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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
Commission file number 1-2918
ASHLAND INC.
(a Kentucky corporation)
I.R.S. No. 61-0122250
50 E. RiverCenter Boulevard
P. O. Box 391
Covington, Kentucky 41012-0391
Telephone Number: (859) 815-3333
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
At April 30, 2000, there were 70,574,938 shares of Registrant's Common
Stock outstanding. One Right to purchase one-thousandth of a share of
Series A Participating Cumulative Preferred Stock accompanies each
outstanding share of Registrant's Common Stock.
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PART I - FINANCIAL INFORMATION
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
March 31 March 31
----------------------- -----------------------
(In millions except per share data) 2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Sales and operating revenues $ 1,822 $ 1,503 $ 3,718 $ 3,149
Equity income 51 139 88 100
Other income 22 13 36 39
---------- ---------- ---------- ---------
1,895 1,655 3,842 3,288
COSTS AND EXPENSES
Cost of sales and operating expenses 1,460 1,176 2,996 2,476
Selling, general and administrative expenses 287 251 531 517
Depreciation, depletion and amortization 58 52 115 103
---------- ---------- ---------- ---------
1,805 1,479 3,642 3,096
---------- ---------- ---------- ---------
OPERATING INCOME 90 176 200 192
Interest expense (net of interest income) (45) (34) (88) (67)
---------- ---------- ---------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 45 142 112 125
Income taxes (20) (55) (47) (49)
---------- ---------- ---------- ---------
INCOME FROM CONTINUING OPERATIONS 25 87 65 76
Loss from discontinued operations (net of income taxes) (9) - (215) -
Costs of spin-off of discontinued operations (net of income taxes) (3) - (3) -
---------- ---------- ---------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS 13 87 (153) 76
Extraordinary loss on early retirement of debt (net of income taxes) (2) - (2) -
---------- ---------- ---------- ---------
NET INCOME (LOSS) $ 11 $ 87 $ (155) $ 76
========== ========== ========== =========
BASIC EARNINGS (LOSS) PER SHARE - Note A
Income from continuing operations $ .35 $ 1.17 $ .91 $ 1.02
Loss from discontinued operations (.12) - (3.01) -
Costs of spin-off discontinued operations (.04) - (.04) -
Extraordinary loss on early retirement of debt (.03) - (.03) -
---------- ---------- ---------- ---------
Net income (loss) $ .16 $ 1.17 $ (2.17) $ 1.02
========== ========== ========== =========
DILUTED EARNINGS (LOSS) PER SHARE - Note A
Income from continuing operations $ .35 $ 1.16 $ .91 $ 1.01
Loss from discontinued operations (.12) - (3.01) -
Costs of spin-off discontinued operations (.04) - (.04) -
Extraordinary loss on early retirement of debt (.03) - (.03) -
---------- ---------- ---------- ---------
Net income (loss) $ .16 $ 1.16 $ (2.17) $ 1.01
========== ========== ========== =========
DIVIDENDS PAID PER COMMON SHARE $ .275 $ .275 $ .55 $ .55
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31 September 30 March 31
(In millions) 2000 1999 1999
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ASSETS
------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 64 $ 110 $ 90
Accounts receivable 1,179 1,242 1,072
Allowance for doubtful accounts (21) (23) (22)
Inventories - Note A 519 464 480
Deferred income taxes 104 107 120
Other current assets 145 159 111
---------- ---------- ---------
1,990 2,059 1,851
INVESTMENTS AND OTHER ASSETS
Investment in Marathon Ashland Petroleum LLC (MAP) 2,189 2,172 2,095
Cost in excess of net assets of companies acquired 484 220 224
Investment in Arch Coal - discontinued operations 36 417 422
Other noncurrent assets 308 264 340
---------- ---------- ---------
3,017 3,073 3,081
PROPERTY, PLANT AND EQUIPMENT
Cost 2,935 2,649 2,544
Accumulated depreciation, depletion and amortization (1,417) (1,357) (1,322)
---------- ---------- ---------
1,518 1,292 1,222
---------- ---------- ---------
$ 6,525 $ 6,424 $ 6,154
========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Debt due within one year $ 413 $ 219 $ 441
Trade and other payables 1,196 1,135 1,115
Income taxes 103 42 39
---------- ---------- ---------
1,712 1,396 1,595
NONCURRENT LIABILITIES
Long-term debt (less current portion) 1,947 1,627 1,481
Employee benefit obligations 415 418 426
Deferred income taxes 87 226 89
Reserves of captive insurance companies 194 175 181
Other long-term liabilities and deferred credits 346 382 301
Commitments and contingencies - Note D
---------- ---------- ---------
2,989 2,828 2,478
COMMON STOCKHOLDERS' EQUITY 1,824 2,200 2,081
---------- ---------- ---------
$ 6,525 $ 6,424 $ 6,154
========== ========== =========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS' EQUITY
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Accumulated
other
Common Paid-in Retained comprehensive
(In millions) stock capital earnings loss Total
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<S> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 1, 1998 $ 76 $ 602 $ 1,501 $ (42) $ 2,137
Total comprehensive income (loss) (1) 76 (12) 64
Cash dividends (41) (41)
Issued common stock under
Stock incentive plans 5 5
Acquisitions of other companies 1 43 44
Repurchase of common stock (3) (126) (129)
Other changes 1 1
--------- --------- ---------- ---------------- --------
BALANCE AT MARCH 31, 1999 $ 74 $ 525 $ 1,536 $ (54) $ 2,081
========= ========= ========== ================ ========
BALANCE AT OCTOBER 1, 1999 $ 72 $ 464 $ 1,710 $ (46) $ 2,200
Total comprehensive income (loss) (1) (155) (8) (163)
Dividends
Cash (39) (39)
Spin-off of Arch Coal shares (123) (123)
Issued common stock for
acquisitions of other companies 1 1
Repurchase of common stock (2) (50) (52)
--------- --------- ---------- ---------------- --------
BALANCE AT MARCH 31, 2000 $ 70 $ 415 $ 1,393 $ (54) $ 1,824
========= ========= ========== ================ ========
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(1) Reconciliations of net income (loss) to total comprehensive income
(loss) follow.
</TABLE>
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31 March 31
--------------------------- ---------------------------
(In millions) 2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Net income (loss) $ 11 $ 87 $ (155) $ 76
Unrealized translation adjustments (4) (13) (14) (11)
Related tax benefit 2 3 6 3
Unrealized losses on securities - (2) - (3)
Related tax benefit - 1 - 1
Gains on securities included in net income - (1) - (3)
Related tax expense - - - 1
----------- ----------- ----------- -----------
Total comprehensive income (loss) $ 9 $ 75 $ (163) $ 64
=========== =========== =========== ===========
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At March 31, 2000, the accumulated other comprehensive loss was comprised of net unrealized translation losses of
$44 million and a minimum pension liability of $10 million.
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
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Six months ended
March 31
--------------------------------
(In millions) 2000 1999
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<S> <C> <C>
CASH FLOWS FROM CONTINUING OPERATIONS
Income from continuing operations $ 65 $ 76
Expense (income) not affecting cash
Depreciation, depletion and amortization 115 103
Deferred income taxes (24) 2
Equity income from affiliates (88) (100)
Distributions from equity affiliates 68 104
Change in operating assets and liabilities (1) 64 (135)
----------- -----------
200 50
CASH FLOWS FROM FINANCING
Proceeds from issuance of long-term debt 737 -
Proceeds from issuance of common stock - 3
Repayment of long-term debt (356) (26)
Repurchase of common stock (52) (129)
Increase in short-term debt 129 300
Dividends paid (2) (39) (41)
----------- -----------
419 107
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment (136) (102)
Purchase of operations - net of cash acquired (3) (550) (24)
Investment purchases (4) (12) (73)
Investment sales and maturities (4) 7 94
Other - net 24 5
----------- -----------
(667) (100)
----------- -----------
CASH PROVIDED (USED) BY CONTINUING OPERATIONS (48) 57
Cash provided (used) by discontinued operations 2 (1)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (46) 56
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 110 34
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 64 $ 90
=========== ===========
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</TABLE>
(1) Excludes changes resulting from operations acquired or sold.
(2) The 2000 amount excludes the dividend of Arch Coal shares to Ashland
shareholders which resulted in a $123 million charge to retained
earnings.
(3) Amounts exclude acquisitions through the issuance of common stock of $1
million in 2000 and $44 million in 1999.
(4) Represents primarily investment transactions of captive insurance
companies.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE A - SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL REPORTING
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial reporting and
Securities and Exchange Commission regulations. Although such
statements are subject to any year-end audit adjustments which may
be necessary, in the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. These financial statements
should be read in conjunction with Ashland's Annual Report on Form
10-K for the fiscal year ended September 30, 1999. Results of
operations for the periods ended March 31, 2000, are not
necessarily indicative of results to be expected for the year
ending September 30, 2000.
INVENTORIES
<TABLE>
<CAPTION>
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March 31 September 30 March 31
(In millions) 2000 1999 1999
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<S> <C> <C> <C>
Chemicals and plastics $ 385 $ 358 $ 370
Construction materials 79 55 53
Petroleum products 56 45 53
Other products 54 55 49
Supplies 7 5 8
Excess of replacement costs over LIFO carrying values (62) (54) (53)
-------- ------- -------
$ 519 $ 464 $ 480
======== ======= =======
</TABLE>
EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share (EPS) from continuing operations.
<TABLE>
<CAPTION>
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Three months ended Six months ended
March 31 March 31
----------------------- -----------------------
(In millions except per share data) 2000 1999 2000 1999
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<S> <C> <C> <C> <C>
NUMERATOR
Numerator for basic and diluted EPS - Income from
continuing operations $ 25 $ 87 $ 65 $ 76
========== ========== =========== ==========
DENOMINATOR
Denominator for basic EPS - Weighted average
common shares outstanding 71 74 71 74
Common shares issuable upon exercise of stock options - 1 - 1
---------- ---------- ----------- ----------
Denominator for diluted EPS - Adjusted weighted
average shares and assumed conversions 71 75 71 75
========== ========== =========== ==========
BASIC EPS FROM CONTINUING OPERATIONS $ .35 $ 1.17 $ .91 $ 1.02
DILUTED EPS FROM CONTINUING OPERATIONS $ .35 $ 1.16 $ .91 $ 1.01
</TABLE>
6
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE B - UNUSUAL ITEMS
DISCONTINUED OPERATIONS
On March 16, 2000, Ashland's Board of Directors approved a
spin-off of 17.4 million shares of its Arch Coal Common Stock to
Ashland's shareholders of record on March 24, 2000, in the form of
a taxable dividend. The spin-off resulted in a charge to retained
earnings of $123 million, with no gain or loss recorded. However,
Ashland accrued $5 million of costs related to the spin-off and an
offsetting tax benefit of $2 million. Ashland intends, subject to
then-existing market conditions but within one year, to dispose of
its remaining 4.7 million Arch shares in a transaction or
transactions that qualify as a sale for federal income tax
purposes. Accordingly, results from the Arch Coal segment are
shown as discontinued operations with prior periods restated.
Components of amounts reflected in the income statements are
presented in the following table. Results for the six months ended
March 31, 2000, include a net loss of $203 million related to
asset impairment and restructuring costs, largely due to the
write-down of assets at Arch's Dal-Tex and Hobet 21 mining
operations and certain coal reserves in central Appalachia.
<TABLE>
<CAPTION>
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Three months ended Six months ended
March 31 March 31
-------------------------- ---------------------------
(In millions) 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues - Equity loss $ (9) $ - $ (246) $ -
Costs and expenses - SG&A expenses (1) - (1) (1)
----------- ----------- ------------ ------------
Operating loss (10) - (247) (1)
Income tax benefit 1 - 32 1
----------- ----------- ------------ ------------
Loss from discontinued operations $ (9) $ - $ (215) $ -
=========== =========== ============ ============
</TABLE>
EXTRAORDINARY LOSS
During the quarter ended March 31, 2000, Ashland refunded $36
million of pollution control revenue bonds and repaid $285 million
of the $600 million floating-rate bank credit agreement used to
fund the acquisition of the U.S. construction operations of
Superfos a/s. The redemption premium on the bonds and write-off of
unamortized deferred debt issuance expenses resulted in pretax
charges totaling $3 million which, net of income tax benefits of
$1 million, resulted in an extraordinary loss on early retirement
of debt of $2 million.
OTHER
Marathon Ashland Petroleum LLC (MAP) maintains an inventory
valuation reserve to reduce the LIFO cost of its inventories to
their net realizable values. Adjustments in that reserve are
recognized quarterly based on changes in petroleum product prices,
creating non-cash charges or credits to Ashland's earnings. No
adjustments to the reserve were required during the March 2000
periods.
7
<PAGE>
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE B - UNUSUAL ITEMS (continued)
The following tables show the effects of these unusual items on
Ashland's operating income, net income and diluted earnings per
share for the periods ended March 31, 2000, and 1999.
<TABLE>
<CAPTION>
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Three months ended Six months ended
March 31 March 31
-------------------------- ---------------------------
(In millions except per share data) 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating income before unusual items $ 90 $ 44 $ 200 $ 153
MAP inventory valuation adjustments - 132 - 39
----------- ----------- ------------ ------------
Operating income as reported $ 90 $ 176 $ 200 $ 192
=========== =========== ============ ============
Net income before unusual items $ 25 $ 6 $ 65 $ 52
Loss from discontinued operations (9) - (215) -
Costs of spin-off of discontinued operations (3) - (3) -
Extraordinary loss on early retirement of debt (2) - (2) -
MAP inventory valuation adjustments - 81 - 24
----------- ----------- ------------ ------------
Net income (loss) as reported $ 11 $ 87 $ (155) $ 76
=========== =========== ============ ============
Diluted earnings per share before unusual items $ .35 $ .08 $ .91 $ .70
Impact of unusual items (.19) 1.08 (3.08) .31
----------- ----------- ------------ ------------
Diluted earnings (loss) per share as reported $ .16 $ 1.16 $ (2.17) $ 1.01
=========== =========== ============ ============
</TABLE>
NOTE C - UNCONSOLIDATED AFFILIATES
Ashland is required by Rule 3-09 of Regulation S-X to file
separate financial statements for its significant unconsolidated
affiliate, Marathon Ashland Petroleum LLC (MAP). Ashland's
ownership position in Arch Coal, Inc. met those same filing
requirements prior to the spin-off described in Note B. Financial
statements for MAP and Arch Coal for the year ended December 31,
1999, were filed on a Form 10-K/A on March 21, 2000. Unaudited
income statement information for MAP is shown below.
MAP is organized as a limited liability company that has elected
to be taxed as a partnership. Therefore, the parents are
responsible for income taxes applicable to their share of MAP's
taxable income. The net income reflected below for MAP does not
include any provision for income taxes which will be incurred by
its parents.
<TABLE>
<CAPTION>
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Three months ended Six months ended
March 31 March 31
----------------------------- -------------------------------
(In millions) 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MAP
Sales and operating revenues $ 6,515 $ 4,184 $ 12,518 $ 8,882
Income from operations 147 383 253 292
Net income
Including inventory valuation adjustments 146 381 257 293
Excluding inventory valuation adjustments 146 33 257 189
Ashland's equity income
Including inventory valuation adjustments 49 138 85 97
Excluding inventory valuation adjustments 49 6 85 58
</TABLE>
8
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE D - LITIGATION, CLAIMS AND CONTINGENCIES
Ashland is subject to various federal, state and local
environmental laws and regulations that require remediation
efforts at multiple locations, including current operating
facilities, operating facilities conveyed to MAP, previously owned
or operated facilities, and Superfund or other waste sites. For
information regarding environmental reserves, see the
"Miscellaneous - Environmental Matters" section of Ashland's Form
10-K.
Environmental reserves are subject to numerous inherent
uncertainties that affect Ashland's ability to estimate its share
of the ultimate costs of required remediation efforts. Such
uncertainties involve the nature and extent of contamination at
each site, the extent of required cleanup efforts under existing
environmental regulations, widely varying costs of alternate
cleanup methods, changes in environmental regulations, the
potential effect of continuing improvements in remediation
technology, and the number and financial strength of other
potentially responsible parties at multiparty sites. Reserves are
regularly adjusted as environmental assessments and remediation
efforts proceed.
In addition to these matters, Ashland and its subsidiaries are
parties to numerous other claims and lawsuits, some of which are
for substantial amounts. While these actions are being contested,
the outcome of individual matters is not predictable with
assurance.
Ashland does not believe that any liability resulting from any of
the above matters, after taking into consideration its insurance
coverage and amounts already provided for, will have a material
adverse effect on its consolidated financial position, cash flows
or liquidity. However, such matters could have a material effect
on results of operations in a particular quarter or fiscal year as
they develop or as new issues are identified.
NOTE E - ACQUISITIONS
In October 1999, Ashland completed its tender offer for Superfos
a/s, a Denmark based industrial company. In November 1999, in a
series of transactions, Ashland sold the businesses of Superfos,
other than its U.S. construction operations, to a unit of Industri
Kapital, a European private equity fund. In the November
transactions, Ashland received from Industri Kapital a short-term
note for $285 million, which was redeemed in the March 2000
quarter. Ashland's net cost for the U.S. construction business of
Superfos was approximately $537 million. Prior to Ashland's
acquisition, these operations generated sales and operating
revenues of $557 million and operating income of $30 million
during the year ended September 30, 1999.
Primarily as a result of this acquisition, APAC's total assets
increased from $996 million at September 30, 1999, to $1.55
billion at March 31, 2000. APAC's capital employed increased from
$663 million at September 30, 1999, to $1.152 billion at March 31,
2000. The acquisition was funded with short-term debt and a $600
million, floating-rate bank credit agreement that matures in
increasing payments between 2000 and 2004. Ashland repaid $285
million of the bank credit agreement in the March 2000 quarter
upon redemption of the note described above. Primarily as a result
of this new debt and the charges to equity related to Arch Coal
(see Note B), Ashland's debt amounted to 56% of capital employed
at March 31, 2000, compared to 46% at September 30, 1999.
9
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
INFORMATION BY INDUSTRY SEGMENT
- -----------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
March 31 March 31
----------------------------- ---------------------------
(In millions) 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Sales and operating revenues
APAC $ 431 $ 262 $ 1,036 $ 691
Ashland Distribution 812 716 1,580 1,422
Ashland Specialty Chemical 323 304 637 613
Valvoline 286 250 524 484
Intersegment sales
Ashland Distribution (9) (8) (19) (17)
Ashland Specialty Chemical (20) (20) (39) (41)
Valvoline (1) (1) (1) (3)
------------ ------------ ------------ -----------
1,822 1,503 3,718 3,149
Equity income
Ashland Specialty Chemical 1 1 2 3
Valvoline 1 - 1 -
Refining and Marketing 49 138 85 97
------------ ------------ ------------ -----------
51 139 88 100
Other income
APAC 5 2 6 5
Ashland Distribution 3 2 5 4
Ashland Specialty Chemical 7 5 13 9
Valvoline 2 1 3 3
Refining and Marketing 2 3 5 11
Corporate 3 - 4 7
------------ ------------ ------------ -----------
22 13 36 39
------------ ------------ ------------ -----------
$ 1,895 $ 1,655 $ 3,842 $ 3,288
============ ============ ============ ===========
OPERATING INCOME (1)
APAC $ 1 $ 2 $ 38 $ 28
Ashland Distribution 14 13 27 25
Ashland Specialty Chemical 24 21 53 49
Valvoline 23 13 34 24
Refining and Marketing 45 138 78 97
Corporate (17) (11) (30) (31)
------------ ------------ ------------ -----------
$ 90 $ 176 $ 200 $ 192
============ ============ ============ ===========
- ------------------------------------------------------------------------------------------------------------------------------------
(1) See Note B to the Condensed Consolidated Financial Statements for a discussion of unusual items.
</TABLE>
10
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<CAPTION>
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
INFORMATION BY INDUSTRY SEGMENT
- ------------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
March 31 March 31
----------------------------- ----------------------------
2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING INFORMATION
APAC
Construction backlog at March 31 (millions) $ 1,388 $ 872
Hot mix asphalt production (million tons) 5.2 3.1 14.0 9.9
Aggregate production (million tons) 5.5 4.1 11.9 9.3
Ready-mix concrete production (thousand cubic yards) 629 289 1,226 621
Ashland Distribution (1)
Sales per shipping day (millions) $ 12.5 $ 11.4 $ 12.5 $ 11.4
Gross profit as a percent of sales 15.4% 16.3% 15.5% 16.0%
Ashland Specialty Chemical (1)
Sales per shipping day (millions) $ 5.0 $ 4.8 $ 5.1 $ 4.9
Gross profit as a percent of sales 34.4% 35.5% 35.2% 35.8%
Valvoline lubricant sales (thousand barrels per day) 13.3 12.3 12.3 11.9
Refining and Marketing (2)
Refined products sold (thousand barrels per day) 1,219 1,121 1,270 1,181
Crude oil refined (thousand barrels per day) 851 848 838 855
Merchandise sales (millions) $ 541 $ 459 $ 1,084 $ 946
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 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.
(2) Amounts represent 100 percent of the volumes of MAP, in which Ashland
owns a 38 percent interest.
11
<PAGE>
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
CURRENT QUARTER - Ashland's net income was $11 million for the
quarter ended March 31, 2000, compared to $87 million for the
quarter ended March 31, 1999. Excluding unusual items described in
Note B to the Condensed Consolidated Financial Statements, net
income amounted to $25 million in the 2000 period, compared to $6
million in the 1999 period. The increase reflected improved
refining margins for Marathon Ashland Petroleum (MAP), as well as
a 25% improvement in combined operating income from Ashland's
wholly owned businesses. Valvoline showed the biggest improvement
on the strength of higher earnings from the sales of R-12
refrigerant. Five of Ashland Specialty Chemical's seven business
units reported profit improvements. Strong performances from
adhesives and electronic chemicals more than offset the impact of
margin compression in polyester resins and petrochemical product
lines, which faced rising raw material costs. Ashland Distribution
was up slightly from last year's quarter, while APAC operated at
near breakeven levels. Partially offsetting the improvements in
operating income was higher interest expense resulting from debt
incurred to purchase the U.S. construction operations of Superfos
a/s.
YEAR-TO-DATE - For the six months ended March 31, 2000, Ashland
recorded a net loss of $155 million, compared to net income of $76
million for the six months ended March 31, 1999. Excluding unusual
items, net income amounted to $65 million in the 2000 period,
compared to $52 million in the 1999 period. The improvement
reflects a 20% increase in combined operating income from
Ashland's wholly owned businesses and improved refining margins
for MAP. Though all four of the wholly owned businesses improved,
the biggest increases came from Valvoline and APAC. Valvoline's
improvement reflects the net effects of higher earnings from the
sales of R-12 refrigerant and antifreeze, and reduced lubricant
margins. APAC's results benefited from the Superfos acquisition
and a change in estimated depreciable lives and salvage values for
its construction equipment. Ashland Specialty Chemical improved
reflecting strong performances in adhesives and electronic
chemicals. Ashland Distribution was up despite margin compression
in the chemicals and solvents business, reflecting strong
performances in the plastics and fine ingredients units. The
increases in operating income were partially offset by higher
interest expense resulting from increased debt levels.
APAC
CURRENT QUARTER - Operating income from APAC's construction
operations amounted to $1 million for the March 2000 quarter,
compared to $2 million in the March 1999 quarter. Given the
seasonality of highway construction, the March quarter is
typically the slowest period in the construction season. The
current year period reflects a $5 million reduction in
depreciation expense related to changes in the estimated useful
lives and salvage values of APAC's construction equipment.
However, this favorable effect was more than offset by higher
liquid asphalt costs and adverse winter weather in many of APAC's
operating areas.
YEAR-TO-DATE - For the six months ended March 31, 2000, APAC
reported operating income of $38 million, compared to $28 million
for the same period of 1999. The increase reflects a $10 million
benefit from the change in depreciation described above, as well
as operating income from the U.S. construction operations of
Superfos (see Note E to the Condensed Consolidated Financial
Statements). Partially offsetting these positive factors were
higher liquid asphalt costs and poor weather conditions in APAC's
markets during January 2000. Net revenue increased 18%, while
production of hot mix asphalt was up 42%, crushed aggregate was up
28%, and ready-mix concrete was up 97% from the 1999 period. The
construction backlog at March 31, 2000, amounted to $1.388
billion, up 59% from a year ago and the highest in company
history. This growth reflects APAC's acquisitions, as well as
robust highway funding.
12
<PAGE>
- -------------------------------------------------------------------------------
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- -------------------------------------------------------------------------------
APAC (continued)
As a result of the Superfos acquisition, 17 other acquisitions
completed since the beginning of fiscal 1999, the growth of the
historical APAC businesses and the change in depreciation, Ashland
expects APAC to generate operating income of roughly $170 million
in fiscal 2000, up from $108 million in fiscal 1999.
ASHLAND DISTRIBUTION
CURRENT QUARTER - Ashland Distribution reported operating income
of $14 million for the quarter ended March 31, 2000, compared to
$13 million for last year's March quarter. Industrial Chemicals &
Solvents felt the impact of margin compression, due to higher
costs for hydrocarbon-based products. The impact was more than
offset by improvements in each of the other distribution
businesses. Strong sales volumes were achieved in thermoplastics,
fine ingredients, chemical distribution and fiber-reinforced
plastics. In addition, losses from the European plastics
operations have declined due to an improvement in their gross
profit percentage.
YEAR-TO-DATE - For the six months ended March 31, 2000, Ashland
Distribution reported operating income of $27 million, compared to
$25 million for the same period of 1999. Sales volumes were up
over the prior year, but much of that increase was offset by lower
gross profit percentages, due to higher product costs. As in the
current quarter comparison, IC&S declined due to higher costs for
petroleum-based raw materials that adversely affected margins, but
the effects were more than offset by better results from each of
the other distribution businesses.
ASHLAND SPECIALTY CHEMICAL
CURRENT QUARTER - For the quarter ended March 31, 2000, Ashland
Specialty Chemical reported operating income of $24 million,
compared to $21 million reported for the March 1999 quarter. Five
of the seven specialty chemical business units reported profit
improvements. Specialty Polymers & Adhesives set a new quarterly
record for operating income and Electronic Chemicals is rebounding
well, as last year's results were still being affected by the
lingering impact of the worldwide semiconductor recession. These
improvements were partially offset by declines in Composite
Polymers and Petrochemicals, as rising raw material and feedstock
costs squeezed margins for polyester resins and maleic anhydride.
YEAR-TO-DATE - For the six months ended March 31, 2000, Ashland
Specialty Chemical reported operating income of $53 million,
compared to $49 million for the first six months of 1999. The same
factors discussed in the current quarter comparison above affected
the year-to-date comparison.
VALVOLINE
CURRENT QUARTER - For the quarter ended March 31, 2000, Valvoline
reported operating income of $23 million, a 79% increase compared
to $13 million for the March 1999 quarter. The increase was
primarily the result of higher earnings from the sales of R-12
refrigerant. Valvoline Instant Oil Change (VIOC) posted record
March quarter results, reflecting higher car counts, improvement
in the average ticket price, and a gain on the sale of certain
service centers. Valvoline International earnings improved due to
better results from operations in Europe, Asia/Pacific and Latin
America. Also contributing to Valvoline's improvement was the
elimination of losses incurred by First Recovery, which was sold
late in fiscal 1999. The core lubricants business showed a slight
decline despite increased volumes, reflecting continued pressure
on margins resulting from base oil and other raw material cost
increases. Price increases for lubricants went into effect
February 14, and the favorable impacts were seen in results for
both February and March.
13
<PAGE>
- -------------------------------------------------------------------------------
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- -------------------------------------------------------------------------------
VALVOLINE (CONTINUED)
YEAR-TO-DATE - For the six months ended March 31, 2000, Valvoline
reported operating income of $34 million, compared to $24 million
for the same period of 1999, a 46% improvement. The increase
primarily reflects the net effects of higher earnings from the
sales of R-12 refrigerant and antifreeze, and reduced lubricant
margins attributed to increasing raw material costs. Valvoline
International earnings improved due to better results from
operations in Europe, Australia, Asia/Pacific and Latin America.
VIOC reported record income, primarily due to improvements in car
counts and the average ticket price. The elimination of losses
incurred by First Recovery in 1999 also contributed to Valvoline's
improvement.
REFINING AND MARKETING
CURRENT QUARTER - Operating income from Refining and Marketing
amounted to $45 million for the quarter ended March 31, 2000. This
compares to $6 million for the quarter ended March 31, 1999
(excluding $132 million in favorable inventory market valuation
adjustments). Results for both periods include Ashland's 38% share
of MAP's earnings, amortization of Ashland's excess investment in
MAP, and results of certain retained refining and marketing
activities. MAP experienced significant improvement in wholesale
refining margins during the March 2000 quarter. Refined product
sales volumes also increased, primarily reflecting the acquisition
of Ultramar Diamond Shamrock's marketing assets in Michigan in the
December 1999 quarter. Retail operations declined, however, as
retail prices did not keep pace with wholesale product price
increases, resulting in retail margin compression. Partially
offsetting this decline were increased merchandise sales volumes.
YEAR-TO-DATE - Operating income from Refining and Marketing
amounted to $78 million for the six months ended March 31, 2000.
This compares to $58 million for the six months ended March 31,
1999 (excluding $39 million in favorable inventory market
valuation adjustments). The increase in operating income reflects
improved refining margins, higher refined product sales volumes,
and increased merchandise sales volumes. These improvements were
partially offset by decreased retail product margins.
CORPORATE
Corporate expenses amounted to $17 million in the quarter ended
March 31, 2000, compared to $11 million for the quarter ended
March 31, 1999. The higher level of expenses reflects increases in
incentive and deferred compensation costs. Corporate expenses on a
year-to-date basis were relatively unchanged, amounting to $30
million in the 2000 period, compared to $31 million in the 1999
period.
INTEREST EXPENSE (NET OF INTEREST INCOME)
For the quarter ended March 31, 2000, interest expense (net of
interest income) totaled $45 million, compared to $34 million for
the March 1999 quarter. For the year-to-date, interest expense
(net of interest income) amounted to $88 million in the 2000
period, compared to $67 million in the 1999 period. The increases
reflect higher debt levels resulting primarily from the debt used
to finance the acquisition of the U.S. construction operations of
Superfos and higher interest rates on floating-rate debt.
14
<PAGE>
- -------------------------------------------------------------------------------
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- -------------------------------------------------------------------------------
DISCONTINUED OPERATIONS
As described in Note B to the Condensed Consolidated Financial
Statements, in March 2000 Ashland distributed to Ashland
shareholders the major portion of its common shares of Arch Coal.
The spin-off resulted in no gain or loss, but Ashland accrued $3
million in after-tax costs related to the transaction. As a
result, the former Arch Coal segment is now shown as discontinued
operations, with prior periods restated.
CURRENT QUARTER - The operations of Arch Coal resulted in a net
loss to Ashland of $9 million in the quarter ended March 31, 2000,
compared to breakeven results in the March 1999 period. The loss
reflects continued weakness in U.S. coal markets and losses from
Arch's West Elk mine in Colorado, which has been idle since
January 28, 2000, when higher than normal levels of
combustion-related gases were detected in the mine.
YEAR-TO-DATE - For the six months ended March 31, 2000, Ashland
recorded a net loss of $215 million from its investment in Arch
Coal, compared to breakeven results in the March 1999 period. The
current year loss includes a $203 million net charge in the
December quarter related to asset impairment and restructuring
costs. The charge was largely due to the write-down of assets at
Arch's Dal-Tex and Hobet 21 mining operations and certain coal
reserves in central Appalachia.
EXTRAORDINARY LOSS
During the quarter ended March 31, 2000, Ashland refunded $36
million of pollution control revenue bonds and repaid $285 million
of the $600 million floating-rate bank credit agreement used to
fund the acquisition of the U.S. construction operations of
Superfos. The redemption premium on the bonds and write-off of
unamortized deferred debt issuance expenses resulted in pretax
charges totaling $3 million which, net of income tax benefits of
$1 million, resulted in an extraordinary loss on early retirement
of debt of $2 million.
FINANCIAL POSITION
LIQUIDITY
Ashland's financial position has enabled it to obtain capital for
its financing needs and to maintain investment grade ratings on
its senior debt of Baa2 from Moody's and BBB from Standard &
Poor's. Ashland has two revolving credit agreements providing for
up to $400 million in borrowings, neither of which was in use at
March 31, 2000. Under a shelf registration, Ashland can also issue
an additional $348 million in debt and equity securities should
future opportunities or needs arise. Ashland intends to increase
this capacity to $600 million under a new shelf registration in
May 2000. Furthermore, Ashland has access to various uncommitted
lines of credit and commercial paper markets, under which $310
million of short-term borrowings were outstanding at March 31,
2000. The revolving credit agreements contain a covenant limiting
new borrowings. Primarily due to the debt incurred to finance the
acquisition of the U.S. construction operations of Superfos, the
$203 million charge to earnings resulting from Arch Coal's asset
impairment write-down and restructuring costs, and the Arch Coal
spin-off, additional debt permissible has been reduced from $1.454
billion at September 30, 1999, to $377 million at March 31, 2000.
15
<PAGE>
- ------------------------------------------------------------------------------
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------------------------------------------------
LIQUIDITY (CONTINUED)
Cash flows from operations, a major source of Ashland's liquidity,
amounted to $200 million for the six months ended March 31, 2000,
compared to $50 million for the six months ended March 31, 1999.
The increase is primarily the result of the sale of $150 million
of accounts receivable under a new program initiated in March
2000. Ashland's cash flows from operations exceeded its capital
requirements for net property additions and dividends by $49
million for the six months ended March 31, 2000.
Operating working capital (accounts receivable and inventories,
less trade and other payables) at March 31, 2000, was $481
million, compared to $548 million at September 30, 1999, and $415
million at March 31, 1999. Liquid assets (cash, cash equivalents
and accounts receivable) amounted to 71% of current liabilities at
March 31, 2000, compared to 95% at September 30, 1999, and 71% at
March 31, 1999. Ashland's working capital is affected by its use
of the LIFO method of inventory valuation, which valued
inventories $62 million below their replacement costs at March 31,
2000.
CAPITAL RESOURCES
For the six months ended March 31, 2000, property additions
amounted to $136 million, compared to $102 million for the same
period last year. Property additions and cash dividends for the
remainder of fiscal 2000 are estimated at $150 million and $40
million. Under Ashland's share repurchase program initiated in
August 1998, Ashland had repurchased 7.8 million shares through
March 31, 2000, with remaining authority to repurchase an
additional 1.6 million shares. The number of shares ultimately
purchased and the prices Ashland will pay for its stock are
subject to periodic review by management. Ashland anticipates
meeting its remaining 2000 capital requirements for property
additions, dividends and scheduled debt repayments of $34 million
from internally generated funds. However, external financing may
be necessary to fund common stock repurchases and acquisitions.
At March 31, 2000, Ashland's debt level amounted to $2.36 billion,
compared to $1.846 billion at September 30, 1999. The increase
reflects a floating-rate bank credit agreement and short-term debt
incurred to finance the acquisition of the U.S. construction
operations of Superfos. Common stockholders' equity decreased by
$376 million during the six months ended March 31, 2000,
reflecting the $203 million charge to earnings resulting from Arch
Coal's asset impairment write-down and restructuring costs, and
the spin-off of Arch Coal shares. As a result, debt as a percent
of capital employed amounted to 56% at March 31, 2000, compared to
46% at September 30, 1999. Ashland's long-term debt included $455
million of floating-rate debt at March 31, 2000. As a result,
Ashland's interest costs for the remainder of 2000 will fluctuate
based on short-term interest rates on that portion of its
long-term debt outstanding, as well as on any short-term notes and
commercial paper.
ENVIRONMENTAL MATTERS
Federal, state and local laws and regulations relating to the
protection of the environment have resulted in higher operating
costs and capital investments by the industries in which Ashland
operates. Because of the continuing trends toward greater
environmental awareness and ever increasing regulations, Ashland
believes that expenditures for environmental compliance will
continue to have a significant effect on its businesses. Although
it cannot accurately predict how such trends will affect future
operations and earnings, Ashland believes the nature and
significance of its ongoing compliance costs will be comparable to
those of its competitors. For information on certain specific
environmental proceedings and
16
<PAGE>
- ------------------------------------------------------------------------------
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------------------------------------------------
ENVIRONMENTAL MATTERS (continued)
investigations, see the "Legal Proceedings" section of this Form
10-Q. For information regarding environmental reserves, see the
"Miscellaneous - Environmental Matters" section of Ashland's Form
10-K.
Environmental reserves are subject to numerous inherent
uncertainties that affect Ashland's ability to estimate its share
of the ultimate costs of required remediation efforts. Such
uncertainties involve the nature and extent of contamination at
each site, the extent of required cleanup efforts under existing
environmental regulations, widely varying costs of alternate
cleanup methods, changes in environmental regulations, the
potential effect of continuing improvements in remediation
technology, and the number and financial strength of other
potentially responsible parties at multiparty sites. Reserves are
regularly adjusted as environmental assessments and remediation
efforts proceed.
Ashland does not believe that any liability resulting from
environmental matters, after taking into consideration its
insurance coverage and amounts already provided for, will have a
material adverse effect on its consolidated financial position,
cash flows or liquidity. However, such matters could have a
material effect on results of operations in a particular quarter
or fiscal year as they develop or as new issues are identified.
CONVERSION TO THE EURO
On January 1, 1999, certain member countries of the European
Economic and Monetary Union (EMU) established fixed conversion
rates between their existing currencies and the EMU's common
currency, the Euro. Entities in the participating countries can
conduct their business operations in either their existing
currencies or the Euro until December 31, 2001. After that date,
all non-cash transactions will be conducted in Euros and
circulation of Euro notes and coins for cash transactions will
commence. National notes and coins will be withdrawn no later than
June 30, 2002.
Ashland conducts business in all of the participating countries
and is addressing the issues associated with the Euro. The more
important issues include converting information technology
systems, reassessing currency risk, and processing accounting and
tax records. Based on the progress to date, Ashland believes that
the use of the Euro will not have a significant impact on the
manner in which it conducts its business and processes its
accounting records. Accordingly, the use of the Euro is not
expected to have a material effect on Ashland's consolidated
financial position, results of operations or cash flows.
FORWARD LOOKING STATEMENTS
This Form 10-Q 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 (among others) prices, supply and demand,
market conditions, cost of raw materials, weather and operating
efficiencies. Although Ashland believes that its expectations are
based on reasonable assumptions, it cannot assure that 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. Other
factors and risks affecting Ashland are contained in Ashland's
Form 10-K for the fiscal year ended September 30, 1999.
17
<PAGE>
PART II - OTHER INFORMATION
- ------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
Environmental Proceedings - (1) As of March 31, 2000, Ashland had been
identified as a "potentially responsible party" ("PRP") under Superfund or
similar state laws for potential joint and several liability for clean-up
costs in connection with alleged releases of hazardous substances in
connection with 90 waste treatment or disposal sites. These sites are
currently subject to ongoing investigation and remedial activities,
overseen by the EPA or a state agency, in which Ashland is typically
participating as a member of a PRP group. Generally, the type of relief
sought includes remediation of contaminated soil and/or groundwater,
reimbursement for past costs of site clean-up and administrative oversight,
and/or long-term monitoring of environmental conditions at the sites.
Ashland carefully monitors the investigatory and remedial activity at many
of these sites. Based on its experience with site remediation, its
familiarity with current environmental laws and regulations, its analysis
of the specific hazardous substances at issue, the existence of other
financially viable PRPs and its current estimates of investigatory,
clean-up and monitoring costs at each site, Ashland believes that its
liability at these sites, either individually or in the aggregate, after
taking into account its insurance coverage and established financial
reserves, will not have a material adverse effect on Ashland's consolidated
financial position, cash flow or liquidity. However, such matters could
have a material effect on Ashland's results of operations in a particular
quarter or fiscal year as they develop or as new issues are identified.
Estimated costs for these matters are recognized in accordance with
generally accepted accounting principles governing the likelihood that
costs will be incurred and Ashland's ability to reasonably estimate future
costs.
(2) Pursuant to a 1990 Agreed Order with the Commonwealth of Kentucky's
Natural Resources and Environmental Protection Cabinet ("NREPC"), Ashland
has conducted source investigation and remedial activities related to
hydrocarbon contamination of the groundwater beneath the Catlettsburg,
Kentucky refinery, operated since 1998 by Marathon Ashland Petroleum LLC
("MAP"). In 1999, Ashland and the NREPC initiated negotiations for a new
Agreed Order which would identify future investigative efforts and
establish timetables for strategic remedial activities. This Order is also
expected to include a monetary penalty. In connection with the formation of
MAP, Ashland agreed to retain responsibility for this matter. Because
discussions are ongoing, Ashland is unable to predict what the final
penalty amount might be. However, the penalty amount is not expected to
have a material adverse effect on Ashland's consolidated financial
position, cash flow or liquidity.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
12 Computation of Ratios of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends
27.1 Financial Data Schedule for the quarter ended March 31, 2000.
27.2 Restated Financial Data Schedule for the quarter ended December 31, 1999.
27.3 Restated Financial Data Schedule for the fiscal year ended September
30, 1999.
27.4 Restated Financial Data Schedule for the quarter ended June 30, 1999.
27.5 Restated Financial Data Schedule for the quarter ended March 31, 1999.
27.6 Restated Financial Data Schedule for the quarter ended December 31,
1998.
27.7 Restated Financial Data Schedule for the fiscal year ended September 30,
1998.
27.8 Restated Financial Data Schedule for the quarter ended June 30, 1998.
18
<PAGE>
27.9 Restated Financial Data Schedule for the quarter ended March 31, 1998.
27.10 Restated Financial Data Schedule for the quarter ended December 31,
1997.
27.11 Restated Financial Data Schedule for the fiscal year ended September 30,
1997.
(b) Reports on Form 8-K
A report on Form 8-K was filed on January 24, 2000 to announce that
Ashland continues to pursue spin-off alternatives for its investment in
Arch Coal, including both tax-free and taxable distributions.
A report on Form 8-K was filed on February 24, 2000 to announce
that, absent intervening circumstances or material events, Ashland's
management intends to recommend to its Board of Directors at the next
Ashland Board meeting, a distribution to Ashland shareholders of 17,397,233
shares of its Arch Coal Common Stock in the form of a taxable dividend.
A report on Form 8-K was filed on March 16, 2000 to announce that
Ashland's Board of Directors had approved a taxable distribution of
17,397,233 shares of Arch Coal Common Stock to Ashland's shareholders and
had set a record date of March 24, 2000 for the distribution.
A report on Form 8-K was filed on March 27, 2000 to announce that
17,397,233 shares of Arch Coal Common Stock had been distributed to
Ashland's shareholders.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Ashland Inc.
---------------
(Registrant)
Date: May 9, 2000 /s/ Kenneth L. Aulen
--------------------
Kenneth L. Aulen
Administrative Vice President and Controller
(Chief Accounting Officer)
Date: May 9, 2000 /s/ David L. Hausrath
---------------------
David L. Hausrath
Vice President and General Counsel
20
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- --------------------------------------------------------
12 Computation of Ratios of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends
27.1 Financial Data Schedule for the quarter ended March 31, 2000.
27.2 Restated Financial Data Schedule for the quarter ended December 31, 1999.
27.3 Restated Financial Data Schedule for the fiscal year ended September
30, 1999.
27.4 Restated Financial Data Schedule for the quarter ended June 30, 1999.
27.5 Restated Financial Data Schedule for the quarter ended March 31, 1999.
27.6 Restated Financial Data Schedule for the quarter ended December 31,
1998.
27.7 Restated Financial Data Schedule for the fiscal year ended September 30,
1998.
27.8 Restated Financial Data Schedule for the quarter ended June 30, 1998.
27.9 Restated Financial Data Schedule for the quarter ended March 31, 1998.
27.10 Restated Financial Data Schedule for the quarter ended December 31,
1997.
27.11 Restated Financial Data Schedule for the fiscal year ended September 30,
1997.
EXHIBIT 12
ASHLAND INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
(In millions)
<TABLE>
<CAPTION>
Six Months Ended
Years Ended September 30 March 31
------------------------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1999 2000
---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS
Income (loss) from continuing operations $ (2) $ 115 $ 169 $ 178 $ 291 $ 76 $ 65
Income taxes - 71 125 114 193 49 47
Interest expense 153 154 148 133 141 68 96
Interest portion of rental expense 35 44 48 40 35 17 18
Amortization of deferred debt expense 1 1 1 1 1 - 1
Undistributed earnings of
unconsolidated affiliates (1) (3) (6) (62) (11) 4 (20)
Amounts related to significant affiliates*
Earnings 7 7 7 - - - -
Dividends (1) - - - - - -
---------- ---------- ----------- ---------- ---------- ---------- ----------
$ 192 $ 389 $ 492 $ 404 $ 650 $ 214 $ 207
========== ========== =========== ========== ========== ========== ==========
FIXED CHARGES
Interest expense $ 153 $ 154 $ 148 $ 133 $ 141 $ 68 $ 96
Interest portion of rental expense 35 44 48 40 35 17 18
Amortization of deferred debt expense 1 1 1 1 1 - 1
Capitalized interest - - 1 - - - -
Fixed charges of significant affiliates* 6 6 5 - - - -
---------- ---------- ----------- ---------- ---------- ---------- ----------
$ 195 $ 205 $ 203 $ 174 $ 177 $ 85 $ 115
========== ========== =========== ========== ========== ========== ==========
COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
Preferred dividend requirements $ 19 $ 19 $ 9 $ - $ - $ - $ -
Ratio of pretax to net income** 1.04 1.61 1.74 - - - -
---------- ---------- ----------- ---------- ---------- ---------- --------
Preferred dividends on a pretax basis 19 30 17 - - - -
Fixed charges 195 205 203 174 177 85 115
---------- ---------- ----------- ---------- ---------- ---------- --------
$ 214 $ 235 $ 220 $ 174 $ 177 $ 85 $ 115
========== ========== =========== ========== ========== ========== =========
RATIO OF EARNINGS TO
FIXED CHARGES *** 1.90 2.42 2.32 3.67 2.52 1.79
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
**** 1.66 2.24 2.32 3.67 2.52 1.79
* Significant affiliates are companies accounted for on the equity method that are 50% or greater owned or
whose indebtedness has been directly or indirectly guaranteed by Ashland or its consolidated
subsidiaries.
** Computed as income from continuing operations before income taxes divided by income from continuing
operations, which adjusts dividends on preferred stock to a pretax basis.
*** Fixed charges exceeded earnings (as defined) by $3 million.
**** Combined fixed charges and preferred stock dividends exceeded earnings (as defined) by $22 million.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S 2ND QUARTER 2000 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 64
<SECURITIES> 0
<RECEIVABLES> 1,179
<ALLOWANCES> 21
<INVENTORY> 519
<CURRENT-ASSETS> 1,990
<PP&E> 2,935
<DEPRECIATION> 1,417
<TOTAL-ASSETS> 6,525
<CURRENT-LIABILITIES> 1,712
<BONDS> 1,947
<COMMON> 70
0
0
<OTHER-SE> 1,754
<TOTAL-LIABILITY-AND-EQUITY> 6,525
<SALES> 3,718
<TOTAL-REVENUES> 3,842
<CGS> 3,111
<TOTAL-COSTS> 3,111
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88
<INCOME-PRETAX> 112
<INCOME-TAX> 47
<INCOME-CONTINUING> 65
<DISCONTINUED> (218)
<EXTRAORDINARY> (2)
<CHANGES> 0
<NET-INCOME> (155)
<EPS-BASIC> (2.17)
<EPS-DILUTED> (2.17)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S 1ST QUARTER 2000 10-Q WHICH
WAS RESTATED IN THE 2ND QUARTER 2000 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q'S AND
NOTE B OF NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS IN THE 2ND QUARTER 2000 10-Q THAT EXPLAINS THE
RESTATEMENT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 46
<SECURITIES> 0
<RECEIVABLES> 1,274
<ALLOWANCES> 24
<INVENTORY> 522
<CURRENT-ASSETS> 2,326
<PP&E> 2,902
<DEPRECIATION> 1,390
<TOTAL-ASSETS> 6,950
<CURRENT-LIABILITIES> 1,664
<BONDS> 2,198
<COMMON> 71
0
0
<OTHER-SE> 1,901
<TOTAL-LIABILITY-AND-EQUITY> 6,950
<SALES> 1,897
<TOTAL-REVENUES> 1,948
<CGS> 1,594
<TOTAL-COSTS> 1,594
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 68
<INCOME-TAX> 28
<INCOME-CONTINUING> 40
<DISCONTINUED> (206)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (166)
<EPS-BASIC> (2.32)
<EPS-DILUTED> (2.32)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S ANNUAL REPORT TO
SHAREHOLDERS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
WHICH WAS RESTATED IN THE 2ND QUARTER 2000 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL
REPORT AND 10-Q AND NOTE B OF NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS IN THE 2ND QUARTER 2000
10-Q THAT EXPLAINS THE RESTATEMENT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 110
<SECURITIES> 0
<RECEIVABLES> 1,242
<ALLOWANCES> 23
<INVENTORY> 464
<CURRENT-ASSETS> 2,059
<PP&E> 2,649
<DEPRECIATION> 1,357
<TOTAL-ASSETS> 6,424
<CURRENT-LIABILITIES> 1,396
<BONDS> 1,627
<COMMON> 72
0
0
<OTHER-SE> 2,128
<TOTAL-LIABILITY-AND-EQUITY> 6,424
<SALES> 6,801
<TOTAL-REVENUES> 7,253
<CGS> 5,574
<TOTAL-COSTS> 5,574
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> 485
<INCOME-TAX> 194
<INCOME-CONTINUING> 291
<DISCONTINUED> (1)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 290
<EPS-BASIC> 3.94
<EPS-DILUTED> 3.89
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S 3RD QUARTER 1999 10-Q WHICH
WAS RESTATED IN THE 2ND QUARTER 2000 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q'S AND
NOTE B OF NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS IN THE 2ND QUARTER 2000 10-Q THAT EXPLAINS THE
RESTATEMENT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 81
<SECURITIES> 0
<RECEIVABLES> 1,152
<ALLOWANCES> 23
<INVENTORY> 491
<CURRENT-ASSETS> 1,957
<PP&E> 2,594
<DEPRECIATION> 1,340
<TOTAL-ASSETS> 6,281
<CURRENT-LIABILITIES> 1,515
<BONDS> 1,627
<COMMON> 73
0
0
<OTHER-SE> 2,032
<TOTAL-LIABILITY-AND-EQUITY> 6,281
<SALES> 4,945
<TOTAL-REVENUES> 5,207
<CGS> 4,037
<TOTAL-COSTS> 4,037
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102
<INCOME-PRETAX> 287
<INCOME-TAX> 111
<INCOME-CONTINUING> 176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176
<EPS-BASIC> 2.37
<EPS-DILUTED> 2.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S 2ND QUARTER 1999 10-Q WHICH
WAS RESTATED IN THE 2ND QUARTER 2000 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q'S AND
NOTE B OF NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS IN THE 2ND QUARTER 2000 10-Q THAT EXPLAINS THE
RESTATEMENT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 90
<SECURITIES> 0
<RECEIVABLES> 1,072
<ALLOWANCES> 22
<INVENTORY> 480
<CURRENT-ASSETS> 1,851
<PP&E> 2,544
<DEPRECIATION> 1,322
<TOTAL-ASSETS> 6,154
<CURRENT-LIABILITIES> 1,595
<BONDS> 1,481
<COMMON> 74
0
0
<OTHER-SE> 2,007
<TOTAL-LIABILITY-AND-EQUITY> 6,154
<SALES> 3,149
<TOTAL-REVENUES> 3,288
<CGS> 2,579
<TOTAL-COSTS> 2,579
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67
<INCOME-PRETAX> 125
<INCOME-TAX> 49
<INCOME-CONTINUING> 76
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76
<EPS-BASIC> 1.02
<EPS-DILUTED> 1.01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S 1ST QUARTER 1999 10-Q WHICH
WAS RESTATED IN THE 2ND QUARTER 2000 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q'S AND
NOTE B OF NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS IN THE 2ND QUARTER 2000 10-Q THAT EXPLAINS THE
RESTATEMENT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 91
<SECURITIES> 0
<RECEIVABLES> 1,109
<ALLOWANCES> 21
<INVENTORY> 471
<CURRENT-ASSETS> 1,853
<PP&E> 2,472
<DEPRECIATION> 1,289
<TOTAL-ASSETS> 5,963
<CURRENT-LIABILITIES> 1,396
<BONDS> 1,511
<COMMON> 75
0
0
<OTHER-SE> 1,988
<TOTAL-LIABILITY-AND-EQUITY> 5,963
<SALES> 1,646
<TOTAL-REVENUES> 1,634
<CGS> 1,350
<TOTAL-COSTS> 1,350
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> (16)
<INCOME-TAX> (6)
<INCOME-CONTINUING> (10)
<DISCONTINUED> (1)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S ANNUAL REPORT TO
SHAREHOLDERS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
WHICH WAS RESTATED IN THE 2ND QUARTER 2000 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL
REPORT AND 10-Q AND NOTE B OF NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS IN THE 2ND QUARTER 2000
10-Q THAT EXPLAINS THE RESTATEMENT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 34
<SECURITIES> 0
<RECEIVABLES> 1,129
<ALLOWANCES> 19
<INVENTORY> 440
<CURRENT-ASSETS> 1,828
<PP&E> 2,413
<DEPRECIATION> 1,252
<TOTAL-ASSETS> 6,082
<CURRENT-LIABILITIES> 1,361
<BONDS> 1,507
<COMMON> 76
0
0
<OTHER-SE> 2,061
<TOTAL-LIABILITY-AND-EQUITY> 6,082
<SALES> 6,534
<TOTAL-REVENUES> 6,908
<CGS> 5,480
<TOTAL-COSTS> 5,480
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> 292
<INCOME-TAX> 114
<INCOME-CONTINUING> 178
<DISCONTINUED> 25
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 203
<EPS-BASIC> 2.68
<EPS-DILUTED> 2.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S 3RD QUARTER 1998 10-Q WHICH
WAS RESTATED IN THE 2ND QUARTER 2000 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q'S AND
NOTE B OF NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS IN THE 2ND QUARTER 2000 10-Q THAT EXPLAINS THE
RESTATEMENT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 44
<SECURITIES> 0
<RECEIVABLES> 1,050
<ALLOWANCES> 20
<INVENTORY> 486
<CURRENT-ASSETS> 1,795
<PP&E> 2,315
<DEPRECIATION> 1,225
<TOTAL-ASSETS> 5,978
<CURRENT-LIABILITIES> 1,325
<BONDS> 1,509
<COMMON> 76
0
0
<OTHER-SE> 2,098
<TOTAL-LIABILITY-AND-EQUITY> 5,978
<SALES> 4,777
<TOTAL-REVENUES> 5,075
<CGS> 4,006
<TOTAL-COSTS> 4,006
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96
<INCOME-PRETAX> 300
<INCOME-TAX> 121
<INCOME-CONTINUING> 179
<DISCONTINUED> 24
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 203
<EPS-BASIC> 2.69
<EPS-DILUTED> 2.64
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S 2ND QUARTER 1998 10-Q WHICH
WAS RESTATED IN THE 2ND QUARTER 2000 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q'S AND
NOTE B OF NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS IN THE 2ND QUARTER 2000 10-Q THAT EXPLAINS THE
RESTATEMENT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 1,004
<ALLOWANCES> 20
<INVENTORY> 465
<CURRENT-ASSETS> 1,664
<PP&E> 2,250
<DEPRECIATION> 1,186
<TOTAL-ASSETS> 5,812
<CURRENT-LIABILITIES> 1,281
<BONDS> 1,536
<COMMON> 76
0
0
<OTHER-SE> 1,991
<TOTAL-LIABILITY-AND-EQUITY> 5,812
<SALES> 3,071
<TOTAL-REVENUES> 3,204
<CGS> 2,594
<TOTAL-COSTS> 2,594
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> 113
<INCOME-TAX> 50
<INCOME-CONTINUING> 63
<DISCONTINUED> 18
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81
<EPS-BASIC> 1.07
<EPS-DILUTED> 1.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S 1ST QUARTER 1998 10-Q WHICH
WAS RESTATED IN THE 2ND QUARTER 2000 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q'S AND
NOTE B OF NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS IN THE 2ND QUARTER 2000 10-Q THAT EXPLAINS THE
RESTATEMENT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 48
<SECURITIES> 0
<RECEIVABLES> 996
<ALLOWANCES> 19
<INVENTORY> 449
<CURRENT-ASSETS> 1,658
<PP&E> 2,159
<DEPRECIATION> 1,160
<TOTAL-ASSETS> 5,508
<CURRENT-LIABILITIES> 1,206
<BONDS> 1,345
<COMMON> 75
0
0
<OTHER-SE> 1,981
<TOTAL-LIABILITY-AND-EQUITY> 5,508
<SALES> 1,598
<TOTAL-REVENUES> 1,663
<CGS> 1,349
<TOTAL-COSTS> 1,349
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> 76
<INCOME-TAX> 34
<INCOME-CONTINUING> 42
<DISCONTINUED> 10
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52
<EPS-BASIC> .69
<EPS-DILUTED> .68
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ASHLAND INC.'S ANNUAL REPORT TO
SHAREHOLDERS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
WHICH WAS RESTATED IN THE 2ND QUARTER 2000 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL
REPORT AND 10-Q AND NOTE B OF NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS IN THE 2ND QUARTER 2000
10-Q THAT EXPLAINS THE RESTATEMENT.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 250
<SECURITIES> 0
<RECEIVABLES> 1,610
<ALLOWANCES> 25
<INVENTORY> 660
<CURRENT-ASSETS> 2,720
<PP&E> 5,567
<DEPRECIATION> 2,889
<TOTAL-ASSETS> 6,462
<CURRENT-LIABILITIES> 2,028
<BONDS> 1,356
<COMMON> 75
0
0
<OTHER-SE> 1,949
<TOTAL-LIABILITY-AND-EQUITY> 6,462
<SALES> 12,833
<TOTAL-REVENUES> 12,936
<CGS> 11,150
<TOTAL-COSTS> 11,150
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> 294
<INCOME-TAX> 125
<INCOME-CONTINUING> 169
<DISCONTINUED> 119
<EXTRAORDINARY> (9)
<CHANGES> 0
<NET-INCOME> 279
<EPS-BASIC> 3.86
<EPS-DILUTED> 3.64
</TABLE>
