- Sales of $609 million, flat compared to the prior-year quarter
- Net income of $5 million, or $0.07 per diluted share
- Income from continuing operations was zero
- Adjusted income from continuing operations excluding intangibles amortization expense of $76 million, or $1.25 per diluted share
- Adjusted EBITDA of $154 million
- Cash flows provided by operating activities of $160 million; free cash flows of $116 million
WILMINGTON, Del., Nov. 10, 2020 (GLOBE NEWSWIRE) -- Ashland Global Holdings Inc. (NYSE: ASH) today announced preliminary1 financial results for the fourth quarter of fiscal year 2020 which ended September 30, 2020. The global specialty materials company serves customers in a wide range of consumer and industrial markets.
Ashland’s financial results during the quarter reflected both strong resiliency in demand and the positive impact of significant self-directed actions to reduce costs and right-size inventory levels. Sales were approximately $609 million, flat compared to the prior-year period and six percent greater than the June quarter, driven by continued strength in Consumer Specialties and improving demand within Industrial Specialties.
Net income was $5 million compared to net income of $411 million in the prior-year quarter, as the prior year included earnings and gains from the Composites and Marl businesses. Income from continuing operations was zero compared to income of $27 million in the prior-year quarter, or zero per diluted share compared to $0.44 in the prior-year quarter. Adjusted income from continuing operations excluding intangibles amortization expense was $76 million compared to $64 million in the prior-year quarter, or $1.25 per diluted share, up from $1.03 in the prior-year quarter. Adjusted EBITDA was $154 million, up from $150 million in the prior-year quarter, driven primarily by lower operating expenses and improved product mix in both the Consumer Specialties and Industrial Specialties segments.
Cash flows provided by operating activities totaled $160 million compared to $135 million in the prior-year quarter. Free cash flows totaled $116 million compared to $83 million in the prior-year quarter, driven primarily by increased earnings and the Company’s efforts to reduce overall inventory levels by $99 million, partially offset by $11 million of foreign currency impact. The one-time costs to achieve the inventory-reduction totaled $47 million. These one-time costs are excluded from the Company’s adjusted results.
“Ashland’s financial results in the fourth quarter demonstrate the strength of our specialty materials portfolio and the importance of the actions we are taking internally,” said Guillermo Novo, chairman and chief executive officer, Ashland. “Our priorities are the health and safety of our employees and the continued supply of products to customers in the critical industries we serve. Our consumer business units performed particularly well as we experienced continued strong demand by our customers in Life Sciences and Personal Care and Household. Furthermore, our industrial business units realized substantial sequential improvement as global industrial demand continued to recover throughout the quarter.”
“I am pleased with the progress our team has made driving improvements to our cost structure and balance sheet,” continued Novo. “The combined benefit of selling, administrative and research and development cost reductions, plus improved product mix and lower raw-material costs in Consumer and Industrial Specialties again yielded year-over-year adjusted EBITDA growth during the quarter. In addition, we exceeded our original target for reduced inventory levels, which contributed to improved cash flow generation. I am confident that our continued internal actions will position us well for the upcoming fiscal year and beyond. I look forward to sharing additional thoughts on our plans and the progress we have made during the conference call with securities analysts tomorrow morning.”
Reportable Segment Performance
To aid in the understanding of Ashland’s ongoing business performance, the results of Ashland’s reportable segments are described below on an adjusted basis. In addition, EBITDA and adjusted EBITDA are reconciled to operating income in Table 4. Free cash flow and adjusted operating income are reconciled in Table 6 and adjusted income from continuing operations, adjusted diluted earnings per share and adjusted diluted earnings per share excluding intangible amortization expense are reconciled in Table 7 of this news release. These adjusted results are considered non-GAAP financial measures. For a full description of the non-GAAP financial measures used, see the “Use of Non-GAAP Measures” section that further describes these adjustments below.
Sales were $344 million, up four percent from the prior-year quarter. The Life Sciences and Personal Care & Household business units performed well with particular strength demonstrated by pharmaceutical excipients, biofunctional ingredients and additives for hand sanitizers. Importantly, our nutraceuticals business also returned to growth. Operating income was $39 million, compared to $53 million in the prior-year quarter. Adjusted EBITDA was $97 million, up 10% from the prior-year quarter, reflecting higher sales, favorable price/mix and lower selling, administrative, research and development costs.
Sales were $240 million, down three percent from the prior-year quarter, due primarily to lower industrial demand across the globe reflecting the impact of the COVID-19 pandemic. Sales grew sequentially by 17% compared to the June quarter as global industrial demand continued to recover. Operating income was $21 million, compared to $37 million in the prior-year quarter. Adjusted EBITDA was $64 million, up three percent from the prior-year quarter, as lower volume was more than offset by favorable price/mix and lower operating costs.
Intermediates & Solvents
Sales were $28 million, down 33% from the prior-year quarter, due primarily to lower merchant and captive volumes. Operating loss was $3 million, down from operating income of $9 million in the prior-year quarter. Adjusted EBITDA was $6 million, down from $13 million in the prior-year quarter, primarily reflecting lower merchant and captive volumes.
Unallocated & Other
Unallocated and Other expense was $42 million, compared to $14 million in the prior-year quarter, primarily due to higher restructuring-related expenses. Adjusted Unallocated and Other expense was $13 million, compared to $14 million in the prior-year quarter.
Conference Call Webcast
Ashland will host a live webcast of its fourth-quarter conference call with securities analysts at 9:00 a.m. ET Wednesday, November 11, 2020. The webcast will be accessible through Ashland’s website at http://investor.ashland.com and will include a slide presentation. Following the live event, an archived version of the webcast and supporting materials will be available for 12 months.
Use of Non-GAAP Measures
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, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin provide Ashland’s investors with performance measures that reflect the impact to operations from trends in changes in sales, margin and operating expenses, providing a perspective not immediately apparent from net income, operating income, net income margin and operating income margin. The adjustments Ashland makes to derive the non-GAAP measures of EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin 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, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin 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. EBITDA margin and adjusted EBITDA margin are defined as EBITDA and adjusted EBITDA divided by sales for the corresponding period.
Key items, which are set forth on Table 7 of this release, are defined as financial effects from significant transactions that, either by their nature or amount, have caused short-term fluctuations in net income and/or operating income which Ashland does not consider to most accurately reflect Ashland’s underlying business performance and trends. Further, Ashland believes that providing supplemental information that excludes the financial effects of these items in the financial results will enhance the investor’s ability to compare financial performance between reporting periods.
Tax-specific key items, which are set forth on Table 7 of this release, are defined as financial transactions, tax law changes or other matters that fall within the definition of key items as described above. These items relate solely to tax matters and would only be recorded within the income tax caption of the Statement of Consolidated Income. As with all key items, due to their nature, Ashland does not consider the financial effects of these tax-specific key items on net income to be the most accurate reflection of Ashland’s underlying business performance and trends.
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.
Adjusted diluted earnings per share is a performance measure used by Ashland and is defined by Ashland as earnings (loss) from continuing operations, adjusted for identified key items and divided by the number of outstanding diluted shares of common stock. Ashland believes this measure provides investors additional insights into operational performance by providing earnings and diluted earnings per share metrics that exclude the effect of the identified key items and tax specific key items. Adjusted diluted earnings per share, excluding intangibles amortization expense metric enables Ashland to demonstrate the impact of non-cash intangibles amortization expense on earnings per share, in addition to key items previously mentioned. Ashland’s management believes this presentation is helpful to illustrate how previous acquisitions impact applicable period results.
Ashland Global Holdings Inc. (NYSE: ASH) is a premier global specialty materials company serving customers in a wide range of consumer and industrial markets, including adhesives, architectural coatings, automotive, construction, energy, food and beverage, nutraceuticals, personal care and pharmaceutical. At Ashland, we are approximately 4,500 passionate, tenacious solvers – from renowned scientists and research chemists to talented engineers and plant operators – who thrive on developing practical, innovative and elegant solutions to complex problems for customers in more than 100 countries. Visit ashland.com to learn more.
This news release contains forward-looking statements 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. Ashland may from time to time make forward-looking statements in its annual reports, quarterly reports and other filings with the 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, 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. These statements include but may not be limited to Ashland’s expectations regarding its ability to drive sales and earnings growth and realize further cost reductions.
Ashland’s expectations and assumptions include, without limitation, 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 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); severe weather, natural disasters, public-health crises (including the current COVID-19 pandemic), cyber events and legal proceedings and claims (including product recalls, environmental and asbestos matters); the effects of the COVID-19 pandemic on the geographies in which we operate, the end markets we serve and on our supply chain and customers, and without limitation, risks and uncertainties affecting Ashland that are described in Ashland’s most recent Form 10-K (including Item 1A Risk Factors) 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 will 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 news release whether as a result of new information, future events or otherwise.
1Financial results are preliminary until Ashland’s Form 10-K is filed with the SEC
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