Ashland Inc. Reports Record Earnings from Operations for June Quarter
Press Release
Ashland Inc. Reports Record Earnings from Operations for June Quarter
Fiscal 2005: June quarter highlights
* Completion of MAP Transaction results in a $1.5 billion net gain
* Operating income up 40 percent to a record $410 million
* Chemical Sector operating income up 40 percent to $105 million
* Transportation Construction Sector operating income up 7 percent to a
record $46 million in spite of higher energy prices
Quarter ended June 30, 2005
In millions except
earnings per share
Businesses MAP Quarter
Sold and Transaction ended
Ongoing Interest and Debt June 30,
Businesses Eliminated Repayments TOTAL 2004
Operating income $99 $311 $- $410 $292
Net income $58 $173 $1,536 $1,767 $161
Diluted net
income per
share $.78 $2.31 $20.56 $23.65 $2.26
Ashland Inc. today reported net income of $1.8 billion for the quarter ended June 30, the third quarter of the company's 2005 fiscal year. These results include a $1.5 billion net gain on the sale of Ashland's 38-percent interest in Marathon Ashland Petroleum LLC, its maleic anhydride business and 60 Valvoline Instant Oil Change centers (collectively referred to as the "MAP Transaction") and the repayment of most of Ashland's debt with the proceeds. (See page 5 of the attached financial statements for an analysis of Ashland's earnings.) Excluding this gain, net income for the June 2005 quarter was $231 million, or $3.09 a share, compared to $161 million, or $2.26 a share, for the quarter last year.
"The completion of the MAP Transaction marked an extraordinary milestone in Ashland's history," said James J. O'Brien, Ashland Inc. chairman and chief executive officer. "After 81 years in the petroleum refining and marketing industry, Ashland is now focused on growth as a two-sector company with operations in chemicals and transportation construction."
O'Brien noted that the company is pleased with its June quarter performance. "Both the Chemical and Transportation Construction Sectors reported higher profits - up 40 percent and 7 percent, respectively - due mainly to improving margins."
Commenting on operations, O'Brien said operating income from refining and marketing was $290 million for the June 2005 quarter. Strong margins throughout the quarter enabled the 41-percent improvement over the 2004 June quarter.
The Transportation Construction Sector, commercially known as Ashland Paving And Construction, Inc. (APAC), reported operating income of $46 million for the June 2005 quarter, compared to $43 million in the 2004 quarter. APAC achieved record third-quarter operating income despite rising hydrocarbon costs. At June 30, APAC's construction backlog, which consists of work awarded and funded but not yet performed, was $2.1 billion, up 12 percent from the same period last year.
The Chemical Sector, which includes the Ashland Distribution, Valvoline and Ashland Specialty Chemical divisions, performed well during the quarter. Operating income amounted to $105 million for the June 2005 quarter, a 40- percent improvement over the June 2004 quarter. Margins drove stronger earnings.
Ashland Distribution achieved record operating income for the June 2005 quarter of $36 million, marking the sixth consecutive record quarter in operating income. The division has sustained its exceptional performance by maintaining margins in the face of rising raw material costs, managing expenses and aggressively expanding its sales reach. Margin improvement more than offset a volume decline of 4 percent.
Valvoline's operating income for the June 2005 quarter was $26 million, down 13 percent primarily due to the combination of a 4-percent decrease in lubricant sales volumes in a soft motor oil market and higher raw material costs. Valvoline International reported a record quarter, with operating income improving by 31 percent due mainly to better earnings from operations in Europe.
Ashland Specialty Chemical reported operating income for the June 2005 quarter of $43 million, up 95 percent over the 2004 quarter. Strong performance resulted from better margins coupled with a 6-percent volume increase. Margin improvement reflects rising prices and partial abatement of rising raw material costs.
"Third quarter results were encouraging," said O'Brien. "Our solid financial performance is a testament to process improvement across Ashland's businesses. As we continue to make progress in both Sectors, we are confident about our ability to perform well during the remainder of fiscal 2005.
In other corporate developments, Ashland announced last week that its board of directors authorized the purchase of up to $270 million of its common shares.
Today at 12:45 p.m. (ET), Ashland will provide a live audio webcast of its quarterly presentation to 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.
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, as amended, for the fiscal year ended Sept. 30, 2004. 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 - unaudited)
Three months ended Nine months ended
June 30 June 30
2005 2004 2005 2004
REVENUES
Sales and operating revenues $2,492 $2,206 $6,731 $5,967
Equity income 315 221 530 277
Other income 14 12 49 34
2,821 2,439 7,310 6,278
COSTS AND EXPENSES
Cost of sales and operating expenses 2,074 1,844 5,678 5,002
Selling, general and administrative
expenses 337 303 957 882
2,411 2,147 6,635 5,884
OPERATING INCOME 410 292 675 394
Gain on the MAP Transaction (a) 1,295 - 1,295 -
Loss on early retirement of debt (143) - (145) -
Net interest and other financial
costs (31) (29) (89) (88)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 1,531 263 1,736 306
Income taxes 236 (96) 157 (111)
INCOME FROM CONTINUING OPERATIONS 1,767 167 1,893 195
Results from discontinued operations
(net of income taxes) - (6) - (16)
NET INCOME $1,767 $161 $1,893 $179
DILUTED EARNINGS PER SHARE
Income from continuing operations $23.65 $2.35 $25.48 $2.75
Results from discontinued operations - (.09) - (.22)
Net income $23.65 $2.26 $25.48 $2.53
AVERAGE COMMON SHARES AND ASSUMED
CONVERSIONS 75 71 74 71
SALES AND OPERATING REVENUES
APAC $713 $698 $1,713 $1,755
Ashland Distribution 987 840 2,837 2,326
Ashland Specialty Chemical 484 366 1,318 1,017
Valvoline 354 330 987 945
Intersegment sales (46) (28) (124) (76)
$2,492 $2,206 $6,731 $5,967
OPERATING INCOME
APAC $46 $43 $6 $41
Ashland Distribution 36 23 95 56
Ashland Specialty Chemical 43 22 104 63
Valvoline 26 30 69 75
Refining and Marketing (b) 290 205 486 232
Corporate (31) (31) (85) (73)
$410 $292 $675 $394
(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) Includes Ashland's equity income from MAP, amortization related to
Ashland's excess investment in MAP, and other activities associated
with refining and marketing.
Ashland Inc. and Consolidated Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - unaudited)
June 30
2005 2004
ASSETS
Current assets
Cash and cash equivalents $692 $183
Accounts receivable proceeds from
the MAP Transaction 913 -
Accounts receivable 1,520 1,217
Inventories 567 510
Deferred income taxes 113 115
Other current assets 125 204
3,930 2,229
Investments and other assets
Investment in MAP - 2,568
Goodwill 576 513
Asbestos insurance receivable
(noncurrent portion) 374 400
Deferred income taxes 160 -
Other noncurrent assets 501 339
1,611 3,820
Property, plant and equipment
Cost 3,219 3,043
Accumulated depreciation,
depletion and amortization (1,839) (1,825)
1,380 1,218
$6,921 $7,267
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Debt due within one year $78 $204
Trade and other payables 1,358 1,384
Income taxes 71 15
1,507 1,603
Noncurrent liabilities
Long-term debt (less current portion) 90 1,338
Employee benefit obligations 444 394
Deferred income taxes - 313
Reserves of captive insurance companies 190 196
Asbestos litigation reserve
(noncurrent portion) 534 565
Other long-term liabilities and
deferred credits 409 358
1,667 3,164
Common stockholders' equity 3,747 2,500
$6,921 $7,267
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - unaudited)
Nine months ended
June 30
2005 2004
CASH FLOWS FROM OPERATIONS
Income from continuing operations $1,893 $195
Adjustments to reconcile to cash
flows from operations
Depreciation, depletion and
amortization (a) 141 144
Deferred income taxes (515) 70
Equity income from affiliates (530) (277)
Distributions from equity
affiliates 277 156
Gain on the MAP Transaction (1,295) -
Loss on early retirement of debt 145 -
Change in operating assets and
liabilities (b) (128) (213)
Other items (5) 2
(17) 77
CASH FLOWS FROM FINANCING
Proceeds from issuance of common stock 100 86
Repayment of long-term debt (1,477) (75)
Increase (decrease) in short-term debt (40) 8
Cash dividends paid (60) (57)
(1,477) (38)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and
equipment (a) (c) (285) (121)
Purchase of operations - net of
cash acquired (152) (5)
Cash proceeds from sale of operations (d) 2,397 48
Other - net 9 13
1,969 (65)
CASH PROVIDED (USED) BY CONTINUING
OPERATIONS 475 (26)
Cash used by discontinued operations (26) (14)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $449 $(40)
DEPRECIATION, DEPLETION AND AMORTIZATION
APAC $67 $71
Ashland Distribution 13 13
Ashland Specialty Chemical 33 31
Valvoline 20 20
Corporate 8 9
$141 $144
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC $155 $29
Ashland Distribution 16 5
Ashland Specialty Chemical 41 33
Valvoline 52 13
Corporate 21 41
$285 $121
(a) Excludes amounts related to equity affiliates. Ashland's 38 percent
share of MAP's DD&A was $119 million in 2005 and $113 million in 2004,
and its share of MAP's capital expenditures was $247 million in 2005
and $209 million in 2004.
(b) Excludes changes resulting from operations acquired or sold. Amount
for 2005 includes a $150 million reduction in accounts receivable sold
under a sale of receivables financing program.
(c) Amount for 2005 includes $101 million for purchases of previously
leased assets with proceeds from the MAP Transaction.
(d) Amount for 2005 includes cash proceeds (net of expenses) of $2,381
million from the MAP Transaction.
Ashland Inc. and Consolidated Subsidiaries
OPERATING INFORMATION BY INDUSTRY SEGMENT
(Unaudited)
Three months ended Nine months ended
June 30 June 30
2005 2004 2005 2004
APAC
Construction backlog at June 30
(millions) (a) $2,100 $1,869
Net construction job revenues
(millions) (b) $424 $409 $966 $982
Hot-mix asphalt production (million
tons) 9.5 9.9 21.0 22.7
Aggregate production (million tons) 8.3 8.1 22.6 21.0
ASHLAND DISTRIBUTION (c)
Sales per shipping day (millions) $15.4 $13.3 $15.1 $12.3
Gross profit as a percent of sales 10.0% 9.8% 9.8% 9.7%
ASHLAND SPECIALTY CHEMICAL (c)
Sales per shipping day (millions) $7.6 $5.8 $7.0 $5.3
Gross profit as a percent of sales 27.6% 27.3% 26.3% 28.8%
VALVOLINE
Lubricant sales (million gallons) 48.1 50.0 131.4 141.3
Premium lubricants (percent of U.S.
branded volumes) 24.3% 22.0% 23.5% 21.0%
REFINING AND MARKETING (d)
Refinery runs (thousand barrels per
day)
Crude oil refined 1,012 1,013 970 900
Other charge and blend stocks 175 142 182 174
Refined product yields (thousand
barrels per day)
Gasoline 636 623 619 596
Distillates 328 323 316 285
Asphalt 97 85 83 70
Other 140 138 150 136
Total 1,201 1,169 1,168 1,087
Refined product sales (thousand
barrels per day) (e) 1,477 1,440 1,421 1,367
Refining and wholesale marketing
margin (per barrel) (f) $6.69 $5.27 $4.58 $2.87
Speedway SuperAmerica (SSA)
Retail outlets at June 30 1,647 1,746
Gasoline and distillate sales
(million gallons) 822 802 2,360 2,371
Gross margin - gasoline and
distillates (per gallon) $.1211 $.1192 $.1165 $.1161
Merchandise sales (millions) $645 $600 $1,786 $1,668
Merchandise margin (as a percent of
sales) 25.2% 23.4% 25.2% 24.4%
(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.
(d) Amounts represent 100% of MAP's operations, in which Ashland owned a
38% interest until June 30, 2005.
(e) Total average daily volume of all refined product sales to MAP's
wholesale, branded and retail (SSA) customers.
(f) Sales revenue less cost of refinery inputs, purchased products and
manufacturing expenses, including depreciation.
Ashland Inc. and Consolidated Subsidiaries
COMPONENTS OF INCOME FROM CONTINUING OPERATIONS
(In millions except per share data - unaudited)
Three months ended June 30, 2005
Businesses Impact of MAP
Sold and Transaction
Ongoing Interest and Debt
Businesses Eliminated Repayments Total
OPERATING INCOME
APAC $46 $ $ $46
Ashland Distribution 36 36
Ashland Specialty Chemical 41 2 43
Valvoline 26 - 26
Refining and Marketing (19) 309 290
Corporate (31) (31)
OPERATING INCOME 99 311 - 410
Gain on the MAP Transaction - 1,295 1,295
Loss on early retirement of debt - (143) (143)
Net interest and other financial
costs (3) (28) (31)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 96 283 1,152 1,531
Income taxes (38) (110) 384 236
INCOME FROM CONTINUING OPERATIONS 58 173 1,536 1,767
Results from discontinued
operations - -
NET INCOME $58 $173 $1,536 $1,767
DILUTED EARNINGS PER SHARE
Income from continuing operations $.78 $2.31 $20.56 $23.65
Results from discontinued
operations - -
Net income $.78 $2.31 $20.56 $23.65
Nine months ended June 30, 2005
Businesses Impact of MAP
Sold and Transaction
Ongoing Interest and Debt
Businesses Eliminated Repayments Total
OPERATING INCOME
APAC $6 $ $ $6
Ashland Distribution 95 95
Ashland Specialty Chemical 101 3 104
Valvoline 68 1 69
Refining and Marketing (34) 520 486
Corporate (85) (85)
OPERATING INCOME 151 524 - 675
Gain on the MAP Transaction - 1,295 1,295
Loss on early retirement of debt - (145) (145)
Net interest and other financial
costs (7) (82) (89)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 144 442 1,150 1,736
Income taxes (55) (173) 385 157
INCOME FROM CONTINUING OPERATIONS 89 269 1,535 1,893
Results from discontinued
operations - -
NET INCOME $89 $269 $1,535 $1,893
DILUTED EARNINGS PER SHARE
Income from continuing
operations $1.20 $3.62 $20.66 $25.48
Results from discontinued
operations - -
Net income $1.20 $3.62 $20.66 $25.48
Media Relations: Investor Relations:
Jim Vitak Daragh Porter
(614) 790-3715 (859) 815-3825
jevitak@ashland.com dlporter@ashland.com
SOURCE Ashland Inc.
-0- 07/25/2005
/CONTACT: Jim Vitak, +1-614-790-3715, jevitak@ashland.com, or Daragh
Porter, or +1-859-815-3825, or dlporter@ashland.com, both of Ashland Inc./
/Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20040113/ASHLANDLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk photodesk@prnewswire.com/
/Company News On-Call: http://www.prnewswire.com/comp/065263.html /
/Web site: http://www.ashland.com /
(ASH)
CO: Ashland Inc.
ST: Kentucky
IN: OIL
SU: ERN
MM-WB
-- CLM012 --
6715 07/25/2005 08:00 EDT 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.