UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 30, 2005
ASHLAND INC.
(Exact name of registrant as specified in its charter)
Kentucky
(State or other jurisdiction of incorporation)
1-32532 20-0865835
(Commission File Number) (I.R.S. Employer
Identification No.)
50 E. RiverCenter Boulevard, Covington, Kentucky 41012-0391
(Address of principal executive offices) (Zip Code)
P.O. Box 391, Covington, Kentucky 41012-0391 (Mailing Address)
(Zip Code)
Registrant's telephone number, including area code (859) 815-3333
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 2230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
EXPLANATORY NOTE
This amendment on Form 8-K/A supplements a Form 8-K filed by
Ashland Inc. ("Ashland") on June 30, 2005 with the Securities and Exchange
Commission to report, in Item 2.01 of such filing, the completion of
Ashland's previously announced agreement with Marathon Oil Corporation to
transfer Ashland's 38-percent interest in Marathon Ashland Petroleum LLC
(MAP) and two other businesses to Marathon Oil Corporation in a transaction
valued at approximately $3.7 billion. This Form 8-K/A is being filed to
supplement such 8-K with the attached unaudited condensed pro forma
financial statements, filed pursuant to Article 11 of Regulation S-X and
incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits
(b) Pro Forma Financial Information
New Ashland Unaudited Condensed Pro Forma Financial Statements
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: July 6, 2005 /s/ J. Marvin Quin
----------------------------
Name: J. Marvin Quin
Title: Senior Vice President,
and Chief Financial
Officer
NEW ASHLAND UNAUDITED CONDENSED PRO FORMA FINANCIAL STATEMENTS
The following unaudited condensed pro forma financial statements of
New Ashland are based upon the historical financial statements of Ashland
and its consolidated subsidiaries, adjusted to give effect to the
transactions, as well as the use of a portion of the proceeds to repay
substantially all of Ashland's outstanding debt, purchase certain assets
currently under operating leases, and repurchase certain accounts
receivable sold under Ashland's sale of receivables program. The following
unaudited condensed pro forma financial statements of New Ashland should be
read in conjunction with the related notes and with the historical
consolidated financial statements of Ashland and the related notes included
in previous filings with the SEC. The unaudited condensed pro forma income
statements were adjusted to reflect these items as if they occurred at
October 1, 2003. The unaudited condensed pro forma balance sheet reflects
these items as if they occurred at March 31, 2005. In addition, the pro
forma balance sheet reflects the use of $100 million of proceeds from the
transactions to fund a contribution to Ashland's pension plan at March 31,
2005. The pro forma adjustments are based on available information and
certain assumptions that Ashland executive management believes are
reasonable and are described in the related notes.
The unaudited condensed pro forma financial statements are provided
for illustrative purposes only and are not necessarily indicative of the
operating results or financial position that would have occurred if the
transactions had occurred on October 1, 2003 or March 31, 2005. For
example, these financial statements do not reflect any earnings from the
investment of the excess proceeds remaining after the repayment of the
various financings and the funding of the pension plan. You should not rely
on the unaudited condensed pro forma financial statements as being
indicative of the historical operating results that New Ashland would have
achieved or any future operating results or financial position that it will
experience after the transactions close.
NEW ASHLAND AND CONSOLIDATED SUBSIDIARIES
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2005
(A) (B)
SALE OF REPAY
MAP AND FINANCINGS
OTHER AND FUND
(IN MILLIONS EXCEPT SHARE AND PER SHARE DATA) HISTORICAL BUSINESSES PENSION PLAN PRO FORMA
--------------------------------------------------------------- ------------ ------------- -------------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 74 $ 3,340 $ (2,337) $ 1,077
Accounts receivable 1,352 2 150 1,504
Allowance for doubtful accounts (42) -- -- (42)
Inventories 546 (3) -- 543
Deferred income taxes 95 -- -- 95
Other current assets 208 (55) 101 254
----------- ------------- -------------- --------------
2,233 3,284 (2,086) 3,431
INVESTMENTS AND OTHER ASSETS
Investment in Marathon Ashland Petroleum LLC (MAP) 2,926 (2,926) -- --
Goodwill 560 -- -- 560
Asbestos insurance receivable (noncurrent portion) 381 -- -- 381
Deferred income taxes -- 229 (40) 189
Other noncurrent assets 413 -- (5) 408
----------- ------------- -------------- --------------
4,280 (2,697) (45) 1,538
PROPERTY, PLANT AND EQUIPMENT
Cost 3,196 (94) 104 3,206
Accumulated depreciation, depletion and amortization (1,894) 65 -- (1,829)
----------- ------------- -------------- --------------
1,302 (29) 104 1,377
----------- ------------- -------------- --------------
$ 7,815 $ 558 $ (2,027) $ 6,346
=========== ============= ============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $ 726 $ -- $ (726) $ --
Trade and other payables 1,254 -- (30) 1,224
Income taxes 30 -- -- 30
----------- ------------- -------------- --------------
2,010 -- (756) 1,254
NONCURRENT LIABILITIES
Long-term debt (less current portion) 1,086 -- (1,073) 13
Employee benefit obligations 436 -- (100) 336
Deferred income taxes 264 (264) -- --
Reserves of captive insurance companies 201 -- -- 201
Asbestos litigation reserve (noncurrent portion) 545 -- -- 545
Other long-term liabilities and deferred credits 374 -- (1) 373
----------- ------------- -------------- --------------
2,906 (264) (1,174) 1,468
COMMON SHAREHOLDERS' EQUITY 2,899 822 (97) 3,624
----------- ------------- -------------- --------------
$ 7,815 $ 558 $ (2,027) $ 6,346
=========== ============= ============== ==============
COMMON SHARES OUTSTANDING AT MARCH 31, 2005 (IN THOUSANDS) 72,870 72,870
BOOK VALUE PER COMMON SHARE OUTSTANDING $ 39.78 $ 49.73
See Notes to New Ashland Unaudited Condensed Pro Forma Financial Statements.
NEW ASHLAND AND CONSOLIDATED SUBSIDIARIES
UNAUDITED CONDENSED PRO FORMA STATEMENT OF CONSOLIDATED INCOME
YEAR ENDED SEPTEMBER 30, 2004
(C)
SALE OF
MAP AND (D)
OTHER REPAY
(IN MILLIONS EXCEPT SHARE AND PER SHARE DATA) HISTORICAL BUSINESSES FINANCINGS PRO FORMA
--------------------------------------------------------------- ------------ ------------- -------------- --------------
REVENUES
Sales and operating revenues $ 8,301 $ (47) $ -- $ 8,254
Equity income 432 (405) -- 27
Other income 48 6 -- 54
----------- ------------- -------------- --------------
8,781 (446) -- 8,335
COSTS AND EXPENSES
Cost of sales and operating expenses 6,948 (34) (7) 6,907
Selling, general and administrative expenses 1,171 (15) -- 1,156
----------- ------------- -------------- --------------
8,119 (49) (7) 8,063
----------- ------------- -------------- --------------
OPERATING INCOME 662 (397) 7 272
Net interest and other financial costs (114) -- 114 --
----------- ------------- -------------- --------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 548 (397) 121 272
Income taxes (150) 154 (47) (43)(e)
----------- ------------- -------------- --------------
INCOME FROM CONTINUING OPERATIONS $ 398 $ (243) $ 74 $ 229
=========== ============= ============== ==============
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Basic $ 5.69 $ 3.27
Diluted $ 5.59 $ 3.22
AVERAGE COMMON SHARES OUTSTANDING (IN THOUSANDS)
Basic 69,938 69,938
Diluted 71,217 71,217
See Notes to New Ashland Unaudited Condensed Pro Forma Financial Statements.
NEW ASHLAND AND CONSOLIDATED SUBSIDIARIES
UNAUDITED CONDENSED PRO FORMA STATEMENT OF CONSOLIDATED INCOME
SIX MONTHS ENDED MARCH 31, 2005
(C)
SALE OF
MAP AND (D)
OTHER REPAY
(IN MILLIONS EXCEPT SHARE AND PER SHARE DATA) HISTORICAL BUSINESSES FINANCINGS PRO FORMA
--------------------------------------------------------------- ------------ ------------- -------------- --------------
REVENUES
Sales and operating revenues $ 4,239 $ (25) $ -- $ 4,214
Equity income 215 (208) -- 7
Other income 35 (2) -- 33
----------- ------------- -------------- --------------
4,489 (235) -- 4,254
COSTS AND EXPENSES
Cost of sales and operating expenses 3,603 (20) (5) 3,578
Selling, general and administrative expenses 620 (6) -- 614
----------- ------------- -------------- --------------
4,223 (26) (5) 4,192
----------- ------------- -------------- --------------
OPERATING INCOME 266 (209) 5 62
Net interest and other financial costs (61) -- 59 (2)
----------- ------------- -------------- --------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 205 (209) 64 60
Income taxes (79) 80 (25) (24)
----------- ------------- -------------- --------------
INCOME FROM CONTINUING OPERATIONS $ 126 $ (129) $ 39 $ 36
=========== ============= ============== ==============
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Basic $ 1.75 $ 0.51
Diluted $ 1.72 $ 0.50
AVERAGE COMMON SHARES OUTSTANDING (IN THOUSANDS)
Basic 72,138 72,138
Diluted 73,467 73,467
See Notes to New Ashland Unaudited Condensed Pro Forma Financial Statements.
NOTES TO NEW ASHLAND UNAUDITED CONDENSED PRO FORMA FINANCIAL STATEMENTS
(a) These adjustments reflect the transfer to Marathon of
Ashland's interest in MAP, as well as the assets of Ashland's maleic
anhydride business and its 60 VIOC centers in Michigan and northwest
Ohio in a transaction that values those assets at approximately
$3.715 billion, which includes proceeds of approximately $2.8 billion
from the partial redemption and the capital contribution and $915
million of Marathon stock that will be issued directly to Ashland
shareholders. Approximately one month prior to the date of the
partial redemption MAP may make a pro rata cash distribution of some
of its distributable cash to Ashland and Marathon in a total amount
to be determined shortly before that distribution. In addition,
Ashland will receive 38% of MAP's distributable cash as of the
closing of the transactions. As of March 31, 2005, Ashland's 38%
portion of MAP's distributable cash amounted to $560 million. The
$915 million will then be reflected as a dividend on the balance
sheet, resulting in a net increase in shareholders' equity of $725
million. Though the terms of the master agreement specify that the
proceeds to Ashland will be a combination of cash and MAP accounts
receivable, the approximately $3.340 billion (net of estimated
expenses of the transfer yet to be incurred of approximately $20
million) has been reflected as cash in this presentation, due to the
undeterminable amount of the split, plus the fact that MAP's accounts
receivable are very short-term in nature. Deferred tax liabilities of
$451 million related to the assets to be transferred were also
eliminated, with Ashland's remaining long-term deferred tax assets
being reclassified to assets on the balance sheet. The net effect of
the transactions is estimated to result in an increase in
shareholders' equity of $725 million. The income statement will
reflect an estimated after-tax gain of $1.640 billion, which reflects
the inclusion of $915 million of Marathon stock.
(b) These adjustments reflect the use of approximately $2.337
billion of proceeds from the transactions to repurchase substantially
all of Ashland's outstanding debt, purchase certain assets from the
lessors under the terms of various operating leases, repurchase $150
million of accounts receivable sold under a sale of receivables
program, and make a $100 million contribution to Ashland's pension
plan. The purchase of the leased assets is estimated to result in a
$104 million increase in the cost of property, plant and equipment.
The repurchase of the debt is estimated to result in a pretax charge
of $159 million ($97 million after provision for a 39 percent income
tax benefit). This estimate gives effect to the closing of the
transactions and the repayment of the debt and assumes market
interest rate conditions at March 31, 2005. The actual amount of this
pretax charge is subject to change depending on the actual closing
date of the transactions and on market interest rate conditions at
the time of the closing of the transactions. Estimated current income
tax benefits of the debt repayment premium ($62 million) and the
pension contribution ($39 million) are reflected as refundable income
taxes in other current assets.
(c) These adjustments eliminate the equity income recorded from
Ashland's 38-percent ownership interest in MAP, as well as the
operating results of Ashland's maleic anhydride business and its 60
VIOC centers in Michigan and northwest Ohio that are being
transferred to Marathon, as if the transactions occurred as of
October 1, 2003. In addition, gains and losses on petroleum
crackspread futures that Ashland entered into to economically hedge
or enhance its equity earnings and cash distributions from MAP have
been eliminated. In addition, fees directly related to the
transaction incurred during the respective periods have been
eliminated. Finally, the income tax effects recorded for these items
(at a rate of approximately 39 percent) have been eliminated.
(d) These adjustments eliminate the interest expense on
substantially all of Ashland's debt that was assumed to be repaid
with a portion of the proceeds from the transaction, as if the
repayment occurred at October 1, 2003. In addition, $150 million of
accounts receivable sold under Ashland's sale of receivables program
were assumed to be repurchased at the same date, eliminating the
costs of that program. In addition, assets under various operating
leases were assumed to be purchased from the lessors under the terms
of those leases. The rent expense recorded on those leases was
eliminated and replaced with the depreciation expense that would have
been recorded had those assets been purchased at October 1, 2003, and
depreciated over their appropriate estimated useful lives (generally
ranging from three to 20 years). Finally, the income tax effects of
these adjustments (at a rate of approximately 39 percent) have been
eliminated.
(e) Ashland's income tax expense for 2004 included
approximately $48 million in tax benefits related to prior years.
During the year, Ashland reached resolution with the Internal Revenue
Service on several open tax matters from prior years, resulting in a
tax benefit of approximately $33 million as a result of the reduction
of amounts previously provided as contingent tax liabilities. In
addition, Ashland recognized federal income tax benefits associated
with a claim for additional research and development tax credits
valued at approximately $15 million. Excluding these two items,
Ashland's pro forma tax expense would have amounted to approximately
$91 million and the pro forma effective tax rate would have been
approximately 33.5%.