SEC Filing | Ashland Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐	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 INC.

(a Delaware corporation)

I.R.S. No. 81-2587835

8145 Blazer Drive

Wilmington, Delaware 19808

Telephone Number (302) 995-3000

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $.01 per share	ASH	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☑No ☐

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.


Large Accelerated Filer	☑	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

At March 31, 2023, there were 52,800,273 shares of Registrant’s Common Stock outstanding.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)


	Three months ended						Six months ended
	March 31						March 31
(In millions except per share data - unaudited)	2023			2022			2023			2022
Sales	$	603		$	604		$	1,128		$	1,115
Cost of sales		406			384			766			735
Gross profit		197			220			362			380

Selling, general and administrative expense		79			90			172			172
Research and development expense		12			13			25			26
Intangibles amortization expense - Note G		23			24			46			47
Equity and other income		—			—			1			—
Income on acquisitions and divestitures, net - Note B		—			7			—			7
Operating income		83			100			120			142

Net interest and other expense (income)		(10	)		43			(24	)		49
Other net periodic benefit loss (income)		2			(1	)		3			(1	)
Income from continuing operations before income taxes		91			58			141			94
Income tax expense (benefit) - Note J		(1	)		20			7			24
Income from continuing operations		92			38			134			70
Income (loss) from discontinued operations (net of income taxes) - Note C		(1	)		748			(2	)		764
Net income	$	91		$	786		$	132		$	834

PER SHARE DATA
Basic earnings per share - Note M
Income from continuing operations	$	1.71		$	0.67		$	2.47		$	1.22
Income (loss) from discontinued operations		(0.01	)		13.23			(0.04	)		13.48
Net income	$	1.70		$	13.90		$	2.43		$	14.70

Diluted earnings per share - Note M
Income from continuing operations	$	1.68		$	0.66		$	2.43		$	1.20
Income (loss) from discontinued operations		(0.01	)		13.03			(0.04	)		13.25
Net income	$	1.67		$	13.69		$	2.39		$	14.45

COMPREHENSIVE INCOME
Net income	$	91		$	786		$	132		$	834
Other comprehensive income (loss), net of tax
Unrealized translation gain (loss)		27			(5	)		109			(21	)
Unrealized gain (loss) on commodity hedges		(3	)		5			(7	)		1
Other comprehensive income (loss) - Note N		24			—			102			(20	)
Comprehensive income	$	115		$	786		$	234		$	814

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(In millions - unaudited)	March 31 2023		September 30 2022
ASSETS
Current assets
Cash and cash equivalents	$	399	$	646
Accounts receivable (a) - Note H		395		402
Inventories - Note F		730		629
Other assets		107		91
Total current assets		1,631		1,768
Noncurrent assets
Property, plant and equipment
Cost		3,164		3,050
Accumulated depreciation		1,813		1,712
Net property, plant and equipment		1,351		1,338
Goodwill - Note G		1,385		1,312
Intangibles - Note G		940		963
Operating lease assets, net - Note I		124		107
Restricted investments - Note E		349		313
Asbestos insurance receivable (b) - Note L		133		138
Deferred income taxes		20		20
Other assets		250		254
Total noncurrent assets		4,552		4,445
Total assets	$	6,183	$	6,213

LIABILITIES AND EQUITY
Current liabilities
Trade and other payables		246		265
Accrued expenses and other liabilities		206		269
Current operating lease obligations - Note I		20		19
Total current liabilities		472		553
Noncurrent liabilities
Long-term debt - Note H		1,328		1,270
Asbestos litigation reserve - Note L		443		472
Deferred income taxes		175		176
Employee benefit obligations - Note K		110		103
Operating lease obligations - Note I		108		94
Other liabilities		280		325
Total noncurrent liabilities		2,444		2,440
Commitments and contingencies - Note L
Stockholders’ equity - Note N		3,267		3,220

Total liabilities and stockholders' equity	$	6,183	$	6,213

(a)

Accounts receivable includes an allowance for credit losses of $4 million at both March 31, 2023 and September 30, 2022.

(b)

Asbestos insurance receivable includes an allowance for credit losses of $3 million at both March 31, 2023 and September 30, 2022.

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS


	Six months ended
	March 31
(In millions - unaudited)	2023			2022
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net income	$	132		$	834
Loss (Income) from discontinued operations (net of income taxes)		2			(764	)
Adjustments to reconcile income from continuing operations to
cash flows from operating activities:
Depreciation and amortization		120			121
Original issue discount and debt issuance costs amortization		3			3
Deferred income taxes		15			(3	)
Stock based compensation expense		12			9
Excess tax benefit on stock based compensation		2			1
Loss (income) from restricted investments		(48	)		14
Asset impairments		4			—
Pension contributions		(3	)		(3	)
Gain on pension and other postretirement plan remeasurements		—			(1	)
Change in operating assets and liabilities (a)		(212	)		(180	)
Total cash flows provided by operating activities from continuing operations		27			31
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Additions to property, plant and equipment		(58	)		(37	)
Proceeds from disposal of property, plant and equipment		—			11
Proceeds from settlement of company-owned life insurance contracts		3			—
Company-owned life insurance payments		(1	)		—
Funds restricted for specific transactions		(5	)		(44	)
Reimbursements from restricted investments		16			28
Proceeds from sale of securities		15			46
Purchases of securities		(15	)		(46	)
Total cash flows used by investing activities from continuing operations		(45	)		(42	)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Repurchase of common stock		(142	)		(155	)
Repayment of long-term debt		—			(250	)
Repayment of short-term debt		—			(365	)
Cash dividends paid		(36	)		(34	)
Stock based compensation employee withholding taxes paid in cash		(10	)		(6	)
Total cash flows used by financing activities from continuing operations		(188	)		(810	)
CASH USED BY CONTINUING OPERATIONS		(206	)		(821	)
Cash provided (used) by discontinued operations
Operating cash flows		(47	)		(73	)
Investing cash flows		—			1,650
Total cash provided (used) by discontinued operations		(47	)		1,577
Effect of currency exchange rate changes on cash and cash equivalents		6			(2	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(247	)		754
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		646			210
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	399		$	964

(a)

Excludes changes resulting from operations acquired, sold or held for sale.

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and Securities and Exchange Commission (SEC) regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. These statements omit certain information and footnote disclosures required for complete annual financial statements and, therefore, should be read in conjunction with the Ashland Inc. and consolidated subsidiaries (Ashland) Annual Report on Form 10-K for the fiscal year ended September 30, 2022. Results of operations for the period ended March 31, 2023 are not necessarily indicative of the expected results for the remaining quarters in the fiscal year.

Ashland is comprised of the following reportable segments: Life Sciences, Personal Care, Specialty Additives and Intermediates. Unallocated and Other includes corporate governance activities and certain legacy matters. For additional information, see Note Q.

Use of estimates, risks and uncertainties

The preparation of Ashland’s Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses, and the disclosures of contingent assets and liabilities. Significant items that are subject to such estimates and assumptions include, but are not limited to, environmental remediation, asbestos litigation, the accounting for goodwill and other intangible assets, and income taxes. Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions.

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 pronouncements

A description of new U.S. GAAP accounting standards issued or adopted during the current year is required in interim financial reporting. A detailed listing of new accounting standards relevant to Ashland is included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2022. There were no new standards that were either issued or adopted in the current fiscal year that will have a material impact on Ashland's consolidated financial statements.

NOTE B – DIVESTITURES

Performance Adhesives

On February 28, 2022, Ashland completed the sale of its Performance Adhesives business to Arkema, a French société anonyme. Proceeds from the sale were approximately $1.7 billion, net of transaction costs. Ashland recognized a $732 million gain on sale within the Income (Loss) from Discontinued Operations caption of the Statements of Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2022.

The transaction represented a strategic shift in Ashland’s business and had a major effect on Ashland’s operations and financial results. Accordingly, the operating results and cash flows related to Performance Adhesives have been reflected as discontinued operations in the Statements of Consolidated Comprehensive Income (Loss) and Statements of Condensed Consolidated Cash Flows. See Note C for the results of operations for Performance Adhesives for all affected periods.

Certain indirect corporate costs included within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) that were previously allocated to the Performance Adhesives segment do not qualify for classification within discontinued operations and are now reported as selling, general and administrative expense within continuing operations on a consolidated basis and within the Unallocated and other segment. There were no such costs for the three and six months ended March 31, 2023 and $3 million and $7 million for the three and six months ended March 31, 2022, respectively.

Other manufacturing facility sales

During the December 2022 quarter, Ashland entered into a definitive sale agreement to sell a Specialty Additives manufacturing facility for less than $1 million. The net asset value related to these sites was less than $1 million and $4 million at March 31, 2023 and September 30, 2022, respectively. During the three and six months ended March 31, 2023, no impairment charges and $4 million of impairment charges, respectively, were recorded within the selling, general and administrative expense caption of the Statement of Consolidated Comprehensive Income (Loss) for this manufacturing facility.

Other corporate assets

During the three and six months ended March 31, 2022, Ashland completed a sale of excess land. Ashland received net proceeds of approximately $11 million and recorded a pre-tax gain of $7 million within the Income on acquisitions and divestitures, net caption of the Statements of Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2022.

NOTE C– DISCONTINUED OPERATIONS

Ashland has divested certain businesses that have qualified as discontinued operations. The operating results from these divested businesses and subsequent adjustments related to ongoing assessments of certain retained liabilities and tax items have been recorded within the discontinued operations caption in the Statements of Consolidated Comprehensive Income (Loss) for all periods presented.

Components of amounts reflected in the Statements of Consolidated Comprehensive Income (Loss) related to discontinued operations are presented in the following table for the three and six months ended March 31, 2023 and 2022.


	Three months ended						Six months ended
	March 31						March 31
(In millions)	2023			2022			2023			2022
Income (loss) from discontinued operations (net of tax)
Performance Adhesives	$	—		$	17		$	—		$	34
Composites/Marl facility		(1	)		—			(1	)		—
Distribution		—			(1	)		(1	)		(2	)
Gain on disposal of discontinued operations (net of tax)
Performance Adhesives		—			732			—			732
	$	(1	)	$	748		$	(2	)	$	764

The following table presents a reconciliation of the captions within Ashland's Statements of Consolidated Comprehensive Income (Loss) for the income (loss) from discontinued operations attributable to Performance Adhesives for the three and six months ended March 31, 2022. This disclosure was not applicable for the three and six months ended March 31, 2023 as a result of the sale in fiscal 2022.


	Three months ended			Six months ended
	March 31			March 31
(In millions)	2022			2022
Income (loss) from discontinued operations attributable to Performance Adhesives
Sales	$	75		$	171
Cost of sales		(56	)		(122	)
Selling, general and administrative expense		(6	)		(