- Sales from continuing operations of $376.2 million grew 19%, while system-wide
same-store sales (SSS) increased 12.5%
- Reported income from continuing operations of $64.5 million grew 62% and earnings per diluted
share (EPS) of $0.40 increased
82%
- Continuing operations adjusted EPS of $0.43 increased 105% and adjusted EBITDA of
$110.4 million increased 28%
- Net store additions total 23 (22 company-operated and 1
franchised) bringing total system-wide stores to 1,804
- Completed a modified "Dutch auction" tender offer to repurchase
27.0 million shares at $38.00 per
share for an aggregate purchase price of $1.02 billion, excluding related fees and
expenses
LEXINGTON, Ky., Aug. 9, 2023
/PRNewswire/ -- Valvoline Inc. (NYSE: VVV), a trusted leader in
preventive automotive maintenance delivering quick and convenient
service, today reported financial results for its third fiscal
quarter ended June 30, 2023. All
comparisons in this press release are made to the same prior-year
period unless otherwise noted.
"Valvoline continues to demonstrate the resiliency of the
preventive maintenance business and our algorithm for growth with
sales growing 19% and adjusted EBITDA growth of 28% versus the
prior year," said Sam Mitchell,
CEO.
"We also made great progress on our commitment to return a
substantial amount of the net proceeds from the sale of the Global
Products business to shareholders," continued Mitchell. "We
have returned $1.39 billion to
shareholders this year through both the tender offer and open
market repurchases, leaving $340
million on our current share repurchase authorization.
We expect to execute on the remaining repurchase authorization over
the next 12 months, subject to market conditions."
Continuing
Operations - Operating Results
|
|
(In millions, except
store counts)
|
Q3 results
|
YoY growth
|
Net revenues
|
$
376.2
|
19 %
|
Operating
income
|
$
86.5
|
42 %
|
Income from continuing
operations
|
$
64.5
|
62 %
|
Adjusted EBITDA
(a)
|
$
110.4
|
28 %
|
System-wide stores
(a)
|
1,804
|
7 %
|
Company-operated
stores
|
854
|
11 %
|
Franchised
stores
|
950
|
3 %
|
System-wide store sales
(a)
|
$
719.6
|
18 %
|
|
YoY growth
|
System-wide SSS
(a)
|
12.5 %
|
|
|
(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.
|
"The summer drive season is off to a great start and demand for
our quick, easy, trusted service remains high. We continue to
see strong same store sales growth for both company and franchise
stores, with 12.5% system-wide same store sales growth this
quarter," said Lori Flees,
President, Retail Services. "This strong same store sales growth is
balanced between transactions and ticket."
"As expected, we saw EBITDA margin improvement both sequentially
and over prior year," continued Flees. "The margin
improvement continues to be primarily driven by labor efficiency
and SG&A leverage from the increased volume we see during the
summer drive season."
Balance Sheet and Cash Flow
- Cash, cash equivalents, and short-term investments balance of
$950.8 million; total debt of
$1.6 billion
- Year-to-date continuing operations cash flow from operations of
$249.9 million and free cash flow of
$124.0 million
- Returned $1.39 billion in cash to
shareholders year-to-date via share repurchases with $340.4 million remaining on the existing
authorization
- Interest income of $24.9 million
earned during the quarter on invested net proceeds from the sale of
Global Products
Outlook
"We continue to deliver best-in-class top-line and bottom-line
growth consistent with the long-term guidance provided earlier this
year," added Mitchell.
"We are narrowing the range of our EBITDA guidance and raising
our net income guidance. We are focused on creating significant
value for shareholders by growing the core business, expanding the
network and evolving with the car parc."
Information regarding the Company's updated outlook for fiscal
2023 is provided in the table below:
|
Updated
Outlook
|
Prior
Outlook
|
Adjusted
EBITDA
|
$375
|
—
|
$385 million
|
$370
|
—
|
$390 million
|
Adjusted net
income
|
$185
|
—
|
$200 million
|
$160
|
—
|
$180 million
|
Valvoline's outlook for adjusted EBITDA and adjusted net income
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.
CEO Succession Plan
In a separate press release issued today, Valvoline announced
that Sam Mitchell is retiring as
Chief Executive Officer and a member of the Board, effective
September 30, 2023. Current
President of Retail Services, Lori
Flees, was named incoming CEO and director. The full press
release is accessible through Valvoline's website at
http://investors.valvoline.com.
Conference Call Webcast
Valvoline will host a live audio webcast of its fiscal third
quarter 2023 conference call today, August 9, 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 over 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. 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.
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
Elizabeth B. Russell
+1 (859)
357-3155
IR@valvoline.com
Media Inquiries
Michele
Gaither Sparks
+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
June 30
|
|
Nine months
ended
June 30
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net revenues
|
|
$ 376.2
|
|
$ 317.4
|
|
$
1,053.5
|
|
$ 900.7
|
Cost of
sales
|
|
225.5
|
|
189.6
|
|
657.3
|
|
553.4
|
Gross
profit
|
|
150.7
|
|
127.8
|
|
396.2
|
|
347.3
|
Selling, general and
administrative expenses
|
|
65.6
|
|
59.2
|
|
194.2
|
|
182.6
|
Net legacy and
separation-related expenses
|
|
1.6
|
|
9.9
|
|
30.8
|
|
18.9
|
Other income,
net
|
|
(3.0)
|
|
(2.4)
|
|
(5.8)
|
|
(7.3)
|
Operating
income
|
|
86.5
|
|
61.1
|
|
177.0
|
|
153.1
|
Net pension and other
postretirement plan expense (income)
|
|
3.7
|
|
(9.2)
|
|
11.0
|
|
(27.7)
|
Net interest and other
financing (income) expense
|
|
(4.6)
|
|
17.3
|
|
27.4
|
|
51.2
|
Income before income
taxes
|
|
87.4
|
|
53.0
|
|
138.6
|
|
129.6
|
Income tax
expense
|
|
22.9
|
|
13.2
|
|
14.2
|
|
32.6
|
Income from continuing
operations
|
|
64.5
|
|
39.8
|
|
124.4
|
|
97.0
|
(Loss) income from
discontinued operations
|
|
(2.9)
|
|
58.4
|
|
1,246.4
|
|
169.6
|
Net
income
|
|
$ 61.6
|
|
$ 98.2
|
|
$
1,370.8
|
|
$ 266.6
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
share
|
|
|
|
|
|
|
|
|
Basic earnings
(loss) per share
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ 0.40
|
|
$ 0.22
|
|
$ 0.74
|
|
$ 0.54
|
Discontinued
operations
|
|
(0.02)
|
|
0.33
|
|
7.35
|
|
0.94
|
Basic earnings per
share
|
|
$ 0.38
|
|
$ 0.55
|
|
$ 8.09
|
|
$ 1.48
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ 0.40
|
|
$ 0.22
|
|
$ 0.73
|
|
$ 0.53
|
Discontinued
operations
|
|
(0.02)
|
|
0.33
|
|
7.31
|
|
0.94
|
Diluted earnings per
share
|
|
$ 0.38
|
|
$ 0.55
|
|
$ 8.04
|
|
$ 1.47
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
|
|
|
|
Basic
|
|
161.5
|
|
178.6
|
|
169.5
|
|
179.6
|
Diluted
|
|
162.5
|
|
179.8
|
|
170.6
|
|
180.9
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
Table 2
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
(In millions -
preliminary and unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30
|
|
September 30
|
|
2023
|
|
2022
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
526.7
|
|
$
23.4
|
|
|
Receivables,
net
|
|
71.9
|
|
66.1
|
|
|
Inventories,
net
|
|
34.1
|
|
29.4
|
|
|
Prepaid expenses and
other current assets
|
|
30.3
|
|
38.0
|
|
|
Short-term
investments
|
|
424.1
|
|
—
|
|
|
Current assets held for
sale
|
|
—
|
|
1,464.2
|
|
Total current
assets
|
|
1,087.1
|
|
1,621.1
|
|
|
|
|
|
|
|
|
|
Noncurrent
assets
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
761.6
|
|
668.6
|
|
|
Operating lease
assets
|
|
264.3
|
|
248.1
|
|
|
Goodwill and
intangibles, net
|
|
678.0
|
|
663.1
|
|
|
Other noncurrent
assets
|
|
194.5
|
|
215.9
|
|
Total assets
|
|
$
2,985.5
|
|
$
3,416.8
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
23.7
|
|
$
162.5
|
|
|
Trade and other
payables
|
|
96.4
|
|
45.0
|
|
|
Accrued expenses and
other liabilities
|
|
285.8
|
|
172.6
|
|
|
Current liabilities
held for sale
|
|
—
|
|
539.3
|
|
Total current
liabilities
|
|
405.9
|
|
919.4
|
|
|
|
|
|
|
|
|
Noncurrent
liabilities
|
|
|
|
|
|
Long-term
debt
|
|
1,567.8
|
|
1,525.1
|
|
|
Employee benefit
obligations
|
|
202.1
|
|
199.4
|
|
|
Operating lease
liabilities
|
|
245.0
|
|
229.2
|
|
|
Other noncurrent
liabilities
|
|
279.3
|
|
237.1
|
|
Total noncurrent
liabilities
|
|
2,294.2
|
|
2,190.8
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
285.4
|
|
306.6
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
|
$
2,985.5
|
|
$
3,416.8
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
Table 3
|
Condensed
Consolidated Statements of Cash Flows
|
|
|
(In millions -
preliminary and unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended
|
|
June 30
|
|
2023
|
|
2022
|
Cash flows from
operating activities
|
|
|
|
|
|
Net income
|
|
$
1,370.8
|
|
$
266.6
|
|
Adjustments to
reconcile net income to cash flows from operating
activities:
|
|
|
|
|
|
|
Income from
discontinued operations
|
|
(1,246.4)
|
|
(169.6)
|
|
|
Depreciation and
amortization
|
|
60.7
|
|
52.1
|
|
|
Deferred income
taxes
|
|
(26.6)
|
|
29.6
|
|
|
Stock-based
compensation expense
|
|
8.8
|
|
11.7
|
|
|
Other, net
|
|
2.1
|
|
1.6
|
|
Change in operating
assets and liabilities
|
|
80.5
|
|
(65.1)
|
|
Operating cash flows
from continuing operations
|
|
249.9
|
|
126.9
|
|
Operating cash flows
from discontinued operations
|
|
(298.3)
|
|
64.3
|
|
Total cash (used in)
provided by operating activities
|
|
(48.4)
|
|
191.2
|
Cash flows from
investing activities
|
|
|
|
|
|
Additions to property,
plant and equipment
|
|
(125.9)
|
|
(89.5)
|
|
Acquisitions of
businesses, net of cash acquired
|
|
(27.8)
|
|
(42.7)
|
|
Purchases of
investments
|
|
(440.4)
|
|
—
|
|
Other investing
activities, net
|
|
(0.8)
|
|
8.6
|
|
Investing cash flows
from continuing operations
|
|
(594.9)
|
|
(123.6)
|
|
Investing cash flows
from discontinued operations
|
|
2,621.0
|
|
(20.0)
|
|
Total cash provided by
(used in) investing activities
|
|
2,026.1
|
|
(143.6)
|
Cash flows from
financing activities
|
|
|
|
|
|
Proceeds from
borrowings, net of issuance costs
|
|
920.9
|
|
—
|
|
Repayments on
borrowings
|
|
(915.0)
|
|
(0.6)
|
|
Repurchases of common
stock
|
|
(1,395.5)
|
|
(103.5)
|
|
Cash dividends
paid
|
|
(21.8)
|
|
(67.1)
|
|
Other financing
activities
|
|
(16.0)
|
|
(13.6)
|
|
Financing cash flows
from continuing operations
|
|
(1,427.4)
|
|
(184.8)
|
|
Financing cash flows
from discontinued operations
|
|
(108.1)
|
|
6.8
|
|
Total cash used in
financing activities
|
|
(1,535.5)
|
|
(178.0)
|
|
Effect of currency
exchange rate changes on cash, cash equivalents and restricted
cash
|
|
0.6
|
|
(1.4)
|
Increase (decrease)
in cash, cash equivalents and restricted cash
|
|
442.8
|
|
(131.8)
|
Cash, cash equivalents
and restricted cash - beginning of period
|
|
83.9
|
|
231.4
|
Cash, cash
equivalents and restricted cash - end of period
|
|
$
526.7
|
|
$
99.6
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
|
|
|
|
|
|
Table 4
|
Retail Stores
Operating Information
|
|
|
|
|
|
|
|
|
(Preliminary and
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
June 30
|
|
Nine months
ended
June 30
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Sales
information
|
|
|
|
|
|
|
|
|
|
System-wide store sales
- in millions (a)
|
|
$
719.6
|
|
$
610.4
|
|
$ 2,023.5
|
|
$ 1,718.3
|
Year-over-year
growth (a)
|
|
17.9 %
|
|
16.0 %
|
|
17.8 %
|
|
21.4 %
|
|
|
|
|
|
|
|
|
|
|
Same-store sales
growth (b)
|
|
|
|
|
|
|
|
|
Company-operated
|
|
12.1 %
|
|
7.1 %
|
|
13.0 %
|
|
12.5 %
|
Franchised
(a)
|
|
12.8 %
|
|
12.1 %
|
|
12.3 %
|
|
17.6 %
|
System-wide
(a)
|
|
12.5 %
|
|
9.9 %
|
|
12.6 %
|
|
15.4 %
|
|
|
|
Number of stores at end
of period
|
|
|
|
Third
Quarter
2023
|
|
Second
Quarter
2023
|
|
First
Quarter
2023
|
|
Fourth
Quarter
2022
|
|
Third
Quarter
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-operated
|
|
854
|
|
832
|
|
813
|
|
790
|
|
772
|
Franchised
(a)
|
|
950
|
|
949
|
|
933
|
|
925
|
|
918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30
|
2023
|
|
2022
|
System-wide store count
(a)
|
|
|
|
|
|
|
|
1,804
|
|
1,690
|
Year-over-year
growth (a)
|
|
|
|
|
|
|
|
6.7 %
|
|
7.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
|
|
Third
Quarter
2023
|
|
Second
Quarter
2023
|
|
First
Quarter
2023
|
|
Fourth
Quarter
2022
|
|
Third
Quarter
2022
|
Beginning of
period
|
|
832
|
|
813
|
|
790
|
|
772
|
|
757
|
|
Opened
|
|
12
|
|
13
|
|
17
|
|
12
|
|
5
|
|
Acquired
|
|
8
|
|
6
|
|
5
|
|
3
|
|
9
|
|
Net conversions between
company-operated and franchised
|
|
2
|
|
—
|
|
2
|
|
3
|
|
1
|
|
Closed
|
|
—
|
|
—
|
|
(1)
|
|
—
|
|
—
|
End of
period
|
|
854
|
|
832
|
|
813
|
|
790
|
|
772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
(a)
|
|
|
|
Third
Quarter
2023
|
|
Second
Quarter
2023
|
|
First
Quarter
2023
|
|
Fourth
Quarter
2022
|
|
Third
Quarter
2022
|
Beginning of
period
|
|
949
|
|
933
|
|
925
|
|
918
|
|
904
|
|
Opened
|
|
3
|
|
16
|
|
11
|
|
10
|
|
16
|
|
Acquired
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Net conversions between
company-operated and franchised
|
|
(2)
|
|
—
|
|
(2)
|
|
(3)
|
|
(1)
|
|
Closed
|
|
—
|
|
—
|
|
(1)
|
|
—
|
|
(1)
|
End of
period
|
|
950
|
|
949
|
|
933
|
|
925
|
|
918
|
|
|
|
|
|
|
|
|
|
|
|
|
Total system-wide
stores (a)
|
|
1,804
|
|
1,781
|
|
1,746
|
|
1,715
|
|
1,690
|
|
(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
June 30
|
|
Nine months
ended
June 30
|
|
|
|
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Reported income from
continuing operations
|
|
$ 64.5
|
|
$ 39.8
|
|
$ 124.4
|
|
$ 97.0
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Net pension and other
postretirement plan expense (income)
|
|
3.7
|
|
(9.2)
|
|
11.0
|
|
(27.7)
|
|
Net legacy and
separation-related expenses
|
|
1.6
|
|
9.9
|
|
30.8
|
|
18.9
|
|
Information technology
transition costs
|
|
1.1
|
|
—
|
|
1.8
|
|
2.6
|
|
Suspended
operations
|
|
(0.4)
|
|
(2.2)
|
|
(0.5)
|
|
1.5
|
|
Investment and
divestiture-related costs
|
|
—
|
|
—
|
|
1.0
|
|
—
|
|
Debt extinguishment and
modification costs
|
|
0.1
|
|
—
|
|
1.0
|
|
—
|
|
Total adjustments,
pre-tax
|
|
6.1
|
|
(1.5)
|
|
45.1
|
|
(4.7)
|
|
Income tax (benefit)
expense of adjustments
|
|
(1.5)
|
|
(0.1)
|
|
(31.8)
|
|
1.8
|
|
Total adjustments,
after tax
|
|
4.6
|
|
(1.6)
|
|
13.3
|
|
(2.9)
|
Adjusted income from
continuing operations (a) (b)
|
|
$ 69.1
|
|
$ 38.2
|
|
$ 137.7
|
|
$ 94.1
|
|
|
|
|
|
|
|
|
|
Reported diluted
earnings per share from continuing operations
|
|
$ 0.40
|
|
$ 0.22
|
|
$ 0.73
|
|
$ 0.53
|
Adjusted diluted
earnings per share from continuing operations (b) (c)
|
|
$ 0.43
|
|
$ 0.21
|
|
$ 0.81
|
|
$ 0.52
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted common shares outstanding
|
|
162.5
|
|
179.8
|
|
170.6
|
|
180.9
|
|
|
|
|
|
(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
June 30
|
|
Nine months
ended
June 30
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Reported net
revenues
|
$
376.2
|
|
$
317.4
|
|
$ 1,053.5
|
|
$
900.7
|
Adjustments:
|
|
|
|
|
|
|
|
|
Suspended
operations
|
|
—
|
|
(1.2)
|
|
(0.2)
|
|
(11.4)
|
Adjusted net
revenues (a) (b)
|
$
376.2
|
|
$
316.2
|
|
$ 1,053.3
|
|
$
889.3
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
64.5
|
|
$
39.8
|
|
$
124.4
|
|
$
97.0
|
Add:
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
22.9
|
|
13.2
|
|
14.2
|
|
32.6
|
Net interest and other
financing (income) expense
|
|
(4.6)
|
|
17.3
|
|
27.4
|
|
51.2
|
Depreciation and
amortization
|
|
21.6
|
|
17.6
|
|
60.7
|
|
52.1
|
EBITDA from
continuing operations (b) (c)
|
|
104.4
|
|
87.9
|
|
226.7
|
|
232.9
|
Key items:
|
|
|
|
|
|
|
|
|
Net pension and other
postretirement plan expense (income)
|
|
3.7
|
|
(9.2)
|
|
11.0
|
|
(27.7)
|
Net legacy and
separation-related expenses
|
|
1.6
|
|
9.9
|
|
30.8
|
|
18.9
|
Information technology
transition costs
|
|
1.1
|
|
—
|
|
1.8
|
|
2.6
|
Suspended
operations
|
|
(0.4)
|
|
(2.2)
|
|
(0.5)
|
|
1.5
|
Investment and
divestiture-related costs
|
|
—
|
|
—
|
|
1.0
|
|
—
|
Key items -
subtotal
|
|
6.0
|
|
(1.5)
|
|
44.1
|
|
(4.7)
|
Adjusted EBITDA from
continuing operations (b) (c)
|
|
$
110.4
|
|
$
86.4
|
|
$
270.8
|
|
$
228.2
|
|
|
|
|
|
|
|
|
|
Net profit
margin (d)
|
17.1 %
|
|
12.5 %
|
|
11.8 %
|
|
10.8 %
|
Adjusted EBITDA
margin (b) (e)
|
29.3 %
|
|
27.3 %
|
|
25.7 %
|
|
25.7 %
|
|
|
|
|
|
|
|
|
|
(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, net interest and other financing (income)
expense, 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)
|
|
Nine months
ended
|
|
June 30
|
|
2023
|
|
2022
|
Total cash flows
provided by operating activities from continuing
operations
|
|
$
249.9
|
|
$
126.9
|
Adjustments:
|
|
|
|
|
Additions to property,
plant and equipment from continuing operations
|
|
(125.9)
|
|
(89.5)
|
Free cash flow from
continuing operations (b)
|
|
$
124.0
|
|
$
37.4
|
|
|
|
|
|
Discretionary free cash
flow (c)
|
|
Nine months
ended
|
|
June 30
|
|
2023
|
|
2022
|
Total cash flows
provided by operating activities from continuing
operations
|
|
$
249.9
|
|
$
126.9
|
Adjustments:
|
|
|
|
|
Maintenance additions
to property, plant and equipment from continuing
operations
|
|
(18.0)
|
|
(13.0)
|
Discretionary free
cash flow from continuing operations (b)
|
|
$
231.9
|
|
$
113.9
|
|
|
|
|
|
(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 expense
(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
nine months ended June 30, 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 and divestiture-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 extinguishment and 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.
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SOURCE Valvoline Inc.