EXHIBIT 99.1
[GRAPHIC OMITTED]
News Release Ashland Logo
FOR ADDITIONAL INFORMATION:
Media Relations: Investor Relations:
Jim Vitak Dean Doza
(614) 790-3715 (859) 815-4454
jevitak@ashland.com lddoza@ashland.com
FOR IMMEDIATE RELEASE
April 25, 2007
ASHLAND INC. EARNINGS PER SHARE RISE 15 PERCENT
Covington, Ky. - Ashland Inc. (NYSE:ASH) today announced preliminary*
net income for the quarter ended March 31, 2007, the second quarter of its
fiscal year, of $49 million, or 77 cents per share. In the prior-year
quarter, net income was also $49 million; however, earnings per share were
67 cents, due to the then-higher shares outstanding. Net income in the
March 2007 quarter benefited from $18 million, or 28 cents per share, of
income from discontinued operations, a result of the improved credit
quality of Ashland's insurance receivable from Equitas Ltd., which provides
a significant portion of Ashland's coverage for asbestos claims. Also in
the March 2007 quarter, net income was reduced by an after-tax charge of
$15 million, or 24 cents per share, for costs associated with Ashland's
previously disclosed voluntary severance offer (VSO).
Operating income for the March 2007 quarter totaled $41 million, or
$66 million when adjusted for the $25 million pre-tax charge related to the
VSO. Operating income for the March 2006 quarter was $49 million, or $61
million when excluding the $12 million of Ashland Paving And Construction,
Inc. (APAC) costs that were retained within continuing operations following
the sale of APAC in August 2006. The majority of corporate costs previously
allocated to APAC have been eliminated, with further cost reductions to be
achieved under the VSO through the remainder of the year. Ashland believes
the use of these adjusted operating incomes are appropriate to enhance
understanding of its current and future performance.
Net interest and other financing income for both the March 2007 and
2006 quarters amounted to $9 million. Income taxes for the March 2007
quarter of $15 million compare with $5 million in the prior-year quarter.
The effective tax rate was 32.9 percent for the 2007 quarter versus 9.9
percent for the March 2006 quarter. The primary factors in the low
effective tax rate in the 2006 quarter were R&D tax credits and a favorable
adjustment to tax contingency reserves. For the balance of fiscal 2007,
Ashland estimates an effective tax rate of 28 percent.
"Operating income for the March 2007 quarter was driven by the
continuing recovery at Valvoline and improved performance from Ashland
Water Technologies, which had recorded a loss a year ago," said James J.
O'Brien, chairman and chief executive officer. "These improvements more
than offset weaker results from Ashland Performance Materials and Ashland
Distribution."
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ASHLAND INC. EARNINGS PER SHARE RISE 15 PERCENT, PG. 2
Performance Materials' operating income of $22.7 million compares with
$27.2 million for the March 2006 quarter, a 17-percent decline. Performance
Materials' decline in income versus the prior year is largely due to a
physical inventory adjustment and higher expenses associated with
international growth initiatives. In addition, margin compression resulting
from continued weakness in the key North American automotive, residential
housing and marine markets also contributed to Performance Materials' lower
earnings. Sales and operating revenues of $376 million increased 8 percent,
and volume increased 4 percent, both as compared with the March 2006
quarter. Both revenue and volume growth were aided by the acquisition of
Northwest Coatings and the purchase of the third-party ownership interests
in a Japanese joint venture.
Distribution's operating income declined to $20.1 million for the
March 2007 quarter as compared with a record $30.4 million in the same
prior-year quarter, which benefited from the post-hurricane market
environment. Gross profit as a percent of sales declined to 9.0 percent
from 9.6 percent in the prior-year quarter. The soft North American
automotive and construction markets, as well as the termination of
Ashland's North American plastics supply contract with Dow Chemical on
March 1, unfavorably affected performance for the quarter. Sales and
operating revenues decreased 2 percent from $1,029 million in the March
2006 quarter to $1,008 million in the 2007 quarter, and volume declined 2
percent as well.
Valvoline achieved second-quarter operating income of $22.4 million as
compared with $2.0 million in the year-ago quarter. Sales and operating
revenues of $382 million increased 8 percent over the March 2006 quarter.
While lubricant volume declined 5 percent, essentially all of this was from
private-label business, which carries a lower margin. Nonetheless,
continued improvement in lubricant margins drove results for the quarter,
as relatively stable base oil costs, coupled with the full effect of
Valvoline's previous pricing actions, enabled Valvoline to recover its
increased costs from the marketplace. Margins as a percent of sales,
however, remain below historical levels.
Water Technologies reported operating income of $6.2 million for the
March 2007 quarter as compared with a loss of $1.0 million in the
prior-year quarter. The improvement is largely the result of increased
margins and earnings from both the industrial and marine water-treatment
businesses. The Environmental and Process Solutions (E&PS) business
acquired last May also contributed to earnings growth, but to a lesser
extent. Sales and operating revenues increased from $100 million in the
March 2006 quarter to $190 million for the 2007 quarter, essentially
reflecting the addition of the E&PS business.
Commenting on the outlook for the remainder of fiscal 2007, O'Brien
said, "Valvoline achieved record operating income for the first half of
2007 and should continue to benefit from stronger margins resulting from
stable base oil costs and better supply. We expect a continuation of
Valvoline's recent strong results. Looking at the Water Technologies
business, we are encouraged by the progress we've seen in the first two
quarters of fiscal 2007. We continue our work to redesign the business
model and expect that this work will set the stage for further improvement
as we approach the next fiscal year.
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ASHLAND INC. EARNINGS PER SHARE RISE 15 PERCENT, PG. 3
"Performance Materials' results in 2007 will be impacted by weakness
in the North American automotive, marine and residential housing markets,
as well as tightness in the supply of a few key raw materials. That said,
the June quarter is traditionally the strongest quarter for Performance
Materials, and as such, results are likely to improve over the March 2007
quarter due to that seasonality.
"Distribution's third-quarter performance will likely continue to be
affected by weakness in North American industrial output. While
Distribution also traditionally benefits from seasonality, results will
reflect a full quarter's impact from the discontinuance of the Dow North
American plastics supply agreement. We expect this impact to be $4 million
to $5 million per quarter as we transition to other suppliers. We have
already announced a number of new suppliers and are working to grow volume
and acquire new customers. In the long term, we feel our supplier base will
be stronger, and the financial effects will diminish over time."
Concluding his comments, O'Brien said, "As we look forward to the
third fiscal quarter, the strength of Valvoline should more than offset the
anticipated weakness from Performance Materials and Distribution relative
to the prior year. Overall, we expect our businesses to produce operating
income that exceeds the prior year's quarter."
Today at 8:30 a.m. (EDT), Ashland will provide a live webcast of its
second-quarter 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), a diversified, global chemical company,
provides quality products, services and solutions to customers in more than
100 countries. A FORTUNE 500 company, it operates through four divisions:
Ashland Performance Materials, Ashland Distribution, Valvoline and Ashland
Water Technologies. To learn more about Ashland, visit www.ashland.com.
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FORTUNE 500 is a registered trademark of Time Inc.
* PRELIMINARY RESULTS
Financial results are preliminary until Ashland's quarterly report on Form
10-Q is filed with the U.S. Securities and Exchange Commission.
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
ended Sept. 30, 2006. 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 Six months ended
March 31 March 31
----------------------- -----------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
REVENUES
Sales and operating revenues $ 1,915 $ 1,786 $ 3,717 $ 3,472
Equity income 3 2 6 4
Other income 7 7 14 14
---------- ---------- ---------- ----------
1,925 1,795 3,737 3,490
COSTS AND EXPENSES
Cost of sales and operating expenses 1,575 1,484 3,064 2,880
Selling, general and administrative expenses (a) 309 262 574 515
---------- ---------- ---------- ----------
1,884 1,746 3,638 3,395
---------- ---------- ---------- ----------
OPERATING INCOME 41 49 99 95
Loss on the MAP Transaction (b) (4) (3) (4) (2)
Net interest and other financing income 9 9 25 20
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 46 55 120 113
Income taxes (15) (5) (36) (29)
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 31 50 84 84
Income (loss) from discontinued operations (net of income taxes) (c) 18 (1) 14 30
---------- ---------- ---------- ----------
NET INCOME $ 49 $ 49 $ 98 $ 114
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE
Income from continuing operations $ .49 $ .68 $ 1.30 $ 1.16
Income (loss) from discontinued operations .28 (.01) .22 .41
---------- ---------- ---------- ----------
Net income $ .77 $ .67 $ 1.52 $ 1.57
========== ========== ========== ==========
AVERAGE COMMON SHARES AND ASSUMED CONVERSIONS 64 72 64 73
SALES AND OPERATING REVENUES
Performance Materials (d) $ 376 $ 347 $ 742 $ 698
Distribution 1,008 1,029 1,956 1,996
Valvoline 382 353 734 663
Water Technologies (d) 190 100 368 197
Intersegment sales (41) (43) (83) (82)
---------- ---------- ---------- ----------
$ 1,915 $ 1,786 $ 3,717 $ 3,472
========== ========== ========== ==========
OPERATING INCOME
Performance Materials (d) $ 23 $ 27 $ 48 $ 53
Distribution 20 30 34 65
Valvoline 22 2 40 3
Water Technologies (d) 6 (1) 12 -
Unallocated and other (a) (e) (30) (9) (35) (26)
---------- ---------- ---------- ----------
$ 41 $ 49 $ 99 $ 95
========== ========== ========== ==========
(a) The current quarter includes a $25 million charge for costs associated
with Ashland's voluntary severance offer.
(b) "MAP Transaction" refers to the June 30, 2005 transfer of Ashland's
38% interest in Marathon Ashland Petroleum LLC (MAP) and two other
businesses to Marathon Oil Corporation. The loss for the periods
presented reflects adjustments in the recorded receivable for future
estimated tax deductions related primarily to environmental and other
post retirement reserves.
(c) The current quarter includes income of $18 million from the increase
of Ashland's asbestos insurance receivable. The prior periods
primarily include after-tax operating results of APAC (excluding
previously allocated corporate costs - see note (e) below) as a result
of APAC's sale to Oldcastle Materials, Inc. in August 2006 for
approximately $1.3 billion.
(d) In June 2006, Ashland redefined its reporting segments as it continues
to evolve into a diversified chemical company. Performance Materials
and Water Technologies, formerly combined under Ashland Specialty
Chemical, have now been separately disclosed. Prior periods have been
conformed to the current period presentation.
(e) Includes corporate costs previously allocated to APAC of $12 million
for the three months ended March 31, 2006 and $22 million for the six
months ended March 31, 2006.
Ashland Inc. and Consolidated Subsidiaries Page 2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - preliminary and unaudited)
March 31
-----------------------
2007 2006
---------- ----------
ASSETS
Current assets
Cash and cash equivalents $ 584 $ 476
Available-for-sale securities 371 621
Accounts receivable 1,448 1,279
Inventories 576 494
Deferred income taxes 86 74
Other current assets 79 86
Current assets of discontinued operations - 439
---------- ----------
3,144 3,469
Investments and other assets
Goodwill and other intangibles 375 230
Asbestos insurance receivable (noncurrent portion) 449 345
Deferred income taxes 194 231
Other noncurrent assets 438 469
Noncurrent assets of discontinued operations - 954
---------- ----------
1,456 2,229
Property, plant and equipment
Cost 2,045 1,891
Accumulated depreciation and amortization (1,088) (1,037)
---------- ----------
957 854
---------- ----------
$ 5,557 $ 6,552
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 10 $ 12
Trade and other payables 1,143 1,083
Income taxes 22 6
Current liabilities of discontinued operations - 211
---------- ----------
1,175 1,312
Noncurrent liabilities
Long-term debt (less current portion) 67 77
Employee benefit obligations 318 404
Asbestos litigation reserve (noncurrent portion) 569 500
Other long-term liabilities and deferred credits 507 477
Noncurrent liabilities of discontinued operations - 88
---------- ----------
1,461 1,546
Stockholders' equity 2,921 3,694
---------- ----------
$ 5,557 $ 6,552
========== ==========
Ashland Inc. and Consolidated Subsidiaries Page 3
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - preliminary and unaudited)
Six months ended
March 31
-----------------------
2007 2006
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net income $ 98 $ 114
Income from discontinued operations (net of income taxes) (14) (30)
Adjustments to reconcile income from continuing operations to
cash flows from operating activities
Depreciation and amortization 57 52
Deferred income taxes (1) 22
Equity income from affiliates (6) (4)
Distributions from equity affiliates 3 2
Change in operating assets and liabilities (a) (223) (310)
Other items 3 2
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(83) (152)
CASH FLOWS FROM FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Proceeds from issuance of common stock 17 14
Excess tax benefits related to share-based payments 8 4
Repayment of long-term debt (5) (5)
Repurchase of common stock (288) (138)
Cash dividends paid (709) (40)
---------- ----------
(977) (165)
CASH FLOWS FROM INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Additions to property, plant and equipment (66) (75)
Purchase of operations - net of cash acquired (73) (3)
Proceeds from sale of operations 1 1
Purchases of available-for-sale securities (306) (549)
Proceeds from sales and maturities of available-for-sale securities 286 337
Other - net 12 1
---------- ----------
(146) (288)
---------- ----------
CASH USED BY CONTINUING OPERATIONS (1,206) (605)
Cash provided (used) by discontinued operations
Operating cash flows (2) 132
Investing cash flows (28) (36)
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS $ (1,236) $ (509)
========== ==========
DEPRECIATION AND AMORTIZATION
Performance Materials (b) $ 16 $ 16
Distribution 10 10
Valvoline 15 13
Water Technologies (b) 9 6
Unallocated and other 7 7
---------- ----------
$ 57 $ 52
========== ==========
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Performance Materials (b) $ 19 $ 20
Distribution 13 19
Valvoline 14 14
Water Technologies (b) 12 11
Unallocated and other 8 11
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$ 66 $ 75
========== ==========
(a) Excludes changes resulting from operations acquired or sold.
(b) In June 2006, Ashland redefined its reporting segments as it continues
to evolve into a diversified chemical company. Performance Materials
and Water Technologies, formerly combined under Ashland Specialty
Chemical, have now been separately disclosed. Prior periods have been
conformed to the current period presentation.
Ashland Inc. and Consolidated Subsidiaries Page 4
INFORMATION BY INDUSTRY SEGMENT
(In millions - preliminary and unaudited)
Three months ended Six months ended
March 31 March 31
----------------------- -----------------------
2007 2006 2007 2006
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PERFORMANCE MATERIALS (a) (b)
Sales per shipping day $ 5.9 $ 5.4 $ 5.9 $ 5.6
Pounds sold per shipping day 4.7 4.5 4.8 4.9
Gross profit as a percent of sales 20.5% 23.0% 20.8% 22.3%
DISTRIBUTION (a)
Sales per shipping day $ 15.7 $ 16.1 $ 15.6 $ 16.0
Pounds sold per shipping day 19.8 20.3 19.4 20.4
Gross profit as a percent of sales 9.0% 9.6% 8.8% 9.9%
VALVOLINE (a)
Lubricant sales (gallons) 41.8 44.2 80.4 82.7
Premium lubricants (percent of U.S. branded volumes) 23.3% 24.3% 22.5% 23.7%
Gross profit as a percent of sales 25.6% 22.0% 24.7% 22.1%
WATER TECHNOLOGIES (a) (b)
Sales per shipping day $ 3.0 $ 1.6 $ 3.0 $ 1.6
Gross profit as a percent of sales 38.8% 47.2% 39.5% 47.9%
(a) Sales are defined as sales and operating revenues. Gross profit is
defined as sales and operating revenues, less cost of sales and
operating expenses.
(b) In June 2006, Ashland redefined its reporting segments as it continues
to evolve into a diversified chemical company. Performance Materials
and Water Technologies, formerly combined under Ashland Specialty
Chemical, have now been separately disclosed. Prior periods have been
conformed to the current period presentation.