FOR FURTHER INFORMATION:
Media Relations: Investor Relations:
Stan Lampe Robert Hughes
(859) 815-4061 (859) 815-4095
FOR IMMEDIATE RELEASE
April 23, 2001
Ashland Inc. reports strong
March quarter results; record
operating income for six months
Covington, Ky. - The following was issued today by Ashland Inc. (NYSE:ASH):
Fiscal 2001: Second quarter highlights
. Strong refining margins boost results from Marathon Ashland Petroleum
. Highway construction unit adversely affected by winter weather and special
charge
. Weakening economy affects some specialty chemical and distribution units
Quarter ended March 31 Six months ended March 31
(In millions except earnings per share) 2001 2000 2001 2000
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Reported results
Operating income $ 87 $ 90 $ 231 $ 200
Net income (loss) $ 46 $ 11 $ 105 $ (155)
Earnings (loss) per share $ .66 $ .16 $ 1.49 $ (2.17)
Income from continuing operations
Operating income $ 87 $ 90 $ 231 $ 200
Net income $ 26 $ 25 $ 85 $ 65
Earnings per share $ .37 $ .35 $ 1.21 $ .91
Ashland Inc. today reported net income of $46 million, or 66 cents a
share, for the quarter ended March 31, the second quarter of the company's
fiscal year. This compares to net income of $11 million, or 16 cents a share,
for the same quarter a year ago.
For the March 2001 quarter, Ashland had income from continuing
operations of $26 million, or 37 cents a share. These amounts include an
after-tax charge of $9 million, or 13 cents a share, to correct improper
recognition of construction contract earnings at one of APAC's 46 operating
divisions. Excluding that charge, income from continuing operations would have
been $35 million, or 50 cents a share, which compares favorably to $25 million,
or 35 cents a share, for the year ago quarter.
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For the six months ended March 31, 2001, Ashland had income from
continuing operations of $85 million, or $1.21 a share, including the charge
associated with the operating division of APAC, compared to $65 million, or 91
cents a share, in the first half of fiscal 2000. "We were pleased with record
operating income for the six months, which at $231 million was up 15 percent
from a year ago," said Chairman and Chief Executive Officer Paul W. Chellgren.
Income from continuing operations excludes the results of discontinued
operations, extraordinary items and the cumulative effect of accounting changes.
During the March 2001 quarter, Ashland sold the remainder of its shares of Arch
Coal common stock realizing an after-tax gain of $33 million from those
discontinued operations. Also recorded were after-tax charges of $8 million
related to other discontinued operations and $5 million, which represents
Ashland's share of the cumulative effect of Marathon Ashland Petroleum's
adoption of new accounting standards related to derivative instruments. Ashland
owns 38 percent of MAP, which is a petroleum refining and marketing joint
venture with USX-Marathon.
"The March quarter was an eventful period for Ashland. Improved results
from MAP more than offset a decline from our wholly owned businesses, once again
demonstrating the effectiveness of our business mix," Chellgren said. "In
addition, we fulfilled our pledge to unlock the value of our investment in the
coal industry by selling our remaining shares of Arch Coal common stock."
Marathon Ashland Petroleum
Operating income from refining and marketing totaled $96 million, up
from $45 million a year ago. MAP experienced strong refining margins for much of
the quarter, offsetting the adverse impact of compressed retail margins.
"Increased demand from utilities and home-heating oil customers spurred
distillate values. At the same time, Midwest gasoline markets tightened on
concerns that demand in the upcoming driving season will again exceed supplies,"
explained Chellgren.
During the quarter, MAP announced two transactions that will strengthen
its retail marketing unit, Speedway SuperAmerica LLC. The planned acquisition of
convenience stores from Welsh Inc. will expand coverage in northern Indiana and
southwestern Michigan. MAP also signed a letter of intent with Pilot Corporation
to form a joint venture involving each company's travel center/truck stop
operations. The new company, of which MAP would own 50 percent, would initially
operate a nationwide chain of about 250 travel centers.
Wholly owned businesses
APAC had an operating loss of $38 million for the March quarter, due in
part to a pre-tax charge of $15 million associated with its Manassas, Va., unit.
During a recent internal investigation of financial activities at this division,
it was discovered that its earnings had been intentionally overstated.
Preliminary indications are that the problems relate primarily to the
recognition of revenues and failure to recognize certain costs over a period of
two to three years. There is no current evidence of any
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impact on outside parties, customers or suppliers. "The company is taking
appropriate steps to address this issue and will take whatever further actions
are necessary based on the results of a comprehensive investigation," Chellgren
said. Ashland has retained Deloitte & Touche to conduct an independent review of
business processes, financial accounting controls and opportunities for
improvement in APAC's accounting practices. Local management of the Manassas
unit has been replaced.
Poor weather was also a major factor in APAC's operating loss. "Road
construction activity levels were materially lower than usual for the March
quarter. Production of hot-mix asphalt was down 21 percent while ready-mix
production fell 27 percent," Chellgren noted. Work interrupted by poor weather
remains under contract and is a factor in the 34 percent increase in APAC's
backlog to a record $1.9 billion at March 31. "If the weather cooperates, APAC
is well-prepared for a busy and profitable construction season. However, given
the division's slow start, results will likely fall well short of those achieved
last year."
Operating income from Ashland Specialty Chemical was $17 million, down
29 percent from a year ago. "Sluggish demand in transportation and construction
markets continues to adversely affect results from four of our specialty
chemical businesses," Chellgren said. Unit volumes and margins were down for
unsaturated polyester resins, foundry chemicals, specialty adhesives and maleic
anhydride. "On a more positive note, earnings from our electronic chemicals,
industrial water treatment and marine chemicals businesses were up."
Ashland Distribution's operating income of $14 million was even with
last year despite unit volume declines resulting from the weak economy. "Margin
improvement and cost reduction initiatives successfully counteracted much of the
impact of lower demand and contributed to improved performance from chemical and
European thermoplastics distribution," noted Chellgren. Environmental services'
results also improved.
Valvoline's results were mixed as operating income declined from $23
million to $19 million. "Results from our core North American lubricants
business and Eagle One were up. However, these improvements were more than
offset by declines in other areas," Chellgren said. Last year, Valvoline
experienced unusually strong early season sales of R-12 automotive refrigerant.
This year, R-12 volumes have been more in line with normal trends. In addition,
higher raw materials costs led to margin compression for automotive chemicals
and antifreeze and results from Valvoline Instant Oil Change declined.
Corporate developments and outlook
During the quarter, Ashland sold the remainder of its shares of Arch
Coal common stock and used the proceeds to repay debt. Debt as a percent of
capital employed at March 31 was 52 percent, down from 56 percent a year ago. In
its stock buyback program, Ashland purchased approximately
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76,000 shares in the March quarter. The company currently has board
authorization to purchase an additional 2.3 million shares.
In keeping with its strategy to pursue selected acquisitions, Ashland
announced that it had reached an agreement with Neste Chemicals Oy to purchase
the business and assets of Neste Polyester. "This acquisition will advance us to
a worldwide market leadership position in unsaturated polyester resins and
gelcoats," Chellgren said, adding that Ashland anticipates completing the
transaction in the next few weeks.
"In summary, despite the slowing economy, we have earned record
operating income for the first six months of this year. Looking ahead to the
second half of fiscal 2001, supply and demand fundamentals for Midwest petroleum
markets continue to suggest a strong performance for refining and marketing,"
Chellgren said. "However, the outlook for our wholly owned businesses remains
mixed. APAC is off to a slow start, and weakness in the manufacturing sector of
the economy continues to adversely affect the volumes and margins for certain
parts of Ashland Specialty Chemical. The same is true of Ashland Distribution,
although realizing the benefits of margin improvement initiatives will mitigate
some of the impact. Valvoline's performance continues to be on track with our
expectations.
"For the full year, combined profits from our wholly owned businesses
are likely to be lower than last year's results. But given the excellent outlook
for MAP, we are quite optimistic about Ashland's prospects for the balance of
fiscal 2001," he concluded.
On April 23, at 11:00 a.m. (EDT), Ashland will provide a live audio
webcast of its quarterly conference call with securities analysts. The call will
cover results for the March quarter and will include an outlook for the
remainder of fiscal 2001. The webcast will be accessible via Ashland's Investor
Relations website, www.ashland.com/investors. Following the live event, replays
of the webcast will be available until May 1. The free RealPlayer 8 Basic is
needed to listen to the webcast and can be downloaded from www.real.com.
Ashland Inc. (NYSE:ASH) is a Fortune 250 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. Our products and services
are fundamental to how people live and work. Through the dedicated efforts 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. Estimates as to operating performance and earnings 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 and cost of raw materials. Successful completion of the transactions
mentioned in this release may be impacted by the required receipt of government
and third party approvals, the completion of due diligence, and the execution
and performance of definitive agreements. 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 September 30, 2000, 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.