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


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


Kentucky		30-0939371

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

Telephone Number (859) 357-7777

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~~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 þNoo

Indicate by check mark whether the ~~Registrant~~registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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~~registrant was required to submit ~~and post~~ such files).Yes þ Noo


Large accelerated filer		☑	Accelerated filer	☐
Non-accelerated filer		☐	Smaller reporting company	☐
~~Large Accelerated Filer~~ þ			Emerging growth company	~~Accelerated Filer~~ o
~~Non-Accelerated Filer~~ o	~~Smaller Reporting Company~~ o
~~(Do not check if a smaller reporting company)~~	~~Emerging Growth Company~~ o ☐

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

At ~~February 1, 2018,~~May 7, 2024, there were ~~200,065,752~~128,854,818 shares of the ~~Registrant~~registrant’s common stock outstanding.

~~VALVOLINE INC. AND CONSOLIDATED SUBSIDIARIES~~

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 data - unaudited) 2017 2016
Sales $ 545
$ 489
Cost of sales 350
304
Gross profit 195
185

Selling, general and administrative expenses 114
95
Separation costs 2
6
Equity and other income (9 ) (10 )
Operating income 88
94
Net pension and other postretirement plan non-service income and remeasurement adjustments (10 ) (26 )
Net interest and other financing expense 14
10
Income before income taxes 84
110
Income tax expense 94
38
Net (loss) income $ (10 ) $ 72

NET (LOSS) INCOME PER SHARE
             Basic $ (0.05 ) $ 0.35
             Diluted $ (0.05 ) $ 0.35

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
             Basic 202
205
             Diluted 202
205

DIVIDENDS PAID PER COMMON SHARE $ 0.07
$ 0.05

COMPREHENSIVE (LOSS) INCOME
Net (loss) income $ (10 ) $ 72
Other comprehensive income (loss), net of tax
Unrealized translation gain (loss) 1
(9 )
Pension and other postretirement obligation adjustment (2 ) (2 )
Other comprehensive loss (1 ) (11 )
Comprehensive (loss) income $ (11 ) $ 61


	Three months ended March 31				Six months ended March 31
(In millions, except per share amounts - unaudited)	2024		2023		2024		2023
Net revenues	$	388.7	$	344.5	$	762.1	$	677.3
Cost of sales	242.5		217.8		481.1		431.8
Gross profit	146.2		126.7		281.0		245.5

Selling, general and administrative expenses	72.3		62.6		146.8		128.6
Net legacy and separation-related expenses	—		3.8		0.1		29.2
Other income, net	(2.5)		(0.9)		(5.1)		(2.8)
Operating income	76.4		61.2		139.2		90.5
Net pension and other postretirement plan expenses	3.6		3.6		7.0		7.3
Net interest and other financing expenses	15.5		13.3		29.1		32.0
Income before income taxes	57.3		44.3		103.1		51.2
Income tax expense (benefit)	14.0		11.4		25.9		(8.7)
Income from continuing operations	43.3		32.9		77.2		59.9
(Loss) income from discontinued operations, net of tax	(1.9)		1,194.4		(3.9)		1,249.3
Net income	$	41.4	$	1,227.3	$	73.3	$	1,309.2

Net earnings per share
Basic earnings (loss) per share
Continuing operations	$	0.33	$	0.19	$	0.59	$	0.35
Discontinued operations	(0.01)		6.96		(0.03)		7.20
Basic earnings per share	$	0.32	$	7.15	$	0.56	$	7.55

Diluted earnings (loss) per share
Continuing operations	$	0.33	$	0.19	$	0.59	$	0.34
Discontinued operations	(0.01)		6.92		(0.03)		7.16
Diluted earnings per share	$	0.32	$	7.11	$	0.56	$	7.50

Weighted average common shares outstanding
Basic	129.8		171.7		130.8		173.5
Diluted	130.7		172.7		131.7		174.5

Comprehensive income
Net income	$	41.4	$	1,227.3	$	73.3	$	1,309.2
Other comprehensive (loss) income, net of tax
Currency translation adjustments	(2.5)		29.3		4.1		44.5
Amortization of pension and other postretirement plan prior service credits	(0.4)		(0.5)		(0.9)		(0.9)
Unrealized loss on cash flow hedges	(1.4)		(3.1)		(3.3)		(4.4)
Other comprehensive (loss) income	(4.3)		25.7		(0.1)		39.2
Comprehensive income	$	37.1	$	1,253.0	$	73.2	$	1,348.4

~~See~~The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Balance Sheets


(In millions, except per share amounts - unaudited)	March 31 2024		September 30 2023
Assets
Current assets
Cash and cash equivalents	$	494.5	$	409.1
Receivables, net	109.6		81.3
Inventories, net	37.5		33.3
Prepaid expenses and other current assets	59.8		65.5
Short-term investments	—		347.5

Total current assets	701.4		936.7
Noncurrent assets
Property, plant and equipment, net	877.9		818.3
Operating lease assets	288.1		266.5
Goodwill and intangibles, net	692.3		680.6

Other noncurrent assets	203.3		187.8

Total noncurrent assets	2,061.6		1,953.2
Total assets	$	2,763.0	$	2,889.9

Liabilities and Stockholders’ Equity
Current liabilities

Current portion of long-term debt	$	623.8	$	23.8
Trade and other payables	118.8		118.7
Accrued expenses and other liabilities	221.1		215.9
Current liabilities held for sale	—		3.9
Total current liabilities	963.7		362.3
Noncurrent liabilities
Long-term debt	951.3		1,562.3
Employee benefit obligations	170.2		168.0
Operating lease liabilities	269.0		247.3

Other noncurrent liabilities	348.7		346.8

Total noncurrent liabilities	1,739.2		2,324.4
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; 128.8 and 134.8 shares issued and outstanding at March 31, 2024 and September 30, 2023, respectively	1.3		1.3
Paid-in capital	45.3		48.0
Retained earnings	0.4		140.7


Accumulated other comprehensive income	13.1		13.2
Stockholders' equity	60.1		203.2
Total liabilities and stockholders’ equity	$	2,763.0	$	2,889.9

(In millions except per share amounts - unaudited) December 31
2017 September 30
2017
Assets
Current assets
Cash and cash equivalents $ 115
$ 201
Accounts receivable, net 418
385
Inventories, net 170
175
Other current assets 32
29
Total current assets 735
790
Noncurrent assets
Property, plant and equipment, net 384
391
Goodwill and intangibles, net 393
335
Equity method investments 33
30
Deferred income taxes 196
281
Other noncurrent assets 86
88
Total noncurrent assets 1,092
1,125
Total assets $ 1,827
$ 1,915

Liabilities and Stockholders’ Deficit
Current liabilities
Short-term debt $ —
$ 75
Current portion of long-term debt 19
15
Trade and other payables 141
192
Accrued expenses and other liabilities 208
196
Total current liabilities 368
478
Noncurrent liabilities
Long-term debt 1,147
1,034
Employee benefit obligations 331
342
Other noncurrent liabilities 175
178
Total noncurrent liabilities 1,653
1,554
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; 201 and 203 shares issued and outstanding at December 31, 2017 and September 30, 2017 2
2
Paid-in capital —
5
Retained deficit (238 ) (167 )
Accumulated other comprehensive income 42
43
Total stockholders’ deficit (194 ) (117 )
Total liabilities and stockholders’ deficit
$ 1,827
$ 1,915

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Statements of Cash Flows


	Six months ended March 31
(In millions - unaudited)	2024		2023
Cash flows from operating activities
Net income	$	73.3	$	1,309.2
Adjustments to reconcile net income to cash flows from operating activities:
Loss (income) from discontinued operations	3.9		(1,249.3)

Depreciation and amortization	50.2		39.1

Deferred income taxes	—		(26.6)





Stock-based compensation expense	4.9		5.4
Other, net	1.4		2.3
Change in operating assets and liabilities
Receivables	(23.1)		4.8
Inventories	(4.7)		(3.7)
Payables and accrued liabilities	4.2		68.5
Other assets and liabilities	(18.0)		23.8
Operating cash flows from continuing operations	92.1		173.5
Operating cash flows from discontinued operations	(3.9)		(63.4)
Total cash provided by operating activities	88.2		110.1
Cash flows from investing activities
Additions to property, plant and equipment	(87.2)		(79.4)

Acquisitions of businesses	(21.3)		(18.9)



Proceeds from maturities of short-term investments	350.0		—
Other investing activities, net	(10.9)		2.0
Investing cash flows from continuing operations	230.6		(96.3)
Investing cash flows from discontinued operations	—		2,623.2
Total cash provided by investing activities	230.6		2,526.9
Cash flows from financing activities
Proceeds from borrowings	—		920.9

Repayments on borrowings	(11.8)		(909.0)

Repurchases of common stock	(212.2)		(257.4)

Cash dividends paid	—		(21.8)
Other financing activities	(13.6)		(12.1)
Financing cash flows from continuing operations	(237.6)		(279.4)
Financing cash flows from discontinued operations	—		(108.1)
Total cash used in financing activities	(237.6)		(387.5)
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash	0.2		1.1
Increase in cash, cash equivalents and restricted cash	81.4		2,250.6
Cash, cash equivalents and restricted cash - beginning of period	413.1		83.9
Cash, cash equivalents and restricted cash - end of period	$	494.5	$	2,334.5

Three months ended
December 31
(In millions - unaudited) 2017 2016
Cash flows from operating activities
Net (loss) income $ (10 ) $ 72
Adjustments to reconcile net income (loss) to cash flows from operating activities
Depreciation and amortization 11
9
Debt issuance cost and discount amortization 1
1
Deferred income taxes 85
—
Equity income from affiliates (5 ) (4 )
Distributions from equity affiliates 3
—
Pension contributions (3 ) (3 )
Gain on pension and other postretirement plan remeasurements —
(8 )
Stock-based compensation expense 4
1
Change in assets and liabilities ^(a)

Accounts receivable (34 ) 10
Inventories 7
(2 )
Payables and accrued liabilities (40 ) 23
Other assets and liabilities 1
(11 )
Total cash provided by operating activities 20
88
Cash flows from investing activities
Additions to property, plant and equipment (14 ) (9 )
Acquisitions, net of cash acquired (60 ) —
Other investing activities, net —
(1 )
Total cash used in investing activities (74 ) (10 )
Cash flows from financing activities
Net transfers to Ashland —
(2 )
Proceeds from borrowings, net of issuance costs 44
75
Repayments on borrowings (4 ) (79 )
Repurchase of common stock (37 ) —
Purchase of additional ownership in subsidiary (15 ) —
Cash dividends paid (15 ) (10 )
Other financing activities (4 ) —
Total cash used in financing activities (31 ) (16 )
Effect of currency exchange rate changes on cash and cash equivalents (1 ) 2
(Decrease) increase in cash and cash equivalents (86 ) 64
Cash and cash equivalents - beginning of period 201
172
Cash and cash equivalents - end of period $ 115
$ 236

~~(a) Excludes changes resulting from operations acquired or sold.~~

~~See~~The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.

Condensed Consolidated Statements of Stockholders' Equity


	Six months ended March 31, 2024
(In millions, except per share amounts - unaudited)	Common stock			Paid-in capital		Retained earnings (deficit)		Accumulated other comprehensive income		Totals
	Shares	Amount
Balance at September 30, 2023	134.8	$	1.3	$	48.0	$	140.7	$	13.2	$	203.2
Net income	—	—		—		31.9		—		31.9

Stock-based compensation, net of issuances	0.2	—		(1.7)		—		—		(1.7)
Repurchases of common stock	(5.4)	—		—		(172.8)		—		(172.8)
Other comprehensive income, net of tax	—	—		—		—		4.2		4.2
Balance at December 31, 2023	129.6	$	1.3	$	46.3	$	(0.2)	$	17.4	$	64.8
Net income	—	—		—		41.4		—		41.4

Stock-based compensation, net of issuances	0.2	—		(1.0)		—		—		(1.0)
Repurchases of common stock	(1.0)	—		—		(40.8)		—		(40.8)
Other comprehensive loss, net of tax	—	—		—		—		(4.3)		(4.3)
Balance at March 31, 2024	128.8	$	1.3	$	45.3	$	0.4	$	13.1	$	60.1































	Six months ended March 31, 2023
(In millions, except per share amounts - unaudited)	Common stock			Paid-in capital		Retained earnings		Accumulated other comprehensive (loss) income		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
Net income	—	—		—		1,227.3		—		1,227.3

Stock-based compensation, net of issuances	0.1	—		1.8		—		—		1.8
Repurchases of common stock	(4.9)	—		—		(171.7)		—		(171.7)
Other comprehensive income, net of tax	—	—		—		—		25.7		25.7
Balance at March 31, 2023	168.7	$	1.7	$	42.6	$	1,310.2	$	17.9	$	1,372.4

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these Condensed Consolidated Financial Statements.

Valvoline Inc. and Consolidated Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Use of estimates, risks and uncertainties

Sale of Global Products business

On March 1, 2023, Valvoline completed the sale of its former Global Products reportable segment (“Global Products”) to Aramco Overseas Company B.V. (the “Transaction”). The operating results and cash flows associated with and directly attributed to the Global Products disposal group are reflected as discontinued operations within these condensed consolidated financial ~~statements~~statements.Refer to Note 2 for additional information regarding the Global Products business, including income from discontinued operations. Unless otherwise noted, disclosures within these ~~interim periods are reasonable. The results for~~remaining Notes to Condensed Consolidated Financial Statements relate solely to the ~~interim periods are not necessarily indicative of results to be expected for the entire year.~~Company's continuing operations.

Recent accounting pronouncements

~~Recently~~Issued but not yet adopted

In ~~March 2017,~~December 2023, the FASB issued ~~accounting~~ guidance which enhances income tax disclosure requirements to include additional disaggregation within the effective tax rate reconciliation and income taxes paid. This guidance will be effective for Valvoline beginning with its fiscal 2026 annual financial statements, with early adoption permitted. The guidance must be applied prospectively, while retrospective application is permitted. The Company is currently assessing the impact of adoption, which is expected to result in enhanced income tax disclosures.

NOTE 2 - DISCONTINUED OPERATIONS

Sale of Global Products

On March 1, 2023, Valvoline completed the sale of Global Products for a cash purchase price of $2.650 billion and recognized a pre-tax gain on the sale within Income from discontinued operations, net of tax, during the second quarter of fiscal 2023, coinciding with the completion of the sale. The Transaction was subject to customary closing settlements that ~~changed how employers who sponsor defined benefit pension and/or postretirement benefit plans present the net periodic benefit cost~~were finalized in the ~~Condensed Consolidated Statements~~third quarter of ~~Comprehensive Income. This guidance requires employers to present the service cost component of net periodic benefit cost~~ fiscal 2023 and resulted in the ~~same caption as other employee compensation costs from services rendered~~recognition of a pre-tax gain on sale of $1.572 billion during the period. All other components of the net periodic benefit cost are presented separately outside of the operating income caption. Valvoline retrospectively adopted this guidance on October 1, 2017. Accordingly, ~~Net pension and other postretirement plan non-service income and remeasurement adjustments~~ ~~has been reclassified to non-operating income for all periods presented~~fiscal year ended September 30, 2023.

The following table summarizes Income from discontinued operations within the Condensed ConsolidatedStatements of Comprehensive Income:


	Three months ended March 31				Six months ended March 31
(In millions)	2024		2023		2024		2023
Net revenues	$	—	$	468.6	$	—	$	1,174.4
Cost of sales	—		367.6		—		924.2
Gross profit	—		101.0		—		250.2

Selling, general and administrative expenses	—		52.7		—		125.0
Net legacy and separation-related expenses	2.6		14.4		4.9		20.6
Equity and other income, net	—		(5.0)		—		(14.2)
Operating (loss) income from discontinued operations	(2.6)		38.9		(4.9)		118.8
Net pension and other postretirement plan expense	—		—		—		0.1
Net interest and other financing expenses	—		2.7		—		5.0
Gain on sale of discontinued operations (a)	—		(1,570.8)		—		(1,570.8)
(Loss) income before income taxes - discontinued operations	(2.6)		1,607.0		(4.9)		1,684.5
Income tax (benefit) expense (b)	(0.7)		412.6		(1.0)		435.2
(Loss) income from discontinued operations, net of tax	$	(1.9)	$	1,194.4	$	(3.9)	$	1,249.3

(a)The gain on sale recorded in the three months ended March 31, 2023 includes the release of Accumulated other comprehensive income of $30.7 million associated with the realization of cumulative translation losses attributed to the Global Products business.

(b)Income tax expense in the three and six months ended March 31, 2023 includes the tax effects of the gain on sale of $420.2 million comprised of current and deferred expense of $327.6 million and $92.6 million, respectively.

Post-closing arrangements

~~In May 2014,~~Valvoline also entered into a Transition Services Agreement with Global Products, effective March 1, 2023, to provide and receive services including information technology (“IT”), legal, finance, and human resources support. Transition services have lapsed periodically as business process transitions have occurred since the FASB issued accounting guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers, which supersedes most current revenue recognition guidance. This guidance introduces a five-step model for revenue recognition that focuses on transfer of control, as opposed to transfer of risksale, and ~~rewards under current guidance. The Company is evaluating the effect of adopting the new revenue guidance on its~~

financial statements and does not currently expect it to have a material effect to net earnings. Based on an evaluation of current contracts and revenue streams to-date, Valvoline believes that most revenue transactions recorded under the new guidance will be substantially consistent with treatment under existing guidance, with certain reclassifications expected within the Condensed Consolidated Statements of Comprehensive Earnings and certain minimal changes to the timing of the recognition of revenues. The Company's revenue transactionsremaining services are generally consist of a single performance obligation to transfer promised goods and are not accounted for under industry-specific guidance. The Company anticipates expanded footnote disclosures under the new guidance.

Management will continue to complete its assessment of revenue streams and implementation plans, including monitoring developments, and plans to substantially complete the Company's implementation assessment in early 2018 and finalize conclusions by the fourth quarter of fiscal 2018. Valvoline will adopt this standard in the first quarter of fiscal 2019 and will provide updated disclosures of the anticipated impacts of adoption in future filings.

In February 2016, the FASB issued new accounting guidance related to lease transactions. The primary objective of this guidance is to increase transparency and comparability among organizations by requiring lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by leases and to disclose key information about leasing arrangements. The Company expects to adopt the new guidance in the first quarter of fiscal 2020 using the modified retrospective method. While adoption is expected to ~~lead to a~~conclude within 18 months post-closing with limited IT transition services that may extend through early calendar year 2025. The income and costs associated with these services were not material ~~increase in~~during the ~~assets~~three and liabilities recorded on the Condensed Consolidated Balance Sheet and an increase in footnote disclosures related to leases, the Company is in the process of developing assessment and implementation plans to determine the specific impacts, including those on the Condensed Consolidated Statements of Comprehensive Earnings.six months ended March 31, 2024.

NOTE 23 - FAIR VALUE MEASUREMENTS

Recurring fair value measurements

December 31, 2017 September 30, 2017
Quoted prices in active markets for identical assets Quoted prices in active markets for identical assets
(In millions) Fair Value Level 1 Fair Value Level 1
Assets
Cash equivalents ^(a)
$ 24
$ 24
$ 46
$ 46
Foreign currency derivatives ^(b)
1
1
1
1
Non-qualified trust funds ^(c)
30
30
30
30
Total assets at fair value $ 55
$ 55
$ 77
$ 77

Liabilities
Foreign currency derivatives ^(d)
$ 1
$ 1
$ 1
$ 1
Total liabilities at fair value $ 1
$ 1
$ 1
$ 1

~~(a) Included in~~ ~~Cash and cash equivalents~~ ~~in the Condensed Consolidated Balance Sheets.~~

~~Included in~~ ~~Other current assets~~ ~~in the Condensed Consolidated Balance Sheets.~~

~~As of December 31, 2017, $2 million of this balance is included in~~ ~~Other current assets, with the remainder included in~~ ~~Other noncurrent assets~~ ~~in the Condensed Consolidated Balance Sheets. As of September 30, 2017, this balance is included in~~ ~~Other noncurrent assets~~ ~~in the Condensed Consolidated Balance Sheets.~~

~~Included in~~ ~~Accrued expense and other liabilities~~ ~~in the Condensed Consolidated Balance Sheets.~~


	As of March 31, 2024
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	360.0	$	360.0	$	—	$	—	$	—
Time deposits	2.3		—		2.3		—		—

Prepaid expenses and other current assets

Interest rate swap agreements	3.3		—		3.3		—		—
Other noncurrent assets
Non-qualified trust funds	1.8		—		—		—		1.8

Deferred compensation investments	21.6		21.6		—		—		—
Total assets at fair value	$	389.0	$	381.6	$	5.6	$	—	$	1.8




Other noncurrent liabilities
Deferred compensation obligations	$	21.8	$	—	$	—	$	—	$	21.8
Total liabilities at fair value	$	21.8	$	—	$	—	$	—	$	21.8

There were no Level 2 or 3 financial assets or liabilities that were accounted for at fair value on a recurring basis as of December 31, 2017 or September 30, 2017. Additionally, there were no transfers between levels of the fair value hierarchy during the three months ending December 31, 2017 or 2016.


	As of September 30, 2023
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	0.6	$	0.6	$	—	$	—	$	—
Time deposits	277.3		—		277.3		—		—
Prepaid expenses and other current assets
Currency derivatives (b)	0.1		—		0.1		—		—
Interest rate swap agreements	7.8		—		7.8		—		—
Other noncurrent assets
Non-qualified trust funds	2.1		—		—		—		2.1

Deferred compensation investments	19.0		19.0		—		—		—
Total assets at fair value	$	306.9	$	19.6	$	285.2	$	—	$	2.1

Accrued expenses and other liabilities
Currency derivatives (b)	$	0.1	$	—	$	0.1	$	—	$	—

Other noncurrent liabilities
Deferred compensation obligations	20.8		—		—		—		20.8
Total liabilities at fair value	$	20.9	$	—	$	0.1	$	—	$	20.8

~~Cash equivalents~~

~~A portion of the Company's excess cash is held in highly liquid investments with maturities of three months or less. Cash equivalents generate interest income and are~~(a)Funds measured at fair value using ~~prevailing market rates.~~

~~The Company uses derivatives~~the net asset value ("NAV") per share practical expedient have not designated as hedging instruments consisting primarily of forward contracts to hedge foreign currency denominated balance sheet exposures and exchange one foreign currency for another for a fixed rate at a future date of twelve months or less. Gains and losses recognized for changesbeen classified in the fair value ~~of these instruments were not material during the three months ended December 31, 2017 and 2016 and are included in~~ ~~Selling, general and administrative expense~~ in the Condensed Consolidated Statements of Comprehensive Income to offset the gain or loss on the hedged item in the same period as the remeasurement losses and gains of the related foreign currency-denominated exposures. hierarchy.

(b)The Company had outstanding contracts with ~~highly-rated financial institutions with~~ notional values of ~~$43 million and $47~~$29.7 million as of ~~December 31, 2017 and~~ September 30, ~~2017, respectively.~~2023.

~~Non-qualified trust funds~~

The Company maintains a non-qualified trust to fund benefit payments for certain of its U.S. non-qualified pension plans, which primarily consists of highly liquid fixed income U.S. government bonds. Gains and losses related to these investments are immediately recognized within ~~Selling, general and administrative expense~~ ~~in the Condensed Consolidated Statements of Comprehensive Income.~~Fair value disclosures

~~The fair values shown in the table below~~long-term debt are based on the prices at which the bonds have recently traded in the market as well as the overall market conditions on the date of valuation, stated coupon rates, the number of coupon payments each year and the maturity dates. Long-term debt is includedreported in the Condensed Consolidated Balance Sheets at carrying value, rather than fair value, and isare therefore excluded from the disclosure above of financial assets and liabilities measured at fair value ~~table above.~~ within the condensed consolidated financial statements on a recurring basis. The following disclosures summarize the fair value of these assets and liabilities at each relevant balance sheet date.

U.S. treasury securities


	September 30, 2023
(In millions)		Amortized cost		Gross unrealized losses		Fair value
Cash and cash equivalents
U.S. treasury securities (a)		$	2.2	$	—	$	2.2
Short-term investments
U.S. treasury securities (b)		$	347.5	$	(0.5)	$	347.0

(a)U.S. treasury securities with original maturity dates of three months or less.

(b)U.S. treasury securities with original maturities greater than three months and less than 12 months.


	March 31, 2024						September 30, 2023
(In millions)	Fair value		Carrying value (a)		Unamortized discounts and issuance costs		Fair value		Carrying value (a)		Unamortized discounts and issuance costs
2030 Notes (b)	$	599.5	$	594.9	$	(5.1)	$	589.8	$	594.5	$	(5.5)
2031 Notes	461.2		530.1		(4.9)		416.6		529.9		(5.2)
Total	$	1,060.7	$	1,125.0	$	(10.0)	$	1,006.4	$	1,124.4	$	(10.7)

(a)Carrying values shown ~~in the following table~~ are net of unamortized discounts and debt issuance costs.

(b)The 2030 Notes were reported in Current portion of long-term debt within the Condensed Consolidated Balance Sheet as of March 31, 2024 due to the execution of the Tender Offer in April 2024 as further described in Note 5.

December 31, 2017 September 30, 2017
(In millions) Fair value Carrying value Unamortized discount and issuance costs Fair value Carrying value Unamortized discount and issuance costs
2024 Notes $ 399
$ 370
$ 5
$ 401
$ 370
$ 5
2025 Notes 404
395
5
408
394
6
Total $ 803
$ 765
$ 10
$ 809
$ 764
$ 11

NOTE 4 - BUSINESS COMBINATIONS

~~NOTE 3 - ACQUISITIONS~~

~~Henley Bluewater acquisition~~

~~On October 2, 2017, the Company completed the acquisition of 56 Quick Lubes franchise service centers from Henley Bluewater LLC~~The Company’s acquisitions are accounted for ~~$60 million. These stores build on the infrastructure and talent base~~as business combinations. A summary follows of the ~~existing Company-owned operations~~aggregate cash consideration paid and the total assets acquired and liabilities assumed for the six months ended March 31:


(In millions)	2024		2023


Inventories	$	—	$	0.3

Property, plant and equipment (a)	4.0		3.5
Operating lease assets	6.5		4.0
Goodwill (b)	20.3		15.1
Intangible assets (c)
Reacquired franchise rights (d)	—		2.3


Other	0.1		0.1


Other current liabilities (a)	(0.4)		(0.4)
Operating lease liabilities	—		(3.7)
Other noncurrent liabilities (a)	(9.2)		(2.3)
Total net assets acquired	$	21.3	$	18.9

(a)Includes finance lease assets in ~~northern Ohio~~property, plant and ~~adds Company-owned locations~~equipment and finance lease liabilities in ~~Michigan.~~other current and noncurrent liabilities. During the six months ended March 31, 2024, finance lease assets acquired were $3.1 million and finance lease liabilities of $0.1 million and $3.0 million in other current and noncurrent liabilities, respectively. During the six months ended March 31, 2023, finance lease assets acquired were $2.4 million and finance lease liabilities of $0.1 million and $2.3 million in other current and noncurrent liabilities.

(b)Goodwill is generally expected to be deductible for income tax purposes and is primarily attributed to the operational synergies and potential growth expected to result in economic benefits in the respective markets of the acquisitions.

(c)Intangible assets acquired during the six months ended March 31, 2024 and 2023 have weighted average amortization periods of five and nine years, respectively.

(d)Prior to the acquisition ~~Valvoline~~of former franchise service center stores, the Company licensed the right to operate ~~quick lube~~franchised service centers, including the use of ~~the Company's~~Valvoline's trademarks and trade ~~name, to the franchisee whose assets were acquired.~~name. In connection with ~~the acquisition,~~these acquisitions, Valvoline reacquired those rights and recognized a separate definite-lived reacquired franchise rights intangible ~~asset~~assets, which ~~was assigned a preliminary fair value of $22 million that will be~~are being amortized on a straight-line basis over the weighted average remaining term of approximately ~~eight years.~~ten years for the rights reacquired in fiscal 2023. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market. There have been no franchise rights reacquired during fiscal 2024.

The fair values above are preliminary for up to one year from the date of acquisition ~~resulted in $36 million of goodwill~~as they may be subject to measurement period adjustments if new information is obtained about facts and ~~the remainder~~circumstances that existed as of the acquisition date. The Company does not currently expect any material changes to the preliminary purchase price ~~was allocated to working capital and property, plant and equipment. Goodwill is primarily attributed to~~allocations for acquisitions completed during the potential growth of the business in the northern Ohio and Michigan markets, has been allocated to the Company's Quick Lubes reportable segment, and is expected to be deductible for income tax purposes.last twelve months.

~~Remaining ownership interest in subsidiary~~

Valvoline historically owned a 70% controlling interest and consolidated the financial results of its subsidiary in Thailand. In December 2017, Valvoline purchased the remaining 30% interest for total consideration of approximately $16 million, making it a wholly-owned subsidiary of the Company. This interest was not material to the current or prior period financial statements for presentation and disclosure as a noncontrolling interest, which was eliminated as a result of this purchase through a net charge to ~~Paid-in capital~~ ~~and~~ ~~Retained deficit~~.

~~NOTE 4 - ACCOUNTS RECEIVABLE~~

~~The following summarizes Valvoline’s accounts receivable:~~

(In millions) December 31
2017 September 30
2017
Trade and other accounts receivable $ 424
$ 390
Less: Allowance for doubtful accounts (6 ) (5 )
$ 418
$ 385

Prior to May 2017 when Valvoline's former parent company, Ashland Global Holdings Inc. (which together with its predecessors and consolidated subsidiaries is referred to as “Ashland”), distributed its net investment in Valvoline (the “Distribution”), Ashland was party to an agreement to sell certain Valvoline customer accounts receivable in the form of drafts or bills of exchange to a financial institution. Each draft constituted an order to pay for obligations of the customer to Ashland arising from the sale of goods to the customer. The intention of the arrangement was to decrease the time accounts receivable was outstanding and increase cash flows as Ashland in turn remitted payment to Valvoline. During the three months ended December 31, 2016, $11 million of accounts receivable were sold to the financial institution under this agreement.

Following the Distribution, Valvoline became party to the arrangement to sell certain customer accounts receivable in the form of draft or bills of exchange to the financial institution. During the three months ended December 31, 2017, Valvoline did not sell accounts receivable to the financial institution.

NOTE 5 - ~~INVENTORIES~~DEBT

Certain lubricants are valued at the lower of cost or market using the last-in, first-out (“LIFO”) method. Remaining inventories are carried at the lower of cost or net realizable value using the weighted average cost method.

~~The following summarizes Valvoline’s inventories:~~

(In millions) December 31
2017 September 30
2017
Finished products $ 178
$ 180
Raw materials, supplies and work in process 28
31
LIFO reserves (33 ) (33 )
Obsolete inventory reserves (3 ) (3 )
$ 170
$ 175

~~NOTE 6 - GOODWILL AND OTHER INTANGIBLES~~

~~Goodwill~~

~~The following table summarizes the changes in the carrying amount of goodwill by reportable segment and in total during the three months ended December 31, 2017.~~

(In millions) Core North America Quick Lubes International Total
September 30, 2017 $ 89
$ 201
$ 40
$ 330
Acquisitions ^(a)
—
30
—
30
December 31, 2017 $ 89
$ 231
$ 40
$ 360

~~(a) Relates to the acquisition of Henley Bluewater LLC during the three months ended December 31, 2017 and adjustments related to prior year acquisitions.~~

~~Other Intangible Assets~~

Valvoline's purchased intangible assets were specifically identified when acquired and have finite lives. Intangible assets were $37 million in gross carrying amount, net of $4 million in accumulated amortization as of December 31, 2017 and were reported in ~~Goodwill and intangibles, net~~ on the Condensed Consolidated Balance Sheet. Amortization expense recognized on intangible assets during the three months ended December 31, 2017 and 2016 was not material. Amortization expense expected in the next five fiscal years is as follows:

(In millions)
Years ending September 30 (estimated)
2018    $ 5
2019    $ 5
2020    $ 5
2021    $ 4
2022    $ 4

~~NOTE 7 - DEBT OBLIGATIONS~~

The following table summarizes Valvoline’s ~~short-term borrowings and long-term debt:~~total debt as of:


(In millions)	March 31 2024		September 30 2023
2031 Notes	$	535.0	$	535.0
2030 Notes	600.0		600.0
Term Loan	451.3		463.1
Revolver (a)	—		—



Debt issuance costs and discounts	(11.2)		(12.0)
Total debt	1,575.1		1,586.1

Current portion of long-term debt	623.8		23.8
Long-term debt	$	951.3	$	1,562.3

(a)As of March 31, 2024, the total borrowing capacity remaining under the $475.0 million revolving credit facility was $471.8 million due to a reduction of $3.2 million for letters of credit outstanding.

(In millions)
December 31
2017
September 30 2017
2025 Notes $ 400
$ 400
2024 Notes 375
375
Term Loans 281
285
Trade Receivables Facility 120
75
Revolver —
—
Other ^(a)
(10 ) (11 )
Total debt $ 1,166
$ 1,124
Short-term debt —
75
Current portion of long-term debt 19
15
Long-term debt $ 1,147
$ 1,034

2030 Notes

(a) At December 31, 2017, Other includes $12 million of debt issuance cost discounts and $2 million of debt acquired through acquisitions. At September 30, 2017, Other included $13 million of debt issuance cost discounts and $2 million of debt acquired through acquisitions.

~~Senior Notes~~

~~During August 2017, Valvoline completed~~On March 14, 2024, the ~~issuance of 4.375%~~Company commenced a tender offer (the “Tender Offer”) to purchase its outstanding 4.250% senior unsecured notes due ~~2025~~2030 with an aggregate principal amount of ~~$400 million.~~$600.0 million (the “2030 Notes”). The ~~net proceeds from~~Tender Offer was made to comply with the ~~offering~~requirements of the ~~2025~~asset sale covenant under the indenture governing the 2030 Notes ~~was $394 million (after deducting initial purchasers' discounts and debt issuance costs), which were used to make a voluntary contribution to~~in connection with the ~~Company's qualified U.S. pension plan.~~sale of Global Products.

~~During July 2016,~~On April 16, 2024, Valvoline completed the ~~issuance~~Tender Offer with 99.7% of ~~5.500% senior unsecured notes due 2024 with an aggregate~~the outstanding principal amount ~~of $375 million. The net proceeds from~~tendered by the ~~offering~~holders of the 2030 Notes. The Company used cash and cash equivalents on hand, in addition to borrowing $175.0 million on the Revolver to facilitate the $598.3 million purchase of the 2030 Notes at par, plus accrued and unpaid interest, and cancelled the 2030 Notes accepted for purchase. The Company elected to redeem the remaining balance outstanding of $1.7 million on April 29, 2024 pursuant to the terms and conditions of the indenture governing the 2030 Notes. Valvoline expects to recognize a loss on extinguishment of the 2030 Notes ~~was $370~~of $5.1 million ~~(after deducting initial purchasers’ discounts and~~during the third quarter of fiscal 2024 due to the write-off of unamortized debt issuance ~~costs), which were transferred to Valvoline's former parent, Ashland.~~

costs and discounts. The ~~Senior~~2030 Notes are ~~subject to customary events~~reported in Current portion of ~~default for similar~~long-term debt ~~securities, which if triggered may accelerate payment~~within the Condensed Consolidated Balance Sheet as of principal, premium, if any, and accrued but unpaid interest on the notes. Such events of default include non-payment of principal and interest, non-performance of covenants and obligations, default on other material debt, and bankruptcy or insolvency. If a change of control repurchase event occurs, Valvoline may be required to offer to purchase the Senior Notes from the holders thereof. The Senior Notes are not otherwise required to be repaid prior to maturity, although they may be redeemed at the option of Valvoline at any time prior to their maturity in the manner specified in the indentures governing the notes. The notes are guaranteed by each of Valvoline's subsidiaries that guarantee obligations under the existing senior secured credit facility described below.March 31, 2024.

~~In December 2017, Valvoline completed registered exchange offers for the Senior Notes.~~

~~Senior Credit Agreement~~

The 2016 Senior Credit Agreement provides for an aggregate principal amount of $1,325 million in senior secured credit facilities (“2016 Credit Facilities”), composed of (i) a five-year $875 million term loan facility (“Term Loans”), and (ii) a five-year $450 million revolving credit facility (including a $100 million letter of credit sublimit) (“Revolver”). At December 31, 2017 and September 30, 2017, the Term Loans had outstanding principal balances of $281 million and $285 million, respectively. At December 31, 2017 and September 30, 2017, there were no amounts outstanding under the Revolver. As of ~~December~~March 31, ~~2017, total borrowing capacity remaining under the Revolver was $439 million due to a reduction of $11 million for letters of credit outstanding.~~

The outstanding principal balance of the Term Loans is required to be repaid in quarterly installments of approximately $4 million for fiscal 2018, $8 million for fiscal 2019 and 2020, and $15 million for fiscal 2021 with the balance due at maturity. At Valvoline’s option, amounts outstanding under the 2016 Senior Credit Agreement bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate fluctuates between LIBOR plus 1.500% per annum and LIBOR plus 2.500% per annum (or between the alternate base rate plus 0.500% per annum and the alternate base rate plus 1.500% annum), based upon Valvoline’s corporate credit ratings or the consolidated first lien net leverage ratio (as defined in the 2016 Senior Credit Agreement).

The 2016 Credit Facilities are guaranteed by Valvoline’s existing and future subsidiaries (other than certain immaterial subsidiaries, joint ventures, special purpose financing subsidiaries, regulated subsidiaries, foreign subsidiaries and certain other subsidiaries), and are secured by a first-priority security interest in substantially all the personal property assets, and certain real property assets, of Valvoline and the guarantors, including all or a portion of the equity interests of certain of Valvoline’s domestic subsidiaries and first-tier foreign subsidiaries. The 2016 Credit Facilities may be prepaid at any time without premium.

The 2016 Senior Credit Agreement contains usual and customary representations and warranties, and usual and customary affirmative and negative covenants, including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants (including maintenance of a maximum consolidated net leverage ratio and a minimum consolidated interest coverage ratio). As of the end of any fiscal quarter, the maximum consolidated net leverage ratio and minimum consolidated interest coverage ratio permitted under the 2016 Senior Credit Agreement are 4.5 and 3.0, respectively. As of December 31, 2017,2024, Valvoline was in compliance with all covenants under ~~the 2016 Senior Credit Agreement.~~its long-term borrowings.

~~Trade Receivables Facility~~

On November 29, 2016, Valvoline entered into a $125 million, one-year revolving trade receivables securitization facility (“Trade Receivables Facility”) with certain financial institutions. On November 20, 2017, the Company amended the Trade Receivables Facility to extend the maturity date to November 19, 2020 and increase the maximum funding under the facility to $175 million based on the availability of eligible receivables and other customary factors and conditions.

Under the Trade Receivables Facility, Valvoline sells and/or transfers a majority of its U.S. trade receivables to a wholly-owned, bankruptcy-remote subsidiary as they are originated, and advances by the lenders to that subsidiary (in the form of cash or letters of credit) are secured by those trade receivables. The assets of this financing subsidiary are restricted as collateral for the payment of its obligations under the Trade Receivables Facility, and its assets and credit are not available to satisfy the debts and obligations owed to the creditors of the Company. The Company includes the assets, liabilities and results of operations of this financing subsidiary in its condensed consolidated financial statements.

During the first fiscal quarter of 2017, Valvoline borrowed $75 million under the Trade Receivables Facility and used the net proceeds to repay an equal amount of the Term Loans. During the first fiscal quarter of 2018, Valvoline borrowed $45 million under the Trade Receivables Facility and used the proceeds to supplement the daily cash needs of the Company's operations. The Company accounts for the Trade Receivables Facility as secured borrowings. Based upon the maturity dates in place in each respective period, as of December 31, 2017, the $120 million balance outstanding was classified as ~~Long-term debt~~ ~~and the $75 million balance outstanding as of September 30, 2017 was classified as~~ ~~Short-term debt~~ ~~in the Condensed Consolidated Balance Sheets~~. Based on the availability of eligible receivables, the total borrowing capacity remaining under the Trade Receivables Facility at December 31, 2017 was $39 million. The financing subsidiary owned $253 million and $247 million of outstanding accounts receivable as of December 31, 2017 and September 30, 2017, respectively, and these amounts are included in ~~Accounts receivable, net~~ ~~in the Company’s Condensed Consolidated Balance Sheets.~~

The financing subsidiary pays customary fees to the lenders, and advances by a lender under the Trade Receivables Facility accrue interest for which the weighted average interest rates were 2.2% and 1.5% for the three months ended December 31, 2017 and 2016, respectively. The Trade Receivables Facility contains various customary affirmative and negative covenants and default and termination provisions, which provide for acceleration of amounts owed under the Trade Receivables Facility in circumstances including, but not limited to, the failure to pay interest or other amounts when due, defaults on certain other indebtedness, certain insolvency events, and breach of representation.

NOTE 86 – INCOME TAXES

Income tax provisions for interim quarterly periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual discrete items related specifically to interim periods. ~~Income~~The following summarizes income tax expense and the effective tax rate in each interim period:


	Three months ended March 31						Six months ended March 31

(In millions)	2024			2023			2024			2023
Income tax expense (benefit)	$	14.0		$	11.4		$	25.9		$	(8.7)
Effective tax rate percentage	24.4		%	25.7		%	25.1		%	(17.0)		%

The increase in income tax expense for the three months ended ~~December~~March 31, ~~2017~~2024 was ~~$94 million, an~~principally driven by higher pre-tax earnings, while the reduction in the effective tax rate was primarily attributed to the favorable impact of ~~111.9% compared to expense of $38 million and an effective~~discrete tax ~~rate of 34.5% for the three months ended December 31, 2016.~~benefits. The ~~increase~~increases in income tax expense and the effective tax rate ~~was principally~~for the six months ended March 31, 2024 were driven by ~~the enactment of tax reform legislation~~more normalized activity in the ~~U.S. in December 2017,~~current year period as compared to the prior year period which ~~resulted in~~included the recognition of a ~~net increase in~~$26.5 million income tax ~~expense~~benefit for the release of ~~approximately $68 million that more than offset benefits related~~a valuation allowance due to the ~~reduction~~change in expectations regarding the ~~estimated annual effective tax rate for fiscal 2018.~~

~~U.S. tax reform legislation~~

On December 22, 2017, the President of the United States signed into law tax reform legislation (the “Act”), which is generally effective January 1, 2018. The Act includes a number of provisions, including lowering the U.S. corporate federal income tax rate from a maximum of 35% to 21% and changing or limiting certain tax deductions. While the Company expects this rate reduction will ultimately benefit Valvoline, the Act also includes provisions that are expected to offset some of the benefit of the rate reduction, including the repeal of the deduction for domestic production activities and the expansion of the limitation on the deductionutilization of certain executive compensation. In addition, the Act alters the landscape of taxation of non-U.S. operations and provides immediate deductions for certain new investments, among other provisions. Based on the Company's provisional estimates of the impacts of the Act, the Company expects the Act will result in a lower estimated annual effectivelegacy tax ~~rate for Valvoline in fiscal 2018 and beyond and decrease the Company's cash taxes, particularly in years beyond fiscal 2018.~~

~~During the three months ended December 31, 2017, enactment of the Act resulted in the following provisional impacts on income tax expense, which are described further below:~~

~~The remeasurement of net deferred tax assets at the lower enacted corporate tax rate resulted in a net $67 million increase in income tax expense;~~

~~The deemed repatriation tax on unremitted non-U.S. earnings and profits resulted in a $4 million increase in income tax expense; and~~

The remeasurement of net indemnity liabilities associated with the Tax Matters Agreement increased pre-tax expense by $7 million and generated a $3 million tax benefit primarily related to the higher expected utilization of tax attributes ~~payable to Ashland.~~

The estimated impacts of the Act recorded during the three months ended December 31, 2017 are provisional in nature, and the Company will continue to assess the impact of the Act and will record adjustments through the income tax provision in the relevant period as amounts are known and reasonably estimable during the measurement period. Accordingly, the impact of the Act may differ from the Company's provisional estimates due to and among other factors, information currently not available, changes in interpretations and the issuance of additional guidance, as well as changes in assumptions the Company has currently made, including actions the Company may take in future periods as a result of the ~~Act.~~

~~In particular, there is currently a lack of clarity regarding the application~~terms of the executive compensation deduction limitations and state tax implications as a result of the Act. The Company currently estimates that the effect of the Act on executive compensation deduction limitations will primarily be effective in future periods. With regard to state tax implications, the Company generally expects taxable state income will increase as a result of deduction limitations associated with the Act, though the impact is not currently reasonably estimable as most U.S. state tax jurisdictions have not responded to the specific effects of the Act. The Company will make relevant updates to management's estimates and assumptions as additional information becomes available.

Given the effective date of the rate reduction in the Act, the Company's statutory federal corporate tax rate for fiscal 2018 will be a blended rate of 24.5% and will decline to 21% for fiscal 2019 and beyond.

~~Deferred tax remeasurement~~

The Company's net deferred income taxes represent benefits that will be used to reduce corporate taxes expected to be paid as well as differences between the tax bases and carrying amounts of assets and liabilities that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates occur, deferred tax assets and liabilities are adjusted in the period changes are enacted through income tax expense.

The Company’s net deferred tax assets of $281 million were determined at September 30, 2017 based on the then-current enacted income tax rates prior to the passage of the Act. As a result of the reduction in the federal corporate income tax rate from 35% to 21% under the Act, the Company revalued its net deferred tax assets as of December 31, 2017, which resulted in a reduction in the value of net deferred tax assets of approximately $67 million that was recorded as additional income tax expense in the Company’s Condensed Consolidated Statements of Comprehensive Income for the three months ended December 31, 2017.

~~Deemed repatriation~~

The Act implements a new territorial tax system that imposes a one-time transition tax, or deemed repatriation, on unremitted earnings of certain non-U.S. subsidiaries that is based in part on the amount of these earnings held in cash and other specified assets. The mandatory deemed repatriation resulted in a $22 million gross liability, but allows for the realization of $18 million of previously unrecognized foreign tax credits related to taxes previously paid in relevant local jurisdictions. The net result was $4 million of income tax expense which was recognized during the three months ended December 31, 2017.

The Company has historically intended to indefinitely reinvest undistributed earnings of its non-U.S. subsidiaries. As undistributed earnings of the Company's non-U.S. subsidiaries were subject to the one-time deemed repatriation tax, the Company began to reevaluate its intentions to indefinitely reinvest its non-U.S. undistributed earnings. The Company now plans to repatriate up to $45 million of previously undistributed earnings of certain non-U.S. subsidiaries where the withholding tax implications are expected to be minimal. The Company is presently not aware of any significant restrictions on the repatriation of these funds and additional taxes and other costs that may arise between the deemed and actual distribution dates are not estimated to be material.

The Company's intent is to continue to indefinitely reinvest the remainder of its undistributed earnings of non-U.S. subsidiaries. Upon any future determination to distribute these earnings, the Company would be subject to certain income and withholding taxes, the amount of which is not practicable to determine given the complexities associated with such a hypothetical calculation, including dependencies on income tax laws and other circumstances in place at the time amounts are distributed.

~~Tax Matters Agreement~~

Total liabilities related to obligations owed to Ashland under the Tax Matters Agreement were $67 million and $62 million at December 31, 2017 and September 30, 2017, respectively. At December 31, 2017 and September 30, 2017, $1 million was recorded in ~~Accrued expenses and other liabilities, and $66 million and $61 million was recorded in~~ ~~Other noncurrent liabilities~~ ~~in the Condensed Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017, respectively.~~

~~Under the Tax Matters Agreement, Valvoline has net indemnification obligations for a number of~~amended tax matters including certain taxes that arise upon audit or examination related to the periods prior to Distribution and Valvoline's utilization of legacy tax attributes contributed as part of the separation from Ashland. During the three months ended December 31, 2017, Valvoline recognized $7 million of expense in ~~Selling, general and administrative expenses~~ for the estimated increase in net amounts due. The estimated increase in net amounts due was a result of the reduction in the federal tax rate primarily related to the reduced federal benefit of state tax deductions, which drove increases in estimated taxes payable upon audit or examination as well as the expected utilization of legacy tax attributes, whichagreement with Valvoline’s former parent company. This amendment also resulted in ~~an income tax benefit~~higher Net legacy and separation-related expenses of $3$24.4 million ~~during~~for the ~~period.~~

~~Uncertainties in income taxes~~

~~The Company records reserves~~ related ~~to its uncertain tax positions when it is more likely than not that~~increased indemnity obligation for the tax position may not be sustained on examination by the taxing authorities. As of December 31, 2017, the Condensed Consolidated Balance Sheet includes a $10 million liability for uncertain income tax positions, and during the threesix months ended ~~December~~March 31, 2017, there were no significant changes in Valvoline's uncertain tax positions or related reserves. As tax examinations are completed or settled, statutes of limitations expire, or other new information becomes available, the Company will adjust its liabilities for uncertain tax positions in the respective period through payment or through the income tax provision. The Company has provided adequate reserves for its income tax uncertainties in all open tax years based on the recognition and measurement considerations in the relevant accounting principles and any adjustments are not expected to have a material effect on its condensed consolidated financial statements at this time; however, it is reasonably possible that there could be changes to the Company's reserves related to its uncertain tax positions due to activities of the taxing authorities, resolution of examination issues, or reassessment of existing uncertain tax positions.2023.

Although the timing and nature of the resolution and/or closure of examinations cannot be predicted with certainty, management estimates that it is reasonably possible that reserves related to uncertain tax positions may decrease by as much as $3 million from the resolution of tax examinations in U.S. jurisdictions during the next twelve months.

NOTE 97 – EMPLOYEE BENEFIT PLANS

~~The total pension and other postretirement benefit income was $10 million and $25 million during the three months ended December 31, 2017 and 2016, respectively.~~

Contributions to the U.S. non-qualified and non-U.S. pension plans during the three months ended December 31, 2017 were $3 million. For the remainder of fiscal 2018, Valvoline expects to contribute approximately $11 million to these plans, for a total of $14 million in fiscal 2018.

~~Components of net periodic benefit income~~

For segment reporting purposes, service cost is proportionately allocated to each reportable segment, while all other components of net periodic benefit income are recognized below operating income within ~~Net pension and other postretirement plan non-service income and remeasurement adjustments~~ ~~in the Condensed Consolidated Statements of Comprehensive Income.~~

Effective January 1, 2017, Valvoline discontinued certain other postretirement health and life insurance benefits. The effect of these plan amendments resulted in a remeasurement gain of $8 million during the three months ended December 31, 2016 as shown in the table below. The following table summarizes the components of pension and other postretirement ~~benefit income for the three months ended December 31:~~plan expense:


	Pension benefits				Other postretirement benefits

(In millions)	2024		2023		2024		2023
Three months ended March 31

Interest cost	$	20.9	$	20.6	$	0.3	$	0.4
Expected return on plan assets	(17.1)		(16.8)		—		—
Amortization of prior service credits	—		—		(0.5)		(0.6)

Net periodic benefit costs (income)	$	3.8	$	3.8	$	(0.2)	$	(0.2)

Six months ended March 31

Interest cost	$	41.8	$	41.2	$	0.6	$	0.8
Expected return on plan assets	(34.3)		(33.6)		—		—
Amortization of prior service credit	—		—		(1.1)		(1.1)
Actuarial gain	—		—		—		—
Net periodic benefit costs (income)	$	7.5	$	7.6	$	(0.5)	$	(0.3)

Other postretirement benefits
Pension benefits
(In millions) 2017 2016 2017 2016
Service cost $ —
$ 1
$ —
$ —
Interest cost 19
21
—
—
Expected return on plan assets (26 ) (36 ) —
—
Amortization of prior service credit —
—
(3 ) (3 )
Actuarial gain —
—
—
(8 )
Net periodic benefit income $ (7 ) $ (14 )
$ (3 ) $ (11 )

NOTE 108 – ~~COMMITMENTS~~LITIGATION, CLAIMS AND CONTINGENCIES

NOTE 119 - EARNINGS PER SHARE


	Three months ended March 31				Six months ended March 31

(In millions, except per share amounts)	2024		2023		2024		2023
Numerator
Income from continuing operations	$	43.3	$	32.9	$	77.2	$	59.9
(Loss) income from discontinued operations, net of tax	(1.9)		1,194.4		(3.9)		1,249.3
Net income	$	41.4	$	1,227.3	$	73.3	$	1,309.2

Denominator
Weighted average common shares outstanding	129.8		171.7		130.8		173.5
Effect of potentially dilutive securities (a)	0.9		1.0		0.9		1.0
Weighted average diluted shares outstanding	130.7		172.7		131.7		174.5

Basic earnings (loss) per share
Continuing operations	$	0.33	$	0.19	$	0.59	$	0.35
Discontinued operations	(0.01)		6.96		(0.03)		7.20
Basic earnings per share	$	0.32	$	7.15	$	0.56	$	7.55

Diluted earnings (loss) per share
Continuing operations	$	0.33	$	0.19	$	0.59	$	0.34
Discontinued operations	(0.01)		6.92		(0.03)		7.16
Diluted earnings per share	$	0.32	$	7.11	$	0.56	$	7.50

(a)There were 0.1 million and 0.3 million outstanding stock appreciation rights not included in the computation of ~~basic and~~ diluted ~~EPS for the three months ended December 31, 2017 and 2016. EPS is reported under the treasury stock method.~~

Three months ended
December 31
(In millions except per share data) 2017 2016
Numerator
Net (loss) income $ (10 ) $ 72
Denominator
Weighted average shares used to compute basic EPS 202
205
Effect of dilutive securities ^(a)
—
—
Weighted average shares used to compute diluted EPS 202
205

(Loss) earnings per share
Basic $ (0.05 ) $ 0.35
Diluted $ (0.05 ) $ 0.35

(a) For the three months ended December 31, 2017, due to the net loss attributable to Valvoline common stockholders, potential common shares primarily related to stock-based compensation plans of approximately 1 million were excluded from the dilutedearnings per share ~~count because their effect would have been anti-dilutive. During the three months ended December 31, 2016, there was not a significant dilutive impact from potential common shares.~~

~~NOTE 12 - STOCKHOLDERS’ DEFICIT~~

NOTE 10 - SUPPLEMENTAL FINANCIAL INFORMATION

Cash, cash equivalents and restricted cash


(In millions)	March 31 2024		September 30 2023		March 31 2023
Cash and cash equivalents - continuing operations	$	494.5	$	409.1	$	2,334.5
Cash and cash equivalents - held for sale (a)	—		4.0		—



Total cash, cash equivalents and restricted cash	$	494.5	$	413.1	$	2,334.5

(a)Former Global Products business whose operations were suspended during fiscal 2022, classified as ~~follows:~~held for sale and impaired as of September 30, 2023, and subsequently sold during the first quarter of fiscal 2024.

(In millions)
Balance as of September 30, 2017 $ (117 )

Net loss (10 )

Repurchases of common stock ^(a)
(39 )
Stock-based compensation plans 2
Dividends paid, $0.0745 per common share (15 )

Purchase of remaining ownership interest in subsidiary ^(b)
(14 )
Accumulated other comprehensive income, net of tax:
Unrealized currency translation gain 1

Amortization of pension and other postretirement prior service credits in income ^(c)
(2 )

Balance as of December 31, 2017 $ (194 )

~~Amortization of unrecognized prior service credits is included in net periodic benefit income within~~ ~~Net pension and other postretirement plan non-service income and remeasurement adjustments~~ ~~in the Condensed Consolidated Statements of Comprehensive Income.~~

~~NOTE 13 – RELATED PARTY TRANSACTIONS~~

~~At December 31, 2017, Valvoline had total net obligations due to Ashland of $81 million, of which $3 million was recorded in Accrued expenses~~Accounts and other ~~liabilities~~receivables

~~At September 30, 2017, Valvoline had total net obligations due to Ashland of $74 million, of which $2 million was recorded~~


(In millions)	March 31 2024		September 30 2023
Current
Trade	$	94.3	$	64.0
Notes receivable from franchisees	6.6		1.6
Other	9.1		16.3
Receivables, gross	110.0		81.9
Allowance for credit losses	(0.4)		(0.6)
Receivables, net	$	109.6	$	81.3

Non-current (a)

Notes receivable	$	2.4	$	2.3
Other	7.8		7.5
Noncurrent notes receivable, gross	10.2		9.8
Allowance for losses	(2.5)		(2.4)
Noncurrent notes receivable, net	$	7.7	$	7.4

(a)Included in ~~Accrued expenses and other liabilities and the remainder was primarily recorded and~~ Other noncurrent ~~liabilities in~~assets within the Condensed Consolidated Balance Sheets.

~~These liabilities generally relate to~~Revenue recognition


	Three months ended March 31				Six months ended March 31

(In millions)	2024		2023		2024		2023
Net revenues transferred at a point in time	$	370.1	$	327.9	$	726.0	$	645.1
Franchised revenues transferred over time	18.6		16.6		36.1		32.2
Net revenues	$	388.7	$	344.5	$	762.1	$	677.3

~~NOTE 14 - REPORTABLE SEGMENT INFORMATION~~

~~Valvoline manages and reports within the following three segments:~~

~~Core North America~~ - sells Valvoline and other branded products and solutions in the United States and Canada to heavy-duty customers and retailers for consumers to perform their own automotive and engine maintenance, as well as to installer customers who use Valvoline products to service vehicles.

~~Quick Lubes~~ - services the passenger car and light truck quick lube market through: Company-owned and franchised Valvoline Instant Oil Change (“VIOC”) retail quick lube service stores; and its Express Care stores for independent operators to purchase Valvoline motor oil and other products and display Valvoline branded signage.

~~International~~ ~~- sells Valvoline and other branded products in approximately 140 countries outside of the United States and Canada for the maintenance of consumer and commercial vehicles and equipment.~~

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker in assessing segment performance and in allocating the Company's resources. Sales and operating income are the primary measures evaluated in assessing each reportable segment’s financial performance. Intersegment sales are not material, and assets are not regularly included in the assessment of segment performance; consequently, these items are not disclosed by segment herein.

To maintain operating focus on business performance, certain corporate and non-operational items, including adjustments related to legacy businesses that no longer are attributed to Valvoline, are excluded from the segment operating results utilized by the chief operating decision maker in evaluating segment performance and are separately delineated within Unallocated and other to reconcile to total reported ~~Operating income~~ ~~as shown in the table below.~~

The following table ~~presents sales and operating income for each reportable segment:~~summarizes net revenues by category:


	Three months ended March 31				Six months ended March 31

(In millions)	2024		2023		2024		2023

Oil changes and related fees	$	283.2	$	254.9	$	560.7	$	502.1
Non-oil changes and related fees	86.8		72.9		165.0		142.7
Franchise fees and other (a)	18.7		16.7		36.4		32.5
Total	$	388.7	$	344.5	$	762.1	$	677.3

(In millions)
Three months ended December 31
2017 2016
Sales
Core North America $ 251
$ 237
Quick Lubes 154
127
International 140
125
Consolidated sales $ 545
$ 489

Operating income (loss)
Core North America $ 43
$ 51
Quick Lubes 35
29
International 19
20
Total operating segments $ 97
$ 100
Unallocated and other ^(a)
(9 ) (6 )
Consolidated operating income $ 88
$ 94

~~NOTE 15 - GUARANTOR FINANCIAL INFORMATION~~

~~The Senior Notes are general unsecured senior obligations~~ of Valvoline Inc. and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by the combined “Guarantor Subsidiaries.” Other subsidiaries (the “Non-Guarantor Subsidiaries”) largely represent the internationalnet revenues associated with suspended operations of the Company, which do not guarantee the Senior Notes. Under the terms of the indentures, Valvoline Inc. and the Guarantor Subsidiaries each fully and unconditionally, jointly and severally, guarantee the payment of interest, principal and premium, if any, on each of the notes included in the Senior Notes. Refer to Note 7 for additional information.

The Guarantor Subsidiaries are subject to release in certain circumstances, including (i) the sale of all of the capital stock of the subsidiary, (ii) the designation of the subsidiary as an “Unrestricted Subsidiary” under the indentures governing the Senior Notes; or (iii) the release of the subsidiary as a guarantor from the Company's 2016 Senior Credit Agreement described further in Note 7.

~~In connection with the registered exchange offers~~ for the Senior Notes completed in December 2017, the Company is required to comply with Rule 3-10 of SEC Regulation S-X (“Rule 3-10”), and has therefore included the accompanying condensed consolidating financial statements in accordance with Rule 3-10(f) of SEC Regulation S-X.six months ended March 31, 2023.

The following tables present, on a consolidating basis, the condensed statements of comprehensive income; condensed balance sheets; and condensed statements of cash flows for the parent issuer of these Senior Notes, the Guarantor Subsidiaries on a combined basis, the Non-Guarantor Subsidiaries on a combined basis and the eliminations necessary to arrive at the Company's consolidated results.

Condensed Consolidating Statements of Comprehensive Income
For the three months ended December 31, 2017
(In millions) Valvoline Inc.
(Parent Issuer) Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Sales $ —
$ 422
$ 134
$ (11 ) $ 545
Cost of sales —
263
98
(11 ) 350
Gross profit —
159
36
—
195

Selling, general and administrative expense 9
83
22
—
114
Separation costs 1
1
—
—
2
Equity and other (income) expenses —
(12 ) 3
—
(9 )
Operating (loss) income (10 ) 87
11
—
88
Net pension and other postretirement plan non-service income and remeasurement adjustments —
(10 ) —
—
(10 )
Net interest and other financing expense 12
1
1
—
14
(Loss) income before income taxes (22 ) 96
10
—
84
Income tax expense 21
70
3
—
94
Equity in net income of subsidiaries 33
7
—
(40 ) —
Net (loss) income $ (10 ) $ 33
$ 7
$ (40 ) $ (10 )

Total comprehensive (loss) income $ (11 ) $ 32
$ 8
$ (40 ) $ (11 )

Condensed Consolidating Statements of Comprehensive Income
For the three months ended December 31, 2016
(In millions) Valvoline Inc.
(Parent Issuer) Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Sales $ —
$ 377
$ 124
$ (12 ) $ 489
Cost of sales —
224
92
(12 ) 304
Gross profit —
153
32
—
185

Selling, general and administrative expense 2
69
24
—
95
Separation costs —
6
—
—
6
Equity and other (income) expenses —
(13 ) 3
—
(10 )
Operating (loss) income (2 ) 91
5
—
94
Net pension and other postretirement plan non-service income and remeasurement adjustments —
(26 ) —
—
(26 )
Net interest and other financing expense 9
1
—
—
10
(Loss) income before income taxes (11 ) 116
5
—
110
Income tax (benefit) expense (4 ) 38
4
—
38
Equity in net income of subsidiaries 79
1
—
(80 ) —
Net income (loss) $ 72
$ 79
$ 1
$ (80 ) $ 72

Total comprehensive income (loss) $ 61
$ 68
$ (7 ) $ (61 ) $ 61

Condensed Consolidating Balance Sheets
As of December 31, 2017
(In millions) Valvoline Inc.
(Parent Issuer) Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Assets
Current assets
Cash and cash equivalents $ —
$ 18
$ 97
$ —
$ 115
Accounts receivable, net —
84
435
(101 ) 418
Inventories, net —
94
76
—
170
Other current assets —
29
3
—
32
Total current assets —
225
611
(101 ) 735
Noncurrent assets
Property, plant and equipment, net —
346
38
—
384
Goodwill and intangibles, net —
391
2
—
393
Equity method investments —
33
—
—
33
Investment in subsidiaries 622
444
—
(1,066 ) —
Deferred income taxes 127
55
14
—
196
Other noncurrent assets 254
78
6
(252 ) 86
Total noncurrent assets 1,003
1,347
60
(1,318 ) 1,092
Total assets $ 1,003
$ 1,572
$ 671
$ (1,419 ) $ 1,827

Liabilities and Stockholders' Deficit
Current Liabilities
Current portion of long-term debt $ 19
$ —
$ —
$ —
$ 19
Trade and other payables —
192
50
(101 ) 141
Accrued expenses and other liabilities 119
55
34
—
208
Total current liabilities 138
247
84
(101 ) 368
Noncurrent liabilities
Long-term debt 1,025
2
120
—
1,147
Employee benefit obligations —
309
22
—
331
Other noncurrent liabilities 34
392
1
(252 ) 175
Total noncurrent liabilities 1,059
703
143
(252 ) 1,653
Commitments and contingencies

Stockholders' (deficit) equity (194 ) 622
444
(1,066 ) (194 )
Total liabilities and stockholders' deficit/equity $ 1,003
$ 1,572
$ 671
$ (1,419 ) $ 1,827

Condensed Consolidating Balance Sheets
As of September 30, 2017
(In millions) Valvoline Inc.
(Parent Issuer) Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Assets
Current assets
Cash and cash equivalents $ —
$ 99
$ 102
$ —
$ 201
Accounts receivable, net —
57
389
(61 ) 385
Inventories, net —
94
81
—
175
Other current assets —
25
4
—
29
Total current assets —
275
576
(61 ) 790
Noncurrent assets
Property, plant and equipment, net —
353
38
—
391
Goodwill and intangibles, net —
333
2
—
335
Equity method investments —
30
—
—
30
Investment in subsidiaries 606
447
—
(1,053 ) —
Deferred income taxes 145
122
14
—
281
Other noncurrent assets 314
80
6
(312 ) 88
Total noncurrent assets 1,065
1,365
60
(1,365 ) 1,125
Total assets $ 1,065
$ 1,640
$ 636
$ (1,426 ) $ 1,915

Liabilities and Stockholders' Deficit
Current Liabilities
Short-term debt $ —
$ —
$ 75
$ —
$ 75
Current portion of long-term debt 15
—
—
—
15
Trade and other payables 2
198
53
(61 ) 192
Accrued expenses and other liabilities 103
60
33
—
196
Total current liabilities 120
258
161
(61 ) 478
Noncurrent liabilities
Long-term debt 1,032
2
—
—
1,034
Employee benefit obligations —
321
21
—
342
Other noncurrent liabilities 30
453
7
(312 ) 178
Total noncurrent liabilities 1,062
776
28
(312 ) 1,554
Commitments and contingencies

Stockholders' (deficit) equity (117 ) 606
447
(1,053 ) (117 )
Total liabilities and stockholders' deficit/equity $ 1,065
$ 1,640
$ 636
$ (1,426 ) $ 1,915

Condensed Consolidating Statements of Cash Flows
For the three months ended December 31, 2017
(In millions) Valvoline Inc.
(Parent Issuer) Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Cash flow provided by (used in) operating activities $ (2 ) $ 52
$ (30 ) $ —
$ 20
Cash flows from investing activities
Additions to property, plant and equipment —
(13 ) (1 ) —
(14 )
Acquisitions, net of cash required —
(60 ) —
—
(60 )
Return of advance from subsidiary 60
—
—
(60 ) —
Total cash provided by (used in) investing activities 60
(73 ) (1 ) (60 ) (74 )
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs of $1 —
—
44
—
44
Repayments on borrowings (4 ) —
—
—
(4 )
Repurchase of common stock (37 ) —
—
—
(37 )
Purchase of additional ownership in subsidiary —
—
(15 ) —
(15 )
Cash dividends paid (15 ) —
—
—
(15 )
Other financing activities (2 ) —
(2 ) —
(4 )
Other intercompany activity, net —
(60 ) —
60
—
Total cash (used in) provided by financing activities (58 ) (60 ) 27
60
(31 )
Effect of currency exchange rate changes on cash and cash equivalents —
—
(1 ) —
(1 )
Decrease in cash and cash equivalents —
(81 ) (5 ) —
(86 )
Cash and cash equivalents - beginning of year —
99
102
—
201
Cash and cash equivalents - end of period $ —
$ 18
$ 97
$ —
$ 115

Condensed Consolidating Statements of Cash Flows
For the three months ended December 31, 2016
(In millions) Valvoline Inc.
(Parent Issuer) Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Cash flows provided by (used in) operating activities $ 89
$ 75
$ (76 ) $ —
$ 88
Cash flows from investing activities
Additions to property, plant and equipment —
(9 ) —
—
(9 )
Other investing activities, net —
(1 ) —
—
(1 )
Total cash used in investing activities —
(10 ) —
—
(10 )
Cash flows from financing activities
Net transfers to Ashland (2 ) —
—
—
(2 )
Proceeds from borrowings —
—
75
—
75
Repayments on borrowings (79 ) —
—
—
(79 )
Cash dividends paid (10 ) —
—
—
(10 )
Other intercompany activity, net 2
(2 ) —
—
—
Total cash (used in) provided by financing activities (89 ) (2 ) 75
—
(16 )
Effect of currency exchange rate changes on cash and cash equivalents —
—
2
—
2
Increase in cash and cash equivalents —
63
1
—
64
Cash and cash equivalents - beginning of year —
94
78
—
172
Cash and cash equivalents - end of period $ —
$ 157
$ 79
$ —
$ 236

~~NOTE 16 – SUBSEQUENT EVENTS~~

~~Dividend declared~~

On January 31, 2018, the Board of Directors of Valvoline declared a quarterly cash dividend of $0.0745 per share on Valvoline common stock. The dividend is payable on March 15, 2018 to shareholders of record on March 1, 2018.

~~Share repurchases~~

The Company repurchased over 1 million shares for an aggregate amount of $29 million in the period from January 1, 2018 through February 6, 2018. The Company has $32 million in aggregate share repurchase authorization remaining under the $150 million share repurchase authorization approved by the Board of Directors on April 24, 2017 (the “2017 Share Repurchase Authorization”).

In addition, on January 31, 2018, the Board of Directors of Valvoline authorized the Company to repurchase up to $300 million of its common stock through September 30, 2020, which amount is in addition to the amount remaining under the 2017 Share Repurchase Authorization. The timing and amount of any purchases of shares of common stock will be based on available liquidity, general business and market conditions and other factors, including alternative investment opportunities.

~~CAUTIONARY STATEMENT REGARDING~~ FORWARD-LOOKING STATEMENTS

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

BUSINESS OVERVIEW AND PURPOSE

As the quick, easy, trusted leader in automotive preventive maintenance, Valvoline Inc. ~~(“Valvoline” or~~is creating shareholder value by driving the ~~“Company”) is a worldwide producer, marketer~~full potential in its core business, accelerating network growth and ~~supplier~~innovating to meet the needs of ~~engine~~customers and ~~automotive maintenance products~~the evolving car parc. With average customer ratings that indicate high levels of service satisfaction, Valvoline and ~~services. Established in 1866, Valvoline’s heritage spans over 150 years, during which it has developed powerful name recognition across multiple product~~the Company’s franchise partners keep customers moving with 15-minute stay-in-your-car oil changes; battery, bulb and ~~service channels. In addition to the iconic Valvoline-branded passenger car motor oils~~wiper replacements; tire rotations; and other ~~automotive lubricant products, Valvoline provides a wide array of lubricants used in heavy duty equipment, as well as automotive chemicals~~manufacturer recommended maintenance services. The Company operates and ~~fluids designed to improve engine performance and lifespan. Valvoline’s premium branded product offerings enhance~~franchises more than 1,900 service center locations through its ~~high quality reputation and provide customers with solutions that address a wide variety of needs.~~

In the United States and Canada, Valvoline's products and services are sold to retailers with over 30,000 retail outlets, to installer customers with over 12,000 locations, and through 1,139 Valvoline branded franchised and company-owned stores. Valvoline also has a strong international presence with products sold in approximately 140 countries.

Valvoline has three reportable segments: Core North America, Quick Lubes, and International, with certain corporate and non-operational items included in Unallocated and Other to reconcile to consolidated results.

~~BUSINESS STRATEGY~~

~~To deliver on Valvoline's key business and growth strategies in 2018, the Company is focused on:~~

accelerating international growth across key markets where demand for premium lubricants is growing, such as China, India and select countries in Latin America, by building strong distribution channels in under-served

~~geographies, replacing less successful distributors and improving brand awareness among installer customers in those regions; and~~

~~leveraging innovation, both in terms of product development, packaging, marketing~~

•Driving the full potential of ~~Valvoline’s new digital infrastructure, to strengthen~~the core business through increasing market share and ~~profitability.~~non-oil change revenue growth in existing stores by building on Valvoline’s strong foundation in marketing, technology, and data;

~~FIRST~~•Aggressively growing the retail footprint with company-operated store growth and an increased emphasis on franchisee store growth; and

•Developing capabilities to capture new customers through services expansion focused on fleet manager needs and needs of the evolving car parc.

SECOND FISCAL QUARTER ~~2018~~2024 OVERVIEW

~~First quarter results were~~•Valvoline’s net revenues grew 13% over the prior year period driven by ~~strong sales led by~~system-wide same-store sales ("SSS") growth of 7.7% and the addition of 147 net new stores to the system from the prior year.

•Income from continuing operations grew 32% to $43.3 million for the three months ended March 31, 2024 compared to the prior year. This growth is attributable to strong gross profit expansion which was partially offset by increased investments in ~~VIOC,~~selling, general and administrative expenses. Diluted earnings per share from the continuing operations increased 74% to $0.33 in the three months ended March 31, 2024 compared to the prior year period driven by earnings expansion from operating results and share count reductions from repurchases, including benefits from the prior year execution of the share repurchase tender offer.

•Adjusted EBITDA increased 21% over the prior year period due to strong top-line growth driven by higher average ticket price from pricing actions, non-oil change service penetration and premiumization. Additionally, benefits from improved labor cost efficiency were partially offset by growth investments in ~~premium product mix across all reportable segments~~selling, general and ~~continued volume gains in international markets.~~ administrative expenses.

•The Company ~~also continues~~returned $40.4 million to ~~be focused on margin expansion~~its shareholders during the quarter through repurchases of 1.0 million shares of Valvoline common stock completing the 2022 Share Repurchase Authorization for $1.6 billion and ~~cost management to drive profitability improvements. Valvoline's gross profit as~~successfully returning a ~~percentage~~substantial portion of ~~sales (i.e., gross margin) was 35.8% and declined due to increased raw material, new packaging and supply chain costs in~~ the ~~current quarter.~~

Valvoline acquired 56 company-owned stores within the Quick Lubes reportable segment in connection with the acquisition of business assets from Henley Bluewater LLC. Refer to Note 3 of the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q for additional information.

Valvoline extended the maturity date by three years and increased the maximum funding capacity of the trade receivables securitization facility to $175 million and borrowed an additional $45 million during the quarter. Refer to Note 7 and the Financial Position, Liquidity and Capital Resources section below for more details.

Use of Non-GAAP Measures

To aid in the understanding of ~~Valvoline's~~Valvoline’s ongoing business performance, certain items within this document are presented on an adjusted, non-GAAP basis. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, or more meaningful than, the financial statements presented ~~on both a consolidated and reportable segment basis are not defined within~~in accordance with U.S. GAAP. The financial results presented in accordance with U.S. GAAP and ~~do not purport to~~reconciliations of non-GAAP measures included within this Quarterly Report on Form 10-Q should be ~~alternatives to net income/loss or cash flows from operating activities as measures of operating performance or cash flows.~~ carefully evaluated.

~~Earnings before interest, taxes, depreciation and amortization (“EBITDA”), which management defines as~~ •EBITDA - net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization;

•Adjusted EBITDA ~~which management defines as~~ - EBITDA adjusted for the impacts of certain unusual, infrequent or non-operational activity not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods ("key items," as further described ~~below, and~~below);

•Adjusted EBITDA margin - adjusted EBITDA divided by adjusted net ~~pension and other postretirement plan non-service income and remeasurement adjustments; and~~revenues;

•Adjusted net revenues - reported net revenues adjusted for key items;

•Free cash flow ~~which management defines as~~-cash flows from operating ~~cash flows~~activities less capital expenditures and certain other adjustments as ~~applicable.~~applicable; and

~~These~~•Discretionary free cash flow - cash flows from operating activities less maintenance capital expenditures and certain other adjustments as applicable.

~~Due~~Management believes EBITDA measures provide a meaningful supplemental presentation of Valvoline’s operating performance between periods on a comparable basis due to the depreciable assets associated with the nature of the Company’s operations as well as income tax and interest costs related to Valvoline’s tax and capital structures, respectively. Adjusted EBITDA measures enable comparison of financial trends and results between periods where certain items may not be reflective of the Company’s underlying and ongoing operations performance or vary independent of business performance.

~~Management believes Adjusted EBITDA provides investors with a meaningful supplemental presentation of Valvoline’s operating performance. Adjusted EBITDA excludes the impact~~legacy matters or market-driven events considered by management to not be reflective of the ~~following:~~

Key Business Measures

Management uses free cash flow as an additional non-GAAP metric of cash flow generation. By including capital expenditures and certain other adjustments as applicable, management is able to provide a better indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Unlike cash flow from operating activities, free cash flow includes the impact of capital expenditures, providing a more complete picture of cash generation. Free cash flow has certain limitations, including that it does not reflect adjustments for certain non-discretionary cash flows, such as mandatory debt repayments. ~~The amount of mandatory versus discretionary expenditures can vary significantly between periods.~~

Valvoline’s results of operations are presented based on Valvoline’s management structure and internal accounting practices. The structure and practices are specific to Valvoline; therefore, Valvoline’s financial results, EBITDA, Adjusted EBITDA and free cash flow are not necessarily comparable with similar information for other comparable companies. EBITDA, Adjusted EBITDA and free cash flow each have limitations as analytical tools and should ~~not~~ be considered ~~in isolation from, or~~ as ~~an alternative~~supplements to, ~~or more meaningful than,~~not substitutes for, Valvoline's net ~~income~~revenues and ~~cash flows from~~ operating ~~activities~~income, as determined in accordance with U.S. GAAP. Because of these limitations, you should rely primarily on net income and cash flows from operating activities as determined in accordance with U.S. GAAP and use EBITDA, Adjusted EBITDA, and free cash flow only as supplements. In evaluating EBITDA, Adjusted EBITDA, and free cash flow, you should be aware that in the future Valvoline may incur expenses/income similar to those for which adjustments are made in calculating EBITDA, Adjusted EBITDA, and free cash flow. Valvoline’s presentation of EBITDA, Adjusted EBITDA, and free cash flow should not be construed as a basis to infer that Valvoline’s future results will be unaffected by unusual or nonrecurring items.

~~RESULTS OF OPERATIONS~~

~~Consolidated Review~~

~~The following table summarizes the results of the Company's operations for the three months ended December 31, 2017 and 2016:~~

Three months ended
December 31
2017 2016
(In millions) % of Sales % of Sales
Sales $ 545
100.0% $ 489
100.0%
Gross profit $ 195
35.8% $ 185
37.8%
Net operating expenses $ 107
19.6% $ 91
18.6%
Operating income $ 88
16.1% $ 94
19.2%
Net (loss) income $ (10 ) (1.8)% $ 72
14.7%

~~Sales~~

Sales for the three months ended December 31, 2017 increased $56 million, or 11%, compared to the three months ended December 31, 2016. The following table provides a reconciliation of the change in sales:

(In millions) Year over year change - Quarter
Pricing $ 20
Volume 10
Product mix 6
Currency exchange 7
Acquisitions 13
Change in sales $ 56

The primary drivers of this increase were higher product pricing and higher volume levels, which increased sales by $20 million, or 4%, and $10 million, or 2%, respectively. During the current quarter, lubricant gallons sold increased 2% to 43.8 million. Favorable changes in product mix with increases in the percentage of sales of premium lubricants across all reportable segments and favorable foreign currency exchange increased sales by $6 million and $7 million, respectively. Acquisitions within the Quick Lubes reportable segment increased sales by $13 million, or 3%, in the current quarter.

~~The changes to reportable segment sales and the drivers thereof are discussed in further detail in “Reportable Segment Review” below.~~

~~Gross profit~~

Gross profit margin was 35.8% for the three months ended December 31, 2017 compared to 37.8% in the prior year quarter. Gross profit increased $10 million and the table below provides a reconciliation of the change:

(In millions) Year over year change - Quarter
Volume and product mix $ 7
Acquisitions 3
Currency exchange 2
Price and cost (2 )
Change in gross profit $ 10

The increase in gross profit was primarily driven by higher volume levels and favorable changes in product mix of $7 million, or 4%. Additional profits generated by acquisitions of Quick Lubes locations and favorable foreign currency exchange increased gross profit by $3 million and $2 million, respectively. Lower product margins of $2 million were attributed to higher product costs primarily driven by new product packaging as well as increased raw material costs associated with the hurricanes in the late summer of 2017.

~~The changes to reportable segment gross profit and the drivers thereof are discussed in further detail in “Reportable Segment Review” below.~~

Net ~~operating expenses~~

Net operating expenses were $107 million or 19.6% of sales for the three months ended December 31, 2017 compared to $91 million or 18.6% for the three months ended December 31, 2016. The table below provides further details of the components of net operating expenses during each period:

Three months ended
December 31
2017 2016
(In millions) % of Sales % of Sales
Selling, general and administrative expenses $ 114
20.9 % $ 95
19.4 %
Separation costs 2
0.4 % 6
1.2 %
Equity and other income (9 ) (1.7 )% (10 ) (2.0 )%
Net operating expenses $ 107
19.6 % $ 91
18.6 %

Selling, general and administrative expenses were $114 million, or 20.9% of sales, in the three months ended December 31, 2017 as compared to $95 million, or 19.4% of sales, in the three months ended December 31, 2016. Adjustments in the estimates of the amounts payable to Ashland related to indemnities under the Tax Matters Agreement as a result of tax reform legislation increased selling, general and administrative expense by $7 million in the current quarter. Acquisitions, depreciation and foreign currency exchange also contributed $4 million to the year-over-year increase in selling, general and administrative expenses. The remaining increase was primarily the result of planned increased spend related to the Company's investments in its teams and shared infrastructure expenses necessary to operate independently subsequent to the separation from Ashland, which phased in during fiscal 2017, including investments in sales and marketing to drive growth and profitability.

The Company incurred $2 million of costs during the current period related to the separation from Ashland. The decline from the prior year quarter is due to the substantial completion of separation-related activities as Ashland distributed all of its remaining interest in Valvoline in May 2017, marking the completion of Valvoline's separation from Ashland.

Equity and other income decreased $1 million during the current year period compared to the prior year period driven by a decrease of $2 million in income generated by research and development testing, partially offset by an increase of $1 million in equity income.

~~Net pension and other postretirement plan non-service income and remeasurement adjustments~~

Net pension and other postretirement plan non-service income and remeasurement adjustments decreased by $16 million from the prior year period due to a decrease of $8 million in pension and other postretirement plan non-service income primarily attributed to the pension de-risking actions taken by the Company in late fiscal 2017 to shift the U.S. qualified plan's target asset allocation toward more fixed income securities and better match the asset duration to that of the pension plan obligations, which resulted in a decrease in related recurring income. In addition, during the prior year quarter, a gain on other postretirement plan remeasurement of $8 million was recorded due to the discontinuation of certain postretirement health and life insurance benefits, compared to none during the current year period as there were no changes requiring remeasurement.

~~Net interest and other financing expense~~

Net interest and other financing expense increased by $4 million during the three months ended December 31, 2017 compared to the three months ended December 31, 2016. There was an increase in interest associated with higher outstanding debt at December 31, 2017 compared to December 31, 2016 primarily related to the borrowing to fund the U.S. qualified pension plan in the aggregate principal amount of $400 million during the fourth fiscal quarter of 2017 and $45 million in new borrowings on the trade receivables securitization facility entered into during the three months ended December 31, 2017.

~~Income tax expense~~

Income tax expense for the three months ended December 31, 2017 was $94 million or an effective tax rate of 111.9% compared to an expense of $38 million or an effective tax rate of 34.5% for the three months ended December 31, 2016. The increase in income tax expense and the effective tax rate in the current year was primarily attributed to the enactment of U.S. tax reform legislation during the period, which resulted in a net increase in income tax expense of approximately $68 million that more than offset benefits related to the reduction in the estimated annual effective tax rate for fiscal 2018. Specifically, the Company recorded provisional one-time adjustments to income tax expense of $67 million related to the remeasurement of net deferred tax assets due to the income tax rate reduction and $4 million for the deemed repatriation tax on unremitted non-U.S. earnings and profits, net of benefits related to the rate reduction, including $3 million as a result of adjustments to the estimates of the net amounts payable related to indemnities under the Tax Matters Agreement, as well as a reduction in the estimated annual blended effective tax rate for fiscal 2018 . Refer to the “Tax-Related Commitments” section in this Management's Discussion and Analysis of Financial Condition and Results of Operations below for additional details regarding tax reform legislation and its estimated impacts to Valvoline.

~~EBITDA and Adjusted EBITDA~~

~~The following table reconciles EBITDA and Adjusted EBITDA to net income for the interim periods presented:~~

Three months ended December 31
(In millions) 2017 2016
Net (loss) income $ (10 ) $ 72
Income tax expense 94
38
Net interest and other financing expense 14
10
Depreciation and amortization 11
9
EBITDA 109
129
Separation costs 2
6
Adjustment associated with Ashland tax indemnity 7
—
Non-service pension and other postretirement plan net periodic income ^(a)
(10 ) (18 )
Gain on pension and other postretirement plan remeasurements —
(8 )
Adjusted EBITDA $ 108
$ 109

(a) Recurring non-service pension and other postretirement net periodic income, which consists of interest cost, expected return on plan assets and amortization of prior service credit. Refer to Note 9 in Item 1 of Part I in this Quarterly Report on Form 10-Q for further details.

The decrease in Adjusted EBITDA of $1 million was primarily due to the performance of the Company's operating segments, notably higher planned investments in selling, general and administrative expenses and higher raw material costs related to new product packaging and the hurricanes partially offset by higher volume levels and favorable changes in product mix.

~~The changes to reportable segment EBITDA and Adjusted EBITDA and the drivers thereof are discussed in further detail in “Reportable Segment Review” below.~~

~~Reportable Segment Review~~

~~Valvoline’s business is managed within the following three reportable segments:~~

~~Quick Lubes~~ - services the passenger car and light truck quick lube market through: Company-owned and franchised VIOC retail quick lube service stores; and its Express Care stores for independent operators to purchase Valvoline motor oil and other products and display Valvoline branded signage.

Results of Valvoline’s reportable segments are presented based on how operations are managed internally, including how the results are reviewed by the chief operating decision maker. The structure and practices are specific to Valvoline; therefore, the financial results of its reportable segments are not necessarily comparable with similar information for other comparable companies. Valvoline's reportable segments are measured for profitability based on operating income; therefore, Valvoline does not generally allocate items to each reportable segment below operating income, such as non-service pension and other postretirement income and remeasurement adjustments, interest expense or income tax expense. Valvoline allocates all items above operating income to its reportable segments except for certain significant corporate and non-operational matters, including, but not limited to, company-wide restructuring activities and costs or adjustments that relate to former businesses

that Valvoline no longer operates. The service cost component of pension and other postretirement benefit plans is allocated to each reportable segment on a ratable basis, while the remaining non-service and remeasurement components of pension and other postretirement benefits costs are recorded below operating income and attributed to Unallocated and other.

The EBITDA and Adjusted EBITDA amounts presented within this section are provided as a means to enhance the understanding of financial measurements that Valvoline has internally determined to be relevant measures of comparison for each reportable segment. Each of these non-GAAP measures is defined as follows: EBITDA (operating income plus depreciation and amortization) and Adjusted EBITDA (EBITDA adjusted for key items, which may include adjustments for significant acquisitions or divestitures, as applicable). As Valvoline does not allocate items to each reportable segment below operating income, reportable segment EBITDA and Adjusted EBITDA are reconciled directly to operating income since it is the most directly comparable Condensed Consolidated Statements of Comprehensive Income caption.

~~The following table presents sales, operating income and statistical operating information by reportable segment for the three months ended December 31, 2017 and 2016:~~

Three months ended December 31
(In millions) 2017 2016
Sales
Core North America $ 251
$ 237
Quick Lubes 154
127
International 140
125
$ 545
$ 489
Operating income (loss)
Core North America $ 43
$ 51
Quick Lubes 35
29
International 19
20
Total operating segments 97
100
Unallocated and other (9 ) (6 )
$ 88
$ 94
Depreciation and amortization
Core North America $ 4
$ 3
Quick Lubes 6
5
International 1
1
$ 11
$ 9
Operating information
Core North America
Lubricant sales gallons 23.8
24.1
Premium lubricants (percent of U.S. branded volumes) 47.8 % 43.8 %
Gross profit as a percent of sales ^(a)
37.7 % 40.9 %
Quick Lubes
Lubricant sales gallons 5.7
5.3
Premium lubricants (percent of U.S. branded volumes) 61.5 % 58.6 %
Gross profit as a percent of sales ^(a)
40.4 % 40.1 %
International
Lubricant sales gallons ^(b)
14.3
13.7
Lubricant sales gallons, including unconsolidated joint ventures 25.1
23.0
Premium lubricants (percent of lubricant volumes) 27.7 % 27.4 %
Gross profit as a percent of sales ^(a)
28.2 % 30.7 %

~~(a) Gross profit as a percent of sales is defined as sales, less cost of sales, divided by sales.~~

~~(b) Excludes volumes from unconsolidated joint ventures.~~

~~Core North America~~

Core North America sales increased $14 million, or 6%, to $251 million during the current quarter compared to the prior year quarter. This increase was primarily driven by higher product pricing and favorable changes in product mix of $13 million, or 5%, and $4 million, or 2%, respectively. These increases were partially offset by volume declines of approximately $4 million.

Gross profit decreased $2 million compared to the prior year quarter. Higher raw material costs decreased gross profit by $3 million and overall decreases in volume related to the timing of promotions drove declines in non-branded product sales which decreased gross profit by $2 million. These decreases were partially offset by gains in premium product mix which increased gross profit by $3 million. Gross profit margin decreased 3.2 percentage points to 37.7% for the quarter ended December 31, 2017 driven largely by incremental costs associated with the launch of new packaging and higher raw material costs attributed to the hurricanes in late 2017.

Selling, general and administrative expenses, which include corporate expense allocations of costs, increased $3 million, or 6%, during the current quarter compared to the prior year quarter due to planned increases related to the Company's investments in its teams and shared infrastructure expenses.

Operating income totaled $43 million in the current quarter compared to $51 million in the prior year quarter. EBITDA decreased $7 million to $47 million in the current quarter. EBITDA margin decreased 4.1 percentage points to 18.7%.

~~Core North America - EBITDA and Adjusted EBITDA reconciliation~~

The following EBITDA presentation is provided as a means to enhance the understanding of financial measurements that the Company has internally determined to be relevant measures of comparison for the results of Core North America. There were no unusual or key items that affected comparability for Adjusted EBITDA during the three months ended December 31, 2017 and 2016.

Three months ended December 31
(In millions) 2017 2016
Operating income $ 43
$ 51
Depreciation and amortization 4
3
EBITDA $ 47
$ 54

~~Quick Lubes~~

Quick Lubes sales increased $27 million, or 21%, to $154 million during the current quarter compared to the prior year quarter. Volume increased sales by $8 million as lubricant sales gallons increased to 5.7 million gallons during the quarter. Increased pricing and favorable changes in product mix increased sales $5 million and $1 million, respectively. Acquisitions increased sales by $13 million.

Gross profit increased $11 million during the current quarter compared to the prior year quarter. Increases in volumes and higher premium product mix combined to increase gross profit by approximately $4 million. Favorable pricing increased gross profit by $4 million, while acquisitions increased gross profit by $3 million. Gross profit margin during the current quarter increased 0.3 percentage points to 40.4% as a percentage of sales for the quarter, driven primarily by favorable margins due to increased ticket as a result of pricing improvements coupled with effective store execution, including increased transactions.

Selling, general and administrative expenses, which include corporate expense allocations of costs, increased $6 million, or 27%, during the current quarter compared to the prior year quarter. The increase was primarily a result of planned increases related to the Company's investments in its teams and shared infrastructure expenses of $3 million, an increase of $1 million in operating costs as a result of acquisitions and an increase of $1 million in advertising costs.

Operating income totaled $35 million in the current quarter as compared to $29 million in the prior year quarter. EBITDA increased $7 million to $41 million in the current quarter. EBITDA margin decreased 0.2 percentage points to 26.6% in the current quarter.

~~Quick Lubes - Additional growth and sales information~~

~~Quick Lubes sales~~revenues are influenced by the number of ~~company-owned~~service center stores and the business performance of those stores. ~~Through Quick Lubes,~~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. Valvoline ~~sells products to and receives royalty fees from VIOC franchisees. As a result, Quick Lubes sales are influenced by the number of units owned by franchisees~~Instant Oil Change (“VIOC”) stores (company-operated, franchised and the ~~business performance~~combination of ~~franchisees. The following tables provide supplemental information regarding company-owned stores and franchisees that Valvoline believes is relevant to an understanding of the Quick Lubes business.~~

Company-owned
First Quarter 2018 Fourth Quarter 2017 Third Quarter 2017 Second Quarter 2017 First Quarter 2017

Beginning of period 384
383
374
347
342
Opened 2
2
1
—
—
Acquired —
1
—
28
—
Conversions between company-owned and franchise 56
—
9
—
5
Closed —
(2 ) (1 ) (1 ) —
End of period 442
384
383
374
347

Franchise
First Quarter 2018 Fourth Quarter 2017 Third Quarter 2017 Second Quarter 2017 First Quarter 2017

Beginning of period 743
730
734
729
726
Opened 11
15
6
7
10
Acquired —
—
—
—
—
Conversions between company-owned and franchise (56 ) —
(9 ) —
(5 )
Closed (1 ) (2 ) (1 ) (2 ) (2 )
End of period 697
743
730
734
729

Total VIOC Stores 1,139
1,127
1,113
1,108
1,076

The year over year change from December 31, 2017 to December 31, 2016 is primarily driven by opening new company-owned stores and franchise locations, including the acquisition of Time-It Lube in the second quarter of 2017, which added 28 company-owned locations. In addition, the acquisition of 56 Henley Bluewater stores converted from franchises in the first quarter of 2018.

Three months ended December 31
2017 2016
Same-Store Sales Growth** - Company-owned 8.2 % 9.5 %
Same-Store Sales Growth** - Franchisee* 7.7 % 8.9 %
Same-Store Sales Growth** - Combined* 7.9 % 9.0 %

* Valvoline’s franchisees are distinct legal entities and Valvoline does not consolidate the results of operations of its franchisees.

** Valvoline has historically determined same-store sales growth on a fiscal year basis,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.~~operation as this period is generally required for new store sales levels to begin to normalize.

~~Quick Lubes -~~Net revenues are limited to sales at company-operated stores, in addition to royalties and other fees from independent franchised and Express Care stores. Although Valvoline does not recognize store-level sales from franchised stores as net revenues in its Statements of Condensed Consolidated Income, management believes system-wide and franchised SSS comparisons, store counts, and total system-wide store sales are useful to assess market position relative to competitors and overall store and operating performance.

RESULTS OF OPERATIONS

The following summarizes the results of the Company’s continuing operations for the periods ended March 31:


	Three months ended March 31							Six months ended March 31
	2024			2023				2024			2023
(In millions)	Amount		% of Net revenues	Amount		% of Net revenues	Amount	% of Net revenues		Amount	% of Net revenues
Net revenues	$	388.7	100.0%	$	344.5	100.0%		$	762.1	100.0%	$	677.3	100.0%
Gross profit	$	146.2	37.6%	$	126.7	36.8%		$	281.0	36.9%	$	245.5	36.2%
Net operating expenses	$	69.8	18.0%	$	65.5	19.0%		$	141.8	18.6%	$	155.0	22.9%
Operating income	$	76.4	19.7%	$	61.2	17.8%		$	139.2	18.3%	$	90.5	13.4%
Income from continuing operations	$	43.3	11.1%	$	32.9	9.6%		$	77.2	10.1%	$	59.9	8.8%

EBITDA (a)	$	98.4	25.3%	$	78.2	22.7%		$	182.4	23.9%	$	122.3	18.1%
Adjusted EBITDA (a)	$	105.1	27.0%	$	87.1	25.3%		$	195.3	25.6%	$	160.4	23.7%

(a)Refer to the “Use of Non-GAAP Measures” and Continuing operations EBITDA and Adjusted EBITDA for management’s definitions of the metrics presented above and reconciliation to the corresponding GAAP measures, where applicable.

~~The following EBITDA presentation is provided as a means to enhance the understanding of financial measurements that the Company has internally determined to be relevant measures of comparison~~


	Three months ended March 31							Six months ended March 31

	2024			2023			2023				2023
System-wide store sales - in millions (a)	$	746.1		$	659.9			$	1,469.0			$	1,303.9
Year-over-year growth (a)	13.1		%	18.5		%		12.7		%		17.7		%

Same-store sales growth (b)
Company-operated	7.4		%	14.2		%		6.8		%		13.5		%
Franchised (a)	8.0		%	12.9		%		8.0		%		12.0		%
System-wide (a)	7.7		%	13.5		%		7.4		%		12.7		%











		Number of stores at end of period
		Second Quarter 2024	First Quarter 2024	Fourth Quarter 2023	Third Quarter 2023	Second Quarter 2023

Company-operated		919	895	876	854	832
Franchised (a)		1,009	995	976	950	949
Total system-wide stores (a)		1,928	1,890	1,852	1,804	1,781





(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. VIOC stores (company-operated, franchised, and the combination of these for system-wide SSS), with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation.

Net revenues

Net revenues increased $44.2 million, or 12.8% for ~~the results of Quick Lubes. There were no unusual or key items that affected comparability for Adjusted EBITDA during~~ the three months ended ~~December~~March 31, ~~2017 and 2016.~~

Three months ended December 31
(In millions) 2017 2016
Operating income $ 35
$ 29
Depreciation and amortization 6
5
EBITDA $ 41
$ 34

~~International~~

~~International sales increased $15 million, or 12%, to $140 million during the current quarter~~2024 compared to the prior year ~~quarter. Higher volume levels~~period. Store operations fueled top-line expansion with system-wide SSS increasing by 7.7% largely due to increased ticket from non-oil change service penetration with the balance from net pricing and ~~changes~~premiumization. Transaction growth contributed modestly to system-wide SSS growth driven primarily by benefits from day mix. Additionally, revenue growth was bolstered by the addition of 147 net new stores through openings and acquisitions. The following reconciles the year-over-year change in ~~product mix combined to increase sales by $6~~net revenues:

Net revenues increased $84.8 million, or ~~5%. Favorable foreign currency exchange increased sales by $6 million and favorable product pricing increased sales $3 million.~~

~~Gross profit increased $1 million, or 3%, during~~12.5% for the ~~current quarter~~six months ended March 31, 2024 compared to the prior year ~~quarter. Increases in volumes~~period due to volume, mix and ~~favorable changes in product mix combined to increase gross profits by $2 million. Favorable foreign currency exchange increased gross profit by $1 million, while higher product~~price improvements, as well as store expansion through net new openings and ~~supply chain costs resulted in a $2 million decrease in gross profit. Gross profit margin decreased by 2.5 percentage points to 28.2%~~acquisitions. System-wide SSS grew 7.4% compared to the prior year ~~quarter largely~~with ticket contributing the majority of the

benefits from non-oil change service penetration, premiumization, and pricing actions, in addition to increased transactions. The following reconciles the year-over-year change in year-to-date net revenues:

Gross profit

Gross profit increased $19.5 million, or 15.4%, for the three months ended March 31, 2024 compared to the prior year period. Profitability increased primarily due to mix improvements from non-oil change service penetration and premiumization. Additionally, strategic pricing actions coupled with cost efficiencies, particularly in labor and modest benefits from materials increased profitability and were partially offset by increased store operating expenses, including higher depreciation. The following reconciles the year-over-year change in gross profit:

Gross profit margin improved in the three months ended March 31, 2024 compared to the prior year primarily due to labor efficiency resulting from strong schedule management.

Gross profit improved $35.5 million, or 14.5%, for the six months ended March 31, 2024 compared to the prior year period driven by increased average ticket from non-oil change service penetration and premiumization as well as pricing actions. Additionally, increased transactions and unit growth also provided benefits along with improved labor management. The following reconciles the year-over-year change in year-to-date gross profit:

The improvement in gross profit margin in the six months ended March 31, 2024 compared to the prior year was primarily due to pricing actions and labor efficiency which resulted in staff providing best-in-class customer experiences improving overall service mix. These benefits were partially offset by increased store operating expenses, including higher ~~raw material and supply chain costs in some markets and~~depreciation.

Net operating expenses

Details of the ~~lower contribution from higher-margin geographies.~~components of Net operating expenses are summarized below for the periods ended March 31:


	Three months ended March 31								Six months ended March 31
	2024				2023				2024				2023
(In millions)	Amount		% of Net revenues		Amount		% of Net revenues		Amount		% of Net revenues		Amount		% of Net revenues
Selling, general and administrative expenses	$	72.3	18.6	%	$	62.6	18.2	%	$	146.8	19.3	%	$	128.6	19.0	%
Net legacy and separation-related expenses	—		—	%	3.8		1.1	%	0.1		—	%	29.2		4.3	%
Other income, net	(2.5)		(0.6)	%	(0.9)		(0.3)	%	(5.1)		(0.7)	%	(2.8)		(0.4)	%
Net operating expenses	$	69.8	18.0	%	$	65.5	19.0	%	$	141.8	18.6	%	$	155.0	22.9	%

Selling, general and administrative expenses ~~which include corporate expense allocations of costs,~~(“SG&A”) increased $3$9.7 million ~~or 12%, during~~and $18.2 millionfor the ~~current quarter~~three and six months ended March 31, 2024, respectively, compared to the prior year ~~quarter. The increase was primarily related~~periods. These increases were principally driven by costs from implementing stand-alone information technology platforms, and increased investments in advertising to ~~$2 million of planned increases~~attract and retain customers and talent to support future growth. Additionally, higher travel expenses related to the ~~Company's investments in its teams~~Company’s annual meeting and ~~shared infrastructure expenses, and a $1 million~~store growth contributed to the increase in ~~employee costs. Equity~~the six months ended March 31, 2024.

Net legacy and ~~other income increased $1~~separation-related expenses decreased $3.8 million and $29.1 million for the three and six months ended March 31, 2024, respectively, compared to the prior year ~~quarter~~periods attributable to activities that did not recur. In the three and six months ended March 31, 2023, the expense was primarily associated with the modification of certain performance-based unvested stock awards as a result of ~~increased equity~~the sale of Global Products as well as expense of $24.4 million to increase the indemnity obligation and ~~royalty income from~~reflect the ~~Company's investments in joint ventures, which had increased volumes~~utilization of certain legacy tax attributes associated with the amendment of the tax matters agreement with its former parent company during the ~~quarter.~~six months ended March 31, 2023.

~~Operating~~

Other income, ~~totaled $19~~net increased $1.6 million and $2.3 million in the ~~current quarter as~~three and six months ended March 31, 2024, respectively, compared to ~~$20~~the prior year periods, primarily due to higher rental income from subleasing properties in connection with the sale of Global Products partially offset by expense associated with an investment impairment of $1.0 million in the prior year ~~quarter. EBITDA decreased $1 million to $20 million~~period which did not recur.

Net pension and other postretirement plan expenses

Net pension and other postretirement plan expenses were flat in ~~the current quarter. EBITDA margin decreased 2.5 percentage points to 14.3% in the current quarter.~~

~~International - EBITDA and Adjusted EBITDA reconciliation~~

The following EBITDA presentation is provided as a means to enhance the understanding of financial measurements that Valvoline has internally determined to be relevant measures of comparison for the results of International. There were no unusual or key items that affected comparability for Adjusted EBITDA during the three months ended ~~December~~March 31, ~~2017~~2024 and ~~2016.~~decreased $0.3 million in the six months ended March 31, 2024 compared to the prior year periods. The decrease was generally attributable to higher recurring expected returns on plan assets partially offset by higher interest costs of the rate environment as a result of the most recent annual remeasurement of the plans.

Three months ended December 31
(In millions) 2017 2016
Operating income $ 19
$ 20
Depreciation and amortization 1
1
EBITDA $ 20
$ 21

~~Unallocated and Other~~

~~Unallocated~~Net interest and other ~~operating income/loss generally includes items such~~financing expenses

Net interest and other financing expenses increased $2.2 million and decreased $2.9 million during the three and six months ended March 31, 2024, respectively, compared to the prior year periods. While higher rates on outstanding borrowings increased expense during the periods, interest income on invested remaining net proceeds from the sale of Global Products drove benefits. These benefits more than offset the increased expense in the year-to-date period and were lower to partially offset increased expense in the quarter as ~~certain other corporate and non-operational matters, such as company-wide restructuring activities and legacy costs, including those associated with~~ the ~~separation from Ashland.~~ investments matured prior to executing the Tender Offer in April 2024.

Income tax provision

The following table summarizes income tax provision and the ~~components of Unallocated~~effective tax rate for the current and ~~other operating income/loss~~prior year periods:


	Three months ended March 31						Six months ended March 31

(In millions)	2024			2023			2024			2023
Income tax expense (benefit)	$	14.0		$	11.4		$	25.9		$	(8.7)
Effective tax rate percentage	24.4		%	25.7		%	25.1		%	(17.0)		%

The increase in income tax expense for the three months ended ~~December~~March 31, ~~2017~~2024 was principally driven by higher pre-tax earnings, while the reduction in the effective tax rate was primarily attributed to the favorable impact of discrete tax benefits. The increases in income tax expense and ~~2016:~~the effective tax rate for the six months ended March 31, 2024 were driven by more normalized activity in the current year period as compared to the prior year period which included the recognition of a $26.5 million income tax benefit for the release of a valuation allowance due to the change in expectations regarding the utilization of certain legacy tax attributes as a result of the terms of the amended tax matters agreement with Valvoline’s former parent company. This amendment also resulted in higher Net legacy and separation-related expenses of $24.4 million for the related increased indemnity obligation for the six months ended March 31, 2023.

(Loss) income from discontinued operations, net of tax

The following summarizes (Loss) income from discontinued operations, net of tax for the current and prior year periods:


	Three months ended March 31				Six months ended March 31

(In millions)	2024		2023		2024		2023
(Loss) income from discontinued operations, net of tax	$	(1.9)	$	1,194.4	$	(3.9)	$	1,249.3

Earnings from discontinued operations declined $1.196 billion and $1.253 billion in the three and six months ended March 31, 2024, respectively, compared to the prior year periods primarily due to the recognition of a gain on the sale of the Global Products business in March 2023 resulting in costs associated with the separation of processes

Three months ended December 31
(In millions) 2017 2016
Separation costs $ (2 ) $ (6 )
Adjustments associated with Ashland tax indemnity (7 ) —
Operating loss $ (9 ) $ (6 )

and systems and no longer reflecting operational results from the underlying business for the three and six months ended March 31, 2024.

~~Unallocated~~

Continuing operations adjusted net revenues

The following table reconciles Net revenues to Adjusted net revenues for the current and ~~other had operating loss~~prior year periods:


	Three months ended March 31				Six months ended March 31
(In millions)	2024		2023		2024		2023
Reported net revenues	$	388.7	$	344.5	$	762.1	$	677.3
Key items:
Suspended operations (a)	—		—		—		(0.2)
Adjusted net revenues (b) (c)	$	388.7	$	344.5	$	762.1	$	677.1

(a)Represents the results of $9a former Global Products business where operations were suspended during fiscal 2022 that were not included in the sale.

(b)Adjusted net revenues are reported net revenues adjusted for key items.

(c)Represents a non-GAAP measure. Refer to “Use of Non-GAAP Measures” for management’s definitions of the metrics presented above.

Continuing operations EBITDA and Adjusted EBITDA

The following table reconciles Income from continuing operations to EBITDA and Adjusted EBITDA for the current and prior year periods:


	Three months ended March 31				Six months ended March 31
(In millions)	2024		2023		2024		2023
Income from continuing operations	$	43.3	$	32.9	$	77.2	$	59.9
Income tax expense (benefit)	14.0		11.4		25.9		(8.7)
Net interest and other financing expenses	15.5		13.3		29.1		32.0
Depreciation and amortization	25.6		20.6		50.2		39.1
EBITDA from continuing operations (a)	98.4		78.2		182.4		122.3
Net pension and other postretirement plan expenses (b)	3.6		3.6		7.0		7.3
Net legacy and separation-related expenses (c)	—		3.8		0.1		29.2
Information technology transition costs (d)	3.1		0.4		5.8		0.7
Investment and divestiture-related costs (e)	—		1.0		—		1.0
Suspended operations (f)	—		0.1		—		(0.1)
Adjusted EBITDA from continuing operations (a)	$	105.1	$	87.1	$	195.3	$	160.4


(a)			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.
(b)			Includes several elements impacted by changes in plan assets and obligations that are primarily driven by the debt and equity markets, including remeasurement gains and losses, when applicable; and recurring non-service pension and other postretirement net periodic activity, which consists of interest cost, expected return on plan assets and amortization of prior service credits. Management considers these elements are more reflective of changes in current conditions in global markets (in particular, interest rates), outside the operational performance of the business, and are also legacy amounts that are not directly related to the underlying business and do not have an impact on the compensation and benefits provided to eligible employees for current service. Refer to Note 7 in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q for further details.


(c)			Activity associated with legacy businesses, including the separation from Valvoline’s former parent company and its former Global Products reportable segment. This activity includes the recognition of and adjustments to indemnity obligations to its former parent company; certain legal, financial, professional advisory and consulting fees; and other expenses incurred by the continuing operations in connection with and directly related to these separation transactions and legacy matters. This incremental activity directly attributable to legacy matters and separation transactions is not considered reflective of the underlying operating performance of the Company’s continuing operations. During the six months ended March 31, 2023, the Company recognized $24.4 million of pre-tax expense to reflect its increased estimated indemnity obligation which also resulted in an income tax benefit of $26.5 million to reflect the release of valuations allowances in connection with the amendment of the Tax Matters Agreement with Valvoline’s former parent company.
(d)			Consists of expenses incurred related to the Company’s transition to a stand-alone enterprise resource planning software system during fiscal years 2023 and 2024, including data conversion, temporary support, training, and redundant expenses incurred from duplicative technology platforms during implementation. These expenses are reflective of incremental costs directly associated with technology transitions and data migration that are not considered to be reflective of the ongoing expenses of operating the Company’s technology platforms.
(e)			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.
(f)			Represents the results of a former Global Products business where operations were suspended during fiscal 2022. This business was not included in the sale of the Global Products business in March 2023. It was classified as held for sale and impaired as of September 30, 2023, and subsequently sold during the first fiscal quarter of 2024. These results are not indicative of the operating performance of the Company’s ongoing continuing operations.

Adjusted EBITDA from continuing operations increased $18.0 million ~~and loss of $6 million during~~for the three months ended ~~December~~March 31, ~~2017~~2024 and ~~2016, respectively. The~~ increased ~~operating loss is~~$34.9 million in thesix months ended March 31, 2024compared to the prior year periods driven by strong revenue growth primarily ~~the result of increased expense related~~due to ~~adjustments recorded for indemnities associated with the Tax Matters Agreement primarily as a result of tax reform legislation,~~higher average ticket from pricing actions, non-oil change service penetration, and premiumization. In addition, improved labor cost efficiency was partially offset by ~~decreased separation costs from the prior year as the separation from Ashland was completed in May 2017.~~SG&A investments to support future growth.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Overview

The Company closely manages its liquidity and capital resources. ~~Valvoline's~~Valvoline’s liquidity requirements depend on key variables, including the level of investment needed to support business strategies, the performance of the business, capital expenditures, borrowing arrangements, and working capital management. Capital expenditures, acquisitions, share repurchases, and dividend payments are components of the ~~Company's~~Company’s cash flow and capital management strategy, which to a large extent, can be adjusted in response to economic and other changes in the business environment. The Company has a disciplined approach to capital allocation, which focuses on investing in key priorities that support ~~Valvoline's~~Valvoline’s business and growth strategies and returning capital to shareholders, while funding ongoing operations.

~~As of December 31, 2017, the Company had $115 million in~~ ~~Cash and~~Continuing operations cash ~~equivalents~~, of which approximately $96 million was held by Valvoline's non-U.S. subsidiaries. The Company utilizes a variety of strategies to deploy available cash in locations where it is needed, and the Company has historically intended to indefinitely reinvest undistributed earnings offlows

its non-U.S. subsidiaries. As a result of the enactment of tax reform legislation in December 2017, undistributed earnings of the Company's non-U.S. subsidiaries were subject to the one-time deemed repatriation tax, which provides certain expected opportunities to repatriate with lower tax consequences. Consequently, the Company began to reevaluate its intentions to indefinitely reinvest its non-U.S. undistributed earnings. The Company now plans to repatriate up to approximately $45 million of previously undistributed earnings of certain non-U.S. subsidiaries where the withholding tax implications are expected to be minimal. The Company is presently not aware of any significant restrictions on the repatriation of these funds and additional taxes and other costs that may arise between the deemed and actual distribution dates are not estimated to be material.

~~Cash Flow~~

Valvoline’s continuing operations cash flows as reflected in the Condensed Consolidated Statements of Cash Flows are summarized as follows for the ~~three~~six months ended ~~December 31, 2017 and 2016:~~March 31:


(In millions)	2024		2023


Cash provided (used by):
Operating activities	$	92.1	$	173.5
Investing activities	$	230.6	$	(96.3)
Financing activities	$	(237.6)	$	(279.4)

Three months ended December 31

(In millions) 2017 2016
Cash provided by (used in):
Operating activities $ 20
$ 88
Investing activities (74 ) (10 )
Financing activities (31 ) (16 )
Effect of currency exchange rate changes on cash and cash equivalents (1 ) 2
(Decrease) increase in cash and cash equivalents $ (86 ) $ 64

Operating activities

The decrease in cash flows provided by operating activities ~~for the three months ended December 31, 2017 compared to~~of $81.4 million from the prior year ~~period~~ was primarily ~~related~~driven by changes in net working capital. Unfavorable changes in payables and accruals of approximately $60 million were due to the ~~timing~~establishment of ~~cash settlements of both asset~~the supply agreement and ~~liability working capital accounts, including those related to Valvoline's separation from Ashland that drove higher operating cash flows~~other separation-related matters with Global Products in the prior year period . Specifically, in the three months ended December 31, 2016, Valvoline received $23 million from Ashland in customer payments on certain Valvoline receivables that were collected by Ashland and remitted to Valvolineyear. Additionally, a lengthened collection cycle during the ~~period. In addition, Valvoline's accrued liabilities increased by~~current year due to billing delays in connection with the implementation of a new enterprise resource planning (“ERP”) system contributed approximately ~~$40~~$25 million ~~during~~to the ~~three months ended December 31, 2016 related primarily to transition services, tax sharing and other miscellaneous billings from Ashland. Also, as described further~~growth in Note 4 of the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q, during the three months ended December 31, 2016, the Company sold $11 million of accounts receivables to a financial institution and did not sell accounts receivable during the three months ended December 31, 2017.working capital.

Investing activities

The ~~increase~~decrease in cash flows used in investing activities ~~for the three months ended December 31, 2017 compared to~~of $326.9 million from the prior year ~~period~~ was ~~primarily related~~substantially driven by proceeds from the maturities of short-term investments of $350.0 million. This cash inflow was partially offset by a net outflow of $3.7 million for cash transferred in connection with selling a former Global Products business during the current year, in addition to ~~the acquisition~~loans extended to franchisees, net of ~~56 franchise service centers from Henley Bluewater LLC for $60~~repayments of $5.2 million, ~~combined with a moderate~~an increase in acquisition activity of $2.4 million, and increased capital expenditures ~~due to planned investments. Valvoline is currently forecasting approximately$80~~of $7.8 million to ~~$90 million of capital expenditures for full year fiscal 2018, funded primarily from operating cash flows.~~support investments in store growth.

Financing activities

The ~~increase~~decrease in cash flows used in financing activities ~~for the three months ended December 31, 2017 compared to~~of $41.8 million from the prior year ~~period~~ was ~~related~~primarily due to ~~transactions that occurred~~returning $45.2 million less in ~~the current year, including payments related~~cash to ~~the repurchase of common stock of $37 million, the purchase of~~shareholders through share repurchases from utilizing the remaining ~~ownership interest~~authorization under the 2022 Share Repurchase Authorization during the second quarter of fiscal 2024 in addition to a ~~consolidated subsidiary for $15~~$23.7 million ~~lower borrowings in the period related to the trade receivables securitization facility, and the increase in dividends that resulted in an incremental $5 million payment. These increases~~decrease in cash ~~usage were~~inflows from net borrowing activity. This decreased use of cash from the prior year was partially offset by ~~reduced repayments~~lower dividends paid of ~~borrowings in~~$21.8 million as the ~~current year period.~~Company discontinued its dividend during the second quarter of fiscal 2023 following the sale of Global Products.

~~Free~~Continuing operations free cash flow ~~and other liquidity information~~

The following ~~table~~ sets forth free cash flow ~~for the disclosed periods~~and discretionary free cash flow and reconciles cash flows ~~provided by~~from operating activities to ~~free cash flow. As previously noted,~~both measures. These free cash flow ~~has~~measures have certain limitations, including that ~~it does~~they do not reflect adjustments for certain non-discretionary cash flows, such as mandatory debt ~~repayments, and includes pension and other postretirement plan remeasurement gains/losses.~~repayments. Refer to the “Use of Non-GAAP Measures” section ~~previously~~ included above in this Item 2 for additional ~~information.~~information regarding these non-GAAP measures.


	Six months ended March 31
(In millions)	2024		2023
Cash flows provided by operating activities	$	92.1	$	173.5
Less: Maintenance capital expenditures	(13.6)		(9.7)
Discretionary free cash flow	78.5		163.8
Less: Growth capital expenditures	(73.6)		(69.7)
Free cash flow	$	4.9	$	94.1

Three months ended December 31
(In millions) 2017 2016
Cash flows provided by operating activities $ 20
$ 88
Additions to property, plant and equipment (14 ) (9 )
Free cash flow $ 6
$ 79

~~Free~~The decrease in free cash flow from continuing operations over the prior year was driven by lower cash flow provided by operating activities in addition to increased capital expenditures during the current period. The increase in maintenance capital expenditures over the prior year period was driven by facility and equipment expenditures due to the growing store count. In addition, the higher growth capital expenditures over the prior year period primarily relate to new store construction. The Company continues to focus the majority of its capital spend toward growth, which is expected to drive a high return on invested capital.

Discontinued operations cash flows

The cash flows of the discontinued operation are reflected in the Condensed Consolidated Statements of Cash Flows and are summarized below for the ~~three~~six months ended ~~December 31, 2017 as compared~~March 31:


(In millions)	2024		2023


Cash (used in) provided by:
Operating activities	$	(3.9)	$	(63.4)
Investing activities	$	—	$	2,623.2
Financing activities	$	—	$	(108.1)

The declines in cash flows used in operating and financing activities and those provided from investing activities of the discontinued operation were due to the completion of the sale of Global Products in March 2023, where prior year cash flows were from conducting business within the former Global Products segment and the current year cash flows generally relate to the completion of the separation of the business processes and systems. During the prior year period, cash flows used in operating activities of the discontinued operation were largely driven by trade and other payables activity operating in an unfavorable working capital environment, in addition to transaction costs to support the sale of the Global Products business. Prior year discontinued operations cash flows provided by investing activities were due to the cash consideration received, net of cash transferred to Global Products entities, at the close of the sale of Global Products of $2.6 billion. The decrease in cash flows used in financing activities of discontinued operations was due to net repayments on borrowings during the prior year period, driven by ~~lower cash flows from operating activities as described above, coupled~~the extinguishment of the $175 million Trade Receivables Facility.

Debt

Inclusive of the interest rate swap agreements, approximately 83% of Valvoline's outstanding borrowings at March 31, 2024 had fixed interest rates, with ~~higher capital expenditures due to planned investments.~~

the remainder bearing variable rates. As of ~~December~~March 31, 2017, working capital (current assets minus current liabilities, excluding long-term debt due within one year) amounted to $386 million, compared to $327 million at September 30, 2017. Liquid assets, (cash, cash equivalents, and accounts receivable) was~~145% of current liabilities as of December 31, 2017 and 123% at September 30, 2017.~~

~~Debt~~

~~The following summary reflects Valvoline’s debt as of:~~

December 31 September 30
(In millions) 2017 2017
Short-term debt $ —
$ 75
Long-term debt (including current portion and debt issuance cost discounts) ^(a)
1,166
1,049
Total debt $ 1,166
$ 1,124


~~(a)~~	Amount includes $2 million of debt acquired through acquisitions and is net of $12 million and $13 million of debt issuance cost discounts as of December 31 and September 30, 2017, respectively, which are direct reductions from the carrying amount of debt.

As of December 31, 2017, the senior secured credit facility consisted of a term loan facility with an aggregate principal outstanding balance of $281 million and a $450 million revolving credit facility with no outstanding balance. The revolving credit facility also allows a portion of the availability to be used for outstanding letters of credit, and as of December 31, 2017, there were $11 million in letters of credit outstanding. As of September 30, 2017, the outstanding principal balance of the term loan facility was $285 million and there was no outstanding balance on the revolving facility.

As of December 31 and September 30, 2017, the Company had outstanding $400 million in aggregate principal balance of 4.375% senior unsecured notes due in 2025 and $375 million in aggregate principal balance of 5.500% senior unsecured notes due in 2024. In December 2017, the Company completed registered exchange offers for the senior notes.

During the first fiscal quarter of 2018, the Company amended the trade receivables securitization facility to extend the maturity date to November 19, 2020 and increase the maximum funding under the facility to $175 million. Valvoline borrowed an additional $45 million under this facility during the three months ended December 31, 2017 and used the proceeds to supplement the daily cash needs of the Company's operations. As of December 31, 2017, $120 million remains outstanding under this facility. As of September 30, 2017, the Company had $75 million outstanding under this facility.

~~Debt covenant restrictions~~

Valvoline’s debt contains usual and customary representations and warranties, and usual and customary affirmative and negative covenants, including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants (including maintenance of a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio). As of the end of any fiscal quarter, the maximum consolidated net leverage ratio and minimum consolidated interest coverage ratio permitted under the 2016 Senior Credit Agreement are 4.5 and 3.0, respectively. As of December 31, 2017,2024, Valvoline was in compliance with all covenants of its debt ~~obligations.~~obligations and had borrowing capacity remaining of $471.8 million under its Revolver, which was reduced to $296.8 million from borrowing $175.0 million to facilitate the purchase of the 2030 Notes in April 2024.

~~Pension and Other Postretirement Plan Obligations~~

~~During fiscal 2018,~~On March 14, 2024, the Company commenced the Tender Offer to purchase its outstanding 2030 Notes. The Tender Offer was made to comply with the requirements of the asset sale covenant under the indenture governing the 2030 Notes in connection with the sale of Global Products.

On April 16, 2024, Valvoline completed the Tender Offer with 99.7% of the outstanding principal amount tendered by the holders of the 2030 Notes. The Company used cash and cash equivalents on hand, in addition to borrowing $175.0 million on the Revolver to facilitate the $598.3 million purchase of the 2030 Notes at par, plus accrued and unpaid interest, and cancelled the 2030 Notes accepted for purchase. The Company elected to redeem the remaining balance outstanding of $1.7 million on April 29, 2024 pursuant to the terms and conditions of the indenture governing the 2030 Notes. Valvoline expects to ~~make contributions~~recognize a loss on extinguishment of ~~approximately $14~~the 2030 Notes of $5.1 million ~~to its pension plans related to its U.S. non-qualified and non-U.S. pension plans, of which contributions of $3 million were made~~ during the ~~three months ended December~~third quarter of fiscal 2024 due to the write-off of unamortized debt issuance costs and discounts. The 2030 Notes are reported in Current portion of long-term debt within the Condensed Consolidated Balance Sheet as of March 31, ~~2017.~~ 2024.

Refer to Note 95 of the Notes to Condensed Consolidated Financial Statements for additional ~~information.~~details regarding the Company’s debt instruments.

~~Tax-related Commitments~~Share repurchases

On December 22, 2017, the President of the United States signed into law tax reform legislation (the “Act”), which is generally effective January 1, 2018. The Act includes a number of provisions, including lowering the U.S. corporate federal income tax rate from a maximum of 35% to 21% and changing or limiting certain tax deductions. While the Company expects the Act will ultimately benefit Valvoline, it also includes provisions that are expected to offset some of the benefit of the rate reduction, including the repeal of the deduction for domestic production activities and the expansion of the limitation on the deduction of certain executive compensation. In addition, the Act alters the landscape of taxation of non-U.S. operations and provides immediate deductions for certain new investments, among other provisions.

During the ~~three~~six months ended ~~December~~March 31, ~~2017, enactment of the Act resulted in pre-tax expense of $7 million and income tax expense of $68 million due to the following:~~

~~The remeasurement of net deferred tax assets at the lower enacted corporate tax rate resulted in a net $67 million increase in income tax expense;~~

~~The deemed repatriation tax on unremitted non-U.S. earnings and profits resulted in a $4 million increase in income tax expense; and~~

The remeasurement of net indemnity liabilities associated with the Tax Matters Agreement increased pre-tax expense by $7 million and generated a $3 million tax benefit related to the higher expected utilization of tax attributes payable to Ashland.

Based on the Company's provisional estimates of the impacts of the Act, management expects there will be a net favorable impact on Valvoline and its U.S. operations primarily due to the reduction in the federal statutory income tax rate. Set forth below is a discussion of certain provisions of the Act and the Company's preliminary assessment of the impact of such provisions on Valvoline's consolidated financial statements:

Given the effective date of the rate reduction in the Act, the Company's statutory federal corporate tax rate for fiscal 2018 will be a blended rate of 24.5%, with the federal statutory rate of 21% beginning in fiscal 2019. Inclusive of the reduction of the annual estimated effective tax rate and combined with income tax expense recorded in the three months ended December 31, 2017 related to the enactment of the Act,2024, the Company ~~currently anticipates an estimated consolidated effective tax rate between 44% and 45%~~repurchased 6.3 million shares of its common stock for ~~fiscal 2018. The reduced federal tax rate is expected to result in overall lower income tax expense in fiscal 2019, and~~$211.5 million utilizing the Company currently expects that its consolidated effective tax rate for fiscal 2019 will be between 25% and 26%. Such estimates are based on management’s current assumptions with respect to, among other things, the Company’s earnings, state income tax levels and tax deductions.

The Act implements a new territorial tax system and imposes a one-time U.S. tax on the deemed repatriation of certain accumulated non-U.S. earnings and profits. The Company currently expects to settle the related gross liability of approximately $22 million through utilization of foreign tax credits of $18 million, resulting in a net impact of $4 million which was recorded as income tax expense in the three months ended December 31, 2017. As a result of certain opportunities to repatriate with estimated lower tax consequences, the Company now intends to repatriate up to approximately $45 million of previously undistributed non-U.S. earnings in the foreseeable future.

The Act expands the limitation on the deduction of certain executive compensation. This expansion is subject to transition rules that provide grandfather relief. The Company has currently estimated that these deduction limitations will primarily be effective in future periods.

The Act repeals the deduction for domestic manufacturing production activities. With Valvoline’s domestic manufacturing footprint, the repeal will have an unfavorable impact beginning in fiscal 2019.

The Act includes a new incentive for U.S. companies to produce goods and services domestically and sell them abroad, which the Company expects will have a favorable impact on Valvoline beginning in fiscal 2019.

The Act provides for an election of 100 percent tax depreciation on certain property expenditures through 2022. The depreciation percentage will be phased down beginning in 2023 through 2026, when the prior depreciation rules will return. The Company expects to benefitremaining authorization available from ~~this provision related to the timing of deductions for investments.~~

~~Given the Company's present financial profile, management expects to fully deduct interest expense under the present and future limitation rules under the Act.~~

The Company generally expects taxable state income will increase as a result of deduction limitations associated with the Act. However, the impact is not currently reasonably estimable as most U.S. state tax jurisdictions have not responded to the specific effects of the Act.

As summarized above, based on the Company's provisional estimates of the impacts of the Act, management expects there will be a net favorable impact on Valvoline, taking into account the impact on profitability and improved capital generation, which will provide the Company the opportunity to evaluate the potential utilization of the expected savings to increase or accelerate investments in its business and growth.

The estimated impacts of the Act recorded during the three months ended December 31, 2017 as well as the forward-looking estimates are provisional in nature, and the Company will continue to assess the impact of the Act and provide additional information and record adjustments through the income tax provision in the relevant period as amounts are known and reasonably estimable during the measurement period. Accordingly, the impact of the Act may differ from the Company's provisional estimates due to and among other factors, information currently not available, changes in interpretations and the issuance of additional guidance, as well as changes in assumptions the Company has currently made, including actions the Company may take in future periods as a result of the Act.

~~Dividend Payments and Share Repurchases~~

For the three months ended December 31, 2017, the Company paid cash dividends of $0.0745 per common share for $15 million. On January 31, 2018, the Valvoline Board of Directors declared a quarterly cash dividend of $0.0745 per share on Valvoline common stock. The dividend is payable on March 15, 2018 to shareholders of record on March 1, 2018.

~~Future declarations of quarterly dividends are subject to approval by~~ the Board of Directors ~~and may be adjusted as business needs or market conditions change. For the three months ended December 31, 2016,~~for the Company ~~paid cash dividends~~to repurchase up to $1.6 billion of ~~$0.049 per~~its common ~~share for $10 million.~~

For the three months ended December 31, 2017, the Company repurchased approximately 2 million shares for $39 million under the $150 million share repurchase authorization approved by the Board of Directorsstock announced on ~~April 24, 2017~~November 15, 2022 (the ~~“2017~~“2022 Share Repurchase Authorization”). As of ~~December~~March 31, ~~2017, there was $61 million of share repurchase authority remaining under the 2017 Share Repurchase Authorization. This repurchase authority allows~~2024, the Company ~~to repurchase its stock from time to time in~~repurchased the open market or in privately negotiated transactions depending upon market price and other factors. Repurchases were and will continue to be in accordance with all applicable securities laws and regulations and funded from available liquidity. The Company did not repurchase shares during the three months ended December 31, 2016.

~~On January 31, 2018, the Board of Directors of Valvoline:~~

~~Declared a quarterly cash dividend of $0.0745 per share on Valvoline common stock that is payable on March 15, 2018 to shareholders of record on March 1, 2018; and~~

~~Authorized the Company to repurchase up to $300 million~~full amount of its common stock ~~through September 30, 2020, which amount is in addition to~~under the ~~2017~~2022 Share Repurchase ~~Authorization.~~Authorization and no other share repurchase authorizations have been approved.

~~Off-Balance Sheet Arrangements and Contractual Obligations~~

~~Other than the matters disclosed in this Quarterly Report on Form 10-Q and~~The share repurchase authorization is part of a broader capital allocation framework to deliver value to shareholders by first driving growth in the ~~ordinary course of~~ business, since the end of fiscal 2017, there have been no material changes in the Company's contractual obligations. See the Annual Report on Form 10-K for the fiscal year ended September 30, 2017 for additional information regarding the Company's off-balance-sheet arrangementsorganically and ~~contractual obligations.~~through acquisitions and franchise development, and then returning excess cash to shareholders through share repurchases.

Summary

As of ~~December~~March 31, ~~2017,~~2024, Valvoline had cash and cash equivalents ~~totaled $115~~of $494.5 million, total debt of $1,575.1 million, and total ~~debt was $1.2 billion. Valvoline's~~remaining borrowing capacity of $471.8 million, which decreased to $296.8 million subsequent to borrowing $175.0 million on the Revolver to facilitate the purchase of the 2030 Notes in April 2024. Valvoline’s ability to continue to generate positive cash flows from operations is dependent on general economic conditions, ~~and~~ the competitive environment in the industry, and is subject to the business and other risk factors described in Item 1A of Part II of this Quarterly Report on Form 10-Q and Item 1A of Part I of the Annual Report on Form 10-K for the fiscal year ended September 30, 2017. If the Company is unable to generate sufficient cash flows from operations, or otherwise comply with the terms of its credit facilities, Valvoline may be required to seek additional financing alternatives. Valvoline's financial position has enabled it to achieve a Moody's rating of Ba2 and a Standard & Poor’s rating of BB+, which was upgraded in the fourth fiscal quarter of 2017. Subsequent changes to ratings may have an effect on Valvoline's borrowing rate or ability to access capital markets in the future. Borrowing capacity under the 2016 Senior Credit Agreement was $439 million (due to a $11 million reduction for letters of credit) and based on the availability of eligible receivables, $39 million under the trade receivables securitization facility as of December 31, 2017.2023.

Management believes that the Company has sufficient liquidity based on its current cash, ~~position,~~cash equivalents, cash generated from business operations, and existing financing to meet its required pension and other postretirement plan ~~contributions,~~contributions; debt servicing obligations, including the purchase of the 2030 Notes in connection with the Tender Offer; tax-related and other ~~contractual commitments, as well as~~material cash and operating requirements for the next twelve months.

~~RECENT~~

NEW ACCOUNTING PRONOUNCEMENTS

For a discussion and analysis of recently issued accounting pronouncements and the ~~impact~~impacts on Valvoline, refer to Note 1 in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I inof this Quarterly Report on Form 10-Q.

CRITICAL ACCOUNTING ~~POLICIES AND~~ ESTIMATES

The ~~Company's~~Company’s critical accounting ~~policies and~~ estimates are ~~discussed in detail~~described in Item 7 of Part II in Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017. As described in Note 1 of the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q, the Company adopted accounting policy changes related to the classification of non-service pension and other postretirement net periodic income effective October 1, 2017. Accordingly, ~~Net pension and other postretirement plan non-service income and remeasurement adjustments~~ ~~for all periods presented has been reclassified from within operating income to non-operating income within the Condensed Consolidated Statements of Comprehensive Income.~~

2023. Management reassessed the critical accounting ~~policies~~estimates as disclosed in the Annual Report on Form 10-K, and determined there were no ~~other~~ changes ~~to critical accounting policies~~ in the ~~three~~six months ended ~~December~~March 31, ~~2017. There were also no significant changes in estimates associated with those policies.~~2024.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The ~~Company's~~Company’s market risks are discussed in ~~detail in~~ Item 7A of Part II in ~~Valvoline’s~~Valvoline's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2023. Management reassessed the quantitative and qualitative market risk disclosures as described in the Annual Report on Form 10-K and determined there were no material changes to market risks in the ~~three~~six months ended ~~December~~March 31, ~~2017.~~2024.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~Valvoline's Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), with the assistance of management, have evaluated the effectiveness of the Company's disclosure~~Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), and based upon such evaluation, have concluded that as of the Evaluation Date, the Company's disclosure controls and procedures were effective. These controls are designed to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, ~~(“SEC”),~~ and that such information is accumulated and communicated to ~~Valvoline's~~Valvoline’s management, including the ~~CEO~~Chief Executive Officer (“CEO”) and ~~CFO,~~Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives.

Valvoline’s CEO and CFO, with the assistance of management, have evaluated the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), and based upon such evaluation, have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were not effective at the reasonable assurance level due to a material weakness in internal control over financial reporting as described below.

Notwithstanding the conclusion that disclosure controls and procedures were not effective as of March 31, 2024 due to the material weakness, management implemented and enhanced certain manual controls intended to ensure the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly presented in all material respects. Accordingly, the Company believes there are no material inaccuracies or omissions of material fact in its condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and that such financial statements present fairly, in all material respects, the financial position, results of operations and cash flows as of and for each of the periods presented herein in accordance with U.S. GAAP.

Changes in Internal Control

~~There~~During the three months ended March 31, 2024, Valvoline implemented a new ERP system to facilitate the separation from its former Global Products reportable segment that was sold in March 2023. This new ERP system will better accommodate the Company’s retail business model and support its continued growth. As a result of the ERP system implementation, Valvoline implemented new or modified certain pre-existing internal controls, processes and procedures. These modifications also concluded certain transition services between the Company and its former Global Products reportable segment, whereby certain stand-alone processes were implemented commensurate with the system go-live. Other than these changes and the ongoing remedial efforts described further below, there have been no ~~significant~~ changes in ~~Valvoline’s~~the Company’s internal control over financial reporting that occurred during the ~~three months~~fiscal quarter ended ~~December~~March 31, ~~2017~~2024 that ~~have~~ materially affected, or are reasonably likely to materially affect, Valvoline’s internal control over financial reporting.

Material Weakness in Internal Control over Financial Reporting

In connection with the implementation of the new ERP system on January 1, 2024, a material weakness in internal control over financial reporting arose. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness relates to the Company’s January 2024 implementation of a new ERP system and its related impact on IT general controls. Specifically, the Company did not ensure adequate (a) system design for certain business processes, (b) segregation of duties reviews for a portion of time during the three-month period ended March 31, 2024, and (c) evidence to support the rigor of change management activities, sensitive access reviews, and design of user roles and application controls, including certain reports, automated jobs and interfaces.

The material weakness did not result in any identified misstatements to the condensed consolidated interim financial statements. However, if not timely remediated, the material weakness could impact maintaining effective systematic access, as well as the effectiveness of IT-dependent controls (such as automated controls and underlying information that supports the effectiveness of IT system-generated data and reports to address the risk of material misstatement).

Remedial Measures

Management has been actively developing and executing remedial plans following the ERP implementation. The remedial efforts are planned to be completed during the course of management’s annual assessment of the effectiveness of its internal control over financial reporting and include the following:

•Establishment of a plan to stabilize the ERP system for the classes of transactions with inadequate initial system design, including the continued execution of manual control activities to address the periods of time with systematic deficiencies;

•Enhancement of the design of provisioning and review of user access to confirm that such access, including privileged access and segregation of duties, was appropriate during the period following implementation, as validating user access and segregation of duties for appropriateness at quarter-end is substantially complete;

•Improvement of the consistency of manually reviewing the appropriateness of changes to the ERP environment for proper authorization, testing, and implementation until a change management tool can be implemented to centrally retain this evidence; and

•Completion of end-to-end business process walkthroughs to identify the points in the process for each significant class of transactions where risk of material misstatement exists to validate the design and operational effectiveness of responsive controls, including application controls, such as system configuration, reports, automated jobs and interfaces.

Management believes the foregoing efforts will effectively remediate the material weakness; however, remediation will not be considered complete until the relevant controls operate effectively for a sufficient period of time and this conclusion is reached through testing to validate effectiveness. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may take additional measures to address control deficiencies or modify the remedial efforts and timeline described above.

The Company started the remediation process outlined above prior to March 31, 2024.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

From time to time, the Company’s officers and directors enter into equity trading plans with their brokers, which are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Securities and Exchange Act of 1934 (a “Rule 10b5-1 Trading Plan”). A Rule 10b5-1 Trading Plan is a written agreement between the officer or director and such person’s broker that pre-establishes the formula for determining the amounts, prices, and dates of Valvoline common stock and does not permit the officer or director to exercise any subsequent influence over how, when or whether to effect purchases or sales. In addition, the officer or director must represent that he or she is not aware of any material nonpublic information concerning Valvoline or its common stock upon execution of the Rule 10b5-1 Trading Plan. The Company’s insider trading policy requires a 90-day cooling-off period before transactions may be executed pursuant an officer’s or director’s Rule 10b5-1 Trading Plan.

During the three months ended March 31, 2024, no director or officer, as defined in Rule 16a-1(f), of Valvoline adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non Rule 10b5-1 trading arrangement” as defined in Item 408 of Regulation S-K.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, Valvoline is ~~involved in~~party to lawsuits, claims and other legal ~~actions~~proceedings that arise in the ordinary course of business. ~~While Valvoline cannot predict with certainty~~For a description of Valvoline's legal proceedings, refer to Note 8 of the ~~outcome, costs recognized with respect~~Notes to ~~such actions were immaterial during the three months ended December 31, 2017. Valvoline does not have any currently pending claims or litigation which Valvoline believes, individually or~~Condensed Consolidated Financial Statements included in ~~the aggregate, will have a material adverse effect~~Item 1 of Part I of this Quarterly Report on its financial position, results of operations, liquidity or capital resources. While Valvoline cannot predict with certainty the outcome of such matters, where appropriate, adequate reserves have been recorded, which were not material as of December 31, 2017. There is a reasonable possibility that a loss exceeding amounts already recognized may be incurred related to these matters; however, Valvoline currently believes that such potential losses will not be material.Form 10-Q.

ITEM 1A. RISK FACTORS

~~During~~Information about the ~~period covered by this report, there were no material changes from the~~Company’s risk factors ~~previously disclosed~~is contained in ~~Valvoline's~~Item 1A of Part I in Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2023. Except for the addition of the risk factor set forth below, there have been no material changes to the Company’s risk factors previously disclosed.

The Company’s recently implemented ERP system has adversely impacted Valvoline’s internal controls and working capital and could continue to negatively impact the business if remedial efforts are not timely and effective.

Valvoline relies upon its ERP application to assist in managing certain business processes and summarizing operational and financial results. Following the sale of the former Global Products reportable segment in fiscal 2023, and as part of Valvoline’s continued evolution to a standalone retail business, the Company has been in the process of separating certain business processes, information systems and applications that were previously shared to support both businesses. On January 1, 2024, Valvoline implemented a new ERP application intended to better accommodate the retail business model and support the Company’s continued growth.

A material weakness in internal control over financial reporting arose in connection with the Company’s implementation of the new ERP system and its related impact on IT general controls, which included deficiencies related to certain business processes that were not adequately designed at the time of system implementation. While the ERP system is intended to ultimately improve and enhance business processes, its implementation resulted in disruptions to maintaining an effective internal control environment and the timely processing of invoices and billings to franchisee, independent operator and fleet customers. Although the new ERP application is not currently utilized in the day-to-day operations of Valvoline’s retail stores and there have been no material impacts on its ability to serve customers to-date, the conversion to any new IT system exposes the Company to additional risks and possible continued disruptions, including the loss of information, unauthorized access and systematic changes, disruption to normal operations, and risks associated with integrations with other applications and processes.

Implementing the new ERP system has required, and the efforts associated with mitigation, remediation, and enhancements will continue to require, the investment of significant personnel and financial resources. Failure to adequately and timely address any known or potential issues to ensure the new ERP system operates as intended could result in unexpected incremental costs and diversion of management’s attention and resources, further interruptions or delays in processes and challenges with vendor and customer relationships, difficulty in achieving and maintaining effective internal controls and issuing timely and accurate financial results. Valvoline management has implemented a remedial plan, as described in Item 4, Evaluation of Disclosure Controls and Procedures, which is expected to be completed by the end of fiscal 2024. However, management cannot provide any assurance that such remedial measures, or any other remedial measures taken, will be effective and identify or address all inherent risks from implementing an ERP application. If this remediation fails or other material weaknesses arise, it may adversely affect operating results, the trading price of Valvoline’s common stock, internal control over financial reporting, or the ability to effectively manage the business.

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

~~During the three months ended December 31, 2017, the~~The Company repurchased ~~1.6~~approximately 1 million shares of its common stock ~~for $39~~during the three months ended March 31, 2024, utilizing the $40.4 million ~~under~~remaining on the ~~2017~~2022 Share Repurchase Authorization. Under the authorization, shares may be repurchased on the open market, through Rule 10b5-1 trading plans, Rule 10b-18 repurchase programs and accelerated share acquisition programs. As of December 31, 2017, $61 million remains available for repurchase under this authorization, and on January 31, 2018, the Board of Directors of Valvoline authorized the Company to repurchase up to $300 million of its common stock through September 30, 2020, which amount is in addition to the 2017 Share Repurchase Authorization.

Share repurchase activity during the three months ended ~~December~~March 31, ~~2017 was as~~2024 follows:


Monthly period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Dollar value of shares that may yet be purchased under the plans or programs (in millions)
January 1, 2024 - January 31, 2024	—			—	$	40.4
February 1, 2024 - February 29, 2024	849,511	$	40.55	849,511	$	5.9
March 1, 2024 - March 31, 2024	136,557	$	43.51	136,557	$	—
Total	986,068	$	40.96	986,068

Fiscal Period
Total Number of Shares Purchased⁽¹⁾
Average Price Paid per Share, including Commission
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾

Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)⁽²⁾
October 1, 2017 to
October 31, 2017
—
$ —
—
$ 100
November 1, 2017 to November 30, 2017 747,265
$ 24.04
737,629
$ 82
December 1, 2017 to
December 31, 2017
875,728
$ 24.58
875,728
$ 61
Total 1,622,993
1,613,357

⁽¹⁾Total number of shares purchased includes both shares repurchased under the Board of Directors authorization described above, as well as vested restricted stock awards purchased to cover withholding taxes.

⁽²⁾Further information regarding the Company's share repurchases can be found in Note 12 of the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

ITEM 6. EXHIBITS



10.1*












31.1*		First Amendment to the Transfer and Administration Agreement, dated as of November 20, 2017, among Valvoline LLC, Lex Capital LLC, the Originators, the Investors, Letter of Credit Issuers, Managing Agents and Administrators party thereto, and PNC Bank National Association, as agent for the Investors.

31.1*	Certification of ~~Samuel J. Mitchell, Jr.,~~Lori A. Flees, Chief Executive Officer of Valvoline, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification of Mary E. Meixelsperger, Chief Financial Officer of Valvoline, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32**	Certification of ~~Samuel J. Mitchell, Jr.,~~Lori A. Flees, Chief Executive Officer of Valvoline, and Mary E. Meixelsperger, Chief Financial Officer of Valvoline, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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~~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 files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Statements of Comprehensive Income for the three months ended December 31, 2017~~Data File (formatted as inline XBRL and 2016, (ii) the Condensed Consolidated Balance Sheets at December 31, 2017 and September 30, 2017, (iii) the Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2017 and 2016, and (iv) the Notes to Condensed Consolidated Financial Statements.contained in Exhibit 101).

* Filed herewith.

^SM ~~Service mark, Valvoline or its subsidiaries, registered in various countries.~~** Furnished herewith.

™ Trademark, Valvoline or its subsidiaries, registered in various countries.

^†~~Trademark owned by a third party.~~SM Service mark, Valvoline or its subsidiaries, registered in various countries.

~~SIGNATURE~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			VALVOLINE INC.
					(Registrant)
			~~VALVOLINE INC.~~
May 10, 2024			~~(Registrant)~~
By:
~~February 8, 2018~~	~~By:~~	/s/ Mary E. Meixelsperger
				Mary E. Meixelsperger
				Chief Financial Officer


Index to Notes to Condensed Consolidated Financial Statements			Page

Note 1 - Basis of Presentation and Significant Accounting Policies			8
Note 2 - Discontinued Operations			9
Note 3 - Fair Value Measurements			10
Note 4 - Business Combinations			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			15
Note 10 - Supplemental Financial Information			15


		Page

	~~Page~~
PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Condensed Consolidated Statements of Comprehensive Income
~~For the three months ended December 31, 2017 and 2016~~	3

Condensed Consolidated Balance Sheets
~~As of December 31, 2017 and September 30, 2017~~	4

Condensed Consolidated Statements of Cash Flows
~~For the three months ended December 31, 2017 and 2016~~	5

Condensed Consolidated Statements of Stockholders' Equity		6

Notes to Condensed Consolidated Financial Statements		67

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		2516

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		4328

ITEM 4. CONTROLS AND PROCEDURES		4328

ITEM 5. OTHER INFORMATION		30

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS		4431

ITEM 1A. RISK FACTORS		4431

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		4432

ITEM 6. EXHIBITS		4533

SIGNATURE		34



	Three months ended December 31
(In millions except per share data - unaudited)	2017			2016
Sales	$	545		$	489
Cost of sales	350			304
Gross profit	195			185

Selling, general and administrative expenses	114			95
Separation costs	2			6
Equity and other income	(9		)	(10		)
Operating income	88			94
Net pension and other postretirement plan non-service income and remeasurement adjustments	(10		)	(26		)
Net interest and other financing expense	14			10
Income before income taxes	84			110
Income tax expense	94			38
Net (loss) income	$	(10	)	$	72

NET (LOSS) INCOME PER SHARE
Basic	$	(0.05	)	$	0.35
Diluted	$	(0.05	)	$	0.35

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	202			205
Diluted	202			205

DIVIDENDS PAID PER COMMON SHARE	$	0.07		$	0.05

COMPREHENSIVE (LOSS) INCOME
Net (loss) income	$	(10	)	$	72
Other comprehensive income (loss), net of tax
Unrealized translation gain (loss)	1			(9		)
Pension and other postretirement obligation adjustment	(2		)	(2		)
Other comprehensive loss	(1		)	(11		)
Comprehensive (loss) income	$	(11	)	$	61



(In millions except per share amounts - unaudited)	December 31 2017			September 30 2017
Assets
Current assets
Cash and cash equivalents	$	115		$	201
Accounts receivable, net	418			385
Inventories, net	170			175
Other current assets	32			29
Total current assets	735			790
Noncurrent assets
Property, plant and equipment, net	384			391
Goodwill and intangibles, net	393			335
Equity method investments	33			30
Deferred income taxes	196			281
Other noncurrent assets	86			88
Total noncurrent assets	1,092			1,125
Total assets	$	1,827		$	1,915

Liabilities and Stockholders’ Deficit
Current liabilities
Short-term debt	$	—		$	75
Current portion of long-term debt	19			15
Trade and other payables	141			192
Accrued expenses and other liabilities	208			196
Total current liabilities	368			478
Noncurrent liabilities
Long-term debt	1,147			1,034
Employee benefit obligations	331			342
Other noncurrent liabilities	175			178
Total noncurrent liabilities	1,653			1,554
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; 201 and 203 shares issued and outstanding at December 31, 2017 and September 30, 2017	2			2
Paid-in capital	—			5
Retained deficit	(238		)	(167		)
Accumulated other comprehensive income	42			43
Total stockholders’ deficit	(194		)	(117		)
Total liabilities and stockholders’ deficit	$	1,827		$	1,915



	Three months ended December 31
(In millions - unaudited)	2017			2016
Cash flows from operating activities
Net (loss) income	$	(10	)	$	72
Adjustments to reconcile net income (loss) to cash flows from operating activities
Depreciation and amortization	11			9
Debt issuance cost and discount amortization	1			1
Deferred income taxes	85			—
Equity income from affiliates	(5		)	(4		)
Distributions from equity affiliates	3			—
Pension contributions	(3		)	(3		)
Gain on pension and other postretirement plan remeasurements	—			(8		)
Stock-based compensation expense	4			1
Change in assets and liabilities ^(a)
Accounts receivable	(34		)	10
Inventories	7			(2		)
Payables and accrued liabilities	(40		)	23
Other assets and liabilities	1			(11		)
Total cash provided by operating activities	20			88
Cash flows from investing activities
Additions to property, plant and equipment	(14		)	(9		)
Acquisitions, net of cash acquired	(60		)	—
Other investing activities, net	—			(1		)
Total cash used in investing activities	(74		)	(10		)
Cash flows from financing activities
Net transfers to Ashland	—			(2		)
Proceeds from borrowings, net of issuance costs	44			75
Repayments on borrowings	(4		)	(79		)
Repurchase of common stock	(37		)	—
Purchase of additional ownership in subsidiary	(15		)	—
Cash dividends paid	(15		)	(10		)
Other financing activities	(4		)	—
Total cash used in financing activities	(31		)	(16		)
Effect of currency exchange rate changes on cash and cash equivalents	(1		)	2
(Decrease) increase in cash and cash equivalents	(86		)	64
Cash and cash equivalents - beginning of period	201			172
Cash and cash equivalents - end of period	$	115		$	236



	December 31, 2017				September 30, 2017
			Quoted prices in active markets for identical assets				Quoted prices in active markets for identical assets
(In millions)	Fair Value		Level 1		Fair Value		Level 1
Assets
Cash equivalents ^(a)	$	24	$	24	$	46	$	46
Foreign currency derivatives ^(b)	1		1		1		1
Non-qualified trust funds ^(c)	30		30		30		30
Total assets at fair value	$	55	$	55	$	77	$	77

Liabilities
Foreign currency derivatives ^(d)	$	1	$	1	$	1	$	1
Total liabilities at fair value	$	1	$	1	$	1	$	1


~~(b)~~	~~Included in~~ ~~Other current assets~~ ~~in the Condensed Consolidated Balance Sheets.~~


~~(c)~~	~~As of December 31, 2017, $2 million of this balance is included in~~ ~~Other current assets, with the remainder included in~~ ~~Other noncurrent assets~~ ~~in the Condensed Consolidated Balance Sheets. As of September 30, 2017, this balance is included in~~ ~~Other noncurrent assets~~ ~~in the Condensed Consolidated Balance Sheets.~~


~~(d)~~	~~Included in~~ ~~Accrued expense and other liabilities~~ ~~in the Condensed Consolidated Balance Sheets.~~



(In millions)	Core North America		Quick Lubes		International		Total
September 30, 2017	$	89	$	201	$	40	$	330
Acquisitions ^(a)	—		30		—		30
December 31, 2017	$	89	$	231	$	40	$	360



(In millions)
Years ending September 30 (estimated)
2018	$	5
2019	$	5
2020	$	5
2021	$	4
2022	$	4



(In millions)	December 31 2017			September 30 2017
2025 Notes	$	400		$	400
2024 Notes	375			375
Term Loans	281			285
Trade Receivables Facility	120			75
Revolver	—			—
Other ^(a)	(10		)	(11		)
Total debt	$	1,166		$	1,124
Short-term debt	—			75
Current portion of long-term debt	19			15
Long-term debt	$	1,147		$	1,034



	Three months ended
	December 31
(In millions except per share data)	2017			2016
Numerator
Net (loss) income	$	(10	)	$	72
Denominator
Weighted average shares used to compute basic EPS	202			205
Effect of dilutive securities ^(a)	—			—
Weighted average shares used to compute diluted EPS	202			205

(Loss) earnings per share
Basic	$	(0.05	)	$	0.35
Diluted	$	(0.05	)	$	0.35



(In millions)
Balance as of September 30, 2017		$	(117	)

	Net loss	(10		)
	Repurchases of common stock ^(a)	(39		)
	Stock-based compensation plans	2
	Dividends paid, $0.0745 per common share	(15		)
	Purchase of remaining ownership interest in subsidiary ^(b)	(14		)
	Accumulated other comprehensive income, net of tax:
	Unrealized currency translation gain	1
	Amortization of pension and other postretirement prior service credits in income ^(c)	(2		)

Balance as of December 31, 2017		$	(194	)


~~(b)~~	~~Refer to Note 3 for details regarding the Company's purchase of the remaining ownership interest in a controlled and consolidated subsidiary during the three months ended December 31, 2017.~~


~~(a)~~	~~Unallocated and other includes $7~~(a)Includes $0.2 million of expense in the three months ended December 31, 2017 related to adjustments associated with Ashland tax indemnities driven by tax reform legislation, as well as separation costs of $2 million and $6 million for the three months ending December 31, 2017 and 2016, respectively.



Condensed Consolidating Balance Sheets
As of December 31, 2017
(In millions)	Valvoline Inc. (Parent Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	18	$	97	$	—		$	115
Accounts receivable, net	—			84		435		(101		)	418
Inventories, net	—			94		76		—			170
Other current assets	—			29		3		—			32
Total current assets	—			225		611		(101		)	735
Noncurrent assets
Property, plant and equipment, net	—			346		38		—			384
Goodwill and intangibles, net	—			391		2		—			393
Equity method investments	—			33		—		—			33
Investment in subsidiaries	622			444		—		(1,066		)	—
Deferred income taxes	127			55		14		—			196
Other noncurrent assets	254			78		6		(252		)	86
Total noncurrent assets	1,003			1,347		60		(1,318		)	1,092
Total assets	$	1,003		$	1,572	$	671	$	(1,419	)	$	1,827

Liabilities and Stockholders' Deficit
Current Liabilities
Current portion of long-term debt	$	19		$	—	$	—	$	—		$	19
Trade and other payables	—			192		50		(101		)	141
Accrued expenses and other liabilities	119			55		34		—			208
Total current liabilities	138			247		84		(101		)	368
Noncurrent liabilities
Long-term debt	1,025			2		120		—			1,147
Employee benefit obligations	—			309		22		—			331
Other noncurrent liabilities	34			392		1		(252		)	175
Total noncurrent liabilities	1,059			703		143		(252		)	1,653
Commitments and contingencies
Stockholders' (deficit) equity	(194		)	622		444		(1,066		)	(194		)
Total liabilities and stockholders' deficit/equity	$	1,003		$	1,572	$	671	$	(1,419	)	$	1,827



Condensed Consolidating Balance Sheets
As of September 30, 2017
(In millions)	Valvoline Inc. (Parent Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	99	$	102	$	—		$	201
Accounts receivable, net	—			57		389		(61		)	385
Inventories, net	—			94		81		—			175
Other current assets	—			25		4		—			29
Total current assets	—			275		576		(61		)	790
Noncurrent assets
Property, plant and equipment, net	—			353		38		—			391
Goodwill and intangibles, net	—			333		2		—			335
Equity method investments	—			30		—		—			30
Investment in subsidiaries	606			447		—		(1,053		)	—
Deferred income taxes	145			122		14		—			281
Other noncurrent assets	314			80		6		(312		)	88
Total noncurrent assets	1,065			1,365		60		(1,365		)	1,125
Total assets	$	1,065		$	1,640	$	636	$	(1,426	)	$	1,915

Liabilities and Stockholders' Deficit
Current Liabilities
Short-term debt	$	—		$	—	$	75	$	—		$	75
Current portion of long-term debt	15			—		—		—			15
Trade and other payables	2			198		53		(61		)	192
Accrued expenses and other liabilities	103			60		33		—			196
Total current liabilities	120			258		161		(61		)	478
Noncurrent liabilities
Long-term debt	1,032			2		—		—			1,034
Employee benefit obligations	—			321		21		—			342
Other noncurrent liabilities	30			453		7		(312		)	178
Total noncurrent liabilities	1,062			776		28		(312		)	1,554
Commitments and contingencies
Stockholders' (deficit) equity	(117		)	606		447		(1,053		)	(117		)
Total liabilities and stockholders' deficit/equity	$	1,065		$	1,640	$	636	$	(1,426	)	$	1,915


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

Business Overview			16
Results of Operations - Consolidated Review			19

Financial Position, Liquidity and Capital Resources			25
New Accounting Pronouncements			28
Critical Accounting Policies and Estimates			28



(In millions)	Year over year change - Quarter
Pricing	$	20
Volume	10
Product mix	6
Currency exchange	7
Acquisitions	13
Change in sales	$	56



(In millions)	Year over year change - Quarter
Volume and product mix	$	7
Acquisitions	3
Currency exchange	2
Price and cost	(2		)
Change in gross profit	$	10



		Company-owned
		First Quarter 2018		Fourth Quarter 2017		Third Quarter 2017		Second Quarter 2017		First Quarter 2017

Beginning of period		384		383		374		347		342
	Opened	2		2		1		—		—
	Acquired	—		1		—		28		—
	Conversions between company-owned and franchise	56		—		9		—		5
	Closed	—		(2	)	(1	)	(1	)	—
End of period		442		384		383		374		347

		Franchise
		First Quarter 2018		Fourth Quarter 2017		Third Quarter 2017		Second Quarter 2017		First Quarter 2017

Beginning of period		743		730		734		729		726
	Opened	11		15		6		7		10
	Acquired	—		—		—		—		—
	Conversions between company-owned and franchise	(56	)	—		(9	)	—		(5	)
	Closed	(1	)	(2	)	(1	)	(2	)	(2	)
End of period		697		743		730		734		729

Total VIOC Stores		1,139		1,127		1,113		1,108		1,076



	December 31		September 30
(In millions)	2017		2017
Short-term debt	$	—	$	75
Long-term debt (including current portion and debt issuance cost discounts) ^(a)	1,166		1,049
Total debt	$	1,166	$	1,124



Fiscal Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share, including Commission		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)⁽²⁾
October 1, 2017 to October 31, 2017	—	$	—	—	$	100
November 1, 2017 to November 30, 2017	747,265	$	24.04	737,629	$	82
December 1, 2017 to December 31, 2017	875,728	$	24.58	875,728	$	61
Total	1,622,993			1,613,357