SEC Company Response from ASHLAND INC. (ASH) (CIK 0001674862) (ASH) — Mar 26, 2020
ASHLAND INC. (ASH) (CIK 0001674862)
Date: March 26, 2020 · CIK: 0001674862 · Accession: 0001564590-20-012997
AI Filing Summary & Sentiment
File numbers found in text: 333-211719
Referenced dates: March 20, 2020
Letter
VIA EDGAR Division of Corporation Finance Office of Trade & Services Ashland Global Holdings Inc. Form 10-K for the year ended September 30, 2019 Filed November 25, 2019 File No. 333-211719
Dear Division of Corporation Finance:
Set forth below is the response from Ashland Global Holdings Inc. (“Ashland” or “we”) to the comment (the “Comment”) of the staff (the “Staff”) of the United States Securities and Exchange Commission (the “SEC”), dated March 20, 2020, concerning Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019 (the “2019 Form 10-K”).
For your convenience, the response set forth below repeats the Comment from the Staff prior to the response. The Comment is highlighted in bold.
Form 10-K for the year ended September 30, 2019
MD&A
Results of Operations – Consolidated Review, page M-3
Comment
We note your discussion and reconciliation of non-GAAP measures precedes your caption review of results on a consolidated and segment basis under GAAP. Please revise to provide prominence to your discussion and analysis of GAAP results. Refer to non-GAAP C&DI 102.10.
Response
In order to provide increased prominence to our discussion and analysis of GAAP results we have provided an example of the type of prospective disclosure we will make beginning with our second quarterly report on Form 10-Q for the interim period ending March 31, 2020 and thereafter. The changes noted below utilize the 2019 Form 10-K filing information (starting with page M-3 and ending with page M-22). The additional disclosure presentation changes have been bolded and underlined for ease of reference as follows:
U.S. Securities and Exchange Commission
March 26, 2020
Page 2
RESULTS OF OPERATIONS – CONSOLIDATED REVIEW
Consolidated review
Net income
Ashland’s net income is primarily affected by results within operating income, net interest and other financing expense, net loss on acquisitions and divestitures, income taxes, discontinued operations and other significant events or transactions that are unusual or nonrecurring. Net income also includes Ashland’s adjustment for the immediate recognition of the change in the fair value of the plan assets and net actuarial gains and losses for defined benefit pension plans and other postretirement benefit plans for each fiscal year.
Key financial results for 2019, 2018 and 2017 included the following:
•
Ashland’s net income attributable to Ashland amounted to income of $505 million in 2019, $114 million in 2018, and $1 million in 2017, or $8.03, $1.79 and $0.01 diluted earnings per share, respectively.
•
Ashland’s net income attributable to noncontrolling interest amounted to $27 million during 2017 and reflects the noncontrolling interest of Valvoline Inc. for the period after the IPO close on September 28, 2016 and before the final separation occurred on May 12, 2017.
•
Discontinued operations, which are reported net of taxes, resulted in income of $481 million, $95 million and $208 million during 2019, 2018 and 2017, respectively. The activity within discontinued operations includes the gain on the disposal of the Composites segment (excluding the Maleic business) and the Intermediates and Solvents Marl facility in 2019, the operating results of the Composites segment (including the Maleic business) and the Intermediates and Solvents Marl facility for all periods reported, and Valvoline Inc. for the period in fiscal year 2017 prior to the final separation on May 12, 2017. Discontinued operations also includes adjustments related to other retained liabilities for previously divested businesses within discontinued operations.
•
Results from continuing operations, which excludes results from discontinued operations, amounted to income of $24 million in 2019, $19 million in 2018 and a loss of $180 million in 2017.
U.S. Securities and Exchange Commission
March 26, 2020
Page 3
•
The effective income tax expense rate of 66% for 2019, income tax benefit rate of 73% for 2018, and income tax benefit rate of 8% for 2017, were significantly impacted by certain tax specific key items and tax discrete items.
•
Ashland incurred pretax net interest and other financing expense of $99 million, $102 million and $229 million during 2019, 2018 and 2017, respectively, and was impacted by debt principal payments and certain charges associated with debt financing activity during each year.
•
Other net periodic benefit income (costs) totaled income of $5 million and $15 million during 2019 and 2018, respectively, and costs of $6 million during 2017.
•
Net loss on acquisitions and divestitures totaled $2 million, $4 million and $10 million during 2019, 2018 and 2017, respectively.
•
Operating income amounted to income of $166 million, $102 million and $49 million in 2019, 2018 and 2017, respectively.
For further information on the items reported above, see the discussion in the comparative Statements of Consolidated Comprehensive Income (Loss) caption review analysis.
Operating income
Operating income amounted to income of $166 million, $102 million and $49 million in 2019, 2018 and 2017, respectively. The current and prior years’ operating income included certain key items that were excluded to arrive at Adjusted EBITDA and are quantified in the table below in the “EBITDA and Adjusted EBITDA” section. These operating key items for the applicable periods are summarized as follows:
•
Restructuring, separation and other costs - Ashland periodically implements company-wide restructuring programs related to acquisitions, divestitures and other cost reduction programs in order to enhance profitability through streamlined operations and an improved overall cost structure. Ashland often incurs severance, facility and integration costs associated with these programs. See Notes C, D and F in the Notes to Consolidated Financial Statements for further information. Also included within this key item category are separation costs incurred as a result of the separation from Valvoline, which primarily related to transaction, consulting and legal fees. See Note B of the Notes to Consolidated Financial Statements for more information on the separation of Valvoline.
•
Accelerated depreciation – As a result of various restructuring activities at certain office facilities and manufacturing plants, Ashland recorded accelerated depreciation due to changes in the expected useful life of certain property, plant and equipment. See Note H of the Notes to Consolidated Financial Statements for more information.
U.S. Securities and Exchange Commission
March 26, 2020
Page 4
•
Proxy costs – Ashland incurred significant consulting and other costs associated with the 2019 Annual Meeting of Stockholders and agreement with the Cruiser Group (as defined in the agreement).
•
Environmental reserve adjustments – Ashland is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively environmental remediation) at multiple locations. As a result of these activities, Ashland recorded non-cash adjustments during each year to its environmental liabilities and receivables related to previously divested businesses or non-operational sites. See Note O of the Notes to Consolidated Financial Statements for more information.
•
Asset impairments – Consistent with historical policies and U.S. GAAP provisions, Ashland recognizes assets at fair value less cost to sell which resulted in impairment charges to certain assets during 2019 and 2018. The charges during 2018 primarily related to the impairment of an office facility as a result of a company-wide restructuring program. See Note F of the Notes to Consolidated Financial Statements for more information.
•
Tax indemnity expense – During 2019 and 2018, Ashland recorded an adjustment to a tax indemnity receivable that was associated with the acquisition of Pharmachem.
•
Legal settlement/reserve – Ashland recorded adjustments related to settlements and/or reserves for certain legal matters.
•
Unplanned plant shutdowns – During 2019 and 2017, Ashland incurred costs related to temporary shutdowns as follows: (a) for the Specialty Ingredients Parlin facility as a result of force majeure contract issues in 2019 and (b) from a Specialty Ingredients manufacturing plant due to a hurricane in 2017.
•
Inventory fair value adjustment – During 2017, Ashland recorded non-cash charges related to the fair value adjustment of inventory acquired from Pharmachem at the date of acquisition. See Note C for more information on the acquisition of Pharmachem.
Operating income for 2019, 2018 and 2017 included depreciation and amortization of $289 million, $277 million and $265 million, respectively (which includes accelerated depreciation of $39 million, $14 million, and $19 million, respectively, for each year).
Non-operating key items affecting EBITDA
During the current and prior years, there were certain key items that were not included in operating income but were excluded to arrive at Adjusted EBITDA and are quantified in the table below in the
U.S. Securities and Exchange Commission
March 26, 2020
Page 5
“EBITDA and Adjusted EBITDA” section. These non-operating key items for the applicable periods are summarized as follows:
•
Net loss on acquisitions and divestitures – Ashland recorded a loss on certain divestitures during each year and incurred certain transaction costs associated with the acquisition of Pharmachem during 2017. See Notes C and D of the Notes to Consolidated Financial Statements for more information on these acquisitions and divestitures.
•
Loss (gain) on pension and other postretirement plan remeasurements - Ashland recognized actuarial gains and losses for defined benefit pension and other postretirement benefit plans annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. See Note N of the Notes to Consolidated Financial Statements for more information.
Statements of Consolidated Comprehensive Income (Loss) – caption review
A comparative analysis of the Statements of Consolidated Comprehensive Income (Loss) by caption is provided as follows for the years ended September 30, 2019, 2018 and 2017.
(In millions)
change
change
Sales
$
2,493
$
2,589
$
2,309
$
(96
)
$
The following table provides a reconciliation of the change in sales between fiscal years 2019 and 2018 and between fiscal years 2018 and 2017.
(In millions)
2019 change
2018 change
Volume/product mix
$
(58
)
$
Currency exchange
(45
)
Acquisitions and Divestitures (including plant realignment)
(11
)
Pricing
Change in sales
$
(96
)
$
Sales for 2019 decreased $96 million, or 4%, compared to 2018. Unfavorable volume/product mix, foreign currency exchange and acquisitions and divestitures decreased sales by $58 million, $45 million and $11 million, respectively. These decreases were partially offset by product pricing which increased sales by $18 million.
Sales for 2018 increased $280 million, or 12%, compared to 2017. The acquisition of Pharmachem within the Specialty Ingredients reportable segment increased sales by $140 million while the net impact of other acquisitions and divestitures decreased sales by $33 million. Improved volume, higher pricing and favorable foreign currency increased sales by $88 million, $40 million and $45 million, respectively.
U.S. Securities and Exchange Commission
March 26, 2020
Page 6
(In millions)
change
change
Cost of sales
$
1,726
$
1,726
$
1,580
$
—
$
Gross profit as a percent of sales
30.8
%
33.3
%
31.6
%
Fluctuations in cost of sales are driven primarily by raw material prices, volume and changes in product mix, currency exchange, acquisitions and divestitures and other certain charges incurred as a result of changes or events within the businesses or restructuring activities.
The following table provides a reconciliation of the changes in cost of sales between fiscal years 2019 and 2018 and between fiscal years 2018 and 2017.
(In millions)
2019 change
2018 change
Volume/product mix
$
(27
)
$
Currency exchange
(23
)
Acquisitions and divestitures (including plant realignment)
(11
)
Accelerated depreciation
(13
)
Production costs
Unplanned plant shutdowns
(4
)
Inventory fair value adjustment
—
(7
)
Change in cost of sales
$
—
$
Cost of sales for 2019 was flat compared to 2018. Accelerated depreciation, higher production costs and charges for unplanned plant shutdowns increased cost of sales by $39 million, $14 million and $8 million, respectively. Those increases were offset by declines in volume and product mix, currency exchange and the net impact of acquisitions and divestitures which decreased cost of sales by $27 million, $23 million and $11 million, respectively.
Cost of sales for 2018 increased $146 million, or 9%, compared to 2017. The Pharmachem acquisition increased cost of sales by $101 million, while the net impact of other acquisitions and divestitures decreased cost of sales by $29 million. Changes in volume and product mix and higher production costs increased cost of sales by $54 million and $20 million, respectively. Unfavorable currency exchange increased cost of sales by $24 million. Charges for accelerated depreciation, unplanned plant shutdowns and inventory fair value adjustments decreased cost of sales by $13 million, $4 million and $7 million, respectively.
(In millions)
change
change
Selling, general and administrative expense
$
$
$
$
(153
)
$
As a percent of sales
21.6
%
26.7
%
26.4
%
U.S. Securities and Exchange Commission
March 26, 2020
Page 7
Selling, general and administrative expense for 2019 decreased $153 million compared to 2018, with expenses as a percent of sales decreasing 5.1 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to 2018 were:
•
$27 million and $60 million in net environmental-related expenses during 2019 and 2018, respectively (see Note O for more information);
•
$43 million and $83 million of key items for restructuring, separation and other costs during the current and prior year, respectively, comprised of the following:
o
$43 million and $56 million of severance, lease abandonment and other restructuring costs related to company-wide cost-savings initiatives during 2019 and 2018, respectively;
o
$10 million of costs related to the separation of Valvoline during 2018;
o
$8 million of accelerated depreciation related to the planned closure of an office building during 2018; and
o
$9 million of Pharmachem integration costs during 2018;
•
$16 million of asset impairment charges during 2018;
•
$4 million of consulting and other costs associated with the proxy contest during 2019;
•
Lower variable compensation of $21 million during 2019;
•
Favorable currency exchange of $9 million as well as achieved cost savings during 2019.
Selling, general and administrative expense for 2018 increased $82 million compared to 2017, while expenses as a percent of sales increased 0.3 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to 2017 were:
•
$75 million and $86 million of restructuring, separation and other costs during 2018 and 2017, respectively, comprised of the following:
o
$56 million of severance, lease ab
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CORRESP 1 filename1.htm ash-corresp.htm Ashland Global Holdings Inc. 50 E. RiverCenter Blvd., Covington, KY 41011 J. Kevin Willis Senior Vice President and Chief Financial Officer VIA EDGAR March 26, 2020 Division of Corporation Finance Office of Trade & Services 100 F Street, N.E. Washington, DC 20549 Ashland Global Holdings Inc. Form 10-K for the year ended September 30, 2019 Filed November 25, 2019 File No. 333-211719 Dear Division of Corporation Finance: Set forth below is the response from Ashland Global Holdings Inc. (“Ashland” or “we”) to the comment (the “Comment”) of the staff (the “Staff”) of the United States Securities and Exchange Commission (the “SEC”), dated March 20, 2020, concerning Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019 (the “2019 Form 10-K”). For your convenience, the response set forth below repeats the Comment from the Staff prior to the response. The Comment is highlighted in bold. Form 10-K for the year ended September 30, 2019 MD&A Results of Operations – Consolidated Review, page M-3 Comment We note your discussion and reconciliation of non-GAAP measures precedes your caption review of results on a consolidated and segment basis under GAAP. Please revise to provide prominence to your discussion and analysis of GAAP results. Refer to non-GAAP C&DI 102.10. Response In order to provide increased prominence to our discussion and analysis of GAAP results we have provided an example of the type of prospective disclosure we will make beginning with our second quarterly report on Form 10-Q for the interim period ending March 31, 2020 and thereafter. The changes noted below utilize the 2019 Form 10-K filing information (starting with page M-3 and ending with page M-22). The additional disclosure presentation changes have been bolded and underlined for ease of reference as follows: U.S. Securities and Exchange Commission March 26, 2020 Page 2 RESULTS OF OPERATIONS – CONSOLIDATED REVIEW Consolidated review Net income Ashland’s net income is primarily affected by results within operating income, net interest and other financing expense, net loss on acquisitions and divestitures, income taxes, discontinued operations and other significant events or transactions that are unusual or nonrecurring. Net income also includes Ashland’s adjustment for the immediate recognition of the change in the fair value of the plan assets and net actuarial gains and losses for defined benefit pension plans and other postretirement benefit plans for each fiscal year. Key financial results for 2019, 2018 and 2017 included the following: • Ashland’s net income attributable to Ashland amounted to income of $505 million in 2019, $114 million in 2018, and $1 million in 2017, or $8.03, $1.79 and $0.01 diluted earnings per share, respectively. • Ashland’s net income attributable to noncontrolling interest amounted to $27 million during 2017 and reflects the noncontrolling interest of Valvoline Inc. for the period after the IPO close on September 28, 2016 and before the final separation occurred on May 12, 2017. • Discontinued operations, which are reported net of taxes, resulted in income of $481 million, $95 million and $208 million during 2019, 2018 and 2017, respectively. The activity within discontinued operations includes the gain on the disposal of the Composites segment (excluding the Maleic business) and the Intermediates and Solvents Marl facility in 2019, the operating results of the Composites segment (including the Maleic business) and the Intermediates and Solvents Marl facility for all periods reported, and Valvoline Inc. for the period in fiscal year 2017 prior to the final separation on May 12, 2017. Discontinued operations also includes adjustments related to other retained liabilities for previously divested businesses within discontinued operations. • Results from continuing operations, which excludes results from discontinued operations, amounted to income of $24 million in 2019, $19 million in 2018 and a loss of $180 million in 2017. U.S. Securities and Exchange Commission March 26, 2020 Page 3 • The effective income tax expense rate of 66% for 2019, income tax benefit rate of 73% for 2018, and income tax benefit rate of 8% for 2017, were significantly impacted by certain tax specific key items and tax discrete items. • Ashland incurred pretax net interest and other financing expense of $99 million, $102 million and $229 million during 2019, 2018 and 2017, respectively, and was impacted by debt principal payments and certain charges associated with debt financing activity during each year. • Other net periodic benefit income (costs) totaled income of $5 million and $15 million during 2019 and 2018, respectively, and costs of $6 million during 2017. • Net loss on acquisitions and divestitures totaled $2 million, $4 million and $10 million during 2019, 2018 and 2017, respectively. • Operating income amounted to income of $166 million, $102 million and $49 million in 2019, 2018 and 2017, respectively. For further information on the items reported above, see the discussion in the comparative Statements of Consolidated Comprehensive Income (Loss) caption review analysis. Operating income Operating income amounted to income of $166 million, $102 million and $49 million in 2019, 2018 and 2017, respectively. The current and prior years’ operating income included certain key items that were excluded to arrive at Adjusted EBITDA and are quantified in the table below in the “EBITDA and Adjusted EBITDA” section. These operating key items for the applicable periods are summarized as follows: • Restructuring, separation and other costs - Ashland periodically implements company-wide restructuring programs related to acquisitions, divestitures and other cost reduction programs in order to enhance profitability through streamlined operations and an improved overall cost structure. Ashland often incurs severance, facility and integration costs associated with these programs. See Notes C, D and F in the Notes to Consolidated Financial Statements for further information. Also included within this key item category are separation costs incurred as a result of the separation from Valvoline, which primarily related to transaction, consulting and legal fees. See Note B of the Notes to Consolidated Financial Statements for more information on the separation of Valvoline. • Accelerated depreciation – As a result of various restructuring activities at certain office facilities and manufacturing plants, Ashland recorded accelerated depreciation due to changes in the expected useful life of certain property, plant and equipment. See Note H of the Notes to Consolidated Financial Statements for more information. U.S. Securities and Exchange Commission March 26, 2020 Page 4 • Proxy costs – Ashland incurred significant consulting and other costs associated with the 2019 Annual Meeting of Stockholders and agreement with the Cruiser Group (as defined in the agreement). • Environmental reserve adjustments – Ashland is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively environmental remediation) at multiple locations. As a result of these activities, Ashland recorded non-cash adjustments during each year to its environmental liabilities and receivables related to previously divested businesses or non-operational sites. See Note O of the Notes to Consolidated Financial Statements for more information. • Asset impairments – Consistent with historical policies and U.S. GAAP provisions, Ashland recognizes assets at fair value less cost to sell which resulted in impairment charges to certain assets during 2019 and 2018. The charges during 2018 primarily related to the impairment of an office facility as a result of a company-wide restructuring program. See Note F of the Notes to Consolidated Financial Statements for more information. • Tax indemnity expense – During 2019 and 2018, Ashland recorded an adjustment to a tax indemnity receivable that was associated with the acquisition of Pharmachem. • Legal settlement/reserve – Ashland recorded adjustments related to settlements and/or reserves for certain legal matters. • Unplanned plant shutdowns – During 2019 and 2017, Ashland incurred costs related to temporary shutdowns as follows: (a) for the Specialty Ingredients Parlin facility as a result of force majeure contract issues in 2019 and (b) from a Specialty Ingredients manufacturing plant due to a hurricane in 2017. • Inventory fair value adjustment – During 2017, Ashland recorded non-cash charges related to the fair value adjustment of inventory acquired from Pharmachem at the date of acquisition. See Note C for more information on the acquisition of Pharmachem. Operating income for 2019, 2018 and 2017 included depreciation and amortization of $289 million, $277 million and $265 million, respectively (which includes accelerated depreciation of $39 million, $14 million, and $19 million, respectively, for each year). Non-operating key items affecting EBITDA During the current and prior years, there were certain key items that were not included in operating income but were excluded to arrive at Adjusted EBITDA and are quantified in the table below in the U.S. Securities and Exchange Commission March 26, 2020 Page 5 “EBITDA and Adjusted EBITDA” section. These non-operating key items for the applicable periods are summarized as follows: • Net loss on acquisitions and divestitures – Ashland recorded a loss on certain divestitures during each year and incurred certain transaction costs associated with the acquisition of Pharmachem during 2017. See Notes C and D of the Notes to Consolidated Financial Statements for more information on these acquisitions and divestitures. • Loss (gain) on pension and other postretirement plan remeasurements - Ashland recognized actuarial gains and losses for defined benefit pension and other postretirement benefit plans annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. See Note N of the Notes to Consolidated Financial Statements for more information. Statements of Consolidated Comprehensive Income (Loss) – caption review A comparative analysis of the Statements of Consolidated Comprehensive Income (Loss) by caption is provided as follows for the years ended September 30, 2019, 2018 and 2017. 2019 2018 (In millions) 2019 2018 2017 change change Sales $ 2,493 $ 2,589 $ 2,309 $ (96 ) $ 280 The following table provides a reconciliation of the change in sales between fiscal years 2019 and 2018 and between fiscal years 2018 and 2017. (In millions) 2019 change 2018 change Volume/product mix $ (58 ) $ 88 Currency exchange (45 ) 45 Acquisitions and Divestitures (including plant realignment) (11 ) 107 Pricing 18 40 Change in sales $ (96 ) $ 280 Sales for 2019 decreased $96 million, or 4%, compared to 2018. Unfavorable volume/product mix, foreign currency exchange and acquisitions and divestitures decreased sales by $58 million, $45 million and $11 million, respectively. These decreases were partially offset by product pricing which increased sales by $18 million. Sales for 2018 increased $280 million, or 12%, compared to 2017. The acquisition of Pharmachem within the Specialty Ingredients reportable segment increased sales by $140 million while the net impact of other acquisitions and divestitures decreased sales by $33 million. Improved volume, higher pricing and favorable foreign currency increased sales by $88 million, $40 million and $45 million, respectively. U.S. Securities and Exchange Commission March 26, 2020 Page 6 2019 2018 (In millions) 2019 2018 2017 change change Cost of sales $ 1,726 $ 1,726 $ 1,580 $ — $ 146 Gross profit as a percent of sales 30.8 % 33.3 % 31.6 % Fluctuations in cost of sales are driven primarily by raw material prices, volume and changes in product mix, currency exchange, acquisitions and divestitures and other certain charges incurred as a result of changes or events within the businesses or restructuring activities. The following table provides a reconciliation of the changes in cost of sales between fiscal years 2019 and 2018 and between fiscal years 2018 and 2017. (In millions) 2019 change 2018 change Volume/product mix $ (27 ) $ 54 Currency exchange (23 ) 24 Acquisitions and divestitures (including plant realignment) (11 ) 72 Accelerated depreciation 39 (13 ) Production costs 14 20 Unplanned plant shutdowns 8 (4 ) Inventory fair value adjustment — (7 ) Change in cost of sales $ — $ 146 Cost of sales for 2019 was flat compared to 2018. Accelerated depreciation, higher production costs and charges for unplanned plant shutdowns increased cost of sales by $39 million, $14 million and $8 million, respectively. Those increases were offset by declines in volume and product mix, currency exchange and the net impact of acquisitions and divestitures which decreased cost of sales by $27 million, $23 million and $11 million, respectively. Cost of sales for 2018 increased $146 million, or 9%, compared to 2017. The Pharmachem acquisition increased cost of sales by $101 million, while the net impact of other acquisitions and divestitures decreased cost of sales by $29 million. Changes in volume and product mix and higher production costs increased cost of sales by $54 million and $20 million, respectively. Unfavorable currency exchange increased cost of sales by $24 million. Charges for accelerated depreciation, unplanned plant shutdowns and inventory fair value adjustments decreased cost of sales by $13 million, $4 million and $7 million, respectively. 2019 2018 (In millions) 2019 2018 2017 change change Selling, general and administrative expense $ 539 $ 692 $ 610 $ (153 ) $ 82 As a percent of sales 21.6 % 26.7 % 26.4 % U.S. Securities and Exchange Commission March 26, 2020 Page 7 Selling, general and administrative expense for 2019 decreased $153 million compared to 2018, with expenses as a percent of sales decreasing 5.1 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to 2018 were: • $27 million and $60 million in net environmental-related expenses during 2019 and 2018, respectively (see Note O for more information); • $43 million and $83 million of key items for restructuring, separation and other costs during the current and prior year, respectively, comprised of the following: o $43 million and $56 million of severance, lease abandonment and other restructuring costs related to company-wide cost-savings initiatives during 2019 and 2018, respectively; o $10 million of costs related to the separation of Valvoline during 2018; o $8 million of accelerated depreciation related to the planned closure of an office building during 2018; and o $9 million of Pharmachem integration costs during 2018; • $16 million of asset impairment charges during 2018; • $4 million of consulting and other costs associated with the proxy contest during 2019; • Lower variable compensation of $21 million during 2019; • Favorable currency exchange of $9 million as well as achieved cost savings during 2019. Selling, general and administrative expense for 2018 increased $82 million compared to 2017, while expenses as a percent of sales increased 0.3 percentage points. Key drivers of the fluctuation in selling, general and administrative expense compared to 2017 were: • $75 million and $86 million of restructuring, separation and other costs during 2018 and 2017, respectively, comprised of the following: o $56 million of severance, lease ab