EX-99 2 ex99-1.txt EXHIBIT 99.1 PRESS RELEASE AND FINANCIALS 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 ============== ============== ============== ===============