Ashland Inc. Reports Increased Fiscal Fourth-Quarter Earnings
Press Release
Ashland Inc. Reports Increased Fiscal Fourth-Quarter Earnings
COVINGTON, Ky., Oct 28, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Ashland Inc. (NYSE: ASH) today announced preliminary(1) results for the quarter ended Sept. 30, 2009, the fourth quarter of its 2009 fiscal year.
Fourth Quarter Highlights
(in millions except per-share amounts) Quarter Ended
-------------------------------------- Sept. 30, 2009
--------------
Operating income $ 133
Adjusted pro forma earnings before interest,
taxes, depreciation and amortization (EBITDA)* 224
Diluted earnings per share (EPS)
Income from continuing operations $ 1.30
Key items* 0.34
----
Adjusted* $ 0.96
Cash flows provided by operating activities
from continuing operations $ 378
Free cash flow* 305
* See Tables 5, 6 and 7 for U.S. GAAP reconciliations.
--------------------------------------------------------------
-- Reduced debt by 19 percent since June 30, 2009, to $1.6 billion.
-- Achieved run-rate cost reductions of $355 million from previously
announced $400 million cost-reduction initiatives.
(Logo: http://www.newscom.com/cgi-bin/prnh/20040113/ASHLANDLOGO )
Fiscal Fourth-Quarter Results
For its 2009 fourth quarter, Ashland reported sales and operating revenue of $2,113 million; operating income of $133 million; and net income of $93 million ($1.22 per share). Unadjusted earnings before interest, taxes, depreciation and amortization (see Table 6) were $218 million. On Nov. 13, 2008, Ashland completed the acquisition of Hercules Incorporated, affecting the comparability of reported results versus the same prior-year period.
Adjusted Pro Forma Results
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 September 2009 quarter versus the September 2008 quarter would have been as follows:
-- pro forma sales and operating revenue declined 25 percent from $2,822
million to $2,113 million;
-- adjusted pro forma operating income increased 78 percent from $80
million to $142 million; and
-- adjusted pro forma EBITDA increased 37 percent from $163 million to $224
million.
Key Items
Key items for the September 2009 quarter resulted in a net pretax benefit to earnings of $38 million, or 34 cents per share, as follows:
-- severance and accelerated depreciation charges of $23 million pretax (20
cents negative EPS impact), primarily related to cost-reduction
programs;
-- a favorable insurance reserve adjustment of $14 million pretax (12 cents
positive EPS impact);
-- a predominantly noncash charge of $9 million pretax (8 cents negative
EPS impact) from accelerated debt-issuance-cost amortization related to
the early retirement of portions of Ashland's term loans; and
-- a pretax gain on the sale of Drew Marine of $56 million (50 cents
positive EPS impact).
In the year-ago quarter, key items amounted to $4 million of pretax income (4 cents positive EPS impact). (Refer to Table 5 of the accompanying financial statements for details of key items in both periods.)
Performance Summary
Commenting on Ashland's adjusted pro forma fourth-quarter results, Chairman and Chief Executive Officer James J. O'Brien said, "We continued to produce substantial free cash flow, generating $305 million during the quarter. Our strong cash generation was predominantly due to earnings from operations and significant working capital reductions. We have reached our short-term goal of $1.6 billion of gross debt as a result.
"Our 37-percent increase in EBITDA versus the prior-year quarter reflects the benefits of cost-reduction initiatives and successful margin management. This more than offset year-versus-year volume declines ranging from 3 percent in Ashland Consumer Markets, which is our Valvoline business, to 25 percent in Ashland Performance Materials. That said, we saw single-digit volume improvements over the June quarter in most of our segments. Our results reflect record fourth-quarter EBITDA from Consumer Markets. Ashland Hercules Water Technologies also achieved record EBITDA and is making significant progress toward our long-term goal of double-digit operating income margins."
O'Brien continued, "Our annualized run-rate cost savings now stand at $355 million through the September 2009 quarter as we near completion of our previously announced $400 million cost-reduction initiatives."
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 Table 6 of this news release.
Ashland Aqualon Functional Ingredients recorded sales and operating revenue of $237 million in the September 2009 quarter, 18 percent below the year-ago quarter. Metric tons sold declined 21 percent. These declines continued to reflect the relative weakness in the construction and energy markets. While the construction business was down 23 percent versus the prior September quarter, it continued to show slight improvement sequentially, as did the energy business. The regulated business experienced a 10-percent volume decline as compared with the prior-year quarter, largely driven by the food segment. Volumes in the coatings business increased 7 percent versus the year-ago quarter, due in part to significant new product sales. Overall, volumes were relatively strong in Asia Pacific, with only 9-percent declines versus the prior year. Gross profit as a percent of sales of 35.6 percent showed a 310-basis-point improvement over the September 2008 quarter. In total, Functional Ingredients' EBITDA in the September 2009 quarter declined 16 percent versus the prior September quarter, to $56 million, and represented 23.6 percent of sales. Both EBITDA and EBITDA margin represented significant improvements over the June quarter.
Ashland Hercules Water Technologies' sales and operating revenue declined 14 percent to $465 million for the September 2009 quarter as compared with the same year-ago quarter, largely driven by an 11-percent volume decline. All regions, however, experienced sequential improvement. At 36.7 percent, gross profit as a percent of sales improved by 760 basis points over the September 2008 quarter, primarily the result of lower manufacturing and material costs, along with improved product mix. Selling, general and administrative and research and development (SG&A) expenses declined by $20 million, or 13 percent. EBITDA of $66 million was 89 percent above the prior-year quarter and represented 14.2 percent of sales, a 780-basis-point improvement. Sequentially, EBITDA increased 18 percent over the June quarter, while EBITDA as a percent of sales improved by 140 basis points.
Ashland Performance Materials' sales and operating revenue of $268 million declined 37 percent versus the same prior-year quarter, and volume per day declined 25 percent, due to weak, but sequentially improving, demand in most key geographies in both the transportation and construction markets. Volumes in China were essentially even with the prior-year quarter, due to relatively strong performance in the composites business for industrial construction and infrastructure applications, while North America continued to lag. Gross profit as a percent of sales increased 270 basis points over the prior-year quarter to 17.5 percent. However, this represented a 280-basis-point decline versus the June quarter, as a result of significant raw material cost increases, particularly for styrene and propylene glycol. An 18-percent reduction in SG&A expenses reflected the cost-savings initiatives taken during the past year. These improvements were not enough to offset the volume declines, and EBITDA was $12 million in the September 2009 quarter, a decrease of 40 percent versus the prior-year September quarter, while EBITDA as a percent of sales declined 20 basis points to 4.5 percent.
Ashland Consumer Markets' sales and operating revenue was $414 million, 9 percent below the September 2008 quarter. While total lubricant volume decreased by 3 percent versus the prior-year quarter, primarily due to lower private-label sales, U.S.-branded lubricants volume increased 3 percent. Same-store sales at Valvoline Instant Oil Change increased 7 percent over the prior year. Gross profit improved to 35.5 percent of sales in the September 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. The sequential reduction in gross profit percent was primarily due to higher raw material costs, including base oil. SG&A expenses rose 6 percent over the year-ago quarter, largely the result of higher advertising expenses in support of the Valvoline Engine Guarantee(SM) program announced in June. Overall, Consumer Markets' quarterly EBITDA was $79 million, as compared with $22 million in the year-ago quarter, and represented 19.1 percent of sales as compared with 4.8 percent in the prior-year quarter.
Ashland Distribution's sales and operating revenue for the September 2009 quarter declined 33 percent to $771 million. Volume per day decreased 18 percent versus the prior-year quarter, but compared with the June 2009 quarter, increased 6 percent. Gross profit as a percent of sales was 8.8 percent versus 8.1 percent in the September 2008 quarter. SG&A expenses declined 23 percent versus 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 $12 million for the September 2009 quarter represented a 40-percent decline as compared with the prior-year quarter and was 1.6 percent of sales.
Outlook
Commenting on Ashland's outlook, O'Brien said, "We will continue our emphasis on generating free cash flow. For the past year, we have used our free cash flow to significantly reduce debt. Now that we have reached our targeted debt level, we will use our excess cash flow to increase liquidity, providing increased financial flexibility.
"Demand appears to be showing some signs of growth in many end markets. We will continue to manage our pricing and control our costs in order to create operating leverage that will support both increased profitability and growth as the economy improves."
Conference Call Webcast
Today at 9 a.m. EDT, Ashland will provide a live webcast of its fourth-quarter conference call with securities analysts. The webcast will be accessible through Ashland's website, www.ashland.com. Following the live event, an archived version of the webcast will be available for 12 months at http://investor.ashland.com.
Use of Non-GAAP Measures
This news release includes certain non-GAAP measures. Such measurements are not prepared in accordance with generally accepted accounting principles (GAAP) and should not be construed as an alternative to reported results determined in accordance with GAAP. Management believes the use of such non-GAAP measures assists investors in understanding the ongoing 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 Tables 5, 6 and 7 of the financial statements provided below.
About Ashland
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 www.ashland.com.
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 and June 30, 2009, which are available on Ashland's Investor Relations website at http://investor.ashland.com or the SEC's website at 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.
(1) Preliminary Results
Financial results are preliminary until Ashland's annual report on Form 10-K is filed with the U.S. Securities and Exchange Commission.
Ashland Inc. and Consolidated Subsidiaries Table 1
STATEMENTS OF CONSOLIDATED INCOME
(In millions except per share data - preliminary and unaudited)
Three months ended Year ended
September 30 September 30
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
SALES AND OPERATING REVENUES $ 2,113 $ 2,216 $ 8,106 $ 8,381
COSTS AND EXPENSES
Cost of sales and
operating expenses (a) 1,601 1,898 6,317 7,056
Selling, general and
administrative expenses (a) 365 297 1,341 1,118
Research and development
expenses (b) 23 13 96 48
-------- -------- -------- --------
1,989 2,208 7,754 8,222
EQUITY AND OTHER INCOME 9 20 38 54
-------- -------- -------- --------
OPERATING INCOME 133 28 390 213
Net gain (loss) on
divestitures (c) 57 (3) 59 20
Net interest and other
financing (expense) income (60) 2 (205) 28
Other expenses (d) - - (86) -
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 130 27 158 261
Income tax expense 32 28 80 86
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 98 (1) 78 175
Loss from discontinued operations
(net of income taxes) (5) (9) (7) (8)
-------- -------- -------- --------
NET INCOME (LOSS) $ 93 $ (10) $ 71 $ 167
======== ======== ======== ========
DILUTED EARNINGS PER SHARE
Income (loss) from
continuing operations $ 1.30 $ (.01) $ 1.07 $ 2.76
Loss from discontinued
operations (.08) (.14) (.11) (.13)
-------- -------- -------- --------
Net income (loss) $ 1.22 $ (.15) $ .96 $ 2.63
======== ======== ======== ========
AVERAGE COMMON SHARES AND
ASSUMED CONVERSIONS 76 63 73 64
SALES AND OPERATING REVENUES
Functional Ingredients $ 237 $ - $ 812 $ -
Water Technologies 465 226 1,652 893
Performance Materials 268 427 1,106 1,621
Consumer Markets 414 454 1,650 1,662
Distribution 771 1,151 3,020 4,374
Intersegment sales (42) (42) (134) (169)
-------- -------- -------- --------
$ 2,113 $ 2,216 $ 8,106 $ 8,381
======== ======== ======== ========
OPERATING INCOME (LOSS)
Functional Ingredients $ 22 $ - $ 36 $ -
Water Technologies 40 (6) 78 10
Performance Materials (5) 2 1 52
Consumer Markets 72 13 252 83
Distribution 8 13 52 51
Unallocated and other (4) 6 (29) 17
-------- -------- -------- --------
$ 133 $ 28 $ 390 $ 213
======== ======== ======== ========
(a) The three months and year ended September 30, 2009 include $4 million
and $17 million, respectively, within the cost of sales and operating
expenses caption and $19 million and $58 million, respectively, within
the selling, general and administrative expenses caption for
restructuring charges related to the ongoing integration and
reorganization from the Hercules Incorporated (Hercules) acquisition
and other cost reduction
programs. In addition, a charge of $37 million for the year ended
September 30, 2009 was recorded for a one-time fair value assessment
of Hercules inventory as of the date of the transaction.
(b) The year ended September 30, 2009 includes a $10 million charge
related to the original valuation of the ongoing research and
development projects at Hercules as of the merger date. In accordance
with applicable GAAP and SEC accounting regulations, these purchased
in-process research and development costs were expensed as recognized.
(c) For the three months and year ended September 30, 2009, Ashland
recorded a gain of $56 million related to the sale of its interest in
Drew Marine, a division within Ashland Hercules Water Technologies.
During 2005, Ashland transferred its 38% interest in Marathon Ashland
Petroleum LLC (MAP) and two other businesses to Marathon Oil
Corporation. The income for the year ended September 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 remaining gain (loss) in the
periods presented reflects adjustments to the recorded MAP receivable
for future estimated tax deductions related primarily to environmental
and other postretirement reserves.
(d) The year ended September 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 $10 million relates
to securities sold.
Ashland Inc. and Consolidated Subsidiaries Table 2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - preliminary and unaudited)
September 30
--------------
2009 2008
------ ------
ASSETS
Current assets
Cash and cash equivalents $ 352 $ 886
Accounts receivable 1,404 1,441
Inventories 554 476
Deferred income taxes 115 97
Other current assets 46 79
Current assets held for sale 2 47
------- -------
2,473 3,026
Investments and other noncurrent assets
Auction rate securities 170 243
Goodwill 2,220 283
Intangibles 1,204 109
Asbestos insurance receivable (noncurrent portion) 510 428
Deferred income taxes 161 153
Other noncurrent assets 596 388
Noncurrent assets held for sale 17 46
------- -------
4,878 1,650
Property, plant and equipment
Cost 3,493 2,271
Accumulated depreciation and amortization (1,397) (1,176)
------- -------
2,096 1,095
------- -------
$ 9,447 $ 5,771
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt $ 23 $ -
Current portion of long-term debt 53 21
Trade payables 949 918
Accrued expenses and other liabilities 541 278
Current liabilities held for sale - 13
------- -------
1,566 1,230
Noncurrent liabilities
Long-term debt (noncurrent portion) 1,537 45
Employee benefit obligations 1,214 344
Asbestos litigation reserve (noncurrent portion) 956 522
Other noncurrent liabilities 590 428
------- -------
4,297 1,339
Stockholders' equity 3,584 3,202
$ 9,447 $ 5,771
======= =======
Ashland Inc. and Consolidated Subsidiaries Table 3
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - preliminary and unaudited)
Year ended
September 30
------------
2009 2008
---- ----
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING
OPERATIONS
Net income $ 71 $ 167
Loss from discontinued operations (net of
income taxes) 7 8
Adjustments to reconcile income from continuing
operations to cash flows from operating
activities
Depreciation and amortization 329 145
Debt issuance cost amortization 52 -
Purchased in-process research and development
amortization 10 -
Deferred income taxes 12 44
Equity income from affiliates (14) (23)
Distributions from equity affiliates 15 13
Gain from the sale of property and equipment (2) (2)
Stock based compensation expense 9 12
Stock contributions to qualified savings plans 13 -
Net gain on divestitures (59) (20)
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) 461 134
------- -------
1,027 478
CASH FLOWS USED BY INVESTING ACTIVITIES FROM CONTINUING
OPERATIONS
Additions to property, plant and equipment (174) (205)
Proceeds from the disposal of property, plant and
equipment 47 10
Purchase of operations - net of cash acquired (2,080) (129)
Proceeds from sale of operations 114 26
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 73 315
------- -------
(2,115) (418)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES FROM
CONTINUING OPERATIONS
Proceeds from issuance of long-term debt 2,628 -
Repayment of long-term debt (1,862) (5)
Proceeds from/repayments of issuance of short-term
debt (19) -
Debt issuance costs (162) -
Cash dividends paid (22) (69)
Proceeds from the exercise of stock options 9 3
Excess tax benefits related to share-based payments 1 1
------- -------
573 (70)
------- -------
CASH USED BY CONTINUING OPERATIONS (515) (10)
Cash used by discontinued operations
Operating cash flows (2) (8)
Effect of currency exchange rate changes on cash and
cash equivalents (17) 7
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (534) (11)
Cash and cash equivalents - beginning of year 886 897
------- -------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 352 $ 886
======= =======
DEPRECIATION AND AMORTIZATION
Functional Ingredients $ 101 $ -
Water Technologies 94 29
Performance Materials 63 46
Consumer Markets 36 35
Distribution 28 28
Unallocated and other 7 7
------- -------
$ 329 $ 145
======= =======
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Functional Ingredients $ 58 $ -
Water Technologies 26 17
Performance Materials 27 48
Consumer Markets 33 42
Distribution 8 27
Unallocated and other 22 71
------- -------
$ 174 $ 205
======= =======
(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 Year ended
September 30 September 30
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
FUNCTIONAL INGREDIENTS (a) (b)
Sales per shipping day $ 3.7 $ - $ 3.7 $ -
Metric tons sold 42.0 - 154.1 -
Gross profit as a percent of sales (c) 35.6% - 26.7% -
WATER TECHNOLOGIES (a) (b)
Sales per shipping day $ 7.3 $ 3.5 $ 6.6 $ 3.5
Gross profit as a percent of sales (c) 36.7% 32.9% 33.9% 36.7%
PERFORMANCE MATERIALS (a)
Sales per shipping day $ 4.2 $ 6.7 $ 4.4 $ 6.4
Pounds sold per shipping day 3.9 5.2 3.9 4.9
Gross profit as a percent of sales 16.0% 14.6% 17.0% 17.0%
CONSUMER MARKETS (a)
Lubricant sales (gallons) 42.4 43.5 158.8 169.2
Premium lubricants (percent of U.S.
branded volumes) 27.2% 26.1% 28.2% 24.9%
Gross profit as a percent of sales 35.5% 19.2% 32.0% 23.0%
DISTRIBUTION (a)
Sales per shipping day $ 12.1 $ 18.0 $ 12.0 $ 17.3
Pounds sold per shipping day 14.9 18.2 14.7 18.8
Gross profit as a percent of sales (d) 8.8% 8.1% 10.0% 7.8%
(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) Year-to-date results were affected in Functional Ingredients and
Water Technologies by $30 million and $7 million, respectively, due
to a one-time fair value assessment of Hercules inventory.
(d) Distribution's gross profit as a percentage of sales for the three
months ended September 30, 2009 and 2008 include a LIFO quantity
credit of $1 million and $11 million, respectively, and $15 million
and $16 million for the twelve months ended September 30, 2009 and
2008, respectively.
Ashland Inc. and Consolidated Subsidiaries Table 5
RECONCILIATION OF NON GAAP DATA - INCOME FROM CONTINUING OPERATIONS
(In millions - preliminary and unaudited)
Three Months Ended September 30, 2009
Consumer
Functional Water Performance Markets
Ingredients Technologies Materials (Valvoline)
----------- ------------ --------- -----------
OPERATING INCOME
Severance $ (9) $ (2) $ (5) $ -
Self-insurance
Reserve adjustment - 3 4 3
Accelerated depreciation - - (3) -
All other operating
income 31 39 (1) 69
----------- ------------ --------- -----------
Operating income 22 40 (5) 72
NET GAIN ON DIVESTITURES
Drew Marine divestiture
All other divestitures
NET INTEREST AND OTHER
FINANCING EXPENSE
Fees and amortization
related to debt
retirements
All other net interest
and other financing
expense
INCOME TAX EXPENSE
Income tax on key items
All other income tax
expense
----------- ------------ --------- -----------
INCOME FROM
CONTINUING
OPERATIONS $ 22 $ 40 $ (5) $ 72
=========== ============ ========= ===========
Ashland Inc. and Consolidated Subsidiaries Table 5
RECONCILIATION OF NON GAAP DATA - INCOME FROM CONTINUING OPERATIONS
(In millions - preliminary and unaudited)
Three Months Ended September 30, 2009
Unallocated After Tax
Distribution & Other Total EPS Impact
------------ ----------- ------- ----------
OPERATING INCOME
Severance $ (1) $ (3) $ (20) (0.17)
Self-insurance
reserve adjustment 4 - 14 0.12
Accelerated depreciation - - (3) (0.03)
All other operating
income 5 (1) 142 1.40
------------ ----------- -------
Operating income 8 (4) 133 1.32
NET GAIN ON DIVESTITURES
Drew Marine divestiture 56 56 0.50
All other divestitures 1 1 -
----------- -------
57 57 0.50
NET INTEREST AND OTHER
FINANCING EXPENSE
Fees and amortization
related to debt
retirements (9) (9) (0.08)
All other net interest
and other financing
expense (51) (51) (0.44)
----------- -------
(60) (60) (0.52)
INCOME TAX EXPENSE
Income tax on key items (12) (12) -
All other income tax
expense (20) (20) -
------------ ----------- -------
(32) (32)
------------ ----------- -------
INCOME FROM
CONTINUING
OPERATIONS $ 8 $ (39) $ 98 1.30
============ =========== =======
Three Months Ended September 30, 2008
Consumer
Functional Water Performance Markets
Ingredients Technologies Materials (Valvoline)
----------- ------------ --------- -----------
OPERATING INCOME
Severance $ - $ (3) $ (4) $ -
Self-insurance
Reserve adjustment - - - -
All other operating
income - (3) 6 13
----------- ------------ --------- -----------
Operating income - (6) 2 13
NET GAIN ON DIVESTITURES
NET INTEREST AND OTHER
FINANCING EXPENSE
INCOME TAX EXPENSE
Income tax on key items
All other income tax
expense
----------- ------------ --------- -----------
INCOME FROM
CONTINUING OPERATIONS $ - $ (6) $ 2 $ 13
=========== ============ ========= ===========
Three Months Ended September 30, 2008
Unallocated After tax
Distribution & Other Total EPS Impact
------------ ----------- ------- ----------
OPERATING INCOME
Severance $ - $ - $ (7) (0.07)
Self-insurance
reserve adjustment - 11 11 0.11
All other operating
income 13 (5) 24 (0.07)
----------- ------------ --------- -----------
Operating income 13 6 28 (0.03)
NET GAIN ON DIVESTITURES (3) (3) -
NET INTEREST AND OTHER
FINANCING EXPENSE 2 2 0.02
INCOME TAX EXPENSE
Income tax on key items (2) (2) -
All other income tax
expense (26) (26) -
------------ ----------- -------
(28) (28) -
------------ ----------- -------
INCOME FROM
CONTINUING
OPERATIONS $ 13 $ (23) $ (1) (0.01)
============ =========== =======
Ashland Inc. and Consolidated Subsidiaries Table 6
RECONCILIATION OF NON GAAP DATA - EBITDA
(In millions - preliminary and unaudited)
RECONCILIATION OF 2009 FISCAL FOURTH QUARTER
ADJUSTED PRO FORMA RESULTS
---------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND AQUALON
FUNCTIONAL INGREDIENTS Ashland Eliminate Key Adjusted
Three Months Ended GAAP Items Pro Forma
September 30, 2009 Results (Table 5) Results
-------------------------------------------------------------------------
Sales and operating revenue $ 237 $ 237
Cost of sales and operating
expenses 153 153
Gross profit as a percent of sales 35.6% 35.6%
SG&A expenses (includes research
and development) 62 $ (9) 53
Equity and other income - -
Operating income 22 9 31
Operating income as a percent of
sales 9.3% 13.1%
Depreciation and amortization 25 25
-------------------------------------------------------------------------
Earnings before interest, taxes,
depreciation and amortization $ 47 $ 9 $ 56
=========================================================================
EBITDA as a percent of sales 19.8% 23.6%
-------------------------------------------------------------------------
RECONCILIATION OF 2009 FISCAL FOURTH QUARTER
ADJUSTED PRO FORMA RESULTS
--------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND HERCULES
WATER TECHNOLOGIES Ashland Eliminate Key Adjusted
Three Months Ended GAAP Items Pro Forma
September 30, 2009 Results (Table 5) Results
-------------------------------------------------------------------------
Sales and operating revenue $ 465 $ 465
Cost of sales and operating
expenses 294 294
Gross profit as a percent of sales 36.7% 36.7%
SG&A expenses (includes research
and development) 131 $ 1 132
Equity and other income - -
Operating income 40 (1) 39
Operating income as a percent of
sales 8.6% 8.4%
Depreciation and amortization 27 27
-------------------------------------------------------------------------
Earnings before interest, taxes,
depreciation and amortization $ 67 $ (1) $ 66
=========================================================================
EBITDA as a percent of sales 14.4% 14.2%
-------------------------------------------------------------------------
Ashland Inc. and Consolidated Subsidiaries Table 6
RECONCILIATION OF NON GAAP DATA - EBITDA
(In millions - preliminary and unaudited)
RECONCILIATION OF 2009 FISCAL FOURTH QUARTER
ADJUSTED PRO FORMA RESULTS
---------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND PERFORMANCE
MATERIALS Ashland Eliminate Key Adjusted
Three Months Ended GAAP Items Pro Forma
September 30, 2009 Results (Table 5) Results
-------------------------------------------------------------------------
Sales and operating revenue $ 268 $ 268
Cost of sales and operating
expenses 225 $ (4) 221
Gross profit as a percent of sales 16.0% 17.5%
SG&A expenses (includes research
and development) 51 51
Equity and other income 3 3
Operating income (5) 4 (1)
Operating income as a percent of
sales -1.9% -0.4%
Depreciation and amortization 16 (3) 13
-------------------------------------------------------------------------
Earnings before interest, taxes,
depreciation and amortization $ 11 $ 1 $ 12
=========================================================================
EBITDA as a percent of sales 4.1% 4.5%
-------------------------------------------------------------------------
RECONCILIATION OF 2009 FISCAL FOURTH QUARTER
ADJUSTED PRO FORMA RESULTS
--------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND CONSUMER
MARKETS (Valvoline) Ashland Eliminate Key Adjusted
Three Months Ended GAAP Items Pro Forma
September 30, 2009 Results (Table 5) Results
-------------------------------------------------------------------------
Sales and operating revenue $ 414 $ 414
Cost of sales and operating
expenses 267 267
Gross profit as a percent of sales 35.5% 35.5%
SG&A expenses (includes research
and development) 80 $ 3 83
Equity and other income 5 5
Operating income 72 (3) 69
Operating income as a percent of
sales 17.4% 16.7%
Depreciation and amortization 10 10
-------------------------------------------------------------------------
Earnings before interest, taxes,
depreciation and amortization $ 82 $ (3) $ 79
=========================================================================
EBITDA as a percent of sales 19.8% 19.1%
-------------------------------------------------------------------------
Ashland Inc. and Consolidated Subsidiaries Table 6
RECONCILIATION OF NON GAAP DATA - EBITDA
(In millions - preliminary and unaudited)
RECONCILIATION OF 2009 FISCAL FOURTH QUARTER
ADJUSTED PRO FORMA RESULTS
---------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND DISTRIBUTION Ashland Eliminate Key Adjusted
Three Months Ended GAAP Items Pro Forma
September 30, 2009 Results (Table 5) Results
-------------------------------------------------------------------------
Sales and operating revenue $ 771 $ 771
Cost of sales and operating
expenses 704 704
Gross profit as a percent of sales 8.8% 8.8%
SG&A expenses (includes research
and development) 60 $ 3 63
Equity and other income 1 1
Operating income 8 (3) 5
Operating income as a percent of
sales 1.0% 0.6%
Depreciation and amortization 7 7
-------------------------------------------------------------------------
Earnings before interest, taxes,
depreciation and amortization $ 15 $ (3) $ 12
=========================================================================
EBITDA as a percent of sales 1.9% 1.6%
-------------------------------------------------------------------------
RECONCILIATION OF 2009 FISCAL FOURTH QUARTER
ADJUSTED PRO FORMA RESULTS
--------------------------------------------
($ millions, except percentages)
Preliminary
INTERSEGMENT SALES/
UNALLOCATED AND OTHER Ashland Eliminate Key Adjusted
Three Months Ended GAAP Items Pro Forma
September 30, 2009 Results (Table 5) Results
-------------------------------------------------------------------------
Sales and operating revenue $ (42) $ (42)
Cost of sales and operating
expenses (42) (42)
SG&A expenses (includes research
and development) 4 $ (3) 1
Equity and other income - -
Operating income (4) 3 (1)
Depreciation and amortization - -
-------------------------------------------------------------------------
Earnings before interest, taxes,
depreciation and amortization $ (4) $ 3 $ (1)
=========================================================================
Ashland Inc. and Consolidated Subsidiaries Table 6
RECONCILIATION OF NON GAAP DATA - EBITDA
(In millions - preliminary and unaudited)
RECONCILIATION OF 2009 FISCAL FOURTH QUARTER
ADJUSTED PRO FORMA RESULTS
---------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND INC. Ashland Eliminate Adjusted
Three Months Ended GAAP Key Items Pro Forma
September 30, 2009 Results (Table 5) Results
-------------------------------------------------------------------------
Sales and operating revenue $ 2,113 $ 2,113
Cost of sales and operating
expenses 1,601 $ (4) 1,597
Gross profit as a percent of sales 24.2% 24.4%
SG&A expenses (includes research
and development) 388 (5) 383
Equity and other income 9 9
Operating income 133 9 142
Operating income as a percent of
sales 6.3% 6.7%
Depreciation and amortization 85 (3) 82
-------------------------------------------------------------------------
Earnings before interest, taxes,
depreciation and amortization $ 218 $ 6 $ 224
=========================================================================
EBITDA as a percent of sales 10.3% 10.6%
-------------------------------------------------------------------------
RECONCILIATION OF 2008 FISCAL FOURTH QUARTER ADJUSTED PRO FORMA RESULTS
-----------------------------------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND AQUALON
FUNCTIONAL INGREDIENTS
Three Months Ended
September 30, 2008
Pro Forma Adjustments
---------------------
Additional
Ashland Hercules Purchase Eliminate Adjusted
GAAP Ongoing Accounting Conforming Key Items Pro Forma
Results Results(a) D&A Adjustments (Table 5) Results
-------------------------------------------------------------------------
Sales and
operating
revenue $ - $ 289 $ 289
Cost of
sales and
operating
expenses 194 $ 1 195
Gross profit
as a percent
of sales 32.9% 32.5%
SG&A expenses
(includes
research and
development) 38 10 $ 4 52
Equity and
other income - 1 1
Operating
income 57 (11) (3) 43
Operating
income as
a percent
of sales 19.7% 14.9%
Depreciation
and
amortization 12 11 1 24
-------------------------------------------------------------------------
Earnings before
interest,
taxes,
depreciation
and
amortization $ - $ 69 $ - $ (2) $ - $ 67
=========================================================================
EBITDA as a
percent of
sales 23.9% 23.2%
-------------------------------------------------------------------------
(a) Certain nonrecurring, noncash or key items have been removed.
Ashland Inc. and Consolidated Subsidiaries Table 6
RECONCILIATION OF NON GAAP DATA - EBITDA
(In millions - preliminary and unaudited)
RECONCILIATION OF 2008 FISCAL FOURTH QUARTER ADJUSTED PRO FORMA RESULTS
-----------------------------------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND HERCULES
WATER TECHNOLOGIES
Three Months Ended September 30, 2008
Pro Forma Adjustments
---------------------
Additional
Ashland Hercules Purchase Eliminate Adjusted
GAAP Ongoing Accounting Conforming Key Items Pro Forma
Results Results(a) D&A Adjustments (Table 5) Results
-------------------------------------------------------------------------
Sales and
operating
revenue $ 226 $ 317 $ 543
Cost of
sales and
operating
expenses 151 228 $ 6 385
Gross profit
as a percent
of sales 32.9% 28.1% 29.1%
SG&A expenses
(includes
research
and
development) 81 65 5 $ 4 $ (3) 152
Equity and
other income - - -
Operating
income (6) 24 (11) (4) 3 6
Operating
income as a
percent of
sales -2.7% 7.6% 1.1%
Depreciation
and
amortization 7 9 11 2 29
-------------------------------------------------------------------------
Earnings
before
interest,
taxes,
depreciation
and
amortization $ 1 $ 33 $ - $ (2) $ 3 $ 35
=========================================================================
EBITDA as a
percent of
sales 0.4% 10.4% 6.4%
-------------------------------------------------------------------------
RECONCILIATION OF 2008 FISCAL FOURTH QUARTER ADJUSTED PRO FORMA RESULTS
-----------------------------------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND PERFORMANCE
MATERIALS
Three Months Ended September 30, 2008
Pro Forma Adjustments
---------------------
Additional
Ashland Hercules Purchase Eliminate Adjusted
GAAP Ongoing Accounting Conforming Key Items Pro Forma
Results Results(a) D&A Adjustments (Table 5) Results
-------------------------------------------------------------------------
Sales and
operating
revenue $ 427 $ 427
Cost of
sales and
operating
expenses 365 $ (1) 364
Gross profit
as a percent
of sales 14.6% 14.8%
SG&A expenses
(includes
research
and
development) 65 (3) 62
Equity and
other income 5 5
Operating
income 2 4 6
Operating
income as
a percent
of sales 0.5% 1.4%
Depreciation
and
amortization 13 $ 1 14
-------------------------------------------------------------------------
Earnings
before
interest,
taxes,
depreciation
and
amortization $ 15 $ 1 $ 4 $ 20
=========================================================================
EBITDA as a
percent of
sales 3.5% 4.7%
-------------------------------------------------------------------------
(a) Certain nonrecurring, noncash or key items have been removed.
Ashland Inc. and Consolidated Subsidiaries Table 6
RECONCILIATION OF NON GAAP DATA - EBITDA
(In millions - preliminary and unaudited)
RECONCILIATION OF 2008 FISCAL FOURTH QUARTER ADJUSTED PRO FORMA RESULTS
-----------------------------------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND CONSUMER
MARKETS (Valvoline)
Three Months Ended September 30, 2008
Pro Forma Adjustments
---------------------
Additional
Ashland Hercules Purchase Eliminate Adjusted
GAAP Ongoing Accounting Conforming Key Items Pro Forma
Results Results(a) D&A Adjustments (Table 5) Results
-------------------------------------------------------------------------
Sales and
operating
revenue $ 454 $ 454
Cost of
sales and
operating
expenses 366 366
Gross profit
as a percent
of sales 19.2% 19.2%
SG&A expenses
(includes
research
and
development) 78 78
Equity and
other income 3 3
Operating
income 13 13
Operating
income as
a percent
of sales 2.9% 2.9%
Depreciation
and
amortization 8 $ 1 9
-------------------------------------------------------------------------
Earnings
before
interest,
taxes,
depreciation
and
amortization $ 21 $ 1 $ 22
=========================================================================
EBITDA as a
percent of
sales 4.6% 4.8%
-------------------------------------------------------------------------
RECONCILIATION OF 2008 FISCAL FOURTH QUARTER ADJUSTED PRO FORMA RESULTS
-----------------------------------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND DISTRIBUTION
Three Months Ended September 30, 2008
Pro Forma Adjustments
---------------------
Additional
Ashland Hercules Purchase Eliminate Adjusted
GAAP Ongoing Accounting Conforming Key Items Pro Forma
Results Results(a) D&A Adjustments (Table 5) Results
-------------------------------------------------------------------------
Sales and
operating
revenue $1,151 $ 1,151
Cost of
sales and
operating
expenses 1,058 1,058
Gross profit
as a
percent
of sales 8.1% 8.1%
SG&A
expenses
(includes
research
and
development) 82 82
Equity and
other income 2 2
Operating
income 13 13
Operating
income as
a percent
of sales 1.1% 1.1%
Depreciation
and
amortization 6 $ 1 7
-------------------------------------------------------------------------
Earnings
before
interest,
taxes,
depreciation
and
amortization $ 19 $ 1 $ 20
=========================================================================
EBITDA as a
percent of
sales 1.7% 1.7%
-------------------------------------------------------------------------
(a) Certain nonrecurring, noncash or key items have been removed.
Ashland Inc. and Consolidated Subsidiaries Table 6
RECONCILIATION OF NON GAAP DATA - EBITDA
(In millions - preliminary and unaudited)
RECONCILIATION OF 2008 FISCAL FOURTH QUARTER ADJUSTED PRO FORMA RESULTS
-----------------------------------------------------------------------
($ millions, except percentages)
Preliminary
INTERSEGMENT SALES/
UNALLOCATED AND OTHER
Three Months Ended September 30, 2008
Pro Forma Adjustments
---------------------
Additional
Ashland Hercules Purchase Eliminate Adjusted
GAAP Ongoing Accounting Conforming Key Items Pro Forma
Results Results(a) D&A Adjustments (Table 5) Results
-------------------------------------------------------------------------
Sales and
operating
revenue $ (42) $ (42)
Cost of
sales and
operating
expenses (42) (42)
SG&A expenses
(includes
research
and
development) 4 $ 3 $ (8) $ 11 10
Equity and
other income 10 - (1) 9
Operating
income 6 (3) 7 (11) (1)
Depreciation
and
amortization 6 - (6) -
-------------------------------------------------------------------------
Earnings
before
interest,
taxes,
depreciation
and
amortization $ 12 $ (3) $ 1 $ (11) $ (1)
=========================================================================
RECONCILIATION OF 2008 FISCAL FOURTH QUARTER ADJUSTED PRO FORMA RESULTS
-----------------------------------------------------------------------
($ millions, except percentages)
Preliminary
ASHLAND INC.
Three Months Ended September 30, 2008
Pro Forma Adjustments
---------------------
Additional
Ashland Hercules Purchase Eliminate Adjusted
GAAP Ongoing Accounting Conforming Key Items Pro Forma
Results Results(a) D&A Adjustments (Table 5) Results
-------------------------------------------------------------------------
Sales and
operating
revenue $ 2,216 $ 606 $ 2,822
Cost of
sales and
operating
expenses 1,898 422 $ 7 $ (1) 2,326
Gross profit
as a percent
of sales 14.4% 30.4% 17.6%
SG&A expenses
(includes
research
and
development) 310 106 15 $ - 5 436
Equity and
other income 20 - - 20
Operating
income 28 78 (22) - (4) 80
Operating
income as
a percent
of sales 1.3% 12.9% 2.8%
Depreciation
and
amortization 40 21 22 - 83
-------------------------------------------------------------------------
Earnings
before
interest,
taxes,
depreciation
and
amortization $ 68 $ 99 $ - $ - $ (4) $ 163
=========================================================================
EBITDA as
a percent
of sales 3.1% 16.3% 5.8%
-------------------------------------------------------------------------
(a) Certain nonrecurring, noncash or key items have been removed.
Ashland Inc. and Consolidated Subsidiaries Table 7
RECONCILIATION OF NON GAAP DATA - FREE CASH FLOW
(In millions - preliminary and unaudited)
Three Months Ended September 30, 2009
Ashland GAAP results - Cash flows provided by
operating activities from continuing operations $ 378
Less:
Capital expenditures 67
Shareholder dividends 6
-----------
Free cash flows $ 305
===========
Three Months Ended September 30, 2008
Ashland GAAP results - Cash flows provided by
operating activities from continuing operations $ 149
Less:
Capital expenditures 87
Shareholder dividends 17
-----------
Free cash flows $ 45
===========
SOURCE Ashland Inc.
http://www.ashland.com
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