Ashland Inc. Reports Preliminary Results for September Quarter and Fiscal 2005
Press Release
Ashland Inc. Reports Preliminary Results for September Quarter and Fiscal 2005
* Total Chemical Sector operating income reached $78 million for the
quarter, up slightly
-- Ashland Distribution operating income increased to a record $28
million, up 22 percent
-- Ashland Specialty Chemical operating income grew to a record $29
million, up 21 percent
-- Valvoline recorded operating income of $21 million for the quarter,
down 30 percent
* Transportation Construction Sector recorded operating income of $43
million, down 39 percent
(Logo: http://www.newscom.com/cgi-bin/prnh/20040113/ASHLANDLOGO )
"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.
Net income for Ashland's fiscal fourth quarter, ended Sept. 30, 2005, amounted to $93 million as compared with $200 million in the prior-year quarter. Earnings per share amounted to $1.24 in the 2005 quarter versus $2.76 per share in the September 2004 quarter. The prior-year quarter included operating income of $146 million from Ashland's 38-percent interest in Marathon Ashland Petroleum LLC, our maleic anhydride business and 60 Valvoline Instant Oil Change units that were transferred to Marathon Oil Corp. in the June 2005 quarter (collectively referred to as the "MAP Transaction"). The September 2005 quarter benefited from a $33 million decline in net interest and other financial costs, resulting from the retirement of debt and other financings and the investment of the remaining proceeds from the MAP Transaction.
During the September 2005 quarter, Ashland recorded a pretax charge of $13 million for the estimated impact of hurricanes Katrina and Rita on future insurance premiums due Oil Insurance Limited (OIL), the energy-industry mutual insurance consortium in which Ashland participates. These estimates may change as additional information becomes available. Ashland has given notice to OIL that it will terminate its participation effective December 31, 2005. Also during the quarter, Ashland recorded $39 million in tax benefits unrelated to current-period operations. These benefits resulted primarily from a favorable settlement with the Internal Revenue Service for the 1996 - 1998 audit period and the reevaluation of income tax reserves related to other years. Operating income from ongoing businesses was $66 million in the September 2005 quarter as compared with $122 million in the same quarter of 2004.
For its fiscal year ended Sept. 30, 2005, Ashland recorded net income of $2.0 billion versus $378 million in fiscal 2004. The results for fiscal 2005 included a gain of $1.3 billion on the MAP Transaction and a loss of $145 million on the early retirement of debt. Operating income from ongoing businesses was $218 million in fiscal 2005 as compared with $256 million in fiscal 2004.
A detailed analysis of Ashland's earnings for fiscal 2005 appears on page 5 of the attached financial statements.
"Fiscal 2005 was an extraordinary year with our exit from the petroleum refining and marketing industry," said James J. O'Brien, Ashland chairman and chief executive officer. "The quarter, however, was challenging. Disruptions caused by hurricanes and escalating energy prices put pressure on operations in our two industry sectors, Chemical and Transportation Construction, and our results were mixed. As expected, results from our Valvoline and APAC businesses declined. I am encouraged, however, by the continued strong performances of our Specialty Chemical and Distribution businesses. We believe they are positioned to steer through changing economic conditions better than chemical industry norms."
For the fourth quarter, in the Chemical Sector, record performances by the Ashland Distribution and Ashland Specialty Chemical divisions were offset by weak results from Valvoline. As a result, operating income for the Chemical Sector amounted to $78 million, a slight improvement over the $77 million of operating income in the September 2004 quarter.
Ashland Specialty Chemical reported record operating income for the September 2005 quarter of $29 million, up 21 percent over a record fourth quarter established last year. Sales and operating revenues grew to $446 million for the quarter, a 21-percent increase over the fourth quarter last year. Revenue growth was driven by higher selling prices, as well as the contribution of sales from the DERAKANE® resins business acquired in December 2004. The increase in operating income reflected a combination of revenue and margin growth.
Ashland Distribution earned $28 million of operating income in the September 2005 quarter -- its seventh consecutive record quarter. Operating income increased by 22 percent compared with the previous quarter a year ago. Sales and operating revenues increased 11 percent versus the year-ago quarter to $972 million. The division has maintained operating margins by passing through rising raw material costs and by aggressively managing expenses. Volume declined by 3 percent compared to the prior-year quarter, primarily reflecting the disposition of the ingestible ingredients business (2 percent).
Valvoline's operating income for the September 2005 quarter was $21 million, down 30 percent from the September quarter a year ago, primarily due to the combination of a 13-percent decrease in lubricant sales volumes, including a 17-percent decline in North American branded volume, and higher raw material costs. Sales and operating revenues were $339 million for the quarter, 4 percent below the September 2004 quarter. Valvoline International reported a record quarter, mostly due to better earnings from operations in Europe and Latin America.
The Transportation Construction Sector, commercially known as Ashland Paving And Construction, Inc. (APAC), reported operating income of $43 million for the September 2005 quarter, compared to $70 million in the 2004 quarter. Results for the September 2005 quarter reflect work disruptions and rapid increases in raw material and energy costs due to the active hurricane and tropical storm season in the quarter. These increases in raw material and energy costs resulted in additional loss provisions for certain construction jobs awarded in prior periods. In total, the provision for job loss reserves was $6.4 million higher than that recorded in the September 2004 quarter. At Sept. 30, APAC's construction backlog, which consists of work awarded and funded but not yet performed, was $2.0 billion, up 17 percent from the same period last year.
Today at 5 p.m. (EDT), Ashland will provide a live 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.
(R) Registered trademark, Ashland
* Preliminary Results
Financial results are preliminary until the Company's 2005 Annual Report
on Form 10-K is filed with the U.S. Securities and Exchange Commission.
This filing is expected to be made in December 2005.
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 - preliminary and unaudited)
Three months ended Year ended
September 30 September 30
2005 2004 2005 2004
REVENUES
Sales and operating revenues $2,538 $2,334 $9,270 $8,301
Equity income 1 155 531 432
Other income 10 14 59 48
2,549 2,503 9,860 8,781
COSTS AND EXPENSES
Cost of sales and operating expenses 2,145 1,946 7,823 6,948
Selling, general and administrative
expenses 338 289 1,296 1,171
2,483 2,235 9,119 8,119
OPERATING INCOME 66 268 741 662
Gain on the MAP Transaction (a) (8) - 1,287 -
Loss on early retirement of debt - - (145) -
Net interest and other financial
costs 7 (26) (82) (114)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 65 242 1,801 548
Income taxes 29 (39) 186 (150)
INCOME FROM CONTINUING OPERATIONS 94 203 1,987 398
Results from discontinued operations
(net of income taxes) (1) (3) (1) (20)
NET INCOME $ 93 $ 200 $1,986 $ 378
DILUTED EARNINGS PER SHARE
Income from continuing operations $ 1.25 $ 2.81 $26.62 $ 5.59
Results from discontinued operations (.01) (.05) (.01) (.28)
Net income $ 1.24 $ 2.76 $26.61 $ 5.31
AVERAGE COMMON SHARES AND ASSUMED
CONVERSIONS 75 72 75 71
SALES AND OPERATING REVENUES
APAC $ 826 $ 770 $2,539 $2,525
Ashland Distribution 972 873 3,810 3,199
Ashland Specialty Chemical 446 369 1,763 1,386
Valvoline 339 352 1,326 1,297
Intersegment sales (45) (30) (168) (106)
$2,538 $2,334 $9,270 $8,301
OPERATING INCOME
APAC $ 43 $ 70 $ 48 $ 111
Ashland Distribution 28 23 123 78
Ashland Specialty Chemical 29 24 134 87
Valvoline 21 30 90 105
Refining and Marketing (b) (2) 151 484 383
Corporate (53) (30) (138) (102)
$ 66 $ 268 $ 741 $ 662
(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 - preliminary and unaudited)
September 30
2005 2004
ASSETS
Current assets
Cash and cash equivalents $ 987 $ 243
Available-for-sale securities 403 -
Accounts receivable 1,603 1,290
Inventories 527 458
Deferred income taxes 127 103
Other current assets 148 208
3,795 2,302
Investments and other assets
Investment in Marathon Ashland
Petroleum LLC (MAP) - 2,713
Goodwill 577 513
Asbestos insurance receivable
(noncurrent portion) 370 399
Deferred income taxes 154 -
Other noncurrent assets 480 319
1,581 3,944
Property, plant and equipment
Cost 3,274 3,104
Accumulated depreciation,
depletion and amortization (1,852) (1,848)
1,422 1,256
$ 6,798 $ 7,502
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Debt due within one year $ 12 $ 439
Trade and other payables 1,523 1,362
Income taxes 9 14
1,544 1,815
Noncurrent liabilities
Long-term debt (less current
portion) 82 1,109
Employee benefit obligations 358 428
Deferred income taxes - 367
Reserves of captive insurance
companies 182 179
Asbestos litigation reserve
(noncurrent portion) 521 568
Other long-term liabilities and
deferred credits 390 330
1,533 2,981
Stockholders' equity 3,721 2,706
$ 6,798 $ 7,502
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - preliminary and unaudited)
Year ended
September 30
2005 2004
CASH FLOWS FROM OPERATIONS
Income from continuing operations $ 1,987 $ 398
Adjustments to reconcile to cash
flows from operations
Depreciation, depletion and
amortization 193 193
Deferred income taxes (515) 125
Equity income from affiliates (531) (432)
Distributions from equity
affiliates 281 169
Gain on the MAP Transaction (1,287) -
Loss on early retirement of debt 145 -
Change in operating assets and
liabilities (a) (228) (246)
Other items (5) 2
40 209
CASH FLOWS FROM FINANCING
Proceeds from issuance of common
stock 115 108
Repayment of long-term debt (1,552) (100)
Repurchase of common stock (100) -
Increase (decrease) in short-term
debt (40) 40
Cash dividends paid (79) (77)
(1,656) (29)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and
equipment (b) (380) (210)
Purchase of operations - net of
cash acquired (156) (5)
Cash proceeds from sale of
operations (c) 3,306 48
Purchases of available-for-sale
securities (402) -
Proceeds from sales and maturities
of available-for-sale securities 1 -
Other - net 19 26
2,388 (141)
CASH PROVIDED BY CONTINUING
OPERATIONS 772 39
Cash used by discontinued
operations (28) (19)
INCREASE IN CASH AND CASH EQUIVALENTS $ 744 $ 20
DEPRECIATION, DEPLETION AND
AMORTIZATION
APAC $ 93 $ 95
Ashland Distribution 18 18
Ashland Specialty Chemical 44 41
Valvoline 27 27
Corporate 11 12
$ 193 $ 193
ADDITIONS TO PROPERTY, PLANT AND
EQUIPMENT
APAC $ 200 $ 73
Ashland Distribution 26 10
Ashland Specialty Chemical 64 62
Valvoline 66 26
Corporate 24 39
$ 380 $ 210
(a) 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.
(b) Amount for 2005 includes $101 million for purchases of previously
leased assets with proceeds from the MAP Transaction.
(c) Amount for 2005 includes cash proceeds (net of expenses) of $3,290
million from the MAP Transaction.
Ashland Inc. and Consolidated Subsidiaries
OPERATING INFORMATION BY INDUSTRY SEGMENT
(In millions - preliminary and unaudited)
Three months Year
ended ended
September 30 September 30
2005 2004 2005 2004
APAC
Construction backlog at September
30 (a) $ 2,038 $ 1,746
Net construction job revenues (b) $ 492 $ 451 $ 1,458 $ 1,433
Hot-mix asphalt production (tons) 10.3 10.7 31.3 33.4
Aggregate production (tons) 8.8 8.7 31.4 29.6
ASHLAND DISTRIBUTION (c)
Sales per shipping day $ 15.2 $ 13.6 $ 15.1 $ 12.6
Gross profit as a percent of sales 9.3% 9.5% 9.7% 9.6%
ASHLAND SPECIALTY CHEMICAL (c)
Sales per shipping day $ 7.0 $ 5.8 $ 7.0 $ 5.4
Gross profit as a percent of sales 27.4% 25.5% 26.6% 27.9%
VALVOLINE
Lubricant sales (gallons) 44.0 50.3 175.4 191.6
Premium lubricants (percent of U.S.
branded volumes) 23.1% 22.9% 23.4% 21.5%
(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.
Ashland Inc. and Consolidated Subsidiaries
COMPONENTS OF NET INCOME
(In millions except per share data - preliminary and unaudited)
Year ended September 30, 2005
Impact of
Businesses MAP
Sold and Transaction
Ongoing Interest and Debt
Businesses Eliminated Repayments Total
OPERATING INCOME
APAC $ 48 $ $ $ 48
Ashland Distribution 123 123
Ashland Specialty Chemical 131 3 134
Valvoline 89 1 90
Refining and Marketing (35) 519 484
Corporate (138) (138)
OPERATING INCOME 218 523 741
Gain on the MAP Transaction - 1,287 1,287
Loss on early retirement of debt - (145) (145)
Net interest and other financial
costs 4 (86) (82)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 222 437 1,142 1,801
Income taxes (25) (171) 382 186
INCOME FROM CONTINUING OPERATIONS 197 266 1,524 1,987
Results from discontinued
operations (1) (1)
NET INCOME $ 196 $ 266 $ 1,524 $ 1,986
DILUTED EARNINGS PER SHARE
Income from continuing operations $ 2.64 $ 3.57 $ 20.41 $ 26.62
Results from discontinued
operations (0.01) (0.01)
Net income $ 2.63 $ 3.57 $ 20.41 $ 26.61
SOURCE Ashland Inc.
-0- 10/24/2005
/CONTACT: Media, Jim Vitak, +1-614-790-3715, jevitak@ashland.com, or
Investor, Daragh Porter, +1-859-815-3825, dlporter@ashland.com/
/Company News On-Call: http://www.prnewswire.com/comp/065263.html /
/Photo: http://www.newscom.com/cgi-bin/prnh/20040113/ASHLANDLOGO
AP Archive: http://photoarchive.ap.org
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/Web site: http://www.ashland.com /
(ASH)
CO: Ashland Inc.
ST: Kentucky
IN: OIL CHM TRN
SU: ERN CCA
WS
-- NYM074 --
8402 10/24/2005 08:00 EDT http://www.prnewswire.com