Sale of Global Products Complete, Moving
Forward with Return of Proceeds
- Completed sale of Global Products business on March 1, generating $2.38
billion of net proceeds and an after-tax gain on the sale of
discontinued operations of $1.15
billion
- Intend to commence a modified "Dutch auction" tender offer for
up to $1 billion of Valvoline common
stock, subject to market conditions
- Sales from continuing operations of $344.5 million grew 16% and 19% on an adjusted
basis1, while system-wide same store sales (SSS)
increased 13.5%
- Reported income from continuing operations of $32.9 million grew 43% and earnings per diluted
share (EPS) of $0.19 increased
46%
- Continuing operations adjusted EPS of $0.23 increased 64% and adjusted EBITDA of
$87.1 million increased 26%
- Net store additions total 35 (19 company-operated and 16
franchised) bringing total system-wide stores to 1,781; focused on
continued growth to long-term goal of 3,500+ store count
LEXINGTON, Ky., May 10, 2023
/PRNewswire/ -- Valvoline Inc. (NYSE: VVV), a trusted leader in
preventive automotive maintenance delivering quick and convenient
service, today reported financial results for its second fiscal
quarter ended March 31, 2023. All
comparisons in this press release are made to the same prior-year
period unless otherwise noted.
"With the sale of the Global Products business complete,
Valvoline is wholly focused on driving long-term value to
shareholders through our best-in-class retail platform by growing
system-wide store sales, increasing units through both
company-operated and franchised additions, and evolving the service
portfolio over time," said Sam
Mitchell, CEO. "Valvoline continues to see resiliency and
strength in the demand for the quick, easy and trusted preventive
maintenance service we provide to our customers, demonstrated by
26% adjusted EBITDA growth on 19% adjusted sales growth1
year over year for the quarter."
|
|
|
1 Excluding
suspended operations of a former Global Products business that was
not included in the sale.
|
Continuing Operations - Operating Results
(In
millions)
|
Q2 results
|
YoY growth
|
Net revenues
|
$
344.5
|
16 %
|
Operating
income
|
$
61.2
|
53 %
|
Income from continuing
operations
|
$
32.9
|
43 %
|
Adjusted EBITDA
(a)
|
$
87.1
|
26 %
|
System-wide stores
(a)
|
1,781
|
7 %
|
Company-operated
stores
|
832
|
10 %
|
Franchised
stores
|
949
|
5 %
|
System-wide store sales
(a)
|
$
659.9
|
18 %
|
|
YoY growth
|
System-wide SSS
(a)
|
13.5 %
|
|
|
(a)
|
Refer to Key Business
Measures, Use of Non-GAAP Measures, Table 4 - Retail Stores
Operating Information, and Table 7 - Non-GAAP Reconciliation -
Adjusted Net Revenues and EBITDA from Continuing Operations for
management's definitions of the metrics presented above and
reconciliation to the corresponding GAAP measures, where
applicable.
|
"As expected, we saw EBITDA margin improvement in the second
quarter, largely driven by top-line growth and improved SG&A
leverage," said Lori Flees,
President, Retail Services.
"Both our store team members and franchise partners continue to
deliver results demonstrated by the 13.5% system-wide same store
sales growth this quarter," continued Flees. "The strong same store
sales are coming from growth in transactions, non-oil change
service penetration and pricing. As we approach the summer travel
season, our stores are well staffed and prepared to continue
driving growth in the back half of the year."
Balance Sheet and Cash Flow
- Cash and cash equivalents, net of debt of $737.3 million; total debt of $1.6 billion
- Year-to-date continuing operations cash flow from operations of
$173.5 million and free cash flow of
$94.1 million
- Returned $257.4 million in cash
to shareholders year-to-date via share repurchases and $21.8 million in dividends
- Cash and cash equivalents balance of $2.3 billion with $8.3
million of interest income earned on net proceeds from the
sale of Global Products
Outlook
"The second quarter results were in line with our expectations
and we remain on track to meet our FY23 targets. We also expect the
margin improvement we saw during Q2 to continue in the back half of
the year." said Mitchell.
"This quarter we reached the final milestone on our path to
becoming a pure-play, automotive services company with closing the
sale of the Global Products business. After thoughtful
consideration, management and our board of directors concluded that
a modified "Dutch auction" tender offer would allow us to most
efficiently and expeditiously return a substantial portion of the
net sale proceeds to our investors," continued Mitchell. "We are
excited to focus on driving growth of the new Valvoline. Our
long-term model of generating high return on invested capital
through growing the core business, expanding the network and
evolving with the car parc positions us for a long runway of growth
and creating significant value for shareholders."
The Company's outlook for fiscal 2023 is unchanged. Information
is provided in the table below:
|
Fiscal 2023
Outlook
|
System-wide SSS
growth
|
8
|
—
|
12 %
|
System-wide store
additions
|
130
|
—
|
160
|
Company-operated
|
80
|
—
|
90
|
Franchised
|
50
|
—
|
70
|
System-wide store sales
growth
|
16
|
—
|
20 %
|
Net revenues
|
$1.4
|
—
|
$1.5 billion
|
Net revenues
growth
|
14
|
—
|
18 %
|
Adjusted
EBITDA
|
$370
|
—
|
$390 million
|
Capital
expenditures
|
$170
|
—
|
$200 million
|
Adjusted effective tax
rate
|
25.5
|
—
|
26.5 %
|
Adjusted net
income
|
$160
|
—
|
$180 million
|
Valvoline's outlook for adjusted EBITDA, adjusted net income,
and the adjusted effective tax rate are non-GAAP financial measures
that are expected to be impacted by items affecting comparability.
Valvoline is unable to reconcile these forward-looking non-GAAP
financial measures to the comparable GAAP measures estimated for
fiscal 2023 without unreasonable efforts, as the Company is
currently unable to predict with a reasonable degree of certainty
the type and extent of certain items that would be expected to
impact these GAAP measures in fiscal 2023 but would not impact
non-GAAP adjusted results.
Tender Offer for Common Stock
Today, Valvoline is announcing its intention to commence a
modified "Dutch auction" tender offer for up to $1 billion in value of shares of its common
stock, subject to market conditions, at a specified price range
that is yet to be determined. The tender offer will form part of
Valvoline's $1.6 billion share
repurchase authorization announced on November 15, 2022.
Conference Call Webcast
Valvoline will host a live audio webcast of its fiscal second
quarter 2023 conference call today, May 10, 2023, at
9 a.m. ET. The webcast and supporting materials will be
accessible through Valvoline's website at
http://investors.valvoline.com. Following the live event, an
archived version of the webcast and supporting materials will be
available.
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 sales 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. SSS is defined as net revenues by U.S. stores
(company-operated, franchised and the combination of these for
system-wide SSS), with new stores, including franchised
conversions, excluded from the metric until the completion of their
first full fiscal year in operation as this period is generally
required for new store sales levels to begin to normalize.
Net revenues are limited to sales at company-operated stores, in
addition to royalties and other fees from independent franchised
and Express Care stores. Although Valvoline does not recognize
store-level sales from franchised stores as net revenues in its
Statements of 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.
Use of Non-GAAP Measures
The following non-GAAP measures are included herein: Adjusted
net revenues; EBITDA, adjusted EBITDA, and adjusted EBITDA margin;
adjusted net income and adjusted diluted earnings per share; and
free cash flow and discretionary free cash flow. Refer to the
tables herein for management's definition of each non-GAAP measure
and reconciliation to the most comparable U.S. GAAP measure.
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.
These non-GAAP measures have limitations as analytical tools and
should not be considered in isolation from, an alternative to, or
more meaningful than, the financial results presented in accordance
with U.S. GAAP. The financial results presented in accordance with
U.S. GAAP and the reconciliations of non-GAAP measures should be
carefully evaluated. The manner used to compute the non-GAAP
information used by management may differ from the methods used by
other companies and may not be comparable.
Refer to the Appendix at the end of this release for
descriptions of the adjustments that depart from the computations
in accordance with U.S. GAAP.
About Valvoline™ Inc.
The Quick, Easy, Trusted name in preventive vehicle maintenance,
Valvoline Inc. (NYSE: VVV) leads the industry with automotive
service innovations that simplify consumers' lives. With an average
consumer rating of 4.6 out of 5 stars*, Valvoline Inc. has built
the model for transparency and convenience to take the worry out of
vehicle care. From its 15-minute, stay-in-your-car oil changes to
battery replacements and tire rotations, the Company's model offers
maintenance solutions for all types of vehicles. The Company
operates and franchises nearly 1,800 service center locations
through its Valvoline Instant Oil ChangeSM and
Valvoline Great Canadian Oil Change retail brands, and helps
independent operators grow their businesses through its nearly 300
Valvoline Express Care locations in North
America. To learn more, or to find a Valvoline Inc. service
center near you, visit vioc.com.
Forward-Looking Statements
Certain statements herein, 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,
benefits and synergies of the sale of Global Products; 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. Other forward-looking
statements used herein include statements about the expected tender
offer, including the value of shares expected to be offered to
purchase in the tender offer and whether the tender offer is
actually commenced and consummated as planned or at all.
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. Additional information
regarding these risks and uncertainties are described in the
Company's filings with the Securities and Exchange Commission (the
"SEC"), including in the "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and
"Quantitative and Qualitative Disclosures about Market Risk"
sections of Valvoline's most recently filed periodic reports on
Forms 10-K and 10-Q, which are available on Valvoline's website at
http://investors.valvoline.com/sec-filings or on the SEC's
website at http://www.sec.gov. 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.
Additional Information and Where to Find It
This press release is for informational purposes only, is not a
recommendation to buy or sell the Company's common stock and does
not constitute an offer to buy or the solicitation to sell the
Company's common stock. The tender offer described in this press
release has not yet commenced, and there can be no assurances that
the Company will commence the tender offer on the terms described
in this press release or at all. The tender offer will be made only
pursuant to the Offer to Purchase, the Letter of Transmittal and
other related materials that the Company expects to file with the
SEC upon commencement of the tender offer. SHAREHOLDERS ARE URGED
TO CAREFULLY READ THE OFFER TO PURCHASE, LETTER OF TRANSMITTAL AND
RELATED MATERIALS (AND ANY AMENDMENT OR SUPPLEMENT THERETO) IF AND
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION, INCLUDING THE VARIOUS TERMS OF, AND CONDITIONS TO, THE
TENDER OFFER, THAT SHAREHOLDERS SHOULD CONSIDER BEFORE MAKING ANY
DECISION REGARDING TENDERING THEIR SHARES. If and when the tender
offer is commenced, shareholders will be able to obtain a free copy
of the tender offer materials (including the Offer to Purchase, the
Letter of Transmittal and other related materials) that the Company
expects to file with the SEC at the SEC's website at
http://www.sec.gov. In addition, if and when the tender offer is
commenced, the Company will provide contact information for
shareholders if they should have any questions or require
assistance.
TM Trademark, Valvoline Inc., or its
subsidiaries, registered in various countries
SM Service mark, Valvoline Inc., or its
subsidiaries, registered in various countries
* Based on a survey of more than 600,000 Valvoline Instant
Oil Change℠ customers annually
FOR FURTHER INFORMATION
Investor Inquiries
+1 (859) 357-3155
IR@valvoline.com
Media Inquiries
Michele
Gaither Sparks
Sr. Director, Corporate Communications
+1 (859) 230-8097
michele.sparks@valvoline.com
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
|
|
|
|
Table 1
|
Statements of
Consolidated Income
|
|
|
|
|
|
|
|
|
(In millions, except
per share amounts - preliminary and unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
March 31
|
|
Six months
ended
March 31
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net revenues
|
|
$ 344.5
|
|
$ 296.0
|
|
$ 677.3
|
|
$ 583.3
|
Cost of
sales
|
|
217.8
|
|
188.7
|
|
431.8
|
|
363.8
|
GROSS
PROFIT
|
|
126.7
|
|
107.3
|
|
245.5
|
|
219.5
|
Selling, general and
administrative expenses
|
|
62.6
|
|
63.2
|
|
128.6
|
|
123.4
|
Net legacy and
separation-related expenses
|
|
3.8
|
|
6.2
|
|
29.2
|
|
9.0
|
Other income,
net
|
|
(0.9)
|
|
(2.1)
|
|
(2.8)
|
|
(4.9)
|
OPERATING
INCOME
|
|
61.2
|
|
40.0
|
|
90.5
|
|
92.0
|
Net pension and other
postretirement plan expense (income)
|
|
3.6
|
|
(9.2)
|
|
7.3
|
|
(18.5)
|
Net interest and other
financing expenses
|
|
13.3
|
|
16.9
|
|
32.0
|
|
33.9
|
INCOME BEFORE INCOME
TAXES
|
|
44.3
|
|
32.3
|
|
51.2
|
|
76.6
|
Income tax expense
(benefit)
|
|
11.4
|
|
9.3
|
|
(8.7)
|
|
19.4
|
Income from continuing
operations
|
|
32.9
|
|
23.0
|
|
59.9
|
|
57.2
|
Income from
discontinued operations
|
|
1,194.4
|
|
58.4
|
|
1,249.3
|
|
111.2
|
NET
INCOME
|
|
$
1,227.3
|
|
$ 81.4
|
|
$
1,309.2
|
|
$ 168.4
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS PER
SHARE
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ 0.19
|
|
$ 0.13
|
|
$ 0.35
|
|
$ 0.32
|
Discontinued
operations
|
|
6.96
|
|
0.32
|
|
7.20
|
|
0.61
|
Basic earnings per
share
|
|
$ 7.15
|
|
$ 0.45
|
|
$ 7.55
|
|
$ 0.93
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ 0.19
|
|
$ 0.13
|
|
$ 0.34
|
|
$ 0.32
|
Discontinued
operations
|
|
6.92
|
|
0.32
|
|
7.16
|
|
0.61
|
Diluted earnings per
share
|
|
$ 7.11
|
|
$ 0.45
|
|
$ 7.50
|
|
$ 0.93
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
BASIC
|
|
171.7
|
|
179.8
|
|
173.5
|
|
180.1
|
DILUTED
|
|
172.7
|
|
181.0
|
|
174.5
|
|
181.5
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
Table 2
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
(In millions -
preliminary and unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
September 30
|
|
2023
|
|
2022
|
ASSETS
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
2,334.5
|
|
$
23.4
|
|
|
Receivables,
net
|
|
61.1
|
|
66.1
|
|
|
Inventories,
net
|
|
33.5
|
|
29.4
|
|
|
Prepaid expenses and
other current assets
|
|
29.0
|
|
38.0
|
|
|
Current assets held for
sale
|
|
—
|
|
1,464.2
|
|
Total current
assets
|
|
2,458.1
|
|
1,621.1
|
|
|
|
|
|
|
|
|
|
Noncurrent
assets
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
722.5
|
|
668.6
|
|
|
Operating lease
assets
|
|
258.7
|
|
248.1
|
|
|
Goodwill and
intangibles, net
|
|
673.1
|
|
663.1
|
|
|
Other noncurrent
assets
|
|
168.0
|
|
215.9
|
|
Total assets
|
|
$
4,280.4
|
|
$
3,416.8
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
23.8
|
|
$
162.5
|
|
|
Trade and other
payables
|
|
85.8
|
|
45.0
|
|
|
Accrued expenses and
other liabilities
|
|
512.0
|
|
172.6
|
|
|
Current liabilities
held for sale
|
|
—
|
|
539.3
|
|
Total current
liabilities
|
|
621.6
|
|
919.4
|
|
|
|
|
|
|
|
|
Noncurrent
liabilities
|
|
|
|
|
|
|
Long-term
debt
|
|
1,573.4
|
|
1,525.1
|
|
|
Employee benefit
obligations
|
|
201.0
|
|
199.4
|
|
|
Operating lease
liabilities
|
|
239.6
|
|
229.2
|
|
|
Other noncurrent
liabilities
|
|
272.4
|
|
237.1
|
|
Total noncurrent
liabilities
|
|
2,286.4
|
|
2,190.8
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
1,372.4
|
|
306.6
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
|
$
4,280.4
|
|
$
3,416.8
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
Table 3
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
(In millions -
preliminary and unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months
ended
|
|
March 31
|
|
2023
|
|
2022
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
|
$
1,309.2
|
|
$
168.4
|
|
Adjustments to
reconcile net income to cash flows from operating
activities:
|
|
|
|
|
|
|
Income from
discontinued operations
|
|
(1,249.3)
|
|
(111.2)
|
|
|
Depreciation and
amortization
|
|
39.1
|
|
34.5
|
|
|
Deferred income
taxes
|
|
(26.6)
|
|
13.5
|
|
|
Stock-based
compensation expense
|
|
5.4
|
|
7.2
|
|
|
Other, net
|
|
2.3
|
|
1.7
|
|
Change in operating
assets and liabilities
|
|
93.4
|
|
(67.3)
|
|
Operating cash flows
from continuing operations
|
|
173.5
|
|
46.8
|
|
Operating cash flows
from discontinued operations
|
|
(63.4)
|
|
49.0
|
|
Total cash provided by
operating activities
|
|
110.1
|
|
95.8
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
|
Additions to property,
plant and equipment
|
|
(79.4)
|
|
(57.7)
|
|
Acquisitions of
businesses, net of cash acquired
|
|
(18.9)
|
|
(23.4)
|
|
Other investing
activities, net
|
|
2.0
|
|
6.1
|
|
Investing cash flows
from continuing operations
|
|
(96.3)
|
|
(75.0)
|
|
Investing cash flows
from discontinued operations
|
|
2,623.2
|
|
(9.2)
|
|
Total cash provided by
(used in) investing activities
|
|
2,526.9
|
|
(84.2)
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
|
|
Proceeds from
borrowings, net of issuance costs
|
|
920.9
|
|
—
|
|
Repayments on
borrowings
|
|
(909.0)
|
|
—
|
|
Repurchases of common
stock
|
|
(257.4)
|
|
(66.3)
|
|
Cash dividends
paid
|
|
(21.8)
|
|
(45.0)
|
|
Other financing
activities
|
|
(12.1)
|
|
(11.2)
|
|
Financing cash flows
from continuing operations
|
|
(279.4)
|
|
(122.5)
|
|
Financing cash flows
from discontinued operations
|
|
(108.1)
|
|
(1.0)
|
|
Total cash used in
financing activities
|
|
(387.5)
|
|
(123.5)
|
|
Effect of currency
exchange rate changes on cash, cash equivalents and
restricted cash
|
|
1.1
|
|
0.7
|
Increase (decrease)
in cash, cash equivalents and restricted cash
|
|
2,250.6
|
|
(111.2)
|
Cash, cash equivalents
and restricted cash - beginning of period
|
|
83.9
|
|
231.4
|
CASH, CASH
EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD
|
|
$
2,334.5
|
|
$
120.2
|
Valvoline Inc. and
Consolidated Subsidiaries
|
Table 4
|
Retail Stores
Operating Information
|
|
(Preliminary and
unaudited)
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
March 31
|
|
March 31
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Sales
information
|
|
|
|
|
|
|
|
System-wide store sales
- in millions (a)
|
$659.9
|
|
$557.0
|
|
$1,303.9
|
|
$1,107.9
|
Year-over-year
growth (a)
|
18.5 %
|
|
19.0 %
|
|
17.7 %
|
|
24.7 %
|
|
|
|
|
|
|
|
|
Same-store sales growth
(b)
|
|
|
|
|
|
|
|
Company-operated
|
14.2 %
|
|
10.0 %
|
|
13.5 %
|
|
15.7 %
|
Franchised
(a)
|
12.9 %
|
|
15.5 %
|
|
12.0 %
|
|
20.9 %
|
System-wide
(a)
|
13.5 %
|
|
13.1 %
|
|
12.7 %
|
|
18.6 %
|
|
|
|
|
|
|
|
|
|
Number of stores at end
of period
|
|
|
Second
Quarter
|
|
First
Quarter
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Second
Quarter
|
|
|
2023
|
|
2023
|
|
2022
|
|
2022
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
Company-operated
|
|
832
|
|
813
|
|
790
|
|
772
|
|
757
|
Franchised
(a)
|
|
949
|
|
933
|
|
925
|
|
918
|
|
904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
|
|
|
|
|
|
2023
|
|
2022
|
System-wide store count
(a)
|
|
|
|
|
|
|
|
1,781
|
|
1,661
|
Year-over-year
growth (a)
|
|
|
|
|
|
|
|
7.2 %
|
|
7.3 %
|
|
|
(a)
|
Measures include
Valvoline franchisees, which are independent legal entities.
Valvoline does not consolidate the results of operations of its
franchisees.
|
(b)
|
Valvoline determines
SSS growth as sales by U.S. stores, with new stores, including
franchised conversions, excluded from the metric until the
completion of their first full fiscal year in operation.
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
|
|
|
|
Table 5
|
System-wide Retail
Stores
|
|
|
|
|
|
|
|
|
|
(Preliminary and
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-operated
|
|
|
|
Second
Quarter
2023
|
|
First
Quarter
2023
|
|
Fourth
Quarter
2022
|
|
Third
Quarter
2022
|
|
Second
Quarter
2022
|
Beginning of
period
|
|
813
|
|
790
|
|
772
|
|
757
|
|
738
|
|
Opened
|
|
13
|
|
17
|
|
12
|
|
5
|
|
10
|
|
Acquired
|
|
6
|
|
5
|
|
3
|
|
9
|
|
9
|
|
Net conversions between
company-operated and franchised
|
|
—
|
|
2
|
|
3
|
|
1
|
|
—
|
|
Closed
|
|
—
|
|
(1)
|
|
—
|
|
—
|
|
—
|
End of
period
|
|
832
|
|
813
|
|
790
|
|
772
|
|
757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
(a)
|
|
|
|
Second
Quarter
2023
|
|
First
Quarter
2023
|
|
Fourth
Quarter
2022
|
|
Third
Quarter
2022
|
|
Second
Quarter
2022
|
Beginning of
period
|
|
933
|
|
925
|
|
918
|
|
904
|
|
897
|
|
Opened
|
|
16
|
|
11
|
|
10
|
|
16
|
|
9
|
|
Acquired
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Net conversions between
company-operated and franchised
|
|
—
|
|
(2)
|
|
(3)
|
|
(1)
|
|
—
|
|
Closed
|
|
—
|
|
(1)
|
|
—
|
|
(1)
|
|
(2)
|
End of
period
|
|
949
|
|
933
|
|
925
|
|
918
|
|
904
|
|
|
|
|
|
|
|
|
|
|
|
|
Total system-wide
stores (a)
|
|
1,781
|
|
1,746
|
|
1,715
|
|
1,690
|
|
1,661
|
|
|
|
|
|
(a)
|
Measures include
Valvoline franchisees, which are independent legal entities.
Valvoline does not consolidate the results of operations of its
franchisees .
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
|
|
|
|
Table 6
|
Non-GAAP
Reconciliation - Income from Continuing Operations and Diluted
Earnings per Share
|
(In millions, except
per share amounts - preliminary and unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
March 31
|
|
Six months
ended
March 31
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Reported income from
continuing operations
|
|
$ 32.9
|
|
$ 23.0
|
|
$ 59.9
|
|
$ 57.2
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Net pension and other
postretirement plan expenses (income)
|
|
3.6
|
|
(9.2)
|
|
7.3
|
|
(18.5)
|
|
Net legacy and
separation-related expenses
|
|
3.8
|
|
6.2
|
|
29.2
|
|
9.0
|
|
Information technology
transition costs
|
|
0.4
|
|
1.6
|
|
0.7
|
|
2.6
|
|
Suspended
operations
|
|
0.1
|
|
4.0
|
|
(0.1)
|
|
3.7
|
|
Investment-related
costs
|
|
1.0
|
|
—
|
|
1.0
|
|
—
|
|
Debt modification
costs
|
|
0.9
|
|
—
|
|
0.9
|
|
—
|
|
Total adjustments,
pre-tax
|
|
9.8
|
|
2.6
|
|
39.0
|
|
(3.2)
|
|
Income tax (benefit)
expense of adjustments
|
|
(2.5)
|
|
0.4
|
|
(30.3)
|
|
1.9
|
|
Total adjustments,
after tax
|
|
7.3
|
|
3.0
|
|
8.7
|
|
(1.3)
|
Adjusted income from
continuing operations (a) (b)
|
|
$ 40.2
|
|
$ 26.0
|
|
$ 68.6
|
|
$ 55.9
|
|
|
|
|
|
|
|
|
|
Reported diluted
earnings per share from continuing operations
|
|
$ 0.19
|
|
$ 0.13
|
|
$ 0.34
|
|
$ 0.32
|
Adjusted diluted
earnings per share from continuing operations (b)
(c)
|
|
$ 0.23
|
|
$ 0.14
|
|
$ 0.39
|
|
$ 0.31
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted common shares outstanding
|
|
172.7
|
|
181.0
|
|
174.5
|
|
181.5
|
|
|
(a)
|
Adjusted income from
continuing operations is defined as income from continuing
operations adjusted for the effects of key items.
|
(b)
|
Represents a non-GAAP
measure. Refer to "Use of Non-GAAP Measures" and the Appendix for
additional details.
|
(c)
|
Adjusted diluted
earnings per share from continuing operations is defined as diluted
earnings per share calculated using adjusted income from continuing
operations.
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
|
|
|
|
Table 7
|
Non-GAAP
Reconciliation - Adjusted Net Revenues and EBITDA from Continuing
Operations
|
(In millions -
preliminary and unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
March 31
|
|
Six months
ended
March 31
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Reported net
revenues
|
$
344.5
|
|
$
296.0
|
|
$
677.3
|
|
$
583.3
|
Adjustments:
|
|
|
|
|
|
|
|
|
Suspended
operations
|
|
—
|
|
(6.5)
|
|
(0.2)
|
|
(10.2)
|
Adjusted net
revenues (a) (b)
|
$
344.5
|
|
$
289.5
|
|
$
677.1
|
|
$
573.1
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
32.9
|
|
$
23.0
|
|
$
59.9
|
|
$
57.2
|
Add:
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
|
11.4
|
|
9.3
|
|
(8.7)
|
|
19.4
|
Net interest and other
financing expenses
|
|
13.3
|
|
16.9
|
|
32.0
|
|
33.9
|
Depreciation and
amortization
|
|
20.6
|
|
17.6
|
|
39.1
|
|
34.5
|
EBITDA from
continuing operations (b) (c)
|
|
78.2
|
|
66.8
|
|
122.3
|
|
145.0
|
Key items:
|
|
|
|
|
|
|
|
|
Net pension and other
postretirement plan expenses (income)
|
|
3.6
|
|
(9.2)
|
|
7.3
|
|
(18.5)
|
Net legacy and
separation-related expenses
|
|
3.8
|
|
6.2
|
|
29.2
|
|
9.0
|
Information technology
transition costs
|
|
0.4
|
|
1.6
|
|
0.7
|
|
2.6
|
Suspended
operations
|
|
0.1
|
|
4.0
|
|
(0.1)
|
|
3.7
|
Investment-related
costs
|
|
1.0
|
|
—
|
|
1.0
|
|
—
|
Key items -
subtotal
|
|
8.9
|
|
2.6
|
|
38.1
|
|
(3.2)
|
Adjusted EBITDA from
continuing operations (b) (c)
|
|
$
87.1
|
|
$
69.4
|
|
$
160.4
|
|
$
141.8
|
|
|
|
|
|
|
|
|
|
Net profit
margin (d)
|
9.6 %
|
|
7.8 %
|
|
8.8 %
|
|
9.8 %
|
Adjusted EBITDA
margin (b) (e)
|
25.3 %
|
|
24.0 %
|
|
23.7 %
|
|
24.7 %
|
|
|
|
|
|
|
|
(a)
|
Adjusted net revenues
are reported net revenues adjusted for key items.
|
(b)
|
Represents a non-GAAP
measure. Refer to "Use of Non-GAAP Measures" and the Appendix for
additional details.
|
(c)
|
EBITDA from continuing
operations is defined as income from continuing operations, plus
Income tax expense (benefit), 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.
|
(d)
|
Net profit margin is
defined as reported income from continuing operations divided by
reported net revenues.
|
(e)
|
Adjusted EBITDA margin
is defined as Adjusted EBITDA from continuing operations divided by
adjusted net revenues.
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
Table 8
|
Non-GAAP
Reconciliation - Free Cash Flows from Continuing
Operations
|
|
|
(In millions -
preliminary and unaudited)
|
|
|
|
|
|
|
|
|
|
Free cash flow
(a)
|
|
Six months
ended
|
|
March 31
|
|
2023
|
|
2022
|
Total cash flows
provided by operating activities from continuing
operations
|
|
$
173.5
|
|
$
46.8
|
Adjustments:
|
|
|
|
|
Additions to property,
plant and equipment from continuing operations
|
|
(79.4)
|
|
(57.7)
|
Free cash flow from
continuing operations (b)
|
|
$
94.1
|
|
$
(10.9)
|
|
|
|
|
|
Discretionary free cash
flow (c)
|
|
Six months
ended
|
|
March 31
|
|
2023
|
|
2022
|
Total cash flows
provided by operating activities from continuing
operations
|
|
$
173.5
|
|
$
46.8
|
Adjustments:
|
|
|
|
|
Maintenance additions
to property, plant and equipment from continuing
operations
|
|
(9.7)
|
|
(8.3)
|
Discretionary free
cash flow from continuing operations (b)
|
|
$
163.8
|
|
$
38.5
|
|
|
|
|
|
(a)
|
Free cash flow from
continuing operations is defined as operating cash flows from
continuing operations less capital expenditures of the continuing
operations and certain other adjustments attributable to continuing
operations, as applicable.
|
(b)
|
Represents a non-GAAP
measure. Refer to "Use of Non-GAAP Measures" and the Appendix for
additional details.
|
(c)
|
Discretionary free cash
flow from continuing operations is defined as operating cash flows
from continuing operations less maintenance capital expenditures of
the continuing operations and certain other adjustments
attributable to continuing operations, as applicable.
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
|
Appendix -
Description of Non-GAAP Measures and Adjustments
|
|
|
|
EBITDA
Measures
|
|
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.
|
|
Free Cash Flow and
Discretionary Free Cash Flow
|
|
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.
|
|
Adjusted Net Revenue
and Profitability Measures
|
|
Adjusted net revenue
and profitability measures (i.e., adjusted net income, diluted
earnings per share and EBITDA) enable the comparison of financial
trends and results between periods where certain items may not be
reflective of the Company's underlying and ongoing operational
performance or vary independent of business performance.
|
|
Key
Items
|
|
The non-GAAP measures
used by management exclude the impact 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").
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.
|
|
Refer to the below for
descriptions of the key items that comprise the adjustments which
depart from the computations in accordance with U.S.
GAAP:
|
|
Net pension and other
postretirement plan expenses (income): 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 that
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.
|
|
Net legacy and
separation-related expenses: Activity associated with legacy
businesses and 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.
|
|
Of specific note, the
Company recognized $24.4 million of pre-tax expense during the
six months ended March 31, 2023 to reflect its increased estimated
indemnity obligation, which also resulted in an income tax benefit
of $26.5 million to reflect the release of valuation
allowances in connection with the amendment of the Tax Matters
Agreement with Valvoline's former parent company.
|
|
Information technology
transition costs: Consist of redundant expenses incurred from
duplicative technology platforms required while implementing the
Company's stand-alone enterprise resource planning software system
during fiscal 2023 and transitioning its data centers during fiscal
2022. These expenses are reflective of 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.
|
|
Suspended operations:
Represents the results of a former Global Products business where
operations were suspended during fiscal 2022 that were not
included in the sale. These results are not indicative of the
operating performance of the Company's ongoing continuing
operations.
|
|
Investment-related
costs: Expense recognized to reduce the carrying value of an
investment interest determined to be impaired. This cost is not
considered to be reflective of the underlying performance of the
Company's ongoing continuing operations.
|
|
Debt modification
costs: Relates to the modification of the Senior Credit Agreement
and includes the accelerated amortization of previously capitalized
debt issuance costs, as well as third-party fees expensed in
connection with the execution of the amended Senior Credit
Agreement. These expenses are not considered to be indicative of
the future servicing costs of the Company's ongoing debt
facilities.
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/valvoline-reports-second-quarter-results-301820424.html
SOURCE Valvoline Inc.