8145 Blazer Drive

Wilmington, Delaware 19808

Telephone Number ~~(859) 815-3333~~(302) 995-3000

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

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

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

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

☐

Indicate by check mark whether the Registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit ~~and post~~ such files). Yes þ ☑No o

☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check One):~~



Large Accelerated Filerþ	☑			Accelerated Filero		☐
Non-Accelerated Filero	☐			Smaller Reporting Companyo		☐
		~~(Do not check if a smaller reporting company.)~~	Emerging Growth Companyo		☐

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

☐

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

☑

At ~~December 31, 2017,~~June 30, 2020, there were ~~62,228,812~~60,470,499 shares of Registrant’s Common Stock outstanding.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

	Three months ended						Nine months ended
	June 30						June 30
(In millions except per share data - unaudited)	2020			2019			2020			2019
Sales	$	574		$	641		$	1,717		$	1,884
Cost of sales		378			434			1,171			1,327
Gross profit		196			207			546			557

Selling, general and administrative expense		113			128			315			364
Research and development expense		14			17			48			51
Intangibles amortization expense		21			22			63			65
Equity and other income (loss)		—			3			7			3
Goodwill impairment - Note G		—			—			530			—
Operating income (loss)		48			43			(403	)		80

Net interest and other expense (income)		(14	)		21			113			73
Other net periodic benefit income (expense)		—			—			1			17
Net income (loss) on divestitures		—			—			3			(3	)
Income (loss) from continuing operations before income taxes		62			22			(512	)		21
Income tax expense (benefit)		12			(1	)		(21	)		24
Income (loss) from continuing operations		50			23			(491	)		(3	)
Income (loss) from discontinued operations (net of income taxes)		(13	)		43			(22	)		97
Net income (loss)	$	37		$	66		$	(513	)	$	94

PER SHARE DATA
Basic earnings per share - Note M
Income (loss) from continuing operations	$	0.82		$	0.38		$	(8.11	)	$	(0.05	)
Income (loss) from discontinued operations		(0.21	)		0.68			(0.36	)		1.55
Net income (loss)	$	0.61		$	1.06		$	(8.47	)	$	1.50

Diluted earnings per share - Note M
Income (loss) from continuing operations	$	0.81		$	0.37		$	(8.11	)	$	(0.05	)
Income (loss) from discontinued operations		(0.20	)		0.68			(0.36	)		1.55
Net income (loss)	$	0.61		$	1.05		$	(8.47	)	$	1.50

COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$	37		$	66		$	(513	)	$	94
Other comprehensive income (loss), net of tax
Unrealized translation gain (loss)		7			3			(7	)		(37	)
Pension and postretirement obligation adjustment		—			—			—			(6	)
Other comprehensive income (loss)		7			3			(7	)		(43	)
Comprehensive income (loss)	$	44		$	69		$	(520	)	$	51

Three months ended
December 31
(In millions except per share data - unaudited) 2017
2016
Sales $ 842
$ 704
Cost of sales 613
515
Gross profit 229
189

Selling, general and administrative expense 171
157
Research and development expense 21
20
Equity and other income 2
3
Operating income 39
15

Net interest and other financing expense 31
122
Other net periodic benefit income —
2
Net loss on divestitures 1
1
Income (loss) from continuing operations before income taxes 7
(106 )
Income tax expense (benefit) - Note I 14
(41 )
Loss from continuing operations (7 ) (65 )
Income from discontinued operations (net of tax) - Note D

3
75
Net income (loss) (4 ) 10
Net income attributable to noncontrolling interest (a)
—
11
Net loss attributable to Ashland $ (4 ) $ (1 )

PER SHARE DATA
Basic earnings per share - Note L

Loss from continuing operations
$ (0.12 ) $ (1.05 )
Income from discontinued operations attributable to Ashland 0.05
1.04
Net loss attributable to Ashland $ (0.07 ) $ (0.01 )

Diluted earnings per share - Note L

Loss from continuing operations

$ (0.12 ) $ (1.05 )
Income from discontinued operations attributable to Ashland 0.05
1.04
Net loss attributable to Ashland $ (0.07 ) $ (0.01 )

COMPREHENSIVE INCOME (LOSS)
Net income (loss) $ (4 ) $ 10
Other comprehensive income (loss), net of tax - Note M
Unrealized translation gain (loss) 3
(146 )
Net change in available-for-sale securities 8
—
Pension and postretirement obligation adjustment —
(1 )
Other comprehensive income (loss) 11
(147 )
Comprehensive income (loss) $ 7
$ (137 )
Comprehensive income attributable to noncontrolling interest —
10
Comprehensive income (loss) attributable to Ashland $ 7
$ (147 )


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

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions - unaudited)	June 30 2020		September 30 2019
ASSETS
Current assets
Cash and cash equivalents	$	416	$	232
Accounts receivable (a)		455		481
Inventories - Note F		617		597
Other assets		121		64
Current assets held for sale - Note B		61		59
Total current assets		1,670		1,433
Noncurrent assets
Property, plant and equipment
Cost		3,203		3,165
Accumulated depreciation		1,649		1,588
Net property, plant and equipment		1,554		1,577
Goodwill - Note G		1,734		2,253
Intangibles - Note G		1,026		1,088
Operating lease assets, net - Note I		140		—
Restricted investments - Note E		297		310
Asbestos insurance receivable - Note L		138		157
Deferred income taxes		24		23
Other assets		403		410
Total noncurrent assets		5,316		5,818
Total assets	$	6,986	$	7,251

LIABILITIES AND EQUITY
Current liabilities
Short-term debt - Note H	$	446	$	166
Trade and other payables		225		313
Accrued expenses and other liabilities		238		271
Current operating lease obligations - Note I		23		—
Current liabilities held for sale - Note B		5		7
Total current liabilities		937		757
Noncurrent liabilities
Long-term debt - Note H		1,547		1,501
Asbestos litigation reserve - Note L		525		555
Deferred income taxes		248		264
Employee benefit obligations - Note K		152		150
Operating lease obligations - Note I		126		—
Other liabilities		438		453
Total noncurrent liabilities		3,036		2,923
Commitments and contingencies - Note L
Stockholders’ equity		3,013		3,571

Total liabilities and stockholders' equity	$	6,986	$	7,251


(a)

December 31
September 30
(In millions - unaudited) 2017
2017

ASSETS
Current assets
Cash and cash equivalents $ 601
$ 566
Accounts receivable (a)
597
612
Inventories - Note F 674
634
Other assets 92
91
Total current assets 1,964
1,903
Noncurrent assets

Property, plant and equipment
Cost 3,795
3,762
Accumulated depreciation 1,850
1,792
Net property, plant and equipment 1,945
1,970
Goodwill - Note G 2,475
2,465
Intangibles - Note G 1,298
1,319
Restricted investments - Note E 315
302
Asbestos insurance receivable - Note K 205
209
Deferred and other income taxes 28
28
Other assets 425
422
Total noncurrent assets 6,691
6,715
Total assets $ 8,655
$ 8,618

LIABILITIES AND EQUITY

Current liabilities

Short-term debt - Note H $ 355
$ 235
Trade and other payables 382
409
Accrued expenses and other liabilities 266
324
Total current liabilities 1,003
968
Noncurrent liabilities

Long-term debt - Note H 2,584
2,584
Asbestos litigation reserve - Note K 676
694
Deferred and other income taxes 390
375
Employee benefit obligations - Note J 194
191
Other liabilities 409
400
Total noncurrent liabilities 4,253
4,244
Commitments and contingencies - Note K

Stockholders' equity 3,399
3,406

Total liabilities and stockholders' equity $ 8,655
$ 8,618


~~(a)~~	Accounts receivable includes an allowance for doubtful accounts of $9$2 million and $3 million at ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017~~. 2019, respectively.

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CONSOLIDATED EQUITY

								Accumulated
								other
	Common		Paid-in		Retained			comprehensive
(In millions - unaudited)	stock		capital		earnings			income (loss) (a)			Total
BALANCE AT SEPTEMBER 30, 2019	$	1	$	756	$	3,224		$	(410	)	$	3,571
Total comprehensive income (loss)
Net Income (loss)						(513	)					(513	)
Other comprehensive income									(7	)		(7	)
Regular dividends, $0.825 per common share						(50	)					(50	)
Common shares issued under stock incentive and other plans (b)				12								12
BALANCE AT JUNE 30, 2020	$	1	$	768	$	2,661		$	(417	)	$	3,013


(a)

(In millions - unaudited)
Common
stock

Paid-in
capital

Retained
earnings

Accumulated
other
comprehensive
income (loss)

(a) Total
BALANCE AT SEPTEMBER 30, 2017 $ 1
$ 931
$ 2,696
$ (222 )
$ 3,406
Total comprehensive income (loss)
Net loss
(4 )
(4 )
Other comprehensive income 11
11
Regular dividends, $0.225 per common share

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

—

—
BALANCE AT DECEMBER 31, 2017 $ 1
$ 931
$ 2,678
$ (211 )
$ 3,399

~~(a)~~

At ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017,~~2019, the after-tax accumulated other comprehensive loss ~~attributable to Ashland~~ of ~~$211~~$417 million and ~~$222~~$410 million, respectively, was each comprised of net unrealized translation losses of ~~$243~~$415 million and ~~$246 million, respectively, net unrealized gains on available-for-sale securities of $29 million and $21~~$408 million, respectively, and unrecognized prior service ~~credits as a result~~costs of ~~certain employee benefit plan amendments of $3~~$2 million ~~for each period.~~

each.

(b)
~~(b)~~	Common shares issued were ~~111,400~~293,485 for the ~~three~~nine months ended ~~December 31, 2017~~. June 30, 2020.

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

	Nine months ended
	June 30
(In millions - unaudited)	2020			2019
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net income (loss)	$	(513	)	$	94
Income (loss) from discontinued operations (net of income taxes)		22			(97	)
Adjustments to reconcile income from continuing operations to
cash flows from operating activities:
Depreciation and amortization		183			225
Original issue discount and debt issuance costs amortization		14			6
Deferred income taxes		(30	)		1
Distributions to equity affiliates		(1	)		—
Stock based compensation expense		11			17
(Income) loss from restricted investments		(17	)		(10	)
Excess tax benefit on stock based compensation		1			3
Loss on early retirement of debt		59			—
Impairments		530			8
Pension contributions		(5	)		(4	)
Gain on pension and other postretirement plan remeasurements		—			(18	)
Change in operating assets and liabilities (a)		(101	)		(132	)
Total cash flows provided by operating activities from continuing operations		153			93
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Additions to property, plant and equipment		(94	)		(103	)
Proceeds from disposal of property, plant and equipment		1			4
Purchase of operations		—			(2	)
Proceeds from settlement of Company-owned life insurance contracts		7			1
Company-owned life insurance payments		(2	)		(1	)
Net purchase of funds restricted for specific transactions		(3	)		(2	)
Reimbursement from restricted investments		26			25
Proceeds from sales of securities		16			156
Purchase of securities		(16	)		(156	)
Proceeds from the settlement of derivative instruments		—			4
Payments for the settlement of derivative instruments		—			(2	)
Total cash flows used by investing activities from continuing operations		(65	)		(76	)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Proceeds from issuance of long-term debt		804			—
Repayment of long-term debt		(767	)		(10	)
Premium on long-term debt repayment		(59	)		—
Proceeds from (repayment of) short-term debt		281			83
Debt issuance costs		(11	)		—
Cash dividends paid		(50	)		(48	)
Repurchase of common stock		—			(200	)
Stock based compensation employee withholding taxes paid in cash		(6	)		(8	)
Total cash flows provided (used) by financing activities from continuing operations		192			(183	)
CASH PROVIDED (USED) BY CONTINUING OPERATIONS		280			(166	)
Cash provided (used) by discontinued operations
Operating cash flows		(98	)		—
Investing cash flows		1			6
Total cash provided (used) by discontinued operations		(97	)		6
Effect of currency exchange rate changes on cash and cash equivalents		1			(2	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		184			(162	)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		232			294
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	416		$	132


(a)

Three months ended
December 31
(In millions - unaudited) 2017
2016
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES FROM
CONTINUING OPERATIONS
Net income (loss) $ (4 ) $ 10
Income from discontinued operations (net of tax) (3 ) (75 )
Adjustments to reconcile income from continuing operations to

cash flows from operating activities

Depreciation and amortization 79
68
Original issue discount and debt issuance cost amortization 2
94
Deferred and other income taxes 8
2
Stock based compensation expense 7
5
Gain on early retirement of debt —
(3 )
Realized gain and investment income on available-for-sale securities (3 ) (3 )
Net loss on divestitures 1
1
Pension contributions (2 ) (1 )
Gain on post-employment plan remeasurement —
(2 )
Change in operating assets and liabilities (a)
(109 ) (156 )
Total cash flows used by operating activities from continuing operations (24 ) (60 )
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES FROM

CONTINUING OPERATIONS

Additions to property, plant and equipment (24 ) (33 )
Proceeds from disposal of property, plant and equipment 1
—
Proceeds from sale of operations 1
—
Net purchase of funds restricted for specific transactions (5 ) (2 )
Reimbursements from restricted investments 5
—
Proceeds from sales of available-for-sale securities 5
—
Purchases of available-for-sale securities (5 ) —
Proceeds from the settlement of derivative instruments —
4
Payments for the settlement of derivative instruments (2 ) —
Total cash flows used by investing activities from continuing operations (24 ) (31 )
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES FROM

CONTINUING OPERATIONS

Repayment of long-term debt (2 ) (239 )
Premium on long-term debt repayment —
(5 )
Proceeds (repayment) from short-term debt 120
(154 )
Debt issuance costs —
(4 )
Cash dividends paid (14 ) (24 )
Stock based compensation employee withholding taxes paid in cash (5 ) (8 )
Total cash flows provided (used) by financing activities from continuing operations 99
(434 )
CASH USED BY CONTINUING OPERATIONS 51
(525 )
Cash provided (used) by discontinued operations

Operating cash flows, net (16 ) 70
Investing cash flows, net —
(10 )
Financing cash flows, net —
(10 )
Total cash provided (used) by discontinued operations (16 ) 50
Effect of currency exchange rate changes on cash and cash equivalents —
(9 )
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 35
(484 )
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 566
1,017
Change in cash and cash equivalents held by Valvoline —
(65 )
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 601
$ 468


~~(a)~~	Excludes changes resulting from operations acquired, sold or ~~sold.~~held for sale.

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A–SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and Securities and Exchange Commission (SEC) regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Additionally, certain prior period ~~data, primarily related to discontinued operations, have~~information has been reclassified inwithin the Condensed Consolidated Financial Statements and accompanying notes to conform to ~~the~~ current period ~~presentation,~~presentation. These items include the reclassification of Intangibles Amortization Expense as ~~further described~~a separate component within operating expenses and changes in ~~this section.~~Ashland’s reportable segment and reporting unit structure. These statements omit certain information and footnote disclosures required for complete annual financial statements and, therefore, should be read in conjunction with ~~Ashland’s~~Ashland Global Holdings Inc. and consolidated subsidiaries (Ashland) Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017~~.2019. Results of operations for the period ended ~~December 31, 2017~~June 30, 2020 are not necessarily indicative of the expected results for the remaining ~~quarters~~quarter in the fiscal year.

All amounts are presented in millions except per-share amounts.

The Intangibles Amortization Expense presented within the Statement of Consolidated Comprehensive Income (Loss) includes amortization expense related to trademarks and trade names, intellectual property, customer and supplier relationships and land use rights. Intangible assets classified as finite are amortized on a straight-line basis over their estimated useful lives.

On ~~May 12, 2017,~~August 30, 2019, Ashland completed the ~~distribution~~sale of its ~~remaining 170 million shares of common stock of Valvoline Inc. which represented approximately 83% of the total outstanding shares of Valvoline Inc.'s common stock.~~Composites business (excluding Ashland’s maleic anhydride business (Maleic business)) and its butanediol facility in Marl, Germany (Marl facility). This ~~separation from Valvoline~~disposal group represented a strategic shift in ~~Ashland's~~Ashland’s business and qualified as a discontinued operation. Accordingly, ~~Valvoline's~~Composites (including the Maleic business) and the Marl facility assets, liabilities, operating results and cash flows for ~~the three months ended December 31, 2016~~all periods presented have been classified as discontinued operations within the Condensed Consolidated Financial Statements. See ~~Note~~Notes B and C for additional information on this divestiture.

During the ~~separation~~second quarter of ~~Valvoline Inc.~~

~~Subsequent~~fiscal 2020, Ashland changed the manner in which it manages the business, moving from a functionally led to ~~completing~~a business led organization. This change recognizes that Ashland has a diverse portfolio of businesses with different value propositions for the ~~separation from Valvoline Inc., Ashland's operations are managed within~~markets Ashland serves. The organizational change allows Ashland to align its business models, resources and cost structure to the ~~following three~~specific needs of each business and enable greater ownership and accountability for both short- and long- term performance. Ashland has realigned its segment reporting structure commensurate with this organizational change.

As a result, Ashland’s 5 reportable ~~segments:~~segments include the consumer specialty businesses: Life Sciences and Personal Care & Household; the industrial specialty businesses: Specialty ~~Ingredients, Composites~~Additives and Performance Adhesives; and Intermediates and Solvents.

Corporate includes corporate governance activities and certain legacy matters. For additional information, see Note Q.

Use of estimates, risks and uncertainties

Ashland’s results are affected by domestic and international economic, political, legislative, regulatory and legal actions. Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies and changes in the prices of certain key raw materials, can have a significant effect on operations. While Ashland maintains reserves for anticipated liabilities and carries various levels of insurance, Ashland could be affected by civil, criminal, regulatory or administrative actions, claims or proceedings relating to asbestos, environmental remediation or other matters.

New accounting ~~standards~~

pronouncements

A description of new U.S. GAAP accounting standards issued or adopted during the current year is required in interim financial reporting. A detailed listing of new accounting standards relevant to Ashland is included in the Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2019. The following standards relevant to Ashland were either issued or adopted in the current ~~period,~~fiscal year or will become effective in a subsequent period.

Leases

Effective October 1, 2019, Ashland adopted new accounting guidance related to lease transactions. The adoption of the new lease guidance resulted in the recognition of right-of-use assets and operating lease liabilities of $174 million as of October 1, 2019. The adoption did not have a material impact on Ashland’s results of operations, cash flows or debt covenants. Results for reporting periods beginning after October 1, 2019 are presented under the new accounting guidance for leases, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting treatment. Ashland elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed it to carry forward the historical lease classification.

Ashland determines if an arrangement contains a lease at inception. Ashland recognizes right-of-use assets and liabilities associated with leases based on the present value of the future minimum lease payments over the lease term at the later of the commencement date of the lease or the October 1, 2019 implementation date. Ashland uses its incremental borrowing rate at the recognition date in determining the present value of future payments for leases that do not have a readily determinable implicit rate. Lease terms reflect options to extend or terminate the lease when it is reasonably certain that the option will be exercised. For leases that include residual value guarantees or payments for terminating the lease, Ashland includes these costs in the lease liability when it is probable that they will be incurred. Right-of-use assets and obligations for short-term leases (leases with an initial term of 12 months or less) are not recognized in the Condensed Consolidated Balance Sheet. Lease expense for short-term leases is recognized on a straight-line basis over the lease term. When contracts contain lease and non-lease components, the Company generally accounted for both components as a single lease component.

For additional information, see Note I.

Other accounting pronouncements

In ~~May 2014,~~February 2018, the FASB issued ~~accounting~~ guidance ~~outlining a single comprehensive five step model for~~which permits entities to ~~use~~reclassify tax effects stranded in ~~accounting for revenue arising from contracts with customers (ASC 606 Revenue from Contracts with Customers). The new~~accumulated other comprehensive income (AOCI) as a result of U.S. tax reform legislation to retained earnings. Additionally, this guidance ~~supersedes most current revenue recognition guidance, in an~~

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE A~~–~~SIGNIFICANT ACCOUNTING POLICIES (continued)~~

~~effort to converge the revenue recognition principles within U.S. GAAP. This new guidance also~~ requires entities to disclose ~~certain quantitative~~whether they made an election to reclassify the tax effects and ~~qualitative information regarding the nature, amount, timing and uncertainty of qualifying revenue and cash flows arising~~to disclose their accounting policy for releasing income tax effects from contracts with customers. Entities have the option of using a full retrospective or a modified retrospective approach to adopt the new guidance. Ashland has identified an implementation team that is currently evaluating the impact of the new standard on the Condensed Consolidated Financial Statements and the adoption method options available as well as the overall impact the new guidance will have on the organization. The assessment process consists of categorizing Ashland’s revenue streams and reviewing the current internal accounting policies and practices to determine potential differences that would result from applying the requirements of the new standard to revenue contracts. Additional discussions and meetings with each revenue stream team have occurred to solicit input, identify potential impacts and appropriate changes to Ashland’s business processes, systems and controls to support the revenue recognition and disclosure requirements under the new standard. Based on various preliminary assessments conducted to date, Ashland has identified agreements with distributors and customers that are subject to rebate and incentive programs that could contain elements of material rights and/or variable consideration. Ashland does not currently believe that these elements would result in a material change to how revenue would be recognized for these agreements. Ashland currently intends to adopt this standard using the modified retrospective approach and does not believe the impact will be material to the Condensed Consolidated Financial Statements but does expect there to be significant additional disclosures within the Notes to Condensed Consolidated Financial Statements.AOCI. This guidance ~~becomes~~became effective for Ashland on October 1, ~~2018.~~

2019. Ashland did not elect to reclassify the disproportionate amount in AOCI to retained earnings. Ashland estimated the impact of this guidance to be approximately $3 million. Ashland’s accounting policy for releasing income tax effects from AOCI is under the individual units of account method for items sold, terminated or extinguished from AOCI.

In ~~March~~August 2017, the FASB issued accounting guidance ~~that will change how employers who sponsor defined benefit pension and/or postretirement benefit plans present~~amending the ~~net periodic benefit cost in the Statement of Consolidated Comprehensive Income (Loss).~~existing hedge accounting model to simplify various hedge documentation requirements while also expanding hedging abilities for certain nonfinancial and financial risk components. This guidance requires employers to present the service cost component of net periodic benefit cost in the same caption within the Statement of Consolidated Comprehensive Income (Loss) as other employee compensation costs from services rendered during the period. All other components of the net periodic benefit cost will be presented separately outside of the operating income caption. This guidance must be applied retrospectively.became effective for Ashland ~~elected to early adopt this guidance~~ on October 1, ~~2017, which resulted in a reclassification of $2 million in income from~~2019 and had no material impact on the ~~selling, general and administrative expense and cost of sales captions to the other net periodic benefit income caption in the Statement of~~ Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016. The components of net periodic benefits income (costs) reclassified primarily relate to interest cost, expected return on assets, curtailments, settlements and actuarial gains and losses. Ashland did not have to adjust the classification of service cost since it previously was recorded within the caption required by the new guidance. See Note J for additional information on net periodic benefit costs.Financial Statements.

In ~~March~~June 2016, the FASB issued ~~new~~amended accounting guidance related to the measurement of credit losses on financial instruments. The amended accounting guidance changes the impairment model for ~~certain aspects~~most financial assets to require measurement and recognition of ~~share-based payments to employees.~~expected credit losses for financial assets held. This guidance ~~requires all excess tax benefits~~will become effective for Ashland on October 1, 2020. Ashland is in the process of evaluating the effect this amended accounting guidance will have on its consolidated financial position and ~~tax deficiencies~~results of operations; however, Ashland does not expect the amended accounting guidance to have a material impact to Ashland’s Consolidated Financial Statements.

NOTE B– DIVESTITURES

Composites and Marl facility

On August 30, 2019, Ashland completed the sale of its Composites business (excluding the Maleic business) and butanediol manufacturing facility in Marl, Germany to INEOS Enterprises for $1.015 billion. The operating results and cash flows related to ~~share-based payments to be recognized~~Composites and the Marl facility, including the Maleic business, have been reflected as ~~income tax expense~~discontinued operations in the Statements of Consolidated Comprehensive Income (Loss) ~~instead of additional paid-in capital,~~ and ~~changes the classification of excess tax benefits from a financing activity to an operating activity within the~~ Statements of Condensed Consolidated Cash Flows. ~~This guidance also allows entities~~See Note C of the Notes to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. In addition, this guidance increases the amount an employer can withhold to cover income taxes on awards and still qualify for equity classification and requires that cash paid by an employer when directly withholding shares for tax-withholding purposes be classified as a financing activity within the Statements of Condensed Consolidated Cash Flows. The guidance became effective for Ashland and was adopted on October 1, 2017. The guidance specifically related to the Statements of Consolidated Comprehensive Income (Loss) was adopted prospectively while the guidance related to the Statements of Condensed Consolidated Cash Flows was adopted retrospectively, as required by the guidance.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE A~~–~~SIGNIFICANT ACCOUNTING POLICIES (continued)~~

~~Upon adoption, the overall impact on Ashland's~~ Condensed Consolidated Financial Statements ~~was not significant.~~

~~NOTE B– VALVOLINE~~

~~Ashland Separation of Valvoline~~

On September 22, 2015, Ashland announced that the Board of Directors approved proceeding with a plan to separate Ashland into two independent, publicly traded companies comprising of the new Ashland (now known as Ashland Global Holdings Inc.) and Valvoline Inc. The initial step of the separation, the initial public offering (IPO) of Valvoline Inc., closed on September 28, 2016. As discussed further within the Final Separation section of this Note, Ashland completed the distribution of its remaining shares in Valvoline Inc. on May 12, 2017. The new Ashland is a premier global leader in providing specialty chemical solutions to customers in a wide range of consumer and industrial markets. Key markets and applications include pharmaceutical, personal care, food and beverage, architectural coatings, adhesives, automotive, construction and energy.

After completing the IPO on September 28, 2016 and before the distribution of its remaining shares on May 12, 2017, Ashland owned 170 million shares of Valvoline Inc.’s common stock which represented approximately 83% of the total outstanding shares of Valvoline Inc.’s common stock. As a result, Ashland continued to consolidate Valvoline within the Condensed Consolidated Financial Statements up until the distribution of the remaining shares. The resulting outside stockholders’ interests in Valvoline Inc., which was approximately 17%, was presented separately as a noncontrolling interest within Ashland’s equity in the Condensed Consolidated Balance Sheets up until the distribution of the remaining shares. The amount of consolidated net income attributable to these minority holders is presented as a separate caption on the Statement of Consolidated Comprehensive Income (Loss) for the ~~three months ended December 31, 2016.~~

~~Final Separation~~

~~Ashland completed~~results of operations for Composites and the ~~distribution of its remaining 170 million shares of common stock of Valvoline Inc. as a pro rata dividend on shares of Ashland common stock outstanding at~~Marl facility, including the ~~close of~~Maleic business, ~~on the record date of May 5, 2017. Based on the shares of Ashland common stock outstanding as of May 5, 2017, the record date~~ for the distribution, each share of Ashland common stock received 2.745338 shares of Valvoline common stock in the distribution. The distribution was recorded at the carrying amount of Valvoline Inc.'s net assets which was a deficit of $187 million as of May 12, 2017, as follows:

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE B – VALVOLINE (continued)~~

May 12
(In millions) 2017
ASSETS
Current assets
Cash 179
Accounts receivable, net 385
Inventories 153
Other current assets 24
Total current assets 741
Noncurrent assets
Net property, plant and equipment 357
Goodwill 329
Equity and other unconsolidated investments 31
Deferred income taxes 391
Other noncurrent assets 93
Total noncurrent assets 1,201
Total assets $ 1,942
LIABILITIES AND EQUITY
Current liabilities
Short-term debt 75
Current portion of long-term debt 16
Trade and other payables 353
Other current liabilities 34
Total current liabilities 478
Noncurrent liabilities
Long-term debt 662
Employee benefit obligations 826
Other long-term liabilities 163
Total noncurrent liabilities 1,651
Total liabilities $ 2,129
Net deficit $ (187 )

A Tax Matters Agreement between Ashland and Valvoline Inc. governs the rights and obligations after the separation regarding certain income taxes and other taxes, including certain tax liabilities and benefits, attributes, returns and contests.

~~Discontinued Operations Assessment~~

Valvoline met the criteria to qualify as a discontinued operation and accordingly, its operating results and cash flows for the three months ended December 31, 2016 have been classified as discontinued operations within the Condensed Consolidated Financial Statements. See Note D for more information.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE B – VALVOLINE (continued)~~

~~Costs of transaction~~

~~Ashland recognized separation~~all periods presented.

Certain indirect corporate costs ~~of $6 million and $28 million for the three months ended December 31, 2017 and 2016, respectively. Of these amounts, $6 million of separation costs directly related to Valvoline and were~~ included ~~within the discontinued operations caption of the Statement of Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016. Otherwise, separation costs are recorded~~ within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss).

~~NOTE C– ACQUISITIONS~~

~~Pharmachem~~

~~Background~~

~~On May 17, 2017, Ashland completed its acquisition~~ that were previously allocated to the Composites segment and Marl facility do not qualify for classification within discontinued operations and are now reported as selling, general and administrative expense within continuing operations on a consolidated basis and within the Unallocated and other segment. These costs were 0 for the three and nine months ended June 30, 2020, and $10 millionand $33 million during the three and nine months ended June 30, 2019, respectively.

Subsequent to the completion of the ~~stock~~sale, Ashland is providing certain transition services to INEOS for a fee. While the transition services are expected to vary in duration depending upon the type of ~~Pharmachem Laboratories, Inc. (Pharmachem),~~ a ~~leading provider~~service provided, Ashland expects to reduce certain costs as the transition services are completed. Ashland recognized transition service fee income of ~~quality ingredients to the global health and wellness industries and high-value differentiated products to fragrance and flavor houses. With annual revenues of approximately $300~~$3 million and ~~14 manufacturing facilities in~~$9 million for the ~~United States~~three and Mexico, New Jersey-based Pharmachem develops, manufactures and supplies custom and branded nutritional and fragrance products. Ashland has included Pharmachem within the Specialty Ingredients reporting segment.

~~Purchase price allocation~~

nine months periods ended June 30, 2020, respectively.

Held for sale classification

The ~~acquisition was recorded by Ashland using the purchase method of accounting in accordance with applicable U.S. GAAP whereby the total purchase price was allocated to tangible and intangible~~ assets and liabilities ~~acquired based on respective fair values.~~

~~The all-cash purchase price of Pharmachem was $680 million which included working capital adjustments of approximately $20 million. The following table summarizes the current preliminary values~~ of the Maleic business, along with certain other corporate property, have been reflected as assets ~~acquired~~ and liabilities ~~assumed at~~held for sale. As a result depreciation and amortization are not being recorded within the ~~date~~Statements of ~~acquisition.~~

At
May 17, 2017
Preliminary purchase price allocation (in millions) As Adjusted
Assets:
Accounts receivable 52
Inventory 74
Other current assets 4
Intangible assets 330
Goodwill 287
Property, plant and equipment 97
Other noncurrent assets 20
Liabilities:
Accounts payable (32 )
Deferred tax - net (138 )
Other noncurrent liabilities (14 )
Total purchase price $ 680

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE C – ACQUISITIONS (continued)~~

~~As of December 31, 2017,~~Consolidated Comprehensive Income (Loss) and the ~~purchase price allocation for the acquisition was preliminary. Adjustments to the current fair value estimates in the above table may occur as the process conducted for various valuations~~Condensed Consolidated Balance Sheets. These assets and ~~assessments, including certain tangible and intangible assets,~~liabilities are ~~finalized. Goodwill was calculated as the excess~~comprised of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were based on strategic benefits that are expected to be realized from the acquisition. None of the goodwill is expected to be deductible for income tax purposes.

~~Intangible assets identified~~

The purchase price allocation included $330 million of certain definite-lived intangible assets which are being amortized over the estimated useful life in proportion to the economic benefits consumed. The determination of the useful lives is based upon various industry studies, historical acquisition experience, economic factors, and future cash flows of the combined company. In addition, Ashland reviewed certain technological trends and also considered the relative stability in the current Pharmachem customer base.

~~The~~ following ~~details the total intangible assets identified as of May 17, 2017.~~components:

	June 30		September 30
(In millions)	2020		2019
Accounts receivable, net	$	6	$	5
Inventories		2		3
Net property, plant and equipment		34		34
Goodwill		14		14
Other assets		5		3
Current assets held for sale	$	61	$	59

Trade and other payables	$	4	$	6
Accrued expenses and other liabilities		1		1
Current liabilities held for sale	$	5	$	7

Weighted-average
amortization period
Intangible asset type (in millions) Value
(years)
Trademarks and trade names $ 26
15
Intellectual property 68
22
Customer and supplier relationships 236
20
Total $ 330

NOTE ~~D –~~C– DISCONTINUED OPERATIONS

~~In previous periods,~~

Ashland has divested certain businesses that have qualified as discontinued operations. The operating results from these divested businesses and subsequent adjustments related to ongoing assessments of certain

retained liabilities and tax items have been recorded within the discontinued operations caption in the Statements of Consolidated Comprehensive Income (Loss) for all periods ~~presented and are discussed further within this note.~~

As previously discussed in Notes A and B, Ashland completed the distribution of its remaining 170 million shares of common stock of Valvoline Inc. on May 12, 2017. Ashland determined that the Valvoline separation qualified as a discontinued operation, in accordance with U.S. GAAP, since it represents a strategic shift for Ashland and has a major effect on Ashland's operations and financial results. Accordingly, Valvoline's operating results and cash flows for the three months ended December 31, 2016 have been classified as discontinued operations within the Condensed Consolidated Financial Statements.

presented.

Components of amounts reflected in the Statements of Consolidated Comprehensive Income (Loss) related to discontinued operations are presented in the following table for the three and nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~.2019.

	Three months ended					Nine months ended
	June 30					June 30
(In millions)	2020			2019		2020			2019
Income (loss) from discontinued operations (net of tax)
Composites/Marl facility	$	1		$	24	$	5		$	77
Valvoline		—			—		(1	)		1
Asbestos		(8	)		—		(15	)		—
Water Technologies		(1	)		—		(1	)		1
Distribution		(5	)		19		(7	)		18
Gain (loss) on disposal of discontinued operations (net of taxes)
Composites/Marl facility		—			—		(3	)		—
	$	(13	)	$	43	$	(22	)	$	97

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE D – DISCONTINUED OPERATIONS (continued)~~

Three months ended
December 31
(In millions) 2017
2016
Income from discontinued operations (net of tax)
Valvoline $ 3
$ 75
Total income from discontinued operations (net of tax) $ 3
$ 75

The following table presents a reconciliation of the ~~historically reported~~ captions within Ashland's Statements of Consolidated Comprehensive Income (Loss) for the income (loss) from discontinued operations attributable to ~~Valvoline~~Composites and the Marl facility for the three and nine months ended June 30, 2020 and 2019. Interest expense was allocated to discontinued operations based on Ashland’s mandatory debt prepayments upon the disposition of Composites and the Marl facility for applicable periods only. Although the Maleic business was not sold to INEOS, this business was operated under the Composites business and Marl facility disposal group and will continue to be reported in discontinued operations as it meets the held for sale criteria.

	Three months ended						Nine months ended
	June 30						June 30
(In millions)	2020			2019			2020			2019
Income (loss) from discontinued operations attributable to Composites/Marl facility
Sales	$	10		$	281		$	38		$	840
Cost of sales		(6	)		(215	)		(26	)		(648	)
Selling, general and administrative expense		(2	)		(20	)		(5	)		(61	)
Research and development expense		—			(2	)		—			(9	)
Equity and other income		—			—			2			3
Pretax operating income of discontinued operations		2			44			9			125
Net interest and other financing expense		—			(6	)		—			(18	)
Pretax income of discontinued operations		2			38			9			107
Income tax expense		(1	)		(14	)		(4	)		(30	)
Income from discontinued operations	$	1		$	24		$	5		$	77

NOTE D – RESTRUCTURING ACTIVITIES

Company-wide restructuring activities

Ashland periodically implements company-wide restructuring programs related to acquisitions, divestitures and other cost reduction programs in order to enhance profitability through streamlined operations and an improved overall cost structure.

Fiscal 2018 program costs

Severance costs

During fiscal 2018, Ashland initiated a company-wide cost reduction program as a result of ongoing strategic asset plans and activities. As part of this restructuring program, Ashland announced a voluntary severance offer (VSO) to certain qualifying employees that was formally approved during 2018. Additionally, during fiscal 2018, an involuntary program for employees was also initiated as part of the restructuring program. These programs resulted in additional severance expense of 0 and $3 million for the three months ended ~~December 31, 2016.~~June 30, 2020 and 2019, respectively, and $1and $7 million for the nine months ended June 30, 2020 and 2019, respectively, which was primarily recorded within the selling, general and administrative expense caption of the Statement of Consolidated Comprehensive Income (Loss). As of June 30, 2020, the severance reserve for the company-wide restructuring program was 0.

Facility costs

Ashland incurred lease abandonment charges of 0 during the three months ended June 30, 2020 and 2019, and 0 and $8 million for the nine months ended June 30, 2020 and 2019, respectively. These charges were due to the exit from certain office facilities in conjunction with the company-wide cost reduction program. The costs related to this reserve were recorded within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) and are paid over the remaining lease terms. As of June 30, 2020, the reserve for facility costs was $6 million.

The following table details at June 30, 2020 and 2019, the amount of restructuring reserves related to the programs discussed above, and the related activity in these reserves during the nine months ended June 30, 2020. The severance and facility cost reserves were primarily recorded within accrued expenses and other liabilities in the Condensed Consolidated Balance Sheet as of June 30, 2020 and June 30, 2019.

(In millions)	Severance costs			Facility costs			Total
Balance at of September 30, 2019		7			7			14
Restructuring reserve		1			—			1
Utilization (cash paid)		(8	)		(1	)		(9	)
Balance at June 30, 2020	$	—		$	6			6

(In millions)	Severance costs			Facility costs			Total
Balance at of September 30, 2018		36			7			43
Restructuring reserve		7			8			15
Utilization (cash paid)		(29	)		(7	)		(36	)
Balance at June 30, 2019	$	14		$	8			22

Three months ended
(In millions) December 31, 2016
Income from discontinued operations
attributable to Valvoline

Sales $ 489
Cost of sales (293 )
Selling, general and administrative expense (82 )
Research and development expense (3 )
Equity and other income 9
Operating income of discontinued operations 120
Net interest and other financing expense (10 )
Pretax income of discontinued operations 110
Income tax expense (35 )
Income from discontinued operations $ 75

Other restructuring activities

Fiscal 2019 Plant restructuring

During the three and nine months ended June 30, 2019, Specialty Additives committed to a cost reduction plan within an existing manufacturing facility. As a result, Ashland incurred restructuring charges of 0and $47 million for the three and nine months ended June 30, 2019, respectively. These charges were recorded primarily within the cost of sales caption of the Statements of Consolidated Comprehensive Income (Loss) consisting of $38 million of accelerated depreciation and amortization, $5 million of severance and $4 million of plant closure costs during the nine months ended June 30, 2019. As of June 30, 2020, there was 0 restructuring reserve related to this plant restructuring.

Fiscal 2020 restructuring severance costs

During the three and nine months ended June 30, 2020, Ashland incurred severance expense of $12 million and $30 million, respectively, attributable to executive management changes and business management changes within the organization. As of June 30, 2020, the severance reserve associated with this transition was $22 million.

The following table details at June 30, 2020, the amount of restructuring severance reserves related to this program. The severance reserves were primarily recorded within accrued expenses and other liabilities in the Condensed Consolidated Balance Sheet as of June 30, 2020.

(In millions)	Severance costs
Balance at of September 30, 2019		—
Restructuring reserve		30
Utilization (cash paid)		(8	)
Balance at June 30, 2020	$	22

NOTE E – FAIR VALUE MEASUREMENTS

As required by U.S. GAAP, Ashland uses applicable guidance for defining fair value, the initial recording and periodic remeasurement of certain assets and liabilities measured at fair value and related disclosures for instruments measured at fair value. Fair value accounting guidance establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows.

Level 1 – Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 – Unobservable inputs for the asset or liability for which there is little, if any, market activity at the measurement date. Unobservable inputs reflect Ashland’s own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include Ashland’s own financial data such as internally developed pricing

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE E – FAIR VALUE MEASUREMENTS (continued)~~

models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment.

For assets that are measured using quoted prices in active markets (Level 1), the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs (Level 2) are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability. For all other assets and liabilities for which unobservable inputs are used (Level 3), fair value is derived ~~through the use of~~using fair value models, such as a discounted cash flow model or other standard pricing models that Ashland deems reasonable.

The following table summarizes financial instruments subject to recurring fair value measurements as of ~~December 31, 2017.~~June 30, 2020.

	Carrying		Total fair		Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
(In millions)	value		value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	416	$	416	$	416	$	—	$	—
Restricted investments (a)		327		327		327		—		—
Investment of captive insurance company (b)		7		7		7		—		—
Foreign currency derivatives		1		1		—		1		—
Total assets at fair value	$	751	$	751	$	750	$	1	$	—
Liabilities
Foreign currency derivatives	$	2	$	2	$	—	$	2	$	—

(In millions)
Carrying
value

Total
fair
value

Quoted prices
in active
markets for
identical
assets
Level 1

Significant
other
observable
inputs
Level 2

Significant
unobservable
inputs
Level 3

Assets
Cash and cash equivalents $ 601
$ 601
$ 601
$ —
$ —
Restricted investments (a)
345
345
345
—
—
Deferred compensation investments (b)
160
160
—
160
—
Investments of captive insurance company (b)
3
3
3
—
—
Foreign currency derivatives 4
4
—
4
—
Total assets at fair value $ 1,113
$ 1,113
$ 949
$ 164
$ —

Liabilities

Foreign currency derivatives $ 13
$ 13
$ —
$ 13
$ —


(a)	Included in restricted investments is $30 million classified in the other current assets caption on the Condensed Consolidated Balance Sheets.


(b)	Included in other noncurrent assets in the Condensed Consolidated Balance Sheets.

The following table summarizes financial asset instruments subject to recurring fair value measurements as of September 30, ~~2017.~~2019.

	Carrying		Total fair		Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
(In millions)	value		value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	232	$	232	$	232	$	—	$	—
Restricted investments (a)		334		334		334		—		—
Investment of captive insurance company (b)		5		5		5		—		—
Foreign currency derivatives		2		2		—		2		—
Total assets at fair value	$	573	$	573	$	571	$	2	$	—
Liabilities
Foreign currency derivatives	$	2	$	2	$	—	$	2	$	—


	(a)

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE E – FAIR VALUE MEASUREMENTS (continued)~~

(In millions)
Carrying
value

Total
fair
value

Quoted prices
in active
markets for
identical
assets
Level 1

Significant
other
observable
inputs
Level 2

Significant
unobservable
inputs
Level 3

Assets

Cash and cash equivalents $ 566
$ 566
$ 566
$ —
$ —
Restricted investments (a)
332
332
332
—
—
Deferred compensation investments (b)
158
158
—
158
—
Investments of captive insurance company (b)
3
3
3
—
—
Foreign currency derivatives 2
2
—
2
—
Total assets at fair value $ 1,061
$ 1,061
$ 901
$ 160
$ —

Liabilities

Foreign currency derivatives $ 36
$ 36
$ —
$ 36
$ —


~~(a)~~	Included in restricted investments is ~~$30~~$24 million classified in the other current assets caption on the Condensed Consolidated Balance Sheets.


(b)	Included in other noncurrent assets in the Condensed Consolidated Balance Sheets.

Restricted investments

During 2015, Ashland and Hercules entered into a comprehensive settlement agreement related to certain insurance coverage for asbestos bodily injury claims with Underwriters at Lloyd’s, certain London Companies and Chartis (AIG) member companies, along with National Indemnity Company and Resolute Management, Inc., under which Ashland and Hercules received a total of $398 million (the January 2015 asbestos insurance settlement). Ashland placed $335 million of the settlement funds from the January 2015 asbestos insurance settlement into a renewable annual trust restricted for the purpose of paying ongoing and future litigation defense and claim settlement costs incurred in conjunction with asbestos claims. These funds were classified primarily as noncurrent restricted investment assets, with $30 million classified within other current assets, in the Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017.

During 2015, Ashland diversified the restricted investments received from the January 2015 asbestos insurance settlement into primarily equity and corporate bond mutual funds that are designated as available-for-sale securities, classified as Level 1 measurements within the fair value hierarchy. Available-for-sale securities are reported at fair value with unrealized gains and losses, net of related deferred income taxes, included in the stockholders' equity section of the Condensed Consolidated Balance Sheets as a component of accumulated other comprehensive income (AOCI).

Investment income and realized gains and losses on ~~the available-for-sale securities~~these company-restricted investments are reported inwithin the net interest and other ~~financing~~ expense caption inon the Statements of Consolidated Comprehensive ~~Income.~~Income (Loss). The following table provides a summary of the ~~available-for-sale securities~~activity within the investment portfolio as of ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017:~~2019:

(In millions)	June 30 2020			September 30 2019
Original cost	$	335		$	335
Accumulated adjustments, net (a)		(30	)		(47	)
Adjusted cost, beginning of year		305			288
Investment income (b)		8			10
Net unrealized gain (c)		37			29
Realized gains (c)		—			32
Settlement funds		3			7
Disbursements		(26	)		(32	)
Fair value	$	327		$	334


	(a)

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE E – FAIR VALUE MEASUREMENTS (continued)~~

December 31
September 30
(In millions) 2017
2017
Original cost $ 335
$ 335
Accumulated adjustments, net (a)

(38 ) (24 )
Adjusted cost, beginning of year 297
311
Investment income (b)
2
9
Unrealized gain 45
35
Realized gain 1
2
Settlement funds 5
2
Disbursements (5 ) (27 )
Fair value $ 345
$ 332


~~(a)~~	The accumulated adjustments include investment income, realized gains, disbursements and settlements recorded in previous periods.


(b)	Investment income for the demand deposit includes interest income as well as dividend income transferred from the equity and ~~corporate bond~~fixed income mutual funds.

(c)

Presented under the original cost method.

The following table presents gross unrealized gains and losses for the restricted investment ~~available-for-sale~~ securities as of ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017:~~2019:

			Gross		Gross
(In millions)	Adjusted Cost		Unrealized Gain		Unrealized Loss			Fair Value
As of June 30, 2020
Demand deposit	$	10	$	—	$	—		$	10
Equity mutual fund		116		24		(4	)		136
Fixed income mutual fund		166		15		—			181
	$	292	$	39	$	(4	)	$	327

As of September 30, 2019
Demand deposit	$	9	$	—	$	—		$	9
Equity mutual fund		120		24		(2	)		142
Fixed income mutual fund		176		7		—			183
	$	305	$	31	$	(2	)	$	334

Gross
Gross

(In millions) Adjusted Cost
Unrealized Gain
Unrealized Loss
Fair Value
As of December 31, 2017
Demand Deposit $ 17
$ —
$ —
$ 17
Equity Mutual Fund 163
45
—
208
Corporate bond Mutual Fund 120
—
—
120
Fair value $ 300
$ 45
$ —
$ 345

As of September 30, 2017
Demand Deposit $ 9
$ —
$ —
$ 9
Equity Mutual Fund 168
34
—
202
Corporate bond Mutual Fund 120
1
—
121
Fair value $ 297
$ 35
$ —
$ 332

~~The unrealized gains and losses as~~ of December 31, 2017 and September 30, 2017 were recognized within AOCI. Ashland invests in highly-rated investment grade mutual funds. No other-than-temporary impairment was recognized in AOCI during the three months ended December 31, 2017 and 2016.

The following table presents the investment income, net gains and losses realized and disbursements related to the investments within the portfolio for the three and nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~2019.

	Three months ended						Nine months ended
	June 30						June 30
(In millions)	2020			2019			2020			2019
Investment income	$	2		$	2		$	8		$	7
Net gains (losses) unrealized (a)		31			6			9			3
Disbursements		(7	)		(5	)		(26	)		(25	)

Three months ended
December 31
(In millions) 2017
2016
Investment income $ 2
$ 3
Realized gains 1
—
Disbursements (5 ) —


	(a)
Ashland determined that all unrealized gains and losses were related to securities with readily determinable fair values. Due to the new accounting guidance adopted in the first quarter of fiscal 2019, the net unrealized gains (losses) during the three months ended December 31, 2018 and forward were recorded within the net interest and other expense caption in the Statements of Consolidated Comprehensive Income (Loss).

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE E – FAIR VALUE MEASUREMENTS (continued)~~

~~Deferred compensation investments~~

Deferred compensation investments consist of Level 2 measurements within the fair value hierarchy which are comprised primarily of a guaranteed interest fund, a common stock index fund and an intermediate government bond fund. Gains and losses related to deferred compensation investments are immediately recognized within the Statements of Consolidated Comprehensive Income (Loss).

Foreign currency derivatives

Ashland conducts business in a variety of foreign currencies. Accordingly, Ashland regularly uses foreign currency derivative instruments to manage exposure on certain transactions denominated in foreign currencies to curtail potential earnings volatility effects on certain assets and liabilities, including short-term inter-company loans, denominated in currencies other than Ashland’s functional currency of an entity. These derivative contracts generally require exchange of one foreign currency for another at a fixed rate at a future date and generally have maturities of less than twelve months. All contracts are valued at fair value with net changes in fair value recorded within the selling, general and administrative expense caption. The impacts of these contracts were largely offset by gains and losses resulting from the impact of changes in exchange rates on transactions denominated in non-functional currencies. The following table summarizes the net gains ~~and/or~~and losses recognized during the three and nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 within the Statements of Consolidated Comprehensive Income (Loss).

	Three months ended					Nine months ended
	June 30					June 30
(In millions)	2020		2019			2020		2019
Foreign currency derivative gains (losses)	$	1	$	(4	)	$	5	$	—

Three months ended
December 31
(In millions) 2017
2016
Foreign currency derivative loss $ (11 ) $ (8 )

The following table summarizes the fair values of the outstanding foreign currency derivatives as of ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017~~2019 included in accounts receivable and accrued expenses and other liabilities of the Condensed Consolidated Balance Sheets.

	June 30		September 30
(In millions)	2020		2019
Foreign currency derivative assets	$	1	$	2
Notional contract values		178		271

Foreign currency derivative liabilities	$	2	$	2
Notional contract values		149		168

December 31
September 30
(In millions) 2017
2017
Foreign currency derivative assets $ 4
$ 2
Notional contract values 425
79

Foreign currency derivative liabilities $ 13
$ 36
Notional contract values 810
1,601

Other financial instruments

At ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017,~~2019, Ashland's long-term debt (including the current portion and excluding debt issuance cost discounts) had a carrying value of ~~$2,614~~$1,562 million and ~~2,615~~$1,513 million, respectively, compared to a fair value of ~~$2,755~~$1,637 million and ~~$2,768~~$1,680 million, respectively. The fair values of long-term debt are based on quoted market prices or, if market prices are not available, the present values of the underlying cash flows discounted at Ashland’s incremental borrowing ~~rates, which are deemed to be Level 2 measurements within the fair value hierarchy.~~

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

rates.

NOTE F – INVENTORIES

Inventories are carried at the lower of cost or ~~market.~~net realizable value. Inventories are primarily stated at cost using the weighted-average cost method. In addition, certain inventories are valued at cost using the last-in, first-out (LIFO) method.

The following table summarizes Ashland’s inventories as of the reported Condensed Consolidated Balance Sheet dates.

(In millions)	June 30, 2020		September 30, 2019
Finished products	$	417	$	400
Raw materials, supplies and work in process		200		197
	$	617	$	597

December 31
September 30
(In millions) 2017
2017
Finished products $ 421
$ 390
Raw materials, supplies and work in process 256
245
LIFO reserves (3 ) (1 )
$ 674
$ 634

NOTE G – GOODWILL AND OTHER INTANGIBLES

Goodwill

Ashland ~~reviews~~tests goodwill and other indefinite-lived intangible assets for impairment annually oras of July 1 and when events and circumstances indicate an impairment may have occurred. ~~This annual assessment is performed as of July 1~~Ashland tests goodwill and ~~consists of Ashland determining each reporting unit’s current~~other indefinite-lived intangible assets for impairment by comparing the estimated fair value ~~compared~~of the reporting units (for goodwill) and other indefinite-lived intangible assets to ~~its current~~the related carrying value. ~~For~~If the carrying amount of a reporting unit or other indefinite-lived intangible asset exceeds its ~~July 1, 2017 assessment,~~estimated fair value, Ashland records an impairment loss based on the difference between fair value and carrying amount, in the case of reporting units, not to exceed to the associated carrying amount of goodwill.

During the second quarter of fiscal 2020, Ashland realigned its operations into 5 reportable segments which resulted in a reassessment of the Company’s reporting units used to evaluate goodwill impairment. The Company’s reporting units align with its reportable segments. Ashland determined that its reporting units ~~for the allocation of goodwill~~ are ~~its three reportable segments:~~Life Sciences, Personal Care & Household, Specialty ~~Ingredients, Composites~~Additives, Performance Adhesives, and Intermediates and Solvents. AtPrior to the business realignment, the reporting units consisted of Ashland Specialty Ingredients and Intermediates and Solvents. The Ashland Specialty Ingredients reporting unit contained all of Ashland’s reported goodwill at September 30, 2019.

In conjunction with the realignment during the second quarter of fiscal 2020, Ashland tested goodwill for impairment for each reporting unit both immediately before and immediately after the business realignment. The fair values of the reporting units were determined using a combination of discounted cash flow models and valuations based on earnings multiples for guideline public companies in each reporting unit’s industry peer group. Significant assumptions inherent in the valuation methodologies include estimates of future projected business results (principally revenue and EBITDA), long-term growth rates, and the weighted-average cost of capital.

The goodwill impairment test under the former reporting unit structure concluded that ~~time,~~0 impairment existed during the second quarter of fiscal 2020. Ashland ~~determined no additional~~then allocated goodwill to the new reporting unit structure using a relative fair value approach and re-assessed goodwill for impairment ~~existed.~~

for each of its new reporting units. The impairment test under the new reporting unit structure concluded that the carrying value of the Personal Care & Household and the Specialty Additives reporting units exceeded their fair value, resulting in a non-cash goodwill impairment charge of $530 million, which was recorded within the Goodwill impairment caption within the Statement of Consolidated Comprehensive Income (Loss) for the nine months ended June 30, 2020. The Personal Care & Household goodwill impairment charge was due in large part to lower growth and lower margins since the acquisition of the Oral Care and Avoca businesses, which collectively have resulted in reduced cash flow projections. The Specialty Additives goodwill impairment charge was due in large part to lower growth and lower margins within the global construction and energy markets, which collectively have resulted in reduced cash flow projections. There were 0 indicators of impairment that were identified in the third quarter of fiscal 2020.

The following is a progression of goodwill by reportable segment for the ~~three~~nine months ended ~~December 31, 2017.~~June 30, 2020.

(In millions)	Life Sciences		Personal Care & Household			Specialty Additives			Performance Adhesives		Intermediates and Solvents		(a)	Total
Balance at September 30, 2019	$	836	$	355		$	609		$	453	$	—		$	2,253
Impairment		—		(356	)		(174	)		—		—			(530	)
Currency translation		6		1			4			—		—			11
Balance at June 30, 2020	$	842	$	—		$	439		$	453	$	—		$	1,734

Specialty
Intermediates

(In millions) Ingredients
Composites
and Solvents
(a) Total
Balance as of September 30, 2017 $ 2,315
$ 150
$ —
$ 2,465
Currency translation adjustment 10
—
—
10
Balance as of December 31, 2017 $ 2,325
$ 150
$ —
$ 2,475


(a)	As of ~~December 31, 2017,~~June 30, 2020 and September 30, 2019, there was accumulated impairment of ~~$171~~$90 million related to the Intermediates and Solvents reportable segment.

Other intangible assets

Intangible assets principally consist of trademarks and trade names, intellectual property and customer and supplier relationships. Intangible assets classified as finite are amortized on a straight-line basis over their estimated useful lives. The cost of trademarks and trade names is amortized principally over 3 to 25 years, intellectual property over 5 to 25 years, and customer and supplier relationships over 3 to 24 years.

Ashland annually reviews, as of July 1, indefinite-lived intangible assets for possible impairment or whenever events or changes in circumstances indicate that carrying amounts may not be recoverable.

Ashland tested its indefinite-lived intangible assets for impairment during the second quarter of fiscal 2020 as a result of the business realignment. Trademarks and trade names are valued using a “relief-from-royalty” valuation method compared to the carrying value. NaN impairment was indicated for trademarks and trade names.

Intangible assets were comprised of the following as of ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017~~.2019.

	June 30, 2020
	Gross					Net
	carrying		Accumulated			carrying
(In millions)	amount		amortization			amount
Definite-lived intangibles
Trademarks and trade names	$	66	$	(31	)	$	35
Intellectual property		713		(426	)		287
Customer and supplier relationships		747		(321	)		426
Total definite-lived intangibles		1,526		(778	)		748

Indefinite-lived intangibles
Trademarks and trade names		278		—			278
Total intangible assets	$	1,804	$	(778	)	$	1,026

	September 30, 2019
	Gross					Net
	carrying		Accumulated			carrying
(In millions)	amount		amortization			amount
Definite-lived intangibles
Trademarks and trade names	$	66	$	(29	)	$	37
Intellectual property		712		(391	)		321
Customer and supplier relationships		744		(292	)		452
Total definite-lived intangibles		1,522		(712	)		810

Indefinite-lived intangibles
Trademarks and trade names		278		—			278
Total intangible assets	$	1,800	$	(712	)	$	1,088

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE G – GOODWILL AND OTHER INTANGIBLES (continued)~~

December 31, 2017
Gross
Net
carrying
Accumulated
carrying
(In millions) amount
amortization
amount
Definite-lived intangible assets
Trademarks and trade names $ 67
$ (22 ) $ 45
Intellectual property 758
(340 ) 418
Customer and supplier relationships 780
(246 ) 534
Total definite-lived intangible assets 1,605
(608 ) 997

Indefinite-lived intangible assets
Trademarks and trade names 301
—
301
Total intangible assets $ 1,906
$ (608 ) $ 1,298

September 30, 2017
Gross
Net
carrying
Accumulated
carrying
(In millions) amount
amortization
amount
Definite-lived intangible assets
Trademarks and trade names $ 67
$ (22 ) $ 45
Intellectual property 757
(326 ) 431
Customer and supplier relationships 777
(235 ) 542
Total definite-lived intangible assets 1,601
(583 ) 1,018

Indefinite-lived intangible assets
Trademarks and trade names 301
—
301
Total intangible assets $ 1,902
$ (583 ) $ 1,319

Amortization expense recognized on intangible assets was ~~$24~~$21 million and ~~$19~~$22 million for the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, respectively, and $63 million and $65 million for the nine months ended June 30, 2020 and 2019, respectively, and is included in the ~~selling, general and administrative expense~~Intangibles Amortization Expense caption of the Statements of Consolidated Comprehensive Income (Loss). Estimated amortization expense for future periods is ~~$94~~$85 million in ~~2018~~2020 (includes ~~three~~nine months actual and ~~nine~~three months estimated), ~~$90 million in 2019, $89 million in 2020, $89~~$85 million in 2021, ~~and $87~~$84 million in ~~2022. The amortization expense for future periods is an estimate.~~2022, $84 million in 2023 and $70 million in 2024. Actual amounts may change from such estimated amounts due to fluctuations in foreign currency exchange rates, additional intangible asset acquisitions and divestitures, potential impairment, accelerated amortization, or other events.

NOTE H – DEBT

The following table summarizes Ashland’s current and long-term debt as of the dates reported in the Condensed Consolidated Balance Sheets.

(In millions)	June 30, 2020			September 30, 2019
4.750% notes, due 2022	$	411		$	1,080
2.00% Senior Notes, due 2028 (Euro 500 million principal)		561			—
6.875% notes, due 2043		282			374
Term loan A, due 2025		250			—
Accounts receivable securitizations		194			144
6.50% junior subordinated notes, due 2029		54			54
Revolving credit facility		230			—
Other (a)		11			15
Total debt		1,993			1,667
Short-term debt (includes current portion of long-term debt)		(446	)		(166	)
Long-term debt (less current portion)	$	1,547		$	1,501


	(a)

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE H – DEBT (continued)~~

December 31
September 30
(In millions) 2017
2017
4.750% notes, due 2022 $ 1,082
$ 1,082
Term Loan B, due 2024 597
599
6.875% notes, due 2043 376
376
Revolving Credit Facility 285
173
Term Loan A, due 2022 250
250
Term Loan A, due 2020 250
250
Accounts receivable securitization 64
56
6.50% junior subordinated notes, due 2029 51
51
Medium-term notes, due 2019, interest of 9.4% at December 31, 2017 5
5
Other (a)
(21 ) (23 )
Total debt 2,939
2,819
Short-term debt (includes current portion of long-term debt) (355 ) (235 )
Long-term debt (less current portion and debt issuance cost discounts) $ 2,584
$ 2,584


~~(a)~~	~~Other includes $24~~ Includes $15 million and ~~$25~~$12 million of debt issuance cost discounts as of ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017,~~2019, respectively. Additionally, as of both June 30, 2020 and September 30, 2019, Other included a European short-term loan facility with an outstanding balance of $22 million.

The scheduled aggregate maturities of long-term debt by year (including the current portion and excluding debt issuance costs) are as ~~follows: $5 million~~follows as of June 30, 2020: 0 remaining in ~~2018, $11~~2020, 0 in 2021, $421 million in ~~2019, $269~~2022, $22 million in ~~2020, $56~~2023 and $44 million in ~~2021 and $1,279 million in 2022.~~

2024.

Ashland Financing Activities

~~2017~~

Credit ~~Agreement~~

~~On May 17, 2017, in conjunction with the closing~~Agreements and Refinancing

During January 2020, Ashland LLC and Ashland Services B.V., indirect wholly owned subsidiaries of ~~the Pharmachem acquisition,~~ Ashland, entered into a ~~secured~~new senior unsecured credit agreement (the ~~2017~~2020 Credit Agreement) with a group of ~~lenders. The~~lenders, replacing the 2017 Credit Agreement. The 2020 Credit Agreement ~~provided~~provides for (i) a ~~$250~~$600 million ~~three-year term loan A~~unsecured five-year revolving credit facility (the ~~Three-Year TLA Facility),~~revolving credit facility) and (ii) a $250 million unsecured five-year term loan A facility (the ~~Five-Year TLA Facility~~term loan facility). The 2020 Credit Agreement is guaranteed by Ashland Global Holdings Inc. and ~~together with~~Ashland Chemco Inc., and the ~~Three-Year TLA Facility,~~obligations of Ashland Services B.V. under the ~~TLA Facilities) and (iii) a $680 million five-year~~ revolving credit facility (including a $125 million letter of credit sublimit) (the 2017 Revolving Credit Facility). Proceeds of borrowings under the TLA Facilities were used solely to finance the acquisition of Pharmachem, while the proceeds of the 2017 Revolving Credit Facility were used to finance, in part, the acquisition of Pharmachem, to refinance the 2015 Seniorare guaranteed by Ashland LLC.

The 2020 Credit Agreement contains financial covenants for leverage and ~~for general corporate purposes. On May 19, 2017, Ashland entered into Amendment No. 1~~interest coverage ratios akin to ~~the 2017 Credit Agreement, which increased the aggregate commitments under the 2017 Revolving Credit Facility from $680 million to $800 million.~~

~~At Ashland’s option, loans issued~~those in effect under the 2017 Credit Agreement. The 2020 Credit Agreement ~~bear~~contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest ~~at either LIBOR or an alternate base rate,~~coverage ratios, limitations on liens, additional indebtedness, further negative pledges, investments, mergers, sale of assets and restricted payments, and other customary limitations.

Ashland incurred $4 million of new debt issuance costs in each case plus the applicable interest rate margin. Loans bear interest at LIBOR plus 1.75% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus 0.75%, in the alternative, through and including the date of delivery of a quarterly compliance certificate and thereafter the interest rate will fluctuate between LIBOR plus 1.375% per annum and LIBOR plus 2.500% per annum (or between the alternate base rate plus 0.375% per annum and the alternate base rate plus 1.500% per annum), based upon Ashland’s secured facilities ratings or the consolidated net leverage ratio (as defined in the 2017 Credit Agreement) (whichever yields a lower applicable interest rate margin) at such time. In addition, Ashland was required to pay fees of 0.25% per annum on the daily unused amount of the 2017 Revolving Credit Facility through and including the date of delivery of a compliance certificate, and thereafter the fee rate will fluctuate between 0.175% and 0.40% per annum, based upon Ashland’s secured facilities rating or the consolidated net leverage ratio (whichever yields a lower applicable rate). The TLA Facilities may be prepaid at any time without

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE H – DEBT (continued)~~

premium. The Three-Year TLA Facility will not amortize and will be due on May 17, 2020. The Five-Year TLA Facility will not amortize in each of the first, second and third years and will amortize at a rate of 20% per annum in each of the fourth and fifth years (payable in equal quarterly installments),connection with the ~~outstanding balance of the Five-Year TLA Facility to be paid on May 17, 2022.~~

~~On June 14, 2017, Ashland entered into Amendment No. 2 to the 2017~~2020 Credit Agreement, of which ~~provided for a new $600~~$1 million ~~seven-year senior secured term loan B facility (the 2017 TLB Facility). At Ashland’s option, loans issued under~~was expensed immediately during the 2017 TLB Facility bear interest at either (x) LIBOR plus 2.00% per annum or (y) an alternate base rate plus 1.00% per annum. The 2017 TLB Facility may be prepaid at any time. The 2017 TLB Facility amortizes at a rate of 1.00% per annum (payable in equal quarterly installments) with the outstanding balance to be paid on May 17, 2024.

~~6.50% junior subordinated notes due 2029~~

In December 2016, Hercules LLC (Hercules) (formerly Hercules Incorporated), an indirect wholly-owned subsidiary of Ashland, repurchased, through a cash tender offer (the Tender Offer), $182 million of the aggregate principal par value amount of its 6.50% junior subordinated notes due 2029 (2029 notes) for an aggregate purchase price of $177 million. As a result of the Tender Offer, the carrying value of the 2029 notes was reduced by $90 million and Ashland recognized a $92 million charge related to accelerated accretion of the recorded debt discount (compared to the total par value) and $5 million of a net gain related to the repayment of the debt. The charge and net gain are included innine months ended June 30, 2020 within the net interest and other ~~financing~~ expense caption of the Statements of Consolidated Comprehensive Income (Loss). The remaining balance is amortized using either the effective interest method or straight-line method. Additionally, as a result of the termination of the 2017 Credit Agreement, Ashland recognized a $1 million charge for the ~~three~~accelerated amortization of previously capitalized debt issuance costs during the nine months ended ~~December 31, 2016.~~June 30, 2020, which is included in the net interest and other expense caption of the Statements of Consolidated Comprehensive Income (Loss).

~~Open market repurchases~~

Note Issuance and existing notes tender

During January 2020, a subsidiary of Ashland, Ashland Services B.V., completed the issuance of 2.00% senior unsecured notes due 2028 with an aggregate principal amount of €500 million (the 2028 Notes). The notes are senior unsecured obligations of Ashland Services B.V and initially guaranteed on an unsecured basis by each of Ashland Global Holdings Inc. and Ashland LLC. Ashland used the net proceeds of the offering (after deducting initial purchasers’ discounts and other fees and expenses), together with the proceeds of the new term loan facility and other funds of Ashland LLC or its subsidiaries, to repurchase the existing notes described below in cash tender offers, and to pay fees and expenses associated therewith.

Ashland incurred $8 million of new debt issuance costs in connection with the 2028 Notes, which is amortized using the effective interest method over the Notes’ term.

Tender offers of 4.750% notes due 2022 ~~and 3.875% notes due 2018~~

During the ~~three~~nine months ended ~~December 31, 2016,~~June 30, 2020, Ashland executed ~~open market repurchases~~tender offers of its 4.750% notes due 2022 ~~(2022 notes) and its 3.875% notes due 2018 (2018 notes)~~(the 2022 Notes). As a result of these repurchases, the carrying values of the 2022 notes ~~and 2018 notes were~~was reduced by ~~$36 million and $29 million, respectively.~~$670 million. Ashland recognized a $2$5 million charge related to ~~premiums paid in the open market repurchases~~accelerated accretion on debt discounts and accelerated amortization of previously capitalized debt issuance costs, which is included in the net interest and other ~~financing~~ expense caption of the Statements of Consolidated Comprehensive Income (Loss) for the ~~three~~nine months ended ~~December 31, 2016.~~

~~Remaining~~June 30, 2020.

Tender offers of 6.875% notes due 2043

During the nine months ended June 30, 2020, Ashland executed tender offers of its 6.875% notes due 2043 (the 2043 Notes). As a result of these repurchases, the carrying values of the 2043 notes was reduced by $92 million. Ashland recognized a $1 million charge related to accelerated accretion on debt premiums and accelerated amortization previously capitalized debt issuance costs, which is included in the net interest and other expense caption of the Statements of Consolidated Comprehensive Income (Loss) for the nine months ended June 30, 2020.

Tender offers of 6.500% Junior Subordinated Debentures due 2029

During the nine months ended June 30, 2020, Ashland executed tender offers of Hercules LLC’s 6.500% notes due 2029 (the 2029 Junior Debentures). As a result of these repurchases, the carrying values of the 2029 notes was reduced by $2 million.

Total premiums paid for all tender offers noted above were $59 million, which is in included in the net interest and other expenses caption of the Statements of Consolidated Comprehensive Income (Loss) for the nine months ended June 30, 2020.

Available borrowing capacity

The borrowing capacity remaining under the ~~2017~~2020 $600 million Revolving Credit Facility was ~~$467~~$350 million due to an outstanding balance of ~~$285~~$230 million, as well as a reduction of ~~$48~~$20 million for letters of credit outstanding ~~at December 31, 2017.~~as of June 30, 2020. Ashland's total borrowing capacity at ~~December 31, 2017~~June 30, 2020 was ~~$498~~$350 million, which included ~~$31 million~~0 of available capacity from the two accounts receivable securitization ~~facility.~~

facilities.

Covenants related to current Ashland debt agreements

Ashland's debt contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional subsidiary indebtedness, restrictions on subsidiary distributions, investments, mergers, sale of assets and restricted payments and other customary limitations. As of ~~December 31, 2017,~~June 30, 2020, Ashland is in compliance with all debt agreement covenant restrictions.

The maximum consolidated net leverage ratio permitted under Ashland's most recent credit agreement (the ~~2017~~2020 Credit Agreement) is ~~4.5.~~4.0. At ~~December 31, 2017,~~June 30, 2020, Ashland’s calculation of the consolidated net leverage ratio was ~~3.9.~~

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE H – DEBT (continued)~~

3.0.

The minimum required consolidated interest coverage ratio under the ~~2017~~2020 Credit Agreement during its entire duration is 3.0. At ~~December 31, 2017,~~June 30, 2020, Ashland’s calculation of the interest coverage ratio was ~~4.6.~~7.7.

NOTE I – ~~INCOME TAXES~~

~~Tax Law Changes~~

LEASING ARRANGEMENTS

Ashland determines if an arrangement is or contains a lease at contract inception and determines its classification as an operating or finance lease at lease commencement. Ashland leases certain office buildings, transportation equipment, warehouses and storage facilities, and equipment. All of Ashland’s leases are operating leases. Real estate leases represent approximately 87% of the total lease liability. Operating lease assets and obligations are reflected within operating lease assets, net; current operating lease obligations; and non-current operating lease obligations captions on the Condensed Consolidated Balance Sheets.

Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. The ~~Tax Cuts~~components of lease cost recognized within our Statements of Consolidated Comprehensive Income (Loss) were as follows:

(In millions)	Location	Three months ended June 30, 2020		Nine months ended June 30, 2020
Lease cost:
Operating lease cost	Selling, General & Administrative	$	4	$	12
Operating lease cost	Cost of Sales		4		10
Variable lease cost	Selling, General & Administrative		—		2
Variable lease cost	Cost of Sales		—		4
Short-term leases	Cost of Sales		1		4
Total lease cost		$	9	$	32

The following table summarizes Ashland’s lease assets and ~~Jobs Act (Tax Act)~~liabilities as presented in the June 30, 2020 Condensed Consolidated Balance Sheet:

(In millions)	June 30, 2020
Assets
Operating lease assets, net	$	140
Total lease assets		140

Liabilities
Current operating lease obligations	$	23
Non-current operating lease obligations		126
Total lease liabilities	$	149

Ashland often has options to renew lease terms for buildings and other assets. The exercise of lease renewal options are generally at Ashland’s sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at Ashland’s discretion. Ashland evaluates renewal and termination options at the lease commencement date to determine if it is reasonably certain to exercise the option on the basis of economic factors. The weighted average remaining lease term for operating leases as of June 30, 2020 was enacted on December 22, 2017. The Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. At December 31, 2017,15 years.

Residual value guarantees are not common within Ashland’s lease agreements nor are restrictions or covenants imposed by leases. Ashland has elected the practical expedient to combine lease and non-lease components. The discount rate implicit within the leases is generally not ~~completed~~determinable. Therefore, Ashland determines the ~~internal accounting assessment for~~discount rate based on its incremental borrowing rate. The incremental borrowing rate is determined using a buildup method resulting in an estimated range of secured borrowing rates matching the ~~tax effects of enactment~~lease term and the currency of the ~~Tax Act; however, Ashland determined a reasonable estimate~~jurisdiction in which lease payments are made, adjusted for impacts of ~~the effects on our existing deferred tax balances~~collateral. Consideration was given to Ashland’s own relevant debt issuances as well as debt instruments of comparable companies with similar credit characteristics. The weighted average discount rate used to measure operating lease liabilities as of June 30, 2020 was 3.0%. There are no leases that have not yet commenced but that create significant rights and ~~the one-time transition tax. Ashland recognized a provisional amount~~obligations for Ashland.

Right-of-use assets exchanged for new operating lease obligations were $1 million and $3 million for the three and nine months ended ~~December 31, 2017, which is~~June 30, 2020.

Cash paid for amounts included as a component of income tax expense from continuing operations. Ashland recorded net unfavorable tax adjustments of $16 million primarily related to deferred tax rate changes and a one-time transition tax assessed on foreign cash and unremitted earnings.

~~Provisional amounts - Deferred and other income tax assets and liabilities~~

~~Ashland remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse~~ in ~~the future, which is generally 21%. However, Ashland is still analyzing certain aspects of the Tax Act and refining certain calculations, which could potentially affect~~ the measurement of ~~these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to~~operating lease liabilities:

(In millions)				Three months ended June 30, 2020				Nine months ended June 30, 2020
Operating cash flows from operating leases				$	7			$	21

Maturity Analysis of Lease Liabilities

Maturities of lease liabilities are shown below as of June 30, 2020:

(In millions)	As of June 30, 2020
Remainder of 2020	$	7
2021		26
2022		34
2023		16
2024		13
Thereafter	$	98
Total lease payments		194
Less amount of lease payment representing interest		(45	)
Total present value of lease payments	$	149

As of September 30, 2019, under the ~~remeasurement of~~previous guidance, the ~~deferred tax balance was a favorable tax adjustment of $126 million.~~

~~Provisional amounts - Foreign tax effects~~

The one-time transition tax is based on Ashland's total post-1986 earnings and profits (E&P) of foreign subsidiaries that were previously deferred from U.S. income taxes. Ashland recorded a provisional amount for this one-time transition tax liability of $142 million. Ashland has not yet completed its calculation of the total post-1986 E&P for these foreign subsidiaries. In addition, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when Ashland finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities,future minimum rental payments are as these amounts continue to be indefinitely reinvested in foreign operations. Ashland determined that the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable at this time.follows:

(In millions)	As of September 30, 2019
2020	$	29
2021		27
2022		34
2023		15
2024		13
Thereafter		110
Total lease payments	$	228

NOTE J – INCOME TAXES

Current fiscal year

Ashland’s effective tax rate in any interim period is subject to adjustments related to discrete items and the mix of domestic and foreign operating results. The overall effective tax rate was ~~200%~~an expense of 19% for the three months ended ~~December 31, 2017~~June 30, 2020 and a benefit of 4% for the nine months ended June 30, 2020.

The current quarter rate was primarily impacted by income mix, and net unfavorable discrete items of $4 million. The current nine months tax rate was impacted by nondeductible goodwill impairment of $527 million of the $530 million charge taken during the nine months and a favorable tax discrete ~~adjustments of $16 million~~item from the tax benefit related to the Swiss Tax ~~Act.~~

Reform.

Prior fiscal year

The overall effective tax ~~benefit~~ rate was ~~39%~~a negative 5% for the three months ended ~~December 31, 2016~~June 30, 2019 and 114% for the nine months ended June 30, 2019. The quarter tax rate was primarily impacted by income ~~mix.~~

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

mix, as well as $2 million in net favorable tax discrete items including the favorable adjustment from the release of reserves related to unrecognized tax benefits and the unfavorable adjustment related to transaction tax and other items. The nine month period was primarily impacted by the items referenced in the three-month period, as

~~NOTE I – INCOME TAXES (continued)~~

well as a net $17 million from unfavorable tax discrete items including the final assessment of the U.S. Tax Act and other items.

Unrecognized tax benefits

Changes in unrecognized tax benefits are summarized as follows for the ~~three~~nine months ended ~~December 31, 2017.~~June 30, 2020.

(In millions)
Balance at October 1, 2019	$	165
Increases related to positions taken on items from prior years		2
Decreases related to positions taken on items from prior years		(1	)
Increases related to positions taken in the current year		4
Lapse of statute of limitations		(1	)
Balance at June 30, 2020	$	169

(In millions)
Balance at October 1, 2017 $ 194
Increases related to positions taken on items from prior years 2
Increases related to positions taken in the current year 3
Balance at December 31, 2017 $ 199

From a combination of statute expirations and audit settlements in the next twelve months, Ashland expects a decrease in the amount accrued for uncertain tax positions of between ~~$22~~$1 million and ~~$32~~$3 million for continuing operations. It is reasonably possible that there could be other material changes to the amount of uncertain tax positions due to activities of the taxing authorities, settlement of audit issues or the reassessment of existing uncertain tax positions; however, Ashland is not able to estimate the impact of these items at this time.

NOTE JK - EMPLOYEE BENEFIT PLANS

Plan contributions

For the ~~three~~nine months ended ~~December 31, 2017,~~June 30, 2020, Ashland contributed $2$4 million to its non-U.S. pension plans and ~~zero~~$1 million to its U.S. pension plans. Ashland expects to make additional contributions of approximately $5$1 million to its non-U.S. plans ~~and $1 million to its U.S. plans~~ during the remainder of ~~2018.~~

2020.

Plan ~~Remeasurements~~

~~Effective January 1, 2017,~~ remeasurement

Ashland ~~discontinued certain post-employment health and life insurance benefits. The effect~~settled a non-U.S. pension plan during the first quarter of ~~these~~fiscal 2019, which required the plan ~~changes~~to be remeasured. This remeasurement resulted in a ~~remeasurement~~curtailment gain of ~~$2 million recorded within the other net period benefit cost (income) caption on the Statement of Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016.~~

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE J – EMPLOYEE BENEFIT PLANS (continued)~~

$18 million.

Components of net periodic benefit costs (income)

The following table details the components of pension and other postretirement benefit costs for continuing operations.

	Pension benefits						Other postretirement benefits
(In millions)	2020			2019			2020		2019
Three months ended June 30
Service cost	$	1		$	1		$	—	$	1
Interest cost		2			2			1		—
Expected return on plan assets		(3	)		(2	)		—		—
Curtailment		—			—			—		—
Total net periodic benefit costs	$	—		$	1		$	1	$	1
Nine months ended June 30
Service cost	$	3		$	4		$	1	$	1
Interest cost		5			8			1		1
Expected return on plan assets		(7	)		(8	)		—		—
Curtailment		—			(18	)		—		—
Total net periodic benefit costs (income)	$	1		$	(14	)	$	2	$	2

Other postretirement
Pension benefits benefits
(In millions) 2017
2016
2017
2016
Three months ended December 31
Service cost (a)
$ 2
$ 2
$ 1
$ —
Interest cost (b)
3
2
—
1
Expected return on plan assets (b)
(3 ) (3 ) —
—
Actuarial gain (b)
—
—
—
(2 )
Total net periodic benefit costs (income) $ 2
$ 1
$ 1
$ (1 )


~~(a)~~	Service cost was not impacted by new accounting guidance adopted in the current quarter and is therefore still classified within the selling, general and administrative expense and cost of sales captions on the Statements of Consolidated Comprehensive Income (Loss). See Note A for additional information.


~~(b)~~	These components are now classified within the other net periodic benefit income caption on the Statements of Consolidated Comprehensive Income (Loss) due to the adoption of new accounting guidance in the current quarter. See Note A for additional information.

For segment reporting purposes, service cost ~~for continuing operations~~ is proportionately allocated to each segment, excluding the Unallocated and other segment, ~~while all~~and is recorded within the selling, general and administrative expense and cost of sales captions on the Statements of Consolidated Comprehensive Loss (Income). All other ~~costs for continuing operations~~

components are recorded within the other net periodic benefit income caption on the Statements of Consolidated Comprehensive ~~Income (Loss)~~Loss (Income).

NOTE KL–LITIGATION, CLAIMS AND CONTINGENCIES

Asbestos litigation

Ashland ~~and Hercules have~~is subject to liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims result from indemnification obligations undertaken in 1990 in connection with the sale of Riley Stoker Corporation (Riley) and the acquisition of Hercules in November 2008. Although Riley, a former subsidiary, was neither a producer nor a manufacturer of asbestos, its industrial boilers contained some asbestos-containing components provided by other companies. Hercules, an indirect wholly-owned subsidiary of Ashland, has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products sold by one of Hercules’ former subsidiaries to a limited industrial market.

To assist in developing and annually updating independent reserve estimates for future asbestos claims and related costs given various assumptions for Ashland and Hercules asbestos claims, Ashland retained ~~Hamilton, Rabinovitz &~~Nathan Associates Inc. ~~(HR&A)~~(Nathan). The methodology used by ~~HR&A~~Nathan to project future asbestos costs is based largely on recent experience, including claim-filing and settlement rates, disease mix, enacted legislation, open claims and litigation defense. The claim experience of Ashland and Hercules are separately compared to the results of previously conducted third party epidemiological studies estimating the number of people likely to develop asbestos-related diseases. Those studies were undertaken in connection with national analyses of the population expected to have been exposed to asbestos. Using that information, ~~HR&A~~Nathan estimates a range of the number of future claims that may be filed, as well as the related costs that may be incurred in resolving those claims. Changes in asbestos-related liabilities and receivables are recorded on an after-tax basis within the discontinued operations caption in the Statements of Consolidated Comprehensive ~~Income.~~

Income (Loss).

Ashland asbestos-related litigation

The claims alleging personal injury caused by exposure to asbestos asserted against Ashland result primarily from indemnification obligations undertaken in 1990 in connection with the sale of ~~Riley Stoker Corporation, a former subsidiary.~~Riley. The amount and timing of settlements and number of open claims can fluctuate from period to period. A summary of Ashland asbestos claims activity, excluding Hercules claims, follows.

	Nine months ended
	June 30						Years ended September 30
(In thousands)	2020			2019			2019			2018			2017
Open claims - beginning of year		53			53			53			54			57
New claims filed		1			2			2			2			2
Claims settled		—			(1	)		(1	)		(1	)		(1	)
Claims dismissed		(5	)		(1	)		(1	)		(2	)		(4	)
Open claims - end of period		49			53			53			53			54

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES (continued)~~

Three months ended
December 31 Years ended September 30
(In thousands) 2017
2016
2017
2016
2015
Open claims - beginning of period 54
57
57
60
65
New claims filed 1
—
2
2
2
Claims settled —
—
(1 ) —
—
Claims dismissed (1 ) (1 ) (4 ) (5 ) (7 )
Open claims - end of period 54
56
54
57
60

Ashland asbestos-related liability

Nathan.

During the most recent annual update of this estimate completed during the June ~~2017~~2020 quarter, it was determined that the liability for Ashland asbestos-related claims should be increased by ~~$36~~$13 million. Total reserves for asbestos claims were ~~$409~~$341 million at ~~December 31, 2017~~June 30, 2020 compared to ~~$419~~$352 million at September 30, ~~2017~~.2019.

A progression of activity in the asbestos reserve is presented in the following table.

	Nine months ended
	June 30						Years ended September 30
(In millions)	2020			2019			2019			2018			2017
Asbestos reserve - beginning of year	$	352		$	380		$	380		$	419		$	415
Reserve adjustment		13			1			1			(8	)		36
Amounts paid		(24	)		(21	)		(29	)		(31	)		(32	)
Asbestos reserve - end of period (a)	$	341		$	360		$	352		$	380		$	419

Three months ended
December 31 Years ended September 30
(In millions) 2017
2016
2017
2016
2015
Asbestos reserve - beginning of period $ 419
$ 415
$ 415
$ 409
$ 438
Reserve adjustment —
—
36
37
—
Amounts paid (10 ) (9 ) (32 ) (31 ) (29 )
Asbestos reserve - end of period (a)
$ 409
$ 406
$ 419
$ 415
$ 409


(a)	Included ~~$34~~$29 million and $28 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of ~~December 31, 2017~~both June 30, 2020 and September 30, ~~2017.~~2019.

Ashland asbestos-related receivables

Ashland has insurance coverage for certain litigation defense and claim settlement costs incurred in connection with its asbestos claims, and coverage-in-place agreements exist with the insurance companies that provide substantially all of the coverage that will be accessed.

For the Ashland asbestos-related obligations, Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. ~~Substantially all~~A substantial portion of the estimated receivables from insurance companies are expected to be due from domestic ~~insurers, all of which are solvent.~~

insurers.

At ~~December 31, 2017,~~June 30, 2020, Ashland’s receivable for recoveries of litigation defense and claim settlement costs from insurers amounted to ~~$151~~$105 million (excluding the Hercules receivable for asbestos claims) compared to ~~$155~~$123 million at September 30, ~~2017.~~2019. During the June ~~2017~~2020 quarter, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed. This model update resulted in a ~~$15~~$1 million increase in the receivable for probable insurance recoveries.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES (continued)~~

A progression of activity in the Ashland insurance receivable is presented in the following table.

	Nine months ended
	June 30						Years ended September 30
(In millions)	2020			2019			2019			2018			2017
Insurance receivable - beginning of year	$	123		$	140		$	140		$	155		$	151
Receivable adjustment		1			(5	)		(5	)		(5	)		15
Insurance settlement		(10	)		—			—			—			(5	)
Amounts collected		(7	)		(5	)		(12	)		(10	)		(6	)
Insurance receivable - end of period (a)	$	105		$	130		$	123		$	140		$	155

Three months ended
December 31 Years ended September 30
(In millions) 2017
2016
2017
2016
2015
Insurance receivable - beginning of period $ 155
$ 151
$ 151
$ 150
$ 402
Receivable adjustment —
—
15
16
(3 )
Insurance settlement —
—
(5 ) (4 ) (227 )
Amounts collected (4 ) (2 ) (6 ) (11 ) (22 )
Insurance receivable - end of period (a)
$ 151
$ 149
$ 155
$ 151
$ 150


(a)	Included $14 million and $15 million classified in accounts receivable on the Condensed Consolidated Balance Sheets as of ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017.~~2019.

Hercules asbestos-related litigation

Hercules has liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products which were sold by one of Hercules’ former subsidiaries to a limited industrial market. The amount and timing of settlements and number of open claims can fluctuate from period to period. A summary of Hercules’ asbestos claims activity follows.

	Nine months ended
	June 30						Years ended September 30
(In thousands)	2020			2019			2019			2018			2017
Open claims - beginning of year		13			13			13			12			15
New claims filed		1			—			1			2			1
Claims dismissed		(1	)		(1	)		(1	)		(1	)		(4	)
Open claims - end of period		13			12			13			13			12

Three months ended
December 31
Years ended September 30
(In thousands) 2017
2016
2017
2016
2015
Open claims - beginning of period 12
15
15
20
21
New claims filed —
—
1
1
1
Claims dismissed —
—
(4 ) (6 ) (2 )
Open claims - end of period 12
15
12
15
20

Hercules asbestos-related liability

From the range of estimates, Ashland records the amount it believes to be the best estimate of future payments for litigation defense and claim settlement costs, which generally approximates the mid-point of the estimated range of exposure from model results. Ashland reviews this estimate, and related assumptions quarterly and annually updates the results of a non-inflated, non-discounted approximate 50-year model developed with the assistance of ~~HR&A.~~Nathan. As a result of the most recent annual update of this estimate, completed during the June ~~2017~~2020 quarter, it was determined that the liability for Hercules asbestos-related claims should be ~~increased~~decreased by ~~$16~~$3 million. Total reserves for asbestos claims were ~~$315~~$235 million at ~~December 31, 2017~~June 30, 2020 compared to ~~$323~~ $252million at September 30, ~~2017~~.

2019.

A progression of activity in the asbestos reserve is presented in the following table.

	Nine months ended
	June 30						Years ended September 30
(In millions)	2020			2019			2019			2018			2017
Asbestos reserve - beginning of year	$	252		$	282		$	282		$	323		$	321
Reserve adjustments		(3	)		(10	)		(10	)		(19	)		16
Amounts paid		(14	)		(15	)		(20	)		(22	)		(14	)
Asbestos reserve - end of period (a)	$	235		$	257		$	252		$	282		$	323


	(a)

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES (continued)~~

Three months ended
December 31 Years ended September 30
(In millions) 2017
2016
2017
2016
2015
Asbestos reserve - beginning of period $ 323
$ 321
$ 321
$ 311
$ 329
Reserve adjustment —
—
16
25
4
Amounts paid (8 ) (3 ) (14 ) (15 ) (22 )
Asbestos reserve - end of period (a) $ 315
$ 318
$ 323
$ 321
$ 311


~~(a)~~	Included ~~$14~~$22 million and $21 million classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets as of ~~December 31, 2017~~both June 30, 2020 and September 30, ~~2017.~~2019.

Hercules asbestos-related receivables

For the Hercules asbestos-related obligations, certain reimbursement obligations pursuant to coverage-in-place agreements with insurance carriers exist. ~~As a result, any increases in the asbestos reserve have been partially offset by probable insurance recoveries.~~ Ashland has estimated the value of probable insurance recoveries associated with its asbestos reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage, including an assumption that all solvent insurance carriers remain solvent. The estimated receivable consists exclusively of solvent domestic insurers.

As of ~~December 31, 2017~~June 30, 2020, Ashland’s receivable for recoveries of litigation defense and ~~September 30, 2017, the receivables~~claims costs from insurers with respect to Hercules amounted to ~~$68~~$47 million. During the June ~~2017~~2020 quarter, the annual update of the model used for purposes of valuing the asbestos reserve and its impact on valuation of future recoveries from insurers was completed. This model update resulted in a $5decrease of $2 million ~~increase~~ in the receivable for probable insurance recoveries.

A progression of activity in the Hercules insurance receivable is presented in the following table.

	Nine months ended
	June 30						Years ended September 30
(In millions)	2020			2019			2019			2018			2017
Insurance receivable - beginning of year	$	49		$	54		$	54		$	68		$	63
Receivable adjustment		(2	)		(5	)		(5	)		(14	)		5
Insurance receivable - end of period	$	47		$	49		$	49		$	54		$	68

Three months ended
December 31 Years ended September 30
(In millions) 2017
2016
2017
2016
2015
Insurance receivable - beginning of period $ 68
$ 63
$ 63
$ 56
$ 77
Receivable adjustment —
—
5
7
1
Insurance settlement —
—
—
—
(22 )
Insurance receivable - end of period $ 68
$ 63
$ 68
$ 63
$ 56

Asbestos litigation cost projection

Projecting future asbestos costs is subject to numerous variables that are extremely difficult to predict. In addition to the significant uncertainties surrounding the number of claims that might be received, other variables include the type and severity of the disease alleged by each claimant, the long latency period associated with asbestos exposure, mortality rates, dismissal rates, costs of medical treatment, the impact of bankruptcies of other companies that are co-defendants in claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, and the impact of potential changes in legislative or judicial standards. Furthermore, any predictions with respect to these variables are subject to even greater uncertainty as the projection period lengthens. ~~In light of~~Considering these inherent uncertainties, Ashland believes that the asbestos reserves for Ashland and Hercules represent the best estimate within a range of possible outcomes. As a part of the process to develop these estimates of future asbestos costs, a range of long-term cost models was developed. These models are based on national studies that predict the number of people likely to develop asbestos-related diseases and are heavily influenced by assumptions regarding long-term inflation rates for indemnity payments and legal defense costs, as well as other variables mentioned previously. Ashland has currently estimated in various models ranging from approximately 40 to 50 year periods that it is reasonably

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES (continued)~~

possible that total future litigation defense and claim settlement costs on an inflated and undiscounted basis could range as high as approximately ~~$660~~$520 million for the Ashland asbestos-related litigation (current reserve of ~~$409~~$341 million) and approximately ~~$510~~$350 million for the Hercules asbestos-related litigation (current reserve of ~~$315~~$235 million), depending on the combination of assumptions selected in the various models. If actual experience is worse than projected, relative to the number of claims filed, the severity of alleged disease associated with those claims or costs incurred to resolve those claims, or actuarial refinement or improvements to the assumptions used within these models are initiated, Ashland may need to further increase the estimates of the costs associated with asbestos claims and these increases could be material over time.

Environmental remediation and asset retirement obligations

Ashland is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively, environmental remediation) at multiple locations. At ~~December 31, 2017~~,June 30, 2020, such locations included 8283 waste treatment or disposal sites where Ashland has been identified as a potentially responsible party under Superfund or similar state laws, ~~118~~113 current and former operating facilities (including certain operating facilities conveyed as part of ~~the MAP Transaction)~~previous divestitures) and about 1,225 service station properties, of which 3627 are being actively remediated.

Ashland’s reserves for environmental remediation and related environmental litigation amounted to ~~$168~~$198 million at ~~December 31, 2017~~June 30, 2020 compared to ~~$163~~$186 million at September 30, ~~2017,~~2019, of which ~~$125~~$155 million at ~~December 31, 2017~~June 30, 2020 and ~~$121~~$143 million at September 30, ~~2017~~2019 were classified in other noncurrent liabilities on the Condensed Consolidated Balance Sheets. The remaining reserves were classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets.

The following table provides a reconciliation of the changes in the environmental remediation reserves during the ~~three~~nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~.2019.

	Nine months ended
	June 30
(In millions)	2020			2019
Reserve - beginning of period	$	186		$	187
Disbursements		(28	)		(23	)
Revised obligation estimates and accretion		40			28
Reserve - end of period	$	198		$	192

Three months ended
December 31
(In millions) 2017
2016
Reserve - beginning of period $ 163
$ 177
Disbursements (8 ) (7 )
Revised obligation estimates and accretion 13
4
Reserve - end of period $ 168
$ 174

The total reserves for environmental remediation reflect Ashland’s estimates of the most likely costs that will be incurred over an extended period to remediate identified conditions for which the costs are reasonably estimable, without regard to any third-party recoveries. Engineering studies, probability techniques, historical experience and other factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated reserves for environmental remediation. Ashland continues to discount certain environmental sites and regularly adjusts its reserves as environmental remediation continues. Ashland has estimated the value of its probable insurance recoveries associated with its environmental reserve based on management’s interpretations and estimates surrounding the available or applicable insurance coverage. At ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017,~~2019, Ashland’s recorded receivable for these probable insurance recoveries was ~~$14~~$15 million and ~~$15~~$13 million, ~~respectively,~~ of which ~~$13 million and $14~~$13 million at ~~December 31, 2017~~June 30, 2020 and $12 million atSeptember 30, ~~2017, respectively, were~~2019 was classified in other noncurrent assets on the Condensed Consolidated Balance Sheets.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE K – LITIGATION, CLAIMS AND CONTINGENCIES (continued)~~

Components of environmental remediation expense included within the selling, general and administrative expense caption of the Statements of Consolidated Comprehensive Income (Loss) are presented in the following table for the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~.2019.

	Three months ended						Nine months ended
	June 30						June 30
(In millions)	2020			2019			2020			2019
Environmental expense	$	29		$	21		$	39		$	27
Accretion		—			—			1			1
Legal expense		1			2			4			5
Total expense		30			23			44			33

Insurance receivable		(1	)		(1	)		(4	)		(2	)
Total expense, net of receivable activity (a)	$	29		$	22		$	40		$	31

Three months ended
December 31
(In millions) 2017
2016
Environmental expense $ 12
$ 4
Accretion 1
—
Legal expense 1
2
Total expense 14
6

Insurance receivable (a)
—
—
Total expense, net of receivable activity $ 14
$ 6


(a)	~~Activity~~ Net expense of ~~$0 denotes value less than $1 million.~~$8 million and $10 million for the three and nine months ended June 30, 2020, and $5 million and $7 million the three and nine months ended June 30, 2019, respectively, relates to divested businesses which qualified for treatment as discontinued operations for which certain environmental liabilities were retained by Ashland. These amounts are classified within the income from discontinued operations caption of the Statements of Consolidated Comprehensive Income (loss).

Environmental remediation reserves are subject to numerous inherent uncertainties that affect Ashland’s ability to estimate its share of the costs. Such uncertainties involve the nature and extent of contamination at each site, the extent of required cleanup efforts under existing environmental regulations, widely varying costs of alternate cleanup methods, changes in environmental regulations, the potential effect of continuing improvements in remediation technology, and the number and financial strength of other potentially responsible parties at multiparty sites. Although it is not possible to predict with certainty the ultimate costs of environmental remediation, Ashland currently estimates that the upper end of the reasonably possible range of future costs for identified sites could be as high as approximately ~~$412~~$480 million. The largest reserve for any site is ~~approximately 15%~~14% of the remediation reserve.

Other legal proceedings and claims

In addition to the matters described above, there are other various claims, lawsuits and administrative proceedings pending or threatened against Ashland and its current and former subsidiaries. Such actions are with respect to commercial matters, product liability, toxic tort liability, and other environmental matters, which seek remedies or damages, some of which are for substantial amounts. While Ashland cannot predict with certainty the outcome of such actions, it believes that adequate reserves have been recorded and losses already recognized with respect to such actions were immaterial as of ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017~~.2019. There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions; however, Ashland believes that such potential losses were immaterial as of ~~December 31, 2017~~.June 30, 2020.

NOTE LM– EARNINGS PER SHARE

The following is the computation of basic and diluted earnings per share (EPS) from continuing operations attributable to Ashland. Stock appreciation rights (SARs), stock options and warrants available to purchase shares outstanding for each reporting period whose grant price was greater than the average market price of Ashland Common Stock for each applicable period were not included in the computation of income from continuing operations per diluted share because the effect of these instruments would be antidilutive. The total number of these shares outstanding was approximately ~~0.7~~2 million and ~~0.9~~1 million at ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, respectively. Earnings per share is reported under the treasury stock method.

	Three months ended				Nine months ended
	June 30				June 30
(In millions, except per share data)	2020		2019		2020			2019
Numerator
Numerator for basic and diluted EPS -
Income (loss) from continuing operations	$	50	$	23	$	(491	)	$	(3	)
Denominator
Denominator for basic EPS - Weighted- average common shares outstanding		60		61		61			63
Share based awards convertible to common shares (a)		1		1		—			—
Denominator for diluted EPS - Adjusted weighted- average shares and assumed conversions		61		62		61			63
EPS from continuing operations
Basic	$	0.82	$	0.38	$	(8.11	)	$	(0.05	)
Diluted		0.81		0.37		(8.11	)		(0.05	)


	(a)

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE L~~ – ~~EARNINGS PER SHARE (continued)~~

Three months ended
December 31
(In millions except per share data) 2017
2016
Numerator
Numerator for basic and diluted EPS –
Loss from continuing operations $ (7 ) $ (65 )
Denominator

Denominator for basic EPS – Weighted-average

common shares outstanding 62
62
Share-based awards convertible to common shares (a)
—
—
Denominator for diluted EPS – Adjusted weighted-

average shares and assumed conversions 62
62

EPS from continuing operations attributable to Ashland
Basic $ (0.12 ) $ (1.05 )
Diluted (0.12 ) (1.05 )


~~(a)~~	As a result of the loss from continuing operations attributable to Ashland during the ~~three~~nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, the effect of the share-based awards convertible to common shares would be ~~antidilutive. In accordance with U.S. GAAP, they~~antidilutive and have been excluded from the diluted EPS calculation.

NOTE MN– EQUITY ITEMS

Stock repurchase ~~programs~~

program agreements

In April 2015, Ashland's Board of Directors approved a $1 billion share repurchase authorization that was set to expire on December 31, 2017 (the 2015 stock repurchase program). This authorization allows for Ashland’s common shares to be repurchased in open market transactions, privately negotiated transactions or pursuant to one or more accelerated stock repurchase programs or Rule 10b5-1 plans.

~~During 2017, Ashland's Board of Directors extended~~May 2019, under the ~~2015~~2018 stock repurchase program, ~~indefinitely. As of December 31, 2017, $500 million of~~Ashland announced that it entered into an accelerated share repurchase ~~authorization remains~~agreement (2019 ASR Agreement). Under the 2019 ASR Agreement, Ashland paid an initial purchase price of $200 million and received an initial delivery of 2.2 million shares of common stock during May 2019. The bank exercised its early termination option under the ~~2015~~2019 ASR Agreement in August 2019, and an additional 400 thousand shares were repurchased, bringing the total shares repurchased upon settlement to 2.6 million. This was the first stock repurchase ~~program.~~

under the 2018 stock repurchase program and 0 additional shares have been repurchased in fiscal 2020.

Stockholder dividends

~~In May 2017, subsequent to the final distribution~~

Dividends of ~~Valvoline Inc.'s common stock, the Board of Directors of Ashland announced a quarterly cash dividend of 22.5~~27.5 cents per share ~~to eligible shareholders at record which was~~were paid ~~for quarterly dividends~~ in the first, ~~quarter~~second and third quarters of fiscal ~~2018~~2020, and the third and fourth quarters of fiscal ~~2017. This~~2019. These dividends represented a ~~reduction from~~10% increase over the previous quarterly cash dividend of 3925 cents per share ~~which was~~ paid ~~for quarterly dividends~~ in the first and second quarters of fiscal ~~2017.~~2019.

Accumulated other comprehensive income (loss)

Components of other comprehensive income (loss) recorded in the Statements of Consolidated Comprehensive Income (Loss) are presented below, before tax and net of tax effects.

	2020								2019
(In millions)	Before tax			Tax (expense) benefit		Net of tax			Before tax			Tax (expense) benefit		Net of tax
Three months ended June 30
Other comprehensive income (loss)
Unrealized translation gain (loss)	$	7		$	—	$	7		$	3		$	—	$	3
Total other comprehensive income (loss)	$	7		$	—	$	7		$	3		$	—	$	3

Nine months ended June 30
Other comprehensive income (loss)
Unrealized translation gain (loss)	$	(7	)	$	—	$	(7	)	$	(37	)	$	—	$	(37	)
Pension and postretirement obligation adjustment:
Adjustment of unrecognized prior service costs		—			—		—			(7	)		1		(6	)
Total other comprehensive income (loss)		(7	)		—		(7	)		(44	)		1		(43	)

Summary of stockholders’ equity

A reconciliation of changes in stockholders’ equity are as follows:

	Three months ended						Nine months ended
	June 30						June 30
(In millions)	2020			2019			2020			2019
Common stock and paid in capital
Balance, beginning of period	$	766		$	953		$	757		$	947
Common shares issued under stock incentive and other plans (a)		3			2			12			8
Common shares purchased under repurchase program (b)					(200	)					(200	)
Balance, end of period		769			755			769			755
Retained earnings
Balance, beginning of period		2,641			2,780			3,224			2,750
Adoption of new accounting pronouncements (c)		—			—			—			34
Net income (loss)		37			66			(513	)		94
Regular dividends		(17	)		(16	)		(50	)		(48	)
Balance, end of period		2,661			2,830			2,661			2,830
Accumulated other comprehensive income (loss)
Balance, beginning of period		(424	)		(371	)		(410	)		(291	)
Adoption of new accounting pronouncements (c)		—			—			—			(34	)
Unrealized translation gain (loss)		7			3			(7	)		(37	)
Pension and postretirement obligation adjustment		—			—			—			(6	)
Net change in investment securities		—			—			—			—
Balance, end of period		(417	)		(368	)		(417	)		(368	)
Total stockholders' equity	$	3,013		$	3,217		$	3,013		$	3,217
Cash dividends declared per common share	$	0.275		$	0.275		$	0.825		$	0.775


	(a)

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE M – EQUITY ITEMS (continued)~~

2017 2016
Tax
Tax

Before
(expense)
Net of
Before
(expense)
Net of
(In millions) tax
benefit
tax
tax
benefit
tax
Three months ended December 31
Other comprehensive income (loss)
Unrealized translation gain (loss) $ 3
$ —
$ 3
$ (150 ) $ 4
$ (146 )
Pension and postretirement obligation adjustment:
Amortization of unrecognized prior service
credits included in net income (a)
—
—
—
(3 ) 2
(1 )
Net change in available-for-sale securities:
Unrealized gains during period 11
(2 ) 9
—
—
—
Reclassification adjustment for realized gains
included in net income (1 ) —
(1 ) —
—
—
Total other comprehensive income (loss) $ 13
$ (2 ) $ 11
$ (153 ) $ 6
$ (147 )


~~(a)~~	~~For~~ Common shares issued were 14,460 shares and 46,725 shares for the three months ended ~~December 31, 2016,~~June 30, 2020 and 2019, respectively, and 293,485 shares and 281,077 shares for the ~~amortization of unrecognized prior service credits was~~nine months ended June 30, 2020 and 2019.

(b)

Common shares repurchased were 0 shares and 2,236,546 in the three and nine months ended June 30, 2020 and 2019.

(c)

Represents the cumulative-effect adjustment related to ~~pension~~the adoption of the new guidance related to the accounting for equity securities and ~~other postretirement benefit plans that transferred to Valvoline and was classified in the discontinued operations caption on the Statements~~tax effects of ~~Consolidated Comprehensive Income (Loss).~~intercompany transfers during fiscal 2019.

NOTE NO – STOCK INCENTIVE PLANS

Ashland has stock incentive plans under which key employees or directors are granted stock appreciation rights (SARs), performance awards or nonvested stock awards. Each program is typically a long-term incentive plan designed to link employee compensation with increased shareholder value or reward superior performance and encourage continued employment with Ashland. Ashland recognizes compensation expense for the grant date fair value of stock-based awards over the applicable vesting period.

The components of Ashland’s ~~pretax~~pre-tax stock-based compensation expense included in continuing operations are as follows:

	Three months ended					Nine months ended
	June 30					June 30
(In millions)	2020 (a)		2019 (b)			2020 (a)		2019 (b)
SARs	$	1	$	1		$	4	$	5
Nonvested stock awards		4		6			7		16
Performance share awards		—		(1	)		1		1
	$	5	$	6		$	12	$	22

Three months ended
December 31
(In millions)
2017 (a)

2016 (b)

SARs $ 1
$ 1
Nonvested stock awards 6
4
Performance awards 4
2
$ 11
$ 7


(a)	~~The three months ended December 31, 2017 included~~ Included $2 million ~~of expense related to cash-settled nonvested restricted stock awards~~ and ~~$2 million of expense related to cash-settled performance units.~~


~~(b)~~	~~The three months ended December 31, 2016 included~~ $1 million of expense related to cash-settled nonvested restricted stock awards during the three and $1nine months ended June 30, 2020 and 0 related to cash-settled performance units during the three and nine months ended June 30, 2020.

(b)

Included $2 million and $5 million of expense related to cash-settled ~~performance units.~~nonvested restricted stock awards during the three and nine months ended June 30, 2019.

~~SARs~~

NOTE P – REVENUE

Revenue recognition

Ashland’s revenue is measured as the amount of consideration it expects to receive in exchange for transferring goods or providing services and is recognized when performance obligations are ~~granted~~satisfied under

the terms of contracts with customers. Ashland generally utilizes standardized language for the terms of contracts, unless a separate agreement has been entered into with a customer that supersedes the standard language.

A performance obligation is deemed to ~~employees~~be satisfied by Ashland when control of the product or ~~directors~~service is transferred to the customer. The transaction price of a contract, or the amount Ashland expects to receive upon satisfaction of all performance obligations, is determined by reference to the contract’s terms and includes adjustments, if applicable, for any variable consideration, such as volume discounts, rebates, refunds and right to return. Where a contract contains more than one distinct performance obligation, the transaction price is allocated to each performance obligation based on the standalone selling price of each performance obligation, although these situations do not occur frequently and are generally not included within Ashland’s contracts. Any unsatisfied performance obligations are not material. Standalone selling prices are based on prices Ashland charges to customers, which in some cases is based on established market prices. Ashland generally collects the cash from its customers within 60 days of the product delivery date. Sales and other similar taxes collected from customers on behalf of third parties are excluded from the contract price.

All of Ashland’s revenue is derived from contracts with customers, and nearly all contracts with customers contain one performance obligation for the transfer of goods where such performance obligation is satisfied at a ~~price equal~~point in time. Control of a product is deemed to be transferred to the ~~fair market value~~customer generally upon shipment or delivery. Costs for shipping and handling activities, whether performed before or after the customer obtains control of the ~~stock on the date of grant and typically become exercisable over periods of one~~goods, are accounted for as fulfillment costs when not reimbursed.

Costs incurred to three years. Unexercised SARs lapse ten years and one month after the date of grant. SARs granted for the three months ended December 31, 2017 and 2016 were 470 thousand and 422 thousand, respectively. As of December 31, 2017, there was $13 million

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE N – STOCK INCENTIVE PLANS (continued)~~

of total unrecognized compensation costs related to SARs. That cost is expected to be recognized over a weighted-average period of 2.4 years. Ashland estimates the fair value of SARs granted using the Black-Scholes option-pricing model. This model requires several assumptions, which Ashland has developed and updates based on historical trends and current market observations. The accuracy of these assumptions is critical to the estimate of fair value for these equity instruments.

~~Nonvested stock awards~~

Nonvested stock awards are granted to employees or directors at a price equal to the fair market value of the stock on the date of grant and generally vest over a one-to-five-year period. However, such shares or units are subject to forfeiture upon termination of service before the vesting period ends. Only nonvested stock awards granted in the form of shares entitle employees or directors to vote the shares. Dividends on nonvested stock awards granted are in the form of additional units or shares of nonvested stock awards, which are subject to vesting and forfeiture provisions.

~~Stock-settled nonvested stock awards~~

Nonvested stock awards granted in the form of shares were 142 thousand and 81 thousand for the three months ended December 31, 2017 and 2016, respectively. As of December 31, 2017, there was $12 million of total unrecognized compensation costs related to these nonvested stock awards. That cost is expected to be recognized over a weighted-average period of 2.0 years.

~~Cash-settled nonvested stock awards~~

~~Certain nonvested stock awards are granted to employees~~obtain contracts with customers have historically not been significant and are ~~settled~~expensed immediately as the amortization period is generally one year or less. Ashland records bad debt expense in ~~cash upon vesting. As of December 31, 2017, 220 thousand cash-settled nonvested stock awards were outstanding. The value of these cash-settled nonvested stock awards changes in connection~~specific situations when it is determined that the customer is unable to meet its financial obligation.

Trade receivables

Trade receivables are defined as receivables arising from contracts with changes in the fair market value of the Ashland Common Stock. These awards generally vest over a period of three years. The expense recognized related to cash-settled nonvested stock awards was $2 millioncustomers and ~~$1 million during the three months ended December 31, 2017 and 2016, respectively.~~

~~Executive performance incentive and retention program~~

During 2016, certain executives were granted performance-based restricted shares of Ashland in order to provide an incentive to remain employed in the period after the full separation. At December 31, 2017, there were 60 thousand shares outstanding in connection with these awards, which includes forfeitures and the cumulative value of forfeitable dividends. The expense recognition for these awards commenced upon completing the full separation of Valvoline which occurred on May 12, 2017, as discussed further in Note B, and resulted in $2 million of expense for the three months ended December 31, 2017. As of December 31, 2017, there was $8 million of total unrecognized compensation costs related to these awards.

~~Performance awards~~

Ashland sponsors a long-term incentive plan that awards performance shares/units to certain key employees that are primarily tied to Ashland’s overall financial performance relative to internal targets. Additionally, certain outstanding performance awards are tied to Ashland's overall financial performance relative to the financial performance of selected industry peer groups. Awards are granted annually, with each award covering a three-year vesting period.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE N – STOCK INCENTIVE PLANS (continued)~~

~~For awards granted in fiscal 2016, each performance share/unit is convertible to one share of Ashland Common Stock. These plans~~ are recorded ~~as a component of stockholders’ equity in~~within the accounts receivable caption within the Condensed Consolidated Balance Sheets. ~~Performance measures used to determine the actual number~~Ashland’s trade receivables were $415 million and $435 million as of ~~performance shares issuable upon vesting include an equal weighting~~June 30, 2020 and September 30, 2019, respectively.

Disaggregation of ~~Ashland’s total shareholder return (TSR) performance~~revenue

Ashland disaggregates its revenue by segment and ~~Ashland’s return on investment (ROI) performance~~geographical region as ~~compared to the internal targets. TSR relative to peers is considered a market condition while ROI is considered a performance condition under applicable U.S. GAAP.~~

~~For awards granted in fiscal 2017 and 2018, the performance measure used to determine the actual number of performance shares/units issuable upon vesting is~~Ashland believes these categories best depict how management reviews the financial performance of ~~Ashland compared to award targets. The financial performance award metric is considered a performance condition under applicable U.S. GAAP. Additionally,~~its operations. See the actual number of performance shares/units issuable upon vesting can be potentially increased or decreased based on a TSR performance modifier relative to peers of Ashland. For awards granted in fiscal 2017, each performance unit will be settled in cash based on the fair value of Ashland common stock. For awards granted in fiscal 2018, each performance share/unit is convertible to one share of Ashland Common Stock.

~~Nonvested performance shares/units do not entitle employees to vote the shares or to receive any dividends thereon. Performance shares/units granted~~following tables for the three months ended December 31, 2017 and 2016 were 101 thousand and 56 thousand, respectively. As of December 31, 2017, there was $17 million of total unrecognized compensation costs related to performance shares/units. That cost is expected to be recognized over a weighted-average period of 2.2 years.details (intersegment sales eliminations have been excluded). See Note Q for additional information.

Sales by geography
	Three months ended				Nine months ended
	June 30				June 30
(In millions)	2020		2019		2020		2019
Life Sciences
North America	$	58	$	67	$	166	$	193
Europe		62		60		174		170
Asia Pacific		50		45		135		140
Latin America & other		19		18		53		53
	$	189	$	190	$	528	$	556

	Three months ended				Nine months ended
	June 30				June 30
(In millions)	2020		2019		2020		2019
Personal Care & Household
North America	$	42	$	44	$	133	$	135
Europe		65		68		190		217
Asia Pacific		28		28		74		83
Latin America & other		20		18		54		60
	$	155	$	158	$	451	$	495

	Three months ended				Nine months ended
	June 30				June 30
(In millions)	2020		2019		2020		2019
Specialty Additives
North America	$	50	$	59	$	148	$	165
Europe		48		68		157		180
Asia Pacific		29		42		97		120
Latin America & other		8		8		27		29
	$	135	$	177	$	429	$	494

	Three months ended				Nine months ended
	June 30				June 30
(In millions)	2020		2019		2020		2019
Performance Adhesives
North America	$	59	$	76	$	196	$	220
Europe		8		8		24		27
Asia Pacific		2		2		5		5
Latin America & other		1		2		4		6
	$	70	$	88	$	229	$	258

	Three months ended				Nine months ended
	June 30				June 30
(In millions)	2020		2019		2020		2019
Intermediates and Solvents
North America	$	21	$	28	$	59	$	78
Europe		6		5		17		16
Asia Pacific		8		7		21		20
Latin America & other		2		1		5		4
	$	37	$	41	$	102	$	118

NOTE OQ – REPORTABLE SEGMENT INFORMATION

Ashland determines its reportable segments based on how operations are managed internally for the products and services sold to customers, including how the results are reviewed by the chief operating decision maker, which includes determining resource allocation methodologies used for reportable segments. Operating income isand EBITDA are the primary ~~measure on the Statements~~measures of ~~Consolidated Comprehensive Income (Loss)~~performance that isare reviewed by the chief operating decision maker in assessing each reportable segment's financial performance. Ashland does not aggregate operating segments to arrive at these reportable segments.

Change in Reportable Segments

~~Subsequent~~

During the second quarter of fiscal year 2020, Ashland changed the manner in which it manages the business moving from a functionally led to ~~completing~~a business led organization. This change recognizes that Ashland has a diverse portfolio of businesses with different value propositions for the ~~separation from Valvoline Inc. on May 12, 2017, Ashland's operations are managed by~~markets Ashland serves. The organizational change allows Ashland to align its business models, resources and cost structure to the ~~chief operating decision maker within~~specific needs of each business and enables greater ownership and accountability for both short- and long-term performance. Ashland has realigned its segment reporting structure commensurate with this organizational change. As a result, Ashland’s 5 reportable segments include the ~~following three reportable segments:~~consumer specialty businesses: Life Sciences and Personal Care & Household; the industrial specialty businesses: Specialty ~~Ingredients, Composites~~Additives and Performance Adhesives; and Intermediates and Solvents. ~~As a result, the financial~~Corporate includes corporate governance activities and certain legacy matters. The historical segment information ~~for the new reportable segments (Composites and Intermediates and Solvents)~~ has been ~~disclosed for all periods presented. Prior~~recast to conform to the ~~separation from Valvoline Inc., Composites and Intermediates and Solvents were reporting units included within the previous Ashland Performance Materials reportable segment.~~

current segment structure.

Reportable segment business descriptions

~~Specialty Ingredients~~

Consumer Specialties

Life Sciences is ~~a global leader in cellulose ethers, vinyl pyrrolidones~~comprised of pharmaceuticals, nutrition, nutraceuticals, agricultural chemicals, advanced materials and ~~biofunctionals. It offers industry-leading~~fine chemicals. Pharmaceutical solutions include controlled release polymers, disintegrants, film coatings, solubilizers, and tablet binders. Nutrition solutions include thickeners, stabilizers, emulsifiers and additives for enhancing mouthfeel, controlling moisture migration, reducing oil uptake and controlling color. Nutraceutical solutions include products ~~technologies~~for weight management, joint comfort, stomach and ~~resources for solving~~intestinal health, sports nutrition and general wellness, and providing custom formulation, toll processing and ~~product-performance challenges. Specialty Ingredients uses natural, synthetic~~particle engineering solutions. Customers include pharmaceutical, food, beverage, nutraceuticals and ~~semisynthetic polymers derived from cellulose ethers, vinyl pyrrolidones, acrylic polymers, polyester~~supplements manufacturers, hospitals and ~~polyurethane-based adhesives, and plant and seed extract. Specialty Ingredients’ end markets offer comprehensive and innovative solutions for today’s demanding consumer~~radiologists and industrial ~~applications. Key customers include: pharmaceutical companies; makers~~manufacturers.

Personal Care & Household is comprised of ~~personal~~biofunctionals, preservatives, skin care, ~~products, food~~sun care, oral care, hair care and beverages; makers of nutraceuticals and supplements; manufacturers of paint, coatings and construction materials; packaging and converting; and oilfield service companies. On May 17, 2017, Ashland completed its acquisition of the stock of Pharmachem, a leading provider of quality ingredients to

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE O – REPORTABLE SEGMENT INFORMATION (continued)~~

the global health and wellness industries and high-value differentiated products to fragrance and flavor houses. With 14 manufacturing facilities in the United States and Mexico, New Jersey-based Pharmachem develops, manufactures and supplies custom and branded nutritional and fragrance products. See Note C for more information.

~~Composites is a global leader in unsaturated polyester resins, vinyl ester resins and gelcoats. The Composites business manufactures and sells~~household. These businesses have a broad range of ~~general-purpose~~nature-based, biodegradable, and ~~high-performance grades~~performance-enhancing ingredients for customer-driven solutions to help protect, renew, moisturize and revitalize skin and hair, and provide solutions for toothpastes, mouth washes and rinses, denture cleaning and care for teeth. Household supplies nature-derived rheology ingredients, biodegradable surface wetting agents, performance encapsulates, and specialty polymers for household, industrial and institutional cleaning products. Customers include formulators at large multinational branded consumer products companies and smaller, independent boutique companies.

Industrial Specialties

Specialty Additives is comprised of ~~unsaturated polyester~~rheology- and ~~vinyl ester resins, gelcoats~~performance-enhancing additives serving the coatings, construction, energy, automotive and ~~low-profile~~various industrial markets. Solutions include coatings additives for architectural paints, finishes and lacquers, cement- and gypsum- based dry mortars, ready-mixed joint compounds, synthetic plasters for commercial and residential construction, and specialty materials for industrial applications. Products include rheology modifiers (cellulosic and associative thickeners), foam-control agents, surfactants and wetting agents, pH neutralizers, advanced ceramics used in catalytic converters, and environmental filters, ingredients that aid the ~~reinforced plastics~~manufacturing process of ceramic capacitors, plasma display panels and solar cells, ingredients for textile printing, thermoplastic metals and alloys for welding. Products help improve desired functional outcomes through rheology modification and control, water retention, workability, adhesive strength, binding power, film formation, deposition and suspension and emulsification. Customers include global paint manufacturers, electronics and automotive manufacturers, textile mills, the construction industry, and welders.

Performance Adhesives is comprised of adhesives used in packaging, converting and structural applications. Packaging adhesives has an extensive line of pressure sensitive adhesives, functional coatings and primers combined with innovative technology solutions for narrow-, mid- and wide-web applications. Products meet stringent requirements in food and beverage safety, shipping, transportation, health and beauty, industrial, postage and security printing. Structural adhesives include light weighting vehicles and eliminating VOCs in buildings. Customers include converters of packaging materials, manufacturers of building materials and tier one suppliers to transportation industry. The products in the Composites business provide an array of functional properties including corrosion resistance, fire retardance, ultraviolet resistance, water and chemical resistance, high mechanical strength, impact and scratch resistance and high strength-to-weight ratios. Key end markets include transportation, construction, marine and infrastructure. In addition, the business manufactures and sells molten maleic anhydride for the manufacture of a variety of products such as unsaturated polyester resins, copolymers, lubricating oil additives, alkenyl succinic anhydrides, malic acid, fumaric acid and numerous derivative chemicals. Key markets include composites, personal care, dispersants and paper sizing.

Other

Intermediates and Solvents is ~~a leading producer~~comprised of the production of 1,4 butanediol (BDO) and related derivatives, including ~~tetrahydrofuran and~~ n-methylpyrrolidone. These products are used as chemical intermediates in the production of engineering polymers and polyurethanes, and as specialty process solvents in a wide array of applications including electronics, pharmaceuticals, water filtration membranes and more. Butanediol is also ~~supplied~~provided to ~~Ashland’s~~Life Sciences, Personal Care, and Specialty ~~Ingredients business~~Additives for use as a raw material.

Unallocated and Other generally includes items such as certain significant company-wide restructuring activities, ~~including internal separation~~corporate governance costs and legacy costs or ~~adjustments~~activities that relate to divested businesses that are no longer operated by Ashland.

Reportable segment results

Results of Ashland’s reportable segments are presented based on its management and internal accounting structure. The structure is specific to Ashland; therefore, the financial results of Ashland’s reportable segments are not necessarily comparable with similar information for other comparable companies. Ashland allocates all significant costs to its reportable segments except for certain significant company-wide restructuring activities, certain corporate governance costs and other costs or ~~adjustments~~activities that relate to former businesses that Ashland no longer operates. The service cost component of pension and other postretirement benefits costs is allocated to each reportable segment on a ratable basis; while the remaining components of pension and other postretirement benefits costs are recorded within the other net periodic benefit income caption on the Statements of Consolidated Comprehensive Income (Loss). Ashland refines its expense allocation methodologies to the reportable segments from time to time as internal accounting practices are improved, more refined information becomes available and the industry or market changes. Significant revisions to Ashland’s methodologies are adjusted for all segments on a retrospective basis. This includes charges in the current fiscal year for certain corporate governance costs, which were previously allocated. These costs are now reflected in Unallocated and Other for all periods presented.

The following table presents various financial information for each reportable segment for the three and nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~ 2019.

	Three months ended						Nine months ended
	June 30						June 30
(In millions - unaudited)	2020			2019			2020			2019
SALES
Life Sciences	$	189		$	190		$	528		$	556
Personal Care & Household		155			158			451			495
Consumer Specialties		344			348			979			1,051
Specialty Additives		135			177			429			494
Performance Adhesives		70			88			229			258
Industrial Specialties		205			265			658			752
Intermediates and Solvents		37			41			102			118
Intersegment sales (a)
Intermediates and Solvents		(12	)		(13	)		(22	)		(37	)
	$	574		$	641		$	1,717		$	1,884
OPERATING INCOME (LOSS)
Life Sciences	$	40		$	32		$	97		$	88
Personal Care & Household		16			17			(309	)		60
Consumer Specialties		56			49			(212	)		148
Specialty Additives		15			19			(137	)		(5	)
Performance Adhesives		13			16			40			42
Industrial Specialties		28			35			(97	)		37
Intermediates and Solvents		7			8			(7	)		20
Unallocated and other		(43	)		(49	)		(87	)		(125	)
	$	48		$	43		$	(403	)	$	80
DEPRECIATION EXPENSE
Life Sciences	$	8		$	8		$	24		$	24
Personal Care & Household		10			10			30			30
Consumer Specialties		18			18			54			54
Specialty Additives		15			15			46			84
Performance Adhesives		4			4			10			11
Industrial Specialties		19			19			56			95
Intermediates and Solvents		4			3			10			8
Unallocated and other		—			—			—			3
	$	41		$	40		$	120		$	160

AMORTIZATION EXPENSE
Life Sciences	$	7		$	7		$	21		$	21
Personal Care & Household		9			10			27			28
Consumer Specialties		16			17			48			49
Specialty Additives		5			5			14			14
Performance Adhesives		—			—			1			1
Industrial Specialties		5			5			15			15
Intermediates and Solvents		—			—			—			1
	$	21		$	22		$	63		$	65
EBITDA (b) (c)
Life Sciences	$	55		$	47		$	142		$	133
Personal Care & Household		35			37			(252	)		118
Consumer Specialties		90			84			(110	)		251
Specialty Additives		35			39			(77	)		93
Performance Adhesives		17			20			51			54
Industrial Specialties		52			59			(26	)		147
Intermediates and Solvents		11			11			3			29
Unallocated and other		(43	)		(49	)		(83	)		(122	)
	$	110		$	105		$	(216	)	$	305

							June 30, 2020			September 30, 2019
TOTAL ASSETS
Life Sciences							$	1,979		$	1,946
Personal Care & Household								979			1,366
Consumer Specialties								2,958			3,312
Specialty Additives								1,642			1,775
Performance Adhesives								595			618
Industrial Specialties								2,237			2,393
Intermediates and Solvents								164			185
Unallocated and other								1,627			1,361
							$	6,986		$	7,251


	(a)
		Intersegment sales from Intermediates and Solvents are accounted for at prices that approximate fair value. All other intersegment sales are accounted for at cost.


	(b)
		Excludes income (loss) from discontinued operations, other net periodic benefit income (expense) and net income (loss) on divestitures. See the Statement of Consolidated Comprehensive Income (Loss) for applicable amounts excluded.

(c)

Includes $39 million of accelerated depreciation for the nine months ended June 30, 2019.

NOTE R – SUBSEQUENT EVENTS

On July 27, 2020, Ashland announced a definitive agreement to sell the Maleic business, which includes the manufacturing facility in Neal, West Virginia, to AOC Materials, LLC for $100 million. The Maleic business was previously excluded from the sale of Ashland’s Composites business that was previously sold to INEOS Enterprises. See Notes B and C for additional information. This transaction is expected to close prior to the end of calendar year 2020, contingent on customary regulatory approvals and standard closing conditions.

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NOTE O – REPORTABLE SEGMENT INFORMATION (continued)~~

Three months ended
December 31
(In millions - unaudited) 2017
2016
SALES
Specialty Ingredients $ 550
$ 482
Composites 218
165
Intermediates and Solvents 74
57
$ 842
$ 704
OPERATING INCOME (LOSS)

Specialty Ingredients $ 42
$ 40
Composites 18
15
Intermediates and Solvents 8
(7 )
Unallocated and other (29 ) (33 )
$ 39
$ 15

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements including, without limitation, statements made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation” (MD&A), within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Ashland has identified some of these forward-looking statements with words such as “anticipates,” “believes,” “expects,” “estimates,” “is likely,” “predicts,” “projects,” “forecasts,” “objectives,” “may,” “will,” “should,” “plans” and “intends” and the negative of these words or other comparable terminology. ~~In addition,~~ Ashland may from time to time make forward-looking statements in its ~~annual reports,~~Annual Report to Shareholders, quarterlyreports and other filings with the Securities and Exchange Commission (SEC), news releases and other written and oral communications. These forward-looking statements are based on Ashland’s expectations and assumptions, as of the date such statements are made, regarding Ashland’s future operating performance and financial condition and expected effects of the COVID-19 pandemic on Ashland’s business, as well as the economy and other future events or circumstances. Ashland’s expectations and assumptions include, without limitation, those mentioned within the MD&A, internal forecasts and analyses of current and future market conditions and trends, management plans and strategies, operating efficiencies and economic conditions (such as prices, supply and demand, cost of raw materials, and the ability to recover raw-material cost increases through price increases), and risks and uncertainties associated with the following: the impact of acquisitions and/or divestitures Ashland has made or may make ~~including the acquisition of Pharmachem~~ (including the possibility that Ashland may not realize the anticipated benefits from such transactions); Ashland’s substantial indebtedness (including the possibility that such indebtedness and related restrictive covenants may adversely affect Ashland’s future cash flows, results of operations, financial condition and its ability to repay debt); the potential that Ashland does not realize all of the expected benefits of the separation of its Valvoline business; the potential that the Tax Cuts and Jobs Act enacted on December 22, 2017 will have a negative impact on Ashland’s financial results, and severe weather, natural disasters, public health crises (including the COVID-19 pandemic), cyber events and legal proceedings and claims (including product recalls, environmental and asbestos matters)~~. Various risks~~; the effects of the COVID-19 pandemic on the geographies in which Ashland operates, the end markets Ashland serves and ~~uncertainties may cause actual results to differ materially from those stated, projected or implied by any forward-looking statements, including,~~on Ashland’s supply chain and customers; and without limitation, risks and uncertainties affecting Ashland that are contained in “Use of estimates, risks and uncertainties” in Note A of Notes to Consolidated Financial Statements and in Item 1A in its most recent Form 10-K filed with the SEC, which is available on Ashland’s website at http://investor.ashland.com or on the SEC’s website at http://www.sec.gov. Various risks and uncertainties may cause actual results to differ materially from those stated, projected or implied by any forward-looking statements. The extent and duration of the COVID-19 pandemic on our business and operations is uncertain. Factors that influence the impact on our business and operations include the duration and extent of the pandemic, the extent of imposed or recommended containment and mitigation measures, and the general economic consequences of the pandemic. Ashland believes its expectations and assumptions are reasonable, but there can be no assurance that the expectations reflected herein will be achieved. Unless legally required, Ashland undertakes no obligation to update any forward-looking statements made in this Form 10-Q whether as a result of new information, future events or otherwise. Information on Ashland’s website is not incorporated into or a part of this Form 10-Q.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements herein.

BUSINESS OVERVIEW

Ashland profile

Ashland is a premier global leader in providing specialty ~~chemical solutions~~materials to customers in a wide range of consumer and industrial markets, including adhesives, architectural coatings, construction, energy, food and beverage, personal care and pharmaceutical. With approximately ~~6,500~~4,600 employees worldwide, Ashland serves customers in more than 100 countries.

Ashland’s sales generated outside of North America were 62% and 60% for ~~both~~ the three and nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~59% and 60% for the three and nine months ended June 30, 2019, respectively. Sales by region expressed as a percentage of total consolidated sales for the three and nine months ended ~~December 31~~June 30 were as follows:

	Three months ended						Nine months ended
	June 30						June 30
Sales by Geography	2020			2019			2020			2019
North America (a)		38	%		41	%		40	%		40	%
Europe		33	%		33	%		33	%		32	%
Asia Pacific		20	%		19	%		19	%		20	%
Latin America & other		9	%		7	%		8	%		8	%
		100	%		100	%		100	%		100	%

(a)

Ashland includes only U.S. and Canada in its North America designation.

Three months ended
December 31
Sales by Geography 2017
2016
North America (a)
40 % 40 %
Europe 34 % 31 %
Asia Pacific 18 % 20 %
Latin America & other 8 % 9 %
100 % 100 %

~~(a)Ashland includes only U.S. and Canada in its North America designation.~~

Reportable segments

~~Subsequent~~

During the second quarter of fiscal year 2020, Ashland changed the manner in which it manages the business moving from a functionally led to ~~completing~~a business led organization. This change recognizes that Ashland has a diverse portfolio of businesses with different value propositions for the ~~separation from Valvoline Inc., Ashland's businesses are managed within~~markets Ashland serves. The organizational change allows Ashland to align its business models, resources and cost structure to the ~~following three~~specific needs of each business and enable greater ownership and accountability for both short- and long-term performance. As a result, Ashland’s five reportable ~~segments:~~segments include the consumer specialty businesses: Life Sciences and Personal Care & Household; the industrial specialty businesses: Specialty ~~Ingredients, Composites~~Additives and Performance Adhesives; and Intermediates and Solvents. ~~For further descriptions of each reportable~~Corporate includes corporate governance activities and certain legacy matters. The historical segment ~~see “Results of Operations – Reportable Segment Review” beginning on page 45.~~

information has been recast to conform to the current segment structure. The contribution to sales by each reportable segment expressed as a percentage of total consolidated sales for the three and nine months ended ~~December 31~~June 30 were as follows:

	Three months ended						Nine months ended
	June 30						June 30
Sales by Reportable Segment	2020			2019			2020			2019
Life Sciences		33	%		30	%		31	%		30	%
Personal Care & Household		27	%		25	%		26	%		26	%
Consumer Specialties		60	%		55	%		57	%		56	%
Specialty Additives		24	%		27	%		25	%		26	%
Performance Adhesives		12	%		14	%		14	%		14	%
Industrial Specialties		36	%		41	%		39	%		40	%
Intermediates and Solvents		4	%		4	%		4	%		4	%
		100	%		100	%		100	%		100	%

Three months ended
December 31
Sales by Reportable Segment 2017
2016
Specialty Ingredients 65 % 69 %
Composites 26 % 23 %
Intermediates and Solvents 9 % 8 %
100 % 100 %

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

KEY DEVELOPMENTS

Business results

~~Ashland’s~~

Ashland recorded a net ~~loss was $4~~income of $37 million in the current quarter (income of $50 million in continuing operations and loss of $13 million in discontinued operations) compared to a net income of ~~$10~~$66 million in the prior year quarter (income of $23 million in continuing operations and $43 million in discontinued operations). Results for Ashland’s continuing operations were primarily driven by improved product mix, lower raw-material costs and lower selling, general and administrative expense partially offset by lower volumes, between periods. Discontinued operations were primarily driven by the change in results of the Composites segment and Marl facility between periods. Ashland’s EBITDA of $97 million decreased by $51 million, primarily due to the impact of discontinued operations and lower sales volume partially offset by improved product mix, lower raw-materials and lower selling, general and administrative expense costs between periods. Ashland’s Adjusted EBITDA is $143 million for the current quarter compared to $140 million in the prior year quarter. ~~Ashland’s Adjusted EBITDA increased by 25% to $136 million~~ (see U.S. GAAP reconciliation ~~on page 41)~~below under consolidated review). The $3 million increase in Adjusted EBITDA is primarily due to improved product mix, lower raw-materials and lower selling, general and administrative expenses as a result of cost reduction programs, partially offset by lower sales volumes.

Uncertainty relating to the COVID-19 pandemic

Ashland did not incur significant financial consequences during the three and nine months ended June 30, 2020 from the COVID-19 pandemic, as Ashland was able to manage through the execution of shelter in place, social distancing and deep cleaning process requirements. To date, the net effects from the COVID-19 pandemic have not been significant and Ashland’s operations and cash flows remain stable. Ashland’s overall liquidity remains sufficient for it to meet its operating needs and other investing and financing requirements.

Ashland is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and geographies, including how it will impact customers, employees, suppliers, vendors, business partners and distribution channels. Ashland is unable to predict the impact that the COVID-19 pandemic will have on its future financial position and operating results due to numerous uncertainties. These uncertainties include the severity of the virus, the duration of the outbreak, governmental, business or other actions, impacts on Ashland’s supply chain, the effect on customer demand, or changes to Ashland’s operations. The health of Ashland’s workforce and its ability to meet staffing needs throughout the critical functions cannot be predicted and is vital to operations. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown. In addition, Ashland cannot predict the impact that the COVID-19 pandemic will have on its customers, vendors, suppliers and other business partners; however, any material effect on these parties could adversely impact Ashland.

The situation surrounding the COVID-19 pandemic remains fluid, and Ashland is actively managing its response in collaboration with customers, government officials, team members and business partners. For further information regarding the impact of the COVID-19 pandemic on the Company, please see Item 1A, risk factors in this report, which is incorporated herein by reference.

RESULTS OF OPERATIONS – CONSOLIDATED REVIEW

Consolidated review

Net income

Ashland’s net income is primarily affected by results within operating income, net interest and other expense, income taxes, discontinued operations and other significant events or transactions that are unusual or nonrecurring.

Current Quarter - Key financial results for the three months ended June 30, 2020 and 2019 included the following:

•

Ashland’s net income amounted to $37 million compared to $66 million for the three months ended June 30, 2020 and 2019, respectively, or income of $0.61 and $1.05 diluted earnings per share, respectively.

•

Discontinued operations, which are reported net of taxes, resulted in a loss of $13 million and income of $43 million during the three months ended June 30, 2020 and 2019, respectively.

•

Income from continuing operations, which excludes results from discontinued operations, amounted to $50 million and $23 million for the three months ended June 30, 2020 and 2019, respectively.

•

The effective income tax rates were an expense of 19% and a benefit of 5% for the three months ended June 30, 2020 and 2019, respectively, and were significantly impacted by certain tax discrete items in both the current and prior year quarters.

•

Ashland incurred pretax net interest and other income of $14 millioncompared to expense of $21 million for the three months ended June 30, 2020 and 2019, respectively. This includes gains of $31 million and $6 million on restricted investments.

•

Operating income was $48 million and $43 million for the three months ended June 30, 2020 and 2019, respectively.

Year-to-date - Key financial results for the nine months ended June 30, 2020 and 2019 included the following:

•

Ashland’s net income amounted to a loss of $513 million compared to an income of $94 million for the nine months ended June 30, 2020 and 2019, respectively, or loss of $8.47 and income of $1.50 diluted earnings per share, respectively.

•

Discontinued operations, which are reported net of taxes, resulted in a loss of $22 million compared to income of $97 million during the nine months ended June 30, 2020 and 2019, respectively.

•

Results from continuing operations, which excludes results from discontinued operations, amounted to losses of $491 million and $3 million for the nine months ended June 30, 2020 and 2019, respectively.

•

Results from continuing operations include a goodwill impairment charge of $530 million during the current year related to the Personal Care & Household and the Specialty Additives segments. See Critical Accounting Policies section for additional information.

•

The effective income tax rates were a benefit of 4% and an expense of 114% for the nine months ended June 30, 2020 and 2019, respectively, and were significantly impacted by certain tax discrete items in both the current and prior year periods.

•

Ashland incurred pretax net interest and other expense of $113 million and $73 million for the nine months ended June 30, 2020 and 2019, respectively. This includes charges for $59 million and $9 million for debt refinancing costs and accelerated debt issuance costs, respectively, for the current year, as well as gains of $9 million and $3 million on restricted investments for the current and prior year period, respectively.

•

Other net periodic benefit income totaled $1 million and $17 million for the nine months ended June 30, 2020 and 2019, respectively, of which $18 million in the prior year was related to the curtailment gain from the settlement of a non-U.S. pension plan.

•

Net income/loss on divestitures totaled income of $3 million and a loss of $3 million for the nine months ended June 30, 2020 and 2019, respectively.

•

Operating income/loss amounted to a loss of $403 million compared to an income of $80 million for the nine months ended June 30, 2020 and 2019, respectively.

For further information on the items reported above, see the discussion in the comparative Statements of Consolidated Comprehensive Income (Loss) caption review analysis.

Operating income

Current Quarter – Operating income/loss amounted to income of $48 million and $43 million for the three months ended June 30, 2020 and 2019, respectively. The current and prior year quarters’ operating income included certain key items that were excluded to arrive at Adjusted EBITDAand are quantified in the table below in the “EBITDA and Adjusted EBITDA” section. These operating key items for the applicable periods are summarized as follows:

•

Restructuring, separation and other costs – Ashland periodically implements company-wide cost reduction programs related to acquisitions, divestitures and other cost reduction programs in order to enhance profitability through streamlined operations and an improved overall cost structure. Ashland often incurs severance, facility and integration costs associated with these programs. See Note D in the Notes to Condensed Consolidated Financial Statements for further information on the restructuring activities.

•

Environmental reserve adjustments – Ashland is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively environmental remediation) at multiple locations. As a result of these activities, Ashland recorded non-cash adjustments during the current and prior year quarters to its environmental liabilities and receivables related to operating facilities and previously divested businesses or non-operational sites. See Note L of the Notes to Condensed Consolidated Financial Statements for more information.

•

Tax indemnity expense – Ashland incurred a charge in the prior year quarter for pre-tax indemnity related items

•

Unplanned plant shutdown – Ashland incurred an unplanned plant shutdown during the prior year quarter at its Parlin facility for force majeure contract issues.

Operating income/loss for the three months ended June 30, 2020 and 2019 included depreciation and amortization of $62 million, each.

Year-to-date - Operating income/loss was a loss of $403 million compared to income of $80 million for the nine months ended June 30, 2020 and 2019, respectively. The current and prior year periods’ operating income included certain key items that were excluded to arrive at Adjusted EBITDAand are quantified in the table below in the “EBITDA and Adjusted EBITDA” section. These operating key items for the applicable periods are summarized as follows:

•

Goodwill impairment – During the current period, Ashland realigned its operations into five reportable segments which resulted in a reassessment of the Company’s reporting units used to evaluate goodwill impairment. The impairment test under the new reporting unit structure concluded that the carrying value of the Personal Care & Household and the Specialty Additives reporting units exceeded their fair value, resulting in a non-cash goodwill impairment charge. See note G and Critical Accounting Policies for additional information.

•

Accelerated depreciation – As a result of various restructuring activities at certain office facilities and manufacturing facilities during the prior year period, Ashland recorded accelerated depreciation due to changes in the expected useful life of certain property, plant and equipment.

•

Proxy costs – Ashland incurred significant consulting and other costs associated with the 2019 Annual Meeting of Stockholders and agreement with Cruiser Capital in the prior year period.

•

recorded non-cash adjustments during the current and prior year quarters to its environmental liabilities and receivables related to operating facilities and previously divested businesses or non-operational sites. See Note L of the Notes to Condensed Consolidated Financial Statements for more information.

•

Tax indemnity expense – Ashland incurred a charge in the prior year quarter for pre-tax indemnity related items

•

Unplanned plant shutdown – Ashland incurred an unplanned plant shutdown during the prior year quarter at its Parlin facility for force majeure contract issues.

•

Lower of cost or net realizable value inventory adjustment –Inventories are carried at the lower of cost or net realizable value. When comparing the stated value of its inventory to its net realizable value, Ashland determined that an adjustment was required for the current year.

Operating income for the nine months ended June 30, 2020 and 2019 included depreciation and amortization of $183 million and $186 million, respectively (which excluded accelerated depreciation and amortization of $39 million the nine months ended June 30, 2019).

Non-operating key items affecting EBITDA

•

Gain on pension and other postretirement plan remeasurements – Ashland recognized a remeasurement gain due to the settlement of a non-U.S. pension plan during the prior year period. See Note K of the Notes to Condensed Consolidated Financial Statements for more information.

•

Net loss on divestitures – Ashland recorded a loss during the prior year period related to the impairment of an investment.

Statements of Consolidated Comprehensive Income (Loss) – caption review

A comparative analysis of the Statements of Consolidated Comprehensive Income (Loss) by caption is provided as follows for the three and nine months ended June 30, 2020 and 2019.

	Three months ended June 30							Nine months ended June 30
(In millions)	2020		2019		Change			2020		2019		Change
Sales	$	574	$	641	$	(67	)	$	1,717	$	1,884	$	(167	)

The following table provides a reconciliation of the change in sales for the three and nine months ended June 30, 2020 and 2019.

	Three months ended			Nine months ended
(In millions)	June 30, 2020			June 30, 2020
Volume	$	(53	)	$	(116	)
Pricing		(6	)		(18	)
Currency exchange		(6	)		(17	)
Plant realignment		(2	)		(16	)
Change in sales	$	(67	)	$	(167	)

Current Quarter - Sales for the current quarter decreased $67 million compared to the prior year quarter. Unfavorable volume, due primarily to lower industrial demand across the globe reflecting the impact of the COVID-19 pandemic, product pricing, foreign currency exchange and plant realignment decreased sales by $53 million, $6 million, $6 million and $2 million, respectively.

Year-to-Date - Sales for the current year decreased $167 million compared to the prior year period. Unfavorable volume, due primarily to lower industrial demand across the globe reflecting the impact of the COVID-19 pandemic, product pricing, foreign currency and plant realignment decreased sales by $116 million, $18 million, $17 million and $16 million, respectively.

	Three months ended June 30									Nine months ended June 30
(In millions)	2020			2019			Change			2020			2019			Change
Cost of sales	$	378		$	434		$	(56	)	$	1,171		$	1,327		$	(156	)
Gross profit as a percent of sales		34.1	%		32.3	%					31.8	%		29.6	%

The following table provides a quantified reconciliation of the changes in cost of sales between the three and nine months ended June 30, 2020 and 2019.

	Three months ended			Nine months ended
(In millions)	June 30, 2020			June 30, 2020
Changes in:
Volume	$	(38	)	$	(80	)
Plant realignment/closure costs		(5	)		(65	)
Price/mix		(7	)		(4	)
Currency exchange		(3	)		(9	)
Operating costs		(3	)		2
Change in cost of sales	$	(56	)	$	(156	)

Current Quarter - Cost of sales for the current quarter decreased $56 million compared to the prior year quarter. Unfavorable volume, due primarily to lower industrial demand across the globe reflecting the impact of the COVID-19 pandemic, plant realignment/closure costs, price/mix, foreign currency exchange, and operating costs decreased cost of sales by $38 million, $5 million, $7 million, $3 million and $3 million, respectively.

Year-to-Date - Cost of sales for the current year decreased $156 million compared to the prior year. Unfavorable volume, due primarily to lower industrial demand across the globe reflecting the impact of the COVID-19 pandemic, plant realignment/closure costs, price/mix, and foreign currency exchange decreased cost of sales by $80 million, $65 million, $4 million and $9 million, respectively. Those decreases were partially offset by higher operating costs which increased cost of sales by $2 million.

	Three months ended June 30									Nine months ended June 30
(In millions)	2020			2019			Change			2020			2019			Change
Selling, general and administrative expense	$	113		$	128		$	(15	)	$	315		$	364		$	(49	)
As a percent of sales		19.7	%		20.0	%					18.3	%		19.3	%

Current Quarter - Selling, general and administrative expense for the current quarter decreased $15 million compared to the prior year quarter with expenses as a percent of sales decreasing 0.3 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year quarter were:

•

$21 million and $17 million in net environmental-related expenses during the current and prior year period, respectively (see Note L for more information).

•

$14 million and $12 million of key items for severance, lease abandonment and other restructuring costs related to company-wide cost-savings initiatives during the current and prior year quarters, respectively.

•

$6 million of tax indemnity costs during the prior year quarter.

•

Remaining variance primarily driven by achieved cost savings and lower variable compensation and other costs during the current quarter.

Year-to-Date - Selling, general and administrative expense for the current year decreased $49 million compared to the prior year with expenses as a percent of sales decreasing 1.0 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year were:

•

$30 million and $24 million in net environmental-related expenses during the current and prior year period, respectively (see Note L for more information).

•

$36 million and $50 million of key items for restructuring, separation and other costs during the current and prior year periods, respectively.

•

$6 million of tax indemnity costs during the prior year.

•

$5 million of consulting and other costs associated with the 2019 proxy during the prior year period.

•

Favorable currency exchange of $6 million as well as achieved cost savings and lower variable compensation and other costs during the current year period.

	Three months ended June 30							Nine months ended June 30
(In millions)	2020		2019		Change			2020		2019		Change
Research and development expense	$	14	$	17	$	(3	)	$	48	$	51	$	(3	)

Current Quarter - Research and development expense decrease was a result of achieved cost savings and lower variable compensation and other costs compared to the prior year quarter.

Year-to-Date - Research and development expense decrease was a result of achieved cost savings and lower variable compensation and other costs compared to the prior year.

	Three months ended June 30							Nine months ended June 30
(In millions)	2020		2019		Change			2020		2019		Change
Intangibles amortization expense	$	21	$	22	$	(1	)	$	63	$	65	$	(2	)

Current Quarter - Amortization expense is relatively consistent with the prior year quarter.

Year-to-Date - Amortization expense is relatively consistent with the prior year period.

	Three months ended June 30						Nine months ended June 30
(In millions)	2020		2019		Change		2020		2019		Change
Goodwill impairment	$	—	$	—	$	—	$	530	$	—	$	530

Current Quarter – Ashland did not record an impairment charge in the current quarter.

Year-to-Date - Ashland recorded an impairment charge of $530 million in the current year. See note G Goodwill and Other Intangibles for more information.

	Three months ended June 30							Nine months ended June 30
(In millions)	2020		2019		Change			2020		2019		Change
Equity and other income
Equity income (a)	$	—	$	—	$	—		$	—	$	—	$	—
Other income		—		3		(3	)		7		3		4
	$	—	$	3	$	(3	)	$	7	$	3	$	4

(a)

Activity of $0 denotes value less than $1 million.

Current Quarter – Other income for the prior year was primarily due to ~~growth~~proceeds from a financial subsidy in China.

Year-to-Date – Equity and other income increased during the ~~Intermediates~~nine months primarily due to a liquidation gain of $3 million.

	Three months ended June 30									Nine months ended June 30
(In millions)	2020			2019			Change			2020			2019			Change
Net interest and other expense (income)
Interest expense	$	18		$	28		$	(10	)	$	70		$	81		$	(11	)
Interest income		—			—			—			(1	)		(1	)		—
Loss on early retirement of debt		—			—			—			59			—			59
Loss (income) from restricted investments		(33	)		(8	)		(25	)		(17	)		(10	)		(7	)
Other financing costs		1			1			—			2			3			(1	)
	$	(14	)	$	21		$	(35	)	$	113		$	73		$	40

Current Quarter - Net interest and ~~Solvents and Specialty Ingredients reportable segments, which reported increases to Adjusted EBITDA of $16~~other expense decreased by $35 million ~~and $10 million, respectively. The significant improvement in the performance of Intermediates and Solvents was primarily driven by improved product pricing and reduced costs in~~during the current quarter compared to the prior year quarter. ~~Excluding~~Interest expense decreased $10 million due to lower cost of debt and lower debt levels compared to the ~~acquisition~~prior year quarter. Restricted investments included gains of ~~Pharmachem,~~$31 million and $6 million for the ~~increase~~three months ended June 30, 2020 and 2019, respectively. See Note E for more information on the restricted investments.

Year-to-Date - Net interest and other expense increased by $40 million during the current year compared to the prior year period. Interest expense decreased $19 million due to lower debt levels and lower cost of debt related to the debt restructuring activity during the current year compared to the prior year period. The decreases were partially offset by $8 million of accelerated debt issuance costs and original issuance discount costs for the current period. Ashland incurred $59 million of debt refinancing costs during the current year. See Note H for more information on the refinancing activity. Restricted investments included gains of $9 million for the current period compared to gains of $3 million for the prior period. See Note E for more information on the restricted investments.

	Three months ended June 30						Nine months ended June 30
(In millions)	2020		2019		Change		2020		2019		Change
Other net periodic benefit income	$	—	$	—	$	—	$	1	$	17	$	(16	)

Other net periodic benefit income during the prior year related to the curtailment gain from the settlement of a non-U.S. pension plan.

	Three months ended June 30						Nine months ended June 30
(In millions)	2020		2019		Change		2020		2019			Change
Net income (loss) on divestitures	$	—	$	—	$	—	$	3	$	(3	)	$	6

The activity in ~~profitability~~the current year was related to post-closing adjustments for ~~Specialty Ingredients~~certain divestitures, while activity in the prior year related to the impairment of an investment.

	Three months ended June 30								Nine months ended June 30
(In millions)	2020			2019			Change		2020			2019			Change
Income tax expense (benefit)	$	12		$	(1	)	$	13	$	(21	)	$	24		$	(45	)
Effective tax rate		19	%		(5	)%				4	%		114	%

Current Quarter - Ashland’s effective tax rate in any interim period is subject to adjustments related to discrete items and the mix of domestic and foreign operating results. The overall effective tax rate was an expense of 19% for the three months ended June 30, 2020 and was impacted primarily by income mix and unfavorable discrete items of $4 million.

The overall effective tax rate was a benefit of 5% for the three months ended June 30, 2019 and was primarily impacted by income mix, as well as $2 million in net favorable tax discrete items including the favorable adjustment from the release of reserves to unrecognize tax benefits and the unfavorable adjustment related to transition tax and other items.

Year-to-Date - Ashland’s effective tax rate in any interim period is subject to adjustments related to discrete items and the mix of domestic and foreign operating results. The overall effective tax rate was a benefit of 4% for the nine months ended June 30, 2020 and was primarily impacted by nondeductible goodwill impairment of $527 million as well as $20 million favorable tax discrete items primarily from the tax benefit related to the Swiss Tax Reform enacted in the first quarter.

The overall effective tax rate was an expense of 114% for the nine months ended June 30, 2019 and was primarily impacted by the items referenced in the three month period as well as a net $17 million from unfavorable tax discrete items including the final assessment of the Tax Act and other items.

Adjusted income tax expense (benefit)

Key items are defined as the financial effects from significant transactions that may have caused short-term fluctuations in net income and/or operating income which Ashland believes do not accurately reflect Ashland’s underlying business performance and trends. Tax specific key items are defined as the financial effects from tax specific financial transactions, tax law changes or other matters that fall within the definition of key items as previously described. The effective tax rate, excluding key items, which is a non-GAAP measure, has been prepared to illustrate the ongoing tax effects of Ashland’s operations. Management believes investors and analysts use this financial measure in assessing Ashland's business performance and that presenting this non-GAAP measure on a consolidated basis assists investors in better understanding Ashland’s ongoing business performance and enhancing their ability to compare period-to-period financial results. The effective tax rate during the three months ended June 30, 2020 and 2019 was significantly impacted by the following tax specific key items:

•

Deferred tax rate changes – Includes the impact from the remeasurement of Ashland’s domestic deferred tax balances resulting from the enactment of the Tax Act as well as the impact from deferred rate changes for other jurisdictions;

•

One-time transition tax – Includes the impact from the one-time transition tax resulting from the enactment of the Tax Act;

•

Restructuring and separation activity – Includes the impact from company-wide cost reduction programs; and

•

Other tax reform – Includes the impact from other items related to the Tax Act and other tax law changes including Swiss Tax Reform. The Swiss Tax Reform benefit is an estimate based on ten year income projections and is subject to approval by the Swiss tax authorities. Ashland will monitor this amount and make adjustments as appropriate in future periods. These adjustments also include the impact from the deductibility of compensation items and miscellaneous state tax items.

The following table is a calculation of the effective tax rate, excluding these key items.

	Three months ended						Nine months ended
	June 30						June 30
(In millions)	2020			2019			2020			2019
Income (loss) from continuing operations before income taxes	$	62		$	22		$	(512	)	$	21
Key items (pre-tax) (a)		2			29			647			99
Adjusted income from continuing operations
before income taxes	$	64		$	51		$	135		$	120

Income tax expense (benefit)	$	12		$	(1	)	$	(21	)	$	24
Income tax rate adjustments:
Tax effect of key items		1			5			20			10
Tax specific key items: (b)
Deferred tax rate changes		—			—			—			(2	)
One-time transition tax		—			(6	)		—			(28	)
Uncertain tax positions		—			8			—			8
Restructuring and separation activity		—			—			—			1
Other tax reform		—			(3	)		25			(3	)
Total income tax rate adjustments		1			4			45			(14	)
Adjusted income tax expense	$	13		$	3		$	24		$	10

Effective tax rate, excluding key items (Non-GAAP) (c)		20	%		6	%		18	%		8	%

(a)

See Adjusted EBITDA reconciliation table previously disclosed in this MD&A for a summary of the key items, before tax.

(b)

For additional information on the effect that these tax specific key items had on EPS, see the Adjusted Diluted EPS table previously disclosed in this MD&A.

(c)

Due to rounding conventions, the effective tax rate presented may not recalculate precisely based on the numbers disclosed within this table.

	Three months ended June 30								Nine months ended June 30
(In millions)	2020			2019		Change			2020			2019		Change
Income (loss) from discontinued operation (net of taxes)
Composites/Marl facility	$	1		$	24	$	(23	)	$	5		$	77	$	(72	)
Valvoline		—			—		—			(1	)		1		(2	)
Water Technologies		(1	)		—		(1	)		(1	)		1		(2	)
Distribution		(5	)		19		(24	)		(7	)		18		(25	)
Asbestos		(8	)		—		(8	)		(15	)		—		(15	)
Gain (loss) on disposal of discontinued operations (net of taxes)															—
Composites/Marl facility		—			—		—			(3	)		—		(3	)
	$	(13	)	$	43	$	(56	)	$	(22	)	$	97	$	(119	)

Current Quarter - As a result of the divestiture of the Composites segment and Marl facility, the related operating results have been reflected as discontinued operations (net of tax) within the Statements of Consolidated Comprehensive Income (Loss). See Note B for more information on this divestiture. In the current quarter, for the Maleic business component of the Composites business not sold to INEOS, the sales and pre-tax operating income included in discontinued operations were $10 million and $2 million, respectively. In the prior year quarter, the sales and pre-tax operating income included in discontinued operations were $281 million and $44 million, respectively for the Composites/Marl facility.

The activity for Valvoline, Water Technologies, Distribution and the Composites loss on sale during the current and prior quarters was related to post-closing adjustments.

Year-to-Date - As a result of the divestiture of the Composites segment and Marl facility, the related operating results have been reflected as discontinued operations (net of tax) within the Statements of Consolidated Comprehensive Income (Loss). See Note B for more information on this divestiture. In the current year, for the Maleic business component of the Composites business not sold to INEOS, the sales and pre-tax operating income included in discontinued operations were $38 million and $9 million, respectively. In the prior year period, the sales and pre-tax operating income included in discontinued operations were $840 million and $125 million, respectively for the Composites/Marl facility.

The activity for Valvoline, Water Technologies, Distribution and the Composites loss on sale during the current and prior periods was related to post-closing adjustments.

Other comprehensive income (loss)

A comparative analysis of the components of other comprehensive income (loss) is provided below for the three and nine months ended June 30, 2020 and 2019.

	Three months ended June 30						Nine months ended June 30
(In millions)	2020		2019		Change		2020			2019			Change
Other comprehensive income (loss) (net of taxes)
Unrealized translation gain (loss)	$	7	$	3	$	4	$	(7	)	$	(37	)	$	30
Pension and postretirement obligation adjustment		—		—		—		—			(6	)		6
	$	7	$	3	$	4	$	(7	)	$	(43	)	$	36

Current Quarter - Total other comprehensive income, net of tax, for the current quarter increased $4 million compared to the prior year quarter ~~was primarily driven by improvements in volume and mix and favorable foreign currency exchange.~~

~~Tax law changes~~

~~The Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017. The Tax Act reduces~~as a result of the ~~U.S. federal corporate~~following components:

•

For the three months ended June 30, 2020, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in a gain of $7 million compared to a gain of $3 million for the three months ended June 30, 2019. The fluctuations in unrealized translation gains and losses are primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars.

Year-to-Date - Total other comprehensive income, net of tax, rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. At December 31, 2017, Ashland has not completed the internal accounting assessment for the ~~tax effects of enactment~~current period increased $36 million compared to the prior year period as a result of the Tax Act; however, Ashland determined a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax. Ashland recognized a provisional amount for the three months ended December 31, 2017, which is included as a component of income tax expense from continuing operations. Ashland recorded net unfavorable tax adjustments of $16 million primarily related to deferred tax rate changes and a one-time transition tax assessed on foreign cash and unremitted earnings.following components:

•

For the nine months ended June 30, 2020, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in a loss of $7 million compared to a loss of $37 million for the nine months ended June 30, 2019. The fluctuations in unrealized translation gains and losses are primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars.

•

For the nine months ended June 30, 2019, the pension and postretirement obligation adjustment included $6 million of prior service costs recognized within other comprehensive income (loss) due to pension plan remeasurements.

~~RESULTS OF OPERATIONS – CONSOLIDATED REVIEW~~

Use of non-GAAP measures

Ashland has included within this document the following non-GAAP measures, on both a consolidated and reportable segment basis, which are not defined within U.S. GAAP and do not purport to be alternatives to net income or cash flows from operating activities as a measure of operating performance or cash flows:

•

EBITDA – net income (loss), plus income tax expense (benefit), net interest and other expenses, and depreciation and amortization.

~~EBITDA - net income (loss), plus income tax expense (benefit), net interest and other financing expenses, and depreciation and amortization.~~

•

Adjusted EBITDA – EBITDA adjusted for noncontrolling interests, discontinued operations, net income (loss) on acquisitions and divestitures, other income and (expense) and key items (including the remeasurement gains and losses related to pension and other postretirement plans).

Adjusted EBITDA - EBITDA adjusted for noncontrolling interests, discontinued operations, net gain (loss) on acquisitions and divestitures, other income and (expense) and key items (including the remeasurement gains and losses related to pension and other postretirement plans).

•

Adjusted EBITDA margin – Adjusted EBITDA divided by sales.

~~Adjusted EBITDA margin - Adjusted EBITDA, which can include pro forma adjustments, divided by sales.~~

•

Adjusted diluted earnings per share (EPS) – income (loss) from continuing operations, adjusted for key items, net of tax, divided by the average outstanding diluted shares for the applicable period.

~~Adjusted diluted earnings per share (EPS) - income (loss) from continuing operations, adjusted for key items,~~

•

Adjusted diluted earnings per share (EPS) excluding intangibles amortization expense – Adjusted earnings per share adjusted for intangibles amortization expense net of tax, divided by the average outstanding diluted shares for the applicable period.

~~Free cash flow -~~

•

Free cash flow – operating cash flows less capital expenditures and certain other adjustments as applicable.

Management believes the use of EBITDA and Adjusted EBITDA measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance by presenting comparable financial results between periods. Ashland believes that by removing the impact of depreciation and amortization and excluding certain non-cash charges, amounts spent on interest and taxes and certain other charges that are highly variable from year to year, EBITDA and Adjusted EBITDA provide Ashland’s investors with performance measures that reflect the impact to operations from trends in changes in sales, margin and

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

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

The Adjusted diluted EPS metric enables Ashland to demonstrate what effect key items have on an earnings per diluted share basis by taking income (loss) from continuing operations, adjusted for key items after tax that have been identified in the Adjusted EBITDA table, and dividing by the average outstanding diluted shares for the applicable period. Ashland’s management believes this presentation is helpful to illustrate how the key items have impacted this metric during the applicable period.

The Adjusted diluted EPS, excluding intangibles amortization expense metric enables Ashland to demonstrate the impact of non-cash intangibles amortization expense on EPS, in addition to the key items previously mentioned. Ashland’s management believes this presentation is helpful to illustrate how previous acquisitions impact applicable period results.

The free cash flow metric enables Ashland to provide a better indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Unlike cash flow provided by operating activities, free cash flow includes the impact of capital expenditures from continuing operations, providing a more complete picture of cash generation. Free cash flow has certain limitations, including that it does not reflect adjustment for certain non-discretionary cash flows such as mandatory debt repayments. The amount of mandatory versus discretionary expenditures can vary significantly between periods.

Although Ashland ~~provides~~may provide forward-looking guidance for Adjusted EBITDA, Adjusted diluted EPS and free cash flow, Ashland is not reaffirming or providing forward-looking guidance for U.S. GAAP-reported financial measures or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP measure because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items that affect these metrics such as domestic and international

economic, political, legislative, regulatory and legal actions. In addition, certain economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies and changes in the prices of certain key raw materials, can have a significant effect on operations and are difficult to predict with certainty.

These non-GAAP measures should be considered supplemental in nature and should not be construed as more significant than comparable measures defined by U.S. GAAP. Limitations associated with the use of these non-GAAP measures include that these measures do not present all of the amounts associated with our results as determined in accordance with U.S. GAAP. The non-GAAP measures provided are used by Ashland management and may not be determined in a manner consistent with the methodologies used by other companies. EBITDA and Adjusted EBITDA provide a supplemental presentation of Ashland’s operating performance on a consolidated and reportable segment basis. Adjusted EBITDA generally includes adjustments for items that impact comparability between periods. In addition, certain financial covenants related to Ashland’s ~~2017~~2020 Credit Agreement are based on similar non-GAAP measures and are defined further in the sections that ~~reference~~refer to this metric.

~~In accordance with U.S. GAAP, Ashland recognizes actuarial gains~~

EBITDA and ~~losses for defined benefit pension and other postretirement benefit plans annually in the fourth quarter~~Adjusted EBITDA

EBITDA totaled income of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. Actuarial gains and losses occur when actual experience differs from the estimates used to allocate the change in value of pension and other postretirement benefit plans to expense throughout the year or when assumptions change, as they may each year. Significant factors that can contribute to the recognition of actuarial gains and losses include changes in discount rates used to remeasure pension and other postretirement obligations on an annual basis or upon a qualifying remeasurement, differences between actual and expected returns on plan assets and other changes in actuarial assumptions, for example, the life expectancy of plan participants. Management believes Adjusted EBITDA,

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

which includes the expected return on pension plan assets yet excludes both the actual return on pension plan assets and the impact of actuarial gains and losses, provides investors with a meaningful supplemental presentation of Ashland’s operating performance (see the Adjusted EBITDA reconciliation table on page 41 for additional details on exact amounts included within this non-GAAP measure related to pension and other postretirement plans.) Management believes these actuarial gains and losses are primarily financing activities that are more reflective of changes in current conditions in global financial markets (and in particular interest rates) that are not directly related to the underlying business. For further information on the actuarial assumptions and plan assets referenced above, see Note M of the Notes to Consolidated Financial Statements within the 2017 Form 10-K.

~~Consolidated review~~

~~Net income~~

Ashland’s net income is primarily affected by results within operating income, net interest and other financing expense, income taxes, discontinued operations and other significant events or transactions that are unusual or nonrecurring.

~~Key financial results for the three months ended December 31, 2017 and 2016 included the following:~~

~~Ashland’s net loss attributable to Ashland amounted to $4~~$97 million and $1$148 million for the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, respectively, ~~or a~~and loss of ~~$0.07 and $0.01 diluted earnings per share, respectively.~~

~~Ashland’s net~~$238 million compared to income ~~attributable to noncontrolling interest amounted to $11~~of $377 million for the ~~three~~nine months ended ~~December 31, 2016~~June 30, 2020 and ~~reflects the noncontrolling interest of Valvoline Inc. before the final separation occurred on May 12, 2017.~~

Discontinued operations, which are reported net of taxes, resulted in income of $3 million and $75 million during the three months ended December 31, 2017 and 2016, respectively. The activity within discontinued operations for the three months ended December 31, 2016 includes the operating results of Valvoline Inc.

~~Loss from continuing operations, which excludes results from discontinued operations, amounted to $7 million and $65 million for the three months ended December 31, 2017 and 2016, respectively.~~

The effective income tax rate was 200% and 39% for the three months ended December 31, 2017 and 2016, and was impacted by certain discrete items in both the current and prior year quarters. The current quarter rate was primarily impacted by income mix and net unfavorable tax discrete adjustments of $16 million related to the Tax Act.

Ashland incurred pretax net interest and other financing expense of $31 million and $122 million for the three months ended December 31, 2017 and 2016, respectively. The prior year quarter was impacted by $92 million of net charges associated with debt financing activity.

~~Operating income was $39 million and $15 million for the three months ended December 31, 2017 and 2016, respectively.~~

~~For further information on the items reported above, see the discussion in the comparative Statements of Consolidated Comprehensive Income caption review analysis.~~

~~Operating income~~

Operating income amounted to $39 million and $15 million for the three months ended December 31, 2017 and 2016, respectively. The current and prior year quarters' operating income included certain key items that were excluded to arrive at Adjusted EBITDA. These key items are summarized as follows:

•~~$11 million of environmental charges during the three months ended December 31, 2017;~~

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

•~~Separation, restructuring and other costs and accelerated depreciation include the following:~~


◦	~~$6 million and $22 million of costs related to the separation of Valvoline during the three months ended December 31, 2017 and 2016, respectively;~~


◦	~~$4 million of accelerated depreciation related to the planned closure of an office building during the three months ended December 31, 2017;~~


◦	~~$2 million of accelerated depreciation for the termination of a contract at a manufacturing facility during the three months ended December 31, 2017;~~


◦	~~$1 million of severance and other restructuring charges for the closure of a manufacturing plant during the three months ended December 31, 2017; and~~


◦	~~$1 million of integration costs related to the acquisition of Pharmachem for the three months ended December 31, 2017;~~

~~Remeasurement gain of $2 million associated with the discontinuation of certain post-employment health and life insurance benefits during the three months ended December 31, 2016; and~~

~~a $5 million charge for a legal reserve during the three months ended December 31, 2016.~~

Operating income for the three months ended December 31, 2017 and 2016 included depreciation and amortization of $73 million and $68 million, respectively (which excluded accelerated depreciation of $6 million for the three months ended December 31, 2017).

~~EBITDA and Adjusted EBITDA~~

~~EBITDA totaled $114 million and $159 million for the three months ended December 31, 2017 and 2016,~~2019, respectively. EBITDA and Adjusted EBITDA results in the table below have been prepared to illustrate the ongoing effects of Ashland’s operations, which exclude certain key items previously described. Management believes the use of such non-GAAP measures on a consolidated and reportable segment basis assists investors in understanding the ~~impact of Ashland's previous noncontrolling interest in Valvoline Inc.~~

ongoing operating performance by presenting the financial results between periods on a more comparable basis.

	Three months ended						Nine months ended
	June 30						June 30
(In millions)	2020			2019			2020			2019
Net income (loss)	$	37		$	66		$	(513	)	$	94
Income tax expense (benefit)		12			(1	)		(21	)		24
Net interest and other expense		(14	)		21			113			73
Depreciation and amortization (a)		62			62			183			186
EBITDA		97			148			(238	)		377
Loss (income) from discontinued operations (net of tax)		13			(43	)		22			(97	)
Key items included in EBITDA:
Restructuring, separation and other costs		14			12			36			50
Proxy costs		—			—			—			5
Goodwill impairment		—			—			530			—
Inventory adjustment		—			—			4			—
Accelerated depreciation		—			—			—			39
Environmental reserve adjustments		19			15			19			15
Unplanned plant shutdown		—			2			—			2
Tax indemnity expense		—			6			—			6
Gain on pension and other postretirement plan remeasurements		—			—			—			(18	)
Net loss on divestitures		—			—			—			3
Total key items included in EBITDA		33			35			589			102
Adjusted EBITDA	$	143		$	140		$	373		$	382

Total key items included in EBITDA	$	33		$	35		$	589		$	102
Accelerated amortization of debt issuance costs		—			—			8			—
Debt refinancing costs		—			—			59			—
Unrealized (gain) loss on securities (b)		(31	)		(6	)		(9	)		(3	)
Total key items, before tax	$	2		$	29		$	647		$	99


	(a)
Excludes $39 million for the nine months ended June 30, 2019 included as key items.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

(b)

Due to the adoption of new accounting guidance in October 2018, the unrealized losses on certain investment securities directly impact earnings and are recorded within the net interest and other expense caption on the Statements of Consolidated Comprehensive Income (Loss). See Note E of the Notes to Condensed Consolidated Financial Statements for more information.

Three months ended
December 31
(In millions) 2017
2016
Net income (loss) $ (4 ) $ 10
Income tax expense (benefit) 14
(41 )
Net interest and other financing expense 31
122
Depreciation and amortization (a)
73
68
EBITDA 114
159
Income from discontinued operations (net of tax) (3 ) (75 )
Environmental reserve adjustments 11
—
Separation, restructuring and other costs 8
22
Accelerated depreciation 6
—
Legal reserve —
5
Gain on post-employment plan remeasurement —
(2 )
Adjusted EBITDA (b)
$ 136
$ 109


~~(a)~~	~~Excludes $6 million of accelerated depreciation for the three months ended December 31, 2017.~~

Diluted EPS and Adjusted Diluted EPS

The following table reflects the U.S. GAAP calculation for the income (loss) from continuing operations adjusted for the cumulative diluted EPS effect for key items after tax that have been identified in the Adjusted EBITDA table in the previous section. Key items are defined as the financial effects from significant transactions that may have caused short-term fluctuations in net income and/or operating income which Ashland believes do not accurately reflect Ashland’s underlying business performance and trends. The Adjusted diluted EPS for the income (loss) from continuing operations in the following table has been prepared to illustrate the ongoing effects of Ashland’s ~~operations since management~~operations. Management believes ~~the~~investors and analysts use ofthis financial measure in assessing Ashland's business performance and that presenting this non-GAAP ~~measures~~measure on a consolidated ~~and reportable segment~~ basis assists investors in better understanding ~~the~~Ashland’s ongoing ~~operating~~business performance ~~by presenting the~~and enhances their ability to compare period-to-period financial ~~results between periods on a more comparable basis.~~

results.

Three months ended
December 31
2017
2016
Diluted EPS from continuing operations (as reported) $ (0.12 ) $ (1.05 )
Key items 0.54
1.19
Adjusted diluted EPS from continuing operations (non-GAAP) $ 0.42
$ 0.14

~~Statements of Consolidated Comprehensive Income – caption review~~

~~A comparative analysis of the Statements of Consolidated Comprehensive Income by caption is provided as follows for the three months ended December 31, 2017 and 2016.~~

Three months ended December 31
(In millions) 2017
2016
Change

Sales $ 842
$ 704
$ 138

~~The following table provides a reconciliation of the change in sales between the three months ended December 31, 2017 and 2016.~~

	Three months ended						Nine months ended
	June 30						June 30
	2020			2019			2020			2019
Diluted EPS from continuing operations (as reported)	$	0.81		$	0.37		$	(8.11	)	$	(0.05	)
Key items, before tax:
Restructuring, separation and other costs		0.23			0.19			0.58			1.40
Proxy costs		—			—			—			0.08
Tax indemnity expense		—			0.10			—			0.10
Gain on pension and other postretirement plan remeasurements		—			—			—			(0.29	)
Environmental reserve adjustments		0.32			0.24			0.32			0.24
Unplanned plant shutdowns		—			0.03			—			0.03
Unrealized (gain) loss on securities		(0.51	)		(0.10	)		(0.15	)		(0.05	)
Goodwill impairment		—			—			8.75			—
Inventory adjustment		—			—			0.06			—
Accelerated amortization of debt issuance costs		—			—			0.13			—
Debt refinancing costs		—			—			0.97			—
Net loss on divestitures		—			—			—			0.05
Key items, before tax		0.04			0.46			10.66			1.56
Tax effect of key items (a)		(0.01	)		(0.08	)		(0.33	)		(0.16	)
Key items, after tax		0.03			0.38			10.33			1.40
Tax specific key items:
Deferred tax rate changes		—			—			—			0.03
One-time transition tax		—			0.10			—			0.44
Uncertain tax positions		—			(0.13	)		—			(0.12	)
Restructuring and separation activity		—			—			—			(0.02	)
Other tax reform		—			0.05			(0.41	)		0.05
Tax specific key items (b)		—			0.02			(0.41	)		0.38
Total key items		0.03			0.40			9.92			1.78
Adjusted diluted EPS from continuing operations (non-GAAP)	$	0.84		$	0.77		$	1.81		$	1.73
Amortization expense adjustment (net of tax) (c)	$	0.28		$	0.27		$	0.83		$	0.79
Adjusted diluted EPS from continuing operations (non-GAAP) excluding intangibles amortization expense	$	1.12		$	1.04		$	2.64		$	2.52


	(a)
Represents the diluted EPS impact from the tax effect of the key items that are identified above.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~


	(b)
Represents the diluted EPS impact from tax specific financial transactions, tax law changes or other matters that fall within the definition of key items. For additional explanation of these tax specific key items, see the income tax expense (benefit) discussion within the following caption review section.

Three months ended
(In millions) December 31, 2017
Acquisitions and divestitures $ 63
Pricing 30
Currency exchange 20
Volume 18
Product mix 7
Change in sales $ 138

Sales for the current quarter increased $138 million compared to the prior year quarter. The acquisition of Pharmachem within the Specialty Ingredients reportable segment increased sales by $58 million, or 8%, while the net impact of other acquisitions and divestitures increased sales by $5 million. Improvements in pricing increased sales by $30 million, or 4%, while favorable foreign currency exchange increased sales by $20 million, or 3%. Higher volumes and changes in product mix increased sales by $18 million and $7 million, respectively.

Three months ended December 31
(In millions) 2017
2016
Change
Cost of sales $ 613
$ 515
$ 98
Gross profit as a percent of sales 27.2 % 26.8 %

Fluctuations in cost of sales are driven primarily by raw material prices, volume and changes in product mix, currency exchange, acquisitions and divestitures and other certain charges incurred as a result of changes or events within the businesses or restructuring activities. The following table provides a quantified reconciliation of the changes in cost of sales between the three months ended December 31, 2017 and 2016.

Three months ended
(In millions) December 31, 2017
Changes in:
Acquisitions and divestitures $ 50
Production costs 20
Currency exchange 15
Volume 8
Product mix 4
Severance and other restructuring costs 1
Change in cost of sales $ 98

Cost of sales for the current quarter increased $98 million compared to the prior year quarter. The Pharmachem acquisition increased cost of sales by $44 million, or 9%, while the net impact of other acquisitions and divestitures increased cost of sales by $6 million. Unfavorable production costs and foreign currency exchange increased cost of sales by $20 million, or 4%, and $15 million, or 3%, respectively. Higher volumes and changes in product mix increased cost of sales by $8 million and $4 million, respectively, while the current quarter also included $1 million of severance and other restructuring charges related to a plant closure.

Three months ended December 31
(In millions) 2017
2016
Change
Selling, general and administrative expense $ 171
$ 157
$ 14
As a percent of sales 20.3 % 22.3 %


	(c)
Amortization expense adjustment (net of tax) tax rates were 20% for the three and nine months ended June 30, 2020, and 21% and 23% for the three and nine months ended June 30, 2019, respectively.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

Selling, general and administrative expense for the current quarter increased $14 million compared to the prior year quarter with expenses as a percent of sales decreasing 2.0 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year quarter were:

~~$10 million of incremental costs related to Pharmachem’s operations and $1 million of Pharmachem integration costs during the current quarter;~~

~~$14 million and $6 million in net environmental-related expenses during the current and prior year quarters, respectively;~~

~~an increase of $7 million due to higher employee-related costs in the current quarter;~~

~~an increase of $5 million due to unfavorable foreign currency exchange in the current quarter;~~

~~$4 million of accelerated depreciation related to the planned closure of an office building during the current quarter;~~

~~$6 million of costs related to the separation of Valvoline during the current quarter compared to $22 million in the prior year quarter; and~~

~~a $5 million charge for a legal reserve during the prior year quarter.~~

Three months ended December 31
(In millions) 2017
2016
Change
Research and development expense $ 21
$ 20
$ 1

~~Research and development expense remained relatively consistent with the prior year quarter.~~

Three months ended December 31
(In millions) 2017
2016
Change
Equity and other income

Equity income (a)
$ —
$ —
$ —
Other income 2
3
(1 )
$ 2
$ 3
$ (1 )


~~(a)~~	~~Activity of $0 denotes value less than $1 million.~~

~~Equity and other income remained relatively consistent with the prior year quarter.~~

Three months ended December 31
(In millions) 2017
2016
Change
Net interest and other financing expense (income)
Interest expense $ 34
$ 126
$ (92 )
Interest income (1 ) (1 ) —
Available-for-sale securities income (3 ) (3 ) —
Other financing costs 1
—
1
$ 31
$ 122
$ (91 )

Net interest and other financing expense decreased $91 million during the current quarter compared to the prior year quarter. The current quarter decrease in interest expense was primarily due to the prior year quarter including $92 million of accelerated accretion related to the December 2016 tender offer of the 2029 notes. Available-for-sale securities income of $3 million during both the current and the prior year quarters represents investment income and realized gains related to restricted investments discussed in Note E of the Notes to Condensed Consolidated Financial Statements.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

Three months ended December 31
(In millions) 2017
2016
Change
Other net periodic benefit income $ —
$ 2
$ (2 )

~~The income in the prior year quarter primarily related to a $2 million gain on the remeasurement of certain post-employment health and life insurance benefit plans that were discontinued.~~

Three months ended December 31
(In millions) 2017
2016
Change
Net loss on divestitures $ 1
$ 1
$ —

~~The activity in the current and prior year quarters primarily related to post-closing adjustments for certain divestitures.~~

Three months ended December 31
(In millions) 2017
2016
Change
Income tax expense (benefit) $ 14
$ (41 ) $ 55
Effective tax rate 200 % 39 %

The overall effective tax expense rate was 200% for the three months ended December 31, 2017 and was primarily impacted by the current quarter income mix and net unfavorable tax discrete adjustments of $16 million related to the enactment of the Tax Act. These net unfavorable adjustments primarily included deferred tax rate changes and a one-time transition tax assessed on foreign cash and unremitted earnings.

~~The overall effective tax benefit rate was 39% for the three months ended December 31, 2016 and was primarily impacted by income mix.~~

Three months ended December 31
(In millions) 2017
2016
Change
Income from discontinued operations (net of tax)
Valvoline $ 3
$ 75
$ (72 )

As a result of the full separation of Valvoline Inc. on May 12, 2017, the operating results related to Valvoline Inc., including the operating results of the former Valvoline reportable segment, have been reflected as discontinued operations (net of tax) within the Statement of Consolidated Comprehensive Income (Loss). The activity within the current quarter represents subsequent adjustments that were made in conjunction with the Tax Matters Agreement. See Note B for more information on the Tax Matters Agreement. During the prior year quarter, Valvoline's sales and pre-tax operating income included in discontinued operations were $489 million and $120 million, respectively.

Three months ended December 31
(In millions) 2017
2016
Change
Net income attributable to noncontrolling interest $ —
$ 11
$ (11 )

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

Since Ashland's ownership interest in Valvoline Inc. was approximately 83% until the final separation on May 12, 2017, the amount of net income attributable to the outside stockholders' approximately 17% noncontrolling interest in Valvoline Inc. is presented within this caption on the Statement of Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016.

~~Other comprehensive income (loss)~~

~~A comparative analysis of the components of other comprehensive income (loss) is provided below for the three months ended December 31, 2017 and 2016.~~

Three months ended December 31
(In millions) 2017
2016
Change
Other comprehensive income (loss) (net of taxes)
Unrealized translation gain (loss) $ 3
$ (146 ) $ 149
Net change in available-for-sale securities 8
—
8
Pension and postretirement obligation adjustment —
(1 ) 1
$ 11
$ (147 ) $ 158

~~Total other comprehensive income, net of tax, for the current quarter increased $158 million compared to the prior year quarter as a result of the following components:~~

For the three months ended December 31, 2017, the change in unrealized gain (loss) from foreign currency translation adjustments was a gain of $3 million compared to a loss of $146 million for the three months ended December 31, 2016. The fluctuations in unrealized translation gains and losses are primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars.

~~Gains on available-for-sale securities related to restricted investments amounted to $8 million, net of tax, during the three months ended December 31, 2017.~~

Pension and postretirement obligation adjustment was $1 million for the three months ended December 31, 2016. This amount related to amortization of unrecognized prior services credits for pension and other postretirement benefit plans and was reclassified into net income during the prior year quarter.

RESULTS OF OPERATIONS – REPORTABLE SEGMENT REVIEW

~~Subsequent~~

Corporate includes corporate governance activities and certain legacy matters. The historical segment information has been recast to conform to the current segment structure.

Results of Ashland’s reportable segments are presented based on its management and internal accounting structure. The structure is specific to Ashland; therefore, the financial results of Ashland’s reportable segments are not necessarily comparable with similar information for other ~~comparable~~ companies. Ashland allocates all significant costs to its reportable segments except for certain significant company-wide restructuring activities, certain corporate governance costs and other costs or ~~adjustments~~activities that relate to former businesses that Ashland no longer operates. The service cost component of pension and other postretirement benefits costs is allocated to each reportable segment on a ratable basis; while the remaining components of pension and other postretirement benefits costs are recorded within the other net periodic benefit income caption on the Statements of Consolidated Comprehensive Income (Loss). Ashland refines its expense allocation methodologies to the reportable segments from time to time as internal accounting practices are improved, more refined information becomes available and the industry or market changes. Significant revisions to Ashland’s methodologies are adjusted for all segments on a retrospective basis. This includes charges in the current fiscal year for certain corporate governance costs, which were previously allocated. These costs are now reflected in Unallocated and Other for all periods presented.

The following table discloses sales, operating income and depreciation and amortization by reportable segment for the three and nine months ended June 30, 2020 and 2019.

	Three months ended						Nine months ended
	June 30						June 30
(In millions)	2020			2019			2020			2019
Sales
Life Sciences	$	189		$	190		$	528		$	556
Personal Care & Household		155			158			451			495
Consumer Specialties		344			348			979			1,051
Specialty Additives		135			177			429			494
Performance Adhesives		70			88			229			258
Industrial Specialties		205			265			658			752
Intermediates and Solvents		37			41			102			118
Intersegment sales (a)		(12	)		(13	)		(22	)		(37	)
	$	574		$	641		$	1,717		$	1,884
Operating income (loss)
Life Sciences	$	40		$	32		$	97		$	88
Personal Care & Household		16			17			(309	)		60
Consumer Specialties		56			49			(212	)		148
Specialty Additives		15			19			(137	)		(5	)
Performance Adhesives		13			16			40			42
Industrial Specialties		28			35			(97	)		37
Intermediates and Solvents		7			8			(7	)		20
Unallocated and other		(43	)		(49	)		(87	)		(125	)
	$	48		$	43		$	(403	)	$	80

Depreciation expense
Life Sciences	$	8	$	8	$	24	$	24
Personal Care & Household		10		10		30		30
Consumer Specialties		18		18		54		54
Specialty Additives		15		15		46		84
Performance Adhesives		4		4		10		11
Industrial Specialties		19		19		56		95
Intermediates and Solvents		4		3		10		8
Unallocated and other		—		—		—		3
	$	41	$	40	$	120	$	160
Amortization expense
Life Sciences	$	7	$	7	$	21	$	21
Personal Care & Household		9		10		27		28
Consumer Specialties		16		17		48		49
Specialty Additives		5		5		14		14
Performance Adhesives		—		—		1		1
Industrial Specialties		5		5		15		15
Intermediates and Solvents		—		—		—		1
	$	21	$	22	$	63	$	65

EBITDA (b) (c)
Life Sciences	$	55		$	47		$	142		$	133
Personal Care & Household		35			37			(252	)		118
Consumer Specialties		90			84			(110	)		251
Specialty Additives		35			39			(77	)		93
Performance Adhesives		17			20			51			54
Industrial Specialties		52			59			(26	)		147
Intermediates and Solvents		11			11			3			29
Unallocated and other		(43	)		(49	)		(83	)		(122	)
	$	110		$	105		$	(216	)	$	305


	(a)
		Intersegment sales are accounted for at prices that approximate fair value.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

(b)

Excludes income (loss) from discontinued operations, other net periodic benefit income (expense) and net income (loss) on divestitures. See the Statement of Consolidated Comprehensive Income (Loss) for applicable amounts excluded.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~


	(c)
		Includes zero of accelerated depreciation for the three months ended June 30, 2019 and $39 million for the nine months ended June 30, 2019.

Consumer Specialties

The Consumer Specialties group is comprised of the following business segments:

Life Sciences

Life Sciences is comprised of pharmaceuticals, nutrition, nutraceuticals, agricultural chemicals, advanced materials and fine chemicals. Pharmaceutical solutions include controlled release polymers, disintegrants, film coatings, solubilizers, and tablet binders. Nutrition solutions include thickeners, stabilizers, emulsifiers and additives for enhancing mouthfeel, controlling moisture migration, reducing oil uptake and controlling color. Nutraceutical solutions include products for weight management, joint comfort, stomach and intestinal health, sports nutrition and general wellness, and providing custom formulation, toll processing and particle engineering solutions. Customers include pharmaceutical, food, beverage, nutraceuticals and supplements manufacturers, hospitals and radiologists and industrial manufacturers.

Personal Care & Household

Personal Care & Household is comprised of biofunctionals, preservatives, skin care, sun care, oral care, hair care and household. These businesses have a broad range of nature-based, biodegradable, and performance-enhancing ingredients for customer-driven solutions to help protect, renew, moisturize and revitalize skin and hair, and provide solutions for toothpastes, mouth washes and rinses, denture cleaning and care for teeth. Household supplies nature-derived rheology ingredients, biodegradable surface wetting agents, performance encapsulates, and specialty polymers for household, industrial and institutional cleaning products. Customers include formulators at large multinational branded consumer products companies and smaller, independent boutique companies.

June 2020 quarter compared to June 2019 quarter

Consumer Specialties’ sales decreased $4 million to $344 million in the current quarter. Personal Care & Household and Life Sciences represented $3 million and $1 million of the decrease, respectively. Unfavorable currency exchange, lower pricing and plant restructuring decreased sales by $4 million, $2 million and $1 million, respectively. Those decreases were partially offset by favorable volume which increased sales by $3 million.

Operating income increased $7 million to income of $56 million for the current quarter. Personal Care & Household recorded income of $16 million, while Life Sciences recorded income of $40 million. Favorable volume and favorable price/mix increased operating income by $1 million and $11 million, respectively. Those increases were partially offset by unfavorable foreign exchange and unfavorable costs which decreased operating income by $1 million and $4 million, respectively. Current quarter EBITDA increased $6 million to $90 million, $35 million in Personal Care & Household and $55 million in Life Sciences. EBITDA margin increased 2.1 percentage points in the current quarter to 26.2%.

Fiscal 2020 year-to-date compared to fiscal 2019 year-to-date

Consumer Specialties’ sales decreased $72 million to $979 million in the current period. Personal Care & Household and Life Sciences represented $44 million and $28 million of the decrease, respectively. Lower volume, unfavorable currency exchange, plant restructuring and lower pricing decreased sales by $44 million, $11 million, $11 million and $6 million, respectively.

Operating income/loss decreased $360 million to a loss of $212 million for the current period. Personal Care & Household recorded a $309 million loss, driven by a goodwill impairment, while Life Sciences recorded $97 million operating income, up $9 million from the prior year period. Goodwill impairments, lower volume, unfavorable foreign exchange and unfavorable costs decreased operating income by $356 million, $16 million, $4 million and $4 million, respectively. Those decreases were partially offset by favorable price/mix which increased operating income/loss by $20 million. Current year EBITDA decreased $361 million to a loss of $110 million, a $252 million loss in Personal Care & Household and $142 million income in Life Sciences, while Adjusted EBITDA decreased $4 million to $247 million, of which $143 million and $104 million originated from Life Sciences and Personal Care & Household, respectively. Adjusted EBITDA margin increased 1.3 percentage points in the current period to 25.2%.

EBITDA and Adjusted EBITDA reconciliation

The EBITDA and Adjusted EBITDA amounts presented within this business section are provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for each segment. Each of these non-GAAP measures is defined as follows: EBITDA (operating income ~~(loss)~~ plus depreciation and amortization), Adjusted EBITDA (EBITDA adjusted for key items, which may include pro forma effects for significant acquisitions or divestitures, as applicable), and Adjusted EBITDA margin (Adjusted EBITDA, which may include pro forma adjustments, divided by sales or sales adjusted for pro forma results). Ashland does not allocate items to each reportable segment below operating income, such as interest expense and income taxes. As a result, reportable segment EBITDA and Adjusted EBITDA are reconciled directly to operating income since it is the most directly comparable ~~caption to the~~ Statements of Consolidated Comprehensive ~~Income.~~

Income (Loss) caption.

The following ~~table discloses sales, operating income, depreciation and amortization and statistical operating information by reportable segment~~EBITDA presentation for the three and nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~

Three months ended
December 31
(In millions) 2017
2016
Sales
Specialty Ingredients $ 550
$ 482
Composites 218
165
Intermediates and Solvents 74
57
$ 842
$ 704
Operating income (loss)

Specialty Ingredients $ 42
$ 40
Composites 18
15
Intermediates and Solvents 8
(7 )
Unallocated and other (29 ) (33 )
$ 39
$ 15
Depreciation and amortization

Specialty Ingredients $ 62
$ 55
Composites 5
6
Intermediates and Solvents 8
7
Unallocated and other 4
—
$ 79
$ 68
Operating information

Specialty Ingredients

Sales per shipping day $ 9.0
$ 7.9
Metric tons sold (thousands) 73.0
72.6
Gross profit as a percent of sales (a)
31.5 % 32.0 %
Composites

Sales per shipping day $ 3.6
$ 2.7
Metric tons sold (thousands) 91.2
78.4
Gross profit as a percent of sales (a)
18.4 % 21.1 %
Intermediates and Solvents

Sales per shipping day $ 1.2
$ 0.9
Metric tons sold (thousands) 32.7
32.2
Gross profit as a percent of sales (a)
21.3 % (0.9 )%


~~(a)~~	~~Gross profit is defined as sales, less cost of sales divided by sales.~~

~~Sales by region expressed~~2019 is provided as a ~~percentage~~means to enhance the understanding of ~~reportable segment sales~~financial measurements that Ashland has internally determined to be relevant measures of comparison for the ~~three~~results of Consumer Specialties. The key items during the nine months ended ~~December 31, 2017~~June 30, 2020 related to a goodwill impairment of $356 million for Personal Care & Household and ~~2016 were as follows. Ashland includes only U.S. and Canada~~$1 million in ~~its North American designation.~~

restructuring costs for Life Sciences.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

	Life Sciences				Personal Care & Household					Consumer Specialties
	Three months ended June 30
(In millions)	2020		2019		2020			2019		2020			2019
Operating income	$	40	$	32	$	16		$	17	$	56		$	49
Depreciation and amortization		15		15		19			20		34			35
EBITDA		55		47		35			37		90			84
Restructuring and other costs		—		—		—			—		—			—
Goodwill impairment		—		—		—			—		—			—
Adjusted EBITDA	$	55	$	47	$	35		$	37	$	90		$	84

	Life Sciences				Personal Care & Household					Consumer Specialties
	Nine months ended June 30
(In millions)	2020		2019		2020			2019		2020			2019
Operating income	$	97	$	88	$	(309	)	$	60	$	(212	)	$	148
Depreciation and amortization		45		45		57			58		102			103
EBITDA		142		133		(252	)		118		(110	)		251
Restructuring and other costs		1		—		—			—		1			—
Goodwill impairment		—		—		356			—		356			—
Adjusted EBITDA	$	143	$	133	$	104		$	118	$	247		$	251

Three months ended December 31, 2017

Sales by Geography
Specialty Ingredients Composites Intermediates and Solvents
North America 41 % 45 % 21 %
Europe 30 % 34 % 59 %
Asia Pacific 19 % 14 % 17 %
Latin America & other 10 % 7 % 3 %
100 % 100 % 100 %

Three months ended December 31, 2016

Sales by Geography
Specialty Ingredients Composites Intermediates and Solvents
North America 39 % 48 % 23 %
Europe 29 % 28 % 57 %
Asia Pacific 22 % 16 % 17 %
Latin America & other 10 % 8 % 3 %
100 % 100 % 100 %

Industrial Specialties

The Industrial Specialties business group is comprised of the below business segments:

Specialty ~~Ingredients~~

Additives

Specialty ~~Ingredients~~Additives is acomprised of rheology- and performance-enhancing additives serving the coatings, construction, energy, automotive and various industrial markets. Solutions include coatings additives for architectural paints, finishes and lacquers, cement- and gypsum- based dry mortars, ready-mixed joint compounds, synthetic plasters for commercial and residential construction, and specialty materials for industrial applications. Products include rheology modifiers (cellulosic and associative thickeners), foam-control agents, surfactants and wetting agents, pH neutralizers, advanced ceramics used in catalytic converters, and environmental filters, ingredients that aid the manufacturing process of ceramic capacitors, plasma display panels and solar cells, ingredients for textile printing, thermoplastic metals and alloys for welding. Products help improve desired functional outcomes through rheology modification and control, water retention, workability, adhesive strength, binding power, film formation, deposition and suspension and emulsification. Customers include global ~~leader~~paint manufacturers, electronics and automotive manufacturers, textile mills, the construction industry, and welders.

Performance Adhesives

Performance Adhesives is comprised of adhesives used in ~~cellulose ethers, vinyl pyrrolidones~~packaging, converting and ~~biofunctionals. It offers industry-leading products, technologies~~structural applications. Packaging adhesives has an extensive line of pressure sensitive adhesives, functional coatings and resources for solving formulation and product-performance challenges. Specialty Ingredients uses natural, synthetic and semisynthetic polymers derived from cellulose ethers, vinyl pyrrolidones, acrylic polymers, polyester and polyurethane-based adhesives, and plant and seed extract. Specialty Ingredients’ end markets offer comprehensive andprimers combined with innovative technology solutions for ~~today’s demanding consumer~~narrow-, mid- and ~~industrial~~wide-web applications. ~~Key customers include: pharmaceutical companies; makers of personal care products,~~Products meet stringent requirements in food and ~~beverages; makers~~beverage safety, shipping, transportation, health and beauty, industrial, postage and security printing. Structural adhesives include light weighting vehicles and eliminating VOCs in buildings. Customers include converters of ~~nutraceuticals and supplements;~~packaging materials, manufacturers of ~~paint, coatings~~building materials and ~~construction materials; packaging and converting; and oilfield service companies.~~

~~On May 17, 2017, Ashland completed its acquisition of the stock of Pharmachem, a leading provider of quality ingredients~~tier one suppliers to the global health and wellness industries and high-value differentiated products to fragrance and flavor houses. With annual revenues of approximately $300 million and 14 manufacturing facilities in the United States and Mexico, New Jersey-based Pharmachem develops, manufactures and supplies custom and branded nutritional and fragrance products. See Note C within the Notes to Condensed Consolidated Financial Statements for more information.

~~Additionally, Ashland completed the transfer of its ownership interest in a consolidated joint venture during the third quarter of fiscal 2017.~~

~~December 2017~~transportation industry.

June 2020 quarter compared to ~~December 2016~~June 2019 quarter

~~Specialty Ingredients’~~

Industrial Specialties’ sales ~~increased $68~~decreased $60 million to ~~$550~~$205 million in the current quarter. ~~The acquisition~~Specialty Additives and Performance Adhesives represented $42 million and $18 million of ~~Pharmachem increased~~the decrease, respectively. Lower volume, due primarily to lower industrial demand across the globe reflecting the impact of the COVID-19 pandemic, unfavorable currency exchange, lower pricing, and plant restructuring decreased sales by ~~$58~~$54 million, ~~or 12%. Favorable foreign currency exchange increased sales by $10~~$2 million, $3 million and $1 million, respectively.

Operating income decreased $7 million to $28 million for the current quarter. Specialty Additives recorded operating income of $15 million, while Performance Adhesives recorded operating income of $13 million, down $4 million and $3 million from the prior year quarter, respectively. Lower volume and ~~mix combined to increase sales~~increased environmental costs decreased operating income by ~~$9 million. In addition, improved product pricing increased sales by $2 million. These increases~~$15 million and $1 million, respectively. Those decreases were partially offset by ~~a decrease~~favorable price/mix and lower costs of ~~$11 million from divestitures which was primarily related to the transfer of ownership interest in a consolidated joint venture.~~

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

Gross profit during the current quarter increased $19 million compared to the prior year quarter. The acquisition of Pharmachem increased gross profit by $14 million while improved volume and mix combined to increase gross profit by $9 million. Favorable foreign currency exchange increased gross profit by $4 million. These increases were partially offset by the net impact of pricing and costs which decreased gross profit by $6$5 million and the joint venture divestiture which decreased gross profit by $2 million. In total, gross profit margin during the current quarter decreased 0.5 percentage points as compared to the prior year quarter to 31.5%.

~~Selling, general and administrative expenses (which include research and development expenses throughout the reportable segment discussion and analysis) increased $15~~$4 million, in the current quarter as compared to the prior year quarter largely due to incremental costs of $10 million related to Pharmachem’s operations. The remaining increase in selling, general and administrative expenses was primarily due to higher employee-related costs and unfavorable foreign currency exchange. Equity and other income decreased $2 million compared to the prior year quarter.

~~Operating income totaled $42 million for the current quarter compared to $40 million in the prior year quarter.~~respectively. Current quarter EBITDA ~~increased~~decreased $7 to $52 million, ~~to $102~~$35 million income in Specialty Additives and $17 million income in Performance Adhesives, while Adjusted EBITDA ~~increased $10~~decreased $8 million to ~~$105 million.~~$54 million, of which $37 million and $17 million originated from Specialty Additives and Performance Adhesives, respectively. Adjusted EBITDA margin ~~decreased 0.6~~increased 2.9 percentage points in the current quarter to ~~19.1%~~26.3%.

Fiscal 2020 year-to-date compared to fiscal 2019 year-to-date

Industrial Specialties’ sales decreased $94 million to $658 million in the current period. Specialty Additives and Performance Adhesives represented $65 million and $29 million of the decrease, respectively. Lower volume, due primarily to lower industrial demand across the globe reflecting the impact of the COVID-19 pandemic, unfavorable currency exchange, plant restructuring and lower pricing decreased sales by $76 million, $6 million, $5 million and $7 million, respectively.

Operating income/loss decreased $134 million to a loss of $97 million for the current year. Specialty Additives recorded a $137 million loss, driven by a goodwill impairment, while Performance Adhesives

recorded $40 million operating income, down $2 million from the prior year period. Goodwill impairment, lower volume and increased environmental costs decreased operating income by $174 million, $21 million, and $1 million, respectively. Those decreases were partially offset by prior year plant restructuring costs, lower costs, favorable price/mix and favorable shutdown costs of $48 million, $2 million, $10 million and $2 million, respectively. Current year EBITDA decreased $135 to a loss of $26 million, a $77 million loss in Specialty Additives and $51 million income in Performance Adhesives, while Adjusted EBITDA decreased $10 million to $150 million, of which $99 million and $51 million originated from Specialty Additives and Performance Adhesives, respectively. Adjusted EBITDA margin increased 1.5 percentage points in the current year to 22.8%.

EBITDA and adjusted EBITDA reconciliation

The following EBITDA and Adjusted EBITDA ~~reconciliation~~

~~The following EBITDA~~ presentation (as defined and described in the section above) for the three and nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 below is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of ~~Specialty Ingredients.~~Industrial Specialties. Adjusted EBITDA results have been prepared to illustrate the ongoing effects of ~~Ashland's~~Ashland’s operations, which exclude certain key items. The key items ~~within~~during the ~~current quarter relate~~three and nine months ended June 30, 2020 related to ~~$2 million of accelerated depreciation~~a Goodwill impairment and environmental reserve adjustments for Specialty Additives. The key items during the ~~termination of a contract at a manufacturing facility and $1 million of severance and other~~prior year periods related to restructuring ~~charges for~~costs associated with the planned closure of a manufacturing ~~plant. There were no unusual or key items that affected comparability~~facility, environmental reserve adjustments and unplanned plant shutdown within Specialty Additives (which included $38 million of accelerated depreciation) for ~~EBITDA during~~ the ~~prior year quarter.~~three and nine months ended June 30, 2019.

	Specialty Additives						Performance Adhesives				Industrial Specialties
	Three months ended June 30
(In millions)	2020			2019			2020		2019		2020			2019
Operating income	$	15		$	19		$	13	$	16	$	28		$	35
Depreciation and amortization (a)		20			20			4		4		24			24
EBITDA		35			39			17		20		52			59
Environmental reserve adjustments		2			1			—		—		2			1
Unplanned plant shutdown		—			2			—		—		—			2
Adjusted EBITDA	$	37		$	42		$	17	$	20	$	54		$	62

	Specialty Additives						Performance Adhesives				Industrial Specialties
	Nine months ended June 30
(In millions)	2020			2019			2020		2019		2020			2019
Operating income	$	(137	)	$	(5	)	$	40	$	42	$	(97	)	$	37
Depreciation and amortization (a)		60			60			11		12		71			72
EBITDA		(77	)		55			51		54		(26	)		109
Accelerated depreciation		—			38			—		—		—			38
Goodwill Impairment		174			—			—		—		174			—
Severance and other restructuring costs		—			10			—		—		—			10
Environmental reserve adjustments		2			1			—		—		2			1
Unplanned plant shutdown		—			2			—		—		—			2
Adjusted EBITDA	$	99		$	106		$	51	$	54	$	150		$	160

Three months ended
December 31
(In millions) 2017
2016
Operating income $ 42
$ 40
Depreciation and amortization (a)
60
55
EBITDA 102
95
Accelerated depreciation 2
—
Severance and other restructuring costs 1
—
Adjusted EBITDA $ 105
$ 95


(a)	~~Excludes $2 million of~~ Depreciation and amortization excludes accelerated depreciation of $38 million for the three and nine months ended ~~December 31, 2017.~~

~~Composites~~

Composites is a global leader in unsaturated polyester resins, vinyl ester resins and gelcoats. The Composites business manufactures and sells a broad range of general-purpose and high-performance grades of unsaturated polyester and vinyl ester resins, gelcoats and low-profile additives for the reinforced plastics industry. The products in the Composites business provide an array of functional properties including corrosion resistance, fire retardance, ultraviolet resistance, water and chemical resistance, high mechanical strength, impact and scratch resistance and high strength-to-weight ratios. Key end markets include transportation, construction, marine and infrastructure. In addition, the business manufactures and sells molten maleic anhydride for the manufacture of a variety of products such as unsaturated polyester resins, copolymers, lubricating oil additives,


June 30, 2019, which are included as key items.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

~~alkenyl succinic anhydrides, malic acid, fumaric acid and numerous derivative chemicals. Key markets include composites, personal care, dispersants and paper sizing.~~

~~December 2017 quarter compared to December 2016 quarter~~

~~Composites’ sales increased~~$53 million to $218 million in the current quarter. Improved product pricing increased sales by $19 million, or 12%. The acquisition of an unsaturated polyester resins manufacturing facility in the third of quarter of fiscal 2017 increased sales by $16 million, or 10%. Improved volume and mix increased sales by $12 million, or 7%, as metric tons sold increased to 91.2 thousand in the current quarter, while favorable foreign currency exchange increased sales by $6 million, or 4%.

Gross profit increased $5 million in the current quarter compared to the prior year quarter. Changes in volume and mix combined to increase gross profit by $3 million, while the facility acquisition and favorable foreign currency exchange each increased gross profit by $1 million. The net effects of pricing and raw material increases did not impact gross profit in the current quarter. In total, gross profit margin decreased 2.7 percentage points as compared to the prior year quarter to 18.4%.

Selling, general and administrative expenses during the current quarter increased $3 million compared to the prior year quarter primarily due to higher employee-related costs and unfavorable foreign currency exchange. Equity and other income increased $1 million compared to the prior year quarter.

Operating income totaled $18 million in the current quarter compared to $15 million in the prior year quarter. EBITDA increased $2 million to $23 million in the current quarter, while EBITDA margin decreased 2.1 percentage points in the current quarter to 10.6%.

~~EBITDA and Adjusted EBITDA reconciliation~~

~~The following EBITDA presentation for the three months ended~~ ~~December 31, 2017~~ ~~and~~ ~~2016~~ below is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Composites. There were no unusual or key items that affected comparability for EBITDA during the current and prior year quarters.

Three months ended
December 31
(In millions) 2017
2016
Operating income $ 18
$ 15
Depreciation and amortization 5
6
EBITDA $ 23
$ 21

Intermediates and Solvents

~~December 2017~~

June 2020 quarter compared to ~~December 2016~~June 2019 quarter

Intermediates and Solvents’ sales ~~increased $17~~decreased $4 million to ~~$74 million in the current quarter. Higher product pricing increased sales by $9 million while higher volumes and favorable foreign currency exchange each increased sales by $4 million.~~

Gross profit increased $16 million during the current quarter compared to the prior year quarter. Lower facility turn around costs in the current quarter resulted in an $8 million increase in gross profit as a result of a significant

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

planned plant shutdown that occurred in the prior year quarter. The net impact of pricing and costs increased gross profit by $7 million primarily due to improvements in product pricing. Higher volumes contributed to a $1 million increase in gross profit. In total, gross profit margin increased 22.2 percentage points as compared to the prior year quarter to 21.3%.

~~Selling, general and administrative expenses increased by $1 million compared to the prior year quarter.~~

~~Operating income totaled $8~~$37 million in the current quarter asprimarily due to lower pricing.

Operating income/loss decreased $1 million to $7 million for the current quarter. Unfavorable price/mix decreased operating income by $2 million. This decrease was offset by lower costs which increased operating income by $1 million. Current quarter EBITDA was flat at $11 million.

Fiscal 2020 year-to-date compared to fiscal 2019 year-to-date

Intermediates and Solvents’ sales decreased $16 million to $102 million in the current period. Lower volume and lower pricing decreased sales by $6 million and $10 million, respectively.

Operating income/loss decreased $27 million to a loss of $7 million infor the ~~prior~~current period. Lower volume, unfavorable price/mix, unfavorable costs and inventory adjustments decreased operating income by $2 million, $5 million, $16 million and $4 million, respectively. Current year ~~quarter.~~ EBITDA ~~and~~decreased $26 million to $3 million, while Adjusted EBITDA decreased $22 million to $7 million. Adjusted EBITDA margin decreased 17.7 percentage points in the current ~~quarter increased~~year to ~~$16 million and 21.6%, respectively.~~

6.9%.

EBITDA and Adjusted EBITDA reconciliation

The following EBITDA presentation (as defined and described in the section above) for the three and nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016~~2019 is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Intermediates and Solvents. ~~There were no unusual or key~~Key items ~~that affected comparability~~ for ~~EBITDA during~~ the ~~current and prior year quarters.~~nine months ended June 30, 2020 included an inventory adjustment of $4 million.

	Three months ended				Nine months ended
	June 30				June 30
(In millions)	2020		2019		2020			2019
Operating income	$	7	$	8	$	(7	)	$	20
Depreciation and amortization		4		3		10			9
EBITDA	$	11	$	11	$	3		$	29
Inventory adjustment		—		—		4			—
Adjusted EBITDA	$	11	$	11	$	7		$	29

Three months ended
December 31
(In millions) 2017
2016
Operating income (loss) $ 8
$ (7 )
Depreciation and amortization 8
7
EBITDA $ 16
$ —

Unallocated and other

The following table summarizes the key components of the Unallocated and other ~~segment's~~segment’s operating ~~loss~~income (loss) for the three and nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~2019.

	Three months ended						Nine months ended
	June 30						June 30
(In millions)	2020			2019			2020			2019
Restructuring activities	$	(14	)	$	(24	)	$	(36	)	$	(77	)
Environmental expenses		(18	)		(16	)		(26	)		(22	)
Proxy costs		—			—			—			(5	)
Tax indemnity costs		—			(6	)		—			(6	)
Other expenses (primarily governance and legacy expenses)		(11	)		(3	)		(25	)		(15	)
Total expense	$	(43	)	$	(49	)	$	(87	)	$	(125	)

Three months ended
December 31
(In millions) 2017
2016
Restructuring activities (includes separation, severance, integration
and stranded divestiture costs) $ 14
$ 24
Environmental expense for divested businesses 13
4
Legal reserve —
5
Other expense 2
—
Total expense $ 29
$ 33

~~December 2017~~

June 2020 quarter compared to ~~December 2016~~June 2019 quarter

Unallocated and other recorded expense of ~~$29~~$43 million and ~~$33~~$49 million for the three months ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, respectively. The ~~unallocated items for the~~ current and prior year quarters included charges for restructuring activities of $14 million and $24 million, ~~respectively. Restructuring activities included $6 million and $22 million~~respectively, which were comprised of ~~costs related to~~ the ~~separation of Valvoline and stranded divestiture costs of $3 million and $2 million during the current and prior year quarters, respectively.~~ following items:

•

$10 million of stranded divestiture costs during the prior year quarter, primarily related to the planned divestiture of the Composites segment and Marl facility;

•

$14 million and $14 million of severance, lease abandonment and other restructuring costs related to company-wide cost reduction programs during the current and prior quarters, respectively.

The current quarter ~~also~~ included ~~$4 million of accelerated depreciation related to the planned closure of an office building and $1 million of integration charges related to the acquisition of Pharmachem.~~

~~The remaining unallocated items during the current quarter primarily included $13~~$18 million for ~~environmental-related expenses while the~~environmental expenses.

The remaining items during the prior year quarter primarily included ~~$5 million of expense for a legal reserve and $4~~$16 million for environmental ~~reserve adjustments.~~

expenses and $6 million for tax indemnity costs.

Fiscal 2020 year-to-date compared to fiscal 2019 year-to-date

Unallocated and other recorded expense of $87 million and $125 million for the nine months ended June 30, 2020 and 2019, respectively. The current and prior year periods included charges for restructuring activities of $36 million and $77 million, respectively, which were comprised of the following items:


	•
$34 million of stranded divestiture costs during the prior year period;


	•
$36 million and $39 million of severance, lease abandonment and other restructuring costs related to company-wide cost reduction programs during the current and prior year periods, respectively; and

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~


	•
$4 million of impairment related to the planned sale of an office building during the prior year period.

The current year period also included $26 million for environmental expenses.

The remaining items during the prior year period primarily included $22 million for environmental expenses, $6 million for tax indemnity costs and $5 million in proxy defense costs.

FINANCIAL POSITION

Liquidity

Ashland had ~~$601~~$416 million in cash and cash equivalents as of ~~December 31, 2017,~~June 30, 2020, of which ~~$581~~$222 million was held by foreign subsidiaries and had no significant limitations that would prohibit remitting the funds to satisfy corporate obligations. In certain circumstances, if such amounts were repatriated to the United States, additional taxes might need to be accrued and paid depending on the source of the earnings remitted. Ashland currently has no plans to repatriate any amounts for which additional taxes would need to be accrued. ~~However, due~~

Ashland has taken actions and may continue to take actions intended to increase its cash position and preserve financial flexibility in light of current uncertainty in the ~~recent Tax Act,~~global markets. In January 2020, Ashland renewed and extended its Revolving Credit Agreement through 2025 and issued new 2.00% senior notes in Europe for €500 million which mature in 2028. During the three months ended June 30, 2020, Ashland elected to access $230 million on its Revolving Credit Facility, with these amounts on deposit as cash and cash equivalents. As of June 30, 2020, Ashland has total remaining borrowing capacity of $350 million, comprised of amounts remaining available under the Revolving Credit Facility. Ashland has no significant maturities related to our term loans, revolving credit facilities or bonds until August 2022.

Ashland believes that cash flow from operations, availability under existing credit facilities and arrangements, current cash and investment balances and the ability to obtain other financing, if necessary, will ~~be reassessing~~provide adequate cash funds for Ashland’s foreseeable working capital needs, capital expenditures at existing facilities, dividend payments and debt service obligations. Ashland’s cash requirements are subject to change as business conditions warrant and opportunities arise. The timing and size of any new business ventures or acquisitions that the Company may complete may also impact its cash requirements. For

information regarding the impact of COVID-19 on the Company, including on its liquidity and capital resources, please see item 1A, risk factors in this ~~position in future quarters.~~

report.

Ashland’s cash flows from operating, investing and financing activities, as reflected in the Statements of Condensed Consolidated Cash Flows, are summarized as follows for the ~~three~~nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~ 2019.

	Nine months ended
	June 30
(In millions)	2020			2019
Cash provided (used) by:
Operating activities from continuing operations	$	153		$	93
Investing activities from continuing operations		(65	)		(76	)
Financing activities from continuing operations		192			(183	)
Discontinued operations		(97	)		6
Effect of currency exchange rate changes on cash and cash equivalents		1			(2	)
Net increase (decrease) in cash and cash equivalents	$	184		$	(162	)

Three months ended
December 31
(In millions) 2017
2016
Cash provided (used) by:
Operating activities from continuing operations $ (24 ) $ (60 )
Investing activities from continuing operations (24 ) (31 )
Financing activities from continuing operations 99
(434 )
Discontinued operations (16 ) 50
Effect of currency exchange rate changes on cash and cash equivalents —
(9 )
Net increase (decrease) in cash and cash equivalents $ 35
$ (484 )

Operating activities

The following discloses the cash flows associated with Ashland’s operating activities for the ~~three~~nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~

2019.

	Nine months ended
	June 30
(In millions)	2020			2019
Cash flows provided (used) by operating activities from continuing operations
Net income (loss)	$	(513	)	$	94
Income (loss) from discontinued operations (net of income taxes)		22			(97	)
Adjustments to reconcile income from continuing operations to
cash flows from operating activities:
Depreciation and amortization		183			225
Original issue discount and debt issuance costs amortization		14			6
Deferred income taxes		(30	)		1
Distributions to equity affiliates		(1	)		—
Stock based compensation expense		11			17
(Income) loss from restricted investments		(17	)		(10	)
Excess tax benefit on stock based compensation		1			3
Loss on early retirement of debt		59			—
Impairments		530			8
Pension contributions		(5	)		(4	)
Gain on pension and other postretirement plan remeasurements		—			(18	)
Change in operating assets and liabilities (a)		(101	)		(132	)
Total cash flows provided by operating activities from continuing operations	$	153		$	93


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

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

Three months ended
December 31
(In millions) 2017
2016
Cash flows provided (used) by operating activities from continuing operations
Net income (loss) $ (4 ) $ 10
Income from discontinued operations (net of tax) (3 ) (75 )
Adjustments to reconcile income from continuing operations to

cash flows from operating activities

Depreciation and amortization 79
68
Original issue discount and debt issuance cost amortization 2
94
Deferred income taxes 8
2
Stock based compensation expense 7
5
Gain on early retirement of debt —
(3 )
Realized gain and investment income on available-for-sale securities (3 ) (3 )
Net loss on divestitures 1
1
Pension contributions (2 ) (1 )
Gain on post-employment plan remeasurement —
(2 )
Change in operating assets and liabilities (a)
(109 ) (156 )
Total cash flows used by operating activities from continuing operations $ (24 ) $ (60 )

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

Cash flows used from operating activities from continuing operations ~~a major source of Ashland’s liquidity,~~ amounted to ~~cash~~ inflows of ~~$24~~$153 million and ~~$60~~$93 million in the current and prior year ~~quarters,~~periods, respectively.

Operating Activities -– Operating Assets and Liabilities

The cash results during each ~~quarter~~period are primarily driven by net income (loss), excluding discontinued operation results, adjusted for certain non-cash items including depreciation and amortization (including original issue discount and debt issuance cost amortization), as well as changes in working capital, which are fluctuations within accounts receivable, inventory, trade payables and accrued expenses. Ashland continues to emphasize working capital management as a high priority and focus.

Changes in ~~net working capital accounted~~operating assets and liabilities for outflows of ~~$96~~$101 million and ~~$71~~$132 million for the ~~three~~nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, respectively, and were driven by the ~~following:~~

Accounts receivable - There were cash inflows of $15 million and $9 million during the current and prior year quarters, respectively, which were primarily due to collections in excess of sales during the first quarter of each fiscal year.

Inventory - The current quarter had a cash outflow of $39 million compared to a cash inflow of $15 million during the prior year quarter, which were primarily due to sales volumes and inventory management strategies.

Trade and other payables - There were cash outflows of $72 million and $95 million during the current and prior year quarters, respectively, which were primarily driven by seasonal fluctuations in trade payables and incentive compensation payouts from the prior year paid during the first quarter of each fiscal year. Additionally, the prior year quarter included the payment of certain Valvoline separation costs that were incurred in the preceding fiscal year.

following net working capital accounts:


	•
Accounts receivable – There were cash inflows of $23 million and $21 million during the current and prior year periods, respectively.


	•
Inventory – There were cash outflows of $21 million and inflows of $3 million during the current and prior year periods, respectively.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~


	•
Trade and other payables – There were cash outflows of $91 million and $118 million during the current and prior year periods, respectively, and primarily related to the timing of certain payments.

The remaining ~~outflows within~~ changes into operating assets and liabilities resulted in outflows of ~~$13~~$12 million and ~~$85~~$38 million in the current and prior year ~~quarters,~~periods, respectively, ~~relate~~and were primarily due to income taxes paid or income tax refunds, interest paid, and adjustments to certain accruals and ~~long term~~other long-term assets and ~~liabilities as well as income taxes received and paid.~~

liabilities.

Operating Activities -– Summary

Operating cash flows for the current ~~quarter~~year period included a loss from continuing operations of ~~$7 million, noncash~~$491 million. Additionally, the current period included non-cash adjustments of ~~$79~~$530 million for a goodwill impairment charge, $183 million for depreciation and amortization, ~~and $2~~$59 million ~~for~~loss on early retirement of debt, $14 million original issue discounts and debt issuance cost ~~amortization.~~

amortization, $11 million for stock-based compensation expense and $17 million income from restricted investments.

Operating cash flows for the prior year ~~quarter~~period included a loss from continuing operations of ~~$65 million and noncash adjustments~~$3 million. Additionally, the prior year period included a non-cash adjustment of ~~$68~~$225 million for depreciation and amortization, ~~and $94~~$10 million income from restricted investments, $8 million for ~~original issue discount~~an impairment of a held for sale facility, $17 million for stock-based compensation expense and ~~debt issuance cost amortization, including $92~~$18 million ~~of accelerated accretion related to~~for the ~~tender offer of the 2029 notes.~~gain on pension and other postretirement plan remeasurements.

Investing activities

The following discloses the cash flows associated with Ashland’s investing activities for the ~~three~~nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~2019.

	Nine months ended
	June 30
(In millions)	2020			2019
Cash flows provided (used) by investing activities from continuing operations
Additions to property, plant and equipment	$	(94	)	$	(103	)
Proceeds from disposal of property, plant and equipment		1			4
Purchase of operations		—			(2	)
Proceeds from settlement of Company-owned life insurance contracts		7			1
Company-owned life insurance payments		(2	)		(1	)
Net purchase of funds restricted for specific transactions		(3	)		(2	)
Reimbursement from restricted investments		26			25
Proceeds from sales of securities		16			156
Purchase of securities		(16	)		(156	)
Proceeds from the settlement of derivative instruments		—			4
Payments for the settlement of derivative instruments		—			(2	)
Total cash flows used by investing activities from continuing operations	$	(65	)	$	(76	)

Three months ended
December 31
(In millions) 2017
2016
Cash flows provided (used) by investing activities from continuing operations
Additions to property, plant and equipment $ (24 ) $ (33 )
Proceeds from disposal of property, plant and equipment 1
—
Proceeds from sale of operations 1
—
Net purchase of funds restricted for specific transactions (5 ) (2 )
Reimbursements from restricted investments 5
—
Proceeds from sales of available-for-sale securities 5
—
Purchases of available-for-sale securities (5 ) —
Proceeds from the settlement of derivative instruments —
4
Payments for the settlement of derivative instruments (2 ) —
Total cash flows used by investing activities from continuing operations $ (24 ) $ (31 )

Cash used by investing activities was ~~$24~~$65 million and ~~$31~~$76 million for the current and prior year ~~quarters,~~periods, respectively. The significant cash investing activities for the current ~~quarter~~period primarily related to cash outflows of ~~$24~~$94 million for property additions compared to ~~$33~~$103 million in the prior year ~~quarter.~~

period. Additionally, there were reimbursements from the restricted renewable annual asbestos trust of $26 million during the current period compared to $25 million in the prior year period.

Financing activities

The following discloses the cash flows associated with Ashland’s financing activities for the ~~three~~nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~2019.

	Nine months ended
	June 30
(In millions)	2020			2019
Cash flows provided (used) by financing activities from continuing operations
Proceeds from issuance of long-term debt		804			—
Repayment of long-term debt		(767	)		(10	)
Premium on long-term debt repayment		(59	)		—
Proceeds from (repayment of) short-term debt		281			83
Debt issuance costs		(11	)		—
Cash dividends paid		(50	)		(48	)
Repurchase of common stock		—			(200	)
Stock based compensation employee withholding taxes paid in cash		(6	)		(8	)
Total cash flows provided (used) by financing activities from continuing operations	$	192		$	(183	)

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

Three months ended
December 31
(In millions) 2017
2016
Cash flows provided (used) by financing activities from continuing operations
Repayment of long-term debt $ (2 ) $ (239 )
Premium on long-term debt repayment —
(5 )
Proceeds (repayment) from short-term debt 120
(154 )
Debt issuance costs —
(4 )
Cash dividends paid (14 ) (24 )
Stock based compensation employee withholding taxes paid in cash (5 ) (8 )
Total cash flows provided (used) by financing activities from continuing operations $ 99
$ (434 )

Cash flows ~~generated~~(used) provided by financing activities ~~was $99~~resulted in an inflow of $192 million for the current ~~quarter~~period as compared to ~~cash used~~an outflow of ~~$434~~$183 million for the prior year ~~quarter.~~

period.

Significant cash financing activities for the current ~~quarter~~period included ~~short-term~~proceeds from issuance of long-term debt, ~~net~~repayment of long-term debt, premiums paid on retirement of long-term debt, and debt issuance costs paid of $804 million, $767 million, $59 million and $11 million, respectively, all related to debt refinancing activity. See note H for additional information. The current year period also included short-term cash inflows of ~~$120~~$281 million, primarily related to ~~debt outstanding~~draws on the ~~2017~~2020 Revolving Credit ~~Facility and the accounts receivable securitization.~~Facility. The current ~~quarter~~period included cash dividends paid of ~~$0.225~~$0.825 per share, for a total of ~~$14~~$50 million.

Significant cash financing activities for the prior year ~~quarter~~period included long-term cash outflows of ~~$239~~$10 million, ~~related to the repayments of a portion of the 2029 notes, 2022 notes and 2018 notes. Additionally, the prior year quarter included short-term debt net repayments of $154 million, which was~~ primarily related to ~~the $150 million full repayment~~repayments of a term ~~loan held by a foreign subsidiary.~~loans and debentures. The prior year ~~quarter~~period included cash dividends paid of ~~$0.39~~$0.775 per share, for a total of ~~$24~~$48 million.

There was a $200 million outflow related to the accelerated share repurchase program. Additionally, $83 million of inflows were drawn out of the 2017 Revolving Credit Facility.

The following discloses the cash flows associated with Ashland’s discontinued operations for the ~~three~~nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016.~~2019.

	Nine months ended
	June 30
(In millions)	2020			2019
Cash provided (used) by discontinued operations
Operating cash flows	$	(98	)	$	—
Investing cash flows		1			6
Total cash provided (used) by discontinued operations	$	(97	)	$	6

Three months ended
December 31
(In millions) 2017
2016
Cash used by discontinued operations
Operating cash flows $ (16 ) $ 70
Investing cash flows —
(10 )
Financing cash flows —
(10 )
Total cash provided (used) by discontinued operations $ (16 ) $ 50

Cash flows for discontinued operations in the current ~~quarter~~period primarily related to previously divested businesses, including net payments of asbestos, environmental liabilities and ~~environmental liabilities.~~

tax payments associated with the Composites divestiture, which was a $59 million cash outflow for taxes paid during the period.

Cash flows for discontinued operations in the prior year ~~quarter primarily relate to~~period included net cash inflows of ~~$62~~$12 million related to the activity of ~~Valvoline Inc.~~Composites and the Marl facility. The remaining cash flows ~~in the prior year quarter~~for discontinued operations related to other previously divested businesses, including net payments of asbestos and environmental liabilities.

Free cash flow and other liquidity resources

The following represents Ashland’s calculation of free cash flow for the disclosed quarters. Free cash flow does not reflect adjustments for certain non-discretionary cash flows such as mandatory debt repayments.

	Nine months ended
	June 30
(In millions)	2020			2019
Total cash flows provided by operating activities from continuing operations	$	153		$	93
Adjustments:
Additions to property, plant and equipment		(94	)		(103	)
Free cash flows (a)	$	59		$	(10	)


	(a)

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

Three months ended
December 31
(In millions) 2017
2016
Cash flows provided by operating activities from continuing operations $ (24 ) $ (60 )
Adjustments:

Additions to property, plant and equipment (24 ) (33 )
Free cash flows (a)
$ (48 ) $ (93 )


~~(a)~~	Includes ~~$23~~$22 million and ~~$29~~$55 million of restructuring payments for the ~~three~~nine months ended ~~December 31, 2017~~June 30, 2020 and ~~2016,~~2019, respectively.

~~At December 31, 2017, working~~

Working capital (current assets minus current liabilities, excluding long-term debt due within one year) amounted to ~~$967~~$733 million ~~compared to $941~~and $676 million atas of June 30, 2020 and September 30, ~~2017.~~2019, respectively. Liquid assets (cash, cash equivalents and accounts receivable) amounted to ~~119%~~93% and ~~122%~~94% of current liabilities ~~at December 31, 2017~~(excluding current liabilities held for sale) as of June 30, 2020 and September 30, ~~2017,~~2019, respectively.

The following summary reflects Ashland’s cash and unused borrowing capacity as of ~~December 31, 2017~~June 30, 2020 and September 30, ~~2017~~.2019.

(In millions)	June 30 2020		September 30 2019
Cash and investment securities
Cash and cash equivalents	$	416	$	232

Unused borrowing capacity
Revolving credit facility	$	350	$	752
Accounts receivable securitizations		—		48

December 31
September 30
(In millions) 2017
2017
Cash and cash equivalents $ 601
$ 566

Unused borrowing capacity

2017 Revolving Credit Facility $ 467
$ 579
Accounts receivable securitization facility 31
35

During the current year period, Ashland entered into a new revolving credit facility. The borrowing capacity remaining under the ~~2017 Revolving Credit Facility~~new $600 million revolving credit facility was ~~$467~~$350 million due to an outstanding balance of ~~$285~~$230 million ~~as well as~~and a reduction of ~~$48~~$20 million for letters of credit outstanding at ~~December 31, 2017.~~June 30, 2020. In total, Ashland’s available liquidity position, which includes cash, the revolving credit facility and the accounts receivable securitization ~~facility,~~facilities, was ~~$1,099~~$766 million at ~~December 31, 2017,~~June 30, 2020, compared to ~~$1,180~~$1,032 million at September 30, ~~2017.~~

2019. This reduction was due primarily to the $200 million reduction in the revolving credit facility as part of the 2020 Credit Agreement.

Capital resources

Debt

The following summary reflects Ashland’s debt as of ~~December 31, 2017~~ ~~and~~ ~~September~~June 30, ~~2017~~.

December 31
September 30
(In millions) 2017
2017
Short-term debt (includes current portion of long-term debt) $ 355
$ 235
Long-term debt (including current portion and debt issuance cost discounts) (a)
2,584
2,584
Total debt $ 2,939
$ 2,819

~~(a)Includes $24 million and $25 million of debt issuance cost discounts as of December 31, 2017~~2020 and September 30, ~~2017, respectively.~~2019.

(In millions)	June 30 2020		September 30 2019
Short-term debt (includes current portion of long-term debt)	$	446	$	166
Long-term debt (less current portion and debt issuance cost discounts) (a)		1,547		1,501
Total debt	$	1,993	$	1,667

(a)

Includes $15 million and $12 million of debt issuance cost discounts as of June 30, 2020 and September 30, 2019, respectively.

During the current year, Ashland entered into a new credit facility, the 2020 Credit Agreement, which was comprised of a $600 million, 5-year credit facility and a $250 million 5-year term loan. Additionally, Ashland issued new 8-year Senior notes in Europe, for approximately $554 million. The ~~current portion~~proceeds of ~~long-term~~these debt ~~was $6~~issuances were primarily used to tender for $767 million ~~at December 31, 2017.~~ of Senior notes. See Note H for more information.

Debt as a percent of capital employed was ~~46%~~40% and 32% at ~~December 31, 2017~~June 30, 2020 and ~~45%~~ at September 30, ~~2017.~~2019, respectively. At ~~December 31, 2017,~~June 30, 2020, Ashland’s total debt had an outstanding principal balance of ~~$3,015~~$2,051 million, discounts of ~~$52~~$43 million, and debt issuance costs of ~~$24~~$15 million. The scheduled aggregate maturities of long-term debt by year (including the current portion and excluding debt issuance costs) are as follows: ~~$5 million~~zero remaining in ~~2018, $11~~2020, zero in 2021, $421 million in ~~2019, $269~~2022, $22 million in ~~2020, $56~~2023 and $44 million in ~~2021 and $1,279 million in 2022.~~

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

~~Financing Activities~~

~~2017 Credit Agreement~~

On May 17, 2017, in conjunction with the closing of the Pharmachem acquisition, Ashland entered into a secured credit agreement (the 2017 Credit Agreement) with a group of lenders. The 2017 Credit Agreement provided for (i) a $250 million three-year term loan A facility (the Three-Year TLA Facility), (ii) a $250 million five-year term loan A facility (the Five-Year TLA Facility and together with the Three-Year TLA Facility, the TLA Facilities) and (iii) a $680 million five-year revolving credit facility (including a $125 million letter of credit sublimit) (the 2017 Revolving Credit Facility). Proceeds of borrowings under the TLA Facilities were used solely to finance the acquisition of Pharmachem, while the proceeds of the 2017 Revolving Credit Facility were used to finance, in part, the acquisition of Pharmachem, to refinance the 2015 Senior Credit Agreement and for general corporate purposes. On May 19, 2017, Ashland entered into Amendment No. 1 to the 2017 Credit Agreement, which increased the aggregate commitments under the 2017 Revolving Credit Facility from $680 million to $800 million.

At Ashland’s option, loans issued under the 2017 Credit Agreement bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. Loans bear interest at LIBOR plus 1.75% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus 0.75%, in the alternative, through and including the date of delivery of a quarterly compliance certificate and thereafter the interest rate will fluctuate between LIBOR plus 1.375% per annum and LIBOR plus 2.500% per annum (or between the alternate base rate plus 0.375% per annum and the alternate base rate plus 1.500% per annum), based upon Ashland’s secured facilities ratings or the consolidated net leverage ratio (as defined in the 2017 Credit Agreement) (whichever yields a lower applicable interest rate margin) at such time. In addition, Ashland was required to pay fees of 0.25% per annum on the daily unused amount of the 2017 Revolving Credit Facility through and including the date of delivery of a compliance certificate, and thereafter the fee rate will fluctuate between 0.175% and 0.40% per annum, based upon Ashland’s secured facilities rating or the consolidated net leverage ratio (whichever yields a lower applicable rate). The TLA Facilities may be prepaid at any time without premium. The Three-Year TLA Facility will not amortize and will be due on May 17, 2020. The Five-Year TLA Facility will not amortize in each of the first, second and third years and will amortize at a rate of 20% per annum in each of the fourth and fifth years (payable in equal quarterly installments), with the outstanding balance of the Five-Year TLA Facility to be paid on May 17, 2022.

On June 14, 2017, Ashland entered into Amendment No. 2 to the 2017 Credit Agreement, which provided for a new $600 million seven-year senior secured term loan B facility (the 2017 TLB Facility). At Ashland’s option, loans issued under the 2017 TLB Facility bear interest at either (x) LIBOR plus 2.00% per annum or (y) an alternate base rate plus 1.00% per annum. The 2017 TLB Facility may be prepaid at any time. The 2017 TLB Facility amortizes at a rate of 1.00% per annum (payable in equal quarterly installments) with the outstanding balance to be paid on May 17, 2024.

~~6.50% junior subordinated notes due 2029~~

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

~~Open market repurchases of 4.750% notes due 2022 and 3.875% notes due 2018~~

During the three months ended December 31, 2016, Ashland executed open market repurchases of its 4.750% notes due 2022 (2022 notes) and its 3.875% notes due 2018 (2018 notes). As a result of these repurchases, the carrying values of the 2022 notes and 2018 notes were reduced by $36 million and $29 million, respectively. Ashland recognized a $2 million charge related to premiums paid in the open market repurchases and accelerated amortization of previously capitalized debt issuance costs, which is included in the net interest and other financing expense caption of the Statements of Consolidated Comprehensive Income (Loss) for the three months ended December 31, 2016.

Ashland credit ratings

Ashland’s corporate credit ~~rating with~~ratings remained unchanged at BB+ by Standard & Poor’s ~~is BB, while~~and Ba1 by Moody’s Investor Services. As of June 30, 2020, Moody’s Investor Services ~~is Ba2. Moody’s Investor Services and~~outlook remained at stable, while Standard & Poor's ~~outlooks both remained at stable.~~revised Ashland’s outlook to negative. Subsequent changes to these ratings or outlook may have an effect on Ashland’s borrowing rate or ability to access capital markets in the future.

Ashland debt covenant restrictions

Ashland's most recent credit agreement (the ~~2017~~2020 Credit Agreement) contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional subsidiary indebtedness, restrictions on subsidiary distributions, investments, mergers, sale of assets and restricted payments and other customary limitations. As of ~~December 31, 2017,~~June 30, 2020, Ashland is in compliance with all debt agreement covenant restrictions under the ~~2017~~2020 Credit Agreement.

The maximum consolidated net leverage ratio permitted under the ~~2017~~2020 Credit Agreement is ~~4.5.~~4.0. The ~~2017~~2020 Credit Agreement defines the consolidated net leverage ratio as the ratio of consolidated indebtedness minus unrestricted cash and cash equivalents to consolidated EBITDA (Covenant Adjusted EBITDA) for any measurement period. In general, the ~~2017~~2020 Credit Agreement defines Covenant Adjusted EBITDA as net income plus consolidated interest charges, taxes, depreciation and amortization expense, fees and expenses related to capital market transactions and proposed or actual acquisitions and divestitures, restructuring and integration charges, noncash stock and equity compensation expense, and any other nonrecurring expenses or losses that do not represent a cash item in such period or any future period; less any noncash gains or other items increasing net income. The computation of Covenant Adjusted EBITDA differs from the

calculation of EBITDA and Adjusted EBITDA, which have been reconciled ~~on page 41.~~above in the “consolidated review” section. In general, consolidated indebtedness includes debt plus all purchase money indebtedness, banker’s acceptances and bank guaranties, deferred purchase price of property or services, attributable indebtedness and guarantees.

At June 30, 2020, Ashland’s calculation of the consolidated net leverage ratio was 3.0.

The minimum required consolidated interest coverage ratio under the ~~2017~~2020 Credit Agreement is 3.0. The ~~2017~~2020 Credit Agreement defines the consolidated interest coverage ratio as the ratio of Covenant Adjusted EBITDA to consolidated interest charges for any measurement period.

At December 31, 2017, Ashland’s calculation of the consolidated net leverage ratio was 3.9, which is below the maximum consolidated ratio permitted under the 2017 Credit Agreement of 4.5. At December 31, 2017,June 30, 2020, Ashland’s calculation of the consolidated interest coverage ratio was ~~4.6, which exceeds the minimum required consolidated ratio of 3.0.~~

~~The average~~7.7.

Any change in Covenant Adjusted EBITDA of $100 million would have an approximate ~~0.7x~~0.5x effect on the consolidated net leverage ratio and a ~~0.8x~~1.4x effect on the consolidated interest coverage ratio. The average change in consolidated indebtedness of $100 million would affect the consolidated leverage ratio by approximately 0.2x.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

Additional capital resources

Cash projection

Ashland ~~projects~~believes that cash flow from operations, availability under existing credit facilities and arrangements, current cash and investment balances and the ability to obtain other ~~available financial resources such as~~financing, if necessary, will provide adequate cash ~~on hand and revolving credit should be sufficient to meet investing and financing requirements to enable Ashland to comply with~~funds for the ~~covenants and other terms of its financing obligations. These projections are based on various assumptions that include, but are not limited to: operational results, capital expenditures,~~Company’s foreseeable working capital needs, ~~and tax~~capital expenditures at existing facilities, pending acquisitions, dividend payments and ~~receipts.~~

debt service obligations. The Company’s cash requirements are subject to change as business conditions warrant and opportunities arise. The timing and size of any new business ventures or acquisitions that the Company may complete may also impact its cash requirements. For information regarding the impact of COVID-19 on the Company, including on its liquidity and capital resources, please see item 1A, risk factors in this report.

Total equity

Total equity decreased $7$558 million since September 30, ~~2017~~2019 to ~~$3,399~~$3,013 million at ~~December 31, 2017.~~June 30, 2020. The decrease of $7$558 million was due to ~~cash dividends of $14 million and a~~ net loss of $4$513 million, ~~partially~~deferred translation loss of $7 million, and dividends of $50 million, offset by ~~an $8~~$12 million ~~net increase in available-for-sale securities and $3 million related to deferred translation gains.~~

~~Stock repurchase program~~

~~In April 2015, Ashland's Board~~ of ~~Directors approved a $1 billion share repurchase authorization that was set to expire on December 31, 2017 (the 2015 stock repurchase program). This authorization allows for Ashland’s~~ common shares ~~to be repurchased in open market transactions, privately negotiated transactions or pursuant to one or more accelerated~~issued under stock ~~repurchase programs or Rule 10b5-1~~incentive and other plans.

During 2017, Ashland's Board of Directors extended the 2015 stock repurchase program indefinitely. As of December 31, 2017, $500 million of share repurchase authorization remains under the 2015 stock repurchase program.

Stockholder dividends

In May ~~2017, subsequent to the final distribution of Valvoline Inc.'s common stock,~~2019, the Board of Directors of Ashland announced a quarterly cash dividend of ~~22.5~~27.5 cents per share to eligible ~~shareholders~~stockholders at ~~record which was~~record. Dividends of 27.5 cents per share were paid ~~for quarterly dividends~~ in the first, ~~quarter~~second and third quarters of fiscal ~~2018~~2020 and the third and fourth quarters of fiscal ~~2017. This~~2019. These dividends represented a ~~reduction from~~10% increase over the previous quarterly cash dividend of 3925 cents per share ~~which was~~ paid ~~for quarterly dividends~~ in the first and second quarters of fiscal ~~2017.~~

2019.

Capitalexpenditures

Capital expenditures were ~~$24~~$94 million for the ~~three~~nine months ended ~~December 31, 2017 and averaged approximately $217~~June 30, 2020 compared to $103 million ~~during~~for the ~~last three fiscal years.~~

~~Contractual obligations and commitments~~

As a result of the Tax Act that was enacted during December 2017, Ashland has currently estimated and identified that the one-time transition tax related to the new law is estimated to be approximately $160 million payable over eight years, with the first payment of approximately $13 million due during the first quarter of fiscal yearnine months ended June 30, 2019. ~~Ashland will continue to reassess this estimate in future periods.~~

In addition, during January 2018, Ashland repatriated approximately $300 million in cash that was used to repay existing debt. There were no other significant changes to the contractual obligations table as presented at September 30, 2017.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

CRITICAL ACCOUNTING POLICIES

The preparation of Ashland’s Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses, and the disclosures of contingent assets and liabilities. Significant items that are subject to such estimates and assumptions include, but are not limited to, long-lived assets (including goodwill and other intangible assets), income taxes, other liabilities and receivables associated with asbestos litigation and environmental remediation. These accounting policies are discussed in detail in “Management’s Discussion and Analysis – Critical Accounting Policies” in Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017~~.2019. Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions. Management has reviewed the estimates affecting these items with the Audit Committee of Ashland’s Board of Directors. No material changes have been made to the valuation techniques during the ~~three~~nine months ended ~~December 31, 2017~~.June 30, 2020.

~~OUTLOOK~~

~~Fiscal Year 2018~~

Goodwill and other indefinite-lived intangible assets

Ashland ~~updated~~tests goodwill and other indefinite-lived intangible assets for impairment annually as of July 1 and when events and circumstances indicate an impairment may have occurred. Ashland tests goodwill and other indefinite-lived intangible assets for impairment by comparing the estimated fair value of the reporting units (for goodwill) or other indefinite-lived intangible assets to the related carrying value. If the carrying amount of a reporting unit or other indefinite-lived intangible asset exceeds its ~~financial outlook for fiscal 2018 as shown~~estimated fair value, Ashland records an impairment loss based on the difference between fair value and carrying amount, in the ~~table below.~~



	~~Prior FY 2018 Outlook~~	~~Updated FY 2018 Outlook~~
~~Adjusted EBITDA~~
~~Specialty Ingredients~~	~~$560 - $590 million~~	~~No change~~
~~Composites~~	~~$85 - $95 million~~	~~No change~~
~~Intermediates & Solvents~~	~~$40 - $50 million~~	~~No change~~
~~Unallocated and other~~	~~($35 - $45 million)~~	~~No change~~

~~Key Operating Metrics~~
~~Free cash flow~~	~~>$220 million~~	~~No change~~
~~Adjusted diluted EPS~~	~~$3.20 - $3.40~~	~~$2.90 - $3.10~~

~~Corporate Items~~
~~Depreciation & amortization~~	~~~$290 million~~	~~No change~~
~~Interest expense~~	~~$125 - $135 million~~	~~No change~~
~~Effective tax rate~~	~~8 - 13%~~	~~16 - 20%~~
~~Capital expenditures~~	~~$195 - $205 million~~	~~No change~~
~~Diluted share count~~	~~~64 million~~	~~No change~~

~~Second Quarter~~case of ~~2018~~

~~For~~reporting units, not to exceed to the associated carrying amount of goodwill.

Reporting units are defined as either operating segments or one level below the operating segments for which discrete financial information is available and reviewed by the business management. During the second quarter of fiscal ~~2018,~~2020, Ashland ~~expects Adjusted diluted EPS~~realigned its operations into five reportable segments which resulted in a reassessment of the Company’s reporting units used to beevaluate goodwill impairment. The Company’s reporting units align with its reportable segments. Ashland determined that its reporting units are Life Sciences, Personal Care & Household, Specialty Additives, Performance Adhesives, and Intermediates and Solvents. Prior to the business realignment, the reporting units consisted of Ashland Specialty Ingredients and Intermediates and Solvents. The Ashland Specialty Ingredients reporting unit contained all of Ashland’s reported goodwill at September 30, 2019.

In conjunction with the realignment, Ashland tested goodwill for impairment for each reporting unit both immediately before and immediately after the business realignment during the second quarter of fiscal 2020. The fair values of the reporting units were determined using a combination of discounted cash flow models and valuations based on earnings multiples for guideline public companies in each reporting unit’s industry peer group.

The goodwill impairment test under the former reporting unit structure concluded that no impairment existed during the second quarter of fiscal 2020. Ashland then allocated goodwill to the new reporting unit structure using a relative fair value approach and re-assessed goodwill for impairment for each of its new reporting units. The impairment test under the new reporting unit structure concluded that Life Sciences and Performance Adhesives fair value were in excess of the carrying amounts by more than 10%. The carrying value of the Personal Care & Household reporting unit and the Specialty Additives reporting unit exceeded its respective fair value, resulting in a non-cash goodwill impairment charge of $530 million, which was recorded within the Goodwill impairment caption within the Statement of Consolidated Comprehensive Income (Loss) for the nine months ended June 30, 2020. Remaining goodwill after impairment was zero for Personal Care & Household and $439 million for Specialty Additives. The Personal Care & Household goodwill impairment charge was due in large part to lower growth and lower margins since the acquisitions of the Oral Care and Avoca businesses, which collectively have resulted in reduced cash flow projections. The Specialty Additives goodwill impairment charge was also due in large part to lower growth and lower margins within the global construction and energy end markets, which collectively have resulted in reduced cash flow projections. There were no indicators of impairment that were identified in the third quarter of fiscal 2020.

The table below provides a sensitivity analysis for Specialty Additives goodwill, utilizing reasonably possible changes in the assumptions for the shorter term and residual growth rates and the discount rate, to demonstrate the potential impacts to the estimated fair values. The table below provides, in isolation, the estimated fair value impacts related to a 25-basis point increase to discount rate or a 25-basis point decrease to residual growth rates, both of which would result in incremental impairment charges to Specialty Additives reporting unit.

	Approximate Percent Change in Estimated Fair Value
	+25 bps	-25 bps
	Discount Rate	Growth Rate
Specialty Additives	-2.9%	-2.1%

Significant assumptions inherent in the valuation methodologies include estimates of future projected business results (principally revenue and EBITDA), long-term growth rates, and the weighted-average cost of capital. Ashland performed sensitivity analyses by using a range of ~~$0.80-$0.90 per diluted share. This estimate assumes an effective tax~~inputs to confirm reasonableness of these estimates. Additionally, Ashland compares the indicated equity value to Ashland’s market capitalization, and implied control premium/discount, to determine if the estimated enterprise value is reasonable compared to external market indicators. Ashland believes the data and assumptions used are appropriate in the circumstances and consistent with internal projections. Significant assumptions utilized in the impairment analysis performed during the second quarter of 2020 included the weighted average cost of capital, ranging between 9.0% and 10.5%, and terminal growth rate, ~~of 18% based~~ranging between 2.0% and 4.0% depending on the ~~new U.S. tax legislation.~~reporting unit.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Ashland’s market risk exposure at ~~December 31, 2017~~June 30, 2020 is generally consistent with the types of market risk exposures presented in Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017~~.

~~ASHLAND GLOBAL HOLDINGS INC. AND CONSOLIDATED SUBSIDIARIES~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

2019.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures - As of the end of the period covered by this quarterly report, Ashland, under the supervision and with the participation of its management, including Ashland’s Chief Executive Officer and its Chief Financial Officer, evaluated the effectiveness of Ashland’s disclosure controls and procedures pursuant to Rule 13a-15(b) and 15d-15(b) promulgated under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of ~~December 31, 2017.~~

June 30, 2020.

Changes in Internal Control over Financial Reporting - During the ~~three~~nine months ended ~~December 31, 2017,~~June 30, 2020, there were no significant changes in Ashland’s internal control over financial reporting, or in other factors, that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, Ashland’s internal control over financial reporting.

During the June 2017 quarter, Ashland completed its purchase of Pharmachem. Although management believes appropriate internal controls and procedures have been maintained, Pharmachem’s controls and procedures for the recording, processing, and summarizing of financial information have not been fully evaluated by Ashland’s management as of December 31, 2017. As such, there is a risk that deficiencies may exist and not yet be identified that could constitute significant deficiencies or in the aggregate, a material weakness related to Pharmachem's businesses.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The following is a description of Ashland’s material legal proceedings.

Asbestos-Related Litigation

Ashland is subject to liabilities from claims alleging personal injury caused by exposure to asbestos. Such claims result primarily from indemnification obligations undertaken in 1990 in connection with the sale of Riley Stoker Corporation (Riley), a former subsidiary. Although Riley was neither a producer nor a manufacturer of asbestos, its industrial boilers contained some asbestos-containing components provided by other companies.

Hercules LLC (formerly Hercules Incorporated), an indirect wholly-owned subsidiary of Ashland, is also subject to liabilities from asbestos-related personal injury lawsuits involving claims which typically arise from alleged exposure to asbestos fibers from resin encapsulated pipe and tank products which were sold by one of Hercules’ former subsidiaries to a limited industrial market.

Ashland and Hercules are also defendants in lawsuits alleging exposure to asbestos at facilities formerly or presently owned or operated by Ashland or Hercules.

For additional detailed information regarding liabilities arising from asbestos-related litigation, see Note KL of Notes to Condensed Consolidated Financial Statements in this quarterly report on Form 10-Q.

Environmental Proceedings

(a) CERCLA and Similar State Law Sites - Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state laws, Ashland and its subsidiaries may be subject to joint and several liability for cleanup costs in connection with alleged releases of hazardous substances at sites where it has been identified as a “potentially responsible party” (PRP). As of ~~December 31, 2017,~~June 30, 2020, Ashland and its subsidiaries have been identified as a PRP by U.S. federal and state authorities, or by private parties seeking contribution, for the cost of environmental investigation and/or cleanup at 8283 waste treatment or disposal sites. These sites are currently subject to ongoing investigation and remedial activities, overseen by the United States Environmental Protection Agency (USEPA) or a state agency, in which Ashland or its subsidiaries are typically participating as a member of a PRP group. Generally, the types of relief sought include remediation of contaminated soil and/or groundwater, reimbursement for past costs of site cleanup and administrative oversight and/or long-term monitoring of environmental conditions at the sites. The ultimate costs are not predictable with assurance.

(b) Hattiesburg, Mississippi Resource Conservation and Recovery Act Matter - In November 2008, the Mississippi Department of Environmental Quality (MDEQ) issued a Notice of Violation to Hercules’ now-closed Hattiesburg, Mississippi manufacturing facility alleging that a process water impoundment basin at the facility had been operated as a hazardous waste storage and treatment facility without a permit in violation of the Resource Conservation and Recovery Act. In May 2011, the USEPA issued an inspection report from a September 2010 inspection with allegations similar to those of the MDEQ and promulgated an information request. Ashland has been working with the MDEQ and USEPA to settle this matter in the context of the shutdown and ongoing remediation of the Hattiesburg facility. The USEPA proposed a settlement penalty in excess of $100,000. While it is reasonable to believe that this matter will involve a penalty from the MDEQ and/or the USEPA exceeding $100,000, the potential penalty with respect to this enforcement matter should not be material to Ashland.

(c) Lower Passaic River, New Jersey Matters - Ashland, through two formerly owned facilities, and ISP, through a now-closed facility, have been identified as PRPs, along with approximately 70 other companies (the Cooperating Parties Group or the CPG), in a May 2007 Administrative Order of Consent (AOC) with the USEPA. The parties are required to perform a remedial investigation and feasibility study (RI/FS) of the entire 17 miles of the Passaic River. In June 2007, the USEPA separately commenced a Focused Feasibility Study (FFS) as an interim measure. In accordance with the 2007 AOC, in June 2012 the CPG voluntarily entered into another AOC for an interim removal action focused solely at mile 10.9 of the Passaic River. The allocations for the 2007 AOC and the 2012 removal action are based on interim allocations, are immaterial and have been accrued. In April 2014, the USEPA released the FFS. The CPG

submitted the Draft RI/FS Report on April 30, 2015. The USEPA has released the FFS Record of Decision for the lower 8 miles and recently reached an agreement with ~~Occidental~~another chemical company to conduct and pay for the

remedial design. ~~The~~This chemical company has sued Ashland, ISP and numerous other defendants to recover past and future costs pursuant to the CERCLA. Ashland, ISP and numerous other defendants have filed a Motion to Dismiss all of the claims. Ashland and ISP are participating in an USEPA ~~has advised that it will be working to secure similar agreements with other PRPs.~~allocation process. The release of the FFS Record of Decision, ~~did not have a material adverse impact on Ashland’s business and financial operations; however, there are a number of contingencies in~~ the ~~future that could possibly have a material impact including adverse rulings or verdicts, allocation~~current allocations proceedings and ~~related orders.~~

the lawsuit are not expected to be material to Ashland.

(d)Freetown, MA Resource Conservation and Recovery Act (RCRA) Matter - On September 27, 2018, the USEPA issued a Complaint, Compliance Order and Opportunity for Hearing to ISP Freetown Fine Chemicals, Inc.’s facility in Assonet, Massachusetts alleging various violations of the RCRA relating to certain distillation tanks at the facility and seeking a penalty of $203,792. Ashland disputes USEPA’s stated interpretation of the RCRA regulations and their applicability to these tanks. While this matter could result in a penalty from USEPA in excess of $100,000, the potential penalty is not expected to be material to Ashland.

For additional information regarding environmental matters and reserves, see Note KL of Notes to Condensed Consolidated Financial Statements in this quarterly report on Form 10-Q.

Other Pending Legal Proceedings

In addition to the matters described above, there are other various claims, lawsuits and administrative proceedings pending or threatened against Ashland and its current and former subsidiaries. Such actions are with respect to commercial matters, product liability, toxic tort liability and other environmental matters which seek remedies or damages, some of which are for substantial amounts. While Ashland cannot predict with certainty the outcome of such actions, it believes that adequate reserves have been recorded and losses already recognized with respect to such actions were immaterial as of ~~December 31, 2017.~~June 30, 2020. There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these actions; however, Ashland believes that such potential losses were immaterial as of ~~December 31, 2017.~~June 30, 2020.

ITEM 1A. RISK FACTORS

During the period covered by this report, there were no material changes from the risk factors previously disclosed in Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~

2019.

The COVID-19 pandemic could have a material adverse effect on Ashland’s business operations, results of operations, cash flows and financial position

Ashland is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and geographies, including how the pandemic will impact customers, employees, suppliers, vendors, business partners and distribution channels. The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption, which may materially and adversely affect Ashland’s business operations, cash flows, liquidity and financial position. The extent to which the COVID-19 pandemic impacts Ashland will depend on numerous evolving factors and future developments that are difficult to predict, including: the severity of the virus; the duration of the outbreak; governmental, business and other actions in response to the pandemic (which could include limitations on Ashland’s operations or mandates to provide products or services); the impact of the pandemic on Ashland’s supply chain; the impact of the pandemic on economic activity; the extent and duration of the effect on consumer confidence and spending, customer demand and buying patterns including spending on discretionary categories; the health of and the effect on Ashland’s workforce and its ability to meet staffing needs through the operations and other critical functions, particularly if employees are quarantined as a result of exposure; any impairment in value of tangible or intangible assets which could be recorded as a result of weaker economic conditions; the impact on Ashland’s business and the global economy from governmental actions related to international trade; and the potential effects on internal controls including those over financial reporting as a result of changes in working environments such as shelter-in-place and similar orders that are applicable to employees and business partners, among others. In addition, if the pandemic continues to create disruptions or turmoil in the credit or financial markets, or impacts Ashland’s credit ratings, it could adversely affect Ashland’s ability to access capital on favorable terms and continue to meet its liquidity needs, all of which are highly uncertain and cannot be predicted. In addition, Ashland cannot predict the impact that the COVID-19 pandemic will have on its customers, suppliers, vendors, and other business partners, and each of their financial conditions; however, any material effect on these parties could adversely impact Ashland. The impact of the COVID-19 pandemic may also exacerbate other risks discussed in Item 1A. Risk Factors in Ashland’s Annual Report on Form 10-K for fiscal year ended September 30, 2019, any of which could have a material effect on Ashland. This situation is changing rapidly and additional impacts may arise that Ashland is not aware of currently.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Share~~

There was no share repurchase activity during the three months ended ~~December 31, 2017 was as follows:~~June 30, 2020.

Issuer Purchases of Equity Securities
Q3 Fiscal Periods	Total Number of Shares Purchased		Average Price Paid Per Share, including commission		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Dollar Value of Shares that May Be Purchased Under the Plans or Programs (in millions)(a)
April 1, 2020 to April 30, 2020		—	$	—		—	$	800
May 1, 2020 to May 31, 2020		—		—		—		800
June 1, 2020 to June 30, 2020		—		—		—		800
Total		—				—	$	800

Issuer Purchases of Equity Securities
Q1 Fiscal Periods Total Number of Shares Purchased Average Price Paid Per Share, including commission Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)(a)
October 1, 2017 to October 31, 2017 —
$ —
—
$ 500
November 1, 2017 to November 30, 2017:

Employee Tax Withholdings 16,465
(b) 66.56
—
500
December 1, 2017 to December 31, 2017 —
—
—
500
Total.......................................................... 16,465
—
$ 500

(a)

During March 2018, Ashland’s Board of Directors approved a new $1 billion stock repurchase program, which replaced the previous stock repurchase program. Ashland’s stock repurchase program does not obligate it to acquire any specific number of shares. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 of the Exchange Act. As of June 30, 2020, $800 million remains available for repurchase under this authorization.

~~(a)~~In April 2015, the Company's Board of Directors authorized a program to repurchase up to $1 billion of the Company's stock, with the authorization expiring December 31, 2017. In September 2017, the Company's Board of Directors renewed the program for the remaining $500 million. The Company's share repurchase program does not obligate it to acquire any specific number of shares. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 of the Exchange Act. As of December 31, 2017, $500 million remains available for repurchase under this authorization.

~~(b)Shares withheld from employees to cover their withholding requirements for personal income taxes related to the vesting of restricted stock.~~

ITEM 6. EXHIBITS

(a) Exhibits

~~(a) Exhibits~~ 10.1

10.1*	~~Amendment No. 1 to the~~Letter Agreement by and between Ashland Global Holdings Inc. ~~Non-Qualified Defined Contribution Plan~~

~~10.2~~	~~Ashland Global Holdings Inc. 2018 Omnibus Incentive Compensation Plan~~and Peter J. Ganz, dated May 19, 2020 (filed as Exhibit 10.1 to Ashland’s Form 8-K filed on ~~January 26, 2018~~May 22, 2020, (SEC File No. 333-211719), and incorporated herein by reference).

~~10.3~~ 10.2	~~Form of Stock-Settled Restricted Stock Unit Award~~Consulting Agreement ~~under the~~by and between Ashland Global Holdings Inc. ~~2018 Omnibus Incentive Compensation Plan~~and Peter J. Ganz, dated May 19, 2020 (filed as Exhibit 10.2 to Ashland’s Form 8-K filed on ~~January 26, 2018~~May 22, 2020, (SEC File No. 333-211719), and incorporated herein by reference).

~~10.4~~ 31.1*	Form of Restricted Stock Award Agreement under the Ashland Global Holdings Inc. 2018 Omnibus Incentive Compensation Plan (filed as Exhibit 10.3 to Ashland’s Form 8-K filed on January 26, 2018 (SEC File No. 333-211719), and incorporated herein by reference).

~~10.5~~	Form of Stock Appreciation Rights Award Agreement under the Ashland Global Holdings Inc. 2018 Omnibus Incentive Compensation Plan (filed as Exhibit 10.4 to Ashland’s Form 8-K filed on January 26, 2018 (SEC File No. 333-211719), and incorporated herein by reference).

~~10.6~~	Form of Performance Unit Award Agreement under the Ashland Global Holdings Inc. 2018 Omnibus Incentive Compensation Plan (filed as Exhibit 10.5 to Ashland’s Form 8-K filed on January 26, 2018 (SEC File No. 333-211719), and incorporated herein by reference).

~~10.7~~	Form of Cash-Settled Restricted Stock Unit Award Agreement under the Ashland Global Holdings Inc. 2018 Omnibus Incentive Compensation Plan (filed as Exhibit 10.6 to Ashland’s Form 8-K filed on January 26, 2018 (SEC File No. 333-211719), and incorporated herein by reference).

12*	~~Computation of Ratio of Earnings to Fixed Charges.~~

31.1*	Certificate of ~~William A. Wulfsohn,~~Guillermo Novo, Chief Executive Officer of Ashland pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certificate of J. Kevin Willis, Chief Financial Officer of Ashland pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32*	Certificate of ~~William A. Wulfsohn,~~Guillermo Novo, Chief Executive Officer of Ashland, and J. Kevin Willis, Chief Financial Officer of Ashland pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**	Inline XBRL Instance Document.

101.SCH**	Inline XBRL Taxonomy Extension Schema Document.

101.CAL**	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF**	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB**	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE**	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

Filed herewith.

*Filed herewith.

Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Consolidated Comprehensive Income (Loss) for the three months ended June 30, 2020 and June 30, 2019; (ii) Condensed Consolidated Balance Sheets at June 30, 2020 and September 30, 2019; (iii) Statements of Consolidated Equity at June 30, 2020; (iv) Statements of Condensed Consolidated Cash Flows for the nine months ended June 30, 2020 and June 30, 2019; and (v) Notes to Condensed Consolidated Financial Statements.

**Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Statements of Consolidated Comprehensive Income for the three months ended ~~December 31, 2017~~ ~~and~~ ~~December 31, 2016; (ii) Condensed Consolidated Balance Sheets at~~ ~~December 31, 2017~~ ~~and~~ ~~September 30, 2017; (iii) Statements of Consolidated Equity at~~ ~~December 31, 2017; (iv) Statements of Condensed Consolidated Cash Flows for the three months ended~~ ~~December 31, 2017~~ ~~and~~ ~~December 31, 2016; and (v) Notes to Condensed Consolidated Financial Statements.~~

^SM

Service mark, Ashland or its subsidiaries, registered in various countries.

™

Trademark, Ashland or its subsidiaries, registered in various countries.

^SM~~Service mark, Ashland or its subsidiaries, registered in various countries.~~

~~™ Trademark, Ashland or its subsidiaries, registered in various countries.~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	Ashland Global Holdings Inc.
		(Registrant)
~~January~~ July 30, ~~2018~~2020		/s/ J. Kevin Willis
		J. Kevin Willis
		Senior Vice President and Chief Financial Officer (on behalf of the Registrant and as principal financial officer)



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


☐
	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three months ended
	December 31
(In millions except per share data - unaudited)	2017			2016
Sales	$	842		$	704
Cost of sales	613			515
Gross profit	229			189

Selling, general and administrative expense	171			157
Research and development expense	21			20
Equity and other income	2			3
Operating income	39			15

Net interest and other financing expense	31			122
Other net periodic benefit income	—			2
Net loss on divestitures	1			1
Income (loss) from continuing operations before income taxes	7			(106		)
Income tax expense (benefit) - Note I	14			(41		)
Loss from continuing operations	(7		)	(65		)
Income from discontinued operations (net of tax) - Note D	3			75
Net income (loss)	(4		)	10
Net income attributable to noncontrolling interest (a)	—			11
Net loss attributable to Ashland	$	(4	)	$	(1	)

PER SHARE DATA
Basic earnings per share - Note L
Loss from continuing operations	$	(0.12	)	$	(1.05	)
Income from discontinued operations attributable to Ashland	0.05			1.04
Net loss attributable to Ashland	$	(0.07	)	$	(0.01	)

Diluted earnings per share - Note L
Loss from continuing operations	$	(0.12	)	$	(1.05	)
Income from discontinued operations attributable to Ashland	0.05			1.04
Net loss attributable to Ashland	$	(0.07	)	$	(0.01	)

COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$	(4	)	$	10
Other comprehensive income (loss), net of tax - Note M
Unrealized translation gain (loss)	3			(146		)
Net change in available-for-sale securities	8			—
Pension and postretirement obligation adjustment	—			(1		)
Other comprehensive income (loss)	11			(147		)
Comprehensive income (loss)	$	7		$	(137	)
Comprehensive income attributable to noncontrolling interest	—			10
Comprehensive income (loss) attributable to Ashland	$	7		$	(147	)



(In millions - unaudited)	Common stock		Paid-in capital		Retained earnings			Accumulated other comprehensive income (loss)			(a)	Total
BALANCE AT SEPTEMBER 30, 2017	$	1	$	931	$	2,696		$	(222	)		$	3,406
Total comprehensive income (loss)
Net loss					(4		)					(4		)
Other comprehensive income								11				11
Regular dividends, $0.225 per common share					(14		)					(14		)
Common shares issued under stock incentive and other plans (b)			—									—
BALANCE AT DECEMBER 31, 2017	$	1	$	931	$	2,678		$	(211	)		$	3,399



	May 12
(In millions)	2017
ASSETS
Current assets
Cash	179
Accounts receivable, net	385
Inventories	153
Other current assets	24
Total current assets	741
Noncurrent assets
Net property, plant and equipment	357
Goodwill	329
Equity and other unconsolidated investments	31
Deferred income taxes	391
Other noncurrent assets	93
Total noncurrent assets	1,201
Total assets	$	1,942
LIABILITIES AND EQUITY
Current liabilities
Short-term debt	75
Current portion of long-term debt	16
Trade and other payables	353
Other current liabilities	34
Total current liabilities	478
Noncurrent liabilities
Long-term debt	662
Employee benefit obligations	826
Other long-term liabilities	163
Total noncurrent liabilities	1,651
Total liabilities	$	2,129
Net deficit	$	(187	)



	At
	May 17, 2017
Preliminary purchase price allocation (in millions)	As Adjusted
Assets:
Accounts receivable	52
Inventory	74
Other current assets	4
Intangible assets	330
Goodwill	287
Property, plant and equipment	97
Other noncurrent assets	20
Liabilities:
Accounts payable	(32		)
Deferred tax - net	(138		)
Other noncurrent liabilities	(14		)
Total purchase price	$	680



			Weighted-average
			amortization period
Intangible asset type (in millions)	Value		(years)
Trademarks and trade names	$	26	15
Intellectual property	68		22
Customer and supplier relationships	236		20
Total	$	330



	Three months ended
(In millions)	December 31, 2016
Income from discontinued operations
attributable to Valvoline
Sales	$	489
Cost of sales	(293		)
Selling, general and administrative expense	(82		)
Research and development expense	(3		)
Equity and other income	9
Operating income of discontinued operations	120
Net interest and other financing expense	(10		)
Pretax income of discontinued operations	110
Income tax expense	(35		)
Income from discontinued operations	$	75



(In millions)	Carrying value		Total fair value		Quoted prices in active markets for identical assets Level 1		Significant other observable inputs Level 2		Significant unobservable inputs Level 3
Assets
Cash and cash equivalents	$	601	$	601	$	601	$	—	$	—
Restricted investments (a)	345		345		345		—		—
Deferred compensation investments (b)	160		160		—		160		—
Investments of captive insurance company (b)	3		3		3		—		—
Foreign currency derivatives	4		4		—		4		—
Total assets at fair value	$	1,113	$	1,113	$	949	$	164	$	—

Liabilities
Foreign currency derivatives	$	13	$	13	$	—	$	13	$	—



	Specialty				Intermediates
(In millions)	Ingredients		Composites		and Solvents		(a)	Total
Balance as of September 30, 2017	$	2,315	$	150	$	—		$	2,465
Currency translation adjustment	10		—		—			10
Balance as of December 31, 2017	$	2,325	$	150	$	—		$	2,475


☑
~~(Mark One)~~



	December 31, 2017
	Gross					Net
	carrying		Accumulated			carrying
(In millions)	amount		amortization			amount
Definite-lived intangible assets
Trademarks and trade names	$	67	$	(22	)	$	45
Intellectual property	758		(340		)	418
Customer and supplier relationships	780		(246		)	534
Total definite-lived intangible assets	1,605		(608		)	997

Indefinite-lived intangible assets
Trademarks and trade names	301		—			301
Total intangible assets	$	1,906	$	(608	)	$	1,298



	September 30, 2017
	Gross					Net
	carrying		Accumulated			carrying
(In millions)	amount		amortization			amount
Definite-lived intangible assets
Trademarks and trade names	$	67	$	(22	)	$	45
Intellectual property	757		(326		)	431
Customer and supplier relationships	777		(235		)	542
Total definite-lived intangible assets	1,601		(583		)	1,018

Indefinite-lived intangible assets
Trademarks and trade names	301		—			301
Total intangible assets	$	1,902	$	(583	)	$	1,319



(In millions)
Balance at October 1, 2017	$	194
Increases related to positions taken on items from prior years	2
Increases related to positions taken in the current year	3
Balance at December 31, 2017	$	199



							Other postretirement
	Pension benefits						benefits
(In millions)	2017			2016			2017		2016
Three months ended December 31
Service cost (a)	$	2		$	2		$	1	$	—
Interest cost (b)	3			2			—		1
Expected return on plan assets (b)	(3		)	(3		)	—		—
Actuarial gain (b)	—			—			—		(2		)
Total net periodic benefit costs (income)	$	2		$	1		$	1	$	(1	)



	Three months ended
	December 31
(In millions except per share data)	2017			2016
Numerator
Numerator for basic and diluted EPS –
Loss from continuing operations	$	(7	)	$	(65	)
Denominator
Denominator for basic EPS – Weighted-average
common shares outstanding	62			62
Share-based awards convertible to common shares (a)	—			—
Denominator for diluted EPS – Adjusted weighted-
average shares and assumed conversions	62			62

EPS from continuing operations attributable to Ashland
Basic	$	(0.12	)	$	(1.05	)
Diluted	(0.12		)	(1.05		)



	2017									2016
				Tax									Tax
	Before			(expense)			Net of			Before			(expense)		Net of
(In millions)	tax			benefit			tax			tax			benefit		tax
Three months ended December 31
Other comprehensive income (loss)
Unrealized translation gain (loss)	$	3		$	—		$	3		$	(150	)	$	4	$	(146	)
Pension and postretirement obligation adjustment:
Amortization of unrecognized prior service
credits included in net income (a)	—			—			—			(3		)	2		(1		)
Net change in available-for-sale securities:
Unrealized gains during period	11			(2		)	9			—			—		—
Reclassification adjustment for realized gains
included in net income	(1		)	—			(1		)	—			—		—
Total other comprehensive income (loss)	$	13		$	(2	)	$	11		$	(153	)	$	6	$	(147	)



	Three months ended December 31, 2017
Sales by Geography	Specialty Ingredients		Composites		Intermediates and Solvents
North America	41	%	45	%	21	%
Europe	30	%	34	%	59	%
Asia Pacific	19	%	14	%	17	%
Latin America & other	10	%	7	%	3	%
	100	%	100	%	100	%



	Three months ended December 31, 2016
Sales by Geography	Specialty Ingredients		Composites		Intermediates and Solvents
North America	39	%	48	%	23	%
Europe	29	%	28	%	57	%
Asia Pacific	22	%	16	%	17	%
Latin America & other	10	%	8	%	3	%
	100	%	100	%	100	%



Issuer Purchases of Equity Securities
Q1 Fiscal Periods	Total Number of Shares Purchased		Average Price Paid Per Share, including commission		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)(a)
October 1, 2017 to October 31, 2017	—		$	—	—	$	500
November 1, 2017 to November 30, 2017:
Employee Tax Withholdings	16,465	(b)	66.56		—	500
December 1, 2017 to December 31, 2017	—		—		—	500
Total..........................................................	16,465				—	$	500