Ashland Inc. Reports Strong March Quarter Results; Record Operating Income for Six Months

Apr 23, 2001, 01:00 ET from Ashland Inc.

    COVINGTON, Ky., April 23 /PRNewswire Interactive News Release/ --
     Asland Inc. today issued the following (NYSE:   ASH):
 
                     Fiscal 2001: Second quarter highlights
 
     * Strong refining margins boost results from Marathon Ashland Petroleum
     * Highway construction unit adversely affected by winter weather and
       special charge
     * Weakening economy affects some specialty chemical and distribution units
 
                             Quarter ended March 31Six months ended March 31
     (In millions except       2001          2000         2001         2000
       earnings per share)
 
     Reported results
     Operating income          $ 87          $ 90        $ 231       $  200
     Net income (loss)         $ 46          $ 11        $ 105       $ (155)
     Earnings (loss) per share $.66          $.16        $1.49       $(2.17)
 
     Income from continuing operations
     Operating income          $ 87          $ 90        $ 231       $  200
     Net income                $ 26          $ 25        $  85       $   65
     Earnings per share        $.37          $.35        $1.21       $  .91
 
     Ashland Inc. today reported net income of $46 million, or 66 cents a
 share, for the quarter ended March 31, the second quarter of the company's
 fiscal year.  This compares to net income of $11 million, or 16 cents a share,
 for the same quarter a year ago.
     (Photo:  http://www.newscom.com/cgi-bin/prnh/20001019/CHTH004LOGO
              http://www.newscom.com/cgi-bin/prnh/19990125/CHM011-c )
     For the March 2001 quarter, Ashland had income from continuing operations
 of $26 million, or 37 cents a share.  These amounts include an after-tax
 charge of $9 million, or 13 cents a share, to correct improper recognition of
 construction contract earnings at one of APAC's 46 operating divisions.
 Excluding that charge, income from continuing operations would have been
 $35 million, or 50 cents a share, which compares favorably to $25 million, or
 35 cents a share, for the year ago quarter.
     For the six months ended March 31, 2001, Ashland had income from
 continuing operations of $85 million, or $1.21 a share, including the charge
 associated with the operating division of APAC, compared to $65 million, or
 91 cents a share, in the first half of fiscal 2000.  "We were pleased with
 record operating income for the six months, which at $231 million was up
 15 percent from a year ago," said Chairman and Chief Executive Officer Paul W.
 Chellgren.
     Income from continuing operations excludes the results of discontinued
 operations, extraordinary items and the cumulative effect of accounting
 changes.  During the March 2001 quarter, Ashland sold the remainder of its
 shares of Arch Coal common stock realizing an after-tax gain of $33 million
 from those discontinued operations.  Also recorded were after-tax charges of
 $8 million related to other discontinued operations and $5 million, which
 represents Ashland's share of the cumulative effect of Marathon Ashland
 Petroleum's adoption of new accounting standards related to derivative
 instruments. Ashland owns 38 percent of MAP, which is a petroleum refining and
 marketing joint venture with USX-Marathon.
     "The March quarter was an eventful period for Ashland.  Improved results
 from MAP more than offset a decline from our wholly owned businesses, once
 again demonstrating the effectiveness of our business mix," Chellgren said.
 "In addition, we fulfilled our pledge to unlock the value of our investment in
 the coal industry by selling our remaining shares of Arch Coal common stock."
 
     Marathon Ashland Petroleum
     Operating income from refining and marketing totaled $96 million, up from
 $45 million a year ago.  MAP experienced strong refining margins for much of
 the quarter, offsetting the adverse impact of compressed retail margins.
 "Increased demand from utilities and home-heating oil customers spurred
 distillate values.  At the same time, Midwest gasoline markets tightened on
 concerns that demand in the upcoming driving season will again exceed
 supplies," explained Chellgren.
     During the quarter, MAP announced two transactions that will strengthen
 its retail marketing unit, Speedway SuperAmerica LLC.  The planned acquisition
 of convenience stores from Welsh Inc. will expand coverage in northern Indiana
 and southwestern Michigan.  MAP also signed a letter of intent with Pilot
 Corporation to form a joint venture involving each company's travel
 center/truck stop operations.  The new company, of which MAP would own
 50 percent, would initially operate a nationwide chain of about 250 travel
 centers.
 
     Wholly owned businesses
     APAC had an operating loss of $38 million for the March quarter, due in
 part to a pre-tax charge of $15 million associated with its Manassas, Va.,
 unit.  During a recent internal investigation of financial activities at this
 division, it was discovered that its earnings had been intentionally
 overstated.  Preliminary indications are that the problems relate primarily to
 the recognition of revenues and failure to recognize certain costs over a
 period of two to three years.  There is no current evidence of any impact on
 outside parties, customers or suppliers.  "The company is taking appropriate
 steps to address this issue and will take whatever further actions are
 necessary based on the results of a comprehensive investigation," Chellgren
 said.  Ashland has retained Deloitte & Touche to conduct an independent review
 of business processes, financial accounting controls and opportunities for
 improvement in APAC's accounting practices.  Local management of the Manassas
 unit has been replaced.
     Poor weather was also a major factor in APAC's operating loss.  "Road
 construction activity levels were materially lower than usual for the March
 quarter.  Production of hot-mix asphalt was down 21 percent while ready-mix
 production fell 27 percent," Chellgren noted.  Work interrupted by poor
 weather remains under contract and is a factor in the 34 percent increase in
 APAC's backlog to a record $1.9 billion at March 31.  "If the weather
 cooperates, APAC is well-prepared for a busy and profitable construction
 season.  However, given the division's slow start, results will likely fall
 well short of those achieved last year."
     Operating income from Ashland Specialty Chemical was $17 million, down
 29 percent from a year ago.  "Sluggish demand in transportation and
 construction markets continues to adversely affect results from four of our
 specialty chemical businesses," Chellgren said.  Unit volumes and margins were
 down for unsaturated polyester resins, foundry chemicals, specialty adhesives
 and maleic anhydride.  "On a more positive note, earnings from our electronic
 chemicals, industrial water treatment and marine chemicals businesses were
 up."
     Ashland Distribution's operating income of $14 million was even with last
 year despite unit volume declines resulting from the weak economy.  "Margin
 improvement and cost reduction initiatives successfully counteracted much of
 the impact of lower demand and contributed to improved performance from
 chemical and European thermoplastics distribution," noted Chellgren.
 Environmental services' results also improved.
     Valvoline's results were mixed as operating income declined from
 $23 million to $19 million.  "Results from our core North American lubricants
 business and Eagle One were up.  However, these improvements were more than
 offset by declines in other areas," Chellgren said.  Last year, Valvoline
 experienced unusually strong early season sales of R-12 automotive
 refrigerant.  This year, R-12 volumes have been more in line with normal
 trends.  In addition, higher raw materials costs led to margin compression for
 automotive chemicals and antifreeze and results from Valvoline Instant Oil
 Change declined.
 
     Corporate developments and outlook
     During the quarter, Ashland sold the remainder of its shares of Arch Coal
 common stock and used the proceeds to repay debt.  Debt as a percent of
 capital employed at March 31 was 52 percent, down from 56 percent a year ago.
 In its stock buyback program, Ashland purchased approximately 76,000 shares in
 the March quarter. The company currently has board authorization to purchase
 an additional 2.3 million shares.
     In keeping with its strategy to pursue selected acquisitions, Ashland
 announced that it had reached an agreement with Neste Chemicals Oy to purchase
 the business and assets of Neste Polyester.  "This acquisition will advance us
 to a worldwide market leadership position in unsaturated polyester resins and
 gelcoats," Chellgren said, adding that Ashland anticipates completing the
 transaction in the next few weeks.
     "In summary, despite the slowing economy, we have earned record operating
 income for the first six months of this year.  Looking ahead to the second
 half of fiscal 2001, supply and demand fundamentals for Midwest petroleum
 markets continue to suggest a strong performance for refining and marketing,"
 Chellgren said.  "However, the outlook for our wholly owned businesses remains
 mixed.  APAC is off to a slow start, and weakness in the manufacturing sector
 of the economy continues to adversely affect the volumes and margins for
 certain parts of Ashland Specialty Chemical.  The same is true of Ashland
 Distribution, although realizing the benefits of margin improvement
 initiatives will mitigate some of the impact.  Valvoline's performance
 continues to be on track with our expectations.
     "For the full year, combined profits from our wholly owned businesses are
 likely to be lower than last year's results.  But given the excellent outlook
 for MAP, we are quite optimistic about Ashland's prospects for the balance of
 fiscal 2001," he concluded.
     On April 23, at 11:00 a.m. (EDT), Ashland will provide a live audio
 webcast of its quarterly conference call with securities analysts.  The call
 will cover results for the March quarter and will include an outlook for the
 remainder of fiscal 2001.  The webcast will be accessible via Ashland's
 Investor Relations website, www.ashland.com/investors.  Following the live
 event, replays of the webcast will be available until May 1.  The free
 RealPlayer 8 Basic is needed to listen to the webcast and can be downloaded
 from www.real.com.
     Ashland Inc. (NYSE:   ASH) is a Fortune 250 company providing products,
 services and customer solutions throughout the world.  Our businesses include
 road construction, specialty chemicals, lubricants, car-care products,
 chemical and plastics distribution and transportation fuels.  Our products and
 services are fundamental to how people live and work.  Through the dedicated
 efforts of our employees, we are "The Who In How Things Work.(TM)" Find us at
 www.ashland.com.
 
     This news release contains forward-looking statements, within the meaning
 of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
 Exchange Act of 1934, with respect to Ashland's operating performance and
 earnings.  Estimates as to operating performance and earnings are based upon a
 number of assumptions, including those mentioned within this news release.
 Such estimates are also based upon internal forecasts and analyses of current
 and future market conditions and trends, management plans and strategies,
 weather, operating efficiencies and economic conditions, such as prices,
 supply and demand and cost of raw materials.  Successful completion of the
 transactions mentioned in this release may be impacted by the required receipt
 of government and third party approvals, the completion of due diligence, and
 the execution and performance of definitive agreements.  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 and risks affecting
 Ashland are contained in Ashland's Form 10-K for the fiscal year ended
 September 30, 2000, as amended.  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 release.
 
     (TM)Trademark, Ashland Inc.
 
 
     Ashland Inc. and Consolidated Subsidiaries                          Page 1
     STATEMENTS OF CONSOLIDATED INCOME
     (In millions except per share data - unaudited)
 
                                            Three months ended Six months ended
                                                 March 31          March 31
                                               2001     2000     2001     2000
     REVENUES
       Sales and operating revenues         $ 1,659  $ 1,822  $ 3,537  $ 3,718
       Equity income                            102       51      223       88
       Other income                              17       22       31       36
                                              1,778    1,895    3,791    3,842
     COSTS AND EXPENSES
       Cost of sales and operating expenses   1,365    1,460    2,911    2,996
       Selling, general and administrative
        expenses                                267      287      532      531
       Depreciation, depletion and
        amortization                             59       58      117      115
                                              1,691    1,805    3,560    3,642
     OPERATING INCOME                            87       90      231      200
       Net interest and other financial
        costs                                   (43)     (45)     (89)     (88)
     INCOME FROM CONTINUING OPERATIONS
      BEFORE INCOME TAXES                        44       45      142      112
       Income taxes                             (18)     (20)     (57)     (47)
     INCOME FROM CONTINUING OPERATIONS           26       25       85       65
       Loss from discontinued operations
        (net of income taxes)                    (8)      (9)      (8)    (215)
       Gain (loss) on disposal of
        discontinued operations (net of
        income taxes)                            33       (3)      33       (3)
     INCOME (LOSS) BEFORE EXTRAORDINARY
      LOSS AND CUMULATIVE EFFECT OF ACCOUNTING
        CHANGE                                   51       13      110     (153)
       Extraordinary loss on early
        retirement of debt (net of income
        taxes)                                   --       (2)      --       (2)
       Cumulative effect of accounting
        change (net of income taxes)             (5)      --       (5)      --
     NET INCOME (LOSS)                       $   46   $   11   $  105   $ (155)
 
     DILUTED EARNINGS (LOSS) PER SHARE
       Income from continuing operations     $  .37   $  .35   $ 1.21   $  .91
       Loss from discontinued operations       (.11)    (.12)    (.11)   (3.01)
       Gain (loss) on disposal of
        discontinued operations                 .46     (.04)     .46     (.04)
       Extraordinary loss on early
        retirement of debt                       --     (.03)      --     (.03)
       Cumulative effect of accounting
        change                                 (.06)      --     (.07)      --
       Net income (loss)                     $  .66   $  .16   $ 1.49   $(2.17)
 
     AVERAGE COMMON SHARES AND ASSUMED
      CONVERSIONS                                70       71       70       71
 
 
 
     Ashland Inc. and Consolidated Subsidiaries                         Page 2
     CONDENSED CONSOLIDATED BALANCE SHEETS
     (In millions - unaudited)
 
                                                              March 31
                                                       2001              2000
     ASSETS
     Current assets
       Cash and cash equivalents                    $    77           $    64
       Accounts receivable                            1,055             1,158
       Inventories                                      503               519
       Deferred income taxes                            131               104
       Other current assets                             109               145
                                                      1,875             1,990
 
     Investments and other assets
       Investment in Marathon Ashland
        Petroleum LLC (MAP)                           2,307             2,189
       Cost in excess of net assets of
        companies acquired                              530               484
       Investment in Arch Coal -
        discontinued operations                          --                36
       Other noncurrent assets                          387               308
                                                      3,224             3,017
 
     Property, plant and equipment
       Cost                                           2,941             2,935
       Accumulated depreciation, depletion
        and amortization                             (1,529)           (1,417)
                                                      1,412             1,518
 
                                                    $ 6,511           $ 6,525
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities
       Debt due within one year                     $   266           $   413
       Trade and other payables                       1,119             1,196
       Income taxes                                      31               103
                                                      1,416             1,712
 
     Noncurrent liabilities
       Long-term debt (less current
        portion)                                      1,889             1,947
       Employee benefit obligations                     375               415
       Deferred income taxes                            262                87
       Reserves of captive insurance
        companies                                       185               194
       Other long-term liabilities and
        deferred credits                                369               346
                                                      3,080             2,989
 
     Common stockholders' equity                      2,015             1,824
 
                                                    $ 6,511           $ 6,525
 
 
 
     Ashland Inc. and Consolidated Subsidiaries                         Page 3
     STATEMENTS OF CONSOLIDATED CASH FLOWS
     (In millions - unaudited)
                                                          Six months ended
                                                              March 31
                                                       2001              2000
     CASH FLOWS FROM CONTINUING OPERATIONS
     Income from continuing operations               $   85            $   65
     Expense (income) not affecting cash
       Depreciation, depletion and
        amortization (a)                                117               115
       Deferred income taxes                             23               (24)
       Equity income from affiliates                   (223)              (88)
       Distributions from equity
        affiliates                                      212                68
       Other items                                        1                --
     Change in operating assets and
      liabilities (b)                                   (65)               64
                                                        150               200
     CASH FLOWS FROM FINANCING
     Proceeds from issuance of long-term
      debt                                               52               737
     Proceeds from issuance of common
      stock                                               6                --
     Repayment of long-term debt                        (73)             (356)
     Repurchase of common stock                         (11)              (52)
     Increase (decrease) in short-term
      debt                                              (50)              129
     Dividends paid (c)                                 (38)              (39)
                                                       (114)              419
     CASH FLOWS FROM INVESTMENT
     Additions to property, plant and
      equipment (a)                                    (109)             (136)
     Purchase of operations - net of cash
      acquired (d)                                      (18)             (550)
     Proceeds from sale of operations                     8                --
     Other - net                                          7                19
                                                       (112)             (667)
     CASH USED BY CONTINUING OPERATIONS                 (76)              (48)
     Cash provided by discontinued
      operations                                         86                 2
     INCREASE (DECREASE) IN CASH AND CASH
      EQUIVALENTS                                    $   10           $   (46)
 
     EBITDA (e)
     APAC                                            $   40           $   100
     Ashland Distribution                                35                38
     Ashland Specialty Chemical                          60                77
     Valvoline                                           40                45
     Refining and Marketing                             204                78
     Corporate                                          (31)              (23)
                                                     $  348           $   315
 
     ADDITIONS TO PROPERTY, PLANT AND
      EQUIPMENT
     APAC                                            $   65           $    74
     Ashland Distribution                                 4                10
     Ashland Specialty Chemical                          19                33
     Valvoline                                           17                 9
     Corporate                                            4                10
                                                     $  109           $   136
 
     (a) Excludes amounts related to equity affiliates. Ashland's 38 percent
         share of MAP's DD&A was $65 million in 2001 and $58 million in 2000,
         and its share of MAP's capital expenditures was $161 million in 2001
         and $163 million in 2000.
     (b) Excludes changes resulting from operations acquired or sold.
     (c) The 2000 amount excludes the dividend of Arch Coal shares to Ashland
         shareholders which resulted in a $123 million charge to retained
         earnings.
     (d) Amounts exclude acquisitions through the issuance of common stock of
         $1 million in 2000.
     (e) Earnings before interest, taxes, depreciation and amortization
         (EBITDA) for Ashland represents operating income plus DD&A, each
         excluding unusual items. EBITDA is a widely accepted financial
         indicator of a company's ability to incur and service debt, but should
         not be considered in isolation or as an alternative to net income,
         operating income, cash flows from operations, or a measure of a
         company's profitability, liquidity or performance under generally
         accepted accounting principles.
 
 
 
     Ashland Inc. and Consolidated Subsidiaries                          Page 4
     INFORMATION BY INDUSTRY SEGMENT
     (Dollars in millions - unaudited)
                                           Three months ended Six months ended
                                                  March 31          March 31
                                               2001     2000     2001     2000
     SALES AND OPERATING REVENUES
     APAC                                      $384     $431   $1,005   $1,036
     Ashland Distribution                       726      812    1,457    1,580
     Ashland Specialty Chemical                 304      323      615      637
     Valvoline                                  267      286      508      524
     Intersegment sales                         (22)     (30)     (48)     (59)
                                             $1,659   $1,822   $3,537   $3,718
 
     OPERATING INCOME
     APAC                                      $(38)(a)   $1     $(25)(a)  $38
     Ashland Distribution                        14       14       24       27
     Ashland Specialty Chemical                  17       24       36       53
     Valvoline                                   19       23       29       34
     Refining and Marketing (b)                  96       45      204       78
     Corporate                                  (21)     (17)     (37)     (30)
                                                $87      $90     $231     $200
     OPERATING INFORMATION
     APAC
        Construction backlog at March 31
         (millions)                                            $1,856   $1,388
        Hot mix asphalt production (million
         tons)                                  4.1      5.2     12.6     14.0
        Aggregate production (million tons)     5.5      5.5     11.4     11.9
        Ready-mix concrete production
         (thousand cubic yards)                 460      629      983    1,226
     Ashland Distribution (c)
        Sales per shipping day (millions)     $11.3    $12.5    $11.7    $12.5
        Gross profit as a percent of sales     16.4%    15.6%    16.0%    15.6%
 
     Ashland Specialty Chemical (c)
        Sales per shipping day (millions)      $4.8     $5.0     $4.9     $5.1
        Gross profit as a percent of sales     34.0%    34.4%    34.0%    35.2%
 
     Valvoline lubricant sales (thousand
      barrels per day)                         11.6     13.3     11.0     12.3
     Refining and Marketing (d)
        Crude oil refined (thousand barrels
         per day)                             869.9    851.4    863.3    837.8
        Refined products sold (thousand
         barrels per day)                   1,253.0  1,218.6  1,280.9  1,269.6
        Refining and wholesale marketing
         margin (per barrel) (e)              $3.63    $1.84    $3.69    $1.43
        Speedway SuperAmerica (SSA) retail
         outlets at March 31                                    2,183    2,420
        SSA gasoline and distillate sales
         (millions of gallons)                1,054    1,113    2,186    2,247
        SSA gross margin - gasoline and
         distillates (per gallon)           $0.0958  $0.1079  $0.1021  $0.1122
        SSA merchandise sales (millions)       $528     $533   $1,086   $1,063
        SSA merchandise margin (as a
         percent of sales)                     24.5%    24.3%    24.7%    26.1%
 
     (a) Includes a charge of $15 million to correct improper recognition of
         construction contract earnings.
     (b) Includes Ashland's equity income from MAP, amortization of Ashland's
         excess investment in MAP, and certain retained refining and marketing
         activities.
     (c) Sales are defined as sales and operating revenues.  Gross profit is
         defined as sales and operating revenues, less cost of sales and
         operating expenses, less depreciation and amortization relative to
         manufacturing assets.
     (d) Amounts represent 100 percent of the volumes of MAP, in which Ashland
         owns a 38 percent interest.
     (e) Sales revenue less cost of refinery inputs, purchased products and
         manufacturing expenses, including depreciation.
 
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SOURCE Ashland Inc.
    COVINGTON, Ky., April 23 /PRNewswire Interactive News Release/ --
     Asland Inc. today issued the following (NYSE:   ASH):
 
                     Fiscal 2001: Second quarter highlights
 
     * Strong refining margins boost results from Marathon Ashland Petroleum
     * Highway construction unit adversely affected by winter weather and
       special charge
     * Weakening economy affects some specialty chemical and distribution units
 
                             Quarter ended March 31Six months ended March 31
     (In millions except       2001          2000         2001         2000
       earnings per share)
 
     Reported results
     Operating income          $ 87          $ 90        $ 231       $  200
     Net income (loss)         $ 46          $ 11        $ 105       $ (155)
     Earnings (loss) per share $.66          $.16        $1.49       $(2.17)
 
     Income from continuing operations
     Operating income          $ 87          $ 90        $ 231       $  200
     Net income                $ 26          $ 25        $  85       $   65
     Earnings per share        $.37          $.35        $1.21       $  .91
 
     Ashland Inc. today reported net income of $46 million, or 66 cents a
 share, for the quarter ended March 31, the second quarter of the company's
 fiscal year.  This compares to net income of $11 million, or 16 cents a share,
 for the same quarter a year ago.
     (Photo:  http://www.newscom.com/cgi-bin/prnh/20001019/CHTH004LOGO
              http://www.newscom.com/cgi-bin/prnh/19990125/CHM011-c )
     For the March 2001 quarter, Ashland had income from continuing operations
 of $26 million, or 37 cents a share.  These amounts include an after-tax
 charge of $9 million, or 13 cents a share, to correct improper recognition of
 construction contract earnings at one of APAC's 46 operating divisions.
 Excluding that charge, income from continuing operations would have been
 $35 million, or 50 cents a share, which compares favorably to $25 million, or
 35 cents a share, for the year ago quarter.
     For the six months ended March 31, 2001, Ashland had income from
 continuing operations of $85 million, or $1.21 a share, including the charge
 associated with the operating division of APAC, compared to $65 million, or
 91 cents a share, in the first half of fiscal 2000.  "We were pleased with
 record operating income for the six months, which at $231 million was up
 15 percent from a year ago," said Chairman and Chief Executive Officer Paul W.
 Chellgren.
     Income from continuing operations excludes the results of discontinued
 operations, extraordinary items and the cumulative effect of accounting
 changes.  During the March 2001 quarter, Ashland sold the remainder of its
 shares of Arch Coal common stock realizing an after-tax gain of $33 million
 from those discontinued operations.  Also recorded were after-tax charges of
 $8 million related to other discontinued operations and $5 million, which
 represents Ashland's share of the cumulative effect of Marathon Ashland
 Petroleum's adoption of new accounting standards related to derivative
 instruments. Ashland owns 38 percent of MAP, which is a petroleum refining and
 marketing joint venture with USX-Marathon.
     "The March quarter was an eventful period for Ashland.  Improved results
 from MAP more than offset a decline from our wholly owned businesses, once
 again demonstrating the effectiveness of our business mix," Chellgren said.
 "In addition, we fulfilled our pledge to unlock the value of our investment in
 the coal industry by selling our remaining shares of Arch Coal common stock."
 
     Marathon Ashland Petroleum
     Operating income from refining and marketing totaled $96 million, up from
 $45 million a year ago.  MAP experienced strong refining margins for much of
 the quarter, offsetting the adverse impact of compressed retail margins.
 "Increased demand from utilities and home-heating oil customers spurred
 distillate values.  At the same time, Midwest gasoline markets tightened on
 concerns that demand in the upcoming driving season will again exceed
 supplies," explained Chellgren.
     During the quarter, MAP announced two transactions that will strengthen
 its retail marketing unit, Speedway SuperAmerica LLC.  The planned acquisition
 of convenience stores from Welsh Inc. will expand coverage in northern Indiana
 and southwestern Michigan.  MAP also signed a letter of intent with Pilot
 Corporation to form a joint venture involving each company's travel
 center/truck stop operations.  The new company, of which MAP would own
 50 percent, would initially operate a nationwide chain of about 250 travel
 centers.
 
     Wholly owned businesses
     APAC had an operating loss of $38 million for the March quarter, due in
 part to a pre-tax charge of $15 million associated with its Manassas, Va.,
 unit.  During a recent internal investigation of financial activities at this
 division, it was discovered that its earnings had been intentionally
 overstated.  Preliminary indications are that the problems relate primarily to
 the recognition of revenues and failure to recognize certain costs over a
 period of two to three years.  There is no current evidence of any impact on
 outside parties, customers or suppliers.  "The company is taking appropriate
 steps to address this issue and will take whatever further actions are
 necessary based on the results of a comprehensive investigation," Chellgren
 said.  Ashland has retained Deloitte & Touche to conduct an independent review
 of business processes, financial accounting controls and opportunities for
 improvement in APAC's accounting practices.  Local management of the Manassas
 unit has been replaced.
     Poor weather was also a major factor in APAC's operating loss.  "Road
 construction activity levels were materially lower than usual for the March
 quarter.  Production of hot-mix asphalt was down 21 percent while ready-mix
 production fell 27 percent," Chellgren noted.  Work interrupted by poor
 weather remains under contract and is a factor in the 34 percent increase in
 APAC's backlog to a record $1.9 billion at March 31.  "If the weather
 cooperates, APAC is well-prepared for a busy and profitable construction
 season.  However, given the division's slow start, results will likely fall
 well short of those achieved last year."
     Operating income from Ashland Specialty Chemical was $17 million, down
 29 percent from a year ago.  "Sluggish demand in transportation and
 construction markets continues to adversely affect results from four of our
 specialty chemical businesses," Chellgren said.  Unit volumes and margins were
 down for unsaturated polyester resins, foundry chemicals, specialty adhesives
 and maleic anhydride.  "On a more positive note, earnings from our electronic
 chemicals, industrial water treatment and marine chemicals businesses were
 up."
     Ashland Distribution's operating income of $14 million was even with last
 year despite unit volume declines resulting from the weak economy.  "Margin
 improvement and cost reduction initiatives successfully counteracted much of
 the impact of lower demand and contributed to improved performance from
 chemical and European thermoplastics distribution," noted Chellgren.
 Environmental services' results also improved.
     Valvoline's results were mixed as operating income declined from
 $23 million to $19 million.  "Results from our core North American lubricants
 business and Eagle One were up.  However, these improvements were more than
 offset by declines in other areas," Chellgren said.  Last year, Valvoline
 experienced unusually strong early season sales of R-12 automotive
 refrigerant.  This year, R-12 volumes have been more in line with normal
 trends.  In addition, higher raw materials costs led to margin compression for
 automotive chemicals and antifreeze and results from Valvoline Instant Oil
 Change declined.
 
     Corporate developments and outlook
     During the quarter, Ashland sold the remainder of its shares of Arch Coal
 common stock and used the proceeds to repay debt.  Debt as a percent of
 capital employed at March 31 was 52 percent, down from 56 percent a year ago.
 In its stock buyback program, Ashland purchased approximately 76,000 shares in
 the March quarter. The company currently has board authorization to purchase
 an additional 2.3 million shares.
     In keeping with its strategy to pursue selected acquisitions, Ashland
 announced that it had reached an agreement with Neste Chemicals Oy to purchase
 the business and assets of Neste Polyester.  "This acquisition will advance us
 to a worldwide market leadership position in unsaturated polyester resins and
 gelcoats," Chellgren said, adding that Ashland anticipates completing the
 transaction in the next few weeks.
     "In summary, despite the slowing economy, we have earned record operating
 income for the first six months of this year.  Looking ahead to the second
 half of fiscal 2001, supply and demand fundamentals for Midwest petroleum
 markets continue to suggest a strong performance for refining and marketing,"
 Chellgren said.  "However, the outlook for our wholly owned businesses remains
 mixed.  APAC is off to a slow start, and weakness in the manufacturing sector
 of the economy continues to adversely affect the volumes and margins for
 certain parts of Ashland Specialty Chemical.  The same is true of Ashland
 Distribution, although realizing the benefits of margin improvement
 initiatives will mitigate some of the impact.  Valvoline's performance
 continues to be on track with our expectations.
     "For the full year, combined profits from our wholly owned businesses are
 likely to be lower than last year's results.  But given the excellent outlook
 for MAP, we are quite optimistic about Ashland's prospects for the balance of
 fiscal 2001," he concluded.
     On April 23, at 11:00 a.m. (EDT), Ashland will provide a live audio
 webcast of its quarterly conference call with securities analysts.  The call
 will cover results for the March quarter and will include an outlook for the
 remainder of fiscal 2001.  The webcast will be accessible via Ashland's
 Investor Relations website, www.ashland.com/investors.  Following the live
 event, replays of the webcast will be available until May 1.  The free
 RealPlayer 8 Basic is needed to listen to the webcast and can be downloaded
 from www.real.com.
     Ashland Inc. (NYSE:   ASH) is a Fortune 250 company providing products,
 services and customer solutions throughout the world.  Our businesses include
 road construction, specialty chemicals, lubricants, car-care products,
 chemical and plastics distribution and transportation fuels.  Our products and
 services are fundamental to how people live and work.  Through the dedicated
 efforts of our employees, we are "The Who In How Things Work.(TM)" Find us at
 www.ashland.com.
 
     This news release contains forward-looking statements, within the meaning
 of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
 Exchange Act of 1934, with respect to Ashland's operating performance and
 earnings.  Estimates as to operating performance and earnings are based upon a
 number of assumptions, including those mentioned within this news release.
 Such estimates are also based upon internal forecasts and analyses of current
 and future market conditions and trends, management plans and strategies,
 weather, operating efficiencies and economic conditions, such as prices,
 supply and demand and cost of raw materials.  Successful completion of the
 transactions mentioned in this release may be impacted by the required receipt
 of government and third party approvals, the completion of due diligence, and
 the execution and performance of definitive agreements.  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 and risks affecting
 Ashland are contained in Ashland's Form 10-K for the fiscal year ended
 September 30, 2000, as amended.  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 release.
 
     (TM)Trademark, Ashland Inc.
 
 
     Ashland Inc. and Consolidated Subsidiaries                          Page 1
     STATEMENTS OF CONSOLIDATED INCOME
     (In millions except per share data - unaudited)
 
                                            Three months ended Six months ended
                                                 March 31          March 31
                                               2001     2000     2001     2000
     REVENUES
       Sales and operating revenues         $ 1,659  $ 1,822  $ 3,537  $ 3,718
       Equity income                            102       51      223       88
       Other income                              17       22       31       36
                                              1,778    1,895    3,791    3,842
     COSTS AND EXPENSES
       Cost of sales and operating expenses   1,365    1,460    2,911    2,996
       Selling, general and administrative
        expenses                                267      287      532      531
       Depreciation, depletion and
        amortization                             59       58      117      115
                                              1,691    1,805    3,560    3,642
     OPERATING INCOME                            87       90      231      200
       Net interest and other financial
        costs                                   (43)     (45)     (89)     (88)
     INCOME FROM CONTINUING OPERATIONS
      BEFORE INCOME TAXES                        44       45      142      112
       Income taxes                             (18)     (20)     (57)     (47)
     INCOME FROM CONTINUING OPERATIONS           26       25       85       65
       Loss from discontinued operations
        (net of income taxes)                    (8)      (9)      (8)    (215)
       Gain (loss) on disposal of
        discontinued operations (net of
        income taxes)                            33       (3)      33       (3)
     INCOME (LOSS) BEFORE EXTRAORDINARY
      LOSS AND CUMULATIVE EFFECT OF ACCOUNTING
        CHANGE                                   51       13      110     (153)
       Extraordinary loss on early
        retirement of debt (net of income
        taxes)                                   --       (2)      --       (2)
       Cumulative effect of accounting
        change (net of income taxes)             (5)      --       (5)      --
     NET INCOME (LOSS)                       $   46   $   11   $  105   $ (155)
 
     DILUTED EARNINGS (LOSS) PER SHARE
       Income from continuing operations     $  .37   $  .35   $ 1.21   $  .91
       Loss from discontinued operations       (.11)    (.12)    (.11)   (3.01)
       Gain (loss) on disposal of
        discontinued operations                 .46     (.04)     .46     (.04)
       Extraordinary loss on early
        retirement of debt                       --     (.03)      --     (.03)
       Cumulative effect of accounting
        change                                 (.06)      --     (.07)      --
       Net income (loss)                     $  .66   $  .16   $ 1.49   $(2.17)
 
     AVERAGE COMMON SHARES AND ASSUMED
      CONVERSIONS                                70       71       70       71
 
 
 
     Ashland Inc. and Consolidated Subsidiaries                         Page 2
     CONDENSED CONSOLIDATED BALANCE SHEETS
     (In millions - unaudited)
 
                                                              March 31
                                                       2001              2000
     ASSETS
     Current assets
       Cash and cash equivalents                    $    77           $    64
       Accounts receivable                            1,055             1,158
       Inventories                                      503               519
       Deferred income taxes                            131               104
       Other current assets                             109               145
                                                      1,875             1,990
 
     Investments and other assets
       Investment in Marathon Ashland
        Petroleum LLC (MAP)                           2,307             2,189
       Cost in excess of net assets of
        companies acquired                              530               484
       Investment in Arch Coal -
        discontinued operations                          --                36
       Other noncurrent assets                          387               308
                                                      3,224             3,017
 
     Property, plant and equipment
       Cost                                           2,941             2,935
       Accumulated depreciation, depletion
        and amortization                             (1,529)           (1,417)
                                                      1,412             1,518
 
                                                    $ 6,511           $ 6,525
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities
       Debt due within one year                     $   266           $   413
       Trade and other payables                       1,119             1,196
       Income taxes                                      31               103
                                                      1,416             1,712
 
     Noncurrent liabilities
       Long-term debt (less current
        portion)                                      1,889             1,947
       Employee benefit obligations                     375               415
       Deferred income taxes                            262                87
       Reserves of captive insurance
        companies                                       185               194
       Other long-term liabilities and
        deferred credits                                369               346
                                                      3,080             2,989
 
     Common stockholders' equity                      2,015             1,824
 
                                                    $ 6,511           $ 6,525
 
 
 
     Ashland Inc. and Consolidated Subsidiaries                         Page 3
     STATEMENTS OF CONSOLIDATED CASH FLOWS
     (In millions - unaudited)
                                                          Six months ended
                                                              March 31
                                                       2001              2000
     CASH FLOWS FROM CONTINUING OPERATIONS
     Income from continuing operations               $   85            $   65
     Expense (income) not affecting cash
       Depreciation, depletion and
        amortization (a)                                117               115
       Deferred income taxes                             23               (24)
       Equity income from affiliates                   (223)              (88)
       Distributions from equity
        affiliates                                      212                68
       Other items                                        1                --
     Change in operating assets and
      liabilities (b)                                   (65)               64
                                                        150               200
     CASH FLOWS FROM FINANCING
     Proceeds from issuance of long-term
      debt                                               52               737
     Proceeds from issuance of common
      stock                                               6                --
     Repayment of long-term debt                        (73)             (356)
     Repurchase of common stock                         (11)              (52)
     Increase (decrease) in short-term
      debt                                              (50)              129
     Dividends paid (c)                                 (38)              (39)
                                                       (114)              419
     CASH FLOWS FROM INVESTMENT
     Additions to property, plant and
      equipment (a)                                    (109)             (136)
     Purchase of operations - net of cash
      acquired (d)                                      (18)             (550)
     Proceeds from sale of operations                     8                --
     Other - net                                          7                19
                                                       (112)             (667)
     CASH USED BY CONTINUING OPERATIONS                 (76)              (48)
     Cash provided by discontinued
      operations                                         86                 2
     INCREASE (DECREASE) IN CASH AND CASH
      EQUIVALENTS                                    $   10           $   (46)
 
     EBITDA (e)
     APAC                                            $   40           $   100
     Ashland Distribution                                35                38
     Ashland Specialty Chemical                          60                77
     Valvoline                                           40                45
     Refining and Marketing                             204                78
     Corporate                                          (31)              (23)
                                                     $  348           $   315
 
     ADDITIONS TO PROPERTY, PLANT AND
      EQUIPMENT
     APAC                                            $   65           $    74
     Ashland Distribution                                 4                10
     Ashland Specialty Chemical                          19                33
     Valvoline                                           17                 9
     Corporate                                            4                10
                                                     $  109           $   136
 
     (a) Excludes amounts related to equity affiliates. Ashland's 38 percent
         share of MAP's DD&A was $65 million in 2001 and $58 million in 2000,
         and its share of MAP's capital expenditures was $161 million in 2001
         and $163 million in 2000.
     (b) Excludes changes resulting from operations acquired or sold.
     (c) The 2000 amount excludes the dividend of Arch Coal shares to Ashland
         shareholders which resulted in a $123 million charge to retained
         earnings.
     (d) Amounts exclude acquisitions through the issuance of common stock of
         $1 million in 2000.
     (e) Earnings before interest, taxes, depreciation and amortization
         (EBITDA) for Ashland represents operating income plus DD&A, each
         excluding unusual items. EBITDA is a widely accepted financial
         indicator of a company's ability to incur and service debt, but should
         not be considered in isolation or as an alternative to net income,
         operating income, cash flows from operations, or a measure of a
         company's profitability, liquidity or performance under generally
         accepted accounting principles.
 
 
 
     Ashland Inc. and Consolidated Subsidiaries                          Page 4
     INFORMATION BY INDUSTRY SEGMENT
     (Dollars in millions - unaudited)
                                           Three months ended Six months ended
                                                  March 31          March 31
                                               2001     2000     2001     2000
     SALES AND OPERATING REVENUES
     APAC                                      $384     $431   $1,005   $1,036
     Ashland Distribution                       726      812    1,457    1,580
     Ashland Specialty Chemical                 304      323      615      637
     Valvoline                                  267      286      508      524
     Intersegment sales                         (22)     (30)     (48)     (59)
                                             $1,659   $1,822   $3,537   $3,718
 
     OPERATING INCOME
     APAC                                      $(38)(a)   $1     $(25)(a)  $38
     Ashland Distribution                        14       14       24       27
     Ashland Specialty Chemical                  17       24       36       53
     Valvoline                                   19       23       29       34
     Refining and Marketing (b)                  96       45      204       78
     Corporate                                  (21)     (17)     (37)     (30)
                                                $87      $90     $231     $200
     OPERATING INFORMATION
     APAC
        Construction backlog at March 31
         (millions)                                            $1,856   $1,388
        Hot mix asphalt production (million
         tons)                                  4.1      5.2     12.6     14.0
        Aggregate production (million tons)     5.5      5.5     11.4     11.9
        Ready-mix concrete production
         (thousand cubic yards)                 460      629      983    1,226
     Ashland Distribution (c)
        Sales per shipping day (millions)     $11.3    $12.5    $11.7    $12.5
        Gross profit as a percent of sales     16.4%    15.6%    16.0%    15.6%
 
     Ashland Specialty Chemical (c)
        Sales per shipping day (millions)      $4.8     $5.0     $4.9     $5.1
        Gross profit as a percent of sales     34.0%    34.4%    34.0%    35.2%
 
     Valvoline lubricant sales (thousand
      barrels per day)                         11.6     13.3     11.0     12.3
     Refining and Marketing (d)
        Crude oil refined (thousand barrels
         per day)                             869.9    851.4    863.3    837.8
        Refined products sold (thousand
         barrels per day)                   1,253.0  1,218.6  1,280.9  1,269.6
        Refining and wholesale marketing
         margin (per barrel) (e)              $3.63    $1.84    $3.69    $1.43
        Speedway SuperAmerica (SSA) retail
         outlets at March 31                                    2,183    2,420
        SSA gasoline and distillate sales
         (millions of gallons)                1,054    1,113    2,186    2,247
        SSA gross margin - gasoline and
         distillates (per gallon)           $0.0958  $0.1079  $0.1021  $0.1122
        SSA merchandise sales (millions)       $528     $533   $1,086   $1,063
        SSA merchandise margin (as a
         percent of sales)                     24.5%    24.3%    24.7%    26.1%
 
     (a) Includes a charge of $15 million to correct improper recognition of
         construction contract earnings.
     (b) Includes Ashland's equity income from MAP, amortization of Ashland's
         excess investment in MAP, and certain retained refining and marketing
         activities.
     (c) Sales are defined as sales and operating revenues.  Gross profit is
         defined as sales and operating revenues, less cost of sales and
         operating expenses, less depreciation and amortization relative to
         manufacturing assets.
     (d) Amounts represent 100 percent of the volumes of MAP, in which Ashland
         owns a 38 percent interest.
     (e) Sales revenue less cost of refinery inputs, purchased products and
         manufacturing expenses, including depreciation.
 
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 SOURCE  Ashland Inc.

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