vvv-20221231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________

FORM 10-Q

(Mark one)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022


☐			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.

(Exact name of registrant as specified in its charter)


Kentucky			30-0939371
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

100 Valvoline Way

Lexington, Kentucky 40509

(Address of principal executive offices) (Zip Code)

Telephone Number (859) 357-7777

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

VVV

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ

At January 31, 2023, there were 171,935,576 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS


			Page
PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Condensed Consolidated Statements of Comprehensive Income			3

Condensed Consolidated Balance Sheets			4

Condensed Consolidated Statements of Cash Flows			5

Condensed Consolidated Statements of Stockholders' Equity			6

Notes to Condensed Consolidated Financial Statements			7

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			17

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			27

ITEM 4. CONTROLS AND PROCEDURES			27

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS			29

ITEM 1A. RISK FACTORS			29

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			29

ITEM 6. EXHIBITS			30

SIGNATURE			31

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Statements of Comprehensive Income


	Three months ended December 31
(In millions, except per share amounts - unaudited)	2022		2021
Net revenues	$	332.8	$	287.3
Cost of sales	214.0		175.1
Gross profit	118.8		112.2

Selling, general and administrative expenses	66.0		60.2
Net legacy and separation-related expenses	25.4		2.8
Other income, net	(1.9)		(2.8)
Operating income	29.3		52.0
Net pension and other postretirement plan expense (income)	3.7		(9.3)
Net interest and other financing expenses	18.7		17.0
Income before income taxes	6.9		44.3
Income tax (benefit) expense	(20.1)		10.1
Income from continuing operations	27.0		34.2
Income from discontinued operations	54.9		52.8
Net income	$	81.9	$	87.0

NET EARNINGS PER SHARE
Basic earnings per share
Continuing operations	0.16		0.19
Discontinued operations	0.31		0.29
Basic earnings per share	$	0.47	$	0.48

Diluted earnings per share
Continuing operations	0.15		0.19
Discontinued operations	0.31		0.29
Diluted earnings per share	$	0.46	$	0.48

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	175.2		180.5
Diluted	176.3		182.0

COMPREHENSIVE INCOME
Net income	$	81.9	$	87.0
Other comprehensive income (loss), net of tax
Currency translation adjustments	15.2		0.3
Amortization of pension and other postretirement plan prior service credits	(0.4)		(0.4)
Unrealized (loss) gain on cash flow hedges	(1.3)		2.2
Other comprehensive income	13.5		2.1
Comprehensive income	$	95.4	$	89.1

See Notes to Condensed Consolidated Financial Statements.

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Balance Sheets


(In millions, except per share amounts - unaudited)	December 31 2022		September 30 2022
Assets
Current assets
Cash and cash equivalents	$	21.0	$	23.4
Receivables, net	56.9		66.1
Inventories, net	31.2		29.4
Prepaid expenses and other current assets	38.7		38.0
Current assets held for sale	1,553.6		1,464.2
Total current assets	1,701.4		1,621.1
Noncurrent assets
Property, plant and equipment, net	693.3		668.6
Operating lease assets	253.5		248.1
Goodwill and intangibles, net	668.2		663.1
Deferred tax assets	82.2		61.6
Other noncurrent assets	152.9		154.3

Total noncurrent assets	1,850.1		1,795.7
Total assets	$	3,551.5	$	3,416.8

Liabilities and Stockholders’ Equity
Current liabilities

Current portion of long-term debt	$	224.5	$	162.5
Trade and other payables	46.6		45.0
Accrued expenses and other liabilities	175.2		172.6
Current liabilities held for sale	478.1		539.3
Total current liabilities	924.4		919.4
Noncurrent liabilities
Long-term debt	1,656.1		1,525.1
Employee benefit obligations	200.5		199.4
Operating lease liabilities	234.5		229.2

Other noncurrent liabilities	246.7		237.1

Total noncurrent liabilities	2,337.8		2,190.8
Commitments and contingencies
Stockholders' equity
Preferred stock, no par value, 40.0 shares authorized; no shares issued and outstanding	—		—
Common stock, par value $0.01 per share, 400.0 shares authorized; 173.5 and 176.1 shares issued and outstanding at December 31, 2022 and September 30, 2022, respectively	1.7		1.8
Paid-in capital	40.8		44.1
Retained earnings	254.6		282.0


Accumulated other comprehensive loss	(7.8)		(21.3)
Stockholders' equity	289.3		306.6
Total liabilities and stockholders’ equity	$	3,551.5	$	3,416.8

See Notes to Condensed Consolidated Financial Statements.

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Statements of Cash Flows


	Three months ended December 31
(In millions - unaudited)	2022		2021
Cash flows from operating activities
Net income	$	81.9	$	87.0
Adjustments to reconcile to cash flows from operations
Income from discontinued operations	(54.9)		(52.8)

Depreciation and amortization	18.5		16.9

Deferred income taxes	(26.5)		7.5





Stock-based compensation expense	2.9		3.2
Other, net	0.6		0.6
Change in assets and liabilities
Receivables	13.4		(4.7)
Inventories	(1.0)		3.1
Payables and accrued liabilities	(17.2)		(22.3)
Other assets and liabilities	30.8		(0.8)
Operating cash flows from continuing operations	48.5		37.7
Operating cash flows from discontinued operations	(57.2)		(5.9)
Total cash (used in) provided by operating activities	(8.7)		31.8
Cash flows from investing activities
Additions to property, plant and equipment	(39.9)		(32.0)
Notes receivable, net of repayments	(0.5)		3.0
Acquisitions of businesses, net of cash acquired	(9.6)		(13.6)


Other investing activities, net	1.6		(0.1)
Investing cash flows from continuing operations	(48.4)		(42.7)
Investing cash flows from discontinued operations	(8.4)		(3.1)
Total cash used in investing activities	(56.8)		(45.8)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	250.0		—

Repayments on borrowings	(119.4)		—

Repurchases of common stock	(87.4)		(31.5)

Cash dividends paid	(21.8)		(22.5)
Other financing activities	(8.9)		(8.9)
Financing cash flows from continuing operations	12.5		(62.9)
Financing cash flows from discontinued operations	60.0		(0.9)
Total cash provided by (used in) financing activities	72.5		(63.8)
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash	2.1		0.1
Increase (decrease) in cash, cash equivalents and restricted cash	9.1		(77.7)
Cash, cash equivalents and restricted cash - beginning of period	83.9		231.4
Cash, cash equivalents and restricted cash - end of period	$	93.0	$	153.7

See Notes to Condensed Consolidated Financial Statements.

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity


	Three months ended December 31, 2022
(In millions, except per share amounts - unaudited)	Common stock			Paid-in capital		Retained earnings		Accumulated other comprehensive Income (loss)		Totals
	Shares	Amount
Balance at September 30, 2022	176.1	$	1.8	$	44.1	$	282.0	$	(21.3)	$	306.6
Net income	—	—		—		81.9		—		81.9
Dividends paid, $0.125 per common share	—	—		0.1		(21.9)		—		(21.8)
Stock-based compensation, net of issuances	0.3	—		(3.4)		—		—		(3.4)
Repurchases of common stock	(2.9)	(0.1)		—		(87.4)		—		(87.5)
Other comprehensive income, net of tax	—	—		—		—		13.5		13.5
Balance at December 31, 2022	173.5	$	1.7	$	40.8	$	254.6	$	(7.8)	$	289.3

SEC Form 10-Q filed by Valvoline Inc.