EDGAR 10-K Filing

Company CIK: 1674862
Filing Year: 2024
Filename: 1674862_10-K_2024_0000950170-24-128009.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
GENERAL
Ashland Inc. is a Delaware corporation, with its headquarters and principal executive offices at 8145 Blazer Drive, Wilmington, Delaware 19808. Our common stock is listed on the New York Stock Exchange (NYSE) under the ticker symbol “ASH”. The terms “Ashland” and the “Company” as used herein include Ashland Inc., its predecessors, and its consolidated subsidiaries, except where the context indicates otherwise.
Ashland is a global specialty additives and materials company with a conscious and proactive mindset for sustainability. The Company serves customers in a wide range of consumer and industrial markets including, architectural coatings, construction, energy, food and beverage, personal care and pharmaceutical. With approximately 3,200 employees worldwide, Ashland serves customers in more than 100 countries.
Ashland’s reportable segments include: Life Sciences; Personal Care; Specialty Additives; and Intermediates. Unallocated and Other includes corporate governance activities and certain legacy matters.
Life Sciences is comprised of pharmaceuticals, nutrition, agricultural chemicals, diagnostic films (formerly known as advanced materials) and fine chemicals. Pharmaceutical solutions include controlled release polymers, disintegrants, tablet coatings, thickeners, solubilizers and tablet binders. Nutrition solutions include thickeners, stabilizers, emulsifiers and additives for enhancing mouthfeel, controlling moisture migration, reducing oil uptake and binding structured foods. Customers include pharmaceutical, food, beverage, hospitals and radiologists and industrial manufacturers. The nutraceuticals business was sold in August 2024.
Personal Care is comprised of biofunctionals, microbial protectants (preservatives), skin care, sun care, oral care, hair care and household solutions. These businesses have a broad range of natural, nature-derived, biodegradable, and high-performance ingredients for customer-driven solutions to help protect, renew, moisturize and revitalize skin and hair, and provide solutions for toothpastes, mouth washes and rinses, denture cleaning and care for teeth. Personal Care supplies nature-derived rheology ingredients, biodegradable surface wetting agents, performance encapsulates, and specialty polymers for household, industrial and institutional cleaning products. Customers include formulators at large multinational branded consumer products companies and smaller, independent boutique companies.
Specialty Additives is comprised of rheology and performance-enhancing additives serving the architectural coatings, construction, energy, automotive and various industrial markets. Solutions include coatings additives for architectural paints, finishes and lacquers, cement- and gypsum-based dry mortars, ready-mixed joint compounds, synthetic plasters for commercial and residential construction, and specialty materials for industrial applications. Products include rheology modifiers (cellulosic and associative thickeners), foam control agents, surfactants and wetting agents, pH neutralizers, advanced ceramics used in catalytic converters, and environmental filters, ingredients that aid the manufacturing process of ceramic capacitors, plasma display panels and solar cells, ingredients for textile printing, thermoplastic metals and alloys for welding. Products help improve desired functional outcomes through rheology modification and control, water retention, workability, adhesive strength, binding power, film formation, deposition and suspension and emulsification. Customers include global paint manufacturers, electronics and automotive manufacturers, textile mills, the construction industry and welders.
Intermediates is comprised of the production of 1,4 butanediol ("BDO") and related derivatives, including n-methylpyrrolidone. These products are used as chemical intermediates in the production of engineering polymers and polyurethanes, and as specialty process solvents in a wide array of applications including electronics, pharmaceuticals, water filtration membranes and more. BDO is also supplied to Life Sciences, Personal Care, and Specialty Additives for use as a raw material.
Unallocated and Other generally includes items such as certain significant company-wide restructuring activities, corporate governance costs and legacy costs or activities that relate to divested businesses that are no longer operated by Ashland.
Available Information - Ashland’s Internet address is http://www.ashland.com. On this website, Ashland makes available, free of charge, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as well as any beneficial ownership reports of officers and directors filed on Forms 3, 4 and 5. All such reports are available as soon as reasonably practicable after they are electronically filed with, or electronically furnished to, the Securities and Exchange Commission ("SEC"). Ashland also makes available, free of charge on its website, its Corporate Governance Guidelines, Board Committee Charters, Director Independence Standards and Global Code of Conduct that applies to Ashland’s directors, officers and employees. These documents are also available in print to any stockholder who requests them. Information contained on Ashland’s website referenced here or elsewhere in this Annual Report is not part of this Annual Report on Form 10-K and is not incorporated by reference in this document. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
LIFE SCIENCES
Life Sciences is a leading supplier of excipients and tablet coating systems to the pharmaceutical and nutrition industries. Excipients include a comprehensive range of polymers for use as tablet binders, super disintegrants, sustained-release agents and drug solubilizers, as well as a variety of coating formulations for immediate, delayed, and sustained release applications. Core products include cellulosics and vinyl pyrrolidone polymers which are used primarily in oral solid dosage drug formulations. Its nutrition portfolio provides functional benefits in areas such as thickening, texture control, thermal gelation, structure enhancement, water binding, clarification and stabilization. Its core products include cellulose gums and vinyl pyrrolidone polymers which are used in a wide range of offerings for bakery, beverage, dairy, desserts, meat products, pet food, prepared foods, sauces and savory products.
Life Sciences operates throughout the Americas, Europe and Asia Pacific. It has 14 manufacturing and lab facilities in nine countries which serve its various end markets. It has manufacturing facilities and labs in Wilmington, Delaware; Calvert City, Kentucky; Columbus, Ohio; Fiskeville, Rhode Island; and Texas City, Texas within the United States; Cabreuva and Sao Paolo, Brazil; Shanghai, China; Dusseldorf, Germany; Hyderabad, India; Mullingar, Ireland; Mexico City, Mexico; Bangkok, Thailand; and Istanbul, Turkey.
Life Science markets and distributes its products in the Americas, Europe, the Middle East, Africa and Asia Pacific.
For fiscal 2024, the following Life Sciences product categories were 10% or greater of Ashland’s total consolidated sales:
Product
% of Life Sciences sales
% of Ashland total consolidated sales
Cellulosics
38%
37%
Polyvinylpyrrolidones (PVP)
38%
23%
PERSONAL CARE
The Personal Care portfolio of oral care products delivers active ingredients in toothpaste and mouthwashes; provides bioadhesive functionality for dentures; delivers flavor, texture and other functional properties; and provides product binding to ensure form and function throughout product lifecycle.
The Personal Care portfolio of hair care products includes advanced styling polymers, fixatives, conditioning polymers, emulsifiers, preservatives, rheology modifiers and biofunctional actives.
The Personal Care portfolio of ingredients and solutions for skin care, sun care, and cosmetics focuses on natural and sustainable solutions. Ashland’s Personal Care business includes biofunctional actives, preservatives, and specialty polymers to provide functionality such as water resistance and rheology. Ashland’s natural ingredients include a wide range of cellulose, guar, and cassia derivatives; unique active ingredients derived from botanical sources using exclusive Ashland technologies such as Zeta FractionTM and PSR technology; emollients based on natural chemistries; encapsulation technology derived from alginates; and efficacious preservative blends inspired by nature.
The Personal Care portfolio of products and technologies is used in many types of cleaning and fragrance applications, including fabric care, home care and dishwashing. Personal Care products are used in a variety of applications for viscosity enhancement, particle suspension, rheology modification, stabilization and fragrance enhancement.
Personal Care operates throughout the Americas, Europe and Asia Pacific. It has 14 manufacturing and lab facilities in nine countries which serve its various end markets and participates in one joint venture. It has manufacturing facilities and labs in Freetown, Massachusetts; Chatham, New Jersey; Ossining, New York; Merry Hill, North Carolina; Kenedy, Texas; and Menomonee Falls, Wisconsin within the United States; Sao Paulo, Brazil; Shanghai, China; Sophia Antipolis, France; Hamburg, Germany; Mumbai, India; Mexico City, Mexico; Zwijndrecht, Netherlands and Poole, United Kingdom.
Personal Care markets and distributes its products in the Americas, Europe, the Middle East, Africa and Asia Pacific.
For fiscal 2024, the following Personal Care product categories were 10% or greater of Ashland’s total consolidated sales:
Product
% of Personal Care sales
% of Ashland total consolidated sales
Cellulosics
18%
37%
Polyvinylpyrrolidones (PVP)
22%
23%
SPECIALTY ADDITIVES
Specialty Additives offers industry-leading products, technologies and resources for solving formulation and product-performance challenges. Using synthetic and semisynthetic polymers derived from polyester and polyurethane-based adhesives, and plant and seed extract, Specialty Additives offers comprehensive and innovative solutions for industrial applications.
Key customers include manufacturers of paint, coatings and construction materials; packaging and converting companies; and oilfield service companies.
The areas of expertise include organic and synthetic chemistry, colloid science, rheology, structural analysis and microbiology.
The solutions provide an array of properties, including thickening and rheology control, binding power, film formation, conditioning and deposition, colloid stabilization and suspension.
Specialty Additives is composed of various end use markets. Many of the products of the end markets are produced in shared manufacturing facilities, to better manage capacity and achieve desired returns.
Specialty Additives provides products and services to over 30 industries. Ashland offers a broad spectrum of organo- and water-soluble polymers that are derived from both natural and synthetic resources. Product lines include derivatized cellulose polymers, synthetics, and vinyl pyrrolidone polymers that impart effective functionalities to serve a variety of industrial markets and specialized applications. Many of the products within Specialty Additives function as performance additives that deliver high levels of end-user value in formulated products. In other areas, such as plastics and textiles, Specialty Additives’ products function as a processing aid, improving the quality of end products and reducing manufacturing costs.
Specialty Additives is a recognized leader in rheology solutions for waterborne architectural paint and coatings. Products include hydroxyethylcellulose ("HEC"), which provides thickening and application properties for interior and exterior paints, and nonionic synthetic associative thickeners ("NSATs"), which are APEO-free liquid synthetics for high-performance paint and industrial coatings. The Specialty Additives market complements its rheology offering with a broad portfolio of performance foam-control agents, surfactants and wetting agents, dispersants and pH neutralizers.
Specialty Additives is a major producer and supplier of cellulose ethers and companion products for the construction industry. These products control properties such as water retention, open time, workability, adhesion, stabilization, pumping, sag resistance, rheology, strength, appearance and performance in dry-mortar formulations.
Specialty Additives is a leading global manufacturer of synthetic- and cellulosic-based products for drilling fluids, oil-well cement slurries, completion and workover fluids, fracturing fluids and production chemicals. Specialty Additives offers the oil and gas industry solutions for drilling, stimulation, completion, cementing and production applications.
Specialty Additives operates throughout the Americas, Europe and Asia Pacific. It has 11 manufacturing and lab facilities in nine countries which serve its various end markets. Specialty Additives has manufacturing facilities and labs in Parlin, New Jersey; and Hopewell, Virginia within the United States and Doel-Beveren, Belgium; Nanjing and Shanghai, China; Alizay, France; Dusseldorf, Germany; Mumbai, India; Zwijndrecht, the Netherlands; Singapore, Singapore; and Newton Aycliffe, United Kingdom.
Specialty Additives markets and distributes its products in the Americas, Europe, the Middle East, Africa and Asia Pacific.
For fiscal 2024, the following Specialty Additives products were 10% or greater of Ashland’s total consolidated sales:
Product
% of Specialty Additives sales
% of Ashland total consolidated sales
Cellulosics
65%
37%
Polyvinylpyrrolidones (PVP)
7%
23%
INTERMEDIATES
Intermediates is a leading producer of BDO and related derivatives, including n-methylpyrrolidone. These products are used as chemical intermediates in the production of engineering polymers and polyurethanes, and as specialty process solvents in a wide array of applications including electronics, pharmaceuticals, water filtration membranes and more. BDO is also supplied to Life Sciences, Personal Care and Specialty Additives for use as a raw material.
Key customers include Ashland’s Life Sciences, Personal Care and Specialty Additives segments, general industrial manufacturers, plastics and polymers producers, pharmaceutical companies, agricultural firms and producers of electronic components and systems.
Intermediates has a manufacturing facility in Lima, Ohio, while some derivatives are produced at Life Sciences facilities in Texas City, Texas and Calvert City, Kentucky. Intermediates markets and distributes its products in the Americas, Europe, and Asia Pacific.
MISCELLANEOUS
Environmental Matters
Ashland maintains a company-wide environmental policy overseen by the Environmental, Health, Safety and Quality Committee of Ashland’s Board of Directors (the "Board"). Ashland’s Environmental, Health, Safety, Quality and Regulatory Affairs ("EHSQ&RA") department has the responsibility to ensure that Ashland’s businesses worldwide maintain environmental compliance in accordance with applicable laws and regulations. This responsibility is carried out via training; widespread communication of EHSQ&RA policies; information and regulatory updates; formulation of relevant policies, procedures and work practices; design and implementation of EHSQ&RA management systems; internal auditing; monitoring of legislative and regulatory developments that may affect Ashland’s operations; assistance to the businesses in identifying compliance issues and opportunities for voluntary actions that go beyond compliance; and incident response planning and implementation.
Federal, state and local laws and regulations relating to the protection of the environment have a significant impact on how Ashland conducts its businesses. In addition, Ashland’s operations outside the United States are subject to the environmental laws of the countries in which they are located. These laws include regulation of air emissions and water discharges, waste handling, remediation and product inventory, registration and regulation. New laws and regulations may be enacted or adopted by various regulatory agencies globally. The costs of compliance with any new laws or regulations cannot be estimated until the manner in which they will be implemented has been more precisely defined.
At September 30, 2024, Ashland’s reserves for environmental remediation and related environmental litigation amounted to $221 million, reflecting Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable, without regard to any third-party recoveries. Engineering studies, historical experience and other factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Environmental remediation reserves are subject to
uncertainties that affect Ashland’s ability to estimate its share of the costs. Such uncertainties involve the nature and extent of contamination at each site and the extent of required cleanup efforts under existing environmental regulations. Although it is not possible to predict with certainty the ultimate costs of environmental remediation, Ashland currently estimates that the upper end of the reasonably possible range of future costs for identified sites could be as high as approximately $485 million. The largest reserve for any site is 21% of the remediation reserve. Ashland regularly adjusts its reserves as environmental remediation continues. Environmental remediation expense, net of insurance receivables, amounted to $56 million in 2024 compared to $59 million in 2023 and $66 million in 2022.
Product Control, Registration and Inventory - Many of Ashland’s products and operations are subject to chemical control laws of the countries in which they are located. These laws include regulation of chemical substances and inventories under the Toxic Substances Control Act ("TSCA") in the United States and the Registration, Evaluation and Authorization of Chemicals ("REACH") regulation in Europe as well as new cosmetic ingredients filings in China under the Cosmetics Supervision and Administration Regulation ("CSAR"). Under TSCA, REACH, and CSAR additional testing requirements, documentation, risk assessments and registrations are occurring and will continue to occur and may adversely affect Ashland’s costs of products produced in or imported into the European Union. Examples of other product control regulations include right to know laws under the Global Harmonized System ("GHS") for hazard communication, regulation of chemicals used in the manufacture of pharmaceuticals and personal care products and that contact food under the Food, Drug and Cosmetics Act in the United States, the Framework Regulation in Europe and other product control requirements for chemical weapons, drug precursors and import/export. The Green Deal in the EU, specifically Chemicals Strategy for Sustainability, will require additional information to be developed on hazard communication and risk assessment of both chemical substances and finished products. New laws and regulations may be enacted or adopted by various regulatory agencies globally. The costs of compliance with any new laws or regulations cannot be estimated until the manner in which they will be implemented has been more precisely defined.
Remediation - Ashland currently operates, and in the past has operated, various facilities at which, during the normal course of business, releases of hazardous substances have occurred. Additionally, Ashland has known or alleged potential environmental liabilities at a number of third-party sites. Federal and state laws, including but not limited to the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") and various other remediation laws, require that contamination caused by hazardous substance releases be assessed and, if necessary, remediated to meet applicable standards. Some of these laws also provide for liability for related damage to natural resources, and claims for alleged property and personal injury damage which can also arise related to contaminated sites. Laws in other jurisdictions in which Ashland operates require that contamination caused by such releases at these sites be assessed and, if necessary, remediated to meet applicable standards.
Air - In the United States, the Clean Air Act ("CAA") imposes stringent limits on facility air emissions, establishes a federally mandated operating permit program, allows for civil and criminal enforcement actions and sets limits on the volatile or toxic content of many types of industrial materials and consumer products. The CAA establishes national ambient air quality standards ("NAAQS") with attainment deadlines and control requirements based on the severity of air pollution in a given geographical area. Various state clean air acts implement, complement and, in many instances, add to the requirements of the federal CAA. The requirements of the CAA and its state counterparts have a significant impact on the daily operation of Ashland’s businesses and, in many cases, on product formulation and other long-term business decisions. Other countries where Ashland operates also have laws and regulations relating to air quality. Ashland’s businesses maintain numerous permits and emission control devices pursuant to these clean air laws.
The United States Environmental Protection Agency ("USEPA") has increased its frequency in reviewing the NAAQS. The USEPA has stringent standards for particulate matter, ozone and sulfur dioxide. Throughout 2022, 2023 and 2024, state and local agencies continued to implement options for meeting the newest standards. Particulate matter strategies include dust control measures for construction sites and reductions in emission rates allowed for industrial operations. Options for ozone include emission controls for certain types of sources, reduced limits on the volatile organic compound content of industrial materials and consumer products, and requirements on the transportation sector. Most options for sulfur dioxide focus on coal and diesel fuel combustion sources. It is not possible at this time to estimate the potential financial impact that these newest standards may
have on Ashland’s operations or products. Ashland will continue to monitor and evaluate these standards to meet these and all air quality requirements.
Solid Waste - Ashland’s businesses are subject to various laws relating to and establishing standards for the management of hazardous and solid waste. In the United States, Ashland’s facilities are subject to RCRA and its regulations governing generators of hazardous waste. Ashland has implemented systems to oversee compliance with the RCRA regulations. In addition to regulating current waste disposal practices, RCRA also addresses the environmental effects of certain past waste disposal operations, the recycling of wastes and the storage of regulated substances in underground tanks. Ashland has the remediation liability for certain facilities subject to these regulations. Other countries where Ashland operates also have laws and regulations relating to hazardous and solid waste, and Ashland has systems in place to oversee compliance.
Water - Ashland’s businesses maintain numerous discharge permits. In the United States, such permits may be required by the National Pollutant Discharge Elimination System of the Clean Water Act and similar state programs. Other countries have similar laws and regulations requiring permits and controls relating to water discharge.
Climate Change and Related Regulatory Developments - Ashland has been collecting energy use data and calculating greenhouse gas ("GHG") emissions for many years. Ashland evaluates the physical and transitional risks and opportunities from both climate change and the anticipated GHG regulations to facilities, products and other business interests, as well as the strategies commonly considered by the industrial sector to reduce the potential impact of these risks. These risks are generally grouped as impacts from legislative, regulatory and international developments, impacts from business and investment trends and impacts to Company assets from the physical effects of climate change. North American, European and other regional regulatory developments (most notably the pending SEC and approved Corporate Sustainability Reporting Directive ("CSRD") climate disclosure regulations) are monitored continuously for material impacts to Ashland’s operations, and some facilities and subsidiaries are subject to promulgated rules. Proposed and pending climate legislation is monitored for impact and Ashland is taking steps to strengthen climate reporting to meet anticipated disclosure requirements. Other requirements requiring additional product level climate disclosures or supply chain transparency are also approved and in draft or finalized status and could impact the requirements for disclosure and restrictions on sourcing of raw materials. Regulations such as the PFAS restrictions and Microplastics ban in the EU have potential business interruption impacts where they limit the type and availability of raw materials that may be used.
Business and investment trends are expected to drive an increase in the demand for products that improve energy efficiency, reduce energy use and increase the use of renewable resources. At this time, Ashland cannot estimate the impact of this expected demand increase to its businesses. Physical effects from climate change have the potential to affect Ashland’s assets in areas prone to sea level rise or extreme weather events much as they do the general public and other businesses. Due to the uncertainty of these matters, Ashland cannot estimate the impact at this time of GHG-related developments on its operations or financial condition.
Competition
Ashland competes in the highly fragmented additives and specialty ingredients industries. The participants in these industries offer a varied and broad array of product lines designed to meet specific customer requirements. Participants compete with service and product offerings on a global, regional and/or local level subject to the nature of the businesses and products, as well as the end-markets and customers served. Competition is based on several key criteria, including product performance and quality, product price, product availability and security of supply, responsiveness of product development in cooperation with customers, customer service, industry knowledge and technical capability. Certain key competitors are significantly larger than Ashland and have greater financial resources, leading to greater operating and financial flexibility. The industry has become increasingly global as participants have focused on establishing and maintaining leadership positions outside of their home markets. Many of these segments’ product lines face domestic and international competition, due to industry consolidation, pricing pressures and competing technologies. To improve its competitive position as Ashland narrows its focus, the Company is building and leveraging the Ashland corporate brand as a differentiator to create value and better communicate the capabilities, promise and scale of the Company, making it easier to introduce new product lines and applications.
Intellectual Property
Ashland has a broad intellectual property portfolio which is an important component of its business. Ashland relies on patents, trade secrets, formulae and know-how to protect and differentiate its products and technologies. In addition, the reportable segments own valuable trademarks which identify and differentiate its products from its competitors. Ashland also uses licensed intellectual property rights from third-parties.
Raw Materials and Energy
Ashland purchases its raw materials from multiple sources of supply in the United States and other countries. Raw material supplies were available in quantities sufficient to meet demand in fiscal 2024 and 2023, which was a significant improvement over fiscal 2022 when raw and packaging materials were globally constrained. Similarly, energy costs, which are a significant component of production costs, stabilized in fiscal 2024 and 2023 after significant volatility in 2022.
Research and Development
Ashland’s program of research and development is focused on defining the needs of the marketplace and framing those needs into technology platforms. Ashland has the capability to develop and deliver the intellectual property required to grow and protect those platforms. Ashland is focused on developing new chemistries, market-changing technologies and customer driven solutions at numerous technology centers located in the Americas, Europe and the Asia Pacific regions.
Seasonality
Ashland’s business may vary due to seasonality. Ashland’s business units typically experience stronger demand during warmer weather months.
Human Capital
Employee Health and Safety - Cultivating a safety culture is intentional at Ashland and is best shown by its commitment to a Zero Incident Culture ("ZIC"). ZIC begins with the vision, values, beliefs, and actions of Ashland’s leaders demonstrating that zero incidents is possible. It means developing processes where compliance is the minimum expectation, allowing employees to proactively manage safety above compliance on the journey to zero.
As an indication of its commitment to Responsible Care, Ashland obtained a third-party certification to RC14001, which includes the internationally recognized ISO 14001 certification and adds additional health, safety, security, and chemical industry requirements. Currently, Ashland has 25 sites participating on a group RC14001 certification, including 13 international sites. Also, as part of its commitment to health and safety, 18 of the Company's sites have obtained an additional ISO 45001 certification, an international health and safety management system.
As part of ZIC, the Company strives every day to achieve zero incidents. Ashland continues to make good progress on its journey. For the year ended September 30, 2024, the Company had a Total Preventable Recordable Rate ("TPRR") of 0.46 compared to 0.39 for the year ended September 30, 2023.
Ashland has implemented several tools for communicating lessons learned from injuries, process safety incidents, and environmental releases. Immediately following an event, flash reports are developed and shared to communicate key lessons learned across the Company with a review call within 48 hours with Ashland’s Environmental, Health and Safety (“EHS”) leadership team and Operations Leadership. Additionally, incidents and root causes/corrective and preventive actions are reviewed monthly with Company leadership and EHS leaders globally to discuss areas for improvement and highlight the importance of identifying and addressing management system errors.
Ashland has implemented the “Good Catch” Program aimed at identifying underlying unsafe conditions or behaviors that could lead to an undesirable outcome. Employees are encouraged to report good catches that fall into one of three categories - substandard conditions, near misses, and suggestions. These are tracked with the goal of continuing to increase overall reporting of identified good catches year to year.
Environmental - Ashland has a conscious and proactive mindset for sustainability and has established a renewable annual trust for ongoing and future environmental remediation and related litigation cash outlays. The initiative follows Ashland's
announcement in February 2021 to align its operations with the ambitious aim of the Paris Climate Accord to limit global temperature rise to 1.5°C above preindustrial levels. At that time, Ashland also became a signatory to the United Nations Global Compact and is making the United Nations principles part of the Company's business strategy, culture, and day-to-day operations. Ashland has targets to reduce its environmental footprint (including energy usage, GHG emissions, and hazardous waste generation). These targets and progress towards meeting them can be found on: https://www.ashland.com/esg/esg-overview, which is not incorporated by reference into the Annual Report on Form 10-K.
Ashland is committed to ensuring compliance with applicable environmental, health, safety and security laws, regulations, technical specifications, and internal standards, while adhering to high ethical standards. We are committed to continuously improving our processes and to providing products and services that throughout their life cycle involve minimum risk to people and the environment, while best meeting the needs of our customers. We strive to eliminate or reduce emissions, discharges, and wastes from our operations and to promote energy efficiency and resource conservation throughout the value chain.
Ashland also maintains an open dialogue with our employees and communities about environmental, health, safety, security, and product stewardship issues. We also work with governments, policy makers, advocacy groups and value chain partners to develop and promote laws, regulations and practices that improve human health and the environment.
Human Capital Management - Ashland is committed to continuously evaluating and strengthening the growth-minded and innovative culture by attracting and developing exceptional global talent, supporting employees’ physical, emotional, and financial well-being, and recognizing and rewarding performance. To achieve the highest return, Ashland is building an inclusive and high-integrity organization where everyone belongs, feels inspired to excel, and does the right thing.
Ashland is committed to respecting the human and economic rights of others and does not tolerate the use of child or forced labor, slavery, or human trafficking in any of its facilities or operations. Ashland does not tolerate the physical punishment, abuse, involuntary servitude or exploitation of any worker and expects our suppliers and contractors with whom we do business to uphold the same standards and will discontinue the business relationship with any individual or company that does not follow the same standards.
Ashland builds a culture of wellness by empowering our employees, and their families, to make healthy decisions that lead to successful outcomes in and outside of work. The four components of Ashland’s global wellbeing vision include health, work-life balance, physical fitness, and financial stability. We achieve this vision by offering diverse and inclusive wellness programs and solutions to our employees that encourage and advance healthy lifestyles within the communities we are part of and the planet we share.
As of September 30, 2024, Ashland had approximately 3,200 employees who thrive on developing practical, innovative, and simple solutions to complex problems for customers in more than 100 countries. The employees’ global demographics consist of approximately 68% male employees and approximately 32% female employees, and in the U.S., approximately 21% of its employees self-identify as ethnically diverse.
Ashland's global footprint is geographically located as follows:
Competitive Pay and Benefits - Ashland is committed to paying its employees in a fair and equitable manner, regardless of race or gender, and has implemented global total rewards tools to promote equitable remuneration. The Company provides a total compensation package that is designed to be competitive with the markets in which it competes for talent. Ashland believes employees should be compensated equitably based on performance, skills, and experience.
Ashland reviews pay equity annually in conjunction with its annual performance review, merit, bonus and promotion processes. The Company annually completes an in-depth analysis of its pay equity globally using a number of factors to determine if a pay gap exists based on any protected factors (gender, age, race, veteran status). Overall findings continue to be encouraging, identifying only a few employees annually that had a disparity in pay requiring further analysis and corrective action. Ashland reviews each process annually to ensure that its policies, procedures, and training continue to provide pay equity within the Company.
In June 2024, Ashland achieved certification as a Global Living Wage Employer by the Fair Wage Network following a rigorous and thorough process in which compensation data for all employees was reviewed on an anonymous basis and steps were taken to remediate any pay gaps. A living wage is one that covers one’s basic needs such as housing, food, water, healthcare, transportation, clothing and education for the employee and their dependents. A living wage goes beyond simply fulfilling the local statutory minimum wage requirement.
The Company’s compensation programs are globally aligned, and, where possible, its total rewards plans include base salary, short and long-term incentives, benefits, financial, and special recognition programs. The Company routinely reviews its total rewards practices in the markets in which it operates to ensure its plans allow for the recruitment and retention of the talent it needs to be successful.
Ashland also offers a competitive global benefits program to support employees through all life stages. The following benefit plans are available to employees depending on local markets in which the Company operates that include plan specific features such as on-site and on-demand resources:
•Health care benefits including medical, prescription, dental and/or vision
•Wellness initiatives:
oGlobal EAP (employee assistance program)
oFlu vaccination resources
•Paid time off
•Voluntary benefits
•Life and accident coverage
•Disability coverage
•Retirement plans
•Tuition reimbursement
•Business travel accident
Inclusion and Diversity - In 2024, Ashland progressed its global inclusion and diversity strategy focused on belonging, accountability, community engagement, recruitment, and internal mobility. These priorities serve as the basis of the global and local objectives and initiatives that advance Ashland's collective progress towards equity. The Company and its leadership team are committed to creating a collaborative environment that leverages the talents of a diverse global workforce to drive sustainable growth and innovation that creates value for its shareholders, customers, employees, and the communities in which it operates.
Ashland’s commitment to inclusion and diversity starts at the top with its Board and its executive leadership. The Board is comprised of individuals with diverse experience and credentials, selected for their business acumen and ability to challenge and add value to management. These directors have held significant leadership positions and bring a depth of experience across a wide variety of industries, providing the Company with unique insights and fresh perspectives. The demographics of the Company’s Board is 72% diverse, including females and ethnically diverse males.
The Company’s management is led by its President and Chief Executive Officer and the other members of the Executive Committee (“EC”). The demographics of the EC include 30% women and 60% ethnic diversity. The chart below shows the Company’s global gender diversity and US ethnic diversity progress over the past three years. The Company remains committed to making continued short and long-term progress.
Talent Management - Ashland is dedicated to creating a purpose-driven people ecosystem that enables personal and professional growth at every level while minimizing risk to the business. The Company deploys a disciplined annual talent review and succession process to identify and develop a leadership pipeline that accelerates business results, promotes internal mobility, and minimizes attrition. The talent management process includes a performance management process that seeks to provide employees with on-going feedback to enhance their performance in support of the Company’s business objectives. As part of Ashland's commitment to professional development, it offers associate’s and bachelor’s undergraduate, graduate, and PhD tuition assistance to eligible employees, along with ongoing technical and professional development.
In 2024, the Company elevated the skillset of its leaders to support the career development of their employees and provided continued learning on inclusion and allyship. Ashland conducted its third annual global Culture Survey, with 82% response rate, which provided valuable insight to prioritize investments in the tools, resources, and processes that will make a positive impact on employee’s well-being, engagement, and career growth. Ashland remains committed to continuously listening and evolving its people practices aligning with and drive the Company’s purpose and business success.
Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts and generally are identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “is likely,” “predicts,” “projects,” “forecasts,” “objectives,” “may,” “will,” “should,” “plans,” and “intends” and the negative of these words or other comparable terminology. Although Ashland believes that its expectations are based on reasonable assumptions, such expectations are subject to risks and uncertainties that are difficult to predict and may be beyond Ashland’s control. As a result, Ashland cannot assure that the expectations contained in such statements will be achieved. Important factors that could cause actual results to differ materially from those contained in such statements are discussed under “Use of estimates, risks and uncertainties” in Note A of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. For a discussion of other factors and risks that could affect Ashland’s expectations and operations, see “Item 1A. Risk Factors” in this Annual Report on Form 10-K.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
The following discussion of “risk factors” identifies the most significant factors that may adversely affect Ashland’s business, operations, financial position or future financial performance. This information should be read in conjunction with Management’s Discussion and Analysis and the consolidated financial statements and related notes incorporated by reference into this Annual Report on Form 10-K. The following discussion of risks is designed to highlight what Ashland believes are important factors to consider when evaluating its expectations. These factors could cause future results to differ from those in forward-looking statements and from historical trends.
Risks Related to the Company’s Business Operations, Financial Performance and Growth
Ashland has set aggressive growth goals for its businesses which may be impacted by such risks as the failure to optimize the use of Ashland’s tangible and intangible assets, the failure to identify and successfully integrate acquisition targets, and/or unexpected costs and liabilities associated with strategic acquisitions. If they materialize, these risks could lead to reduced sales, impairment of goodwill or intangible assets, and other adverse effects on the Company’s financial condition and results of operations.
Ashland’s failure to fully achieve one or more of its aggressive growth goals or meet its long-term objectives could negatively impact Ashland’s potential value and its businesses. One of the most important risks is that Ashland might fail to adequately execute its business strategy and growth plans by not optimizing the use of its physical and intangible assets. Aspects of that risk include changes to the global economic environment, changes to the competitive landscape, attraction and retention of skilled employees, the potential failure of product innovation plans, failure to comply with existing or new regulatory schemes, failure to maintain a competitive cost structure and other risks outlined in greater detail in this Item 1A. In addition, Ashland, as part of its growth goals, continuously evaluates acquisition candidates. If Ashland is unable to successfully identify and integrate acquired businesses, Ashland could fail to achieve any expected increases in sales and operating results, which could have a
material adverse effect on Ashland’s financial results. Ashland’s ability to achieve the anticipated financial benefits from any acquisition transactions may not be realized due to any number of factors, including, but not limited to, unsuccessful integration efforts, unexpected or underestimated liabilities or increased costs, fees, expenses and charges related to such transactions. Such adverse events could result in a decrease in the estimated fair value of goodwill or other intangible assets established as a result of such transactions, triggering an impairment. These and other factors could have a material adverse effect on our financial condition and results of operations.
Business disruptions from natural, operational and other catastrophic risks could seriously harm Ashland’s operations and financial performance. In addition, a catastrophic event at one of Ashland’s facilities or involving its products or employees could lead to liabilities that could further impair its operations and financial performance.
Business disruptions, including those related to operating hazards inherent with the production of chemicals, natural disasters, severe weather conditions, supply or logistics disruptions, increasing costs for energy, temporary plant and/or power outages, information technology systems and network disruptions, cyber-security breaches, terrorist attacks, armed conflicts, war, public health crises, fires, floods or other catastrophic events, could seriously harm Ashland’s operations, as well as the operations of its customers and suppliers, and may adversely impact Ashland’s financial performance. These events could result in reduced demand for Ashland’s products, make it difficult or impossible for Ashland to manufacture its products or deliver products to its customers or to receive raw materials from suppliers, or create delays and inefficiencies in the supply chain. In addition to leading to a serious disruption of Ashland’s businesses, a catastrophic event at one of our facilities or involving our products or employees could lead to substantial legal liability to or claims by parties allegedly harmed by the event.
Furthermore, because catastrophic events are inherently uncertain, Ashland's business continuity plans may not address every potential scenario and may not fully protect it from all such events. In addition, insurance maintained by Ashland to protect against property damage, loss of business and other related consequences resulting from catastrophic events is subject to various deductibles and coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of Ashland’s damages or damages to others in the event of a catastrophe. In addition, insurance related to these types of risks may not be available now or, if available, may not be available in the future at commercially reasonable rates.
Climate change and related resource impacts may lead to supply chain disruptions, operational impacts, and geopolitical events which could result in impacts to raw material pricing, lack of product availability, and decreased sales.
Ashland sources a large number of raw materials from third party suppliers globally. These products include both natural and synthetic materials derived from plants, animal products, organic and petroleum based raw materials. Disruptions to the global supply chain due to climate related impacts or geopolitical events are possible and exist as external risk factors that the Company cannot control. These events could limit the supply of key raw materials to the Company, or could have significant impacts to pricing.
Ashland has manufacturing operations in areas vulnerable to coastal storms which may increase in magnitude and impact due to climate change. Increasingly large and unprecedented weather events may pose a risk to business operations in vulnerable areas. Storms could cause business interruptions, incur additional restoration costs, and impact product availability and pricing.
Consumer preference is increasingly impacted by awareness of and a response to climate change. Consumers are increasingly demanding responsibly sourced and manufactured products. An inability to respond to consumer demands through environmental, social and governance ("ESG") innovation could lead to a loss of sales to competitors providing more sustainable product offerings.
Energy availability and pricing has been impacted by geopolitical events and may be impacted by climate related legislation and regulations. As climate legislation increases in many countries, the availability of conventional and nonrenewable energy may be increasingly limited and prices may continue to increase. Where demand exceeds energy capacity, energy disruptions such as brown out or black out events are possible, leading to business interruption and quality/operational impacts. Failure to respond to or mitigate this risk could lead to increased cost and business impacts.
Globally, the availability of fresh, potable water is a growing concern, where water withdrawal can exceed the rates of surface and groundwater replenishment in critical basins, rivers, or other bodies of water. This concern continues to increase for Ashland
and for the global supply chain where fresh water is a key resource for manufacturing operations. Failure to respond to this risk could lead to business interruptions and impact the availability and pricing of product.
Ashland sources several key natural raw materials that contain processed timber, palm, soy, and other harvested or farmed raw materials. Deforestation is an increasing concern where the irresponsible harvest of these raw materials can lead to loss of critical forests and habitats. Additional sourcing of these materials is under increasing scrutiny due to deforestation, and the availability of these raw materials may be limited in the future. Failure to source responsibly and respond to or mitigate the risk could lead to business impacts and increased cost.
As part of its commitment to supporting climate change response efforts, Ashland has committed to 2032 targets through the Science Based Targets Initiative (SBTi) which were approved by SBTi in November of 2023. These targets are aligned with the objective of limiting global warming to no more than 1.5C above preindustrial levels. Ashland’s sustainability commitments are key to stakeholders and a differentiator for Ashland. Failure to meet stated commitments could lead to reputational and business impacts.
Ashland’s customers could change their products in a way that reduces the demand for Ashland’s products.
Ashland produces and sells specialty materials that are used by its customers for a broad range of applications. Many of these Ashland materials become part of end products that are sold to consumers. Changes in consumer preferences and demands can lead to certain Ashland customers making changes to their products. In other instances, Ashland’s customers may change their products or production techniques to take advantage of newer technologies, alternative chemistries, more effective formulations, or improved processes, or in response to various market, technical or regulatory changes.
Such changes in Ashland’s customers’ products or production techniques may cause these customers to reduce consumption of Ashland’s products or eliminate their need entirely. Ashland may not be able to supply products that meet the customers’ new requirements. Such lost sales opportunities may not be replaced by those offering equal revenue potential or margin. If Ashland fails to develop new products and new applications of existing products, it may face loss of market share, margins and cash flow.
Ashland’s substantial global operations subject it to risks of doing business in foreign countries, which could adversely affect its business, financial condition and results of operations.
Greater than half of Ashland’s net sales for fiscal 2024 were to customers outside of North America. Ashland expects sales from international markets to continue to represent an even larger portion of the Company’s sales in the future. Also, a significant portion of Ashland’s manufacturing capacity is located outside of the United States. Accordingly, Ashland’s business is subject to risks related to the differing legal, political, cultural, social and regulatory requirements and economic conditions of many jurisdictions.
The global nature of Ashland’s business presents difficulties in hiring and maintaining a workforce in certain countries. Fluctuations in exchange rates may affect product demand and may adversely affect the profitability in U.S. dollars of products and services provided in foreign countries. In addition, foreign countries may impose additional withholding taxes or otherwise tax Ashland’s foreign income, or adopt other restrictions on foreign trade or investment, including currency exchange controls. The imposition of new tariffs or trade quotas, or an impairment of existing trade agreements is also a risk that could impair Ashland’s financial performance.
Certain legal and political risks are also inherent in the operation of a company with Ashland’s global scope. Ashland’s ability to do business and execute its growth strategies could be adversely affected by legal and political changes or other changes to trade policy and trade relationships. Ashland could also be impacted negatively if the ongoing trade disputes between the United States and China, or those between the United States and the E.U. were to worsen. In addition, it may be more difficult for Ashland to enforce its agreements or collect receivables through foreign legal systems. There is a risk that foreign governments may nationalize private enterprises in certain countries where Ashland operates. In certain countries or regions, terrorist activities and the response to such activities may threaten Ashland’s operations more than those in the United States. In Europe, the effect of economic sanctions imposed on Russia and/or Russia’s reaction to the sanctions could adversely impact Ashland’s performance and results of operations. The risks associated with localized or regional armed conflict in many parts of the world remain high and could disrupt and/or adversely impact Ashland’s businesses. Social and cultural norms in certain countries may
not support compliance with Ashland’s corporate policies including those that require compliance with substantive laws and regulations. Also, changes in general economic and political conditions in countries where Ashland operates, particularly in Europe, the Middle East and emerging markets, are a risk to Ashland’s financial performance.
As Ashland continues to operate its business globally, its success will depend, in part, on its ability to anticipate and effectively manage these and other related risks.
Adverse developments in the global economy and potential disruptions of financial markets could negatively impact Ashland’s customers and suppliers, and therefore have a negative impact on Ashland’s results of operations.
A global or regional economic downturn may reduce customer demand or inhibit Ashland’s ability to produce and sell products. Ashland’s business and operating results are sensitive to global and regional economic downturns, credit market tightness, declining consumer and business confidence, fluctuating commodity prices, volatile exchange rates, inflation or changes in interest rates, sovereign debt defaults and other challenges, including those related to international sanctions and acts of aggression or threatened aggression that can affect the global economy. In the event of adverse developments or stagnation in the economy or financial markets, Ashland’s customers may experience deterioration of their businesses, reduced demand for their products, cash flow shortages and difficulty obtaining financing. As a result, existing or potential customers might delay or cancel plans to purchase products, which includes customer destocking of their own inventories, and may not be able to fulfill their obligations to Ashland in a timely fashion. Further, suppliers may experience similar conditions, which could impact their ability to fulfill their obligations to Ashland. A weakening or reversal of the current economic conditions in the global economy or a substantial part of it could negatively impact Ashland’s business, results of operations, financial condition and ability to grow.
Ashland’s substantial indebtedness may adversely affect our ability to pursue certain strategic acquisitions and other business opportunities, inhibit our flexibility in responding to changing market conditions, and impede our ability to generate revenue.
Ashland maintains a substantial amount of debt. Ashland’s substantial indebtedness could adversely affect its business, results of operations and financial condition by, among other things:
•requiring Ashland to dedicate a substantial portion of its cash flow from operations to pay principal and interest on its debt, which would reduce the availability of Ashland’s cash flow to fund working capital, capital expenditures, acquisitions, execution of its growth strategy and other general corporate purposes;
•limiting Ashland’s ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of its growth strategy and other purposes;
•making Ashland more vulnerable to adverse changes in general economic, industry and regulatory conditions and in its business by limiting Ashland’s flexibility in planning for, and making it more difficult for Ashland to react quickly to, changing conditions;
•placing Ashland at a competitive disadvantage compared with those of its competitors that have less debt and lower debt service requirements;
•making Ashland more vulnerable to increases in interest rates if debt is refinanced; and
•making it more difficult for Ashland to satisfy its financial obligations.
In addition, Ashland may not be able to generate sufficient cash flow from its operations to repay its indebtedness when it becomes due and to meet its other cash needs. If Ashland is not able to pay its debts as they become due, it could be in default under its credit facility or other indebtedness. Ashland might also be required to pursue one or more alternative strategies to repay indebtedness, such as selling assets, refinancing or restructuring its indebtedness or selling additional debt or equity securities. Ashland may not be able to refinance its debt or sell additional debt or equity securities or its assets on favorable terms, if at all, and if Ashland must sell its assets, it may negatively affect its ability to generate revenues.
Risks Related to Competition
Failure to develop and market new products and production technologies could impact Ashland’s competitive position and have an adverse effect on its sales, businesses, and results of operations.
The specialty additives and materials industry is subject to periodic technological change and ongoing product improvements. In order to maintain margins and remain competitive, Ashland must successfully develop and introduce new products or improvements that appeal to its customers and ultimately to global consumers. Ashland plans to grow earnings, in part, by focusing on developing markets and solutions to meet increasing demand in those markets, including demand for personal care and pharmaceutical products which are subject to lengthy regulatory approval processes. The fast change in Ashland’s industry and those of its customers necessitates that Ashland continue the development of new technologies to replace older technologies whose demand or market position may be fading. Ashland’s efforts to respond to changes in customer demand in a timely and cost-efficient manner to drive growth could be adversely affected by difficulties or delays in product development, including the inability to identify viable new products, successfully complete research and development, obtain regulatory approvals, obtain intellectual property protection or gain market acceptance of new products. Due to the lengthy development process, technological challenges and intense competition, Ashland’s products may not achieve substantial commercial success.
In all business segments and especially within Personal Care, there is an increasing awareness of and competition for innovations relating to more sustainable products with increasing attributes such as naturality and biodegradability, or materials sourced from bio-based raw materials. Ashland sees increasing pressure to innovate and provide solutions with these features to stay competitive and to differentiate the Company from competitors in key markets. Failure to innovate could result in a loss of business to competitors who offer similar or improved sustainable product portfolios.
The competitive nature of Ashland’s markets may delay or prevent Ashland from passing increases in raw materials or energy costs on to its customers. In addition, certain of Ashland’s suppliers may be unable to deliver products or raw materials or fulfill contractual requirements. The occurrence of either event could result in decreased sales, increased costs, and adverse impacts to the valuation of Ashland’s inventory.
Rising and volatile raw material prices, especially those of hydrocarbon derivatives, cotton linters or wood pulp, may negatively impact Ashland’s costs, results of operations and the valuation of its inventory. Similarly, energy costs are a significant component of certain of Ashland’s product costs. Ashland is not always able to raise prices in response to such increased costs, and its ability to pass on the costs of such price increases is dependent upon market conditions. Likewise, reductions in the valuation of Ashland’s inventory due to market volatility may not be recovered and could result in losses.
Ashland purchases certain products and raw materials from suppliers, often pursuant to written supply contracts. If those suppliers are unable to meet Ashland’s orders in a timely manner or choose to terminate or not fulfill contractual arrangements, Ashland may not be able to make alternative supply arrangements. Also, domestic and global government regulations related to the manufacture, transport or import of certain raw materials may impede Ashland’s ability to obtain those raw materials on commercially reasonable terms. Certain Ashland businesses rely on agricultural output of clary sage, guar, and cotton linters, and the availability of these materials can be severely impacted by crop yields, weather events, and other factors. If Ashland is unable to obtain and retain qualified suppliers under commercially acceptable terms, its ability to manufacture and deliver products in a timely, competitive and profitable manner or grow its business successfully could be adversely affected.
Ashland operates in highly competitive markets which places downward pressure on prices and margins and may adversely affect Ashland’s businesses and results of operations.
Ashland operates in highly competitive markets, competing against a number of domestic and foreign companies. Competition is based on several key criteria, including product performance and quality, product price, product availability and security of supply, responsiveness of product development in cooperation with customers and customer service, as well as the ability to bring innovative products or services to the marketplace. Certain key competitors are significantly larger than Ashland and have greater financial resources, leading to greater operating and financial flexibility. As a result, these competitors may be better able to withstand changes in conditions within the relevant industry, changes in the prices of raw materials and energy and changes in general economic conditions. In addition, competitors’ pricing decisions could compel Ashland to decrease its prices,
which could negatively affect its margins and profitability. Additional competition in markets served by Ashland could adversely affect margins and profitability and could lead to a reduction in market share. Also, Ashland competes in certain markets that are declining and has targeted other markets for growth opportunities. Competitive and pricing pressures could also impact Ashland’s production volumes, which can in turn reduce cost efficiency. If Ashland’s strategies for dealing with declining markets and leveraging opportunity markets are not successful, its businesses and results of operations could be negatively affected.
Risks Related to Human Capital
Ashland’s success depends upon its ability to attract and retain key employees and the identification and development of talent to succeed senior management.
Ashland’s success depends on its ability to attract and retain key personnel. Ashland relies heavily on its senior management team as these executives are primarily responsible for determining the strategic direction of Ashland’s business and for executing its growth strategy. Therefore, Ashland’s future success depends, in part, on the continued service of its senior management team. The loss of any member of the senior management team could impact the Company’s execution of its growth strategy and also be viewed negatively by investors and analysts, which may cause the price of Ashland’s common stock to decline.
In addition, Ashland’s success further depends on the Company’s ability to identify and develop talent to succeed its senior management team and other key positions throughout the organization. If Ashland fails to identify and develop successors, the Company is at risk of being harmed by the departures of these key employees. The inability to recruit, retain and develop key personnel or the unexpected loss, voluntarily or otherwise, of key personnel may adversely affect Ashland’s operations.
Risks Related to Information Technology, Cybersecurity and Intellectual Property
Ashland uses information technology ("IT") systems to conduct business and these IT systems are at risk of potential disruption and cybersecurity threats.
Ashland’s businesses rely on IT systems to operate efficiently and in some cases, to operate at all. Ashland employs third parties to manage and maintain a significant portion of its IT systems, including, but not limited to data centers, IT infrastructure, network, client support and end user services, as well as the functions of backing up and securing those systems. A partial or complete failure of Ashland’s IT systems or those of our third parties managing, providing or servicing them for any amount of time more than several hours could result in significant business disruption causing harm to Ashland’s reputation, results of operations or financial condition.
In addition, the nature of our businesses, the markets we serve, and the extensive geographic profile of our operations make Ashland a target of cybersecurity threats. Cybersecurity threats in general are increasing and becoming more advanced and could occur as a result of the activity of hackers, employee error or employee misconduct. In addition, bad actors are becoming more sophisticated in using various techniques and tools, including artificial intelligence, for malicious purposes. We have in the past experienced cybersecurity threats and other incidents, and we expect such incidents to continue in varying degrees. Ashland utilizes various cybersecurity controls and governance procedures to protect against such disruptions; however, these measures may not be sufficient for all eventualities. A failure in these controls and procedures may prevent us from detecting a failure or breach of our information systems and delay our ability to respond. Such failure of our controls and procedures and/or a breach of our IT systems could lead to the loss and destruction of trade secrets, confidential information, proprietary data, intellectual property, customer and supplier data, and employee personal information and we may be required by law to notify the impacted individuals and/or make other disclosures. These events could expose us to customer litigation, regulatory actions and costs related to the reporting and handling of such a failure or breach, all of which could disrupt our business operations and adversely affect Ashland’s relationships with business partners, harm our brands, reputation, and financial results.
Ashland may not be able to effectively protect or enforce its intellectual property rights.
Ashland relies on the patent, trademark, trade secret and copyright laws of the United States and other countries to protect its intellectual property rights. The laws of some countries may not protect Ashland’s intellectual property rights to the same extent as the laws of the United States. Failure of foreign countries to have laws to protect Ashland’s intellectual property rights or an inability to effectively enforce such rights in foreign countries could result in the loss of valuable proprietary information, which could have an adverse effect on Ashland’s business and results of operations.
Even in circumstances where Ashland has a patent on certain technologies, such patents may not provide meaningful protection against competitors or against competing technologies. In addition, any patent applications submitted by Ashland may not result in an issued patent. Ashland’s intellectual property rights may be challenged, invalidated, circumvented or rendered unenforceable. Ashland could also face claims from third parties alleging that Ashland’s products or processes infringe on their proprietary rights. If Ashland is found liable for infringement, it could be responsible for significant damages, prohibited from using certain products or processes or required to modify certain products and processes. Any such infringement liability could adversely affect Ashland’s product and service offerings, profitability and results of operations.
Ashland also has substantial intellectual property associated with its know-how and trade secrets that are not protected by patent or copyright laws. Ashland’s confidentiality and non-disclosure agreements with its employees and third parties may be breached or may not be effectively enforced. In addition, Ashland’s trade secrets and know-how may be improperly obtained by other means, such as a breach of Ashland’s information technologies security systems or direct theft. Any unauthorized disclosure of any of Ashland’s material know-how or trade secrets could adversely affect Ashland’s business and results of operations.
Risks Related to Legal and Regulatory Compliance and Litigation
Ashland’s business exposes it to potential product liability claims and recalls, which could adversely affect its financial condition, performance, and reputation.
The development, manufacture and sale of specialty materials and other products by Ashland, including products produced for the food, beverage, personal care, pharmaceutical and nutritional supplement industries, involve an inherent risk of exposure to product liability claims, product recalls, product seizures and related adverse publicity. Ashland also produces products that are subject to rigorous specifications and quality standards, with an expectation from its customers around these strict requirements. A product liability claim, recall or judgment against Ashland, or a customer complaint on product specifications, could also result in substantial and unexpected expenditures, affect consumer or customer confidence in its products, and divert management’s attention from other responsibilities. Ashland’s product liability insurance may be inadequate to address such claims, recalls, or judgments. Additionally, Ashland may be unable to continue to maintain its existing insurance or obtain comparable insurance at a reasonable cost, if at all. A product recall or a partially or completely uninsured product liability judgment against Ashland could have a material adverse effect on its reputation, results of operations and financial condition.
Ashland has incurred, and will continue to incur, substantial costs as a result of environmental, health and safety, and hazardous substances liabilities and related compliance requirements. These costs could adversely impact Ashland’s cash flow, and, to the extent they exceed Ashland’s established reserves for these liabilities, its results of operations.
Ashland is subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment and human health and safety, and the generation, storage, handling, treatment, disposal and remediation of hazardous substances and waste materials. Ashland has incurred, and will continue to incur, significant costs and capital expenditures to comply with these laws and regulations.
Environmental, health and safety regulations change over time, and such regulations and their enforcement have tended to become more stringent. Accordingly, changes in environmental, health and safety laws and regulations and the enforcement of such laws and regulations could interrupt Ashland’s operations, require modifications to its facilities or cause Ashland to incur significant liabilities, costs or losses that could adversely affect its profitability. Actual or alleged violations of environmental, health or safety laws and regulations could result in restrictions or prohibitions on plant operations as well as substantial damages, penalties, fines, civil or criminal sanctions and remediation costs. In addition, under some environmental laws, Ashland may be strictly liable and/or jointly and severally liable for environmental damages and penalties.
Ashland is also subject to various federal, state, local and foreign environmental laws and regulations that require environmental assessment or remediation efforts (collectively, environmental remediation) at multiple locations. Ashland uses engineering studies, historical experience and other factors to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Environmental remediation reserves are subject to uncertainties that affect Ashland’s ability to estimate its share of the applicable costs. Such uncertainties involve the nature and extent of contamination at each site and the extent of required cleanup efforts under existing environmental regulations, with varying costs of alternate cleanup methods. There may also be situations in which certain environmental liabilities are not known
to Ashland or are not probable and estimable. As a result, Ashland’s actual costs for environmental remediation could adversely affect Ashland’s cash flow and, to the extent costs exceed established reserves for those liabilities, its results of operations.
Ashland is responsible for, and has financial exposure to, liabilities from pending and threatened claims, including those alleging personal injury caused by exposure to asbestos, which could adversely impact Ashland’s results of operations and cash flow.
There are various claims, lawsuits and administrative proceedings pending or threatened, including those alleging personal injury caused by exposure to asbestos, against Ashland and its current and former subsidiaries. Such actions are with respect to commercial matters, product liability, toxic tort liability and other matters that seek remedies or damages, some of which are for substantial amounts. While these actions are being contested, their outcome is not predictable. Ashland’s results could be adversely affected by financial exposure to these liabilities. Insurance maintained by Ashland to protect against claims for damages alleged by third parties is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of Ashland’s liabilities to others. In addition, insurance related to these types of risks may not be available now or, if available, may not be available in the future at commercially reasonable rates. Ashland’s ability to recover from its insurers for asbestos liabilities could also have an adverse impact on its results of operations. Projecting future asbestos costs is subject to numerous variables that are extremely difficult to predict. In addition to the significant uncertainties surrounding the number of claims that might be received, other variables include the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, dismissal rates, costs of medical treatment, the impact of bankruptcies of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards. Furthermore, any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. As a part of the process to develop estimates of the Company’s future asbestos costs, a range of long-term cost models was developed. These models are based on national studies that predict the number of people likely to develop asbestos-related diseases and are heavily influenced by assumptions regarding long-term inflation rates for indemnity payments and legal defense costs, as well as other variables mentioned previously. Because of the inherent uncertainties in projecting future asbestos liabilities and establishing appropriate reserves, Ashland’s actual asbestos costs could adversely affect its results of operations and, to the extent they exceed its reserves, could adversely affect its results of operations.
The impact of changing laws or regulations or the manner of interpretation or enforcement of existing rules could adversely impact Ashland’s financial performance and restrict its ability to operate its business or execute its strategies.
New laws or regulations, or changes in existing laws or regulations or the manner of their interpretation or enforcement, could increase Ashland’s cost of doing business and restrict its ability to operate its business or execute its strategies. This includes, among other things, the possible taxation under U.S. law of certain income from foreign operations, the possible taxation under foreign laws of certain income Ashland reports in other jurisdictions, the Pillar Two initiative of the Organization for Economic Co-operation and Development which introduces a 15% global minimum tax applied on a country-by-country basis to Ashland in many jurisdictions starting October 1, 2024, tariffs or quotas levied on Ashland products, raw materials or key components by certain countries, regulations related to the protection of private information of Ashland’s employees and customers, regulations issued by the U.S. Food and Drug Administration (and analogous non-U.S. agencies) affecting Ashland and its customers, compliance with the U.S. Foreign Corrupt Practices Act (and analogous non-U.S. laws) and the European Union’s Registration, Authorization and Restriction of Chemicals ("REACH") regulation (and analogous non-EU initiatives), and potential operational impacts of General Data Protection Regulation ("GDPR"). Uncertainty associated with the passage of new laws, application of executive authority beyond the legislative process, as well as changes in and enforcement of existing laws, can limit Ashland’s ability to make and execute business plans effectively. In addition, compliance with laws and regulations is complicated by Ashland’s substantial and growing global footprint, which will require significant and additional resources to comprehend and ensure compliance with applicable laws in the more than one hundred countries where Ashland conducts business. Compliance with current and future regulations is further complicated by uncertainty around the reevaluation of international agreements by various countries, including the United States, and the resulting impact on regulatory regimes, customs regulations, tariffs, sanctions, and other transnational protocols.
Emerging ESG regulations in the European Union and globally such as the Corporate Sustainability Reporting Directive ("CSRD") and European Union Deforestation Regulations ("EUDR") may also require significant resources and data management systems to continue to support the Company. These regulations have the potential to impact Ashland’s business and ability to manage materials effectively.
Risks Related to Taxation
Imposition of new taxes, disagreements with tax authorities or additional tax liabilities could adversely affect Ashland’s business, financial condition, reputation or results of operations.
Ashland’s products are made, manufactured, distributed or sold in more than 100 countries and territories. A significant portion of Ashland’s revenues are generated outside the United States. As such, Ashland is subject to taxes in the United States as well as numerous foreign countries. Ashland’s future effective tax rates could be affected by changes in the mix of earnings in countries with differing tax rates, changes in the valuation of deferred tax assets and liabilities, changes in liabilities for uncertain tax positions, cost of repatriations or changes in tax laws, regulations, administrative practices or their interpretation. Moreover, because Ashland is subject to the regular examination of its income tax returns by various tax authorities, the economic and political pressure to increase tax revenues in these jurisdictions may make resolving tax disputes even more difficult, and the final resolution of tax audits and any related litigation may differ from our historical provisions and accruals resulting in an adverse impact on our business, financial condition, reputation or results of operations. The Tax Cuts and Jobs Act (the Tax Act), enacted in December 2017, made significant changes to US tax law; many other countries or organizations, including those where Ashland has significant operations, are actively considering or enacting changes to tax laws which could significantly impact our tax rate and cash flows. The increasingly complex global tax environment, including changes in how United States multinational corporations are taxed, could adversely affect Ashland’s business, financial condition or results of operations.
Other than the one-time transition tax enacted by the Tax Act, Ashland will continue to be indefinitely reinvested in our foreign earnings. As such, Ashland has not accrued income taxes or foreign withholding taxes on undistributed earnings for most non-US subsidiaries because those earnings are intended to be indefinitely reinvested in the operations of those subsidiaries. If these earnings are needed for Ashland’s operations in the United States, the repatriation of such earnings could adversely affect its business, results of operations or financial condition.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
Ashland’s corporate headquarters is located in Wilmington, Delaware. Principal offices of other major operations are located in Wilmington, Delaware (Life Sciences, Specialty Additives, Intermediates and Corporate); and Bridgewater, New Jersey (Personal Care and Corporate) within the United States and Hyderabad, India; Warsaw, Poland; and Schaffhausen, Switzerland (each of which are shared service centers of Ashland’s and house corporate and direct business segment personnel). All of these locations are leased, except for the Wilmington, Delaware site which is owned. Principal manufacturing, marketing and other materially important physical properties of Ashland and its subsidiaries are described within the applicable business units under “Item 1” in this Annual Report on Form 10-K. All of Ashland’s physical properties are owned or leased. Ashland believes its physical properties are suitable and adequate for the Company’s business. Additional information concerning leases may be found in Note J of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
The following is a description of Ashland’s material legal proceedings. Ashland’s threshold for disclosing material environmental legal proceedings involving a governmental authority where potential monetary sanctions are involved is $1 million.
Asbestos-Related Litigation
Ashland is subject to liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley Stoker Corporation (Riley), a former subsidiary. Although Riley was neither a producer nor a manufacturer of asbestos, its industrial boilers contained some asbestos containing components provided by other companies.
Hercules LLC (Hercules) (formerly Hercules Incorporated), an indirect wholly-owned subsidiary of Ashland, is also subject to liabilities from asbestos-related personal injury lawsuits involving claims which typically arise from alleged exposure to
asbestos fibers from resin encapsulated pipe and tank products which were sold by one of Hercules’ former subsidiaries to a limited industrial market.
Ashland and Hercules are also defendants in lawsuits alleging exposure to asbestos at facilities formerly or presently owned or operated by Ashland or Hercules.
For additional detailed information regarding liabilities arising from asbestos-related litigation, see “Management’s Discussion and Analysis - Critical Accounting Policies - Asbestos Litigation” and Note M of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Environmental Proceedings
(a) CERCLA and Similar State Law Sites - Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state laws, Ashland and its subsidiaries may be subject to joint and several liability for cleanup costs in connection with alleged releases of hazardous substances at sites where it has been identified as a “potentially responsible party” (PRP). As of September 30, 2024, Ashland and its subsidiaries have been identified as a PRP by U.S. federal and state authorities, or by private parties seeking contribution, for the cost of environmental investigation and/or cleanup at 53 sites. These sites are currently subject to ongoing investigation and remedial activities, overseen by the United States Environmental Protection Agency (USEPA) or a state agency, in which Ashland or its subsidiaries are typically participating as a member of a PRP group. Generally, the types of relief sought include remediation of contaminated sediment, soil and/or groundwater, reimbursement for past costs of site cleanup and administrative oversight and/or long-term monitoring of environmental conditions at the sites. The ultimate costs are not predictable with assurance.
(b) Lower Passaic River, New Jersey Matters - Ashland, through two formerly owned facilities, and International Specialty Products (ISP), through a now-closed facility, were identified as PRPs, along with approximately 70 other companies (the Cooperating Parties Group or the CPG), in a May 2007 Administrative Order of Consent (AOOC) with the USEPA. The parties were required to perform a remedial investigation and feasibility study (RI/FS) of the entire 17 miles of the Passaic River. In June 2007, the USEPA separately commenced a Focused Feasibility Study (FFS) as an interim measure of the lower 8 miles of the river. In accordance with the 2007 AOOC, in June 2012 the CPG voluntarily entered into another AOOC for an interim removal action focused solely at mile 10.9 of the Passaic River. The allocations for the 2007 AOOC and the 2012 removal action were based on interim allocations, are immaterial and have been accrued. In April 2014, the USEPA released the FFS for a cleanup of the lower 8 miles. The CPG submitted the Draft RI/FS Report on April 30, 2015. In March 2016, the USEPA released the FFS Record of Decision for the lower 8 miles and reached an agreement with another chemical company, Occidental Chemical Corporation (OCC) to conduct and pay for the remedial design in Sept. 2016, which design work was completed in Spring 2024. In March 2023, USEPA issued a unilateral order with OCC to conduct and pay for the remedial design for a remedy in the upper 9 miles of the river. In June 2018, OCC sued Ashland, ISP and numerous other defendants in the United States District Court for the District of New Jersey to recover past and future costs of the lower 8 miles pursuant to CERCLA, and filed a later suit in March 2023 for past and future costs of the upper 9 miles of the river. Between 2017 and 2020, Ashland and ISP participated in an USEPA allocation process that resulted in a partial settlement with the EPA. The settlement was lodged with the New Jersey District Court on December 16, 2022, and is currently pending court approval amidst opposition from OCC and others. The 2018 and 2023 OCC litigations have been stayed pending the outcome of the settlement.
For additional information regarding environmental matters and reserves, see Note M of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Other Pending Legal Proceedings
In addition to the matters described above, there are other various claims, lawsuits and administrative proceedings pending or threatened against Ashland and its current and former subsidiaries. Such actions are with respect to commercial matters, product liability, toxic tort liability, employment matters and other environmental matters which seek remedies or damages, some of which are for substantial amounts. While Ashland cannot predict with certainty the outcome of such actions, it believes that adequate reserves have been recorded as of September 30, 2024. There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions; however, Ashland believes that such potential losses would not be material as of September 30, 2024.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Ashland’s Common Stock is listed on the NYSE (ticker symbol “ASH”) and has trading privileges on Nasdaq.
Holders
At October 31, 2024, there were approximately 8,003 holders of record of Ashland’s Common Stock.
Dividends
While we currently expect that quarterly cash dividends comparable to past dividends will continue to be paid in the future, such payments are at the discretion of our Board of Directors and will depend upon many factors, including our results of operations and liquidity position.
There were no sales of unregistered securities required to be reported under Item 5 of Form 10-K.
FIVE-YEAR TOTAL RETURN PERFORMANCE GRAPH
The following graph compares Ashland’s five-year cumulative total shareholder return with the cumulative total return of the S&P MidCap 400 index and one peer group of companies. Ashland is listed in the S&P MidCap 400 index. The cumulative total shareholder return assumes the reinvestment of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
ASHLAND, S&P MIDCAP 400 INDEX AND PEER GROUP
Ashland
S&P MidCap 400
Peer Group - Materials
The peer group consists of the following industry indices:
• Peer Group - Materials: S&P 500 Materials (large-cap) and S&P MidCap 400 Materials. As of September 30, 2024, this peer group consisted of 53 companies.
Repurchases of Company Common Stock
Share repurchase activity during the three months ended September 30, 2024 was as follows:
Q4 Fiscal Periods
Total Number
of Shares
Purchased
Average
Price Paid
per Share,
including
commission
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
Dollar Value
of Shares
That May Yet
Be Purchased
Under the
Plans or
Programs
(in millions)(a)
July 1, 2024 to July 31, 2024
-
$
-
-
$
August 1, 2024 to August 31, 2024
992,380
86.44
992,380
September 1, 2024 to September 30, 2024
740,117
86.82
740,117
Total
1,732,497
1,732,497
$
(a)On June 28, 2023, Ashland's board of directors authorized a new evergreen $1 billion common share repurchase program ("2023 Stock Repurchase Program"). The new authorization terminated and replaced the Company's 2022 Stock Repurchase Program, which had $200 million outstanding at the date of termination. As of September 30, 2024, $620 million remained available for repurchase under this authorization.

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements for the years ended September 30, 2024, 2023 and 2022.
BUSINESS OVERVIEW
Ashland profile
Ashland is a global additives and specialty ingredients company with a conscious and proactive mindset for environmental, social and governance ("ESG"). The company serves customers in a wide range of consumer and industrial markets, including architectural coatings, construction, energy, food and beverage, personal care and pharmaceutical. With approximately 3,200 employees worldwide, Ashland serves customers in more than 100 countries.
Ashland’s sales generated outside of North America were 69%, 69% and 68% in 2024, 2023 and 2022, respectively. Sales by region expressed as a percentage of total consolidated sales were as follows:
Sales by Geography
North America(a)
%
%
%
Europe(a)
%
%
%
Asia Pacific
%
%
%
Latin America & other
%
%
%
%
%
%
(a)Ashland includes only U.S. and Canada in its North American designation and includes Europe, the Middle East and Africa in its Europe designation.
Reportable segments
Ashland’s reportable segments include Life Sciences, Personal Care, Specialty Additives and Intermediates. Unallocated and Other includes corporate governance activities and certain legacy matters. The contribution to sales by each reportable segment expressed as a percentage of total consolidated sales for the year ended September 30 were as follows:
Sales by Reportable Segment
Life Sciences
%
%
%
Personal Care
%
%
%
Specialty Additives
%
%
%
Intermediates
%
%
%
%
%
%
M-1
KEY DEVELOPMENTS
Uncertainty relating to the ongoing Ukraine/Russia conflict and Israel/Hamas conflict
Business disruptions, including those related to the ongoing conflicts between Ukraine/Russia or Israel/Hamas continue to impact businesses around the globe. While it is impossible to predict the effects of the conflicts such as possible escalating geopolitical tensions (including the imposition of existing and additional sanctions by the U.S. and the European Union on Russia), worsening macroeconomic and general business conditions, supply chain interruptions and unfavorable energy markets, the impact could be material. Ashland is closely monitoring these situations and maintains business continuity plans that are intended to continue operations or mitigate the effects of events that could disrupt its business.
Ashland does not have manufacturing operations in Russia, Ukraine, or Belarus. Ashland sells (or previously sold) additives and specialty ingredients to manufacturers in these countries for their use in pharmaceuticals, personal care, and coatings applications. Sales to Russia and Belarus were previously limited and our products were primarily used in products and applications that are essential to the population's well-being and currently support our customers' humanitarian efforts. We have sales controls in place to ensure that future potential sales into the region are only to support critical pharmaceutical or personal hygiene products which are essential for the general population and in accordance with any applicable sanctions. Sales to Ukraine, Russia, and Belarus represent less than 1% of total consolidated sales and less than 1% of total consolidated assets (related to accounts receivable).
Ashland does not have manufacturing operations in Israel. Sales to Israel represent approximately 1% of total consolidated sales and less than 1% of total consolidated assets (related to accounts receivable).
Other significant items
Stock repurchase program
On June 28, 2023, Ashland's board of directors authorized a new evergreen $1 billion common share repurchase program ("2023 Stock Repurchase Program"). The new authorization terminated and replaced the Company's 2022 Stock Repurchase Program, which had $200 million outstanding at the date of termination. As of September 30, 2024, $620 million remained available for repurchase under the 2023 Stock Repurchase Program.
Stock repurchase program agreements
During fiscal year 2024, under the 2023 Stock Repurchase Program, Ashland initiated and completed a number of Rule 10b5-1 trading plan agreements. Ashland paid a total of $380 million and repurchased a total of 4.3 million shares. During the most recent three fiscal years Ashland paid a total of $880 million and received a total of 10.2 million shares. See Note N for more information.
Restructuring programs
As previously disclosed, in November 2023, Ashland is taking portfolio optimization actions to further strengthen Ashland’s resilience and improve margins and returns. When completed, these portfolio actions are expected to result in improved Adjusted EBITDA margins of approximately 200 to 250 basis-points and returns on net assets of 150 to 200 basis-points. These actions are expected to reduce volatility, improve focus and decrease working capital and maintenance capital expenditures.
Ashland continues to make progress on these portfolio optimization actions which include optimizing and consolidating CMC and MC production as well as rebalancing the global HEC production network. During fiscal year 2024, Ashland closed CMC production at Hopewell, Virginia. CMC levels continue to be drawn down while Ashland migrates select production volumes into Alizay, France. In addition, Ashland completed actions to optimize MC by consolidating production capacity in Doel, Belgium. Other actions to improve Ashland's HEC business continue to be assessed. Ashland also executed similar optimization actions at a Personal Care facility in Summerville, South Carolina.
The impact of these portfolio actions for the twelve months ended September 30, 2024, resulted in accelerated depreciation charges of $57 million and other plant optimization costs of $10 million recorded within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss). In addition, severance of $25 million and other restructuring costs of $5 million
M-2
were recorded for the twelve months ended September 30, 2024, each respectively within the selling, general and administrative caption of the Statements of Consolidated Comprehensive Income (Loss). See Note D for additional information.
Nutraceuticals business
On August 30, 2024, Ashland completed the sale of its Nutraceuticals business to Turnspire Capital Partners LLC ("Turnspire"). Proceeds from the sale were approximately $26 million, net of transaction costs. Ashland recorded $107 million impairment charge and loss on sale within the income (loss) on acquisitions and divestitures, net caption of the Statements of Consolidated Comprehensive Income (Loss) for the twelve months ended September 30, 2024. See Note B of the Notes to the Consolidated Financial Statements for more information.
RESULTS OF OPERATIONS - CONSOLIDATED REVIEW
Consolidated review
Overview
Key financial results for 2024, 2023 and 2022 included the following:
(In millions except per share data)
change
change
Net income(a)
$
$
$
$
(9
)
$
(749
)
Diluted earnings per share net income
3.36
3.31
16.41
0.05
(13.10
)
Income from continuing operations
(13
)
Diluted earnings per share income from continuing operations
3.95
3.13
3.20
0.82
(0.07
)
Operating income (loss)
(26
)
(198
)
(161
)
EBITDA(b)
1,342
(277
)
(923
)
Adjusted EBITDA(b)
-
(131
)
Adjusted Diluted EPS from Continuing Operations Excluding Intangibles Amortization Expense(b)
4.45
4.07
5.70
0.38
(1.63
)
(a)Fiscal 2022 includes a $726 million gain associated with the sale of the Performance Adhesives business.
(b)These are non-GAAP measures. See "Use of non-GAAP measures" section below for reconciliations to U.S. GAAP.
Ashland’s net income of $169 million ($3.36 diluted earnings per share) in 2024, $178 million ($3.31 diluted earnings per share) in 2023 and $927 million ($16.41 diluted earnings per share) in 2022 included a loss from discontinued operations of $30 million, ($0.59 diluted earnings per share) in 2024, income from discontinued operations of $10 million ($0.18 diluted earnings per share) in 2023, and $746 million ($13.21 diluted earnings per share) in 2022. Fiscal 2022 included a $726 million gain recorded in discontinued operations associated with the sale of the Performance Adhesives business in February of 2022 and was the largest impact on net income between periods.
Results for Ashland’s continuing operations, diluted earnings per share from continuing operations and operating income (loss) for 2024, 2023 and 2022 included certain key items that were excluded to arrive at Adjusted EBITDA and are quantified in the “Use of non-GAAP measures” section of this Annual Report on Form 10-K. These pre-tax key items totaled expense of $227 million, $21 million and $96 million in 2024, 2023 and 2022, respectively, impacting continuing operations. Continuing operations was also impacted by favorable discrete tax items totaling $234 million, $44 million and $9 million in 2024, 2023 and 2022, respectively, for various tax specific key items for uncertain tax positions, valuation allowances, restructuring and separation activity and tax reform related activity. The pre-tax key items impacting operating income (loss) totaled expense of $273 million, $52 million, and $16 million in 2024, 2023 and 2022, respectively. Excluding these key items, continuing operations, diluted earnings per share from continuing operations and operating income (loss) increased from fiscal 2023 to 2024 primarily due to deflationary raw materials offset by unfavorable pricing and lower volume. The decrease in continuing operations, diluted earnings per share from continuing operations and operating income (loss) from fiscal 2022 to 2023 was primarily driven by lower sales volumes from customer de-stocking, partially offset by improved pricing associated with cost inflation pricing actions and favorable selling, general and administrative expense primarily driven by lower incentive compensation. In addition, diluted earnings per share from continuing operations was also impacted by common share reductions from repurchases of Ashland common stock in the amount of $380 million in 2024, $300 million in 2023 and $200 million in
M-3
2022. These common stock repurchases reduced the number of weighted average shares from 56 million diluted shares in 2022 to 54 million diluted shares in 2023 and 50 million diluted shares in 2024.
Ashland’s Adjusted EBITDA was $459 million for both 2024 and 2023 (see U.S. GAAP reconciliation under “Use of non-GAAP measures” below). Adjusted EBITDA remained consistent from fiscal 2023 to 2024 primarily due to deflationary raw materials, unfavorable product mix and favorable foreign exchange currency, offset by unfavorable pricing and lower volume in the Life Sciences segment. The $131 million decrease in Adjusted EBITDA from fiscal 2022 to 2023 was primarily driven by lower sales volumes from customer de-stocking, partially offset by improved pricing associated with cost inflation pricing actions and favorable selling, general and administrative expense primarily driven by lower incentive compensation. Adjusted Diluted EPS from Continuing Operations (non-GAAP) Excluding Intangibles Amortization Expense was also impacted by these key factors along with the impact of common share repurchases noted above.
For further information on the items reported above, see the discussion in the comparative Statements of Consolidated Comprehensive Income (Loss) caption review analysis.
Statements of Consolidated Comprehensive Income (Loss) - caption review
A comparative analysis of the Statements of Consolidated Comprehensive Income (Loss) by caption is provided as follows for the years ended September 30, 2024, 2023 and 2022.
(In millions)
change
change
Sales
$
2,113
$
2,191
$
2,391
$
(78
)
$
(200
)
The following table provides a reconciliation of the change in sales between fiscal years 2024 and 2023 and between fiscal years 2023 and 2022.
(In millions)
2024 change
2023 change
Sales change
Volume
$
$
(354
)
Foreign currency exchange
(21
)
Acquisition (Divestiture)
(3
)
(3
)
Price/mix
(78
)
Change in sales
$
(78
)
$
(200
)
Sales for 2024 decreased $78 million, or 4%, compared to 2023 primarily from unfavorable pricing. Pricing was softer as compared to the prior year in a moderately deflationary raw material environment. CMC and MC portfolio optimization initiatives and the Nutraceuticals business sale reduced sales by approximately $30 million during the current year.
Sales for 2023 decreased $200 million, or 8%, compared to 2022. Lower sales volume of $354 million, primarily from customer de-stocking and the COVID-19 impact related to the China re-opening in the first half of fiscal 2023, and unfavorable foreign currency exchange of $21 million, were the main drivers of the decline. These declines were partially offset by favorable mix and favorable product pricing associated with cost inflation pricing actions, which increased sales by $178 million.
(In millions)
change
change
Cost of sales
$
1,495
$
1,523
$
1,561
$
(28
)
$
(38
)
Gross profit as a percent of sales
29.2
%
30.5
%
34.7
%
Fluctuations in cost of sales are driven primarily by product line and plant optimization costs in the current year, the effects of challenges in shipping and logistics in the prior year, the impact of the COVID-19 pandemic in the prior periods, raw material prices and energy, volume and changes in product mix, currency exchange, acquisitions and divestitures and other certain charges incurred as a result of changes or events within the businesses or other restructuring activities.
M-4
The following table provides a reconciliation of the changes in cost of sales between fiscal years 2024 and 2023 and between fiscal years 2023 and 2022.
(In millions)
2024 change
2023 change
Cost of sales change
Volume
$
$
(241
)
Foreign currency exchange
(9
)
Acquisition (Divestiture)
(2
)
(1
)
Operating costs (plant)
Price/mix
(56
)
Change in cost of sales
$
(28
)
$
(38
)
Cost of sales for 2024 decreased $28 million compared to 2023. Favorable product price/mix was the primary factor for the decrease. This decrease was partially offset by higher operating costs driven by higher unit manufacturing costs associated with decreased plant loading to produce to demand in the first half of the year, $57 million of accelerated depreciation for product line optimization activities associated with two Specialty Additives manufacturing facilities and one Personal Care manufacturing facility, $10 million of other plant optimization costs, and higher volume compared to inventory control measures in the prior year. Gross profit as a percentage of sales decreased 1.3 percentage points primarily as a result of higher operating costs including higher unit manufacturing cost and product line optimization activities.
Cost of sales for 2023 decreased $38 million compared to 2022. Lower volume primarily from customer de-stocking, including the divestiture in Specialty Additives, and unfavorable foreign currency exchange decreased cost of sales by $242 million and $9 million, respectively. This decrease was partially offset by higher operating costs, which includes costs associated with inventory control actions and inflation associated with plant manufacturing and shipping costs (as well as planned and unplanned plant shutdowns and maintenance), and higher price/mix associated with other cost inflation increased cost of sales by $183 million and $30 million, respectively. Gross profit as a percentage of sales decreased 4.2 percentage points primarily as a result of lower sales volume and higher operating costs.
(In millions)
change
change
Selling, general and administrative expense
$
$
$
$
$
(28
)
As a percent of sales
19.1
%
16.7
%
16.4
%
Selling, general and administrative expense for 2024 increased $39 million compared to 2023, while expenses as a percent of sales increased 2.4 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to 2023 were:
•Expense of $30 million and $9 million comprised of key items for severance, lease abandonment and other restructuring costs during 2024 and 2023, respectively;
•$45 million and $54 million in net environmental-related expenses during 2024 and 2023, respectively (see Note M for more information);
•$11 million capital project impairment charge in 2024 and a $4 million impairment charge in 2023 associated with the sale of a Specialty Additives manufacturing facility;
•$12 million gain associated with ICMS Brazil tax credit in 2023;
•A $5 million charge associated with the impact of a currency devaluation in Argentina during 2024;
•A $4 million legal settlement during 2024; and
M-5
•Increases associated with the following:
oHigher variable compensation expense, partially offset by lower stock based compensation;
oHigher salary, benefits and travel expenses of $10 million; and
oPartially offset by favorable foreign currency exchange of $5 million.
Selling, general and administrative expense for 2023 decreased $28 million compared to 2022, while expenses as a percent of sales increased 0.3 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to 2022 were:
•Expense of $9 million and $5 million comprised of key items for severance, lease abandonment and other restructuring costs during 2023 and 2022, respectively;
•$54 million and $53 million in net environmental-related expenses during 2023 and 2022, respectively (see Note M for more information);
•$4 million impairment charge in 2023 associated with the sale of a Specialty Additives manufacturing facility;
•$12 million gain associated with ICMS Brazil tax credit in 2023; and
•Decreases associated with the following:
oLower incentive pay of $33 million;
oUnfavorable foreign currency exchange of $6 million; and
oHigher salary, benefits and travel expenses of $5 million.
(In millions)
change
change
Research and development expense
$
$
$
$
$
(4
)
Research and development expense increased $4 million in 2024 compared to 2023 primarily due to higher compensation costs. In 2023, the $4 million decrease compared to 2022 was primarily due to lower compensation costs.
(In millions)
change
change
Intangibles amortization expense
$
$
$
$
(17
)
$
(1
)
Amortization expense decreased $17 million in 2024 compared to 2023 primarily due to the impact of fully amortized intangibles in prior periods and $2 million from the impact of the held for sale treatment of the Nutraceuticals business divested during 2024, while amortization expense was primarily consistent in 2023 compared to 2022.
(In millions)
change
change
Equity and other income
$
$
$
$
(1
)
$
Equity and other income remained relatively consistent in 2024 compared to 2023. The $4 million increase in 2023 compared to 2022 was primarily related to the China financial cash subsidies.
(In millions)
change
change
Income (loss) on acquisitions and divestitures, net
$
(115
)
$
$
$
(121
)
$
(36
)
Income (loss) on acquisitions and divestitures, net during 2024 primarily relates to $107 million impairment charge and loss on sale associated with the divestiture of the Nutraceuticals business. In addition, a $7 million reserve for foreign VAT taxes was also recorded in 2024 associated with the sold Nutraceuticals legal entities. See Note B for more information.
M-6
Income (loss) on acquisitions and divestitures, net during 2023 primarily relates to a $7 million gain on the sale of excess corporate real estate.
Income (loss) on acquisitions and divestitures, net during 2022 primarily relates to a $42 million gain on the sale of excess corporate real estate.
(In millions)
change
change
Net interest and other expense (income)
Interest expense
$
$
$
$
(1
)
$
(8
)
Interest income
(10
)
(12
)
(4
)
(8
)
Loss on the accounts receivable sale programs
Loss (income) from restricted investments
(75
)
(42
)
(33
)
(128
)
Other financing costs
(1
)
(1
)
$
(24
)
$
$
$
(30
)
$
(143
)
Net interest and other expense (income) decreased by $30 million in 2024 compared to 2023. Interest expense and interest income remained primarily consistent to the prior year. Restricted investments gains of $75 million and losses of $42 million included realized gains of $60 million compared to losses of $29 million for 2024 and 2023, respectively. See Note E for more information on the restricted investments.
Net interest and other expense (income) decreased by $143 million in 2023 compared to 2022. Interest expense decreased by $8 million primarily due to lower debt levels during 2023 compared to 2022. Interest income increased $8 million due to higher investment yields and higher cash balances. Restricted investments gains of $42 million and losses of $86 million included mark-to-market gains of $29 million compared to losses of $102 million for 2023 and 2022, respectively. See Note E for more information on the restricted investments.
(In millions)
change
change
Other net periodic benefit loss (income)
$
$
$
(22
)
$
$
Other net periodic benefit expense during 2024 primarily included interest cost of $16 million and a $14 million loss on pension postretirement plan remeasurements offset by expected return on plan assets of $8 million.
Other net periodic benefit income during 2023 primarily included interest cost of $15 million offset by expected return on plan assets of $7 million and a $2 million gain on pension and other postretirement plan remeasurements.
Other net periodic benefit expense during 2022 primarily included actuarial gains of $25 million and expected return on plan assets of $7 million, offset by interest cost of $10 million.
(In millions)
change
change
Income tax expense (benefit)
$
(223
)
$
(8
)
$
$
(215
)
$
(33
)
Effective tax rate
%
(5
)%
%
The 2024 effective tax rate was impacted by jurisdictional income mix, as well as favorable discrete items of $231 million primarily related to changes in foreign tax activity and the tax impact of the Nutraceuticals business sale.
The 2023 effective tax rate was impacted by jurisdictional income mix, as well as favorable discrete items of $49 million primarily related to uncertain tax positions.
The 2022 effective tax rate was impacted by jurisdictional income mix, as well as favorable discrete items of $15 million primarily related to uncertain tax positions and restructuring activities.
M-7
Adjusted income tax expense
Key items are defined as the financial effects from significant transactions that may have caused short-term fluctuations in net income and/or operating income (loss) which Ashland believes do not accurately reflect Ashland’s underlying business performance and trends. Tax specific key items are defined as the financial effects from tax specific financial transactions, tax law changes or other matters that fall within the definition of key items as previously described. The Effective Tax Rate, Excluding Key Items, which is a non-GAAP measure, has been prepared to illustrate the ongoing tax effects of Ashland’s operations. Management believes investors and analysts use this financial measure in assessing Ashland's business performance and that presenting this non-GAAP measure on a consolidated basis assists investors in better understanding Ashland’s ongoing business performance and enhancing their ability to compare period-to-period financial results.
The effective tax rates during 2024, 2023 and 2022 were significantly impacted by the following tax specific key items:
•Uncertain tax position - Includes the impact from the settlement of uncertain tax positions with various tax authorities;
•Valuation allowances - Includes the impact from the release of certain foreign tax credit valuation allowances;
•Restructuring and separation activity - Includes the tax impact of the Nutraceuticals business sale and company-wide restructuring activities; and
•Other and tax reform related activity - Includes miscellaneous state and foreign statute adjustments.
The following table is a calculation of the effective tax rate, excluding the impact of these key items:
(In millions)
Income (loss) from continuing operations before income taxes
$
(24
)
$
$
Key items (pre-tax)(a)
Adjusted income from continuing operations before income taxes
$
$
$
Income tax expense (benefit)
(223
)
(8
)
Income tax rate adjustments:
Tax effect of key items(b)
Tax specific key items:(c)
Uncertain tax positions
(9
)
Valuation allowance
(5
)
Restructuring and separation activity
-
(3
)
Other and tax reform related activity
-
Total income tax rate adjustments
Adjusted income tax expense
$
$
$
Effective tax rate
%
(5
)%
%
Effective Tax Rate, Excluding Key Items (Non-GAAP)(d)
%
%
%
(a)See Adjusted EBITDA reconciliation table disclosed below in this Management, Discussion and Analysis of Financial Condition and Results of Operation for a summary of the key items, before tax.
(b)The tax rate specific to the jurisdiction in which the key item originates is used to calculate the tax effect of key items.
(c)For additional information on the effect that these tax specific key items had on EPS, see the Adjusted Diluted EPS table disclosed below in this Management Discussion and Analysis of Financial Condition and Results of Operation.
(d)Due to rounding conventions, the effective tax rate presented may not recalculate precisely based on the numbers disclosed within this table.
M-8
The following table provides a reconciliation of tax specific key items within the statutory federal income tax with the provision for income taxes summary disclosed in Note K of the Notes to Consolidated Financial Statements.
(In millions)
Tax effect of key items computed at applicable statutory rate(a)
$
$
$
Uncertain tax positions
(9
)
Valuation allowance changes
(5
)
Basis difference on stock sale
-
-
Tax law changes
-
-
Non US Restructuring
-
-
Deemed inclusions, foreign dividends and other restructuring
-
(3
)
$
$
$
(a)The tax rate specific to the jurisdiction in which the key item originates is used to calculate the tax effect of key items.
(In millions)
change
change
Income (loss) from discontinued operations, net of income taxes
Performance Adhesives
$
(2
)
$
$
$
(7
)
$
(36
)
Composites/Marl Facility
(2
)
(1
)
(1
)
(3
)
Asbestos-related litigation
(18
)
(5
)
(14
)
(13
)
Water Technologies
(4
)
-
(4
)
(4
)
Distribution
(6
)
(4
)
(7
)
(2
)
Valvoline
(6
)
(13
)
Gain (loss) on disposal of discontinued operations
Performance Adhesives
-
-
-
(726
)
Composites/Marl facility
-
-
-
-
-
Water Technologies
-
-
-
-
-
$
(30
)
$
$
$
(40
)
$
(736
)
As a result of the divestiture of the Performance Adhesives segment during 2022 the related operating results have been reflected as discontinued operations (net of income taxes) within the Statements of Consolidated Comprehensive Income (Loss). See Note B for more information on this transaction. In 2024, 2023 and 2022, the Performance Adhesives activity represents subsequent adjustments that were made in conjunction with the post-closing disputes. In 2022, the sales and pre-tax income included in discontinued operations were $171 million and $33 million, respectively, for the Performance Adhesives segment. In 2022, a $726 million gain on disposal was recorded associated with the February 28, 2022 closing of the Performance Adhesives business segment divestiture.
Asbestos-related activity during 2024, 2023 and 2022 included after-tax net adjustments to the asbestos reserves and receivables of $18 million of expense, $5 million of expense and $14 million of expense, respectively, including the adjustments for the annual update for each of these years.
The Valvoline activity within 2024, 2023 and 2022 primarily represents subsequent adjustments that were made in conjunction with post-closing disputes and the Tax Matters Agreement.
The activity for Water Technologies and Distribution were primarily related to post-closing adjustments associated with environmental remediation reserves associated with these businesses.
See Note C for more information related to discontinued operations.
M-9
Other comprehensive income (loss)
A comparative analysis of the components of other comprehensive income (loss) is provided below for the last three fiscal years ended September 30.
(In millions)
change
change
Other comprehensive income (loss), net of tax
Unrealized translation gain (loss)
$
$
$
(197
)
$
(18
)
$
Unrealized gain (loss) on commodity hedges
(6
)
(1
)
(5
)
Pension and postretirement obligation adjustment
-
-
-
(1
)
$
$
$
(197
)
$
(11
)
$
Total other comprehensive income (loss), net of tax, decreased $11 million in 2024 as compared to 2023 as a result of the following components:
• In 2024, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in a gain of $54 million, compared to a gain of $72 million during 2023. The fluctuations in unrealized translation gains and losses were primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars; and
• In 2024, a $1 million unrealized gain on commodity hedges was recorded compared to a loss of $6 million during 2023. See Note E for more information.
Total other comprehensive income (loss), net of tax, increased $263 million in 2023 as compared to 2022 as a result of the following components:
• In 2023, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in a gain of $72 million, compared to a loss of $197 million during 2022. The fluctuations in unrealized translation gains and losses were primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars;
• In 2023, a $6 million unrealized loss on commodity hedges was recorded compared to a loss of $1 million during 2022. See Note E for more information; and
• In 2022, a $1 million pension and postretirement obligation adjustment was recorded. See Note L for more information.
Use of non-GAAP measures
Ashland has included within this document the following non-GAAP measures, on both a consolidated and reportable segment basis, which are not defined within U.S. GAAP and do not purport to be alternatives to net income or cash flows from operating activities as a measure of operating performance or cash flows:
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
EBITDA is defined as net income, plus income tax expense (benefit), net interest and other expense (income), and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for discontinued operations and key items (including remeasurement gains and losses related to pension and other postretirement plans). Adjusted EBITDA margin is Adjusted EBITDA divided by sales.
Management believes the use of EBITDA and Adjusted EBITDA measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance by presenting comparable financial results between periods. Ashland believes that by removing the impact of depreciation and amortization and excluding certain non-cash charges, amounts spent on interest and taxes and certain other charges that are highly variable from year to year, EBITDA and Adjusted EBITDA provide Ashland’s investors with performance measures that reflect the impact to operations from trends in changes in sales, margin and operating expenses, providing a perspective not immediately apparent from net income and operating income (loss). The adjustments Ashland makes to derive the non-GAAP measures of EBITDA and Adjusted EBITDA exclude items which may cause short-term fluctuations in net income and operating income (loss) and which Ashland does not consider to be the fundamental attributes or primary drivers of its business. EBITDA and Adjusted EBITDA provide disclosure on the same basis as that used by Ashland’s management to evaluate financial performance on a consolidated and reportable segment basis and
M-10
provide consistency in our financial reporting, facilitate internal and external comparisons of Ashland’s historical operating performance and its segments and provide continuity to investors for comparability purposes.
Adjusted Diluted Earnings Per Share (EPS)
Adjusted Diluted EPS is defined as income (loss) from continuing operations, adjusted for key items, net of tax, divided by the average outstanding diluted shares for the applicable period. The Adjusted Diluted EPS metric enables Ashland to demonstrate what effect key items have on an earnings per diluted share basis by taking income (loss) from continuing operations, adjusted for key items after tax that have been identified in the Adjusted EBITDA table, and dividing by the average outstanding diluted shares for the applicable period. Ashland’s management believes this presentation is helpful to illustrate how the key items have impacted this metric during the applicable period.
Adjusted Diluted Earnings Per Share (EPS) Excluding Intangibles Amortization Expense
The Adjusted Diluted EPS Excluding Intangible Amortization Expense is adjusted earnings per share adjusted for intangibles amortization expense net of tax, divided by the average outstanding diluted shares for the applicable period. The Adjusted Diluted EPS, Excluding Intangibles Amortization Expense metric enables Ashland to demonstrate the impact of non-cash intangibles amortization expense on EPS, in addition to the key items previously mentioned. Ashland’s management believes this presentation is helpful to illustrate how previous acquisitions impact applicable period results.
Free Cash Flow, Ongoing Free Cash Flow and Ongoing Free Cash Flow Conversion
Free Cash Flow is defined as operating cash flows less capital expenditures while Ongoing Free Cash Flow is operating cash flows less capital expenditures and certain other adjustments as applicable. Ongoing Free Cash Flow Conversion is Ongoing Free Cash Flow divided by Adjusted EBITDA. These Free Cash Flow metrics enable Ashland to provide a better indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Unlike cash flow provided by operating activities, Free Cash Flow and Ongoing Free Cash Flow includes the impact of capital expenditures from continuing operations and other significant items impacting cash flow, providing a more complete picture of current and future cash generation. Free Cash Flow, Ongoing Free Cash Flow, and Free Cash Flow Conversion are non-GAAP liquidity measures that Ashland believes provide useful information to management and investors about Ashland's ability to convert Adjusted EBITDA to Ongoing Free Cash Flow. These liquidity measures are used regularly by Ashland's stakeholders and industry peers to measure the efficiency at providing cash from regular business activity. Free Cash Flow, Ongoing Free Cash Flow, and Ongoing Free Cash Flow Conversion have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash flows such as mandatory debt repayments. The amount of mandatory versus discretionary expenditures can vary significantly between periods.
Other disclosures on non-GAAP measures
Although Ashland may provide forward-looking guidance for Adjusted EBITDA, Adjusted Diluted EPS and Ongoing Free Cash Flow, Ashland is not reaffirming or providing forward-looking guidance for U.S. GAAP-reported financial measures or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP measure because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items that affect these metrics such as domestic and international economic, political, legislative, regulatory and legal actions. In addition, certain 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 and are difficult to predict with certainty.
These non-GAAP measures should be considered supplemental in nature and should not be construed as more significant than comparable measures defined by U.S. GAAP. Limitations associated with the use of these non-GAAP measures include that these measures do not present all of the amounts associated with our results as determined in accordance with U.S. GAAP. The non-GAAP measures provided are used by Ashland management and may not be determined in a manner consistent with the methodologies used by other companies. EBITDA and Adjusted EBITDA provide a supplemental presentation of Ashland’s operating performance on a consolidated and reportable segment basis. Adjusted EBITDA generally includes adjustments for items that impact comparability between periods. In addition, certain financial covenants related to Ashland’s 2022 Credit Agreement are based on similar non-GAAP measures and are defined further in the sections that reference this metric.
M-11
In accordance with U.S. GAAP, Ashland recognizes actuarial gains and losses for defined benefit pension and other postretirement benefit plans annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. Actuarial gains and losses occur when actual experience differs from the estimates used to allocate the change in value of pension and other postretirement benefit plans to expense throughout the year or when assumptions change, as they may each year. Significant factors that can contribute to the recognition of actuarial gains and losses include changes in discount rates used to remeasure pension and other postretirement obligations on an annual basis or upon a qualifying remeasurement, differences between actual and expected returns on plan assets and other changes in actuarial assumptions, for example, the life expectancy of plan participants. Management believes Adjusted EBITDA, which includes the expected return on pension plan assets yet excludes both the actual return on pension plan assets and the impact of actuarial gains and losses, provides investors with a meaningful supplemental presentation of Ashland’s operating performance (see the Adjusted EBITDA reconciliation table for additional details on exact amounts included within this non-GAAP measure related to pension and other postretirement plans). Management believes these actuarial gains and losses are primarily financing activities that are more reflective of changes in current conditions in global financial markets (and in particular interest rates) that are not directly related to the underlying business. For further information on the actuarial assumptions and plan assets referenced above, see Note L of the Notes to Consolidated Financial Statements.
EBITDA and Adjusted EBITDA
EBITDA totaled income of $142 million, $419 million and $1,342 million for 2024, 2023 and 2022, respectively. EBITDA and Adjusted EBITDA results in the following table have been prepared to illustrate the ongoing effects of Ashland’s operations, which exclude certain key items previously described. Management believes the use of such non-GAAP measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance by presenting the financial results between periods on a more comparable basis.
These operating key items for the applicable periods are summarized as follows:
• Nutraceuticals impairment and sale - During 2024, Ashland sold substantially all of the net assets of its Nutraceuticals business. As a result, Ashland recorded an impairment charge and loss on sale within the income (loss) on acquisitions and divestitures, net caption of the Statements of Consolidated Comprehensive Income (Loss) in 2024. See Note B of the Notes to Consolidated Financial Statements for more information;
• Accelerated depreciation - As a result of product line optimization activities at two Specialty Additives manufacturing plants and a Personal Care manufacturing plant, Ashland recorded accelerated depreciation due to changes in the expected useful life of certain property, plant and equipment during 2024. See Note D of the Notes to Consolidated Financial Statements for more information;
• Environmental reserve adjustments - Ashland is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively environmental remediation) at multiple locations. As a result of these activities, Ashland recorded adjustments during each year to its environmental liabilities and receivables primarily related to previously divested businesses or non-operational sites. See Note M of the Notes to Consolidated Financial Statements for more information;
• Restructuring, separation and other costs - Ashland periodically implements company-wide and targeted cost reduction programs related to acquisitions, divestitures and other cost reduction programs in order to enhance profitability through streamlined operations and an improved overall cost structure. Ashland often incurs severance, facility and integration costs associated with these programs. See Note D in the Notes to Consolidated Financial Statements for further information on the restructuring activities;
• Asset impairments - Ashland recognized impairment charges to certain assets during 2024 and 2023. See Note D of the Notes to Consolidated Financial Statements for more information;
• Other plant optimization costs - During 2024, Ashland incurred inventory adjustment and production costs associated with product line optimization actions;
M-12
• Nutraceuticals VAT reserve - During 2024, Ashland incurred a Value-Added Tax ("VAT") reserve associated with the sale of the Nutraceuticals business;
• Argentina foreign currency devaluation - Following the enactment by the Argentina government of a 50% peso devaluation against the dollar, Ashland recorded a currency devaluation charge within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) during 2024;
• Legal settlement - During 2024, Ashland incurred $4 million in costs associated with a legal settlement;
• Income on acquisitions and divestitures, net - Ashland recorded income of $6 million and $42 million during 2023 and 2022, respectively. The income was related to the pre-tax gains in connection with the sale of excess corporate property;
• ICMS Brazil tax credit - In 2017, the Federal Supreme Court of Brazil ruled in a leading case that a Brazil value-added tax (ICMS) should not be included in the base used to calculate a taxpayer's federal contribution on total revenue known as PIS/COFINS (2017 Decision). Following favorable court rulings from lawsuits previously filed by two of Ashland's Brazilian subsidiaries challenging the inclusion of ICMS in Ashland's calculation of PIS/COFINS, Ashland received acknowledgment from the Brazilian tax authorities that allows Ashland to begin the process to recover the taxes. See Note M of the Notes to Consolidated Financial Statements for more information; and
• Held for sale depreciation and amortization - Represents the depreciation and amortization for the Nutraceuticals business held for sale assets during fiscal 2024. See Note B of the Notes to Consolidated Financial Statements for more information.
Non-operating key items affecting EBITDA
During the current and prior years, there were certain key items that were not included in operating income (loss) but were excluded to arrive at Adjusted EBITDA. These non-operating key items for the applicable periods are summarized as follows:
• Gain/loss on pension and other postretirement plan remeasurements - Ashland recognized actuarial gains and losses for defined benefit pension and other postretirement benefit plans annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. See Note L of the Notes to Consolidated Financial Statements for more information.
M-13
(In millions)
Net income
$
$
$
Income tax expense (benefit)
(223
)
(8
)
Net interest and other financing expense
(24
)
Depreciation and amortization(a)
EBITDA
1,342
Income (loss) from discontinued operations, net of income taxes
(10
)
(746
)
Key items included in EBITDA:
Nutraceuticals impairment and sale
-
-
Accelerated depreciation
-
-
Environmental reserve adjustments
Restructuring, separation and other costs
Loss (gain) on pension and other postretirement plan remeasurements(b)
(2
)
(22
)
Asset impairments
-
Other plant optimization costs
-
-
Nutraceuticals VAT reserve
-
-
Argentina currency devaluation impact
-
-
Legal settlement
-
-
Income on acquisitions and divestitures, net
-
(6
)
(42
)
ICMS Brazil tax credit
-
(12
)
-
Held for sale depreciation and amortization
(3
)
-
-
Total key items included in EBITDA
(6
)
Adjusted EBITDA(b)
$
$
$
Total key items included in EBITDA
$
$
$
(6
)
Unrealized (gain) loss on securities
(60
)
(29
)
Total key items, before tax
$
$
$
(a)Depreciation and amortization excludes accelerated depreciation of $2 million and $55 million for Personal Care and Specialty Additives for fiscal 2024, respectively, which is included as a key item within this table as a component of Adjusted EBITDA. Depreciation and amortization includes $3 million for Life Sciences associated with the Nutraceuticals business held for sale assets for fiscal 2024, which is included as a key item within this table as a component of Adjusted EBITDA.
(b)Includes $12 million, $12 million and $7 million during 2024, 2023 and 2022, respectively, of net periodic pension and other postretirement expense recognized ratably through the fiscal year. These expenses are comprised of service cost, interest cost, expected return on plan assets, and amortization of prior service credit and are disclosed in further detail in Note L of the Notes to Consolidated Financial Statements.
Diluted EPS and Adjusted Diluted EPS
The following table reflects the U.S. GAAP calculation for the income (loss) from continuing operations adjusted for the cumulative diluted EPS effect for key items after tax that have been identified in the Adjusted EBITDA table in the previous section. Key items are defined as the financial effects from significant transactions that may have caused short-term fluctuations in net income and/or operating income (loss) which Ashland believes do not accurately reflect Ashland’s underlying business performance and trends. The Adjusted Diluted EPS for the income (loss) from continuing operations and Adjusted Diluted EPS from Continuing Operations Excluding Intangibles Amortization Expense in the following table have been prepared to illustrate these ongoing effects on Ashland’s operations. Management believes investors and analysts use this financial measure in assessing Ashland's business performance and that presenting this non-GAAP measure on a consolidated basis assists investors in better understanding Ashland’s ongoing business performance and enhancing their ability to compare period-to-period financial results.
In addition to the operating key items previously described, additional non-operating key items for the applicable periods are summarized as follows:
• Unrealized gain on securities - represents gains recognized on restricted investments related to the Asbestos trust and Environmental trust for each period. See Note E of the Notes to Consolidated Financial Statements for more information;
• Uncertain tax positions - represents the impact from the settlement of uncertain tax positions with various tax authorities for fiscal 2024 and 2023;
M-14
• Valuation allowance - represents the impact from the release of certain foreign tax credit valuation allowances;
• Restructuring and separation activity - represents the tax impact of the held for sale classification for the Nutraceuticals business; and
• Other and tax reform related activity - represents tax specific key items associated with foreign tax related activity for fiscal 2024.
Diluted EPS from continuing operations (as reported)
$
3.95
$
3.13
$
3.20
Key items, before tax:
Nutraceuticals impairment and sale
2.14
-
-
Accelerated depreciation
1.14
-
-
Environmental reserve adjustments
0.90
1.04
0.95
Restructuring, separation and other costs
0.60
0.19
0.09
Loss (gain) on pension and other postretirement plan remeasurements
0.29
(0.04
)
(0.40
)
Asset impairments
0.22
0.08
-
Other plant optimization costs
0.20
-
-
Nutraceuticals VAT reserve
0.14
-
-
Argentina currency devaluation impact
0.10
-
-
Legal settlement
0.08
-
-
Income on acquisitions and divestitures, net
-
(0.11
)
(0.75
)
ICMS Brazil tax credit
-
(0.22
)
-
Held for sale depreciation and amortization
(0.06
)
-
-
Unrealized (gain) loss on securities
(1.20
)
(0.54
)
1.82
Key items, before tax
4.55
0.40
1.71
Tax effect of key items(a)
(0.62
)
(0.02
)
(0.38
)
Key items, after tax
3.93
0.38
1.33
Tax specific key items:
Uncertain tax positions
0.18
(0.60
)
(0.15
)
Valuation allowance
0.10
(0.12
)
(0.07
)
Restructuring and separation activity
(2.30
)
-
0.06
Other tax reform related activity
(2.66
)
(0.11
)
-
Tax specific key items(b)
(4.68
)
(0.83
)
(0.16
)
Total key items
(0.75
)
(0.45
)
1.17
Adjusted Diluted EPS from Continuing Operations (non-GAAP)
$
3.20
$
2.68
$
4.37
Amortization expense adjustment (net of tax)(c)
1.25
1.39
1.33
Adjusted Diluted EPS from Continuing Operations (non-GAAP) Excluding Intangibles Amortization Expense
$
4.45
$
4.07
$
5.70
(a)Represents the diluted EPS impact from the tax effect of the key items that are previously identified above.
(b)Represents the diluted EPS impact from tax specific financial transactions, tax law changes or other matters that fall within the definition of tax specific key items. For additional explanation of these tax specific key items, see the income tax expense (benefit) discussion within the following caption review section.
(c)Amortization expense adjustment (net of tax) tax rates were 20% for each of the years ended 2024, 2023 and 2022.
M-15
RESULTS OF OPERATIONS - REPORTABLE SEGMENT REVIEW
Ashland's reportable segments include Life Sciences, Personal Care, Specialty Additives, and Intermediates. Unallocated and Other includes corporate governance activities and certain legacy matters.
Results of Ashland’s reportable segments are presented based on its management and internal accounting structure. The structure is specific to Ashland; therefore, the financial results of Ashland’s reportable segments are not necessarily comparable with similar information for other companies. Ashland allocates all significant costs to its reportable segments except for certain significant company-wide restructuring activities, certain corporate governance costs and other costs or activities that relate to former businesses that Ashland no longer operates. The service cost component of pension and other postretirement benefits costs is allocated to each reportable segment on a ratable basis; while the remaining components of pension and other postretirement benefits costs are recorded within the other net periodic benefit loss (income) caption on the Statements of Consolidated Comprehensive Income (Loss). Ashland refines its expense allocation methodologies to the reportable segments from time to time as internal accounting practices are improved, more refined information becomes available and the industry or market changes. Significant revisions to Ashland’s methodologies are adjusted for all segments on a retrospective basis. This includes charges in prior years for indirect corporate costs previously allocated to Performance Adhesives. These costs are reflected in Unallocated and Other for all periods presented.
M-16
The following table shows sales, operating income (loss), depreciation and amortization and EBITDA by reportable segment for each of the last three years ended September 30.
(In millions)
change
change
Sales
Life Sciences
$
$
$
$
(59
)
$
Personal Care
(80
)
Specialty Additives
(28
)
(119
)
Intermediates
(41
)
(71
)
Intersegment sales(a)
(47
)
(61
)
(77
)
$
2,113
$
2,191
$
2,391
$
(78
)
$
(200
)
Operating income (loss)
Life Sciences
$
$
$
$
(4
)
$
Personal Care(b)
(50
)
Specialty Additives(b)
(32
)
(42
)
(93
)
Intermediates
(21
)
(37
)
Unallocated and Other(b)
(264
)
(112
)
(114
)
(152
)
$
(26
)
$
$
$
(198
)
$
(161
)
Depreciation expense
Life Sciences
$
$
$
$
(3
)
$
Personal Care(c)
(2
)
Specialty Additives(d)
(5
)
Intermediates
-
Unallocated and Other
-
-
-
-
-
$
$
$
$
$
Amortization expense
Life Sciences
$
$
$
$
(5
)
$
-
Personal Care
(4
)
-
Specialty Additives
(8
)
-
Intermediates
-
-
-
(1
)
Unallocated and Other
-
-
-
-
-
$
$
$
$
(17
)
$
(1
)
EBITDA(e)
Life Sciences
$
$
$
$
(12
)
$
Personal Care
(49
)
Specialty Additives
(98
)
Intermediates
(21
)
(37
)
Unallocated and Other
(264
)
(112
)
(114
)
(152
)
$
$
$
$
(167
)
$
(159
)
(a)Intersegment sales from Intermediates are accounted for at prices that approximate fair value. All other intersegment sales are accounted for at cost.
(b)Includes a $99 million impairment charge and a $8 million loss on sale, both related to the divestiture of the Nutraceuticals business within the income (loss) on acquisitions and divestitures, net in 2024. Includes a capital project impairment charge of $11 million within Personal Care in 2024 and a $4 million impairment charge related to a Specialty Additives facility in 2023.
(c)Depreciation includes accelerated depreciation of $2 million for Personal Care in 2024.
(d)Depreciation includes accelerated depreciation of $55 million for Specialty Additives in 2024.
(e)Excludes income (loss) from discontinued operations and other net periodic benefit loss (income). See the Statement of Consolidated Comprehensive Income (Loss) for applicable amounts excluded.
M-17
Life Sciences
Life Sciences is comprised of pharmaceuticals, nutrition, agricultural chemicals, diagnostic films (formerly known as advanced materials) and fine chemicals. Pharmaceutical solutions include controlled release polymers, disintegrants, tablet coating, thickeners, solubilizers, and tablet binders. Nutrition solutions include thickeners, stabilizers, emulsifiers and additives for enhancing mouthfeel, controlling moisture migration, reducing oil uptake and binding structured foods. Customers include pharmaceutical, food, beverage, hospitals and radiologists and industrial manufacturers. The nutraceuticals business was sold in August 2024. See Note B of the the Notes to Consolidated Financial Statements for more information.
The following table provides a reconciliation of the change in sales for the Life Sciences operating segment between fiscal years 2024 and 2023 and between fiscal years 2023 and 2022.
(In millions)
2024 change
2023 change
Sales change
Volume
$
(46
)
$
(33
)
Price/mix
(14
)
Foreign Currency
(8
)
$
(59
)
$
The following table provides a reconciliation of the change in operating income for the Life Sciences operating segment between fiscal years 2024 and 2023 and between fiscal years 2023 and 2022.
(In millions)
2024 change
2023 change
Operating income change
Volume
$
(20
)
$
(5
)
Cost
(73
)
Price/mix
Foreign Currency
(5
)
$
(4
)
$
EBITDA and Adjusted EBITDA reconciliation
The EBITDA and Adjusted EBITDA amounts presented within this business section are provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for each segment. Each of these non-GAAP measures is defined as follows: EBITDA (operating income (loss) plus depreciation and amortization), Adjusted EBITDA (EBITDA adjusted for key items as applicable), and Adjusted EBITDA margin (Adjusted EBITDA divided by sales). Ashland does not allocate items to each reportable segment below operating income (loss), such as interest expense and income taxes. As a result, reportable segment EBITDA and Adjusted EBITDA are reconciled directly to operating income (loss) since it is the most directly comparable Statements of Consolidated Comprehensive Income (Loss) caption.
The following EBITDA presentation for the years ended September 30, 2024, 2023 and 2022, is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Life Sciences. The key items during the year ended September 30, 2024 related to charges of $1 million for environmental reserve adjustments which is more than offset by $3 million held for sale reversal of depreciation and amortization. The key items during the year ended September 30, 2023 related to charges of $4 million for restructuring actions and $2 million for environmental reserve adjustments. Life Sciences had no key items for the year ended September 30, 2022.
M-18
(In millions)
change
change
Operating income
$
$
$
$
(4
)
$
Depreciation and amortization(a)
(5
)
EBITDA
(9
)
Restructuring and other costs
-
-
(4
)
Environmental reserve adjustments
-
(1
)
Held for sale depreciation and amortization
(3
)
-
-
(3
)
-
Adjusted EBITDA
$
$
$
$
(17
)
$
Operating income as a percent of sales
20.7
%
19.8
%
19.0
%
90 bps
80 bps
Adjusted EBITDA as a percent of sales
28.4
%
28.4
%
26.7
%
0 bps
170 bps
(a)Depreciation and amortization includes $3 million for Life Sciences associated with the Nutraceuticals business held for sale assets for 2024 which is included as a key item within this table as a component of Adjusted EBITDA.
2024 compared to 2023
Life Sciences' sales decreased in 2024 due to lower volume and pricing, while operating income and Adjusted EBITDA decreased in 2024 due to lower volume partially offset by favorable product price/mix, deflationary raw materials, and favorable foreign currency exchange. The CMC portfolio optimization initiative and the Nutraceuticals business sale had an approximate $12 million negative sales impact during the year. Pharma and crop sales showed growth on stronger sales volumes partially offset by lower pricing.
2023 compared to 2022
Life Sciences' sales, operating income and Adjusted EBITDA increased in 2023 due to favorable price/mix actions, partially offset by higher costs associated with inflation, lower volumes and unfavorable foreign currency exchange. Life Sciences experienced a strong global demand for pharmaceutical ingredients in 2023.
Personal Care
Personal Care is comprised of biofunctionals, microbial protectants (preservatives), skin care, sun care, oral care, hair care and household solutions. These businesses have a broad range of natural, nature-derived, biodegradable, and high-performance ingredients for customer driven solutions to help protect, renew, moisturize and revitalize skin and hair, and provide solutions for toothpastes, mouth washes and rinses, denture cleaning and care for teeth. Personal Care supplies nature-derived rheology ingredients, biodegradable surface wetting agents, performance encapsulates, and specialty polymers for household, industrial and institutional cleaning products. Customers include formulators at large multinational branded consumer products companies and smaller, independent boutique companies.
The following table provides a reconciliation of the change in sales for the Personal Care operating segment between fiscal years 2024 and 2023 and between fiscal years 2023 and 2022.
(In millions)
2024 change
2023 change
Sales change
Volume
$
$
(121
)
Price/mix
(6
)
Foreign Currency
-
(5
)
$
$
(80
)
M-19
The following table provides a reconciliation of the change in operating income for the Personal Care operating segment between fiscal years 2024 and 2023 and between fiscal years 2023 and 2022.
(In millions)
2024 change
2023 change
Operating income change
Volume
$
$
(47
)
Price/mix
Foreign Currency
(1
)
Costs
(7
)
(43
)
$
$
(50
)
EBITDA and Adjusted EBITDA reconciliation
The following EBITDA presentation (as defined and described in the section above) for the years ended September 30, 2024, 2023 and 2022, is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Personal Care. The key items during the year ended September 30, 2024 related to $11 million from a capital project impairment charge, $2 million of accelerated depreciation and $1 million from other plant optimization costs. Personal Care had no key items for the years ended September 30, 2023 and 2022.
(In millions)
change
change
Operating income
$
$
$
$
$
(50
)
Depreciation and amortization(a)
(8
)
EBITDA
(49
)
Accelerated depreciation
-
-
-
Other plant optimization costs
-
-
-
Asset impairment
-
-
-
Adjusted EBITDA
$
$
$
$
$
(49
)
Operating income as a percent of sales
11.5
%
8.7
%
15.0
%
280 bps
-630 bps
Adjusted EBITDA as a percent of sales
25.9
%
22.9
%
27.4
%
300 bps
-450 bps
(a)Depreciation and amortization excludes accelerated depreciation of $2 million for Personal Care for 2024, which is included as a key item within this table as a component of Adjusted EBITDA.
2024 compared to 2023
Personal Care's sales increased in 2024 primarily due to higher volume partially offset by unfavorable pricing. Sales growth for Personal Care reflects improved demand in most regions for skin care and hair care. Personal Care’s globalization initiatives for biofunctionals and microbial protection also contributed to sales growth. As expected, oral care sales were adversely impacted by order timing with a key customer. Operating income and Adjusted EBITDA increased primarily due to higher volume, favorable product mix and foreign currency exchange, partially offset by higher cost including $11 million for a capital impairment charge and $2 million of accelerated depreciation for product line optimization activities associated with a manufacturing facility. The CMC portfolio optimization initiative had an approximate $7 million negative sales impact during the year. The performance impact for Avoca moderated near the end of the fiscal year.
2023 compared to 2022
Personal Care's sales, operating income and Adjusted EBITDA decreased in 2023 primarily due to lower volume, higher costs, and unfavorable foreign currency exchange, partially offset by favorable price/mix.
Specialty Additives
Specialty Additives is comprised of rheology- and performance-enhancing additives serving the architectural coatings, construction, energy, automotive and various industrial markets. Solutions include coatings additives for architectural paints, finishes and lacquers, cement- and gypsum- based dry mortars, ready-mixed joint compounds, synthetic plasters for commercial and residential construction, and specialty materials for industrial applications. Products include rheology modifiers (cellulosic and associative thickeners), foam control agents, surfactants and wetting agents, pH neutralizers, advanced ceramics used in
M-20
catalytic converters, and environmental filters, ingredients that aid the manufacturing process of ceramic capacitors, plasma display panels and solar cells, ingredients for textile printing, thermoplastic metals and alloys for welding. Products help improve desired functional outcomes through rheology modification and control, water retention, workability, adhesive strength, binding power, film formation, deposition and suspension and emulsification. Customers include global paint manufacturers, electronics and automotive manufacturers, textile mills, the construction industry, and welders.
The following table provides a reconciliation of the change in sales for the Specialty Additives operating segment between fiscal years 2024 and 2023 and between fiscal years 2023 and 2022.
(In millions)
2024 change
2023 change
Sales change
Price/mix
$
(32
)
$
Divestiture
(3
)
-
Volume
(155
)
Foreign Currency
(7
)
$
(28
)
$
(119
)
The following table provides a reconciliation of the change in operating income for the Specialty Additives operating segment between fiscal years 2024 and 2023 and between fiscal years 2023 and 2022.
(In millions)
2024 change
2023 change
Operating income change
Costs
$
(34
)
$
(71
)
Price/mix
(9
)
Divestiture
(1
)
-
Volume
(41
)
Foreign Currency
(1
)
$
(42
)
$
(93
)
EBITDA and Adjusted EBITDA reconciliation
The following EBITDA presentation (as defined and described in the section above) for the years ended September 30, 2024, 2023 and 2022 below is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Specialty Additives. The key items during 2024 included a $55 million charge for accelerated depreciation, $9 million of other plant optimization costs and $1 million related to environmental reserve adjustments within Specialty Additives, respectively. The key items during 2023 included a $4 million impairment charge associated with a manufacturing facility and $4 million related to environmental reserve adjustments within Specialty Additives, respectively. The key items during 2022 included $1 million related to environmental reserve adjustments within Specialty Additives.
(In millions)
change
change
Operating income (loss)
$
(32
)
$
$
$
(42
)
$
(93
)
Depreciation and amortization(a)
(10
)
(5
)
EBITDA
(52
)
(98
)
Accelerated depreciation
-
-
-
Other plant optimization costs
-
-
-
Asset impairment
-
-
(4
)
Environmental reserve adjustments
(3
)
Adjusted EBITDA
$
$
$
$
$
(91
)
Operating income as a percent of sales
-5.6
%
1.7
%
14.3
%
-730 bps
-1260 bps
Adjusted EBITDA as a percent of sales
17.3
%
15.7
%
25.7
%
160 bps
-1000 bps
(a)Depreciation and amortization excludes accelerated depreciation of $55 million for Specialty Additives for 2024, which is included as a key item within this table as a component of Adjusted EBITDA.
2024 compared to 2023
M-21
Specialty Additives' sales for 2024 decreased primarily due to unfavorable pricing, while operating income (loss) and Adjusted EBITDA decreased primarily due to higher costs, including $55 million of accelerated depreciation and $9 million of other costs for product line optimization activities associated with two Specialty Additives manufacturing facilities, and unfavorable price/mix partially offset by higher volume and favorable foreign currency exchange. The lower pricing was primarily in coatings with the largest impact related to China. The CMC and MC portfolio optimization initiatives had an approximate $11 million negative sales impact during the year.
2023 compared to 2022
Specialty Additives' sales, operating income (loss) and Adjusted EBITDA for 2023 decreased primarily due to lower volume, including the divestiture of a manufacturing facility, higher costs, and unfavorable foreign currency exchange, partially offset by favorable price/mix.
Intermediates
Intermediates is comprised of the production of 1,4 butanediol (BDO) and related derivatives, including n-methylpyrrolidone. These products are used as chemical intermediates in the production of engineering polymers and polyurethanes, and as specialty process solvents in a wide array of applications including electronics, pharmaceuticals, water filtration membranes and more. BDO is also supplied to Life Sciences, Personal Care, and Specialty Additives for use as a raw material.
The following table provides a reconciliation of the change in sales for the Intermediates operating segment between fiscal years 2024 and 2023 and between fiscal years 2023 and 2022.
(In millions)
2024 change
2023 change
Sales change
Price/mix
$
(34
)
$
(21
)
Volume
(7
)
(50
)
Foreign Currency
-
-
$
(41
)
$
(71
)
The following table provides a reconciliation of the change in operating income for the Intermediates operating segment between fiscal years 2024 and 2023 and between fiscal years 2023 and 2022.
(In millions)
2024 change
2023 change
Operating income change
Price/mix
$
(27
)
$
(14
)
Volume
(4
)
(20
)
Cost
(2
)
Foreign Currency
-
(1
)
$
(21
)
$
(37
)
EBITDA and Adjusted EBITDA reconciliation
The following EBITDA presentation (as defined and described in the section above) for the years ended September 30, 2024, 2023 and 2022 is provided as a means to enhance the understanding of financial measurements that Ashland has internally
M-22
determined to be relevant measures of comparison for the results of Intermediates. Intermediates had no key items for the years ended September 30, 2024, 2023 and 2022.
(In millions)
change
change
Operating income
$
$
$
$
(21
)
$
(37
)
Depreciation and amortization
-
-
EBITDA
(21
)
(37
)
None
-
-
-
-
-
Adjusted EBITDA
$
$
$
$
(21
)
$
(37
)
Operating income as a percent of sales
20.1
%
27.0
%
34.0
%
-690 bps
-700 bps
Adjusted EBITDA as a percent of sales
29.2
%
34.1
%
39.1
%
-490 bps
-500 bps
2024 compared to 2023
Intermediates' sales, operating income and Adjusted EBITDA for 2024 decreased primarily due to unfavorable pricing and lower volume, partially offset by lower costs.
2023 compared to 2022
Intermediates' sales, operating income and Adjusted EBITDA for 2023 decreased primarily due to lower volume, unfavorable price/mix, higher costs and unfavorable foreign currency exchange.
Unallocated and other
The following table summarizes the key components of the Unallocated and other segment’s operating income (loss) for each of the last three years ended September 30.
Unallocated and Other
(In millions)
Restructuring activities
$
(30
)
$
(9
)
$
(14
)
Environmental expenses
(43
)
(49
)
(51
)
ICMS Brazil tax credit
-
-
Income (loss) on acquisitions and divestitures, net
(115
)
Argentina currency devaluation impact
(5
)
-
-
Other expenses (primarily governance and legacy expenses)
(71
)
(72
)
(91
)
Total expense
$
(264
)
$
(112
)
$
(114
)
Unallocated and other recorded expense of $264 million, $112 million and $114 million for 2024, 2023 and 2022, respectively. The charges for restructuring activities of $30 million, $9 million and $14 million during 2024, 2023 and 2022, respectively, were primarily comprised of the following items:
• $30 million, $9 million and $5 million of severance, lease abandonment and other restructuring costs related to company-wide cost reduction programs during 2024, 2023 and 2022, respectively; and
• $9 million of stranded divestiture costs during 2022.
The remaining items included: $43 million, $49 million and $51 million for environmental expenses in 2024, 2023 and 2022, respectively, expense of $5 million related to the devaluation of the currency in Argentina and loss of $115 million in 2024 (including a $107 million impairment charge and loss on sale associated with the Nutraceuticals business as well as a $7 million charge related to Nutraceutical VAT reserves) compared to income of $6 million and $42 million from acquisitions and divestitures in 2023 and 2022 related to excess corporate property sales, respectively, see income (loss) on acquisitions and divestitures, net caption review above for additional details, and income of $12 million for ICMS tax credits in Brazil in 2023 (see Note M for more information).
Other expenses between periods were driven by increases and decreases in governance and legacy expenses associated with foreign currency, deferred compensation, stock compensation and incentive compensation.
M-23
FINANCIAL POSITION
Liquidity
Ashland had $300 million in cash and cash equivalents as of September 30, 2024, of which $282 million was held by foreign subsidiaries and had no significant limitations that would prohibit remitting the funds to satisfy corporate obligations. In certain circumstances, if such amounts were repatriated to the United States, additional withholding taxes might need to be accrued and paid depending on the source of the earnings remitted. Ashland currently has no plans to repatriate any amounts for which additional taxes would need to be accrued.
Ashland has taken actions and may continue to take actions intended to increase its cash position and preserve financial flexibility. At September 30, 2024, Ashland has total remaining borrowing capacity of $596 million available under the Revolving Credit Facility and foreign Accounts Receivable Securitization Facility. Ashland had no available liquidity under the U.S. and Foreign Accounts Receivable Sales Program, respectively, as of September 30, 2024. Ashland has no maturities related to revolving credit facilities or bonds until fiscal 2027.
On October 19, 2023, Ashland entered, through an Ireland based, wholly-owned, bankruptcy-remote consolidated special purpose entity (SPE), into a three-year agreement with a group of entities (buyers) to sell certain trade receivables, without recourse beyond the pledged receivables, of certain wholly-owned Ashland subsidiaries (Foreign Accounts Receivable Sales Program) primarily in Europe. Under the agreement, Ashland can transfer whole receivables up to a limit established by the buyer, which is currently set at a maximum of €125 million subject to other limitations as applicable. Ashland accounts for receivables transferred to buyers as part of this agreement as sales. See Note H for more information on the Foreign Accounts Receivables Sale Program.
During April 2024, Ashland authorized a financing program offered through JP Morgan and Taulia Alliance. Under this program, JP Morgan and its affiliates may purchase certain confirmed receivables directly from suppliers pursuant to the terms of a separate arrangement entered into between JPMorgan and such suppliers. There were no changes to Ashland's standard payment terms with its suppliers in connection with this program. Ashland provides no guarantees to the third party under this program. As of September 30, 2024, the program is in systems implementation phase and has not yet been offered to suppliers.
Ashland believes that cash flow from operations, availability under existing credit facilities and arrangements, current cash and investment balances and the ability to obtain other financing, if necessary, will provide adequate cash funds for Ashland’s foreseeable working capital needs, capital expenditures at existing facilities, dividend payments and debt service obligations. Ashland’s cash requirements are subject to change as business conditions warrant and opportunities arise. The timing and size of any new business ventures or acquisitions that the Company may complete may also impact its cash requirements.
Ashland’s cash flows from operating, investing and financing activities, as reflected in the Statements of Consolidated Cash Flows, are summarized as follows.
(In millions)
Cash provided (used) by:
Operating activities from continuing operations
$
$
$
Investing activities from continuing operations
(51
)
(109
)
(102
)
Financing activities from continuing operations
(479
)
(371
)
(896
)
Discontinued operations
(51
)
(51
)
1,252
Effect of currency exchange rate changes on cash and cash equivalents
(11
)
Net increase (decrease) in cash and cash equivalents
$
(117
)
$
(229
)
$
Ashland paid income taxes of $53 million during 2024 compared to $63 million in 2023 (of which $16 million related to discontinued operations) and $406 million in 2022 (of which $339 million related to discounted operations). Cash receipts for interest income were $10 million in 2024, $12 million in 2023, and $4 million in 2022, respectively, while cash payments for interest expense amounted to $52 million in 2024, $53 million in 2023 and $56 million in 2022.
M-24
Operating activities
The following discloses the cash flows associated with Ashland’s operating activities for 2024, 2023 and 2022, respectively.
(In millions)
Cash flows provided (used) by operating activities from continuing operations
Net income
$
$
$
Loss (income) from discontinued operations, net of income taxes
(10
)
(746
)
Adjustments to reconcile income from continuing operations to cash flows from operating activities
Depreciation and amortization
Original issue discount and debt issuance cost amortization
Deferred income taxes
(302
)
(32
)
(35
)
Gain from sales of property and equipment
-
(1
)
-
Stock based compensation expense - Note O
Excess tax benefits on stock based compensation
-
Loss (income) from restricted investments
(74
)
(43
)
Loss (income) on acquisitions and divestitures, net - Notes B
(7
)
(42
)
Asset impairments
-
Pension contributions
(15
)
(8
)
(5
)
Loss (gain) on pension and other postretirement plan remeasurements
(2
)
(22
)
Change in operating assets and liabilities(a)
(58
)
(237
)
Total cash flows provided by operating activities from continuing operations
$
$
$
(a)Excludes changes resulting from operations acquired or sold.
Cash flows provided by operating activities from continuing operations, a major source of Ashland’s liquidity, amounted to $462 million in 2024, $294 million in 2023 and $193 million in 2022.
Operating Activities - Operating Assets and Liabilities
The cash results during each year were primarily driven by net income, excluding discontinued operation results, adjusted for certain non-cash items including depreciation and amortization (including debt issuance cost amortization), income (loss) on acquisitions and divestitures, net as well as changes in working capital, which are fluctuations within accounts receivable, inventory, trade payables and accrued expenses.
The following details certain changes in key operating assets and liabilities for 2024, 2023 and 2022, respectively.
(In millions)
Cash flows from assets and liabilities(a)
Accounts receivable
$
$
$
(23
)
Inventories
(7
)
(141
)
Trade and other payables
(112
)
Other assets and liabilities
(4
)
(107
)
Change in operating assets and liabilities
$
$
(58
)
$
(237
)
(a)Excludes changes resulting from operations acquired or sold.
M-25
Changes in net working capital accounted for inflows of $231 million in 2024, outflows of $61 million in 2023 and $130 million in 2022, and were driven by the following:
• Accounts receivable - Changes in accounts receivable resulted in inflows of $96 million and $58 million, and outflows of $23 million in 2024, 2023 and 2022, respectively. The U.S. Accounts Receivable Sales Program contributed to inflows of $1 million, outflows of $40 million, and inflows of $17 million in 2024, 2023 and 2022, respectively. The Foreign Accounts Receivable Sales Program contributed to inflows of $104 million in 2024. Sales volumes in each period and activity from the U.S. and Foreign Accounts Receivable Sales Program were the main drivers of changes between periods.
• Inventory - Changes in inventory resulted in cash inflows of $79 million in 2024, outflows of $7 million in 2023 and outflows of $141 million in 2022 and were primarily driven by inventory production levels and volumes. Additionally, 2022 was impacted by cost inflation and management efforts to rebuild inventory levels globally in response to global supply-chain challenges.
• Trade and other payables - Changes in trade and other payables resulted in cash inflows of $56 million in 2024, cash outflows of $112 million in 2023, and cash inflows of $34 million in 2022, respectively, and primarily related to the timing of certain payments, most notably incentive plan payments in 2023 for fiscal year 2022.
The remaining cash outflows of $4 million, inflows of $3 million, and outflows of $107 million in 2024, 2023 and 2022, respectively, were primarily due to income taxes paid or income tax refunds, interest paid, and adjustments to certain accruals and other long-term assets and liabilities such as payments associated with environmental remediation.
Operating Activities - Other
Operating cash flows for 2024 included income from continuing operations of $199 million and significant non-cash adjustments of $274 million for depreciation and amortization, $15 million for stock-based compensation expense, $74 million of gains from restricted investments, $14 million loss on pension and other postretirement plan remeasurements, $302 million for deferred taxes, and $107 million of loss on acquisitions and divestitures, net.
Operating cash flows for 2023 included income from continuing operations of $168 million and significant non-cash adjustments of $243 million for depreciation and amortization, $22 million for stock-based compensation expense, $43 million of gains from restricted investments, $2 million gain on pension and other postretirement plan remeasurements, $32 million for deferred taxes, and $7 million of income on acquisitions and divestitures, net.
Operating cash flows for 2022 included income from continuing operations of $181 million and significant non-cash adjustments of $241 million for depreciation and amortization, $18 million for stock-based compensation expense, $86 million of losses from restricted investments, a $22 million gain on pension and other postretirement plan remeasurements, $35 million for deferred taxes, and $42 million of income on acquisitions and divestitures, net.
M-26
Investing activities
The following discloses the cash flows associated with Ashland’s investing activities for 2024, 2023 and 2022.
(In millions)
Cash flows provided (used) by investing activities from continuing operations
Additions to property, plant and equipment
$
(137
)
$
(170
)
$
(113
)
Proceeds from disposal of property, plant and equipment
-
Proceeds from sale or restructuring of operations
-
-
Proceeds from settlement of company-owned life insurance contracts
Company-owned life insurance payments
(5
)
(5
)
(4
)
Funds restricted for specific transactions
(5
)
(9
)
(74
)
Reimbursement from restricted investments
Proceeds from sale of securities
Purchase of securities
(53
)
(47
)
(87
)
Other investing cash flows
(10
)
-
-
Total cash flows used by investing activities from continuing operations
$
(51
)
$
(109
)
$
(102
)
Cash used by investing activities was $51 million in 2024 compared to $109 million and $102 million in 2023 and 2022, respectively. The significant cash investing activities for the current year primarily related to cash outflows of $137 million for capital expenditures, $10 million for lease asset acquisition and $5 million restricted for investment trust purposes for environmental remediation. Additionally, there were inflows of $26 million from the sale of the Nutraceuticals business and reimbursements of $79 million from the restricted renewable annual investment trusts.
The significant cash investing activities for 2023 primarily related to cash outflows of $170 million for capital expenditures and $9 million restricted for investment trust purposes for environmental remediation. Additionally, there were inflows of $11 million from the disposal of excess corporate property, which were used to provide additional funding to the environmental trust, and reimbursements of $58 million from the restricted renewable annual investment trusts.
The significant cash investing activities for 2022 primarily related to cash outflows of $113 million for capital expenditures and $74 million restricted for investment trust purposes for environmental remediation. Additionally, there were inflows of $51 million from the disposal of excess corporate property and reimbursements of $35 million from the restricted renewable annual investment trusts.
Financing activities
The following discloses the cash flows associated with Ashland’s financing activities for 2024, 2023 and 2022, respectively.
(In millions)
Cash flows provided (used) by financing activities from continuing operations
Repayment of long-term debt
-
-
(250
)
Proceeds from (repayment of) short-term debt
(16
)
(365
)
Repurchase of common stock
(380
)
(300
)
(200
)
Debt issuance costs
-
-
(2
)
Cash dividends paid
(78
)
(76
)
(70
)
Stock based compensation employee withholding taxes paid in cash
(5
)
(11
)
(9
)
Total cash flows used by financing activities from continuing operations
$
(479
)
$
(371
)
$
(896
)
Cash used by financing activities was $479 million for 2024, $371 million for 2023, and $896 million for 2022. Significant cash financing activities for 2024 included outflows of $380 million for common stock repurchases, short-term debt repayment of $16 million, and cash dividends paid of $1.58 per share, for a total of $78 million. See Note N for additional information.
Significant cash financing activities for 2023 included outflows of $300 million for common stock repurchases and cash dividends paid of $1.44 per share, for a total of $76 million. See Note N for additional information.
M-27
Significant cash financing activities for 2022 included outflows of $250 million for the full prepayment of the term loan A and short-term debt repayment of $365 million. See Note H for additional information. 2022 also included cash dividends paid of $1.27 per share, for a total of $70 million and common stock repurchases of $200 million.
Cash provided (used) by discontinued operations
The following discloses the cash flows associated with Ashland’s discontinued operations for 2024, 2023 and 2022, respectively.
(In millions)
Cash provided (used) by discontinued operations
Operating cash flows
$
(51
)
$
(51
)
$
(406
)
Investing cash flows
-
-
1,658
Total cash provided (used) by discontinued operations
$
(51
)
$
(51
)
$
1,252
Cash flows for discontinued operations in 2024, 2023 and 2022 primarily related to cash outflows of $4 million related to cash taxes paid, $39 million and $6 million related to asbestos and environmental payments, respectively, $2 million related to insurance payments partially offset by cash inflows of $2 million related to Valvoline in 2024; outflows of $16 million related to cash taxes paid partially offset by cash inflows of $15 million related to Valvoline in 2023; inflows of $1.3 billion (which includes net proceeds from the completed sale of the Performance Adhesives business segment of $1.7 billion in 2022) related to the divestiture of the Performance Adhesives business segment including $339 million in cash tax payments associated with the transaction in 2022. The remaining cash flows for discontinued operations for these years related to other previously divested businesses, including net payments of asbestos and environmental liabilities related to those divested businesses.
Free Cash Flow and other liquidity resources
The following represents Ashland’s calculation of Free Cash Flow and Ongoing Free Cash Flow for the disclosed periods. Free Cash Flow does not reflect adjustments for certain non-discretionary cash flows such as mandatory debt repayments.
September 30
(In millions)
Total cash flows provided by operating activities from continuing operations
$
$
$
Less:
Additions to property, plant and equipment
(137
)
(170
)
(113
)
Free Cash Flow
Cash (inflows) outflows from U.S. Accounts Receivable Sales Program(a)
(1
)
(17
)
Cash (inflows) outflows from Foreign Accounts Receivable Sales Program(b)
(104
)
-
-
Restructuring-related payments(c)
Environmental and related litigation payments(d)
Ongoing Free Cash Flow
$
$
$
Net Income
Adjusted EBITDA(e)
Operating Cash Flow Conversion(f)
%
%
%
Ongoing Free Cash Flow Conversion(g)
%
%
%
(a)Represents activity associated with the U.S. Accounts Receivable Sales Program impacting each period presented.
(b)Represents activity associated with the Foreign Accounts Receivable Sales Program impacting each period presented.
(c)Restructuring payments incurred during each period.
(d)Represents cash outflows associated with environmental and related litigation payments which will be reimbursed by the environmental trust.
(e)See Adjusted EBITDA reconciliation.
(f)Operating Cash Flow Conversion is defined as Cash flows provided by operating activities from continuing operations divided by Net income.
(g)Ongoing Free Cash Flow Conversion is defined as Ongoing Free Cash Flow divided by Adjusted EBITDA.
Working capital (current assets minus current liabilities, excluding long-term debt due within one year) amounted to $705 million and $1,050 million as of September 30, 2024 and September 30, 2023, respectively. The $345 million decrease in working capital was driven by a reduction in cash and cash equivalents, primarily associated with repurchases of common stock and lower
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trade working capital (accounts receivable and inventories minus trade and other payables and accrued expenses and other liabilities), including sales of foreign accounts receivables under the new Foreign Accounts Receivable Sales Program, partially offset by an increase in refundable income taxes. The $53 million increase in Ongoing Free Cash Flows between periods was primarily a result of reduced trade working capital compared to the prior year. Liquid assets (cash, cash equivalents and accounts receivable) amounted to 111% and 166% of current liabilities (excluding current liabilities held for sale) as of September 30, 2024 and September 30, 2023, respectively.
The following summary reflects Ashland’s cash, investment securities and unused borrowing capacity as of September 30, 2024, 2023 and 2022.
September 30
(In millions)
Cash and investment securities
Cash and cash equivalents
$
$
$
Restricted investments(a)
Unused borrowing capacity
Revolving credit facility
$
$
$
2018 accounts receivable securitization (foreign)
NA
U.S Accounts Receivable Sales Program
-
-
-
Foreign Accounts Receivable Sales Program
-
-
-
(a)Includes $248 million, $243 million and $245 million related to the Asbestos trust and $120 million, $124 million and $129 million related to the Environmental trust as of September 30, 2024, 2023 and 2022 respectively.
The borrowing capacity remaining under the 2022 Credit Agreement was $596 million, which reflects the full $600 million Revolving Credit Facility less a reduction of $4 million for letters of credit outstanding at September 30, 2024. In total, Ashland’s available liquidity position, which includes cash, the revolving credit facility, and accounts receivable securitization facilities, was $896 million at September 30, 2024 as compared to $1,115 million at September 30, 2023 and $1,326 million at September 30, 2022. Ashland had zero available liquidity under the U.S. and Foreign Accounts Receivable Sales Program, respectively, as of September 30, 2024. Ashland also maintained $368 million of restricted investments to pay for future asbestos claims and environmental remediation and related litigation.
Capital resources
Debt
The following summary reflects Ashland’s debt as of September 30, 2024 and 2023.
September 30
(In millions)
Short-term debt
$
-
$
Long-term debt (less debt issuance cost discounts)(a)
1,349
1,314
Total debt
$
1,349
$
1,330
(a)Includes $12 million and $13 million of debt issuance cost discounts as of September 30, 2024 and 2023, respectively. The current portion of long-term debt was zero for both September 30, 2024 and 2023.
Ashland continues to maintain the 2022 Credit Agreement which provides for a $600 million five-year revolving credit facility. Proceeds of borrowings under the 2022 Revolving Credit Facility provide ongoing working capital and are used for other general corporate purposes.
Debt as a percent of capital employed was 32% at September 30, 2024 and 30% at September 30, 2023. At September 30, 2024, Ashland’s total debt had an outstanding principal balance of $1,390 million, discounts of $29 million and debt issuance costs of $12 million. Ashland had no long-term debt (excluding debt issuance costs) maturing within the next 2 years, $4 million due in fiscal 2027 and $558 million due in fiscal 2028.
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Credit Agreements and Refinancing
2022 Credit Agreement
During July 2022, Ashland, through two of its subsidiaries, enacted an amendment to the 2020 credit agreement. The amended credit agreement (the 2022 Credit Agreement) provides for a $600 million five-year revolving credit facility (the 2022 Revolving Credit Facility). The 2022 Credit Agreement and the obligations of Ashland Services B.V. under the 2022 Revolving Credit Facility are guaranteed by Ashland.
At Ashland’s option, loans issued under the 2022 Credit Agreement will bear interest at (a) in the case of loans denominated in U.S. dollars, either Term SOFR or an alternate base rate and (b) in the case of loans denominated in Euros, EURIBOR, in each case plus the applicable interest rate margin. Loans will initially bear interest at Term SOFR or EURIBOR plus 1.250% per annum, in the case of Term SOFR borrowings or EURIBOR borrowings, respectively, or at the alternate base rate plus 0.250% per annum, in the case of alternate base rate borrowings, through and including the date of delivery of a quarterly compliance certificate and thereafter the interest rate will fluctuate between Term SOFR or EURIBOR plus 1.250% per annum and Term SOFR or EURIBOR plus 1.750% per annum (or between the alternate base rate plus 0.250% per annum and the alternate base rate plus 0.750% per annum), based upon the Consolidated Net Leverage Ratio (as defined in the 2022 Credit Agreement) at such time. Term SOFR borrowings are subject to a credit spread adjustment of 0.10% per annum. In addition, the Company will initially be required to pay fees of 0.125% per annum on the daily unused amount of the 2022 Revolving Credit Facility through and including the date of delivery of a quarterly compliance certificate, and thereafter the fee rate will fluctuate between 0.125% and 0.275% per annum, based upon the Consolidated Net Leverage Ratio. Borrowings under the 2022 Credit Agreement may be prepaid at any time without premiums.
As a result of the amendment of the 2020 Credit Agreement, Ashland recognized a $1 million charge for accelerated amortization of previously capitalized debt issuance costs during 2022, which is included in the net interest and other expense (income) caption of the Statements of Consolidated Comprehensive Income (Loss). Ashland also incurred $2 million of new debt issuance costs in connection with the 2022 Credit Agreement, of which $1 million was expensed immediately during 2022 within the net interest and other expense (income) caption of the Statements of Consolidated Comprehensive Income (Loss). The remaining balance is amortized using the straight-line method.
The 2022 Credit Agreement contains financial covenants for leverage and interest coverage ratios akin to those in effect under the 2020 Credit Agreement. The 2022 Credit Agreement contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional indebtedness, further negative pledges, investments, mergers, sale of assets and restricted payments, and other customary limitations.
Debt repayments and repurchases
Cash repatriation
During 2024 and 2023, Ashland repatriated approximately $305 million and $92 million, respectively, in cash.
2022 Debt repayments and repurchases
2020 Credit Agreement
During 2022, Ashland prepaid its Term loan A principal balance of $250 million.
Other Debt
During 2022, Ashland repaid the outstanding balance on its European short-term loan facility for $23 million.
Accounts receivable facilities and off-balance sheet arrangements
U.S. accounts receivable sales program
On March 17, 2021, a wholly-owned, bankruptcy-remote special purpose entity and consolidated Ashland subsidiary (SPE) entered into an agreement with a group of entities (buyers) to sell certain trade receivables, without recourse beyond the pledged
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receivables, of two other U.S. based Ashland subsidiaries. On April 14, 2023, Ashland entered into Second and Third Amendments associated with this current program, whereby the scheduled termination date was extended to April 14, 2025 and the buyer's limits were reduced to allow for transfer of whole receivables up to a limit set at $115 million between February and October of each year and up to $100 million all other times. On September 13, 2024, Ashland entered into a Fourth Amendment associated with this current program, whereby the scheduled termination date was extended to September 11, 2026 and the buyer's limits were reduced to allow for transfer of whole receivables up to a limit set at $80 million between September 13, 2024 to (and including) December 31, 2024 and up to $70 million from January 1, 2025 through the termination date of the agreement. Ashland’s continuing involvement is limited to servicing the receivables, including billing, collections and remittance of payments to the buyers as well as a limited guarantee on over-collateralization.
Ashland determined that any receivables transferred under this agreement are put presumptively beyond the reach of Ashland and its creditors, even in bankruptcy or other receivership. Ashland received a true sale at law and non-consolidation opinions to support the legal isolation of these receivables. Ashland accounts for the receivables transferred to buyers as sales. Ashland recognizes any gains or losses based on the excess of proceeds received net of buyer’s discounts and fees compared to the carrying value of the assets. Proceeds received, net of buyer’s discounts and fees, are recorded within the operating activities of the Statements of Consolidated Cash Flows. Losses on sale of assets, including related transaction expenses are recorded within the net interest and other expense (income) caption of the Statements of Consolidated Comprehensive Income (Loss). Ashland regularly assesses its servicing obligations and records them as assets or liabilities when appropriate. Ashland also monitors its obligation with regards to the limited guarantee and records the resulting guarantee liability when warranted. When applicable, Ashland discloses the amount of the receivable that serves as over-collateralization as a restricted asset.
Ashland recognized a $3 million, a $3 million and a $1 million loss within the Statements of Consolidated Comprehensive Income (Loss) for 2024, 2023 and 2022, respectively, within the net interest and other expense (income) caption associated with sales under the program. Ashland has recorded $71 million of sales against the buyer’s limit, which was $71 million at September 30, 2024, compared to $86 million of sales against the buyer's limit, which was $86 million at September 30, 2023. Ashland transferred $85 million and $106 million in receivables to the SPE as of September 30, 2024 and 2023, respectively. Ashland recorded liabilities related to its service obligations and limited guarantee as of September 30, 2024 and 2023 of less than $1 million. As of September 30, 2024 and 2023, the year-to-date gross cash proceeds received for receivables transferred and derecognized were $323 million and $217 million, respectively, of which $322 million and $241 million were collected by Ashland in our capacity as a servicer of the receivables and remitted to the buyer. The difference between receivables transferred and derecognized versus collected of $1 million and $24 million for the periods ended September 30, 2024 and 2023, respectively, represents the impact of a net increase and a net reduction in account receivable sales volume during each year.
2018 foreign accounts receivable securitization
In October 2023, Ashland terminated its 2018 Foreign Accounts Receivable Securitization Facility. The program had no outstanding borrowings at its termination. This program did not meet criteria for sale accounting and was reported as secured borrowing under ASC 860. At September 30, 2023, the outstanding amount of accounts receivable transferred by Ashland to the purchaser was $124 million. The weighted-average interest rate for this instrument was 0.5% for 2023.
Foreign Accounts Receivable Sales Program
On October 19, 2023, Ashland entered, through an Ireland based, wholly-owned, bankruptcy-remote consolidated special purpose entity (the "SPE"), into a three-year agreement with a group of entities (buyers) to sell certain trade receivables, without recourse beyond the pledged receivables, of certain wholly-owned Ashland subsidiaries (Foreign Accounts Receivable Sales Program) primarily in Europe. Under the agreement, Ashland can transfer whole receivables up to a limit established by the buyer, which is currently set at €125 million. Ashland’s continuing involvement is limited to servicing the receivables, including billing, collections and remittance of payments to the buyers as well as a limited guarantee on over-collateralization.
Ashland determined that any receivables transferred under this agreement are put presumptively beyond the reach of Ashland and its creditors, even in bankruptcy or other receivership. Ashland received true sale at law and non-consolidation opinions from independent qualified legal advisors in the jurisdiction of each originating subsidiary to support the legal isolation of these receivables. Consequently, Ashland accounts for receivables transferred to buyers as part of this agreement as sales.
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Through September 30, 2024, Ashland has sold $104 million in receivables under this agreement. Accordingly, Ashland recognized a loss of $3 million within the net interest and other expense (income) caption of the Statements of Consolidated Income (Loss) for the twelve months ended September 30, 2024. Ashland recorded $104 million in sales and gross proceeds received against the buyer's limit, which was $104 million at September 30, 2024. Ashland transferred $155 million in receivables to the SPE as of September 30, 2024. Ashland recorded less than $1 million in liabilities related to its service obligations and limited guarantee as of September 30, 2024.
Supply Chain Finance Program
During April 2024, Ashland authorized a financing program offered through JP Morgan and Taulia Alliance. Under this program, JP Morgan and its affiliates may purchase certain confirmed receivables directly from suppliers pursuant to the terms of a separate arrangement entered into between JPMorgan and such Suppliers. There were no changes to Ashland's standard payment terms with its suppliers in connection with this program. Ashland provides no guarantees to JP Morgan under this program. As of September 30, 2024, the program has not yet been offered to suppliers for utilization.
Other debt
At September 30, 2024 and 2023, Ashland held other debt totaling $71 million and $83 million, respectively, comprised primarily of the 6.50% notes due 2029 and other notes.
Available borrowing capacity and liquidity
The borrowing capacity remaining under the $600 million 2022 Revolving Credit Facility was $596 million due to a reduction of $4 million for letters of credit outstanding at September 30, 2024. Ashland's total borrowing capacity at September 30, 2024 was $596 million.
Additionally, Ashland has no available liquidity under its current U.S. and Foreign Accounts Receivable Sales Program.
Covenants related to current Ashland debt agreements
Ashland’s debt contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional subsidiary indebtedness, restrictions on subsidiary distributions, investments, mergers, sale of assets and restricted payments and other customary limitations. As of September 30, 2024, Ashland was in compliance with all debt agreement covenant restrictions.
The maximum consolidated net leverage ratio permitted under the 2022 Credit Agreement is 4.0. The 2022 Credit Agreement defines the consolidated net leverage ratio as the ratio of consolidated indebtedness minus unrestricted cash and cash equivalents to consolidated EBITDA (Covenant Adjusted EBITDA) for any measurement period. In general, the 2022 Credit Agreement defines Covenant Adjusted EBITDA as net income plus consolidated interest charges, taxes, depreciation and amortization expense, fees and expenses related to capital market transactions and proposed or actual acquisitions and divestitures, restructuring and integration charges, certain environmental charges, non-cash stock and equity compensation expense, and any other nonrecurring expenses or losses that do not represent a cash item in such period or any future period; less any non-cash gains or other items increasing net income. The computation of Covenant Adjusted EBITDA differs from the calculation of EBITDA and Adjusted EBITDA, which have been reconciled in the "Use of non-GAAP measures" section. In general, consolidated indebtedness includes debt plus all purchase money indebtedness, banker’s acceptances and bank guaranties, deferred purchase price of property or services, attributable indebtedness and guarantees. At September 30, 2024, Ashland’s calculation of the consolidated net leverage ratio was 2.3.
The minimum required consolidated interest coverage ratio under the 2022 Credit Agreement is 3.0. The 2022 Credit Agreement defines the consolidated interest coverage ratio as the ratio of Covenant Adjusted EBITDA to consolidated interest charges for any measurement period. At September 30, 2024, Ashland’s calculation of the consolidated interest coverage ratio was 7.8.
Any change in Covenant Adjusted EBITDA of $100 million would have an approximate 0.4x effect on the consolidated net leverage ratio and a 1.7x effect on the consolidated interest coverage ratio. Any change in consolidated indebtedness of $100 million would affect the consolidated net leverage ratio by approximately 0.2x.
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Ashland credit ratings
Ashland’s corporate credit ratings remained unchanged at BB+ by Standard & Poor’s and Ba1 by Moody’s Investor Services. As of September 30, 2024, both Moody’s Investor Services and Standard & Poor’s outlook remained at stable. Subsequent changes to these ratings or outlook may have an effect on Ashland’s borrowing rate or ability to access capital markets in the future.
Additional capital resources
Ashland cash projection
Ashland believes that cash flow from operations, availability under existing credit facilities and arrangements, current cash and investment balances and the ability to obtain other financing, if necessary, will provide adequate cash funds for the Company’s foreseeable working capital needs, capital expenditures at existing facilities, pending acquisitions, dividend payments and debt service obligations. The Company’s cash requirements are subject to change as business conditions warrant and opportunities arise. The timing and size of any new business ventures or acquisitions that the Company may complete may also impact its cash requirements.
Ashland expects the following material cash funding requirements from known contractual obligations at September 30, 2024:
Less than
More than
(In millions)
Total
1 year
1 year
Material Cash Funding Requirements Contractual obligations
Raw material and service contract purchase obligations(a)
$
$
$
Employee benefit obligations(b)
Operating lease obligations(c)
Interest payments(d)
Unrecognized tax benefits(e)
One-time transition tax(f)
Total contractual obligations
$
1,100
$
$
Other commitments
Letters of credit(g)
$
$
$
-
(a)Includes raw material and service contracts where minimal committed quantities and prices are fixed.
(b)Includes estimated funding of Ashland’s qualified U.S. and non-U.S. pension plans for 2024 as well as projected benefit payments through 2031 under Ashland’s unfunded pension and other postretirement benefit plans. Excludes the benefit payments from the pension plan trust funds. See Note L of the Notes to Consolidated Financial Statements for additional information.
(c)Includes leases for office buildings, transportation equipment, warehouses and storage facilities and other equipment. For further information, see Note J of the Notes to Consolidated Financial Statements.
(d)Includes interest expense on both variable and fixed rate debt assuming no prepayments. Variable interest rates have been assumed to remain constant through the end of the term at rates that existed as of September 30, 2024.
(e)Due to uncertainties in the timing of the effective settlement of tax positions with respect to taxing authorities, Ashland is unable to determine the timing of payments related to noncurrent unrecognized tax benefits, including interest and penalties. Therefore, these amounts were included in the “More than 1 year” column.
(f)As a result of the Tax Act enacted during fiscal year 2017, Ashland has currently recorded a $29 million liability for the one-time transition tax. This liability will be payable over two years.
(g)Ashland issues various types of letters of credit as part of its normal course of business.
Total Equity
Total equity was $2,868 million and $3,097 million at September 30, 2024 and September 30, 2023, respectively. During 2024, there were increases of $169 million for net income, $54 million for deferred translation gains, $9 million for common shares issued under stock incentive plans, and $1 million increase for unrealized gains on commodity hedges. The increases were more than offset by decreases of $79 million for dividends paid during 2024, and $383 million for repurchases of common stock (which includes $3 million in excise tax on stock repurchases).
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2023 Stock repurchase program
On June 28, 2023, Ashland's board of directors authorized a new evergreen $1 billion common share repurchase program ("2023 Stock Repurchase Program"). The new authorization terminated and replaced the 2022 Stock Repurchase Program, which had $200 million outstanding at the date of termination. In 2022, the 2022 Stock Repurchase Program replaced and terminated the 2018 $1 billion share repurchase program, which had $150 million outstanding at its date of termination on May 22, 2022. As of September 30, 2024, $620 million remained available for repurchase under the 2023 Repurchase Program.
The following table provides the stock repurchase activity for fiscal years 2024, 2023, and 2022:
(In millions, except per share amounts)
Number of shares repurchased
4.30
3.10
2.85
Weighted-average price per share(a)
$
88.70
$
97.33
$
70.09
Aggregate purchase price(a)
$
$
$
Program
2023 Stock Repurchase Program
2022 Stock Repurchase Program
2018 Stock Repurchase Program
(a)Includes transactions costs.
Stockholder dividends
Ashland paid dividends per common share of $1.58, $1.44 and $1.27 during 2024, 2023 and 2022, respectively.
In May 2024, the Board of Directors of Ashland announced a quarterly cash dividend of 40.5 cents per share to eligible stockholders at record, which represented an increase from the previous quarterly cash dividend of 38.5 cents per share. The dividend was paid in the third and fourth quarter of fiscal 2024.
In May 2023, the Board of Directors of Ashland announced a quarterly cash dividend of 38.5 cents per share to eligible stockholders at record, which represented an increase from the previous quarterly cash dividend of 33.5 cents per share. The dividend was paid in the third and fourth quarter of fiscal 2023.
In May 2022, the Board of Directors of Ashland announced a quarterly cash dividend of 33.5 cents per share to eligible stockholders at record, which represented an increase from the previous quarterly cash dividend of 30.0 cents per share. This dividend was paid in the third and fourth quarters of fiscal 2022 and the first and second quarters of fiscal 2023.
In May 2021, the Board of Directors of Ashland announced a quarterly cash dividend of 30.0 cents per share to eligible stockholders at record, which represented an increase from the previous quarterly cash dividend of 27.5 cents per share. This dividend was paid in the third and fourth quarters of fiscal 2021 and the first and second quarters of fiscal 2022.
Capital expenditures
Capital expenditures were $137 million for 2024 and averaged $140 million during the last three years. Ashland expects capital expenditures over the next three years to average approximately $123 million per year. A summary of capital expenditures by reportable segment during 2024, 2023 and 2022 follow.
(In millions)
Life Sciences
$
$
$
Personal Care
Specialty Additives
Intermediates
Unallocated and Other
Total capital expenditures
$
$
$
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A summary of the capital employed in Ashland’s current operations, which is calculated by adding equity to capital investment, as of the end of the last two years is as follows.
(In millions)
Capital employed(a)
Life Sciences
$
1,696
$
1,807
Personal Care
Specialty Additives
1,351
1,421
Intermediates
(a)Excludes the assets and liabilities classified within unallocated and other which primarily includes debt and other long-term liabilities such as asbestos and pension. The net liability in unallocated and other was $1,162 million and $1,190 million as of September 30, 2024 and 2023, respectively.
OFF-BALANCE SHEET ARRANGEMENTS
As part of its normal course of business, Ashland is a party to various financial guarantees and other commitments. These arrangements involve elements of performance and credit risk that are not included in the Consolidated Balance Sheets. The possibility that Ashland would have to make actual cash expenditures in connection with these obligations is largely dependent on the performance of the guaranteed party, or the occurrence of future events that Ashland is unable to predict. The fair value of these guarantees is not significant.
NEW ACCOUNTING PRONOUNCEMENTS
For a discussion and analysis of recently issued accounting pronouncements and its impact on Ashland, see Note A of the Notes to Consolidated Financial Statements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of Ashland’s Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales 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 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. Management has reviewed the estimates affecting these items with the Audit Committee of Ashland’s Board of Directors.
Environmental remediation and asset retirement obligations
Ashland is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively environmental remediation) at multiple locations. At September 30, 2024, such locations included 53 sites where Ashland has been identified as a potentially responsible party under Superfund or similar state laws, 108 current and former operating facilities and about 1,225 service station properties, of which 14 are being actively remediated. See Note N of the Notes to Consolidated Financial Statements for additional information.
Ashland’s reserves for environmental remediation and related environmental litigation amounted to $221 million at September 30, 2024 compared to $214 million at September 30, 2023 of which $164 million at September 30, 2024 and $165 million at September 30, 2023 were classified in other noncurrent liabilities on the Consolidated Balance Sheets. The remaining reserves were classified in accrued expenses and other liabilities on the Consolidated Balance Sheets.
The total reserves for environmental remediation reflect Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable, without regard to any third-party recoveries. Engineering studies, historical experience and other factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Ashland regularly adjusts its reserves as environmental remediation continues. Ashland has estimated the value of its probable insurance recoveries associated with its environmental reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage. At September 30, 2024 and 2023, Ashland’s recorded receivable for these probable insurance
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recoveries was $13 million and $17 million, respectively, of which $11 million and $15 million was classified in other noncurrent assets in the respective Consolidated Balance Sheets.
During 2024, 2023 and 2022, Ashland recognized $54 million, $56 million and $66 million of expense, respectively, for certain environmental liabilities related to normal ongoing remediation cost estimate updates for sites, which is consistent with Ashland’s historical environmental accounting policy.
Environmental remediation reserves are subject to uncertainties that affect Ashland’s ability to estimate its share of the costs. Such uncertainties involve the nature and extent of contamination at each site and the extent of required cleanup efforts under existing environmental regulations. Although it is not possible to predict with certainty the ultimate costs of environmental remediation, Ashland currently estimates that the upper end of the reasonably possible range of future costs for identified sites could be as high as approximately $485 million. The largest reserve for any site is 21% of the remediation reserve as of September 30, 2024.
Asbestos litigation
Ashland and Hercules have liabilities from claims alleging personal injury caused by exposure to asbestos. To assist in developing and annually updating independent reserve estimates for future asbestos claims and related costs, Ashland has retained third party actuarial experts Gnarus Advisors, LLC ("Gnarus"). The methodology used by Gnarus to project future asbestos costs is based largely on recent experience, including claim-filing and settlement rates, disease mix, open claims and litigation defense. The claim experience of Ashland and Hercules are separately compared to the results of previously conducted third party epidemiological studies estimating the number of people likely to develop asbestos-related diseases. Those studies were undertaken in connection with national analyses of the population expected to have been exposed to asbestos. Using that information, Gnarus estimates a range of the number of future claims that may be filed, as well as the related costs that may be incurred in resolving those claims. Changes in asbestos-related liabilities and receivables are recorded on an after-tax basis within the discontinued operations caption in the Statements of Consolidated Comprehensive Income (Loss). See Note M of the Notes to Consolidated Financial Statements for additional information.
Ashland asbestos-related litigation
The claims alleging personal injury caused by exposure to asbestos asserted against Ashland result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley, a former subsidiary. The amount and timing of settlements and number of open claims can fluctuate from period to period.
Ashland asbestos-related liability
From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs. Ashland reviews this estimate and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 40-year model developed with the assistance of Gnarus.
During the most recent update completed during 2024, it was determined that the liability for Ashland asbestos-related claims should be increased by $24 million. Total reserves for asbestos claims were $274 million at September 30, 2024 compared to $281 million at September 30, 2023.
Ashland asbestos-related receivables
Ashland has insurance coverage for certain litigation defense and claim settlement costs incurred in connection with its asbestos claims, and coverage-in-place agreements exist with the insurance companies that provide substantially all of the coverage that will be accessed.
For the Ashland asbestos-related obligations, Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. Substantially all of the estimated receivables from insurance companies are expected to be due from domestic insurers, all of which are solvent.
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At September 30, 2024, Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $97 million (excluding the Hercules receivable for asbestos claims). Receivables from insurers amounted to $95 million at September 30, 2023. During 2024, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers, was completed. This model update resulted in a $11 million increase in the receivable for probable insurance recoveries.
Hercules asbestos-related litigation
Hercules has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products which were sold by one of Hercules’ former subsidiaries to a limited industrial market. The amount and timing of settlements and number of open claims can fluctuate from period to period.
Hercules asbestos-related liability
From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs. Ashland reviews this estimate and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 40-year model developed with the assistance of Gnarus. As a result of the most recent annual update of this estimate completed during 2024, it was determined that the liability for Hercules asbestos-related claims should be increased by $14 million. Total reserves for asbestos claims were $185 million at September 30, 2024 compared to $191 million at September 30, 2023.
Hercules asbestos-related receivables
For the Hercules asbestos-related obligations, certain reimbursement obligations pursuant to coverage-in-place agreements with insurance carriers exist. As a result, any increases in the asbestos reserve have been partially offset by probable insurance recoveries. Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. The estimated receivable consists exclusively of solvent domestic insurers.
As of September 30, 2024 and 2023, the receivables from insurers amounted to $50 million and $47 million, respectively. During 2024, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed. This model update resulted in a $6 million increase in the receivable for probable insurance recoveries.
Asbestos litigation cost projection
Projecting future asbestos costs is subject to numerous variables that are difficult to predict. In addition to the uncertainties surrounding the number of claims that might be received, other variables include the type and severity of the disease alleged by each claimant and the related costs incurred in resolving those claims, mortality rates, dismissal rates, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case. Furthermore, any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. In light of these inherent uncertainties, Ashland believes that the asbestos reserves for Ashland and Hercules represent the best estimate within a range of possible outcomes. As a part of the process to develop these estimates of future asbestos costs, a range of long-term cost models was developed. These models are based on national studies that predict the number of people likely to develop asbestos-related diseases and are heavily influenced by assumptions regarding long-term inflation rates for indemnity payments and legal defense costs, as well as other variables mentioned previously. Ashland has currently estimated in various models ranging from approximately 40 year periods that it is reasonably possible that total future litigation defense and claim settlement costs on an inflated and undiscounted basis could range as high as approximately $410 million for the Ashland asbestos-related litigation (current reserve of $274 million) and approximately $276 million for the Hercules asbestos-related litigation (current reserve of $185 million), depending on the combination of assumptions selected in the various models. While the timeframe used in Ashland's models for projecting asbestos liabilities generally decreases over time based on the expected lifetime of the liabilities, these models have been consistently applied within all periods presented. If actual experience is worse than projected, relative to the number of claims filed, the severity of alleged disease associated with those claims or costs incurred to resolve those claims, or actuarial refinement or
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improvements to the assumptions used within these models are initiated, Ashland may need to further increase the estimates of the costs associated with asbestos claims and these increases could be material over time.
Accounting for goodwill and other indefinite-lived intangible assets
Goodwill
Ashland accounts for goodwill and other intangible assets acquired in a business combination in conformity with current accounting guidance which does not allow for goodwill and indefinite-lived intangible assets to be amortized.
Ashland reviews goodwill for impairment annually as of July 1 or when events and circumstances indicate an impairment may have occurred. Ashland tests goodwill for impairment by comparing the estimated fair value of the reporting units to the related carrying value. If the fair value of the reporting unit is lower than its carrying amount, goodwill is written down for the amount by which the carrying amount exceeds fair value. However, the loss recognized cannot exceed the carrying amount of goodwill. Reporting units are defined as either operating segments or one level below the operating segments for which discrete financial information is available and reviewed by the business management. Ashland determined that its reporting units are Life Sciences, Personal Care, Specialty Additives and Intermediates.
Ashland makes various estimates and assumptions in determining the estimated fair value of each reporting unit using a combination of discounted cash flow models and valuations based on earnings multiples for guideline public companies in each reporting unit’s industry peer group, when externally quoted market prices are not readily available. Discounted cash flow models are reliant on various assumptions, including projected business results, long-term growth factors and weighted-average cost of capital. Management judgment is involved in estimating these variables, and they include uncertainties since they are forecasting future events. Ashland performs sensitivity analyses by using a range of inputs to confirm the reasonableness of the long-term growth rate and weighted average cost of capital estimates. Additionally, Ashland compares the indicated equity value to Ashland’s market capitalization and evaluates the resulting implied control premium/discount to determine if the estimated enterprise value is reasonable.
Ashland performed its annual goodwill impairment using the quantitative approach as of July 1, 2024, and concluded that all reporting units had fair values in excess of its respective carrying amounts. The fair values of Life Sciences, Personal Care, and Specialty Additives exceeded their carrying values by 15%, 82%, and 22%, respectively. The Intermediates reporting unit has no associated goodwill. Ashland concluded there was no impairment as of July 1, 2024. Ashland compared the total fair values of the reporting units to Ashland’s market capitalization at July 1, 2024, to determine if the fair values are reasonable. Ashland's market capitalization exceeded the aggregate fair value of each reporting unit at the annual assessment date by approximately 10%. A discount of 10% implies a high level of conservatism in Ashland's impairment assessment as recent comparable market transactions would imply control premiums of approximately 20% at the median (i.e., the premium of an offer price over the closing stock price immediately preceding an announced transaction).
Assumptions inherent in the valuation methodologies include estimates of future projected business results (principally revenue and EBITDA), long-term growth rates, and the weighted-average cost of capital. Ashland performed sensitivity analyses by using a range of inputs to confirm the reasonableness of long-term growth rate and weighted average cost of capital estimates. Significant assumptions utilized in the impairment analysis included the weighted-average cost of capital, ranging between 11.25% and 12.50%, and terminal growth rate, ranging between 2.0% and 4.0% depending on the reporting unit. Based on sensitivity analysis performed on two key assumptions in the discounted cash flow model at July 1, 2024, a 1% decrease in the long-term growth factor assumption or a 1% increase in the weighted average cost of capital assumption across each of Ashland’s reporting units would not have resulted in a fair value below the respective reporting units carrying value. For further information, see Note G of Notes to the Consolidated Financial Statements.
Other indefinite-lived intangible assets
Other indefinite-lived intangible assets include certain trademarks and trade names. Ashland reviews these intangible assets for possible impairment annually as of July 1 or whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. If the carrying value of an individual indefinite-lived intangible asset exceeds its fair value, the asset is
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written down to its fair value and the amount of the write down is the impairment charge. Similar to its annual assessment for goodwill, Ashland performs a quantitative test for impairment.
Ashland tested these assets using a “relief-from-royalty” valuation method to determine the fair value. Assumptions inherent in the valuation methodologies include, but are not limited to, future projected business results, growth rates, the weighted-average cost of capital for a market participant, and royalty rates. In conjunction with the July 1 annual assessment of indefinite-lived intangible assets, Ashland’s quantitative approach models did not indicate any impairment, as each indefinite-lived intangible asset’s fair value exceeded its carrying values.
Ashland’s assessment of an impairment on any of these assets classified currently as having indefinite lives, including goodwill, could change in future periods if significant events happen and/or circumstances change that affect the previously mentioned assumptions. Assumptions inherent in the valuation methodologies include, but are not limited to, such estimates as future projected business results, growth rates, the weighted average cost of capital for a market participant, and royalty rates. For further information, see Note G of Notes to Consolidated Financial Statements.
Income taxes
Ashland is subject to income taxes in the United States and numerous foreign jurisdictions. Judgment in the forecasting of taxable income using historical and projected future operating results is required in determining Ashland’s provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable, and deferred taxes. Under U.S. GAAP, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax loss and credit carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the period in which the enactment date occurs. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized. Deferred taxes are not provided on the unremitted earnings of subsidiaries outside of the United States when it is expected that these earnings are indefinitely reinvested. In the event that the actual outcome of future tax consequences differs from Ashland’s estimates and assumptions due to changes or future events such as tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans, the resulting change to the provision for income taxes could have a material effect on the Statement of Consolidated Comprehensive Income (Loss) and Consolidated Balance Sheets.
The recoverability of deferred tax assets and the recognition and measurement of uncertain tax positions are subject to various assumptions and judgment by Ashland. If actual results differ from the estimates made by Ashland in establishing or maintaining valuation allowances against deferred tax assets, the resulting change in the valuation allowance would generally impact earnings or other comprehensive income depending on the nature of the respective deferred tax asset. Additionally, the positions taken with regard to tax contingencies may be subject to audit and review by tax authorities, which may result in future taxes, interest and penalties. Positive and negative evidence is considered in determining the need for a valuation allowance against deferred tax assets, which includes such evidence as historical earnings, projected future earnings, tax planning strategies and expected timing of reversal of existing temporary differences.
In determining the recoverability of deferred tax assets Ashland gives consideration to all available positive and negative evidence including reversals of deferred tax liabilities (other than those with an indefinite reversal period), projected future taxable income, tax planning strategies and recent financial operations. Ashland attaches the most weight to historical earnings due to their verifiable nature. In evaluating the objective evidence that historical results provide, Ashland considers three years of cumulative income or loss. In addition, Ashland has reflected increases and decreases in our valuation allowance based on the overall weight of positive versus negative evidence on a jurisdiction by jurisdiction basis.
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EFFECTS OF INFLATION AND CHANGING PRICES
Ashland’s financial statements are prepared on the historical cost method of accounting in accordance with U.S. GAAP and, as a result, do not reflect changes in the purchasing power of the U.S. dollar. Monetary assets (such as cash, cash equivalents and accounts receivable) lose purchasing power as a result of inflation, while monetary liabilities (such as accounts payable and indebtedness) result in a gain, because they can be settled with dollars of diminished purchasing power. As of September 30, 2024, Ashland’s monetary assets exceed its monetary liabilities, leaving it currently more exposed to the effects of future inflation. While inflation rose significantly during 2022, it began to gradually decrease in fiscal 2023 and fiscal 2024. See Item 1A - Risk Factors for additional information.
Certain of the industries in which Ashland operates are capital-intensive, and replacement costs for its plant and equipment generally would substantially exceed their historical costs. Accordingly, depreciation and amortization expense would be greater if it were based on current replacement costs. However, because replacement facilities would reflect technological improvements and changes in business strategies, such facilities would be expected to be more productive than existing facilities, mitigating at least part of the increased expense.
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OUTLOOK
Portfolio-optimization actions
Ashland is taking the following actions to offset the impact of portfolio optimization and to further strengthen the company’s core:
•Reviewing strategic alternatives for Avoca business line;
•Completed a share buyback program of $150 million to offset the annual adjusted earnings per share impact from the divestiture of nutraceuticals and the potential future exit of Avoca;
•Initiation of $30 million restructuring plan to offset impact from the nutraceuticals sale and other portfolio optimization actions, with 50 percent realization in fiscal year 2025 and 50 percent in fiscal year 2026;
•Advancing a multi-year manufacturing optimization restructuring plan to improve operational cost and strengthen the competitive position of HEC and VP&D which is expected to generate pre-tax savings of $60 million once fully achieved, including savings of $5 million in fiscal year 2025.
Financial Outlook
For fiscal year 2025, Ashland’s outlook is based on the following assumptions:
•Continued geopolitical and economic uncertainty results in lower overall growth in most regions;
•China’s economy will remain challenged for the fiscal year, especially the property market;
•Increased competitive intensity in China and several export markets result in volume growth being partially offset by additional price erosion;
•+$45 million in improved first-half absorption when compared to inventory actions in fiscal 2024;
•+$20 million in realized cost reduction actions;
•Generally stable raw material environment;
•($30) million from reduced earnings and stranded costs from our nutraceuticals sale and other portfolio optimization actions;
•($20) million in negative price carryover from fiscal year 2024;
•For Avoca, Ashland exited an unprofitable tolling operation and will sell or close the remaining sclareolide business; ($15) million year-over-year EBITDA erosion; and
•($10) million in variable incentive reset.
For fiscal year 2025, Ashland expects sales to be in the range of $1.90 billion to $2.05 billion, and Adjusted EBITDA to be in the range of $430 million to $470 million.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements including, without limitation, statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation” (MD&A), within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Ashland has identified some of these forward-looking statements with words such as “anticipates,” “believes,” “expects,” “estimates,” “is likely,” “predicts,” “projects,” “forecasts,” “objectives,” “may,” “will,” “should,” “plans” and “intends” and the negative of these words or other comparable terminology. Ashland may from time to time make forward-looking statements in its Annual Report to Stockholders, quarterly reports and other filings with the Securities and Exchange Commission (SEC), news releases and other written and oral communications. These forward-looking statements are based on Ashland’s expectations and assumptions, as of the date such statements are made, regarding Ashland’s future operating
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performance and financial condition, as well as the economy and other future events or circumstances. Ashland’s expectations and assumptions include, without limitation, those mentioned within the MD&A, internal forecasts and analyses of current and future market conditions and trends, management plans and strategies, operating efficiencies, cost savings and economic conditions (such as prices, supply and demand, cost of raw materials, and the ability to recover raw-material cost increases through price increases), and risks and uncertainties associated with the following: the impact of acquisitions and/or divestitures Ashland has made or may make (including the possibility that Ashland may not realize the anticipated benefits from such transactions); Ashland’s substantial indebtedness (including the possibility that such indebtedness and related restrictive covenants may adversely affect Ashland’s future cash flows, results of operations, financial condition and its ability to repay debt); execution risks associated with our growth strategies; the competitive nature of our business; severe weather, natural disasters, public health crises, cyber events and legal proceedings and claims (including product recalls, environmental and asbestos matters); the ongoing Ukraine/Russia and Israel/Hamas conflict on the geographies in which Ashland operates, the end markets Ashland serves and on Ashland’s supply chain and customers; and without limitation, risks and uncertainties affecting Ashland that are contained in “Use of estimates, risks and uncertainties” in Note A of Notes to Consolidated Financial Statements and in Item 1A of this Annual Report Form 10-K. Various risks and uncertainties may cause actual results to differ materially from those stated, projected or implied by any forward-looking statements. Ashland believes its expectations and assumptions are reasonable, but there can be no assurance that the expectations reflected herein will be achieved. Unless legally required, Ashland undertakes no obligation to update any forward-looking statements made in this Form 10-K whether as a result of new information, future events or otherwise. Information on Ashland’s website is not incorporated into or a part of this Form 10-K.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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.
As of September 30, 2024 and 2023, Ashland had not identified any significant credit risk on open derivative contracts. The potential loss from a hypothetical 10% adverse change in foreign currency rates on Ashland’s open foreign currency derivative instruments would be largely offset by gains resulting from the impact of changes in exchange rates on transactions denominated in non-functional currencies. Ashland did not have any significant open hedging contracts with respect to commodities or any related raw material requirements as of and for the year ended September 30, 2024.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Management's report on internal control over financial reporting
Reports of independent registered public accounting firm (Ernst & Young LLP; PCAOB ID: 42)
Consolidated Financial Statements:
Statements of Consolidated Comprehensive Income (Loss)
Consolidated Balance Sheets
Statements of Consolidated Equity
Statements of Consolidated Cash Flows
Notes to Consolidated Financial Statements
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for the preparation and integrity of the Consolidated Financial Statements and other financial information included in this Annual Report on Form 10-K. Such financial statements are prepared in accordance with accounting principles generally accepted in the United States. Accounting principles are selected, and information is reported which, using management’s best judgment and estimates, present fairly Ashland’s consolidated financial position, results of operations and cash flows. The other financial information in this Annual Report on Form 10-K is consistent with the Consolidated Financial Statements.
Ashland’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Ashland’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Ashland’s Consolidated Financial Statements. Ashland’s internal control over financial reporting is supported by a code of business conduct which summarizes our guiding values such as obeying the law, adhering to high ethical standards and acting as responsible members of the communities where we operate. Compliance with that Code forms the foundation of our internal control systems, which are designed to provide reasonable assurance that Ashland’s assets are safeguarded, and its records reflect, in all material respects, transactions in accordance with management’s authorization. The concept of reasonable assurance is based on the recognition that the cost of a system of internal control should not exceed the related benefits. Management believes that adequate internal controls are maintained by the selection and training of qualified personnel, by an appropriate division of responsibility in all organizational arrangements, by the establishment and communication of accounting and business policies, and by internal audits.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Board, subject to stockholder ratification, selects and engages the independent auditors based on the recommendation of the Audit Committee. The Audit Committee, composed of directors who are not members of management, reviews the adequacy of Ashland’s policies, procedures, controls and risk management strategies, the scope of auditing and other services performed by the independent auditors, and the scope of the internal audit function. The Audit Committee holds meetings with Ashland’s internal auditor and independent auditors, with and without management present, to discuss the findings of their audits, the overall quality of Ashland’s financial reporting and their evaluation of Ashland’s internal controls. The report of Ashland’s Audit Committee can be found in Ashland’s Proxy for its 2025 Annual Meeting.
Management assessed the effectiveness of Ashland’s internal control over financial reporting as of September 30, 2024. Management conducted its assessment utilizing the framework described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, management believes that Ashland maintained effective internal control over financial reporting as of September 30, 2024.
Ernst & Young LLP, an independent registered public accounting firm, has audited and reported on the Consolidated Financial Statements of Ashland Inc. and Consolidated Subsidiaries as of and for the year ended September 30, 2024, and the effectiveness of Ashland’s internal control over financial reporting as of September 30, 2024. The reports of the independent registered public accounting firm are contained in this Annual Report on Form 10-K.
/s/ Guillermo Novo
Guillermo Novo
Chair of the Board and Chief Executive Officer
/s/ J. Kevin Willis
J. Kevin Willis
Senior Vice President and Chief Financial Officer
November 18, 2024
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Ashland Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Ashland Inc. and Consolidated Subsidiaries’ internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Ashland Inc. and Consolidated Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2024 and 2023, the related consolidated statements of comprehensive income (loss), equity and cash flows for each of the three years in the period ended September 30, 2024, and the related notes and our report dated November 18, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Grandview Heights, Ohio
November 18, 2024
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Ashland Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ashland Inc. and Consolidated Subsidiaries (the Company) as of September 30, 2024 and 2023, the related statements of consolidated comprehensive income (loss), equity and cash flows for each of the three years in the period ended September 30, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated November 18, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of Environmental Remediation Reserves
Description of the Matter
At September 30, 2024, the reserves for environmental remediation amounted to $221 million. As discussed within Note M of the consolidated financial statements, the reserves for environmental remediation reflect Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable and probable of being incurred, without regard to any third-party recoveries. The Company uses engineering studies, historical experience and other factors to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Ashland regularly adjusts its reserves as environmental remediation continues.
Auditing the environmental remediation reserve was complex due to inherent uncertainties that affect Ashland’s ability to estimate probable costs. Such uncertainties include the nature and extent of contamination at each site, and the nature and extent of required cleanup efforts.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of relevant controls over Ashland’s environmental remediation reserves process. For example, we tested controls over the Company’s annual reserve setting training process, management’s monitoring of sites, and management’s development of the environmental reserve estimates. We also tested management’s controls over the completeness and accuracy of the underlying data used in the reserve estimates.
To test the environmental reserves, we performed audit procedures that included, among others: assessing the appropriateness of Ashland’s policies and procedures and testing management’s development of the environmental reserve estimates. We obtained an understanding of the nature and extent of contamination at each site, the nature and extent of required cleanup efforts, and the corresponding environmental remediation reserves through discussions with Ashland’s remediation project managers. We also involved our environmental reserve subject matter specialists to evaluate the reasonableness of management’s reserve estimates, including consideration of information available on regulatory databases in the public domain that was assessed for possible contrary evidence. With the support of our environmental reserve subject matter specialists, we evaluated whether the environmental reserve estimates were appropriate based on engineering studies and historical experience.
Valuation of Asbestos Litigation Reserves
Description of the Matter
At September 30, 2024, the reserves for asbestos litigation amounted to $459 million. As discussed within Note M of the consolidated financial statements, Ashland has liabilities from claims alleging personal injury caused by exposure to asbestos. Ashland retained third-party actuarial experts to assist in developing and annually updating independent reserve estimates for future asbestos claims and related costs given various assumptions. The methodology used by the actuarial experts to project future asbestos costs is based largely on recent experience, including claim-filing and settlement rates, disease mix, open claims and litigation defense costs. Further, the claim experience identified is compared to the results of previously conducted third-party epidemiological studies estimating the number of people likely to develop asbestos-related diseases. Using that information, the Company estimates a range of the number of future claims that may be filed, as well as the related costs that may be incurred in resolving those claims. Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs using the results of a non-inflated, non-discounted approximate 40-year model developed with the assistance of the Company’s third-party actuarial experts.
Auditing the Company’s asbestos litigation reserve was complex due to uncertainty associated with the estimate of projected future asbestos costs. The methodology employed by management to develop the estimate of projected future asbestos costs is subject to assumptions such as the number of claims that may be received in the future, the type and severity of disease alleged by claimant, the related costs incurred in resolving those claims, and the dismissal rates. These assumptions have a significant effect on the asbestos litigation reserve.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the asbestos litigation reserves process. These include controls over management's assessment of the assumptions utilized within the estimate, management’s oversight of asbestos trends including claims movement and costs incurred, and the completeness and accuracy of the underlying claims data utilized to project future costs.
To evaluate the reasonableness of the reserve for asbestos litigation, our audit procedures included testing the completeness and accuracy of the underlying claims data provided to management's actuarial experts utilized to project future costs. Additionally, we evaluated the claims and spend activity from legal letters obtained from internal and external legal counsel. Furthermore, we involved our actuarial subject matter specialists to assist in the evaluation of the methodologies and assumptions applied by management's experts as described above to determine the appropriateness of the asbestos litigation reserve, and to independently prepare an estimated range of the liability. We then assessed the reasonableness of the Company's recorded reserve against our independently calculated range.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2014.
Grandview Heights, Ohio
November 18, 2024
Ashland Inc. and Consolidated Subsidiaries
Statements of Consolidated Comprehensive Income (Loss)
Years Ended September 30
(In millions except per share data)
Sales
$
2,113
$
2,191
$
2,391
Cost of sales
1,495
1,523
1,561
Gross profit
Selling, general and administrative expense
Research and development expense
Intangibles amortization expense - Note G
Equity and other income
Income (loss) on acquisitions and divestitures, net - Note B
(115
)
Operating income (loss)
(26
)
Net interest and other expense (income) - Note H
(24
)
Other net periodic benefit loss (income) - Note L
(22
)
Income (loss) from continuing operations before income taxes
(24
)
Income tax expense (benefit) - Note K
(223
)
(8
)
Income from continuing operations
Income (loss) from discontinued operations, net of income taxes - Note C
(30
)
Net income
$
$
$
PER SHARE DATA - NOTE A
Basic earnings per share
Income from continuing operations
$
3.99
$
3.18
$
3.26
Income (loss) from discontinued operations
(0.59
)
0.18
13.45
Net income
$
3.40
$
3.36
$
16.71
Diluted earnings per share
Income from continuing operations
$
3.95
$
3.13
$
3.20
Income (loss) from discontinued operations
(0.59
)
0.18
13.21
Net income
$
3.36
$
3.31
$
16.41
COMPREHENSIVE INCOME
Net income
$
$
$
Other comprehensive income (loss), net of tax
Unrealized translation gain (loss)
(197
)
Unrealized gain (loss) on commodity hedges
(6
)
(1
)
Pension and postretirement obligation adjustment
-
-
Other comprehensive income (loss)
(197
)
Comprehensive income
$
$
$
See Notes to Consolidated Financial Statements.
Ashland Inc. and Consolidated Subsidiaries
Consolidated Balance Sheets
At September 30
(In millions)
ASSETS
Current assets
Cash and cash equivalents
$
$
Accounts receivable(a) - Notes A and H
Inventories - Note A
Other assets
Total current assets
1,195
1,506
Noncurrent assets
Property, plant and equipment - Note F
Cost
3,316
3,211
Accumulated depreciation
2,013
1,838
Net property, plant and equipment
1,303
1,373
Goodwill - Note G
1,381
1,362
Intangibles - Note G
Operating lease assets, net - Note J
Restricted investments - Note E
Asbestos insurance receivable(b) - Notes A and M
Deferred income taxes - Note K
Other assets - Note I
Total noncurrent assets
4,450
4,433
Total assets
$
5,645
$
5,939
LIABILITIES AND EQUITY
Current liabilities
Short-term debt - Note H
$
-
$
Trade and other payables
Accrued expenses and other liabilities
Current operating lease obligations - Note J
Total current liabilities
Noncurrent liabilities
Long-term debt - Note H
1,349
1,314
Asbestos litigation reserve - Note M
Deferred income taxes - Note K
Employee benefit obligations - Note L
Operating lease obligations - Note J
Other liabilities - Note I
Total noncurrent liabilities
2,287
2,386
Commitments and contingencies - Notes J and M
Equity - Notes N and O
Common stock, par value $.01 per share, 200 million shares authorized
Issued 47 million and 51 million shares in 2024 and 2023
Paid-in capital
-
Retained earnings
3,315
3,595
Accumulated other comprehensive loss
(448
)
(503
)
Total equity
2,868
3,097
Total liabilities and equity
$
5,645
$
5,939
(a)Accounts receivable includes an allowance for credit losses of $2 million and $3 million at September 30, 2024 and 2023, respectively.
(b)Asbestos insurance receivable includes an allowance for credit losses of $2 million at both September 30, 2024 and 2023.
See Notes to Consolidated Financial Statements.
Ashland Inc. and Consolidated Subsidiaries
Statements of Consolidated Equity
Accumulated
other
Common
Paid-in
Retained
comprehensive
(In millions)
stock
capital
earnings
income (loss)(a)
Total
Balance at September 30, 2021
$
$
$
2,796
$
(372
)
$
2,752
Total comprehensive income
Net income
Other comprehensive income
(197
)
(197
)
Dividends, $1.27 per common share
(70
)
(70
)
Compensation expense and common shares issued under stock incentive and other plans(b)(c)
Repurchase of common stock(d)
(200
)
(200
)
Balance at September 30, 2022
3,653
(569
)
3,220
Total comprehensive income (loss)
Net income
Other comprehensive loss
Dividends, $1.44 per common share
(76
)
(76
)
Compensation expense and common shares issued under stock incentive and other plans(b)(c)
Repurchase of common stock(d)(e)
(143
)
(160
)
(303
)
Balance at September 30, 2023
3,595
(503
)
3,097
Total comprehensive income
Net income
Other comprehensive income
Dividends, $1.58 per common share
(79
)
(79
)
Compensation expense and common shares issued under stock incentive and other plans(b)(c)
Repurchase of common stock(d)(e)
(13
)
(370
)
(383
)
Balance at September 30, 2024
$
$
-
$
3,315
$
(448
)
$
2,868
(a)At September 30, 2024 and 2023, the net of tax accumulated other comprehensive loss of $448 million and $503 million, respectively, was comprised of net unrealized translation losses of $445 million and $499 million, respectively, unrecognized prior service costs as a result of certain employee benefit plan amendments of $1 million and $1 million, respectively, and net unrealized losses on commodity hedges of $2 million and $3 million, respectively.
(b)Includes a benefit of $5 million, $11 million and $9 million for stock based compensation employee withholding taxes paid in cash for 2024, 2023 and 2022, respectively,
(c)Common shares issued were 137,799, 193,767, and 168,270 for 2024, 2023 and 2022, respectively.
(d)Common shares repurchased were 4,285,194, 3,082,928, and 2,853,312 for 2024, 2023 and 2022, respectively.
(e)Includes $3 million of accrued excise taxes on stock repurchases for 2024 and 2023.
See Notes to Consolidated Financial Statements.
Ashland Inc. and Consolidated Subsidiaries
Statements of Consolidated Cash Flows
Years Ended September 30
(In millions)
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net income
$
$
$
Loss (income) from discontinued operations, net of income taxes
(10
)
(746
)
Adjustments to reconcile income from continuing operations to cash flows from operating activities
Depreciation and amortization
Original issue discount and debt issuance cost amortization
Deferred income taxes
(302
)
(32
)
(35
)
Gain from sales of property and equipment
-
(1
)
-
Stock based compensation expense - Note O
Excess tax benefits on stock based compensation
-
Loss (income) from restricted investments
(74
)
(43
)
Loss (income) on acquisitions and divestitures, net - Notes B
(7
)
(42
)
Asset impairments
-
Pension contributions
(15
)
(8
)
(5
)
Loss (gain) on pension and other postretirement plan remeasurements
(2
)
(22
)
Change in operating assets and liabilities(a)
(58
)
(237
)
Total cash flows provided by operating activities from continuing operations
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Additions to property, plant and equipment
(137
)
(170
)
(113
)
Proceeds from disposal of property, plant and equipment
-
Proceeds from sale or restructuring of operations
-
-
Proceeds from settlement of company-owned life insurance contracts
Company-owned life insurance payments
(5
)
(5
)
(4
)
Funds restricted for specific transactions
(5
)
(9
)
(74
)
Reimbursement from restricted investments
Proceeds from sale of securities
Purchase of securities
(53
)
(47
)
(87
)
Other investing cash flows
(10
)
-
-
Total cash flows used by investing activities from continuing operations
(51
)
(109
)
(102
)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Repayment of long-term debt
-
-
(250
)
Proceeds from (repayment of) short-term debt
(16
)
(365
)
Repurchase of common stock
(380
)
(300
)
(200
)
Debt issuance costs
-
-
(2
)
Cash dividends paid
(78
)
(76
)
(70
)
Stock based compensation employee withholding taxes paid in cash
(5
)
(11
)
(9
)
Total cash flows used by financing activities from continuing operations
(479
)
(371
)
(896
)
CASH USED BY CONTINUING OPERATIONS
(68
)
(186
)
(805
)
Cash provided (used) by discontinued operations
Operating cash flows
(51
)
(51
)
(406
)
Investing cash flows
-
-
1,658
Total cash provided (used) by discontinued operations
(51
)
(51
)
1,252
Effect of currency exchange rate changes on cash and cash equivalents
(11
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(117
)
(229
)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS - END OF YEAR
$
$
$
CHANGES IN ASSETS AND LIABILITIES(a)
Accounts receivable
$
$
$
(23
)
Inventories
(7
)
(141
)
Trade and other payables
(112
)
Other assets and liabilities
(4
)
(107
)
CHANGE IN OPERATING ASSETS AND LIABILITIES
$
$
(58
)
$
(237
)
SUPPLEMENTAL DISCLOSURES
Interest paid
$
$
$
Income taxes paid (including discontinued operations)
(a)	Excludes changes resulting from operations acquired or sold.
See Notes to Consolidated Financial Statements.
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation and basis of presentation
The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and U.S. Securities and Exchange Commission ("SEC") regulations. The Consolidated Financial Statements include the accounts of Ashland Inc. ("Ashland") and its majority owned subsidiaries and, when applicable, entities for which Ashland has a controlling financial interest or is the primary beneficiary. Investments in joint ventures and 20% to 50% owned affiliates where Ashland has the ability to exert significant influence are accounted for under the equity method. Ashland had no significant equity method investments for any of the periods presented. All intercompany transactions and balances have been eliminated.
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. See Note Q for more information.
Use of estimates, risks and uncertainties
The preparation of Ashland’s 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.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and highly liquid investments maturing within three months after purchase.
Allowance for credit losses on accounts receivable
Ashland records an allowance for credit losses using the expected credit loss model. Ashland estimates expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. When measuring expected credit losses, Ashland pools assets with similar country risk and credit risk characteristics. Each period, the allowance for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives of the assets. No significant credit losses were incurred in 2024, 2023 and 2022.
A progression of activity in the allowance for credit losses is presented in the following table.
(In millions)
Allowance for credit losses - beginning of year
$
$
$
Adjustments to allowances for credit losses(a)
-
Reserves utilized
(1
)
(2
)
(1
)
Allowance for credit losses - end of year
$
$
$
(a)Adjustments to allowances for credit loses were less than $1 million for fiscal 2024.
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 summarizes Ashland’s inventories as of the Consolidated Balance Sheet dates.
(In millions)
Finished products
$
$
Raw materials, supplies and work in process
$
$
A progression of activity in the inventory reserves for obsolete and slow moving inventories, which reduce the amounts of finished products and raw materials, supplies and work in process reported, is presented in the following table.
(In millions)
Inventory reserves - beginning of year
$
$
$
Adjustments to inventory reserves
Reserves utilized
(4
)
(3
)
(3
)
Inventory reserves - end of year
$
$
$
Property, plant and equipment
The cost of property, plant and equipment is depreciated by the straight-line method over the estimated useful lives of the assets. Buildings are depreciated principally over 12 to 35 years and machinery and equipment principally over 2 to 25 years. Such costs are periodically reviewed for recoverability when impairment indicators are present. Such indicators include, among other factors, operating losses, unused capacity, market value declines and technological obsolescence. Recorded values of asset groups of property, plant and equipment that are not expected to be recovered through undiscounted future net cash flows are written down to current fair value, which generally is determined from estimated discounted future net cash flows (assets held for use) or net realizable value (assets held for sale). See Note F for additional information related to property, plant and equipment.
Leasing arrangements
Ashland determines if an arrangement contains a lease at inception based on whether or not it has the right to control the asset during the contract period and other facts and circumstances.
Operating lease right-of-use assets represent Ashland’s right to use an underlying asset for the lease term and lease liabilities represent Ashland’s obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded within the Consolidated Balance Sheet and are expensed on a straight-line basis over the lease term within the Statements of Consolidated Comprehensive Income (Loss). The lease term is determined by assuming the exercise of renewal options that are reasonably certain. As most leases do not provide an implicit interest rate, Ashland used its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. When contracts contain lease and non-lease components, Ashland generally accounts for both components as a single lease component. For additional information on leasing arrangements, see Note J.
Goodwill and other intangibles
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. Ashland reviews goodwill for impairment based on its identified reporting units. Ashland determined that its reporting units are Life Sciences, Personal Care, Specialty Additives and Intermediates. Ashland tests goodwill for impairment by comparing the carrying value to the estimated fair value of its reporting units. If the fair value of the reporting unit is lower than its carrying amount, goodwill is written down for the amount by which the carrying amount exceeds the fair value. However, the loss recognized cannot exceed the carrying amount of goodwill.
Using the quantitative approach, Ashland makes various estimates and assumptions in determining the estimated fair value of each reporting unit using a combination of discounted cash flow models and valuations based on earnings multiples for guideline public companies in each reporting unit’s industry peer group, when externally quoted market prices are not readily available. Discounted cash flow models are
reliant on various assumptions, including projected business results, long-term growth factors and weighted-average cost of capital. Management judgment is involved in estimating these variables, and they include uncertainties since they are forecasting future events. Ashland performs sensitivity analyses by using a range of inputs to confirm the reasonableness of the long-term growth rate and weighted average cost of capital. Additionally, Ashland compares the indicated equity value to Ashland’s market capitalization and evaluates the resulting implied control premium/discount to determine if the estimated enterprise value is reasonable.
Ashland tests at least annually its indefinite-lived intangible assets, principally trademarks and trade names. If the carrying value of an individual indefinite-lived intangible asset exceeds its fair value, such individual indefinite-lived intangible asset is written down by an amount equal to such excess. Ashland performs a quantitative impairment test for the trademarks and trade names during which, trademarks and trade names are valued using a “relief-from-royalty” valuation method compared to the carrying value. Assumptions inherent in the valuation methodologies include, but are not limited to, such estimates as future projected business results, growth rates, the weighted-average cost of capital for a market participant, and royalty rates.
Finite-lived intangible assets principally consist of certain trademarks and trade names, intellectual property, and customer lists. These intangible assets 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 reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Ashland monitors these changes and events on at least a quarterly basis. The intangibles amortization expense caption within the Statement of Consolidated Comprehensive Income (Loss) includes amortization expense related to 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. For further information on goodwill and other intangible assets, see Note G.
Derivative instruments
Ashland regularly uses derivative instruments to manage its exposure to fluctuations in foreign currencies and certain commodities. All derivative instruments are recognized as either assets or liabilities on the balance sheet and are measured at fair value. Changes in the fair value of all derivatives are recognized immediately in the Statements of Consolidated Comprehensive Income (Loss) unless the derivative qualifies as a hedge of future cash flows or a hedge of a net investment in a foreign operation. Gains and losses related to an instrument that qualifies for hedge accounting are either recognized in the Statements of Consolidated Comprehensive Income (Loss) immediately to offset the gain or loss on the hedged item, or deferred and recorded in the stockholders’ equity section of the Consolidated Balance Sheets as a component of accumulated other comprehensive income and subsequently recognized in the Statements of Consolidated Comprehensive Income (Loss) when the hedged item affects net income. For additional information on derivative instruments, see Note E.
Restricted investments
During 2015, Ashland placed $335 million of insurance proceeds into a renewable annual trust for asbestos (Asbestos trust) that Ashland determined is restricted for the purpose of paying ongoing and future litigation defense and claim settlement costs incurred in conjunction with asbestos claims. As of September 30, 2024 and 2023, the funds within the Asbestos trust had a balance of $248 million and $243 million, respectively, and were primarily invested in public equity, U.S. government bonds and investment grade corporate bond investments with a portion maintained in demand deposits. These funds are presented primarily as noncurrent assets within the restricted investments caption of the Consolidated Balance Sheets, with $36 million and $37 million classified within other current assets in the Consolidated Balance Sheets as of September 30, 2024 and 2023, respectively.
During 2021, Ashland established a renewable annual trust for environmental remediation (Environmental trust) that Ashland determined is restricted for ongoing and future environmental remediation and related litigation costs. As of September 30, 2024 and 2023, the funds within the Environmental trust had a balance of $120 million and $124 million, respectively, and were primarily invested in public equity, U.S. government bonds and investment grade corporate bond investments with a portion maintained in demand deposits. These funds are presented primarily as noncurrent assets within the restricted investments caption of the Consolidated Balance Sheets, with $37 million and $40 million classified within other current assets in the Consolidated Balance Sheets as of September 30, 2024 and 2023, respectively.
The funds within these trusts are classified as investment securities reported at fair value. Interest income and gains and losses (realized and unrealized) on the investment securities are reported in the net interest and other expense (income) caption in the Statements of Consolidated Comprehensive Income (Loss). See Note E for additional information regarding the fair value of these investments within the trusts.
Revenue recognition
Ashland’s revenue is measured as the amount of consideration it expects to receive in exchange for transferring goods and is recognized when performance obligations are satisfied under the terms of contracts or purchase orders with customers. Ashland generally utilizes standardized language for the terms of contracts or purchase orders.
A performance obligation is deemed to be satisfied by Ashland when control of the product or service is transferred to the customer. The transaction price of a contract or purchase order, or the amount Ashland expects to receive upon satisfaction of all performance obligations, is determined by reference to the applicable terms. Ashland generally collects the cash from its customers within 60 days of the product delivery date. Sales and other similar taxes collected from customers on behalf of third parties are excluded from the contract price.
All of Ashland’s revenue is derived from contracts or purchase orders with customers, and nearly all contracts or purchase orders with customers contain a single performance obligation for the transfer of goods where such performance obligation is satisfied at a point in time. Control of a product is deemed to be transferred to the customer generally upon shipment or delivery. Costs for shipping and handling activities, whether performed before or after the customer obtains control of the goods, are accounted for as fulfillment costs when not reimbursed.
Costs incurred to obtain contracts with customers are not significant and are expensed immediately as the period of performance is generally one year or less. Ashland records credit losses in specific situations when it is determined that the customer is unable to meet its financial obligation.
Expense recognition
Cost of sales include material and production costs, as well as the costs of inbound freight, purchasing and receiving, inspection, warehousing, internal transfers and all other distribution network costs. Selling, general and administrative expense includes sales and marketing costs, advertising, customer support, environmental remediation, corporate and divisional administrative and other costs. Advertising costs ($1 million in 2024, $2 million in 2023 and $2 million in 2022) and research and development costs ($55 million in 2024, $51 million in 2023 and $55 million in 2022) are expensed as incurred.
Income taxes
Ashland is subject to income taxes in the United States and numerous foreign jurisdictions. The provision for income taxes includes income taxes paid, currently payable or receivable, and deferred taxes. Ashland recognizes the income tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. Ashland evaluates and adjusts these accruals based on changing facts and circumstances. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax loss and credit carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the period in which the enactment date occurs. Taxes due on Global Intangible Low-Taxed Income ("GILTI") inclusions in U.S. are recognized as a current period expense when incurred. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized. In the event that the actual outcome of tax consequences differs from Ashland’s estimates and assumptions due to changes or future events such as tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans, the resulting change to the provision for income taxes could have a material effect on the Statements of Consolidated Comprehensive Income (Loss) and Consolidated Balance Sheets. For additional information on income taxes, see Note K.
The Organization for Economic Co-operation and Development (“OECD”) introduced Global Anti-Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules under which multi-national entities would pay a minimum level of tax. Numerous countries, including European Union member states, have enacted or are expected to enact legislation to effectuate the new rules. In addition, several non-EU countries have proposed and/or adopted legislation consistent with the global minimum tax framework. Important details of these minimum tax developments are still to be determined and, in some cases, enactment and timing remain uncertain. Based on current legislation and available guidance, these rules will be effective for Ashland in its fiscal year beginning October 1, 2024. Ashland plans to treat the Pillar Two global minimum tax as a period cost. Currently, Ashland expects these Pillar Two minimum tax rules will result in an increase in Ashland’s effective tax rate, but the overall impact will not have a material impact on Ashland’s financial condition, results of operations, or cash flows in the fiscal year ending September 30, 2025.
A progression of activity in the tax valuation allowances is presented in the following table.
(In millions)
Tax valuation allowances - beginning of year
$
$
$
Adjustments to valuation allowances
(1
)
(19
)
Reserves utilized
Tax valuation allowances - end of year
$
$
$
Asbestos-related litigation
Ashland is subject to liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims result from indemnification obligations undertaken in 1990 in connection with the sale of Riley Stoker Corporation ("Riley") and the acquisition of Hercules in November 2008. Although Riley, a former subsidiary, was neither a producer nor a manufacturer of asbestos, its industrial boilers contained some asbestos-containing components provided by other companies. Hercules, an indirect wholly-owned subsidiary of Ashland, has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products sold by one of Hercules’ former subsidiaries to a limited industrial market.
Ashland retained Gnarus Advisors LLC ("Gnarus") to assist in developing and annually updating independent reserve estimates for future asbestos claims and related costs given various assumptions. The methodology used to project future asbestos costs is based largely on Ashland’s recent experience, including claim-filing and settlement rates, disease mix, open claims, and litigation defense. Ashland’s claim experience is compared to the results of previously conducted epidemiological studies estimating the number of people likely to develop asbestos-related diseases. Those studies were undertaken in connection with national analyses of the population expected to have been exposed to asbestos. Using that information, Gnarus estimates a range of the number of future claims that may be filed, as well as the related costs that may be incurred in resolving those claims. Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs using the results of a non-inflated, non-discounted approximate 40-year model. For additional information on asbestos-related litigation, see Note M.
Environmental remediation
Accruals for environmental remediation are recognized when it is probable a liability has been incurred and the amount of that liability can be reasonably estimated. Such costs are charged to expense if they relate to the remediation of conditions caused by past operations or are not expected to mitigate or prevent contamination from future operations. Accruals for environmental remediation reflect Ashland's estimates of the most likely costs that will be incurred over an extended period of time to remediate identified conditions for which costs are reasonably estimatible and probable of being incurred, without regard to any third-party recoveries, and are regularly adjusted as environmental assessments and remediation efforts continue. For additional information on environmental remediation, see Note M.
Pension and other postretirement benefits
The funded status of Ashland’s pension and other postretirement benefit plans is recognized in the Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at September 30, the measurement date. For defined benefit pension plans, the benefit obligation is the projected benefit obligation ("PBO") and for the other postretirement benefit plans, the benefit obligation is the accumulated postretirement benefit obligation ("APBO"). The PBO represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. The APBO represents the actuarial present value of postretirement benefits attributed to employee services already rendered. The measurement of the benefit obligation is based on Ashland’s estimates and actuarial valuations. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain assumptions that require judgment, including, but not limited to, estimates of discount rates, rate of compensation increases, interest rates and mortality rates. The fair value of plan assets represents the current market value of assets held by an irrevocable trust fund for the sole benefit of participants. For additional information regarding plan assumptions and the current financial position of the pension and other postretirement plans, see Note L.
Ashland recognizes the change in the fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement. The remaining components of pension and other postretirement benefits expense are recorded ratably on a quarterly basis. Pension and other postretirement benefits adjustments charged directly to cost of sales that are applicable to inactive participants are excluded from inventoriable costs. The service cost component of pension and other postretirement
benefits costs is allocated to each reportable segment; while the remaining components of pension and other postretirement benefits costs are recorded within the other net periodic benefit loss (income) caption on the Statements of Consolidated Comprehensive Income (Loss).
Foreign currency translation
Subsidiaries outside the United States primarily use the local currency as the functional currency. Upon consolidation, the results of operations of the subsidiaries and affiliates whose functional currency is other than the U.S. dollar are translated into U.S. dollars at the average exchange rates for the year while assets and liabilities are translated at year-end exchange rates. Adjustments to translate assets and liabilities into U.S. dollars are recorded in the stockholders’ equity section of the Consolidated Balance Sheets as a component of accumulated other comprehensive income (loss) and are included in net earnings only upon sale or substantial liquidation of the underlying foreign subsidiary or affiliated company.
During 2024, following the enactment by the Argentina government of a 50% peso devaluation against the dollar, Ashland recorded a $5 million currency devaluation charge within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss).
Stock incentive plans
Ashland recognizes compensation expense for stock incentive plans awarded to key employees and directors over the requisite service period based upon the grant-date fair value. Stock incentive awards are primarily in the form of restricted stock and restricted stock units, performance shares and other non-vested stock awards. Ashland utilizes several industry accepted valuation models to determine grant-date fair value. For further information concerning stock incentive plans, see Note O.
Earnings per share
The following is the computation of basic and diluted earnings per share ("EPS") from continuing operations attributable to Ashland. Earnings per share are reported under the treasury stock method. Stock Appreciation Rights ("SARs") and warrants for each reported year whose grant price was greater than the market price of Ashland Common Stock at the end of each fiscal year were not included in the computation of earnings per share from continuing operations per diluted share because the effect of these instruments would be antidilutive. The total number of these shares outstanding was 1.2 million for 2024, 2023 and 2022. The majority of these shares are for warrants with a strike price of $128.66.
(In millions except per share data)
Numerator
Numerator for basic and diluted EPS - Income from continuing operations, net of tax
$
$
$
Denominator
Denominator for basic EPS - Weighted-average common shares outstanding
Share based awards convertible to common shares
Denominator for diluted EPS - Adjusted weighted - average shares and assumed conversions
EPS from continuing operations
Basic
$
3.99
$
3.18
$
3.26
Diluted
$
3.95
$
3.13
$
3.20
Other accounting pronouncements
In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." The ASU was issued to improve transparency and disclosure requirements for the rate reconciliation, income taxes paid and other tax disclosures. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting this guidance.
In November 2023, the FASB issued ASU No. 2023-07 "Segment Reporting (Topic 280): Improvements to Reporting Segment Disclosures." The ASU was issued to improve reportable segment disclosure requirements, primarily through enhanced disclosures of significant segment expenses that are regularly provided to the chief operating decision maker and included within segment profit and loss. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, and applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this guidance.
In October 2023, the FASB issued ASU No. 2023-06 "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative." The amendments in this ASU represent changes to clarify or improve disclosures and presentation requirements of a variety of topics by aligning them with the SEC's regulations. The amendments to the various topics should be applied prospectively, and the effective date will be determined for each individual disclosure based on the effective date of the SEC's removal of the related disclosure. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, then this ASU will not become effective. Early adoption is prohibited. The Company does not expect the amendments in this ASU to have a material impact on the Ashland's Consolidated Financial Statements.
In December 2022, the Financial Accounting Standards Board ("FASB") issued ASU No. 2022-06 "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848." The ASU was issued to provide an update on ASU 2020-04 and ASU 2021-01 that were issued in March 2020 and January 2021, respectively, which provided practical expedients simplifying the U.S. GAAP treatment of certain reference rate related contract modifications including hedging relationships and other agreements. Specifically, the guidance eased the accounting burden of the modification of the reference rate of contracts where the underlying reference rate was the London Interbank Offered Rate ("LIBOR"). With the issuance of ASU 2022-06, the sunset date of Topic 848 has been deferred from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. This amendment did not have a material impact on Ashland's Consolidated Financial Statements.
NOTE B - DIVESTITURES
Nutraceuticals business sale
On August 30, 2024, Ashland completed the sale of its Nutraceuticals business to Turnspire Capital Partners LLC ("Turnspire"). Proceeds from the sale were approximately $26 million, net of transaction costs. Ashland recorded a $99 million impairment charge primarily related to allocated goodwill, intangibles and property, plant and equipment within the income (loss) on acquisitions and divestitures, net caption of the Statements of Consolidated Comprehensive Income (Loss) for the twelve months ended September 30, 2024. The impairment charge includes the impact of the related inside tax basis differences associated with the impaired assets. The tax benefit associated with the expected disposition is included within the income tax expense (benefit) caption of the Statements of Consolidated Comprehensive Income (Loss). See Note K for additional details. Ashland also recorded a pre-tax loss on sale of $8 million following the completion of this divestiture, mainly related to working capital movements, within the income (loss) on acquisitions and divestitures, net caption of Statements of Consolidated Comprehensive Income (Loss) for the twelve months ended September 30, 2024. The income (loss) on acquisitions and divestitures, net caption also includes a reserve of $7 million for foreign VAT taxes associated with the entities transferred within the Statements of Consolidated Comprehensive Income (Loss) for the twelve months ended September 30, 2024.
The Nutraceuticals business was included within Ashland's Life Sciences segment and served the broader nutrition market.
Ashland determined this transaction did not qualify for discontinued operations treatment since it neither represented a strategic shift nor did it have a major effect on Ashland's operations and financial results.
Performance Adhesives
On February 28, 2022, Ashland completed the sale of its Performance Adhesives business to Arkema, a French société anonyme. Proceeds from the sale were approximately $1.7 billion, net of transaction costs. Ashland recognized a $726 million after-tax gain on sale within the income (loss) from discontinued operations caption of the Statements of Consolidated Comprehensive Income (Loss) for the twelve months ended September 30, 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 Consolidated Cash Flows, while the assets and liabilities that were sold have been classified within the 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 $9 million during the twelve months ended September 30, 2022.
Other manufacturing facility sales
During 2023, Ashland entered into and completed a definitive sale agreement to sell a Specialty Additives manufacturing facility for less than $1 million. The net asset value related to this site was $4 million at September 30, 2022. Ashland recorded a $4 million impairment charge within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) during the twelve months ended September 30, 2023 related to this site.
Ashland determined this transaction did not qualify for discontinued operations treatment since it neither represented a strategic shift nor did it have a major effect on Ashland’s operations and financial results.
Other corporate assets
During 2023, Ashland completed the sale of two excess land properties with a net book value of $2 million. Ashland received net proceeds of approximately $9 million and recorded a pre-tax gain of $7 million within the income (loss) on acquisitions and divestitures caption within the Statement of Consolidated Comprehensive Income (Loss) for 2023.
During 2022, Ashland completed the sale of two excess land properties with a net book value of $8 million as of September 30, 2021. Ashland received net proceeds of approximately $50 million and recorded pre-tax gain of $42 million within the income (loss) on acquisitions and divestitures caption within the Statement of Consolidated Comprehensive Income (Loss) for 2022.
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 and activities 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 and are discussed further within this note.
Due to the ongoing assessment of certain matters associated with previous divestitures, subsequent adjustments to these divestitures may continue in future periods in the discontinued operations caption in the Statements of Consolidated Comprehensive Income (Loss).
The following divested businesses represent disposal groups that qualified as discontinued operations in previous periods and impacted discontinued operations:
•The Performance Adhesives business divested in 2022;
•The Composites business and Marl facility (Composites/Marl facility) divested in 2019;
•The separation of Valvoline Inc. (Valvoline) business divested in 2017;
•The sale of Ashland Water Technologies (Water Technologies) business divested in 2014; 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 Riley Stoker Corporation (Riley), a former subsidiary, which qualified as a discontinued operation and from the acquisition during 2009 of Hercules LLC (formerly Hercules Incorporated), 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 M 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 each of the years ended September 30.
(In millions)
Income (loss) from discontinued operations
Performance Adhesives
$
-
$
(1
)
$
Composites/Marl facility
(3
)
(1
)
-
Valvoline
(7
)
Water Technologies
(5
)
-
Distribution
(7
)
(5
)
(9
)
Asbestos-related litigation
(21
)
(6
)
(17
)
Gain on disposal of discontinued operations
Performance Adhesives
-
-
1,063
Income (loss) before taxes
(34
)
1,068
Income tax benefit (expense)
Benefit (expense) related to income (loss) from discontinued operations
Performance Adhesives
(2
)
Composites/Marl facility
-
Valvoline
-
-
Water Technologies
-
(1
)
Distribution
Asbestos-related litigation
Expense related to gain on disposal of discontinued operations
Performance Adhesives
-
-
(337
)
Income (loss) from discontinued operations, net of income taxes
$
(30
)
$
$
Performance Adhesives divestiture
The following table presents a reconciliation of the captions within Ashland’s Statements of Consolidated Income (Loss) for the income from discontinued operations attributable to the Performance Adhesives segment for the year ended September 30.
(In millions)
Income (loss) from discontinued operations attributable to Performance Adhesives
Sales
$
Cost of sales
(122
)
Selling, general and administrative expense
(12
)
Research and development expense
(4
)
Intangible amortization expense
-
Pretax operating income of discontinued operations
Other net periodic benefit loss (income)
-
Pretax income of discontinued operations
Income tax expense
Income from discontinued operations
$
NOTE D - RESTRUCTURING ACTIVITIES
Restructuring activities
Ashland periodically implements company-wide and targeted 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. Ashland recorded severance expense of $25 million and $5 million during 2024 and 2023, respectively, within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss). As of September 30, 2024, the severance reserve associated with this program was $18 million and is recorded within accrued expenses and other liabilities in the Consolidated Balance Sheets.
The following table details at September 30, 2024, the amount of restructuring severance reserves related to this program. The severance reserves were primarily recorded within accrued expenses and other liabilities in the Consolidated Balance Sheet as of September 30, 2024.
(In millions)
Severance costs
Balance as of September 30, 2023
$
Restructuring reserve
Utilization (cash paid)
(10
)
Balance as of September 30, 2024
$
Fiscal 2023 Life Sciences restructuring program
During 2023, Ashland implemented a restructuring program within the Nutraceuticals business of the Life Sciences segment. Ashland recorded severance expense of $1 million during 2023 within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss). As of September 30, 2024, the severance reserve associated with this program was zero.
Fiscal 2020 restructuring costs
During 2022, Ashland realized severance income of $2 million attributable to executive management changes and business management changes within the organization initiated in fiscal 2020 within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss). As of September 30, 2024, the severance reserve associated with this transition was zero.
Plant optimization actions
During 2024, Ashland incurred $55 million of accelerated depreciation for product line optimization activities associated with two Specialty Additives manufacturing facilities, which was recorded within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss). Ashland's portfolio optimization actions include the consolidation of Ashland's carboxymethylcellulose (CMC) and industrial methylcellulose (MC) capacity and rebalancing of the hydroxyethylcellulose (HEC) network.
During 2024, Ashland incurred $2 million of accelerated depreciation for product line optimization activities associated with a Personal Care manufacturing facility in Summerville, South Carolina, which was recorded within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss).
NOTE E - FAIR VALUE MEASUREMENTS
As required by U.S. GAAP, 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. The three levels within the fair value hierarchy are described as follows.
Level 1 - Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3 - Unobservable inputs for the asset or liability for which there is little, if any, market activity at the measurement date. Unobservable inputs reflect Ashland’s own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include Ashland’s own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment.
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 September 30, 2024. For additional information on fair value hierarchy measurements of pension plan asset holdings, see Note L.
Quoted prices
in active
Significant
markets for
other
Significant
identical
observable
unobservable
Carrying
Total fair
assets
inputs
inputs
(In millions)
value
value
Level 1
Level 2
Level 3
Assets
Cash and cash equivalents
$
$
$
$
-
$
-
Restricted investments(a)(b)
-
-
Investments of captive insurance company(c)
-
-
Foreign currency derivatives(d)
-
-
Total assets at fair value
$
$
$
$
$
-
Liabilities
Foreign currency derivatives(e)
$
$
$
-
$
$
-
Commodity derivatives(e)
-
-
Total liabilities at fair value
$
$
$
-
$
$
-
(a)Includes $295 million within restricted investments and $73 million within other current assets in the Consolidated Balance Sheets.
(b)Includes $248 million related to the Asbestos trust and $120 million related to the Environmental trust. See Note A for additional details.
(c)Included in other noncurrent assets in the Consolidated Balance Sheets.
(d)Included in accounts receivable in the Consolidated Balance Sheets.
(e)Included in accrued expenses and other liabilities in the Consolidated Balance Sheets.
The following table summarizes financial instruments subject to recurring fair value measurements as of September 30, 2023.
Quoted prices
in active
Significant
markets for
other
Significant
identical
observable
unobservable
Carrying
Total fair
assets
inputs
inputs
(In millions)
value
value
Level 1
Level 2
Level 3
Assets
Cash and cash equivalents
$
$
$
$
-
$
-
Restricted investments(a)(b)
-
-
Investments of captive insurance company(c)
-
-
Foreign currency derivatives(d)
-
-
Total assets at fair value
$
$
$
$
$
-
Liabilities
Foreign currency derivatives(e)
$
$
$
-
$
$
-
Commodity derivatives(e)
-
-
Total liabilities at fair value
$
$
$
-
$
$
-
(a)Includes $290 million within restricted investments and $77 million within other current assets in the Consolidated Balance Sheets.
(b)Includes $243 million related to the Asbestos trust and $124 million related to the Environmental trust. See Note A for additional details.
(c)Included in other noncurrent assets in the Consolidated Balance Sheets.
(d)Included in accounts receivable in the Consolidated Balance Sheets.
(e)Included in accrued expenses and other liabilities in the Consolidated Balance Sheets.
Restricted investments
As discussed in Note A, Ashland maintains certain investments in a company restricted renewable annual trusts for the purpose of paying future asbestos indemnity and defense costs and future environmental remediation and related litigation costs. The financial instruments are designated as investment securities, classified as Level 1 measurements within the fair value hierarchy. These securities were classified primarily as noncurrent restricted investment assets, with $73 million and $77 million classified within other current assets, in the Consolidated Balance Sheets for the periods ended in September 30, 2024, and 2023, respectively.
The following table presents gross unrealized gains and losses for the restricted securities as of September 30, 2024 and 2023:
Gross
Gross
(In millions)
Adjusted Cost
Unrealized Gain
Unrealized Loss
Fair Value
As of September 30, 2024
Demand deposit
$
$
-
$
-
$
Equity mutual fund
-
Fixed income mutual fund
-
(28
)
Fair value
$
$
$
(28
)
$
As of September 30, 2023
Demand deposit
$
$
-
$
-
$
Equity mutual fund
(2
)
Fixed income mutual fund
-
(48
)
Fair value
$
$
$
(50
)
$
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 during 2024, 2023 and 2022.
(In millions)
Investment income(a)
$
$
$
Net gains (losses)(a)
(102
)
Funds restricted for specific transactions
Disbursements
(79
)
(58
)
(35
)
(a)Included in the net interest and other expense (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 2024, 2023 and 2022 within the Statements of Consolidated Comprehensive Income (Loss).
(In millions)
Foreign currency derivative gains (losses)
$
$
$
(40
)
The following table summarizes the fair values of the outstanding foreign currency derivatives as of September 30, 2024, and 2023 included in accounts receivable and accrued expenses and other liabilities of the Consolidated Balance Sheets.
(In millions)
Foreign currency derivative assets
$
$
Notional contract values
Foreign currency derivative liabilities
$
$
Notional contract values
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. See Note A for more information.
The following table summarizes the gains and losses recognized during 2024, 2023, 2022 within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss).
(In millions)
Commodity derivative gains (losses)
$
(6
)
$
(3
)
$
The following table summarizes the fair values of the outstanding commodity derivatives as of September 30, 2024 and 2023 included in accounts receivable and accrued expenses and other liabilities of the Consolidated Balance Sheets.
(In millions)
Commodity derivative assets
$
-
$
-
Notional contract values
Commodity derivative liabilities
$
$
Notional contract values
Other financial instruments
At September 30, 2024 and 2023, Ashland’s long-term debt (including the current portion and excluding debt issuance cost discounts) had carrying values of $1,361 million and $1,327 million, respectively, compared to a fair value of $1,327 million and $1,160 million, respectively. The fair values of long-term debt are based on quoted market prices.
NOTE F - PROPERTY, PLANT AND EQUIPMENT
The following table describes the various components of property, plant and equipment within the Consolidated Balance Sheets as of September 30, 2024 and 2023.
(In millions)
Land(a)
$
$
Buildings
Machinery and equipment
2,513
2,371
Construction in progress
Total property, plant and equipment (gross)
3,316
3,211
Accumulated depreciation
(2,013
)
(1,838
)
Total property, plant and equipment (net)
$
1,303
$
1,373
(a)Includes $10 million of finance lease asset as of September 30, 2024.
The following table summarizes various property, plant and equipment charges recognized during 2024, 2023, 2022 within the Statements of Consolidated Comprehensive Income.
(In millions)
Depreciation(a)
$
$
$
Capitalized interest
(a)Includes $57 million of accelerated depreciation during 2024 related to plant optimization actions. See Note D for additional details.
NOTE G - GOODWILL AND OTHER INTANGIBLES
Goodwill
Ashland performed its annual goodwill impairment test using the quantitative approach as of July 1, 2024, and concluded that the reporting unit fair values for all reporting units exceeded their carrying values. No impairment existed as of that date and no subsequent impairment indicators have been identified.
The following is a progression of goodwill by reportable segment for the years ended September 30, 2024 and 2023.
(In millions)
Life
Sciences
Personal Care(a)
Specialty
Additives(a)
Intermediates(a)
Total
Balance at September 30, 2022
$
$
$
$
-
$
1,312
Currency translation and other
-
Balance at September 30, 2023
-
1,362
Currency translation and other
-
Nutraceuticals divestiture(b)
(17
)
-
-
-
(17
)
Balance at September 30, 2024
$
$
$
$
-
$
1,381
(a)As of September 30, 2024 and 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.
(b)Ashland allocated $17 million to the Nutraceuticals disposal group during 2024. See Note B for additional details.
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 performed its annual impairment test for other indefinite lived intangible assets using the quantitative approach as of July 1, 2024 and concluded that the assets fair values exceeded their carrying values. No impairment existed as of that date.
Other intangible assets were comprised of the following as of September 30, 2024 and 2023.
Gross
Net
Gross
Net
carrying
Accumulated
carrying
carrying
Accumulated
carrying
(In millions)
amount
amortization
amount
amount
amortization
amount
Definite-lived intangible assets
Trademarks and trade names(a)
$
$
(42
)
$
$
$
(43
)
$
Intellectual property(b)
(613
)
(581
)
Customer and supplier relationships(c)
(433
)
(417
)
Total definite-lived intangible assets
1,561
(1,088
)
1,649
(1,041
)
Indefinite-lived intangible assets
Trademarks and trade names
-
-
Total intangible assets
$
1,839
$
(1,088
)
$
$
1,927
$
(1,041
)
$
(a)Ashland allocated $7 million to the Nutraceuticals disposal group during 2024. See Note B for additional details.
(b)Ashland allocated $17 million to the Nutraceuticals disposal group during 2024. See Note B for additional details.
(c)Ashland allocated $45 million to the Nutraceuticals disposal group during 2024. See Note B for additional details.
Amortization expense recognized on intangible assets was $76 million for 2024, $93 million for 2023 and $94 million for 2022, and is included in the intangibles amortization expense caption of the Statements of Consolidated Comprehensive Income (Loss). As of September 30, 2024, all of Ashland’s intangible assets that had a carrying value were being amortized except for certain trademarks and trade names that have been determined to have indefinite lives. Estimated amortization expense for future periods is $70 million in 2025, $68 million in 2026, $47 million in 2027, $44 million in 2028 and $39 million in 2029. The amortization expense for future periods is an estimate. Actual amounts may change from such estimated amounts due to fluctuations in foreign currency exchange rates, additional intangible asset acquisitions and divestitures, potential impairment, accelerated amortization, or other events.
Goodwill and Other Intangible assets
Ashland’s assessment of an impairment on any of these assets classified currently as having indefinite lives, including goodwill, could change in future periods if significant events happen and/or circumstances change that effect the previously mentioned assumptions such as: a significant change in projected business results, a divestiture decision, increase in Ashland’s weighted-average cost of capital rates, decrease in growth rates or assumptions, economic deterioration that is more severe or of a longer duration than anticipated, or another significant economic event.
NOTE H - DEBT
The following table summarizes Ashland’s current and long-term debt at September 30, 2024 and 2023.
(In millions)
3.375% Senior Notes, due 2031
$
$
2.00% Senior Notes, due 2028 (Euro 500 million principal)
6.875% notes, due 2043
6.50% junior subordinated notes, due 2029
Other(a)
(8
)
Total debt
1,349
1,330
Short-term debt
-
Long-term debt (less debt issuance costs)
$
1,349
$
1,314
(a)Other includes $12 million and $13 million of debt issuance costs as of September 30, 2024 and 2023, respectively. The current portion of the long-term debt was zero for both September 30, 2024 and 2023.
At September 30, 2024, Ashland’s total debt had an outstanding principal balance of $1,390 million, discounts of $29 million and debt issuance costs of $12 million. As of September 30, 2024, Ashland had no long-term debt (excluding debt issuance costs) maturing within the next 2 years, $4 million due in fiscal 2027 and $558 million in 2028.
Credit Agreements and Refinancing
2022 Credit Agreement
During July 2022, Ashland, through two of its subsidiaries, enacted an amendment to the 2020 credit agreement. The amended credit agreement (the 2022 Credit Agreement) provides for a $600 million five-year revolving credit facility (the 2022 Revolving Credit Facility). The 2022 Credit Agreement and the obligations of Ashland Services B.V. under the 2022 Revolving Credit Facility are guaranteed by Ashland. The borrowing capacity remaining under the 2022 Credit Agreement was $596 million, which reflects the full $600 million Revolving Credit Facility less a reduction of $4 million for letters of credit outstanding at September 30, 2024.
At Ashland’s option, loans issued under the 2022 Credit Agreement will bear interest at (a) in the case of loans denominated in U.S. dollars, either Term SOFR or an alternate base rate and (b) in the case of loans denominated in Euros, EURIBOR, in each case plus the applicable interest rate margin. Loans will initially bear interest at Term SOFR or EURIBOR plus 1.250% per annum, in the case of Term SOFR borrowings or EURIBOR borrowings, respectively, or at the alternate base rate plus 0.250% per annum, in the case of alternate base rate borrowings, through and including the date of delivery of a quarterly compliance certificate and thereafter the interest rate will fluctuate between Term SOFR or EURIBOR plus 1.250% per annum and Term SOFR or EURIBOR plus 1.750% per annum (or between the alternate base rate plus 0.250% per annum and the alternate base rate plus 0.750% per annum), based upon the Consolidated Net Leverage Ratio (as defined in the 2022 Credit Agreement) at such time. Term SOFR borrowings are subject to a credit spread adjustment of 0.10% per annum. In addition, the Company will initially be required to pay fees of 0.125% per annum on the daily unused amount of the 2022 Revolving Credit Facility through and including the date of delivery of a quarterly compliance certificate, and thereafter the fee rate will fluctuate between 0.125% and 0.275% per annum, based upon the Consolidated Net Leverage Ratio. Borrowings under the 2022 Credit Agreement may be prepaid at any time without premiums.
As a result of the amendment of the 2020 Credit Agreement, Ashland recognized a $1 million charge for accelerated amortization of previously capitalized debt issuance costs during 2022, which is included in the net interest and other expense (income) caption of the Statements of Consolidated Comprehensive Income (Loss). Ashland also incurred $2 million of new debt issuance costs in connection with the 2022 Credit Agreement, of which $1 million was expensed immediately during 2022 within the net interest and other expense (income) caption of the Statements of Consolidated Comprehensive Income (Loss). The remaining balance is amortized using the straight-line method.
The 2022 Credit Agreement contains financial covenants for leverage and interest coverage ratios akin to those in effect under the 2020 Credit Agreement. The 2022 Credit Agreement contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional indebtedness, further negative pledges, investments, mergers, sale of assets and restricted payments, and other customary limitations.
Debt repayments and repurchases
Cash repatriation
During 2024 and 2023, Ashland repatriated approximately $305 million and $92 million, respectively, in cash.
2022 Debt repayments and repurchases
2020 Credit Agreement
During 2022, Ashland prepaid its Term loan A principal balance of $250 million.
Other Debt
During 2022, Ashland repaid the outstanding balance on its European short-term loan facility for $23 million.
Accounts receivable facilities and off-balance sheet arrangements
U.S. Accounts Receivable Sales Program
On March 17, 2021, a wholly-owned, bankruptcy-remote special purpose entity and consolidated Ashland subsidiary (SPE) entered into an agreement with a group of entities (buyers) to sell certain trade receivables, without recourse beyond the pledged receivables, of two other U.S. based Ashland subsidiaries. Under the agreement, Ashland can transfer whole receivables up to a limit established by the buyer, which was set at $125 million between February and October of each year and up to $100 million all other times. Ashland’s continuing involvement
is limited to servicing the receivables, including billing, collections and remittance of payments to the buyers as well as a limited guarantee on over-collateralization. The arrangement was set to terminate on May 31, 2023.
On April 14, 2023, Ashland entered into a Second and Third Amendments associated with this current program. As part of this amendment the buyer's limit was reduced to $115 million between April and October of each year, and up to $100 million at all other times. Additionally, the scheduled termination date was extended from May 31, 2023 to April 14, 2025.
On September 13, 2024, Ashland entered into a Fourth Amendment associated with this current program. As part of this amendment the buyer's limits were reduced to $80 million between September 13, 2024 to (and including) December 31, 2024 and up to $70 million from January 1, 2025 through the termination date of the agreement. Additionally, the scheduled termination date was extended from April 14, 2025 to September 11, 2026.
Ashland determined that any receivables transferred under this agreement are put presumptively beyond the reach of Ashland and its creditors, even in bankruptcy or other receivership. Ashland received a true sale at law and non-consolidation opinions to support the legal isolation of these receivables. Ashland accounts for the receivables transferred to buyers as sales. Ashland recognizes any gains or losses based on the excess of proceeds received net of buyer’s discounts and fees compared to the carrying value of the assets. Proceeds received, net of buyer’s discounts and fees, are recorded within the operating activities of the Statements of Consolidated Cash Flows. Losses on sale of assets, including related transaction expenses are recorded within the net interest and other expense (income) caption of the Statements of Consolidated Comprehensive Income (Loss). Ashland regularly assesses its servicing obligations and records them as assets or liabilities when appropriate. Ashland also monitors its obligation with regards to the limited guarantee and records the resulting guarantee liability when warranted. When applicable, Ashland discloses the amount of the receivable that serves as over-collateralization as a restricted asset.
Ashland recognized a $3 million loss within the Statements of Consolidated Comprehensive Income (Loss) for 2024 and 2023, respectively, within the net interest and other expense (income) caption associated with sales under the program. Ashland has recorded $71 million of sales against the buyer’s limit, which was $71 million at September 30, 2024, compared to $86 million of sales against the buyer's limit, which was $86 million at September 30, 2023. Ashland transferred $85 million and $106 million in receivables to the SPE as of September 30, 2024 and 2023, respectively. Ashland recorded liabilities related to its service obligations and limited guarantee as of September 30, 2024 and 2023 of less than $1 million.
As of September 30, 2024 and 2023, the year-to-date gross cash proceeds received for receivables transferred and derecognized were $323 million and $217 million, respectively, of which $322 million and $241 million were collected by Ashland in our capacity as a servicer of the receivables and remitted to the buyer. The difference between receivables transferred and derecognized versus collected of $1 million and $24 million for the periods ended September 30, 2024 and 2023, respectively, represents the impact of a net increase and a net reduction in account receivable sales volume during each year, respectively.
2018 foreign accounts receivable securitization
In October 2023, Ashland terminated its 2018 Foreign Accounts Receivable Securitization Facility. The program had no outstanding borrowings at its termination. This program did not meet criteria for sale accounting and was reported as secured borrowing under ASC 860. At September 30, 2023, the outstanding amount of accounts receivable transferred by Ashland to the purchaser was $124 million. The weighted-average interest rate for this instrument was 0.5% for 2023.
Foreign Accounts Receivable Sales Program
On October 19, 2023, Ashland entered, through an Ireland based, wholly-owned, bankruptcy-remote consolidated special purpose entity (the "SPE"), into a three-year agreement with a group of entities (buyers) to sell certain trade receivables, without recourse beyond the pledged receivables, of certain wholly-owned Ashland subsidiaries (Foreign Accounts Receivable Sales Program) primarily in Europe. Under the agreement, Ashland can transfer whole receivables up to a limit established by the buyer, which is currently set at €125 million. Ashland’s continuing involvement is limited to servicing the receivables, including billing, collections and remittance of payments to the buyers as well as a limited guarantee on over-collateralization.
Ashland determined that any receivables transferred under this agreement are put presumptively beyond the reach of Ashland and its creditors, even in bankruptcy or other receivership. Ashland received true sale at law and non-consolidation opinions from independent qualified legal advisors in the jurisdiction of each originating subsidiary to support the legal isolation of these receivables. Consequently, Ashland accounts for receivables transferred to buyers as part of this agreement as sales.
Through September 30, 2024, Ashland has sold $104 million in receivables under this agreement. Accordingly, Ashland recognized a loss of $3 million within the net interest and other expense (income) caption of the Statements of Consolidated Income (Loss) for the twelve months ended September 30, 2024. Ashland recorded $104 million in sales and gross proceeds received against the buyer's limit, which was $104 million at September 30, 2024. Ashland transferred $155 million in receivables to the SPE as of September 30, 2024. Ashland recorded less than $1 million in liabilities related to its service obligations and limited guarantee as of September 30, 2024.
Supply Chain Finance Program
During April 2024, Ashland authorized a financing program offered through JP Morgan and Taulia Alliance. Under this program, JP Morgan and its affiliates may purchase certain confirmed receivables directly from suppliers pursuant to the terms of a separate arrangement entered into between JPMorgan and such Suppliers. There were no changes to Ashland's standard payment terms with its suppliers in connection with this program. Ashland provides no guarantees to JP Morgan under this program. As of September 30, 2024, the program has not yet been offered to suppliers for utilization.
Other debt
At September 30, 2024 and 2023, Ashland held other debt totaling $71 million and $83 million, respectively, comprised primarily of the 6.50% notes due 2029 and other notes.
Covenants related to current Ashland debt agreements
Ashland’s debt contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional subsidiary indebtedness, restrictions on subsidiary distributions, investments, mergers, sale of assets and restricted payments and other customary limitations. As of September 30, 2024, Ashland was in compliance with all debt agreement covenant restrictions.
The maximum consolidated net leverage ratio permitted under Ashland’s most recent credit agreement (the 2022 Credit Agreement) is 4.0. The 2022 Credit Agreement defines the consolidated net leverage ratio as the ratio of consolidated indebtedness minus unrestricted cash and cash equivalents to consolidated EBITDA (Covenant Adjusted EBITDA) for any measurement period. In general, the 2022 Credit Agreement defines Covenant Adjusted EBITDA as net income plus consolidated interest charges, taxes, depreciation and amortization expense, fees and expenses related to capital market transactions and proposed or actual acquisitions and divestitures, restructuring and integration charges, certain environmental charges, non-cash stock and equity compensation expense, and any other nonrecurring expenses or losses that do not represent a cash item in such period or any future period; less any non-cash gains or other items increasing net income. In general, consolidated indebtedness includes debt plus all purchase money indebtedness, banker’s acceptances and bank guaranties, deferred purchase price of property or services, attributable indebtedness and guarantees. At September 30, 2024, Ashland’s calculation of the consolidated net leverage ratio was 2.3.
The minimum required consolidated interest coverage ratio under the 2022 Credit Agreement is 3.0. The 2022 Credit Agreement defines the consolidated interest coverage ratio as the ratio of Covenant Adjusted EBITDA to consolidated interest charges for any measurement period. At September 30, 2024, Ashland’s calculation of the consolidated interest coverage ratio was 7.8.
Net interest and other expense (income)
(In millions)
Interest expense(a)
$
$
$
Interest income
(10
)
(12
)
(4
)
Loss on the accounts receivables sale programs
Investment securities loss (income)(b)
(75
)
(42
)
Other financing costs
$
(24
)
$
$
(a)Includes $1 million of accelerated accretion and/or amortization for original issue discounts and debt issuance costs during 2022.
(b)Represents investment loss (income) related to the restricted investments discussed in Note E.
The following table details the debt issuance cost and original issue discount amortization included in interest expense during 2024, 2023 and 2022.
(In millions)
Normal amortization
$
$
$
Accelerated amortization(a)
-
-
Total
$
$
$
(a)Fiscal year 2022 includes $1 million of accelerated debt issuance costs for the 2020 credit agreement.
NOTE I - OTHER NONCURRENT ASSETS AND LIABILITIES
The following table provides the components of other noncurrent assets in the Consolidated Balance Sheets as of September 30.
(In millions)
Deferred compensation investments
$
$
Tax and tax indemnity receivables
Life insurance policies
Manufacturing catalyst supplies
Defined benefit plan assets
Equity and other unconsolidated investments
Land use rights
Environmental insurance receivables
Debt issuance costs
Other
$
$
Deferred compensation investments
Deferred compensation investments consist of insurance policies valued at cash surrender value. Gains and losses related to deferred compensation investments are immediately recognized within the selling, general and administrative expense caption on the Statements of Consolidated Comprehensive Income (Loss). These investments had gains of $8 million and $5 million during 2024 and 2023, respectively, and losses of $2 million during 2022. These cash inflows exclude company-owned life insurance death benefits of $1 million, $6 million and $3 million for 2024, 2023 and 2022, respectively.
The following table provides the components of other noncurrent liabilities in the Consolidated Balance Sheets as of September 30.
(In millions)
Tax liabilities
$
$
Environmental remediation reserves
Deferred compensation
Other
$
$
NOTE J - LEASING ARRANGEMENTS
Ashland leases certain office buildings, transportation equipment, warehouses and storage facilities, and equipment. Substantially all of Ashland’s leases are operating leases or short-term leases. Real estate leases represented over 85% of the total lease liability at September 30, 2024 and 2023, respectively. See Note A for additional information related to Ashland’s leasing policies.
The components of lease cost recognized within the Statements of Consolidated Comprehensive Income (Loss) were as follows:
(In millions)
Location
Lease cost:
Operating lease cost
Selling, General & Administrative
$
$
$
Operating lease cost
Cost of Sales
Variable lease cost
Selling, General & Administrative
Variable lease cost
Cost of Sales
Short-term leases
Cost of Sales
Total lease cost(a)
$
$
$
(a)Includes $2 million lease termination fee in fiscal 2022.
The following table summarizes Ashland’s lease assets and liabilities as presented in the Consolidated Balance Sheet at September 30:
(In millions)
Assets
Operating lease assets, net
$
$
Total lease assets
$
$
Liabilities
Current operating lease obligations
$
$
Non-current operating lease obligations
Total lease liabilities
$
$
Ashland often has options to renew lease terms for buildings and other assets. The exercise of lease renewal options are generally at Ashland's sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at Ashland's discretion. Ashland evaluates renewal and termination options at the lease commencement date to determine if it is reasonably certain to exercise the option on the basis of economic factors. The weighted average remaining lease term for operating leases as of September 30, 2024 and 2023 was approximately 19 years and 17 years, respectively.
Residual value guarantees are not common within Ashland's lease agreements nor are restrictions or covenants imposed by leases. Ashland has elected the practical expedient to combine lease and non-lease components. The discount rate implicit within the leases is generally not determinable. Therefore, Ashland determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate is determined using a buildup method resulting in an estimated range of secured borrowing rates matching the lease term and the currency of the jurisdiction in which lease payments are made, adjusted for impacts of collateral. Consideration was given to Ashland’s own relevant debt issuances as well as debt instruments of comparable companies with similar credit characteristics. The weighted average discount rate used to measure operating lease liabilities as of September 30, 2024 and 2023 was 3.8% and 3.5%, respectively. There are no leases that have not yet commenced but that create significant rights and obligations for Ashland.
Right-of-use assets exchanged for new operating lease obligations was $6 million and $32 million for the twelve months ended September 30, 2024 and 2023, respectively. During the second quarter of fiscal 2024, Ashland acquired a favorable lease asset for $10 million, which was recorded in the property, plant and equipment caption of the Consolidated Balance Sheet at September 30, 2024.
The following table provides cash paid for amounts included in the measurement of operating lease liabilities for during 2024, 2023 and 2022:
(In millions)
Operating cash flows from operating leases
$
$
$
Investing cash flows from finance lease
-
-
The following table summarizes Ashland's maturities of lease liabilities as of September 30, 2024:
(In millions)
$
Thereafter
Total lease payments
Less amount of lease payment representing interest
(40
)
Total present value of lease payments
$
NOTE K - INCOME TAXES
Income Tax Provision
A summary of the provision for income taxes related to continuing operations follows.
(In millions)
Current
Federal
$
$
(17
)
$
State
(5
)
Foreign
Deferred
(302
)
(32
)
(35
)
Income tax expense (benefit)
$
(223
)
$
(8
)
$
Temporary differences that give rise to significant deferred tax assets and liabilities as of September 30 are presented in the following table.
(In millions)
Deferred tax assets
Foreign net operating loss carryforwards(a)
$
$
Employee benefit obligations
Environmental, self-insurance and litigation reserves (net of receivables)
State net operating loss carryforwards (net of unrecognized tax benefits)(b)
Capital loss carryback/carryforward
-
Compensation accruals
Credit carryforwards (net of unrecognized tax benefits)(c)
Other items
Other lease liability
Goodwill and other intangibles(e)
-
Valuation allowances(d)
(64
)
(56
)
Total deferred tax assets
Deferred tax liabilities
Goodwill and other intangibles(e)
-
Property, plant and equipment
Right of use assets
Total deferred tax liabilities
Net deferred tax asset (liability)
$
$
(126
)
(a)Gross net operating loss carryforwards of $97 million will expire in future years beyond 2025 or have no expiration, and primarily relate to European and Asian subsidiaries.
(b)Apportioned net operating loss carryforwards generated of $473 million will expire in future years as follows: $53 million in 2025, $42 million in 2026 and the remaining balance in other future years.
(c)Credit carryforwards consist primarily of foreign tax credits of $15 million expiring in future years, and state tax credits of $2 million that will expire in 2026 and other future years.
(d)Valuation allowances primarily relate to certain state and foreign net operating loss carryforwards and certain federal credit carryforwards.
(e)The total gross amount of goodwill as of September 30, 2024 expected to be deductible for tax purposes is $36 million.
The U.S. and foreign components of income (loss) from continuing operations before income taxes and a reconciliation of the statutory federal income tax with the provision for income taxes follow. The foreign components of income from continuing operations disclosed in the following table exclude any allocations of certain corporate expenses incurred in the U.S.
(In millions)
Income (loss) from continuing operations before income taxes
United States
$
(228
)
$
(112
)
$
(133
)
Foreign
Income (loss) from continuing operations before income taxes
$
(24
)
$
$
Income taxes computed at U.S. statutory rate
$
(5
)
$
$
Increase (decrease) in amount computed resulting from
Tax law changes
(49
)
-
-
Non U.S. restructuring
(83
)
-
-
Uncertain tax positions
(26
)
(6
)
Deemed inclusions, foreign dividends and other restructuring(a)
Foreign tax credits
(22
)
(22
)
(32
)
Valuation allowance changes(b)
(7
)
(4
)
Research and development credits
(4
)
(3
)
(2
)
State taxes
(3
)
(1
)
(4
)
International rate differential
(14
)
(16
)
(27
)
Basis difference on stock sale
(100
)
-
-
Other items(c)
Income tax expense (benefit)
$
(223
)
$
(8
)
$
(a)2024 includes $17 million related to GILTI permanent adjustments and $11 million related to Subpart F. 2023 includes $19 million related to GILTI permanent adjustment and $12 million related to Subpart F. 2022 includes $31 million primarily related to GILTI permanent adjustments.
(b)2024 includes net $10 million related to state NOL's, deferred taxes and foreign tax credits. 2023 includes net $2 million related to deferred taxes and foreign tax credits. 2022 includes $4 million related to state NOL's.
(c)2024 includes miscellaneous items of $6 million. 2023 includes miscellaneous items of $1 million. 2022 includes $8 million related to withholding tax.
Unrecognized tax benefits
U.S. GAAP prescribes a recognition threshold and measurement attribute for the accounting and financial statement disclosure of tax positions taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first step requires Ashland to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step requires Ashland to recognize in the financial statements each tax position that meets the more likely than not criteria, measured at the amount of benefit that has a greater than 50% likelihood of being realized. Ashland had $65 million and $59 million of unrecognized tax benefits at September 30, 2024 and 2023, respectively, recorded within other noncurrent liabilities. As of September 30, 2024, the total amount of unrecognized tax benefits that, if recognized, would affect the tax rate for continuing and discontinued operations was $57 million. The remaining unrecognized tax benefits relate to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility. Recognition of these tax benefits would not have an impact on the effective tax rate.
Ashland recognizes interest and penalties related to uncertain tax positions as a component of income tax expense (benefit) in the Statements of Consolidated Comprehensive Income (Loss). Such interest and penalties totaled $3 million expense in 2024, $1 million benefit in 2023 and $3 million expense in 2022. Ashland had $14 million in interest and penalties related to unrecognized tax benefits accrued as of September 30, 2024 and $10 million as of 2023.
Changes in unrecognized tax benefits were as follows:
(In millions)
Balance at September 30, 2022
$
Decreases related to positions taken on items from prior years
(30
)
Increases related to positions taken in the current year
Increases related to positions taken in the prior year
Lapse of statute of limitations
(4
)
Balance at September 30, 2023
$
Decreases related to positions taken on items from prior years
(3
)
Increases related to positions taken in the current year
Increases related to positions taken in the prior year
Settlements
(1
)
Lapse of statute of limitations
(6
)
Balance at September 30, 2024
$
From a combination of statute expirations and audit settlements in the next twelve months, Ashland expects a decrease in the amount of accrual for uncertain tax positions of between $2 million and $5 million for continuing operations. For the remaining balance as of September 30, 2024, it is reasonably possible that there could be material changes to the amount of uncertain tax positions due to activities of the taxing authorities, settlement of audit issues, reassessment of existing uncertain tax positions or the expiration of applicable statute of limitations; however, Ashland is not able to estimate the impact of these items at this time.
Ashland or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Foreign taxing jurisdictions significant to Ashland include Belgium, Brazil, China, Germany, India, Italy, Mexico, Netherlands, Spain, Switzerland and the United Kingdom. Ashland is subject to U.S. federal income tax examinations by tax authorities for periods after September 30, 2021 and U.S. state income tax examinations by tax authorities for periods after September 30, 2017. With respect to countries outside of the United States, with certain exceptions, Ashland’s foreign subsidiaries are subject to income tax audits for years after 2018.
NOTE L - EMPLOYEE BENEFIT PLANS
Pension plans
Ashland and its subsidiaries have several contributory and noncontributory qualified defined benefit pension plans that generally cover international employees and a small portion of certain U.S. manufacturing union employees. Pension obligations for applicable employees of non-U.S. consolidated subsidiaries are provided for in accordance with local practices and regulations of the respective countries. The majority of these foreign pension plans are closed to new participants while those that remain open relate to areas where jurisdictions require plans to operate within the applicable country.
Benefits for those eligible for Ashland’s U.S. pension plans generally are based on employees’ years of service and compensation during the years immediately preceding their retirement. The remaining U.S. plans are still open for enrollment for qualifying union employees within certain manufacturing sites.
Other postretirement benefit plans
Ashland and its subsidiaries maintain limited health care for certain eligible employees in the U.S. who are retired or disabled. Ashland shares the costs of providing health care coverage with certain eligible retired employees through premiums, deductibles and coinsurance provisions. Ashland funds its share of the costs of the postretirement benefit plans as the benefits are paid.
Postretirement health care plans include a limit on Ashland’s share of costs for recent and future retirees. The assumed pre-65 health care cost increase trend rate as of September 30, 2024 was 7.2% and continues to be reduced to 4.0% in 2048 and thereafter. The assumptions used to project the liability anticipate future cost-sharing changes to the written plans that are consistent with the increase in health care costs.
Plan Amendments and Remeasurements
Following the completion of the sale of its Performance Adhesives business segment on February 28, 2022, the post-retirement benefits for approximately 40 employees transferred to Arkema, all of whom participated in a non-contributory defined benefit plan in the U.S., were frozen. This resulted in a decrease in total expected future years of service within the plan and required Ashland to remeasure the plan as February 28, 2022. As a result, Ashland recorded a $1 million actuarial gain within the other net periodic benefit loss (income) caption of the Statements of Consolidated Comprehensive Income (Loss) for fiscal 2022.
Net periodic benefit loss (income) allocation
Consistent with Ashland’s historical accounting policies, service cost for continuing operations is allocated to each reportable segment, excluding the Unallocated and other segment, while all other costs for continuing operations are recorded within the Unallocated and other segment.
The following table summarizes the components of pension and other postretirement benefit costs for continuing operations and the assumptions used to determine net periodic benefit loss (income) for the plans.
Pension benefits
Other postretirement benefits
(In millions)
Net periodic benefit loss (income)
Service cost(a)
$
$
$
$
$
$
Interest cost(b)
Curtailment, settlement and other(b)
-
-
(1
)
-
-
-
Expected return on plan assets(b)
(8
)
(7
)
(7
)
-
-
-
Actuarial (gain) loss(b)
-
(16
)
(2
)
(8
)
$
$
$
(12
)
$
$
$
(5
)
Weighted-average plan assumptions(c)
Discount rate for service cost
4.64
%
4.56
%
2.99
%
6.04
%
5.80
%
3.19
%
Discount rate for interest cost
5.49
%
5.44
%
3.33
%
5.92
%
5.54
%
2.10
%
Rate of compensation increase
3.07
%
3.07
%
2.50
%
Expected long-term rate of return on plan assets
4.99
%
4.25
%
2.89
%
(a)Service cost is classified within the selling, general and administrative expense and cost of sales captions on the Statements of Consolidated Comprehensive Income (Loss).
(b)These components are classified within the other net periodic benefit loss (income) caption on the Statements of Consolidated Comprehensive Income (Loss).
(c)The plan assumptions discussed are a blended weighted-average rate for Ashland’s U.S. and non-U.S. plans.
The changes in prior service credit recognized in accumulated other comprehensive income during both 2024 and 2023 were less than $1 million each. At September 30, 2024, Ashland expects to recognize less than $1 million of the prior service credit in accumulated other comprehensive income as net periodic benefit loss (income) during the next fiscal year.
At September 30, 2024 and 2023, the amounts included in accumulated other comprehensive income are shown in the following table.
Pension
Postretirement
(In millions)
Prior service cost
$
$
$
-
$
-
Obligations and funded status
Actuarial valuations are performed for the pension and other postretirement benefit plans to determine Ashland’s obligation for each plan. In accordance with U.S. GAAP, Ashland recognizes the unfunded status of the plans as a liability in the Consolidated Balance Sheets. Ashland maintains a defined benefits plan in the UK that is overfunded by $18 million, all of which is recorded in the other noncurrent assets caption of the Consolidated Balance Sheets.
Summaries of the change in benefit obligations, plan assets, funded status of the plans, amounts recognized in the balance sheet, and assumptions used to determine the benefit obligations for 2024 and 2023 are as follows:
Other postretirement
Pension plans
benefit plans
(In millions)
Change in benefit obligations
Benefit obligations at October 1
$
$
$
$
Service cost
Interest cost
Participant contributions
-
-
-
-
Benefits paid
(17
)
(16
)
(2
)
(4
)
Actuarial (gain) loss
(10
)
(1
)
Curtailments
-
-
-
-
Foreign currency exchange rate changes
-
-
Other (including acquisitions)
-
-
-
-
Settlements
(1
)
-
-
-
Benefit obligations at September 30
$
$
$
$
Change in plan assets
Value of plan assets at October 1
$
$
$
-
$
-
Actual return on plan assets
(2
)
-
-
Employer contributions
-
-
Participant contributions
-
-
-
-
Benefits paid
(16
)
(16
)
-
-
Foreign currency exchange rate changes
-
-
Settlements
(1
)
-
-
-
Other
-
(2
)
-
-
Value of plan assets at September 30
$
$
$
-
$
-
Unfunded status of the plans
$
(56
)
$
(52
)
$
(38
)
$
(34
)
Amounts recognized in the balance sheet
Other assets (noncurrent)
$
$
$
-
$
-
Accrued expenses and other liabilities
(3
)
(4
)
(3
)
(3
)
Employee benefit obligations
(71
)
(65
)
(35
)
(31
)
Net amount recognized
$
(56
)
$
(52
)
$
(38
)
$
(34
)
Weighted-average plan assumptions
Discount rate
4.50
%
5.43
%
4.91
%
5.72
%
Rate of compensation increase
3.07
%
3.07
%
The accumulated benefit obligation for all pension plans was $284 million at September 30, 2024 and $250 million at September 30, 2023. All Ashland pension plans are either qualified U.S. or non-US plans. Information for pension plans with an accumulated benefit obligation in excess of plan assets follows:
(In millions)
Projected benefit obligation
$
$
Accumulated benefit obligation
Fair value of plan assets
Plan assets
The expected long-term rate of return on pension plan assets was 4.99% and 4.25% for September 30, 2024 and 2023, respectively. The basis for determining the expected long-term rate of return is a combination of future return assumptions for various asset classes in Ashland’s investment portfolio, historical analysis of previous returns, market indices and a projection of inflation.
The following table summarizes the various investment categories that the pension plan assets are invested in and the applicable fair value hierarchy that the financial instruments are classified within these investment categories as of September 30, 2024. For additional information and a detailed description of each level within the fair value hierarchy, see Note E.
Quoted prices
in active
Significant
markets for
other
Significant
identical
observable
unobservable
Total fair
assets
inputs
inputs
(In millions)
value
Level 1
Level 2
Level 3
Cash and cash equivalents
$
$
$
-
$
-
U.S. Government securities
-
-
Non-U.S. Government securities
-
-
-
-
Corporate debt instruments
-
-
Listed real assets
-
-
Asset-backed securities
-
-
-
-
Corporate stocks
-
-
Insurance contracts
-
-
Total assets at fair value
$
$
$
$
-
The following table summarizes the various investment categories that the pension plan assets are invested in and the applicable fair value hierarchy that the financial instruments are classified within these investment categories as of September 30, 2023.
Quoted prices
in active
Significant
markets for
other
Significant
identical
observable
unobservable
Total fair
assets
inputs
inputs
(In millions)
value
Level 1
Level 2
Level 3
Cash and cash equivalents
$
$
$
-
$
-
U.S. Government securities
-
-
Non-U.S. Government securities
-
-
Corporate debt instruments
-
-
Listed real assets
-
-
Asset-backed securities
-
-
Corporate stocks
-
-
Insurance contracts
-
-
Total assets at fair value
$
$
$
$
-
Ashland’s pension plan holds a variety of investments designed to diversify risk. Investments classified as a Level 1 fair value measure principally represent marketable securities priced in active markets. Cash and cash equivalents and public equity and debt securities are well diversified and invested in U.S. and international small-to-large companies across various asset managers and styles. Investments classified as a Level 2 fair value measure principally represents fixed-income securities and other investment grade corporate bonds and debt obligations.
Investments and Strategy
In developing an investment strategy for its defined benefit plans, Ashland has considered the following factors: the nature of the plans’ liabilities, the allocation of liabilities between active, deferred and retired members, the funded status of the plans, the applicable investment horizon, the respective size of the plans and historical and expected capital market returns. Ashland’s U.S. pension plan assets are managed by outside investment managers, which are monitored against investment return benchmarks and Ashland’s established investment strategy. Investment managers are selected based on an analysis of, among other things, their investment process, historical investment results, frequency of management turnover, cost structure and assets under management. Assets are periodically reallocated between investment managers to maintain an appropriate asset mix and diversification of investments and to optimize returns.
The current asset allocation for the U.S. plans is 47.6% fixed income securities, 38.8% equity securities and 13.6% other securities. Fixed income securities primarily include cash and cash equivalents, long duration corporate debt obligations and U.S. government debt obligations. In addition, Ashland’s non-U.S. plan fixed income securities include insurance contracts. Equity securities are comprised solely of traditional public equity investments. Investment managers may employ a limited use of derivatives to gain efficient exposure to markets.
Ashland’s investment strategy and management practices relative to plan assets of non-U.S. plans generally are consistent with those for U.S. plans, except in those countries where investment of plan assets is dictated by applicable regulations. Although the investment allocation may vary based on funding percentages and whether plans are still accruing additional liabilities, the weighted-average asset allocations for Ashland’s U.S. and non-U.S. plans at September 30, 2024 and 2023 by asset category follow.
Actual at September 30
(In millions)
Target
Plan assets allocation
Equity securities
5 - 45%
%
%
Fixed income securities
55 - 95%
%
%
Other
0 - 5%
%
%
%
%
Cash flows
During 2024 and 2023, Ashland contributed $7 million and $3 million to its U.S. pension plans, respectively, and $8 million and $5 million to its non-U.S. pension plans, respectively. Ashland expects to contribute approximately $6 million to its U.S. pension plans and expects to contribute approximately $5 million to its non-U.S. pension plans during 2025.
The following benefit payments, which reflect future service expectations, are projected to be paid from plan assets in each of the next five years and in aggregate for five years thereafter.
Other
Pension
postretirement
(In millions)
benefits
benefits
$
$
2030 - 2034
Other plans
Ashland sponsors savings plans to assist eligible employees in providing for retirement or other future needs. Under such plans, company contributions amounted to $21 million in 2024, and $23 million in 2023 and 2022, respectively. Ashland also sponsors various other employee benefit plans, some of which are required by different countries. The total noncurrent liabilities associated with these plans was $4 million for September 30, 2024 and 2023, respectively.
NOTE M - LITIGATION, CLAIMS AND CONTINGENCIES
Asbestos litigation
Ashland and Hercules have liabilities from claims alleging personal injury caused by exposure to asbestos. To assist in developing and annually updating independent reserve estimates for future asbestos claims and related costs, Ashland has retained third party actuarial experts Gnarus. The methodology used by Gnarus to project future asbestos costs is based largely on recent experience, including claim-filing and settlement rates, disease mix, open claims and litigation defense. The claim experience of Ashland and Hercules are separately compared to the results of previously conducted third party epidemiological studies estimating the number of people likely to develop asbestos-related diseases. Those studies were undertaken in connection with national analyses of the population expected to have been exposed to asbestos. Using that information, Gnarus estimates a range of the number of future claims that may be filed, as well as the related costs that may be incurred in resolving those claims. Changes in asbestos-related liabilities and receivables are recorded on an after-tax basis within the discontinued operations caption in the Statements of Consolidated Comprehensive Income (Loss).
Ashland asbestos-related litigation
The claims alleging personal injury caused by exposure to asbestos asserted against Ashland result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley, a former subsidiary. The amount and timing of settlements and number of open claims can fluctuate from period to period. A summary of Ashland asbestos claims activity, excluding Hercules claims, follows.
(In thousands)
Open claims - beginning of year
New claims filed
Claims settled
(1
)
(1
)
(1
)
Claims dismissed
(2
)
(3
)
(3
)
Open claims - end of year
Ashland asbestos-related liability
From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs. Ashland reviews this estimate and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 40-year model developed with the assistance of Gnarus.
During the most recent update completed during 2024, it was determined that the liability for Ashland asbestos-related claims should be increased by $24 million. Total reserves for asbestos claims were $274 million at September 30, 2024 compared to $281 million at September 30, 2023.
A progression of activity in the asbestos reserve is presented in the following table.
(In millions)
Asbestos reserve - beginning of year
$
$
$
Reserve adjustment
Amounts paid
(31
)
(33
)
(31
)
Asbestos reserve - end of year(a)
$
$
$
(a)Included $28 million classified in accrued expenses and other liabilities on the Consolidated Balance Sheets as of September 30, 2024 and 2023.
Ashland asbestos-related receivables
Ashland has insurance coverage for certain litigation defense and claim settlement costs incurred in connection with its asbestos claims, and coverage-in-place agreements exist with the insurance companies that provide substantially all of the coverage that will be accessed.
For the Ashland asbestos-related obligations, Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. Substantially all of the estimated receivables from insurance companies are expected to be due from domestic insurers, all of which are solvent.
At September 30, 2024, Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $97 million (excluding the Hercules receivable for asbestos claims discussed below). Receivables from insurers amounted to $95 million at
September 30, 2023. During 2024, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed. This model update resulted in a $11 million increase in the receivable for probable insurance recoveries.
A progression of activity in the Ashland insurance receivable is presented in the following table.
(In millions)
Insurance receivable - beginning of year
$
$
$
Receivable adjustment(a)
Amounts collected
(9
)
(9
)
(6
)
Insurance receivable - end of year(b)
$
$
$
(a)The total allowance for credit losses was $1 million as of September 30, 2024 and 2023.
(b)Includes $9 million and $11 million classified in accounts receivable on the Consolidated Balance Sheets as of September 30, 2024 and 2023, respectively.
Hercules asbestos-related litigation
Hercules has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products which were sold by one of Hercules’ former subsidiaries to a limited industrial market. The amount and timing of settlements and number of open claims can fluctuate from period to period. A summary of Hercules’ asbestos claims activity follows.
(In thousands)
Open claims - beginning of year
New claims filed
Claims dismissed
(1
)
-
(2
)
Open claims - end of year
Hercules asbestos-related liability
From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs. Ashland reviews this estimate and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 40-year model developed with the assistance of Gnarus. As a result of the most recent annual update of this estimate completed during 2024, it was determined that the liability for Hercules asbestos-related claims should be increased by $14 million. Total reserves for asbestos claims were $185 million at September 30, 2024 compared to $191 million at September 30, 2023.
A progression of activity in the asbestos reserve is presented in the following table.
(In millions)
Asbestos reserve - beginning of year
$
$
$
Reserve adjustments
(2
)
Amounts paid
(20
)
(20
)
(19
)
Asbestos reserve - end of year(a)
$
$
$
(a)Included $17 million classified in accrued expenses and other liabilities on the Consolidated Balance Sheets as of September 30, 2024 and 2023.
Hercules asbestos-related receivables
For the Hercules asbestos-related obligations, certain reimbursement obligations pursuant to coverage-in-place agreements with insurance carriers exist. As a result, any increases in the asbestos reserve have been partially offset by probable insurance recoveries. Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. The estimated receivable consists exclusively of solvent domestic insurers.
As of September 30, 2024 and 2023, the receivables from insurers amounted to $50 million and $47 million, respectively. During 2024, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed. This model update resulted in a $6 million increase in the receivable for probable insurance recoveries.
A progression of activity in the Hercules insurance receivable is presented in the following table.
(In millions)
Insurance receivable - beginning of year
$
$
$
Receivable adjustment(a)
(3
)
Amounts collected
(3
)
(2
)
(2
)
Insurance receivable - end of year(b)
$
$
$
(a)The total allowance for credit losses was $1 million as of September 30, 2024 and 2023.
(b)Includes $6 million and $4 million classified in accounts receivable on the Consolidated Balance Sheets as of September 30, 2024 and 2023, respectively.
Asbestos litigation cost projection
Projecting future asbestos costs is subject to numerous variables that are difficult to predict. In addition to the uncertainties surrounding the number of claims that might be received, other variables include the type and severity of the disease alleged by each claimant and the related costs incurred in resolving those claims, mortality rates, dismissal rates, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case. Furthermore, any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. In light of these inherent uncertainties, Ashland believes that the asbestos reserves for Ashland and Hercules represent the best estimate within a range of possible outcomes. As a part of the process to develop these estimates of future asbestos costs, a range of long-term cost models was developed. These models are based on national studies that predict the number of people likely to develop asbestos-related diseases and are heavily influenced by assumptions regarding long-term inflation rates for indemnity payments and legal defense costs, as well as other variables mentioned previously. Ashland has currently estimated in various models ranging from approximately 40 year periods that it is reasonably possible that total future litigation defense and claim settlement costs on an inflated and undiscounted basis could range as high as approximately $410 million for the Ashland asbestos-related litigation (current reserve of $274 million) and approximately $276 million for the Hercules asbestos-related litigation (current reserve of $185 million), depending on the combination of assumptions selected in the various models. While the timeframe used in Ashland's models for projecting asbestos liabilities generally decreases over time based on the expected lifetime of the liabilities, these models have been consistently applied within all periods presented. If actual experience is worse than projected, relative to the number of claims filed, the severity of alleged disease associated with those claims or costs incurred to resolve those claims, or actuarial refinement or improvements to the assumptions used within these models are initiated, Ashland may need to further increase the estimates of the costs associated with asbestos claims and these increases could be material over time.
Environmental remediation and asset retirement obligations
Ashland is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively environmental remediation) at multiple locations. At September 30, 2024, such locations included 53 sites where Ashland has been identified as a potentially responsible party under Superfund or similar state laws, 108 current and former operating facilities and about 1,225 service station properties, of which 14 are being actively remediated.
Ashland’s reserves for environmental remediation and related environmental litigation amounted to $221 million at September 30, 2024 compared to $214 million at September 30, 2023, of which $164 million at September 30, 2024 and $165 million at September 30, 2023 were classified in other noncurrent liabilities on the Consolidated Balance Sheets. The remaining reserves were classified in accrued expenses and other liabilities on the Consolidated Balance Sheets.
The following table provides a reconciliation of the changes in the environmental remediation reserves during 2024 and 2023.
(In millions)
Environmental remediation reserve - beginning of year
$
$
Disbursements
(49
)
(54
)
Revised obligation estimates and accretion
Environmental remediation reserve - end of year
$
$
The total reserves for environmental remediation reflect Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable, without regard to any third-party recoveries. Engineering studies, historical experience and other factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Ashland regularly adjusts its reserves as environmental remediation continues. Ashland has estimated the value of its probable insurance recoveries associated with its environmental reserve based on management’s interpretations
and estimates surrounding the available or applicable insurance coverage. At September 30, 2024 and 2023, Ashland’s recorded receivable for these probable insurance recoveries was $13 million and $17 million, respectively, of which $11 million and $15 million was classified in other noncurrent assets in the respective Consolidated Balance Sheets.
During 2024, 2023 and 2022, Ashland recognized $54 million, $56 million and $66 million of expense, respectively, for certain environmental liabilities related to normal ongoing remediation cost estimate updates for sites, which is consistent with Ashland’s historical environmental accounting policy.
Components of environmental remediation expense included within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) are presented in the following table for the years ended September 30, 2024, 2023 and 2022.
(In millions)
Environmental expense
$
$
$
Accretion
Legal expense
Total expense
Insurance receivable
(2
)
(1
)
(5
)
Total expense, net of receivable activity(a)
$
$
$
(a)Net expense of $11 million, $5 million and $13 million for the fiscal years ended September 30, 2024, 2023 and 2022, respectively, related to divested businesses which qualified for treatment as discontinued operations and for which certain environmental liabilities were retained by Ashland. These amounts are classified within the income (loss) from discontinued operations caption of the Statements of Consolidated Comprehensive Income (Loss).
Environmental remediation reserves are subject to uncertainties that affect Ashland’s ability to estimate its share of the costs. Such uncertainties involve the nature and extent of contamination at each site and the extent of required cleanup efforts under existing environmental regulations. Although it is not possible to predict with certainty the ultimate costs of environmental remediation, Ashland currently estimates that the upper end of the reasonably possible range of future costs for identified sites could be as high as approximately $485 million. The largest reserve for any site is 21% of the remediation reserve as of September 30, 2024.
Brazil tax credits
In March 2017, the Federal Supreme Court of Brazil (Brazil Supreme Court) ruled in a leading case that a Brazilian value-added tax (ICMS) should not be included in the base used to calculate a taxpayer’s federal contribution on total revenue known as PIS/COFINS (2017 Decision). As a result, two of Ashland’s Brazilian subsidiaries filed lawsuits challenging the inclusion of ICMS in Ashland’s calculation of PIS/COFINs, seeking recovery of excess taxes paid plus interest.
In response to the 2017 Decision, the Brazilian tax authority filed an appeal of the 2017 Decision seeking clarification of the amount of ICMS tax to exclude from the calculation of PIS/COFINS. In May 2021, the Brazil Supreme Court ruled that the ICMS tax be excluded from the calculation of PIS/COFINS. In May 2023, Law 14592/23 was passed in Brazil, converting the 2017 Decision provisional measure effective for PIS/COFINS legislation excluding ICMS from the calculation basis.
As of September 30, 2024, Ashland had received all favorable court rulings for previously filed suits, completed its analysis of certain prior year overpayments related to ICMS and received acknowledgment from the Brazilian tax authority that allows Ashland to begin the process to recover the taxes. As a result, Ashland recorded a pre-tax gain of $12 million for period ended September 30, 2023 for certain excess PIS/COFINS paid from 2012 to February 2023 plus interest. The gain was recognized within the selling, general and administrative expense caption of the Statement of Consolidated Comprehensive Income (Loss). Ashland started utilizing these credits in December 2023. As of September 30, 2024, Ashland had remaining credits for a total of $8 million available for future use ($5 million within other current assets and $3 million within other noncurrent assets in the Consolidated Balance Sheets, respectively).
Other legal proceedings and claims
In addition to the matters described above, there are other various claims, lawsuits and administrative proceedings pending or threatened against Ashland and its current and former subsidiaries. Such actions are with respect to commercial matters, product liability, toxic tort liability, and other environmental matters, which seek remedies or damages, some of which are for substantial amounts. While Ashland cannot predict with certainty the outcome of such actions, it believes that adequate reserves have been recorded and losses already recognized with respect to
such actions were immaterial as of September 30, 2024 and 2023. There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions; however, Ashland believes that such potential losses were immaterial as of September 30, 2024.
NOTE N - EQUITY ITEMS
Stock repurchase program
On June 28, 2023, Ashland's board of directors authorized a new evergreen $1 billion common share repurchase program ("2023 Stock Repurchase Program"). The new authorization terminated and replaced the 2022 Stock Repurchase Program, which had $200 million outstanding at the date of termination. In 2022, the 2022 Stock Repurchase Program replaced and terminated the 2018 $1 billion share repurchase program, which had $150 million outstanding at its date of termination on May 22, 2022. As of September 30, 2024, $620 million remained available for repurchase under the 2023 Stock Repurchase Program.
The following table provides the stock repurchase activity for fiscal years 2024, 2023, and 2022:
(In millions, except per share amounts)
Number of shares repurchased
4.30
3.10
2.85
Weighted-average price per share(a)
$
88.70
$
97.33
$
70.09
Aggregate purchase price(a)
$
$
$
Program
2023 Stock Repurchase Program
2022 Stock Repurchase Program
2018 Stock Repurchase Program
(a)Includes transactions costs.
Stockholder dividends
Ashland paid dividends per common share of $1.58, $1.44 and $1.27 during 2024, 2023 and 2022, respectively.
In May 2024, the Board of Directors of Ashland announced a quarterly cash dividend of 40.5 cents per share to eligible stockholders at record, which represented an increase from the previous quarterly cash dividend of 38.5 cents per share. The dividend was paid in the third and fourth quarter of fiscal 2024.
In May 2023, the Board of Directors of Ashland announced a quarterly cash dividend of 38.5 cents per share to eligible stockholders at record, which represented an increase from the previous quarterly cash dividend of 33.5 cents per share. The dividend was paid in the third and fourth quarter of fiscal 2023.
In May 2022, the Board of Directors of Ashland announced a quarterly cash dividend of 33.5 cents per share to eligible stockholders at record, which represented an increase from the previous quarterly cash dividend of 30.0 cents per share. This dividend was paid in the third and fourth quarters of fiscal 2022 and the first and second quarters of fiscal 2023.
In May 2021, the Board of Directors of Ashland announced a quarterly cash dividend of 30.0 cents per share to eligible stockholders at record, which represented an increase from the previous quarterly cash dividend of 27.5 cents per share. This dividend was paid in the third and fourth quarters of fiscal 2021 and the first and second quarters of fiscal 2022.
Shares reserved for issuance
At September 30, 2024, 17.1 million common shares were reserved for issuance under stock incentive and deferred compensation plans.
Other comprehensive income (loss)
Components of other comprehensive income (loss) recorded in the Statements of Consolidated Comprehensive Income (Loss) are presented in the following table, before tax and net of tax effects.
Tax
Before
(expense)
Net of
(In millions)
tax
benefit
tax
Year ended September 30, 2024
Other comprehensive income (loss)
Unrealized translation gain
$
$
$
Unrealized gain on commodity hedges
(1
)
Total other comprehensive income (loss)
$
$
-
$
Year ended September 30, 2023
Other comprehensive income (loss)
Unrealized translation gain
$
$
-
$
Unrealized loss on commodity hedges
(8
)
(6
)
Total other comprehensive income (loss)
$
$
$
Year ended September 30, 2022
Other comprehensive income (loss)
Unrealized translation loss
$
(199
)
$
$
(197
)
Unrealized loss on commodity hedges
(2
)
(1
)
Pension and postretirement obligation adjustment
-
Total other comprehensive income (loss)
$
(200
)
$
$
(197
)
Summary of Stockholders’ Equity
A reconciliation of changes in stockholders’ equity are as follows:
(In millions)
Common stock and paid in capital
Balance, beginning of period
$
$
$
Common shares issued under stock incentive and other plans(a)
Common shares purchased under repurchase program(b)(c)
(13
)
(143
)
(200
)
Balance, end of period
Retained earnings
Balance, beginning of period
3,595
3,653
2,796
Adoption of new accounting pronouncements
-
-
-
Common shares purchased under repurchase program(b)
(370
)
(160
)
-
Net income
Regular dividends
(79
)
(76
)
(70
)
Balance, end of period
3,315
3,595
3,653
Accumulated other comprehensive income (loss)
Balance, beginning of period
(503
)
(569
)
(372
)
Unrealized translation gain (loss)
(197
)
Unrealized gain (loss) on commodity hedges
(6
)
(1
)
Pension and postretirement obligation adjustment
-
-
Balance, end of period
(448
)
(503
)
(569
)
Total stockholders' equity
$
2,868
$
3,097
$
3,220
Cash dividends declared per common share
$
1.58
$
1.44
$
1.27
(a)Common shares issued were 137,799, 193,767 and 168,270 for 2024, 2023 and 2022, respectively.
(b)Common shares repurchased were 4,285,194, 3,082,928 and 2,853,312 for 2024, 2023 and 2022, respectively.
(c)Includes $3 million in excise tax on stock repurchases for 2024 and 2023.
NOTE O - STOCK INCENTIVE PLANS
Ashland has stock incentive plans under which key employees or directors are granted performance share awards or nonvested stock awards. Each program is typically a long-term incentive plan designed to link employee compensation with increased shareholder value or reward superior performance and encourage continued employment with Ashland. Ashland recognizes compensation expense for the grant date fair value of stock-based awards over the requisite service period and accounts for forfeitures when they occur across all stock-based awards.
The components of Ashland's pretax compensation expense for stock-based awards (net of forfeitures) and associated income tax benefits are as follows.
(In millions)
2024(a)
2023(b)
2022(c)
SARs
$
-
$
-
$
Nonvested stock awards
Performance share awards
$
$
$
Income tax benefit
$
$
$
(a)The year ended September 30, 2024 included $2 million and less than $1 million of expense related to cash-settled nonvested restricted stock awards and cash-settled performance units, respectively.
(b)The year ended September 30, 2023 included $1 million of expense and $1 million of income related to cash-settled nonvested restricted stock awards and cash-settled performance units, respectively.
(c)The year ended September 30, 2022 included $4 million and $2 million of expense related to cash-settled nonvested restricted stock awards and cash-settled performance units, respectively.
Stock Appreciation Rights
SARs were granted to employees or directors at a price equal to the fair market value of the stock on the date of grant and typically become exercisable over periods of one to three years. Unexercised SARs lapse ten years after the date of grant. Ashland estimated the fair value of SARs granted using the Black-Scholes option-pricing model. Ashland has not granted any SARs since August 2020.
A progression of activity and various other information relative to SARs and previously issued and vested stock options is presented in the following table.
Number
Weighted-
Number
Weighted-
Number
Weighted-
of
average
of
average
of
average
(In thousands except per
common
exercise price
common
exercise price
common
exercise price
share data)
shares
per share
shares
per share
shares
per share
Outstanding - beginning of year
1,023
$
65.22
1,142
$
63.85
1,543
$
62.14
Exercised
(199
)
61.15
(114
)
52.31
(392
)
57.32
Forfeitures and expirations
(5
)
71.33
(5
)
46.67
(9
)
54.70
Outstanding - end of year(a)
66.16
1,023
65.22
1,142
63.85
Exercisable - end of year
66.16
1,023
65.22
1,094
63.24
(a)Exercise prices per share for SARs outstanding at September 30, 2024 ranged from $57.96 to $59.95 for 368 thousand shares and from $67.16 to $82.34 for 451 thousand shares. The weighted-average remaining contractual life of outstanding and exercisable SARs and stock options was 3.0 years.
The total intrinsic value of SARs exercised was $6 million in 2024, $6 million in 2023 and $19 million in 2022. The actual tax benefit realized from the exercised SARs was $1 million in 2024, $1 million in 2023 and $4 million in 2022. The total grant date fair value of SARs that vested during 2024, 2023 and 2022 was zero, $1 million and $1 million, respectively. As of September 30, 2024, there was zero unrecognized compensation costs related to SARs. As of September 30, 2024, the aggregate intrinsic value of outstanding and exercisable SARs was $17 million.
Nonvested stock awards
Nonvested stock awards are granted to employees or directors at a price equal to the fair market value of the stock on the date of grant and generally vest over a one-to-three-year period. However, such shares or units are subject to forfeiture upon termination of service before the vesting period ends. Beginning in 2016, these awards were primarily granted as stock units that will convert to shares upon vesting, while the grants in prior years were generally made in nonvested shares. Only nonvested stock awards granted in the form of shares entitle employees or directors to vote the shares. Dividends on nonvested stock awards granted are in the form of additional units or shares of nonvested stock awards, which are subject to vesting and forfeiture provisions.
A progression of activity and various other information relative to nonvested stock awards is presented in the following table.
Number
Weighted-
Number
Weighted-
Number
Weighted-
of
average
of
average
of
average
(In thousands except per
common
grant date
common
grant date
common
grant date
share data)
shares
fair value
shares
fair value
shares
fair value
Nonvested - beginning of year
$
97.66
$
82.55
$
76.10
Granted
78.93
105.72
92.34
Vested
(107
)
97.33
(106
)
82.04
(72
)
78.81
Forfeitures
(32
)
84.96
(7
)
106.25
(10
)
80.06
Nonvested - end of year
85.21
97.66
82.55
The total grant date fair value of nonvested stock awards that vested during 2024, 2023 and 2022 was $9 million, $8 million and $6 million, respectively. As of September 30, 2024, there was $6 million of total unrecognized compensation costs related to nonvested stock awards. That cost is expected to be recognized over a weighted-average period of 1.9 years.
Cash-settled nonvested stock awards
Certain nonvested stock awards are granted to employees and are settled in cash upon vesting. As of September 30, 2024, 31 thousand cash-settled nonvested stock awards were outstanding. The value of these cash-settled nonvested stock awards changes in connection with changes in the fair market value of the Ashland Common Stock. These awards generally vest over a period of three years. The expense recognized related to cash-settled nonvested stock awards was $2 million, zero, and $6 million during 2024, 2023 and 2022, respectively.
Performance awards
Ashland sponsors a long-term incentive plan that awards performance shares/units to certain key employees that are tied to Ashland’s overall financial performance relative to the financial performance of selected industry peer groups and/or internal targets. Awards are granted annually, with each award covering a three-year measurement period and vesting over a one to three year period. Nonvested performance shares/units do not entitle employees to vote the shares or to receive any dividends thereon.
Each awarded performance share is convertible to one share of Ashland Common Stock and recorded as a component of stockholders’ equity. Performance measures used to determine the actual number of performance shares issuable upon vesting includes 60:40 weighting of Ashland’s total shareholder return (TSR) performance and Ashland’s return on net assets (RONA) performance as compared to internal targets. TSR relative to peers is considered a market condition while RONA is considered a performance condition in accordance with U.S. GAAP.
The following table shows the performance shares/units granted for all plans that award Ashland Common Stock.
Weighted-
Target
average
(In thousands except per
shares/units
fair value per
share data)
Vesting period
granted(a)
share/unit(a)
Fiscal Year 2024
October 1, 2023 - September 30, 2026
$
81.29
Fiscal Year 2023
October 1, 2022 - September 30, 2025
$
135.93
Fiscal Year 2022
October 1, 2021 - September 30, 2024
$
131.33
(a)At the end of the performance period, the actual number of shares/units awarded can range from zero to 200% of the target shares/units granted, which is assumed to be 100%. Both the shares granted and weighted-average fair value per share/unit are as of the grant date.
For these awards, the fair value of the performance unit awards is equal to the fair market value of Ashland’s Common Stock as of the end of each reporting period. Compensation cost is recognized over the requisite service period if it is probable that the performance condition will be satisfied.
The fair values of the TSR portion of the performance share awards and TSR modifier of the performance unit awards are calculated using a Monte Carlo simulation valuation model using key assumptions included in the following table. Compensation cost is recognized over the requisite service period regardless of whether the market condition is satisfied.
Risk-free interest rate
4.59
%
4.22
%
1.2
%
Expected dividend yield
1.9
%
1.3
%
1.3
Expected life (in years)
Expected volatility
26.0
%
35.1
%
33.4%
The following table shows changes in nonvested performance shares/units for all plans that award Ashland Common Stock.
Weighted-
Weighted-
Weighted-
average
average
average
(In thousands except per
Shares/
grant date
Shares/
grant date
Shares/
grant date
share data)
Units
fair value
Units
fair value
Units
fair value
Nonvested - beginning of year
$
118.43
$
105.78
$
88.66
Granted
81.29
135.93
131.33
Vested
(104
)
91.77
(88
)
84.33
(1
)
96.32
Forfeitures
(35
)
108.50
(33
)
94.53
(52
)
85.78
Nonvested - end of year
111.16
118.43
105.78
As of September 30, 2024, there was $5 million of total unrecognized compensation costs related to nonvested performance share/unit awards. That cost is expected to be recognized over a weighted-average period of approximately 1.9 years.
NOTE P - REVENUE
Trade receivables
Trade receivables are defined as receivables arising from contracts with customers and are recorded within the accounts receivable caption within the Consolidated Balance Sheets. Ashland’s trade receivables were $206 million and $288 million as of September 30, 2024 and September 30, 2023, respectively. See Note H for additional information on Ashland's program to sell certain receivables on a revolving basis to third party banks up to an aggregate purchase limit.
Disaggregation of revenue
Ashland disaggregates its revenue from contracts with customers by segment and geographical region, as Ashland believes these categories best depict how management reviews the financial performance of its operations for the twelve months ended September 30, 2024, 2023 and 2022. Ashland includes only U.S. and Canada in its North America designation and includes Europe, the Middle East and Africa in its Europe designation. See the following tables for details (Intersegment sales eliminations have been excluded. See Note Q for additional information.):
Sales by geography
(In millions)
Life Sciences
North America
$
$
$
Europe
Asia Pacific
Latin America & other
$
$
$
(In millions)
Personal Care
North America
$
$
$
Europe
Asia Pacific
Latin America & other
$
$
$
(In millions)
Specialty Additives
North America
$
$
$
Europe
Asia Pacific
Latin America & other
$
$
$
(In millions)
Intermediates
North America
$
$
$
Europe
Asia Pacific
Latin America & other
$
$
$
For fiscal 2024, Ashland had two product categories that represented 10% or greater of Ashland's total consolidated sales which were cellulosics representing 37% of total consolidated sales and polyvinylprrolidones (PVP) representing 23% of total consolidated sales.
NOTE Q - REPORTABLE SEGMENT INFORMATION
Ashland determines its reportable segments based on how operations are managed internally for the products and services sold to customers, including how the results are reviewed by the chief operating decision maker, which includes determining resource allocation methodologies used for reportable segments. Operating income (loss) and EBITDA are the primary measures of performance that are reviewed by the chief operating decision maker in assessing each reportable segment's financial performance. Ashland does not aggregate operating segments to arrive at these reportable segments.
Change in reportable segments
On February 28, 2022, Ashland completed the sale of its Performance Adhesives segment. The operating results and cash flows for the Performance Adhesives segment have been classified as discontinued operations within the Consolidated Financial Statements for all periods presented. As a result, Ashland’s reportable segments include Life Sciences, Personal Care, Specialty Additives, and Intermediates.
Unallocated and Other includes corporate governance activities and certain legacy matters. The historical segment information has been recast to conform to the current segment structure.
Reportable segment business descriptions
Life Sciences is comprised of pharmaceuticals, nutrition, agricultural chemicals, diagnostic films (formerly known as advanced materials) and fine chemicals. Pharmaceutical solutions include controlled release polymers, disintegrants, tablet coatings, thickeners, solubilizers and tablet binders. Nutrition solutions include thickeners, stabilizers, emulsifiers and additives for enhancing mouthfeel, controlling moisture
migration, reducing oil uptake and binding structured foods. Customers include pharmaceutical, food, beverage, hospitals and radiologists and industrial manufacturers. The nutraceutical business was sold in August 2024. See Note B for additional details.
Personal Care is comprised of biofunctionals, microbial protectants (preservatives), skin care, sun care, oral care, hair care and household. These businesses have a broad range of natural, nature-derived, biodegradable, and high-performance ingredients for customer-driven solutions to help protect, renew, moisturize and revitalize skin and hair, and provide solutions for toothpastes, mouth washes and rinses, denture cleaning and care for teeth. Personal Care supplies nature-derived rheology ingredients, biodegradable surface wetting agents, performance encapsulates, and specialty polymers for household, industrial and institutional cleaning products. Customers include formulators at large multinational branded consumer products companies and smaller, independent boutique companies.
Specialty Additives is comprised of rheology and performance-enhancing additives serving the architectural coatings, construction, energy, automotive and various industrial markets. Solutions include coatings additives for architectural paints, finishes and lacquers, cement and gypsum based dry mortars, ready-mixed joint compounds, synthetic plasters for commercial and residential construction, and specialty materials for industrial applications. Products include rheology modifiers (cellulosic and associative thickeners), foam control agents, surfactants and wetting agents, pH neutralizers, advanced ceramics used in catalytic converters, and environmental filters, ingredients that aid the manufacturing process of ceramic capacitors, plasma display panels and solar cells, ingredients for textile printing, thermoplastic metals and alloys for welding. Products help improve desired functional outcomes through rheology modification and control, water retention, workability, adhesive strength, binding power, film formation, deposition and suspension and emulsification. Customers include global paint manufacturers, electronics and automotive manufacturers, textile mills, the construction industry, and welders.
Intermediates is comprised of the production of 1,4 butanediol (BDO) and related derivatives, including n-methylpyrrolidone. These products are used as chemical intermediates in the production of engineering polymers and polyurethanes, and as specialty process solvents in a wide array of applications including electronics, pharmaceuticals, water filtration membranes and more. Butanediol is also supplied to Life Sciences, Personal Care, and Specialty Additives for use as a raw material.
Unallocated and Other generally includes items such as certain significant company-wide restructuring activities, corporate governance costs and legacy costs or activities that relate to divested businesses that are no longer operated by Ashland.
International data
Information about Ashland’s domestic and international operations follows. Ashland has no operations in any individual international country or single customer that represented more than 10% of sales in 2024, 2023 and 2022.
Sales to external
customers
Net assets
(liabilities)
Property, plant and
equipment - net
(In millions)
United States
$
$
$
$
1,352
$
1,532
$
$
1,032
International
1,489
1,557
1,660
1,516
1,565
$
2,113
$
2,191
$
2,391
$
2,868
$
3,097
$
1,303
$
1,373
Reportable segment results
Results of Ashland’s reportable segments are presented based on its management and internal accounting structure. The structure is specific to Ashland; therefore, the financial results of Ashland’s reportable segments are not necessarily comparable with similar information for other comparable companies. Ashland allocates all costs to its reportable segments except for certain significant company-wide restructuring activities, certain corporate governance costs and other costs or activities that relate to former businesses that Ashland no longer operates. The service cost component of pension and other postretirement benefits costs is allocated to each reportable segment on a ratable basis; while the remaining components of pension and other postretirement benefits costs are recorded within the other net periodic benefit loss (income) caption of the Statement of Consolidated Comprehensive Income (loss). Ashland refines its expense allocation methodologies to the reportable segments from time to time as internal accounting practices are improved, more refined information becomes available and the industry or market changes. Significant revisions to Ashland’s methodologies are adjusted for all segments on a retrospective basis. This includes changes in prior years for indirect corporate costs previously allocated to Performance Adhesives. These costs are now reflected in Unallocated and Other for all periods presented.
Ashland determined that disclosing sales by specific product was impracticable due to the highly customized and extensive portfolio of products offered to customers and since no one product or a small group of products could be aggregated together to represent a majority of revenue within a reportable segment.
The following table presents various financial information for each reportable segment for the years ended September 30, 2024, 2023 and 2022.
(In millions)
Sales
Life Sciences
$
$
$
Personal Care
Specialty Additives
Intermediates
Intersegment sales(a)
(47
)
(61
)
(77
)
$
2,113
$
2,191
$
2,391
Equity income
Life Sciences
$
-
$
-
$
-
Personal Care
-
Specialty Additives
-
-
-
Intermediates
-
-
-
$
-
$
$
Other income
Life Sciences
$
-
$
-
$
-
Personal Care
-
-
-
Specialty Additives
-
-
-
Intermediates
-
-
-
Unallocated and Other
$
$
$
Equity and other income
$
$
$
Operating income (loss)
Life Sciences
$
$
$
Personal Care(b)
Specialty Additives(b)
(32
)
Intermediates
Unallocated and Other(b)
(264
)
(112
)
(114
)
$
(26
)
$
$
(In millions)
Depreciation expense
Life Sciences
$
$
$
Personal Care(c)
Specialty Additives(d)
Intermediates
Unallocated and Other
-
-
-
$
$
$
Amortization expense
Life Sciences
$
$
$
Personal Care
Specialty Additives
Intermediates
-
-
Unallocated and Other
-
-
-
$
$
$
EBITDA(e)
Life Sciences
$
$
$
Personal Care
Specialty Additives
Intermediates
Unallocated and Other
(264
)
(112
)
(114
)
$
$
$
Additions to property, plant and equipment
Life Sciences
$
$
$
Personal Care
Specialty Additives
Intermediates
Unallocated and Other
$
$
$
(In millions)
Assets
Life Sciences
$
1,778
$
1,904
Personal Care
1,004
Specialty Additives
1,516
1,580
Intermediates
Unallocated and Other
1,274
1,315
$
5,645
$
5,939
Property, plant and equipment - net
Life Sciences
$
$
Personal Care
Specialty Additives
Intermediates
Unallocated and Other
$
1,303
$
1,373
(a)Intersegment sales from Intermediates are accounted for at prices that approximate fair value. All other intersegment sales are accounted for at cost.
(b)Includes a $99 million impairment charge and a $8 million loss on sale, both related to the divestiture of the Nutraceuticals business within the income (loss) on acquisitions and divestitures, net in 2024. Includes a capital project impairment charge of $11 million within Personal Care in 2024 and a $4 million impairment charge related to a Specialty Additives facility in 2023.
(c)Depreciation includes accelerated depreciation of $2 million for Personal Care in 2024.
(d)Depreciation includes accelerated depreciation of $55 million for Specialty Additives in 2024.
(e)Excludes income (loss) from discontinued operations and other net periodic benefit loss (income). See the Statement of Consolidated Comprehensive Income (Loss) for applicable amounts excluded.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

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ITEM 9A. CONTROLS AND PROCEDURES

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ITEM 9B. OTHER INFORMATION

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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ITEM 11. EXECUTIVE COMPENSATION

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES