10-Q 1 ash-20231231.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 333-211719

ASHLAND INC.

(a Delaware corporation)

I.R.S. No. 81-2587835

 

8145 Blazer Drive

Wilmington, Delaware 19808

Telephone Number (302) 995-3000

Securities Registered Pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ASH

New York Stock Exchange

 

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YesNo ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

 

 

Accelerated Filer

 

Non-Accelerated Filer

 

 

Smaller Reporting Company

 

 

 

Emerging Growth Company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

At December 31, 2023, there were 50,094,986 shares of Registrant’s Common Stock outstanding.

 

 


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

 

 

 

Three months ended

 

 

 

December 31

 

(In millions except per share data - unaudited)

 

2023

 

 

2022

 

Sales

 

$

473

 

 

$

525

 

Cost of sales

 

 

375

 

 

 

360

 

Gross profit

 

 

98

 

 

 

165

 

 

 

 

 

 

 

Selling, general and administrative expense

 

 

83

 

 

 

93

 

Research and development expense

 

 

12

 

 

 

13

 

Intangibles amortization expense - Note F

 

 

21

 

 

 

23

 

Equity and other income

 

 

2

 

 

 

1

 

Loss on acquisitions and divestitures, net

 

 

(2

)

 

 

 

Operating income (loss)

 

 

(18

)

 

 

37

 

 

 

 

 

 

 

Net interest and other income

 

 

(24

)

 

 

(14

)

Other net periodic benefit loss - Note J

 

 

2

 

 

 

1

 

Income from continuing operations before income taxes

 

 

4

 

 

 

50

 

Income tax expense (benefit) - Note I

 

 

(24

)

 

 

8

 

Income from continuing operations

 

 

28

 

 

 

42

 

Loss from discontinued operations, net of income taxes - Note B

 

 

(2

)

 

 

(2

)

Net income

 

$

26

 

 

$

40

 

 

 

 

 

 

 

 

PER SHARE DATA

 

 

 

 

 

 

Basic earnings per share - Note L

 

 

 

 

 

 

Income from continuing operations

 

$

0.54

 

 

$

0.77

 

Loss from discontinued operations

 

 

(0.03

)

 

 

(0.03

)

Net income

 

$

0.51

 

 

$

0.74

 

 

 

 

 

 

 

Diluted earnings per share - Note L

 

 

 

 

 

 

Income from continuing operations

 

$

0.54

 

 

$

0.76

 

Loss from discontinued operations

 

 

(0.03

)

 

 

(0.03

)

Net income

 

$

0.51

 

 

$

0.73

 

 

 

 

 

 

 

COMPREHENSIVE INCOME

 

 

 

 

 

 

Net income

 

$

26

 

 

$

40

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

Unrealized translation gain

 

 

54

 

 

 

82

 

Unrealized loss on commodity hedges

 

 

(1

)

 

 

(4

)

Other comprehensive income - Note M

 

 

53

 

 

 

78

 

Comprehensive income

 

$

79

 

 

$

118

 

 

 

 

 

 

 

 

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

2


ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In millions - unaudited)

 

December 31
2023

 

 

September 30
2023

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

440

 

 

$

417

 

Accounts receivable(a) - Note G

 

 

194

 

 

 

338

 

Inventories - Note E

 

 

588

 

 

 

626

 

Other assets

 

 

143

 

 

 

125

 

Total current assets

 

 

1,365

 

 

 

1,506

 

Noncurrent assets

 

 

 

 

 

 

Property, plant and equipment

 

 

 

 

 

 

Cost

 

 

3,277

 

 

 

3,211

 

Accumulated depreciation

 

 

1,910

 

 

 

1,838

 

Net property, plant and equipment

 

 

1,367

 

 

 

1,373

 

Goodwill - Note F

 

 

1,396

 

 

 

1,362

 

Intangibles - Note F

 

 

875

 

 

 

886

 

Operating lease assets, net - Note H

 

 

123

 

 

 

122

 

Restricted investments - Note D

 

 

315

 

 

 

290

 

Asbestos insurance receivable(b) - Note K

 

 

124

 

 

 

127

 

Deferred income taxes

 

 

45

 

 

 

22

 

Other assets

 

 

256

 

 

 

251

 

Total noncurrent assets

 

 

4,501

 

 

 

4,433

 

Total assets

 

$

5,866

 

 

$

5,939

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Short-term debt - Note G

 

$

 

 

$

16

 

Trade and other payables

 

 

202

 

 

 

210

 

Accrued expenses and other liabilities

 

 

190

 

 

 

208

 

Current operating lease obligations - Note H

 

 

22

 

 

 

22

 

Total current liabilities

 

 

414

 

 

 

456

 

Noncurrent liabilities

 

 

 

 

 

 

Long-term debt - Note G

 

 

1,341

 

 

 

1,314

 

Asbestos litigation reserve - Note K

 

 

412

 

 

 

427

 

Deferred income taxes

 

 

148

 

 

 

148

 

Employee benefit obligations - Note J

 

 

98

 

 

 

100

 

Operating lease obligations - Note H

 

 

107

 

 

 

106

 

Other liabilities

 

 

293

 

 

 

291

 

Total noncurrent liabilities

 

 

2,399

 

 

 

2,386

 

Commitments and contingencies - Note K

 

 

 

 

 

 

Stockholders’ equity - Note M

 

 

3,053

 

 

 

3,097

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

5,866

 

 

$

5,939

 

 

 

 

 

 

 

 

(a)
Accounts receivable includes an allowance for credit losses of $3 million at both December 31, 2023 and September 30, 2023.
(b)
Asbestos insurance receivable includes an allowance for credit losses of $2 million at both December 31, 2023 and September 30, 2023.

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)

 

2023

 

 

2022

 

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

 

 

 

 

 

 

Net income

 

$

26

 

 

$

40

 

Loss from discontinued operations, net of income taxes

 

 

2

 

 

 

2

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

77

 

 

 

59

 

Original issue discount and debt issuance costs amortization

 

 

1

 

 

 

1

 

Deferred income taxes

 

 

(30

)

 

 

7

 

Stock based compensation expense

 

 

1

 

 

 

7

 

Excess tax benefit on stock-based compensation

 

 

 

 

 

1

 

Income from restricted investments

 

 

(35

)

 

 

(26

)

Asset impairments

 

 

 

 

 

4

 

Pension contributions

 

 

(8

)

 

 

(1

)

Change in operating assets and liabilities(a)

 

 

167

 

 

 

(123

)

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

 

 

201

 

 

 

(29

)

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

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(36

)

 

 

(23

)

Proceeds from settlement of Company-owned life insurance contracts

 

 

 

 

 

2

 

Company-owned life insurance payments

 

 

(1

)

 

 

(1

)

Funds restricted for specific transactions

 

 

(5

)

 

 

(5

)

Reimbursements from restricted investments

 

 

16

 

 

 

 

Proceeds from sale of securities

 

 

9

 

 

 

 

Purchases of securities

 

 

(9

)

 

 

 

Total cash flows used by investing activities from continuing operations

 

 

(26

)

 

 

(27

)

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

 

 

 

 

 

 

Repurchase of Common Stock

 

 

(100

)

 

 

 

Repayment of short-term debt

 

 

(16

)

 

 

 

Cash dividends paid

 

 

(20

)

 

 

(18

)

Stock based compensation employee withholding taxes paid in cash

 

 

(3

)

 

 

(9

)

Total cash flows used by financing activities from continuing operations

 

 

(139

)

 

 

(27

)

CASH PROVIDED (USED) BY CONTINUING OPERATIONS

 

 

36

 

 

 

(83

)

Cash used by discontinued operations

 

 

 

 

 

 

Operating cash flows

 

 

(14

)

 

 

(34

)

Total cash used by discontinued operations

 

 

(14

)

 

 

(34

)

Effect of currency exchange rate changes on cash and cash equivalents

 

 

1

 

 

 

3

 

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

23

 

 

 

(114

)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

 

 

417

 

 

 

646

 

CASH AND CASH EQUIVALENTS - END OF PERIOD

 

$

440

 

 

$

532

 

 

 

 

 

 

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

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 accounting principles generally accepted in the United States for interim financial reporting ("U.S. GAAP") and Securities and Exchange Commission ("SEC") regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. These statements omit certain information and footnote disclosures required for complete annual financial statements and, therefore, should be read in conjunction with the Ashland Inc. and consolidated subsidiaries ("Ashland" or the "Company") Annual Report on Form 10-K for the fiscal year ended September 30, 2023. Results of operations for the period ended December 31, 2023 are not necessarily indicative of the expected results for the remainder of the fiscal year.

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 P.

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, the 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, 2023. There were no new standards that were either issued or adopted in the current fiscal year that will have a material impact on Ashland's Condensed Consolidated Financial Statements.

NOTE B – 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 tax items have been recorded within the discontinued operations caption in the Statements of Consolidated Comprehensive Income (Loss) for all periods presented.

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

The Performance Adhesives business divested in 2022; and
The sale of the Ashland Distribution (Distribution) business divested in 2011.

Additionally, Ashland is subject to liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims result primarily from indemnification obligations undertaken in 1990 in connection with the sale of

5


Riley Stoker Corporation, a former subsidiary, which qualified as a discontinued operation and from the acquisition during 2009 of Hercules LLC (formerly Hercules Incorporated), an indirect wholly-owned subsidiary of Ashland. Adjustments to the recorded litigation reserves and related insurance receivables are recorded within the discontinued operations caption. See Note K for more information related to the adjustments on asbestos liabilities and receivables.

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

 

 

Three months ended

 

 

 

December 31

 

(In millions)

 

2023

 

 

2022

 

Loss from discontinued operations, net of income taxes

 

 

 

 

 

 

Performance Adhesives

 

$

(3

)

 

$

(1

)

Asbestos-related litigation

 

 

1

 

 

 

 

Distribution

 

 

 

 

 

(1

)

 

$

(2

)

 

$

(2

)

 

 

 

 

 

 

 

 

 

NOTE C – 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.

Fiscal 2024 and 2023 restructuring costs

During fiscal 2023, Ashland implemented targeted organizational restructuring actions to reduce costs. This program continued into fiscal 2024.

Severance costs

Ashland recorded severance expense of $3 million and zero during the three months ended December 31, 2023 and 2022, respectively, within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss). As of December 31, 2023 and September 30, 2023, the severance reserve associated with this program was $3 million within accrued expenses and other liabilities in the Consolidated Balance Sheets.

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

(In millions)

Severance costs

 

Balance at of September 30, 2023

$

3

 

Restructuring reserve

 

3

 

Utilization (cash paid)

 

(3

)

Balance at December 31, 2023

$

3

 

 

 

 

Plant optimization actions

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

Fiscal 2023 Life Sciences restructuring program

During the three months ended December 31, 2022, Ashland implemented a restructuring program within the Nutraceuticals business of the Life Sciences segment. Ashland recorded severance expense of $1 million during the three months ended December 31, 2022, within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss). As of December 31, 2023 and September 30, 2023, the severance reserve associated with this program was zero.

 

6


NOTE D – 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). 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, 2023.

 

 

 

Carrying

 

 

Total
fair

 

 

Quoted prices
in active
markets for
identical
assets

 

 

Significant
other
observable
inputs

 

 

Significant
unobservable
inputs

 

(In millions)

 

value

 

 

value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

440

 

 

$

440

 

 

$

440

 

 

$

 

 

$

 

Restricted investments(a)(b)

 

 

392

 

 

 

392

 

 

 

392

 

 

 

 

 

 

 

Investment of captive insurance company(c)

 

 

7

 

 

 

7

 

 

 

7

 

 

 

 

 

 

 

Foreign currency derivatives(d)

 

 

1

 

 

 

1

 

 

 

 

 

 

1

 

 

 

 

Total assets at fair value

 

$

840

 

 

$

840

 

 

$

839

 

 

$

1

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives(e)

 

 

5

 

 

 

5

 

 

 

 

 

 

5

 

 

 

 

Total liabilities at fair value

 

$

5

 

 

$

5

 

 

$

 

 

$

5

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)
Included in restricted investments and $77 million within other current assets in the Condensed Consolidated Balance Sheets.
(b)
Includes $258 million related to the Asbestos trust and $134 million related to the Environmental trust.
(c)
Included in other noncurrent assets in the Condensed Consolidated Balance Sheets.
(d)
Included in accounts receivable in the Condensed Consolidated Balance Sheets.
(e)
Included in accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets.

7


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

 

 

 

Carrying

 

 

Total
fair

 

 

Quoted prices
in active
markets for
identical
assets

 

 

Significant
other
observable
inputs

 

 

Significant
unobservable
inputs

 

(In millions)

 

value

 

 

value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

417

 

 

$

417

 

 

$

417

 

 

$

 

 

$

 

Restricted investments(a)(b)

 

 

367

 

 

 

367

 

 

 

367

 

 

 

 

 

 

 

Investment of captive insurance company(c)

 

 

6

 

 

 

6

 

 

 

6

 

 

 

 

 

 

 

Foreign currency derivatives(d)

 

 

1

 

 

 

1

 

 

 

 

 

 

1

 

 

 

 

Total assets at fair value

 

$

791

 

 

$

791

 

 

$

790

 

 

$

1

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency derivatives(e)

 

$

1

 

 

$

1

 

 

$

 

 

$

1

 

 

$

 

Commodity derivatives(e)

 

 

4

 

 

 

4

 

 

 

 

 

 

4

 

 

 

 

Total liabilities at fair value

 

$

5

 

 

$

5

 

 

$

 

 

$

5

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)
Included in restricted investments and $77 million within other current assets in the Condensed Consolidated Balance Sheets.
(b)
Includes $243 million related to the Asbestos trust and $124 million related to the Environmental trust.
(c)
Included in other noncurrent assets in the Condensed Consolidated Balance Sheets.
(d)
Included in accounts receivable in the Condensed Consolidated Balance Sheets.
(e)
Included in accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets.

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

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

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

(In millions)

 

Adjusted Cost

 

 

Unrealized Gain

 

 

Unrealized Loss

 

 

Fair Value

 

As of December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposit

 

$

16

 

 

$

 

 

$

 

 

$

16

 

Equity mutual fund

 

 

147

 

 

 

36

 

 

 

 

 

 

183

 

Fixed income mutual fund

 

 

226

 

 

 

 

 

 

(33

)

 

 

193

 

Fair value

 

$

389

 

 

$

36

 

 

$

(33

)

 

$

392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposit

 

$

12

 

 

$

 

 

$

 

 

$

12

 

Equity mutual fund

 

 

155

 

 

 

24

 

 

 

(2

)

 

 

177

 

Fixed income mutual fund

 

 

226

 

 

 

 

 

 

(48

)

 

 

178

 

Fair value

 

$

393

 

 

$

24

 

 

$

(50

)

 

$

367

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8


 

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

 

 

 

Three months ended

 

 

 

December 31

 

(In millions)

 

2023

 

 

2022

 

Investment income(a)

 

$

5

 

 

$

4

 

Net gains(a)

 

 

31

 

 

 

21

 

Funds restricted for specific transactions

 

 

5

 

 

 

5

 

Disbursements

 

 

(16

)

 

 

 

 

 

 

 

 

 

 

(a)
Included in the net interest and other income caption within the Statements of 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. The impacts of these contracts were largely offset by gains and losses resulting from the impact of changes in exchange rates on transactions denominated in non-functional currencies. The following table summarizes the gains and losses recognized during the three months ended December 31, 2023 and 2022 within the Statements of Consolidated Comprehensive Income (Loss).

 

 

 

Three months ended

 

 

 

December 31

 

(In millions)

 

2023

 

 

2022

 

Foreign currency derivative gains

 

$

3

 

 

$

8

 

 

 

 

 

 

 

 

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

 

 

 

December 31

 

 

September 30

 

(In millions)

 

2023

 

 

2023

 

Foreign currency derivative assets

 

$

1

 

 

$

1

 

Notional contract values

 

 

173

 

 

 

147

 

 

 

 

 

 

Foreign currency derivative liabilities

 

$

 

 

$

1

 

Notional contract values

 

 

17

 

 

 

103

 

 

 

 

 

 

 

 

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

 

 

Three months ended

 

 

 

December 31

 

(In millions)

 

2023

 

 

2022

 

Commodity derivative gains (losses)

 

$

(1

)

 

$

1

 

 

 

 

 

 

 

 

 

9


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

 

 

December 31

 

 

September 30

 

(In millions)

 

2023

 

 

2023

 

Commodity derivative assets

 

$

 

 

$

 

Notional contract values

 

 

 

 

 

2

 

 

 

 

 

 

Commodity derivative liabilities

 

$

5

 

 

$

4

 

Notional contract values

 

 

14

 

 

 

16

 

 

 

 

 

 

 

 

Other financial instruments

At December 31, 2023 and September 30, 2023, Ashland's long-term debt (including the current portion and excluding debt issuance cost discounts) had a carrying value of $1,354 million and $1,327 million, respectively, compared to a fair value of $1,279 million and $1,160 million, respectively. The fair values of long-term debt are based on quoted market prices.

NOTE E – 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 the reported Condensed Consolidated Balance Sheets dates.

 

 

 

December 31

 

 

September 30

 

(In millions)

 

2023

 

 

2023

 

Finished products

 

$

376

 

 

$

390

 

Raw materials, supplies and work in process

 

 

212

 

 

 

236

 

 

 

$

588

 

 

$

626

 

 

 

 

 

 

 

 

 

NOTE F – GOODWILL AND OTHER INTANGIBLES

Goodwill

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

No indicators of impairment were identified in the three months ended December 31, 2023.

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

 

 

Life

 

 

Personal

 

 

Specialty

 

 

 

 

 

 

 

(In millions)

Sciences

 

 

Care(a)

 

 

Additives(a)

 

 

Intermediates(a)

 

 

Total

 

Balance at September 30, 2023

$

819

 

 

$

122

 

 

$

421

 

 

$

 

 

$

1,362

 

Currency translation

 

21

 

 

 

2

 

 

 

11

 

 

 

 

 

 

34

 

Balance at December 31, 2023

$

840

 

 

$

124

 

 

$

432

 

 

$

 

 

$

1,396

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

10


Other intangible assets

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 in the three months ended December 31, 2023.

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

 

 

December 31, 2023

 

 

September 30, 2023

 

 

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

$

99

 

 

$

(44

)

 

$

55

 

 

$

97

 

 

$

(43

)

 

$

54

 

Intellectual property

 

741

 

 

 

(598

)

 

 

143

 

 

 

731

 

 

 

(581

)

 

 

150

 

Customer and supplier relationships

 

835

 

 

 

(436

)

 

 

399

 

 

 

821

 

 

 

(417

)

 

 

404

 

Total definite-lived intangibles

 

1,675

 

 

 

(1,078

)

 

 

597

 

 

 

1,649

 

 

 

(1,041

)

 

 

608

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indefinite-lived intangibles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks and trade names

 

278

 

 

 

 

 

 

278

 

 

 

278

 

 

 

 

 

 

278

 

Total intangible assets

$

1,953

 

 

$

(1,078

)