Good morning, ladies and gentlemen and welcome to the Ashland Global Holdings Incorporated First Quarter Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to our host for today, Seth Mrozek, Director of Investor Relations. You may begin.

Thank you, Sonia. Good morning, everyone and welcome to Ashland’s first quarter fiscal 2018 earnings conference call and webcast. My name is Seth Mrozek, Director, Ashland Investor Relations. Joining me on the call today are Bill Wulfsohn, Ashland’s Chairman and Chief Executive Officer and Kevin Willis, Senior Vice President and Chief Financial Officer. We released preliminary results for the quarter ended December 31, 2017 shortly after 05:00 p.m. Eastern Time yesterday, January 29. Additionally, we posted slides to our website, ashland.com under the Investor Relations section and have furnished each of these documents to the SEC in a Form 8-K. As a reminder, some of the matters discussed today and included in our presentations may include forward-looking statements as such term is defined under U.S. securities law. We can 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 during this call. We believe this enhances understanding of our performance by more accurately reflecting our ongoing business. With that, I will turn the call over to Bill. Bill?

Thank you, Seth and good morning everyone. In the first quarter, the Ashland team took important steps forward to build the momentum needed to deliver our fiscal year 2018 commitments as outlined during our November earnings call. Each of our three segments showed growth in sales and adjusted EBITDA even before including the positive impact of foreign exchange and acquisitions. As a company, aggregate price exceeded raw material inflation. Asset utilization had a positive impact on earning and adjusted SG&A as a percentage of sales was down 110 basis points versus prior year. In addition, as expected, the integration of Pharmachem and the Etain composites facility both made strong positive contributions to Ashland in the quarter. As a result, in total, Ashland increased its sales by 20%, improved gross profit margins by 50 basis points, increased adjusted EBITDA by 25% and adjusted EBITDA margin by 70 basis points and delivered adjusted EPS of $0.42, which includes a $0.04 per share negative impact from our tax rate. Within Specialty Ingredients, the team focused on driving volume mix gains. As a result, we delivered solid top line growth across a number of our key end markets. We saw strong growth in the personal care segment, with sales up 5% driven by significant gains in the biofunctional ingredients area. New capacity has enabled us to begin meeting robust demand in pharma, where sales grew by 4% in the quarter. And after a slow fourth quarter, we drove 12% sales year-over-year growth in coatings. This growth was led by key customer wins and favorable order patterns. From a margin perspective, Specialty Ingredients experienced $8 million of year-over-year raw material inflation in Q1 and that’s approximately $5 million more than what’s anticipated at the start of the year. While this had a negative impact on…

Thank you, Bill and good morning everyone. Adjusted EBITDA in the quarter was $136 million compared to $109 million in the year ago period. In the quarter, we reported a GAAP loss from continuing operations of $0.12 per diluted share. On an adjusted basis, we reported income from continuing operations of $0.42 per diluted share compared to $0.14 in the prior year. Ashland’s capital expenditures were $24 million during the quarter compared to $33 million in the prior year period. Free cash flow during the first quarter was negative $48 million compared to negative $93 million in the prior year. These amounts include $23 million in the restructuring payments in the first quarter of fiscal ‘18 and $29 million of restructuring payments in the year ago period. There are several areas I would like to focus on this morning: first, the impact of the U.S. Tax Cuts and Jobs Act on Ashland; second, an update on SG&A; and finally, our outlook for the second quarter and the remainder of our fiscal year. Our effective tax rate for the first quarter after adjusting for key items was 18%, which was 8 percentage points higher than we forecast last November. As Bill noted, this higher rate reduced EPS by $0.04 in the quarter. The increase in the tax rate is primarily attributable to U.S. tax reform enacted in late December. Furthermore, as a result of the new tax legislation, we have reset our expected effective tax rate for fiscal ‘18 to be in the range of 16% to 20%. The higher ETR for Ashland may seem counterintuitive to some as there has been so much discussion and focus on companies that would realize a tax benefit. However, the increase in Ashland’s ETR reflects the global nature of our business. We have provided…

Thank you, Kevin. As outlined at our Investor Day last year, Ashland has a clear strategy to drive strong sales and earnings growth in fiscal year 2018 and beyond. As a reminder, we established the following financial targets for fiscal year 2018 through fiscal 2021. We intend to grow adjusted EBITDA by at least 15% per year, improve specialty ingredients adjusted EBITDA margins to above 25% and generate more than $1 billion of free cash flow. Our performance in the first quarter reflects important progress we are making. While we have more work to do, we are working hard to accelerate our progress and increase our momentum. The second quarter is an important period for specialty ingredients. To that end, we expect to see sustained volume/mix improvements. In the second quarter, we also expect to realize the benefit of pricing actions taken particularly in personal care, pharma and adhesives and take additional pricing actions in the cellulosics portion of Industrial Specialties. Ashland margins in Q2 should also be positively impacted by our asset utilization programs as we begin to see the impact of previously announced closure of four operating facilities. Our de-tolling efforts which are gaining greater traction and we lowered turnaround expenses as many of our plant shutdowns were completed in Q1. And last but not least the ASH team is working aggressively to drive our Pharmachem synergy action plans. From a composites perspective, we continue to see healthy demand in the second quarter. Just last Friday, we announced another round of price increases to help offset raw material inflation which resulted from reduced production from several styrene producers. I&S has again raised prices. The benefit of this action will be partially offset in Q2 by the impact of the planned maintenance shutdown in Marl, Germany. We view this…

Thank you. [Operator Instructions] Our first question comes from Christopher Parkinson of Credit Suisse. Your line is now open.

Thank you. Given your comments in your PowerPoint that there is roughly a $4 million net EBITDA contribution from acquisitions and divestitures which I guess includes Pharmachem and exiting the China JV, can you just quickly parse out the various moving parts including the corporate costs you mentioned, we are just trying to get a sense of where the Pharmachem came in versus expectations and the implied margin or EBITDA contribution for the remainder of the year? Thank you.

Sure Chris. This is Kevin. If you look at Pharmachem, I will first talk about the settlement. So as Bill mentioned approximately $35 million of what I would call contribution EBITDA. So, ex any corporate allocations that the business produced over that period got $2 million, $3 million probably of JV EBITDA that was not there, the delta between that would be corporate allocations. With Pharmachem in the mix, we basically apply our methodology for allocating corporate costs to each of the businesses and Pharmachem participates in that. So, the way to think about it is on average $5 million, $6 million a quarter of corporate cost would be ultimately allocated to the Pharmachem number if you want to apply that to the first quarter that would imply call it $10 million, $11 million or some million dollars of EBITDA ex corporate cost basis, clearly, seasonality in the business during the December quarter as we dealt into it. And so thinking about it on a full year basis, it makes us on an overall basis pretty confident that we are going to be able to meet our targets within that business from an economics perspective. And we very much remain committed to managing those SG&A costs. And as I indicated my comments on an overall basis, we expect corporation to be flat for the year. So, the movement of corporate costs is really just kind of pushing water around in the balloon if you want to think of it that way.

Great. And just a quick follow-up as it pertains to increasing your pharma capacity at Hopewell as well as some of the mix improvements you are targeting out of your Dalton facility, can you simply comment on what inning you believe are you in regarding your pharma initiatives that you are no longer capacity constrained as well as the consequent mix benefits on an annualized basis? And then also just if you could very quickly touch on given the desire to place that new capacity in the market, can you confirm that you are comfortable doing this without any concern on pricing, I know that’s the initiative, but just any confidence there will be appreciated? Thank you.

Sure, Chris. Thank you. That’s good questions. And in fact, it’s – we do see the momentum building from a demand standpoint in these key product areas that you mentioned out of Doel with Benecel and also out of our Hopewell expansions and Klucel is one of the products and these are some of our most differentiated products and with that really the gains that you see in Q1 are the result of those activities and we see demand building in those areas, customers who we weren’t able to supply effectively or consistently now understand and have the confidence to have more of that business with us. And so I would say that a significant or great amount of our current and targeted growth are in these more differentiated platforms, they are really in these areas are very few competitors and our products are differentiated even by the nature of how they perform. So, we still have plenty of upside opportunity as it relates to utilizing that capacity. In fact, we are still in the process of qualifying our additional Klucel capacity with customers. So while we are able to use it today, we will be able to use it more and even improve the mix running through those assets as we go forward. Basically, I think what it does is it has taken the cap off in terms of limitations at least from a production standpoint on our growth in the pharma market.

And we saw really good volume mix out of that business in the quarter, very strong performance. And we have been bullish on pharma. We remain bullish on pharma and really just comes down to the team executing on the new capacity and continuing to drive that value through the system.

Thank you.

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

Thank you. If the volume mix benefit to the specialty segment was about 9.5% at the EBITDA level, what was the volume mix contribution at the sales level in specialties?

Hi, John. Good morning. It’s Seth. You pointed out correctly volume mix was a positive contribution certainly at the profitability level, it is also a 2% contributor to the top line for specialty.

Okay. And then should the tax rate in fiscal September ‘19 come down from a full year reform or not really since the U.S. taxable earnings are still going to be at a modest loss even after the debt reduction?

Yes, John, it’s a great question and it’s going to take us, I think a good bit of the fiscal year to work through that. The new tax provisions really pile a lot of complexity on top of what was already there. The idea I think within ‘18 is really, in fact, not true. And so we have to work through that. Each provision – each new provision of tax reform is going to drive in some cases benefit and in some cases not. Couple of small examples. There is interest deductibility as that’s probably going to be something that we have to deal with, because not all of our interest is likely to be deductible in the U.S. However, we have new provisions around CapEx deductibility as the capital is spent in the U.S. and so there is offsets to be had there and those are just a couple of examples of really many that our internal team and our third-party advisors are working through as we try to figure this out. And I think a lot of companies are frankly in the same boat if they are global as we are. And so what we will commit to is certainly providing an update as soon as we have one. I think the way we think about it based on where we are right now I wouldn’t expect the range to get worse. And I think it remains to be seen if the ETR range can in fact improve from the 16% to 20% that we are currently using. And again, we see no material impact on the overall cash tax rate absent the one-time repat cost that we will be paying over 8 years, which is largely offset by a reduction in deferred tax liabilities due to the lower rates.

Okay, thank you.

Thank you. Our next question comes from Mike Sison of KeyBanc. Your line is now open.

Hey, guys. Nice start to the year. In terms of ASI, your guidance would imply that you are going to need 150 to 160 in EBITDA per quarter after a seasonally slow first quarter. Can you maybe help us understand how you get that ramp particularly in 2Q and then is there any seasonality between that number for the rest of the other quarters?

Kevin, why don’t you speak to the seasonality and I will speak to the ramp if you will.

Yes. I mean, really what we should see is frankly positive seasonality coming out of Q2 and Q3 which basically gets at the ramp concept as well. Those are typically the strongest two quarters within ASI and frankly Q4 isn’t typically far behind, but if you look at it on an overall basis, Q2, Q3 will be our strongest quarters. And so it really comes down to the team continuing to execute on an overall basis. I think manufacturing is stepping up and doing what we need to do. We have seen good benefits from that. We should see that accelerate through the course of the year. Volume mix equation is very positive and really I think it comes down to executing fully on pricing initiatives and driving that through the system and that’s primarily in the industrial area.

Kevin stated it very well, so no need to repeat at all. I think the products that we feel very good about of course is that we are seeing improvement in the volume mix area with a particular focus on mix. Good SG&A control, manufacturing, we see the momentum building there and what’s really going to be key for us is to make sure that especially in the cellulosics portion of the Industrial Specialties business that we drive the pricing needed to fully offset raw material inflation. By the way, they were the group that saw the biggest impact from the increase year-over-year.

Great. And then in terms of the raw material inflation for ASI, what is the basket of raw materials that go into ASI, what’s the increase in cost that you need to offset, so like low single-digit, mid single-digits? And then can you just remind us what the major inputs for the cellulosics are that you need that you need to overcome?

So, just in general within ASI some of the key raw materials are butane which can go into BDO, of course, cotton linters, which of course and wood pulp which goes into cellulosics, you have other key materials. Polypropylene ultimately works its way through as well. So, those are some of the key raw materials that have been impacted if you will in the let’s say last 6 months or so. And just to put it in perspective, with the way things are right now, the raw materials that we have realized to-date that versus prior year. Raw material costs would be up about $26 million year-over-year, that’s assuming that prices don’t go down or they don’t go up further, but that’s – that’s the amount that we need to overcome with our pricing activities.

Great. Thank you.

Thank you. Our next question comes from Laurence Alexander of Jefferies. Your line is now open.

Good morning. Two questions, can you flush out a little bit your thinking about the ASI asset utilization and how much of it – how we should think about the benefit in the back half of this year compared to in next year, is it a steady cadence or is there a bit of a hockey stick effect. And secondly, can you give us some sense of the trends you are seeing in your construction and energy markets?

Sure. I mean from an asset utilization standpoint, we will see from quarter-to-quarter some variations just because when you do have a shutdown in a quarter right it’s been one you had one in the prior year, but in general, we really break it out into several key buckets fairly straightforward. One is spend and the other is absorption for better utilizing the assets that lowers the cost across all units and of course if we can reduce the overall spend rate that’s another way to make improvements kind of numerator and denominator math there. And so we are focused on for example in the – in the cost portion being better, more precise with our shutdowns making them shorter in duration and focusing on reducing their costs and also consolidating facilities in our footprint where possible. So we have lean Six Sigma programs, which are also helping not only to drive productivity, but to look to reduce the cost. And then you have the absorption effect, which really comes from selling incremental volume to the system. And in that regard what you are seeing so far you saw in Q4 and we expect to see in Q1, you will see really more of the impact of managing the cost side of that equation. Ultimately, we expect to and need to drive greater volume growth while our focus is on mix over a volume, we do expect to see our business grow and with that that will help on the absorption equation. So, I would say overall, we anticipated continuing through this fiscal year. Again, it maybe a little lumpy from one quarter to another and there is no reason why it shouldn’t continue next year at a rate I will say at least at this point in the similar kind of fashion. And from a market standpoint in the energy area, we saw demand increasing in the U.S. which of course is good news. In Europe, it was a little bit softer and overall, we saw construction down versus prior year.

Okay. Thank you.

Thank you. Our next question comes from David Begleiter of Deutsche Bank. Your line is now open.

Thank you. Good morning.

Good morning.

Bill, just in cellulosics, any more details on what’s causing the pricing issues, is it a competitor intensity, is it excess supply, anymore color on that inside cellulosics?

Sure. And this is how I would characterize it is. We have a lot of very differentiated products and a lot of contracts associated with those and in some of those contracts we have cycles to them. So it takes a little time to pass those prices through those raw material inflations through with some of our larger key customers with some of our more differentiated products, because of that structure. But in general, I think it’s fair to say that in the – it in the spaces say portions of the construction market, may be the mid to lower end of the coatings market you do see a little bit more global competition and we are trying to fight the right balance, between having the right mix, the right volume, but also offsetting the raw material inflation. And I would like to highlight not in as an excuse or anything like that, but this is where we saw really significant increase in the quarter versus what we anticipated coming into the quarter in terms of raw material costs. The team is out there working the equation hard. And frankly as Kevin alluded to as we look forward on that the business we run a highly integrated ASI business today. We are going to increase our focus on the strategic imperatives in this part of the business, where to the extent there is some greater cost sensitivity, we are going to be more aggressive working to make sure that we are truly competitive on a global scale regardless of the segments that we are competing in.

Very good and just on BDO, you also have strong in this year, I know you have some turnaround on costs in Q2, but can you give us your view of the BDO cycle and is there some bias for the upside for I&S EBITDA guidance for the year, given the BDO cycle?

Sure. So we are going to highlight the BOD – the turnarounds mainly because given the timing it could look based on Q1 like we should have our number that’s much bigger for the year end. But again you do need to factor in now we will have versus last year we will have this turnaround in Q2. But overall we have been able to consistently increase prices in the marketplace kind of step-by-step. Our last increase was in January and taking place or taking effect in February. Since then actually one of the other suppliers in the market has had a force majeure, making the supply demand dynamic even tighter. And so we want to make sure that we are appropriately and fairly valuing our product. And we are working hard. We don’t want to presume that there is upside at this point because we need to see how the dynamics play out. But the indications are now that pricing is holding. And we have actually seen it now translate not just in BDO, but into the derivatives, which is an important element of, if you will, that equation. And again I just bring it up, because it’s a point to note and your information is as good as mine. You all read about the tightening that’s going on in terms of productions and missions standards in China and the impact that’s having on whether it would cost or access to energy and operations of facilities. And we have been setting that and looking at that and it’s going to take some more time. But that I will say has had an impact up to this point because we haven’t seen some capacity that we otherwise might have predicted would come back online at these prices. And it may mean that there is some further upside to the cycle just by nature of our capacity limitations coming in other region. I don’t want to make too big of a deal out of it, because that’s uncertain, it’s just something that that we are watching very carefully.

Thank you very much.

And one obviously we will commit to is as we get through Q2 and we get more visibility into the rest of the year, clearly we will update our outlook for the business based on current knowledge that we have and so you expect to hear from us on the next call relative to that.

Thank you again.

Sure. Thanks.

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

Good morning.

Good morning.

Just going back to the ASI business and some of the timing of turnarounds there, I think it was last year that you guys have made efforts to move all of your maintenance downtime into that seasonally weak Q1, is that something that we saw all of that impact in this Q1 and can you comment on whether the maintenance costs or the downtime or however you want to think about it, was that higher or lower or pretty much in line with where it was in the prior year?

Yes. In the quarter in Q1 the turnaround expenses were about $2 million higher versus prior year. And we do have turnarounds really through – throughout the year. You have put down three buckets. You have the large plan to turnarounds. You have kind of shorter maintenance shutdowns. And then you do have from time-to-time unplanned outages. What I would say is that the great majority in ASI of our planned major maintenance outages, have been completed here in Q1 and so that’s why we see some upside associated with that going forward.

Got it. And then just looking at the coatings business within ASI, obviously really nice rebound there and you referenced some wins with key customers, just wondering if you can into a little more detail about what you were seeing in terms of those wins and whether part of what we are seeing there in terms of the 12% growth was some restocking after a year that obviously was ended up being weaker than a lot of your customers may have anticipated?

Right and thanks for that question. There are some two – I would say important parts in answering that. And one is I recall as I am sure you did a lot of concern coming out of our last quarter because coatings was flat and we have said that you shouldn’t read too much into it, because you do have some timing of different order patterns. And I am willing to acknowledge that while we are on the positive side of that coin here today that some of the orders that maybe we didn’t see in Q4, you see in Q1 and that helped to create a very robust growth rate. At the same time, this is an area where the team has been focusing extensively on trying to expand our position given our available capacity frankly and there has been a lot of work on the international front, lot of work in the Middle East and in the rest of Asia to help drive new customer wins to improve our volume mix equation and better utilize our capacity. So, it’s really to me a combination of the two.

Alright. Thanks very much.

Thank you. [Operator Instructions] Our next question comes from Jeff Zekauskas of JPMorgan. Your line is now open.

Hi, thanks very much. Your Specialty Ingredients tonnage was flat year-over-year at 73,000 tons and the tons from the Pharmachem has to be larger than the exited tons from the China JV. So, I think your volumes in the quarter were down. How much were they down and in which areas were they down?

So, Jeff, it was about an offset. You are right, the Pharmachem volumes were modestly larger, I would say than the exited JV volumes. Keeping in mind, construction volumes tend to be pretty high for the value. On an overall basis, the base business was pretty flat. And just to provide a little more color around that and this follows very closely and very logically with the mix impact we saw, the higher value pieces of the business care, pharma and nutrition and coatings contributed strongly to the mix equation and also from a volume perspective. And to provide just a little bit more color to the overall equation, we think about the business oftentimes as a consumer business and an industrial business we talk about that way. Consumer volumes tend to be much lower in our value. The industrial volumes tend to be much, much higher and obviously lower value. It’s roughly a 30-70 split between consumer and industrial. So, the point of that is increases on the consumer side really drive a lot of value to the overall equation and the industrial is going to move around between the lower value materials and the higher value materials, coatings being typically the highest value material we move on the industrial side and that’s really how the overall equation works.

And Jeff, just to add a little more color and I think this hopefully will bridge with prior conversations that we have had about the business and some of the changes that we have been making is we have really expanded the focus by the market facing commercial units to focus on their commercial contribution and that is the combination of the impact of volume, the impact of mix, the impact of pricing versus raw material and ultimately, the absorption effect versus what’s planned in our budget. And the equation that we hold our team accountable to is the aggregate of that and we have actually modified our sales incentive programs to mirror that. So, we would rather drive a richer mix and earn more money than simply track volume. And on the other hand, if we can drive volume and mix at the same time, all the better and if we can do that while getting price that’s the best of all worlds, but it’s the combination that we look at in the aggregate and that’s what we hold our commercial teams accountable for and then the individual levers. There is some flexibility for them to determine what specific customers are in specific marketplaces, what’s the best formula to get there. So, that’s just how we are looking at it and I think it maybe reflected in kind of your broader question.

Right. Okay, thank you for that. And last year your intermediates and solvents business, I think produced 139,000 tons. When you look historically, what’s the highest tonnage output you have ever had out of intermediates and solvents and can you say sort of what a normal tonnage level, but first what’s the highest tonnage you have ever produced?

I don’t know exactly what the highest tonnage is, nameplate capacity on our two plants is 160,000 tons on a combined basis it’s 100,000 for the Marl, Germany facility, 60,000 for the Lima, Ohio facility. We have in the past produced in excess of that. If you think about it in terms of what’s possible 165,000, 100 or so tons is probably about the number, but that’s a generalization, but that’s pretty close I would imagine. The difference between what we sell and what we produce is really driven by the internal volume that we use as raw materials to produce the PVP and the VP polymers and changes in inventory, which can move around by 5,000, 10,000 tons depending on what demand is, where demand is and time of year and that sort of things. Those are really the three components. It’s production, internal utilization and changes in the inventory.

Do you expect to sell more tons this year than you did last year?

But certainly it would be our objective.

Okay, great. Thank you.

So, first priority is to serve our need internally and then obviously the second priority is to make as much and sell as much as possible over and above that.

Okay, great. Thank you so much.

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

Good morning. Thanks for taking my call. Couple of questions. First of all, just you have obviously got very good growth in coatings, I think you said something like 18% volume on some customer gains as well as which you mentioned is timing of orders. Obviously, last quarter 0% was not a good number to use this quarter’s 18% is probably not a good number to use. So, how should we think about the growth of that coatings business both for the rest of 2018 and have you sort of have some visibility on sort of past 2018 as far as what this business can sustain?

Sure. I think from a revenue standpoint, it was around 12% in the quarter just to make sure we are talking about the same numbers here. I would think that in the 3% to 4% range on average would be a reasonable number. I would say that there are opportunities in the coatings markets in regions that we don’t support throughout the globe to help to use or leverage some of our excess capacity, so we could see some additional growth as a result of that. But if you look at our base business, the core customers and geographies that we serve I think that 3% range maybe 3% to 4% would be the targeted range.

So with that in mind for 2018, I mean, obviously we are going to see something more than that because of the customer gains that you mentioned having, so can we look at sort of mid single-digit growth for this year?

I wouldn’t say that’s an unreasonable outlook. That being said as we have seen especially over the last few quarters, you do see some volatility that goes quarter-by-quarter. This is the time of the year where we are going to begin to get a much better read with what our, if you will many of our core coatings customers isn’t going to be a good season for architectural coatings with our primary, if you will, main customers or will be a slow one, I think last year we felt that it was comparatively slower, didn’t feel robust. Obviously, we are cautiously optimistic that, that will be a more positive, but that will certainly help to determine whether it will be really up towards the higher end of that range that you are thinking in your mind or more towards what we might consider to be kind of an industry average that I was describing just a minute ago. So, we should have a good read on that over the next quarter here I would think.

Okay, as we get into the bidding season, it makes sense. And then just a quick follow-up on the BDO issue, BASF was out this morning with the force majeure on their BDO planned here in North America, you talked about Chinese capacity rationalization, not perhaps extending the pricing cycle for BDO, it’s a regional market. Can you talk about sort of what your – what you are seeing in the markets as far as tightness or the availability of supply even before this BASF force majeure in North America, is it going to help you with getting better pricing here or is it just going to relieve a little bit of an oversupply that may have been in the market?

Well, certainly the supply demand dynamic has some move towards will say a tighter supply situation which is good for the fundamentals. Just if you will kind of anecdote, we saw over the course of the last couple of months, some customers who maybe they purchased from us a little less consistently than and were maybe a little more spot purchase in their nature where we took a little bit more aggressive stance just because of the demand for what we had available was such that it was okay, if they did their spot purchases elsewhere and we were positively surprised in a number of incidents to see those companies come and say okay, that’s – we will move forward on those terms. So, this is one that can change with the supply demand shift, but right now there is nothing that makes us feel like the trend, the positive trend and the tightening trend isn’t continuing. And with that, we believe that I mean, you look at the pain that we took when there was an excess of supply back to just appropriate economics in the business, this is the time where we need to get the price back up to where we get good returns on the investments that have been made over. So we are not shy about that. We have been doing it consistently and we will continue to press forward.

Yes, Dmitry, the team has been, I would say, pretty aggressive in the market and appropriately. So, as we have – we have seen outages in various places and it’s caused tightness. It is regional business, as you have indicated and clearly those things have helped the environmental restrictions around coal-fired plants in China are, we believe helping that business and going to continue to help that business. I mean one of the positive signs and Bill mentioned this earlier that we have seen is some pricing power in the derivative side. The pricing around BDO has been steadily increasing for the last 4 to 6 months, let’s say, but we have not seen that until very recently in derivatives such as NMP and THF, we are now seeing pricing opportunities in those derivatives, which I think it’s a positive thought, so more to come as we work through the next few months of this business, but rest assured the team is very attuned to what’s going on in the marketplace, they are very experienced and they do a great job managing this business and the customer base.

Thank you very much. That’s very helpful.

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

Thank you. Question on Pharmachem, I think that I was a little confused about the seasonality of that business last quarter, so I want to ask you about the cadence of earnings for the rest of the year in second quarter and third quarter, I mean if we think about it as a $60 million EBITDA type business and it did about $5 million in the December quarter. Does that mean it should do about $20 million a quarter in the second and third quarters and just if you could when you comment on that also indicate what degree of EBITDA margin improvement should we expect sequentially in ASI overall?

So in terms of the $5 million, I think the thing to keep in mind is that is inclusive of $5 million, $6 million of corporate cost allocation. So on a contribution basis, you should think of it as call it $10 million to $12 million for the quarter and that’s what gets us to the $35 million of contribution margin or contribution EBITDA for the year. We would expect both that the March quarter, June quarter to be stronger. So as we move into the warmer months for the year, we would expect that to improve.

I think the key, Jim like we said, if you net out [indiscernible] and the role of the corporate allocations through 7 months or about $35 million and if you just extrapolate that with as we mentioned there was some seasonality in Q4 that puts you right at about the run-rate that you are talking about there more or less. So, that’s basically the math associated with it. And as we look at the results in what will be our Q2, what would be a run-rate to get us to the $60 million from the $35 million, we will just have the same dampened effect from the reallocation of their corporate expenses that we put on the business just like we put on our businesses. And as I mentioned that just want to emphasize again what Kevin has said earlier in this call, which is it’s important as we talk about we have a normal allocation methodology, but ultimately our spend across the corporation was expected to be flat year-over-year and so does that incremental and increased I am excluding FX and the direct cost of acquisitions. But we are not increasing our spending. We are just away it gets allocated across the businesses and Pharmachem is part of ASH in that.

Great. And then quickly on interest expense you are using some repatriated cash to pay down debt I assume, should we expect interest expense to be falling throughout the course of the year?

So last week we did repatriated a little over $300 million and we reduced debt with that cash. And as you will recall we talked about as we do the Pharmachem acquisition potential to move as a large portion of that term loan A offshore and used non-U.S. cash to reduce that debt. Part of that was in fact included in our full year outlook from an interest expense perspective, so there are a couple of other components. So we now have largely unfettered access to cash globally although there are pockets where it’s still difficult to get cash out of account as an example. We should be able to more consistently repatriate cash that is generated outside the U.S. and it would be our intent of course to reduce debt with that cash as we bring it home. And so what I would say there is probably some upside and in our overall interest rate range for the full year assuming the availability of that cash absolute and there is upside in that. I think that the caveat to that would be we have about call it around $700 million of floating rate debt. And the remainder is fixed rates bonds so that obviously coupon doesn’t move on that. But to the extent LIBOR we are to put some pressure on rates been that could obviously be got the other way for us. So we will continue to update throughout the rest of the year. We are pleased to have access to the cash. We have got another couple of hundred million that we feel like we will be able to repatriate over the course of the year. You should expect us to reduce debt with that which not only reduces absolute interest rate expense. It also reduces interest rate risk which is also a positive. So that’s just – that’s where we are right now.

Thanks a lot Kevin.

Sure.

Thank you. And ladies and gentlemen this does conclude today’s conference call. I would now like to – today’s Q&A. I would now like to turn the call back over to Seth Mrozek for any closing remarks.

Thank you, Sonia. Thank you all for your time and interest this morning and your interest in Ashland. Hope everyone has a great day. Take care. Bye-bye.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone have a great day.