form10q2ndqtr.htm
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 
 
FORM 10-Q
 
 
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2007
 
OR
 
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             
 
Commission file number 1-1070

Olin Corporation
(Exact name of registrant as specified in its charter)

 
 
Virginia
13-1872319
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
 
190 Carondelet Plaza, Suite 1530, Clayton, MO
63105-3443
(Address of principal executive offices)
(Zip Code)
 
(314) 480-1400
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act).
 
Large Accelerated Filer  x    Accelerated Filer  ¨    Non-accelerated Filer  ¨
 
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.    Yes  ¨    No  x
 
As of June 30, 2007, 73,955,593 shares of the registrant’s common stock were outstanding




Part I — Financial Information
 
Item 1. Financial Statements.
 
OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Balance Sheets
(In millions, except per share data)
(Unaudited)
 
 
 
June 30,
2007
 
 
December 31,
2006
 
 
June 30,
2006
 
ASSETS
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
 
$
 230.5
 
 
$
199.8
 
 
$
117.1
 
Short-Term Investments
 
 
26.6
 
 
 
76.6
 
 
 
76.6
 
Receivables, Net
 
 
397.5
 
 
 
338.6
 
 
 
411.4
 
Inventories
 
 
241.6
 
 
 
263.3
 
 
 
279.1
 
Current Deferred Income Taxes
 
 
5.8
 
 
 
8.9
 
 
 
10.2
 
Other Current Assets
 
 
35.5
 
 
 
32.0
 
 
 
27.2
 
Total Current Assets
 
 
937.5
 
 
 
919.2
 
 
 
921.6
 
Property, Plant and Equipment (less Accumulated Depreciation of $1,437.7, $1,407.0 and $1,402.0)
 
 
465.7
 
 
 
486.9
 
 
 
477.1
 
Prepaid Pension Costs
 
 
 
 
 
 
 
 
248.3
 
Deferred Income Taxes
 
 
135.9
 
 
 
117.3
 
 
 
125.9
 
Other Assets
 
 
39.4
 
 
 
37.2
 
 
 
25.8
 
Goodwill
 
 
76.0
 
 
 
75.9
 
 
 
78.4
 
Total Assets
 
$
1,654.5
 
 
$
1,636.5
 
 
$
1,877.1
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Current Installments of Long-Term Debt
 
$
8.3
 
 
$
1.7
 
 
$
1.7
 
Accounts Payable
 
 
232.8
 
 
 
200.3
 
 
 
189.3
 
Income Taxes Payable
 
 
37.0
 
 
 
4.8
 
 
 
26.9
 
Accrued Liabilities
 
 
179.0
 
 
 
201.0
 
 
 
190.2
 
Total Current Liabilities
 
 
457.1
 
 
 
407.8
 
 
 
408.1
 
Long-Term Debt
 
 
242.5
 
 
 
252.2
 
 
 
250.6
 
Accrued Pension Liability
 
 
128.8
 
 
 
234.4
 
 
 
567.9
 
Other Liabilities
 
 
226.5
 
 
 
198.8
 
 
 
168.7
 
Total Liabilities
 
 
1,054.9
 
 
 
1,093.2
 
 
 
1,395.3
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
 
 
 
Shareholders’ Equity:
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock, Par Value $1 Per Share:
 
 
 
 
 
 
 
 
 
 
 
 
Authorized, 120.0 Shares; Issued and Outstanding 73.9, 73.3 and 72.5 Shares
 
 
73.9
 
 
 
73.3
 
 
 
72.5
 
Additional Paid-In Capital
 
 
730.8
 
 
 
721.6
 
 
 
707.7
 
Accumulated Other Comprehensive Loss
 
 
(301.1
)
 
 
(318.5
)
 
 
(311.5
)
Retained Earnings
 
 
96.0
 
 
 
66.9
 
 
 
13.1
 
Total Shareholders’ Equity
 
 
599.6
 
 
 
543.3
 
 
 
481.8
 
Total Liabilities and Shareholders’ Equity
 
$
1,654.5
 
 
$
1,636.5
 
 
$
1,877.1
 
 
    The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements.


2

OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Income
(In millions, except per share data)
(Unaudited)
 
 
 
Three Months Ended
June 30,
 
 
Six Months Ended
June 30,
 
 
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Sales
 
$
839.1
 
 
$
826.4
 
 
$
1,604.8
 
 
$
1,551.5
 
Operating Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of Goods Sold (exclusive of LIFO inventory liquidation gains, shown below)
 
 
760.1
 
 
 
741.2
 
 
 
1,461.0
 
 
 
1,373.6
 
LIFO Inventory Liquidation Gains
 
 
7.8
 
 
 
 
 
 
13.1
 
 
 
13.5
 
Selling and Administration
 
 
44.2
 
 
 
44.1
 
 
 
85.4
 
 
 
89.9
 
Research and Development
 
 
1.2
 
 
 
1.1
 
 
 
2.3
 
 
 
2.3
 
Restructuring (Credit) Charge
 
 
(1.7
)
 
 
 
 
 
(1.7
)
 
 
15.7
 
Other Operating Income
 
 
0.2
 
 
 
0.7
 
 
 
0.2
 
 
 
0.7
 
Operating Income
 
 
43.3
 
 
 
40.7
 
 
 
71.1
 
 
 
84.2
 
Earnings of Non-consolidated Affiliates
 
 
12.3
 
 
 
13.0
 
 
 
20.4
 
 
 
25.1
 
Interest Expense
 
 
4.9
 
 
 
5.1
 
 
 
9.9
 
 
 
10.2
 
Interest Income
 
 
3.2
 
 
 
2.9
 
 
 
6.7
 
 
 
5.9
 
Other Income
 
 
0.1
 
 
 
0.3
 
 
 
0.2
 
 
 
1.2
 
Income before Taxes
 
 
54.0
 
 
 
51.8
 
 
 
88.5
 
 
 
106.2
 
Income Tax Provision
 
 
18.4
 
 
 
18.8
 
 
 
29.8
 
 
 
39.5
 
Net Income
 
$
35.6
 
 
$
33.0
 
 
$
58.7
 
 
$
66.7
 
Net Income per Common Share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.48
 
 
$
0.46
 
 
$
0.80
 
 
$
0.92
 
Diluted
 
$
0.48
 
 
$
0.45
 
 
$
0.79
 
 
$
0.92
 
Dividends per Common Share
 
$
0.20
 
 
$
0.20
 
 
$
0.40
 
 
$
0.40
 
Average Common Shares Outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
73.8
 
 
 
72.4
 
 
 
73.7
 
 
 
72.2
 
Diluted
 
 
74.2
 
 
 
72.6
 
 
 
73.9
 
 
 
72.5
 
 
    The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements.




3




OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Shareholders’ Equity
(In millions, except per share data)
(Unaudited)
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
Issued
 
 
Par
Value
 
 
Additional
Paid-In
Capital
 
 
Accumulated
Other
Comprehensive
Loss
 
 
Retained
Earnings
(Accumulated
Deficit)
 
 
Total
Shareholders’
Equity
 
Balance at January 1, 2006
 
 
71.9
 
 
$
71.9
 
 
$
683.8
 
 
$
(304.4
)
 
$
(24.7
)
 
$
426.6
 
Comprehensive Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
66.7
 
 
 
66.7
 
Translation Adjustment
 
 
 
 
 
 
 
 
 
 
 
0.5
 
 
 
 
 
 
0.5
 
Net Unrealized Loss
 
 
 
 
 
 
 
 
 
 
 
(7.6
)
 
 
 
 
 
(7.6
)
Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
59.6
 
Dividends Paid:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock ($0.40 per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(28.9
)
 
 
(28.9
)
Common Stock Issued for:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock Options Exercised
 
 
0.2
 
 
 
0.2
 
 
 
4.2
 
 
 
 
 
 
 
 
 
4.4
 
Employee Benefit Plans
 
 
0.4
 
 
 
0.4
 
 
 
7.4
 
 
 
 
 
 
 
 
 
7.8
 
Other Transactions
 
 
 
 
 
 
 
 
0.3
 
 
 
 
 
 
 
 
 
0.3
 
Stock-Based Compensation
 
 
 
 
 
 
 
 
12.0
 
 
 
 
 
 
 
 
 
12.0
 
Balance at June 30, 2006
 
 
72.5
 
 
$
72.5
 
 
$
707.7
 
 
$
(311.5
)
 
$
13.1
 
 
$
481.8
 
Balance at January 1, 2007
 
 
73.3
 
 
$
73.3
 
 
$
721.6
 
 
$
(318.5
)
 
$
66.9
 
 
$
543.3
 
Comprehensive Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
58.7
 
 
 
58.7
 
Translation Adjustment
 
 
 
 
 
 
 
 
 
 
 
0.3
 
 
 
 
 
 
0.3
 
Net Unrealized Gain
 
 
 
 
 
 
 
 
 
 
 
4.6
 
 
 
 
 
 
4.6
 
Minimum Pension Liability Adjustment, Net
 
 
     
     
     
12.5
     
     
12.5
 
Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
76.1
 
Dividends Paid:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock ($0.40 per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(29.5
)
 
 
(29.5
)
Common Stock Issued for:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock Options Exercised
 
 
 
 
 
 
 
 
0.8
 
 
 
 
 
 
 
 
 
0.8
 
Employee Benefit Plans
 
 
0.6
 
 
 
0.6
 
 
 
9.2
 
 
 
 
 
 
 
 
 
9.8
 
Other Transactions
 
 
 
 
 
 
 
 
0.6
 
 
 
 
 
 
 
 
 
0.6
 
Stock-Based Compensation
 
 
 
 
 
 
 
 
(1.4
)
 
 
 
 
 
 
 
 
(1.4
)
Cumulative Effect of Accounting Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(0.1
)
 
 
(0.1
)
Balance at June 30, 2007
 
 
73.9
 
 
$
73.9
 
 
$
730.8
 
 
$
(301.1
)
 
$
96.0
 
 
$
599.6
 
 
    The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements.





4

OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statements of Cash Flows
(In millions)
(Unaudited)
 
 
 
Six Months Ended
June 30,
 
 
 
2007
 
 
2006
 
Operating Activities
 
 
 
 
 
 
Net Income
 
$
58.7
 
 
$
66.7
 
Adjustments to Reconcile Net Income to Net Cash and Cash Equivalents Provided by (Used for) Operating Activities:
 
 
 
 
 
 
 
 
Earnings of Non-consolidated Affiliates
 
 
(20.4
)
 
 
(25.1
)
Other Operating Income – Gain on Disposition of Real Estate
 
 
 
 
 
(0.7
)
Stock-Based Compensation
 
 
2.5
 
 
 
3.0
 
Depreciation and Amortization
 
 
36.1
 
 
 
35.5
 
LIFO Inventory Liquidation Gains
 
 
(13.1
)
 
 
(13.5
)
Dividend Received from Non-consolidated Affiliate
 
 
3.3
 
 
 
 
Deferred Income Taxes
 
 
(6.8
)
 
 
(53.0
)
Qualified Pension Plan Contribution
 
 
(100.0
)
 
 
 
Qualified Pension Plan Expense
 
 
12.9
 
 
 
17.7
 
Common Stock Issued under Employee Benefit Plans
 
 
1.7
 
 
 
1.7
 
Change in:
 
 
 
 
 
 
 
 
Receivables
 
 
(58.9
)
 
 
(116.4
)
Inventories
 
 
34.8
 
 
 
(3.0
)
Other Current Assets
 
 
(3.5
)
 
 
(15.1
)
Accounts Payable and Accrued Liabilities
 
 
9.2
 
 
 
36.9
 
Income Taxes Payable
 
 
35.0
 
 
 
2.9
 
Other Assets
 
 
1.5
 
 
 
7.1
 
Other Noncurrent Liabilities
 
 
9.6
 
 
 
(18.1
)
Other Operating Activities
 
 
5.0
 
 
 
(7.4
)
Net Operating Activities
 
 
7.6
 
 
 
(80.8
)
Investing Activities
 
 
 
 
 
 
 
 
Capital Expenditures
 
 
(32.3
)
 
 
(30.7
)
Proceeds from Disposition of Property, Plant and Equipment
 
 
0.2
 
 
 
1.3
 
Purchase of Short-Term Investments
 
 
 
 
 
(76.6
)
Proceeds from Sale of Short-Term Investments
 
 
50.0
 
 
 
 
Proceeds from Sale/Leaseback of Equipment
 
 
14.8
 
 
 
 
Distributions from Affiliated Companies, Net
 
 
11.7
 
 
 
19.0
 
Other Investing Activities
 
 
0.2
 
 
 
(0.5
)
Net Investing Activities
 
 
44.6
 
 
 
(87.5
)
Financing Activities
 
 
 
 
 
 
 
 
Long-Term Debt Repayments
 
 
(1.1
)
 
 
(0.5
)
Issuance of Common Stock
 
 
8.1
 
 
 
6.1
 
Stock Options Exercised
 
 
0.8
 
 
 
4.4
 
Excess Tax Benefits from Stock Options Exercised
 
 
0.2
 
 
 
0.6
 
Dividends Paid
 
 
(29.5
)
 
 
(28.9
)
Net Financing Activities
 
 
(21.5
)
 
 
(18.3
)
Net Increase (Decrease) in Cash and Cash Equivalents
 
 
30.7
 
 
 
(186.6
)
Cash and Cash Equivalents, Beginning of Period
 
 
199.8
 
 
 
303.7
 
Cash and Cash Equivalents, End of Period
 
$
230.5
 
 
$
117.1
 
Cash Paid for Interest and Income Taxes:
 
 
 
 
 
 
 
 
Interest
 
$
9.0
 
 
$
10.3
 
Income Taxes, Net of Refunds
 
$
6.1
 
 
$
86.7
 
 
    The accompanying Notes to Condensed Financial Statements are an integral part of the condensed financial statements.
 
 
5

 

OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Financial Statements
(Tabular amounts in millions, except per share data)
(Unaudited)
 
1.
Olin Corporation is a Virginia corporation, incorporated in 1892. We are a manufacturer concentrated in three business segments: Chlor Alkali Products, Metals, and Winchester. Chlor Alkali Products, with four U.S. manufacturing facilities, produces chlorine and caustic soda, sodium hydrosulfite, hydrochloric acid, hydrogen, bleach products and potassium hydroxide. Metals, with its principal manufacturing facilities in East Alton, IL and Montpelier, OH, produces and distributes copper and copper alloy sheet, strip, foil, rod, welded tube, fabricated parts, and stainless steel and aluminum strip. Winchester, with its principal manufacturing facility in East Alton, IL, produces and distributes sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.
 
We have prepared the condensed financial statements included herein, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The preparation of the consolidated financial statements requires estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. In our opinion, these financial statements reflect all adjustments (consisting only of normal accruals), which are necessary to present fairly the results for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, we believe that the disclosures are appropriate. We recommend that you read these condensed financial statements in conjunction with the financial statements, accounting policies, and the notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2006. Certain reclassifications were made to prior year amounts to conform to the 2007 presentation.
 
2.
Allowance for doubtful accounts was $8.8 million at June 30, 2007, $9.5 million at December 31, 2006, and $9.8 million at June 30, 2006. Provisions (credited) charged to operations were $(0.1) million and $0.7 million for the three months ended June 30, 2007 and 2006, respectively, and $0.4 million and $1.4 million for the six months ended June 30, 2007 and 2006, respectively. Bad debt write-offs, net of recoveries, were $1.1 million and $0.7 million for the six months ended June 30, 2007 and 2006, respectively.
 
3.
Inventory consists of the following:
 
 
 
June 30,
2007
 
 
December 31,
2006
 
 
June 30,
2006
 
Supplies
 
$
38.1
 
 
$
38.2
 
 
$
37.0
 
Raw materials
 
 
273.1
 
 
 
293.7
 
 
 
253.9
 
Work in process
 
 
220.5
 
 
 
206.3
 
 
 
209.7
 
Finished goods
 
 
166.7
 
 
 
151.8
 
 
 
159.2
 
 
 
 
698.4
 
 
 
690.0
 
 
 
659.8
 
LIFO reserve
 
 
(456.8
)
 
 
(426.7
)
 
 
(380.7
)
Inventory, net
 
$
241.6
 
 
$
263.3
 
 
$
279.1
 
 
Inventories are valued at the lower of cost or market, with cost being determined principally by the dollar value last-in, first-out (LIFO) method of inventory accounting. Cost for other inventories has been determined principally by the average cost (primarily operating supplies, spare parts, and maintenance parts) and first-in, first-out (FIFO) (primarily inventory of foreign subsidiaries) methods. Elements of costs in inventories include raw materials, direct labor, and manufacturing overhead. Inventories under the LIFO method are based on annual estimates of quantities and costs as of year-end; therefore, the condensed financial statements at June 30, 2007, reflect certain estimates relating to inventory quantities and costs at December 31, 2007. If the FIFO method of inventory accounting had been used, inventories would have been approximately $456.8 million, $426.7 million and $380.7 million higher than reported at June 30, 2007, December 31, 2006, and June 30, 2006, respectively. Fluctuations in underlying metal values will increase or decrease the FIFO value of the inventories.
 
As part of the Metals inventory reduction program, a LIFO inventory liquidation gain of $7.8 million was realized in the three months ended June 30, 2007 and $13.1 million in the six months ended June 30, 2007.  As part of the 2006 Metals restructuring actions, a LIFO inventory liquidation gain of $13.5 million was realized in the six months ended June 30, 2006 related to the closure of our Waterbury Rolling Mills (Waterbury) facility.  The Metals restructuring action is described under note 10.
 
6

4.
Basic and diluted income per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share reflect the dilutive effect of stock-based compensation.
 
 
 
Three Months Ended
June 30,
 
 
Six Months Ended
June 30,
 
 
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Computation of Basic Income per Share
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
35.6
 
 
$
33.0
 
 
$
58.7
 
 
$
66.7
 
Basic shares
 
 
73.8
 
 
 
72.4
 
 
 
73.7
 
 
 
72.2
 
Basic net income per share
 
$
0.48
 
 
$
0.46
 
 
$
0.80
 
 
$
0.92
 
Computation of Diluted Income per Share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
35.6
 
 
$
33.0
 
 
$
58.7
 
 
$
66.7
 
Diluted shares:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic shares
 
 
73.8
 
 
 
72.4
 
 
 
73.7
 
 
 
72.2
 
Stock-based compensation
 
 
0.4
 
 
 
0.2
 
 
 
0.2
 
 
 
0.3
 
Diluted shares
 
 
74.2
 
 
 
72.6
 
 
 
73.9
 
 
 
72.5
 
Diluted net income per share
 
$
0.48
 
 
$
0.45
 
 
$
0.79
 
 
$
0.92
 
 
5.
We are party to various government and private environmental actions associated with past manufacturing operations and former waste disposal sites. Environmental provisions charged to income amounted to $7.0 million and $5.2 million for the three months ended June 30, 2007 and 2006, respectively, and $13.1 million and $10.1 million for the six months ended June 30, 2007 and 2006, respectively.  Charges to income for investigatory and remedial efforts were material to operating results in 2006 and are expected to be material to operating results in 2007. The consolidated balance sheets include reserves for future environmental expenditures to investigate and remediate known sites amounting to $93.0 million at June 30, 2007, $90.8 million at December 31, 2006, and $100.2 million at June 30, 2006, of which $58.0 million, $55.8 million, and $65.2 million were classified as other noncurrent liabilities, respectively.
 
Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, 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.
 
6.
Our board of directors, in April 1998, authorized a share repurchase program of up to 5 million shares of our common stock. We have repurchased 4,845,924 shares under the April 1998 program. There were no share repurchases during the six-month periods ended June 30, 2007 and 2006. At June 30, 2007, 154,076 shares remain authorized to be purchased.
 
7.
We issued less than 0.1 million and 0.2 million shares with a total value of $0.8 million and $4.4 million, representing stock options exercised for the six months ended June 30, 2007 and 2006, respectively. In addition, for the six months ended June 30, 2007 and 2006, we issued 0.6 million and 0.4 million shares with a total value of $9.8 million and $7.8 million, respectively, in connection with our Contributing Employee Ownership Plan (CEOP).
 
8.
Other operating income consists of miscellaneous operating income items which are related to our business activities and gains (losses) on the disposition of property, plant, and equipment.  Other operating income of $0.2 million for the three and six months ended June 30, 2007 represents the impact of the gain realized on an intangible asset sale in Chlor Alkali Products, which will be recognized ratably through March 2012.  Other operating income for the three and six months ended June 30, 2006 included a $0.7 million gain on the disposition of a former manufacturing plant.
 
9.
We define segment results as income (loss) before interest expense, interest income, other income, and income taxes, and include the operating results of non-consolidated affiliates. Intersegment sales of $26.0 million and $17.6 million for the three months ended June 30, 2007 and 2006, respectively, and $48.8 million and $32.9 million for the six months ended June 30, 2007 and 2006, respectively, representing the sale of ammunition cartridge case cups to Winchester from Metals, at prices that approximate market, have been eliminated from Metals segment sales.

7

 
 
Three Months Ended
June 30,
 
 
Six Months Ended
June 30,
 
 
 
2007
 
 
2006
 
 
2007
 
2006
 
Sales:
 
 
 
 
 
 
 
   
 
 
Chlor Alkali Products
 
$
166.4
 
 
$
169.5
 
$
321.7
 
$
343.2
 
Metals
 
 
572.9
 
 
 
571.2
 
 
1,083.1
 
 
1,032.6
 
Winchester
 
 
99.8
 
 
 
85.7
 
 
200.0
 
 
175.7
 
Total sales
 
$
839.1
 
 
$
826.4
 
$
1,604.8
 
$
1,551.5
 
Income before taxes:
 
 
 
 
 
 
 
 
 
   
 
 
 
Chlor Alkali Products(1)
 
$
55.3
 
 
$
67.2
 
$
98.5
 
$
141.1
 
Metals(1) (2) 
 
 
20.7
 
 
 
8.7
 
 
30.6
 
 
29.2
 
Winchester
 
 
5.6
 
 
 
3.3
 
 
13.7
 
 
7.2
 
Corporate/Other:
 
 
 
 
 
 
 
 
 
   
 
 
 
Pension expense(3)
 
 
(2.5
)
 
 
(4.5
)
 
(4.0
)
 
(7.9
)
Environmental provision
 
 
(7.0
)
 
 
(5.2
)
 
(13.1
)
 
(10.1
)
Other corporate and unallocated costs
 
 
(18.4
)
 
 
(16.5
)
 
(36.1
)
 
(35.2
)
Restructuring credit (charge)(4)
 
 
1.7
   
 
 
 
1.7
 
 
(15.7
)
Other operating income
 
 
0.2
   
 
0.7
 
 
0.2
 
 
0.7
 
Interest expense
 
 
(4.9
)
 
 
(5.1
)
 
(9.9
)
 
(10.2
)
Interest income
 
 
3.2
   
 
2.9
 
 
6.7
 
 
5.9
 
Other income
 
 
0.1
   
 
0.3
 
 
0.2
 
 
1.2
 
Income before taxes
 
$
54.0
 
 
$
51.8
 
$
88.5
 
$
106.2
 
 
(1)
Earnings of non-consolidated affiliates are included in the segment results consistent with management’s monitoring of the operating segments. The earnings from non-consolidated affiliates, by segment, are as follows:
 
 
 
Three Months Ended
June 30,
 
 
Six Months Ended
June 30,
 
 
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Chlor Alkali Products
 
$
12.2
 
 
$
12.9
 
 
$
20.3
 
 
$
24.8
 
Metals
 
 
0.1
 
 
 
0.1
 
 
 
0.1
 
 
 
0.3
 
Earnings of non-consolidated affiliates
 
$
12.3
 
 
$
13.0
 
 
$
20.4
 
 
$
25.1
 
 
(2)
Metals segment income for the three and six months ended June 30, 2007 included LIFO inventory liquidation gains of $7.8 million and $13.1 million, respectively, resulting from the Metals inventory reduction program.  Metals segment income for the six months ended June 30, 2006, included a LIFO inventory liquidation gain of $13.5 million related to the closure of our Waterbury facility as part of the 2006 Metals restructuring actions.
 
(3)
The service cost and the amortization of prior service cost components of pension expense related to the employees of the operating segments are allocated to the operating segments based on their respective estimated census data. All other components of pension costs are included in Corporate/Other and include items such as the expected return on plan assets, interest cost, and recognized actuarial gains and losses.

(4)
The 2007 restructuring credit of $1.7 million is primarily the result of realizing more proceeds than expected from equipment sales associated with the 2006 closure of the Waterbury facility.  The six-month period ended June 30, 2006 reflects the 2006 Metals restructuring charge of $15.7 million.
 
8

10.
On February 1, 2006, we announced that, in connection with the ongoing cost reduction efforts of our Metals business, we decided to close our Waterbury facility and consolidate those production activities into our East Alton, IL mill. In addition, on March 14, 2006, we decided to reduce the utilization of one of our Metals service center facilities by consolidating certain activities into another service center facility, and make overhead reductions in the Metals business affecting approximately 20 employees. We based this decision on an evaluation of the size, location, and capability of our facilities and staffing in light of anticipated business needs. We substantially completed these activities by June 30, 2006. As a result of these cost reduction efforts, we recorded a pretax restructuring charge of $15.7 million in the first quarter of 2006. In the fourth quarter of 2006 and the second quarter of 2007, primarily as a result of realizing more proceeds than expected from equipment sales, we reduced our previously established restructuring reserve related to the Waterbury facility by $1.6 million and $1.5 million, respectively. The net restructuring charge of $12.6 million included lease and other contract termination costs ($6.9 million), the write-off of equipment and facility costs ($2.6 million), and employee severance and related benefit costs ($3.1 million). We expect to incur cash expenditures of $8.7 million related to this restructuring charge, of which $8.2 million has been paid as of June 30, 2007. The impact of this restructuring charge was substantially offset by a LIFO inventory liquidation gain of $13.5 million realized in 2006 related to the closure of our Waterbury facility.

 
On November 27, 2006, we announced that, in connection with the ongoing cost reduction efforts of our Metals business, we decided to close our New Haven Copper Company facility in Seymour, CT (Seymour facility) and consolidate some of those production activities into other Olin locations.  We based this decision on an evaluation of the size, location, and capability of our facilities and staffing in light of anticipated business needs.  We substantially completed the closure of the Seymour facility by March 31, 2007. We recorded a one-time pretax restructuring charge of $3.5 million in the fourth quarter of 2006. This restructuring charge included the write-off of equipment and facility costs ($2.4 million), employee severance and related benefit costs ($0.9 million), and other contract termination costs ($0.2 million). We expect to incur cash expenditures of $1.6 million related to this restructuring, of which $0.9 million has been paid as of June 30, 2007. The impact of this restructuring charge was more than offset by a LIFO inventory liquidation gain of $10.4 million realized in 2006 related to the closure of our Seymour facility.
 
The following table summarizes our restructuring activity for the six months ended June 30, 2007 and the remaining balances as of June 30, 2007:
 
 
 
December 31, 2006
Accrued Costs
 
 
Amounts
Utilized
 
 
 
 
Adjustments
 
 
June 30,  2007
Accrued Costs
 
2006 Metals Restructuring Charges
 
 
 
 
 
 
 
 
 
 
 
 
Lease and other contract termination costs
 
$
7.5
 
 
$
(5.5
)
$
(1.1
)
 
$
0.9
 
Write-off of equipment and facilities
 
 
1.4
 
 
 
(1.3
)
 
(0.1
)
 
 
 
Employee severance and job-related benefits
 
 
2.5
 
 
 
(1.1
)
 
(0.3
)
 
 
1.1
 
 
 
$
11.4
 
 
$
(7.9
)
$
(1.5
)
 
$
2.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2004 Corporate Restructuring Charge
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee severance and job-related benefits
 
$
0.3
 
 
$
(0.1
)
$
(0.2
)
 
$
 
 
The majority of the remaining balance of $2.0 million of the 2006 restructuring charge is expected to be paid out in 2007.
 
11.
In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123 (Revised 2004), “Share-Based Payment” (SFAS No. 123R), which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123). This pronouncement revised the accounting treatment for stock-based compensation. It established standards for transactions in which an entity exchanges its equity instruments for goods or services. It also addressed transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This statement focused primarily on accounting for transactions in which an entity obtained employee services in share-based payment transactions.

9

Effective January 1, 2006, we began recording compensation expense associated with stock options and other forms of equity compensation in accordance with SFAS No. 123R. We adopted the modified prospective transition method provided for under SFAS No. 123R and, consequently, have not retroactively adjusted results from prior periods. Under this transition method, compensation cost associated with stock options includes the amortization, using the straight-line method, related to the remaining unvested portion of all stock option awards granted prior to January 1, 2006, based on the grant-date fair value, estimated in accordance with the original provisions of SFAS No. 123 and the amortization, using the straight line method, related to all stock option awards granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R.
 
In 2006, a reclassification totaling $9.0 million from Other Liabilities to Additional Paid-In Capital was made related to previously recorded costs for deferred directors’ compensation, the fair value of stock options assumed at the 2002 acquisition of Chase Industries, restricted stock, and the portion of performance shares that are settled in our stock. In 2007, a reclassification totaling $3.5 million from Additional Paid-In Capital to Other Liabilities was made for deferred directors’ compensation that could be settled in cash.  These reclassifications conform to the accounting treatment for stock-based compensation in SFAS No. 123R.
 
Assumptions
 
The fair value of each option granted, which typically vests ratably over three years, was estimated on the date of grant, using the Black-Scholes option-pricing model with the following weighted-average assumptions used:
 
Grant date
 
2007
 
 
2006
 
Dividend yield
 
 
4.37
%
 
 
4.36
%
Risk-free interest rate
 
 
4.81
%
 
 
4.55
%
Expected volatility
 
 
35
%
 
 
35
%
Expected life (years)
 
 
7.0
 
 
 
7.0
 
Grant fair value (per option)
 
$
4.46
 
 
$
5.50
 
 
Dividend yield for 2007 and 2006 is based on a five-year historical average. The dividend yield on prior option grants was based on the actual dividend in effect at the date of grant and the quoted market price of our stock at the date of the award. Risk-free interest rate is based on zero coupon U.S. Treasury securities rates for the expected life of the options. Expected volatility is based on our historical stock price movements, and we believe that historical experience is the best available indicator of the expected volatility. Expected life of the option grant is based on historical exercise and cancellation patterns, and we believe that historical experience is the best estimate of future exercise patterns.

12.
We have a 50% ownership interest in SunBelt Chlor Alkali Partnership (SunBelt), which is accounted for using the equity method of accounting. The condensed financial positions and results of operations of this equity-basis affiliate in its entirety were as follows:
 
100% Basis
 
June 30,
2007
 
 
December 31,
2006
 
 
June 30,
2006
 
Condensed Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Current assets
 
$
46.7
 
 
$
 25.1
 
 
$
48.5
 
Noncurrent assets
 
 
108.2
 
 
 
113.7
 
 
 
114.7
 
Current liabilities
 
 
19.4
 
 
 
22.1
 
 
 
18.5
 
Noncurrent