Ashland Inc. · NYSE:ASH
Ashland — Bank of America 2008 Credit Conference
26 slides from Ashland's conference presentation, Nov 21, 2008
Slide 1: Bank of America 2008 Credit Conference
Bank of America 2008 Credit Conference James J. O'Brien Chairman and Chief Executive Officer November 21, 2008
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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. Such statements include those made with respect to Ashland’s operating performance and Ashland’s a
Slide 3: Agenda
Agenda • Hercules acquisition • Financial structure • Ashland today • Summary • Questions
Slide 4: Hercules Acquisition: Investment Highlights
Hercules Acquisition Investment Highlights • Diversified business portfolio serving wide range of end markets • Creates focus and scale in specialty paper chemicals • Leading market positions across platform • Broad geographical diversity - Approximately $3.7 billion of pro forma revenues generated
Slide 5: Hercules Acquisition: Key Terms
Hercules Acquisition Key Terms • Hercules shareholders receive consideration of: - $18.60 per Hercules share in cash - 0.093 of a share of Ashland stock • Purchase price of $2.6 billion for shares of Hercules stock that were outstanding at the closing date • Net assumed debt of $0.8 billion
Slide 6: Hercules Acquisition: Financing
Hercules Acquisition Financing • $2.6 billion new financing - Jointly led by Bank of America and Scotia Capital - $2.3 billion drawn at closing • Term Loan A, Term Loan B and bridge loan • $400 million revolver ($100 million drawn) • 10.5 million new common shares issued at closing • $750 million ca
Slide 7: Financing at Close
Financing at Close 1 Convertible to rollover loan/exchange notes or exchangeable to bonds with not longer than 6-year no-call 4-year provisions. 2 $282MM par. 3 Estimated fair value. 4 Revolver draw = $100MM. (in millions) • Forecasted Year 1 annual book interest expense of approximately $250 millio
Slide 8: Financial Covenants
Financial Covenants • Consolidated leverage ratio (Consolidated Debt/EBITDA ) - Funding date through Sept. 2009: 3.75x - Dec. 2009 through Sept. 2010: 3.5x - Dec. 2010 through Sept. 2011: 3.0x - Dec. 2011 through Sept. 2012: 2.75x - Dec. 2012 and after: 2.5x • Consolidated fixed charge coverage rati
Slide 9: Synergies: Cost Savings Estimate
Sales & Marketing Manufacturing Purchasing G&A • $120 million estimate (cost savings only) - Run-rate by the end of FY 2010 - $80 million run-rate by end of FY 2009 Sales & Marketing Manufacturing Purchasing G&A • Estimated one-time integration costs still being finalized • Key areas for synergy - C
Slide 10: Ashland Today
Ashland Today • Pro forma sales and operating revenue * = $10.7 billion • Pro forma EBITDA * = $717 million • Among top five specialty chemicals companies in North America and top 10 worldwide Ashland Performance Materials Ashland Hercules Water Technologies Ashland Distribution Ashland Consumer Mar
Slide 11: Fiscal 2008 Pro Forma Sales and Operating Revenue
Ashland Distribution 40% Ashland Consumer Markets 16% 19% North America 65% Latin America/ Other - 4% Europe 24% Fiscal 2008 Pro Forma* Sales and Operating Revenue Ashland Distribution 40% By commercial unit 19% * For the 12 months ended Sept. 30, 2008, including intersegment, Hercules Paper Technol
Slide 12: Corporate Profile
Ashland Distribution 10% Ashland Performance Materials 13% Ashland Consumer Markets 16% Ashland Hercules Water Technologies 25% Ashland Aqualon Functional Ingredients 36% Corporate Profile * For the 12 months ended Sept. 30, 2008. Ashland Distribution 10% Ashland Performance Materials 13% Ashland He
Slide 13: Focus on Cash Flow
Focus on Cash Flow • Reduced dividend reflects levels of specialty chemical peers • Capital expenditures expected to be approximately $200 million • Accelerate realization of $120 million of synergies • Focus on expense control and discretionary spending • Other sources
Slide 14: Investment in Ashland
Investment in Ashland • Focus on cash generation producing results • Realizing cost structure efficiencies • Completion of Hercules acquisition creates a major, global specialty chemicals company - 74 percent of pro forma EBITDA derived from specialty chemicals core, with roughly one-third from bio-
Slide 15: Appendix A: Fiscal 2008 Preliminary Results
Appendix A Fiscal 2008 Preliminary Results
Slide 16: Fiscal 2008 Preliminary Financial Results
) ) ) ) ) ) ) ) ) ) ) ) ) ) Fiscal 2008 Preliminary Financial Results (in millions, except change) Twelve months ended Sept. 30, Fav./(Unfav.) Sales and operating revenue $ 8,381 $ 7,785 8 % Cost of sales 7,056 6,447 (9)% Gross profit 1,325 1,338 (1)% Gross profit percentage 15.8% 17.2% (140) bp Sel
Slide 17: Fiscal 2008 Preliminary Diluted Earnings Per Share
(in millions) Twelve months ended Sept. 30, 2008 2007 Operating income $ 213 ) $ 216 ) Gain (loss) on MAP Transaction 20 ) (3) Net interest and other financing income 28 ) 46 ) Income from continuing operations before income taxes 261 ) 259 ) Income tax expense 86 ) 58 ) Income from continuing opera
Slide 18: Regulation G: Reconciliation of Operating Income to EBITDA
Regulation G: Reconciliation of Operating Income to EBITDA The information provided in this presentation regarding earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternativ
Slide 19: Ashland Inc. Reconciliation of Operating Income to EBITDA
Ashland Inc. Fiscal Year Ended Sept. 30 Regulation G: Reconciliation of Operating Income to EBITDA (in millions)
Slide 20: Hercules Inc. Reconciliation of Operating Income to EBITDA
Hercules Inc. 12 Months Ended Sept. 30, 2008 Regulation G: Reconciliation of Operating Income to EBITDA
Slide 21: Appendix B: Commercial Unit Profiles
Appendix B Commercial Unit Profiles
Slide 22: Ashland Hercules Water Technologies
North America 43% E&PS 18% Pulp/ Paper 57% Business Overview Customers/ Markets • Pulp and paper processing • Industrial and institutional • Mining • Municipal wastewater treatment • Merchant marine Products/ Services • Process chemicals for microbial and contaminant control, pulping aids and retent
Slide 23: Ashland Performance Materials
North America 45% Europe 36% Trans- portation 24% Ind. Constr. 27% Res. Constr. 14% Infra- structure 15% Pkg. & Ashland Performance Materials A global leader in specialty chemicals North America 45% Latin America/ Other - 9% Trans- portation 24% Revenue by Geography Revenue by Market For the Fiscal
Slide 24: Ashland Aqualon Functional Ingredients
Business Overview Customers • Diversified, global customer base Products • Broad product line based on renewable resources - Water soluble polymers (cellulose derivatives and guar) - Pinova products (wood rosin derivatives) Markets • Water-based paints • Paper coatings • Construction • Oilfield (che
Slide 25: Ashland Consumer Markets
Lubricants 80% Valvoline Int'l - 23% Do-It- Yourself 35% Business Overview Customers • Retail auto parts stores and mass merchandisers who sell to consumers; installers, such as car dealers and quick lubes; distributors Products/ Services • Valvoline® lubricants and automotive chemicals • MaxLife® l
Slide 26: Ashland Distribution
Chemicals 47% Plastics 41% Construction 24% Other 15% Trans- portation 15% Com- posites 10% Ashland Distribution A leading North American chemicals and plastics distributor Chemicals 47% Environmental Service/Other - 2% Construction 24% Revenue by Product Line Revenue by Market Paint & Coatings - 10