UNITED STATES
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): April 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
On April 25, 2005, Ashland Inc. reported its second quarter results,
which are discussed in more detail in the press release attached hereto as
Exhibit 99.1, which 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
(c) Exhibits
99.1 Press Release dated April 25, 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: April 25, 2005 /s/ J. Marvin Quin
--------------------------------------------
Name: J. Marvin Quin
Title: Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
99.1 Press Release dated April 25, 2005
EXHIBIT 99.1
[GRAPHIC OMITTED]
FOR FURTHER INFORMATION:
Media Relations: Investor Relations:
Jim Vitak Bill Henderson
(614) 790-3715 (859) 815-4454
jevitak@ashland.com wehenderson@ashland.com
FOR IMMEDIATE RELEASE
APRIL 25, 2005
ASHLAND INC.'S SECOND QUARTER
EARNINGS IMPROVE SIGNIFICANTLY
Covington, Ky. - The following was issued today by Ashland Inc. (NYSE:ASH):
FISCAL 2005: MARCH QUARTER HIGHLIGHTS
o Net income of 44 cents a share compared to prior-year loss.
o Chemical Sector operating income increased by 56 percent:
- Ashland Distribution: achieves second consecutive all-time record
quarter;
- Ashland Specialty Chemical: profits more than double due in part to
higher sales volumes;
- Valvoline: price increases offset volume declines, resulting in
essentially even profits.
o Transportation Construction Sector experiences operating loss due to
lower production.
o Refining and marketing experiences sharp increase in operating profits
due to higher refinery output and margins.
Quarter ended March 31 Six Months Ended March 31
In millions except earnings per share 2005 2004 2005 2004
- -----------------------------------------------------------------------------------------------------------------------------------
Operating income $ 86 $ 10 $ 266 $ 102
Income (loss) from continuing operations $ 33 $ (11) $ 126 $ 27
Net income (loss) $ 33 $ (16) $ 126 $ 17
Diluted earnings (loss) per share:
Income (loss) from continuing operations $ .44 $ (.16) $ 1.72 $.39
Net income (loss) $ .44 $ (.23) $ 1.72 $.25
Ashland Inc. today reported net income of $33 million, or 44 cents a
share, for the quarter ended March 31, the second quarter of the company's
2005 fiscal year. These results compare to a net loss of $16 million, or 23
cents a share, for the 2004 March quarter. The prior-year loss from
continuing operations was $11 million, or 16 cents a share.
-more-
ASHLAND INC.'S SECOND QUARTER EARNINGS IMPROVE SIGNIFICANTLY, PAGE 2
For the six months ended March 31, 2005, Ashland reported net income
of $126 million, or $1.72 a share, compared to net income of $17 million,
or 25 cents a share for the same period last year. Income from continuing
operations for the first six months of the prior year was $27 million, or
39 cents a share.
"Normal seasonality makes the March quarter our most difficult
earnings period," said James J. O'Brien, Ashland Inc. chairman and chief
executive officer. "We improved operating income by $76 million compared to
last year's March quarter, despite continued high raw material costs and
poor weather conditions in our paving and construction operating area.
Improvements from our other businesses - due in part to success in passing
on the high cost of materials influenced by hydrocarbon pricing - more than
offset disappointing results from our Transportation Construction Sector."
Commenting on operations, O'Brien noted that the Chemical Sector,
which includes the Ashland Distribution, Ashland Specialty Chemical and
Valvoline divisions, continues to make progress in its integration efforts.
Chemical Sector operating income grew to $97 million, a 56-percent
improvement compared to the previous March quarter.
Ashland Distribution achieved its second consecutive all-time record
quarter. Operating income for the March 2005 quarter was $34 million, up 79
percent over the previous year's quarter. Overall sales revenues were up 21
percent due to the division's ability to pass through price increases. This
division is building solid momentum for continued growth by creating
consistent processes, sustaining a low-cost model and delivering value to
its customers.
Ashland Specialty Chemical reported record operating income for the
March 2005 quarter of $39 million, up 105 percent over last year's March
quarter. Sales revenues grew by 32 percent due in part to an 8-percent
increase in thermoset resin volumes. Partial recovery of margins during the
quarter, and the sale of an idle plant in Plaquemine, La., which resulted
in a pre-tax gain of $7 million, also contributed to the division's record
performance.
Valvoline's operating income for the March 2005 quarter was $24
million, essentially even with the record achieved in the March 2004
quarter. Price increases enabled Valvoline to maintain profits despite
softer volumes and high raw material costs. While U.S.-branded lubricant
sales volumes declined 7 percent, premium lubricant sales volumes increased
by 5 percent.
The Transportation Construction Sector, commercially known as Ashland
Paving And Construction, Inc. (APAC), reported an operating loss of $46
million for the March 2005 quarter, compared to a $33 million loss in the
March 2004 quarter. The March quarter is typically APAC's slowest. Hot-mix
asphalt production declined 16 percent compared to the same period last
year, driven primarily by poor weather conditions in APAC's operating area
and higher hydrocarbon costs. During the quarter, APAC won two major
highway construction jobs in Tennessee and Florida totaling $135
-more-
ASHLAND INC.'S SECOND QUARTER EARNINGS IMPROVE SIGNIFICANTLY, PAGE 3
million. At March 31, APAC's construction backlog, which consists of work
awarded and funded but not yet performed, was a record $2.1 billion.
Operating income from refining and marketing was $61 million for the
March 2005 quarter, compared to $2 million in the March 2004 quarter.
Marathon Ashland Petroleum LLC (MAP) benefited from greater discounts on
high-sulfur crude oil and less planned maintenance. Crude oil throughput
was 17 percent higher than during the March 2004 quarter. During the
quarter, 38-percent owned MAP realized a $12 million loss and recorded a
$61 million mark-to-market charge for crack spread derivative contracts.
MAP also recorded a $73 million in-transit crude oil charge during the
March 2005 quarter.
"Our performance during the second quarter is encouraging," said
O'Brien. "Due to the hard work and dedication of our employees worldwide,
we continue to improve how we take our products and services to market,
meet the needs of our customers and manage our supplier relationships."
O'Brien added that Ashland continues to identify and implement process
improvements that are enabling more effective management of rising raw
material costs and improving operational efficiency.
UPDATE ON THE PROPOSED TRANSFER OF INTEREST IN MAP
On March 19, 2004, Ashland announced the signing of an agreement under
which it would transfer its 38-percent interest in Marathon Ashland
Petroleum LLC and two wholly-owned businesses to Marathon Oil Corporation
in a transaction structured to be generally tax free and valued at
approximately $3 billion. The two businesses are Ashland's maleic anhydride
business and 61 Valvoline Instant Oil Change centers. The transaction is
subject to several previously disclosed conditions, including receipt of a
private letter ruling from the IRS with respect to the tax treatment of the
transaction. The IRS has indicated that it will not provide all the rulings
requested by Ashland and Marathon, and discussions are continuing with the
IRS on modifications to the proposed transaction. In addition, as disclosed
on April 13, 2005, Ashland and Marathon are discussing possible
alternatives with respect to the proposed transaction. There can be no
assurance that an agreement on an alternative transaction will be reached.
Cash distributions from MAP have been suspended pending the transfer
of the company's interest in the joint venture to Marathon. If the proposed
transaction closes, Ashland would receive proceeds equal to 38 percent of
MAP's distributable cash at the time of closing. If the transaction does
not close, Ashland would receive its share of these funds as part of its
normal distributions. Ashland's share on March 31, 2005, was $560 million.
Today at 10:00 a.m. (EDT), Ashland will provide a live audio webcast
of its quarterly conference call with securities analysts. The webcast will
be accessible through Ashland's website,
-more-
ASHLAND INC.'S SECOND QUARTER EARNINGS IMPROVE SIGNIFICANTLY, PAGE 4
www.ashland.com. Following the live event, an archived version of the
webcast will be available at www.ashland.com/investors 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. 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,
as amended, 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.
ADDITIONAL INFORMATION ABOUT THE MAP TRANSACTION
In connection with the proposed transaction, Ashland filed a preliminary
proxy statement on Schedule 14A with the SEC on June 21, 2004 and an
amended preliminary proxy statement on Schedule 14A on August 31, 2004. ATB
Holdings Inc. and New EXM Inc. filed a registration statement on Form S-4,
which includes a further amended preliminary proxy statement/prospectus,
with the SEC on October 12, 2004. Investors and security holders are urged
to read those documents and any other relevant documents filed or that will
be filed with the SEC, including the definitive proxy statement/prospectus
regarding the proposed transaction as they become available, because they
contain, or will contain, important information. The definitive proxy
statement/prospectus will be filed with the SEC by Ashland, and security
holders may obtain a free copy of the definitive proxy statement/prospectus
when it becomes available, and other documents filed with the SEC by
Ashland, including the preliminary proxy statement at the SEC's website at
www.sec.gov. The definitive proxy statement/prospectus, and other documents
filed with the SEC by Ashland, including the preliminary proxy statement,
may also be obtained for free in the SEC filings section on Ashland's
Investor Relations website at www.ashland.com/investors, or by directing a
request to Ashland at 50 E. RiverCenter Blvd., Covington, KY 41012. The
respective directors and executive officers of Ashland and other persons
may be deemed to be participants in solicitation of proxies in respect of
the proposed transaction. Information regarding Ashland's directors and
executive officers is available in its proxy statement filed with the SEC
by Ashland on December 14, 2004. Investors may obtain information regarding
the interests of participants in the solicitation of proxies in connection
with the transaction referenced in the foregoing information by reading the
definitive proxy statement/prospectus when it becomes available.
Ashland Inc. and Consolidated Subsidiaries Page 1
STATEMENTS OF CONSOLIDATED INCOME
(In millions except per share data - unaudited)
Three months ended Six months ended
March 31 March 31
----------------------- ------------------------
2005 2004 2005 2004
---------- ---------- ----------- ----------
REVENUES
Sales and operating revenues $ 2,062 $ 1,825 $ 4,239 $ 3,761
Equity income 69 18 215 56
Other income 18 9 35 22
---------- ---------- ----------- ----------
2,149 1,852 4,489 3,839
COSTS AND EXPENSES
Cost of sales and operating expenses 1,754 1,547 3,603 3,158
Selling, general and administrative expenses 309 295 620 579
---------- ---------- ----------- ----------
2,063 1,842 4,223 3,737
---------- ---------- ----------- ----------
OPERATING INCOME 86 10 266 102
Net interest and other financial costs (29) (29) (61) (59)
---------- ---------- ----------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 57 (19) 205 43
Income taxes (24) 8 (79) (16)
---------- ---------- ----------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 33 (11) 126 27
Results from discontinued operations (net of income taxes) - (5) - (10)
---------- ---------- ----------- ----------
NET INCOME (LOSS) $ 33 $ (16) $ 126 $ 17
========== ========== =========== ==========
DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) from continuing operations $ .44 $ (.16) $ 1.72 $ .39
Results from discontinued operations - (.07) - (.14)
---------- ---------- ----------- ----------
Net income (loss) $ .44 $ (.23) $ 1.72 $ .25
========== ========== =========== ==========
AVERAGE COMMON SHARES AND ASSUMED CONVERSIONS 74 69 73 70
SALES AND OPERATING REVENUES
APAC $ 388 $ 408 $ 1,000 $ 1,058
Ashland Distribution 956 788 1,851 1,485
Ashland Specialty Chemical 434 329 833 652
Valvoline 323 324 633 614
Intersegment sales (39) (24) (78) (48)
---------- ---------- ----------- ----------
$ 2,062 $ 1,825 $ 4,239 $ 3,761
========== ========== =========== ==========
OPERATING INCOME
APAC $ (46) $ (33) $ (40) $ (2)
Ashland Distribution 34 19 59 32
Ashland Specialty Chemical 39 19 61 42
Valvoline 24 24 42 45
Refining and Marketing (a) 61 2 197 27
Corporate (26) (21) (53) (42)
---------- ---------- ----------- ----------
$ 86 $ 10 $ 266 $ 102
========== ========== =========== ==========
- ----------
(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)
March 31
---------------------------
2005 2004
----------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 74 $ 180
Accounts receivable 1,310 1,141
Inventories 546 475
Deferred income taxes 95 114
Refundable income taxes 125 6
Other current assets 83 131
----------- ------------
2,233 2,047
Investments and other assets
Investment in Marathon Ashland Petroleum LLC (MAP) 2,926 2,349
Goodwill 560 524
Asbestos insurance receivable (noncurrent portion) 381 396
Other noncurrent assets 413 333
----------- ------------
4,280 3,602
Property, plant and equipment
Cost 3,196 3,076
Accumulated depreciation, depletion and amortization (1,894) (1,823)
----------- ------------
1,302 1,253
----------- ------------
$ 7,815 $ 6,902
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Debt due within one year
Revolving credit facility $ 228 $ -
Commercial paper 73 17
Short-term borrowing from MAP 177 -
Current portion of long-term debt 248 189
Trade and other payables 1,254 1,262
Income taxes 30 17
----------- ------------
2,010 1,485
Noncurrent liabilities
Long-term debt (less current portion) 1,086 1,353
Employee benefit obligations 436 402
Deferred income taxes 264 221
Reserves of captive insurance companies 201 192
Asbestos litigation reserve (noncurrent portion) 545 565
Other long-term liabilities and deferred credits 374 354
----------- ------------
2,906 3,087
Common stockholders' equity 2,899 2,330
----------- ------------
$ 7,815 $ 6,902
=========== ============
Ashland Inc. and Consolidated Subsidiaries Page 3
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - unaudited)
Six months ended
March 31
--------------------------
2005 2004
----------- -----------
CASH FLOWS FROM OPERATIONS
Income from continuing operations $ 126 $ 27
Expense (income) not affecting cash
Depreciation, depletion and amortization (a) 93 97
Deferred income taxes (11) (1)
Equity income from affiliates (215) (56)
Distributions from equity affiliates 4 153
Other items 1 1
Change in operating assets and liabilities (b) (236) (163)
----------- -----------
(238) 58
CASH FLOWS FROM FINANCING
Proceeds from issuance of common stock 51 54
Repayment of long-term debt (174) (70)
Increase in short-term debt 438 17
Dividends paid (40) (38)
----------- -----------
275 (37)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment (a) (127) (86)
Purchase of operations - net of cash acquired (101) (4)
Proceeds from sale of operations 16 10
Other - net 6 21
----------- -----------
(206) (59)
----------- -----------
CASH PROVIDED (USED) BY CONTINUING OPERATIONS (169) (38)
Cash provided (used) by discontinued operations - (5)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS $ (169) $ (43)
=========== ===========
DEPRECIATION, DEPLETION AND AMORTIZATION
APAC $ 44 $ 49
Ashland Distribution 9 9
Ashland Specialty Chemical 22 20
Valvoline 13 13
Corporate 5 6
----------- -----------
$ 93 $ 97
=========== ===========
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC $ 62 $ 19
Ashland Distribution 8 3
Ashland Specialty Chemical 31 21
Valvoline 14 8
Corporate 12 35
----------- -----------
$ 127 $ 86
=========== ===========
- ----------
(a) Excludes amounts related to equity affiliates. Ashland's 38 percent
share of MAP's DD&A was $80 million in 2005 and $74 million in 2004,
and its share of MAP's capital expenditures was $187 million in 2005
and $158 million in 2004.
(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 Six months ended
March 31 March 31
-------------------------- --------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
APAC
Construction backlog at March 31 (millions) (a) $ 2,135 $ 1,897
Net construction job revenues (millions) (b) $ 198 $ 207 $ 542 $ 573
Hot-mix asphalt production (million tons) 3.7 4.4 11.5 12.9
Aggregate production (million tons) 6.5 6.1 14.3 12.9
ASHLAND DISTRIBUTION (c)
Sales per shipping day (millions) $ 15.4 $ 12.3 $ 14.9 $ 11.8
Gross profit as a percent of sales 9.8% 9.7% 9.7% 9.7%
ASHLAND SPECIALTY CHEMICAL (c)
Sales per shipping day (millions) $ 7.0 $ 4.8 $ 6.7 $ 5.0
Gross profit as a percent of sales 26.7% 29.5% 25.5% 29.7%
VALVOLINE
Lubricant sales (million gallons) 42.2 47.5 83.3 91.3
Premium lubricants (percent of U.S. branded volumes) 24.1% 21.4% 23.0% 20.4%
REFINING AND MARKETING (d)
Refinery runs (thousand barrels per day)
Crude oil refined 922 789 949 844
Other charge and blend stocks 171 196 186 190
Refined product yields (thousand barrels per day)
Gasoline 576 552 611 582
Distillates 292 235 310 266
Asphalt 72 57 76 63
Other 168 155 154 135
----------- ----------- ----------- -----------
Total 1,108 999 1,151 1,046
Refined product sales (thousand barrels per day) (e) 1,370 1,307 1,392 1,331
Refining and wholesale marketing margin (per barrel) (f) $ 2.88 $ 1.44 $ 3.47 $ 1.58
Speedway SuperAmerica (SSA)
Retail outlets at March 31 1,659 1,773
Gasoline and distillate sales (million gallons) 745 763 1,538 1,569
Gross margin - gasoline and distillates (per gallon) $ .1058 $ .1145 $ .1141 $ .1145
Merchandise sales (millions) $ 560 $ 521 $ 1,141 $ 1,068
Merchandise margin (as a percent of sales) 25.6% 25.3% 25.2% 25.1%
- ----------
(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.
(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.