Filed by Olin Corporation
Pursuant to Rule 425
under the Securities Act of 1933
Subject Company: Chase Industries Inc.
Commission File No: 001-13394
Set forth below are remarks used in a conference call with analysts on
May 8, 2002 regarding the proposed merger between a subsidiary of Olin
Corporation and Chase Industries Inc.
May 8, 2002
Olin Conference Call Remarks
By
Joseph Rupp, President and CEO;
Anthony Ruggiero, Executive Vice President and CFO;
and John Steadman, President & CEO, Chase Industries
Joseph Rupp
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Good morning. Thank you for joining us today. With me from Olin are Tony
Ruggiero and Dick Koch, and from Chase we have John Steadman, President and
CEO.
This morning, Olin Corporation and Chase Industries Inc. announced that we
have entered into a merger agreement under which Chase, a leading manufacturer
of brass rod, will become a wholly-owned subsidiary of Olin. Chase
stockholders will receive a fixed exchange ratio of 0.64 shares of Olin common
stock for each outstanding share of Chase common stock in a tax-free share
exchange. Olin will issue approximately 10 million common shares under the
agreement.
The transaction is conditioned on shareholder approval of both companies,
regulatory clearance and other customary closing conditions. Citicorp Venture
Capital, which owns approximately 48% of Chase's outstanding common shares,
has agreed to vote its shares in favor of this transaction.
This acquisition is expected to be immediately accretive to Olin's earnings
and will also strengthen Olin's financial position.
I firmly believe that Olin and Chase are quite complementary and such a
combination is in the best interest of both sets of shareholders. Each of our
companies is a leader with premier reputations in our respective fields. Our
combination would create a company with the scale, scope and critical mass to
compete more effectively, and will create a stronger, less cyclical company.
Chase is the leading manufacturer and supplier of brass rod in the United
States and Canada. Chase's diverse customer mix uses its trademark brass rod -
commonly called Blue Dot -- to produce a variety of products, including
plumbing fixtures, industrial valves and fittings, heating and air
conditioning components, cable and electronic connectors, and automotive
parts. Over the years, Chase has continued to strengthen its position as the
highest quality, lowest cost and most customer-service-oriented producer in
the domestic brass rod industry.
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The acquisition of Chase Industries combines the domestic industry leader in
brass rod with Olin Brass, the market leader in copper-alloy sheet and strip.
Both businesses have similar philosophies and strengths. Both are committed to
manufacturing excellence with low-cost production and superior quality. There
is intense customer focus and exceptional customer service. Both businesses
have a long history of solid financial performance and growth. We intend to
leverage these strengths and to utilize the combined metallurgical and
manufacturing capabilities, marketing and distribution know-how, and economies
of scale to seek to further enhance long-term profitability and return on
investment.
Let me introduce to you this morning John Steadman, Chase's President and CEO,
who will provide some background on Chase.
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John Steadman
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Thank you, Joe. Chase Industries traces its roots back to 1837 when the
business was founded as the Hitchcock Button Manufacturing Company in
Waterbury, Connecticut. The current business was formed in 1990 as an
asset-based leveraged buyout from British Petroleum. The company became
publicly traded in 1994 and is currently traded on the New York Stock Exchange
under the symbol CSI.
Chase's current manufacturing facility and general offices are located on a
75-acre site in Montpelier, Ohio, near the Michigan and Indiana borders. The
fully owned facility in Montpelier consists of one plant of approximately
260,000 square feet. The Montpelier plant, like Olin's world-class strip mill
in East Alton, Illinois, is considered the most modern and low-cost production
facility in the United States. Production begins with the melting of scrap
that is subsequently cast into 10-inch diameter cylindrical billets. These
billets are pre-heated and extruded into smaller diameter, semi-finished rod.
Depending on customer specifications, the rod is then drawn to diameters
ranging from 5/16 to 4 inches. Finished product is shipped to customers in
straight lengths in round, hexagonal, square, rectangular and other shapes for
machining into a variety of finished components.
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In many ways, the process utilized by Chase to manufacture rod is similar to
the process utilized by Olin to manufacture copper-alloy strip. Both the Olin
and Chase processes use large volumes of copper-alloy scrap as raw material,
and incorporate high volume melting and casting, hot working, and cold working
to produce alloys in the brass family. These similarities are expected to
result in opportunities to leverage purchasing power, manufacturing know-how,
and metallurgical skills to further strengthen each company's position as the
quality leader and low-cost producer.
Besides the Montpelier, Ohio, manufacturing facility, Chase also operates a
47,000 square foot warehouse in Los Angeles, California, for just-in-time
distribution of rod products on the West Coast.
The main attributes of brass rod are its excellent corrosion resistance, the
ease with which it can be machined or forged into a variety of shapes, and its
moderate strength. U.S. consumption of brass rod was approximately 1.1 billion
pounds in 2000 and 0.9 billion pounds in 2001. This market has shown average
annual growth of 3% over the last 10 years, in line with the GDP trend. Chase
currently has a market share in excess of 30%. The three other domestic rod
producers have a combined market share estimated at 60%, with the remaining
supply coming primarily from imports.
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By far the largest end-use segment for brass rod is building and construction,
where it is used extensively for plumbing fittings and fixtures. The
industrial machinery segment uses brass rod to manufacture screw machine parts
and components such as industrial valves, fittings, and control devices. The
transportation sector incorporates numerous fittings and sensors produced from
brass rod for autos, light trucks and buses while the electrical and
electronics market utilizes rod for coaxial cables, traps, and connector
applications. Olin has an excellent familiarity with these markets, since each
segment consumes a considerable volume of copper- alloy strip.
Due to its leadership position in quality and service, Chase has won numerous
awards from its customers and has achieved preferred status among major
original equipment manufacturers and distributors. In fact, Chase became the
first U.S. brass rod mill to achieve an ISO 9002 certification.
I really believe this merger is in the best interests of all of Chase's
stakeholders: our customers, employees, vendors, shareholders, and the
community in which we operate. This combination of two industry leaders will
give Chase access to additional technical, product development and marketing
resources to more rapidly expand its markets and potentially broaden its
product line by leveraging the combined skills and technologies of both
Chase's rod and Olin's strip businesses.
Now let me turn the microphone over to Tony Ruggiero
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Anthony Ruggiero
----------------
Thank you, John. As we mentioned in the press release, we expect this
transaction to be accretive for Olin and to improve our financial position.
From 1997 through 2000, Chase averaged $17.8 million in net income from
continuing operations. Looking at that on an Olin per share basis, using the
approximate 10 million shares that we're going to issue, this equates to $1.78
per Olin share. This is higher than the $1.43 average that Olin earned during
this period and, as such, had the operations been combined during this period,
Chase would have been accretive to Olin's earnings by approximately 5%.
In the year 2000, Chase achieved $290 million in sales and $19.1 million in
net income from continuing operations. In 2001, Chase's sales were $232
million, a 20% reduction from 2000, due to lower metal prices and lower
volumes. Net income from continuing operations in 2001 was $8.1 million. And
in 2001, Chase recorded $4.4 million of costs associated with a tender offer
and other expenses. Excluding those costs, their net income would have been
$10.9 million, a 43% decrease from the prior year. And as you all know, 2001
was a difficult year for many, many sectors.
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For the first quarter of 2002, Chase reported sales of $60.9 million, a 8%
decrease over the prior year's period, due to lower metal prices, which were
partially offset by higher volume. First quarter 2002 net income from
continuing operations was $3.0 million, compared with $3.3 million in 2001,
which excludes tender offer and other expenses. This is a 9% decrease over the
prior year's period. First quarter 2002 volumes started to rebound with
shipments up 5% from the first quarter of 2001, and with sequential
improvement from the fourth quarter of 2001. Chase noted in their first
quarter earnings release that their projection of a 10% increase in brass rod
consumption for 2002 is on track. At the end of the first quarter of 2002,
Chase had $3.6 million in cash and no debt, which is a reason why we mentioned
this as strengthening Olin's financial position. Operating cash flows from
1997 through 2001 averaged $25.6 million per year.
I should note that Olin's Brass business also experienced higher sequential
sales from the fourth quarter of 2001 to the first quarter of 2002 and we
continue to forecast higher sales volumes in the second quarter and for the
balance of the year.
Now let me return the microphone to Joe Rupp.
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Joe Rupp
--------
Thanks for the overview, John and Tony. Both Olin and Chase have experienced
direct sales forces that provide an important link with each of its respective
customers. The aggregate marketing and sales expertise of both companies
provides the potential to generate new ideas to increase customer
satisfaction. Together, the two companies will be better positioned to take
advantage of opportunities in growing global markets.
Chase has strengthened its leadership position by investing in
state-of-the-art production capabilities. Project 400, a $92 million expansion
project launched in 1997, is designed to increase foundry, extrusion, and
finishing capabilities with the goal of increasing production by 33% to more
than 400 million pounds annually. This expansion will enable Chase to reduce
costs and to further solidify its excellence in quality and service.
Phase I, at $12 million, was completed in 1998 with the installation of three
new billet heaters that increased finished rod capacity by about 17%. Phase II
was completed in 2000, and consisted of a new $30 million brass melting and
casting foundry with continuous casting capabilities. The new caster has
benefits in both yield and cost, and overall the new foundry permits alloy
flexibility that allows Chase to begin producing multiple alloys in response
to the customer's needs.
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Phase III, a $50 million investment that includes finishing equipment, billet
heaters and a second extrusion press, is on schedule and will be fully
operational in the second quarter of 2002. When Project 400 is fully
completed, Chase will be positioned to capitalize on market opportunities for
years to come through superior quality, shorter lead-times, and increased
manufacturing flexibility. John will be happy to answer questions about
Project 400 following our prepared remarks.
Chase anticipates spending approximately $12 million for capital expenditures
in 2002, which includes $5 million to complete Phase III. In the future, Chase
anticipates maintenance capital of roughly $3 million per year. In addition to
this, they will continue to evaluate opportunities with quick payback and
returns, which could result in spending in the $5 million range for selected
projects. This compares to Chase's forecast depreciation of approximately $10
million in 2002.
As I noted earlier, although Chase and the rest of the metals industry have
experienced a slowdown, it is anticipated that brass rod demand will continue
to improve. The long-term fundamentals of the rod business continue to look
promising. And as I mentioned earlier, this acquisition is expected to be
immediately accretive to Olin's earnings. Future improvements are expected
from the full implementation of Project 400 and the realization of synergy
opportunities.
In summary, we are excited about welcoming Chase into the Olin family of
successful businesses. Chase with their excellent position in rod will
complement Olin's leadership role in copper-based strip and sheet products.
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This transaction will require shareholder approval from both companies, as
well as normal regulatory approvals. We expect this transaction will be
completed in the middle of the summer. Olin and Chase will file a proxy
statement/prospectus and other documents regarding our proposed merger with
the Securities and Exchange Commission.
Before I conclude, let me remind you that throughout this presentation we have
made statements regarding Olin's and Chase's estimates of future performance.
Clearly these are forward looking statements and results could differ
materially from those projected. Some of the factors that could cause actual
results to differ are described in the business and outlook sections of Olin's
most recent 10-K and in the management discussion and analysis in Chase's most
recent 10-K.
We would now be pleased to take your questions.
FORWARD-LOOKING STATEMENTS
This communication includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements relate
to analyses and other information that are based on management's beliefs,
certain assumptions made by management, forecasts of future results, and
current expectations, estimates and projections about the markets and economy
in which we and our various segments operate. The statements contained in this
communication that are not statements of historical fact may include
forward-looking statements that involve a number of risks and uncertainties.
We have used the words "anticipate," "intend," "may," "expect," "believe,"
"should," "plan," "will," "estimate," and variations of such words and similar
expressions in this communication to identify such forward-looking statements.
These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions, which are difficult to predict and many
of which are beyond our control. Therefore, actual outcomes and results may
differ materially from those matters expressed or implied in such
forward-looking statements. We undertake no obligation to update publicly any
forward-looking statements, whether as a result of future events, new
information or otherwise.
The risks, uncertainties and assumptions that are involved in our
forward-looking statements include, but are not limited to:
o general economic, business and market conditions in the United States and
overseas, including economic instability or a downturn in the markets
served by us, such as automotive, electronics, coinage,
telecommunications, ammunition and housing;
o the cyclical nature of our operating results;
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o competitive pressures affecting selling prices and volumes, particularly
changes in electrochemical unit, which we refer to as an ECU, prices from
expected levels;
o the supply/demand balance for our products, including the impact of
excess industry capacity;
o the occurrence of unexpected manufacturing interruptions/outages,
including those occurring as a result of production hazards;
o efficacy of new technologies;
o loss of key customers or suppliers;
o acceleration or expansion of backward integration by current and
potential customers;
o higher-than-expected raw material and utility costs;
o higher-than-expected transportation and/or logistics costs;
o failure to achieve targeted cost reduction programs;
o environmental costs and other expenditures in excess of those projected;
o changes in laws and regulations inside or outside the United States;
o higher-than-expected interest rates; and
o the occurrence of extraordinary events, such as the attacks on the World
Trade Center and the Pentagon that occurred on September 11, 2001.
All of our forward-looking statements should be considered in light of these
factors.
Olin Corporation and Chase Industries Inc. will file a proxy
statement/prospectus and other documents regarding the proposed merger
described in this press release with the Securities and Exchange Commission.
Investors and security holders are urged to read the proxy
statement/prospectus when it becomes available, because it will contain
important information about Olin Corporation and Chase Industries Inc., and
the proposed transaction. A definitive proxy statement/prospectus will be sent
to security holders of Olin Corporation seeking their approval of the issuance
of Olin Corporation Stock in the transaction and to security holders of Chase
Industries Inc. seeking their approval of the transaction. Investors and
security holders may obtain a free copy of the definitive proxy
statement/prospectus (when available) and other documents filed by Olin
Corporation and Chase Industries Inc. with the SEC at the SEC's web site at
http://www.sec.gov. The definitive proxy statement/prospectus and other
documents may also be obtained free of cost by directing a request to:
Olin Corporation
PO Box 4500
501 Merritt 7
Norwalk, CT 06856-4500
Attn: Investor Relations
Tel: (203) 750-3254
Olin Corporation, and Chase Industries Inc., each of their directors, and
certain of their executive officers may be considered participants in the
solicitation of proxies in connection with the proposed transactions.
Information about the directors and executive officers of Olin Corporation and
their ownership of Olin Corporation stock is set forth in Olin Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
Information about the directors and executive officers of Chase Industries
Inc. and their ownership of Chase Industries Inc. stock is set forth in Chase
Industries Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 2001. Investors may obtain additional information regarding the
interests of such participants by reading the prospectus/proxy statement when
it becomes available.
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