Ashland Inc. Reports December Quarter Earnings
Ashland Inc. Reports December Quarter Earnings
(Logo: http://www.newscom.com/cgi-bin/prnh/20040113/ASHLANDLOGO ) 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, www.ashland.com/investors . 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 www.ashland.com .
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 STATEMENTS OF CONSOLIDATED INCOME (In millions except per share data - unaudited) Three months ended December 31 2003 2002 REVENUES Sales and operating revenues $1,923 $1,738 Equity income 38 35 Other income 13 18 1,974 1,791 COSTS AND EXPENSES 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) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 62 - Income taxes (23) (1) INCOME (LOSS) FROM CONTINUING OPERATIONS 39 (1) Results from discontinued operations (net of income taxes) (5) (91) NET INCOME (LOSS) $34 $(92) DILUTED EARNINGS (LOSS) PER SHARE Income (loss) from continuing operations $.56 $(.02) Results from discontinued operations (.07) (1.33) Net income (loss) $.49 $(1.35) AVERAGE COMMON SHARES AND ASSUMED CONVERSIONS 69 68 SALES AND OPERATING REVENUES APAC $650 $558 Ashland Distribution 696 637 Ashland Specialty Chemical 311 283 Valvoline 290 281 Intersegment sales (24) (21) $1,923 $1,738 OPERATING INCOME 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 CONDENSED CONSOLIDATED BALANCE SHEETS (In millions - unaudited) December 31 2003 2002 ASSETS 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 LIABILITIES AND STOCKHOLDERS' EQUITY 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 STATEMENTS OF CONSOLIDATED CASH FLOWS (In millions - unaudited) Three months ended December 31 2003 2002 CASH FLOWS FROM OPERATIONS Income (loss) from continuing operations $39 $(1) Expense (income) not affecting cash 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 CASH FLOWS FROM FINANCING 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 CASH FLOWS FROM INVESTMENT 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) CASH PROVIDED (USED) BY CONTINUING OPERATIONS (16) 33 Cash used by discontinued operations (6) (4) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $(22) $29 DEPRECIATION, DEPLETION AND AMORTIZATION APAC $25 $28 Ashland Distribution 4 5 Ashland Specialty Chemical 10 10 Valvoline 6 6 Corporate 3 3 $48 $52 ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT 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 OPERATING INFORMATION BY INDUSTRY SEGMENT (Unaudited) Three months ended December 31 2003 2002 APAC 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 ASHLAND DISTRIBUTION (c) Sales per shipping day (millions) $11.2 $10.3 Gross profit as a percent of sales 14.9% 15.9% ASHLAND SPECIALTY CHEMICAL (c) Sales per shipping day (millions) $5.0 $4.6 Gross profit as a percent of sales 33.5% 34.9% VALVOLINE Lubricant sales (million gallons) 43.7 44.3 Premium lubricants (percent of U.S. branded volumes) 19.3% 16.9% REFINING AND MARKETING (d) Refinery runs (thousand barrels per day) 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.|