OLIN CORP - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended		March 31, 2004

¨ 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 incorporation or organization)		(I.R.S. Employer Identification No.)

501 Merritt 7, Norwalk, CT		06856

(Address of principal executive offices)		(Zip Code)

(203) 750-3000
(Registrant’s telephone number, including area code)

(Former name, address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes	x	No	¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).


Yes	x	No	¨

As of April 30, 2004, there were outstanding 69,474,817 shares of the registrant’s common stock.

Part I — Financial Information

Item 1. Financial Statements.

OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES

Condensed Balance Sheets

(In millions, except per share data)

(Unaudited)


	March 31,			December 31,
	2004			2003
ASSETS

Cash and cash equivalents	$	185.8		$ 189.8
Accounts receivable, net		261.4		184.8
Inventories		249.7		242.4
Other current assets		66.4		62.0

Total current assets		763.3		679.0
Property, plant and equipment (less accumulated depreciation of $1,330.5 and $1,313.4)		489.1		500.6
Prepaid pension costs		224.7		101.5
Deferred income taxes		106.5		71.5
Other assets		11.0		11.0
Goodwill		79.5		79.5

Total assets	$	1,674.1		$1,443.1


LIABILITIES AND SHAREHOLDERS’ EQUITY

Short-term borrowings and current installments of long-term debt	$	9.7		$ 27.2
Accounts payable		141.8		128.9
Income taxes payable		48.4		11.1
Accrued liabilities		163.1		141.9

Total current liabilities		363.0		309.1
Long-term debt		299.9		300.4
Accrued pension liability		470.8		469.2
Other liabilities		188.8		188.0

Total liabilities		1,322.5		1,266.7

Commitments and contingencies
Shareholders’ equity:
Common stock, par value $1 per share:
Authorized 120.0 shares
Issued 69.3 shares (59.0 in 2003)		69.3		59.0
Additional paid-in capital		637.6		464.2
Accumulated other comprehensive loss		(244.4	)	(246.8	)
Accumulated deficit		(110.9	)	(100.0	)

Total shareholders’ equity		351.6		176.4

Total liabilities and shareholders’ equity	$	1,674.1		$1,443.1

The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements.

OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES

Condensed Statements of Income

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2004		2003
Sales	$	489.0	$	390.2
Operating Expenses:
Cost of goods sold		437.3		345.9
Selling and administration		33.1		30.3
Research and development		1.0		1.2
Restructuring charge		8.9		29.0
Earnings of non-consolidated affiliates		0.5		1.5

Operating income (loss)		9.2		(14.7	)
Interest expense		5.0		5.2
Interest income		0.5		0.2
Other income		0.5		—

Income (loss) before taxes and cumulative effect of accounting change		5.2		(19.7	)
Income tax provision (benefit)		2.3		(6.1	)

Income (loss) before cumulative effect of accounting change		2.9		(13.6	)
Cumulative effect of accounting change, net		—		(25.4	)

Net income (loss)	$	2.9	$	(39.0	)

Basic and diluted net income (loss) per common share:
Income (loss) before cumulative effect of accounting change	$	0.04	$	(0.23	)
Cumulative effect of accounting change, net		—		(0.44	)

Net income (loss)	$	0.04	$	(0.67	)

Dividends per common share	$	0.20	$	0.20

Diluted average common shares outstanding		64.4		57.8

The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements.

OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES

Condensed Statements of Cash Flows

(In millions)

(Unaudited)


	Three Months Ended March 31,
	2004			2003
Operating activities
Net income (loss)	$	2.9		$	(39.0	)
Adjustments to reconcile net income (loss) to net cash and cash equivalents used for operating activities:
Earnings of non-consolidated affiliates		(0.5	)		(1.5	)
Depreciation and amortization		18.3			22.8
Deferred income taxes		(35.0	)		(2.8	)
Non-cash portion of restructuring charge		—			22.8
Cumulative effect of accounting change		—			25.4
Pension plan contribution		(125.0	)		—
Qualified pension plan expense		1.8			—
Common stock issued under employee benefit plans		0.7			0.7
Change in:
Receivables		(76.6	)		(44.0	)
Inventories		(7.3	)		(16.8	)
Other current assets		(4.4	)		(0.6	)
Accounts payable and accrued liabilities		34.1			(10.6	)
Income taxes payable		37.3			(3.8	)
Noncurrent liabilities		2.7			(6.8	)
Other operating activities		0.9			(2.6	)

Net operating activities		(150.1	)		(56.8	)


Investing activities
Capital expenditures		(7.2	)		(8.6	)
Proceeds from sale of short-term investments		—			25.0
Investments and advances-affiliated companies at equity		0.9			5.7
Disposition of property, plant and equipment		0.6			0.4
Other investing activities		0.9			1.6

Net investing activities		(4.8	)		24.1


Financing activities
Long-term debt repayments		(18.0	)		(0.5	)
Issuance of common stock		181.1			3.9
Stock options exercised		1.6			1.0
Dividends paid		(13.8	)		(11.5	)

Net financing activities		150.9			(7.1	)

Net decrease in cash and cash equivalents		(4.0	)		(39.8	)
Cash and cash equivalents, beginning of period		189.8			110.5

Cash and cash equivalents, end of period	$	185.8		$	70.7

The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements.

OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Tabular amounts in millions, except per share data)

(Unaudited)

We have prepared the condensed financial statements included herein, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In our opinion, these financial statements reflect all adjustments (consisting only of normal accruals) which are necessary to present fairly the results for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, we believe that the disclosures are adequate to make the information presented not misleading. Certain reclassifications were made to prior year amounts to conform to the 2004 presentation. We recommend that you read these condensed financial statements in conjunction with the financial statements, accounting policies and the notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2003.

2.	Inventory consists of the following:


	March 31, 2004			December 31, 2003
Raw materials and supplies	$	129.8		$	120.0
Work in process		143.4			124.3
Finished goods		80.7			75.4

		353.9			319.7
LIFO reserve		(104.2	)		(77.3	)

Inventory, net	$	249.7		$	242.4

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. Inventories under the LIFO method are based on annual estimates of quantities and costs as of year-end; therefore, the condensed financial statements at March 31, 2004, reflect certain estimates relating to inventory quantities and costs at December 31, 2004.

Basic and diluted income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per share for the three months ended March 31, 2004 reflect the dilutive effect of stock options. The effect of stock options of 0.2 million shares for the three months ended March 31, 2003 has not been included in the 2003 diluted loss per share as their effect would have been anti-dilutive.


	Three Months Ended March 31,
Basic Income (Loss) Per Share:	2004		2003
Income (loss) before cumulative effect of accounting change	$	2.9	$	(13.6	)
Cumulative effect of accounting change, net		—		(25.4	)

Net income (loss)	$	2.9	$	(39.0	)


Basic shares		64.1		57.8

Basic income (loss) per share:
Income (loss) before cumulative effect of accounting change	$	0.04	$	(0.23	)
Cumulative effect of accounting change, net		—		(0.44	)

Net income (loss)	$	0.04	$	(0.67	)


Diluted Income (Loss) Per Share:
Income (loss) before cumulative effect of accounting change	$	2.9	$	(13.6	)
Cumulative effect of accounting change, net		—		(25.4	)

Net income (loss)	$	2.9	$	(39.0	)

Diluted shares:
Basic shares		64.1		57.8
Stock options		0.3		—

Diluted shares