Ashland Global Holdings, Inc. (NYSE:ASH) Q3 2020 Earnings Conference Call July 29, 2020 9:00 AM ET Company Participants Seth Mrozek - Director, IR Guillermo Novo - Chairman and CEO John Willis - SVP and CFO Conference Call Participants John McNulty - BMO Capital Markets David Begleiter - Deutsche Bank Chris Parkinson - Credit Suisse John Roberts - UBS Mike Harrison - Seaport Global Laurence Alexander - Jefferies Jeffrey Zekauskas - JPMorgan Mike Sison - Wells Fargo Operator Ladies and gentlemen, thank you f ...

Ashland Global Holdings, Inc. (NYSE:ASH) Q2 2020 Earnings Conference Call May 6, 2020 10:00 AM ET Company Participants Seth Mrozek - Director, IR Guillermo Novo - Chairman & CEO John Willis - SVP & CFO Conference Call Participants Christopher Parkinson - Crédit Suisse John Roberts - UBS Investment Bank David Begleiter - Deutsche Bank Michael Harrison - Seaport Global Securities John McNulty - BMO Capital Markets Laurence Alexander - Jefferies James Sheehan - SunTrust Robinson Humphrey Operator Ladies and ge ...

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides a comprehensive overview of Ashland Global Holdings Inc.'s financial performance and position [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Ashland Global Holdings Inc.'s unaudited condensed consolidated financial statements, including the statements of comprehensive income, balance sheets, statements of equity, and cash flows, along with detailed notes explaining significant accounting policies, divestitures, restructuring activities, fair value measurements, debt, and segment information for the periods ended March 31, 2020 and 2019 [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=2&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement details Ashland's comprehensive income and loss, highlighting a significant net loss for the periods presented Three Months Ended March 31 (in millions) | Metric | 2020 | 2019 | | :----- | :--- | :--- | | Sales | $610 | $667 | | Gross profit | $197 | $198 | | Operating income (loss) | $(468) | $44 | | Net income (loss) | $(582) | $76 | | Basic EPS | $(9.61) | $1.21 | | Diluted EPS | $(9.61) | $1.19 | | Comprehensive income (loss) | $(634) | $67 | Six Months Ended March 31 (in millions) | Metric | 2020 | 2019 | | :----- | :--- | :--- | | Sales | $1,143 | $1,243 | | Gross profit | $350 | $350 | | Operating income (loss) | $(451) | $37 | | Net income (loss) | $(550) | $28 | | Basic EPS | $(9.08) | $0.45 | | Diluted EPS | $(9.08) | $0.45 | | Comprehensive income (loss) | $(564) | $(18) | - Ashland reported a significant **net loss** of **$582 million** for the three months ended March 31, 2020, compared to a **net income** of **$76 million** in the prior year, primarily due to a **$530 million goodwill impairment charge**[3](index=3&type=chunk) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents Ashland's financial position, showing assets, liabilities, and equity as of March 31, 2020, and September 30, 2019 As of March 31, 2020 vs. September 30, 2019 (in millions) | Asset/Liability Category | March 31, 2020 | September 30, 2019 | | :----------------------- | :------------- | :----------------- | | **Assets:** | | | | Total current assets | $1,645 | $1,433 | | Total noncurrent assets | $5,323 | $5,818 | | Total assets | $6,968 | $7,251 | | **Liabilities & Equity:** | | | | Total current liabilities | $972 | $757 | | Total noncurrent liabilities | $3,013 | $2,923 | | Stockholders' equity | $2,983 | $3,571 | | Total liabilities and stockholders' equity | $6,968 | $7,251 | - **Total assets** decreased from **$7,251 million** to **$6,968 million**, and **stockholders' equity** decreased from **$3,571 million** to **$2,983 million**, primarily driven by the **net loss** and **goodwill impairment**[6](index=6&type=chunk) [Statements of Consolidated Equity](index=4&type=section&id=Statements%20of%20Consolidated%20Equity) This statement tracks changes in stockholders' equity, including net income, other comprehensive income, dividends, and stock transactions Six Months Ended March 31, 2020 (in millions) | Equity Component | Balance at Sep 30, 2019 | Net Income (Loss) | Other Comprehensive Income (Loss) | Dividends | Stock Issued | Balance at Mar 31, 2020 | | :--------------- | :---------------------- | :---------------- | :-------------------------------- | :-------- | :----------- | :---------------------- | | Common stock | $1 | — | — | — | — | $1 | | Paid-in capital | $756 | — | — | — | $9 | $765 | | Retained earnings | $3,224 | $(550) | — | $(33) | — | $2,641 | | Accumulated other comprehensive income (loss) | $(410) | — | $(14) | — | — | $(424) | | **Total** | **$3,571** | **$(550)** | **$(14)** | **$(33)** | **$9** | **$2,983** | - **Total stockholders' equity** decreased by **$588 million** from September 30, 2019, to March 31, 2020, primarily due to a **net loss** of **$550 million** and regular **dividends** of **$33 million**[8](index=8&type=chunk)[351](index=351&type=chunk) [Statements of Condensed Consolidated Cash Flows](index=5&type=section&id=Statements%20of%20Condensed%20Consolidated%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities for the periods presented Six Months Ended March 31 (in millions) | Cash Flow Activity | 2020 | 2019 | | :----------------- | :--- | :--- | | Operating activities from continuing operations | $13 | $6 | | Investing activities from continuing operations | $(49) | $(49) | | Financing activities from continuing operations | $234 | $(36) | | Discontinued operations | $(78) | $(49) | | Effect of currency exchange rate changes | $1 | $(2) | | **Net increase (decrease) in cash and cash equivalents** | **$121** | **$(130)** | | Cash and cash equivalents - End of period | $353 | $164 | - **Cash and cash equivalents** increased by **$121 million** in the six months ended March 31, 2020, primarily driven by **$234 million** in **financing activities** from continuing operations, largely due to debt refinancing[11](index=11&type=chunk)[326](index=326&type=chunk)[327](index=327&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for significant accounting policies and financial statement line items [NOTE A – SIGNIFICANT ACCOUNTING POLICIES](index=6&type=section&id=NOTE%20A%20%E2%80%93%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis of presentation for the unaudited condensed consolidated financial statements, emphasizing compliance with U.S. GAAP and SEC regulations. It details the reclassification of certain prior period information, the strategic shift to a business-led organization with five new reportable segments, and the significant estimates and assumptions used in financial reporting. Key accounting pronouncements adopted include new lease guidance, which resulted in the recognition of $174 million in right-of-use assets and operating lease liabilities - Ashland realigned its segment reporting structure in Q2 fiscal 2020, moving from a functionally led to a business-led organization, resulting in five new reportable segments: Life Sciences, Personal Care & Household, Specialty Additives, Performance Adhesives, and Intermediates and Solvents[15](index=15&type=chunk)[16](index=16&type=chunk) - Effective October 1, 2019, Ashland adopted new lease accounting guidance, recognizing **$174 million** in **right-of-use assets** and **operating lease liabilities**, with no material impact on results of operations, cash flows, or debt covenants[21](index=21&type=chunk) - The preparation of financial statements involves significant estimates and assumptions, particularly for long-lived assets (including goodwill and other intangibles), income taxes, and liabilities/receivables related to asbestos litigation and environmental remediation[17](index=17&type=chunk) [NOTE B – DIVESTITURES](index=9&type=section&id=NOTE%20B%20%E2%80%93%20DIVESTITURES) Ashland completed the sale of its Composites business and Marl facility on August 30, 2019, for $1.015 billion, classifying these operations as discontinued. The Maleic business, though not sold, is held for sale and continues to be reported under discontinued operations. Ashland also provides transition services to the buyer, generating fee income - Ashland completed the sale of its Composites business (excluding Maleic business) and Marl facility on August 30, 2019, for **$1.015 billion**, classifying them as discontinued operations[27](index=27&type=chunk) - The Maleic business, part of the Composites disposal group, is classified as held for sale, with assets and liabilities totaling **$64 million** and **$5 million**, respectively, as of March 31, 2020[30](index=30&type=chunk) - Transition service fee income of **$3 million** and **$6 million** was recognized for the three and six months ended March 31, 2020, respectively, from services provided to the buyer[29](index=29&type=chunk) [NOTE C – DISCONTINUED OPERATIONS](index=9&type=section&id=NOTE%20C%20%E2%80%93%20DISCONTINUED%20OPERATIONS) This note details the financial results of divested businesses classified as discontinued operations, including Composites/Marl facility, Valvoline, Asbestos, Water Technologies, and Distribution. For the six months ended March 31, 2020, discontinued operations resulted in a net loss of $9 million, a significant decrease from a $54 million income in the prior year, primarily due to the sale of Composites/Marl facility and asbestos-related losses Income (loss) from discontinued operations (net of tax) (in millions) | Category | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Composites/Marl facility | $4 | $28 | $4 | $53 | | Valvoline | $0 | $1 | $(1) | $1 | | Asbestos | $(7) | $0 | $(7) | $0 | | Water Technologies | $0 | $2 | $(1) | $1 | | Distribution | $(2) | $0 | $(2) | $(1) | | Gain (loss) on disposal of discontinued operations (net of taxes) - Composites/Marl facility | $(2) | $0 | $(2) | $0 | | **Total** | **$(7)** | **$31** | **$(9)** | **$54** | - The Maleic business, although not sold to INEOS, continues to be reported in discontinued operations as it meets the held for sale criteria, contributing **$17 million** in sales and **$5 million** in pretax **operating income** for the three months ended March 31, 2020[33](index=33&type=chunk)[34](index=34&type=chunk) [NOTE D – RESTRUCTURING ACTIVITIES](index=10&type=section&id=NOTE%20D%20%E2%80%93%20RESTRUCTURING%20ACTIVITIES) Ashland implemented company-wide restructuring programs, including a fiscal 2018 program for severance and facility costs, and a fiscal 2019 plant restructuring. In fiscal 2020, new severance expenses of $14 million and $17 million were incurred for the three and six months ended March 31, respectively, due to executive and business management changes. Total restructuring reserves stood at $7 million as of March 31, 2020 - Ashland incurred **$14 million** and **$17 million** in **severance expense** for the three and six months ended March 31, 2020, respectively, related to executive and business management changes[42](index=42&type=chunk) Restructuring Reserves (in millions) | Category | Balance at Sep 30, 2019 | Utilization (cash paid) | Balance at Mar 31, 2020 | | :--------------- | :---------------------- | :---------------------- | :---------------------- | | Severance costs | $7 | $(6) | $1 | | Facility costs | $7 | $(1) | $6 | | **Total** | **$14** | **$(7)** | **$7** | - The fiscal 2019 plant restructuring within Specialty Additives resulted in charges of **$20 million** and **$47 million** for the three and six months ended March 31, 2019, respectively, primarily from accelerated depreciation and amortization[40](index=40&type=chunk) [NOTE E – FAIR VALUE MEASUREMENTS](index=12&type=section&id=NOTE%20E%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note details Ashland's fair value measurements for financial instruments, categorizing them into Level 1, 2, or 3 based on observability of inputs. As of March 31, 2020, total assets at fair value were $667 million, primarily in cash, restricted investments, and foreign currency derivatives. Restricted investments, mainly in equity and fixed income mutual funds, had a fair value of $301 million, experiencing a net unrealized loss of $32 million for the three months ended March 31, 2020 Financial Instruments Subject to Recurring Fair Value Measurements (March 31, 2020, in millions) | Asset/Liability | Carrying Value | Total Fair Value | Level 1 | Level 2 | Level 3 | | :-------------- | :------------- | :--------------- | :------ | :------ | :------ | | Cash and cash equivalents | $353 | $353 | $353 | $0 | $0 | | Restricted investments | $301 | $301 | $301 | $0 | $0 | | Investment of captive insurance company | $7 | $7 | $7 | $0 | $0 | | Foreign currency derivatives (assets) | $6 | $6 | $0 | $6 | $0 | | **Total assets at fair value** | **$667** | **$667** | **$661** | **$6** | **$0** | | Foreign currency derivatives (liabilities) | $5 | $5 | $0 | $5 | $0 | Restricted Investment Activity (in millions) | Metric | Three Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2020 | | :-------------------------- | :------------------------------ | :---------------------------- | | Investment income | $3 | $7 | | Net gains (losses) unrealized | $(32) | $(23) | | Disbursements | $(9) | $(19) | - Ashland uses foreign currency derivative instruments to manage exposure, with net gains of **$3 million** and **$4 million** for the three and six months ended March 31, 2020, respectively[58](index=58&type=chunk)[59](index=59&type=chunk) [NOTE F – INVENTORIES](index=15&type=section&id=NOTE%20F%20%E2%80%93%20INVENTORIES) Ashland's inventories are valued at the lower of cost or net realizable value, primarily using the weighted-average cost method, with some inventories using the last-in, first-out (LIFO) method. As of March 31, 2020, total inventories amounted to $611 million, an increase from $597 million at September 30, 2019, mainly driven by finished products Inventories (in millions) | Category | March 31, 2020 | September 30, 2019 | | :-------------------------- | :------------- | :----------------- | | Finished products | $420 | $400 | | Raw materials, supplies and work in process | $191 | $197 | | **Total** | **$611** | **$597** | - Inventories are primarily stated at cost using the weighted-average cost method, with certain inventories valued using the LIFO method[62](index=62&type=chunk) [NOTE G – GOODWILL AND OTHER INTANGIBLES](index=15&type=section&id=NOTE%20G%20%E2%80%93%20GOODWILL%20AND%20OTHER%20INTANGIBLES) Ashland conducts annual impairment tests for goodwill and indefinite-lived intangible assets. Following a business realignment in Q2 fiscal 2020, a goodwill impairment test resulted in a $530 million non-cash charge, primarily impacting the Personal Care & Household ($356 million) and Specialty Additives ($174 million) segments due to lower growth and margins. Total goodwill decreased to $1,723 million as of March 31, 2020. No impairment was indicated for indefinite-lived intangible assets - A non-cash **goodwill impairment charge** of **$530 million** was recorded for the three and six months ended March 31, 2020, following a business realignment and reassessment of reporting units[68](index=68&type=chunk) Goodwill Progression by Reportable Segment (Six Months Ended March 31, 2020, in millions) | Segment | Balance at Sep 30, 2019 | Impairment | Currency Translation | Balance at Mar 31, 2020 | | :---------------------- | :---------------------- | :--------- | :------------------- | :---------------------- | | Life Sciences | $836 | $0 | $(1) | $835 | | Personal Care & Household | $355 | $(356) | $1 | $0 | | Specialty Additives | $609 | $(174) | $0 | $435 | | Performance Adhesives | $453 | $0 | $0 | $453 | | Intermediates and Solvents | $0 | $0 | $0 | $0 | | **Total** | **$2,253** | **$(530)** | **$0** | **$1,723** | - The impairment was largely due to lower growth and margins in the Personal Care & Household (Oral Care and Avoca businesses) and Specialty Additives (global construction and energy markets) reporting units[68](index=68&type=chunk) [NOTE H – DEBT](index=18&type=section&id=NOTE%20H%20%E2%80%93%20DEBT) Ashland's total debt increased to $2,006 million at March 31, 2020, from $1,667 million at September 30, 2019, driven by refinancing activities. In January 2020, Ashland entered into a new $600 million revolving credit facility and a $250 million term loan, and issued €500 million (approx. $551 million) senior unsecured notes due 2028. Proceeds were used to repurchase existing notes, resulting in $59 million of debt refinancing costs and $8 million in accelerated debt issuance costs. Ashland remains in compliance with all debt covenants, with a consolidated net leverage ratio of 3.1 and an interest coverage ratio of 7.7 Debt Summary (in millions) | Debt Type | March 31, 2020 | September 30, 2019 | | :------------------------------------------ | :------------- | :----------------- | | 4.750% notes, due 2022 | $410 | $1,080 | | 2.00% Senior Notes, due 2028 (Euro 500 million) | $551 | $0 | | 6.875% notes, due 2043 | $282 | $374 | | Term loan A, due 2025 | $250 | $0 | | Accounts receivable securitizations | $209 | $144 | | Revolving credit facility | $240 | $0 | | Other | $10 | $15 | | **Total debt** | **$2,006** | **$1,667** | | Short-term debt | $(471) | $(166) | | Long-term debt (less current portion) | $1,535 | $1,501 | - Ashland incurred **$59 million** in **debt refinancing costs** and **$8 million** in accelerated debt issuance costs during the current quarter due to new credit agreements and note issuances[81](index=81&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk) - As of March 31, 2020, Ashland's consolidated net leverage ratio was **3.1** (max **4.0**) and consolidated interest coverage ratio was **7.7** (min **3.0**), indicating compliance with debt covenants[90](index=90&type=chunk) [NOTE I – LEASING ARRANGEMENTS](index=20&type=section&id=NOTE%20I%20%E2%80%93%20LEASING%20ARRANGEMENTS) This note provides specific details regarding Leasing Arrangements Lease Assets and Liabilities (March 31, 2020, in millions) | Category | Amount | | :---------------------------- | :----- | | Operating lease assets, net | $144 | | Current operating lease obligations | $23 | | Non-current operating lease obligations | $131 | | **Total lease liabilities** | **$154** | Total Lease Cost (in millions) | Period | Three Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2020 | | :----- | :------------------------------ | :---------------------------- | | Total lease cost | $12 | $23 | | Operating cash flows from operating leases | $5 | $14 | - The weighted average remaining lease term for operating leases is **15 years**, and the weighted average discount rate used is **3.2%**[93](index=93&type=chunk)[94](index=94&type=chunk) [NOTE J – INCOME TAXES](index=21&type=section&id=NOTE%20J%20%E2%80%93%20INCOME%20TAXES) This note provides specific details regarding Income Taxes Income Tax Expense (Benefit) and Effective Tax Rate | Period | Income Tax Expense (Benefit) (in millions) | Effective Tax Rate | | :-------------------------- | :--------------------------------------- | :----------------- | | Three months ended Mar 31, 2020 | $(10) | 2% | | Three months ended Mar 31, 2019 | $1 | 2% | | Six months ended Mar 31, 2020 | $(34) | 6% | | Six months ended Mar 31, 2019 | $25 | (2500)% | - The current period's **effective tax rate** was significantly impacted by a **$527 million** nondeductible **goodwill impairment** and a **$25 million** favorable tax discrete item from the Swiss Tax Reform[100](index=100&type=chunk)[235](index=235&type=chunk) Unrecognized Tax Benefits (in millions) | Activity | Amount | | :------------------------------------------------- | :----- | | Balance at October 1, 2019 | $165 | | Increases related to positions taken from prior years | $2 | | Decreases related to positions taken from prior years | $(1) | | Increases related to positions taken in the current year | $3 | | Lapse of statute of limitations | $(2) | | **Balance at March 31, 2020** | **$167** | [NOTE K - EMPLOYEE BENEFIT PLANS](index=22&type=section&id=NOTE%20K%20-%20EMPLOYEE%20BENEFIT%20PLANS) This note provides specific details regarding Employee Benefit Plans - Ashland contributed **$3 million** to its non-U.S. pension plans for the six months ended March 31, 2020, and anticipates an additional **$3 million** in contributions for the remainder of 2020[105](index=105&type=chunk) Total Net Periodic Benefit Costs (Income) for Continuing Operations (Six Months Ended March 31, in millions) | Component | Pension Benefits (2020) | Pension Benefits (2019) | Other Postretirement Benefits (2020) | Other Postretirement Benefits (2019) | | :-------------------------- | :---------------------- | :---------------------- | :----------------------------------- | :----------------------------------- | | Service cost | $2 | $3 | $0 | $0 | | Interest cost | $3 | $5 | $1 | $1 | | Expected return on plan assets | $(4) | $(5) | $0 | $0 | | Curtailment | $0 | $(18) | $0 | $0 | | **Total net periodic benefit costs (income)** | **$1** | **$(15)** | **$1** | **$1** | [NOTE L – LITIGATION, CLAIMS AND CONTINGENCIES](index=23&type=section&id=NOTE%20L%20%E2%80%93%20LITIGATION,%20CLAIMS%20AND%20CONTINGENCIES) This note provides specific details regarding Litigation, Claims and Contingencies - Ashland's asbestos-related litigation stems from indemnification obligations related to the 1990 sale of Riley Stoker Corporation and the 2008 acquisition of Hercules[109](index=109&type=chunk)[111](index=111&type=chunk) Asbestos Reserves (in millions) | Entity | March 31, 2020 | September 30, 2019 | | :------- | :------------- | :----------------- | | Ashland | $337 | $352 | | Hercules | $242 | $252 | | **Total** | **$579** | **$604** | - It is reasonably possible that total future litigation defense and claim settlement costs could range as high as **$600 million** for Ashland asbestos-related litigation and **$450 million** for Hercules asbestos-related litigation[131](index=131&type=chunk) Environmental Remediation Reserves (in millions) | Metric | March 31, 2020 | September 30, 2019 | | :-------------------------- | :------------- | :----------------- | | Environmental remediation reserves | $178 | $186 | | Probable insurance recoveries | $14 | $13 | | **Net reserve** | **$164** | **$173** | - The upper end of the reasonably possible range of future environmental remediation costs for identified sites could be as high as approximately **$425 million**[138](index=138&type=chunk) [NOTE M – EARNINGS PER SHARE](index=28&type=section&id=NOTE%20M%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note provides specific details regarding Earnings Per Share Basic and Diluted EPS from Continuing Operations | Period | Basic EPS (2020) | Basic EPS (2019) | Diluted EPS (2020) | Diluted EPS (2019) | | :-------------------------- | :--------------- | :--------------- | :----------------- | :----------------- | | Three months ended Mar 31 | $(9.48) | $0.72 | $(9.48) | $0.71 | | Six months ended Mar 31 | $(8.93) | $(0.41) | $(8.93) | $(0.41) | - The **loss** from continuing operations for the three and six months ended March 31, 2020, resulted in share-based awards being antidilutive and thus excluded from **diluted EPS** calculations[141](index=141&type=chunk)[142](index=142&type=chunk) [NOTE N – EQUITY ITEMS](index=28&type=section&id=NOTE%20N%20%E2%80%93%20EQUITY%20ITEMS) This note provides specific details regarding Equity Items - **Total stockholders' equity** decreased by **$588 million** from September 30, 2019, to March 31, 2020, primarily due to a **net loss** of **$550 million**, **$33 million** in regular **dividends**, and a **$14 million** unrealized translation loss[351](index=351&type=chunk)[148](index=148&type=chunk) Cash Dividends Declared Per Common Share | Period | 2020 | 2019 | | :-------------------------- | :----- | :----- | | Three months ended Mar 31 | $0.275 | $0.250 | | Six months ended Mar 31 | $0.550 | $0.500 | Other Comprehensive Income (Loss), Net of Tax (in millions) | Component | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :-------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Unrealized translation gain (loss) | $(52) | $(9) | $(14) | $(40) | | Pension and postretirement obligation adjustment | $0 | $0 | $0 | $(6) | | **Total** | **$(52)** | **$(9)** | **$(14)** | **$(46)** | [NOTE O – STOCK INCENTIVE PLANS](index=30&type=section&id=NOTE%20O%20%E2%80%93%20STOCK%20INCENTIVE%20PLANS) This note provides specific details regarding Stock Incentive Plans Pre-Tax Stock-Based Compensation Expense (in millions) | Component | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :-------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | SARs | $1 | $2 | $3 | $4 | | Nonvested stock awards | $3 | $6 | $5 | $10 | | Performance share awards | $0 | $2 | $1 | $2 | | **Total** | **$4** | **$10** | **$9** | **$16** | [NOTE P – REVENUE](index=30&type=section&id=NOTE%20P%20%E2%80%93%20REVENUE) This note provides specific details regarding Revenue - Revenue is recognized when control of the product or service is transferred to the customer, generally upon shipment or delivery[151](index=151&type=chunk)[152](index=152&type=chunk) - Trade receivables from contracts with customers were **$458 million** as of March 31, 2020, an increase from **$435 million** at September 30, 2019[154](index=154&type=chunk) Sales by Geography (in millions) | Segment | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :-------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Life Sciences - North America | $59 | $67 | $108 | $126 | | Life Sciences - Europe | $63 | $61 | $112 | $110 | | Life Sciences - Asia Pacific | $43 | $48 | $85 | $95 | | Personal Care & Household - North America | $50 | $48 | $91 | $91 | | Personal Care & Household - Europe | $69 | $86 | $124 | $149 | | Specialty Additives - North America | $53 | $57 | $98 | $105 | | Performance Adhesives - North America | $73 | $75 | $137 | $144 | | Intermediates and Solvents - North America | $23 | $29 | $37 | $50 | [NOTE Q – REPORTABLE SEGMENT INFORMATION](index=33&type=section&id=NOTE%20Q%20%E2%80%93%20REPORTABLE%20SEGMENT%20INFORMATION) This note provides specific details regarding Reportable Segment Information - Ashland's five reportable segments are Life Sciences, Personal Care & Household, Specialty Additives, Performance Adhesives, and Intermediates and Solvents, with Corporate covering governance and legacy matters[162](index=162&type=chunk) Sales by Reportable Segment (in millions) | Segment | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :-------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Life Sciences | $184 | $196 | $340 | $366 | | Personal Care & Household | $159 | $183 | $296 | $337 | | Specialty Additives | $155 | $169 | $294 | $316 | | Performance Adhesives | $85 | $89 | $159 | $171 | | Intermediates and Solvents | $37 | $44 | $64 | $77 | | **Total Sales** | **$610** | **$667** | **$1,143** | **$1,243** | Operating Income (Loss) by Reportable Segment (in millions) | Segment | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :-------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Life Sciences | $36 | $33 | $58 | $56 | | Personal Care & Household | $(336) | $25 | $(326) | $42 | | Specialty Additives | $(161) | $(2) | $(152) | $(24) | | Performance Adhesives | $16 | $17 | $27 | $26 | | Intermediates and Solvents | $(2) | $9 | $(14) | $11 | | Unallocated and other | $(21) | $(38) | $(44) | $(74) | | **Total Operating Income (Loss)** | **$(468)** | **$44** | **$(451)** | **$37** | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=38&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on Ashland's financial performance, condition, and operational results [BUSINESS OVERVIEW](index=38&type=section&id=BUSINESS%20OVERVIEW) Ashland is a global leader in specialty materials for consumer and industrial markets, serving over 100 countries with 60% of sales generated outside North America. The company recently reorganized into a business-led structure with five reportable segments: Life Sciences, Personal Care & Household, Specialty Additives, Performance Adhesives, and Intermediates and Solvents - Ashland is a global leader in specialty materials, with approximately **4,700 employees** serving customers in over **100 countries**[180](index=180&type=chunk) Sales by Geography (Percentage of Total Consolidated Sales) | Geography | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :-------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | North America | 40% | 39% | 40% | 39% | | Europe | 35% | 34% | 33% | 33% | | Asia Pacific | 17% | 18% | 19% | 19% | | Latin America & other | 8% | 9% | 8% | 9% | - The company's five reportable segments are Life Sciences, Personal Care & Household, Specialty Additives, Performance Adhesives, and Intermediates and Solvents, reflecting a shift to a business-led organization[182](index=182&type=chunk) [Ashland profile](index=38&type=section&id=Ashland%20profile) This profile outlines Ashland's global presence and strategic focus as a specialty materials leader [Reportable segments](index=38&type=section&id=Reportable%20segments) This section details Ashland's five business-led reportable segments, reflecting its recent organizational realignment [KEY DEVELOPMENTS](index=39&type=section&id=KEY%20DEVELOPMENTS) Ashland reported a net loss of $582 million for the current quarter, primarily due to a $530 million non-cash goodwill impairment charge and debt restructuring costs. Despite global uncertainties, the COVID-19 pandemic has not significantly impacted Ashland's operations or cash flows to date, and liquidity remains sufficient, though the long-term impact remains unpredictable - Ashland recorded a **net loss** of **$582 million** for the current quarter, driven by a **$530 million** non-cash **goodwill impairment charge** and **$67 million** in **debt restructuring costs**[184](index=184&type=chunk) - **Adjusted EBITDA** remained flat at **$142 million** for the current quarter, with lower sales volumes offset by reduced selling, general, and administrative expenses[184](index=184&type=chunk) - The COVID-19 pandemic has not significantly impacted Ashland's operations or cash flows for the three and six months ended March 31, 2020, and the company's liquidity remains sufficient[185](index=185&type=chunk)[186](index=186&type=chunk) [Business results](index=39&type=section&id=Business%20results) This section summarizes Ashland's key financial outcomes, including the significant net loss and adjusted EBITDA for the period [Uncertainty relating to the COVID-19 pandemic](index=39&type=section&id=Uncertainty%20relating%20to%20the%20COVID-19%20pandemic) This section addresses the potential and unpredictable impacts of the COVID-19 pandemic on Ashland's operations and financial stability [RESULTS OF OPERATIONS – CONSOLIDATED REVIEW](index=39&type=section&id=RESULTS%20OF%20OPERATIONS%20%E2%80%93%20CONSOLIDATED%20REVIEW) Ashland experienced a significant net loss of $582 million for the three months and $550 million for the six months ended March 31, 2020, primarily due to a $530 million goodwill impairment charge and increased net interest and other expenses from debt refinancing. Sales decreased by $57 million and $100 million for the three and six months, respectively, driven by unfavorable volume, plant realignment, currency exchange, and pricing. Despite these challenges, Adjusted EBITDA remained flat at $142 million for the quarter, reflecting cost reduction efforts [Net income](index=39&type=section&id=Net%20income) This section analyzes the drivers behind Ashland's net income (loss), including the goodwill impairment and debt refinancing costs - Ashland reported a **net loss** of **$582 million** (**diluted EPS** of **$(9.61)**) for the three months ended March 31, 2020, compared to a **net income** of **$76 million** (**diluted EPS** of **$1.19**) in the prior year[188](index=188&type=chunk) - The **loss** from continuing operations for the three months ended March 31, 2020, was **$575 million**, primarily due to a **$530 million goodwill impairment charge**[190](index=190&type=chunk)[191](index=191&type=chunk) - Net interest and other expense increased to **$117 million** for the three months ended March 31, 2020, from an income of **$3 million** in the prior year, including **$59 million** for **debt refinancing** and **$8 million** for accelerated debt issuance costs[192](index=192&type=chunk) [Operating income](index=41&type=section&id=Operating%20income) This section examines the factors influencing Ashland's operating income, particularly the impact of the goodwill impairment charge - **Operating income** for the three months ended March 31, 2020, was a **loss** of **$468 million**, compared to an income of **$44 million** in the prior year, primarily due to the **$530 million goodwill impairment charge**[200](index=200&type=chunk) - Key items affecting **operating income** included the **goodwill impairment**, restructuring, separation and other costs, accelerated depreciation, proxy costs, and inventory adjustments[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - Depreciation and amortization for continuing operations were **$61 million** and **$122 million** for the three and six months ended March 31, 2020, respectively[204](index=204&type=chunk)[210](index=210&type=chunk) [Non-operating key items affecting EBITDA](index=42&type=section&id=Non-operating%20key%20items%20affecting%20EBITDA) This section identifies specific non-operating items that influenced Ashland's EBITDA, such as pension remeasurements and divestiture losses - Non-operating key items affecting **EBITDA** included a gain on pension and other postretirement plan remeasurements in the prior year and **net loss** on divestitures[210](index=210&type=chunk)[211](index=211&type=chunk) [Statements of Consolidated Comprehensive Income (Loss) – caption review](index=42&type=section&id=Statements%20of%20Consolidated%20Comprehensive%20Income%20(Loss)%20%E2%80%93%20caption%20review) This review provides a detailed breakdown of changes in sales, costs, expenses, and other comprehensive income components Sales Change (in millions) | Driver | Three Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2020 | | :-------------------------- | :------------------------------ | :---------------------------- | | Volume | $(35) | $(64) | | Plant realignment | $(8) | $(14) | | Currency exchange | $(7) | $(11) | | Pricing | $(7) | $(11) | | **Total Change in Sales** | **$(57)** | **$(100)** | Cost of Sales Change (in millions) | Driver | Three Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2020 | | :-------------------------- | :------------------------------ | :---------------------------- | | Plant realignment/closure costs | $(27) | $(61) | | Volume | $(23) | $(41) | | Currency exchange | $(3) | $(6) | | Operating costs | $(4) | $4 | | Price/mix | $1 | $4 | | **Total Change in Cost of Sales** | **$(56)** | **$(100)** | - Selling, general and administrative expense decreased by **$12 million** for the three months and **$34 million** for the six months ended March 31, 2020, due to cost savings initiatives and favorable currency exchange[219](index=219&type=chunk)[220](index=220&type=chunk) - Net interest and other expense increased by **$120 million** for the three months and **$75 million** for the six months ended March 31, 2020, primarily due to **debt refinancing costs** (**$59 million**) and **losses** on restricted investments (**$29 million** for three months, **$16 million** for six months)[229](index=229&type=chunk)[230](index=230&type=chunk) - **Income tax expense** was a benefit of **$10 million** for the three months and **$34 million** for the six months ended March 31, 2020, significantly impacted by the nondeductible **goodwill impairment** and a favorable tax benefit from Swiss Tax Reform[233](index=233&type=chunk)[235](index=235&type=chunk) - Discontinued operations resulted in a **net loss** of **$7 million** for the three months and **$9 million** for the six months ended March 31, 2020, compared to income of **$31 million** and **$54 million** in the prior year periods, mainly due to the Composites/Marl facility divestiture and asbestos-related losses[242](index=242&type=chunk)[244](index=244&type=chunk) - Other comprehensive income (**loss**) for the three months ended March 31, 2020, was a **loss** of **$52 million**, primarily due to unrealized foreign currency translation losses[246](index=246&type=chunk) [Use of non-GAAP measures](index=48&type=section&id=Use%20of%20non-GAAP%20measures) This section discusses Ashland's use of non-GAAP financial measures to provide a clearer understanding of its ongoing operating performance and comparability between periods - Ashland uses non-GAAP measures like **EBITDA**, **Adjusted EBITDA**, **Adjusted EBITDA margin**, **Adjusted diluted EPS**, and **Free cash flow** to provide a clearer understanding of ongoing operating performance and comparability between periods[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) - These non-GAAP measures exclude items causing short-term fluctuations, such as depreciation, amortization, non-cash charges, interest, taxes, and certain other variable charges, to reflect fundamental business attributes[254](index=254&type=chunk) - **Free cash flow** is used to indicate cash available for debt and equity holders and investments, but it does not reflect mandatory debt repayments[257](index=257&type=chunk) [EBITDA and Adjusted EBITDA](index=50&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) This section reconciles net income to EBITDA and Adjusted EBITDA, highlighting the impact of key non-recurring items EBITDA and Adjusted EBITDA (in millions) | Metric | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income (loss) | $(582) | $76 | $(550) | $28 | | Income tax expense (benefit) | $(10) | $1 | $(34) | $25 | | Net interest and other expense | $117 | $(3) | $127 | $52 | | Depreciation and amortization | $61 | $62 | $122 | $124 | | **EBITDA** | **$(414)** | **$136** | **$(335)** | **$229** | | Loss (income) from discontinued operations | $7 | $(31) | $9 | $(54) | | Key items included in EBITDA | $549 | $37 | $556 | $67 | | **Adjusted EBITDA** | **$142** | **$142** | **$230** | **$242** | - **Adjusted EBITDA** remained flat at **$142 million** for the three months ended March 31, 2020, compared to the prior year, despite a significant decrease in reported **EBITDA** due to key items like **goodwill impairment**[261](index=261&type=chunk) - Key items totaling **$549 million** for the three months ended March 31, 2020, included **$530 million goodwill impairment**, **$15 million restructuring costs**, and **$4 million** inventory adjustment[261](index=261&type=chunk) [Diluted EPS and Adjusted Diluted EPS](index=51&type=section&id=Diluted%20EPS%20and%20Adjusted%20Diluted%20EPS) This section presents diluted and adjusted diluted EPS, illustrating the effect of significant non-GAAP adjustments on per-share earnings Diluted EPS and Adjusted Diluted EPS from Continuing Operations | Metric | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :------------------------------------------------------------------------------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Diluted EPS from continuing operations (as reported) | $(9.48) | $0.71 | $(8.93) | $(0.41) | | Key items, before tax | $10.67 | $0.16 | $10.64 | $1.10 | | Tax effect of key items | $(0.35) | $0.04 | $(0.33) | $(0.08) | | Tax specific key items | $0 | $(0.08) | $(0.41) | $0.36 | | **Adjusted diluted EPS from continuing operations (non-GAAP)** | **$0.84** | **$0.83** | **$0.97** | **$0.97** | | Amortization expense adjustment (net of tax) | $0.28 | $0.25 | $0.56 | $0.51 | | **Adjusted diluted EPS from continuing operations (non-GAAP) excluding intangibles amortization expense** | **$1.12** | **$1.08** | **$1.53** | **$1.48** | - **Adjusted diluted EPS** from continuing operations (non-GAAP) was **$0.84** for the three months and **$0.97** for the six months ended March 31, 2020, showing stability after excluding significant key items[264](index=264&type=chunk) - The key items, before tax, for the three months ended March 31, 2020, totaled **$10.67** per share, primarily driven by **goodwill impairment** (**$8.75**) and **debt refinancing costs** (**$0.97**)[264](index=264&type=chunk) [RESULTS OF OPERATIONS – REPORTABLE SEGMENT REVIEW](index=51&type=section&id=RESULTS%20OF%20OPERATIONS%20%E2%80%93%20REPORTABLE%20SEGMENT%20REVIEW) Ashland's reportable segments were realigned in Q2 fiscal 2020. Consumer Specialties saw sales decrease by $36 million for the quarter, with Personal Care & Household experiencing a $336 million operating loss due to goodwill impairment. Industrial Specialties' sales decreased by $18 million, with Specialty Additives recording a $161 million operating loss from goodwill impairment. Intermediates and Solvents' sales decreased by $7 million, resulting in an $11 million decrease in operating income. Unallocated and other expenses decreased due to lower restructuring and stranded divestiture costs [Consumer Specialties](index=54&type=section&id=Consumer%20Specialties) This segment review details the sales and operating income performance of Life Sciences and Personal Care & Household, including the impact of goodwill impairment - Consumer Specialties' sales decreased by **$36 million** to **$343 million** for the three months ended March 31, 2020, with Personal Care & Household and Life Sciences contributing **$24 million** and **$12 million** to the decrease, respectively[275](index=275&type=chunk) - **Operating income** for Consumer Specialties decreased by **$358 million** to a **loss** of **$300 million** for the current quarter, primarily due to a **$336 million loss** in Personal Care & Household from **goodwill impairment**[276](index=276&type=chunk) - **Adjusted EBITDA** for Consumer Specialties decreased **$1 million** to **$91 million** for the three months ended March 31, 2020, with Life Sciences contributing **$52 million** and Personal Care & Household contributing **$39 million**[276](index=276&type=chunk)[283](index=283&type=chunk) [Life Sciences](index=54&type=section&id=Life%20Sciences) This section provides a detailed review of the Life Sciences segment's financial performance [Personal Care & Household](index=54&type=section&id=Personal%20Care%20%26%20Household) This section provides a detailed review of the Personal Care & Household segment's financial performance, including goodwill impairment [March 2020 quarter compared to March 2019 quarter (Consumer Specialties)](index=54&type=section&id=March%202020%20quarter%20compared%20to%20March%202019%20quarter%20(Consumer%20Specialties)) This section compares Consumer Specialties' performance for the three months ended March 31, 2020, against the prior year [Fiscal 2020 year-to-date compared to fiscal 2019 year-to-date (Consumer Specialties)](index=54&type=section&id=Fiscal%202020%20year-to-date%20compared%20to%20fiscal%202019%20year-to-date%20(Consumer%20Specialties)) This section compares Consumer Specialties' year-to-date performance for fiscal 2020 against fiscal 2019 [EBITDA and Adjusted EBITDA reconciliation (Consumer Specialties)](index=55&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20reconciliation%20(Consumer%20Specialties)) This reconciliation details the EBITDA and Adjusted EBITDA for the Consumer Specialties segment [Industrial Specialties](index=56&type=section&id=Industrial%20Specialties) This segment review covers the sales and operating income performance of Specialty Additives and Performance Adhesives, including goodwill impairment - Industrial Specialties' sales decreased by **$18 million** to **$240 million** for the three months ended March 31, 2020, with Specialty Additives and Performance Adhesives contributing **$14 million** and **$4 million** to the decrease, respectively[288](index=288&type=chunk) - **Operating income** for Industrial Specialties decreased by **$160 million** to a **loss** of **$145 million** for the current quarter, primarily due to a **$161 million loss** in Specialty Additives from **goodwill impairment**[289](index=289&type=chunk) - **Adjusted EBITDA** for Industrial Specialties decreased **$6 million** to **$53 million** for the three months ended March 31, 2020, with Specialty Additives contributing **$33 million** and Performance Adhesives contributing **$20 million**[289](index=289&type=chunk)[294](index=294&type=chunk) [Specialty Additives](index=56&type=section&id=Specialty%20Additives) This section provides a detailed review of the Specialty Additives segment's financial performance, including goodwill impairment [Performance Adhesives](index=56&type=section&id=Performance%20Adhesives) This section provides a detailed review of the Performance Adhesives segment's financial performance [March 2020 quarter compared to March 2019 quarter (Industrial Specialties)](index=56&type=section&id=March%202020%20quarter%20compared%20to%20March%202019%20quarter%20(Industrial%20Specialties)) This section compares Industrial Specialties' performance for the three months ended March 31, 2020, against the prior year [Fiscal 2020 year-to-date compared to fiscal 2019 year-to-date (Industrial Specialties)](index=56&type=section&id=Fiscal%202020%20year-to-date%20compared%20to%20fiscal%202019%20year-to-date%20(Industrial%20Specialties)) This section compares Industrial Specialties' year-to-date performance for fiscal 2020 against fiscal 2019 [EBITDA and Adjusted EBITDA reconciliation (Industrial Specialties)](index=57&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20reconciliation%20(Industrial%20Specialties)) This reconciliation details the EBITDA and Adjusted EBITDA for the Industrial Specialties segment [Intermediates and Solvents](index=57&type=section&id=Intermediates%20and%20Solvents) This segment review analyzes the sales and operating income performance of the Intermediates and Solvents segment - Intermediates and Solvents' sales decreased by **$7 million** to **$37 million** for the three months ended March 31, 2020, due to lower volume and pricing[296](index=296&type=chunk) - **Operating income** for Intermediates and Solvents decreased by **$11 million** to a **loss** of **$2 million** for the current quarter, impacted by unfavorable price/mix, costs, and inventory adjustments[298](index=298&type=chunk) - **Adjusted EBITDA** for Intermediates and Solvents decreased **$7 million** to **$5 million** for the three months ended March 31, 2020[298](index=298&type=chunk)[301](index=301&type=chunk) [March 2020 quarter compared to March 2019 quarter (Intermediates and Solvents)](index=57&type=section&id=March%202020%20quarter%20compared%20to%20March%202019%20quarter%20(Intermediates%20and%20Solvents)) This section compares Intermediates and Solvents' performance for the three months ended March 31, 2020, against the prior year [Fiscal 2020 year-to-date compared to fiscal 2019 year-to-date (Intermediates and Solvents)](index=58&type=section&id=Fiscal%202020%20year-to-date%20compared%20to%20fiscal%202019%20year-to-date%20(Intermediates%20and%20Solvents)) This section compares Intermediates and Solvents' year-to-date performance for fiscal 2020 against fiscal 2019 [EBITDA and Adjusted EBITDA reconciliation (Intermediates and Solvents)](index=58&type=section&id=EBITDA%20and%20Adjusted%20EBITDA%20reconciliation%20(Intermediates%20and%20Solvents)) This reconciliation details the EBITDA and Adjusted EBITDA for the Intermediates and Solvents segment [Unallocated and other](index=58&type=section&id=Unallocated%20and%20other) This section details unallocated corporate expenses and other items not attributable to specific operating segments Unallocated and Other Segment's Operating Income (Loss) (in millions) | Expense Category | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Restructuring activities | $(14) | $(24) | $(22) | $(53) | | Environmental expenses | $(5) | $(4) | $(8) | $(6) | | Proxy costs | $0 | $(5) | $0 | $(5) | | Other expenses (governance and legacy) | $(2) | $(5) | $(14) | $(10) | | **Total expense** | **$(21)** | **$(38)** | **$(44)** | **$(74)** | - Unallocated and other expenses decreased to **$21 million** for the three months and **$44 million** for the six months ended March 31, 2020, primarily due to lower **restructuring activities** and reduced stranded divestiture costs[304](index=304&type=chunk)[306](index=306&type=chunk) [March 2020 quarter compared to March 2019 quarter (Unallocated and other)](index=58&type=section&id=March%202020%20quarter%20compared%20to%20March%202019%20quarter%20(Unallocated%20and%20other)) This section compares unallocated and other expenses for the three months ended March 31, 2020, against the prior year [Fiscal 2020 year-to-date compared to fiscal 2019 year-to-date (Unallocated and other)](index=59&type=section&id=Fiscal%202020%20year-to-date%20compared%20to%20fiscal%202019%20year-to-date%20(Unallocated%20and%20other)) This section compares unallocated and other expenses year-to-date for fiscal 2020 against fiscal 2019 [FINANCIAL POSITION](index=59&type=section&id=FINANCIAL%20POSITION) Ashland's liquidity remains strong with $353 million in cash and cash equivalents and $339 million in unused borrowing capacity as of March 31, 2020. Operating cash flows from continuing operations were $13 million for the six months ended March 31, 2020, while financing activities provided $234 million, largely from debt refinancing. Total debt increased to $2,006 million, but the company remains in compliance with all debt covenants. Total equity decreased by $588 million due to net loss and dividends [Liquidity](index=59&type=section&id=Liquidity) This section assesses Ashland's cash position, borrowing capacity, and overall ability to meet short-term obligations - Ashland held **$353 million** in **cash and cash equivalents** as of March 31, 2020, with **$160 million** held by foreign subsidiaries[308](index=308&type=chunk) - The company renewed its revolving credit agreement and issued new senior notes in January 2020, accessing **$240 million** from the revolving credit facility[309](index=309&type=chunk) - Total remaining borrowing capacity was **$339 million** as of March 31, 2020, with no major loan maturities until 2022[309](index=309&type=chunk) [Operating activities](index=60&type=section&id=Operating%20activities) This section details cash flows generated or used by Ashland's core business operations, including changes in working capital - **Cash flows** provided by **operating activities** from continuing operations amounted to **$13 million** for the six months ended March 31, 2020, compared to **$6 million** in the prior year[314](index=314&type=chunk) - Changes in operating assets and liabilities resulted in outflows of **$163 million** for the six months ended March 31, 2020, primarily driven by accounts receivable (**$19 million** outflow), inventory (**$15 million** outflow), and trade and other payables (**$83 million** outflow)[317](index=317&type=chunk)[318](index=318&type=chunk) - **Operating cash flows** for the current year period included a **$541 million loss** from continuing operations, offset by non-cash adjustments such as **$530 million goodwill impairment** and **$122 million** depreciation and amortization[320](index=320&type=chunk) [Investing activities](index=61&type=section&id=Investing%20activities) This section outlines cash flows related to Ashland's investments in property, plant, equipment, and other strategic assets - Cash used by **investing activities** from continuing operations was **$49 million** for both the six months ended March 31, 2020, and 2019[325](index=325&type=chunk) - Significant **investing activities** included **$66 million** for property additions and **$19 million** in reimbursements from the restricted asbestos trust for the current period[325](index=325&type=chunk) [Financing activities](index=62&type=section&id=Financing%20activities) This section describes cash flows from debt, equity, and dividend transactions, including the impact of recent debt refinancing - **Cash flows** provided by **financing activities** from continuing operations resulted in an inflow of **$234 million** for the six months ended March 31, 2020, compared to an outflow of **$36 million** in the prior year[326](index=326&type=chunk) - This inflow was driven by **$804 million** from long-term debt issuance, partially offset by **$767 million** in long-term debt repayment, **$59 million** in premiums on debt repayment, and **$11 million** in debt issuance costs, all related to debt refinancing[327](index=327&type=chunk) - **Cash dividends** paid totaled **$33 million** (**$0.550** per share) for the current period[327](index=327&type=chunk) - **Cash flows** for discontinued operations resulted in a **$78 million** outflow for the current period, primarily due to payments of asbestos, environmental liabilities, and tax payments associated with the Composites divestiture[330](index=330&type=chunk) [Free cash flow and other liquidity resources](index=63&type=section&id=Free%20cash%20flow%20and%20other%20liquidity%20resources) This section analyzes Ashland's free cash flow and other available liquidity resources, including working capital and borrowing capacity Free Cash Flow (in millions) | Metric | Six Months Ended Mar 31, 2020 | Six Months Ended Mar 31, 2019 | | :-------------------------------------------------------------------------------- | :------------------------------ | :------------------------------ | | Total cash flows provided by operating activities from continuing operations | $13 | $6 | | Additions to property, plant and equipment | $(66) | $(70) | | **Free cash flows** | **$(53)** | **$(64)** | - Working capital amounted to **$673 million** as of March 31, 2020, and liquid assets represented **88%** of current liabilities (excluding current liabilities held for sale)[334](index=334&type=chunk) - Ashland's total available liquidity position, including cash and unused borrowing capacity, was **$692 million** at March 31, 2020, down from **$1,032 million** at September 30, 2019[338](index=338&type=chunk) [Capital resources](index=64&type=section&id=Capital%20resources) This section details Ashland's debt structure and its impact on capital employed, providing an overview of its financial leverage Debt Summary (in millions) | Debt Type | March 31, 2020 | September 30, 2019 | | :------------------------------------------------------------------- | :------------- | :----------------- | | Short-term debt (includes current portion of long-term debt) | $471 | $166 | | Long-term debt (less current portion and debt issuance cost discounts) | $1,535 | $1,501 | | **Total debt** | **$2,006** | **$1,667** | - **Debt** as a percent of capital employed was **40%** at March 31, 2020, up from **32%** at September 30, 2019[342](index=342&type=chunk) [Ashland credit ratings](index=64&type=section&id=Ashland%20credit%20ratings) This section provides an overview of Ashland's corporate credit ratings from major agencies and their outlooks - Ashland's corporate credit rating is **BB+** with Standard & Poor's and **Ba1** with Moody's Investor Services, both with stable outlooks[343](index=343&type=chunk) [Ashland debt covenant restrictions](index=64&type=section&id=Ashland%20debt%20covenant%20restrictions) This section confirms Ashland's compliance with its debt covenants, including leverage and interest coverage ratios - Ashland is in compliance with all debt agreement covenant restrictions under the 2020 Credit Agreement as of March 31, 2020[344](index=344&type=chunk) - The consolidated net leverage ratio was **3.1** (maximum permitted **4.0**), and the consolidated interest coverage ratio was **7.7** (minimum required **3.0**)[347](index=347&type=chunk)[348](index=348&type=chunk) [Additional capital resources](index=65&type=section&id=Additional%20capital%20resources) This section discusses other potential sources of capital available to Ashland beyond its primary debt and equity structures [Total equity](index=65&type=section&id=Total%20equity) This section summarizes the changes in Ashland's total stockholders' equity, driven by net income, dividends, and other comprehensive income [Stockholder dividends](index=65&type=section&id=Stockholder%20dividends) This section details the cash dividends declared and paid to Ashland's common stockholders during the reporting period [Capital expenditures](index=65&type=section&id=Capital%20expenditures) This section outlines Ashland's investments in property, plant, and equipment, reflecting its capital allocation strategy - **Capital expenditures** were **$66 million** for the six months ended March 31, 2020, a slight decrease from **$70 million** in the prior year period[352](index=352&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=65&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Ashland's critical accounting policies involve significant estimates for long-lived assets, income taxes, and asbestos/environmental liabilities. A key event was the $530 million goodwill impairment charge in Q2 fiscal 2020, affecting Personal Care & Household and Specialty Additives segments, following a business realignment. This impairment was driven by lower growth and margins in these units. Sensitivity analysis indicates potential further impairment with changes in discount or growth rates [Goodwill and other indefinite-lived intangible assets](index=66&type=section&id=Goodwill%20and%20other%20indefinite-lived%20intangible%20assets) This section details Ashland's accounting for goodwill and indefinite-lived intangible assets, including impairment testing and the recent $530 million charge - Ashland tests **goodwill** and other indefinite-lived intangible assets for impairment annually and when circumstances indicate, comparing fair value to carrying value[355](index=355&type=chunk) - A **$530 million** non-cash **goodwill impairment charge** was recorded in Q2 fiscal 2020, impacting Personal Care & Household (remaining **goodwill** zero) and Specialty Additives (remaining **goodwill** **$435 million**)[358](index=358&type=chunk) - The impairment was attributed to lower growth and margins in the affected reporting units, with fair values determined using discounted cash flow models and earnings multiples[358](index=358&type=chunk)[362](index=362&type=chunk) Sensitivity Analysis for Specialty Additives Goodwill | Scenario | Approximate Percent Change in Estimated Fair Value | | :-------------------------- | :--------------------------------------- | | +25 bps Discount Rate | -2.9% | | -25 bps Growth Rate | -2.1% | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=68&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Ashland's market risk exposure as of March 31, 2020, remains consistent with the types of market risks previously disclosed in its Annual Report on Form 10-K for the fiscal year ended September 30, 2019 - Ashland's market risk exposure at March 31, 2020, is consistent with disclosures in the prior fiscal year's Form 10-K[364](index=364&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=68&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Ashland's management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020. There were no significant changes in internal control over financial reporting during the quarter that materially affected or are reasonably likely to materially affect these controls - Ashland's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2020[365](index=365&type=chunk) - No significant changes in internal control over financial reporting occurred during the three months ended March 31, 2020[366](index=366&type=chunk) [PART II – OTHER INFORMATION](index=69&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section includes disclosures on legal proceedings, risk factors, equity security sales, and exhibits, providing additional context [ITEM 1. LEGAL PROCEEDINGS](index=69&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Ashland is involved in material legal proceedings, primarily asbestos-related litigation from its former subsidiary Riley Stoker and acquired subsidiary Hercules, and environmental proceedings under CERCLA and similar state laws at multiple sites. While the ultimate costs are uncertain, Ashland believes adequate reserves have been recorded, and potential losses exceeding recognized amounts are immaterial as of March 31, 2020 - Ashland is subject to asbestos-related litigation from indemnification obligations related to Riley Stoker Corporation and claims against Hercules LLC[369](index=369&type=chunk)[370](index=370&type=chunk) - The company is identified as a 'potentially responsible party' (PRP) at **79** waste treatment or disposal sites under CERCLA and similar state laws for environmental remediation[372](index=372&type=chunk) - Ashland believes adequate reserves have been recorded for all legal proceedings, and potential losses exceeding recognized amounts were immaterial as of March 31, 2020[379](index=379&type=chunk) [Asbestos-Related Litigation](index=69&type=section&id=Asbestos-Related%20Litigation) This section details Ashland's ongoing liabilities and legal challenges stemming from asbestos-related claims against its former and acquired entities [Environmental Proceedings](index=69&type=section&id=Environmental%20Proceedings) This section outlines Ashland's involvement in environmental remediation efforts and associated liabilities under various regulations [Other Pending Legal Proceedings](index=70&type=section&id=Other%20Pending%20Legal%20Proceedings) This section addresses other miscellaneous legal actions and claims that Ashland is currently facing [ITEM 1A. RISK FACTORS](index=71&type=section&id=ITEM%201A.%20RISK%20FACTORS) There were no material changes to Ashland's previously disclosed risk factors, but the COVID-19 pandemic presents new and significant uncertainties. Its impact on business operations, cash flows, liquidity, and financial position is unpredictable, depending on factors like virus severity, outbreak duration, governmental actions, supply chain dis

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 December 31, 2019 OR ☐ 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 8145 Blazer Drive Wilmington, Delaware 198 ...

Ashland Global Holdings Inc. (NYSE:ASH) Q1 2020 Earnings Conference Call January 28, 2020 9:00 AM ET Company Participants Seth Mrozek - Director IR Guillermo Novo - Chairman & CEO J. Kevin Willis - SVP & CFO Conference Call Participants Christopher Parkinson - Credit Suisse John McNulty - BMO Capital Markets David Begleiter - Deutsche Bank Mike Sison - Wells Fargo John Roberts - UBS Jeff Zekauskas - J.P. Morgan Jim Sheehan - SunTrust Robinson Humphrey Mike Harrison - Seaport Global Securities Operator Ladie ...

PART I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) Ashland is a global specialty chemical solutions leader with two reportable segments after divesting its Composites business [General](index=3&type=section&id=General) - Ashland Global Holdings Inc. was incorporated in 2016 in Delaware, succeeding Ashland Inc. to facilitate the separation of the Valvoline business[3](index=3&type=chunk) - The company is a global leader in specialty chemical solutions, serving over 100 countries with approximately **4,700 employees**[3](index=3&type=chunk) - Following the sale of its Composites segment and Marl facility on August 30, 2019, Ashland's operations are managed under two reportable segments: **Specialty Ingredients** and **Intermediates and Solvents**[3](index=3&type=chunk) [Specialty Ingredients](index=4&type=section&id=Specialty%20Ingredients) - Specialty Ingredients is a global leader in cellulose ethers, vinyl pyrrolidones, and biofunctionals for diverse consumer and industrial markets[3](index=3&type=chunk)[5](index=5&type=chunk) - The segment's expertise spans multiple chemistry disciplines to provide properties like thickening, water retention, and film formation[5](index=5&type=chunk) Specialty Ingredients Products as % of Total Consolidated Sales (Fiscal 2019) | Product | % of Specialty Ingredients sales | % of Ashland total consolidated sales | | :--- | :--- | :--- | | Cellulosics | 35% | 34% | | Polyvinylpyrrolidones (PVP) | 17% | 17% | [Intermediates and Solvents](index=6&type=section&id=Intermediate%20and%20Solvents) - Intermediates and Solvents is a leading producer of 1,4 butanediol (BDO) and its derivatives for various industrial applications[3](index=3&type=chunk)[11](index=11&type=chunk) - Butanediol is also supplied internally to Ashland's Specialty Ingredients business as a key raw material[3](index=3&type=chunk)[11](index=11&type=chunk) - The segment operates a primary manufacturing facility in Lima, Ohio, following the sale of its Marl, Germany facility in August 2019[11](index=11&type=chunk) [Miscellaneous](index=6&type=section&id=Miscellaneous) - Ashland maintains a company-wide environmental policy and an EHSQ&RA department to ensure compliance with global environmental laws[12](index=12&type=chunk)[14](index=14&type=chunk) - Ashland operates in a highly fragmented specialty chemicals industry, competing on product performance, quality, price, and service[17](index=17&type=chunk) - The company's broad intellectual property portfolio is crucial for protecting and differentiating its products and technologies[19](index=19&type=chunk) - Research and development focuses on new chemistries and customer-driven solutions, while facing volatile raw material costs[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) Environmental Remediation Reserves and Expense | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | Environmental remediation reserves | $186 | $187 | N/A | | Upper end of reasonably possible range | ~$440 | N/A | N/A | | Environmental remediation expense, net of insurance receivables | $34 | $65 | $24 | [Item 1A. Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks in operations, global markets, regulations, and financial obligations - Ashland's aggressive growth goals face risks from global economic changes, competition, and failures in talent retention or product innovation[26](index=26&type=chunk) - The company's success depends on attracting and retaining key employees, particularly with a large portion of U.S-based employees nearing retirement[26](index=26&type=chunk) - Failure to develop and market new products in the fast-changing specialty chemical industry could impact Ashland's competitive position[27](index=27&type=chunk) - Ashland operates in highly competitive markets, facing price and margin pressure from larger competitors with greater financial resources[29](index=29&type=chunk)[30](index=30&type=chunk) - The company is exposed to potential product liability claims and recalls, which could result in substantial expenditures and reputational damage[30](index=30&type=chunk) - Rising and volatile raw material and energy costs may negatively impact Ashland's costs and profitability[32](index=32&type=chunk) - Ashland's substantial global operations expose it to risks from differing legal requirements, exchange rate fluctuations, and trade disputes[32](index=32&type=chunk) - New or changing laws and regulations could increase compliance costs and restrict business operations[34](index=34&type=chunk) - The IPO and final distribution of Valvoline shares could result in **significant tax liability** for Ashland if the transactions are deemed not to qualify for non-recognition of gain[36](index=36&type=chunk) - Business disruptions from natural disasters, IT system failures, or cyber-security threats could seriously harm Ashland's operations[36](index=36&type=chunk)[38](index=38&type=chunk) - Ashland relies on intellectual property but faces risks of infringement claims or unauthorized disclosure of proprietary information[39](index=39&type=chunk) - The company incurs substantial costs for environmental liabilities, with potential future remediation costs estimated as high as **$440 million**[41](index=41&type=chunk) - Ashland's substantial indebtedness could adversely affect its financial condition by requiring a significant portion of cash flow for debt service[41](index=41&type=chunk) - Ashland is exposed to liabilities from asbestos-related claims, primarily from indemnification obligations and the acquisition of Hercules LLC[43](index=43&type=chunk) [Item 1B. Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - No unresolved staff comments were reported[44](index=44&type=chunk) [Item 2. Properties](index=18&type=section&id=Item%202.%20Properties) The company maintains global offices and properties suitable for its operations, with a headquarters move to Delaware - Ashland's corporate headquarters will relocate from Covington, Kentucky, to Wilmington, Delaware, by December 2019[45](index=45&type=chunk) - All of Ashland's physical properties are either owned or leased, and the company believes they are suitable for its business operations[45](index=45&type=chunk) [Item 3. Legal Proceedings](index=18&type=section&id=Item%203.%20Legal%20Proceedings) Ashland is involved in material legal proceedings related to historical asbestos and environmental liabilities - Ashland is subject to asbestos-related litigation primarily due to indemnification obligations from the sale of Riley Stoker Corporation and claims against its subsidiary Hercules LLC[46](index=46&type=chunk) - Under CERCLA and similar laws, Ashland has been identified as a 'potentially responsible party' (PRP) at **80 waste treatment or disposal sites**[47](index=47&type=chunk) - Specific environmental proceedings include RCRA matters in Hattiesburg, Mississippi, and Freetown, MA, and involvement as a PRP in the Lower Passaic River, New Jersey[49](index=49&type=chunk) - For all pending legal proceedings, Ashland believes adequate reserves have been recorded as of September 30, 2019[50](index=50&type=chunk) [Item 4. Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to Ashland Global Holdings Inc[52](index=52&type=chunk) [Item X. Information about our Executive Officers](index=20&type=section&id=Item%20X.%20Information%20about%20our%20Executive%20Officers) This section details the executive team and highlights the upcoming CEO transition - Guillermo Novo will succeed William A. Wulfsohn as Chairman and Chief Executive Officer effective December 31, 2019[53](index=53&type=chunk) - Key executive officers include J. Kevin Willis (CFO), Peter J. Ganz (General Counsel), Anne T. Schumann (CHRO), Vito J. Consiglio (CCO), Osama M. Musa (CTO), and Keith C. Silverman (SVP, Global Operations)[53](index=53&type=chunk)[55](index=55&type=chunk) - J. William Heitman, Vice President and Controller, is retiring on December 31, 2019[55](index=55&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=22&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on the NYSE, and this section details shareholder returns and share repurchase activities - Ashland Global Holdings Inc.'s common stock (ASH) began trading on the NYSE on September 20, 2016, with approximately **10,500 holders of record** at October 31, 2019[57](index=57&type=chunk) - The five-year cumulative total shareholder return graph compares Ashland's performance against the S&P MidCap 400† index and a peer group[58](index=58&type=chunk)[61](index=61&type=chunk) - During the three months ended September 30, 2019, Ashland repurchased **400,508 shares** at an average price of $75.84 per share[62](index=62&type=chunk) - In May 2019, Ashland initiated a **$200 million accelerated share repurchase (ASR) program**, resulting in the repurchase of 2.6 million shares[62](index=62&type=chunk) Five-Year Cumulative Total Return Comparison (Indexed to 100 in 2014) | | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Ashland | 100 | 98 | 114 | 127 | 165 | 153 | | S&P MidCap 400 † | 100 | 101 | 117 | 137 | 157 | 153 | | Peer Group - Materials | 100 | 83 | 103 | 125 | 130 | 131 | [Item 6. Selected Financial Data](index=23&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected five-year financial data is provided on page F-69 of the report - Five-Year Selected Financial Information is available on page F-69[63](index=63&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation](index=38&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation) This section provides a comprehensive analysis of financial condition, results of operations, and liquidity [BUSINESS OVERVIEW](index=38&type=section&id=BUSINESS%20OVERVIEW) - Ashland is a global leader in specialty chemical solutions, serving diverse consumer and industrial markets[109](index=109&type=chunk) - The company has approximately **4,700 employees** worldwide and serves customers in over 100 countries, with **60% of sales generated outside North America**[109](index=109&type=chunk) - Ashland's reporting structure consists of two reportable segments: Specialty Ingredients and Intermediates and Solvents[111](index=111&type=chunk) Sales by Geography (Percentage of Total Consolidated Sales) | Sales by Geography | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | North America (a) | 40% | 40% | 40% | | Europe | 33% | 32% | 30% | | Asia Pacific | 19% | 19% | 20% | | Latin America & other | 8% | 9% | 10% | | Total | 100% | 100% | 100% | Sales by Reportable Segment (Percentage of Total Consolidated Sales) | Sales by Reportable Segment | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Specialty Ingredients | 96% | 95% | 96% | | Intermediates and Solvents | 4% | 5% | 4% | | Total | 100% | 100% | 100% | [KEY DEVELOPMENTS](index=38&type=section&id=KEY%20DEVELOPMENTS) - The increase in Net Income for 2019 was primarily driven by a **$372 million after-tax gain** on the sale of the Composites segment and Marl facility[113](index=113&type=chunk)[116](index=116&type=chunk) - Adjusted EBITDA increased by **$17 million** in 2019, mainly due to lower selling, general and administrative costs[113](index=113&type=chunk) - On August 30, 2019, Ashland completed the sale of its Composites business and Marl facility to INEOS Enterprises for **$1.015 billion**[116](index=116&type=chunk) - Ashland announced a company-wide restructuring program in May 2018 to achieve **$120 million in annualized run-rate savings**, with $115 million captured by September 2019[117](index=117&type=chunk) - The Tax Cuts and Jobs Act of 2017 led to net unfavorable tax adjustments of **$29 million** in 2019[119](index=119&type=chunk) - In May 2019, Ashland initiated a **$200 million accelerated share repurchase (ASR) program**, repurchasing 2.6 million shares[120](index=120&type=chunk) - Ashland's Board of Directors increased the quarterly cash dividend to **27.5 cents per share** in May 2019[121](index=121&type=chunk) - Debt was reduced by approximately **$0.9 billion** in fiscal 2019, leading to corporate credit rating upgrades from Standard & Poor's (BB to BB+) and Moody's (Ba2 to Ba1)[122](index=122&type=chunk) Ashland's Net Income and Adjusted EBITDA (2019 vs. 2018) | Metric | 2019 (Millions USD) | 2018 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Net Income | $505 | $114 | +$391 | | Adjusted EBITDA | $532 | $515 | +$17 | [RESULTS OF OPERATIONS – CONSOLIDATED REVIEW](index=40&type=section&id=RESULTS%20OF%20OPERATIONS%20–%20CONSOLIDATED%20REVIEW) - Ashland uses non-GAAP measures like EBITDA and Adjusted EBITDA to provide a clearer understanding of ongoing operating performance[123](index=123&type=chunk)[126](index=126&type=chunk) - Discontinued operations significantly impacted net income, contributing **$481 million in 2019**, including a $372 million gain on the Composites/Marl sale[129](index=129&type=chunk) - Operating income included key items such as restructuring costs (**$51M in 2019**), accelerated depreciation (**$39M in 2019**), and environmental reserve adjustments (**$15M in 2019**)[132](index=132&type=chunk) - Sales decreased by **$96 million (4%)** in 2019 due to unfavorable volume/product mix and foreign currency exchange[144](index=144&type=chunk) - Sales increased by **$280 million (12%)** in 2018, driven by the Pharmachem acquisition and improved volume[144](index=144&type=chunk) - Cost of sales was flat in 2019 compared to 2018, with increases from accelerated depreciation and higher production costs offset by volume declines[146](index=146&type=chunk) - Selling, general and administrative (SG&A) expense decreased by **$153 million** in 2019, primarily due to lower net environmental-related expenses and reduced restructuring costs[149](index=149&type=chunk) - Research and development expense decreased by **$7 million** in 2019 due to company-wide cost reduction programs[151](index=151&type=chunk) - Net interest and other financing expense decreased by **$3 million** in 2019, primarily due to lower debt levels[153](index=153&type=chunk) - The 2019 effective tax rate was **66%**, impacted by jurisdictional income mix, restructuring activities, and U.S. tax reform[157](index=157&type=chunk) - The **$372 million gain on disposal** in 2019 is from the sale of the Composites business and Marl facility[164](index=164&type=chunk) - The decrease in other comprehensive income (loss) in 2019 was primarily due to a **$5 million pension and postretirement obligation adjustment**[167](index=167&type=chunk) Consolidated Net Income and EPS Attributable to Ashland | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | Net income attributable to Ashland | $505 | $114 | $1 | | Diluted earnings per share | $8.03 | $1.79 | $0.01 | Consolidated Operating Income | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | Operating income | $166 | $102 | $49 | Consolidated EBITDA and Adjusted EBITDA | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | EBITDA | $900 | $471 | $487 | | Adjusted EBITDA | $532 | $515 | $430 | Consolidated Sales and Changes | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | 2019 Change (Millions USD) | 2018 Change (Millions USD) | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $2,493 | $2,589 | $2,309 | $(96) | $280 | Consolidated Cost of Sales and Gross Profit Margin | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | Cost of sales | $1,726 | $1,726 | $1,580 | | Gross profit as a percent of sales | 30.8% | 33.3% | 31.6% | Consolidated Selling, General and Administrative Expense | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | Selling, general and administrative expense | $539 | $692 | $610 | | As a percent of sales | 21.6% | 26.7% | 26.4% | Consolidated Research and Development Expense | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | Research and development expense | $66 | $73 | $73 | Consolidated Net Interest and Other Expense (Income) | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | Net interest and other expense (income) | $99 | $102 | $229 | Consolidated Income Tax Expense (Benefit) and Effective Tax Rate | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | Income tax expense (benefit) | $46 | $(8) | $(16) | | Effective tax rate | 66% | (73)% | 8% | Consolidated Income (Loss) from Discontinued Operations (Net of Taxes) | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | Composites and Marl Facility | $94 | $86 | $75 | | Asbestos-related litigation | $0 | $13 | $(25) | | Water Technologies | $1 | $3 | $2 | | Distribution | $14 | $(6) | $(3) | | Valvoline | $0 | $(1) | $159 | | Gain on disposal of discontinued operations (Composites/Marl facility) | $372 | $0 | $0 | | Total Income from discontinued operations (net of taxes) | $481 | $95 | $208 | Consolidated Other Comprehensive Income (Loss) (Net of Taxes) | Metric | 2019 (Millions USD) | 2018 (Millions USD) | 2017 (Millions USD) | | :--- | :--- | :--- | :--- | | Unrealized translation gain (loss) | $(80) | $(82) | $81 | | Pension and postretirement obligation adjustment | $(5) | $0 | $(4) | | Net change in investment securities | $0 | $13 | $15 | | Total other comprehensive income (loss), net of tax | $(85) | $(69) | $92 | [RESULTS OF OPERATIONS – REPORTABLE SEGMENT REVIEW](index=54&type=section&id=RESULTS%20OF%20OPERATIONS%20–%20REPORTABLE%20SEGMENT%20REVIEW) - Ashland's operations are managed within two reportable segments: Specialty Ingredients and Intermediates and Solvents[169](index=169&type=chunk) - Specialty Ingredients sales decreased by **$88 million (4%)** in 2019, driven by lower volume/mix and unfavorable foreign currency[173](index=173&type=chunk) - Specialty Ingredients gross profit decreased by **$95 million** in 2019, with gross profit margin falling 2.7 percentage points to 31.1%[175](index=175&type=chunk) - Specialty Ingredients operating income decreased to **$272 million** in 2019, but Adjusted EBITDA margin increased 0.2 percentage points to 23.4%[175](index=175&type=chunk) - Intermediates and Solvents sales decreased by **$8 million (7%)** to $111 million in 2019, primarily due to lower volume and mix[182](index=182&type=chunk) - Intermediates and Solvents gross profit decreased by **$2 million** in 2019, but gross profit margin increased 0.1 percentage points to 23.1%[182](index=182&type=chunk)[184](index=184&type=chunk) - Unallocated and other expenses decreased to **$122 million** in 2019 from $229 million in 2018, primarily due to lower restructuring and environmental expenses[189](index=189&type=chunk) Reportable Segment Sales (Millions USD) | Segment | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Specialty Ingredients | $2,382 | $2,470 | $2,216 | | Intermediates and Solvents | $111 | $119 | $93 | | Total | $2,493 | $2,589 | $2,309 | Reportable Segment Operating Income (Loss) (Millions USD) | Segment | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Specialty Ingredients | $272 | $314 | $233 | | Intermediates and Solvents | $16 | $17 | $(6) | | Unallocated and Other | $(122) | $(229) | $(178) | | Total | $166 | $102 | $49 | Specialty Ingredients Operating Information | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Sales per shipping day (Millions USD) | $9.4 | $9.8 | $8.8 | | Metric tons sold (thousands) | 317.2 | 324.7 | 317.2 | | Gross profit as a percent of sales | 31.1% | 33.8% | 32.7% | Specialty Ingredients Adjusted EBITDA (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Operating income | $272 | $314 | $233 | | Depreciation and amortization | $235 | $246 | $229 | | EBITDA | $507 | $560 | $462 | | Accelerated depreciation | $38 | $6 | $14 | | Severance and other costs | $10 | $5 | $4 | | Asset impairment | $0 | $2 | $0 | | Environmental reserve adjustment | $1 | $1 | $0 | | Inventory fair value adjustment | $0 | $0 | $7 | | Unplanned plant shutdown | $2 | $0 | $6 | | Adjusted EBITDA | $558 | $574 | $493 | Intermediates and Solvents EBITDA (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Operating income | $16 | $17 | $(6) | | Depreciation and amortization | $13 | $14 | $14 | | EBITDA | $29 | $31 | $8 | Unallocated and Other Segment Expense (Millions USD) | Expense Category | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Restructuring activities | $(87) | $(139) | $(136) | | Environmental expenses | $(25) | $(58) | $(20) | | Asset impairment charges | $0 | $(14) | $0 | | Legal settlement/reserve | $0 | $5 | $(5) | | Tax indemnity expense | $(6) | $(5) | $0 | | Proxy costs | $(4) | $0 | $0 | | Other income (expense) | $0 | $(18) | $(17) | | Total unallocated expense | $(122) | $(229) | $(178) | [FINANCIAL POSITION](index=59&type=section&id=FINANCIAL%20POSITION) - As of September 30, 2019, **$157 million** of cash and cash equivalents were held by foreign subsidiaries[192](index=192&type=chunk) - Cash flows from operating activities from continuing operations were **$228 million** in 2019[196](index=196&type=chunk)[197](index=197&type=chunk)[201](index=201&type=chunk) - Investing activities used **$118 million** in 2019, primarily for capital expenditures ($154M)[204](index=204&type=chunk) - Financing activities used **$1,149 million** in 2019, mainly for repayments of long-term debt ($797M) and common stock repurchases ($200M)[208](index=208&type=chunk) - Cash flows from discontinued operations provided **$980 million** in 2019, including $972 million net proceeds from the sale of the Composites business[210](index=210&type=chunk) - Working capital increased to **$676 million** at September 30, 2019, from $647 million in 2018[214](index=214&type=chunk) - Total debt decreased to **$1,667 million** in 2019 from $2,529 million in 2018, with debt as a percent of capital employed falling to 32% from 43%[216](index=216&type=chunk) - Ashland's consolidated net leverage ratio was **2.6** and consolidated interest coverage ratio was **6.1** at September 30, 2019, both in compliance with debt covenants[233](index=233&type=chunk) - Ashland's corporate credit ratings were upgraded to **BB+ by S&P** and **Ba1 by Moody's** in September/October 2019[234](index=234&type=chunk) - Total equity increased to **$3,571 million** at September 30, 2019, from $3,406 million in 2018[236](index=236&type=chunk) Cash and Cash Equivalents (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $232 | $294 | $566 | Cash Flows Summary (Millions USD) | Cash Flow Category | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Operating activities from continuing operations | $228 | $241 | $174 | | Investing activities from continuing operations | $(118) | $(174) | $(798) | | Financing activities from continuing operations | $(1,149) | $(368) | $136 | | Discontinued operations | $980 | $28 | $(129) | | Net decrease in cash and cash equivalents | $(62) | $(272) | $(622) | Free Cash Flow (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Cash flows provided by operating activities from continuing operations | $228 | $241 | $174 | | Less: Additions to property, plant and equipment | $(154) | $(157) | $(168) | | Free cash flows | $74 | $84 | $6 | Total Debt (Millions USD) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Short-term debt | $166 | $254 | | Long-term debt | $1,501 | $2,275 | | Total debt | $1,667 | $2,529 | Capital Expenditures by Segment (Millions USD) | Segment | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Specialty Ingredients | $137 | $138 | $148 | | Intermediates and Solvents | $7 | $5 | $5 | | Unallocated and other | $10 | $14 | $15 | | Total capital expenditures | $154 | $157 | $168 | Contractual Obligations and Other Commitments (Millions USD) as of Sep 30, 2019 | Contractual obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Raw material and service contract purchase obligations | $180 | $79 | $85 | $11 | $5 | | Employee benefit obligations | $84 | $9 | $12 | $31 | $32 | | Operating lease obligations | $213 | $28 | $58 | $24 | $103 | | Debt | $1,726 | $166 | $1,083 | $0 | $477 | | Interest payments | $844 | $88 | $172 | $65 | $519 | | Unrecognized tax benefits | $165 | $0 | $0 | $0 | $165 | | One-time transition tax | $60 | $5 | $11 | $15 | $29 | | Total contractual obligations | $3,272 | $375 | $1,421 | $146 | $1,330 | | Other commitments: Letters of credit | $48 | $48 | $0 | $0 | $0 | [CRITICAL ACCOUNTING POLICIES](index=72&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) - Ashland's critical accounting policies involve significant estimates for environmental remediation, asbestos litigation, long-lived assets, and income taxes[251](index=251&type=chunk) - Environmental remediation reserves amounted to **$186 million** at September 30, 2019, with the upper end of the reasonably possible range of future costs as high as **$440 million**[252](index=252&type=chunk)[253](index=253&type=chunk) - Asbestos litigation reserves totaled **$604 million** at September 30, 2019, with potential future costs ranging up to **$550 million** for Ashland-related and **$390 million** for Hercules-related litigation[254](index=254&type=chunk)[255](index=255&type=chunk)[257](index=257&type=chunk)[259](index=259&type=chunk) - Long-lived assets, including goodwill and other intangibles, are tested annually for impairment using discounted cash flow models and earnings multiples[260](index=260&type=chunk)[261](index=261&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[266](index=266&type=chunk) - Income taxes involve significant judgment in forecasting taxable income and recognizing uncertain tax positions[267](index=267&type=chunk) [FORWARD-LOOKING STATEMENTS](index=77&type=section&id=FORWARD-LOOKING%20STATEMENTS) - This annual report contains forward-looking statements based on Ashland's expectations and assumptions regarding future performance[271](index=271&type=chunk) - These statements are subject to risks and uncertainties, including the success of cost elimination programs, indebtedness, and economic conditions[271](index=271&type=chunk) - Ashland undertakes no obligation to update any forward-looking statements unless legally required[273](index=273&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=78&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Ashland primarily manages market risk through foreign currency derivative instruments - Ashland uses foreign currency derivative instruments to manage exposure to foreign currency fluctuations on transactions[274](index=274&type=chunk) - These derivative contracts typically have maturities of less than twelve months, with changes in fair value recorded in SG&A expense[274](index=274&type=chunk) - The potential loss from a hypothetical **10% adverse change** in foreign currency rates would be largely offset by gains on non-functional currency transactions[274](index=274&type=chunk) - As of September 30, 2019, Ashland had no significant credit risk on open derivative contracts and no significant commodity hedging contracts[274](index=274&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=79&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, notes, and supplementary data [MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING](index=80&type=section&id=MANAGEMENT'S%20REPORT%20ON%20INTERNAL%20CONTROL%20OVER%20FINANCIAL%20REPORTING) - Management is responsible for the integrity of the Consolidated Financial Statements and maintaining adequate internal control over financial reporting[277](index=277&type=chunk) - Ashland's internal control over financial reporting is designed to provide reasonable assurance regarding financial reporting reliability[277](index=277&type=chunk) - Management concluded that Ashland maintained **effective internal control** over financial reporting as of September 30, 2019[277](index=277&type=chunk) - Ernst & Young LLP audited and expressed an **unqualified opinion** on the effectiveness of Ashland's internal control over financial reporting[277](index=277&type=chunk) [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Opinion on Internal Control Over Financial Reporting)](index=81&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM) - Ernst & Young LLP audited Ashland Global Holdings Inc.'s internal control over financial reporting as of September 30, 2019[279](index=279&type=chunk) - The firm expressed an **unqualified opinion**, stating that Ashland maintained effective internal control over financial reporting[279](index=279&type=chunk) - The audit was conducted in accordance with PCAOB standards to obtain reasonable assurance about the effectiveness of internal control[280](index=280&type=chunk) [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Opinion on Financial Statements)](index=82&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM%20(Opinion%20on%20Financial%20Statements)) - Ernst & Young LLP audited Ashland Global Holdings Inc.'s consolidated financial statements for the three years ended September 30, 2019[283](index=283&type=chunk) - The firm expressed an **unqualified opinion**, stating that the consolidated financial statements present fairly the financial position in conformity with U.S. GAAP[283](index=283&type=chunk) - The audit was conducted in accordance with PCAOB standards, including assessing risks of material misstatement[284](index=284&type=chunk) [Critical Audit Matters](index=82&type=section&id=Critical%20Audit%20Matters) - The valuation of **Environmental Remediation Reserves ($186 million)** was a critical audit matter due to inherent uncertainties in estimating costs[287](index=287&type=chunk) - The valuation of **Asbestos Litigation Reserve ($604 million)** was a critical audit matter due to the highly judgmental nature of projecting future costs[288](index=288&type=chunk) [Statements of Consolidated Comprehensive Income (Loss)](index=85&type=section&id=Statements%20of%20Consolidated%20Comprehensive%20Income%20(Loss)) Consolidated Comprehensive Income (Loss) (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Sales | $2,493 | $2,589 | $2,309 | | Gross profit | $767 | $863 | $729 | | Operating income | $166 | $102 | $49 | | Income (loss) from continuing operations before income taxes | $70 | $11 | $(196) | | Income tax expense (benefit) | $46 | $(8) | $(16) | | Income (loss) from continuing operations | $24 | $19 | $(180) | | Income from discontinued operations (net of tax) | $481 | $95 | $208 | | Net income | $505 | $114 | $28 | | Net income attributable to Ashland | $505 | $114 | $1 | | Basic earnings per share (attributable to Ashland) | $8.15 | $1.82 | $0.01 | | Diluted earnings per share (attributable to Ashland) | $8.03 | $1.79 | $0.01 | | Other comprehensive income (loss), net of tax | $(85) | $(69) | $92 | | Comprehensive income attributable to Ashland | $420 | $45 | $93 | [Consolidated Balance Sheets](index=86&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets (Millions USD) as of September 30 | Asset/Liability/Equity Category | 2019 | 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $232 | $294 | | Accounts receivable | $481 | $522 | | Inventories | $597 | $596 | | Current assets held for sale | $59 | $240 | | Total current assets | $1,433 | $1,712 | | Net property, plant and equipment | $1,577 | $1,646 | | Goodwill | $2,253 | $2,304 | | Intangibles | $1,088 | $1,185 | | Restricted investments | $310 | $312 | | Asbestos insurance receivable | $157 | $179 | | Deferred income taxes | $23 | $28 | | Other assets | $410 | $416 | | Noncurrent assets held for sale | $0 | $477 | | Total noncurrent assets | $5,818 | $6,547 | | **Total assets** | $7,251 | $8,259 | | **Liabilities and Equity** | | | | Short-term debt | $166 | $254 | | Trade and other payables | $313 | $331 | | Accrued expenses and other liabilities | $271 | $328 | | Current liabilities held for sale | $7 | $163 | | Total current liabilities | $757 | $1,076 | | Long-term debt | $1,501 | $2,275 | | Asbestos litigation reserve | $555 | $612 | | Deferred income taxes | $264 | $286 | | Employee benefit obligations | $150 | $156 | | Other liabilities | $453 | $422 | | Noncurrent liabilities held for sale | $0 | $26 | | Total noncurrent liabilities | $2,923 | $3,777 | | Common stock | $1 | $1 | | Paid-in capital | $756 | $946 | | Retained earnings | $3,224 | $2,750 | | Accumulated other comprehensive loss | $(410) | $(291) | | Total equity | $3,571 | $3,406 | | **Total liabilities and equity** | $7,251 | $8,259 | [Statements of Consolidated Equity](index=87&type=section&id=Statements%20of%20Consolidated%20Equity) - Total equity increased from **$3,406 million** in 2018 to **$3,571 million** in 2019, driven by net income of $505 million[295](index=295&type=chunk) - The adoption of new accounting pronouncements in 2019 resulted in a reclassification of **$34 million** from accumulated other comprehensive loss to retained earnings[295](index=295&type=chunk) Consolidated Equity (Millions USD) | Metric | Sep 30, 2016 | Sep 30, 2017 | Sep 30, 2018 | Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Common stock | $1 | $1 | $1 | $1 | | Paid-in capital | $923 | $931 | $946 | $756 | | Retained earnings | $2,704 | $2,696 | $2,750 | $3,224 | | Accumulated other comprehensive income (loss) | $(281) | $(222) | $(291) | $(410) | | Noncontrolling interest | $(182) | $0 | $0 | $0 | | Total | $3,165 | $3,406 | $3,406 | $3,571 | Cash Dividends Declared Per Common Share | Year | Dividend Per Share | | :--- | :--- | | 2019 | $1.05 | | 2018 | $0.95 | | 2017 | $1.23 | [Statements of Consolidated Cash Flows](index=88&type=section&id=Statements%20of%20Consolidated%20Cash%20Flows) - Operating cash flows from continuing operations were **$228 million** in 2019, $241 million in 2018, and $174 million in 2017[297](index=297&type=chunk) - Investing activities from continuing operations used **$118 million** in 2019, primarily due to additions to property, plant and equipment ($154 million)[297](index=297&type=chunk) - Financing activities from continuing operations used **$1,149 million** in 2019, largely due to repayment of long-term debt ($797 million) and repurchase of common stock ($200 million)[297](index=297&type=chunk) - Cash provided by discontinued operations was **$980 million** in 2019, mainly due to the sale of the Composites business and Marl facility[297](index=297&type=chunk) Consolidated Cash Flows (Millions USD) | Cash Flow Category | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Cash flows provided by operating activities from continuing operations | $228 | $241 | $174 | | Cash flows used by investing activities from continuing operations | $(118) | $(174) | $(798) | | Cash flows provided (used) by financing activities from continuing operations | $(1,149) | $(368) | $136 | | Cash provided (used) by discontinued operations | $980 | $28 | $(129) | | Effect of currency exchange rate changes on cash and cash equivalents | $(3) | $1 | $(5) | | Decrease in cash and cash equivalents | $(62) | $(272) | $(622) | | Cash and cash equivalents - end of year | $232 | $294 | $566 | [Notes to Consolidated Financial Statements](index=89&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [NOTE A – SIGNIFICANT ACCOUNTING POLICIES](index=89&type=section&id=NOTE%20A%20–%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - Ashland Global Holdings Inc. was reincorporated in Delaware in 2016, with financial statements prepared in accordance with U.S. GAAP[299](index=299&type=chunk) - Valvoline Inc. (separated May 2017) and the Composites business/Marl facility (sold August 2019) are classified as discontinued operations[299](index=299&type=chunk) - Significant estimates are made for environmental remediation, asbestos litigation, long-lived assets, and income taxes[300](index=300&type=chunk)[302](index=302&type=chunk) - Inventories are carried at the lower of cost or net realizable value, primarily using the weighted-average cost method[306](index=306&type=chunk) - Goodwill and other indefinite-lived intangible assets are tested for impairment annually (July 1) or when circumstances indicate[311](index=311&type=chunk) - Ashland adopted **ASC 606 (Revenue from Contracts with Customers)** on October 1, 2018, with no material impact on its financial statements[315](index=315&type=chunk)[317](index=317&type=chunk) - Asbestos-related litigation liabilities are estimated with the assistance of third-party actuarial experts[321](index=321&type=chunk)[323](index=323&type=chunk) - New accounting pronouncements include new lease guidance (**ASC 842**) effective Oct 1, 2019, expected to add **$140M-$180M** in operating lease liabilities[331](index=331&type=chunk)[332](index=332&type=chunk)[333](index=333&type=chunk) Allowance for Doubtful Accounts (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Allowance for doubtful accounts - beginning of year | $3 | $3 | $5 | | Adjustments to net income | $0 | $1 | $(1) | | Reserves utilized | $0 | $(1) | $(1) | | Allowance for doubtful accounts - end of year | $3 | $3 | $3 | Inventories (Millions USD) as of September 30 | Category | 2019 | 2018 | | :--- | :--- | :--- | | Finished products | $395 | $381 | | Raw materials, supplies and work in process | $197 | $215 | | LIFO benefit (reserve) | $5 | $0 | | Total | $597 | $596 | Tax Valuation Allowances (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Tax valuation allowances - beginning of year | $79 | $122 | $136 | | Adjustments to income tax expense (benefit) | $8 | $(5) | $27 | | Reserves utilized | $(4) | $(38) | $(41) | | Tax valuation allowances - end of year | $83 | $79 | $122 | Basic and Diluted EPS from Continuing Operations Attributable to Ashland | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Income (loss) from continuing operations, net of tax | $24 | $19 | $(180) | | Denominator for basic EPS (Weighted-average common shares outstanding) | 62 | 63 | 62 | | Denominator for diluted EPS (Adjusted weighted-average shares and assumed conversions) | 63 | 64 | 62 | | Basic EPS from continuing operations | $0.39 | $0.30 | $(2.90) | | Diluted EPS from continuing operations | $0.39 | $0.29 | $(2.90) | [NOTE B – VALVOLINE](index=98&type=section&id=NOTE%20B%20–%20VALVOLINE) - Ashland completed the separation of Valvoline Inc. into two independent, publicly traded companies, with the IPO closing on September 28, 2016[336](index=336&type=chunk) - Ashland distributed its remaining **170 million shares (83%)** of Valvoline Inc. common stock as a pro rata dividend on May 12, 2017[338](index=338&type=chunk) - The distribution was recorded at a carrying amount of Valvoline Inc.'s net assets, which was a deficit of **$187 million**[338](index=338&type=chunk) - Valvoline qualified as a discontinued operation, and its results are classified as such for all periods presented[339](index=339&type=chunk) - Ashland recognized separation costs of **$10 million in 2018** and **$95 million in 2017**[339](index=339&type=chunk) [NOTE C – ACQUISITIONS](index=100&type=section&id=NOTE%20C%20–%20ACQUISITIONS) - On May 17, 2017, Ashland acquired Pharmachem Laboratories, Inc. for **$680 million** in cash[341](index=341&type=chunk)[342](index=342&type=chunk) - Pharmachem had approximately **$300 million in annual revenues** and its operations are included in Ashland's Specialty Ingredients segment[341](index=341&type=chunk) - The acquisition included **$330 million in definite-lived intangible assets** and **$288 million in goodwill**[347](index=347&type=chunk)[348](index=348&type=chunk) - In January 2018, Ashland acquired Vornia Limited for **$12 million**, primarily for its intellectual property[353](index=353&type=chunk) Pharmachem Purchase Price Allocation (Millions USD) as of May 17, 2017 | Category | Value | | :--- | :--- | | Accounts receivable | $52 | | Inventory | $74 | | Other current assets | $4 | | Intangible assets | $330 | | Goodwill | $288 | | Property, plant and equipment | $94 | | Other noncurrent assets | $17 | | Accounts payable | $(33) | | Deferred tax - net | $(132) | | Other noncurrent liabilities | $(14) | | Total purchase price | $680 | Pharmachem Results of Operations Included in Ashland's 2017 Results (Millions USD) | Metric | 2017 | | :--- | :--- | | Sales | $104 | | Operating income | $7 | [NOTE D – DIVESTITURES](index=102&type=section&id=NOTE%20D%20–%20DIVESTITURES) - On August 30, 2019, Ashland completed the sale of its Composites business and Marl facility to INEOS Enterprises for **$1.015 billion**[354](index=354&type=chunk) - Ashland recognized a **$372 million after-tax gain** from this sale, recorded within income from discontinued operations[354](index=354&type=chunk) - Certain indirect corporate costs previously allocated to the divested businesses are now reported within continuing operations[354](index=354&type=chunk) - Ashland is pursuing options to divest several corporate assets with a net value of **$6 million** at September 30, 2019[358](index=358&type=chunk) Assets and Liabilities Held for Sale (Millions USD) as of September 30 | Category | 2019 | 2018 | | :--- | :--- | :--- | | **Current assets held for sale** | | | | Accounts receivable, net | $5 | $159 | | Inventories | $3 | $67 | | Net property, plant and equipment | $34 | $0 | | Goodwill | $14 | $0 | | Other assets | $3 | $14 | | Total current assets held for sale | $59 | $240 | | **Noncurrent assets held for sale** | | | | Net property, plant and equipment | $0 | $254 | | Goodwill | $0 | $144 | | Intangibles | $0 | $40 | | Deferred income taxes | $0 | $7 | | Other assets | $0 | $32 | | Total noncurrent assets held for sale | $0 | $477 | | **Current liabilities held for sale** | | | | Trade and other payables | $6 | $152 | | Accrued expenses and other liabilities | $1 | $11 | | Total current liabilities held for sale | $7 | $163 | | **Noncurrent liabilities held for sale** | | | | Employee benefit obligations | $0 | $23 | | Other liabilities | $0 | $3 | | Total noncurrent liabilities held for sale | $0 | $26 | [NOTE E – DISCONTINUED OPERATIONS](index=104&type=section&id=NOTE%20E%20–%20DISCONTINUED%20OPERATIONS) - Ashland has divested several businesses classified as discontinued operations, including Valvoline and the Composites business/Marl facility[363](index=363&type=chunk)[364](index=364&type=chunk) - Asbestos-related litigation, Water Technologies, and Ashland Distribution are also reported within discontinued operations[365](index=365&type=chunk) - The **$423 million pre-tax gain on disposal** in 2019 is from the sale of the Composites business and Marl facility[368](index=368&type=chunk)[369](index=369&type=chunk) - Valvoline's activity in 2019 and 2018 primarily reflects subsequent adjustments related to the Tax Matters Agreement[365](index=365&type=chunk)[371](index=371&type=chunk) Income (Loss) from Discontinued Operations (Millions USD) | Category | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Composites/Marl facility | $118 | $103 | $98 | | Valvoline | $0 | $(1) | $240 | | Asbestos-related litigation | $0 | $14 | $(31) | | Water Technologies | $(1) | $0 | $1 | | Distribution | $18 | $(11) | $(5) | | Gain on disposal of discontinued operations (Composites/Marl facility) | $423 | $0 | $0 | | Income before taxes | $558 | $105 | $303 | | Income tax benefit (expense) | $(79) | $(10) | $(95) | | Income from discontinued operations (net of taxes) | $481 | $95 | $208 | [NOTE F – RESTRUCTURING ACTIVITIES](index=107&type=section&id=NOTE%20F%20–%20RESTRUCTURING%20ACTIVITIES) - Ashland initiated a company-wide restructuring program in 2018, resulting in **$6 million expense in 2019** and **$36 million in 2018**[373](index=373&type=chunk) - Lease abandonment charges of **$7 million in 2019** and **$9 million in 2018** were incurred due to office facility exits[374](index=374&type=chunk)[375](index=375&type=chunk) - In 2018, Ashland incurred **$16 million in asset impairment charges** related to restructuring activities[376](index=376&type=chunk) - In 2019, Specialty Ingredients incurred **$47 million in restructuring charges** for a manufacturing facility cost reduction plan[377](index=377&type=chunk) Restructuring Reserves Activity (Millions USD) | Metric | Severance costs | Facility costs | Total | | :--- | :--- | :--- | :--- | | Balance as of September 30, 2018 | $36 | $7 | $43 | | Restructuring reserve | $6 | $7 | $13 | | Utilization (cash paid) | $(35) | $(7) | $(42) | | Balance as of September 30, 2019 | $7 | $7 | $14 | [NOTE G – FAIR VALUE MEASUREMENTS](index=108&type=section&id=NOTE%20G%20–%20FAIR%20VALUE%20MEASUREMENTS) - Ashland uses a three-level fair value hierarchy to prioritize inputs for fair value measurements[379](index=379&type=chunk) - Restricted investments, held in a trust for asbestos costs, are designated as available-for-sale securities and classified as Level 1[383](index=383&type=chunk) - Ashland uses foreign currency derivatives to manage currency exposure, recognizing a **$2 million gain** in 2019 compared to a **$32 million loss** in 2018[388](index=388&type=chunk)[389](index=389&type=chunk) - Long-term debt had a carrying value of **$1,513 million** and a fair value of **$1,680 million** in 2019[391](index=391&type=chunk) Financial Instruments Subject to Recurring Fair Value Measurements (Millions USD) as of September 30, 2019 | Category | Carrying value | Total fair value | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Assets** | | | | | | | Cash and cash equivalents | $232 | $232 | $232 | $0 | $0 | | Restricted investments | $334 | $334 | $334 | $0 | $0 | | Investments of captive insurance company | $5 | $5 | $5 | $0 | $0 | | Foreign currency derivatives | $2 | $2 | $0 | $2 | $0 | | Total assets at fair value | $573 | $573 | $571 | $2 | $0 | | **Liabilities** | | | | | | | Foreign currency derivatives | $2 | $2 | $0 | $2 | $0 | Restricted Investments Activity (Millions USD) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Adjusted cost, beginning of year | $288 | $297 | | Investment income | $10 | $8 | | Net unrealized gain | $29 | $54 | | Realized gain | $32 | $6 | | Settlement funds | $7 | $10 | | Disbursements | $(32) | $(33) | | Fair value, end of year | $334 | $342 | Foreign Currency Derivatives (Millions USD) as of September 30 | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Foreign currency derivative assets | $2 | $11 | | Notional contract values (assets) | $271 | $1,209 | | Foreign currency derivative liabilities | $2 | $3 | | Notional contract values (liabilities) | $168 | $755 | [NOTE H – PROPERTY, PLANT AND EQUIPMENT](index=111&type=section&id=NOTE%20H%20–%20PROPERTY%2C%20PLANT%20AND%20EQUIPMENT) - Depreciation in 2019 included **$38 million of accelerated depreciation** for a Specialty Ingredients manufacturing facility cost reduction plan[394](index=394&type=chunk) - In 2017, **$13 million of accelerated depreciation** was recorded for a Specialty Ingredients manufacturing facility closure[395](index=395&type=chunk)[396](index=396&type=chunk) Property, Plant and Equipment (Millions USD) as of September 30 | Category | 2019 | 2018 | | :--- | :--- | :--- | | Land | $148 | $148 | | Buildings | $461 | $461 | | Machinery and equipment | $2,361 | $2,363 | | Construction in progress | $195 | $200 | | Total (gross) | $3,165 | $3,172 | | Accumulated depreciation | $(1,588) | $(1,526) | | Total (net) | $1,577 | $1,646 | Depreciation and Capitalized Interest (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Depreciation | $203 | $184 | $185 | | Capitalized interest | $0 | $0 | $1 | [NOTE I – GOODWILL AND OTHER INTANGIBLES](index=112&type=section&id=NOTE%20I%20–%20GOODWILL%20AND%20OTHER%20INTANGIBLES) - Goodwill for Specialty Ingredients decreased from **$2,304 million** in 2018 to **$2,253 million** in 2019, primarily due to currency translation effects[398](index=398&type=chunk) - Amortization expense for intangible assets was **$86 million** in 2019, with estimated amortization for 2020 also at $86 million[399](index=399&type=chunk) - Ashland performed its annual goodwill and other intangibles impairment tests as of July 1, 2019, and concluded **no impairment existed**[401](index=401&type=chunk)[402](index=402&type=chunk) Goodwill by Reportable Segment (Millions USD) | Segment | Sep 30, 2017 | Sep 30, 2018 | Sep 30, 2019 | | :--- | :--- | :--- | :--- | | Specialty Ingredients | $2,315 | $2,304 | $2,253 | | Intermediates and Solvents | $0 | $0 | $0 | | Total | $2,315 | $2,304 | $2,253 | Other Intangible Assets (Millions USD) as of September 30, 2019 | Intangible asset type | Gross carrying amount | Accumulated amortization | Net carrying amount | | :--- | :--- | :--- | :--- | | **Definite-lived intangible assets** | | | | | Trademarks and trade names | $66 | $(29) | $37 | | Intellectual property | $712 | $(391) | $321 | | Customer and supplier relationships | $744 | $(292) | $452 | | Total definite-lived intangible assets | $1,522 | $(712) | $810 | | **Indefinite-lived intangible assets** | | | | | Trademarks and trade names | $278 | $0 | $278 | | Total intangible assets | $1,800 | $(712) | $1,088 | [NOTE J – DEBT](index=114&type=section&id=NOTE%20J%20–%20DEBT) - Total debt decreased to **$1,667 million** in 2019 from $2,529 million in 2018[404](index=404&type=chunk) - The 2017 Credit Agreement provided facilities to finance the Pharmachem acquisition and refinance existing debt[405](index=405&type=chunk)[407](index=407&type=chunk) - In 2019, Ashland repaid the remaining principal balances of the TLA Facility (**$195M**) and TLB Facility (**$593M**) using proceeds from the Composites/Marl facility sale[408](index=408&type=chunk)[409](index=409&type=chunk)[411](index=411&type=chunk) - Ashland repatriated approximately **$900 million** in cash in 2019 primarily to repay existing debt[409](index=409&type=chunk) - Ashland operates two accounts receivable securitization facilities with total borrowings of **$144 million** as of Sep 30, 2019[412](index=412&type=chunk)[414](index=414&type=chunk) - Ashland was in compliance with all debt agreement covenants as of September 30, 2019[418](index=418&type=chunk) Ashland's Current and Long-Term Debt (Millions USD) as of September 30 | Debt Type | 2019 | 2018 | | :--- | :--- | :--- | | 4.750% notes, due 2022 | $1,080 | $1,083 | | Term loan B, due 2024 | $0 | $593 | | 6.875% notes, due 2043 | $374 | $376 | | Term loan A, due 2022 | $0 | $195 | | Accounts receivable securitizations | $144 | $195 | | 6.50% junior subordinated notes, due 2029 | $54 | $52 | | Revolving credit facility | $0 | $25 | | Medium-term notes, due 2019, interest of 9.35% | $0 | $5 | | Other | $15 | $5 | | Total debt | $1,667 | $2,529 | | Short-term debt (includes current portion of long-term debt) | $(166) | $(254) | | Long-term debt (less current portion and debt issuance cost discounts) | $1,501 | $2,275 | Net Interest and Other Expense (Income) (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Interest expense | $114 | $116 | $227 | | Interest income | $(2) | $(4) | $(4) | | Investment securities income | $(17) | $(14) | $(11) | | Other financing costs | $4 | $4 | $17 | | Total | $99 | $102 | $229 | [NOTE K – OTHER NONCURRENT ASSETS AND LIABILITIES](index=119&type=section&id=NOTE%20K%20–%20OTHER%20NONCURRENT%20ASSETS%20AND%20LIABILITIES) - Deferred compensation investments generated gains of **$7 million** in 2019, **$10 million** in 2018, and **$11 million** in 2017[425](index=425&type=chunk) Components of Other Noncurrent Assets (Millions USD) as of September 30 | Category | 2019 | 2018 | | :--- | :--- | :--- | | Deferred compensation investments | $170 | $165 | | Tax and tax indemnity receivables | $68 | $74 | | Life insurance policies | $56 | $52 | | Manufacturing catalyst supplies | $38 | $35 | | Defined benefit plan assets | $33 | $35 | | Equity and other unconsolidated investments | $6 | $8 | | Land use rights | $6 | $11 | | Environmental insurance receivables | $12 | $11 | | Debt issuance costs | $4 | $6 | | Other | $17 | $19 | | Total | $410 | $416 | Components of Other Noncurrent Liabilities (Millions USD) as of September 30 | Category | 2019 | 2018 | | :--- | :--- | :--- | | Tax liabilities | $220 | $176 | | Environmental remediation reserves | $143 | $147 | | Deferred compensation | $42 | $47 | | Other | $48 | $52 | | Total | $453 | $422 | [NOTE L – LEASE COMMITMENTS](index=120&type=section&id=NOTE%20L%20–%20LEASE%20COMMITMENTS) - Ashland leases office buildings, transportation equipment, warehouses, and other facilities[429](index=429&type=chunk) Future Minimum Rental Payments (Millions USD) as of September 30, 2019 | Year | Amount | | :--- | :--- | | 2020 | $28 | | 2021 | $25 | | 2022 | $33 | | 2023 | $13 | | 2024 | $11 | | 2025 and later | $103 | Rental Expense Under Operating Leases (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Minimum rentals | $42 | $46 | $40 | | Sublease rental income | $(1) | $(1) | $(2) | | Total | $41 | $45 | $38 | [NOTE M – INCOME TAXES](index=120&type=section&id=NOTE%20M%20–%20INCOME%20TAXES) - The Tax Cuts and Jobs Act of 2017 resulted in net unfavorable tax adjustments of **$29 million** in 2019 related to the transition tax[430](index=430&type=chunk)[431](index=431&type=chunk) - Ashland has elected to treat taxes due on future Global Intangible Low-Taxed Income (GILTI) as a current period expense[435](index=435&type=chunk) - Ashland had **$165 million of unrecognized tax benefits** at September 30, 2019, with $155 million affecting the tax rate[443](index=443&type=chunk) Provision for Income Taxes Related to Continuing Operations (Millions USD) | Category | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Current** | | | | | Federal | $(2) | $20 | $(26) | | State | $(7) | $(2) | $(1) | | Foreign | $35 | $74 | $37 | | Total Current | $26 | $92 | $10 | | **Deferred** | | | | | Deferred | $20 | $(100) | $(26) | | Income tax expense (benefit) | $46 | $(8) | $(16) | Deferred Tax Assets and Liabilities (Millions USD) as of September 30 | Category | 2019 | 2018 | | :--- | :--- | :--- | | **Deferred tax assets** | | | | Foreign net operating loss carryforwards | $36 | $39 | | Employee benefit obligations | $29 | $28 | | Environmental, self-insurance and litigation reserves | $114 | $119 | | State net operating loss carryforwards | $38 | $48 | | Compensation accruals | $28 | $31 | | Credit carryforwards | $10 | $10 | | Other items | $38 | $32 | | Valuation allowances | $(83) | $(79) | | Total deferred tax assets | $210 | $228 | | **Deferred tax liabilities** | | | | Goodwill and other intangibles | $243 | $269 | | Property, plant and equipment | $207 | $217 | | Unremitted earnings | $1 | $0 | | Total deferred tax liabilities | $451 | $486 | | Net deferred tax liability | $(241) | $(258) | Reconciliation of Statutory Federal Income Tax to Provision for Income Taxes (Millions USD) | Category | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Income taxes computed at U.S. statutory rate | $15 | $3 | $(69) | | Tax reform | $29 | $44 | $0 | | Uncertain tax positions | $10 | $(13) | $12 | | Foreign dividends, deemed inclusions and other restructuring | $11 | $48 | $125 | | Foreign tax credits | $(17) | $(54) | $(29) | | Valuation allowance changes | $14 | $(2) | $(3) | | Research and development credits | $(6) | $(5) | $(6) | | State taxes | $(5) | $(3) | $(16) | | International rate differential | $(30) | $(50) | $(57) | | Other items | $25 | $24 | $27 | | Income tax expense (benefit) | $46 | $(8) | $(16) | Changes in Unrecognized Tax Benefits (Millions USD) | Metric | Amount | | :--- | :--- | | Balance at September 30, 2017 | $194 | | Increases related to positions taken on items from prior years | $5 | | Decreases related to positions taken on items from prior years | $(40) | | Increases related to positions taken in the current year | $14 | | Lapse of statute of limitations | $(5) | | Settlement of uncertain tax positions with tax authorities | $(4) | | Balance at September 30, 2018 | $164 | | Increases related to positions taken on items from prior years | $1 | | Decreases related to positions taken on items from prior years | $(5) | | Increases related to positions taken in the current year | $21 | | Lapse of statute of limitations | $(10) | | Disposition of Composites and Marl facility | $(6) | | Balance at September 30, 2019 | $165 | [NOTE N – EMPLOYEE BENEFIT PLANS](index=124&type=section&id=NOTE%20N%20–%20EMPLOYEE%20BENEFIT%20PLANS) - Ashland sponsors several defined benefit pension plans for international and certain U.S. union employees[446](index=446&type=chunk) - In 2019, Ashland settled a non-U.S. pension plan, resulting in an **$18 million curtailment gain**[448](index=448&type=chunk)[449](index=449&type=chunk) - Ashland contributed **$1 million** to U.S. pension plans and **$4 million** to non-U.S. pension plans in 2019[464](index=464&type=chunk) - Company contributions to savings plans for eligible employees amounted to **$26 million** in 2019[466](index=466&type=chunk) Components of Net Periodic Benefit Costs (Income) (Millions USD) | Metric | 2019 Pension | 2018 Pension | 2017 Pension | 2019 Other Postretirement | 2018 Other Postretirement | 2017 Other Postretirement | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Service cost | $6 | $9 | $8 | $1 | $1 | $1 | | Interest cost | $10 | $10 | $8 | $2 | $1 | $2 | | Curtailment, settlement and other | $(18) | $0 | $0 | $0 | $0 | $0 | | Expected return on plan assets | $(10) | $(12) | $(12) | $0 | $0 | $0 | | Amortization of prior service credit | $0 | $0 | $0 | $0 | $0 | $0 | | Actuarial (gain) loss | $18 | $(14) | $2 | $(7) | $0 | $6 | | Total | $6 | $(7) | $6 | $(4) | $2 | $9 | Weighted-Average Plan Assumptions for Net Periodic Benefit Costs | Assumption | 2019 Pension | 2018 Pension | 2017 Pension | 2019 Other Postretirement | 2018 Other Postretirement | 2017 Other Postretirement | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Discount rate for service cost | 2.40% | 2.54% | 1.93% | 4.37% | 3.93% | 3.93% | | Discount rate for interest cost | 3.02% | 2.55% | 2.25% | 3.91% | 3.13% | 2.86% | | Rate of compensation increase | 2.52% | 2.53% | 2.81% | N/A | N/A | N/A | | Expected long-term rate of return on plan assets | 3.44% | 3.36% | 3.44% | N/A | N/A | N/A | Pension and Other Postretirement Benefit Obligations and Funded Status (Millions USD) as of September 30 | Metric | 2019 Pension | 2018 Pension | 2019 Other Postretirement | 2018 Other Postretirement | | :--- | :--- | :--- | :--- | :--- | | Benefit obligations at October 1 | $404 | $428 | $58 | $62 | | Benefit obligations at September 30 | $405 | $404 | $52 | $58 | | Value of plan assets at October 1 | $341 | $349 | $0 | $0 | | Value of plan assets at September 30 | $337 | $341 | $0 | $0 | | Unfunded status of the plans | $(68) | $(63) | $(52) | $(58) | | Noncurrent benefit assets | $33 | $35 | $0 | $0 | | Current benefit liabilities | $(3) | $(3) | $(3) | $(4) | | Noncurrent benefit liabilities | $(98) | $(95) | $(49) | $(54) | | Net amount recognized | $(68) | $(63) | $(52) | $(58) | Pension Plan Assets by Investment Category (Millions USD) as of September 30, 2019 | Investment Category | Total fair value | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $5 | $5 | $0 | $0 | | U.S. Government securities | $29 | $0 | $29 | $0 | | Non-U.S. Government securities | $73 | $0 | $73 | $0 | | Corporate debt instruments | $145 | $0 | $145 | $0 | | Listed real assets | $11 | $0 | $11 | $0 | | Asset-backed securities | $22 | $0 | $22 | $0 | | Corporate stocks | $29 | $0 | $29 | $0 | | Insurance contracts | $23 | $0 | $23 | $0 | | Total assets at fair value | $337 | $5 | $332 | $0 | Weighted-Average Asset Allocations for U.S. and Non-U.S. Plans | Plan assets allocation | Target | Actual at September 30, 2019 | Actual at September 30, 2018 | | :--- | :--- | :--- | :--- | | Equity securities | 5 - 45% | 9% | 9% | | Fixed income securities | 55 - 95% | 88% | 88% | | Other | 0 - 5% | 3% | 3% | | Total | | 100% | 100% | Projected Benefit Payments (Millions USD) | Year | Pension benefits | Other postretirement benefits | | :--- | :--- | :--- | | 2020 | $18 | $3 | | 2021 | $18 | $3 | | 2022 | $18 | $3 | | 2023 | $19 | $4 | | 2024 | $19 | $4 | | 2025 - 2029 | $99 | $18 | [NOTE O – LITIGATION, CLAIMS AND CONTINGENCIES](index=129&type=section&id=NOTE%20O%20–%20LITIGATION%2C%20CLAIMS%20AND%20CONTINGENCIES) - Ashland and Hercules face asbestos-related litigation, with reserve estimates updated annually by third-party actuarial experts[467](index=467&type=chunk) - Ashland's asbestos-related liability reserves totaled **$352 million** at September 30, 2019[471](index=471&type=chunk) - Ashland's receivable for asbestos insurance recoveries was **$123 million** at September 30, 2019[475](index=475&type=chunk) - Hercules' asbestos-related liability reserves totaled **$252 million** at September 30, 2019[479](index=479&type=chunk) - Hercules' receivable from insurers for asbestos claims was **$49 million** at September 30, 2019[481](index=481&type=chunk) - Projecting future asbestos costs is highly uncertain, with total future costs estimated to range up to **$550 million** for Ashland-related and **$390 million** for Hercules-related litigation[482](index=482&type=chunk)[484](index=484&type=chunk) - Environmental remediation reserves were **$186 million** at September 30, 2019[485](index=485&type=chunk)[486](index=486&type=chunk) - Ashland believes adequate reserves have been recorded for other pending legal proceedings and claims[490](index=490&type=chunk) Ashland Asbestos Claims Activity (Thousands) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Open claims - beginning of year | 53 | 54 | 57 | | New claims filed | 2 | 2 | 2 | | Claims settled | (1) | (1) | (1) | | Claims dismissed | (1) | (2) | (4) | | Open claims - end of year | 53 | 53 | 54 | Ashland Asbestos Reserve Activity (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Asbestos reserve - beginning of year | $380 | $419 | $415 | | Reserve adjustment | $1 | $(8) | $36 | | Amounts paid | $(29) | $(31) | $(32) | | Asbestos reserve - end of year | $352 | $380 | $419 | Hercules Asbestos Claims Activity (Thousands) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Open claims - beginning of year | 13 | 12 | 15 | | New claims filed | 1 | 2 | 1 | | Claims dismissed | (1) | (1) | (4) | | Open claims - end of year | 13 | 13 | 12 | Environmental Remediation Expense (Millions USD) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Environmental expense | $

Ashland Global Holdings Inc. (NYSE:ASH) Q4 2019 Earnings Conference Call November 19, 2019 9:00 AM ET Company Participants Seth Mrozek - Director IR Bill Wulfsohn - Chairman & CEO Guillermo Novo - Director, Incoming Chairman & CEO Kevin Willis - SVP & CFO Conference Call Participants David Begleiter - Deutsche Bank Christopher Parkinson - Credit Suisse Dan Rizzo - Jefferies Mike Sison - KeyBanc John Roberts - UBS Mike Harrison - Seaport Global Securities Operator Ladies and gentlemen, thank you for standing ...