Ashland Inc. Revises First Quarter Earnings
Press Release
Ashland Inc. Revises First Quarter Earnings
COVINGTON, Ky., Jan 28, 2005 /PRNewswire-FirstCall via COMTEX/ -- Ashland Inc. (NYSE: ASH) announced today that it has made a revision to its first quarter fiscal 2005 results issued on January 25, 2005. As a result, net income was reduced to $94 million, or $1.28 a share, for the December 2004 quarter rather than the previously reported $101 million, or $1.39 a share. Operating income was reduced to $180 million from $193 million. There is no cash flow impact from this correction of past accounting treatment.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040113/ASHLANDLOGO )
Subsequent to Ashland's earnings release on January 25, 2005, Ashland was informed by its independent public accounting firm that the major public accounting firms had re-evaluated the appropriateness of historical accounting practices within the industry for certain insurance policies issued through an energy industry mutual insurance consortium. After completing its own review and discussions with its independent accountants, Ashland has concluded, based on this re-evaluation, that accounting standards require a shareholder of a mutual insurance company to record a liability for the estimated effect of past losses of the shareholder group on the individual shareholder's future insurance premiums. As a result, Ashland recorded a liability of approximately $7 million for the estimated effect on its future premiums, which increased the operating loss from corporate activities to $27 million, compared to the previously reported $20 million.
In addition, Marathon Ashland Petroleum LLC (MAP) recorded a liability of $15 million for the estimated effect on its future premiums, which was included in the earnings Marathon Oil Corporation reported on January 27, 2005. Ashland's 38-percent share of that liability reduced Ashland's equity income from MAP by approximately $6 million. This reduction decreased Ashland's Refining and Marketing operating income to $136 million, compared to the previously reported $142 million.
Ashland has not yet filed its quarterly report on Form 10-Q for the quarter ended December 31, 2004. Ashland's financial statements in the 10-Q will reflect the revised accounting treatment. No restatement of prior periods was required as the impact on such periods would not have been material. Attached are revised unaudited financial statements.
Ashland Inc. (NYSE: ASH) is a Fortune 500 transportation construction, chemicals and petroleum company providing products, services and customer solutions throughout the world. To learn more about Ashland, visit http://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. These statements include those that refer to Ashland's operating performance, earnings and expectations about the MAP transaction. Although Ashland believes its expectations are based on reasonable assumptions, it cannot assure the expectations reflected herein will be achieved. These forward-looking statements are 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) and are subject to a number of risks, uncertainties, and assumptions that could cause actual results to differ materially from those we describe in the forward- looking statements. The risks, uncertainties, and assumptions include the possibility that Ashland will be unable to fully realize the benefits anticipated from the MAP transaction; the possibility the transaction may not close including as a result of failure to receive a favorable ruling from the Internal Revenue Service or failure of Ashland to obtain the approval of its shareholders; the possibility that Ashland may be required to modify some aspect of the transaction to obtain regulatory approvals; and other risks that are described from time to time in the Securities and Exchange Commission (SEC) reports of Ashland. Other factors and risks affecting Ashland are contained in Ashland's Form 10-K for the fiscal year ended Sept. 30, 2004, filed with the SEC and available on Ashland's Investor Relations website at http://www.ashland.com/investors or the SEC's website at http://www.sec.gov . 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 news release.
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED INCOME
(In millions except per share data - unaudited)
Three months ended
December 31
2004 2003
REVENUES
Sales and operating revenues $2,177 $1,936
Equity income 146 38
Other income 17 13
2,340 1,987
COSTS AND EXPENSES
Cost of sales and operating expenses 1,849 1,611
Selling, general and administrative
expenses 311 284
2,160 1,895
OPERATING INCOME 180 92
Net interest and other financial costs (31) (30)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 149 62
Income taxes (55) (23)
INCOME FROM CONTINUING OPERATIONS 94 39
Results from discontinued
operations (net of income taxes) - (5)
NET INCOME $94 $34
DILUTED EARNINGS PER SHARE
Income from continuing operations $1.28 $.56
Results from discontinued operations - (.07)
Net income $1.28 $.49
AVERAGE COMMON SHARES AND ASSUMED
CONVERSIONS 73 69
SALES AND OPERATING REVENUES
APAC $611 $650
Ashland Distribution 895 698
Ashland Specialty Chemical 400 322
Valvoline 309 290
Intersegment sales (38) (24)
$2,177 $1,936
OPERATING INCOME
APAC $7 $30
Ashland Distribution 24 13
Ashland Specialty Chemical 22 23
Valvoline 18 20
Refining and Marketing (a) 136 26
Corporate (27) (20)
$180 $92
(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
2004 2003
ASSETS
Current assets
Cash and cash equivalents $146 $201
Accounts receivable 1,212 1,045
Inventories 538 483
Deferred income taxes 95 110
Other current assets 106 103
2,097 1,942
Investments and other assets
Investment in Marathon Ashland
Petroleum LLC (MAP) 2,856 2,335
Goodwill 567 527
Asbestos insurance receivable
(noncurrent portion) 396 403
Other noncurrent assets 370 296
4,189 3,561
Property, plant and equipment
Cost 3,166 3,087
Accumulated depreciation,
depletion and amortization (1,889) (1,809)
1,277 1,278
$7,563 $6,781
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Debt due within one year $575 $145
Trade and other payables 1,197 1,123
Income taxes 69 56
1,841 1,324
Noncurrent liabilities
Long-term debt (less current portion) 1,087 1,429
Employee benefit obligations 438 399
Deferred income taxes 248 221
Reserves of captive insurance companies 177 173
Asbestos litigation reserve
(noncurrent portion) 553 562
Other long-term liabilities and
deferred credits 375 355
2,878 3,139
Common stockholders' equity 2,844 2,318
$7,563 $6,781
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - unaudited)
Three months ended
December 31
2004 2003
CASH FLOWS FROM OPERATIONS
Income from continuing operations $94 $39
Expense (income) not affecting cash
Depreciation, depletion and amortization (a) 46 48
Deferred income taxes 17 21
Equity income from affiliates (146) (38)
Distributions from equity affiliates 1 148
Other items 2 -
Change in operating assets and
liabilities (b) (68) (150)
(54) 68
CASH FLOWS FROM FINANCING
Proceeds from issuance of common stock 20 17
Repayment of long-term debt (98) (38)
Increase in short-term debt 211 -
Dividends paid (20) (19)
113 (40)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and
equipment (a) (55) (53)
Purchase of operations - net of
cash acquired (95) -
Other - net 2 9
(148) (44)
CASH USED BY CONTINUING OPERATIONS (89) (16)
Cash used by discontinued operations (8) (6)
DECREASE IN CASH AND CASH EQUIVALENTS $(97) $(22)
DEPRECIATION, DEPLETION AND AMORTIZATION
APAC $22 $25
Ashland Distribution 4 4
Ashland Specialty Chemical 11 10
Valvoline 6 6
Corporate 3 3
$46 $48
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC $33 $5
Ashland Distribution 5 1
Ashland Specialty Chemical 11 10
Valvoline 5 3
Corporate 1 34
$55 $53
(a) Excludes amounts related to equity affiliates. Ashland's 38 percent
share of MAP's DD&A was $41 million in 2004 and $37 million in 2003,
and its share of MAP's capital expenditures was $138 million in 2004
and $109 million in 2003.
(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
2004 2003
APAC
Construction backlog at December 31
(millions) (a) $1,730 $1,659
Net construction job revenues
(millions) (b) $344 $366
Hot-mix asphalt production (million tons) 7.8 8.4
Aggregate production (million tons) 7.8 6.8
ASHLAND DISTRIBUTION (c)
Sales per shipping day (millions) $14.4 $11.3
Gross profit as a percent of sales 9.6% 9.6%
ASHLAND SPECIALTY CHEMICAL (c)
Sales per shipping day (millions) $6.4 $5.2
Gross profit as a percent of sales 24.2% 29.8%
VALVOLINE
Lubricant sales (million gallons) 41.1 43.7
Premium lubricants (percent of U.S.
branded volumes) 21.8% 19.4%
REFINING AND MARKETING (d)
Refinery runs (thousand barrels per day)
Crude oil refined 975 899
Other charge and blend stocks 200 184
Refined product yields (thousand
barrels per day)
Gasoline 644 612
Distillates 328 296
Asphalt 81 68
Other 140 116
Total 1,193 1,092
Refined product sales (thousand
barrels per day) (e) 1,414 1,355
Refining and wholesale marketing
margin (per barrel) (f) $4.03 $1.71
Speedway SuperAmerica (SSA)
Retail outlets at December 31 1,669 1,775
Gasoline and distillate sales
(million gallons) 793 806
Gross margin - gasoline and
distillates (per gallon) $.1219 $.1145
Merchandise sales (millions) $581 $547
Merchandise margin (as a percent
of sales) 24.9% 24.8%
(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 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.
SOURCE Ashland Inc.
Media Relations, Jim Vitak, +1-614-790-3715, or jevitak@ashland.com , or Investor
Relations, Bill Henderson, +1-859-815-4454, or wehenderson@ashland.com , both of
Ashland Inc.
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.