UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(a
I.R.S. No.
Telephone Number (
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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.
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).
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.
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Accelerated Filer |
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Non-Accelerated Filer |
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Smaller Reporting Company |
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Emerging Growth Company |
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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, 2024, there were
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
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June 30 |
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June 30 |
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(In millions except per share data - unaudited) |
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2024 |
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2023 |
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2024 |
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2023 |
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Sales |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expense |
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Research and development expense |
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Intangibles amortization expense - Note G |
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Equity and other income |
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Loss on acquisitions and divestitures, net - Note B |
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Operating income (loss) |
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Net interest and other expense (income) |
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Other net periodic benefit loss - Note K |
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Income (loss) from continuing operations before income taxes |
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Income tax expense (benefit) - Note J |
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Income from continuing operations |
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Income (loss) from discontinued operations, net of income taxes - Note C |
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Net income |
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$ |
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$ |
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$ |
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$ |
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PER SHARE DATA |
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Basic earnings per share - Note M |
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Income from continuing operations |
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$ |
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$ |
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$ |
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$ |
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Income (loss) from discontinued operations |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Diluted earnings per share - Note M |
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Income from continuing operations |
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$ |
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$ |
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$ |
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$ |
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Income (loss) from discontinued operations |
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Net income |
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$ |
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$ |
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$ |
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$ |
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COMPREHENSIVE INCOME (LOSS) |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax |
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Unrealized translation gain (loss) |
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Unrealized gain (loss) on commodity hedges |
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Other comprehensive income (loss) - Note N |
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Comprehensive income (loss) |
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$ |
( |
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$ |
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$ |
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$ |
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - unaudited) |
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June 30 |
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September 30 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable(a) - Note H |
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Inventories - Note F |
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Other assets |
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Current assets held for Sale - Note B |
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— |
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Total current assets |
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Noncurrent assets |
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Property, plant and equipment |
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Cost |
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Accumulated depreciation |
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Net property, plant and equipment |
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Goodwill - Note G |
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Intangibles - Note G |
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Operating lease assets, net - Note I |
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Restricted investments - Note E |
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Asbestos insurance receivable(b) - Note L |
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Deferred income taxes |
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Other assets |
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Total noncurrent assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities |
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Short-term debt - Note H |
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$ |
— |
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$ |
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Trade and other payables |
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Accrued expenses and other liabilities |
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Current operating lease obligations - Note I |
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Current liabilities held for sale - Note B |
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— |
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Total current liabilities |
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Noncurrent liabilities |
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Long-term debt - Note H |
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Asbestos litigation reserve - Note L |
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Deferred income taxes |
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Employee benefit obligations - Note K |
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Operating lease obligations - Note I |
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Other liabilities |
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Total noncurrent liabilities |
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Stockholders’ equity - Note N |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
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Nine months ended |
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June 30 |
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(In millions - unaudited) |
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2024 |
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2023 |
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CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS |
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Net income |
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$ |
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$ |
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Loss (income) from discontinued operations, net of income taxes |
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( |
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Adjustments to reconcile income from continuing operations to cash flows from operating activities: |
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Depreciation and amortization |
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Original issue discount and debt issuance costs amortization |
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Deferred income taxes |
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( |
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Gain from sales of property and equipment |
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( |
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Loss on acquisitions and divestitures, net |
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— |
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Stock based compensation expense |
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Excess tax benefit on stock-based compensation |
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Income from restricted investments |
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( |
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( |
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Asset impairments |
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Pension contributions |
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( |
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( |
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Change in operating assets and liabilities |
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( |
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Total cash flows provided by operating activities from continuing operations |
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CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS |
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Additions to property, plant and equipment |
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( |
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( |
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Proceeds from disposal of property, plant and equipment |
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— |
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Proceeds from settlement of Company-owned life insurance contracts |
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Company-owned life insurance payments |
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( |
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( |
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Funds restricted for specific transactions |
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( |
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( |
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Other investing cash flows |
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( |
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— |
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Reimbursements from restricted investments |
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Proceeds from sale of securities |
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Purchases of securities |
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( |
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( |
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Total cash flows used by investing activities from continuing operations |
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( |
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( |
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CASH FLOWS USED BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS |
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Repurchase of Common Stock |
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( |
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( |
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Repayment of short-term debt |
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( |
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Cash dividends paid |
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( |
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( |
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Stock based compensation employee withholding taxes paid in cash |
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( |
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( |
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Total cash flows used by financing activities from continuing operations |
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( |
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( |
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CASH PROVIDED (USED) BY CONTINUING OPERATIONS |
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( |
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Cash used by discontinued operations |
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Operating cash flows |
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( |
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( |
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Total cash used by discontinued operations |
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( |
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( |
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Effect of currency exchange rate changes on cash and cash equivalents |
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DECREASE IN CASH AND CASH EQUIVALENTS |
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( |
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( |
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CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD |
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CASH AND CASH EQUIVALENTS - END OF PERIOD |
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$ |
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$ |
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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 June 30, 2024 are not necessarily indicative of the expected results for the remainder of the fiscal year.
Ashland is comprised of the following reportable segments: Life Sciences, Personal Care, Specialty Additives and Intermediates. Unallocated and Other includes corporate governance activities and certain legacy matters. For additional information about Ashland's reportable segments, see Note Q.
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 – DIVESTITURES
Nutraceuticals business sale
In May 2024, Ashland signed a definitive agreement to sell substantially all of the net assets of its Nutraceuticals business to Turnspire Capital Partners LLC ("Turnspire").
The Nutraceuticals business is included within Ashland's Life Sciences segment and serves the broader nutrition market.
The transaction is expected to close during Ashland's fiscal fourth quarter, contingent on certain customary regulatory approvals and standard closing conditions.
Ashland determined that it has met all the criteria for its Nutraceuticals business to be classified as held for sale. Therefore, the net assets of this business were classified as held for sale within the Condensed Consolidated Balance Sheets as of June 30, 2024. Ashland determined this transaction did not qualify for discontinued operations
5
treatment since it neither represented a strategic shift nor did it have a major effect on Ashland's operations and financial results.
Ashland recorded a $
Held for sale classification
The assets and liabilities of the Nutraceuticals business have been reflected as assets and liabilities held for sale, as described above, which are comprised of the following components:
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June 30 |
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(In millions) |
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2024 |
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Accounts receivable, net |
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$ |
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Inventories |
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Deferred income taxes |
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Current assets held for sale |
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$ |
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Trade and other payables |
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$ |
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Accrued expenses and other liabilities |
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Operating lease obligations |
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Current liabilities held for sale |
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$ |
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NOTE C – DISCONTINUED OPERATIONS
Ashland has divested certain businesses that have qualified as discontinued operations. The operating results from these divested businesses and subsequent adjustments related to ongoing assessments of certain retained liabilities and tax items have been recorded within the discontinued operations caption in the Statements of Consolidated Comprehensive Income (Loss) for all periods presented.
The following divested businesses represent disposal groups that qualified as discontinued operations in previous periods and impacted discontinued operations for the three and nine months ended June 30, 2024 and 2023:
Additionally, Ashland is subject to liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley Stoker Corporation, a former subsidiary, which qualified as a discontinued operation and from the acquisition during 2009 of Hercules LLC (formerly Hercules Incorporated), an indirect wholly-owned subsidiary of Ashland. Adjustments to the recorded litigation reserves and related insurance receivables are recorded within the discontinued operations caption. See Note L for more information related to the adjustments on asbestos liabilities and receivables.
6
Components of amounts reflected in the Statements of Consolidated Comprehensive Income (Loss) related to discontinued operations are presented in the following table for the three and nine months ended June 30, 2024 and 2023.
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Three months ended |
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Nine months ended |
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June 30 |
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June 30 |
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(In millions) |
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2024 |
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2023 |
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2024 |
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2023 |
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Income (loss) from discontinued operations, net of income taxes |
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Performance Adhesives |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
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Composites/Marl facility |
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( |
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( |
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( |
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Distribution |
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( |
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( |
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( |
) |
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( |
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Water Technologies |
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( |
) |
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( |
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Valvoline |
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Asbestos-related litigation |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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NOTE D – RESTRUCTURING ACTIVITIES
Ashland periodically implements restructuring programs related to acquisitions, divestitures and other cost reduction programs in order to enhance profitability through streamlined operations and an improved overall cost structure.
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 $
The following table details at June 30, 2024 the amount of restructuring severance reserves related to this program.
(In millions) |
Severance reserves |
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Balance at of September 30, 2023 |
$ |
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Severance expense |
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Utilization (cash paid) |
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( |
) |
Balance at June 30, 2024 |
$ |
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Plant optimization actions
During the three and nine months ended June 30, 2024, Ashland incurred $
During the three and nine months ended June 30, 2024, Ashland incurred $
7
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
NOTE E – FAIR VALUE MEASUREMENTS
Ashland uses applicable guidance for defining fair value, the initial recording and periodic remeasurement of certain assets and liabilities measured at fair value and related disclosures for instruments measured at fair value. Fair value accounting guidance establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). 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 June 30, 2024.
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Carrying |
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Total |
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Quoted prices |
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Significant |
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Significant |
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(In millions) |
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value |
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|
value |
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Level 1 |
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Level 2 |
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Level 3 |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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$ |
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$ |
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Restricted investments(a)(b) |
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Investment of captive insurance company(c) |
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Foreign currency derivatives(d) |
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(d) |
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Total assets at fair value |
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$ |
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$ |
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$ |
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$ |
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$ |
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Liabilities |
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(e) |
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$ |
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$ |
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|
$ |
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|
$ |
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|
$ |
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|||||
Total liabilities at fair value |
|
$ |
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|
$ |
|
|
$ |
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|
$ |
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$ |
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8
The following table summarizes financial asset instruments subject to recurring fair value measurements as of September 30, 2023.
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|
Carrying |
|
|
Total |
|
|
Quoted prices |
|
|
Significant |
|
|
Significant |
|
|||||
(In millions) |
|
value |
|
|
value |
|
|
Level 1 |
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Level 2 |
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|
Level 3 |
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|||||
Assets |
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|
|||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Restricted investments(a)(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment of captive insurance company(c) |
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|
|||||
Foreign currency derivatives(d) |
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|
|
|
|||||
Total assets at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
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|||||
Liabilities |
|
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|
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|
|||||
Foreign currency derivatives(e) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
(e) |
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Total liabilities at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
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|
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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 $
The following table presents gross unrealized gains and losses for the restricted securities as of June 30, 2024 and September 30, 2023:
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Gross |
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Gross |
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(In millions) |
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Adjusted Cost |
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Unrealized Gain |
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Unrealized Loss |
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Fair Value |
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As of June 30, 2024 |
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Demand deposit |
|
$ |
|
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$ |
|
|
$ |
|
|
$ |
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Equity mutual fund |
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Fixed income mutual fund |
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( |
) |
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Fair value |
|
$ |
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$ |
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$ |
( |
) |
|
$ |
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As of September 30, 2023 |
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Demand deposit |
|
$ |
|
|
$ |
|
|
$ |
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