Olin Corp. (NYSE:OLN) Q4 2016 Earnings Conference Call - Final Transcript

Feb 01, 2017 • 10:00 am ET


Olin Corp. (NYSE:OLN) Q4 2016 Earnings Conference Call - Final Transcript


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Good morning and welcome to the Olin Corporation's fourth quarter 2016 earnings conference call. Please note this event is being recorded. I would now like to turn the conference over to Larry Kromidas, Director of Investor Relations. Please go ahead.

Larry Kromidas

Thank you, Cate. And good morning, everyone. Before we begin, I want to remind everyone that this presentation along with the associated slides and the question-and-answer session following our prepared remarks will include statements regarding estimated performance.

(Forward-Looking Cautionary Statements)

Also please note that during today's call, we will reference quarter-over-quarter comparisons as the 2015 fourth quarter results do not reflect the full quarter contribution from the chlorine products businesses that we acquired from Dow. Beginning next quarter, we will revert to traditional year-over-year comparisons.

Finally, a copy of today's transcript and slides will be available on our website in the investors section under calendar of events. The earnings press release and other financial data and information are available under press releases.

Now I'd like to turn the call over to John Fischer, Olin's President and Chief Executive Officer. John?

John Fischer

Good morning and thank you for joining us today. In addition to Larry, with me this morning are Pat Dawson, Executive Vice President and President at Epoxy; John McIntosh, Executive Vice President, Chemicals and Ammunition; Jim Varilek, Executive Vice President and President of Chlor Alkali Products and Vinyls; and Todd Slater, Vice President and Chief Financial Officer.

I will begin with a few key highlights and then discuss our adjusted EBITDA forecast for 2017 before providing some detail in each of the businesses. Todd will then provide an update on our cash flow projections for the year and some full-year modeling forecast assumptions before we open the call to questions.

On slide 3, we summarize our fourth quarter and full-year 2016 results as well as our full-year 2017 expectations. Last night, we announced fourth-quarter 2016 adjusted EBITDA of $221.7 million, which includes depreciation and amortization expense of $136.1 million, restructuring charges of $6.7 million, and acquisition related integration costs of $9.2 million.

The fourth quarter saw better than expected results in the Chlor Alkali Products and Vinyls segment, which more than offset weaker than expected results in the Epoxy segment. The favorable results in Chlor Alkali Products and Vinyls were primarily the result of favorable cost performance, while the shortfall in Epoxy results reflect softer demand from coatings customers. Winchester's fourth-quarter 2016 segment earnings exceeded the 2015 earnings due to higher sales volumes and lower operating costs.

The full-year 2016 adjusted EBITDA of $838.5 million included some significant accomplishments. Olin realized approximately $75 million of cost-related synergies and these contributed to our favorable fourth quarter cost performance.The Chlor Alkali Products and Vinyls segment, we experienced a significant improvement in caustic soda pricing beginning mid-year and we achieved a record volume of bleach sales. EBITDA in the Epoxy business improved approximately 25% in 2016 compared to 2015. And the Winchester business achieved the third highest level of annual EBITDA in its history,