Good day, ladies and gentlemen, and welcome to the Ashland Incorporated Fourth Quarter Earnings Call. (Operator Instructions) As a reminder, today’s conference is being recorded. I would now like to turn the call over to David Neuberger.

Thank you, Jamie. Good morning, and welcome to Ashland’s fourth quarter fiscal 2012 conference call and webcast. We released results for the quarter ended September 30, 2012 at approximately 6:00 a.m. Eastern Time today and this presentation should be viewed in conjunction with the earnings release. These results are preliminary until we file our 10-K. On the call today are Ashland’s Chairman and Chief Executive Officer, Jim O’Brien; Lamar Chambers, Senior Vice President and Chief Financial Officer; and John Panichella, Senior Vice President and Group Operating Officer responsible for Ashland Specialty Ingredients and Ashland Water Technologies. As shown on Slide 2, our remarks today will include forward-looking statements as that term is defined in securities laws. We believe any such statements are based on reasonable assumptions but cannot assure that such expectations will be achieved. Please also note that during this presentation, we will be discussing adjusted and pro forma results. We believe this will enhance understanding of our performance by more accurately reflecting our ongoing business. In addition, we are providing ISP’s historical financial contribution, representing Ashland’s best estimate of the appropriate cost allocation and shared resource costs. Reporting results in this manner has inherent limitations, and we do not represent that these financial results were calculated using the same methodology used by ISP. Please turn to Slide 3 for our fourth quarter highlights. In the September 2012 quarter we reported a loss of $3.47 per share from continuing operations. This reported loss included a $3.88 unfavorable expense related to pension which I will describe shortly. When adjusted for pension and other key items, EPS was $1.87 as compared with $1.01 in the year ago quarter. We acquired ISP on August 23, 2011 and the prior year only includes a partial quarter of the ISP results and related financing.…

Thank you, David. Good morning, everyone. Specialty Ingredients pro forma volumes were down 1% from the prior year quarter. Over this comparison, most of our business held up well with a few exceptions. Our pharmaceutical and nutrition business did very well with volumes up 10% over the prior year quarter. In contrast, our coatings and energy businesses were both down about 6%. In coatings, we had reduced demand in Europe and Asia due to the broader economic climate. In energy, we had a sizable decline in guar-based products, which were off by nearly a third. Pro forma sales increased 9% to $734 million with good mix and solid pricing versus the prior year. Gross profit as a percent of sales was 34%. This was up 330 basis points over the prior year, but down 70 basis points sequentially. The vast majority of sequential decline is due to a shutdown at one of our major production facilities in the U.S. This type of shutdown is taken once every three years and it cost us roughly $6 million during the quarter. The plant is now back online. SG&A was $127 million in the quarter. While up versus the prior year, we view this as a good run rate going forward. Overall, EBITDA grew 25% over the prior year to $193 million. EBITDA as a percent of sales was 26.3%. Slide 10 shows Specialty Ingredients’ EBITDA bridge. Improved margin and mix were the primary drivers of the year-over-year increase in EBITDA. While overall volumes were down slightly, we had a very strong business mix during the quarter, leading to the $22 million EBITDA contribution shown here. Our higher margin pharmaceutical and personal care businesses did well and we saw a compression in our low margin intermediates and solvent product lines. Within solvents, volumes…

Thank you, John. Performance Materials had another good quarter in adhesives and composites and the elastomers business returned to more normalized margin levels. Performance Materials’ reported volume and sales were down 11% and 15% respectively from the year ago quarter. When we exclude the effects of the Casting Solutions and the divested PVAc business, the normalized volumes were up 4%. This is largely due to continued strength in North America. Overall sales were $369 million and we achieved gross profit as a percent of sales of 16.3%, a 300 basis point improvement over the prior year. Profitability gains were driven by adhesives and composites where we continue to benefit from the strategic actions we have taken over the last few years. These actions include capacity reductions and cost outs, which have raised utilization rates to around 90%. We’re also benefiting from an improving North American construction market where we have seen good growth in both the residential and industrial areas. This has led to a significant improvement in profitability with adhesives and composite margins up over 400 basis points from the prior year quarter. As expected, margins returned to normal levels within elastomers. This was due to a more stable raw material cost environment which was described in some detail during our June quarter call. For Performance Materials in total, we view normalized gross profit at current demand levels as being roughly in line with the September quarter. This level will vary to some degree based on normal seasonality and I will remind you that the December quarter is our seasonally weakest. While not explicitly shown on the slide, we had a roughly $5 million sequential decline in equity income from our Casting Solutions joint venture. This shows up within Performance Materials’ operating income. Part of this decline is due…

(Operator Instructions) The first question comes from David Begleiter from Deutsche Bank. David Begleiter – Deutsche Bank: Good morning.

Good morning, David. David Begleiter – Deutsche Bank: Jim and Lamar, just on the 2014 reaffirmation of the target, could you bridge us from 2012 to 2014 to get to that midpoint $10 EPS number? Jim O’Brien: When you take a look at what we described in our last meeting, we said that the mix is going to be a little bit different. I think the Specialty Ingredients to meet those goals will be higher than we described. Obviously, with Water having the difficult – really last two years and with the reset this year, I would expect it to fall short of its objectives. I think Valvoline will come close to what they’ve outlined and their segments that they’re trying to grow are still doing very well. So I fully expect Valvoline to get close to their objectives. And in Performance Materials, I think we’ll require a better European market and a reset in China. So if we don’t get China and Europe reset, I think, they’ll have a difficult time meeting theirs. So I think that all hinges on that performance. But overall, I think that within the range that we provided, we’re still very much committed to get there, but obviously, the external environment will have a big impact on our ability to achieve. David Begleiter – Deutsche Bank: You mentioned that Water Tech must improve in 2013. What if it doesn’t improve in 2013? Is there – will it still be part of the portfolio in 2014? Jim O’Brien: I can’t predict what we’ll do, but obviously, we’re running out of plays, and I think that with John’s involvement, with – as he described his experience, being in the water industry for over 20 years, that’s going to be very helpful. We’re very focused on getting new external leadership and the people we’ve interviewed already are very, very talented, very experienced. So in that part I’m encouraged. So as we put the new leadership in I would say that by this summer, we should be able to tell if this is making a difference or not. If it’s not making a difference then obviously that limits our alternatives and what we can do, and we’ll certainly take a hard look of what the outcome will be. David Begleiter – Deutsche Bank: And lastly, Jim, in guar, how much is – of your business is derivatized guar versus the commoditized portion or straight guar? Jim O’Brien: John is probably best suited to answer that question, I’ll let John Panichella answer that one. John?

It’s about 50%-50%. So it’s pretty close to half. David Begleiter – Deutsche Bank: Thank you, very much.

Thanks, David.

The next question comes from John McNulty from Credit Suisse. Abhiram Rajendran – Credit Suisse: Hi, this is Abhi Rajendran calling in for John. Good morning. Jim O’Brien: Good morning, Abhi. Abhiram Rajendran – Credit Suisse: So a couple of quick questions. So in Valvoline it appears the base oil market has been relatively steady recently. I guess how are you thinking about that market as we head into year-end and into 2013 and how should we be thinking about maybe cost per gallon being relatively stable or maybe down a bit in the near term? Jim O’Brien: When you take a look at the base oil market, that has historically followed crude. With crude softening and playing within a smaller range, I think that base oil has caught up with crude at that $90 plus. So I think that in the near term if crude stays in the range that it’s been trading, I would fully expect that the base oil would be fairly stable as well. As I look in the next year, the things that worry me most are more of some sort of political economic activity in the Middle East. I think that’s our biggest risk. If something happens there and drives crude up, that could bring base oil with it. But with the economy being soft and all the things that are forcing crude down, I think that in near term at least, there is more headwinds against crude than bullishness. So I would fully expect that Valvoline should experience a more stable environment here in the near term. Now for the full year, I can’t predict, but I think in the next quarter at least, we’re anticipating it’s going to be somewhat stable.

And then, Abhi, this is Dave Neuberger. One other thing that I’d add to that, when you’re looking out over the longer term, bear in mind, we do expect significant capacity expansions in both the group two and the group three space. So from our view, at a minimum that should limit some of the volatility that we’ve seen in that input over the course over the last year, year and a half. Abhiram Rajendran – Credit Suisse: Okay, great. And then just a quick follow-up. How should we be thinking about the current raw material environment in Performance Materials and Water Tech with regards to propylene and some of its derivatives and are there potential further tailwinds to margin and also how is the pricing environment kind of shaping up in this more benign raw material environment? Jim O’Brien: I would say that really over the last several months, the material markets have somewhat stabilized and flattened. So in some respect that’s good news because the margins that we’ve been able to achieve look like they’ll be able to be held and there is no pressure up or down on that to create a disruption. So from that standpoint, stability is probably a good thing for us and I’m hopeful that’ll continue for some time, so we can get our markets reset to go out and try to achieve some top line growth. So our focus now is more on top line growth because that’s where the toughest issues are for, I think, all companies. The economies are not – they’re strong obviously and to go out and find new business and has to be done through innovation and new products and John described one of those in the coatings market, with work that they’ve done. So I think we have some good things coming out next year which gives me encouragement that we’ll be able to achieve some top line growth in many of our products. Abhiram Rajendran – Credit Suisse: Okay. Great. Thanks very much.

Thanks, Abhi.

The next question comes from Mike Sison from KeyBanc. Mike Sison – KeyBanc: Hey, good morning, guys.

Good morning, Mike. Mike Sison – KeyBanc: If the – if guar stays at these levels, I suppose, when you look in for the full year, do we sort of take that potential loss in the first quarter and multiply by it by four, is that sort of the size? Jim O’Brien: No. Mike, I think in the description, maybe we weren’t clear, but the potential loss, number one, isn’t certain – Mike Sison – KeyBanc: Right. Jim O’Brien: – but it’s likely and it just depends on how the market plays out and resets. So we don’t – we really don’t know. So we wanted to make sure that the market was aware that that potentiality was out there. So that’s the primary reason for it. But as you take a look at the inventory that we have in hand, it’s all isolated to that. So if you take the inventory in hand and you take a look at the pricing that is bouncing around now that’s where the range of loss possibly could be. Once that’s taken, whatever it is, if it’s taken at all, it’s done. And then, as the market resets in January, we’ll go back in the market and purchase and we’ll have a much better sense of the spread of what the selling prices will be versus the cost of purchase. So this is an isolated issue that should play out in the first quarter. Mike Sison – KeyBanc: Got it.

And Mike, this is Lamar. Let me just add that on that range of potential loss that John described, $15 million to $25 million, that is really almost a mathematical computation just based on what we think we can observe in the market currently. The challenge is there is not a very robust market right now. So it’s hard to get a fix on what clearing prices would be even be. So it’s – we’re trying to give you a sense of where we think the values will be relative to our inventories if we were executing transactions today. So it’s a highly uncertain range of numbers, but still give you some sense of order of magnitude.

Just to add – this is John. Just to add a little color to that, this is an annual crop and so the reason there is uncertainty right now is the crop is just being harvested. It’ll come to market in the November, December timeframe and we’ll start purchasing then. So there is no really current transactions happening because the 2012 crop, if you will, is done and gone and sold and now we’re anticipating the 2013 crop. Mike Sison – KeyBanc: Got it. Okay. And then you’ve outlined some CapEx for Specialty Ingredients. I think you’ve spent a good amount this year in terms of growth prospects. How much of that will be a positive for you in 2013 and then the plans that you just laid out in terms of spending, John, a little bit in 2013, when do those projects come on and how much could that contribute?

Yeah so as you know, we invest in really high growth, high margin product lines and only consider projects that are pretty well in excess of our cost of capital. So when you look at – that’s the kind of project we invest in, it generally takes us 18 to 24 months to execute on projects and then they produce those kind of returns as I explained to you, well in excess of our cost of capital. So that’s kind of the way to think about it. These aren’t generally projects that return in the fiscal year, they are more or like 18 to 24 months and they’re pretty high return kind of projects. Mike Sison – KeyBanc: Okay and then, Jim, if you could sort of give us a little bit of help, your interest expense is going to be lower next year, pension income better, cost savings, that’s a plus. How much growth in earnings do you see in your operating business now when you go through each of the segments next year to help us maybe given this economic outlook that we see? Jim O’Brien: Yeah. I would say that the 2014 guidance we gave you, directionally gives you the endpoint. So we’ve got two points now. You can draw a curve, so depending upon how that curve plays out we’ll know, but directionally, you kind of have a sense of that. So I would use that. And then also when you look at the environment Specialty Ingredients is probably best suited to perform in the current environment because the types of products and markets they sell into are less economic sensitive. We talked about guar, so you have a sense of that. And then when you get into Performance Materials, as I said, it’s highly sensitive to the macroeconomic environment of China and in Europe. So we’re going to need some recovery for that business to perform. Valvoline is less sensitive, broadly both internationally and domestically. It’s more of a consumer-style product. So it’s going to perform in spite of the macroeconomic environment. And that leaves you with Water, and Water isn’t so much it’s being held back by the market where it’s held back our own execution. So that is all going to be around our ability to execute better. And in that one – and in some respects it’s an easier one to fix since it’s is all in our control. So that’s kind of how I see the year playing out, and as you think about it, those would be some of the inputs that I would consider.

And then, Mike, this is Dave Neuberger. Just two below the line items to mention when you’re modeling it out. One is the tax rate. So we’ve given you the – our estimation of the range for 2013, somewhere in the 26% to 28%. By 2014 that will probably come down a bit more, closer to the mid 20% range. And then on the interest income, we gave you the current run rate of interest expense for the year. Right now, that’s around $180 million. When we call the remaining 9 and 91.8% notes that are out there and make the required debt payments, that might pick up another $10 million or so as we go into 2014. So I think when you add in all those elements, you’ll see how we come up with those targets. Mike Sison – KeyBanc: Got it. Thank you.

Thanks, Mike.

The next question comes from Jeff Zekauskas from JP Morgan. Jeff Zekauskas – JP Morgan: Good morning. In terms of your pension expense and your – or your pension income for 2013 versus 2014, do the funding requirements step up again in 2014 and does your pension income change very much for 2014, assuming that interest rates stay the same?

If we assume consistent interest rates and achieve our long-term asset returns across that period, we’d expect the book expense for pension to be pretty steady across that period between now and 2014. On a funding basis, the federal legislation that was passed back in the summer under MAP-21 does gravitate toward the more traditional funding rules by the time you get to 2016. So there’s a phase back in of more normal funding, but we’ll be able to enjoy this deferral of funding for between now and 2016 on a declining basis. We get the full effect of that of course first in 2013, and we’re actually pleased to have that opportunity. Jeff Zekauskas – JP Morgan: And then if you can just describe sort of guar related products generally, that is in fiscal 2012 on some kind of rough operating income basis, how much did you benefit year-over-year in guar and in 2013, what do you see the penalty as being or the adverse comparison assuming prices stay more or less where they are?

This is Dave Neuberger. I’ll share with you the public disclosures that are already out there. In terms of the overall guar sales for 2011, and this is something that we report out every quarter on a trailing 12 month basis, within what we call our business profile slides, it would have been somewhere around $120 million, $130 million of sales. And again, that would include both the straight guar and the derivatized guars. In terms of 2012 that would have grown to somewhere around the $340 million to $350 million sales range. So huge increase in volumes, huge increase in price over that period as we covered the large inflation in the raw material cost. In terms of disclosures around profitability, we don’t get into that level from a product perspective mainly for competitive concerns. What we have shared though to give you some idea, maybe to remind you, back in the June quarter, we had pointed to some of the unusual profitability in guar as being the primary contributor to the sequential increase in profitability. And I think it’s safe to say that when you look from the June to the September quarter for Specialty Ingredients, some of the softness that we saw in guar, particularly in the straight guar product lines, was the primary reason for the sequential decline in profitability from the June to the September quarter. Now looking out into 2013 and, John, you’ll probably want to elaborate on this, but it’s probably too early to say considering where the crop is. Jeff Zekauskas – JP Morgan: Okay. Thank you very much. Jim O’Brien: But I think also as John described, just so we don’t lose this point, that guar has derivative guar, which is a very high margin, highly sought after product, which is short in supply and we actually have to process that and create a value-added product; that’s 50% of the sales. So the part that’s probably more volatile and it causes us ups and downs is the straight guar, the powdered guar. And the part that we’re most interested in is the derivatized guar. That’s why we’re in this business. We’re not in the business just to trade guar. We’re in it to create a derivative, which is highly processed, high value-added, in short supply and we’re actually looking at ways to expand that. So that’s really the opportunity long-term.

Just one clarification on that, to be sure you’re getting it right for your attempts to model this, the guar split between derivatives and straight 50%-50% is at the gross profit level. So the sales mix is actually a little different because you get a higher gross profit percentage on the more derivatized. Jeff Zekauskas – JP Morgan: Thank you.

Thanks, Jeff.

(Operator Instructions)

And I think we have time for one more question, Jamie.

Okay. The final question comes from Mike Harrison with First Analysis. Mike Harrison – First Analysis: Hi, Good morning. Jim O’Brien: Good morning, Mike.

Mike. Mike Harrison – First Analysis: I had a couple questions on Valvoline. First you kind of talked a little bit about the SG&A outlook and suggested that this year you would pull back on SG&A spend and maybe anticipate spending a little bit more next year. And I know you guys don’t like to talk too much about marketing spend, et cetera. But I guess just help me understand, my expectations there were that you were going to try to kind of keep SG&A costs flat while you were growing the business. And now, it sounds like we should expect SG&A up next year? Jim O’Brien: Valvoline?

This is Dave Neuberger, I’ll give the data and then maybe Jim will elaborate. In terms of the overall SG&A dollars, the way that I’d model that in today and as we said on the prepared comments, from the September to the December quarter. We think the SG&A dollars will remain relatively flat. And so what we’ve done this year that we actually take a fair bit of pride in is we did ratchet down SG&A to be more reflective of the current reduced demand environment. That market has started to stabilize, we started to see some signs of it coming back. So we’re resetting that SG&A expense as we go into 2013 at this type of higher level. And then from there we’ll take a look at what the results of that spend are and adjust as necessary going forward. But right now I’d say going into the December quarter, you’re flat and then that sets the new baseline that we’ll adjust from. Jim O’Brien: And what also drives that marketing spend is the ability of the team on how many promotional activities they achieve from the various retail accounts and Wal-Mart, et cetera. And inside of that, there’s a certain amount of pull marketing that stays fairly stable, which is the advertising you see on television and whatnot, then there’s also a push, which is more of incentive style marketing on markdowns and incentives for the retail community to push volume through the system and that’s very variable, based upon the number of events you get and the size and the success of the pull-through. So that’s why you get some variability. And in the last quarter we were fairly successful. And I think as we look into the next several quarters, I think we have some pretty…

Yeah. So this is a highly complex business, Water where a large percentage of the business is tied up in contracts we have with customers. And those contracts can be items like cost per ton billing, consignment contracts, all sorts of different contracts. And we need to do a better job in executing against those contracts we have in customers and the visibility and the complexity of the data and the information. We’ve done a much better job here recently of understanding that, so that we can get the price that we deserve. So getting that information in a way that we can manage it better will allow us to take the appropriate marketplace actions that we need to take around both pricing and contract, and it’s highly complex in a business like AWT. And we’re leveraging some of the things that we learned around standard pricing in ASI because we don’t have contracts in ASI. So we’re leveraging some of the best practices that we had from standard pricing in ASI to drive standard pricing improvements in AWT. And we think there can be some pretty nice improvements there that can develop in the short-term. Mike Harrison – First Analysis: Thanks very much.

Thanks, Mike.

This is David Neuberger again. Thank you for your time this morning and for your interest in Ashland. If you have any additional questions, please give me a call at 859-815-3527. Thank you.

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.