Ashland Inc. Reports Preliminary Net Income of $0.91 Per Share for Fiscal First Quarter
Press Release
Ashland Inc. Reports Preliminary Net Income of $0.91 Per Share for Fiscal First Quarter
- Chemical Sector operating income reached $62 million, up 27 percent
- Ashland Specialty Chemical operating income grew to $27 million,
up 69 percent
- Ashland Distribution operating income increased to $34 million,
up 70 percent
- Valvoline recorded operating income of $1 million versus
$13 million in the prior-year period
- Transportation Construction Sector operating income rose to $39 million
versus $4 million for the prior-year period.
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Net income for Ashland's fiscal first quarter, ended Dec. 31, 2005, amounted to $66 million, or $0.91 per share, as compared with $94 million, or $1.28 per share, in the prior-year quarter. The comparison is affected by the June 2005 transfer of Ashland's former 38-percent interest in Marathon Ashland Petroleum LLC (MAP) to Marathon Oil Corp., the retirement of most of Ashland's debt and the investment of the remaining proceeds. Net income in the 2004 quarter included $83 million of net income from MAP, as well as net, after-tax interest expense of $18 million, for a net benefit of $65 million, or $.89 per share. The 2005 quarter included $6 million, or $.08 per share, of net, after- tax interest income.
"We are pleased with the strong start we've had to fiscal 2006," said James J. O'Brien, Ashland chairman and chief executive officer. "Three of our four businesses performed well. The continued excellent performances of Ashland Specialty Chemical and Ashland Distribution drove results in the Chemical Sector. These businesses increased revenues and expanded their profit margins in an environment of rising costs. The quarter was disappointing for Valvoline, however, as declining demand in the motor oil market, rising raw materials costs and competitive price discounting adversely affected results. The Transportation Construction Sector benefited from margin improvement due to our efforts to incorporate higher material values and energy costs into our bids, as well as more favorable weather conditions in the quarter."
Line of business results reflect new methodology for allocating substantially all corporate expenses to Ashland's four operating businesses, with the exception of certain legacy costs or items clearly not associated with the operating divisions. Accordingly, an additional $21 million has been allocated to the divisions for the December 2005 quarter. The remaining $6 million expense is classified as "Unallocated and other" in Ashland's segment reporting. Results for previously reported periods have been reclassified to conform with the new allocation methodology.
For the December 2005 quarter, in the Chemical Sector, robust results from Ashland Distribution and Ashland Specialty Chemical more than offset the weak performance from Valvoline. As a result, operating income for the Chemical Sector amounted to $62 million, a 27-percent improvement over the $49 million of operating income in the December 2004 quarter.
Ashland Specialty Chemical achieved record operating income for the December 2005 quarter of $27 million, up 69 percent over the $16 million of operating income in the prior-year quarter. The December 2004 quarter included approximately $4 million in net nonrecurring gains, primarily from the termination of a product supply contract. Sales and operating revenues grew to $449 million for the December 2005 quarter, a 12-percent increase over the December 2004 quarter. Sales from the DERAKANE® resins business acquired in December 2004 contributed approximately half of the growth, with the remainder mainly attributable to higher selling prices. The increase in operating income reflected a combination of revenue and margin growth.
Ashland Distribution earned $34 million of operating income in the December 2005 quarter -- marking its eighth consecutive record quarter. Operating income increased by 70 percent compared with the prior-year quarter. Sales and operating revenues increased 8 percent versus the December 2004 quarter to $967 million. The division's performance reflects its ability to expand margins despite rising costs of chemicals and plastics. Daily sales volume declined 4 percent, a result of the sale of the ingestibles business in the March 2005 quarter and supply disruptions from hurricanes Katrina and Rita.
Valvoline's performance for the December 2005 quarter reflected a 6-percent decrease in total lubricant volumes in a declining U.S. market for passenger-car lubricants, and continued high raw material costs. Sales and operating revenues were $310 million for the quarter, essentially even with $309 million of revenues in the December 2004 quarter.
The Transportation Construction Sector, commercially known as Ashland Paving And Construction, Inc. (APAC), reported operating income of $39 million for the December 2005 quarter, compared to $4 million in the December 2004 quarter. Results for the December 2005 quarter reflect APAC's continuing focus on incorporating increases in raw material and energy costs into its sales prices and more favorable weather conditions. Results for the December 2005 quarter also include a $10-million gain from the transfer of property subject to eminent domain, as well as a $4-million loss on fuel hedges. At Dec. 31, 2005, APAC's construction backlog, which consists of work awarded and funded but not yet performed, was $1.9 billion, up 12 percent over the same period last year.
Today at 4:30 p.m. (EST), Ashland will provide a live webcast of its quarterly 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 www.ashland.com/investors.
Ashland Inc. (NYSE: ASH) is a Fortune 500 chemical and transportation construction company providing products, services and customer solutions throughout the world. To learn more about Ashland, visit www.ashland.com.
® Registered trademark, Ashland
* Preliminary Results
Financial results are preliminary until the Company's Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission. This filing is expected to be made on or before February 9, 2006.
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, with respect to Ashland's operating performance. These estimates are based upon a number of assumptions, including those mentioned within this news release. Such estimates are also based upon internal forecasts and analyses of current and future market conditions and trends, management plans and strategies, weather, operating efficiencies and economic conditions, such as prices, supply and demand, cost of raw materials, and legal proceedings and claims (including environmental and asbestos matters). 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 and risks affecting Ashland are contained in Ashland's Form 10-K for the fiscal year ended Sept. 30, 2005. 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 release.
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED INCOME
(In millions except per share data - preliminary and unaudited)
Three months ended
December 31
2005 2004
REVENUES
Sales and operating revenues $2,412 $2,177
Equity income 2 146
Other income 15 17
2,429 2,340
COSTS AND EXPENSES
Cost of sales and operating expenses 2,029 1,849
Selling, general and administrative
expenses 305 311
2,334 2,160
OPERATING INCOME 95 180
Gain on the MAP Transaction (a) 2 -
Loss on early retirement of debt - (2)
Net interest and other financial costs 10 (29)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 107 149
Income taxes (40) (55)
INCOME FROM CONTINUING OPERATIONS 67 94
Results from discontinued
operations (net of income taxes) (1) -
NET INCOME $66 $94
DILUTED EARNINGS PER SHARE
Income from continuing operations $.91 $1.28
Results from discontinued operations - -
Net Income $.91 $1.28
AVERAGE COMMON SHARES AND ASSUMED
CONVERSIONS 73 73
SALES AND OPERATING REVENUES
APAC $726 $611
Ashland Distribution 967 895
Ashland Specialty Chemical 449 400
Valvoline 310 309
Intersegment sales (40) (38)
$2,412 $2,177
OPERATING INCOME (b)
APAC $39 $4
Ashland Distribution 34 20
Ashland Specialty Chemical 27 16
Valvoline 1 13
Refining and Marketing (c) - 136
Unallocated and other (6) (9)
$95 $180
(a) "MAP Transaction" refers to the June 30, 2005 transfer of Ashland's
38% interest in Marathon Ashland Petroleum LLC (MAP), Ashland's maleic
anhydride business and 60 Valvoline Instant Oil Change centers in
Michigan and northwest Ohio to Marathon Oil Corporation in a
transaction valued at approximately $3.7 billion.
(b) In October 2005, Ashland refined its segment reporting to allocate
substantially all corporate expenses to Ashland's four operating
divisions, with the exception of certain legacy costs or items clearly
not associated with the operating divisions. Prior periods have been
conformed to the current period presentation.
(c) Includes Ashland's equity income from MAP, amortization related to
Ashland's excess investment in MAP and other activities associated
with refining and marketing through June 30, 2005.
Ashland Inc. and Consolidated Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - preliminary and unaudited)
December 31
2005 2004
ASSETS
Current assets
Cash and cash equivalents $601 $146
Available-for-sale securities 479 -
Accounts receivable 1,514 1,212
Inventories 584 538
Deferred income taxes 78 95
Other current assets 132 106
3,388 2,097
Investments and other assets
Investment in Marathon Ashland
Petroleum LLC (MAP) - 2,856
Goodwill and other intangibles 645 624
Asbestos insurance receivable
(noncurrent portion) 363 396
Deferred income taxes 164 -
Other noncurrent assets 499 313
1,671 4,189
Property, plant and equipment
Cost 3,310 3,166
Accumulated depreciation,
depletion and amortization (1,887) (1,889)
1,423 1,277
$6,482 $7,563
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Debt due within one year $12 $575
Trade and other payables 1,228 1,197
Income taxes 2 69
1,242 1,841
Noncurrent liabilities
Long-term debt (less current portion) 77 1,087
Employee benefit obligations 394 438
Deferred income taxes - 248
Reserves of captive insurance companies 183 177
Asbestos litigation reserve
(noncurrent portion) 512 553
Other long-term liabilities and
deferred credits 388 375
1,554 2,878
Stockholders' equity 3,686 2,844
$6,482 $7,563
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - preliminary and unaudited)
Three months ended
December 31
2005 2004
CASH FLOWS FROM OPERATIONS
Income from continuing operations $67 $94
Adjustments to reconcile to cash
flows from operations
Depreciation, depletion and amortization 51 46
Deferred income taxes 54 17
Equity income from affiliates (2) (146)
Distributions from equity affiliates 1 1
Change in operating assets and
liabilities (a) (312) (70)
Other items (3) 2
(144) (56)
CASH FLOWS FROM FINANCING
Proceeds from issuance of common stock 4 20
Excess tax benefits related to
share-based payments 1 2
Repayment of long-term debt (5) (98)
Repurchase of common stock (96) -
Increase in short-term debt - 211
Cash dividends paid (20) (20)
(116) 115
CASH FLOWS FROM INVESTMENT
Additions to property, plant and
equipment (50) (55)
Purchase of operations - net of
cash acquired - (95)
Purchases of available-for-sale
securities (227) -
Proceeds from sales and maturities
of available-for-sale securities 152 -
Other - net 3 2
(122) (148)
CASH USED BY CONTINUING OPERATIONS (382) (89)
Cash used by discontinued operations (2) (8)
DECREASE IN CASH AND CASH EQUIVALENTS $(384) $(97)
DEPRECIATION, DEPLETION AND AMORTIZATION
APAC $26 $22
Ashland Distribution 5 4
Ashland Specialty Chemical 10 11
Valvoline 6 6
Unallocated and other 4 3
$51 $46
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC $25 $33
Ashland Distribution 3 5
Ashland Specialty Chemical 12 11
Valvoline 5 5
Unallocated and other 5 1
$50 $55
(a) Excludes changes resulting from operations acquired or sold.
Ashland Inc. and Consolidated Subsidiaries
OPERATING INFORMATION BY INDUSTRY SEGMENT
(In millions - preliminary and unaudited)
Three months ended
December 31
2005 2004
APAC
Construction backlog at December 31 (a) $1,941 $1,730
Net construction job revenues (b) $423 $344
Hot-mix asphalt production (tons) 7.8 7.8
Aggregate production (tons) 8.1 7.8
ASHLAND DISTRIBUTION (c)
Sales per shipping day $15.9 $14.4
Gross profit as a percent of sales 10.2% 9.6%
ASHLAND SPECIALTY CHEMICAL (c)
Sales per shipping day $7.4 $6.4
Gross profit as a percent of sales 27.4% 24.2%
VALVOLINE
Lubricant sales (gallons) 38.5 41.1
Premium lubricants (percent of U.S.
branded volumes) 22.9% 21.8%
(a) Includes APAC's proportionate share of the backlog of unconsolidated
joint ventures.
(b) Total construction job revenues, less subcontract costs.
(c) Sales are defined as sales and operating revenues. Gross profit is
defined as sales and operating revenues, less cost of sales and
operating expenses.
SOURCE Ashland Inc.
-0- 01/25/2006
/CONTACT: Media Relations, Jim Vitak, +1-614-790-3715, or
jevitak@ashland.com, or Investor Relations, Daragh Porter, +1-859-815-3825, or
dlporter@ashland.com, both of Ashland Inc./
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/Web site: http://www.ashland.com/
(ASH)
CO: Ashland Inc.; Ashland Paving And Construction, Inc.; APAC
ST: Kentucky
IN: OIL CHM TRN CST
SU: ERN
DL-JK
-- CLW009 --
3222 01/25/2006 08:00 EST http://www.prnewswire.com
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:
Statements in this press release regarding Ashland's business which are not historical
facts are "forward-looking statements" that involve risks and uncertainties. For a
discussion of such risks and uncertainties, which could cause actual results to differ from
those contained in the forward-looking statements, see "Risk Factors" in the Company's
Annual Report or Form 10-K for the most recently ended fiscal year.