UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

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 (Address of principal executive offices)	63105-3443 (Zip code)

Registrant’s telephone number, including area code: (314) 480-1400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $1 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes    x    No    ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes    ¨    No    x

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes    x    No    ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  Large Accelerated Filer x Accelerated Filer ¨ Non-accelerated Filer ¨ Smaller Reporting Company ¨

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, 2014, the aggregate market value of registrant’s common stock, par value $1 per share, held by non-affiliates of registrant was approximately $2,091,879,897 based on the closing sale price as reported on the New York Stock Exchange.

As of January 30, 2015, 77,385,015 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following document are incorporated by reference in this Form 10-K

as indicated herein:

Document	Part of 10-K into which incorporated
Proxy Statement relating to Olin’s Annual Meeting of Shareholders to be held in 2015	Part III

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PART I

Item 1.  BUSINESS

GENERAL

Olin Corporation is a Virginia corporation, incorporated in 1892, having its principal executive offices in Clayton, MO.  We are a manufacturer concentrated in three business segments:  Chlor Alkali Products, Chemical Distribution and Winchester.  Chlor Alkali Products manufactures and sells chlorine and caustic soda, hydrochloric acid, hydrogen, bleach products and potassium hydroxide, which represent 56% of 2014 sales.  Chemical Distribution manufactures bleach products and distributes caustic soda, bleach products, potassium hydroxide and hydrochloric acid, which represent 12% of 2014 sales. Winchester products, which represent 32% of 2014 sales, include sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.  See our discussion of our segment disclosures contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

On August 22, 2012, we acquired 100% of privately-held K. A. Steel Chemicals Inc. (KA Steel), whose operating results are included in the accompanying financial statements since the date of the acquisition. For segment reporting purposes, KA Steel comprises the Chemical Distribution segment. KA Steel is one of the largest distributors of caustic soda in North America and manufactures and sells bleach in the Midwest.

GOVERNANCE

We maintain an Internet website at www.olin.com.  Our reports on Form 10-K, Form 10-Q, and Form 8-K, as well as amendments to those reports, are available free of charge on our website, as soon as reasonably practicable after we file the reports with the Securities and Exchange Commission (SEC).  Additionally, a copy of our SEC filings can be accessed from the SEC at their Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or by calling that office of the SEC at 1-800-SEC-0330.  Also, a copy of our electronically filed materials can be obtained at www.sec.gov.  Our Principles of Corporate Governance, Committee Charters and Code of Conduct are available on our website at www.olin.com in the Governance Section under Governance Documents and Committees.

In May 2014, our Chief Executive Officer executed the annual Section 303A.12(a) CEO Certification required by the New York Stock Exchange (NYSE), certifying that he was not aware of any violation of the NYSE’s corporate governance listing standards by us.  Additionally, our Chief Executive Officer and Chief Financial Officer executed the required Sarbanes-Oxley Act of 2002 (SOX) Sections 302 and 906 certifications relating to this Annual Report on Form 10-K, which are filed with the SEC as exhibits to this Annual Report on Form 10-K.

PRODUCTS, SERVICES AND STRATEGIES

Chlor Alkali Products

Products and Services

We have been involved in the U.S. chlor alkali industry for more than 100 years and are a major participant in the North American chlor alkali market.  Chlorine, caustic soda and hydrogen are co-produced commercially by the electrolysis of salt.  These co-produced products are produced simultaneously, and in a fixed ratio of 1.0 ton of chlorine to 1.1 tons of caustic soda and 0.03 tons of hydrogen.  The industry refers to this as an Electrochemical Unit or ECU.  With a demonstrated capacity as of the end of 2014 of 1.9 million ECUs per year, we are the fourth largest chlor alkali producer, measured by production capacity of chlorine and caustic soda, in North America, according to data from IHS, Inc. (IHS).  IHS is a global information consulting company established in 1959 that provides information to a variety of industries.  Approximately 60% of our caustic soda production is high purity membrane grade, which, according to IHS data, normally commands a premium selling price in the market.  According to data from CEH Marketing Research (a division of IHS), we are the largest North American producer of industrial bleach, which is manufactured using both chlorine and caustic soda.

Our manufacturing facilities in Augusta, GA; McIntosh, AL; Charleston, TN; St. Gabriel, LA; Henderson, NV; Becancour, Canada; Santa Fe Springs, CA; Tracy, CA; and a portion of our facility in Niagara Falls, NY are ISO 9001 certified.  In addition, Augusta, GA; McIntosh, AL; Charleston, TN; St. Gabriel, LA; Henderson, NV; Santa Fe Springs, CA; Tracy, CA and Niagara Falls, NY are ISO 14001 certified.  ISO 9000 (which includes ISO 9001 and ISO 9002) and ISO 14000 (which includes ISO 14001) are sets of related international standards on quality assurance and environmental management developed by the International Organization for Standardization to help companies effectively document the quality and

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environmental management system elements to be implemented to maintain effective quality and environmental management systems.  Our facilities in Augusta, GA; McIntosh, AL; Charleston, TN; Niagara Falls, NY; and St. Gabriel, LA have also achieved Star status in the Voluntary Protection Program (VPP) of the Occupational Safety and Health Administration (OSHA).  OSHA’s VPP is a program in which companies voluntarily participate that recognizes facilities for their exemplary safety and health programs.  Our Augusta, GA; McIntosh, AL; Charleston, TN; St. Gabriel, LA; Henderson, NV; Santa Fe Springs, CA; Tracy, CA and Niagara Falls, NY manufacturing sites and the division headquarters are accredited under the RC 14001 Responsible Care^® (RC 14001) standard.  Supported by the chemical industry and recognized by government and regulatory agencies, RC 14001 establishes requirements for the management of safety, health, environmental, security, transportation, product stewardship and stakeholder engagement activities for the business.

Chlorine is used as a raw material in the production of thousands of products for end-uses including vinyls, chlorinated intermediates, isocyanates and water treatment.  A significant portion of U.S. chlorine production is consumed in the manufacture of ethylene dichloride, or EDC, a precursor for polyvinyl chloride, or PVC.  PVC is a plastic used in applications such as vinyl siding, plumbing and automotive parts.  We estimate that approximately 16% of our chlorine produced is consumed in the manufacture of EDC.  While much of the chlorine produced in the U.S. is consumed by the producing company to make downstream products, we sell most of the chlorine we produce to third parties in the merchant market.

Caustic soda has a wide variety of end-use applications, the largest of which in North America is in the pulp and paper industry.  Caustic soda is used in the delignification and bleaching portions of the pulping process.  Caustic soda is also used in the production of detergents and soaps, alumina and a variety of other inorganic and organic chemicals.

The chlor alkali industry is cyclical, both as a result of changes in demand for each of the co-produced products and as a result of the large increments in which new capacity is added and removed.  Because chlorine and caustic soda are produced in a fixed ratio, the supply of one product can be constrained both by the physical capacity of the production facilities and/or by the ability to sell the co-produced product.  Prices for both products respond rapidly to changes in supply and demand.  Our ECU netbacks (defined as gross selling price less freight and discounts) averaged approximately $505, $560 and $575 per ECU in 2014, 2013 and 2012, respectively. See our discussion of chlor alkali product pricing contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Electricity and salt are the major purchased raw materials for our Chlor Alkali Products segment.  Raw materials represent approximately 49% of the total cost of producing an ECU.  Electricity is the single largest raw material component in the production of chlor alkali products.  We are supplied by utilities that primarily utilize coal, hydroelectric, natural gas and nuclear power.  The commodity nature of this industry places an emphasis on cost management and we believe that we have managed our manufacturing costs in a manner that makes us one of the low cost producers in the industry.

We also manufacture and sell other chlor alkali-related products.  These products include chemically processed salt, hydrochloric acid, sodium hypochlorite (bleach), hydrogen and potassium hydroxide.  We refer to these other chlor alkali-related products as co-products.  Sales of co-products represented approximately 32% of Chlor Alkali Products’ sales in 2014.  We have recently invested in capacity and product upgrades in bleach and hydrochloric acid.  In 2013, we completed a capital project to expand hydrochloric acid production at our Henderson, NV chlor alkali site. Hydrochloric acid is a key value-added co-product, and we continue to evaluate hydrochloric acid expansion opportunities at our chlor alkali manufacturing sites. During 2010 to 2013, we initiated and completed low salt, high strength bleach facilities at McIntosh, AL, Niagara Falls, NY and Henderson, NV. These three new facilities increased total bleach manufacturing capacity by approximately 50% over the 2011 capacity.  These low salt, high strength bleach facilities nearly double the concentration of the bleach we manufacture, which significantly reduces transportation costs.

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The following table lists products of our Chlor Alkali Products business, with principal products on the basis of annual sales highlighted in bold face.

Products & Services	Major End Uses	Plants & Facilities	Major Raw Materials & Components for Products/Services
Chlorine/caustic soda	Pulp & paper processing, chemical manufacturing, water purification, manufacture of vinyl chloride, bleach, swimming pool chemicals and urethane chemicals	Becancour, Canada Charleston, TN Henderson, NV McIntosh, AL Niagara Falls, NY St. Gabriel, LA	salt, electricity
Sodium hypochlorite (bleach)	Household cleaners, laundry bleaching, swimming pool sanitizers, semiconductors, water treatment, textiles, pulp & paper and food processing	Augusta, GA Becancour, Canada Charleston, TN Henderson, NV* McIntosh, AL* Niagara Falls, NY* Santa Fe Springs, CA Tracy, CA	chlorine, caustic soda
Hydrochloric acid	Steel, oil & gas, plastics, organic chemical synthesis, water & wastewater treatment, brine treatment, artificial sweeteners, pharmaceuticals, food processing and ore & mineral processing	Becancour, Canada Charleston, TN Henderson, NV McIntosh, AL Niagara Falls, NY	chlorine, hydrogen
Potassium hydroxide	Fertilizer manufacturing, soaps, detergents & cleaners, battery manufacturing, food processing chemicals and deicers	Charleston, TN	potassium chloride, electricity
Hydrogen	Fuel source, hydrogen peroxide and hydrochloric acid	Becancour, Canada Charleston, TN Henderson, NV McIntosh, AL Niagara Falls, NY St. Gabriel, LA	salt, electricity
* Includes low salt, high strength bleach manufacturing.

Strategies

Continued Role as a Preferred Supplier to Merchant Market Customers.   Based on our market research, we believe our Chlor Alkali Products business is viewed as a preferred supplier by our merchant market customers.  We will continue to focus on providing quality customer service support and developing relationships with our valued customers.

Pursue Incremental Expansion Opportunities.   We have invested in capacity and product upgrades in our chemically processed salt, hydrochloric acid, bleach, potassium hydroxide and hydrogen businesses.  These expansions increase our captive use of chlorine while increasing the sales of these co-products.  These businesses provide opportunities to upgrade chlorine and caustic soda to higher value-added applications.  We also have the opportunity, when business conditions permit, to pursue incremental cost effective chlorine and caustic soda expansions at our McIntosh, AL and St. Gabriel, LA facilities.

Chemical Distribution

Products and Services

We acquired KA Steel, a privately-held distributor of caustic soda and bleach, on August 22, 2012. KA Steel was founded in 1957 and had been managed by the two shareholders, Robert and Kenneth Steel, since 1980. For segment reporting purposes, KA Steel comprises the Chemical Distribution segment. KA Steel is one of the largest distributors of caustic soda in North America and manufactures and sells bleach in the Midwest. The Chemical Distribution segment gives us the expanded capability to market and sell caustic soda, bleach, potassium hydroxide and hydrochloric acid, as well as, gives us the geographic diversification the KA Steel locations provide us, and strengthens our position in the industrial bleach segment.

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KA Steel is a chemical distributor historically focused in caustic soda and bleach. The addition of KA Steel substantially increased our bleach capacity. KA Steel’s geographic profile expanded our reach and provides a strong platform to increase our caustic soda, bleach, potassium hydroxide and hydrochloric acid sales through Chemical Distribution.

Chemical Distribution sources its chemicals from both international and domestic suppliers, including several of the major chemical producers in the U.S. Chemical Distribution typically has written distributorship agreements or supply contracts with our suppliers that are periodically renewed. The Chemical Distribution supply agreements with producers generally include specific volume commitments and performance criteria, with pricing negotiated based on market dynamics and competitive supply alternatives.

The prices at which Chemical Distribution resells the products that it distributes, such as caustic soda, fluctuate in accordance with the prices that they pay for these products, which in turn are driven by the underlying commodity prices, such as caustic soda, in accordance with supply and demand economics. As a result, movements in the product prices tend to result in largely corresponding changes to sales and cost of goods sold.

Transportation of products to and from customers and suppliers is a fundamental component of the Chemical Distribution business. The Chemical Distribution business relies on their private fleet of trucks, tankers and trailers to ship the majority of their annual volume and on common carriers and direct supply sales for the remainder. Direct supply sales occur by shipping products directly from a supplier to a customer when direct shipment is optimal for our route management. Although the products move directly from supplier to customer, Chemical Distribution remains the only point of contact for both customers and suppliers, and we take ownership of the products during the direct supply process.

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The Chemical Distribution facilities are strategically placed to optimize route density in an effort to balance high quality customer service with execution costs. The following table lists each of the distribution facilities, if the facility is owned or leased, and the products currently shipped from the location. The table does not include supplier controlled direct-ship facilities.

Products & Services	Plants & Facilities	Owned/Leased
Caustic, Bleach, Potassium Hydroxide, Hydrochloric Acid	Lemont, IL	Own
Caustic, Bleach	Muscatine, IA	Own
Bleach	Romulus, MI	Own
Caustic	Baltimore, MD	Lease
Caustic	Bayonne, NJ	Lease
Caustic	Charleston, SC	Lease
Caustic	Cincinnati, OH	Lease
Caustic	Cozad, NE	Lease
Caustic, Bleach	Dallas, TX	Lease
Caustic	E Sauget, IL	Lease
Bleach	Fairborn, OH	Lease
Caustic	Houston, TX	Lease
Caustic	Kansas City, KS	Lease
Caustic	Lubbock, TX	Lease
Caustic	Manly, IA	Lease
Caustic	McKees Rocks, PA	Lease
Caustic	Pt. Allen, LA	Lease
Caustic	Savannah, GA	Lease
Caustic	Searsport, ME	Lease
Caustic	Sioux City, IA	Lease
Caustic	Spokane, WA	Lease
Caustic	St. Louis, MO	Lease
Caustic	St. Paul, MN	Lease
Caustic	Vancouver, WA	Lease
Caustic	Warren, MI	Lease

Strategies

Pursue Incremental Expansion Options. The acquisition of KA Steel enhanced our commodity chemical business by increasing the amount of our core chlor alkali capacity that can be sold as value-added products.

Winchester

Products and Services

In 2014, Winchester was in its 148^th year of operation and its 84^th year as part of Olin.  Winchester is a premier developer and manufacturer of small caliber ammunition for sale to domestic and international retailers (commercial customers), law enforcement agencies and domestic and international militaries.  We believe we are a leading U.S. producer of ammunition for recreational shooters, hunters, law enforcement agencies and the U.S. Armed Forces.

In September 2014, Winchester was awarded a five-year contract to produce training ammunition for the U.S. Department of Homeland Security. The contract has the potential to generate $50 million of sales over the next five years.

In June 2014, Winchester was awarded a five-year contract to provide 9mm frangible ammunition to be used by the U.S. Air Force, Coast Guard and Navy for close quarter training, which has the potential to generate approximately $28 million of sales over the next five years.

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In September 2012, Winchester, along with another ammunition manufacturer, was awarded a contract from the Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI). The contract is to provide .40 caliber duty and training ammunition for one year with four option years; the contract has the potential to generate approximately $5 million of annual sales over the life of the contract.

In October 2014 and 2013, Winchester was recognized by the National Association of Sporting Goods Wholesalers (NASGW) with the group’s Excellence in Ammunition Manufacturing award. The NASGW presents the award to manufacturers who best demonstrate outstanding value and service to NASGW distributor members.

In April 2014, Winchester was recognized with the exclusive Overall Vendor of the Year award by Cabela’s Incorporated (Cabela’s), one of the country’s largest retailers of hunting, fishing and outdoor gear. The Overall Vendor of the Year is Cabela’s highest merchandising vendor award across all categories and departments. Winchester was chosen from more than 3,500 merchandise suppliers for superior performance, partnership and overall contribution to the retailer.

In May 2012, the National Defense Industrial Association (NDIA) presented Winchester with the prestigious Ambrose Award for exemplary commitment and contribution to the U.S. Armed Forces. The NDIA presents the award periodically when a manufacturer delivers superior materials that meet required operational capabilities and support a high level of force readiness in conduct of warfighting activities and homeland defense.

Our legendary Winchester^® product line includes all major gauges and calibers of shotgun shells, rimfire and centerfire ammunition for pistols and rifles, reloading components and industrial cartridges.  We believe we are the leading U.S. supplier of small caliber commercial ammunition.  In support of our continuous improvement initiatives, our manufacturing facilities in East Alton, IL achieved ISO recertification to the ISO 9001:2008 standard in November 2012.  Additionally, our facilities in Oxford, MS and Australia achieved ISO 9001:2008 recertification in 2011.

Winchester has strong relationships throughout the sales and distribution chain and strong ties to traditional dealers and distributors.  Winchester has also built its business with key high-volume mass merchants and specialty sporting goods retailers.  Winchester has consistently developed industry-leading ammunition, which is recognized in the industry for manufacturing excellence, design innovation and consumer value. Winchester’s new ammunition products continue to receive awards from major industry publications, with recent awards including: Field & Stream magazine’s “Best of the Best” award in 2014 and 2013; Petersen's Hunting magazine’s 2014 “Editor’s Choice” award; Guns & Ammo magazine’s “2014 Ammunition of the Year” award; American Rifleman magazine’s Golden Bullseye Award as “Ammunition Product of the Year” in 2014 and 2012; and Shooting Illustrated magazine’s “Ammunition Product of the Year” in 2014.

Winchester purchases raw materials such as copper-based strip and ammunition cartridge case cups and lead from vendors based on a conversion charge or premium.  These conversion charges or premiums are in addition to the market prices for metal as posted on exchanges such as the Commodity Exchange, or COMEX, and London Metals Exchange, or LME.  Winchester’s other main raw material is propellant, which is purchased predominantly from one of the United States’ largest propellant suppliers.

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The following table lists products and services of our Winchester business, with principal products on the basis of annual sales highlighted in bold face.

Products & Services	Major End Uses	Plants & Facilities	Major Raw Materials & Components for Products/Services
Winchester® sporting ammunition (shot-shells, small caliber centerfire & rimfire ammunition)	Hunters & recreational shooters, law enforcement agencies	East Alton, IL Oxford, MS Geelong, Australia	brass, lead, steel, plastic, propellant, explosives
Small caliber military ammunition	Infantry and mounted weapons	East Alton, IL Oxford, MS	brass, lead, propellant, explosives
Industrial products (8 gauge loads & powder-actuated tool loads)	Maintenance applications in power & concrete industries, powder-actuated tools in construction industry	East Alton, IL Oxford, MS Geelong, Australia	brass, lead, plastic, propellant, explosives

On November 3, 2010, we announced that we had made the decision to relocate the Winchester centerfire pistol and rifle ammunition manufacturing operations from East Alton, IL to Oxford, MS.  In October 2011, we opened the new centerfire pistol and rifle production facility in Oxford, MS and, during 2013, the relocation of the centerfire pistol manufacturing equipment was completed. During 2014, the centerfire rifle manufacturing equipment was in the process of being relocated, and by December 1, 2014, all commercial centerfire rifle ammunition was manufactured in Oxford, MS. During 2014, all of Winchester’s centerfire pistol ammunition and approximately 55% of Winchester’s centerfire rifle ammunition was manufactured in Oxford, MS.  This relocation, when completed, is forecast to reduce Winchester’s annual operating costs by approximately $35 million to $40 million.  We currently expect to complete this relocation by the end of 2016.  Once completed, Winchester expects to have the most modern centerfire ammunition production facility in North America.

Strategies

Leverage Existing Strengths.   Winchester plans to seek new opportunities to leverage the legendary Winchester brand name and will continue to offer a full line of ammunition products to the markets we serve, with specific focus on investments that make Winchester ammunition the retail brand of choice.

Focus on Product Line Growth.   With a long record of pioneering new product offerings, Winchester has built a strong reputation as an industry innovator.  This includes the introduction of reduced-lead and non-lead products, which are growing in popularity for use in indoor shooting ranges and for outdoor hunting.

Cost Reduction Strategy. Winchester plans to continue to focus on strategies that will lower our costs, including the ongoing relocation of our centerfire pistol and rifle ammunition manufacturing operations from East Alton, IL to Oxford, MS.

INTERNATIONAL OPERATIONS

Our subsidiary, Olin Canada ULC, operates one chlor alkali facility in Becancour, Canada, which sells chlor alkali-related products within Canada and to the United States and also sells and distributes ammunition within Canada.  Our subsidiary, Winchester Australia Limited, loads and packs sporting and industrial ammunition in Australia.  See the Note “Segment Information” of the notes to consolidated financial statements contained in Item 8, for geographic segment data.  We are incorporating our segment information from that Note into this section of our Form 10-K.

CUSTOMERS AND DISTRIBUTION

During 2014, no single customer accounted for more than 8% of sales.  Sales to all U.S. Government agencies and sales under U.S. Government contracting activities in total accounted for approximately 4% of sales in 2014.  Products we sell to industrial or commercial users or distributors for use in the production of other products constitute a major part of our total sales.  We sell some of our products, such as caustic soda and sporting ammunition, to a large number of users or distributors, while we sell others, such as chlorine, in substantial quantities to a relatively small number of industrial users.  We discuss the customers for each of our three businesses in more detail above under “Products and Services.”

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We market most of our products and services primarily through our sales force and sell directly to various industrial customers, mass merchants, retailers, wholesalers, other distributors and the U.S. Government and its prime contractors.

Because we engage in some government contracting activities and make sales to the U.S. Government, we are subject to extensive and complex U.S. Government procurement laws and regulations.  These laws and regulations provide for ongoing government audits and reviews of contract procurement, performance and administration.  Failure to comply, even inadvertently, with these laws and regulations and with laws governing the export of munitions and other controlled products and commodities could subject us or one or more of our businesses to civil and criminal penalties, and under certain circumstances, suspension and debarment from future government contracts and the exporting of products for a specified period of time.

BACKLOG

The total amount of contracted backlog was approximately $289.0 million and $532.4 million as of January 31, 2015 and 2014, respectively.  The backlog orders are in our Winchester business.  Beginning in November 2012, consumer purchases of ammunition surged significantly above historical demand levels. The surge in demand was across all of Winchester’s commercial product offerings. Beginning in the third quarter of 2014, Winchester began to experience a decline in commercial demand from the 2013 level. However, the second half of 2014 commercial demand remained stronger than 2011 levels. The increase above historical levels of commercial demand can be illustrated by the increase in Winchester’s commercial backlog, which was $192.4 million and $423.0 million at January 31, 2015 and 2014, respectively, compared to $29.4 million at December 31, 2011 and $37.6 million at January 31, 2012. The orders included in the commercial backlog may be canceled by the customer. Backlog is comprised of all open customer orders not yet shipped.  Approximately 82% of contracted backlog as of January 31, 2015 is expected to be filled during 2015.

COMPETITION

We are in active competition with businesses producing or distributing the same or similar products, as well as, in some instances, with businesses producing or distributing different products designed for the same uses.

Chlor alkali manufacturers in North America, with approximately 17 million tons of chlorine and 18 million tons of caustic soda capacity, account for approximately 17% of worldwide chlor alkali production capacity.  According to IHS, the Dow Chemical Company (Dow), the Occidental Petroleum Corporation (Oxy), and Axiall Corporation (Axiall) are the three largest chlor alkali producers in North America.  Approximately 75% of the total North American capacity is located in the U.S. Gulf Coast region.

Many of our competitors are integrated producers of chlorine, using some, or all, of their chlorine production in the manufacture of other downstream products.  In contrast, we are primarily a merchant producer of chlorine and sell the majority of our chlorine to merchant customers.  As a result, we supply a greater share of the merchant chlorine market than our share of overall industry capacity.  We do utilize chlorine to manufacture industrial bleach and hydrochloric acid.  There is a worldwide market for caustic soda, which attracts imports and allows exports depending on market conditions.  All of our competitors and the integrated producers of chlorine sell caustic soda into the North American merchant market.

The chlor alkali industry in North America is highly competitive, and many of our competitors, including Dow and Oxy, are substantially larger and have greater financial resources than we do.  While the technologies to manufacture and transport chlorine and caustic soda are widely available, the production facilities require large capital investments, and are subject to significant regulatory and permitting requirements.

We became one of the largest distributors of caustic soda in North America with the acquisition of KA Steel. We operate in a competitive industry and compete with many producers, distributors and sales agents offering chemicals equivalent to the products we handle. The primary competitive factors affecting the distribution business is the availability of product, the price, customer service and delivery capabilities. Our principal distribution competitors in North America include Univar Inc., Brenntag AG and numerous smaller regional distributors.

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We are among the largest manufacturers in the United States of commercial small caliber ammunition based on independent market research sponsored by the National Shooting Sports Foundation (NSSF).  Formed in 1961, NSSF has a membership of more than 8,000 manufacturers, distributors, firearms retailers, shooting ranges, sportsman’s organizations and publishers. According to NSSF, our Winchester business, Vista Outdoor Inc. (Vista), which began publicly trading in February 2015, (formerly a part of Alliant Techsystems Inc. (ATK)) and Remington Outdoor Company, Inc. (Remington) are the three largest commercial ammunition manufacturers in the United States.  The ammunition industry is highly competitive with us, Vista, Remington, numerous smaller domestic manufacturers and foreign producers competing for sales to the commercial ammunition customers.  Many factors influence our ability to compete successfully, including price, delivery, service, performance, product innovation and product recognition and quality, depending on the product involved.

EMPLOYEES

As of December 31, 2014, we had approximately 3,900 employees, with 3,700 working in the United States and 200 working in foreign countries, primarily Canada.  Various labor unions represent a majority of our hourly-paid employees for collective bargaining purposes.

The following labor contract is scheduled to expire in 2015:

Location	Number of Employees	Expiration Date
McIntosh (Chlor Alkali)	212	April 2015

While we believe our relations with our employees and their various representatives are generally satisfactory, we cannot assure that we can conclude this labor contract or any other labor agreements without work stoppages and cannot assure that any work stoppages will not have a material adverse effect on our business, financial condition or results of operations.

RESEARCH ACTIVITIES; PATENTS

Our research activities are conducted on a product-group basis at a number of facilities.  Company-sponsored research expenditures were $4.1 million in 2014, $2.5 million in 2013 and $2.6 million in 2012.

We own or license a number of patents, patent applications and trade secrets covering our products and processes.  We believe that, in the aggregate, the rights under our patents and licenses are important to our operations, but we do not consider any individual patent or license or group of patents and licenses related to a specific process or product to be of material importance to our total business.

RAW MATERIALS AND ENERGY

We purchase the major portion of our raw material requirements.  The principal basic raw materials for our production of chlor alkali products are salt, electricity, potassium chloride, sulfur dioxide and hydrogen.  A portion of the salt used in our Chlor Alkali Products segment is produced from internal resources.  Lead, brass and propellant are the principal raw materials used in the Winchester business.  We typically purchase our electricity, salt, potassium chloride, sulfur dioxide, ammunition cartridge case cups and copper-based strip, and propellants pursuant to multi-year contracts.  We provide additional information with respect to specific raw materials in the tables set forth under “Products and Services.”

Electricity is the predominant energy source for our manufacturing facilities.  Most of our facilities are served by utilities which generate electricity principally from coal, hydroelectric and nuclear power except at St. Gabriel, LA and Henderson, NV which predominantly use natural gas.

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ENVIRONMENTAL AND TOXIC SUBSTANCES CONTROLS

In the United States, the establishment and implementation of federal, state and local standards to regulate air, water and land quality affect substantially all of our manufacturing locations.  Federal legislation providing for regulation of the manufacture, transportation, use and disposal of hazardous and toxic substances, and remediation of contaminated sites has imposed additional regulatory requirements on industry, particularly the chemicals industry.  In addition, implementation of environmental laws, such as the Resource Conservation and Recovery Act and the Clean Air Act, has required and will continue to require new capital expenditures and will increase operating costs.  Our Canadian facility is governed by federal environmental laws administered by Environment Canada and by provincial environmental laws enforced by administrative agencies.  Many of these laws are comparable to the U.S. laws described above.  We employ waste minimization and pollution prevention programs at our manufacturing sites and we are a party to various governmental and private environmental actions associated with former waste disposal sites and past manufacturing facilities.  Charges to income for investigatory and remedial efforts were material to operating results in the past three years and may be material to operating results in future years.

See our discussion of our environmental matters contained in Item 3—“Legal Proceedings” below, the Note “Environmental” of the notes to consolidated financial statements contained in Item 8 and Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 1A.  RISK FACTORS

In addition to the other information in this Form 10-K, the following factors should be considered in evaluating Olin and our business.  All of our forward-looking statements should be considered in light of these factors.  Additional risks and uncertainties that we are unaware of or that we currently deem immaterial also may become important factors that affect us.

Sensitivity to Global Economic Conditions and Cyclicality—Our operating results could be negatively affected during economic downturns.

The business of most of our customers, particularly our vinyl, urethanes and pulp and paper customers are, to varying degrees, cyclical and have historically experienced periodic downturns.  These economic and industry downturns have been characterized by diminished product demand, excess manufacturing capacity and, in some cases, lower average selling prices.  Therefore, any significant downturn in our customers’ businesses or in global economic conditions could result in a reduction in demand for our products and could adversely affect our results of operations or financial condition.

Although we do not generally sell a large percentage of our products directly to customers abroad, a large part of our financial performance is dependent upon a healthy economy beyond North America.  Our customers sell their products abroad.  As a result, our business is affected by general economic conditions and other factors in Western Europe, South America and most of East Asia, particularly China and Japan, including fluctuations in interest rates, customer demand, labor and energy costs, currency changes and other factors beyond our control.  The demand for our customers’ products, and therefore, our products, is directly affected by such fluctuations.  In addition, our customers could decide to move some or all of their production to lower cost, offshore locations, and this could reduce demand in North America for our products.  We cannot assure you that events having an adverse effect on the industries in which we operate will not occur or continue, such as a downturn in the Western European, South American, Asian or world economies, increases in interest rates or unfavorable currency fluctuations.  Economic conditions in other regions of the world, predominantly Asia and Europe, can increase the amount of caustic soda produced and available for export to North America.  The increased caustic soda supply can put downward pressure on our caustic soda prices, negatively impacting our profitability.

Cyclical Pricing Pressure—Our profitability could be reduced by declines in average selling prices of our products, particularly declines in the ECU netbacks for chlorine and caustic soda.

Our historical operating results reflect the cyclical and sometimes volatile nature of the chemical and ammunition industries.  We experience cycles of fluctuating supply and demand in each of our business segments, particularly in Chlor Alkali Products, which result in changes in selling prices.  Periods of high demand, tight supply and increasing operating margins tend to result in increases in capacity and production until supply exceeds demand, generally followed by periods of oversupply and declining prices.  Another factor influencing demand and pricing for chlorine and caustic soda is the price of natural gas.  Higher natural gas prices increase our customers’ and competitors’ manufacturing costs, and depending on the ratio of crude oil to natural gas prices, could make them less competitive in world markets.  Continued expansion offshore, particularly in Asia, will continue to have an impact on the ECU values as imported caustic soda replaces some capacity in North America.

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Price in the chlor alkali industry is the major supplier selection criterion.  We have little or no ability to influence prices in this large commodity market.  Decreases in the average selling prices of our products could have a material adverse effect on our profitability.  For example, in the Chlor Alkali Products segment, assuming all other costs remain constant and internal consumption remains approximately the same, a $10 per ECU selling price change equates to an approximate $14 million annual change in our revenues and pretax profit when we are operating at full capacity.  While we strive to maintain or increase our profitability by reducing costs through improving production efficiency, emphasizing higher margin products and by controlling transportation, selling and administration expense, we cannot assure you that these efforts will be sufficient to offset fully the effect of possible decreases in pricing on operating results.

Because of the cyclical nature of our businesses, we cannot assure you that pricing or profitability in the future will be comparable to any particular historical period, including the most recent period shown in our operating results.  We cannot assure you that the chlor alkali industry will not experience adverse trends in the future, or that our operating results and/or financial condition will not be adversely affected by them.

Our Chemical Distribution segment is also subject to changes in operating results as a result of cyclical pricing pressures. The prices at which we resell the products that we distribute often fluctuate in accordance with the prices that we pay for these products, which in turn are driven by the underlying commodity prices, such as caustic soda, in accordance with supply and demand economics. We attempt to pass commodity pricing changes to our customers, but we may be unable to or be delayed in doing so. The inability to pass through price increases or any limitation or delays in passing through price increases in our Chemical Distribution segment could adversely affect our profitability.

Our Winchester segment is also subject to changes in operating results as a result of cyclical pricing pressures, but to a lesser extent than the Chlor Alkali Products segment.  Selling prices of ammunition are affected by changes in raw material costs and availability and customer demand, and declines in average selling prices of products of our Winchester segment could adversely affect our profitability.

Imbalance in Demand for Our Chlor Alkali Products—A loss of a substantial customer for our chlorine or caustic soda could cause an imbalance in demand for these products, which could have an adverse effect on our results of operations.

Chlorine and caustic soda are produced simultaneously and in a fixed ratio of 1.0 ton of chlorine to 1.1 tons of caustic soda.  The loss of a substantial chlorine or caustic soda customer could cause an imbalance in demand for our chlorine and caustic soda products.  An imbalance in demand may require us to reduce production of both chlorine and caustic soda or take other steps to correct the imbalance.  Since we cannot store large quantities of chlorine, we may not be able to respond to an imbalance in demand for these products as quickly or efficiently as some of our competitors.  If a substantial imbalance occurred, we would need to reduce prices or take other actions that could have a negative impact on our results of operations and financial condition.

Security and Chemicals Transportation—New regulations on the transportation of hazardous chemicals and/or the security of chemical manufacturing facilities and public policy changes related to transportation safety could result in significantly higher operating costs.

The chemical industry, including the chlor alkali industry, has proactively responded to the issues related to national security and environmental concerns by starting new initiatives relating to the security of chemicals industry facilities and the transportation of hazardous chemicals in the United States.  Government at the local, state and federal levels could implement new regulations that would impact the security of chemical plant locations and the transportation of hazardous chemicals.  Our Chlor Alkali Products business could be adversely impacted by the cost of complying with any new regulations.  Our business also could be adversely affected if an incident were to occur at one of our facilities or while transporting product.  The extent of the impact would depend on the requirements of future regulations and the nature of an incident, which are unknown at this time.

Effects of Regulation—Changes in legislation or government regulations or policies, including tax policies, could have a material adverse effect on our financial position or results of operations.

Legislation that may be passed by Congress or other legislative bodies or new regulations that may be issued by federal and other administrative agencies could significantly affect the sales, costs and profitability of our business.  The chemical and ammunition industries are subject to legislative and regulatory actions, which could have a material adverse effect on our financial position or results of operations.

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Cost Control—Our profitability could be reduced if we experience increasing raw material, utility, transportation or logistics costs, or if we fail to achieve our targeted cost reductions.

Our operating results and profitability are dependent upon our continued ability to control, and in some cases further reduce, our costs.  If we are unable to do so, or if costs outside of our control, particularly our costs of raw materials, utilities, transportation and similar costs, increase beyond anticipated levels, our profitability will decline.

For example, our Chlor Alkali product transportation costs, particularly railroad shipment costs, are a significant portion of our cost of goods sold, and have been increasing over the past several years.  If the cost increases continue, and we are unable to control those costs or pass the increased costs on to customers, our profitability in our Chlor Alkali business would be negatively affected.  Similarly, costs of commodity metals and other materials used in our Winchester business, such as copper and lead, can vary.  If we experience significant increases in these costs and are unable to raise our prices to offset the higher costs, the profitability in our Winchester business would be negatively affected.

Environmental Costs—We have ongoing environmental costs, which could have a material adverse effect on our financial position or results of operations.

The nature of our operations and products, including the raw materials we handle, exposes us to the risk of liabilities or claims with respect to environmental matters.  In addition, we are party to various governmental and private environmental actions associated with past manufacturing facilities and former waste disposal sites.  We have incurred, and expect to incur, significant costs and capital expenditures in complying with environmental laws and regulations.

The ultimate costs and timing of environmental liabilities are difficult to predict.  Liabilities under environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis.  One liable party could be held responsible for all costs at a site, regardless of fault, percentage of contribution to the site or the legality of the original disposal.  We could incur significant costs, including cleanup costs, natural resource damages, civil or criminal fines and sanctions and third-party lawsuits claiming, for example, personal injury and/or property damage, as a result of past or future violations of, or liabilities under, environmental or other laws.

In addition, future events, such as changes to or more rigorous enforcement of environmental laws, could require us to make additional expenditures, modify or curtail our operations and/or install pollution control equipment.

Accordingly, it is possible that some of the matters in which we are involved or may become involved may be resolved unfavorably to us, which could materially adversely affect our financial position, cash flows or results of operations.  See “Environmental Matters” contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Litigation and Claims—We are subject to litigation and other claims, which could cause us to incur significant expenses.

We are a defendant in a number of pending legal proceedings relating to our present and former operations.  These include product liability claims relating to ammunition and firearms and proceedings alleging injurious exposure of plaintiffs to various chemicals and other substances (including proceedings based on alleged exposures to asbestos).  Frequently, the proceedings alleging injurious exposure involve claims made by numerous plaintiffs against many defendants.  However, because of the inherent uncertainties of litigation, we are unable to predict the outcome of these proceedings and therefore cannot determine whether the financial impact, if any, will be material to our financial position, cash flows or results of operations.

Information Security—A failure of our information technology systems, or an interruption in their operation, could have a material adverse effect on our business, financial condition or results of operations.

Our operations are dependent on our ability to protect our information systems, computer equipment and information databases from systems failures.  We rely on our information technology systems generally to manage the day-to-day operation of our business, operate elements of our chlor alkali and ammunition manufacturing facilities, manage relationships with our customers, fulfill customer orders and maintain our financial and accounting records.  Failures of our information technology systems could be caused by internal or external events, such as incursions by intruders or hackers, computer viruses, cyber-attacks, failures in hardware or software, or power or telecommunication fluctuations or failures.  The failure of our information technology systems to perform as anticipated for any reason or any significant breach of security could disrupt our business and result in numerous adverse consequences, including reduced effectiveness and efficiency of operations, increased

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costs or loss of important information, any of which could have a material adverse effect on our business, financial condition or results of operations.  We have technology and information security processes and disaster recovery plans in place to mitigate our risk to these vulnerabilities.  However, these measures may not be adequate to ensure that our operations will not be disrupted, should such an event occur.

Production Hazards—Our facilities are subject to operating hazards, which may disrupt our business.

We are dependent upon the continued safe operation of our production facilities.  Our production facilities are subject to hazards associated with the manufacture, handling, storage and transportation of chemical materials and products and ammunition, including leaks and ruptures, explosions, fires, inclement weather and natural disasters, unexpected utility disruptions or outages, unscheduled downtime and environmental hazards.  From time to time in the past, we have had incidents that have temporarily shut down or otherwise disrupted our manufacturing, causing production delays and resulting in liability for workplace injuries and fatalities.  Some of our products involve the manufacture and/or handling of a variety of explosive and flammable materials.  Use of these products by our customers could also result in liability if an explosion, fire, spill or other accident were to occur.  We cannot assure you that we will not experience these types of incidents in the future or that these incidents will not result in production delays or otherwise have a material adverse effect on our business, financial condition or results of operations.

Credit Facilities—Weak industry conditions could affect our ability to comply with the financial maintenance covenants in our senior credit facility and certain tax-exempt bonds.

Our senior credit facility and our Gulf Opportunity Zone Act of 2005 (Go Zone) and American Recovery and Reinvestment Act of 2009 (Recovery Zone) tax-exempt bonds include certain financial maintenance covenants requiring us to not exceed a maximum leverage ratio and to maintain a minimum coverage ratio.

Depending on the magnitude and duration of chlor alkali cyclical downturns, including deterioration in prices and volumes, there can be no assurance that we will continue to be in compliance with these ratios.  If we failed to comply with either of these covenants in a future period and were not able to obtain waivers from the lenders thereunder, we would need to refinance our current senior credit facility and the Go Zone and Recovery Zone bonds.  However, there can be no assurance that such refinancing would be available to us on terms that would be acceptable to us or at all.

Credit and Capital Market Conditions—Adverse conditions in the credit and capital markets may limit or prevent our ability to borrow or raise capital.

While we believe we have facilities in place that should allow us to borrow funds as needed, adverse conditions in the credit and financial markets could prevent us from obtaining financing, if the need arises.  Our ability to invest in our businesses and refinance or repay maturing debt obligations could require access to the credit and capital markets and sufficient bank credit lines to support cash requirements.  If we are unable to access the credit and capital markets, we could experience a material adverse effect on our financial position or results of operations.

Indebtedness—Our indebtedness could adversely affect our financial condition and limit our ability to grow and compete, which could prevent us from fulfilling our obligations under our indebtedness.

As of December 31, 2014, we had $675.1 million of indebtedness outstanding, including $4.5 million representing the unrecognized gain related to $161.5 million of interest rate swaps at December 31, 2014.  This outstanding indebtedness does not include our $265.0 million senior revolving credit facility of which we had $257.7 million available as of December 31, 2014 because we had issued $7.3 million of letters of credit.  As of December 31, 2014, our indebtedness represented 40.0% of our total capitalization.  At December 31, 2014, $16.4 million of our indebtedness was due within one year.

Our indebtedness could adversely affect our financial condition and limit our ability to fund working capital, capital expenditures and other general corporate purposes, to accommodate growth by reducing funds otherwise available for other corporate purposes, and to compete, which in turn could prevent us from fulfilling our obligations under our indebtedness.  In addition, our indebtedness could make us more vulnerable to any continuing downturn in general economic conditions and reduce our ability to respond to changing business and economic conditions.  Despite our level of indebtedness, the terms of our senior credit facility and our existing indentures permit us to borrow additional money.  If we borrow more money, the risks related to our indebtedness could increase.

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Pension Plans—The impact of declines in global equity and fixed income markets on asset values and any declines in interest rates used to value the liabilities in our pension plans may result in higher pension costs and the need to fund the pension plans in future years in material amounts.

Under Accounting Standard Codification (ASC) 715 “Compensation–Retirement Benefits” (ASC 715), we recorded an after-tax charge of $86.6 million ($142.0 million pretax) to shareholders’ equity as of December 31, 2014 for our pension and other postretirement plans.  This charge reflected a 60-basis point decrease in the plans’ discount rate and the negative impact of the newly mandated mortality tables, partially offset by favorable performance on plan assets during 2014. In 2013, we recorded an after-tax charge of $7.7 million ($12.5 million pretax) to shareholders’ equity as of December 31, 2013 for our pension and other postretirement plans.  This charge reflected unfavorable performance on plan assets during 2013, partially offset by a 60-basis point increase in the plans’ discount rate.  In 2012, we recorded an after-tax charge of $101.9 million ($166.8 million pretax) to shareholders’ equity as of December 31, 2012 for our pension and other postretirement plans.  This charge reflected a 100-basis point decrease in the plans’ discount rate, partially offset by the favorable performance on plan assets during 2012.  The non-cash charges to shareholders’ equity do not affect our ability to borrow under our senior credit facility.

The determinations of pension expense and pension funding are based on a variety of rules and regulations.  Changes in these rules and regulations could impact the calculation of pension plan liabilities and the valuation of pension plan assets.  They may also result in higher pension costs, additional financial statement disclosure, and accelerate the need to fully fund the pension plan.  During the fourth quarter of 2014, the Society of Actuaries (SOA) issued the final report of its mortality tables and mortality improvement scales. The updated mortality data reflected increasing life expectancies in the United States. During the third quarter of 2012, the “Moving Ahead for Progress in the 21st Century Act” (MAP-21) became law. The new law changes the mechanism for determining interest rates to be used for calculating minimum defined benefit pension plan funding requirements. Interest rates are determined using an average of rates for a 25-year period, which can have the effect of increasing the annual discount rate, reducing the defined benefit pension plan obligation and potentially reducing or eliminating the minimum annual funding requirement. The new law also increased premiums paid to the Pension Benefit Guaranty Corporation (PBGC). During the third quarter of 2014, the “Highway and Transportation Funding Act” (HATFA 2014) became law, which includes an extension of MAP-21’s defined benefit plan funding stabilization relief. Based on our plan assumptions and estimates, we will not be required to make any cash contributions to the domestic qualified defined benefit pension plan at least through 2015 and under the new law may not be required to make any additional contributions for at least the next five years.  We do have a small Canadian qualified defined benefit pension plan to which we made cash contributions of $0.8 million in 2014, $1.0 million in 2013 and $0.9 million in 2012, and we anticipate approximately $1 million of cash contributions in 2015.  At December 31, 2014, the projected benefit obligation of $2,117.4 million exceeded the market value of assets in our qualified defined benefit pension plans by $138.7 million, as calculated under ASC 715.

In addition, the impact of declines in global equity and fixed income markets on asset values may result in higher pension costs and may increase and accelerate the need to fund the pension plans in future years.  For example, holding all other assumptions constant, a 100-basis point decrease or increase in the assumed long-term rate of return on plan assets would have decreased or increased, respectively, the 2014 defined benefit pension plans income by approximately $17.4 million.

Holding all other assumptions constant, a 50-basis point decrease in the discount rate used to calculate pension income for 2014 and the projected benefit obligation as of December 31, 2014 would have decreased pension income by $0.5 million and increased the projected benefit obligation by $118.0 million.  A 50-basis point increase in the discount rate used to calculate pension income for 2014 and the projected benefit obligation as of December 31, 2014 would have increased pension income by $0.7 million and decreased the projected benefit obligation by $115.0 million.

Labor Matters—We cannot assure you that we can conclude future labor contracts or any other labor agreements without work stoppages.

Various labor unions represent a majority of our hourly-paid employees for collective bargaining purposes.  The following labor contract is scheduled to expire in 2015:

Location	Number of Employees	Expiration Date
McIntosh (Chlor Alkali)	212	April 2015

While we believe our relations with our employees and their various representatives are generally satisfactory, we cannot assure that we can conclude this labor contract or any other labor agreements without work stoppages and cannot assure that any work stoppages will not have a material adverse effect on our business, financial condition or results of operations.

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Debt Service—We may not be able to generate sufficient cash to service our debt, which may require us to refinance our indebtedness or default on our scheduled debt payments.

Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt depends on a range of economic, competitive and business factors, many of which are outside our control.  We cannot assure you that our business will generate sufficient cash flow from operations.  If we are unable to meet our expenses and debt obligations, we may need to refinance all or a portion of our indebtedness on or before maturity, sell assets or raise equity.  We cannot assure you that we would be able to refinance any of our indebtedness, sell assets or raise equity on commercially reasonable terms or at all, which could cause us to default on our obligations and impair our liquidity.  Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms, would have an adverse effect on our business, financial condition and results of operations, as well as on our ability to satisfy our debt obligations.  See “Liquidity and Other Financing Arrangements” contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 7A—“Quantitative and Qualitative Disclosures about Market Risk.”

Item 1B.  UNRESOLVED STAFF COMMENTS

Not applicable.

Item 2.  PROPERTIES

We have manufacturing sites at 13 separate locations in nine states, Canada and Australia.  Most manufacturing sites are owned although a number of small sites are leased.  We also own 4 terminals in 3 states and Canada and lease 26 terminal facilities in 19 states. We listed the principal locations at or from which our products and services are manufactured, distributed or marketed in the tables set forth under the caption “Products and Services” contained in Item 1—“Business.”

We lease warehouses, terminals and distribution offices and space for executive and branch sales offices and service departments.

Item 3.  LEGAL PROCEEDINGS

Saltville

We have completed all work in connection with remediation of mercury contamination at the site of our former mercury cell chlor alkali plant in Saltville, VA required to date.  In mid-2003, the Trustees for natural resources in the North Fork Holston River, the Main Stem Holston River and associated floodplains, located in Smyth and Washington Counties in Virginia and in Sullivan and Hawkins Counties in Tennessee notified us of, and invited our participation in, an assessment of alleged damages to natural resources resulting from the release of mercury.  The Trustees also notified us that they have made a preliminary determination that we are potentially liable for natural resource damages in said rivers and floodplains.  We agreed to participate in the assessment.  We and the Trustees have entered into discussions concerning a resolution of this matter.  In light of the ongoing discussions and inherent uncertainties of the assessment, we cannot at this time determine whether the financial impact, if any, of this matter will be material to our financial position or results of operations.  See “Environmental Matters” contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Other

As part of the continuing environmental investigation by federal, state and local governments of waste disposal sites, we have entered into a number of settlement agreements requiring us to participate in the investigation and cleanup of a number of sites.  Under the terms of such settlements and related agreements, we may be required to manage or perform one or more elements of a site cleanup, or to manage the entire remediation activity for a number of parties, and subsequently seek recovery of some or all of such costs from other Potentially Responsible Parties (PRPs).  In many cases, we do not know the ultimate costs of our settlement obligations at the time of entering into particular settlement agreements, and our liability accruals for our obligations under those agreements are often subject to significant management judgment on an ongoing basis.  Those cost accruals are provided for in accordance with generally accepted accounting principles and our accounting policies set forth in “Environmental Matters” contained in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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We, and our subsidiaries, are defendants in various other legal actions (including proceedings based on alleged exposures to asbestos) incidental to our past and current business activities.  At December 31, 2014 and 2013, our consolidated balance sheets included liabilities for these legal actions of $22.1 million and $19.3 million, respectively.  These liabilities do not include costs associated with legal representation.  Based on our analysis, and considering the inherent uncertainties associated with litigation, we do not believe that it is reasonably possible that these legal actions will materially adversely affect our financial position, cash flows or results of operations.

Item 4.  MINE SAFETY DISCLOSURES

Not applicable.

Executive Officers of the Registrant as of February 25, 2015

Name and Age	Office	Served as an Olin Officer Since
Joseph D. Rupp (64)	Chairman and Chief Executive Officer	1996
Scott R. Abel (51)	President, K. A. Steel Chemicals Inc.	2014
Frank W. Chirumbole (56)	Vice President and President, Chlor Alkali Products	2011
Stephen C. Curley (63)	Vice President and Treasurer	2005
Dolores J. Ennico (62)	Vice President, Human Resources	2009
John E. Fischer (59)	President and Chief Operating Officer	2004
G. Bruce Greer, Jr. (54)	Vice President, Strategic Planning and Information Technology	2005
John L. McIntosh (60)	Senior Vice President, Chemicals	1999
Thomas J. O’Keefe (56)	Vice President and President, Winchester	2011
George H. Pain (64)	Senior Vice President, General Counsel and Secretary	2002
Todd A. Slater (51)	Vice President and Chief Financial Officer	2005
Randee N. Sumner (40)	Vice President and Controller	2014

No family relationship exists between any of the above named executive officers or between any of them and any of our directors.  Such officers were elected to serve, subject to the By-laws, until their respective successors are chosen.

All executive officers, except Messrs. Abel, Chirumbole and O’Keefe, and Ms. Sumner, have served as executive officers for more than five years.

Scott R. Abel joined Olin in April 2014, and became President, K. A. Steel Chemicals Inc. on August 22, 2014. From 2012 to 2014, he served as Commercial Vice President at KOST USA, Inc. and from 2009 to 2012, he served as Business Director – Glycols at Archer Daniels Midland Company. From 2008 to 2009, he served as Global Marketing Director – Acrylic Monomers; from 2003 to 2007, he served as Senior Marketing Manager – Chlor Alkali; and from 1989 through 2007, he served in various sales and marketing positions, all at The Dow Chemical Company.

Frank W. Chirumbole was appointed Vice President and President, Chlor Alkali Products effective April 26, 2012, and assumed his current duties on April 28, 2011.  From October 2010 until April 2012, he served as President, Chlor Alkali Products; from 2009 until September 2010, he served as Vice President, General Manager – Bleach; from 2007 to 2009 he served as Vice President, Supply Chain Management; and from 2001 to 2007 he served as Vice President, Manufacturing and Engineering, all in the Chlor Alkali Products Division.

Thomas J. O’Keefe was appointed Vice President and President, Winchester effective April 26, 2012, and assumed his current duties on April 28, 2011.  From 2010 to 2011, he served as President, Winchester; from 2008 to 2010, he served as Vice President, Operations and Planning and from 2006 to 2008 he was Vice President, Manufacturing Operations, in each case, in the Winchester Division.  From 2001 to 2006, he was Vice President, Manufacturing and Engineering for Olin’s former Brass Division.

Randee N. Sumner was appointed Vice President and Controller effective May 4, 2014. From December 2012 until April 2014, she served as Division Financial Officer for K. A. Steel Chemicals Inc. From 2010 until December 2012, she served as Assistant Controller; from 2008 to 2010, she served as Director, Corporate Accounting and Financial Reporting; and from 2006 to 2008, she served as Manager, Corporate Accounting and Financial Reporting, all for Olin Corporation.

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PART II

Item 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

As of January 30, 2015, we had 3,627 record holders of our common stock.

Our common stock is traded on the New York Stock Exchange.

The high and low sales prices of our common stock during each quarterly period in 2014 and 2013 are listed below.  A dividend of $0.20 per common share was paid during each of the four quarters in 2014 and 2013.

2014	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Market price of common stock per New York Stock Exchange composite transactions
High	$	29.18	$	29.28	$	28.08	$	25.97
Low	24.51		26.42		25.23		20.43

2013
Market price of common stock per New York Stock Exchange composite transactions
High	$	25.42	$	26.05	$	25.17	$	29.52
Low	21.29		22.74		22.50		21.79

Issuer Purchases of Equity Securities

Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1-31, 2014	60,000	$23.93	60,000
November 1-30, 2014	414,700	25.00	414,700
December 1-31, 2014	356,200	23.19	356,200
Total				6,062,657 (1)

(1) On April 24, 2014, we announced a share repurchase program approved by the board of directors for the purchase of up to 8 million shares of common stock that will terminate on April 24, 2017.  Through December 31, 2014, 1,937,343 shares had been repurchased, and 6,062,657 shares remained available for purchase under this program.

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Performance Graph

This graph compares the total shareholder return on our common stock with the cumulative total return of the Standard & Poor’s 1000 Index (the “S&P 1000”), our current peer group (the “Peer Group B”) and our prior peer group (the “Peer Group A”). Peer Group A consists of six companies comprised of: ATK, Axiall, Dow, Oxy, PPG Industries, Inc. and Westlake Chemical Corporation. Peer Group B consists of five companies comprised of: ATK, Axiall, Dow, Oxy and Westlake Chemical Corporation.

Our board adjusted the peer group to better reflect companies that are in our current line of business. PPG Industries, Inc. was removed from Peer Group B as they have divested from their commodity chemicals business. Our board believes that the current peer group provides a better and more accurate basis to compare our performance, as the compensation committee uses our peer group for certain benchmarks in executive compensation.

Data is for the five-year period from December 31, 2009 through December 31, 2014.  The cumulative return includes reinvestment of dividends.  The Peer Groups are weighted in accordance with market capitalization (closing stock price multiplied by the number of shares outstanding) as of the beginning of each of the five years covered by the performance graph.  We calculated the weighted return for each year by multiplying (a) the percentage that each corporation’s market capitalization represented of the total market capitalization for all corporations in the Peer Groups for such year by (b) the total shareholder return for that corporation for such year.

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Item 6.  SELECTED FINANCIAL DATA

TEN-YEAR SUMMARY

	2014			2013			2012			2011			2010			2009			2008			2007			2006			2005
Operations				($ and shares in millions, except per share data)
Sales	$	2,241		$	2,515		$	2,185		$	1,961		$	1,586		$	1,532		$	1,765		$	1,277		$	1,040		$	955
Cost of goods sold	1,853			2,034			1,748			1,574			1,350			1,223			1,377			1,035			792			682
Selling and administration	170			190			177			161			134			135			137			129			129			128
Restructuring charges	(16		)	(6		)	(9		)	(11		)	(34		)	—			—			—			—			—
Other operating income	2			1			8			9			2			9			1			2			7			9
Earnings of non-consolidated affiliates	2			3			3			10			30			38			39			46			45			37
Interest expense	44			39			26			30			25			12			13			22			20			20
Interest and other income (expense)	1			—			(10		)	176			2			1			(20		)	12			12			20
Income before taxes from continuing operations	163			250			226			380			77			210			258			151			163			191
Income tax provision	58			71			76			138			12			74			100			50			39			74
Income from continuing operations	105			179			150			242			65			136			158			101			124			117
Discontinued operations, net	1			—			—			—			—			—			—			(110		)	26			21
Cumulative effect of accounting changes, net	—			—			—			—			—			—			—			—			—			(5		)
Net income (loss)	$	106		$	179		$	150		$	242		$	65		$	136		$	158		$	(9	)	$	150		$	133
Financial position
Cash and cash equivalents, short-term investments and restricted cash	$	257		$	312		$	177		$	357		$	561		$	459		$	247		$	333		$	276		$	304
Working capital, excluding cash and cash equivalents and short-term investments	182			125			150			76			33			91			24			(14		)	223			191
Property, plant and equipment, net	931			988			1,034			885			675			695			630			504			251			227
Total assets	2,698			2,803			2,778			2,450			2,049			1,932			1,720			1,731			1,642			1,802
Capitalization:
Short-term debt	16			13			24			12			78			—			—			10			2			1
Long-term debt	659			678			690			524			418			398			252			249			252			257
Shareholders’ equity	1,013			1,101			998			986			830			822			705			664			543			427
Total capitalization	$	1,688		$	1,792		$	1,712		$	1,522		$	1,326		$	1,220		$	957		$	923		$	797		$	685
Per share data
Basic:
Continuing operations	$	1.33		$	2.24		$	1.87		$	3.02		$	0.82		$	1.74		$	2.08		$	1.36		$	1.70		$	1.65
Discontinued operations, net	0.01			—			—			—			—			—			—			(1.48		)	0.36			0.30
Accounting changes, net	—			—			—			—			—			—			—			—			—			(0.08		)
Net income (loss)	$	1.34		$	2.24		$	1.87		$	3.02		$	0.82		$	1.74		$	2.08		$	(0.12	)	$	2.06		$	1.87
Diluted:
Continuing operations	$	1.32		$	2.21		$	1.85		$	2.99		$	0.81		$	1.73		$	2.07		$	1.36		$	1.70		$	1.65
Discontinued operations, net	0.01			—			—			—			—			—			—			(1.48		)	0.36			0.29
Accounting changes, net	—			—			—			—			—			—			—			—			—			(0.08		)
Net income (loss)	$	1.33		$	2.21		$	1.85		$	2.99		$	0.81		$	1.73		$	2.07		$	(0.12	)	$	2.06		$	1.86
Common Cash Dividends	0.80			0.80			0.80			0.80			0.80			0.80			0.80			0.80			0.80			0.80
Market price of common stock:
High	29.28			29.52			23.48			27.16			22.39			19.79			30.39			24.53			22.65			25.35
Low	20.43			21.29			18.40			16.11			14.35			8.97			12.52			15.97			14.22			16.65
Year end	22.77			28.85			21.59			19.65			20.52			17.52			18.08			19.33			16.52			19.68
Other
Capital expenditures	$	72		$	91		$	256		$	201		$	85		$	138		$	180		$	76		$	62		$	63
Depreciation and amortization	139			135			111			99			87			72			70			48			38			36
Common dividends paid	63			64			64			64			63			63			61			59			58			57
Repurchases of common stock	65			36			3			4			—			—			—			—			—			—
Current ratio	2.2			2.1			1.7			2.0			2.3			2.8			1.7			1.8			2.2			2.3
Total debt to total capitalization	40.0		%	38.6		%	41.7		%	35.2		%	37.4		%	32.6		%	26.4		%	28.1		%	31.8		%	37.7		%
Effective tax rate	35.5		%	28.6		%	33.6		%	36.3		%	15.7		%	35.4		%	38.8		%	33.1		%	24.2		%	38.4		%
Average common shares outstanding - diluted	79.7			80.9			81.0			80.8			79.9			78.3			76.1			74.3			72.8			71.6
Shareholders	3,600			3,900			4,100			4,400			4,600			4,900			5,100			5,300			5,700			6,100
Employees(1)	3,900			4,100			4,100			3,800			3,700			3,700			3,600			3,600			3,100			2,900

Our Selected Financial Data reflects the Metals business (sold in 2007) as discontinued operations.  Since August 31, 2007, our Selected Financial Data reflects the Pioneer acquisition.  Since February 28, 2011, our Selected Financial Data reflects the acquisition of the remaining 50% of the SunBelt Chlor Alkali Partnership, which we refer to as SunBelt. Since August 22, 2012, our Selected Financial Data reflects the acquisition of KA Steel.

(1) Employee data exclude employees who worked at government-owned/contractor-operated facilities.

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Item 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS BACKGROUND

Our operations are concentrated in three business segments:  Chlor Alkali Products, Chemical Distribution and Winchester.  Chlor Alkali Products and Winchester are both capital intensive manufacturing businesses.  Chlor Alkali Products operating rates are closely tied to the general economy.  Each segment has a commodity element to it, and therefore, our ability to influence pricing is quite limited on the portion of the segment’s business that is strictly commodity.  Our Chlor Alkali Products and Chemical Distribution businesses are commodity businesses where all supplier products are similar and price is the major supplier selection criterion.  We have little or no ability to influence prices in this large, global commodity market.  Cyclical price swings, driven by changes in supply/demand, can be abrupt and significant and, given capacity in our Chlor Alkali Products business, can lead to very significant changes in our overall profitability.  Winchester also has a commodity element to its business, but a majority of Winchester ammunition is sold as a branded consumer product where there are opportunities to differentiate certain offerings through innovative new product development and enhanced product performance.  While competitive pricing versus other branded ammunition products is important, it is not the only factor in product selection.

RECENT DEVELOPMENTS AND HIGHLIGHTS

2014 Year

In 2014, Chlor Alkali Products’ segment income was $130.1 million compared to $203.8 million in 2013. Chlor Alkali Products’ segment income was lower than the prior year as a result of lower product prices, predominantly caustic soda, and decreased chlorine and caustic soda volumes. These decreases were partially offset by decreased operating costs, primarily related to cost reduction efforts that were implemented during 2014 and increased shipments of hydrochloric acid and potassium hydroxide. Operating rates in Chlor Alkali Products were 80% in 2014 and 84% in 2013. The lower operating rate in 2014 was affected by planned and unplanned customer outages in the second half of 2014.

Our 2014 ECU netbacks of approximately $505 were 10% lower than the 2013 ECU netbacks of approximately $560 due to lower caustic soda prices. In the first quarter of 2014, we announced a chlorine price increase of $50 per ton and a caustic soda price increase of $50 per ton, which included the reinstatement of the fourth quarter of 2013 $40 per ton caustic soda price increase. The 2014 chlorine price increase was not successful. In the second quarter of 2014, we announced an additional $60 per ton caustic soda price increase. Neither of these caustic soda price increases were successful. In the third quarter of 2014, an additional caustic soda price increase was announced for $30 per ton. In the fourth quarter of 2014, the caustic soda price indices increased a total of $30 per ton. The benefit of this increase should impact the first quarter of 2015 results. Also in the fourth quarter of 2014, an additional caustic soda price increase was announced for $40 per ton. In January 2015, a chlorine price increase of $75 per ton was announced. While the success of the first quarter 2015 chlorine price increase and the fourth quarter 2014 caustic soda price increase are not yet known, the majority of the benefit, if realized, would impact second quarter 2015 results. ECU netbacks in the first quarter of 2015 are forecast to be higher than the fourth quarter of 2014 ECU netbacks of approximately $490 as a result of higher chlorine and caustic soda prices.

Chemical Distribution segment income was breakeven in 2014 compared to $9.7 million in 2013. Chemical Distribution segment income was lower than the prior year primarily due to decreased caustic soda volumes. Depreciation and amortization expense included in segment income for the years ended December 31, 2014 and 2013 of $15.8 million and $15.4 million, respectively, were primarily associated with the acquisition fair value adjustment related to the KA Steel acquisition.

Winchester segment income was $127.3 million in 2014, which represented the second highest level of segment income in at least the last two decades, compared to $143.2 million in 2013. The decrease in segment income compared to last year primarily reflects a lower level of demand for shotshell and rifle ammunition. The higher than historical commercial demand level that began in November 2012 continued through the second quarter of 2014. Beginning in the third quarter of 2014, Winchester began to experience a decline in commercial demand from the 2013 level. However, the second half of 2014 commercial demand remained stronger than 2011 levels. This decrease in demand was partially offset by improved selling prices and lower costs, including the impact of decreased costs associated with our new centerfire operation in Oxford, MS.

Income from discontinued operations, net for the year ended December 31, 2014 included an after tax gain of $0.7 million ($4.6 million pretax) for the favorable resolution of certain indemnity obligations related to our Metals business sold in 2007.

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Financing

In August 2014, we redeemed our $150.0 million8.875% senior notes (2019 Notes), which would have matured on August 15, 2019. We recognized interest expense of $9.5 million for the call premium and the write-off of unamortized deferred debt issuance costs and unamortized discount related to this action. We anticipate interest expense savings of approximately $10 million during the first year after the redemption of these notes.

On June 24, 2014, we entered into a new five-year $415.0 million senior credit facility consisting of a $265.0 million senior revolving credit facility, which replaced our previous $265.0 million senior revolving credit facility, and a $150.0 million delayed-draw term loan facility. In August 2014, we drew the entire $150.0 million of the term loan and used the proceeds to redeem our 2019 Notes. The new $415.0 million senior credit facility will expire in June 2019.

In December 2014, we repaid $12.2 million due under the annual requirements of the SunBelt Notes and $0.9 million due under the required quarterly installments of the $150.0 million term loan facility.

During 2014, we repurchased and retired 2.5 million shares with a total value of $64.8 million.

Restructurings

On December 12, 2014, we announced that we had made the decision to permanently close the portion of the Becancour, Canada chlor alkali facility that has been shut down since late June 2014. This action reduces the facility’s chlor alkali capacity by 185,000 tons. The plant will now predominantly focus on bleach and hydrochloric acid, which are value-added products, as well as caustic soda. In the fourth quarter of 2014, we recorded pretax restructuring charges of $10.0 million for the write-off of equipment and facility costs, employee severance and related benefit costs, lease and other contract termination costs and a non-cash pension curtailment charge related to these actions.  We expect to incur additional restructuring charges through 2016 of approximately $5 million related to the shut down of this portion of the facility.

On December 9, 2010, our board of directors approved a plan to eliminate our use of mercury in the manufacture of chlor alkali products.  Under the plan, the 260,000 tons of mercury cell capacity at our Charleston, TN facility was converted to 200,000 tons of membrane capacity capable of producing both potassium hydroxide and caustic soda.  The board of directors also approved plans to reconfigure our Augusta, GA facility to manufacture bleach and distribute caustic soda, while discontinuing chlor alkali manufacturing at this site.  The completion of these projects eliminated our chlor alkali production using mercury cell technology. For the years ended December 31, 2014, 2013 and 2012, we recorded pretax restructuring charges of $3.8 million, $3.7 million and $2.3 million, respectively, for employee severance and related benefit costs, employee relocation costs, facility exit costs, write-off of equipment and facility costs and lease and other contract termination costs related to these actions.

On November 3, 2010, we announced that we had made the decision to relocate the Winchester centerfire pistol and rifle ammunition manufacturing operations from East Alton, IL to Oxford, MS.  This relocation, when completed, is forecast to reduce Winchester’s annual operating costs by approximately $35 million to $40 million.  We expect the centerfire relocation project to generate Winchester operating cost savings of approximately $30 million in 2015. Consistent with this relocation decision in 2010, we initiated an estimated $110 million five-year project, which includes approximately $80 million of capital spending.  The capital spending was partially financed by $31 million of grants provided by the State of Mississippi and local governments.  In October 2011, we opened the new centerfire pistol and rifle production facility in Oxford, MS and, during 2013, the relocation of the centerfire pistol manufacturing equipment was completed. During 2014, the centerfire rifle manufacturing equipment was in the process of being relocated, and by December 1, 2014, all commercial centerfire rifle ammunition was manufactured in Oxford, MS. During 2014, all of Winchester’s centerfire pistol ammunition and approximately 55% of Winchester’s centerfire rifle ammunition was manufactured in Oxford, MS.  We currently expect to complete this relocation by the end of 2016.  Once completed, Winchester expects to have the most modern centerfire ammunition production facility in North America. For the years ended December 31, 2014, 2013 and 2012, we recorded pretax restructuring charges of $1.9 million, $1.8 million and $6.2 million, respectively, for employee severance and related benefit costs, employee relocation costs and facility exit costs related to these actions.  We expect to incur additional restructuring charges through 2016 of approximately $3 million related to the transfer of these operations.

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2013 Year

In 2013, Chlor Alkali Products’ segment income was $203.8 million compared to $263.2 million in 2012. Chlor Alkali Products’ segment income in 2013 was lower than 2012 as a result of lower product prices, primarily hydrochloric acid and chlorine, and increased operating costs associated with planned maintenance outages, higher electricity costs primarily due to increased natural gas prices and higher depreciation expense. These decreases were partially offset by an $11.0 million favorable contract settlement. Operating rates in Chlor Alkali Products were 84% in 2013, which reflected the capacity reductions that occurred in fourth quarter of 2012, and 80% in 2012.

Our 2013 ECU netbacks of approximately $560 were 3% lower than the 2012 ECU netbacks of approximately $575 due to lower chlorine prices partially offset by higher caustic soda prices. In the first quarter of 2013, a caustic soda price increase of $50 per ton was announced and a chlorine price increase of $60 per ton was announced. The 2013 chlorine price increase was not successful. In the second quarter of 2013, we announced an additional $40 per ton caustic soda price increase. In the third quarter of 2013, an additional caustic soda price increase was announced for $30 per ton. Finally in the fourth quarter of 2013, an additional caustic soda price increase was announced for $40 per ton. During 2013, caustic soda prices increased, but were more than offset by lower chlorine prices.

Chemical Distribution segment income was $9.7 million in 2013 compared to $4.5 million in 2012. Chemical Distribution segment income in 2013 was higher than 2012 as a result of the additional period of our ownership. Depreciation and amortization expense included in segment income for the years ended December 31, 2013 and 2012 of $15.4 million and $5.5 million, respectively, were primarily associated with the acquisition fair value adjustment related to the KA Steel acquisition.

Winchester segment income of $143.2 million in 2013, which represented the highest level of segment income in at least the last two decades, improved 159% compared to 2012 segment income of $55.2 million. The increase in segment income in 2013 compared to 2012 reflects the impact of increased volumes due to the continuation of the stronger than historical demand that began in the fourth quarter of 2012, improved selling prices and decreased costs, including the impact of decreased costs associated with our new centerfire operation in Oxford, MS.

Other income (expense) in 2013 included a gain of $6.5 million on the sale of our equity interest in a limited liability company that owns a bleach related chemical manufacturing facility (bleach joint venture).

Income tax provision for 2013 included $11.4 million of favorable adjustments associated with the expiration of the statutes of limitations in federal and state jurisdictions, $8.3 million of benefit associated with reductions in valuation allowances on our capital loss carryforwards and $1.9 million of benefit associated with the Research Credit under Section 41 of the U.S. Internal Revenue Code (Research Credit), which were partially offset by $1.8 million of expense associated with changes in tax contingencies and $1.3 million of expense associated with increases in valuation allowances on certain state tax credits carryforwards.

During 2013, we entered into sale/leaseback agreements for bleach trailers and chlorine, caustic soda and bleach railcars. We received proceeds from the sales of $35.8 million.

In December 2013, we repaid $12.2 million due under the annual requirements of the SunBelt Notes. In January 2013, we also repaid the $11.4 million 6.5% Senior Notes (2013 Notes), which became due. These were redeemed using cash.

During 2013, we repurchased and retired 1.5 million shares with a total value of $36.2 million under the share repurchase plan approved by our board of directors on July 21, 2011.

2012 Year

KA Steel Acquisition

On August 22, 2012, we acquired 100% of privately-held KA Steel, on a debt free basis, for $336.6 million in cash, after receiving the final working capital adjustment of $1.9 million. As of the date of acquisition, KA Steel had cash and cash equivalents of $26.2 million. KA Steel is one of the largest distributors of caustic soda in North America and manufactures and sells bleach in the Midwest. As part of the acquisition, we expensed $8.3 million of acquisition costs during 2012.

23

For segment reporting purposes, KA Steel comprises the Chemical Distribution segment. Our results for the year ended December 31, 2012 included KA Steel sales of $156.3 million and $4.5 million of segment income, which included depreciation and amortization expense of $5.5 million, primarily associated with the acquisition fair value adjustment related to the KA Steel acquisition.

As a result of acquiring KA Steel, we expect synergies to be realized by the Chemical Distribution and Chlor Alkali Products segments. These synergies include opportunities to sell additional volumes of products we produce such as caustic soda, bleach, hydrochloric acid and potassium hydroxide through KA Steel and to optimize freight cost and logistics assets between our Chlor Alkali Products segment and KA Steel. Also, under the terms of the acquisition, both parties agreed to make an election under Section 338(h)(10) of the U.S. Internal Revenue Code (U.S. IRC) that is expected to result in cash tax benefits to us that have a net present value of approximately $60 million as of August 22, 2012.

Financing

In August 2012, we sold $200.0 million of 5.5% senior notes (2022 Notes) with a maturity of August 15, 2022. The 2022 Notes were issued at par value. Interest is paid semi-annually on February 15 and August 15. The acquisition of KA Steel was partially financed with proceeds of $196.0 million, after expenses of $4.0 million, from the 2022 Notes.

In June 2012, we redeemed $7.7 million of industrial development and environmental improvement tax-exempt bonds (industrial revenue bonds) due in 2017. We paid a premium of $0.2 million to the bond holders, which was included in interest expense. We also recognized a $0.2 million deferred gain in interest expense related to the interest rate swaps, which were terminated in March 2012, on these industrial revenue bonds. In December 2012, we repaid $12.2 million due under the annual requirements of the SunBelt Notes.

Other Highlights

In 2012, Chlor Alkali Products’ segment income was $263.2 million, an increase of 7% compared to 2011. Segment income in 2012 was higher than 2011 as a result of higher product prices and the ownership of SunBelt for the full period. These increases were partially offset by decreased chlorine and caustic soda volumes. Operating rates in Chlor Alkali Products for 2012 and 2011 were 80%.

Our 2012 ECU netbacks of approximately $575 were 1% higher than the 2011 ECU netbacks of approximately $570 due to higher caustic soda prices partially offset by lower chlorine prices. In the first quarter of 2012, a caustic soda price increase was announced of $45 per ton and a chlorine price increase was announced of $40 per ton. The 2012 chlorine price increase was not successful. In the second quarter of 2012, we announced an additional $60 per ton caustic soda price increase. In the third quarter of 2012, an additional caustic soda price increase was announced of $70 per ton. Finally, in the fourth quarter of 2012, an additional caustic soda price increase was announced for $50 per ton. During 2012, caustic soda prices increased, but were partially offset by lower chlorine prices.

Winchester segment income was $55.2 million in 2012 compared to $37.9 million in 2011. The increase in segment income compared to 2011 reflects the impact of higher selling prices and increased volumes, partially offset by higher operating costs and incremental costs associated with the ongoing relocation of our centerfire ammunition manufacturing operations to Oxford, MS.

Other operating income in 2012 included $4.9 million of insurance recoveries for business interruption related to an outage of one of our Chlor Alkali customers in the first half of 2012.

Income tax provision for 2012 included a $6.6 million benefit associated with the Agricultural Chemicals Security Tax Credit under Section 45O of the U.S. IRC (Section 45O), which were partially offset by $3.6 million of tax expense associated with remeasurement of deferred taxes, changes in tax contingencies and tax expense associated with previously undistributed earnings from our Winchester Australia Limited subsidiary.

Capital spending of $255.7 million for 2012 included $108.1 million for the conversion of our Charleston, TN facility from mercury cell technology to membrane technology, $58.6 million for the construction of low salt, high strength bleach facilities at our McIntosh, AL; Henderson, NV; and Niagara Falls, NY chlor alkali sites and $16.1 million for the ongoing relocation of our Winchester centerfire ammunition manufacturing operations.  The conversion of our Charleston, TN facility was completed in the second half of 2012 with the successful start-up of two new membrane cell lines and we also completed low salt, high strength bleach facilities at McIntosh, AL and Niagara Falls, NY in the first and third quarters of 2012, respectively.

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CHLOR ALKALI PRODUCTS PRICING

In accordance with industry practice, we calculate Chlor Alkali Products’ prices on an ECU netbacks basis, reporting and analyzing prices net of the cost of transporting the products to customers to allow for a comparable means of price comparisons between periods and with respect to our competitors.  For purposes of determining our ECU netbacks, we use prices that we realize as a result of sales of chlorine and caustic soda to our customers, and we do not include the value of chlorine and caustic soda that is incorporated in other products that we manufacture and sell.

Quarterly and annual average ECU netbacks for 2014, 2013 and 2012 were as follows:

	2014		2013		2012
First quarter	$	520	$	565	$	585
Second quarter	510		575		575
Third quarter	505		570		560
Fourth quarter	490		525		580
Annual average	505		560		575

Our 2012 ECU netbacks of approximately $575 were 1% higher than the 2011 ECU netbacks of approximately $570 due to higher caustic soda prices partially offset by lower chlorine prices. In the first quarter of 2012, a caustic soda price increase was announced of $45 per ton and a chlorine price increase was announced totaling $40 per ton. The 2012 chlorine price increase was not successful. In the second quarter of 2012, we announced an additional $60 per ton caustic soda price increase. In the third quarter of 2012, an additional caustic soda price increase was announced of $70 per ton. Finally, in the fourth quarter of 2012, an additional caustic soda price increase was announced for $50 per ton. During 2012, caustic soda prices increased, but were partially offset by lower chlorine prices.

Our 2013 ECU netbacks of approximately $560 were 3% lower than the 2012 ECU netbacks of approximately $575 due to lower chlorine prices partially offset by higher caustic soda prices. In the first quarter of 2013, a caustic soda price increase of $50 per ton was announced and a chlorine price increase of $60 per ton was announced. The 2013 chlorine price increase was not successful. In the second quarter of 2013, we announced an additional $40 per ton caustic soda price increase. In the third quarter of 2013, an additional caustic soda price increase was announced for $30 per ton. Finally in the fourth quarter of 2013, an additional caustic soda price increase was announced for $40 per ton. During 2013, caustic soda prices increased, but were more than offset by lower chlorine prices.

Our 2014 ECU netbacks of approximately $505 were 10% lower than the 2013 ECU netbacks of approximately $560 due to lower caustic soda prices. In the first quarter of 2014, we announced a chlorine price increase of $50 per ton and a caustic soda price increase of $50 per ton, which included the reinstatement of the fourth quarter of 2013 $40 per ton caustic soda price increase. The 2014 chlorine price increase was not successful. In the second quarter of 2014, we announced an additional $60 per ton caustic soda price increase. Neither of these caustic soda price increases were successful. In the third quarter of 2014, an additional caustic soda price increase was announced for $30 per ton. In the fourth quarter of 2014, the caustic soda price indices increased a total of $30 per ton. The benefit of this increase should impact the first quarter of 2015 results. Also in the fourth quarter of 2014, an additional caustic soda price increase was announced for $40 per ton. In January 2015, a chlorine price increase of $75 per ton was announced. While the success of the first quarter 2015 chlorine price increase and the fourth quarter 2014 caustic soda price increase are not yet known, the majority of the benefit, if realized, would impact second quarter 2015 results. ECU netbacks in the first quarter of 2015 are forecast to be higher than the fourth quarter of 2014 ECU netbacks of approximately $490 as a result of higher chlorine and caustic soda prices.

25

PENSION AND POSTRETIREMENT BENEFITS

Under ASC 715, we recorded an after-tax charge of $86.6 million ($142.0 million pretax) to shareholders’ equity as of December 31, 2014 for our pension and other postretirement plans.  This charge reflected a 60-basis point decrease in the plans’ discount rate and the negative impact of the newly mandated mortality tables, partially offset by favorable performance on plan assets during 2014.  Our benefit obligation as of December 31, 2014 increased approximately $90 million pretax as a result of the newly mandated mortality tables. In 2013, we recorded an after-tax charge of $7.7 million ($12.5 million pretax) to shareholders’ equity as of December 31, 2013 for our pension and other postretirement plans.  This charge reflected unfavorable performance on plan assets during 2013, partially offset by a 60-basis point increase in the plans’ discount rate.  In 2012, we recorded an after-tax charge of $101.9 million ($166.8 million pretax) to shareholders’ equity as of December 31, 2012 for our pension and other postretirement plans.  This charge reflected a 100-basis point decrease in the plans’ discount rate, partially offset by the favorable performance on plan assets during 2012.  The non-cash charges to shareholders’ equity do not affect our ability to borrow under our senior credit facility.

During the fourth quarter of 2014, the SOA issued the final report of its mortality tables and mortality improvement scales. The updated mortality data reflected increasing life expectancies in the United States. During the third quarter of 2012, the MAP-21 became law. The new law changes the mechanism for determining interest rates to be used for calculating minimum defined benefit pension plan funding requirements. Interest rates are determined using an average of rates for a 25-year period, which can have the effect of increasing the annual discount rate, reducing the defined benefit pension plan obligation, and potentially reducing or eliminating the minimum annual funding requirement. The new law also increased premiums paid to the PBGC. During the third quarter of 2014, HATFA 2014 became law, which includes an extension of MAP-21’s defined benefit plan funding stabilization relief. Based on our plan assumptions and estimates, we will not be required to make any cash contributions to the domestic qualified defined benefit pension plan at least through 2015 and under the new law may not be required to make any additional contributions for at least the next five years. We do have a small Canadian qualified defined benefit pension plan to which we made cash contributions of $0.8 million in 2014, $1.0 million in 2013, and $0.9 million in 2012, and we anticipate approximately $1 million of cash contributions in 2015.  At December 31, 2014, the projected benefit obligation of $2,117.4 million exceeded the market value of assets in our qualified defined benefit pension plans by $138.7 million, as calculated under ASC 715.

Components of net periodic benefit (income) costs were:

	Years ended December 31,
	2014			2013			2012
	($ in millions)
Pension benefits	$	(25.0	)	$	(20.5	)	$	(21.1	)
Other postretirement benefits	6.6			7.5			7.4

In December 2014, we recorded a curtailment charge of $0.2 million associated with permanently closing a portion of the Becancour, Canada chlor alkali facility that has been shut down since late June 2014. This charge was included in restructuring charges for 2014.

The service cost and the amortization of prior service cost components of pension expense related to employees of the operating segments are allocated to the operating segments based on their respective estimated census data.

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CONSOLIDATED RESULTS OF OPERATIONS

	Years ended December 31,
	2014		2013			2012
	($ in millions, except per share data)
Sales	$	2,241.2	$	2,515.0		$	2,184.7
Cost of goods sold	1,853.2		2,033.7			1,748.0
Gross margin	388.0		481.3			436.7
Selling and administration	170.4		190.0			168.6
Restructuring charges	15.7		5.5			8.5
Acquisition costs	—		—			8.3
Other operating income	1.5		0.7			7.6
Operating income	203.4		286.5			258.9
Earnings of non-consolidated affiliates	1.7		2.8			3.0
Interest expense	43.8		38.6			26.4
Interest income	1.3		0.6			1.0
Other income (expense)	0.1		(1.3		)	(11.3		)
Income from continuing operations before taxes	162.7		250.0			225.2
Income tax provision	57.7		71.4			75.6
Income from continuing operations	105.0		178.6			149.6
Income from discontinued operations, net	0.7		—			—
Net income	$	105.7	$	178.6		$	149.6
Net income per common share:
Basic income per common share:
Income from continuing operations	$	1.33	$	2.24		$	1.87
Income from discontinued operations, net	0.01		—			—
Net income	$	1.34	$	2.24		$	1.87
Diluted income per common share:
Income from continuing operations	$	1.32	$	2.21		$	1.85
Income from discontinued operations, net	0.01		—			—
Net income	$	1.33	$	2.21		$	1.85

2014 Compared 2013

Sales for 2014 were $2,241.2 million compared to $2,515.0 million last year, a decrease of $273.8 million, or 11%.  Chemical Distribution segment sales decreased by $112.6 million primarily due to lower caustic soda volumes and decreased caustic soda prices. Chlor Alkali Products sales decreased by $106.7 million primarily due to lower product prices, predominantly caustic soda, and decreased chlorine and caustic soda volumes, partially offset by increased shipments of hydrochloric acid and potassium hydroxide. Winchester sales decreased by $39.2 million primarily due to decreased shipments of shotshell and rifle ammunition, partially offset by increased shipments of pistol ammunition to domestic commercial customers. The decreased commercial volumes were partially offset by higher selling prices and increased shipments to international and other customers. Sales were also impacted by an increase in the elimination of intersegment sales between the Chlor Alkali Products segment and the Chemical Distribution segment of $15.3 million.

Gross margin decreased $93.3 million, or 19%, from 2013. Chlor Alkali Products gross margin decreased by $78.1 million, primarily due to lower product prices, predominantly caustic soda, and decreased chlorine and caustic soda volumes, which were partially offset by decreased operating costs and increased shipments of hydrochloric acid and potassium hydroxide. Winchester gross margin was lower by $14.2 million primarily due to decreased shipments of shotshell and rifle ammunition to domestic commercial customers, which was partially offset by higher selling prices. Chemical Distribution gross margin was lower by $7.9 million primarily due to decreased caustic soda volumes. Gross margin as a percentage of sales was 17% in 2014 and 19% in 2013.

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Selling and administration expenses in 2014 decreased $19.6 million, or 10%, from 2013, primarily due to decreased management incentive compensation expense of $18.1 million, which includes mark-to-market adjustments on stock-based compensation, decreased legal and legal-related settlement expenses of $15.5 million and decreased non-income tax expense of $3.7 million. These decreases were partially offset by the recovery of legacy legal costs of $13.9 million during 2013 and increased consulting fees of $3.9 million. Selling and administration expenses as a percentage of sales were 8% in both 2014 and 2013.

Restructuring charges in 2014 included $10.0 million associated with permanently closing a portion of the Becancour, Canada chlor alkali facility. Restructuring charges in 2014 and 2013 also included $5.7 million and $5.5 million, respectively, associated with exiting the use of mercury cell technology in the chlor alkali manufacturing process and the ongoing relocation of our Winchester centerfire ammunition manufacturing operations from East Alton, IL to Oxford, MS.

Other operating income in 2014 included a gain of $1.0 million for the resolution of a contract matter. Other operating income in 2013 included a gain of $1.5 million on the sale of two former manufacturing sites.

Interest expense increased by $5.2 million in 2014, primarily due to the call premium and the write-off of unamortized deferred debt issuance costs and unamortized discount of $9.5 million associated with the redemption of the 2019 Notes and a decrease in capitalized interest of $0.9 million primarily due to the completion of the low salt, high strength bleach facility and hydrochloric acid expansion project at our Henderson, NV chlor alkali site in the first quarter of 2013. These increases were partially offset by lower interest rates.

Other income (expense) in 2013 included $7.9 million of expense for our earn out liability from the SunBelt acquisition and a gain of $6.5 million on the sale of our equity interest in a bleach joint venture.

The effective tax rate from continuing operations for 2014 included $1.2 million of benefit associated with the return to provision adjustment for the finalization of our 2013 U.S. federal and state income tax returns and $0.7 million of benefit associated with the expiration of the statutes of limitations in federal and state jurisdictions. These items were partially offset by $0.8 million of expense associated with increases in valuation allowances on certain state tax credit balances primarily associated with a change in state tax law and $0.6 million of expense related to the remeasurement of deferred taxes due to an increase in state effective tax rates. After giving consideration to these four items of $0.5 million, the effective tax rate from continuing operations for 2014 of 35.8% was slightly higher than the 35% U.S. federal statutory rate, primarily due to state income taxes net of utilization of certain state tax credits, partially offset by favorable permanent tax deduction items, such as the domestic manufacturing deduction and tax deductible dividends paid to the Contributing Employee Ownership Plan (CEOP). The effective tax rate from continuing operations for 2013 included $11.4 million of benefit associated with the expiration of the statutes of limitations in federal and state jurisdictions, $8.3 million of benefit associated with reductions in valuation allowances on our capital loss carryforwards and $1.9 million of benefit associated with the Research Credit. These items were partially offset by $1.8 million of expense associated with changes in tax contingencies and $1.3 million of expense associated with increases in valuation allowances on certain state tax credit carryforwards. After giving consideration to these five items of $18.5 million, the effective tax rate from continuing operations for 2013 of 36.0% was slightly higher than the 35% U.S. federal statutory rate, primarily due to state income taxes net of utilization of certain state tax credits, partially offset by favorable permanent tax deduction items, such as the domestic manufacturing deduction and tax deductible dividends paid to the CEOP.

Income from discontinued operations, net for the year ended December 31, 2014 included an after tax gain of $0.7 million ($4.6 million pretax) for the favorable resolution of certain indemnity obligations related to our Metals business sold in 2007.

2013 Compared 2012

Sales for 2013 were $2,515.0 million compared to $2,184.7 million in 2012, an increase of $330.3 million, or 15%.  Chemical Distribution segment sales increased by $250.1 million due to the additional period of our ownership. Winchester sales increased by $160.0 million, or 26%, from 2012 primarily due to increased shipments to domestic commercial and law enforcement customers and higher selling prices, partially offset by lower shipments to military and international customers. These increases were partially offset by an increase in the elimination of intersegment sales between the Chlor Alkali Products segment and the Chemical Distribution segment of $63.2 million and a decrease in Chlor Alkali Products’ sales of $16.6 million, or 1%, primarily due to lower product prices, primarily hydrochloric acid and chlorine. Our 2013 ECU netbacks decreased 3% compared to 2012.  

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Gross margin increased $44.6 million, or 10%, from 2012, primarily as a result of increased Winchester gross margin of $91.6 million, primarily due to increased shipments to domestic commercial customers and improved selling prices, and additional gross margin contributed by the Chemical Distribution segment of $12.2 million due to the additional period of our ownership. These increases were partially offset by lower Chlor Alkali gross margin of $61.3 million, primarily due to lower product prices, primarily hydrochloric acid and chlorine, and higher operating costs associated with planned maintenance outages, higher electricity costs primarily due to increased natural gas prices and higher depreciation expense. These decreases were partially offset by a favorable contract settlement. Gross margin as a percentage of sales was 19% in 2013 and 20% in 2012.

Selling and administration expenses in 2013 increased $21.4 million, or 13%, from 2012, primarily due to increased legal and legal-related settlement expenses of $11.4 million, primarily associated with cost recovery actions, increased management incentive compensation expense of $11.1 million, which includes mark-to-market adjustments on stock-based compensation of $5.4 million, increased selling and administration expenses of the acquired KA Steel operations of $7.0 million and increased salary and benefit costs of $4.1 million. These increases were partially offset by the recovery of legacy legal costs of $13.9 million. Selling and administration expenses as a percentage of sales were 8% in 2013 and 2012.

Restructuring charges in 2013 and 2012 of $5.5 million and $8.5 million, respectively, were associated with exiting the use of mercury cell technology in the chlor alkali manufacturing process and the ongoing relocation of our Winchester centerfire ammunition manufacturing operations from East Alton, IL to Oxford, MS.

Acquisition costs in 2012 were related to the acquisition of KA Steel.

Other operating income in 2013 included a gain of $1.5 million on the sale of two former manufacturing sites. Other operating income in 2012 included $4.9 million of insurance recoveries for business interruption related to an outage of one of our Chlor Alkali customers in the first half of 2012.

Interest expense increased by $12.2 million in 2013, primarily due to a higher level of debt outstanding and a decrease in capitalized interest of $6.3 million, primarily due to the completion of the Charleston, TN conversion project in the second half of 2012.

Other income (expense) in 2013 and 2012 included $7.9 million and $11.5 million, respectively, of expense for our earn out liability from the SunBelt acquisition.  Other income (expense) in 2013 also included a gain of $6.5 million on the sale of our equity interest in a bleach joint venture.

The effective tax rate from continuing operations for 2013 included $11.4 million of benefit associated with the expiration of the statutes of limitations in federal and state jurisdictions, $8.3 million of benefit associated with reductions in valuation allowances on our capital loss carryforwards and $1.9 million of benefit associated with the Research Credit, which were partially offset by $1.8 million of expense associated with changes in tax contingencies and $1.3 million of expense associated with increases in valuation allowances on certain state tax credit carryforwards. After giving consideration to these five items of $18.5 million, the effective tax rate from continuing operations for 2013 of 36.0% was slightly higher than the 35% U.S. federal statutory rate, primarily due to state income taxes net of utilization of certain state tax credits, partially offset by favorable permanent tax deduction items, such as the domestic manufacturing deduction and tax deductible dividends paid to the CEOP. The effective tax rate from continuing operations for 2012 included a $6.6 million benefit associated with the Section 45O credits, partially offset by a $1.6 million expense associated with the remeasurement of deferred taxes, a $1.3 million expense associated with changes in tax contingencies and a $0.7 million expense associated with previously undistributed earnings from our Winchester Australia Limited subsidiary. After giving consideration to these four items of $3.0 million, the effective tax rate from continuing operations for 2012 of 34.9% was slightly lower than the 35% U.S. federal statutory rate, primarily due to favorable permanent tax deductions, such as the domestic manufacturing deduction and tax deductible dividends paid to the CEOP, which were partially offset by state income taxes net of utilization of certain state tax credits.

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SEGMENT RESULTS

We define segment results as income (loss) from continuing operations before interest expense, interest income, other operating income, other income (expense) and income taxes, and include the results of non-consolidated affiliates.  Consistent with the guidance in ASC 280 “Segment Reporting” (ASC 280), we have determined it is appropriate to include the operating results of non-consolidated affiliates in the relevant segment financial results. Intersegment sales of $96.6 million, $81.3 million and $18.1 million for the years ended December 31, 2014, 2013 and 2012, respectively, have been eliminated. These represent the sale of caustic soda, bleach, potassium hydroxide and hydrochloric acid between Chemical Distribution and Chlor Alkali Products, at prices that approximate market.

	Years ended December 31,
	2014			2013			2012
Sales:	($ in millions)
Chlor Alkali Products	$	1,305.6		$	1,412.3		$	1,428.9
Chemical Distribution	293.8			406.4			156.3
Winchester	738.4			777.6			617.6
Intersegment sales elimination	(96.6		)	(81.3		)	(18.1		)
Total sales	$	2,241.2		$	2,515.0		$	2,184.7
Income (loss) from continuing operations before taxes:
Chlor Alkali Products(1)	$	130.1		$	203.8		$	263.2
Chemical Distribution	—			9.7			4.5
Winchester	127.3			143.2			55.2
Corporate/Other:
Pension income(2)	32.4			26.6			27.2
Environmental expense(3)	(8.2		)	(10.2		)	(8.3		)
Other corporate and unallocated costs	(62.3		)	(79.0		)	(70.7		)
Restructuring charges(4)	(15.7		)	(5.5		)	(8.5		)
Acquisition costs(5)	—			—			(8.3		)
Other operating income(6)	1.5			0.7			7.6
Interest expense(7)	(43.8		)	(38.6		)	(26.4		)
Interest income	1.3			0.6			1.0
Other income (expense)(8)	0.1			(1.3		)	(11.3		)
Income from continuing operations before taxes	$	162.7		$	250.0		$	225.2

(1) Earnings of non-consolidated affiliates are included in the Chlor Alkali Products segment results consistent with management’s monitoring of the operating segment.  The earnings from non-consolidated affiliates were $1.7 million, $2.8 million and $3.0 million for the years ended 2014, 2013 and 2012, respectively.  During October 2013, we sold our equity interest in a bleach joint venture.

(2) 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.

(3) Environmental expense for the years ended 2014, 2013 and 2012 included $1.4 million, $1.3 million and $0.1 million, respectively, of recoveries from third parties for costs incurred and expensed in prior periods.  Environmental expense is included in cost of goods sold in the consolidated statements of operations.

(4) Restructuring charges for the year ended 2014 included $10.0 million associated with permanently closing a portion of the Becancour, Canada chlor alkali facility. Restructuring charges for the years ended 2014, 2013 and 2012 were also associated with exiting the use of mercury cell technology in the chlor alkali manufacturing process and the ongoing relocation of our Winchester centerfire ammunition manufacturing operations from East Alton, IL to Oxford, MS.

(5) Acquisition costs in 2012 were related to the acquisition of KA Steel.

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(6) Other operating income for the year ended 2014 included a gain of $1.0 million for the resolution of a contract matter. Other operating income for the year ended 2013 included a gain of $1.5 million on the sale of two former manufacturing sites. Other operating income for the year ended 2012 included $4.9 million of insurance recoveries for business interruption related to an outage at one of our Chlor Alkali customers in the first half of 2012.

(7) Interest expense for the year ended December 31, 2014 included $9.5 million for the call premium and the write-off of unamortized deferred debt issuance costs and unamortized discount associated with the redemption of our 2019 Notes, which would have matured on August 15, 2019. Interest expense was reduced by capitalized interest of $0.2 million, $1.1 million and $7.4 million for the years ended 2014, 2013 and 2012, respectively.

(8) Other income (expense) for the years ended 2013 and 2012 included $7.9 million and $11.5 million, respectively, of expense for our earn out liability from the SunBelt acquisition. Other income (expense) for the year ended December 31, 2013 also included a gain of $6.5 million on the sale of our equity interest in a bleach joint venture.

Chlor Alkali Products

2014 Compared to 2013

Chlor Alkali Products’ sales for 2014 were $1,305.6 million compared to $1,412.3 million for 2013, a decrease of $106.7 million, or 8%.  The sales decrease was primarily due to lower product prices ($73.5 million), predominantly caustic soda, and lower shipments of chlorine and caustic soda ($61.4 million). These decreases were partially offset by increased shipments of hydrochloric acid ($22.3 million) and potassium hydroxide ($11.4 million). Our ECU netbacks were approximately $505 for 2014 compared to approximately $560 for 2013.  Our operating rates were 80% in 2014 and 84% in 2013. The lower operating rate in 2014 was affected by planned and unplanned customer outages in the second half of 2014. We discuss product prices in more detail above under “Chlor Alkali Products Pricing.”

Chlor Alkali Products generated segment income of $130.1 million for 2014 compared to $203.8 million for 2013, a decrease of $73.7 million.  Chlor Alkali Products’ segment income was lower primarily due to lower product prices ($73.5 million), predominantly caustic soda, decreased volumes ($11.6 million), primarily chlorine and caustic soda, which were partially offset by increased shipments of hydrochloric acid and potassium hydroxide, and the recognition of a favorable contract settlement during 2013 ($11.0 million). These decreases were partially offset by lower operating costs ($22.4 million), primarily related to cost reduction efforts that were implemented during 2014.

2013 Compared to 2012

Chlor Alkali Products’ sales for 2013 were $1,412.3 million compared to $1,428.9 million for 2012, a decrease of $16.6 million, or 1%.  The sales decrease was primarily due to lower product prices ($37.4 million), primarily hydrochloric acid and chlorine, lower shipments of chlorine and caustic soda ($5.9 million) and decreased shipments of hydrochloric acid ($4.8 million). These decreases were partially offset by increased shipments of potassium hydroxide ($16.6 million) and bleach ($12.7 million). Our ECU netbacks were approximately $560 for 2013 compared to approximately $575 for 2012.  Freight costs included in the ECU netbacks increased 2% for 2013 compared to 2012, primarily due to higher railroad freight rates.  Our operating rates were 84% in 2013, which reflected the capacity reductions that occurred in the fourth quarter of 2012, and 80% in 2012. We discuss product prices in more detail above under “Chlor Alkali Products Pricing.”

Chlor Alkali Products generated segment income of $203.8 million for 2013 compared to $263.2 million for 2012, a decrease of $59.4 million.  Chlor Alkali Products’ segment income was lower primarily due to lower product prices ($49.2 million), primarily hydrochloric acid and chlorine, and increased operating costs ($25.0 million) associated with planned maintenance outages, higher electricity costs primarily due to increased natural gas prices and higher depreciation expense. These decreases were partially offset by a favorable contract settlement ($11.0 million) and increased volumes ($3.8 million).

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Chemical Distribution

2014 Compared to 2013

Chemical Distribution sales were $293.8 million for 2014 compared to $406.4 million for 2013, a decrease of $112.6 million.  The sales decrease was primarily due to lower caustic soda volumes ($80.4 million) and decreased caustic soda prices ($35.1 million). These decreases were partially offset by increased shipments of potassium hydroxide, hydrochloric acid and bleach ($5.5 million).

Chemical Distribution segment income was breakeven and $9.7 million for the years ended December 31, 2014 and 2013, respectively. Chemical Distribution segment income was lower than the prior year primarily as a result of decreased caustic soda volumes ($9.8 million). Depreciation and amortization expense included in segment income for the years ended December 31, 2014 and 2013 of $15.8 million and $15.4 million, respectively, were primarily associated with the acquisition fair value adjustment related to the KA Steel acquisition.

2013 Compared to 2012

Chemical Distribution sales were $406.4 million and $156.3 million for the years ended December 31, 2013 and 2012, respectively. Chemical Distribution segment income was $9.7 million and $4.5 million for the years ended December 31, 2013 and 2012, respectively. Chemical Distribution 2013 sales and segment income were higher than 2012 as a result of the additional period of our ownership. Depreciation and amortization expense included in segment income for the years ended December 31, 2013 and 2012 of $15.4 million and $5.5 million, respectively, were primarily associated with the acquisition fair value adjustment related to the KA Steel acquisition.

Winchester

2014 Compared to 2013

Winchester sales were $738.4 million for 2014 compared to $777.6 million for 2013, a decrease of $39.2 million, or 5%.  Sales of ammunition to domestic commercial customers were lower ($61.8 million), primarily due to a lower level of demand for shotshell and rifle ammunition, partially offset by higher pistol ammunition. Beginning with the third quarter of 2014, Winchester began to experience a decline in commercial demand from the 2013 levels. This decrease was partially offset by increased shipments to international customers ($11.8 million), law enforcement agencies ($7.7 million), industrial customers ($2.4 million), who primarily supply the construction sector, and military customers ($0.7 million).

Winchester reported segment income of $127.3 million for 2014 compared to $143.2 million for 2013, a decrease of $15.9 million, or 11%.  The decrease in segment income in 2014 compared to 2013 reflected the impact of decreased volumes ($29.6 million), primarily due to a lower level of demand for shotshell and rifle ammunition, and higher commodity and other material costs ($4.9 million). These decreases were partially offset by higher selling prices ($17.0 million) and lower operating costs ($1.6 million), which include the impact of decreased costs associated with the ongoing relocation of our centerfire ammunition manufacturing operations to Oxford, MS ($7.4 million).

2013 Compared to 2012

Winchester sales were $777.6 million for 2013 compared to $617.6 million for 2012, an increase of $160.0 million, or 26%.  The increased sales were due to increased shipments to domestic commercial customers ($172.5 million) and law enforcement agencies ($12.1 million).  These increases were partially offset by a reduction in shipments to military customers ($21.6 million) and reduced shipments to international customers ($3.7 million).

Winchester reported segment income of $143.2 million for 2013 compared to $55.2 million for 2012, an increase of $88.0 million, or 159%.  The increase in segment income in 2013 compared to 2012 reflected the impact of increased volumes ($53.8 million), higher selling prices ($29.5 million), lower operating costs ($3.3 million), which include the impact of decreased costs associated with the ongoing relocation of our centerfire ammunition manufacturing operations to Oxford, MS ($16.7 million), and lower commodity and other material costs ($1.4 million).

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Corporate/Other

2014 Compared to 2013

For 2014, pension income included in corporate/other was $32.4 million compared to $26.6 million for 2013.  On a total company basis, defined benefit pension income for 2014 was $25.0 million compared to $20.5 million for 2013. Pension income for 2014 included a curtailment charge of $0.2 million associated with permanently closing a portion of the Becancour, Canada chlor alkali facility that has been shut down since late June 2014. This charge was included in restructuring charges for 2014.

Charges to income for environmental investigatory and remedial activities were $8.2 million for 2014 compared to $10.2 million for 2013, which included $1.4 million and $1.3 million, respectively, of recoveries from third parties for costs incurred and expensed in prior periods.  Without these recoveries, charges to income for environmental investigatory and remedial activities would have been $9.6 million for 2014 compared to $11.5 million for 2013.  These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites.

For 2014, other corporate and unallocated costs were $62.3 million compared to $79.0 million for 2013, a decrease of $16.7 million, or 21%.  The decrease was primarily due to lower stock-based compensation expense of $13.9 million, which includes mark-to-market adjustments, decreased legal and legal-related settlement expenses of $11.2 million, decreased non-income tax expense of $3.7 million and lower insurance costs of $2.1 million. These decreases were partially offset by the recovery of legacy legal costs of $13.9 million during 2013.

2013 Compared to 2012

For 2013, pension income included in corporate/other was $26.6 million compared to $27.2 million for 2012.  On a total company basis, defined benefit pension income for 2013 was $20.5 million compared to $21.1 million for 2012.

Charges to income for environmental investigatory and remedial activities were $10.2 million for 2013 compared to $8.3 million for 2012, which included $1.3 million and $0.1 million, respectively, of recoveries from third parties for costs incurred and expensed in prior periods.  Without these recoveries, charges to income for environmental investigatory and remedial activities would have been $11.5 million for 2013 compared to $8.4 million for 2012.  These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites.

For 2013, other corporate and unallocated costs were $79.0 million compared to $70.7 million for 2012, an increase of $8.3 million, or 12%.  The increase was primarily due to increased legal and legal-related settlement expenses of $11.4 million, primarily associated with cost recovery actions, increased stock-based compensation of $9.1 million, which include mark-to-market adjustments of $5.4 million, higher consulting fees of $2.1 million and increased salary and benefit costs of $1.5 million. These increases were partially offset by the recovery of legacy legal costs of $13.9 million and lower asset retirement obligation and legacy site charges of $4.0 million.

2015 OUTLOOK

Net income in the first quarter of 2015 is projected to be in the $0.20 to $0.25 per diluted share range compared to $0.37 per diluted share in the first quarter of 2014.

In Chlor Alkali Products, the first quarter of 2015 segment income is expected to decline compared with the first quarter of 2014 income of $34.3 million.  The expected decrease in segment income anticipates lower ECU pricing. The Chlor Alkali Products operating rate in the first quarter of 2015 is expected to be in the mid 80% range, which is similar to the fourth quarter of 2014 operating rate of 84%, after giving consideration to the closure of a portion of the Becancour, Canada chlor alkali facility. Chlor Alkali Products full year 2015 segment income is expected to improve compared to full year 2014 segment income of $130.1 million, primarily due to higher ECU pricing and higher hydrochloric acid, bleach and potassium hydroxide volumes.

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Our 2014 ECU netbacks of approximately $505 were 10% lower than the 2013 ECU netbacks of approximately $560 due to lower caustic soda prices. In the fourth quarter of 2014, the caustic soda price indices increased a total of $30 per ton. The benefit of this increase should impact the first quarter of 2015 results. Also in the fourth quarter of 2014, an additional caustic soda price increase was announced for $40 per ton. In January 2015, a chlorine price increase of $75 per ton was announced. While the success of the first quarter 2015 chlorine price increase and the fourth quarter 2014 caustic soda price increase are not yet known, the majority of the benefit, if realized, would impact second quarter 2015 results. ECU netbacks in the first quarter of 2015 are forecast to be higher than the fourth quarter of 2014 ECU netbacks of approximately $490 as a result of higher chlorine and caustic soda prices.

Chemical Distribution first quarter 2015 segment income is expected to improve compared to the first quarter of 2014 segment loss of $0.8 million due to increased sales of Olin-produced hydrochloric acid and potassium hydroxide. Chemical Distribution full year 2015 segment income is expected to improve compared to full year 2014 breakeven results due to increased caustic soda, hydrochloric acid, bleach and potassium hydroxide volumes. As a result of the growth in co-product sales and the continued focus on improving the returns in caustic soda, we expect Chemical Distribution annual segment income to increase by approximately $15 million in the next two years. In addition to growth in Chemical Distribution segment income, we expect Chlor Alkali Products to realize $10 million to $15 million of additional annual benefits from producing co-products, as well as logistics and infrastructure cost savings.

Winchester first quarter 2015 segment income is expected to be lower than the $38.3 million of segment income achieved during the first quarter of 2014 but only slightly lower than the first quarter of 2013 of $31.3 million. The forecasted decline in segment income is due to an anticipated lower level of commercial demand, partially offset by lower operating costs associated with our new centerfire operation in Oxford, MS. During the fourth quarter, Winchester experienced a decline from the elevated level of commercial demand for pistol, shotshell and rifle ammunition that the Winchester business began to experience in early November 2012, while rimfire ammunition demand continued at record levels. Although the consumer demand for pistol, shotshell and rifle ammunition has declined compared to higher than historical levels, it remains strong. The Winchester commercial backlog on January 31, 2015 was $192.4 million compared to $423.0 million at January 31, 2014 and $37.6 million at January 31, 2012. Winchester full year 2015 segment income is expected to be higher than the full year 2014 segment income of $127.3 million, primarily due to lower operating costs associated with our new centerfire operation in Oxford, MS. Commercial ammunition shipments for the full year 2015 are expected to be similar to full year 2014.

In October 2011, Winchester opened the new centerfire production facility in Oxford, MS. During 2013, the relocation of the centerfire pistol manufacturing equipment was completed. During 2014, the relocation of the centerfire rifle manufacturing equipment continued to be relocated and started up. During the fourth quarter of 2014, all pistol ammunition and approximately 85% of all rifle ammunition was produced in Oxford. By December 1, 2014, all commercial rifle ammunition was being produced in Oxford. This relocation, which is projected to be completed in 2016, is forecast to reduce Winchester's annual operating costs by approximately $35 million to $40 million. We expect the centerfire relocation project to generate operating costs savings of approximately $30 million in 2015 compared to $24.1 million realized in 2014.

We anticipate that full year 2015 Other Corporate and Unallocated costs will increase compared with the full year 2014 Other Corporate and Unallocated costs of $62.3 million.

We anticipate that full year 2015 charges for environmental investigatory and remedial activities will be in the $15 million to $20 million range.  We do not believe that there will be recoveries of environmental costs incurred and expensed in prior periods in 2015.

We expect defined benefit pension plan income in 2015 to be lower than the 2014 level due to the impact of the newly mandated mortality tables issued in the fourth quarter of 2014.  Based on our plan assumptions and estimates, we will not be required to make any cash contributions to our domestic qualified defined benefit pension plan in 2015 and under the pension funding relief laws passed in 2012 and 2014, we may not be required to make any additional contributions for at least five years. We do have a small Canadian qualified defined benefit pension plan to which we anticipate cash contributions of approximately $1 million in 2015.

During 2015, we are anticipating pretax restructuring charges of approximately $6 million, primarily associated with the ongoing relocation of our Winchester centerfire ammunition manufacturing operations from East Alton, IL to Oxford, MS and the closure of a portion of the Becancour, Canada chlor alkali facility. 

In 2015, we expect our capital spending to be in the $120 million to $130 million range, which includes spending for the ongoing relocation of our Winchester centerfire ammunition manufacturing operations. We expect 2015 depreciation and amortization expense to be in the $140 million to $145 million range.

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We believe the 2015 effective tax rate will be in the 35% to 37% range.

ENVIRONMENTAL MATTERS

	Years ended December 31,
	2014			2013			2012
Cash outlays (receipts):	($ in millions)
Remedial and investigatory spending (charged to reserve)	$	14.9		$	12.4		$	25.5
Recoveries from third parties	(1.4		)	(1.3		)	(0.1		)
Capital spending	2.7			0.9			1.5
Plant operations (charged to cost of goods sold)	24.2			25.4			25.1
Total cash outlays	$	40.4		$	37.4		$	52.0

Cash outlays for remedial and investigatory activities associated with former waste sites and past operations were not charged to income but instead were charged to reserves established for such costs identified and expensed to income in prior years.  Cash outlays for normal plant operations for the disposal of waste and the operation and maintenance of pollution control equipment and facilities to ensure compliance with mandated and voluntarily imposed environmental quality standards were charged to income.

Total environmental-related cash outlays in 2014 were comparable to 2013.  Total environmental-related cash outlays in 2013 decreased compared to 2012, primarily driven by the completion of a remedial action plan at a former waste disposal site in 2012. Total environmental-related cash outlays for 2015 are estimated to be approximately $50 million, of which approximately $20 million is expected to be spent on investigatory and remedial efforts, approximately $5 million on capital projects and approximately $25 million on normal plant operations.  Remedial and investigatory spending is anticipated to be higher in 2015 than 2014 due to the timing of continuing remedial action plans and investigations. Historically, we have funded our environmental capital expenditures through cash flow from operations and expect to do so in the future.

Annual environmental-related cash outlays for site investigation and remediation, capital projects and normal plant operations are expected to range between $45 million to $65 million over the next several years, $15 million to $35 million of which is for investigatory and remedial efforts, which are expected to be charged against reserves recorded on our consolidated balance sheet.  While we do not anticipate a material increase in the projected annual level of our environmental-related cash outlays, there is always the possibility that such an increase may occur in the future in view of the uncertainties associated with environmental exposures.

Our liabilities for future environmental expenditures were as follows:

	December 31,
	2014			2013			2012
	($ in millions)
Beginning balance	$	144.6		$	146.5		$	163.3
Charges to income	9.6			11.5			8.4
Remedial and investigatory spending	(14.9		)	(12.4		)	(25.5		)
Currency translation adjustments	(1.0		)	(1.0		)	0.3
Ending balance	$	138.3		$	144.6		$	146.5

In the United States, the establishment and implementation of federal, state and local standards to regulate air, water and land quality affect substantially all of our manufacturing locations.  Federal legislation providing for regulation of the manufacture, transportation, use and disposal of hazardous and toxic substances, and remediation of contaminated sites, has imposed additional regulatory requirements on industry, particularly the chemicals industry.  In addition, implementation of environmental laws, such as the Resource Conservation and Recovery Act and the Clean Air Act, has required and will continue to require new capital expenditures and will increase plant operating costs.  Our Canadian facility is governed by federal environmental laws administered by Environment Canada and by provincial environmental laws enforced by administrative agencies.  Many of these laws are comparable to the U.S. laws described above.  We employ waste minimization and pollution prevention programs at our manufacturing sites.

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We are party to various governmental and private environmental actions associated with past manufacturing facilities and former waste disposal sites.  Associated costs of investigatory and remedial activities are provided for in accordance with generally accepted accounting principles governing probability and the ability to reasonably estimate future costs.  Our ability to estimate future costs depends on whether our investigatory and remedial activities are in preliminary or advanced stages.  With respect to unasserted claims, we accrue liabilities for costs that, in our experience, we may incur to protect our interests against those unasserted claims.  Our accrued liabilities for unasserted claims amounted to $1.9 million at December 31, 2014.  With respect to asserted claims, we accrue liabilities based on remedial investigation, feasibility study, remedial action and operation, maintenance and monitoring (OM&M) expenses that, in our experience, we may incur in connection with the asserted claims.  Required site OM&M expenses are estimated and accrued in their entirety for required periods not exceeding 30 years, which reasonably approximates the typical duration of long-term site OM&M.  Charges to income for investigatory and remedial efforts were material to operating results in 2014, 2013 and 2012 and may be material to operating results in future years.

Environmental provisions charged (credited) to income, which are included in cost of goods sold, were as follows:

	Years ended December 31,
	2014			2013			2012
	($ in millions)
Charges to income	$	9.6		$	11.5		$	8.4
Recoveries from third parties of costs incurred and expensed in prior periods	(1.4		)	(1.3		)	(0.1		)
Total environmental expense	$	8.2		$	10.2		$	8.3

These charges relate primarily to remedial and investigatory activities associated with past manufacturing operations and former waste disposal sites.

Our total estimated environmental liability at the end of 2014 was attributable to 70 sites, 15 of which were USEPA National Priority List (NPL) sites.  Ten sites accounted for 79% of our environmental liability and, of the remaining 60 sites, no one site accounted for more than 3% of our environmental liability.  At five of the ten sites, part of the site is subject to a remedial investigation and another part is in the long-term OM&M stage.  At two of these ten sites, a remedial investigation is being performed.  The three remaining sites are in long-term OM&M.  All ten sites are either associated with past manufacturing operations or former waste disposal sites.  None of the ten largest sites represents more than 22% of the liabilities reserved on our consolidated balance sheet at December 31, 2014 for future environmental expenditures.

Our consolidated balance sheets included liabilities for future environmental expenditures to investigate and remediate known sites amounting to $138.3 million at December 31, 2014, and $144.6 million at December 31, 2013, of which $119.3 million and $126.6 million, respectively, were classified as other noncurrent liabilities.  Our environmental liability amounts do not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology.  These liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and our estimate of related costs have changed.  As a result of these reassessments, future charges to income may be made for additional liabilities.  Of the $138.3 million included on our consolidated balance sheet at December 31, 2014 for future environmental expenditures, we currently expect to utilize $80.2 million of the reserve for future environmental expenditures over the next 5 years, $17.3 million for expenditures 6 to 10 years in the future, and $40.8 million for expenditures beyond 10 years in the future.  These estimates are subject to a number of risks and uncertainties, as described in “Environmental Costs” contained in Item 1A—“Risk Factors.”

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 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.  At December 31, 2014, we estimate it is reasonably possible that we may have additional contingent environmental liabilities of $50 million in addition to the amounts for which we have already recorded as a reserve.

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LEGAL MATTERS AND CONTINGENCIES

We, and our subsidiaries, are defendants in various legal actions (including proceedings based on alleged exposures to asbestos) incidental to our past and current business activities.  We describe some of these matters in Item 3—“Legal Proceedings.”  At December 31, 2014 and 2013, our consolidated balance sheets included liabilities for these legal actions of $22.1 million and $19.3 million, respectively.  These liabilities do not include costs associated with legal representation.  Based on our analysis, and considering the inherent uncertainties associated with litigation, we do not believe that it is reasonably possible that these legal actions will materially adversely affect our financial position, cash flows or results of operations.

During the ordinary course of our business, contingencies arise resulting from an existing condition, situation or set of circumstances involving an uncertainty as to the realization of a possible gain contingency.  In certain instances such as environmental projects, we are responsible for managing the cleanup and remediation of an environmental site.  There exists the possibility of recovering a portion of these costs from other parties.  We account for gain contingencies in accordance with the provisions of ASC 450 “Contingencies” (ASC 450) and therefore do not record gain contingencies and recognize income until it is earned and realizable.

For the year ended December 31, 2013, we recognized $11.0 million as a reduction of cost of goods sold related to a Chlor Alkali Products favorable contract settlement. Also for the year ended December 31, 2013, we recognized $13.9 million as a reduction of selling and administration expense related to the recovery of legacy legal costs.

LIQUIDITY, INVESTMENT ACTIVITY AND OTHER FINANCIAL DATA

Cash Flow Data

	Years ended December 31,
	2014			2013			2012
Provided by (used for)	($ in millions)
Net operating activities	$	159.2		$	317.0		$	279.2
Capital expenditures	(71.8		)	(90.8		)	(255.7		)
Business acquired in purchase transaction, net of cash acquired	—			—			(310.4		)
Proceeds from sale/leaseback of equipment	—			35.8			4.4
Restricted cash activity, net	4.2			7.7			39.8
Net investing activities	(61.7		)	(43.8		)	(512.4		)
Long-term debt (repayments) borrowings, net	(12.4		)	(23.7		)	180.1
Earn out payment - SunBelt	(14.8		)	(17.1		)	(15.3		)
Common stock repurchased and retired	(64.8		)	(36.2		)	(3.1		)
Net financing activities	(148.5		)	(130.6		)	93.6

Operating Activities

For 2014, cash provided by operating activities decreased by $157.8 million from 2013, primarily due to lower earnings and an increase in working capital in 2014 compared to a decrease in working capital in 2013.  For 2014, working capital increased $62.4 million compared to a decrease of $29.6 million in 2013.  Inventories increased $23.6 million, primarily due to the return to a more normal level of inventory at Winchester. Accounts payable and accrued liabilities decreased by $38.5 million, primarily due to the final earn out payment related to the SunBelt performance. The 2014 cash from operations was also impacted by a $12.3 million decrease in cash tax payments.

For 2013, cash provided by operating activities increased by $37.8 million from 2012, primarily due to higher earnings and a larger decrease in working capital in 2013.  For 2013, working capital decreased $29.6 million compared to a decrease of $18.4 million in 2012.  The decrease in 2013 was primarily due to decreased receivables of $18.9 million, primarily at Chemical Distribution, and decreased inventory of $8.6 million, primarily at Chemical Distribution and Winchester. The 2013 cash from operations was also impacted by a $32.9 million increase in cash tax payments.

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Capital Expenditures

Capital spending was $71.8 million, $90.8 million and $255.7 million in 2014, 2013 and 2012, respectively.  The decreased capital spending in 2014 was primarily due to the completion of the low salt, high strength bleach facility and the hydrochloric acid expansion project at our Henderson, NV chlor alkali site during the first quarter of 2013. Capital spending in 2012 included spending for the completion of the Charleston, TN conversion project and the completion of the low salt, high strength bleach facilities at our McIntosh, AL and Niagara Falls, NY chlor alkali sites. Capital spending was 58%, 75% and 245% of depreciation in 2014, 2013 and 2012, respectively.

In 2015, we expect our capital spending to be in the $120 million to $130 million range, which includes spending for the ongoing relocation of our Winchester centerfire ammunition manufacturing operations.

Investing Activities

On August 22, 2012, we acquired KA Steel and paid cash of $310.4 million, after receiving the final working capital adjustment of $1.9 million, net of $26.2 million of cash acquired.

During 2013 and 2012, we entered into sale/leaseback agreements for caustic soda barges, bleach trailers and chlorine, caustic soda and bleach railcars.  In 2013 and 2012, we received proceeds from the sales of $35.8 million and $4.4 million, respectively.

In 2010, we completed financings of Go Zone and Recovery Zone bonds totaling $153.0 million due 2024, 2033 and 2035. The proceeds of these bonds were required to be used to fund capital projects in Alabama, Mississippi and Tennessee and were fully utilized as of December 31, 2014.  In 2014, 2013 and 2012, we utilized $4.2 million, $7.7 million and $39.8 million, respectively, of the Go Zone and Recovery Zone proceeds to fund qualifying capital spending.

Financing Activities

In August 2014, we redeemed our $150.0 million 2019 Notes, which would have matured on August 15, 2019. We recognized interest expense of $9.5 million for the call premium ($6.7 million) and the write-off of unamortized deferred debt issuance costs ($2.1 million) and unamortized discount ($0.7 million) related to this action.

On June 24, 2014, we entered into a new five-year $415.0 million senior credit facility consisting of a $265.0 million senior revolving credit facility, which replaced our previous $265.0 million senior revolving credit facility, and a $150.0 million delayed-draw term loan facility. In August 2014, we drew the entire $150.0 million of the term loan and used the proceeds to redeem our 2019 Notes. In December 2014, we repaid $0.9 million under the required quarterly installments of the $150.0 million term loan facility.

In 2014, we paid deferred debt issuance costs of $1.2 million related to the new five-year $415.0 million senior credit facility.

In December 2014, 2013 and 2012, we repaid $12.2 million due under the annual requirements of the SunBelt Notes. In January 2013, we also repaid $11.4 million of 2013 Notes, which became due.

In August 2012, we sold $200.0 million of 2022 Notes with a maturity date of August 15, 2022. The 2022 Notes were issued at par value. Interest is paid semi-annually on February 15 and August 15. The acquisition of KA Steel was partially financed with proceeds of $196.0 million, after expenses of $4.0 million, from the 2022 Notes.

In June 2012, we redeemed industrial revenue bonds totaling $7.7 million with a maturity date of 2017. We paid a premium of $0.2 million to the bond holders, which was included in interest expense. We also recognized a $0.2 million deferred gain in interest expense related to the interest rate swap, which was terminated in March 2012, on these industrial revenue bonds.

During 2014, 2013 and 2012, we paid $26.7 million, $23.2 million and $18.5 million, respectively, for the earn out related to the 2013, 2012 and 2011 SunBelt performance.  The earn out payments for the years ended December 31, 2014, 2013 and 2012 included $14.8 million, $17.1 million and $15.3 million, respectively, that were recognized as part of the original purchase price.  The $14.8 million, $17.1 million and $15.3 million are included as a financing activity in the statement of cash flows.

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We repurchased and retired 2.5 million, 1.5 million and 0.2 million shares in 2014, 2013 and 2012, respectively, with a total value of $64.8 million, $36.2 million and $3.1 million, respectively.

In 2014, 2013 and 2012, we issued 0.5 million, 0.5 million and 0.1 million shares, respectively, with a total value of $12.1 million, $9.7 million and $1.4 million, respectively, representing stock options exercised.  

The percent of total debt to total capitalization increased to 40.0% at December 31, 2014, from 38.6% at year-end 2013. The percent of total debt to total capitalization was 41.7% at year-end 2012.  The 2014 increase from 2013 was due to lower shareholders’ equity primarily resulting from the $86.6 million after-tax charge for our pension and other postretirement plans. This increase was partially offset by a lower level of long-term debt at December 31, 2014 resulting from the repayments of maturing debt. The 2013 decrease from 2012 was due to a lower level of long-term debt at December 31, 2013 resulting from the repayments of maturing debt and higher shareholders’ equity primarily resulting from the net income for the year ended December 31, 2013. 

Dividends per common share were $0.80 in 2014, 2013 and 2012.  Total dividends paid on common stock amounted to $63.0 million, $64.0 million and $64.1 million in 2014, 2013 and 2012, respectively.  On January 23, 2015, our board of directors declared a dividend of $0.20 per share on our common stock, payable on March 10, 2015 to shareholders of record on February 10, 2015.

The payment of cash dividends is subject to the discretion of our board of directors and will be determined in light of then-current conditions, including our earnings, our operations, our financial condition, our capital requirements and other factors deemed relevant by our board of directors.  In the future, our board of directors may change our dividend policy, including the frequency or amount of any dividend, in light of then-existing conditions.

LIQUIDITY AND OTHER FINANCING ARRANGEMENTS

Our principal sources of liquidity are from cash and cash equivalents, cash flow from operations and short-term borrowings under our senior revolving credit facility.  Additionally, we believe that we have access to the debt and equity markets.

Cash flow from operations is variable as a result of both the seasonal and the cyclical nature of our operating results, which have been affected by seasonal and economic cycles in many of the industries we serve, such as the vinyls, urethanes, bleach, ammunition and pulp and paper.  The seasonality of the ammunition business, which is typically driven by the fall hunting season, and the seasonality of the vinyls and bleach businesses, which are stronger in periods of warmer weather, typically cause working capital to fluctuate between $50 million to $100 million over the course of the year.  Cash flow from operations is affected by changes in ECU selling prices caused by the changes in the supply/demand balance of chlorine and caustic soda, resulting in the chlor alkali business having significant leverage on our earnings and cash flow.  For example, assuming all other costs remain constant and internal consumption remains approximately the same, a $10 per ECU selling price change equates to an approximate $14 million annual change in our revenues and pretax profit when we are operating at full capacity.

For 2014, cash provided by operating activities decreased by $157.8 million from 2013, primarily due to lower earnings and an increase in working capital in 2014 compared to a decrease in working capital in 2013.  For 2014, working capital increased $62.4 million compared to a decrease of $29.6 million in 2013.  Inventories increased $23.6 million, primarily due to the return to a more normal level of inventory at Winchester. Accounts payable and accrued liabilities decreased by $38.5 million, primarily due to the final earn out payment related to the SunBelt performance. The 2014 cash from operations was also impacted by a $12.3 million decrease in cash tax payments.

Capital spending was $71.8 million, $90.8 million and $255.7 million in 2014, 2013 and 2012, respectively.  The decreased capital spending in 2014 was primarily due to the completion of the low salt, high strength bleach facility and the hydrochloric acid expansion project at our Henderson, NV chlor alkali site in the first quarter of 2013. Capital spending in 2012 included spending for the completion of the Charleston, TN conversion project and the completion of the low salt, high strength bleach facilities at our McIntosh, AL and Niagara Falls, NY chlor alkali sites. Capital spending was 58%, 75% and 245% of depreciation in 2014, 2013 and 2012, respectively.

In 2015, we expect our capital spending to be in the $120 million to $130 million range, which includes spending for the ongoing relocation of our Winchester centerfire ammunition manufacturing operations.

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The overall cash decrease of $51.0 million in 2014 primarily reflects common stock repurchased and retired and repayments of maturing debt, partially offset by our operating results. Based on our December 31, 2014 cash balance of $256.8 million and the availability of $257.7 million of liquidity from our senior revolving credit facility, we believe we have sufficient liquidity to meet our short-term and long-term needs. Additionally, we believe that we have access to the debt and equity markets.

On April 24, 2014, our board of directors authorized a new share repurchase program for up to 8 million shares of common stock that will terminate in three years for any remaining shares not yet repurchased.  This authorization replaced the July 2011 program. We repurchased and retired 2.5 million, 1.5 million and 0.2 million shares in 2014, 2013 and 2012, respectively, at a cost of $64.8 million, $36.2 million and $3.1 million, respectively.  As of December 31, 2014, we had repurchased a total of 1.9 million shares under the April 2014 program, and 6.1 million shares remained authorized to be purchased.  The repurchases will be effected from time to time on the open market, or in privately negotiated transactions.

In August 2014, we redeemed our $150.0 million 2019 Notes, which would have matured on August 15, 2019. We recognized interest expense of $9.5 million for the call premium ($6.7 million) and the write-off of unamortized deferred debt issuance costs ($2.1 million) and unamortized discount ($0.7 million) related to this action.

On June 24, 2014, we entered into a new five-year $415.0 million senior credit facility consisting of a $265.0 million senior revolving credit facility, which replaced our previous $265.0 million senior revolving credit facility, and a $150.0 million delayed-draw term loan facility. In August 2014, we drew the entire $150.0 million of the term loan and used the proceeds to redeem our 2019 Notes. The new $415.0 million senior credit facility will expire in June 2019. The new $265.0 million senior revolving credit facility includes a $60.0 million letter of credit subfacility and the option to expand the facility by an additional $100.0 million. At December 31, 2014, we had $257.7 million available under our $265.0 million senior revolving credit facility because we had issued $7.3 million of letters of credit under the $60.0 million subfacility.  The $150.0 million term loan facility includes amortization in equal quarterly installments at a rate of 2.5% annually for the first two years increasing to 5% for the remaining three years. In December 2014, we repaid $0.9 million under the required quarterly installments. The terms and conditions of the new senior credit facility are similar to those of our previous $265.0 million senior revolving credit facility except the addition of quarterly installments on the term loan facility. Under the new senior credit facility, we may select various floating rate borrowing options.  The actual interest rate paid on borrowings under the senior credit facility is based on a pricing grid which is dependent upon the leverage ratio as calculated under the terms of the facility at the end of the prior fiscal quarter.  The facility includes various customary restrictive covenants, including restrictions related to the ratio of debt to earnings before interest expense, taxes, depreciation and amortization (leverage ratio) and the ratio of earnings before interest expense, taxes, depreciation and amortization to interest expense (coverage ratio).  Compliance with these covenants is determined quarterly based on the operating cash flows for the last four quarters.  We were in compliance with all covenants and restrictions under all our outstanding credit agreements as of December 31, 2014 and 2013, and no event of default had occurred that would permit the lenders under our outstanding credit agreements to accelerate the debt if not cured.  In the future, our ability to generate sufficient operating cash flows, among other factors, will determine the amounts available to be borrowed under these facilities.  As of December 31, 2014, there were no covenants or other restrictions that limited our ability to borrow.

Pursuant to a note purchase agreement dated December 22, 1997, SunBelt sold $97.5 million of Guaranteed Senior Secured Notes due 2017, Series O, and $97.5 million of Guaranteed Senior Secured Notes due 2017, Series G.  We refer to these notes as the SunBelt Notes.  The SunBelt Notes bear interest at a rate of 7.23% per annum, payable semi-annually in arrears on each June 22 and December 22.  Beginning on December 22, 2002 and each year through 2017, SunBelt is required to repay $12.2 million of the SunBelt Notes, of which $6.1 million is attributable to the Series O Notes and of which $6.1 million is attributable to the Series G Notes.  In December 2014, 2013 and 2012, $12.2 million was repaid on these SunBelt Notes.

We have guaranteed the Series O Notes, and PolyOne Corporation (PolyOne), our former SunBelt partner, has guaranteed the Series G Notes, in both cases pursuant to customary guaranty agreements.  We have agreed to indemnify PolyOne for any payments or other costs under the guarantee in favor of the purchasers of the Series G Notes, to the extent any payments or other costs arise from a default or other breach under the SunBelt Notes.  If SunBelt does not make timely payments on the SunBelt Notes, whether as a result of a failure to pay on a guarantee or otherwise, the holders of the SunBelt Notes may proceed against the assets of SunBelt for repayment.

In January 2013, we repaid $11.4 million of 2013 Notes, which became due.

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In August 2012, we sold $200.0 million of 2022 Notes with a maturity date of August 15, 2022. The 2022 Notes were issued at par value. Interest is paid semi-annually on February 15 and August 15. The acquisition of KA Steel was partially financed with proceeds of $196.0 million, after expenses of $4.0 million, from these 2022 Notes.

In June 2012, we redeemed industrial revenue bonds totaling $7.7 million with a maturity date of 2017. We paid a premium of $0.2 million to the bond holders, which was included in interest expense. We also recognized a $0.2 million deferred gain in interest expense related to the interest rate swap, which was terminated in March 2012, on these industrial revenue bonds.

At December 31, 2014, we had total letters of credit of $20.9 million outstanding, of which $7.3 million were issued under our $265.0 million senior revolving credit facility.  The letters of credit were used to support certain long-term debt, certain workers compensation insurance policies, certain plant closure and post-closure obligations and certain Canadian pension funding requirements.

Our current debt structure is used to fund our business operations.  As of December 31, 2014, we had long-term borrowings, including the current installment and capital lease obligations, of $675.1 million, of which $305.0 million was at variable rates.  Annual maturities of long-term debt, including capital lease obligations, are $16.4 million in 2015, $146.0 million in 2016, $21.4 million in 2017, $8.0 million in 2018, $126.1 million in 2019 and a total of $357.2 million thereafter. Commitments from banks under our senior revolving credit facility are an additional source of liquidity.

In June 2012, we terminated $73.1 million of interest rate swaps with Wells Fargo Bank, N.A. (Wells Fargo) that had been entered into on the SunBelt Notes in May 2011. The result was a gain of $2.2 million which will be recognized through 2017. As of December 31, 2014, $0.8 million of this gain was included in long-term debt.

In March 2012, Citibank, N.A. (Citibank) terminated $7.7 million of interest rate swaps on our industrial development and environmental improvement tax-exempt bonds due in 2017. The result was a gain of $0.2 million, which would have been recognized through 2017. In June 2012, the industrial revenue bonds were redeemed by us, and as a result, the remaining $0.2 million deferred gain was recognized in interest expense during 2012.

In March 2010, we entered into interest rate swaps on $125 million of our underlying fixed-rate debt obligations, whereby we agreed to pay variable rates to a counterparty who, in turn, pays us fixed rates.  The counterparty to these agreements is Citibank, a major financial institution.  In October 2011, we entered into $125 million of interest rate swaps with equal and opposite terms as the $125 million variable interest rate swaps on the 6.75% senior notes due 2016 (2016 Notes).  We have agreed to pay a fixed rate to a counterparty who, in turn, pays us variable rates.  The counterparty to this agreement is also Citibank.  The result was a gain of $11.0 million on the $125 million variable interest rate swaps, which will be recognized through 2016.  As of December 31, 2014, $3.7 million of this gain was included in long-term debt.  In October 2011, we de-designated our $125 million interest rate swaps that had previously been designated as fair value hedges.  The $125 million variable interest rate swaps and the $125 million fixed interest rate swaps do not meet the criteria for hedge accounting.  All changes in the fair value of these interest rate swaps are recorded currently in earnings.

We have registered an undetermined amount of securities with the SEC, so that, from time-to-time, we may issue debt securities, preferred stock and/or common stock and associated warrants in the public market under that registration statement.

OFF-BALANCE SHEET ARRANGEMENTS

Our operating lease commitments are primarily for railroad cars but also include distribution, warehousing and office space and data processing and office equipment.  Virtually none of our lease agreements contain escalation clauses or step rent provisions.  

In conjunction with the St. Gabriel, LA conversion and expansion project, which was completed in the fourth quarter of 2009, we entered into a twenty-year brine and pipeline supply agreement with Boardwalk Louisiana Midstream, LLC (formerly PetroLogistics Olefins, LLC) (Boardwalk).   Boardwalk installed, owns and operates, at its own expense, a pipeline supplying brine to the St. Gabriel, LA facility. Since November 2009, we have been obligated to make a fixed annual payment over the life of the contract of $2.0 million for use of the pipeline, regardless of the amount of brine purchased.  We also had a minimum usage requirement for brine of $8.4 million over the first five-year period of the contract.  We have met or exceeded the minimum brine usage requirements for this five-year period. After the first five-year period, the contract contains a buy out provision exercisable by us for $12.0 million, which decreases by $0.8 million per year.

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Our long-term contractual commitments, including the on and off-balance sheet arrangements, consisted of the following:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	($ in millions)
Debt obligations, including capital lease obligations	$	675.1	$	16.4	$	167.4	$	134.1	$	357.2
Interest payments under debt obligations and interest rate swap agreements(a)	138.9		24.2		36.1		29.3		49.3
Contingent tax liability	38.4		7.3		4.4		7.3		19.4
Qualified pension plan contributions(b)	1.0		1.0		—		—		—
Non-qualified pension plan payments	65.4		22.1		11.8		6.3		25.2
Postretirement benefit payments	67.2		5.5		10.6		9.5		41.6
Off-Balance Sheet Commitments:
Noncancelable operating leases	301.5		60.5		95.5		70.2		75.3
Purchasing commitments:
Raw materials	64.5		28.3		36.2		—		—
Capital expenditures	4.6		4.2		0.4		—		—
Utilities