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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
______________________
FORM 10-Q
(Mark one)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024

OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ___________
Commission file number 001-37884
VALVOLINE INC.
VVV Logo 3Q'24.jpg
(Exact name of registrant as specified in its charter)
Kentucky30-0939371
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
100 Valvoline Way, Suite 100
Lexington, Kentucky 40509
(Address of principal executive offices) (Zip Code)

Telephone Number (859) 357-7777
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareVVVNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes þ     No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ☐    No þ
At August 2, 2024, there were 128,866,347 shares of the registrant’s common stock outstanding.



2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Valvoline Inc. and Consolidated Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
Three months ended
June 30		Nine months ended
June 30
(In millions, except per share amounts - unaudited) 2024202320242023
Net revenues$421.4 $376.2 $1,183.5 $1,053.5 
Cost of sales253.9 225.5 735.0 657.3 
Gross profit167.5 150.7 448.5 396.2 
Selling, general and administrative expenses77.2 65.6 224.0 194.2 
Net legacy and separation-related expenses0.1 1.6 0.2 30.8 
Other income, net(3.2)(3.0)(8.3)(5.8)
Operating income93.4 86.5 232.6 177.0 
Net pension and other postretirement plan expenses3.4 3.7 10.4 11.0 
Net interest and other financing expenses (income)24.8 (4.6)53.9 27.4 
Income before income taxes65.2 87.4 168.3 138.6 
Income tax expense17.0 22.9 42.9 14.2 
Income from continuing operations48.2 64.5 125.4 124.4 
(Loss) income from discontinued operations, net of tax(2.3)(2.9)(6.2)1,246.4 
Net income$45.9 $61.6 $119.2 $1,370.8 
Net earnings per share
Basic earnings (loss) per share
Continuing operations$0.37 $0.40 $0.96 $0.74 
Discontinued operations(0.02)(0.02)(0.05)7.35 
Basic earnings per share$0.35 $0.38 $0.91 $8.09 
Diluted earnings (loss) per share
Continuing operations$0.37 $0.40 $0.96 $0.73 
Discontinued operations(0.02)(0.02)(0.05)7.31 
Diluted earnings per share$0.35 $0.38 $0.91 $8.04 
Weighted average common shares outstanding
Basic129.4 161.5 130.3 169.5 
Diluted130.2 162.5 131.2 170.6 
Comprehensive income
Net income$45.9 $61.6 $119.2 $1,370.8 
Other comprehensive (loss) income, net of tax
Currency translation adjustments(1.2)1.0 2.9 45.5 
Amortization of pension and other postretirement plan prior service credits(0.4)(0.4)(1.3)(1.3)
Unrealized loss on cash flow hedges(1.5)(1.5)(4.8)(5.9)
Other comprehensive (loss) income(3.1)(0.9)(3.2)38.3 
Comprehensive income$42.8 $60.7 $116.0 $1,409.1 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.
3

Valvoline Inc. and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets
(In millions, except per share amounts - unaudited)June 30
2024
September 30
2023
Assets
Current assets
Cash and cash equivalents$65.7 $409.1 
Receivables, net97.5 81.3 
Inventories, net40.2 33.3 
Prepaid expenses and other current assets53.0 65.5 
Short-term investments— 347.5 
Total current assets256.4 936.7 
Noncurrent assets
Property, plant and equipment, net927.2 818.3 
Operating lease assets289.3 266.5 
Goodwill and intangibles, net693.7 680.6 
Other noncurrent assets209.0 187.8 
Total noncurrent assets2,119.2 1,953.2 
Total assets$2,375.6 $2,889.9 
Liabilities and Stockholders’ Equity
Current liabilities
Current portion of long-term debt$23.8 $23.8 
Trade and other payables107.7 118.7 
Accrued expenses and other liabilities219.9 215.9 
Current liabilities held for sale— 3.9 
Total current liabilities351.4 362.3 
Noncurrent liabilities
Long-term debt1,125.7 1,562.3 
Employee benefit obligations167.8 168.0 
Operating lease liabilities270.3 247.3 
Other noncurrent liabilities353.9 346.8 
Total noncurrent liabilities1,917.7 2,324.4 
Commitments and contingencies
Stockholders' equity
Preferred stock, no par value, 40.0 shares authorized; no shares issued and outstanding
— — 
Common stock, par value $0.01 per share, 400.0 shares authorized; 128.9 and 134.8 shares issued and outstanding at June 30, 2024 and September 30, 2023, respectively
1.3 1.3 
Paid-in capital48.9 48.0 
Retained earnings46.3 140.7 
Accumulated other comprehensive income10.0 13.2 
Stockholders' equity106.5 203.2 
Total liabilities and stockholders’ equity
$2,375.6 $2,889.9 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.



4

Valvoline Inc. and Consolidated Subsidiaries
Condensed Consolidated Statements of Cash Flows
Nine months ended
June 30
(In millions - unaudited)20242023
Cash flows from operating activities
Net income$119.2 $1,370.8 
Adjustments to reconcile net income to cash flows from operating activities:
Loss (income) from discontinued operations6.2 (1,246.4)
Loss on extinguishment of debt5.1 — 
Depreciation and amortization77.1 60.7 
Deferred income taxes— (26.6)
Stock-based compensation expense9.4 8.8 
Other, net1.6 2.1 
Change in operating assets and liabilities
Receivables(14.5)(3.5)
Inventories(8.0)(3.3)
Payables and accrued liabilities(7.6)76.4 
Other assets and liabilities(18.5)10.9 
Operating cash flows from continuing operations170.0 249.9 
Operating cash flows from discontinued operations(6.2)(298.3)
Total cash provided by (used in) operating activities163.8 (48.4)
Cash flows from investing activities
Additions to property, plant and equipment(153.0)(125.9)
Acquisitions of businesses(27.9)(27.8)
Proceeds from (purchases of) investments, net348.0 (440.4)
Other investing activities, net(5.7)(0.8)
Investing cash flows from continuing operations161.4 (594.9)
Investing cash flows from discontinued operations— 2,621.0 
Total cash provided by investing activities161.4 2,026.1 
Cash flows from financing activities
Proceeds from borrowings200.0 920.9 
Repayments on borrowings(642.8)(915.0)
Repurchases of common stock(212.2)(1,395.5)
Cash dividends paid— (21.8)
Other financing activities(17.4)(16.0)
Financing cash flows from continuing operations(672.4)(1,427.4)
Financing cash flows from discontinued operations— (108.1)
Total cash used in financing activities(672.4)(1,535.5)
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash0.1 0.6 
(Decrease) increase in cash, cash equivalents and restricted cash(347.1)442.8 
Cash, cash equivalents and restricted cash - beginning of period413.1 83.9 
Cash, cash equivalents and restricted cash - end of period$66.0 $526.7 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.
5

Valvoline Inc. and Consolidated Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
Nine months ended June 30, 2024
(In millions, except per share amounts - unaudited)Common stockPaid-in capitalRetained earnings (deficit)Accumulated other comprehensive incomeTotals
SharesAmount
Balance at September 30, 2023134.8 $1.3 $48.0 $140.7 $13.2 $203.2 
Net income— — — 31.9 — 31.9 
Stock-based compensation, net of issuances0.2 — (1.7)— — (1.7)
Repurchases of common stock(5.4)— — (172.8)— (172.8)
Other comprehensive income, net of tax— — — — 4.2 4.2 
Balance at December 31, 2023129.6 $1.3 $46.3 $(0.2)$17.4 $64.8 
Net income— — — 41.4 — 41.4 
Stock-based compensation, net of issuances0.2 — (1.0)— — (1.0)
Repurchases of common stock(1.0)— — (40.8)— (40.8)
Other comprehensive loss, net of tax— — — — (4.3)(4.3)
Balance at March 31, 2024128.8 $1.3 $45.3 $0.4 $13.1 $60.1 
Net income— — — 45.9 — 45.9 
Stock-based compensation, net of issuances0.1 — 3.6 — — 3.6 
Other comprehensive loss, net of tax— — — — (3.1)(3.1)
Balance at June 30, 2024128.9 $1.3 $48.9 $46.3 $10.0 $106.5 
6

Nine months ended June 30, 2023
(In millions, except per share amounts - unaudited)Common stockPaid-in capitalRetained earningsAccumulated other comprehensive (loss) incomeTotals
SharesAmount
Balance at September 30, 2022176.1 $1.8 $44.1 $282.0 $(21.3)$306.6 
Net income— — — 81.9 — 81.9 
Dividends paid, $0.125 per common share
— — 0.1 (21.9)— (21.8)
Stock-based compensation, net of issuances0.3 — (3.4)— — (3.4)
Repurchases of common stock(2.9)(0.1)— (87.4)— (87.5)
Other comprehensive income, net of tax— — — — 13.5 13.5 
Balance at December 31, 2022173.5 $1.7 $40.8 $254.6 $(7.8)$289.3 
Net income— — — 1,227.3 — 1,227.3 
Stock-based compensation, net of issuances0.1 — 1.8 — — 1.8 
Repurchases of common stock(4.9)— — (171.7)— (171.7)
Other comprehensive income, net of tax— — — — 25.7 25.7 
Balance at March 31, 2023168.7 $1.7 $42.6 $1,310.2 $17.9 $1,372.4 
Net income— — — 61.6 — 61.6 
Stock-based compensation, net of issuances0.1 — 2.2 — — 2.2 
Repurchases of common stock(30.1)(0.3)— (1,149.6)— (1,149.9)
Other comprehensive income, net of tax— — — — (0.9)(0.9)
Balance at June 30, 2023138.7$1.4 $44.8 $222.2 $17.0 $285.4 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.
7


8

Valvoline Inc. and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared by Valvoline Inc. (“Valvoline” or the “Company”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Securities and Exchange Commission regulations for interim financial reporting, which do not include all information and footnote disclosures normally included in annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023. Certain prior period amounts disclosed herein have been reclassified to conform to the current presentation.

Use of estimates, risks and uncertainties

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent matters. Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions.

Sale of Global Products business

On March 1, 2023, Valvoline completed the sale of its former Global Products reportable segment (“Global Products”) to Aramco Overseas Company B.V. (the “Transaction”). The operating results and cash flows associated with and directly attributed to the Global Products disposal group are reflected as discontinued operations within these condensed consolidated financial statements. Refer to Note 2 for additional information regarding the Global Products business, including income from discontinued operations. Unless otherwise noted, disclosures within these remaining Notes to Condensed Consolidated Financial Statements relate solely to the Company's continuing operations.

Recent accounting pronouncements

The following accounting guidance relevant to Valvoline was either issued or adopted in the current fiscal year or is expected to have a meaningful impact on Valvoline in future periods upon adoption.

Issued but not yet adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance that enhances reportable segment disclosures by requiring disclosure of significant reportable segment expenses and other items regularly provided to the Chief Operating Decision Maker (“CODM”) and included within measures of a segment’s profit or loss, inclusive of entities that operate in a single reportable segment. This guidance must be applied retrospectively to all prior periods presented and will become effective for Valvoline beginning with its fiscal 2025 annual financial statements and interim periods starting in fiscal 2026, with early adoption permitted. Valvoline is currently evaluating the impact this guidance will have on the Company and expects adoption will require enhanced disclosures regarding its CODM and the information used in assessing performance and allocating resources, including significant expenses.

In December 2023, the FASB issued guidance which enhances income tax disclosure requirements to include additional disaggregation within the effective tax rate reconciliation and income taxes paid. This guidance will be effective for Valvoline beginning with its fiscal 2026 annual financial statements, with early adoption permitted. The guidance must be applied prospectively, while retrospective application is permitted. The Company is currently assessing the impact of adoption, which is expected to result in enhanced income tax disclosures.
9

NOTE 2 - DISCONTINUED OPERATIONS

Sale of Global Products

Financial results

On March 1, 2023, Valvoline completed the sale of Global Products for a cash purchase price of $2.650 billion and recognized a pre-tax gain on the sale within Income from discontinued operations, net of tax, during the second quarter of fiscal 2023, coinciding with the completion of the sale. The Transaction was subject to customary closing settlements that were finalized in the third quarter of fiscal 2023 and resulted in the recognition of a pre-tax gain on sale of $1.572 billion during the fiscal year ended September 30, 2023.

The following table summarizes Income from discontinued operations within the Condensed Consolidated Statements of Comprehensive Income:
Three months ended
June 30		Nine months ended
June 30
(In millions) 2024202320242023
Net revenues$— $— $— $1,174.4 
Cost of sales— — — 924.2 
Gross profit— — — 250.2 
Selling, general and administrative expenses— — — 125.0 
Net legacy and separation-related expenses4.3 5.6 9.2 26.2 
Equity and other income, net— — — (14.2)
Operating (loss) income from discontinued operations(4.3)(5.6)(9.2)113.2 
Net pension and other postretirement plan expense— — — 0.1 
Net interest and other financing (income) expenses— (0.7)— 4.3 
Gain on sale of discontinued operations (a)
— (0.8)— (1,571.6)
(Loss) income before income taxes - discontinued operations(4.3)(4.1)(9.2)1,680.4 
Income tax (benefit) expense (b)
(2.0)(1.2)(3.0)434.0 
(Loss) income from discontinued operations, net of tax$(2.3)$(2.9)$(6.2)$1,246.4 
(a)The gain on sale recorded in the nine months ended June 30, 2023 includes the release of Accumulated other comprehensive income of $30.7 million associated with the realization of cumulative translation losses attributed to the Global Products business.
(b)During the three and nine months ended June 30, 2024 Valvoline recognized an adjustment to reduce the tax on the gain on sale of $0.9 million. The prior year periods include $0.2 million and $420.4 million of expense for the three and nine months ended June 30, 2023, respectively. The total tax expense on the gain on sale recognized to-date is $423.4 million.

Post-closing arrangements

Valvoline sources substantially all lubricant and certain ancillary products for its stores through a long-term supply agreement with Global Products. Net revenues within the results of Global Products above include product sales to the Company's continuing operations prior to the closing of the Transaction, which were considered to be effectively settled and were not eliminated. These transactions totaled $89.7 million for the nine months ended June 30, 2023.

Valvoline also entered into a Transition Services Agreement with Global Products, effective March 1, 2023, to provide and receive services including information technology (“IT”), legal, finance, and human resources support. Transition services have lapsed periodically as business process transitions have occurred since the sale, and remaining services are generally expected to conclude within 18 months post-closing with limited IT transition services that may extend through early calendar year 2025. The income and costs associated with these services were not material during the three and nine months ended June 30, 2024.
10

NOTE 3 - FAIR VALUE MEASUREMENTS

Recurring fair value measurements

The following tables set forth the Company’s financial assets and liabilities by level within the fair value hierarchy for those measured at fair value on a recurring basis:

As of June 30, 2024
(In millions)TotalLevel 1Level 2Level 3
NAV (a)
Cash and cash equivalents
Money market funds$0.3 $0.3 $— $— $— 
Time deposits2.4 — 2.4 — — 
Prepaid expenses and other current assets
Interest rate swap agreements1.2 — 1.2 — — 
Other noncurrent assets
Non-qualified trust funds1.1 — — — 1.1 
Deferred compensation investments21.9 21.9 — — — 
Total assets at fair value$26.9 $22.2 $3.6 $— $1.1 
Other noncurrent liabilities
Deferred compensation obligations$21.1 $— $— $— $21.1 
Total liabilities at fair value$21.1 $— $— $— $21.1 
As of September 30, 2023
(In millions)TotalLevel 1Level 2Level 3
NAV (a)
Cash and cash equivalents
Money market funds$0.6 $0.6 $— $— $— 
Time deposits277.3 — 277.3 — — 
Prepaid expenses and other current assets
Currency derivatives (b)
0.1 — 0.1 — — 
Interest rate swap agreements7.8 — 7.8 — — 
Other noncurrent assets
Non-qualified trust funds2.1 — — — 2.1 
Deferred compensation investments19.0 19.0 — — — 
Total assets at fair value$306.9 $19.6 $285.2 $— $2.1 
Accrued expenses and other liabilities
Currency derivatives (b)
$0.1 $— $0.1 $— $— 
Other noncurrent liabilities
Deferred compensation obligations20.8 — — — 20.8 
Total liabilities at fair value$20.9 $— $0.1 $— $20.8 
(a)Funds measured at fair value using the net asset value ("NAV") per share practical expedient have not been classified in the fair value hierarchy.
(b)The Company had outstanding contracts with notional values of $29.7 million as of September 30, 2023.

Fair value disclosures

The Company’s held-to-maturity U.S. treasury securities and long-term debt are reported in the Condensed Consolidated Balance Sheets at carrying value, rather than fair value, and are therefore excluded from the disclosure above of financial assets and liabilities measured at fair value within the condensed consolidated financial statements on a recurring basis. The following disclosures summarize the fair value of these assets and liabilities at each relevant balance sheet date.

11

U.S. treasury securities

The fair values of the Company’s U.S. treasury securities summarized below were determined utilizing quoted prices for identical securities from less active markets, which are considered Level 2 inputs within the fair value hierarchy. The U.S. treasury securities were fully matured as of March 31, 2024.

September 30, 2023
(In millions)Amortized costGross unrealized lossesFair value
Cash and cash equivalents
U.S. treasury securities (a)
$2.2 $— $2.2 
Short-term investments
U.S. treasury securities (b)
$347.5 $(0.5)$347.0 
(a)U.S. treasury securities with original maturity dates of three months or less.
(b)U.S. treasury securities with original maturities greater than three months and less than 12 months.

Debt

The fair values of the Company's outstanding fixed rate senior notes shown below are based on recent trading values, which are considered Level 2 inputs within the fair value hierarchy.

June 30, 2024September 30, 2023
(In millions)Fair value
Carrying value (a)
Unamortized
discounts and
issuance costs		Fair value
Carrying value (a)
Unamortized
discounts and
issuance costs
2030 Notes (b)
$— $— $— $589.8 $594.5 $(5.5)
2031 Notes461.5 535.0 (4.7)416.6 529.9 (5.2)
Total$461.5 $535.0 $(4.7)$1,006.4 $1,124.4 $(10.7)
(a)Carrying values shown are net of unamortized discounts and debt issuance costs.
(b)The Company completed a tender offer to purchase the outstanding 2030 Notes in April 2024 as further described in Note 5.

Refer to Note 5 for details of these senior notes as well as Valvoline's other debt instruments that have variable interest rates with carrying amounts that approximate fair value.

NOTE 4 - BUSINESS COMBINATIONS

The Company acquired 21 service center stores in single and multi-store transactions for an aggregate purchase price of $28.2 million during the nine months ended June 30, 2024. These acquisitions expand Valvoline's retail presence in key North American markets, increase the number of company-operated service center stores, and contribute to growing the retail footprint to 1,961 system-wide service center stores.

12

The Company’s acquisitions are accounted for as business combinations. A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the nine months ended June 30:

(In millions)20242023
Inventories$— $0.4 
Property, plant and equipment (a)
4.8 5.9 
Operating lease assets8.6 6.1 
Goodwill (b)
26.3 21.1 
Intangible assets (c)
Reacquired franchise rights (d)
— 4.0 
Other0.2 0.2 
Other current liabilities (a)
(0.1)(0.6)
Operating lease liabilities(8.6)(5.7)
Other noncurrent liabilities (a)
(3.0)(3.6)
Total net assets acquired$28.2 $27.8 
Non-cash consideration
(0.3)— 
Total cash consideration transferred
$27.9 $27.8 
(a)Includes finance lease assets in property, plant and equipment and finance lease liabilities in other current and noncurrent liabilities. During the nine months ended June 30, 2024, finance lease assets acquired were $3.1 million and finance lease liabilities of $0.1 million and $3.0 million in other current and noncurrent liabilities, respectively. During the nine months ended June 30, 2023, finance lease assets acquired were $3.8 million and finance lease liabilities of $0.2 million and $3.6 million in other current and noncurrent liabilities.
(b)Goodwill is generally expected to be deductible for income tax purposes and is primarily attributed to the operational synergies and potential growth expected to result in economic benefits in the respective markets of the acquisitions.
(c)Intangible assets acquired during the nine months ended June 30, 2024 and 2023 have weighted average amortization periods of five and nine years, respectively.
(d)Prior to the acquisition of former franchise service center stores, the Company licensed the right to operate franchised service centers, including the use of Valvoline's trademarks and trade name. In connection with these acquisitions, Valvoline reacquired those rights and recognized separate definite-lived reacquired franchise rights intangible assets, which are being amortized on a straight-line basis over the weighted average remaining term of approximately nine years for the rights reacquired in fiscal 2023. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market. There have been no franchise rights reacquired during fiscal 2024.

The fair values above are preliminary for up to one year from the date of acquisition as they may be subject to measurement period adjustments if new information is obtained about facts and circumstances that existed as of the acquisition date. The Company does not currently expect any material changes to the preliminary purchase price allocations for acquisitions completed during the last twelve months.

13

NOTE 5 - DEBT

The following table summarizes Valvoline’s total debt as of:

(In millions)June 30
2024
September 30
2023
2031 Notes$535.0 $535.0 
2030 Notes— 600.0 
Term Loan445.3 463.1 
Revolver (a)
175.0 — 
Debt issuance costs and discounts(5.8)(12.0)
Total debt1,149.5 1,586.1 
Current portion of long-term debt23.8 23.8 
Long-term debt$1,125.7 $1,562.3 
 
(a)As of June 30, 2024, the total borrowing capacity remaining under the $475.0 million revolving credit facility was $296.8 million due to a reduction of $175.0 million from borrowings and $3.2 million for letters of credit outstanding.

2030 Notes

On April 16, 2024, Valvoline completed a tender offer (the “Debt Tender Offer”) to purchase its outstanding 4.250% senior unsecured notes due 2030 with an aggregate principal amount of $600.0 million (the “2030 Notes”). The Debt Tender Offer was made to comply with the requirements of the asset sale covenant under the indenture governing the 2030 Notes in connection with the sale of Global Products and Valvoline’s use of the related net proceeds. The Company used cash and cash equivalents on hand, in addition to borrowing $175.0 million on the Revolver to facilitate the $598.3 million, or 99.7% of the outstanding principal amount, purchase of the 2030 Notes at par, plus accrued and unpaid interest, and cancelled the 2030 Notes accepted for purchase. The Company elected to redeem the remaining balance outstanding of $1.7 million on April 29, 2024 pursuant to the terms and conditions of the indenture governing the 2030 Notes. During the three and nine months ended June 30, 2024, Valvoline recognized a loss on extinguishment of $5.1 million on the 2030 Notes due to the write-off of unamortized debt issuance costs and discounts.

As of June 30, 2024, Valvoline was in compliance with all covenants under its long-term borrowings.

NOTE 6 – INCOME TAXES

Income tax provisions for interim quarterly periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual discrete items related specifically to interim periods. The following summarizes income tax expense and the effective tax rate in each interim period:

Three months ended
June 30		Nine months ended
June 30
(In millions)2024202320242023
Income tax expense$17.0 $22.9 $42.9 $14.2 
Effective tax rate percentage26.1 %26.2 %25.5 %10.2 %

The decrease in income tax expense for the three months ended June 30, 2024 is primarily attributed to lower pre-tax income in the current year. The increases in income tax expense and the effective tax rate for the nine months ended June 30, 2024 were driven by more normalized activity in the current year period as compared to the prior year period which included the recognition of a $26.5 million income tax benefit for the release of a valuation allowance due to the change in expectations regarding the utilization of certain legacy tax attributes as a result of the terms of the amended tax matters agreement with Valvoline’s former parent company. This amendment also resulted in higher Net legacy and separation-related expenses of $24.4 million for the related increased indemnity obligation for the nine months ended June 30, 2023.
14


NOTE 7 – EMPLOYEE BENEFIT PLANS

The following table summarizes the components of pension and other postretirement plan expense:

Pension benefitsOther postretirement benefits
(In millions)2024202320242023
Three months ended June 30
Interest cost$20.7 $20.6 $0.3 $0.4 
Expected return on plan assets(17.2)(16.8)— — 
Amortization of prior service credits0.1 0.1 (0.5)(0.6)
Net periodic benefit costs (income)$3.6 $3.9 $(0.2)$(0.2)
Nine months ended June 30
Interest cost$62.5 $61.8 $0.9 $1.2 
Expected return on plan assets(51.5)(50.4)— — 
Amortization of prior service credit0.1 0.1 (1.6)(1.7)
Net periodic benefit costs (income)$11.1 $11.5 $(0.7)$(0.5)

NOTE 8 – LITIGATION, CLAIMS AND CONTINGENCIES

From time to time, Valvoline is party to lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company establishes liabilities for the outcome of such matters where losses are determined to be probable and reasonably estimable. Where appropriate, the Company has recorded liabilities with respect to these matters, which were not material for the periods presented as reflected in the condensed consolidated financial statements herein. There are certain claims and legal proceedings pending where loss is not determined to be probable or reasonably estimable, and therefore, accruals have not been made. In addition, Valvoline discloses matters when management believes a material loss is at least reasonably possible.

In all instances, management has assessed each matter based on current information available and made a judgment concerning its potential outcome, giving due consideration to the amount and nature of the claim and the probability of success. The Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable.

Although the ultimate resolution of these matters cannot be predicted with certainty and there can be no assurances that the actual amounts required to satisfy liabilities from these matters will not exceed the amounts reflected in the condensed consolidated financial statements, based on information available at this time, it is the opinion of management that such pending claims or proceedings will not have a material adverse effect on its condensed consolidated financial statements.

15

NOTE 9 - EARNINGS PER SHARE

The following table summarizes basic and diluted earnings per share:

Three months ended
June 30		Nine months ended
June 30
(In millions, except per share amounts)2024202320242023
Numerator
Income from continuing operations$48.2 $64.5 $125.4 $124.4 
(Loss) income from discontinued operations, net of tax(2.3)(2.9)(6.2)1,246.4 
Net income$45.9 $61.6 $119.2 $1,370.8 
Denominator
Weighted average common shares outstanding129.4 161.5 130.3 169.5 
Effect of potentially dilutive securities (a)
0.8 1.0 0.9 1.1 
Weighted average diluted shares outstanding130.2 162.5 131.2 170.6 
 
Basic earnings (loss) per share
Continuing operations$0.37 $0.40 $0.96 $0.74 
Discontinued operations(0.02)(0.02)(0.05)7.35 
Basic earnings per share$0.35 $0.38 $0.91 $8.09 
Diluted earnings (loss) per share
Continuing operations$0.37 $0.40 $0.96 $0.73 
Discontinued operations(0.02)(0.02)(0.05)7.31 
Diluted earnings per share$0.35 $0.38 $0.91 $8.04 
(a)There were 0.1 million outstanding stock appreciation rights not included in the computation of diluted earnings per share in both the three months ended June 30, 2024 and 2023, and 0.1 million and 0.2 million in the nine months ended June 30, 2024 and 2023, respectively, because the effect would have been antidilutive.

NOTE 10 - SUPPLEMENTAL FINANCIAL INFORMATION

Cash, cash equivalents and restricted cash

The following provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statements of Cash Flows to the Condensed Consolidated Balance Sheets:

(In millions)June 30
2024		September 30
2023		June 30
2023
Cash and cash equivalents - continuing operations$65.7 $409.1 $526.7 
Cash and cash equivalents - held for sale (a)
— 4.0 — 
Restricted cash - continuing operations (b)
0.3 — — 
Total cash, cash equivalents and restricted cash$66.0 $413.1 $526.7 
(a)Former Global Products business whose operations were suspended during fiscal 2022, classified as held for sale and impaired as of September 30, 2023, and subsequently sold during the first quarter of fiscal 2024.
(b)Included in Prepaid expenses and other current assets within the Condensed Consolidated Balance Sheets.

Accounts and other receivables

The following summarizes Valvoline’s accounts and other receivables in the Condensed Consolidated Balance Sheets as of:

(In millions)June 30
2024
September 30
2023
Current
Trade$85.4 $64.0 
Notes receivable from franchisees
3.7 1.6 
Other8.9 16.3 
Receivables, gross98.0 81.9 
Allowance for credit losses(0.5)(0.6)
Receivables, net$97.5 $81.3 
Non-current (a)
Notes receivable$2.4 $2.3 
Other7.1 7.5 
Noncurrent notes receivable, gross9.5 9.8 
Allowance for losses(2.5)(2.4)
Noncurrent notes receivable, net$7.0 $7.4 
(a)Included in Other noncurrent assets within the Condensed Consolidated Balance Sheets.

Revenue recognition

The following disaggregates the Company’s net revenues by timing of revenue recognized:

Three months ended
June 30		Nine months ended
June 30
(In millions)2024202320242023
Net revenues transferred at a point in time$401.7 $358.3 $1,127.7 $1,003.4 
Franchised revenues transferred over time19.7 17.9 55.8 50.1 
Net revenues$421.4 $376.2 $1,183.5 $1,053.5 

The following table summarizes net revenues by category:

Three months ended
June 30		Nine months ended
June 30
(In millions)2024202320242023
Oil changes and related fees$307.9 $280.7 $868.6 $782.8 
Non-oil changes and related fees93.6 77.2 258.6 219.9 
Franchise fees and other (a)
19.9 18.3 56.3 50.8 
Total$421.4 $376.2 $1,183.5 $1,053.5 
(a)Includes $0.2 million of net revenues associated with suspended operations for the nine months ended June 30, 2023.

16

NOTE 11 – SUBSEQUENT EVENTS

Disposition

During July 2024, the Company entered into an agreement and completed the sale of 17 company-owned service center stores to a franchisee. The Company will derecognize the related net assets and expects to recognize a gain on sale in the fourth quarter of fiscal 2024 to reflect the completion of this transaction.

Acquisitions

From July 1, 2024 through August 7, 2024, Valvoline acquired 12 service center stores for an aggregate purchase price of $18.7 million. These transactions included five former franchise service center stores in Texas acquired from TL2 Services, LLC on July 31, 2024 and seven service center stores in a multi-store transaction. These acquisitions provide an opportunity to expand Valvoline’s store locations in key markets and contribute to company-owned service center store growth.

Share repurchase authorization

During July 2024, Valvoline’s Board of Directors (the “Board”) approved a share repurchase authorization of $400.0 million, which has no expiration date (the “2024 Share Repurchase Authorization”). The timing and amount of any repurchases of common stock will be solely at the discretion of the Company and is subject to general business and market conditions, as well as other factors. The Board approved the 2024 Share Repurchase Authorization as part of the Company’s broader capital allocation framework to deliver value to shareholders.



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FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, executing on its growth strategy to create shareholder value by driving the full potential in the Company’s core business, accelerating network growth and innovating to meet the needs of customers and the evolving car parc; realizing the benefits from the sale of Global Products; and future opportunities for the remaining stand-alone retail business; and any other statements regarding Valvoline's future operations, financial or operating results, capital allocation, debt leverage ratio, anticipated business levels, dividend policy, anticipated growth, market opportunities, strategies, competition, and other expectations and targets for future periods. Valvoline has identified some of these forward-looking statements with words such as “anticipates,” “believes,” “expects,” “estimates,” “is likely,” “predicts,” “projects,” “forecasts,” “may,” “will,” “should,” and “intends,” and the negative of these words or other comparable terminology. These forward-looking statements are based on Valvoline’s current expectations, estimates, projections, and assumptions as of the date such statements are made and are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures about Market Risk” in this Quarterly Report on Form 10-Q and Valvoline’s most recently filed Annual Report on Form 10-K. Valvoline assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, unless required by law.


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

The following discussion and analysis should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as well as the condensed consolidated financial statements and the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q. Unless otherwise noted, disclosures within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations relate solely to the Company's continuing operations.

BUSINESS OVERVIEW AND PURPOSE

As the quick, easy, trusted leader in automotive preventive maintenance. Valvoline Inc. is creating shareholder value by driving the full potential in its core business, accelerating network growth and innovating to meet the needs of customers and the evolving car parc. With average customer ratings that indicate high levels of service satisfaction, Valvoline and the Company’s franchise partners keep customers moving with 15-minute stay-in-your-car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended maintenance services. The Company operates and franchises approximately 2,000 service center locations through its Valvoline Instant Oil ChangeSM and Great Canadian Oil Change retail locations and supports nearly 300 locations through its Express CareTM platform.



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BUSINESS STRATEGY

As a pure play automotive retail services provider and the trusted leader in preventive automotive maintenance, Valvoline is well positioned to create long-term shareholder value through executing the Company’s strategic initiatives, which include:

•Driving the full potential of the core business through increasing market share and non-oil change revenue growth in existing stores by building on Valvoline’s strong foundation in marketing, technology, and data;

•Aggressively growing the retail footprint with company-operated store growth and an increased emphasis on franchisee store growth; and

•Developing capabilities to capture new customers through services expansion focused on fleet manager needs and needs of the evolving car parc.

THIRD FISCAL QUARTER 2024 OVERVIEW

The following were the significant events for the third fiscal quarter of 2024, each of which is discussed more fully in this Quarterly Report on Form 10-Q:

•Valvoline’s net revenues grew 12% over the prior year period driven by system-wide same-store sales ("SSS") growth of 6.5% and the addition of 157 net new stores to the system from the prior year.

•Income from continuing operations declined 25% to $48.2 million for the three months ended June 30, 2024 compared to the prior year period. This reduction was primarily due to higher interest expense as prior year income earned on invested net proceeds from the sale of Global Products did not recur, in addition to increased expense related to the repurchase of the 2030 Notes in the current year. This increased interest expense drove lower pre-tax earnings and a lower income tax provision that coupled with improved operating income from gross profit expansion which was moderated by investments in selling, general and administrative expenses to partially offset the impacts of higher interest expense.

•Diluted earnings per share from continuing operations decreased 8% for the three months ended June 30, 2024 compared to the prior year period driven by unfavorable changes in interest expense, which were partially offset by benefits from the lower current year share count and increased operating income.

•Adjusted EBITDA increased 12% over the prior year period due to top-line growth driven by higher ticket from non-oil change service penetration and increased premiumization as well as modest benefits from cost management. These benefits were partially offset by growth investments in selling, general and administrative expenses.

Use of Non-GAAP Measures

To aid in the understanding of Valvoline’s ongoing business performance, certain items within this document are presented on an adjusted, non-GAAP basis. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, or more meaningful than, the financial statements presented in accordance with U.S. GAAP. The financial results presented in accordance with U.S. GAAP and reconciliations of non-GAAP measures included within this Quarterly Report on Form 10-Q should be carefully evaluated.

The following are the non-GAAP measures management has included and how management defines them:

•EBITDA - net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization;

•Adjusted EBITDA - EBITDA adjusted for the impacts of certain unusual, infrequent or non-operational activity not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods ("key items," as further described below);

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•Adjusted EBITDA margin - adjusted EBITDA divided by adjusted net revenues;

•Adjusted net revenues - reported net revenues adjusted for key items;

•Free cash flow - cash flows from operating activities less capital expenditures and certain other adjustments as applicable; and

•Discretionary free cash flow - cash flows from operating activities less maintenance capital expenditures and certain other adjustments as applicable.

Non-GAAP measures include adjustments from results based on U.S. GAAP that management believes enables comparison of certain financial trends and results between periods and provides a useful supplemental presentation of Valvoline's operating performance that allows for transparency with respect to key metrics used by management in operating the business and measuring performance. The manner used to compute non-GAAP information used by management may differ from the methods used by other companies, and may not be comparable. For a reconciliation of the most comparable U.S. GAAP measures to the non-GAAP measures, refer to the “Results of Operations” and “Financial Position, Liquidity and Capital Resources” sections below.

Management believes EBITDA measures provide a meaningful supplemental presentation of Valvoline’s operating performance between periods on a comparable basis due to the depreciable assets associated with the nature of the Company’s operations as well as income tax and interest costs related to Valvoline’s tax and capital structures, respectively. Adjusted EBITDA measures enable comparison of financial trends and results between periods where certain items may not be reflective of the Company’s underlying and ongoing operations performance or vary independent of business performance.

Management uses free cash flow and discretionary free cash flow as additional non-GAAP metrics of cash flow generation. By including capital expenditures and certain other adjustments, as applicable, management is able to provide an indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Free cash flow includes the impact of capital expenditures, providing a supplemental view of cash generation. Discretionary free cash flow includes maintenance capital expenditures, which are routine uses of cash that are necessary to maintain the Company's operations and provides a supplemental view of cash flow generation to maintain operations before discretionary investments in growth. Free cash flow and discretionary free cash flow have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash flows, such as mandatory debt repayments.

The non-GAAP measures used by management exclude key items. Key items are often related to legacy matters or market-driven events considered by management to not be reflective of the ongoing operating performance. Key items may consist of adjustments related to: legacy businesses, including the separation from Valvoline's former parent company, the former Global Products reportable segment, and associated impacts of related activity and indemnities; non-service pension and other postretirement plan activity; restructuring-related matters, including organizational restructuring plans, the separation of Valvoline’s businesses, significant acquisitions or divestitures, debt extinguishment and modification, and tax reform legislation; in addition to other matters that management considers non-operational, infrequent or unusual in nature.

Details with respect to the description and composition of key items recognized during the respective periods presented herein are set forth below in the “EBITDA and Adjusted EBITDA” section of “Results of Operations” that follows.

Key Business Measures

Valvoline tracks its operating performance and manages its business using certain key measures, including system-wide, company-operated and franchised store counts and SSS; and system-wide store sales. Management believes these measures are useful to evaluating and understanding Valvoline's operating performance and should be considered as supplements to, not substitutes for, Valvoline's net revenues and operating income, as determined in accordance with U.S. GAAP.

Net revenues are influenced by the number of service center stores and the business performance of those stores. Stores are considered open upon acquisition or opening for business. Temporary store closings remain in the
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respective store counts with only permanent store closures reflected in the activity and end of period store counts. SSS is defined as net revenues by U.S. Valvoline Instant Oil Change (“VIOC”) stores (company-operated, franchised and the combination of these for system-wide SSS), with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation as this period is generally required for new store sales levels to begin to normalize.

Net revenues are limited to sales at company-operated stores, in addition to royalties and other fees from independent franchised and Express Care stores. Although Valvoline does not recognize store-level sales from franchised stores as net revenues in its Statements of Condensed Consolidated Income, management believes system-wide and franchised SSS comparisons, store counts, and total system-wide store sales are useful to assess market position relative to competitors and overall store and operating performance.

RESULTS OF OPERATIONS

The following summarizes the results of the Company’s continuing operations for the periods ended June 30:

Three months ended June 30Nine months ended June 30
2024202320242023
(In millions)Amount% of Net revenuesAmount% of Net revenuesAmount% of Net revenuesAmount% of Net revenues
Net revenues$421.4 100.0%$376.2 100.0%$1,183.5 100.0%$1,053.5 100.0%
Gross profit$167.5 39.7%$150.7 40.1%$448.5 37.9%$396.2 37.6%
Net operating expenses$74.1 17.6%$64.2 17.1%$215.9 18.2%$219.2 20.8%
Operating income$93.4 22.2%$86.5 23.0%$232.6 19.7%$177.0 16.8%
Income from continuing operations$48.2 11.4%$64.5 17.1%$125.4 10.6%$124.4 11.8%
EBITDA (a)
$116.9 27.7%$104.4 27.8%$299.3 25.3%$226.7 21.5%
Adjusted EBITDA (a)
$123.2 29.2%$110.4 29.3%$318.5 26.9%$270.8 25.7%
(a)Refer to the “Use of Non-GAAP Measures” and Continuing operations EBITDA and Adjusted EBITDA for management’s definitions of the metrics presented above and reconciliation to the corresponding GAAP measures, where applicable.

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Three months ended
June 30		Nine months ended
June 30
2024202320242023
System-wide store sales - in millions (a)
$808.5 $719.6 $2,277.5 $2,023.5 
Year-over-year growth (a)
12.4 %17.9 %12.6 %17.8 %
Same-store sales growth (b)
Company-operated6.7 %12.1 %6.8 %13.0 %
Franchised (a)
6.4 %12.8 %7.4 %12.3 %
System-wide (a)
6.5 %12.5 %7.1 %12.6 %
Number of stores at end of period
Third Quarter
2024		Second Quarter
2024		First Quarter
2024		Fourth Quarter
2023		Third Quarter
2023
Company-operated937 919 895 876 854 
Franchised (a)
1,024 1,009 995 976 950 
Total system-wide stores (a)
1,961 1,928 1,890 1,852 1,804 
(a)Measures include Valvoline franchisees, which are independent legal entities. Valvoline does not consolidate the results of operations of its franchisees.
(b)
Valvoline determines SSS growth as sales by U.S. VIOC stores (company-operated, franchised, and the combination of these for system-wide SSS), with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation.

Net revenues

Net revenues increased $45.2 million, or 12.0% for the three months ended June 30, 2024 compared to the prior year period. System-wide SSS grew 6.5% over the prior year primarily from increased ticket as a result of continued non-oil change service penetration, increased premiumization, and net pricing benefits, while transaction growth drove modest improvements. Additionally, net revenue growth also benefited from the addition of 157 net new stores over the prior year. The following reconciles the year-over-year change in net revenues:

910

Net revenues increased $130.0 million, or 12.3% for the nine months ended June 30, 2024 compared to the prior year period largely due to volume, mix, and pricing improvements. System-wide SSS grew 7.1% compared to the prior year with ticket contributing the majority of the benefits from non-oil change service penetration, pricing, and
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premiumization, while transaction growth drove the remaining improvements. The following reconciles the year-over-year change in year-to-date net revenues:

1402

Gross profit

Gross profit increased $16.8 million, or 11.1%, for the three months ended June 30, 2024 compared to the prior year period. Profitability rose largely due to mix improvements from non-oil change service penetration and premiumization, in addition to volume expansion from store growth. Modest cost efficiencies from materials also increased profitability and were partially offset by higher store operating expenses, including higher depreciation. The following reconciles the year-over-year change in gross profit:

1932

Gross profit margin declined modestly in the three months ended June 30, 2024 compared to the prior year period primarily due to increased store operating expenses, including higher depreciation from unit growth, as well as more consistent franchise incentives throughout fiscal 2024 where the prior year period benefited from timing of these offerings. This margin deleverage was partially offset by benefits from service mix and cost efficiencies in materials.

Gross profit improved $52.3 million, or 13.2%, for the nine months ended June 30, 2024 compared to the prior year period driven by increased ticket from continued non-oil change service penetration, strategic pricing actions, and premiumization. Additionally, increased transactions from store and customer base growth, as well as improved labor management, also provided benefits. The following reconciles the year-over-year change in year-to-date gross profit:

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2559

Gross profit margin improved modestly in the nine months ended June 30, 2024 compared to the prior year and was primarily due to labor efficiency from effective management which resulted in best-in-class service delivery that also improved overall service mix. These benefits were partially offset by increased store operating expenses, including depreciation.

Net operating expenses

Details of the components of net operating expenses are summarized below for the periods ended June 30:

Three months ended June 30Nine months ended June 30
2024202320242023
(In millions)Amount% of Net revenuesAmount% of Net revenues