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Ashland Inc. Reports December Quarter Earnings

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Ashland Inc. Reports December Quarter Earnings

Ashland Inc. Reports December Quarter EarningsCOVINGTON, Ky., Jan. 26 /PRNewswire-FirstCall/ -- The following was issued today by Ashland Inc. (NYSE: ASH):
    (Logo: )
                    Fiscal 2004: First quarter highlights
     -- December quarter income recovered sharply due to stronger performance
        from wholly owned businesses.
         -- Sales increased 11 percent.
         -- Operating income increased 188 percent.
     -- Results from refining and marketing were tempered by increased crude
        oil costs.
                                                     Quarter ended December 31
    In millions except earnings per share               2003           2002

    Operating income                                     $92            $32
    Income (loss) from continuing operations             $39            $(1)
    Net income (loss)                                    $34           $(92)
    Diluted earnings (loss) per share:
      Income (loss) from continuing operations          $.56          $(.02)
      Net income (loss)                                 $.49         $(1.35)

Ashland Inc. today reported net income of $34 million, or 49 cents a share, for the quarter ended December 31, 2003, the first quarter of the company's 2004 fiscal year. These results compared to a net loss of $92 million, or $1.35 a share, for the first quarter of 2003. Ashland's income from continuing operations for the first quarter of 2004 amounted to $39 million, or 56 cents a share, compared to a loss of $1 million, or 2 cents a share, for the quarter a year ago. The difference between net income and income from continuing operations results primarily from reserves for asbestos liabilities.

"Our performance during the December quarter was very encouraging," said James J. O'Brien, Ashland Inc. chairman and chief executive officer. "In fiscal 2003, we focused on changing the way we run our businesses. In fiscal 2004, we are focusing on execution of our strategies. As our first quarter performance shows, we are growing sales volumes while lowering selling, general and administrative expenses.

"The overall performance of our wholly owned businesses demonstrates the strength of our corporate strategy," O'Brien said. "Ashland Paving And Construction (APAC), Ashland Specialty Chemical, Ashland Distribution and Valvoline continued to lower fixed costs and increase revenues. APAC also benefited from closer-to-normal weather, which enabled construction efficiencies and higher asphalt production."

Review of operations

Commenting on operations, O'Brien noted that results from APAC improved significantly compared to the December quarter a year ago. Operating income was $30 million versus near break-even results in 2003. Net construction job revenues increased 20 percent, while asphalt production was up 18 percent. Lower equipment costs coupled with the positive impact of other cost-reduction efforts also contributed to APAC's improved performance. Construction backlog, or jobs awarded but not yet completed, was $1.7 billion at the end of the quarter, a level comparable to a year ago.

APAC will continue to focus on improving its operating performance in fiscal 2004. As was recently announced, Garry M. Higdem was named senior vice president of Ashland Inc. and president of APAC effective January 12, 2004. Higdem will utilize his background in construction management, large projects and branch operations to continue APAC's strategic progress and to leverage its strong construction capabilities with both small and large projects.

Operating income for Ashland Specialty Chemical rose 77 percent to $23 million. Increased profits were driven by improved sales volumes in its thermoset resins business and strong revenues from its water treatment group. Specialty Chemical's strong first quarter performance is due in part to its continuing penetration of high value markets, such as foundry sleeves, cultured marble for the construction industry, clear label adhesives and pathogen control in waterborne systems.

Valvoline reported a record December quarter with operating income of $20 million, compared to $15 million in the 2003 quarter. Valvoline-branded lubricant sales volumes improved 5 percent on the strength of a 20-percent increase in premium product sales volumes. Valvoline Instant Oil Change (VIOC) also had an all-time record quarter. Operating income rose 49 percent due in part to a 9-percent increase in revenues from transmission, cooling, fuel and air quality system services and a 7-percent increase in premium lubricant oil changes.

Ashland Distribution continues to improve results with operating income up 44 percent to $13 million. Successful efforts to lower costs contributed to the division's performance. Ashland Distribution also demonstrated its ability to grow faster than its markets with sales per shipping day up by 9 percent, and sales volumes up by 6 percent. Ashland's operating income from refining and marketing was $26 million compared to $24 million last year. Results from Marathon Ashland Petroleum LLC (MAP) improved primarily due to less planned maintenance during the December quarter, enabling MAP to process about 8 million more barrels of crude oil and other feedstocks. However, the increased volumes were offset by a sharp increase in crude oil costs during December, which resulted in lower margins, particularly in MAP's primary Midwest market.

"Overall, our businesses performed well this quarter," O'Brien said. "We continue to take steps towards our goal of top-quartile performance versus our industry peers."

In other corporate developments, debt was reduced by $40 million in the December quarter. The company also met the goals previously announced in its Top-Quartile Cost Structure Program, including the reduction of 400 positions before the end of November 2003.

Today at 11:00 a.m. (EST), Ashland will provide a live audio webcast of its quarterly conference call with securities analysts. The webcast will be accessible through Ashland's Investor Relations website, . Following the live event, an archived version of the webcast will be available on the Ashland website for 12 months. Minimum requirements to listen to the webcast include the free Windows MediaPlayer software and a 28.8 Kbps connection to the Internet.

Ashland Inc. (NYSE: ASH) is a Fortune 500 transportation construction, chemical and petroleum company providing products, services and customer solutions throughout the world. Through the dedication of our employees, we are "The Who In How Things Work™." Find us at .

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 and earnings. 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, 2003. 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.

    (TM) Trademark, Ashland Inc.
    Ashland Inc. and Consolidated Subsidiaries
    (In millions except per share data - unaudited)
                                                       Three months ended
                                                           December 31
                                                     2003              2002
      Sales and operating revenues                  $1,923            $1,738
      Equity income                                     38                35
      Other income                                      13                18
1,974             1,791
      Cost of sales and operating
       expenses                                      1,518             1,373
      Selling, general and administrative
       expenses                                        316               334
      Depreciation, depletion and
       amortization                                     48                52
1,882             1,759
    OPERATING INCOME                                    92                32
      Net interest and other financial
       costs                                           (30)              (32)
     BEFORE INCOME TAXES                                62                 -
      Income taxes                                     (23)               (1)
     OPERATIONS                                         39                (1)
      Results from discontinued
       operations (net of income taxes)                 (5)              (91)
    NET INCOME (LOSS)                                  $34              $(92)
      Income (loss) from continuing
       operations                                     $.56             $(.02)
      Results from discontinued
       operations                                     (.07)            (1.33)
      Net income (loss)                               $.49            $(1.35)
     CONVERSIONS                                        69                68
      APAC                                            $650              $558
      Ashland Distribution                             696               637
      Ashland Specialty Chemical                       311               283
      Valvoline                                        290               281
      Intersegment sales                               (24)              (21)
                                                    $1,923            $1,738
      APAC                                             $30               $ -
      Ashland Distribution                              13                 9
      Ashland Specialty Chemical                        23                13
      Valvoline                                         20                15
      Refining and Marketing (a)                        26                24
      Corporate                                        (20)              (29)
$92               $32
    (a) Includes Ashland's equity income from Marathon Ashland Petroleum LLC
        (MAP), amortization related to Ashland's excess investment in MAP, and
        other activities associated with refining and marketing.
    Ashland Inc. and Consolidated Subsidiaries
    (In millions - unaudited)
                                                           December 31
2003              2002
      Current assets
        Cash and cash equivalents                     $201              $119
        Accounts receivable                          1,045               939
        Inventories                                    483               474
        Deferred income taxes                          110                83
        Current assets of discontinued
         operations held for sale                        -               201
        Other current assets                           103                89
                                                     1,942             1,905
      Investments and other assets
        Investment in Marathon Ashland
         Petroleum LLC (MAP)                         2,335             2,300
        Goodwill                                       527               511
        Asbestos insurance receivable
         (noncurrent portion)                          403               402
        Other noncurrent assets                        355               328
3,620             3,541
      Property, plant and equipment
        Cost                                         2,999             2,917
        Accumulated depreciation,
         depletion and amortization                 (1,780)           (1,653)
1,219             1,264

                                                    $6,781            $6,710
      Current liabilities
        Debt due within one year                      $145              $228
        Trade and other payables                     1,123             1,022
        Current liabilities of
         discontinued operations held for
         sale                                            -                34
        Income taxes                                    56                22
1,324             1,306
      Noncurrent liabilities
        Long-term debt (less current
         portion)                                    1,429             1,598
        Employee benefit obligations                   399               518
        Deferred income taxes                          221               150
        Reserves of captive insurance
         companies                                     173               174
        Asbestos litigation reserve
         (noncurrent portion)                          562               525
        Other long-term liabilities and
         deferred credits                              355               364
                                                     3,139             3,329
      Common stockholders' equity                    2,318             2,075
                                                    $6,781            $6,710
    Ashland Inc. and Consolidated Subsidiaries
    (In millions - unaudited)
                                                       Three months ended
                                                           December 31
                                                      2003               2002
      Income (loss) from continuing
       operations                                      $39                $(1)
      Expense (income) not affecting
        Depreciation, depletion and
         amortization (a)                               48                 52
        Deferred income taxes                           21                 14
        Equity income from affiliates                  (38)               (35)
        Distributions from equity
         affiliates                                    148                 82
      Change in operating assets and
       liabilities (b)                                (150)               (57)
                                                        68                 55
      Proceeds from issuance of common
       stock                                            17                  1
      Repayment of long-term debt                      (38)               (45)
      Increase in short-term debt                        -                 64
      Dividends paid                                   (19)               (19)
                                                       (40)                 1
      Additions to property, plant and
       equipment (a)                                   (53)               (23)
      Purchase of operations - net of
       cash acquired                                     -                 (5)
      Proceeds from sale of operations                   -                  5
      Other - net                                        9                  -
(44)               (23)
     OPERATIONS                                        (16)                33
      Cash used by discontinued
       operations                                       (6)                (4)
     EQUIVALENTS                                      $(22)               $29
      APAC                                             $25                $28
      Ashland Distribution                               4                  5
      Ashland Specialty Chemical                        10                 10
      Valvoline                                          6                  6
      Corporate                                          3                  3
$48                $52
      APAC                                              $5                $10
      Ashland Distribution                               1                  2
      Ashland Specialty Chemical                        10                  6
      Valvoline                                          3                  4
      Corporate                                         34                  1
                                                       $53                $23
    (a) Excludes amounts related to equity affiliates. Ashland's 38 percent
        share of MAP's DD&A was $37 million in 2003 and $35 million in 2002,
        and its share of MAP's capital expenditures was $109 million in 2003
        and $118 million in 2002.
    (b) Excludes changes resulting from operations acquired or sold.
    Ashland Inc. and Consolidated Subsidiaries
                                                       Three months ended
                                                           December 31
                                                      2003              2002
      Construction backlog at December 31
       (millions) (a)                               $1,659            $1,697
      Net construction job revenues
       (millions) (b)                                 $366              $304
      Hot-mix asphalt production
       (million tons)                                  8.4               7.1
      Aggregate production (million tons)              6.8               7.1
      Ready-mix concrete production
       (million cubic yards)                           0.5               0.5
      Sales per shipping day (millions)              $11.2             $10.3
      Gross profit as a percent of sales              14.9%             15.9%
      Sales per shipping day (millions)               $5.0              $4.6
      Gross profit as a percent of sales              33.5%             34.9%
      Lubricant sales (million gallons)               43.7              44.3
      Premium lubricants (percent of U.S.
       branded volumes)                               19.3%             16.9%
      Refinery runs (thousand barrels per
        Crude oil refined                              899               831
        Other charge and blend stocks                  184               163
      Refined product yields (thousand
       barrels per day)
        Gasoline                                       612               565
        Distillates                                    296               278
        Asphalt                                         68                64
        Other                                          116                90
        Total                                        1,092               997
      Refined product sales (thousand
       barrels per day) (e)                          1,355             1,306
      Refining and wholesale marketing
       margin (per barrel) (f)                       $1.71             $1.93
      Speedway SuperAmerica (SSA)
        Retail outlets at December 31                1,775             2,006
        Gasoline and distillate sales
         (million gallons)                             806               897
        Gross margin - gasoline and
         distillates (per gallon)                   $.1145            $.1010
        Merchandise sales (millions) (g)              $547              $583
        Merchandise margin (as a percent
         of sales)                                    24.8%             24.1%
    (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, and depreciation and amortization relative to
        manufacturing assets.
    (d) Amounts represent 100% of MAP's operations, in which Ashland owns a
        38% interest.
    (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.
    (g) Effective January 1, 2003, SSA adopted EITF 02-16, "Accounting by a
        Customer (Including a Reseller) for Certain Consideration Received
        from a Vendor," which requires rebates from vendors to be recorded as
        reductions to cost of sales. Rebates from vendors recorded in SSA
        merchandise sales for periods prior to January 1, 2003 have not been
        restated and included $46 million in the three months ended
        December 31, 2002.

SOURCE Ashland Inc.

"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.