Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
Three months ended
December 31
(In millions except per share data - unaudited)
2024
2023
Sales - Note P
$
405
$
473
Cost of sales
294
375
Gross profit
111
98
Selling, general and administrative expense
78
83
Research and development expense
13
12
Intangibles amortization expense - Note G
17
21
Equity and other income
1
2
Loss on acquisitions and divestitures, net - Note B
( 183
)
( 2
)
Operating loss
( 179
)
( 18
)
Net interest and other expense (income)
28
( 24
)
Other net periodic benefit loss - Note K
2
2
Income (loss) from continuing operations before income taxes
( 209
)
4
Income tax benefit - Note J
( 43
)
( 24
)
Income (loss) from continuing operations
( 166
)
28
Income (loss) from discontinued operations, net of income taxes - Note C
1
( 2
)
Net income (loss)
$
( 165
)
$
26
PER SHARE DATA
Basic earnings per share - Note M
Income (loss) from continuing operations
$
( 3.51
)
$
0.54
Income (loss) from discontinued operations
0.01
( 0.03
)
Net income (loss)
$
( 3.50
)
$
0.51
Diluted earnings per share - Note M
Income (loss) from continuing operations
$
( 3.51
)
$
0.54
Income (loss) from discontinued operations
0.01
( 0.03
)
Net income (loss)
$
( 3.50
)
$
0.51
COMPREHENSIVE INCOME (LOSS)
Net income (loss)
$
( 165
)
$
26
Other comprehensive income (loss), net of tax
Unrealized translation gain (loss)
( 94
)
54
Unrealized gain (loss) on commodity hedges
1
( 1
)
Other comprehensive income (loss) - Note N
( 93
)
53
Comprehensive income (loss)
$
( 258
)
$
79
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - unaudited)
December 31
2024
September 30
2024
ASSETS
Current assets
Cash and cash equivalents
$
219
$
300
Accounts receivable, net (a) - Note H
163
243
Inventories - Note F
528
545
Other assets
127
107
Current assets held for sale - Note B
32
—
Total current assets
1,069
1,195
Noncurrent assets
Property, plant and equipment
Cost
3,227
3,316
Accumulated depreciation
1,993
2,013
Net property, plant and equipment
1,234
1,303
Goodwill - Note G
1,330
1,381
Intangibles - Note G
588
751
Operating lease assets, net - Note I
99
114
Restricted investments - Note E
277
295
Asbestos insurance receivable, net (b) - Note L
129
132
Deferred income taxes
241
210
Other assets
264
264
Total noncurrent assets
4,162
4,450
Total assets
$
5,231
$
5,645
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade and other payables
$
184
$
214
Accrued expenses and other liabilities
207
256
Current operating lease obligations - Note I
20
20
Current liabilities held for sale - Note B
14
—
Total current liabilities
425
490
Noncurrent liabilities
Long-term debt - Note H
1,313
1,349
Asbestos litigation reserve - Note L
401
414
Deferred income taxes
28
29
Employee benefit obligations - Note K
110
110
Operating lease obligations - Note I
83
99
Other liabilities
279
286
Total noncurrent liabilities
2,214
2,287
Commitments and contingencies - Note L
Stockholders’ equity - Note N
2,592
2,868
Total liabilities and stockholders' equity
$
5,231
$
5,645
(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.
3
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
Three months ended
December 31
(In millions - unaudited)
2024
2023
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net income (loss)
$
( 165
)
$
26
Loss (income) from discontinued operations, net of income taxes
( 1
)
2
Adjustments to reconcile income (loss) from continuing operations to cash flows from operating activities:
Depreciation and amortization
51
77
Original issue discount and debt issuance costs amortization
2
1
Deferred income taxes
( 3
)
( 30
)
Income from affiliates
( 1
)
—
Stock based compensation expense
4
1
Loss (income) from restricted investments
12
( 35
)
Impairment charges
183
—
Pension contributions
( 4
)
( 8
)
Loss on pension plan remeasurements
1
—
Change in operating assets and liabilities
( 109
)
167
Total cash flows provided (used) by operating activities from continuing operations
( 30
)
201
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Additions to property, plant and equipment
( 23
)
( 36
)
Company-owned life insurance payments
( 1
)
( 1
)
Funds restricted for specific transactions
—
( 5
)
Reimbursements from restricted investments
6
16
Proceeds from sale of securities
5
9
Purchases of securities
( 5
)
( 9
)
Total cash flows used by investing activities from continuing operations
( 18
)
( 26
)
CASH FLOWS USED BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Repurchase of common stock
—
( 100
)
Repayment of short-term debt
—
( 16
)
Cash dividends paid
( 19
)
( 20
)
Stock based compensation employee withholding taxes paid in cash
( 3
)
( 3
)
Total cash flows used by financing activities from continuing operations
( 22
)
( 139
)
CASH PROVIDED (USED) BY CONTINUING OPERATIONS
( 70
)
36
CASH USED BY DISCONTINUED OPERATIONS
Operating cash flows
( 10
)
( 14
)
Total cash used by discontinued operations
( 10
)
( 14
)
Effect of currency exchange rate changes on cash and cash equivalents
( 1
)
1
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
( 81
)
23
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
300
417
CASH AND CASH EQUIVALENTS - END OF PERIOD
$
219
$
440
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A – SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
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 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: Life Sciences, Personal Care, Specialty Additives and Intermediates. Unallocated and Other includes corporate governance activities and certain legacy matters. 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
The preparation of Ashland’s Condensed Consolidated Financial Statements in conformity with U.S. 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, 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.
Ashland’s results are affected by domestic and international economic, political, legislative, regulatory and legal actions. Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies and changes in the prices of certain key raw materials, can have a significant effect on operations. While Ashland maintains reserves for anticipated liabilities and carries various levels of insurance, Ashland could be affected by civil, criminal, regulatory or administrative actions, claims or proceedings relating to asbestos, environmental remediation, income taxes or other matters.
New accounting pronouncements
A description of new U.S. GAAP accounting standards issued or adopted during the current year is required in interim financial reporting. 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.
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
Avoca business sale
5
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 Avoca business have been reflected as assets and liabilities held for sale, as described above and are comprised of the following components as of:
December 31
(In millions)
2024
Accounts receivable, net
$
11
Inventories
21
Current assets held for sale
$
32
Trade and other payables
$
1
Operating lease obligations
13
Current liabilities held for sale
$
14
NOTE C – DISCONTINUED OPERATIONS
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 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 ("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.
6
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
December 31
(In millions)
2024
2023
Income (loss) from discontinued operations, net of income taxes
Performance Adhesives
$
—
$
( 3
)
Asbestos-related litigation
1
1
$
1
$
( 2
)
NOTE D – RESTRUCTURING ACTIVITIES
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.
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 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 expense (income) (a)
Utilization (cash paid)
Severance expense (a)
Utilization (cash paid)
2025 Restructuring program
$
4
$
( 1
)
$
—
$
—
2023 Restructuring program
( 2
)
( 1
)
3
( 3
)
Total
$
2
$
( 2
)
$
3
$
( 3
)
(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)
$
—
$
18
Restructuring reserve
4
( 2
)
Utilization (cash paid)
( 1
)
( 1
)
Balance at December 31, 2024 (a)
$
3
$
15
(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
Ashland uses applicable guidance for defining fair value, the initial recording and periodic remeasurement of certain assets and liabilities measured at fair value and related disclosures for instruments measured at fair value. Fair value accounting guidance establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
7
An instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement.
For assets that are measured using quoted prices in active markets (Level 1), the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs (Level 2) are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability. 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, 2024:
(In millions)
Carrying value
Total
fair value
Level 1
Level 2
Level 3
Assets
Cash and cash equivalents
$
219
$
219
$
219
$
—
$
—
Restricted investments (a)(b)
350
350
350
—
—
Investment of captive insurance company (c)
9
9
9
—
—
Commodity derivatives (d)
1
1
—
1
—
Total assets at fair value
$
579
$
579
$
578
$
1
$
—
Liabilities
Commodity derivatives (e)
1
1
—
1
—
Total liabilities at fair value
$
1
$
1
$
—
$
1
$
—
(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 .
(c) Included in other noncurrent assets in the Condensed Consolidated Balance Sheet .
(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:
(In millions)
Carrying value
Total
fair value
Level 1
Level 2
Level 3
Assets
Cash and cash equivalents
$
300
$
300
$
300
$
—
$
—
Restricted investments (a)(b)
368
368
368
—
—
Investment of captive insurance company (c)
7
7
7
—
—
Foreign currency derivatives (d)
1
1
—
1
—
Total assets at fair value
$
676
$
676
$
675
$
1
$
—
Liabilities
Foreign currency derivatives (e)
$
1
$
1
$
—
$
1
$
—
Commodity derivatives (e)
2
2
—
2
—
Total liabilities at fair value
$
3
$
3
$
—
$
3
$
—
(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 .
(c) Included in other noncurrent assets in the Condensed Consolidated Balance Sheet .
(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.
8
Restricted investments
Ashland maintains certain investments in Company restricted renewable annual trusts for the purpose of paying future asbestos indemnity and defense costs and future environmental remediation and related litigation costs. The financial instruments are designated as investment securities, classified as Level 1 measurements within the fair value hierarchy. These securities were classified primarily as noncurrent restricted investment assets, with $ 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:
Gross
Gross
(In millions)
Adjusted Cost
Unrealized Gain
Unrealized Loss
Fair Value
December 31, 2024
Demand deposit
$
10
$
—
$
—
$
10
Equity mutual fund
122
46
—
168
Fixed income mutual fund
211
—
( 39
)
172
Fair value
$
343
$
46
$
( 39
)
$
350
September 30, 2024
Demand deposit
$
5
$
—
$
—
$
5
Equity mutual fund
124
56
—
180
Fixed income mutual fund
211
—
( 28
)
183
Fair value
$
340
$
56
$
( 28
)
$
368
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:
Three months ended
December 31
(In millions)
2024
2023
Investment income (a)
$
5
$
5
Net gains (losses) (a)
( 17
)
31
Funds restricted for specific transactions
—
5
Disbursements
( 6
)
( 16
)
(a) Included in the net interest and other expense (income) caption within the Statements of Condensed Consolidated Comprehensive Income (Loss).
Foreign currency derivatives
Ashland conducts business in a variety of foreign currencies. Accordingly, Ashland regularly uses foreign currency derivative instruments to manage exposure on certain transactions denominated in foreign currencies to curtail potential earnings volatility effects of certain assets and liabilities, including short-term intercompany loans, denominated in currencies other than Ashland’s functional currency of an entity. 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 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 within the Statements of Condensed Consolidated Comprehensive Income (Loss):
Three months ended
December 31
(In millions)
2024
2023
Foreign currency derivative gains (losses)
$
( 15
)
$
3
9
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:
December 31
September 30
(In millions)
2024
2024
Foreign currency derivative assets
$
—
$
1
Notional contract values
218
125
Foreign currency derivative liabilities
$
—
$
1
Notional contract values
156
184
Commodity derivatives
To manage its exposure to the market price volatility of natural gas consumed by its U.S. 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 within the cost of sales caption of the Statements of Condensed Consolidated Comprehensive Income (Loss):
Three months ended
December 31
(In millions)
2024
2023
Commodity derivative losses
$
( 1
)
$
( 1
)
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:
December 31
September 30
(In millions)
2024
2024
Commodity derivative assets
$
1
$
—
Notional contract values
8
3
Commodity derivative liabilities
$
1
$
2
Notional contract values
8
13
Other financial instruments
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
Inventories are carried at the lower of cost or net realizable value. Inventories are stated at cost using the weighted-average cost method. 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:
December 31
September 30
(In millions)
2024
2024
Finished products
$
363
$
372
Raw materials, supplies and work in process
165
173
$
528
$
545
10
NOTE G – GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
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:
Life
Personal
Specialty
(In millions)
Sciences
Care (a)
Additives (a)
Intermediates (a)
Total
Balance at September 30, 2024
$
822
$
125
$
434
$
—
$
1,381
Currency translation
( 29
)
( 4
)
( 17
)
—
( 50
)
Avoca business - held for sale (b)
—
( 1
)
—
—
( 1
)
Balance at December 31, 2024
$
793
$
120
$
417
$
—
$
1,330
(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
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. The cost of trademarks and trade names is amortized principally over 3 to 20 years , intellectual property over 3 to 20 years , and customer and supplier relationships over 10 to 24 years .
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 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
Gross
Net
Gross
Net
carrying
Accumulated
carrying
carrying
Accumulated
carrying
(In millions)
amount
amortization
amount
amount
amortization
amount
Definite-lived intangibles
Trademarks and trade names
$
70
$
( 36
)
$
34
$
87
$
( 42
)
$
45
Intellectual property
658
( 595
)
63
715
( 613
)
102
Customer and supplier relationships
580
( 367
)
213
759
( 433
)
326
Total definite-lived intangibles
1,308
( 998
)
310
1,561
( 1,088
)
473
Indefinite-lived intangibles
Trademarks and trade names
278
—
278
278
—
278
Total intangible assets
$
1,586
$
( 998
)
$
588
$
1,839
$
( 1,088
)
$
751
(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.
11
NOTE H – DEBT AND OTHER FINANCING ACTIVITIES
The following table summarizes Ashland’s long-term debt as of:
(In millions)
December 31, 2024
September 30, 2024
3.375 % Senior Notes, due 2031
$
450
$
450
2.00 % Senior Notes, due 2028 (Euro 500 million principal)
520
558
6.875 % Notes, due 2043
282
282
6.50 % Junior Subordinated Notes, due 2029
68
67
Other (a)
( 7
)
( 8
)
Long-term debt (less debt issuance costs)
$
1,313
$
1,349
(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
Ashland continues to maintain its U.S. 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 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 accounts receivable that serves as over-collateralization as a restricted asset.
U.S. 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.
12
Foreign Accounts Receivable Sales Program
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 Taulia Alliance 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 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 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 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 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 December 31, 2024 , Ashland’s calculation of the interest coverage ratio was 7.6 .
13
NOTE I – LEASING ARRANGEMENTS
The components of lease cost recognized within the Statements of Condensed Consolidated Comprehensive Income (Loss) are as follows:
Three months ended
December 31
(In millions)
Location
2024
2023
Lease cost:
Operating lease cost
Selling, General & Administrative (a)
$
3
$
4
Operating lease cost
Cost of Sales
3
3
Variable lease cost
Selling, General & Administrative
1
1
Variable lease cost
Cost of Sales
2
1
Short-term leases
Cost of Sales
1
1
Total lease cost
$
10
$
10
(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:
Three months ended
December 31
(In millions)
2024
2023
Operating cash flows from operating leases
$
7
$
7
NOTE J – INCOME TAXES
Current fiscal year
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 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 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 three months ended December 31, 2024.
(In millions)
Balance at October 1, 2024
$
65
Decreases related to positions taken on items from prior years
( 2
)
Increases related to positions taken in the current year
1
Increases related to positions taken in the prior year
1
Settlements
( 1
)
Balance at December 31, 2024
$
64
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 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,
14
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 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 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
The following table details the components of pension and other postretirement benefit costs for continuing operations.
Pension benefits
Other postretirement
benefits
Three months ended December 31
Three months ended December 31
(In millions)
2024
2023
2024
2023
Service cost
$
1
$
1
$
—
$
—
Interest cost
3
3
—
1
Expected return on plan assets
( 2
)
( 2
)
—
—
Curtailment loss
1
—
—
—
Total net periodic benefit costs
$
3
$
2
$
—
$
1
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 Condensed Consolidated Comprehensive Income (Loss). All other components are recorded within the other net periodic benefit loss caption on the Statements of Condensed Consolidated Comprehensive Income (Loss), which resulted in expense of $ 2 million for both the three months ended December 31, 2024 and 2023 .
NOTE L – LITIGATION, CLAIMS AND CONTINGENCIES
Asbestos litigation
Ashland is subject to liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims result from indemnification obligations undertaken in 1990 in connection with the sale of Riley and the acquisition of Hercules in November 2008. Although Riley, a former subsidiary, was neither a producer nor a manufacturer of asbestos, its industrial boilers contained some asbestos-containing components provided by other companies. Hercules, an indirect wholly-owned subsidiary of Ashland, has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products sold by one of Hercules’ former subsidiaries to a limited industrial market.
To assist in developing and annually updating independent reserve estimates for future asbestos claims and related costs given various assumptions for Ashland and Hercules asbestos claims, Ashland retained third party actuarial experts Gnarus. The methodology used by Gnarus to project future asbestos costs is based largely on recent experience, including claim-filing and settlement rates, disease mix, open claims and litigation defense. The claim experience of Ashland and Hercules are separately compared to the results of previously conducted third party
15
epidemiological studies estimating the number of people likely to develop asbestos-related diseases. Those studies were undertaken in connection with national analyses of the population expected to have been exposed to asbestos. Using that information, Gnarus estimates a range of the number of future claims that may be filed, as well as the related costs that may be incurred in resolving those claims. Changes in asbestos-related liabilities and receivables are recorded on an after-tax basis within the discontinued operations caption in the Statements of Condensed Consolidated Comprehensive Income (Loss).
Ashland asbestos-related litigation
The claims alleging personal injury caused by exposure to asbestos asserted against Ashland result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley. The amount and timing of settlements and number of open claims can fluctuate from period to period. A summary of Ashland asbestos claims activity, excluding Hercules claims, is as follow:
Three months ended
December 31
Years ended September 30
(In thousands)
2024
2023
2024
2023
2022
Open claims - beginning of year
41
42
42
44
46
New claims filed
1
1
2
2
2
Claims settled
—
—
( 1
)
( 1
)
( 1
)
Claims dismissed
( 1
)
( 1
)
( 2
)
( 3
)
( 3
)
Open claims - end of period
41
42
41
42
44
Ashland asbestos-related liability
From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs. Ashland reviews this estimate and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 40-year model developed with the assistance of Gnarus.
During the most recent update completed in fiscal 2024, it was determined that the liability for Ashland asbestos-related claims should be increased by $ 24 million. Total reserves for asbestos claims were $ 264 million and $ 274 million at December 31, 2024 and September 30, 2024, respectively.
A progression of activity in the asbestos reserve is presented in the following table.
Three months ended
December 31
Years ended September 30
(In millions)
2024
2023
2024
2023
2022
Asbestos reserve - beginning of year
$
274
$
281
$
281
$
305
$
320
Reserve adjustment
—
—
24
9
16
Amounts paid
( 10
)
( 10
)
( 31
)
( 33
)
( 31
)
Asbestos reserve - end of period (a)
$
264
$
271
$
274
$
281
$
305
(a) Includes $ 28 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of December 31, 2024 and September 30, 2024 .
Ashland asbestos-related receivables
Ashland has insurance coverage for certain litigation defense and claim settlement costs incurred in connection with its asbestos claims, and coverage-in-place agreements exist with the insurance companies that provide substantially all of the coverage that will be accessed.
For the Ashland asbestos-related obligations, Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. Substantially all of the estimated receivables from insurance companies are expected to be due from domestic insurers, all of which are solvent.
16
At December 31, 2024 and September 30, 2024, Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $ 96 million (excluding the Hercules receivable for asbestos claims discussed below) and $ 97 million, respectively. In fiscal 2024, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed. This model update resulted in a $ 11 million increase in the receivable for probable insurance recoveries.
A progression of activity in the Ashland insurance receivable is presented in the following table.
Three months ended
December 31
Years ended September 30
(In millions)
2024
2023
2024
2023
2022
Insurance receivable - beginning of year
$
97
$
95
$
95
$
101
$
100
Receivable adjustment (a)
—
—
11
3
7
Amounts collected
( 1
)
( 2
)
( 9
)
( 9
)
( 6
)
Insurance receivable - end of period (b)
$
96
$
93
$
97
$
95
$
101
(a) The total allowance for credit losses was $ 1 million at of December 31, 2024 and September 30, 2024 .
(b) Includes $ 9 million classified in accounts receivable, net on the Condensed Consolidated Balance Sheets at December 31, 2024 and September 30, 2024 .
Hercules asbestos-related litigation
Hercules has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products which were sold by one of Hercules’ former subsidiaries to a limited industrial market. The amount and timing of settlements and number of open claims can fluctuate from period to period. A summary of Hercules’ asbestos claims activity follows:
Three months ended
December 31
Years ended September 30
(In thousands)
2024
2023
2024
2023
2022
Open claims - beginning of year
12
12
12
11
12
New claims filed
—
—
1
1
1
Claims dismissed
( 1
)
—
( 1
)
—
( 2
)
Open claims - end of period
11
12
12
12
11
Hercules asbestos-related liability
From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs. Ashland reviews this estimate, and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 40-year model developed with the assistance of Gnarus. During the most recent update completed in fiscal 2024, it was determined that the liability for Hercules asbestos-related claims should be increased by $ 14 million. Total reserves for asbestos claims were $ 182 million and $ 185 million at December 31, 2024 and September 30, 2024, respectively.
A progression of activity in the asbestos reserve is presented in the following table.
Three months ended
December 31
Years ended September 30
(In millions)
2024
2023
2024
2023
2022
Asbestos reserve - beginning of year
$
185
$
191
$
191
$
213
$
217
Reserve adjustments
—
—
14
( 2
)
15
Amounts paid
( 3
)
( 5
)
( 20
)
( 20
)
( 19
)
Asbestos reserve - end of period (a)
$
182
$
186
$
185
$
191
$
213
(a) Includes $ 17 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets at December 31, 2024 and September 30, 2024 .
17
Hercules asbestos-related receivables
For the Hercules asbestos-related obligations, certain reimbursement obligations pursuant to coverage-in-place agreements with insurance carriers exist. As a result, any increases in the asbestos reserve have been partially offset by probable insurance recoveries. Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. The estimated receivable consists exclusively of solvent domestic insurers.
As of December 31, 2024 and September 30, 2024, Ashland’s receivable for recoveries of litigation defense and claims costs from insurers with respect to Hercules amounted to $ 48 million and $ 50 million, respectively. In fiscal 2024, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed. This model update resulted in a increase of $ 6 million in the receivable for probable insurance recoveries.
A progression of activity in the Hercules insurance receivable is presented in the following table.
Three months ended
December 31
Years ended September 30
(In millions)
2024
2023
2024
2023
2022
Insurance receivable - beginning of year
$
50
$
47
$
47
$
52
$
47
Receivable adjustment (a)
—
—
6
( 3
)
7
Amounts collected
( 2
)
( 1
)
( 3
)
( 2
)
( 2
)
Insurance receivable - end of period (b)
$
48
$
46
$
50
$
47
$
52
(a) The total allowance for credit losses was $ 1 million at December 31, 2024 and September 30, 2024 .
(b) Includes $ 6 million classified in accounts receivable, net on the Condensed Consolidated Balance Sheets at December 31, 2024 and September 30, 2024 .
Asbestos litigation cost projection
Projecting future asbestos costs is subject to numerous variables that are difficult to predict. In addition to the uncertainties surrounding the number of claims that might be received, other variables include the type and severity of the disease alleged by each claimant and the related costs incurred in resolving those claims, mortality rates, dismissal rates, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case. Furthermore, any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. In light of these inherent uncertainties, Ashland believes that the asbestos reserves for Ashland and Hercules represent the best estimate within a range of possible outcomes. As a part of the process to develop these estimates of future asbestos costs, a range of long-term cost models was developed. These models are based on national studies that predict the number of people likely to develop asbestos-related diseases and are heavily influenced by assumptions regarding long-term inflation rates for indemnity payments and legal defense costs, as well as other variables mentioned previously. Ashland has currently estimated in various models ranging from approximately 40 year periods that it is reasonably possible that total future litigation defense and claim settlement costs on an inflated and undiscounted basis could range as high as approximately $ 410 million for the Ashland asbestos-related litigation (current reserve of $ 264 million) and approximately $ 276 million for the Hercules asbestos-related litigation (current reserve of $ 182 million), depending on the combination of assumptions selected in the various models. While the timeframe used in Ashland’s models for projecting asbestos liabilities generally decreases over time based on the expected lifetime of the liabilities, these models have been consistently applied between all periods presented. If actual experience is worse than projected, relative to the number of claims filed, the severity of alleged disease associated with those claims or costs incurred to resolve those claims, or actuarial refinement or improvements to the assumptions used within these models are initiated, Ashland may need to further increase the estimates of the costs associated with asbestos claims and these increases could be material over time.
Environmental remediation and asset retirement obligations
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, 2024 , such locations included 53 sites where Ashland has been identified as a potentially responsible party under
18
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 $ 216 million and $ 221 million at December 31, 2024 and September 30, 2024 , respectively, of which $ 159 million and $ 164 million at December 31, 2024 and September 30, 2024, respectively, 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:
Three months ended
December 31
(In millions)
2024
2023
Reserve - beginning of period
$
221
$
214
Disbursements
( 6
)
( 11
)
Revised obligation estimates and accretion
1
4
Reserve - end of period
$
216
$
207
The total reserves for environmental remediation reflect Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable, without regard to any third-party recoveries. Engineering studies, historical experience and other factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Ashland regularly adjusts its reserves as environmental remediation continues. 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, 2024 and September 30, 2024 , Ashland’s recorded receivables for these probable insurance recoveries were $ 12 million and $ 13 million, respectively, of which $ 11 million at December 31, 2024 and September 30, 2024 , 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 Condensed Consolidated Comprehensive Income (Loss) are presented in the following table:
Three months ended
December 31
(In millions)
2024
2023
Environmental expense
$
1
$
4
Legal expense
1
1
Total expense
2
5
Insurance receivable
( 1
)
( 1
)
Total expense, net of receivable activity (a)
$
1
$
4
(a) Net expense of zero and $ 1 million for the three months ended December 31, 2024 and 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 income (loss) from discontinued operations, net of income taxes caption of the Statements of Condensed Consolidated Comprehensive Income (Loss).
Environmental remediation reserves are subject to uncertainties that affect Ashland’s ability to estimate its share of the costs. Such uncertainties involve the nature and extent of contamination at each site and the extent of required cleanup efforts under existing environmental regulations. 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 $ 475 million. The largest reserve for any site is 21 % of the remediation reserve as of December 31, 2024.
Other legal proceedings and claims
In addition to the matters described above, there are other various claims, lawsuits and administrative proceedings pending or threatened against Ashland and its current and former subsidiaries. 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
19
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, 2024. 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, 2024 .
NOTE M – EARNINGS PER SHARE
The following is the computation of basic and diluted earnings per share ("EPS") from continuing operations attributable to Ashland. 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 (loss) 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, 2024 and 2023 . The majority of these shares are for warrants with a strike price of $ 128.66 . Earnings per share is reported under the treasury stock method.
Three months ended
December 31
(In millions, except per share data)
2024
2023
Numerator
Numerator for basic and diluted EPS - Income (loss) from continuing operations, net of tax
$
( 166
)
$
28
Denominator
Denominator for basic EPS - Weighted-average common shares outstanding
47
51
Share based awards convertible to common shares
—
—
Denominator for diluted EPS - Adjusted weighted-average shares and assumed conversions
47
51
EPS from continuing operations
Basic
$
( 3.51
)
$
0.54
Diluted (a)
( 3.51
)
0.54
(a) As a result of the loss from continuing operations attributable to Ashland during the three months ended December 31, 2024, the effect of the share-based awards convertible to common stock would be antidilutive and have been excluded from the diluted EPS calculation.
NOTE N – EQUITY ITEMS
2023 Stock repurchase program
On June 28, 2023, Ashland's board of directors authorized a new evergreen $ 1 billion common share repurchase program ("2023 Stock Repurchase Program"). The new authorization terminated and replaced the 2022 Stock Repurchase Program, which had $ 200 million outstanding at the date of termination. As of December 31, 2024 and September 30, 2024 , $ 620 million remained available for repurchase under the 2023 Stock Repurchase Program.
There was no stock repurchase activity during the three months ended December 31, 2024 . The following table provides the common stock repurchase activity for the three months ended December 31, 2023:
(In millions, except per share data)
Number of shares repurchased
1.20
Weighted-average price per share (a)
$
80.78
Aggregate purchase price (a)
$
100
Program
2023 Stock Repurchase Program
(a) Includes transactions costs.
Stockholder dividends
Dividends of 40.5 cents and 38.5 cents per share were paid in the first quarters of fiscal 2025 and 2024, respectively.
20
Accumulated other comprehensive income (loss)
Components of other comprehensive income (loss) recorded in the Statements of Condensed Consolidated Comprehensive Income (Loss) are presented below, before tax and net of tax effects.
2024
2023
(In millions)
Before
tax
Tax benefit
Net of
tax
Before
tax
Tax benefit
Net of
tax
Three months ended December 31
Other comprehensive income (loss)
Unrealized translation gain (loss)
$
( 95
)
$
1
$
( 94
)
$
54
$
—
$
54
Unrealized gain (loss) on commodity hedges
1
—
1
( 1
)
—
( 1
)
Total other comprehensive income (loss)
$
( 94
)
$
1
$
( 93
)
$
53
$
—
$
53
Summary of stockholders’ equity
A reconciliation of changes in stockholders’ equity are as follows:
Three months ended
December 31
(In millions, except per share data)
2024
2023
Common stock and paid in capital
Balance, beginning of period
$
1
$
5
Common shares issued under stock incentive and other plans (a)
1
( 2
)
Common shares purchased under repurchase program (b)(c)
—
( 2
)
Balance, end of period
2
1
Retained earnings
Balance, beginning of period
3,315
3,595
Net income (loss)
( 165
)
26
Regular dividends
( 19
)
( 20
)
Common shares purchased under repurchase program (b)(c)
—
( 99
)
Balance, end of period
3,131
3,502
Accumulated other comprehensive income (loss)
Balance, beginning of period
( 448
)
( 503
)
Unrealized translation gain (loss)
( 94
)
54
Unrealized gain (loss) on commodity hedges
1
( 1
)
Balance, end of period
( 541
)
( 450
)
Total stockholders' equity
$
2,592
$
3,053
Cash dividends declared per common share
$
0.405
$
0.385
(a) Common stock issued were 75,408 and 78,349 for the three months ended December 31, 2024 and 2023 , respectively. Includes $ 3 million for both the three months ended December 31, 2024 and 2023 associated with stock-based compensation employee withholding taxes.
(b) Common stock repurchased were 1,238,212 for the three months ended December 31, 2023 .
(c) Includes $ 1 million in excise tax on common stock repurchases 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.
21
NOTE O – STOCK INCENTIVE PLANS
The components of Ashland’s pre-tax stock-based compensation expense included in continuing operations are as follows:
Three months ended
December 31
(In millions)
2024 (a)
2023 (b)
Nonvested stock awards
$
3
$
4
Performance share awards
1
( 3
)
$
4
$
1
(a) Included $ 1 million of expense related to cash-settled nonvested restricted stock awards during the three months ended December 31, 2024 , and $ 1 million income related to cash-settled performance units during the three months ended December 31, 2024 .
(b) 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 .
22
NOTE P – REVENUE
Disaggregation of revenue
Ashland disaggregates its revenue by reportable segment and geographical region as Ashland believes these categories best depict how management reviews the financial performance of its operations. Ashland includes only U.S. and Canada in its North America designation and includes Europe, the Middle East and Africa in its Europe designation. See the following tables for details. See Note Q of the Notes to the Condensed Consolidated Financial Statements for additional information.
Sales by geography
Three months ended
December 31
(In millions)
2024
2023
Life Sciences
North America
$
23
$
67
Europe
50
63
Asia Pacific
46
51
Latin America & other
15
19
$
134
$
200
Three months ended
December 31
(In millions)
2024
2023
Personal Care
North America
$
40
$
40
Europe
45
47
Asia Pacific
31
25
Latin America & other
18
17
$
134
$
129
Three months ended
December 31
(In millions)
2024
2023
Specialty Additives
North America
$
40
$
42
Europe
34
40
Asia Pacific
34
34
Latin America & other
7
6
$
115
$
122
Three months ended
December 31
(In millions)
2024
2023
Intermediates
North America
$
23
$
25
Europe
5
4
Asia Pacific
3
3
Latin America & other
2
1
$
33
$
33
23
For the three months ending December 31, 2024 , Ashland had two product categories that represented 10 % or greater of Ashland's total consolidated sales which were cellulosics representing 38 % of total consolidated sales and polyvinylpyrrolidones (PVP) representing 25 % of total consolidated sales.
Trade receivables
Trade receivables are defined as receivables arising from contracts with customers and are recorded within the accounts receivable, net caption within the Condensed Consolidated Balance Sheets. Ashland’s trade receivables were $ 128 million and $ 206 million as of December 31, 2024 and September 30, 2024 , respectively. See Note H of the Notes to the Condensed Consolidated Financial Statements for additional information on Ashland’s programs to sell certain accounts receivables on a revolving basis to third party banks up to an aggregate purchase limit (U.S and Foreign Accounts Receivable Sales Programs).
NOTE Q – REPORTABLE SEGMENT INFORMATION
Ashland determines its reportable segments based on how operations are managed internally for the products and services sold to customers, including how the results are reviewed by the chief operating decision maker, which includes determining resource allocation methodologies used for reportable segments. Operating income (loss) and EBITDA (EBITDA is defined as net income (loss), plus income tax benefit, net interest and other expense (income), and depreciation and amortization) are the primary measures of performance that are reviewed by the chief operating decision maker in assessing each reportable segment's financial performance. Ashland does not aggregate reportable segments to arrive at these reportable segments.
Reportable segment business descriptions
Life Sciences is comprised of pharmaceuticals, nutrition, agricultural chemicals, diagnostic films (formerly known as advanced materials) and fine chemicals. Pharmaceutical solutions include controlled release polymers, disintegrants, tablet coatings, thickeners, solubilizers and tablet binders. Nutrition solutions include thickeners, stabilizers, emulsifiers and additives for enhancing mouthfeel, controlling moisture migration, reducing oil uptake and binding structured foods. Customers include pharmaceutical, food, beverage, hospitals and radiologists and industrial manufacturers. The nutraceutical business was sold in August 2024.
Personal Care is comprised of biofunctionals, microbial protectants (preservatives), skin care, sun care, oral care, hair care and household. These businesses have a broad range of natural, nature-derived, biodegradable, and high-performance ingredients for customer-driven solutions to help protect, renew, moisturize and revitalize skin and hair, and provide solutions for toothpastes, mouth washes and rinses, denture cleaning and care for teeth. Personal Care supplies nature-derived rheology ingredients, biodegradable surface wetting agents, performance encapsulates, and specialty polymers for household, industrial and institutional cleaning products. Customers include formulators at large multinational branded consumer products companies and smaller, independent boutique companies.
Specialty Additives is comprised of rheology and performance-enhancing additives serving the architectural coatings, construction, energy, automotive and various industrial markets. Solutions include coatings additives for architectural paints, finishes and lacquers, cement and gypsum based dry mortars, ready-mixed joint compounds, synthetic plasters for commercial and residential construction, and specialty materials for industrial applications. Products include rheology modifiers (cellulosic and associative thickeners), foam control agents, surfactants and wetting agents, pH neutralizers, advanced ceramics used in catalytic converters, and environmental filters, ingredients that aid the manufacturing process of ceramic capacitors, plasma display panels and solar cells, ingredients for textile printing, thermoplastic metals and alloys for welding. Products help improve desired functional outcomes through rheology modification and control, water retention, workability, adhesive strength, binding power, film formation, deposition and suspension and emulsification. Customers include global paint manufacturers, electronics and automotive manufacturers, textile mills, the construction industry, and welders.
Intermediates is comprised of the production of 1,4 butanediol (BDO) and related derivatives, including n-methylpyrrolidone. These products are used as chemical intermediates in the production of engineering polymers and polyurethanes, and as specialty process solvents in a wide array of applications including electronics, pharmaceuticals, water filtration membranes and more. Butanediol is also supplied to Life Sciences, Personal Care, and Specialty Additives for use as a raw material.
24
Unallocated and other generally includes items such as certain significant company-wide restructuring activities, corporate governance costs and legacy costs or activities that relate to divested businesses that are no longer operated by Ashland.
Reportable segment results
Results of Ashland’s reportable segments are presented based on its management and internal accounting structure. The structure is specific to Ashland; therefore, the financial results of Ashland’s reportable segments are not necessarily comparable with similar information for other comparable companies. Ashland allocates all costs to its reportable segments except for certain significant company-wide restructuring activities, certain corporate governance costs and other costs or activities that relate to former businesses that Ashland no longer operates. The service cost component of pension and other postretirement benefits costs is allocated to each reportable segment on a ratable basis; while the remaining components of pension and other postretirement benefits costs are recorded within the other net periodic benefit loss caption of the Statement of Condensed Consolidated Comprehensive Income (loss). Ashland refines its expense allocation methodologies to the reportable segments from time to time as internal accounting practices are improved, more refined information becomes available and the industry or market changes. Significant revisions to Ashland’s methodologies are adjusted for all reportable segments on a retrospective basis.
25
The following table presents various financial information for each reportable segment:
Three months ended
December 31
(In millions - unaudited)
2024
2023
SALES
Life Sciences
$
134
$
200
Personal Care
134
129
Specialty Additives
115
122
Intermediates
33
33
Intersegment sales (a)
( 11
)
( 11
)
$
405
$
473
OPERATING INCOME (LOSS)
Life Sciences
$
14
$
32
Personal Care
11
2
Specialty Additives
( 5
)
( 32
)
Intermediates
3
7
Unallocated and other (b)
( 202
)
( 27
)
$
( 179
)
$
( 18
)
DEPRECIATION EXPENSE
Life Sciences
$
9
$
9
Personal Care
8
9
Specialty Additives (c)
14
35
Intermediates
3
3
$
34
$
56
AMORTIZATION EXPENSE
Life Sciences
$
5
$
7
Personal Care
10
11
Specialty Additives
2
3
Intermediates
—
—
$
17
$
21
EBITDA (d)
Life Sciences
$
28
$
48
Personal Care
29
22
Specialty Additives
11
6
Intermediates
6
10
Unallocated and other
( 202
)
( 27
)
$
( 128
)
$
59
December 31
September 30
(In millions - unaudited)
2024
2024
TOTAL ASSETS
Life Sciences
$
1,816
$
1,778
Personal Care
717
950
Specialty Additives
1,323
1,516
Intermediates
124
127
Unallocated and other
1,251
1,274
$
5,231
$
5,645
(a) Intersegment sales from Intermediates are accounted for at prices that approximate fair value. All other intersegment sales are accounted for at cost.
(b) Includes a $ 183 million impairment charge related to the Avoca business within the loss on acquisitions and divestitures, net for the three months ended December 31, 2024 .
(c) Depreciation includes accelerated depreciation of $ 21 million for Specialty Additives for the three months ended December 31, 2023 .
(d) Excludes income (loss) from discontinued operations and other net periodic benefit loss. See the Statements of Condensed Consolidated Comprehensive Income (Loss) for applicable amounts excluded.
26
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements including, without limitation, statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation” (MD&A), within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Ashland has identified some of these forward-looking statements with words such as “anticipates,” “believes,” “expects,” “estimates,” “is likely,” “predicts,” “projects,” “forecasts,” “objectives,” “may,” “will,” “should,” “plans” and “intends” and the negative of these words or other comparable terminology. Ashland may from time to time make forward-looking statements in its Annual Report to Stockholders, quarterly reports and other filings with the Securities and Exchange Commission (SEC), news releases and other written and oral communications. These forward-looking statements are based on Ashland’s expectations and assumptions, as of the date such statements are made, regarding Ashland’s future operating performance and financial condition, as well as the economy and other future events or circumstances. Ashland’s expectations and assumptions include, without limitation, those mentioned within the MD&A, internal forecasts and analyses of current and future market conditions and trends, management plans and strategies, operating efficiencies, cost savings and economic conditions (such as prices, supply and demand, cost of raw materials, and the ability to recover raw-material cost increases through price increases), and risks and uncertainties associated with the following: the impact of acquisitions and/or divestitures Ashland has made or may make (including the possibility that Ashland may not realize the anticipated benefits from such transactions); Ashland’s substantial indebtedness (including the possibility that such indebtedness and related restrictive covenants may adversely affect Ashland’s future cash flows, results of operations, financial condition and its ability to repay debt); execution risks associated with our growth strategies; the competitive nature of our business; severe weather, natural disasters, public health crises, cyber events and legal proceedings and claims (including product recalls, environmental and asbestos matters); the ongoing Ukraine/Russia and Israel/Hamas conflict on the geographies in which Ashland operates, the end markets Ashland serves and on Ashland’s supply chain and customers; and without limitation, risks and uncertainties affecting Ashland that are contained in “Use of estimates, risks and uncertainties” in Note A of Notes to Consolidated Financial Statements and in Item 1A of its most recent Form 10-K filed with SEC. Various risks and uncertainties may cause actual results to differ materially from those stated, projected or implied by any forward-looking statements. Ashland believes its expectations and assumptions are reasonable, but there can be no assurance that the expectations reflected herein will be achieved. Unless legally required, Ashland undertakes no obligation to update any forward-looking statements made in this Form 10-Q whether as a result of new information, future events or otherwise. Information on Ashland’s website is not incorporated into or a part of this Form 10-Q.
27
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.