Ashland Inc. Reports Fiscal First-Quarter EPS from Continuing Operations of 97 Cents

Jan 26, 2010, 06:00 ET from Ashland Inc.

COVINGTON, Ky., Jan. 26 /PRNewswire-FirstCall/ -- Ashland Inc. (NYSE: ASH) today announced preliminary(1) results for the quarter ended Dec. 31, 2009, the first quarter of its 2010 fiscal year.

(Logo: http://www.newscom.com/cgi-bin/prnh/20040113/ASHLANDLOGO )

First Quarter Highlights

(in millions except per-share amounts)

Quarter Ended Dec. 31, 2009

Quarter Ended Dec. 31, 2008

Operating income (loss)

$           146

$              (7)

Adjusted pro forma EBITDA*

             226

             147

Diluted earnings (loss) per share (EPS)

  From continuing operations

$           0.97

$         (1.73)

  Less: key items*

             0.08

           (1.98)

  Add: Hercules' results prior to acquisition

                  -  

            0.11

     Adjusted*

$           0.89

$          0.36

Cash flows provided by operating activities   from continuing operations

$              35

$             74

Free cash flow*

                  8

               30

* See Tables 5, 6 and 7 for definitions and U.S. GAAP reconciliations.

Fiscal First-Quarter Results

For its 2010 first quarter, Ashland reported sales of $2,020 million, operating income of $146 million and net income of $86 million ($1.10 per share). Net income benefited by $10 million aftertax (13 cents per share) from discontinued operations. Cash flows provided by operating activities from continuing operations amounted to $35 million and included a $163 million use of cash for operating assets and liabilities, primarily working capital. 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, 2008, Ashland's results for the December 2009 quarter versus the December 2008 quarter would have been as follows:

  • pro forma sales declined 10 percent from $2,233 million to $2,020 million;
  • adjusted pro forma operating income increased 97 percent from $74 million to $146 million; and
  • adjusted pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) increased 54 percent from $147 million to $226 million.

Key Items

For the December 2009 quarter, discrete income tax effects resulted in a net benefit to earnings of $6 million, or 8 cents per share. In the year-ago quarter, key items negatively affected EPS by $1.98. Refer to Table 5 of the accompanying financial statements for details of key items in both periods.

Results also included noncash intangible amortization expense of $18 million pretax (15 cents negative EPS impact) in the December 2009 quarter and $13 million pretax (12 cents negative EPS impact) in the December 2008 quarter. Amounts in both periods primarily reflect the addition of intangible assets from the Hercules acquisition.

Performance Summary

Commenting on Ashland's adjusted pro forma results for the December quarter, Chairman and Chief Executive Officer James J. O'Brien said, "I continue to be encouraged by Ashland's delivery of profit improvement in the face of a challenging demand environment. We increased EBITDA by more than 50 percent versus the year-ago December quarter. Modest growth in underlying demand, gross margin increases in all of our commercial units, and our continued focus on cost reductions contributed to this improved performance."

O'Brien continued, "Through our aggressive cost-cutting efforts initiated early in the recession, we have positioned Ashland to perform well in an improving demand environment. I am pleased that, during the December quarter, we achieved $405 million of run-rate cost reductions, exceeding the $400 million target for our program."

Commenting on the performance of Ashland's commercial units, O'Brien said, "Record first-quarter EBITDA from Ashland Consumer Markets, which is our Valvoline business, and Ashland Hercules Water Technologies highlighted the quarter. Ashland Aqualon Functional Ingredients is also demonstrating improved profitability despite the mixed global demand environment. We are also seeing early volume improvements in Ashland Performance Materials and Ashland Distribution, which are starting to drive sequential earnings improvements in both of these businesses."

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 of $210 million in the December 2009 quarter, 9 percent below the year-ago quarter. Metric tons sold declined 16 percent. Excluding the volume associated with a renegotiated supply contract in the oil-field sector from the prior-year period, the decline would have been 6 percent on a comparable basis. The construction and energy markets continued to be weak, with Functional Ingredients' volumes in both markets down 20 percent versus the year-ago quarter. Both regulated industries and the coatings additives business achieved solid growth, with volume increases of 8 percent and 13 percent, respectively. Growth in regulated industries was driven by the personal care sector, while new products continued to generate growth for the coatings additives business. Regionally, Functional Ingredients had greater than 30-percent volume growth in Asia Pacific and Latin America, while the more mature markets in Europe and North America declined 13 percent and 20 percent, respectively, on a comparable basis. Gross profit as a percent of sales of 33.7 percent showed a 470-basis-point improvement over the December 2008 quarter. Selling, general and administrative and research and development (SG&A) expenses were 5 percent above the prior-year quarter. In total, Functional Ingredients' EBITDA in the December 2009 quarter increased 10 percent versus the prior December quarter, to $54 million, and represented 25.7 percent of sales.

Ashland Hercules Water Technologies' sales declined 6 percent to $443 million for the December 2009 quarter as compared with the same year-ago quarter, while volumes were flat. Excluding the marine business sold in August 2009, sales in Latin America and Asia Pacific increased greater than 10 percent versus the December 2008 quarter, while Europe grew at 6 percent, and North American sales declined 5 percent. Gross profit as a percent of sales was 36.6 percent, a 660-basis-point improvement over the December 2008 quarter, primarily the result of lower manufacturing and raw material costs. The growth in gross profit percentage was broad-based and included significant increases in nearly all markets and regions. SG&A expenses declined 5 percent. EBITDA of $63 million was 85 percent above the prior-year quarter and represented 14.2 percent of sales, a 700-basis-point improvement.

Ashland Performance Materials' sales of $271 million declined 16 percent versus the same prior-year quarter, and volume per day declined 7 percent. Sequentially, volume improved 3 percent despite seasonal trends, as volumes sold into the marine and transportation markets grew 7 percent to 8 percent. Gross profit as a percent of sales increased 250 basis points over the prior-year quarter to 18.4 percent, due to lower manufacturing costs resulting from several previously announced plant shutdowns. A 9-percent reduction in SG&A expenses represents the cumulative effect of cost reductions taken during 2009. As a result, EBITDA was $21 million in the December 2009 quarter, up 17 percent over the year-ago December quarter, and EBITDA as a percent of sales increased 210 basis points to 7.7 percent.

Ashland Consumer Markets' sales were $400 million, 3 percent above the December 2008 quarter. Total lubricant volume increased by 22 percent versus an unusually weak prior-year quarter. Same-store sales at Valvoline Instant Oil Change increased 4 percent over the prior year. Gross profit was 33.9 percent of sales in the December 2009 quarter versus 21.8 percent in the year-ago quarter and 35.5 percent in the September 2009 quarter. The sequential reduction was primarily due to higher raw material costs and lower private-label margins, partially offset by higher selling prices beginning in November. While SG&A expenses rose 10 percent over the year-ago quarter, largely the result of higher advertising expenses, SG&A declined 8 percent sequentially. Overall, Consumer Markets' quarterly EBITDA was $76 million, as compared with $28 million in the year-ago quarter, and was slightly less than the $79 million earned in the seasonally stronger September 2009 quarter. EBITDA margins were 19.0 percent and 7.2 percent of sales in the December 2009 and 2008 quarters, respectively. The December 2009 quarter marks the fourth consecutive quarter with EBITDA margins above 18 percent.

Ashland Distribution's sales for the December 2009 quarter declined 15 percent to $729 million. Volume per day decreased 8 percent versus the prior-year quarter. Sequentially, Distribution's volume was down only 4 percent despite typical December-quarter seasonality. Gross profit as a percent of sales was 9.2 percent versus 8.6 percent in the prior December quarter. SG&A expenses declined 5 percent versus the prior-year quarter, as previously announced cost-reduction initiatives were partially offset by increased bad debt expense and currency translation. Margin improvements and SG&A expense reductions did not fully offset the impact of volume reductions. As a result, EBITDA declined 28 percent versus the prior-year December quarter, to $13 million, and was 1.8 percent of sales.

Outlook

Commenting on Ashland's outlook, O'Brien said, "We believe we are starting to demonstrate our ability to generate the consistent earnings, gross margins and cash flows indicative of specialty chemicals companies. Each of our businesses is currently showing some signs of demand improvement and stable or improving margins. Although raw material cost increases may well occur during the fiscal year, our continued emphasis on pricing and cost management should support both increased profitability and growth as the economy recovers."

Conference Call Webcast

Today at 9 a.m. EST, Ashland will provide a live webcast of its first-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 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; and legal proceedings and claims (including environmental and asbestos matters). Other risks and uncertainties include those associated with Ashland's integration of Hercules Incorporated businesses; Ashland's substantial indebtedness; the restrictive covenants under Ashland's debt instruments; Ashland's ability to repay the debt with future cash flow; and other risks and uncertainties that are described in filings made by Ashland with the Securities and Exchange Commission, including its most recent Form 10-K, which are available on Ashland's website at http://investor.ashland.com or at www.sec.gov. Ashland believes its expectations are reasonable, but cannot assure they will be achieved. Forward-looking information may prove to be inaccurate, and actual results may differ significantly from those anticipated. Ashland is not obligated to subsequently update or revise the forward-looking statements made in this news release.

(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.

Ashland Inc. and Consolidated Subsidiaries                                                                                                         Table 1

STATEMENTS OF CONSOLIDATED INCOME

(In millions except per share data - preliminary and unaudited)

Three months ended

December 31

2009

2008  (d)

SALES

$

2,020 

$

1,966 

COSTS AND EXPENSES

Cost of sales (a)

1,534 

1,641 

Selling, general and administrative expenses (a)

334 

317 

Research and development expenses (b)

20 

27 

1,888 

1,985 

EQUITY AND OTHER INCOME

14 

12 

OPERATING INCOME (LOSS)

146 

(7)

Net interest and other financing expense

(41)

(28)

Net gain on divestitures

Other expenses (c)

(86)

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

105 

(120)

Income tax expense (benefit)

29 

(1)

INCOME (LOSS) FROM CONTINUING OPERATIONS

76 

(119)

Income from discontinued operations (net of income taxes)

10 

NET INCOME (LOSS)

$

86 

$

(119)

DILUTED EARNINGS PER SHARE

Income (loss) from continuing operations

$

.97 

$

(1.73)

Income from discontinued operations

.13 

Net income (loss)

$

1.10 

$

(1.73)

AVERAGE COMMON SHARES AND ASSUMED CONVERSIONS

78 

69 

SALES

Functional Ingredients

$

210 

$

119 

Water Technologies

443 

318 

Performance Materials

271 

324 

Consumer Markets

400 

388 

Distribution

729 

853 

Intersegment sales

(33)

(36)

$

2,020 

$

1,966 

OPERATING INCOME (LOSS)

Functional Ingredients

$

27 

$

(7)

Water Technologies

39 

(6)

Performance Materials

Consumer Markets

67 

19 

Distribution

10 

Unallocated and other

(1)

(28)

$

146 

$

(7)

(a)  The three months ended December 31, 2009 includes $2 million within the selling, general and administrative expenses caption for restructuring charges.  The three months ended December 31, 2008 includes a $26 million severance charge within the selling, general and administrative expenses caption for the ongoing integration and reorganization from the Hercules acquisition and other cost reduction programs and a $21 million charge recorded within the cost of sales caption for a one-time fair value assessment of Hercules inventory as of the date of the transaction.    

(b)  The three months ended December 31, 2008 includes a $10 million charge related to the valuation of the ongoing research and development projects at Hercules as of the merger date.  In accordance with applicable U.S. GAAP and SEC accounting regulations, these purchased in-process research and development costs should be expensed upon acquisition.    

(c)  The three months ended December 31, 2008 includes a $54 million loss on currency swaps related to the Hercules acquisition and a $32 million loss on auction rate securities.    

(d)  Results from November 14, 2008 forward include operations acquired from Hercules Incorporated.

Ashland Inc. and Consolidated Subsidiaries                                                                                                           Table 2

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions - preliminary and unaudited)

December 31

2009

2008

ASSETS

Current assets

Cash and cash equivalents

$

406 

$

222 

Accounts receivable

1,289 

1,499 

Inventories

593 

688 

Deferred income taxes

101 

103 

Other current assets

32 

121 

Current assets held for sale

46 

88 

2,467 

2,721 

Noncurrent assets

Auction rate securities

126 

225 

Goodwill

2,213 

2,100 

Intangibles

1,182 

1,328 

Asbestos insurance receivable (noncurrent portion)

484 

447 

Deferred income taxes

100 

Other noncurrent assets

585 

639 

Noncurrent assets held for sale

60 

91 

4,750 

4,830 

Property, plant and equipment

Cost

3,451 

3,429 

Accumulated depreciation and amortization

(1,438)

(1,238)

2,013 

2,191 

Total assets

$

9,230 

$

9,742 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Short-term debt

$

28 

$

246 

Current portion of long-term debt

50 

94 

Trade and other payables

834 

871 

Accrued expenses and other liabilities

439 

505 

Current liabilities held for sale

23 

1,357 

1,739 

Noncurrent liabilities

Long-term debt (noncurrent portion)

1,516 

2,128 

Employee benefit obligations

1,118 

663 

Asbestos litigation reserve (noncurrent portion)

906 

807 

Deferred income taxes

236 

Other noncurrent liabilities

579 

569 

4,119 

4,403 

Stockholders' equity

3,754 

3,600 

Total liabilities and stockholders' equity

$

9,230 

$

9,742 

Ashland Inc. and Consolidated Subsidiaries                                                                                                                                         Table 3

STATEMENTS OF CONSOLIDATED CASH FLOWS

(In millions - preliminary and unaudited)

Three months ended

December 31

2009

2008

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS

Net income (loss)

$

86 

$

(119)

Income from discontinued operations (net of income taxes)

(10)

Adjustments to reconcile income (loss) from continuing operations to

 cash flows from operating activities

Depreciation and amortization

80 

62 

Debt issuance cost amortization

Purchased in-process research and development amortization

10 

Deferred income taxes

26 

13 

Equity income from affiliates

(6)

(5)

Distributions from equity affiliates

Gain from sale of property and equipment

(2)

Stock based compensation expense

Stock contributions to qualified savings plans

Net gain on divestitures

(1)

Inventory fair value adjustment related to Hercules acquisition

21 

Loss on currency swaps related to Hercules acquisition

54 

Loss on auction rate securities

32 

Change in operating assets and liabilities (a)

(163)

(3)

35 

74 

CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS

Additions to property, plant and equipment

(21)

(38)

Proceeds from disposal of property, plant and equipment

Purchase of operations - net of cash acquired

(2,082)

Proceeds from sale of operations

Settlement of currency swaps related to Hercules acquisition

(95)

Proceeds from sales and maturities of available-for-sale securities

44 

18 

26 

(2,188)

CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS

Proceeds from issuance of long-term debt

2,000 

Repayment of long-term debt

(25)

(601)

Proceeds from/repayments of issuance of short-term debt

205 

Debt issuance costs

(138)

Cash dividends paid

(6)

(6)

Proceeds from exercise of stock options

(24)

1,460 

CASH PROVIDED (USED) BY CONTINUING OPERATIONS

37 

(654)

Cash provided by discontinued operations

Operating cash flows

13 

Effect of currency exchange rate changes on cash and cash equivalents

(15)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

54 

(664)

Cash and cash equivalents - beginning of year

352 

886 

CASH AND CASH EQUIVALENTS - END OF PERIOD

$

406 

$

222 

DEPRECIATION AND AMORTIZATION

Functional Ingredients

$

27 

$

16 

Water Technologies

24 

16 

Performance Materials

13 

13 

Consumer Markets

Distribution

$

80 

$

62 

ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT

Functional Ingredients

$

10 

$

14 

Water Technologies

Performance Materials

Consumer Markets

Distribution

Unallocated and other

$

21 

$

38 

(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

December 31

2009

2008

FUNCTIONAL INGREDIENTS (a) (b)

Sales per shipping day

$

3.4   

$

4.0   

Metric tons sold (thousands)

37.4   

24.4   

Gross profit as a percent of sales

33.7%

15.7%

WATER TECHNOLOGIES (a) (b)

Sales per shipping day

$

7.2   

$

5.1   

Gross profit as a percent of sales

36.6%

30.3%

PERFORMANCE MATERIALS (a)

Sales per shipping day

$

4.4   

$

5.2   

Pounds sold per shipping day

4.0   

4.3   

Gross profit as a percent of sales

18.4%

15.9%

CONSUMER MARKETS (a)

Lubricant sales (gallons)

40.3   

33.0   

Premium lubricants (percent of U.S. branded volumes)

28.3%

27.1%

Gross profit as a percent of sales

33.9%

21.8%

DISTRIBUTION (a)

Sales per shipping day

$

11.8   

$

13.8   

Pounds sold per shipping day

14.3   

15.5   

Gross profit as a percent of sales

9.2%

8.6%

(a)  Sales are defined as net sales.  Gross profit as a percent of sales is defined as sales, less cost of sales divided by sales.    

(b)  Industry segment results from November 14, 2008 forward include operations acquired from Hercules Incorporated.    

Ashland Inc. and Consolidated Subsidiaries                                                                                                                                                                                                                                                                                  Table 5

RECONCILIATION OF NON-GAAP DATA - INCOME (LOSS) FROM CONTINUING OPERATIONS

(In millions - preliminary and unaudited)

Three Months Ended December 31, 2009

Functional

Water

Performance

Consumer

Unallocated

Ingredients

Technologies

Materials

Markets

Distribution

& Other

Total

OPERATING INCOME (LOSS)

All other operating income (loss)

$

27 

$

39 

$

$

67 

$

$

(1)

$

146 

NET INTEREST AND OTHER FINANCING EXPENSE

(41)

(41)

INCOME TAX EXPENSE (BENEFIT)

Discrete tax matters

(6)

(6)

All other income tax expense

35 

35 

29 

29 

INCOME (LOSS) FROM CONTINUING OPERATIONS

$

27 

$

39 

$

$

67 

$

$

(71) 

$

76 

Three Months Ended December 31, 2008

Functional

Water

Performance

Consumer

Unallocated

Ingredients

Technologies

Materials

Markets

Distribution

& Other

Total

OPERATING INCOME (LOSS)

Severance

$

-  

$

(2)

$

-  

$

-  

$

-  

$

(24)

$

(26)

Inventory fair value adjustment

(14)

(7)

-  

-  

-  

(21)

Purchased in-process research

 and development expense

(5)

(5)

-  

-  

-  

(10)

All other operating income (loss)

12

8

5

19

10

(4)

50 

Operating income

(7)

(6)

5

19

10

(28)

(7)

NET GAIN ON DIVESTITURES

NET INTEREST AND OTHER FINANCING EXPENSE

(28)

(28)

OTHER EXPENSES

Loss on currency swaps related to Hercules

acquisition

(54)

(54)

Loss on auction rate securities

(32)

(32)

(86)

(86)

INCOME TAX EXPENSE (BENEFIT)

Discrete tax matters

25 

25 

All other income tax expense

(26)

(26)

(1)

(1)

INCOME (LOSS) FROM CONTINUING OPERATIONS

$

                   (7)

$

                   (6)

$

                     5

$

                   19

$

                   10

$

(140)

$

(119)

Ashland Inc. and Consolidated Subsidiaries                                                                                                                                    Table 6

RECONCILIATION OF NON-GAAP DATA - EBITDA

(In millions - preliminary and unaudited)

RECONCILIATION OF 2010 FISCAL FIRST QUARTER

ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Preliminary

ASHLAND AQUALON

FUNCTIONAL INGREDIENTS

Three Months Ended December 31, 2009

Ashland

GAAP

Results

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma

Results

Sales

$   210   

$         210   

Cost of sales

139   

139   

Gross profit as a percent of sales

33.7%

33.7%

SG&A expenses (includes research and development)

44   

44   

Equity and other income

-   

-   

Operating income

27   

27   

Operating income as a percent of sales

12.9%

12.9%

Depreciation and amortization

27   

27   

Earnings before interest, taxes,

   depreciation and amortization

$    54   

$                    -   

$           54   

EBITDA as a percent of sales

25.7%

25.7%

                                                                                                                                                                                                       Table 6

RECONCILIATION OF 2010 FISCAL FIRST QUARTER

ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Preliminary

ASHLAND HERCULES

WATER TECHNOLOGIES

Three Months Ended December 31, 2009

Ashland

GAAP

Results

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma

Results

Sales

$   443   

$       443   

Cost of sales

281   

281   

Gross profit as a percent of sales

36.6%

36.6%

SG&A expenses (includes research and development)

123   

123   

Equity and other income

-   

-   

Operating income

39   

39   

Operating income as a percent of sales

8.8%

8.8%

Depreciation and amortization

24   

24   

Earnings before interest, taxes,

   depreciation and amortization

$     63   

$             -   

$         63   

EBITDA as a percent of sales

14.2%

14.2%

Ashland Inc. and Consolidated Subsidiaries                                                                                                                                  Table 6

RECONCILIATION OF NON-GAAP DATA - EBITDA

(In millions - preliminary and unaudited)

RECONCILIATION OF 2010 FISCAL FIRST QUARTER

ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Preliminary

ASHLAND PERFORMANCE

MATERIALS

Three Months Ended December 31, 2009

Ashland

GAAP

Results

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma Results

Sales

$     271   

$     271   

Cost of sales

221   

221   

Gross profit as a percent of sales

18.4%

18.4%

SG&A expenses (includes research and development)

48   

48   

Equity and other income

6   

6   

Operating income

8   

8   

Operating income as a percent of sales

3.0%

3.0%

Depreciation and amortization

13   

13   

Earnings before interest, taxes,

   depreciation and amortization

$        21   

$                    -   

$         21   

EBITDA as a percent of sales

7.7%

7.7%

                                                                                                                                                                                                     Table 6

RECONCILIATION OF 2010 FISCAL FIRST QUARTER

ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Preliminary

ASHLAND CONSUMER

MARKETS

Three Months Ended December 31, 2009

Ashland

GAAP

Results

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma

Results

Sales

$   400   

$         400   

Cost of sales

264   

264   

Gross profit as a percent of sales

33.9%

33.9%

SG&A expenses (includes research and development)

76   

76   

Equity and other income

7   

7   

Operating income

67   

67   

Operating income as a percent of sales

16.8%

16.8%

Depreciation and amortization

9   

9   

Earnings before interest, taxes,

   depreciation and amortization

$    76   

$                    -   

$           76   

EBITDA as a percent of sales

19.0%

19.0%

Ashland Inc. and Consolidated Subsidiaries                                                                                                                              Table 6

RECONCILIATION OF NON-GAAP DATA - EBITDA

(In millions - preliminary and unaudited)

RECONCILIATION OF 2010 FISCAL FIRST QUARTER

ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Preliminary

ASHLAND DISTRIBUTION

Three Months Ended December 31, 2009

Ashland

GAAP

Results

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma Results

Sales

$       729   

$      729   

Cost of sales

662   

662   

Gross profit as a percent of sales

9.2%

9.2%

SG&A expenses (includes research and development)

62   

62   

Equity and other income

1   

1   

Operating income

6   

6   

Operating income as a percent of sales

0.8%

0.8%

Depreciation and amortization

7   

7   

Earnings before interest, taxes,

   depreciation and amortization

$          13   

$                    -   

$       13   

EBITDA as a percent of sales

1.8%

1.8%

                                                                                                                                                                                                    Table 6

RECONCILIATION OF 2010 FISCAL FIRST QUARTER

ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Preliminary

INTERSEGMENT SALES/ UNALLOCATED AND OTHER

Three Months Ended December 31, 2009

Ashland

GAAP

Results

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma Results

Sales

$        (33)

$           (33)

Cost of sales

(33)

(33)

SG&A expenses (includes research and development)

Equity and other income

Operating income

(1)

(1)

Depreciation and amortization

Earnings before interest, taxes,    depreciation and amortization

$          (1)

$                    - 

$             (1)

Ashland Inc. and Consolidated Subsidiaries                                                                                                                                    Table 6

RECONCILIATION OF NON-GAAP DATA - EBITDA

(In millions - preliminary and unaudited)

RECONCILIATION OF 2010 FISCAL FIRST QUARTER

ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Preliminary

ASHLAND INC.

Three Months Ended December 31, 2009

Ashland

GAAP

Results

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma Results

Sales

$    2,020   

$      2,020   

Cost of sales

1,534   

1,534   

Gross profit as a percent of sales

24.1%

24.1%

SG&A expenses (includes research and development)

354   

354   

Equity and other income

14   

14   

Operating income

146   

146   

Operating income as a percent of sales

7.2%

7.2%

Depreciation and amortization

80   

80   

Earnings before interest, taxes,

   depreciation and amortization

$       226   

$                    -   

$          226   

EBITDA as a percent of sales

11.2%

11.2%

                                                                                                                                                                                                                                                                        Table 6

RECONCILIATION OF 2009 FISCAL FIRST QUARTER ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Pro Forma Adjustments

Preliminary

ASHLAND AQUALON

FUNCTIONAL INGREDIENTS

Three Months Ended December 31, 2008

Ashland  GAAP Results

Hercules

Ongoing

Results (a)

Nonrecurring Purchase Accounting

Adjustments

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma Results

Sales

$       119   

$               112   

$         231   

Cost of sales

101   

77   

$                (14)  

164   

Gross profit as a percent of sales

15.7%

31.3%

29.0%

SG&A expenses (includes research and development)

27   

20   

(5)  

42   

Equity and other income

2   

-   

2   

Operating income

(7)  

15   

19   

27   

Operating income as a percent of sales

-5.9%

13.4%

11.7%

Depreciation and amortization

21   

6   

(5)  

22   

Earnings before interest, taxes,

   depreciation and amortization

$         14   

$                 21   

$                 14   

$           49   

EBITDA as a percent of sales

11.8%

18.8%

21.2%

(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 2009 FISCAL FIRST QUARTER ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Pro Forma Adjustments

Preliminary

ASHLAND HERCULES

WATER TECHNOLOGIES

Three Months Ended December 31, 2008

Ashland  GAAP Results

Hercules

Ongoing

Results (a)

Nonrecurring Purchase Accounting

Adjustments

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma Results

Sales

$       318   

$            155   

$         473   

Cost of sales

222   

116   

$                  (7)  

331   

Gross profit as a percent of sales

30.3%

25.2%

30.0%

SG&A expenses (includes research and development)

102   

34   

(5)  

$               (2)  

129   

Equity and other income

-   

-   

-   

Operating income

(6)  

5   

12   

2   

13   

Operating income as a percent of sales

-1.9%

3.2%

2.7%

Depreciation and amortization

21   

5   

(5)  

-   

21   

Earnings before interest, taxes,

   depreciation and amortization

$         15   

$              10   

$                   7   

$                2   

$           34   

EBITDA as a percent of sales

4.7%

6.5%

7.2%

                                                                                                                                                                                                                                                    Table 6

RECONCILIATION OF 2009 FISCAL FIRST QUARTER ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Pro Forma Adjustments

Preliminary

ASHLAND PERFORMANCE

MATERIALS

Three Months Ended December 31, 2008

Ashland  GAAP Results

Hercules

Ongoing

Results (a)

Nonrecurring Purchase Accounting

Adjustments

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma Results

Sales

$       324   

$         324   

Cost of sales

272   

272   

Gross profit as a percent of sales

15.9%

15.9%

SG&A expenses (includes research and development)

53   

53   

Equity and other income

6   

6   

Operating income

5   

5   

Operating income as a percent of sales

1.5%

1.5%

Depreciation and amortization

13   

13   

Earnings before interest, taxes,    depreciation and amortization

$         18   

$           18   

EBITDA as a percent of sales

5.6%

5.6%

(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 2009 FISCAL FIRST QUARTER ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Pro Forma Adjustments

Preliminary

ASHLAND CONSUMER

MARKETS

Three Months Ended December 31, 2008

Ashland  GAAP Results

Hercules

Ongoing

Results (a)

Nonrecurring Purchase Accounting

Adjustments

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma Results

Sales

$       388   

$         388   

Cost of sales

303   

303   

Gross profit as a percent of sales

21.8%

21.8%

SG&A expenses (includes research and development)

69   

69   

Equity and other income

3   

3   

Operating income

19   

19   

Operating income as a percent of sales

4.9%

4.9%

Depreciation and amortization

9   

9   

Earnings before interest, taxes,    depreciation and amortization

$         28   

$           28   

EBITDA as a percent of sales

7.2%

7.2%

                                                                                                                                                                                                                                                    Table 6

RECONCILIATION OF 2009 FISCAL FIRST QUARTER ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Pro Forma Adjustments

Preliminary

ASHLAND DISTRIBUTION

Three Months Ended December 31, 2008

Ashland  GAAP Results

Hercules

Ongoing

Results (a)

Nonrecurring Purchase Accounting

Adjustments

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma Results

Sales

$       853   

$         853   

Cost of sales

779   

779   

Gross profit as a percent of sales

8.6%

8.6%

SG&A expenses (includes research and development)

65   

65   

Equity and other income

1   

1   

Operating income

10   

10   

Operating income as a percent of sales

1.2%

1.2%

Depreciation and amortization

8   

8   

Earnings before interest, taxes,    depreciation and amortization

$         18   

$           18   

EBITDA as a percent of sales

2.1%

2.1%

(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 2009 FISCAL FIRST QUARTER ADJUSTED PRO FORMA RESULTS

($ millions, except percentages)

Pro Forma Adjustments

Preliminary

INTERSEGMENT SALES/

UNALLOCATED AND OTHER

Three Months Ended December 31, 2008

Ashland  GAAP Results

Hercules

Ongoing

Results (a)

Nonrecurring Purchase Accounting

Adjustments

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma

Results

Sales

$        (36)

$          (36)

Cost of sales

(36)

(36)

SG&A expenses (includes research and development)

28 

$             (24)

Equity and other income

$                   4 

Operating income

(28)

24 

Depreciation and amortization

Earnings before interest, taxes,    depreciation and amortization

$        (28)

$                   4 

$              24 

$              - 

                                                                                                                                                                                                                                                                       Table 6

RECONCILIATION OF 2009 FISCAL FIRST QUARTER ADJUSTED PRO FORMA RESULTS

($ millions, except percentages) 

Pro Forma Adjustments

Preliminary

ASHLAND INC.

Three Months Ended December 31, 2008

Ashland  GAAP Results

Hercules

Ongoing

Results (a)

Nonrecurring Purchase Accounting

Adjustments

Eliminate Key Items

(Table 5)

Adjusted

Pro Forma

Results

Sales

$    1,966   

$            267   

$      2,233   

Cost of sales

1,641   

193   

$                (21)  

$                 -   

1,813   

Gross profit as a percent of sales

16.5%

27.7%

18.8%

SG&A expenses (includes research and development)

344   

54   

(10)  

(26)  

362   

Equity and other income

12   

4   

16   

Operating income

(7)  

24   

31   

26   

74   

Operating income as a percent of sales

-0.4%

9.0%

3.3%

Depreciation and amortization

72   

11   

(10)  

-   

73   

Earnings before interest, taxes,    depreciation and amortization

$         65   

$              35   

$                 21   

$              26   

$         147   

EBITDA as a percent of sales

3.3%

13.1%

6.6%

(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

December 31

2009

2008

Total cash flows provided by operating activities from continuing operations

$

35 

$

74 

Less:

Additions to property, plant and equipment

(21)

(38)

Cash dividends paid

(6)

(6)

Free cash flows

$

8

$

30 

SOURCE Ashland Inc.



RELATED LINKS

http://www.ashland.com