SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 25, 2005
ASHLAND INC.
(Exact name of registrant as specified in its charter)
Kentucky
(State or other jurisdiction of incorporation)
1-2918 61-0122250
(Commission File Number) (I.R.S. Employer
Identification No.)
50 E. RiverCenter Boulevard, Covington, Kentucky 41012-0391
(Address of principal executive offices) (Zip Code)
P.O. Box 391, Covington, Kentucky 41012-0391
(Mailing Address) (Zip Code)
Registrant's telephone number, including area code (859) 815-3333
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
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On January 28, 2005, Ashland Inc. ("Ashland") announced 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.
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.
A copy of Ashland's January 28, 2005 press release with respect to this
matter is attached as Exhibit 99.1 and is incorporated by reference into
this Item 2.02.
The information in this report, being furnished pursuant to Item 2.02
of Form 8-K, shall not be deemed to be "filed" for purposes of Section 18
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise subject to the liabilities of that Section, and is not
incorporated by reference in any filing under the Securities Act of 1933,
as amended, or the Exchange Act, except as expressly set forth by specific
reference in such filing.
Item 9.01. Financial Statements and Exhibits
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(c) Exhibits
99.1 Press Release dated January 28, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ASHLAND INC.
-------------------------------------------
(Registrant)
Date: January 28, 2005 /s/ J. Marvin Quin
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Name: J. Marvin Quin
Title: Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
99.1 Press Release dated January 28, 2005
EXHIBIT 99.1
[GRAPHIC OMITTED][GRAPHIC OMITTED]
News Release
FOR ADDITIONAL INFORMATION:
Media Relations: Investor Relations:
Jim Vitak Bill Henderson
(614) 790-3715 (859) 815-4454
jevitak@ashland.com wehenderson@ashland.com
FOR IMMEDIATE RELEASE:
January 28, 2005
ASHLAND INC. REVISES FIRST QUARTER EARNINGS
COVINGTON, KY. - 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.
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 www.ashland.com.
- 0 -
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 www.ashland.com/investors or the
SEC's website at 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 Page 1
STATEMENTS OF CONSOLIDATED INCOME
(In millions except per share data - unaudited)
Three months ended
December 31
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2004 2003
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REVENUES
Sales and operating revenues $ 2,177 $ 1,936
Equity income 146 38
Other income 17 13
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2,340 1,987
COSTS AND EXPENSES
Cost of sales and operating expenses 1,849 1,611
Selling, general and administrative expenses 311 284
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2,160 1,895
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OPERATING INCOME 180 92
Net interest and other financial costs (31) (30)
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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 149 62
Income taxes (55) (23)
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INCOME FROM CONTINUING OPERATIONS 94 39
Results from discontinued operations (net of income taxes) - (5)
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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)
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$ 2,177 $ 1,936
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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)
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$ 180 $ 92
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(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 Page 2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - unaudited)
December 31
-------------------------
2004 2003
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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
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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
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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
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$ 7,563 $ 6,781
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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
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2,878 3,139
Common stockholders' equity 2,844 2,318
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$ 7,563 $ 6,781
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Ashland Inc. and Consolidated Subsidiaries Page 3
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - unaudited)
Three months ended
December 31
-------------------------
2004 2003
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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)
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(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)
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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
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(148) (44)
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CASH USED BY CONTINUING OPERATIONS (89) (16)
Cash used by discontinued operations (8) (6)
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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
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$ 46 $ 48
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ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC $ 33 $ 5
Ashland Distribution 5 1
Ashland Specialty Chemical 11 10
Valvoline 5 3
Corporate 1 34
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$ 55 $ 53
=========== ===========
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(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 Page 4
OPERATING INFORMATION BY INDUSTRY SEGMENT
(Unaudited)
Three months ended
December 31
--------------------------
2004 2003
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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
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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%
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(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.