Filed by Ashland Inc. pursuant to Rules 165 and 425
promulgated under the 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 April 25, 2005 conference call
regarding its second quarter and fiscal
2005 earnings)
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PRESENTATION
BILL HENDERSON - ASHLAND - DIRECTOR OF IR
Allow me now to review corporate developments. During the quarter our debt
increased by $150 million, due in part to a $148 million income tax payment
and approximate $40 million increase in normal working capital items, and
no cash distribution from MAP.
Cash investments decreased by $34 million during the quarter, and at the
end of the March quarter MAP had $560 million in distributable cash due
Ashland. Lastly, our effective tax rate is currently estimated at 38.5% for
the remainder of the year. At this time, Marvin Quin will make a few
comments.
***
QUESTION AND ANSWER
JEFF ZEKAUSKAS - JP MORGAN - ANALYST
Can you give us an update on what is happening with the MAP transaction?
MARVIN QUIN - I - CFO
As I think we disclosed recently, we are in discussions with both Marathon
and the IRS, and at this point in time we have nothing to announce.
JEFF ZEKAUSKAS - JP MORGAN - ANALYST
I remember that there was a hope that the deal would close by the end of
June. What relevance does that date have, and is it now likely that the
deal won't close at the end of June?
MARVIN QUIN - ASHLAND - CFO
Clearly, closing by the end of June would be a challenge at this point in
time. Not impossible, but it's a challenge. I think the relevance of that
date may be less than a lot of investors place on it. From our perspective,
if we are able to negotiate a transaction that we think is favorable to our
shareholders, we would be inclined to extend that date. If we are unable
to, we would be -- it would just terminate.
It is not terribly relevant in the sense other than the sense that it is in
the existing document, the original document. It is once again, what can we
negotiate? If it is attractive we would be willing to extend it.
BILL HENDERSON - ASHLAND - DIRECTOR OF IR
And we would expect it to take approximately 60 days after some
announcement to close the deal, approximately.
JEFF ZEKAUSKAS - JP MORGAN - ANALYST
60 days. Again, can you remind me as to the meaning of a tax efficient
transaction?
MARVIN QUIN - ASHLAND - CFO
Yes, what we're talking about there is using the structure that was
announced in March of 2004 in the Morris Trust. And we say tax efficient as
opposed to nontaxable because I think we have disclosed that we were not
able to get one of the tax rulings. And as a result, there would be a
certain amount of taxes due related to contingent liabilities. And in
addition, there would be taxes due related to our stock price now exceeding
our basis of new Ashland.
JEFF ZEKAUSKAS - JP MORGAN - ANALYST
Lastly, has the - what is the IRS is feeling about the tax efficient
transaction?
MARVIN QUIN - I - CFO
I really cannot talk about the IRS' views on matters. That is a
confidential discussion between the IRS and ourselves and Marathon at this
point.
JEFF ZEKAUSKAS - JP MORGAN - ANALYST
Did it have any view in the past that you have already said?
MARVIN QUIN - ASHLAND - CFO
I'm sorry?
JEFF ZEKAUSKAS - JP MORGAN - ANALYST
What was your previous public view on the tax -- on the IRS' view of the
tax efficient transaction?
MARVIN QUIN - ASHLAND - CFO
As you may recall, there were a number of rulings which we requested, and
we received all but one of those rulings. And that was the one related to
contingent liabilities. And the IRS has stated that they will not provide
that ruling.
***
JACK PASTERCHAK - BB&T - ANALYST
Second question, with regard to the Marathon and MAP transaction, given
that the IRS did not give you the initial rulings on the transaction in its
initial contemplation, and given that today's announcement between Valero
and Premcor sets some sort of valuation bar mark-to-market, if you will,
for these types of assets anyway, why -- in a sense, couldn't you guys just
move on with sort of a newer negotiation, given that changed environment
that has occurred in the industry in terms of performance and now valuation
over the last year since this transaction was done? Since it was initially
announced it kind of seems like we are a little stuck in the mud. It is
that not a fair assessment?
GARY HEMINGER - MAP - PRESIDENT
I think it is a fair assessment. And I think as we disclosed earlier, we
are looking at -- are discussing alternate transaction structures. So it is
not just the original Morris Trust structured that has received our
attention.
OPERATOR
Fred Leuffer of Bear Stearns.
GARY HEMINGER - MAP - PRESIDENT
That was a key part of that answer.
FRED LEUFFER - BEAR STEARNS - ANALYST
First, Bill, congratulations and thank you for all your help. You have done
a fantastic job. I had two questions. First, Marvin, just a clarification.
It sounds like regarding the MAP transaction, you are still in discussions
with the IRS, meaning that you are still looking for some kind of
tax-favored structured? Is that correct?
MARVIN QUIN - ASHLAND - CFO
That has been one of the options we have been pursuing.
***
OPERATOR
John Roberts of Buckingham Research.
JOHN ROBERTS - BUCKINGHAM RESEARCH - ANALYST
Sorry, Marvin, to keep asking you this differently. But is it fair to say
that Ashland would not be inclined to extend the end of June deadline for
the original price deal?
MARVIN QUIN - ASHLAND - CFO
I don't want to go into price. Let me put it in this way. Ashland has
several alternatives. One is to continue its ownership. Two, if we don't
reach agreement Marathon could call our interest. In the third scenario, we
could enter into some type of an agreement. We are obviously not going to
enter into an agreement that we think is less favorable than the other two
options.
JOHN ROBERTS - BUCKINGHAM RESEARCH - ANALYST
You're not obligated to extend the June 30 deadline if you're unhappy with
the deal?
MARVIN QUIN - ASHLAND - CFO
Yes.
***
JOHN ROBERTS - BUCKINGHAM RESEARCH - ANALYST
Again, Bill has done a great job but this seems to be made a peculiarly odd
time to make that change, given all of the help everybody needs with the
MAP transaction.
***
OPERATOR
Matt Warburton of UBS.
MATT WARBURTON - UBS - ANALYST
Bill, all the best for the future. Two quick questions, if I may. The tax
burden that you said, 148 million, was that in relation to your taxable
income that obviously hasn't been distributed on MAP? So I see you also
borrowed some money from MAP during the quarter. And then I have a
follow-on on MAP after that.
MARVIN QUIN - ASHLAND - CFO
The answer is yes. As an MLP -- LLP -- MAP is paying -- repaying (ph)
income taxes on that income as it is recorded, not as paid.
MATT WARBURTON - UBS - ANALYST
Secondly, Marvin, you mentioned that you continue to talk to the IRS and
they're looking for a tax favored structure. And it seems to me, given the
duration and given what the IRS has said to you in the past, that a tax
restructure is virtually impossible, from looking at it on the outside. To
what degree if the IRS come back and say we are prepared to accept a
partially taxed transaction, will Ashland then return -- stick to the guns
of no restrictions on use of proceeds?
MARVIN QUIN - ASHLAND - CFO
We can't make a judgment without having specific facts available to make
that judgment. The factors that are important to us are after-tax value,
and it is certainly the most important. But also factors like financial
flexibility and certainty of transaction would be important in that
(technical difficulty) deliberation.
MATT WARBURTON - UBS - ANALYST
So essentially you could potentially see a case where the after-tax value
was preserved or even increased, given what the commentators were saying in
terms of the benchmark stage -- Premcor, Valero deal, that you would accept
some sort of limitations on use of proceeds?
MARVIN QUIN - ASHLAND - CFO
Yes. It would depend on the overall -- what we thought the value of each
alternative was.
***
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 the transaction may not close including as a result of failure
to receive a favorable ruling from the Internal Revenue Service or failure
of Ashland to obtain the approval of its shareholders; the possibility 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,
as amended, for the fiscal year ended Sept. 30, 2004, 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 and an
amended preliminary proxy statement on Schedule 14A 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 those 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 Ashland, 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 by
Ashland, 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, 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 14, 2004. 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.
***