What changed in this filing

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Item 1. Financial Statements

2024-05-01 compared with 2024-01-31 · 173 added, 142 removed, 631 unchanged (33% of the section changed)

3 unchanged sentences

Three months ended

Six months ended

(In millions except per share data - unaudited)

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Loss on acquisitions and divestitures, net

Operating income (loss)

Net interest and other income

Operating income

Net interest and other expense (income)

Other net periodic benefit loss - Note J

12 unchanged sentences

Other comprehensive income (loss), net of tax

Unrealized translation gain

Unrealized loss on commodity hedges

Other comprehensive income - Note M

Unrealized translation gain (loss)

Unrealized gain (loss) on commodity hedges

Other comprehensive income (loss) - Note M

Comprehensive income

37 unchanged sentences

Total liabilities and stockholders' equity

(a) Accounts receivable includes an allowance for credit losses of $ 3 million at both December 31, 2023 and September 30, 2023 .

(b) Asbestos insurance receivable includes an allowance for credit losses of $2 million at both December 31, 2023 and September 30, 2023 .

(a) Accounts receivable includes an allowance for credit losses of $ 3 million at both March 31, 2024 and September 30, 2023 .

(b) Asbestos insurance receivable includes an allowance for credit losses of $ 2 million at both March 31, 2024 and September 30, 2023 .

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

1 unchanged sentence

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

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Six months ended

(In millions - unaudited)

10 unchanged sentences

Pension contributions

Change in operating assets and liabilities (a)

Total cash flows provided (used) by operating activities from continuing operations

Change in operating assets and liabilities

Total cash flows provided by operating activities from continuing operations

CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS

3 unchanged sentences

Funds restricted for specific transactions

Other investing cash flows

Reimbursements from restricted investments

2 unchanged sentences

Total cash flows used by investing activities from continuing operations

CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS

CASH FLOWS USED BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS

Repurchase of Common Stock

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CASH AND CASH EQUIVALENTS - END OF PERIOD

(a) Excludes changes resulting from operations acquired, sold or held for sale.

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

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and consolidated subsidiaries ("Ashland" or the "Company") Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

Results of operations for the period ended December 31, 2023 are not necessarily indicative of the expected results for the remainder of the fiscal year.

Results of operations for the period ended March 31, 2024 are not necessarily indicative of the expected results for the remainder of the fiscal year.

Ashland is comprised of the following reportable segments:

18 unchanged sentences

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.

The following divested businesses represent disposal groups that qualified as discontinued operations in previous periods and impacted discontinued operations for the three months ended December 31, 2023 and 2022:

• The Performance Adhesives business divested in 2022;

• The Composites business and Marl facility (Composites/Marl facility) divested in 2019;

• The separation of Valvoline Inc.

(Valvoline) business divested in 2017;

• The sale of the Ashland Distribution (Distribution) business divested in 2011.

Additionally, Ashland is subject to liabilities from claims alleging personal injury caused by exposure to asbestos.

Such claims result primarily from indemnification obligations undertaken in 1990 in connection with the sale of

Riley Stoker Corporation, a former subsidiary, which qualified as a discontinued operation and from the acquisition during 2009 of Hercules LLC (formerly Hercules Incorporated), an indirect wholly-owned subsidiary of Ashland.

Adjustments to the recorded litigation reserves and related insurance receivables are recorded within the discontinued operations caption.

See Note K for more information related to the adjustments on asbestos liabilities and receivables.

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 months ended December 31, 2023 and 2022.

Three months ended

Six months ended

(In millions)

Loss from discontinued operations, net of income taxes

Income (loss) from discontinued operations, net of income taxes

Performance Adhesives

Asbestos-related litigation

Composites/Marl facility

NOTE C – RESTRUCTURING ACTIVITIES

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Severance costs

Ashland recorded severance expense of $ 3 million and zero during the three months ended December 31, 2023 and 2022, respectively, within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss).

As of December 31, 2023 and September 30, 2023 , the severance reserve associated with this program was $ 3 million within accrued expenses and other liabilities in the Consolidated Balance Sheets.

The following table details at December 31, 2023, the amount of restructuring severance reserves related to this program.

Ashland recorded severance expense of $ 18 million and zero during the three months ended March 31, 2024 and 2023 and $ 21 million and zero during the six months ended March 31, 2024 and 2023, respectively, within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss).

As of March 31, 2024 , the severance liability associated with this program was $ 20 million and is recorded within accrued expenses and other liabilities in the Consolidated Balance Sheets.

The following table details at March 31, 2024 the amount of restructuring severance reserves related to this program.

(In millions)

Severance costs

Severance reserves

Balance at of September 30, 2023

Restructuring reserve

Severance expense

Utilization (cash paid)

Balance at December 31, 2023

Balance at March 31, 2024

Plant optimization actions

During the three months ended December 31, 2023, Ashland incurred $ 21 million of accelerated depreciation for product line optimization activities associated with a Specialty Additives manufacturing facility, which was recorded within the cost of goods sold caption of the Statements of Consolidated Comprehensive Income (Loss).

During the three and six months ended March 31, 2024 , Ashland incurred $ 27 million and $ 49 million, respectively, of accelerated depreciation for product line optimization activities associated with two Specialty Additives manufacturing facilities, which was recorded within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss).

Ashland's portfolio optimization actions include the consolidation of Ashland's carboxymethylcellulose (CMC) and industrial methylcellulose (MC) capacity and rebalancing of the hydroxyethylcellulose (HEC) network.

Fiscal 2023 Life Sciences restructuring program

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Ashland recorded severance expense of $ 1 million during the three months ended December 31, 2022, within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss).

As of December 31, 2023 and September 30, 2023, the severance reserve associated with this program was zero .

As of March 31, 2024 , the severance reserve associated with this program was zero .

NOTE D – FAIR VALUE MEASUREMENTS

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For all other assets and liabilities for which unobservable inputs are used (Level 3), fair value is derived through the use of 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 December 31, 2023.

The following table summarizes financial instruments subject to recurring fair value measurements as of March 31, 2024.

Quoted prices

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Investment of captive insurance company (c)

Foreign currency derivatives (d)

Total assets at fair value

Commodity derivatives (e )

Foreign currency derivatives (d)

Commodity derivatives (d )

Total liabilities at fair value

(a) Included in restricted investments and $ 77 million within other current assets in the Condensed Consolidated Balance Sheets .

(a) Includes $ 306 million within restricted investments and $ 77 million within other current assets in the Condensed Consolidated Balance Sheets .

(b) Includes $ 255 million related to the Asbestos trust and $ 128 million related to the Environmental trust .

(d) Included in accounts receivable in the Condensed Consolidated Balance Sheets .

(e) Included in accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets.

(d) Included in accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets.

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

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Total liabilities at fair value

(a) Included in restricted investments and $ 77 million within other current assets in the Condensed Consolidated Balance Sheets .

(a) Includes $ 290 million within restricted investments and $ 77 million within other current assets in the Condensed Consolidated Balance Sheets .

(b) Includes $ 243 million related to the Asbestos trust and $ 124 million related to the Environmental trust .

5 unchanged sentences

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 $ 77 million classified within other current assets, in the Condensed Consolidated Balance Sheets at both December 31, 2023 and September 30, 2023.

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

The following table presents gross unrealized gains and losses for the restricted securities as of March 31, 2024 and September 30, 2023:

(In millions)

2 unchanged sentences

Unrealized Loss

As of December 31, 2023

As of March 31, 2024

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 restricted investments portfolio for the three months ended December 31, 2023 and 2022.

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(In millions)

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Disbursements

(a) Included in the net interest and other income caption within the Statements of Consolidated Comprehensive Income (Loss).

(a) Included in the net interest and other expense (income) caption within the Statements of Consolidated Comprehensive Income (Loss).

Foreign currency derivatives

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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 gains and losses recognized during the three months ended December 31, 2023 and 2022 within the Statements of Consolidated Comprehensive Income (Loss).

The following table summarizes the gains and losses recognized during the three and six months ended March 31, 2024 and 2023 within the Statements of Consolidated Comprehensive Income (Loss).

Three months ended

Six months ended

(In millions)

Foreign currency derivative gains

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

Foreign currency derivative gains (losses)

The following table summarizes the fair values of the outstanding foreign currency derivatives as of March 31, 2024 and September 30, 2023 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 months ended December 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 six months ended March 31, 2024 and 2023 within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss).

Three months ended

Six months ended

(In millions)

Commodity derivative gains (losses)

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

Commodity derivative losses

The following table summarizes the fair values of the outstanding commodity derivatives as of March 31, 2024, and September 30, 2023 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 December 31, 2023 and September 30, 2023 , Ashland's long-term debt (including the current portion and excluding debt issuance cost discounts) had a carrying value of $ 1,354 million and $ 1,327 million, respectively, compared to a fair value of $ 1,279 million and $ 1,160 million, respectively.

At March 31, 2024 and September 30, 2023 , Ashland's long-term debt (including the current portion and excluding debt issuance cost discounts) had a carrying value of $ 1,340 million and $ 1,327 million, respectively, compared to a fair value of $ 1,266 million and $ 1,160 million, respectively.

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

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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 months ended December 31, 2023 .

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

N o indicators of impairment were identified in the three and six months ended March 31, 2024 .

The following is a progression of goodwill by reportable segment for the six months ended March 31, 2024.

(In millions)

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Currency translation

Balance at December 31, 2023

(a) As of December 31, 2023 and September 30, 2023 , 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 March 31, 2024

(a) As of March 31, 2024 and September 30, 2023 , 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

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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 months ended December 31, 2023 .

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

December 31, 2023

No indicators of impairment were identified in the three and six months ended March 31, 2024 .

Other intangible assets were comprised of the following as of March 31, 2024 and September 30, 2023.

March 31, 2024

September 30, 2023

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Total intangible assets

Amortization expense recognized on intangible assets was $ 21 million and $ 23 million for the three months ended December 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 $ 79 million in 2024 (includes three months actual and nine months estimated), $ 77 million in 2025, $ 75 million in 2026, $ 53 million in 2027 and $ 50 million in 2028.

Amortization expense recognized on intangible assets was $ 20 million and $ 23 million for the three months ended March 31, 2024 and 2023 , respectively, and $ 40 million and $ 46 million for the six months ended March 31, 2024 and 2023 , 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 $ 79 million in 2024 (includes six months actual and six months estimated), $ 77 million in 2025, $ 75 million in 2026, $ 53 million in 2027 and $ 50 million in 2028.

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.

2 unchanged sentences

(In millions)

December 31, 2023

March 31, 2024

September 30, 2023

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Long-term debt (less debt issuance costs)

(a) Other includes $ 13 million of debt issuance costs as of December 31, 2023 and September 30, 2023 .

The current portion of the long-term debt was zero for both December 31, 2023 and September 30, 2023.

The scheduled aggregate maturities to 2028 for long-term debt by year (including the current portion and excluding debt issuance costs) are as follows as of December 31, 2023 :

(a) Other includes $ 12 million and $ 13 million of debt issuance costs as of March 31, 2024 and September 30, 2023 , respectively.

The current portion of the long-term debt was zero for both March 31, 2024 and September 30, 2023.

The scheduled aggregate maturities to 2028 for long-term debt by year (including the current portion and excluding debt issuance costs) are as follows as of March 31, 2024 :

zero in the next 3 years, $ 4 million in 2027, and $ 540 million in 2028.

6 unchanged sentences

Proceeds received, net of buyer’s discounts and fees, are recorded within the operating activities of the Statements of Condensed Consolidated Cash Flows.

Losses on sale of assets, including related transaction expenses are recorded within the net interest and other income caption of the Statements of Consolidated Comprehensive Income (Loss).

Losses on sale of assets, including related transaction expenses are recorded within the net interest and other expense (income) caption of the Statements of Consolidated Comprehensive Income (Loss).

Ashland regularly assesses its servicing obligations and records them as assets or liabilities when appropriate.

1 unchanged sentence

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 December 31, 2023 and 2022 within the net interest and other income caption associated with sales under the program.

Ashland has recorded $ 78 million in sales at December 31, 2023 against the buyer’s limit, which was $ 100 million at December 31, 2023 compared to $ 86 million of sales at September 30, 2023 against the buyer's limit, which was $ 115 million at September 30, 2023 .

Ashland transferred $ 99 million and $ 106 million in receivables to the special purpose entity as of December 31, 2023 and September 30, 2023, respectively.

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

As of December 31, 2023 and 2022, the year-to-date gross cash proceeds received for receivables transferred and derecognized were $ 85 million and $ 49 million, respectively, of which $ 77 million and $ 68 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 $ 8 million and $ 19 million for the periods ended December 31, 2023 and 2022, respectively, represents the impact of a net increase and a net reduction in accounts receivable sales volume during each period, respectively.

Ashland recognized a loss of $ 1 million and less than $ 1 million within the Statements of Consolidated Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023, respectively, and $ 2 million and $ 1 million for the six months ended March 31, 2024 and 2023, respectively, within the net interest and other expense (income) caption associated with sales under the program.

Ashland has recorded $ 84 million in sales at March 31, 2024 against the buyer’s limit, which was $ 100 million at March 31, 2024 compared to $ 86 million of sales at September 30, 2023 against the buyer's limit, which was $ 115 million at September 30, 2023 .

Ashland transferred $ 102 million and $ 106 million in receivables to the special purpose entity as of March 31, 2024 and September 30, 2023, respectively.

Ashland recorded liabilities related to its service obligations and limited guarantee as of March 31, 2024 and September 30, 2023 of less than $ 1 million.

As of March 31, 2024 and 2023, the year-to-date gross cash proceeds received for receivables transferred and derecognized were $ 174 million and $ 99 million, respectively, of which $ 159 million and $ 122 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 $ 15 million and $ 22 million for the periods ended March 31, 2024 and 2023, respectively, represents the impact of a net increase and a net reduction in accounts receivable sales volume during each period, respectively.

2018 Foreign Accounts Receivable Securitization Facility

4 unchanged sentences

Foreign Accounts Receivable Sales Program

On October 19, 2023, Ashland entered, through an Ireland based, wholly-owned, bankruptcy-remote consolidated special purpose entity (the "SPE"), into a three-year agreement with a group of entities (buyers) to sell certain trade receivables, without recourse beyond the pledged receivables, of certain wholly-owned Ashland subsidiaries (Foreign Accounts Receivable Sales Program s) primarily in Europe.

Under the agreement, Ashland can transfer whole receivables up to a limit established by the buyer, which is currently set at € 125 million.

3 unchanged sentences

Consequently, Ashland accounts for receivables transferred to buyers as part of this agreement as sales.

Through December 31, 2023 , Ashland has sold $ 102 million in receivables under this agreement.

Accordingly, Ashland recognized $ 1 million in losses within the net interest and other income caption of the Statements of Consolidated Income (Loss) for the three months ended December 31, 2023 .

Ashland recorded $ 102 million in sales and gross proceeds received against the buyer's limit, which was $ 102 million at December 31, 2023 .

Ashland transferred $ 147 million in receivables to the SPE as of December 31, 2023 .

Ashland recorded less than $ 1 million in liabilities related to its service obligations and limited guarantee as of December 31, 2023.

Through March 31, 2024 , Ashland has sold $ 122 million in receivables under this agreement.

Accordingly, Ashland recognized $ 1 million and $ 2 million in losses within the net interest and other expense (income) caption of the Statements of Consolidated Income (Loss) for the three and six months ended March 31, 2024 , respectively.

Ashland recorded $ 122 million in sales and gross proceeds received against the buyer's limit, which was $ 122 million at March 31, 2024 .

Ashland transferred $ 168 million in receivables to the SPE as of March 31, 2024 .

Ashland recorded less than $ 1 million in liabilities related to its service obligations and limited guarantee as of March 31, 2024.

Available borrowing capacity and liquidity

The borrowing capacity remaining under the 2022 Credit Agreement was $ 596 million, which reflects the full $ 600 million Revolving Credit Facility less a reduction of $ 4 million for letters of credit outstanding as of December 31, 2023.

Ashland's total borrowing capacity at December 31, 2023 was $ 596 million.

Ashland had no available liquidity under its current U.S.

and Foreign Accounts Receivable Sales Programs as of December 31, 2023.

Ashland's total borrowing capacity at March 31, 2024 was $ 596 million.

Ashland had zero of available liquidity under its current U.S.

and Foreign Accounts Receivable Sales Programs as of March 31, 2024.

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 December 31, 2023, Ashland is in compliance with all debt agreement covenant restrictions.

As of March 31, 2024, 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 December 31, 2023 , Ashland’s calculation of the consolidated net leverage ratio was 2.1 .

At March 31, 2024 , Ashland’s calculation of the consolidated net leverage ratio was 2.1 .

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

At December 31, 2023 , Ashland’s calculation of the interest coverage ratio was 7.6 .

At March 31, 2024 , Ashland’s calculation of the interest coverage ratio was 7.3 .

NOTE H – LEASING ARRANGEMENTS

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(In millions)

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Total lease cost

(a) Includes a $ 1 million charge for the impairment of an abandoned right of use office building asset for the three months ended December 31, 2023 .

Right-of-use assets exchanged for new operating lease obligations were $ 1 million and $ 2 million for the three months ended December 31, 2023 and 2022, respectively.

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

(a) Includes zero and $ 1 million charges for the impairment of an abandoned right of use office building asset for the three and six months ended March 31, 2024 , respectively.

Right-of-use assets exchanged for new operating lease obligations were $ 2 million and $ 20 million for the three months ended March 31, 2024 and 2023 , respectively, and $ 3 million and $ 23 million for the six months ended March 31, 2024 and 2023 , respectively.

During the second quarter of fiscal 2024, Ashland acquired a favorable lease asset for $ 10 million, which was recorded in the property, plant and equipment caption of the Condensed Consolidated Balance Sheets as of March 31, 2024.

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

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(In millions)

Operating cash flows from operating leases

Investing cash flows from finance leases

NOTE I – INCOME TAXES

1 unchanged sentence

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 600 % for the three months ended December 31, 2023.

The current quarter's tax rate was impacted by jurisdictional income mix, as well as net $ 24 million from favorable tax discrete items primarily related to changes in foreign tax reform related activity.

The overall effective tax rate was a benefit of 612 % and 610 % for the three and six months ended March 31, 2024.

The current quarter's tax rate was impacted by jurisdictional income mix, as well as a net $ 102 million from favorable tax discrete items primarily related to changes in foreign tax activity.

The current six month tax rate was impacted by jurisdictional income mix, as well as net $ 126 million from favorable tax discrete items primarily related to changes in foreign tax activity.

Prior fiscal year

The overall effective tax rate was 16 % for the three months ended December 31, 2022 .

The prior year quarter's tax rate was impacted by jurisdictional income mix, as well as net $ 1 million from favorable tax discrete items.

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

The 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 six months 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.

Unrecognized tax benefits

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

Changes in unrecognized tax benefits are summarized as follows for the six months ended March 31, 2024.

(In millions)

1 unchanged sentence

Increases related to positions taken in prior years

Decreases related to positions taken in prior years

Increases related to positions taken in current year

Lapse of statute of limitations

Balance at December 31, 2023

Balance at March 31, 2024

From a combination of statute expirations and audit settlements in the next twelve months, Ashland expects a decrease in the amount of accrual for uncertain tax positions of between $ 4 million and $ 5 million for continuing operations.

For the remaining balance as of December 31, 2023 , it is reasonably possible that there could be material changes to the amount of uncertain tax positions due to activities of the taxing authorities, settlement of audit issues, reassessment of existing uncertain tax positions or the expiration of applicable statute of limitations;

For the remaining balance as of March 31, 2024 , it is reasonably possible that there could be material changes to the amount of uncertain tax positions due to activities of the taxing authorities, settlement of audit issues, reassessment of existing uncertain tax positions or the expiration of applicable statute of limitations;

however, Ashland is not able to estimate the impact of these items at this time.

1 unchanged sentence

Plan contributions

For the three months ended December 31, 2023 , Ashland contributed $ 4 million to its non-U.S.

For the six months ended March 31, 2024 , Ashland contributed $ 6 million to its non-U.S.

pension plans and $ 5 million to its U.S.

8 unchanged sentences

(In millions)

Three months ended December 31

Three months ended March 31

Interest cost

1 unchanged sentence

Total net periodic benefit costs

Six months ended March 31

Interest cost

Expected return on plan assets

Total net periodic benefit costs

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 expense of $ 2 million and $ 1 million for the three months ended December 31, 2023 and 2022 , respectively.

All other components are recorded within the other net periodic benefit loss caption on the Statements of Consolidated Comprehensive Income (Loss), which netted to expense of $ 2 million and $ 4 million for the three and six months ended March 31, 2024 , respectively, and expense of $ 2 million and $ 3 million for the three and six months ended March 31, 2023 , respectively.

NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES

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

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Years ended September 30

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

Total reserves for asbestos claims were $ 271 million at December 31, 2023 compared to $ 281 million at September 30, 2023.

Total reserves for asbestos claims were $ 263 million at March 31, 2024 compared to $ 281 million at September 30, 2023.

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

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Years ended September 30

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Asbestos reserve - end of period (a)

(a) Included $ 28 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of December 31, 2023 and September 30, 2023.

(a) Included $ 28 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of March 31, 2024 and September 30, 2023.

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 December 31, 2023 , Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $ 93 million (excluding the Hercules receivable for asbestos claims discussed below) compared to $ 95 million at September 30, 2023 .

At March 31, 2024 , Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $ 91 million (excluding the Hercules receivable for asbestos claims discussed below) compared to $ 95 million at September 30, 2023 .

In fiscal 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.

1 unchanged sentence

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

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Years ended September 30

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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 credit measurement standard.

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

(b) Includes $ 11 million classified in accounts receivable on the Condensed Consolidated Balance Sheets as of December 31, 2023 and September 30, 2023 .

The total allowance for credit losses was $ 1 million as of March 31, 2024 and September 30, 2023.

(b) Includes $ 11 million classified in accounts receivable on the Condensed Consolidated Balance Sheets as of March 31, 2024 and September 30, 2023 .

Hercules asbestos-related litigation

3 unchanged sentences

A summary of Hercules’ asbestos claims activity follows.

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Years ended September 30

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

Total reserves for asbestos claims were $ 186 million at December 31, 2023 compared to $ 191 million at September 30, 2023.

Total reserves for asbestos claims were $ 180 million at March 31, 2024 compared to $ 191 million at September 30, 2023.

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 $ 17 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of December 31, 2023 and September 30, 2023 .

(a) Included $ 16 million and $ 17 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of March 31, 2024 and September 30, 2023 , respectively.

Hercules asbestos-related receivables

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The estimated receivable consists exclusively of solvent domestic insurers.

As of December 31, 2023 , Ashland’s receivable for recoveries of litigation defense and claims costs from insurers with respect to Hercules amounted to $ 46 million compared to $ 47 million at September 30, 2023 .

As of March 31, 2024 , Ashland’s receivable for recoveries of litigation defense and claims costs from insurers with respect to Hercules amounted to $ 45 million compared to $ 47 million at September 30, 2023 .

In fiscal 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.

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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 credit measurement standard.

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

(b) Includes $ 4 million classified in accounts receivable on the Condensed Consolidated Balance Sheets as of December 31, 2023 and September 30, 2023 .

The total allowance for credit losses was $ 1 million as of March 31, 2024 and September 30, 2023 .

(b) Includes $ 4 million classified in accounts receivable on the Condensed Consolidated Balance Sheets as of March 31, 2024 and September 30, 2023 .

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 December 31, 2023 , such locations included 55 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 $ 207 million at December 31, 2023 compared to $ 214 million at September 30, 2023 , of which $ 158 million at December 31, 2023 and $ 165 million at September 30, 2023 were classified in other noncurrent liabilities on the Condensed Consolidated Balance Sheets.

At March 31, 2024 , such locations included 53 sites where Ashland has been identified as a potentially responsible party under Superfund or similar state laws, 107 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 $ 198 million at March 31, 2024 compared to $ 214 million at September 30, 2023 , of which $ 149 million at March 31, 2024 and $ 165 million at September 30, 2023 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 three months ended December 31, 2023 and 2022.

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The following table provides a reconciliation of the changes in the environmental remediation reserves during the six months ended March 31, 2024 and 2023.

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(In millions)

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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 December 31, 2023 and September 30, 2023 , Ashland’s recorded receivable for these probable insurance recoveries

were $ 16 million and $ 17 million, respectively, of which $ 12 million and $ 15 million at December 31, 2023 and September 30, 2023 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 months ended December 31, 2023 and 2022.

At March 31, 2024 and September 30, 2023 , Ashland’s recorded receivables for these probable insurance recoveries were $ 15 million and $ 17 million, respectively, of which $ 12 million and $ 15 million at March 31, 2024 and September 30, 2023 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 $ 1 million for the three months ended December 31, 2022 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 loss from discontinued operations caption of the Statements of Consolidated Comprehensive Income (Loss).

(a) Net expense of zero and $ 1 million for the three and six months ended March 31, 2024 , respectively, and zero and $ 1 million for the three and six months ended March 31, 2023 , 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 loss from discontinued operations, net of income taxes caption of the Statements of Consolidated Comprehensive Income (Loss).

Environmental remediation reserves are subject to uncertainties that affect Ashland’s ability to estimate its share of the costs.

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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 $ 450 million.

The largest reserve for any site is 22 % of the remediation reserve as of December 31, 2023.

The largest reserve for any site is 23 % of the remediation reserve as of March 31, 2024.

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 December 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 December 31, 2023 .

however, Ashland believes that such potential losses were immaterial as of March 31, 2024 .

NOTE L – EARNINGS PER SHARE

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Stock appreciation rights 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 December 31, 2023 and 2022 , respectively.

The total number of these shares outstanding was approximately 1 million at March 31, 2024 and 2023 , respectively.

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

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(In millions, except per share data)

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The new authorization terminated and replaced the 2022 Stock Repurchase Program, which had $ 200 million outstanding at the date of termination.

As of December 31, 2023, $ 900 million remained available for repurchase under this authorization.

As of March 31, 2024 , $ 900 million remained available for repurchase under this authorization.

Stock repurchase program agreements

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The program was completed during December 2023, when Ashland paid a total of $ 100 million and received a delivery of 1.2 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 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 February 2023, when Ashland paid a total of $ 100 million and received a delivery of 1.0 million shares of common stock.

Stockholder dividends

Dividends of 38.5 cents and 33.5 cents per share were paid in the first quarters of fiscal 2024 and 2023, respectively.

Dividends of 38.5 cents per share were paid in the first and second quarters of fiscal 2024 and 33.5 cents per share were paid in the first and second quarters of fiscal 2023.

Accumulated other comprehensive income (loss)

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(expense) benefit

Three months ended December 31

Three months ended March 31

Other comprehensive income (loss)

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Total other comprehensive income

Six months ended March 31

Other comprehensive income (loss)

Unrealized translation gain (loss)

Unrealized gain (loss) on commodity hedges

Total other comprehensive income (loss)

Summary of stockholders’ equity

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(In millions)

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Balance, beginning of period

Common shares purchased under repurchase program (b)(c)

Regular dividends

Common shares purchased under repurchase program (b)(c)

Balance, end of period

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Balance, beginning of period

Unrealized translation gain

Unrealized loss on commodity hedges

Unrealized translation gain (loss)

Unrealized gain (loss) on commodity hedges

Balance, end of period

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Cash dividends declared per common share

(a) Common shares issued were 78,349 and 127,577 for the three months ended December 31, 2023 and 2022 , respectively.

Includes $ 3 million and $ 9 million associated with stock-based compensation employee withholding taxes for the three months ended December 31, 2023 and 2022 , respectively.

(b) Common shares repurchased were 1,238,212 for the three months ended December 31, 2023 .

Ashland paid a total of $ 100 million for the three months ended December 31, 2023 for common stock repurchases.

(a) Common shares issued were 32,458 and 16,935 for the three months ended March 31, 2024 and 2023 , respectively, and 110,807 and 144,514 for the six months ended March 31, 2024 and 2023 , respectively.

Includes $ 1 million for the three months ended March 31, 2024 and 2023 , respectively, and $ 4 million and $ 10 million for the six months ended March 31, 2024 and 2023 , respectively, associated with stock-based compensation employee withholding taxes.

(b) Common shares repurchased were zero and 1,238,212 for the three and six months ended March 31, 2024 , and 1,488,251 for the three and six months ended March 31, 2023 .

(c) Includes zero and $ 1 million in excise tax on stock repurchases for the three and six months ended March 31, 2024 , respectively, and $ 1 million for both the three and six months ended March 31, 2023 .

NOTE N – STOCK INCENTIVE PLANS

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Performance share awards

(a) Included less than $ 1 million of expense related to cash-settled nonvested restricted stock awards during the three months ended December 31, 2023 , and $ 1 million of income related to cash-settled performance units during the three months ended December 31, 2023 .

(b) Included $ 1 million of expense related to cash-settled nonvested restricted stock awards during the three months ended December 31, 2022 .

(a) Included zero and $ 1 million of expense related to cash-settled nonvested restricted stock awards during the three and six months ended March 31, 2024 , respectively, and $ 1 million of expense and zero related to cash-settled performance units during the three and six months ended March 31, 2024 , respectively.

(b) 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 .

NOTE O – REVENUE

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Latin America & other

For the six months ending March 31, 2024, Ashland had two product categories that represented 10 % or greater of Ashland's total consolidated sales which were cellulosics representing 37 % of total consolidated sales and polyvinylpyrrolidones (PVP) representing 23 % of total consolidated sales.

Trade receivables

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 $ 161 million and $ 288 million as of December 31, 2023 and September 30, 2023 , respectively.

Ashland’s trade receivables were $ 225 million and $ 288 million as of March 31, 2024 and September 30, 2023 , respectively.

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

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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 months ended December 31, 2023 and 2022.

The following table presents various financial information for each reportable segment for the three and six months ended March 31, 2024 and 2023.

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(In millions - unaudited)

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Intermediates

Unallocated and other

AMORTIZATION EXPENSE

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All other intersegment sales are accounted for at cost.

(b) Depreciation includes accelerated depreciation of $ 21 million for Specialty Additives for the three months ended December 31, 2023.

(b) Depreciation includes accelerated depreciation of $ 27 million and $ 49 million for Specialty Additives for the three and six months ended March 31, 2024 , respectively.

19 unchanged sentences

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