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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 June 30, 2022

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 GLOBAL HOLDINGS 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 $.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 June 30, 2022, there were 54,139,396 shares of Registrant’s Common Stock outstanding.

 

 


 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

June 30

 

 

June 30

 

(In millions except per share data - unaudited)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Sales

 

$

644

 

 

$

543

 

 

$

1,759

 

 

$

1,520

 

Cost of sales

 

 

404

 

 

 

370

 

 

 

1,139

 

 

 

1,040

 

Gross profit

 

 

240

 

 

 

173

 

 

 

620

 

 

 

480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

 

127

 

 

 

93

 

 

 

299

 

 

 

274

 

Research and development expense

 

 

14

 

 

 

13

 

 

 

40

 

 

 

37

 

Intangibles amortization expense

 

 

23

 

 

 

23

 

 

 

71

 

 

 

65

 

Equity and other income

 

 

1

 

 

 

1

 

 

 

2

 

 

 

7

 

Operating income

 

 

77

 

 

 

45

 

 

 

212

 

 

 

111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest and other expense

 

 

59

 

 

 

1

 

 

 

108

 

 

 

18

 

Other net periodic benefit loss - Note K

 

 

(1

)

 

 

 

 

 

 

 

 

 

Income on acquisitions and divestitures, net - Note B

 

 

35

 

 

 

2

 

 

 

42

 

 

 

11

 

Income from continuing operations before income taxes

 

 

52

 

 

 

46

 

 

 

146

 

 

 

104

 

Income tax expense (benefit)

 

 

1

 

 

 

(26

)

 

 

25

 

 

 

(35

)

Income from continuing operations

 

 

51

 

 

 

72

 

 

 

121

 

 

 

139

 

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

 

 

(15

)

 

 

8

 

 

 

749

 

 

 

37

 

Net income

 

$

36

 

 

$

80

 

 

$

870

 

 

$

176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PER SHARE DATA

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share - Note M

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.94

 

 

$

1.18

 

 

$

2.16

 

 

$

2.29

 

Income (loss) from discontinued operations

 

 

(0.28

)

 

 

0.12

 

 

 

13.40

 

 

 

0.61

 

Net income

 

$

0.66

 

 

$

1.30

 

 

$

15.56

 

 

$

2.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share - Note M

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.93

 

 

$

1.17

 

 

$

2.12

 

 

$

2.27

 

Income (loss) from discontinued operations

 

 

(0.28

)

 

 

0.12

 

 

 

13.16

 

 

 

0.60

 

Net income

 

$

0.65

 

 

$

1.29

 

 

$

15.28

 

 

$

2.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

36

 

 

$

80

 

 

$

870

 

 

$

176

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized translation gain (loss)

 

 

(86

)

 

 

23

 

 

 

(107

)

 

 

37

 

Unrealized gain (loss) on commodity hedges

 

 

(3

)

 

 

 

 

 

(2

)

 

 

 

Other comprehensive income (loss) - Note N

 

 

(89

)

 

 

23

 

 

 

(109

)

 

 

37

 

Comprehensive income (loss)

 

$

(53

)

 

$

103

 

 

$

761

 

 

$

213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

2


 

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In millions - unaudited)

 

June 30
2022

 

 

September 30
2021

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

629

 

 

$

210

 

Accounts receivable (a) - Note H

 

 

488

 

 

 

369

 

Inventories - Note F

 

 

609

 

 

 

473

 

Other assets

 

 

91

 

 

 

68

 

Current assets held for sale - Note B

 

 

 

 

 

597

 

Total current assets

 

 

1,817

 

 

 

1,717

 

Noncurrent assets

 

 

 

 

 

 

Property, plant and equipment

 

 

 

 

 

 

Cost

 

 

3,065

 

 

 

3,066

 

Accumulated depreciation

 

 

1,713

 

 

 

1,639

 

Net property, plant and equipment

 

 

1,352

 

 

 

1,427

 

Goodwill - Note G

 

 

1,356

 

 

 

1,430

 

Intangibles - Note G

 

 

1,001

 

 

 

1,099

 

Operating lease assets, net - Note I

 

 

112

 

 

 

124

 

Restricted investments - Note E

 

 

346

 

 

 

384

 

Asbestos insurance receivable (b) - Note L

 

 

140

 

 

 

134

 

Deferred income taxes

 

 

30

 

 

 

30

 

Other assets

 

 

258

 

 

 

267

 

Total noncurrent assets

 

 

4,595

 

 

 

4,895

 

Total assets

 

$

6,412

 

 

$

6,612

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Short-term debt - Note H

 

$

 

 

$

365

 

Current portion of long-term debt - Note H

 

 

 

 

 

9

 

Trade and other payables

 

 

241

 

 

 

236

 

Accrued expenses and other liabilities

 

 

291

 

 

 

251

 

Current operating lease obligations - Note I

 

 

18

 

 

 

23

 

Current liabilities held for sale - Note B

 

 

 

 

 

50

 

Total current liabilities

 

 

550

 

 

 

934

 

Noncurrent liabilities

 

 

 

 

 

 

Long-term debt - Note H

 

 

1,302

 

 

 

1,596

 

Asbestos litigation reserve - Note L

 

 

483

 

 

 

490

 

Deferred income taxes

 

 

218

 

 

 

237

 

Employee benefit obligations - Note K

 

 

137

 

 

 

144

 

Operating lease obligations - Note I

 

 

100

 

 

 

110

 

Other liabilities

 

 

356

 

 

 

349

 

Total noncurrent liabilities

 

 

2,596

 

 

 

2,926

 

Commitments and contingencies - Note L

 

 

 

 

 

 

Stockholders’ equity - Note N

 

 

3,266

 

 

 

2,752

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

6,412

 

 

$

6,612

 

 

 

 

 

 

 

 

(a)
Accounts receivable includes an allowance for credit losses of $2 million at both June 30, 2022 and September 30, 2021.
(b)
Asbestos insurance receivable includes an allowance for credit losses of $3 million at both June 30, 2022 and September 30, 2021.

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

3


 

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

 

 

 

Nine months ended

 

 

 

June 30

 

(In millions - unaudited)

 

2022

 

 

2021

 

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

 

 

 

 

 

 

Net income

 

$

870

 

 

$

176

 

Income from discontinued operations (net of income taxes)

 

 

(749

)

 

 

(37

)

Adjustments to reconcile income from continuing operations to

 

 

 

 

 

 

cash flows from operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

182

 

 

 

180

 

Original issue discount and debt issuance costs amortization

 

 

4

 

 

 

4

 

Deferred income taxes

 

 

(5

)

 

 

(3

)

Gain from sales of property and equipment

 

 

 

 

 

(3

)

Distributions from equity affiliates

 

 

 

 

 

1

 

Stock based compensation expense

 

 

14

 

 

 

12

 

Excess tax benefit on stock based compensation

 

 

1

 

 

 

1

 

Loss (income) from restricted investments

 

 

59

 

 

 

(36

)

Income on acquisitions and divestitures

 

 

(42

)

 

 

(15

)

Impairments

 

 

 

 

 

9

 

Pension contributions

 

 

(4

)

 

 

(6

)

Gain on pension and other postretirement plan remeasurements

 

 

(1

)

 

 

 

Change in operating assets and liabilities (a)

 

 

(315

)

 

 

31

 

Total cash flows provided by operating activities from continuing operations

 

 

14

 

 

 

314

 

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

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(67

)

 

 

(74

)

Proceeds from disposal of property, plant and equipment

 

 

51

 

 

 

4

 

Purchase of operations - net of cash acquired

 

 

 

 

 

(308

)

Proceeds from sale or restructuring of operations

 

 

 

 

 

14

 

Proceeds from settlement of Company-owned life insurance contracts

 

 

2

 

 

 

1

 

Company-owned life insurance payments

 

 

 

 

 

(1

)

Net purchase of funds restricted for specific transactions

 

 

(74

)

 

 

(1

)

Reimbursements from restricted investments

 

 

28

 

 

 

25

 

Proceeds from sale of securities

 

 

75

 

 

 

56

 

Purchases of securities

 

 

(75

)

 

 

(56

)

Total cash flows used by investing activities from continuing operations

 

 

(60

)

 

 

(340

)

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

 

 

 

 

 

 

Repurchase of common stock

 

 

(200

)

 

 

 

Repayment of long-term debt

 

 

(250

)

 

 

 

Proceeds from (repayment of) short-term debt

 

 

(365

)

 

 

(185

)

Cash dividends paid

 

 

(52

)

 

 

(52

)

Stock based compensation employee withholding taxes paid in cash

 

 

(9

)

 

 

(6

)

Total cash flows used by financing activities from continuing operations

 

 

(876

)

 

 

(243

)

CASH USED BY CONTINUING OPERATIONS

 

 

(922

)

 

 

(269

)

Cash provided (used) by discontinued operations

 

 

 

 

 

 

Operating cash flows

 

 

(302

)

 

 

84

 

Investing cash flows

 

 

1,650

 

 

 

(11

)

Total cash provided by discontinued operations

 

 

1,348

 

 

 

73

 

Effect of currency exchange rate changes on cash and cash equivalents

 

 

(7

)

 

 

4

 

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

419

 

 

 

(192

)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

 

 

210

 

 

 

454

 

CASH AND CASH EQUIVALENTS - END OF PERIOD

 

$

629

 

 

$

262

 

 

 

 

 

 

 

 

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

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

4


 

ASHLAND GLOBAL HOLDINGS 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 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 Ashland Global Holdings Inc. and consolidated subsidiaries (Ashland) Annual Report on Form 10-K for the fiscal year ended September 30, 2021. Results of operations for the periods ended June 30, 2022 are not necessarily indicative of the expected results for the remaining quarter in the fiscal year.

On February 28, 2022, Ashland completed the sale of its Performance Adhesives segment to Arkema, a French société anonyme. This divestiture represented a strategic shift in Ashland's business and qualified as a discontinued operation. As a result, the assets, liabilities, operating results and cash flows related to Performance Adhesives have been classified as discontinued operations for all periods presented within the Consolidated Financial Statements. See Notes B and C for additional information on this divestiture.

Ashland is comprised of four reportable segments: Life Sciences, Personal Care (formerly Personal Care and Household), Specialty Additives, and Intermediates (formerly Intermediates and Solvents). Unallocated and Other includes corporate governance activities and certain legacy matters. For additional information, see Note Q.

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, long-lived assets (including goodwill and other intangible assets), income taxes and liabilities and receivables associated with asbestos litigation and environmental remediation. 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 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, 2021. 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 consolidated financial statements.

 

 

5


 

NOTE B – ACQUISITIONS AND DIVESTITURES

Acquisitions

Personal Care acquisition

On April 30, 2021, Ashland completed its acquisition of the personal care business of Schülke & Mayr GmbH (Schülke), a portfolio company of the global investment organization EQT. Ashland included the purchase of this business within the Personal Care reporting segment.

The all-cash purchase price of Schülke was $312 million. Ashland incurred acquisition related transaction costs of $2 million and $4 million during the three and nine months ended June 30, 2021, respectively, which are recorded within the income on acquisitions and divestitures, net caption within the Statement of Consolidated Comprehensive Income (Loss). Within this same caption, Ashland recognized income of $4 million and $1 million during the three and nine months ended June 30, 2021, respectively, associated with foreign currency derivatives gains on foreign exchange contracts entered into to mitigate the exposure of the Euro dominated purchase price.

Divestitures

Performance Adhesives

On February 28, 2022, Ashland completed the sale of its Performance Adhesives business. Proceeds from the sale were approximately $1.7 billion, net of transaction costs. Ashland recognized a $732 million gain on sale within the Income (loss) from Discontinued Operations caption of the Statements of Consolidated Comprehensive Income (Loss) during the second quarter of fiscal 2022.

The transaction represented a strategic shift in Ashland’s business and had a major effect on Ashland’s operations and financial results. Accordingly, the operating results and cash flows related to Performance Adhesives have been reflected as discontinued operations in the Statements of Consolidated Comprehensive Income (Loss) and Statements of Condensed Consolidated Cash Flows, while the assets and liabilities that were sold have been classified within the Condensed Consolidated Balance Sheets as held for sale in periods preceding the sale. See Note C for the results of operations for Performance Adhesives for all periods presented.

Certain indirect corporate costs included within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) that were previously allocated to the Performance Adhesives segment do not qualify for classification within discontinued operations and are now reported as selling, general and administrative expense within continuing operations on a consolidated basis and within the Unallocated and other segment. These costs were $1 million and $4 million for the three months ended June 30, 2022 and 2021, respectively, and $8 million and $12 million for the nine months ended June 30, 2022 and 2021, respectively.

Following the completion of the sale, Ashland is providing certain transition services to Arkema for a fee. While the transition services are expected to vary in duration depending upon the type of service provided, Ashland does not expect these transition services, or related fees, will be significant. Ashland recognized transaction service fee income of less than $1 million for the three and nine months ended June 30, 2022.

Other manufacturing facility sales

During the nine months ended June 30, 2021, Ashland completed the sale of a Specialty Additives facility. Net proceeds received from the sale were approximately $14 million in the December 31, 2020 quarter ($20 million in total including a deposit received in fiscal year 2020). Ashland recognized a pre-tax gain of $14 million recorded within the Income on acquisitions and divestitures, net caption in the Statements of Consolidated Comprehensive Income (Loss) for the nine months ended June 30, 2021.

6


 

Other corporate assets

During the three and nine months ended June 30, 2022, Ashland completed the sale of two excess land properties. The net book value of the land was $8 million as of September 30, 2021. Ashland received net proceeds of approximately $50 million and recorded pre-tax gains of $35 million and $42 million within the Income (loss) on acquisitions and divestitures, net caption of the Statements of Consolidated Comprehensive Income (Loss) for the three and nine months ended June 30, 2022, respectively.

Held for sale classification

The assets and liabilities of the Performance Adhesives segment, along with other properties, had been reflected as assets and liabilities held for sale as described above for the period ended September 20, 2021. As a result, in accordance with U.S. GAAP standards, depreciation and amortization were not being recorded within the Statements of Consolidated Comprehensive Income (Loss) and the Condensed Consolidated Balance Sheets. These assets and liabilities are comprised of the following components:

 

 

September 30

 

(In millions)

 

2021

 

Accounts receivable, net

 

$

26

 

Inventories

 

 

27

 

Net property, plant and equipment

 

 

80

 

Goodwill

 

 

453

 

Operating lease assets, net

 

 

10

 

Other assets

 

 

1

 

Current assets held for sale

 

$

597

 

 

 

 

 

Trade and other payables

 

$

33

 

Accrued expenses and other liabilities

 

 

7

 

Current operating lease obligations

 

 

1

 

Operating lease obligations

 

 

9

 

Current liabilities held for sale