COVINGTON, Ky., July 24 /PRNewswire-FirstCall/ -- Ashland Inc.
(NYSE:ASH) today announced preliminary(1) results for the quarter
ended June 30, 2009, the third quarter of its 2009 fiscal year. On
Nov. 13, 2008, Ashland completed the acquisition of Hercules
Incorporated, which significantly impacted Ashland's reported
results. Ashland's results for the June 2009 quarter were as
follows: sales and operating revenues of $2,037 million; operating
income of $152 million; and net income of $50 million, or 66 cents
per share. Income from continuing operations amounted to $51
million after taxes, or 68 cents per share, in the June 2009
quarter. Unadjusted earnings before interest, taxes, depreciation
and amortization(2) were $240 million, and cash flows from
operating activities from continuing operations were $355 million.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040113/ASHLANDLOGO)
Key items affecting the June 2009 quarter were as follows: --
severance and accelerated depreciation charges of $16 million
pretax [14 cents earnings per share (EPS) impact], primarily
related to cost-reduction programs; -- a noncash charge of $10
million pretax (9 cents EPS impact) from accelerated
debt-issuance-cost amortization related to the retirement of
Ashland's bridge loan, affecting Ashland's interest expense; and --
an unfavorable $8 million tax judgment in a foreign jurisdiction
(10 cents EPS impact). Earnings in the June 2009 quarter also were
significantly affected by an unfavorable adjustment to income tax
expense related to a projected shift to more U.S.-sourced earnings
for the year. The combination of the aforementioned foreign tax
judgment and earnings shift resulted in a 44-percent effective tax
rate for the June 2009 quarter. The effective tax rate for the June
quarter reflects an adjustment to achieve an annualized effective
tax rate of 27 percent excluding discrete items. (Refer to Table 5
of the accompanying financial statements for details of key items
affecting operating income.) Adjusted Pro Forma Results(3) Ashland
believes the use of adjusted pro forma results enhances
understanding of its current and future performance by providing
more comparable results period to period. Thus, adjusting for the
impact of key items in both the current and prior year and
including Hercules' results as if the acquisition had been
completed on Oct. 1, 2007, Ashland's results for the June 2009
quarter versus the June 2008 quarter would have been as follows: --
pro forma sales and operating revenue declined 28 percent from
$2,814 million to $2,037 million; -- adjusted pro forma operating
income increased 11 percent from $151 million to $168 million; and
-- adjusted pro forma earnings before interest, taxes, depreciation
and amortization (EBITDA) increased 9 percent from $227 million to
$248 million. Performance Summary Commenting on Ashland's adjusted
pro forma third-quarter results, Chairman and Chief Executive
Officer James J. O'Brien said, "Our performance during the June
2009 quarter continued to demonstrate our ability to generate cash
during a difficult demand environment. We increased overall EBITDA
by 9 percent versus the prior-year quarter, in spite of volume
declines in all of our businesses except Ashland Consumer Markets
(Valvoline), which saw an uptick. The EBITDA improvement was
achieved both through strong gross-profit performance and reduced
selling, general and administrative expenses. Our results benefited
from all-time-record quarterly EBITDA from Consumer Markets and
reduced overall expenses of $87 million in the quarter, both from
integration and other cost-reduction initiatives." O'Brien
continued, "Our annualized run-rate cost savings now stand at $287
million through the June 2009 quarter, exceeding our previously
announced $265 million fiscal 2009 target by $22 million, which was
achieved three months sooner than we had announced. "We made
considerable progress in the June quarter towards our goals of
generating cash and reducing debt. We generated $355 million of
cash flows from operating activities and reduced gross debt by $269
million. This reduced our total debt to less than $2 billion. In
addition, we issued $650 million of 9 1/8% Senior Notes and used
the proceeds, along with available liquidity, to retire our $750
million bridge loan. Also during the quarter, we signed a
definitive agreement to sell our Drew Marine business. We expect
net aftertax proceeds of approximately $105 million from the
transaction, which is anticipated to close before the end of the
fiscal year. We expect to use the proceeds from this divestiture to
further reduce our debt." Business Performance In order to aid
understanding of Ashland's ongoing business performance, the
results of Ashland's business segments are presented on an adjusted
pro forma basis as described under the heading "Adjusted Pro Forma
Results" and reconciled to GAAP in footnote 3 of this news release.
Ashland Aqualon Functional Ingredients recorded sales and operating
revenue of $233 million in the June 2009 quarter, a 23-percent
decline versus the year-ago quarter, and metric tons sold declined
27 percent. These results continue to reflect the worldwide decline
in the construction market. Overall volume declines ranged from 11
percent in Asia Pacific to 36 percent in North America. Gross
profit as a percent of sales was 27.6 percent, 210 basis points
below the June 2008 quarter. The decision to reduce inventory by
manufacturing at below-replacement levels negatively impacted gross
profit by $7 million, or 3 percent of sales. However, this decision
enabled Functional Ingredients to generate $23 million of cash from
the reduced inventories. In total, Functional Ingredients' EBITDA
in the June 2009 quarter declined 26 percent versus the prior June
quarter, to $50 million, and represented 21.5 percent of sales.
Both the $50 million of EBITDA and 21.5 percent of sales are slight
improvements over the March quarter. Ashland Hercules Water
Technologies' sales and operating revenue declined 21 percent to
$436 million for the June 2009 quarter as compared with the same
year-ago quarter, primarily driven by a 17-percent volume decline.
At 34.7 percent, gross profit as a percent of sales improved by 200
basis points over the June 2008 quarter. Selling, general and
administrative (SG&A) expenses declined by $32 million, or 21
percent. EBITDA of $56 million was slightly ahead of the prior-year
quarter and represented 12.8 percent of sales, a 290-basis-point
improvement. Sequentially, EBITDA increased 47 percent over the
March quarter results, while EBITDA as a percent of sales improved
by 400 basis points. Ashland Performance Materials' sales and
operating revenue of $256 million declined 40 percent versus the
same prior-year quarter, and volume per day declined 22 percent.
Both revenue and volume comparisons were affected by the
acquisition of a line of business from Air Products in 2008.
Excluding this effect, revenue and volume decreased 46 percent and
36 percent, respectively, due to continued significant weakness in
demand in all key geographies in both the transportation and
construction markets. These volume reductions reflect slight
sequential improvement. This was generally consistent with the
overall composites and castings markets. Disciplined price
management and savings from idled plant capacity drove a
280-basis-point improvement in gross profit percentage versus the
June 2008 quarter. A 23-percent reduction in SG&A expenses
reflects the benefits of actions taken in this and prior quarters
to reduce costs. Despite these improvements, EBITDA declined 33
percent to $20 million in the June 2009 quarter versus the
prior-year June quarter, but improved 70 basis points to 7.8
percent of sales. Ashland Consumer Markets' sales and operating
revenue was $441 million, a 3-percent increase over the June 2008
quarter. Lubricant volume increased by 4 percent, primarily due to
increases in volumes sold through the Do-It-Yourself market
channel. Same-store sales at Valvoline Instant Oil Change increased
6 percent versus the prior year. Gross profit improved to 37.5
percent of sales in the June 2009 quarter, driven by a combination
of pricing actions that began in 2008, lower raw materials costs in
the quarter, cost-savings initiatives and a continued shift in mix
toward sales of premium brands. SG&A expenses declined 5
percent, further contributing to Consumer Markets' record quarterly
performance. As a result, Consumer Markets' quarterly EBITDA nearly
tripled versus the prior June quarter to $103 million. For the June
2009 quarter, EBITDA represented 23.4 percent of sales as compared
with 8.2 percent in the prior-year quarter. Ashland Distribution's
sales and operating revenue for the June 2009 quarter declined 39
percent to $698 million. Volume decreased 26 percent versus the
prior-year quarter, generally in line with the year-over-year
trends in the March quarter. Gross profit as a percent of sales
improved to 10.1 percent versus 7.8 percent in the June 2008
quarter. SG&A expenses were 4 percent below the prior-year
quarter. Margin improvements and SG&A expense reductions were
not enough to offset the impact of volume reductions. As a result,
EBITDA of $13 million for the June 2009 quarter represented a
decline of 50 percent as compared with the prior-year quarter and
was 1.9 percent of sales. For the June 2009 quarter, EBITDA of $6
million was recorded for Unallocated and Other, as compared with
$13 million of EBITDA in the same prior-year quarter. Outlook
Commenting on Ashland's outlook, O'Brien said, "Our short-term
focus continues to be on generating cash and paying down debt. It
appears that demand could remain flat for the foreseeable future
due to global macroeconomic dynamics. We will continue to manage
our pricing, reduce our costs, and apply the cash we generate to
reduce debt from our current 2.4 times debt-to-EBITDA level to our
targeted ratio of 2.0 times. We continue to resize our businesses
to match current economic conditions and to create a leverageable
cost structure that will support increased profitability and growth
when the economy improves." Conference Call Webcast Today at 9 a.m.
(EDT), Ashland will provide a live webcast of its third-quarter
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://investor.ashland.com/. Ashland
Inc. (NYSE:ASH) provides specialty chemical products, services and
solutions for many of the world's most essential needs and
industries. Serving customers in more than 100 countries, it
operates through five commercial units: Ashland Aqualon Functional
Ingredients, Ashland Hercules Water Technologies, Ashland
Performance Materials, Ashland Consumer Markets (Valvoline) and
Ashland Distribution. To learn more about Ashland, visit
http://www.ashland.com/. (1) 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. (2)
Regulation G - Unadjusted EBITDA The information presented in this
news release regarding unadjusted earnings before interest, taxes,
depreciation, and amortization (unadjusted EBITDA) does not conform
to generally accepted accounting principles (GAAP) and should not
be construed as an alternative to the reported results determined
in accordance with GAAP. Management has included this non-GAAP
information to assist in understanding the operating performance of
the company and its operating segments. The non-GAAP information
provided may not be consistent with the methodologies used by other
companies. All non-GAAP information is reconciled with reported
GAAP results in the table provided below. Q3 2009 Q3 2008 (in
millions) ------- ------- Operating income $152 $87 Add:
Depreciation and amortization 88 34 -- -- Unadjusted EBITDA $240
$121 ==== ==== (3) Regulation G - Adjusted Pro Forma Results The
information presented in this news release regarding adjusted pro
forma results does not conform to generally accepted accounting
principles (GAAP) and should not be construed as an alternative to
the reported results determined in accordance with GAAP. Management
has included this non-GAAP information to assist in understanding
the operating performance of the company and its segments. The
non-GAAP information provided may not be consistent with the
methodologies used by other companies. All non-GAAP information is
reconciled with reported GAAP results in the tables provided below.
The unaudited adjusted pro forma results are presented for
informational purposes only and do not reflect future events that
may occur or any operating efficiencies or inefficiencies that may
result from the acquisition of Hercules Incorporated. Certain
significant and identifiable cost allocation, reporting and
accounting policy differences have been reflected in these adjusted
pro forma results. However, these adjusted pro forma results do not
purport to identify all these differences. Therefore, the unaudited
adjusted pro forma results are not necessarily indicative of
results that would have been achieved had the businesses been
combined during the period presented or the results that Ashland
will experience in the future. In addition, the preparation of
financial statements in conformity with GAAP requires management to
make certain estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. These estimates and
assumptions can be significantly different depending on changes to
conform to Ashland policy. RECONCILIATION OF 2009 FISCAL THIRD
QUARTERADJUSTED PRO FORMA RESULTS
----------------------------------------------------------------------
($ millions, except percentages) Preliminary ASHLAND AQUALON
Ashland Eliminate Adjusted FUNCTIONAL INGREDIENTS GAAP Key Items
Pro Forma Three Months Ended June 30, 2009 Results (Table 5)
Results
----------------------------------------------------------------------
Sales and operating revenue $ 233 $ 233 Cost of sales and operating
expenses 169 169 Gross profit as a percent of sales 27.6% 27.6%
Selling, general and administrative expenses 39 39 Equity and other
income (1) (1) Operating income 24 24 Operating income as a percent
of sales 10.3% 10.3% Depreciation and amortization 26 26
----------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ 50
$ 50
======================================================================
EBITDA as a percent of sales 21.5% 21.5%
----------------------------------------------------------------------
RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
----------------------------------------------------------------------
($ millions, except percentages) Preliminary ASHLAND HERCULES
Ashland Eliminate Adjusted WATER TECHNOLOGIES GAAP Key Items Pro
Forma Three Months Ended June 30, 2009 Results (Table 5) Results
----------------------------------------------------------------------
Sales and operating revenue $ 436 $ 436 Cost of sales and operating
expenses 285 285 Gross profit as a percent of sales 34.7% 34.7%
Selling, general and administrative expenses 120 120 Equity and
other income - - Operating income 31 31 Operating income as a
percent of sales 7.1% 7.1% Depreciation and amortization 25 25
----------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ 56
$ 56
======================================================================
EBITDA as a percent of sales 12.8% 12.8%
----------------------------------------------------------------------
RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
----------------------------------------------------------------------
($ millions, except percentages) Preliminary ASHLAND PERFORMANCE
Ashland Eliminate Adjusted MATERIALS GAAP Key Items Pro Forma Three
Months Ended June 30, 2009 Results (Table 5) Results
-----------------------------------------------------------------------
Sales and operating revenue $ 256 $ 256 Cost of sales and operating
expenses 213 $ (9) 204 Gross profit as a percent of sales 16.9%
20.3% Selling, general and administrative expenses 48 (1) 47 Equity
and other income - 3 3 Operating income (5) 13 8 Operating income
as a percent of sales -2.0% 3.1% Depreciation and amortization 20
(8) 12
-----------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ 15
$ 5 $ 20
=======================================================================
EBITDA as a percent of sales 5.9% 7.8%
-----------------------------------------------------------------------
RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
----------------------------------------------------------------------
($ millions, except percentages) Preliminary ASHLAND CONSUMER
Ashland Eliminate Adjusted MARKETS (Valvoline) GAAP Key Items Pro
Forma Three Months Ended June 30, 2009 Results (Table 5) Results
----------------------------------------------------------------------
Sales and operating revenue $ 441 $ 441 Cost of sales and operating
expenses 275 275 Gross profit as a percent of sales 37.5% 37.5%
Selling, general and administrative expenses 76 76 Equity and other
income 5 5 Operating income 95 95 Operating income as a percent of
sales 21.5% 21.5% Depreciation and amortization 8 8
----------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $
103 $ 103
======================================================================
EBITDA as a percent of sales 23.4% 23.4%
----------------------------------------------------------------------
RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
-----------------------------------------------------------------------
($ millions, except percentages) Preliminary Ashland Eliminate
Adjusted ASHLAND DISTRIBUTION GAAP Key Items Pro Forma Three Months
Ended June 30, 2009 Results (Table 5) Results
-----------------------------------------------------------------------
Sales and operating revenue $ 698 $ 698 Cost of sales and operating
expenses 627 627 Gross profit as a percent of sales 10.1% 10.1%
Selling, general and administrative expenses 69 $ (3) 66 Equity and
other income 1 1 Operating income 3 3 6 Operating income as a
percent of sales 0.4% 0.9% Depreciation and amortization 7 7
-----------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ 10
$ 3 $ 13
=======================================================================
EBITDA as a percent of sales 1.4% 1.9%
-----------------------------------------------------------------------
RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
----------------------------------------------------------------------
($ millions, except percentages) Preliminary INTERSEGMENT
SALES/UNALLOCATED AND Ashland Eliminate Adjusted OTHER GAAP Key
Items Pro Forma Three Months Ended June 30, 2009 Results (Table 5)
Results
----------------------------------------------------------------------
Sales and operating revenue $ (27) $ (27) Cost of sales and
operating expenses (25) (25) Selling, general and administrative
expenses 1 1 Equity and other income 7 7 Operating income 4 4
Depreciation and amortization 2 2
----------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ 6
$ 6
======================================================================
RECONCILIATION OF 2009 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
------------------------------------------------------------------------
($ millions, except percentages) Preliminary Ashland Eliminate
Adjusted ASHLAND INC. GAAP Key Items Pro Forma Three Months Ended
June 30, 2009 Results (Table 5) Results
------------------------------------------------------------------------
Sales and operating revenue $ 2,037 $ 2,037 Cost of sales and
operating expenses 1,544 $ (9) 1,535 Gross profit as a percent of
sales 24.2% 24.6% Selling, general and administrative expenses 353
(4) 349 Equity and other income 12 3 15 Operating income 152 16 168
Operating income as a percent of sales 7.5% 8.2% Depreciation and
amortization 88 (8) 80
------------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $
240 $ 8 $ 248
========================================================================
EBITDA as a percent of sales 11.8% 12.2%
------------------------------------------------------------------------
RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
------------------------------------------------------------------------
($ millions, except percentages) Pro Forma Adjustments
--------------------- Preliminary Additional ASHLAND AQUALON
Ashland Hercules Purchase Adjusted FUNCTIONAL INGREDIENTS GAAP
Ongoing Accounting Conforming Pro Forma Three Months Ended Results
Results(a) D&A Adjustments Results June 30, 2008
------------------------------------------------------------------------
Sales and operating revenue $ - $ 303 $ 303 Cost of sales and
operating expenses 205 $ 8 213 Gross profit as a percent of sales
32.3% 29.7% Selling, general and administrative expenses 41 4 $ 2
47 Equity and other income - (1) (1) Operating income 57 (12) (3)
42 Operating income as a percent of sales 18.8% 13.9% Depreciation
and amortization 13 12 1 26
------------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ -
$ 70 $ - $ (2) $ 68
========================================================================
EBITDA as a percent of sales 23.1% 22.4%
------------------------------------------------------------------------
RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
-------------------------------------------------------------------------
($ millions, except percentages) Pro Forma Adjustments
--------------------- Preliminary Additional ASHLAND HERCULES
Ashland Hercules Purchase Adjusted WATER TECHNOLOGIES GAAP Ongoing
Accounting Conforming Pro Forma Three Months Ended Results
Results(a) D&A Adjustments Results June 30, 2008
-------------------------------------------------------------------------
Sales and operating revenue $ 244 $ 310 $ 554 Cost of sales and
operating expenses 153 215 $ 5 373 Gross profit as a percent of
sales 37.2% 30.6% 32.7% Selling, general and administrative
expenses 80 68 2 $ 2 152 Equity and other income 1 - 1 2 Operating
income 12 27 (7) (1) 31 Operating income as a percent of sales 4.9%
8.7% 5.6% Depreciation and amortization 6 10 7 1 24
-------------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ 18
$ 37 $ - $ - $ 55
=========================================================================
EBITDA as a percent of sales 7.4% 11.9% 9.9%
-------------------------------------------------------------------------
RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
-------------------------------------------------------------------------
($ millions, except percentages) Pro Forma Adjustments
--------------------- Preliminary Additional ASHLAND PERFORMANCE
Ashland Hercules Purchase Adjusted MATERIALS GAAP Ongoing
Accounting Conforming Pro Forma Three Months Ended Results
Results(a) D&A Adjustments Results June 30, 2008
-------------------------------------------------------------------------
Sales and operating revenue $ 425 $ 425 Cost of sales and operating
expenses 350 350 Gross profit as a percent of sales 17.5% 17.5%
Selling, general and administrative expenses 61 61 Equity and other
income 5 5 Operating income 19 19 Operating income as a percent of
sales 4.5% 4.5% Depreciation and amortization 10 $ 1 11
-------------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ 29
$ 1 $ 30
=========================================================================
EBITDA as a percent of sales 6.8% 7.1%
-------------------------------------------------------------------------
RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
-------------------------------------------------------------------------
($ millions, except percentages) Pro Forma Adjustments
--------------------- Preliminary Additional ASHLAND CONSUMER
Ashland Hercules Purchase Adjusted MARKETS (Valvoline) GAAP Ongoing
Accounting Conforming Pro Forma Three Months Ended Results
Results(a) D&A Adjustments Results June 30, 2008
-------------------------------------------------------------------------
Sales and operating revenue $ 428 $ 428 Cost of sales and operating
expenses 325 325 Gross profit as a percent of sales 23.9% 23.9%
Selling, general and administrative expenses 80 80 Equity and other
income 3 3 Operating income 26 26 Operating income as a percent of
sales 6.1% 6.1% Depreciation and amortization 8 $ 1 9
------------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ 34
$ 1 $ 35
========================================================================
EBITDA as a percent of sales 7.9% 8.2%
------------------------------------------------------------------------
RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
-------------------------------------------------------------------------
($ millions, except percentages) Pro Forma Adjustments
--------------------- Preliminary Additional ASHLAND Ashland
Hercules Purchase Adjusted DISTRIBUTION GAAP Ongoing Accounting
Conforming Pro Forma Three Months Ended Results Results(a) D&A
Adjustments Results June 30, 2008
-------------------------------------------------------------------------
Sales and operating revenue $1,151 $ 1,151 Cost of sales and
operating expenses 1,063 1,063 Gross profit as a percent of sales
7.8% 7.8% Selling, general and administrative expenses 69 69 Equity
and other income 1 1 Operating income 20 20 Operating income as a
percent of sales 1.7% 1.7% Depreciation and amortization 6 6
-------------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ 26
$ 26
=========================================================================
EBITDA as a percent of sales 2.3% 2.3%
-------------------------------------------------------------------------
RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
-------------------------------------------------------------------------
($ millions, except percentages) Pro Forma Adjustments
--------------------- Preliminary Additional INTERSEGMENT SALES/
Ashland Hercules Purchase Adjusted UNALLOCATED AND OTHER GAAP
Ongoing Accounting Conforming Pro Forma Three Months Ended Results
Results(a) D&A Adjustments Results June 30, 2008
-------------------------------------------------------------------------
Sales and operating revenue $ (47) $ (47) Cost of sales and
operating expenses (47) (47) Selling, general and administrative
expenses (7) $ - $ (4) (11) Equity and other income 3 (1) - 2
Operating income 10 (1) 4 13 Depreciation and amortization 4 - (4)
-
------------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $ 14
$ (1) $ - $ 13
========================================================================
RECONCILIATION OF 2008 FISCAL THIRD QUARTER ADJUSTED PRO FORMA
RESULTS
-------------------------------------------------------------------------
($ millions, except percentages) Pro Forma Adjustments
--------------------- Additional Preliminary Ashland Hercules
Purchase Adjusted ASHLAND INC. GAAP Ongoing Accounting Conforming
Pro Forma Three Months Ended Results Results(a) D&A Adjustments
Results June 30, 2008
-------------------------------------------------------------------------
Sales and operating revenue $2,201 $ 613 $ 2,814 Cost of sales and
operating expenses 1,844 420 $ 13 2,277 Gross profit as a percent
of sales 16.2% 31.5% 19.1% Selling, general and administrative
expenses 283 109 6 $ - 398 Equity and other income 13 (1) - 12
Operating income 87 83 (19) - 151 Operating income as a percent of
sales 4.0% 13.5% 5.4% Depreciation and amortization 34 23 19 - 76
-------------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization $
121 $ 106 $ - $ - $ 227
=========================================================================
EBITDA as a percent of sales 5.5% 17.3% 8.1%
-------------------------------------------------------------------------
(a) Certain nonrecurring, noncash or key items have been removed.
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. These forward-looking statements are based upon a
number of assumptions, including those mentioned within this news
release. Performance estimates are also based upon internal
forecasts and analyses of current and future market conditions and
trends; management plans and strategies; operating efficiencies and
economic conditions, such as prices, supply and demand, and cost of
raw materials; legal proceedings and claims (including
environmental and asbestos matters); and weather. These risks and
uncertainties may cause actual operating results to differ
materially from those stated, projected or implied. Other risks and
uncertainties include the possibility that the benefits anticipated
from Ashland's acquisition of Hercules will not be fully realized;
Ashland's substantial indebtedness may impair its financial
condition; the restrictive covenants under the debt instruments may
hinder the successful operation of Ashland's business; future cash
flow may be insufficient to repay the debt; and other risks that
are described in filings made by Ashland with the Securities and
Exchange Commission (the "SEC"). 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, uncertainties and risks affecting
Ashland are contained in Ashland's periodic filings made with the
SEC, including its Form 10-K for the fiscal year ended Sept. 30,
2008, and Form 10-Q for the quarters ended Dec. 31, 2008, and March
31, 2009, which are available on Ashland's Investor Relations
website at http://investor.ashland.com/ or the SEC's website at
http://www.sec.gov/. 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 news release. Ashland Inc. and Consolidated
Subsidiaries Table 1 STATEMENTS OF CONSOLIDATED INCOME (In millions
except per share data - preliminary and unaudited) Three months
ended Nine months ended June 30 June 30 ------------------
----------------- 2009 2008 2009 2008 ------ ------ ------ ------
SALES AND OPERATING REVENUES $2,037 $2,201 $5,993 $6,166 COSTS AND
EXPENSES Cost of sales and operating expenses (a) 1,544 1,844 4,716
5,158 Selling, general and administrative expenses (a) (b) 353 283
1,049 856 ------ ------ ------ ------ 1,897 2,127 5,765 6,014
EQUITY AND OTHER INCOME 12 13 29 33 ------ ------ ------ ------
OPERATING INCOME 152 87 257 185 Gain on the MAP Transaction (c) 1 1
2 23 Net interest and other financing (expense) income (62) 5 (144)
26 Other expenses (d) - - (86) - ------ ------ ------ ------ INCOME
FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 91 93 29 234 Income
tax expense 40 27 49 58 ------ ------ ------ ------ INCOME (LOSS)
FROM CONTINUING OPERATIONS 51 66 (20) 176 Income (loss) from
discontinued operations (net of income taxes) (1) 6 (2) 1 ------
------ ------ ------ NET INCOME (LOSS) $ 50 $ 72 $ (22) $ 177
====== ====== ====== ====== DILUTED EARNINGS PER SHARE Income
(loss) from continuing operations $ .68 $ 1.03 $ (.27) $ 2.77
Income (loss) from discontinued operations (.02) .10 (.03) .01
------ ------ ------ ------ Net income (loss) $ .66 $ 1.13 $ (.30)
$ 2.78 ====== ====== ====== ====== AVERAGE COMMON SHARES AND
ASSUMED CONVERSIONS 75 64 72 63 SALES AND OPERATING REVENUES
Functional Ingredients $ 233 $ - $ 575 $ - Water Technologies 436
244 1,187 667 Performance Materials 256 425 839 1,194 Consumer
Markets 441 428 1,236 1,209 Distribution 698 1,151 2,249 3,223
Intersegment sales (27) (47) (93) (127) ------ ------ ------ ------
$2,037 $2,201 $5,993 $6,166 ====== ====== ====== ====== OPERATING
INCOME (LOSS) Functional Ingredients $ 24 $ - $ 13 $ - Water
Technologies 31 12 38 16 Performance Materials (5) 19 6 50 Consumer
Markets 95 26 180 70 Distribution 3 20 44 39 Unallocated and other
4 10 (24) 10 ------ ------ ------ ------ $ 152 $ 87 $ 257 $ 185
====== ====== ====== ====== (a) The three and nine months ended
June 30, 2009 include $9 million and $13 million, respectively,
within the cost of sales and operating expenses caption and $4
million and $39 million, respectively, within the selling, general
and administrative expenses caption for restructuring charges
related to the ongoing integration and reorganization from the
Hercules acquisition and other cost reduction programs. (b) The
nine months ended June 30, 2009 includes a $10 million charge
related to the original valuation of the ongoing research and
development projects at Hercules Incorporated (Hercules) as of the
merger date. In accordance with applicable GAAP and SEC accounting
regulations, these purchased in-process research and development
costs should be expensed as recognized. In addition, a charge of
$37 million for the nine months ended June 30, 2009 was recorded
for a one-time fair value assessment of Hercules inventory as of
the date of the transaction. (c) "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 income for the nine months ended June 30, 2008
is primarily due to a $23 million gain associated with a tax
settlement agreement entered into with Marathon Oil Corporation,
relating to four specific tax areas, that supplement the original
Tax Matters Agreement from the initial MAP Transaction. The gain
(loss) in the remaining periods presented reflects adjustments in
the recorded receivable for future estimated tax deductions related
primarily to environmental and other postretirement reserves. (d)
The nine months ended June 30, 2009 includes a $54 million loss on
currency swaps related to the Hercules acquisition and a $32
million realized loss on auction rate securities, of which $7
million relates to securities sold. Ashland Inc. and Consolidated
Subsidiaries Table 2 CONDENSED CONSOLIDATED BALANCE SHEETS (In
millions - preliminary and unaudited) June 30 --------------- 2009
2008 ------ ------ ASSETS Current assets Cash and cash equivalents
$ 256 $ 853 Accounts receivable 1,420 1,520 Inventories 546 521
Deferred income taxes 95 74 Other current assets 64 79 Current
assets held for sale 45 46 ------ ------ 2,426 3,093 Investments
and other noncurrent assets Auction rate securities 188 267
Goodwill 2,150 291 Intangibles 1,178 114 Asbestos insurance
receivable (noncurrent portion) 464 438 Deferred income taxes - 131
Other noncurrent assets 565 397 Noncurrent assets held for sale 41
49 ------ ------ 4,586 1,687 Property, plant and equipment Cost
3,492 2,243 Accumulated depreciation and amortization (1,339)
(1,179) ------ ------ 2,153 1,064 ------ ------ $9,165 $5,844
====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Short-term debt $ 44 $ - Current portion of long-term
debt 71 20 Trade payables 790 910 Accrued expenses and other
liabilities 455 264 Current liabilities held for sale 10 10 ------
------ 1,370 1,204 Noncurrent liabilities Long-term debt
(noncurrent portion) 1,878 45 Employee benefit obligations 657 262
Asbestos litigation reserve (noncurrent portion) 828 530 Deferred
income taxes 147 - Other noncurrent liabilities 578 445 ------
------ 4,088 1,282 ------ ------ Stockholders' equity 3,707 3,358
------ ------ $9,165 $5,844 ====== ====== Ashland Inc. and
Consolidated Subsidiaries Table 3 STATEMENTS OF CONSOLIDATED CASH
FLOWS (In millions - preliminary and unaudited) Nine months ended
June 30 ----------------- 2009 2008 ------- ------- CASH FLOWS
PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS Net
(loss) income $ (22) $ 177 Loss (income) from discontinued
operations (net of income taxes) 2 (1) Adjustments to reconcile
income from continuing operations to cash flows from operating
activities Depreciation and amortization 244 105 Debt issuance cost
amortization 35 - Purchased in-process research and development
amortization 10 - Deferred income taxes 33 20 Equity income from
affiliates (9) (17) Distributions from equity affiliates 13 7 Gain
from the sale of property and equipment - (2) Stock based
compensation expense 6 8 Stock contributions to qualified savings
plans 8 - Gain on the MAP Transaction (2) (23) Inventory fair value
adjustment 37 - Loss on currency swaps related to Hercules
acquisition 54 - Loss on auction rate securities 32 - Change in
operating assets and liabilities (a) 208 55 ------ ------ 649 329
CASH FLOWS USED BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Additions to property, plant and equipment (107) (118) Proceeds
from the disposal of property, plant and equipment 5 10 Purchase of
operations - net of cash acquired (2,080) (128) Proceeds from sale
of operations 7 35 Settlement of currency swaps related to Hercules
acquisition (95) - Purchases of available-for-sale securities -
(435) Proceeds from sales and maturities of available-for-sale
securities 55 314 ------ ------ (2,215) (322) CASH FLOWS PROVIDED
(USED) BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS Proceeds
from issuance of long-term debt 2,628 - Repayment of long-term debt
(1,489) (4) Proceeds from/repayments of issuance of short-term debt
3 - Debt issuance costs (161) - Premium on long-term debt repayment
(13) - Cash dividends paid (17) (52) Proceeds from the exercise of
stock options 2 3 Excess tax benefits related to share-based
payments - 1 ------ ------ 953 (52) ------ ------ CASH USED BY
CONTINUING OPERATIONS (613) (45) Cash provided (used) by
discontinued operations Operating cash flows (1) (2) Effect of
currency exchange rate changes on cash and cash equivalents (16) 3
------ ------ DECREASE IN CASH AND CASH EQUIVALENTS (630) (44) Cash
and cash equivalents - beginning of year 886 897 ------ ------ CASH
AND CASH EQUIVALENTS - END OF PERIOD $ 256 $ 853 ====== ======
DEPRECIATION AND AMORTIZATION Functional Ingredients $ 77 $ - Water
Technologies 66 19 Performance Materials 48 29 Consumer Markets 26
24 Distribution 21 18 Unallocated and other 6 15 ------ ------ $
244 $ 105 ====== ====== ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Functional Ingredients $ 42 $ - Water Technologies 13 11
Performance Materials 16 33 Consumer Markets 19 20 Distribution 2
20 Unallocated and other 15 34 ------ ------ $ 107 $ 118 ======
====== (a) Excludes changes resulting from operations acquired or
sold. Ashland Inc. and Consolidated Subsidiaries Table 4
INFORMATION BY INDUSTRY SEGMENT (In millions - preliminary and
unaudited) Three months ended Nine months ended June 30 June 30
------------------ ----------------- 2009 2008 2009 2008 ---------
-------- -------- -------- FUNCTIONAL INGREDIENTS (a) (b) Sales per
shipping day $ 3.7 $ - $ 3.7 $ - Metric tons sold 41.2 - 112.0 -
Gross profit as a percent of sales 27.6% - 23.1% - WATER
TECHNOLOGIES (a) (b) Sales per shipping day $ 6.9 $ 3.8 $ 6.3 $ 3.5
Gross profit as a percent of sales 34.7% 37.2% 32.8% 37.9%
PERFORMANCE MATERIALS (a) Sales per shipping day $ 4.1 $ 6.6 $ 4.5
$ 6.3 Pounds sold per shipping day 3.8 4.9 3.9 4.7 Gross profit as
a percent of sales 16.9% 17.5% 17.3% 17.9% CONSUMER MARKETS (a)
Lubricant sales (gallons) 45.7 43.8 116.4 125.7 Premium lubricants
(percent of U.S. branded volumes) 29.0% 24.9% 28.5% 24.6% Gross
profit as a percent of sales 37.5% 23.9% 30.8% 24.4% DISTRIBUTION
(a) Sales per shipping day $11.1 $18.0 $12.0 $17.1 Pounds sold per
shipping day 14.1 19.0 14.6 18.9 Gross profit as a percent of sales
(c) 10.1% 7.8% 10.4% 7.6% (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) Industry
segment results from November 14, 2008 forward include operations
acquired from Hercules Incorporated. (c) Distribution's gross
profit as a percentage of sales for the three months ended June 30,
2009 and 2008 include a LIFO quantity credit of $3 million and $1
million, respectively, and $14 million and $5 million for the nine
months ended June 30, 2009 and 2008, respectively. Ashland Inc. and
Consolidated Subsidiaries Table 5 COMPONENTS OF OPERATING INCOME
(In millions - preliminary and unaudited) Three Months Ended June
30, 2009 Consumer Functional Water Performance Markets Ingredients
Technologies Materials (Valvoline) ----------- ------------
----------- ----------- OPERATING INCOME Severance $ - $ - $ (1) $
- Accelerated depreciation - - (9) - Joint venture plant closing
costs - - (3) - All other operating income 24 31 8 95 ----------
---------- --------- ---------- $ 24 $ 31 $ (5) $ 95 ==========
========== ========= ========== Unallocated Distribution &
Other Total ------------ ----------- --------- OPERATING INCOME
Severance $ (3) $ - $ (4) Accelerated depreciation - - (9) Joint
venture plant closing costs - - (3) All other operating income 6 4
168 ---------- ---------- --------- $ 3 $ 4 $ 152 ==========
========== =========
http://www.newscom.com/cgi-bin/prnh/20040113/ASHLANDLOGODATASOURCE:
Ashland Inc. CONTACT: Media Relations: Jim Vitak, +1-614-790-3715,
, or Investor Relations: Eric Boni, +1-859-815-4454, , both of
Ashland Web Site: http://www.ashland.com/
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