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Ashland Inc. Reports Operating Results (10-Q)

February 02, 2011 | About:
10qk

10qk

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Ashland Inc. (ASH) filed Quarterly Report for the period ended 2010-12-31.

Ashland Inc has a market cap of $4.68 billion; its shares were traded at around $59.33 with a P/E ratio of 14.6 and P/S ratio of 0.5. The dividend yield of Ashland Inc stocks is 1%.Hedge Fund Gurus that owns ASH: Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC. Mutual Fund and Other Gurus that owns ASH: John Keeley of Keeley Fund Management, Mario Gabelli of GAMCO Investors, Jeremy Grantham of GMO LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

In April 2010, Ashland acquired the remaining 50% interest in Ara Quimica S.A. (Ara Quimica), a leading producer of custom unsaturated polyester resin formulations for the composites industry in South America, for $28 million. Prior to the acquisition, Ashland owned a 50% interest in Ara Quimica, which it recorded as an equity method investment within the Performance Materials reporting segment. Ara Quimica recorded sales of approximately $56 million from its most recent fiscal year ended September 30, 2010. As a result of this transaction, Ashland recorded $19 million of current assets and $61 million of long-term assets, which included $55 million of goodwill and intangible assets. In addition, Ashland recorded $18 million of current liabilities and $6 million of noncurrent liabilities.

On November 13, 2008, Ashland completed its acquisition of Hercules Incorporated (Hercules). The total merger consideration for outstanding Hercules Common Stock was $2,594 million, including $2,096 million in cash, $450 million in Ashland Common Stock with the remaining value of the transaction related to cash consideration and value for restricted stock units, stock options and transaction costs. In addition, Ashland inherited $798 million in debt as a part of the transaction. The acquired businesses of Hercules now comprise the Functional Ingredients reporting segment, as well as a significant portion of the Water Technologies reporting segment. The total debt borrowed upon the closing of the merger was approximately $2,300 million with the remaining cash consideration for the transaction paid from Ashland s existing cash at the date of the transaction.

Ashland s net income amounted to $87 million and $86 million for the three months ended December 31, 2010 and 2009, respectively, or $1.09 and $1.10 diluted earnings per share. Ashland s net income is primarily affected by results within operating income, net interest and other financing expense, income taxes, discontinued operations and other significant events or transactions that are unusual or nonrecurring. Income from continuing operations, which excludes results from discontinued operations, amounted to $62 million and $64 million for the three months ended December 31, 2010 and 2009, respectively, or $.78 and $.82 per diluted earnings per share.

Operating income for the three months ended December 31, 2010 and 2009 included depreciation and amortization of $73 million (including accelerated depreciation of $7 million) and $74 million, respectively. EBITDA totaled $172 million and $201 million for 2010 and 2009, respectively. Adjusted EBITDA decreased $26 million, from $201 million in 2009 to $175 million in 2010. Adjusted EBITDA margin decreased 3.0 percentage points in 2010 to 12.2% from 15.2% in 2009. A reconciliation of EBITDA and Adjusted EBITDA results for 2010 and 2009 were as follows.

Sales for 2010 increased $109 million, or 8%, compared to 2009 primarily as a result of increases in pricing, implemented to recover the effects of increases in raw material costs, and volume, which improved sales $73 million and $72 million, respectively, or 11%. Unfavorable currency exchange rates and product mix decreased sales $19 million and $8 million, respectively, or 2%. In addition, the net acquisitions and divestitures, attributable to the January 2010 divestiture of Pinova, April 2010 purchase of Ara Quimica and the November 2010 contribution of the Castings Solutions business to the expanded global joint venture with Süd-Chemie, decreased sales by $9 million, or 1%.

Cost of sales for 2010 increased $134 million, or 15%, compared to 2009 primarily due to escalating raw material costs, increasing cost of sales $123 million, or 14%. Increased volume contributed an additional $35 million, or 4% to cost of sales. Currency exchange, due to the strengthening of the U.S. dollar as compared to 2009, decreased cost of sales by $15 million, or 2%, while the net acquisitions and divestitures impact of Pinova, Ara Quimica and Castings Solutions represented an additional net decline of $6 million, or 1%. Change in product mix decreased cost of sales by $3 million.

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