COVINGTON, Ky., April 26 /PRNewswire-FirstCall/ -- Ashland Inc. (NYSE:
ASH) today announced preliminary* results for the fiscal second quarter
ended March 31, 2006. For the 2006 second quarter:
- Net income was $49 million, or $.67 per share, as compared with $33
million, or $.44 per share, in the March 2005 quarter.
- Chemical Sector operating income totaled $58 million, down 25 percent
versus the prior-year quarter, primarily due to continuing
underperformance by Valvoline in the current year and gains on
dispositions in the prior year.
- Transportation Construction Sector performance improved from an
operating loss of $51 million in the March 2005 quarter to a loss of
$11 million in the current quarter, which included gains of $10 million
on asset sales.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040113/ASHLANDLOGO)
Ashland's net income 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 MAP Transaction), the retirement of most
of Ashland's debt and the temporary investment of the remaining proceeds.
Net income in the 2005 quarter included $37 million of net income from MAP,
as well as net after-tax interest expense of $18 million, for a net benefit
of $19 million, or $.26 per share. The 2006 quarter included $6 million, or
$.08 per share, of net after-tax interest income. The 2006 quarter also
included tax benefits of $8 million, or $.11 per share, from R&D credits
and favorable adjustments to tax contingency reserves.
"Our Transportation Construction Sector performed well for our second
fiscal quarter, considering that it represents the winter months," said
James J. O'Brien, Ashland chairman and chief executive officer. "Due to the
seasonality of the construction business, results for the March quarter are
typically negative in this sector. Ashland Distribution achieved its ninth
consecutive record quarter for operating income. In addition, Ashland
Specialty Chemical's operating income increased solidly excluding a
one-time gain in 2005. Valvoline continued to experience difficult market
conditions, resulting in a significant decline in operating income.
Overall, with three of our four divisions performing well, we are pleased
with Ashland's second- quarter results."
Ashland Specialty Chemical earned operating income for the March 2006
quarter of $26 million, a 16-percent decline from $31 million of operating
income in the March 2005 quarter, which included a $7 million gain on the
sale of an idle plant in Plaquemine, La. Excluding that gain, operating
income increased 8 percent. Sales and operating revenues grew to $447
million during the March 2006 quarter, a 3-percent increase over the March
2005 quarter. Margin expansion drove operating income growth, while volume
during the quarter was down slightly, when adjusted for the maleic
anhydride business transferred to Marathon in the MAP Transaction.
Ashland Distribution earned a record $30 million of operating income in
the March 2006 quarter, 3 percent above the previous record of $29 million
for the March 2005 quarter. Sales and operating revenues increased 8
percent versus the March 2005 quarter to $1,029 million. The division's
performance for the second quarter reflects more typical margins as
hurricane-related supply disruptions abated.
Valvoline's operating income for the March 2006 quarter was $2 million,
down 88 percent versus the March 2005 quarter, primarily due to rapid
increases in raw material costs. Valvoline's sales and operating revenues
were $353 million for the quarter, a 9-percent increase over the March 2005
quarter, due to a combination of a 5-percent increase in lubricant volumes
and higher selling prices. Valvoline has not been able to recoup through
price increases the full impact of the rapidly rising cost of base lube
stock. Consequently, branded lubricant margins declined 20 percent from
last year's quarter. While Valvoline continued to implement price
increases, margins thus far have not recovered.
The Transportation Construction Sector, known as Ashland Paving And
Construction, Inc. (APAC), reported substantially improved results for the
March 2006 quarter, with an operating loss of $11 million as compared with
a loss of $51 million in the March 2005 quarter. Results for the March 2006
quarter included an $8 million gain from the transfer of property subject
to eminent domain and a $2 million gain from the sale of assets in
construction markets exited by APAC. The 2006 quarter also included a $3
million gain on commodity hedges. APAC's improved performance primarily
reflects enhanced bidding and estimating processes, resulting in higher
pricing and better margins. In addition, performance was assisted by a
significantly milder winter, which led to increased hot-mix asphalt and
aggregate volumes. At March 31, 2006, APAC's construction backlog, which
consists of work awarded and funded but not yet performed, was $2.1
billion, equal to the prior year.
Commenting on the outlook for the year, O'Brien concluded, "Valvoline
continues to experience a market environment more difficult than we've seen
in over a decade. However, I am pleased with the continuing strong
performance of our Ashland Distribution and Ashland Specialty Chemical
divisions and the sharp improvement in APAC's performance."
Today at 11 a.m. (EDT), Ashland will provide a live webcast of its
quarterly conference call with securities analysts. The webcast will be
accessible through Ashland's website, http://www.ashland.com. Following the live
event, an archived version of the webcast will be available for 12 months
at http://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 http://www.ashland.com.
FORTUNE 500 is a registered trademark of Time Inc.
* 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 May 10, 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, as amended, for the
fiscal year 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
STATEMENTS OF CONSOLIDATED INCOME
(In millions except per share data - preliminary and unaudited)
Three months ended Six months ended
March 31 March 31
2006 2005 2006 2005
REVENUES
Sales and operating revenues $2,275 $2,062 $4,687 $4,239
Equity income 2 69 4 215
Other income 22 18 37 35
2,299 2,149 4,728 4,489
COSTS AND EXPENSES
Cost of sales and operating expenses 1,936 1,754 3,965 3,603
Selling, general and administrative
expenses 314 309 619 620
2,250 2,063 4,584 4,223
OPERATING INCOME 49 86 144 266
Gain (loss) on the MAP Transaction(a) (3) - (2) -
Loss on early retirement of debt - - - (2)
Net interest and other financing
income (costs) 9 (29) 20 (59)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 55 57 162 205
Income taxes (6) (24) (47) (79)
INCOME FROM CONTINUING OPERATIONS 49 33 115 126
Results from discontinued operations
(net of income taxes) - - (1) -
NET INCOME $49 $33 $114 $126
DILUTED EARNINGS PER SHARE
Income from continuing operations $.67 $.44 $1.59 $1.72
Results from discontinued operations - - (.02) -
Net income $.67 $.44 $1.57 $1.72
AVERAGE COMMON SHARES AND ASSUMED
CONVERSIONS 72 74 73 73
SALES AND OPERATING REVENUES
APAC $489 $388 $1,215 $1,000
Ashland Distribution 1,029 956 1,996 1,851
Ashland Specialty Chemical 447 434 895 833
Valvoline 353 323 663 633
Intersegment sales (43) (39) (82) (78)
$2,275 $2,062 $4,687 $4,239
OPERATING INCOME(b)
APAC $(11) $(51) $28 $(47)
Ashland Distribution 30 29 65 49
Ashland Specialty Chemical 26 31 53 47
Valvoline 2 17 3 30
Refining and Marketing(c) - 61 - 197
Unallocated and other 2 (1) (5) (10)
$49 $86 $144 $266
(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
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - preliminary and unaudited)
March 31
2006 2005
ASSETS
Current assets
Cash and cash equivalents $476 $74
Available-for-sale securities 621 -
Accounts receivable 1,566 1,310
Inventories 595 546
Deferred income taxes 88 95
Refundable income taxes 50 125
Other current assets 73 83
3,469 2,233
Investments and other assets
Investment in Marathon Ashland
Petroleum LLC (MAP) - 2,926
Goodwill and other intangibles 641 622
Asbestos insurance receivable
(noncurrent portion) 345 381
Deferred income taxes 169 -
Other noncurrent assets 491 351
1,646 4,280
Property, plant and equipment
Cost 3,349 3,196
Accumulated depreciation,
depletion and amortization (1,912) (1,894)
1,437 1,302
$6,552 $7,815
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Debt due within one year $12 $726
Trade and other payables 1,294 1,254
Income taxes 6 30
1,312 2,010
Noncurrent liabilities
Long-term debt (less current portion) 77 1,086
Employee benefit obligations 404 436
Deferred income taxes - 264
Reserves of captive insurance companies 179 201
Asbestos litigation reserve
(noncurrent portion) 500 545
Other long-term liabilities and
deferred credits 386 374
1,546 2,906
Stockholders' equity 3,694 2,899
$6,552 $7,815
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - preliminary and unaudited)
Six months ended
March 31
2006 2005
CASH FLOWS FROM OPERATIONS
Income from continuing operations $115 $126
Adjustments to reconcile to cash
flows from operations
Depreciation, depletion and amortization 103 93
Deferred income taxes 39 (11)
Equity income from affiliates (4) (215)
Distributions from equity affiliates 3 4
Change in operating assets and
liabilities (a) (279) (242)
Other items (1) 1
(24) (244)
CASH FLOWS FROM FINANCING
Proceeds from issuance of common stock 14 51
Excess tax benefits related to
share-based payments 4 6
Repayment of long-term debt (5) (174)
Repurchase of common stock (138) -
Increase in short-term debt - 438
Cash dividends paid (40) (40)
(165) 281
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment (126) (127)
Purchase of operations - net of cash
acquired (3) (101)
Proceeds from sale of operations 12 16
Purchases of available-for-sale securities (549) -
Proceeds from sales and maturities
of available-for-sale securities 337 -
Other - net 5 6
(324) (206)
CASH USED BY CONTINUING OPERATIONS (513) (169)
Cash provided by discontinued operations
Operating cash flows 4 -
DECREASE IN CASH AND CASH EQUIVALENTS $(509) $(169)
DEPRECIATION, DEPLETION AND AMORTIZATION
APAC $52 $44
Ashland Distribution 10 9
Ashland Specialty Chemical 21 22
Valvoline 13 13
Unallocated and other 7 5
$103 $93
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC $51 $62
Ashland Distribution 19 8
Ashland Specialty Chemical 31 31
Valvoline 14 14
Unallocated and other 11 12
$126 $127
(a) Excludes changes resulting from operations acquired or sold.
Ashland Inc. and Consolidated Subsidiaries
OPERATING INFORMATION BY INDUSTRY SEGMENT
(In millions - preliminary and unaudited)
Three months ended Six months ended
March 31 March 31
2006 2005 2006 2005
APAC
Construction backlog at March 31(a) $2,107 $2,135
Net construction job revenues(b) $257 $198 $681 $542
Hot-mix asphalt production (tons) 4.2 3.7 11.9 11.5
Aggregate production (tons) 7.0 6.5 15.1 14.3
ASHLAND DISTRIBUTION(c)
Sales per shipping day $16.1 $15.4 $16.0 $14.9
Gross profit as a percent of sales 9.6% 9.8% 9.9% 9.7%
ASHLAND SPECIALTY CHEMICAL(c)
Sales per shipping day $7.0 $7.0 $7.2 $6.7
Gross profit as a percent of sales 28.4% 26.7% 27.9% 25.5%
VALVOLINE
Lubricant sales (gallons) 44.2 42.2 82.7 83.3
Premium lubricants (percent of U.S.
branded volumes) 24.3% 24.1% 23.7% 23.0%
(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.
SOURCE Ashland Inc.
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CONTACT:
Media Relations, Jim Vitak, +1-614-790-3715,
or jevitak@ashland.com, or Investor Relations, Daragh Porter,
+1-859-815-3825, or dlporter@ashland.com, both of Ashland Inc.
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