Valvoline Inc 10-Q for FY2021 Q1

Valvoline Inc (VVV)

10-Q 2021-02-04 For: 2020-12-31

Added on April 11, 2026

About this 10-Q

Valvoline Inc filed this 10-Q on February 4, 2021, covering the quarter ended December 31, 2020 (FY2021 Q1).

Headline figures

Quarter ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $653M; up 7.6% from $607M a year earlier
Net income: $87M; up 19.2% from net income of $73M a year earlier
Diluted EPS: $0.47; up 20.5% from $0.39 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


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


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


			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 Stockholders’ Deficit			5

Condensed Consolidated Statements of Cash Flows			6

Notes to Condensed Consolidated Financial Statements			7

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			19

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			33

ITEM 4. CONTROLS AND PROCEDURES			33

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS			34

ITEM 1A. RISK FACTORS			34

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			34

ITEM 6. EXHIBITS			35

SIGNATURE			36


	Three months ended December 31
(In millions, except per share amounts - unaudited)	2020		2019
Sales	$	653	$	607
Cost of sales	425		396
Gross profit	228		211

Selling, general and administrative expenses	117		117
Net legacy and separation-related expenses (income)	1		(1)
Equity and other income, net	(14)		(9)
Operating income	124		104
Net pension and other postretirement plan income	(13)		(9)
Net interest and other financing expenses	20		16

Income before income taxes	117		97
Income tax expense	30		24
Net income	$	87	$	73

NET EARNINGS PER SHARE
Basic	$	0.47	$	0.39
Diluted	$	0.47	$	0.39

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	185		189
Diluted	186		189

COMPREHENSIVE INCOME
Net income	$	87	$	73
Other comprehensive income (loss), net of tax
Currency translation adjustments	18		8
Amortization of pension and other postretirement plan prior service credit	(2)		(2)

Other comprehensive income	16		6
Comprehensive income	$	103	$	79


(In millions, except per share amounts - unaudited)	December 31 2020		September 30 2020
Assets
Current assets
Cash and cash equivalents	$	527	$	760
Receivables, net	430		433
Inventories, net	213		199
Prepaid expenses and other current assets	44		46
Total current assets	1,214		1,438
Noncurrent assets
Property, plant and equipment, net	713		613
Operating lease assets	293		261
Goodwill and intangibles, net	739		529
Equity method investments	46		44
Deferred income taxes	28		34
Other noncurrent assets	123		132
Total noncurrent assets	1,942		1,613
Total assets	$	3,156	$	3,051

Liabilities and Stockholders’ Deficit
Current liabilities

Current portion of long-term debt	$	88	$	—
Trade and other payables	158		189
Accrued expenses and other liabilities	260		255
Total current liabilities	506		444
Noncurrent liabilities
Long-term debt	1,887		1,962
Employee benefit obligations	303		317

Operating lease liabilities	260		231
Other noncurrent liabilities	255		173
Total noncurrent liabilities	2,705		2,683
Commitments and contingencies
Stockholders’ deficit
Preferred stock, no par value, 40 shares authorized; no shares issued and outstanding	—		—
Common stock, par value $0.01 per share, 400 shares authorized; 183 and 185 shares issued and outstanding at December 31, 2020 and September 30, 2020, respectively	2		2
Paid-in capital	25		24
Retained deficit	(106)		(110)


Accumulated other comprehensive income	24		8
Total stockholders’ deficit	(55)		(76)
Total liabilities and stockholders’ deficit	$	3,156	$	3,051


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


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



	Three months ended December 31, 2020
(In millions, except per share amounts - unaudited)	Common stock			Paid-in capital		Retained deficit		Accumulated other comprehensive income		Totals
	Shares	Amount
Balance at September 30, 2020	185	$	2	$	24	$	(110)	$	8	$	(76)
Net income	—	—		—		87		—		87
Dividends paid, $0.125 per common share	—	—		—		(23)		—		(23)
Stock-based compensation, net of issuances	—	—		1		—		—		1
Repurchases of common stock	(2)	—		—		(58)		—		(58)

Cumulative effect of adoption of new credit losses standard, net of tax	—	—		—		(2)		—		(2)


Other comprehensive income, net of tax	—	—		—		—		16		16
Balance at December 31, 2020	183	$	2	$	25	$	(106)	$	24	$	(55)






















	Three months ended December 31, 2019
(In millions, except per share amounts - unaudited)	Common stock			Paid-in capital		Retained deficit		Accumulated other comprehensive income		Totals
	Shares	Amount
Balance at September 30, 2019	188	$	2	$	13	$	(284)	$	11	$	(258)
Net income	—	—		—		73		—		73
Dividends paid, $0.113 per common share	—	—		—		(21)		—		(21)
Stock-based compensation, net of issuances	—	—		3		—		—		3
Cumulative effect of adoption of new leasing standard, net of tax	—	—		—		1		—		1


Other comprehensive income, net of tax	—	—		—		—		6		6
Balance at December 31, 2019	188	$	2	$	16	$	(231)	$	17	$	(196)


	Three months ended December 31
(In millions - unaudited)	2020		2019
Cash flows from operating activities
Net income	$	87	$	73
Adjustments to reconcile net income to cash flows from operating activities

Depreciation and amortization	21		16


Equity income from unconsolidated affiliates, net of distributions	—		(2)


Pension contributions	(1)		(4)

Stock-based compensation expense	3		4
Other, net	—		2
Change in assets and liabilities
Receivables	7		7
Inventories	(4)		4
Payables and accrued liabilities	(40)		(47)
Other assets and liabilities	6		6
Total cash provided by operating activities	79		59
Cash flows from investing activities
Additions to property, plant and equipment	(35)		(28)
Repayments on notes receivable	9		—
Acquisitions of businesses	(218)		(6)


Other investing activities, net	(1)		(1)
Total cash used in investing activities	(245)		(35)
Cash flows from financing activities

Proceeds from borrowings	11		—



Repurchases of common stock	(58)		—

Cash dividends paid	(23)		(21)
Other financing activities	(3)		(2)
Total cash used in financing activities	(73)		(23)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	6		3
(Decrease) increase in cash, cash equivalents, and restricted cash	(233)		4
Cash, cash equivalents, and restricted cash - beginning of period	761		159
Cash, cash equivalents, and restricted cash - end of period	$	528	$	163


Index to Notes to Condensed Consolidated Financial Statements			Page

Note 1 - Basis of Presentation and Significant Accounting Policies			8
Note 2 - Fair Value Measurements			9
Note 3 - Acquisitions and Divestitures			10
Note 4 - Intangible Assets			11
Note 5 - Debt			12
Note 6 - Income Taxes			13
Note 7 - Employee Benefit Plans			14
Note 8 - Litigation, Claims and Contingencies			14
Note 9 - Earnings Per Share			14
Note 1 0 - Reportable Segment Information			15
Note 1 1 - Supplemental Financial Information			16
Note 1 2 - Subsequent Events			18


	As of December 31, 2020
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	189	$	189	$	—	$	—	$	—
Time deposits	36		—		36		—		—
Prepaid expenses and other current assets
Currency derivatives (b)	1		—		1		—		—
Other noncurrent assets
Non-qualified trust funds	15		—		6		—		9
Total assets at fair value	$	241	$	189	$	43	$	—	$	9

Accrued expenses and other liabilities
Currency derivatives (b)	$	1	$	—	$	1	$	—	$	—
Interest rate swap agreements	1		—		1		—		—
Other noncurrent liabilities
Deferred compensation obligations	27		—		—		—		27
Total liabilities at fair value	$	29	$	—	$	2	$	—	$	27

	As of September 30, 2020
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	296	$	296	$	—	$	—	$	—
Time deposits	139		—		139		—		—
Prepaid expenses and other current assets
Currency derivatives (b)	3		—		3		—		—
Other noncurrent assets
Non-qualified trust funds	16		—		8		—		8
Total assets at fair value	$	454	$	296	$	150	$	—	$	8

Accrued expenses and other liabilities
Currency derivatives (b)	$	2	$	—	$	2	$	—	$	—
Interest rate swap agreements	1		—		1		—		—
Other noncurrent liabilities
Deferred compensation obligations	25		—		—		—		25
Total liabilities at fair value	$	28	$	—	$	3	$	—	$	25


	December 31, 2020						September 30, 2020
(In millions)	Fair value		Carrying value		Unamortized discounts and issuance costs		Fair value		Carrying value		Unamortized discounts and issuance costs

2025 Notes	$	826	$	790	$	(10)	$	827	$	790	$	(10)
2030 Notes	635		592		(7)		613		592		(8)
Total	$	1,461	$	1,382	$	(17)	$	1,440	$	1,382	$	(18)


(In millions)	Quick Lubes		Core North America		International		Total
Balance at September 30, 2020	$	316	$	89	$	40	$	445
Acquisitions (a)	175		—		—		175
Currency translation	1		—		—		1

Balance at December 31, 2020	$	492	$	89	$	40	$	621


	Actual		Estimated
	Three months ended December 31		Years ended September 30
(In millions)	2020		2021		2022		2023		2024		2025
Amortization expense	$	3	$	15	$	14	$	14	$	13	$	11


	Three months ended
	December 31
(In millions)	2020			2019
Income tax expense	$	30		$	24
Effective tax rate percentage	25.6		%	24.7		%


(In millions)	December 31 2020		September 30 2020
Finished products	$	204	$	195
Raw materials, supplies and work in process	39		30
Reserve for LIFO cost valuation	(30)		(26)

Total inventories, net	$	213	$	199


	Company-owned
	First Quarter 2021	Fourth Quarter 2020	Third Quarter 2020	Second Quarter 2020	First Quarter 2020
Beginning of period	584	548	536	524	519
Opened	10	22	5	7	2
Acquired	42	2	2	1	7
Net conversions between company-owned and franchised	27	12	5	4	(4)

End of period	663	584	548	536	524

	Franchised (a)
	First Quarter 2021	Fourth Quarter 2020	Third Quarter 2020	Second Quarter 2020	First Quarter 2020
Beginning of period	878	884	883	883	866
Opened	8	7	8	8	13
Acquired	12	—	—	—	—
Net conversions between company-owned and franchised	(27)	(12)	(5)	(4)	4
Closed	(1)	(1)	(2)	(4)	—
End of period (b)	870	878	884	883	883

Total stores	1,533	1,462	1,432	1,419	1,407


	Three months ended December 31
(In millions)	2020			2019
Sales	$	254		$	218
Operating income	$	43		$	38
Depreciation and amortization	$	15		$	10
Gross profit as a percent of sales (a)	35.0		%	37.3		%
Operating income as a percent of sales	16.9		%	17.4		%

Operating information
Lubricant sales gallons	7.7			7.3
Premium lubricants (percent of U.S. branded volumes)	69.4		%	66.5		%
Same-store sales growth (b) - Company-owned	6.1		%	6.3		%
Same-store sales growth (b) - Franchised (c)	6.0		%	9.9		%
Same-store sales growth (b) - Combined (c)	6.0		%	8.4		%


	Three months ended December 31
(In millions)	2020			2019
Sales	$	164		$	141
Operating income	$	34		$	20
Depreciation and amortization	$	2		$	2
Gross profit as a percent of sales (a)	30.9		%	28.7		%
Operating income as a percent of sales	20.7		%	14.2		%

Operating information
Lubricant sales gallons (b)	16.8			14.7
Lubricant sales gallons, including unconsolidated joint ventures (c)	30.3			25.5
Premium lubricants (percent of lubricant volume)	27.1		%	25.8		%


					Other postretirement benefits
	Pension benefits
(In millions)	2020		2019		2020		2019
Three months ended December 31
Service cost	$	1	$	1	$	—	$	—
Interest cost	11		16		—		—
Expected return on plan assets	(22)		(22)		—		—
Amortization of prior service credit	—		—		(2)		(3)

Net periodic benefit income	$	(10)	$	(5)	$	(2)	$	(3)


	Three months ended
	December 31
(In millions, except per share amounts)	2020		2019
Numerator
Net income	$	87	$	73
Denominator

Weighted average common shares outstanding	185		189
Effect of potentially dilutive securities (a)	1		—
Weighted average diluted shares outstanding	186		189

Earnings per share
Basic	$	0.47	$	0.39
Diluted	$	0.47	$	0.39


Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations			Page

Business Overview			19
Results of Operations - Consolidated Review			23
Results of Operations - Reportable Segment Review			25
Financial Position, Liquidity and Capital Resources			29
New Accounting Pronouncements			33
Critical Accounting Policies and Estimates			33


	Year over year change
(In millions)	Three months ended December 31, 2020
Volume and mix	$	25

Price	5

Currency exchange	5
Acquisitions	11
Change in sales	$	46


(In millions)	Obligor Group
Revenue	$	495
Intercompany revenue with non-obligor subsidiaries, net	$	10
Gross profit	$	179
Operating income	$	107
Net income attributable to group	$	72


Monthly period	Total number of shares purchase	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)
October 1, 2020 - October 31, 2020	—	$	—	—	$	—
November 1, 2020 - November 30, 2020	555,904	$	22.94	555,904	$	87
December 1, 2020 - December 31, 2020	1,963,475	$	23.22	1,963,475	$	42
Total	2,519,379	$	23.16	2,519,379











22			List of Guarantors Subsidiaries (incorporated by reference to Exhibit 22 to Valvoline's Annual Report on Form 10-K (File No. 001-37884) filed on November 24, 2020).

31.1*			Certification of Samuel J. Mitchell, Jr., 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 Samuel J. Mitchell, Jr., 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.

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.
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).


	VALVOLINE INC.
	(Registrant)

February 4, 2021	By:	/s/ Mary E. Meixelsperger
		Mary E. Meixelsperger
		Chief Financial Officer


1.			I have reviewed this Quarterly Report on Form 10-Q of Valvoline Inc.;


2.			Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.			Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.			The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.			Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.			Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c.			Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.			Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


a.			All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.			Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


			/s/ Samuel J. Mitchell Jr.
			Samuel J. Mitchell Jr.
			Chief Executive Officer and Director
			(Principal Executive Officer)


(1)			The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)			The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Samuel J. Mitchell, Jr.
Samuel J. Mitchell, Jr.
Chief Executive Officer and Director
February 4, 2021


/s/ Mary E. Meixelsperger
Mary E. Meixelsperger
Chief Financial Officer
February 4, 2021