Good day, ladies and gentlemen and welcome to Ashland Inc, First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Jason Thompson, Director of Investor Relations. Sir you may begin.

Thank you. Good morning and welcome to Ashland's First Quarter Fiscal 2015 Conference Call and Webcast. We released preliminary results for the quarter ended December 31, 2014, at approximately 5 p.m. Eastern Time yesterday, January 26 and this presentation should be viewed in conjunction with the earnings release. Additionally, we posted slides and prepared remarks to our website under the Investor Relations section and have furnished each of these documents to the SEC in a Form 8-K. On the call today are Bill Wulfsohn, Ashland's Chairman and Chief Executive Officer; Kevin Willis, Senior Vice President and Chief Financial Officer, Luis Fernandez-Moreno, Senior Vice President and President of Ashland Specialty Ingredients, Ted Harris, Senior Vice President and President, Ashland Performance Materials and Sam Mitchell, Senior Vice President, President of Valvoline. As shown on Slide 2, our remarks 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 we will be discussing adjusted results in this presentation. We believe this enhances understanding of our performance by more accurately reflecting our ongoing business. I’ll hand the presentation over to Bill.

Thanks, Jason, and good morning everyone. Let me by saying is a privilege to be here as the new leader of the Ashland team. I’ve spent my first several weeks meeting the team and conducting intensive strategy and business plan reviews. Later in the call, I’ll share some of my views on the Ashland team strategy and results based upon what I’ve learned so far. That said, before I transition the call to Kevin, I want to share right up front that I feel fortunate to have inherited a very talented team that’s executing our clear strategy and doing so with discipline, which most importantly is delivering strong results. I also want to be clear that I believe Ashland’s current strategy is a good one and I fully support it. To me, the Ashland strategy has two core parts. First, operationally the team is focused on driving revenue and margin growth by providing innovative solutions to enable our customers. They are continuing to optimize product portfolio mix and they are driving continuous cost management. Second from a capital allocation perspective the strategy is to aggressively manage the business portfolio and find effective ways to return cash to shareholders. My goal is to sustain and we are appropriate to expand on these strategies so as to maintain Ashland’s strong performance. I’ve asked our commercial unit Presidents to join us today as they have done a great job with their team of driving our first quarter results. With that I will now turn the call over to Kevin for our summary of our first quarter financial highlights.

Thanks Bill and good morning. Yesterday, we reported GAAP earnings of $0.57 per share from continuing operations. When adjusted for key items, earnings per share were a $1.46, a 30% increase from prior year. Good volume and sales growth in the higher margin areas of our business combined with favorable input costs more than offset currency headwinds leading to a 270 basis point increase to gross margins from the prior year. Sales declined 3% year-over-year, however after normalizing for both currency and the elastomers divestiture, sales would have increased 1%. We experience some weakness in the construction and energy end markets, but saw good growth in care, adhesives, composites and lubricants. Geographically our businesses continued to show strength in North America and in Asia, Europe and Latin America have began to show signs of broader economic weakness. Ashland continues to make good progress on the global restructuring program. Through the end of the first quarter, we had achieved approximately $175 million in annualized run rate savings. Savings to-date have more than offset the previously disclosed headwinds of stranded costs, incentive compensation and merit increases. In total SG&A was down $19 million from the prior year and SG&A as a percent of sales was 17.5% and what is our seasonally weakest quarter. We continue to expect substantially all of the $200 million run rate savings will be in place by the end of the current quarter. Ashland grew EBITDA a 11% from the prior year despite the headwinds I mentioned a moment ago. Good business and product mix in the quarter combined with lower feedstock costs and savings from the global restructuring drove the solid year-over-year increase. EBITDA margin was 18.8% putting us closer to our 20% target and placing us among the top quartile of specialty chemical companies. Let’s discuss…

Thanks, Kevin. ASI reported another quarter of continued margin improvement versus prior year. EBITDA was consistent with our estimates at the beginning of the quarter despite foreign exchange to be in a bigger headwind than we originally expected. At the topline we had mixed results. Our personal care pharmaceutical excipients and adhesive product lines all posted solid revenue growth from last year. However, painting these areas where more than offset by foreign exchange, work harder and the energy market at large and it’s low down in Europe particularly within the construction market. Regionally, our core business showed strength in both North America and Asia. We recently completed the first phase of the HEC expense from project in Nanjing, China that we discussed on the previous earnings call. We expect to begin selling product during the current quarter. This new capacity will allow us to take advantage of strong demand for our differentiated product offerings serving the global coatings market. SG&A was down $6 million from last year as we have done a good job over moving costs through the global restructuring. These reduced support cost combined with improvement in product and market mix and manufacturing cost execution drove solid overall margin expansion in the business. The progress we’ve made on the four step plan that we laid out in previous earnings calls was instrumental to the business improvement. In general, I am pleased with the quarter. Our teams are consistently performing well in many of the higher margin areas of the business and in those areas where we are experiencing macro weaknesses, we will take steps to continue diversifying and earn market exposure and aggressively develop new products and applications. Let’s turn to the next slide and I’ll talk a little about some of the near-term challenges and opportunities. As…

Thank you, Luis. Overall performance materials had a good quarter. Just as Luis mentioned, currency was also a headwind for us with revenues down approximately $11 million as a result of the stronger dollar. Year-over-year sales were also affected by the divestiture of the elastomers division. If you exclude the effect of these, sales increased 1% primarily due to another good quarter from composites. Adjusting for currency, composites sales grew 8% from the prior year won strong performances in North America and China. Mining and building and construction markets remain sluggish globally, but we continue to see good growth in the transportation and heavy truck markets and the marine market in North America is also beginning to pickup. On a year-over-year basis our business looked good in Europe. However, the prior year was a low base and presented an easy comp for us. We are seeing soft construction activity in the EMEA region and expect that to continue moving forward. Within our Intermediates and Solvents line of business BDO pricing remained a headwind in the quarter inline with our expectation. This was somewhat offset by lower input costs as we purchase a number of crude derivatives. We expect BDO pricing to remain a consistent headwinds for the better part of fiscal 2015. Please turn to the next slide and I’ll provide more color on BDO and the other areas of our business. We’ve taken many steps within Performance Materials to improve the overall financial performance of the business. The most recent example is the elastomer sale in the first quarter, which should improve our gross margin by approximately 100 basis points while reducing volatility as we focus on composites and intermediates and solvents. In addition, we have continued to look at our manufacturing footprint to ensure we are aligned with…

Fiscal 2015 is off to a good start for Valvoline; we had excellent performance from Valvoline Instant Oil Change and had some good promotions during the period driving a strong quarter for our DIY channel. We also had a tailwind from lower base oil cost in the first quarter. While we expect input cost to fall again in Q2, price decreases to customers are also being implemented, moderating this benefit as the year progresses. In a moment, I will provide more context on pricing dynamics. Lower gas prices are also a positive factor for the business albeit a modest one. Total miles driven in the U.S. was up about 1% in 2014, but not enough to offset the impact of longer drain intervals. Our data indicates that U.S. motor oil category demand declined 2% last year, consistent with our long-term consumption model. Valvoline remains focused on increasing market share and improving mix to more than offset this category softness. Valvoline Instant Oil Change continues to post strong same-store sales growth, attracting new customers while maintaining a solid average ticket. Store growth versus prior year of 29 units across the network also contributed to overall performance. Our U.S. DIY and Installer Channels businesses both posted good performance driven by improved mix, overall mix enhancement is critical to Valvoline’s success and our team has performed well in this area. Valvoline’s international channels are growth engine for the overall business, had a slower first quarter due to weak volume and currency headwinds. We believe that our distributors in a number of regions have slowed orders in anticipation of a price decrease, as price changes are made, volume growth is expected to return to mid single-digit rates. This is a slightly slower rate of growth than we had in recent quarters and is primarily…

Thank you, Sam and congratulations on a record first quarter. As previously mentioned, I want to take a moment to share a few brief thoughts on my first-month here at Ashland. I’ve spent the majority of my career in the specialty chemical industry and I must say I have been impressed by Ashland’s remarkable transformation over the past several years. It has been a period of dramatic change for the company and those changes have reshaped Ashland and helped delivered market beating results. Since joining the company on January 1st, I’ve worked intensively to better understand the Ashland team as well as the company’s strategies and business plans. To me the team has articulated comprehensive and well thought through strategies which they’re acting on and they are also demonstrating great focus on delivering their annual plans. It is only my first month on the job, so I have a lot to learn, but I have also dug deep and I have dug quickly. Based upon my work today, as I said in my opening remarks I firmly support the execution of the existing strategy in business plans. That is my number one priority. Our goal is to become the world’s greatest specialty chemical company. In my view that means we need to 1) Sustain our never ending commitment to save complained ethical and responsible operations. 2) Drive differentiation through product innovation and outstanding customer and technical service. 3) Ensure we have the commercial excellence to partner with our customers to better understand their needs and then sell the value we have created. And finally, 4) support our customers with world-class operations to ensure we have outstanding customer satisfaction in terms of quality and delivery and also have continuous improvements to drive lower production cost. From a capital allocation perspective we…

Thanks, Bill. Terea, just before we begin I would like to remind everyone just to keep their questioning to one question and one follow-up. Please feel free to begin Terea. Thank you.

Thank you. [Operator Instructions] Our first question comes from the line of David Begleiter of Deutsche Bank. Your line is now open.

Thank you. Good morning.

Good morning, Dave.

Good morning, Dave.

Bill, just on Valvoline given your vision to be a premier as the chemical company, it would appear Valvoline remains non-core, the prior management team shows to keep it back in July. What’s your view on, is it business core or non-core to your vision and if it’s not core timing for a separation?

Well, first of all let me begin by saying, I think the Valvoline business is excellent branded business and they have great growth opportunities and they have strong return on capitals. So I think it’s a great business and it’s well run. From a portfolio management standpoint and this is in general I think the board has done a great job of examining the portfolio and returning cash to shareholders. I think this is a good practice to regularly review the portfolio and as I enter the company I have no particular bias or disposition. So at this point there is not much more I can add around that subject and when we have something to say, I’ll make sure that we reach out and is broadly communicated.

And just for Luis, Luis EBITDA margin in your business have improved nicely, can you get back to the 25% plus target you have in the space in ASI and if so when?

Hi David how are you? Yes, we're still committed to that number to 25% to 27%. As you know, we have not placed a date when we’re going to get there, clearly we're trying to improve it consistently and the way we are doing it is through growth in our high margin business, making sure that we're improving the mix as we do so, improve our operations when it comes to cost both SG&A and manufacturing costs and number three, we do have some pruning activities that we’ve been doing specifically the redispersible powders closure that we had in the quarter would be an example of those. So we’re committed to that number, when it comes to a date rather than predict it just say we continue to believe we are making continuous progress towards our target and clearly in the mid-term we should get there.

Thank you.

Thank you and our next question comes from the line of John McNulty of Credit Suisse. Your line is now open.

Yes, good morning. Thanks for taking my question and Bill welcome aboard.

Thank you.

Question regarding Valvoline, when I look at your guidance, you are looking for margins in the 17.5% to 18.5% range, which I guess is roughly inline with the 18% you did in 2014. So I guess I’m a little surprised to not see that maybe bumped up a little but given the raw material advantages that you may see as well as some of the growth in the businesses from some of the new stores, et cetera. So can you walk me through kind of how you are getting to that type of a range and how you are thinking about where the potential either upside or downside is around it?

Yes, John, last year when we shared our model and some of the changes that we are making, we had projected that our EBITDA margin would be in that 18% to 19% range. In today's environment with the falling raw material cost some of the margin improvement that we're seeing with that and the continued performance of the business, we believe will be in that 19% to 20% range moving forward. Part of that is a function of the fact that our prices are lower that we have made those price reduction, so that’s a function of the math, but the other part is, the business is continuing to perform well and as you noted Valvoline Instant Oil Change is performing well and we're seeing some volume growth in different parts of the business.

Okay got it. Thanks for clearing that up.

Sure.

And then one question on the ASI, it looks like Louis you had indicated for some of the healthier business segments you expect to see 2% to 3% growth or see a tailwind there. That seems a little bit on the – also maybe a little bit on the lighter side relative to kind of the normalized growth rates you look for in those markets. So maybe you can walk us through what you are seeing there?

Yes, part of the reason is I was talking about the core business and we are definitely seeing very good growth in personal care, but it was on a currently adjusted basis, high single-digit number, we are seeing growth in adhesives, coatings there is a lot of strength in the industry and obviously we’ll see the growth as we come up with the expansion. What has happened in our core businesses there is two areas are impacting us from a lower demand. One is the construction market mostly in Europe which is our largest construction exposure and the energy markets in North America. So all combined that’s where we get to that 2%, 3% as, in reality we are seeing probably better tailwinds from some of the personal occurred businesses, but we are seeing a little bit headwinds from both construction and energy.

So those businesses - maybe I misunderstood, but I thought those businesses were included in the 0% to 1% headwind category that you had listed, and I was more referring to the 2% to 3% tailwind portion that you were talking about on slide 5.

Yes, again it’s part of the core as I said and that’s the average that we are seeing in the business. Yes, that’s what we have calculated some.

Okay, thanks for the clarity.

Thank you. And our next question comes from the line of Brian Maguire of Goldman Sachs. Your line is now open.

Yes, good morning, and Bill, welcome to Ashland.

Thank you, good morning.

A quick question just following up on that last point on the energy business. Just wondered if you could size that business for us within ASI today, and maybe what percentage or what part of that is guar, and how much of it is in the U.S., or how much of it would you characterize as being impacted by the drop in rig counts that we are seeing.

So our business it’s about 8% of our sales, so which is about $200 million that’s a total business in 2014, we have about 50% of that business tied to what would be the drilling, cementing and assimilating of new wells. Most of that is in North America, clearly that business will be impacted by the lower oil price and depending on how the rig count evolves and the longer that oil stays below 50 and closer to 40 the more of the business will be impacted. So that’s the area of the business that you can think of us as in the short-term being impacted by the energy prices and again it’s about 50% of that business driven by new wells.

Okay, great, and as a follow-up, I think you noted in the release last night that a good chunk of your cash is overseas. The cash balance after you get the $400 million insurance recovery will be pretty high. Can you just remind us how much of that is committed to the ASR is already including the $270 million one in how of it you will be able to redeploy going forward and what kind of options you might have given that the cash in overseas?

The $270 million ASR obviously we’ve committed to and plan to get that done as soon as practicable and we certainly have cash available to do that. As we move forward as business continues to generate cash pretty strongly, one of the outcomes having higher base income in U.S., which does drive our tax rate up a little bit, is we will also be generating a bit more cash in U.S. which obviously is something at the time. And in terms of the cash that’s outside the U.S. and clearly there are ways and times at which that can be moved back to the U.S. efficiently and obviously we would be working on that. We wouldn’t put a timeline on it, we wouldn’t put an amount on it, but obviously those are things that we work towards as we manage the growth of the business.

And just a clarification on the $400 million recovery, net of taxes, what do you expect the net proceeds to be?

Yes, we can’t disclose that what we have said is that we expect the gain if you will to be in the $110 million to $130 million range and to be clear that doesn’t necessarily drive at least not completely the cash tax payment that will ultimately be required. To be honest we don’t have that numbers specifically that’s an incredibility complicated calculation and we will take some time to work through, but throughout the course of the quarter we’ll have a better view on that and make sure that we have.

Great, thanks very much.

Sure.

Thank you. And our next question comes from the line of Jeff Zekauskas of JP Morgan. Your line is now open.

Hi, thanks very much.

Hi, Jeff.

Is it the case that at Valvoline there wasn't much raw material benefit in the quarter, and which quarter this year do you think you'll get your maximum raw material benefit? Net of price changes?

Yes, no there was real benefit in the first quarter and so that you see in our results, but it’s we also expect to have a positive impact from the lag effect in Q2 because there is a fairly significant base of decrease that’s moving through right now. So I would say most significant impact in Q1 and Q2 and then no declining impact in Q3 and Q4.

So you think the benefit in Q3 will be less than the benefit in Q2, net of price?

Yes.

Okay, great. Then there was a question previously about your gain as to what the cash effect was, and you said the gain was $120 million and the proceeds are roughly $400 million. In terms of your funds flow statement, is the number that will be reflected in fiscal 2015 some number like $400 million or some number like $100 million? Roughly what is it?

$:

$400 million on the cash flow side. Okay.

$398 millionspecifically.

Okay, good. Thank you so much.

Thank you. And our next question comes from Michael Sison of KeyBanc. Your line is now open.

Hey, good morning, and welcome on Board, Bill.

Thank you. Good morning Mike.

In terms of your commentary on active portfolio management, can you maybe – you've spent most of your career in the chemical industry. What do you think, just qualitatively, are businesses you want to keep? What sort of the keepers and which ones do you think, just qualitatively, do you think you want to actively divest over time?

Sure, and I would put that more with a general type reply and hopefully this is helpful. From my perspective, there is kind of two sides of fence that you want to look at. One is kind of character of the business itself and the second is the economic profile of it. So to me Specialty businesses are one where it’s very clear that you have a strong presence, a strong sense of engagement that is very valued by your customers. There is a typically a heavy concentration of competitors, and the impact of your product is very high versus the total cost of your customers operations or the product that it’s going into. That the technology that you bring is helping to really enable solutions, enable you to sell value, and where commercial excellence, once again plays a very important role in getting the value that’s associated with your products. If it goes to an e-auction to set the price, I typically don’t think of that as Specialty Material. Now the other side as I mentioned really relates to some of the core metrics. What’s the EBITDA margin? What’s the growth profile? What’s the cash conversion? What’s the return on invested capital. I think those are all fundamental questions and when you put those two sides of the house together, you typically end up saying this is a good fit and this isn’t.

Okay, great, and then I think in your prepared remarks you talked about Ashland doing some transformational acquisitions, your balance sheet certainly could absorb something of that degree, on the M&A front given where the multiples are, are you more focused on maybe adding bolt-ons versus something really big or if multiples come back would you entertain sort of another transformational acquisition for the company?

Well first of all, as you mentioned maybe first and foremost multiples are high, so its hard to envision something too large, there is always opportunities for small bolt-ons that support high growth, highly differentiated businesses, but I would step back and say that after such an extended period of moving the company forward and changing its portfolio and reorganizing the businesses, the businesses are very well run today, but at the same time I think there is opportunities by just focusing on that pure execution side to deliver enhanced results and so from my perspective that’s where we’ll start and we’ll see where things go overtime.

Great. Thank you.

Thank you. Our next question comes from Mike Harrison of First Analysis. Your line is now open.

Hi good morning.

Good morning.

Good morning Mike.

Luis just looking at the raw material costs and the trends there in your segment, how they have been trending and can you talk a little bit about what you have been doing on the pricing side to help drive better returns?

Yes, so a couple of comments. We definitely are impacted somewhat by reduction of oil prices, having said that that’s a much less of an affect for us than other businesses, as you know a lot of what we do is based on cellulosics which we don’t get impacted by oil and then some of the other materials, our cost are not only necessarily driven by raw materials themselves, but by also the fixed cost. So we do have a benefit, but the benefit is much more muted than in other segments and when it comes to pricing, I mean the best way to manage the price is by introducing new precuts that are higher value that allow you then to capture more of that value with your customers and that’s what we will continue to do. Drive innovation, drive value through the products that we bring to customers and get that value from there. Other than that we manage pricing on a continuous basis with our customers appropriate, but the key driver again is getting the value from them. before I end, let me answer back to it John, I don’t think I gave a good answer with the 2%, 3% growth, because I didn’t have the chart in front of me. For us to impact 2%, 3% on the total sales for ASI those businesses are growing again 1.5 to two times GDP which is more in the 4% to 5% rate, but as you see the chart that’s 2% to 3% of our total ASI sales. So, obviously those business have to be growing again in the 1.5 times to 2 times GDP, so sorry, that I was not fast on my feet, but that’s the reason. So yes those businesses are growing faster.

All right. My second question is for Bill. You have stepped into a Company here that's at the tail end of a $200 million restructuring plan. In your opinion, is that big enough, a big enough reduction in the cost structure, or are you seeing opportunities to maybe expand on where they're going with those cost savings?

Well, to begin with I think the work that’s been done internally to really drive if you will internal transformation of how things are done, really changing process and the way decisions are made, so that execution could be enhanced at the same time cost is reduced, really impressive and the progress has been great. So there is more work to be done on that front to close out this program and it’s a little bit early for me to get into whether we have the right amount of overhead or SG&A once again to me that’s determined by two core factors. One is what’s required to make the business operate appropriately and what I mean by that is kind of back to some of the values that I articulated earlier, we want to make sure we are investing in innovation and having operations that have the support of our customers, but at the same time we also have to look at what the market will bear and what opportunities exist. So it’s a little early for me to say whether or not we will extend it. One more comment I’ll maybe just to position it is we know in this competitive world we absolutely have to, as a mantra, continue to focus on becoming more and more efficient every day. So where that takes us, well that will be part of the strategic planning that team will go through and we’ll articulate that next chapter once we have better clarity on it.

All right, thanks and welcome aboard.

Thank you.

Thank you. Our next question comes from James Sheehan of SunTrust Robinson Humphrey. Your line is now open.

Good morning. With respect to Valvoline pricing and the give-back to customers with the lag, I'm just wondering about, in the DIY portion, how much of the base oil decline would you consider being shared with retailers and how much would you retain within Ashland?

Yes, those discussions are taking place right now with our major customers in the DIY channel. So I can’t give you exactly how that’s going to play out, but it’s a competitive environment right now, and it’s a process of negotiation with those retailers that is sensitive to their margin trends and the pricing to the end consumer at the shale, so we can’t share anymore insight then the model that I’ve shared with you earlier today, but we as you look at the portion of the business that pricing moves on market driven dynamics. We worked close to with those customers to figure out where there can be some structural benefit to both Valvoline and our customers.

Thank you, and on Performance Materials, it looks like the EBITDA margins have been tracking pretty strong for the first half of the year. I was wondering if you could just provide an update on your expectations for full-year EBITDA margins in that segment?

We’ve had a good start to the year and we’ve seen some benefit from lower raw material costs that will wane as the year progresses. We expect full-year EBITDA margins to be in a 10% range as we give back some of the raw material gains that we have seen in the first quarter and we will see in the second quarter and as butanediol prices continue to fall that’s probably the most significant impact on the business as the year progresses, utilization rates continue to fall in the global BDO market and prices are following those utilization rate that will have an impact on Q3 and Q4 and bring the overall EBITDA margin down somewhat below what was experienced in the first quarter.

Thank you very much.

Thank you. And our next question comes from John Roberts of UBS. Your line is now open.

Good morning Bill, let me add my welcome.

Thank you. Good morning John.

You indicated that returning cash may be a better idea than acquisitions in the current market, but what about accelerating internal reinvestment? Specifically I'm thinking that ASI's business in the emerging markets seems to grow through cycles, that you could probably invest faster there. And Valvoline also looks like it could grow faster if you didn't take as much cash out of it over time?

Okay, so very good question and also while I’ll try to provide a perspective maybe Luis and Sam will have some perspective. One I think the company has been investing in Valvoline. You see that number of stores is increasing and I think also there has been investment in ASI to try to debottleneck critical operations. I have sat through the business reviews and I haven’t heard a lot of pushback in terms of, if we only had more capital, we would be able to do more. And I think the company has had a good discipline making sure that capital has strong returns on the investment. And that the capital deployment is very prudent. So that it’s not speculative and it’s not something which, if you will, will burden the company or lower the return on invested capital. So I feel very good about the way the company has approached it. And I would turn the discussion over to Luis and Sam and, for that matter, Ted.

Yes, couple of comments, this is Luis. Number one we have continued to invest in people and resources in the right geographies. As we did the redesign, fundamentally we kept our complement slightly, almost slightly above what we had at these places, like China and rest of Asia and we continue to invest in those areas from a talent point of view. And also we’ve done a variety of investments we’ve talked a lot about HEC today, but six months ago we announced an expansion on our HPC product line which goes into pharmaceutical excipients. And we have also expanded our [PVP] capacity over the past two years. So we definitely continue to put their capital, and as Bill said, it’s not that we are asking for more. We’re obviously very conscious on how we invest that capital to make sure that we do it, A, effectively and, B, at the right time so not to put undue pressure on our investments. But that’s definitely something that we will continue to do as we try to grow more on our high margin businesses.

Regarding the Valvoline business one of the real strengths of the Valvoline business, is that it’s not capital intensive. However the one area that does require some capital certainly is the growth of our Valvoline Instant Oil Change system. We are interested in seeing faster growth in the years ahead on this business. And we are working closely with Bill and our Board on a more aggressive growth plan for Valvoline Instant Oil Change, the business model is performing very well. We think it’s the industry’s top quick-lube and we are forecasting to continue to perform. So we are going through a pretty rigorous process of evaluating market specific opportunities both in terms of acquisitions, store builds, working with our franchise partners to grow this business in the years ahead.

And I would just to add on Performance Materials while it’s obviously a lower margin profile business, we continue to invest what's needed to operate that business, much of our investments tends to be in cost reduction projects and I think the team feels good about the amount of investment that we’ve received over the last few years and allowing our performance materials to invest in low cost initiatives that allow us to continue to expand our margins.

I guess I’ll go ahead and chime in as well and say that continuing to invest in both stay in business, cost reduction and organic growth opportunities with our existing businesses is not mutually exclusive to returning cash to shareholders. We generate lot of EBITDA, we plan to grow our profile in that regard as well as our free cash flow and I think clearly we're positioned to be able to do both of those things as we have been doing both of those things.

Thank you. Very thorough answer.

Thank you and our next question comes from Dmitry Silversteyn of Longbow Research. Your line is now open.

Hi good morning guys and Bill let me add my congratulations and welcome to Ashland.

Thank you.

A lot of my questions have been answered, but I would like to follow-up on a couple of things that were said before and maybe get some more clarification. First of all on the specialty ingredients Louis, I understand that about half of the business the Aqualon portion is non-petrochemical raw materials, but wood pulp and cotton inter pricing does change overtime. So can you sort of update us on what's going on your raw material front in both sort of the ISP portion of the business as well as the Aqualon of the business and are you getting any help from the lower energy cost on the cellulosics part of the business, given that it’s a fairly energy intensive process.

Yes, a couple of things, I mean you are right that I mean although cellulosics are not necessarily driven by energy, they do move around and they have been moving down over the past year or so and that has provided somewhat of a benefit. Depending on which segment you are in some cases you actually give up price so it’s in more of the commoditized side like constriction with metal sale low, those prices tend to go pretty rapidly back to the customer. In the more differentiated parts, It does take time what eventually again things tend equilibrate. And yes we do get a little bit of a benefit from energy both in the operation of the plants as well – in cellulosics as well as acetylenics which use a fair amount of energy, but again compared to the total cost of the product these are much smaller and again I don’t want to give a figure, but they are much smaller as a proportion of our cost and because these are higher margin products they are even a lesser proportion versus our selling price and obviously we always manage those two to try to keep the benefit for as long as it lasts. But to be honest what’s driving more of the concern is the impact of foreign exchange, which at this time is significantly outweighing the benefit that we’re getting from raw materials and of course those are included in the comments we’ve made. But yes, we’re getting benefit from raw materials unfortunately again the headwind from FX is, at this time, outweighing any benefits we are seeing from cost.

Thank you and that was a very nice lead-in into my next question, and that is you referenced a foreign-exchange and international exposure for a number of your businesses, both on the good side and the not-so-good side. Can you update us what the exposure to international operations is for both ASI and also for the composites business in Performance Materials?

Yes, when it comes to ASI, we have actually two types of exposure. One is just a simple translation of the operations we have there of both selling prices and earnings and we do make some of our products in Europe, so we get the benefit of the lower costs, which yields a translation of the earnings. When it comes to some of our product lines though, we actually export a fair amount of products into Europe and of course that impacted significant because the prices as denominated in dollars go down, but your cost stay the same and we do compete with a very large European producers, so it’s not easy to go out and recovery those prices. When it comes from a sales exposure to way I think about it is about at one-third of our sales are in Europe and they directly again prices would move with the euro down and that’s the exposure we get. And again from an earnings perspective, we’re naturally hedging some of our operations, but in other words we’re not and again we disclosed a little bit of the total for the company. I don’t think that we have disclosed specifically what for ASI is, but I just wanted to give you the dynamics of what impacts our exposure to FX.

Got it, got it. You did mention that European construction and some of the other markets were a little bit of a headwind to the composites part of the business. Is Europe a major part of composites or is that sort of in the same 25% to 30% of sales?

It is, right in that range it’s about 27% of sales and most of our costs are also in Europe, we don’t import a lot of raw materials nor do we export a whole lot out of Europe. So we’re somewhat naturally hedged there, so most of the issue we have around currency is just translation of earnings.

Understood. Thank you very much, gentlemen, and thank you for taking the time to get to my question.

Thanks, Dmitry

Thank you. End of Q&A

Thank you, and I’d now like to turn the call over to the Jason Thompson for any closing remarks.

All right, thank you everybody for your interest in Ashland and joining us today and have a good week. Appreciate it.

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