What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2025-01-29 · 383 added, 189 removed, 445 unchanged (56% of the section changed)

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With approximately 3,200 employees worldwide, Ashland serves customers in more than 100 countries.

Ashland’s sales generated outside of North America were 72% and 66% for the three months ended December 31, 2024 and 2023, respectively.

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

Ashland’s sales generated outside of North America were 72% for both the three and six months ended March 31, 2025, and 69% and 68% for the three and six months ended March 31, 2024, respectively.

Sales by region expressed as a percentage of total consolidated sales were as follows:

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Sales by Geography

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

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

The contribution to sales by each reportable segment expressed as a percentage of total consolidated sales was as follows:

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Sales by Reportable Segment

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KEY DEVELOPMENTS

Uncertainty related to tariffs and global trade policy changes

The March quarter saw increased regulatory activity, including the imposition of tariffs and evolving global trade policies, which have resulted in retaliatory measures on U.S.

The extent and duration of the tariffs and the resulting impact on general economic conditions and on Ashland are uncertain and depend on various factors, such as negotiations between the U.S.

and affected countries, the responses of other countries or regions, exemptions that may be granted, availability and cost of alternative sources of supply and demand for Ashland's products in affected markets.

Additionally, the uncertainty about trade policy, tariff rates, and other changes in practices affecting international trade, including whether such tariffs or other measures will be withdrawn, or modified in the future, may make it difficult to operate optimally.

Ashland continues to monitor the rapidly evolving tariff and global trade policies and is working to mitigate potential impacts on its business.

Uncertainty relating to the ongoing Ukraine/Russia and Israel/Hamas conflicts

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Restructuring programs

As previously announced, Ashland initiated a new $30 million restructuring plan to offset the impact from the Nutraceuticals sale, completed in fiscal 2024, and other portfolio optimization actions, which are expected to be realized 50 percent in fiscal 2025 and 50 percent in fiscal 2026.

As previously announced, Ashland initiated a new $30 million pre-tax restructuring plan to offset the impact from the Nutraceuticals sale, completed in fiscal 2024, and other portfolio optimization actions, which are expected to be realized 50 percent in fiscal 2025 and 50 percent in fiscal 2026.

Ashland is also advancing a multi-year manufacturing optimization restructuring plan to improve operational cost and strengthen its competitive position.

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Ashland is also continuing to execute its fiscal 2024 portfolio and plant optimization actions to further strengthen Ashland’s resilience and improve margins and returns.

The following table summarizes the impact of these restructuring actions:

These previously announced actions include initiatives focused on carboxymethylcellulose (CMC), methylcellulose (MC), Nutraceuticals and Avoca portfolio optimization (collectively, Portfolio Optimization).

Overall, these portfolio optimization actions reduced sales and operating income (loss) by approximately $67 million and $9 million, respectively, for the three months ended March 31, 2025 and approximately $117 million and $14 million, respectively, for the six months ended March 31, 2025 as compared to the prior year.

Adjusted EBITDA was also reduced by $13 million and $21 million for the three and six months ended March 31, 2025, respectively, as compared to the prior year.

The following table summarizes the expense impact of these restructuring actions:

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(In millions)

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Restructuring, separation and other costs (b)

Other plant optimization costs (c)

Other plant optimization costs (a)

(a) Recorded within the cost of sales caption within the Statements of Condensed Consolidated Comprehensive Income (Loss).

(b) Recorded within the selling, general and administrative caption within the Statements of Condensed Consolidated Comprehensive Income (Loss).

Avoca business

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

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

Ashland recorded a $183 million impairment charge related to allocated goodwill, intangibles and property, plant and equipment within the loss on acquisitions and divestitures, net caption of the Statements of Condensed

Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2024.

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

Avoca business sale

During the three months ended March 2025, Ashland completed the sale of its Avoca business to Mane SA.

Proceeds from the sale were approximately $16 million, net of transaction costs.

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

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 zero for the three months ended March 31, 2025 and $183 million ($1 million allocated to goodwill, $134 million to other intangible assets, $33 million to property, plant and equipment, $14 million to operating lease assets, net and $1 million to other current assets) for the six months ended March 31, 2025, within the income (loss) on acquisitions and divestitures, net caption of the Statements of Condensed Consolidated Comprehensive Income (Loss).

The tax benefit associated with the sale is included within the income tax expense (benefit) caption of the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2025.

See Note J of the Notes to the Condensed Consolidated Financial Statements for additional details.

Ashland also recorded a pre-tax gain on sale of $8 million following the completion of this sale, mainly related to working capital movements, within the income (loss) on acquisitions and divestitures, net caption of the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2025.

RESULTS OF OPERATIONS – CONSOLIDATED REVIEW

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(In millions except per share data)

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Diluted earnings per share income (loss) from continuing operations (a)

Operating loss

Operating income (loss)

Adjusted EBITDA (b)

Adjusted Diluted EPS from Continuing Operations Excluding Intangibles Amortization Expense (b)

(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.

(a) As a result of the loss from continuing operations attributable to Ashland during the six months ended March 31, 2025, the effect of the share-based awards convertible to common stock would be antidilutive and have been excluded from the diluted EPS calculation.

(b) These are non-GAAP financial measures.

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Business results current quarter

Ashland's net loss of $165 million ($3.50 diluted earnings per share) and net income of $26 million ($0.51 diluted earnings per share) included income from discontinued operations of $1 million ($0.01 diluted earnings per share) and a loss from discontinued operations of $2 million (loss of $0.03 diluted earnings per share) in the three months ended December 31, 2024 and 2023, respectively.

Ashland's net loss, during the December 31, 2024 quarter, was primarily driven by a $183 million impairment charge related to the Avoca business.

Results for Ashland’s continuing operations, diluted earnings per share from continuing operations and operating loss for the three months ended December 31, 2024 and 2023 included certain key items that were excluded to arrive at Adjusted EBITDA and are quantified in the “Use of Non-GAAP Financial Measures” section below.

These pre-tax key items totaled expense of $191 million and $34 million for the three months ended December 31, 2024 and 2023, respectively, impacting continuing operations.

Continuing operations was also impacted by unfavorable tax specific key items for discrete tax items totaling $8 million and favorable tax specific key items for discrete tax items totaling $24 million for the three months ended December 31, 2024 and 2023, respectively.

Excluding these key items, the decrease in continuing operations, diluted earnings per share from continuing operations and operating loss was primarily driven by portfolio optimization actions, which includes volume impacts, and reduced pricing.

This was partially offset by production volume recovery versus inventory corrective actions in the prior year.

Ashland's net income of $31 million ($0.65 diluted earnings per share) and $120 million ($2.39 diluted earnings per share) included income from discontinued operations of $1 million ($0.02 diluted earnings per share) and a loss from discontinued operations of $1 million (loss of $0.01 diluted earnings per share) in the three months ended March 31, 2025 and 2024, respectively.

Results for Ashland’s continuing operations, diluted earnings per share from continuing operations and operating income for the three months ended March 31, 2025 and 2024 included certain key items that were excluded to arrive at Adjusted EBITDA and are quantified in the “Use of Non-GAAP Financial Measures” section below.

These pre-tax key items totaled expense of $6 million and $42 million for the three months ended March 31, 2025 and 2024, respectively, impacting continuing operations.

Continuing operations was also impacted by favorable tax specific key items for discrete tax items totaling $1 million and $105 million for the three months ended March 31, 2025 and 2024, respectively.

Excluding these key items, the decrease in continuing operations, diluted earnings per share from continuing operations and operating income was primarily driven by portfolio optimization actions, which includes volume impacts, and lower organic sales.

This was partially offset by favorable production costs and lower selling, administrative, research and development costs.

In addition, diluted earnings per share from continuing operations was also impacted by common stock reductions from repurchases of Ashland common stock over the last twelve months.

These common stock repurchases reduced the number of weighted average shares from 51 million diluted shares at December 31, 2023 to 47 million diluted shares at December 31, 2024.

Ashland’s Adjusted EBITDA was $61 million for the three months ended December 31, 2024 compared to $70 million for the three months ended December 31, 2023 (see U.S.

These common stock repurchases reduced the number of weighted average shares from 51 million diluted shares at March 31, 2024 to 47 million diluted shares at March 31, 2025.

Ashland’s Adjusted EBITDA was $108 million for the three months ended March 31, 2025 compared to $126 million for the three months ended March 31, 2024 (see U.S.

GAAP reconciliation under “Use of Non-GAAP Financial Measures” below).

The $9 million decrease in Adjusted EBITDA was primarily driven by portfolio optimization actions, which includes volume impacts, and reduced pricing.

This was partially offset by production volume recovery versus inventory corrective actions in the prior year.

The $18 million decrease in Adjusted EBITDA was primarily driven by portfolio optimization actions, which includes volume impacts, and lower organic sales.

This was partially offset by favorable production costs and lower selling, administrative, research and development costs.

Adjusted Diluted EPS from Continuing Operations (non-GAAP) Excluding Intangibles Amortization Expense was also impacted by these key factors along with the impact of common stock repurchases noted above.

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A comparative analysis of the Statements of Condensed Consolidated Comprehensive Income (Loss) by caption is provided as follows:

Three months ended December 31

Three months ended March 31

Six months ended March 31

(In millions)

The following table provides a reconciliation of the change in sales for the three months ended December 31, 2024 from the three months ended December 31, 2023:

The following table provides a reconciliation of the change in sales for the three and six months ended March 31, 2025 and 2024:

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(In millions)

March 31, 2025

Foreign currency exchange

Change in sales

Sales for the current quarter decreased $68 million compared to the prior year quarter.

Current Quarter - Sales for the current quarter decreased $96 million compared to the prior year quarter.

The decrease was driven by the unfavorable impact of divestitures, lower volume, unfavorable pricing and unfavorable foreign currency exchange.

Portfolio optimization initiatives had an approximate $67 million impact on sales compared to the prior year quarter, primarily within divestiture and volume caption changes.

Three months ended December 31

Year-to-date - Sales for the current year decreased $164 million compared to the prior year period.

The decrease was driven by the unfavorable impact of divestitures, lower volume, unfavorable pricing and unfavorable foreign currency exchange.

Portfolio optimization initiatives had an approximate $117 million impact on sales compared to the prior year period, primarily within divestiture and volume caption changes.

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(In millions)

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Gross profit as a percent of sales

The following table provides a reconciliation of the change in cost of sales between the three months ended December 31, 2024 and 2023.

The following table provides a reconciliation of the change in cost of sales between the three and six months ended March 31, 2025 and 2024:

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(In millions)

March 31, 2025

Cost of sales change

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Change in cost of sales

Cost of sales for the current quarter decreased $81 million compared to the prior year quarter.

The decrease was primarily driven by lower operating costs, the favorable impact of divestitures, lower sales volume, and favorable foreign exchange currency, which was partially offset by unfavorable pricing and $3 million of other plant optimization costs.

Gross profit as a percentage of sales increased 6.7% primarily due to production volume recovery versus inventory corrective actions and accelerated depreciation in the prior year.

Three months ended December 31

Current Quarter - Cost of sales for the current quarter decreased $82 million compared to the prior year quarter.

The decrease was primarily driven by the favorable impact of divestitures, lower sales volume, lower operating costs, and favorable foreign exchange currency, partially offset by unfavorable pricing.

The current period operating costs were affected by $13 million of accelerated depreciation for product line optimization activities at a Life Sciences manufacturing plant and $6 million of other plant optimization costs while the prior year quarter included $27 million of accelerated depreciation for product line optimization activities at two Speciality Additives manufacturing plants and $1 million of other plant optimization costs.

Gross profit as a percentage of sales increased 2.7% primarily due to production volume recovery versus inventory corrective actions and decreased accelerated depreciation compared to the prior year quarter.

Year-to-date - Cost of sales for the current year decreased $163 million compared to the prior year period.

The decrease was primarily driven by the favorable impact of divestitures, lower operating costs, lower sales volume, and favorable foreign exchange currency, partially offset by unfavorable pricing.

The current period operating costs were affected by $13 million of accelerated depreciation for product line optimization activities at a Life Sciences manufacturing plant and $9 million of other plant optimization costs while the prior year period included $49 million of accelerated depreciation for product line optimization activities at two Speciality Additives manufacturing plants and $1 million of other plant optimization costs.

Gross profit as a percentage of sales increased 4.5% primarily due to production volume recovery versus inventory corrective actions and decreased accelerated depreciation compared to the prior year period.

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(In millions)

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As a percent of sales

Selling, general and administrative expense for the current quarter decreased $5 million compared to the prior year quarter with expenses as a percent of sales increasing 1.7%.

Current Quarter - Selling, general and administrative expense for the current quarter decreased $21 million compared to the prior year quarter with expenses as a percent of sales decreasing 0.7%.

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

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• Expense of $8 million and $20 million comprised of key items for severance, lease abandonment and other restructuring costs during the current and prior year quarter, respectively;

• Expense of $5 million related to the devaluation of the currency in Argentina in the prior year;

• Higher variable compensation expenses (including stock-based compensation) between periods.

Three months ended December 31

• Lower stock-based compensation expense, favorable currency exchange and the favorable impact of divestitures between periods.

Year-to-date - Selling, general and administrative expense for the current year decreased $27 million compared to the prior year period with expenses as a percent of sales increasing 0.3%.

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

• $3 million and $7 million in net environmental-related expenses during the current and prior year quarter, respectively (see Note L of the Notes to the Condensed Consolidated Financial Statements for more information);

• Expense of $11 million and $24 million comprised of key items for severance, lease abandonment and other restructuring costs during the current and prior year quarter, respectively;

• A $5 million charge associated with the impact of a currency devaluation in Argentina in the prior period;

• Favorable currency exchange and the favorable impact of divestitures between periods.

Three months ended March 31

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(In millions)

Research and development expense

Research and development expense is generally consistent with the prior year quarter.

Three months ended December 31

Current Quarter - Research and development expense is generally consistent with the prior year quarter.

Year-to-date - Research and development expense is generally consistent with the prior year period.

Three months ended March 31

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(In millions)

Intangibles amortization expense

The lower intangibles amortization expense in the current quarter is driven by the impact of amortization related to the divested Nutraceuticals business in the prior year quarter.

Three months ended December 31

Current Quarter - The lower intangibles amortization expense in the current quarter is driven by the impact of amortization related to the divested Avoca business in the current quarter and Nutraceuticals business in the prior year quarter.

Year-to-date - The lower intangibles amortization expense in the current year is driven by the impact of amortization related to the divested Avoca business in the current year and Nutraceuticals business in the prior year period.

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(In millions)

Equity and other income

Equity and other income is generally consistent with the prior year quarter.

Three months ended December 31

Current Quarter - Equity and other income was zero for the current and prior year quarter.

Year-to-date - Equity and other income is generally consistent with the prior year period.

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Six months ended March 31

(In millions)

Loss on acquisitions and divestitures, net

Ashland recorded a $183 million impairment charge associated with the Avoca business during the current quarter.

Income (loss) on acquisitions and divestitures, net

Current Quarter - Ashland recorded a pre-tax gain on sale of $8 million associated with the sale of the Avoca business and a pre-tax gain on sale of a land property of $11 million during the current period.

Additionally, Ashland incurred $1 million of charges related to the Nutraceuticals business sale completed in fiscal 2024.

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

Three months ended December 31

Year-to-date - Ashland recorded a $183 million impairment charge and a pre-tax gain on sale of $8 million associated with the Avoca business during the current year.

In addition, Ashland recorded a pre-tax gain on sale of a land property of $11 million during the current year.

Additionally, Ashland incurred $1 million of charges related

to the Nutraceuticals business sale completed in fiscal 2024.

Prior period primarily related to legal fees associated with ongoing divestiture activity and acquisitions related due diligence costs.

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

Three months ended March 31

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(In millions)

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Other financing costs

Net interest and other expense (income) increased by $52 million during the current quarter compared to the prior year quarter.

Current Quarter - Net interest and other expense (income) increased by $9 million during the current quarter compared to the prior year quarter.

Interest expense and interest income remained primarily consistent during the current quarter compared to the prior year quarter.

Restricted investments expense of $12 million and income of $36 million included realized losses of $17 million compared to gains of $31 million for the three months ended December 31, 2024 and 2023, respectively.

Restricted investments income of $6 million and $12 million included realized gains of $3 million compared to $9 million for the three months ended March 31, 2025 and 2024, respectively, and was the primary change between quarters.

See Note E of the Notes to the Condensed Consolidated Financial Statements for more information on the restricted investments.

Three months ended December 31

Year-to-date - Net interest and other expense (income) increased by $60 million during the current year compared to the prior year period.

Interest expense and interest income remained primarily consistent during the current quarter compared to the prior year quarter.

Restricted investments expense of $7 million and income of $48 million included realized losses of $14 million compared to gains of $39 million for the six months ended March 31, 2025 and 2024, respectively, and was the primary change between periods.

See Note E of the Notes to the Condensed Consolidated Financial Statements for more information on the restricted investments.

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(In millions)

Other net periodic benefit loss

Other net periodic benefit loss for the three months ended December 31, 2024 primarily included interest cost of $3 million and a $1 million loss on curtialment partially offset by expected return on plan assets of $2 million.

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

Current Quarter - Other net periodic benefit loss for the three months ended March 31, 2025 primarily included interest cost of $4 million which was partially offset by expected return on plan assets of $3 million.

Other net periodic benefit loss for the three months ended March 31, 2024 primarily included interest cost of $3 million which was partially offset by expected return on plan assets of $1 million.

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

Three months ended December 31

Year-to-date - Other net periodic benefit loss for the six months ended March 31, 2025 primarily included interest cost of $7 million and a $1 million curtailment loss partially offset by expected return on plan assets of $5 million.

Other net periodic benefit loss for the six months ended March 31, 2024 primarily included interest cost of $8 million which was partially offset by expected return on plan assets of $4 million.

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

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Six months ended March 31

(In millions)

Income tax benefit

Income tax expense (benefit)

Effective tax rate

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 and was primarily 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.

The overall effective tax rate was a benefit of 600% for the three months ended December 31, 2023 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $24 million primarily related to changes in foreign tax reform related activity.

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

The overall effective tax rate was 23% for the three months ended March 31, 2025 and was primarily impacted by jurisdictional income mix.

The overall effective tax rate was a benefit of 612% for the three months ended March 31, 2024 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $102 million primarily related to changes in foreign tax reform related activity.

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

The overall effective tax rate was 20% for the six months

ended March 31, 2025 and was primarily impacted by jurisdictional income mix as well as a net $7 million from unfavorable tax discrete items primarily related to final regulations issued in the United States during the year impacting the recognition of deferred taxes on certain unrealized foreign exchange gains and losses.

The overall effective tax rate was a benefit of 610% for the six months ended March 31, 2024 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $126 million primarily related to changes in foreign tax reform related activity.

Adjusted income tax expense (benefit)

Key items are defined as the financial effects from significant transactions that may have caused short-term fluctuations in net loss and/or operating income (loss) which Ashland believes do not accurately reflect Ashland’s underlying business performance and trends.

Key items are defined as the financial effects from significant transactions that may have caused short-term fluctuations in net income (loss) and/or operating income (loss) which Ashland believes do not accurately reflect Ashland’s underlying business performance and trends.

Tax specific key items are defined as the financial effects from tax specific financial transactions, tax law changes or other matters that fall within the definition of key items as previously described.

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

The effective tax rate during the three months ended December 31, 2024 was significantly impacted by U.S.

tax final regulation activity while the effective tax rate during the three months ended December 31, 2023 was significantly impacted by foreign tax reform related activity.

The effective tax rate during the three and six months ended March 31, 2025 was significantly impacted by U.S.

tax final regulation activity while the effective tax rate during the three and six months ended March 31, 2024 was significantly impacted by foreign tax reform related activity.

The following table is a calculation of the effective tax rate, excluding these key items.

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(In millions)

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Key items (pre-tax) (a)

Adjusted income (loss) from continuing operations before income taxes

Income tax benefit

Adjusted income from continuing operations before income taxes

Income tax expense (benefit)

Income tax rate adjustments:

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Total income tax rate adjustments

Adjusted income tax expense (benefit)

Adjusted income tax expense

Effective tax rate

Effective Tax Rate, Excluding Key Items (Non-GAAP) (d)

Not meaningful

(a) See Adjusted EBITDA reconciliation table disclosed in this Management’s Discussion and Analysis of Financial Condition and Results of Operation for a summary of the key items, before tax.

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

Three months ended December 31

Three months ended March 31

Six months ended March 31

(In millions)

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Performance Adhesives

Asbestos-related litigation

The activity for Performance Adhesives in the prior year represents subsequent adjustments that were made in conjunction with post-closing disputes and taxes.

Asbestos activity in each quarter primarily relates to after-tax net adjustments to the asbestos reserves and receivables.

Composites/Marl facility

Current Quarter - The activity for Performance Adhesives in the current quarter represents subsequent adjustments that were made in conjunction with post-closing disputes and taxes.

The activity for Valvoline represents subsequent adjustments that were made in conjunction with post-closing tax items during the current and prior year quarters.

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

Year-to-date - The activity for Performance Adhesives and Valvoline in the current and prior year periods represents subsequent adjustments that were made in conjunction with post-closing disputes and taxes.

The activity for Composites/Marl facility was related to post-closing adjustments in the prior year period.

Other comprehensive income (loss)

Three months ended December 31

Three months ended March 31

Six months ended March 31

(In millions)

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Unrealized translation gain (loss)

Unrealized gain (loss) on commodity hedges

Total other comprehensive income (loss), net of tax, for the current quarter decreased $146 million compared to the prior year quarter primarily as a result of the following:

• For the three months ended December 31, 2024 and 2023, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in losses of $94 million and gains of $54 million, respectively.

Unrealized gain on commodity hedges

Current Quarter - Total other comprehensive income (loss), net of tax, for the current quarter increased $77 million compared to the prior year quarter primarily as a result of the following:

• For the three months ended March 31, 2025 and 2024, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in gains of $49 million and losses of $27 million, respectively.

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

• For the three months ended December 31, 2024 and 2023, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities.

Commodity hedges resulted in unrealized gains of $1 million and losses of $1 million for the three months ended December 31, 2024 and 2023, respectively.

• For the three months ended March 31, 2025 and 2024, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities.

Commodity hedges resulted in unrealized gains of $2 million and $1 million for the three months ended March 31, 2025 and 2024, respectively.

Year-to-date - Total other comprehensive income (loss), net of tax, for the current year decreased $69 million compared to the prior year period primarily as a result of the following:

• For the six months ended March 31, 2025 and 2024, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in losses of $45 million and gains of $27 million, respectively.

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

• For the six months ended March 31, 2025 and 2024, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities.

Commodity hedges resulted in unrealized gains of $3 million and zero for the six months ended March 31, 2025 and 2024, respectively.

Use of Non-GAAP Financial Measures

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EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

EBITDA is defined as net income (loss), plus income tax benefit, net interest and other expense (income), and depreciation and amortization.

EBITDA is defined as net income (loss), plus income tax expense (benefit), net interest and other expense (income), and depreciation and amortization.

Adjusted EBITDA is EBITDA adjusted for discontinued operations and key items.

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Management believes the use of EBITDA and Adjusted EBITDA measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance by presenting comparable financial results between periods.

Ashland believes that by removing the impact of depreciation and amortization and excluding certain non-cash charges, amounts spent on interest and taxes and certain other charges that are highly variable from year to year, EBITDA and Adjusted EBITDA provide Ashland’s investors with performance measures that reflect the impact to operations from trends in changes in sales, margin and operating expenses, providing a perspective not immediately apparent from net income (loss) and operating loss.

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

EBITDA and Adjusted EBITDA provide

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

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

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

Adjusted Diluted Earnings Per Share (EPS)

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EBITDA and Adjusted EBITDA provide a supplemental presentation of Ashland’s operating performance on a consolidated and reportable segment basis.

Adjusted EBITDA generally includes adjustments for

items that impact comparability between periods.

Adjusted EBITDA generally includes adjustments for items that impact comparability between periods.

In addition, certain financial covenants related to Ashland’s 2022 Credit Agreement are based on similar non-GAAP financial measures and are defined further in the sections that reference this metric.

EBITDA and Adjusted EBITDA

EBITDA totaled loss of $129 million and income of $34 million for the three months ended December 31, 2024 and 2023, respectively.

EBITDA totaled income of $100 million and $74 million for the three months ended March 31, 2025 and 2024, respectively, and loss of $30 million and income of $109 million for the six months ended March 31, 2025 and 2024, respectively.

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

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These operating key items for the applicable periods are summarized as follows:

• Avoca impairment – During the three months ended December 31, 2024, Ashland entered into an agreement to sell substantially all of the net assets of its Avoca business.

As a result, Ashland recorded a $183 million impairment charge within the loss on acquisitions and divestitures, net caption of the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2024.

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

• Avoca business impairment and sale – During March 2025, Ashland sold substantially all of the net assets of its Avoca business.

As a result, Ashland recorded an impairment charge and gain on sale within the income (loss) on acquisitions and divestitures, net caption of the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2025.

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

• Accelerated depreciation – As a result of product line optimization activities at a Life Sciences manufacturing plant and two Specialty Additives manufacturing plants, Ashland recorded accelerated depreciation due to changes in the expected useful life of certain property, plant and equipment during the three and six months ended March 31, 2025 and 2024.

See Note D of the Notes to the Condensed Consolidated Financial Statements for more information;

• Restructuring, separation and other costs – Ashland periodically implements company-wide and targeted cost reduction programs related to acquisitions, divestitures and other cost reduction programs in order to enhance profitability through streamlined operations and an improved overall cost structure.

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

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

• Other plant optimization costs – During the three months ended December 31, 2024, Ashland incurred inventory adjustments and production costs associated with product line optimization actions;

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

• Other plant optimization costs – During the three and six months ended March 31, 2025 and 2024, Ashland incurred inventory adjustments and production costs associated with product line optimization actions;

• Environmental reserve adjustments – 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.

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

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

• Accelerated depreciation – As a result of product line optimization activities at a Specialty Additives manufacturing plant, Ashland recorded accelerated depreciation due to changes in the expected useful life of certain property, plant and equipment during the three months ended December 31, 2023.

See Note D of the Notes to Condensed Consolidated Financial Statements for more information;

• Argentina foreign currency devaluation – Following the enactment by the Argentina government of a 50% peso devaluation against the dollar, Ashland recorded a currency devaluation charge within the selling, general and administrative expense caption of the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2023.

As a result of these activities, Ashland recorded adjustments during each year to its environmental liabilities and receivables primarily related to previously

divested businesses or non-operational sites.

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

• Argentina foreign currency devaluation – Following the enactment by the Argentina government of a 50% peso devaluation against the dollar, Ashland recorded a currency devaluation charge within the selling, general and administrative expense caption of the Statement of Condensed Consolidated Comprehensive Income (Loss) for the six months ended March 31, 2024;

• Held for sale depreciation and amortization – Represents the depreciation and amortization for the Avoca business assets during the three and six months ended March 31, 2025.

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

• Income on divestitures, net – Ashland recorded income of $11 million during the three and six months ended March 31, 2025.

The income was related to the pre-tax gains in connection with the sale of a land property.

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

Non-operating key items affecting EBITDA

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These non-operating key items for the applicable periods are summarized as follows:

• Loss on pension plan remeasurements – During the three months ended December 31, 2024, Ashland recognized a curtailment loss for pension plan remeasurement for defined benefit pension plan.

• Loss on pension plan remeasurements – During the six months ended March 31, 2025, Ashland recognized a curtailment loss for pension plan remeasurement for defined benefit pension plan.

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

Three months ended

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(In millions)

Net income (loss)

Income tax benefit

Income tax expense (benefit)

Net interest and other expense (income)

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Key items included in EBITDA:

Avoca business impairment

Avoca business impairment and sale

Accelerated depreciation

Restructuring, separation and other costs

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Loss on pension plan remeasurements

Accelerated depreciation

Argentina currency devaluation impact

Held for sale depreciation and amortization

Income on divestitures, net

Total key items included in EBITDA

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Total key items, before tax

(a) Depreciation and amortization excludes accelerated depreciation of $21 million for Specialty Additives for the three months ended December 31, 2023, which is included as a key item within this table as a component of Adjusted EBITDA.

(a) Depreciation and amortization excludes accelerated depreciation of $13 million for Life Sciences for both the three and six months ended March 31, 2025, and $27 million and $49 for Specialty Additives for the three and six months ended March 31, 2024, respectively, which is included as a key item within this table as a component of Adjusted EBITDA.

Depreciation and amortization includes $2 million for Personal Care associated with the Avoca business assets for both the three and six months ended March 31, 2025, which is included as a key item within this table as a component of Adjusted EBITDA.

Diluted EPS and Adjusted Diluted EPS

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See Note E of the Notes to Condensed Consolidated Financial Statements for more information;

• Uncertain tax positions – represents the impact from the settlement of uncertain tax positions with various tax authorities for the three months ended December 31, 2024 and 2023;

• Other and tax reform related activity – primarily represents tax specific key items associated with final tax regulations and tax reform related activity for the three months ended December 31, 2024 and 2023.

• Uncertain tax positions – represents the impact from the settlement of uncertain tax positions with various tax authorities for the three and six months ended March 31, 2025 and 2024;

• Other and tax reform related activity – primarily represents tax specific key items associated with final tax regulations and tax reform related activity for the three and six months ended March 31, 2025 and 2024.

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Six months ended

Diluted EPS from continuing operations (as reported)

Key items, before tax:

Avoca business impairment

Avoca business impairment and sale

Accelerated depreciation

Unrealized losses (gains) on securities

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Loss on pension plan remeasurements

Accelerated depreciation

Argentina currency devaluation impact

Held for sale depreciation and amortization

Income on divestitures, net

Key items, before tax

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Tax specific key items:

Restructuring and separation activity

Uncertain tax positions

Other and tax reform related activity

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

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

(c) Amortization expense adjustment (net of tax) tax rates were 21% and 20% for the three months ended December 31, 2024 and 2023, respectively.

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

(c) Amortization expense adjustment (net of tax) tax rates were 21% for both the three and six months ended March 31, 2025, and 20% for both the three and six months ended March 31, 2024.

RESULTS OF OPERATIONS – REPORTABLE SEGMENT REVIEW

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Three months ended

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(In millions - unaudited)

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DEPRECIATION EXPENSE

Life Sciences

Life Sciences (c)

Personal Care

Specialty Additives (c)

Specialty Additives (d)

Intermediates

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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.

(b) Includes a $8 million gain on sale for the three and six months ended March 31, 2025 and a $183 million impairment charge for the six months ended March 31, 2025, both related to the divestiture of the Avoca business within the income (loss) on acquisitions and divestitures, net caption of the Statements of Condensed Consolidated Income (Loss).

(c) Depreciation includes accelerated depreciation of $13 million for Life Sciences for the three and six months ended March 31, 2025.

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

(e) 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.

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The Nutraceuticals business was sold in August 2024.

The following table provides a reconciliation of the change in sales for the Life Sciences reportable segment between the three months ended December 31, 2024 and 2023.

The following table provides a reconciliation of the change in sales for the Life Sciences reportable segment.

Three months ended

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(In millions)

March 31, 2025

Foreign Currency

The following table provides a reconciliation of the change in operating income for the Life Sciences reportable segment between the three months ended December 31, 2024 and 2023.

The following table provides a reconciliation of the change in operating income for the Life Sciences reportable segment.

Three months ended

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(In millions)

March 31, 2025

Operating income change

Foreign Currency

EBITDA and Adjusted EBITDA reconciliation

The following EBITDA presentation is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Life Sciences.

Life Sciences had no key items for the three months ended December 31, 2024 or 2023.

The key items for the three and six months ended March 31, 2025 were $13 million and $2 million related to accelerated depreciation and other product line optimization activities associated with a Life Sciences manufacturing plant.

Life Sciences had no key items for the three and six months ended March 31, 2024.

Life Sciences

Three months ended December 31

Three months ended March 31

Six months ended March 31

(In millions)

Operating income

Depreciation and amortization

Depreciation and amortization (a)

Accelerated depreciation

Other plant optimization costs

Adjusted EBITDA

Operating income as a percent of sales

EBITDA as a percent of sales

Three months ended December 31, 2024 compared to three months ended December 31, 2023

Life Sciences' sales, operating income and EBITDA decreased in the current quarter due to lower volume, including the effects of portfolio optimization activities, the divestiture of the Nutraceuticals business, unfavorable pricing and unfavorable foreign currency exchange partially offset by lower costs.

Adjusted EBITDA as a percent of sales

(a) Depreciation and amortization excludes accelerated depreciation of $13 million for Life Sciences for the three and six months ended March 31, 2025, which is included as a key item within this table as a component of Adjusted EBITDA.

Three months ended March 31, 2025 compared to three months ended March 31, 2024

Life Sciences' sales, operating income and Adjusted EBITDA decreased in the current quarter due to the divestiture of the Nutraceuticals business, higher costs, including the effects of portfolio optimization activities and accelerated depreciation, unfavorable pricing, lower volume and unfavorable foreign currency exchange.

Fiscal 2025 year-to-date compared to fiscal 2024 year-to-date

Life Sciences' sales, operating income and Adjusted EBITDA decreased in the current period due to the divestiture of the Nutraceuticals business, lower volume, higher costs, including the effects of portfolio optimization activities and accelerated depreciation, unfavorable price/mix actions and unfavorable foreign currency exchange.

Personal Care

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

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

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

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

The following table provides a reconciliation of the change in sales for the Personal Care reportable segment between the three months ended December 31, 2024 and 2023.

The Avoca business was sold in March 2025.

The following table provides a reconciliation of the change in sales for the Personal Care reportable segment.

Three months ended

Six months ended

(In millions)

The following table provides a reconciliation of the change in operating income for the Personal Care reportable segment between the three months ended December 31, 2024 and 2023.

March 31, 2025

Foreign Currency

The following table provides a reconciliation of the change in operating income for the Personal Care reportable segment.

Three months ended

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(In millions)

March 31, 2025

Operating income change

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The following EBITDA and Adjusted EBITDA presentation is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Personal Care.

The key items for Personal Care for the three months ended December 31, 2024 related to $1 million of plant optimization costs.

Personal Care had no key items for the three months ended December 31, 2023.

The key items for Personal Care for the three and six months ended March 31, 2025 related to $1 million and $2 million of plant optimization costs, respectively and $2 million from held for sale depreciation and amortization.

Personal Care had no key items for the three and six months ended March 31, 2024.

Personal Care

Three months ended December 31

Three months ended March 31

Six months ended March 31

(In millions)

1 unchanged sentence

Depreciation and amortization

Held for sale depreciation and amortization

Other plant optimization costs

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Adjusted EBITDA as a percent of sales

Three months ended December 31, 2024 compared to three months ended December 31, 2023

Personal Care's sales increased in the current quarter primarily due to higher volume while operating income and EBITDA increased in the current quarter primarily due to higher volume and lower costs.

a) Depreciation and amortization includes $2 million for Personal Care associated with the Avoca business assets for the three and six months ended March 31, 2025, which is included as a key item within this table as a component of Adjusted EBITDA.

Three months ended March 31, 2025 compared to three months ended March 31, 2024

Personal Care's sales decreased in the current quarter primarily due to lower volume, including the divestiture of the Avoca business and other portfolio optimization actions, while operating income increased mainly due to lower costs partially offset by unfavorable price/mix.

Adjusted EBITDA remained relatively consistent compared to the prior quarter.

Fiscal 2025 year-to-date compared to fiscal 2024 year-to-date

Personal Care's sales decreased in the current period primarily due to lower volume, including the divestiture of the Avoca business and other portfolio optimization actions, while operating income and Adjusted EBITDA increased primarily due to lower costs partially offset by unfavorable price/mix.

Specialty Additives

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

The following table provides a reconciliation of the change in sales for the Specialty Additives reportable segment between the three months ended December 31, 2024 and 2023.

The following table provides a reconciliation of the change in sales for the Specialty Additives reportable segment.

Three months ended

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(In millions)

The following table provides a reconciliation of the change in operating loss for the Specialty Additives reportable segment between the three months ended December 31, 2024 and 2023.

March 31, 2025

Foreign Currency

The following table provides a reconciliation of the change in operating loss for the Specialty Additives reportable segment.

Three months ended

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(In millions)

March 31, 2025

Operating loss change

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The key items during the three months ended December 31, 2024 and 2023 related to $2 million in plant optimization costs and $21 million accelerated depreciation, respectively.

The key items during the three and six months ended March 31, 2025 related to $3 million and $5 million of other plant optimization costs, respectively.

The key items during the three months ended March 31, 2024 related to $27 million of accelerated depreciation and $1 million of other plant optimization costs.

The key items during the six months ended March 31, 2024 related to $49 million of accelerated depreciation and $1 million of other plant optimization costs.

Specialty Additives

Three months ended December 31

Three months ended March 31

Six months ended March 31

(In millions)

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Adjusted EBITDA as a percent of sales

Three months ended December 31, 2024 compared to three months ended December 31, 2023

Specialty Additives sales for the quarter decreased primarily as a result of lower volume and unfavorable pricing while operating income and Adjusted EBITDA increased primarily due to lower costs as a result of higher production volumes when compared to the inventory corrective actions in the prior year which included accelerated depreciation.

(b) Depreciation and amortization excludes accelerated depreciation of $27 million and $49 million for Specialty Additives for the three and six months ended March 31, 2024, which is included as a key item within this table as a component of Adjusted EBITDA.

Three months ended March 31, 2025 compared to three months ended March 31, 2024

Specialty Additives sales for the quarter decreased primarily as a result of lower volume and unfavorable pricing while operating income increased primarily due to lower costs as a result of higher production volumes when compared to the inventory corrective actions in the prior year which included accelerated depreciation associated with portfolio optimization actions.

Adjusted EBITDA remained relatively consistent compared to the prior quarter.

Fiscal 2025 year-to-date compared to fiscal 2024 year-to-date

Specialty Additives sales for the current period decreased primarily due to lower volume and unfavorable pricing while operating income and Adjusted EBITDA increased mainly due to lower costs as a result of higher production volumes when compared to the inventory corrective actions in the prior year which included accelerated depreciation associated with portfolio optimization actions.

Intermediates

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

The following table provides a reconciliation of the change in sales for the Intermediates reportable segment between the three months ended December 31, 2024 and 2023.

The following table provides a reconciliation of the change in sales for the Intermediates reportable segment.

Three months ended

Six months ended

(In millions)

The following table provides a reconciliation of the change in operating income for the Intermediates reportable segment between the three months ended December 31, 2024 and 2023.

March 31, 2025

Foreign Currency

The following table provides a reconciliation of the change in operating income for the Intermediates reportable segment.

Three months ended

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(In millions)

March 31, 2025

Operating income change

EBITDA and Adjusted EBITDA reconciliation

EBITDA reconciliation

Intermediates had no key items for the three months ended December 31, 2024 or 2023.

Intermediates had no key items for the three and six months ended March 31, 2025 or 2024.

Intermediates

Three months ended December 31

Three months ended March 31

Six months ended March 31

(In millions)

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EBITDA as a percent of sales

Three months ended December 31, 2024 compared to three months ended December 31, 2023

Intermediates' sales for the quarter remained consistent while operating income and EBITDA decreased primarily due to unfavorable price/mix partially offset by lower costs and higher volume.

Three months ended March 31, 2025 compared to three months ended March 31, 2024

Intermediates' sales, operating income and EBITDA decreased primarily due to unfavorable price/mix and higher costs.

Fiscal 2025 year-to-date compared to fiscal 2024 year-to-date

Intermediates' sales, operating income and EBITDA for the current period decreased primarily due to unfavorable price/mix, partially offset by higher volume and lower costs.

Unallocated and other

The following table summarizes the key components of the Unallocated and other’s operating loss between the three months ended December 31, 2024 and 2023.

The following table summarizes the key components of the Unallocated and other’s operating loss between the three and six months ended March 31, 2025 and 2024.

Unallocated and other

Three months ended December 31

Three months ended March 31

Six months ended March 31

(In millions)

1 unchanged sentence

Environmental expenses

Loss on acquisitions and divestitures, net

Income (loss) on acquisitions and divestitures, net

Argentina currency devaluation impact

1 unchanged sentence

Total expense

Three months ended December 31, 2024 compared to three months ended December 31, 2023

Unallocated and other recorded expense of $202 million and $27 million for the three months ended December 31, 2024 and 2023, respectively.

Three months ended March 31, 2025 compared to three months ended March 31, 2024

Unallocated and other recorded expense of $11 million and $45 million for the three months ended March 31, 2025 and 2024, respectively.

The current and prior year quarter included expense of $8 million and $20 million, respectively, for restructuring activities mainly comprised of severance, lease abandonment and other restructuring costs related to company-wide cost reduction programs during the current and prior year quarter, respectively.

The current quarter and prior year quarter included $2 million and $3 million for environmental expenses, respectively.

The remaining items included losses of $183 million, related to the Avoca business impairment, and $2 million from acquisitions and divestitures during the current and prior year quarter, respective, and expense of $5 million related to the devaluation of the currency in Argentina during the prior quarter.

The current quarter also includes gains of $18 million from acquisitions and divestitures primarily related to the sale of the Avoca business and excess corporate land property.

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

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

Fiscal 2025 year-to-date compared to fiscal 2024 year-to-date

Unallocated and other recorded expense of $213 million and $72 million for the six months ended March 31, 2025 and 2024, respectively.

The current and prior year period included expense of $11 million and $24 million, respectively, for restructuring activities mainly comprised of severance, lease abandonment and other restructuring costs related to company-wide cost reduction programs during the current and prior year period, respectively.

The current and prior year period included $3 million and $7 million for environmental expenses, respectively.

The current year period included a loss on divestiture of $165 million, primarily related to the $183 million impairment of the Avoca business during the December quarter, $8 million pre-tax gain on the final sale of the Avoca business, and $11 million gain on the sale of a property, compared to a loss of $2 million on property sale during the prior year period.

The prior year period also included expense of $5 million related to the devaluation of the currency in Argentina during the prior year.

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

FINANCIAL POSITION

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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.

As of March 31, 2025, the program is still in implementation with no active supplier participation.

Ashland’s cash flows from operating, investing and financing activities, as reflected in the Statements of Condensed Consolidated Cash Flows, are summarized as follows:

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(In millions)

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Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents decreased $81 million for the three months ended December 31, 2024 compared to an increase of $23 million for the three months ended December 31, 2023.

The $81 million decrease for the three months ended December 31, 2024 was primarily driven by payment of cash dividends and additions to property, plant and equipment of $19 million and $23 million, respectively.

Cash and cash equivalents decreased $132 million for the six months ended March 31, 2025 compared to an increase of $22 million for the six months ended March 31, 2024.

The $132 million decrease for the six months ended March 31, 2025 was primarily driven by payment of cash dividends, additions to property, plant and equipment and stock repurchase activity of $38 million, $44 million and $100 million, respectively.

Operating cash flows from continuing operations were outflows of $21 million, while discontinued operations cash flows were outflows of $18 million.

The $23 million increase for the three months ended December 31, 2023 was primarily driven by operating cash inflows offset by payment of cash dividends, additions to property, plant and equipment, and stock repurchase activity of $20 million, $36 million, and $100 million, respectively.

Operating cash flows from continuing operations were inflows of $201 million, while discontinued operations cash flows were outflows of $14 million.

These outflows were partially offset by inflows from short-term debt, proceeds from the sale of Avoca, and proceeds from the sale of a land proprerty of $50 million, $16 million and $11 million, respectively.

The $22 million increase for the six months ended March 31, 2024 was primarily driven by operating cash inflows from continuing operations of $255 million partially offset by payment of cash dividends, additions to property, plant and equipment, and stock repurchase activity of $39 million, $70 million, and $100 million, respectively.

Discontinued operations cash flows were outflows of $27 million.

The change in cash flows from operating activities from continuing operations was primarily driven by U.S.

and Foreign Accounts Receivable Sales Program activity, $130 million negative impact between periods, as well as unfavorable working capital, approximately $113 million negative impact between periods, primarily related to changes in inventory and incentive compensation payouts between periods.

and Foreign Accounts Receivable Sales Program activity, $139 million negative impact between periods, as well as unfavorable working capital, primarily related to changes in inventory and incentive compensation payouts between periods.

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

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

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(In millions)

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Accounts Receivable Sales Program (a)

Cash (inflows) outflows from Foreign Accounts Receivable Sales Program (b)

Cash inflows from Foreign Accounts Receivable Sales Program (b)

Restructuring-related payments (c)

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Operating Cash Flow Conversion (f)

Not meaningful

Ongoing Free Cash Flow Conversion (g)

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(g) Ongoing Free Cash Flow Conversion is defined as Ongoing Free Cash Flow divided by Adjusted EBITDA.

Working capital (current assets minus current liabilities, excluding long-term debt due within one year) amounted to $644 million and $705 million as of December 31, 2024 and September 30, 2024, respectively.

The $61 million decrease in working capital was driven by lower trade working capital (accounts receivable and inventories minus trade and other payables and accrued expenses and other liabilities), including sales of foreign accounts receivable under the Foreign Accounts Receivable Sales Programs, partially offset by an increase in refundable income taxes and current assets held for sale.

Working capital (current assets minus current liabilities, excluding long-term debt due within one year) amounted to $612 million and $705 million as of March 31, 2025 and September 30, 2024, respectively.

The $93 million decrease in working capital was driven by lower cash due to share repurchases and increased accounts receivable sales primarily related to sales of foreign accounts receivable under the Foreign Accounts Receivable Sales Programs, and an increase in short-term debt, partially offset by an increase in refundable income taxes and lower other payables and accrued expenses and other liabilities.

See Note H of the Notes to the Condensed Consolidated Financial Statements for additional information on the Foreign Accounts Receivable Sales Programs.

Liquid assets (cash, cash equivalents and accounts receivable) amounted to 90% and 111% of current liabilities as as of December 31, 2024 and September 30, 2024, respectively.

The decrease in Ongoing Free Cash Flows was driven by lower Adjusted EBITDA, higher variable compensation payouts and increased inventory reductions in the prior year due to inventory control measures during that period.

Liquid assets (cash, cash equivalents and accounts receivable) amounted to 85% and 111% of current liabilities as as of March 31, 2025 and September 30, 2024, respectively.

The following summary reflects Ashland’s cash, unused borrowing capacity and liquidity as of:

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Foreign Accounts Receivable Sales Program

(a) Includes $233 million and $248 million related to the Asbestos trust and $117 million and $120 million related to the Environmental trust as of December 31, 2024 and September 30, 2024, respectively.

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 at December 31, 2024.

In total, Ashland’s available liquidity position, which includes cash and the revolving credit facility, was $815 million at December 31, 2024, compared to $896 million at September 30, 2024.

Ashland had zero available liquidity under the U.S.

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

(a) Includes $222 million and $248 million related to the Asbestos trust and $123 million and $120 million related to the Environmental trust as of March 31, 2025 and September 30, 2024, respectively.

The borrowing capacity remaining under the 2022 Credit Agreement was $546 million, which reflects the $550 million undrawn balance of the $600 million Revolving Credit Facility less a reduction of $4 million for letters of credit outstanding at March 31, 2025.

In total, Ashland’s available liquidity position, which includes cash and cash equivalents and the revolving credit facility, was $714 million at March 31, 2025, compared to $896 million at September 30, 2024.

Ashland had no available liquidity under the U.S.

and Foreign Accounts Receivable Sales Programs as of March 31, 2025.

Ashland also maintained $345 million of restricted investments to pay for future asbestos claims and environmental remediation and related litigation.

4 unchanged sentences

Long-term debt (less debt issuance cost discounts) (a)

(a) Includes $11 million and $12 million of debt issuance cost discounts as of December 31, 2024 and September 30, 2024 , respectively.

Debt as a percent of capital employed was 34% and 32% at December 31, 2024 and September 30, 2024, respectively.

At December 31, 2024, Ashland’s total debt had an outstanding principal balance of $1,352 million, discounts of $28 million, and debt issuance costs of $11 million.

(a) Includes $11 million and $12 million of debt issuance cost discounts as of March 31, 2025 and September 30, 2024 , respectively.

Debt as a percent of capital employed was 35% and 32% at March 31, 2025 and September 30, 2024, respectively.

At March 31, 2025, Ashland’s total debt had an outstanding principal balance of $1,423 million, discounts of $26 million, and debt issuance costs of $11 million.

Ashland has no long-term debt (excluding debt issuance costs) maturing within 2025 and 2026, $4 million due in fiscal 2027, $541 million due in 2028, $97 million in 2029, and zero in 2030.

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

As of December 31, 2024, both Moody’s Investor Services and Standard & Poor's outlook remained at stable.

As of March 31, 2025, both Moody’s Investor Services and Standard & Poor's outlook remained at stable.

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

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

As of December 31, 2024, Ashland is in compliance with all debt agreement covenant restrictions under the 2022 Credit Agreement.

As of March 31, 2025, Ashland is in compliance with all debt agreement covenant restrictions under the 2022 Credit Agreement.

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

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

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

At March 31, 2025, Ashland’s calculation of the consolidated net leverage ratio was 2.9.

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

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

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

At March 31, 2025, Ashland’s calculation of the consolidated interest coverage ratio was 7.0.

Any change in Covenant Adjusted EBITDA of $100 million would have an approximate 0.5x effect on the consolidated net leverage ratio and a 1.6x effect on the consolidated interest coverage ratio.

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Additional capital resources

Total equity decreased by $276 million since September 30, 2024 to $2,592 million at December 31, 2024.

The decrease of $276 million was due to net loss of $165 million, $94 million of deferred translation losses, and dividends of $19 million partially offset by common stock issued of $1 million and $1 million for unrealized gains on commodity hedges.

Total equity decreased by $309 million since September 30, 2024 to $2,559 million at March 31, 2025.

The decrease of $309 million was due to net loss of $135 million, stock repurchase activity of $101 million (includes $1 million in excise tax), $45 million of deferred translation losses, and dividends of $38 million partially offset by common stock issued of $6 million, $3 million for unrealized gains on commodity hedges and other activity of $1 million.

2023 Stock Repurchase program

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

As of December 31, 2024, $620 million remained available for repurchase under the 2023 Stock Repurchase Program.

As of March 31, 2025, $520 million remained available for repurchase under the 2023 Stock Repurchase Program.

Stock repurchase program agreements

There was no common 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:

The following table provides the common stock repurchase activity for the three and six months ended March 31, 2025 and 2024:

Three months ended

Six months ended

(In millions, except per share data)

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2023 Stock Repurchase Program

(a) Includes transactions costs.

Stockholder dividends

Ashland paid dividends of 40.5 cents per share for the first quarter of fiscal 2024 and 38.5 cents per share in the first quarter of fiscal 2024.

Ashland paid a dividend of 40.5 cents per share for the first and second quarters of fiscal 2024 and 38.5 cents per share in the first and second quarters of fiscal 2024.

Capital expenditures

Capital expenditures were $23 million for the three months ended December 31, 2024, compared to $36 million for the three months ended December 31, 2023.

Capital expenditures were $44 million for the six months ended March 31, 2025, compared to $70 million for the six months ended March 31, 2024.

CRITICAL ACCOUNTING POLICIES

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

No material changes have been made to the valuation techniques during the three months ended December 31, 2024.

Ashland continues to proactively drive performance by leveraging growth catalysts, such as expanding high-performing business lines into new markets and commercializing new technology platforms, while simultaneously accelerating cost savings and optimizing its portfolio through the planned sale of Avoca.

This diversified strategy aims to drive growth and improve business mix while improving cost structure to ultimately support the company's full-year outlook.

As expected, the first quarter was seasonally slow.

Aside from weaker demand in Europe and the effects of extended plant shutdowns, Ashland’s performance is generally aligned with planning assumptions.

The company is monitoring a potential European recovery and trade policy shifts, but has not observed any market dynamics that would necessitate a revision of its outlook.

Despite uncertainty surrounding potential trade policy changes, Ashland is well-prepared following the completion of its annual maintenance turnarounds.

Overall, Ashland continues to expect full fiscal year sales in the range of $1.90 billion to $2.05 billion and Adjusted EBITDA in the range of $430 million to $470 million.

No material changes have been made to the valuation techniques during the six months ended March 31, 2025.

Ashland recognizes the current economic headwinds and uncertainties created by tariffs and global trade policies.

The company is closely monitoring changes in tariff policies and adjusting its strategies to optimize performance.

To navigate this evolving landscape, Ashland is focused on maintaining flexible operations and actively managing risks for financial resilience while pursuing growth opportunities.

Key tariff exposures (as of April 30th):

• Raw materials:

Ashland has limited direct exposure to US or China tariffs on raw materials due to the company’s localized sourcing strategy.

Ashland’s estimated tariff impact for fiscal year 2025 is $3 to $5 million for the second half, modestly increasing to $5 to $7 million annually after mitigation actions;

• US finished goods:

The vast majority of Ashland’s US sales are domestically sourced.

A small portion is imported from the European Union and mostly benefits from current Annex II exemptions.

Ashland is closely monitoring the recently initiated Section 232 investigation to assess potential future impacts.

For context, without the current Annex II exemptions, the annual tariff exposure is projected to be $4 to $6 million, and approximately $1 million in fiscal year 2025;

• China finished goods:

While most China sales are produced outside the US, approximately $70 million of US-produced China sales, generating company average gross profit, are mostly in scope for tariffs.

The primary exposure within these exports is in the Life Sciences and Personal Care segments, with the majority being intercompany transactions.

Ashland’s tariff response plan includes measures to offset a significant portion of this business-at-risk.

Approximately one-third of Ashland's gross profit is derived from products where the company is the sole supplier.

With approximately 90 days of finished goods inventory currently held in China, any potential impact on fiscal year 2025 is anticipated to occur in the fourth quarter;

• Tariff response plan:

Ashland is evaluating and executing several mitigation strategies, including optimizing production, sourcing, logistics, intercompany trading strategies, relative competitive positioning, share gain opportunities, customer and vendor negotiations, and pricing actions where appropriate.

Financial Outlook

Ashland is adjusting its full-year fiscal 2025 outlook to reflect a weakening macroeconomic environment that is dampening consumer sentiment and demand globally.

This shift is evident in the following key areas:

• Reduced consumer sentiment:

growing global macroeconomic and geopolitical uncertainties are negatively impacting consumer confidence, leading to decreased demand from Ashland’s customer base, particularly for architectural coatings;

• Challenging intermediates market:

a persistent supply-demand imbalance continues to pressure the intermediates market.

Despite ongoing pricing adjustments, overall pricing remains below expectations;

• Subdued European demand:

while European markets have stabilized at a low level, the anticipated moderate recovery has not yet materialized.

Ashland now anticipates flattish organic sales volume growth for the full fiscal year.

This revision reflects the company’s expectation of a positive inflection in organic sales volumes in the second half, led by Life Sciences, which Ashland anticipates will offset the organic sales volume declines experienced in the first half.

Year-over-year pricing headwinds are expected to lessen in the second half of the fiscal year as the company moves beyond comparable periods with prior pricing actions.

Excluding the tariff impact detailed earlier above, overall raw material costs are expected to remain generally stable year-over-year.

The outlook reflects Ashland’s assessment of the direct financial impact from global trade policies in the second half of fiscal 2025.

In response to this evolving demand landscape, Ashland is proactively focusing on its strategic priorities.

The completed portfolio optimization initiative and accelerating cost savings programs are expected to enhance business mix and improve profitability throughout the remainder of the fiscal year.

Based on these factors, Ashland now projects full fiscal year sales in the range of $1.825 billion to $1.9 billion and adjusted EBITDA in the range of $400 million to $420 million.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Ashland’s market risk exposure at December 31, 2024 is generally consistent with the types of market risk exposures presented in Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

Ashland’s market risk exposure at March 31, 2025 is generally consistent with the types of market risk exposures presented in Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis