2 0 2 4
A N N U A L R E P O R T
Forward-Looking Statements:
Certain statements in this Annual Report, other than statements of historical fact, including estimates, projections and statements related to
our business plans and operating results, 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 the 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. We have 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 our 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. Additional information regarding these risks and uncertainties are
described in our Form 10-K, which has been included in this Annual Report and is available on our website at http://investors.valvoine.com/
sec-filings and on the SEC’s website at http://www.sec.gov. We assume 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.
Non-GAAP Measures:
This Annual Report includes certain financial measures that do not conform to generally accepted accounting principles in the U.S. (U.S.
GAAP), and should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Management believes
including this non-GAAP information assists investors in understanding the ongoing operating performance of Valvoline’s business by
presenting comparable financial results between periods. The non-GAAP information provided may not be consistent with the methodologies
used by other companies. Information regarding Valvoline’s definitions, calculations and reconciliation of non-GAAP measures is included in
the fiscal 2024 form 10-K, which has been enclosed with this Annual Report.
More than 28 million times we delivered on our promise of quick, easy, trusted services in Fiscal Year 2024. Every time a customer enters
one of our store bays, we’re doing more than servicing a vehicle -- we’re helping people across the United States and Canada drive safely
wherever life’s journeys take them.
This drove strong results in FY24, demonstrating once again the profitable growth of Valvoline Inc. We generated $1.6 billion in revenue
and surpassed $3 billion in system-wide store sales, both increasing 12% over the prior year. We also achieved our 18th consecutive year
of system-wide same store sales growth, with system-wide same store sales increasing 6.7%. Income from continuing operations was
$215 million, with adjusted EBITDA of $443 million up 17%.
We continued to invest in our strategic priorities in FY24: drive full potential of the core business, accelerate network growth, and target
customer and service expansion. Here are a few highlights of the progress we made in each of these areas:
How did we accomplish these results? Simple – it all starts with our people. Our more than 11,000 team members and the team
members of our franchise partners are committed to delivering our distinct V-Class service every day. I am grateful for their drive,
tenacity, and commitment to support our customers, our communities, and each other. Their ‘happy to help’ attitude played an
important role in delivering strong results.
Together, we continue to pursue more improvements to our customer experience, identify more efficient ways to deliver our services,
welcome more franchise partners, and expand into more communities to serve more customers. With the strength of our 150+ year-old
brand and the team we have assembled, we are focused on growing and evolving our business which will strengthen and extend our
leadership position for generations to come.
1. DRIVE FULL POTENTIAL IN THE CORE BUSINESS.
We took a fresh look at our SuperPro® process. In partnership with our franchisees, we implemented process changes to deliver a faster
and more convenient service experience to our customers. And we continue to attract new customers to both our new and mature stores,
with the majority of new customers coming from dealerships and other tire and automotive service providers. Further, by managing our
costs, we improved our adjusted EBITDA margins by 100 basis points to 27.3%.
2. ACCELERATE NETWORK GROWTH.
We accomplished an important milestone in FY24, with a store in Centerville, Ohio, becoming the 2,000th store in our network. This was
just one of 158 net new stores added system-wide, bringing our total system-wide store locations to 2,010 at the end of the fiscal year. We
welcomed several new franchise partners to the network this past year and continue to invest in the partnership with our entire franchise
network to grow our market share and achieve our goal of 3,500+ locations.
3. TARGET CUSTOMER & SERVICE EXPANSION.
More customers received non-oil change services from us in FY24, as our well-trained technicians helped customers address the
preventive maintenance needs of their vehicles. It was also a strong year for our fleet business. Over the past three years, our system-wide
fleet transactions increased at a compounded annual growth rate of 14%.
DEAR VALVOLINE INC. STAKEHOLDERS,
Sincerely,
Lori Flees
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 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.
Kentucky
30-0939371
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
100 Valvoline Way, Suite 100
Lexington, Kentucky 40509
Telephone Number (859) 357-7777
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, par value $0.01 per share
VVV
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
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 ☑ No ☐
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 ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statement. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrants’ executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of voting common stock held by non-affiliates at March 31, 2024 was approximately $5.7 billion. At November 19, 2024,
there were 128,373,010 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2025 Annual Meeting of Shareholders (the “Proxy Statement”) are incorporated by reference
into Part III of this Annual Report on Form 10-K and will be filed within 120 days of the registrant’s fiscal year end.
TABLE OF CONTENTS
Page
PART I
Item 1.
Business
4
Item 1A.
Risk Factors
15
Item 1B.
Unresolved Staff Comments
26
Item 1C.
Cybersecurity
26
Item 2.
Properties
28
Item 3.
Legal Proceedings
28
Item 4.
Mine Safety Disclosures
28
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
29
Item 6.
Reserved
30
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
31
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
49
Item 8.
Financial Statements and Supplementary Data
50
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
92
Item 9A.
Controls and Procedures
92
Item 9B.
Other Information
97
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
97
Item 11.
Executive Compensation
97
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
97
Item 13.
Certain Relationships and Related Transactions and Director Independence
97
Item 14.
Principal Accountant Fees and Services
97
PART IV
Item 15.
Exhibits and Financial Statement Schedules
98
Item 16.
Form 10-K Summary
102
2
Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K, 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 the 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” in Item 1A of Part I of this Annual Report on Form 10-K,
“Management’s Discussion and Analysis of Financial Condition and Results of Operation” in Item 7 of Part II of this
Annual Report on Form 10-K and “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of Part II
of this 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.
3
PART I
ITEM 1. BUSINESS
Overview
Valvoline Inc. is a leader in automotive preventive maintenance delivering convenient and trusted services in its
retail stores throughout the United States (“U.S.”) and Canada. The terms “Valvoline,” the “Company,” “we,” “us,”
“management,” and “our” as used herein refer to Valvoline Inc., its predecessors and its consolidated subsidiaries,
except where the context indicates otherwise.
As the quick, easy, trusted leader in automotive preventive maintenance, Valvoline is creating shareholder value by
driving the full potential of 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 approximately 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 more than 2,000 service center locations through its
Valvoline Instant Oil ChangeSM (“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and
supports nearly 270 locations through its Express CareTM platform. For over 15 decades, Valvoline has consistently
adapted to address changing technologies and customer needs and is well positioned to service evolving vehicle
maintenance needs with its growing network of stores.
Company background
Established in 1866, Valvoline has a history of innovation spanning nearly 160 years when Dr. John Ellis founded
Valvoline by discovering the lubricating properties of distilled crude oil and formulated the world's first petroleum-
based lubricant. Valvoline was trademarked seven years later in 1873, making it the first trademarked motor oil
brand in the U.S. Soon thereafter, as vehicle ownership rapidly grew, Valvoline became widely known in the
automotive world through racing victories and as a recommended oil for the iconic Ford Model T, while expanding
its product offerings and global reach through its innovative automotive maintenance and heavy-duty engine
applications.
Valvoline was acquired by Ashland (currently doing business as Ashland Inc., and together with its predecessors
and consolidated subsidiaries, referred to herein as “Ashland”), in 1950 and continued accelerating through the
development of all-climate and racing motor oils, in addition to supporting notable automobile racing victories by
some of the biggest legends of the sport. By the late 1980s, Valvoline began operating and franchising VIOC
service center stores, expanding into consumer-focused automotive preventive maintenance and quick lube
services. Valvoline maintained its focus on innovating for evolving vehicle technologies and the needs of customers
through the late 1990s and early 2000s by introducing synthetic and high-mileage motor oils.
Valvoline was incorporated in May 2016 as a subsidiary of Ashland, followed by the transfer of the Valvoline
business and certain other legacy Ashland assets and liabilities from Ashland to Valvoline. Valvoline completed its
initial public offering of common stock in September 2016, and Ashland distributed its remaining ownership interest
in Valvoline in May 2017 (the “Distribution”). Today, Valvoline operates as an independent corporation that trades
on the New York Stock Exchange (“NYSE”) under the symbol “VVV” as a pure play automotive retail services
provider focused on delivering quick, easy, and trusted vehicle maintenance services.
Discontinued operations
On March 1, 2023, Valvoline completed the sale of its former Global Products reportable segment (currently doing
business as “Valvoline Global Operations” and referred to herein as “Global Products”) to Aramco Overseas
Company B.V. (the “Buyer”) (the “Transaction”). The operating results and cash flows associated with and directly
attributed to the Global Products disposal group are reflected as discontinued operations. Refer to Note 3 included
within the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form
4
10-K for additional information regarding the Global Products business, including income from discontinued
operations. Unless otherwise noted, disclosures herein relate solely to the Company’s continuing operations.
Valvoline’s retail services
Valvoline operates and franchises more than 2,000 service center locations through its VIOC and GCOC retail
locations and supports nearly 270 locations through its Express Care platform. The Company has built a reputation
as the quick, easy, trusted name in automotive preventive maintenance through its full-service oil changes from
certified technicians in approximately 15-minutes, including a free 18-point maintenance check. Valvoline continues
to build its market share by leveraging its stay-in-your-car service model and providing each customer with service
that can be seen by experts they can trust. Valvoline technicians utilize the Company’s proprietary SuperProTM
system to deliver a superior customer experience and make timely service recommendations based upon visual
inspection, vehicle service history, and original equipment manufacturer (“OEM”) recommendations. The SuperPro
system is utilized in both company-operated and franchised service center locations, creating a consistent service
experience for customers.
The following summarizes the primary services Valvoline offers at most retail service center stores:
5
Valvoline’s services are offered to a wide range of vehicle types, including fleets, as shown below:
Industry overview
Demand for automotive aftermarket services benefits from the growing number and age of vehicles in operation as
well as increasing vehicle complexity and ongoing increases in miles driven. In addition, the resilient North
American automotive aftermarket services market is highly fragmented, which creates a significant opportunity for
consolidation. Based on industry surveys and management estimates, the U.S. Do It For Me (“DIFM”) total
addressable market depicted below demonstrates the magnitude of the opportunity in the U.S. for Valvoline:
(a) VIOC oil changes in fiscal year 2024 (U.S. company-operated and franchised stores)
(b) Management estimates developed utilizing internal and industry data for U.S. passenger car and light truck quick lube and DIFM oil
changes
Business and growth strategies
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:
6
•
Driving the full potential of the core business through increasing market share and improving operational
efficiency in existing stores by building on Valvoline’s strong foundation in marketing, technology, and data
insights.
•
Aggressively growing the retail footprint with company-operated store growth and an increased emphasis
on franchisee store growth; and
•
Targeting customer and service expansion with a focus on fleet business, driving non-oil change service
penetration, and meeting the needs of an evolving car parc.
Retail store development
Valvoline’s network of retail service centers delivered its 18th consecutive year of system-wide same-store sales
(“SSS”) growth in fiscal 2024, demonstrating the system's operational excellence. As shown below, Valvoline
operates, either directly or through its franchisees, 2,010 service center stores across the U.S. and Canada as of
September 30, 2024:
l
Company-operated
l
Franchised
Valvoline utilizes a three-pronged approach to grow its retail network through 1) franchisee store expansion 2)
opportunistic acquisitions, and 3) new store development. This approach drove system-wide store growth of over
45% over the last five years. During this period, Valvoline added 625 net new stores to the system and expanded its
service centers internationally into Canada. The retail services store network and its same-store sales growth is
summarized below:
7
System-wide Store Count (a) (b)
1,068
1,127
1,242
1,385
1,462
1,594
1,715
1,852
2,010
342
384
462
519
584
719
790
876
950
726
743
780
866
878
875
925
976
1,060
Company
Franchise
2016
2017
2018
2019
2020
2021
2022
2023
2024
System-wide SSS Growth (a)
7.5%
7.6%
8.7%
10.1%
2.3%
21.2%
13.7%
11.9%
6.7%
2016
2017
2018
2019
2020
2021
2022
2023
2024
(a) Refer to "Key Business Measures" in Item 7 of Part II of this Annual Report on Form 10-K for a description of management's use and
determination of key metrics, including store counts and SSS. Measures include franchisees, which are distinct independent legal entities
and Valvoline does not consolidate the results of operations of its franchisees.
(b) As of September 30, 2020, one franchised service center store included in the store count was temporarily closed at the discretion of the
respective independent operator due to the impacts of COVID-19.
Competition
Valvoline faces competition across its service offerings based on several key criteria, including brand recognition,
product selection, quality of service, price, convenience, speed, location, and customer experience, in addition to
the ability to deliver innovative services to meet evolving customer needs. Valvoline competes for customers in the
highly fragmented automotive aftermarket service industry with automotive dealerships, automotive repair and
maintenance centers, as well as other regional and independent quick lube operators.
Additionally, Valvoline’s retail stores compete for consumers and franchisees with other major franchised brands
that offer a turn-key operations management system, such as Jiffy Lube, Grease Monkey, Take 5 Oil Change,
Express Oil Change, and Mr. Lube in Canada. Valvoline competes with other franchisors in automotive services and
across other industries on the basis of the expected return on investment and the value propositions offered to
franchisees.
Valvoline also competes for Express Care operators and customers with national branded companies that offer an
independent quick lube platform with a professional signage program and limited business model support.
8
Marketing and customer experience
Valvoline places a high priority on delivering an in-store customer experience that is quick, easy, and trusted. To
both acquire and retain customers, marketing plays an important role in demonstrating the distinct experience that
Valvoline offers customers, as well as providing information on locations, promotions, services offered, and wait
times.
Techniques utilized by the Company are intended to build awareness of and create demand for its automotive
preventive maintenance services. Valvoline markets through search and direct response channels, invests in
advertising through social and digital media, and leverages targeted sponsorships to reach specific audiences. The
Company’s modeled marketing strategies are efficient and yield strong rates of return.
Valvoline leverages its digital tools to obtain customer feedback across the retail network of stores. Customer
feedback is frequently measured and monitored to ensure that any service issues are quickly addressed to maintain
high levels of customer satisfaction. Valvoline also utilizes its digital infrastructure and technology to more efficiently
interact with customers, driving customer engagement, acquisition and retention, and consistency. The Company's
strengths in digital marketing and data analytics are leveraged to attract new and retain existing customers,
including tailored marketing campaigns directed to specific customers when they are in the market for their next
service.
Intellectual property
Valvoline holds approximately 390 trademarks in more than 70 countries across the world, including the Valvoline
and “V” brand logo trademarks. These trademarks have a perpetual life, are generally subject to renewal every ten
years, and are among Valvoline's most protected and valuable assets. With the completion of the sale of Global
Products, Valvoline owns the Valvoline brand for all global retail services, excluding China and certain countries in
the Middle East and North Africa, while Global Products owns the Valvoline brand for all product uses globally.
Valvoline partners with Global Products to ensure that Valvoline's iconic brand is managed in a consistent and
holistic manner.
Valvoline trade names and service marks used in its business include ValvolineTM and Valvoline Instant Oil
ChangeSM, among others. Valvoline is also party to arrangements that license its intellectual property to others in
return for revenues. Valvoline owns approximately 700 domain names that are used to promote Valvoline services
and provide information about the Company.
Product supply and price
The products used in Valvoline’s retail service delivery are principally sourced from Global Products. In connection
with the sale of Global Products, Valvoline entered into a long-term supply agreement for the purchase of
substantially all lubricant and certain ancillary products for its stores from Global Products (the “Supply Agreement”).
Valvoline is able to leverage its scale, as well as the scale of its suppliers, for favorable terms in the arrangement of
product supply for its store operations across the network. This benefit enhances the value proposition to new and
existing independent store operators as well as to the profits of Valvoline’s company store operations. Valvoline’s
arrangement of product supply for its independent operators provides recurring fees and margins that benefit
ongoing results. As Valvoline continues to grow organically and through acquisitions, the business is well-positioned
to continue driving increased benefits to the overall system of retail stores.
Valvoline works diligently to preserve margins by adjusting its pricing in response to changes in costs. The
Company’s customer value proposition focuses on convenience and quality service which provides the ability to
leverage pricing power to raise prices while maintaining customer loyalty. Pricing adjustments to products sold to
Valvoline's independent operators are made pursuant to their contracts and are generally based on movements in
published base oil indices.
9
Seasonality
Valvoline’s business is moderately impacted by seasonality. Transaction volumes follow driving patterns of
consumers, which generally trend with the length of daylight hours, North American holidays, and vacation timing.
As a result, the second half of the fiscal year ordinarily is more robust as miles driven tends to be higher. Weather
conditions can modestly affect transaction volumes, and geographic variation typically limits weather impacts to
specific regions.
Regulatory and environmental matters
Valvoline operates to maintain compliance with various federal, state, local and non-U.S. laws and governmental
regulations relating to the operation of its business, including those regarding employment and labor practices;
workplace safety; building and zoning requirements; the handling, storage and disposal of hazardous substances
contained in the products used in service, including used motor oil and lead-acid batteries; and the ownership,
construction and operation of real property, among others. Valvoline maintains policies and procedures to control
risks and monitor compliance with applicable laws and regulations. These laws and regulations require Valvoline to
obtain and comply with permits, registrations or other authorizations issued by governmental authorities. These
authorities can modify or revoke the Company’s permits, registrations or other authorizations and can enforce
compliance through fines, sanctions and injunctions. The Company is also subject to regulation by various U.S.
federal regulatory agencies and by the applicable regulatory authorities in locations in which Valvoline’s services are
offered. Such regulations principally relate to the operation of its service centers, advertising and marketing of
Valvoline’s services.
Valvoline inventories lubricating and vehicle maintenance products and handles used automotive oils and filters.
Accordingly, Valvoline is subject to numerous federal, state, local and non-U.S. environmental laws including the
Comprehensive Environmental Response Compensation and Liability Act. In addition, the U.S. Environmental
Protection Agency under the Resource Conservation and Recovery Act, as well as various state and local
environmental protection agencies, regulate the handling and disposal of certain waste products and other
materials.
As a franchisor, Valvoline is subject to various federal, state, and non-U.S. franchising laws. The Federal Trade
Commission (the “FTC”) regulates franchising activities in the U.S. and requires franchisors to make extensive
disclosure to prospective franchisees before the execution of a franchise agreement. Certain jurisdictions require
registration or specific disclosure in connection with franchise offers and sales, or have laws that limit franchisor
rights regarding the termination, renewal or transfer of franchise agreements.
Valvoline is subject to various federal, state, local and non-U.S. laws and regulations relating to information security,
privacy, cashless payments and customer credit, protection and fraud. An increasing number of governments and
industry groups have established data privacy laws and standards for the protection of personal information,
including financial information (e.g., credit card numbers), social security numbers, and health information. The
Company is also subject to labor and employment laws, including regulations established by the U.S. Department of
Labor and other local regulatory agencies, governing working conditions, paid leave, workplace safety, wage and
hour standards, and hiring and employment practices.
Human capital management
"It all starts with our people" is one of Valvoline's core values, and the Company endeavors to create an
environment that promotes safety, fosters diversity, encourages creativity, rewards performance, and emphasizes
culture and purpose. To recruit and retain the most qualified team members, Valvoline focuses on treating team
members well by paying competitive wages, offering an attractive benefit package, and providing robust training
and career development opportunities. Valvoline is committed to actively creating an environment where each team
member is empowered to learn, grow, and maximize their personal contribution.
Workforce
As of September 30, 2024, Valvoline had approximately 11,500 employees (excluding contract employees) in the
U.S. and Canada, including approximately 10,500 full-time employees. Valvoline operates 950 company-owned
10
retail service center stores throughout the U.S. and Canada and supports its network of more than 2,000 stores
through centralized teams.
The table below provides the Company's approximate distribution of employees, which includes its company-
operated service center stores, central supporting teams, and excludes independent contractors:
Number of employees
Company-operated store employees
10,300
Central supporting team members
1,200
Total employee headcount
11,500
Valvoline seeks to attract, develop, and retain highly qualified talent as summarized further below.
Talent acquisition
Valvoline strives to foster a workplace culture that attracts and retains top, diverse talent at every level. Valvoline's
talent acquisition is based on qualifications and experiences of target employees, including "building block" traits
and capabilities that support strong development early in an employee's career with the Company. Valvoline
continues to benefit from substantial investment in talent acquisition to ensure the Company has the right skill set to
attract and recruit exceptional diverse talent along with supporting technology to increase efficiency in staffing
stores. Valvoline utilizes innovative technology and structured processes intended to attract qualified candidates,
including engaging job descriptions designed to reach a larger audience, a quick and mobile-friendly application
process, online chat features to proactively address applicant questions, and video storytelling that offers a view of
Valvoline's culture through the lens of its own employees. These tools have been created to convey what makes
Valvoline unique as an employer to better attract diverse and ideal candidates, and these strong branding and
sourcing efforts allow Valvoline to select among the very best.
The Company’s focus on aggressive growth, including the addition of 158 net new system-wide stores in fiscal
2024, creates a critical need for talent to operate those stores. Valvoline utilizes its tools and processes to attract
qualified candidates, including providing support to franchise sourcing efforts. Franchisees collaborate through
periodic sharing of hiring experiences and best practices to ensure company-operated and franchised locations
attract and hire the best candidates to deliver consistent and superior service to Valvoline’s customers.
Training and development
The opportunity to develop and advance, regardless of job role or location, is critical to the success of Valvoline. A
key component of the Company’s talent development approach is to provide each team member with the necessary
tools and training opportunities to develop within their area of subject matter knowledge. Training is tailored to
specific job roles and functions incorporating both on-the-job training as well as virtual or in-person classes and e-
learning. Valvoline provides new VIOC and GCOC employees 270 hours of training that is generally completed
within the first 60 days of employment leading to their first certification and another 240 hours of training in the next
140 days that supports promotability.
Valvoline provides an Introduction to Management program within its VIOC and GCOC stores where assistant
managers interact with leadership team members and peers from other stores to learn about Valvoline's culture,
share best practices, and receive management training to prepare them for career advancement. The combination
of these efforts enable Valvoline to continue a promote-from-within strategy which has led to a majority of service
center managers, area managers, and market manager promotions in the last year being earned by team members
who started in hourly positions at VIOC. By engaging team members early, Valvoline provides them with the
necessary tools to learn and acquire new skills which increases their value as an employee and, most importantly,
affords them the opportunity to advance their careers.
VIOC has been presented with Training magazine’s Training APEX Award 11 times, which ranks companies that
are unsurpassed in harnessing human capital and reflects the winners’ journey to attain peak performance in
employee training and development and organizational success. Additionally, the Company is an eleven-time
recipient of the BEST Award from The Association for Talent Development, that recognizes organizations that are
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building talent, enterprise-wide and strategically driving a talent development culture that delivers results. As an
eleven-time winner of this award, the Company was also named to the association’s Best of the BEST list.
Employee communication and feedback
In an ongoing effort to understand employees’ needs and deliver on the Company’s values of trust, accountability
and collaboration, Valvoline remains focused on transparency and employee feedback. The Company regularly
hosts company-wide town halls in which Valvoline’s Chief Executive Officer and other members of senior
management inform employees about performance, strategic initiatives, activities, and policies along with providing
opportunities for them to ask questions. In addition, Valvoline management is focused on listening to understand
what is on the minds of employees by regularly surveying team members to gather real-time feedback as well as
identifying opportunities for continuous improvement. Valvoline believes employee survey results are important to
evaluate areas for improved communication and are meaningful to recruit and retain top talent, believing satisfied
employees are more likely to have a positive impact in the workplace and deliver great customer service.
Total rewards
Valvoline’s total rewards philosophy is to help attract, motivate, develop and retain a qualified and diverse
workforce. The Company offers competitive, comprehensive compensation and benefits programs designed to care
for the physical, mental, emotional, social and financial well-being of its employees. The Company’s objective is to
base compensation on employee position, experience, location, performance, and the labor market in order to not
be influenced by factors such as gender, race, or ethnicity. Additionally, the Compensation Committee of the Board
of Directors (the “Board”) and senior management are actively involved in determining the Company’s total rewards
strategy to help Valvoline provide a positive employee experience.
The Company provides a wide variety of benefits to eligible full-time and part-time employees. Valvoline’s strategy
is to provide competitive benefit programs which align to the competitive business environment and meet the needs
of employees through all stages of life. These include:
•
Affordable healthcare plans (medical, prescription, dental, vision, maternity, fertility, adoption and
telehealth)
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•
Life, disability, and accident insurance coverage
•
Health savings account (HSA) with company contributions
•
401(k) retirement savings plan with generous company basic and matching contributions
•
Personalized employee well-being programs to support taking care of the whole employee and family
•
Tuition reimbursement
•
Paid time off, plus holiday pay, paid disability, paid maternity and family leave, and other leave programs.
Health and safety
The Company designs, builds and operates its facilities to promote and protect the health and safety of its
employees, known as its "Vamily." Valvoline strives to create a safe and secure environment for every employee
and customer and fosters a sense of belonging to promote emotional well-being that enables employees to deliver
“V-Class” service to customers. To help reduce the number of incidents at the Company, Valvoline employs safety-
specific education as part of its training programs for all employees. Employees begin this training on day one to
instill safety precautions and best practices. As part of the broader training curriculum, team members are required
to successfully complete execution reports confirming a strong understanding of Valvoline safety measures.
Diversity, equity and inclusion (“DEI”)
Valvoline is committed to creating an inclusive and welcoming environment for its employees and customers by
fostering a strong sense of belonging, where diverse backgrounds are represented, engaged and empowered to
inspire innovative ideas and decisions. Valvoline’s goal is for the Company’s workforce to represent the diverse
communities served.
The Company is committed to the inclusion of federally-insured minority depository institutions (“MDIs”) alongside
larger banks and financial institutions as part of its overall cash management strategy and has $2.6 million of its
cash equivalents as of September 30, 2024 with MDIs.
The Company also supports employee-led networking groups (Employee Resource Groups or “ERGs”), which are
open to all employees. These ERGs provide a forum to communicate and exchange ideas, build a network of
relationships across the Company and pursue personal and professional development. The Company also actively
sponsors events that promote diversity and inclusion across the business and its operations.
Citizenship
Valvoline’s citizenship efforts support social and educational needs within the communities the Company serves.
Throughout the year, Valvoline supports its employees in volunteering their time and talents to give back to their
communities. Valvoline employees support the United Way, Red Cross, Children’s Miracle Network, Habitat for
Humanity, Big Brothers Big Sisters, and many more national and local organizations.
Valvoline's Charitable Giving Program encourages its team members to support the communities in which they live
and in which the Company operates, through hands-on service, focused generosity and the continuous pursuit of
innovative and sustainable solutions. A major focus of Valvoline’s charitable giving programs is the annual
employee giving campaign where employees are encouraged to donate to the charity of their choice. Valvoline’s
matching program will match the donations given to the organizations that align with at least one of the Company’s
fiscal 2024 giving pillars: (1) disadvantaged families and children, (2) education, (3) environment, (4) health care,
and/or (5) diversity, equity and inclusion.
Additionally, Valvoline employees support a program that assists Company employees during times of personal
hardship by providing short-term financial assistance to eligible service center and corporate employees in
immediate financial need because of an accident, illness, injury, death, natural disaster, or other catastrophic event
or emergency.
Available information
More information about Valvoline is available on the Company’s website at http://investors.valvoline.com. On this
website, Valvoline makes available, free of charge, its Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K and any amendments to those reports, as well as any beneficial ownership
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reports of officers and directors filed on Forms 3, 4 and 5. All such reports are available as soon as reasonably
practicable after they are electronically filed with, or electronically furnished to, the U.S. Securities and Exchange
Commission (the “SEC"). Valvoline also makes available, free of charge on its website, its Amended and Restated
Articles of Incorporation, By-Laws, Corporate Governance Guidelines, Board Committee Charters, Director
Independence Standards, and Code of Conduct that apply to Valvoline’s directors, officers and employees. These
documents are also available in print to any shareholder who requests them. The information contained on
Valvoline’s website is not part of this Annual Report on Form 10-K and is not incorporated by reference in this
document. References to website addresses are provided as inactive textual references only. The SEC also
maintains a website (http://www.sec.gov) that contains reports, proxy and other information and statements
regarding issuers, including Valvoline, that file electronically with the SEC.
Executive officers of Valvoline
The following table sets forth information concerning Valvoline's executive officers as of November 19, 2024:
Name
Age
Title
Lori A. Flees
54
President and Chief Executive Officer and Director
Mary E. Meixelsperger
64
Chief Financial Officer
Julie M. O’Daniel
57
Senior Vice President, Chief Legal Officer and Corporate Secretary
Jonathan L. Caldwell
47
Senior Vice President and Chief People Officer
R. Travis Dobbins
52
Senior Vice President and Chief Technology Officer
Linwood R. Fulcher
53
Senior Vice President and Chief Operating Officer
Dione R. Sturgeon
47
Vice President, Chief Accounting Officer and Controller
Lori A. Flees has served as a director and President and Chief Executive Officer of Valvoline since October 2023.
Ms. Flees served as President, Retail Services of Valvoline from April 2022 to September 2023. Prior to joining
Valvoline, Ms. Flees held various leadership positions at Walmart Inc., serving as Senior Vice President and Chief
Operating Officer of Health & Wellness from August 2020 to March 2022; Senior Vice President and General
Merchandising Manager, Sam’s Club Health & Wellness from June 2018 to August 2020; and Senior Vice
President, Next Generation Retail and Principal Store No.8 from September 2017 to June 2019.
Mary E. Meixelsperger has served as Valvoline's Chief Financial Officer since June 2016. Prior to joining Valvoline,
Ms. Meixelsperger was Senior Vice President and Chief Financial Officer of DSW Inc. from April 2014 to June 2016.
In October 2024, Ms. Meixelsperger announced her plans to retire. Ms. Meixelsperger will continue as Chief
Financial Officer until a successor is hired and will remain with the Company through a subsequent transition period.
Julie M. O’Daniel has served as Valvoline’s Senior Vice President, Chief Legal Officer and Corporate Secretary
since January 2017. Ms. O’Daniel served as General Counsel and Corporate Secretary of Valvoline from
September 2016 to January 2017 and as Lead Commercial Counsel of Valvoline from April 2014 to September
2016.
Jonathan L. Caldwell has served as Valvoline's Senior Vice President and Chief People Officer since April 2020.
Mr. Caldwell served as Senior Director, Human Resources of Valvoline from March 2018 to April 2020 and as
Senior Director, Global Talent Management of Valvoline from October 2016 to March 2018.
R. Travis Dobbins has served as Valvoline's Senior Vice President and Chief Technology Officer since March
2023. Mr. Dobbins served as Vice President of Information Technology of Valvoline from January 2019 to February
2023 and as Information Technology Director, Commercial Solutions from September 2016 to January 2019.
Linwood R. Fulcher has served as Valvoline's Senior Vice President and Chief Operating Officer since October
2023. Mr. Fulcher served as Vice President, Central Operations and Customer Experience Optimization from
August 2022 to September 2023. Prior to joining Valvoline, Mr. Fulcher held various leadership positions at Walmart
Inc., serving as Vice President Customer Strategy, Science and Journeys from October 2019 to August 2021; and
Vice President Returns from February 2017 to October 2019.
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Dione R. Sturgeon has served as Valvoline's Vice President, Chief Accounting Officer and Controller since March
2023. Ms. Sturgeon served as Vice President, Corporate Controller from March 2022 to February 2023; as Senior
Director, Global Accounting, Reporting & Controls from October 2020 to March 2022; and as Director, Corporate
Accounting of Valvoline from August 2016 to October 2020.
ITEM 1A. RISK FACTORS
The following risks could materially and adversely affect Valvoline’s business, operations, financial position or future
financial performance. This information should be considered when reviewing this Annual Report on Form 10-K,
including Management’s Discussion and Analysis of Financial Condition and Results of Operations, in addition to
the consolidated financial statements and related notes thereto. These risk factors could cause future results to
differ from those in forward-looking statements and from historical trends. These risks are not the only risks that
Valvoline faces. Additional risks and uncertainties that are not presently known, or that Valvoline currently believes
are not material, may also become meaningful and adversely affect Valvoline’s business.
Risks related to the industries in which Valvoline operates
Valvoline faces significant competition from other companies, which places downward pressure
on prices and margins and may adversely affect Valvoline’s business and results of operations.
Valvoline operates in a highly competitive market, competing against a wide variety of companies across the
automotive services industry. Competition is based on several key criteria, including brand recognition, quality,
price, customer service, and the ability to bring innovative services to the marketplace. Competitors include
international, national, regional and local automotive repair and maintenance shops, automobile dealerships, and oil
change shops. Certain competitors are larger than Valvoline and have greater financial resources and more
diversified portfolios, leading to greater operating and financial flexibility. As a result, these competitors may be
better able to withstand adverse changes in conditions within the industry, market dynamics, the price of supplies or
general economic conditions. In addition, competitors’ pricing decisions could compel Valvoline to decrease its
prices, which could negatively affect Valvoline’s margins and profitability.
Rising and volatile supply costs and supply chain constraints or disruptions could adversely
affect Valvoline’s results of operations.
Valvoline’s service center locations require large quantities of automotive products and supplies. The Company’s
success depends in part on the ability to anticipate and react to changes in supply costs, and the Company is
susceptible to increases in primary and secondary supply costs as a result of factors beyond its control. These
factors include general economic conditions, including recessions, significant variations in supply and demand,
potential increases in taxes and tariffs, pandemics, armed conflicts, war, weather conditions, currency fluctuations
where Valvoline operates, commodity market speculation, labor strikes, including rail strikes, and government
regulations. For example, Valvoline’s supplier for air filters experienced supply constraints in fiscal 2024 leading to
delivery delays to Valvoline until the supplier was able to diversify its supply chain, which impacted non-oil change
revenue in the first half of fiscal 2024. Additionally, the International Longshoreman’s Association (“ILA”) union of
maritime workers contract expired on September 30, 2024 without a renewed contract negotiated until early
October 2024, resulting in a brief labor strike. A more lengthy strike from the ILA could have had a negative impact
on Valvoline’s suppliers resulting in an unfavorable impact to product availability and cost and negatively impacted
the Company’s consolidated results of operations. Higher product and supply costs could reduce the Company’s
profits, which in turn may adversely affect the business and results of operations for both company-operated and
franchised stores.
Additionally, should conditions such as supply chain congestion or availability related to severe weather or climate
conditions become severe or last for an extended period of time, Valvoline's inventory of supplies may not be
sufficient to meet customer demands. Government regulations related to the manufacture or transport of products
provided by the supplier may also impede Valvoline’s ability to obtain those supplies on commercially reasonable
terms. If Valvoline is unable to obtain and retain product supply under commercially acceptable terms, its ability to
deliver services in a competitive and profitable manner or grow its business successfully could be adversely
affected.
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Demand for Valvoline’s services could be adversely affected by spending trends, declining
economic conditions, industry trends and a number of other factors, all of which are beyond its
control.
Demand for Valvoline’s services may be affected by a number of factors it cannot control, including the number and
age of vehicles in current service, regulation and legislation, technological advances in the automotive industry and
changes in engine technology, including the adoption rate of electric or other alternative engine technologies,
changing automotive OEM specifications and longer recommended intervals between services. In addition, during
periods of declining economic conditions, including recessions, customers may defer vehicle maintenance.
Similarly, increases in energy prices or other factors may cause miles driven to decline, resulting in less vehicle
wear and tear and reducing demand for maintenance, which may lead to customers deferring or foregoing
Valvoline’s services. All of these factors, which impact metrics such as drain intervals and vehicles served per day,
could result in a decline in the demand for Valvoline’s services and adversely affect its sales, cash flows and overall
financial condition.
Failure to develop and market new services and technologies could impact Valvoline’s
competitive position and have an adverse effect on its business and results of operations.
Valvoline’s efforts to respond to changes in customer demand in a timely and cost-efficient manner to drive growth
could be adversely affected by difficulties or delays in service innovation, including the inability to identify or gain
market acceptance of new service techniques. Due to the rigorous development process and intense competition,
there can be no assurance that any of the services Valvoline is currently developing, or could develop in the future,
will achieve substantial commercial success. Moreover, Valvoline may experience operating losses for new services
after they are introduced and commercialized because of start-up costs or lack of demand.
The automotive maintenance service industry is subject to periodic technological change and ongoing product
improvements. The adoption of electric vehicles is increasing, which reduces demand for lubricant services, but
expands the opportunity for other services required by electric vehicles, including coolants, fluids and greases. If
Valvoline is unable to develop and market services for electric vehicles, its business and results of operations could
be adversely impacted. As automotive technologies evolve, Valvoline could be required to comply with any new or
stricter laws or regulations, which could require additional expenditures by Valvoline that could adversely impact
business results.
Damage to Valvoline’s brand and reputation could have an adverse effect on its business.
Maintaining Valvoline’s strong reputation with customers is a key component of its business. Liability claims, false
advertising claims, service complaints, and governmental investigations could result in substantial and unexpected
expenditures and affect consumer or customer confidence in Valvoline's services, which may materially and
adversely affect its business operations, decrease sales and increase costs. Additionally, as customers are shifting
to more environmentally-conscious electric and hybrid vehicles, the inability of Valvoline to continue its development
of new services to adapt to those changing demands could affect the Company's reputation as an environmentally
friendly choice for vehicle care and could reduce demand for its services. Further, legislators, customers, investors
and other stakeholders are increasingly focusing on environmental, social and governance policies of companies.
This focus could result in new or increased legislation or disclosure requirements. In the event that such
requirements result in increased costs or a negative perception of the Company, there could be an adverse effect
on the business or its results of operations.
If allegations are made that Valvoline’s automotive maintenance services were not provided in a manner consistent
with its vision and values, the public may develop a negative perception of Valvoline, its brands, image and
reputation. In addition, if Valvoline’s franchise or Express Care operators experience service failures or do not
successfully operate their service centers in a manner consistent with Valvoline’s standards, its brand, image and
reputation could be harmed, which in turn could negatively impact its business and operating results. A negative
public perception of Valvoline’s brands, whether justified or not, could impair its reputation, involve it in litigation,
damage its brand equity and have a material adverse effect on its business. In addition, damage to the reputation of
Valvoline’s competitors or others in the automotive maintenance services industry could negatively impact
Valvoline’s reputation and business.
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In connection with the sale of Global Products, the parties entered into a brand agreement (the “Brand Agreement”).
Pursuant to the Brand Agreement, Valvoline retains ownership of the Valvoline brand for generally all retail services
purposes, and Global Products owns the brand for all product uses. The brand sharing arrangement may increase
the risk of inconsistency in its use, messaging, or overall damage to the brand, which could have an adverse impact
on Valvoline’s reputation and business and result in lengthy and expensive litigation or settlements.
Risks related to executing Valvoline’s strategy
Valvoline has set aggressive growth goals for its business, including increasing sales, cash flow,
market share, margins and number of service center stores, to achieve its long-term strategic
objectives. Execution of Valvoline’s growth strategies and business plans to facilitate that growth
involves a number of risks.
Valvoline has set aggressive growth goals for its business to meet its long-term strategic objectives and improve
shareholder value by aggressively growing through new store development, opportunistic acquisitions and
increased emphasis on franchise development. Valvoline’s failure to meet one or more of these goals or objectives
could negatively impact its business. Aspects of that risk include, among others, changes to the global economy,
availability of or failure to identify acquisition targets or real estate for new stores to grow the Company’s network of
retail service center stores, real estate and construction costs or delays limiting new store growth, changes to the
competitive landscape, including those related to automotive maintenance recommendations and customer
preferences, entry of new competitors, attraction and retention of skilled employees, failure to successfully develop
and implement digital platforms to support the Company’s growth initiatives, failure to comply with existing or new
regulatory requirements, failure to maintain a competitive cost structure and other risks outlined in greater detail in
this “Risk Factors” section.
Another component of the Company’s network growth strategy is dependent on the success of recent refranchising
activities taken during fiscal 2024 and planned for early fiscal 2025. Failure to achieve the expected benefits of the
refranchising transactions could negatively impact the Company’s operating results and its overall long-term
strategic growth objectives, including accelerating franchise store growth. In addition, if the Company’s franchise
partners are unsuccessful in continuing productivity and growth objectives within their respective markets, the
Company’s business results could be adversely affected. Valvoline has also guaranteed future lease commitments
related to certain refranchised stores and the Company’s operating results could be negatively impacted by any
increased rent obligations to the extent the franchisees default on such lease agreements.
Valvoline's performance is also highly dependent on attracting and retaining appropriately qualified employees in its
service center stores and supporting and corporate teams. A tight labor market in recent years has led to
challenges in staffing service center stores due to labor shortages as a number of trends conflate reflecting
changing demographics, governmental policies, employee sentiment, and technological change. In response,
Valvoline made labor investments and enhanced its recruiting programs to attract new employees. As trends in the
labor market evolve, the Company may experience future challenges in recruiting and retaining talent in various
locations. Valvoline operates in a competitive labor market, and failure to recruit or retain qualified employees in the
future, or the Company's inability to implement corresponding adjustments to its labor model, including
compensation and benefit packages, could impair the Company's ability to grow and meet its strategic goals.
Valvoline may be unable to execute its growth strategy, and acquisitions, investments and
strategic partnerships could result in operating difficulties, dilution and other harmful
consequences that may adversely impact Valvoline’s business and results of operations.
Acquisitions are an important element of Valvoline’s overall growth strategy. Valvoline has completed a significant
number of acquisitions in recent years and has developed a pipeline of future viable targets expected to
complement the Company’s growth initiatives. An insufficient quantity of strategic acquisition targets in the
marketplace with limited targets remaining, or the inability of Valvoline to successfully acquire those targets, may
have a negative impact on Valvoline's ability to achieve its future growth projections. Valvoline expects to continue
to evaluate and enter into discussions regarding a wide array of potential strategic transactions and to continue to
grow organically and through acquisitions. An inability to execute these plans could have an adverse impact on
Valvoline’s financial condition and results of operations. In addition, the anticipated benefits of Valvoline’s
acquisitions may not be realized and the process of integrating an acquired company, business, or product may
create unforeseen operating difficulties or expenditures.
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Valvoline’s acquisitions, investments and strategic partnerships could also result in dilutive issuances of its equity
securities, the incurrence of debt, contingent liabilities or amortization expenses, impairment of goodwill or
purchased long-lived assets and restructuring charges, any of which could harm its financial condition, results of
operations and cash flows.
The business model for Valvoline is affected by the financial results of its franchisees.
Valvoline’s business is made up of a network of both company-operated and franchised stores. Valvoline’s success
relies in part on the operational and financial success, as well as the cooperation of, its franchisees to implement
the Company’s growth strategy, which may be dependent upon their ability to secure adequate financing to meet
store development requirements. However, Valvoline has limited influence over its franchisees’ operations and the
quality of franchised store operations may be diminished by a number of factors beyond the Company’s control.
Valvoline’s franchisees manage their businesses independently and are responsible for the day-to-day operations
of 53% of the Company’s system-wide service center stores as of September 30, 2024. Valvoline’s royalty, product,
and other revenues from franchised stores are largely dependent on franchisee sales and compliance with
franchise agreements. Valvoline’s revenues and margins could be negatively affected should franchisees
experience limited or no sales growth, or if the franchisee fails to renew its franchise agreements or otherwise fulfill
its obligations under negotiated business development, franchise, or supply agreements with Valvoline. Additionally,
if the franchisees are impacted by weak economic conditions and are unable to secure adequate sources of
financing, their financial health may worsen, and Valvoline’s revenues may decline. If sales or business
performance trends worsen for franchisees, their financial results may deteriorate, which could result in, among
other things, store closures, delayed or reduced royalties and purchases and reduced growth in the number of
service center stores.
Valvoline’s success also depends on the willingness and ability of its independent franchisees to implement major
initiatives, which may require additional investment by them, and to remain aligned with Valvoline on operating,
promotional and capital-intensive reinvestment plans. The ability of Valvoline’s franchisees to contribute to the
achievement of Valvoline’s overall plans is dependent in large part on the availability of financing to its franchisees
at reasonable interest rates and may be negatively impacted by the financial markets in general or the
creditworthiness of individual franchisees. The size of Valvoline’s largest franchisees creates additional risk due to
their importance to the Company’s growth strategy, requiring their cooperation and alignment with Valvoline’s
initiatives. Furthermore, if the franchisees are not able to obtain the financing necessary to complete planned
remodel and construction projects, they may be forced to postpone or cancel such projects, impacting the
Company’s ability to grow and expand the Valvoline retail footprint.
Risks related to operating Valvoline's business
The Company’s recently implemented enterprise resource planning (“ERP”) system has
adversely impacted Valvoline’s internal controls and could continue to negatively impact the
business if remedial efforts are not timely and effective.
͏Valvoline relies upon its ERP application to assist in managing certain business processes and summarizing
operational and financial results. Following the sale of the former Global Products reportable segment in fiscal 2023,
and as part of Valvoline’s continued evolution to a standalone retail business, the Company has been in the process
of separating certain business processes, information systems and applications that were previously shared to
support both businesses. On January 1, 2024, Valvoline implemented a new ERP application intended to better
accommodate the retail business model and support the Company’s continued growth.
͏A material weakness in internal control over financial reporting arose in connection with the Company’s
implementation of the new ERP system and its related impact on IT general controls, which included deficiencies
related to certain business processes that were not adequately designed at the time of system implementation.
While the ERP system is intended to ultimately improve and enhance business processes, its implementation
resulted in disruptions to maintaining an effective internal control environment and the timely processing of invoices
and billings to franchisee, independent operator and fleet customers. Although the new ERP application is not
currently utilized in the day-to-day operations of Valvoline’s retail stores and there have been no material impacts
on its ability to serve customers to-date, the conversion to any new IT system, including the planned implementation
of a human resources information system expected in fiscal 2025, exposes the Company to additional risks and
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possible continued disruptions. This includes the loss of information, unauthorized access and systematic changes,
disruption to normal operations, and risks associated with integrations with other applications and processes.
Implementing the new ERP system has required, and the efforts associated with mitigation, remediation, and
enhancements will continue to require, the investment of significant personnel and financial resources. Failure to
adequately and timely address any known or potential issues to ensure the new ERP system operates as intended
could result in unexpected incremental costs and diversion of management’s attention and resources, further
interruptions or delays in processes and challenges with vendor and customer relationships, difficulty in achieving
and maintaining effective internal controls and issuing timely and accurate financial results. Valvoline management
has implemented a remedial plan, as described in Item 9A, Controls and Procedures, which substantial progress
has been made during fiscal 2024. However, management cannot provide any assurance that such remedial
measures, or any other remedial measures taken, will be effective and identify or address all inherent risks from
implementing an ERP system. If this remediation fails or other material weaknesses arise, it may adversely affect
operating results, the trading price of Valvoline’s common stock, internal control over financial reporting, or the
ability to effectively manage the business.
Changes in economic conditions that impact customer spending could harm Valvoline’s
business.
Economic downturns, including a recession, may reduce customer demand or inhibit Valvoline’s ability to provide its
services. Valvoline’s business and operating results are sensitive to declining economic conditions, credit market
tightness, declining customer and business confidence, volatile exchange and interest rates, continuing inflation and
other challenges, including those related to acts of aggression or threatened aggression that can affect the
economy and financial markets. In the event of adverse developments or stagnation in the economy or financial
markets, Valvoline’s customers may defer vehicle maintenance, oil changes, or other services, may repair and
maintain their vehicles themselves or be unable to obtain credit reducing their ability to spend.
In a prolonged economic downturn or recession, these risks and uncertainties could have a material negative
impact on Valvoline’s business, financial condition and results of operations. The severity and duration of a
downturn in economic and financial market conditions, as well as the timing, strength, and sustainability of a
recovery, are unknown and are not within the Company’s control. If the U.S. economy were to enter a recession,
the recessionary risks discussed above and elsewhere within these risk factors could be more pronounced in such
an economic climate.
Economic weakness and uncertainty may cause changes in customer preferences and habits, and if such economic
conditions persist for an extended period of time, this may result in customers making long-lasting changes to their
spending behaviors, which could unfavorably impact Valvoline’s business, its results of operations and cash flows.
Additionally, during periods of favorable economic conditions, customers may be more likely to purchase new
vehicles rather than maintaining and servicing older vehicles, which could also have an adverse impact on
Valvoline’s business, results of operations, cash flows and strategic objectives.
If Valvoline does not attract, train and retain quality employees in appropriate numbers, including
key employees and management, performance could be adversely affected.
Valvoline’s performance is dependent on recruiting, developing, training, and retaining quality and diverse service
center employees in large numbers. Valvoline’s service centers positions are subject to high rates of turnover.
Valvoline’s ability to meet labor needs while controlling costs is subject to external factors, such as unemployment
levels, prevailing wage rates, wage legislation, and changes in rules governing eligibility for overtime and changing
demographics. In the event of increasing wage rates, if Valvoline does not increase wages competitively, staffing
levels and customer service could suffer because of declining workforce quality. Valvoline’s earnings could
decrease if wage rates increase, whether in response to market demands or new wage legislation, and Valvoline is
unable to adjust pricing to offset the additional costs. In addition, inflation and economic uncertainty may negatively
impact Valvoline’s ability to attract and retain employees.
Valvoline’s success also depends on the efforts of key management personnel. Valvoline’s failure to develop an
adequate succession plan for one or more of these key positions could reduce Valvoline’s institutional knowledge
base and competitive advantage during a transition. The loss or limited availability of the services of one or more
key management personnel, or Valvoline’s inability to recruit and retain qualified diverse candidates in the future,
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could, at least temporarily, have an adverse effect on Valvoline’s operating results and financial condition.
Additionally, turnover in other key positions can disrupt progress in implementing business strategies, result in a
loss of institutional knowledge, cause greater workload demands for remaining team members and divert attention
away from key areas of the business, or otherwise negatively impact the Company’s growth prospects or future
operating results.
Valvoline uses information technology systems to conduct business, and a cybersecurity threat,
data breach, security incident, failure of a key information technology system, or inability to
enhance its capabilities could adversely affect Valvoline’s business and reputation.
Valvoline relies on its information technology systems, including systems which are managed or provided by third-
party service providers, to conduct its business. The Company’s point-of-sale platforms for company-operated and
franchisee retail stores could be subject to cybersecurity threats, service outages, or data breaches, such as the
July 2024 software update by CrowdStrike Holdings, Inc., a cybersecurity technology company, which caused a
global information technology outage. This incident required temporary manual processes to maintain operations.
Although it was brief and did not have a material impact to business, Valvoline’s business was adversely impacted
by the outage and slowed service. Similar software-induced interruptions or any security breach involving the point-
of-sale or other systems within the Valvoline network could harm business operations, result in a loss of consumer
confidence, or cause costs to be incurred associated with data recovery, investigation, remediation, and data
breach notification obligations required under data privacy laws, which can be significant and vary by jurisdiction.
Despite employee training and other measures to mitigate them, cybersecurity threats to its information technology
systems, and those of its third-party service providers, are increasing and becoming more advanced and cyber
incidents have occurred and could occur as a result of unauthorized access, business email compromise, viruses,
malicious code, ransomware, phishing, organized cyber-attacks, social engineering, break-ins, and security
breaches due to error or misconduct by its employees, contractors or third-party service providers. The cyber
incidents that have occurred have not resulted in a material loss to Valvoline; however, a material breach of or
failure of Valvoline’s information technology systems, including systems in which data is stored or may be
transferred across third-party platforms, could lead to the loss and destruction of trade secrets, confidential
information, proprietary data, intellectual property, customer and supplier data, and employee personal information,
and could disrupt business operations which could adversely affect Valvoline’s relationships with business partners
and harm its brands, reputation and financial results.
Valvoline’s customer and vendor data may include names, addresses, phone numbers, email addresses and
payment account information, among other information. Depending on the nature of the data that is compromised,
Valvoline may also have obligations to notify individuals, regulators, law enforcement or payment companies about
the incident and may need to provide some form of remedy. Valvoline could also face fines and penalties should it
fail to adequately notify affected parties pursuant to new and evolving privacy laws in various jurisdictions in which it
does business, as outlined in greater detail in the "Regulatory, legal, and financial risks" section below.
Valvoline is continuing to expand, upgrade and develop its information technology capabilities, including, the
Company’s core ERP system. If the Company is unable to adequately transition its information technology
organization’s skills and capabilities rapidly enough, including the ability to capitalize on the advancements in
Artificial Intelligence software and platforms, it may not effectively support the modernization of Valvoline’s
technology architecture and environment. This could hinder Valvoline’s ability to keep pace with its growth and
digital initiatives for the consumer-oriented, data driven, mobility enabled nature of the business. Consequently, this
might inhibit Valvoline’s ability to meet stakeholder needs and preferences.
Business disruptions from natural, operational and other catastrophic risks could seriously harm
Valvoline’s operations and financial performance. In addition, a catastrophic event at one of
Valvoline’s service center stores or involving its services or employees could lead to liabilities
that could further impair its operations and financial performance.
Business disruptions, including those related to operating hazards inherent in servicing vehicles, natural disasters,
severe weather conditions, climate change, supply or logistics disruptions, increasing costs for energy, temporary
store and/or power outages, information technology systems and network disruptions, cybersecurity breaches,
terrorist attacks, armed conflicts, war, pandemic diseases, fires, floods or other catastrophic events, could harm
Valvoline’s operations as well as the operations of Valvoline’s customers and suppliers, and may adversely impact
Valvoline’s financial performance. Although the impact to the Company’s results of operations and financial
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condition were not material, the recent hurricanes Beryl, Helene and Milton caused certain company-operated and
franchised service center stores to temporarily pause operations for a period of time for safety and evacuations, in
addition to being impacted by intermittent connectivity issues and limited damage to stores. In these cases when
the stores remain open, they often rely upon manual processes which can slow service times and minimize
transactions, or in the cases where the stores have to close for a period of time, the inability to service customers
until the stores are safe to operate. Although it is impossible to predict the occurrence or consequences of any such
events, they could result in reduced demand for Valvoline’s services or make it difficult or impossible for Valvoline to
deliver services to its customers. In addition to leading to a disruption of Valvoline’s businesses, a catastrophic
event at one of Valvoline’s service center stores or involving its employees could lead to substantial legal liability to
or claims by parties allegedly harmed by the event.
While Valvoline maintains business continuity plans that are intended to allow it to continue operations or mitigate
the effects of events that could disrupt its business, Valvoline cannot provide assurances that its plans would fully
protect it from all such events. In addition, insurance maintained by Valvoline to protect against property damage,
loss of business and other related consequences resulting from catastrophic events is subject to significant
retentions and coverage limitations, depending on the nature of the risk insured. This insurance may not be
sufficient to cover all of Valvoline’s damages or damages to others in the event of a catastrophe. In addition,
insurance related to these types of risks may not be available now or, if available, may not be available in the future
at commercially reasonable rates.
Pandemics, epidemics or disease outbreaks may disrupt Valvoline’s business and operations,
which could materially affect Valvoline’s financial condition, results of operations and forward-
looking expectations.
Disruptions caused by pandemics, epidemics or disease outbreaks, such as COVID-19, in the United States or
Canada, could materially affect Valvoline's results of operations, financial condition and forward-looking
expectations. These events could impact Valvoline's business, particularly as it relates to congestion in the supply
chain and related cost, as well as disruptions in the labor market. The Company could experience reduced traffic
and sales volume due to changes in customer behavior as individuals may decrease automobile use and practice
social distancing and other behavioral changes which may be mandated by governmental authorities or
independently undertaken out of an abundance of caution. The extent to which these events could impact
Valvoline's business results and operations depends upon the duration and severity, emerging variants, vaccine
and booster effectiveness, public acceptance of safety protocols, and governmental measures, including vaccine
mandates, among others.
Worsening conditions in the severity and spread of pandemics, epidemics, or disease outbreaks, could result in the
resurgence of lockdowns or stay-at-home guidelines which could adversely affect Valvoline’s ability to implement its
growth plans, including, without limitation, delay the construction or acquisition of service center stores, or
negatively impact Valvoline’s ability to successfully execute plans to enter into new markets; reduce demand for
Valvoline’s services; affect the ability and cost to attract and retain talent within the labor market; reduce sales or
profitability; negatively impact Valvoline’s ability to maintain operations; or lead to significant disruption of financial
markets in which the Company operates, and may reduce Valvoline’s ability to access capital and, in the future,
negatively affect the Company’s liquidity.
The limited diversification of Valvoline’s operations subjects it to risks.
Historically, Valvoline has been able to take advantage of its size and global reach as a combined products and
services company. The sale of Global Products reportable segment during fiscal 2023 resulted in Valvoline being a
smaller, less diversified company, potentially making it more vulnerable to changing market, regulatory and
economic conditions. Following completion of the sale of Global Products, Valvoline is more concentrated
geographically in the U.S. and Canada and in serving the automotive aftermarket through company-operated,
independent franchise and Express Care stores that service vehicles with Valvoline products. In addition, as a
smaller company, Valvoline may be unable to obtain goods or services at prices or on terms that are as favorable
as those obtained by Valvoline prior to the sale of Global Products, and Valvoline’s ability to absorb costs or
unexpected expenses whether due to contingencies or other risks as described herein, may be negatively
impacted. Any of these factors could have an adverse effect on Valvoline’s business, financial condition, results of
operations, or cash flows.
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Operating in numerous locations in the U.S. and Canada increases the scrutiny on Valvoline’s reputation for safety,
quality, friendliness, trustworthy service, integrity and business ethics. Any negative publicity about these or other
areas involving the business, including Valvoline’s response or lack thereof to external events involving civil unrest,
social justice, and political issues, whether or not based in fact, could damage Valvoline’s reputation and the value
of the brand.
Regulatory, legal, and financial risks
Data protection requirements could increase operating costs and requirements and a breach in
information privacy or other related risks could negatively impact operations.
Valvoline is subject to federal, state and local laws, and regulations in the U.S. and Canada relating to the
collection, use, retention, disclosure, security and transfer of personal data relating to its customers and employees.
These laws and regulations, and their interpretation and enforcement continue to evolve and may be inconsistent
from jurisdiction to jurisdiction. For example, the California Consumer Privacy Act ("CCPA") applies to Valvoline's
activities conducted in the state of California. Valvoline is also subject to Canada data privacy laws, such as The
Personal Information Protection and Electronic Documents Act (“PIPEDA”), due to operations throughout Canada.
Complying with the CCPA, PIPEDA and other similar emerging and changing privacy and data protection
requirements can be resource-intensive and may cause Valvoline to incur substantial costs as compliance requires
investment in new processes, technologies, and training.
Failure to protect customer personal data or comply with these legal obligations relating to privacy and data
protection could damage Valvoline's reputation and affect its ability to retain and attract customers. Additionally, any
failure or perceived failure by Valvoline or any third parties with which it does business, to comply with these privacy
and data protection laws and regulations, or with respect to similar obligations to which Valvoline may be or become
subject, may result in actions against Valvoline by governmental entities, private claims and litigation, fines,
penalties or other liabilities. Any such action would be expensive to defend, damage Valvoline’s reputation and
adversely affect business, operating results, financial position and cash flows.
The impact of changing laws or regulations or the manner of interpretation or enforcement of
existing laws or regulations could adversely impact Valvoline’s financial performance and restrict
its ability to operate its business or execute its strategies.
New laws or regulations, or changes in existing laws or regulations or the manner of their interpretation or
enforcement, could increase Valvoline’s cost of doing business and restrict its ability to operate its business or
execute its strategies. This risk includes, among other things, compliance with a myriad of U.S. tax laws and
regulations; franchise laws and regulations; securities laws and regulations; environmental laws and regulations;
labor laws and regulations; anti-competition laws and regulations; product compliance regulations; anti-corruption
and anti-bribery laws, including the Foreign Corrupt Practices Act (“FCPA”); anti-money-laundering laws; and other
laws governing Valvoline’s operations.
Although Valvoline has implemented policies and procedures to ensure compliance with these laws and regulations,
it cannot be sure that its policies and procedures are sufficient or that directors, officers, employees,
representatives, consultants and agents have not engaged in, and will not engage in, conduct for which Valvoline
may be held responsible, nor can Valvoline be sure that its business partners, including franchisees, have not
engaged in, and will not engage in, conduct that could materially affect their ability to perform their contractual
obligations to Valvoline or even result in Valvoline being held liable for such conduct. Violations of these laws or
regulations may result in severe criminal or civil sanctions or penalties, or significant changes in existing laws and
regulations may subject Valvoline to other liabilities, which could have a material adverse effect on its business,
financial condition, cash flows and results of operations.
Valvoline’s substantial indebtedness may adversely affect its business, results of operations and
financial condition.
Valvoline has substantial indebtedness and financial obligations. As of September 30, 2024, Valvoline had
outstanding indebtedness of $1.094 billion and available borrowing capacity of $346.8 million under its revolving
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credit facility. Valvoline may incur substantial additional debt from time to time to finance working capital, capital
expenditures, investments or acquisitions, or for other general corporate purposes.
Valvoline's substantial indebtedness could adversely affect its business, results of operations and financial condition
by, among other things: requiring Valvoline to dedicate a substantial portion of its cash flows to pay principal and
interest on its debt, which would reduce the availability of its cash flow to fund working capital, capital expenditures,
acquisitions, execution of its growth strategy and other general corporate purposes; limiting Valvoline’s ability to
borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements,
execution of its growth strategy and other general corporate purposes; making Valvoline more vulnerable to
adverse changes in general economic, industry and regulatory conditions and in its business by limiting its flexibility
in planning for or reacting to changing conditions; placing Valvoline at a competitive disadvantage compared with its
competitors that have less debt and lower debt service requirements; making Valvoline more vulnerable to
increases in interest rates since some of its indebtedness is subject to variable rates of interest; and making it more
difficult for Valvoline to satisfy its financial obligations.
In addition, Valvoline may not be able to generate sufficient cash flows to repay its indebtedness when it becomes
due and to meet its other cash needs. If Valvoline is not able to pay its debts as they become due, it could be in
default under the terms of its indebtedness. Valvoline might also be required to pursue one or more alternative
strategies to repay indebtedness, such as selling assets, refinancing or restructuring its indebtedness or selling
additional debt or equity securities. Valvoline may not be able to refinance its debt or sell additional debt or equity
securities or its assets on favorable terms, if at all, and if it must sell its assets, it may negatively affect Valvoline’s
ability to generate revenues.
Adverse developments and instability in financial institutions and markets may adversely impact
Valvoline’s business and financial condition.
The global macroeconomic environment could be negatively affected by, among other things, disruptions to the
banking system and financial market volatility resulting from bank failures and actions to reduce inflation. The
Company utilizes and maintains material balances of cash and cash equivalents, therefore is reliant on banks and
financial institutions to safeguard and allow ready access to these assets. Specifically, the Company has $68.3
million of cash and cash equivalents as of September 30, 2024 held by various financial institutions.
The failure of a bank, or other adverse conditions in the financial markets, impacting the institutions or
counterparties with which the Company, or its customers or vendors, maintain deposits or financing activities, could
impact Valvoline’s timely access to liquid assets or its financial performance. There are no assurances or
guarantees that deposits greater than the Federal Deposit Insurance Corporation limits will be protected by the U.S.
government or that any bank, government or financial institution will be able to obtain the needed liquidity in the
event of a failure or similar crisis. If financial institutions are unable to provide timely access to deposits and funds,
the Company, its vendors, customers, or lenders could be required to seek additional sources of liquidity to maintain
operating and cash requirements. As a result of uncertainty in the broader financial markets, there may be
additional impacts to Valvoline’s business that cannot be predicted at this time.
Valvoline’s pension and other postretirement benefit plan obligations are currently underfunded,
and Valvoline may have to make significant cash payments to some or all of these plans, which
would reduce the cash available for its business.
In connection with Valvoline’s separation from Ashland, Valvoline assumed certain of Ashland’s historical pension
and other postretirement benefit plans and related liabilities. The most significant of these plans, the U.S. qualified
pension plans, are estimated to be underfunded by $51.5 million as of September 30, 2024. The funded status of
Valvoline's pension plans is dependent upon many factors, including returns on invested assets, the level of certain
market interest rates and the discount rate used to determine pension obligations. Valvoline has taken a number of
actions to reduce the risk and volatility associated with the pension plans; however, changing market conditions or
laws and regulations could require material increases in the expected cash contributions to these plans in future
years. Specifically, unfavorable returns on plan assets or unfavorable changes in applicable laws or regulations
could materially change the timing and amount of required plan funding. In addition, a decrease in the discount rate
used to determine pension obligations could result in an increase in the valuation of pension obligations, which
could affect the reported funded status of Valvoline’s pension plans and future contributions. Similarly, an increase
in discount rates could increase the periodic pension cost in subsequent fiscal years. If any of these events occur,
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Valvoline may have to make cash payments to its pension plans to satisfy minimum funding requirements, which
based on current data and assumptions, are not expected for at least the next five years. If such payments are
required, it would reduce the cash available for Valvoline’s business. Finally, Valvoline’s policy to recognize
changes in the fair value of the pension assets and liabilities annually and as otherwise required through mark to
market accounting could result in volatility in Valvoline’s earnings, which could be material.
Valvoline may fail to adequately protect its intellectual property rights or may be accused of
infringing the intellectual property rights of third parties.
Valvoline relies heavily upon its trademarks, domain names and logos to market its brands and to build and
maintain brand loyalty and recognition. The Company’s success depends on the continued ability of Valvoline’s
company-operated and franchised service center stores to use the intellectual property and on the adequate
protection and enforcement of such intellectual property. Valvoline also relies on a combination of laws and
contractual restrictions with employees, customers, suppliers, affiliates and others, to establish and protect its
various intellectual property rights.
There can be no assurance that steps taken to protect and maintain the rights in Valvoline’s intellectual property will
be adequate, or that third parties will not infringe, misappropriate or violate the intellectual property. If any efforts to
protect the intellectual property are not adequate, or if any third party infringes, misappropriates or violates
Valvoline’s intellectual property, or if brand standards are not upheld in connection with the Brand Agreement, the
value of its brands may be harmed. The occurrence of any of these events could result in the erosion of Valvoline’s
brands and limit its ability to market its brands using its various trademarks, cause Valvoline to lose such trade
secrets, as well as impede its ability to effectively compete against competitors with similar products and services,
any of which could adversely affect its business, financial condition and results of operations.
From time to time, Valvoline has been subject to legal proceedings and claims, including claims of alleged
infringement of trademarks, copyrights, patents and other intellectual property rights held by third parties. In the
future, third parties may sue Valvoline for alleged infringement of their proprietary or intellectual property rights. In
addition, litigation may be necessary to enforce Valvoline’s intellectual property rights, protect its trade secrets or
determine the validity and scope of proprietary rights claimed by others. Any litigation or other intellectual property
proceedings of this nature, regardless of outcome or merit, could result in substantial costs and diversion of
management and technical resources, or loss of rights in Valvoline’s intellectual property, any of which could
adversely affect Valvoline’s business, financial condition and results of operations.
Valvoline has incurred, and will continue to incur, costs as a result of Environmental Health and
Safety (“EHS”) compliance requirements, which could adversely impact Valvoline’s cash flow,
results of operations or financial condition.
Valvoline is subject to extensive federal, state, local and non-U.S. laws, regulations, rules and ordinances relating to
pollution, protection of the environment and human health and safety, as well as the storage, handling, treatment,
disposal and remediation of hazardous substances and waste materials. Valvoline has incurred, and will continue to
incur, costs and capital expenditures to comply with these laws and regulations.
EHS regulations change frequently, and such regulations and their enforcement have tended to become more
stringent over time. Accordingly, changes in EHS laws and regulations and the enforcement of such laws and
regulations could interrupt Valvoline’s operations, require modifications to its facilities or cause it to incur significant
liabilities, costs or losses that could adversely affect its profitability. Actual or alleged violations of EHS laws and
regulations could result in restrictions or prohibitions on service center operations as well as substantial damages,
penalties, fines, civil or criminal sanctions and remediation costs.
Valvoline’s business involves the purchase, storage and transportation of hazardous substances. Under some
environmental laws, Valvoline may be strictly liable and/or jointly and severally liable for environmental damages
caused by releases of hazardous substances and waste materials into the environment. For instance, under
relevant laws and regulations Valvoline may be deemed liable for soil and/or groundwater contamination at sites it
currently owns and/or operates even though the contamination was caused by a third party such as a former owner
or operator, and at sites it formerly owned and operated if the release of hazardous substances or waste materials
was caused by it or by a third party during the period it owned and/or operated the site. Valvoline also may be
deemed liable for soil and/or groundwater contamination at sites to which it sent hazardous wastes for treatment or
24
disposal, notwithstanding that the original treatment or disposal activity accorded with all applicable regulatory
requirements.
The Company’s Amended and Restated Articles of Incorporation (the “Articles”) designate the
Fayette County Circuit Court of the Commonwealth of Kentucky as the sole and exclusive forum
for substantially all disputes between the Company and its shareholders, which may limit a
shareholder’s ability to bring a claim in a favorable judicial forum for disputes with the Company
and its directors, officers or employees.
The Company’s Articles specify that the Fayette County Circuit Court of the Commonwealth of Kentucky shall be
the sole and exclusive forum for any derivative action or proceeding brought on behalf of the Company, any action
asserting a breach of a fiduciary duty, any action asserting a claim arising pursuant to the Kentucky Business
Corporation Act, or any action asserting a claim governed by the internal affairs doctrine. This exclusive forum
provision does not apply to suits brought to enforce any duty or liability created by the Securities Exchange Act of
1934, as amended, (“Exchange Act”) or by the Securities Act of 1933, as amended.
The Company believes that the exclusive forum provision in the Articles benefits the Company by providing
increased consistency in the application of Kentucky law for the specified types of actions and may benefit the
Company by preventing it from having to litigate claims in multiple jurisdictions (and incur additional expenses) and
be subject to potential inconsistent or contrary rulings by different courts, among other considerations. The
exclusive forum provision in the Articles, however, may have the effect of discouraging lawsuits against Valvoline's
directors, officers or employees as it could increase a shareholder’s cost to bring a claim or limit a shareholder’s
ability to bring a claim in a judicial forum that it finds favorable for such claims. In connection with any applicable
action brought against the Company, it is possible that a court could find the forum selection provisions contained in
the Articles to be inapplicable or unenforceable in such action. If a court were to render such a finding, the
Company may incur additional costs to resolve the action in other jurisdictions, which could adversely affect
Valvoline’s business, financial condition or results of operations.
Risks related to the sale of the Global Products business
Valvoline may be unable to achieve some or all of the strategic and financial benefits that it
expects to achieve from the Transaction.
In connection with completing the sale of its former Global Products reportable segment, Valvoline received net
proceeds of $2.383 billion. Valvoline focused on accelerating the return of capital to shareholders through share
repurchases, reductions of debt, and investments in attractive retail service growth opportunities. In connection with
the sale of Global Products and the use of the net proceeds, Valvoline expects to drive growth and shareholder
value as a best-in-class, pure-play automotive retail service provider.
The anticipated operational, financial, strategic and other benefits may not be achieved from the Transaction, which
could have an adverse impact on Valvoline’s business, financial condition and results of operations. The anticipated
benefits are based on a number of assumptions, some of which may prove incorrect and could be affected by a
number of factors beyond Valvoline’s control, including without limitation, general economic conditions, increased
operating costs, challenges in separating the businesses information technology infrastructure and processes,
regulatory developments and the other risks described in these risk factors.
Valvoline is dependent on Global Products for its product supply and certain remaining transition
services and certain indemnities have been agreed to with the Buyer, for which the Company may
be negatively impacted if Global Products is unable to provide these products and services or is
unable to satisfy its indemnification obligations.
In connection with the sale of Global Products in fiscal 2023, the parties entered into a Supply Agreement and an
agreement for certain transition services. Pursuant to the Supply Agreement, Valvoline purchases substantially all
lubricant and certain ancillary products for its stores from Global Products and certain transition services remain in
place, which includes limited information technology support expected to continue through early calendar year
2025. Valvoline is dependent on Global Products for product supply and each party is reliant on one another for the
remaining transition services. Any interruption, delay, quality issue or other failure in product supply or service could
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adversely affect the business and results of operations and result in disputes between the parties. In addition, if
either party has issues or delays with finalizing the remaining transitions, Valvoline may not be able to operate its
business effectively which could cause adverse effects to its financial condition, results of operations, or cash flows.
As part of the sale of Global Products, the parties agreed to indemnify and reimburse one another for various
matters, which include tax indemnities. Each business will be responsible for taxes related to its operations,
breaches of its tax covenants, and its share of transfer taxes, while Valvoline assumes responsibility for tax matters
associated with the pre-closing reorganization. There is no guarantee that these indemnification arrangements will
sufficiently protect Valvoline from potential exposures or liability claims from third parties, including taxing
authorities. Additionally, there can be no assurance that Global Products can fulfill its indemnification obligations in
the future. Valvoline could experience negative impacts on its business, financial position, and cash flows due to
these risks.
Risks related to Valvoline’s separation from Ashland
Ashland has agreed to indemnify Valvoline for certain liabilities. However, there can be no
assurance that the indemnity will be sufficient to insure Valvoline against the full amount of such
liabilities, or that Ashland’s ability to satisfy its indemnification obligation will not be impaired in
the future.
Pursuant to the terms of the Separation Agreement and certain other agreements with Ashland, Ashland agreed to
indemnify Valvoline for certain liabilities. However, third parties could also seek to hold Valvoline responsible for any
of the liabilities that Ashland agreed to retain, and there can be no assurance that the indemnity from Ashland will
be sufficient to protect Valvoline against the full amount of such liabilities, or that Ashland will be able to fully satisfy
its indemnification obligations in the future. Even if Valvoline ultimately succeeded in recovering from Ashland any
amounts for which Valvoline is held liable, Valvoline may be temporarily required to bear these losses. Each of
these risks could negatively affect Valvoline’s business, financial position, results of operations and cash flows.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Valvoline is committed to protecting information that is valuable to customers and critical to business operations
from unauthorized access and disclosure by devoting significant resources to protecting information systems and
data through investing in people, technology, and processes to protect data and systems against evolving
cybersecurity threats. A cybersecurity program has been designed and implemented that is believed to reasonably
manage risks from cybersecurity threats and enable the Company to prevent, monitor, identify, detect, investigate,
respond to, mitigate, and report on threats and incidents.
Cybersecurity governance
Valvoline has adopted a cross-functional and multi-management level approach to assessing and managing risks
arising from cybersecurity threats. The Audit Committee of the Board (the “Audit Committee”) oversees the
Company’s enterprise risk management program. As part of this oversight, the Audit Committee has primary
responsibility for overseeing risks related to cybersecurity, although the Board retains ultimate oversight over these
risks. The Audit Committee reviews and discusses cybersecurity risks along with the Company’s cybersecurity
programs and strategy with management. The Audit Committee receives reports and presentations from the Senior
Vice President and Chief Technology Officer (“CTO”) and Senior Director of Information Security during bi-annual
meetings, and as needed, on a range of topics including, but not limited to, the cybersecurity program and
processes, information systems, business risk identification and mitigation strategies, strategic updates, operational
matters, the evolving cybersecurity threat landscape, regulatory developments, and notable incidents or threats
affecting the Company.
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The CTO, who serves as the Chief Information Security Officer (“CISO”) for the Company, is the primary executive
responsible for leading the Company’s cybersecurity risk management program and has over 25 years of
experience in various technology-related roles, including responsibilities related to managing information security,
developing cybersecurity strategy, and implementing cybersecurity programs. The Company’s Computer Security
Incident Response Team (“CSIRT”) has primary responsibility for monitoring and enacting the incident response
program and is led by the Senior Director of Information Security who reports to the CTO.
The CSIRT receives direction and guidance from various departments including operations, information technology,
communications, legal, and human resources while being responsible for maintaining and operating incident
response capabilities at Valvoline by collecting, aggregating, and analyzing detected alerts and events from
computer systems across the enterprise. Valvoline’s CSIRT meets at least quarterly, and more frequently as
appropriate, to review and discuss the Company’s cybersecurity program. The CSIRT has the authority and system
entitlements to confiscate, isolate, or disconnect equipment; investigate suspicious activity; monitor usage; and
disable system access in the proper execution of their duties. The CSIRT is responsible for declaring an incident
and initiating escalation to the Incident Response Team (“IRT”). The IRT is responsible for coordinating incident
response activities across functions and is comprised of cross-functional and multi-management level personnel
including, but not limited to, the Senior Director of Information Security, CSIRT Manager, Chief Legal Officer, Chief
Audit Executive, Privacy & Compliance Counsel, Chief Technology Officer, Head of Global Insurance, Director of
Corporate Communications, Chief Financial Officer, Chief Operating Officer, Chief Human Resource Officer, and
Head of Physical Security.
The IRT is also responsible for reporting incidents, following Valvoline’s Information Security Incident Response
Plan (“IRP”), in accordance with legal requirements, coordinating external communications, and setting information
sharing restrictions. Other departments or individuals may be engaged according to the specific nature of the
incident and will operate at the direction of the IRT. Valvoline’s Senior Director of Information Security is responsible
for the implementation of, and amendments to, the IRP and supporting procedures.
Risk management and strategy
Valvoline has developed and implemented a cybersecurity risk management program intended to protect the
confidentiality, integrity, and availability of critical systems and information in addition to a cybersecurity incident
response plan based on the National Institute of Standards (“NIST”) Cybersecurity Framework (“CSF”). The
program applies, where appropriate, to the Company’s internal and external information systems, applications,
networks, and operations which includes scanning, testing, and assessments designed to identify risks from
cybersecurity threats. Management across various functional teams administer the enterprise risk management
program, which is designed to identify, assess, and manage top enterprise risks, including risks arising from
cybersecurity threats. Valvoline continually evaluates and makes updates to the Company’s cybersecurity programs
to align with regulatory requirements and industry best practices in order to keep company-wide training initiatives
related to cybersecurity risks robust and up to date.
The IRP was designed to comprehensively leverage capabilities throughout the Company and to provide a
standardized framework for responding to cybersecurity incidents by coordinating an approach to investigate,
contain, mitigate, fix vulnerabilities, determine legally required responses or notifications, and document
cybersecurity incidents including reporting and escalating findings as appropriate. The CSIRT, being responsible for
incident response, assembles the IRT and assigns responsibilities based on the circumstances of the information
security incident.
Valvoline employs a risk-based approach to secure access to networks, systems, and applications for business
partners and vendors receiving access to the environments and data. Business partners and vendors with whom
information is shared to conduct business are required to safeguard it by appropriate means, including elevated
contractual commitments when appropriate. The Company provides cybersecurity training to team members during
onboarding and regularly thereafter and deploy technologies to automate and enhance operational security
capabilities. In addition, Valvoline also uses third-party managed security services to augment the cybersecurity
team’s capabilities.
To date, risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not
materially affected the Company, including the business strategy, results of operations or financial condition, and
management does not believe that such risks are reasonably likely to have such an effect over the long term.
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However, due to evolving cybersecurity threats, and despite security measures taken, it may not be possible to
anticipate, prevent, and stop future cybersecurity incidents, including attacks on information systems and data or
those of relevant business partners. Additional information on cybersecurity risks identified is discussed in Item 1A
of Part I, “Risk Factors”, which should be read in conjunction with this Item 1C. Cybersecurity.
ITEM 2. PROPERTIES
Valvoline is headquartered in Lexington, Kentucky, where the Company leases approximately 135,000 square feet
of office and warehouse space to support operations across its business, which excludes certain properties that the
Company currently subleases to others. In addition, Valvoline owns or leases the property associated with 950
company-operated retail service center stores under the Valvoline Instant Oil ChangeSM and Valvoline Great
Canadian Oil Change brands throughout the United States and Canada, respectively. Valvoline’s store leases
typically have initial terms of up to 15 years with renewal options, exercisable at the Company’s discretion.
Valvoline believes its physical properties are suitable and adequate for the Company’s business, and none of the
property owned by Valvoline is subject to any major known encumbrances. Additional information regarding lease
obligations may be found in Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of
this Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
From time to time, Valvoline is party to lawsuits, claims and other legal proceedings that arise in the ordinary course
of business. For a description of Valvoline's legal proceedings, refer to Note 11 of the Notes to Consolidated
Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
28
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
Market information
Valvoline common stock is listed on the NYSE and trades under the symbol “VVV.” As of November 19, 2024, there
were approximately 7,400 registered holders of Valvoline common stock.
Dividend policy
The Company currently does not anticipate declaring or paying any cash dividends for the foreseeable future. The
declaration, amount and payment of any future dividends to holders of Valvoline common stock is at the sole
discretion of Valvoline's Board of Directors (the “Board”) after considering various factors, including Valvoline’s
financial condition, operating results, current and anticipated cash needs, cash flows, impact on Valvoline’s effective
tax rate, indebtedness, legal requirements and other factors that the Board considers relevant. In addition, the
instruments governing Valvoline’s indebtedness may limit the Company’s ability to pay dividends. Therefore, no
assurance are given that Valvoline will pay any dividends to its shareholders, or as to the amount of any such
dividends if the Board determines to do so.
Stock performance graph
The following graph compares the cumulative total shareholder return on a $100 investment in Valvoline common
stock, the S&P MidCap 400 Index, and the S&P MidCap 400 Specialty Retail Index for the period from September
30, 2019 to September 30, 2024. This graph assumes an investment in Valvoline common stock and each index
were $100 on September 30, 2019 and that all dividends were reinvested.
Five-year cumulative total shareholder returns
VVV
S&P MidCap 400 Index
S&P MidCap 400 Specialty Retail Index
09/30/19
09/30/20
09/30/21
09/30/22
09/30/23
09/30/24
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00
29
Years ended September 30
Cumulative total returns
2020
2021
2022
2023
2024
Valvoline Inc.
$
88.36 $ 147.37 $ 121.61 $ 155.32 $ 201.62
S&P MidCap 400 Index
$
97.84 $ 140.58 $ 119.14 $ 137.62 $ 174.49
S&P MidCap 400 Specialty Retail Index
$ 110.75 $ 187.47 $ 126.52 $ 142.05 $ 203.20
Purchases of Company common stock
Valvoline has returned value to shareholders through share repurchases, the timing and amount of which will be at
the discretion of the Company and based on Valvoline’s liquidity, general business and market conditions, and other
factors, including alternative investment opportunities.
Repurchases of the Company’s common stock during the three months ended September 30, 2024 pursuant to the
July 30, 2024 Board authorization to repurchase up to $400 million of common stock with no expiration date were:
Fiscal period
Total number of
shares
purchased
Average price
paid per share
Total number of
shares
purchased as
part of publicly
announced
plans or
programs
Dollar value of
shares that
may yet be
purchased
under the plans
or programs
(in millions)
July 1, 2024 - July 31, 2024
— $
—
— $
400.0
August 1, 2024 - August 31, 2024
70,886 $
42.11
70,886 $
397.0
September 1, 2024 - September 30, 2024
299,082 $
40.75
299,082 $
384.8
Total
369,968 $
41.01
369,968
ITEM 6. RESERVED
30
Index to Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Page
Business Overview
31
Results of Operations - Consolidated Review
35
Financial Position, Liquidity and Capital Resources
40
New Accounting Pronouncements
43
Critical Accounting Estimates
44
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and the
accompanying Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on
Form 10-K. Unless otherwise noted, disclosures herein relate solely to the Company’s continuing operations.
BUSINESS OVERVIEW AND PURPOSE
As the quick, easy, trusted leader in automotive preventive maintenance, Valvoline is creating shareholder value by
driving the full potential of 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 approximately 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 more than 2,000 service center locations through its
Valvoline Instant Oil ChangeSM (“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and
supports nearly 270 locations through its Express CareTM platform.
Valvoline's fiscal year ends on September 30 of each year.
31
FISCAL 2024 OVERVIEW
Key operating highlights from continuing operations are presented below, each of which is discussed more fully in
this Annual Report on Form 10-K:
12%
Growth in Net revenues
$367.2 million
Operating income from continuing
operations
33%
Growth in Diluted EPS
$3.1 billion
System-wide store sales (a)
$226.8 million
Returned to shareholders through share
repurchases
$282.9 million
Cash flows from operations
2,010
System-wide stores (a) with 8.5% annual
growth
18 years
of consecutive system-wide same-store
sales growth (b)
16.5%
Growth in adjusted EBITDA (c)
(a) Measures include Valvoline franchisees, which are independent legal entities. Valvoline does not consolidate the results of operations of its
franchisees.
(b) Valvoline currently determines same-store sales growth as sales by U.S. VIOC stores (company-operated, franchised and the combination
of these for system-wide same-store sales), with new stores, including franchised conversions, excluded from the metric until the
completion of their first full fiscal year in operation.
(c)
Represents a non-GAAP measure. Refer to “Use of Non-GAAP Measures” and the Appendix for additional details.
Summarized below are Valvoline's trends in the results of its continuing operations Net revenues, Income from
continuing operations, and Adjusted EBITDA over the last five fiscal years:
Net revenues
(In millions)
$727.0
$1,037.2
$1,236.1
$1,443.5
$1,619.0
2020
2021
2022
2023
2024
Income from continuing
operations
(In millions)
$69.6
$200.1
$109.4
$199.4 $214.5
2020
2021
2022
2023
2024
Adjusted EBITDA (a)
(In millions)
$166.1
$277.0
$315.7
$380.0
$442.6
2020
2021
2022
2023
2024
(a)
Adjusted EBITDA is a non-GAAP measure, further described and defined within the “Use of Non-GAAP Measures” section below. Also refer
to the “Continuing operations EBITDA and Adjusted EBITDA” section within “Results of Operations” below for a reconciliation of income
from continuing operations to Adjusted EBITDA for each fiscal year presented.
Net revenues and Adjusted EBITDA trends have significantly increased over the past five fiscal years largely driven
by strong system-wide same-store sales (“SSS”) growth, which benefited from increased transactions, higher
average ticket, and continued non-oil change penetration, in addition to acquisitions and overall store expansion.
Income from continuing operations has also followed an upward trend largely from strong top-line performance with
the exception of fiscal 2022 where the decrease was primarily driven by a loss due to the remeasurement of
pension and other postretirement plans, as well as higher separation-related expenses in connection with the
planning and evaluation of the separation of the Company’s businesses that ultimately culminated in the sale of
Global Products.
32
Results for Fiscal 2023 compared to Fiscal 2022
For comparisons of Valvoline's consolidated results of operations and cash flows for the fiscal years ended
September 30, 2023 to September 30, 2022, refer to Item 7 of Part II of the Annual Report on Form 10-K for the
fiscal year ended September 30, 2023, filed with the Securities and Exchange Commission on November 20, 2023.
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 Annual Report on Form 10-K 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);
•
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.
33
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
respective store counts with only permanent store closures reflected in the activity and end of period store counts.
For the periods presented herein, SSS is defined as net revenues of 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. Beginning in fiscal 2025,
management is updating its definition of same-store sales and in connection with this change, prior periods will be
recast to present SSS on a consistent basis with the new approach. The new approach will define same stores at
the beginning of the month following the completion of 12 full months in operation within the system to more closely
conform with common retail practice.
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.
34
RESULTS OF OPERATIONS
The following summarizes the results of the Company’s continuing operations for the years ended September 30:
2024 vs. 2023
(In millions)
2024
2023
$
%
Net revenues
$ 1,619.0
$ 1,443.5
$
175.5
12.2 %
Gross profit
$ 618.8
$ 544.5
$
74.3
13.6 %
Gross profit margin
38.2 %
37.7 %
50 bps
Net operating expenses
$ 251.6
$ 297.3
$
(45.7)
(15.4) %
Percentage of net revenues
15.5 %
20.6 %
(510) bps
Operating income
$ 367.2
$ 247.2
$
120.0
48.5 %
Operating margin
22.7 %
17.1 %
560 bps
Income from continuing operations
$ 214.5
$ 199.4
$
15.1
7.6 %
EBITDA (a)
$ 461.4
$ 363.6
$
97.8
26.9 %
Adjusted EBITDA (a)
$ 442.6
$ 380.0
$
62.6
16.5 %
Adjusted EBITDA margin (a)
27.3 %
26.3 %
100 bps
(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.
Fiscal 2024 marked the 18th consecutive year for system-wide SSS growth with 158 net store additions to the
system. The table below highlights the growth over the last year:
(In millions, except store count)
Fiscal year 2024
Growth vs.
2023
System-wide store sales (a)
$
3,104.3
12.4 %
System-wide store count (a)
2,010
8.5 %
Years ended September 30
2024
2023
System-wide SSS growth (a)
6.7 %
11.9 %
(a)
Measures include Valvoline franchisees, which are independent legal entities. Refer to the “Key Business Measures” section above for
additional details on these key business measures, including management’s definitions.
Net revenues
Net revenues increased $175.5 million, or 12.2% over the prior year period primarily driven by improvements in
volume, mix, and pricing. System-wide SSS growth increased 6.7% with the majority of the gains coming from ticket
growth, driven by higher non-oil change penetration, pricing adjustments, and premiumization while transaction
growth accounted for the remaining balance. Year-over-year system-wide store growth of 8.5% also contributed to
net revenues and volumes through the addition of 158 net new stores. The following reconciles the year-over-year
changes in Net revenues:
35
2023 to 2024 changes in Net revenues
(In millions)
$1,443.5
71.5
59.2
23.7
26.8
(5.4)
(0.1)
(0.2)
$1,619.0
2023 Net
revenues
Volume
Mix
Acquisitions
Price
Dispositions
Currency
exchange
Suspended
operations
2024 Net
revenues
Gross profit
Gross profit improved 13.6% year-over-year, largely driven by strong top-line growth from higher transaction
volumes, increased average ticket, and continued store expansion. These benefits were partially offset by increased
store operating costs, including depreciation, as well as higher labor and material expenses. The following
reconciles the year-over-year changes in gross profit:
2023 to 2024 changes in Gross profit
(In millions)
$544.5
21.0
39.7
2.4
12.1
(0.8)
0.1
(0.2)
$618.8
2023 Gross
profit
Volume
Mix
Acquisitions
Price and
cost
Dispositions
Currency
exchange
Suspended
operations
2024 Gross
profit
Gross profit margin rate improved compared to the prior year, driven by increased labor efficiency from effective
management, along with lower product costs as a percentage of sales. These benefits were partially offset by
business mix and higher depreciation.
Net operating expenses
Details of the components of Net operating expenses are summarized below for the years ended September 30:
36
Variance
(In millions)
2024
2023
$
%
Selling, general and administrative expenses
$
305.1 $
264.5 $
40.6
15.3 %
Net legacy and separation-related (income) expenses
(0.7)
32.8
(33.5)
(102.1) %
Other income, net
(52.8)
—
(52.8)
— %
Net operating expenses
$
251.6 $
297.3 $
(45.7)
(15.4) %
Selling, general and administrative (“SG&A”) expenses increased $40.6 million compared to the prior year period.
This increase reflects ongoing investments in growth, particularly related to the expansion of the stand-alone retail
services business following the sale of Global Products in fiscal 2023. The higher costs were primarily driven by
investments in stand-alone technology platforms, outside services, and implementation costs which together
contributed an increase in expense of $23.8 million. Additionally, increased spending on advertising to attract and
retain customers as well as investments in talent combined to increase expense by $16.8 million.
Net legacy and separation-related activity was favorable compared to the prior year by $33.5 million as a result of
prior year expenses that generally did not recur. In fiscal 2023, $25.7 million of expense was recognized due to the
amendment of the tax matters agreement with Valvoline’s former parent company that resulted in an increased
indemnity obligation for the utilization of certain legacy tax attributes. Additionally, expense was recognized in the
prior year associated with the modification of certain unvested performance-based stock awards for the continuing
operation in connection with the sale of Global Products.
Other income, net increased by $52.8 million primarily driven by a $41.8 million gain on sale of operations
recognized from the sale of company-operated service center stores to franchisees and higher rental income of
$1.7 million from subleasing portions of certain properties to Global Products, which only included a partial year of
income in the prior year. The prior year also includes impairment charges of $9.2 million related to suspended
operations and an investment that did not recur.
Net pension and other postretirement plan expense (income)
Net pension and other postretirement plan income decreased $39.3 million from the prior year, primarily due to a
lower current year gain on pension and other postretirement plan remeasurement of $2.4 million compared to a gain
of $41.6 million in the prior year. The lower remeasurement gain was primarily attributed to a decline in discount
rates, which was moderated by higher actual returns on plan assets in the current year compared to the prior year.
Net interest and other financing expenses
Net interest and other financing expense increased $33.6 million during fiscal 2024, primarily due to a $26.9 million
decrease in interest income following the maturity of invested net proceeds from the sale of Global Products. These
investments began maturing in late fiscal 2023 and fully matured in the second quarter of fiscal 2024 and were
utilized to complete the tender offer to repurchase 27.0 million shares of its common stock for $1.024 billion (the
“Equity Tender Offer”) in fiscal 2023. They were also utilized in fiscal 2024 to complete a tender offer (the “Debt
Tender Offer”) for $598.3 million, or 99.7%, of the outstanding principal amount tendered by the holders of the 2030
Notes. Additionally, debt modification charges and related fees were $6.2 million higher, driven by the current year’s
repurchase of the 2030 Notes, which resulted in the write-off of previously capitalized debt issuance costs and
discounts, as well as third-party fees associated with the execution of the Debt Tender Offer, which were higher
than those recognized in the prior year modification of the Senior Credit Agreement.
37
Income tax expense
The following table summarizes Income tax expense and the effective tax rate during the years ended September
30:
(In millions)
2024
2023
Income tax expense
$
69.1
$
37.1
Effective tax rate percentage
24.4 %
15.7 %
The higher effective tax rate in fiscal 2024 is primarily due to more normalized activity compared to the prior year
period, which included a $29.0 million income tax benefit. This benefit resulted from 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.
(Loss) income from discontinued operations, net of tax
(Loss) income from discontinued operations, net of tax for the years ended September 30 are as follows:
(In millions)
2024
2023
(Loss) income from discontinued operations, net of tax
$
(3.0) $
1,220.3
Earnings from discontinued operations declined $1.223 billion compared to the prior year primarily due to the
recognition of an after-tax gain of $1.147 billion from the sale of the Global Products business in the prior year
period, along with partial-year results from the underlying business in the pre-closing period. In contrast, the current
year no longer reflects operational results from the underlying business and includes certain remaining costs to
facilitate the separation of processes and systems, which were partially offset by favorable tax adjustments to the
gain on sale.
Continuing operations adjusted net revenues
The following reconciles Net revenues to Adjusted net revenues for the years ended September 30:
(In millions)
2024
2023
Reported net revenues
$
1,619.0 $
1,443.5
Key items:
Suspended operations (a)
—
(0.2)
Adjusted net revenues (b) (c)
$
1,619.0 $
1,443.3
(a)
Represents the results of a former Global Products business where operations were suspended during fiscal 2022 that were not included in
the sale.
(b)
Adjusted net revenues is defined as net revenue adjusted for key items.
(c)
Represents a non-GAAP measure. Refer to “Use of Non-GAAP Measures” for management’s definitions of the metrics presented above.
38
Continuing operations EBITDA and Adjusted EBITDA
The following reconciles Income from continuing operations to EBITDA and Adjusted EBITDA for the years ended
September 30:
Income from continuing operations
$ 214.5 $ 199.4 $ 109.4 $ 200.1 $
69.6
Income tax expense
69.1
37.1
34.7
59.9
53.4
Net interest and other financing expenses
71.9
38.3
69.3
108.3
92.1
Depreciation and amortization
105.9
88.8
71.4
62.1
40.5
EBITDA from continuing operations (a)
461.4
363.6
284.8
430.4
255.6
Net pension and postretirement plan expense (income) (b)
11.7
(27.6)
6.9 (128.2)
(54.9)
Net legacy and separation-related (income) expenses (c)
(0.7)
32.8
20.5
(23.6)
(30.0)
Information technology transition costs (d)
10.4
3.0
2.6
—
—
Investment and divestiture-related (income) costs (e)
(40.2)
1.1
—
—
1.3
Suspended operations (f)
—
7.1
0.9
(1.5)
(1.3)
Restructuring and related adjustments (g)
—
—
—
(0.1)
0.3
Compensated absences benefits change (h)
—
—
—
—
(4.9)
Adjusted EBITDA from continuing operations (a)
$ 442.6 $ 380.0 $ 315.7 $ 277.0 $ 166.1
(In millions)
2024
2023
2022
2021
2020
(a)
EBITDA from continuing operations is defined as income from continuing operations, plus income tax expense, net interest and other
financing expenses, and depreciation and amortization attributable to continuing operations. Adjusted EBITDA from continuing operations is
EBITDA adjusted for key items attributable to continuing operations.
(b)
Includes several elements impacted by changes in plan assets and obligations that are primarily driven by the debt and equity markets,
including remeasurement gains and losses, when applicable; and recurring non-service pension and other postretirement net periodic
activity, which consists of interest cost, expected return on plan assets and amortization of prior service credits. Management considers
these elements are more reflective of changes in current conditions in global markets (in particular, interest rates), outside the operational
performance of the business, and are also legacy amounts that are not directly related to the underlying business and do not have an
impact on the compensation and benefits provided to eligible employees for current service. Refer to Note 10 in the Notes to Consolidated
Financial Statements in Item 8 of Part II in this Annual Report on Form 10-K for further details.
(c)
Activity associated with legacy businesses, including the separation from Valvoline’s former parent company and its former Global Products
reportable segment. This activity includes the recognition of and adjustments to indemnity obligations to its former parent company; certain
legal, financial, professional advisory and consulting fees; and other expenses incurred by the continuing operations in connection with and
directly related to these separation transactions and legacy matters. This incremental activity directly attributable to legacy matters and
separation transactions is not considered reflective of the underlying operating performance of the Company’s continuing operations. During
fiscal three months ended September 30, 2023, the Company recognized $25.7 million of pre-tax expense to reflect its increased estimated
indemnity obligation which also resulted in an income tax benefit of $29.0 million to reflect the release of valuations allowances in
connection with the amendment of the Tax Matters Agreement with Valvoline’s former parent company.
(d)
Consists of expenses incurred related to the Company’s information technology transitions, primarily related to implementing stand-alone
enterprise resource planning and human resource information systems during fiscal years 2023 and 2024. These expenses include data
conversion, temporary support, training, and redundant expenses incurred from duplicative technology platforms, which are incremental
costs directly associated with technology transitions and are not considered to be reflective of the ongoing expenses of operating the
Company’s technology platforms.
(e)
Consists of activity associated with significant acquisitions, investments and divestitures, including legal, advisory and consulting fees, such
as diligence costs, in addition to gains or losses recognized upon disposition and expense recognized to reduce the carrying values of
investments determined to be impaired. These costs are not considered to be reflective of the underlying performance of the Company’s
ongoing continuing operations.
(f)
Represents the results of a former Global Products business where operations were suspended during fiscal 2022. This business was not
included in the sale of the Global Products business in March 2023. It was classified as held for sale and impaired as of September 30,
2023, and subsequently sold during the first fiscal quarter of 2024. These results are not indicative of the operating performance of the
Company’s ongoing continuing operations.
(g)
Adjustments to employee termination benefits recognized over remaining employee service periods as a result of company-wide
restructuring activities that are not considered reflective of the underlying operating performance of the Company’s ongoing operations.
(h)
Adjustment associated with the Company’s change in its policy for benefits associated with compensated absences, the results of which are
not indicative of the operating performance of the Company’s underlying operations.
Adjusted EBITDA increased $62.6 million, or 16.5%, for the year ended September 30, 2024 compared to the prior
year. This growth was primarily attributable to strong gross profit expansion, which benefited from higher average
ticket driven by non-oil change service penetration, net pricing benefits, and increased premiumization, along with
increased transactions and unit growth, in addition to operational efficiencies, primarily in labor management, that
39
further contributed to the increase. These benefits were partially offset by investments in SG&A expenses to
support the stand-alone business and future growth.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company closely manages its liquidity and capital resources. Valvoline’s liquidity requirements depend on key
variables, including the level of investment needed to support business strategies, the performance of the business,
capital expenditures, borrowing arrangements, and working capital management. Capital expenditures, acquisitions,
and share repurchases are components of the Company’s cash flow and capital management strategy, which to a
large extent, can be adjusted in response to economic and other changes in the business environment. The
Company has a disciplined approach to capital allocation, which focuses on investing in key priorities that support
Valvoline’s business and growth strategies and returning capital to shareholders, while funding ongoing operations.
Continuing operations cash flows
Valvoline’s continuing operations cash flows as reflected in the Consolidated Statements of Cash Flows are
summarized as follows for the years ended September 30:
Cash provided by (used in):
Operating activities
$
282.9 $
353.0
Investing activities
$
136.8 $
(577.2)
Financing activities
$
(746.3) $
(1,565.5)
(In millions)
2024
2023
Operating activities
The decrease in cash flows provided by operating activities of $70.1 million from the prior year was primarily driven
by changes in net working capital. Net working capital in the prior year period benefited approximately $70 million
from the establishment of the Supply Agreement, which includes a full conversion cycle of related outstanding
payables, in addition to other separation-related accruals in connection with the sale of Global Products.
Investing activities
The increase in cash flows from investing activities of $714.0 million from the prior year was substantially driven by
net proceeds from investments of $346.5 million during the current year in comparison to the net purchase of
investments of $360.4 million during the prior year. The Company invested a substantial portion of the net proceeds
from the sale of Global Products in short-term investments in the prior year, which completely matured in the
second quarter of fiscal 2024 to support the repurchase of the 2030 Notes that took place in April 2024 discussed in
financing activities below. In addition, the Company received proceeds, net of cash disposed of, of $71.5 million
primarily as a result of completing two refranchising transactions in the current year. These year-over-year changes
in cash flows from investing activities were partially offset by increased capital expenditures of $43.9 million and an
increase in acquisition activity of $16.4 million in the current year to support store growth.
Financing activities
The decrease in cash flows used in financing activities of $819.2 million from the prior year was principally driven by
year over year reductions in share repurchases partially offset by higher net payments on borrowings. In the prior
year, the Company completed the Equity Tender Offer to repurchase 27.0 million shares of its common stock for
$1.024 billion coupled with other share repurchases of $500.6 million, which utilized a substantial portion of the net
proceeds from the sale of Global Products to return cash to shareholders. In the current year, share repurchases of
$226.8 million drove lower uses of cash year-over-year of $1.298 billion. Further contributing to lower uses of cash
for financing activities were prior year dividend payments of $21.8 million that did not recur as the Company
discontinued its dividend during the second quarter of fiscal 2023 following the sale of Global Products.
40
These decreases in cash flows used in financing activities were partially offset by higher net payments on
borrowings of $498.9 million. Higher net payments in the current year were driven by the Debt Tender Offer, which
utilized cash and cash equivalents and borrowings of $175.0 million on the Revolver to facilitate the repurchase of
the $600.0 million 2030 Notes in accordance with the asset sale covenant of the governing indenture. These net
payments on borrowings in the current year compared to net inflows in the prior year associated with the
modification of the Senior Credit Agreement in connection with closing the sale of Global Products.
Continuing operations free cash flow
The following table sets forth free cash flow and discretionary free cash flow from continuing operations and
reconciles cash flows from operating activities to both measures. As previously noted, free cash flow has certain
limitations, including that it does not reflect adjustments for certain non-discretionary cash flows, such as mandatory
debt repayments. Refer to “Use of Non-GAAP Measures” within this Item 7 for additional information regarding this
non-GAAP measure.
(In millions)
2024
2023
Cash flows provided by operating activities
$
282.9 $
353.0
Less: Maintenance capital expenditures
(35.9)
(29.5)
Discretionary free cash flow
247.0
323.5
Less: Growth capital expenditures
(188.5)
(151.0)
Free cash flow
$
58.5 $
172.5
The decrease in free cash flow from continuing operations over the prior year was driven primarily by lower cash
flows provided by operating activities in the current year as described above. These changes, in addition to higher
capital expenditures, resulted in lower free cash flow from the prior year. New store construction primarily drove
increased capital expenditures during the current year, as the Company continues to focus the majority of its capital
spend toward growth, which is expected to drive a high return on invested capital.
Discontinued operations cash flows
The cash flows attributable to the discontinued operation are reflected in the Consolidated Statements of Cash
Flows and are summarized below for the years ended September 30:
(In millions)
2024
2023
Cash (used by) provided in:
Operating activities
$
(17.8) $
(393.8)
Investing activities
$
— $
2,620.9
Financing activities
$
— $
(108.1)
The decrease in operating cash flows provided by discontinued operations was largely due to prior year tax
payments of $300.8 million relating to the gain on sale of discontinued operations, in addition to payments of
separation-related costs attributed to the sale of the Global Products business, including the success fee which
coincided with the close of the Transaction on March 1, 2023. In addition, unfavorable changes in net working
capital during the pre-close period in the prior year contributed to the use of cash flows that were primarily due to
trade and other payables activity in the cost inflationary environment and growth in accounts receivable from
increased sales. Prior year discontinued operations cash flows provided by investing activities were due to the cash
consideration received, net of cash transferred, at the close of the sale of Global Products of $2.6 billion. The prior
year cash flows used in financing activities were due to net repayments on borrowings driven by the extinguishment
of the $175 million Trade Receivables Facility.
41
Debt
The following table summarizes Valvoline’s continuing operations debt as of September 30:
(In millions)
2024
2023
2031 Notes
$
535.0 $
535.0
2030 Notes
—
600.0
Term Loan
439.4
463.1
Revolver
125.0
—
Debt issuance costs and discounts
(5.6)
(12.0)
Total debt
1,093.8
1,586.1
Current portion of long-term debt
23.8
23.8
Long-term debt
$
1,070.0 $
1,562.3
Approximately 49% of Valvoline's outstanding borrowings as of September 30, 2024 had fixed rates, with the
remainder bearing variable interest rates. As of September 30, 2024, Valvoline was in compliance with all
covenants of its debt obligations and had borrowing capacity remaining of $346.8 million. Refer to Note 8 of the
Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for
additional details regarding the Company’s debt instruments.
On April 16, 2024, Valvoline completed the Debt Tender Offer with 99.7% of the outstanding principal amount
tendered by the holders of 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 purchase of the 2030 Notes at
par, plus accrued and unpaid interest, and cancelled the 2030 Notes accepted for purchase. The Company elected
to repurchase 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. In connection with the completion of the Debt Tender Offer,
Valvoline recognized a loss on extinguishment of the 2030 Notes of $5.1 million within Net interest and other
financing expenses in the Consolidated Statements of Comprehensive Income during the year ended September
30, 2024, comprised of the write-off of related unamortized debt issuance costs and discounts.
Material cash requirements and other commitments
The Company's material cash requirements for the continuing operations include the following contractual
obligations and commitments as of September 30, 2024:
Long-term debt
$
1,099.4 $
23.8 $
47.5 $
493.1 $
535.0
Interest payments (a)
264.7
59.0
112.9
54.0
38.8
Operating lease obligations
403.6
45.9
87.5
77.1
193.1
Finance lease obligations
296.1
24.1
50.1
50.4
171.5
Employee benefit obligations (b)
73.4
7.8
17.7
15.9
32.0
Total
$
2,137.2 $
160.6 $
315.7 $
690.5 $
970.4
(In millions)
Total
Less than
1 year
1-3
years
3-5
years
5 years
and more
(a)
Includes interest expense on both variable and fixed rate debt, assuming no prepayments. Variable interest rates have been assumed to
remain constant through payment at the rates that existed as of September 30, 2024.
(b)
Includes projected benefit payments through fiscal 2034 for Valvoline’s unfunded benefit plans. Excludes benefit payments from pension
plan trust funds.
The Company guaranteed future lease commitments related to certain facilities in connection with the sale and
disposal of certain retail stores and the Global Products business. Valvoline is obligated to perform if the buyers of
the divested businesses default on the leases under the guarantees, which extend through 2037. The undiscounted
42
maximum potential future payments under the guarantees were $32.8 million as of September 30, 2024. The
Company has not recorded a liability for these guarantees as the likelihood of making future payments is
considered remote.
Fiscal 2025 capital expenditures
Valvoline is currently forecasting approximately $230 million to $250 million of capital expenditures for fiscal 2025,
funded primarily from operating cash flows.
Pension and other postretirement plan obligations
The Company makes cash and non-cash contributions and benefit payments for its pension and other
postretirement plans. During fiscal 2024, the Company made $16.6 million in benefit payments for its non-qualified
pension and other postretirement plans, consisting of $8.3 million of cash payments and $8.3 million of non-cash
payments. Based on current data and assumptions, the Company does not anticipate the need to satisfy any
minimum funding requirements to its qualified pension plans for at least the next 5 years. Refer to Note 10 of the
Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for additional
information regarding the Company's U.S. pension and other postretirement plans.
Share repurchases
During the year ended September 30, 2024, the Company repurchased 6.7 million shares of its common stock for a
principal amount of $226.7 million, which completed the November 2022 Board authorization to repurchase up to
$1.6 billion of its common stock (the “2022 Share Repurchase Authorization”). During July 2024, the Board
approved a share repurchase authorization of $400.0 million (the “2024 Share Repurchase Authorization”), which
has no expiration date. As of September 30, 2024, $384.8 million remained available for repurchase under the 2024
Share Repurchase Authorization. Additionally, the Company repurchased 0.2 million shares for an aggregate
amount of $9.8 million from October 1, 2024 through November 19, 2024 pursuant to the 2024 Share Repurchase
Authorization, leaving $375.0 million in aggregate repurchase authority remaining as of November 19, 2024.
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 share repurchase authorization is
part of a broader capital allocation framework to deliver value to shareholders by first, driving profitable growth in the
business, organically and through acquisitions and franchise development; second, to remain within a ratings
agency target adjusted EBITDA net leverage ratio of 2.5 to 3.5 times; and third, to continue returning excess capital
to shareholders.
Summary
Valvoline’s continuing operations had cash and cash equivalents of $68.3 million, total debt of $1.1 billion, and total
remaining borrowing capacity of $346.8 million as of September 30, 2024. Valvoline’s ability to generate positive
cash flows from operations is dependent on general economic conditions, the competitive environment in the
industry, and is subject to the business and other risk factors described in Item 1A of Part I of this Annual Report on
Form 10-K.
Management believes that the Company has sufficient liquidity based on its current cash, cash equivalents, cash
generated from business operations and existing financing to meet its pension and other postretirement plan, debt
servicing, tax-related and other material cash and operating requirements for the next twelve months.
NEW ACCOUNTING PRONOUNCEMENTS
For a discussion and analysis of recently issued and adopted accounting pronouncements and the impact on
Valvoline, refer to Note 2 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual
Report on Form 10-K.
43
CRITICAL ACCOUNTING ESTIMATES
The preparation of Valvoline’s consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and
expenses, and the disclosures of contingent matters. Significant items that are subject to such estimates and
assumptions include, but are not limited to, employee benefit obligations, business combinations, and income taxes.
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. Valvoline’s significant accounting policies are discussed in Note 2 of the Notes to
Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. The Company believes
the accounting estimates listed below are the most critical to aid in fully understanding and evaluating the reported
financial results, and require the most difficult, subjective, or complex judgments, resulting from the need to make
estimates about the effects of matters that are inherently uncertain.
Employee benefit obligations
Description
Judgments and
uncertainties
Effect if actual results
differ from assumptions
Valvoline sponsors defined benefit pension and other
postretirement plans in the U.S. As of September 30,
2024, Valvoline’s net unfunded pension and other
postretirement plan liabilities included in the Consolidated
Balance Sheet totaled $136.6 million. Total pension and
other postretirement net periodic benefit income
recognized in fiscal 2024 was $11.7 million, inclusive of a
$2.4 million remeasurement gain.
Valvoline recognizes the change in the fair value of plan
assets and the net actuarial gains and losses calculated
using updated actuarial assumptions as of the
measurement date, which for Valvoline is September 30,
and when a plan qualifies for an interim remeasurement.
Refer to Note 10 of the Notes to Consolidated Financial
Statements included in Item 8 for Part II of this Annual
Report on Form 10-K for additional information regarding
the Company’s pension and other postretirement plans.
The Company’s pension
and other postretirement
benefit costs and
obligations are dependent
on actuarial valuations and
various assumptions that
attempt to anticipate future
events and are used in
calculating the expense
and liabilities relating to
these plans. These
assumptions include
estimates and judgments
the Company makes about
discount rates, expected
long-term investment
return on plan assets, and
mortality, among others.
Significant assumptions
the Company must review
and set annually and at
each measurement date
related to its pension and
other postretirement
benefit obligations are
described further below.
Though management
considers current market
conditions and other
relevant factors in
establishing these
assumptions, the actuarial
assumptions used may
differ materially from
actual results due to
changing market and
economic conditions,
longer or shorter life spans
of participants, and
differences between the
actual and expected return
on plan assets. These
differences may result in a
significant impact to the
amount of pension or other
postretirement benefits
cost recorded or that may
be recorded. Changes in
assumptions or asset
values may have a
significant effect on the
measurement of expense
or income.
Actuarial assumptions
Significant assumptions the Company must review and set annually and at each measurement date related to its
pension and other postretirement benefit obligations are:
•
Expected long-term return on plan assets — The expected long-term return on plan assets assumption
reflects the long-term average rate of return plan assets are expected to earn. This assumption is
determined considering each plan's asset allocation targets and overall expected performance, including
evaluation of the most recent long-term historical returns, as applicable. The weighted-average long-term
expected rate of return on assets assumption was 5.30% for fiscal 2024. The pension plan assets
generated an actual weighted-average return of 16.50% in fiscal 2024 primarily driven by the market
44
performance of the plan assets of the qualified pension plans based on the Company’s investment strategy
to hedge the movement in liabilities related to changes in discount rates with investments of a matched
duration that provide offsetting returns aligned with changes in interest rates. The expected return on plan
assets is designed to be a long-term assumption, and therefore, actual returns will be subject to year-to-
year variances. For fiscal 2025, the expected rate of return on assets assumption for the qualified pension
plans will be 5.20%. The expected long-term return on plan assets assumption has no impact on the
reported net liability or net actuarial gains or losses upon remeasurement but does impact the recurring
non-service net periodic income recognized ratably throughout the year.
Valvoline’s pension plans hold a variety of investments designed to diversify risk. Plan assets are invested
in equity securities, government and agency securities, corporate debt, and other non-traditional assets
such as hedge funds. The investment goal of the pension plans is to achieve an adequate net investment
return to provide for future benefit payments to its participants. Target asset allocation percentages as
of September 30, 2024 for the qualified pension plans were 90% fixed income and 10% equity investments.
The qualified pension plans are managed by professional investment managers that operate under
investment management contracts that include specific investment guidelines, requiring among other
actions, adequate diversification and prudent use of risk management practices such as portfolio
constraints relating to established benchmarks. Holding all other assumptions constant, a hypothetical
1.00% change in the expected long-term return on plan assets assumption for the qualified pension plans
would impact fiscal 2024 recurring non-service pension income by $13.0 million.
•
Discount rate — Reflects the rates at which benefits could effectively be settled and is based on current
investment yields of high-quality corporate bonds. Consistent with historical practice, the Company uses an
actuarially-developed full yield curve approach, the above mean yield curve, to match the timing of cash
flows of expected future benefit payments from the plans by applying specific spot rates along the yield
curve to determine the assumed discount rate. Valvoline’s fiscal 2024 expense, excluding actuarial gains
and losses, for pension plans was determined using the spot discount rates as of the beginning of the fiscal
year. The interest cost discount rates for fiscal 2024 pension expense and other postretirement expense
were each 5.92%. The weighted-average discount rate at the end of fiscal 2024 was 4.94% for the pension
plans and 4.89% for the postretirement health and life plans.
The following table illustrates the estimated impact on hypothetical pension and other postretirement
expense that would have resulted from a one percentage point change in discount rates in isolation of
impacts on other significant assumptions in the years ended September 30:
(In millions)
2024
2023
Increase (decrease) in pension and other postretirement plan expense - 1.00% decrease in
discount rates:
Pension benefits
Increase in benefit obligation
$
142.6 $
126.6
Increased return on plan assets (a)
(138.0)
(122.0)
Estimated hypothetical increase in expense
4.6
4.6
Other postretirement benefits
Increase in benefit obligation
1.9
1.7
Total estimated hypothetical increase in expense
$
6.5 $
6.3
(a) The qualified pension plans employ an investing strategy to match the duration of its obligation and investments. These plans represent
approximately 95% of Valvoline’s total gross pension plan obligation as of September 30, 2024 and 2023. This strategy hedges
approximately 100% of the movement in liabilities related to changes in discount rates as of September 30, 2024 and 2023. Therefore,
when discount rates change, asset returns generally mirror the impacts, minimizing the net impact to the consolidated financial statements.
This estimated impact does not include increased returns of other plan assets that may also benefit from increased interest rates.
45
•
Mortality — The mortality assumption for Valvoline's U.S. pension and other postretirement plans is utilizes
the Society of Actuaries PRI-2012 mortality base tables and a mortality improvement scale that follows the
2024 Trustees Report of the Social Security Administration Intermediate Alternative as reflected in the
MSS-2024 improvement scale. Valvoline believes the updated mortality improvement scales provide a
reasonable assessment of current mortality trends and is an appropriate estimate of future mortality
projections.
Other assumptions, including the rate of compensation increase and healthcare cost trend rate, do not have a
significant impact on Valvoline's pension and other postretirement benefit plan costs and obligations based upon
current plan provisions that have generally frozen benefits and limited costs.
46
Business combinations and intangible assets
Description
Judgments and uncertainties
Effect if actual results differ
from assumptions
Valvoline acquired 36 service center stores
during fiscal 2024 for an aggregate purchase
price of $53.3 million. The Company allocates
the purchase price of an acquired business to its
identifiable assets acquired and liabilities
assumed at the acquisition date based upon their
estimated fair values. The excess of the fair
value of purchase consideration over the fair
value of these assets acquired and liabilities
assumed is recorded as goodwill or if the fair
value of the assets acquired and liabilities
assumed exceed the purchase price
consideration, a bargain purchase gain is
recorded.
Goodwill is tested at the reporting unit level for
impairment on an annual basis during the fourth
fiscal quarter as of July 1 or more frequently if
certain events occur indicating that the carrying
value of goodwill may be impaired. At the time of
the Company’s annual impairment assessment,
Valvoline consisted of a singular reporting unit,
Retail Services.
The Company’s amortizable intangible assets
were $90.3 million, net of $83.2 million of
accumulated amortization as of September 30,
2024. Other intangible assets are evaluated for
impairment whenever events or changes in
circumstances indicate the carrying amount may
not be recoverable. Various factors are
considered in determining whether a trigger
requiring impairment assessment has occurred,
such as, but not limited to, changes in the
expected use of the assets, technology or
development of alternative assets, economic
conditions, operating performance, and expected
future cash flows.
Purchase price allocations
contain uncertainties because
they require management to
make significant estimates and
assumptions and to apply
judgment to estimate the fair
value of assets acquired and
liabilities assumed, particularly
with respect to intangible
assets.
Management estimates the fair
value of assets acquired and
liabilities assumed based on
quoted market prices, the
carrying value of the acquired
assets and widely accepted
valuation techniques, including
discounted cash flows and
market multiple analyses.
Critical estimates in valuing
intangible assets include, but
are not limited to, estimates
about: expected future cash
flows from customers, including
revenue and operating
expenses; royalty and
customer attrition rates;
proprietary technology
obsolescence curve; the
acquired company's brand
awareness and market
position; the market awareness
of the acquired company's
branded technology solutions
and services; assumptions
about the period of time the
brands will continue to be
valuable; as well as discount
rates. The Company's
estimates of fair value are
based upon reasonable
assumptions, but which are
inherently uncertain and
unpredictable. Assumptions
may be incomplete or
inaccurate, and unanticipated
events and circumstances may
occur.
If actual results are materially
different than the assumptions
used to determine fair value of
the assets acquired and
liabilities assumed through a
business combination, or the
useful lives of the acquired
intangible assets, it is possible
that adjustments to the
carrying values of such assets
and liabilities will have a
material impact on the
Company's financial position
and results of operations.
Furthermore, if actual results
are not consistent with
estimates or assumptions, the
Company may be exposed to
an impairment charge that
could materially adversely
impact its consolidated
financial position and results of
operations.
There were no impairments to
intangible assets recognized
by the Company during fiscal
2024 or 2023. Valvoline
elected to perform a
quantitative impairment
assessment of goodwill in 2024
and a qualitative impairment
assessment of goodwill in
2023, which indicated that it
was more likely than not that
the fair values of the reporting
unit in fiscal 2024 and 2023
were in excess of carrying
amounts.
47
Income taxes
Description
Judgments and uncertainties
Effect if actual
results differ from
assumptions
Valvoline is subject to income taxes
in the United States and international
jurisdictions where its businesses
operate.
The provision for income taxes
includes current income taxes as well
as deferred income taxes. Under
U.S. GAAP, deferred tax assets and
liabilities are determined based on
differences between the financial
reporting and tax basis of assets and
liabilities and are measured using
enacted tax rates and laws that are
expected to be in effect when the
deferred assets or liabilities are
expected to be settled or realized.
The effect of changes in tax rates on
deferred taxes is recognized in the
period in which such changes are
enacted.
Once the consolidated income tax
provision is computed, the tax effect
of pre-tax income is determined
without consideration of the current
year pre-tax income or loss from
other financial statement
components, including discontinued
operations. The portion of total
income tax that remains after the
attribution of tax to continuing
operations is allocated to the
remaining components.
The separation from Global Products
resulted in a pre-tax gain of $1.572
billion during fiscal 2023 and related
income tax expense recognized to-
date of $419.1 million which includes
federal, state, and international
considerations for the jurisdictions
where the proceeds were allocated
and the respective tax bases of the
net assets transferred. In connection
with completing separation
transactions, both from Valvoline’s
former parent company and the sale
of Global Products, the parties
generally indemnify one another for
various tax matters between the
businesses.
Judgment in forecasting taxable income using
historical and projected future operating results is
required in determining Valvoline’s provision for
income taxes and the related assets and liabilities.
Valuation allowances are established when
necessary on a jurisdictional basis to reduce deferred
tax assets to the amounts expected to be realized
when it is more likely than not that some portion or all
of a deferred tax asset will not be realized. The
determination as to whether a deferred tax asset will
be realized is based on the evaluation of positive and
negative evidence, which includes historical
profitability, future market growth, future taxable
income, the expected timing of the reversals of
existing temporary differences and tax planning
strategies. The Company assesses deferred taxes
and the adequacy or need for a valuation allowance
on a quarterly basis.
The Company is subject to ongoing tax examinations
and assessments in various jurisdictions. At any time,
multiple tax years are subject to audit by the various
tax authorities and a number of years may elapse
before a particular matter, for which a liability has
been established, is audited and fully resolved or
clarified. In evaluating the exposures associated with
various tax filing positions, the Company may record
liabilities for such exposures. Valvoline generally
adjusts its liabilities for unrecognized tax benefits and
related indemnification obligations through earnings
in the period in which an uncertain tax position is
effectively settled, the statute of limitations expires for
the relevant taxing authority to examine the tax
position, or when more information becomes
available. Although management believes that the
judgments and estimates discussed herein are
reasonable, actual results could differ, and may
materially increase or decrease the effective tax rate,
as well as impact the Company’s operating results.
Income tax impacts associated with the gain on the
sale of Global Products were complex and included
high degree of judgment due to the pre-sale
restructuring transactions completed to facilitate the
sale in additional to the large volume of federal, state,
and international jurisdictions that were required to
be evaluated and completed.
Indemnifications among parties regarding tax matters
require judgment in determining the timing and
measurement of related receivables and payables to
resolve these obligations.
If the Company is
unable to generate
sufficient future
taxable income,
there is a material
change in the actual
effective tax rates,
the time period within
which the underlying
temporary
differences become
taxable or
deductible, or if the
tax laws change
unfavorably, then
Valvoline could be
required to increase
the valuation
allowance against
deferred tax assets,
resulting in an
increase in income
tax expense and the
effective tax rate.
Adjustments to
indemnifications
impact pre-tax
results and are not
directly related to the
ongoing business.
These adjustments
may also affect the
income tax provision
of the continuing
operation dependent
on the nature of the
underlying issue.
Each change of $2.8
million and $2.7
million for continuing
operations and
consolidated income
tax provisions,
respectively, would
impact the respective
fiscal 2024 effective
tax rates by one
percentage point.
48
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Valvoline is exposed to market risks arising from adverse changes in:
•
Inflation and changing prices;
•
Interest rates;
•
Credit risk; and
•
Currency exchange rates.
These market risks are described further below. In addition, refer to Item 1A of Part I in this Annual Report on Form
10-K for additional discussion of these and other risks.
Inflation and changing prices
The cost of materials and labor used in Valvoline’s automotive preventive maintenance services are affected by
cost inflation and global commodity prices that could expose Valvoline to risks in its results. Fiscal 2024, 2023, and
2022 all experienced high rates of inflation and Valvoline mitigates this risk by passing along price increases to its
customers; however, the ability to pass on these price increases is largely dependent upon market conditions.
Contracts with Valvoline’s independent operators are generally indexed to accommodate changes in material
prices. Valvoline may not always be able to raise prices in response to increased costs or may experience delays in
passing through such costs, as its ability to do so is largely dependent upon market conditions.
Interest rate risk
The Company is subject to interest rate risk in relation to its variable-rate debt. Approximately 49% of the
Company’s outstanding borrowings as of September 30, 2024 carried fixed rates. A hypothetical 100 basis point
change in variable interest rates would impact the Company’s interest expense and pre-tax earnings by $5.6 million
for the year ended September 30, 2024.
In addition, the Company is exposed to market risk relative to the impact of changes in interest rates and
investment returns on its pension and other postretirement plans. Declines in the discount rates used in measuring
the Company's pension and other postretirement plan obligations result in a higher obligation and decrease the
funded status. The pension plans hold a variety of investments designed to diversify risk, protect against declines in
interest rates, and achieve an adequate net investment return to provide for future benefit payments to its
participants. These investments are subject to variability that can be caused by fluctuations in general economic
conditions. Decreases in the fair value of plan assets and discount rates increase net pension and other
postretirement plan expense and can also result in requirements to make contributions to the plans. Pension and
other postretirement plans were underfunded by $136.6 million at September 30, 2024 as the projected benefit
obligation exceeded the fair value of plan assets.
Credit risk
The Company is potentially subject to concentrations of credit risk on financial instruments for its cash and cash
equivalents. Credit risk includes the risk of nonperformance by counterparties, and the maximum potential loss may
exceed the amount recognized within the Consolidated Balance Sheets. Exposure to credit risk is managed by
selecting highly-rated financial institutions as counterparties to transactions and monitoring procedures. As
of September 30, 2024, there was not a significant concentration of credit risk related to financial instruments.
Currency exchange risk
Substantially all of Valvoline’s business and results of its continuing operations occur within the U.S., resulting in
limited exposure to the effects of currency exchange. The impacts from currency exchange have not been material
to Valvoline’s continuing operations, and the Company will continue to monitor its exposure to determine if changes
in its business and operations may warrant undertaking strategies to minimize currency exchange risk.
49
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
51
Consolidated Statements of Comprehensive Income
53
Consolidated Balance Sheets
54
Consolidated Statements of Cash Flows
55
Consolidated Statements of Stockholders’ Equity
56
Notes to Consolidated Financial Statements
57
Note 1 - Description of Business and Basis of Presentation
57
Note 2 - Significant Accounting Policies
57
Note 3 - Discontinued Operations
68
Note 4 - Fair Value Measurements
69
Note 5 - Acquisitions and Dispositions
71
Note 6 - Leasing
73
Note 7 - Intangible Assets
74
Note 8 - Debt
75
Note 9 - Income Taxes
77
Note 10 - Employee Benefit Plans
81
Note 11 - Litigation, Claims and Contingencies
86
Note 12 - Stock-Based Compensation Plans
86
Note 13 - Earnings Per Share
88
Note 14 - Stockholders' Equity
88
Note 15 - Supplemental Balance Sheet Information
90
Note 16 - Subsequent Events
92
50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Valvoline Inc. and Consolidated Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Valvoline Inc. and Consolidated Subsidiaries
(the Company) as of September 30, 2024 and 2023, the related consolidated statements of comprehensive income,
stockholders’ equity and cash flows for each of the three years in the period ended September 30, 2024, and the
related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at September 30, 2024 and 2023, and the results of its
operations and its cash flows for each of the three years in the period ended September 30, 2024, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2024, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework), and our report dated November 22, 2024,
expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which
it relates.
51
Accounting for pension benefit obligations
Description of the Matter
At September 30, 2024, the Company’s aggregate defined benefit pension benefit obligation
was $1,565.7 million and exceeded the fair value of pension plan assets of $1,452.9 million,
resulting in an unfunded status of $112.8 million. As disclosed in Note 10 of the consolidated
financial statements, the Company recognizes the change in the net actuarial gains and
losses annually in the fourth quarter of each fiscal year and whenever a plan is determined
to qualify for a remeasurement to reflect the updated actuarial assumptions. The remaining
components of pension benefit costs are recorded ratably throughout the year.
Auditing the valuation of the pension benefit obligation was complex due to the judgmental
nature of certain of the actuarial assumptions (i.e., discount rate and mortality rate) used in
the measurement process. These assumptions have a significant effect on the projected
pension benefit obligation.
How We Addressed the
Matter in Our Audit
To test the pension benefit obligation, we performed audit procedures that included, among
others, evaluating the methodology used, testing the significant actuarial assumptions (i.e.,
discount rate and mortality rate), and testing the completeness and accuracy of the
underlying data used by management, including participant data. In addition, we involved
our actuarial specialists to assist with our procedures. We compared the significant actuarial
assumptions (i.e., discount rate and mortality rate) used by management to its historical
accounting practices and evaluated the change in the pension benefit obligation from the
prior year. For example, the discount rate reflects the rates at which benefits could
effectively be settled and is based on current investment yields of high-quality corporate
bonds. The Company uses an actuarially-developed full yield curve approach in establishing
its discount rate. We evaluated management’s methodology for determining the discount
rate that reflects the maturity and duration of the benefit payments. As part of this
assessment, we tested the underlying securities used to develop the yield curve to evaluate
whether they were appropriate for use in a yield curve and whether the provided yield curve
reasonably followed from those securities. To evaluate the mortality rate, we assessed
whether the information was consistent with publicly available information, and whether any
market data adjusted for entity-specific adjustments were applied.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.
Louisville, Kentucky
November 22, 2024
52
Valvoline Inc. and Consolidated Subsidiaries
Consolidated Statements of Comprehensive Income
Years ended September 30
(In millions, except per share amounts)
2024
2023
2022
Net revenues
$
1,619.0 $
1,443.5 $
1,236.1
Cost of sales
1,000.2
899.0
759.7
Gross profit
618.8
544.5
476.4
Selling, general and administrative expenses
305.1
264.5
244.7
Net legacy and separation-related (income) expenses
(0.7)
32.8
20.5
Other income, net
(52.8)
—
(9.1)
Operating income
367.2
247.2
220.3
Net pension and other postretirement plan expense (income)
11.7
(27.6)
6.9
Net interest and other financing expense
71.9
38.3
69.3
Income before income taxes
283.6
236.5
144.1
Income tax expense
69.1
37.1
34.7
Income from continuing operations
214.5
199.4
109.4
(Loss) income from discontinued operations, net of tax
(3.0)
1,220.3
314.9
Net income
$
211.5 $
1,419.7 $
424.3
NET EARNINGS PER SHARE
Basic earnings (loss) per share
Continuing operations
$
1.65 $
1.24 $
0.61
Discontinued operations
(0.02)
7.55
1.76
Basic earnings per share
$
1.63 $
8.79 $
2.37
Diluted earnings (loss) per share
Continuing operations
$
1.63 $
1.23 $
0.61
Discontinued operations
(0.02)
7.50
1.74
Diluted earnings per share
$
1.61 $
8.73 $
2.35
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic
130.1
161.6
179.1
Diluted
131.0
162.6
180.4
COMPREHENSIVE INCOME
Net income
$
211.5 $
1,419.7 $
424.3
Other comprehensive income (loss), net of tax
Currency translation adjustments
4.2
43.7
(39.6)
Amortization of pension and other postretirement plan prior
service credits
(1.7)
(1.7)
(1.7)
Unrealized (loss) gain on cash flow hedges
(5.8)
(7.5)
12.5
Other comprehensive (loss) income
(3.3)
34.5
(28.8)
Comprehensive income
$
208.2 $
1,454.2 $
395.5
The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
53
Valvoline Inc. and Consolidated Subsidiaries
Consolidated Balance Sheets
As of September 30
(In millions, except per share amounts)
2024
2023
Assets
Current assets
Cash and cash equivalents
$
68.3 $
409.1
Receivables, net
86.4
81.3
Inventories, net
39.7
33.3
Prepaid expenses and other current assets
61.0
65.5
Short-term investments
—
347.5
Total current assets
255.4
936.7
Noncurrent assets
Property, plant and equipment, net
958.7
818.3
Operating lease assets
298.6
266.5
Goodwill and intangibles, net
705.6
680.6
Other noncurrent assets
220.4
187.8
Total noncurrent assets
2,183.3
1,953.2
Total assets
$
2,438.7 $
2,889.9
Liabilities and Stockholders’ Equity
Current liabilities
Current portion of long-term debt
$
23.8 $
23.8
Trade and other payables
117.4
118.7
Accrued expenses and other liabilities
212.7
215.9
Current liabilities held for sale
—
3.9
Total current liabilities
353.9
362.3
Noncurrent liabilities
Long-term debt
1,070.0
1,562.3
Employee benefit obligations
176.2
168.0
Operating lease liabilities
279.7
247.3
Other noncurrent liabilities
373.3
346.8
Total noncurrent liabilities
1,899.2
2,324.4
Commitments and contingencies
Stockholders' Equity
Preferred stock, no par value, 40 shares authorized; no shares issued and
outstanding
—
—
Common stock, par value $0.01 per share, 400.0 shares authorized, 128.5 and
134.8 shares issued and outstanding at September 30, 2024 and 2023,
respectively
1.3
1.3
Paid-in capital
51.2
48.0
Retained earnings
123.2
140.7
Accumulated other comprehensive income
9.9
13.2
Stockholders' equity
185.6
203.2
Total liabilities and stockholders’ equity
$
2,438.7 $
2,889.9
The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
54
Valvoline Inc. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Years ended September 30
(In millions)
2024
2023
2022
Cash flows from operating activities
Net income
$
211.5 $
1,419.7 $
424.3
Adjustments to reconcile net income to cash flows from operating
activities:
Loss (income) from discontinued operations
3.0
(1,220.3)
(314.9)
Loss on extinguishment of debt
5.1
—
—
Gain on sale of operations
(41.8)
—
—
Depreciation and amortization
105.9
88.8
71.4
Deferred income taxes
23.5
33.6
18.0
(Gain) loss on pension and other postretirement plan
remeasurements
(2.4)
(41.6)
43.9
Stock-based compensation expense
12.0
12.2
14.4
Other, net
(0.1)
11.9
4.2
Change in assets and liabilities
Receivables
(0.9)
26.4
(17.5)
Inventories
(7.7)
(3.3)
(5.4)
Payables and accrued liabilities
(6.4)
111.3
24.5
Other assets and liabilities
(18.8)
(85.7)
(128.5)
Operating cash flows from continuing operations
282.9
353.0
134.4
Operating cash flows from discontinued operations
(17.8)
(393.8)
149.8
Total cash provided by (used in) operating activities
265.1
(40.8)
284.2
Cash flows from investing activities
Additions to property, plant and equipment
(224.4)
(180.5)
(132.0)
Acquisitions of businesses
(52.7)
(36.3)
(50.7)
Proceeds from sale of operations, net of cash disposed
71.5
—
—
Purchases of investments
(3.5)
(440.4)
—
Proceeds from investments
350.0
80.0
—
Other investing activities, net
(4.1)
—
11.8
Investing cash flows from continuing operations
136.8
(577.2)
(170.9)
Investing cash flows from discontinued operations
—
2,620.9
(36.7)
Total cash provided by (used in) investing activities
136.8
2,043.7
(207.6)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs of $3.0 million in 2023
200.0
921.0
23.0
Repayments on borrowings
(698.8)
(920.9)
(38.1)
Repurchases of common stock
(226.8)
(1,524.8)
(142.6)
Cash dividends paid
—
(21.8)
(89.2)
Other financing activities
(20.7)
(19.0)
(16.0)
Financing cash flows from continuing operations
(746.3)
(1,565.5)
(262.9)
Financing cash flows from discontinued operations
—
(108.1)
44.0
Total cash used in financing activities
(746.3)
(1,673.6)
(218.9)
Effect of currency exchange rate changes on cash, cash
equivalents and restricted cash
—
(0.1)
(5.2)
(Decrease) increase in cash, cash equivalents and restricted
cash
(344.4)
329.2
(147.5)
Cash, cash equivalents and restricted cash - beginning of year
413.1
83.9
231.4
Cash, cash equivalents and restricted cash - end of year
$
68.7 $
413.1 $
83.9
Supplemental disclosures
Interest paid
$
78.2 $
69.6 $
59.4
Income taxes paid
$
31.3 $
373.8 $
73.9
The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
55
Valvoline Inc. and Consolidated Subsidiaries
Consolidated Statements of Stockholders’ Equity
Paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Totals
Common stock
(In millions, except per share amounts)
Shares
Amount
Balance at September 30, 2021
180.3 $
1.8 $ 35.2
$
90.0 $
7.5 $ 134.5
Net income
—
—
—
424.3
— 424.3
Dividends paid, $0.500 per common share
—
—
0.5
(89.7)
—
(89.2)
Stock-based compensation, net of issuances
0.3
—
8.4
—
—
8.4
Repurchases of common stock
(4.5)
—
—
(142.6)
— (142.6)
Other comprehensive loss, net of tax
—
—
—
—
(28.8)
(28.8)
Balance at September 30, 2022
176.1
1.8
44.1
282.0
(21.3) 306.6
Net income
—
—
—
1,419.7
— 1,419.7
Dividends paid, $0.125 per common share
—
—
0.1
(21.9)
—
(21.8)
Stock-based compensation, net of issuances
0.5
—
3.8
—
—
3.8
Repurchases of common stock
(41.8)
(0.5)
—
(1,539.1)
— (1,539.6)
Other comprehensive income, net of tax
—
—
—
—
34.5
34.5
Balance at September 30, 2023
134.8
1.3
48.0
140.7
13.2 203.2
Net income
—
—
—
211.5
— 211.5
Stock-based compensation, net of issuances
0.4
—
3.2
—
—
3.2
Repurchases of common stock
(6.7)
—
—
(229.0)
— (229.0)
Other comprehensive loss, net of tax
—
—
—
—
(3.3)
(3.3)
Balance at September 30, 2024
128.5 $
1.3 $ 51.2
$ 123.2 $
9.9 $ 185.6
The accompanying Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
56
Valvoline Inc. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of business
Valvoline Inc. (“Valvoline” or the “Company”) is a leader in automotive preventive maintenance delivering
convenient and trusted services in its retail stores throughout the United States (“U.S.”) and Canada. The Company
operates and franchises more than 2,000 service center locations through its Valvoline Instant Oil ChangeSM
(“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and supports nearly 270 locations
through its Express CareTM platform.
As the quick, easy, trusted leader in automotive preventive maintenance, Valvoline is creating shareholder value by
driving the full potential of 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 approximately 15-minute stay-in-your-
car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended
maintenance services. For over 15 decades, Valvoline has consistently adapted to address changing technologies
and customer needs and is well positioned to service evolving vehicle maintenance needs with its growing network
of stores.
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 consolidated financial statements. Refer to Note 3 for additional information regarding the Global Products
business, including income from discontinued operations. Unless otherwise noted, disclosures within these
remaining Notes to Consolidated Financial Statements relate solely to the Company's continuing operations.
Basis of presentation and consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) and Securities and Exchange Commission
(“SEC”) regulations. The financial statements are presented on a consolidated basis for all periods presented and
include the operations of the Company and its majority-owned and controlled subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
Certain prior period amounts have been reclassified in the accompanying consolidated financial statements and
notes thereto to conform to the current period presentation.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Valvoline’s significant accounting policies, which conform to U.S. GAAP and are applied on a consistent basis in all
periods presented, except when otherwise disclosed, are described below.
Use of estimates, risks and uncertainties
The preparation of the 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.
57
Held for sale and discontinued operations
The Company classifies assets and liabilities to be sold (disposal group) as held for sale in the period when all of
the applicable criteria are met, including: (i) management commits to a plan to sell, (ii) the disposal group is
available to sell in its present condition, (iii) there is an active program to locate a buyer, (iv) the disposal group is
being actively marketed at a reasonable price in relation to its fair value, (v) significant changes to the plan to sell
are unlikely, and (vi) the sale of the disposal group is generally probable of being completed within one year.
Management performs an assessment at least quarterly or when events or changes in business circumstances
indicate that a change in classification may be necessary.
Assets and liabilities held for sale are presented separately within the Consolidated Balance Sheets with any
adjustments necessary to measure the disposal group at the lower of its carrying value or fair value less costs to
sell. Depreciation of property, plant and equipment and amortization of intangible and right-of-use assets are not
recorded while these assets are classified as held for sale. For each period the disposal group remains classified as
held for sale, its recoverability is reassessed and any necessary adjustments are made to its carrying value.
The Company reports the results of operations of a business as discontinued operations if a disposal represents a
strategic shift that will have a major effect on its operations and financial results. The results of discontinued
operations are reported as (Loss) income from discontinued operations, net of tax in the Consolidated Statements
of Comprehensive Income for the current and prior periods commencing in the period in which the held for sale
criteria are met. (Loss) income from discontinued operations, net of tax includes direct costs attributable to the
divested business and excludes any cost allocations associated with any shared or corporate functions unless
otherwise dedicated to the divested business. (Loss) income from discontinued operations, net of tax will include
any gain or loss recognized upon disposition or from adjustment of the carrying amount to fair value less costs to
sell while classified as held for sale.
Transactions between the businesses held for sale and businesses held for use that are expected to continue after
the disposal are not eliminated in order to appropriately reflect the continuing operations as well as the activity to be
disposed of. Interest costs are included as a component of (Loss) income from discontinued operations, net of tax
for debt specifically attributable to the discontinued operation or debt that is obligated to be repaid in connection
with the completion of the divestiture. Activity within comprehensive income directly associated with a divested
business is not realized as a component of (Loss) income from discontinued operations, net of tax until completion
of the sale or disposition.
Cash and cash equivalents
All short-term, highly liquid investments having original maturities of three months or less are considered to be cash
equivalents.
Short-term investments
As part of the Company’s commitment to using proceeds from the sale of the Global Products business, the
Company invested in U.S. treasury securities classified as short-term investments, which had maturities of greater
than three months and less than one year. Valvoline determined the classification of these securities as trading,
available for sale or held-to-maturity at the time of purchase and evaluated those determinations at each balance
sheet date the investments were held for. The Company’s short-term investments were stated at amortized cost
within the Consolidated Balance Sheet and classified as held-to-maturity based on the intent and ability to hold to
these investments to maturity. These investments were held to maturity and used to complete the tender offer to
repurchase the 4.250% senior unsecured notes due 2030 with an aggregate principal amount of $600.0 million (the
“2030 Notes”) in fiscal 2024, which was the final step in utilizing the net proceeds from the sale of Global Products.
Receivables and allowance for credit losses
The majority of Valvoline’s sales are tendered at the point of service in its retail stores, and its receivables are
generally limited to those with its fleet customers and independent store operators, in addition to credit card
receivables. Valvoline recognizes a receivable within its Consolidated Balance Sheets once control is transferred,
typically upon the completion of services, at which point its right to consideration becomes unconditional and only
the passage of time is required before payment of that consideration is due. As the majority of the Company’s
58
performance obligations are satisfied at a point in time and customers typically do not make material payments in
advance, nor does Valvoline generally have a right to consideration in advance of control transfer, the Company
has no contract assets or material contract liabilities.
Valvoline recognizes credit losses following the current expected credit loss model, which results in the immediate
recognition of losses that are expected to occur over the life of the financial instruments, principally trade and other
receivables. Allowances are maintained to estimate expected lifetime credit losses that are based on a broad range
of reasonable and supportable information and factors, including the length of time receivables are past due, the
financial health of its customers, macroeconomic conditions, and historical collection experience. If the financial
condition of its customers deteriorates or other circumstances occur that result in an impairment of customers’
ability to make payments, the Company records additional allowances as needed. The Company writes off
uncollectible receivables against the allowance when collection efforts have been exhausted and/or any legal action
taken by the Company has concluded.
Inventories
Inventories are comprised of purchased finished goods that are carried at the lower of cost or net realizable value
using the weighted average cost method. The Company regularly reviews inventory quantities on hand and the
estimated utilization of inventory. Excess and obsolete reserves are established when inventory is estimated to not
be usable based on forecasts, demand, life cycle, or utility.
Property, plant and equipment
Property, plant and equipment is recorded at cost and is depreciated using the straight-line method over the
estimated useful lives of the assets. Buildings generally have useful lives of seven to 20 years and machinery and
equipment typically have five to seven year useful lives, dependent on the nature and utility of the assets. Building
and leasehold improvements are depreciated over the shorter of their estimated useful lives or the period from
which the date the assets are placed in service to the end of the lease term, as appropriate. Depreciation expense
is recognized in Cost of sales or Selling, general and administrative expenses within the Consolidated Statements
of Comprehensive Income based on the function the underlying asset supports. Property, plant and equipment is
relieved of the cost and related accumulated depreciation when assets are disposed of or otherwise retired. Gains
or losses on the dispositions of property, plant and equipment are included in the Consolidated Statements of
Comprehensive Income and generally reported in Other income, net.
Property, plant and equipment carrying values are evaluated for recoverability at the lowest level of identifiable cash
flows when impairment indicators are present. Such indicators could include, among other factors, operating losses,
unused capacity, market value declines and technological obsolescence. Recorded values of asset groups of long-
lived assets that are not expected to be recovered through undiscounted future net cash flows are written down to
fair value, which generally is determined from estimated discounted future net cash flows (assets held for use) or
net realizable value (assets held for sale).
Cloud computing arrangements
The Company periodically enters into cloud computing arrangements to access and use third-party software in
support of its operations. The Company assesses its cloud computing arrangements to determine whether the
contract meets the definition of a service contract or conveys a software license. For cloud computing arrangements
that meet the definition of a service contract, the Company capitalizes implementation costs incurred during the
application development stage and amortizes the costs on a straight-line basis over the term of the service contract.
As of September 30, 2024, 2023 and 2022, the Company had capitalized implementation costs, net of amortization,
of $33.1 million, $20.5 million, 21.9 million, respectively, included in Other noncurrent assets within the Consolidated
Balance Sheets. Amortization expense for the implementation costs was $4.2 million, $3.3 million and $3.0 million
for fiscal 2024, 2023 and 2022, respectively, and is included in Selling, general and administrative expenses within
the Consolidated Statements of Comprehensive Income.
59
Leases
Certain of the properties Valvoline utilizes, including its retail service center stores, offices, and storage facilities, in
addition to certain equipment, are leased. Valvoline determines if an arrangement contains a lease at inception
primarily based on whether or not the Company has the right to control the asset during the contract period. For all
agreements where it is determined that a lease exists, the related lease assets and liabilities are recognized within
the Consolidated Balance Sheets as either operating or finance leases at the commencement date.
The lease liability is measured based on the present value of future payments over the lease term, and the right-of-
use asset is measured as the lease liability, adjusted for prepaid lease payments, lease incentives, and initial direct
costs (e.g., commissions). Valvoline's leases generally have terms ranging from five to 20 years, and leases with an
initial term of 12 months or less are included in the measurement of its right-of-use asset and lease liability
balances. The lease term includes options to extend or terminate the lease when it is reasonably certain that the
option will be exercised.
Fixed rental payments, including variable payments based on a rate or index, are included in the determination of
the lease liability. Many leases also require the payment of taxes, insurance, operating expenses, and maintenance.
In instances where these other components are fixed, they are included in the measurement of the lease liability
due to Valvoline's election to combine lease and non-lease components and account for them as a single
component. Otherwise, these components are recognized along with other variable lease payments in the
Consolidated Statements of Comprehensive Income in the period in which the obligation for those payments is
incurred.
As most leases do not provide the rate implicit in the lease, the Company estimates its incremental borrowing rate
to best approximate the rate of interest that Valvoline would have to pay to borrow on a collateralized basis over a
similar term an amount equal to the lease payments in a similar economic environment. Valvoline applies the
incremental borrowing rate to groups of leases with similar lease terms in determining the present value of future
payments. In determining the incremental borrowing rate, the Company considers information available at the
commencement date, including lease term, interest rate yields for specific interest rate environments and the
Company's credit spread.
Lessor arrangements
Valvoline is the lessor in arrangements to sublease and lease certain properties and equipment. Sublease income
is recognized in Other income, net within the Company’s Consolidated Statements of Comprehensive Income.
Business combinations
The Company allocates the purchase consideration to the identifiable assets acquired and liabilities assumed in
business combinations based on their acquisition-date fair values. The excess of the purchase consideration over
the amounts assigned to the identifiable assets and liabilities is recognized as goodwill, or if the fair value of the net
assets acquired exceeds the purchase consideration, a bargain purchase gain is recorded. Factors giving rise to
goodwill generally include operational synergies that are anticipated as a result of the business combination and
growth expected to result in economic benefits from access to new customers and markets. The fair values of
identifiable intangible assets acquired in business combinations are generally determined using an income
approach, requiring financial forecasts and estimates as well as market participant assumptions. The fair values are
preliminary for up to one year from the date of acquisition as they are subject to measurement period adjustments
as new information is obtained about facts and circumstances that existed as of the acquisition date.
The incremental financial results of the businesses that Valvoline has acquired are included in the Company’s
consolidated financial results from the respective dates of each acquisition.
Goodwill and other intangible assets
Valvoline evaluates goodwill for impairment annually as of July 1 or when events and circumstances indicate an
impairment may have occurred by monitoring for the existence of potential impairment indicators throughout the
fiscal year. This assessment consists of evaluating a reporting unit’s fair value compared to its carrying value.
Reporting units may be operating segments as a whole or an operation one level below an operating segment,
60
referred to as a component. Goodwill is assigned to reporting units for purposes of impairment testing based upon
the relative fair value of the asset to reporting units. The Company determined that it has one reporting unit in fiscal
2024.
In evaluating goodwill for impairment, Valvoline has the option to first perform a qualitative assessment to determine
whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value
of a reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, the Company is not
required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that
its fair value is less than its carrying amount. Qualitative factors considered include macroeconomic conditions,
industry and market conditions, cost factors, and overall financial performance, among others.
Under the quantitative assessment, if the fair value of a reporting unit is less than its carrying amount, then the
amount of the impairment loss, if any, is measured as the excess of the carrying value of the reporting unit’s
goodwill over its fair value, not to exceed the total goodwill allocated to the reporting unit. Fair values of the
reporting units are estimated using a weighted methodology considering the output from both the income and
market approaches. The income approach incorporates the use of a discounted cash flow (“DCF”) analysis, and a
number of significant assumptions and estimates are involved in the application of the DCF model to forecast
operating cash flows, including markets and market shares, sales volumes and prices, costs to produce, tax rates,
capital spending, discount rate, weighted average cost of capital, terminal values, and working capital changes.
Several of these assumptions vary among reporting units, and the cash flow forecasts are generally based on
approved strategic operating plans. The market approach is performed using the Market Capitalization Method
utilizing the Company’s stock price to derive fair value and the Guideline Public Companies method based on
earnings multiple data. The Company also performs a reconciliation between market capitalization and the
estimated aggregate fair value of the reporting units, including consideration of a control premium.
Acquired finite-lived intangible assets principally consist of certain trademarks and trade names, reacquired
franchise rights, and customer relationships. Intangible assets acquired in an asset acquisition are carried at cost,
less accumulated amortization. For intangible assets acquired in a business combination, the estimated fair values
of the assets acquired are used to establish the carrying values, which are determined using assumptions from the
perspective of a market participant and generally an income approach. These intangible assets are amortized on a
straight-line basis over their estimated useful lives. Valvoline evaluates finite-lived intangible assets for impairment
whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable,
and any assets not expected to be recovered through undiscounted future net cash flows are written down to
current fair value.
Pension and other postretirement benefit plans
Valvoline sponsors defined benefit pension and other postretirement plans in the U.S. The Company's U.S. pension
plans are closed to new participants and the accrual of pension benefits has been frozen since September 30,
2016. Valvoline also sponsors retiree healthcare and life insurance plans for certain qualifying participants with
amendments effective in fiscal 2017 to limit annual per capita costs.
Valvoline recognizes the funded status of each applicable plan within the Consolidated Balance Sheets whereby
each unfunded plan is recognized as a liability and each funded plan is recognized as either an asset or liability
based on its funded status. The funded status is measured as the difference between the fair value of plan assets
and the benefit obligation. Changes in the fair value of plan assets and net actuarial gains or losses are recognized
upon remeasurement as of September 30, the annual measurement date, and whenever a remeasurement is
triggered. The remaining components of pension and other postretirement benefits income or expense are recorded
ratably throughout the year.
The fair value of plan assets represents the current market value of assets held by irrevocable trust funds for the
sole benefit of participants, and the benefit obligation is the actuarial present value of the benefits expected to be
paid upon retirement, death, or other distributable event based on estimates. These valuations reflect the terms of
the plans and use participant-specific information such as compensation, age and years of service, as well as
certain key assumptions that require significant judgment, including, but not limited to, estimates of discount rates,
rate of compensation increases, interest rates and mortality rates. Actuarial gains and losses may be related to
actual results that differ from assumptions as well as changes in assumptions, which may occur each year. All
61
components of net periodic benefit income or costs are recognized below operating income within Net pension and
other postretirement plan (income) expenses in the Consolidated Statements of Comprehensive Income.
Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are
recorded when it is probable that a liability has been incurred and the amount of the loss can be reasonably
estimated. Legal costs such as outside counsel fees and expenses are charged to expense in the period incurred
and are recorded in Selling, general and administrative expenses in the Consolidated Statements of
Comprehensive Income.
The Company guaranteed future lease commitments related to certain facilities in connection with the sale and
disposal of certain retail stores and the Global Products business. Valvoline is obligated to perform if the buyers of
the divested businesses default on the leases under the guarantees, which extend through 2037. The undiscounted
maximum potential future payments under the guarantees were $32.8 million as of September 30, 2024. The
Company has not recorded a liability for these guarantees as the likelihood of making future payments is
considered remote.
Revenue recognition
Revenue is recognized for the amount that reflects the consideration the Company is expected to be entitled to
receive based on when control of the promised good or service is transferred to the customer. Revenue recognition
is evaluated through the following five steps: (i) identification of the contract(s) with a customer; (ii) identification of
the performance obligation(s) in the contract(s); (iii) determination of the transaction price; (iv) allocation of the
transaction price to the performance obligation(s) in the contract(s); and (v) recognition of revenue when or as a
performance obligation is satisfied.
Nature of services
Valvoline generates all revenues from contracts with customers, primarily as a result of delivery of automotive
maintenance services through the following two principal activities: (i) company-operated service center operations
and (ii) independent service center operations. Valvoline’s revenues from delivering preventive vehicle maintenance
and related services are from end consumers, independent franchisees and operators, and other end customers,
including fleet managers and others that require service solutions to address light and medium-duty vehicles.
Valvoline's net revenues are predominantly derived at a point in time with approximately 95% recognized either
through services delivered at company-operated service centers or fees for arranging product supply to
independent store operators. The remainder of the Company's sales generally relate to fees, including royalties,
transferred over time. The following table summarizes Valvoline's sales by timing of revenue recognized for the
fiscal years ended September 30:
(In millions)
2024
2023
2022
Net revenues transferred at a point in time
$
1,543.0 $
1,375.0 $
1,177.2
Franchised revenues transferred over time
76.0
68.5
58.9
Net revenues
$
1,619.0 $
1,443.5 $
1,236.1
Below is a summary of the key considerations for Valvoline's material revenue-generating activities:
Company-operated service center operations
Performance obligations related to company-operated service center operations primarily include the sale of engine
and automotive maintenance products and related services. These performance obligations are distinct and are
delivered simultaneously at a point in time. Accordingly, sales from company-operated service center operations is
recognized at the completion of product and service delivery upon the transfer of control and benefits from the
performance obligations to the customer, which generally coincides with the tender of payment at the point of sale.
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Non-company operated service center operations
The primary performance obligations related to independent service center operations include arrangement of
product supply and the license of intellectual property, which provides access to the Valvoline brand and proprietary
information to operate service center stores over the term of a franchise agreement. Other franchise performance
obligations do not result in material revenue. Each performance obligation is distinct, and franchisees generally
receive and consume the benefits provided by the Company’s performance over the course of the franchise
agreement, which typically ranges from 10 to 15 years. Billings and payments occur monthly. Variable consideration
is not disclosed as remaining performance obligations qualify for the sales-based royalty and usage-based
exemptions.
In exchange for the license of Valvoline intellectual property, franchisees generally remit initial fees upon renewal or
store opening and royalties at a contractual rate of the applicable service center store sales over the term of the
franchise agreement. The license provides access to the intellectual property over the term of the franchise
agreements and is considered a right-to-access license of symbolic intellectual property as substantially all of its
utility is derived from association with the Company’s past and ongoing activities. The license granted to operate
each franchised service center store is the predominant item to which the royalties relate and represents a distinct
performance obligation which is recognized over time as the underlying sales occur, as this is the most appropriate
measure of progress toward complete satisfaction of the performance obligation.
Valvoline also receives development fees from franchisees in exchange for exclusive rights to territory development
arrangements. In exchange for these fees, the Company provides its franchisees with assistance in identifying
potential sites and targets within designated territories, in addition to operational support for new service center
stores. The Company defers these fees as a contract liability and recognizes them as revenue on a straight-line
basis over the term of the underlying agreements. All upfront fees from franchisees and the related contract
liabilities are not material to any periods presented herein.
Valvoline is the agent in arranging product supply for its independent operators as the Company has no control of
the products prior to transfer to the customer. Accordingly, revenue is recognized on a net basis for the fees
charged for this service. The Company determines the point in time at which service delivery occurs and the
performance obligation is satisfied by considering when the customer has the ability to direct the use of and obtain
substantially all of the remaining benefits of the product, which generally coincides with the transfer of title and risk
of loss from the supplier to the independent operators.
Customer payment terms vary by customer and are generally 30 to 60 days after service delivery. Valvoline does
not provide extended payment terms greater than one year and therefore, does not adjust the promised amount of
consideration for the effects of a significant financing component.
Revenue disaggregation
The following table summarizes net revenues by category for the years ended September 30:
(In millions)
2024
2023
2022
Oil changes and related fees
$
1,188.7 $
1,074.3 $
913.4
Non-oil changes and related fees
350.1
297.6
248.3
Franchise fees and other (a)
80.2
71.6
74.4
Total
$
1,619.0 $
1,443.5 $
1,236.1
(a)
Includes net revenues of $0.2 million, and $11.6 million for the years ended September 30, 2023, and 2022, respectively, associated with
suspended operations of a former Global Products business that was sold in fiscal 2024.
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The following presents net revenues by geographic area where services are delivered for the years ended
September 30:
(In millions)
2024
2023
2022
United States
$
1,571.8 $
1,407.7 $
1,191.8
Non-U.S. (a)
47.2
35.8
44.3
Total
$
1,619.0 $
1,443.5 $
1,236.1
(a)
Includes the amounts noted above in each fiscal year of net revenues associated with suspended operations of a former Global Products
business which was not included in the sale.
Valvoline did not have a single customer that represented 10% or more of consolidated net revenues in fiscal 2024,
2023 or 2022.
Variable consideration
The nature of Valvoline’s transactions with its customers often gives rise to variable consideration consisting of
customer discounts, incentives or rebates. The Company determines transaction price as the amount of
consideration it expects to be entitled to in exchange for fulfilling the performance obligations, including variable
consideration to the extent it is probable that a significant future reversal will not occur. Variable consideration is
recorded as a reduction of the transaction price at the time of sale and is primarily estimated utilizing the most likely
amount method that is expected to be earned as the Company is able to estimate the anticipated discounts within a
sufficiently narrow range of possible outcomes based on its extensive historical experience with certain customers
and similar programs. Variable consideration is reassessed at each reporting date and adjustments are made, when
necessary.
The reduction of revenues due to customer incentives was $222.6 million, $190.3 million, and $176.5 million in the
Consolidated Statements of Comprehensive Income for the years ended September 30, 2024, 2023, and 2022,
respectively. Reserves for these customer programs and incentives were $3.4 million, $3.2 million, and $2.8 million
as of September 30, 2024, 2023, and 2022 respectively, and are recorded within Accrued expenses and other
liabilities in the Consolidated Balance Sheets.
Allocation of transaction price
In each contract with multiple performance obligations, Valvoline allocates the transaction price, including variable
consideration, to each performance obligation on a relative standalone selling price basis, which is generally
determined based on the directly observable data of the Company’s standalone sales of the performance
obligations in similar circumstances to similar customers. The amount allocated to each performance obligation is
recognized as revenue commensurate with the transfer of control to the customer.
The Company excludes taxes collected from customers from sales, which are reflected in accrued expenses until
remitted to the appropriate governmental authority. Incremental direct costs of obtaining a contract, primarily sales
commissions, are expensed when incurred due to the short-term nature of individual contracts, which would result in
amortization periods of one year or less. These costs are not material and are recorded within Selling, general and
administrative expenses in the Consolidated Statements of Comprehensive Income.
Expense recognition
Cost of sales are expensed as incurred and include product, labor and benefits, store operating and occupancy,
and depreciation expenses. Selling, general and administrative expenses are recognized as incurred and include
sales and marketing costs, advertising, customer support, and other corporate and administrative costs. Advertising
costs were $69.4 million in fiscal 2024, $60.5 million in fiscal 2023 and $54.8 million in fiscal 2022.
Stock-based compensation
The Company recognizes expense related to stock-based compensation, net of actual forfeitures, over the requisite
vesting period based on the grant date fair value of new or modified awards. Substantially all of the awards granted
64
by the Company are routine annual grants. Management evaluates its award grants and modifications and will
adjust the fair value if any are determined to be spring-loaded.
Income taxes
Income tax expense is provided based on income before income taxes. The Company estimates its tax expense
based on current tax laws in the statutory jurisdictions in which it operates. These estimates include judgments
about the recognition and realization of deferred tax assets and liabilities resulting from the expected future tax
consequences of events that have been included in the financial statements. Under this method, deferred tax
assets and liabilities are determined based on the difference between the financial statement carrying amounts and
tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected
to be recovered or settled. As changes in tax laws or rates occur, deferred tax assets and liabilities are adjusted in
the period changes are enacted through income tax expense. Valvoline records valuation allowances related to its
deferred income tax assets when it is more likely than not that some portion or all of the deferred income tax assets
will not be realized.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities based on the technical merits of the position. The
tax benefits recognized in the consolidated financial statements from such a position are measured based on the
largest benefit that has a greater than fifty percent likelihood of being sustained upon examination by authorities.
Interest and penalties related to unrecognized tax benefits are recognized as part of the provision for income taxes
and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law
and until such time that the related tax benefits are recognized. Interest and penalties were not material to any of
the periods presented herein.
Once the consolidated income tax provision is computed, the tax effect of pre-tax income from continuing
operations is determined without consideration of the current year pre-tax income or loss from other financial
statement components, including discontinued operations. The portion of total income tax that remains after the
attribution of tax to continuing operations is allocated to the remaining components.
Derivatives
Valvoline’s derivative instruments consist of currency exchange and interest rate swap agreements, each of which
is described further below.
Currency derivatives
The Company's currency exchange contracts are used to manage non-functional currency denominated balance
sheet exposures and exchange on currency for another at a fixed rate on a future date of generally a month or less.
These contracts are not designated as hedging instruments and are accounted for as either assets or liabilities in
the Consolidated Balance Sheets at fair value with the resulting gains or losses recognized as adjustments to
earnings within Selling, general and administrative expenses in the Consolidated Statements of Comprehensive
Income. Gains and losses are recognized as exchange rates change the fair value of these instruments and upon
settlement to offset the remeasurement gain or loss on the related currency-denominated exposures in the same
period. The Company classifies its cash flows related to currency exchange contracts as investing activities in the
Consolidated Statements of Cash Flows.
Interest rate swap agreements
The Company's interest rate swap agreements effectively modify its exposure to interest rate risk by converting
floating rate debt to a fixed rate for the term of the swap agreements, reducing the impact of interest rate changes
on future interest expense. These agreements involve the receipt of floating rate amounts in exchange for fixed rate
interest payments over the life of the agreement without an exchange of the underlying principal amount.
Valvoline's interest rate swap agreements are designated as cash flow hedges with effectiveness of the hedges
assessed at inception and quarterly thereafter. To the extent the hedging relationship is highly effective, the
unrealized gains or losses on the swaps are recorded in Accumulated other comprehensive income and reclassified
into earnings within Net interest and other financing expense when the payments occur. The Company classifies its
65
cash flows related to interest rate swap agreements as operating activities in the Consolidated Statements of Cash
Flows.
The fair values of the interest rate swaps are reflected as an asset or liability in the Consolidated Balance Sheets
and the change in fair value is reported in Accumulated other comprehensive income. The fair values of the interest
rate swaps are estimated as the net present value of projected cash flows based upon forward interest rates at the
balance sheet date. The Company does not offset fair value amounts recognized in its Consolidated Balance
Sheets for presentation purposes.
Fair value measurements
Fair value is defined as an exit price, representing an amount that would be received to sell an asset or the amount
paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such,
fair value is a market-based measurement determined based on assumptions that market participants would use in
pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance prioritizes the
inputs used to measure fair value into the following three-tier fair value hierarchy for which an instrument’s
classification within the fair value hierarchy is based upon the lowest level of input that is significant to the
instrument’s fair value measurement:
•
Level 1 - Observable inputs such as unadjusted quoted prices in active markets for identical assets or
liabilities.
•
Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and
quoted prices for identical or similar assets or liabilities in markets that are not active.
•
Level 3 - Unobservable inputs for the asset or liability for which there is little, if any, market activity at the
measurement date. Unobservable inputs reflect the Valvoline's assumptions about what market participants
would use to price the asset or liability. The inputs are developed based on the best information available in
the circumstances, which may include the Company's own financial data, such as internally developed
pricing models, DCF methodologies, as well as instruments for which the fair value determination requires
significant management judgment.
Certain investments which measure fair value using the net asset value (“NAV”) per share practical expedient are
not classified within the fair value hierarchy and are separately disclosed.
Valvoline measures its financial assets and financial liabilities at fair value based on one or more of the following
three valuation techniques:
•
Market approach: Prices and other relevant information generated by market transactions involving
identical or comparable assets or liabilities
•
Cost approach: Amount that would be required to replace the service capacity of an asset (replacement
cost)
•
Income approach: Techniques to convert future amounts to a single present amount based upon market
expectations (including present value techniques, option pricing and excess earnings models)
The Company generally uses a market approach, when practicable, in valuing financial instruments. In certain
instances, when observable market data is lacking, the Company uses valuation techniques consistent with the
income approach whereby future cash flows are converted to a single discounted amount. The Company uses
multiple sources of pricing as well as trading and other market data in its process of reporting fair values.
The fair values of accounts receivables and accounts payable approximate their carrying values due to the relatively
short-term nature of the instruments. Valvoline's notes receivable consist of fixed and variable-rate interest term
loans extended to franchisees to provide financial assistance. These notes bear interest comparable with the
market rates within Valvoline's variable rate borrowings, and accordingly, their carrying amounts approximate fair
value.
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The methods described above may produce a fair value that may not be indicative of net realizable value or
reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and
consistent with other market participants, the use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different fair value measurement.
Currency translation
Operations outside the United States are measured generally using the local currency as the functional
currency. Upon consolidation, the results of operations of the subsidiaries and affiliates whose functional currency is
other than the U.S. dollar are translated into U.S. dollars at the average exchange rates for the year while assets
and liabilities are translated at year-end exchange rates. Adjustments to translate assets and liabilities into U.S.
dollars are recorded in the Stockholders’ Equity section of the Consolidated Balance Sheets as a component of
Accumulated other comprehensive income and are included in net earnings only upon sale or substantial liquidation
of the underlying non-U.S. subsidiary or affiliated company.
Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted-average number of common
shares outstanding during the reported period. Diluted EPS is calculated similar to basic EPS, except that the
weighted-average number of shares outstanding includes the number of shares that would have been outstanding
had potentially dilutive common shares been issued. Potentially dilutive securities include stock appreciation rights
and nonvested stock-based awards. Nonvested market and performance-based share awards are included in the
weighted-average diluted shares outstanding each period if established market or performance criteria have been
met at the end of the respective periods.
Share repurchases
Shares that are repurchased are retired and returned to the status of authorized, unissued shares. The excess of
the repurchase price over the par value of shares acquired is recognized in Retained earnings.
Recent accounting pronouncements
The following standards relevant to Valvoline were either issued or are expected to have a meaningful impact on
Valvoline in future periods.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued new guidance to enhance
reportable segment disclosures. This guidance requires the disclosure of significant reportable segment expenses
and other items regularly provided to the Chief Operating Decision Maker (“CODM”) that are included in a
segment’s profit or loss measures, inclusive of entities that operate in a single reportable segment. While the
guidance requires enhanced disclosures regarding the Company’s CODM and the information regularly provided to
the CODM, including significant expenses, the adoption of this guidance will not impact the Company’s operating
results, financial condition, or cash flows. The Company plans to adopt this guidance and conform the applicable
disclosures retrospectively when it becomes effective for the Annual Report on Form 10-K for the year ending
September 30, 2025.
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 continuing to
assess the new guidance which is expected to result in enhanced income tax disclosures but does not expect there
will be any impact to its results of operations, cash flows, or financial condition.
In November 2024, the FASB issued new guidance which requires enhanced disclosure of specified categories of
expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain
expense captions presented on the face of the income statement. This guidance will be effective for Valvoline
beginning with its fiscal 2028 Form 10-K and interim periods beginning in fiscal 2029, with early adoption permitted,
in addition to either prospective or retrospective application. The Company is currently evaluating the new guidance
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to determine its adoption approach and the impact on the presentation and disclosure of its consolidated income
statement and expenses. The Company anticipates its processes will be enhanced to address the disaggregation
and disclosure requirements, though it does not expect adoption to impact its overall results from operations.
NOTE 3 – 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 (Loss) income from discontinued operations, net of tax included in the Consolidated
Statements of Comprehensive Income for the years ended September 30:
(In millions)
2024
2023
2022
Net revenues
$
— $
1,174.4 $
2,695.2
Cost of sales
—
924.2
2,134.7
Gross profit
—
250.2
560.5
Selling, general and administrative expenses
—
124.9
304.3
Net legacy and separation-related expenses
14.1
53.7
7.0
Equity and other income, net
—
(14.2)
(33.4)
Operating (loss) income from discontinued operations
(14.1)
85.8
282.6
Net pension and other postretirement plan expense (income)
—
0.1
(3.4)
Net interest and other financing expenses
—
4.4
4.6
Gain on sale of discontinued operations (a)
—
(1,571.6)
—
(Loss) income before income taxes - discontinued
operations
(14.1)
1,652.9
281.4
Income tax (benefit) expense (b)
(11.1)
432.6
(33.5)
(Loss) income from discontinued operations, net of tax
$
(3.0) $
1,220.3 $
314.9
(a)
The gain on sale realized in fiscal 2023 included 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 fiscal 2024, Valvoline recognized an adjustment to reduce income tax expense on the gain on sale by $5.2 million. During fiscal
2023, tax expense on the gain of $424.3 million was recognized, bringing total tax expense on the gain on sale to-date to $419.1 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 and $218.1 million for fiscal 2023 and
2022, respectively.
Valvoline also entered into a Transition Services Agreement with Global Products, effective March 1, 2023, to
provide and receive services including information technology, legal, finance, and human resources support. These
transition services have lapsed periodically as business process transitions have occurred since the sale with
limited IT transition services extending through early calendar year 2025. The income and costs associated with
these services were not material during fiscal 2024 and 2023.
68
NOTE 4 – FAIR VALUE MEASUREMENTS
Recurring fair value measurements
The Company’s financial assets and liabilities accounted for at fair value on a recurring basis are summarized below
by level within the fair value hierarchy:
As of September 30, 2024
(In millions)
Total
Level 1
Level 2
Level 3
NAV (a)
Cash and cash equivalents
Money market funds
$
0.3 $
0.3 $
—
$
— $
—
Time deposits
2.6
—
2.6
—
—
Other noncurrent assets
Non-qualified trust funds
1.9
—
—
—
1.9
Deferred compensation investments
23.0
23.0
—
—
—
Total assets at fair value
$
27.8 $
23.3 $
2.6
$
— $
1.9
Other noncurrent liabilities
Deferred compensation obligations
22.3
—
—
—
22.3
Total liabilities at fair value
$
22.3 $
— $
—
$
— $
22.3
As of September 30, 2023
(In millions)
Total
Level 1
Level 2
Level 3
NAV (a)
Cash and cash equivalents
Money market funds
$
0.6 $
0.6 $
—
$
— $
—
Time deposits
277.3
—
277.3
—
—
Prepaid expenses and other current assets
Currency derivatives
0.1
—
0.1
—
—
Interest rate swap agreements
7.8
—
7.8
—
—
Other noncurrent assets
Non-qualified trust funds
2.1
—
—
—
2.1
Deferred compensation investments
19.0
19.0
—
—
—
Total assets at fair value
$
306.9 $
19.6 $
285.2
$
— $
2.1
Accrued expenses and other liabilities
Currency derivatives
$
0.1 $
— $
0.1
$
— $
—
Other noncurrent liabilities
Deferred compensation obligations
20.8
—
—
—
20.8
Total liabilities at fair value
$
20.9 $
— $
0.1
$
— $
20.8
(a)
Funds measured at fair value using the NAV per share practical expedient have not been classified in the fair value hierarchy.
Money market funds
Money market funds trade in an active market and are valued using quoted market prices, which are Level 1 inputs.
Time deposits
Time deposits are balances held with financial institutions at face value plus accrued interest, which approximates
fair value and are categorized as Level 2.
69
Currency derivatives
The Company has utilized currency derivatives to manage certain non-functional currency denominated balance
sheet exposures. As of September 30, 2024, no contracts were outstanding, while currency forward contracts with
notional values of $29.7 million were outstanding as of September 30, 2023. The fair value of these outstanding
contracts were recorded as assets and liabilities on a gross basis measured using readily observable market inputs
to estimate the fair value for similar derivative instruments and are classified as Level 2. Gains and losses
recognized related to these instruments were not material in any period presented herein.
Non-qualified trust funds
The Company maintains a non-qualified trust that is utilized to fund benefit payments for certain of its U.S. non-
qualified pension plans. This trust is invested in mutual funds which are measured at fair value using the NAV per
share practical expedient. There were no significant redemption restrictions or unfunded commitments on these
mutual fund investments as of September 30, 2024. Gains and losses related to these investments are immediately
recognized within Selling, general and administrative expenses in the Consolidated Statements of Comprehensive
Income and were not material in any periods presented herein.
Interest rate swap agreements
Interest rate swap agreements with a notional amount of $175.0 million matured during fiscal 2024. The Company
currently does not have any outstanding interest rate swap agreements. The fair value of interest rate swap
agreements represent the difference in the present value of cash flows calculated at the contracted interest rates
and at current market interest rates at the end of the period. The Company utilizes Level 2 observable inputs such
as interest rate yield curves to estimate fair value for the interest rate swap agreements.
Deferred compensation investments
The Company has an investment fund that is primarily comprised of mutual funds traded in active markets and
valued using quoted (unadjusted) prices, which are Level 1 inputs. Gains and losses related to these investments
are immediately recognized in the Consolidated Statement of Comprehensive Income within Selling, general and
administrative expenses and were not material for the period ended September 30, 2024.
Deferred compensation obligations
The Company has an unfunded deferred compensation plan that is valued based on the underlying participant-
directed investments. The fair value of underlying investments in collective trust funds is determined using the NAV
provided by the administrator of the fund as a practical expedient. The NAV is determined by each fund’s trustee
based upon the fair value of the underlying assets owned by the fund, less its liabilities, divided by outstanding
units. There were no significant redemption restrictions or unfunded commitments on these investments as of
September 30, 2024. Changes in the fair values are recognized in the Consolidated Statements of Comprehensive
Income within Selling, general and administrative expenses and were not material for the periods presented herein.
U.S. treasury securities
The Company had U.S. treasury securities which were fully matured as of March 31, 2024, and carried at amortized
cost within the Consolidated Balance Sheet. They were classified as held-to-maturity based on the intent and ability
of the Company to hold these investments to maturity. The fair value of these investments summarized below is
determined utilizing quoted prices for identical securities from less active markets, which are considered Level 2
inputs within the fair value hierarchy.
70
September 30, 2023
(In millions)
Amortized cost
Gross unrealized
losses
Fair value
Cash and cash equivalents
U.S. treasuries (a)
$
2.2 $
— $
2.2
Short-term investments
U.S. treasuries (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.
Fair value of long-term debt
Long-term debt is reported in the Consolidated Balance Sheets at carrying value, rather than fair value, and is
therefore excluded from the disclosure above of financial assets and liabilities measured at fair value within the
consolidated financial statements on a recurring basis. The fair values of the Company's outstanding fixed rate
senior notes shown in the table below are based on recent trading values, which are considered Level 2 inputs
within the fair value hierarchy.
September 30, 2024
September 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
$
— $
— $
— $
589.8 $
594.5 $
(5.5)
2031 Notes
478.5
530.4
(4.6)
416.6
529.9
(5.2)
Total
$
478.5 $
530.4 $
(4.6) $ 1,006.4 $ 1,124.4 $
(10.7)
(a)
Carrying values shown are net of unamortized discounts and issuance costs.
Refer to Note 8 for details of these notes as well as Valvoline's other debt instruments that have variable interest
rates with carrying amounts that approximate fair value.
NOTE 5 – ACQUISITIONS AND DISPOSITIONS
Acquisitions
Fiscal 2024
The Company acquired 36 service center stores in single and multi-store transactions, including five former
franchise locations and two former Express Care locations that were converted to company-operated service center
stores, for an aggregate purchase price of $53.3 million during the year ended September 30, 2024. These
acquisitions expand Valvoline’s retail presence in key North American markets and contribute to growing the
number of company-operated service center stores to 950 as of the year ended September 30, 2024.
Fiscal 2023
The Company acquired 31 service center stores in single and multi-store transactions for an aggregate purchase
price of $36.3 million during the year ended September 30, 2023.
Fiscal 2022
The Company acquired 37 service center stores in single and multi-store transactions, including four former
franchise locations and five former Express Care locations, which were converted to company-operated service
stores, for an aggregate purchase price of $50.7 million during the year ended September 30, 2022.
71
Summary
The following table summarizes the aggregate cash consideration paid and the total assets acquired and liabilities
assumed for the years ended September 30:
(In millions)
2024
2023
2022
Inventories
$
0.2 $
0.4 $
—
Other current assets
—
—
0.2
Property, plant and equipment (a)
5.0
6.4
10.0
Operating lease assets
23.2
9.7
9.6
Goodwill (b)
44.3
29.0
39.1
Intangible assets (c)
Reacquired franchise rights (d)
6.4
4.0
2.8
Other
0.5
0.3
0.4
Other current liabilities
(0.1)
(0.7)
(0.8)
Operating lease liabilities
(23.2)
(9.1)
(8.9)
Other noncurrent liabilities (a)
(3.0)
(3.7)
(1.7)
Total net assets acquired
$
53.3 $
36.3 $
50.7
Non-cash consideration
(0.6)
—
—
Total cash consideration transferred
$
52.7 $
36.3 $
50.7
(a)
Includes finance lease assets in Property, plant and equipment and finance lease liabilities in Other current and noncurrent liabilities. During
the years ended September 30, 2024, 2023 and 2022, finance lease assets acquired were $3.1 million, $3.8 million and $1.8 million,
respectively; finance lease liabilities in Other current liabilities were $0.1 million, $0.2 million and $0.1 million, respectively; and finance lease
liabilities in Other noncurrent liabilities were $3.0 million, $3.7 million and $1.7 million, respectively.
(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)
Weighted average amortization period of intangible assets acquired is seven years for fiscal 2024, and nine years for fiscal 2023 and 2022.
(d)
Prior to the acquisition of former franchise service center stores, Valvoline licensed the right to operate franchised service centers, including
use of the Company’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 seven years for fiscal 2024, nine years for fiscal 2023, and 10 years for fiscal 2022. The effective
settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market.
The Company did not record any material measurement period adjustments and does not expect any material
changes to the preliminary purchase price allocations summarized above for acquisitions completed during the last
twelve months.
Dispositions
Sale of company-operated service center stores
During the fourth fiscal quarter of 2024, Valvoline entered into agreements and completed the sale of company-
operated service center stores to franchisees. Upon completion of the transactions, Valvoline derecognized the net
assets associated with the service center stores and recorded a gain of $41.8 million which was reported in Other
income, net in the Consolidated Statements of Comprehensive Income during the year ended September 30, 2024.
Sale of former Global Products business
During the first quarter of fiscal 2024, Valvoline completed the sale of a former Global Products business whose
operations were suspended in fiscal 2022. This business was not included in the Global Products disposal group
and was classified as held for sale as of September 30, 2023. As a result, the Company evaluated the business for
impairment and determined the carrying value of the disposal group was in excess of its fair value resulting in a pre-
tax impairment loss of $8.1 million that was recognized within Other income, net in the Consolidated Statement of
Comprehensive Income during the year ended September 30, 2023. Upon completion of the sale in fiscal 2024,
72
Valvoline derecognized the remaining net liabilities of $3.9 million inclusive of a cumulative translation loss
attributable to the business.
NOTE 6 – LEASE COMMITMENTS
The following table presents the Company's lease balances as of September 30:
(In millions)
Location in Consolidated Balance Sheets
2024
2023
Assets
Operating lease assets
Operating lease assets
$
298.6 $
266.5
Finance lease assets
Property, plant and equipment, net
261.7
240.0
Amortization of finance
lease assets
Property, plant and equipment, net
(67.4)
(50.0)
Total leased assets
$
492.9 $
456.5
Liabilities
Current
Operating lease liabilities
Accrued expenses and other liabilities
$
31.2 $
29.2
Finance lease liabilities
Accrued expenses and other liabilities
13.4
12.3
Noncurrent
Operating lease liabilities
Operating lease liabilities
279.7
247.3
Finance lease liabilities
Other noncurrent liabilities
207.3
198.9
Total lease liabilities
$
531.6 $
487.7
The following table presents the components of total lease costs for the years ended September 30:
(In millions)
Location in Consolidated Statements of
Comprehensive Income
2024
2023
Operating lease cost
Cost of sales and Selling, general and
administrative expenses
$
45.8 $
40.7
Finance lease costs
Amortization of lease
assets
Cost of sales
17.4
15.8
Interest on lease
liabilities
Net interest and other financing expenses
11.1
10.2
Variable lease cost
Cost of sales and Selling, general and
administrative expenses
3.7
3.7
Sublease income
Other income, net
(9.3)
(7.6)
Total lease cost
$
68.7 $
62.8
73
Other information related to the Company's leases follows for the years ended September 30:
(In millions)
2024
2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (a)
$
43.1 $
38.7
Operating cash flows from finance leases
$
11.1 $
10.2
Financing cash flows from finance leases
$
12.0 $
10.8
Lease assets obtained in exchange for lease obligations:
Operating leases
$
63.4 $
46.4
Finance leases
$
22.4 $
21.3
(a)
Included within the change in Other assets and liabilities within the Consolidated Statements of Cash Flows offset by noncash operating
lease asset amortization and liability accretion.
The following table reconciles the undiscounted cash flows for the next five fiscal years ended September 30 and
thereafter to the operating and finance lease liabilities recorded within the Consolidated Balance Sheet as of
September 30, 2024:
(In millions)
Operating leases
Finance leases
2025
$
45.9 $
24.1
2026
44.9
25.0
2027
42.6
25.1
2028
39.9
25.3
2029
37.2
25.1
Thereafter
193.1
171.5
Total future lease payments
403.6
296.1
Imputed interest
92.7
75.4
Present value of lease liabilities
$
310.9 $
220.7
As of September 30, 2024, Valvoline has additional leases primarily related to its retail service center stores that
have not yet commenced with approximately $30.1 million in undiscounted future lease payments that are not
included in the table above. These leases are expected to commence over the next twelve months and generally
have lease terms of 15 years.
The weighted average remaining lease terms and interest rates as of September 30, 2024 were:
Operating leases
Finance leases
Weighted average remaining lease term (in years)
9.9
11.7
Weighted average discount rate
5.1 %
5.3 %
NOTE 7 – INTANGIBLE ASSETS
Goodwill
The following summarizes the changes in the carrying amount of goodwill during fiscal 2024 and 2023:
74
(In millions)
Balance at September 30, 2022
$
548.2
Acquisitions
29.0
Currency translation
0.8
Balance at September 30, 2023
578.0
Acquisitions
44.3
Currency translation
(0.1)
Dispositions
(6.9)
Balance at September 30, 2024
$
615.3
Other intangible assets
Valvoline’s purchased intangible assets were specifically identified when acquired, have finite lives, and are
reported in Goodwill and intangibles, net within the Consolidated Balance Sheets. The following summarizes the
gross carrying amounts and accumulated amortization of the Company’s intangible assets as of September 30:
(In millions)
2024
2023
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Definite-lived intangible assets
Trademarks and trade names
$
29.2 $
(11.4) $
17.8 $
29.6 $
(10.5) $
19.1
Reacquired franchise rights
122.2
(58.7)
63.5
122.1
(49.4)
72.7
Customer relationships
15.1
(7.9)
7.2
16.8
(8.3)
8.5
Other intangible assets
7.0
(5.2)
1.8
6.9
(4.6)
2.3
Total definite-lived intangible assets
$ 173.5 $
(83.2) $
90.3 $ 175.4 $
(72.8) $ 102.6
The table that follows summarizes amortization expense (actual and estimated) for the Company's current
intangible assets for the years ended September 30:
(In millions)
Actual
Estimated
2024
2025
2026
2027
2028
2029
Amortization expense
$
16.7 $
15.3 $
12.3 $
11.7 $
11.6 $
11.3
NOTE 8 – DEBT
The following table summarizes Valvoline’s debt as of September 30:
(In millions)
2024
2023
2031 Notes
$
535.0 $
535.0
2030 Notes
—
600.0
Term Loan
439.4
463.1
Revolver
125.0
—
Debt issuance costs and discounts
(5.6)
(12.0)
Total debt
1,093.8
1,586.1
Current portion of long-term debt
23.8
23.8
Long-term debt
$
1,070.0 $
1,562.3
75
Senior Notes
The Company's outstanding fixed rate senior notes as of September 30, 2024 consist of 3.625% senior unsecured
notes due 2031 with an aggregate principal amount of $535.0 million (the “2031 Notes”). The 2031 Notes are
subject to customary events of default for similar debt securities, which if triggered may accelerate payment of
principal, premium, if any, and accrued but unpaid interest. If a change of control repurchase event occurs,
Valvoline may be required to offer to purchase the 2031 Notes from the holders thereof. The 2031 Notes are not
otherwise required to be repaid prior to maturity, although they may be redeemed at the option of Valvoline at any
time prior to maturity in the manner specified in the governing indentures. In April 2024, the Company repurchased
the 2030 Notes described in more detail below.
2030 Notes
On April 16, 2024, Valvoline completed a tender offer (the “Debt Tender Offer”) with 99.7% of the outstanding
principal amount tendered by the holders of 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 purchase of the 2030
Notes at par, plus accrued and unpaid interest, and cancelled the 2030 Notes accepted for purchase. The Company
elected to repurchase 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. In connection with the completion of the Debt Tender Offer,
Valvoline recognized a loss on extinguishment of the 2030 Notes of $5.1 million within Net interest and other
financing expenses in the Consolidated Statements of Comprehensive Income during the year ended September
30, 2024, comprised of the write-off of related unamortized debt issuance costs and discounts.
Senior Credit Agreement
Key terms and conditions
In December 2022, Valvoline amended the Senior Credit Agreement, which became effective March 1, 2023
commensurate with the sale of Global Products. The Senior Credit Agreement provides an aggregate principal
amount of $950.0 million in senior secured credit facilities comprised of (i) a five-year $475.0 million term loan
facility (the “Term Loan”) and (ii) a five-year $475.0 million revolving credit facility (the “Revolver”), including a
$100.0 million letter of credit sublimit.
The principal amount of the Term Loan under the Senior Credit Agreement is required to be repaid in quarterly
installments of approximately $5.9 million beginning with the first fiscal quarter after the sale of Global Products,
with the remainder due at maturity and prepayment required in the amount of the net cash proceeds from certain
events. Amounts outstanding under the Senior Credit Agreement may be prepaid at any time, and from time to time,
in whole or part, without premium or penalty. At Valvoline’s option, amounts outstanding under the Senior Credit
Agreement will bear interest at either the Secured Overnight Financing Rate (“SOFR”) or an alternate base rate, in
each case plus the applicable interest rate margin. The interest rate will fluctuate between SOFR plus 1.375% per
year and SOFR plus 2.250% per year (or between the alternate base rate plus 0.375% per year and the alternate
base rate plus 1.250% per year), based upon Valvoline’s consolidated total net leverage ratio.
Summary of activity
Proceeds from the Term Loan, in addition to a portion of the proceeds from the sale of Global Products, were used
to pay in full the outstanding borrowings under the prior Credit Agreement, including the principal balance of the
term loan facility of $445.6 million and outstanding borrowings under the revolving credit facility of $290.0 million, as
well as accrued and unpaid interest and fees and expenses related to the amendment. The Company recognized
$1.1 million of expense within Net interest and other financing expenses in the Consolidated Statements of
Comprehensive Income during the year ended September 30, 2023 associated with the modification of the Credit
Agreement, which included accelerated amortization of previously capitalized debt issuance costs.
As of September 30, 2024 and 2023, the Term Loan had an outstanding balance of $439.4 million and $463.1
million, respectively, and $125.0 million outstanding under the Revolver as of September 30, 2024 while there were
no amounts outstanding under the Revolver as of September 30, 2023. Excluding the refinancing of the Term Loan
76
described above, Valvoline made payments on the Term Loan of $23.8 million and $11.9 million during fiscal 2024
and 2023, respectively. The total borrowing capacity remaining under the Revolver was $346.8 million as of
September 30, 2024 due to reductions of $125.0 million and $3.2 million for outstanding borrowings and letters of
credit, respectively.
Covenants and guarantees
The Company is required to satisfy certain covenants pursuant to its long-term borrowings. These covenants
contain customary limitations, including limitations on liens, additional indebtedness, investments, restricted
payments, asset sales, mergers, and affiliate transactions. The maintenance of financial covenants as of the end of
each fiscal quarter is required, as defined in the Senior Credit Agreement, including: i) a maximum net leverage
ratio of 4.5, which is calculated as net debt divided by Adjusted EBITDA and ii) a minimum interest coverage ratio of
3.0, which is calculated as Adjusted EBITDA divided by net interest expense. Cross-default provisions also exist
between certain debt instruments. As of September 30, 2024 and 2023, the Company was in compliance with all
debt covenants.
Valvoline’s existing and future subsidiaries (other than certain immaterial subsidiaries, joint ventures, special
purpose financing subsidiaries, regulated subsidiaries, non-U.S. subsidiaries and certain other subsidiaries)
guarantee obligations under the Senior Credit Agreement, which is also secured by a first-priority security interest in
substantially all the personal property assets and certain real property assets of Valvoline and the guarantors,
including all or a portion of the equity interests of certain of Valvoline’s domestic subsidiaries and first-tier non-U.S.
subsidiaries, and in certain cases, a portion of the equity interests of other non-U.S. subsidiaries. Valvoline's
subsidiaries that guarantee obligations under its Senior Credit Agreement also guarantee the Senior Notes, which
have not been and are not expected to be registered in exchange offers as debt securities.
Long-term debt maturities
The future maturities of debt outstanding as of September 30, 2024, excluding debt issuance costs and discounts,
are as follows:
(In millions)
Years ending September 30
2025
$
23.8
2026
23.8
2027
23.7
2028
493.1
2029
—
Thereafter
535.0
Total
$
1,099.4
NOTE 9 – INCOME TAXES
Components of income tax expense
Income tax expense consisted of the following for the years ended September 30:
77
(In millions)
2024
2023
2022
Current
Federal
$
34.7 $
8.0 $
9.4
State
8.3
(5.5)
4.3
Non-U.S.
2.6
1.0
3.0
45.6
3.5
16.7
Deferred
Federal
20.8
36.8
16.2
State
2.7
(3.2)
1.3
Non-U.S.
—
—
0.5
23.5
33.6
18.0
Income tax expense
$
69.1 $
37.1 $
34.7
The following presents pre-tax income and the principal components of the reconciliation between the effective tax
rate and the U.S. federal statutory income tax rate in effect for the years ended September 30:
(In millions)
2024
2023
2022
Income before income taxes
United States
$
286.5
$
242.7
$
119.1
Non-U.S.
(2.9)
(6.2)
25.0
Total income before income taxes
$
283.6
$
236.5
$
144.1
U.S. statutory tax rate
21 %
21 %
21 %
Income taxes computed at U.S. statutory tax rate
$
59.6
$
49.7
$
30.3
(Decrease) increase in amount computed resulting from:
Unrecognized tax benefits
0.1
0.1
0.1
State taxes, net of federal benefit
9.2
11.2
5.2
International rate differential
(0.1)
0.1
(0.4)
Permanent items
1.7
0.1
(1.0)
Remeasurement of net deferred taxes
(0.1)
(1.1)
(0.5)
Return-to-provision adjustments
(0.7)
(0.9)
(0.4)
Change in valuation allowances
(1.7)
(27.7)
1.8
Tax Matters Agreement activity
—
5.4
—
Other
1.1
0.2
(0.4)
Income tax expense
$
69.1
$
37.1
$
34.7
Effective tax rate
24.4 %
15.7 %
24.1 %
The higher effective tax rate in fiscal 2024 is primarily due to more normalized activity compared to the prior year
period, which included a $29.0 million income tax benefit. This benefit resulted from 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. Higher pre-tax income in
fiscal 2023 compared to fiscal 2022 led to increased tax expense, which was more than offset by the benefit from
the valuation allowance release, driving a lower effective tax rate in fiscal 2023.
78
Deferred taxes
A summary of the deferred tax assets and liabilities included in the Consolidated Balance Sheets follows as of
September 30:
(In millions)
2024
2023
Deferred tax assets
Non-U.S. net operating loss carryforwards (a)
$
2.9 $
1.1
State net operating loss carryforwards (b)
6.9
8.2
Employee benefit obligations
33.9
34.6
Compensation accruals
15.8
17.9
Credit carryforwards (c)
0.3
0.3
Operating lease liabilities
107.9
95.2
Other
10.3
12.4
Valuation allowances (d)
(1.0)
(3.0)
Net deferred tax assets
177.0
166.7
Deferred tax liabilities
Goodwill and other intangibles
25.9
19.1
Property, plant and equipment
154.1
134.7
Operating lease assets
75.4
68.1
Other
0.2
0.3
Total deferred tax liabilities
255.6
222.2
Total net deferred tax liabilities (e)
$
(78.6) $
(55.5)
(a)
Gross non-U.S. net operating loss carryforwards of $10.6 million expire in fiscal years 2039 to 2044.
(b)
Apportioned gross state net operating loss carryforwards of $130.2 million expire in fiscal years 2029 through 2037.
(c)
Credit carryforwards consist primarily of state tax credits that generally expire in fiscal years 2025 through 2032.
(d)
Valuation allowances at September 30, 2024 primarily relate to nondeductible executive compensation and state net operating loss
carryforwards that are not expected to be realized or realizable.
(e)
Balances are presented in the Consolidated Balance Sheets based on the net position of each tax jurisdiction.
Tax Matters Agreement
Background
Prior to its initial public offering (the "IPO") in September 2016, the Valvoline business operated as a wholly-owned
subsidiary of Ashland Inc. (which together with its predecessors and consolidated subsidiaries is referred to herein
as “Ashland”). In advance of the IPO, the Valvoline business and certain other legacy Ashland assets and liabilities
were transferred from Ashland to Valvoline as a reorganization of entities under common Ashland control (the
"Contribution"). In connection with the IPO, Ashland retained 83% of the total outstanding shares of Valvoline's
common stock. On May 12, 2017, Ashland distributed its interest in Valvoline to Ashland stockholders through a pro
rata dividend on shares of Ashland common stock outstanding (the "Distribution"), which marked the completion of
Valvoline's separation from Ashland.
For the periods prior to the Distribution, Valvoline was included in Ashland’s consolidated U.S. and state income tax
returns and in the income tax returns of certain Ashland international subsidiaries (collectively, the “Ashland Group
Returns”). For the taxable periods that began on and after the Distribution, Valvoline files tax returns that include
only Valvoline and its subsidiaries.
79
Key terms and conditions
An agreement (the "Tax Matters Agreement") was entered into in September 2016 between Valvoline and Ashland,
that generally provides that Valvoline indemnify Ashland for the following items:
•
The utilization of certain legacy tax attributes transferred from Ashland as the result of the Contribution;
•
Taxes for the pre-IPO period that arise on audit or examination and are directly attributable to the Valvoline
business;
•
Certain U.S. federal, state or local taxes for the pre-IPO period of Ashland and/or its subsidiaries that arise on
audit or examination and are not directly attributable to either the Valvoline business or the Ashland chemicals
business;
•
Taxes of Valvoline for the period between the IPO and Distribution that are not attributable to Ashland Group
Returns (as defined above);
•
Taxes of Valvoline for all taxable periods that begin on or after the day after the date of the Distribution; and
•
Certain taxes and expenses resulting from the failure of the Contribution or Distribution to qualify for the
intended tax-free treatment.
Summary of activity
Adjustments to the net obligations to Ashland under the Tax Matters Agreement are recorded within Net legacy and
separation-related expenses (income), with any resulting impacts to Valvoline's stand-alone income tax provision
recorded in Income tax expense within the Consolidated Statements of Comprehensive Income.
During fiscal 2023, Valvoline recognized an income tax benefit of $29.0 million in connection with releasing its
valuation allowance. Additionally, Valvoline recognized $25.7 million of expense within Net legacy and separation-
related expenses in the Consolidated Statement of Comprehensive Income during fiscal 2023 to reflect its
increased estimated indemnity obligation to its former parent as a result of the terms of the amended Tax Matters
Agreement.
Total liabilities related to obligations owed to Ashland under the Tax Matters Agreement are primarily recorded in
Other noncurrent liabilities in the Consolidated Balance Sheets and were $9.0 million and $10.8 million as of
September 30, 2024 and 2023, respectively. Given the indemnification of Ashland for periods in which Valvoline
was included in Ashland Group Returns, a portion of the Company's liability for unrecognized tax benefits is
included in the Tax Matters Agreement obligation. The periods under indemnity that currently remain open to
examination include certain U.S. state jurisdictions from fiscal 2018.
Unrecognized tax benefits
The aggregate changes in the balance of gross unrecognized tax benefits were as follows for the years ended
September 30:
(In millions)
2024
2023
2022
Gross unrecognized tax benefits as of October 1
$
35.7 $
8.2 $
8.7
Increases related to tax positions from prior years
0.1
0.6
0.1
Decreases related to tax positions from prior years
(2.1)
(0.6)
(0.6)
Increases related to tax positions taken during the current year
—
27.7
0.8
Lapses of statutes of limitation
(0.6)
(0.2)
(0.8)
Gross unrecognized tax benefits as of September 30 (a)
$
33.1 $
35.7 $
8.2
(a)
These unrecognized tax benefits would favorably impact the continuing operations and discontinued operations effective income tax rates, if
recognized. Accruals for interest and penalties were $1.8 million as of September 30, 2024 and 2023, respectively.
In connection with the sale of Global Products, Valvoline established reserves of $27.1 million for gross
unrecognized tax benefits as of September 30, 2024. If realized, these unrecognized tax benefits would favorably
impact the discontinued operations effective income tax rate.
80
The Company's U.S. federal income tax returns remain open to examination from fiscal 2019 forward and Canada
from fiscal 2020 and forward. Fiscal years including and after 2018 remain open to examination by certain U.S.
state jurisdictions.
Because Valvoline is routinely under examination by various taxing authorities, it is reasonably possible that the
amount of unrecognized tax benefits will change during fiscal 2025. Due to the complexity and number of open
years, it is not practical to estimate the amount or range of such change at this time. Based on current information
available, management does not expect a material change to the Company's gross unrecognized tax benefits within
fiscal 2025.
NOTE 10 – EMPLOYEE BENEFIT PLANS
Pension and other postretirement plans
The components of pension and other postretirement plans net periodic benefit costs (income) and the assumptions
used in this determination are summarized below for the years ended September 30:
(In millions)
Pension benefits
Other postretirement benefits
2024
2023
2022
2024
2023
2022
Net periodic benefit costs (income)
Interest cost
$
83.4
$
81.8
$
43.0
$
1.2
$
1.2
$
0.7
Expected return on plan assets
(68.4)
(66.9)
(78.6)
—
—
—
Amortization of prior service cost (credit)
0.1
0.1
0.1
(2.2)
(2.2)
(2.2)
Actuarial (gain) loss
(5.1)
(35.0)
49.5
2.7
(6.6)
(5.6)
Net periodic benefit costs (income)
$
10.0
$ (20.0)
$
14.0
$
1.7
$
(7.6)
$
(7.1)
Weighted-average plan assumptions
Discount rate for interest cost
5.92 %
5.45 %
2.10 %
5.92 %
5.41 %
1.92 %
Expected long-term rate of return on plan
assets
5.30 %
4.90 %
4.10 %
—
—
—
Valvoline recognizes the change in the fair value of plan assets and net actuarial gains and losses annually in the
fourth quarter of each fiscal year and whenever a plan is determined to qualify for remeasurement. These gains and
losses are reported within Net pension and other postretirement plan expense (income) in the Consolidated
Statements of Comprehensive Income and included a gain of $2.4 million for the year ended September 30, 2024, a
gain of $41.6 million for the year ended September 30, 2023, and a loss of $43.9 million for the year ended
September 30, 2022.
The fiscal 2024 gain was primarily attributed to lower discounts rates, partially offset by higher-than-expected
returns on plan assets. The fiscal 2023 gain was primarily attributed to an increase in discount rates, partially offset
by lower-than-expected returns on plan assets. The fiscal 2022 loss was primarily attributed to lower-than-expected
returns on plan assets, partially offset by higher discount rates.
The following table summarizes the net periodic benefit loss (income) and the amortization of prior service credits
recognized during the years ended September 30:
(In millions)
Pension benefits
Other postretirement benefits
2024
2023
2022
2024
2023
2022
Amortization of prior service credits
recognized in Accumulated other
comprehensive income
$
(0.1) $
(0.1) $
(0.1) $
2.2 $
2.2 $
2.2
Net periodic benefit loss (income)
10.0
(20.0)
14.0
1.7
(7.6)
(7.1)
Total pre-tax amount recognized in
comprehensive loss (income)
$
9.9 $
(20.1) $
13.9 $
3.9 $
(5.4) $
(4.9)
81
Obligations and funded status
Changes in benefit obligations and the fair value of plan assets, as well as key assumptions used to determine the
benefit obligations, and the amounts in the Consolidated Balance Sheets for the Company’s pension and other
postretirement benefit plans are summarized below as of September 30:
(In millions)
Pension benefits
Other postretirement
benefits
2024
2023
2024
2023
Change in benefit obligations
Benefit obligations as of October 1
$ 1,478.1
$ 1,585.2
$
22.3
$
30.7
Interest cost
83.4
81.8
1.2
1.2
Benefits paid
(130.6)
(130.4)
(2.4)
(3.0)
Actuarial loss (gain)
140.0
(52.7)
2.7
(6.6)
Transfers in
1.6
4.4
—
—
Settlements
(6.8)
(10.2)
—
—
Benefit obligations as of September 30
$ 1,565.7
$ 1,478.1
$
23.8
$
22.3
Change in plan assets
Fair value of plan assets as of October 1
$ 1,361.0
$ 1,438.1
$
—
$
—
Actual return on plan assets
213.5
41.3
—
—
Employer contributions
14.2
17.8
2.4
3.0
Benefits paid
(130.6)
(130.4)
(2.4)
(3.0)
Settlements
(6.8)
(10.2)
—
—
Transfers in
1.6
4.4
—
—
Fair value of plan assets as of September 30
$ 1,452.9
$ 1,361.0
$
—
$
—
Unfunded status of the plans as of September 30
$
112.8
$
117.1
$
23.8
$
22.3
(In millions)
Pension benefits
Other postretirement
benefits
2024
2023
2024
2023
Amounts in the Consolidated Balance Sheets
Noncurrent benefit assets (a)
$
49.0
$
38.6
$
—
$
—
Current benefit liabilities (b)
7.1
7.7
2.7
2.6
Noncurrent benefit liabilities (c)
154.7
148.0
21.1
19.7
Total benefit liabilities
161.8
155.7
23.8
22.3
Net liabilities recognized
$
112.8
$
117.1
$
23.8
$
22.3
Balance in Accumulated other comprehensive loss
Prior service cost (credit)
$
1.1
$
1.1
$
(14.4)
$
(16.7)
Weighted-average plan assumptions
Discount rate
4.94 %
5.98 %
4.89 %
5.98 %
Healthcare cost trend rate (d)
—
—
7.2 %
5.5 %
(a)
Noncurrent benefit assets are recorded in Other noncurrent assets within the Consolidated Balance Sheets.
(b)
Current benefit liabilities are recorded in Accrued expenses and other liabilities within the Consolidated Balance Sheets.
(c)
Noncurrent benefit liabilities are recorded in Employee benefit obligations within the Consolidated Balance Sheets.
(d)
The assumed pre-65 health care cost trend rate continues to be reduced to 4.0% in 2049 and thereafter.
82
Accumulated benefit obligation
The accumulated benefit obligation for all pension plans was $1.6 billion and $1.5 billion as of September 30, 2024
and 2023, respectively. Pension plans with projected and accumulated benefit obligations in excess of the fair value
of plan assets follows for the Company’s plans as of September 30:
(In millions)
2024
2023
Benefit
obligation
Plan
assets
Benefit
obligation
Plan
assets
Plans with projected and accumulated benefit obligations in
excess of plan assets
$ 1,146.0 $
984.1 $ 1,101.7 $
946.0
Plan assets
Pension plan asset investments and their level within the fair value hierarchy is summarized below as of:
(In millions)
September 30, 2024
Total fair
value
Level 1
Level 2
Level 3
Assets
measured at
NAV
Cash and cash equivalents
$
25.4 $
25.4 $
— $
— $
—
U.S. government securities and
futures
49.6
—
49.6
—
—
Other government securities
42.1
—
42.1
—
—
Corporate debt instruments
1,108.4
—
1,108.4
—
—
Private equity and hedge funds
1.2
—
—
—
1.2
Collective trust funds
216.0
—
—
—
216.0
Other investments
10.2
—
10.2
—
—
Total assets at fair value
$
1,452.9 $
25.4 $
1,210.3 $
— $
217.2
(In millions)
September 30, 2023
Total fair
value
Level 1
Level 2
Level 3
Assets
measured at
NAV
Cash and cash equivalents
$
21.5 $
21.5 $
— $
— $
—
U.S. government securities and
futures
63.1
—
63.1
—
—
Other government securities
33.1
—
33.1
—
—
Corporate debt instruments
1,055.4
—
1,055.4
—
—
Private equity and hedge funds
4.4
—
—
—
4.4
Collective trust funds
176.9
—
—
—
176.9
Other investments
6.6
—
6.6
—
—
Total assets at fair value
$
1,361.0 $
21.5 $
1,158.2 $
— $
181.3
Cash and cash equivalents
The carrying value of cash and cash equivalents approximates fair value.
Government securities
Government securities are valued based on Level 2 inputs, which include yields available for comparable securities
of issuers with similar credit ratings.
83
Corporate debt instruments
Corporate debt instruments are valued based on Level 2 inputs that are observable in the market or may be derived
principally from, or corroborated by, recently executed transactions, observable market data such as pricing for
similar securities, cash flow models with yield curves, counterparty credit ratings, and credit spreads applied using
the maturity and coupon interest rate terms of the debt instrument.
Private equity and hedge funds
Private equity and hedge funds primarily represent alternative investments not traded on an active market which are
valued at the NAV per share determined by the manager of the fund based on the fair value of the underlying net
assets owned by the fund divided by the number of shares or units outstanding.
Collective trust funds
Collective trust funds are comprised of a diversified portfolio of investments across various asset classes, including
U.S. and international equities, fixed-income securities, commodities and currencies. The collective trust funds are
valued using a NAV provided by the manager of each fund, which is based on the underlying net assets owned by
the fund, divided by the number of shares outstanding.
Other investments
Other investments are primarily comprised of swaps that are valued using closing market swap curves and market
derived inputs.
The following summarizes investments for which fair value is measured using the NAV per share practical expedient
as of September 30, 2024:
(In millions)
Fair value at
NAV
Unfunded
commitments
Redemption
frequency
(if currently eligible)
Redemption
notice period
Relative value hedge funds
$
0.1 $
—
None (a)
None (a)
Event driven hedge funds
0.3
—
None (a)
None (a)
Collective trust funds
216.0
—
Daily
Up to 3 days
Private equity
0.8
1.6
None (b)
None (b)
Total
$
217.2 $
1.6
(a)
These hedge funds are in the process of liquidation and the timing is unknown.
(b)
These private equity instruments are estimated to be liquidated over the next 1 to 5 years.
Investments and strategy
In developing an investment strategy for its defined benefit plans, Valvoline considered the following factors: the
nature of the liabilities of the plans; the allocation of liabilities between active, deferred and retired plan participants;
the funded status of the plans; the applicable investment horizon; the respective size of the plans; and historical and
expected investment returns. Valvoline’s pension plan assets are managed by outside investment managers,
which are monitored against investment benchmark returns and Valvoline's established investment strategy.
Investment managers are selected based on an analysis of, among other things, their investment process, historical
investment results, frequency of management turnover, cost structure, and assets under management. Assets are
periodically reallocated between investment managers to optimize returns and maintain an appropriate asset mix
and diversification of investments.
The current target asset allocation for the plans is 90% fixed income securities and 10% equity-based securities.
Fixed income securities are liability matching assets that primarily include long duration, high grade corporate debt
obligations. Equity-based securities are return-seeking assets that include both traditional equities as well as a mix
of non-traditional assets such as hedge and commingled funds and private equity. Investment managers may
employ a limited use of futures or other derivatives to manage risk within the portfolio through efficient exposure to
84
markets. Valvoline’s pension plans hold a variety of investments designed to diversify risk and achieve an adequate
net investment return to provide for future benefit payments to its participants.
The weighted-average asset allocations for Valvoline’s plans by asset category follow as of September 30:
Target
2024
2023
Plan assets allocation
Equity securities
3-10%
7 %
7 %
Debt securities
80-100%
92 %
92 %
Other
0-10%
1 %
1 %
Total
100 %
100 %
The basis for determining the expected long-term rate of return is a combination of future return assumptions for the
various asset classes in Valvoline’s investment portfolio based on active management, historical analysis of
previous returns, market indices, and a projection of inflation, net of plan expenses.
Funding and benefit payments
Valvoline contributed $14.2 million and $17.8 million to its pension plans during fiscal 2024 and 2023, respectively.
Valvoline does not plan to contribute to its qualified pension plans in fiscal 2025 and expects to contribute
approximately $7.1 million to its non-qualified pension plans.
The following benefit payments, which reflect future service expectations, are projected to be paid in each of the
next five fiscal years ended September 30 and the five fiscal years thereafter in aggregate:
(In millions)
Pension benefits
Other postretirement
benefits
2025
$
136.3 $
2.6
2026
135.1
2.3
2027
133.1
2.1
2028
130.0
2.1
2029
128.7
2.0
2028 - 2032
592.5
8.7
Total
$
1,255.7 $
19.8
Other plans
Defined contribution and other defined benefit plans
Valvoline sponsors certain defined contribution savings plans that provide matching contributions. Expense
associated with these plans was $14.1 million in fiscal 2024, $12.5 million in fiscal 2023 and $15.9 million in fiscal
2022.
Valvoline also sponsors a long-term disability benefit plan. Total liabilities associated with this plan were $0.6 million
and $1.0 million as of September 30, 2024 and 2023, respectively.
Incentive plans
Reserves for incentive plans were $15.8 million and $16.4 million as of September 30, 2024 and 2023, respectively.
85
NOTE 11 – 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 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, there are currently no matters for
which 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
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 consolidated financial statements.
NOTE 12 – STOCK-BASED COMPENSATION PLANS
Valvoline has approved stock-based incentive plans that authorize 21.0 million shares of common stock to be
issued, with approximately 8.8 million shares of common stock remaining available for issuance as of September
30, 2024. The Valvoline stock-based incentive plans authorize the grant of stock options, stock appreciation rights
(“SARs”), and nonvested stock awards, principally in the form of restricted stock, restricted stock units, and
performance share units. The following summarizes stock-based compensation expense recognized by the
Company during the years ended September 30:
(In millions)
2024
2023
2022
Stock appreciation rights
$
1.1 $
1.2 $
1.5
Nonvested stock awards
10.9
12.6
8.4
Total stock-based compensation expense, pre-tax
12.0
13.8
9.9
Tax benefit
(3.0)
(3.5)
(2.5)
Total stock-based compensation expense, net of tax
$
9.0 $
10.3 $
7.4
Stock appreciation rights
SARs are granted to certain Valvoline employees to provide vested award holders with the ability to profit from the
appreciation in value of a set number of shares of common stock over a period of time by receiving the differential
between the value of the Company's common stock price at the grant and exercise dates. SARs typically vest and
become exercisable over a period of one to three years and are subject to pre-vesting forfeiture upon service
termination. Unexercised SARs generally lapse ten years after the grant date. Stock-based compensation expense
for SARs is determined using the Black-Scholes option-pricing model to estimate the grant date fair value of new or
modified awards.
Nonvested stock awards
Nonvested stock awards in the form of Restricted Stock Awards ("RSAs") and Restricted Stock Units ("RSUs") are
granted to certain Valvoline employees and directors. These awards can have service-based or both service and
performance-based vesting conditions. Nonvested stock awards generally vest over a one to three-year period and
are subject to forfeiture upon termination of service prior to vesting. Nonvested stock awards are primarily granted
as RSUs that settle in shares upon vesting, while RSAs result in share issuance at grant, entitling the award holders
to voting rights, though the shares are restricted until vesting. Nonvested stock awards with service-only vesting
conditions receive dividend equivalents in the form of additional units or shares, which are subject to vesting and
forfeiture provisions.
86
Nonvested stock awards with both service and performance conditions vest through continued employee service
and upon the achievement of specific financial targets subject to adjustment relative to performance among
selected industry peer groups. These awards are granted annually and subject to a three-year performance and
vesting period. Each performance share unit is convertible to one share of common stock, the actual number of
which is dependent upon performance compared to financial and market performance targets at the end of each
performance period. Compensation cost for performance-based nonvested stock awards is recognized at fair value
over the requisite service period based on the probable achievement of the financial performance conditions.
The following summarizes nonvested stock award activity during the year ended September 30, 2024:
Number of
shares
(in thousands)
Weighted average grant
date fair value per share
Unvested shares as of September 30, 2023
1,350.6 $
33.35
Granted
315.6 $
36.59
Performance adjustments (a)
22.0 $
38.32
Vested
(468.9) $
35.53
Forfeited
(51.6) $
35.95
Unvested shares as of September 30, 2024
1,167.7 $
32.74
(a)
Adjustments based on current attainment expectations of performance targets.
The fair value of new or modified nonvested stock awards with service-only conditions was determined based on
the closing market price of Valvoline common stock on the grant date, and the fair value of performance-based
nonvested stock awards that include both financial and market performance conditions was determined using a
Monte Carlo simulation valuation model with the following key assumptions:
2024
2023
2022
Weighted average grant date fair value per share
$
38.32
$
35.94
$
33.98
Assumptions (weighted average)
Risk-free interest rates (a)
4.6 %
4.3 %
1.6 %
Expected dividend yield
— %
— %
1.8 %
Expected volatility (b)
28.5 %
43.0 %
41.5 %
Expected term (in years)
3.0
3.0
3.0
(a)
Based on the U.S. Treasury yield curve in effect at the time of grant or modification for the expected term of the award. The range of risk-
free interest rates used for performance awards was 4.54% to 4.83% in fiscal 2024, 4.24% to 4.78% in fiscal 2023, and 1.14% to 1.88% in
fiscal 2022.
(b)
Expected volatility is based on historical volatilities over periods commensurate with the expected term. In recent years, Valvoline utilized its
historical daily closing price over this period.
The total grant date fair value of nonvested stock awards vested and the weighted average grant date fair value of
nonvested stock awards granted follows for the years ended September 30:
2024
2023
2022
Total grant date fair value of shares vested
$
17.1 $
15.7 $
11.2
Weighted average grant date fair value
$
36.59 $
33.98 $
35.32
As of September 30, 2024, there was $6.9 million of total unrecognized compensation costs related to nonvested
stock awards, which is expected to be recognized over a weighted average period of 1.9 years. The aggregate
intrinsic value of nonvested stock awards as of September 30, 2024 is $38.2 million.
87
NOTE 13 - EARNINGS PER SHARE
The following summarizes basic and diluted EPS for the years ended September 30:
(In millions, except per share data)
2024
2023
2022
Numerator
Income from continuing operations
$
214.5 $
199.4 $
109.4
(Loss) income from discontinued operations, net of tax
(3.0)
1,220.3
314.9
Net income
$
211.5 $
1,419.7 $
424.3
Denominator
Weighted average common shares outstanding
130.1
161.6
179.1
Effect of potentially dilutive securities (a)
0.9
1.0
1.3
Weighted average diluted shares outstanding
131.0
162.6
180.4
Basic earnings per share
Continuing operations
$
1.65 $
1.24 $
0.61
Discontinued operations
(0.02)
7.55
1.76
Basic earnings per share
$
1.63 $
8.79 $
2.37
Diluted earnings per share
Continuing operations
$
1.63 $
1.23 $
0.61
Discontinued operations
(0.02)
7.50
1.74
Diluted earnings per share
$
1.61 $
8.73 $
2.35
(a)
There were 0.1 million outstanding securities, primarily SARs, not included in the computation of diluted earnings per share in the year
ended September 30, 2024 because the effect would have been antidilutive and 0.2 million for each of the years ended September 30, 2023
and 2022.
NOTE 14 - STOCKHOLDERS' EQUITY
Modified “Dutch auction” tender offer
During fiscal 2023, Valvoline completed a modified “Dutch auction” tender offer and accepted 27.0 million shares for
an aggregate purchase price of $1.024 billion, excluding fees and related expenses. Valvoline incurred $16.4 million
in fees and expenses, which included $10.2 million for excise taxes on share repurchases. These costs were
recognized within Retained earnings during the year ended September 30, 2023 as costs to repurchase the
Company’s common stock. Shares repurchased were retired and returned to the status of authorized, unissued
shares.
88
Accumulated other comprehensive income (loss)
Changes in Accumulated other comprehensive income (loss) by component for fiscal years 2024 and 2023 were as
follows:
(In millions)
Unamortized
benefit plan
credits
Currency
translation
adjustments
Changes in fair
value of cash
flow hedges
Total
Balance as of September 30, 2022
$
15.1 $
(49.7) $
13.3 $
(21.3)
Other comprehensive income before
reclassification (loss)
—
13.1
(22.8)
(9.7)
(Gain) loss reclassified out of
accumulated other comprehensive
income
(2.2)
30.7
12.7
41.2
Tax benefit (expense)
0.5
(0.1)
2.6
3.0
Balance as of September 30, 2023
13.4
(6.0)
5.8
13.2
Other comprehensive income before
reclassification (loss)
—
(0.4)
(10.0)
(10.4)
(Gain) loss reclassified out of
accumulated other comprehensive
income
(2.1)
4.4
2.3
4.6
Tax benefit
0.4
0.2
1.9
2.5
Balance as of September 30, 2024
$
11.7 $
(1.8) $
— $
9.9
Amounts reclassified from Accumulated other comprehensive income (loss) follow for the years ended September
30:
(in millions)
2024
2023
2022
Amortization of pension and other postretirement plan
prior service credits (a)
$
(2.1) $
(2.1) $
(2.1)
Business disposal (b)
4.4
30.6
—
Loss (gain) on cash flow hedges (c)
2.3
12.7
1.4
Tax effect of reclassifications
2.5
3.0
(3.4)
Total amounts reclassified, net of tax
$
7.1 $
44.2 $
(4.1)
(a)
Amortization of unrecognized prior service credits included in net periodic benefit income for pension and other postretirement plans was
reported in Net pension and other postretirement plan expense (income) within the Consolidated Statements of Comprehensive Income.
The Company releases the income tax effects from Accumulated other comprehensive income as benefit plan credits are amortized into
earnings.
(b)
Reflects the realization of $4.4 million of currency translation losses included in the net assets held for sale upon completing the sale of a
former Global Products business in the first quarter of fiscal 2024. Additionally, includes the realization of $30.7 million in currency
translation losses and $0.1 million in unamortized pension prior service credits both recognized within (Loss) income from discontinued
operations, net of tax in the Consolidated Statement of Comprehensive Income for fiscal 2023.
(c)
Represents the realization of gains from cash flow hedges reported in Net interest and other financing expense within the Consolidated
Statements of Comprehensive Income.
89
NOTE 15 – SUPPLEMENTAL BALANCE SHEET INFORMATION
Cash and cash equivalents
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the
Consolidated Balance Sheets to the totals shown within the Consolidated Statements of Cash Flows for the years
ended September 30:
(In millions)
2024
2023
2022
Cash and cash equivalents - continuing operations
$
68.3 $
409.1 $
23.4
Cash and cash equivalents - held for sale (a)
—
4.0
—
Cash and cash equivalents - discontinued operations
—
—
59.0
Restricted cash - continuing operations (b)
0.4
—
—
Restricted cash - discontinued operations (c)
—
—
1.5
Total cash, cash equivalents and restricted cash
$
68.7 $
413.1 $
83.9
(a)
Refer to Note 3 for additional information regarding the asset group classified as held for sale at September 30, 2023.
(b)
Included in Prepaid expenses and other current assets within the Consolidated Balance Sheets.
(c)
Included in Current assets held for sale with the Consolidated Balance Sheets.
Accounts and other receivables
The following summarizes Valvoline’s accounts and other receivables in the Consolidated Balance Sheets as of
September 30:
(In millions)
2024
2023
Current
Trade
$
73.2 $
64.0
Other
9.1
16.3
Notes receivable from franchisees
5.4
1.6
Receivables, gross
87.7
81.9
Allowance for credit losses
(1.3)
(0.6)
Receivables, net
$
86.4 $
81.3
Non-current (a)
Notes receivable
$
2.5 $
2.3
Other
4.4
7.5
Noncurrent notes receivable, gross
6.9
9.8
Allowance for losses
(2.6)
(2.4)
Noncurrent notes receivable, net
$
4.3 $
7.4
(a) Included in Other noncurrent assets within the Consolidated Balance Sheets.
90
Property, plant and equipment
The following table summarizes the various components of property, plant and equipment within the Consolidated
Balance Sheets as of September 30:
(In millions)
2024
2023
Land
$
160.1 $
148.5
Buildings
869.5
725.1
Machinery and equipment
348.7
302.6
Construction in progress
72.1
57.6
Total property, plant and equipment
1,450.4
1,233.8
Accumulated depreciation
(491.7)
(415.5)
Net property, plant and equipment
$
958.7 $
818.3
The following table summarizes finance lease assets included in net property, plant and equipment as of September
30:
(In millions)
2024
2023
Land
$
96.1 $
85.4
Buildings
165.6
154.6
Total finance lease assets
261.7
240.0
Accumulated depreciation
(67.4)
(50.0)
Net finance lease assets
$
194.3 $
190.0
Non-cash transactions, including finance leases, recognized within total property, plant and equipment were $18.3
million and $17.5 million during the years ended September 30, 2024 and 2023, respectively.
The following summarizes expense associated with property, plant and equipment recognized within the
Consolidated Statements of Comprehensive Income for the years ended September 30:
(In millions)
2024
2023
2022
Depreciation (includes finance leases)
$
89.2 $
72.0 $
54.7
Long-lived assets
The following presents long-lived assets comprised of net property, plant and equipment and operating lease assets
by geographic area in which the assets physically reside for the years ended September 30:
Property, plant and equipment, net
Operating lease assets
(In millions)
2024
2023
2024
2023
United States
$
909.1 $
774.4 $
281.6 $
247.2
Non-U.S.
49.6
43.9
17.0
19.3
Total
$
958.7 $
818.3 $
298.6 $
266.5
91
NOTE 16 – SUBSEQUENT EVENTS
Assets held for sale
In October 2024, the Company entered into a definitive agreement to sell 38 company-owned service center stores
to a new franchise partner. The transaction is subject to standard closing conditions and is expected to close in
early fiscal 2025. The underlying net assets associated with the transaction were classified as held for sale
beginning in October 2024 and will be classified as such until the closing of the sale.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Valvoline’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), with the assistance of management,
conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of
September 30, 2024 (the “Evaluation Date”). Although management believes that the consolidated financial
statements included in this Annual Report on Form 10-K are fairly presented in all material respects, this evaluation
concluded that as of the Evaluation Date, the Company's disclosure controls and procedures were not effective
based on a material weakness in internal control over financial reporting described below. These controls are
designed to ensure that information required to be disclosed in the reports that are filed or submitted under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and
forms of the Securities and Exchange Commission (“SEC”), and that such information is accumulated and
communicated to Valvoline’s management, including the CEO and CFO, to allow timely decisions regarding
required disclosure.
Notwithstanding the conclusion that disclosure controls and procedures were not effective as of September 30,
2024 due to the material weakness described below, management performed additional analyses and other
procedures, including implementing and enhancing certain manual procedures and controls intended to ensure the
consolidated financial statements included in this Annual Report on Form 10-K are fairly presented in all material
respects. The material weakness did not result in any identified material misstatements in the current or prior period
consolidated financial statements. Accordingly, the Company believes there are no material inaccuracies or
omissions of material fact in its consolidated financial statements included in this Annual Report on Form 10-K and
that such financial statements present fairly, in all material respects, the financial position, results of operations and
cash flows as of and for each of the periods presented herein in accordance with U.S. GAAP.
Management’s report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Management assessed the effectiveness of the
Company’s internal control over financial reporting as of September 30, 2024 based on the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in the 2013 Internal Control -
Integrated Framework. Based on this assessment, management concluded that the Company’s internal control over
financial reporting was not effective as of September 30, 2024 due to the material weakness in internal control over
financial reporting described below.
A company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and
92
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Valvoline’s independent registered public accounting firm, Ernst & Young LLP, who audited the consolidated
financial statements included in this Annual Report on Form 10-K, issued an adverse opinion on the effectiveness of
the Company’s internal control over financial reporting as of September 30, 2024, which appears in this Item 9A.
Material weakness in internal control over financial reporting
The sale of the former Global Products reportable segment on March 1, 2023 resulted in material changes in the
Company’s internal control over financial reporting, including the implementation of a new ERP system on January
1, 2024. A material weakness in internal control over financial reporting was initially reported during the quarter
ended March 31, 2024 due to the ERP implementation and the related ineffective information technology general
controls (“ITGCs”) and the design of certain business process controls. A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the annual or interim financial statements will not be prevented or detected on a
timely basis.
While significant progress has been made to address the control deficiencies, a material weakness continued to
exist as of September 30, 2024. Specifically, the Company did not ensure adequate (a) user access controls for
certain applications to ensure segregation of duties risks were addressed and that user and privileged access
reviews were completed timely and sufficiently evidenced, (b) change management controls for certain applications,
including sufficient documentation of effectiveness of underlying tools and evaluation of all potential risks, (c)
evidence of the effectiveness of controls at its third party IT service organization hosting the ERP application, and
(d) design for certain business process controls (automated and manual), including those that are dependent on
effective ITGCs.
Although management has performed procedures to gain comfort that the consolidated financial statements are
fairly stated in all material respects, these control deficiencies aggregate to allow for the possibility that material
misstatements could impact most financial statement accounts and disclosures that may not be prevented or
detected. Accordingly, these control deficiencies aggregate within the control activities component of the COSO
framework and constitute a material weakness. The material weakness did not result in any identified material
misstatements to the consolidated financial statements.
Remedial measures
Management has been actively developing, executing and enhancing its remedial efforts, which began during the
quarter ended March 31, 2024 following the ERP implementation. The remedial efforts include the following:
•
Established a plan to stabilize the ERP system for the classes of transactions with inadequate initial system
design, including the continued execution of manual control activities, analyses and procedures to address
the periods of time with systematic deficiencies;
•
Enhanced the design of access controls, including reviews of ERP privileged access and segregation of
duties in user provisioning to increase the rigor of review and centrally retain supporting evidence, while
continuing to enhance the reviews and documentation retained to support reviews of segregation of duties
conflicts and user access within certain other relevant applications;
•
Implemented tools to directly oversee access and change management for a key application that was
previously managed by a third party, and obtained direct evidence of effectiveness of the tools managed by
the third party as of and for the fiscal year ended September 30, 2024;
•
Increased the support of an outside consulting firm to advise regarding best practices for documentation,
design and execution of IT general controls and related transactional-level controls;
•
Improved the consistency of manually reviewing the appropriateness of changes to the ERP environment
for proper authorization, testing, and implementation and deployed a change management tool to centrally
retain this evidence, while continuing to enhance change management evidence and reviews for other
relevant applications;
•
Obtained and evaluated evidence of the continued operating effectiveness of controls for its ERP service
organization as of and through fiscal year-end, which will be supplemented in future periods by periodic
documented assessments; and
93
•
Conducted end-to-end business process walkthroughs to identify the points in the process for each
significant class of transactions where risks of material misstatement exist to validate the design and
operational effectiveness of responsive controls, including application controls, such as system
configuration, reports, automated jobs and interfaces. Based on these procedures, management is
supplementing its existing review controls with certain preventative transaction-level controls to align with
each point in the process where a reasonable possibility of material misstatement exists.
Management believes the foregoing efforts will remediate the material weakness, and these efforts are planned to
be completed during fiscal 2025. In addition to the measures outlined above, remediation will be complete upon
management’s consistent execution and validation through sufficient testing to support operational effectiveness.
Changes in internal control
Other than with respect to the remediation efforts discussed above, there have been no significant changes in
Valvoline’s internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2024
that materially affected, or are reasonably likely to materially affect, Valvoline’s internal control over financial
reporting.
94
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Valvoline Inc. and Consolidated Subsidiaries
Opinion on Internal Control Over Financial Reporting
We have audited Valvoline Inc. and Consolidated Subsidiaries’ internal control over financial reporting as of
September 30, 2024, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our
opinion, because of the effect of the material weakness described below on the achievement of the objectives of the
control criteria, Valvoline Inc. and Consolidated Subsidiaries (the Company) has not maintained effective internal
control over financial reporting as of September 30, 2024, based on the COSO criteria.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial
statements will not be prevented or detected on a timely basis. The following material weakness has been identified
and included in management's assessment. Management has identified a material weakness in controls related to
the aggregated control deficiencies in IT general controls for certain IT applications and the design of certain
controls dependent on those relevant IT applications, which could affect most consolidated significant accounts and
disclosures.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2024 and 2023,
the related consolidated statements of comprehensive income, stockholders’ equity and cash flows for each of the
three years in the period ended September 30, 2024, and the related notes and financial statement schedule listed
in the Index at Item 15(a). This material weakness was considered in determining the nature, timing and extent of
audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our
report dated November 22, 2024, which expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
95
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ Ernst & Young LLP
Louisville, Kentucky
November 22, 2024
96
ITEM 9B. OTHER INFORMATION
Rule 10b5-1 Trading Plans
From time to time, the Company’s officers and directors enter into equity trading plans with their brokers, which are
intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Securities and Exchange Act of
1934 (a “Rule 10b5-1 Trading Plan”). A Rule 10b5-1 Trading Plan is a written agreement between the officer or
director and such person’s broker that pre-establishes the formula for determining the amounts, prices, and dates of
Valvoline common stock and does not permit the officer or director to exercise any subsequent influence over how,
when or whether to effect purchases or sales. In addition, the officer or director must represent that he or she is not
aware of any material nonpublic information concerning Valvoline or its common stock upon execution of the Rule
10b5-1 Trading Plan. The Company’s insider trading policy requires a 90-day cooling-off period before transactions
may be executed pursuant an officer’s or director’s Rule 10b5-1 Trading Plan.
On August 27, 2024, Mr. R. Travis Dobbins, the Company’s Senior Vice President and Chief Technology Officer
entered into a Rule 10b5-1 Trading Plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).
Mr. Dobbins’ plan covers the sale of 100% of the net shares (after withholding of applicable taxes) of Valvoline
common stock received in settlement of any earned performance share units (2,080 at target) for the fiscal 2022 to
fiscal 2024 performance period. Mr. Dobbins’ Rule 10b5-1 Trading Plan expires upon the earlier of January 31,
2025, or the date all transactions pursuant to such trading plan are executed.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
A list of Valvoline’s executive officers and related information appears under the caption “Executive Officers of
Valvoline” in Item 1 of Part I of this Annual Report on Form 10-K. The other information required by this item will be
included in the Proxy Statement, which will be filed with the SEC within 120 days of September 30, 2024 and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included in the Proxy Statement, which will be filed with the SEC within
120 days of September 30, 2024 and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The information required by this item will be included in the Proxy Statement, which will be filed with the SEC within
120 days of September 30, 2024 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item will be included in the Proxy Statement, which will be filed with the SEC within
120 days of September 30, 2024 and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
97
The information required by this item will be included in the Proxy Statement, which will be filed with the SEC within
120 days of September 30, 2024 and is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this Report
(1) Financial statements
The consolidated financial statements of Valvoline filed as part of this Annual Report on Form 10-K are
included in Item 8 of Part II.
Separate financial statements of unconsolidated affiliates are omitted because none of these companies
constitute significant subsidiaries using the 20% tests when considered individually.
(2) Financial statement schedules
Financial Statement Schedule II - Valuation and Qualifying Accounts included within this Item 15 in this
Annual Report on Form 10-K. All other schedules are not required under the related instructions or are not
applicable.
(3) Exhibits
Refer to Item 15(b) included in this Annual Report on Form 10-K.
(b) Documents required by Item 601 of Regulation S-K
3.1
-
Amended and Restated Articles of Incorporation of Valvoline Inc. (incorporated by reference to
Exhibit 3.1 to Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on November
17, 2017).
3.2
-
Amended and Restated By-laws of Valvoline Inc. (incorporated by reference to Exhibit 3.2 to
Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on December 19, 2016).
4.1
-
Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to Valvoline’s Registration
Statement on Form S-1 (File No. 333-211720) filed on September 12, 2016).
4.2
-
Indenture, dated as of January 4, 2021, among Valvoline Inc. the guarantors party thereto and
U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Valvoline's
Current Report on Form 8-K (File No. 001-37884) filed on January 4, 2021.
4.3
-
Description of Securities (incorporated by reference to Exhibit 4.5 to Valvoline’s Annual Report on
10-K (File No. 001-37884) filed on November 19, 2021).
The following Exhibits 10.1 through 10.20 are contracts, compensatory plans or arrangements, or management
contracts required to be filed as exhibits pursuant to Items 601(b)(10)(ii)(A) and 601(b)(10)(iii)(A) and (B) of
Regulations S-K.
10.1
-
Valvoline Inc. 2016 Deferred Compensation Plan for Employees (incorporated by reference to
Exhibit 10.1 to Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on December
19, 2016).
10.2
-
Valvoline Inc. 2016 Deferred Compensation Plan for Non-Employee Directors (incorporated by
reference to Exhibit 10.6 to Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on
December 19, 2016).
10.3
-
2016 Valvoline Inc. Incentive Plan, as Amended (incorporated by reference to Exhibit 10.1 to
Valvoline's Current Report on Form 8-K (File No. 001-37884) filed on February 5, 2019.
98
10.4
-
Valvoline Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to
Valvoline’s Current Report on Form 8-K (File No. 001-37884) filed on February 5, 2018).
10.5
-
Form of (Outside Directors) Restricted Stock Award Agreement pursuant to the 2016 Valvoline
Inc. Incentive Plan (incorporated by reference to Exhibit 10.3 to Valvoline's Annual Report on
Form 10-K (File No. 001-37884) filed on December 19, 2016).
10.6
-
Form of Performance Stock Unit Award Agreement pursuant to the 2016 Valvoline Inc. Incentive
Plan (incorporated by reference to Exhibit 10.5 to Valvoline's Current Report on Form 8-K (File
No. 001-37884) filed on May 15, 2017).
10.7
-
Form of Stock Appreciation Right Award Agreement pursuant to the 2016 Valvoline Inc. Incentive
Plan (incorporated by reference to Exhibit 10.6 to Valvoline's Current Report on Form 8-K (File
No. 001-37884) filed on May 15, 2017).
10.8
-
Form of Stock Appreciation Right Award Agreement pursuant to the 2016 Valvoline Inc. Incentive
Plan, as Amended, for awards granted after fiscal 2020 (incorporated by reference to Exhibit 10.8
to Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on November 24, 2020).
10.9
-
Form of Restricted Stock Unit Agreement pursuant to the 2016 Valvoline Inc. Incentive Plan, as
Amended, for awards granted after fiscal 2020 (incorporated by reference to Exhibit 10.11 to
Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on November 24, 2020).
10.10
-
Form of Outside Director Restricted Stock Unit Award Agreement pursuant to the 2016 Valvoline
Inc. Incentive Plan (incorporated by reference to Exhibit 10.1 to Valvoline’s Quarterly Report on
Form 10-Q (File No. 001-37884) filed on February 9, 2022).
10.11
-
Valvoline Inc. Nonqualified Defined Contribution Plan (incorporated by reference to Exhibit 10.4 to
Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on December 19, 2016).
10.12
-
Ashland Inc. Nonqualified Excess Benefit Pension Plan (incorporated by reference to Exhibit
10.12 to Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on November 17,
2017).
10.13
-
Amendment to Ashland Inc. Nonqualified Excess Benefit Pension Plan, effective as of September
1, 2016 (incorporated by reference to Exhibit 10.7 to Valvoline's Annual Report on Form 10-K
(File No. 001-37884) filed on December 19, 2016).
10.14
-
Amendment to Ashland Inc. Nonqualified Excess Benefit Pension Plan, effective as of September
30, 2016 (incorporated by reference to Exhibit 10.9 to Valvoline's Annual Report on Form 10-K
(File No. 001-37884) filed on December 19, 2016).
10.15
-
Ashland Inc. Supplemental Early Retirement Plan for Certain Employees (“Ashland SERP”)
(incorporated by reference to Exhibit 10.15 to Valvoline's Annual Report on Form 10-K (File No.
001-37884) filed on November 17, 2017).
10.16
-
Amendment to Ashland SERP, effective as of January 1, 2015 (incorporated by reference to
Exhibit 10.16 to Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on November
17, 2017).
10.17
-
Amendment to Ashland SERP, effective as of September 1, 2016 (incorporated by reference to
Exhibit 10.17 to Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on November
17, 2017).
10.18
-
Amendment to Ashland SERP, effective as of September 30, 2016 (incorporated by reference to
Exhibit 10.8 to Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on December
19, 2016).
10.19*
-
Valvoline Change in Control Severance Plan, as amended and restated, effective September 19,
2024.
10.20
-
Valvoline Severance Pay Plan, as amended and restated, effective January 1, 2022 (incorporated
by reference to Exhibit 10.4 to Valvoline's Quarterly Report on Form 10-Q (File No. 001-37884)
filed on February 9, 2022).
99
10.21
-
Amendment and Restatement Agreement, dated as of December 12, 2022, among Valvoline Inc.
(“Valvoline”), certain subsidiaries of Valvoline party thereto, The Bank of Nova Scotia, as
Administrative Agent, swing line lender and an L/C issuer, and the lenders party thereto (including
Exhibit A – Amended and Restated Credit Agreement, among Valvoline, The Bank of Nova
Scotia, as Administrative Agent, swing line lender and an L/C issuer, and the lenders party
thereto) (incorporated by reference to Exhibit 10.1 to Valvoline Current Report on Form 8-K (File
No. 001-37884) filed on December 13, 2022.
10.22
-
Separation Agreement, dated as of September 22, 2016, by and between Ashland Inc. and
Valvoline Inc. (incorporated by reference to Exhibit 10.15 to Valvoline's Annual Report on Form
10-K (File No. 001-37884) filed on December 19, 2016).
10.23
-
Tax Matters Agreement, dated as of September 22, 2016, by and between Ashland Inc. and
Valvoline Inc. (incorporated by reference to Exhibit 10.18 to Valvoline's Annual Report on Form
10-K (File No. 001-37884) filed on December 19, 2016).
10.24
-
Amendment to Tax Matters Agreement, dated as of January 13, 2023, between Ashland Inc. and
Valvoline Inc. (incorporated by reference to Exhibit 10.1 to Valvoline’s Current Report on Form 8-
K (File No. 001-37884) filed on January 20, 2023).
10.25
-
Employee Matters Agreement, dated as of September 22, 2016, by and between Ashland Inc.
and Valvoline Inc. (incorporated by reference to Exhibit 10.19 to Valvoline's Annual Report on
Form 10-K (File No. 001-37884) filed on December 19, 2016).
10.26
-
Amended and Restated Equity Purchase Agreement (“Equity Purchase Agreement”), dated as of
March 1, 2023, among Valvoline Inc., Gateway Velocity Holding Corp., and, solely for the
purposes set forth therein, Aramco Overseas Company B.V. (incorporated by reference to Exhibit
10.1 to Valvoline Current Report on Form 8-K (File No. 001-37884) filed on March 1, 2023).
10.27
-
Supply Agreement by and between VGP Holdings LLC, Valvoline Inc. and Valvoline LLC,
effective as of March 1, 2023 (incorporated by reference to Exhibit 10.1 to Valvoline’s Quarterly
Report on Form 10-Q (File No. 001-37884) filed on May 10, 2023).
10.28
-
Trademark Co-Existence Agreement by and between, on the one hand, Valvoline LLC, Valvoline
Licensing and Intellectual Property LLC, and Valvoline Inc. and, on the other hand, VGP Holdings
LLC and VGP IPCo LLC, dated as of March 1, 2023 (incorporated by reference to Exhibit 10.2 to
Valvoline’s Quarterly Report on Form 10-Q (File No. 001-37884) filed on May 10, 2023).
10.29
-
Letter Agreement to Equity Purchase Agreement, dated as of September 25, 2023, by and among
Valvoline Inc., Aramco Valvoline Global Holding Corp., and Aramco Overseas B.V. (incorporated
by reference to Exhibit 10.31 to Valvoline's Annual Report on Form 10-K (File No. 001-37884)
filed on November 20, 2023).
19*
-
Securities Laws and Insider Trading Policy.
21*
-
List of Subsidiaries.
23.1*
-
Consent of Ernst & Young LLP.
24*
-
Power of Attorney.
31.1*
-
Certification of Lori A. Flees, Chief Executive Officer of Valvoline, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2*
-
Certification of Mary E. Meixelsperger, Chief Financial Officer of Valvoline, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32**
-
Certification of Lori A. Flees, Chief Executive Officer of Valvoline, and Mary E. Meixelsperger,
Chief Financial Officer of Valvoline, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1
-
Valvoline Inc. Executive Compensation Recovery (Clawback) Policy (incorporated by reference to
Exhibit 97.1 to Valvoline’s Annual Report on Form 10-K (File No. 001-37884) filed on November
20, 2023).
101.INS
-
XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
-
XBRL Taxonomy Extension Schema Document.
100
101.CAL
-
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
-
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
-
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
-
XBRL Taxonomy Extension Presentation Linkbase Document.
104
-
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
*
Filed herewith.
**
Furnished herewith.
SM
Service mark, Valvoline Inc. or its subsidiaries, registered in various countries.
™
Trademark, Valvoline Inc. or its subsidiaries, registered in various countries.
†
Trademark owned by a third party.
Upon written or oral request, a copy of the above exhibits will be furnished at cost.
101
VALVOLINE INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended September 30, 2024, 2023 and 2022
(In millions)
(A)
(B)
(C)
(D)
(E)
Additions
Description
Balance at
beginning
of period
Charged to
expenses
Charged to
other
accounts
Deductions
Balance at
end of
period
Current allowance for credit losses
Year ended September 30, 2024
$
0.6
$
0.6 $
0.1
$
—
$
1.3
Year ended September 30, 2023
$
4.6
$
(0.6) $
(3.4) (a) $
—
$
0.6
Year ended September 30, 2022
$
0.3
$
4.5 $
(0.2)
$
—
$
4.6
Allowances for loan losses
Year ended September 30, 2024
$
2.4
$
— $
0.2
$
—
$
2.6
Year ended September 30, 2023
$
2.2
$
— $
0.2
$
—
$
2.4
Year ended September 30, 2022
$
2.1
$
— $
0.1
$
—
$
2.2
Inventory excess and obsolete reserves
Year ended September 30, 2024
$
1.1
$
0.2 $
—
$
—
$
1.3
Year ended September 30, 2023
$
2.0
$
(0.3) $
(0.6) (a) $
—
$
1.1
Year ended September 30, 2022
$
0.8
$
1.2 $
—
$
—
$
2.0
Deferred tax asset valuation allowance
Year ended September 30, 2024
$
3.0
$
(2.0) $
—
$
—
$
1.0
Year ended September 30, 2023
$
33.3
$
(30.3) $
—
$
—
$
3.0
Year ended September 30, 2022
$
31.8
$
1.5 $
—
$
—
$
33.3
(a) Includes currency translation and balances reclassified to held for sale within the Consolidated Balance Sheet.
ITEM 16.
FORM 10-K SUMMARY
None.
102
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VALVOLINE INC.
(Registrant)
By:
/s/ Mary E. Meixelsperger
Mary E. Meixelsperger
Chief Financial Officer
Date: November 22, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant, in the capacities indicated, on November 22, 2024.
Signatures
Capacity
/s/ Lori A. Flees
Chief Executive Officer and Director
Lori A. Flees
(Principal Executive Officer)
/s/ Mary E. Meixelsperger
Chief Financial Officer
Mary E. Meixelsperger
(Principal Financial Officer)
/s/ Dione R. Sturgeon
Vice President, Chief Accounting Officer and Controller
Dione R. Sturgeon
(Principal Accounting Officer)
*
Chairman of the Board and Director
Richard J. Freeland
*
Director
Gerald W. Evans, Jr.
*
Director
Carol H. Kruse
*
Director
Vada O. Manager
*
Director
Patrick S. Pacious
*
Director
Jennifer L. Slater
*
Director
Charles M. Sonsteby
*
Director
Mary J. Twinem
*By:
/s/ Julie M. O’Daniel
Julie M. O’Daniel
Attorney-in-Fact
Date:
November 22, 2024
103
Shareholder Information
Financial Information
Valvoline's annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K
and any amendments to those reports, as well as
any beneficial ownership reports of officers and
directors are available at http://
investors.valvoline.com/sec-filings after they are
filed with the Securities and Exchange Commission.
Paper copies are also available upon request and at
no charge. Requests for these and other
shareholder and security analyst inquires should be
directed to:
Investor Relations
Valvoline Inc.
100 Valvoline Way, Suite 100
Lexington, KY 40509
+1 (859) 357-3155
IR@valvoline.com
Ticker Symbol: VVV
Fiscal 2024 closing stock prices per common share:
High:
Low:
Year-end:
$47.60
2934
$41.85
07/16/2024
10302023
09/30/2024
Annual Meeting
The annual meeting of shareholders will be held at
Valvoline's Corporate Headquarters, 100 Valvoline
Way, Lexington, Kentucky at 8:00 a.m. ET, Tuesday,
January 28, 2025.
Stock Information
Valvoline Inc. is incorporated under the laws of the
Commonwealth of Kentucky. Valvoline common
stock is listed on the New York Stock Exchange
under the symbol "VVV".
Questions regarding shareholder accounts should
be directed to Valvoline's transfer agent and
registrar:
EQ Shareowner Services
1110 Centre Point Curve, Suite 101
Mendota Heights, MN 55120
Mailing Address:
EQ Shareowner Services
PO Box 64874
St. Paul, MN 55164-0874
+1 (800) 468-9716 toll-free (U.S.)
+1 (651) 450-4064 (non-U.S.)
www.shareowneronline.com
Independent Registered
Public Accounting Firm
Ernst & Young LLP
400 West Market Street, Suite 1200
Louisville, KY 40202
Media Inquiries
media@valvoline.com
Corporate Headquarters
Valvoline Inc.
100 Valvoline Way, Suite 100
Lexington, KY 40509
+1 (859) 357-7777
www.valvoline.com