Joseph Rupp – President, Chairman and CEO John Fischer – VP and CFO John McIntosh – VP and President, Chlor Alkali Products Division

Frank Mitsch – BB&T Capital Edward Yang – Oppenheimer Christopher Butler – Sidoti & Company Adam France – 1492 Capital

Good day, ladies and gentlemen, and welcome to the second quarter Olin Corporation earnings conference call. My name is Kianna, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Joseph Rupp, President, Chairman, and CEO. You may proceed.

Good morning. Thank you for joining us today. With me this morning are John Fischer, Vice President, Chief Financial Officer; John McIntosh, Vice President and President of our Chlor Alkali Products Business; and, Larry Kromidas, our Assistant Treasurer and Director of Investor Relations. Last night, we announced that net income in the second quarter of 2010 was $16.9 million or $0.21 per diluted share, compared to $27.8 million or $0.36 per diluted share in the second quarter of 2009. Second quarter 2010 results in our Winchester chlor alkali business has improved, compared to the first quarter of 2010. These improvements were partially offset by a higher effective tax rate in the second quarter of 2010. Winchester achieved its highest second quarter segment earnings and its history and the second best quarterly earnings ever, reflecting the continuation of the stronger than normal demand that began in the fourth quarter of 2008. In the second quarter of 2010, Winchester benefited from strong sales to commercial, military, and law enforcement customers. Winchester's second quarter 2010 segment earnings were $21.1 million, compared to $19.1 million in the second quarter of 2009. Chlor alkali second quarter 2010 segment earnings of $26.1 million more than doubled, compared to the first quarter of 2010, and represented the third consecutive quarter of sequential earnings improvement. Both ECU netbacks and product volumes improved during from the first quarter of 2010. Second quarter 2010 chlor alkali segment earnings include approximately $6 million of costs associated with our second quarter planned maintenance outages at five manufacturing locations. The second quarter 2010 chlor alkali operating rate was 83%, which was higher than both the first quarter of 2010 rate of 75% and the second quarter 2009 rate of 70%. Second quarter 2010 earnings include $2.8 million of pretax recoveries from third parties…

Thank you, Joe. First, I'd like to discuss a few items on the balance sheet. Cash and cash equivalents at June 30th, 2010 were $388.4 million, compared to $411 million at March 31st, 2010 and a $192.2 million at June 30th, 2009. The decrease in the cash balance for March reflects the continuation of the normal seasonal working capital growth in both the chlor alkali and Winchester businesses. In the chlor alkali business the increase in working capital reflects the increased sales volumes and improved pricing that we're experiencing in the second quarter. While in the Winchester business, the increase in working capital reflects the normal build-up of inventory as the business moves towards the fall hunting season. We expect working capital in both businesses to decline in the second half of the year due to these same seasonal factors. Olin typically experiences working capital growth of $50 million to $100 million during the first two quarters of each year, followed by a third and fourth quarter liquidation. We are currently forecasting that Olin will finish 2010 with a cash balance of at least $425 million. The seasonal swings in working capital are the key component of our cash planning. In addition to the working capital needs, we have a continuous call-on-cash associated with funding legacy environmental liabilities. Spending associated with legacy environmental matters has averaged approximately $25 million annually over the past five years. We also have a defined benefit pension plan that while not in issue today is large relative to the size of the company. And as Joe discussed earlier, we also currently face uncertainty and potential investment decisions surrounding chlor alkali facilities that utilize mercury cell technology. For these reasons, we believe that it is prudent and appropriate for Olin to maintain a cash balance of…

(Operator Instructions) Our first question comes from the line of Frank Mitsch with BB&T Capital. You may proceed. Frank Mitsch – BB&T Capital: Good morning, gentlemen.

Good morning, Frank. Frank Mitsch – BB&T Capital: Joe, when you're talking about the results in the chlor alkali business in the first – in the second quarter, you mentioned your operating rates were on 83%. Much of that – lower operating rate than perhaps others had reported. In fact, you're one company within the low 90s. It could be attributed to the turnarounds that you took. Now, if you look at the third quarter, do you have – what would be the impact on operating rates from turnarounds? And I think you said you were looking for 85%. Part of that is due to lower demand from a chlorine customer, and so therefore, it would run at lower rates. Is that 85%, though – is that what you also think the industry will operate at? Or do you think the industry will be above or below that?

I think we would say – and John can – is that probably the industries in that 85% to 90% range is really where they are, which is where we've been operating. You correctly point out it got impacted in the second quarter because of our outages. We do have – a customer is going to take a major outage in the second – in the third quarter, which will affect us. But I think some of it depends upon what happens with the ability for everybody to continue to export in the vinyls market to the extent that that can continue that the industry will run at a higher rate. Frank Mitsch – BB&T Capital: All right. But sequentially, though, you – at this stage – at a minimum, flattish operating rate, if not higher. And then, looking at the other side of the equation, the ECU, you talked about the price increases, the fact that you realize the majority of the $80 caustic increase here in the third quarter. Sequentially, I think you're up 5% to 7% on ECU in the second quarter. Are you looking for that order of magnitude or more or less in the third quarter?

More or less in the third quarter is really where we'll be looking for it.

A lot of it I think, Frank, is due to what happens to the price increases that are – have been announced last quarter that have the potential, if they're accepted in the marketplace, to have some small impact for us in the third quarter, even though the majority would be in the fourth quarter, above the chlorine and the caustic price increase that were announced. Some of our contracts allow us to get benefit for increases in the current quarter as opposed to having to wait a quarter. The clarity of those is unsure at this point in time. There's been some early evidence that some of the indices may recognize part of the chlorine increase and part of the caustic increase. And if that happens, then that would be a positive for us not only partially in the third quarter, but mainly – give us momentum mainly in the fourth quarter.

Yes, yes. Our theme is that – is that the – we're going to get the balance of the 80% in the third quarter and there's the potential for the latest price increase within the fourth quarter. But that's in negotiation. Frank Mitsch – BB&T Capital: I understand that on the chlorine side that there are some customers that have – that are resisting more than others and that others have already taken the increase. So that would be – you probably keep part of that in the third quarter, but most of that in the fourth quarter then?

That is correct. Frank Mitsch – BB&T Capital: All right. And then lastly, Joe, in talking about Winchester, you mentioned that you think they'll be down year-over-year. Last year, you're in around $23 million. And obviously, you had a great second quarter here at $21 million. I don't think you've ever had a third quarter that was less than your second quarter in terms of results. Is 2010 possibly that year?

It could be slightly less, Frank. Frank Mitsch – BB&T Capital Markets: And then, you're talking much – much of this is the impact of higher commodities as well as your backlog is going to trend down?

That is exactly right. I would still say a big – a very good quarter by (inaudible) standards. Frank Mitsch – BB&T Capital Markets: All right. Terrific. Thank you so much.

Thank you.

Our next question comes from the line of Edward Yang of Oppenheimer. You may proceed. Edward Yang – Oppenheimer: Hi, good morning. Thanks for taking my question. On chlor alkali, could you provide the monthly breakout in terms of operating rates in the second quarter and where you are currently running at around in July?

This is John. The operating rates for the quarter were, by month, were 80%, 81%, and 89%, roughly, for the third quarter. And our average was 83%, 84%.

Second quarter.

That's right, for the second quarter. Edward Yang – Oppenheimer: And John, where are you running so far in July?

We're running at roughly the same levels. Edward Yang – Oppenheimer: Eighty-three percent or closer to the 89% that you exited in the second quarter.

No, no. Close to the – where comments are – our comments said earlier whether we expect to be in the mid-80s in the third quarter. And that's where we're currently at. Edward Yang – Oppenheimer: Okay. And it looks like June operating rates for the industry bounced back from a disappointing May. What do you think accounts for so much of the volatility in terms of operating rates going from above 90%, low 80%, and now we're back to close 90% again for the industry.

Well, I think that there were turnarounds that were major by some of the major producers that occurred in the month that had an impact on the specific months that was low. And then I think the bounce back came from some demand probably that moved from month-to-month because of that. So I think that the one thing that's been relatively constant is the amount of export volume that we've seen out of North American chlor alkali derivates products into the export markets. And I think that's continued to be strong. But I think the anomaly was more driven by the supply side. Edward Yang – Oppenheimer: And in terms of further price increases and your ability to get traction on price increases, what kind of operating rate do you need? I mean, you've been – I think this cycle's been a little bit different in that you've been able to raise – and the industry's been able to raise prices when operating rates were very, very low, mid 60s, 50% range. But going forward, do you a need an industry operating rate to be at a minimum 85% or give or take? What's the pressure level there for price increases?

I guess I don't think that there is a finite threshold anymore. I think you have to sort out all the pieces of the demand that are out there when there're strong demand for this export-based as opposed to merchant chlor alkali demand in North America. And I think the operating rate numbers are influenced high. And that doesn't necessarily mean that it's export volume is being fulfilled by the integrated producers, that it's – that it signals underlying strength across the broader market segments that Olin meets with its merchant chlor alkali business. I don't think you can just look at one number and from that define whether you've met some threshold or not, if you have to sort it out and look at where the demands coming from, and how broad that demand is across all the market segments. Edward Yang – Oppenheimer: Okay. I appreciate the color. And circling it back around Winchester, Joe, you mentioned that you think this is the last quarter of the surge. Where do you think demand, revenues, and earnings for Winchester will plateau?

Obviously, we haven't forecast it out. And what we think is that as the surge ends and starts to come down, that it'll come to a higher level than it was pre-surge. Edward Yang – Oppenheimer: Okay. Thank you very much.

Our next question comes from the line of Christopher Butler of Sidoti & Company. You may proceed. Christopher Butler – Sidoti & Company: Hi. Good morning, guys.

Good morning, Chris. Christopher Butler – Sidoti & Company: Just jumping off that last question, historically, how quickly has demand decline following a surge like this?

It will decline over a one to two-year period, it just depends. Christopher Butler – Sidoti & Company: And how much of your sales do you sell into law enforcement there?

We've increased this – we say it before, Chris, we're in the law enforcement, military 30% plus range, which is a change from where we used to be. Christopher Butler – Sidoti & Company: And switching gears to chlor alkali, with the maintenance outages that you had in the quarter, where there any volumes that you lost as a result or added costs for – that were in your ECU netback for freight or something of that nature that wouldn't have been there otherwise?

We don't believe that we were impacted by necessary sales that were lost. We ended the month with – on a significant late list on both products, chlorine and caustic. But we think that's volume that will be able to have the opportunity to make up as long as demand – underlying demand stays strong. Our freight numbers for the quarter were really no change from prior quarter on an ECU basis. And we don't think there was – and the impact in that cost category compares to the outages. We have built-in inventory – appropriate inventory at the locations where we had planned outages just so we didn't run into a negative freight burden for the month. Christopher Butler – Sidoti & Company: And do you have ECU netback implied in your guidance that you're expecting for the third quarter?

Just that it's up versus the second quarter. Christopher Butler – Sidoti & Company: And finally, looking at the balance sheet, you thrown out a number of numbers as far as the capital structure is concerned. I was furiously typing into my calculator, but it seems, at the end of the day, that you may have about $100 million of cash more on the balance sheet than you would need as a prudent reserve. Is that a good way of looking at it?

I think that's a fair analysis, Chris. Christopher Butler – Sidoti & Company: And the thoughts on what you're going to do with that going forward?

Chris, as we've stated before our preference would be to further invest in our business or to find acquisitions that will allow us to go downstream. They'll allow us to get an acceptable return on that money. And obviously, we're continuing to work on that – down those avenues. Christopher Butler – Sidoti & Company: It seems that you're leaning more towards internal investments than–?

I think that the key word that we said there is presently. We actually have some good investments that we can make. We believe that the high strength blows out bleach. It's an excellent investment for us. It gives us the kind of returns we're looking for. And I think as we've stated in the past – is in the acquisition area is valuations are still the issue. And when we find something that meets the valuation that we're looking for, we would not hesitate to make the acquisition. Christopher Butler – Sidoti & Company: I appreciate your time.

Thank you.

Our next question comes from the line of Adam France of 1492 Capital. You may proceed. Adam France – 1492 Capital: Yes, good morning. Thank you for taking my call. I have two quick questions here. Well I'm putting together a model before the $6 million in tax benefit that you're expecting. What is the tax rate that I should be using?

What we've said is the statutory tax rate typically is somewhere between 37% and 39%. One factor to consider is the permanent items that run through our tax rate on a quarterly basis are credits so they reduce the rate. And those credits have, in periods of lower earnings, a disproportionate effect on the rate. But as a base statutory rate, I'd say, 37% to 39%. The permanent items drive that down to the low end of that range. Adam France – 1492 Capital: Okay. If I heard it correctly, General Manyard [ph] talked about the industry pushing for a $50 chlorine increase, and you all are doing $20. Is it normal for you not to be with the industry move? Explain the thinking in terms of being so much lower, I guess.

We may have miscommunicated that. We're right there with the industry. We actually announced the price increase on chlorine. We had actually announced the $75 price increase, of which we're pushing on $50 and had a TVA, the $25, due to competitive situations. But we're out trying to get every penny we can with that price increase. Adam France – 1492 Capital: Okay, perhaps I misheard you there. And then on the caustic soda, did you say $60?

Caustic soda is $35 to $50 depending upon the grade, so higher grade caustic's $50, lower grade caustic's $35. Adam France – 1492 Capital: Okay. Is that what you were doing or what the industry is doing?

That's what we are doing and pretty much what the industry is doing. Adam France – 1492 Capital: Okay, very good. Thank you.

Thank you.

With no further questions at this time, I would like to turn the call back over to Mr. Joseph Rupp.

Thank you for joining us today and we look forward to speaking with you in October when we report the results of our third quarter. Thanks.

Thank you for your participation in today's conference. This concludes today's presentation. You may now disconnect, and have a great day.