NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS
Olin Corporation (Olin) is a Virginia corporation, incorporated in 1892, having its principal executive offices in Clayton, MO. We are a manufacturer concentrated in three business segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. The Chlor Alkali Products and Vinyls segment manufactures and sells chlorine and caustic soda, ethylene dichloride and vinyl chloride monomer, methyl chloride, methylene chloride, chloroform, carbon tetrachloride, perchloroethylene, trichloroethylene, hydrochloric acid, hydrogen, bleach products and potassium hydroxide. The Epoxy segment produces and sells a full range of epoxy materials and precursors, including aromatics (acetone, bisphenol, cumene and phenol), allyl chloride, epichlorohydrin, liquid epoxy resins, solid epoxy resins and downstream products such as converted epoxy resins and additives. The Winchester segment produces and sells sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.
NOTE 2. 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.
Basis of Presentation
The consolidated financial statements include the accounts of Olin and all majority-owned subsidiaries. Investment in our affiliates are accounted for on the equity method. Accordingly, we include only our share of earnings or losses of these affiliates in consolidated net income (loss). Certain reclassifications were made to prior year amounts to conform to the 2020 presentation.
Revenue Recognition
We derive our revenues primarily from the manufacturing and delivery of goods to customers. Revenues are recognized on sales of goods at the time when control of those goods is transferred to our customers at an amount that reflects the consideration to which we expect to be entitled in exchange for those goods. We primarily sell our goods directly to customers, and to a lesser extent, through distributors. Payment terms are typically 30 to 90 days from date of invoice. Our contracts do not typically have a significant financing component. Right to payment is determined at the point in time in which control has transferred to the customer.
A performance obligation is a promise in a contract to transfer a distinct good to the customer. At contract inception, we assess the goods promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a good (or bundle of goods) that is distinct. A contract’s transaction price is based on the price stated in the contract and allocated to each distinct performance obligation and revenue is recognized when the performance obligation is satisfied. Substantially all of our contracts have a single distinct performance obligation or multiple performance obligations which are distinct and represent individual promises within the contract. Substantially all of our performance obligations are satisfied at a single point in time, when control is transferred, which is generally upon shipment or delivery as stated in the contract terms.
All taxes assessed by governmental authorities that are both imposed on and concurrent with our revenue-producing transactions and collected from our customers are excluded from the measurement of the transaction price. Shipping and handling fees billed to customers are included in revenue and are considered activities to fulfill the promise to transfer the good. Allowances for estimated returns, discounts and rebates are considered variable consideration, which may be constrained, and are estimated and recognized when sales are recorded. The estimates are based on various market data, historical trends and information from customers. Actual returns, discounts and rebates have not been materially different from estimates. For all contracts that have a duration of one year or less at contract inception, we do not adjust the promised amount of consideration for the effects of a significant financing component.
Substantially all of our revenue is derived from contracts with an original expected length of time of one year or less and for which we recognize revenue for the amount in which we have the right to invoice at the point in time in which control has transferred to the customer. However, a portion of our revenue is derived from long-term contracts which have contract periods that vary between one to multi-year. Certain of these contracts represent contracts with minimum purchase obligations, which can be substantially different than the actual revenue recognized. Such contracts consist of varying types of products across our chemical businesses. Certain contracts include variable volumes and/or variable pricing with pricing provisions tied to
commodity, consumer price or other indices. The transaction price allocated to the remaining performance obligations related to our contracts was excluded from the disclosure of our remaining performance obligations based on the following practical expedients that we elected to apply: (i) contracts with index-based pricing or variable volume attributes in which such variable consideration is allocated entirely to a wholly unsatisfied performance obligation; and (ii) contracts with an original expected duration of one year or less.
Cost of Goods Sold and Selling and Administration Expenses
Cost of goods sold includes the costs of inventory sold, related purchasing, distribution and warehousing costs, costs incurred for shipping and handling, depreciation and amortization expense related to these activities and environmental remediation costs and recoveries. Selling and administration expenses include personnel costs associated with sales, marketing and administration, research and development, legal and legal-related costs, consulting and professional services fees, advertising expenses, depreciation expense related to these activities, foreign currency translation and other similar costs.
Acquisition-related Costs
Acquisition-related costs include advisory, legal, accounting and other professional fees incurred in connection with the purchase and integration of our acquisitions. Acquisition-related costs also may include costs which arise as a result of acquisitions, including contractual change in control provisions, contract termination costs, compensation payments related to the acquisition or pension and other postretirement benefit plan settlements. On October 5, 2015 (the Closing Date), we completed the acquisition (the Acquisition) from The Dow Chemical Company (Dow) of its U.S. Chlor Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses (collectively, the Acquired Business). For the year ended December 31, 2018, we incurred costs related to the integration of the Acquired Business of $1.0 million which consisted of advisory, legal, accounting and other professional fees.
Other Operating Income (Expense)
Other operating income (expense) consists of miscellaneous operating income items, which are related to our business activities, and gains (losses) on disposition of property, plant and equipment.
Included in other operating income were the following:
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Years Ended December 31,
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2020
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2019
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2018
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($ in millions)
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Losses on disposition of property, plant and equipment, net
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$
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(0.2)
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$
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—
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$
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(2.0)
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Gains on insurance recoveries
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—
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—
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8.0
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Other
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0.9
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0.4
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0.4
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Other operating income
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$
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0.7
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$
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0.4
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$
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6.4
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Other operating income for 2020 included an $0.8 million gain on the sale of land. Other operating income for 2018 included an $8.0 million insurance recovery for a second quarter 2017 business interruption at our Freeport, TX vinyl chloride monomer facility partially offset by a $1.7 million loss on the sale of land.
Other Income (Expense)
Other income (expense) consists of non-operating income and expense items which are not related to our primary business activities.
Foreign Currency Translation
Our worldwide operations utilize the U.S. dollar (USD) or local currency as the functional currency, where applicable. For foreign entities where the USD is the functional currency, gains and losses resulting from balance sheet translations are included in selling and administration. For foreign entities where the local currency is the functional currency, assets and liabilities denominated in local currencies are translated into USD at end-of-period exchange rates and the resultant translation adjustments are included in accumulated other comprehensive loss. Assets and liabilities denominated in other than the local currency are remeasured into the local currency prior to translation into USD and the resultant exchange gains or losses are included in income in the period in which they occur. Income and expenses are translated into USD using an approximation of the average rate prevailing during the period. We change the functional currency of our separate and distinct foreign entities only when significant changes in economic facts and circumstances indicate clearly that the functional currency has changed.
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
We classify our marketable securities as available-for-sale, which are reported at fair market value with unrealized gains and losses included in accumulated other comprehensive loss, net of applicable taxes. The fair value of marketable securities is determined by quoted market prices. 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 (expense) in the consolidated statements of operations. Interest and dividends on all securities are included in interest income and other income (expense), respectively. As of December 31, 2020 and 2019, we had no short-term investments recorded on our consolidated balance sheets.
Allowance for Doubtful Accounts Receivable
We evaluate the collectibility of financial instruments based on our current estimate of credit losses expected to be incurred over the life of the financial instrument. The only significant financial instrument which creates exposure to credit losses are customer accounts receivables. We measure credit losses on uncollected accounts receivable through an allowance for doubtful accounts receivable which is based on a combination of factors including both historical collection experience and reasonable estimates that affect the expected collectibility of the receivable. These factors include historical bad debt experience, industry conditions of the customer or group of customers, geographical region, credit ratings and general market conditions. We group receivables together for purposes of estimating credit losses when customers have similar risk characteristics; otherwise, the estimation is performed on the individual receivable.
This estimate is periodically adjusted when we become aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. While we have a large number of customers that operate in diverse businesses and are geographically dispersed, a general economic downturn in any of the industry segments in which we operate could result in higher than expected defaults, and, therefore, the need to revise estimates for the provision for doubtful accounts could occur.
Inventories
Inventories are valued at the lower of cost and net realizable value. For U.S. inventories, inventory costs are determined principally by the last-in, first-out (LIFO) method of inventory accounting while for international inventories, inventory costs are determined principally by the first-in, first-out (FIFO) method of inventory accounting. Costs for other inventories have been determined principally by the average-cost method (primarily operating supplies, spare parts and maintenance parts). Elements of costs in inventories include raw materials, direct labor and manufacturing overhead.
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. Interest costs incurred to finance expenditures for major long-term construction projects are capitalized as part of the historical cost and included in property, plant and equipment and are depreciated over the 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. Expenditures for maintenance and repairs are charged to expense when incurred while the costs of significant improvements, which extend the useful life of the underlying asset, are capitalized.
Property, plant and equipment are reviewed for impairment when conditions indicate that the carrying values of the assets may not be recoverable. Such impairment conditions include an extended period of idleness or a plan of disposal. If such impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may not be recoverable, we determine whether impairment has occurred through the use of an undiscounted cash flow analysis at the lowest level for which identifiable cash flows exist. For our Chlor Alkali Products and Vinyls, Epoxy and Winchester segments, the lowest level for which identifiable cash flows exist is the operating facility level or an appropriate grouping of operating facilities level. The amount of impairment loss, if any, is measured by the difference between the net book value of the assets and the estimated fair value of the related assets.
Leases
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02 “Leases,” (ASU 2016-02) which supersedes Accounting Standards Codification (ASC) 840 “Leases” and creates a new topic, ASC 842 “Leases” (ASC 842). Subsequent to the issuance of ASU 2016-02, ASC 842 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update. Upon initial application, the provisions of these updates are required to be applied using the modified retrospective method which requires retrospective adoption to each prior reporting period presented with the cumulative effect of adoption recorded to the earliest reporting period presented. An optional transition method can be utilized which requires application of these updates beginning on the date of adoption with the cumulative effect of initially applying these updates recognized at the date of initial adoption. We adopted these updates on January 1, 2019 using the optional transition method. Consequently, our comparative periods have not been retrospectively adjusted for the new lease requirements. In addition, we elected the following practical expedients:
•We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification.
•We elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements.
•We elected the short-term practical expedient for all classes of lease assets, which allows us to not record leases with an initial term of 12 months or less on the balance sheet, and instead recognize the expense straight-line over the lease term.
•We elected the practical expedient to not separate lease components from non-lease components for all asset classes.
Adoption of these updates resulted in the recording of operating lease assets and lease liabilities on our consolidated balance sheet of $291.9 million as of January 1, 2019. Our assets and liabilities for finance leases remained unchanged. We also recognized the cumulative effect of applying these updates as an adjustment to retained earnings of $11.2 million, net of tax, which was primarily related to the recognition of previously deferred sale/leaseback gains. Our consolidated statements of operations and cash flows, along with our compliance with all covenants and restrictions under all our outstanding credit agreements, were not impacted by this adoption.
We determine if an arrangement is a lease at inception of the contract. Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of fixed lease payments over the lease term. Our lease commitments are primarily for railcars, but also include logistics, manufacturing, storage, real estate and information technology assets. Leases with an initial term of 12 months or less are not recorded on the balance sheet; instead, we recognize lease expense for these leases on a straight-line basis over the lease term. We do not account for lease components (e.g., fixed payments to use the underlying lease asset) separately from the non-lease components (e.g., fixed payments for common-area maintenance costs and other items that transfer a good or service). Some of our leases include variable lease payments, which primarily result from changes in consumer price and other market-based indices, which are generally updated annually, and maintenance and usage charges. These variable payments are excluded from the calculation of our lease assets and liabilities.
Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to many years. The exercise of lease renewal options is typically at our sole discretion. Certain leases also include options to purchase the leased asset. We do not include options to renew or purchase leased assets in the measurement of lease liabilities unless those options are highly certain of exercise. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. We have operating leases with terms that require us to guarantee a portion of the residual value of the leased assets upon termination of the lease as well as other guarantees. These residual value guarantees consist primarily of leases for railcars. Residual value guarantee payments that become probable and estimable are accrued as part of the lease liability and recognized over the remaining life of the applicable lease. Our current expectation is that the likelihood of material residual guarantee payments is remote. We utilize the interest rate implicit in the lease to determine the lease liability when the interest rate can be determined. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. We estimate the incremental borrowing rate based on the geographic region for which we would borrow, on a secured basis of the lease asset, at an amount equal to the lease payments over a similar time period as the lease term. We have no additional restrictions or covenants imposed by our lease contracts.
Asset Retirement Obligations
We record the fair value of an asset retirement obligation associated with the retirement of a tangible long-lived asset as a liability in the period incurred. The liability is measured at discounted fair value and is adjusted to its present value in subsequent periods as accretion expense is recorded. The corresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s useful life. Asset retirement obligations are reviewed annually in the fourth quarter and/or when circumstances or other events indicate that changes underlying retirement assumptions may have occurred.
The activities of our asset retirement obligations were as follows:
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December 31,
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2020
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2019
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($ in millions)
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Beginning balance
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$
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63.7
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$
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60.2
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Accretion
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3.4
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3.4
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Spending
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(4.1)
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(4.5)
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Foreign currency translation adjustments
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0.1
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0.1
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Adjustments
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1.9
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|
4.5
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Ending balance
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$
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65.0
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$
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63.7
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At December 31, 2020 and 2019, our consolidated balance sheets included an asset retirement obligation of $47.0 million and $53.4 million, respectively, which were classified as other noncurrent liabilities.
In 2020 and 2019, we had net adjustments that increased the asset retirement obligation by $1.9 million and $4.5 million, respectively, which were primarily comprised of increases in estimated costs for certain assets.
Comprehensive Income (Loss)
Accumulated other comprehensive loss consists of foreign currency translation adjustments, pension and postretirement liability adjustments, pension and postretirement amortization of prior service costs and actuarial losses and net unrealized (losses) gains on derivative contracts.
Goodwill
Goodwill is not amortized, but is reviewed for impairment annually in the fourth quarter and/or when circumstances or other events indicate that impairment may have occurred. ASC 350 “Intangibles—Goodwill and Other” (ASC 350) permits entities to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the goodwill impairment test. Circumstances that are considered as part of the qualitative assessment and could trigger a quantitative impairment test include, but are not limited to: a significant adverse change in the business climate; a significant adverse legal judgment; adverse cash flow trends; an adverse action or assessment by a government agency; unanticipated competition; sustained decline in our stock price; and a significant restructuring charge within a reporting unit. We define reporting units at the business segment level or one level below the business segment level. For purposes of testing goodwill for impairment, goodwill has been allocated to our reporting units to the extent it relates to each reporting unit.
It is our practice, at a minimum, to perform a quantitative goodwill impairment test in the fourth quarter every three years. We use a discounted cash flow approach to develop the estimated fair value of a reporting unit when a quantitative test is performed. Management judgment is required in developing the assumptions for the discounted cash flow model. We also corroborate our discounted cash flow analysis by evaluating a market-based approach that considers earnings before interest, taxes, depreciation and amortization (EBITDA) multiples from a representative sample of comparable public companies. As a further indicator that each reporting unit has been valued appropriately using a discounted cash flow model, the aggregate fair value of all reporting units is reconciled to the total market value of Olin. An impairment would be recorded if the carrying amount of a reporting unit exceeded the estimated fair value. See Note 11 “Goodwill and Intangible Assets” for additional information.
Intangible Assets
In conjunction with our acquisitions, we have obtained access to the customer contracts and relationships, trade names, acquired technology and other intellectual property of the acquired companies. These relationships are expected to provide economic benefit for future periods. Amortization expense is recognized on a straight-line basis over the estimated lives of the related assets. The amortization period of customer contracts and relationships, trade names, acquired technology and other intellectual property represents our best estimate of the expected usage or consumption of the economic benefits of the acquired assets, which is based on the company’s historical experience.
Intangible assets with finite lives are reviewed for impairment when conditions indicate that the carrying values of the assets may not be recoverable. Circumstances that are considered as part of the qualitative assessment and could trigger a quantitative impairment test include, but are not limited to: a significant adverse change in the business climate; a significant adverse legal judgment including asset specific factors; adverse cash flow trends; an adverse action or assessment by a government agency; unanticipated competition; sustained decline in our stock price; and a significant restructuring charge within a reporting unit. Based upon our qualitative assessment, it is more likely than not that the fair value of our intangible assets are greater than the carrying amount as of December 31, 2020. No impairment of our intangible assets were recorded in 2020, 2019 or 2018.
Environmental Liabilities and Expenditures
Accruals (charges to income) 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 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 basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided to offset deferred tax assets if, based on the available evidence, it is more likely than not that some or all of the value of the deferred tax assets will not be realized.
Derivative Financial Instruments
We are exposed to market risk in the normal course of our business operations due to our purchases of certain commodities, our ongoing investing and financing activities and our operations that use foreign currencies. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies and procedures governing our management of market risks and the use of financial instruments to manage exposure to such risks. We use hedge accounting treatment for a significant amount of our business transactions whose risks are covered using derivative instruments. The hedge accounting treatment provides for the deferral of gains or losses on derivative instruments until such time as the related transactions occur.
Concentration of Credit Risk
Accounts receivable is the principal financial instrument which subjects us to a concentration of credit risk. Credit is extended based upon the evaluation of a customer’s financial condition and, generally, collateral is not required. Concentrations of credit risk with respect to receivables are somewhat limited due to our large number of customers, the diversity of these customers’ businesses and the geographic dispersion of such customers. Our accounts receivable are predominantly derived from sales denominated in USD or the Euro. We maintain an allowance for doubtful accounts based upon the expected collectibility of all trade receivables.
Fair Value
Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties or the amount that would be paid to transfer a liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.
Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by ASC 820 “Fair Value Measurement” (ASC 820), and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
Level 1 — Inputs were unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 — Inputs (other than quoted prices included in Level 1) were either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 — Inputs reflected management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration was given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
Retirement-Related Benefits
We account for our defined benefit pension plans and non-pension postretirement benefit plans using actuarial models required by ASC 715 “Compensation—Retirement Benefits” (ASC 715). These models use an attribution approach that generally spreads the financial impact of changes to the plan and actuarial assumptions over the average remaining service lives of the employees in the plan. Changes in liability due to changes in actuarial assumptions such as discount rate, rate of compensation increases and mortality, as well as annual deviations between what was assumed and what was experienced by the plan are treated as actuarial gains or losses. The principle underlying the required attribution approach is that employees render service over their average remaining service lives on a relatively smooth basis and, therefore, the accounting for benefits earned under the pension or non-pension postretirement benefits plans should follow the same relatively smooth pattern. Substantially all domestic defined benefit pension plan participants are no longer accruing benefits; therefore, actuarial gains and losses are amortized based upon the remaining life expectancy of the inactive plan participants. For both the years ended December 31, 2020 and 2019, the average remaining life expectancy of the inactive participants in the domestic defined benefit pension plan were 18 years, respectively.
One of the key assumptions for the net periodic pension calculation is the expected long-term rate of return on plan assets, used to determine the “market-related value of assets.” The “market-related value of assets” recognizes differences between the plan’s actual return and expected return over a five year period. The required use of an expected long-term rate of return on the market-related value of plan assets may result in recognized pension income that is greater or less than the actual returns of those plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns and, therefore, result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the employees. As differences between actual and expected returns are recognized over five years, they subsequently generate gains and losses that are subject to amortization over the average remaining life expectancy of the inactive plan participants, as described in the preceding paragraph.
We use long-term historical actual return information, the mix of investments that comprise plan assets, and future estimates of long-term investment returns and inflation by reference to external sources to develop the expected long-term rate of return on plan assets as of December 31.
The discount rate assumptions used for pension and non-pension postretirement benefit plan accounting reflect the rates available on high-quality fixed-income debt instruments on December 31 of each year. The rate of compensation increase is based upon our long-term plans for such increases. For retiree medical plan accounting, we review external data and our own historical trends for healthcare costs to determine the healthcare cost trend rates.
For our defined benefit pension and other postretirement benefit plans, we measure service and interest costs by applying the specific spot rates along the yield curve to the plans’ estimated cash flows. We believe this approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve.
Stock-Based Compensation
We measure the cost of employee services received in exchange for an award of equity instruments, such as stock options, performance shares and restricted stock, based on the grant-date fair value of the award. This cost is recognized over the period during which an employee is required to provide service in exchange for the award, the requisite service period (usually the vesting period). An initial measurement is made of the cost of employee services received in exchange for an award of liability instruments based on its current fair value and the value of that award is subsequently remeasured at each reporting date through the settlement date. Changes in fair value of liability awards during the requisite service period are recognized as compensation cost over that period.
The fair value of each option granted, which typically vests ratably over three years, but not less than one year, was estimated on the date of grant, using the Black-Scholes option-pricing model with the following assumptions:
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2020
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2019
|
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2018
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|
Dividend yield
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4.60
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%
|
|
3.05
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%
|
|
2.43
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%
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|
Risk-free interest rate
|
1.44
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%
|
|
2.51
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%
|
|
2.72
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%
|
|
Expected volatility
|
36
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%
|
|
34
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%
|
|
32
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%
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|
Expected life (years)
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6.0
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|
6.0
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|
6.0
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Weighted-average grant fair value (per option)
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$
|
3.64
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|
|
$
|
6.76
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|
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$
|
8.89
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Weighted-average exercise price
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$
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17.33
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|
|
$
|
26.26
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|
|
$
|
32.94
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Shares granted
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2,663,100
|
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1,578,200
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|
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927,000
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|
Dividend yield was based on our current dividend yield as of the option grant date. Risk-free interest rate was based on zero coupon U.S. Treasury securities rates for the expected life of the options. Expected volatility was based on our historical stock price movements, as we believe that historical experience is the best available indicator of the expected volatility. Expected life of the option grant was based on historical exercise and cancellation patterns, as we believe that historical experience is the best estimate for future exercise patterns.
Share Repurchases
On April 26, 2018, our board of directors authorized a share repurchase program for the purchase of shares of common stock at an aggregate price of up to $500.0 million. This program will terminate upon the purchase of $500.0 million of our common stock. Under our April 26, 2018 share repurchase program, we may pursue various share repurchase strategies, which
include entering into accelerated share repurchase (ASR) agreements with third-party financial institutions to repurchase shares of Olin’s common stock. Under an ASR agreement, Olin pays a specified amount to the financial institution and receives an initial delivery of shares. This initial delivery of shares represents the minimum number of shares that Olin may receive under the agreement. Upon settlement of the ASR agreement, the financial institution delivers additional shares, with the final number of shares delivered determined with reference to the volume weighted-average price of Olin’s common stock over the term of the agreement, less an agreed-upon discount. The transactions are accounted for as liability or equity transactions and also as share retirements, similar to our other share repurchase activity, when the shares are received, at which time there is an immediate reduction in the weighted-average common shares calculation for basic and diluted earnings per share.
NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
In March 2020, the U.S. Securities and Exchange Commission issued final rule 33-10762, “Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities.” In October 2020, the FASB issued ASU 2020-09, “Amendments Pursuant to SEC Release No. 33-10762,” which amends ASC 470, “Debt” for this rule. This rule simplifies the disclosure requirements related to registered securities under Rule 3-10 of Regulation S-X by modifying criteria to qualify for an exception to the requirement that an entity file separate financial statements for subsidiary issuers and guarantors. The rule also reduces and, in some cases, eliminates the disclosures an entity must provide in lieu of the subsidiary’s audited financial statements and allows disclosures to be summarized and included within Management’s Discussion and Analysis of Financial Condition and Results of Operations. The rule requires certain enhanced narrative disclosures, including the terms and conditions of the guarantees and how the legal obligations of the issuer and guarantor, as well as other factors, may affect payments to holders of the debt securities. The final rule is effective on January 4, 2021, with earlier application permitted. We adopted the provisions of this rule during the third quarter of 2020 which did not have a material impact on our consolidated financial statements. The adoption of this rule resulted in summarizing our supplemental guarantor financial information in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (ASU 2020-04) which creates a new topic, ASC 848 “Reference Rate Reform” (ASC 848). Subsequent to the issuance of ASU 2020-04, ASC 848 was amended by ASU 2021-01, “Scope” which amended and clarified the application and scope aforementioned update. This update provides optional guidance to ease the potential accounting burden associated with transition away from reference rates that are expected to be discontinued at the end of 2021, at which time financial institutions will no longer be required to report information that is currently used to determine the London Interbank Offered Rate (LIBOR) and other reference rates. This update allows companies to treat contract amendments to existing contracts for the purpose of establishing a new reference rate as continuations of those contracts without additional analysis, as long as the modification was made to establish a new reference rate. This update applies prospectively to contract modifications. The optional guidance was effective on March 12, 2020 and can be adopted beginning January 1, 2020 or any date thereafter until December 31, 2022, at which time the optional guidance can no longer be applied to contract amendments to existing contracts. We adopted the provisions of this update on January 1, 2020 and will apply this guidance prospectively to contract modifications that are entered into for the purpose of establishing a new reference rate. We are currently evaluating the prospective impact on our consolidated financial statements; however, for the year ended December 31, 2020, the adoption of this update did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” which amends ASC 740 “Income Taxes” (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. We adopted this update on January 1, 2020 which did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment” which amended ASC 350. This update simplifies the measurement of goodwill impairment by eliminating Step 2 from the goodwill impairment test. This update requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The update did not modify the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The guidance in this update is applied on a prospective basis, with earlier application permitted. We adopted this update on January 1, 2020, see Note 11 “Goodwill and Intangible Assets” for additional information.
In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” (ASU 2016-03) which amends ASC 326 “Financial Instruments—Credit Losses” (ASC 326). Subsequent to the issuance of ASU 2016-13, ASC 326 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update. The new guidance introduces the current expected credit loss (CECL) model, which will require an entity to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. This update is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis, with earlier application permitted. We adopted this update on January 1, 2020 which did not have a material impact on our consolidated financial statements and related disclosures.
In February 2016, the FASB issued ASU 2016-02 “Leases,” (ASU 2016-02) which supersedes ASC 840 “Leases” and creates a new topic, ASC 842 “Leases” (ASC 842). Subsequent to the issuance of ASU 2016-02, ASC 842 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update. These updates require lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. Upon initial application, the provisions of these updates are required to be applied using the modified retrospective method which requires retrospective adoption to each prior reporting period presented with the cumulative effect of adoption recorded to the earliest reporting period presented. An optional transition method can be utilized which requires application of these updates beginning on the date of adoption with the cumulative effect of initially applying these updates recognized at the date of initial adoption. These updates also expand the required quantitative and qualitative disclosures surrounding leases. These updates are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier application permitted. We adopted these updates on January 1, 2019 using the optional transition method. Accordingly, prior periods were not retrospectively adjusted. Adoption of these updates resulted in the recording of operating lease assets and lease liabilities on our consolidated balance sheet of $291.9 million as of January 1, 2019. Our assets and liabilities for finance leases remained unchanged. We also recognized the cumulative effect of applying these updates as an adjustment to retained earnings of $11.2 million, net of tax, which was primarily related to the recognition of previously deferred sale/leaseback gains. Our consolidated statements of operations and cash flows, along with our compliance with all covenants and restrictions under all our outstanding credit agreements, were not impacted by this adoption. These updates also impacted our accounting policies, internal controls and disclosures related to leases. Expanded disclosures regarding leases are included in Note 22 “Leases”.
NOTE 4. RESTRUCTURING CHARGES
On December 11, 2019, we announced that we had made the decision to permanently close a chlor alkali plant with a capacity of 230,000 tons and our VDC production facility, both in Freeport, TX. The VDC facility was closed during the fourth quarter of 2020. The related chlor alkali plant closure is expected to be completed in the second quarter of 2021. For the year ended December 31, 2020, we recorded pretax restructuring charges of $3.8 million for facility exit costs and employee severance and related benefit costs related to these actions. For the year ended December 31, 2019, we recorded pretax restructuring charges of $58.9 million for non-cash impairment of equipment and facilities related to these actions. We expect to incur additional restructuring charges through 2025 of approximately $45 million related to these actions.
On December 10, 2018, we announced that we had made the decision to permanently close the ammunition assembly operations at our Winchester facility in Geelong, Australia. Subsequent to the facility’s closure, products for customers in the region are sourced from Winchester manufacturing facilities located in the United States. For the years ended December 31, 2019 and 2018, we recorded pretax restructuring charges of $0.4 million and $4.1 million, respectively for the write-off of equipment and facility costs, employee severance and related benefit costs, lease and other contract termination costs and facility exit costs related to this action. For the year ended December 31, 2019, we also recorded additional pretax restructuring charges of $1.4 million for employee severance and related benefit costs related to our Winchester operations.
On March 21, 2016, we announced that we had made the decision to close a combined total of 433,000 tons of chlor alkali capacity across three separate locations. Associated with this action, we have permanently closed our Henderson, NV chlor alkali plant with 153,000 tons of capacity and have reconfigured the site to manufacture bleach and distribute caustic soda and hydrochloric acid. Also, the capacity of our Niagara Falls, NY chlor alkali plant has been reduced from 300,000 tons to 240,000 tons and the chlor alkali capacity at our Freeport, TX facility was reduced by 220,000 tons. This 220,000 ton reduction was entirely from diaphragm cell capacity. For the years ended December 31, 2020, 2019 and 2018, we recorded pretax restructuring charges of $5.2 million, $15.8 million and $15.7 million, respectively, for the lease and other contract termination costs, employee severance and related benefit costs and facility exit costs related to these actions. We expect to incur additional restructuring charges through 2021 of approximately $2 million related to these capacity reductions.
For the year ended December 31, 2018, we recorded pretax restructuring charges of $2.1 million for lease and other contract termination costs and facility exit costs related to our permanent reduction in capacity at our Becancour, Canada chlor alkali facility in 2014.
The following table summarizes the 2020, 2019 and 2018 activities by major component of these restructuring actions and the remaining balances of accrued restructuring costs as of December 31, 2020, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance and related benefit costs
|
|
Lease and other contract termination costs
|
|
Facility exit costs
|
|
Write-off of equipment and facility
|
|
Total
|
|
|
($ in millions)
|
|
Balance at January 1, 2018
|
$
|
1.8
|
|
|
$
|
3.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.1
|
|
|
Restructuring charges
|
1.7
|
|
|
5.6
|
|
|
12.0
|
|
|
2.6
|
|
|
21.9
|
|
|
Amounts utilized
|
(2.0)
|
|
|
(2.9)
|
|
|
(11.3)
|
|
|
(2.6)
|
|
|
(18.8)
|
|
|
Balance at December 31, 2018
|
1.5
|
|
|
6.0
|
|
|
0.7
|
|
|
—
|
|
|
8.2
|
|
|
Restructuring charges
|
2.1
|
|
|
0.9
|
|
|
14.6
|
|
|
58.9
|
|
|
76.5
|
|
|
Amounts utilized
|
(3.6)
|
|
|
(3.8)
|
|
|
(15.3)
|
|
|
(58.9)
|
|
|
(81.6)
|
|
|
Balance at December 31, 2019
|
—
|
|
|
3.1
|
|
|
—
|
|
|
—
|
|
|
3.1
|
|
|
Restructuring charges
|
2.2
|
|
|
1.4
|
|
|
5.4
|
|
|
—
|
|
|
9.0
|
|
|
Amounts utilized
|
(0.4)
|
|
|
(2.8)
|
|
|
(5.4)
|
|
|
—
|
|
|
(8.6)
|
|
|
Balance at December 31, 2020
|
$
|
1.8
|
|
|
$
|
1.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.5
|
|
The following table summarizes the cumulative restructuring charges of these restructuring actions by major component through December 31, 2020:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chlor Alkali Products and Vinyls
|
|
|
|
Total
|
|
|
|
Becancour
|
|
Capacity Reductions
|
|
Freeport
|
|
Winchester
|
|
|
|
|
($ in millions)
|
|
Write-off of equipment and facility
|
|
$
|
3.5
|
|
|
$
|
78.1
|
|
|
$
|
58.9
|
|
|
$
|
2.6
|
|
|
$
|
143.1
|
|
|
Employee severance and related benefit costs
|
|
2.7
|
|
|
6.7
|
|
|
2.1
|
|
|
2.7
|
|
|
14.2
|
|
|
Facility exit costs
|
|
5.9
|
|
|
52.0
|
|
|
1.7
|
|
|
0.2
|
|
|
59.8
|
|
|
Employee relocation costs
|
|
—
|
|
|
1.7
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
|
Lease and other contract termination costs
|
|
6.1
|
|
|
42.2
|
|
|
—
|
|
|
0.4
|
|
|
48.7
|
|
|
Total cumulative restructuring charges
|
|
$
|
18.2
|
|
|
$
|
180.7
|
|
|
$
|
62.7
|
|
|
$
|
5.9
|
|
|
$
|
267.5
|
|
As of December 31, 2020, we have incurred cash expenditures of $120.5 million and non-cash charges of $143.5 million related to these restructuring actions. The remaining balance of $3.5 million is expected to be paid out through 2022.
Subsequent Event
On January 18, 2021, we announced we had made the decision to permanently close our trichloroethylene and anhydrous hydrogen chloride liquefaction facilities in Freeport, TX, before the end of 2021. We expect to incur restructuring charges through 2023 of approximately $23 million related to these actions, approximately $2 million of which is expected to be incurred in 2021. These restructuring costs are expected to consist of $21 million of facility exit costs and $2 million of contract termination costs.
NOTE 5. EARNINGS PER SHARE
Basic and diluted net (loss) income per share are computed by dividing net (loss) income by the weighted-average number of common shares outstanding. Diluted net (loss) income per share reflects the dilutive effect of stock-based compensation.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Computation of Net (Loss) Income per Share
|
(In millions, except per share data)
|
|
Net (loss) income
|
$
|
(969.9)
|
|
|
$
|
(11.3)
|
|
|
$
|
327.9
|
|
|
Basic shares
|
157.9
|
|
|
162.3
|
|
|
166.8
|
|
|
Basic net (loss) income per share
|
$
|
(6.14)
|
|
|
$
|
(0.07)
|
|
|
$
|
1.97
|
|
|
Diluted shares:
|
|
|
|
|
|
|
Basic shares
|
157.9
|
|
|
162.3
|
|
|
166.8
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
1.6
|
|
|
Diluted shares
|
157.9
|
|
|
162.3
|
|
|
168.4
|
|
|
Diluted net (loss) income per share
|
$
|
(6.14)
|
|
|
$
|
(0.07)
|
|
|
$
|
1.95
|
|
The computation of dilutive shares from stock-based compensation does not include 10.0 million, 7.8 million and 2.4 million shares in 2020, 2019 and 2018, respectively, as their effect would have been anti-dilutive.
NOTE 6. ACCOUNTS RECEIVABLES
On July 16, 2019, our existing $250.0 million Receivables Financing Agreement was extended to July 15, 2022 and downsized to $10.0 million with the option to expand (Receivables Financing Agreement). In 2020, we amended the Receivables Financing Agreement to expand the borrowing capacity to $250.0 million. The Receivables Financing Agreement includes a minimum borrowing requirement of 50% of the facility limit or available borrowing capacity, whichever is lesser. The administrative agent for our Receivables Financing Agreement is PNC Bank, National Association. Under the Receivables Financing Agreement, our eligible trade receivables are used for collateralized borrowings and continue to be serviced by us. In
addition, the Receivables Financing Agreement incorporates the secured leverage covenant that is contained in the $1,300.0 million senior secured credit facility. For the year ended December 31, 2019, the outstanding balance of the $250.0 million Receivables Financing Agreement of $150.0 million was repaid with proceeds from the issuance of $750.0 million senior notes due 2029. As of December 31, 2020 and 2019, we had $125.0 million and zero, respectively, drawn under the agreement. As of December 31, 2020, $332.8 million of our trade receivables were pledged as collateral. As of December 31, 2020, we had $124.0 million of additional borrowing capacity under the Receivables Financing Agreement.
Olin also has trade accounts receivable factoring arrangements (AR Facilities) and pursuant to the terms of the AR Facilities, certain of our subsidiaries may sell their accounts receivable up to a maximum of $228.0 million. We will continue to service the outstanding accounts sold. These receivables qualify for sales treatment under ASC 860 “Transfers and Servicing” and, accordingly, the proceeds are included in net cash provided by operating activities in the consolidated statements of cash flows. The following table summarizes the AR Facilities activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
($ in millions)
|
|
Beginning Balance
|
$
|
63.1
|
|
|
$
|
132.4
|
|
|
Gross receivables sold
|
854.3
|
|
|
984.8
|
|
|
Payments received from customers on sold accounts
|
(868.6)
|
|
|
(1,054.1)
|
|
|
Ending Balance
|
$
|
48.8
|
|
|
$
|
63.1
|
|
The factoring discount paid under the AR Facilities is recorded as interest expense on the consolidated statements of operations. The factoring discount for the years ended December 31, 2020, 2019 and 2018 was $1.5 million, $2.9 million and $4.3 million, respectively. The agreements are without recourse and therefore no recourse liability has been recorded as of December 31, 2020.
At December 31, 2020 and 2019, our consolidated balance sheets included other receivables of $62.4 million and $87.4 million, respectively, which were classified as receivables, net.
NOTE 7. ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLES
Allowance for doubtful accounts receivable consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
($ in millions)
|
|
Beginning balance
|
$
|
11.9
|
|
|
$
|
12.9
|
|
|
Provisions charged
|
0.7
|
|
|
1.1
|
|
|
Write-offs, net of recoveries
|
(0.5)
|
|
|
(2.1)
|
|
|
Foreign currency translation adjustments
|
0.2
|
|
|
—
|
|
|
Ending balance
|
$
|
12.3
|
|
|
$
|
11.9
|
|
NOTE 8. INVENTORIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
($ in millions)
|
|
Supplies
|
$
|
113.8
|
|
|
$
|
105.6
|
|
|
Raw materials
|
116.3
|
|
|
69.2
|
|
|
Work in process
|
133.2
|
|
|
120.9
|
|
|
Finished goods
|
359.6
|
|
|
449.5
|
|
|
|
722.9
|
|
|
745.2
|
|
|
LIFO reserve
|
(48.2)
|
|
|
(49.5)
|
|
|
Inventories, net
|
$
|
674.7
|
|
|
$
|
695.7
|
|
Inventories valued using the LIFO method comprised 51% and 56% of the total inventories at December 31, 2020 and 2019, respectively. The replacement cost of our inventories would have been approximately $48.2 million and $49.5 million higher than that reported at December 31, 2020 and 2019, respectively.
NOTE 9. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Useful Lives
|
|
2020
|
|
2019
|
|
|
|
|
($ in millions)
|
|
Land and improvements to land
|
10-20 Years(1)
|
|
$
|
282.7
|
|
|
$
|
277.5
|
|
|
Buildings and building equipment
|
10-30 Years
|
|
409.4
|
|
|
392.4
|
|
|
Machinery and equipment
|
3-20 Years
|
|
5,945.2
|
|
|
5,566.0
|
|
|
Leasehold improvements
|
3-11 Years
|
|
8.3
|
|
|
9.9
|
|
|
Construction in progress
|
|
|
245.2
|
|
|
346.1
|
|
|
Property, plant and equipment
|
|
|
6,890.8
|
|
|
6,591.9
|
|
|
Accumulated depreciation
|
|
|
(3,719.8)
|
|
|
(3,268.1)
|
|
|
Property, plant and equipment, net
|
|
|
$
|
3,171.0
|
|
|
$
|
3,323.8
|
|
(1) Useful life is exclusively related to improvements to land as land is not depreciated.
The weighted-average useful life of machinery and equipment at December 31, 2020 was 11 years. Depreciation expense was $445.4 million, $493.3 million and $497.8 million for 2020, 2019 and 2018, respectively. Interest capitalized was $6.4 million, $10.8 million and $6.0 million for 2020, 2019 and 2018, respectively.
The consolidated statements of cash flows for the years ended December 31, 2020, 2019 and 2018, included an increase of $31.0 million and decreases of $5.7 million and $25.5 million, respectively, to capital expenditures, with the corresponding change to accounts payable and accrued liabilities, related to purchases of property, plant and equipment included in accounts payable and accrued liabilities at December 31, 2020, 2019 and 2018.
NOTE 10. OTHER ASSETS
Included in other assets were the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
($ in millions)
|
|
Supply contracts
|
$
|
1,122.9
|
|
|
$
|
1,112.6
|
|
|
Other
|
68.4
|
|
|
56.5
|
|
|
Other assets
|
$
|
1,191.3
|
|
|
$
|
1,169.1
|
|
On January 1, 2019, we sold our 9.1% limited partnership interest in Bay Gas Storage Company, Ltd. (Bay Gas) for $20.0 million. The sale closed on February 7, 2019 which resulted in a gain of $11.2 million for the year ended December 31, 2019 which was recorded to other income in the consolidated statements of operations.
For the year ended December 31, 2018, we recorded a $21.5 million non-cash impairment charge related to an adjustment to the value of our 9.1% limited partnership interest in Bay Gas. Bay Gas owns, leases and operates underground gas storage and related pipeline facilities, which are used to provide storage in the McIntosh, AL area and delivery of natural gas. The general partner, Sempra Energy (Sempra), announced in the second quarter of 2018 its plan to sell several assets including its 90.9% interest in Bay Gas. In connection with this decision, Sempra recorded an impairment charge related to Bay Gas adjusting the related assets’ carrying values to an estimated fair value. We recorded a reduction in our investment in the non-consolidated affiliate for the proportionate share of the non-cash impairment charge. Olin has no other non-consolidated affiliates.
The losses of non-consolidated affiliates were $19.7 million for the year ended December 31, 2018, which reflect the $21.5 million non-cash impairment charge.
In connection with the Acquisition, Olin and Dow entered into arrangements for the long-term supply of ethylene by Dow to Olin, pursuant to which, among other things, Olin made upfront payments in order to receive ethylene at producer economics and for certain reservation fees and for the option to obtain additional ethylene at producer economics.
On February 27, 2017, we exercised the remaining option to reserve additional ethylene at producer economics from Dow. In connection with the exercise of this option, we also secured a long-term customer arrangement. As a result, an additional payment was made to Dow of $461.0 million during the second quarter of 2020. The original liability was discounted and recorded at present value as of March 31, 2017. The discounted amount of $40.9 million was recorded as interest expense from the inception through March 31, 2020. For the years ended December 31, 2020, 2019, and 2018 interest expense of $4.0 million, $17.0 million and $16.0 million, respectively, was recorded for accretion on the 2020 payment discount.
During the year ended December 31, 2020, a payment of $75.8 million was made associated with the resolution of a dispute over the allocation to Olin of certain capital costs incurred at our Plaquemine, LA site after the Closing Date of the Acquisition.
The weighted-average useful life of long-term supply contracts at December 31, 2020 was 20 years. For the years ended December 31, 2020, 2019 and 2018, amortization expense of $56.0 million, $39.9 million and $38.3 million, respectively, was recognized within cost of goods sold related to our supply contracts and is reflected in depreciation and amortization on the consolidated statements of cash flows. We estimate that amortization expense will be approximately $70 million in 2021, 2022, 2023, 2024 and 2025 related to our long-term supply contracts. The long-term supply contracts are monitored for impairment each reporting period.
NOTE 11. GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying value of goodwill were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chlor Alkali Products and Vinyls
|
|
Epoxy
|
|
Total
|
|
|
($ in millions)
|
|
Balance at January 1, 2019
|
$
|
1,832.6
|
|
|
$
|
287.0
|
|
|
$
|
2,119.6
|
|
|
Foreign currency translation adjustment
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
Balance at December 31, 2019
|
1,832.7
|
|
|
287.0
|
|
|
2,119.7
|
|
|
Goodwill impairment
|
(557.6)
|
|
|
(142.2)
|
|
|
(699.8)
|
|
|
Foreign currency translation adjustment
|
0.2
|
|
|
0.1
|
|
|
0.3
|
|
|
Balance at December 31, 2020
|
$
|
1,275.3
|
|
|
$
|
144.9
|
|
|
$
|
1,420.2
|
|
During the first quarter of 2020, our market capitalization declined significantly compared to the fourth quarter of 2019. Over the same period, the equity value of our peer group companies and the overall U.S. stock market also declined significantly amid market volatility. These declines were driven by the uncertainty surrounding the outbreak of the 2019 Novel Coronavirus (COVID-19) global pandemic and other macroeconomic events impacting the various industries in which Olin and our peers participate. Additionally, the various governmental, business and consumer responses to the pandemic were expected to have a negative impact on the near-term demand for several of the products produced by our Chlor Alkali Products and Vinyls and Epoxy businesses. The full extent and duration of the impact of COVID-19 on our operations and financial performance was unknown at the time. As a result of these events, we identified triggering events associated with a significant overall decrease in our stock price, a significant adverse change in the business climate and a significant reduction in near-term cash flow projections and performed a quantitative goodwill impairment test during the first quarter of 2020. We used a discounted cash flow approach to develop the estimated fair value of our reporting units. Based on the aforementioned analysis, the estimated fair value of our reporting units exceeded the carrying value of the reporting units and no impairment charges were recorded.
Throughout the second and third quarters of 2020, the spread of the COVID-19 pandemic and the associated response has caused significant disruptions in the U.S. and global economies, resulting in the disruption of the supply and demand fundamentals of our Chemicals businesses. The various governmental, business and consumer responses to the pandemic continued to negatively impact the demand for several of the products produced by our Chlor Alkali Products and Vinyls and Epoxy businesses resulting in lower volumes and pricing during 2020 compared to 2019. Due to these factors, the triggering events identified in the first quarter associated with a significant adverse change in the business climate and a significant adverse reduction in near-term cash flow projections have persisted during 2020. Throughout the second and third quarters of 2020, the equity value of our peer group companies and the overall U.S. stock market improved significantly while Olin’s stock price remained low. During the three months ended September 30, 2020, we identified a triggering event associated with a sustained significant overall decrease in our stock price. As a result, we performed an updated quantitative goodwill impairment test during the third quarter of 2020. We used a discounted cash flow approach to develop the estimated fair value of our reporting units.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. The discount rate, profitability assumptions and terminal growth rate of our reporting units and the supply and demand fundamentals of the chlor alkali industry were the material assumptions utilized in the discounted cash flow model used to estimate the fair value of each reporting unit. The discount rate reflects a weighted-average cost of capital, which is calculated, in part based on observable market data. Some of this data (such as the risk free or treasury rate and the pretax cost of debt) are based on the market data at a point in time. Other data (such as the equity risk premium) are based upon market data over time for a peer group of companies in the chemical manufacturing or distribution industries with a market capitalization premium added, as applicable. Also factoring into the discount rate was a market participant’s perceived risk (such as the company specific risk premium) in the valuation implied by the sustained reduction in our stock price.
The discounted cash flow analysis requires estimates, assumptions and judgments about future events. Our analysis uses our internally generated long-range plan. Specifically, the assumptions in our long-range plan about terminal growth rates, forecasted capital expenditures and changes in future working capital requirements are used to determine the implied fair value of each reporting unit. The long-range plan reflects management judgment, supplemented by independent chemical industry analyses which provide multi-year industry operating and pricing forecasts.
As a further indicator that each reporting unit has been valued appropriately using a discounted cash flow model, the aggregate fair value of all reporting units is reconciled to the total market value of Olin. Due to the sustained decline in our stock price, the decrease in the value of our reporting units reflects a market participant’s perceived risk in the valuation implied by the sustained reduction in our stock price. As a result of this assessment, the carrying values of our Chlor Alkali Products and Vinyls and Epoxy reporting units exceeded the fair values which resulted in pre-tax goodwill impairment charges of $557.6 million and $142.2 million, respectively, for the year ended December 31, 2020. The goodwill impairment charge was calculated as the amount that the carrying value of the reporting unit, including any goodwill, exceeded its fair value and therefore the carrying value of our reporting units equal their fair value upon completion of the goodwill impairment test.
We believe the assumptions used in our goodwill impairment analysis are appropriate and result in reasonable estimates of the implied fair value of each reporting unit. However, given the economic environment and the uncertainties regarding the impact on our business, there can be no assurance that our estimates and assumptions, made for purposes of our goodwill impairment testing, will prove to be an accurate prediction of the future. If our assumptions regarding future performance are not achieved, or if our stock price experiences further sustained declines, we may be required to record additional goodwill impairment charges in future periods. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material. No impairment charges were recorded for 2019 or 2018.
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2020
|
|
2019
|
|
|
Useful Lives
|
|
Gross Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Gross Amount
|
|
Accumulated Amortization
|
|
Net
|
|
|
|
|
($ in millions)
|
|
Customers, customer contracts and relationships
|
10-15 Years
|
|
$
|
681.0
|
|
|
$
|
(312.5)
|
|
|
$
|
368.5
|
|
|
$
|
673.5
|
|
|
$
|
(260.9)
|
|
|
$
|
412.6
|
|
|
Trade name
|
5 Years
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.0
|
|
|
(6.0)
|
|
|
1.0
|
|
|
Acquired technology
|
5-7 Years
|
|
95.0
|
|
|
(65.3)
|
|
|
29.7
|
|
|
85.1
|
|
|
(51.8)
|
|
|
33.3
|
|
|
Other
|
10 Years
|
|
1.8
|
|
|
(0.6)
|
|
|
1.2
|
|
|
1.8
|
|
|
(0.6)
|
|
|
1.2
|
|
|
Total intangible assets
|
|
|
$
|
777.8
|
|
|
$
|
(378.4)
|
|
|
$
|
399.4
|
|
|
$
|
767.4
|
|
|
$
|
(319.3)
|
|
|
$
|
448.1
|
|
Amortization expense relating to intangible assets was $62.9 million, $62.8 million and $62.8 million in 2020, 2019 and 2018, respectively. We estimate that amortization expense will be approximately $63 million in 2021, approximately $55 million in 2022, approximately $37 million in both 2023 and 2024 and approximately $36 million in 2025.
NOTE 12. DEBT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
Notes payable:
|
($ in millions)
|
|
Variable-rate Delayed Draw Term Loan secured facility, due 2024 (4.125% at December 31, 2020)
|
$
|
500.0
|
|
|
$
|
—
|
|
|
Variable-rate Recovery Zone secured bonds, due 2024-2035 (3.625% and 2.85% at December 31, 2020 and 2019, respectively)
|
103.0
|
|
|
103.0
|
|
|
Variable-rate Go Zone secured bonds, due 2024 (3.625% and 2.85% at December 31, 2020 and 2019, respectively)
|
50.0
|
|
|
50.0
|
|
|
Variable-rate Industrial development and environmental improvement unsecured obligations, due 2025 (0.21% and 1.70% at December 31, 2020 and 2019, respectively)
|
2.9
|
|
|
2.9
|
|
|
10.00% secured senior notes, due 2025
|
500.0
|
|
|
500.0
|
|
|
9.75% secured senior notes, due 2023
|
120.0
|
|
|
720.0
|
|
|
9.50% secured senior notes, due 2025
|
500.0
|
|
|
—
|
|
|
5.625% secured senior notes, due 2029
|
750.0
|
|
|
750.0
|
|
|
5.50% unsecured senior notes, due 2022
|
200.0
|
|
|
200.0
|
|
|
5.125% secured senior notes, due 2027
|
500.0
|
|
|
500.0
|
|
|
5.00% secured senior notes, due 2030
|
550.0
|
|
|
550.0
|
|
|
Receivables Financing Agreement (See Note 6)
|
125.0
|
|
|
—
|
|
|
Finance lease obligations
|
4.3
|
|
|
5.3
|
|
|
Total notes payable
|
3,905.2
|
|
|
3,381.2
|
|
|
Deferred debt issuance costs
|
(37.4)
|
|
|
(38.2)
|
|
|
Unamortized bond original issue discount
|
(2.2)
|
|
|
—
|
|
|
Interest rate swaps
|
(1.8)
|
|
|
(2.2)
|
|
|
Total debt
|
3,863.8
|
|
|
3,340.8
|
|
|
Amounts due within one year
|
26.3
|
|
|
2.1
|
|
|
Total long-term debt
|
$
|
3,837.5
|
|
|
$
|
3,338.7
|
|
On October 15, 2020, Olin redeemed $600.0 million of the outstanding 9.75% senior notes due 2023 (2023 Notes). The 2023 Notes were redeemed at 102.438% of the principal amount of the 2023 Notes, resulting in a redemption premium of $14.6 million, which was recorded to interest expense. The 2023 Notes were redeemed by drawing $500.0 million of the Delayed Draw Term Loan Facility along with utilizing $114.6 million of cash on hand.
On May 19, 2020, Olin issued $500.0 million aggregate principal amount of 9.50% senior notes due June 1, 2025 (2025 Notes). The 2025 Notes were issued at 99.5% of par value, the discount from which is included within long-term debt in the consolidated balance sheets. Interest on the 2025 Notes is payable semi-annually beginning on December 1, 2020. Proceeds from the 2025 Notes were used for general corporate purposes.
On May 8, 2020, we entered into a $1,300.0 million senior secured credit facility (Senior Secured Credit Facility) that amended our existing five-year, $2,000.0 million senior credit facility. The Senior Secured Credit Facility included a senior secured delayed-draw term loan facility with aggregate commitments of $500.0 million (Delayed Draw Term Loan Facility) and a senior secured revolving credit facility with aggregate commitments in an amount equal to $800.0 million (Senior Revolving Credit Facility). The maturity date for the Senior Secured Credit Facility is July 16, 2024. The amendment modified the financial covenants of the Senior Secured Credit Facility to be less restrictive and expanded the permitted use of proceeds of the Delayed Draw Term Loan Facility to include general corporate purposes.
The amendment also requires that the obligations under the Senior Secured Credit Facility be guaranteed by certain of our domestic subsidiaries, which are also guarantors of Olin’s outstanding notes, with the exception of the $200.0 million senior notes due 2022. The obligations under the Senior Secured Credit Facility are also secured by liens on substantially all of Olin’s and the subsidiary guarantors’ personal property (Collateral), other than certain principal properties and capital stock of subsidiaries, and subject to certain other exceptions. The amendment provides that substantially all guarantees under the Senior
Secured Credit Facility and liens on the Collateral may be released when our net leverage ratio is below 3.50 to 1.00 for two consecutive fiscal quarters.
On October 15, 2020, Olin drew the entire $500.0 million of the Delayed Draw Term Loan Facility. The Delayed Draw Term Loan Facility includes principal amortization amounts payable beginning the quarter ending after the facility is fully drawn at a rate of 5.0% per annum for the first two years, increasing to 7.5% per annum for the following year and to 10.0% per annum for the last two years. The Senior Revolving Credit Facility includes a $100.0 million letter of credit subfacility. At December 31, 2020, we had $799.6 million available under our $800.0 million Senior Revolving Credit Facility because we had issued $0.4 million of letters of credit.
Under the Senior Secured Credit Facility, we may select various floating rate borrowing options. The actual interest rate paid on borrowings under the Senior Secured Credit Facility is based on a pricing grid which is dependent upon the net leverage ratio as calculated under the terms of the applicable facility for the prior fiscal quarter. The Senior Secured Credit Facility includes various customary restrictive covenants, including restrictions related to the ratio of secured debt to earnings before interest expense, taxes, depreciation and amortization (secured leverage ratio) and the ratio of earnings before interest expense, taxes, depreciation and amortization to interest expense (coverage ratio). The calculation of secured debt in our secured leverage ratio excludes borrowings under the Receivables Financing Agreement, up to a maximum of $250.0 million. As of December 31, 2020, the only secured borrowings included in the secured leverage ratio were $500.0 million for our Delayed Draw Term Loan Facility and $153.0 million for our Go Zone and Recovery Zone bonds. Compliance with these covenants is determined quarterly. We were in compliance with all covenants and restrictions under all our outstanding credit agreements as of December 31, 2020, and no event of default had occurred that would permit the lenders under our outstanding credit agreements to accelerate the debt if not cured. In the future, our ability to generate sufficient operating cash flows, among other factors, will determine the amounts available to be borrowed under these facilities. As a result of our restrictive covenant related to the secured leverage ratio, the maximum additional borrowings available to us could be limited in the future. The limitation, if an amendment or waiver from our lenders is not obtained, could restrict our ability to borrow the maximum amounts available under the Senior Revolving Credit Facility and the Receivables Financing Agreement. As of December 31, 2020, there were no covenants or other restrictions that limited our ability to borrow.
On July 16, 2019, Olin issued $750.0 million aggregate principal amount of 5.625% senior notes due August 1, 2029 (2029 Notes), which were registered under the Securities Act of 1933, as amended. Interest on the 2029 Notes began accruing from July 16, 2019 and is payable semi-annually beginning on February 1, 2020. Proceeds from the 2029 Notes were used to redeem the remaining balance of the $1,375.0 million term loan facility of $493.0 million and $150.0 million of the Receivables Financing Agreement.
On July 16, 2019, Olin entered into a five-year, $2,000.0 million senior credit facility (2019 Senior Credit Facility), which replaced the existing $1,975.0 million senior credit facility. The 2019 Senior Credit Facility included a senior unsecured delayed-draw term loan facility in an aggregate principal amount of up to $1,200.0 million. The 2019 Senior Credit Facility also included a senior unsecured revolving credit facility with aggregate commitments in an amount equal to $800.0 million (2019 Senior Revolving Credit Facility), which was increased from $600.0 million. The 2019 Senior Revolving Credit Facility included a $100.0 million letter of credit subfacility. In December 2019, Olin amended the 2019 Senior Credit Facility which amended the restrictive covenants of the agreement, including expanding the coverage and leverage ratios to be less restrictive over the next two and a half years.
On January 19, 2018, Olin issued $550.0 million aggregate principal amount of 5.00% senior notes due February 1, 2030 (2030 Notes), which were registered under the Securities Act of 1933, as amended. Interest on the 2030 Notes began accruing from January 19, 2018 and is paid semi-annually beginning on August 1, 2018. Proceeds from the 2030 Notes were used to redeem $550.0 million of debt under the $1,375.0 million term loan facility.
For the year ended December 31, 2020, we recognized interest expense of $5.8 million for the write-off of unamortized deferred debt issuance costs related to the reduction of commitments under the Senior Secured Credit Facility and partial redemption of the 2023 Notes. For the year ended December 31, 2019, we recognized interest expense of $2.8 million for the write-off of unamortized deferred debt issuance costs related to the replacement of the existing $1,975.0 million senior credit facility, including the redemption of the remaining balance of the $1,375.0 million term loan facility, and the redemption of the remaining balance of and reduction in the borrowing capacity under the Receivables Financing Agreement. For the year ended December 31, 2018, we recognized interest expense of $2.6 million for the write-off of unamortized deferred debt issuance costs related to redemption of $550.0 million of debt under the $1,375.0 million term loan facility.
In 2020, we paid debt issuance costs of $10.3 million for the issuance of the 2025 Notes and amendments to our Senior Secured Credit Facility and Receivables Financing Agreement. In 2019, we paid debt issuance costs of $16.6 million for the
issuance of the 2029 Notes and 2019 Senior Credit Facility. In 2018, we paid debt issuance costs of $8.5 million relating to the 2030 Notes.
At December 31, 2020, we had total letters of credit of $80.4 million outstanding, of which $0.4 million were issued under our Senior Revolving Credit Facility. The letters of credit are used to support certain long-term debt, certain workers compensation insurance policies, certain plant closure and post-closure obligations, certain international payment obligations and certain international pension funding requirements.
Annual maturities of long-term debt, including finance lease obligations, are $26.3 million in 2021, $351.1 million in 2022, $158.4 million in 2023, $483.3 million in 2024, $1,003.1 million in 2025 and a total of $1,883.0 million thereafter.
In August 2019, we terminated the April 2016 and October 2016 interest rate swaps which resulted in a loss of $2.3 million that will be deferred as an offset to the carrying value of the related debt and will be recognized to interest expense through October 2025.
Our interest rate swaps increased interest expense by $0.4 million in 2020 and reduced interest expense by $1.7 million and $6.8 million in 2019 and 2018, respectively. The difference between interest paid and interest received is included as an adjustment to interest expense.
Subsequent Event
On January 15, 2021, Olin redeemed the remaining $120.0 million of the outstanding 2023 Notes. The 2023 Notes were redeemed at 102.438% of the principal amount of the 2023 Notes, resulting in a redemption premium of $2.9 million. The remaining 2023 Notes were redeemed by utilizing $122.9 million of cash on hand.
NOTE 13. PENSION PLANS
We sponsor domestic and foreign defined benefit pension plans for eligible employees and retirees. Most of our domestic employees participate in defined contribution plans. However, a portion of our bargaining hourly employees continue to participate in our domestic qualified defined benefit pension plans under a flat-benefit formula. Our funding policy for the qualified defined benefit pension plans is consistent with the requirements of federal laws and regulations. Our foreign subsidiaries maintain pension and other benefit plans, which are consistent with local statutory practices.
Our domestic qualified defined benefit pension plan provides that if, within three years following a change of control of Olin, 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 (subject to applicable collective bargaining requirements).
During 2019, we made a discretionary cash contribution to our domestic qualified defined benefit pension plan of $12.5 million. Based on our plan assumptions and estimates, we will not be required to make any cash contributions to the domestic qualified defined benefit pension plan at least through 2021.
We have international qualified defined benefit pension plans to which we made cash contributions of $2.1 million, $2.4 million and $2.6 million in 2020, 2019 and 2018, respectively, and we anticipate less than $5 million of cash contributions to international qualified defined benefit pension plans in 2021.
Pension Obligations and Funded Status
Changes in the benefit obligation and plan assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
Change in Benefit Obligation
|
($ in millions)
|
|
Benefit obligation at beginning of year
|
$
|
2,620.2
|
|
|
$
|
377.6
|
|
|
$
|
2,997.8
|
|
|
$
|
2,365.5
|
|
|
$
|
302.3
|
|
|
$
|
2,667.8
|
|
|
Service cost
|
0.9
|
|
|
10.0
|
|
|
10.9
|
|
|
1.0
|
|
|
10.3
|
|
|
11.3
|
|
|
Interest cost
|
70.7
|
|
|
4.4
|
|
|
75.1
|
|
|
88.7
|
|
|
6.0
|
|
|
94.7
|
|
|
Actuarial loss
|
203.5
|
|
|
31.6
|
|
|
235.1
|
|
|
299.5
|
|
|
64.6
|
|
|
364.1
|
|
|
Benefits paid
|
(136.4)
|
|
|
(4.8)
|
|
|
(141.2)
|
|
|
(134.5)
|
|
|
(4.8)
|
|
|
(139.3)
|
|
|
Plan participant’s contributions
|
—
|
|
|
0.4
|
|
|
0.4
|
|
|
—
|
|
|
1.7
|
|
|
1.7
|
|
|
Plan amendments
|
—
|
|
|
(4.2)
|
|
|
(4.2)
|
|
|
—
|
|
|
(0.7)
|
|
|
(0.7)
|
|
|
Foreign currency translation adjustments
|
—
|
|
|
31.4
|
|
|
31.4
|
|
|
—
|
|
|
(1.8)
|
|
|
(1.8)
|
|
|
Benefit obligation at end of year
|
$
|
2,758.9
|
|
|
$
|
446.4
|
|
|
$
|
3,205.3
|
|
|
$
|
2,620.2
|
|
|
$
|
377.6
|
|
|
$
|
2,997.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
Change in Plan Assets
|
($ in millions)
|
|
Fair value of plans’ assets at beginning of year
|
$
|
2,122.6
|
|
|
$
|
76.7
|
|
|
$
|
2,199.3
|
|
|
$
|
1,925.8
|
|
|
$
|
67.2
|
|
|
$
|
1,993.0
|
|
|
Actual return on plans’ assets
|
397.3
|
|
|
6.4
|
|
|
403.7
|
|
|
318.8
|
|
|
7.6
|
|
|
326.4
|
|
|
Employer contributions
|
0.3
|
|
|
2.1
|
|
|
2.4
|
|
|
12.5
|
|
|
2.4
|
|
|
14.9
|
|
|
Benefits paid
|
(136.4)
|
|
|
(2.9)
|
|
|
(139.3)
|
|
|
(134.5)
|
|
|
(3.4)
|
|
|
(137.9)
|
|
|
Foreign currency translation adjustments
|
—
|
|
|
3.0
|
|
|
3.0
|
|
|
—
|
|
|
2.9
|
|
|
2.9
|
|
|
Fair value of plans’ assets at end of year
|
$
|
2,383.8
|
|
|
$
|
85.3
|
|
|
$
|
2,469.1
|
|
|
$
|
2,122.6
|
|
|
$
|
76.7
|
|
|
$
|
2,199.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
Funded Status
|
($ in millions)
|
|
Qualified plans
|
$
|
(371.8)
|
|
|
$
|
(358.5)
|
|
|
$
|
(730.3)
|
|
|
$
|
(494.3)
|
|
|
$
|
(298.4)
|
|
|
$
|
(792.7)
|
|
|
Non-qualified plans
|
(3.3)
|
|
|
(2.6)
|
|
|
(5.9)
|
|
|
(3.3)
|
|
|
(2.5)
|
|
|
(5.8)
|
|
|
Total funded status
|
$
|
(375.1)
|
|
|
$
|
(361.1)
|
|
|
$
|
(736.2)
|
|
|
$
|
(497.6)
|
|
|
$
|
(300.9)
|
|
|
$
|
(798.5)
|
|
Under ASC 715, we recorded a $17.9 million after-tax benefit ($30.7 million pretax) to shareholders’ equity as of December 31, 2020 for our pension plans. This benefit primarily reflected favorable performance on plan assets during 2020, partially offset by a 80-basis point decrease in the domestic pension plans’ discount rate. In 2019, we recorded a $145.5 million after-tax charge ($177.7 million pretax) to shareholders’ equity as of December 31, 2019 for our pension plans. This charge primarily reflected a 100-basis point decrease in the domestic pension plans’ discount rate, partially offset by favorable performance on plan assets during 2019.
The $235.1 million actuarial loss for 2020 was primarily due to a 80-basis point decrease in the domestic pension plans’ discount rate. The $364.1 million actuarial loss for 2019 was primarily due to a 100-basis point decrease in the domestic pension plans’ discount rate.
Amounts recognized in the consolidated balance sheets consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
|
($ in millions)
|
|
Accrued benefit in current liabilities
|
$
|
(0.7)
|
|
|
$
|
(2.2)
|
|
|
$
|
(2.9)
|
|
|
$
|
(0.6)
|
|
|
$
|
(0.2)
|
|
|
$
|
(0.8)
|
|
|
Accrued benefit in noncurrent liabilities
|
(374.4)
|
|
|
(358.9)
|
|
|
(733.3)
|
|
|
(497.0)
|
|
|
(300.7)
|
|
|
(797.7)
|
|
|
Accumulated other comprehensive loss
|
798.4
|
|
|
130.1
|
|
|
928.5
|
|
|
891.6
|
|
|
111.6
|
|
|
1,003.2
|
|
|
Net balance sheet impact
|
$
|
423.3
|
|
|
$
|
(231.0)
|
|
|
$
|
192.3
|
|
|
$
|
394.0
|
|
|
$
|
(189.3)
|
|
|
$
|
204.7
|
|
At December 31, 2020 and 2019, the benefit obligation of non-qualified pension plans was $5.9 million and $5.8 million, respectively, and was included in the above pension benefit obligation. There were no plan assets for these non-qualified pension plans. Benefit payments for the non-qualified pension plans are expected to be as follows: 2021—$0.8 million; 2022—$0.4 million; 2023—$0.4 million; 2024—$0.4 million; and 2025—$0.3 million. Benefit payments for the qualified plans are projected to be as follows: 2021—$146.6 million; 2022—$147.0 million; 2023—$147.8 million; 2024—$148.7 million; and 2025—$149.0 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
($ in millions)
|
|
Projected benefit obligation
|
$
|
3,205.3
|
|
|
$
|
2,997.8
|
|
|
Accumulated benefit obligation
|
3,180.2
|
|
|
2,972.4
|
|
|
Fair value of plans’ assets
|
2,469.1
|
|
|
2,199.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Components of Net Periodic Benefit (Income) Costs
|
($ in millions)
|
|
Service cost
|
$
|
10.9
|
|
|
$
|
11.3
|
|
|
$
|
11.1
|
|
|
Interest cost
|
75.1
|
|
|
94.7
|
|
|
86.3
|
|
|
Expected return on plans’ assets
|
(141.7)
|
|
|
(141.8)
|
|
|
(146.5)
|
|
|
Amortization of prior service cost
|
(0.4)
|
|
|
—
|
|
|
0.1
|
|
|
Recognized actuarial loss
|
44.4
|
|
|
27.0
|
|
|
34.5
|
|
|
Net periodic benefit (income) costs
|
$
|
(11.7)
|
|
|
$
|
(8.8)
|
|
|
$
|
(14.5)
|
|
|
|
|
|
|
|
|
|
Included in Other Comprehensive Loss (Pretax)
|
|
|
|
|
|
|
Liability adjustment
|
$
|
(30.7)
|
|
|
$
|
177.7
|
|
|
$
|
100.6
|
|
|
Amortization of prior service costs and actuarial losses
|
(44.0)
|
|
|
(27.0)
|
|
|
(34.6)
|
|
The service cost component of net periodic benefit (income) cost related to the employees of the operating segments are allocated to the operating segments based on their respective estimated census data.
Pension Plan Assumptions
Certain actuarial assumptions, such as discount rate and long-term rate of return on plan assets, have a significant effect on the amounts reported for net periodic benefit cost and accrued benefit obligation amounts. We use a measurement date of December 31 for our pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Benefits
|
|
Foreign Pension Benefits
|
|
Weighted-Average Assumptions
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
Discount rate—periodic benefit cost
|
3.2
|
%
|
(1)
|
4.2
|
%
|
|
3.6
|
%
|
|
1.4
|
%
|
|
2.2
|
%
|
|
2.2
|
%
|
|
Expected return on assets
|
7.75
|
%
|
|
7.75
|
%
|
|
7.75
|
%
|
|
4.4
|
%
|
|
5.2
|
%
|
|
5.2
|
%
|
|
Rate of compensation increase
|
3.0
|
%
|
|
3.0
|
%
|
|
3.0
|
%
|
|
2.7
|
%
|
|
2.9
|
%
|
|
2.9
|
%
|
|
Discount rate—benefit obligation
|
2.4
|
%
|
|
3.2
|
%
|
|
4.2
|
%
|
|
0.8
|
%
|
|
1.4
|
%
|
|
2.2
|
%
|
(1) The discount rate—periodic benefit cost for our domestic qualified pension plan is comprised of the discount rate used to determine interest costs of 2.8% and the discount rate used to determine service costs of 3.3%.
The discount rate is based on a hypothetical yield curve represented by a series of annualized individual zero-coupon bond spot rates for maturities ranging from one-half to thirty years. The bonds used in the yield curve must have a rating of AA or better per Standard & Poor’s, be non-callable, and have at least $250 million par outstanding. The yield curve is then applied to the projected benefit payments from the plan. Based on these bonds and the projected benefit payment streams, the single rate that produces the same yield as the matching bond portfolio is used as the discount rate.
The long-term expected rate of return on plan assets represents an estimate of the long-term rate of returns on the investment portfolio consisting of equities, fixed income and alternative investments. We use long-term historical actual return information, the allocation mix of investments that comprise plan assets and forecast estimates of long-term investment returns, including inflation rates, by reference to external sources. The historic rates of return on plan assets have been 11.7% for the last 5 years, 9.6% for the last 10 years and 10.1% for the last 15 years. The following rates of return by asset class were considered in setting the long-term rate of return assumption:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. equities
|
9%
|
|
to
|
|
13%
|
|
Non-U.S. equities
|
6%
|
|
to
|
|
11%
|
|
Fixed income/cash
|
5%
|
|
to
|
|
9%
|
|
Alternative investments
|
5%
|
|
to
|
|
15%
|
Plan Assets
Our pension plan asset allocations at December 31, 2020 and 2019 by asset class were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Plan Assets
|
|
Asset Class
|
2020
|
|
2019
|
|
U.S. equities
|
13
|
%
|
|
11
|
%
|
|
Non-U.S. equities
|
17
|
%
|
|
17
|
%
|
|
Fixed income/cash
|
35
|
%
|
|
38
|
%
|
|
Alternative investments
|
35
|
%
|
|
34
|
%
|
|
Total
|
100
|
%
|
|
100
|
%
|
The Alternative Investments asset class includes hedge funds, real estate and private equity investments. The Alternative Investments class is intended to help diversify risk and increase returns by utilizing a broader group of assets.
A master trust was established by our pension plan to accumulate funds required to meet benefit payments of our plan and is administered solely in the interest of our plan’s participants and their beneficiaries. The master trust’s investment horizon is long term. Its assets are managed by professional investment managers or invested in professionally managed investment vehicles.
Our pension plan maintains a portfolio of assets designed to achieve an appropriate risk adjusted return. The portfolio of assets is also structured to manage risk by diversifying assets across asset classes whose return patterns are not highly
correlated, investing in passively and actively managed strategies and in value and growth styles, and by periodic rebalancing of asset classes, strategies and investment styles to objectively set targets.
As of December 31, 2020, the following target allocation and ranges have been set for each asset class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Class
|
Target Allocation
|
|
Target Range
|
|
U.S. equities(1)
|
34
|
%
|
|
24-44
|
|
Non-U.S. equities(1)
|
22
|
%
|
|
0-42
|
|
Fixed income/cash(1)
|
37
|
%
|
|
25-90
|
|
Alternative investments
|
7
|
%
|
|
0-35
|
(1) The target allocation for these asset classes include alternative investments, primarily hedge funds, based on the underlying investments in each hedge fund.
Determining which hierarchical level an asset or liability falls within requires significant judgment. The following table summarizes our domestic and foreign defined benefit pension plan assets measured at fair value as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Class
|
Investments Measured at Net Asset Value
|
|
Quoted Prices In Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Total
|
|
Equity securities
|
($ in millions)
|
|
U.S. equities
|
$
|
85.0
|
|
|
$
|
233.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
318.6
|
|
|
Non-U.S. equities
|
382.3
|
|
|
39.9
|
|
|
0.4
|
|
|
—
|
|
|
422.6
|
|
|
Fixed income/cash
|
|
|
|
|
|
|
|
|
|
|
Cash
|
—
|
|
|
122.8
|
|
|
—
|
|
|
—
|
|
|
122.8
|
|
|
Government treasuries
|
—
|
|
|
—
|
|
|
419.9
|
|
|
—
|
|
|
419.9
|
|
|
Corporate debt instruments
|
114.6
|
|
|
—
|
|
|
62.1
|
|
|
—
|
|
|
176.7
|
|
|
Asset-backed securities
|
126.3
|
|
|
—
|
|
|
23.2
|
|
|
—
|
|
|
149.5
|
|
|
Alternative investments
|
|
|
|
|
|
|
|
|
|
|
Hedge fund of funds
|
817.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
817.8
|
|
|
Real estate funds
|
9.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.0
|
|
|
Private equity funds
|
32.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32.2
|
|
|
Total assets
|
$
|
1,567.2
|
|
|
$
|
396.3
|
|
|
$
|
505.6
|
|
|
$
|
—
|
|
|
$
|
2,469.1
|
|
The following table summarizes our domestic and foreign defined benefit pension plan assets measured at fair value as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Class
|
Investments Measured at Net Asset Value
|
|
Quoted Prices In Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Total
|
|
Equity securities
|
($ in millions)
|
|
U.S. equities
|
$
|
117.2
|
|
|
$
|
132.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
250.0
|
|
|
Non-U.S. equities
|
341.2
|
|
|
32.7
|
|
|
0.3
|
|
|
—
|
|
|
374.2
|
|
|
Fixed income/cash
|
|
|
|
|
|
|
|
|
|
|
Cash
|
—
|
|
|
101.5
|
|
|
—
|
|
|
—
|
|
|
101.5
|
|
|
Government treasuries
|
—
|
|
|
—
|
|
|
285.0
|
|
|
—
|
|
|
285.0
|
|
|
Corporate debt instruments
|
99.1
|
|
|
—
|
|
|
158.3
|
|
|
—
|
|
|
257.4
|
|
|
Asset-backed securities
|
166.9
|
|
|
—
|
|
|
19.2
|
|
|
—
|
|
|
186.1
|
|
|
Alternative investments
|
|
|
|
|
|
|
|
|
|
|
Hedge fund of funds
|
698.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
698.3
|
|
|
Real estate funds
|
16.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16.9
|
|
|
Private equity funds
|
29.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29.9
|
|
|
Total assets
|
$
|
1,469.5
|
|
|
$
|
267.0
|
|
|
$
|
462.8
|
|
|
$
|
—
|
|
|
$
|
2,199.3
|
|
U.S. equities—This class included actively and passively managed equity investments in common stock and commingled funds comprised primarily of large-capitalization stocks with value, core and growth strategies.
Non-U.S. equities—This class included actively managed equity investments in commingled funds comprised primarily of international large-capitalization stocks from both developed and emerging markets.
Fixed income and cash—This class included commingled funds comprised of debt instruments issued by the U.S. and Canadian Treasuries, U.S. Agencies, corporate debt instruments, asset- and mortgage-backed securities and cash.
Hedge fund of funds—This class included a hedge fund which invests in the following types of hedge funds:
Event driven hedge funds—This class included hedge funds that invest in securities to capture excess returns that are driven by market or specific company events including activist investment philosophies and the arbitrage of equity and private and public debt securities.
Market neutral hedge funds—This class included investments in U.S. and international equities and fixed income securities while maintaining a market neutral position in those markets.
Other hedge funds—This class primarily included long-short equity strategies and a global macro fund which invested in fixed income, equity, currency, commodity and related derivative markets.
Real estate funds—This class included several funds that invest primarily in U.S. commercial real estate.
Private equity funds—This class included several private equity funds that invest primarily in infrastructure and U.S. power generation and transmission assets.
U.S. equities and non-U.S. equities are primarily valued at the net asset value provided by the independent administrator or custodian of the commingled fund. The net asset value is based on the value of the underlying equities, which are traded on an active market. U.S. equities are also valued at the closing price reported in an active market on which the individual securities are traded. A portion of our fixed income investments are valued at the net asset value provided by the independent administrator or custodian of the fund. The net asset value is based on the underlying assets, which are valued using inputs such as the closing price reported, if traded on an active market, values derived from comparable securities of issuers with similar credit ratings, or under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments, but includes adjustments for risks that may not be observable such as certain credit and liquidity risks. Alternative
investments are valued at the net asset value as determined by the independent administrator or custodian of the fund. The net asset value is based on the underlying investments, which are valued using inputs such as quoted market prices of identical instruments, discounted future cash flows, independent appraisals and market-based comparable data. Absolute return strategies are commingled funds which reflect the fair value of our ownership interest in these funds. The investments in these commingled funds include some or all of the above asset classes and are primarily valued at net asset values based on the underlying investments, which are valued consistent with the methodologies described above for each asset class.
NOTE 14. POSTRETIREMENT BENEFITS
We provide certain postretirement healthcare (medical) and life insurance benefits for eligible active and retired domestic employees. The healthcare plans are contributory with participants’ contributions adjusted annually based on medical rates of inflation and plan experience. We use a measurement date of December 31 for our postretirement plans.
Other Postretirement Benefits Obligations and Funded Status
Changes in the benefit obligation were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
Change in Benefit Obligation
|
($ in millions)
|
|
Benefit obligation at beginning of year
|
$
|
41.8
|
|
|
$
|
10.9
|
|
|
$
|
52.7
|
|
|
$
|
37.5
|
|
|
$
|
9.5
|
|
|
$
|
47.0
|
|
|
Service cost
|
0.9
|
|
|
0.3
|
|
|
1.2
|
|
|
0.8
|
|
|
0.3
|
|
|
1.1
|
|
|
Interest cost
|
1.1
|
|
|
0.3
|
|
|
1.4
|
|
|
1.4
|
|
|
0.3
|
|
|
1.7
|
|
|
Actuarial loss
|
3.5
|
|
|
0.6
|
|
|
4.1
|
|
|
5.5
|
|
|
0.7
|
|
|
6.2
|
|
|
Benefits paid
|
(3.1)
|
|
|
(0.4)
|
|
|
(3.5)
|
|
|
(3.4)
|
|
|
(0.4)
|
|
|
(3.8)
|
|
|
Foreign currency translation adjustments
|
—
|
|
|
0.2
|
|
|
0.2
|
|
|
—
|
|
|
0.5
|
|
|
0.5
|
|
|
Benefit obligation at end of year
|
$
|
44.2
|
|
|
$
|
11.9
|
|
|
$
|
56.1
|
|
|
$
|
41.8
|
|
|
$
|
10.9
|
|
|
$
|
52.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
|
($ in millions)
|
|
Funded status
|
$
|
(44.2)
|
|
|
$
|
(11.9)
|
|
|
$
|
(56.1)
|
|
|
$
|
(41.8)
|
|
|
$
|
(10.9)
|
|
|
$
|
(52.7)
|
|
Under ASC 715, we recorded a $3.1 million after-tax charge ($4.1 million pretax) to shareholders’ equity as of December 31, 2020 for our other postretirement plans. In 2019, we recorded an after-tax charge of $4.7 million ($6.2 million pretax) to shareholders’ equity as of December 31, 2019 for our other postretirement plans.
Amounts recognized in the consolidated balance sheets consisted of:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
|
($ in millions)
|
|
Accrued benefit in current liabilities
|
$
|
(3.1)
|
|
|
$
|
(0.3)
|
|
|
$
|
(3.4)
|
|
|
$
|
(3.3)
|
|
|
$
|
(0.4)
|
|
|
$
|
(3.7)
|
|
|
Accrued benefit in noncurrent liabilities
|
(41.1)
|
|
|
(11.6)
|
|
|
(52.7)
|
|
|
(38.5)
|
|
|
(10.5)
|
|
|
(49.0)
|
|
|
Accumulated other comprehensive loss
|
24.9
|
|
|
2.1
|
|
|
27.0
|
|
|
23.5
|
|
|
1.7
|
|
|
25.2
|
|
|
Net balance sheet impact
|
$
|
(19.3)
|
|
|
$
|
(9.8)
|
|
|
$
|
(29.1)
|
|
|
$
|
(18.3)
|
|
|
$
|
(9.2)
|
|
|
$
|
(27.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Components of Net Periodic Benefit Cost
|
($ in millions)
|
|
Service cost
|
$
|
1.2
|
|
|
$
|
1.1
|
|
|
$
|
1.3
|
|
|
Interest cost
|
1.4
|
|
|
1.7
|
|
|
1.5
|
|
|
Amortization of prior service cost
|
0.1
|
|
|
—
|
|
|
—
|
|
|
Recognized actuarial loss
|
2.2
|
|
|
2.1
|
|
|
2.4
|
|
|
Net periodic benefit cost
|
$
|
4.9
|
|
|
$
|
4.9
|
|
|
$
|
5.2
|
|
|
|
|
|
|
|
|
|
Included in Other Comprehensive Loss (Pretax)
|
|
|
|
|
|
|
Liability adjustment
|
$
|
4.1
|
|
|
$
|
6.2
|
|
|
$
|
(2.1)
|
|
|
Amortization of prior service costs and actuarial losses
|
(2.3)
|
|
|
(2.1)
|
|
|
(2.4)
|
|
The service cost component of net periodic postretirement benefit cost related to the employees of the operating segments are allocated to the operating segments based on their respective estimated census data.
Other Postretirement Benefits Plan Assumptions
Certain actuarial assumptions, such as discount rate, have a significant effect on the amounts reported for net periodic benefit cost and accrued benefit obligation amounts.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Weighted-Average Assumptions
|
2020
|
|
2019
|
|
2018
|
|
Discount rate—periodic benefit cost
|
3.1
|
%
|
|
4.1
|
%
|
|
3.5
|
%
|
|
Discount rate—benefit obligation
|
2.3
|
%
|
|
3.1
|
%
|
|
4.1
|
%
|
The discount rate is based on a hypothetical yield curve represented by a series of annualized individual zero-coupon bond spot rates for maturities ranging from one-half to thirty years. The bonds used in the yield curve must have a rating of AA or better per Standard & Poor’s, be non-callable, and have at least $250 million par outstanding. The yield curve is then applied to the projected benefit payments from the plan. Based on these bonds and the projected benefit payment streams, the single rate that produces the same yield as the matching bond portfolio is used as the discount rate.
We review external data and our own internal trends for healthcare costs to determine the healthcare cost for the post retirement benefit obligation. The assumed healthcare cost trend rates for pre-65 retirees were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
Healthcare cost trend rate assumed for next year
|
7.3
|
%
|
|
7.5
|
%
|
|
Rate that the cost trend rate gradually declines to
|
4.5
|
%
|
|
4.5
|
%
|
|
Year that the rate reaches the ultimate rate
|
2031
|
|
2031
|
For post-65 retirees, we provide a fixed dollar benefit, which is not subject to escalation.
We expect to make payments of approximately $3 million for each of the next five years under the provisions of our other postretirement benefit plans.
NOTE 15. INCOME TAXES
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Components of Income (Loss) Before Taxes
|
($ in millions)
|
|
Domestic
|
$
|
(1,025.2)
|
|
|
$
|
(1.3)
|
|
|
$
|
288.0
|
|
|
Foreign
|
5.2
|
|
|
(35.6)
|
|
|
149.3
|
|
|
Income (loss) before taxes
|
$
|
(1,020.0)
|
|
|
$
|
(36.9)
|
|
|
$
|
437.3
|
|
|
Components of Income Tax (Benefit) Provision
|
|
|
|
|
|
|
Current (benefit) provision:
|
|
|
|
|
|
|
Federal
|
$
|
(42.9)
|
|
|
$
|
9.3
|
|
|
$
|
21.7
|
|
|
State
|
0.5
|
|
|
3.2
|
|
|
5.1
|
|
|
Foreign
|
12.5
|
|
|
7.6
|
|
|
48.0
|
|
|
|
(29.9)
|
|
|
20.1
|
|
|
74.8
|
|
|
Deferred (benefit) provision:
|
|
|
|
|
|
|
Federal
|
(36.0)
|
|
|
(32.4)
|
|
|
27.0
|
|
|
State
|
(13.2)
|
|
|
(9.3)
|
|
|
(0.8)
|
|
|
Foreign
|
29.0
|
|
|
(4.0)
|
|
|
8.4
|
|
|
|
(20.2)
|
|
|
(45.7)
|
|
|
34.6
|
|
|
Income tax (benefit) provision
|
$
|
(50.1)
|
|
|
$
|
(25.6)
|
|
|
$
|
109.4
|
|
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 to the income (loss) before taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
Effective Tax Rate Reconciliation (Percent)
|
2020
|
|
2019
|
|
2018
|
|
Statutory federal tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
|
State income taxes, net
|
1.1
|
|
|
(5.4)
|
|
|
2.0
|
|
|
Foreign rate differential
|
(0.2)
|
|
|
19.4
|
|
|
1.8
|
|
|
U.S. tax on foreign earnings
|
(1.8)
|
|
|
—
|
|
|
1.1
|
|
|
Salt depletion
|
1.0
|
|
|
29.0
|
|
|
(2.4)
|
|
|
Change in valuation allowance
|
(3.5)
|
|
|
(64.9)
|
|
|
3.8
|
|
|
Remeasurement of U.S. state deferred taxes
|
(0.1)
|
|
|
16.1
|
|
|
(0.6)
|
|
|
Change in tax contingencies
|
0.2
|
|
|
35.4
|
|
|
(0.7)
|
|
|
U.S. Tax Cuts and Jobs Act
|
—
|
|
|
—
|
|
|
(0.8)
|
|
|
Share-based payments
|
—
|
|
|
0.7
|
|
|
—
|
|
|
Dividends paid to Contributing Employee Ownership Plan
|
—
|
|
|
1.1
|
|
|
(0.1)
|
|
|
Return to provision
|
0.3
|
|
|
15.0
|
|
|
(0.1)
|
|
|
U.S. federal tax credits
|
0.2
|
|
|
6.4
|
|
|
(0.4)
|
|
|
Goodwill impairment charge
|
(13.3)
|
|
|
—
|
|
|
—
|
|
|
Other, net
|
—
|
|
|
(4.4)
|
|
|
0.4
|
|
|
Effective tax rate
|
4.9
|
%
|
|
69.4
|
%
|
|
25.0
|
%
|
The effective tax rate for 2020 included expenses associated with a net increase in the valuation allowance related to foreign and domestic tax credits and deferred tax assets in foreign jurisdictions, a remeasurement of deferred taxes due to an increase in our state effective tax rates and a change in tax contingencies, and stock-based compensation, partially offset by a benefit associated with prior year tax positions. These factors resulted in a net $27.9 million tax expense. For 2020, a tax benefit of $10.8 million was recognized associated with the $699.8 million goodwill impairment charge. After giving consideration to these items, including the goodwill impairment charge on Olin’s loss before taxes, the effective tax rate for 2020 of 21.0% was equal to the 21% U.S. federal statutory rate as foreign income taxes, foreign income inclusions and a net increase in the valuation allowance related to losses in foreign jurisdictions were offset by state taxes and favorable permanent salt depletion deductions.
The effective tax rate for 2019 included benefits associated with the finalization of the Internal Revenue Service (IRS) review of years 2013 to 2015 U.S. income tax claims, stock-based compensation, prior year tax positions, foreign tax law changes, a remeasurement of deferred taxes due to a decrease in our state effective tax rates and a change in tax contingencies. The effective tax rate also included expenses associated with a net increase in the valuation allowance primarily related to foreign deferred tax assets and liabilities. These factors resulted in a net $19.4 million tax benefit. After giving consideration to these items, the effective tax rate for 2019 of 16.8% was lower than the 21% U.S. federal statutory rate primarily due to state taxes and a net increase in the valuation allowance related to losses in foreign jurisdictions, partially offset by foreign income taxes and favorable permanent salt depletion deductions.
The effective tax rate for 2018 included benefits associated with the U.S. Tax Cuts and Jobs Act (2017 Tax Act), stock-based compensation, changes in tax contingencies, a foreign dividend payment, changes associated with prior year tax positions and the remeasurement of deferred taxes due to a decrease in our state effective tax rates. The effective tax rate also included expenses associated with a net increase in the valuation allowance related to deferred tax assets in foreign jurisdictions and the remeasurement of deferred taxes due to changes in our foreign tax rates. These factors resulted in a net $2.9 million tax benefit, of which $3.8 million related to the increase of the 2017 Tax Act benefit. After giving consideration to these items, the effective tax rate for 2018 of 25.7% was higher than the 21% U.S. federal statutory rate primarily due to state and foreign income taxes, foreign income inclusions and a net increase in the valuation allowance related to current year losses in foreign jurisdictions, partially offset by favorable permanent salt depletion deductions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Components of Deferred Tax Assets and Liabilities
|
2020
|
|
2019
|
|
Deferred tax assets:
|
($ in millions)
|
|
Pension and postretirement benefits
|
$
|
181.9
|
|
|
$
|
190.6
|
|
|
Environmental reserves
|
36.3
|
|
|
34.5
|
|
|
Asset retirement obligations
|
16.4
|
|
|
13.2
|
|
|
Accrued liabilities
|
54.1
|
|
|
38.6
|
|
|
Lease liabilities
|
87.4
|
|
|
90.0
|
|
|
Tax credits
|
49.8
|
|
|
25.1
|
|
|
Net operating losses
|
141.0
|
|
|
70.0
|
|
|
Capital loss carryforward
|
0.9
|
|
|
0.9
|
|
|
Interest deduction limitation
|
7.0
|
|
|
41.8
|
|
|
Other miscellaneous items
|
—
|
|
|
20.2
|
|
|
Total deferred tax assets
|
574.8
|
|
|
524.9
|
|
|
Valuation allowance
|
(239.6)
|
|
|
(182.1)
|
|
|
Net deferred tax assets
|
335.2
|
|
|
342.8
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Property, plant and equipment
|
530.4
|
|
|
525.0
|
|
|
Right-of-use lease assets
|
86.2
|
|
|
88.8
|
|
|
Intangible amortization
|
40.0
|
|
|
54.6
|
|
|
Inventory and prepaids
|
17.4
|
|
|
20.6
|
|
|
Partnerships
|
80.9
|
|
|
67.3
|
|
|
Taxes on unremitted earnings
|
6.1
|
|
|
5.7
|
|
|
Other miscellaneous items
|
6.2
|
|
|
—
|
|
|
Total deferred tax liabilities
|
767.2
|
|
|
762.0
|
|
|
Net deferred tax liability
|
$
|
(432.0)
|
|
|
$
|
(419.2)
|
|
Realization of the net deferred tax assets, irrespective of indefinite-lived deferred tax liabilities, is dependent on future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing temporary differences and carryforwards. Although realization is not assured, we believe that it is more likely than not that the net deferred tax assets will be realized.
At December 31, 2020, we had a U.S. federal net operating loss (NOL) of $253.1 million (representing $53.2 million of deferred tax assets), which do not expire.
At December 31, 2020, we had deferred state tax assets of $25.9 million relating to state NOLs, which will expire in years 2021 through 2040, if not utilized.
At December 31, 2020, we had deferred state tax assets of $23.3 million relating to state tax credits, which will expire in years 2021 through 2035, if not utilized.
At December 31, 2020, we had a capital loss carryforward of $3.6 million (representing $0.9 million of deferred tax assets) which is available to offset future consolidated capital gains that will expire in years 2021 through 2025, if not utilized.
At December 31, 2020, we had U.S. federal tax credits of $10.5 million, that will expire in years 2038 through 2040, if not utilized.
At December 31, 2020, we had foreign tax credits of $16.9 million, that will expire in years 2027 through 2030, if not utilized.
At December 31, 2020, we had NOLs of approximately $362.8 million (representing $61.9 million of deferred tax assets) in various foreign jurisdictions. Of these, $59.9 million (representing $14.5 million of deferred tax assets) expire in various years from 2022 to 2040. The remaining $302.9 million (representing $47.4 million of deferred tax assets) do not expire.
As of December 31, 2020, we had recorded a valuation allowance of $239.6 million, compared to $182.1 million as of December 31, 2019. The increase of $57.5 million is primarily due to the recent history of cumulative losses within foreign jurisdictions and projections of future taxable income insufficient to overcome the loss history. We continue to have net deferred tax assets in several jurisdictions which we expect to realize, assuming sufficient taxable income can be generated to utilize these deferred tax benefits, which is based on certain estimates and assumptions. If these estimates and related assumptions change in the future, we may be required to reduce the value of the deferred tax assets resulting in additional tax expense.
The activity of our deferred income tax valuation allowance was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
($ in millions)
|
|
Beginning balance
|
$
|
182.1
|
|
|
$
|
147.4
|
|
|
Increases to valuation allowances
|
54.6
|
|
|
38.1
|
|
|
Decreases to valuation allowances
|
(2.2)
|
|
|
(0.7)
|
|
|
Foreign currency translation adjustments
|
5.1
|
|
|
(2.7)
|
|
|
Ending balance
|
$
|
239.6
|
|
|
$
|
182.1
|
|
As of December 31, 2020, we had $21.3 million of gross unrecognized tax benefits, which would have a net $21.2 million impact on the effective tax rate, if recognized. As of December 31, 2019, we had $22.8 million of gross unrecognized tax benefits, which would have a net $22.4 million impact on the effective tax rate, if recognized. The change for both 2020 and 2019 primarily relates to additional gross unrecognized benefits for current and prior year tax positions, as well as decreases for prior year tax positions. The amounts of unrecognized tax benefits were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
($ in millions)
|
|
Beginning balance
|
$
|
22.8
|
|
|
$
|
33.8
|
|
|
Increase for current year tax positions
|
1.7
|
|
|
2.0
|
|
|
Increase for prior year tax positions
|
0.2
|
|
|
1.5
|
|
|
Decrease for prior year tax positions
|
(3.5)
|
|
|
(14.3)
|
|
|
Decrease due to tax settlements
|
—
|
|
|
(0.2)
|
|
|
Foreign currency translation adjustments
|
0.1
|
|
|
—
|
|
|
Ending balance
|
$
|
21.3
|
|
|
$
|
22.8
|
|
In July 2019, the review of certain U.S. income tax claims by the IRS for the years 2013 to 2015 was finalized which resulted in a $14.3 million income tax benefit primarily related to favorable adjustments in uncertain tax positions for prior tax years.
We recognize interest and penalty expense related to unrecognized tax positions as a component of the income tax provision. As of both December 31, 2020 and 2019, interest and penalties accrued were $0.1 million. For 2020, 2019 and 2018, we recorded (benefit) expense related to interest and penalties of $(0.1) million, $(1.5) million and $0.4 million, respectively.
As of December 31, 2020, we believe it is reasonably possible that our total amount of unrecognized tax benefits will decrease by approximately $6.9 million over the next twelve months. The anticipated reduction primarily relates to settlements with tax authorities and the expiration of federal, state and foreign statutes of limitation.
We operate globally and file income tax returns in numerous jurisdictions. Our tax returns are subject to examination by various federal, state and local tax authorities. Our 2016 U.S. federal income tax return is currently under examination by the IRS. Additionally, examinations are ongoing in various states and foreign jurisdictions. We believe we have adequately provided for all tax positions; however, amounts asserted by taxing authorities could be greater than our accrued position. For our primary tax jurisdictions, the tax years that remain subject to examination are as follows:
|
|
|
|
|
|
|
|
|
Tax Years
|
|
U.S. federal income tax
|
2016 - 2019
|
|
U.S. state income tax
|
2012 - 2019
|
|
Canadian federal income tax
|
2013 - 2019
|
|
Brazil
|
2015 - 2019
|
|
Germany
|
2015 - 2019
|
|
China
|
2014 - 2019
|
|
The Netherlands
|
2015 - 2019
|
NOTE 16. ACCRUED LIABILITIES
Included in accrued liabilities were the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
($ in millions)
|
|
Accrued compensation and payroll taxes
|
$
|
57.2
|
|
|
$
|
56.3
|
|
|
Tax-related accruals
|
54.5
|
|
|
37.4
|
|
|
Accrued interest
|
59.2
|
|
|
68.2
|
|
|
Legal and professional costs
|
40.2
|
|
|
52.4
|
|
|
Accrued employee benefits
|
29.6
|
|
|
24.0
|
|
|
Manufacturing related accruals
|
22.4
|
|
|
1.3
|
|
|
Environmental (current portion only)
|
19.0
|
|
|
17.0
|
|
|
Asset retirement obligation (current portion only)
|
18.0
|
|
|
10.3
|
|
|
Restructuring reserves (current portion only)
|
2.6
|
|
|
2.1
|
|
|
Derivative contracts
|
0.1
|
|
|
19.0
|
|
|
Other
|
55.2
|
|
|
41.1
|
|
|
Accrued liabilities
|
$
|
358.0
|
|
|
$
|
329.1
|
|
NOTE 17. CONTRIBUTING EMPLOYEE OWNERSHIP PLAN
The Contributing Employee Ownership Plan (CEOP) is a defined contribution plan available to essentially all domestic employees. We provide a contribution to an individual retirement contribution account maintained with the CEOP equal to an amount of between 5.0% and 7.5% of the employee’s eligible compensation. The defined contribution plan expense was $30.6 million, $29.9 million and $28.6 million for 2020, 2019 and 2018, respectively.
Company matching contributions are invested in the same investment allocation as the employee’s contribution. Our matching contributions for eligible employees amounted to $3.7 million, $15.8 million and $14.9 million in 2020, 2019 and 2018, respectively. Effective January 1, 2020, we suspended the match on all salaried and non-bargaining hourly employees’ contributions, and moved to a discretionary contribution model with contributions contingent upon company-wide financial performance. For the year ended December 31, 2020, we did not make a discretionary matching contribution. Effective January 1, 2021, we reinstated the match on all salaried and non-bargaining hourly employees’ contributions, which provides for a maximum 3% matching contribution based on the level of participant contributions.
Employees generally become vested in the value of the contributions we make to the CEOP according to a schedule based on service. After 2 years of service, participants are 25% vested. They vest in increments of 25% for each additional year and after 5 years of service, they are 100% vested in the value of the contributions that we have made to their accounts.
Employees may transfer any or all of the value of the investments, including Olin common stock, to any one or combination of investments available in the CEOP. Employees may transfer balances daily and may elect to transfer any percentage of the balance in the fund from which the transfer is made. However, when transferring out of a fund, employees are prohibited from trading out of the fund to which the transfer was made for seven calendar days. This limitation does not apply to trades into the money market fund or the Olin Common Stock Fund.
NOTE 18. STOCK-BASED COMPENSATION
Stock-based compensation expense was allocated to the operating segments for the portion related to employees whose compensation would be included in cost of goods sold with the remainder recognized in corporate/other. There were no significant capitalized stock-based compensation costs. Stock-based compensation granted includes stock options, performance stock awards, restricted stock awards and deferred directors’ compensation. Stock-based compensation expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
($ in millions)
|
|
Stock-based compensation
|
$
|
17.5
|
|
|
$
|
9.4
|
|
|
$
|
19.3
|
|
|
Mark-to-market adjustments
|
4.8
|
|
|
(1.8)
|
|
|
(10.7)
|
|
|
Total expense
|
$
|
22.3
|
|
|
$
|
7.6
|
|
|
$
|
8.6
|
|
Stock Plans
Under the stock option and long-term incentive plans, options may be granted to purchase shares of our common stock at an exercise price not less than fair market value at the date of grant, and are exercisable for a period not exceeding ten years from that date. Stock options, restricted stock and performance shares typically vest over three years. We issue shares to settle stock options, restricted stock and share-based performance awards. In 2020, 2019 and 2018, long-term incentive awards included stock options, performance share awards and restricted stock. The stock option exercise price was set at the fair market value of common stock on the date of the grant, and the options have a ten-year term.
Stock option transactions were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
|
|
|
Shares
|
|
Option Price
|
|
Weighted-Average Option Price
|
|
Options
|
|
Weighted-Average Exercise Price
|
|
Outstanding at January 1, 2020
|
7,210,551
|
|
|
$13.14-32.94
|
|
$
|
24.95
|
|
|
4,648,574
|
|
|
$
|
23.07
|
|
|
Granted
|
2,663,100
|
|
|
17.33-17.33
|
|
17.33
|
|
|
|
|
|
|
Exercised
|
(190,295)
|
|
|
13.14-18.78
|
|
17.42
|
|
|
|
|
|
|
Canceled
|
(555,981)
|
|
|
13.14-32.94
|
|
22.03
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
9,127,375
|
|
|
$13.14-32.94
|
|
$
|
23.06
|
|
|
5,671,371
|
|
|
$
|
24.57
|
|
At December 31, 2020, the average exercise period for all outstanding and exercisable options was 77 months and 60 months, respectively. At December 31, 2020, the aggregate intrinsic value (the difference between the exercise price and market value) for outstanding options was $33.8 million and exercisable options was $16.0 million. The total intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018 was $0.6 million, $1.3 million and $2.9 million, respectively.
The total unrecognized compensation cost related to unvested stock options at December 31, 2020 was $9.9 million and was expected to be recognized over a weighted-average period of 1.3 years.
The following table provides certain information with respect to stock options exercisable at December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of
Exercise Prices
|
|
Options Exercisable
|
|
Weighted-Average Exercise Price
|
|
Options Outstanding
|
|
Weighted-Average Exercise Price
|
|
Under $22.00
|
|
1,570,673
|
|
|
$
|
15.14
|
|
|
3,936,073
|
|
|
$
|
16.45
|
|
|
$22.00 - $28.00
|
|
2,096,617
|
|
|
25.77
|
|
|
2,953,235
|
|
|
25.91
|
|
|
Over $28.00
|
|
2,004,081
|
|
|
30.70
|
|
|
2,238,067
|
|
|
30.93
|
|
|
|
|
5,671,371
|
|
|
|
|
9,127,375
|
|
|
|
At December 31, 2020, common shares reserved for issuance and available for grant or purchase under the following plans consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Stock Option Plans
|
Reserved for Issuance
|
|
Available for Grant or Purchase(1)
|
|
2000 long term incentive plan
|
18,666
|
|
|
—
|
|
|
2003 long term incentive plan
|
178,284
|
|
|
—
|
|
|
2006 long term incentive plan
|
93,190
|
|
|
—
|
|
|
2009 long term incentive plan
|
1,510,954
|
|
|
—
|
|
|
2014 long term incentive plan
|
1,784,213
|
|
|
—
|
|
|
2016 long term incentive plan
|
1,967,666
|
|
|
—
|
|
|
2018 long term incentive plan
|
9,933,512
|
|
|
4,834,380
|
|
|
Total under stock option plans
|
15,486,485
|
|
|
4,834,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Stock Purchase Plans
|
Reserved for Issuance
|
|
Available for Grant or Purchase
|
|
1997 stock plan for non-employee directors
|
453,323
|
|
|
176,088
|
|
(1)All available to be issued as stock options, but includes a sub-limit for all types of stock awards of 472,630 shares.
Under the stock purchase plans, our non-employee directors may defer certain elements of their compensation into shares of our common stock based on fair market value of the shares at the time of deferral. Non-employee directors annually receive stock grants as a portion of their director compensation. Of the shares reserved under the stock purchase plans at December 31, 2020, 277,716 shares were committed.
Performance share awards are denominated in shares of our stock and are paid half in cash and half in stock. Payouts for performance share awards are based on two criteria: (1) 50% of the award is based on Olin’s total shareholder returns over the applicable three-year performance cycle in relation to the total shareholder return over the same period among a portfolio of public companies which are selected in concert with outside compensation consultants and (2) 50% of the award is based on Olin’s net income over the applicable three-year performance cycle in relation to the net income goal for such period as set by the compensation committee of Olin’s board of directors. The expense associated with performance shares is recorded based on our estimate of our performance relative to the respective target. If an employee leaves the company before the end of the performance cycle, the performance shares may be prorated based on the number of months of the performance cycle worked and are settled in cash instead of half in cash and half in stock when the three-year performance cycle is completed. Performance share transactions were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To Settle in Cash
|
|
To Settle in Shares
|
|
|
Shares
|
|
Weighted-Average Fair Value per Share
|
|
Shares
|
|
Weighted-Average Fair Value per Share
|
|
Outstanding at January 1, 2020
|
317,710
|
|
|
$
|
17.18
|
|
|
304,075
|
|
|
$
|
28.91
|
|
|
Granted
|
238,050
|
|
|
17.33
|
|
|
238,050
|
|
|
17.33
|
|
|
Paid/Issued
|
(69,639)
|
|
|
17.18
|
|
|
(64,970)
|
|
|
29.75
|
|
|
Converted from shares to cash
|
22,952
|
|
|
25.10
|
|
|
(22,952)
|
|
|
25.10
|
|
|
Canceled
|
(115,868)
|
|
|
21.29
|
|
|
(108,773)
|
|
|
27.83
|
|
|
Outstanding at December 31, 2020
|
393,205
|
|
|
$
|
24.84
|
|
|
345,430
|
|
|
$
|
21.37
|
|
|
Total vested at December 31, 2020
|
216,955
|
|
|
$
|
24.84
|
|
|
168,230
|
|
|
$
|
23.41
|
|
The summary of the status of our unvested performance shares to be settled in cash were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average Fair Value per Share
|
|
Unvested at January 1, 2020
|
125,567
|
|
|
$
|
17.18
|
|
|
Granted
|
238,050
|
|
|
17.33
|
|
|
Vested
|
(120,982)
|
|
|
24.84
|
|
|
Canceled
|
(66,385)
|
|
|
19.61
|
|
|
Unvested at December 31, 2020
|
176,250
|
|
|
$
|
24.84
|
|
At December 31, 2020, the liability recorded for performance shares to be settled in cash totaled $5.4 million. The total unrecognized compensation cost related to unvested performance shares at December 31, 2020 was $7.8 million and was expected to be recognized over a weighted-average period of 1.2 years.
NOTE 19. SHAREHOLDERS’ EQUITY
On April 26, 2018, our board of directors authorized a share repurchase program for the purchase of shares of common stock at an aggregate price of up to $500.0 million. This program will terminate upon the purchase of $500.0 million of our common stock.
There were no shares repurchased for the year ended December 31, 2020. On August 5, 2019, we entered into an accelerated share repurchase (ASR) agreement with Goldman Sachs & Co. LLC, a third-party financial institution, to repurchase $100.0 million of Olin’s common stock. This authorization was granted under the April 26, 2018 share repurchase program and reduced the remaining authorized repurchase amount under that program by $100.0 million. In connection with this agreement, we repurchased a total of 5.7 million shares under this ASR agreement.
For the year ended December 31, 2019, 8.0 million shares were repurchased and retired at a cost of $145.9 million. As of December 31, 2020, a cumulative total of 10.1 million shares were repurchased and retired at a cost of $195.9 million and $304.1 million of common stock remained authorized to be repurchased.
During 2020, 2019 and 2018, we issued 0.1 million, 0.1 million and 0.2 million shares, respectively, with a total value of $1.9 million, $1.7 million and $3.4 million, respectively, representing stock options exercised.
We have registered an undetermined amount of securities with the SEC, so that, from time-to-time, we may issue debt securities, preferred stock and/or common stock and associated warrants in the public market under that registration statement.
In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” which amends ASC 220 “Income Statement—Reporting Comprehensive Income.” This update allows a reclassification from accumulated other comprehensive loss to retained earnings for the stranded tax effects resulting from the 2017 Tax Act during each fiscal year or quarter in which the effect of the lower tax rate is recorded. We adopted this update in March 2018 and reclassified $85.9 million related to the deferred gain resulting from the 2017 Tax Act from accumulated other comprehensive loss to retained earnings.
The following table represents the activity included in accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustment (net of taxes)
|
|
Unrealized Gains (Losses) on Derivative Contracts (net of taxes)
|
|
Pension and Other Postretirement Benefits (net of taxes)
|
|
Accumulated Other Comprehensive Loss
|
|
|
($ in millions)
|
|
Balance at January 1, 2018
|
$
|
7.6
|
|
|
$
|
11.1
|
|
|
$
|
(503.3)
|
|
|
$
|
(484.6)
|
|
|
Unrealized losses
|
(22.2)
|
|
|
(1.1)
|
|
|
(98.5)
|
|
|
(121.8)
|
|
|
Reclassification adjustments of (gains) losses into income
|
—
|
|
|
(14.3)
|
|
|
37.0
|
|
|
22.7
|
|
|
Tax benefit
|
—
|
|
|
3.7
|
|
|
14.9
|
|
|
18.6
|
|
|
Net change
|
(22.2)
|
|
|
(11.7)
|
|
|
(46.6)
|
|
|
(80.5)
|
|
|
Income tax reclassification adjustment
|
15.3
|
|
|
2.4
|
|
|
(103.6)
|
|
|
(85.9)
|
|
|
Balance at December 31, 2018
|
0.7
|
|
|
1.8
|
|
|
(653.5)
|
|
|
(651.0)
|
|
|
Unrealized losses
|
(9.1)
|
|
|
(47.1)
|
|
|
(183.9)
|
|
|
(240.1)
|
|
|
Reclassification adjustments of losses into income
|
—
|
|
|
26.9
|
|
|
29.1
|
|
|
56.0
|
|
|
Tax benefit
|
—
|
|
|
4.8
|
|
|
26.9
|
|
|
31.7
|
|
|
Net change
|
(9.1)
|
|
|
(15.4)
|
|
|
(127.9)
|
|
|
(152.4)
|
|
|
Balance at December 31, 2019
|
(8.4)
|
|
|
(13.6)
|
|
|
(781.4)
|
|
|
(803.4)
|
|
|
Unrealized gains
|
27.8
|
|
|
31.1
|
|
|
26.6
|
|
|
85.5
|
|
|
Reclassification adjustments of losses into income
|
—
|
|
|
14.9
|
|
|
46.3
|
|
|
61.2
|
|
|
Tax provision
|
—
|
|
|
(11.0)
|
|
|
(22.2)
|
|
|
(33.2)
|
|
|
Net change
|
27.8
|
|
|
35.0
|
|
|
50.7
|
|
|
113.5
|
|
|
Balance at December 31, 2020
|
$
|
19.4
|
|
|
$
|
21.4
|
|
|
$
|
(730.7)
|
|
|
$
|
(689.9)
|
|
Net income (loss), interest expense and cost of goods sold included reclassification adjustments for realized gains and losses on derivative contracts from accumulated other comprehensive loss.
Net income (loss) and non-operating pension income included the amortization of prior service costs and actuarial losses from accumulated other comprehensive loss.
NOTE 20. SEGMENT INFORMATION
We define segment results as income (loss) before interest expense, interest income, goodwill impairment charges, other operating income (expense), non-operating pension income, other income and income taxes, and includes the operating results of non-consolidated affiliates. Consistent with the guidance in ASC 280 “Segment Reporting,” we have determined it is appropriate to include the operating results of non-consolidated affiliates in the relevant segment financial results. We have three operating segments: Chlor Alkali Products and Vinyls, Epoxy and Winchester. The three operating segments reflect the organization used by our management for purposes of allocating resources and assessing performance. Chlorine used in our Epoxy segment is transferred at cost from the Chlor Alkali Products and Vinyls segment. Sales and profits are recognized in the Chlor Alkali Products and Vinyls segment for all caustic soda generated and sold by Olin.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Sales:
|
($ in millions)
|
|
Chlor Alkali Products and Vinyls
|
$
|
2,959.9
|
|
|
$
|
3,420.1
|
|
|
$
|
3,986.7
|
|
|
Epoxy
|
1,870.5
|
|
|
2,024.4
|
|
|
2,303.1
|
|
|
Winchester
|
927.6
|
|
|
665.5
|
|
|
656.3
|
|
|
Total sales
|
$
|
5,758.0
|
|
|
$
|
6,110.0
|
|
|
$
|
6,946.1
|
|
|
Income (loss) before taxes:
|
|
|
|
|
|
|
Chlor Alkali Products and Vinyls
|
$
|
3.5
|
|
|
$
|
336.7
|
|
|
$
|
637.1
|
|
|
Epoxy
|
40.8
|
|
|
53.9
|
|
|
52.8
|
|
|
Winchester
|
92.3
|
|
|
40.1
|
|
|
38.4
|
|
|
Corporate/Other:
|
|
|
|
|
|
|
Environmental (expense) income
|
(20.9)
|
|
|
(20.5)
|
|
|
103.7
|
|
|
Other corporate and unallocated costs
|
(154.3)
|
|
|
(156.3)
|
|
|
(158.3)
|
|
|
Restructuring charges
|
(9.0)
|
|
|
(76.5)
|
|
|
(21.9)
|
|
|
Acquisition-related costs
|
—
|
|
|
—
|
|
|
(1.0)
|
|
|
Goodwill impairment
|
(699.8)
|
|
|
—
|
|
|
—
|
|
|
Other operating income
|
0.7
|
|
|
0.4
|
|
|
6.4
|
|
|
Interest expense
|
(292.7)
|
|
|
(243.2)
|
|
|
(243.2)
|
|
|
Interest income
|
0.5
|
|
|
1.0
|
|
|
1.6
|
|
|
Non-operating pension income
|
18.9
|
|
|
16.3
|
|
|
21.7
|
|
|
Other income
|
—
|
|
|
11.2
|
|
|
—
|
|
|
Income (loss) before taxes
|
$
|
(1,020.0)
|
|
|
$
|
(36.9)
|
|
|
$
|
437.3
|
|
|
Losses of non-consolidated affiliates:
|
|
|
|
|
|
|
Chlor Alkali Products and Vinyls
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(19.7)
|
|
|
Depreciation and amortization expense:
|
|
|
|
|
|
|
Chlor Alkali Products and Vinyls
|
$
|
451.4
|
|
|
$
|
470.4
|
|
|
$
|
473.1
|
|
|
Epoxy
|
90.7
|
|
|
100.1
|
|
|
102.4
|
|
|
Winchester
|
20.1
|
|
|
20.1
|
|
|
20.0
|
|
|
Corporate/Other
|
6.2
|
|
|
6.8
|
|
|
5.9
|
|
|
Total depreciation and amortization expense
|
$
|
568.4
|
|
|
$
|
597.4
|
|
|
$
|
601.4
|
|
|
Capital spending:
|
|
|
|
|
|
|
Chlor Alkali Products and Vinyls
|
$
|
180.4
|
|
|
$
|
240.3
|
|
|
$
|
259.9
|
|
|
Epoxy
|
33.7
|
|
|
30.0
|
|
|
36.3
|
|
|
Winchester
|
24.5
|
|
|
12.1
|
|
|
14.7
|
|
|
Corporate/Other
|
60.3
|
|
|
103.2
|
|
|
74.3
|
|
|
Total capital spending
|
$
|
298.9
|
|
|
$
|
385.6
|
|
|
$
|
385.2
|
|
Segment assets include only those assets which are directly identifiable to an operating segment. Assets of the corporate/other segment include primarily such items as cash and cash equivalents, deferred taxes and other assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
Assets:
|
($ in millions)
|
|
Chlor Alkali Products and Vinyls
|
$
|
6,165.5
|
|
|
$
|
6,898.7
|
|
|
Epoxy
|
1,153.2
|
|
|
1,469.1
|
|
|
Winchester
|
468.2
|
|
|
385.0
|
|
|
Corporate/Other
|
484.0
|
|
|
435.0
|
|
|
Total assets
|
$
|
8,270.9
|
|
|
$
|
9,187.8
|
|
Property, plant and equipment is attributed to geographic areas based on asset location and sales are attributed to geographic areas based on customer location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
Property, plant and equipment:
|
($ in millions)
|
|
United States
|
$
|
2,860.1
|
|
|
$
|
3,017.4
|
|
|
Foreign
|
310.9
|
|
|
306.4
|
|
|
Total property, plant and equipment
|
$
|
3,171.0
|
|
|
$
|
3,323.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Sales by geography:
|
($ in millions)
|
|
Chlor Alkali Products and Vinyls
|
|
|
|
|
|
|
United States
|
$
|
2,208.5
|
|
|
$
|
2,332.1
|
|
|
$
|
2,610.7
|
|
|
Europe
|
104.4
|
|
|
134.5
|
|
|
181.8
|
|
|
Other foreign
|
647.0
|
|
|
953.5
|
|
|
1,194.2
|
|
|
Total Chlor Alkali Products and Vinyls
|
2,959.9
|
|
|
3,420.1
|
|
|
3,986.7
|
|
|
Epoxy
|
|
|
|
|
|
|
United States
|
622.8
|
|
|
664.0
|
|
|
742.7
|
|
|
Europe
|
684.4
|
|
|
844.2
|
|
|
991.1
|
|
|
Other foreign
|
563.3
|
|
|
516.2
|
|
|
569.3
|
|
|
Total Epoxy
|
1,870.5
|
|
|
2,024.4
|
|
|
2,303.1
|
|
|
Winchester
|
|
|
|
|
|
|
United States
|
865.9
|
|
|
603.4
|
|
|
591.0
|
|
|
Europe
|
9.3
|
|
|
11.7
|
|
|
11.0
|
|
|
Other foreign
|
52.4
|
|
|
50.4
|
|
|
54.3
|
|
|
Total Winchester
|
927.6
|
|
|
665.5
|
|
|
656.3
|
|
|
Total
|
|
|
|
|
|
|
United States
|
3,697.2
|
|
|
3,599.5
|
|
|
3,944.4
|
|
|
Europe
|
798.1
|
|
|
990.4
|
|
|
1,183.9
|
|
|
Other foreign
|
1,262.7
|
|
|
1,520.1
|
|
|
1,817.8
|
|
|
Total sales
|
$
|
5,758.0
|
|
|
$
|
6,110.0
|
|
|
$
|
6,946.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
Sales by product line:
|
($ in millions)
|
|
Chlor Alkali Products and Vinyls
|
|
|
|
|
|
|
Caustic soda
|
$
|
1,408.3
|
|
|
$
|
1,737.4
|
|
|
$
|
2,198.6
|
|
|
Chlorine, chlorine derivatives and other co-products
|
1,551.6
|
|
|
1,682.7
|
|
|
1,788.1
|
|
|
Total Chlor Alkali Products and Vinyls
|
2,959.9
|
|
|
3,420.1
|
|
|
3,986.7
|
|
|
Epoxy
|
|
|
|
|
|
|
Aromatics and allylics
|
821.0
|
|
|
945.3
|
|
|
1,145.7
|
|
|
Epoxy resins
|
1,049.5
|
|
|
1,079.1
|
|
|
1,157.4
|
|
|
Total Epoxy
|
1,870.5
|
|
|
2,024.4
|
|
|
2,303.1
|
|
|
Winchester
|
|
|
|
|
|
|
Commercial
|
640.5
|
|
|
441.3
|
|
|
427.6
|
|
|
Military and law enforcement
|
287.1
|
|
|
224.2
|
|
|
228.7
|
|
|
Total Winchester
|
927.6
|
|
|
665.5
|
|
|
656.3
|
|
|
Total sales
|
$
|
5,758.0
|
|
|
$
|
6,110.0
|
|
|
$
|
6,946.1
|
|
NOTE 21. ENVIRONMENTAL
As is common in our industry, we are subject to environmental laws and regulations related to the use, storage, handling, generation, transportation, emission, discharge, disposal and remediation of, and exposure to, hazardous and non-hazardous substances and wastes in all of the countries in which we do business.
The establishment and implementation of national, state or provincial and local standards to regulate air, water and land quality affect substantially all of our manufacturing locations around the world. Laws providing for regulation of the manufacture, transportation, use and disposal of hazardous and toxic substances, and remediation of contaminated sites, have imposed additional regulatory requirements on industry, particularly the chemicals industry. In addition, implementation of environmental laws has required and will continue to require new capital expenditures and will increase plant operating costs. We employ waste minimization and pollution prevention programs at our manufacturing sites.
We are party to various government and private environmental actions associated with past manufacturing facilities and former waste disposal sites. 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. Our ability to estimate future costs depends on whether our investigatory and remedial activities are in preliminary or advanced stages. With respect to unasserted claims, we accrue liabilities for costs that, in our experience, we expect to incur to protect our interests against those unasserted claims. Our accrued liabilities for unasserted claims amounted to $9.0 million at December 31, 2020. With respect to asserted claims, we accrue liabilities based on remedial investigation, feasibility study, remedial action and operation, maintenance and monitoring (OM&M) expenses that, in our experience, we expect to incur in connection with the asserted claims. Required site OM&M expenses are estimated and accrued in their entirety for required periods not exceeding 30 years, which reasonably approximates the typical duration of long-term site OM&M.
Our liabilities for future environmental expenditures were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
($ in millions)
|
|
Beginning balance
|
$
|
139.0
|
|
|
$
|
125.6
|
|
|
Charges to income
|
20.9
|
|
|
25.3
|
|
|
Remedial and investigatory spending
|
(12.8)
|
|
|
(12.2)
|
|
|
Foreign currency translation adjustments
|
0.1
|
|
|
0.3
|
|
|
Ending balance
|
$
|
147.2
|
|
|
$
|
139.0
|
|
At December 31, 2020 and 2019, our consolidated balance sheets included environmental liabilities of $128.2 million and $122.0 million, respectively, which were classified as other noncurrent liabilities. Our environmental liability amounts do not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology. These liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and our estimate of related costs have changed. As a result of these reassessments, future charges to income may be made for additional liabilities. Of the $147.2 million included on our consolidated balance sheet at December 31, 2020 for future environmental expenditures, we currently expect to utilize $88.5 million of the reserve for future environmental expenditures over the next 5 years, $27.6 million for expenditures 6 to 10 years in the future, and $31.1 million for expenditures beyond 10 years in the future.
Our total estimated environmental liability at December 31, 2020 was attributable to 58 sites, 14 of which were United States Environmental Protection Agency National Priority List sites. Nine sites accounted for 82% of our environmental liability and, of the remaining 49 sites, no one site accounted for more than 3% of our environmental liability. At seven of the nine sites, part of the site is in the long-term OM&M stage. At six of the nine sites, a remedial action plan is being developed for part of the site. At five of the nine sites, a remedial design is being developed at part of the site and at four of the nine sites, part of the site is subject to a remedial investigation. All nine sites are either associated with past manufacturing operations or former waste disposal sites. None of the nine largest sites represents more than 23% of the liabilities reserved on our consolidated balance sheet at December 31, 2020 for future environmental expenditures.
Environmental provisions charged (credited) to income, which are included in cost of goods sold, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
($ in millions)
|
|
Provisions charged to income
|
$
|
20.9
|
|
|
$
|
25.3
|
|
|
$
|
7.3
|
|
|
Insurance recoveries for costs incurred and expensed
|
—
|
|
|
(4.8)
|
|
|
(111.0)
|
|
|
Environmental expense (income)
|
$
|
20.9
|
|
|
$
|
20.5
|
|
|
$
|
(103.7)
|
|
During 2018, we settled certain disputes with respect to insurance coverage for costs at various environmental remediation sites for $121.0 million. Environmental expense (income) for the year ended December 31, 2018 include insurance recoveries for environmental costs incurred and expensed in prior periods of $111.0 million. The recoveries are reduced by estimated liabilities of $10.0 million associated with claims by subsequent owners of certain of the settled environmental sites. Environmental expense (income) for the year ended December 31, 2019 included $4.8 million of recoveries associated with resolving the outstanding third party claims against the proceeds from the 2018 environmental insurance settlement.
These charges relate primarily to remedial and investigatory activities associated with past manufacturing operations and former waste disposal sites and may be material to operating results in future years.
Annual environmental-related cash outlays for site investigation and remediation are expected to range between approximately $15 million to $25 million over the next several years, which are expected to be charged against reserves recorded on our consolidated balance sheet. While we do not anticipate a material increase in the projected annual level of our environmental-related cash outlays for site investigation and remediation, there is always the possibility that such an increase 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, changes in regulatory authorities, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other Potentially Responsible Parties (PRPs), our 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 to us, which could materially adversely affect our financial position or results of operations. At December 31, 2020, we estimate that it is reasonably possible that we may have additional contingent environmental liabilities of $60 million in addition to the amounts for which we have already recorded as a reserve.
NOTE 22. LEASES
Our lease commitments are primarily for railcars, but also include logistics, manufacturing, storage, real estate and information technology assets. Our leases have remaining lease terms of up to 94 years, some of which may include options to extend the leases for up to five years, and some of which may include options to terminate the leases within one year.
The amounts for leases included in our consolidated balance sheet include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2020
|
|
2019
|
|
Lease assets:
|
Balance sheet location:
|
($ in millions)
|
|
Operating
|
Operating lease assets, net
|
$
|
360.7
|
|
|
$
|
377.8
|
|
|
Finance
|
Property, plant and equipment, less accumulated depreciation(1)
|
4.5
|
|
|
5.4
|
|
|
Total lease assets
|
|
$
|
365.2
|
|
|
$
|
383.2
|
|
|
Lease liabilities:
|
|
|
|
|
|
Current
|
|
|
|
|
|
Operating
|
Current operating lease liabilities
|
$
|
74.7
|
|
|
$
|
79.3
|
|
|
Finance
|
Current installments of long-term debt
|
1.3
|
|
|
2.1
|
|
|
Long-term
|
|
|
|
|
|
Operating
|
Operating lease liabilities
|
291.6
|
|
|
303.4
|
|
|
Finance
|
Long-term debt
|
3.0
|
|
|
3.2
|
|
|
Total lease liabilities
|
|
$
|
370.6
|
|
|
$
|
388.0
|
|
(1) As of December 31, 2020, assets recorded under finance leases were $8.0 million and accumulated depreciation associated with finance leases was $3.5 million.
The components of lease expense are recorded to cost of goods sold and selling and administration expenses in the consolidated statement of operations, excluding interest on finance lease liabilities which is recorded to interest expense. The components of lease expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
Lease expense:
|
($ in millions)
|
|
Operating
|
$
|
96.0
|
|
|
$
|
93.6
|
|
|
Other operating lease expense(1)
|
24.3
|
|
|
27.5
|
|
|
Finance:
|
|
|
|
|
Depreciation of leased assets
|
1.3
|
|
|
1.3
|
|
|
Interest on lease liabilities
|
0.2
|
|
|
0.2
|
|
|
Total lease expense
|
$
|
121.8
|
|
|
$
|
122.6
|
|
(1) Includes costs associated with short-term leases and variable lease expenses.
The maturities of lease liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
Operating leases
|
|
Finance leases
|
|
Total
|
|
|
($ in millions)
|
|
2021
|
$
|
83.6
|
|
|
$
|
1.4
|
|
|
$
|
85.0
|
|
|
2022
|
66.9
|
|
|
1.2
|
|
|
68.1
|
|
|
2023
|
52.6
|
|
|
1.0
|
|
|
53.6
|
|
|
2024
|
41.5
|
|
|
0.8
|
|
|
42.3
|
|
|
2025
|
33.7
|
|
|
0.2
|
|
|
33.9
|
|
|
Thereafter
|
148.4
|
|
|
—
|
|
|
148.4
|
|
|
Total lease payments
|
426.7
|
|
|
4.6
|
|
|
431.3
|
|
|
Less: Imputed interest(1)
|
(60.4)
|
|
|
(0.3)
|
|
|
(60.7)
|
|
|
Present value of lease liabilities
|
$
|
366.3
|
|
|
$
|
4.3
|
|
|
$
|
370.6
|
|
(1) Calculated using the discount rate for each lease.
Other information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
Supplemental cash flows information:
|
($ in millions)
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows from operating leases
|
$
|
95.9
|
|
|
$
|
93.4
|
|
|
Operating cash flows from finance leases
|
0.2
|
|
|
0.2
|
|
|
Financing cash flows from finance leases
|
2.1
|
|
|
1.4
|
|
|
Non-cash increase in lease assets and lease liabilities:
|
|
|
|
|
Operating leases
|
$
|
70.5
|
|
|
$
|
176.1
|
|
|
Finance leases
|
1.1
|
|
|
2.5
|
|
|
|
|
|
|
|
|
December 31,
|
|
Weighted-average remaining lease term:
|
2020
|
|
2019
|
|
Operating leases
|
9.5 years
|
|
9.4 years
|
|
Finance leases
|
3.1 years
|
|
3.2 years
|
|
Weighted-average discount rate:
|
|
|
|
|
Operating leases
|
3.0
|
%
|
|
3.1
|
%
|
|
Finance leases
|
3.3
|
%
|
|
3.3
|
%
|
As of December 31, 2020, we have additional operating leases for railcars that have not yet commenced of approximately $64 million which are expected to commence during 2021 with lease terms between 2 years and 15 years. We also have additional operating leases for logistics equipment that have not yet commenced of approximately $5 million which are expected to commence during 2021 with lease terms of 15 years.
NOTE 23. COMMITMENTS AND CONTINGENCIES
The following table summarizes our contractual commitments under purchase contracts as of December 31, 2020:
|
|
|
|
|
|
|
|
|
Purchase Commitments
|
|
|
($ in millions)
|
|
2021
|
$
|
722.8
|
|
|
2022
|
657.4
|
|
|
2023
|
657.4
|
|
|
2024
|
651.3
|
|
|
2025
|
541.2
|
|
|
Thereafter
|
2,390.6
|
|
|
Total commitments
|
$
|
5,620.7
|
|
The above purchase commitments include raw material, capital expenditure and utility purchasing commitments utilized in our normal course of business for our projected needs. In connection with the Acquisition, certain additional agreements have been entered into with Dow, including, long-term purchase agreements for raw materials. These agreements are maintained through long-term cost based contracts that provide us with a reliable supply of key raw materials. Key raw materials received from Dow include ethylene, electricity, propylene and benzene.
Legal Matters
Olin, K.A. Steel Chemicals (a wholly owned subsidiary of Olin) and other alleged caustic soda producers were named as defendants in six purported class action civil lawsuits filed March 22, 25 and 26, 2019 and April 12, 2019 in the U.S. District Court for the Western District of New York on behalf of the respective named plaintiffs and a putative class comprised of all persons and entities who purchased caustic soda in the U.S. directly from one or more of the defendants, their parents, predecessors, subsidiaries or affiliates at any time on or after October 1, 2015. Olin, K.A. Steel Chemicals and other caustic soda producers were also named as defendants in two purported class action civil lawsuits filed July 25 and 29, 2019 in the U.S. District Court for the Western District of New York on behalf of the respective named plaintiffs and a putative class comprised of all persons and entities who purchased caustic soda in the U.S. indirectly from distributors at any time on or after October 1, 2015. The other defendants named in the lawsuits are Occidental Petroleum Corporation, Occidental Chemical Corporation d/b/a OxyChem, Westlake Chemical Corporation, Shin-Etsu Chemical Co., Ltd., Shintech Incorporated, Formosa Plastics Corporation, and Formosa Plastics Corporation, U.S.A. The lawsuits allege the defendants conspired to fix, raise, maintain and stabilize the price of caustic soda, restrict domestic (U.S.) supply of caustic soda and allocate caustic soda customers. Plaintiffs seek an unspecified amount of damages and injunctive relief.
Olin, K.A. Steel Chemical, Olin Canada ULC, 3229897 Nova Scotia Co. (wholly owned subsidiaries of Olin) and other alleged caustic soda producers were named as defendants in a proposed class action civil lawsuit filed on October 7, 2020 in the Quebec Superior Court (Province of Quebec) on behalf of the respective named plaintiff and a putative class comprised of all Canadian persons and entities who, between October 1, 2015 and the date of the eventual class action certification, directly or indirectly purchased caustic soda or products containing caustic soda, produced by one or more of the defendants. Olin, K.A. Steel Chemical, Olin Canada ULC, 3229897 Nova Scotia Co. and other alleged caustic soda producers were also named as defendants in a proposed class action civil lawsuit filed November 13, 2020 in the Federal Court of Canada on behalf of the respective named plaintiff and a putative class comprised of all legal persons in Canada who, at any time on or after October 1, 2015 to the present, directly or indirectly purchased caustic soda. The other defendants named in the two Canadian lawsuits are Occidental Petroleum Corporation, Occidental Chemical Corporation, Oxy Canada Sales, Inc., Westlake Chemical Corporation, Axiall Canada, Inc., Shin-Etsu Chemical Co., Ltd., Shintech Incorporated, Formosa Plastics Corporation, and Formosa Plastics Corporation, U.S.A. The lawsuits allege the defendants conspired to fix, raise, maintain control, and stabilize the price of caustic soda, divide and allocate markets, sales, customers and territories, fix, maintain, control, prevent, restrict, lessen or eliminate production and supply of caustic soda, and agree to idle capacity of production and/or refrain from increasing their production capacity. Plaintiffs seek an unspecified amount of damages, including punitive damages.
We believe we have meritorious legal positions and will continue to represent our interests vigorously in these matters. Any losses related to these matters are not currently estimable because of unresolved questions of fact and law, but if resolved unfavorably to Olin, could have a material adverse effect on our financial position, cash flows or results of operations.
We, and our subsidiaries, are defendants in various other legal actions (including proceedings based on alleged exposures to asbestos) incidental to our past and current business activities. At December 31, 2020 and 2019, our consolidated balance sheets included liabilities for these other legal actions of $13.5 million and $12.4 million, respectively. These liabilities do not include costs associated with legal representation. Based on our analysis, and considering the inherent uncertainties associated with litigation, we do not believe that it is reasonably possible that these other legal actions will materially adversely affect our financial position, cash flows or results of operations.
During the ordinary course of our business, contingencies arise resulting from an existing condition, situation or set of circumstances involving an uncertainty as to the realization of a possible gain contingency. In certain instances such as environmental projects, we are responsible for managing the clean-up and remediation of an environmental site. There exists the possibility of recovering a portion of these costs from other parties. We account for gain contingencies in accordance with the provisions of ASC 450 “Contingencies” and therefore do not record gain contingencies and recognize income until it is earned and realizable.
For the year ended December 31, 2018, we recognized an insurance recovery of $8.0 million in other operating income for a second quarter 2017 business interruption at our Freeport, TX vinyl chloride monomer facility.
NOTE 24. DERIVATIVE FINANCIAL INSTRUMENTS
We are exposed to market risk in the normal course of our business operations due to our purchases of certain commodities, our ongoing investing and financing activities and our operations that use foreign currencies. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies and procedures governing our management of market risks and the use of financial instruments to manage exposure to such risks. ASC 815 requires an entity to recognize all derivatives as either assets or liabilities in the consolidated balance sheets and measure those instruments at fair value. In accordance with ASC 815, we designate derivative contracts as cash flow hedges of forecasted purchases of commodities and forecasted interest payments related to variable-rate borrowings and designate certain interest rate swaps as fair value hedges of fixed-rate borrowings. We do not enter into any derivative instruments for trading or speculative purposes.
Energy costs, including electricity and natural gas, and certain raw materials used in our production processes are subject to price volatility. Depending on market conditions, we may enter into futures contracts, forward contracts, commodity swaps and put and call option contracts in order to reduce the impact of commodity price fluctuations. The majority of our commodity derivatives expire within one year.
We actively manage currency exposures that are associated with net monetary asset positions, currency purchases and sales commitments denominated in foreign currencies and foreign currency denominated assets and liabilities created in the normal course of business. We enter into forward sales and purchase contracts to manage currency risk to offset our net exposures, by currency, related to the foreign currency denominated monetary assets and liabilities of our operations. At December 31, 2020, we had outstanding forward contracts to buy foreign currency with a notional value of $169.9 million and to sell foreign currency with a notional value of $113.6 million. All of the currency derivatives expire within one year and are for USD equivalents. The counterparties to the forward contracts are large financial institutions; however, the risk of loss to us in the event of nonperformance by a counterparty could impact our financial position or results of operations. At December 31, 2019, we had outstanding forward contracts to buy foreign currency with a notional value of $140.6 million and to sell foreign currency with a notional value of $99.2 million.
Cash Flow Hedges
For derivative instruments that are designated and qualify as a cash flow hedge, the change in fair value of the derivative is recognized as a component of other comprehensive income (loss) until the hedged item is recognized in earnings.
We had the following notional amounts of outstanding commodity contracts that were entered into to hedge forecasted purchases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
($ in millions)
|
|
Natural gas
|
$
|
74.1
|
|
|
$
|
62.9
|
|
|
Ethane
|
51.8
|
|
|
51.5
|
|
|
Metals
|
88.2
|
|
|
60.2
|
|
|
Total notional
|
$
|
214.1
|
|
|
$
|
174.6
|
|
As of December 31, 2020, the counterparties to these commodity contracts were Wells Fargo Bank, N.A., Citibank, N.A., JPMorgan Chase Bank, National Association, Intesa Sanpaolo S.p.A. and Bank of America Corporation, all of which are major financial institutions.
We use cash flow hedges for certain raw material and energy costs such as copper, zinc, lead, ethane, electricity and natural gas to provide a measure of stability in managing our exposure to price fluctuations associated with forecasted purchases of raw materials and energy used in our manufacturing process. At December 31, 2020, we had open derivative contract positions through 2027. If all open futures contracts had been settled on December 31, 2020, we would have recognized a pretax gain of $28.4 million.
If commodity prices were to remain at December 31, 2020 levels, approximately $16.6 million of deferred gains, net of tax, would be reclassified into earnings during the next twelve months. The actual effect on earnings will be dependent on actual commodity prices when the forecasted transactions occur.
We use interest rate swaps as a means of minimizing cash flow fluctuations that may arise from volatility in interest rates of our variable-rate borrowings. In July 2019, we terminated the remaining interest rate swaps designated as cash flow hedges which resulted in a gain of $1.8 million that was recognized in interest expense for the year ended December 31, 2019. For the years ended December 31, 2019 and 2018, $4.3 million and $8.9 million, respectively, of income was recorded to interest expense on the accompanying consolidated statements of operations related to these swap agreements.
Fair Value Hedges
We use interest rate swaps as a means of managing interest expense and floating interest rate exposure to optimal levels. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. We include the gain or loss on the hedged items (fixed-rate borrowings) in the same line item, interest expense, as the offsetting loss or gain on the related interest rate swaps.
In August 2019, we terminated the interest rate swaps designated as fair value hedges which resulted in a loss of $2.3 million that will be deferred as an offset to the carrying value of the related debt and will be recognized to interest expense through October 2025. For the years ended December 31, 2020, 2019 and 2018, $0.4 million, $2.6 million and $2.1 million, respectively, of expense was recorded to interest expense on the accompanying consolidated statements of operations related to these swap agreements.
Financial Statement Impacts
We present our derivative assets and liabilities in our consolidated balance sheets on a net basis whenever we have a legally enforceable master netting agreement with the counterparty to our derivative contracts. We use these agreements to manage and substantially reduce our potential counterparty credit risk.
The following table summarizes the location and fair value of the derivative instruments on our consolidated balance sheets. The table disaggregates our net derivative assets and liabilities into gross components on a contract-by-contract basis before giving effect to master netting arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
Asset Derivatives:
|
($ in millions)
|
|
Other current assets
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
Commodity contracts - gains
|
$
|
25.0
|
|
|
$
|
1.8
|
|
|
Commodity contracts - losses
|
(3.1)
|
|
|
(0.5)
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
Foreign exchange contracts - gains
|
2.5
|
|
|
1.1
|
|
|
Foreign exchange contracts - losses
|
(0.2)
|
|
|
(0.5)
|
|
|
Total other current assets
|
24.2
|
|
|
1.9
|
|
|
Other assets
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
Commodity contracts - gains
|
7.4
|
|
|
0.8
|
|
|
Commodity contracts - losses
|
(0.2)
|
|
|
(0.1)
|
|
|
Total other assets
|
7.2
|
|
|
0.7
|
|
|
Total Asset Derivatives(1)
|
$
|
31.4
|
|
|
$
|
2.6
|
|
|
Liability Derivatives:
|
|
|
|
|
Accrued liabilities
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
Commodity contracts - losses
|
$
|
1.4
|
|
|
$
|
18.0
|
|
|
Commodity contracts - gains
|
(1.3)
|
|
|
(0.2)
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
Foreign exchange contracts - losses
|
—
|
|
|
1.4
|
|
|
Foreign exchange contracts - gains
|
—
|
|
|
(0.2)
|
|
|
Total accrued liabilities
|
0.1
|
|
|
19.0
|
|
|
Other liabilities
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
Commodity contract - losses
|
0.8
|
|
|
1.8
|
|
|
Commodity contract - gains
|
(0.2)
|
|
|
—
|
|
|
Total other liabilities
|
0.6
|
|
|
1.8
|
|
|
Total Liability Derivatives(1)
|
$
|
0.7
|
|
|
$
|
20.8
|
|
(1) Does not include the impact of cash collateral received from or provided to counterparties.
The following table summarizes the effects of derivative instruments on our consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss)
|
|
|
|
|
Years Ended December 31,
|
|
|
Location of Gain (Loss)
|
|
2020
|
|
2019
|
|
2018
|
|
Derivatives – Cash Flow Hedges
|
|
|
($ in millions)
|
|
Recognized in other comprehensive loss:
|
|
|
|
|
|
|
|
Commodity contracts
|
———
|
|
$
|
31.1
|
|
|
$
|
(46.1)
|
|
|
$
|
(4.8)
|
|
|
Interest rate contracts
|
———
|
|
—
|
|
|
(1.0)
|
|
|
3.7
|
|
|
|
|
|
$
|
31.1
|
|
|
$
|
(47.1)
|
|
|
$
|
(1.1)
|
|
|
Reclassified from accumulated other comprehensive loss into income:
|
|
|
|
|
|
|
|
Interest rate contracts
|
Interest expense
|
|
$
|
—
|
|
|
$
|
4.3
|
|
|
$
|
8.9
|
|
|
Commodity contracts
|
Cost of goods sold
|
|
(14.9)
|
|
|
(31.1)
|
|
|
5.4
|
|
|
|
|
|
$
|
(14.9)
|
|
|
$
|
(26.8)
|
|
|
$
|
14.3
|
|
|
Derivatives – Fair Value Hedges
|
|
|
|
|
|
|
|
Interest rate contracts
|
Interest expense
|
|
$
|
(0.4)
|
|
|
$
|
(2.6)
|
|
|
$
|
(2.1)
|
|
|
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
Selling and administration
|
|
$
|
17.7
|
|
|
$
|
(4.0)
|
|
|
$
|
(5.4)
|
|
|
|
|
|
|
|
|
|
|
Credit Risk and Collateral
By using derivative instruments, we are exposed to credit and market risk. If a counterparty fails to fulfill its performance obligations under a derivative contract, our credit risk will equal the fair value gain in a derivative. Generally, when the fair value of a derivative contract is positive, this indicates that the counterparty owes us, thus creating a repayment risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, assume no repayment risk. We minimize the credit (or repayment) risk in derivative instruments by entering into transactions with high-quality counterparties. We monitor our positions and the credit ratings of our counterparties, and we do not anticipate non-performance by the counterparties.
Based on the agreements with our various counterparties, cash collateral is required to be provided when the net fair value of the derivatives, with the counterparty, exceeds a specific threshold. If the threshold is exceeded, cash is either provided by the counterparty to us if the value of the derivatives is our asset, or cash is provided by us to the counterparty if the value of the derivatives is our liability. As of December 31, 2020 and 2019, this threshold was not exceeded. In all instances where we are party to a master netting agreement, we offset the receivable or payable recognized upon payment of cash collateral against the fair value amounts recognized for derivative instruments that have also been offset under such master netting agreements.
NOTE 25. FAIR VALUE MEASUREMENTS
Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities. We are required to separately disclose assets and liabilities measured at fair value on a recurring basis, from those measured at fair value on a nonrecurring basis. Nonfinancial assets measured at fair value on a nonrecurring basis are intangible assets and goodwill, which are reviewed for impairment annually in the fourth quarter and/or when circumstances or other events indicate that impairment may have occurred. Determining which hierarchical level an asset or liability falls within requires significant judgment. The following table summarizes the assets and liabilities measured at fair value in the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Total
|
|
Assets
|
($ in millions)
|
|
Commodity contracts
|
$
|
—
|
|
|
$
|
29.1
|
|
|
$
|
—
|
|
|
$
|
29.1
|
|
|
Foreign exchange contracts
|
—
|
|
|
2.3
|
|
|
—
|
|
|
2.3
|
|
|
Total Assets
|
$
|
—
|
|
|
$
|
31.4
|
|
|
$
|
—
|
|
|
$
|
31.4
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Commodity contracts
|
$
|
—
|
|
|
$
|
0.7
|
|
|
$
|
—
|
|
|
$
|
0.7
|
|
|
Total Liabilities
|
$
|
—
|
|
|
$
|
0.7
|
|
|
$
|
—
|
|
|
$
|
0.7
|
|
|
Balance at December 31, 2019
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Commodity contracts
|
$
|
—
|
|
|
$
|
2.0
|
|
|
$
|
—
|
|
|
$
|
2.0
|
|
|
Foreign exchange contracts
|
—
|
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|
Total Assets
|
$
|
—
|
|
|
$
|
2.6
|
|
|
$
|
—
|
|
|
$
|
2.6
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Commodity contracts
|
$
|
—
|
|
|
$
|
19.6
|
|
|
$
|
—
|
|
|
$
|
19.6
|
|
|
Foreign exchange contracts
|
—
|
|
|
1.2
|
|
|
—
|
|
|
1.2
|
|
|
Total Liabilities
|
$
|
—
|
|
|
$
|
20.8
|
|
|
$
|
—
|
|
|
$
|
20.8
|
|
Commodity Contracts
Commodity contract financial instruments were valued primarily based on prices and other relevant information observable in market transactions involving identical or comparable assets or liabilities including both forward and spot prices for commodities. We use commodity derivative contracts for certain raw materials and energy costs such as copper, zinc, lead, ethane, electricity and natural gas to provide a measure of stability in managing our exposure to price fluctuations.
Foreign Currency Contracts
Foreign currency contract financial instruments were valued primarily based on relevant information observable in market transactions involving identical or comparable assets or liabilities including both forward and spot prices for currencies. We enter into forward sales and purchase contracts to manage currency risk resulting from purchase and sale commitments denominated in foreign currencies.
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. Since our long-term debt instruments may not be actively traded, the inputs used to measure the fair value of our long-term debt are based on current market rates for debt of similar risk and maturities and is classified as Level 2 in the fair value measurement hierarchy. The following table summarizes the fair value measurements of debt and the actual debt recorded on our balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Amount recorded on balance sheets
|
|
|
($ in millions)
|
|
Balance at December 31, 2020
|
$
|
—
|
|
|
$
|
4,177.2
|
|
|
$
|
—
|
|
|
$
|
4,177.2
|
|
|
$
|
3,863.8
|
|
|
Balance at December 31, 2019
|
—
|
|
|
3,572.7
|
|
|
—
|
|
|
3,572.7
|
|
|
3,340.8
|
|
Nonrecurring Fair Value Measurements
In addition to assets and liabilities that are recorded at fair value on a recurring basis, we record assets and liabilities at fair value on a nonrecurring basis as required by ASC 820. For the three months ended September 30, 2020, the carrying value of the Chlor Alkali Products and Vinyls and Epoxy reporting units’ goodwill was remeasured to fair value on a nonrecurring basis. The fair value of each reporting unit was calculated utilizing an income approach. The income approach uses a discounted cash flow model that requires various observable and nonobservable inputs, such as prices, volumes, expenses, capital expenditures, discount rates and projected long-term growth rates and terminal values. The resulting fair value Level 3 estimates were less than the reporting units’ carrying value which resulted in pre-tax goodwill impairment charge of $699.8 million. As part of our impairment analysis, the fair value of all reporting units was reconciled to the company’s market capitalization. See Note 11 “Goodwill and Intangibles” for additional information on the goodwill impairment. There were no other assets measured at fair value on a nonrecurring basis as of, or for the years ended, December 31, 2020 and 2019.
NOTE 26. OTHER FINANCIAL DATA
Quarterly Data (Unaudited)
($ in millions, except per share data)
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|
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|
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2020
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First Quarter
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Second Quarter
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Third Quarter
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Fourth Quarter
|
|
Year
|
|
Sales
|
|
$
|
1,425.1
|
|
|
$
|
1,241.2
|
|
|
$
|
1,437.6
|
|
|
$
|
1,654.1
|
|
|
$
|
5,758.0
|
|
|
Cost of goods sold
|
|
1,374.2
|
|
|
1,235.7
|
|
|
1,307.4
|
|
|
1,457.3
|
|
|
5,374.6
|
|
|
Net loss
|
|
(80.0)
|
|
|
(120.1)
|
|
|
(736.8)
|
|
|
(33.0)
|
|
|
(969.9)
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|
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Net loss per common share:
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|
|
|
|
|
|
|
|
|
|
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Basic
|
|
(0.51)
|
|
|
(0.76)
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|
|
(4.67)
|
|
|
(0.21)
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|
|
(6.14)
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|
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Diluted
|
|
(0.51)
|
|
|
(0.76)
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|
|
(4.67)
|
|
|
(0.21)
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|
|
(6.14)
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|
|
Common dividends per share
|
|
0.20
|
|
|
0.20
|
|
|
0.20
|
|
|
0.20
|
|
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
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Fourth Quarter
|
|
Year
|
|
Sales
|
|
$
|
1,553.4
|
|
|
$
|
1,592.9
|
|
|
$
|
1,576.6
|
|
|
$
|
1,387.1
|
|
|
$
|
6,110.0
|
|
|
Cost of goods sold
|
|
1,347.3
|
|
|
1,463.7
|
|
|
1,357.6
|
|
|
1,270.6
|
|
|
5,439.2
|
|
|
Net income (loss)
|
|
41.7
|
|
|
(20.0)
|
|
|
44.2
|
|
|
(77.2)
|
|
|
(11.3)
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
0.25
|
|
|
(0.12)
|
|
|
0.27
|
|
|
(0.49)
|
|
|
(0.07)
|
|
|
Diluted
|
|
0.25
|
|
|
(0.12)
|
|
|
0.27
|
|
|
(0.49)
|
|
|
(0.07)
|
|
|
Common dividends per share
|
|
0.20
|
|
|
0.20
|
|
|
0.20
|
|
|
0.20
|
|
|
0.80
|
|
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