8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

______________

FORM 8-K

______________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  July 24, 2009

ASHLAND INC.

(Exact name of registrant as specified in its charter)

Kentucky

(State or other jurisdiction of incorporation)

1-32532	20-0865835
(Commission File Number)	(I.R.S. Employer Identification No.)

50 E. RiverCenter Boulevard, Covington, Kentucky  41011

(Address of principal executive offices)   (Zip Code)

P.O. Box 391, Covington, Kentucky  41012-0391

(Mailing Address)   (Zip Code)

Registrant’s telephone number, including area code (859) 815-3333

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

-1-

Item 2.02.  Results of Operations and Financial Condition

On July 24, 2009, Ashland Inc. (“Ashland”) announced its third quarter results, which are discussed in more detail in the news release attached hereto as Exhibit 99.1, which is incorporated by reference into this Item 2.02.

The information in this report, being furnished pursuant to Item 2.02 of Form 8-K, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and is not incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01.  Financial Statements and Exhibits

(d) Exhibits

99.1 News Release dated July 24, 2009.

-2-

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ASHLAND INC.
	(Registrant)
July 24, 2009	/s/ Lamar M. Chambers
	Lamar M. Chambers
	Senior Vice President and Chief Financial Officer

-3-

EXHIBIT INDEX

99.1 News Release dated July 24, 2009.

-4-

EX-99.1

EXHIBIT 99.1

News Release    

Media Relations:	Investor Relations:
Jim Vitak	Eric Boni
(614) 790-3715	(859) 815-4454
jevitak@ashland.com	enboni@ashland.com
FOR IMMEDIATE RELEASE
July 24, 2009

Ashland Inc. reports preliminary operating income of $152 million for fiscal third quarter, generates $355 million of cash flows from operating activities

COVINGTON, Ky. – Ashland Inc. (NYSE: ASH) today announced preliminary(1) results for the quarter ended June 30, 2009, the third quarter of its 2009 fiscal year. On Nov. 13, 2008, Ashland completed the acquisition of Hercules Incorporated, which significantly impacted Ashland’s reported results. Ashland’s results for the June 2009 quarter were as follows: sales and operating revenues of $2,037 million; operating income of $152 million; and net income of $50 million, or 66 cents per share. Income from continuing operations amounted to $51 million after taxes, or 68 cents per share, in the June 2009 quarter. Unadjusted earnings before interest, taxes, depreciation and amortization(2) were $240 million, and cash flows from operating activities were $355 million.

Key items affecting the June 2009 quarter were as follows: 

·   severance and accelerated depreciation charges of $16 million pretax [14 cents earnings per share (EPS) impact], primarily related to cost-reduction programs;

·   a noncash charge of $10 million pretax (9 cents EPS impact) from accelerated debt-issuance-cost amortization related to the retirement of Ashland's bridge loan, affecting Ashland's interest expense; and

·   an unfavorable $8 million tax judgment in a foreign jurisdiction (10 cents EPS impact).

 

Earnings in the June 2009 quarter also were significantly affected by an unfavorable adjustment to income tax expense related to a projected shift to more U.S.-sourced earnings for the year.  The combination of the aforementioned foreign tax judgment and earnings shift resulted in a 44-percent effective tax rate for the June 2009 quarter.  The effective tax rate for the June quarter reflects an adjustment to achieve an annualized effective tax rate of 27 percent excluding discrete items.  (Refer to Table 5 of the accompanying financial statements for details of key items affecting operating income.)

Adjusted Pro Forma Results(3)

Ashland believes the use of adjusted pro forma results enhances understanding of its current and future performance by providing more comparable results period to period. Thus, adjusting for the impact of key items in both the current and prior year and including Hercules’ results as if the acquisition had been completed on Oct. 1, 2007, Ashland’s results for the June 2009 quarter versus the June 2008 quarter would have been as follows:

·   pro forma sales and operating revenue declined 28 percent from $2,814 million to $2,037 million;

·   adjusted pro forma operating income increased 11 percent from $151 million to $168 million; and

·   adjusted pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) increased 9 percent from $227 million to $248 million.

Performance Summary

Commenting on Ashland’s adjusted pro forma third-quarter results, Chairman and Chief Executive Officer James J. O’Brien said, “Our performance during the June 2009 quarter continued to demonstrate our ability to generate cash during a difficult demand environment. We increased overall EBITDA by 9 percent versus the prior-year quarter, in spite of volume declines in all of our businesses except Ashland Consumer Markets (Valvoline), which saw an uptick. The EBITDA improvement was achieved both through strong gross-profit performance and reduced selling, general and administrative expenses. Our results benefited from all-time-record quarterly EBITDA from Consumer Markets and reduced overall expenses of $87 million in the quarter, both from integration and other cost-reduction initiatives.”

O’Brien continued, “Our annualized run-rate cost savings now stand at $287 million through the June 2009 quarter, exceeding our previously announced $265 million fiscal 2009 target by $22 million, which was achieved three months sooner than we had announced.

“We made considerable progress in the June quarter towards our goals of generating cash and reducing debt. We generated $355 million of cash flows from operating activities and reduced gross debt by $269 million. This reduced our total debt to less than $2 billion.  In addition, we issued $650 million of 9 1/8% Senior Notes and used the proceeds, along with available liquidity, to retire our $750 million bridge loan. Also during the quarter, we signed a definitive agreement to sell our Drew Marine business. We expect net aftertax proceeds of approximately $105 million from the transaction, which is anticipated to close before the end of the fiscal year.  We expect to use the proceeds from this divestiture to further reduce our debt.”

Business Performance

In order to aid understanding of Ashland’s ongoing business performance, the results of Ashland’s business segments are presented on an adjusted pro forma basis as described under the heading “Adjusted Pro Forma Results” and reconciled to GAAP in footnote 3 of this news release.

Ashland Aqualon Functional Ingredients recorded sales and operating revenue of $233 million in the June 2009 quarter, a 23-percent decline versus the year-ago quarter, and metric tons sold declined 27 percent. These results continue to reflect the worldwide decline in the construction market. Overall volume declines ranged from 11 percent in Asia Pacific to 36 percent in North America. Gross profit as a percent of sales was 27.6 percent, 210 basis points below the June 2008 quarter. The decision to reduce inventory by manufacturing at below-replacement levels negatively impacted gross profit by $7 million, or 3 percent of sales. However, this decision enabled Functional Ingredients to generate $23 million of cash from the reduced inventories. In total, Functional Ingredients’ EBITDA in the June 2009 quarter declined 26 percent versus the prior June quarter, to $50 million, and represented 21.5 percent of sales. Both the $50 million of EBITDA and 21.5 percent of sales are slight improvements over the March quarter.

Ashland Hercules Water Technologies’ sales and operating revenue declined 21 percent to $436 million for the June 2009 quarter as compared with the same year-ago quarter, primarily driven by a 17-percent volume decline. At 34.7 percent, gross profit as a percent of sales improved by 200 basis points over the June 2008 quarter. Selling, general and administrative (SG&A) expenses declined by $32 million, or 21 percent. EBITDA of $56 million was slightly ahead of the prior-year quarter and represented 12.8 percent of sales, a 290-basis-point improvement. Sequentially, EBITDA increased 47 percent over the March quarter results, while EBITDA as a percent of sales improved by 400 basis points.

Ashland Performance Materials’ sales and operating revenue of $256 million declined 40 percent versus the same prior-year quarter, and volume per day declined 22 percent. Both revenue and volume comparisons were affected by the acquisition of a line of business from Air Products in 2008. Excluding this effect, revenue and volume decreased 46 percent and 36 percent, respectively, due to continued significant weakness in demand in all key geographies in both the transportation and construction markets. These volume reductions reflect slight sequential improvement. This was generally consistent with the overall composites and castings markets. Disciplined price management and savings from idled plant capacity drove a 280-basis-point improvement in gross profit percentage versus the June 2008 quarter. A 23-percent reduction in SG&A expenses reflects the benefits of actions taken in this and prior quarters to reduce costs. Despite these improvements, EBITDA declined 33 percent to $20 million in the June 2009 quarter versus the prior-year June quarter, but improved 70 basis points to 7.8 percent of sales.

Ashland Consumer Markets’ sales and operating revenue was $441 million, a 3-percent increase over the June 2008 quarter. Lubricant volume increased by 4 percent, primarily due to increases in volumes sold through the Do-It-Yourself market channel. Same-store sales at Valvoline Instant Oil Change increased 6 percent versus the prior year. Gross profit improved to 37.5 percent of sales in the June 2009 quarter, driven by a combination of pricing actions that began in 2008, lower raw materials costs in the quarter, cost-savings initiatives and a continued shift in mix toward sales of premium brands. SG&A expenses declined 5 percent, further contributing to Consumer Markets' record quarterly performance. As a result, Consumer Markets’ quarterly EBITDA nearly tripled versus the prior June quarter to $103 million. For the June 2009 quarter, EBITDA represented 23.4 percent of sales as compared with 8.2 percent in the prior-year quarter.

Ashland Distribution’s sales and operating revenue for the June 2009 quarter declined 39 percent to $698 million. Volume decreased 26 percent versus the prior-year quarter, generally in line with the year-over-year trends in the March quarter. Gross profit as a percent of sales improved to 10.1 percent versus 7.8 percent in the June 2008 quarter. SG&A expenses were 4 percent below the prior-year quarter. Margin improvements and SG&A expense reductions were not enough to offset the impact of volume reductions. As a result, EBITDA of $13 million for the June 2009 quarter represented a decline of 50 percent as compared with the prior-year quarter and was 1.9 percent of sales.

For the June 2009 quarter, EBITDA of $6 million was recorded for Unallocated and Other, as compared with $13 million of EBITDA in the same prior-year quarter.

Outlook

Commenting on Ashland’s outlook, O’Brien said, “Our short-term focus continues to be on generating cash and paying down debt. It appears that demand could remain flat for the foreseeable future due to global macroeconomic dynamics.  We will continue to manage our pricing, reduce our costs, and apply the cash we generate to reduce debt from our current 2.4 times debt-to-EBITDA level to our targeted ratio of 2.0 times.  We continue to resize our businesses to match current economic conditions and to create a leverageable cost structure that will support increased profitability and growth when the economy improves.”

Conference Call Webcast

Today at 9 a.m. (EDT), Ashland will provide a live webcast of its third-quarter conference call with securities analysts. The webcast will be accessible through Ashland’s website, www.ashland.com. Following the live event, an archived version of the webcast will be available for 12 months at http://investor.ashland.com.

Ashland Inc. (NYSE: ASH) provides specialty chemical products, services and solutions for many of the world’s most essential needs and industries. Serving customers in more than 100 countries, it operates through five commercial units: Ashland Aqualon Functional Ingredients, Ashland Hercules Water Technologies, Ashland Performance Materials, Ashland Consumer Markets (Valvoline) and Ashland Distribution. To learn more about Ashland, visit www.ashland.com.

- 0 -

(1) Preliminary Results

Financial results are preliminary until Ashland’s quarterly report on Form 10-Q is filed with the U.S. Securities and Exchange Commission.

(2) Regulation G – Unadjusted EBITDA

The information presented in this news release regarding unadjusted earnings before interest, taxes, depreciation, and amortization (unadjusted EBITDA) does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported results determined in accordance with GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the company and its operating segments. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results in the table provided below.

(in millions)		Q3 2009		Q3 2008
Operating income	$	152	$	87
Add:
Depreciation and amortization		88		34
Unadjusted EBITDA	$	240	$	121

(3) Regulation G – Adjusted Pro Forma Results

The information presented in this news release regarding adjusted pro forma results does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported results determined in accordance with GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the company and its segments. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results in the tables provided below.

The unaudited adjusted pro forma results are presented for informational purposes only and do not reflect future events that may occur or any operating efficiencies or inefficiencies that may result from the acquisition of Hercules Incorporated. Certain significant and identifiable cost allocation, reporting and accounting policy differences have been reflected in these adjusted pro forma results. However, these adjusted pro forma results do not purport to identify all these differences. Therefore, the unaudited adjusted pro forma results are not necessarily indicative of results that would have been achieved had the businesses been combined during the period presented or the results that Ashland will experience in the future. In addition, the preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions can be significantly different depending on changes to conform to Ashland policy.

RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)
Preliminary ASHLAND AQUALON FUNCTIONAL INGREDIENTS Three Months Ended June 30, 2009	Ashland GAAP Results			Eliminate Key  Items (Table 5)	Adjusted Pro Forma  Results
Sales and operating revenue	$	233			$	233
Cost of sales and operating expenses		169				169
Gross profit as a percent of sales		27.6	%			27.6	%
Selling, general and administrative expenses		39				39
Equity and other income		(1	)			(1	)
Operating income		24				24
Operating income as a percent of sales		10.3	%			10.3	%
Depreciation and amortization		26				26
Earnings before interest, taxes,     depreciation and amortization	$	50			$	50
EBITDA as a percent of sales		21.5	%			21.5	%

RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)
Preliminary ASHLAND HERCULES WATER TECHNOLOGIES Three Months Ended June 30, 2009	Ashland GAAP Results			Eliminate Key Items (Table 5)	Adjusted Pro Forma Results
Sales and operating revenue	$	436			$	436
Cost of sales and operating expenses		285				285
Gross profit as a percent of sales		34.7	%			34.7	%
Selling, general and administrative expenses		120				120
Equity and other income		-				-
Operating income		31				31
Operating income as a percent of sales		7.1	%			7.1	%
Depreciation and amortization		25				25
Earnings before interest, taxes,     depreciation and amortization	$	56			$	56
EBITDA as a percent of sales		12.8	%			12.8	%

RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)
Preliminary ASHLAND PERFORMANCE MATERIALS Three Months Ended June 30, 2009	Ashland GAAP Results			Eliminate Key Items (Table 5)			Adjusted Pro Forma Results
Sales and operating revenue	$	256					$	256
Cost of sales and operating expenses		213		$	(9	)		204
Gross profit as a percent of sales		16.9	%					20.3	%
Selling, general and administrative expenses		48			(1	)		47
Equity and other income		-			3			3
Operating income		(5	)		13			8
Operating income as a percent of sales		-2.0	%					3.1	%
Depreciation and amortization		20			(8	)		12
Earnings before interest, taxes,     depreciation and amortization	$	15		$	5		$	20
EBITDA as a percent of sales		5.9	%					7.8	%

RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)
Preliminary ASHLAND CONSUMER MARKETS (Valvoline) Three Months Ended June 30, 2009	Ashland GAAP Results			Eliminate Key Items (Table 5)	Adjusted Pro Forma Results
Sales and operating revenue	$	441			$	441
Cost of sales and operating expenses		275				275
Gross profit as a percent of sales		37.5	%			37.5	%
Selling, general and administrative expenses		76				76
Equity and other income		5				5
Operating income		95				95
Operating income as a percent of sales		21.5	%			21.5	%
Depreciation and amortization		8				8
Earnings before interest, taxes,     depreciation and amortization	$	103			$	103
EBITDA as a percent of sales		23.4	%			23.4	%

RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)
Preliminary ASHLAND DISTRIBUTION Three Months Ended June 30, 2009	Ashland GAAP Results			Eliminate Key Items (Table 5)			Adjusted Pro Forma Results
Sales and operating revenue	$	698					$	698
Cost of sales and operating expenses		627						627
Gross profit as a percent of sales		10.1	%					10.1	%
Selling, general and administrative expenses		69		$	(3	)		66
Equity and other income		1						1
Operating income		3			3			6
Operating income as a percent of sales		0.4	%					0.9	%
Depreciation and amortization		7						7
Earnings before interest, taxes,     depreciation and amortization	$	10		$	3		$	13
EBITDA as a percent of sales		1.4	%					1.9	%

RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)
Preliminary INTERSEGMENT SALES/ UNALLOCATED AND OTHER Three Months Ended June 30, 2009	Ashland GAAP Results			Eliminate Key Items (Table 5)	Adjusted Pro Forma Results
Sales and operating revenue	$	(27	)		$	(27	)
Cost of sales and operating expenses		(25	)			(25	)
Selling, general and administrative expenses		1				1
Equity and other income		7				7
Operating income		4				4
Depreciation and amortization		2				2
Earnings before interest, taxes,     depreciation and amortization	$	6			$	6

RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)
Preliminary ASHLAND INC. Three Months Ended June 30, 2009	Ashland GAAP Results			Eliminate Key Items (Table 5)			Adjusted Pro Forma Results
Sales and operating revenue	$	2,037					$	2,037
Cost of sales and operating expenses		1,544		$	(9	)		1,535
Gross profit as a percent of sales		24.2	%					24.6	%
Selling, general and administrative expenses		353			(4	)		349
Equity and other income		12			3			15
Operating income		152			16			168
Operating income as a percent of sales		7.5	%					8.2	%
Depreciation and amortization		88			(8	)		80
Earnings before interest, taxes,     depreciation and amortization	$	240		$	8		$	248
EBITDA as a percent of sales		11.8	%					12.2	%

RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)			Pro Forma Adjustments
Preliminary ASHLAND AQUALON FUNCTIONAL INGREDIENTS Three Months Ended June 30, 2008	Ashland  GAAP Results			Hercules Ongoing Results (a)			Additional Purchase Accounting D&A			Conforming Adjustments			Adjusted Pro Forma Results
Sales and operating revenue	$	-		$	303								$	303
Cost of sales and operating expenses					205		$	8						213
Gross profit as a percent of sales					32.3	%								29.7	%
Selling, general and administrative expenses					41			4		$	2			47
Equity and other income					-						(1	)		(1	)
Operating income					57			(12	)		(3	)		42
Operating income as a percent of sales					18.8	%								13.9	%
Depreciation and amortization					13			12			1			26
Earnings before interest, taxes,     depreciation and amortization	$	-		$	70		$	-		$	(2	)	$	68
EBITDA as a percent of sales					23.1	%								22.4	%

RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)				Pro Forma Adjustments
Preliminary ASHLAND HERCULES WATER TECHNOLOGIES Three Months Ended June 30, 2008	Ashland  GAAP Results			Hercules Ongoing Results (a)			Additional Purchase Accounting D&A			Conforming Adjustments			Adjusted Pro Forma Results
Sales and operating revenue	$	244		$	310								$	554
Cost of sales and operating expenses		153			215		$	5						373
Gross profit as a percent of sales		37.2	%		30.6	%								32.7	%
Selling, general and administrative expenses		80			68			2		$	2			152
Equity and other income		1			-						1			2
Operating income		12			27			(7	)		(1	)		31
Operating income as a percent of sales		4.9	%		8.7	%								5.6	%
Depreciation and amortization		6			10			7			1			24
Earnings before interest, taxes,     depreciation and amortization	$	18		$	37		$	-		$	-		$	55
EBITDA as a percent of sales		7.4	%		11.9	%								9.9	%

RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)				Pro Forma Adjustments
Preliminary ASHLAND PERFORMANCE MATERIALS Three Months Ended June 30, 2008	Ashland  GAAP Results				Hercules Ongoing Results (a)	Additional Purchase Accounting D&A	Conforming Adjustments		Adjusted Pro Forma Results
Sales and operating revenue	$	425							$	425
Cost of sales and operating expenses		350								350
Gross profit as a percent of sales		17.5	%							17.5	%
Selling, general and administrative expenses		61								61
Equity and other income		5								5
Operating income		19								19
Operating income as a percent of sales		4.5	%							4.5	%
Depreciation and amortization		10					$	1		11
Earnings before interest, taxes,     depreciation and amortization	$	29					$	1	$	30
EBITDA as a percent of sales		6.8	%							7.1	%

RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)				Pro Forma Adjustments
Preliminary ASHLAND CONSUMER MARKETS (Valvoline) Three Months Ended June 30, 2008	Ashland  GAAP Results			Hercules Ongoing Results (a)	Additional Purchase Accounting D&A	Conforming Adjustments		Adjusted Pro Forma Results
Sales and operating revenue	$	428						$	428
Cost of sales and operating expenses		325							325
Gross profit as a percent of sales		23.9	%						23.9	%
Selling, general and administrative expenses		80							80
Equity and other income		3							3
Operating income		26							26
Operating income as a percent of sales		6.1	%						6.1	%
Depreciation and amortization		8				$	1		9
Earnings before interest, taxes,     depreciation and amortization	$	34				$	1	$	35
EBITDA as a percent of sales		7.9	%						8.2	%

RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)				Pro Forma Adjustments
Preliminary ASHLAND DISTRIBUTION Three Months Ended June 30, 2008	Ashland  GAAP Results			Hercules Ongoing Results (a)	Additional Purchase Accounting D&A	Conforming Adjustments	Adjusted Pro Forma Results
Sales and operating revenue	$	1,151					$	1,151
Cost of sales and operating expenses		1,063						1,063
Gross profit as a percent of sales		7.8	%					7.8	%
Selling, general and administrative expenses		69						69
Equity and other income		1						1
Operating income		20						20
Operating income as a percent of sales		1.7	%					1.7	%
Depreciation and amortization		6						6
Earnings before interest, taxes,     depreciation and amortization	$	26					$	26
EBITDA as a percent of sales		2.3	%					2.3	%

RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)				Pro Forma Adjustments
Preliminary INTERSEGMENT SALES/ UNALLOCATED AND OTHER Three Months Ended June 30, 2008	Ashland  GAAP Results			Hercules Ongoing Results (a)			Additional Purchase Accounting D&A	Conforming Adjustments			Adjusted Pro Forma Results
Sales and operating revenue	$	(47	)								$	(47	)
Cost of sales and operating expenses		(47	)									(47	)
Selling, general and administrative expenses		(7	)	$	-			$	(4	)		(11	)
Equity and other income		3			(1	)			-			2
Operating income		10			(1	)			4			13
Depreciation and amortization		4			-				(4	)		-
Earnings before interest, taxes,     depreciation and amortization	$	14		$	(1	)		$	-		$	13

RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA RESULTS
($ millions, except percentages)				Pro Forma Adjustments
Preliminary ASHLAND INC. Three Months Ended June 30, 2008	Ashland  GAAP Results			Hercules Ongoing Results (a)			Additional Purchase Accounting D&A			Conforming Adjustments		Adjusted Pro Forma Results
Sales and operating revenue	$	2,201		$	613							$	2,814
Cost of sales and operating expenses		1,844			420		$	13					2,277
Gross profit as a percent of sales		16.2	%		31.5	%							19.1	%
Selling, general and administrative expenses		283			109			6		$	-		398
Equity and other income		13			(1	)					-		12
Operating income		87			83			(19	)		-		151
Operating income as a percent of sales		4.0	%		13.5	%							5.4	%
Depreciation and amortization		34			23			19			-		76
Earnings before interest, taxes,     depreciation and amortization	$	121		$	106		$	-		$	-	$	227
EBITDA as a percent of sales		5.5	%		17.3	%							8.1	%

(a) Certain nonrecurring, noncash or key items have been removed.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based upon a number of assumptions, including those mentioned within this news release. Performance estimates are also based upon internal forecasts and analyses of current and future market conditions and trends; management plans and strategies; operating efficiencies and economic conditions, such as prices, supply and demand, and cost of raw materials; legal proceedings and claims (including environmental and asbestos matters); and weather. These risks and uncertainties may cause actual operating results to differ materially from those stated, projected or implied. Other risks and uncertainties include the possibility that the benefits anticipated from Ashland's acquisition of Hercules will not be fully realized; Ashland's substantial indebtedness may impair its financial condition; the restrictive covenants under the debt instruments may hinder the successful operation of Ashland’s business; future cash flow may be insufficient to repay the debt; and other risks that are described in filings made by Ashland with the Securities and Exchange Commission (the “SEC”). Although Ashland believes its expectations are based on reasonable assumptions, it cannot assure the expectations reflected herein will be achieved. This forward-looking information may prove to be inaccurate and actual results may differ significantly from those anticipated if one or more of the underlying assumptions or expectations proves to be inaccurate or is unrealized or if other unexpected conditions or events occur. Other factors, uncertainties and risks affecting Ashland are contained in Ashland's periodic filings made with the SEC, including its Form 10-K for the fiscal year ended Sept. 30, 2008, and Form 10-Q for the quarters ended Dec. 31, 2008, and March 31, 2009, which are available on Ashland’s Investor Relations website at http://investor.ashland.com or the SEC’s website at www.sec.gov. Ashland undertakes no obligation to subsequently update or revise the forward-looking statements made in this news release to reflect events or circumstances after the date of this news release.

Ashland Inc. and Consolidated Subsidiaries											Table 1
STATEMENTS OF CONSOLIDATED INCOME
(In millions except per share data - preliminary and unaudited)
		Three months ended						Nine months ended
		June 30						June 30
		2009			2008			2009			2008
SALES AND OPERATING REVENUES		$	2,037		$	2,201		$	5,993		$	6,166
COSTS AND EXPENSES
	Cost of sales and operating expenses (a)		1,544			1,844			4,716			5,158
	Selling, general and administrative expenses (a) (b)		353			283			1,049			856
			1,897			2,127			5,765			6,014
EQUITY AND OTHER INCOME			12			13			29			33
OPERATING INCOME			152			87			257			185
	Gain on the MAP Transaction (c)		1			1			2			23
	Net interest and other financing (expense) income		(62	)		5			(144	)		26
	Other expenses (d)		-			-			(86	)		-
INCOME FROM CONTINUING OPERATIONS
	BEFORE INCOME TAXES		91			93			29			234
	Income tax expense		40			27			49			58
INCOME (LOSS) FROM CONTINUING OPERATIONS			51			66			(20	)		176
	Income (loss) from discontinued operations (net of income taxes)		(1	)		6			(2	)		1
NET INCOME (LOSS)		$	50		$	72		$	(22	)	$	177
DILUTED EARNINGS PER SHARE
	Income (loss) from continuing operations	$	.68		$	1.03		$	(.27	)	$	2.77
	Income (loss) from discontinued operations		(.02	)		.10			(.03	)		.01
	Net income (loss)	$	.66		$	1.13		$	(.30	)	$	2.78
AVERAGE COMMON SHARES AND ASSUMED CONVERSIONS			75			64			72			63
SALES AND OPERATING REVENUES
	Functional Ingredients	$	233		$	-		$	575		$	-
	Water Technologies		436			244			1,187			667
	Performance Materials		256			425			839			1,194
	Consumer Markets		441			428			1,236			1,209
	Distribution		698			1,151			2,249			3,223
	Intersegment sales		(27	)		(47	)		(93	)		(127	)
		$	2,037		$	2,201		$	5,993		$	6,166
OPERATING INCOME (LOSS)
	Functional Ingredients	$	24		$	-		$	13		$	-
	Water Technologies		31			12			38			16
	Performance Materials		(5	)		19			6			50
	Consumer Markets		95			26			180			70
	Distribution		3			20			44			39
	Unallocated and other		4			10			(24	)		10
		$	152		$	87		$	257		$	185
(a)	The three and nine months ended June 30, 2009 include $9 million and $13 million, respectively, within the cost of sales and operating expenses caption and $4 million and $39 million, respectively, within the selling, general and administrative expenses caption for restructuring charges related to the ongoing integration and reorganization from the Hercules acquisition and other cost reduction programs.
(b)	The nine months ended June 30, 2009 includes a $10 million charge related to the original valuation of the ongoing research and development projects at Hercules Incorporated (Hercules) as of the merger date.  In accordance with applicable GAAP and SEC accounting regulations, these purchased in-process research and development costs should be expensed as recognized.  In addition, a charge of $37 million for the nine months ended June 30, 2009 was recorded for a one-time fair value assessment of Hercules inventory as of the date of the transaction.
(c)	"MAP Transaction" refers to the June 30, 2005 transfer of Ashland's 38% interest in Marathon Ashland Petroleum LLC (MAP) and two other businesses to Marathon Oil Corporation.  The income for the nine months ended June 30, 2008 is primarily due to a $23 million gain associated with a tax settlement agreement entered into with Marathon Oil Corporation, relating to four specific tax areas, that supplement the original Tax Matters Agreement from the initial MAP Transaction.  The gain (loss) in the remaining periods presented reflects adjustments in the recorded receivable for future estimated tax deductions related primarily to environmental and other postretirement reserves.
(d)	The nine months ended June 30, 2009 includes a $54 million loss on currency swaps related to the Hercules acquisition and a $32 million realized loss on auction rate securities, of which $7 million relates to securities sold.

Ashland Inc. and Consolidated Subsidiaries				Table 2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - preliminary and unaudited)
	June 30
	2009			2008
ASSETS
Current assets
Cash and cash equivalents	$	256		$	853
Accounts receivable		1,420			1,520
Inventories		546			521
Deferred income taxes		95			74
Other current assets		64			79
Current assets held for sale		45			46
		2,426			3,093
Investments and other noncurrent assets
Auction rate securities		188			267
Goodwill		2,150			291
Intangibles		1,178			114
Asbestos insurance receivable (noncurrent portion)		464			438
Deferred income taxes		-			131
Other noncurrent assets		565			397
Noncurrent assets held for sale		41			49
		4,586			1,687
Property, plant and equipment
Cost		3,492			2,243
Accumulated depreciation and amortization		(1,339	)		(1,179	)
		2,153			1,064
	$	9,165		$	5,844
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term debt	$	44		$	-
Current portion of long-term debt		71			20
Trade payables		790			910
Accrued expenses and other liabilities		455			264
Current liabilities held for sale		10			10
		1,370			1,204
Noncurrent liabilities
Long-term debt (noncurrent portion)		1,878			45
Employee benefit obligations		657			262
Asbestos litigation reserve (noncurrent portion)		828			530
Deferred income taxes		147			-
Other noncurrent liabilities		578			445
		4,088			1,282
Stockholders’ equity		3,707			3,358
	$	9,165		$	5,844

Ashland Inc. and Consolidated Subsidiaries					Table 3
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - preliminary and unaudited)
		Nine months ended
		June 30
		2009			2008
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
	Net (loss) income	$	(22	)	$	177
	Loss (income) from discontinued operations (net of income taxes)		2			(1	)
	Adjustments to reconcile income from continuing operations to
	cash flows from operating activities
	Depreciation and amortization		244			105
	Debt issuance cost amortization		35			-
	Purchased in-process research and development amortization		10			-
	Deferred income taxes		33			20
	Equity income from affiliates		(9	)		(17	)
	Distributions from equity affiliates		13			7
	Gain from the sale of property and equipment		-			(2	)
	Stock based compensation expenses		6			8
	Stock contributions to qualified savings plans		8			-
	Gain on the MAP Transaction		(2	)		(23	)
	Inventory fair value adjustment		37			-
	Loss on currency swaps related to Hercules acquisition		54			-
	Loss on auction rate securities		32			-
	Change in operating assets and liabilities (a)		208			55
			649			329
CASH FLOWS USED BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
	Additions to property, plant and equipment		(107	)		(118	)
	Proceeds from the disposal of property, plant and equipment		5			10
	Purchase of operations - net of cash acquired		(2,080	)		(128	)
	Proceeds from sale of operations		7			35
	Settlement of currency swaps related to Hercules acquisition		(95	)		-
	Purchases of available-for-sale securities		-			(435	)
	Proceeds from sales and maturities of available-for-sale securities		55			314
			(2,215	)		(322	)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
	Proceeds from issuance of long-term debt		2,628			-
	Repayment of long-term debt		(1,489	)		(4	)
	Proceeds from/repayments of issuance of short-term debt		3			-
	Debt issuance costs		(161	)		-
	Premium on long-term debt repayment		(13	)		-
	Cash dividends paid		(17	)		(52	)
	Proceeds from the exercise of stock options		2			3
	Excess tax benefits related to share-based payments		-			1
			953			(52	)
CASH USED BY CONTINUING OPERATIONS			(613	)		(45	)
	Cash provided (used) by discontinued operations
	Operating cash flows		(1	)		(2	)
	Effect of currency exchange rate changes on cash and cash equivalents		(16	)		3
DECREASE IN CASH AND CASH EQUIVALENTS			(630	)		(44	)
Cash and cash equivalents - beginning of year			886			897
CASH AND CASH EQUIVALENTS - END OF PERIOD		$	256		$	853
DEPRECIATION AND AMORTIZATION
	Functional Ingredients	$	77		$	-
	Water Technologies		66			19
	Performance Materials		48			29
	Consumer Markets		26			24
	Distribution		21			18
	Unallocated and other		6			15
		$	244		$	105
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
	Functional Ingredients	$	42		$	-
	Water Technologies		13			11
	Performance Materials		16			33
	Consumer Markets		19			20
	Distribution		2			20
	Unallocated and other		15			34
		$	107		$	118
(a)	Excludes changes resulting from operations acquired or sold.

        

Ashland Inc. and Consolidated Subsidiaries													Table 4
INFORMATION BY INDUSTRY SEGMENT
(In millions - preliminary and unaudited)
		Three months ended							Nine months ended
		June 30								June 30
		2009				2008				2009			2008
FUNCTIONAL INGREDIENTS (a) (b)
	Sales per shipping day		$	3.7		$	-			$	3.7		$	-
	Metric tons sold			41.2			-				112.0			-
	Gross profit as a percent of sales			27.6	%		-				23.1	%		-
WATER TECHNOLOGIES (a) (b)
	Sales per shipping day		$	6.9		$	3.8			$	6.3		$	3.5
	Gross profit as a percent of sales			34.7	%		37.2	%			32.8	%		37.9	%
PERFORMANCE MATERIALS (a)
	Sales per shipping day		$	4.1		$	6.6			$	4.5		$	6.3
	Pounds sold per shipping day			3.8			4.9				3.9			4.7
	Gross profit as a percent of sales			16.9	%		17.5	%			17.3	%		17.9	%
CONSUMER MARKETS (a)
	Lubricant sales (gallons)			45.7			43.8				116.4			125.7
	Premium lubricants (percent of U.S. branded volumes)			29.0	%		24.9	%			28.5	%		24.6	%
	Gross profit as a percent of sales			37.5	%		23.9	%			30.8	%		24.4	%
DISTRIBUTION (a)
	Sales per shipping day		$	11.1		$	18.0			$	12.0		$	17.1
	Pounds sold per shipping day			14.1			19.0				14.6			18.9
	Gross profit as a percent of sales (c)			10.1	%		7.8	%			10.4	%		7.6	%
(a)	Sales are defined as sales and operating revenues. Gross profit is defined as sales and operating revenues, less cost of sales and operating expenses.
(b)	Industry segment results from November 14, 2008 forward include operations acquired from Hercules Incorporated.
(c)	Distribution's gross profit as a percentage of sales for the three months ended June 30, 2009 and 2008 include a LIFO quantity credit of $3 million and $1 million, respectively, and $14 million and $5 million for the nine months ended June 30, 2009 and 2008, respectively.

Ashland Inc. and Consolidated Subsidiaries																Table 5
COMPONENTS OF OPERATING INCOME
(In millions - preliminary and unaudited)
	Three Months Ended June 30, 2009
									Consumer
		Functional		Water		Performance			Markets					Unallocated
		Ingredients		Technologies		Materials			(Valvoline)		Distribution			& Other		Total
OPERATING INCOME
Severance		$	-	$	-	$	(1	)	$	-	$	(3	)	$	-	$	(4	)
Accelerated depreciation			-		-		(9	)		-		-			-		(9	)
Joint venture plant closing costs			-		-		(3	)		-		-			-		(3	)
All other operating income			24		31		8			95		6			4		168
		$	24	$	31	$	(5	)	$	95	$	3		$	4	$	152