ASHLAND INC

Previous 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:

Current wording

Ashland’s sales generated outside of North America were 69% and 68% for the three and nine months ended June 30, 2024, respectively, and 69% and 70% for the three and nine months ended June 30, 2023, respectively. Sales by region expressed as a percentage of total consolidated sales for the three and nine months ended June 30 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 and six months ended March 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 nine months ended June 30 was as follows:

Previous wording

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 the fiscal second quarter, Ashland continued to wrap-up CMC production at Hopewell, Virginia. CMC levels will be drawn down while Ashland migrates select production volumes into Alizay, France. In addition, Ashland advanced actions to optimize MC by consolidating production capacity in Doel, Belgium. Other actions to improve Ashland's HEC business continue to be assessed.

Current wording

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. As of the fiscal third quarter, 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.

Previous 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.

Current wording

The impact of these portfolio actions for the three and nine months ended June 30, 2024, resulted in accelerated depreciation charges of $8 million and $56 million and other plant optimization costs of $4 million and $5 million, respectively, recorded within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss). In addition, severance of $3 million and $23 million and other restructuring costs of zero and $5 million were recorded for the three and nine months ended June 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.

Previous wording

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

Current wording

Key financial results for the three and nine months ended June 30, 2024 and 2023 included the following:

Previous 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.

Current wording

Ashland's net income of $6 million ($0.12 diluted earnings per share) and $50 million ($0.94 diluted earnings per share) included a loss from discontinued operations of $25 million ($0.48 diluted earnings per share) and income of $8 million ($0.15 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 $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.

Current wording

Results for Ashland’s continuing operations, diluted earnings per share from continuing operations and operating income (loss) 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 $147 million and $5 million for the three months ended June 30, 2024 and 2023 impacting continuing operations. Continuing operations was also impacted by favorable tax specific key items for discrete tax items totaling $106 million and $4 million for the three months ended June 30, 2024 and 2023.

Previous 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.

Current wording

Excluding these key items, the increase in continuing operations, diluted earnings per share from continuing operations and operating income (loss) was primarily driven by higher sales and production volumes within the Personal Care and Specialty Additives segments, favorable product mix, and deflationary raw materials, partially offset by unfavorable volume and pricing within the Life Sciences segment, lower pricing within the Intermediates segment and higher selling, general and administrative expenses, primarily related to the reset of variable compensation. 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 53 million diluted shares in the third quarter of fiscal 2023 to 51 million diluted shares in the third quarter of fiscal 2024.

Previous 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.

Current wording

Ashland’s adjusted EBITDA was $139 million for the current quarter compared to $133 million in the prior year quarter (see U.S. GAAP reconciliation under “Use of Non-GAAP Financial Measures” below). The $6 million increase in adjusted EBITDA was primarily driven by higher sales and production volumes within the Personal

Previous 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.

Current wording

A comparative analysis of the Statements of Consolidated Comprehensive Income (Loss) by caption is provided as follows for the three and nine months ended June 30, 2024 and 2023.

Previous wording

Year-to-date - Sales for the current year decreased $80 million compared to the prior year period. Lower sales volumes and unfavorable pricing were the primary factors.

Current wording

Year-to-date - Sales for the current year decreased $83 million compared to the prior year period. Unfavorable product price/mix and lower sales volumes were the primary factors. CMC and MC portfolio optimization initiatives reduced sales by approximately $15 million during the current year.

Previous 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.

Current wording

The following table provides a reconciliation of the change in cost of sales between the three and nine months ended June 30, 2024 and 2023.

Previous wording

Current Quarter - Cost of sales for the current quarter increased $8 million compared to the prior year quarter. Higher operating costs driven by $27 million accelerated depreciation for product line optimization activities associated with two Specialty Additives manufacturing facilities was the primary factor. This increase was partially offset by favorable product price/mix. Gross profit as a percentage of sales decreased 4.7% primarily as a result of higher operating costs and lower sales.

Current wording

Current Quarter - Cost of sales for the current quarter decreased $10 million compared to the prior year quarter. The decrease was primarily driven by favorable product price/mix, lower operating costs and favorable foreign exchange currency, which was partially offset by higher volume, $8 million of accelerated depreciation for product line optimization activities associated with two Specialty Additives manufacturing facilities and one Personal Care manufacturing facility, and $4 million of other plant optimization costs. Gross profit as a percentage of sales increased 1.6%.

Previous 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.

Current wording

Year-to-date - Cost of sales for the current year increased $13 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 in the first half of the year, $56 million of accelerated depreciation for product line optimization activities associated with two Specialty Additives manufacturing facilities and one Personal Care manufacturing facility, and $5 million of other plant optimization costs were the primary factors. These increases were partially offset by favorable product price/mix and lower volume. Gross profit as a percentage of sales decreased 4.4% primarily as a result of higher operating costs including product line optimization activities.

Previous 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:

Current wording

Current Quarter - Selling, general and administrative expense for the current quarter increased $30 million compared to the prior year quarter with expenses as a percent of sales increasing 5.6 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year quarter were:

Previous 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);

Current wording

$35 million and $16 million in net environmental-related expenses during the current and prior year quarter, respectively (see Note L for more information);

Previous wording

Year-to-date - Selling, general and administrative expense for the current period increased $17 million compared to the prior year period with expenses as a percent of sales increasing 2.8 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year quarter were:

Current wording

Year-to-date - Selling, general and administrative expense for the current period increased $47 million compared to the prior year period with expenses as a percent of sales increasing 3.7 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year quarter were:

Previous wording

$7 million and $12 million in net environmental-related expenses during the current and prior year period, respectively (see Note K for more information);

Current wording

$41 million and $28 million in net environmental-related expenses during the current and prior year period, respectively (see Note L for more information);

Previous 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;

Current wording

Expense of $28 million and $5 million comprised of key items for severance, lease abandonment and other restructuring costs during the current and prior year period, respectively;

Previous wording

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

Current wording

Current Quarter - Research and development expense increased due to higher incentive compensation.

Previous wording

Year-to-date - Research and development expense is generally consistent with the prior year period.

Current wording

Year-to-date - Research and development expense increased due to higher incentive compensation.

Previous wording

Current Quarter - Equity and other income was zero for the current and prior year quarter.

Current wording

Current Quarter - Equity and other income was zero for the current year quarter, while the prior year quarter included China financial cash subsidies.

Previous wording

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

Current wording

Year-to-date - Equity and other income is $3 million for in the current year period. The prior year activity related to China financial cash subsidies.

Previous 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.

Current wording

Current Quarter - Net interest and other expense (income) increased by $4 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 $4 million and $10 million included realized gains of $1 million compared to gains of $6 million for the three months ended June 30, 2024 and 2023, respectively. See Note E for more information on the restricted investments.

Previous wording

Year-to-date - Net interest and other expense (income) increased by $3 million during the current period compared to the prior year period. Interest expense and interest income remained primarily consistent during the current quarter compared to the prior year period. Restricted investments income of $48 million and $47 million included realized gains of $39 million compared to gains of $41 million for the six months ended March 31, 2024 and 2023, respectively. See Note D for more information on the restricted investments.

Current wording

Year-to-date - Net interest and other expense (income) increased by $7 million during the current period compared to the prior year period. Interest expense and interest income remained primarily consistent during the current quarter compared to the prior year period. Restricted investments income of $51 million and $57 million included realized gains of $39 million compared to gains of $47 million for the nine months ended June 30, 2024 and 2023, respectively. See Note E for more information on the restricted investments.

Previous wording

Year-to-date - Other net periodic benefit loss for the six months ended March 31, 2024 primarily included interest cost of $8 million which was partially offset by expected return on plan assets of $4 million. Other net periodic benefit loss for the six months ended March 31, 2023 primarily included interest cost of $7 million which was partially offset by expected return on plan assets of $4 million. See Note J for more information.

Current wording

Year-to-date - Other net periodic benefit loss for the nine months ended June 30, 2024 primarily included interest cost of $12 million which was partially offset by expected return on plan assets of $6 million. Other net periodic benefit loss for the nine months ended June 30, 2023 primarily included interest cost of $11 million which was partially offset by expected return on plan assets of $5 million. See Note K for more information.

Previous 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.

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 144% for the three months ended June 30, 2024 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $104 million primarily related to the tax impact of the held for sale classification for the Nutraceuticals business.

Previous wording

The overall effective tax rate was 5% for the six months ended March 31, 2023 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $23 million primarily related to changes in uncertain tax positions primarily from a combination of state expirations and audit settlements.

Current wording

The overall effective tax rate was 26% for the three months ended June 30, 2023 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $4 million primarily related to changes in uncertain tax positions and adjustments to valuation allowances.

Previous wording

Year-to-date - 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 610% for the six months ended March 31, 2024 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $126 million primarily related to changes in foreign tax activity.

Current wording

Year-to-date - 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 467% for the nine months ended June 30, 2024 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $231 million primarily related to changes in foreign tax activity and the tax impact of the held for sale classification for the Nutraceuticals business.

Previous wording

The overall effective tax rate was a benefit 1% for the three months ended March 31, 2023 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $20 million primarily related to changes in uncertain tax positions.

Current wording

The overall effective tax rate was 11% for the nine months ended June 30, 2023 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $27 million primarily related to changes in uncertain tax positions.

Previous 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.

Current wording

The effective tax rate during the three and nine months ended June 30, 2024 and 2023 was significantly impacted by foreign tax activity, uncertain tax positions, and the tax impact of the held for sale classification for the Nutraceuticals business.

Previous wording

Current Quarter - The activity for Valvoline represents subsequent adjustments that were made in conjunction with post-closing tax items and disputes during the current quarter. The activity for Composites/Marl facility was related to post-closing adjustments in the current and prior year quarter.

Current wording

Current Quarter - The activity for Valvoline for the three months ended June 30, 2023 primarily represents cash proceeds related to subsequent adjustments that were made in conjunction with post-closing disputes and Tax Matters Agreement. The activity for Composites/Marl facility, Distribution, and Water Technologies was related to post-closing adjustments in the current and prior year quarter primarily related to environmental liabilities. Asbestos activity in each quarter primarily relates to Ashland's annual update.

Previous 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.

Current wording

Year-to-date - The activity for the Performance Adhesives represents subsequent adjustments that were made in conjunction with post-closing tax items during the current year period. The activity for Composites/Marl facility, Distribution and Water Technologies was related to post-closing adjustments primarily related to environmental liabilities. The Valvoline activity for the current year period represents subsequent adjustments that were made in conjunction with post-closing tax items and disputes and primarily represents cash proceeds related to certain post-closing disputes and Tax Matters Agreement during the prior year period. Asbestos activity in each period primarily relates to Ashland's annual update.

Previous 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.

Current wording

A comparative analysis of the components of other comprehensive income is provided below for the three and nine months ended June 30, 2024 and 2023.

Previous 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:

Current wording

Current Quarter - Total other comprehensive income (loss), net of tax, for the current quarter decreased $20 million compared to the prior year quarter primarily as a result of the following:

Previous wording

For the three months ended March 31, 2024 and 2023, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in a loss of $27 million and a gain of $27 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 three months ended June 30, 2024 and 2023, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in losses of $25 million and $4 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

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.

Current wording

For the three months ended June 30, 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 $2 million and $1 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Year-to-date - Total other comprehensive income (loss), net of tax, for the current year decreased $75 million compared to the prior year period primarily as a result of the following:

Current wording

Year-to-date - Total other comprehensive income (loss), net of tax, for the current year decreased $95 million compared to the prior year period primarily as a result of the following:

Previous 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.

Current wording

For the nine months ended June 30, 2024 and 2023, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in gains of $2 million and $105 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

For the six 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 losses of $7 million for the six months ended March 31, 2023.

Current wording

For the nine months ended June 30, 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 $2 million and unrealized losses of $6 million for the nine months ended June 30, 2024 and 2023, respectively.