• | sensitivity to economic, business and market conditions in the United States and overseas, including economic instability or a downturn in the sectors served by us, such as vinyls, urethanes, and pulp and paper; |
• | the cyclical nature of our operating results, particularly declines in average selling prices in the chlor alkali industry and the supply/demand balance for our products, including the impact of excess industry capacity or an imbalance in demand for our chlor alkali products; |
• | our reliance on a limited number of suppliers for specified feedstock and services and our reliance on third-party transportation; |
• | higher-than-expected raw material, energy, transportation, and/or logistics costs; |
• | failure to control costs or to achieve targeted cost reductions; |
• | new regulations or public policy changes regarding the transportation of hazardous chemicals and the security of chemical manufacturing facilities; |
• | the occurrence of unexpected manufacturing interruptions and outages, including those occurring as a result of labor disruptions and production hazards; |
• | weak industry conditions affecting our ability to comply with the financial maintenance covenants in our senior secured credit facility; |
• | the negative impact from the COVID-19 pandemic and the global response to the pandemic; |
• | the failure or an interruption of our information technology systems; |
• | complications resulting from our multiple enterprise resource planning systems and the conversion to a new system; |
• | the loss of a substantial customer for either chlorine or caustic soda could cause an imbalance in customer demand for these products; |
• | our substantial amount of indebtedness and significant debt service obligations; |
• | unexpected litigation outcomes; |
• | changes in, or failure to comply with, legislation or government regulations or policies; |
• | costs and other expenditures in excess of those projected for environmental investigation and remediation or other legal proceedings; |
• | failure to attract, retain and motivate key employees; |
• | the effects of any declines in global equity markets on asset values and any declines in interest rates used to value the liabilities in our pension plan; |
• | adverse changes in international markets, including economic, political or regulatory changes; |
• | our long range plan assumptions not being realized causing a non-cash impairment charge of long-lived assets; |
• | adverse conditions in the credit and capital markets, limiting or preventing our ability to borrow or raise capital; and |
• | various risks associated with our transition and subsequent operation of the Lake City U.S. Army Ammunition Plant. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In millions, except per share amounts) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Sales | $ | 1,437.6 | $ | 1,576.6 | $ | 4,103.9 | $ | 4,722.9 | |||||||
Operating Expenses: | |||||||||||||||
Cost of Goods Sold | 1,307.4 | 1,357.6 | 3,917.3 | 4,168.6 | |||||||||||
Selling and Administration | 112.7 | 110.8 | 309.1 | 314.8 | |||||||||||
Restructuring Charges | 1.3 | 4.9 | 4.7 | 12.7 | |||||||||||
Goodwill Impairment | 699.8 | — | 699.8 | — | |||||||||||
Other Operating (Expense) Income | (0.2 | ) | 0.1 | (0.1 | ) | 0.3 | |||||||||
Operating (Loss) Income | (683.8 | ) | 103.4 | (827.1 | ) | 227.1 | |||||||||
Interest Expense(b) | 74.6 | 63.9 | 207.1 | 179.2 | |||||||||||
Interest Income | 0.1 | 0.2 | 0.4 | 0.7 | |||||||||||
Non-operating Pension Income | 4.9 | 4.1 | 14.4 | 12.2 | |||||||||||
Other Income(c) | — | — | — | 11.2 | |||||||||||
Income (Loss) before Taxes | (753.4 | ) | 43.8 | (1,019.4 | ) | 72.0 | |||||||||
Income Tax (Benefit) Provision | (16.6 | ) | (0.4 | ) | (82.5 | ) | 6.1 | ||||||||
Net (Loss) Income | $ | (736.8 | ) | $ | 44.2 | $ | (936.9 | ) | $ | 65.9 | |||||
Net (Loss) Income Per Common Share: | |||||||||||||||
Basic | $ | (4.67 | ) | $ | 0.27 | $ | (5.94 | ) | $ | 0.40 | |||||
Diluted | $ | (4.67 | ) | $ | 0.27 | $ | (5.94 | ) | $ | 0.40 | |||||
Dividends Per Common Share | $ | 0.20 | $ | 0.20 | $ | 0.60 | $ | 0.60 | |||||||
Average Common Shares Outstanding - Basic | 157.9 | 161.9 | 157.8 | 163.7 | |||||||||||
Average Common Shares Outstanding - Diluted | 157.9 | 162.8 | 157.8 | 164.5 |
(a) | Unaudited. |
(b) | Interest expense included $4.4 million for the three months ended September 30, 2019 and $4.0 million and $12.6 million for the nine months ended September 30, 2020 and 2019, respectively, related to the 2020 ethylene payment discount. |
(c) | Other income for the nine months ended September 30, 2019 included a gain of $11.2 million on the sale of our equity interest in a non-consolidated affiliate. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Sales: | |||||||||||||||
Chlor Alkali Products and Vinyls | $ | 755.1 | $ | 876.3 | $ | 2,166.2 | $ | 2,657.7 | |||||||
Epoxy | 476.1 | 511.6 | 1,350.7 | 1,554.4 | |||||||||||
Winchester | 206.4 | 188.7 | 587.0 | 510.8 | |||||||||||
Total Sales | $ | 1,437.6 | $ | 1,576.6 | $ | 4,103.9 | $ | 4,722.9 | |||||||
Income (Loss) before Taxes: | |||||||||||||||
Chlor Alkali Products and Vinyls | $ | 37.8 | $ | 112.7 | $ | (53.5 | ) | $ | 303.8 | ||||||
Epoxy | 14.9 | 24.2 | 13.6 | 38.6 | |||||||||||
Winchester | 21.0 | 13.9 | 47.5 | 33.1 | |||||||||||
Corporate/Other: | |||||||||||||||
Environmental (Expense) Income(b) | (12.5 | ) | 0.8 | (17.9 | ) | (18.2 | ) | ||||||||
Other Corporate and Unallocated Costs(c) | (43.7 | ) | (43.4 | ) | (112.2 | ) | (117.8 | ) | |||||||
Restructuring Charges | (1.3 | ) | (4.9 | ) | (4.7 | ) | (12.7 | ) | |||||||
Goodwill Impairment | (699.8 | ) | — | (699.8 | ) | — | |||||||||
Other Operating (Expense) Income | (0.2 | ) | 0.1 | (0.1 | ) | 0.3 | |||||||||
Interest Expense(d) | (74.6 | ) | (63.9 | ) | (207.1 | ) | (179.2 | ) | |||||||
Interest Income | 0.1 | 0.2 | 0.4 | 0.7 | |||||||||||
Non-operating Pension Income | 4.9 | 4.1 | 14.4 | 12.2 | |||||||||||
Other Income(e) | — | — | — | 11.2 | |||||||||||
Income (Loss) before Taxes | $ | (753.4 | ) | $ | 43.8 | $ | (1,019.4 | ) | $ | 72.0 |
(a) | Unaudited. |
(b) | Environmental (expense) income for the nine months ended September 30, 2019 included $4.8 million of an environmental insurance-related settlement gain. |
(c) | Other corporate and unallocated costs included charges of $25.5 million and $24.5 million for the three months ended September 30, 2020 and 2019, respectively, and $60.6 million and $60.1 million for the nine months ended September 30, 2020 and 2019, respectively, associated with the implementation of new enterprise resource planning, manufacturing, and engineering systems, and related infrastructure costs. |
(d) | Interest expense included $4.4 million for the three months ended September 30, 2019 and $4.0 million and $12.6 million for the nine months ended September 30, 2020 and 2019, respectively, related to the 2020 ethylene payment discount. |
(e) | Other income for the nine months ended September 30, 2019 included a gain of $11.2 million on the sale of our equity interest in a non-consolidated affiliate. |
September 30, | December 31, | September 30, | |||||||||
(In millions, except per share data) | 2020 | 2019 | 2019 | ||||||||
Assets: | |||||||||||
Cash & Cash Equivalents | $ | 282.7 | $ | 220.9 | $ | 177.4 | |||||
Accounts Receivable, Net | 714.9 | 760.4 | 849.9 | ||||||||
Income Taxes Receivable | 22.0 | 13.9 | 17.5 | ||||||||
Inventories, Net | 608.4 | 695.7 | 700.7 | ||||||||
Other Current Assets | 44.5 | 23.1 | 24.1 | ||||||||
Total Current Assets | 1,672.5 | 1,714.0 | 1,769.6 | ||||||||
Property, Plant and Equipment (Less Accumulated Depreciation of $3,602.4, $3,268.1 and $3,112.4) | 3,179.8 | 3,323.8 | 3,367.0 | ||||||||
Operating Lease Assets, Net | 376.0 | 377.8 | 314.6 | ||||||||
Deferred Income Taxes | 36.3 | 35.3 | 30.3 | ||||||||
Other Assets | 1,177.0 | 1,169.1 | 1,170.1 | ||||||||
Intangibles, Net | 404.9 | 448.1 | 461.9 | ||||||||
Goodwill | 1,420.1 | 2,119.7 | 2,119.1 | ||||||||
Total Assets | $ | 8,266.6 | $ | 9,187.8 | $ | 9,232.6 | |||||
Liabilities and Shareholders’ Equity: | |||||||||||
Current Installments of Long-term Debt | $ | 1.2 | $ | 2.1 | $ | 1.1 | |||||
Accounts Payable | 614.7 | 651.9 | 647.7 | ||||||||
Income Taxes Payable | 14.2 | 19.8 | 9.8 | ||||||||
Current Operating Lease Liabilities | 76.2 | 79.3 | 71.2 | ||||||||
Accrued Liabilities | 335.8 | 329.1 | 347.4 | ||||||||
Total Current Liabilities | 1,042.1 | 1,082.2 | 1,077.2 | ||||||||
Long-term Debt | 3,959.5 | 3,338.7 | 3,339.0 | ||||||||
Operating Lease Liabilities | 305.0 | 303.4 | 248.2 | ||||||||
Accrued Pension Liability | 766.5 | 797.7 | 622.4 | ||||||||
Deferred Income Taxes | 410.9 | 454.5 | 515.5 | ||||||||
Other Liabilities | 313.5 | 793.8 | 765.6 | ||||||||
Total Liabilities | 6,797.5 | 6,770.3 | 6,567.9 | ||||||||
Commitments and Contingencies | |||||||||||
Shareholders’ Equity: | |||||||||||
Common Stock, $1.00 Par Value Per Share, Authorized 240.0 Shares: Issued and Outstanding 157.9 Shares (157.7 and 159.7 in 2019) | 157.9 | 157.7 | 159.7 | ||||||||
Additional Paid-in Capital | 2,129.9 | 2,122.1 | 2,128.6 | ||||||||
Accumulated Other Comprehensive Loss | (728.2 | ) | (803.4 | ) | (672.7 | ) | |||||
Retained Earnings (Accumulated Deficit) | (90.5 | ) | 941.1 | 1,049.1 | |||||||
Total Shareholders’ Equity | 1,469.1 | 2,417.5 | 2,664.7 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 8,266.6 | $ | 9,187.8 | $ | 9,232.6 |
(a) | Unaudited. |
Nine Months Ended September 30, | |||||||
(In millions) | 2020 | 2019 | |||||
Operating Activities: | |||||||
Net (Loss) Income | $ | (936.9 | ) | $ | 65.9 | ||
Goodwill Impairment | 699.8 | — | |||||
Gain on Disposition of Non-consolidated Affiliate | — | (11.2 | ) | ||||
Stock-based Compensation | 7.1 | 8.9 | |||||
Depreciation and Amortization | 425.1 | 460.3 | |||||
Deferred Income Taxes | (61.6 | ) | (11.0 | ) | |||
Qualified Pension Plan Contributions | (1.3 | ) | (13.2 | ) | |||
Qualified Pension Plan Income | (8.7 | ) | (6.9 | ) | |||
Changes in: | |||||||
Receivables | 57.0 | (77.4 | ) | ||||
Income Taxes Receivable/Payable | (14.0 | ) | (24.1 | ) | |||
Inventories | 90.5 | 2.5 | |||||
Other Current Assets | (7.2 | ) | 4.9 | ||||
Accounts Payable and Accrued Liabilities | 52.9 | 14.2 | |||||
Other Assets | (4.1 | ) | (4.8 | ) | |||
Other Noncurrent Liabilities | 0.9 | 12.9 | |||||
Other Operating Activities | 5.8 | (4.4 | ) | ||||
Net Operating Activities | 305.3 | 416.6 | |||||
Investing Activities: | |||||||
Capital Expenditures | (223.3 | ) | (271.8 | ) | |||
Payments under Ethylene Long-Term Supply Contracts | (461.0 | ) | — | ||||
Payments under Other Long-Term Supply Contracts | (75.8 | ) | — | ||||
Proceeds from Disposition of Non-consolidated Affiliate | — | 20.0 | |||||
Net Investing Activities | (760.1 | ) | (251.8 | ) | |||
Financing Activities: | |||||||
Long-term Debt Borrowings, Net | 620.7 | 80.9 | |||||
Common Stock Repurchased and Retired | — | (135.6 | ) | ||||
Stock Options Exercised | 0.5 | 1.5 | |||||
Dividends Paid | (94.7 | ) | (98.5 | ) | |||
Debt Issuance Costs | (9.9 | ) | (14.4 | ) | |||
Net Financing Activities | 516.6 | (166.1 | ) | ||||
Net Increase (Decrease) in Cash and Cash Equivalents | 61.8 | (1.3 | ) | ||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | — | (0.1 | ) | ||||
Cash and Cash Equivalents, Beginning of Year | 220.9 | 178.8 | |||||
Cash and Cash Equivalents, End of Period | $ | 282.7 | $ | 177.4 |
(a) | Unaudited. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Reconciliation of Net (Loss) Income to Adjusted EBITDA: | |||||||||||||||
Net (Loss) Income | $ | (736.8 | ) | $ | 44.2 | $ | (936.9 | ) | $ | 65.9 | |||||
Add Back: | |||||||||||||||
Interest Expense | 74.6 | 63.9 | 207.1 | 179.2 | |||||||||||
Interest Income | (0.1 | ) | (0.2 | ) | (0.4 | ) | (0.7 | ) | |||||||
Income Tax (Benefit) Provision | (16.6 | ) | (0.4 | ) | (82.5 | ) | 6.1 | ||||||||
Depreciation and Amortization | 142.1 | 156.0 | 425.1 | 460.3 | |||||||||||
EBITDA | (536.8 | ) | 263.5 | (387.6 | ) | 710.8 | |||||||||
Add Back: | |||||||||||||||
Restructuring Charges | 1.3 | 4.9 | 4.7 | 12.7 | |||||||||||
Environmental Recoveries, Net(b) | — | — | — | (4.8 | ) | ||||||||||
Information Technology Integration Project(c) | 25.5 | 24.5 | 60.6 | 60.1 | |||||||||||
Goodwill Impairment | 699.8 | — | 699.8 | — | |||||||||||
Certain Non-recurring Items(d) | 5.7 | — | 12.3 | (11.2 | ) | ||||||||||
Adjusted EBITDA | $ | 195.5 | $ | 292.9 | $ | 389.8 | $ | 767.6 |
(a) | Unaudited. |
(b) | Environmental recoveries, net for the nine months ended September 30, 2019 included $4.8 million of an environmental insurance-related settlement. |
(c) | Information technology integration project charges were associated with the implementation of new enterprise resource planning, manufacturing, and engineering systems, and related infrastructure costs. |
(d) | Certain non-recurring items for the three and nine months ended September 30, 2020 included $5.7 million and $12.3 million, respectively, of charges related to the Lake City facility transition. Certain non-recurring items for the nine months ended September 30, 2019 included a gain of $11.2 million on the sale of our equity interest in a non-consolidated affiliate. |