Good morning and welcome to the Olin Corporation Fourth 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, Chairman, President and CEO. Please go ahead.

Thank you. Good morning, and thanks for joining us today. 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 in the fourth quarter of 2011 was $18.7 million or $0.23 per diluted share, compared to $2 million or $0.02 per diluted share in the fourth quarter of 2010. Sales in the fourth quarter of 2011 were $445.8 million compared to $385.4 million in the fourth quarter of 2010. 2011 was a successful year for Olin. Earnings in our Chlor Alkali business more than doubled compared to 2010, driven by improved pricing and by a higher level of co-product sales. The Chlor Alkali business also was strengthened by the acquisition of PolyOne's 50% interest in SunBelt facility in the first quarter. Winchester's earnings, while declining from the surge levels of 2009 and 2010, still represented the third most profitable year in its history. And as a result of these performances, Olin generated the second highest level of EBITDA in our history. In the fourth quarter of 2011, the Chlor Alkali segment did experience weaker demand compared to both the third quarter of 2011 and the fourth quarter of 2010 levels. We experienced weaker demand in most end-use market segments and it resulted in a fourth quarter operating rate of 70%. Fourth quarter 2011 ECU netbacks of $580 per ton, excluding SunBelt, improved approximately 13% when compared to the fourth quarter of 2010. These factors resulted in year-over-year improvement in fourth quarter Chlor Alkali segment earnings of 38%. Winchester's fourth quarter 2011 results declined compared to the fourth quarter of 2010, reflecting higher commodity and manufacturing costs. Fourth quarter 2011 restructuring charges…

Thank you, Joe. First, I'd like to discuss a few items on the income statement. Selling and administration expenses increased $6.5 million or 20% in the fourth quarter of 2011 compared to the fourth quarter of 2010. The year-over-year increase reflects the inclusion of SunBelt selling and administration expenses as consolidated Olin expenses, higher salary and benefit costs and an unfavorable foreign currency impact. The inclusion of the SunBelt expenses of approximately $9 million caused absolute year-over-year selling and administration expenses to be higher in 2011 compared to 2010. Fourth quarter 2011 charges to income for environmental, investigatory and remedial activities were $5 million, which included $400,000 of recoveries from third parties for environmental cost incurred in expense in prior periods. During the fourth quarter of 2010, there was less than $100,000 of charges related to environmental, investigatory and remedial activities, which included $1.6 million of recoveries for environmental costs incurred in expense in prior periods. After giving consideration to the recoveries in both periods, year-over-year expenses related to environmental, remedial and investigatory activities increased by $3.8 million. These charges related primarily to expected future investigatory and remedial activities associated with past manufacturing operations and former waste disposal sites. Full year 2011 expenses for environmental, investigatory and remedial activities prior to any recoveries were $19.3 million compared to $16.3 million last year. The 2010 environmental and remediation expenses were lower than normal year experienced. In 2012, we anticipate these expenses, without giving consideration to recoveries, to be comparable to 2011. We are not currently expecting any environmental recoveries in 2012. On a total company basis, defined benefit pension plan income was $5.9 million in the fourth quarter of 2011 compared to $2.3 million in the fourth quarter of 2010. The fourth quarter 2010 restructuring charge included a pension curtailment charge…

[Operator Instructions] First question comes from Frank Mitsch of Wells Fargo.

It's Sabina Chatterjee in for Frank Mitsch. I'm just curious on the operating rates and supply. We'd heard that chlorine operating rates actually increased 3 points in December versus November. So with that greater cost and supply, it seems that buyers at this time would actually have ample inventories. But based on the early indications, Joe, that you had mentioned on the call, are you seeing buyers reenter the market here? And what sort of lead time do you have on orders?

Sabina, this is John. Let me try to answer that. We did see -- at least for our system, we saw a pretty consistent demand on the caustic side through -- even through the period in December when chlorine demand had fallen off. And we've seen that continue into the current quarter that we're in. So we've not really seen any change in demand patterns on the caustic soda side. We're still seeing strength in pulp and paper predominantly and some of the other market segments that have been relatively strong over the last year.

Okay. And then can you just explain what the mechanics are of the earnout on SunBelt so that we know what to expect going forward?

We have not disclosed the mechanics of the earnout, Sabina, and we do not intend to.

Okay then. So a final question, if I may. You came in pretty nicely above the range you'd given us on the Q3 call. I mean, if we exclude restructuring charges and just take midpoints, it looks like about $0.20. So can you just tell us where the greatest upside was relative to what your expectations were a few months ago?

I think the greatest expectations came in our co-products' performance. We did much better in hydrochloric acid and we did much better in bleach than we would have expected.

The next question comes from Edward Yang of Oppenheimer. Edward H. Yang - Oppenheimer & Co. Inc., Research Division: If I could start with a clarification, first of all. When you say that January operating rates are in 80% range, is that for Olin specifically or for the industry?

It's for Olin's.

For Olin. Edward H. Yang - Oppenheimer & Co. Inc., Research Division: Okay. And in the fourth quarter, the industry actually appeared to operate at a bit higher level than you did in the mid 70s and Olin came in at 78. Could you explain the divergence there?

Well, I can tell you that when you look at the fourth quarter, and I'm talking from an industry standpoint, there are really 2 distinct patterns in the fourth quarter. In the first part of the quarter, chlorine derivative exports from the U.S. were still very strong. We didn't see that phenomenon change until later in the quarter. And during that part of the quarter, Olin just doesn't have an opportunity to participate in chlorine derivative export. In the latter part of the quarter when that phenomenon for the industry dropped off, then we saw, at least anecdotally, evidence that the industry operating rate was a closer match to Olin's through the entire fourth quarter.

We just had a lower operating rate in the fourth quarter than the industry because of the fact that we're heavy into the bleach business, et cetera. So we're not actually surprised by that. Edward H. Yang - Oppenheimer & Co. Inc., Research Division: That makes sense. On the pricing side, you mentioned the $65 in the caustic side you expect to realize in the first quarter. How much do you expect to realize net after transport cost? That's been fairly volatile. And also, do you expect to see any movement on the chlorine side? Chlorine prices have actually ticked somewhat. But now that operating rates are going up, do you expect chlorine to rise as well, somewhat?

We have -- this is John. We have historically seen 50% to 60% of announced price increases ultimately make it through our system and we would expect, consistent with what we currently see, for that $65 caustic price increase to replicate what we've seen historically. We have seen -- did see in the fourth quarter and expect that trend to continue into the first quarter, chlorine prices offset that. And that's strictly driven by the weakness in not only domestic chlorine demand, but in the derivatives markets for export purposes, as well.

As a follow-up, Edward, you made a point, which was if we see volumes continue to pick up as we move on the chlorine side, there ultimately will be the opportunity for that pricing to stop and to turn the other way. So I mean, we're pleased that the volumes are moving on the chlorine side. Edward H. Yang - Oppenheimer & Co. Inc., Research Division: Okay. And any way to quantify or size how much of an offset you expect to see in chlorine relative to caustic?

Well, we've reported that our fourth quarter ECU went down slightly from the third quarter, and our remarks say we expect that trend to continue into the first quarter before chlorine prices stabilize or start to increase if current demand trends hold as we look into the balance of 2012.

Yes, I think we used the word "slight." Edward H. Yang - Oppenheimer & Co. Inc., Research Division: Okay, I apologize. I missed that. Finally, on some of the industry happenings with the Westlake bid for Georgia Gulf, any thoughts there? What does -- does that mean anything for Olin specifically? Your thoughts on M&A or the outlook on industry consolidation, and also supply as well.

Not really. I think what we'd say is that naturally, we'd pay attention to it because you've got 2 companies that are in the merchant market, and we're in the merchant market, but that's all we can comment on it, Edward.

The next question comes from Christopher Butler of Sidoti & Company. Christopher W. Butler - Sidoti & Company, LLC: You talked about the operating rate in January. How do you see the quarter playing out with, typically March, you begin the seasonal build into the spring? Is it going to be a relatively typical year as far as that's concerned for you?

We don't see any indication that it won't be typical or better than we've seen. Just as an example, we continue to see strength in the HCL market, driven by oil, shale gas and steel. That ultimately translates into higher operating rates. We see strength in the bleach market as more and more users convert away from other sources of water disinfection to bleach. That ultimately helps our system in terms of operating rates as well. So we've seen nothing that would indicate anything different than historical or better as we look forward into the later months of the first quarter and the beginning of the second. Christopher W. Butler - Sidoti & Company, LLC: And with your new bleach capacity, is that something that you can utilize immediately? Or is that going to take a little time to build up the sales and customer base into?

No, we can utilize that immediately. We actually have -- we're in a good position. We have customers who really want to make the conversion away from other sources of disinfection for water to a bleach-based system, and we've quite honestly been capacity constrained. So this new capacity that will come online in the first quarter will enable us to reach out and draw in some new business. Christopher W. Butler - Sidoti & Company, LLC: And shifting to caustic pricing with the November increase that was announced and understanding that generally, it's about 50% of the increase that goes through. With the resistance, should we be looking at 50% of the $40 increase that some of the others had announced? Is that a better way of looking at that?

Well, if you read what the industry says, the buyers would like you to believe that the number is going to be less than that. When we look at our operations and look at our demand pattern, we're still running late on caustic orders. So we would -- our bias would be towards a number that's closer to historical. But there's a lot at play right now with increased chlorine operating rates, and we'll just have to see. Christopher W. Butler - Sidoti & Company, LLC: And just finally, with the upgrade, the mercury conversion and the transition to bleach production in Augusta, what's the timetable on those at this point as far as wrapping those up?

Third quarter.

Yes. Our intent is to have the conversion made at Charleston in the third quarter of this year. And then we will transition operations at Augusta, idling the mercury cell facility and transitioning into a different ongoing operation with a smaller footprint by the end of the year.

The next question comes from Herb Hardt of Monness. Herbert Hardt - Monness, Crespi, Hardt & Co., Inc., Research Division: Is it fair to assume that this year is a peaking of CapEx as you go out 3, 4, 5 years? Or are there other projects?

No. It's a fair assumption, Herb. Herbert Hardt - Monness, Crespi, Hardt & Co., Inc., Research Division: And the second question is, have things stabilized? I know you don't ship into the Far East, but after the Japanese earthquake, there were a lot of imbalances in chlorine and caustic. Has that pretty much stabilized now?

It has, Herb. What we -- if you look at the industry, at the North American industry, exports were up 7%, 8% last year. X imports were roughly flat, and a lot of that was -- or some of that was driven by what happened in the Toso [ph] facility in Japan. But the worldwide trade patterns have kind of adjusted to the new norm with that capacity out, and the Chinese have really stepped in to make up that difference. And the impact on North America has really leveled out to where we expect to be able to continue to export caustic out of North America in 2012 in a very similar fashion to what we did in 2011.

The next question comes from Dmitry Silversteyn of Longbow Research.

Can you -- just to switch a gear a little bit, I'm talking about Winchester, the charge and profitability of that -- of the division in the fourth quarter, was that just a mismatch in timing between raw material increases and your own pricing? Or was there significant volume decline or cost flowing through for the restructuring that drove down the operating margin to almost breakeven levels?

That is historic. That is normally a non-surge period. It's how that business works. What happens is we build inventory. We start in the first and second quarters. We sell it in the hunting season in the third quarter. And normally, in the fourth quarter, what happens is we actually take our operations down for about 2 to 3 weeks in that time period. And that was masked over the past couple of years because of the surge.

I mean, I'm going back. I don't have that much data going back. But going back to 2006, you still managed to do it -- to hold the operating margins between 2% to 3%. So I'm not surprised that it went down sequentially and seasonally. I'm just surprised that it went down almost to 0.

Yes, but we're not.

Okay, fair enough. The price in chlorine -- the softness in chlorine pricing that you saw in the fourth quarter, it sounded like in the answer to the previous question that you still continue to see sequential price declines in chlorine in the first quarter but you expect them to start appreciating with uptick up in seasonal demand. Is that more of a second quarter event or still end of the first quarter, as far as timing is concerned?

In terms of pricing and when it will stabilize and potentially start to improve, that will be a second quarter event. But it will be manifest by what happens in the first quarter. I mean, we expect, if the trend continues, to see pricing activity on the chlorine molecule sometime later in this quarter, which would potentially show up in contract pricing in the next quarter.

Got it, okay. And on the last question, with these 3 new plants that you're adding for bleach production that's supposed to give you higher purity or higher concentration, I should say bleach, is the ECU premium, which I think you talked about being $100 to $200 for bleach versus a typical ECU, is that going to expand when these new plants come on stream? Or is that going to be at the same premium that you're selling your current bleach at?

I think we'll just end up in the high end of that range as we bring this new capacity on and then basically expand the reach of our bleach business to fill up our total capacity available.

Got it. And then last question on bleach, it looks like -- my math may be off here, so if it is, please correct me -- but it looks like you did something, a number, but up 7% to 8% of your volumes sold as bleach in 2011. What's your goal for 2012 as far as bleach as a percentage of volume?

8% is about right for 2011, and we would expect that number to increase in the -- to be 11% to 12% in 2012.

The next question comes from Don Carson of Susquehanna Financial.

I just want to clarify the price. What, if anything, of this $65 August increase did you get in the fourth quarter? And you've talked about your ECUs x SunBelt. What was the SunBelt ECU realization in Q4?

The SunBelt ECU unit realization in Q4 was something over $600.

Okay. So down slightly from the $610 of Q3?

Yes. That's correct. And then I would say in Q4, we've probably got 25% of the $65.

Okay. And what was the impact of lower operating rates in terms of unabsorbed fixed cost. I mean, as you sort of rebound from 70% operating rates to 80%, what kind of a cost absorption benefit do you get? Can you help us with that at all?

It's a minimal number. Fixed costs are not a high component of our overall cost of manufacturing. So it doesn't move around.

And John, I want to talk about freight a bit. When you talked about a 23% increase for the quarter and a 20% for the full year, is that your all-in freight costs? Or is that just rail freight? And then...

All in.

That's all in. Now at $220 spot chlorine, if you're shipping that sale by rail, are you making any money? Or are you losing a little?

We continue to have a positive margin.

How positive is positive?

Positive enough.

Okay. I'm just wondering, it seems here that chlorine is more and more, I guess, almost not quite a loss later, but an opportunity to sell not just caustic but co-products as well.

Well, our intent is to try -- obviously, as freight costs go up, our intent is to try to manage the logistics of our business, to try to manage our customer mix and try to manage our integration of chlorine into other value-added products in a way that helps minimize that. And I think -- so far, as we look at our -- the progress we've made, we feel like we've been pretty successful in migrating towards a better value-added profile.

Now I'd heard that there is a 10% rail increase as of Jan 1. Can you confirm that? Or talk about what your outlook is for -- I mean, how long does this 20% full year -- and obviously, rail is higher since not all your product is going by rail. So what's your outlook on the freight rate side?

I guess our outlook is that freight rates are going to continue to increase. And that's really all we know. I mean, it's hard to predict in terms of a specific rumor about a January 1 price increase. I mean, we have rail price increases that occur in certain segments of our business from certain carriers scattered throughout the entire year. So we don't -- we're not in a position where we see a one-time impact across our entire system.

Okay. And then final question, John, what's your exposure to chlorovinyl? So if we see a pickup in housing and more demand out of the chlorovinyl sector, I mean, how will Olin participate in that? What percentage of chlorine ultimately gets into chlorovinyls?

23% versus the industry. It's a little higher than that.

The next question comes from Alex Yefremov of Bank of America Merrill Lynch.

I just wanted to follow up on the freight cost. It looks like in Q4, it went up more than it did in 3Q on a year-over-year basis. Was this a function of just a different mix between rail and pipeline? Or rates actually went up sequentially?

It was a function of different -- of a different mix. We had -- you may recall, we have mentioned during the quarter, we had several customers, the majority of whom were pipeline customers that had extended outages. So that created the mix issue, looking at our customer portfolio. And we did have some increases in rail freight, in some cases driven by crude oil increases, the changed fuel surcharges that occurred during the fourth quarter. So it wasn't entirely freight. It was a pretty significant mixed component, too.

Okay. And John, the demand uptick in the first quarter in the Chlor Alkali that you see. Can you help us understand whether it's -- to what extent it is driven by PVC versus other chlorine derivatives? Or whether this is pretty much across the board?

We've seen it pretty much across the board although we've probably seen more impact in some other segments besides PVC. But we've seen it really is a pretty broad increase across most of the segments we serve.

And finally, a question on pension. John, maybe you can help. Just looking further out after 2012, is there anything that could change sort of the magnitude of pension income for you?

I think as we look out over a longer period of time, and I would call that 3 to 5 years, we do not see anything that would dramatically change the level of pension income from the level we're currently reporting.

The next question comes from Gregg Goodnight of UBS.

I was a little surprised by the magnitude of the chlorine -- in the polyurethane going down 28% in the fourth quarter. Do you think your exposure was unusual? Do you think is was -- that sort of number was typical of the industry? And if I could, if you have an early read on the first quarter in the polyurethane side, I would like to understand what that is.

We didn't -- we weren't surprised by it because again, we had some customers -- pipeline customers in the polyurethanes business that had planned significant outages during the course of at least the last half of the fourth quarter. And a lot of that fell in line with the overall decline in chlorine derivative exports that was, I believe, seen across the industry and widely reported by a wide number of people. So it wasn't a surprise for us. As we look in the first quarter, again, we've seen improvement in demand trends across all the segments, really including urethanes so far.

Okay. Just in that vein, any additional color on titanium dioxide, recent operations versus your reported 20% decline in 4Q?

Again, we've just seen trends across all the segments up, so...

Okay. The ECU, on a netback basis, is your expectation pretty flat for Q1 versus Q4, I mean, with all the chlorine and caustic movements? Could you comment on that, please?

Yes. We have said a slight decrease to flat.

Okay, excellent. The hydrochloric acid contribution, reportedly, prices were up by -- if you could, could you comment on what level of pricing you saw on a year-to-year basis? And is hydrochloric acid getting meaningful in terms of an earnings contribution, say over 5% of the segment earnings?

I would say the hydrochloric acid, in terms of equivalent to an ECU shipped in the fourth quarter and in 2011, was about equivalent to bleach in terms of how much chlorine got shipped through that channel.

Okay. Do you measure profitability, I would assume, on a product basis? My recollection is that the price has historically been very low for hydrochloric acid. So could you give us some sort of feel, how meaningful hydrochloric acid is now to your operation?

Well, if you add in the value of the caustic that hydrochloric acid allows you to produce, then it's as meaningful to us as selling bleach.

Okay. So it goes back to Don's lost leader sort of comment. But, no, I appreciate your comments.

What we said in our remarks, the premium that we got in the fourth quarter for selling HCL compared to chlorine had widened out. So it is more of a value-added than chlorine is right now because of the demand profile.

The next question comes from James Finnerty of Citigroup.

At a large -- at an Investor Day for one of your merchant-producing peers, they recently stated that if there were to be further consolidation in the industry that they would likely be a seller. Has anything changed in terms of cost structure or in terms of supply and demand that would make consolidation more likely? Or is it just a -- it is a sort of a similar status as it was 5 years ago?

I don't think there's anything that's changed dramatically. I think that everybody's looking for opportunities. And consolidation has worked in our industry in the past with what we did with Pioneer, actually with Vulcan. PPG bought Equa-Chlor last year. So I think that everybody comes to their own decisions at different times, but I do think that there is the opportunity for further consolidation.

And in terms of natural gas, the prospect of it being very low for an extended period of time, does that make the industry in the U.S. more profitable?

Yes.

For that purpose, that's as one of the beneficiaries?

Yes.

The next question comes from Roman Kuznetsov of Gates Capital.

Actually, it's Jeff Gates. A couple of quick questions. Can you talk about your mix of delivery methods between pipeline, rail, whatever other methods on the Chlor Alkali side? And also, secondly, can you talk about the -- your mix of electricity and just remind us again what percent comes from hydropower, coal and natural gas?

Our mix is predominantly rail. We've said, based on the locations of our facilities and the markets we serve, that it's predominantly rail shipments that we make. And depending upon which product you're talking about and whether or not you're serving a regional market, that will transition. Because for bleach markets, for caustic markets, for HCL markets, where you typically you're only serving a region around the producing facility, then your truck shipment becomes more and more a focus of how you deliver to your customer. In terms of energy mix...

So that would be 90% rail?

No, no, no. More in the 75% to 80% rail. In terms of fuel mix, I don't know if we've given absolute numbers before, but I can tell you that in order, starting with the highest percentages, our fuel mix, the top 2 are coal and hydropower, and then natural gas and nuclear fuel mixes are kind of like a second tier, but..

I guess specifically, what percent approximately were natural gas?

We've not broken it down. We think we have a balanced set of fuel sources that provide us with the kind of balance we need in our electricity pricing.

And if I could, one last final question. I guess, I'm looking at Winchester. I'm looking that the last few years have been exceptionally high, and I'd just kind of like to understand, should we be looking at 2011 as closer to the normalized long-term earning power of Winchester?

I think we would suggest that 2011 is, prior to the positive benefits we expect to derive from the relocation to Oxford. And we talked in the call about that. We think that's a $30 million benefit that will be in place in the 2016 timeframe.

The next question comes from Alex Yefremov of Bank of America Merrill Lynch.

Just a quick follow-up on Winchester, would you expect your operating margins in 2012 to be higher than 2011? What's going on with your prices and also prices of metals?

I think we look at Winchester in 2012 and see a similar year to 2011.

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

We just want to thank you for joining us this morning, and we will look forward to speaking with you in April when we announce our results of the first quarter. Thank you, and have a good day.

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