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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Large Accelerated Filer
þ
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Accelerated Filer
o
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Non-Accelerated Filer
o
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Smaller Reporting Company
o
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(Do not check if a smaller reporting company.)
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Three months ended
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Six months ended
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||||||||||||
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March 31
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March 31
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||||||||||||
(In millions except per share data - unaudited)
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2016
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2015
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2016
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2015
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||||
Sales
|
$
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1,247
|
|
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$
|
1,350
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$
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2,410
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$
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2,741
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Cost of sales
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823
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925
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1,595
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1,906
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||||
Gross profit
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424
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425
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815
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835
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||||
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||||||||
Selling, general and administrative expense
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258
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203
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483
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429
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||||
Research and development expense
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25
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25
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49
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50
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||||
Equity and other income (loss)
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6
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(4
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)
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15
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6
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||||
Operating income
|
147
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|
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193
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298
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362
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||||
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||||||||
Net interest and other financing expense
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43
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40
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85
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81
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||||
Net loss on divestitures
|
(2
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)
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|
(33
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)
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—
|
|
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(118
|
)
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||||
Income from continuing operations before income taxes
|
102
|
|
|
120
|
|
|
213
|
|
|
163
|
|
||||
Income tax expense - Note J
|
15
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|
|
25
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|
|
35
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|
|
27
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|
||||
Income from continuing operations
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87
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|
|
95
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|
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178
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|
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136
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||||
Income (loss) from discontinued operations
|
|
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||||||||
(net of tax) - Note D
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—
|
|
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129
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|
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(2
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)
|
|
121
|
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||||
Net income
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$
|
87
|
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$
|
224
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$
|
176
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$
|
257
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|
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||||||||
PER SHARE DATA
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||||||||
Basic earnings per share - Note M
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||||
Income from continuing operations
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$
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1.39
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$
|
1.40
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$
|
2.79
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$
|
1.97
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Income (loss) from discontinued operations
|
—
|
|
|
1.90
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(0.03
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)
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|
1.76
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||||
Net income
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$
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1.39
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$
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3.30
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$
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2.76
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$
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3.73
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||||||||
Diluted earnings per share - Note M
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||||
Income from continuing operations
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$
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1.38
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$
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1.39
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$
|
2.76
|
|
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$
|
1.95
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Income (loss) from discontinued operations
|
—
|
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1.87
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(0.03
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)
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1.73
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||||
Net income
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$
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1.38
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$
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3.26
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$
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2.73
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$
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3.68
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||||||||
DIVIDENDS PAID PER COMMON SHARE
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$
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0.39
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$
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0.34
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$
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0.78
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$
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0.68
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||||||||
COMPREHENSIVE INCOME (LOSS)
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||||||||
Net income
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$
|
87
|
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$
|
224
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$
|
176
|
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$
|
257
|
|
Other comprehensive income (loss), net of tax - Note N
|
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||||||||
Unrealized translation gain (loss)
|
80
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|
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(255
|
)
|
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19
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|
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(382
|
)
|
||||
Pension and postretirement obligation adjustment
|
24
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(6
|
)
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21
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(11
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)
|
||||
Unrealized gain on available-for-sale securities
|
3
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—
|
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|
9
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|
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—
|
|
||||
Other comprehensive income (loss)
|
107
|
|
|
(261
|
)
|
|
49
|
|
|
(393
|
)
|
||||
Comprehensive income (loss)
|
$
|
194
|
|
|
$
|
(37
|
)
|
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$
|
225
|
|
|
$
|
(136
|
)
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March 31
|
|
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September 30
|
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(In millions - unaudited)
|
2016
|
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|
2015
|
|
||
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||||
ASSETS
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|
||||
Current assets
|
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|
||||
Cash and cash equivalents
|
$
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1,136
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$
|
1,257
|
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Accounts receivable
(a)
|
935
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|
961
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|
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Inventories - Note G
|
726
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706
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|
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Other assets
|
115
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|
169
|
|
||
Total current assets
|
2,912
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|
3,093
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Noncurrent assets
|
|
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|
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Property, plant and equipment
|
|
|
|
||||
Cost
|
4,252
|
|
|
4,144
|
|
||
Accumulated depreciation
|
2,086
|
|
|
1,962
|
|
||
Net property, plant and equipment
|
2,166
|
|
|
2,182
|
|
||
Goodwill - Note H
|
2,578
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|
|
2,486
|
|
||
Intangibles - Note H
|
1,110
|
|
|
1,142
|
|
||
Restricted investments - Note F
|
280
|
|
|
285
|
|
||
Asbestos insurance receivable - Note L
|
171
|
|
|
180
|
|
||
Equity and other unconsolidated investments
|
64
|
|
|
65
|
|
||
Deferred income taxes
|
213
|
|
|
212
|
|
||
Other assets
|
407
|
|
|
409
|
|
||
Total noncurrent assets
|
6,989
|
|
|
6,961
|
|
||
Total assets
|
$
|
9,901
|
|
|
$
|
10,054
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
||
Current liabilities
|
|
|
|
|
|
||
Short-term debt - Note I
|
$
|
694
|
|
|
$
|
326
|
|
Current portion of long-term debt - Note I
|
55
|
|
|
55
|
|
||
Trade and other payables
|
519
|
|
|
573
|
|
||
Accrued expenses and other liabilities
|
434
|
|
|
488
|
|
||
Total current liabilities
|
1,702
|
|
|
1,442
|
|
||
Noncurrent liabilities
|
|
|
|
|
|
||
Long-term debt - Note I
|
3,328
|
|
|
3,348
|
|
||
Employee benefit obligations - Note K
|
1,013
|
|
|
1,076
|
|
||
Asbestos litigation reserve - Note L
|
636
|
|
|
661
|
|
||
Deferred income taxes
|
85
|
|
|
85
|
|
||
Other liabilities
|
414
|
|
|
405
|
|
||
Total noncurrent liabilities
|
5,476
|
|
|
5,575
|
|
||
Commitments and contingencies - Note L
|
|
|
|
|
|
||
Stockholders’ equity
|
2,723
|
|
|
3,037
|
|
||
|
|
|
|
||||
Total liabilities and stockholders’ equity
|
$
|
9,901
|
|
|
$
|
10,054
|
|
|
|
|
|
(a)
|
Accounts receivable includes an allowance for doubtful accounts of
$11 million
at
March 31, 2016
and
September 30, 2015
.
|
|
|
|
|
|
|
|
|
|
(In millions - unaudited)
|
Common
stock
|
|
|
Paid-in
capital
|
|
|
Retained
earnings
|
|
|
Accumulated
other
comprehensive
income (loss)
|
|
(a)
|
Total
|
|
|||||
BALANCE AT SEPTEMBER 30, 2015
|
$
|
1
|
|
|
$
|
46
|
|
|
$
|
3,281
|
|
|
$
|
(291
|
)
|
|
$
|
3,037
|
|
Total comprehensive income
|
|
|
|
|
|
176
|
|
|
49
|
|
|
225
|
|
||||||
Regular dividends, $.78 per common share
|
|
|
|
|
|
|
(48
|
)
|
|
|
|
|
(48
|
)
|
|||||
Common shares issued under stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
incentive and other plans
(b)
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
||||||
Repurchase of common shares
(c)
|
|
|
(49
|
)
|
|
(451
|
)
|
|
|
|
(500
|
)
|
|||||||
BALANCE AT MARCH 31, 2016
|
$
|
1
|
|
|
$
|
6
|
|
|
$
|
2,958
|
|
|
$
|
(242
|
)
|
|
$
|
2,723
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
At
March 31, 2016
and
September 30, 2015
, the after-tax accumulated other comprehensive loss of
$242 million
and
$291 million
, respectively, was comprised of unrecognized prior service credits as a result of certain employee benefit plan amendments of
$62 million
and
$41 million
, respectively, net unrealized translation loss of
$302 million
and
$321 million
, respectively, and net unrealized loss on available-for-sale securities of
$2 million
and
$11 million
, respectively.
|
(b)
|
Common shares issued were
318,033
for the
six
months ended
March 31, 2016
.
|
(c)
|
Common shares repurchased were
5,049,911
for the
six
months ended
March 31, 2016
. See Note N of the Notes to Condensed Consolidated Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
||||||
|
March 31
|
||||||
(In millions - unaudited)
|
2016
|
|
|
2015
|
|
||
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES FROM
|
|
|
|
||||
CONTINUING OPERATIONS
|
|
|
|
||||
Net income
|
$
|
176
|
|
|
$
|
257
|
|
Loss (income) from discontinued operations (net of tax)
|
2
|
|
|
(121
|
)
|
||
Adjustments to reconcile income from continuing operations to
|
|
|
|
|
|
||
cash flows from operating activities
|
|
|
|
|
|
||
Depreciation and amortization
|
168
|
|
|
170
|
|
||
Debt issuance cost amortization
|
6
|
|
|
7
|
|
||
Deferred income taxes
|
1
|
|
|
(13
|
)
|
||
Equity income from affiliates
|
(8
|
)
|
|
(7
|
)
|
||
Distributions from equity affiliates
|
9
|
|
|
10
|
|
||
Stock based compensation expense
|
17
|
|
|
15
|
|
||
Gain on available-for-sale securities
|
(4
|
)
|
|
—
|
|
||
Net loss on divestitures
|
—
|
|
|
118
|
|
||
Impairment of equity investment
|
—
|
|
|
14
|
|
||
Pension contributions
|
(15
|
)
|
|
(29
|
)
|
||
Losses on pension and other postretirement plan remeasurements
|
23
|
|
|
9
|
|
||
Change in operating assets and liabilities (a)
|
(125
|
)
|
|
(334
|
)
|
||
Total cash flows provided by operating activities from continuing operations
|
250
|
|
|
96
|
|
||
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES FROM
|
|
|
|
|
|
||
CONTINUING OPERATIONS
|
|
|
|
|
|
||
Additions to property, plant and equipment
|
(103
|
)
|
|
(86
|
)
|
||
Proceeds from disposal of property, plant and equipment
|
3
|
|
|
1
|
|
||
Purchase of operations - net of cash acquired
|
(66
|
)
|
|
—
|
|
||
Proceeds from sale of operations or equity investments
|
12
|
|
|
106
|
|
||
Funds restricted for specific transactions
|
—
|
|
|
(320
|
)
|
||
Reimbursements from restricted investments
|
23
|
|
|
—
|
|
||
Proceeds from the settlement of derivative instruments
|
7
|
|
|
—
|
|
||
Purchase of available-for-sale securities
|
(4
|
)
|
|
—
|
|
||
Proceeds from sales of available-for-sale securities
|
4
|
|
|
—
|
|
||
Total cash flows used by investing activities from continuing operations
|
(124
|
)
|
|
(299
|
)
|
||
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES FROM
|
|
|
|
|
|
||
CONTINUING OPERATIONS
|
|
|
|
|
|
||
Repayment of long-term debt
|
(36
|
)
|
|
—
|
|
||
Proceeds (repayment) from short-term debt
|
368
|
|
|
(96
|
)
|
||
Repurchase of common stock
|
(500
|
)
|
|
(397
|
)
|
||
Cash dividends paid
|
(48
|
)
|
|
(46
|
)
|
||
Excess tax benefits related to share-based payments
|
(1
|
)
|
|
7
|
|
||
Total cash flows used by financing activities from continuing operations
|
(217
|
)
|
|
(532
|
)
|
||
CASH USED BY CONTINUING OPERATIONS
|
(91
|
)
|
|
(735
|
)
|
||
Cash provided (used) by discontinued operations
|
|
|
|
|
|
||
Operating cash flows
|
(19
|
)
|
|
277
|
|
||
Investing cash flows
|
—
|
|
|
10
|
|
||
Total cash provided (used) by discontinued operations
|
(19
|
)
|
|
287
|
|
||
Effect of currency exchange rate changes on cash and cash equivalents
|
(11
|
)
|
|
(34
|
)
|
||
DECREASE IN CASH AND CASH EQUIVALENTS
|
(121
|
)
|
|
(482
|
)
|
||
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
1,257
|
|
|
1,393
|
|
||
CASH AND CASH EQUIVALENTS - END OF PERIOD
|
$
|
1,136
|
|
|
$
|
911
|
|
|
|
|
|
(a)
|
Excludes changes resulting from operations acquired or sold.
|
|
|
|
|
|
|
|
|
|
•
|
equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income;
|
•
|
a qualitative assessment to identify impairment of equity investments without readily determinable fair values;
|
•
|
the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes;
|
•
|
an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; and
|
•
|
separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
Income (loss) from discontinued operations (net of tax)
|
|
|
|
|
|
|
|
||||||||
Asbestos-related litigation
|
$
|
—
|
|
|
$
|
122
|
|
|
$
|
—
|
|
|
$
|
120
|
|
Water Technologies
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
||||
Gain (loss) on disposal of discontinued operations (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
||||
Water Technologies
|
1
|
|
|
7
|
|
|
(1
|
)
|
|
3
|
|
||||
Total income (loss) from discontinued operations (net of tax)
|
$
|
—
|
|
|
$
|
129
|
|
|
$
|
(2
|
)
|
|
$
|
121
|
|
|
|
|
Facility
|
|
|
|
|||||
(In millions)
|
Severance
|
|
|
costs
|
|
|
Total
|
|
|||
Balance as of September 30, 2015
|
$
|
8
|
|
|
$
|
3
|
|
|
$
|
11
|
|
Utilization (cash paid)
|
(6
|
)
|
|
(2
|
)
|
|
(8
|
)
|
|||
Balance as of March 31, 2016
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
|
|
|
|
|
||||||
Balance as of September 30, 2014
|
$
|
56
|
|
|
$
|
9
|
|
|
$
|
65
|
|
Reserve adjustments
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|||
Utilization (cash paid)
|
(38
|
)
|
|
(2
|
)
|
|
(40
|
)
|
|||
Balance as of March 31, 2015
|
$
|
16
|
|
|
$
|
7
|
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
$
|
1,136
|
|
|
$
|
1,136
|
|
|
$
|
1,136
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted investments
(a)
|
310
|
|
|
310
|
|
|
310
|
|
|
—
|
|
|
—
|
|
|||||
Deferred compensation investments
(b)
|
186
|
|
|
186
|
|
|
40
|
|
|
146
|
|
|
—
|
|
|||||
Investments of captive insurance company
(b)
|
3
|
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|||||
Foreign currency derivatives
|
8
|
|
|
8
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|||||
Total assets at fair value
|
$
|
1,643
|
|
|
$
|
1,643
|
|
|
$
|
1,489
|
|
|
$
|
154
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Foreign currency derivatives
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Included in restricted investments and
$30 million
within other current assets in the Condensed Consolidated Balance Sheets.
|
(b)
|
Included in other noncurrent assets in the Condensed Consolidated Balance Sheets.
|
(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
|
$
|
1,257
|
|
|
$
|
1,257
|
|
|
$
|
1,257
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted investments
(a)
|
315
|
|
|
315
|
|
|
315
|
|
|
—
|
|
|
—
|
|
|||||
Deferred compensation investments
(b)
|
180
|
|
|
180
|
|
|
40
|
|
|
140
|
|
|
—
|
|
|||||
Investments of captive insurance company
(b)
|
4
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|||||
Foreign currency derivatives
|
13
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|||||
Total assets at fair value
|
$
|
1,769
|
|
|
$
|
1,769
|
|
|
$
|
1,616
|
|
|
$
|
153
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Foreign currency derivatives
|
$
|
16
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Included in restricted investments and
$30 million
within other current assets in the Condensed Consolidated Balance Sheets.
|
(b)
|
Included in other noncurrent assets in the Condensed Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
Demand
|
|
|
Equity
|
|
|
Corporate Bond
|
|
|
|
|||||
(In millions)
|
Deposit
|
|
|
Mutual Fund
|
|
|
Mutual Fund
|
|
|
Total
|
|
||||
As of March 31, 2016
|
|
|
|
|
|
|
|
||||||||
Original cost
|
$
|
20
|
|
|
$
|
195
|
|
|
$
|
120
|
|
|
$
|
335
|
|
Accumulated investment income
|
|
|
|
|
|
|
|
|
|||||||
and disbursements
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||
Adjusted cost
(a)
|
17
|
|
|
195
|
|
|
120
|
|
|
332
|
|
||||
Investment income
(b)
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||
Unrealized loss
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
||||
Purchases (Sales)
|
4
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
||||
Disbursements
|
(23
|
)
|
|
—
|
|
|
—
|
|
|
(23
|
)
|
||||
Fair value
|
$
|
2
|
|
|
$
|
188
|
|
|
$
|
120
|
|
|
$
|
310
|
|
|
|
|
|
|
|
|
|
||||||||
As of September 30, 2015
|
|
|
|
|
|
|
|
||||||||
Original cost
|
$
|
20
|
|
|
$
|
195
|
|
|
$
|
120
|
|
|
$
|
335
|
|
Investment income
(b)
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Unrealized loss
|
—
|
|
|
(14
|
)
|
|
(3
|
)
|
|
(17
|
)
|
||||
Disbursements
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
||||
Fair value
|
$
|
17
|
|
|
$
|
181
|
|
|
$
|
117
|
|
|
$
|
315
|
|
|
|
|
|
|
|
|
|
(b)
|
Investment income for the demand deposit includes interest income as well as dividend income transferred from the equity and corporate bond mutual funds.
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
||||
|
|
March 31
|
|
|
|
March 31
|
|
||
(In millions)
|
|
2016
|
|
|
|
2016
|
|
||
Investment income
|
|
$
|
2
|
|
|
|
$
|
4
|
|
Disbursements
|
|
(16
|
)
|
|
|
(23
|
)
|
|
March 31
|
|
|
September 30
|
|
||
(In millions)
|
2016
|
|
|
2015
|
|
||
Foreign currency derivative assets
|
$
|
7
|
|
|
$
|
5
|
|
Notional contract values
|
307
|
|
|
192
|
|
||
|
|
|
|
||||
Foreign currency derivative liabilities
|
$
|
5
|
|
|
$
|
16
|
|
Notional contract values
|
202
|
|
|
673
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
September 30
|
|
||
(In millions)
|
Consolidated balance sheet caption
|
2016
|
|
|
2015
|
|
||
Net investment hedge assets
|
Accounts receivable
|
$
|
1
|
|
|
$
|
8
|
|
Net investment hedge liabilities
(a)
|
Accrued expenses and other liabilities
|
3
|
|
|
—
|
|
||
|
|
|
|
|
(a)
|
Fair value of $0 denotes a value less than $1 million.
|
|
|
|
|
March 31
|
|
|
September 30
|
|
||
(In millions)
|
2016
|
|
|
2015
|
|
||
Finished products
|
$
|
559
|
|
|
$
|
542
|
|
Raw materials, supplies and work in process
|
194
|
|
|
198
|
|
||
LIFO reserve
|
(27
|
)
|
|
(34
|
)
|
||
|
$
|
726
|
|
|
$
|
706
|
|
|
Specialty
|
|
|
Performance
|
|
|
|
|
|
|
|||||
(In millions)
|
Ingredients
|
|
|
Materials
|
|
(a)
|
Valvoline
|
|
|
Total
|
|
||||
Balance as of September 30, 2015
|
$
|
2,004
|
|
|
$
|
313
|
|
|
$
|
169
|
|
|
$
|
2,486
|
|
Acquisitions
(b)
|
—
|
|
|
—
|
|
|
84
|
|
|
84
|
|
||||
Currency translation adjustment
|
5
|
|
|
3
|
|
|
—
|
|
|
8
|
|
||||
Balance as of March 31, 2016
|
$
|
2,009
|
|
|
$
|
316
|
|
|
$
|
253
|
|
|
$
|
2,578
|
|
|
|
|
|
|
|
|
|
(a)
|
As of
March 31, 2016
, goodwill consisted of
$171 million
for the Intermediates/Solvents reporting unit and
$145 million
for the Composites reporting unit.
|
(b)
|
Relates to
$82 million
for the acquisition of Oil Can Henry's and
$2 million
for Valvoline Instant Oil Change
SM
center acquisitions during the
six
months ended
March 31, 2016
. See Note B for more information on the acquisition of Oil Can Henry's.
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
||||||||||
|
Gross
|
|
|
|
|
Net
|
|
||||
|
carrying
|
|
|
Accumulated
|
|
|
carrying
|
|
|||
(In millions)
|
amount
|
|
|
amortization
|
|
|
amount
|
|
|||
Definite-lived intangible assets
|
|
|
|
|
|
||||||
Trademarks and trade names
(a)
|
$
|
52
|
|
|
$
|
(42
|
)
|
|
$
|
10
|
|
Intellectual property
|
821
|
|
|
(289
|
)
|
|
532
|
|
|||
Customer relationships
|
428
|
|
|
(161
|
)
|
|
267
|
|
|||
Total definite-lived intangible assets
|
1,301
|
|
|
(492
|
)
|
|
809
|
|
|||
|
|
|
|
|
|
||||||
Indefinite-lived intangible assets
|
|
|
|
|
|
||||||
Trademarks and trade names
|
301
|
|
|
—
|
|
|
301
|
|
|||
Total intangible assets
|
$
|
1,602
|
|
|
$
|
(492
|
)
|
|
$
|
1,110
|
|
|
|
|
|
|
|
(a)
|
Acquired trade names during the six months ended
March 31, 2016
had gross carrying amounts of
$2 million
for Oil Can Henry's. See Note B for more information on the acquisition of Oil Can Henry's.
|
|
September 30, 2015
|
||||||||||
|
Gross
|
|
|
|
|
Net
|
|
||||
|
carrying
|
|
|
Accumulated
|
|
|
carrying
|
|
|||
(In millions)
|
amount
|
|
|
amortization
|
|
|
amount
|
|
|||
Definite-lived intangible assets
|
|
|
|
|
|
||||||
Trademarks and trade names
|
$
|
48
|
|
|
$
|
(41
|
)
|
|
$
|
7
|
|
Intellectual property
|
813
|
|
|
(266
|
)
|
|
547
|
|
|||
Customer relationships
|
424
|
|
|
(147
|
)
|
|
277
|
|
|||
Total definite-lived intangible assets
|
1,285
|
|
|
(454
|
)
|
|
831
|
|
|||
|
|
|
|
|
|
||||||
Indefinite-lived intangible assets
|
|
|
|
|
|
||||||
IPR&D
|
8
|
|
|
—
|
|
|
8
|
|
|||
Trademarks and trade names
|
303
|
|
|
—
|
|
|
303
|
|
|||
Total intangible assets
|
$
|
1,596
|
|
|
$
|
(454
|
)
|
|
$
|
1,142
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
September 30
|
|
||
(In millions)
|
2016
|
|
|
2015
|
|
||
4.750% notes, due 2022
|
$
|
1,121
|
|
|
$
|
1,120
|
|
Term Loan, due 2020
|
1,059
|
|
|
1,086
|
|
||
3.875% notes, due 2018
|
700
|
|
|
700
|
|
||
Revolving credit facility
|
550
|
|
|
110
|
|
||
6.875% notes, due 2043
|
376
|
|
|
376
|
|
||
6.50% junior subordinated notes, due 2029
|
138
|
|
|
136
|
|
||
Accounts receivable securitization
|
120
|
|
|
190
|
|
||
Other international loans, interest at a weighted-
|
|
|
|
|
|
||
average rate of 5.4% at March 31, 2016 (4.8% to 9.4%)
|
24
|
|
|
25
|
|
||
Medium-term notes, due 2019, interest of 9.4% at March 31, 2016
|
5
|
|
|
5
|
|
||
Other
(a)
|
(16
|
)
|
|
(19
|
)
|
||
Total debt
|
4,077
|
|
|
3,729
|
|
||
Short-term debt
|
(694
|
)
|
|
(326
|
)
|
||
Current portion of long-term debt
|
(55
|
)
|
|
(55
|
)
|
||
Long-term debt (less current portion and debt issuance cost discounts)
|
$
|
3,328
|
|
|
$
|
3,348
|
|
|
|
|
|
(a)
|
Other includes
$26 million
and
$28 million
of debt issuance cost discounts as of
March 31, 2016
and
September 30, 2015
, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
As a result of the remeasurement the affected U.S. pension plans, Ashland recognized a curtailment gain of
$65 million
and actuarial loss of
$123 million
during the three and six months ended
March 31, 2016
.
|
•
|
As a result of the remeasurement of other postretirement benefit plans, Ashland recognized a curtailment gain of
$39 million
and actuarial loss of
$7 million
during the three and six months ended
March 31, 2016
. This remeasurement reduced the benefit obligations by
$86 million
, which will be amortized to income in future periods.
|
•
|
Ashland was also required to remeasure a non-U.S. pension plan during the quarter and as a result recognized a curtailment gain of
$6 million
and actuarial loss of
$3 million
during the three and six months ended
March 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other postretirement
|
||||||||||
|
Pension benefits
|
|
benefits
|
||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
Three months ended March 31
|
|
|
|
|
|
|
|
||||||||
Service cost
(a)
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
31
|
|
|
44
|
|
|
1
|
|
|
2
|
|
||||
Expected return on plan assets
|
(48
|
)
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization of prior service credit
(a)
|
—
|
|
|
(1
|
)
|
|
(4
|
)
|
|
(4
|
)
|
||||
Curtailment
|
(71
|
)
|
|
(7
|
)
|
|
(39
|
)
|
|
—
|
|
||||
Actuarial loss
|
126
|
|
|
11
|
|
|
7
|
|
|
—
|
|
||||
|
$
|
44
|
|
|
$
|
(2
|
)
|
|
$
|
(35
|
)
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
||||||||
Six months ended March 31
|
|
|
|
|
|
|
|
|
|
|
|
||||
Service cost
(a)
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Interest cost
|
62
|
|
|
88
|
|
|
3
|
|
|
3
|
|
||||
Expected return on plan assets
|
(96
|
)
|
|
(109
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization of prior service credit
|
(1
|
)
|
|
(1
|
)
|
|
(8
|
)
|
|
(8
|
)
|
||||
Curtailment
|
(71
|
)
|
|
(7
|
)
|
|
(39
|
)
|
|
—
|
|
||||
Actuarial loss
|
126
|
|
|
11
|
|
|
7
|
|
|
—
|
|
||||
|
$
|
33
|
|
|
$
|
(5
|
)
|
|
$
|
(37
|
)
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
|
|
(a)
|
Activity of $0 denote values less than $1 million.
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
|||||||
|
March 31
|
|
Years ended September 30
|
|||||||||||
(In thousands)
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Open claims - beginning of period
|
60
|
|
|
65
|
|
|
65
|
|
|
65
|
|
|
66
|
|
New claims filed
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
|
2
|
|
Claims settled
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
Claims dismissed
|
(3
|
)
|
|
(1
|
)
|
|
(7
|
)
|
|
(1
|
)
|
|
(2
|
)
|
Open claims - end of period
|
58
|
|
|
65
|
|
|
60
|
|
|
65
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
||||||||||||
|
March 31
|
|
Years ended September 30
|
||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|||||
Asbestos reserve - beginning of period
|
$
|
409
|
|
|
$
|
438
|
|
|
$
|
438
|
|
|
$
|
463
|
|
|
$
|
522
|
|
Reserve adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
(28
|
)
|
|||||
Amounts paid
|
(17
|
)
|
|
(16
|
)
|
|
(29
|
)
|
|
(29
|
)
|
|
(31
|
)
|
|||||
Asbestos reserve - end of period
|
$
|
392
|
|
|
$
|
422
|
|
|
$
|
409
|
|
|
$
|
438
|
|
|
$
|
463
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
||||||||||||
|
March 31
|
|
Years ended September 30
|
||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|||||
Insurance receivable - beginning of period
|
$
|
150
|
|
|
$
|
402
|
|
|
$
|
402
|
|
|
$
|
408
|
|
|
$
|
423
|
|
Receivable adjustment
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
22
|
|
|
(3
|
)
|
|||||
Insurance settlement
|
(4
|
)
|
|
(227
|
)
|
|
(227
|
)
|
|
—
|
|
|
—
|
|
|||||
Amounts collected
|
(7
|
)
|
|
(13
|
)
|
|
(22
|
)
|
|
(28
|
)
|
|
(12
|
)
|
|||||
Insurance receivable - end of period
|
$
|
139
|
|
|
$
|
162
|
|
|
$
|
150
|
|
|
$
|
402
|
|
|
$
|
408
|
|
|
Six months ended
|
|
|
|
|
|
|
|||||||
|
March 31
|
|
Years ended September 30
|
|||||||||||
(In thousands)
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Open claims - beginning of period
|
20
|
|
|
21
|
|
|
21
|
|
|
21
|
|
|
21
|
|
New claims filed
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Claims dismissed
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(1
|
)
|
Open claims - end of period
|
20
|
|
|
21
|
|
|
20
|
|
|
21
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
|
|
|
||||||||||||
|
March 31
|
|
Years ended September 30
|
||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|||||
Asbestos reserve - beginning of period
|
$
|
311
|
|
|
$
|
329
|
|
|
$
|
329
|
|
|
$
|
342
|
|
|
$
|
320
|
|
Reserve adjustment
|
—
|
|
|
—
|
|
|
4
|
|
|
10
|
|
|
46
|
|
|||||
Amounts paid
|
(8
|
)
|
|
(9
|
)
|
|
(22
|
)
|
|
(23
|
)
|
|
(24
|
)
|
|||||
Asbestos reserve - end of period
|
$
|
303
|
|
|
$
|
320
|
|
|
$
|
311
|
|
|
$
|
329
|
|
|
$
|
342
|
|
|
Six months ended
|
|
|
|
|
|
|
||||||||||||
|
March 31
|
|
Years ended September 30
|
||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|||||
Insurance receivable - beginning of period
|
$
|
56
|
|
|
$
|
77
|
|
|
$
|
77
|
|
|
$
|
75
|
|
|
$
|
56
|
|
Receivable adjustment
|
—
|
|
|
—
|
|
|
1
|
|
|
3
|
|
|
19
|
|
|||||
Insurance settlement
|
—
|
|
|
(22
|
)
|
|
(22
|
)
|
|
—
|
|
|
—
|
|
|||||
Amounts collected
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||||
Insurance receivable - end of period
|
$
|
56
|
|
|
$
|
55
|
|
|
$
|
56
|
|
|
$
|
77
|
|
|
$
|
75
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
||||||
|
March 31
|
||||||
(In millions)
|
2016
|
|
|
2015
|
|
||
Reserve - beginning of period
|
$
|
186
|
|
|
$
|
197
|
|
Disbursements
|
(24
|
)
|
|
(22
|
)
|
||
Revised obligation estimates and accretion
|
14
|
|
|
15
|
|
||
Reserve - end of period
|
$
|
176
|
|
|
$
|
190
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
Environmental expense
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
13
|
|
|
$
|
14
|
|
Accretion
(a)
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Legal expense
|
3
|
|
|
2
|
|
|
5
|
|
|
3
|
|
||||
Total expense
|
13
|
|
|
11
|
|
|
19
|
|
|
18
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Insurance receivable
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Total expense, net of receivable activity
|
$
|
12
|
|
|
$
|
10
|
|
|
$
|
18
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
(a)
|
Activity of $0 denotes value less than $1 million.
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(In millions except per share data)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
Numerator
|
|
|
|
|
|
|
|
||||||||
Numerator for basic and diluted EPS – Income
|
|
|
|
|
|
|
|
||||||||
from continuing operations
|
$
|
87
|
|
|
$
|
95
|
|
|
$
|
178
|
|
|
$
|
136
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|||||
Denominator for basic EPS – Weighted-average
|
|
|
|
|
|
|
|
|
|
|
|||||
common shares outstanding
|
62
|
|
|
68
|
|
|
63
|
|
|
69
|
|
||||
Share-based awards convertible to common shares
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Denominator for diluted EPS – Adjusted weighted-
|
|
|
|
|
|
|
|
|
|
|
|||||
average shares and assumed conversions
|
63
|
|
|
69
|
|
|
64
|
|
|
70
|
|
||||
|
|
|
|
|
|
|
|
||||||||
EPS from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
1.39
|
|
|
$
|
1.40
|
|
|
$
|
2.79
|
|
|
$
|
1.97
|
|
Diluted
|
1.38
|
|
|
1.39
|
|
|
2.76
|
|
|
1.95
|
|
|
|
|
|
|
|
|
|
|
•
|
In 2014, completed a prepaid variable share repurchase agreement for
$80 million
and received
0.8 million
shares.
|
•
|
In 2014, entered into
$750 million
of accelerated share repurchase agreements that were completed during the June 2015 quarter and received
6.4 million
shares, of which
0.5 million
shares were received during July 2015.
|
•
|
In 2014, entered into
$250 million
of share repurchase agreements that were completed during the December 2014 quarter and received
2.4 million
shares, of which
1.2 million
were repurchased during the December 2014 quarter.
|
•
|
In 2015, entered into
$270 million
of accelerated share repurchase agreements that were completed during the June 2015 quarter and received
2.2 million
shares, of which
0.3 million
shares were received during July 2015.
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
||||||||||||||||||||
|
|
|
Tax
|
|
|
|
|
|
|
Tax
|
|
|
|
||||||||||
|
Before
|
|
|
(expense)
|
|
|
Net of
|
|
|
Before
|
|
|
(expense)
|
|
|
Net of
|
|
||||||
(In millions)
|
tax
|
|
|
benefit
|
|
|
tax
|
|
|
tax
|
|
|
benefit
|
|
|
tax
|
|
||||||
Three months ended March 31
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized translation gain (loss)
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
(256
|
)
|
|
$
|
1
|
|
|
$
|
(255
|
)
|
Pension and postretirement obligation adjustment:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjustment of unrecognized prior service credit
|
86
|
|
|
(31
|
)
|
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of unrecognized prior service
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
credits included in net income
(a)
|
(45
|
)
|
|
14
|
|
|
(31
|
)
|
|
(8
|
)
|
|
2
|
|
|
(6
|
)
|
||||||
Unrealized gain on available-for-sale securities
|
5
|
|
|
(2
|
)
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total other comprehensive income (loss)
|
$
|
126
|
|
|
$
|
(19
|
)
|
|
$
|
107
|
|
|
$
|
(264
|
)
|
|
$
|
3
|
|
|
$
|
(261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Six months ended March 31
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized translation gain (loss)
|
$
|
17
|
|
|
$
|
2
|
|
|
$
|
19
|
|
|
$
|
(382
|
)
|
|
$
|
—
|
|
|
$
|
(382
|
)
|
Pension and postretirement obligation adjustment:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjustment of unrecognized prior service credit
|
86
|
|
|
(31
|
)
|
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of unrecognized prior service
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
credits included in net income
(a)
|
(49
|
)
|
|
15
|
|
|
(34
|
)
|
|
(12
|
)
|
|
1
|
|
|
(11
|
)
|
||||||
Unrealized gain on available-for-sale securities
|
14
|
|
|
(5
|
)
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total other comprehensive income (loss)
|
$
|
68
|
|
|
$
|
(19
|
)
|
|
$
|
49
|
|
|
$
|
(394
|
)
|
|
$
|
1
|
|
|
$
|
(393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Amortization of unrecognized prior service credits are included in the calculation of net periodic benefit costs (income) for pension and other postretirement plans. For specific financial statement captions impacted by the amortization see the table below.
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
Cost of sales
|
$
|
(18
|
)
|
|
$
|
(2
|
)
|
|
$
|
(20
|
)
|
|
$
|
(3
|
)
|
Selling, general and administrative expense
|
(27
|
)
|
|
(3
|
)
|
|
(29
|
)
|
|
(6
|
)
|
||||
Discontinued operations
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
||||
Total amortization of unrecognized prior service credits
|
$
|
(45
|
)
|
|
$
|
(8
|
)
|
|
$
|
(49
|
)
|
|
$
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(In millions - unaudited)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
SALES
|
|
|
|
|
|
|
|
||||||||
Specialty Ingredients
|
$
|
529
|
|
|
$
|
583
|
|
|
$
|
1,004
|
|
|
$
|
1,144
|
|
Performance Materials
|
239
|
|
|
286
|
|
|
470
|
|
|
623
|
|
||||
Valvoline
|
479
|
|
|
481
|
|
|
936
|
|
|
974
|
|
||||
|
$
|
1,247
|
|
|
$
|
1,350
|
|
|
$
|
2,410
|
|
|
$
|
2,741
|
|
OPERATING INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
||||
Specialty Ingredients
|
$
|
65
|
|
|
$
|
65
|
|
|
$
|
103
|
|
|
$
|
125
|
|
Performance Materials
|
20
|
|
|
30
|
|
|
43
|
|
|
55
|
|
||||
Valvoline
|
105
|
|
|
82
|
|
|
197
|
|
|
165
|
|
||||
Unallocated and other
|
(43
|
)
|
|
16
|
|
|
(45
|
)
|
|
17
|
|
||||
|
$
|
147
|
|
|
$
|
193
|
|
|
$
|
298
|
|
|
$
|
362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||
|
March 31
|
|
March 31
|
||||||||
Sales by Geography
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
North America
(a)
|
53
|
%
|
|
52
|
%
|
|
53
|
%
|
|
53
|
%
|
Europe
|
24
|
%
|
|
25
|
%
|
|
24
|
%
|
|
24
|
%
|
Asia Pacific
|
16
|
%
|
|
16
|
%
|
|
16
|
%
|
|
16
|
%
|
Latin America & other
|
7
|
%
|
|
7
|
%
|
|
7
|
%
|
|
7
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||
|
March 31
|
|
March 31
|
||||||||
Sales by Reportable Segment
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Specialty Ingredients
|
43
|
%
|
|
43
|
%
|
|
42
|
%
|
|
42
|
%
|
Performance Materials
|
19
|
%
|
|
21
|
%
|
|
19
|
%
|
|
23
|
%
|
Valvoline
|
38
|
%
|
|
36
|
%
|
|
39
|
%
|
|
35
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
As a result of the remeasurement the affected U.S. pension plans, Ashland recognized a curtailment gain of
$65 million
and actuarial loss of
$123 million
during the three and six months ended
March 31, 2016
.
|
•
|
As a result of the remeasurement of other postretirement benefit plans, Ashland recognized a curtailment gain of
$39 million
and actuarial loss of
$7 million
during the three and six months ended
March 31, 2016
. This remeasurement reduced the benefit obligations by
$86 million
, which will be amortized to income in future periods.
|
•
|
Ashland was also required to remeasure a non-U.S. pension plan during the quarter and as a result recognized a curtailment gain of
$6 million
and actuarial loss of
$3 million
during the three and six months ended
March 31, 2016
.
|
|
|
|
|
|
|
|
|
|
•
|
Ashland’s net income amounted to
$87 million
and
$224 million
for the three months ended
March 31, 2016
and
2015
, respectively, or
$1.38
and
$3.26
diluted earnings per share, respectively.
|
•
|
Discontinued operations, which are reported net of taxes, resulted in income of
$129 million
for the three months ended March 31, 2015. The three months ended
March 31, 2016
included nominal adjustments, which essentially offset, related to previously divested businesses that qualified as discontinued operations.
|
•
|
Income from continuing operations, which excludes results from discontinued operations, amounted to
$87 million
and
$95 million
for the three months ended
March 31, 2016
and
2015
, respectively, or
$1.38
and
$1.39
diluted earnings per share, respectively.
|
•
|
The effective income tax expense rates of
15%
and
21%
for the three months ended
March 31, 2016
and
2015
, respectively, were both affected by certain discrete items.
|
|
|
|
|
|
|
|
|
|
•
|
Ashland incurred pretax net interest and other financing expense of
$43 million
and
$40 million
for the three months ended
March 31, 2016
and
2015
, respectively.
|
•
|
Net loss on divestitures totaled
$2 million
and
$33 million
for the three months ended
March 31, 2016
and
2015
, respectively.
|
•
|
Operating income was
$147 million
and
$193 million
for the three months ended
March 31, 2016
and
2015
, respectively.
|
•
|
Ashland’s net income amounted to
$176 million
and
$257 million
for the
six
months ended
March 31, 2016
and 2015, respectively, or
$2.73
and
$3.68
diluted earnings per share, respectively.
|
•
|
Discontinued operations, which are reported net of taxes, resulted in a loss of
$2 million
and income of
$121 million
for the
six
months ended
March 31, 2016
and
2015
, respectively.
|
•
|
Income from continuing operations, which excludes results from discontinued operations, amounted to
$178 million
and
$136 million
for the
six
months ended
March 31, 2016
and
2015
, respectively, or
$2.76
and
$1.95
diluted earnings per share, respectively.
|
•
|
The effective income tax expense rates of
16%
and
17%
for the
six
months ended
March 31, 2016
and
2015
, respectively, were both affected by certain discrete items.
|
•
|
Ashland incurred pretax net interest and other financing expense of
$85 million
and
$81 million
for the
six
months ended
March 31, 2016
and
2015
, respectively.
|
•
|
Net loss on divestitures totaled
$118 million
for the
six
months ended March 31,
2015
. The six months ended March 31, 2016 included nominal adjustments related to previous divestitures, which essentially offset.
|
•
|
Operating income was
$298 million
and
$362 million
for the
six
months ended
March 31, 2016
and
2015
, respectively.
|
•
|
$23 million and $9 million of key items related to pension and other postretirement plan remeasurement losses during the three months ended
March 31, 2016
and
2015
, respectively, with the current quarter key item representing the net impact of a curtailment gain of $110 million related to the current quarter plan amendments and an $133 million actuarial loss due to changes in discount rates and asset values;
|
•
|
$2 million of accelerated depreciation during the three months ended
March 31, 2016
and
2015
and $16 million of severance and other costs during the three months ended March 31, 2015 relating to a restructuring plan for a manufacturing facility;
|
•
|
$12 million of costs related to the separation of Valvoline and $4 million of restructuring charges related to office buildings during the three months ended
March 31, 2016
;
|
•
|
a $14 million impairment related to the Valvoline joint venture equity investment within Venezuela during the three months ended March 31, 2015;
|
•
|
$5 million related to a legal reserve during the three months ended
March 31, 2016
; and
|
|
|
|
|
|
|
|
|
|
•
|
$16 million of tax indemnity income during the three months ended March 31, 2015.
|
|
Three months ended
|
||||||
|
March 31
|
||||||
(In millions)
|
2016
|
|
|
2015
|
|
||
Net income
|
$
|
87
|
|
|
$
|
224
|
|
Income tax expense
|
15
|
|
|
25
|
|
||
Net interest and other financing expense
|
43
|
|
|
40
|
|
||
Depreciation and amortization
(a)
|
83
|
|
|
83
|
|
||
EBITDA
|
228
|
|
|
372
|
|
||
Income from discontinued operations (net of tax)
|
—
|
|
|
(129
|
)
|
||
Losses on pension and other postretirement plan remeasurements
|
23
|
|
|
9
|
|
||
Restructuring, separation and other costs
|
16
|
|
|
16
|
|
||
Legal reserve charge
|
5
|
|
|
—
|
|
||
Accelerated depreciation
|
2
|
|
|
2
|
|
||
Net loss on divestitures
|
—
|
|
|
33
|
|
||
Impairment of equity investment
|
—
|
|
|
14
|
|
||
Tax indemnity income
|
—
|
|
|
(16
|
)
|
||
Adjusted EBITDA
|
$
|
274
|
|
|
$
|
301
|
|
|
|
|
|
(a)
|
Excludes
$2 million
of accelerated depreciation for each of the three months ended
March 31, 2016
and
2015
.
|
•
|
an additional $10 million charge for a legal reserve during the
six
months ended
March 31, 2016
;
|
•
|
additional adjustments related to a restructuring plan within an existing manufacturing facility of a
$5 million
reversal of the previous severance accrual and $2 million of accelerated depreciation during the
six
months ended
March 31, 2016
;
|
•
|
an additional $6 million of costs related to the separation of Valvoline during the
six
months ended
March 31, 2016
;
|
•
|
a $7 million charge for a stock incentive plan award modification for the six months ended March 31, 2015; and
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
||||||
|
March 31
|
||||||
(In millions)
|
2016
|
|
|
2015
|
|
||
Net income
|
$
|
176
|
|
|
$
|
257
|
|
Income tax expense
|
35
|
|
|
27
|
|
||
Net interest and other financing expense
|
85
|
|
|
81
|
|
||
Depreciation and amortization
(a)
|
164
|
|
|
168
|
|
||
EBITDA
|
460
|
|
|
533
|
|
||
Loss (income) from discontinued operations (net of tax)
|
2
|
|
|
(121
|
)
|
||
Losses on pension and other postretirement plan remeasurements
|
23
|
|
|
9
|
|
||
Restructuring, separation and other costs, net
|
17
|
|
|
17
|
|
||
Legal reserve
|
15
|
|
|
—
|
|
||
Accelerated depreciation
|
4
|
|
|
2
|
|
||
Net loss on divestitures
|
—
|
|
|
118
|
|
||
Impairment of equity investment
|
—
|
|
|
14
|
|
||
Tax indemnity income
|
—
|
|
|
(16
|
)
|
||
Stock incentive award modification
|
—
|
|
|
7
|
|
||
Adjusted EBITDA
|
$
|
521
|
|
|
$
|
563
|
|
|
|
|
|
(a)
|
Excludes
$4 million
and
$2 million
of accelerated depreciation for the
six
months ended
March 31, 2016
. and
2015
, respectively.
|
|
Three months ended March 31
|
|
Six months ended March 31
|
||||||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||||||
Sales
|
$
|
1,247
|
|
|
$
|
1,350
|
|
|
$
|
(103
|
)
|
|
$
|
2,410
|
|
|
$
|
2,741
|
|
|
$
|
(331
|
)
|
|
Three months ended
|
|
|
Six months ended
|
|
||||
(In millions)
|
March 31, 2016
|
|
|
March 31, 2016
|
|
||||
Pricing
|
|
$
|
(70
|
)
|
|
|
$
|
(139
|
)
|
Volume and product mix
|
|
5
|
|
|
|
(28
|
)
|
||
Currency exchange
|
|
(22
|
)
|
|
|
(76
|
)
|
||
Divestitures and acquisitions
|
|
(16
|
)
|
|
|
(88
|
)
|
||
Change in sales
|
|
$
|
(103
|
)
|
|
|
$
|
(331
|
)
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
Six months ended March 31
|
||||||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||||||
Cost of sales
|
$
|
823
|
|
|
$
|
925
|
|
|
$
|
(102
|
)
|
|
$
|
1,595
|
|
|
$
|
1,906
|
|
|
$
|
(311
|
)
|
Gross profit as a percent of sales
|
34.0
|
%
|
|
31.5
|
%
|
|
|
|
|
33.8
|
%
|
|
30.5
|
%
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
||||
(In millions)
|
March 31, 2016
|
|
|
March 31, 2016
|
|
||||
Changes in:
|
|
|
|
|
|
||||
Production costs
|
|
$
|
(58
|
)
|
|
|
$
|
(133
|
)
|
Volume and product mix
|
|
(1
|
)
|
|
|
(22
|
)
|
||
Divestitures and acquisitions
|
|
(13
|
)
|
|
|
(79
|
)
|
||
Currency exchange
|
|
(15
|
)
|
|
|
(54
|
)
|
||
Pension and other postretirement benefit plans expense (income)
|
|
|
|
|
|
||||
(including remeasurements)
|
|
1
|
|
|
|
(4
|
)
|
||
Severance and other costs
|
|
(16
|
)
|
|
|
(21
|
)
|
||
Accelerated depreciation
|
|
—
|
|
|
|
2
|
|
||
Change in cost of sales
|
|
$
|
(102
|
)
|
|
|
$
|
(311
|
)
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
Six months ended March 31
|
||||||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||||||
Selling, general and administrative
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
expense
|
$
|
258
|
|
|
$
|
203
|
|
|
$
|
55
|
|
|
$
|
483
|
|
|
$
|
429
|
|
|
$
|
54
|
|
As a percent of sales
|
20.7
|
%
|
|
15.0
|
%
|
|
|
|
|
20.0
|
%
|
|
15.7
|
%
|
|
|
|
•
|
$12 million of costs related to the separation of Valvoline and $4 million of restructuring charges related to office buildings during the current quarter;
|
•
|
Tax indemnification income of $16 million included in the prior year quarter;
|
•
|
Increased pension and other postretirement plan remeasurements losses of $9 million compared to prior year quarter. The current quarter includes $14 million of losses on pension and other postretirement plan remeasurements consisting of a curtailment gain of $65 million and an actuarial loss of $79 million, while the prior year quarter included $5 million of a loss on a pension plan remeasurement;
|
•
|
a $5 million charge for a legal reserve during the current quarter; and
|
•
|
increased resource costs of $7 million, primarily due to employee related costs.
|
|
|
|
|
|
|
|
|
|
•
|
$18 million of costs related to the separation of Valvoline and $4 million of restructuring charges related to office buildings during the current period;
|
•
|
Tax indemnification income of $16 million included in the prior year period;
|
•
|
a $15 million charge for a legal reserve during the current period;
|
•
|
Increased pension and other postretirement plan remeasurements losses of $9 million compared to prior year period (see discussion within current quarter analysis); and
|
•
|
a $7 million charge related to a stock incentive award modification during the prior year period.
|
|
Three months ended March 31
|
|
Six months ended March 31
|
||||||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||||||
Research and development expense
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
49
|
|
|
$
|
50
|
|
|
$
|
(1
|
)
|
|
Three months ended March 31
|
|
Six months ended March 31
|
||||||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||||||
Equity and other income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Equity income (loss)
|
$
|
3
|
|
|
$
|
(10
|
)
|
|
$
|
13
|
|
|
$
|
8
|
|
|
$
|
(7
|
)
|
|
$
|
15
|
|
Other income
|
3
|
|
|
6
|
|
|
(3
|
)
|
|
7
|
|
|
13
|
|
|
(6
|
)
|
||||||
|
$
|
6
|
|
|
$
|
(4
|
)
|
|
$
|
10
|
|
|
$
|
15
|
|
|
$
|
6
|
|
|
$
|
9
|
|
|
Three months ended March 31
|
|
Six months ended March 31
|
||||||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||||||
Net interest and other financing
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
expense (income)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
$
|
44
|
|
|
$
|
40
|
|
|
$
|
4
|
|
|
$
|
87
|
|
|
$
|
81
|
|
|
$
|
6
|
|
Interest income
|
(1
|
)
|
|
(2
|
)
|
|
1
|
|
|
(2
|
)
|
|
(4
|
)
|
|
2
|
|
||||||
Available-for-sale securities income
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
||||||
Other financing costs
|
2
|
|
|
2
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
—
|
|
||||||
|
$
|
43
|
|
|
$
|
40
|
|
|
$
|
3
|
|
|
$
|
85
|
|
|
$
|
81
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
Six months ended March 31
|
||||||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||||||
Net loss on divestitures
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Valvoline car care products
|
$
|
—
|
|
|
$
|
(26
|
)
|
|
$
|
26
|
|
|
$
|
—
|
|
|
$
|
(26
|
)
|
|
$
|
26
|
|
Elastomers
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
(86
|
)
|
|
86
|
|
||||||
MAP Transaction adjustments
|
(1
|
)
|
|
(6
|
)
|
|
5
|
|
|
—
|
|
|
(6
|
)
|
|
6
|
|
||||||
Castings Solutions joint venture
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Pinova
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||
|
$
|
(2
|
)
|
|
$
|
(33
|
)
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
(118
|
)
|
|
$
|
118
|
|
|
Three months ended March 31
|
|
Six months ended March 31
|
||||||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||||||
Income tax expense
|
$
|
15
|
|
|
$
|
25
|
|
|
$
|
(10
|
)
|
|
$
|
35
|
|
|
$
|
27
|
|
|
$
|
8
|
|
Effective tax rate
|
15
|
%
|
|
21
|
%
|
|
|
|
|
16
|
%
|
|
17
|
%
|
|
|
|
|
Three months ended March 31
|
|
Six months ended March 31
|
||||||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||||||
Income (loss) from discontinued
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
operations (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Asbestos-related litigation
|
$
|
—
|
|
|
$
|
122
|
|
|
$
|
(122
|
)
|
|
$
|
—
|
|
|
$
|
120
|
|
|
$
|
(120
|
)
|
Water Technologies
|
—
|
|
|
7
|
|
|
(7
|
)
|
|
(2
|
)
|
|
1
|
|
|
(3
|
)
|
||||||
|
$
|
—
|
|
|
$
|
129
|
|
|
$
|
(129
|
)
|
|
$
|
(2
|
)
|
|
$
|
121
|
|
|
$
|
(123
|
)
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
Six months ended March 31
|
||||||||||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(loss) (net of taxes)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized translation income (loss)
|
$
|
80
|
|
|
$
|
(255
|
)
|
|
$
|
335
|
|
|
$
|
19
|
|
|
$
|
(382
|
)
|
|
$
|
401
|
|
Pension and postretirement
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
obligation adjustment
|
24
|
|
|
(6
|
)
|
|
30
|
|
|
21
|
|
|
(11
|
)
|
|
32
|
|
||||||
Unrealized gain on available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
securities
|
3
|
|
|
—
|
|
|
3
|
|
|
9
|
|
|
—
|
|
|
9
|
|
||||||
|
$
|
107
|
|
|
$
|
(261
|
)
|
|
$
|
368
|
|
|
$
|
49
|
|
|
$
|
(393
|
)
|
|
$
|
442
|
|
•
|
For the three months ended
March 31, 2016
, other comprehensive income, net of tax, from foreign currency translation adjustments was
$80 million
, compared to a loss of
$255 million
for the three months ended
March 31, 2015
. The fluctuations in unrealized translation gains and losses is primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars.
|
•
|
Pension and postretirement obligation adjustment was income of
$24 million
and loss of
$6 million
for the three months ended
March 31, 2016
and
2015
, respectively. Of these amounts, $31 million and
$6 million
during the current quarter and prior year quarter, respectively, of unrecognized prior service credits, net of tax, relating to pension and other postretirement benefit plans were amortized and reclassified into net income. Additional unrecognized prior service credits, net of tax, of $55 million during the current quarter were included in other comprehensive income as a result of the pension and other postretirement plan remeasurements.
|
•
|
$3 million
of unrealized gain on available-for-sale securities, net of tax, related to restricted investments, was recognized within other comprehensive income during the three months ended
March 31, 2016
.
|
•
|
For the
six
months ended
March 31, 2016
, other comprehensive income , net of tax, from foreign currency translation adjustments was
$19 million
, compared to a loss of
$382 million
for the
six
months ended
March 31, 2015
. The fluctuations in unrealized translation gains and losses are primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars.
|
•
|
Pension and postretirement obligation adjustment was income of
$21 million
and loss of
$11 million
for the
six
months ended
March 31, 2016
and
2015
, respectively. Of these amounts, $34 million and
$11 million
during the current and prior year periods, respectively, of unrecognized prior service credits, net
|
|
|
|
|
|
|
|
|
|
•
|
$9 million
of unrealized gain on available-for-sale securities, net of tax, related to restricted investments, was recognized within other comprehensive income during the
six
months ended
March 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
Sales
|
|
|
|
|
|
|
|
||||||||
Specialty Ingredients
|
$
|
529
|
|
|
$
|
583
|
|
|
$
|
1,004
|
|
|
$
|
1,144
|
|
Performance Materials
|
239
|
|
|
286
|
|
|
470
|
|
|
623
|
|
||||
Valvoline
|
479
|
|
|
481
|
|
|
936
|
|
|
974
|
|
||||
|
$
|
1,247
|
|
|
$
|
1,350
|
|
|
$
|
2,410
|
|
|
$
|
2,741
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
||||
Specialty Ingredients
|
$
|
65
|
|
|
$
|
65
|
|
|
$
|
103
|
|
|
$
|
125
|
|
Performance Materials
|
20
|
|
|
30
|
|
|
43
|
|
|
55
|
|
||||
Valvoline
|
105
|
|
|
82
|
|
|
197
|
|
|
165
|
|
||||
Unallocated and other
|
(43
|
)
|
|
16
|
|
|
(45
|
)
|
|
17
|
|
||||
|
$
|
147
|
|
|
$
|
193
|
|
|
$
|
298
|
|
|
$
|
362
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
||||
Specialty Ingredients
|
$
|
62
|
|
|
$
|
61
|
|
|
$
|
123
|
|
|
$
|
121
|
|
Performance Materials
|
13
|
|
|
14
|
|
|
26
|
|
|
30
|
|
||||
Valvoline
|
10
|
|
|
10
|
|
|
19
|
|
|
19
|
|
||||
|
$
|
85
|
|
|
$
|
85
|
|
|
$
|
168
|
|
|
$
|
170
|
|
Operating information
|
|
|
|
|
|
|
|
|
|
|
|
||||
Specialty Ingredients
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales per shipping day
|
$
|
8.3
|
|
|
$
|
9.3
|
|
|
$
|
8.0
|
|
|
$
|
9.2
|
|
Metric tons sold (thousands)
|
77.3
|
|
|
82.7
|
|
|
146.0
|
|
|
162.6
|
|
||||
Gross profit as a percent of sales
(a)
|
34.6
|
%
|
|
31.7
|
%
|
|
33.8
|
%
|
|
32.2
|
%
|
||||
Performance Materials
|
|
|
|
|
|
|
|
|
|
||||||
Sales per shipping day
|
$
|
3.7
|
|
|
$
|
4.5
|
|
|
$
|
3.7
|
|
|
$
|
5.0
|
|
Metric tons sold (thousands)
|
116.3
|
|
|
118.3
|
|
|
222.5
|
|
|
247.8
|
|
||||
Gross profit as a percent of sales
(a)
|
20.6
|
%
|
|
22.7
|
%
|
|
21.3
|
%
|
|
19.8
|
%
|
||||
Valvoline
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lubricant sales gallons
|
43.7
|
|
|
40.5
|
|
|
84.2
|
|
|
79.5
|
|
||||
Premium lubricants (percent of U.S. branded volumes)
|
44.6
|
%
|
|
40.7
|
%
|
|
43.9
|
%
|
|
39.6
|
%
|
||||
Gross profit as a percent of sales
(a)
|
40.0
|
%
|
|
36.1
|
%
|
|
39.2
|
%
|
|
34.7
|
%
|
||||
|
|
|
|
|
|
|
|
(a)
|
Gross profit is defined as sales, less cost of sales divided by sales.
|
|
Three months ended March 31, 2016
|
|
Six months ended March 31, 2016
|
||||||||||||||
Sales by Geography
|
Specialty Ingredients
|
|
Performance Materials
|
|
Valvoline
|
|
Specialty Ingredients
|
|
Performance Materials
|
|
Valvoline
|
||||||
North America
|
39
|
%
|
|
42
|
%
|
|
75
|
%
|
|
39
|
%
|
|
41
|
%
|
|
75
|
%
|
Europe
|
31
|
%
|
|
40
|
%
|
|
7
|
%
|
|
32
|
%
|
|
39
|
%
|
|
7
|
%
|
Asia Pacific
|
19
|
%
|
|
13
|
%
|
|
13
|
%
|
|
19
|
%
|
|
14
|
%
|
|
13
|
%
|
Latin America & other
|
11
|
%
|
|
5
|
%
|
|
5
|
%
|
|
10
|
%
|
|
6
|
%
|
|
5
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2015
|
|
Six months ended March 31, 2015
|
||||||||||||||
Sales by Geography
|
Specialty Ingredients
|
|
Performance Materials
|
|
Valvoline
|
|
Specialty Ingredients
|
|
Performance Materials
|
|
Valvoline
|
||||||
North America
|
39
|
%
|
|
42
|
%
|
|
75
|
%
|
|
39
|
%
|
|
45
|
%
|
|
75
|
%
|
Europe
|
32
|
%
|
|
39
|
%
|
|
7
|
%
|
|
32
|
%
|
|
35
|
%
|
|
7
|
%
|
Asia Pacific
|
19
|
%
|
|
14
|
%
|
|
13
|
%
|
|
19
|
%
|
|
14
|
%
|
|
14
|
%
|
Latin America & other
|
10
|
%
|
|
5
|
%
|
|
5
|
%
|
|
10
|
%
|
|
6
|
%
|
|
4
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
Operating income
|
$
|
65
|
|
|
$
|
65
|
|
|
$
|
103
|
|
|
$
|
125
|
|
Depreciation and amortization
(a)
|
60
|
|
|
59
|
|
|
119
|
|
|
119
|
|
||||
EBITDA
|
125
|
|
|
124
|
|
|
222
|
|
|
244
|
|
||||
Severance and other costs
|
—
|
|
|
16
|
|
|
(5
|
)
|
|
16
|
|
||||
Accelerated depreciation
|
2
|
|
|
2
|
|
|
4
|
|
|
2
|
|
||||
Adjusted EBITDA
|
$
|
127
|
|
|
$
|
142
|
|
|
$
|
221
|
|
|
$
|
262
|
|
|
|
|
|
|
|
|
|
(a)
|
Excludes
$2 million
of accelerated depreciation for the three months ended
March 31, 2016
and
2015
, while the
six
months ended
March 31, 2016
and
2015
excludes accelerated depreciation of
$4 million
and
$2 million
, respectively.
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
Operating income
|
$
|
20
|
|
|
$
|
30
|
|
|
$
|
43
|
|
|
$
|
55
|
|
Depreciation and amortization
|
13
|
|
|
14
|
|
|
26
|
|
|
30
|
|
||||
EBITDA
|
$
|
33
|
|
|
$
|
44
|
|
|
69
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
Operating income
|
$
|
105
|
|
|
$
|
82
|
|
|
$
|
197
|
|
|
$
|
165
|
|
Depreciation and amortization
|
10
|
|
|
10
|
|
|
19
|
|
|
19
|
|
||||
EBITDA
|
115
|
|
|
92
|
|
|
216
|
|
|
184
|
|
||||
Impairment of equity investment
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
||||
Adjusted EBITDA
|
$
|
115
|
|
|
$
|
106
|
|
|
$
|
216
|
|
|
$
|
198
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(In millions)
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
||||
Losses on pension and other postretirement plan
|
|
|
|
|
|
|
|
||||||||
remeasurements
|
$
|
(23
|
)
|
|
$
|
(9
|
)
|
|
$
|
(23
|
)
|
|
$
|
(9
|
)
|
Pension and other postretirement net periodic income
|
|
|
|
|
|
|
|
||||||||
(excluding service cost)
|
20
|
|
|
14
|
|
|
40
|
|
|
27
|
|
||||
Restructuring activities (includes severance
|
|
|
|
|
|
|
|
||||||||
and separation costs)
|
(16
|
)
|
|
—
|
|
|
(22
|
)
|
|
(1
|
)
|
||||
Legal reserve
|
(5
|
)
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
||||
Tax indemnity income
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
||||
Environmental expense for divested businesses
|
(11
|
)
|
|
(9
|
)
|
|
(16
|
)
|
|
(15
|
)
|
||||
Other income (expense)
|
(8
|
)
|
|
4
|
|
|
(9
|
)
|
|
(1
|
)
|
||||
Total unallocated income (expense)
|
$
|
(43
|
)
|
|
$
|
16
|
|
|
$
|
(45
|
)
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
||||||
|
March 31
|
||||||
(In millions)
|
2016
|
|
|
2015
|
|
||
Cash provided (used) by:
|
|
|
|
||||
Operating activities from continuing operations
|
$
|
250
|
|
|
$
|
96
|
|
Investing activities from continuing operations
|
(124
|
)
|
|
(299
|
)
|
||
Financing activities from continuing operations
|
(217
|
)
|
|
(532
|
)
|
||
Discontinued operations
|
(19
|
)
|
|
287
|
|
||
Effect of currency exchange rate changes on cash and cash equivalents
|
(11
|
)
|
|
(34
|
)
|
||
Net decrease in cash and cash equivalents
|
$
|
(121
|
)
|
|
$
|
(482
|
)
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
||||||
|
March 31
|
||||||
(In millions)
|
2016
|
|
|
2015
|
|
||
Cash flows provided (used) by operating activities from continuing operations
|
|
|
|
||||
Net income
|
$
|
176
|
|
|
$
|
257
|
|
Loss (income) from discontinued operations (net of tax)
|
2
|
|
|
(121
|
)
|
||
Adjustments to reconcile income from continuing operations to
|
|
|
|
|
|
||
cash flows from operating activities
|
|
|
|
|
|
||
Depreciation and amortization
|
168
|
|
|
170
|
|
||
Debt issuance cost amortization
|
6
|
|
|
7
|
|
||
Deferred income taxes
|
1
|
|
|
(13
|
)
|
||
Equity income from affiliates
|
(8
|
)
|
|
(7
|
)
|
||
Distributions from equity affiliates
|
9
|
|
|
10
|
|
||
Stock based compensation expense
|
17
|
|
|
15
|
|
||
Gain on available-for-sale securities
|
(4
|
)
|
|
—
|
|
||
Net loss on divestitures
|
—
|
|
|
118
|
|
||
Impairment of equity investment
|
—
|
|
|
14
|
|
||
Pension contributions
|
(15
|
)
|
|
(29
|
)
|
||
Losses on pension and other postretirement plan remeasurements
|
23
|
|
|
9
|
|
||
Change in operating assets and liabilities
(a)
|
(125
|
)
|
|
(334
|
)
|
||
Total cash flows provided by operating activities from continuing operations
|
$
|
250
|
|
|
$
|
96
|
|
|
|
|
|
•
|
Accounts receivable - The cash inflows of $27 million and $153 million during the current and prior year periods, respectively, were primarily due to decreased sales compared to the prior year period.
|
•
|
Inventory - The cash outflow of $9 million and inflow $32 million during the current and prior year periods, respectively, were primarily a result of sales volumes.
|
•
|
Trade and other payables - The cash outflows of $116 million and $283 million during the current and prior year periods, respectively, were primarily driven by seasonal declines in trade payables and incentive compensation payouts to employees from the prior year paid during the first quarter of each fiscal year. The prior year period outflow was also due to severance payments relating to the 2014 global restructuring program.
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
||||||
|
March 31
|
||||||
(In millions)
|
2016
|
|
|
2015
|
|
||
Cash flows provided (used) by investing activities from continuing operations
|
|
|
|
||||
Additions to property, plant and equipment
|
$
|
(103
|
)
|
|
$
|
(86
|
)
|
Proceeds from disposal of property, plant and equipment
|
3
|
|
|
1
|
|
||
Purchase of operations - net of cash acquired
|
(66
|
)
|
|
—
|
|
||
Proceeds from sale of operations or equity investments
|
12
|
|
|
106
|
|
||
Funds restricted for specific transactions
|
—
|
|
|
(320
|
)
|
||
Reimbursements from restricted investments
|
23
|
|
|
—
|
|
||
Proceeds from the settlement of derivative instruments
|
7
|
|
|
—
|
|
||
Purchase of available-for-sale securities
|
(4
|
)
|
|
—
|
|
||
Proceeds from sales of available-for-sale securities
|
4
|
|
|
—
|
|
||
Total cash flows used by investing activities from continuing operations
|
$
|
(124
|
)
|
|
$
|
(299
|
)
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
||||||
|
March 31
|
||||||
(In millions)
|
2016
|
|
|
2015
|
|
||
Cash flows provided (used) by financing activities from continuing operations
|
|
|
|
||||
Repayment of long-term debt
|
$
|
(36
|
)
|
|
$
|
—
|
|
Proceeds (repayment) from short-term debt
|
368
|
|
|
(96
|
)
|
||
Repurchase of common stock
|
(500
|
)
|
|
(397
|
)
|
||
Cash dividends paid
|
(48
|
)
|
|
(46
|
)
|
||
Excess tax benefits related to share-based payments
|
(1
|
)
|
|
7
|
|
||
Total cash flows used by financing activities from continuing operations
|
$
|
(217
|
)
|
|
$
|
(532
|
)
|
|
Six months ended
|
||||||
|
March 31
|
||||||
(In millions)
|
2016
|
|
|
2015
|
|
||
Cash provided (used) by discontinued operations
|
|
|
|
||||
Operating cash flows
|
$
|
(19
|
)
|
|
$
|
277
|
|
Investing cash flows
|
—
|
|
|
10
|
|
||
Total cash provided (used) by discontinued operations
|
$
|
(19
|
)
|
|
$
|
287
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
||||||
|
March 31
|
||||||
(In millions)
|
2016
|
|
|
2015
|
|
||
Cash flows provided by operating activities from continuing operations
|
$
|
250
|
|
|
$
|
96
|
|
Adjustments:
|
|
|
|
|
|
||
Additions to property, plant and equipment
|
(103
|
)
|
|
(86
|
)
|
||
Free cash flows
|
$
|
147
|
|
|
$
|
10
|
|
|
March 31
|
|
|
September 30
|
|
||
(In millions)
|
2016
|
|
|
2015
|
|
||
Cash and cash equivalents
|
$
|
1,136
|
|
|
$
|
1,257
|
|
|
|
|
|
||||
Unused borrowing capacity
|
|
|
|
|
|
||
Revolving credit facility
|
$
|
575
|
|
|
$
|
1,013
|
|
Accounts receivable securitization facility
|
$
|
79
|
|
|
$
|
10
|
|
|
March 31
|
|
|
September 30
|
|
||
(In millions)
|
2016
|
|
|
2015
|
|
||
Short-term debt
|
$
|
694
|
|
|
$
|
326
|
|
Long-term debt (including current portion and debt issuance cost discounts)
(a)
|
3,383
|
|
|
3,403
|
|
||
Total debt
|
$
|
4,077
|
|
|
$
|
3,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer Purchases of Equity Securities
|
||||||||||||||||||
Q2 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)(1)
|
||||||||||||
January 1, 2016 to January 31, 2016:
|
—
|
|
|
|
—
|
|
|
—
|
|
|
$
|
500
|
|
|
||||
Employee Tax Withholdings
|
12,513
|
|
(2
|
)
|
|
$
|
101.15
|
|
(2
|
)
|
|
|
|
|
||||
February 1, 2016 to February 29, 2016:
|
|
|
|
|
|
|
|
|
500
|
|
|
|||||||
ASR Agreement
|
1,176,061
|
|
(3
|
)
|
|
99.01
|
|
(3
|
)
|
1,176,061
|
|
(3
|
)
|
|
|
|||
March 1, 2016 to March 31, 2016
|
—
|
|
|
|
—
|
|
|
—
|
|
|
500
|
|
|
|||||
Total
|
1,188,574
|
|
|
|
|
|
1,176,061
|
|
|
$
|
500
|
|
|
|
Ashland Inc.
|
|
(Registrant)
|
April 27, 2016
|
/s/ J. Kevin Willis
|
|
J. Kevin Willis
|
|
Senior Vice President and Chief Financial Officer
(on behalf of the Registrant and as principal
financial officer)
|
SECTION 1.
|
Definitions
.
|
SECTION 2.
|
Amendment to the Agreement
.
Section 8.1(j)
of the Agreement is hereby amended
|
(i)
|
after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Potential Termination Event shall exist;
|
(ii)
|
the representations and warranties of such Person set forth in the Transaction Documents to which it is a party (as amended hereby) are true and correct as of the date hereof (except to the extent such representations and warranties relate solely to an earlier date and then as of such earlier date and except as may be necessary to reflect the existence of the Specified Termination Event and Resulting Events (as such terms are defined in the Waiver)); and
|
(iii)
|
this Amendment constitutes the legal, valid and binding obligations of such Person enforceable against such Person in accordance with their respective terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally and to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
|
(i)
|
counterparts of this Amendment duly executed by each of the parties hereto; and
|
(ii)
|
counterparts of that certain waiver, dated as of the date hereof (the “
Waiver
”).
|
By:
|
/s/ Lynn P. Freeman
|
Name:
|
Lynn P. Freeman
|
Title:
|
Assistant Treasurer
|
By:
|
/s/ Lynn P. Freeman
|
Name:
|
Lynn P. Freeman
|
Title:
|
Vice President & Treasurer
|
By:
|
/s/ Asad P. Lodhi
|
Name:
|
Asad P. Lodhi
|
Title:
|
President
|
By:
|
/s/ Jill A. Russo
|
Name:
|
Jill A. Russo
|
Title:
|
Vice President
|
By:
|
/s/ David V. DeAngelis
|
Name:
|
David V. DeAngelis
|
Title:
|
Vice President
|
By:
|
/s/ Sam Pilcer
|
Name:
|
Sam Pilcer
|
Title:
|
Managing Director
|
By:
|
/s/ Kostantina Kourmpetis
|
Name:
|
Kostantina Kourmpetis
|
Title:
|
Managing Director
|
By:
|
/s/ Michael Grad
|
Name:
|
Michael Grad
|
Title:
|
Director
|
By:
|
/s/ Christopher Pohl
|
Name:
|
Christopher Pohl
|
Title:
|
Managing Director
|
By:
|
/s/ Christopher Pohl
|
Name:
|
Christopher Pohl
|
Title:
|
Managing Director
|
By:
|
/s/ Michael Brown
|
Name:
|
Michael Brown
|
Title:
|
Senior Vice President
|
By:
|
/s/ Sam Pilcer
|
Name:
|
Sam Pilcer
|
Title:
|
Managing Director
|
By:
|
/s/ Kostantina Kourmpetis
|
Name:
|
Kostantina Kourmpetis
|
Title:
|
Managing Director
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Ashland Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ William A. Wulfsohn
|
|
William A. Wulfsohn
|
|
Chairman and Chief Executive Officer
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Ashland Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ J. Kevin Willis
|
|
J. Kevin Willis
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
/s/ William A. Wulfsohn
|
|
|
William A. Wulfsohn
|
|
|
Chief Executive Officer
|
|
|
April 27, 2016
|
|
|
|
|
|
|
|
|
/s/ J. Kevin Willis
|
|
|
J. Kevin Willis
|
|
|
Chief Financial Officer
|
|
|
April 27, 2016
|
|
|
|
|
|