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Ashland Inc. Announces March Quarter Results

COVINGTON, Ky., April 22 -- The following was issued today by Ashland Inc. :

                  Fiscal 2003: Second quarter highlights
  * Ashland reports net loss due to a sluggish economy and seasonality of
    businesses
  * Road construction operations report large operating loss, reflecting the
    harsh winter and higher energy prices
  * Operating profits from refining and marketing up from prior-year quarter
  * Specialty Chemical down; Distribution results improve
  * Solid performance from Valvoline

                                   Quarter ended   Six months ended
                                      March 31         March 31
  In millions except earnings per
   share                             2003  2002       2003  2002

  Operating income (loss)          $ (21)  $ (1)      $ 16  $ 97
  Income (loss) from continuing
   operations                      $ (34)  $ (21)     $(32) $ 17
  Net income (loss)                $ (39)  $ (21)    $(131) $  5
  Diluted earnings (loss) per share:
   Income (loss) from continuing
    operations                    $ (.50)  $(.31)    $(.46) $.24
   Net income (loss)              $ (.57)  $(.31)   $(1.91) $.08

Ashland Inc. today reported a net loss of $39 million, or 57 cents a share, for the quarter ended March 31, the second quarter of the company's 2003 fiscal year. Ashland had a loss from continuing operations of $34 million, or 50 cents a share, for the March 2003 quarter. These results compared to a loss of $21 million, or 31 cents a share, for the same quarter last year. Results from continuing operations in the quarter a year ago included an $18 million after-tax, non-cash gain, equal to 25 cents a share, to adjust the carrying value of Marathon Ashland Petroleum (MAP) inventories to the lower of cost or market value. (Ashland owns 38 percent of MAP, a petroleum refining and marketing joint venture with Marathon Oil Corporation.) An after-tax charge of $5 million, equal to 7 cents a share, is reflected in discontinued operations in the March 2003 quarter for future asbestos liabilities less probable insurance recoveries. Overall activity related to asbestos litigation remained consistent with previously established reserves. Additional quarterly charges are being recognized to maintain reserves at a level adequate to cover future payments over a rolling 10-year period.

For the six months ended March 31, 2003, Ashland reported a net loss of $131 million, or $1.91 a share, compared to net income of $5 million, or 8 cents a share for the same period last year. Ashland had a loss from continuing operations of $32 million, or 46 cents a share, for the 2003 period, compared to income of $17 million, or 24 cents a share, for the 2002 period. An after-tax charge of $99 million, equal to $1.45 a share, associated with estimated future asbestos liabilities less probable insurance recoveries, is reflected in discontinued operations for the 2003 period.

"Normal seasonality makes the March quarter our most difficult earnings period," said James J. O'Brien, Ashland Inc. chairman and chief executive officer. "This quarter has been even tougher than usual because of volatile crude oil markets, a harsh winter and continued economic weakness."

Review of operations

Commenting on operations, O'Brien noted that results from refining and marketing improved over the quarter last year due to stronger margins and wider differentials between sweet and sour crude oil prices. These improvements were partially offset by a 10% drop in refinery throughputs due to planned and unplanned maintenance at MAP refineries, as well as higher maintenance and natural gas costs.

APAC reported an operating loss of $57 million, compared with a loss of $14 million in last year's quarter. APAC continues to suffer from adverse construction weather and high hydrocarbon costs. Asphaltic mix and aggregate production were down 11% and 10%, respectively, compared to the same period last year. Operating expenses included higher costs for liquid asphalt and the fuels used to operate plants and equipment. APAC also continues to incur implementation costs associated with its business process re-design initiative, Project PASS.

"We typically experience a slowdown in the second quarter, but this year has been markedly slower," O'Brien explained. "Heavier than normal precipitation in the December quarter continued through most of the March period, while temperatures have been colder than usual in about half of our operating area. These factors severely limited paving operations and the sale of construction materials." During the quarter, APAC won more than 400 job awards of more than $100,000 each, raising its backlog to a record $1.8 billion.

Looking forward, APAC's ability to achieve its previously announced target of 10% return on investment in fiscal 2004 is subject to a number of factors, including: successfully achieving internally generated cost savings - which are on track, adequate governmental funding of highway construction programs, normal weather conditions and reasonable energy costs.

Results from Ashland's chemical businesses were mixed. Operating income from Ashland Specialty Chemical was $8 million, down from $18 million earned during the March quarter of last year. Sales per shipping day increased by 8%, despite weak industrial output. However, rising raw material prices were the primary factor contributing to the decline in profits. The composite polymers, maleic anhydride, and specialty polymers and adhesives businesses were hardest hit by the rising costs, necessitating price increases that went into effect April 1, 2003.

Ashland Distribution had operating income of $7 million in the quarter, compared to a $4 million operating loss a year ago. "Margins have been under some pressure as a result of hydrocarbon-driven cost increases for chemicals and plastics," O'Brien said. "However, sales per shipping day increased by 13% compared to the same period last year, which indicates that we're doing a better job of satisfying our customers. While we are pleased with this progress, Ashland Distribution's sales levels have not yet returned to their historical peak."

Valvoline continued to perform well. Operating income was $18 million in the March quarter compared to $17 million in the same period last year. Overall sales revenues increased 10% over last year's quarter. The improvement reflects higher branded lubricant sales volumes and improved international sales. Additionally, an increase in the average ticket price from Valvoline Instant Oil Change contributed to its record March quarter earnings. The most significant contributor to Valvoline's profits is continued success in the premium products category. While our total U.S. branded lubricant volumes were up 6% this quarter, premium product volumes were up 25%.

Outlook

"In summary, the March quarter was disappointing. However, we are optimistic about the second half of our fiscal year, when we typically earn most of our income," O'Brien said. "We know our work is cut out for us. To a large extent, our earnings are dependent on three factors: the weather in APAC's operating area, refining and marketing margins, and the health of the U.S. economy. While we cannot predict the weather, we're seeing encouraging signs in refining and marketing, and the domestic economy appears to be recovering.

"Our goal is to become a top quartile performer within each of the industries in which we operate, and we are moving aggressively to take necessary actions to achieve that goal. As these actions are fully implemented, we expect them to result in greater profitability for the corporation." O'Brien added that the company is making good progress in the way it goes to market, serves customers and operates its businesses.

Today at 11:00 a.m. (EDT), Ashland will provide a live audio webcast of its quarterly conference call with securities analysts. The webcast will be accessible through Ashland's Investor Relations website, www.ashland.com/investors. Following the live event, an archived version of the webcast will be available on the Ashland website. Minimum requirements to listen to the webcast include the free Windows MediaPlayer software and a 28.8 Kbps connection to the Internet.

Ashland Inc. is a Fortune 500 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. Through the dedication 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, earnings, and scope and effect of asbestos liabilities. These estimates 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, cost of raw materials, and legal proceedings and claims (including environmental and asbestos matters). 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 Sept. 30, 2002, 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.

  (R) Registered trademark, Ashland Inc.
  (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
                                       2003     2002        2003     2002
  REVENUES
    Sales and operating revenues       $1,692   $1,598      $3,479   $3,410
    Equity income                          29        9          64       61
    Other income                           15       18          38       37
                                        1,736    1,625       3,581    3,508
  COSTS AND EXPENSES
    Cost of sales and operating
     expenses                           1,402    1,290       2,852    2,755
    Selling, general and
     administrative expenses              300      282         604      550
    Depreciation, depletion and
     amortization                          55       54         109      106
                                        1,757    1,626       3,565    3,411
  OPERATING INCOME (LOSS)                 (21)      (1)         16       97
    Net interest and other financial
     costs                                (32)     (34)        (65)     (70)
  INCOME (LOSS) FROM CONTINUING
   OPERATIONS BEFORE INCOME TAXES         (53)     (35)        (49)      27
    Income taxes                           19       14          17      (10)
  INCOME (LOSS) FROM CONTINUING
   OPERATIONS                             (34)     (21)        (32)      17
    Results from discontinued
     operations (net of income taxes)      (5)      --         (99)      --
  INCOME (LOSS) BEFORE CUMULATIVE
   EFFECT OF ACCOUNTING CHANGE            (39)     (21)       (131)      17
    Cumulative effect of accounting
     change (net of income taxes)          --       --          --      (12)
  NET INCOME (LOSS)                      $(39)    $(21)      $(131)      $5

  DILUTED EARNINGS (LOSS) PER SHARE
    Income (loss) from continuing
     operations                         $(.50)   $(.31)      $(.46)    $.24
    Results from discontinued
     operations                          (.07)      --       (1.45)      --
    Cumulative effect of accounting
     change                                --       --          --     (.16)
    Net income (loss)                   $(.57)   $(.31)     $(1.91)    $.08

  AVERAGE COMMON SHARES AND ASSUMED
   CONVERSIONS                             68       69          68       70

  SALES AND OPERATING REVENUES
    APAC                                 $374     $424        $932   $1,105
    Ashland Distribution                  712      621       1,348    1,205
    Ashland Specialty Chemical            326      300         659      612
    Valvoline                             301      273         582      528
    Intersegment sales                    (21)     (20)        (42)     (40)
                                       $1,692   $1,598      $3,479   $3,410
  OPERATING INCOME (LOSS)
    APAC                                 $(57)    $(14)       $(56)     $22
    Ashland Distribution                    7       (4)         15        5
    Ashland Specialty Chemical              8       18          26       34
    Valvoline                              18       17          32       28
    Refining and Marketing (a)             21       -- (b)      45       45
    Corporate                             (18)     (18)        (46)     (37)
                                         $(21)     $(1)        $16      $97

  (a) Includes Ashland's equity income from Marathon Ashland Petroleum LLC
      (MAP), amortization related to Ashland's excess investment in MAP, and
       other activities associated with refining and marketing.
  (b) Includes Ashland's share of income ($29 million pretax, $18 million
      after tax, $.25 per share) from adjustments to MAP's inventory market
      valuation (IMV) reserve.  The reserve reflects the excess of the LIFO
      cost of MAP's crude oil and refined product inventories over their net
      realizable values.

  Ashland Inc. and Consolidated Subsidiaries                         Page 2
  CONDENSED CONSOLIDATED BALANCE SHEETS
  (In millions - unaudited)

                                                         March 31
                                                   2003             2002
  ASSETS
    Current assets
      Cash and cash equivalents                     $106              $156
      Accounts receivable                          1,061               992
      Inventories                                    509               475
      Deferred income taxes                           89               121
      Other current assets                           146                91
                                                   1,911             1,835

    Investments and other assets
      Investment in Marathon Ashland
       Petroleum LLC (MAP)                         2,315             2,328
      Goodwill                                       525               515
      Asbestos insurance receivable
       (noncurrent portion)                          394               170
      Other noncurrent assets                        358               388
                                                   3,592             3,401

    Property, plant and equipment
      Cost                                         3,128             3,063
      Accumulated depreciation,
       depletion and amortization                 (1,758)           (1,639)
                                                   1,370             1,424

                                                  $6,873            $6,660

  LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities
      Debt due within one year                      $243              $241
      Trade and other payables                     1,260             1,104
      Income taxes                                    16                96
                                                   1,519             1,441

    Noncurrent liabilities
      Long-term debt (less current
       portion)                                    1,568             1,625
      Employee benefit obligations                   480               448
      Deferred income taxes                          181               226
      Reserves of captive insurance
       companies                                     186               183
      Asbestos litigation reserve
       (noncurrent portion)                          530               157
      Other long-term liabilities and
       deferred credits                              353               377
                                                   3,298             3,016

    Common stockholders' equity                    2,056             2,203

                                                  $6,873            $6,660

  Ashland Inc. and Consolidated Subsidiaries                         Page 3
  STATEMENTS OF CONSOLIDATED CASH FLOWS
  (In millions - unaudited)
                                                     Six months ended
                                                          March 31
                                                    2003             2002
  CASH FLOWS FROM OPERATIONS
    Income (loss) from continuing
     operations                                     $(32)              $17
    Expense (income) not affecting cash
      Depreciation, depletion and
       amortization (a)                              109               106
      Deferred income taxes                           22               (79)
      Equity income from affiliates                  (64)              (61)
      Distributions from equity
       affiliates                                     98               119
    Change in operating assets and
     liabilities (b)                                 (21)              (92)
                                                     112                10
  CASH FLOWS FROM FINANCING
    Proceeds from issuance of common
     stock                                             1                11
    Repayment of long-term debt                     (161)              (55)
    Increase in short-term debt                      165                50
    Dividends paid                                   (37)              (38)
                                                     (32)              (32)
  CASH FLOWS FROM INVESTMENT
    Additions to property, plant and
     equipment (a)                                   (55)              (92)
    Purchase of operations - net of
     cash acquired                                    (5)               (8)
    Proceeds from sale of operations                   6                --
    Other - net                                       (6)               20
                                                     (60)              (80)
  CASH PROVIDED (USED) BY CONTINUING
   OPERATIONS                                         20              (102)
    Cash provided (used) by
     discontinued operations                          (4)               22
  INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                       $16              $(80)

  DEPRECIATION, DEPLETION AND
   AMORTIZATION
    APAC                                             $55               $56
    Ashland Distribution                              10                10
    Ashland Specialty Chemical                        26                24
    Valvoline                                         13                11
    Corporate                                          5                 5
                                                    $109              $106
  ADDITIONS TO PROPERTY, PLANT AND
   EQUIPMENT
    APAC                                             $22               $57
    Ashland Distribution                               3                 7
    Ashland Specialty Chemical                        17                14
    Valvoline                                          7                11
    Corporate                                          6                 3
                                                     $55               $92

  (a) Excludes amounts related to equity affiliates. Ashland's 38 percent
      share of MAP's DD&A was $69 million in 2003 and $68 million in 2002,
      and its share of MAP's capital expenditures was $166 million in 2003
      and $111 million in 2002.
  (b) Excludes changes resulting from operations acquired or sold.

  Ashland Inc. and Consolidated Subsidiaries                          Page 4
  OPERATING INFORMATION BY INDUSTRY SEGMENT
  (Unaudited)
                                         Three months ended Six months ended
                                               March 31          March 31
                                            2003     2002     2003     2002
  APAC
    Construction backlog at March 31
     (millions) (a)                                         $1,800   $1,658
    Hot-mix asphalt production (million
     tons)                                   4.1      4.6     11.2     13.9
    Aggregate production (million tons)      5.3      5.9     12.4     13.8
    Ready-mix concrete production
     (million cubic yards)                   0.4      0.4      0.9      1.0
  ASHLAND DISTRIBUTION (b)
    Sales per shipping day (millions)      $11.3    $10.0    $10.8     $9.7
    Gross profit as a percent of sales      15.6%    15.9%    15.8%    16.2%
  ASHLAND SPECIALTY CHEMICAL (b)
    Sales per shipping day (millions)       $5.2     $4.8     $5.3     $4.9
    Gross profit as a percent of sales      33.3%    36.2%    33.9%    35.3%
  VALVOLINE
    Lubricant sales (million gallons)       48.6     48.6     92.9     91.8
    Premium lubricants (percent of U.S.
     branded volumes)                       18.7%    15.6%    17.8%    14.8%
  REFINING AND MARKETING (c)
    Refinery runs (thousand barrels per
     day)
      Crude oil refined                      853      891      842      908
      Other charge and blend stocks           96      160      130      168
    Refined product yields (thousand
     barrels per day)
      Gasoline                               483      591      525      604
      Distillates                            257      278      268      293
      Asphalt                                 66       65       65       68
      Other                                  143      123      115      117
      Total                                  949    1,057      973    1,082
    Refining and wholesale marketing
     margin (per barrel) (d)               $1.71    $0.68    $1.82    $1.74
    Speedway SuperAmerica (SSA)
      Gasoline and distillate sales
       (million gallons)                     829      852    1,726    1,768
      Gross margin - gasoline and
       distillates (per gallon)           $.1166   $.0827   $.1085   $.0989

  (a) Includes APAC's proportionate share of the backlog of unconsolidated
      joint ventures.
  (b) Sales are defined as sales and operating revenues. Gross profit is
      defined as sales and operating revenues, less cost of sales and
      operating expenses, and depreciation and amortization relative to
      manufacturing assets.
  (c) Amounts represent 100% of MAP's operations, in which Ashland owns a
      38% interest.
  (d) Sales revenue less cost of refinery inputs, purchased products and
      manufacturing expenses, including depreciation.
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