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Item 1. Financial Statements

2025-01-29 compared with 2024-08-07 · 269 added, 308 removed, 553 unchanged (51% of the section changed)

1 unchanged sentence

AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

STATEMENTS OF CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

Three months ended

Nine months ended

(In millions except per share data - unaudited)

Sales - Note P

Cost of sales

4 unchanged sentences

Loss on acquisitions and divestitures, net - Note B

Operating income (loss)

Operating loss

Net interest and other expense (income)

1 unchanged sentence

Income (loss) from continuing operations before income taxes

Income tax expense (benefit) - Note J

Income from continuing operations

Income tax benefit - Note J

Income (loss) from continuing operations

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

Net income (loss)

PER SHARE DATA

Basic earnings per share - Note M

Income from continuing operations

Income (loss) from continuing operations

Income (loss) from discontinued operations

Net income (loss)

Diluted earnings per share - Note M

Income from continuing operations

Income (loss) from continuing operations

Income (loss) from discontinued operations

Net income (loss)

COMPREHENSIVE INCOME (LOSS)

Net income (loss)

Other comprehensive income (loss), net of tax

9 unchanged sentences

Cash and cash equivalents

Accounts receivable (a) - Note H

Accounts receivable, net (a) - Note H

Inventories - Note F

9 unchanged sentences

Restricted investments - Note E

Asbestos insurance receivable (b) - Note L

Asbestos insurance receivable, net (b) - Note L

Deferred income taxes

Total noncurrent assets

LIABILITIES AND EQUITY

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Short-term debt - Note H

Trade and other payables

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Total liabilities and stockholders' equity

(a) Accounts receivable includes an allowance for credit losses of $ 2 million and $ 3 million at June 30, 2024 and September 30, 2023 , respectively.

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

(a) Accounts receivable, net includes an allowance for credit losses of $ 2 million at both December 31, 2024 and September 30, 2024 .

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

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

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STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

Nine months ended

Three months ended

(In millions - unaudited)

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

Net income (loss)

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

Adjustments to reconcile income from continuing operations to cash flows from operating activities:

Adjustments to reconcile income (loss) from continuing operations to cash flows from operating activities:

Depreciation and amortization

1 unchanged sentence

Deferred income taxes

Gain from sales of property and equipment

Loss on acquisitions and divestitures, net

Income from affiliates

Stock based compensation expense

Excess tax benefit on stock-based compensation

Income from restricted investments

Asset impairments

Loss (income) from restricted investments

Impairment charges

Pension contributions

Loss on pension plan remeasurements

Change in operating assets and liabilities

Total cash flows provided by operating activities from continuing operations

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

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

Additions to property, plant and equipment

Proceeds from disposal of property, plant and equipment

Proceeds from settlement of Company-owned life insurance contracts

Company-owned life insurance payments

Funds restricted for specific transactions

Other investing cash flows

Reimbursements from restricted investments

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Effect of currency exchange rate changes on cash and cash equivalents

DECREASE IN CASH AND CASH EQUIVALENTS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

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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 ("U.S.

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

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles for interim financial reporting ("U.S.

GAAP") and U.S.

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

Results of operations for the period ended June 30, 2024 are not necessarily indicative of the expected results for the remainder of the fiscal year.

These Condensed Consolidated Financial 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" or the "Company") Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the SEC on November 18, 2024.

Results of operations for the period ended December 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:

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

For additional information about Ashland's reportable segments, see Note Q.

For additional information about Ashland's reportable segments, see Note Q of the Notes to the Condensed Consolidated Financial Statements.

Use of estimates, risks and uncertainties

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities.

Significant items that are subject to such estimates and assumptions include, but are not limited to, environmental remediation, asbestos litigation, the accounting for goodwill and other indefinite-lived intangible assets and income taxes.

Significant items that are subject to such estimates and assumptions include, but are not limited to, environmental remediation, asbestos litigation, accounting for goodwill and other indefinite-lived intangible assets and income taxes.

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.

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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, 2024.

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.

Since that date, in November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures” (“ASU 2024-03”) to expand expense disclosures by requiring disaggregated disclosure of certain income statement expense line items, including those that contain purchases of inventory, employee compensation, depreciation and amortization.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, or Ashland's fiscal 2028, and subsequent interim periods, with early adoption permitted.

The amendments should be applied prospectively, but retrospective application is permitted.

The company is currently assessing the impact of the requirements on our Condensed Consolidated Financial Statements.

No other new accounting pronouncements recently adopted or issued had or are expected to have a material impact on the Condensed Consolidated Financial Statements.

NOTE B – DIVESTITURES

Nutraceuticals business sale

In May 2024, Ashland signed a definitive agreement to sell substantially all of the net assets of its Nutraceuticals business to Turnspire Capital Partners LLC ("Turnspire").

The Nutraceuticals business is included within Ashland's Life Sciences segment and serves the broader nutrition market.

The transaction is expected to close during Ashland's fiscal fourth quarter, contingent on certain customary regulatory approvals and standard closing conditions.

Ashland determined that it has met all the criteria for its Nutraceuticals business to be classified as held for sale.

Therefore, the net assets of this business were classified as held for sale within the Condensed Consolidated Balance Sheets as of June 30, 2024.

Ashland determined this transaction did not qualify for discontinued operations

treatment since it neither represented a strategic shift nor did it have a major effect on Ashland's operations and financial results.

Ashland recorded a $ 99 million impairment charge within the loss on acquisitions and divestitures, net caption of the Statements of Consolidated Comprehensive Income (Loss) for the three and nine months ended June 30, 2024.

The impairment charge includes the impact of the related inside tax basis differences associated with the impaired assets.

The tax benefit associated with the expected disposition is included within the income tax expense (benefit) caption of the Statements of Consolidated Comprehensive Income (Loss).

Avoca business sale

In December 2024, Ashland signed a definitive agreement to sell substantially all of the net assets of its Avoca business to Mane SA.

The Avoca business is included within Ashland's Personal Care reportable segment.

The transaction is expected to close during Ashland's fiscal second quarter, contingent on certain customary regulatory approvals and standard closing conditions.

Ashland determined that it has met all the criteria for its Avoca business to be classified as held for sale as of December 31, 2024.

Therefore, the net assets of this business were classified as held for sale within the Condensed Consolidated Balance Sheet as of December 31, 2024.

Ashland determined this transaction did not qualify for discontinued operations treatment since it neither represented a strategic shift nor did it have a major effect on Ashland's operations and financial results.

Ashland recorded an impairment charge of $ 183 million related to allocated goodwill of $ 1 million, other intangible assets of $ 134 million, property, plant and equipment of $ 33 million, operating lease assets, net of $ 14 million, and other current assets of $ 1 million within the loss on acquisitions and divestitures, net caption of the Statement of Condensed Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2024.

The tax benefit associated with the expected disposition is included within the income tax benefit caption of the Statement of Condensed Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2024.

See Note J for additional details.

Held for sale classification

The assets and liabilities of the Nutraceuticals business have been reflected as assets and liabilities held for sale, as described above, which are comprised of the following components:

The assets and liabilities of the Avoca business have been reflected as assets and liabilities held for sale, as described above and are comprised of the following components as of:

(In millions)

Accounts receivable, net

Deferred income taxes

Current assets held for sale

Trade and other payables

Accrued expenses and other liabilities

Operating lease obligations

2 unchanged sentences

Ashland has divested certain businesses that have qualified as discontinued operations.

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 and nine months ended June 30, 2024 and 2023:

• The Performance Adhesives business divested in 2022;

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

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

• The sale of Ashland Water Technologies (Water Technologies) business divested in 2014;

• The separation of Valvoline Inc.

(Valvoline) business divested in 2017.

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

Due to the ongoing assessment of certain matters associated with previous divestitures, subsequent adjustments to these divestitures may continue in future periods in the discontinued operations caption in the Statements of Condensed Consolidated Comprehensive Income (Loss).

The Performance Adhesives business, divested in 2022, represents a disposal group that qualified as discontinued operations in previous periods and impacted discontinued operations for the three months ended December 31, 2023.

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 L 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 and nine months ended June 30, 2024 and 2023.

Such claims result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley Stoker Corporation ("Riley"), a former subsidiary, which qualified as a discontinued operation and from the acquisition during 2009 of Hercules LLC (formerly Hercules Incorporated) ("Hercules"), an indirect wholly-owned subsidiary of Ashland.

Adjustments to the recorded litigation reserves and related insurance receivables are recorded within the discontinued operations caption within the Statements of Condensed Consolidated Comprehensive Income (Loss).

See Note L of the Notes to the Condensed Consolidated Financial Statements for more information related to the adjustments on asbestos liabilities and receivables.

Components of amounts reflected in the Statements of Condensed Consolidated Comprehensive Income (Loss) related to discontinued operations are presented in the following table:

Three months ended

Nine months ended

(In millions)

1 unchanged sentence

Performance Adhesives

Composites/Marl facility

Water Technologies

Asbestos-related litigation

1 unchanged sentence

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

Fiscal 2024 and 2023 restructuring costs

During fiscal 2025, Ashland initiated a restructuring plan to offset the impact from the Nutraceuticals business sale completed in fiscal 2024 and other portfolio optimization actions.

As a part of this program, Ashland is also advancing a multi-year manufacturing optimization restructuring plan to improve operational cost and strengthen its competitive position.

During fiscal 2023, Ashland implemented targeted organizational restructuring actions to reduce costs.

This program continued into fiscal 2024.

Severance costs

Ashland recorded severance expense of $ 3 million and $ 1 million during the three months ended June 30, 2024 and 2023 and $ 23 million and $ 1 million during the nine months ended June 30, 2024 and 2023, respectively, within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss).

As of June 30, 2024 , the severance liability associated with this program was $ 19 million and is recorded within accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets.

The following table details at June 30, 2024 the amount of restructuring severance reserves related to this program.

This program continued into fiscal 2024 and 2025.

Additionally, 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 Statement of Condensed Consolidated Comprehensive Income (Loss).

The following table details the amount of restructuring severance expense related to these programs.

Three months ended December 31,2024

Three months ended December 31,2023

(In millions)

Severance reserves

Balance at of September 30, 2023

Severance expense

Severance expense (income) (a)

Utilization (cash paid)

Balance at June 30, 2024

Plant optimization actions

During the three and nine months ended June 30, 2024 , Ashland incurred $ 7 million and $ 55 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.

During the three and nine months ended June 30, 2024 , Ashland incurred $ 1 million, of accelerated depreciation for product line optimization activities associated with a Personal Care manufacturing facility in Summerville, South Carolina, which was recorded within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss).

Fiscal 2023 Life Sciences restructuring program

During the three months ended December 31, 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 nine months ended June 30, 2023, within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss).

As of June 30, 2024 , the severance reserve associated with this program was zero .

Severance expense (a)

Utilization (cash paid)

2025 Restructuring program

2023 Restructuring program

(a) Severance expense is recorded within the selling, general and administrative expense caption of the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2024 and 2023.

The following table details at December 31, 2024 the amount of restructuring severance liabilities related to these programs.

(In millions)

2025 Restructuring Program

2023 Restructuring Program

Balance at September 30, 2024 (a)

Restructuring reserve

Utilization (cash paid)

Balance at December 31, 2024 (a)

(a) The restructuring severance liability associated with these programs is recorded within accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets at December 31, 2024 and September 30, 2024 .

NOTE E – 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 June 30, 2024.

Quoted prices

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

(In millions)

Carrying value

Cash and cash equivalents

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Investment of captive insurance company (c)

Foreign currency derivatives (d)

Commodity derivatives (d)

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Total liabilities at fair value

(a) Includes $ 287 million within restricted investments and $ 76 million within other current assets in the Condensed Consolidated Balance Sheets .

(a) Includes $ 277 million within restricted investments and $ 73 million within other current assets in the Condensed Consolidated Balance Sheet .

(b) Includes $ 233 million related to the Asbestos trust and $ 117 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 accounts receivable, net in the Condensed Consolidated Balance Sheet.

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

The following table summarizes financial asset instruments subject to recurring fair value measurements as of September 30, 2024:

Quoted prices

(In millions)

Carrying value

Cash and cash equivalents

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Total liabilities at fair value

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

(a) Includes $ 295 million within restricted investments and $ 73 million within other current assets in the Condensed Consolidated Balance Sheet .

(b) Includes $ 248 million related to the Asbestos trust and $ 120 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 accounts receivable, net in the Condensed Consolidated Balance Sheet .

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

Restricted investments

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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 $ 76 million and $ 77 million classified within other current assets, in the Condensed Consolidated Balance Sheets at June 30, 2024 and September 30, 2023, respectively.

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

These securities were classified primarily as noncurrent restricted investment assets, with $ 73 million classified within other current assets, in the Condensed Consolidated Balance Sheets at both December 31, 2024 and September 30, 2024.

The following table presents gross unrealized gains and losses for the restricted securities as of:

(In millions)

2 unchanged sentences

Unrealized Loss

As of June 30, 2024

December 31, 2024

Demand deposit

1 unchanged sentence

Fixed income mutual fund

As of September 30, 2023

September 30, 2024

Demand deposit

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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 and nine months ended June 30, 2024 and 2023.

Three months ended

Nine months ended

(In millions)

Investment income (a)

Net gains (a)

Net gains (losses) (a)

Funds restricted for specific transactions

Disbursements

(a) Included in the net interest and other expense (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 Condensed Consolidated Comprehensive Income (Loss).

Foreign currency derivatives

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These derivative contracts generally require exchange of one foreign currency for another at a fixed rate at a future date and generally have maturities of less than twelve months.

All contracts are valued at fair value with net changes in fair value recorded within the selling, general and administrative expense caption.

All contracts are valued at fair value with net changes in fair value recorded within the selling, general and administrative expense caption within the Statements of Condensed Consolidated Comprehensive Income (Loss).

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 and nine months ended June 30, 2024 and 2023 within the Statements of Consolidated Comprehensive Income (Loss).

The following table summarizes the gains and losses recognized within the Statements of Condensed Consolidated Comprehensive Income (Loss):

Three months ended

Nine months ended

(In millions)

Foreign currency derivative gains

The following table summarizes the fair values of the outstanding foreign currency derivatives as of June 30, 2024 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 included in accounts receivable, net and accrued expenses and other liabilities of the Condensed Consolidated Balance Sheets as of:

(In millions)

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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 nine months ended June 30, 2024 and 2023 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 within the cost of sales caption of the Statements of Condensed Consolidated Comprehensive Income (Loss):

Three months ended

Nine months ended

(In millions)

Commodity derivative losses

The following table summarizes the fair values of the outstanding commodity derivatives as of June 30, 2024, and September 30, 2023 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 included in accounts receivable, net and accrued expenses and other liabilities of the Condensed Consolidated Balance Sheets as of:

(In millions)

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Other financial instruments

At June 30, 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 $ 1,337 million and $ 1,327 million, respectively, compared to a fair value of $ 1,255 million and $ 1,160 million, respectively.

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

At December 31, 2024 and September 30, 2024 , Ashland's long-term debt (including the current portion and excluding debt issuance cost discounts) had a carrying value of $ 1,324 million and $ 1,361 million, respectively, compared to a fair value of $ 1,276 million and $ 1,327 million, respectively.

The fair values of long-term debt are based on quoted market prices (level 1 of the fair value hierarchy).

NOTE F – INVENTORIES

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This method values inventories using average costs for raw materials and most recent production costs for labor and overhead.

The following table summarizes Ashland’s inventories as of the reported Condensed Consolidated Balance Sheets dates.

The following table summarizes Ashland’s inventories as of:

(In millions)

1 unchanged sentence

Raw materials, supplies and work in process

NOTE G – GOODWILL AND OTHER INTANGIBLES

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 nine months ended June 30, 2024 .

The following is a progression of goodwill by reportable segment for the nine months ended June 30, 2024.

NOTE G – GOODWILL AND OTHER INTANGIBLE ASSETS

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

No indicators of impairment were identified during the three months ended December 31, 2024 .

The following is a progression of goodwill by reportable segment for the three months ended December 31, 2024:

(In millions)

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Currency translation

Nutraceuticals - Held for sale (b)

Balance at June 30, 2024

(a) As of June 30, 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.

(b) Reclassified to the current assets held for sale caption of the Condensed Consolidated Balance Sheets as of June 30, 2024.

Avoca business - held for sale (b)

Balance at December 31, 2024

(a) As of December 31, 2024 and September 30, 2024 , there were accumulated impairments of $ 356 million, $ 174 million and $ 90 million related to the Personal Care, Specialty Additives and Intermediates reportable segments, respectively.

(b) Reclassified to the current assets held for sale caption of the Condensed Consolidated Balance Sheet as of December 31, 2024 .

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

Other intangible assets

Intangible assets principally consist of trademarks and trade names, intellectual property and customer and supplier relationships.

Other intangible assets principally consist of trademarks and trade names, intellectual property and customer and supplier relationships.

Intangible assets classified as finite are amortized on a straight-line basis over their estimated useful lives.

1 unchanged sentence

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 nine months ended June 30, 2024 .

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

June 30, 2024

No indicators of impairment were identified during the three months ended December 31, 2024 , other than the other intangible assets within the Avoca business.

See Note B for further information.

Other intangible assets were comprised of the following as of:

December 31, 2024 (a)

September 30, 2024

8 unchanged sentences

Total intangible assets

Amortization expense recognized on intangible assets was $ 19 million and $ 24 million for the three months ended June 30, 2024 and 2023 , respectively, and $ 59 million and $ 70 million for the nine months ended June 30, 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 $ 76 million in 2024 (includes nine months actual and three months estimated), $ 70 million in 2025, $ 68 million in 2026, $ 46 million in 2027 and $ 43 million in 2028.

(a) Includes $ 134 million r eclassified to the current assets held for sale caption of the Condensed Consolidated Balance Sheets as of December 31, 2024 .

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

Amortization expense recognized on intangible assets was $ 17 million and $ 21 million for the three months ended December 31, 2024 and 2023 , respectively, and is included within the intangibles amortization expense caption of the Statements of Condensed Consolidated Comprehensive Income (Loss).

Estimated amortization expense for future periods is $ 62 million in 2025 (includes three months actual and nine months estimated), $ 57 million in 2026, $ 35 million in 2027, $ 33 million in 2028 and $ 28 million in 2029.

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.

NOTE H – DEBT AND OTHER FINANCING ACTIVITIES

The following table summarizes Ashland’s current and long-term debt as of the dates reported in the Condensed Consolidated Balance Sheets.

The following table summarizes Ashland’s long-term debt as of:

(In millions)

June 30, 2024

December 31, 2024

September 30, 2024

3 unchanged sentences

6.50 % Junior Subordinated Notes, due 2029

Short-term debt

Long-term debt (less debt issuance costs)

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

The current portion of the long-term debt was zero for both June 30, 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 June 30, 2024 :

zero in the next 3 years, $ 4 million in 2027, and $ 535 million in 2028.

(a) Other includes $ 11 million and $ 12 million of debt issuance costs as of December 31, 2024 and September 30, 2024 , respectively.

The scheduled aggregate maturities for long-term debt by year (excluding debt issuance costs) are as follows as of December 31, 2024 :

zero in 2025 and 2026, $ 4 million in 2027, $ 520 million in 2028, $ 97 million in 2029, and zero in 2030.

Accounts Receivable Facilities and Off-Balance Sheet Arrangements

Accounts Receivable Sales Program

Ashland continues to maintain its U.S.

Accounts Receivable Sales Program, which was entered into during fiscal 2021.

Ashland accounts for the receivables transferred to buyers as sales.

Ashland recognizes any gains or losses based on the excess of proceeds received net of buyer’s discounts and fees compared to the carrying value of the assets.

Accounts Receivable Sales Program, which was entered into during fiscal 2021, and its Foreign Accounts Receivable Sales Program, which was entered into during fiscal 2024.

Under these programs, Ashland accounts for the accounts receivable transferred to buyers as sales.

Ashland recognizes any gains or losses based on the excess of proceeds received net of buyer’s discounts and fees compared to the carrying value of the accounts receivable.

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 expense (income) caption of the Statements of Consolidated Comprehensive Income (Loss).

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

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

Ashland also monitors its obligation with regards to the limited guarantee and records the resulting guarantee liability when warranted.

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

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 June 30, 2024 and 2023, respectively, and $ 3 million and $ 2 million for the nine months ended June 30, 2024 and 2023, respectively, within the net interest and other expense (income) caption associated with sales under the program.

Ashland has recorded $ 81 million in sales at June 30, 2024 against the buyer’s limit, which was $ 81 million at June 30, 2024 compared to $ 86 million of sales at September 30, 2023 against the buyer's limit, which was $ 86 million at September 30, 2023 .

Ashland transferred $ 104 million and $ 106 million in receivables to the special purpose entity as of June 30, 2024 and September 30, 2023, respectively.

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

As of June 30, 2024 and 2023, the year-to-date gross cash proceeds received for receivables transferred and derecognized were $ 244 million and $ 150 million, respectively, of which $ 233 million and $ 164 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 $ 11 million and $ 14 million for the periods ended June 30, 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

In October 2023, Ashland terminated its 2018 Foreign Accounts Receivable Securitization Facility.

The program had no outstanding borrowings at its termination.

This program did not meet criteria for sale accounting and was reported as secured borrowing under ASC 860.

At September 30, 2023 , the outstanding amount of accounts receivable transferred by Ashland to the purchaser was $ 124 million.

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

Accounts Receivable Sales Program

Ashland recognized a loss of $ 1 million and less than $ 1 million within the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2024 and 202 3, respectively, within the net interest and other expense (income) caption associated with sales under the program.

Ashland has recorded $ 64 million in sales at December 31, 2024 against the buyer’s limit, which was $ 64 million at December 31, 2024 compared to $ 71 million of sales at September 30, 2024 against the buyer's limit, which was $ 71 million at September 30, 2024 .

Ashland transferred $ 78 million and $ 85 million in accounts receivable to the special purpose entity as of December 31, 2024 and September 30, 2024, respectively.

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

As of December 31, 2024 and 20 23, the year-to-date gross cash proceeds received for accounts receivable transferred and derecognized were $ 95 million and $ 85 million, respectively, of which $ 102 million and $ 77 million were collected, which includes collections from sales in prior years transferred to the buyer.

The difference between accounts receivable transferred and derecognized versus collected of $ 7 million and $ 8 million for the three months ended December 31, 2024 and 2023, respectively, represents the impact of a net reduction and a net increase in accounts receivable sales volume during each period, respectively.

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 ) 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.

Ashland’s continuing involvement is limited to servicing the receivables, including billing, collections and remittance of payments to the buyers as well as a limited guarantee on over-collateralization.

Ashland determined that any receivables transferred under this agreement are put presumptively beyond the reach of Ashland and its creditors, even in bankruptcy or other receivership.

Ashland received true sale at law and non-consolidation opinions from independent qualified legal advisors in the jurisdiction of each originating subsidiary to support the legal isolation of these receivables.

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

Through June 30, 2024 , Ashland has sold $ 123 million in receivables under this agreement.

Accordingly, Ashland recognized a loss of less than $ 1 million and $ 2 million within the net interest and other expense (income) caption of the Statements of Consolidated Income (Loss) for the three and nine months ended June 30, 2024 , respectively.

Ashland recorded $ 123 million in sales and gross proceeds received against the buyer's limit, which was $ 123 million at June 30, 2024 .

Ashland transferred $ 158 million in receivables to the SPE as of June 30, 2024 .

Ashland recorded less than $ 1 million in liabilities related to its service obligations and limited guarantee as of June 30, 2024.

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

Ashland has recorded $ 92 million in sales at December 31, 2024 against the buyer’s limit, which was $ 92 million at December 31, 2024 compared to $ 104 million of sales at September 30, 2024 against the buyer's limit, which was $ 104 million at September 30, 2024 .

Ashland transferred $ 128 million and $ 155 million in accounts receivable to the special purpose entity as of December 31, 2024 and September 30, 2024, respectively.

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

As of December 31, 2024 and 20 23, the year-to-date gross cash proceeds received for accounts receivable transferred and derecognized were $ 71 million and $ 102 million, respectively, of which $ 84 million and zero million were collected.

The difference between accounts receivable transferred and derecognized versus collected of $ 13 million and $ 102 million for the three months ended December 31, 2024 and 2023, respectively, represents the impact of a net reduction and a net increase in accounts receivable sales volume during each period, respectively.

Supply Chain Finance Program

During April 2024, Ashland authorized a financing program offered through JP Morgan and Taulia Alliance.

Under this program, JP Morgan and its affiliates may purchase certain confirmed receivables directly from suppliers pursuant to the terms of a separate arrangement entered into between JPMorgan and such Suppliers.

There were no changes to Ashland's standard payment terms with its suppliers in connection with this program.

Ashland provides no guarantees to JP Morgan under this program.

As of June 30, 2024, the program is in systems implementation phase and has not yet been offered to suppliers.

Ashland provides no guarantees to JP Morgan and Taulia Alliance under this program.

As of December 31, 2024, the program has not yet been offered to suppliers for utilization.

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 June 30, 2024.

Ashland's total borrowing capacity at June 30, 2024 was $ 596 million.

The borrowing capacity remaining under current credit agreement (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, 2024.

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

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

and Foreign Accounts Receivable Sales Programs as of June 30, 2024.

and Foreign Accounts Receivable Sales Programs as of December 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 June 30, 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 June 30, 2024 , Ashland’s calculation of the consolidated net leverage ratio was 2.2 .

As of December 31, 2024, Ashland is in compliance with all debt agreement covenant restrictions.

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

At December 31, 2024 , Ashland’s calculation of the consolidated net leverage ratio was 2.5 .

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

At June 30, 2024 , Ashland’s calculation of the interest coverage ratio was 7.3 .

At December 31, 2024 , Ashland’s calculation of the interest coverage ratio was 7.6 .

NOTE I – LEASING ARRANGEMENTS

The components of lease cost recognized within the Statements of Consolidated Comprehensive Income (Loss) were as follows:

The components of lease cost recognized within the Statements of Condensed Consolidated Comprehensive Income (Loss) are as follows:

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Nine months ended

(In millions)

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Total lease cost

(a) Includes zero and $ 1 million charges for the impairment of an abandoned right of use office building asset for the three and nine months ended June 30, 2024 , respectively.

Right-of-use assets exchanged for new operating lease obligations were $ 1 million and $ 6 million for the three months ended June 30, 2024 and 2023 , respectively, and $ 4 million and $ 29 million for the nine months ended June 30, 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 June 30, 2024.

(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 zero and $ 1 million for the three months ended December 31, 2024 and 2023, respectively.

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

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Nine months ended

(In millions)

Operating cash flows from operating leases

Investing cash flows from finance leases

NOTE J – INCOME TAXES

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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 144 % and 467 % for the three and nine months ended June 30, 2024.

The current quarter's tax rate was impacted by jurisdictional income mix, as well as a net $ 104 million from favorable tax discrete items primarily related to the tax impact of the held for sale classification for the Nutraceuticals business.

The current nine month tax rate was impacted by jurisdictional income mix, as well as net $ 231 million from favorable tax discrete items primarily related to changes in foreign tax activity and the tax impact of the held for sale classification for the Nutraceuticals business.

The overall effective tax rate was 21 % for the three months ended December 31, 2024.

The current quarter's tax rate was impacted by jurisdictional income mix as well as a net $ 8 million from unfavorable tax discrete items primarily related to final regulations issued in the United States during the quarter impacting the recognition of deferred taxes on certain unrealized foreign exchange gains and losses.

Prior fiscal year

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

The quarter 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 nine months 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 .

The overall effective tax rate was a benefit of 600 % for the three months ended December 31, 2023 .

The quarter 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.

Unrecognized tax benefits

Changes in unrecognized tax benefits are summarized as follows for the nine months ended June 30, 2024.

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

(In millions)

Balance at October 1, 2024

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 June 30, 2024

Decreases related to positions taken on items from prior years

Increases related to positions taken in the current year

Increases related to positions taken in the prior year

Balance at December 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 $ 2 million and $ 4 million for continuing operations.

For the remaining balance as of June 30, 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;

For the remaining balance as of December 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.

NOTE K - EMPLOYEE BENEFIT PLANS

Restructuring and plan remeasurement

During the first quarter of fiscal 2025, as part of its fiscal 2024 restructuring activities, Ashland terminated approximately 40 employees in its Doel, Belgium facility.

The post-retirement benefits for these employees, all of whom participated in a non-contributory defined benefit plan in Belgium, were frozen.

This resulted in a decrease in total expected future years of service within the plan and required Ashland to remeasure the plan as of December 31, 2024.

As a result, Ashland recorded a $ 1 million curtailment loss within the other net periodic benefit loss caption of the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2024.

Plan contributions

For the nine months ended June 30, 2024 , Ashland contributed $ 7 million to its non-U.S.

For the three months ended December 31, 2024 , Ashland contributed $ 1 million to its non-U.S.

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

pension plans.

Ashland does no t expect to make additional contributions to its U.S.

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

pension plans and $ 4 million to its non-U.S.

pension plans during the remainder of fiscal 2025.

Components of net periodic benefit costs (income)

Components of net periodic benefit costs

The following table details the components of pension and other postretirement benefit costs for continuing operations.

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What changed 10-Q

Item 1. Financial Statements