Good day everyone, and welcome to today's Ashland Incorporated first quarter earnings conference call. (Operator Instructions) At this time for opening remarks, I would like to turn the call over to Eric Boni.

Good morning and welcome to Ashland's first quarter fiscal 2009 conference call and web cast. We released our fiscal first quarter results for the period ended December 31, 2008 as 6:00 eastern time today. These results are preliminary until we file our 10-Q in February. With me here today are Jim O'Brien, Ashland's Chairman and Chief Executive Officer and Lamar Chambers, Senior Vice President and CFO. Before we get started let me remind you and review our cautionary language regarding forward-looking statements on Slide 2. Statements may be made during the course of this presentation that constitute forward-looking statements as that term is defined in relevant securities laws. We believe our expectations are based on reasonable assumptions but cannot assure that those assumptions will be achieved. Therefore, any forward-looking statements may prove to be inaccurate. Please turn to the agenda on Slide 3. Now I will give you an outline for the call. First, I'll review the quarter's highlights followed by key items as well as pro forma and conforming adjustments to get you to our reported results, and get you from our reported results to our adjusted pro forma results for the first fiscal quarter. We believe these adjusted pro forma results enhance understanding of our current and future performance particularly so for this past quarter which reflected only partial quarter results for the Hercules business and certain large effects related to accounting for the acquisition. Then, I'll discuss our debt covenant status. Lamar will discuss our performance and outlook by commercial unit, and then present potential cash flow scenarios that may help you with your financial models. Jim will cover our $265 million of cost savings initiatives, including Hercules integration and other identified opportunities. After that, we will take your questions. Please turn to Slide 4. Clearly the…

Please turn to Slide 14. Ashland Aqualon Functional Ingredients represents former Hercules Aqualon group including its woods rosins business along with a small business transferred from water technologies following the acquisition. As Eric noted, we are presenting these results on an adjusted pro forma basis. Overall, Functional Ingredients volume dropped by 14% versus the year ago quarter primarily reflecting the world wide decline in the codings and construction markets. Conversely, sales to the regulated markets grew slightly in the quarter and CMC in China, and the EC product lines exceeded prior year levels although they did negatively impact mix. Overall, revenue declined 7%. EBITDA declined by 16% to $49 million for the December quarter and as a percent of sales declined 210 basis points to 21.2%. Let's take a look at factors impacting pro forma EBITDA for this segment on Slide 15. Volume productions drove the decline and adjusted pro forma EBITDA versus the year ago December quarter. Until several months ago, Functional Ingredients was on allocation for three of our primary product lines. In many cases, we had to turn away orders or could only accept partial orders. As world wide consumption has significantly decreased, we've been able to take these products off allocation but have not yet been successful in replacing the diminished business from our customers. As a result, the fixed cost impact of lower volumes also reduced margins. Raw material costs were lower sequentially, however the cost of cellulose, which is the most significant raw material used by Functional Ingredients has not dropped as quickly as some other commodities. Cumulative price increases implemented during the year enabled us to recover 95% of our cumulative increases in raw materials, freight and utility costs during the December quarter. Moving on, let's look at the outlook for Functional Ingredients…

Slide 33 talks to our current primary focus as an organization, and that is, cash generation. We are focused on cash generation and savings from six sources; increased profitability from sales, reductions in operating expenses, working capital, capital expenditures and dividends and sales of non strategic assets primarily business divestitures of auction rate securities. Maintaining our share of business for our customers and driving gross margin improvement from the depressed levels we have experienced as of late are paramount to our performance. You've already heard about our business segments' progress in these areas from Lamar. Cost reductions represent a significant component of our plan to generate cash and I will spend some time on our progress shortly. Cash generation through working capital has been a focus for the company for well over a year. Last year we generated $134 million of cash from operating assets and liabilities almost all of which was from reductions in working capital. In addition to our continued active approach to managing working capital, the market forces driving reductions in volume and price should provide a natural counterbalance for cash generation in the depressed current operating environment. Capital expenditure reductions are a priority for us as well in the current economic situation. We are now planning only $200 million of capital expenditures for fiscal 2009 which represents a reduction of roughly $120 million on a pro forma basis. This will be achieved by delaying projects that will not generate positive cash flow in the very near term. We spent $57 million on capital expenditures in the first quarter putting us right on track for our forecast of $200 million. We already announced and implemented a reduction in our quarterly dividend to $0.075 per share which will reduce cash outflows by approximately $60 million annually as compared…

(Operator Instructions) Your first call comes from [James Sheehan – Deutsche Bank] [James Sheehan – Deutsche Bank]: On the functional ingredients, can you talk a little bit about the traction you're getting there and do you expect that to continue despite volume weakness?

The activities that the group is trying to do is focus primarily on placing the volume and they still have strength areas where they continue to get price. But the focus is primarily on filling the plants out and getting the operations to run at the most efficient rate. [James Sheehan – Deutsche Bank]: On Water Technologies, you spoke last quarter about municipal contracts being renewed. Can you comment a little bit about the progress you've made there? Is that in line with what you had expected and how does that impact your pricing and margins in 2009?

The time line of getting new contracts, there is a significant number that are coming due through the December quarter in January and February. Obviously with the current economic conditions, the negotiations are different than we would have otherwise expected, so the intention is to continue to get as much price to cover cost but the activities being negotiated with these customers is what is, what is the raw material base that we're basing our discussions off of, and that's still somewhat unclear. So these negotiations are not as easy as one would expect in the previous environment, but we fully intend to get a sufficient recovery of margin to cover our service and the raw material costs. But those negotiations are ongoing. [James Sheehan – Deutsche Bank]: With respect to sales of non strategic assets, could you elaborate a little bit about what types of businesses you're referring to and is that expected to be wrapped up in 2009 or is that more of a longer term ambition?

As we look at this concept of this idea, it's around reducing our debt, so if we can find a time frame where we can get a significant value for the assets we have for sale, we would do a transaction, but we have no intention of just giving these businesses away to gain cash. So our anticipation is, this may continue on through '09 and will be dependent upon the environment that we continue to discuss these issues with potential buyers and I don't anticipate anything near term.

Your next question comes from Laurence Alexander – Jefferies & Co. Laurence Alexander – Jefferies & Co.: This is Lucy sitting in for Lawrence. Just had a couple of quick questions. Going back to the divestitures, can you give any more color on particulars in each area that you are focusing on for divestitures?

I think at this time all we've said is that there would be areas that we would view as non core and this does not necessarily mean it would be one particular business or another whether it's viewed as core or non core in the description. It's really in the sub segment how we would view its importance to the corporation going forward. So these are normally between $100 to $500 million in size and scale at this stage and they go across basically the whole range of businesses that we have. So as we look at the importance of monetizing it or running it for EBITDA, the real analysis is what is the EBITDA contribution versus what would be the cash generated from the sale for reduction of debt, and that's the analysis that would be completed before we would decide to make any decision on sale or keeping the asset. Laurence Alexander – Jefferies & Co: Can you give any additional color on distribution margin expansion?

The effect you're seeing right now is with the falling values that we have. Distribution is on a LIPO basis so much of the cost that we have incurred through the run up has already been taken through the P&L so now they're going to gain a benefit on the run down of price because on the LIPO basis, we'll get a benefit from that. Laurence Alexander – Jefferies & Co: Going back to the Aqualon segment, pricing was less than raw material increases in calendar 2008? What would you expect for 2009?

They are a very aggressive group and they're out negotiating new contracts, new business, continuing discussion with their customers, continue to negotiate the raw material costs for the cellulose that they purchase, and they had about a 95% recovery as we reported in our prepared remarks. The continually go out and look for price, look for business, and as I stated before, our primary intent is to fill the plants out. So having the plant through put to us is just if not more important than an incremental margin at this point in time.

Your next question comes from Mike Harrison – First Analysis. Mike Harrison – First Analysis: Looking at the Aqualon business, a couple of questions. I was wondering first of all if you could speak broadly about the strategy in China and maybe provide an update on the Changzhou joint venture and whether that's ramped up on the higher margin MC products following the fire that they had about a year ago, and also wondering how the construction of the Nanjing ATC facility is proceeding.

What we've done in China is adjust the volumes there to the current demand curve in China which is down from where it was, so in Changzhou we've actually taken the opportunity to use this time for training and upgrading the facilities so we can run it at the higher grade materials. So a lot of production has been taken out of that plant. We have taken shifts out of several other lines in China as well to adjust for the demand curve. And as far as our Nanjing plant, we continue to have construction but we have pushed that out at least one quarter for completion, so the need for assets in China are not as great as they once were going back six months. So we're adjusting our plans and our through puts there appropriately to adjust for that demand curve. Mike Harrison – First Analysis: So the timing for Nanjing then is that getting into the first calendar quarter of 2010?

Yes. It would be pushed out to '010 and it's at least one quarter. Mike Harrison – First Analysis: In the Water Technologies business, you mentioned you expect raw material costs to decline. Pricing is still something you're working through. Do you have a metric for where you are in the pricing versus raw material gap that needs to be covered and maybe when you expect that gap to close and start to turn positive for you?

We will have that metric I would expect by the end of this month because of all the changes that are being made to this business. As we've stated in the discussion, we've closed the agreement with GE which was important to how we were going to wind out some of our plants and how we were going to source materials. So that is being decided now. As far as the pricing, we're getting our analysis of what our true costs are so we can go in and negotiate appropriately with our customers, and at the same time we are going through significant cost reduction because of integration in that business. So they're really focused on that, which in the near term, that probably has a larger impact on the performance of the business as far as getting the right sizing of the business integration done quickly versus a slow incremental increase of margin. So all these things are going to be worked simultaneously and they've made significant progress in each area. So I would hope that by the end of this month we would have some real clear ideas about where we stand in that business and what the opportunities and the challenges are. And by the end of this quarter, they will have run for one quarter as a combined business, so as we report out next quarter, we'll probably have a clear metrics for you of what's really occurring in that business.

Your next question comes from Robert Felice – Gabelli & Company. Robert Felice – Gabelli & Company: I wanted to focus on the statements that you made about divestiture of assets. Jim, you've been very clear that priority number one is maximizing cash to reduce debt and you mentioned $100 million to $500 million as a ball park range for divestitures. If the world continues to deteriorate at the pace we've seen during this quarter, is it fair to assume that you'd consider divestiture of some of your larger non specialty chemical businesses?

If you take a look the contingency scenarios that perhaps we would be looking at, obviously one of the primary objectives is to meet our covenants and to protect the company. So we would do whatever is necessary to achieve those two outcomes. Robert Felice – Gabelli & Company: One of the big questions that's swirling around right now is the extent to which the large volume declines we're seeing both for Ashland and its peers alike is due to end market demand versus a massive inventory de-stocking or recalibration of the supply chain, if I can call it that. Do you have any sense as to the magnitude of the de-stocking versus the decline in end market demand to give us a better sense as to a run rate level of underlying volumes?

As you look at the business, the best transparency into that is our Distribution business, and it varies market to market. These markets are off anywhere from 10% to 25% and as we look at January, there's been some recovery, but nothing significant. So what we're looking at for our forecasting and what we're planning on, and why you're seeing us take significant issues on cost cutting is, we're not counting on anything more than what we've already seen which is about a 20% reduction in demand. So we're making all our plans and all our forecasts and working all the requirements to meet our covenants and our cash requirements based upon that outlook. So we are not forecasting or anticipating any improvement this year. Robert Felice – Gabelli & Company: While you're not planning for that which seems to be the prudent thing to do, your sense, would you say it's fair to assume that a portion of that is due to de-stocking?

I would say there was some de-stocking but everybody is still pretty much working off "make to order". No one's "making to inventory". So the fact that everybody is making to order, the supply chain is still very, very tight and if there would ever be a significant uptick in demand, there would be a lot of catch up being made because there's really slim if any inventories out there in the supply chain. Robert Felice – Gabelli & Company: You made mention of price cuts in your Valvoline business. Can you give us a sense as to the magnitude of those and then also given the magnitude of the decline of base oil costs you're seeing as we look to the second quarter and beyond, would you expect year over year improvement in EBITDA just to kind of balance the cost versus volume?

What we see in this type of environment is obviously as the price of lub stock is announced to decrease, we follow that at some point in time with some decrease in the price of lubricant. In our prepared remarks, we anticipate that our margin should expand through this period, so this is a favorable environment for us for increasing EBITDA during the period. Robert Felice – Gabelli & Company: On Valvoline, are you seeing any decline in lubricant additives costs right now?

We require all our suppliers, as the price of the raw materials go down, within our negotiated contracts with them, there is a transparency of the flow through of those costs. Robert Felice – Gabelli & Company: So you would expect to see those decline as the year progresses?

I'd better.

Your next question comes from Dmitry Silversteyn – Longbow Research. Dmitry Silversteyn – Longbow Research: This is Jonathan Grassy in for Dmitry. Could you provide us a regional outbreak on how you see the paper technologies business performing over the next year and are you expecting volumes to be down across all regions and then the pricing dynamics as well.

What we've seen so far is that U.S. has probably been the strongest of the lot at this point. Europe is down significantly and China is basically way down. So for the most part the paper industry in China has been shut for several weeks and we don't anticipate it any time soon coming back up with any rates that would be meaningful to us. So as you look at the paper business, it's going to be under some stress going forward, but I think the good news with the Hercules business, historically it's been that the type of customer that it has, it's in the higher end of the tissue and towel and not really tied to the more cyclical, although they do have some business there with packaging and paperboard and loose print and those areas, so the areas that get impacted the greatest we have the least exposure as far as our chemicals where they're applied. So to some extent we have some mitigation into that, but overall the direction of paper consumption obviously with the downtrend in the economy is going to follow that, so it's no different than anything else. But we do have some mitigating factors in that tissue and towel is a big part of our business, and it's impacted the least. Dmitry Silversteyn – Longbow Research: And did you see any significant incremental deterioration in the European market?

We saw some in the first quarter and we anticipate some deterioration in the second quarter, pretty much on line with the economic forecast. Dmitry Silversteyn – Longbow Research: Can you provide some detail on how you broke out Hercules's ventures business amongst the five operating segments? There were multiple businesses with the ventures.

We pretty much kept it all into the old TV group. It's still all contained there. One thing that Lamar mentioned was we took part of a small additives business that we had, we put that into the Aqualon business.

Your next call comes from [Douglas Shoody – Keybanc Capital Markets]. [Douglas Shoody – Keybanc Capital Markets]: A couple of questions on Valvoline. You mentioned the Goodyear win. Can you maybe quantify that in terms of what that means in new business? Is there any way to put some kind of figure on that?

It's about two million gallons. [Douglas Shoody – Keybanc Capital Markets]: As far as holding onto pricing when base oil falls, you've discussed, do you have confidence that you can hold on to it permanently or is it just temporary for the lag and you're going to have to give all that back considering that demand has been pretty weak?

The demand in the lubricants has decreased some but the price of gasoline and people's driving habits, and plus their intention of keeping their cars longer, they're paying more attention to the maintenance schedules. And actually, we have seen improvement in our Valvoline and oil changes as far as car counts and the ticket, and also part of the reason why companies like Goodyear and other want to work with us, is that we have a very strong program that help the retailer service the car more appropriately and get a much broader preventative maintenance schedule set up with the customer. So as a consequence, we see the business actually performing fairly well this year. And plus, with the volatility accrued, although you do pass through to a certain extent the price decreases as they come, you don't get ahead of it because there's obviously an unknown about when crude will bounce back up. So the volatility of that market place really prevents you from having to chase it down as aggressive as you would think otherwise, because the retailer and other don't want to decrease their prices either and so we have that dynamic. So it's more about negotiating the margin than it is the price on the shelf. [Douglas Shoody – Keybanc Capital Markets]: As far as monthly trends, has January for Valvoline improved over December or was December the weakest or did December improve as oil price?

December was the weakest for all of our businesses and everything has improved somewhat from December.

Your next question comes from Steve Velgot– SIG. Steve Velgot – SIG: The results that you talked about amounting to $7 million of net income from Hercules before you owned it, do you have the EBITDA contribution that that translated to?

As a part of our earnings release, let me recap that business overall. The EBITDA that we added through that stub approximately a six week period prior to that acquisition for Hercules was right at $91 million.

From an EBITDA perspective, it was $34 million.

There are no other questions at this time. I'd like to turn the things back to our speakers for any closing remarks.

I'd like to thank everybody for joining us today and we appreciate your following action. Thank you.