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Acquisitions | 12 Months Ended
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Sep. 30, 2019
Business Combinations [Abstract] |
Acquisitions | NOTE C – ACQUISITIONS Pharmachem On May 17, 2017, Ashland completed its acquisition of the stock of Pharmachem Laboratories, Inc. (Pharmachem), a leading provider of quality ingredients to the global health and wellness industries and high-value differentiated products to fragrance and flavor houses. At the acquisition date, Pharmachem had approximately $300 million in annual revenues and 14 manufacturing facilities located in the United States and Mexico. New Jersey-based Pharmachem develops, manufactures and supplies custom and branded nutritional and fragrance products. Ashland has included Pharmachem within the Specialty Ingredients reporting segment. Purchase price allocation The acquisition was recorded by Ashland using the purchase method of accounting in accordance with U.S. GAAP whereby the total purchase price was allocated to tangible and intangible assets and liabilities acquired based on respective fair values. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were based on strategic benefits that are expected to be realized from the acquisition. None of the goodwill is expected to be deductible for income tax purposes. The all-cash purchase price of Pharmachem was $680 million which included working capital adjustments of approximately $20 million. Ashland incurred $5 million of transaction costs during 2017 related to the acquisition, which was recorded within the net loss on acquisitions and divestitures caption in the Statement of Consolidated Comprehensive Income (Loss). The purchase price allocation was finalized during 2018 and the following table summarizes the values of the assets acquired and liabilities assumed at the date of acquisition.
|  | At |
|  | May 17, 2017 |
Purchase price allocation (in millions) |  | As Adjusted |
Assets: |  |  |  |
Accounts receivable |  |  | 52 |
Inventory |  |  | 74 |
Other current assets |  |  | 4 |
Intangible assets |  |  | 330 |
Goodwill |  |  | 288 |
Property, plant and equipment |  |  | 94 |
Other noncurrent assets |  |  | 17 |
Liabilities: |  |  |  |
Accounts payable |  |  | (33 | )
Deferred tax - net |  |  | (132 | )
Other noncurrent liabilities |  |  | (14 | )
Total purchase price |  | $ | 680 |
Subsequent adjustments to initial purchase price allocation During the September 2017 quarter, Ashland updated certain valuations and reserve estimates as part of the purchase accounting process and procedures. As a result of these updates, Ashland increased the intangible assets associated with the purchase by $18 million. The remaining updates to the Consolidated Balance Sheet during the September 2017 quarter related to certain liabilities that in total, along with the intangible assets impact, increased goodwill by $11 million. These adjustments did not have a significant effect on the Statement of Consolidated Comprehensive Income (Loss) during 2017. During 2018, there were subsequent adjustments of $6 million to deferred tax liabilities, $3 million to property, plant and equipment, $3 million to other noncurrent assets and $1 million to accounts payable. The combined impact of these adjustments resulted in an increase to goodwill of $1 million. These adjustments did not have a significant effect on the Statement of Consolidated Comprehensive Income (Loss) during 2018. Intangible assets identified The purchase price allocation included $330 million of certain definite-lived intangible assets which are being amortized over the estimated useful life in proportion to the economic benefits consumed. The determination of the useful lives is based upon various industry studies, historical acquisition experience, economic factors, and future cash flows of the combined company. In addition, Ashland reviewed certain technological trends and also considered the current Pharmachem customer base. The following details the total intangible assets identified as of May 17, 2017.
|  |  |  |  |  | Weighted-average |
|  |  |  |  |  | amortization period |
Intangible asset type (in millions) |  | Value |  |  | (years) |
Trademarks and trade names |  | $ | 26 |  |  |  | 15 |
Intellectual property |  |  | 68 |  |  |  | 22 |
Customer and supplier relationships |  |  | 236 |  |  |  | 20 |
Total |  | $ | 330 |  |  |  |  |
Impact on operating results The results of Pharmachem’s operations have been included in Ashland’s Consolidated Financial Statements since the May 17, 2017 closing date. The following table provides sales and operating income from the acquired Pharmachem operations included in Ashland’s 2017 results.
Pharmachem results of operations |  |  |  |
(In millions) |  | 2017 (a) |
Sales |  | $ | 104 |
Operating income |  |  | 7 |
(a) | Amounts represent the sales and results of operations for the period May 17, 2017 through September 30, 2017, the period for which Pharmachem was owned during 2017.
The following unaudited pro forma information for 2017 assumes the acquisition of Pharmachem occurred at the beginning of the respective periods presented.
Unaudited pro forma information |  |  |  |
(In millions) |  | 2017 |
Sales |  | $ | 2,483 |
Net income |  |  | 31 |
These amounts have been calculated after applying Ashland’s accounting policies and adjusting the results of Pharmachem to reflect the additional depreciation, amortization and interest expense that would have been charged assuming the fair value adjustments to tangible and intangible assets, and the related debt incurred had been applied on October 1, 2015, together with an estimate of the various tax effects. The unaudited pro forma information presented above is for illustrative purposes only and does not purport to be indicative of the results of future operations of Ashland or the results that would have been attained had the operations been combined during the periods presented. Vornia Limited In January 2018, Ashland completed the acquisition of Vornia Limited for $12 million, of which $1 million was paid in 2019. Vornia Limited’s principal activity is the design, development and fabrication of customized biomaterial solutions. The purchase price allocation primarily included $8 million of intellectual property and $4 million of goodwill and has been included within the Specialty Ingredients reportable segment.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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