SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2004
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 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 July 31, 2004, there were outstanding 69,821,486 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)
| June 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 117.8 | $ | 189.8 | ||||
| Accounts receivable, net |
283.5 | 184.8 | ||||||
| Inventories, net |
253.0 | 242.4 | ||||||
| Other current assets |
58.8 | 62.0 | ||||||
| Total current assets |
713.1 | 679.0 | ||||||
| Property, plant and equipment (less accumulated depreciation of $1,318.8 and $1,313.4) |
476.4 | 500.6 | ||||||
| Prepaid pension costs |
226.5 | 101.5 | ||||||
| Deferred income taxes |
108.0 | 71.5 | ||||||
| Other assets |
12.7 | 11.0 | ||||||
| Goodwill |
77.3 | 79.5 | ||||||
| Total assets |
$ | 1,614.0 | $ | 1,443.1 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current installments of long-term debt |
$ | 51.6 | $ | 27.2 | ||||
| Accounts payable |
136.8 | 128.9 | ||||||
| Income taxes payable |
11.5 | 11.1 | ||||||
| Accrued liabilities |
151.4 | 141.9 | ||||||
| Total current liabilities |
351.3 | 309.1 | ||||||
| Long-term debt |
249.7 | 300.4 | ||||||
| Accrued pension liability |
474.6 | 469.2 | ||||||
| Other liabilities |
186.6 | 188.0 | ||||||
| Total liabilities |
1,262.2 | 1,266.7 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ equity: |
||||||||
| Common stock, par value $1 per share: |
||||||||
| Authorized 120.0 shares Issued and outstanding 69.7 shares (59.0 in 2003) |
69.7 | 59.0 | ||||||
| Additional paid-in capital |
644.3 | 464.2 | ||||||
| Accumulated other comprehensive loss |
(247.8 | ) | (246.8 | ) | ||||
| Accumulated deficit |
(114.4 | ) | (100.0 | ) | ||||
| Total shareholders’ equity |
351.8 | 176.4 | ||||||
| Total liabilities and shareholders’ equity |
$ | 1,614.0 | $ | 1,443.1 | ||||
The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements.
2
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Income
(In millions, except per share amounts)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||
| 2004 |
2003 |
2004 |
2003 |
||||||||||
| Sales |
$ | 512.7 | $ | 396.4 | $ | 1,001.7 | $ | 786.6 | |||||
| Operating Expenses: |
|||||||||||||
| Cost of goods sold |
470.0 | 348.4 | 907.3 | 694.3 | |||||||||
| Selling and administration |
34.4 | 31.6 | 67.5 | 61.9 | |||||||||
| Research and development |
0.9 | 1.1 | 1.9 | 2.3 | |||||||||
| Restructuring charge |
— | — | 8.9 | 29.0 | |||||||||
| Earnings of non-consolidated affiliates |
1.0 | 3.1 | 1.5 | 4.6 | |||||||||
| Operating income |
8.4 | 18.4 | 17.6 | 3.7 | |||||||||
| Interest expense |
5.0 | 5.1 | 10.0 | 10.3 | |||||||||
| Interest income |
0.4 | 0.3 | 0.9 | 0.5 | |||||||||
| Other income |
13.8 | 1.8 | 14.3 | 1.8 | |||||||||
| Income (loss) before taxes and cumulative effect of accounting change |
17.6 | 15.4 | 22.8 | (4.3 | ) | ||||||||
| Income tax provision |
7.2 | 6.9 | 9.5 | 0.8 | |||||||||
| Income (loss) before cumulative effect of accounting change |
10.4 | 8.5 | 13.3 | (5.1 | ) | ||||||||
| Cumulative effect of accounting change, net |
— | — | — | (25.4 | ) | ||||||||
| Net income (loss) |
$ | 10.4 | $ | 8.5 | $ | 13.3 | $ | (30.5 | ) | ||||
| Basic and diluted net income (loss) per common share: |
|||||||||||||
| Income (loss) before cumulative effect of accounting change |
$ | 0.15 | $ | 0.15 | $ | 0.20 | $ | (0.09 | ) | ||||
| Cumulative effect of accounting change, net |
— | — | — | (0.44 | ) | ||||||||
| Net income (loss) |
$ | 0.15 | $ | 0.15 | $ | 0.20 | $ | (0.53 | ) | ||||
| Dividends per common share |
$ | 0.20 | $ | 0.20 | $ | 0.40 | $ | 0.40 | |||||
| Average common shares outstanding: |
|||||||||||||
| Basic |
69.5 | 58.1 | 66.5 | 58.0 | |||||||||
| Diluted |
69.7 | 58.4 | 66.7 | 58.0 | |||||||||
The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements.
3
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Cash Flows
(In millions)
(Unaudited)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Operating activities |
||||||||
| Net income (loss) |
$ | 13.3 | $ | (30.5 | ) | |||
| Adjustments to reconcile net income (loss) to net cash and cash equivalents used for operating activities: |
||||||||
| Earnings of non-consolidated affiliates |
(1.5 | ) | (4.6 | ) | ||||
| Gain on sales of a business and an insurance investment |
(7.5 | ) | — | |||||
| Depreciation and amortization |
36.7 | 44.1 | ||||||
| Deferred income taxes |
(34.3 | ) | 7.0 | |||||
| Non-cash portion of restructuring charge |
— | 22.8 | ||||||
| Cumulative effect of accounting change |
— | 25.4 | ||||||
| Pension plan contribution |
(125.0 | ) | — | |||||
| Qualified pension plan expense |
3.2 | — | ||||||
| Common stock issued under employee benefit plans |
1.4 | 1.4 | ||||||
| Change in: |
||||||||
| Receivables |
(103.0 | ) | (40.6 | ) | ||||
| Inventories |
(14.2 | ) | (18.2 | ) | ||||
| Other current assets |
3.1 | (3.6 | ) | |||||
| Accounts payable and accrued liabilities |
19.1 | (8.7 | ) | |||||
| Income taxes payable |
0.4 | (6.0 | ) | |||||
| Other assets |
(1.2 | ) | 2.2 | |||||
| Noncurrent liabilities |
1.2 | (8.8 | ) | |||||
| Other operating activities |
(0.5 | ) | 0.9 | |||||
| Net operating activities |
(208.8 | ) | (17.2 | ) | ||||
| Investing activities |
||||||||
| Capital expenditures |
(17.8 | ) | (21.1 | ) | ||||
| Proceeds from sale of short-term investments |
— | 25.0 | ||||||
| Investments and advances-affiliated companies at equity |
(0.4 | ) | 4.8 | |||||
| Proceeds from sales of a business and an insurance investment |
19.7 | — | ||||||
| Disposition of property, plant and equipment |
0.7 | 3.7 | ||||||
| Other investing activities |
(0.4 | ) | 2.8 | |||||
| Net investing activities |
1.8 | 15.2 | ||||||
| Financing activities |
||||||||
| Long-term debt repayments |
(26.3 | ) | (0.7 | ) | ||||
| Issuance of common stock |
184.5 | 7.4 | ||||||
| Stock options exercised |
5.0 | 2.8 | ||||||
| Dividends paid |
(27.7 | ) | (23.1 | ) | ||||
| Other financing activities |
(0.5 | ) | (0.4 | ) | ||||
| Net financing activities |
135.0 | (14.0 | ) | |||||
| Net decrease in cash and cash equivalents |
(72.0 | ) | (16.0 | ) | ||||
| Cash and cash equivalents, beginning of period |
189.8 | 110.5 | ||||||
| Cash and cash equivalents, end of period |
$ | 117.8 | $ | 94.5 | ||||
The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements.
4
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Tabular amounts in millions, except per share data)
(Unaudited)
| 1. | 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 appropriate. 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: |
| June 30, 2004 |
December 31, 2003 |
|||||||
| Raw materials and supplies |
$ | 131.1 | $ | 120.0 | ||||
| Work in process |
150.6 | 124.3 | ||||||
| Finished goods |
81.5 | 75.4 | ||||||
| 363.2 | 319.7 | |||||||
| LIFO reserve |
(110.2 | ) | (77.3 | ) | ||||
| Inventory, net |
$ | 253.0 | $ | 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 June 30, 2004, reflect certain estimates relating to inventory quantities and costs at December 31, 2004.
| 3. | 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 June 30, 2004 and 2003 and for the six months ended June 30, 2004 reflect the dilutive effect of stock options. The effect of stock options of 0.2 million shares for the six months ended June 30, 2003 has not been included in the 2003 diluted loss per share as their effect would have been anti-dilutive. Please refer to footnote 6. |