Earnings from continuing operations equal $1.27 per diluted share; adjusted EPS, excluding key items, is $1.12 per diluted share
COVINGTON, Ky. - Ashland Inc. (NYSE: ASH), a global leader in specialty chemical solutions for consumer and industrial markets, today announced preliminary(1) financial results for the quarter ended December 31, 2012, the first quarter of its 2013 fiscal year.
| (in millions except per-share amounts) || || Quarter Ended Dec. 31 |
| || || || 2012 || || || 2011 |
| Operating income || || $ || 176 || || $ || 144 |
| Key items* || || || (13) || || || 53 |
| Adjusted operating income* || || $ || 163 || || $ || 197 |
| || || || || || || |
| Adjusted EBITDA* || || $ || 268 || || $ || 301 |
| || || || || || || |
| Diluted earnings per share (EPS) || || ||
|| || || |
| From net income || || $ || 1.26 || || $ || 0.77 |
| || || ||
|| || || |
| From continuing operations || || $ || 1.27 || || $ || 0.76 |
| Key items* || || || (0.15) || || || 0.44 |
| Adjusted EPS from continuing operations* || || $ || 1.12 || || $ ||
| || || || || || || |
| Cash flows provided by operating activities|
from continuing operations
| || $ || 81 || || $ || (181) |
| Free cash flow* || || || 30 || || || (133) |
| || || || || || || |
| * See Tables 5, 6 and 7 for definitions and U.S. GAAP reconciliations. || || || |
Ashland reported income from continuing operations of $102 million, or $1.27 per diluted share, on sales of $1.9 billion. These results included three key items that together
had a net favorable impact on continuing operations of $12 million, net of tax, or 15 cents per diluted share. The largest key item was a $13 million after-tax benefit related to a business interruption insurance settlement. Excluding the three key items, Ashland's adjusted income from continuing operations was $90 million, or $1.12 per diluted share, a decrease of 7 percent from the year-ago quarter.
For the year-ago quarter, Ashland reported income from continuing operations of $60 million, or 76 cents per diluted share, on sales of $1.9 billion. The year-ago results included two key items that had a combined negative effect of $35 million, net of tax, or 44 cents per diluted share. Excluding these items, adjusted
income from continuing operations was $1.20 per diluted share. (Please refer to Table 5 of the accompanying financial statements for details of key items in both periods.)
For the remainder of this news release, financial results exclude the effect of key items in both the current and prior-year quarters. On this basis, Ashland's results as compared to the year-ago quarter were as follows:
· Sales were $1.9 billion; normalizing for currency, divestitures and joint ventures, sales were flat;
· Operating income decreased 17 percent to $163 million;
· Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 11 percent to $268 million; and
· EBITDA as a percent of sales declined
130 basis points to 14.3 percent.
"Our financial performance in the first quarter - which is Ashland's seasonally weakest period of the year - reflects soft demand in some key markets and regions. It also includes $31 million in losses on straight guar, primarily reflecting a discrete write-down of inventory to current market value," said James J. O'Brien, Ashland chairman and chief executive officer. "Without this loss, adjusted earnings per share would have increased 14 percent when compared to a year ago. Ashland Consumer Markets turned in a strong quarter, as higher margins led to a 34-percent increase in EBITDA compared to a year ago. In addition, we generated $30 million of free cash flow in the first quarter, a significant improvement compared to the year-ago quarter."
Business Segment Performance
In order to aid understanding of Ashland's ongoing business performance, the results of Ashland's business segments are described below on an adjusted basis and EBITDA, or adjusted EBITDA, is reconciled to operating income in Tables 7 and 8 of this news release.
Ashland Specialty Ingredients' sales totaled $622 million, a decline of 1 percent when compared to a year ago. EBITDA declined 28 percent, to $116 million, while EBITDA as a percent of sales was 18.6 percent, down 690 basis points versus the year-ago quarter. This year-over-year decline is primarily due to the aforementioned $31 million loss on straight guar, as well as weak demand, particularly in the month of December, in our
coatings and construction product lines in emerging markets. Specialty Ingredients' pharmaceutical, hair and oral care, non-guar energy and specialties businesses all generated sales and gross profit increases versus the prior-year quarter.
Ashland Water Technologies' sales totaled $421 million in the December 2012 quarter, a decline of 6 percent from the year-ago quarter. Normalizing for currency effects and adjusting for divestitures, sales would have been flat. EBITDA was $34 million, a 15-percent decline from the year-ago quarter. EBITDA as a percent of sales was 8.1 percent, down 80 basis points. During the quarter, Water Technologies continued to face soft demand in several markets, most notably industrial water treatment. Under a new leader, Luis
Fernandez-Moreno, the team is focused on revenue growth and cost structure efficiencies.
Ashland Performance Materials reported sales of $345 million, a 9-percent decrease from the December 2011 quarter. Normalizing for currency and adjusting for divestitures, sales would have been down 4 percent over the prior year. EBITDA declined 38 percent to $28 million, while EBITDA as a percent of sales declined 380 basis points to 8.1 percent, primarily due to lower margins on elastomers, which benefited in the year-ago quarter from declining raw material costs.
Ashland Consumer Markets reported strong results versus the year ago period, with higher earnings driven by lower raw-material costs and a 13-percent volume increase
within the international business. While overall sales increased 1 percent, to $481 million, EBITDA rose 34 percent, to $75 million. EBITDA as a percent of sales was 15.6 percent, an increase of 380 basis points versus the year ago quarter.
After excluding the effects from key items, Ashland's effective tax rate for the December 2012 quarter was 24 percent. Ashland continues to expect the effective tax rate for the full 2013 fiscal year to be in the range of 26-28 percent.
Summary and Outlook
"While our first-quarter financial results did not meet our expectations, we believe the biggest issues affecting our performance have been addressed," O'Brien said. "The inventory issue with straight guar is now behind us, and we
have taken action to significantly reduce the risks going forward. In addition, the weak volumes we saw within certain parts of our Specialty Ingredients business in December appear to have been short-term, as order patterns through the first four weeks of January have improved to more normalized levels."
"Looking ahead, our strategic focus has not changed. We remain committed to achieving our fiscal 2013 objectives, which should put us in a good position to attain our 2014 overall financial targets and generate significant value for our shareholders," he said.
Conference Call Webcast
Ashland will host a live webcast of its first-quarter conference call with securities analysts at 9 a.m. EST Tuesday, Jan. 29, 2013. The webcast and supporting materials
will be accessible through Ashland's website at http://investor.ashland.com. Following the live event, an archived version of the webcast and supporting materials will be available for 12 months.
Use of Non-GAAP Measures
This news release includes certain non-GAAP (Generally Accepted Accounting Principles) measures. Such measurements are not prepared in accordance with GAAP and should not be construed as an alternative to reported results determined in accordance with GAAP. Management believes the use of such non-GAAP measures assists investors in understanding the ongoing 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
amounts have been reconciled with reported GAAP results in Tables 5, 6 and 7 of the financial statements provided with this news release.
In more than 100 countries, the people of Ashland Inc. (NYSE: ASH) provide the specialty chemicals, technologies and insights to help customers create new and improved products for today and sustainable solutions for tomorrow. Our chemistry is at work every day in a wide variety of markets and applications, including architectural coatings, automotive, construction, energy, food and beverage, personal care, pharmaceutical, tissue and towel, and water treatment. Visit ashland.com to see the innovations we offer through our four commercial units - Ashland Specialty Ingredients, Ashland Water Technologies, Ashland Performance Materials and Ashland Consumer Markets.
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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. In addition, Ashland may from time to time make forward-looking statements in its filings with the Securities and Exchange Commission (SEC), news releases and other written and oral communications. These forward-looking statements are based on Ashland's
expectations and assumptions, as of the date such statements are made, regarding Ashland's future operating performance and financial condition, the economy and other future events or circumstances. Ashland's expectations and assumptions include, without limitation, 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, cost of raw materials, and the ability to recover raw-material cost increases through price increases), and risks and uncertainties associated with the following: Ashland's substantial indebtedness (including the possibility that such indebtedness and related restrictive covenants may adversely affect Ashland's future cash flows, results of operations, financial condition and its ability to repay debt), severe weather, natural
disasters, and legal proceedings and claims (including environmental and asbestos matters). Various risks and uncertainties may cause actual results to differ materially from those stated, projected or implied by any forward-looking statements, including, without limitation, risks and uncertainties affecting Ashland that are described in its most recent Form 10-K (including Item 1A Risk Factors) filed with the SEC, which is available on Ashland's website at http://investor.ashland.com or on the SEC's website at www.sec.gov. Ashland believes its expectations and assumptions are reasonable, but there can be no assurance that the expectations reflected herein will be achieved. Ashland undertakes no obligation to subsequently update
any forward-looking statements made in this news release or otherwise except as required by securities or other applicable law.
(1) Preliminary Results
Financial results are preliminary until Ashland's Form 10-Q for the quarter ended Dec. 31, 2012, is filed with the SEC.
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