for
the non-cash asset writedown, which was understated due to the lower-than-
expected cash recoveries on these assets.
Since the Company was unable to sell the rod, wire, and tube businesses at
Indianapolis in 1998, the Company decided to shut down the operations, which
occurred on December 31, 1998. The Company continues to produce sheet and
strip copper-based alloys at the Indianapolis facility.
Discontinued Operations
On February 8, 1999, the Company completed the spin-off of its specialty
chemicals businesses as Arch Chemicals, Inc. Under the terms of the spin-off,
the Company distributed to its holders of common stock as of the close of
business on February 1, 1999 one Arch Chemicals common share for every two
shares of Olin common stock. In February 1999 prior to the distribution, Olin
borrowed $75 under a credit facility, which liability was assumed by Arch
Chemicals.
The historical operating results of these businesses are shown net of tax as
discontinued operations in the consolidated statements of income. Accordingly,
1999 includes the operating results of Arch Chemicals for the month of
January. The years 1998 and 1997 include twelve months of operating results.
The discontinued operations include an allocation of corporate overhead with
the allocation based on either effort committed or number of employees.
Management believes that the allocation methods used to allocate the costs and
expenses are reasonable, however, such allocated amounts may or may not
necessarily be indicative of what those expenses would have been had Arch
43
<PAGE>
Chemicals operated independently of Olin. Interest expense was not allocated
to Arch Chemicals. Net assets of discontinued operations in the consolidated
balance sheet include those assets and liabilities attributable to the Arch
Chemicals business.
The Company has entered into tax sharing agreements with Arch Chemicals
effectively providing that the Company will be responsible for the tax
liability of Arch Chemicals for the years that Arch Chemicals was included in
the Company's consolidated income tax returns. Income taxes have been
allocated to Arch Chemicals based on its pretax income and calculated on a
separate company basis pursuant to the requirements of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Income taxes
allocated to the discontinued operations were $2, $21 and $30 in 1999, 1998
and 1997, respectively.
In addition, the Company entered into several other agreements with Arch
Chemicals which cover such matters as technology transfers, transition
services, covenants not to compete and chlorine and caustic supply.
Condensed historical combined balance sheet and income statement data of the
discontinued operations are summarized below:
<TABLE>
<CAPTION>
1998
----
<S> <C> <C> <C>
Combined Balance Sheets
Total assets............................................... $722
Total liabilities.......................................... 217
Equity..................................................... 505
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Combined Statements of Income
Sales...................................................... $ 73 $863 $930
Net income................................................. 4 40 56
</TABLE>
Environmental
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 $17 in 1999, $16 in
1998 and $17 in 1997. Charges to income for investigatory and remedial efforts
were material to operating results in 1999, 1998 and 1997. The consolidated
balance sheets include reserves for future environmental expenditures to
investigate and remediate known sites amounting to $125 at December 31, 1999
and $129 at December 31, 1998, of which $100 and $99 are 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. At December 31, 1999, the Company
had estimated additional contingent environmental liabilities of $40.
Commitments and Contingencies
The Company leases certain properties, such as railroad cars, manufacturing,
warehousing and office space and data processing and office equipment. Leases
covering these properties generally contain escalation clauses based on
increased costs of the lessor, primarily property taxes, maintenance and
insurance and have renewal or purchase options. Total rent expense charged to
44
<PAGE>
operations amounted to $32 in 1999, $38 in 1998 and $33 in 1997 (sublease
income is not significant). Future minimum rent payments under operating
leases having initial or remaining noncancelable lease terms in excess of one
year at December 31, 1999 are as follows: $18 in 2000; $16 in 2001; $14 in
2002; $12 in 2003; $10 in 2004; and $34 thereafter.
There are a variety of non-environmental legal proceedings pending or
threatened against the Company. Those matters that are probable have been
accrued for in the accompanying financial statements. Any contingent amounts
in excess of amounts accrued are not expected to have a material adverse
effect on results of operations, financial position or liquidity of the
Company.
45
<PAGE>
Other Financial Data
Quarterly Data (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
1999 Quarter Quarter Quarter(/1/) Quarter(/2/) Year(/1/)(/2/)
- ---- -------- -------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Sales................... $ 305 $ 315 $ 354 $ 341 $ 1,315
Cost of goods sold...... 263 271 310 291 1,135
Income from continuing
operations............. 3 2 3 9 17
Net income.............. 7 2 3 9 21
Per common share:
Basic
Income from continuing
operations........... .05 .05 .06 .20 .36
Net income............ .14 .05 .06 .20 .45
Diluted
Income from continuing
operations........... .05 .05 .06 .20 .36
Net income............ .14 .05 .06 .20 .45
Common dividends per
share.................. .30 .20 .20 .20 .90
Market price of common
stock(/3/)
High.................. 15 3/4 15 3/16 14 13/16 19 7/8 19 7/8
Low................... 9 1/2 9 11/16 12 3/16 12 1/8 9 1/2
<CAPTION>
1998
- ----
<S> <C> <C> <C> <C> <C>
Sales................... $ 359 $ 348 $ 383 $ 336 $ 1,426
Cost of goods sold...... 287 285 320 269 1,161
Income (loss) from
continuing operations.. 23 17 (11) 9 38
Net income (loss)....... 39 38 (7) 8 78
Per common share:
Basic
Income (loss) from
continuing
operations........... .47 .37 (.24) .19 .79
Net income (loss)..... .81 .81 (.15) .16 1.64
Diluted
Income (loss) from
continuing
operations........... .46 .37 (.24) .19 .79
Net income (loss)..... .80 .80 (.15) .16 1.63
Common dividends per
share.................. .30 .30 .30 .30 1.20
Market price of common
stock(/3/)
High.................. 49 5/16 48 3/4 41 5/8 30 7/8 49 5/16
Low................... 42 5/16 39 7/8 23 7/8 24 13/16 23 7/8
</TABLE>
- --------
(1) Operating results in 1998 include a charge for the sale of the
microelectronic packaging unit at Manteca, CA and the restructuring of the
rod, wire and tube businesses at Indianapolis, IN ($42 pretax, $26 after
tax and $0.55 diluted earnings per share).
(2) Operating results in 1998 include non-recurring costs associated with the
spin-off of Arch Chemicals, Inc. primarily severance, investment banking
and legal fees ($21 pretax, $15 after tax and $0.32 diluted earnings per
share).
(3) New York Stock Exchange composite transactions.
46
<PAGE>
Economic Value Added Performance Measure (Unaudited)
In 1995, the Company recognized a need to improve our total return to
shareholders. After a thorough review of our financial management systems, we
selected an innovative business management system known as Economic Value
Added, or EVA(R). Developed by Stern Stewart & Company, EVA is a highly
successful management tool that builds upon and refines traditional tools. It
is designed to help maximize long-term profitability, increase return on
capital employed and operate businesses more effectively. EVA is recognized as
a reliable predictor of stock market performance over a period of time. A
positive correlation has been demonstrated between improvement in a company's
EVA and the price of its stock. EVA is a method of measuring the Company's
financial health by taking operating profit after taxes and subtracting a
charge for capital employed. The table below summarizes the Company's EVA
calculation for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998(/1/)
---- ---------
<S> <C> <C>
Earnings before interest and taxes.............................. $ 41 $136
Adjustments..................................................... 30 27
---- ----
Operating profit before taxes................................... 71 163
Cash taxes at 35%............................................... (25) (57)
---- ----
Net operating profit after taxes................................ 46 106
Capital charge.................................................. (71) (67)
---- ----
EVA............................................................. $(25) $ 39
==== ====
Average capital employed........................................ $758 $712
==== ====
Return on capital............................................... 6.1% 14.9%
==== ====
Cost of capital................................................. 9.4% 9.4%
==== ====
</TABLE>
- --------
(1) Adjusted to reflect the Spin-Off of Arch Chemicals, Inc.
Earnings Before Interest and Taxes
Earnings before interest and taxes ("EBIT") is calculated as pretax profits
plus interest expense, less interest income. EBIT in 1998 excludes the $63
million pretax charge for the sale of the microelectronic packaging unit at
Manteca, CA, the restructuring of the rod, wire and tube businesses at
Indianapolis, IN and non-recurring costs associated with the Spin-Off of Arch
Chemicals. For EVA purposes, gains and losses on asset or business sales and
restructurings are excluded from EBIT but instead, the related cash flows are
considered permanent increases or decreases to the capital employed and are
therefore part of the capital charge forever.
Adjustments to EBIT
Various adjustments are made to EBIT (as defined above) in order to
determine operating profit before taxes, make EVA a better management tool and
drive appropriate decision making and include the following:
Goodwill is considered a permanent investment in capital employed.
Accordingly, an adjustment is made to add goodwill amortization back to
EBIT and average capital employed is adjusted such that the original amount
of goodwill purchased is included in the asset base.
LIFO (last in first out) based inventory is restated to a FIFO (first in
first out) basis to appropriately reflect the actual current investment in
inventory.
Operating Leases are considered investments in capital and therefore an
adjustment is made to EBIT to remove the implicit financing cost and
average capital is increased by the net present value of the operating
leases.
47
<PAGE>
Environmental remediation accruals are removed from EBIT and the after
tax cash cost of legacy environmental remediation expenditures is added to
the average capital base.
Special Charges, such as the non-recurring costs associated with the
Spin-Off of Arch Chemicals in 1998, are excluded from EBIT and the actual
cash expenditures are accounted for as a permanent increase in average
capital.
Asset Sales are accounted for such that the pretax book gain or loss is
excluded from EBIT and any after tax cash gain is a permanent reduction of
average capital and any after tax cash loss is a permanent increase to
average capital.
Capital Charge
The capital charge is the EVA based average capital employed multiplied by
the cost of capital. The cost of capital is the Company's target weighted
average cost of debt and equity capital.
48
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The biographical information relating to Olin's Directors under the heading
"Item 1--Election of Directors" in the Proxy Statement relating to Olin's 2000
Annual Meeting of Shareholders (the "Proxy Statement") is incorporated by
reference in this Report. See also the list of executive officers following
Item 4 of this Report. The information regarding compliance with Section 16 of
the Securities Exchange Act of 1934, as amended, contained in the paragraph
entitled "Section 16(a) Beneficial Ownership Reporting Compliance" under the
heading "Security Ownership of Directors and Officers" in the Proxy Statement
is incorporated by reference in this Report.
Item 11. Executive Compensation
The information under the heading "Executive Compensation" in the Proxy
Statement (but excluding the Report of the Compensation Committee on Executive
Compensation appearing on pages 10 through 11 of the Proxy Statement and the
graph appearing on page 15 of the Proxy Statement) is incorporated by reference
in this Report. The information under the heading "Additional Information
Regarding the Board of Directors--Compensation of Directors" in the Proxy
Statement is incorporated by reference in this Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information concerning holdings of Olin stock by certain beneficial
owners contained under the heading "Certain Beneficial Owners" in the Proxy
Statement and the information concerning beneficial ownership of Olin stock by
directors and officers of Olin under the heading "Security Ownership of
Directors and Officers" in the Proxy Statement are incorporated by reference in
this Report.
Item 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules, and Reports on
Form 8-K
(a) 1. Consolidated Financial Statements
Included in Item 8 above.
2. Consolidated Financial Statement Schedules
Schedules not included herein are omitted because they are inapplicable or
not required or because the required information is given in the consolidated
financial statements and notes thereto.
Separate consolidated financial statements of 50% or less owned subsidiaries
accounted for by the equity method are not summarized herein and have been
omitted because, in the aggregate, they would not constitute a significant
subsidiary.
49
<PAGE>
3. Exhibits
Management contracts and compensatory plans and arrangements are listed as
Exhibits 10(a) through 10(r) below.
3(a) Olin's Restated Articles of Incorporation as amended effective
May 8, 1997--Exhibit 3 to Olin's Form 10-Q for the Quarter ended
March 31, 1997.*
(b) By-laws of Olin as amended effective April 29, 1999--Exhibit 3(b)
to Olin's Form 10-Q for the quarter ended March 31, 1999.*
4(a) Articles of Amendment designating Series A Participating
Cumulative Preferred Stock, par value $1 per share--Exhibit 2 to
Olin's Form 8-A dated February 21, 1996, covering Series A
Participating Cumulative Preferred Stock Purchase Rights.*
(b) Rights Agreement dated as of February 27, 1996 between Olin and
Chemical Mellon Shareholder Services, LLP, Rights Agent--Exhibit
1 to Olin's Form 8-A dated February 21, 1996, covering Series A
Participating Cumulative Preferred Stock Purchase Rights.*
(c) Form of Senior Debt Indenture between Olin and Chemical Bank--
Exhibit 4(a) to Form 8-K dated June 15, 1992; Supplemental
Indenture dated as of March 18, 1994 between Olin and Chemical
Bank--Exhibit 4(c) to Registration Statement No. 33-52771;
Prospectus Supplement dated June 17, 1992 to Prospectus dated
June 16, 1992, with respect to Olin's 8% Senior Notes Due 2002
filed under Registration Statement No. 33-4479; and Prospectus
Supplement dated May 23, 1995 to Prospectus dated May 4, 1994
relating to Medium Term Notes, Series A filed under Registration
Statement No. 33-52771.*
(d) Form of Subordinated Debt Indenture between Olin and Bankers
Trust Company--Exhibit 4(i) to Registration Statement No. 33-
4479.*
(e) Amended and Restated Credit Agreement, dated as of September 30,
1993 and amended and restated as of February 22, 1999, among Olin
and the banks named therein.--Exhibit 4(e) to Olin's Form 10-K
for 1998.*
Olin is party to a number of other instruments defining the rights of
holders of long-term debt. No such instrument authorizes an amount of
securities in excess of 10% of the total assets of Olin and its subsidiaries
on a consolidated basis. Olin agrees to furnish a copy of each instrument to
the Commission upon request.
10(a) 1980 Stock Option Plan for Key Employees of Olin Corporation and
Subsidiaries, as amended--Exhibit 10(a) to Olin's Form 10-K for
1991.*
(b) 1988 Stock Option Plan for Key Employees of Olin Corporation and
Subsidiaries as amended through February 23, 1995--Exhibit 10(b)
to Olin's Form 10-K for 1994.*
(c) Amended and Restated Employee Deferral Plan, effective November
1, 1997, as amended and restated effective as of February 8,
1999--Exhibit 10(c) to Olin's Form 10-K for 1998.*
(d) Olin Senior Executive Pension Plan as restated February 8, 1999--
Exhibit 10(d) to Olin's Form 10-Q for the quarter ended March 31,
1999.*
(e) Olin Supplemental Contributing Employee Ownership Plan, effective
January 1, 1990 as amended and restated as of February 8, 1999--
Exhibit 10(e) to Olin's Form 10-Q for the quarter ended March 31,
1999.*
(f) Olin Corporation Key Executive Life Insurance Program--Exhibit
10(b) to Olin's Form 10-Q for Quarter ended March 31, 1986.*
(g) Form of Olin Corporation Endorsement Split Dollar Agreement
(effective January 1, 1993)--Exhibit 10(s) to Olin's Form 10-K
for 1992.*
(h) Form of executive agreement between Olin and certain executive
officers as amended December 10, 1998--Exhibit 10(h) to Olin's
Form 10-K for 1998.*
50
<PAGE>
(i) Form of special severance agreement provided to certain employees
to become operative upon a "change in control" event--Exhibit
10(n) to Olin's Form 10-K for 1997.*
(j) Olin 1991 Long Term Incentive Plan, as amended through February
23, 1995--Exhibit 10(u) to Olin's Form 10-K for 1994.*
(k) Amended and Restated 1997 Stock Plan for Non-Employee Directors
as amended and restated effective as of July 28, 1999--Exhibit
10(n) to Olin's Form 10-Q for the quarter ended June 30, 1999.*
(l) Olin Senior Management Incentive Compensation Plan, as amended
through December 9, 1999--Exhibit A to Olin's 2000 Proxy
Statement dated March 14, 2000.*
(m) Description of Restricted Stock Unit Awards granted under the
Olin 1991 Long Term Incentive Plan--Exhibit 10(bb) to Olin's Form
10-K for 1995.*
(n) Form of EVA Incentive Plan (Management Incentive Compensation
Plan)--Exhibit 10(dd) to Olin's Form 10-K for 1996.*
(o) 1996 Stock Option Plan for Key Employees of Olin Corporation and
Subsidiaries--Exhibit A to Olin's 1996 Proxy Statement dated
March 12, 1996.*
(p) Olin Supplementary and Deferral Benefit Pension Plan restated as
of February 8, 1999--Exhibit 10(s) to Olin's Form 10-Q for the
quarter ended March 31, 1999.*
(q) Form of Senior Executive Retention Agreement between Olin and
certain executive officers.
(r) Olin Corporation 2000 Long Term Incentive Plan--Exhibit B to
Olin's 2000 Proxy Statement dated March 14, 2000.*
(s) Assumption of Liabilities and Indemnity Agreement, dated December
31, 1996, between Olin Corporation and Primex Technologies,
Inc.--Exhibit 10(ii) to Olin's Form 10-K for 1996.*
(t) Distribution Agreement between Olin Corporation and Arch
Chemicals, Inc., dated as of February 1, 1999--Exhibit 2.1 to
Olin's Form 8-K filed February 23, 1999.*
(u) Form of Employee Benefits Allocation Agreement between Olin
Corporation and Arch Chemicals, Inc.--Exhibit 10(v) to Olin's
Form 10-K for 1998.*
(v) 364-Day Credit Agreement dated as of January 27, 1999, among Arch
Chemicals, Inc., Olin Corporation, the Lenders party thereto,
Bank of America, National Trust and Savings Association, as
Syndication Agent, Wachovia Bank, N.A., as Documentation Agent,
The Chase Manhattan Bank, as Administrative Agent and Chase
Securities, Inc., as Arranger--Exhibit 10.1 to Olin's Form 8-K
filed February 23, 1999.*
(w) Five-year Credit Agreement dated as of January 27, 1999, among
Arch Chemicals, Inc., Olin Corporation, the Lenders party
thereto, Bank of America, National Trust and Savings Association,
as Syndication Agent, Wachovia Bank, N.A., as Documentation
Agent, The Chase Manhattan Bank, as Administrative Agent and
Chase Securities, Inc., as Arranger--Exhibit 10.2 to Olin's Form
8-K filed February 23, 1999.*
11. Computation of Per Share Earnings (included in the Note--"Earnings
Per Share" to Notes to Consolidated Financial Statements in Item
8.)
12. Computation of Ratio of Earnings to Fixed Charges (unaudited).
21. List of Subsidiaries.
23. Consent of KPMG LLP dated March 7, 2000.
27. Financial Data Schedule.
- --------
* Previously filed as indicated and incorporated herein by reference. Exhibits
incorporated by reference are located in SEC File No. 1-1070 unless
otherwise indicated.
Any of the foregoing exhibits are available from the Company for a nominal
charge by writing to: Mr. Richard E. Koch, Vice President, Investor Relations
and Public Affairs, Olin Corporation, 501 Merritt 7, P.O. Box 4500, Norwalk,
CT 06856-4500.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1999.
51
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: March 7, 2000
/s/ Donald W. Griffin
By___________________________________
Donald W. Griffin
Chairman of the Board,
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Donald W. Griffin Chairman of the Board, March 7, 2000
_________________________________ President and Chief
Donald W. Griffin Executive Officer and
Director (Principal
Executive Officer)
/s/ William W. Higgins Director March 7, 2000
_________________________________
William W. Higgins
Director
_________________________________
Suzanne Denbo Jaffe
/s/ Randall W. Larrimore Director March 7, 2000
_________________________________
Randall W. Larrimore
/s/ G. Jackson Ratcliffe, Jr. Director March 7, 2000
_________________________________
G. Jackson Ratcliffe, Jr.
/s/ Richard M. Rompala Director March 7, 2000
_________________________________
Richard M. Rompala
/s/ Anthony W. Ruggiero Executive Vice President March 7, 2000
_________________________________ and Chief Financial
Anthony W. Ruggiero Officer (Principal
Financial Officer)
/s/ Mary E. Gallagher Controller (Principal March 7, 2000
_________________________________ Accounting Officer)
Mary E. Gallagher
</TABLE>
52
<PAGE>
PRINTED ON RECYCLED PAPER
[RECYCLED LOGO]
<PAGE>
Exhibit 10(q)
SENIOR EXECUTIVE RETENTION AGREEMENT
Agreement between Olin Corporation, a Virginia corporation ("Olin"), and
(the "Executive"), dated as of , 1999.
Olin and the Executive agree as follows:
1. Definitions. As used in this Agreement:
(a) "Brass" means the Brass division of Olin as operated on the date
hereof with such modifications thereto as are made in the ordinary course
of business.
(b) "Cause" means the willful and continued failure of the Executive to
substantially perform his duties; the willful engaging by the Executive in
gross misconduct significantly and demonstrably financially injurious to
the employer, or willful misconduct by the Executive in the course of his
employment which is a felony or fraud. No act or failure to act on the part
of the Executive will be considered "willful" unless done or omitted not in
good faith and without reasonable belief that the action or omission was in
the interests of the employer or not opposed to the interests of the
employer.
(c) "Chlor Alkali" means the Chlor Alkali Products division of Olin as
operated on the date hereof with such modifications thereto as are made in
the ordinary course of business.
(d) "Compete" means that the Executive becomes an owner, employee,
officer, director, partner or consultant of a business that competes with
the business of Olin, or any division or subsidiary of Olin, by selling,
offering to sell, or producing any product substantially similar to those
then sold or produced by Olin or any such division or subsidiary; provided
that the Executive shall not be deemed to Compete solely by virtue of
ownership of less than one percent of the outstanding securities of a
company whose stock is traded on a national securities exchange or by the
National Association of Securities Dealers Automated Quotation System.
(e) "Division Disposition" means:
(i) Any direct or indirect sale or other disposition of all or
substantially all of the business or assets of Chlor Alkali or Brass,
or both, in one or more transactions, to any person, partnership, joint
venture, corporation or other entity other than Olin, or a direct or
indirect majority-owned subsidiary of Olin; or
(ii) Any transaction by which Olin ceases to be the beneficial owner
of a majority of the capital stock or other equity interests in any
subsidiary corporation or other entity to which all or substantially
all of the assets or business of Chlor Alkali or Brass or both have
been transferred.
(f) "Employment Term" means the period beginning on the date of this
Agreement and ending on December 31, 2001.
(g) "Good Reason" means that:
(1) The employer reduces the Executive's total direct compensation
( i.e., the sum of base salary, the standard annual award under
short-term annual incentive compensation plans or programs and
standard awards under long-term incentive compensation plans or
programs) from the levels in effect on the date of this Agreement
other than a reduction due solely to the employer's financial
performance provided such performance is a relevant criterion under
such plan;
<PAGE>
(2) The Executive's duties, position or reporting responsibilities
are diminished, provided that a reduction in the scale of the
Executive's duties solely as an effect of a Division Disposition or
the reasonable addition of executive responsibilities as a result of
realignment of duties shall not constitute Good Reason;
(3) The employer fails to substantially maintain benefit plans as
Olin's are in effect on the date of this Agreement, unless
reasonably equivalent arrangements (embodied in an on-going
substitute or alternative plan) have been made with respect to such
plans; or
(4) The employer requires the Executive to relocate the
Executive's then office to an area which is not within reasonable
commuting distance (i.e. no more than 50 miles one way), on a daily
basis, from the Executive's then residence.
(h) "Net After Tax Benefit" means the sum of (i) the total amounts
payable to the Executive under this Agreement, plus (ii) all other payments
and benefits which the Executive receives or is entitled to receive from
Olin that would constitute a Parachute Payment, less (iii) the amount of
federal income taxes payable with respect to the foregoing calculated at
the maximum marginal income tax rate in effect for the year in which the
foregoing shall be paid to the Executive, less (iv) the amount of excise
taxes imposed with respect to the payments and benefits described in (i)
and (ii) above by Section 4999 of the Internal Revenue Code of 1986, as
amended.
(i) "Parachute Payment" means any payment deemed to constitute a
"parachute payment" as defined in Section 280G of the Internal Revenue Code
of 1986, as amended.
(j) "Retention Factor" means a number equal to the number of months
remaining in the Employment Term at the time of a termination described in
Section 4, rounded up to the nearest whole month.
(k) "Retention Payment" means an amount equal to the Retention Factor,
multiplied by the sum of: (i) the Executive's monthly salary in effect
immediately prior to the termination; plus (ii) an amount equal to one-
twelfth of the higher of (A) Executive's standard annual award under Olin's
short-term annual incentive compensation plans or programs at the time of
the termination, or (B) the Executive's average annual award actually paid
under Olin's short-term annual incentive compensation plans or programs
(including zero if nothing was paid or deferred, but including any portion
the Executive elected to defer) for the three calendar years immediately
preceding the termination referred to in Section 4.
(l) "Tier 1 Executive Agreement" means the Executive Agreement, dated as
of December 14, 1998, between Olin and the Executive, and any amendment to
or substitution for such agreement.
2. Previous Agreement. This Agreement is in addition to and is not intended
to replace or supersede the Tier 1 Executive Agreement, or any successor
agreement, and does not modify or amend the Tier 1 Executive Agreement.
3. Term. This Agreement expires at the close of business on the earlier of
(i) December 31, 2001, or (ii) a Change in Control as defined in the Tier 1
Executive Agreement provided that if Executive accepts employment with Brass
or Chlor Alkali or a successor entity or one of their affiliates in connection
with a Division Disposition, the Agreement shall continue for a period of
three years after the date Executive begins such new employment. In the event
of the Executive's death while employed by Olin, this Agreement shall
terminate and be of no further force or effect on the date of his or her
death; provided that the Executive's death will not affect any of the
Executive's rights resulting from an event occurring prior to death.
<PAGE>
4. Retention Payment and Related Benefits. In the event that (i) Olin
terminates the Executive's employment prior to the end of the Employment Term,
other than for Cause or Disability (as defined in the Tier 1 Executive
Agreement); or (ii) the Executive terminates his or her employment with Olin
for Good Reason after giving Olin at least three months' prior written notice:
(a) Olin will pay the Executive an amount equal to the Retention Payment,
in equal monthly installments for the remainder of the Employment Term,
beginning on the first day of the month immediately following the month in
which the termination occurs;
(b) Executive will receive service credit under all Olin pension plans
for which the Executive was eligible at the time of the termination (i.e.,
under Olin's qualified pension plans to the extent permitted under then
applicable law; otherwise such credit will be reflected in a supplementary
payment from Olin under one or more supplementary non-qualified pension
plans, to be due at the times and in the manner payments are due the
Executive under such supplementary non-qualified plan(s)) for a number of
months equal to the Retention Factor (such credit to be in addition to and
to run consecutively after, rather than concurrently with, any credit under
the Tier 1 Executive Agreement);
(c) Executive (including covered dependents) will continue to enjoy
coverage on the same basis as a similarly situated active employee under
all Olin medical, dental and life insurance plans to the extent Executive
was enjoying such coverage immediately prior to the termination, for a
number of months equal to the Retention Factor, (such coverage to be in
addition to, and to run consecutively after, rather than concurrently with,
any coverage under the Tier 1 Executive Agreement) and the Executive's
entitlement to insurance coverage under the Consolidated Omnibus Budget
Reconciliation Act would commence at the end of such period, without
offset;
(d) All stock options and shares of restricted stock, or other stock-
based compensation held by Executive immediately prior to the termination
shall vest effective upon the termination, and the exercise period for all
such options or other stock-based compensation shall be extended until the
full term of the relevant award;
(e) The balance (if any) in the Executive's "EVA Bonus Bank" at the time
of termination shall be paid in full, or, if a pro rata EVA Plan payout is
required under that Plan, then as soon as possible thereafter; and
(f) Any vesting requirements under the Olin Supplemental Contributing
Employee Ownership Plan shall be deemed satisfied in full.
(g) Each monthly installment payable for the remainder of the Employment
Term as provided under Section 4(a) shall be offset by amounts Executive
received as cash compensation from another "regular job" in the immediately
preceding month.
5. Payments Upon Termination by a Division. In the event that, in connection
with a Division Disposition, the Executive accepts employment with, and
becomes employed by, the Division or a successor entity or one of their
affiliates, and within three (3) years thereafter, (a) such new employer
terminates the Executive's employment, other than for Cause or Disability (as
defined in the Tier 1 Executive Agreement); or (b) the Executive terminates
his or her employment with such new employer for Good Reason:
(a) Olin will pay the Executive an amount equal to the product of: (i)
the Retention Factor plus twelve, multiplied by (ii) the sum of (A) the
Executive's monthly salary in effect at the time of the Division
Disposition; plus (B) one-twelfth of the higher of (I) Executive's standard
annual award under Olin's short-term annual incentive compensation plans or
programs at the time of the Division Disposition, or (II) the Executive's
average annual award actually paid under Olin's short-term annual incentive
compensation plans or programs (including zero if nothing was paid or
deferred, but including any portion the Executive elected to defer) for the
three calendar years
<PAGE>
immediately preceding the Division Disposition. Such payment shall be made
in equal monthly installments during the remainder of the Employment Term,
beginning on the first day of the month immediately following the month in
which such termination occurs. Such payment shall be reduced by any
severance, job transition or employment termination payments such Executive
receives in cash from his or her new employer in connection with the
termination, and by any cash payments Executive receives under paragraph
4(f) of the Tier 1 Executive Agreement;
(b) Executive will receive service credit under all Olin pension plans
for which the Executive was eligible at the time of the Division
Disposition (i.e., under Olin's qualified pension plans to the extent
permitted under then applicable law; otherwise such credit will be
reflected in a supplementary payment from Olin under one or more
supplementary non-qualified pension plans, to be due at the times and in
the manner payments are due the Executive under such supplementary non-
qualified plan(s)), for a number of months equal to the Retention Factor
plus twelve (net of any number of months of such credit, if any, that
Executive receives under the Tier 1 Executive Agreement);
(c) Executive (including covered dependents) will continue to enjoy
coverage on the same basis as a similarly situated active employee under
all Olin medical, dental and life insurance plans to the extent Executive
was enjoying such coverage immediately prior to the Division Disposition,
for a number of months equal to the Retention Factor plus twelve, (less the
number of months, if any, of such coverage that Executive receives under
the Tier 1 Executive Agreement) and the Executive's entitlement to
insurance coverage under the Consolidated Omnibus Budget Reconciliation Act
will commence at the end of such period, without offset; and
(d) Executive shall be entitled, at Olin's expense, to outplacement
counseling and associated services in accordance with Olin's customary
practice at the time with respect to senior executives terminated without
Cause, but only to the extent Executive does not receive such benefits
under the Tier 1 Executive Agreement.
(e) Any amounts payable under Section 5(a) shall be offset by amounts
Executive receives as cash compensation for full-time employment or full-
time consulting services.
6. Limitation on "Parachute" Payments. If any amounts payable to the
Executive pursuant to this Agreement which are deemed by the Executive to
constitute Parachute Payments, when added to any other payments which are
deemed by the Executive to constitute Parachute Payments, would result in the
imposition on the Executive of an excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), the amounts payable
under Section 4 or 5, as the case may be, shall be reduced by the smallest
amount necessary to avoid the imposition of such excise tax; but shall be
reduced only if, by reason of such reduction, the Executive's Net After Tax
Benefit shall exceed the Net After Tax Benefit if such reduction were not
made. The foregoing calculations (including any calculations required under
the definition of Net After Tax Benefit) shall be made, at Olin's expense, by
Olin and the Executive. If no agreement on the calculations is reached within
five days after the date of the termination triggering the payment, then the
calculations shall be made, at Olin's expense by a nationally-recognized
accounting firm and outside counsel mutually acceptable to the Executive and
Olin. In the event it becomes necessary to limit any payments under this
Agreement, the Executive's insurance shall be the last payments to be so
limited; any other payments payable under this Agreement shall be payable when
due until the remaining maximum permissible amount has been paid to the
Executive under this Section 6.
7. Successors; Offsets; Non-competition; Release.
(a) Olin will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business or assets of Olin, by agreement, in form and substance
satisfactory to the Executive, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that Olin would be
required
<PAGE>
to perform if no such succession had taken place. Failure of Olin to obtain
such assumption and agreement prior to the effectiveness of any such
succession will be a breach of this Agreement and entitle the Executive to
compensation from Olin in the same amount and on the same terms as the
Executive would be entitled to hereunder had a triggering event occurred on
the succession date. As used in this Agreement, "Olin" means Olin as
defined in the preamble to this Agreement and any successor to its business
or assets which executes and delivers this Agreement or which otherwise
becomes bound by all the terms and provisions of this Agreement by
operation of law or otherwise.
(b) This Agreement shall be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
(c) In the event that, without Olin's consent, which consent will not be
unreasonably withheld, the Executive Competes during the Employment Term,
the Executive will forfeit the right to receive amounts due from Olin under
this Agreement after the date Executive begins to Compete and will forfeit
any right to continued insurance coverage under this Agreement after such
date; provided that nothing in this Section shall be deemed to reduce or
otherwise impair in any manner, Executive's right to receive payments or
insurance benefits, if any, under any other plan, agreement or arrangement.
(d) Following termination of Executive's employment, Olin may require
Executive to release Olin from any and all employment, wrongful termination
and/or discrimination claims as a condition to making payments under this
Agreement, any such release to be in substantially the form required of
other former Olin employees.
(e) The Executive will not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise. Nothing in this Agreement, including any offset or similar
provision will be deemed to reduce or limit the rights which the Executive
may have under any other employee benefit plan, policy or arrangement of
Olin.
8. Notices. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
If to the Company: Olin Corporation
501 Merritt 7
P.O. Box 4500
Norwalk, CT 06856-4500
Attention: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
9. Governing Law. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Connecticut
(without giving effect to its conflicts of law).
10. Miscellaneous. No provisions of this Agreement may be modified, waived
or discharged unless such modification, waiver or discharge is agreed to in
writing signed by the Executive and Olin. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth expressly in
this Agreement.
<PAGE>
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
12. Withholding of Taxes. Olin may withhold from any benefits payable under
this Agreement all federal, state, city or other taxes as shall be required
pursuant to any law or governmental regulation or ruling.
13. Non-assignability. This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign or transfer
this Agreement or any rights or obligations hereunder, except as provided in
paragraph 7 above or except to any direct or indirect majority owned
subsidiary of Olin. Without limiting the foregoing, the Executive's right to
receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a transfer by
his will or by the laws of descent or distribution, and, in the event of any
attempted assignment or transfer by the Executive contrary to this paragraph,
Olin shall have no liability to pay any amount so attempted to be assigned or
transferred.
14. No Employment Right. This Agreement shall not be deemed to confer on the
Executive a right to continued employment with Olin.
15. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration at Olin's corporate
headquarters in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of the Executive's
right to be paid during the pendency of any dispute or controversy arising
under or in connection with this Agreement.
(b) Olin shall pay all reasonable legal fees and expenses, as they become
due, which the Executive may incur to enforce this Agreement through
arbitration or otherwise unless the arbitrator determines that Executive
had no reasonable basis for his claim. Should Olin dispute the entitlement
of the Executive to such fees and expenses, the burden of proof shall be on
Olin to establish that the Executive had no reasonable basis for his claim.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above set forth.
Olin Corporation
By:
__________________________________
Accepted and Agreed:
_________________________
Name
Title:
<PAGE>
EXHIBIT 12
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Unaudited)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In millions)
<S> <C> <C> <C> <C> <C>
Earnings:
Income from continuing operations before taxes.... $ 27 $ 59 $147 $352 $137
Add (deduct):
Equity in (income) loss of non-consolidated
affiliates..................................... -- -- (1) (2) (2)
Dividends received from non-consolidated
affiliates..................................... -- -- 1 1 1
Interest capitalized, net of amortization....... -- (1) -- (2) --
Fixed charges as described below................ 27 31 36 42 55
---- ---- ---- ---- ----
Total......................................... $ 54 $ 89 $183 $391 $191
==== ==== ==== ==== ====
Fixed charges:
Interest expense................................ $ 16 $ 18 $ 25 $ 30 $ 44
Estimated interest factor in rent expense....... 11 13 11 12 11
---- ---- ---- ---- ----
Total......................................... $ 27 $ 31 $ 36 $ 42 $ 55
==== ==== ==== ==== ====
Ratio of earnings to fixed charges................ 2.0 2.9 5.1 9.3 3.5
==== ==== ==== ==== ====
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF OLIN CORPORATION/1/
(as of December 31, 1999)
<TABLE>
<CAPTION>
% Ownership
Company (Direct/Indirect) Jurisdiction
------------------- ----------------- -------------------
<S> <C> <C>
A.J. Oster Caribe, Inc. 100 DE
A.J. Oster Foils, Inc. 100 DE
A.J. Oster West, Inc. 100 RI
Bridgeport Brass Corporation/2/ 100 IN
Bryan Metals, Inc./3/ 100 OH
Hunt Trading Co. 100 MO
Lectranator Corporation 100 OH
Olin Aegis 100 DE
Olin Benefits Management, Inc./4/ 90 CA
Olin Engineered Systems, Inc. 100 DE
Olin Environmental Management, Inc./4/ 90 DE
Olin Far East, Limited 100 DE
Olin Financial Services Inc. 100 DE
Olin Sunbelt, Inc. 100 DE
Ravenna Arsenal, Inc. 100 OH
Sunbelt Chlor Alkali Partnership 50 DE
Nutmeg Insurance Limited 100 Bermuda
Olin Asia Pacific Pte. Ltd. 100 Singapore
Olin Australia Limited 100 Australia
Olin Brass Japan, Inc. 100 Japan
Olin Canada Inc. 100 Canada
Olin Corporation N.Z. Limited 100 New Zealand
Olin Export Trading Corporation 100 U.S. Virgin Islands
Olin Hunt Specialty Products S.r.l. 100 Italy
Olin Mexico S.A. de C.V. 100 Mexico
Olin (UK) Limited 100 United Kingdom
Productora de Alcoholes Hidratados,
C.A. (PRALCA) 25 Venezuela
Reductone Brasil Ltda. 100 Brazil
Yamaha-Olin Metal Corporation 50 Japan
</TABLE>
- --------
/1/There are omitted from the following list the names of certain subsidiaries
which, if considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
/2/d/b/a "Olin Brass, Indianapolis" and "Olin Brass, Indianapolis Facility" in
CA, IL, IN, NJ, NC, OH, PA, RI and TX.
/3/d/b/a "Bryan Metals of Ohio" in NJ.
/4/Class A shares, all of which are held directly and indirectly by Olin
Corporation, have the right to elect 4 directors. Class B shares, none of
which are held directly or indirectly by Olin Corporation, have the right to
elect 1 director.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Olin Corporation:
We consent to the incorporation by reference in Registration Statements No.
33-4479 and No. 33-52771 on Form S-3 and Nos. 33-28593, 33-00159, 33-40346,
33-41202, 333-05097, 333-17629, 333-18619, 333-39305, 333-39303, 333-71693,
333-67411 and 333-67086 on Form S-8 of Olin Corporation of our report dated
January 27, 2000, relating to the consolidated balance sheets of Olin
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1999, which report is
included in the December 31, 1999 annual report on Form 10-K of Olin
Corporation.
KPMG LLP
Stamford, Connecticut
March 7, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Financial Statements contained in Item 8 of Form 10-K for the period ended
December 31, 1999 and is qualified in its entirety by reference to such
financial statements. Figures are rounded to the nearest 1,000,000 (except EPS).
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 21
<SECURITIES> 25
<RECEIVABLES> 176
<ALLOWANCES> (6)
<INVENTORY> 208
<CURRENT-ASSETS> 504
<PP&E> 1,595
<DEPRECIATION> (1,127)
<TOTAL-ASSETS> 1,063
<CURRENT-LIABILITIES> 252
<BONDS> 229
0
0
<COMMON> 45
<OTHER-SE> 264
<TOTAL-LIABILITY-AND-EQUITY> 1,063
<SALES> 1,315
<TOTAL-REVENUES> 1,315
<CGS> 1,135
<TOTAL-COSTS> 1,135
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 27
<INCOME-TAX> 10
<INCOME-CONTINUING> 17
<DISCONTINUED> 4
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.45<F1>
<FN>
<F1>Basic and diluted earnings per share from continuing operations were each
$0.36.
</FN>
</TABLE>
