Good morning, and welcome to the Olin Corp. First Quarter 2011 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joseph Rupp. Please go ahead, sir.

Good morning, and thank you for joining us. With me this morning are John Fischer, Senior Vice President and Chief Financial Officer; John McIntosh, Senior Vice President of Operations; and Larry Kromidas, our Assistant Treasurer and Director of Investor Relations. Last night, we announced that net income of the first quarter of 2011 was $133.7 million or $1.66 per diluted share compared to $14.1 million or $0.18 per diluted share in the first quarter of 2010. On February 28, we completed the acquisition of PolyOne's 50% interest in the SunBelt Partnership. And as a result, first quarter 2011 net income includes a one-time pretax non-cash gain of $181.4 million associated with the required remeasurement of the 50% of the SunBelt partnership, which Olin had previously owned. In conjunction with this remeasurement, a discrete deferred tax expense of $76 million was recorded. Sales in the first quarter of 2011 were $436 million, compared to $362 million in the first quarter of 2010. The positive pricing and volume momentum we've been experiencing in our Chlor Alkali business began accelerating in the first quarter of 2011 and should benefit the business for the balance of the year. This momentum provides us with the opportunity in 2011 to achieve the highest level of EBITDA since the spin-off of Arch Chemicals in 1999. First quarter 2011 segment earnings were $45.2 million, which is more than quadruple the first quarter 2010 Chlor Alkali segment earnings of $10.6 million. This improvement reflects significant year-over-year increases in both volumes and ECU netbacks. Year-over-year chlorine and caustic soda volumes improved approximately 8% while ECU netbacks improved approximately 19%. The first quarter 2011 Chlor Alkali results include approximately $3.7 million of incremental segment operating earnings associated with the SunBelt acquisition. In addition, the overall Olin results include approximately $800,000 of…

Thank you, Joe. First, I'd like to discuss a few items on the income statement. During the first quarter, Olin recorded a one-time pretax gain of $181.4 million associated with the remeasurement of the 50% of the SunBelt partnership, which Olin previously owned. This remeasurement is required by FASB Accounting Standard Number 805 business combinations, and essentially represents a mark-to-market adjustment. In conjunction with this remeasurement, the deferred tax expense of $76 million was also recorded. Selling and administrative expenses increased $7.4 million or 23% in the first quarter of 2011 compared to the first quarter of 2010. The year-over-year increase primarily reflects increased management-incentive costs, increased salary costs, transaction costs related to the SunBelt acquisition, incremental SunBelt administration expenses and higher legal and legal-related expenses. First quarter 2011 charges to income for environmental, investigatory and remedial activities were $1.5 million, which includes $500,000 of recoveries from third parties for environmental costs incurred and expensed in prior periods. During the first quarter of 2010, there were $2 million of credits related to environmental, investigatory and remedial activities, which included $2.6 million of recoveries of environmental costs incurred and expensed in prior periods. After giving consideration to the recoveries in both periods, year-over-year expenses related to environmental, remedial and investigatory activities increased $1.4 million. Second quarter 2011 expenses prior to any recoveries, are forecast to increase approximately $6 million from the first quarter 2011 levels, and we continue to forecast to -- full year 2011, expenses for environmental, investigatory and remedial activities prior to any recoveries will increase approximately 50% from 2010 levels. We do not expect significant recoveries from third parties of environmental costs incurred and expensed in prior periods beyond the $10 million that is forecast to be received in the second quarter of 2011. On a total company…

[Operator Instructions] Our first question comes from Frank Mitsch from BB&T Capital Markets. Frank Mitsch - BB&T Capital Markets: Thank you so much for breaking out the 1 month of -- well-dated profits from SunBelt, $3.7 million. If I annualize that, that's $44 million. But obviously, based on the commentary and the positive trends in April and the price increases, et cetera, it's not unreasonable to assume that, that number rises to $50 million. At that sort of level of additional profitability from SunBelt, does that trigger some payments that need to go to PolyOne? How should we be thinking about how that impacts your profitability, what you realize, and et cetera?

Well, Frank, the way we would account for the extra earnings, assuming there was an earn-out of -- all announced earnings would flow through our income statement and that we would have accounted for the earn-out as part of the acquisition accounting. But I would want to reiterate what we've said before, that any shareholder of Olin should be really happy if we're paying PolyOne an earn-out payment. Frank Mitsch - BB&T Capital Markets: All right. So it's still going to be opaque to us?

Yes.

Yes. Frank Mitsch - BB&T Capital Markets: All right. And the commentary before about reducing your shipping costs, et cetera, improving your percentage going to bleach, can you remind us where you are right now in terms of the amount of chlorine and caustic that you're consuming internally and where your target is on that?

We're in the 15% to 18% number now, I believe, Frank, and we said we were going to continue to grow both of those product lines as time -- as we move forward. We haven't really put out a public comment on a target. But our obvious target is to continue to make that number bigger and bigger.

Frank, you might be thinking about, though, on bleach, we have put a target. About 10% goes into bleach, and we have a target to take that up to 15% to 20%. So that is one method of doing that, and obviously, the conversion of St. Gabriel was a big help for us as far as getting off the rails. Frank Mitsch - BB&T Capital Markets: All right. Terrific. And can you comment about the -- a couple of your competitors have suffered some force majeure here recently -- what are the prospects for you, I don't know, gaining market share? I guess, you're at a 95% capacity utilization in the back half of April, and your expectation is that, that's going to continue to the balance of the quarter, into the third quarter. Is that correct?

That's correct, Frank. We are forecast to basically be operating at capacity through the summer, through the fourth -- for us as the bleach season, which is our peak demand requirements. We entered April really late on shipments for both products, so force majeure events in someone else's system don't really afford us much opportunity. We have contract customers we're trying to meet demands of right now. Frank Mitsch - BB&T Capital Markets: All right. Great. And then lastly, there's been a couple of companies that have announced a $50 dollar per-ton caustic increase. Has Olin announced as well?

There's least 3 that have. We announced as well.

Yes, we announced. Frank Mitsch - BB&T Capital Markets: Yesterday? Terrific.

Our next question comes from Edward Yang of Oppenheimer. Edward Yang - Oppenheimer & Co. Inc.: Joe, you mentioned Japan. Do you expect pricing momentum to continue once Japan comes back online? It seems like all of Japan has helped move things along. Pricing was still moving up prior to the earthquake.

Yes, I think, that what we're going to experience, Edward, is this is a very tight market here in the United States -- in North America into 2012. Edward Yang - Oppenheimer & Co. Inc.: And you just mentioned again, you're operating at 95% and that's basically capacity. Not -- is the rest of the industry operating at around capacity? And so does that mean that in some of the other chemical chains, for example, once product gets sold out, we've seen prices really go vertical. Is this kind of what we should expect going forward in terms of price activity in the Chlor Alkali space going forward?

Well, if you look at the industry operating rate, the most recent one that was announced was 92%, which was announced for the month of March. I would expect that in this industry operating rates, we'll see some additional upwards movement during the next quarter or 2 as well. I think that there are significant increases for caustic and chlorine both on the table, which we expect to be implemented starting in the second quarter and impacting on through the balance of the year. So I think it's possible that supply could continue to tighten or it's possible that it could stay where it is and support the increases that have already been announced. Either way, it's a positive story for us. Edward Yang - Oppenheimer & Co. Inc.: Well qualitatively, John, you do sound incrementally more positive than you did just 3 months ago. So in terms of approaching, re-approaching, the prior highs in terms of pricing that you saw back at the end of '08, given how industry fundamentals are playing out now, current pricing is still about 35% below where we were a couple of years ago. Do you think it's reasonable that at some point, over the next 12 to 18 months that we could hit those prior highs in terms of ECU netbacks on a contract basis?

Edward, I think that what we've talked about in the past is that we had, at one time, thought there might be a lid on pricing to not allow caustic to get way, way up there because of what happened on the West Coast from China. What we believe is that lid has continued to raise. We're not sure where it is at this point, but we believe it's higher than it was when we began the year. Edward Yang - Oppenheimer & Co. Inc.: Okay. Wonderful.

Our next question comes from Don Carson of Susquehanna Financial.

Question on just price progression and in your contract structures. I know that CMAI was posting $50 higher caustic. On April 1, ChemSol was $40. I believe those are the 2 key newsletters for you. And on their $60 March initiative, there's even talk that, that will be, I think, applied substantially on May 1. So I was just wondering what's baked into your guidance in terms of price realization in the quarter. What delays do you have in getting prices, once they've been posted to the newsletters? And as we look at the second half of this year, given the amount and magnitude of both caustic and chlorine increases that had been announced, do you run into any cap or collar issues on your contracts?

Don, let me -- let's go backwards to just 60 days within the quarter. We were looking at predicted price indexes by several in the industry that showed prices were going to peak early in the second quarter and decline throughout the entire balance of the year. What happened is that the -- all of the events and resulting increases that have been announced, and announced increases that have now gotten some traction and are being implemented, has changed that story around to where when you look at pricing, there is expectation that pricing is going to improve over the next couple of quarters for us. Because of the lagging nature of our contract, we believe that we have improvement ahead of us through the balance of the year. The only increase that was really -- really had a chance to impact Olin's second quarter pricing was a $40 increase that occurred in January. But you may remember from looking at some of the indexes, and that was a caustic increase, that, that caustic increase wasn't at all reflected in any of the numbers in the first quarter. So consequently for us, for second quarter pricing is driven by what gets reflected in first quarter price indexes, we didn't have much opportunity to see improvement in that regard. Now as you mentioned, that pricing is being shown in April and so that will give us an opportunity to take contracts up through the balance -- in some respects, on some customers, later in this quarter and for the balance of our system in the third quarter. The other price increases, which occurred in late March and in late April, we expect those to be implemented, and we expect them to have third quarter, fourth quarter impact in our system.

And Joe, we're seeing some new capacity come on mid-year, some Shintech and then later on some Formosa [Formosa Plastics Corp]. Are you seeing that potential additional caustic having any impact on customer negotiations? Or is it your expectation that the Dow will close block in [ph] them and it really won't be much of an issue in the second half?

We have consistently said we believe the industry bias is towards capacity rationalization, especially when new capacity is being brought on by some of the integrated players. We still believe that, that is the bias going forward. And so in answer to your question, yes, we would expect as new capacity comes online in the second half of this year, that we will see capacity rationalization occur within North America.

And John, just to clarify, you don't expect any caps or collars in your contracts to prevent eventual realization of all the caustic and chlorine increases that have been announced?

I guess, I would have to say, Don, that it's just a matter of how much movement there is. When we saw the $1,000 caustic levels that we saw in the last peak, there was obviously, constraints when there was that much movement that fast, and I don't think any supplier is going to be in a position to face their customers with that kind of market situation and not, at least, recognize that they need to try to help keep their customers competitive. But from the standpoint of it being a contractual limitation, that's not the same issue as it was for us, historically.

Our next question comes from Christopher Butler from Sidoti & Company. Christopher Butler - Sidoti & Company, LLC: Looking at the SunBelt joint venture and some of the synergies that you're hoping to get from that, do you have a time frame on when you can start to capture the synergies?

Immediately. I said it quickly, but we have the opportunity to get synergies through the balance of this year and into next year.

Remember, we were the plant operator, so there's virtually no transition here in terms of how the plant would run and our ability to know the ins and outs of the plant. Christopher Butler - Sidoti & Company, LLC: And that's something that we would see the benefit from the freight cost? Would that be an easy way to measure that?

Not strictly, no. I think where the places we've said will see it soonest will be increased utilization, the volume side, our ability to run what is the lowest cost plant we have at higher operating rates. The other thing we'll see is that SunBelt brings a significant block of high-purity membrane-grade caustic into our system, the acquisition brings the other half of that, and we'll see some benefit there as well. Christopher Butler - Sidoti & Company, LLC: And looking at your capacity with the high degree of utilization that you're expecting here through the summer, are you all set as far as planned maintenance outages? Is that something that will now wait until the winter months? What are your thoughts there?

We only had 1 major outage planned for the second quarter, and we've already completed that outage, which was at our McIntosh site. That's the only significant planned scheduled outage we have for us for the balance of the second quarter. And yes, we will be looking to move outages and plan around the need to operate at high utilization rates over the next 2 quarters. Christopher Butler - Sidoti & Company, LLC: And shifting gears to Winchester, you had offered guidance that the second quarter was going to have operating income about half of what you saw last year. Is that a good rule of thumb to think about the full year 2011, which I think puts us right about where your peak was before the recent strength?

Chris, the first and second quarters of 2010 were the best 2 quarters for Winchester in the entire surge relative to where it would be in a normal seasonal pattern. The third quarter of 2010 did not have that same high level of profit relative to normal. So I think that 50% is -- probably overstates the impact in the second half of the year. Christopher Butler - Sidoti & Company, LLC: I appreciate your time.

Our next question comes from Aleksey Yefremov from Bank of America Merrill Lynch.

What is your outlook for freight rate increases for the balance of this year, I guess, compared to the first quarter?

The first quarter, we had some freight rate increase -- some additional freight costs that were driven not just by rate increases, but were driven by inefficiencies and operating problems the railroads had, which created some, I would call it, out-of-orbit or illogical shipment requirements for us to meet customer needs. So the first quarter, I don't believe is indicative of what we'll see every quarter throughout 2011. However, having said that, we don't expect the railroads to change their practice of the last several years of using their ability to increase prices at every opportunity and upon every contract renewal.

Can you size that extra freight cost in the first quarter in terms of millions of dollars?

No.

Okay. And it appears that barge shipments in the Mississippi River are now disrupted. Do you expect any positive or negative impact in volumes or maybe even pricing?

We don't see any impacts at this time.

Okay. And finally, switching to Winchester. It seems like FBI background-checks statistics have been rising in recent months. Do you see any signs that after the pull forward of demand in the first quarter, maybe back half of this year or 2012, demand could be stronger than what you currently experienced?

We are still a little bit surprised as well as to what's happened with the next checks, if it's what you're talking about. There is the possibility for a little bit of strength there, but I think, that their statement should be that we believe the surge did end, and then on other products, other than in handgun products such as rifles and shot shells, those kinds or products, that we are off surge at this point in time.

Okay. Great.

Our next question comes from Dmitry Silverstein from Longbow Research.

A couple of questions, if I may. First, on Winchester, you've talked about getting price increases to try to offset the run-up in raw material costs. Can you talk about the dynamics of the price increases and your ability to get them throughout the year? Is it a kind of an annual thing, where you go at it once? Or will you have an opportunity to adjust pricing later in the year if metal costs continue to escalate?

We have had the opportunity -- historically, I'm talking back in the early 2000s et cetera. Normally, it was an annual price increase. When the commodities start running in the 2004, 2005 time period, there was maybe as much as 2 price increases in a year. So my sense would be that if metal continues to run, that there would be the opportunity for another price increase announcement later in the year.

But really, if you look at realistically, at the margin, as you've delivered in the first quarter, it's unlikely that you're going to see margin improvement. Obviously, you'll see dollar improvement in the September quarter, but you're unlikely to see margin improvements this year versus the level you delivered in the first quarter?

I would say the answer to that is no. That is the reason we're undertaking the relocation to Oxford with 1,000 jobs from centerfire. That is our big effort to improve margins in Winchester, long-term, and that project will accomplish that. It will just take a couple of years.

Right.

Got it. Okay. And then the second question, just a comparable, and I'm not sure if I'm comparing apples-to-apples here, but when I look at one of your competitors that released their results earlier, their business is about same as yours in terms of size, but they generated significantly more profitability, both in terms of margin and in terms of absolute dollar amount, is there a discrepancy here that I'm missing? Is there maybe a DNA component between the 2 that can be quite significantly different? Kind of why is your level of profitability not been reflective of the level of your competitor?

I think, Dmitry, there's 2 points that we would make there. We've made significant investments in our business over the last several years. And we think, the more valid comparison there is EBITDA, not earnings. And second, John McIntosh just talked about the lagging effect. We've seen that lag consistently over a long period of time. And in periods where prices are escalating, we tend to lag, and when periods -- and be behind our competitors. In periods, where prices are declining, we tend to be ahead of our competitors. So we think we need to really look at what happens here as we get out into the second, third and fourth quarters of this year, both -- and the valid comparison is EBITDA, not EBIT.

Got you. I have no case, so, all right. That helps. That's all the questions I have.

Our next question comes from Andrew Cash of UBS.

I lost connection when Don Carson was asking what your embedded quarter-to-quarter ECU netback would be from the first to second quarter. I was wondering if you could bring me up-to-date on that. And then I have a couple of other questions.

We didn't provide a specific number. My comments to Don were that when you really look back at price movements in the first quarter of the year, which would drive for us expected price improvement in the second quarter, the only announcement -- price increase announcement that occurred early in the first quarter to have any impact was a $40 caustic increase that was announced the end of January. And that price increase, even though announced, was never reflected in any of the indices voiced in the first quarter. So we obviously said in our comments, that we expect some improvement from first quarter to second quarter. But based on the fact that the other 2 caustic increases, $60 and $50 and the chlorine increase were announced later in the first quarter, we expect to see even better sequential improvement in the third quarter.

Okay. I got you. So no specific numbers on there. Where is all this caustic going to? I mean 8% volume increase, is this just essentially going offshore? Is that where the market is, because the U.S. economy is not really going that great.

Well, 2 things. The natural disasters in Japan really created a change in global trade patterns for caustic, because there is capacity missing out of Japan's normal portfolio of companies, and ones that are operating are impacted by electricity supply and the net effect of that is there is a significant amount of caustic that they used to export that they're no longer exporting, because they don't have it. That's rearranged trade flows and now those exports volumes are being made up by others in the East, predominantly in China. What we've seen is in our business, caustic has continued to really grow being driven by continued strength in pulp and paper and continued strength in super absorbents, and that's really what has been the strong point, and that's been a continuation of the story from several quarters preceding the last one.

And export demand has rain-stormed due to aluminum pick-ups down in South America and pulp and paper down there.

Okay. So you're basically shipping to your traditional customers. But are you also doing exports? Is that a benefit to you?

We have made a limited number of exports and that has facilitated us meeting the demand Joe mentioned in South in pulp and paper, in South America. But we haven't been a major player in the export market.

Okay. Now I heard you, at the early part of the call, you mentioned bleach was up 50%. Was that sales or was that volume?

Bleach is up from 2 years ago, 50%. And that is volume.

Right. First quarter.

That's the first quarter versus first quarter comparison, Andy.

2 years, ago. Okay. And then a couple of financial items. Your SG&A, I heard you had the few reasons that was up. What kind of an ongoing run rate we should pencil in for the future quarters?

I'm not -- we've not provided guidance specifically on SG&A. We do talk -- provide guidance as it relates to the corporate and other line. And that's a number that if you were to look at somewhere in the $60 million to $65 million a year range, is a good number to use.

Okay. And then just to make sure I'm on the right basis here backing out the gain using your 36%, 37% full year tax rate, the first quarter should -- would have been around $0.31?

I think that's a good calculation.

Okay. And then the $30 million savings that you're talking about over in Winchester, is that -- how would you characterize that? Is that mostly a labor savings or a tax savings? What's...

It's labor savings, Andy.

It's mostly labor?

Yes.

And then just finally, you characterized the backlog for military and commercial. Do you have some numbers you can put around that?

We do not at this time, no.

Okay. That's it.

Our next question comes from Gregg Goodnight from UBS.

Just had 1 additional follow-up. Your energy cost, your energy unit cost on a year-over-year basis, up, down? Do you have a number you could give me?

Energy costs were favorable year-over-year comparisons.

Okay. So energy cost were down?

Yes.

By what percentages?

We haven't given those numbers out before, but it was not a huge change.

Okay. That's all I have.

Our next question comes from Richard O'Reilly from Standard & Poor's. Richard O'Reilly - S&P Equity Research: Joe, in your opening comments, you talked about for the Chlorine business -- Chlor Alkali business having the highest-level EBITDA since 1999. I don't know what that number is, but you earned $328 million for the segment a couple of years ago. I mean, are you directing us to something greater than that in 2011?

The comment was designed at the Olin Corp. level, which includes Winchester, and that includes the corporate and other costs.

And what we're saying is it's the opportunity to have that.

And the highest level that we saw since then was in 2008.

Okay. Fine. Okay. That's it then.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Rupp for any closing remarks he may have.

Thank you for joining us today, and we look forward to speaking with you in July, when we announce the results of our second quarter. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.