Securities Act of 1933, as amended, and deemed filed
pursuant to Rule 14a-12 promulgated under the
Securities Exchange Act of 1934, as amended.
SubjectCompany: Ashland Inc.
Commission File No.: 001-02918
(Excerpt from transcript of Ashland Inc.'s October 25, 2004
conference call regarding it's fourth quarter
and fiscal 2004 earnings)
===========================================================================
PRESENTATION
***
MARVIN QUIN - ASHLAND - CFO
***
...The big question for us is, will the transaction with MAP close, and
when? In today's press release, we provided an update on our progress. We
had not yet resolved all tax issues but the dialogue with the IRS
continues. Given the status of our discussions, it would be inappropriate
for me to comment further, other than to say we still believe the
transaction is more likely than not to close. But the December 31 target
date is looking less likely.
***
QUESTION AND ANSWER
***
MICHAEL JUDD - GREENWICH CONSULTANTS - ANALYST
Yes, I hear your comment about potentially the target date or the closing
of the MAP transaction moving out perhaps a little bit past December 31. Do
you have an update in terms of the amount of cash unallocated,
undistributed cash that might be coming back in?
GARY HEMINGER - MARATHON ASHLAND PETROLEUM - PRESIDENT
Yes, I think we included that in our press release. We said that if the
transaction would not close at this time as of September 30, then it
would've been $203 million coming to us. So, that's the amount of foregone
distributions as of September 30.
I should also note that, generally, the fourth quarter is a positive
quarter from a working capital perspective. Working capital tends to
contract in the fourth quarter, and I think it has in every year except the
first year since the formation of MAP.
***
MARVIN QUIN - ASHLAND - CFO
Fred, the largest source of CapEx for us of course is APAC, and Gary
mentioned that. Generally, I think you can assume that, looking forward to
this year, that CapEx elsewhere will be to pretty close to DD&A. I do want
to make one comment, though. If the transaction closes as we expect it
would, we will be buying out a number of leases, and I think we've
disclosed that from the very beginning. That would show up as capital
expenditures, and that number will be in addition to normal capital
expenditures but it's in essence just an elimination of (inaudible)
financing.
UNIDENTIFIED COMPANY REPRESENTATIVE
Our DD&A is approximately $200 million.
FRED LEUFFER - BEAR, STEARNS & Co. - Analyst
Marvin, the buy-out of the leases, what do think that would aggregate to?
MARVIN QUIN - ASHLAND - CFO
I think it kind of depends. I think, back in March when we announced this,
we said it could be a couple hundred million dollars. I think it's probably
less than that. I would say it's probably more likely to be in the 120 to
$150 million range. It really kind of depends on what we are able to
negotiate with various lessors? If we can negotiate attractive
transactions, we would buy out the leases; if we can't, we (indiscernible)
to continue. So it's an area that is subject to a lot of uncertainty but it
doesn't change the equipment being utilized.
FRED LEUFFER - BEAR, STEARNS & Co. - Analyst
All right. The tax rate -- more normal rate of 36 percent. Would that
change after the sale of MAP?
MARVIN QUIN - ASHLAND - CFO
It would to the extent that we would have less income of course from MAP,
and that income is domestic income; it tends to be taxed at pretty much a
straight 38, 39 percent type rate as opposed to some of our foreign-source
income that would come from Specialty Chemical and Valvoline that is taxed
at lower rates. So I think you could assume some lower tax rate overall in
a post-MAP environment.
FRED LEUFFER - BEAR, STEARNS & Co. - Analyst
Are we talking anything significant, more than just a couple percentage
points?
MARVIN QUIN - ASHLAND - CFO
Yes, probably something like that, Fred.
FRED LEUFFER - BEAR, STEARNS & Co. - Analyst
Okay. Lastly, any thoughts on acquisitions and what you can do with the MAP
proceeds?
MARVIN QUIN - ASHLAND - CFO
We've talked about this a number of times. We certainly will consider
acquisitions and are considering acquisitions, but we're looking for
transactions that fit our strategy, first and foremost; that would be more
(indiscernible) sized and can be more easily integrated into the
organization, and it just depends on the opportunities available. We don't
feel any great pressure to reinvest the proceeds and we will take our time
and as attractive opportunities come up, we will become involved and if
things are too expenses, we will step back.
Fred all right, perfect.
OPERATOR
John Roberts of Buckingham Research.
JOHN ROBERTS - BUCKINGHAM RESEARCH GROUP - ANALYST
Good morning, Garry, Bill, and Marvin. I guess I covered everybody! The
transaction you said wouldn't go forward if you didn't get a favorable
review from the IRS. Are the outstanding issues showstopper issues, or are
they issues that we just might end up with a modified transaction?
UNIDENTIFIED COMPANY REPRESENTATIVE
Well, I think we worded the press release is we're looking at alternatives,
and I don't want to get into a position of speculating and defining what
are showstoppers. If we find ways to implement the transaction at modest
taxes, insignificant taxes, I think you could assume we would go forward.
If the transaction was fully taxable, I think you could assume that we
would not (inaudible).
***
JEFFREY ZEKAUSKAS - J.P. MORGAN - ANALYST
Good morning. Is it fair to read your commentary on the IRS letter as --
that the transaction, all things being equal, is somewhat delayed or could
be somewhat delayed because of objections that the IRS has registered over
the last quarter?
UNIDENTIFIED COMPANY REPRESENTATIVE
I would rather not characterize as objections. This was a private
conversation between on one side the IRS and the other side Ashland and
Marathon. It really becomes awkward to go into describing where we are in
those discussions. I fear that doing so would not really be helpful in our
discussions with the IRS.
JEFFREY ZEKAUSKAS - J.P. MORGAN - ANALYST
What I mean to say is that the date seems different.
UNIDENTIFIED COMPANY REPRESENTATIVE
It is!
JEFFREY ZEKAUSKAS - J.P. MORGAN - ANALYST
So is the reason that the date is different is the exploration of
alternatives for the resolution of the issues?
UNIDENTIFIED COMPANY REPRESENTATIVE
Well, the reason the date has been extended is the expectation of the time
that would be required to fully resolve the tax issues. Quite frankly,
we're not finished with the SEC review at this point in time either but
we're not anticipating any major issues there.
JEFFREY ZEKAUSKAS - J.P. MORGAN - ANALYST
I guess if I could just ask you to clarify, is the probability that the
transaction goes through the same or higher or lower than it was three
months ago? I realize there is some discussion about, you know, we think
it's more likely than not, but that doesn't exactly address the issue of
whether the probability has changed.
UNIDENTIFIED COMPANY REPRESENTATIVE
That's a great question, and I'm not sure I have an answer.
JEFFREY ZEKAUSKAS - J.P. MORGAN - ANALYST
What's your guess?
UNIDENTIFIED COMPANY REPRESENTATIVE
Let give you some perspective. When we were (indiscernible) with the IRS,
there were lots of unknown issues, and lots of things you could worry
about. For the most part, we today are further down the road; we know where
we are, still having remaining discussions but a lot of things that we were
perhaps concerned about initially have passed and are not particularly
issues. Beyond that, I don't want to go into to start talking about
probabilities, because I'm not sure we've actually tried to define a
probability back in March and we've certainly have not tried to define a
probability today.
***
ANNE KOHLER - IRG RESEARCH - ANALYST
Good morning, gentlemen. Just a question regarding your acquisition
strategy -- I know that there have been some reports earlier or I guess in
the last week regarding possible acquisition of APAC of some of the coke
properties. If you had any insight into that and as well as any update in
terms of any acquisitions within that division that you're currently
working on.
MARVIN QUIN - ASHLAND - CFO
Yes, I do not think we are (indiscernible) with the Coke properties. Those
are primarily, as I understand it, distributing asphalt-type products,
asphaltic emulsions, and if we got into that business, we would be
competing with customers -- also the parts of the country that APAC is
located in versus Coke.
But I think, within APAC, our focus would be -- and Gary can expand on this
-- but our focus would primarily be in the things that we do well, which is
road construction, bridge-building, all the various skills required to
provide surface transportation.
GARRY HIGDEN - ASHLAND PAVING & Construction - President
That's right, and the bolt-on acquisitions that are within our operating
divisions within the 14 states that we resigned -- and we can bring
synergies to those bolt-ons with the things that Marvin just talked about,
the things that we do well.
***
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements, within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements include those that refer
to Ashland's operating performance, earnings and expectations about the MAP
transaction. Although Ashland believes its expectations are based on
reasonable assumptions, it cannot assure the expectations reflected herein
will be achieved. These forward-looking statements are based upon internal
forecasts and analyses of current and future market conditions and trends,
management plans and strategies, weather, operating efficiencies and
economic conditions, such as prices, supply and demand, cost of raw
materials, and legal proceedings and claims (including environmental and
asbestos matters) and are subject to a number of risks, uncertainties, and
assumptions that could cause actual results to differ materially from those
we describe in the forward-looking statements. The risks, uncertainties,
and assumptions include the possibility that Ashland will be unable to
fully realize the benefits anticipated from the MAP transaction; the
possibility of failing to receive a favorable ruling from the Internal
Revenue Service; the possibility that Ashland fails to obtain the approval
of its shareholders; the possibility that the transaction may not close or
that Ashland may be required to modify some aspect of the transaction to
obtain regulatory approvals; and other risks that are described from time
to time in the Securities and Exchange Commission (SEC) reports of Ashland.
Other factors and risks affecting Ashland are contained in Ashland's Form
10-K for the fiscal year ended Sept. 30, 2003, as amended, filed with the
SEC and available on Ashland's Investor Relations website at
www.ashland.com/investors or the SEC's website at www.sec.gov. Ashland
undertakes no obligation to subsequently update or revise the
forward-looking statements made in this news release to reflect events or
circumstances after the date of this news release.
ADDITIONAL INFORMATION ABOUT THE MAP TRANSACTION
In connection with the proposed transaction, Ashland filed a preliminary
proxy statement on Schedule 14A with the SEC on June 21, 2004. Ashland
filed an amended, preliminary proxy statement on Schedule 14A with the SEC
on August 31, 2004. ATB Holdings Inc. and New EXM Inc. filed a registration
statement on Form S-4, which includes a further amended preliminary proxy
statement/prospectus, with the SEC on October 12, 2004. Investors and
security holders are urged to read these documents and any other relevant
documents filed or that will be filed with the SEC, including the
definitive proxy statement/prospectus regarding the proposed transaction as
they become available, because they contain, or will contain, important
information. The definitive proxy statement/prospectus will be filed with
the SEC by ATB Holdings Inc. and New EXM Inc., and security holders may
obtain a free copy of the definitive proxy statement/prospectus when it
becomes available, and other documents filed with the SEC, including the
preliminary proxy statement at the SEC's website at www.sec.gov. The
definitive proxy statement/prospectus, and other documents filed with the
SEC by Ashland, ATB Holdings Inc. and New EXM Inc., including the
preliminary proxy statement, may also be obtained for free in the SEC
filings section on Ashland's Investor Relations website at
www.ashland.com/investors, or by directing a request to Ashland at 50 E.
RiverCenter Blvd., Covington, KY 41012. The respective directors and
executive officers of Ashland and other persons may be deemed to be
participants in solicitation of proxies in respect of the proposed
transaction. Information regarding Ashland's directors and executive
officers is available in its proxy statement filed with the SEC by Ashland
on December 8, 2003. Investors may obtain information regarding the
interests of participants in the solicitation of proxies in connection with
the transaction referenced in the foregoing information by reading the
definitive proxy statement/prospectus when it becomes available.