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Olin Corp. Reports Operating Results (10-Q)

July 26, 2010 | About:
10qk

10qk

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Olin Corp. (OLN) filed Quarterly Report for the period ended 2010-06-30.

Olin Corp. has a market cap of $1.63 billion; its shares were traded at around $20.66 with a P/E ratio of 25.2 and P/S ratio of 1.1. The dividend yield of Olin Corp. stocks is 3.9%. Olin Corp. had an annual average earning growth of 11.1% over the past 5 years.OLN is in the portfolios of John Buckingham of Al Frank Asset Management, Inc., Bruce Kovner of Caxton Associates, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Second quarter of 2010 ECU netbacks were approximately $470, which was an increase from the approximately $440 experienced in the first quarter of 2010. The second quarter represented the third consecutive quarter of increases in the ECU netback, since the low level of approximately $375 in the third quarter of 2009. In December 2009, a $75 per ton caustic soda price increase was announced. We began realizing a portion of this price increase in caustic soda in the first quarter of 2010 with the remainder of this price increase realized in the second quarter of 2010. During February 2010, an additional $80 per ton caustic soda price increase was announced. We began realizing a portion of this price increase in caustic soda in the second quarter of 2010 with the remainder of this price increase expected to be realized in the third quarter of 2010. Chlorine and caustic soda demand have continued to improve, and as a result, during May 2010, a $50 per ton chlorine price increase and an additional caustic soda price increase of $50 per ton for high purity membrane and rayon grade and $35 per ton for diaphragm grade were announced. While the success of these price increases is not yet known, the benefits of these price increases, if realized, are expected in our system in the fourth quarter of 2010.

Sales for the three months ended June 30, 2010 were $405.7 million compared to $383.0 million for the same period last year, an increase of $22.7 million, or 6%. Chlor Alkali Products sales increased $15.6 million, or 6%, due to increased shipment volumes partially offset by lower ECU prices. Our ECU netbacks, excluding SunBelt, decreased 20% compared to the same period in the prior year. Winchester sales increased by $7.1 million, or 5%, from the three months ended June 30, 2009 primarily due to higher shipments to military, law enforcement and international customers, partially offset by the decline in shipments to commercial customers.

Selling and administration expenses for the three months ended June 30, 2010 decreased $0.2 million, or 1%, from the three months ended June 30, 2009. Lower management incentive compensation of $1.0 million, a lower provision for doubtful customer accounts receivable of $0.9 million, decreased consulting fees of $0.7 million, and decreased salary and benefit costs of $0.6 million were offset by an unfavorable foreign currency impact of $1.2 million, a higher level of legal and legal-related settlement expenses of $0.7 million, and increased stock-based compensation of $1.2 million, primarily due to increased mark-to-market adjustments. Selling and administration expenses as a percentage of sales were 9% in 2010 and 2009.

Sales for the six months ended June 30, 2010 were $767.7 million compared to $783.6 million for the same period last year, a decrease of $15.9 million, or 2%. Chlor Alkali Products sales decreased $21.5 million, or 4%, due to lower ECU prices partially offset by increased shipment volumes. Our ECU netbacks, excluding SunBelt, decreased 32% compared to the same period in the prior year. Winchester sales increased by $5.6 million, or 2%, from the six months ended June 30, 2009 primarily due to higher shipments to military, law enforcement and international customers, partially offset by the decline in shipments to commercial customers.

Selling and administration expenses for the six months ended June 30, 2010 decreased $7.3 million, or 10%, from the six months ended June 30, 2009 primarily due to a lower provision for doubtful customer accounts receivable of $5.5 million, decreased management incentive compensation of $3.0 million, lower consulting fees of $1.7 million, and decreased salary and benefit costs of $1.1 million, partially offset by increased stock-based compensation costs of $3.2 million, primarily due to increased mark-to-market adjustments and an unfavorable foreign currency impact of $0.7 million. Selling and administration expenses as a percentage of sales were 9% in 2010 and 10% in 2009.

The effective tax rate for the six months ended June 30, 2010 included a $2.8 million reduction in expense associated with the expiration of statutes of limitation in domestic and foreign jurisdictions and a $1.4 million reduction in expense related to the release of a portion of a valuation allowance recorded against the foreign tax credit carryforward deferred tax asset generated by our Canadian operations. After giving consideration to these two items of $4.2 million, the effective rate for the six months ended June 30, 2010 of 33.7% was lower than the 35% U.S. federal statutory rate primarily due to favorable permanent tax deduction items and the utilization of certain state tax credits, which offset the effect of state income taxes. During periods of low earnings, our effective tax rate can be significantly impacted by permanent tax deduction items, return to provision adjustments, changes in tax contingencies and valuation allowances, and tax credits. The effective tax rate for the six months ended June 30, 2009 included expense of $2.0 million for a valuation allowance recorded against the foreign tax credit carryforward deferred tax asset generated by our Canadian operations. Additionally, the effective tax rate for the six months ended June 30, 2009 included a $0.9 million reduction in expense primarily associated with the expiration of statutes of limitation in foreign jurisdictions. After giving consideration to these two items of $1.1 million, the effective tax rate for the six months ended June 30, 2009 of 36.6% was higher than the 35% U.S. federal statutory rate primarily due to state income taxes, which were offset in part by the utilization of certain state tax credits.

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