ASHLAND INC

Previous wording

Ashland’s sales generated outside of North America were 66% and 70% for the three months ended December 31, 2023 and 2022, respectively. Sales by region expressed as a percentage of total consolidated sales for the three months ended December 31 were as follows:

Current wording

Ashland’s sales generated outside of North America were 69% and 68% for the three and six months ended March 31, 2024 and 70% for the three and six months ended March 31, 2023. Sales by region expressed as a percentage of total consolidated sales for the three and six months ended March 31 were as follows:

Previous wording

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 three months ended December 31 was as follows:

Current wording

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 three and six months ended March 31 was as follows:

Previous wording

The impact of these portfolio actions for the three months ended December 31, 2023, resulted in accelerated depreciation charges of $21 million within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss) and severance of $3 million and an impairment of a leased office building of $1 million within the selling, general and administrative caption of the Statements of Consolidated Comprehensive Income (Loss).

Current wording

The impact of these portfolio actions for the three and six months ended March 31, 2024, resulted in accelerated depreciation charges of $27 million and $49 million and other plant optimization costs of $1 million and $1 million, respectively, recorded within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss). In addition, severance of $18 million and $21 million and other restructuring costs of $2 million and $3 million, respectively, were recorded for the three and six months ended March 31, 2024 within the selling, general and administrative caption of the Statements of Consolidated Comprehensive Income (Loss). See Note C for additional information.

Previous wording

Key financial results for the three months ended December 31, 2023 and 2022 included the following:

Current wording

Key financial results for the three and six months ended March 31, 2024 and 2023 included the following:

Previous wording

Ashland's net income of $26 million ($0.51 diluted earnings per share) and $40 million ($0.73 diluted earnings per share) included a loss from discontinued operations of $2 million ($0.03 diluted earnings per share) in the current and prior year quarters, each respectively.

Current wording

Ashland's net income of $120 million ($2.39 diluted earnings per share) and $91 million ($1.67 diluted earnings per share) included a loss from discontinued operations of $1 million ($0.01 diluted earnings per share) and a loss of $1 million ($0.01 diluted earnings per share) in the current and prior year quarters, each respectively.

Previous wording

Results for Ashland’s continuing operations, diluted earnings per share from continuing operations and operating income for the current and prior year quarters included certain key items that were excluded to arrive at Adjusted EBITDA and are quantified in the “Use of Non-GAAP Financial Measures” section below. These pre-tax key items totaled expense of $3 million and income of $8 million for the three months ended December 31, 2023 and 2022 impacting continuing operations. Continuing operations was also impacted by favorable discrete tax items totaling $24 million and zero for the three months ended December 31, 2023 and 2022.

Current wording

Results for Ashland’s continuing operations, diluted earnings per share from continuing operations and operating income for the current and prior year quarters included certain key items that were excluded to arrive at adjusted EBITDA and are quantified in the “Use of Non-GAAP Financial Measures” section below. These pre-tax key items totaled expense of $42 million and income of $16 million for the three months ended March 31, 2024 and 2023 impacting continuing operations. Continuing operations was also impacted by favorable tax specific key items for discrete tax items totaling $105 million and $20 million for the three months ended March 31, 2024 and 2023.

Previous wording

The pre-tax key items impacting operating income totaled expense of $34 million and expense of $13 million for the three months ended December 31, 2023 and 2022. Excluding these key items, the decrease in continuing operations, diluted earnings per share from continuing operations and operating income was primarily driven by lower sales and production volumes, partially offset by improved price versus raw material cost and lower selling, general and administrative expense. In addition, diluted earnings per share from continuing operations was also impacted by common share reductions from repurchases of Ashland common stock over the last twelve months. These common stock repurchases reduced the number of weighted average shares from 55 million diluted shares in the first quarter of fiscal 2023 to 51 million diluted shares in the first quarter of fiscal 2024.

Current wording

Excluding these key items, the decrease in continuing operations, diluted earnings per share from continuing operations and operating income was primarily driven by unfavorable pricing primarily within Intermediates, and higher selling, general and administrative expense, due to higher variable compensation expense. In addition, diluted earnings per share from continuing operations was also impacted by common share reductions from repurchases of Ashland common stock over the last twelve months. These common stock repurchases reduced the number of weighted average shares from 55 million diluted shares in the second quarter of fiscal 2023 to 51 million diluted shares in the second quarter of fiscal 2024.

Previous wording

Ashland’s Adjusted EBITDA was $70 million for the current quarter compared to $108 million in the prior year quarter (see U.S. GAAP reconciliation under “Use of Non-GAAP Financial Measures” below). The $38 million decrease in Adjusted EBITDA was primarily driven by lower sales and production volumes, partially offset by improved price versus raw material cost and lower selling, general and administrative expense. 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.

Current wording

Ashland’s adjusted EBITDA was $126 million for the current quarter compared to $145 million in the prior year quarter (see U.S. GAAP reconciliation under “Use of Non-GAAP Financial Measures” below). The $19 million decrease in adjusted EBITDA was primarily driven by unfavorable pricing primarily within Intermediates and higher selling, general and administrative expense, due to higher variable compensation expense. 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.

Previous wording

A comparative analysis of the Statements of Consolidated Comprehensive Income (Loss) by caption is provided as follows for the three ended December 31, 2023 and 2022.

Current wording

A comparative analysis of the Statements of Consolidated Comprehensive Income (Loss) by caption is provided as follows for the three and six months ended March 31, 2024 and 2023.

Previous wording

The following table provides a reconciliation of the change in sales for the three months ended December 31, 2023 and 2022.

Current wording

The following table provides a reconciliation of the change in sales for the three and six months ended March 31, 2024 and 2023.

Previous wording

The following table provides a reconciliation of the change in cost of sales between the three months ended December 31, 2023 and 2022.

Current wording

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

Previous wording

Cost of sales for the current quarter increased $15 million compared to the prior year quarter. Higher operating costs driven primarily by higher unit manufacturing cost associated with decreased plant loading to produce to demand (including $21 million due to accelerated depreciation for product line optimization activities associated with a Specialty Additives manufacturing facility) was the primary factor. This increase was partially offset by lower volume and product price/mix. Gross profit as a percentage of sales decreased 10.7% primarily as a result of lower sales volume and higher operating costs.

Current wording

Year-to-date - Cost of sales for the current year increased $23 million compared to the prior year period. Higher operating costs driven by higher unit manufacturing costs associated with decreased plant loading to produce to demand and $49 million of accelerated depreciation for product line optimization activities associated with two Specialty Additives manufacturing facilities were the primary factor. These increases were partially offset by lower volume and product price/mix. Gross profit as a percentage of sales decreased 7.4% primarily as a result of lower sales volume and higher operating costs.

Previous wording

Selling, general and administrative expense for the current quarter decreased $10 million compared to the prior year quarter with expenses as a percent of sales decreasing 0.2 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year quarter were:

Current wording

Current Quarter - Selling, general and administrative expense for the current quarter increased $27 million compared to the prior year quarter with expenses as a percent of sales increasing 5.3 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year quarter were:

Previous wording

$4 million and $8 million in net environmental-related expenses during the current and prior year quarter, respectively (see Note K for more information);

Current wording

$3 million and $4 million in net environmental-related expenses during the current and prior year quarter, respectively (see Note K for more information);

Previous wording

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

Current wording

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

Previous wording

Expense of $4 million and $1 million comprised of key items for severance, lease abandonment and other restructuring costs during the current and prior year quarter, respectively;

Current wording

Expense of $24 million and $1 million comprised of key items for severance, lease abandonment and other restructuring costs during the current and prior year period, respectively;

Previous wording

$4 million impairment charge in the prior year quarter associated with the sale of a Specialty Additives manufacturing facility; and

Current wording

$4 million impairment charge in the prior year period associated with the sale of a Specialty Additives manufacturing facility;

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The activity in the current quarter primarily related to legal fees associated with ongoing divestiture activity.

Current wording

Year-to-date - The activity in the current period primarily related to legal fees associated with ongoing divestiture activity.

Previous wording

Net interest and other income increased by $10 million during the current quarter compared to the prior year quarter. Interest expense and interest income remained primarily consistent during the current quarter compared to the prior year quarter. Restricted investments income of $36 million and $25 million included realized gains of $31 million compared to gains of $21 million for the three months ended December 31, 2023 and 2022, respectively. See Note D for more information on the restricted investments.

Current wording

Current Quarter - Net interest and other expense (income) increased by $12 million during the current quarter compared to the prior year quarter. Interest expense and interest income remained primarily consistent during the current quarter compared to the prior year quarter. Restricted investments income of $12 million and $22 million included realized gains of $9 million compared to gains of $20 million for the three months ended March 31, 2024 and 2023, respectively. See Note D for more information on the restricted investments.

Previous wording

Other net periodic benefit loss for the three months ended December 31, 2023 primarily included interest cost of $4 million which was partially offset by expected return on plan assets of $2 million. See Note J for more information. Other net periodic benefit loss for the three months ended December 31, 2022 primarily included interest cost of $3 million which was partially offset by expected return on plan assets of $2 million. See Note J for more information.

Current wording

Current Quarter - Other net periodic benefit loss for the three months ended March 31, 2024 primarily included interest cost of $3 million which was partially offset by expected return on plan assets of $1 million. Other net periodic benefit loss for the three months ended March 31, 2023 primarily included interest cost of $4 million which was partially offset by expected return on plan assets of $2 million. See Note J for more information.

Previous wording

Ashland’s effective tax rate in any interim period is subject to adjustments related to discrete items and the mix of domestic and foreign operating results. The overall effective tax rate was a benefit of 600% for the three months ended December 31, 2023 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $24 million primarily related to changes in foreign tax reform related activity.

Current wording

Current Quarter - Ashland’s effective tax rate in any interim period is subject to adjustments related to discrete items and the mix of domestic and foreign operating results. The overall effective tax rate was a benefit of 612% for the three months ended March 31, 2024 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $102 million primarily related to changes in foreign tax activity.

Previous wording

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 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 financial 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 financial measure on a consolidated basis assists investors in better understanding Ashland’s ongoing business performance enhancing their ability to compare period-to-period financial results.

Current wording

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 financial 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 financial measure on a consolidated basis assists investors in better understanding Ashland’s ongoing business performance enhancing their ability to compare period-to-period financial results.

Previous wording

The effective tax rate during the three months ended December 31, 2023 was significantly impacted by foreign tax reform related activity. The effective tax rate during the three months ended December 31, 2022 was not impacted by tax specific key items.

Current wording

The effective tax rate during the three and six months ended March 31, 2024 and 2023 was significantly impacted by foreign tax activity and uncertain tax positions.

Previous wording

The activity for the Performance Adhesives segment represents subsequent adjustments that were made in conjunction with post-closing tax items and disputes during the current and prior year quarters. The activity for Distribution was related to post-closing adjustments for environmental expenses. Asbestos-related activity included after-tax net adjustments to the asbestos reserves and receivables during the current quarter.

Current wording

Year-to-date - The activity for the Performance Adhesives represents subsequent adjustments that were made in conjunction with post-closing tax items and disputes during the current year period. The activity for Composites/Marl facility, Distribution and Valvoline was related to post-closing adjustments.

Previous wording

A comparative analysis of the components of other comprehensive income is provided below for the three months ended December 31, 2023 and 2022.

Current wording

A comparative analysis of the components of other comprehensive income is provided below for the three and six months ended March 31, 2024 and 2023.

Previous wording

Total other comprehensive income (loss), net of tax, for the current quarter decreased $25 million compared to the prior year quarter primarily as a result of the following:

Current wording

Current Quarter - Total other comprehensive income (loss), net of tax, for the current quarter decreased $50 million compared to the prior year quarter primarily as a result of the following:

Previous wording

For the three months ended December 31, 2023 and 2022, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities. Commodity hedges resulted in unrealized losses of $1 million and $4 million for the three months ended December 31, 2023 and 2022, respectively.

Current wording

For the three months ended March 31, 2024 and 2023, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities. Commodity hedges resulted in unrealized gains of $1 million and losses of $3 million for the three months ended March 31, 2024 and 2023, respectively.

Previous wording

For the three months ended December 31, 2023 and 2022, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in gains of $54 million and $82 million, respectively. The fluctuations in unrealized translation gains and losses are primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars.

Current wording

For the six months ended March 31, 2024 and 2023, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in gains of $27 million and $109 million, respectively. The fluctuations in unrealized translation gains and losses are primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars.

Previous wording

EBITDA is defined as net income, plus income tax expense (benefit), net interest and other income, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for discontinued operations and key items. Adjusted EBITDA margin is Adjusted EBITDA divided by sales.

Current wording

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. Adjusted EBITDA margin is adjusted EBITDA divided by sales.

Previous wording

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. The adjustments Ashland makes to derive the non-GAAP financial measures of EBITDA and Adjusted EBITDA exclude items which may cause short-term fluctuations in net income and operating income and which Ashland does not consider to be the fundamental attributes or primary drivers of its business. EBITDA and Adjusted EBITDA provide disclosure on the same basis as that used by Ashland’s management to evaluate financial performance on a consolidated and reportable segment basis and provide consistency in our financial reporting, facilitate internal and external comparisons of Ashland’s historical operating performance and its segments and provide continuity to investors for comparability purposes.

Current wording

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 financial 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 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.

Previous wording

These non-GAAP financial 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 financial 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 financial 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 financial measures and are defined further in the sections that reference this metric.

Current wording

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 financial measures and are defined further in the sections that reference this metric.

Previous wording

EBITDA totaled income of $34 million and $93 million for the three months ended December 31, 2023 and 2022, respectively. EBITDA and Adjusted EBITDA results in the table below have been prepared to illustrate the ongoing effects of Ashland’s operations, which exclude certain key items previously described. 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.

Current wording

EBITDA totaled income of $74 million and $140 million for the three months ended March 31, 2024 and 2023, respectively, and income of $109 million and $235 million for the six months ended March 31, 2024 and 2023, respectively. EBITDA and adjusted EBITDA results in the table below have been prepared to illustrate the ongoing effects of Ashland’s operations, which exclude certain key items previously described. 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.

Previous wording

Accelerated depreciation – As a result of product line optimization activities at a Specialty Additives manufacturing plant, Ashland recorded accelerated depreciation due to changes in the expected useful life of certain property, plant and equipment during the three months ended December 31, 2023. See Note C of the Notes to Consolidated Financial Statements for more information.

Current wording

Accelerated depreciation – As a result of product line optimization activities at two Specialty Additives manufacturing plants, Ashland recorded accelerated depreciation due to changes in the expected useful life of certain property, plant and equipment during the six months ended March 31, 2024. See Note C of the Notes to Consolidated Financial Statements for more information;

Previous wording

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) for the three months ended December 31, 2023

Current wording

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) for the six months ended March 31, 2024;

Previous wording

Asset impairments – Ashland recognized impairment charges to certain assets during 2023.

Current wording

Asset impairments – Ashland recognized impairment charges to certain assets during fiscal 2023; and

Previous wording

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

Current wording

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

Previous wording

The following table reflects the U.S. GAAP calculation for the income 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 which Ashland believes do not accurately reflect Ashland’s underlying business performance and trends. The Adjusted diluted EPS for the income from continuing operations in the following table has been prepared to illustrate the ongoing 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 financial measure on a consolidated basis assists investors in better understanding Ashland’s ongoing business performance and enhances their ability to compare period-to-period financial results.

Current wording

The following table reflects the U.S. GAAP calculation for the income 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 from continuing operations in the following table has been prepared to illustrate the ongoing 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 financial measure on a consolidated basis assists investors in better understanding Ashland’s ongoing business performance and enhances their ability to compare period-to-period financial results.

Previous wording

Other and tax reform related activity – represents tax specific key items associated with foreign tax reform related activity for the three months ended December 31, 2023.

Current wording

Other and tax reform related activity – represents tax specific key items associated with foreign tax related activity for the three and six months ended March 31, 2024; and