SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-2918
ASHLAND OIL, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0122250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Ashland Drive, Russell, Kentucky 41169
(Address of principal executive offices) (Zip Code)
P. O. Box 391, Ashland, Kentucky 41114
(Mailing Address) (Zip Code)
Registrant's telephone number, including area code (606)329-3333
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
--- ----
At January 31, 1994, there were 60,252,127 shares of Registrant's Common
Stock outstanding. One-half of one Right to purchase one-tenth of a share
of Cumulative Preferred Stock, Series of 1987 accompanies each outstanding
share of Registrant's Common Stock.
PART I - FINANCIAL INFORMATION
_____________________________________________________________________________________________
ASHLAND OIL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
_____________________________________________________________________________________________
Three months ended
December 31
-----------------------------
(In thousands except per share data) 1993 1992
_____________________________________________________________________________________________
REVENUES
Sales and operating revenues (including excise taxes) $ 2,571,576 $ 2,554,856
Other 6,435 17,090
------------ ------------
2,578,011 2,571,946
COSTS AND EXPENSES
Cost of sales and operating expenses 1,914,262 2,032,454
Excise taxes on products and merchandise 205,830 162,686
Selling, general and administrative expenses 246,569 229,546
Depreciation, depletion and amortization 72,419 74,214
General corporate expenses 18,832 15,870
------------ ------------
2,457,912 2,514,770
------------ ------------
OPERATING INCOME 120,099 57,176
OTHER INCOME (EXPENSE)
Interest income 455 304
Interest expense (29,316) (31,953)
Equity income (loss) (6,379) 8,741
------------ ------------
INCOME BEFORE INCOME TAXES 84,859 34,268
Income taxes 26,480 9,520
------------ ------------
NET INCOME $ 58,379 $ 24,748
============ ============
EARNINGS PER SHARE - Note E
Primary $ .90 $ .41
Assuming full dilution $ .83 $ .41
DIVIDENDS PAID PER COMMON SHARE $ .25 $ .25
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
_____________________________________________________________________________________________
ASHLAND OIL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
_____________________________________________________________________________________________
December 31 September 30 December 31
(In thousands) 1993 1993 1992
_____________________________________________________________________________________________
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 63,078 $ 40,984 $ 61,612
Accounts receivable 1,124,144 1,198,643 1,045,696
Allowance for doubtful accounts (20,947) (20,318) (16,909)
Construction completed and in progress 26,689 50,972 16,599
Inventories - Note B 561,087 552,406 644,855
Deferred income taxes 71,601 78,243 87,303
Other current assets 68,337 72,071 65,094
------------ ------------ ------------
1,893,989 1,973,001 1,904,250
INVESTMENTS AND OTHER ASSETS
Investments in and advances to
unconsolidated affiliates 270,683 279,978 277,203
Investments of captive insurance companies 190,474 184,689 181,736
Cost in excess of net assets of companies
acquired 64,229 64,650 67,796
Other noncurrent assets 288,017 279,634 272,726
------------ ------------ ------------
813,403 808,951 799,461
PROPERTY, PLANT AND EQUIPMENT
Cost 5,757,269 5,704,852 5,558,715
Accumulated depreciation, depletion and
amortization (2,994,661) (2,934,987) (2,824,967)
------------ ------------ ------------
2,762,608 2,769,865 2,733,748
------------ ------------ ------------
$ 5,470,000 $ 5,551,817 $ 5,437,459
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $ 126,747 $ 158,862 $ 123,566
Trade and other payables 1,314,636 1,418,491 1,508,708
Income taxes 38,153 41,560 54,788
------------ ------------ ------------
1,479,536 1,618,913 1,687,062
NONCURRENT LIABILITIES
Long-term debt (less current portion) 1,383,619 1,399,458 1,592,575
Accrued pension and other postretirement
benefits 514,933 510,662 530,133
Reserves of captive insurance companies 186,025 173,039 172,141
Deferred income taxes 44,012 43,857 45,296
Other long-term liabilities and deferred
credits 366,552 351,094 324,566
Commitments and contingencies - Note C
------------ ------------ ------------
2,495,141 2,478,110 2,664,711
STOCKHOLDERS' EQUITY
Convertible preferred stock 293,179 293,179 -
Common stockholders' equity 1,202,144 1,161,615 1,085,686
------------ ------------ ------------
1,495,323 1,454,794 1,085,686
------------ ------------ ------------
$ 5,470,000 $ 5,551,817 $ 5,437,459
============ ============ ============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
________________________________________________________________________________________________________
ASHLAND OIL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS' EQUITY
________________________________________________________________________________________________________
Loan to
leveraged
employee
Deferred stock Prepaid
translation ownership contribu-
Common Paid-in Retained adjustments plan tion to
(In thousands) stock capital earnings and other (LESOP) LESOP Total
________________________________________________________________________________________________________
BALANCE AT OCTOBER 1, 1992 $ 59,948 $146,418 $ 930,990 $ 6,586 $ (34,519) $(23,386) $1,086,037
Net income 24,748 24,748
Dividends on common stock (14,710) (278) (14,988)
Issued common stock under
stock incentive plans 9 106 115
Other changes (10,226) (10,226)
-------- --------- ---------- --------- ---------- --------- -----------
BALANCE AT DECEMBER 31,
1992 $ 59,957 $146,524 $ 941,028 $ (3,640) $ (34,519) $(23,664) $1,085,686
======== ========= ========== ========= ========== ========= ===========
BALANCE AT OCTOBER 1, 1993 $ 60,022 $142,481 $1,008,264 $ (9,801) $ (33,457) $ (5,894) $1,161,615
Net income 58,379 58,379
Dividends on common stock (14,881) (141) (15,022)
Dividends on preferred
stock (4,688) (4,688)
Issued common stock
under stock incentive
plans 102 2,388 2,490
Other changes (16) (912) 298 (630)
-------- --------- ---------- --------- --------- --------- -----------
BALANCE AT DECEMBER 31,
1993 $ 60,124 $144,853 $1,047,074 $(10,713) $ (33,159) $ (6,035) $1,202,144
======== ========== ========== ========= ========= ========= ===========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
____________________________________________________________________________________________________
ASHLAND OIL, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
____________________________________________________________________________________________________
Three months ended
December 31
--------------------------------
(In thousands) 1993 1992
____________________________________________________________________________________________________
CASH FLOWS FROM OPERATIONS
Net income $ 58,379 $ 24,748
Expense (income) not affecting cash
Depreciation, depletion and amortization (1) 75,408 76,922
Deferred income taxes 6,790 10,810
Undistributed earnings of unconsolidated affiliates 8,430 (6,156)
Loss (gain) on sale of operations - net
of current income taxes 3,125 (1,499)
Other noncash items 25,401 (4,200)
Change in operating assets and liabilities (2) (14,042) 21,956
---------- ----------
163,491 122,581
CASH FLOWS FROM FINANCING
Proceeds from issuance of long-term debt - 255,000
Proceeds from issuance of capital stock 2,490 115
Repayment of long-term debt (35,885) (89,312)
Decrease in short-term debt (12,069) (200,495)
Dividends paid (19,710) (14,988)
---------- ----------
(65,174) (49,680)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment (73,921) (99,132)
Purchase of operations - net of cash acquired (4,876) (1,470)
Proceeds from sale of operations 4,592 40,597
Disposals of property, plant and equipment 3,341 7,386
Investment purchases (3) (73,287) (106,427)
Investment sales and maturities (3) 67,928 94,473
---------- ----------
(76,223) (64,573)
---------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS 22,094 8,328
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 40,984 53,284
---------- ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 63,078 $ 61,612
========== ==========
___________________________________________________________________________________________________
(1) Includes amounts charged to general corporate expenses.
(2) Excludes changes resulting from operations acquired or sold.
(3) Represents primarily investment transactions of captive insurance companies.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
_________________________________________________________________________
ASHLAND OIL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
_________________________________________________________________________
NOTE A - GENERAL
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial reporting and Securities and Exchange
Commission regulations, but are subject to any year-end audit
adjustments which may be necessary. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. These financial
statements should be read in conjunction with Ashland's Annual Report
on Form 10-K for the fiscal year ended September 30, 1993, as amended
by Form 10-K/A, Amendment No. 1 filed December 2, 1993 (hereinafter
referred to as "Form 10-K"). Results of operations for the period
ended December 31, 1993, are not necessarily indicative of results to
be expected for the year ending September 30, 1994.
NOTE B - INVENTORIES
_______________________________________________________________________
December 31 September 30 December 31
(In thousands) 1993 1993 1992
_______________________________________________________________________
Crude oil $ 228,875 $ 273,189 $ 374,726
Petroleum products 241,611 257,726 278,875
Chemicals and other products 349,084 336,494 352,655
Materials and supplies 43,823 44,570 43,809
Excess of replacement costs
over LIFO carrying values (302,306) (359,573) (405,210)
----------- ----------- ------------
$ 561,087 $ 552,406 $ 644,855
============ =========== ============
NOTE C - LITIGATION, CLAIMS AND CONTINGENCIES
Federal, state and local statutes and regulations relating to the
protection of the environment and the health and safety of employees
and other individuals have a significant impact on the conduct of
Ashland's businesses. For information regarding environmental and
health and safety expenditures and reserves, see the "Miscellaneous -
Governmental Regulation and Action - Environmental Protection" section
of Ashland's Form 10-K.
Environmental reserves are subject to considerable uncertainties which
affect Ashland's ability to estimate its share of the ultimate costs
of remediation efforts. Such uncertainties involve the nature and
extent of contamination at each site, the extent of required cleanup
efforts, varying costs of alternate cleanup methods, changes in
environmental remediation requirements, the potential effect of
technological improvements, the number and financial strength of other
potentially responsible parties at multi-party sites, and the
identification of new environmental sites. As a result, charges to
income for environmental liabilities could have a material effect on
results of operations in a particular quarter or fiscal year as
assessments and remediation efforts proceed or as new claims arise.
However, such charges are not expected to have a material adverse
effect on Ashland's consolidated financial position.
NOTE C - LITIGATION, CLAIMS AND CONTINGENCIES (continued)
Ashland has numerous insurance policies from insurers that provide
coverage at various levels for environmental liabilities. Ashland is
currently involved in negotiations concerning the amount of insurance
coverage for environmental costs under certain of these policies. In
addition, certain costs of remediation efforts related to underground
storage tanks are eligible for reimbursement from state administered
funds. Probable recoveries related to costs incurred in prior years
or expected to be incurred in future years are included in other
noncurrent assets.
Ashland has indemnified the purchaser of Riley Consolidated, an
engineering company sold in 1990, against losses related to certain
custom boilers built by Riley and other matters. Ashland is
continuing its efforts to resolve remaining issues related to this
indemnity. Future charges could be incurred under this indemnity, but
any amounts are uncertain at this time.
In addition, Ashland and its subsidiaries are parties to numerous
claims and lawsuits (some of which are for substantial amounts) with
respect to product liability and commercial and other matters. While
these claims and actions are being contested, the outcome of
individual matters is not predictable with assurance. Although any
actual liability is not determinable as of December 31, 1993, Ashland
believes that any liability resulting from these matters involving
Ashland and its subsidiaries, after taking into consideration
Ashland's insurance coverages and amounts already provided for, should
not have a material adverse effect on Ashland's consolidated financial
position.
NOTE D - ACQUISITIONS AND DIVESTITURES
During the quarter ended December 31, 1993, Ashland acquired an
asphalt terminal in Lexington, Kentucky and a specialty chemicals
business. These acquisitions were accounted for as purchases. Also
during the period, Ashland completed the sale of its Illinois Basin
crude oil gathering and trucking operations. These acquisitions and
divestitures did not have a significant impact on Ashland's
consolidated financial statements.
A definitive agreement has been signed to sell most of APAC's Arizona
operations to Kiewit Construction Group, Inc., a subsidiary of Peter
Kiewit Sons, Inc., a construction company based in Omaha, Nebraska.
The transaction is expected to close in the March quarter and will
substantially complete the company's previously announced asset
divestiture program.
___________________________________________________________________________________________________
ASHLAND OIL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
___________________________________________________________________________________________________
NOTE E - COMPUTATION OF EARNINGS PER SHARE
___________________________________________________________________________________________________
Three months ended
December 31
-------------------------------
(In thousands except per share data) 1993 1992
___________________________________________________________________________________________________
PRIMARY EARNINGS PER SHARE
Income available to common shares
Net income $ 58,379 $ 24,748
Ashland Coal, Inc. (ACI) equity income (net of income taxes) - (4,853)
Ashland's share of ACI primary earnings per
share (net of income taxes) - 4,409
Dividends on convertible preferred stock (4,688) -
---------- ---------
$ 53,691 $ 24,304
========== =========
Average common shares and equivalents outstanding
Average common shares outstanding 60,086 59,951
Common shares issuable upon exercise of stock options 452 97
Share adjustment for prepaid contribution to LESOP (563) (1,112)
---------- ---------
59,975 58,936
========== =========
Earnings per share $ .90 $ .41
========== =========
___________________________________________________________________________________________________
EARNINGS PER SHARE ASSUMING FULL DILUTION
Income available to common shares
Net income $ 58,379 $ 24,748
ACI equity income (net of income taxes) - (4,853)
Ashland's share of ACI earnings per share assuming full
dilution (net of income taxes) - 4,089
Interest on convertible debentures (net of income taxes) 1,465 -
---------- ---------
$ 59,844 $ 23,984
========== =========
Average common shares and equivalents outstanding
Average common shares outstanding 60,086 59,951
Common shares issuable upon
Exercise of stock options 468 125
Conversion of debentures 2,773 -
Conversion of preferred stock 9,276 -
Share adjustment for prepaid contribution to LESOP (563) (1,112)
---------- ---------
72,040 58,964
========== =========
Earnings per share $ .83 $ .41
========== =========
_________________________________________________________________________________
ASHLAND OIL, INC. AND SUBSIDIARIES
INFORMATION BY INDUSTRY SEGMENT
_________________________________________________________________________________
Three months ended
December 31
--------------------------------
(Dollars in thousands except as noted) 1993 1992
_________________________________________________________________________________
SALES AND OPERATING REVENUES
Petroleum $ 1,165,820 $ 1,218,288
SuperAmerica 423,817 482,369
Valvoline 271,812 205,476
Chemical 643,152 617,256
Construction 316,052 274,685
Exploration 51,579 76,494
Intersegment sales (300,656) (319,712)
------------ ------------
$ 2,571,576 $ 2,554,856
============ ============
OPERATING INCOME
Petroleum $ 44,682 $ (7,853)
SuperAmerica 21,375 18,023
Valvoline 14,740 13,219
------------ ------------
Total Refining and Marketing Group 80,797 23,389
Chemical 28,300 18,511
Construction 19,916 10,508
Exploration 9,918 20,638
General corporate expenses (18,832) (15,870)
------------ ------------
$ 120,099 $ 57,176
============ ============
EQUITY INCOME (LOSS)
Arch Mineral Corporation $ (7,392) $ 1,900
Ashland Coal, Inc. (707) 5,258
Other 1,720 1,583
------------ ------------
$ (6,379) $ 8,741
============ ============
OPERATING INFORMATION
Petroleum
Product sales (barrels per day) (1) 377,036 336,749
Refining inputs (barrels per day) (2) 359,450 326,542
Value of products manufactured per barrel $ 20.79 $ 23.80
Input cost per barrel 15.79 20.39
------------ ------------
Refining margin per barrel $ 5.00 $ 3.41
SuperAmerica
Product sales (barrels per day) 71,855 79,239
Merchandise sales $ 123,444 $ 143,996
Valvoline product sales (barrels per day) (1) 16,513 14,797
Construction backlog
At end of period $ 502,515 $ 565,835
Increase (decrease) during period $ (41,924) $ 14,391
Exploration
Net daily production
Natural gas (thousands of cubic feet) (1) 100,239 99,313
Nigerian crude oil (barrels) 19,472 23,477
Sales price
Natural gas (per thousand cubic feet) $ 2.56 $ 3.06
Nigerian crude oil (per barrel) $ 15.14 $ 18.92
Arch Mineral Corporation (3)
Tons sold (thousands) 3,830 5,461
Sales price per ton $ 24.08 $ 25.52
Ashland Coal, Inc. (3)
Tons sold (thousands) 3,430 5,356
Sales price per ton $ 31.89 $ 29.77
_________________________________________________________________________________
(1) Includes intersegment sales.
(2) Includes crude oil and other purchased feedstocks.
(3) Amounts are reported on a 100% basis for these affiliated companies accounted
for on the equity method.
___________________________________________________________________________
ASHLAND OIL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
___________________________________________________________________________
RESULTS OF OPERATIONS
Ashland recorded net income of $58 million for the first quarter of fiscal
1994, compared to net income of $25 million for the first quarter of fiscal
1993. The current quarter's earnings represent Ashland's best December
quarter since 1988 and the third-best first quarter in the company's
history. Operating income for the current quarter totaled $120 million,
compared to $57 million for last year's first quarter. The improvement
reflected a strong performance from Ashland Petroleum and record results
from SuperAmerica and Valvoline. Operating income from Chemical and
Construction was also above that of a year ago, while Exploration showed a
decline. In addition, Ashland's coal investments reported equity losses
compared to income in last year's first quarter.
In an effort to improve Ashland's competitive position, an employee-driven
process, known as Advantage Ashland, was initiated in July 1993, to
evaluate overhead costs companywide. The first phase of this program,
which focused on the Corporate staff, was completed in November and
annualized savings of nearly $9 million dollars were identified. The
second phase, which is focusing on the operating divisions, is currently
underway and should be completed by June 1994. The third and final phase
will examine Ashland Services Company.
PETROLEUM
Operating income for Ashland Petroleum totaled $45 million for the three
months ended December 31, 1993, compared to an operating loss of $8 million
for the same period last year. An increase in refining margins (the
difference between the value of products manufactured and input cost) and
higher product sales volumes were the key reasons for this quarter's
improvement in earnings. The refining margin was $5.00 per barrel for the
first quarter of fiscal 1994, compared to $3.41 in last year's first
quarter, benefiting from very favorable distillate prices early in the
quarter and from lower crude oil costs. Ashland Petroleum was able to
capitalize on market conditions in October as a result of its recent
capital spending program that enabled the refineries to produce low-sulfur
diesel fuel. However, near the end of the quarter, wholesale product
prices dropped faster than crude prices, resulting in weaker wholesale
margins.
Ashland Petroleum made substantial progress toward its long-term goal of
improving profits and reducing costs by $1 per barrel of daily refining
capacity by the end of fiscal 1994. Refining margins are currently at
profitable levels, crude costs continue to be low, and distillate demand is
strong due in part to the severe winter. However, for the March 1994
quarter, refinery inputs will be curtailed by planned maintenance at the
Catlettsburg, Kentucky refinery late in the quarter.
SUPERAMERICA
For the three months ended December 31, 1993, SuperAmerica achieved a
record quarterly income of $21 million, compared to last year's first
quarter profit of $18 million. Exceptionally strong gasoline margins and
an improvement in merchandise gross profit more than offset a decline in
sales volumes due to the sale of 80 stores in non-strategic marketing areas
during fiscal 1993. At December 31, 1993, 591 SuperAmerica stores were
operating, compared to 644 stores at December 31, 1992.
VALVOLINE
For the three months ended December 31, 1993, Valvoline set a new first
quarter earnings record with operating income of $15 million, compared to
the previous record of $13 million established last year. The increase in
earnings reflected higher branded U.S. motor oil sales volumes and record
earnings from Valvoline Instant Oil Change (VIOC). An increase in the
number of company-operated quick-lube outlets from 319 at December 31,
1992, to 346 at December 31, 1993, combined with higher average car counts
and ticket prices, contributed to VIOC's profit improvement.
CHEMICAL
For the three months ended December 31, 1993, Ashland Chemical's operating
income totaled $28 million, compared to $19 million for the same period
last year, reflecting a stronger U.S. economy. Operating income from the
distribution group was the highest of any quarter on record as sales
volumes in thermoplastics distribution increased 18% from last year and
chemical distribution sales and margins improved. The specialty chemicals
group recorded its best first quarter results ever, with all businesses
reporting improved sales volume. Also, income from the petrochemical group
was well above the same quarter in the prior year as methanol margins
improved.
CONSTRUCTION
Operating income from the APAC construction operations for the three months
ended December 31, 1993, amounted to $20 million this year, compared to $11
million last year. Construction operations benefited from improved
margins, more favorable operating conditions, and a better quality backlog.
Earnings improved from all operating regions as revenues were the highest
in company history for a December quarter. Backlog at December 31, 1993,
totaled $503 million, compared to $566 million at December 31, 1992.
A definitive agreement has been signed to sell most of APAC's Arizona
operations to Kiewit Construction Group, Inc., a subsidiary of Peter Kiewit
Sons, Inc., a construction company based in Omaha, Nebraska. The
transaction is expected to close in the March quarter.
EXPLORATION
For the first quarter of fiscal 1994, Ashland Exploration's operating
income totaled $10 million, compared to $21 million for the same period
last year. Domestic operating income decreased $12 million principally due
to a 16% decline in natural gas prices. Prior year results also included
the favorable impact of a contract settlement. Earnings from foreign
operations increased this year despite the ongoing decline in Nigerian
crude oil production. This year's operating results reflect a $2 million
decline in exploration expense, as the prior year period included seismic
acquisition activity on two offshore blocks in Nigeria.
GENERAL CORPORATE EXPENSES
For the first quarter of fiscal 1994, general corporate expenses totaled
$19 million, compared to expenses of $16 million for the quarter ended
December 31, 1992. Results for the prior year included income from a
receipt related to the previous sale of an engineering company concerning
an earnout arrangement and other matters, partially offset by an increase
in expenses resulting from debt prepayments.
OTHER INCOME (EXPENSE)
Interest expense for the quarter ended December 31, 1993, declined when
compared to the same period for the prior year, reflecting a decline in
total debt outstanding. During fiscal 1993, funds provided from long-term
borrowings and the issuance of convertible preferred stock were used to
retire long-term debt, based on scheduled maturities or opportunities for
lower interest rates.
Ashland recorded an equity loss from Arch Mineral of $7 million for the
current quarter, compared to equity income of $2 million for the three
months ended December 31, 1992. The decline in earnings was due to the
unfavorable variances in sales volumes and operating costs attributed
primarily to the United Mine Workers of America (UMWA) strike, partially
offset by favorable adjustments to black lung liabilities, as a result of
revised actuarial valuations.
Results for Ashland Coal declined for the quarter ended December 31, 1993,
producing an equity loss of $1 million, compared to equity income of $5
million for the same period last year. The negative effect of the UMWA
strike, coupled with damage (now repaired) to a coal silo at Mingo Logan
Coal Company, reduced Ashland Coal's earnings for the quarter.
Since the prolonged UMWA strike was settled in mid-December, both Arch
Mineral and Ashland Coal now expect an improvement in earnings over the
December quarter. During the fourth quarter of fiscal 1993, Arch Mineral
and Ashland Coal began preliminary discussions about a possible business
combination. These discussions have continued, but there is no assurance
that such a combination will occur.
FINANCIAL POSITION
LIQUIDITY
Ashland's financial position has enabled it to continue investment grade
ratings on its indebtedness and obtain capital for its financing needs.
Ashland's senior debt ratings are Baa1 from Moody's and BBB from Standard &
Poor's. Ashland has revolving credit agreements providing for up to $350
million in borrowings, none of which were in use at December 31, 1993.
During the current quarter, Ashland filed a shelf registration statement to
allow for offerings of an additional $250 million in medium-term notes.
Ashland had previously filed shelf registration statements for $750 million
of which $698 million had been sold. Consequently, at December 31, 1993,
Ashland could issue an additional $302 million in medium-term notes should
future opportunities or needs arise. Ashland also has access to commercial
paper markets and various uncommitted lines of credit, and had short-term
notes and commercial paper of $64 million outstanding at December 31, 1993.
Certain debt agreements contain covenants restricting the amount by which
Ashland can increase its indebtedness. Under these covenants, Ashland's
indebtedness could have been increased by up to $619 million at December
31, 1993.
Cash and cash equivalents at December 31, 1993, were $63 million, compared
to $41 million at September 30, 1993. Cash flows from operations, a major
source of Ashland's liquidity, amounted to $163 million for the three
months ended December 31, 1993, compared to $123 million for the three
months ended December 31, 1992. This increase was attributed primarily
to higher earnings this year.
Working capital at December 31, 1993, was $414 million, compared to $354
million at September 30, 1993. Liquid assets (cash, cash equivalents and
accounts receivable) as a percent of current liabilities amounted to 79% at
December 31, 1993, compared to 75% at September 30, 1993. Ashland's
working capital is significantly affected by its use of the LIFO method of
inventory valuation, which valued such inventories at $302 million below
their replacement costs at December 31, 1993.
CAPITAL RESOURCES
For the three months ended December 31, 1993, property additions amounted
to $74 million, compared to $99 million for the same period last year,
reflecting the expected reduction of Ashland Petroleum's capital
expenditures in fiscal 1994 as a result of the completion of various
refinery units in 1993. Property additions (including exploration costs
and geophysical expenses) and cash dividends for the remainder of 1994 are
estimated at $319 million and $59 million, respectively. Ashland
anticipates meeting its 1994 capital requirements for property additions
and dividends primarily from internally generated funds and divestitures of
assets. However, external financing may be necessary to provide funds for
the remaining contractual maturities of $52 million for long-term debt, for
acquisitions or for common stock purchases.
As previously mentioned, a definitive agreement has been signed to sell
most of APAC's Arizona operations to Kiewit Construction Group, Inc. The
transaction is expected to close in the March quarter and will
substantially complete the company's previously announced asset divestiture
program. Proceeds generated from the divestiture will be used to reduce
debt or fund capital requirements for property additions and dividends, as
needed.
At December 31, 1993, up to 3.5 million additional shares of common stock
can be purchased from time to time in open market transactions under
Ashland's repurchase program. The number of shares ultimately purchased
and the prices Ashland will pay for its stock are subject to periodic
review by management. No shares have been purchased under this program
since 1991.
Ashland's capitalization at December 31, 1993, consists of debt due within
one year (4%), long-term debt (45%), deferred income taxes (1%),
convertible preferred stock (10%), and common stockholders' equity (40%).
Reflecting an improvement in the balance sheet, total debt as a percent of
total capitalization dropped below 50%, having been in excess of 60% as
recently as a year ago. At December 31, 1993, long-term debt included $85
million of floating-rate debt, and the interest rates on an additional $405
million of fixed-rate debt were converted to floating rates through
interest rate swaps. As a result, interest costs will fluctuate with
short-term interest rates in 1994 on over 30% of Ashland's long-term debt.
ENVIRONMENTAL MATTERS
Federal, state and local statutes and regulations relating to the
protection of the environment and the health and safety of employees and
other individuals have resulted in higher operating costs and capital
investments by the industries in which Ashland operates. Because of the
continuing trend toward greater environmental awareness and increasingly
stringent environmental regulations, Ashland believes that expenditures for
compliance with environmental, health and safety regulations will continue
to have a significant impact on the conduct of its businesses. Although it
cannot predict accurately how these developments will affect future
operations and earnings, Ashland does not believe its costs will vary
significantly from those of its competitors in the petroleum and chemical
industries.
Environmental reserves are subject to considerable uncertainties which
affect Ashland's ability to estimate its share of the ultimate costs of
remediation efforts. Such uncertainties involve the nature and extent of
contamination at each site, the extent of required cleanup efforts, varying
costs of alternate cleanup methods, changes in environmental remediation
requirements, the potential effect of technological improvements, the
number and financial strength of other potentially responsible parties at
multi-party sites, and the identification of new environmental sites. As a
result, charges to income for environmental liabilities could have a
material effect on results of operations in a particular quarter or fiscal
year as assessments and remediation efforts proceed or as new claims arise.
However, such charges are not expected to have a material adverse effect on
Ashland's consolidated financial position, cash flow or liquidity.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Environmental Proceedings - (1) As of December 31, 1993, Ashland was
subject to 64 notices received from the United States Environmental
Protection Agency ("USEPA") identifying Ashland as a "potentially
responsible party" ("PRP") under the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA") and the Superfund
Amendment and Reauthorization Act ("SARA") for potential joint and
several liability for cleanup costs in connection with alleged
releases of hazardous substances from various waste treatment or
disposal sites. These sites are currently subject to ongoing
investigation and remedial activities, overseen by the USEPA in
accordance with procedures established under CERCLA and SARA
regulations, in which Ashland is participating as a member of various
PRP groups. Generally, the relief sought by the USEPA includes
remediation of contaminated soil and groundwater, reimbursement for
the costs of site cleanup or oversight expended by the USEPA, and
long-term monitoring of environmental conditions at the sites.
Ashland also periodically receives notices from state environmental
agencies pursuant to similar state legislation. Ashland carefully
monitors the investigatory and remedial activity at each of the sites.
Based on its experience with site remediation, its familiarity with
current environmental laws and regulations, its analysis of the
specific hazardous substances at issue, the existence of other
financially viable PRPs and its current estimates of investigatory,
clean-up and monitoring costs at each site, Ashland believes that its
liability at these sites, either individually or in the aggregate,
will not exceed established reserves by a material amount. Estimated
costs for these matters are recognized in accordance with generally
accepted accounting principles governing probability and the ability
to reasonably estimate future costs.
(2) On March 26, 1993, Ashland received a Notice of Violation and
Opportunity to Show Cause ("Show Cause Notice") from the USEPA. The
Show Cause Notice alleges violations of Section 304 of the Emergency
Planning and Community Right-to-Know Act of 1986 ("EPCRA") in that
while Ashland notified the Kentucky Division for Air Quality, it
allegedly, on various occasions, failed to notify certain other
appropriate agencies about releases of a regulated substance in
amounts greater than the reportable quantity from its Catlettsburg
refinery. Ashland and the USEPA are engaged in settlement discussions,
but no final settlement has been reached.
El Paso Dispute - On March 11, 1993, a complaint was filed by El Paso
Refinery, L.P., against Scurlock Permian Corporation ("SPC"), a wholly
owned subsidiary of Ashland, in the District Court of El Paso County,
Texas. El Paso Refinery, L.P., is currently in Chapter 7 bankruptcy.
Plaintiff alleges that SPC wrongfully breached certain duties under a
contract to supply crude oil. Plaintiff further alleges violations of
Texas usury law, common law fraud and duress and seeks substantial
damages. In an apparent companion case filed the same day by
individual plaintiffs (two officers of El Paso Refining, Inc., the
general partner of El Paso Refinery, L.P.), damages are sought against
SPC and others based upon the execution by plaintiffs of promissory
notes in connection with the financing of the refinery. Ashland and
SPC believe these complaints to be without merit and intend to defend
them vigorously. SPC is a creditor in the El Paso bankruptcy
proceeding and had filed a proof of claim for approximately
$39,000,000 against the bankrupt estate. As of February 4, 1994, SPC
had received approximately $16,900,000 from the liquidation of
collateral. Ashland believes its current reserves are adequate to
cover any shortfall that could be sustained in the bankruptcy
proceeding.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Ashland's Annual Meeting of Shareholders was held on January
27, 1994, at the Ashland Petroleum Executive Office Building,
Ashland Drive, Russell, Kentucky at 10:30 a.m.
(b) Ashland's shareholders at said meeting elected 6 directors:
Votes
Affirmative Negative
Paul W. Chellgren 53,223,625 671,957
Ralph E. Gomory 52,994,584 900,998
Patrick F. Noonan 53,239,235 656,347
Jane C. Pfeiffer 53,210,227 685,355
Michael D. Rose 53,233,676 661,906
Dr. Robert B. Stobaugh 53,229,117 666,465
Directors who continued in office: Jack S. Blanton, Thomas E.
Bolger, Samuel C. Butler, Frank C. Carlucci, James B. Farley, Edmund
B. Fitzgerald, John R. Hall, James R. Rinehart, William L. Rouse, and
James W. Vandeveer.
(c) Ashland's shareholders at said meeting approved the Ashland
Oil, Inc. Deferred Compensation and Stock Incentive Plan for
Non-Employee Directors (the "Plan") by a vote of 43,758,014
affirmative to 9,449,794 negative and 691,976 abstention
votes. A copy of the Plan is attached as Exhibit 10.18.
(d) Ashland's shareholders at said meeting ratified the
appointment of Ernst & Young as independent auditors for
fiscal year 1994 by a vote of 53,222,932 affirmative to
446,172 negative and 230,797 abstention votes.
(e) Although not presented at said meeting, the results of voting
on a shareholder proposal for the Board of Directors to take
steps necessary to require that at future elections of
directors all directors be elected annually were 31,486,703
negative to 18,647,405 affirmative and 1,410,651 abstention
and 2,349,565 broker non-votes.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.18 Copy of Ashland Oil, Inc. Deferred Compensation and
Stock Incentive Plan for Non-Employee Directors.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Ashland Oil, Inc.
(Registrant)
Date: February 10, 1994 /s/ Kenneth L. Aulen
___________________________
Kenneth L. Aulen
Administrative Vice President
and Controller (Chief
Accounting Officer)
Date: February 10, 1994
/s/ Thomas L. Feazell
____________________________
Thomas L. Feazell
Senior Vice President,
General Counsel and Secretary
Exhibit 10.18
ASHLAND OIL, INC.
DEFERRED COMPENSATION AND
STOCK INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
ARTICLE I. GENERAL PROVISIONS
1. PURPOSE
The purpose of this Ashland Oil, Inc. Deferred Compensation and
Stock Incentive Plan For Non-Employee Directors (the "Plan") is to
provide each Director with an opportunity to defer some or all of
the Director's Fees as a means of saving for retirement or other
purposes. In addition, the Plan provides Directors with the
ability to increase their proprietary interest in the Company's
long-term prospects by permitting Directors to receive all or a
portion of their Fees in Ashland Common Stock and providing for the
grant of options to purchase Ashland Common Stock to Directors.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
(a) "Accounting Date" means each December 31, March 31, June
30 and September 30.
(b) "Act" means the Securities Act of 1933, as amended from
time to time.
(c) "Agreement" means a written agreement setting forth the
terms of an Option.
(d) "Beneficiary" means the person(s) who, upon the death of
a Participant, shall have acquired by will, laws of
descent and distribution or by other legal proceedings,
the right to receive the benefits specified under this
Plan in the event of a Director's death.
(e) "Board" means the Board of Directors of Ashland Oil,
Inc.
(f) "Cash Account" means an account by that name established
pursuant to Article III, Section 1.
(g) "Change in Control" shall be deemed to occur (1) upon
the approval of the shareholders of the Company (or if
such approval is not required, upon the approval of the
Board) of (A) any consolidation or merger of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock
would be converted into cash, securities or other
property other than a merger in which the holders of
Common Stock immediately prior to the merger will have
the same proportionate ownership of Common Stock of the
surviving corporation immediately after the merger, (B)
any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all
or substantially all the assets of the Company, or (C)
adoption of any plan or proposal for the liquidation or
dissolution of the Company, (2) when any "person" (as
defined in Section 13(d) of the Exchange Act), other
than the Company or any subsidiary or employee benefit
plan or trust maintained by the Company, shall become
the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of more than
20% of the Common Stock outstanding at the time, without
the prior approval of the Board, or (3) if at any time
during a period of two consecutive years, individuals
who at the beginning of such period constituted the
Board shall cease for any reason to constitute at least
a majority thereof, unless the election or the
nomination for election by the Company's shareholders of
each new director during such two-year period was
approved by a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of such two-year period.
(h) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(i) "Committee" means the Personnel and Compensation
Committee of the Board.
(j) "Common Stock" means the common stock, $1.00 par value,
of Ashland Oil, Inc.
(k) "Company" means Ashland Oil, Inc., its divisions and
subsidiaries.
(l) "Director" means any non-employee director of the
Company.
(m) "Election" means a Participant's delivery of a written
notice of election to the Secretary of the Company
electing to defer payment of his or her Fees or to
receive such Fees in the form of Common Stock.
(n) Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(o) "Exercise Price" means with respect to each share of
Common Stock subject to an Option, the price at which
such share may be purchased from the Company pursuant to
the exercise of such Option.
(p) "Fair Market Value" means, as of any specified date (or,
if a weekend or holiday, the next preceding business
day), the closing price of a share of Common Stock, as
reported on the Composite Tape.
(q) "Fees" mean the annual retainer and meeting fees, as
well as any per diem compensation for special
assignments, earned by a Director for his or her service
as a member of the Board during a calendar year or
portion thereof
(r) "Nonqualified Stock Option" means any Option that does
not comply with the provisions of Section 422 of the
Code.
(s) "Option" means the right to purchase Common Stock as
provided in Article IV.
(t) "Participant" means a Director who has elected to defer
payment of all or a portion of his or her Fees and/or to
receive all or a specified portion of his or her Fees in
shares of Common Stock.
(u) "Payment Commencement Date" means the date payments of
amounts deferred begin pursuant to Article III, Section
6.
(v) "Personal Representative" means the person or persons
who, upon the disability or incompetence of a Director,
shall have acquired on behalf of the Director, by legal
proceeding or otherwise, the right to receive the
benefits specified in this Plan.
(w) "Plan" means this Ashland Oil, Inc. Deferred
Compensation and Stock Incentive Plan For Non-Employee
Directors.
(x) "Prime Rate of Interest" means the rate of interest
quoted by Citibank, N.A. as its prime commercial lending
rate on each Accounting Date.
(y) "Stock Account" means an account by that name
established pursuant to Article III, Section 1.
(z) "Stock Unit(s)" means the share equivalents credited to
a Participant's Stock Account pursuant to Article III,
Sections 1 and 2.
(aa) "Termination" means retirement from the Board or
termination of service as a Director for any other
reason.
3. SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION
(a) Shares Authorized for Issuance. There shall be
reserved for issuance under the Plan 500,000 shares of Common
Stock, subject to adjustment pursuant to subsection (b) below;
provided, however, that of such shares, only 150,000 shares shall
be available for issuance in connection with the award of
Options. Such shares shall be authorized but unissued shares of
Common Stock. If any Option shall expire without having been
exercised in full, the shares subject to the unexercised portion
of such Option shall again be available for the purposes of the
Plan.
(b) Adjustments in Certain Events. In the event of any
change in the outstanding Common Stock of the Company by reason
of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination, or exchange of
shares, split-up, split-off, spin-off, liquidation or other
similar change in capitalization, or any distribution to common
shareholders other than cash dividends, the number or kind of
shares that may be issued under the Plan shall be automatically
adjusted so that the proportionate interest of the Directors
shall be maintained as before the occurrence of such event. Such
adjustment shall be conclusive and binding for all purposes of
the Plan.
4. ELIGIBILITY
Any non-employee Director of the Company shall be eligible to
participate in the Plan.
5. ADMINISTRATION
Full power and authority to construe, interpret and administer
the Plan shall be vested in the Committee. Decisions of the
Committee shall be final, conclusive and binding upon all
parties. Day-to-day administration of the Plan shall be the
responsibility of the Company's Corporate Human Resources
Department. This Department may authorize new or modify existing
forms for use under this Plan so long as any such modified or new
forms are not inconsistent with the terms of the Plan.
ARTICLE II. COMMON STOCK PROVISION
Each Director may elect to receive all or a portion of his or her
Fees in shares of Common Stock by making an Election pursuant to
Article III, Section 4. Shares shall be issued to the Director
at the end of each quarter beginning in the quarter the Election
is effective. The number of shares of Common Stock so issued
shall be equal to the amount of Fees which otherwise would have
been payable to such Director during the quarter divided by the
Fair Market Value on the last day of such quarter. Only whole
number of shares of Common Stock will be issued, with any
fractional shares to be paid in cash.
ARTICLE III. DEFERRED COMPENSATION
1. PARTICIPANT ACCOUNTS
(a) A Director who has elected to defer all or a portion of
his or her Fees by filing an Election as provided in Section 4 of
this Article may further elect to have such deferred amounts
credited to a Cash Account, a Stock Account, or a combination of
both such Accounts. The Company shall maintain such Accounts in
the name of the Director.
(b) The Cash Account of a Director shall be credited on
each Accounting Date with the dollar amount of such deferred
compensation otherwise payable to the Director during the
quarterly period ending on the Accounting Date and as to which a
cash deferral election has been made. The Cash Account shall be
adjusted and increased on each Accounting Date as if interest
were credited thereon, based on the Prime Rate of Interest on
such Accounting Date.
(c) The Stock Account of a Director shall be credited on
each Accounting Date with Stock Units equal to the number of
shares of Common Stock (including fractions of a share) that
could have been purchased with the amount of such deferred Fees
as to which a stock deferral election has been made at the Fair
Market Value on the Accounting Date. As of the date of any
dividend distribution date for the Common Stock, the Director's
Stock Account shall be credited with additional Stock Units equal
to the number of shares of Common Stock (including fractions of a
share) that could have been purchased, at the Fair Market Value
on such date, with the amount which would have been paid as
dividends on that number of shares (including fractions of a
share) of Common Stock which is equal to the number of Stock
Units then credited to the Director's Stock Account.
2. FINANCIAL HARDSHIP
Upon the written request of a Director or a Director's legal
representative and a finding that continued deferral will result
in financial hardship to the Director, the Committee (in its sole
discretion) may authorize (a) the payment of all or a part of a
Director's account(s) in a single installment prior to his or her
ceasing to be a Director, or (b) the acceleration of payment of
any multiple installments hereof; provided, however, that if, in
the sole discretion of the Committee, a six-month delay in any
distribution pursuant to this Section 2 of this Article shall be
necessary to avoid liability of the Director under Section 16 of
the Act, any such distribution shall be so postponed.
3. INITIAL CONVERSION
A Director may make a special one-time election on or before
December 31, 1993 to convert (effective as of June 30, 1994) all
or any portion of (i) his or her Cash Account to his or her Stock
Account, or (ii) his or her Stock Account to his or her Cash
Account. The number of Stock Units to be credited to such
Director's Stock Account in the event of a conversion under (i)
shall be obtained by dividing the portion of the cash balance
credited to his or her Cash Account as specified in his or her
election by the Fair Market Value of Ashland Common Stock on June
30, 1994. The amount to be credited to such Director's Cash
Account in the event of a conversion under (ii) shall be
determined by multiplying the number of Stock Units specified in
his or her election by the Fair Market Value on June 30, 1994.
No further conversions of Accounts may occur after June 30, 1994
except as provided in Section 4(b) of this Article.
4. MANNER OF ELECTION
(a) Any Director wishing to participate in the Plan must deliver
to the Secretary of the Company a written notice, (i) electing to
defer to a period following his or her Termination payment of all
or a portion (in 25% increments) of his or her Fees, and/or (ii)
to receive all or a portion (in 25% increments) of his or her
Fees in shares of Common Stock (an "Election"). The Election
must be filed on or before September 30 in order to be effective
for Fees earned in the immediately succeeding calendar year.
Notwithstanding the foregoing, a Director may choose to
participate in the Plan beginning in 1994 by filing an Election
to so participate on or before December 31, 1993 (the "1994
Election"). Pursuant to the 1994 Election, if a Director chooses
to defer payment of any portion of his or her Fees into the Stock
Account, such Fees will be deemed deferred into the Cash Account
until June 30, 1994 at which time such deferred Fees (together
with accrued earnings thereon) will be automatically transferred
to the Stock Account. The number of Stock Units to be credited
to such Director's Stock Account upon the transfer of such amount
shall be obtained by dividing such amount by the Fair Market
Value of Ashland Common Stock on June 30, 1994. In addition, if
a Director chooses to receive all or a portion of Fees in shares
of Common Stock, such 1994 Election will not take effect until
June 30, 1994.
(b) With respect to Directors' Fees payable for all or any
portion of a calendar year after such person's initial election
to the office of Director of the Company, any such person wishing
to participate in the Plan may file a proper Election within 30
days after such election to office. Any such Election shall be
effective upon filing or as soon as possible thereafter with
respect to such Fees. Notwithstanding the foregoing, if a
Director chooses to defer payment of any portion of his or her
Fees into the Stock Account, such Fees will be deemed deferred
into the Cash Account until six months after the date the
Election is first effective at which time such deferred Fees
(together with accrued earnings thereon) will be automatically
transferred to the Stock Account. The number of Stock Units to
be credited to such Director's Stock Account upon the transfer of
such amount shall be obtained by dividing such amount by the Fair
Market Value of Ashland Common Stock on the first business day
immediately preceding the date of transfer. In addition, if a
Director chooses to receive all or a portion of Fees in shares of
Common Stock, such Election will take effect only with respect to
the payment of Fees six months after the date of the Election and
thereafter.
(c) An effective Election may not be revoked or modified (except
as to changes in the designation of Beneficiary and as otherwise
stated herein) with respect to Fees payable for a calendar year
or portion of a calendar year for which such Election is
effective. Such Election, unless terminated or modified as
described below, shall apply to Fees payable with respect to each
subsequent calendar year. An effective election may be
terminated or modified for any subsequent calendar year by the
filing of an Election, on or before September 30 of the preceding
calendar year for which such modification or termination is to
be effective. A Participant will be allowed to change the
Election as to the applicable payment period for all amounts
deferred pursuant to such Election one time, subject to approval
by the Committee. Such change must be made no later than
eighteen months prior to such Participant's voluntary Termination
or normal retirement from the Board at age 70. If the
Participant making such change is a member of the Committee, such
Participant shall abstain from the Committee's decision to
approve or disapprove such change.
5. MANNER OF PAYMENT UPON TERMINATION
In accordance with the Director's Election and subject to
Committee approval upon payout, amounts credited to a Director's
Cash and/or Stock Account will be paid in a lump sum or in the
form of annual or quarterly installments in shares of Common
Stock or cash, or a combination of both to the Director following
his or her Termination or, in the event of his or her death, to a
Beneficiary. If a Director elects to receive payment in annual
installments, the payment period shall not exceed twenty (20)
years following the date of the Director's Termination.
The amount of any cash distribution to be made in installments
with respect to the Cash Account will be determined by
multiplying (i) the current cash balance in such Cash Account by
(ii) a fraction, the numerator of which is one and the
denominator of which is the number of installments in which
distributions remain to be made (including the current
distribution). The amount of any cash distribution to be made in
installments with respect to Stock Units will be determined by
(i) multiplying the number of Stock Units attributable to such
installment (determined as hereinafter provided) by (ii) the
closing price of the Common Stock on each Accounting Date
immediately prior to the date on which such installment is to be
paid. The number of Stock Units attributable to an installment
shall be determined by multiplying (i) the current number of
Stock Units in such Stock Account by (ii) a fraction, the
numerator of which is one and the denominator of which is the
number of installments in which distributions remain to be made
(including the current distribution).
The amount of any stock distribution to be made in installments
with respect to the Stock Account shall be determined by
multiplying (i) the current number Stock Units in such Stock
Account by (ii) a fraction, the numerator of which is one and the
denominator of which is the number of installments in which
distributions remain to be made (including the current
distribution). The amount of any stock distribution to be made
in installments with respect to the Cash Account shall be
determined by dividing the amount of cash attributable to such
installment (determined as hereinafter provided) by the closing
price of the Common Stock on each Accounting Date immediately
prior to the date on which such installment is to be paid. The
amount of cash attributable to an installment shall be determined
by multiplying (i) the current cash balance in such Cash Account
by (ii) a fraction, the numerator of which is one and the
denominator of which is the number of installments in which
distributions remain to be made (including the current
distribution).
6. PAYMENT COMMENCEMENT DATE
Payments of amounts deferred pursuant to a valid Election shall
commence after a Director's Termination (i) with respect to a
lump sum, on the January 2 of the year selected by a Director in
his or her Election, (ii) with respect to annual installments, on
the January 2 of the first year of deferred payment selected by a
Director in his or her Election, and (iii) with respect to
quarterly installments, on the first business day of the first
calendar quarter of deferred payment selected by a Director in
his or her Election. If a Director dies prior to the first
deferred payment specified in an Election, payments shall
commence to the Employee's Beneficiary on the first payment date
so specified.
7. CHANGE IN CONTROL
Notwithstanding any provision of this Plan to the contrary, in
the event of a "Change in Control" (as defined in Section 2(g) of
Article I), each Director in the Plan shall receive an automatic
lump sum cash distribution of all amounts accrued in the
Director's Cash and/or Stock Account(s) (including interest at
the Prime Rate of Interest through the business day immediately
preceding the date of distribution) not later than fifteen (15)
days after the date of the "Change in Control." For this
purpose, the balance in the Stock Account shall be determined by
multiplying the number of Stock Units by the higher of (a) the
highest closing price of a share of Common Stock during the
period commencing 30 days prior to such Change in Control or (b)
if the Change in Control of the Company occurs as a result of a
tender or exchange offer or consummation of a corporate
transaction, then the highest price paid per share of Common
Stock pursuant thereto. Any consideration other than cash
forming a part or all of the consideration for Common Stock to be
paid pursuant to the applicable transaction shall be valued at
the valuation price thereon determined by the Board.
In addition, the Company shall reimburse a Director for the legal
fees and expenses incurred if the Director is required to seek to
obtain or enforce any right to distribution. In the event that
it is determined that such Director is properly entitled to a
cash distribution hereunder, such Director shall also be entitled
to interest thereon at the Prime Rate of Interest from the date
such distribution should have been made to and including the date
it is made. Notwithstanding any provision of this Plan to the
contrary, Article I, Section 2(g) and Section 7 of this Article
may not be amended after a "Change in Control" occurs without the
written consent of a majority in number of Directors.
ARTICLE IV. OPTIONS
1. OPTION GRANT
On the first business day following the Company's Annual Meeting
of Shareholders in 1994 and each year thereafter until 2004, or,
if no such meeting is held, on January 31 or the first business
day thereafter, and each year thereafter (such day hereinafter
referred to as the "Effective Date"), each person who is a
Director of the Company on the Effective Date shall be
automatically granted an Option to purchase 1,000 shares of
Common Stock if, but only if, the return on average common
stockholders' equity of the Company for the immediately preceding
fiscal year as set forth in the Company's Annual Report to
Shareholders is equal to or greater than 10%.
2. OPTION TERMS
Options granted under the Plan shall be subject to the following
terms and conditions:
(a) Option Designation and Agreement. Any Option granted under
the Plan shall be granted as a Nonqualified Stock Option. Each
Option shall be evidenced by an Agreement between the recipient
and the Company containing the terms and conditions of the
Option.
(b) Option Price. The Exercise Price of Common Stock issued
pursuant to each Option shall be equal to the Fair Market Value
of the Common Stock on the Effective Date.
(c) Term of Option. No Option shall be exercisable more than
ten years after the date the Option is granted.
(d) Vesting. Options granted under the Plan shall vest six
months after the date of grant.
(e) Exercise. Options, to the extent they are vested, may be
exercised in whole or in part at any time during the option
period; provided, however, that an Option may not be exercised at
any time for fewer than 50 shares (or the total remaining shares
covered by the Option if fewer than 50 shares) during the term of
the Option. The specified number of shares will be issued upon
receipt by the Company of (i) notice from the optionee of
exercise of an Option, and (ii) payment to the Company (as
provided in (f) below), of the Exercise Price for the number of
shares with respect to which the Option is exercised. Each such
notice and payment shall be delivered or mailed by postpaid mail,
addressed to the Treasurer of the Company at Ashland Oil, Inc.,
1000 Ashland Drive, Russell, Kentucky, 41169, or such other place
as the Company may designate from time to time.
(f) Payment for Shares. The Exercise Price for the Common Stock
shall be paid in full when the Option is exercised. The Exercise
Price may be paid in whole or in part (i) in cash, (ii) in whole
shares of Common Stock owned by the Director six months or longer
and evidenced by negotiable certificates, valued at their Fair
Market Value on the date of exercise, or (iii) by a combination
of such methods of payment. In addition, a Director may exercise
the Option by effecting a "cashless exercise" of the Option; that
is providing assurance from a broker registered under the
Exchange Act, of the delivery of the proceeds of an imminent sale
of the stock to be issued pursuant to the exercise of such
Option, such sale to be made at the direction of the Director.
(g) Termination . If a Director's service on the Board
terminates by reason of (i) normal retirement from the Board at
age 70, (ii) the death or total and permanent disability within
the meaning of Section 22 (e) (3) of the Code of such Director,
(iii) a Change of Control of the Company, or (iv) voluntary early
retirement to take a position in governmental service, any Option
held by such Director may thereafter be exercised by the
Director, or in the event of death by his or her Beneficiary, to
the extent it was vested and exercisable at the time of
termination (i) for a period equal to the number of years of
completed Board service as of the date of termination of the
Director on whose behalf the Option is exercised, or (ii) until
the expiration of the stated term of such Option, whichever
period is the shorter. In the event of termination for any
reason other than those set forth above, any Option held by such
Director may thereafter be exercised by the Director to the
extent it was vested and exercisable at the time of termination
(i) for a period of one year from the date of such termination or
(ii) until the expiration of the stated term of such Option,
whichever period is the shorter.
(h) Term. No Option shall be granted pursuant to the Plan on or
after the tenth anniversary of the date of shareholder approval,
but Option awards granted prior to such tenth anniversary may
extend beyond that date until the expiration of their terms.
ARTICLE V. MISCELLANEOUS PROVISIONS
1. BENEFICIARY DESIGNATION
A Director may designate any person to whom payments are to be
made if the Director dies before receiving payment of all amounts
due hereunder. A designation of Beneficiary will be effective
only after the signed Election is filed with the Secretary of the
Company while the Director is alive and will cancel all
designations of a Beneficiary signed and filed earlier. If the
Director fails to designate a Beneficiary as provided above,
remaining unpaid amounts shall be paid in one lump sum to the
estate of such Director. If all Beneficiaries of the Director
die before the Director or before complete payment of all amounts
due hereunder, the remaining unpaid amounts shall be paid in one
lump sum to the estate of the last to die of such Beneficiaries.
2. INALIENABILITY OF BENEFITS
The interests of the Directors and their Beneficiaries under the
Plan may not in any way be voluntarily or involuntarily
transferred, alienated or assigned, nor be subject to
attachment, execution, garnishment or other such equitable or
legal process. Any Option shall be exercisable, during a
Director's lifetime, only by him or her or his or her Personal
Representative.
3. GOVERNING LAW
The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the Commonwealth of Kentucky.
4. AMENDMENTS
The Committee may amend, alter or terminate this Plan at any time
without the prior approval of the Directors; provided, however,
that the Committee may not, without approval by the shareholders:
(a) materially increase the number of securities that may
be issued under the Plan (except as provided in Article I,
Section 3),
(b) materially modify the requirements as to eligibility
for participation in the Plan,
(c) otherwise materially increase the benefits accruing to
participants under the Plan, or
(d) amend any provision relating to the amount, price,
timing or vesting of the Options, other than to comport with
changes in the Code or the rules and regulations promulgated
thereunder.
5. COMPLIANCE WITH RULE 16b-3
It is the intention of the Company that the Plan comply in all
respects with Rule 16b-3 promulgated under Section 16(b) of the
Exchange Act and that Plan participants remain disinterested
persons ("Disinterested Persons") for purposes of administering
other employee benefit plans of the Company and having such other
plans be exempt from Section 16(b) of the Exchange Act.
Therefore, if any Plan provision is found not to be in compliance
with Rule 16b-3 or if any Plan provision would disqualify Plan
participants from remaining Disinterested Persons, that provision
shall be deemed amended so that the Plan does so comply and the
Plan participants remain disinterested, to the extent permitted
by law and deemed advisable by the Committee, and in all events
the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3.
6. EFFECTIVE DATE
The Plan shall be submitted to the shareholders of the Company
for their approval and adoption on January 27, 1994, or such
other date fixed for the next meeting of shareholders or any
adjournment or postponement thereof. If approved and adopted by
the shareholders, the Plan will become effective as of November
4, 1993.
