EXHIBIT 99.1
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
JANUARY 25, 2006
ASHLAND INC. REPORTS PRELIMINARY NET INCOME
OF $0.91 PER SHARE FOR FISCAL FIRST QUARTER
Covington, Ky. - Ashland Inc. (NYSE: ASH) today announced preliminary*
results for the fiscal first quarter ended Dec. 31, 2005. Net income was
$66 million, or $0.91 per share. As compared with the December 2004
quarter:
o Chemical Sector operating income reached $62 million, up 27
percent
- Ashland Specialty Chemical operating income grew to $27
million, up 69 percent
- Ashland Distribution operating income increased to $34 million,
up 70 percent
- Valvoline recorded operating income of $1 million versus $13
million in the prior-year period
o Transportation Construction Sector operating income rose to $39
million versus $4 million for the prior-year period.
Net income for Ashland's fiscal first quarter, ended Dec. 31,
2005, amounted to $66 million, or $0.91 per share, as compared with $94
million, or $1.28 per share, in the prior-year quarter. The comparison is
affected by the June 2005 transfer of Ashland's former 38-percent interest
in Marathon Ashland Petroleum LLC (MAP) to Marathon Oil Corp., the
retirement of most of Ashland's debt and the investment of the remaining
proceeds. Net income in the 2004 quarter included $83 million of net income
from MAP, as well as net, after-tax interest expense of $18 million, for a
net benefit of $65 million, or $.89 per share. The 2005 quarter included $6
million, or $.08 per share, of net, after-tax interest income.
"We are pleased with the strong start we've had to fiscal 2006,"
said James J. O'Brien, Ashland chairman and chief executive officer. "Three
of our four businesses performed well. The continued excellent performances
of Ashland Specialty Chemical and Ashland Distribution drove results in the
Chemical Sector. These businesses increased revenues and expanded their
profit margins in an environment of rising costs. The quarter was
disappointing
Ashland Inc. reports preliminary net income of $0.91 per share for fiscal
first quarter, page 2
for Valvoline, however, as declining demand in the motor oil market, rising
raw materials costs and competitive price discounting adversely affected
results. The Transportation Construction Sector benefited from margin
improvement due to our efforts to incorporate higher material values and
energy costs into our bids, as well as more favorable weather conditions in
the quarter."
Line of business results reflect new methodology for allocating
substantially all corporate expenses to Ashland's four operating
businesses, with the exception of certain legacy costs or items clearly not
associated with the operating divisions. Accordingly, an additional $21
million has been allocated to the divisions for the December 2005 quarter.
The remaining $6 million expense is classified as "Unallocated and other"
in Ashland's segment reporting. Results for previously reported periods
have been reclassified to conform with the new allocation methodology.
For the December 2005 quarter, in the Chemical Sector, robust
results from Ashland Distribution and Ashland Specialty Chemical more than
offset the weak performance from Valvoline. As a result, operating income
for the Chemical Sector amounted to $62 million, a 27-percent improvement
over the $49 million of operating income in the December 2004 quarter.
Ashland Specialty Chemical achieved record operating income for
the December 2005 quarter of $27 million, up 69 percent over the $16
million of operating income in the prior-year quarter. The December 2004
quarter included approximately $4 million in net nonrecurring gains,
primarily from the termination of a product supply contract. Sales and
operating revenues grew to $449 million for the December 2005 quarter, a
12-percent increase over the December 2004 quarter. Sales from the
DERAKANE(R) resins business acquired in December 2004 contributed
approximately half of the growth, with the remainder mainly attributable to
higher selling prices. The increase in operating income reflected a
combination of revenue and margin growth.
Ashland Distribution earned $34 million of operating income in the
December 2005 quarter--marking its eighth consecutive record quarter.
Operating income increased by 70 percent compared with the prior-year
quarter. Sales and operating revenues increased 8 percent versus the
December 2004 quarter to $967 million. The division's performance reflects
its ability to expand margins despite rising costs of chemicals and
plastics. Daily sales volume
Ashland Inc. reports preliminary net income of $0.91 per share for fiscal
first quarter, page 3
declined 4 percent, a result of the sale of the ingestibles business in the
March 2005 quarter and supply disruptions from hurricanes Katrina and Rita.
Valvoline's performance for the December 2005 quarter reflected a
6-percent decrease in total lubricant volumes in a declining U.S. market
for passenger-car lubricants, and continued high raw material costs. Sales
and operating revenues were $310 million for the quarter, essentially even
with $309 million of revenues in the December 2004 quarter.
The Transportation Construction Sector, commercially known as
Ashland Paving And Construction, Inc. (APAC), reported operating income of
$39 million for the December 2005 quarter, compared to $4 million in the
December 2004 quarter. Results for the December 2005 quarter reflect APAC's
continuing focus on incorporating increases in raw material and energy
costs into its sales prices and more favorable weather conditions. Results
for the December 2005 quarter also include a $10-million gain from the
transfer of property subject to eminent domain, as well as a $4-million
loss on fuel hedges. At Dec. 31, 2005, APAC's construction backlog, which
consists of work awarded and funded but not yet performed, was $1.9
billion, up 12 percent over the same period last year.
Today at 4:30 p.m. (EST), Ashland will provide a live webcast of
its quarterly conference call with 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.
(R) Registered trademark, Ashland
-0-
* PRELIMINARY RESULTS
Financial results are preliminary until the Company's Quarterly Report on
Form 10-Q is filed with the U.S. Securities and Exchange Commission. This
filing is expected to be made on or before February 9, 2006.
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 for the fiscal year
Ashland Inc. reports preliminary net income of $0.91 per share for fiscal
first quarter, page 4
ended Sept. 30, 2005. 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 - preliminary and unaudited)
Three months ended
December 31
----------------------------
2005 2004
------------- ------------
REVENUES
Sales and operating revenues $ 2,412 $ 2,177
Equity income 2 146
Other income 15 17
------------- ------------
2,429 2,340
COSTS AND EXPENSES
Cost of sales and operating expenses 2,029 1,849
Selling, general and administrative expenses 305 311
------------- ------------
2,334 2,160
------------- ------------
OPERATING INCOME 95 180
Gain on the MAP Transaction (a) 2 -
Loss on early retirement of debt - (2)
Net interest and other financial costs 10 (29)
------------- ------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 107 149
Income taxes (40) (55)
------------- ------------
INCOME FROM CONTINUING OPERATIONS 67 94
Results from discontinued operations (net of income taxes) (1) -
------------- ------------
NET INCOME $ 66 $ 94
============= ============
DILUTED EARNINGS PER SHARE
Income from continuing operations $ .91 $ 1.28
Results from discontinued operations - -
------------- ------------
Net Income $ .91 $ 1.28
============= ============
AVERAGE COMMON SHARES AND ASSUMED CONVERSIONS 73 73
SALES AND OPERATING REVENUES
APAC $ 726 $ 611
Ashland Distribution 967 895
Ashland Specialty Chemical 449 400
Valvoline 310 309
Intersegment sales (40) (38)
------------- ------------
$ 2,412 $ 2,177
============= ============
OPERATING INCOME (b)
APAC $ 39 $ 4
Ashland Distribution 34 20
Ashland Specialty Chemical 27 16
Valvoline 1 13
Refining and Marketing (c) - 136
Unallocated and other (6) (9)
------------- ------------
$ 95 $ 180
============= ============
(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) In October 2005, Ashland refined its segment reporting to allocate
substantially all corporate expenses to Ashland's four operating
divisions, with the exception of certain legacy costs or items
clearly not associated with the operating divisions. Prior periods
have been conformed to the current period presentation.
(c) Includes Ashland's equity income from MAP, amortization related to
Ashland's excess investment in MAP and other activities associated
with refining and marketing through June 30, 2005.
Ashland Inc. and Consolidated Subsidiaries Page 2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - preliminary and unaudited)
December 31
--------------------------
2005 2004
----------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 601 $ 146
Available-for-sale securities 479 -
Accounts receivable 1,514 1,212
Inventories 584 538
Deferred income taxes 78 95
Other current assets 132 106
----------- ------------
3,388 2,097
Investments and other assets
Investment in Marathon Ashland Petroleum LLC (MAP) - 2,856
Goodwill and other intangibles 645 624
Asbestos insurance receivable (noncurrent portion) 363 396
Deferred income taxes 164 -
Other noncurrent assets 499 313
----------- ------------
1,671 4,189
Property, plant and equipment
Cost 3,310 3,166
Accumulated depreciation, depletion and amortization (1,887) (1,889)
----------- ------------
1,423 1,277
----------- ------------
$ 6,482 $ 7,563
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Debt due within one year $ 12 $ 575
Trade and other payables 1,228 1,197
Income taxes 2 69
----------- ------------
1,242 1,841
Noncurrent liabilities
Long-term debt (less current portion) 77 1,087
Employee benefit obligations 394 438
Deferred income taxes - 248
Reserves of captive insurance companies 183 177
Asbestos litigation reserve (noncurrent portion) 512 553
Other long-term liabilities and deferred credits 388 375
----------- ------------
1,554 2,878
Stockholders' equity 3,686 2,844
----------- ------------
$ 6,482 $ 7,563
=========== ============
Ashland Inc. and Consolidated Subsidiaries Page 3
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - preliminary and unaudited)
Three months ended
December 31
-------------------------
2005 2004
----------- -----------
CASH FLOWS FROM OPERATIONS
Income from continuing operations $ 67 $ 94
Adjustments to reconcile to cash flows from operations
Depreciation, depletion and amortization 51 46
Deferred income taxes 54 17
Equity income from affiliates (2) (146)
Distributions from equity affiliates 1 1
Change in operating assets and liabilities (a) (312) (70)
Other items (3) 2
----------- -----------
(144) (56)
CASH FLOWS FROM FINANCING
Proceeds from issuance of common stock 4 20
Excess tax benefits related to share-based payments 1 2
Repayment of long-term debt (5) (98)
Repurchase of common stock (96) -
Increase in short-term debt - 211
Cash dividends paid (20) (20)
----------- -----------
(116) 115
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment (50) (55)
Purchase of operations - net of cash acquired - (95)
Purchases of available-for-sale securities (227) -
Proceeds from sales and maturities of available-for-sale securities 152 -
Other - net 3 2
----------- -----------
(122) (148)
----------- -----------
CASH USED BY CONTINUING OPERATIONS (382) (89)
Cash used by discontinued operations (2) (8)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS $ (384) $ (97)
=========== ===========
DEPRECIATION, DEPLETION AND AMORTIZATION
APAC $ 26 $ 22
Ashland Distribution 5 4
Ashland Specialty Chemical 10 11
Valvoline 6 6
Unallocated and other 4 3
----------- -----------
$ 51 $ 46
=========== ===========
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC $ 25 $ 33
Ashland Distribution 3 5
Ashland Specialty Chemical 12 11
Valvoline 5 5
Unallocated and other 5 1
----------- -----------
$ 50 $ 55
=========== ===========
(a) Excludes changes resulting from operations acquired or sold.
Ashland Inc. and Consolidated Subsidiaries Page 4
OPERATING INFORMATION BY INDUSTRY SEGMENT
(In millions - preliminary and unaudited)
Three months ended
December 31
-----------------------------
2005 2004
------------ --------------
APAC
Construction backlog at December 31 (a) $ 1,941 $ 1,730
Net construction job revenues (b) $ 423 $ 344
Hot-mix asphalt production (tons) 7.8 7.8
Aggregate production (tons) 8.1 7.8
ASHLAND DISTRIBUTION (c)
Sales per shipping day $ 15.9 $ 14.4
Gross profit as a percent of sales 10.2% 9.6%
ASHLAND SPECIALTY CHEMICAL (c)
Sales per shipping day $ 7.4 $ 6.4
Gross profit as a percent of sales 27.4% 24.2%
VALVOLINE
Lubricant sales (gallons) 38.5 41.1
Premium lubricants (percent of U.S. branded volumes) 22.9% 21.8%
(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.