Exhibit 99.1
FOR FURTHER INFORMATION:
Media Relations: Investor Relations:
Jim Vitak Bill Henderson
(859)815-5106 (859)815-4454
jvitak@ashland.com wehenderson@ashland.com
FOR IMMEDIATE RELEASE
October 21, 2003
ASHLAND INC. REPORTS FOURTH QUARTER
AND FISCAL 2003 EARNINGS
Covington, Ky. - The following was issued today by Ashland Inc. (NYSE:ASH):
SEPTEMBER 2003 QUARTER HIGHLIGHTS
Record quarter from Valvoline and improvement in both petroleum
refining and chemical distribution more than offset loss from road
construction and decline from specialty chemical.
Quarter ended September 30 Year ended September 30
In millions except earnings per share 2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------
Operating income $ 119 $ 96 $ 266 $ 321
Income from continuing operations $ 61 $ 41 $ 94 $ 115
Net income $ 137 $ 47 $ 75 $ 117
Diluted earnings per share:
Income from continuing operations $ .89 $ .59 $ 1.37 $ 1.64
Net income $ 1.99 $ .68 $ 1.10 $ 1.67
Ashland Inc. today reported net income of $137 million, or $1.99 a
share, for the quarter ended September 30, the fourth quarter of the
company's 2003 fiscal year. These results included an $81 million gain on
the sale of its Electronic Chemicals group. Net income for the 2002
September quarter was $47 million, or 68 cents a share. Income from
continuing operations for the 2003 quarter amounted to $61 million, or 89
cents a share, compared to $41 million, or 59 cents a share, for the
quarter a year ago. In the quarter just ended, the company recorded $22
million in before-tax charges for severance and other costs related to
-more-
the company's Top-Quartile Cost Structure (TQCS) program. Under this
initiative, actions are underway that are expected to reduce selling,
general and administrative expenses by an annual rate of approximately $75
million by the end of fiscal 2004.
For the year ended September 30, 2003, Ashland reported net income of
$75 million, or $1.10 a share, compared to net income of $117 million, or
$1.67 a share last year. Ashland's income from continuing operations for
2003 totaled $94 million, or $1.37 a share, compared to $115 million, or
$1.64 a share, for 2002.
"Income from continuing operations increased 49 percent for the
quarter, reflecting a record September quarter from Valvoline, a
substantial rebound by Ashland Distribution and good results from our
refining and marketing investment," said Ashland Chairman and Chief
Executive Officer James J. O'Brien. "We were disappointed, however, by an
operating loss from APAC and the drop in operating income from Ashland
Specialty Chemical."
O'Brien said several factors contributed to APAC's $3 million
operating loss. Reserves of $12 million were established for job losses
related to the Virginia Department of Transportation (VDOT) Route 288
project, reflecting weather-related cost increases and construction delays.
Also in the quarter, APAC recorded a $9 million pre-tax impairment charge
for goodwill associated with non-strategic assets identified for sale.
Although revenues for the quarter nearly equaled those of a year ago,
persistent poor weather created inefficiencies throughout the construction
season, which led to much lower than expected margins. In addition, liquid
asphalt costs increased by about 8 percent, compared to the 2002 quarter,
while fuel costs for asphalt plants and the equipment fleet rose 25 percent
and 9 percent, respectively.
"While we are quite disappointed with APAC's 2003 performance, we
continue to believe that APAC will benefit from its strong backlog of $1.7
billion and an improved cost structure in fiscal 2004," O'Brien said.
Operating income from Ashland Specialty Chemical declined to $10
million for the quarter compared to $19 million a year ago. Several factors
contributed to the decline, including a $5 million charge related to
Ashland's TQCS program. In addition, prior increases in raw material costs
were not completely recovered in the marketplace.
"Although the quarter's performance was disappointing, most of the
decline was due to charges and expenses related to initiatives that should
enable us to reduce costs and improve
-more-
performance going forward," O'Brien said. "Additionally, Ashland Specialty
Chemical has created a new solutions process to advance how it
commercializes new technology. We remain optimistic about the future of
this division."
Ashland Distribution significantly improved its performance. Operating
income for the quarter reached $5 million after a $5 million charge for
staff reductions related to Ashland's TQCS program. These results compared
to an operating loss of $7 million in the quarter a year ago. Operating
income for the year climbed to $32 million, versus only $1 million for
fiscal 2002, reflecting an 11 percent increase in sales revenues which
includes a 5 percent increase in volumes.
"Ashland Distribution's improvements were achieved despite a sluggish
industrial economy, which demonstrates the business's success in improving
service and reducing costs," O'Brien said. "We're pleased with the progress
made this year. While sales and profits have not yet met our long-term
expectations, the team is clearly doing the work required to improve
service to customers, increase sales and grow earnings."
Valvoline achieved a record September quarter; operating income rose
29 percent to $31 million, compared to $24 million in the 2002 quarter.
Valvoline branded lubricant sales volumes improved on the strength of an 11
percent increase in premium product sales volumes and an increase in
distributor sales volumes in the "do-it-for-me" market. Valvoline Instant
Oil Change (VIOC) had a record quarter due to a 16 percent increase in
revenues from transmission, cooling, fuel and air quality system services
and an 11 percent increase in premium lubricant oil changes. In addition,
Valvoline International had a record quarter in part due to better volumes
in key markets and strengthening foreign currencies.
"Valvoline's record year demonstrates the division's ability to
perform at a consistently high level. Operating income for the year grew by
13 percent, as Valvoline continued to benefit from its highly successful
strategy to emphasize premium products and services," O'Brien said.
"Valvoline is our best example of the type of performance we are working to
create in all of our businesses."
-more-
Results from refining and marketing improved significantly compared to
the previous year. Operating income in the quarter jumped to $118 million
compared to $33 million a year ago. Strong results from Marathon Ashland
Petroleum were due to improved demand in the Midwest and strong refining
margins and record refinery throughput. For the fiscal year, operating
income from refining and marketing rose by 84 percent over 2002 to $263
million.
Including $11 million in TQCS charges, corporate costs were $42
million in the quarter versus $31 million for the prior year.
"In summary, we moved forward decisively on a number of fronts in
fiscal 2003," O'Brien said. "As a result, we are entering the new fiscal
year with a sharper business focus, a well-defined strategy and in stronger
competitive position. While we recognize there is more yet to be done, we
believe the progress we've made this year has set Ashland on the right
course to deliver greater future value to our shareholders and to reach our
goal of consistently outperforming our competitors."
Today at 5:00 p.m. (EDT), Ashland will provide a live audio webcast of
its year-end meeting with securities analysts. The webcast will be
accessible through Ashland's Investor Relations website,
www.ashland.com/investors. Interested parties may also dial (800) 362-0571
for a listen-only broadcast. 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 company providing products,
services, and customer solutions throughout the world. Our businesses
include road construction, specialty chemicals, lubricants, car-care
products, chemical and plastics distribution and transportation fuels.
Through the dedication of our employees, we are "The Who In How Things
Work(TM)." Find us at www.ashland.com.
- 0 -
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, 2002, AS AMENDED. 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 Year ended
September 30 September 30
----------------------- ------------------------
2003 2002 2003 2002
---------- ---------- ----------- ----------
REVENUES
Sales and operating revenues $ 2,130 $ 2,033 $ 7,518 $ 7,348
Equity income 133 40 301 181
Other income 2 12 46 47
---------- ---------- ----------- ----------
2,265 2,085 7,865 7,576
COSTS AND EXPENSES
Cost of sales and operating expenses 1,708 1,586 6,005 5,756
Selling, general and administrative expenses 386 348 1,390 1,291
Depreciation, depletion and amortization 52 55 204 208
---------- ---------- ----------- ----------
2,146 1,989 7,599 7,255
---------- ---------- ----------- ----------
OPERATING INCOME 119 96 266 321
Net interest and other financial costs (32) (34) (128) (138)
---------- ---------- ----------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 87 62 138 183
Income taxes (26) (21) (44) (68)
---------- ---------- ----------- ----------
INCOME FROM CONTINUING OPERATIONS 61 41 94 115
Results from discontinued operations (net of income taxes) 81 6 (14) 13
---------- ---------- ----------- ----------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 142 47 80 128
Cumulative effect of accounting changes (net of income taxes) (5) - (5) (11)
---------- ---------- ----------- ----------
NET INCOME $ 137 $ 47 $ 75 $ 117
========== ========== =========== ==========
DILUTED EARNINGS PER SHARE
Income from continuing operations $ .89 $ .59 $ 1.37 $ 1.64
Results from discontinued operations 1.18 .09 (.19) .19
Cumulative effect of accounting changes (.08) - (.08) (.16)
---------- ---------- ----------- ----------
Net income $ 1.99 $ .68 $ 1.10 $ 1.67
========== ========== =========== ==========
AVERAGE COMMON SHARES AND ASSUMED CONVERSIONS 69 69 69 70
SALES AND OPERATING REVENUES
APAC $ 785 $ 791 $ 2,400 $ 2,652
Ashland Distribution 723 660 2,804 2,535
Ashland Specialty Chemical 300 285 1,170 1,094
Valvoline 346 319 1,235 1,152
Intersegment sales (24) (22) (91) (85)
---------- ---------- ----------- ----------
$ 2,130 $ 2,033 $ 7,518 $ 7,348
========== ========== =========== ==========
OPERATING INCOME
APAC $ (3) $ 58 $ (42) $ 122
Ashland Distribution 5 (7) 32 1
Ashland Specialty Chemical 10 19 31 70
Valvoline 31 24 87 77
Refining and Marketing (a) 118 33 263 143
Corporate (42) (31) (105) (92)
---------- ---------- ----------- ----------
$ 119 $ 96 $ 266 $ 321
========== ========== =========== ==========
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(a) Includes Ashland's equity income from Marathon Ashland Petroluem
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)
September 30
---------------------------
2003 2002
----------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 223 $ 90
Accounts receivable 1,135 1,056
Inventories 441 456
Deferred income taxes 142 119
Current assets of discontinued operations held for sale - 211
Other current assets 144 139
----------- ------------
2,085 2,071
Investments and other assets
Investment in Marathon Ashland Petroleum LLC (MAP) 2,448 2,350
Goodwill 523 510
Asbestos insurance receivable (noncurrent portion) 399 171
Other noncurrent assets 340 329
----------- ------------
3,710 3,360
Property, plant and equipment
Cost 2,959 2,920
Accumulated depreciation, depletion and amortization (1,748) (1,629)
----------- ------------
1,211 1,291
----------- ------------
$ 7,006 $ 6,722
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Debt due within one year $ 102 $ 201
Trade and other payables 1,371 1,256
Current liabilities of discontinued operations held for sale - 39
Income taxes 11 24
----------- ------------
1,484 1,520
Noncurrent liabilities
Long-term debt (less current portion) 1,512 1,606
Employee benefit obligations 385 509
Deferred income taxes 291 246
Reserves of captive insurance companies 168 166
Asbestos litigation reserve (noncurrent portion) 560 152
Other long-term liabilities and deferred credits 353 350
----------- ------------
3,269 3,029
Common stockholders' equity 2,253 2,173
----------- ------------
$ 7,006 $ 6,722
=========== ============
Ashland Inc. and Consolidated Subsidiaries Page 3
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - unaudited)
Year ended
September 30
--------------------------
2003 2002
----------- -----------
CASH FLOWS FROM OPERATIONS
Income from continuing operations $ 94 $ 115
Expense (income) not affecting cash
Depreciation, depletion and amortization (a) 204 208
Deferred income taxes 49 (121)
Equity income from affiliates (301) (181)
Distributions from equity affiliates 203 201
Other items 1 -
Change in operating assets and liabilities (b) (8) (59)
----------- -----------
242 163
CASH FLOWS FROM FINANCING
Proceeds from issuance of long-term debt - 55
Proceeds from issuance of common stock 2 11
Repayment of long-term debt (216) (140)
Repurchase of common stock - (42)
Increase (decrease) in short-term debt (10) 10
Dividends paid (75) (76)
----------- -----------
(299) (182)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment (a) (110) (174)
Purchase of operations - net of cash acquired (5) (15)
Proceeds from sale of operations 7 -
Other - net 11 27
----------- -----------
(97) (162)
----------- -----------
CASH USED BY CONTINUING OPERATIONS (154) (181)
Cash provided by discontinued operations 287 35
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 133 $ (146)
=========== ===========
DEPRECIATION, DEPLETION AND AMORTIZATION
APAC $ 108 $ 114
Ashland Distribution 19 21
Ashland Specialty Chemical 40 38
Valvoline 26 24
Corporate 11 11
----------- -----------
$ 204 $ 208
=========== ===========
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC $ 47 $ 107
Ashland Distribution 5 12
Ashland Specialty Chemical 34 27
Valvoline 16 21
Corporate 8 7
----------- -----------
$ 110 $ 174
=========== ===========
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(a) Excludes amounts related to equity affiliates. Ashland's 38
percent share of MAP's DD&A was $139 million in 2003 and $138
million in 2002, and its share of MAP's capital expenditures was
$296 million in 2003 and $199 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 Year ended
September 30 September 30
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
APAC
Construction backlog at September 30 (millions) (a) $ 1,745 $ 1,691
Hot-mix asphalt production (million tons) 11.5 11.4 32.5 36.7
Aggregate production (million tons) 9.0 8.8 28.7 31.0
Ready-mix concrete production (million cubic yards) 0.5 0.6 2.0 2.1
ASHLAND DISTRIBUTION (b)
Sales per shipping day (millions) $ 11.3 $ 10.3 $ 11.1 $ 10.1
Gross profit as a percent of sales 15.5% 15.7% 15.3% 16.1%
ASHLAND SPECIALTY CHEMICAL (b)
Sales per shipping day (millions) $ 4.7 $ 4.5 $ 4.6 $ 4.3
Gross profit as a percent of sales 33.6% 36.5% 33.7% 37.0%
VALVOLINE
Lubricant sales (million gallons) 51.3 53.5 193.5 199.0
Premium lubricants (percent of U.S. branded volumes) 18.6% 16.9% 18.5% 16.1%
REFINING AND MARKETING (c)
Refinery runs (thousand barrels per day)
Crude oil refined 966 931 900 930
Other charge and blend stocks 142 134 133 151
Refined product yields (thousand barrels per day)
Gasoline 590 570 554 594
Distillates 290 279 278 293
Asphalt 77 80 71 73
Other 157 140 131 127
----------- ----------- ----------- -----------
Total 1,114 1,069 1,034 1,087
Refined product sales (thousand barrels per day) (d) 1,445 1,387 1,345 1,321
Refining and wholesale marketing margin (per barrel) (e) $ 3.61 $ 1.63 $ 2.59 $ 1.82
Speedway SuperAmerica (SSA)
Retail outlets at September 30 1,791 2,063
Gasoline and distillate sales (million gallons) 815 943 3,423 3,622
Gross margin - gasoline and distillates (per gallon) $ .1375 $ .1063 $ .1191 $ .1040
Merchandise sales (millions) (f) $ 586 $ 645 $ 2,281 $ 2,381
Merchandise margin (as a percent of sales) 24.7% 23.2% 24.5% 24.2%
- ----------
(a) Includes APAC's proportionate share of the backlog of
unconsolidated joint ventures.
(b) 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.
(c) Amounts represent 100% of MAP's operations, in which Ashland owns
a 38% interest.
(d) Total average daily volume of all refined product sales to MAP's
wholesale, branded and retail (SSA) customers.
(e) Sales revenue less cost of refinery inputs, purchased products and
manufacturing expenses, including depreciation.
(f) 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 $41 million in the three
months ended September 30, 2002; $46 million in the year ended
September 30, 2003; and $170 million in the year ended September
30, 2002.