EX-99.1 3 ex991.htm PRO FORMA FINANCIAL INFORMATION ex991.htm
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.