EX-99.2 4 ex99-2.htm PRO FORMA CONSOLIDATED BALANCE SHEET Pro Forma Consolidated Balance Sheet
Exhibit 99.2

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 and its consolidated subsidiaries, adjusted to reflect the disposition of Ashland Paving And Construction, Inc. (name changed to APAC Holdings, Inc. on August 22, 2006) (together with its wholly owned subsidiaries, “APAC”). 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 APAC as if it occurred on June 30, 2006, while the unaudited condensed pro forma statements of consolidated income give effect to the disposition as if it occurred at the beginning of each fiscal period presented. 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 APAC closed on June 30, 2006 for the unaudited condensed pro forma consolidated balance sheet or at the beginning of each fiscal period presented 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
June 30, 2006

 
          
(a) 
        
(In millions except per share data)
    
Historical
    
Sale of APAC
    
Pro Forma
  
                     
ASSETS
                    
                     
CURRENT ASSETS
                    
Cash and cash equivalents
  
$
363
  
$
1,335
  
$
1,698
  
Available-for-sale securities
    
621
    
-
    
621
  
Accounts receivable
    
1,805
    
(374
)
  
1,431
  
Allowance for doubtful accounts
    
(46
)
  
9
    
(37
)
Inventories
   
625
    
(106
)
  
519
  
Deferred income taxes
    
96
    
(14
)
  
82
  
Other current assets
    
153
    
(95
)
  
58
  
     
3,617
    
755
    
4,372
  
INVESTMENTS AND OTHER ASSETS
                    
Goodwill and other intangibles
    
710
    
(411
)
  
299
  
Asbestos insurance receivable (noncurrent portion)
    
446
    
-
    
446
  
Deferred income taxes
    
182
    
56
   
238
  
Other noncurrent assets
    
464
    
(21
)
  
443
  
     
1,802
    
(376
)
  
1,426
  
PROPERTY, PLANT AND EQUIPMENT
                    
Cost
    
3,463
    
(1,470
)
  
1,993
  
Accumulated depreciation, depletion and amortization
    
(1,949
)
  
888
    
(1,061
)
     
1,514
    
(582
)
  
932
  
                     
   
$
6,933
  
$
(203
)
$
6,730
  
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY
                    
                     
CURRENT LIABILITIES
                    
Debt due within one year
   $
18
   $
-
   $
18
  
Trade and other payables
    
1,420
    
(249
)
  
1,171
  
Income taxes
    
48
    
53
    
101
  
     
1,486
    
(196
)
  
1,290
  
NONCURRENT LIABILITIES
                    
Long-term debt (less current portion)
    
70
    
-
    
70
  
Employee benefit obligations
    
417
    
(36
)
  
381
  
Reserves of captive insurance companies
    
182
    
-
    
182
  
Asbestos litigation reserve (noncurrent portion)
    
592
    
-
    
592
  
Other long-term liabilities and deferred credits
    
385
    
(75
)
  
310
  
     
1,646
    
(111
)
  
1,535
  
                     
STOCKHOLDERS’ EQUITY
    
3,801
    
104
    
3,905
  
                     
   
$
6,933
  
$
(203
)
$
6,730
  
                     
Common Shares Outstanding (in thousands)
    
71,094
          
71,094
  
Book Value Per Common Share Outstanding
  
$
53.47
        
$
54.93
  

 
See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
 
 
 
 
Ashland Inc. and Consolidated Subsidiaries
Unaudited Condensed Pro Forma Statement of Consolidated Income
Nine Months Ended June 30, 2006

 
          
(b)
        
(In millions except share and per share data)
    
Historical
    
Sale of APAC
    
Pro Forma
  
                     
Revenues
                    
Sales and operating revenues
  
$
7,378
  
$
(2,053
)
$
5,325
  
Equity income
    
9
    
(1
)
  
8
  
Other income
    
49
    
(30
)
  
19
  
     
7,436
    
(2,084
)
  
5,352
  
Costs and expenses
                    
Cost of sales and operating expenses
    
6,217
    
(1,798
)
  
4,419
  
Selling, general and administrative expenses
    
948
    
(157
)
  
791
  
     
7,165
    
(1,955
)
  
5,210
  
Operating income
    
271
    
(129
)
  
142
  
Loss on the MAP Transaction
    
(2
)
  
-
    
(2
)
Net interest and other financing income
    
29
    
-
    
29
  
Income from continuing operations before income taxes
    
298
    
(129
)
  
169
  
Income tax (expense) benefit
    
(90
)
  
48
    
(42
)
Income from continuing operations
  
$
208
  
$
(81
)
$
127
  
                     
Earnings per share from continuing operations
                    
  Basic
  
$
2.91
        
$
1.77
  
  Diluted
  
$
2.87
        
$
1.75
  
                     
Average common shares outstanding (in thousands)
                    
  Basic
    
71,426
          
71,426
  
  Diluted
    
72,433
          
72,433
  

 
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, 2005

 
          
(b) 
        
(In millions except share and per share data)
    
Historical
    
Sale of APAC
    
Pro Forma
  
                     
Revenues
                    
Sales and operating revenues
  
$
9,270
  
$
(2,539
)
$
6,731
  
Equity income
    
531
    
(6
)
  
525
  
Other income
    
59
    
(20
)
  
39
  
     
9,860
    
(2,565
)
  
7,295
  
Costs and expenses
                    
Cost of sales and operating expenses
    
7,823
    
(2,278
)
  
5,545
  
Selling, general and administrative expenses
    
1,291
    
(212
)
  
1,079
  
     
9,114
    
(2,490
)
  
6,624
  
Operating income
    
746
    
(75
)
  
671
  
Gain on the MAP Transaction (c)
    
1,284
    
-
    
1,284
  
Loss on early retirement of debt (c)
    
(145
)
  
-
    
(145
)
Net interest and other financial costs
    
(82
)
  
-
    
(82
)
Income from continuing operations before income taxes
    
1,803
    
(75
)
  
1,728
  
Income tax benefit (c)
    
202
    
28
    
230
  
Income from continuing operations
  
$
2,005
  
$
(47
)
$
1,958
  
                     
Earnings per share from continuing operations
                    
  Basic
  
$
27.50
        
$
26.85
  
  Diluted
  
$
26.86
        
$
26.23
  
                     
Average common shares outstanding (in thousands)
                    
  Basic
    
72,922
          
72,922
  
  Diluted
    
74,652
          
74,652
  


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, 2004

 
          
(b) 
        
(In millions except share and per share data)
    
Historical
    
Sale of APAC
    
Pro Forma
  
                     
Revenues
                    
Sales and operating revenues
  
$
8,301
  
$
(2,525
)
$
5,776
  
Equity income
    
432
    
(19
)
  
413
  
Other income
    
48
    
(22
)
  
26
  
     
8,781
    
(2,566
)
  
6,215
  
Costs and expenses
                    
Cost of sales and operating expenses
    
6,948
    
(2,227
)
  
4,721
  
Selling, general and administrative expenses
    
1,171
    
(203
)
  
968
  
     
8,119
    
(2,430
)
  
5,689
  
Operating income
    
662
    
(136
)
  
526
  
Net interest and other financial costs
    
(114
)
  
-
    
(114
)
Income from continuing operations before income taxes
    
548
    
(136
)
  
412
  
Income tax (expense) benefit
    
(150
)
  
49
    
(101
)
Income from continuing operations
  
$
398
  
$
(87
)
$
311
  
                     
Earnings per share from continuing operations
                    
Basic
  
$
5.69
        
$
4.44
  
Diluted
  
$
5.59
        
$
4.36
  
                     
Average common shares outstanding (in thousands)
                    
Basic
    
69,938
          
69,938
  
Diluted
    
71,217
          
71,217
  

 
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, 2003

 
          
(b) 
        
(In millions except share and per share data)
    
Historical
    
Sale of APAC
    
Pro Forma
  
                     
Revenues
                    
Sales and operating revenues
  
$
7,566
  
$
(2,400
)
$
5,166
  
Equity income
    
301
    
(9
)
  
292
  
Other income
    
45
    
-
    
45
  
     
7,912
    
(2,409
)
  
5,503
  
Costs and expenses
                    
Cost of sales and operating expenses
    
6,390
    
(2,201
)
  
4,189
  
Selling, general and administrative expenses
    
1,256
    
(225
)
  
1,031
  
     
7,646
    
(2,426
)
  
5,220
  
Operating income
    
266
    
17
    
283
  
Net interest and other financial costs
    
(128
)
  
-
    
(128
)
Income from continuing operations before income taxes
    
138
    
17
    
155
  
Income tax expense
   
(44
)
  
(8
)
  
(52
)
Income from continuing operations
  
$
94
  
$
9
  
$
103
  
                     
Earnings per share from continuing operations
                    
Basic
  
$
1.37
        
$
1.51
  
Diluted
  
$
1.37
        
$
1.50
  
                     
Average common shares outstanding (in thousands)
                    
Basic
    
68,422
          
68,422
  
Diluted
    
68,680
          
68,680
  
 

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 APAC for $1.3 billion, plus estimated additional proceeds of $35 million for changes in specified balance sheet items (primarily working captial accounts), the final amount of which will be determined subsequent to closing. The adjustments also reflect the accrual of estimated income taxes payable of $53 million and fees of $12 million related to the disposition, the retention of certain employee benefit and variable pay liabilities by Ashland, an estimated net $22 million after-tax gain on the associated pension and postretirement welfare plan curtailment, and the reversal of net deferred tax liabilities, resulting in a net gain of $104 million.

(b) These adjustments eliminate the operating results of APAC as if the transaction occurred at the beginning of the fiscal period presented. The amounts eliminated do not include allocations of corporate expenses included in Selling, General and Administrative Expenses and the related combined 39% U.S. federal (35%) and state (4%, net of federal deductions) statutory income tax benefits of such expenses. These corporate expenses were $34 million, $45 million, $42 million and $40 million for the nine months ended June 30, 2006 and the fiscal years ended September 30, 2005, September 30, 2004 and September 30, 2003, respectively. In accordance with a consensus of the Emerging Issues Task Force (EITF 87-24), allocations of general corporate overhead may not be allocated to discontinued operations for financial statement presentation.

(c) “MAP Transaction” refers to the June 30, 2005 transfer of Ashland’s 38% interest in Marathon Ashland Petroleum LLC (MAP), Ashland’s maleic anhydride business and 60 Valvoline Instant Oil Change centers in Michigan and northwest Ohio to Marathon Oil Corporation in a transaction valued at approximately $3.7 billion. Ashland used a substantial portion of the proceeds of the MAP Transaction to retire most of its debt and certain other financial obligations. The gain on the MAP Transaction and the loss on early retirement of debt, net of their respective tax effects, increased net income by $1,531 million, or $20.51 per share, for the year ended September 30, 2005.