Ashland Reports Strong Fourth Quarter Income and Earnings
COVINGTON, Ky., Oct. 23 - The following was issued today by Ashland Inc. (NYSE:ASH):
Fiscal 2000 Highlights
- New fiscal year records for operating income, net income and EPS excluding unusual items
- Operating income from wholly owned businesses up 10 percent; excellent
results from partially owned Marathon Ashland Petroleum
Quarter ended Sept. 30 Year ended Sept. 30 (In millions except earnings per share) 2000 1999 2000 1999
Reported results Operating income $ 203 $ 235 $ 671 $ 625 Net income $ 96 $ 114 $ 70 $ 290 Earnings per share $1.36 $1.57 $ .98 $3.89
Excluding unusual items Operating income $ 203 $ 170 $ 671 $ 496 Net income $ 97 $ 80 $ 292 $ 217 Earnings per share $1.38 $1.11 $4.10 $2.91 Excluding unusual items, Ashland Inc. today reported net income of $97 million, or $1.38 a share, for the quarter ended September 30, the fourth quarter of the company's 2000 fiscal year. These results reflect an increase of 20 percent in net income and 24 percent in earnings per share from the same quarter a year ago when Ashland reported net income excluding unusual items of $80 million, or $1.11 a share.
During the fourth quarter, an extraordinary loss related to the prepayment of certain long-term debt reduced results by $1 million, or 2 cents a share. In the same quarter a year ago, unusual items increased net income by $34 million, or 46 cents a share, and included a $32 million non-cash gain to adjust the carrying value of Marathon Ashland Petroleum LLC (MAP) inventories to market value. Ashland owns 38 percent of MAP, which is a petroleum refining and marketing joint venture with USX-Marathon.
For the year ended September 30, 2000, Ashland had net income excluding unusual items of $292 million, or $4.10 a share, compared to $217 million, or $2.91 a share in fiscal 1999. Sales and operating revenues were $8 billion, compared to $6.8 billion a year ago.
Unusual items reduced fiscal 2000 results by $222 million. Such items included a $203 million charge related to the asset impairment and restructuring costs incurred by Arch Coal, which is now classified as a discontinued operation. Ashland also had an extraordinary loss of $4 million from the prepayment of certain long-term debt. In fiscal 1999, unusual items added $73 million to net income and included full-year MAP inventory valuation adjustments of $71 million.
"We are very pleased with the results of our wholly owned businesses, which performed well in a year of challenging market conditions, particularly in terms of managing large raw materials cost increases," said Ashland Chairman and CEO Paul W. Chellgren. "For the year, three of our four wholly owned businesses achieved higher earnings. This produced total operating income from these businesses of a record $383 million. This compares to $347 million a year ago, excluding unusual items. Their performance during the September quarter generally mirrored the year."
APAC, Ashland's highway construction business, had record operating income for both the quarter and the year. "This is an excellent performance, reflecting in part the successful integration of recent acquisitions. However, operating income would have been even better had it not been for significantly higher liquid asphalt and fuel costs," noted Chellgren.
APAC's growth is evident in a record September 30 backlog, which stood at $1.4 billion, and record hot-mix asphalt production, which climbed 36 percent to 35 million tons in fiscal 2000. During the September quarter, APAC completed the planned disposition of certain non-strategic assets as it now turns its focus toward improving returns. "The business fundamentals for APAC are very healthy," Chellgren said, adding that APAC is looking forward to a fine year in 2001.
Operating income from Valvoline increased 7 percent to $78 million for the year, despite slightly lower profits in the September quarter. The key factor in the quarter's decline was a margin squeeze in antifreeze, which resulted from a price spike in ethylene glycol, the chief ingredient in antifreeze. "Valvoline performed very well this year, particularly in light of multiple base stock price increases which were difficult to pass through," Chellgren said. "We are pleased to report that record results from Valvoline Instant Oil Change, significantly better results from international operations and stringent cost control offset the impact of margin compression." Costs for lube base stocks increased again late in the quarter, and margin pressure remains an issue for both lubricants and antifreeze.
Improved September quarter results contributed to a better year for Ashland Distribution. Operating income for fiscal 2000 totaled $70 million, up 21 percent from a year ago. "Our plastics distribution and services businesses had a good year, including a record year for fiber-reinforced plastics and environmental services. In addition, European thermoplastics operations concluded the sale of its Italian compounding plant and continued to show marked improvement as did our fine ingredients distribution business," Chellgren explained. These improvements offset a decline from the chemical distribution business, which was adversely affected by rising hydrocarbon costs.
Ashland Specialty Chemical had mixed results for the year. Stronger fundamentals led to a record performance from electronic chemicals, as well as the adhesives and water treatment businesses. Results from marine chemicals also improved. However, significantly higher styrene and other raw material costs led to margin compression in the polyester resins business, which is the division's largest business unit. The division also closed two manufacturing facilities in the September quarter, and the associated charges reduced operating income. In total, Ashland Specialty Chemical's operating income was $95 million for the year.
Marathon Ashland Petroleum
Operating income from Ashland's refining and marketing segment, which consists primarily of equity income from MAP, totaled $98 million for the quarter and $361 million for the year. "We had a very good quarter from refining and marketing," Chellgren said. Refined product margins were significantly improved from the depressed levels of a year ago. In addition, sales volumes were up reflecting MAP's acquisition of certain Michigan retail properties from Ultramar Diamond Shamrock in December 1999. "We are extremely pleased with MAP's accomplishments during the past year, a period of extraordinary turbulence in petroleum markets."
Corporate developments
During the September quarter, total debt declined by $199 million. Debt as a percent of capital employed at September 30 was 53 percent, down from 56 percent at June 30, 2000.
Continuing its stock buyback program, Ashland purchased approximately 541,000 shares in the September quarter, bringing total repurchases to about 2.7 million shares for the year. Ashland currently has board authorization to purchase an additional 2.4 million shares.
"In summary, fiscal 2000 was an excellent year for Ashland. We simplified our structure by distributing our Arch Coal shares to our shareholders. We completed the Superfos acquisition, the largest in our history, divested its European businesses and successfully integrated its highway construction operations into APAC. Operating income reached an all-time high; net income excluding unusual items also reached new heights. MAP performed very well, and the improved results from refining and marketing more than offset the impact of higher hydrocarbon costs on our wholly owned businesses. Even so, the wholly owned businesses achieved record combined operating income despite the challenge of higher costs," Chellgren concluded.
On Monday, October 23, Ashland will host a live audio webcast of its year- end management presentation to the investment community. Ashland Chairman and CEO Paul W. Chellgren, Chief Financial Officer J. Marvin Quin and Group Operating Officer David J. D'Antoni will review financial performance of fiscal 2000 and examine some of the challenges and opportunities facing the company in fiscal 2001. The webcast, which can be accessed at www.ashland.com/investors, will begin at 5:00 p.m. (EDT).
Ashland Inc. is a Fortune 250 company providing products, services and customer solutions throughout the world. Our businesses include road construction, specialty chemicals, lubricants, car-care products, chemical and plastics distribution and transportation fuels. Our products and services are fundamental to how people live and work. Through the dedicated efforts of our employees, we are "The Who In How Things Work(TM)" Find us at www.ashland.com
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. Estimates as to operating performance and earnings are based upon a number of assumptions, including (among others) prices, supply and demand, market conditions, cost of raw materials, weather and operating efficiencies. 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. Other factors and risks affecting Ashland are contained in Ashland's Form 10-K for the fiscal year ended September 30, 1999.
(TM)Trademark, Ashland Inc.
Ashland Inc. and Consolidated Subsidiaries STATEMENTS OF CONSOLIDATED INCOME (a) (In millions except per share data - unaudited)
Three months ended Year ended September 30 September 30 2000 1999 2000 1999 REVENUES Sales and operating revenues $2,140 $1,856 $7,961 $6,801 Equity income 109 142 394 351 Other income 27 47 81 101 2,276 2,045 8,436 7,253 COSTS AND EXPENSES Cost of sales and operating expenses 1,721 1,463 6,434 5,346 Selling, general and administrative expenses 290 272 1,094 1,054 Depreciation, depletion and amortization 62 75 237 228 2,073 1,810 7,765 6,628 OPERATING INCOME 203 235 671 625 Net interest and other financial costs (50) (37) (188) (140) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 153 198 483 485 Income taxes (56) (83) (191) (194) INCOME FROM CONTINUING OPERATIONS 97 115 292 291 Loss from discontinued operations (net of income taxes) - (1) (215) (1) Costs of spin-off of discontinued operations (net of income taxes) - - (3) - INCOME BEFORE EXTRAORDINARY LOSS 97 114 74 290 Extraordinary loss on early retirement of debt (net of income taxes) (1) - (4) - NET INCOME $96 $114 $70 $290
DILUTED EARNINGS PER SHARE Income from continuing operations $1.38 $1.59 $4.10 $3.90 Loss from discontinued operations - (.02) (3.03) (.01) Costs of spin-off of discontinued operations - - (.04) - Extraordinary loss on early retirement of debt (.02) - (.05) - Net income $1.36 $1.57 $.98 $3.89
AVERAGE COMMON SHARES AND ASSUMED CONVERSIONS 70 73 71 75
(a)The following tables show the effects of unusual items on Ashland's operating income, net income and diluted earnings per share.
Three months ended Year ended September 30 September 30 2000 1999 2000 1999
Operating income before unusual items $203 $170 $671 $496 Ashland Distribution asset impairment write-downs - (21) - (21) Refining and Marketing inventory valuation adjustments - 53 - 117 Refining and Marketing severance and relocation reserves - (10) - (10) Corporate environmental recoveries - 43 - 43 Operating income as reported $203 $235 $671 $625
Net income before unusual items $97 $80 $292 $217 Ashland Distribution asset impairment write-downs - (17) - (17) Refining and Marketing inventory valuation adjustments - 32 - 71 Refining and Marketing severance and relocation reserves - (6) - (6) Corporate environmental recoveries - 26 - 26 Loss from discontinued operations - (1) (215) (1) Costs of spin-off of discontinued operations - - (3) - Extraordinary loss on early retirement of debt (1) - (4) - Net income as reported $96 $114 $70 $290
Diluted earnings per share before unusual items $1.38 $1.11 $4.10 $2.91 Impact of unusual items (.02) .46 (3.12) .98 Diluted earnings per share as reported $1.36 $1.57 $.98 $3.89
Ashland Inc. and Consolidated Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (In millions - unaudited)
September 30 2000 1999 ASSETS Current assets Cash and cash equivalents $67 $110 Accounts receivable 1,243 1,219 Inventories 488 464 Deferred income taxes 135 107 Other current assets 198 159 2,131 2,059 Investments and other assets Investment in Marathon Ashland Petroleum LLC (MAP) 2,295 2,172 Cost in excess of net assets of companies acquired 537 220 Investment in Arch Coal - discontinued operations 35 417 Other noncurrent assets 351 264 3,218 3,073
Property, plant and equipment Cost 2,879 2,649 Accumulated depreciation, depletion and amortization (1,457) (1,357) 1,422 1,292 $6,771 $6,424
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Debt due within one year $327 $219 Trade and other payables 1,330 1,135 Income taxes 42 42 1,699 1,396
Noncurrent liabilities Long-term debt (less current portion) 1,899 1,627 Employee benefit obligations 383 418 Deferred income taxes 288 226 Reserves of captive insurance companies 179 175 Other long-term liabilities and deferred credits 358 382 3,107 2,828 Common stockholders' equity 1,965 2,200 $6,771 $6,424
Ashland Inc. and Consolidated Subsidiaries STATEMENTS OF CONSOLIDATED CASH FLOWS (In millions - unaudited)
Year ended September 30 2000 1999 CASH FLOWS FROM CONTINUING OPERATIONS Income from continuing operations $292 $291 Expense (income) not affecting cash Depreciation, depletion and amortization (a) 237 228 Deferred income taxes 111 103 Equity income from affiliates (394) (351) Distributions from equity affiliates 282 339 Other items (19) (2) Change in operating assets and liabilities (b) (25) (225) 484 383 CASH FLOWS FROM FINANCING Proceeds from issuance of long-term debt 988 150 Proceeds from issuance of common stock 5 4 Repayment of long-term debt (675) (59) Repurchase of common stock (89) (228) Increase in short-term debt 63 98 Dividends paid (c) (78) (81) 214 (116) CASH FLOWS FROM INVESTMENT Additions to property, plant and equipment (a) (232) (248) Purchase of operations - net of cash acquired (d) (590) (67) Proceeds from sale of operations 50 24 Other - net 71 98 (701) (193) CASH PROVIDED (USED) BY CONTINUING OPERATIONS (3) 74 Cash provided (used) by discontinued operations (40) 2 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $(43) $76
EBITDA (e) APAC $269 $197 Ashland Distribution 93 83 Ashland Specialty Chemical 144 160 Valvoline 101 100 Refining and Marketing (a) 361 216 Corporate (60) (51) $908 $705 ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT APAC $98 $104 Ashland Distribution 18 30 Ashland Specialty Chemical 82 70 Valvoline 25 26 Corporate 9 18 $232 $248 (a) Excludes amounts related to equity affiliates. Ashland's 38 percent share of MAP's DD&A was $116 million in 2000 and $105 million in 1999, and its share of MAP's capital expenditures was $258 million in 2000 and $161 million in 1999. (b) Excludes changes resulting from operations acquired or sold. (c) The 2000 amount excludes the dividend of Arch Coal shares to Ashland shareholders which resulted in a $123 million charge to retained earnings. (d) Amounts exclude acquisitions through the issuance of common stock of $3 million in 2000 and $79 million in 1999. (e) EBITDA is defined as operating income plus DD&A, both excluding unusual items. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to incur and service debt. EBITDA should not be considered in isolation or as an alternative to net income, operating income, cash flows from operations, or a measure of a company's profitability, liquidity or performance under generally accepted accounting principles.
Ashland Inc. and Consolidated Subsidiaries INFORMATION BY INDUSTRY SEGMENT (Dollars in millions - unaudited)
Three months ended Year ended September 30 September 30 2000 1999 2000 1999
SALES AND OPERATING REVENUES APAC $767 $530 $2,505 $1,678 Ashland Distribution 793 750 3,214 2,925 Ashland Specialty Chemical 320 328 1,283 1,263 Valvoline 289 285 1,077 1,059 Intersegment sales (29) (37) (118) (124) $2,140 $1,856 $7,961 $6,801 OPERATING INCOME (excluding unusual items) APAC $61 $44 $140 $108 Ashland Distribution 23 16 70 58 Ashland Specialty Chemical 19 25 95 107 Valvoline 25 26 78 74 Refining and Marketing (a) 98 80 361 216 Corporate (23) (21) (73) (67) $203 $170 $671 $496 OPERATING INFORMATION APAC Construction backlog at September 30 (millions) $1,397 $948 Hot mix asphalt production (million tons) 11.3 8.8 35.0 25.8 Aggregate production (million tons) 8.0 6.1 27.8 20.7 Ready-mix concrete production (thousand cubic yards) 721 449 2,620 1,412 Ashland Distribution (b) Sales per shipping day (millions) $12.6 $11.7 $12.8 $11.6 Gross profit as a percent of sales 15.6% 16.2% 15.6% 16.0% Ashland Specialty Chemical (b) Sales per shipping day (millions) $5.1 $5.1 $5.1 $5.0 Gross profit as a percent of sales 34.5% 34.4% 34.7% 35.9% Valvoline lubricant sales (thousand barrels per day) 12.6 13.7 12.3 12.6 Refining and Marketing (c) Refined products sold (thousand barrels per day) 1,350 1,301 1,309 1,231 Crude oil refined (thousand barrels per day) 928 940 892 898 Merchandise sales (millions) $638 $561 $2,329 $2,031
(a) Includes Ashland's equity income from MAP, amortization of Ashland's excess investment in MAP, and certain retained refining and marketing activities. (b) Sales are defined as sales and operating revenues.Gross profit is defined as sales and operating revenues, less cost of sales and operating expenses, less depreciation and amortization relative to manufacturing assets. (c) Amounts represent 100 percent of the volumes of MAP, in which Ashland owns a 38 percent interest.