Olin Corp. announced that its fourth quarter 2013 net income was $24.7 million, or $0.31 per diluted share, which compares to $34.6 million, or $0.43 per diluted share in the fourth quarter of 2012.
In a release on January 27, the Company noted sales in the fourth quarter of 2013 were $562.1 million compared to $587.6 million in the fourth quarter of 2012. Full year 2013 net income was $178.6 million, or $2.21 per diluted share, which compares to $149.6 million, or $1.85 per diluted share, in 2012. Sales in 2013 were $2.5 billion compared to $2.2 billion in 2012.
Joseph D. Rupp, Chairman, President, and Chief Executive Officer said, "During 2013, Olin achieved $424.6 million of adjusted EBITDA, which is the highest in the history of the company. The record adjusted EBITDA was driven by record results in the Winchester business, which more than offset weaker year-over-year results in the Chlor Alkali business. In addition, during 2013 we increased our cash position by $143 million and repurchased approximately 1.5 million shares of our stock.
"Fourth quarter 2013 results in both Chlor Alkali and Winchester exceeded our expectations as better than expected demand resulted in higher product shipments. The fourth quarter 2013 Chlor Alkali operating rate was 81 percent, which compares favorably to the fourth quarter 2012 operating rate of 76 percent. The favorable Chlor Alkali and Winchester results were partially offset by higher than expected stock-based compensation costs reflecting a $4.6 million unfavorable mark-to-market adjustment, and higher legal and legal-related settlement costs.
"The fourth quarter 2013 results included a $6.5 million pretax gain associated with the sale of a joint venture interest, $4 million of favorable tax adjustments and $1.4 million of pretax restructuring charges.
"As Olin enters 2014, we believe we can generate adjusted EBITDA in the $375 million to $425 million range. This range reflects the view consistent with prior surges that the record level of demand currently being experienced in the Winchester business will begin to moderate during the second half of the year.
"In the first quarter of 2014, earnings per share are forecast to be in the $0.30 to $0.35 range. Winchester first quarter 2014 segment earnings are forecast to improve compared to the first quarter of 2013 due to improved pricing and lower costs. First quarter 2014 Chlor Alkali segment earnings are forecast to decline compared to the first quarter of 2013 due to lower ECU netbacks, partially offset by improved volumes and lower costs."
We define segment earnings as income (loss) before interest expense, interest income, other operating (expense) income, other income (expense) and income taxes and include the earnings of non- consolidated affiliates in segment results consistent with management's monitoring of the operating segments.
CHLOR ALKALI PRODUCTS
Chlor Alkali Products sales for the fourth quarter of 2013 were $322.2 million compared to $336.4 million in the fourth quarter of 2012. Lower selling prices more than offset higher sales volumes. Chlorine and caustic soda volumes increased 2.5 percent compared to the fourth quarter 2012 levels, fourth quarter 2013 hydrochloric acid volumes increased 15 percent compared to the fourth quarter of 2012, fourth quarter 2013 potassium hydroxide volumes increased 7 percent compared to the fourth quarter of 2012, and bleach volumes increased 6 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. The fourth quarter 2013 ECU netback declined approximately 9 percent compared to the fourth quarter of 2012 netback. Fourth quarter 2013 Chlor Alkali segment earnings declined from $54.3 million in the fourth quarter of 2012 to $30.7 million in the fourth quarter of 2013. The year-over-year decline in segment earnings reflects lower ECU netbacks which more than offset increased shipments of chlorine, hydrochloric acid, bleach and potassium hydroxide.
Chemical Distribution sales in the fourth quarter of 2013 were $80.7 million compared to $108.7 million in the fourth quarter of 2012. Fourth quarter 2013 and 2012 sales primarily reflect caustic soda sales. Chemical Distribution bleach sales are seasonally weak in the fourth quarter. Chemical Distribution had breakeven operating earnings during the fourth quarter of 2013 compared to operating earnings of $2.6 million in the fourth quarter of 2012. Both caustic soda volumes and margins declined in the fourth quarter of 2013 compared to the fourth quarter of 2012.
Winchester fourth quarter 2013 sales were $178.4 million compared to $155.8 million in the fourth quarter of 2012. The increase in fourth quarter 2013 sales compared to the fourth quarter of 2012 reflects increased shipments to commercial customers, partially offset by lower sales to military and law enforcement customers. Winchester's fourth quarter 2013 segment earnings were $34.1 million compared to $16.5 million in the fourth quarter of 2012. The increase in segment earnings reflects the impact of higher volumes, improved pricing, lower commodity and other material costs, and lower manufacturing costs. Winchester's fourth quarter 2012 segment earnings included a $3.0 million favorable settlement of a property tax dispute.
CORPORATE AND OTHER COSTS
Pension income included in the fourth quarter 2013 Corporate and Other segment was $6.6 million compared to $6.7 million in the fourth quarter of 2012.
Fourth quarter charges to income for environmental investigatory and remedial activities were $5.3 million in 2013 compared to $1.6 million in the fourth quarter of 2012. These charges relate primarily to remedial and investigatory activities associated with former waste sites and past operations.
Other corporate and unallocated costs in the fourth quarter of 2013 increased $13.8 million compared to the fourth quarter of 2012, primarily due to mark-to-market adjustments on stock-based compensation of $4.6 million and higher legal and legal-related settlement costs of $7.7 million. The legal and legal-related settlement costs are primarily associated with legacy environmental issues and cost recovery actions.
CASH / DEBT
The cash balance at December 31, 2013 was $307.8 million compared to $165.2 million at December 31, 2012. In December 2013, we repaid $12.2 million of SunBelt notes, which reduced the par value of Olin's debt at December 31, 2013 to $679.6 million. During 2014, Olin has maturing debt of $12.2 million. Capital spending and depreciation and amortization expense in 2013 were $90.8 million and $135.3 million, respectively, compared to $255.7 million and $110.9 million, respectively, in 2012.
On January 24, Olin's Board of Directors declared a dividend of $0.20 on each share of Olin common stock. The dividend is payable on March 10, to shareholders of record at the close of business on February 10. This is the 349th consecutive quarterly dividend to be paid by the Company.
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