July 26, 2016
-
Earnings from continuing
operations equal $97 million, or $1.55 per diluted share, a
decrease of 16 percent from a year ago
-
Adjusted earnings from
continuing operations total $122 million, or $1.95 per diluted
share, up 2 percent from a year ago
-
Net income equals $71 million,
a decrease of $36 million from a year ago
-
Adjusted EBITDA totals $294
million and adjusted EBITDA margin was 22.8 percent, a
160-basis-point increase from a year ago
COVINGTON, Ky. - Ashland Inc. (NYSE: ASH), a global leader in
differentiated specialty chemicals and, through Valvoline, a
premium consumer-branded lubricant supplier, today announced
preliminary(1) financial
results for the fiscal third quarter ended June 30, 2016.
Quarterly
Highlights
(in millions except per-share amounts) |
|
Quarter Ended June 30 |
|
|
|
2016 |
|
|
2015 |
Operating income |
|
$ |
175 |
|
$ |
196 |
Key items* |
|
|
31 |
|
|
11 |
Adjusted operating income* |
|
$ |
206 |
|
$ |
207 |
|
|
|
|
|
|
|
Adjusted EBITDA* |
|
$ |
294 |
|
$ |
290 |
|
|
|
|
|
|
|
Diluted earnings per share (EPS) |
|
|
|
|
|
|
From net income |
|
$ |
1.13 |
|
$ |
1.56 |
|
|
|
|
|
|
|
From continuing operations |
|
$ |
1.55 |
|
$ |
1.68 |
Key items* |
|
|
0.40 |
|
|
0.23 |
Adjusted EPS from continuing operations* |
|
$ |
1.95 |
|
$ |
1.91 |
|
|
|
|
|
|
|
Cash flows provided (used) by operating activities from
continuing operations |
|
$ |
185 |
|
$ |
(255) |
Free cash flow* |
|
|
107 |
|
|
184 |
|
|
|
|
|
|
|
* See Tables 5, 6 and 7 for Ashland definitions and
U.S. GAAP reconciliations.
|
|
|
|
For the quarter ended June 30,
2016, Ashland reported income from continuing operations of $97
million, or $1.55 per diluted share, on sales of nearly $1.3
billion. These results included four key items that together
reduced income from continuing operations by approximately $25
million, net of tax, or $0.40 per diluted share. For the year-ago
quarter, Ashland reported income from continuing operations of $115
million, or $1.68 per diluted share, on sales of nearly $1.4
billion. There were three key items in the year-ago quarter that,
on a combined basis, reduced income from continuing operations by
$16 million after tax, or $0.23 per diluted share. (Please refer to
Table 5 of the accompanying financial statements for details of key
items.) For the remainder of this news release, financial results
have been adjusted to exclude the effect of key items in both the
current and prior-year quarters.
On an adjusted basis, Ashland's
income from continuing operations in the third quarter of fiscal
2016 was $122 million, or $1.95 per diluted share, versus $131
million, or $1.91 per diluted share, for the year-ago quarter.
During the third quarter:
-
Both Ashland Performance Materials (APM) and
Valvoline reported sales and earnings results that were consistent
with the outlook provided in late April. Ashland Specialty
Ingredients (ASI) reported sales or volume growth in five key end
markets and strong gross margins while maintaining good cost
discipline. These results were offset by weakness in emerging
regions, particularly China and Latin America.
-
As expected, headwinds from currency, weak
energy markets and exited product lines receded significantly. The
year-over-year impact of these headwinds reduced sales by
approximately $40 million in the third quarter, with divestitures
accounting for more than half of that figure. By comparison, the
year-over-year headwinds impact in the second quarter was $60
million.
-
Net income totaled $71 million, a decrease of
$36 million from a year ago.
-
Adjusted EBITDA rose 1 percent, to $294 million,
while adjusted EBITDA margin increased 160 basis points, to 22.8
percent.
"Ashland's performance in the
third quarter reflected continued progress in executing our
strategic plans as we prepare to separate into two independent,
publicly held companies," said William A. Wulfsohn, Ashland
chairman and chief executive officer.
"Our first priority this year has
been to drive the operational and strategic gains needed to meet
our financial expectations. During the quarter, the overall
performance at both APM and Valvoline were in line with our
expectations. Within APM, composites posted another quarter of
year-over-year margin expansion as pricing adjustments more than
offset the impact of rising raw-material costs. Valvoline achieved
its eleventh straight quarter of year-over-year EBITDA growth
driven by higher volumes, improved channel and product mix, and
good same-store sales growth at Valvoline Instant Oil
ChangeSM (VIOC).
"Within ASI, the team made good
progress on a number of strategic fronts, reporting sales or volume
growth in pharmaceutical, hair care, nutrition, coatings and
adhesives end markets. In addition, we continued to accelerate the
innovation pipeline, particularly within hybrid chemistries where
we believe we have a significant competitive advantage. At the same
time, ASI maintained strong gross margins and demonstrated good
cost discipline. While the combination of lower-than-expected
personal-care volumes in China and Latin America, and the related
impact on manufacturing costs, contributed to ASI's earnings coming
in below our outlook for the quarter, ASI's overall year-over-year
EBITDA trend continued to improve on a sequential basis," Wulfsohn
explained.
He said the second core priority
has been effectively converting earnings to cash. During the first
nine months of fiscal 2016, Ashland generated $435 million of
operating cash flow from continuing operations, compared to a use
of cash of $159 million in the first nine months of fiscal 2015.
For the first nine months of fiscal 2016, Ashland generated free
cash flow of $254 million, compared to $194 million for the same
period a year ago.
Ashland's third priority has been
the effective allocation of capital, such as through the recently
completed offering by a Valvoline subsidiary of $375 million
aggregate principal amount of 5.500% senior notes due 2024. The
proceeds have been used to repay borrowings under Ashland's senior
unsecured credit facilities.
The company's fourth priority has
been to complete the planned separation into two independent,
publicly traded companies: Ashland Global Holdings Inc., composed
of Ashland Specialty Ingredients and Ashland Performance Materials,
and Valvoline Inc., composed of Ashland's Valvoline business
segment. As described in a series of recent announcements and also
outlined later in this news release, Ashland has passed a number of
notable milestones on its way toward a planned separation.
Reportable
Segment Performance
To aid understanding of Ashland's ongoing business performance, the
results of Ashland's reportable segments are described below on an
adjusted basis and EBITDA, or adjusted EBITDA, is reconciled to
operating income in Table 7 of this news release.
ASI reported sales or volume
growth in five key end markets, strong gross margins and cost
discipline, offset by weakness in some oral- and skin-care markets
in emerging regions, particularly China and Latin America. Sales
totaled $552 million, down 5 percent, with headwinds from weak
energy markets and the company's decision to divest or exit certain
non-core product lines representing more than half of the decline.
On a sequential basis, sales grew 4 percent, reflecting normal
seasonality patterns and the receding headwinds. Adjusted EBITDA
totaled $128 million and adjusted EBITDA margin remained healthy at
23.2 percent.
Within Consumer Specialties, sales
declined 3 percent, on both an as-reported and currency-adjusted
basis, versus the prior year. As expected, foreign currency
translation had a negligible impact on the year-over-year results.
Within pharmaceuticals, we continue to see good penetration of our
controlled-release technologies with Ashland's excipients
customers. Our nutrition product line returned to growth due to new
business gains in some emerging regions. Within hair care, ASI has
strengthened its market position through leading-edge technology
introductions and continued product innovation. These results were
offset by weakness in oral- and skin-care end markets in China and
Latin America.
Within Industrial Specialties,
sales declined 7 percent. The previously mentioned headwinds from
energy and divested product lines represented nearly all of this
decline. As expected, the commercial team drove business gains in
the developed regions, offset by further weakness in emerging
regions. Within the core architectural coatings end market, ASI
began to see the results from recent new business wins from several
large customers in North America and Asia, driven by new
technologies and applications. Energy sales declined versus the
prior year, though the overall impact was less than in previous
quarters, consistent with the expectation that ASI would begin
lapping the energy headwind during the third quarter. Within
Adhesives, recent product introductions helped generate continued
growth.
Looking ahead to ASI's fiscal
fourth quarter, we have forecast continued weakness in emerging
regions. Sales are expected to be in the range of approximately
$520-$540 million. Growth of our high-value-add categories of
products sold into higher-margin core growth end markets should
lead to another strong margin performance, with expected EBITDA
margins of 24-24.5 percent.
APM's third-quarter results were
consistent with the outlook provided in late April. Sales totaled
$238 million, down 14 percent from prior year. EBITDA rose 11
percent, to $30 million, while adjusted EBITDA margin finished at
12.6 percent, up 290 basis points from a year ago. Composites
posted another quarter of year-over-year margin expansion as
pricing adjustments more than offset the impact of rising
raw-material costs during the quarter. Volumes were generally soft
across all regions. In Europe, volumes eased when compared to
strong year-ago results for products used in residential
construction markets. Slowing industrial growth in emerging regions
- particularly China and Brazil - was reflected in lower volumes in
these regions. Overall, Composites sales declined 11 percent for
the quarter. The majority of this decline was due to lower pricing
reflecting reduced raw-material costs when compared to the
prior-year period. Within I&S, overall results were generally
consistent with our prior outlook that butanediol (BDO) margins
would decline, reflecting more aggressive pricing in the
marketplace. Overall I&S volumes and sales declined by 3
percent and 21 percent, respectively, when compared to the prior
year.
For the fourth quarter, we expect
APM's sales to be in the range of $220-$240 million, roughly in
line with normal seasonality trends. We expect another quarter of
solid margin performance within Composites to be offset by I&S
pricing and volumes that remain well below prior-year levels. In
addition, due to lower demand, APM has decided to pull forward a
planned manufacturing plant turnaround that was previously
scheduled for the first quarter of fiscal 2017. We expect APM's
EBITDA margin to be in the range of approximately 9-10 percent for
the fourth quarter.
Valvoline reported strong
third-quarter earnings with EBITDA rising 3 percent, to $119
million, due to increased promotional activity in the prior year.
This marks the eleventh consecutive quarter of year-over-year
EBITDA growth as Valvoline continued to execute its strategy of
investing in higher-return opportunities within its core lubricants
product lines. Results were driven by solid overall lubricant
volume growth with particular strength among Do-It-For-Me (DIFM)
customers, including both those served through installers and those
served by VIOC. In total, lubricant volume grew by 3 percent and
EBITDA margin increased by 110 basis points, to 23.8 percent, when
compared to the prior year. At VIOC, same-store sales rose nearly 7
percent at company-owned sites. At the end of the third quarter,
VIOC had a total of 1,055 company-owned and franchised stores
within its network, a gain of 116 stores versus a year ago after
including the acquisition of 89 Oil Can Henry's stores earlier this
year. Within Valvoline's international channel, volume grew 6
percent, driven by continued strong execution of channel-building
efforts. Valvoline's overall sales mix continued to improve, with
U.S. premium-branded lubricant sales volume increasing to 45.3
percent, a 450-basis-point increase from the prior year and a
70-basis-point gain from the second quarter of fiscal 2016.
Due to securities law restrictions
associated with the planned separation, we are not providing a
fourth-quarter outlook for the Valvoline business segment.
Ashland's effective tax rate for
the June 2016 quarter, after adjusting for key items, was 28
percent. For the fiscal fourth quarter, we expect the adjusted
effective tax rate to be approximately 28 percent.
Update on
Separation
Over the past several months, Ashland has achieved several
milestones in its plan to separate into two independent, publicly
traded companies.
Earlier this month, Ashland
announced that a Valvoline subsidiary entered into a new
delayed-draw credit agreement for senior secured bank facilities.
The agreement provides for $1.325 billion in financing. As
previously noted, Ashland also announced that a Valvoline
subsidiary had closed an offering of $375 million aggregate
principal amount of 5.500% senior notes due 2024. Ashland has used
the net proceeds from the notes offering to repay borrowings under
its senior unsecured credit facilities.
"Our teams have made tremendous
progress over the past 10 months in preparing to stand up two great
companies - each with the opportunity to customize its operations
and invest its capital according to the specific global needs of
the business. That work is continuing and we remain on track for
separation," Wulfsohn said.
Path
Forward
"We are pleased with the performance of Valvoline. We are also
pleased with the progress we have made in a number of ASI's end
markets, our margin management and our strong cost control within
the chemicals group. At the same time, we are taking actions to
drive growth across all of ASI's end markets. We have on-boarded
two new senior commercial leaders and have established dedicated
leadership positions for the pharmaceutical and personal care end
markets. Furthermore, to better leverage our scale, we have
consolidated our global technical resources under the newly created
position of chief technology officer. These moves are consistent
with our ongoing strategic focus on enhancing our commercial
excellence and increasing the impact of new product introductions,"
he said.
"Finally, we believe the
separation into two companies will enable the chemicals group to
drive incremental cost savings in excess of $25 million over the
next 18-24 months. These savings are expected to be driven largely
by a redesign of our IT support infrastructure, the implementation
of an enhanced global supply chain system, and the expansion of our
global business service center in India."
He continued: "Looking forward, in
the near term, given the weakness in some emerging regions, we are
taking a cautious approach to our outlook for ASI and APM for the
fiscal fourth quarter. That said, we remain confident that our
talented team, which is aligned around a clear strategy to leverage
our technological innovation and applications expertise, combined
with the aggressive actions we are taking, will drive profitable
growth and create significant shareholder value."
"In conclusion, we remain
confident and excited that we are well on our way toward creating
two great, independent companies," Wulfsohn said.
Conference Call
Webcast
Ashland will host a live webcast of its third-quarter conference
call with securities analysts at 9 a.m. EDT Wednesday, July 27,
2016. The webcast and supporting materials will be accessible
through Ashland's website at http://investor.ashland.com. Following
the live event, an archived version of the webcast and supporting
materials will be available for 12 months.
Use of Non-GAAP
Measures
This news release includes certain non-GAAP (Generally Accepted
Accounting Principles) measures. Such measurements are not prepared
in accordance with GAAP and should not be construed as an
alternative to reported results determined in accordance with GAAP.
Management believes the use of EBITDA and Adjusted EBITDA measures
assists investors in understanding the ongoing operating
performance by presenting comparable financial results between
periods. Ashland believes that by removing the impact of
depreciation and amortization and excluding certain non-cash
charges, amounts spent on interest and taxes and certain other
charges that are highly variable from year to year, EBITDA and
Adjusted EBITDA provide Ashland's investors with performance
measures that reflect the impact to operations from trends in
changes in sales, margin and operating expenses, providing a
perspective not immediately apparent from net income and operating
income. The adjustments Ashland makes to derive the non-GAAP
measures of EBITDA and Adjusted EBITDA exclude items which may
cause short-term fluctuations in net income and operating income
and which Ashland does not consider to be the fundamental
attributes or primary drivers of its business. EBITDA and Adjusted
EBITDA provide disclosure on the same basis as that used by
Ashland's management to evaluate financial performance on a
consolidated and reportable segment basis and provide consistency
in our financial reporting, facilitate internal and external
comparisons of Ashland's historical operating performance and its
business units and provide continuity to investors for
comparability purposes.
The free cash flow metric enables
Ashland to provide a better indication of the ongoing cash being
generated that is ultimately available for both debt and equity
holders as well as other investment opportunities. Unlike cash flow
provided by operating activities, free cash flow includes the
impact of capital expenditures from continuing operations,
providing a more complete picture of cash generation. Free cash
flow has certain limitations, including that it does not reflect
adjustment for certain non-discretionary cash flows such as
mandatory debt repayments. The amount of mandatory versus
discretionary expenditures can vary significantly between
periods.
The non-GAAP information provided
may not be consistent with the methodologies used by other
companies. All non-GAAP amounts have been reconciled with reported
GAAP results in Tables 5, 6 and 7 of the financial statements
provided with this news release.
About
Ashland
Ashland Inc. (NYSE: ASH) is a global leader in providing specialty
chemical solutions to customers in a wide range of consumer and
industrial markets, including adhesives, architectural coatings,
automotive, construction, energy, food and beverage, personal care
and pharmaceutical. Through our three business units - Ashland
Specialty Ingredients, Ashland Performance Materials and Valvoline
- we use good chemistry to make great things happen for customers
in more than 100 countries. Visit ashland.com to learn more.
- 0 -
C-ASH
Forward-Looking
Statements
This news release contains forward-looking statements. Ashland has
identified some of these forward-looking statements with words such
as "anticipates," "believes," "expects," "estimates," "is likely,"
"predicts," "projects," "forecasts," "objectives," "may," "will,"
"should," "plans" and "intends" and the negative of these words or
other comparable terminology. These forward-looking statements
include statements relating to status of the separation process,
the plan to pursue an IPO of up to 20 percent of the common stock
of Valvoline and the expected completion of the separation through
the subsequent distribution of Valvoline common stock, the
anticipated timing of completion of the planned IPO and subsequent
distribution of the remaining Valvoline common stock, the plan to
reorganize under a new public holding company to be called Ashland
Global Holdings Inc. and Ashland's and Valvoline's ability to
pursue their long-term strategies. In addition, Ashland may from
time to time make forward-looking statements in its annual report,
quarterly reports and other filings with the SEC, news releases and
other written and oral communications. These forward-looking
statements are based on Ashland's expectations and assumptions, as
of the date such statements are made, regarding Ashland's future
operating performance and financial condition, including the
proposed separation of its specialty chemicals and Valvoline
businesses, the proposed IPO of its Valvoline business, the
expected timetable for completing the IPO and the separation, the
proposal to reorganize under a new holding company, the future
financial and operating performance of each company, strategic and
competitive advantages of each company, the leadership of each
company, and future opportunities for each company, as well as the
economy and other future events or circumstances. Ashland's
expectations and assumptions include, without limitation, internal
forecasts and analyses of current and future market conditions and
trends, management plans and strategies, operating efficiencies and
economic conditions (such as prices, supply and demand, cost of raw
materials, and the ability to recover raw-material cost increases
through price increases), and risks and uncertainties associated
with the following: the possibility that the proposed IPO, new
holding company reorganization or separation will not be
consummated within the anticipated time period or at all, including
as the result of regulatory, market or other factors or the failure
to obtain shareholder approval of the new holding company
reorganization; the potential for disruption to Ashland's business
in connection with the proposed IPO, new holding company
reorganization or separation; the potential that the new Ashland
and Valvoline do not realize all of the expected benefits of the
proposed IPO, new holding company reorganization or separation or
obtain the expected credit ratings following the proposed IPO, new
holding company reorganization or separation; Ashland's substantial
indebtedness (including the possibility that such indebtedness and
related restrictive covenants may adversely affect Ashland's future
cash flows, results of operations, financial condition and its
ability to repay debt); the impact of acquisitions and/or
divestitures Ashland has made or may make (including the
possibility that Ashland may not realize the anticipated benefits
from such transactions); severe weather, natural disasters, and
legal proceedings and claims (including environmental and asbestos
matters). Various risks and uncertainties may cause actual results
to differ materially from those stated, projected or implied by any
forward-looking statements, including, without limitation, risks
and uncertainties affecting Ashland that are described in its most
recent Form 10-K and its Form 10-Q for the quarterly period ended
March 31, 2016 (including Item 1A Risk Factors) filed with the SEC,
which is available on Ashland's website at
http://investor.ashland.com or on the SEC's website at
http://www.sec.gov. Ashland believes its expectations and
assumptions are reasonable, but there can be no assurance that the
expectations reflected herein will be achieved. Unless legally
required, Ashland undertakes no obligation to update any
forward-looking statements made in this news release whether as a
result of new information, future event or otherwise. Information
on Ashland's website is not incorporated into or a part of this
news release.
Non-solicitation
A registration statement relating to the securities of Ashland
Global Holdings Inc. in connection with the reorganization of
Ashland under a new holding company has been filed with the SEC but
has not yet become effective. The securities subject to such
registration statement may not be sold, nor may offers to buy such
securities be accepted, before the time the registration statement
becomes effective. This news release shall not constitute an offer
to sell or a solicitation of an offer to buy such securities, and
shall not constitute an offer, solicitation or sale in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of that jurisdiction.
Additional
Information and Where to Find It
In connection with the reorganization, Ashland filed with the SEC
the Ashland Global Holdings Inc. registration statement (the
"Ashland Global Registration Statement") that includes a proxy
statement of Ashland Inc. that also constitutes a prospectus of
Ashland Global Holdings Inc. with respect to the securities of
Ashland Global Holdings Inc. (the Ashland Global Registration
Statement has not yet been declared effective). INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS,
AND ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE,
BECAUSE THEY CONTAIN, OR WILL CONTAIN, IMPORTANT INFORMATION ABOUT
ASHLAND INC., ASHLAND GLOBAL HOLDINGS INC. AND THE REORGANIZATION.
A definitive proxy statement will be sent to shareholders of
Ashland Inc. seeking approval of the reorganization after the
Ashland Global Registration Statement is declared effective. The
proxy statement/prospectus and other documents relating to the
reorganization can be obtained free of charge from the SEC website
at www.sec.gov.
Participants in
Solicitation
This communication is not a solicitation of a proxy from any
investor or shareholder. However, Ashland Inc., Ashland Global
Holdings Inc. and certain of their directors and executive officers
may be deemed to be participants in the solicitation of proxies in
connection with the reorganization under the rules of the SEC.
Information regarding Ashland Inc.'s directors and executive
officers may be found in its definitive proxy statement relating to
its 2016 Annual Meeting of Shareholders filed with the SEC on
December 4, 2015 and in the proxy statement/prospectus included in
the Ashland Global Registration Statement. Information regarding
Ashland Global Holdings Inc.'s directors and executive officers may
be found in the proxy statement/prospectus included in the Ashland
Global Registration Statement. These documents can be obtained free
of charge from the SEC.
(1)
Preliminary Results
Financial results are preliminary until Ashland's Form 10-Q is
filed with the SEC.
SM Service
mark, Ashland or its subsidiaries, registered in various
countries.
(TM) Trademark, Ashland or its subsidiaries, registered in various
countries.
FOR FURTHER
INFORMATION:
Investor Relations:
Seth A.
Mrozek
+1 (859) 815-3527
samrozek@ashland.com
Media Relations:
Gary
Rhodes
+1 (859)
815-3047
glrhodes@ashland.com
Ashland Q3 2016 Prepared
Remarks
Ashland Q3 2016 Earnings Release and Tables
Ashland Q3 2016 Earnings Slides
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Ashland Inc. via Globenewswire
HUG#2030893
Ashland (NYSE:ASH)
Historical Stock Chart
From Mar 2024 to Apr 2024
Ashland (NYSE:ASH)
Historical Stock Chart
From Apr 2023 to Apr 2024