EXHIBIT 99.1
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
The following unaudited condensed consolidated pro forma financial statements are based upon the historical financial statements of Ashland Inc. and its consolidated subsidiaries (Ashland), adjusted to reflect the disposition of Ashland Distribution, an unincorporated commercial unit of Ashland (Distribution). The following unaudited condensed consolidated pro forma financial statements of 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 Securities and Exchange Commission. The unaudited condensed pro forma consolidated balance sheet reflects the disposition of Distribution as if it occurred on December 31, 2010 while the unaudited condensed pro forma statements of consolidated income give effect to the disposition as if it occurred on October 1, 2007. The pro forma adjustments, described in the related notes, are based on the best available information and certain assumptions that Ashland management believes are reasonable.
The unaudited condensed consolidated 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 had the disposition of Distribution closed on December 31, 2010 for the unaudited condensed pro forma consolidated balance sheet or on October 1, 2007 for the unaudited condensed pro forma statements of consolidated income. For example, these financial statements do not reflect any potential earnings or other impacts from the use of the proceeds from the disposition or cost reductions of previously allocated corporate costs and potential subsequent restructuring charges. Readers should not rely on the unaudited condensed consolidated pro forma financial statements as being indicative of the historical operating results that Ashland would have achieved or any future operating results or financial position that it will experience after the transaction closes.
Ashland Inc. and Consolidated Subsidiaries | ||||||||||||
Unaudited Condensed Pro Forma Consolidated Balance Sheet | ||||||||||||
December 31, 2010 | ||||||||||||
(a) | ||||||||||||
(In millions except per share data) | Historical | Distribution | Pro Forma | |||||||||
ASSETS | ||||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents | $ | 374 | $ | 972 | $ | 1,346 | ||||||
Accounts receivable | 1,005 | - | 1,005 | |||||||||
Inventories | 497 | - | 497 | |||||||||
Deferred income taxes | 112 | (10 | ) | 102 | ||||||||
Held for sale | 656 | (656 | ) | - | ||||||||
Other assets | 61 | - | 61 | |||||||||
2,705 | 306 | 3,011 | ||||||||||
NONCURRENT ASSETS | ||||||||||||
Auction rate securities | 22 | - | 22 | |||||||||
Goodwill | 2,083 | - | 2,083 | |||||||||
Intangibles | 1,089 | - | 1,089 | |||||||||
Asbestos insurance receivable (noncurrent portion) | 452 | - | 452 | |||||||||
Deferred income taxes | 336 | (46 | ) | 290 | ||||||||
Held for sale | 271 | (263 | ) | 8 | ||||||||
Other assets | 623 | - | 623 | |||||||||
4,876 | (309 | ) | 4,567 | |||||||||
PROPERTY, PLANT AND EQUIPMENT | ||||||||||||
Cost | 3,003 | - | 3,003 | |||||||||
Accumulated depreciation and amortization | (1,235 | ) | - | (1,235 | ) | |||||||
1,768 | - | 1,768 | ||||||||||
TOTAL ASSETS | $ | 9,349 | $ | (3 | ) | $ | 9,346 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
CURRENT LIABILITIES | ||||||||||||
Short-term debt | $ | 77 | $ | - | $ | 77 | ||||||
Current portion of long-term debt | 39 | - | 39 | |||||||||
Trade and other payables | 640 | - | 640 | |||||||||
Accrued expenses and other liabilities | 404 | 102 | 506 | |||||||||
Held for sale | 274 | (274 | ) | - | ||||||||
1,434 | (172 | ) | 1,262 | |||||||||
NONCURRENT LIABILITIES | ||||||||||||
Long-term debt (noncurrent portion) | 1,114 | - | 1,114 | |||||||||
Employee benefit obligations | 1,368 | (100 | ) | 1,268 | ||||||||
Asbestos litigation reserve (noncurrent portion) | 826 | - | 826 | |||||||||
Deferred income taxes | 149 | (20 | ) | 129 | ||||||||
Other liabilities | 581 | - | 581 | |||||||||
4,038 | (120 | ) | 3,918 | |||||||||
STOCKHOLDERS’ EQUITY | 3,877 | 289 | 4,166 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 9,349 | $ | (3 | ) | $ | 9,346 | |||||
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements. |
Ashland Inc. and Consolidated Subsidiaries | ||||||||||||
Unaudited Condensed Pro Forma Statement of Consolidated Income | ||||||||||||
Three Months Ended December 31, 2010 | ||||||||||||
(b) | ||||||||||||
(In millions except share and per share data) | Historical | Distribution | Pro Forma | |||||||||
Sales | $ | 1,433 | $ | - | $ | 1,433 | ||||||
Costs and expenses | ||||||||||||
Cost of sales | 1,040 | - | 1,040 | |||||||||
Selling, general and administrative expense | 286 | - | 286 | |||||||||
Research and development expense | 20 | - | 20 | |||||||||
1,346 | - | 1,346 | ||||||||||
Equity and other income | 12 | 12 | ||||||||||
Operating income | 99 | - | 99 | |||||||||
Net interest and other financing expense | (27 | ) | - | (27 | ) | |||||||
Net gain on acquisitions and divestitures | 21 | - | 21 | |||||||||
Income from continuing operations before income taxes | 93 | - | 93 | |||||||||
Income tax expense | 31 | - | 31 | |||||||||
Income from continuing operations | $ | 62 | $ | - | $ | 62 | ||||||
Earnings per share from continuing operations | ||||||||||||
Basic | $ | .79 | - | $ | .79 | |||||||
Diluted | $ | .78 | - | $ | .78 | |||||||
Average common shares outstanding (in millions) | ||||||||||||
Basic | 79 | - | 79 | |||||||||
Diluted | 80 | - | 80 | |||||||||
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements. |
Ashland Inc. and Consolidated Subsidiaries | ||||||||||||
Unaudited Condensed Pro Forma Statement of Consolidated Income | ||||||||||||
Year Ended September 30, 2010 | ||||||||||||
(c) | ||||||||||||
(In millions except share and per share data) | Historical | Distribution | Pro Forma | |||||||||
Sales | $ | 9,012 | $ | (3,271 | ) | $ | 5,741 | |||||
Costs and expenses | ||||||||||||
Cost of sales | 7,012 | (2,954 | ) | 4,058 | ||||||||
Selling, general and administrative expense | 1,399 | (231 | ) | 1,168 | ||||||||
Research and development expense | 86 | - | 86 | |||||||||
8,497 | (3,185 | ) | 5,312 | |||||||||
Equity and other income | 51 | (3 | ) | 48 | ||||||||
Operating income | 566 | (89 | ) | 477 | ||||||||
Net interest and other financing expense | (197 | ) | - | (197 | ) | |||||||
Net gain on acquisitions and divestitures | 21 | - | 21 | |||||||||
Other income | 2 | - | 2 | |||||||||
Income from continuing operations before income taxes | 392 | (89 | ) | 303 | ||||||||
Income tax expense | 91 | (29 | ) | 62 | ||||||||
Income from continuing operations | $ | 301 | $ | (60 | ) | $ | 241 | |||||
Earnings per share from continuing operations | ||||||||||||
Basic | $ | 3.86 | (0.76 | ) | $ | 3.10 | ||||||
Diluted | $ | 3.79 | (0.75 | ) | $ | 3.04 | ||||||
Average common shares outstanding (in millions) | ||||||||||||
Basic | 78 | - | 78 | |||||||||
Diluted | 79 | - | 79 | |||||||||
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements. |
Ashland Inc. and Consolidated Subsidiaries | ||||||||||||
Unaudited Condensed Pro Forma Statement of Consolidated Income | ||||||||||||
Year Ended September 30, 2009 | ||||||||||||
(c) | ||||||||||||
(In millions except share and per share data) | Historical | Distribution | Pro Forma | |||||||||
Sales | $ | 8,106 | $ | (2,886 | ) | $ | 5,220 | |||||
Costs and expenses | ||||||||||||
Cost of sales | 6,317 | (2,585 | ) | 3,732 | ||||||||
Selling, general and administrative expense | 1,341 | (226 | ) | 1,115 | ||||||||
Research and development expense | 96 | - | 96 | |||||||||
7,754 | (2,811 | ) | 4,943 | |||||||||
Equity and other income | 38 | (4 | ) | 34 | ||||||||
Operating income | 390 | (79 | ) | 311 | ||||||||
Net interest and other financing expense | (205 | ) | - | (205 | ) | |||||||
Net gain on acquisitions and divestitures | 59 | - | 59 | |||||||||
Other expense | (86 | ) | - | (86 | ) | |||||||
Income from continuing operations before income taxes | 158 | (79 | ) | 79 | ||||||||
Income tax expense | 80 | (28 | ) | 52 | ||||||||
Income from continuing operations | $ | 78 | $ | (51 | ) | $ | 27 | |||||
Earnings per share from continuing operations | ||||||||||||
Basic | $ | 1.08 | (0.70 | ) | $ | .38 | ||||||
Diluted | $ | 1.07 | (0.70 | ) | $ | .37 | ||||||
Average common shares outstanding (in millions) | ||||||||||||
Basic | 72 | - | 72 | |||||||||
Diluted | 73 | - | 73 | |||||||||
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements. |
Ashland Inc. and Consolidated Subsidiaries | ||||||||||||
Unaudited Condensed Pro Forma Statement of Consolidated Income | ||||||||||||
Year Ended September 30, 2008 | ||||||||||||
(c) | ||||||||||||
(In millions except share and per share data) | Historical | Distribution | Pro Forma | |||||||||
Sales | $ | 8,381 | $ | (4,205 | ) | $ | 4,176 | |||||
Costs and expenses | ||||||||||||
Cost of sales | 7,056 | (3,865 | ) | 3,191 | ||||||||
Selling, general and administrative expense | 1,118 | (258 | ) | 860 | ||||||||
Research and development expense | 48 | - | 48 | |||||||||
8,222 | (4,123 | ) | 4,099 | |||||||||
Equity and other income | 54 | (4 | ) | 50 | ||||||||
Operating income | 213 | (86 | ) | 127 | ||||||||
Net interest and other financing income | 28 | - | 28 | |||||||||
Net gain on acquisitions and divestitures | 20 | - | 20 | |||||||||
Income from continuing operations before income taxes | 261 | (86 | ) | 175 | ||||||||
Income tax expense | 86 | (33 | ) | 53 | ||||||||
Income from continuing operations | $ | 175 | $ | (53 | ) | $ | 122 | |||||
Earnings per share from continuing operations | ||||||||||||
Basic | $ | 2.78 | (0.83 | ) | $ | 1.95 | ||||||
Diluted | $ | 2.76 | (0.83 | ) | $ | 1.93 | ||||||
Average common shares outstanding (in millions) | ||||||||||||
Basic | 63 | - | 63 | |||||||||
Diluted | 64 | - | 64 | |||||||||
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements. |
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(a) These adjustments reflect the disposition of Distribution for $930 million, plus estimated additional proceeds of $42 million for changes in specified balance sheet items (primarily working capital accounts) as compared to the amounts set forth in the agreement of purchase and sale dated November 5, 2010, the final amount of which will be determined subsequent to closing. The adjustments also reflect the accrual of estimated income taxes payable of $87 million and fees of $15 million related to the disposition, the retention of certain employee benefit and variable pay liabilities by Ashland, an estimated $3 million gain on the associated pension and postretirement welfare plan curtailment (which with the related remeasurement resulted in an estimated $100 million reduction in employee benefit obligations and a $65 million after- tax increase in stockholders equity), and the reversal of net deferred tax liabilities, resulting in a net estimated gain of $224 million as of December 31, 2010.
(b) The direct operating results of the Distribution business were presented in discontinued operations for the three months ended December 31, 2010 in accordance with U.S. GAAP in Ashland's first quarter Form 10-Q. As a result no pro forma adjustments were required.
(c) These adjustments eliminate the operating results of Distribution as if the transaction occurred on October 1, 2007. The direct operating results of Distribution are reported in discontinued operations. The amounts eliminated do not include allocations of corporate expenses included in Selling, General and Administrative Expense. These corporate expenses were $32 million, $26 million and $34 million for fiscal years ended September 30, 2010, 2009 and 2008, respectively. In accordance with U.S. GAAP, allocations of general corporate overhead may not be allocated to discontinued operations for financial statement presentation. For purposes of these unaudited pro forma combined condensed financial statements, estimated income tax rates of 32.2%, 35.6% and 38.9% have been used for fiscal years ended September 30, 2010, 2009 and 2008, respectively. The estimated income tax rates are based on applicable enacted statutory tax rates for the periods referenced above and reflect certain Ashland basis differences that will not result in taxable or deductible amounts in future years when the related financial reporting asset or liability will be recovered or settled.