Document


 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 

___________________________
 
FORM 10-Q
(Mark One)
 
 
 
 
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 2017
 
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934
 
For the transition period from _________ to ___________

Commission file number 333-211719

ASHLAND GLOBAL HOLDINGS INC.

(a Delaware corporation)
I.R.S. No. 81-2587835

50 E. RiverCenter Boulevard
Covington, Kentucky 41011
Telephone Number (859) 815-3333

Indicate by check mark whether the Registrant: (1)  has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ No  o    
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).     Yes þ No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of  “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”  in Rule 12b-2 of the Exchange Act.  (Check One):
 
 Large Accelerated Filer þ
 
 Accelerated Filer o  
 
 Non-Accelerated Filer o
 
Smaller Reporting Company o  
 
 (Do not check if a smaller reporting company.)
Emerging Growth Company o 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o No þ
At December 31, 2017, there were 62,228,812 shares of Registrant’s Common Stock outstanding.
 
 
 
 
 




PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
 
 
 
 
 

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
Three months ended
 
December 31
(In millions except per share data - unaudited)
2017

 
2016

Sales
$
842

 
$
704

Cost of sales
613

 
515

Gross profit
229

 
189

 
 
 
 
Selling, general and administrative expense
171

 
157

Research and development expense
21

 
20

Equity and other income
2

 
3

Operating income
39

 
15

 
 
 
 
Net interest and other financing expense
31

 
122

Other net periodic benefit income

 
2

Net loss on divestitures
1

 
1

Income (loss) from continuing operations before income taxes
7

 
(106
)
Income tax expense (benefit) - Note I
14

 
(41
)
Loss from continuing operations
(7
)
 
(65
)
Income from discontinued operations (net of tax) - Note D

3

 
75

Net income (loss)
(4
)
 
10

Net income attributable to noncontrolling interest (a)

 
11

Net loss attributable to Ashland
$
(4
)
 
$
(1
)
 
 
 
 
PER SHARE DATA
 
 
 
Basic earnings per share - Note L
 

 
 

Loss from continuing operations
$
(0.12
)
 
$
(1.05
)
Income from discontinued operations attributable to Ashland
0.05

 
1.04

Net loss attributable to Ashland
$
(0.07
)
 
$
(0.01
)
 
 
 
 
Diluted earnings per share - Note L
 

 
 

Loss from continuing operations

$
(0.12
)
 
$
(1.05
)
Income from discontinued operations attributable to Ashland
0.05

 
1.04

Net loss attributable to Ashland
$
(0.07
)
 
$
(0.01
)
 
 
 
 
COMPREHENSIVE INCOME (LOSS)
 
 
 
Net income (loss)
$
(4
)
 
$
10

Other comprehensive income (loss), net of tax - Note M
 
 
 
Unrealized translation gain (loss)
3

 
(146
)
Net change in available-for-sale securities
8

 

Pension and postretirement obligation adjustment

 
(1
)
Other comprehensive income (loss)
11

 
(147
)
Comprehensive income (loss)
$
7

 
$
(137
)
Comprehensive income attributable to noncontrolling interest

 
10

Comprehensive income (loss) attributable to Ashland
$
7

 
$
(147
)
 
 
 
 
(a)
For the three months ended December 31, 2016, this represents the income attributable to the previous noncontrolling interest in Valvoline Inc., whose results are now included within discontinued operations. See Note B for more information.




SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

2

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 
 
 

 
December 31

 
September 30

(In millions - unaudited)
2017

 
2017

 
 
 
 
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
601

 
$
566

Accounts receivable (a)
597

 
612

Inventories - Note F
674

 
634

Other assets
92

 
91

Total current assets
1,964

 
1,903

Noncurrent assets
 

 
 

Property, plant and equipment
 
 
 
Cost
3,795

 
3,762

Accumulated depreciation
1,850

 
1,792

Net property, plant and equipment
1,945

 
1,970

Goodwill - Note G
2,475

 
2,465

Intangibles - Note G
1,298

 
1,319

Restricted investments - Note E
315

 
302

Asbestos insurance receivable - Note K
205

 
209

Deferred and other income taxes
28

 
28

Other assets
425

 
422

Total noncurrent assets
6,691

 
6,715

Total assets
$
8,655

 
$
8,618

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

Current liabilities
 

 
 

Short-term debt - Note H
$
355

 
$
235

Trade and other payables
382

 
409

Accrued expenses and other liabilities
266

 
324

Total current liabilities
1,003

 
968

Noncurrent liabilities
 

 
 

Long-term debt - Note H
2,584

 
2,584

Asbestos litigation reserve - Note K
676

 
694

Deferred and other income taxes
390

 
375

Employee benefit obligations - Note J
194

 
191

Other liabilities
409

 
400

Total noncurrent liabilities
4,253

 
4,244

Commitments and contingencies - Note K


 


Stockholders' equity
3,399

 
3,406

 
 
 
 
Total liabilities and stockholders' equity
$
8,655

 
$
8,618

 
 
 
 
(a)
Accounts receivable includes an allowance for doubtful accounts of $9 million at December 31, 2017 and September 30, 2017.








SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

3

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CONSOLIDATED EQUITY

 
 
 



(In millions - unaudited)
Common
stock

 
Paid-in
capital

 
Retained
earnings

 
Accumulated
other
comprehensive
income (loss)

(a)
Total

BALANCE AT SEPTEMBER 30, 2017
$
1

 
$
931

 
$
2,696

 
$
(222
)

$
3,406

Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
Net loss
 

 
 
 
(4
)
 
 

(4
)
Other comprehensive income
 
 
 
 
 
 
11

 
11

Regular dividends, $0.225 per common share
 

 
 

 
(14
)
 
 

 
(14
)
Common shares issued under stock incentive and other plans (b)
 

 

 
 
 
 

 

BALANCE AT DECEMBER 31, 2017
$
1

 
$
931

 
$
2,678

 
$
(211
)

$
3,399

 
 
 
 
 
 
 
 
 
 
(a)
At December 31, 2017 and September 30, 2017, the after-tax accumulated other comprehensive loss attributable to Ashland of $211 million and $222 million, respectively, was comprised of net unrealized translation losses of $243 million and $246 million, respectively, net unrealized gains on available-for-sale securities of $29 million and $21 million, respectively, and unrecognized prior service credits as a result of certain employee benefit plan amendments of $3 million for each period.
(b)
Common shares issued were 111,400 for the three months ended December 31, 2017.



























SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

4

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

 
 
 

 
Three months ended
 
December 31
(In millions - unaudited)
2017

 
2016

CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES FROM
 
 
 
CONTINUING OPERATIONS
 
 
 
Net income (loss)
$
(4
)
 
$
10

Income from discontinued operations (net of tax)
(3
)
 
(75
)
Adjustments to reconcile income from continuing operations to
 

 
 

cash flows from operating activities
 

 
 

Depreciation and amortization
79

 
68

Original issue discount and debt issuance cost amortization
2

 
94

Deferred and other income taxes
8

 
2

Stock based compensation expense
7

 
5

Gain on early retirement of debt

 
(3
)
Realized gain and investment income on available-for-sale securities
(3
)
 
(3
)
Net loss on divestitures
1

 
1

Pension contributions
(2
)
 
(1
)
Gain on post-employment plan remeasurement

 
(2
)
Change in operating assets and liabilities (a)
(109
)
 
(156
)
Total cash flows used by operating activities from continuing operations
(24
)
 
(60
)
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES FROM
 

 
 

CONTINUING OPERATIONS
 

 
 

Additions to property, plant and equipment
(24
)
 
(33
)
Proceeds from disposal of property, plant and equipment
1

 

Proceeds from sale of operations
1

 

Net purchase of funds restricted for specific transactions
(5
)
 
(2
)
Reimbursements from restricted investments
5

 

Proceeds from sales of available-for-sale securities
5

 

Purchases of available-for-sale securities
(5
)
 

Proceeds from the settlement of derivative instruments

 
4

Payments for the settlement of derivative instruments
(2
)
 

Total cash flows used by investing activities from continuing operations
(24
)
 
(31
)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES FROM
 

 
 

CONTINUING OPERATIONS
 

 
 

Repayment of long-term debt
(2
)
 
(239
)
Premium on long-term debt repayment

 
(5
)
Proceeds (repayment) from short-term debt
120

 
(154
)
Debt issuance costs

 
(4
)
Cash dividends paid
(14
)
 
(24
)
Stock based compensation employee withholding taxes paid in cash
(5
)
 
(8
)
Total cash flows provided (used) by financing activities from continuing operations
99

 
(434
)
CASH USED BY CONTINUING OPERATIONS
51

 
(525
)
Cash provided (used) by discontinued operations
 

 
 

Operating cash flows, net
(16
)
 
70

Investing cash flows, net

 
(10
)
Financing cash flows, net

 
(10
)
Total cash provided (used) by discontinued operations
(16
)
 
50

Effect of currency exchange rate changes on cash and cash equivalents

 
(9
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
35

 
(484
)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
566

 
1,017

Change in cash and cash equivalents held by Valvoline

 
(65
)
CASH AND CASH EQUIVALENTS - END OF PERIOD
$
601

 
$
468

 
 
 
 
(a)
Excludes changes resulting from operations acquired or sold.




SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

5

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 



NOTE A  SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation  
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and Securities and Exchange Commission (SEC) regulations.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Additionally, certain prior period data, primarily related to discontinued operations, have been reclassified in the Consolidated Financial Statements and accompanying notes to conform to the current period presentation, as further described in this section. These statements omit certain information and footnote disclosures required for complete annual financial statements and, therefore, should be read in conjunction with Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017.  Results of operations for the period ended December 31, 2017 are not necessarily indicative of the expected results for the remaining quarters in the fiscal year.
On May 12, 2017, Ashland completed the distribution of its remaining 170 million shares of common stock of Valvoline Inc. which represented approximately 83% of the total outstanding shares of Valvoline Inc.'s common stock. This separation from Valvoline represented a strategic shift in Ashland's business and qualified as a discontinued operation. Accordingly, Valvoline's operating results and cash flows for the three months ended December 31, 2016 have been classified as discontinued operations within the Condensed Consolidated Financial Statements. See Note B for additional information on the separation of Valvoline Inc.
Subsequent to completing the separation from Valvoline Inc., Ashland's operations are managed within the following three reportable segments: Specialty Ingredients, Composites and Intermediates and Solvents.
Use of estimates, risks and uncertainties
The preparation of Ashland’s Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities.  Significant items that are subject to such estimates and assumptions include, but are not limited to, long-lived assets (including goodwill and other intangible assets), income taxes and liabilities and receivables associated with asbestos litigation and environmental remediation.  Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions.
Ashland’s results are affected by domestic and international economic, political, legislative, regulatory and legal actions.  Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies and changes in the prices of certain key raw materials, can have a significant effect on operations.  While Ashland maintains reserves for anticipated liabilities and carries various levels of insurance, Ashland could be affected by civil, criminal, regulatory or administrative actions, claims or proceedings relating to asbestos, environmental remediation or other matters.
New accounting standards
A description of new U.S. GAAP accounting standards issued or adopted during the current year is required in interim financial reporting.  A detailed listing of new accounting standards relevant to Ashland is included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2017. The following standards relevant to Ashland were either issued or adopted in the current period, or will become effective in a subsequent period.
In May 2014, the FASB issued accounting guidance outlining a single comprehensive five step model for entities to use in accounting for revenue arising from contracts with customers (ASC 606 Revenue from Contracts with Customers). The new guidance supersedes most current revenue recognition guidance, in an

6

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE A  SIGNIFICANT ACCOUNTING POLICIES (continued)
 

effort to converge the revenue recognition principles within U.S. GAAP. This new guidance also requires entities to disclose certain quantitative and qualitative information regarding the nature, amount, timing and uncertainty of qualifying revenue and cash flows arising from contracts with customers. Entities have the option of using a full retrospective or a modified retrospective approach to adopt the new guidance. Ashland has identified an implementation team that is currently evaluating the impact of the new standard on the Condensed Consolidated Financial Statements and the adoption method options available as well as the overall impact the new guidance will have on the organization. The assessment process consists of categorizing Ashland’s revenue streams and reviewing the current internal accounting policies and practices to determine potential differences that would result from applying the requirements of the new standard to revenue contracts. Additional discussions and meetings with each revenue stream team have occurred to solicit input, identify potential impacts and appropriate changes to Ashland’s business processes, systems and controls to support the revenue recognition and disclosure requirements under the new standard. Based on various preliminary assessments conducted to date, Ashland has identified agreements with distributors and customers that are subject to rebate and incentive programs that could contain elements of material rights and/or variable consideration. Ashland does not currently believe that these elements would result in a material change to how revenue would be recognized for these agreements. Ashland currently intends to adopt this standard using the modified retrospective approach and does not believe the impact will be material to the Condensed Consolidated Financial Statements but does expect there to be significant additional disclosures within the Notes to Condensed Consolidated Financial Statements. This guidance becomes effective for Ashland on October 1, 2018.
In March 2017, the FASB issued accounting guidance that will change how employers who sponsor defined benefit pension and/or postretirement benefit plans present the net periodic benefit cost in the Statement of Consolidated Comprehensive Income (Loss). This guidance requires employers to present the service cost component of net periodic benefit cost in the same caption within the Statement of Consolidated Comprehensive Income (Loss) as other employee compensation costs from services rendered during the period. All other components of the net periodic benefit cost will be presented separately outside of the operating income caption. This guidance must be applied retrospectively. Ashland elected to early adopt this guidance on October 1, 2017, which resulted in a reclassification of $2 million in income from the selling, general and administrative expense and cost of sales captions to the other net periodic benefit income caption in the Statement of Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016. The components of net periodic benefits income (costs) reclassified primarily relate to interest cost, expected return on assets, curtailments, settlements and actuarial gains and losses. Ashland did not have to adjust the classification of service cost since it previously was recorded within the caption required by the new guidance. See Note J for additional information on net periodic benefit costs.
In March 2016, the FASB issued new accounting guidance for certain aspects of share-based payments to employees. This guidance requires all excess tax benefits and tax deficiencies related to share-based payments to be recognized as income tax expense in the Statements of Consolidated Comprehensive Income (Loss) instead of additional paid-in capital, and changes the classification of excess tax benefits from a financing activity to an operating activity within the Statements of Condensed Consolidated Cash Flows. This guidance also allows entities to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. In addition, this guidance increases the amount an employer can withhold to cover income taxes on awards and still qualify for equity classification and requires that cash paid by an employer when directly withholding shares for tax-withholding purposes be classified as a financing activity within the Statements of Condensed Consolidated Cash Flows. The guidance became effective for Ashland and was adopted on October 1, 2017. The guidance specifically related to the Statements of Consolidated Comprehensive Income (Loss) was adopted prospectively while the guidance related to the Statements of Condensed Consolidated Cash Flows was adopted retrospectively, as required by the guidance.

7

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE A  SIGNIFICANT ACCOUNTING POLICIES (continued)
 

Upon adoption, the overall impact on Ashland's Condensed Consolidated Financial Statements was not significant.
NOTE B – VALVOLINE
Ashland Separation of Valvoline
On September 22, 2015, Ashland announced that the Board of Directors approved proceeding with a plan to separate Ashland into two independent, publicly traded companies comprising of the new Ashland (now known as Ashland Global Holdings Inc.) and Valvoline Inc. The initial step of the separation, the initial public offering (IPO) of Valvoline Inc., closed on September 28, 2016. As discussed further within the Final Separation section of this Note, Ashland completed the distribution of its remaining shares in Valvoline Inc. on May 12, 2017. The new Ashland is a premier global leader in providing specialty chemical solutions to customers in a wide range of consumer and industrial markets. Key markets and applications include pharmaceutical, personal care, food and beverage, architectural coatings, adhesives, automotive, construction and energy.
After completing the IPO on September 28, 2016 and before the distribution of its remaining shares on May 12, 2017, Ashland owned 170 million shares of Valvoline Inc.’s common stock which represented approximately 83% of the total outstanding shares of Valvoline Inc.’s common stock. As a result, Ashland continued to consolidate Valvoline within the Condensed Consolidated Financial Statements up until the distribution of the remaining shares. The resulting outside stockholders’ interests in Valvoline Inc., which was approximately 17%, was presented separately as a noncontrolling interest within Ashland’s equity in the Condensed Consolidated Balance Sheets up until the distribution of the remaining shares. The amount of consolidated net income attributable to these minority holders is presented as a separate caption on the Statement of Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016.
Final Separation
Ashland completed the distribution of its remaining 170 million shares of common stock of Valvoline Inc. as a pro rata dividend on shares of Ashland common stock outstanding at the close of business on the record date of May 5, 2017. Based on the shares of Ashland common stock outstanding as of May 5, 2017, the record date for the distribution, each share of Ashland common stock received 2.745338 shares of Valvoline common stock in the distribution. The distribution was recorded at the carrying amount of Valvoline Inc.'s net assets which was a deficit of $187 million as of May 12, 2017, as follows:

8

 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
NOTE B – VALVOLINE (continued)



 
May 12

(In millions)
2017

ASSETS
 
Current assets
 
Cash
179

Accounts receivable, net
385

Inventories
153

Other current assets
24

Total current assets
741

Noncurrent assets
 
Net property, plant and equipment
357

Goodwill
329

Equity and other unconsolidated investments
31

Deferred income taxes
391

Other noncurrent assets
93

Total noncurrent assets
1,201

Total assets
$
1,942

LIABILITIES AND EQUITY
 
Current liabilities
 
Short-term debt
75

Current portion of long-term debt
16

Trade and other payables
353

Other current liabilities
34

Total current liabilities
478

Noncurrent liabilities
 
Long-term debt
662

Employee benefit obligations
826

Other long-term liabilities
163

Total noncurrent liabilities
1,651

Total liabilities
$
2,129

Net deficit
$
(187
)
A Tax Matters Agreement between Ashland and Valvoline Inc. governs the rights and obligations after the separation regarding certain income taxes and other taxes, including certain tax liabilities and benefits, attributes, returns and contests.
Discontinued Operations Assessment
Valvoline met the criteria to qualify as a discontinued operation and accordingly, its operating results and cash flows for the three months ended December 31, 2016 have been classified as discontinued operations within the Condensed Consolidated Financial Statements. See Note D for more information.

9

 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
NOTE B – VALVOLINE (continued)



Costs of transaction
Ashland recognized separation costs of $6 million and $28 million for the three months ended December 31, 2017 and 2016, respectively. Of these amounts, $6 million of separation costs directly related to Valvoline and were included within the discontinued operations caption of the Statement of Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016. Otherwise, separation costs are recorded within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss).
NOTE C – ACQUISITIONS
Pharmachem
Background
On May 17, 2017, Ashland completed its acquisition of the stock of Pharmachem Laboratories, Inc. (Pharmachem), a leading provider of quality ingredients to the global health and wellness industries and high-value differentiated products to fragrance and flavor houses. With annual revenues of approximately $300 million and 14 manufacturing facilities in the United States and Mexico, New Jersey-based Pharmachem develops, manufactures and supplies custom and branded nutritional and fragrance products.  Ashland has included Pharmachem within the Specialty Ingredients reporting segment.  
Purchase price allocation
The acquisition was recorded by Ashland using the purchase method of accounting in accordance with applicable U.S. GAAP whereby the total purchase price was allocated to tangible and intangible assets and liabilities acquired based on respective fair values.
The all-cash purchase price of Pharmachem was $680 million which included working capital adjustments of approximately $20 million. The following table summarizes the current preliminary values of the assets acquired and liabilities assumed at the date of acquisition.
 
At

 
May 17, 2017

Preliminary purchase price allocation (in millions)
As Adjusted

Assets:
 
Accounts receivable
52

Inventory
74

Other current assets
4

Intangible assets
330

Goodwill
287

Property, plant and equipment
97

Other noncurrent assets
20

Liabilities:
 

Accounts payable
(32
)
Deferred tax - net
(138
)
Other noncurrent liabilities
(14
)
Total purchase price
$
680


10

 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
NOTE C – ACQUISITIONS (continued)



As of December 31, 2017, the purchase price allocation for the acquisition was preliminary. Adjustments to the current fair value estimates in the above table may occur as the process conducted for various valuations and assessments, including certain tangible and intangible assets, are finalized. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were based on strategic benefits that are expected to be realized from the acquisition. None of the goodwill is expected to be deductible for income tax purposes.
Intangible assets identified
The purchase price allocation included $330 million of certain definite-lived intangible assets which are being amortized over the estimated useful life in proportion to the economic benefits consumed. The determination of the useful lives is based upon various industry studies, historical acquisition experience, economic factors, and future cash flows of the combined company.  In addition, Ashland reviewed certain technological trends and also considered the relative stability in the current Pharmachem customer base.
The following details the total intangible assets identified as of May 17, 2017.
 
 
 
Weighted-average
 
 
 
amortization period
Intangible asset type (in millions)
Value

 
(years)
Trademarks and trade names
$
26

 
15
Intellectual property
68

 
22
Customer and supplier relationships
236

 
20
Total
$
330

 
 
NOTE D – DISCONTINUED OPERATIONS
In previous periods, Ashland has divested certain businesses that have qualified as discontinued operations. The operating results from these divested businesses and subsequent adjustments related to ongoing assessments of certain retained liabilities and tax items have been recorded within the discontinued operations caption in the Statements of Consolidated Comprehensive Income for all periods presented and are discussed further within this note.
As previously discussed in Notes A and B, Ashland completed the distribution of its remaining 170 million shares of common stock of Valvoline Inc. on May 12, 2017. Ashland determined that the Valvoline separation qualified as a discontinued operation, in accordance with U.S. GAAP, since it represents a strategic shift for Ashland and has a major effect on Ashland's operations and financial results. Accordingly, Valvoline's operating results and cash flows for the three months ended December 31, 2016 have been classified as discontinued operations within the Condensed Consolidated Financial Statements.
Components of amounts reflected in the Statements of Consolidated Comprehensive Income (Loss) related to discontinued operations are presented in the following table for the three months ended December 31, 2017 and 2016.

11

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE D – DISCONTINUED OPERATIONS (continued)

 
Three months ended
 
December 31
(In millions)
2017

 
2016

Income from discontinued operations (net of tax)
 
 
 
Valvoline
$
3

 
$
75

Total income from discontinued operations (net of tax)
$
3

 
$
75

The following table presents a reconciliation of the historically reported captions within Ashland's Statements of Consolidated Income (Loss) for the income from discontinued operations attributable to Valvoline for the three months ended December 31, 2016.
 
Three months ended

(In millions)
December 31, 2016

Income from discontinued operations
 
attributable to Valvoline

 
Sales
$
489

Cost of sales
(293
)
Selling, general and administrative expense
(82
)
Research and development expense
(3
)
Equity and other income
9

Operating income of discontinued operations
120

Net interest and other financing expense
(10
)
Pretax income of discontinued operations
110

Income tax expense
(35
)
Income from discontinued operations
$
75


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

12

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE E – FAIR VALUE MEASUREMENTS (continued)

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 December 31, 2017.
(In millions)
Carrying
value

 
Total
fair
value

 
Quoted prices
in active
markets for
identical
assets
Level 1

 
Significant
other
observable
inputs
Level 2

 
Significant
unobservable
inputs
Level 3

Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
601

 
$
601

 
$
601

 
$

 
$

Restricted investments (a)
345

 
345

 
345

 

 

Deferred compensation investments (b)
160

 
160

 

 
160

 

Investments of captive insurance company (b)
3

 
3

 
3

 

 

Foreign currency derivatives
4

 
4

 

 
4

 

Total assets at fair value
$
1,113

 
$
1,113

 
$
949

 
$
164

 
$

 
 
 
 
 
 
 
 
 
 
Liabilities
 

 
 

 
 

 
 

 
 

Foreign currency derivatives
$
13

 
$
13

 
$

 
$
13

 
$

 
 
 
 
 
 
 
 
 
 
(a)
Included in restricted investments is $30 million classified in the other current assets caption on the Condensed Consolidated Balance Sheets.
(b)
Included in other noncurrent assets in the Condensed Consolidated Balance Sheets.
The following table summarizes financial asset instruments subject to recurring fair value measurements as of September 30, 2017.

13

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE E – FAIR VALUE MEASUREMENTS (continued)

(In millions)
Carrying
value

 
Total
fair
value

 
Quoted prices
in active
markets for
identical
assets
Level 1

 
Significant
other
observable
inputs
Level 2

 
Significant
unobservable
inputs
Level 3

Assets
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
566

 
$
566

 
$
566

 
$

 
$

Restricted investments (a)
332

 
332

 
332

 

 

Deferred compensation investments (b)
158

 
158

 

 
158

 

Investments of captive insurance company (b)
3

 
3

 
3

 

 

Foreign currency derivatives
2

 
2

 

 
2

 

Total assets at fair value
$
1,061

 
$
1,061

 
$
901

 
$
160

 
$

 
 
 
 
 
 
 
 
 
 
Liabilities
 

 
 

 
 

 
 

 
 

Foreign currency derivatives
$
36

 
$
36

 
$

 
$
36

 
$

 
 
 
 
 
 
 
 
 
 
(a)
Included in restricted investments is $30 million classified in the other current assets caption on the Condensed Consolidated Balance Sheets.
(b)
Included in other noncurrent assets in the Condensed Consolidated Balance Sheets.
Restricted investments
During 2015, Ashland and Hercules entered into a comprehensive settlement agreement related to certain insurance coverage for asbestos bodily injury claims with Underwriters at Lloyd’s, certain London Companies and Chartis (AIG) member companies, along with National Indemnity Company and Resolute Management, Inc., under which Ashland and Hercules received a total of $398 million (the January 2015 asbestos insurance settlement). Ashland placed $335 million of the settlement funds from the January 2015 asbestos insurance settlement into a renewable annual trust restricted for the purpose of paying ongoing and future litigation defense and claim settlement costs incurred in conjunction with asbestos claims. These funds were classified primarily as noncurrent restricted investment assets, with $30 million classified within other current assets, in the Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017.
During 2015, Ashland diversified the restricted investments received from the January 2015 asbestos insurance settlement into primarily equity and corporate bond mutual funds that are designated as available-for-sale securities, classified as Level 1 measurements within the fair value hierarchy. Available-for-sale securities are reported at fair value with unrealized gains and losses, net of related deferred income taxes, included in the stockholders' equity section of the Condensed Consolidated Balance Sheets as a component of accumulated other comprehensive income (AOCI). Investment income and realized gains and losses on the available-for-sale securities are reported in the net interest and other financing expense caption in the Statements of Consolidated Comprehensive Income. The following table provides a summary of the available-for-sale securities portfolio as of December 31, 2017 and September 30, 2017:

14

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE E – FAIR VALUE MEASUREMENTS (continued)

 
December 31

 
September 30

(In millions)
2017

 
2017

Original cost
$
335

 
$
335

Accumulated adjustments, net (a)

(38
)
 
(24
)
Adjusted cost, beginning of year
297

 
311

Investment income (b)
2

 
9

Unrealized gain
45

 
35

Realized gain
1

 
2

Settlement funds
5

 
2

Disbursements
(5
)
 
(27
)
Fair value
$
345

 
$
332

 
 
 
 
(a)
The accumulated adjustments include investment income, realized gains, disbursements and settlements recorded in previous periods.
(b)
Investment income for the demand deposit includes interest income as well as dividend income transferred from the equity and corporate bond mutual funds.
The following table presents gross unrealized gains and losses for the restricted investment available-for-sale securities as of December 31, 2017 and September 30, 2017:
 
 
 
Gross

 
Gross

 
 
(In millions)
Adjusted Cost

 
Unrealized Gain

 
Unrealized Loss

 
Fair Value

As of December 31, 2017
 
 
 
 
 
 
 
Demand Deposit
$
17

 
$

 
$

 
$
17

Equity Mutual Fund
163

 
45

 

 
208

Corporate bond Mutual Fund
120

 

 

 
120

Fair value
$
300

 
$
45

 
$

 
$
345

 
 
 
 
 
 
 
 
As of September 30, 2017
 
 
 
 
 
 
 
Demand Deposit
$
9

 
$

 
$

 
$
9

Equity Mutual Fund
168

 
34

 

 
202

Corporate bond Mutual Fund
120

 
1

 

 
121

Fair value
$
297

 
$
35

 
$

 
$
332


The unrealized gains and losses as of December 31, 2017 and September 30, 2017 were recognized within AOCI. Ashland invests in highly-rated investment grade mutual funds. No other-than-temporary impairment was recognized in AOCI during the three months ended December 31, 2017 and 2016.
The following table presents the investment income and disbursements related to the investments within the portfolio for the three months ended December 31, 2017 and 2016.
 
Three months ended
 
December 31
(In millions)
2017

 
2016

Investment income
$
2

 
$
3

Realized gains
1

 

Disbursements
(5
)
 


15

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE E – FAIR VALUE MEASUREMENTS (continued)

Deferred compensation investments
Deferred compensation investments consist of Level 2 measurements within the fair value hierarchy which are comprised primarily of a guaranteed interest fund, a common stock index fund and an intermediate government bond fund. Gains and losses related to deferred compensation investments are immediately recognized 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 on certain assets and liabilities, including short-term inter-company 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 net gains and/or losses recognized during the three months ended December 31, 2017 and 2016 within the Statements of Consolidated Comprehensive Income (Loss).
 
Three months ended
 
December 31
(In millions)
2017

 
2016

Foreign currency derivative loss
$
(11
)
 
$
(8
)
The following table summarizes the fair values of the outstanding foreign currency derivatives as of December 31, 2017 and September 30, 2017 included in accounts receivable and accrued expenses and other liabilities of the Condensed Consolidated Balance Sheets.
 
December 31

 
September 30

(In millions)
2017

 
2017

Foreign currency derivative assets
$
4

 
$
2

Notional contract values
425

 
79

 
 
 
 
Foreign currency derivative liabilities
$
13

 
$
36

Notional contract values
810

 
1,601

Other financial instruments
At December 31, 2017 and September 30, 2017, Ashland's long-term debt (including the current portion and excluding debt issuance cost discounts) had a carrying value of $2,614 million and 2,615 million, respectively, compared to a fair value of $2,755 million and $2,768 million, respectively.  The fair values of long-term debt are based on quoted market prices or, if market prices are not available, the present values of the underlying cash flows discounted at Ashland’s incremental borrowing rates, which are deemed to be Level 2 measurements within the fair value hierarchy.

16

 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
NOTE F – INVENTORIES

Inventories are carried at the lower of cost or market.  Inventories are primarily stated at cost using the weighted-average cost method. In addition, certain inventories are valued at cost using the last-in, first-out (LIFO) method.  
The following table summarizes Ashland’s inventories as of the reported Condensed Consolidated Balance Sheet dates.
 
December 31

 
September 30

(In millions)
2017

 
2017

Finished products
$
421

 
$
390

Raw materials, supplies and work in process
256

 
245

LIFO reserves
(3
)
 
(1
)
 
$
674

 
$
634

NOTE G – GOODWILL AND OTHER INTANGIBLES
Goodwill
Ashland reviews goodwill and indefinite-lived intangible assets for impairment annually or when events and circumstances indicate an impairment may have occurred.  This annual assessment is performed as of July 1 and consists of Ashland determining each reporting unit’s current fair value compared to its current carrying value.  For its July 1, 2017 assessment, Ashland determined that its reporting units for the allocation of goodwill are its three reportable segments: Specialty Ingredients, Composites and Intermediates and Solvents. At that time, Ashland determined no additional impairment existed.
The following is a progression of goodwill by reportable segment for the three months ended December 31, 2017.
 
Specialty

 
 
 
Intermediates

 
 

(In millions)
Ingredients

 
Composites

 
and Solvents

(a)
Total

Balance as of September 30, 2017
$
2,315

 
$
150

 
$

 
$
2,465

Currency translation adjustment
10

 

 

 
10

Balance as of December 31, 2017
$
2,325

 
$
150

 
$

 
$
2,475

 
 
 
 
 
 
 
 
(a)
As of December 31, 2017, there was accumulated impairment of $171 million related to the Intermediates and Solvents reportable segment.
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 25 years, intellectual property over 5 to 25 years, and customer and supplier relationships over 3 to 24 years.
Ashland annually reviews indefinite-lived intangible assets for possible impairment or whenever events or changes in circumstances indicate that carrying amounts may not be recoverable.  
Intangible assets were comprised of the following as of December 31, 2017 and September 30, 2017.
 

17

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE G – GOODWILL AND OTHER INTANGIBLES (continued)

 
December 31, 2017
 
Gross

 
 
 
Net

 
carrying

 
Accumulated

 
carrying

(In millions)
amount

 
amortization

 
amount

Definite-lived intangible assets
 
 
 
 
 
Trademarks and trade names
$
67

 
$
(22
)
 
$
45

Intellectual property
758

 
(340
)
 
418

Customer and supplier relationships
780

 
(246
)
 
534

Total definite-lived intangible assets
1,605

 
(608
)
 
997

 
 
 
 
 
 
Indefinite-lived intangible assets
 
 
 
 
 
Trademarks and trade names
301

 

 
301

Total intangible assets
$
1,906

 
$
(608
)
 
$
1,298



 
September 30, 2017
 
Gross

 
 
 
Net

 
carrying

 
Accumulated

 
carrying

(In millions)
amount

 
amortization

 
amount

Definite-lived intangible assets
 
 
 
 
 
Trademarks and trade names
$
67

 
$
(22
)
 
$
45

Intellectual property
757

 
(326
)
 
431

Customer and supplier relationships
777

 
(235
)
 
542

Total definite-lived intangible assets
1,601

 
(583
)
 
1,018

 
 
 
 
 
 
Indefinite-lived intangible assets
 
 
 
 
 
Trademarks and trade names
301

 

 
301

Total intangible assets
$
1,902

 
$
(583
)
 
$
1,319

Amortization expense recognized on intangible assets was $24 million and $19 million for the three months ended December 31, 2017 and 2016, respectively, and is included in the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss). Estimated amortization expense for future periods is $94 million in 2018 (includes three months actual and nine months estimated), $90 million in 2019, $89 million in 2020, $89 million in 2021 and $87 million in 2022. 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.
NOTE H – DEBT
The following table summarizes Ashland’s current and long-term debt as of the dates reported in the Condensed Consolidated Balance Sheets.

18

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE H – DEBT (continued)

 
December 31

 
September 30

(In millions)
2017

 
2017

4.750% notes, due 2022
$
1,082

 
$
1,082

Term Loan B, due 2024
597

 
599

6.875% notes, due 2043
376

 
376

Revolving Credit Facility
285

 
173

Term Loan A, due 2022
250

 
250

Term Loan A, due 2020
250

 
250

Accounts receivable securitization
64

 
56

6.50% junior subordinated notes, due 2029
51

 
51

Medium-term notes, due 2019, interest of 9.4% at December 31, 2017
5

 
5

Other (a)
(21
)
 
(23
)
Total debt
2,939

 
2,819

Short-term debt (includes current portion of long-term debt)
(355
)
 
(235
)
Long-term debt (less current portion and debt issuance cost discounts)
$
2,584

 
$
2,584

 
 
 
 
(a)
Other includes $24 million and $25 million of debt issuance cost discounts as of December 31, 2017 and September 30, 2017, respectively.
The scheduled aggregate maturities of long-term debt by year (including the current portion and excluding debt issuance costs) are as follows: $5 million remaining in 2018, $11 million in 2019, $269 million in 2020, $56 million in 2021 and $1,279 million in 2022.  
Ashland Financing Activities
2017 Credit Agreement
On May 17, 2017, in conjunction with the closing of the Pharmachem acquisition, Ashland entered into a secured credit agreement (the 2017 Credit Agreement) with a group of lenders. The 2017 Credit Agreement provided for (i) a $250 million three-year term loan A facility (the Three-Year TLA Facility), (ii) a $250 million five-year term loan A facility (the Five-Year TLA Facility and together with the Three-Year TLA Facility, the TLA Facilities) and (iii) a $680 million five-year revolving credit facility (including a $125 million letter of credit sublimit) (the 2017 Revolving Credit Facility). Proceeds of borrowings under the TLA Facilities were used solely to finance the acquisition of Pharmachem, while the proceeds of the 2017 Revolving Credit Facility were used to finance, in part, the acquisition of Pharmachem, to refinance the 2015 Senior Credit Agreement and for general corporate purposes. On May 19, 2017, Ashland entered into Amendment No. 1 to the 2017 Credit Agreement, which increased the aggregate commitments under the 2017 Revolving Credit Facility from $680 million to $800 million.
At Ashland’s option, loans issued under the 2017 Credit Agreement bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. Loans bear interest at LIBOR plus 1.75% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus 0.75%, in the alternative, through and including the date of delivery of a quarterly compliance certificate and thereafter the interest rate will fluctuate between LIBOR plus 1.375% per annum and LIBOR plus 2.500% per annum (or between the alternate base rate plus 0.375% per annum and the alternate base rate plus 1.500% per annum), based upon Ashland’s secured facilities ratings or the consolidated net leverage ratio (as defined in the 2017 Credit Agreement) (whichever yields a lower applicable interest rate margin) at such time. In addition, Ashland was required to pay fees of 0.25% per annum on the daily unused amount of the 2017 Revolving Credit Facility through and including the date of delivery of a compliance certificate, and thereafter the fee rate will fluctuate between 0.175% and 0.40% per annum, based upon Ashland’s secured facilities rating or the consolidated net leverage ratio (whichever yields a lower applicable rate). The TLA Facilities may be prepaid at any time without

19

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE H – DEBT (continued)

premium. The Three-Year TLA Facility will not amortize and will be due on May 17, 2020.  The Five-Year TLA Facility will not amortize in each of the first, second and third years and will amortize at a rate of 20% per annum in each of the fourth and fifth years (payable in equal quarterly installments), with the outstanding balance of the Five-Year TLA Facility to be paid on May 17, 2022.
On June 14, 2017, Ashland entered into Amendment No. 2 to the 2017 Credit Agreement, which provided for a new $600 million seven-year senior secured term loan B facility (the 2017 TLB Facility). At Ashland’s option, loans issued under the 2017 TLB Facility bear interest at either (x) LIBOR plus 2.00% per annum or (y) an alternate base rate plus 1.00% per annum. The 2017 TLB Facility may be prepaid at any time. The 2017 TLB Facility amortizes at a rate of 1.00% per annum (payable in equal quarterly installments) with the outstanding balance to be paid on May 17, 2024.
6.50% junior subordinated notes due 2029
In December 2016, Hercules LLC (Hercules) (formerly Hercules Incorporated), an indirect wholly-owned subsidiary of Ashland, repurchased, through a cash tender offer (the Tender Offer), $182 million of the aggregate principal par value amount of its 6.50% junior subordinated notes due 2029 (2029 notes) for an aggregate purchase price of $177 million. As a result of the Tender Offer, the carrying value of the 2029 notes was reduced by $90 million and Ashland recognized a $92 million charge related to accelerated accretion of the recorded debt discount (compared to the total par value) and $5 million of a net gain related to the repayment of the debt. The charge and net gain are included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016.
Open market repurchases of 4.750% notes due 2022 and 3.875% notes due 2018
During the three months ended December 31, 2016, Ashland executed open market repurchases of its 4.750% notes due 2022 (2022 notes) and its 3.875% notes due 2018 (2018 notes). As a result of these repurchases, the carrying values of the 2022 notes and 2018 notes were reduced by $36 million and $29 million, respectively. Ashland recognized a $2 million charge related to premiums paid in the open market repurchases and accelerated amortization of previously capitalized debt issuance costs, which is included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016.
Remaining borrowing capacity
The borrowing capacity remaining under the 2017 Revolving Credit Facility was $467 million due to an outstanding balance of $285 million, as well as a reduction of $48 million for letters of credit outstanding at December 31, 2017. Ashland's total borrowing capacity at December 31, 2017 was $498 million, which included $31 million of available capacity from the accounts receivable securitization facility.
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 December 31, 2017, Ashland is in compliance with all debt agreement covenant restrictions.
The maximum consolidated net leverage ratio permitted under Ashland's most recent credit agreement (the 2017 Credit Agreement) is 4.5.  At December 31, 2017, Ashland’s calculation of the consolidated net leverage ratio was 3.9.

20

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE H – DEBT (continued)

The minimum required consolidated interest coverage ratio under the 2017 Credit Agreement during its entire duration is 3.0.  At December 31, 2017, Ashland’s calculation of the interest coverage ratio was 4.6.
NOTE I – INCOME TAXES
Tax Law Changes
The Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017. The Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. At December 31, 2017, Ashland has not completed the internal accounting assessment for the tax effects of enactment of the Tax Act; however, Ashland determined a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax. Ashland recognized a provisional amount for the three months ended December 31, 2017, which is included as a component of income tax expense from continuing operations. Ashland recorded net unfavorable tax adjustments of $16 million primarily related to deferred tax rate changes and a one-time transition tax assessed on foreign cash and unremitted earnings.
Provisional amounts - Deferred and other income tax assets and liabilities
Ashland remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, Ashland is still analyzing certain aspects of the Tax Act and refining certain calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of the deferred tax balance was a favorable tax adjustment of $126 million.
Provisional amounts - Foreign tax effects
The one-time transition tax is based on Ashland's total post-1986 earnings and profits (E&P) of foreign subsidiaries that were previously deferred from U.S. income taxes. Ashland recorded a provisional amount for this one-time transition tax liability of $142 million. Ashland has not yet completed its calculation of the total post-1986 E&P for these foreign subsidiaries. In addition, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when Ashland finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. Ashland determined that the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable at this time.
Current fiscal year
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 200% for the three months ended December 31, 2017 and was primarily impacted by income mix and net unfavorable tax discrete adjustments of $16 million related to the Tax Act.
Prior fiscal year
The overall effective tax benefit rate was 39% for the three months ended December 31, 2016 and was primarily impacted by income mix.

21

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE I – INCOME TAXES (continued)

Unrecognized tax benefits
Changes in unrecognized tax benefits are summarized as follows for the three months ended December 31, 2017.
 (In millions)
 

Balance at October 1, 2017
$
194

Increases related to positions taken on items from prior years
2

Increases related to positions taken in the current year
3

Balance at December 31, 2017
$
199

From a combination of statute expirations and audit settlements in the next twelve months, Ashland expects a decrease in the amount accrued for uncertain tax positions of between $22 million and $32 million for continuing operations. It is reasonably possible that there could be other material changes to the amount of uncertain tax positions due to activities of the taxing authorities, settlement of audit issues or the reassessment of existing uncertain tax positions; however, Ashland is not able to estimate the impact of these items at this time.
NOTE J - EMPLOYEE BENEFIT PLANS
For the three months ended December 31, 2017, Ashland contributed $2 million to its non-U.S. pension plans and zero to its U.S. pension plans. Ashland expects to make additional contributions of approximately $5 million to its non-U.S. plans and $1 million to its U.S. plans during the remainder of 2018.
Plan Remeasurements
Effective January 1, 2017, Ashland discontinued certain post-employment health and life insurance benefits. The effect of these plan changes resulted in a remeasurement gain of $2 million recorded within the other net period benefit cost (income) caption on the Statement of Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016.

22

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE J – EMPLOYEE BENEFIT PLANS (continued)

Components of net periodic benefit costs (income)
The following table details the components of pension and other postretirement benefit costs for continuing operations.
 
 
 
 
 
Other postretirement
 
Pension benefits
 
benefits
(In millions)
2017

 
2016

 
2017

 
2016

Three months ended December 31
 
 
 
 
 
 
 
Service cost (a)
$
2

 
$
2

 
$
1

 
$

Interest cost (b)
3

 
2

 

 
1

Expected return on plan assets (b)
(3
)
 
(3
)
 

 

Actuarial gain (b)

 

 

 
(2
)
Total net periodic benefit costs (income)
$
2

 
$
1

 
$
1

 
$
(1
)
 
 
 
 
 
 
 
 
(a)
Service cost was not impacted by new accounting guidance adopted in the current quarter and is therefore still classified within the selling, general and administrative expense and cost of sales captions on the Statements of Consolidated Comprehensive Income (Loss). See Note A for additional information.
(b)
These components are now classified within the other net periodic benefit income caption on the Statements of Consolidated Comprehensive Income (Loss) due to the adoption of new accounting guidance in the current quarter. See Note A for additional information.
For segment reporting purposes, service cost for continuing operations is proportionately allocated to each segment, excluding the Unallocated and other segment, while all other costs for continuing operations are recorded within the other net periodic benefit income caption on the Statements of Consolidated Comprehensive Income (Loss).
NOTE K  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 given various assumptions, Ashland retained Hamilton, Rabinovitz & Associates, Inc. (HR&A).  The methodology used by HR&A to project future asbestos costs is based largely on recent experience, including claim-filing and settlement rates, disease mix, enacted legislation, 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, HR&A 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.
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 Stoker Corporation, 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.

23

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES (continued)


 
Three months ended
 
 
 
 
 
 
 
December 31
 
  Years ended September 30
(In thousands)
2017

 
2016

 
2017

 
2016

 
2015

Open claims - beginning of period
54

 
57

 
57

 
60

 
65

New claims filed
1

 

 
2

 
2

 
2

Claims settled

 

 
(1
)
 

 

Claims dismissed
(1
)
 
(1
)
 
(4
)
 
(5
)
 
(7
)
Open claims - end of period
54

 
56

 
54

 
57

 
60

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, which generally approximates the mid-point of the estimated range of exposure from model results.  Ashland reviews this estimate and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 50-year model developed with the assistance of HR&A.  
During the most recent annual update of this estimate completed during the June 2017 quarter, it was determined that the liability for Ashland asbestos-related claims should be increased by $36 million.  Total reserves for asbestos claims were $409 million at December 31, 2017 compared to $419 million at September 30, 2017.
A progression of activity in the asbestos reserve is presented in the following table.
 
Three months ended
 
 
 
 
 
 
 
December 31
 
  Years ended September 30
(In millions)
2017

 
2016

 
2017

 
2016

 
2015

Asbestos reserve - beginning of period
$
419

 
$
415

 
$
415

 
$
409

 
$
438

Reserve adjustment

 

 
36

 
37

 

Amounts paid
(10
)
 
(9
)
 
(32
)
 
(31
)
 
(29
)
Asbestos reserve - end of period (a)
$
409

 
$
406

 
$
419

 
$
415

 
$
409

 
 
 
 
 
 
 
 
 
 
(a)
Included $34 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017.
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 December 31, 2017, Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to $151 million (excluding the Hercules receivable for asbestos claims) compared to $155 million at September 30, 2017.  During the June 2017 quarter, 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 $15 million increase in the receivable for probable insurance recoveries.

24

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES (continued)


A progression of activity in the Ashland insurance receivable is presented in the following table.
 
Three months ended
 
 
 
 
 
 
 
December 31
 
Years ended September 30
(In millions)
2017

 
2016

 
2017

 
2016

 
2015

Insurance receivable - beginning of period
$
155

 
$
151

 
$
151

 
$
150

 
$
402

Receivable adjustment

 

 
15

 
16

 
(3
)
Insurance settlement

 

 
(5
)
 
(4
)
 
(227
)
Amounts collected
(4
)
 
(2
)
 
(6
)
 
(11
)
 
(22
)
Insurance receivable - end of period (a)
$
151

 
$
149

 
$
155

 
$
151

 
$
150

 
 
 
 
 
 
 
 
 
 
(a)
Included $14 million classified in accounts receivable on the Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017.
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.
 
Three months ended
 
 
 
 
 
 
 
December 31
 
  Years ended September 30
(In thousands)
2017

 
2016

 
2017

 
2016

 
2015

Open claims - beginning of period
12

 
15

 
15

 
20

 
21

New claims filed

 

 
1

 
1

 
1

Claims dismissed

 

 
(4
)
 
(6
)
 
(2
)
Open claims - end of period
12

 
15

 
12

 
15

 
20

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, which generally approximates the mid-point of the estimated range of exposure from model results.  Ashland reviews this estimate and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 50-year model developed with the assistance of HR&A.  As a result of the most recent annual update of this estimate, completed during the June 2017 quarter, it was determined that the liability for Hercules asbestos-related claims should be increased by $16 million.  Total reserves for asbestos claims were $315 million at December 31, 2017 compared to $323 million at September 30, 2017.
A progression of activity in the asbestos reserve is presented in the following table.

25

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES (continued)


 
Three months ended
 
 
 
 
 
 
 
December 31
 
Years ended September 30
(In millions)
2017

 
2016

 
2017

 
2016

 
2015

Asbestos reserve - beginning of period
$
323

 
$
321

 
$
321

 
$
311

 
$
329

Reserve adjustment

 

 
16

 
25

 
4

Amounts paid
(8
)
 
(3
)
 
(14
)
 
(15
)
 
(22
)
Asbestos reserve - end of period (a)
$
315

 
$
318

 
$
323

 
$
321

 
$
311

 
 
 
 
 
 
 
 
 
 
(a)
Included $14 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017.
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 December 31, 2017 and September 30, 2017, the receivables from insurers amounted to $68 million. During the June 2017 quarter, 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 $5 million increase in the receivable for probable insurance recoveries.
A progression of activity in the Hercules insurance receivable is presented in the following table.
 
Three months ended
 
 
 
 
 
 
 
December 31
 
Years ended September 30
(In millions)
2017

 
2016

 
2017

 
2016

 
2015

Insurance receivable - beginning of period
$
68

 
$
63

 
$
63

 
$
56

 
$
77

Receivable adjustment

 

 
5

 
7

 
1

Insurance settlement

 

 

 

 
(22
)
Insurance receivable - end of period
$
68

 
$
63

 
$
68

 
$
63

 
$
56

Asbestos litigation cost projection
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, mortality rates, 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.  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 to 50 year periods that it is reasonably

26

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES (continued)


possible that total future litigation defense and claim settlement costs on an inflated and undiscounted basis could range as high as approximately $660 million for the Ashland asbestos-related litigation (current reserve of $409 million) and approximately $510 million for the Hercules asbestos-related litigation (current reserve of $315 million), depending on the combination of assumptions selected in the various models.  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 December 31, 2017, such locations included 82 waste treatment or disposal sites where Ashland has been identified as a potentially responsible party under Superfund or similar state laws, 118 current and former operating facilities (including certain operating facilities conveyed as part of the MAP Transaction) and about 1,225 service station properties, of which 36 are being actively remediated.
Ashland’s reserves for environmental remediation and related environmental litigation amounted to $168 million at December 31, 2017 compared to $163 million at September 30, 2017, of which $125 million at December 31, 2017 and $121 million at September 30, 2017 were classified in other noncurrent liabilities on the Condensed Consolidated Balance Sheets. The remaining reserves were classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets.
The following table provides a reconciliation of the changes in the environmental remediation reserves during the three months ended December 31, 2017 and 2016.
 
Three months ended
 
December 31
(In millions)
2017

 
2016

Reserve - beginning of period
$
163

 
$
177

Disbursements
(8
)
 
(7
)
Revised obligation estimates and accretion
13

 
4

Reserve - end of period
$
168

 
$
174

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, probability techniques, 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 continues to discount certain environmental sites and 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 December 31, 2017 and September 30, 2017, Ashland’s recorded receivable for these probable insurance recoveries was $14 million and $15 million, respectively, of which $13 million and $14 million at December 31, 2017 and September 30, 2017, respectively, were classified in other noncurrent assets on the Condensed Consolidated Balance Sheets.

27

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES (continued)


Components of environmental remediation expense included within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income are presented in the following table for the three months ended December 31, 2017 and 2016.
 
Three months ended
 
December 31
(In millions)
2017

 
2016

Environmental expense
$
12

 
$
4

Accretion
1

 

Legal expense
1

 
2

Total expense
14

 
6

 
 
 
 
Insurance receivable (a)

 

Total expense, net of receivable activity
$
14

 
$
6

 
 
 
 
(a)
Activity of $0 denotes value less than $1 million.
Environmental remediation reserves are subject to numerous inherent 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, the extent of required cleanup efforts under existing environmental regulations, widely varying costs of alternate cleanup methods, changes in environmental regulations, the potential effect of continuing improvements in remediation technology, and the number and financial strength of other potentially responsible parties at multiparty sites.  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 $412 million.  The largest reserve for any site is approximately 15% of the remediation reserve.
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 December 31, 2017 and September 30, 2017.  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 December 31, 2017.
NOTE L – EARNINGS PER SHARE
The following is the computation of basic and diluted earnings per share (EPS) from continuing operations attributable to Ashland.  Stock appreciation rights (SARs), stock options and warrants available to purchase shares outstanding for each reporting period whose grant price was greater than the average market price of Ashland Common Stock for each applicable period were not included in the computation of income from continuing operations per diluted share because the effect of these instruments would be antidilutive.  The total number of these shares outstanding was approximately 0.7 million and 0.9 million at December 31, 2017 and 2016, respectively.  Earnings per share is reported under the treasury stock method. 

28

 
 
 
 
 
 
ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
 
NOTE L EARNINGS PER SHARE (continued)

 
Three months ended
 
December 31
(In millions except per share data)
2017

 
2016

Numerator
 
 
 
Numerator for basic and diluted EPS –
 
 
 
Loss from continuing operations
$
(7
)
 
$
(65
)
Denominator