FOR FURTHER INFORMATION:
Media Relations: Investor Relations:
Jim Vitak Daragh Porter
(614) 790-3715 (859) 815-3825
jevitak@ashland.com dlporter@ashland.com
FOR IMMEDIATE RELEASE
JULY 25, 2005
ASHLAND INC. REPORTS RECORD EARNINGS
FROM OPERATIONS FOR JUNE QUARTER
Covington, Ky. - The following was issued today by Ashland Inc. (NYSE:ASH):
FISCAL 2005: JUNE QUARTER HIGHLIGHTS
o Completion of MAP Transaction results in a $1.5 billion net gain
o Operating income up 40 percent to a record $410 million
o Chemical Sector operating income up 40 percent to $105 million
o Transportation Construction Sector operating income up 7 percent to a
record $46 million in spite of higher energy prices
QUARTER ENDED JUNE 30, 2005
Businesses MAP
Sold and Transaction
Ongoing Interest and Debt Quarter ended
In millions except earnings per share Businesses Eliminated Repayments TOTAL June 30, 2004
- ---------------------------------------------------------------------------------------------------------------------------
Operating income $ 99 $ 311 $ - $ 410 $ 292
Net income $ 58 $ 173 $ 1,536 $ 1,767 $ 161
Diluted net income per share $ .78 $ 2.31 $ 20.56 $ 23.65 $2.26
Ashland Inc. today reported net income of $1.8 billion for the
quarter ended June 30, the third quarter of the company's 2005 fiscal year.
These results include a $1.5 billion net gain on the sale of Ashland's
38-percent interest in Marathon Ashland Petroleum LLC, its maleic anhydride
business and 60 Valvoline Instant Oil Change centers (collectively referred
to as the "MAP Transaction") and the repayment of most of Ashland's debt
with the proceeds. (See page 5 of the attached financial statements for an
analysis of Ashland's earnings.) Excluding this gain, net income for the
June 2005 quarter was $231 million, or $3.09 a share, compared to $161
million, or $2.26 a share, for the quarter last year.
-more-
"The completion of the MAP Transaction marked an extraordinary
milestone in Ashland's history," said James J. O'Brien, Ashland Inc.
chairman and chief executive officer. "After 81 years in the petroleum
refining and marketing industry, Ashland is now focused on growth as a
two-sector company with operations in chemicals and transportation
construction."
O'Brien noted that the company is pleased with its June quarter
performance. "Both the Chemical and Transportation Construction Sectors
reported higher profits - up 40 percent and 7 percent, respectively - due
mainly to improving margins."
Commenting on operations, O'Brien said operating income from
refining and marketing was $290 million for the June 2005 quarter. Strong
margins throughout the quarter enabled the 41-percent improvement over the
2004 June quarter.
The Transportation Construction Sector, commercially known as
Ashland Paving And Construction, Inc. (APAC), reported operating income of
$46 million for the June 2005 quarter, compared to $43 million in the 2004
quarter. APAC achieved record third-quarter operating income despite rising
hydrocarbon costs. At June 30, APAC's construction backlog, which consists
of work awarded and funded but not yet performed, was $2.1 billion, up 12
percent from the same period last year.
The Chemical Sector, which includes the Ashland Distribution,
Valvoline and Ashland Specialty Chemical divisions, performed well during
the quarter. Operating income amounted to $105 million for the June 2005
quarter, a 40-percent improvement over the June 2004 quarter. Margins drove
stronger earnings.
Ashland Distribution achieved record operating income for the June
2005 quarter of $36 million, marking the sixth consecutive record quarter
in operating income. The division has sustained its exceptional performance
by maintaining margins in the face of rising raw material costs, managing
expenses and aggressively expanding its sales reach. Margin improvement
more than offset a volume decline of 4 percent.
Valvoline's operating income for the June 2005 quarter was $26
million, down 13 percent primarily due to the combination of a 4-percent
decrease in lubricant sales volumes in a soft motor oil market and higher
raw material costs. Valvoline International reported a record quarter, with
operating income improving by 31 percent due mainly to better earnings from
operations in Europe.
Ashland Specialty Chemical reported operating income for the June
2005 quarter of $43 million, up 95 percent over the 2004 quarter. Strong
performance resulted from better margins coupled with a 6-percent volume
increase. Margin improvement reflects rising prices and partial abatement
of rising raw material costs.
-more-
Ashland Inc. reports record earnings from operations for June quarter, page 3
"Third quarter results were encouraging," said O'Brien. "Our
solid financial performance is a testament to process improvement across
Ashland's businesses. As we continue to make progress in both Sectors, we
are confident about our ability to perform well during the remainder of
fiscal 2005.
In other corporate developments, Ashland announced last week that
its board of directors authorized the purchase of up to $270 million of its
common shares.
Today at 12:45 p.m. (ET), Ashland will provide a live audio
webcast of its quarterly presentation to securities analysts. The webcast
will be accessible through Ashland's website, www.ashland.com. Following
the live event, an archived version of the webcast will be available for 12
months at www.ashland.com/investors.
Ashland Inc. (NYSE: ASH) is a Fortune 500 chemical and
transportation construction 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, with respect to Ashland's operating
performance. 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, as amended, for the
fiscal year ended Sept. 30, 2004. 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.
Ashland Inc. and Consolidated Subsidiaries Page 1
STATEMENTS OF CONSOLIDATED INCOME
(In millions except per share data - unaudited)
Three months ended Nine months ended
June 30 June 30
----------------------- ------------------------
2005 2004 2005 2004
---------- ---------- ----------- ----------
REVENUES
Sales and operating revenues $ 2,492 $ 2,206 $ 6,731 $ 5,967
Equity income 315 221 530 277
Other income 14 12 49 34
---------- ---------- ----------- ----------
2,821 2,439 7,310 6,278
COSTS AND EXPENSES
Cost of sales and operating expenses 2,074 1,844 5,678 5,002
Selling, general and administrative expenses 337 303 957 882
---------- ---------- ----------- ----------
2,411 2,147 6,635 5,884
---------- ---------- ----------- ----------
OPERATING INCOME 410 292 675 394
Gain on the MAP Transaction (a) 1,295 - 1,295 -
Loss on early retirement of debt (143) - (145) -
Net interest and other financial costs (31) (29) (89) (88)
---------- ---------- ----------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 1,531 263 1,736 306
Income taxes 236 (96) 157 (111)
---------- ---------- ----------- ----------
INCOME FROM CONTINUING OPERATIONS 1,767 167 1,893 195
Results from discontinued operations (net of income taxes) - (6) - (16)
---------- ---------- ----------- ----------
NET INCOME $ 1,767 $ 161 $ 1,893 $ 179
========== ========== =========== ==========
DILUTED EARNINGS PER SHARE
Income from continuing operations $ 23.65 $ 2.35 $ 25.48 $ 2.75
Results from discontinued operations - (.09) - (.22)
---------- ---------- ----------- ----------
Net income $ 23.65 $ 2.26 $ 25.48 $ 2.53
========== ========== =========== ==========
AVERAGE COMMON SHARES AND ASSUMED CONVERSIONS 75 71 74 71
SALES AND OPERATING REVENUES
APAC $ 713 $ 698 $ 1,713 $ 1,755
Ashland Distribution 987 840 2,837 2,326
Ashland Specialty Chemical 484 366 1,318 1,017
Valvoline 354 330 987 945
Intersegment sales (46) (28) (124) (76)
---------- ---------- ----------- ----------
$ 2,492 $ 2,206 $ 6,731 $ 5,967
========== ========== =========== ==========
OPERATING INCOME
APAC $ 46 $ 43 $ 6 $ 41
Ashland Distribution 36 23 95 56
Ashland Specialty Chemical 43 22 104 63
Valvoline 26 30 69 75
Refining and Marketing (b) 290 205 486 232
Corporate (31) (31) (85) (73)
---------- ---------- ----------- ----------
$ 410 $ 292 $ 675 $ 394
========== ========== =========== ==========
- ----------
(a) "MAP Transaction" refers to the June 30, 2005 transfer of Ashland's
38% interest in Marathon Ashland Petroleum LLC (MAP), Ashland's maleic
anhydride business and 60 Valvoline Instant Oil Change centers in
Michigan and northwest Ohio to Marathon Oil Corporation in a
transaction valued at approximately $3.7 billion.
(b) Includes Ashland's equity income from 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)
June 30
---------------------------
2005 2004
----------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 692 $ 183
Accounts receivable proceeds from the MAP Transaction 913 -
Accounts receivable 1,520 1,217
Inventories 567 510
Deferred income taxes 113 115
Other current assets 125 204
----------- ------------
3,930 2,229
Investments and other assets
Investment in MAP - 2,568
Goodwill 576 513
Asbestos insurance receivable (noncurrent portion) 374 400
Deferred income taxes 160 -
Other noncurrent assets 501 339
----------- ------------
1,611 3,820
Property, plant and equipment
Cost 3,219 3,043
Accumulated depreciation, depletion and amortization (1,839) (1,825)
----------- ------------
1,380 1,218
----------- ------------
$ 6,921 $ 7,267
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Debt due within one year $ 78 $ 204
Trade and other payables 1,358 1,384
Income taxes 71 15
----------- ------------
1,507 1,603
Noncurrent liabilities
Long-term debt (less current portion) 90 1,338
Employee benefit obligations 444 394
Deferred income taxes - 313
Reserves of captive insurance companies 190 196
Asbestos litigation reserve (noncurrent portion) 534 565
Other long-term liabilities and deferred credits 409 358
----------- ------------
1,667 3,164
Common stockholders' equity 3,747 2,500
----------- ------------
$ 6,921 $ 7,267
=========== ============
Ashland Inc. and Consolidated Subsidiaries Page 3
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - unaudited)
Nine months ended
June 30
----------------------------
2005 2004
------------ ------------
CASH FLOWS FROM OPERATIONS
Income from continuing operations $ 1,893 $ 195
Adjustments to reconcile to cash flows from operations
Depreciation, depletion and amortization (a) 141 144
Deferred income taxes (515) 70
Equity income from affiliates (530) (277)
Distributions from equity affiliates 277 156
Gain on the MAP Transaction (1,295) -
Loss on early retirement of debt 145 -
Change in operating assets and liabilities (b) (128) (213)
Other items (5) 2
------------ ------------
(17) 77
CASH FLOWS FROM FINANCING
Proceeds from issuance of common stock 100 86
Repayment of long-term debt (1,477) (75)
Increase (decrease) in short-term debt (40) 8
Cash dividends paid (60) (57)
------------ ------------
(1,477) (38)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment (a) (c) (285) (121)
Purchase of operations - net of cash acquired (152) (5)
Cash proceeds from sale of operations (d) 2,397 48
Other - net 9 13
------------ ------------
1,969 (65)
------------ ------------
CASH PROVIDED (USED) BY CONTINUING OPERATIONS 475 (26)
Cash used by discontinued operations (26) (14)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 449 $ (40)
============ ============
DEPRECIATION, DEPLETION AND AMORTIZATION
APAC $ 67 $ 71
Ashland Distribution 13 13
Ashland Specialty Chemical 33 31
Valvoline 20 20
Corporate 8 9
------------ ------------
$ 141 $ 144
============ ============
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC $ 155 $ 29
Ashland Distribution 16 5
Ashland Specialty Chemical 41 33
Valvoline 52 13
Corporate 21 41
------------ ------------
$ 285 $ 121
============ ============
- ----------
(a) Excludes amounts related to equity affiliates. Ashland's 38 percent
share of MAP's DD&A was $119 million in 2005 and $113 million in 2004,
and its share of MAP's capital expenditures was $247 million in 2005
and $209 million in 2004.
(b) Excludes changes resulting from operations acquired or sold. Amount
for 2005 includes a $150 million reduction in accounts receivable sold
under a sale of receivables financing program.
(c) Amount for 2005 includes $101 million for purchases of previously
leased assets with proceeds from the MAP Transaction.
(d) Amount for 2005 includes cash proceeds (net of expenses) of $2,381
million from the MAP Transaction.
Ashland Inc. and Consolidated Subsidiaries Page 4
OPERATING INFORMATION BY INDUSTRY SEGMENT
(Unaudited)
Three months ended Nine months ended
June 30 June 30
-------------------------- --------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
APAC
Construction backlog at June 30 (millions) (a) $ 2,100 $ 1,869
Net construction job revenues (millions) (b) $ 424 $ 409 $ 966 $ 982
Hot-mix asphalt production (million tons) 9.5 9.9 21.0 22.7
Aggregate production (million tons) 8.3 8.1 22.6 21.0
ASHLAND DISTRIBUTION (c)
Sales per shipping day (millions) $ 15.4 $ 13.3 $ 15.1 $ 12.3
Gross profit as a percent of sales 10.0% 9.8% 9.8% 9.7%
ASHLAND SPECIALTY CHEMICAL (c)
Sales per shipping day (millions) $ 7.6 $ 5.8 $ 7.0 $ 5.3
Gross profit as a percent of sales 27.6% 27.3% 26.3% 28.8%
VALVOLINE
Lubricant sales (million gallons) 48.1 50.0 131.4 141.3
Premium lubricants (percent of U.S. branded volumes) 24.3% 22.0% 23.5% 21.0%
REFINING AND MARKETING (d)
Refinery runs (thousand barrels per day)
Crude oil refined 1,012 1,013 970 900
Other charge and blend stocks 175 142 182 174
Refined product yields (thousand barrels per day)
Gasoline 636 623 619 596
Distillates 328 323 316 285
Asphalt 97 85 83 70
Other 140 138 150 136
----------- ----------- ----------- -----------
Total 1,201 1,169 1,168 1,087
Refined product sales (thousand barrels per day) (e) 1,477 1,440 1,421 1,367
Refining and wholesale marketing margin (per barrel) (f) $ 6.69 $ 5.27 $ 4.58 $ 2.87
Speedway SuperAmerica (SSA)
Retail outlets at June 30 1,647 1,746
Gasoline and distillate sales (million gallons) 822 802 2,360 2,371
Gross margin - gasoline and distillates (per gallon) $ .1211 $ .1192 $ .1165 $ .1161
Merchandise sales (millions) $ 645 $ 600 $ 1,786 $ 1,668
Merchandise margin (as a percent of sales) 25.2% 23.4% 25.2% 24.4%
- ----------
(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 owned a
38% interest until June 30, 2005.
(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.
Ashland Inc. and Consolidated Subsidiaries Page 5
COMPONENTS OF INCOME FROM CONTINUING OPERATIONS (In millions except per
share data - unaudited)
THREE MONTHS ENDED JUNE 30, 2005
-------------------------------------------------------------------
Businesses Impact of MAP
Sold and Transaction
Ongoing Interest and Debt
Businesses Eliminated Repayments Total
-------------- -------------- -------------- ---------------
OPERATING INCOME
APAC $ 46 $ $ $ 46
Ashland Distribution 36 36
Ashland Specialty Chemical 41 2 43
Valvoline 26 - 26
Refining and Marketing (19) 309 290
Corporate (31) (31)
-------------- -------------- -------------- ---------------
OPERATING INCOME 99 311 - 410
Gain on the MAP Transaction - 1,295 1,295
Loss on early retirement of debt - (143) (143)
Net interest and other financial costs (3) (28) (31)
-------------- -------------- -------------- ---------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 96 283 1,152 1,531
Income taxes (38) (110) 384 236
-------------- -------------- -------------- ---------------
INCOME FROM CONTINUING OPERATIONS 58 173 1,536 1,767
Results from discontinued operations - -
-------------- -------------- -------------- ---------------
NET INCOME $ 58 $ 173 $ 1,536 $ 1,767
============== ============== ============== ===============
DILUTED EARNINGS PER SHARE
Income from continuing operations $ .78 $ 2.31 $ 20.56 $ 23.65
Results from discontinued operations - -
-------------- -------------- -------------- ---------------
Net income $ .78 $ 2.31 $ 20.56 $ 23.65
============== ============== ============== ===============
NINE MONTHS ENDED JUNE 30, 2005
-------------------------------------------------------------------
Businesses Impact of MAP
Sold and Transaction
Ongoing Interest and Debt
Businesses Eliminated Repayments Total
-------------- -------------- -------------- ---------------
OPERATING INCOME
APAC $ 6 $ $ $ 6
Ashland Distribution 95 95
Ashland Specialty Chemical 101 3 104
Valvoline 68 1 69
Refining and Marketing (34) 520 486
Corporate (85) (85)
-------------- -------------- -------------- ---------------
OPERATING INCOME 151 524 - 675
Gain on the MAP Transaction - 1,295 1,295
Loss on early retirement of debt - (145) (145)
Net interest and other financial costs (7) (82) (89)
-------------- -------------- -------------- ---------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 144 442 1,150 1,736
Income taxes (55) (173) 385 157
-------------- -------------- -------------- ---------------
INCOME FROM CONTINUING OPERATIONS 89 269 1,535 1,893
Results from discontinued operations - -
-------------- -------------- -------------- ---------------
NET INCOME $ 89 $ 269 $ 1,535 $ 1,893
============== ============== ============== ===============
DILUTED EARNINGS PER SHARE
Income from continuing operations $ 1.20 $ 3.62 $ 20.66 $ 25.48
Results from discontinued operations - -
-------------- -------------- -------------- ---------------
Net income $ 1.20 $ 3.62 $ 20.66 $ 25.48
============== ============== ============== ===============