Ashland Inc. Reports December Quarter Earnings
Press Release
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.
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| "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. |