What changed in this filing

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Item 1. Financial Statements

2023-07-27 compared with 2023-05-03 · 438 added, 418 removed, 1197 unchanged (42% of the section changed)

3 unchanged sentences

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Nine months ended

(In millions except per share data - unaudited)

7 unchanged sentences

Net interest and other expense (income)

Other net periodic benefit loss (income)

Other net periodic benefit loss - Note K

Income from continuing operations before income taxes

Income tax expense (benefit) - Note J

Income tax expense - Note J

Income from continuing operations

12 unchanged sentences

Other comprehensive income (loss) - Note N

Comprehensive income

Comprehensive income (loss)

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

36 unchanged sentences

Total liabilities and stockholders' equity

(a) Accounts receivable includes an allowance for credit losses of $ 4 million at both March 31, 2023 and September 30, 2022 .

(b) Asbestos insurance receivable includes an allowance for credit losses of $ 3 million at both March 31, 2023 and September 30, 2022 .

(a) Accounts receivable includes an allowance for credit losses of $ 4 million at both June 30, 2023 and September 30, 2022 , respectively.

(b) Asbestos insurance receivable includes an allowance for credit losses of $ 3 million at both June 30, 2023 and September 30, 2022 , respectively.

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

1 unchanged sentence

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

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(In millions - unaudited)

1 unchanged sentence

CONTINUING OPERATIONS

Loss (Income) from discontinued operations (net of income taxes)

Income from discontinued operations (net of income taxes)

Adjustments to reconcile income from continuing operations to

3 unchanged sentences

Deferred income taxes

Gain from sales of property and equipment

Stock based compensation expense

1 unchanged sentence

Loss (income) from restricted investments

Income on acquisitions and divestitures

Asset impairments

38 unchanged sentences

Basis of presentation

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 (SEC) regulations.

GAAP) and Securities and Exchange Commission (SEC) regulations.

In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

These statements omit certain information and footnote disclosures required for complete annual financial statements and, therefore, should be read in conjunction with the Ashland Inc.

and consolidated subsidiaries (Ashland) Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Results of operations for the period ended March 31, 2023 are not necessarily indicative of the expected results for the remaining quarters in the fiscal year.

and consolidated subsidiaries (Ashland or the Company) Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Results of operations for the period ended June 30, 2023 are not necessarily indicative of the expected results for the remainder of the fiscal year.

Ashland is comprised of the following reportable segments:

14 unchanged sentences

A detailed listing of new accounting standards relevant to Ashland is included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2022 .

There were no new standards that were either issued or adopted in the current fiscal year that will have a material impact on Ashland's consolidated financial statements.

There were no new standards that were either issued or adopted in the current fiscal year that will have a material impact on Ashland's Condensed Consolidated Financial Statements.

NOTE B –

2 unchanged sentences

Proceeds from the sale were approximately $ 1.7 billion, net of transaction costs.

Ashland recognized a $ 732 million gain on sale within the Income (Loss) from Discontinued Operations caption of the Statements of Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2022.

The transaction represented a strategic shift in Ashland’s business and had a major effect on Ashland’s operations and financial results.

2 unchanged sentences

Certain indirect corporate costs included within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) that were previously allocated to the Performance Adhesives segment do not qualify for classification within discontinued operations and are now reported as selling, general and administrative expense within continuing operations on a consolidated basis and within the Unallocated and other segment.

There were no such costs for the three and six months ended March 31, 2023 and $ 3 million and $ 7 million for the three and six months ended March 31, 2022, respectively.

There were no such costs for the three and nine months ended June 30, 2023 and $ 1 million and $ 8 million for the three and nine months ended June 30, 2022, respectively.

Other manufacturing facility sales

During the December 2022 quarter, Ashland entered into a definitive sale agreement to sell a Specialty Additives manufacturing facility for less than $ 1 million.

The net asset value related to these sites was less than $ 1 million and $ 4 million at March 31, 2023 and September 30, 2022, respectively.

During the three and six months ended March 31, 2023 , no impairment charges and $ 4 million of impairment charges, respectively, were recorded within the selling, general and administrative expense caption of the Statement of Consolidated Comprehensive Income (Loss) for this manufacturing facility.

The net asset value related to these sites was $ 4 million at September 30, 2022.

During the three and nine months ended June 30, 2023 , no impairment and $ 4 million of impairment charges, respectively, were recorded within the selling, general and administrative expense caption of the Statement of Consolidated Comprehensive Income (Loss) for this manufacturing facility.

During the current quarter, Ashland completed the sale of this facility, received proceeds of less than $ 1 million, and recorded a loss of less than $ 1 million within the income on acquisition and divestitures, net caption of the Statement of Consolidated Comprehensive Income (Loss) for the three and nine months ended June 30, 2023.

Other corporate assets

During the three and six months ended March 31, 2022, Ashland completed a sale of excess land.

Ashland received net proceeds of approximately $ 11 million and recorded a pre-tax gain of $ 7 million within the Income on acquisitions and divestitures, net caption of the Statements of Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2022.

During the three and nine months ended June 30, 2022 , Ashland completed the sale of two excess land properties.

Ashland received net proceeds of approximately $ 50 million and recorded a pre-tax gain of $ 35 million within the Income on acquisitions and divestitures, net caption of the Statements of Consolidated Comprehensive Income (Loss) for the three and nine months ended June 30, 2022 .

NOTE C–

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The operating results from these divested businesses and subsequent adjustments related to ongoing assessments of certain retained liabilities and tax items have been recorded within the discontinued operations caption in the Statements of Consolidated Comprehensive Income (Loss) for all periods presented.

Components of amounts reflected in the Statements of Consolidated Comprehensive Income (Loss) related to discontinued operations are presented in the following table for the three and six months ended March 31, 2023 and 2022.

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(In millions)

2 unchanged sentences

Composites/Marl facility

Water Technologies

Gain on disposal of discontinued operations (net of tax)

Performance Adhesives

The following table presents a reconciliation of the captions within Ashland's Statements of Consolidated Comprehensive Income (Loss) for the income (loss) from discontinued operations attributable to Performance Adhesives for the three and six months ended March 31, 2022.

This disclosure was not applicable for the three and six months ended March 31, 2023 as a result of the sale in fiscal 2022.

This disclosure was not applicable for the three and nine months ended June 30, 2023 as a result of the sale in fiscal 2022.

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(In millions)

9 unchanged sentences

Fiscal 2023 Life Sciences restructuring program

During December 2022, Ashland implemented a restructuring program within the Nutraceuticals business of the Life Sciences segment.

Ashland recorded severance expense of zero and $ 1 million during the three and six months ended March 31, 2023 .

As of March 31, 2023, the severance reserve associated with this program was less than $ 1 million.

During the December 2022 quarter, Ashland implemented a restructuring program within the Nutraceuticals business of the Life Sciences segment.

Ashland recorded severance expense of zero and $ 1 million during the three and nine months ended June 30, 2023.

As of June 30, 2023, the severance reserve associated with this program was less than $ 1 million.

Fiscal 2023 company-wide restructuring program

During the current quarter, Ashland implemented additional targeted company-wide restructuring actions to reduce costs.

Ashland recorded severance expense of $ 1 million during the three and nine months ended June 30, 2023.

As of June 30, 2023 , the severance reserve associated with this program was $ 1 million.

NOTE E –

4 unchanged sentences

An instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement.

The three levels within the fair value hierarchy are described as follows.

Level 1 –

Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 –

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 –

Unobservable inputs for the asset or liability for which there is little, if any, market activity at the measurement date.

Unobservable inputs reflect Ashland’s own assumptions about what market participants would use to price the asset or liability.

The inputs are developed based on the best information available in the circumstances, which might include Ashland’s own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment.

For assets that are measured using quoted prices in active markets (Level 1), the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs.

1 unchanged sentence

For all other assets and liabilities for which unobservable inputs are used (Level 3), fair value is derived using fair value models, such as a discounted cash flow model or other standard pricing models that Ashland deems reasonable.

The following table summarizes financial instruments subject to recurring fair value measurements as of March 31, 2023.

The following table summarizes financial instruments subject to recurring fair value measurements as of June 30, 2023.

Quoted prices

31 unchanged sentences

Restricted investments

Ashland maintains certain investments in a company restricted renewable annual trusts for the purpose of paying future asbestos indemnity and defense costs and future environmental remediation and related litigation costs.

Ashland maintains certain investments in company restricted renewable annual trusts for the purpose of paying future asbestos indemnity and defense costs and future environmental remediation and related litigation costs.

The financial instruments are designated as investment securities, classified as Level 1 measurements within the fair value hierarchy.

These securities were classified primarily as noncurrent restricted investment assets, with $ 61 million classified within other current assets, in the Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022.

The following table presents gross unrealized gains and losses for the restricted securities as of March 31, 2023 and September 30, 2022:

These securities were classified primarily as noncurrent restricted investment assets, with $ 71 million and $ 61 million classified within other current assets, in the Condensed Consolidated Balance Sheets as of June 30, 2023 and September 30, 2022, respectively.

The following table presents gross unrealized gains and losses for the restricted securities as of June 30, 2023 and September 30, 2022:

(In millions)

2 unchanged sentences

Unrealized Loss

As of March 31, 2023

As of June 30, 2023

Demand deposit

5 unchanged sentences

Fixed income mutual fund

The following table presents the investment income, net gains and losses realized, funds restricted for specific transactions, and disbursements related to the investments within the portfolio for the three and six months ended March 31, 2023 and 2022.

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(In millions)

10 unchanged sentences

The impacts of these contracts were largely offset by gains and losses resulting from the impact of changes in exchange rates on transactions denominated in non-functional currencies.

The following table summarizes the net gains and losses recognized during the three and six months ended March 31, 2023 and 2022 within the Statements of Consolidated Comprehensive Income (Loss).

The following table summarizes the net gains and losses recognized during the three and nine months ended June 30, 2023 and 2022 within the Statements of Consolidated Comprehensive Income (Loss).

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(In millions)

Foreign currency derivative gains (losses)

The following table summarizes the fair values of the outstanding foreign currency derivatives as of March 31, 2023 and September 30, 2022 included in accounts receivable and accrued expenses and other liabilities of the Condensed Consolidated Balance Sheets.

The following table summarizes the fair values of the outstanding foreign currency derivatives as of June 30, 2023 and September 30, 2022 included in accounts receivable and accrued expenses and other liabilities of the Condensed Consolidated Balance Sheets.

(In millions)

6 unchanged sentences

plants during the manufacturing process, Ashland regularly enters into forward contracts that are designated as cash flow hedges.

The following table summarizes the net gai ns and losses recognized during the three and six months ended March 31, 2023 and 2022 within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss).

The following table summarizes the net gai ns and losses recognized during the three and nine months ended June 30, 2023 and 2022 within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss).

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(In millions)

Commodity derivative gains (losses)

The following table summarizes the fair values of the outstanding commodity derivatives as of March 31, 2023, and September 30, 2022 included in accounts receivable and accrued expenses and other liabilities of the Condensed Consolidated Balance Sheets.

The following table summarizes the fair values of the outstanding commodity derivatives as of June 30, 2023, and September 30, 2022 included in accounts receivable and accrued expenses and other liabilities of the Condensed Consolidated Balance Sheets.

(In millions)

4 unchanged sentences

Other financial instruments

At March 31, 2023 and September 30, 2022 , Ashland's long-term debt (including the current portion and excluding debt issuance cost discounts) had a carrying value of $ 1,342 million and $ 1,284 million, respectively, compared to a fair value of $ 1,224 million and $ 1,102 million, respectively.

The fair values of long-term debt are based on quoted market prices or, if market prices are not available, the present values of the underlying cash flows discounted at Ashland’s incremental borrowing rates.

The carrying value of long-term debt with variable interest approximated fair value.

At June 30, 2023 and September 30, 2022 , Ashland's long-term debt (including the current portion and excluding debt issuance cost discounts) had a carrying value of $ 1,342 million and $ 1,284 million, respectively, compared to a fair value of $ 1,195 million and $ 1,102 million, respectively.

The fair values of long-term debt are based on quoted market prices.

NOTE F –

9 unchanged sentences

Ashland tests goodwill and other indefinite-lived intangible assets for impairment annually as of July 1 and when events and circumstances indicate an impairment may have occurred.

N o indicators of impairment were identified in the three and six months ended March 31, 2023 .

The following is a progression of goodwill by reportable segment for the six months ended March 31, 2023.

N o indicators of impairment were identified in the three and nine months ended June 30, 2023 .

The following is a progression of goodwill by reportable segment for the nine months ended June 30, 2023.

(In millions)

3 unchanged sentences

Currency translation

Balance at March 31, 2023

(a) As of March 31, 2023 and September 30, 2022, there were accumulated impairments of $ 356 million, $ 174 million and $ 90 million related to the Personal Care, Specialty Additives and Intermediates reportable segments, respectively.

Balance at June 30, 2023

(a) As of June 30, 2023 and September 30, 2022, there were accumulated impairments of $ 356 million, $ 174 million and $ 90 million related to the Personal Care, Specialty Additives and Intermediates reportable segments, respectively.

Other intangible assets

3 unchanged sentences

Ashland annually reviews, as of July 1, indefinite-lived intangible assets for possible impairment or whenever events or changes in circumstances indicate that carrying amounts may not be recoverable.

No indicators of impairment were identified in the three and six months ended March 31, 2023 .

Other intangible assets were comprised of the following as of March 31, 2023 and September 30, 2022.

March 31, 2023

No indicators of impairment were identified in the three and nine months ended June 30, 2023 .

Other intangible assets were comprised of the following as of June 30, 2023 and September 30, 2022.

June 30, 2023

(In millions)

17 unchanged sentences

Total intangible assets

Amortization expense recognized on intangible assets was $ 23 million and $ 24 million for the three months ended March 31, 2023 and 2022, respectively, and $ 46 million and $ 47 million for the six months ended March 31, 2023 and 2022, respectively, and is included in the intangibles amortization expense caption of the Statements of Consolidated Comprehensive Income (Loss).

Estimated amortization expense for future periods is $ 93 million in 2023 (includes six months actual and six months estimated), $ 79 million in 2024, $ 74 million in 2025, $ 71 million in 2026 and $ 50 million in 2027.

Amortization expense recognized on intangible assets was $ 24 million and $ 23 million for the three months ended June 30, 2023 and 2022 , respectively, and $ 70 million and $ 71 million for the nine months ended June 30, 2023 and 2022 , respectively, and is included in the intangibles amortization expense caption of the Statements of Consolidated Comprehensive Income (Loss).

Estimated amortization expense for future periods is $ 93 million in 2023 (includes nine months actual and three months estimated), $ 80 million in 2024, $ 76 million in 2025, $ 74 million in 2026 and $ 53 million in 2027.

Actual amounts may change from such estimated amounts due to fluctuations in foreign currency exchange rates, additional intangible asset acquisitions and divestitures, potential impairment, accelerated amortization, or other events.

3 unchanged sentences

(In millions)

March 31, 2023

June 30, 2023

September 30, 2022

5 unchanged sentences

Long-term debt (less current portion)

(a) Other includes $ 14 million of debt issuance costs as of March 31, 2023 and September 30, 2022 , respectively.

The scheduled aggregate maturities to 2027 for long-term debt by year (including the current portion and excluding debt issuance costs) are as follows as of March 31, 2023 :

(a) Other includes $ 14 million of debt issuance costs as of June 30, 2023 and September 30, 2022 .

The scheduled aggregate maturities to 2027 for long-term debt by year (including the current portion and excluding debt issuance costs) are as follows as of June 30, 2023 :

zero in the next 4 years and $ 4 million in 2027.

10 unchanged sentences

When applicable, Ashland discloses the amount of the receivable that serves as over-collateralization as a restricted asset.

Ashland recognized a loss of less than $ 1 million within the Statements of Consolidated Comprehensive Income (Loss) for the three months ended March 31, 2023 and March 31, 2022, respectively, and $ 1 million and less than $ 1 million for the six months ended March 31, 2023 and March 31, 2022, respectively, within the net interest and other expense (income) caption associated with sales under the program.

Ashland has recorded $ 88 million in sales at March 31, 2023 against the buyer’s limit, which was $ 125 million at March 31, 2023 compared to $ 110 million of sales at September 30, 2022 against the buyer's limit, which was $ 125 million at September 30, 2022.

Ashland transferred $ 113 million and $ 136 million in receivables to the special purpose entity (SPE) as of March 31, 2023 and September 30, 2022, respectively.

Ashland recorded liabilities related to its service obligations and limited guarantee as of March 31, 2023 and September 30, 2022 of less than $ 1 million.

As of March 31, 2023 , the year-to-date gross cash proceeds received for receivables transferred and derecognized was $ 99 million, of which $ 122 million was collected, which includes collections from the sales in prior year transferred to the buyer.

The difference of $ 22 million represents the impact of a net reduction in accounts receivable sales volume during the current year.

Ashland recognized a loss of less than $ 1 million and a loss of $ 1 million within the Statements of Consolidated Comprehensive Income (Loss) for the three months ended June 30, 2023 and June 30, 2022 , respectively, and losses of $ 2 million and $ 1 million for the nine months ended June 30, 2023 and June 30, 2022 , respectively, within the net interest and other expense (income) caption associated with sales under the program.

Ashland has recorded $ 96 million in sales at June 30, 2023 against the buyer’s limit, which was $ 115 million at June 30, 2023 compared to $ 110 million of sales at September 30, 2022 against the buyer's limit, which was $ 125 million at September 30, 2022 .

Ashland transferred $ 120 million and $ 136 million in receivables to the special purpose entity (SPE) as of June 30, 2023 and September 30, 2022, respectively.

Ashland recorded liabilities related to its service obligations and limited guarantee as of June 30, 2023 and September 30, 2022 of less than $ 1 million.

As of June 30, 2023 and 2022, the year-to-date gross cash proceeds received for receivables transferred and derecognized were $ 150 million and $ 205 million, respectively, of which $ 164 million and $ 268 million were collected, which includes collections from sales in prior years transferred to the buyer.

The difference between receivables transferred and derecognized versus collected of $ 14 million and $ 63 million for the periods ended June 30, 2023 and 2022, respectively, represent the impact of a net reduction in accounts receivable sales volume during each period, respectively .

The prior year period included the impact of a $ 21 million net reduction in accounts receivables sales volume attributable to the Adhesives business sold in 2022.

On April 14, 2023, Ashland entered into Second and Third Amendments associated with this current program.

As part of this amendment the buyer's limit was reduced to $ 115 million between April and October of each year, and up to $ 100 million at all other times.

As part of these amendments the buyer's limit was reduced to $ 115 million between April and October of each year, and up to $ 100 million at all other times.

Additionally, the scheduled termination date was extended from May 31, 2023 to April 14, 2025.

2 unchanged sentences

Ashland accounts for the Foreign 2018 Accounts Receivable Securitization Facility as secured borrowings, and the receivables sold pursuant to the facility are included in the Consolidated Balance Sheets as accounts receivable.

At March 31, 2023 and September 30, 2022, the outstanding amounts of accounts receivable transferred by Ashland were $ 150 million and $ 162 million, respectively, and there were zero borrowings (denominated in multiple currencies) under the facility in both periods.

At June 30, 2023 and September 30, 2022 , the outstanding amounts of accounts receivable transferred by Ashland were $ 139 million and $ 162 million, respectively, and there were zero borrowings (denominated in multiple currencies) under the facility in both periods.

Available borrowing capacity and liquidity

The borrowing capacity remaining under the 2022 Credit Agreement which included the $ 600 million Revolving Credit Facility was $ 582 million due to an outstanding balance of zero , as well as a reduction of $ 18 million for letters of credit outstanding as of March 31, 2023.

Ashland's total borrowing capacity at March 31, 2023 was $ 690 million, which included $ 108 million of available capacity from the foreign 2018 Accounts Receivable Securitization Facility.

The borrowing capacity remaining under the 2022 Credit Agreement was $ 593 million, which reflects the full $ 600 million Revolving Credit Facility less a reduction of $ 7 million for letters of credit outstanding as of June 30, 2023.

Ashland's total borrowing capacity at June 30, 2023 was $ 702 million, which included $ 109 million of available capacity from the foreign 2018 Accounts Receivable Securitization Facility.

Additionally, Ashland had zero available liquidity under its current U.S.

Accounts Receivable Sales Program as of March 31, 2023.

Accounts Receivable Sales Program as of June 30, 2023.

Covenants related to current Ashland debt agreements

Ashland's debt contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional subsidiary indebtedness, restrictions on subsidiary distributions, investments, mergers, sale of assets and restricted payments and other customary limitations.

As of March 31, 2023, Ashland is in compliance with all debt agreement covenant restrictions.

As of June 30, 2023, Ashland is in compliance with all debt agreement covenant restrictions.

The maximum consolidated net leverage ratio permitted under Ashland's current credit agreement (the 2022 Credit Agreement) is 4.0 .

At March 31, 2023 , Ashland’s calculation of the consolidated net leverage ratio was 1.6 .

At June 30, 2023 , Ashland’s calculation of the consolidated net leverage ratio was 1.8 .

The minimum required consolidated interest coverage ratio under the 2022 Credit Agreement during its entire duration is 3.0 .

At March 31, 2023 , Ashland’s calculation of the interest coverage ratio was 10.6 .

At June 30, 2023 , Ashland’s calculation of the interest coverage ratio was 9.9 .

NOTE I –

2 unchanged sentences

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(In millions)

Operating lease cost

Selling, General & Administrative

Selling, General & Administrative (a)

Operating lease cost

7 unchanged sentences

Total lease cost

Right-of-use assets exchanged for new operating lease obligations were $ 20 million and $ 3 million for the three months ended March 31, 2023 and 2022, respectively, and $ 23 and $ 4 million for the six months ended March 31, 2023 and 2022.

(a) Includes $ 2 million lease termination fee for the three and nine months ended June 30, 2022 .

Right-of-use assets exchanged for new operating lease obligations were $ 6 million and $ 7 million for the three months ended June 30, 2023 and 2022 , respectively, and $ 29 million and $ 11 million for the nine months ended June 30, 2023 and 2022.

The following table provides cash paid for amounts included in the measurement of operating lease liabilities:

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(In millions)

3 unchanged sentences

Ashland’s effective tax rate in any interim period is subject to adjustments related to discrete items and the mix of domestic and foreign operating results.

The overall effective tax rate was a benefit 1 % and 5 % for the three and six months ended March 31, 2023.

The current quarter tax rate was impacted by jurisdictional income mix, as well as net $ 20 million from favorable tax discrete items primarily related to changes in uncertain tax positions.

The current six month tax rate was impacted by jurisdictional income mix, as well as net $ 23 million from favorable tax discrete items primarily related to changes in uncertain tax positions resulting primarily from a combination of state expirations and audit settlements.

The overall effective tax rate was 26 % and 11 % for the three and nine months ended June 30, 2023.

The current quarter's tax rate was impacted by jurisdictional income mix, as well as net $ 4 million from favorable tax discrete items primarily related to changes in uncertain tax positions and adjustments to valuation allowances.

The current nine month tax rate was impacted by jurisdictional income mix, as well as net $ 27 million from favorable tax discrete items primarily related to changes in uncertain tax positions.

Prior fiscal year

The overall effective tax rate was 34 % and 25 % for the three and six months ended March 31, 2022 .

The quarter tax rate was impacted by jurisdictional income mix, as well as $ 7 million from net unfavorable tax discrete items primarily related to restructuring and separation activity partially offset by a favorable valuation allowance adjustment for certain foreign tax credits.

The six months tax rate was impacted by jurisdictional income mix as well as $ 5 million from net unfavorable tax discrete items primarily related to restructuring and separation activity partially offset by a favorable valuation adjustment for certain foreign tax credits and adjustments to uncertain positions.

The overall effective tax rate was 2 % and 17 % for the three and nine months ended June 30, 2022 .

The prior year quarter's tax rate was impacted by jurisdictional income mix, as well as a net $ 1 million benefit primarily from favorable return to provision adjustments for certain jurisdictions.

The nine month tax rate was impacted by jurisdictional income mix as well as $ 3 million from net unfavorable tax discrete items primarily related to restructuring and separation activity partially offset by a favorable valuation adjustment for certain foreign tax credits and adjustments to uncertain positions.

Unrecognized tax benefits

Changes in unrecognized tax benefits are summarized as follows for the six months ended March 31, 2023.

Changes in unrecognized tax benefits are summarized as follows for the nine months ended June 30, 2023.

(In millions)

4 unchanged sentences

Lapse of statute of limitations

Balance at March 31, 2023

From a combination of statute expirations and audit settlements in the next twelve months, Ashland expects a decrease in the amount accrued for uncertain tax positions of between $ 3 million and $ 5 million.

Balance at June 30, 2023

It is reasonably possible that there could be other material changes to the amount of uncertain tax positions due to activities of the taxing authorities, settlement of audit issues or the reassessment of existing uncertain tax positions;

2 unchanged sentences

Plan contributions

For the six months ended March 31, 2023 , Ashland contributed $ 3 million to its non-U.S.

pension plans and zero to its U.S.

For the nine months ended June 30, 2023 , Ashland contributed $ 4 million to its non-U.S.

pension plans and $ 3 million to its U.S.

pension plans.

Ashland expects to make additional contributions of approximately $ 3 million to its U.S.

pension plans and expects to make additional contributions of approximately $ 1 million to its non-U.S.

Ashland expects to make additional contributions of less than $ 1 million to both its U.S.

pension plans and non-U.S.

pension plans during the remainder of fiscal 2023.

1 unchanged sentence

Following the completion of the sale of its Performance Adhesives business segment on February 28, 2022, the post-retirement benefits for approximately 40 employees transferred to Arkema, all of whom participated in a non-contributory defined benefit plan in the U.S., were frozen.

This resulted in a significant decrease in total expected future years of service within the plan and required Ashland to remeasure the plan as February 28, 2022.

As a result, Ashland recorded a $ 1 million actuarial gain within the other net periodic benefits income caption of the Statements of Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2022.

This resulted in a significant decrease in total expected future years of service within the plan and required Ashland to remeasure the plan as of February 28, 2022.

As a result, Ashland recorded zero and $ 1 million actuarial gain within the other net periodic benefits income caption of the Statements of Consolidated Comprehensive Income (Loss) for the three and nine months ended June 30, 2022.

Components of net periodic benefit costs (income)

3 unchanged sentences

(In millions)

Three months ended March 31

Three months ended June 30

Interest cost

2 unchanged sentences

Total net periodic benefit costs

Six months ended March 31

Nine months ended June 30

Interest cost

3 unchanged sentences

For segment reporting purposes, service cost is proportionately allocated to each segment, excluding the Unallocated and other segment, and is recorded within the selling, general and administrative expense and cost of sales captions on the Statements of Consolidated Comprehensive Income (Loss).

All other components are recorded within the other net periodic benefit loss caption on the Statements of Consolidated Comprehensive Income (Loss), which netted to a loss of $ 2 million and $ 3 million for the three and six months ended March 31, 2023 , respectively, and a gain of $ 1 million for the three and six months ended March 31, 2022 .

All other components are recorded within the other net periodic benefit loss caption on the Statements of Consolidated Comprehensive Income (Loss), which netted to a loss of $ 2 million and $ 6 million for the three and nine months ended June 30, 2023 , respectively, and a loss of $ 1 million and zero for the three and nine months ended June 30, 2022 .

NOTE L –

17 unchanged sentences

A summary of Ashland asbestos claims activity, excluding Hercules claims, follows.

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Years ended September 30

8 unchanged sentences

Ashland reviews this estimate and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 40-year model developed with the assistance of Gnarus.

During the most recent update completed during 2022, it was determined that the liability for Ashland asbestos-related claims should be increased by $ 16 million.

Total reserves for asbestos claims were $ 285 million at March 31, 2023 compared to $ 305 million at September 30, 2022.

During the most recent update completed in June 2023, it was determined that the liability for Ashland asbestos-related claims should be increased by $ 9 million.

Total reserves for asbestos claims were $ 285 million at June 30, 2023 compared to $ 305 million at September 30, 2022.

A progression of activity in the asbestos reserve is presented in the following table.

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3 unchanged sentences

Asbestos reserve - end of period (a)

(a) Included $ 29 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022 .

(a) Included $ 28 million and $ 29 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of June 30, 2023 and September 30, 2022 respectively.

Ashland asbestos-related receivables

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Substantially all of the estimated receivables from insurance companies are expected to be due from domestic insurers, all of which are solvent.

At March 31, 2023, Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $ 96 million (excluding the Hercules receivable for asbestos claims discussed below) compared to $ 101 million at September 30, 2022 .

During fiscal year 2022, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed.

At June 30, 2023 , Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $ 97 million (excluding the Hercules receivable for asbestos claims discussed below) compared to $ 101 million at September 30, 2022 .

In June 2023, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed.

This model update resulted in a $ 3 million increase in the receivable for probable insurance recoveries.

A progression of activity in the Ashland insurance receivable is presented in the following table.

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(a) 2021 includes a $ 2 million reserve adjustment related to allowances for credit losses as a result of Ashland's adoption of the new credit measurement standard.

The total allowance for credit losses was $ 2 million as of March 31, 2023 and September 30, 2022.

(b) Includes $ 12 million classified in accounts receivable on the Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022 .

The total allowance for credit losses were $ 1 million and $ 2 million as of June 30, 2023 and September 30, 2022, respectively.

(b) Includes $ 11 million and $ 12 million classified in accounts receivable on the Condensed Consolidated Balance Sheets as of June 30, 2023 and September 30, 2022 respectively.

Hercules asbestos-related litigation

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asbestos claims activity follows.

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Ashland reviews this estimate, and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 40-year model developed with the assistance of Gnarus.

As a result of the most recent annual update of this estimate, completed during fiscal year 2022, it was determined that the liability for Hercules asbestos-related claims should be increased by $ 15 million.

Total reserves for asbestos claims were $ 205 million at March 31, 2023 compared to $ 213 million at September 30, 2022.

During the most recent update completed in June 2023, it was determined that the liability for Hercules asbestos-related claims should be decreased by $ 2 million.

Total reserves for asbestos claims were $ 197 million at June 30, 2023 compared to $ 213 million at September 30, 2022.

A progression of activity in the asbestos reserve is presented in the following table.

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Asbestos reserve - end of period (a)

(a) Included $ 18 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022 .

(a) Included $ 17 million and $ 18 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of June 30, 2023 and September 30, 2022 , respectively.

Hercules asbestos-related receivables

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The estimated receivable consists exclusively of solvent domestic insurers.

As of March 31, 2023, Ashland’s receivable for recoveries of litigation defense and claims costs from insurers with respect to Hercules amounted to $ 51 million compared to $ 52 million at September 30, 2022 .

During fiscal year 2022, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed.

This model update resulted in an increase of $ 7 million in the receivable for probable insurance recoveries.

As of June 30, 2023 , Ashland’s receivable for recoveries of litigation defense and claims costs from insurers with respect to Hercules amounted to $ 47 million compared to $ 52 million at September 30, 2022 .

In June 2023, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed.

This model update resulted in a decrease of $ 3 million in the receivable for probable insurance recoveries.

A progression of activity in the Hercules insurance receivable is presented in the following table.

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(a) 2021 includes a $ 1 million reserve adjustment related to allowances for credit losses as a result of Ashland's adoption of the new credit measurement standard.

The total allowance for credit losses was $ 1 million as of March 31, 2023 and September 30, 2022 .

(b) Includes $ 2 million and $ 3 million classified in accounts receivable on the Condensed Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022 , respectively.

The total allowance for credit losses was $ 1 million as of June 30, 2023 and September 30, 2022 .

(b) Includes $ 4 million and $ 3 million classified in accounts receivable on the Condensed Consolidated Balance Sheets as of June 30, 2023 and September 30, 2022 .

Asbestos litigation cost projection

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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, 2023 ,

such locations included 57 sites where Ashland has been identified as a potentially responsible party under Superfund or similar state laws, 108 current and former operating facilities and about 1,225 service station properties, of which 14 are being actively remediated.

Ashland’s reserves for environmental remediation and related environmental litigation amounted to $ 193 million at March 31, 2023 compared to $ 211 million at September 30, 2022 , of which $ 144 million at March 31, 2023 and $ 157 million at September 30, 2022 were classified in other noncurrent liabilities on the Condensed Consolidated Balance Sheets.

Ashland’s reserves for environmental remediation and related environmental litigation amounted to $ 204 million at June 30, 2023 compared to $ 211 million at September 30, 2022 , of which $ 155 million at June 30, 2023 and $ 157 million at September 30, 2022 were classified in other noncurrent liabilities on the Condensed Consolidated Balance Sheets.

The remaining reserves were classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets.

The following table provides a reconciliation of the changes in the environmental remediation reserves during the six months ended March 31, 2023 and 2022.

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The following table provides a reconciliation of the changes in the environmental remediation reserves during the nine months ended June 30, 2023 and 2022.

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Ashland has estimated the value of its probable insurance recoveries associated with its environmental reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage.

At March 31, 2023 and September 30, 2022 , Ashland’s recorded receivable for these probable insurance recoveries was $ 19 million and $ 21 million, of which $ 16 million and $ 17 million at March 31, 2023 and September 30, 2022 were classified in other noncurrent assets on the Condensed Consolidated Balance Sheets.

Components of environmental remediation expense included within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) are presented in the following table for the three and six ended March 31, 2023 and 2022.

At June 30, 2023 and September 30, 2022 , Ashland’s recorded receivable for these probable insurance recoveries was $ 21 million, of which $ 17 million at June 30, 2023 and September 30, 2022 were classified in other noncurrent assets on the Condensed Consolidated Balance Sheets.

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Total expense, net of receivable activity (a)

(a) Net expense of zero and $ 1 million for the three and six months ended March 31, 2023 , respectively, and $ 1 million and $ 2 million for the three and six months ended March 31, 2022, respectively, relates to divested businesses which qualified for treatment as discontinued operations for which certain environmental liabilities were retained by Ashland.

(a) Net expense of $ 5 million and $ 6 million for the three and nine months ended June 30, 2023 , respectively, and $ 9 million and $ 11 million for the three and nine months ended June 30, 2022 , respectively, relates to divested businesses which qualified for treatment as discontinued operations for which certain environmental liabilities were retained by Ashland.

These amounts are classified within the income (loss) from discontinued operations caption of the Statements of Consolidated Comprehensive Income (Loss).

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Although it is not possible to predict with certainty the ultimate costs of environmental remediation, Ashland currently estimates that the upper end of the reasonably possible range of future costs for identified sites could be as high as approximately $ 465 million.

The largest reserve for any site is 14 % of the remediation reserve.

The largest reserve for any site is 13 % of the remediation reserve as of June 30, 2023.

Brazil tax credits

In March 2017, the Federal Supreme Court of Brazil (Brazil Supreme Court) ruled in a leading case that a Brazilian value-added tax (ICMS) should not be included in the base used to calculate a taxpayer’s federal contribution on total revenue known as PIS/COFINS (2017 Decision).

As a result, two of Ashland’s Brazilian subsidiaries filed lawsuits challenging the inclusion of ICMS in Ashland’s calculation of PIS/COFINs, seeking recovery of excess taxes paid plus interest.

In response to the 2017 Decision, the Brazilian tax authority filed an appeal of the 2017 Decision seeking clarification of the amount of ICMS tax to exclude from the calculation of PIS/COFINS.

In May 2021, the Brazil Supreme Court ruled that the ICMS tax be excluded from the calculation of PIS/COFINS.

In May 2023, Law 14592/23 was passed in Brazil, converting the 2017 Decision provisional measure effective for PIS/COFINS legislation excluding ICMS from the calculation basis.

As of June 2023, Ashland had received all favorable court rulings for previously filed suits, completed its analysis of certain prior year overpayments related to ICMS and received acknowledgment from the Brazilian tax authority that allows Ashland to begin the process to recover the taxes.

As a result, Ashland recorded a pre-tax gain of $ 12 million for the three and nine months ended June 30, 2023 for certain excess PIS/COFINS paid from 2012 to February 2023 plus interest.

The gain was recognized within the selling, general and administrative expense caption of the Statement of Consolidated Comprehensive Income (Loss).

Other legal proceedings and claims

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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 Ashland cannot predict with certainty the outcome of such actions, it believes that adequate reserves have been recorded and losses already recognized with respect to such actions were immaterial as of March 31, 2023.

There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions;

however, Ashland believes that such potential losses were immaterial as of March 31, 2023 .

however, Ashland believes that such potential losses were immaterial as of June 30, 2023 .

NOTE M –

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The following is the computation of basic and diluted earnings per share (EPS) from continuing operations attributable to Ashland.

Stock appreciation rights (SARs), stock options and warrants available to purchase shares outstanding for each reporting period whose grant price was greater than the average market price of Ashland Common Stock for each applicable period were not included in the computation of income from continuing operations per diluted share because the effect of these instruments would be antidilutive .

The total number of these shares outstanding was approximately 1 million at March 31, 2023 and 2022 , respectively.

Stock appreciation rights (SARs), stock options and warrants available to purchase shares outstanding for each reporting period whose exercise price was greater than the average market price of Ashland Common Stock for each applicable period were not included in the computation of income from continuing operations per diluted share because the effect of these instruments would be antidilutive .

The total number of these shares outstanding was approximately 1 million at June 30, 2023 and 2022 , respectively.

The majority of these shares are for warrants with a strike price of $ 128.66 .

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2023 Stock repurchase program

On June 28, 2023, Ashland's board of directors authorized a new evergreen $ 1 billion common share repurchase program (2023 stock repurchase program).

The new authorization terminates and replaces the company's 2022 stock repurchase program, which had $ 200 million outstanding at the date of termination.

Stock repurchase program agreements

During May 2023, under the 2022 stock repurchase program, Ashland initiated a Rule 10b5-1 trading plan agreement to repurchase up to $ 100 million of its outstanding shares.

The program was completed during June 2023, when Ashland paid a total of $ 100 million and received a delivery of 1.1 million shares of common stock.

During March 2023, under the 2022 stock repurchase program, Ashland initiated a Rule 10b5-1 trading plan agreement to repurchase up to $ 100 million of its outstanding shares.

The program was completed during April 2023, when Ashland paid a total of $ 100 million and received a delivery of 1.0 million shares of common stock.

As of March 31, 2023, Ashland purchased a total of $ 52 million (of which $ 42 million was cash settled and $ 10 million was accrued within the accrued expenses and other liabilities caption for authorized and executed share repurchases pending settlement as of period end) and receive a delivery of 0.5 million shares of common stock.

During February 2023, under the 2022 stock repurchase program, Ashland initiated a Rule 10b5-1 trading plan agreement to repurchase up to $ 100 million of its outstanding shares.

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On March 1, 2022, under the 2018 stock repurchase program, Ashland entered into an agreement to repurchase an aggregate amount of $ 200 million of Ashland common stock using open-market purchases under rule 10b-18.

As of March 31, 2022, Ashland paid $ 155 million and received 1.7 million shares of common stock under the agreement.

On April 8, 2022, Ashland completed repurchases under this agreement repurchasing a total of 2.15 million shares for a total amount of $ 200 million.

Stockholder dividends

Dividends of 33.5 cents per share were paid in the first and second quarters of fiscal 2023 and 30 cents per share were paid in the first and second quarters of fiscal 2022.

On May 11, 2023, Ashland's Board declared a quarterly cash dividend of $ 0.385 per share on the company's common stock representing a 15 percent increase from the previous quarter.

The dividend was paid in the third quarter of fiscal 2023.

Dividends of $ 0.335 per share were paid in the first and second quarters of fiscal 2023 and the third quarter of fiscal 2022 and $ 0.30 per share were paid in the first and second quarters of fiscal 2022.

Accumulated other comprehensive income (loss)

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(expense) benefit

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Other comprehensive income (loss)

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Total other comprehensive income (loss)

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Other comprehensive income (loss)

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Cash dividends declared per common share

(a) Common shares issued were 16,937 shares and 13,935 shares for the three months ended March 31, 2023 and 2022 , respectively, and 144,514 shares and 108,650 shares for the six months ended March 31, 2023 and 2022 , respectively.

(b) Common shares repurchased were 1,488,251 shares for the three and six months ended March 31, 2023, and 2,403,380 shares for the three and six months ended March 31, 2022.

(a) Common shares issued were 35,420 shares and 55,006 shares for the three months ended June 30, 2023 and 2022 , respectively, and 179,934 shares and 163,656 shares for the nine months ended June 30, 2023 and 2022 , respectively.

(b) Common shares repurchased were 1,594,677 and 3,082,928 shares for the three and nine months ended June 30, 2023 , and 449,932 shares and 2,853,312 shares for the three and nine months ended June 30, 2022 .

(c) Includes $ 2 million and $ 3 million in excise tax on stock repurchases for the three and nine months ended June 30, 2023 .

NOTE O –

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Performance share awards

(a) Included $ 1 million and $ 2 million of expense related to cash-settled nonvested restricted stock awards during the three and six months ended March 31, 2023 .

(b) Included zero and $ 2 million of expense related to cash-settled nonvested restricted stock awards during the three and six months ended March 31, 2022 .

(a) Included $ 2 million of income and zero of expense related to cash-settled nonvested restricted stock awards during the three and nine months ended June 30, 2023 .

(b) Included $ 1 million and $ 3 million of expense related to cash-settled nonvested restricted stock awards during the three and nine months ended June 30, 2022 , and $ 1 million each of expense related to cash-settled performance units during the three and nine months ended June 30, 2022 .

NOTE P –

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Trade receivables are defined as receivables arising from contracts with customers and are recorded within the accounts receivable caption within the Condensed Consolidated Balance Sheets.

Ashland’s trade receivables were $ 365 million and $ 369 million as of March 31, 2023 and September 30, 2022 , respectively.

Ashland’s trade receivables were $ 309 million and $ 369 million as of June 30, 2023 and September 30, 2022 , respectively.

See Note H for additional information on Ashland’s program to sell certain receivables on a revolving basis to third party banks up to an aggregate purchase limit (U.S Accounts Receivable Sales Program).

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The service cost component of pension and other postretirement benefits costs is allocated to each reportable segment on a ratable basis;

while the remaining components of pension and other postretirement benefits

costs are recorded within the other net periodic benefit loss caption on the Statements of Consolidated Comprehensive Income (Loss).

while the remaining components of pension and other postretirement benefits costs are recorded within the other net periodic benefit loss caption on the Statements of Consolidated Comprehensive Income (Loss).

Ashland refines its expense allocation methodologies to the reportable segments from time to time as internal accounting practices are improved, more refined information becomes available and the industry or market changes.

Significant revisions to Ashland’s methodologies are adjusted for all segments on a retrospective basis.

The following table presents various financial information for each reportable segment for the three and six months ended March 31, 2023 and 2022.

The following table presents various financial information for each reportable segment for the three and nine months ended June 30, 2023 and 2022.

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Intermediates

Unallocated and other

AMORTIZATION EXPENSE

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All other intersegment sales are accounted for at cost.

(b) Excludes income (loss) from discontinued operations and other net periodic benefit loss (income).

(b) Excludes income (loss) from discontinued operations and other net periodic benefit loss.

See the Statement of Consolidated Comprehensive Income (Loss) for applicable amounts excluded.

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Ashland may from time to time make forward-looking statements in its Annual Report to Stockholders, quarterly reports and other filings with the Securities and Exchange Commission (SEC), news releases and other written and oral communications.

These forward-looking statements are based on Ashland’s expectations and assumptions, as of the date such statements are made, regarding Ashland’s future operating performance and financial condition and expected effects of the COVID-19 pandemic on Ashland’s business, as well as the economy and other future events or circumstances.

These forward-looking statements are based on Ashland’s expectations and assumptions, as of the date such statements are made, regarding Ashland’s future operating performance and financial condition, as well as the economy and other future events or circumstances.

Ashland’s expectations and assumptions include, without limitation, those mentioned within the MD&A, internal forecasts and analyses of current and future market conditions and trends, management plans and strategies, operating efficiencies, cost savings and economic conditions (such as prices, supply and demand, cost of raw materials, and the ability to recover raw-material cost increases through price increases), and risks and uncertainties associated with the following:

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severe weather, natural disasters, public health crises (including the COVID-19 pandemic), cyber events and legal proceedings and claims (including product recalls, environmental and asbestos matters);

the effects of the COVID-19 pandemic and the ongoing Ukraine and Russia conflict on the geographies in which Ashland operates, the end markets Ashland serves and on Ashland’s supply chain and customers;

the effects of the ongoing Ukraine and Russia conflict on the geographies in which Ashland operates, the end markets Ashland serves and on Ashland’s supply chain and customers;

and without limitation, risks and uncertainties affecting Ashland that are contained in “Use of estimates, risks and uncertainties”

1 unchanged sentence

Various risks and uncertainties may cause actual results to differ materially from those stated, projected or implied by any forward-looking statements.

The extent and duration of the COVID-19 pandemic on our business and operations remains uncertain.

Factors that influence the impact on our business and operations include the duration and extent of the pandemic, the extent of imposed or recommended containment and mitigation measures, and the general economic consequences of the pandemic.

Ashland believes its expectations and assumptions are reasonable, but there can be no assurance that the expectations reflected herein will be achieved.

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With approximately 3,900 employees worldwide, Ashland serves customers in more than 100 countries.

Ashland’s sales generated outside of North America were 70% for the three and six months ended March 31, 2023 and 67% for the three and six months ended March 31, 2022.

Sales by region expressed as a percentage of total consolidated sales for the three and six months ended March 31 were as follows:

Ashland’s sales generated outside of North America were 69% and 70% for the three and nine months ended June 30, 2023, respectively, and 67% for the three and nine months ended June 30, 2022.

Sales by region expressed as a percentage of total consolidated sales for the three and nine months ended June 30 were as follows:

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Sales by Geography

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Unallocated and Other includes corporate governance activities and certain legacy matters.

The contribution to sales by each reportable segment expressed as a percentage of total consolidated sales for the three and six months ended March 31 was as follows:

The contribution to sales by each reportable segment expressed as a percentage of total consolidated sales for the three and nine months ended June 30 was as follows:

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Sales by Reportable Segment

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Business results current quarter

Ashland recorded net income of $91 million (income of $92 million in continuing operations and a loss of $1 million in discontinued operations) and net income of $786 million (income of $38 million in continuing operations and $748 million in discontinued operations) in the current and prior year quarters, respectively.

Ashland’s EBITDA of $140 million decreased by $770 million for the current quarter, primarily due to a $732 million gain related to Performance Adhesives recorded within income from discontinued operations for the prior year quarter, while Ashland’s Adjusted EBITDA of $145 million decreased by $18 million for the current quarter, compared to the prior year quarter (see U.S.

Ashland recorded net income of $50 million (income of $42 million in continuing operations and income of $8 million in discontinued operations) and net income of $36 million (income of $51 million in continuing operations and loss of $15 million in discontinued operations) in the current and prior year quarters, respectively.

Ashland’s EBITDA of $130 million decreased by $27 million for the current quarter while Ashland’s Adjusted EBITDA of $133 million decreased by $41 million for the current quarter, compared to the prior year quarter (see U.S.

GAAP reconciliation below under consolidated review).

The decrease was primarily driven by increased plant manufacturing costs, which includes a $13 million impact during the quarter related to the December winter storm in the U.S., and energy costs, lower sales volumes, and unfavorable foreign currency exchange, partially offset by improved pricing and mix.

The decrease was primarily driven by lower sales volumes from customer de-stocking and higher costs primarily associated with inventory control actions, partially offset by improved pricing and favorable selling, general and administrative expense primarily driven by lower incentive compensation expense.

Uncertainty relating to the Ukraine and Russia conflict

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Uncertainty relating to the COVID-19 pandemic

Ashland continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business and geographies, including how it will impact customers, employees, suppliers, vendors, business partners and distribution channels.

Ashland is unable to predict the impact that the COVID-19 pandemic will have on its future financial position and operating results due to numerous uncertainties.

These uncertainties include the severity of the virus, the duration of the outbreak, governmental, business or other actions, impacts on Ashland’s supply chain, the effect on customer demand, or changes to Ashland’s operations.

The health of Ashland’s workforce and its ability to meet staffing needs throughout the critical functions cannot be predicted and is vital to operations.

Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown.

In addition, Ashland cannot predict the impact that the COVID-19 pandemic will have on its customers, vendors, suppliers and other business partners;

however, any material effect on these parties could adversely impact Ashland.

Ashland continues to successfully navigate the uncertain environment associated with the COVID-19 pandemic.

Through the second quarter of fiscal 2023, Ashland has not experienced any additional major operating surprises related to the COVID-19 pandemic, continues to maintain supply chains in a challenging environment, had strong safety performance in the face of unprecedented pressures and improved operating discipline across each of its businesses.

Through the third quarter of fiscal 2023, Ashland has not experienced any additional major operating surprises related to the COVID-19 pandemic, continues to maintain supply chains in a challenging environment, had strong safety performance in the face of unprecedented pressures and improved operating discipline across each of its businesses.

Ashland's businesses continued to show resiliency in the face of difficult economic circumstances.

While sales were up in the year-to-date period-over-period, the COVID-19 impact related to the China re-opening did negatively impact demand during the first and second quarters of fiscal 2023 for both the Specialty Additives and Personal Care business segments.

Additionally Specialty Additives was also impacted by extended unplanned plant shutdowns at its Nanjing, China, facility as a result of these same dynamics.

The COVID-19 impact related to the China re-opening did negatively impact demand during the first and second quarters of fiscal 2023 for both the Specialty Additives and Personal Care business segments.

Additionally, Specialty Additives was also impacted by extended unplanned plant shutdowns at its Nanjing, China, facility as a result of these same dynamics during the first half of this fiscal year.

Ashland’s overall liquidity remains strong and Ashland is more than able to meet its operating cash needs and other investing and financing cash requirements at this time, including those necessary to grow the business as economic conditions improve.

The situation surrounding the COVID-19 pandemic remains fluid, and Ashland is actively managing its response in collaboration with customers, government officials, team members and business partners.

For further information regarding the impact of the COVID-19 pandemic on the Company, please see Item 1A, Risk Factors in Ashland’s most recent Form 10-K filed with the SEC.

2023 Stock Repurchase program

On June 28, 2023, Ashland's board of directors authorized a new evergreen $1 billion common share repurchase program (2023 stock repurchase program).

The new authorization terminates and replaces the company's 2022 stock repurchase program, which had $200 million outstanding at the date of termination.

Stock Repurchase program agreements

During May 2023, under the 2022 stock repurchase program, Ashland initiated a Rule 10b5-1 trading plan agreement to repurchase up to $100 million of its outstanding shares.

The program was completed during June 2023, when Ashland paid a total of $100 million and received a delivery of 1.1 million shares of common stock.

During March 2023, under the 2022 stock repurchase program, Ashland initiated a Rule 10b5-1 trading plan agreement to repurchase up to $100 million of its outstanding shares.

The program was completed during April 2023, when Ashland paid a total of $100 million and received a delivery of 1.0 million shares of common stock.

As of March 31, 2023, Ashland purchased a total of $52 million (of which $42 million was cash settled and $10 million was accrued within the accrued expenses and other liabilities caption for authorized and executed share repurchases pending settlement as of period end) and received a delivery of 0.5 million shares of common stock.

During February 2023, under the existing 2022 stock repurchase program, Ashland initiated a Rule 10b5-1 trading plan agreement to repurchase up to $100 million of its outstanding shares.

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Ashland’s net income is primarily affected by results within operating income, net interest and other expense (income), income taxes, discontinued operations and other significant events or transactions that are unusual or nonrecurring.

Current Quarter - Key financial results for the three months ended March 31, 2023 and 2022 included the following:

Ashland’s net income amounted to $91 million compared to $786 million for the three months ended March 31, 2023 and 2022, respectively, or income of $1.67 and $13.69 diluted earnings per share, respectively.

Discontinued operations, which are reported net of taxes, resulted in a loss of $1 million and income of $748 million during the three months ended March 31, 2023 and 2022, respectively.

The prior year quarter includes a $732 million gain on disposal related to the Performance Adhesives business segment.

Income from continuing operations, which excludes results from discontinued operations, amounted to income of $92 million and $38 million for the three months ended March 31, 2023 and 2022, respectively.

The effective income tax rates was a benefit of 1% and expense of 34% for the three months ended March 31, 2023 and 2022, respectively, and were significantly impacted by certain tax discrete items in both the current and prior year quarters.

Ashland incurred pretax net interest and other income of $10 million and expense of $43 million for the three months ended March 31, 2023 and 2022, respectively.

Current Quarter - Key financial results for the three months ended June 30, 2023 and 2022 included the following:

Ashland’s net income amounted to $50 million compared to $36 million for the three months ended June 30, 2023 and 2022, respectively, or income of $0.94 and $0.65 diluted earnings per share, respectively.

Discontinued operations, which are reported net of taxes, resulted in income of $8 million and a loss of $15 million during the three months ended June 30, 2023 and 2022, respectively.

Income from continuing operations, which excludes results from discontinued operations, amounted to income of $42 million and $51 million for the three months ended June 30, 2023 and 2022, respectively.

The effective income tax rates were expense of 26% and 2% for the three months ended June 30, 2023 and 2022, respectively, and were significantly impacted by certain tax discrete items in both the current and prior year quarters.

Ashland incurred pretax net interest and other expense of $3 million and $59 million for the three months ended June 30, 2023 and 2022, respectively.

This includes a gain of $6 million and a loss of $48 million on restricted investments, respectively, for the current and prior year quarters.

Other net periodic benefit loss (income) resulted in a loss of $2 million and income of $1 million during the three months ended March 31, 2023 and 2022, respectively.

The prior year quarter income related to an actuarial gain on the remeasurement of a pension plan during the prior year quarter.

Operating income was $83 million and $100 million for the three months ended March 31, 2023 and 2022, respectively.

Year-to-date - Key financial results for the six months ended March 31, 2023 and 2022 included the following:

Ashland’s net income amounted to $132 million compared to $834 million for the six months ended March 31, 2023 and 2022, respectively, or income of $2.39 and $14.45 diluted earnings per share, respectively.

Discontinued operations, which are reported net of taxes, resulted in a loss of $2 million and income of $764 million during the six months ended March 31, 2023 and 2022, respectively.

Other net periodic benefit loss resulted in losses of $2 million and $1 million during the three months ended June 30, 2023 and 2022, respectively.

Operating income was $62 million and $112 million for the three months ended June 30, 2023 and 2022, respectively.

Year-to-date - Key financial results for the nine months ended June 30, 2023 and 2022 included the following:

Ashland’s net income amounted to $182 million compared to $870 million for the nine months ended June 30, 2023 and 2022, respectively, or income of $3.35 and $15.28 diluted earnings per share, respectively.

Discontinued operations, which are reported net of taxes, resulted in income of $6 million and $749 million during the nine months ended June 30, 2023 and 2022, respectively.

The prior year period includes a $732 million gain on the sale of the Performance Adhesives business segment.

Income from continuing operations, which excludes results from discontinued operations, amounted to income of $134 million and $70 million for the six months ended March 31, 2023 and 2022, respectively.

The effective income tax rates were an expense of 5% and 26% for the six months ended March 31, 2023 and 2022, respectively, and were significantly impacted by certain tax discrete items in both the current and prior year periods.

Ashland incurred pretax net interest and other income of $24 million and expense $49 million for the six months ended March 31, 2023 and 2022, respectively.

Income from continuing operations, which excludes results from discontinued operations, amounted to income of $176 million and $121 million for the nine months ended June 30, 2023 and 2022, respectively.

The effective income tax rates were an expense of 11% and 17% for the nine months ended June 30, 2023 and 2022, respectively, and were significantly impacted by certain tax discrete items in both the current and prior year periods.

Ashland incurred pretax net interest and other income of $21 million and expense $108 million for the nine months ended June 30, 2023 and 2022, respectively.

This includes a gain of $47 million and a loss of $72 million on restricted investments, respectively, for the current and prior year periods.

Other net periodic benefit loss (income) resulted in a loss of $3 million during the six months ended March 31, 2023, and a $1 million actuarial gain on the remeasurement of a pension plan during the prior year period.

Other net periodic benefit loss resulted in a loss of $6 million during the nine months ended June 30, 2023, and zero for the prior year period.

See Note K for more information.

Operating income was $120 million and $142 million for the six months ended March 31, 2023 and 2022, respectively.

Operating income was $182 million and $254 million for the nine months ended June 30, 2023 and 2022, respectively.

For further information on the items reported above, see the discussion in the comparative Statements of Consolidated Comprehensive Income (Loss) caption review analysis.

Operating income

Current Quarter - Operating income amounted to $83 million and $100 million for the three months ended March 31, 2023 and 2022, respectively.

Current Quarter - Operating income amounted to $62 million and $112 million for the three months ended June 30, 2023 and 2022, respectively.

The current and prior year quarters’

9 unchanged sentences

See Note L of the Notes to Condensed Consolidated Financial Statements for more information.

ICMS Brazil tax credit –

In 2017, the Federal Supreme Court of Brazil ruled in a leading case that a Brazil value-added tax (ICMS) should not be included in the base used to calculate a taxpayer's federal contribution on total revenue known as PIS/COFINS (2017 Decision).

Following favorable court rulings from lawsuits previously filed by two of Ashland's Brazilian subsidiaries challenging the inclusion of ICMS in Ashland's calculation of PIS/COFINS, Ashland received acknowledgment from the Brazilian tax authorities that allows Ashland to begin the process to recover the taxes.

See Note L of the Notes to Condensed Consolidated Financial Statements for more information.

Gain on acquisitions and divestitures –

Ashland recorded income of $7 million during the three months ended March 31, 2022.

This includes a pre-tax gain of $7 million related to the sale of an excess corporate property during the three months ended March 31, 2022.

Ashland recorded income of $35 million during the three months ended June 30, 2022, related to the sale of excess land during the three months ended June 30, 2022.

See Note B of the Notes to Condensed Consolidated Financial Statements for more information.

Operating income for the three months ended March 31, 2023 and 2022 included depreciation and amortization of $60 million and $61 million, respectively.

Year-to-date - Operating income to $120 million and $142 million for the six months ended March 31, 2023 and 2022, respectively.

Operating income for the three months ended June 30, 2023 and 2022 included depreciation and amortization of $62 million and $61 million, respectively.

Year-to-date - Operating income amounted to $182 million and $254 million for the nine months ended June 30, 2023 and 2022, respectively.

The current and prior year periods' operating income included certain key items that were excluded to arrive at Adjusted EBITDA and are quantified in the table below in the “EBITDA and Adjusted EBITDA”

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Ashland periodically implements cost reduction programs related to acquisitions, divestitures and other cost reduction programs in order to enhance profitability through streamlined operations and an improved overall cost structure.

Ashland often incurs severance, facility and integration costs associated with these programs.

Ashland often incurs severance, facility and

integration costs associated with these programs.

See Note D in the Notes to Condensed Consolidated Financial Statements for further information on the restructuring activities.

Asset impairments - During the three months ended December 31, 2022, Ashland incurred an impairment charge associated with the pending sale of a Specialty Additives manufacturing facility.

Asset impairments - During the nine months ended June 30, 2023, Ashland incurred an impairment charge associated with the sale of a Specialty Additives manufacturing facility.

See Note B of the Notes to Condensed Consolidated Financial Statements for more information.

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As a result of these activities, Ashland recorded adjustments during the current and prior year quarters to its environmental liabilities and receivables primarily related to previously divested businesses or non-operational sites.

As a result of these activities, Ashland recorded adjustments during the current and prior year periods to its environmental liabilities and receivables primarily related to previously divested businesses or non-operational sites.

See Note L of the Notes to Condensed Consolidated Financial Statements for more information.

ICMS Brazil tax credit –

See Note L of the Notes to Condensed Consolidated Financial Statements for more information.

Gain on acquisitions and divestitures –

Ashland recorded income of $7 during the three and six months ended March 31, 2022, respectively.

This includes a pre-tax gain of $7 million related to the sale of an excess corporate property during the six months ended March 31, 2022.

Ashland recorded income of $42 million during the nine months ended June 30, 2022, related to the sale of excess land during the nine months ended June 30, 2022.

See Note B of the Notes to Condensed Consolidated Financial Statements for more information.

Operating income for the six months ended March 31, 2023 and 2022 included depreciation and amortization of $120 million and $121 million, respectively.

Operating income for the nine months ended June 30, 2023 and 2022 included depreciation and amortization of $181 million and $182 million, respectively.

Statements of Consolidated Comprehensive Income (Loss) –

caption review

A comparative analysis of the Statements of Consolidated Comprehensive Income (Loss) by caption is provided as follows for the three and six months ended March 31, 2023 and 2022.

Three months ended March 31

Six months ended March 31

A comparative analysis of the Statements of Consolidated Comprehensive Income (Loss) by caption is provided as follows for the three and nine months ended June 30, 2023 and 2022.

Three months ended June 30

Nine months ended June 30

(In millions)

The following table provides a reconciliation of the change in sales for the three and six months ended March 31, 2023 and 2022.

The following table provides a reconciliation of the change in sales for the three and nine months ended June 30, 2023 and 2022.

Three months ended

Six months ended

Nine months ended

(In millions)

March 31, 2023

June 30, 2023

Foreign currency exchange

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Current Quarter - Sales for the current quarter decreased $98 million compared to the prior year quarter.

Favorable product pricing associated with cost inflation pricing actions increased sales by $74 million which was more than offset by lower sales volume and unfavorable foreign currency exchange of $61 million and $14 million, respectively.

Year-to-date - Sales for the current year increased $13 million compared to the prior year period.

Favorable product pricing associated with cost inflation pricing actions increased sales by $137 million which was partially offset by lower sales volume and unfavorable foreign currency exchange of $87 million and $37 million, respectively.

Three months ended March 31

Six months ended March 31

Lower sales volume primarily from customer de-stocking of $134 million was partially offset by favorable product pricing associated with cost inflation pricing actions and favorable foreign currency exchange, which increased sales by $33 million and $3 million, respectively.

Year-to-date - Sales for the current year decreased $85 million compared to the prior year period.

Lower sales volume primarily from customer de-stocking of $221 million and unfavorable foreign currency exchange of $34 million were partially offset by favorable product pricing associated with cost inflation pricing actions which increased sales by $170 million.

Three months ended June 30

Nine months ended June 30

(In millions)

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Gross profit as a percent of sales

The following table provides a reconciliation of the change in cost of sales between the three and six months ended March 31, 2023 and 2022.

The following table provides a reconciliation of the change in cost of sales between the three and nine months ended June 30, 2023 and 2022.

Three months ended

Six months ended

Nine months ended

(In millions)

March 31, 2023

June 30, 2023

Foreign currency exchange

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Change in cost of sales

Current Quarter - Cost of sales for the current quarter increased $22 million compared to the prior year quarter.

Price/mix and higher operating costs, which includes cost inflation associated with plant manufacturing and shipping costs (as well as planned and unplanned plant shutdowns and maintenance), increased cost of sales by $19 million and $52 million, respectively.

These increases were partially offset by lower volume and foreign currency exchange, which decreased cost of sales by $43 million and $6 million, respectively.

Gross profit as a percentage of sales decreased 3.7%.

Year-to-date - Cost of sales for the current year increased $31 million compared to the prior year period.

These increases were partially offset by lower volume and foreign currency exchange, which decreased cost of sales by $65 million and $16 million, respectively.

Gross profit as a percentage of sales decreased 2.0%.

Three months ended March 31

Six months ended March 31

Current Quarter - Cost of sales for the current quarter decreased $36 million compared to the prior year quarter.

Lower volume primarily from customer de-stocking decreased cost of sales by $86 million.

This decrease was partially offset by higher product pricing associated with cost inflation, unfavorable foreign currency exchange and higher operating costs primarily associated with inventory control actions, which increased cost of sales by $4 million, $1 million, and $45 million, respectively.

Gross profit as a percentage of sales decreased 4.7% primarily as a result of lower sales volume and higher operating costs.

Year-to-date - Cost of sales for the current year decreased $5 million compared to the prior year period.

Lower volume primarily from customer de-stocking and favorable foreign currency exchange decreased cost of sales by $151 million and $15 million, respectively.

This decrease was partially offset by higher product pricing associated with cost inflation, and higher operating costs, which includes costs associated with inventory control actions and inflation associated with plant manufacturing and shipping costs (as well as planned and unplanned plant shutdowns and maintenance), increased cost of sales by $32 million and $129 million, respectively.

Gross profit as a percentage of sales decreased 2.9% primarily as a result of lower sales volume and higher operating costs.

Three months ended June 30

Nine months ended June 30

(In millions)

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Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year quarter were:

Expense of zero and $1 million during the three months ended March 31, 2023 and 2022, respectively, comprised of key items for severance, lease abandonment and other restructuring costs;

Expense of $3 million and $1 million during the three months ended June 30, 2023 and 2022, respectively, comprised of key items for severance, lease abandonment and other restructuring costs;

$12 million gain associated with ICMS Brazil tax credit (see Note L for more information);

$17 million and $36 million in net environmental-related expenses during the current and prior year quarter, respectively (see Note L for more information);

Decreased incentive accruals primarily make up the remaining change.

Year-to-date - Selling, general and administrative expense for the current period remained consistent compared to the prior year period with expenses as a percent of sales decreasing 0.2 percentage points.

Decreased incentive accruals primarily making up the remaining change.

Year-to-date - Selling, general and administrative expense for the current period decreased $43 million compared to the prior year period with expenses as a percent of sales decreasing 1.7 percentage points.

Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year period were:

Expense of $1 million and $2 million comprised of key items for severance, lease abandonment and other restructuring costs during the six months ended March 31, 2023 and 2022, respectively;

$4 million impairment charge in the current quarter associated with the pending sale of a Specialty Additives manufacturing facility.

$12 million in net environmental-related expenses during the current and prior year period, respectively (see Note L for more information);

Decreased incentive accruals primarily make up the remaining change.

Three months ended March 31

Six months ended March 31

Expense of $4 million and $3 million comprised of key items for severance, lease abandonment and other restructuring costs during the nine months ended June 30, 2023 and 2022, respectively;

$4 million impairment charge in the current year associated with the sale of a Specialty Additives manufacturing facility.

$12 million gain associated with ICMS Brazil tax credit;

$28 million and $48 million in net environmental-related expenses during the current and prior year period, respectively (see Note L for more information);

Decreased incentive accruals primarily making up the remaining change.

Three months ended June 30

Nine months ended June 30

(In millions)

Research and development expense

Current Quarter - Research and development expense remained relatively consistent with the prior year quarter.

Year-to-date - Research and development expense remained relatively consistent with the prior year period.

Three months ended March 31

Six months ended March 31

Current Quarter - Research and development expense decreased primarily due to lower incentive accruals.

Year-to-date - Research and development expense decreased primarily due to lower incentive accruals.

Three months ended June 30

Nine months ended June 30

(In millions)

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Year-to-date - Intangibles amortization expense is primarily consistent with the prior year quarter.

Three months ended March 31

Six months ended March 31

Three months ended June 30

Nine months ended June 30

(In millions)

Equity and other income

Current Quarter - Other income was zero in both the current year quarter and prior year quarter.

Year-to-date - Other income was $1 million and zero in the current and prior year periods.

Three months ended March 31

Six months ended March 31

Current Quarter - Other income increased $3 million primarily related to China financial cash subsidies.

Year-to-date - Other income increased $3 million primarily related to China financial cash subsidies.

Three months ended June 30

Nine months ended June 30

(In millions)

Income on acquisitions and divestitures, net

Current Quarter - The activity in the prior year quarter was related to a gain on the sale of an excess corporate property.

Year-to-date - The activity in the prior year was related to a gain on the sale of an excess corporate property.

Three months ended March 31

Six months ended March 31

Current Quarter - The activity in the prior year quarter was related to a gain on the sale of excess land.

Year-to-date - The activity in the prior year was related to a gain on the sale of excess land.

See Note B of the Notes to Condensed Consolidated Financial Statements for more information.

Three months ended June 30

Nine months ended June 30

(In millions)

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Current Quarter - Net interest and other expense decreased by $56 million during the current quarter compared to the prior year quarter.

Interest expense decreased $2 million primarily due to lower debt levels during the current quarter compared to the prior year quarter.

Interest expense is primarily consistent during the current quarter compared to the prior year quarter.

Interest income increased $2 million due to higher investment yields and higher cash balances.

Restricted investments income of $22 million and losses of $26 million included realized gains of $20 million compared to losses $28 million for the three months ended March 31, 2023 and 2022, respectively.

Restricted investments income of $10 million and losses of $45 million included realized gains of $6 million compared to losses $48 million for the three months ended June 30, 2023 and 2022, respectively.

See Note E for more information on the restricted investments.

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Restricted investments income of $57 million and losses of $59 million included realized gains of

$41 million compared to losses of $24 million for the six months ended March 31, 2023 and 2022, respectively.

$47 million compared to losses of $72 million for the nine months ended June 30, 2023 and 2022, respectively.

See Note E for more information on the restricted investments.

Three months ended March 31

Six months ended March 31

Three months ended June 30

Nine months ended June 30

(In millions)

Other net periodic benefit loss (income)

Current Quarter - Other net periodic benefit loss for the three months ended March 31, 2023 primarily included interest cost of $4 million which was partially offset by expected return on plan assets of $2 million.

Other net periodic benefit income included a $1 million actuarial gain on the remeasurement of a pension plan during the prior year quarter.

Current Quarter - Other net periodic benefit loss for the three months ended June 30, 2023 primarily included interest cost of $4 million which was partially offset by expected return on plan assets of $2 million.

See Note K for more information.

Year-to-date - Other net periodic benefit loss for the six months ended March 31, 2023 primarily included interest cost of $7 million which was partially offset by expected return on plan assets of $4 million.

Year-to-date - Other net periodic benefit loss for the nine months ended June 30, 2023 primarily included interest cost of $11 million which was partially offset by expected return on plan assets of $5 million.

Other net periodic benefit income included a $1 million actuarial gain on the remeasurement of a pension plan during the prior year period.

See Note K for more information.

Three months ended March 31

Six months ended March 31

Three months ended June 30

Nine months ended June 30

(In millions)

2 unchanged sentences

Current Quarter - Ashland’s effective tax rate in any interim period is subject to adjustments related to discrete items and the mix of domestic and foreign operating results.

The overall effective tax rate was a benefit of 1% for the three months ended March 31, 2023 and was impacted by jurisdictional income mix, as well as net favorable discrete items of $20 million primarily related to changes in uncertain tax positions.

The overall effective tax rate was 34% for the three months ended March 31, 2022 and was impacted by jurisdictional income mix, as well as net unfavorable discrete items of $7 million, primarily related to restructuring and separation activity partially offset by a favorable valuation allowance adjustment for certain foreign tax credits.

The overall effective tax rate was 26% for the three months ended June 30, 2023 and was impacted by jurisdictional income mix, as well as net favorable discrete items of $4 million primarily related to changes in uncertain tax positions and adjustments to valuation allowances.

The overall effective tax rate was 2% for the three months ended June 30, 2022 and was impacted by jurisdictional income mix, as well as a net $1 million benefit primarily from favorable return to provision adjustments for certain jurisdictions.

Year-to-date - Ashland’s effective tax rate in any interim period is subject to adjustments related to discrete items and the mix of domestic and foreign operating results.

The overall effective tax rate was 5% for the six months ended March 31, 2023 and was impacted by jurisdictional income mix, as well as net favorable discrete items of $23 million primarily related to changes in uncertain tax positions resulting primarily from a combination of state expirations and audit settlements.

The overall effective tax rate was 26% for the six months ended March 31, 2022 and was impacted by jurisdictional income mix, as well as net unfavorable discrete items of $5 million, primarily related to restructuring and separation activity partially offset by a favorable valuation allowance for certain foreign tax credits and adjustments to uncertain tax positions.

The overall effective tax rate was 11% for the nine months ended June 30, 2023 and was impacted by jurisdictional income mix, as well as net favorable discrete items of $27 million primarily related to changes in uncertain tax positions.

The overall effective tax rate was 17% for the nine months ended June 30, 2022 and was impacted by jurisdictional income mix, as well as net unfavorable discrete items of $3 million, primarily related to restructuring and separation activity partially offset by a favorable valuation allowance for certain foreign tax credits and adjustments to uncertain tax positions.

Adjusted income tax expense (benefit)

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The effective tax rate, excluding key items, which is a non-GAAP measure, has been prepared to illustrate the ongoing tax effects of Ashland’s operations.

Management believes investors and analysts use this financial measure in assessing Ashland's business performance and that presenting this non-GAAP measure on a consolidated basis assists investors in better understanding Ashland’s ongoing business performance and enhancing their ability to compare period-to-period financial results.

The effective tax rate during the three and six months ended March 31, 2023 and 2022 was significantly impacted by the following tax specific key items:

Management believes investors and analysts use this financial measure in assessing Ashland's business performance and that presenting this non-GAAP measure on a

consolidated basis assists investors in better understanding Ashland’s ongoing business performance and enhancing their ability to compare period-to-period financial results.

The effective tax rate during the three and nine months ended June 30, 2023 and 2022 was significantly impacted by the following tax specific key items:

Uncertain tax positions - Includes the impact from the settlement of uncertain tax positions with various tax authorities;

Valuation allowances - Includes the impact from the release of certain foreign tax credit valuation allowances during 2022;

Valuation allowances - Includes the impact from the release of certain foreign tax credit valuation allowances;

Restructuring and separation activity - Includes the impact from company-wide cost reduction programs during 2022.

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Three months ended

Six months ended

Nine months ended

(In millions)

3 unchanged sentences

before income taxes

Income tax expense (benefit)

Income tax expense

Income tax rate adjustments:

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(c) Due to rounding conventions, the effective tax rate presented may not recalculate precisely based on the numbers disclosed within this table.

Three months ended March 31

Six months ended March 31

Three months ended June 30

Nine months ended June 30

(In millions)

Income (loss) from discontinued

operations (net of taxes)

operations (net of tax)

Performance Adhesives

Composites/Marl facility

Gain (loss) on disposal of discontinued

operations (net of taxes)

Water Technologies

Gain on disposal of discontinued

operations (net of tax)

Performance Adhesives

Current Quarter - The activity for Composites/Marl facility and Distribution during the current and prior year quarter was related to post-closing adjustments.

The Performance Adhesives segment sales and pre-tax operating income included in discontinued operations were $75 million and $12 million for the prior year quarter.

A $732 million gain on disposal was recorded in the prior year quarter associated with the February 28, 2022 closing of the Performance Adhesives business segment divestiture.

Year-to-date - The activity for Composites/Marl facility and Distribution during the current and prior year periods was related to post-closing adjustments.

Current Quarter - The activity for Composites/Marl facility, Water Technologies and Distribution during the current and prior year quarter was related to post-closing adjustments.

The Valvoline activity for the three months ended June 30, 2023 primarily represents cash proceeds related to subsequent adjustments that were made in conjunction

with post-closing disputes and Tax Matters Agreement.

Asbestos activity in each quarter primarily relates to Ashland's annual update.

Year-to-date - The activity for Composites/Marl facility, Water Technologies and Distribution during the current and prior year periods was related to post-closing adjustments.

The Performance Adhesives segment sales and pre-tax operating income included in discontinued operations were $171 million and $34 million for the prior year period.

A $732 million

gain on disposal was recorded in the prior year period associated with the February 28, 2022 closing of the Performance Adhesives business segment divestiture.

A $732 million gain on disposal was recorded in the prior year period associated with the February 28, 2022 closing of the Performance Adhesives business segment divestiture.

The Valvoline activity for the nine months ended June 30, 2023 primarily represents cash proceeds related to subsequent adjustments that were made in conjunction with post-closing disputes and Tax Matters Agreement.

Asbestos activity in each period primarily relates to Ashland's annual update.

Other comprehensive income (loss)

A comparative analysis of the components of other comprehensive income is provided below for the three and six months ended March 31, 2023 and 2022.

Three months ended March 31

Six months ended March 31

A comparative analysis of the components of other comprehensive income is provided below for the three and nine months ended June 30, 2023 and 2022.

Three months ended June 30

Nine months ended June 30

(In millions)

3 unchanged sentences

Current Quarter - Total other comprehensive income (loss), net of tax, for the current quarter increased $86 million compared to the prior year quarter primarily as a result of the following:

For the three months ended March 31, 2023, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in a gain of $27 million compared to a loss of $5 million for the three months ended March 31, 2022.

For the three months ended June 30, 2023 and 2022, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in losses of $4 million and $86 million, respectively.

The fluctuations in unrealized translation gains and losses are primarily due to translating foreign subsidiary financial statements from local currencies to U.S.

For the three months ended March 31, 2023 and 2022, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities.

Commodity hedges resulted in unrealized losses of $3 million and gains of $5 million for the three months ended March 31, 2023 and 2022, respectively.

For the three months ended June 30, 2023 and 2022, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities.

Commodity hedges resulted in unrealized gains of $1 million and losses of $3 million for the three months ended June 30, 2023 and 2022, respectively.

Year-to-date - Total other comprehensive income (loss), net of tax, for the current year increased $208 million compared to the prior year period primarily as a result of the following:

For the six months ended March 31, 2023, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in a gain of $109 million compared to a loss of $21 million for the six months ended March 31, 2022.

For the nine months ended June 30, 2023, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in a gain of $105 million compared to a loss of $107 million for the nine months ended June 30, 2022.

The fluctuations in unrealized translation gains and losses are primarily due to translating foreign subsidiary financial statements from local currencies to U.S.

For the six months ended March 31, 2023 and 2022, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities.

Commodity hedges resulted in unrealized losses of $7 million and gains of $1 million for the six months ended March 31, 2023 and 2022, respectively.

For the nine months ended June 30, 2023 and 2022, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities.

Commodity hedges resulted in unrealized losses of $6 million and $2 million for the nine months ended June 30, 2023 and 2022, respectively.

Use of non-GAAP measures

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The adjustments Ashland makes to derive the non-GAAP measures of EBITDA and Adjusted EBITDA exclude items which may cause short-term fluctuations in net income and operating income and which Ashland does not consider to be the fundamental attributes or primary drivers of its business.

EBITDA and Adjusted EBITDA provide disclosure on the same basis as that used by Ashland’s management to evaluate financial performance on a consolidated and reportable segment basis and provide consistency in our financial reporting, facilitate internal and external comparisons of Ashland’s historical operating performance and its business units and provide continuity to investors for comparability purposes.

EBITDA and Adjusted EBITDA provide disclosure on the same basis as that used by Ashland’s management to evaluate financial performance on a consolidated and reportable segment basis and provide consistency in financial reporting, facilitate internal and external comparisons of Ashland’s historical operating performance and its business units and provide continuity to investors for comparability purposes.

The Adjusted diluted EPS metric enables Ashland to demonstrate what effect key items have on an earnings per diluted share basis by taking income (loss) from continuing operations, adjusted for key items after tax that have been identified in the Adjusted EBITDA table, and dividing by the average outstanding diluted shares for the applicable period.

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Unlike cash flow provided by operating activities, free cash flow and ongoing free cash flow includes the impact of capital expenditures from continuing operations and other significant items impacting cash flow, providing a more complete picture of current and future cash generation.

Free cash flow, ongoing free cash flow and free cash flow conversion are non-GAAP liquidity measures that Ashland believes provide useful information to management and investors about Ashland’s ability to convert Adjusted EBITDA to ongoing free cash flow.

Free cash flow, ongoing free cash flow and ongoing free cash flow conversion are non-GAAP liquidity measures that Ashland believes provide useful information to management and investors about Ashland’s ability to convert Adjusted EBITDA to ongoing free cash flow.

These liquidity measures are used regularly by Ashland’s stakeholders and industry peers to measure the efficiency at producing cash from regular business activities.

Free cash flow, ongoing free cash flow and free cash flow conversion have certain limitations, including that it does not reflect adjustment for certain non-discretionary cash flows such as mandatory debt repayments.

Free cash flow, ongoing free cash flow and ongoing free cash flow conversion have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash flows such as mandatory debt repayments.

The amount of mandatory versus discretionary expenditures can vary significantly between periods.

2 unchanged sentences

GAAP measure because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items that affect these metrics such as domestic and international economic, political, legislative, regulatory and legal actions.

In addition, certain economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies and changes in the prices of certain key raw materials, can have a significant effect on operations and are difficult to predict with certainty.

These non-GAAP measures should be considered supplemental in nature and should not be construed as more significant than comparable measures defined by U.S.

Limitations associated with the use of these non-GAAP measures include that these measures do not present all of the amounts associated with our results as

determined in accordance with U.S.

Limitations associated with the use of these non-GAAP measures include that these measures do not present all of the amounts associated with our results as determined in accordance with U.S.

The non-GAAP measures provided are used by Ashland management and may not be determined in a manner consistent with the methodologies used by other companies.

3 unchanged sentences

EBITDA and Adjusted EBITDA

EBITDA totaled income of $140 million and $910 million for the three months ended March 31, 2023 and 2022, respectively, and $235 million and $1,028 million for the six months ended March 31, 2023 and 2022, respectively.

EBITDA totaled income of $130 million and $157 million for the three months ended June 30, 2023 and 2022, respectively, and $363 million and $1,185 million for the nine months ended June 30, 2023 and 2022, respectively.

EBITDA and Adjusted EBITDA results in the table below have been prepared to illustrate the ongoing effects of Ashland’s operations, which exclude certain key items previously described.

1 unchanged sentence

Three months ended

Six months ended

Nine months ended

(In millions)

Income tax expense

Net interest and other expense

Net interest and other expense (income)

Depreciation and amortization

4 unchanged sentences

Asset impairments

Gain on acquisitions and divestitures

ICMS Brazil tax credit

Income on acquisitions and divestitures, net

Total key items included in EBITDA

10 unchanged sentences

Three months ended

Six months ended

Nine months ended

Diluted EPS from continuing operations (as reported)

3 unchanged sentences

Asset impairments

ICMS Brazil tax credit

Unrealized (gain) loss on securities

Gain on acquisitions and divestitures

Income on acquisitions and divestitures, net

Key items, before tax

12 unchanged sentences

(b) Represents the diluted EPS impact from tax specific financial transactions, tax law changes or other matters that fall within the definition of key items.

For additional explanation of these tax specific key items, see the income tax expense (benefit) discussion within the Statements of Consolidated Comprehensive Income (Loss) caption review section above.

(c) Amortization expense adjustment (net of tax) tax rates were 20% for the three and six months ended March 31, 2023 and 2022.

For additional explanation of these tax specific key items, see the income tax expense discussion within the Statements of Consolidated Comprehensive Income (Loss) caption review section above.

(c) Amortization expense adjustment (net of tax) tax rates were 20% for the three and nine months ended June 30, 2023 and 2022.

RESULTS OF OPERATIONS –

10 unchanged sentences

Significant revisions to Ashland’s methodologies are adjusted for all segments on a retrospective basis.

The following table discloses sales, operating income, depreciation and amortization and EBITDA by reportable segment for the three and six months ended March 31, 2023 and 2022.

The following table discloses sales, operating income, depreciation and amortization and EBITDA by reportable segment for the three and nine months ended June 30, 2023 and 2022.

Three months ended

Six months ended

Nine months ended

(In millions - unaudited)

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Intermediates

Unallocated and other

AMORTIZATION EXPENSE

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All other intersegment transfers are accounted for at cost.

(b) Excludes income (loss) from discontinued operations, other net periodic benefit loss (income).

(b) Excludes income (loss) from discontinued operations, other net periodic benefit loss.

See the Statement of Consolidated Comprehensive Income (Loss) for applicable amounts excluded.

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Customers include pharmaceutical, food, beverage, nutraceuticals and supplements manufacturers, hospitals and radiologists and industrial manufacturers.

March 2023 quarter compared to March 2022 quarter

June 2023 quarter compared to June 2022 quarter

Life Sciences’

sales increased $36 million to $240 million in the current quarter.

Favorable pricing and higher volume increased sales by $38 million and $4 million, respectively, while unfavorable foreign currency exchange decreased sales by $6 million.

Operating income increased $15 million to income of $58 million for the current quarter.

Favorable price/mix and higher volume increased operating income by $34 million and $4 million, respectively, partially offset by unfavorable foreign currency exchange and higher costs which decreased operating income by $4 million and $19 million, respectively.

Current quarter EBITDA increased $17 million to $75 million.

EBITDA margin increased 2.9 percentage points in the current quarter to 31.3%.

sales decreased $9 million to $219 million in the current quarter.

Lower volume decreased sales by $32 million while favorable product pricing and foreign currency exchange increased sales by $22 million and $1 million, respectively.

Operating income decreased $2 million to income of $49 million for the current quarter.

Lower volume and higher costs (including restructuring and environmental costs incurred during the current quarter) decreased operating income by $9 million and $16 million, respectively.

These decreases were partially offset by favorable price/mix and foreign currency exchange which increased operating income by $22 million and $1 million, respectively.

Current quarter EBITDA remained consistent at $67 million while Adjusted EBITDA increased $5 million to $72 million.

Adjusted EBITDA margin increased 3.5 percentage points in the current quarter to 32.9%.

Fiscal 2023 year-to-date compared to fiscal 2022 year-to-date

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sales increased $64 million to $666 million in the current period.

Favorable pricing and higher volume increased sales by $61 million and $26 million, respectively, while unfavorable foreign currency exchange decreased sales by $14 million.

Favorable pricing increased sales by $82 million while lower volume and unfavorable foreign currency exchange decreased sales by $5 million and $13 million, respectively.

Life Sciences experienced strong global demand for pharmaceutical ingredients throughout the current period.

Operating income increased $26 million to income of $141 million for the current period.

Favorable price/mix and higher volume increased operating income by $59 million and $14 million, respectively, while unfavorable foreign currency exchange and higher costs decreased operating income by $11 million and $34 million, respectively.

Favorable price/mix and higher volume increased operating income by $81 million and $5 million, respectively, while unfavorable foreign currency exchange and higher costs (including restructuring and environmental costs incurred during the current year) decreased operating income by $9 million and $51 million, respectively.

Current period EBITDA increased $31 million to $192 million while Adjusted EBITDA increased $37 million to $198 million.

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As a result, reportable segment EBITDA and Adjusted EBITDA are reconciled directly to operating income since it is the most directly comparable Statements of Consolidated Comprehensive Income (Loss) caption.

The following EBITDA presentation for the three and six months ended March 31, 2023 and 2022 is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Life Sciences.

The key items during the six months ended March 31, 2023 related to $1 million for restructuring program within the Nutraceuticals business of the Life Sciences segment.

The following EBITDA presentation for the three and nine months ended June 30, 2023 and 2022 is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Life Sciences.

The key items during the three and nine months ended June 30, 2023 related to charges of $3 million and $4 million for restructuring programs, and $2 million each, for environmental reserve adjustments for the three and nine months ended June 30, 2023.

Life Sciences

Three months ended March 31

Six months ended March 31

Three months ended June 30

Nine months ended June 30

(In millions)

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Restructuring and other costs

Environmental reserve adjustments

Adjusted EBITDA

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Customers include formulators at large multinational branded consumer products companies and smaller, independent boutique companies.

March 2023 quarter compared to March 2022 quarter

June 2023 quarter compared to June 2022 quarter

Personal Care's sales decreased $26 million to $146 million in the current quarter.

Unfavorable volume and foreign currency exchange decreased sales by $18 million and $4 million, respectively, while favorable product pricing increased sales by $17 million.

Lower volume decreased sales by $40 million while favorable product pricing and foreign currency exchange increased sales by $13 million and $1 million, respectively.

Operating income decreased $11 million to income of $14 million for the current quarter.

Lower volume, higher operating costs and unfavorable foreign currency exchange decreased operating income by $7 million, $19 million and $1 million, respectively.

These decreases were partially offset by favorable price/mix which increased operating income by $13 million.

Lower volume and higher operating costs decreased operating income by $15 million and $10 million, respectively.

These decreases were partially offset by favorable price/mix and foreign currency exchange which increased operating income by $13 million and $1 million, respectively.

Current quarter EBITDA decreased $11 million to $35 million.

1 unchanged sentence

Fiscal 2023 year-to-date compared to fiscal 2022 year-to-date

Personal Care's sales decreased $13 million to $305 million in the current year perior.

Unfavorable volume and foreign currency exchange decreased sales by $33 million and $10 million, respectively, while favorable product pricing increased sales by $30 million.

Personal Care's sales decreased $38 million to $452 million in the current year period.

Lower volume and unfavorable foreign currency exchange decreased sales by $72 million and $9 million, respectively, while favorable product pricing increased sales by $43 million.

Operating income decreased $29 million to income of $38 million for the current year period.

2 unchanged sentences

Current year EBITDA decreased $29 million to $101 million.

EBITDA margin decreased 4.4 percentage points in the current quarter to 22.0%.

EBITDA margin decreased 4.2 percentage points in the current period to 22.3%.

EBITDA and Adjusted EBITDA reconciliation

Personal Care had no key items for the three and six months ended March 31, 2023 or 2022.

Personal Care had no key items for the three and nine months ended June 30, 2023 or 2022.

Personal Care

Three months ended March 31

Six months ended March 31

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Nine months ended June 30

(In millions)

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Customers include global paint manufacturers, electronics and automotive manufacturers, textile mills, the construction industry, and welders.

March 2023 quarter compared to March 2022 quarter

June 2023 quarter compared to June 2022 quarter

Specialty Additives’

sales decreased $42 million to $152 million in the current quarter.

Lower volume and unfavorable foreign currency exchange decreased sales by $35 million and $4 million, respectively.

Those decreases were partially offset by favorable product pricing which increased sales by $18 million.

Lower volume decreased sales by $47 million which was partially offset by favorable product pricing which increased sales by $5 million.

Operating income decreased $30 million to income of $5 million for the current quarter.

Lower volume, higher operating costs and unfavorable foreign currency exchange decreased operating income by $10 million, $10 million and $1 million, respectively.

Lower volume and higher operating costs (including increased environmental costs) decreased operating income by $15 million and $16 million, respectively.

These decreases were partially offset by favorable pricing/mix which increased operating income by $1 million.

Current quarter EBITDA decreased $14 million to $34 million.

EBITDA margin decreased 5.3 percentage points in the current quarter to 21.1%.

Current quarter EBITDA decreased $31 million to $25 million while Adjusted EBITDA decreased $28 million to $29 million.

Adjusted EBITDA margin decreased 10.3 percentage points in the current quarter to 19.1%.

Fiscal 2023 year-to-date compared to fiscal 2022 year-to-date

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Those decreases were partially offset by favorable product pricing which increased sales by $43 million.

Specialty Additives sales were negatively impacted by the COVID-19 impact related to the China re-opening and the general economic slowdown in Europe in the current period.

Specialty Additives sales were negatively impacted by the COVID-19 impact related to the China re-opening (particularly in the first and second quarter of the current period) and the general economic slowdown in Europe in the current period.

Operating income decreased $57 million to income of $22 million for the current year period.

Lower volume, higher operating costs, asset impairments, and unfavorable foreign currency exchange decreased operating income by $16 million, $28 million, $4 million, and $1 million, respectively.

Lower volume, higher operating costs (including increased environmental costs), asset impairments, and unfavorable foreign currency exchange decreased operating income by $31 million, $43 million, $4 million, and $1 million, respectively.

Operating costs were negatively impacted by COVID-19 dynamics in China which resulted in additional extended unplanned plant shutdowns, that were in addition to planned plant maintenance shutdowns.

1 unchanged sentence

Current year EBITDA decreased $62 million to $79 million while Adjusted EBITDA decreased $55 million to $87 million.

Adjusted EBITDA margin decreased 6.6 percentage points in the current quarter to 18.8%.

Adjusted EBITDA margin decreased 7.6 percentage points in the current period to 19.1%.

EBITDA and Adjusted EBITDA reconciliation

The key items during the six months ended March 31, 2023 related to an impairment charge of $4 million associated with a manufacturing facility.

The key items during the nine months ended June 30, 2023 related to an impairment charge of $4 million associated with a manufacturing facility, and environmental reserve adjustments of $4 million, each for the three and nine months ended June 30, 2023 and $1 million, each for the three and nine months ended June 30, 2022.

Specialty Additives

Three months ended March 31

Six months ended March 31

Three months ended June 30

Nine months ended June 30

(In millions)

1 unchanged sentence

Depreciation and amortization

Environmental reserve adjustments

Adjusted EBITDA

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Butanediol is also provided to Life Sciences, Personal Care, and Specialty Additives for use as a raw material.

March 2023 quarter compared to March 2022 quarter

June 2023 quarter compared to June 2022 quarter

Intermediates’

sales decreased $30 million to $43 million in the current quarter.

Unfavorable product pricing, lower volume and unfavorable foreign currency exchange decreased sales by $2 million, 12 million and $1 million, respectively.

Unfavorable product pricing and lower volume decreased sales by $17 million and $13 million, respectively.

Operating income decreased $17 million to $13 million for the current quarter.

Unfavorable price/mix, lower volume, higher production costs and unfavorable foreign currency exchange which decreased operating income by $2 million, $5 million, $2 million and $1 million, respectively.

Unfavorable price/mix, lower volume and higher production costs decreased operating income by $7 million, $9 million, and $1 million, respectively.

Current quarter EBITDA decreased $17 million to $16 million.

3 unchanged sentences

sales decreased $44 million to $148 million in the current period.

Lower volume and unfavorable foreign currency exchange decreased sales by $19 million and $2 million, respectively.

These decreases were partially offset by favorable product pricing which increased sales by $7 million.

Unfavorable product pricing, lower volume and unfavorable foreign currency exchange decreased sales by $7 million, $36 million and $1 million, respectively.

Operating income decreased $22 million to $50 million for the current period.

Lower volume, higher production costs and unfavorable foreign currency exchange decreased operating income by $7 million, $3 million and $1 million, respectively.

These decreases were partially offset by price/mix which increased operating income by $6 million.

Unfavorable price/mix, lower volume, higher production costs and unfavorable foreign currency exchange decreased operating income by $2 million, $16 million, $3 million and $1 million, respectively.

Current year EBITDA decreased $22 million to $60 million.

EBITDA margin increased 0.7 percentage points in the current quarter to 41.9%.

EBITDA margin decreased 2.2 percentage points in the current period to 40.5%.

EBITDA and Adjusted EBITDA reconciliation

The following EBITDA presentation (as defined and described in the section above) for the three and six months ended March 31, 2023 and 2022 is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Intermediates.

Intermediates had no key items for the three and six months ended March 31, 2023 or 2022.

The following EBITDA presentation (as defined and described in the section above) for the three and nine months ended June 30, 2023 and 2022 is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Intermediates.

Intermediates had no key items for the three and nine months ended June 30, 2023 or 2022.

Intermediates

Three months ended March 31

Six months ended March 31

Three months ended June 30

Nine months ended June 30

(In millions)

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Unallocated and other

The following table summarizes the key components of the Unallocated and other segment’s operating income (loss) for the three ended March 31, 2023 and 2022.

The following table summarizes the key components of the Unallocated and other segment’s operating income (loss) for the three and nine months ended June 30, 2023 and 2022.

Unallocated and Other

Three months ended March 31

Six months ended March 31

Three months ended June 30

Nine months ended June 30

(In millions)

1 unchanged sentence

Environmental expenses

ICMS Brazil tax credit

Income on acquisitions and divestitures, net

1 unchanged sentence

Total expense

March 2023 quarter compared to March 2022 quarter

Unallocated and other recorded expense of $21 million and $24 million for the three months ended March 31, 2023 and 2022, respectively.

June 2023 quarter compared to June 2022 quarter

Unallocated and other recorded expense of $19 million and $29 million for the three months ended June 30, 2023 and 2022, respectively.

The current and prior year quarter included expense of $3 million and $2 million, respectively, for restructuring activities mainly comprised of severance, lease abandonment and other restructuring costs related to company-wide cost reduction programs during the current and prior year quarter, respectively, which included stranded costs of $1 million for prior year quarter associated with the Performance Adhesives divestiture.

The current quarter and prior year quarter included $12 million and $34 million for environmental expenses, respectively.

The prior year quarter also included income of $7 million from acquisitions and divestitiures.

The prior year quarter also included income of $35 million from acquisitions and divestitures.

See income on acquisitions and divestitures caption review above for additional details.

The current quarter also included income of $12 million ICMS tax credits in Brazil (see Note L for more information).

Other expenses between periods were driven by decreases in governance and legacy expenses primarily associated with fluctuations in foreign currency, deferred compensation and incentive compensation.

Fiscal 2023 year-to-date compared to fiscal 2022 year-to-date

Unallocated and other recorded expense of $50 million for the six months ended March 31, 2023 and 2022, respectively.

Unallocated and other recorded expense of $69 million and $79 million for the nine months ended June 30, 2023 and 2022, respectively.

The current and prior year period included expense of $5 million and $11 million, respectively, for restructuring activities mainly comprised of severance, lease abandonment and other restructuring costs related to company-wide cost reduction programs during the current and prior year period, respectively, which included stranded costs of $8 million for the prior year associated with the Performance Adhesives divestiture.

The current period and prior year period included $24 million and $45 million for environmental expenses, respectively.

The prior year quarter also included income of $7 million from acquisitions and divestitures.

The prior year period also included income of $42 million from acquisitions and divestitures.

See income on acquisitions and divestitures caption review above for additional details.

The current period also included income of $12 million ICMS tax credits in Brazil (see Note L for more information).

Other expenses between periods were driven by decreases in governance and legacy expenses primarily associated with fluctuations in foreign currency, deferred compensation and incentive compensation.

1 unchanged sentence

Ashland believes that cash flow from operations, availability under existing credit facilities and arrangements, current cash and investment balances and the ability to obtain other financing, if necessary, will provide adequate cash funds for Ashland’s foreseeable working capital needs, capital expenditures at existing facilities, dividend payments and debt service obligations.

Ashland’s cash requirements are subject to change as business conditions warrant and opportunities arise.

Ashland’s cash requirements are subject to change as business conditions

warrant and opportunities arise.

The timing and size of any new business ventures or acquisitions that the Company may complete may also impact its cash requirements.

Ashland’s cash flows from operating, investing and financing activities, as reflected in the Statements of Condensed Consolidated Cash Flows, are summarized as follows for the six months ended March 31, 2023 and 2022.

Six months ended

Nine months ended

(In millions)

6 unchanged sentences

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents decreased $247 million for the six months ended March 31, 2023 compared to a $754 million increase for the six months ended March 31, 2022.

The $247 million decrease for the six months ended March 31, 2023 was primarily driven by payment of cash dividends, additions to property, plant and equipment, and stock repurchase activity of $36 million, $58 million, and $142 million, respectively.

Operating cash flows from continuing operations were inflows of $27 million, while discontinued operations cash flows were outflows of $47 million.

The $754 million increase for the six months ended March 31, 2022 was primarily driven by the proceeds of the sale of the Performance Adhesives business segment of approximately $1.7 billion, net of transaction costs, and $31 million of operating cash flows from continuing operations offset by short-term debt repayments of $365 million, long-term debt repayments of $250 million, and $155 million of stock repurchase activity.

Cash and cash equivalents decreased $297 million for the nine months ended June 30, 2023 compared to a $419 million increase for the nine months ended June 30, 2022.

The $297 million decrease for the nine months ended June 30, 2023 was primarily driven by payment of cash dividends, additions to property, plant and equipment, and stock repurchase activity of $56 million, $101 million, and $300 million, respectively.

Operating cash flows from continuing operations were inflows of $163 million.

The $419 million increase for the nine months ended June 30, 2022 was primarily driven by the proceeds of the sale of the Performance Adhesives business segment of approximately $1.7 billion, net of transaction costs within discontinued operations cash flows, and $14 million of operating cash flows from continuing operations offset by short-term debt repayments of $365 million, long-term debt repayments of $250 million, $247 million of cash tax payment within discontinued operations cash flows related to the sale of Performance Adhesives, and $200 million of stock repurchase activity.

See the Statements of Condensed Consolidated Cash Flows for additional details.

2 unchanged sentences

Free cash flow does not reflect adjustments for certain non-discretionary cash flows such as mandatory debt repayments.

Nine months ended

(In millions)

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Free cash flows

Cash (inflows) outflows from U.S.

Cash outflows from U.S.

Accounts Receivable Sales Program (a)

12 unchanged sentences

(f) Ongoing free cash flow conversion is defined as Ongoing free cash flow divided by Adjusted EBITDA.

Working capital (current assets minus current liabilities, excluding long-term debt due within one year) amounted to $1,159 million and $1,215 million as of March 31, 2023 and September 30, 2022, respectively.

Working capital (current assets minus current liabilities, excluding long-term debt due within one year) amounted to $1,094 million and $1,215 million as of June 30, 2023 and September 30, 2022, respectively.

The $121 million decrease in working capital was driven by a reduction in cash and cash equivalents, primarily associated with repurchases of common stock, offset by higher trade working capital (accounts receivable and inventories minus trade and other payables and accrued expenses and other liabilities).

The $5 million decline in ongoing free cash flows between periods was primarily as a result of increased inventories to navigate supply-chain issues as well as cost inflation, and reduced accrued expenses as a result of annual incentive program payouts, which were $24 million higher than the prior year, and $21 million higher additions to property, plant and equipment.

Liquid assets (cash, cash equivalents and accounts receivable) amounted to 168% and 190% of current liabilities as as of March 31, 2023 and September 30, 2022, respectively.

The following summary reflects Ashland’s cash, unused borrowing capacity and liquidity as of March 31, 2023 and September 30, 2022.

The $79 million increase in ongoing free cash flows between periods was primarily a result of reduced trade working capital additions compared to the prior year offset by $34 million in higher additions to property, plant and equipment.

Liquid assets (cash, cash equivalents and accounts receivable) amounted to 161% and 190% of current liabilities as as of June 30, 2023 and September 30, 2022, respectively.

The following summary reflects Ashland’s cash, unused borrowing capacity and liquidity as of June 30, 2023 and September 30, 2022.

(In millions)

6 unchanged sentences

Accounts receivable sales program (U.S.)

(a) Includes $267 million and $245 million related to the Asbestos trust and $143 million and $129 million related to the Environmental trust as of March 31, 2023 and September 30, 2022, respectively.

The borrowing capacity remaining under the $600 million revolving credit facility was $582 million due to an outstanding balance of zero, as well as a reduction of $18 million for letters of credit outstanding at March 31, 2023.

In total, Ashland’s available liquidity position, which includes cash, the revolving credit facility and foreign accounts receivable securitization facility, was $1,089 million at March 31, 2023, compared to $1,326 million at September 30, 2022.

(a) Includes $265 million and $245 million related to the Asbestos trust and $127 million and $129 million related to the Environmental trust as of June 30, 2023 and September 30, 2022, respectively.

The borrowing capacity remaining under the 2022 Credit Agreement was $593 million, which reflects the full $600 million Revolving Credit Facility less a reduction of $7 million for letters of credit outstanding at June 30, 2023.

In total, Ashland’s available liquidity position, which includes cash, the revolving credit facility and foreign accounts receivable securitization facility, was $1,051 million at June 30, 2023, compared to $1,326 million at September 30, 2022.

Ashland had zero available liquidity under the U.S.

Accounts Receivable Sales Program as of March 31, 2023.

Accounts Receivable Sales Program as of June 30, 2023.

Ashland also maintained $392 million of restricted investments to pay for future asbestos claims and environmental remediation and related litigation.

Capital resources

The following summary reflects Ashland’s debt as of March 31, 2023 and September 30, 2022.

The following summary reflects Ashland’s debt as of June 30, 2023 and September 30, 2022.

(In millions)

1 unchanged sentence

Long-term debt (less current portion and debt issuance cost discounts) (a)

(a) Includes $14 million of debt issuance cost discounts as of March 31, 2023 and September 30, 2022 , respectively.

Debt as a percent of capital employed was 29% and 28% at March 31, 2023 and at September 30, 2022, respectively.

At March 31, 2023, Ashland’s total debt had an outstanding principal balance of $1,377 million, discounts of $35 million, and debt issuance costs of $14 million.

(a) Includes $14 million of debt issuance cost discounts as of June 30, 2023 and September 30, 2022 , respectively.

Debt as a percent of capital employed was 30% and 28% at June 30, 2023 and at September 30, 2022, respectively.

At June 30, 2023, Ashland’s total debt had an outstanding principal balance of $1,376 million, discounts of $34 million, and debt issuance costs of $14 million.

Ashland had no long-term debt (excluding debt issuance costs) maturing within the next 4 years and $4 million due in fiscal 2027.

1 unchanged sentence

Ashland’s corporate credit ratings remained unchanged at BB+ by Standard & Poor’s and Ba1 by Moody’s Investor Services.

As of March 31, 2023, both Moody’s Investor Services and Standard & Poor's outlook remained at stable.

As of June 30, 2023, both Moody’s Investor Services and Standard & Poor's outlook remained at stable.

Subsequent changes to these ratings or outlook may have an effect on Ashland’s borrowing rate or ability to access capital markets in the future.

1 unchanged sentence

Ashland's current credit agreement (the 2022 Credit Agreement) contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional subsidiary indebtedness, restrictions on subsidiary distributions, investments, mergers, sale of assets and restricted payments and other customary limitations.

As of March 31, 2023, Ashland is in compliance with all debt agreement covenant restrictions under the 2022 Credit Agreement.

As of June 30, 2023, Ashland is in compliance with all debt agreement covenant restrictions under the 2022 Credit Agreement.

The maximum consolidated net leverage ratio permitted under the 2022 Credit Agreement is 4.0.

4 unchanged sentences

In general, consolidated indebtedness includes debt plus all purchase money indebtedness, banker’s acceptances and bank guaranties, deferred purchase price of property or services, attributable indebtedness and guarantees.

At March 31, 2023, Ashland’s calculation of the consolidated net leverage ratio was 1.6.

At June 30, 2023, Ashland’s calculation of the consolidated net leverage ratio was 1.8.

The minimum required consolidated interest coverage ratio under the 2022 Credit Agreement is 3.0.

The 2022 Credit Agreement defines the consolidated interest coverage ratio as the ratio of Covenant Adjusted EBITDA to consolidated interest charges for any measurement period.

At March 31, 2023, Ashland’s calculation of the consolidated interest coverage ratio was 10.6.

At June 30, 2023, Ashland’s calculation of the consolidated interest coverage ratio was 9.9.

Any change in Covenant Adjusted EBITDA of $100 million would have an approximate 0.3x effect on the consolidated net leverage ratio and a 1.8x effect on the consolidated interest coverage ratio.

4 unchanged sentences

The purchase obligations under the contract are estimated to be roughly $12 million for fiscal 2023, and $209 million thereafter for a total of $221 million for the ten year period.

Total equity increased by $47 million since September 30, 2022 to $3,267 million at March 31, 2023.

The increase of $47 million was due to net income of $132 million, compensation expense and common shares issued of $2 million, and $109 million of deferred translation gains offset by stock repurchase activity of $153 million, dividends of $36 million, and losses on commodity hedges of $7 million.

Total equity decreased by $71 million since September 30, 2022 to $3,149 million at June 30, 2023.

The decrease of $71 million was due to net income of $182 million, compensation expense and common shares issued of $7 million, and $105 million of deferred translation gains offset by stock repurchase activity of $303 million (includes $3 million in excise tax), dividends of $56 million, and losses on commodity hedges of $6 million.

2023 Stock Repurchase program

On June 28, 2023, Ashland's board of directors authorized a new evergreen $1 billion common share repurchase program (2023 stock repurchase program).

The new authorization terminates and replaces the company's 2022 stock repurchase program, which had $200 million outstanding at the date of termination.

Stock repurchase program agreements

During May 2023, under the 2022 stock repurchase program, Ashland initiated a Rule 10b5-1 trading plan agreement to repurchase up to $100 million of its outstanding shares.

The program was completed during June 2023, when Ashland paid a total of $100 million and received a delivery of 1.1 million shares of common stock.

During March 2023, under the 2022 stock repurchase program, Ashland inititated a Rule 10b5-1 trading plan agreement to repurchase up to $100 million of its outstanding shares.

The program was completed during April 2023, when Ashland paid a total of $100 million and received a delivery of 1.0 million shares of common stock.

As of March 31, 2023, Ashland repurchased a total of $52 million (of which $42 million was cash settled and $10 million was accrued within the accrued expenses and other liabilities caption for authorized and executed share repurchases pending settlement as of period end) and received a delivery of 0.5 million shares of common stock.

During February 2023, under the existing 2022 stock repurchase program, Ashland initiated a Rule 10b5-1 trading plan agreement to repurchase up to $100 million of its outstanding shares.

1 unchanged sentence

Stockholder dividends

Ashland paid a dividend of 33.5 cents per share for the first and second quarter of fiscal 2023 and 30 cents per share in the first and second quarter of fiscal 2022.

On May 11, 2023, Ashland's Board declared a quarterly cash dividend of $0.385 per share on the company's common stock representing a 15 percent increase from the previous quarter.

The dividend was paid in the third quarter of fiscal 2023.

Dividends of $0.335 per share were paid in the first and second quarters of fiscal 2023 and the third quarter of fiscal 2022 and $0.30 per share were paid in the first and second quarters of fiscal 2022.

Capital expenditures

Capital expenditures were $58 million for the six months ended March 31, 2023 compared to $37 million for the six months ended March 31, 2022.

Capital expenditures were $101 million for the nine months ended June 30, 2023 compared to $67 million for the nine months ended June 30, 2022.

CRITICAL ACCOUNTING POLICIES

5 unchanged sentences

in Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions.

different assumptions or conditions.

Management has reviewed the estimates affecting these items with the Audit Committee of Ashland’s Board of Directors.

No material changes have been made to the valuation techniques during the six months ended March 31, 2023.

Ashland issued its outlook for fiscal 2023 in November 2022.

Based on current forecasting, continued customer de-stocking and external uncertainties for the second half of the fiscal year, Ashland commenced actions in April to reduce inventories in certain product lines for impacted end markets.

These inventory-control actions are expected to negatively impact Adjusted EBITDA in the second half of the fiscal year by approximately $20 million.

As a result, the company has updated its financial outlook for fiscal year 2023.

Ashland now expects sales in the fiscal year to be in the range of $2.3 billion to $2.4 billion reflecting weaker global demand dynamics.

In addition, Ashland now expects Adjusted EBITDA to be in the range of $580 million to $610 million reflecting weaker global end-market demand and the inventory-control actions for specific product lines.

Updated FY 2023 Outlook

Prior FY 2023 Outlook

Key Operating Metrics

$2.3 - $2.4 billion

$2.5 - $2.7 billion

Adjusted EBITDA

$580 - $610 million

$600 - $650 million

No material changes have been made to the valuation techniques during the nine months ended June 30, 2023.

Based on current forecasting, continued customer de-stocking and external uncertainties for the remainder of the fiscal year, Ashland would expect sales to be in the range of $2.2 billion and Adjusted EBITDA to be in the range of $500 million for fiscal year 2023.

Ashland is unable to reconcile forward-looking adjusted EBITDA to forward-looking net income, the most closely comparable GAAP financial measure, because the information needed to provide such reconciliation would require unreasonable efforts.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Ashland’s market risk exposure at March 31, 2023 is generally consistent with the types of market risk exposures presented in Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Ashland’s market risk exposure at June 30, 2023 is generally consistent with the types of market risk exposures presented in Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements