Attached files
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| 8-K - FORM 8K - ASHLAND'S PRO FORMA FINANCIAL INFORMATION - ASHLAND LLC | form8k.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 Water Technologies, an unincorporated commercial unit of Ashland (Water Technologies). 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 Water Technologies as if it occurred on June 30, 2014 while the unaudited condensed pro forma statements of consolidated income give effect to the disposition as if it occurred on October 1, 2010, the beginning of the earliest period presented. The pro forma adjustments, described in the related notes, are based on the best available information and certain assumptions that Ashland management believe 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 Water Technologies closed on June 30, 2014 for the unaudited condensed pro forma consolidated balance sheet or on October 1, 2010 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.
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Ashland Inc. and Consolidated Subsidiaries
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Unaudited Condensed Pro Forma Consolidated Balance Sheet
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June 30, 2014
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(a)
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(In millions)
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Historical
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Water Technologies
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Pro Forma
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ASSETS
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Current assets
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Cash and cash equivalents
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$ | 570 | $ | 1,712 | $ | 2,282 | ||||||
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Accounts receivable
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1,179 | - | 1,179 | |||||||||
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Inventories
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781 | - | 781 | |||||||||
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Deferred income taxes
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108 | (8 | ) | 100 | ||||||||
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Other assets
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75 | 14 | 89 | |||||||||
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Held for sale
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490 | (490 | ) | - | ||||||||
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Total current assets
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3,203 | 1,228 | 4,431 | |||||||||
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Noncurrent assets
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Property, plant and equipment
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Cost
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4,256 | - | 4,256 | |||||||||
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Accumulated depreciation
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1,818 | - | 1,818 | |||||||||
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Net property, plant and equipment
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2,438 | - | 2,438 | |||||||||
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Goodwill
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2,715 | - | 2,715 | |||||||||
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Intangibles
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1,364 | - | 1,364 | |||||||||
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Asbestos insurance receivable
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440 | - | 440 | |||||||||
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Equity and other unconsolidated investments
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84 | - | 84 | |||||||||
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Other assets
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526 | (10 | ) | 516 | ||||||||
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Held for sale
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1,356 | (1,356 | ) | - | ||||||||
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Total noncurrent assets
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8,923 | (1,366 | ) | 7,557 | ||||||||
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Total assets
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$ | 12,126 | $ | (138 | ) | $ | 11,988 | |||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities
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Short-term debt
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$ | 365 | $ | - | $ | 365 | ||||||
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Current portion of long-term debt
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9 | - | 9 | |||||||||
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Trade and other payables
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639 | - | 639 | |||||||||
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Accrued expenses and other liabilities
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554 | 186 | 740 | |||||||||
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Held for sale
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184 | (184 | ) | - | ||||||||
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Total current liabilities
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1,751 | 2 | 1,753 | |||||||||
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Noncurrent liabilities
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Long-term debt
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2,941 | - | 2,941 | |||||||||
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Employee benefit obligations
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1,219 | 32 | 1,251 | |||||||||
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Asbestos litigation reserve
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711 | - | 711 | |||||||||
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Deferred income taxes
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345 | (6 | ) | 339 | ||||||||
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Other liabilities
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550 | - | 550 | |||||||||
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Held for sale
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80 | (80 | ) | - | ||||||||
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Total noncurrent liabilities
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5,846 | (54 | ) | 5,792 | ||||||||
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Stockholders' equity
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4,529 | (86 | ) | 4,443 | ||||||||
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Total liabilities and stockholders' equity
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$ | 12,126 | $ | (138 | ) | $ | 11,988 | |||||
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See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
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Ashland Inc. and Consolidated Subsidiaries
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Unaudited Condensed Pro Forma Statement of Consolidated Income
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Nine months ended June 30, 2014
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(b)
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(In millions except per share data)
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Historical
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Water Technologies
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Pro Forma
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Sales
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$ | 4,583 | $ | - | $ | 4,583 | ||||||
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Cost of sales
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3,377 | - | 3,377 | |||||||||
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Gross profit
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1,206 | - | 1,206 | |||||||||
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Selling, general and administrative expense
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891 | - | 891 | |||||||||
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Research and development expense
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87 | - | 87 | |||||||||
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Equity and other loss
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(6 | ) | - | (6 | ) | |||||||
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Operating income
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222 | - | 222 | |||||||||
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Net interest and other financing expense
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124 | - | 124 | |||||||||
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Net gain on divestitures
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3 | - | 3 | |||||||||
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Income from continuing operations, before income taxes
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101 | - | 101 | |||||||||
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Income tax expense
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3 | - | 3 | |||||||||
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Income from continuing operations
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$ | 98 | $ | - | $ | 98 | ||||||
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Earnings per share from continuing operations
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Basic
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$ | 1.26 | $ | - | $ | 1.26 | ||||||
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Diluted
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1.24 | - | 1.24 | |||||||||
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Average common shares outstanding (in millions)
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Basic
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78 | - | 78 | |||||||||
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Diluted
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79 | - | 79 | |||||||||
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See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
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Ashland Inc. and Consolidated Subsidiaries
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Unaudited Condensed Pro Forma Statement of Consolidated Income
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Year ended September 30, 2013
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(c)
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(In millions except per share data)
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Historical
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Water Technologies
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Pro Forma
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Sales
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$ | 7,813 | $ | (1,722 | ) | $ | 6,091 | |||||
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Cost of sales
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5,419 | (1,115 | ) | 4,304 | ||||||||
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Gross profit
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2,394 | (607 | ) | 1,787 | ||||||||
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Selling, general and administrative expense
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1,044 | (374 | ) | 670 | ||||||||
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Research and development expense
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178 | (36 | ) | 142 | ||||||||
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Equity and other income
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69 | (5 | ) | 64 | ||||||||
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Operating income
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1,241 | (202 | ) | 1,039 | ||||||||
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Net interest and other financing expense
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282 | - | 282 | |||||||||
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Net loss on divestitures
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(8 | ) | - | (8 | ) | |||||||
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Income from continuing operations, before income taxes
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951 | (202 | ) | 749 | ||||||||
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Income tax expense
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274 | (78 | ) | 196 | ||||||||
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Income from continuing operations
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$ | 677 | $ | (124 | ) | $ | 553 | |||||
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Earnings per share from continuing operations
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Basic
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$ | 8.64 | $ | (1.58 | ) | $ | 7.06 | |||||
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Diluted
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8.50 | (1.55 | ) | 6.95 | ||||||||
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Average common shares outstanding (in millions)
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Basic
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78 | - | 78 | |||||||||
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Diluted
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80 | - | 80 | |||||||||
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See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
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Ashland Inc. and Consolidated Subsidiaries
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Unaudited Condensed Pro Forma Statement of Consolidated Income
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Year ended September 30, 2012
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(c)
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(In millions except per share data)
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Historical
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Water Technologies
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Pro Forma
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Sales
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$ | 8,206 | $ | (1,734 | ) | $ | 6,472 | |||||
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Cost of sales
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6,025 | (1,212 | ) | 4,813 | ||||||||
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Gross profit
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2,181 | (522 | ) | 1,659 | ||||||||
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Selling, general and administrative expense
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1,800 | (473 | ) | 1,327 | ||||||||
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Research and development expense
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137 | (33 | ) | 104 | ||||||||
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Equity and other income
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58 | (5 | ) | 53 | ||||||||
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Operating income
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302 | (21 | ) | 281 | ||||||||
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Net interest and other financing expense
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317 | - | 317 | |||||||||
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Net gain (loss) on divestitures
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1 | (8 | ) | (7 | ) | |||||||
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Loss from continuing operations, before income taxes
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(14 | ) | (29 | ) | (43 | ) | ||||||
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Income tax benefit
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(52 | ) | (5 | ) | (57 | ) | ||||||
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Income from continuing operations
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$ | 38 | $ | (24 | ) | $ | 14 | |||||
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Earnings per share from continuing operations
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Basic
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$ | 0.49 | $ | (0.31 | ) | $ | 0.18 | |||||
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Diluted
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0.48 | (0.31 | ) | 0.17 | ||||||||
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Average common shares outstanding (in millions)
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Basic
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78 | - | 78 | |||||||||
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Diluted
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80 | - | 80 | |||||||||
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See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
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Ashland Inc. and Consolidated Subsidiaries
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Unaudited Condensed Pro Forma Statement of Consolidated Income
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Year ended September 30, 2011
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(c)
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(In millions except per share data)
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Historical
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Water Technologies
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Pro Forma
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Sales
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$ | 6,502 | $ | (1,902 | ) | $ | 4,600 | |||||
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Cost of sales
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4,890 | (1,327 | ) | 3,563 | ||||||||
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Gross profit
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1,612 | (575 | ) | 1,037 | ||||||||
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Selling, general and administrative expense
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1,451 | (471 | ) | 980 | ||||||||
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Research and development expense
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80 | (31 | ) | 49 | ||||||||
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Equity and other income
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49 | (4 | ) | 45 | ||||||||
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Operating income
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130 | (77 | ) | 53 | ||||||||
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Net interest and other financing expense
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121 | - | 121 | |||||||||
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Net gain (loss) on acquisitions and divestitures
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(5 | ) | 7 | 2 | ||||||||
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Other expense
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1 | - | 1 | |||||||||
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Income from continuing operations, before income taxes
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3 | (70 | ) | (67 | ) | |||||||
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Income tax benefit
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(53 | ) | (17 | ) | (70 | ) | ||||||
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Income (loss) from continuing operations
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$ | 56 | $ | (53 | ) | $ | 3 | |||||
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Earnings per share from continuing operations
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Basic
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$ | 0.72 | $ | (0.67 | ) | $ | 0.05 | |||||
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Diluted
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0.70 | (0.65 | ) | 0.05 | ||||||||
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Average common shares outstanding (in millions)
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Basic
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78 | - | 78 | |||||||||
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Diluted
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80 | - | 80 | |||||||||
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See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
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(a)
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These adjustments reflect the disposition of Water Technologies’ assets and liabilities which had been reported as “held for sale” as of June 30, 2014 for approximately $1.8 billion in cash, less estimated purchase price adjustments for changes in specified balance sheet items (primarily working capital and retirement plan accounts) as compared to the amounts set forth in the Stock and Asset Purchase Agreement dated February 18, 2014, the final amount of which will be determined subsequent to closing. The adjustments also reflect the accrual of estimated income taxes of $159 million and net adjustments of deferred tax asset and liability balances, transaction costs of $27 million and a curtailment gain of $18 million on the retained pension and other postretirement benefit plans (which with the related loss on remeasurement of these plans of $50 million resulted in a net estimated $32 million increase in employee benefit obligations). The net reduction to stockholders’ equity of $86 million at June 30, 2014 approximates the estimated after-tax loss on the disposition of the Water Technologies business to be reported in the fourth quarter of 2014.
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(b)
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The direct operating results of the Water Technologies business were presented in discontinued operations for the nine months ended June 30, 2014 in Ashland’s Form 10-Q for the fiscal third quarter ended June 30, 2014. As a result no pro forma adjustments were required.
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(c)
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These adjustments eliminate the operating results of Water Technologies as if the transaction occurred on October 1, 2010. The direct operating results of Water Technologies 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 $34 million, $32 million and $34 million for fiscal years ended September 30, 2013, 2012 and 2011, respectively. Allocations of corporate overhead remaining with Ashland may not be allocated to discontinued operations for financial statement presentation.
Additionally, a portion of the other components of pension and other postretirement benefit costs (i.e., interest cost, expected return on assets, amortization of prior service credit, and actuarial gain or loss) related to Water Technologies has been reclassified from the Unallocated and other segment and included within Water Technologies’ results. The amounts attributable to Water Technologies were income of $92 million, expense of $82 million and expense of $50 million for the fiscal years ended September 30, 2013, 2012 and 2011, respectively.
For purposes of these unaudited condensed consolidated pro forma financial statements, estimated income tax rates of 38.6%, 17.2% and 24.3% have been used for fiscal years ended September 30, 2013, 2012 and 2011, respectively. The estimated income tax rates are based on the application of the intraperiod tax allocation model in ASC 740, Income Taxes.
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