Current Report
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
______________
FORM
8-K
______________
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Date
of report (Date of earliest event reported): October 28,
2009
ASHLAND
INC.
(Exact
name of registrant as specified in its charter)
Kentucky
(State or
other jurisdiction of incorporation)
| 1-32532 | 20-0865835 | |||
| (Commission File Number) | (I.R.S. Employer Identification No.) | |||
50
E. RiverCenter Boulevard, Covington, Kentucky 41011
(Address
of principal executive offices) (Zip Code)
P.O.
Box 391, Covington, Kentucky 41012-0391
(Mailing
Address) (Zip Code)
Registrant’s
telephone number, including area code (859) 815-3333
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
|
| [ ] |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
|
Item
2.02.
Results
of Operations and Financial Condition
On
October 28, 2009, Ashland Inc. (“Ashland”) announced preliminary fourth quarter
results, which are discussed in more detail in the news release attached hereto
as Exhibit 99.1, which is incorporated by reference into this Item
2.02.
The
information in this report, being furnished pursuant to Item 2.02 of Form 8-K,
shall not be deemed to be “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to
the liabilities of that Section, and is not incorporated by reference in any
filing under the Securities Act of 1933, as amended, or the Exchange Act, except
as expressly set forth by specific reference in such filing.
Item
9.01
.
Financial
Statements and Exhibits
|
|
(d)
|
Exhibits
|
| 99.1 |
News
Release dated October 28, 2009.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
ASHLAND
INC.
|
|
|
(Registrant)
|
|
| October 28, 2009 |
/s/
Lamar M. Chambers
|
|
Lamar
M. Chambers
|
|
|
Senior
Vice President and
Chief
Financial Officer
|
EXHIBIT
INDEX
| 99.1 |
News
Release dated October 28,
2009.
|
EXHIBIT
99.1
News
Release
| Media Relations: |
Investor
Relations:
|
||
| Jim Vitak |
Eric
Boni
|
||
| (614) 790-3715 |
(859)
815-4454
|
||
| jevitak@ashland.com |
enboni@ashland.com
|
||
|
FOR
IMMEDIATE RELEASE
|
|||
|
Oct.
28, 2009
|
|||
Ashland
Inc. reports increased fiscal fourth-quarter earnings
COVINGTON,
Ky. – 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
|
||||||
|
amoritization
(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.
|
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.
-
0 -
Forward-Looking
Statements
This
news release contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. 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
|
Unallocated
|
After-tax | |||||||||||||||||||||||||||
|
Ingredients
|
Technologies
|
Materials
|
(Valvoline)
|
Distribution
|
&
Other
|
Total
|
EPS
Impact
|
|||||||||||||||||||||||||
|
OPERATING
INCOME
|
||||||||||||||||||||||||||||||||
|
Severance
|
$ | (9 | ) | $ | (2 | ) | $ | (5 | ) | $ | - | $ | (1 | ) | $ | (3 | ) | $ | (20 | ) | (0.17 | ) | ||||||||||
|
Self-insurance
reserve adjustment
|
- | 3 | 4 | 3 | 4 | - | 14 | 0.12 | ||||||||||||||||||||||||
|
Accelerated
depreciation
|
- | - | (3 | ) | - | - | - | (3 | ) | (0.03 | ) | |||||||||||||||||||||
|
All
other operating income
|
31 | 39 | (1 | ) | 69 | 5 | (1 | ) | 142 | 1.40 | ||||||||||||||||||||||
|
Operating
income
|
22 | 40 | (5 | ) | 72 | 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
|
$ | 22 | $ | 40 | $ | (5 | ) | $ | 72 | $ | 8 | $ | (39 | ) | $ | 98 | 1.30 | |||||||||||||||
|
Three
Months Ended September 30, 2008
|
||||||||||||||||||||||||||||||||
|
Consumer
|
||||||||||||||||||||||||||||||||
|
Functional
|
Water
|
Performance
|
Markets
|
Unallocated
|
After-tax | |||||||||||||||||||||||||||
|
Ingredients
|
Technologies
|
Materials
|
(Valvoline)
|
Distribution
|
&
Other
|
Total
|
EPS
Impact
|
|||||||||||||||||||||||||
|
OPERATING
INCOME
|
||||||||||||||||||||||||||||||||
|
Severance
|
$ | - | $ | (3 | ) | $ | (4 | ) | $ | - | $ | - | $ | - | $ | (7 | ) | (0.07 | ) | |||||||||||||
|
Self-insurance
reserve adjustment
|
- | - | - | - | - | 11 | 11 | 0.11 | ||||||||||||||||||||||||
|
All
other operating income
|
- | (3 | ) | 6 | 13 | 13 | (5 | ) | 24 | (0.07 | ) | |||||||||||||||||||||
|
Operating
income
|
- | (6 | ) | 2 | 13 | 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
|
$ | - | $ | (6 | ) | $ | 2 | $ | 13 | $ | 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
Three
Months Ended September 30, 2009
|
Ashland
GAAP
Results
|
Eliminate
Key Items
(Table
5)
|
Adjusted
Pro
Forma 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
Three
Months Ended September 30, 2009
|
Ashland
GAAP
Results
|
Eliminate
Key Items
(Table
5)
|
Adjusted
Pro
Forma 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
Three
Months Ended September 30, 2009
|
Ashland
GAAP
Results
|
Eliminate
Key Items
(Table
5)
|
Adjusted
Pro
Forma 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)
Three
Months Ended September 30, 2009
|
Ashland
GAAP
Results
|
Eliminate
Key Items
(Table
5)
|
Adjusted
Pro
Forma 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)
|
|||||||
|
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.
Three
Months Ended September 30, 2009
|
Ashland
GAAP
Results
|
Eliminate
Key Items
(Table
5)
|
Adjusted
Pro
Forma 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)
|
Pro
Forma Adjustments
|
|||||||||||||||||||||||
|
Preliminary
ASHLAND
AQUALON
FUNCTIONAL
INGREDIENTS
Three
Months Ended September 30, 2008
|
Ashland
GAAP
Results
|
Hercules
Ongoing
Results
(a)
|
Additional
Purchase Accounting
D&A
|
Conforming
Adjustments
|
Eliminate
Key Items
(Table
5)
|
Adjusted
Pro
Forma 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
|
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