RESTRUCTURING CHARGE

6 Months Ended

Jun. 30, 2011

RESTRUCTURING CHARGES

On December 9, 2010, our board of directors approved a plan to convert the 260,000 tons of mercury cell capacity at our Charleston, TN facility to 200,000 tons of membrane capacity capable of producing both potassium hydroxide and caustic soda. The project has an estimated capital cost of approximately $160 million. The board of directors also approved plans to reconfigure our Augusta, GA facility to manufacture bleach and distribute caustic soda, while discontinuing chlor alkali manufacturing at this site. This action will reduce our chlor alkali manufacturing capacity by 100,000 tons. We based our decision to convert and reconfigure on several factors. First, during 2009 and 2010 we had experienced a steady increase in the number of customers unwilling to accept our products manufactured using mercury cell technology. Second, there was federal legislation that was passed in 2008 governing the treatment of mercury that significantly limits our recycling options after December 31, 2012. We concluded that exiting mercury cell technology production after 2012 represented an unacceptable future cost risk. Further, the conversion of the Charleston, TN plant to membrane technology will reduce the electricity usage per ECU produced by approximately 25% and the configuration of the new plant will result in an increase in our capacity to produce potassium hydroxide. The decision to reconfigure the Augusta, GA facility to manufacture bleach and distribute caustic soda removes the highest cost production capacity from our system. We currently expect to complete the conversion and reconfiguration by the end of 2012. We recorded a pretax restructuring charge of $28.0 million associated with these actions in the fourth quarter of 2010. The restructuring charge included write-off of equipment and facility costs of $17.5 million, acceleration of asset retirement obligations of $6.7 million, employee severance and related benefit costs of $2.8 million, and lease and other contract termination costs of $1.0 million. For the three and six months ended June 30, 2011, we recorded pretax restructuring charges of $0.2 million and $0.3 million, respectively, for employee severance and related benefit costs and facility exit costs. We expect to incur additional restructuring charges through 2014 of approximately $10 million related to the implementation of plans to exit the use of mercury cell technology in the chlor alkali manufacturing process.

On November 3, 2010, we announced that we made the decision to relocate the Winchester centerfire ammunition operations from East Alton, IL to Oxford, MS. This relocation, when completed, is forecast to reduce Winchester’s annual operating costs by approximately $30 million. Consistent with this decision we have initiated an estimated $110 million five-year project, which includes approximately $80 million of capital spending. The State of Mississippi and local governments have provided incentives which should offset approximately 40 percent of the capital spending. We recorded a pretax restructuring charge of $6.2 million associated with these actions in the fourth quarter of 2010. The restructuring charge included employee severance and related benefit costs of $3.2 million and a non-cash pension and other postretirement benefits curtailment charge of $3.0 million. For the three and six months ended June 30, 2011, we recorded additional pretax restructuring charges of $2.2 million. The restructuring charges included a non-cash pension curtailment charge of $1.1 million, employee severance and related benefits costs of $0.8 million and employee relocation costs of $0.3 million. These restructuring charges related primarily to the ratification of a new five and one half year Winchester, East Alton, IL union labor agreement. We expect to incur additional restructuring charges through 2016 of approximately $20 million related to the transfer of these operations.

The following table summarizes the major components of the 2010 restructuring actions and the remaining balances as of June 30, 2011:

	2010 Restructuring Charge		2011 Restructuring Charges		Amounts Utilized			Accrued Restructuring Costs
	($ in millions)
Write-off of equipment and facility	$	17.5	$	―	$	(17.5	)	$	―
Asset retirement obligations		6.7		―		(6.7	)		―
Employee severance and job related benefits		6.0		1.0		(0.1	)		6.9
Pension and other postretirement benefits curtailment		3.0		1.1		(4.1	)		―
Lease and other contract termination costs		1.0		―		(0.2	)		0.8
Employee relocation costs		―		0.3		(0.3	)		―
Facility exit costs		―		0.1		(0.1	)		―
	$	34.2	$	2.5	$	(29.0	)	$	7.7

As of June 30, 2011, we have incurred cash expenditures of $0.7 million related to these restructuring actions. The majority of the remaining balance of $7.7 million is expected to be paid out in 2012 through 2016.

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

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