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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
Commission file number 1-2918
ASHLAND INC.
(a Kentucky corporation)
I.R.S. No. 61-0122250
50 E. RiverCenter Boulevard
P. O. Box 391
Covington, Kentucky 41012-0391
Telephone Number: (859) 815-3333
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 July 31, 2002, there were 68,962,958 shares of Registrant's Common Stock
outstanding. One Right to purchase one-thousandth of a share of Series A
Participating Cumulative Preferred Stock accompanies each outstanding share
of Registrant's Common Stock.
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PART I - FINANCIAL INFORMATION
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
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Three months ended Nine months ended
June 30 June 30
----------------------- -----------------------
(In millions except per share data) 2002 2001 2002 2001
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REVENUES
Sales and operating revenues $ 2,047 $ 2,053 $ 5,457 $ 5,590
Equity income 80 314 141 537
Other income 12 20 50 51
---------- ---------- ---------- ----------
2,139 2,387 5,648 6,178
COSTS AND EXPENSES
Cost of sales and operating expenses 1,637 1,675 4,392 4,586
Selling, general and administrative expenses 311 283 861 814
Depreciation, depletion and amortization 54 60 161 178
---------- ---------- ---------- ----------
2,002 2,018 5,414 5,578
---------- ---------- ---------- ----------
OPERATING INCOME 137 369 234 600
Net interest and other financial costs (33) (42) (103) (132)
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 104 327 131 468
Income taxes (39) (130) (49) (187)
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 65 197 82 281
Results from discontinued operations (net of income taxes) - - - 25
---------- ---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 65 197 82 306
Cumulative effect of accounting changes (net of income taxes) - - (12) (4)
---------- ---------- ---------- ----------
NET INCOME $ 65 $ 197 $ 70 $ 302
========== ========== ========== ==========
BASIC EARNINGS PER SHARE - Note A
Income from continuing operations $ .94 $ 2.82 $ 1.18 $ 4.04
Results from discontinued operations - - - .35
Cumulative effect of accounting changes - - (.16) (.06)
---------- ---------- ---------- ----------
Net income $ .94 $ 2.82 $ 1.02 $ 4.33
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE - Note A
Income from continuing operations $ .93 $ 2.79 $ 1.16 $ 3.99
Results from discontinued operations - - - .35
Cumulative effect of accounting changes - - (.16) (.06)
---------- ---------- ---------- ----------
Net income $ .93 $ 2.79 $ 1.00 $ 4.28
========== ========== ========== ==========
DIVIDENDS PAID PER COMMON SHARE $ .275 $ .275 $ .825 $ .825
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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June 30 September 30 June 30
(In millions) 2002 2001 2001
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ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 101 $ 236 $ 70
Accounts receivable 1,126 1,219 1,190
Allowance for doubtful accounts (37) (34) (29)
Inventories - Note A 493 495 507
Deferred income taxes 123 126 124
Other current assets 129 171 176
--------- ---------- ---------
1,935 2,213 2,038
INVESTMENTS AND OTHER ASSETS
Investment in Marathon Ashland Petroleum LLC (MAP) 2,406 2,387 2,377
Goodwill 518 528 547
Other noncurrent assets 392 377 406
--------- ---------- ---------
3,316 3,292 3,330
PROPERTY, PLANT AND EQUIPMENT
Cost 3,101 3,030 2,984
Accumulated depreciation, depletion and amortization (1,669) (1,590) (1,559)
--------- ---------- ---------
1,432 1,440 1,425
--------- ---------- ---------
$ 6,683 $ 6,945 $ 6,793
========= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Debt due within one year $ 302 $ 85 $ 115
Trade and other payables 1,203 1,392 1,282
Income taxes 54 20 18
--------- ---------- ---------
1,559 1,497 1,415
NONCURRENT LIABILITIES
Long-term debt (less current portion) 1,600 1,786 1,881
Employee benefit obligations 400 412 346
Deferred income taxes 272 440 377
Reserves of captive insurance companies 182 173 184
Other long-term liabilities and deferred credits 408 411 404
Commitments and contingencies - Note D
--------- ---------- ---------
2,862 3,222 3,192
COMMON STOCKHOLDERS' EQUITY 2,262 2,226 2,186
--------- ---------- ---------
$ 6,683 $ 6,945 $ 6,793
========= ========== =========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS' EQUITY
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Accumulated
other
Common Paid-in Retained comprehensive
(In millions) stock capital earnings loss Total
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BALANCE AT OCTOBER 1, 2000 $ 70 $ 388 $ 1,579 $ (72) $1,965
Total comprehensive income (1) 302 (23) 279
Cash dividends (57) (57)
Issued common stock under
stock incentive plans 17 17
Repurchase of common stock (1) (17) (18)
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BALANCE AT JUNE 30, 2001 $ 69 $ 388 $ 1,824 $ (95) $2,186
======== ========= ========= ============= =======
BALANCE AT OCTOBER 1, 2001 $ 69 $ 363 $ 1,920 $ (126) $2,226
Total comprehensive income (1) 70 18 88
Cash dividends (57) (57)
Issued common stock under
stock incentive plans 16 16
Repurchase of common stock (11) (11)
-------- --------- --------- ------------- -------
BALANCE AT JUNE 30, 2002 $ 69 $ 368 $ 1,933 $ (108) $2,262
======== ========= ========= ============= =======
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(1) Reconciliations of net income to total comprehensive income follow.
Three months ended Nine months ended
June 30 June 30
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(In millions) 2002 2001 2002 2001
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Net income $ 65 $ 197 $ 70 $ 302
Unrealized translation adjustments 26 (7) 17 (26)
Related tax benefit (expense) (2) - 1 3
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Total comprehensive income $ 89 $ 190 $ 88 $ 279
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At June 30, 2002, the accumulated other comprehensive loss of $108
million (after tax) was comprised of net unrealized translation losses
of $65 million and a minimum pension liability of $43 million.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
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Nine months ended
June 30
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(In millions) 2002 2001
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CASH FLOWS FROM OPERATIONS
Income from continuing operations $ 82 $ 281
Expense (income) not affecting cash
Depreciation, depletion and amortization 161 178
Deferred income taxes (102) 106
Equity income from affiliates (141) (537)
Distributions from equity affiliates 121 454
Change in operating assets and liabilities (1) (100) (50)
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21 432
CASH FLOWS FROM FINANCING
Proceeds from issuance of long-term debt - 52
Proceeds from issuance of common stock 11 11
Repayment of long-term debt (58) (90)
Repurchase of common stock (11) (18)
Increase (decrease) in short-term debt 85 (190)
Dividends paid (57) (57)
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(30) (292)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment (138) (144)
Purchase of operations - net of cash acquired (12) (82)
Proceeds from sale of operations - 9
Other - net 2 (6)
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(148) (223)
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CASH USED BY CONTINUING OPERATIONS (157) (83)
Cash provided by discontinued operations - Note C 22 86
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (135) 3
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 236 67
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CASH AND CASH EQUIVALENTS - END OF PERIOD $ 101 $ 70
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(1) Excludes changes resulting from operations acquired or sold.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE A - SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL REPORTING
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted
in the United States for interim financial reporting and Securities and
Exchange Commission regulations. Although such statements 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, 2001. Results
of operations for the periods ended June 30, 2002, are not necessarily
indicative of results to be expected for the year ending September 30,
2002.
INVENTORIES
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June 30 September 30 June 30
(In millions) 2002 2001 2001
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Chemicals and plastics $ 361 $ 374 $ 369
Construction materials 82 74 81
Petroleum products 55 54 60
Other products 53 57 64
Supplies 6 6 6
Excess of replacement costs over LIFO carrying values (64) (70) (73)
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$ 493 $ 495 $ 507
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EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (EPS) from continuing operations.
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Three months ended Nine months ended
June 30 June 30
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(In millions except per share data) 2002 2001 2002 2001
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NUMERATOR
Numerator for basic and diluted EPS - Income
from continuing operations $ 65 $ 197 $ 82 $ 281
========== ========== =========== ===========
DENOMINATOR
Denominator for basic EPS - Weighted average
common shares outstanding 69 70 69 70
Common shares issuable upon exercise of stock options 1 1 1 -
---------- ---------- ----------- -----------
Denominator for diluted EPS - Adjusted weighted
average shares and assumed conversions 70 71 70 70
========== ========== =========== ===========
BASIC EPS FROM CONTINUING OPERATIONS $ .94 $ 2.82 $ 1.18 $ 4.04
DILUTED EPS FROM CONTINUING OPERATIONS $ .93 $ 2.79 $ 1.16 $ 3.99
6
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE A - SIGNIFICANT ACCOUNTING POLICIES (continued)
ACCOUNTING CHANGE - FAS 133
In June 1998, the Financial Accounting Standards Board issued Statement No.
133 (FAS 133), "Accounting for Derivative Instruments and Hedging
Activities." FAS 133 was amended by two other statements and was required
to be adopted in years beginning after June 15, 2000. Because of Ashland's
minimal use of derivatives, FAS 133 did not have a significant effect on
Ashland's financial position or results of operations when it was adopted
on October 1, 2000. The adoption of FAS 133 by Marathon Ashland Petroleum
LLC (MAP) on January 1, 2001, resulted in a $20 million pretax loss from
the cumulative effect of this accounting change. Ashland's share of the
pretax loss amounted to $7 million which, net of income tax benefits of $3
million, resulted in a loss of $4 million from the cumulative effect of
this accounting change.
ACCOUNTING CHANGE - FAS 142
In June 2001, the Financial Accounting Standards Board issued Statement No.
142 (FAS 142), "Goodwill and Other Intangible Assets." Under FAS 142,
goodwill and intangible assets with indefinite lives will no longer be
amortized but will be subject to annual impairment tests. Other intangible
assets will continue to be amortized over their useful lives. As permitted,
Ashland adopted the statement as of October 1, 2001, the beginning of its
fiscal year.
All of Ashland's recorded intangible assets are subject to amortization.
These recorded intangible assets (included in other noncurrent assets) and
the related amortization expense are not material to Ashland's consolidated
financial position or results of operations, respectively.
Under FAS 142, a company is required to perform an initial impairment test
of goodwill as of the date it adopts the Statement. The first step of that
test compares the fair value of a reporting unit with its carrying amount
to identify potential impairment. If the carrying value of a reporting unit
exceeds its fair value, the second step of the test is then performed to
measure the amount of any impairment. In the March 2002 quarter, Ashland
completed the first step of its initial impairment test of goodwill as of
October 1, 2001. As a result of that process, no potential impairments were
identified, except with respect to goodwill of $14 million recognized by
Ashland Distribution. The second step of the test related to the goodwill
of Ashland Distribution was completed in the June 2002 quarter. The test
indicated that the goodwill of Ashland Distribution was fully impaired and
an impairment loss of $14 million ($12 million net of income taxes) was
recorded as a cumulative effect of accounting change as of the beginning of
fiscal 2002.
Following is a progression of goodwill by segment for the nine months ended
June 30, 2002.
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Ashland
Ashland Specialty
(In millions) APAC Distribution Chemical Valvoline Total
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Balance at October 1, 2001 $ 419 $ 14 $ 92 $ 3 $ 528
Goodwill acquired - - 1 2 3
Impairment losses - (14) - - (14)
Currency translation adjustments - - 1 - 1
--------- --------------- ------------ ------------ ----------
Balance at June 30, 2002 $ 419 $ - $ 94 $ 5 $ 518
========= =============== ============ ============ ==========
7
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE A - SIGNIFICANT ACCOUNTING POLICIES (continued)
The nonamortization of goodwill has increased Ashland's net income and
earnings per share. Following are pro forma results assuming goodwill had
not been amortized prior to October 1, 2001.
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Three months ended Nine months ended
June 30 June 30
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(In millions except per share data) 2002 2001 2002 2001
- -----------------------------------------------------------------------------------------------------------------------
Reported income before cumulative effect
of accounting changes $ 65 $ 197 $ 82 $ 306
Add back: Goodwill amortization - 9 - 26
----------- ----------- ------------ ------------
Adjusted income before cumulative effect
of accounting changes $ 65 $ 206 $ 82 $ 332
=========== =========== ============ ============
Basic EPS before cumulative effect
of accounting changes - as reported $ .94 $ 2.82 $ 1.18 $ 4.39
Add back: Goodwill amortization - .13 - .38
----------- ----------- ------------ ------------
Basic EPS before cumulative effect
of accounting changes - adjusted $ .94 $ 2.95 $ 1.18 $ 4.77
=========== =========== ============ ============
Diluted EPS before cumulative effect
of accounting changes - as reported $ .93 $ 2.79 $ 1.16 $ 4.34
Add back: Goodwill amortization - .13 - .38
----------- ----------- ------------ ------------
Diluted EPS before cumulative effect
of accounting changes - adjusted $ .93 $ 2.92 $ 1.16 $ 4.72
=========== =========== ============ ============
NOTE B - UNCONSOLIDATED AFFILIATES
Ashland is required by Rule 3-09 of Regulation S-X to file separate
financial statements for its significant unconsolidated affiliate, Marathon
Ashland Petroleum LLC (MAP). Financial statements for MAP for the year
ended December 31, 2001, were filed on a Form 10-K/A on March 14, 2002.
Unaudited income statement information for MAP is shown below.
MAP is organized as a limited liability company that has elected to be
taxed as a partnership. Therefore, each parent is responsible for income
taxes applicable to its share of MAP's taxable income. The net income
reflected below for MAP does not include any provision for income taxes
that will be incurred by its parents.
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Three months ended Nine months ended
June 30 June 30
---------------------------- -------------------------
(In millions) 2002 2001 2002 2001
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Sales and operating revenues $ 6,775 $ 7,542 $ 17,823 $ 21,653
Income from operations 217 846 398 1,457
Income before cumulative effect of accounting change 214 843 391 1,456
Net income 214 843 391 1,436
Ashland's equity income 78 313 137 533
8
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE C - DISCONTINUED OPERATIONS
In March 2000, Ashland distributed 17.4 million shares of its Arch Coal
Common Stock to Ashland's shareholders. Ashland sold its remaining 4.7
million Arch Coal shares in February 2001 for $86 million (after
underwriting commissions). Such sale resulted in a pretax gain on disposal
of discontinued operations of $49 million ($33 million after provisions for
current and deferred income taxes). In the December 2001 quarter, Ashland
received $22 million in current tax benefits from capital loss carrybacks
generated by the sale, which are included in "Cash provided by discontinued
operations" on the Statements of Consolidated Cash Flows. Results for the
quarter ended March 31, 2001, also included accruals of $13 million ($8
million after income taxes) for estimated costs associated with other
operations previously discontinued.
NOTE D - LITIGATION, CLAIMS AND CONTINGENCIES
ENVIRONMENTAL PROCEEDINGS
Ashland is subject to various federal, state and local environmental laws
and regulations that require environmental assessment or remediation
efforts (collectively environmental remediation) at multiple locations. At
June 30, 2002, such locations included nearly 100 waste treatment or
disposal sites where Ashland has been identified as a potentially
responsible party under Superfund or similar state laws, approximately 130
current and former operating facilities (including certain operating
facilities conveyed to MAP) and about 1,200 service station properties.
Ashland's reserves for environmental remediation amounted to $164 million
at June 30, 2002. Such amount reflects Ashland's estimate of the most
likely costs that will be incurred over an extended period to remediate
identified conditions for which the costs are reasonably estimable, without
regard to any third-party recoveries.
Environmental remediation reserves are subject to numerous inherent
uncertainties that affect Ashland's ability to estimate its share of the
ultimate costs of the required remediation efforts. Such uncertainties
involve the nature and extent of contamination at each site, the extent of
required cleanup efforts under existing environmental regulations, widely
varying costs of alternate cleanup methods, changes in environmental
regulations, the potential effect of continuing improvements in remediation
technology, and the number and financial strength of other potentially
responsible parties at multiparty sites. Reserves are regularly adjusted as
environmental remediation continues.
None of the remediation locations is individually material to Ashland as
its largest reserve for any site is under $10 million. As a result,
Ashland's exposure to adverse developments with respect to any individual
site is not expected to be material, and these sites are in various stages
of the ongoing environmental remediation process.
ASBESTOS-RELATED LITIGATION
Ashland is subject to liabilities related to a significant number of claims
alleging personal injury resulting from exposure to asbestos, primarily as
a result of indemnification obligations relating to the 1990 sale of Riley
Stoker Corporation, a former subsidiary. This former subsidiary had
manufactured boilers using components that contained asbestos.
9
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE D - LITIGATION, CLAIMS AND CONTINGENCIES (continued)
ASBESTOS-RELATED LITIGATION (continued)
A summary of claims activity during the nine months ended June 30, 2002,
and each of the fiscal years ended September 30, 2001, 2000, and 1999 is as
follows:
Nine months
ended Years ended September 30
------------- ------------------------------------
(In thousands) June 30,2002 2001 2000 1999
------------- --------- --------- ---------
Open claims - beginning
of period 167 118 93 78
New claims 34 52 37 24
Claims settled or dismissed (47) (3) (12) (9)
------------- -------- --------- ---------
Open claims - end of period 154 167 118 93
============= ======== ========= =========
Prior to insurance recoveries, the amounts spent on litigation defense and
claim settlement totaled $34 million during the nine months ended June 30,
2002, and $15 million, $11 million, and $11 million during the fiscal years
ended September 30, 2001, 2000, and 1999, respectively. Ashland expects to
be reimbursed by insurance carriers for most of the litigation defense and
claim settlement costs that have been or will be incurred for open claims.
During the nine months ended June 30, 2002, Ashland recognized expense of
$5 million related to asbestos claims. Ashland has coverage-in-place
agreements with respect to the asbestos-related claims involving the former
subsidiary with most of the insurance carriers that Ashland has identified
as providing coverage, and pursuant to these agreements Ashland has
received substantial payments to date. At June 30, 2002, Ashland has
reserves of $28 million for asbestos liabilities that it does not expect to
recover from its insurance carriers on open claims.
GENERAL
In addition to the matters described above, there are pending or threatened
against Ashland and its current and former subsidiaries various claims,
lawsuits and administrative proceedings. Such actions are with respect to
commercial matters, product liability, toxic tort liability, and other
environmental matters, which seek remedies or damages some of which are for
substantial amounts. While these actions are being contested, their outcome
is not predictable with assurance.
The uncertainties of asbestos claim litigation make it difficult to
accurately predict the results of the ultimate resolution of asbestos
claims. However, considering the foregoing and amounts already provided
for, and given our historical litigation experience on resolved asbestos
claims, the substantial amount of insurance coverage that Ashland has
available from its insurance carriers and expected contributions from other
responsible parties, Ashland does not believe that any liability resulting
from environmental remediation, open asbestos-related claims or other legal
proceedings will have a material adverse effect on its consolidated
financial position, cash flows or liquidity.
10
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
INFORMATION BY INDUSTRY SEGMENT
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Three months ended Nine months ended
June 30 June 30
----------------------------- ----------------------------
(In millions) 2002 2001 2002 2001
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REVENUES
Sales and operating revenues
APAC $ 756 $ 745 $ 1,861 $ 1,750
Ashland Distribution 670 737 1,875 2,194
Ashland Specialty Chemical 340 318 952 933
Valvoline 305 276 833 784
Intersegment sales
Ashland Distribution (6) (7) (15) (21)
Ashland Specialty Chemical (18) (16) (48) (49)
Valvoline - - (1) (1)
------------ ------------ ------------ -----------
2,047 2,053 5,457 5,590
Equity income
Ashland Specialty Chemical 1 1 3 3
Valvoline 1 - 1 1
Refining and Marketing 78 313 137 533
------------ ------------ ------------ -----------
80 314 141 537
Other income
APAC 2 7 8 12
Ashland Distribution 2 1 14 5
Ashland Specialty Chemical 5 5 17 20
Valvoline 2 1 4 4
Refining and Marketing - 5 2 5
Corporate 1 1 5 5
------------ ------------ ------------ -----------
12 20 50 51
------------ ------------ ------------ -----------
$ 2,139 $ 2,387 $ 5,648 $ 6,178
============ ============ ============ ===========
OPERATING INCOME
APAC $ 42 $ 37 $ 64 $ 12
Ashland Distribution 3 13 8 37
Ashland Specialty Chemical 25 19 59 55
Valvoline 25 22 53 51
Refining and Marketing (1) 66 302 111 506
Corporate (24) (24) (61) (61)
------------ ------------ ------------ -----------
$ 137 $ 369 $ 234 $ 600
============ ============ ============ ===========
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(1) Includes Ashland's equity income from MAP, amortization of a portion of
Ashland's excess investment in MAP, and other activities associated with
refining and marketing.
11
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
INFORMATION BY INDUSTRY SEGMENT
- ------------------------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
June 30 June 30
---------------------------- ----------------------------
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING INFORMATION
APAC
Construction backlog at June 30 (millions) (1) $ 1,797 $ 1,746
Hot-mix asphalt production (million tons) 11.4 11.1 25.3 23.7
Aggregate production (million tons) 8.5 8.1 22.2 19.5
Ready-mix concrete production (thousand cubic yards) 565 607 1,537 1,590
Ashland Distribution (2)
Sales per shipping day (millions) $ 10.5 $ 11.0 $ 10.0 $ 11.4
Gross profit as a percent of sales 15.8% 15.5% 16.0% 15.9%
Ashland Specialty Chemical (2)
Sales per shipping day (millions) $ 5.3 $ 5.1 $ 5.1 $ 5.0
Gross profit as a percent of sales 37.1% 34.0% 36.0% 34.0%
Valvoline lubricant sales (million gallons) 52.5 44.6 142.0 128.8
Refining and Marketing (3)
Crude oil refined (thousand barrels per day) 973 958 930 895
Refined products sold (thousand barrels per day) (4) 1,351 1,303 1,299 1,288
Refining and wholesale marketing margin (per barrel) (5) $ 2.18 $ 7.72 $ 1.89 $ 5.05
Speedway SuperAmerica (SSA) (6)
Retail outlets at June 30 2,081 2,177
Gasoline and distillate sales (million gallons) 911 893 2,679 2,671
Gross margin - gasoline and distillates (per gallon) $ .1116 $ .1280 $ .1032 $ .1179
Merchandise sales (millions) $ 612 $ 574 $ 1,736 $ 1,580
Merchandise margin (as a percent of sales) 25.5% 23.7% 24.5% 23.6%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Includes APAC's proportionate share of the backlog of
unconsolidated joint ventures.
(2) Sales are defined as sales and operating revenues. Gross profit is
defined as sales and operating revenues, less cost of sales and
operating expenses, less depreciation and amortization relative to
manufacturing assets.
(3) Amounts represent 100 percent of MAP's operations, in which
Ashland owns a 38 percent interest.
(4) Total average daily volume of all refined product sales to MAP's
wholesale, branded and retail (SSA) customers.
(5) Sales revenue less cost of refinery inputs, purchased products and
manufacturing expenses, including depreciation.
(6) Periods prior to September 1, 2001, have been restated to exclude
amounts related to the travel centers contributed to Pilot Travel
Centers LLC.
12
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
CURRENT QUARTER - For the quarter ended June 30, 2002, Ashland recorded net
income of $65 million, compared to $197 million for the quarter ended June
30, 2001. The most significant factor affecting the comparison was a sharp
decline in operating income from refining and marketing compared to the
record level of 2001. However, operating income from Ashland's wholly owned
businesses was up slightly despite challenging conditions in many of our
markets. APAC, Ashland Specialty Chemical and Valvoline all showed
improvements, while Ashland Distribution continued to grapple with a
difficult business climate.
YEAR-TO-DATE - For the nine months ended June 30, 2002, Ashland recorded
net income of $70 million, compared to $302 million for the nine months
ended June 30, 2001. Both periods included the cumulative effect of
accounting changes and the 2001 period included results from discontinued
operations as described in Notes A and C to the Condensed Consolidated
Financial Statements. Income from continuing operations amounted to $82
million in the 2002 period, compared to $281 million in the 2001 period.
Operating income declined $366 million from the record level recorded in
the 2001 period, reflecting the same factors described in the current
quarter comparison.
As described in Note A to the Condensed Consolidated Financial Statements,
Ashland adopted FAS 142 effective October 1, 2001, which caused
amortization of goodwill to cease. Goodwill amortization reduced operating
income by $32 million and net income by $26 million for the nine months
ended June 30, 2001. The reductions in operating income by segment were $19
million for APAC, $1 million for Ashland Distribution, $4 million for
Ashland Specialty Chemical, $1 million for Valvoline and $7 million for
Refining and Marketing.
APAC
CURRENT QUARTER - APAC's construction operations reported operating income
of $42 million for the June 2002 quarter, compared to $37 million for the
June 2001 quarter, which included a charge of $3 million to correct
improper recognition of construction contract earnings at APAC's division
in Manassas, Virginia. The improvement reflects higher earnings on
construction jobs and increased profitability in APAC's asphalt plants. Net
construction job revenue (total revenue less subcontract costs) increased
3% from the prior year period, while job margins averaged 6.6% in the June
2002 quarter compared to 5.2% in the 2001 period. Production of hot-mix
asphalt increased 3%, while lower costs for production labor, fuel and
power more than offset a slight increase in liquid asphalt costs.
Nonamortization of goodwill increased APAC's operating income by $6
million, compared to the June 2001 quarter, but the benefit was more than
offset by $7 million in expenses related to APAC's business process
redesign initiative (Project PASS). APAC's construction backlog increased
slightly to a June 30 record of $1.8 billion.
YEAR-TO-DATE - For the nine months ended June 30, 2002, APAC reported
operating income of $64 million, compared to $12 million for the same
period of 2001, which included $18 million in charges for the Manassas
division described above. The improved results reflect more favorable
weather conditions in the winter and spring periods compared to last year's
extremely cold, wet weather. Total profitability in APAC's asphalt plants
and construction jobs increased from last year's levels, reflecting higher
production volumes and lower costs for liquid asphalt, fuel and power. Net
construction job revenue increased 4%, hot-mix asphalt production was up 7%
and aggregate production increased 14%. Nonamortization of goodwill
increased operating income by $19 million compared to the prior year
period, while costs of Project PASS were $11 million in the current year
period.
13
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
ASHLAND DISTRIBUTION
CURRENT QUARTER - Ashland Distribution reported operating income of $3
million for the quarter ended June 30, 2002, compared to $13 million for
the quarter ended June 30, 2001. Sales revenues declined 9% reflecting
continued economic weakness and issues related to the ongoing
implementation of a new enterprise resource planning system. Of all of
Ashland's businesses, Ashland Distribution is the most sensitive to
industrial output, which remains soft in comparison to prior years.
However, on the positive side, monthly average sales per shipping day
increased steadily during the quarter, reflecting a division-wide
profitability enhancement program and vigorous efforts to improve service.
YEAR-TO-DATE - For the nine months ended June 30, 2002, Ashland
Distribution reported operating income of $8 million, compared to $37
million for the same period of 2001. Sales revenues declined 15% reflecting
the same factors described in the current quarter comparison. The 2002
period results include income of $7 million from the settlement of a
sorbate class action antitrust suit.
ASHLAND SPECIALTY CHEMICAL
CURRENT QUARTER - For the quarter ended June 30, 2002, Ashland Specialty
Chemical reported operating income of $25 million, compared to $19 million
for the June 2001 quarter. The 32% increase reflects improved results from
six of Ashland's seven specialty chemical businesses. The largest
improvement came in composite polymers, which continues to benefit from
last year's Neste acquisition. Foundry products, specialty polymers &
adhesives, and electronic chemicals also showed significant improvements.
Electronic chemicals continues to improve as the semiconductor industry
recovers from the worldwide downturn which began to adversely affect
results in last year's June quarter.
YEAR-TO-DATE - For the nine months ended June 30, 2002, Ashland Specialty
Chemical reported operating income of $59 million, compared to $55 million
for the first nine months of 2001. Again, six of the seven businesses are
ahead of last year's results, with electronic chemicals being the
exception. Composite polymers showed the largest improvement, followed by
petrochemicals, specialty polymers & adhesives, and foundry products.
VALVOLINE
CURRENT QUARTER - For the quarter ended June 30, 2002, Valvoline reported
operating income of $25 million, compared to $22 million for the June 2001
quarter. The 14% increase reflected healthy fundamentals in the core
lubricants business, where volumes were good and sales of premium products,
including MaxLife, were robust. Valvoline Instant Oil Change had a strong
quarter, and results from international operations improved. R-12 sales
were minimal during the quarter, reflecting reduced demand for this
automotive refrigerant. Earnings from the sale of antifreeze suffered due
to lower margins.
YEAR-TO-DATE - For the nine months ended June 30, 2002, Valvoline reported
operating income of $53 million, compared to $51 million for the same
period of 2001. The same factors described in the current quarter
comparison are responsible for the improvement in the year-to-date results.
Gross profit from sales of R-12 is down $12 million from last year. As a
result, Valvoline now expects R-12 gross profit to be in the range of $1
million for fiscal 2002, compared to roughly $14 million in each of the
last three years.
14
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
REFINING AND MARKETING
CURRENT QUARTER - Refining and Marketing, which consists primarily of
equity income from Ashland's 38% ownership interest in Marathon Ashland
Petroleum (MAP), reported operating income of $66 million for the quarter
ended June 30, 2002, compared to $302 million for the June 2001 quarter.
The $236 million decline reflects reduced refining margins compared to the
exceptionally high level in the June 2001 quarter, which produced Ashland's
best-ever quarter from Refining and Marketing. In this year's quarter,
margins were squeezed by soft industry demand, particularly for diesel
fuel, and high crude oil prices, especially for the type of heavier, sour
crude oils that make up approximately 60% of MAP's crude oil slate. As a
result, MAP's refining and wholesale marketing margin decreased $5.54 per
barrel, which was the primary factor in the $243 million decline in
Ashland's equity income from MAP's refining and wholesale marketing
operations.
YEAR-TO-DATE - Operating income from Refining and Marketing amounted to
$111 million for the nine months ended June 30, 2002, compared to the
record-level $506 million for the nine months ended June 30, 2001.
Ashland's equity income from MAP's refining and wholesale marketing
operations declined $408 million, reflecting a $3.16 per barrel reduction
in MAP's refining and wholesale marketing margin. Ashland's equity income
from MAP's retail operations, including Speedway SuperAmerica and MAP's 50%
interest in the Pilot Travel Center joint venture, increased $5 million
reflecting increased merchandise volumes and margins.
CORPORATE
Corporate expenses were essentially unchanged from last year for both the
quarter and year-to-date periods.
NET INTEREST AND OTHER FINANCIAL COSTS
For the quarter ended June 30, 2002, net interest and other financial costs
totaled $33 million, compared to $42 million for the June 2001 quarter. For
the year-to-date, net interest and other financial costs amounted to $103
million in the 2002 period, compared to $132 million in the 2001 period.
The decline reflects lower average debt levels and, to a lesser extent,
reduced interest rates on floating rate obligations.
DISCONTINUED OPERATIONS
As described in Note C to the Condensed Consolidated Financial Statements,
results for the March 2001 quarter included an after-tax gain of $33
million on the sale of Ashland's remaining shares in Arch Coal and an $8
million after-tax charge for estimated costs associated with other
operations previously discontinued.
CUMULATIVE EFFECT OF ACCOUNTING CHANGES
In the March 2001 quarter, Ashland recognized an after-tax loss of $4
million from MAP's adoption of FAS 133. In the December 2001 quarter,
Ashland recognized an after-tax loss of $12 million from its adoption of
FAS 142. See Note A to the Condensed Consolidated Financial Statements for
descriptions of these two accounting changes.
15
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
FINANCIAL POSITION
LIQUIDITY
Ashland's financial position has enabled it to obtain capital for its
financing needs and to maintain investment grade ratings on its senior debt
of Baa2 from Moody's and BBB from Standard & Poor's. Ashland has two
revolving credit agreements providing for up to $425 million in borrowings,
neither of which has been used. Under a shelf registration, at June 30,
2002, Ashland could also issue an additional $600 million in debt and
equity securities should future opportunities or needs arise. On August 1,
2002, Ashland issued $55 million in medium-term notes under this shelf
registration, thereby reducing the remaining capacity to $545 million.
Furthermore, Ashland has access to various uncommitted lines of credit and
commercial paper markets. While the revolving credit agreements contain a
covenant limiting new borrowings based on its stockholders' equity, Ashland
could have increased its borrowings (including any borrowings under these
agreements) by up to $1.5 billion at June 30, 2002. Additional permissible
borrowings are increased (decreased) by 150% of any increase (decrease) in
Ashland's stockholders' equity.
Cash flows from operations, a major source of Ashland's liquidity, amounted
to $21 million for the nine months ended June 30, 2002, compared to $432
million for the nine months ended June 30, 2001. The decrease principally
reflects decreased cash distributions from MAP ($119 million in 2002,
compared to $451 million in 2001). In addition, the 2002 period included
the negative effects of a $100 million increase in operating assets and
liabilities versus a $50 million increase in the 2001 period. Ashland's
capital requirements for net property additions and dividends exceeded cash
flows from operations by $177 million for the nine months ended June 30,
2002, and were funded with cash equivalents and short-term borrowings.
Earnings before interest, taxes, depreciation and amortization (EBITDA) is
a widely accepted financial indicator of a company's ability to incur and
service debt. Ashland's EBITDA, which represents operating income plus
depreciation, depletion and amortization (each excluding unusual items),
amounted to $395 million for the nine months ended June 30, 2002, compared
to $778 million for the nine months ended June 30, 2001. EBITDA should not
be considered in isolation or as an alternative to net income, operating
income, cash flows from operations, or a measure of a company's
profitability, liquidity or performance under generally accepted accounting
principles.
At June 30, 2002, working capital (excluding debt due within one year)
amounted to $678 million, compared to $801 million at September 30, 2001,
and $738 million at June 30, 2001. Ashland's working capital is affected by
its use of the LIFO method of inventory valuation. That method valued
inventories below their replacement costs by $64 million at June 30, 2002,
$70 million at September 30, 2001, and $73 million at June 30, 2001. Liquid
assets (cash, cash equivalents and accounts receivable) amounted to 76% of
current liabilities at June 30, 2002, compared to 95% at September 30,
2001, and 87% at June 30, 2001.
CAPITAL RESOURCES
For the nine months ended June 30, 2002, property additions amounted to
$138 million, compared to $144 million for the same period last year.
Property additions and cash dividends for the remainder of fiscal 2002 are
estimated at $97 million and $19 million. At June 30, 2002, Ashland had
remaining authority to purchase 3.6 million shares of its common stock in
the open market. The number of shares ultimately purchased and the prices
Ashland will pay for its stock are subject to periodic review by
management. Ashland anticipates meeting the majority of its remaining 2002
capital requirements for property additions,
16
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
CAPITAL RESOURCES (continued)
dividends and scheduled debt repayments of $27 million from internally
generated funds. However, external financing may be necessary to supplement
these needs or provide funds for acquisitions or purchases of common stock.
At June 30, 2002, Ashland's debt level amounted to $1.9 billion, compared
to $1.9 billion at September 30, 2001, and $2 billion at June 30, 2001.
Debt as a percent of capital employed amounted to 46% at June 30, 2002,
compared to 46% at September 30, 2001, and 48% at June 30, 2001. At June
30, 2002, Ashland's long-term debt included $141 million of floating-rate
obligations, and the interest rates on an additional $153 million of
fixed-rate, medium-term notes were effectively converted to floating rates
through interest rate swap agreements. In addition, Ashland's costs under
its sale of receivables program and various operating leases are based on
the floating-rate interest costs on $263 million of third-party debt
underlying those transactions. As a result, Ashland was exposed to
fluctuations in short-term interest rates on $557 million of debt
obligations at June 30, 2002.
ENVIRONMENTAL AND ASBESTOS-RELATED MATTERS
Federal, state and local laws and regulations relating to the protection of
the environment have resulted in higher operating costs and capital
investments by the industries in which Ashland operates. Because of the
continuing trends toward greater environmental awareness and ever
increasing regulations, Ashland believes that expenditures for
environmental compliance will continue to have a significant effect on its
businesses. Although it cannot accurately predict how such trends will
affect future operations and earnings, Ashland believes the nature and
significance of its ongoing compliance costs will be comparable to those of
its competitors. For information on certain specific environmental
proceedings and investigations, see the "Legal Proceedings" section of this
Form 10-Q. For information regarding environmental reserves, see Note D to
the Condensed Consolidated Financial Statements.
Environmental reserves are subject to numerous inherent uncertainties that
affect Ashland's ability to estimate its share of the ultimate costs of
required remediation efforts. Such uncertainties involve the nature and
extent of contamination at each site, the extent of required cleanup
efforts under existing environmental regulations, widely varying costs of
alternate cleanup methods, changes in environmental regulations, the
potential effect of continuing improvements in remediation technology, and
the number and financial strength of other potentially responsible parties
at multiparty sites. Reserves are regularly adjusted as environmental
remediation continues.
Ashland is subject to liabilities related to a significant number of claims
alleging personal injury resulting from exposure to asbestos, primarily as
a result of indemnification obligations relating to the 1990 sale of Riley
Stoker Corporation, a former subsidiary. This former subsidiary had
manufactured boilers using components that contained asbestos. See Note D
to the Condensed Consolidated Financial Statements for information about
asbestos reserves, the number of claims, and litigation defense and claim
settlement costs.
The uncertainties of asbestos claim litigation make it difficult to
accurately predict the results of the ultimate resolution of asbestos
claims. However, considering the foregoing and amounts already provided
for, and given our historical litigation experience on resolved asbestos
claims, the substantial amount of insurance coverage that Ashland has
available from its insurance carriers and expected contributions from other
responsible parties, Ashland does not believe that any liability resulting
from environmental
17
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
ENVIRONMENTAL AND ASBESTOS-RELATED MATTERS (continued)
remediation, open asbestos-related claims or other legal proceedings will
have a material adverse effect on its consolidated financial position, cash
flows or liquidity.
OUTLOOK
Looking ahead to the remainder of fiscal 2002, MAP is a solid performer in
excellent competitive position. Its results should improve as market
conditions strengthen, although results for the September 2002 quarter are
expected to be well below the record level achieved in fiscal 2001.
However, world crude oil markets remain extremely volatile, and refining
margins are subject to significant, unpredictable swings. While most of its
operations are performing well, Valvoline's operating income in fiscal 2002
should be slightly less than 2001 due to weak R-12 refrigerant sales.
Although operating income from APAC will likely be below the $120 million
to $140 million range projected earlier, results for the year are expected
to roughly double the severely depressed level of 2001, when APAC's
operating income amounted to $55 million. Improvements in Ashland's
chemical businesses, particularly in the distribution business, are tied to
economic recovery. Although 2002 earnings from Ashland Specialty Chemical
should be up substantially compared to last year, the decline in operating
income from Ashland Distribution will likely more than offset this gain.
CONVERSION TO THE EURO
Beginning January 1, 2002, certain member countries of the European
Economic and Monetary Union began conducting all non-cash transactions in
Euros and circulation of Euro notes and coins for cash transactions
commenced. National notes and coins were no longer acceptable as legal
tender generally after February 28, 2002. Ashland conducts business in most
of the participating countries and successfully converted to the Euro
without any material effect on its consolidated financial position, results
of operations, cash flows or liquidity.
FORWARD LOOKING STATEMENTS
Management's Discussion and Analysis (MD&A) 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, with respect to
various information in the Results of Operations, Capital Resources and
Outlook sections of this MD&A. Estimates as to operating performance and
earnings are based upon a number of assumptions, including those mentioned
in MD&A. Such estimates are also 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, and cost of raw materials. Although Ashland
believes its expectations are based on reasonable assumptions, it cannot
assure the expectations reflected in MD&A will be achieved. This
forward-looking information may prove to be inaccurate and actual results
may differ significantly from those anticipated if one or more of the
underlying assumptions or expectations proves to be inaccurate or is
unrealized, or if other unexpected conditions or events occur. Other
factors and risks affecting Ashland are contained in Risks and
Uncertainties in Note A to the Consolidated Financial Statements in
Ashland's 2001 Annual Report and in Ashland's Form 10-K, as amended for the
fiscal year ended September 30, 2001. Ashland undertakes no obligation to
subsequently update or revise these forward-looking statements.
18
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
ENVIRONMENTAL PROCEEDINGS - As of June 30, 2002, Ashland has been
identified as a "potentially responsible party" ("PRP") under Superfund or
similar state laws for potential joint and several liability for clean-up
costs in connection with alleged releases of hazardous substances
associated with 97 waste treatment or disposal sites. These sites are
currently subject to ongoing investigation and remedial activities,
overseen by the EPA or a state agency, in which Ashland is typically
participating as a member of a PRP group. Generally, the type of relief
sought includes remediation of contaminated soil and/or groundwater,
reimbursement for past costs of site clean-up and administrative oversight,
and/or long-term monitoring of environmental conditions at the sites. The
ultimate costs are not predictable with assurance. Based on its experience
with site remediation, 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 does not believe that any liability at these sites, either
individually or in the aggregate, will have a material adverse effect on
its consolidated financial position, cash flows or liquidity. For
additional information regarding environmental matters and reserves, see
"Management's Discussion and Analysis - Environmental Matters" and Note D
of Notes to Condensed Consolidated Financial Statements.
ASBESTOS-RELATED LITIGATION - Ashland is subject to liabilities
related to a significant number of claims alleging personal injury
resulting from exposure to asbestos, primarily as a result of
indemnification obligations relating to the 1990 sale of Riley Stoker
Corporation, a former subsidiary. This former subsidiary had manufactured
boilers using components that contained asbestos.
A summary of claims activity during the nine months ended June 30,
2002, and each of the fiscal years ended September 30, 2001, 2000, and 1999
is as follows:
Nine months
ended Years ended September 30
------------- --------------------------------
(In thousands) June 30, 2002 2001 2000 1999
------------- -------- -------- --------
Open claims -
beginning of period 167 118 93 78
New claims 34 52 37 24
Claims settled or dismissed (47) (3) (12) (9)
------------- -------- -------- --------
Open claims - end of period 154 167 118 93
============= ======== ======== ========
Prior to insurance recoveries, the amounts spent on litigation defense
and claim settlement totaled $34 million during the nine months ended June
30, 2002, and $15 million, $11 million, and $11 million during the fiscal
years ended September 30, 2001, 2000, and 1999, respectively. Ashland
expects to be reimbursed by insurance carriers for most of the litigation
defense and claim settlement costs that have been or will be incurred for
open claims. During the nine months ended June 30, 2002, Ashland recognized
expense of $5 million related to asbestos claims. Ashland has
coverage-in-place agreements with respect to the asbestos-related claims
involving the former subsidiary with most of the insurance carriers that
Ashland has identified as providing coverage, and pursuant to these
agreements Ashland has received substantial payments to date.
At June 30, 2002, Ashland has reserves of $28 million for asbestos
liabilities that it does not expect to recover from its insurance carriers
on open claims. The uncertainties of asbestos claim litigation make it
difficult to accurately predict the results of the ultimate resolution of
asbestos claims. However, considering the foregoing and given our
historical litigation experience on resolved asbestos claims and the
substantial amount of insurance coverage that Ashland has available from
its insurance carriers,
19
Ashland does not believe that its pending and reasonably anticipated
liabilities in connection with open asbestos-related claims will have a
material adverse effect on its consolidated financial position, cash flows
or liquidity.
OTHER PROCEEDINGS - In addition to the matters described above, there
are pending or threatened against Ashland and its current and former
subsidiaries various claims, lawsuits and administrative proceedings. Such
actions are with respect to commercial matters, product liability, toxic
tort liability, and other environmental matters, which seek remedies or
damages some of which are for substantial amounts. While these actions are
being contested, their outcome is not predictable with assurance. Ashland
does not believe that any liability resulting from these actions after
taking into consideration expected recoveries from insurers, contributions
by other responsible parties and amounts already provided for, will have a
material adverse effect on its consolidated financial position, cash flows
or liquidity.
ITEM 5. OTHER INFORMATION
On August 2, 2002, Ashland announced that Paul W. Chellgren, Chairman
and Chief Executive Officer, has elected to retire effective November 15,
2002. Mr. Chellgren and Ashland's Board of Directors mutually agreed that
he would retire because of a violation of a company human resources policy.
The policy was not related in any way to the financial affairs or
operations of Ashland. The Board felt it was in the best interest of
Ashland for Mr. Chellgren to retire in November to allow for a smooth and
orderly transition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i) Third Restated Articles of Incorporation of Ashland Inc.
12 Ashland Inc. Computation of Ratios of Earnings to Fixed
Charges and Earnings to Combined Fixed Charges
and Preferred Stock Dividends
99.1 Certificate of Paul W. Chellgren, Chief Executive Officer
of Ashland Inc.
99.2 Certificate of J. Marvin Quin, Chief Financial Officer
of Ashland Inc.
(b) Reports on Form 8-K
-------------------
A report on Form 8-K was filed on August 2, 2002 to report that Paul W.
Chellgren, Chief Executive Officer and Chairman of the Board of Ashland,
has elected to retire effective November 15, 2002.
20
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 Inc.
------------------------------
(Registrant)
Date: August 7, 2002 /s/ J. Marvin Quin
------------------------------
J. Marvin Quin
Senior Vice President and
Chief Financial Officer
(on behalf of the Registrant and
as principal financial officer)
EXHIBIT INDEX
Exhibit
No. Description
------ -----------------------------------------------------------------
3(i) Third Restated Articles of Incorporation of Ashland Inc.
12 Ashland Inc. Computation of Ratios of Earnings to Fixed Charges
and Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
99.1 Certificate of Paul W. Chellgren, Chief Executive Officer of
Ashland Inc.
99.2 Certificate of J. Marvin Quin, Chief Financial Officer of
Ashland Inc.
(ASHLAND LOGO)
ASHLAND INC.
THIRD RESTATED ARTICLES
OF INCORPORATION
As Effective July 17, 2002
TABLE OF CONTENTS
RECORDING DATA
THIRD RESTATED ARTICLES OF INCORPORATION
ASHLAND INC.
Date Filed in Date Recorded in
Office of Office of Number of Shares
Secretary of State County Court Authorized -
Document of Kentucky Clerk Explanation
- -------- ------------------- ---------------- ----------------
1.Third Restated July 17, 2002 Kenton Co., KY - 30,000,000 shares
Articles of July 18, 2002, Cumulative Preferred
Incorporation Arts.of Inc., Stock, including
Book C1125, 500,000 shares of
Page 234; Series A Participating
Cumulative Preferred
Stock;
300,000,000 shares
Common Stock, par
Value $1.00 per share
THIRD RESTATED ARTICLES OF INCORPORATION
OF
ASHLAND INC.
Pursuant to Section 271B.10-070 of the Kentucky Business Corporation
Act, Ashland Inc., pursuant to a resolution duly adopted by its Board of
Directors, hereby adopts the following Third Restated Articles of
Incorporation (hereinafter called the "Articles of Incorporation"):
ARTICLE I
The name of the corporation is Ashland Inc. (hereinafter called the
"Company" or the "Corporation").
ARTICLE II
The purpose for which the Company is organized is the transaction of
any or all lawful businesses for which corporations may be organized under
the Kentucky Business Corporation Act, or any act amendatory thereof,
supplemental thereto or substituted therefor (hereinafter called the
"Act"), and to do all things necessary, convenient, proper or desirable in
connection with or incident to any of the Company's businesses.
ARTICLE III
A. The Company shall have all the powers conferred upon a corporation
organized under the Act and shall have all powers necessary, convenient or
desirable in order to fulfill and further the purpose of the Company.
B. The Company shall have the power to purchase shares of the stock of
the Company to the extent of unreserved and unrestricted capital and earned
surplus of the Company and to any greater extent permitted by the Act.
C. The Board of Directors of the Company may distribute to the
shareholders of the Company a portion of the Company's assets, in cash or
property, out of capital surplus of the Company and from any other source
permitted by the Act.
ARTICLE IV
A. The aggregate number of shares which the Company is authorized to
issue is 30,000,000 shares of Cumulative Preferred Stock (hereinafter
called the "Preferred Stock"), and 300,000,000 shares of Common Stock, par
value $1.00 per share (hereinafter called the "Common Stock").
B. Preferred Stock
(1) To the extent permitted by the Act, the Board of Directors is
authorized, by resolution, to cause the Preferred Stock to be divided into
and issued from time to time in one or more series and to fix and determine
the designation and number of shares, and the relative rights and
preferences of the shares, of each such series, and to change shares of one
series that have been redeemed or reacquired into shares of another series.
(2) All shares of Preferred Stock shall rank equally and be identical
in all respects except as to the relative rights and preferences of any
series fixed and determined by the Board of Directors, which may vary to
the extent permitted by the Act.
(3) The Preferred Stock shall be preferred over the Common Stock as to
payment of dividends. Before any dividends or distributions (other than
dividends or distributions payable in Common Stock) on the Common Stock
shall be declared and set apart for payment or paid, the holders of shares
of each series of Preferred Stock shall be entitled to receive dividends
(either in cash, shares of Common Stock or Preferred Stock, or otherwise)
when, as and if declared by the Board of Directors, at the rate and on the
date or dates fixed in the resolution adopted by the Board of Directors
establishing such series, and no more. With respect to each series of
Preferred Stock, the dividends on each share of such series shall be
cumulative from the date of issue of such share unless some other date is
fixed in the resolution adopted by the Board of Directors establishing such
series. Accruals of dividends shall not bear interest.
(4) The Preferred Stock shall be preferred over the Common Stock as to
assets so that the holders of each series of Preferred Stock shall be
entitled to be paid, upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company and before any distribution is
made to the holders of Common Stock, the amount fixed in the resolution
adopted by the Board of Directors establishing such series, but in such
case the holders of such series of Preferred Stock shall not be entitled to
any other or further payment. If upon any such liquidation, dissolution or
winding up of the Company its net assets shall be insufficient to permit
the payment in full of the respective amounts to which the holders of all
outstanding Preferred Stock are entitled, the entire remaining net assets
of the Company shall be distributed among the holders of each series of
Preferred Stock in amounts proportionate to the full amounts to which the
holders of each such series are respectively so entitled. For purposes of
this paragraph (4), the voluntary sale, lease, exchange or transfer of all
or substantially all of the Company's property or assets to, or its
consolidation or merger with, one or more corporations shall not be deemed
to be a voluntary or involuntary liquidation, dissolution or winding up of
the Company.
(5) All shares of any series of Preferred Stock shall be redeemable to
the extent permitted by the Act and fixed in the resolution adopted by the
Board of Directors establishing such series. All shares of any series of
Preferred Stock shall be convertible into shares of Common Stock or into
shares of any other series of Preferred Stock to the extent permitted by
the Act and fixed in the resolution adopted by the Board of Directors
establishing such series.
(6) Unless otherwise provided herein or by the Act, or unless
otherwise provided in the resolution adopted by the Board of Directors
establishing any series of Preferred Stock, the holders of shares of
Preferred Stock shall be entitled to one vote for each share of Preferred
Stock held by them on all matters properly presented to shareholders, the
holders of Common Stock and the holders of all series of Preferred Stock
voting together as one class.
(7) So long as any shares of Preferred Stock are outstanding, the
Company shall not:
(a) Redeem, purchase or otherwise acquire any shares of Common Stock
if at the time of making such redemption, purchase or acquisition, the
Company shall be in default with respect to any dividends accrued on, or
any obligation to retire, shares of Preferred Stock.
(b) Without the affirmative vote or consent of the holders of at least
662/3% of the number of shares of Preferred Stock at the time outstanding,
voting or consenting (as the case may be) separately as a class without
regard to series, given in person or by proxy, either in writing or by
resolution adopted at a meeting called for the purpose, (i) create any
class of stock ranking prior to the Preferred Stock as to dividends or upon
liquidation or increase the authorized number of shares of any such class
of stock or (ii) alter or change any of the provisions of these Articles of
Incorporation so as adversely to affect the relative rights and preferences
of the Preferred Stock or (iii) increase the authorized number of shares of
Preferred Stock.
(c) Without the affirmative vote or consent of the holders of at lease
662/3% of the number of shares of any series of Preferred Stock at the time
outstanding, voting or consenting (as the case may be) separately as a
series, given in person or by proxy, either in writing or by resolution
adopted at a meeting called for the purpose, alter or change any of the
provisions of these Articles of Incorporation so as adversely to affect the
relative rights and preferences of such series.
(8) Series A Participating Cumulative Preferred Stock
I. DESIGNATION AND NUMBER OF SHARES. This series of the Cumulative
Preferred Stock shall be designated as "Series A Participating Cumulative
Preferred Stock" (the "Series A Preferred Stock"). The number of shares
initially issuable as the Series A Preferred Stock shall be 500,000;
provided, however, that, if more than a total of 500,000 shares of Series A
Preferred Stock shall be issuable upon the exercise of Rights (the
"Rights") issued pursuant to the Rights Agreement dated as of May 16, 1996,
between the Corporation and Harris Trust and Savings Bank, as Rights Agent
(the "Rights Agreement"), the Board of Directors of the Corporation,
pursuant to Section 271B.10-060 of the Kentucky Business Corporation Act,
shall direct by resolution or resolutions that Articles of Amendment of the
Articles of Incorporation of the Corporation be properly executed and filed
with the Secretary of State of Kentucky providing for the total number of
shares issuable as Series A Preferred Stock to be increased (to the extent
that the Articles of Incorporation then permit) to the largest number of
whole shares (rounded up to the nearest whole number) issuable upon
exercise of such Rights.
II. DIVIDENDS OR DISTRIBUTIONS. (a) Subject to the prior and superior
rights of the holders of shares of any other series of Preferred Stock or
other class of capital stock of the Corporation ranking prior and superior
to the shares of Series A Preferred Stock with respect to dividends, the
holders of shares of the Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of the
assets of the Corporation legally available therefor, (i) quarterly
dividends payable in cash on the last day of each fiscal quarter in each
year, or such other dates as the Board of Directors of the Corporation
shall approve (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or a fraction of a share of Series
A Preferred Stock, in the amount of $.01 per whole share (rounded to the
nearest cent), less the amount of all cash dividends declared on the Series
A Preferred Stock pursuant to the following clause (ii) since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock (the total of
which shall not, in any event, be less than zero) and (ii) dividends
payable in cash on the payment date for each cash dividend declared on the
Common Stock in an amount per whole share (rounded to the nearest cent)
equal to the Formula Number (as hereinafter defined) then in effect times
the cash dividends then to be paid on each share of Common Stock. In
addition, if the Corporation shall pay any dividend or make any
distribution on the Common Stock payable in assets, securities or other
forms of non-cash consideration (other than dividends or distributions
solely in shares of Common Stock), then, in each such case, the Corporation
shall simultaneously pay or make on each outstanding whole share of Series
A Preferred Stock a dividend or distribution in like kind equal to the
Formula Number then in effect times such dividend or distribution on each
share of the Common Stock. As used herein, the "Formula Number" shall be
1,000; provided, however, that, if at any time after May 16, 1996, the
Corporation shall (x) declare or pay any dividend on the Common Stock
payable in shares of Common Stock or make any distribution on the Common
Stock in shares of Common Stock, (y) subdivide (by a stock split or
otherwise) the outstanding shares of Common Stock into a larger number of
shares of Common Stock or (z) combine (by a reverse stock split or
otherwise) the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then, in each such event, the Formula Number shall
be adjusted to a number determined by multiplying the Formula Number in
effect immediately prior to such event by a fraction, the numerator of
which is the number of shares of Common Stock that are outstanding
immediately after such event and the denominator of which is the number of
shares of
Common Stock that are outstanding immediately prior to such event (and
rounding the result to the nearest whole number); and provided further,
that, if at any time after May 16, 1996, the Corporation shall issue any
shares of its capital stock in a merger, share exchange, reclassification,
or change of the outstanding shares of Common Stock, then, in each such
event, the Formula Number shall be appropriately adjusted to reflect such
merger, share exchange, reclassification or change so that each share of
Preferred Stock continues to be the economic equivalent of a Formula Number
of shares of Common Stock prior to such merger, share exchange,
reclassification or change.
(b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in Section (2) (a) immediately prior
to or at the same time it declares a dividend or distribution on the Common
Stock (other than a dividend or distribution solely in shares of Common
Stock); provided, however, that, in the event no dividend or distribution
(other than a dividend or distribution in shares of Common Stock) shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $.01 per share on the Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date. The Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
dividend or distribution declared thereon, which record date shall be the
same as the record date for any corresponding dividend or distribution on
the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from and after the Quarterly Dividend
Payment Date next preceding the date of original issue of such shares of
Series A Preferred Stock; provided, however, that dividends on such shares
that are originally issued after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and on or prior to the next succeeding Quarterly
Dividend Payment Date shall begin to accrue and be cumulative from and
after such Quarterly Dividend Payment Date. Notwithstanding the foregoing,
dividends on shares of Series A Preferred Stock that are originally issued
prior to the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend on the
first Quarterly Dividend Payment Date shall be calculated as if cumulative
from and after the last day of the fiscal quarter next preceding the date
of original issuance of such shares. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding and entitled to receive
such dividends.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock,
unless, in each case, the dividend required by this Section (2) to be
declared on the Series A Preferred Stock shall have been declared and paid.
(e) The holders of the shares of Series A Preferred Stock shall not be
entitled to receive any dividends or other distributions, except as
provided herein.
III. VOTING RIGHTS. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share
of Series A Preferred Stock held of record on each matter on which holders
of the Common Stock or shareholders generally are entitled to vote,
multiplied by the maximum number of votes per share which any holder of the
Common Stock or shareholders generally then have with respect to such
matter (assuming any holding period or other requirement to vote a greater
number of shares is satisfied).
(b) Except as otherwise provided herein or by applicable law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock shall vote together as one voting group for the election of
directors of the Corporation and on all other matters submitted to a vote
of shareholders of the Corporation.
(c) If, at the time of any annual meeting of shareholders for the
election of directors, the equivalent of six quarterly dividends (whether
or not consecutive) payable on any share or shares of Series A Preferred
Stock are in default, the number of directors constituting the Board of
Directors of the Corporation shall be increased by two. In addition to
voting together with the holders of Common Stock for the election of other
directors of the Corporation, the holders of record of the Series A
Preferred Stock, voting separately as a voting group to the exclusion of
the holders of Common Stock, shall be entitled at said meeting of
shareholders (and at each subsequent annual meeting of shareholders),
unless all dividends in arrears have been paid or declared and set apart
for payment prior thereto, to vote for the election of two directors of the
Corporation, the holders of any Series A Preferred Stock being entitled to
cast a number of votes per share of Series A Preferred Stock equal to the
Formula Number. Until the default in payments of all dividends that
permitted the election of said directors shall cease to exist, any director
who shall have been so elected pursuant to the next preceding sentence may
be removed at any time, either with or without cause, only by the
affirmative vote of the holders of the shares of Series A Preferred Stock
at the time entitled to cast such number of votes as are required by law
for the election of any such director at a special meeting of such holders
called for that purpose, and any vacancy thereby created may be filled only
by the vote of such holders. If and when such default shall cease to exist,
the holders of the Series A Preferred Stock shall be divested of the
foregoing special voting rights, subject to revesting in the event of each
and every subsequent like default in payments of dividends. Upon the
termination of the foregoing special voting rights, the terms of office of
all persons who may have been elected directors pursuant to said special
voting rights shall forthwith terminate to the extent permitted by law, and
the number of directors constituting the Board of Directors shall be
reduced by two. The voting rights granted by this Section (3) (c) shall be
in addition to any other voting rights granted to the holders of the Series
A Preferred Stock in this Section 3.
(d) Except as provided herein, in Section 11 or by applicable law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for authorizing
or taking any corporate action.
IV. CERTAIN RESTRICTIONS. (a) Whenever quarterly dividends or other
dividends or distributions payable on the Series A Preferred Stock as
provided in Section (2) are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on shares
of Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock;
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation
ranking junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (a) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
V. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, no distribution shall
be made (a) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount equal to the accrued and
unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment, plus an amount equal to the greater of (i) $.01 per
whole share or (ii) an aggregate amount per share equal to the Formula
Number then in effect times the aggregate amount to be distributed per
share to holders of Common Stock or (b) to the holders of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made
ratably on the Series A Preferred Stock and all other such parity stock in
proportion to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up.
VI. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation merger, share exchange, combination or other
transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash or any other property, then,
in any such case, the then outstanding shares of Series A Preferred Stock
shall at the same time be similarly exchanged or changed into an amount per
share equal to the Formula Number then in effect times the aggregate amount
of stock, securities, cash or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is
exchanged or changed. In the event both this Section 6 and Section 2 appear
to apply to a transaction, this Section 6 will control.
VII. NO REDEMPTION; NO SINKING FUND. (a) The shares of Series A
Preferred Stock shall not be subject to redemption by the Corporation or at
the option of any holder of Series A Preferred Stock; provided, however,
that the Corporation may purchase or otherwise acquire outstanding shares
of Series A Preferred Stock in the open market or by offer to any holder or
holders of shares of Series A Preferred Stock.
(b) The shares of Series A Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
VIII. RANKING. The Series A Preferred Stock shall rank junior to all
other series of Preferred Stock of the Corporation, unless the Board of
Directors shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special rights
of the shares of such series and the qualifications, limitations and
restrictions thereof.
IX. FRACTIONAL SHARES. The Series A Preferred Stock shall be issuable
upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one-thousandth (1/1,000)
of a share or any integral multiple of such fraction which shall entitle
the
holder, in proportion to such holder's fractional shares, to receive
dividends, exercise voting rights, participate in distributions and have
the benefit of all other rights of holders of Series A Preferred Stock. In
lieu of fractional shares, the Corporation, prior to the first issuance of
a share or a fraction of a share of Series A Preferred Stock, may elect (a)
to make a cash payment as provided in the Rights Agreement for fractions of
a a share other than one-thousandth (1/1,000) of a share or any integral
multiple thereof or (b) to issue depository receipts evidencing such
authorized fraction of a share of Series A Preferred Stock pursuant to an
appropriate agreement between the Corporation and a depository selected by
the Corporation; provided that such agreement shall provide that the
holders of such depository receipts shall have all the rights, privileges
and preferences to which they are entitled as holders of the Series A
Preferred Stock.
X. REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancelation become authorized but unissued shares
of Preferred Stock, without par value, of the Corporation, undesignated as
to series, and may thereafter be reissued as part of a new series of such
Preferred Stock as permitted by law.
XI. AMENDMENT. None of the powers, preferences and relative,
participating, optional and other special rights of the Series A Preferred
Stock as provided herein or in the Articles of Incorporation shall be
amended in any manner that would alter or change the powers, preferences,
rights or privileges of the holders of Series A Preferred Stock so as to
affect such holders adversely without the affirmative vote of the holders
of at least 66-2/3% of the outstanding shares of Series A Preferred Stock,
voting as a separate voting group; provided, however, that no such
amendment approved by the holders of at least 66-2/3% of the outstanding
shares of Series A Preferred Stock shall be deemed to apply to the powers,
preferences, rights or privileges of any holder of shares of Series A
Preferred Stock originally issued upon exercise of a Right after the time
of such approval without the approval of such holder.
C. Common Stock
(1) The holders of Common Stock of the Company shall be entitled to
one vote for each share of Common Stock held by them on all matters
properly presented to shareholders, except as otherwise provided herein or
by the Act.
(2) Subject to the preferential rights of Preferred Stock set forth
herein or in the resolution adopted by the Board of Directors establishing
any series of Preferred Stock, such dividends (either in cash, shares of
Common Stock or Preferred Stock, or otherwise) as may be determined by the
Board of Directors may be declared and paid on the Common Stock from time
to time in accordance with the Act.
D. No holder of shares of any class of stock of the Company shall have
any preemptive right to subscribe to stock, obligations, warrants,
subscription rights or other securities of the Company of any class,
whether now or hereafter authorized.
ARTICLE V
The Company shall have perpetual existence.
ARTICLE VI
Subject to the restriction that the number of directors shall not be
less than the number required by the laws of the Commonwealth of Kentucky,
the number of directors may be fixed, from time to time, pursuant to the
By-laws of the Company.
The members of the Board of Directors (other than those who may be
elected by the holders of any class or series of capital stock of the
Company having a preference over the Common Stock as to dividends or upon
liquidation pursuant to the terms of these Articles of Incorporation or of
such class or series of stock) shall be
classified (so long as the Board of Directors shall consist of at least
nine members pursuant to the By-laws), with respect to the time for which
they severally hold office, into three classes, as nearly equal in number
as possible, as shall be provided in the By-laws of the Company, one class
to be originally elected for a term expiring at the annual meeting of the
shareholders to be held in 1987, another class to be originally elected for
a term expiring at the annual meeting of the shareholders to be held in
1988, and another class to be originally elected for a term expiring at the
annual meeting of the shareholders to be held in 1989, with each class to
hold office until the successors of such class are elected and qualified.
At each annual meeting of the shareholders, the date of which shall be
fixed by or pursuant to the By-laws of the Company, the successors of the
class of directors whose term expires at that meeting shall be elected to
hold office for a term expiring at the annual meeting of shareholders held
in the third year following the year of their election.
Subject to any requirements of law and the rights of any class or
series of capital stock of the Company having a preference over the Common
Stock as to dividends or upon liquidation pursuant to the terms of these
Articles of Incorporation or of such class or series of stock (and
notwithstanding the fact that a lesser percentage may be specified by law,
these Articles of Incorporation or the terms of such class or series), the
affirmative vote of the holders of 80% or more of the voting power of the
then outstanding voting stock of the Company, voting together as a single
class, shall be required to remove any director without cause. For purposes
of this Article VI, "cause" shall mean the willful and continuous failure
of a director to substantially perform such director's duties to the
Company, other than any such failure resulting from incapacity due to
physical or mental illness, or the willful engaging by a director in gross
misconduct materially and demonstrably injurious to the Company. As used in
these Articles of Incorporation, "voting stock" shall mean shares of
capital stock of the Company entitled to vote generally in an election of
directors.
Subject to any requirements of law and the rights of any class or
series of capital stock of the Company having a preference over the Common
Stock as to dividends or upon liquidation pursuant to the terms of these
Articles of Incorporation or of such class or series of stock, newly
created directorships resulting from any increase in the number of
directors may be filled by the Board of Directors, or as otherwise provided
in the By-laws, and any vacancies on the Board of Directors resulting from
death, resignation, removal or other cause shall only be filled by the
affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, or by a sole
remaining director, or as otherwise provided in the By-laws. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successors shall have been elected and qualified.
ARTICLE VII
In furtherance and not in limitation of the powers conferred upon it
by law, the Board of Directors is expressly authorized to:
A. adopt any By-laws that the Board of Directors may deem necessary or
desirable for the efficient conduct of the affairs of the Company,
including, but not limited to, provisions governing the conduct of, and the
matters which may properly be brought before, annual or special meetings of
the shareholders and provisions specifying the manner and extent to which
prior notice shall be given of the submission of proposals to be considered
at any such meeting or of nominations for election of directors to be held
at any such meeting; and
B. repeal, alter or amend the By-laws.
In addition to any requirements of law and any other provisions of
these Articles of Incorporation or the terms of any class or series of
capital stock having a preference over the Common Stock as to dividends or
upon liquidation (and notwithstanding the fact that a lesser percentage may
be specified by law, these Articles of Incorporation or the terms of such
class or series), the affirmative vote of the holders of 80% or more of the
voting power of the then outstanding voting stock of the Company, voting
together as a single class, shall be required to amend, alter or repeal any
provision of the By-laws.
ARTICLE VIII
A. A higher than majority vote of shareholders for certain Business
Combinations shall be required as follows:
(1) In addition to any affirmative vote otherwise required by law or
these Articles of Incorporation or the terms of any class or series of
capital stock of the Company having a preference over the Common Stock as
to dividends or upon liquidation (and notwithstanding the fact that a
lesser percentage may be specified by law, these Articles of Incorporation
or the terms of such class or series) and except as otherwise expressly
provided in Section B of this Article VIII:
(a) any merger or consolidation of the Company or any Subsidiary with
an Interested Shareholder or with any other corporation, whether or not
itself an Interested Shareholder, which is, or after such merger or
consolidation would be, an Affiliate of an Interested Shareholder who was
an Interested Shareholder prior to the transaction;
(b) any sale, lease, transfer, or other disposition, other than in the
ordinary course of business, in one transaction or a series of transactions
in any twelve-month period, to any Interested Shareholder or any Affiliate
of an Interested Shareholder, other than the Company or any Subsidiary, of
any assets of the Company or any Subsidiary having, measured at the time
the transaction or transactions are approved by the Board of Directors, an
aggregate book value as of the end of the Company's most recently ended
fiscal quarter of 5% or more of the total market value of the outstanding
stock of the Company or of its net worth as of the end of its most recently
ended fiscal quarter;
(c) the issuance or transfer by the Company or any Subsidiary, in one
transaction or a series of transactions in any twelve-month period, of any
equity securities of the Company or any Subsidiary which have an aggregate
market value of 5% or more of the total market value of the outstanding
stock of the Company, determined as of the end of the Company's most
recently ended fiscal quarter prior to the first such issuance or transfer,
to any Interested Shareholder or any Affiliate of any Interested
Shareholder, other than the Company or any Subsidiary, except pursuant to
the exercise of warrants or rights to purchase securities offered pro rata
to all holders of the Company's voting stock or any other method affording
substantially proportionate treatment to the holders of voting stock;
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Company in which anything other than cash will be
received by an Interested Shareholder or any Affiliate of an Interested
Shareholder; or
(e) any reclassification of securities, including any reverse stock
split; any recapitalization of the Company; any merger or consolidation of
the Company with any Subsidiary; or any other transaction which has the
effect, directly or indirectly, in one transaction or a series of
transactions, of increasing by 5% or more the proportionate amount of the
outstanding shares of any class of equity securities of the Company or any
Subsidiary which is directly or indirectly beneficially owned by any
Interested Shareholder or any Affiliate of any Interested Shareholder;
shall require the recommendation of the Board of Directors and the
affirmative vote of the holders of at least (i) 80% of the voting power of
the then outstanding voting stock of the Company, voting together as a
single class, and (ii) two-thirds of the voting power of the then
outstanding voting stock other than voting stock beneficially owned by the
Interested Shareholder who is, or whose Affiliate is, a party to the
Business Combination or by an Affiliate or Associate of such Interested
Shareholder, voting together as a single class.
(2) The term "Business Combination" as used in this Article VIII shall
mean any transaction which is referred to in any one or more of clauses (a)
through (e) of paragraph (1) of Section A of this Article VIII.
B. The provisions of Section A of this Article VIII shall not be
applicable to any Business Combination, and such Business Combination shall
require only such affirmative vote (if any) as is required by law, any
other provision of these Articles of Incorporation or the terms of any
class or series of capital stock of the Company
having a preference over the Common Stock as to dividends or upon
liquidation, if all conditions specified in either of the following
paragraphs (1) or (2) are met:
(1) The Business Combination shall have been approved by resolution by
a majority of the Continuing Directors at a meeting of the Board of
Directors at which a quorum consisting of at least a majority of the then
Continuing Directors was present; or
(2) All the following five conditions have been met:
(a) The aggregate amount of the cash and the market value as of the
Valuation Date of consideration other than cash to be received per share by
holders of Common Stock in such Business Combination is at least equal to
the highest of the following:
(i) the highest per share price, including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the Interested
Shareholder for any shares of Common Stock (a) within the two-year period
immediately prior to the Announcement Date or (b) in the transaction in
which it became an Interested Shareholder, whichever is higher;
(ii) the market value per share of Common Stock on the Announcement
Date or on the Determination Date, whichever is higher; and
(iii) the price per share equal to the market value per share of
Common Stock determined pursuant to clause (ii) immediately preceding,
multiplied by the fraction resulting from (a) the highest per share price,
including any brokerage commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Shareholder for any shares of Common Stock
acquired by it within the two-year period immediately prior to the
Announcement Date, over (b) the market value per share of Common Stock on
the first day in such two-year period on which the Interested Shareholder
acquired any shares of Common Stock.
(b) The aggregate amount of the cash and the market value as of the
Valuation Date of consideration other than cash to be received per share by
holders of shares of any class or series of outstanding stock other than
Common Stock is at least equal to the highest of the following, whether or
not the Interested Shareholder has previously acquired any shares of a
particular class or series of stock:
(i) the highest per share price, including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the Interested
Shareholder for any shares of such class of stock acquired by it (a) within
the two-year period immediately prior to the Announcement Date or (b) in
the transaction in which it became an Interested Shareholder, whichever is
higher;
(ii) the highest preferential amount per share to which the holders of
shares of such class of stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company;
(iii) the market value per share of such class of stock on the
Announcement Date or on the Determination Date, whichever is higher; and
(iv) the price per share equal to the market value per share of such
class of stock determined pursuant to clause (iii) immediately preceding,
multiplied by the fraction resulting from (a) the highest per share price,
including any brokerage commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Shareholder for any shares of any class of
voting stock acquired by it within the two-year period immediately prior to
the Announcement Date over (b) the market value per share of the same class
of voting stock on the first day in such two-year period on which the
Interested Shareholder acquired any shares or the same class of voting
stock.
(c) In making any price calculation under paragraph (2) of this
Section B, appropriate adjustments shall be made to reflect any
reclassification or stock split (including any reverse stock split), stock
dividend, recapitalization or any similar transaction which has the effect
of increasing or reducing the number of
outstanding shares of the stock. The consideration to be received by
holders of any class or series of outstanding stock is to be in cash or in
the same form as the Interested Shareholder has previously paid for shares
of the same class or series of stock. If the Interested Shareholder has
paid for shares of any class of stock with varying forms of consideration,
the form of consideration for such class of stock shall be either in cash
or the form used to acquire the largest number of shares of such class or
series of stock previously acquired by it.
(d) After the Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business Combination:
(i) there shall have been no failure to declare and pay at the regular
date thereof any full periodic dividends, whether or not cumulative, on any
outstanding Preferred Stock of the Company or other capital stock entitled
to a preference over the Common Stock as to dividends or upon liquidation;
(ii) there shall have been no reduction in the annual rate of
dividends paid on the Common Stock, except as necessary to reflect any
subdivision of the Common Stock, and no failure to increase the annual rate
of dividends as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or other similar
transaction which has the effect of reducing the number of outstanding
shares of Common Stock; and
(iii) the Interested Shareholder did not become the beneficial owner
of any additional shares of stock of the Company except as part of the
transaction which resulted in such Interested Shareholder or by virtue of
proportionate stock splits or stock dividends.
The provisions of clauses (i) and (ii) immediately preceding shall not
apply if neither an Interested Shareholder nor any Affiliate or Associate
of an Interested Shareholder voted as a director of the Company in a manner
inconsistent with such clauses and the Interested Shareholder, within ten
days after any act or failure to act inconsistent with such clauses,
notifies the Board of Directors of the Company in writing that the
Interested Shareholder disapproves thereof and requests in good faith that
the Board of Directors rectify such act or failure to act.
(e) After the Interested Shareholder has become an Interested
Shareholder, the Interested Shareholder shall not have received the
benefit, directly or indirectly, except proportionately as a shareholder,
of any loans, advance, guarantees, pledges or other financial assistance
provided by the Company or any Subsidiary, whether in anticipation of or in
connection with such Business Combination or otherwise.
C. For purposes of this Article VIII:
(1) "AFFILIATE" OR "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December 1, 1985
(the term "registrant" in such Rule 12b-2 meaning in this case the
Company).
(2) "ANNOUNCEMENT DATE" means the first general public announcement of
the proposal or intention to make a proposal of the Business Combination or
its first communication generally to shareholders of the Company, whichever
is earlier.
(3) "BENEFICIAL OWNER" when used with respect to any voting stock,
means a person who, individually or with any Affiliate or Associate has:
(i) the right to acquire voting stock, whether such right is
exercisable immediately or only after the passage of time and whether or
not such right is exercisable only after specified conditions are met
pursuant to any agreement, arrangement, or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise;
(ii) the right to vote voting stock pursuant to any agreement,
arrangement, or understanding; or
(iii) any agreement, arrangements, or understanding for the purpose of
acquiring, holding, voting
or disposing of voting stock with any other person who beneficially owns,
or whose Affiliates or Associates beneficially own, directly or indirectly,
such shares of voting stock.
(4) "CONTINUING DIRECTOR" means any member of the Board of Directors
who is not an Affiliate or Associate of an Interested Shareholder or any of
its Affiliates, other than the Company or any Subsidiary, and who was a
director of the Company prior to the time the Interested Shareholder became
an Interested Shareholder, and any other member of the Board of Directors
who is not an Affiliate or Associate of an Interested Director or any of
its Affiliates, other than the Company or any Subsidiary, and was
recommended or elected by a majority of the Continuing Directors at a
meeting at which a quorum consisting of a majority of the Continuing
Directors is present.
(5) "DETERMINATION DATE" means the date on which an Interested
Shareholder first became an Interested Shareholder.
(6) "EQUITY SECURITY" means:
(a) any stock or similar security, certificate of interest, or
participation in any profit-sharing agreement, voting trust certificate, or
certificate of deposit for the foregoing;
(b) any security convertible, with or without consideration, into an
equity security, or any warrant or other security carrying any right to
subscribe to or purchase an equity security; or
(c) any put, call, straddle, or other option, right or privilege of
acquiring an equity security from or selling an equity security to another
without being bound to do so.
(7) "INTERESTED SHAREHOLDER" means any person, other than the Company
or any Subsidiary, who:
(a) is the beneficial owner, directly or indirectly, of 10% or more of
the voting power of the outstanding voting stock of the Company; or
(b) is an Affiliate of the Company and at any time within the two-year
period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of 10% or more of the voting power of the then
outstanding voting stock of the Company.
For the purpose of determining whether a person is an Interested
Shareholder, the number of shares of voting stock deemed to be outstanding
shall include shares deemed owned by the person through application of
paragraph (3) of this Section C but shall not include any other shares of
voting stock which may be issuable pursuant to any agreement, arrangement,
or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise. Furthermore, any such beneficial ownership or voting
power arising solely out of a trustee or custodial relationship of any
person in connection with a Company "employee benefit or stock plan" shall
be excluded for purposes of determining whether or not any such person is
an Interested Stockholder. For purposes hereof, the term "employee benefit
or stock plan" of the Company shall mean any option, bonus, appreciation,
profit sharing, retirement, incentive, thrift, employee stock ownership,
dividend reinvestment, savings or similar plan of the Company.
(8) "MARKET VALUE" means:
(a) in the case of stock, the highest closing sale price during the 30
calendar day period immediately preceding the date in question of a share
of such stock on the Composite Tape for New York Stock Exchange listed
stocks, or, if such stock is not quoted on such Composite Tape, on the New
York Stock Exchange, or if such stock is not listed on such Exchange, on
the principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30 calendar day period
preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then in use, or if
no such quotation is available, the fair market value on the date in
question of a share of such stock as determined by a majority of the
Continuing Directors at a meeting of the Board of Directors at which a
quorum consisting of at least a majority of the then Continuing Directors
is present; and
(b) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by a majority
of the Continuing Directors at a meeting of the Board of Directors at which
a quorum consisting of at least a majority of the then Continuing Directors
is present.
(9) "SUBSIDIARY" means any corporation of which voting stock having a
majority of the votes entitled to be cast is owned, directly or indirectly,
by the Company.
(10) "VALUATION DATE" means:
(a) for a Business Combination voted upon by shareholders, the later
of the day prior to the date of the shareholders' vote or the date 20
business days prior to the consummation of the Business Combination; and
(b) for a Business Combination not voted upon by shareholders, the
date of the consummation of the Business Combination.
(11) "VOTING STOCK" means shares of capital stock of the Company
entitled to vote generally in an election of directors.
D. In addition to any requirements of law and any other provisions of
these Articles of Incorporation or the terms of any class or series of
capital stock of the Company entitled to a preference over the Common Stock
as to dividends or upon liquidation (and notwithstanding the fact that a
lesser percentage may be specified by law, these Articles of Incorporation
or the terms of such class or series), the affirmative vote of
(1) the holders of at least 80% of the voting power of the then
outstanding voting stock of the Company, voting together as a single class,
and
(2) the holders of at least two-thirds of the voting power of the then
outstanding voting stock of the Company other than the Interested
Shareholder, voting together as a single class, shall be required to amend,
alter or repeal, or adopt any provision inconsistent with, this Article
VIII.
ARTICLE IX
In addition to any requirements of law and any other provisions of
these Articles of Incorporation or the terms of any class or series of
capital stock of the Company having a preference over the Common Stock as
to dividends or upon liquidation (and notwithstanding the fact that a
lesser percentage may be specified by law, these Articles of Incorporation
or the terms of such class or series), the affirmative vote of the holders
of 80% or more of the voting power of the then outstanding voting stock of
the Company, voting together as a single class, shall be required to amend,
alter or repeal, or adopt any provision inconsistent with, this Article IX
or Article VI or VII of these Articles of Incorporation. Subject to the
foregoing provisions of this Article IX and Section D of Article VIII, the
Company reserves the right from time to time to amend, alter, change, add
to or repeal any provision contained in these Articles of Incorporation in
any manner now or hereafter prescribed by law and in these Articles of
Incorporation, and all rights and powers at any time conferred upon
shareholders, directors and officers of the Company by these Articles of
Incorporation or any amendment thereof are subject to the provisions of
this Article IX and Section D of Article VIII.
ARTICLE X
Notwithstanding any right to indemnification provided by the Act to
any director, officer, employee or agent of the Company, the Company may,
but shall not be required to, to the maximum extent permitted by law,
indemnify any such person against costs and expenses (including but not
limited to attorneys' fees) and any liabilities (including but not limited
to judgments, fines, penalties and settlements) paid by or imposed against
any such person in connection with any actual or threatened claim, action,
suit or proceeding, whether civil, criminal, administrative, legislative,
investigative or other (including any appeal relating thereto) and whether
made or brought by or in the right of the Company or otherwise, in which
any such person is involved, whether as a party, witness, or otherwise,
because he or she is or was a director, officer, employee or agent of the
Company or a director, officer, partner, trustee, employee or agent of
any other corporation, partnership, employee benefit plan or other entity.
The indemnification authorized by this Article X shall not supersede
or be exclusive of any other right of indemnification which any such person
may have or hereafter acquire under any provision of these Articles or the
By-laws of the Company, agreement, vote of shareholders or disinterested
directors or otherwise. The Company may take such steps as may be deemed
appropriate by the Board of Directors to provide indemnification to any
such person, including, without limitation, entering into contracts for
indemnification between the Company and individual directors, officers,
employees or agents which may provide rights to indemnification which are
broader or otherwise different than the rights authorized by this Article.
The Company may take such steps as may be deemed appropriate by the Board
of Directors to secure, subject to the occurrence of such conditions or
events as may be determined by the Board of Directors, the payment of such
amounts as are required to effect any indemnification permitted or
authorized by this Article, including, without limitation, purchasing and
maintaining insurance, creating a trust fund, granting security interests
or using other means (including, without limitation, irrevocable letters of
credit).
Any amendment or repeal of this Article X shall operate prospectively
only and shall not affect any action taken, or failure to act, by the
Company or any such person prior to such amendment or repeal.
ARTICLE XI
No director shall be personally liable to the Company or its
shareholders for monetary damages for breach of his duties as a director
except to the extent that the applicable law from time to time in effect
shall provide that such liability may not be eliminated or limited.
Neither the amendment nor repeal of this Article XI shall affect the
liability of any director of the Company with respect to any act or failure
to act which occurred prior to such amendment or repeal.
This Article XI is not intended to eliminate or limit any protection
otherwise available to the directors of the Company.
The foregoing Third Restated Articles of Incorporation correctly set
forth without change the corresponding provisions sequentially renumbered
of the Second Restated Articles of Incorporation as heretofore amended, and
supersede the Second Restated Articles of Incorporation and all amendments
thereto.
Dated: July 17, 2002
Ashland Inc.
By: /s/ David L. Hausrath
Vice President
Commonwealth of Kentucky
ss.:
County of Kenton
I, a notary public, do hereby certify that on this 17th day of July,
2002, personally appeared before me David L. Hausrath, who, being duly
sworn, declared that he is the Vice President of Ashland Inc., that he
signed the foregoing document as such, and that the statements contained
therein are true.
My commission expires: (Notary Stamp)
Catholeen C. Dailey
Notary Public, Kentucky, State-At-Large
My Commission Expires May 24, 2003
/s/ Catholeen C. Dailey
Notary Public
Prepared by Linda L. Foss
50 E. RiverCenter Boulevard
Covington, Kentucky
/s/ Linda L. Foss
EXHIBIT 12
ASHLAND INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
(In millions)
Nine Months Ended
Years Ended September 30 June 30
------------------------------------------------------------- --------------------
1997 1998 1999 2000 2001 2001 2002
--------- --------- --------- --------- ---------- --------- ---------
EARNINGS
- --------
Income from continuing operations $ 169 $ 178 $ 291 $ 292 $ 406 $ 281 $ 82
Income taxes 125 114 193 191 275 187 49
Interest expense 148 133 141 189 160 124 100
Interest portion of rental expense 48 40 35 39 41 29 27
Amortization of deferred debt expense 1 1 1 2 2 1 1
Undistributed earnings of
unconsolidated affiliates (6) (62) (11) (112) (90) (83) (20)
Earnings of significant affiliates* 7 - - - - - -
-------- --------- --------- --------- --------- --------- --------
$ 492 $ 404 $ 650 $ 601 $ 794 $ 539 $ 239
======== ========= ========= ========= ========= ========= ========
FIXED CHARGES
- -------------
Interest expense $ 148 $ 133 $ 141 $ 189 $ 160 $ 124 $ 100
Interest portion of rental expense 48 40 35 39 41 29 27
Amortization of deferred debt expense 1 1 1 2 2 1 1
Capitalized interest 1 - - - - - -
Fixed charges of significant affiliates* 5 - - - - - -
-------- --------- --------- --------- --------- --------- --------
$ 203 $ 174 $ 177 $ 230 $ 203 $ 154 $ 128
======== ========= ========= ========= ========= ========= ========
COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
- --------------------------
Preferred dividend requirements $ 9 $ - $ - $ - $ - $ - $ -
Ratio of pretax to net income** 1.74 - - - - - -
-------- --------- --------- --------- --------- --------- --------
Preferred dividends on a pretax basis 17 - - - - - -
Fixed charges 203 174 177 230 203 154 128
-------- --------- --------- --------- --------- --------- --------
$ 220 $ 174 $ 177 $ 230 $ 203 $ 154 $ 128
======== ========= ========= ========= ========= ========= ========
RATIO OF EARNINGS TO
FIXED CHARGES 2.42 2.32 3.67 2.61 3.91 3.51 1.86
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS 2.24 2.32 3.67 2.61 3.91 3.51 1.86
* Significant affiliates are companies accounted for on the equity method
that are 50% or greater owned or whose indebtedness has been directly or
indirectly guaranteed by Ashland or its consolidated subsidiaries.
** Computed as income from continuing operations before income taxes divided
by income from continuing operations, which adjusts dividends on preferred
stock to a pretax basis.
Exhibit 99.1
ASHLAND INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ashland Inc. (the
"Company") on Form 10-Q for the period ended June 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"),
I, Paul W. Chellgren, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Paul W. Chellgren
- ---------------------------------
Paul W. Chellgren
Chief Executive Officer
August 7, 2002
Exhibit 99.2
ASHLAND INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ashland Inc. (the
"Company") on Form 10-Q for the period ended June 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"),
I, J. Marvin Quin, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ J. Marvin Quin
- ----------------------------------
J. Marvin Quin
Chief Financial Officer
August 7, 2002