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 26, 2004
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
Item 7. Financial Statements and Exhibits
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(c) Exhibits
99.1 Press Release dated January 26, 2004
Item 12. Results of Operations and Financial Condition
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On January 26, 2004, Ashland Inc. reported its first quarter fiscal
2004 results, which are discussed in more detail in the press release
attached hereto as Exhibit 99.1. This information is furnished in
accordance with Securities and Exchange Commission Release No. 33-8216.
SIGNATURES
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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 26, 2004 /s/ J. Marvin Quin
-----------------------------------
Name: J. Marvin Quin
Title: Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
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99.1 Press Release dated January 26, 2004
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Exhibit 99.1
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
January 26, 2004
ASHLAND INC. REPORTS
DECEMBER QUARTER EARNINGS
Covington, Ky. - The following was issued today by Ashland Inc. (NYSE:ASH):
FISCAL 2004: FIRST QUARTER HIGHLIGHTS
o December quarter income recovered sharply due to stronger performance from
wholly owned businesses.
- - Sales increased 11 percent.
- - Operating income increased 188 percent.
o 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
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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
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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.
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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(TM)." Find us at www.ashland.com.
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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 Page 1
STATEMENTS OF CONSOLIDATED INCOME
(In millions except per share data - unaudited)
Three months ended
December 31
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2003 2002
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REVENUES
Sales and operating revenues $ 1,923 $ 1,738
Equity income 38 35
Other income 13 18
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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
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1,882 1,759
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OPERATING INCOME 92 32
Net interest and other financial costs (30) (32)
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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 62 -
Income taxes (23) (1)
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INCOME (LOSS) FROM CONTINUING OPERATIONS 39 (1)
Results from discontinued operations (net of income taxes) (5) (91)
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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)
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$ 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)
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$ 92 $ 32
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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
-------------------------
2003 2002
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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
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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
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3,620 3,541
Property, plant and equipment
Cost 2,999 2,917
Accumulated depreciation, depletion and amortization (1,780) (1,653)
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1,219 1,264
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$ 6,781 $ 6,710
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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
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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
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3,139 3,329
Common stockholders' equity 2,318 2,075
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$ 6,781 $ 6,710
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Ashland Inc. and Consolidated Subsidiaries Page 3
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)
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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)
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(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 -
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(44) (23)
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CASH PROVIDED (USED) BY CONTINUING OPERATIONS (16) 33
Cash used by discontinued operations (6) (4)
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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
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$ 48 $ 52
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ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC $ 5 $ 10
Ashland Distribution 1 2
Ashland Specialty Chemical 10 6
Valvoline 3 4
Corporate 34 1
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$ 53 $ 23
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(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 Page 4
OPERATING INFORMATION BY INDUSTRY SEGMENT
(Unaudited)
Three months ended
December 31
--------------------------
2003 2002
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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
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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%
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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, 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.