Document Entity Information
Document Entity Information - shares | 9 Months Ended | |
Jun. 30, 2018 | Jul. 31, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | VALVOLINE INC | |
Entity Central Index Key | 1,674,910 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 190,747,020 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Income - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Net Income (Loss) Attributable to Parent [Abstract] | ||||
Sales | $ 577 | $ 534 | $ 1,691 | $ 1,537 |
Cost of sales | 376 | 337 | 1,088 | 957 |
Gross profit | 201 | 197 | 603 | 580 |
Selling, general and administrative expenses | 110 | 102 | 328 | 294 |
Legacy and separation-related expenses, net | (3) | 13 | 14 | 25 |
Equity and other income | (8) | (5) | (29) | (20) |
Operating income | 102 | 87 | 290 | 281 |
Net pension and other postretirement plan non-service income and remeasurement adjustments | (10) | (17) | (30) | (60) |
Net interest and other financing expenses | 15 | 10 | 45 | 28 |
Income before income taxes | 97 | 94 | 275 | 313 |
Income tax expense | 33 | 38 | 154 | 114 |
Net income | $ 64 | $ 56 | $ 121 | $ 199 |
NET INCOME PER SHARE | ||||
Basic (usd per share) | $ 0.33 | $ 0.27 | $ 0.61 | $ 0.97 |
Diluted (usd per share) | $ 0.33 | $ 0.27 | $ 0.61 | $ 0.97 |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||
Basic (shares) | 195 | 204 | 199 | 204 |
Diluted (shares) | 196 | 204 | 200 | 204 |
Dividends paid per common share (usd per share) | $ 0.07 | $ 0.05 | $ 0.22 | $ 0.15 |
COMPREHENSIVE INCOME | ||||
Net income | $ 64 | $ 56 | $ 121 | $ 199 |
Other comprehensive (loss) income, net of tax | ||||
Unrealized translation (loss) gain | (13) | 6 | (9) | 3 |
Amortization of pension and other postretirement plan prior service credit | (3) | (2) | (7) | (6) |
Other comprehensive (loss) gain | (16) | 4 | (16) | (3) |
Comprehensive income | $ 48 | $ 60 | $ 105 | $ 196 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Jun. 30, 2018 | Sep. 30, 2017 |
Current assets | ||
Cash and cash equivalents | $ 107 | $ 201 |
Accounts receivable, net | 461 | 385 |
Inventories, net | 196 | 175 |
Other current assets | 26 | 29 |
Total current assets | 790 | 790 |
Noncurrent assets | ||
Property, plant and equipment, net | 399 | 391 |
Goodwill and intangibles, net | 398 | 335 |
Equity method investments | 33 | 30 |
Deferred income taxes | 147 | 281 |
Other noncurrent assets | 82 | 88 |
Total noncurrent assets | 1,059 | 1,125 |
Total assets | 1,849 | 1,915 |
Current liabilities | ||
Short-term debt | 0 | 75 |
Current portion of long-term debt | 26 | 15 |
Trade and other payables | 176 | 192 |
Accrued expenses and other liabilities | 223 | 196 |
Total current liabilities | 425 | 478 |
Noncurrent liabilities | ||
Long-term debt | 1,231 | 1,034 |
Employee benefit obligations | 303 | 342 |
Other noncurrent liabilities | 178 | 178 |
Total noncurrent liabilities | 1,712 | 1,554 |
Commitments and contingencies | ||
Stockholders’ deficit | ||
Preferred stock, no par value, 40 shares authorized; no shares issued and outstanding | 0 | 0 |
Common stock, par value $0.01 per share, 400 shares authorized; 193 and 203 shares issued and outstanding at June 30, 2018 and September 30, 2017, respectively | 2 | 2 |
Paid-in capital | 6 | 5 |
Retained deficit | (323) | (167) |
Accumulated other comprehensive income | 27 | 43 |
Total stockholders’ deficit | (288) | (117) |
Total liabilities and stockholders’ deficit | $ 1,849 | $ 1,915 |
Condensed Consolidated Balance4
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2018 | Sep. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred stock authorized (shares) | 40,000,000 | 40,000,000 |
Preferred stock issued (shares) | 0 | 0 |
Preferred stock outstanding (shares) | 0 | 0 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock authorized (shares) | 400,000,000 | 400,000,000 |
Common stock issued (shares) | 193,000,000 | 203,000,000 |
Common stock outstanding (shares) | 193,000,000 | 203,000,000 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | ||
Cash flows from operating activities | |||
Net income | $ 121 | $ 199 | |
Adjustments to reconcile net income to cash flows from operating activities | |||
Depreciation and amortization | 39 | 30 | |
Debt issuance cost and discount amortization | 2 | 2 | |
Deferred income taxes | 71 | 0 | |
Equity income from affiliates | (12) | (10) | |
Distributions from equity affiliates | 8 | 7 | |
Pension contributions | (13) | (16) | |
Gain on pension and other postretirement plan remeasurements | 0 | (8) | |
Gain on sale of assets | (4) | 0 | |
Foreign currency exchange loss | 3 | 0 | |
Stock-based compensation expense | 10 | 6 | |
Change in assets and liabilities | |||
Accounts receivable | [1] | (80) | (39) |
Inventories | [1] | (23) | (41) |
Payables and accrued liabilities | [1] | 12 | 43 |
Other assets and liabilities | [1] | 47 | (16) |
Total cash provided by operating activities | 181 | 157 | |
Cash flows from investing activities | |||
Additions to property, plant and equipment | (51) | (43) | |
Acquisitions, net of cash acquired | (71) | (66) | |
Proceeds from sale of operations | 5 | 0 | |
Total cash used in investing activities | (117) | (109) | |
Cash flows from financing activities | |||
Net transfers from Ashland | 0 | 5 | |
Proceeds from borrowings, net of issuance costs | 170 | 75 | |
Repayments on borrowings | (39) | (87) | |
Repurchases of common stock | (220) | (50) | |
Purchase of additional ownership in subsidiary | (15) | 0 | |
Cash dividends paid | (45) | (30) | |
Other financing activities | (6) | 0 | |
Total cash used in financing activities | (155) | (87) | |
Effect of currency exchange rate changes on cash and cash equivalents | (3) | (1) | |
Decrease in cash and cash equivalents | (94) | (40) | |
Cash and cash equivalents - beginning of period | 201 | 172 | |
Cash and cash equivalents - end of period | $ 107 | $ 132 | |
[1] | Excludes changes resulting from operations acquired or sold. |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | 9 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed consolidated financial statements have been prepared by Valvoline Inc. (“Valvoline” or the “Company”) in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and Securities and Exchange Commission (“SEC”) regulations for interim financial reporting, which do not include all information and footnote disclosures normally included in annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017. The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. In the opinion of management, the assumptions underlying the condensed consolidated financial statements for these interim periods are reasonable, and all adjustments considered necessary for a fair presentation have been made and are of a normal recurring nature unless otherwise disclosed herein. The results for the interim periods are not necessarily indicative of results to be expected for the entire year. Certain prior period amounts have been reclassified to conform to the current presentation. Recent accounting pronouncements A description of new U.S. GAAP accounting standards issued and adopted during the current year is required in interim financial reporting. A detailed listing of recent accounting standards relevant to Valvoline is included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2017. The following standards relevant to Valvoline were either issued or adopted in the current year, or are expected to have a meaningful impact on Valvoline in future periods. Recently adopted In the first fiscal quarter of 2018, Valvoline adopted the following: • In July 2015, the Financial Accounting Standards Board (“FASB”) issued accounting guidance to simplify the subsequent measurement of certain inventories by replacing the current lower of cost or market test with a lower of cost or net realizable value test. The guidance applies only to inventories for which cost is determined by methods other than last-in, first out (“LIFO”) and retail inventory methods. Valvoline adopted this guidance prospectively on October 1, 2017. Valvoline utilizes LIFO to value approximately 70% of its gross inventory and there were no material differences in the Company’s previous valuation methodology for its remaining inventory using lower of cost or market to lower of cost or net realizable value. • In March 2017, the FASB issued accounting guidance that changed how employers who sponsor defined benefit pension and/or postretirement benefit plans present the net periodic benefit cost in the Condensed Consolidated Statements of Comprehensive Income. This guidance requires employers to present the service cost component of net periodic benefit cost in the same caption as other employee compensation costs for services rendered 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 within the Condensed Consolidated Statements of Comprehensive Income, which reduced previously reported operating income by $17 million and $60 million for the three and nine months ended June 30, 2017, respectively. Issued but not yet adopted In May 2014, 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 risk and rewards under current guidance. While the Company is nearing the completion of its assessment of the accounting required under the new revenue recognition guidance and completing documentation of its conclusions, the Company’s revenue is primarily generated from the sale and service delivery of engine and automotive products to customers, which is not accounted for under industry-specific guidance and generally consists of a single delivery element whereby revenue is recognized at the point in time when ownership, risks and rewards transfer. Accordingly, Valvoline believes that most revenue transactions recorded under the new guidance will be substantially consistent with the treatment under existing guidance, and the impact of adoption is not expected to be material to net earnings on an ongoing basis. Management will finalize its assessment and will adopt the new guidance in the first fiscal quarter of 2019. Valvoline plans to adopt this guidance using the modified retrospective method, which will recognize the cumulative effect of the changes in retained earnings at October 1, 2018, but will not retrospectively apply the new guidance to prior periods. The Company expects to adjust retained deficit at adoption primarily related to the timing of certain sales made to distributors and currently does not expect this adjustment will be material to the Condensed Consolidated Balance Sheet. In addition, the Company expects immaterial impacts to reclassify certain activities in the Condensed Consolidated Statements of Comprehensive Earnings on an ongoing basis following adoption. The specific impacts of adoption of the new guidance will be dependent on facts and circumstances at adoption and could vary from management’s preliminary estimates. The Company anticipates expanded footnote disclosures under the new revenue guidance, including disaggregation of revenue, pro forma impacts of changes to the financial statements in the initial year of adoption, and qualitative disclosures related to the nature and terms of its sales, timing of the transfer of control and judgments used in the application of the five-step model. The Company is also in the process of identifying and implementing appropriate changes to business processes to support recognition and disclosure under the new guidance. 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. This new guidance is effective for the Company in the first quarter of fiscal 2020 using a modified retrospective approach. The Company has begun planning its assessment and implementation process, including identifying all forms of its outstanding leases globally, as well as analyzing the practical expedients and determining the specific impacts on its condensed consolidated financial statements. While the Company’s evaluation of this guidance is in the early stages, adoption is expected to have a material impact on the Condensed Consolidated Balance Sheet as the majority of the Company’s operating leases are expected to be recorded by establishing right of use assets and associated lease liabilities. The Company also anticipates expanded footnote disclosures related to its leases under the new guidance. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | FAIR VALUE MEASUREMENTS The following table sets forth, by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis: June 30, 2018 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) $ 16 $ 16 $ 46 $ 46 Foreign currency derivatives (b) — — 1 1 Non-qualified trust funds (c) 28 28 30 30 Total assets at fair value $ 44 $ 44 $ 77 $ 77 Liabilities Foreign currency derivatives (d) $ 2 $ 2 $ 1 $ 1 Total liabilities at fair value $ 2 $ 2 $ 1 $ 1 (a) Included in Cash and cash equivalents in the Condensed Consolidated Balance Sheets. (b) Included in Other current assets in the Condensed Consolidated Balance Sheets. (c) As of June 30, 2018, $3 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 expenses and other liabilities in the Condensed Consolidated Balance Sheets. During the three and nine months ended June 30, 2018 and 2017, there were no transfers between levels of the fair value hierarchy. 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 measured at fair value using prevailing market rates. Derivatives The Company uses derivatives 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 at a fixed rate on a future date of twelve months or less. The Company had outstanding contracts with highly-rated financial institutions with notional values of $ 100 million and $ 47 million as of June 30, 2018 and September 30, 2017, respectively. Gains and losses on these instruments are recognized in Selling, general and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income as exchange rates change the fair value of these instruments and upon settlement to offset the remeasurement gain or loss on the related foreign currency-denominated exposures in the same period. During the three and nine months ended June 30, 2018 and 2017, losses recognized were not material. Non-qualified trust fund 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. During the three and nine months ended June 30, 2018 and 2017, gains and losses related to these investments were not material and were immediately recognized within Selling, general and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income. Long-term debt The Company’s outstanding fixed rate senior notes consist of 5.500% senior unsecured notes due 2024 with an aggregate principal amount of $375 million issued in July 2016 (the “2024 Notes”) and 4.375% senior unsecured notes due 2025 with an aggregate principal amount of $400 million issued in August 2017 (the “2025 Notes” and together with the 2024 Notes, the “Senior Notes”). The fair values of the Senior Notes shown in the table below are based on recent trading values, which are considered Level 2 inputs within the fair value hierarchy. Long-term debt is included in the Condensed Consolidated Balance Sheets at carrying value, rather than fair value, and is therefore excluded from the fair value table above. Carrying values shown in the following table are net of unamortized discounts and issuance costs. June 30, 2018 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 $ 380 $ 370 $ 5 $ 401 $ 370 $ 5 2025 Notes 386 395 5 408 394 6 Total $ 766 $ 765 $ 10 $ 809 $ 764 $ 11 Refer to Note 7 for more information on the Senior Notes and Valvoline’s other debt instruments that have variable interest rates, and accordingly, their carrying amounts approximate fair value. |
Acquisitions and Dispositions
Acquisitions and Dispositions | 9 Months Ended |
Jun. 30, 2018 | |
Business Combinations [Abstract] | |
Acquisitions and Dispositions | ACQUISITIONS AND DISPOSITIONS Quick Lubes store acquisitions During the nine months ended June 30, 2018, the Company acquired 63 service center stores for a total of $71 million . These acquisitions included 60 previous franchise service center stores, of which 56 were acquired from Henley Bluewater LLC in northern Ohio and Michigan on October 2, 2017 for $60 million . During the nine months ended June 30, 2017, acquisitions totaled $70 million and included 42 service center stores, of which 14 were previous franchises. The results of operations of the acquired stores, which were not material, have been included in the Company’s condensed consolidated financial statements from the date of each acquisition, and accordingly, pro forma disclosure of financial information has not been presented. The Company’s acquisitions are accounted for such that the assets acquired and liabilities assumed are recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill. 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. A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the nine months ended June 30: (In millions) 2018 2017 Inventory $ 1 $ 1 Property, plant and equipment 2 — Intangible assets 68 66 Other noncurrent assets — 3 Net assets acquired $ 71 $ 70 Included within the intangible assets above is approximately $42 million of goodwill and $26 million of reacquired franchise rights recognized during the nine months ended June 30, 2018. Prior to the acquisition of franchise service center stores, Valvoline licensed the right to operate quick lube service centers, including use of the Company’s trademarks and trade name. In connection with these acquisitions, Valvoline reacquired those rights and recognized separate definite-lived intangible assets, which are being amortized on a straight-line basis over the weighted average remaining term of approximately seven years. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market. During the nine months ended June 30, 2018, the purchase price allocation for the acquisition of certain franchise locations during the three months ended June 30, 2017 was adjusted to reduce goodwill and increase amortizable intangible assets by $6 million . The Company believes that these changes were not material and does not expect any additional changes to the preliminary purchase price allocations summarized above for acquisitions completed during the nine months ended June 30, 2018. 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 an adjustment to Paid-in capital and Retained deficit . Dispositions During the nine months ended June 30, 2018, the Company sold two service center stores to a franchisee within the Quick Lubes reportable segment. Valvoline received proceeds of approximately $5 million and recognized a gain of $3 million on the sale of net assets that was recorded in Equity and other income in the Condensed Consolidated Statements of Comprehensive Income for the nine months ended June 30, 2018. |
Accounts Receivable
Accounts Receivable | 9 Months Ended |
Jun. 30, 2018 | |
Receivables [Abstract] | |
Accounts Receivable | ACCOUNTS RECEIVABLE The following summarizes Valvoline’s accounts receivable: (In millions) June 30 September 30 Trade and other accounts receivable $ 467 $ 390 Less: Allowance for doubtful accounts (6 ) (5 ) $ 461 $ 385 In May 2017, Valvoline’s former parent company, Ashland Global Holdings Inc. (which together with its predecessors and consolidated subsidiaries is referred to as “Ashland”), distributed its remaining interest in Valvoline to Ashland shareholders (the “Distribution”). Prior to 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 nine months ended June 30, 2017 , $40 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 drafts or bills of exchange to the financial institution. During the nine months ended June 30, 2018 , Valvoline sold $50 million of accounts receivable to the financial institution. |
Inventories
Inventories | 9 Months Ended |
Jun. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | INVENTORIES 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) June 30 September 30 Finished products $ 202 $ 180 Raw materials, supplies and work in process 34 31 LIFO reserves (37 ) (33 ) Obsolete inventory reserves (3 ) (3 ) $ 196 $ 175 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles | 9 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangibles | 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 nine months ended June 30, 2018. (In millions) Core North America Quick Lubes International Total September 30, 2017 $ 89 $ 201 $ 40 $ 330 Acquisitions (a) — 36 — 36 Dispositions (b) — (1 ) — (1 ) June 30, 2018 $ 89 $ 236 $ 40 $ 365 (a) Activity associated with the acquisitions of 56 service center stores from Henley Bluewater LLC and seven other quick lubes service center stores, as well as adjustments related to prior year acquisitions. Refer to Note 3 for details regarding the acquisitions. (b) Activity associated with the derecognition of goodwill from the sale and disposition of two quick lubes service center stores. Refer to Note 3 for further details. Other intangible assets Valvoline’s purchased intangible assets were specifically identified when acquired and have finite lives. Intangible assets were approximately $40 million in gross carrying amount, net of $7 million in accumulated amortization as of June 30, 2018 and were reported in Goodwill and intangibles, net on the Condensed Consolidated Balance Sheet. Amortization expense recognized during the three and nine months ended June 30, 2018 was approximately $1 million and $3 million , respectively. Amortization expense recognized on intangible assets during the prior year periods was not material. Estimated amortization expense for each of the next five fiscal years, assuming no additional amortizable intangible assets, is as follows for the years ended September 30: (In millions) 2018 $ 5 2019 $ 5 2020 $ 5 2021 $ 5 2022 $ 4 |
Debt Obligations
Debt Obligations | 9 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt Obligations | DEBT OBLIGATIONS The following table summarizes Valvoline’s short-term borrowings and long-term debt: (In millions) June 30 September 30 2017 2025 Notes $ 400 $ 400 2024 Notes 375 375 Term Loans 274 285 Trade Receivables Facility 174 75 Revolver 44 — Other (a) (10 ) (11 ) Total debt $ 1,257 $ 1,124 Short-term debt — 75 Current portion of long-term debt 26 15 Long-term debt $ 1,231 $ 1,034 (a) At June 30, 2018, 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 the issuance of 4.375% senior unsecured notes due 2025 with an aggregate principal amount of $400 million . The net proceeds from the offering of the 2025 Notes were $394 million (after deducting initial purchasers ’ discounts and debt issuance costs), which were used to make a voluntary contribution to the Company’s qualified U.S. pension plan. During July 2016, Valvoline completed the issuance of 5.500% senior unsecured notes due 2024 with an aggregate principal amount of $375 million . The net proceeds from the offering of the 2024 Notes was $370 million (after deducting initial purchasers’ discounts and debt issuance costs), which were transferred to Valvoline’s former parent, Ashland. The Senior Notes are subject to customary events of default for similar debt securities, which if triggered may accelerate payment 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 governing indentures. The Senior Notes are guaranteed by each of Valvoline’s subsidiaries that guarantee obligations under the existing senior secured credit facility described below. 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 June 30, 2018 and September 30, 2017, the Term Loans had outstanding principal balances of $274 million and $285 million , respectively. At June 30, 2018, there was $44 million outstanding under the Revolver, and there was no amount outstanding at September 30, 2017. During the nine months ended June 30, 2018, Valvoline borrowed $70 million and made payments of $26 million on the Revolver. As of June 30, 2018, the total borrowing capacity remaining under the Revolver was $395 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 June 30, 2018, Valvoline was in compliance with all covenants under the 2016 Senior Credit Agreement. 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 nine months ended June 30, 2018, Valvoline made payments of $1 million and borrowed $100 million under the Trade Receivables Facility, using the proceeds to supplement the Company’s daily cash needs. The Company accounts for the Trade Receivables Facility as secured borrowings. Based upon the maturity dates in place in each respective period, as of June 30, 2018, the $174 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 June 30, 2018 was less than $1 million . The financing subsidiary owned $282 million and $247 million of outstanding accounts receivable as of June 30, 2018 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 2.9% and 2.6% for the three and nine months ended June 30, 2018, respectively, and 1.8% and 1.7% for the three and nine months ended June 30, 2017. 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. |
Income Taxes
Income Taxes | 9 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 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 items related specifically to interim periods. Income tax expense for the three months ended June 30, 2018 was $ 33 million , an effective tax rate of 34.0% , compared to expense of $38 million , an effective tax rate of 40.4% , for the three months ended June 30, 2017. The decrease in income tax expense and the effective tax rate was primarily driven by the reduction in the corporate federal income tax rate resulting from the enactment of U.S. tax reform legislation in December 2017, which was more than offset by an increase in income tax expense of approximately $7 million resulting from the enactment of Kentucky tax reform legislation in April 2018. Income tax expense for the nine months ended June 30, 2018 was $ 154 million , an effective tax rate of 56.0% , compared to expense of $114 million , an effective tax rate of 36.4% , for the nine months ended June 30, 2017. The increase in income tax expense and the effective tax rate was principally driven by the enactment of U.S. and Kentucky tax reform legislation, which resulted in a net increase in income tax expense of approximately $76 million that more than offset benefits related to the reduction in the estimated annual effective tax rate for fiscal 2018. Tax reform legislation On December 22, 2017, the President of the United States signed into law tax reform legislation (the “Act”), which generally became effective January 1, 2018. The Act includes a number of provisions, including lowering the federal corporate 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 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. Based on the effective date of the rate reduction in the Act, the Company’s federal corporate statutory income tax rate will be a blended rate of 24.5% for fiscal 2018, declining to 21% for fiscal 2019 and beyond. During the nine months ended June 30, 2018, enactment of the Act resulted in the following provisional impacts on income tax expense: • The remeasurement of net deferred tax assets at the lower enacted corporate tax rate resulted in a net $66 million increase in income tax expense; • Income tax expense increased by $4 million related to the deemed repatriation tax on unremitted non-U.S. earnings and profits and $2 million for withholding taxes due to the Company’s change in indefinite reinvestment assertion regarding its undistributed earnings; 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 impacts of the Act recorded during the nine months ended June 30, 2018 are provisional, 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. 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. Many states have enacted state specific tax reform and legislation in response to the Act. In general, these impacts are not material to the Company’s financial statements. Valvoline is incorporated in Kentucky, which enacted income tax reform on April 13, 2018. The provisions of Kentucky tax reform generally become effective in fiscal 2019 and include a number of provisions, notably lowering the corporate income tax rate from a maximum of 6% to 5%. While the Company expects this rate reduction will ultimately benefit Valvoline, during the three and nine months ended June 30, 2018, the enactment of Kentucky tax reform resulted in the following impacts on income tax expense: • The remeasurement of net deferred tax assets at the lower enacted Kentucky corporate tax rate resulted in a net $3 million increase in income tax expense; and • The remeasurement of the net indemnity liabilities associated with the Tax Matters Agreement increased pre-tax income by $4 million and generated $4 million of income tax expense primarily related to the lower expected utilization of tax attributes payable to Ashland. The Company will continue to monitor enacted state legislation and make relevant updates to estimates when warranted. 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 and the reduction of the Kentucky corporate income tax rate from 6% to 5% under Kentucky tax reform, the Company revalued its net deferred tax assets, which resulted in a reduction in the value of net deferred tax assets of approximately $69 million that was recorded as additional income tax expense in the Company’s Condensed Consolidated Statements of Comprehensive Income for the nine months ended June 30, 2018 as noted above. 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 $23 million gross liability, but allows for the realization of $19 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 nine months ended June 30, 2018. 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 reevaluated its intentions to indefinitely reinvest its non-U.S. undistributed earnings. As a result, the Company no longer intends to indefinitely reinvest non-U.S. undistributed earnings and accordingly, recorded $2 million for estimated incremental withholding taxes during the nine months ended June 30, 2018. The Company is presently not aware of any significant restrictions on the ability to transfer these funds, and additional taxes and other costs that may arise between the deemed and actual distribution dates are not estimated to be material. Tax Matters Agreement Total liabilities related to obligations owed to Ashland under the Tax Matters Agreement were $65 million and $62 million at June 30, 2018 and September 30, 2017, respectively. At June 30, 2018 and September 30, 2017, $3 million and $1 million was recorded in Accrued expenses and other liabilities, respectively, with the remainder recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheets at each balance sheet date. Under the Tax Matters Agreement, Valvoline has net indemnification obligations for a number of tax matters, including certain taxes that arise upon audit or examination related to the periods prior to the Distribution and Valvoline’s utilization of legacy tax attributes contributed as part of the separation from Ashland. During the three and nine months ended June 30, 2018, Valvoline recognized a $3 million benefit and $5 million of expense, respectively, in Legacy and separation-related expenses, net for the estimated adjustments in net amounts due and a $2 million benefit during the three and nine months ended June 30, 2017. During the nine months ended June 30, 2018, expense was recognized due to the increase in estimated net amounts due to Ashland principally as a result of the reduction of the federal tax rate and the reduced federal benefit of state tax deductions, which drove increases in the expected utilization of tax attributes. These impacts were partially offset by the benefit recognized in the three months ended June 30, 2018 for the decline in estimated net amounts due to Ashland primarily related to the rate reduction and associated decrease in certain state tax deductions as a result of Kentucky tax reform. In connection with these impacts recorded in Legacy and separation-related expenses, net , Valvoline recognized income tax expense of $4 million and $1 million during the three and nine months ended June 30, 2018, respectively, related to these changes. Uncertainties in income taxes The Company records reserves related to its uncertain tax positions when it is more likely than not that the tax position may not be sustained on examination by the taxing authorities. As of June 30, 2018, the Condensed Consolidated Balance Sheet includes an $11 million liability for uncertain income tax positions which is primarily recorded within the obligations owed to Ashland under the Tax Matters Agreement described above. During the nine months ended June 30, 2018, 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. 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 quarter ended September 30, 2018. |
Employee Benefit Plans
Employee Benefit Plans | 9 Months Ended |
Jun. 30, 2018 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | EMPLOYEE BENEFIT PLANS The total pension and other postretirement benefit income was $10 million and $29 million during the three and nine months ended June 30, 2018 , respectively, and $16 million and $58 million during the three and nine months ended June 30, 2017 , respectively. Contributions to the U.S. non-qualified and non-U.S. pension plans during the nine months ended June 30, 2018 were $13 million . For the remainder of fiscal 2018 , Valvoline expects to contribute approximately $5 million to these plans, for a total of $18 million in fiscal 2018 . Components of net periodic benefit income Due to the freeze of U.S. pension benefits effective September 30, 2016, service costs are related to certain international pension benefits, which are reported in the respective reportable segment and caption of the Condensed Consolidated Statements of Comprehensive Income as the other employee compensation costs from services rendered. 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 nine months ended June 30, 2017 as shown in the table below. The following table summarizes the components of pension and other postretirement benefit income for the three and nine months ended June 30: Other postretirement benefits Pension benefits (In millions) 2018 2017 2018 2017 Three months ended June 30 Service cost $ — $ 1 $ — $ — Interest cost 19 22 — — Expected return on plan assets (26 ) (36 ) — — Amortization of prior service credit — — (3 ) (3 ) Net periodic benefit income $ (7 ) $ (13 ) $ (3 ) $ (3 ) Nine months ended June 30 Service cost $ 1 $ 2 $ — $ — Interest cost 56 65 1 1 Expected return on plan assets (78 ) (109 ) — — Amortization of prior service credit — — (9 ) (9 ) Actuarial gain — — — (8 ) Net periodic benefit income $ (21 ) $ (42 ) $ (8 ) $ (16 ) Multiemployer pension plan partial withdrawal Valvoline participates in two multiemployer pension plans that provide pension benefits to certain union-represented employees under the terms of collective bargaining agreements. Valvoline assumed responsibility for contributions to these plans in connection with the separation from Ashland. Contributions to these plans were not material for the three and nine months ended June 30, 2018 and 2017. In April 2018, Valvoline received a demand for payment of a partial withdrawal liability assessment of approximately $30 million related to the sale of a business by Ashland in fiscal 2011 and the associated reduction in the number of employees covered by one of the multiemployer pension plans and the related decline in contributions. The Company is vigorously contesting the assessment and the calculation method utilized in determining the assessment and will submit a formal arbitration request, if necessary. The Company’s current best estimate of cost associated with this assessment is not material to the condensed consolidated financial statements as of and for the periods ended June 30, 2018. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES From time to time, Valvoline is party to lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company establishes liabilities for the outcome of such matters where losses are determined to be probable and reasonably estimable. Where appropriate, the Company has recorded liabilities with respect to these matters, which were immaterial for the periods presented as reflected in the condensed consolidated financial statements herein. There are certain claims and legal proceedings pending where loss is not determined to be probable or reasonably estimable, and therefore, accruals have not been made. In addition, Valvoline discloses matters for which management believes a material loss is at least reasonably possible. In all instances, management has assessed each matter based on current information available and made a judgment concerning its potential outcome, giving due consideration to the amount and nature of the claim and the probability of success. As disclosed herein, the Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable. Although the ultimate resolution of these matters cannot be predicted with certainty and there can be no assurances that the actual amounts required to satisfy liabilities from these matters will not exceed the amounts reflected in the condensed consolidated financial statements, based on information available at this time, it is the opinion of management that such pending claims or proceedings will not have a material adverse effect on its condensed consolidated financial statements. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | EARNINGS PER SHARE The following is the computation of basic and diluted earnings per share (“EPS”) for the three and nine months ended June 30, 2018 and 2017 . EPS is reported under the treasury stock method. Three months ended Nine months ended June 30 June 30 (In millions except per share data) 2018 2017 2018 2017 Numerator Net income $ 64 $ 56 $ 121 $ 199 Denominator Weighted average shares used to compute basic EPS 195 204 199 204 Dilutive effect of share-based awards (a) 1 — 1 — Weighted average shares used to compute diluted EPS 196 204 200 204 Earnings per share Basic $ 0.33 $ 0.27 $ 0.61 $ 0.97 Diluted $ 0.33 $ 0.27 $ 0.61 $ 0.97 (a) During the three and nine months ended June 30, 2017 , there was no t a significant dilutive impact from potential common shares. |
Stockholders' Deficit
Stockholders' Deficit | 9 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Deficit | STOCKHOLDERS’ DEFICIT Changes in stockholders’ deficit in the nine months ended June 30, 2018 were as follows: (In millions) Balance as of September 30, 2017 $ (117 ) Net income 121 Repurchases of common stock (a) (224 ) Stock-based compensation plans 7 Dividends paid, $0.2235 per common share (45 ) Purchase of remaining ownership interest in subsidiary (b) (14 ) Accumulated other comprehensive loss, net of tax: Unrealized currency translation loss (9 ) Amortization of pension and other postretirement prior service credits in income (c) (7 ) Balance as of June 30, 2018 $ (288 ) (a) During the nine months ended June 30, 2018, the Company repurchased approximately 10 million shares of its common stock for $224 million. Upon repurchase, shares are retired. (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 nine months ended June 30, 2018. (c) 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. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS At June 30, 2018, Valvoline had total net obligations due to Ashland of $78 million , of which $3 million was recorded in Accrued expenses and other liabilities and the remainder was primarily recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheets. At September 30, 2017 , Valvoline had total net obligations due to Ashland of $74 million , of which $2 million was recorded in Accrued expenses and other liabilities and the remainder was primarily recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheets. These liabilities generally relate to net obligations due to Ashland under the Tax Matters Agreement as well as reimbursements for certain other contractual obligations, including those that are intended to transfer to Valvoline as part of the Distribution of Ashland’s remaining interest in Valvoline. Refer to Note 8 for additional details regarding the Tax Matters Agreement and related obligations. |
Reportable Segment Information
Reportable Segment Information | 9 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Reportable Segment Information | 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 retailers for consumers to perform their own automotive and engine maintenance, as well as to installer and heavy-duty customers who use Valvoline products to service vehicles and equipment. • 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: (In millions) Three months ended June 30 Nine months ended June 30 2018 2017 2018 2017 Sales Core North America $ 264 $ 258 $ 773 $ 748 Quick Lubes 167 139 479 394 International 146 137 439 395 Consolidated sales $ 577 $ 534 $ 1,691 $ 1,537 Operating income (loss) Core North America $ 41 $ 48 $ 130 $ 156 Quick Lubes 38 34 111 94 International 20 18 63 56 Total operating segments $ 99 $ 100 $ 304 $ 306 Unallocated and other (a) 3 (13 ) (14 ) (25 ) Consolidated operating income $ 102 $ 87 $ 290 $ 281 (a) Unallocated and other includes legacy and separation-related expenses, net. |
Guarantor Financial Information
Guarantor Financial Information | 9 Months Ended |
Jun. 30, 2018 | |
Condensed Financial Information Disclosure [Abstract] | |
Guarantor Financial Information | 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 international 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. 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 June 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 456 $ 137 $ (16 ) $ 577 Cost of sales — 294 98 (16 ) 376 Gross profit — 162 39 — 201 Selling, general and administrative expenses 3 81 26 — 110 Legacy and separation-related expenses, net (3 ) — — — (3 ) Equity and other (income) expenses — (11 ) 3 — (8 ) Operating income — 92 10 — 102 Net pension and other postretirement plan non-service income and remeasurement adjustments — (10 ) — — (10 ) Net interest and other financing expenses 14 1 — — 15 (Loss) income before income taxes (14 ) 101 10 — 97 Income tax (benefit) expense (1 ) 30 4 — 33 Equity in net income of subsidiaries (77 ) (6 ) — 83 — Net income $ 64 $ 77 $ 6 $ (83 ) $ 64 Total comprehensive income (loss) $ 48 $ 61 $ (5 ) $ (56 ) $ 48 Condensed Consolidating Statements of Comprehensive Income For the three months ended June 30, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 418 $ 131 $ (15 ) $ 534 Cost of sales — 259 93 (15 ) 337 Gross profit — 159 38 — 197 Selling, general and administrative expenses 3 77 22 — 102 Legacy and separation-related expenses, net (2 ) 15 — — 13 Equity and other (income) expenses — (8 ) 3 — (5 ) Operating (loss) income (1 ) 75 13 — 87 Net pension and other postretirement plan non-service income and remeasurement adjustments — (17 ) — — (17 ) Net interest and other financing expenses 8 1 1 — 10 (Loss) income before income taxes (9 ) 91 12 — 94 Income tax (benefit) expense (2 ) 37 3 — 38 Equity in net income of subsidiaries (63 ) (9 ) — 72 — Net income $ 56 $ 63 $ 9 $ (72 ) $ 56 Total comprehensive income $ 60 $ 67 $ 19 $ (86 ) $ 60 Condensed Consolidating Statements of Comprehensive Income For the nine months ended June 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 1,319 $ 413 $ (41 ) $ 1,691 Cost of sales — 832 297 (41 ) 1,088 Gross profit — 487 116 — 603 Selling, general and administrative expenses 10 247 71 — 328 Legacy and separation-related expenses, net 4 10 — — 14 Equity and other (income) expenses — (37 ) 8 — (29 ) Operating (loss) income (14 ) 267 37 — 290 Net pension and other postretirement plan non-service income and remeasurement adjustments — (30 ) — — (30 ) Net interest and other financing expenses 39 4 2 — 45 (Loss) income before income taxes (53 ) 293 35 — 275 Income tax expense 16 128 10 — 154 Equity in net income of subsidiaries (190 ) (25 ) — 215 — Net income $ 121 $ 190 $ 25 $ (215 ) $ 121 Total comprehensive income $ 105 $ 174 $ 17 $ (191 ) $ 105 Condensed Consolidating Statements of Comprehensive Income For the nine months ended June 30, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 1,197 $ 382 $ (42 ) $ 1,537 Cost of sales — 724 275 (42 ) 957 Gross profit — 473 107 — 580 Selling, general and administrative expenses 7 218 69 — 294 Legacy and separation-related expenses, net (2 ) 27 — — 25 Equity and other (income) expenses — (29 ) 9 — (20 ) Operating (loss) income (5 ) 257 29 — 281 Net pension and other postretirement plan non-service income and remeasurement adjustments — (60 ) — — (60 ) Net interest and other financing expenses 25 2 1 — 28 (Loss) income before income taxes (30 ) 315 28 — 313 Income tax (benefit) expense (10 ) 115 9 — 114 Equity in net income of subsidiaries (219 ) (19 ) — 238 — Net income $ 199 $ 219 $ 19 $ (238 ) $ 199 Total comprehensive income $ 196 $ 216 $ 27 $ (243 ) $ 196 Condensed Consolidating Balance Sheets As of June 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Assets Current assets Cash and cash equivalents $ — $ 7 $ 100 $ — $ 107 Accounts receivable, net 1 98 517 (155 ) 461 Inventories, net — 112 84 — 196 Other current assets — 23 3 — 26 Total current assets 1 240 704 (155 ) 790 Noncurrent assets Property, plant and equipment, net — 363 36 — 399 Goodwill and intangibles, net — 397 1 — 398 Equity method investments — 33 — — 33 Investment in subsidiaries 762 477 — (1,239 ) — Deferred income taxes 60 73 14 — 147 Other noncurrent assets 51 75 5 (49 ) 82 Total noncurrent assets 873 1,418 56 (1,288 ) 1,059 Total assets $ 874 $ 1,658 $ 760 $ (1,443 ) $ 1,849 Liabilities and Stockholders’ Deficit Current Liabilities Current portion of long-term debt $ 26 $ — $ — $ — $ 26 Trade and other payables — 280 51 (155 ) 176 Accrued expenses and other liabilities 50 135 38 — 223 Total current liabilities 76 415 89 (155 ) 425 Noncurrent liabilities Long-term debt 1,055 2 174 — 1,231 Employee benefit obligations — 285 18 — 303 Other noncurrent liabilities 31 194 2 (49 ) 178 Total noncurrent liabilities 1,086 481 194 (49 ) 1,712 Commitments and contingencies Stockholders’ (deficit) equity (288 ) 762 477 (1,239 ) (288 ) Total liabilities and stockholders’ deficit/equity $ 874 $ 1,658 $ 760 $ (1,443 ) $ 1,849 Condensed Consolidating Balance Sheets As of September 30, 2017 (In millions) Valvoline Inc. 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 nine months ended June 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Cash flow (used in) provided by operating activities $ (28 ) $ 287 $ (78 ) $ — $ 181 Cash flows from investing activities Additions to property, plant and equipment — (48 ) (3 ) — (51 ) Acquisitions, net of cash required — (71 ) — — (71 ) Proceeds from sale of operations — 5 — — 5 Return of advance from subsidiary 263 — — (263 ) — Total cash provided by (used in) investing activities 263 (114 ) (3 ) (263 ) (117 ) Cash flows from financing activities Proceeds from borrowings, net of issuance costs 70 — 100 — 170 Repayments on borrowings (38 ) — (1 ) — (39 ) Repurchases of common stock (220 ) — — — (220 ) Purchase of additional ownership in subsidiary — — (15 ) — (15 ) Cash dividends paid (45 ) — — — (45 ) Other financing activities (2 ) (2 ) (2 ) — (6 ) Other intercompany activity, net — (263 ) — 263 — Total cash (used in) provided by financing activities (235 ) (265 ) 82 263 (155 ) Effect of currency exchange rate changes on cash and cash equivalents — — (3 ) — (3 ) Decrease in cash and cash equivalents — (92 ) (2 ) — (94 ) Cash and cash equivalents - beginning of year — 99 102 — 201 Cash and cash equivalents - end of period $ — $ 7 $ 100 $ — $ 107 Condensed Consolidating Statements of Cash Flows For the nine months ended June 30, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Cash flows provided by (used in) operating activities $ 101 $ 112 $ (56 ) $ — $ 157 Cash flows from investing activities Additions to property, plant and equipment — (42 ) (1 ) — (43 ) Acquisitions, net of cash required — (66 ) — — (66 ) Advance from subsidiary 66 — — (66 ) — Total cash provided by (used in) investing activities 66 (108 ) (1 ) (66 ) (109 ) Cash flows from financing activities Net transfers from Ashland 5 — — — 5 Proceeds from borrowings — — 75 — 75 Repayments on borrowings (87 ) — — — (87 ) Repurchases of common stock (50 ) — — — (50 ) Cash dividends paid (30 ) — — — (30 ) Other intercompany activity, net (5 ) (61 ) — 66 — Total cash (used in) provided by financing activities (167 ) (61 ) 75 66 (87 ) Effect of currency exchange rate changes on cash and cash equivalents — — (1 ) — (1 ) (Decrease) increase in cash and cash equivalents — (57 ) 17 — (40 ) Cash and cash equivalents - beginning of year — 93 79 — 172 Cash and cash equivalents - end of period $ — $ 36 $ 96 $ — $ 132 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS Quick Lubes acquisition On July 13, 2018, the Company completed the acquisition of the business assets of Great Canadian Oil Change Franchising Ltd. to add 73 franchise service center stores in Canada for approximately $53 million . This acquisition provides an opportunity to expand Valvoline’s Quick Lubes footprint outside of the United States and increases the Quick Lubes system to more than 1,200 company-owned and franchised locations in North America. Dividend declared On July 24, 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 September 17, 2018 to shareholders of record on August 31, 2018. Share repurchases The Company repurchased nearly 2 million shares for an aggregate amount of $42 million in the period from July 1, 2018 through July 31, 2018 pursuant to the Board of Directors authorization on January 31, 2018 to repurchase up to $300 million of common stock through September 30, 2020 (the “2018 Share Repurchase Authorization”). The Company has approximately $134 million in aggregate share repurchase authority remaining under the 2018 Share Repurchase Authorization. Borrowing activity In the period from July 1, 2018 through July 31, 2018, the Company had net borrowings of $86 million under the Revolver to fund its daily cash needs, bringing the total borrowing capacity remaining under the Revolver to $309 million due to a reduction of $11 million for letters of credit outstanding. |
Basis of Presentation and Sig22
Basis of Presentation and Significant Accounting Policies (Policies) | 9 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements have been prepared by Valvoline Inc. (“Valvoline” or the “Company”) in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and Securities and Exchange Commission (“SEC”) regulations for interim financial reporting, which do not include all information and footnote disclosures normally included in annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017. The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. In the opinion of management, the assumptions underlying the condensed consolidated financial statements for these interim periods are reasonable, and all adjustments considered necessary for a fair presentation have been made and are of a normal recurring nature unless otherwise disclosed herein. The results for the interim periods are not necessarily indicative of results to be expected for the entire year. Certain prior period amounts have been reclassified to conform to the current presentation. |
Recent accounting pronouncements | Recent accounting pronouncements A description of new U.S. GAAP accounting standards issued and adopted during the current year is required in interim financial reporting. A detailed listing of recent accounting standards relevant to Valvoline is included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2017. The following standards relevant to Valvoline were either issued or adopted in the current year, or are expected to have a meaningful impact on Valvoline in future periods. Recently adopted In the first fiscal quarter of 2018, Valvoline adopted the following: • In July 2015, the Financial Accounting Standards Board (“FASB”) issued accounting guidance to simplify the subsequent measurement of certain inventories by replacing the current lower of cost or market test with a lower of cost or net realizable value test. The guidance applies only to inventories for which cost is determined by methods other than last-in, first out (“LIFO”) and retail inventory methods. Valvoline adopted this guidance prospectively on October 1, 2017. Valvoline utilizes LIFO to value approximately 70% of its gross inventory and there were no material differences in the Company’s previous valuation methodology for its remaining inventory using lower of cost or market to lower of cost or net realizable value. • In March 2017, the FASB issued accounting guidance that changed how employers who sponsor defined benefit pension and/or postretirement benefit plans present the net periodic benefit cost in the Condensed Consolidated Statements of Comprehensive Income. This guidance requires employers to present the service cost component of net periodic benefit cost in the same caption as other employee compensation costs for services rendered 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 within the Condensed Consolidated Statements of Comprehensive Income, which reduced previously reported operating income by $17 million and $60 million for the three and nine months ended June 30, 2017, respectively. Issued but not yet adopted In May 2014, 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 risk and rewards under current guidance. While the Company is nearing the completion of its assessment of the accounting required under the new revenue recognition guidance and completing documentation of its conclusions, the Company’s revenue is primarily generated from the sale and service delivery of engine and automotive products to customers, which is not accounted for under industry-specific guidance and generally consists of a single delivery element whereby revenue is recognized at the point in time when ownership, risks and rewards transfer. Accordingly, Valvoline believes that most revenue transactions recorded under the new guidance will be substantially consistent with the treatment under existing guidance, and the impact of adoption is not expected to be material to net earnings on an ongoing basis. Management will finalize its assessment and will adopt the new guidance in the first fiscal quarter of 2019. Valvoline plans to adopt this guidance using the modified retrospective method, which will recognize the cumulative effect of the changes in retained earnings at October 1, 2018, but will not retrospectively apply the new guidance to prior periods. The Company expects to adjust retained deficit at adoption primarily related to the timing of certain sales made to distributors and currently does not expect this adjustment will be material to the Condensed Consolidated Balance Sheet. In addition, the Company expects immaterial impacts to reclassify certain activities in the Condensed Consolidated Statements of Comprehensive Earnings on an ongoing basis following adoption. The specific impacts of adoption of the new guidance will be dependent on facts and circumstances at adoption and could vary from management’s preliminary estimates. The Company anticipates expanded footnote disclosures under the new revenue guidance, including disaggregation of revenue, pro forma impacts of changes to the financial statements in the initial year of adoption, and qualitative disclosures related to the nature and terms of its sales, timing of the transfer of control and judgments used in the application of the five-step model. The Company is also in the process of identifying and implementing appropriate changes to business processes to support recognition and disclosure under the new guidance. 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. This new guidance is effective for the Company in the first quarter of fiscal 2020 using a modified retrospective approach. The Company has begun planning its assessment and implementation process, including identifying all forms of its outstanding leases globally, as well as analyzing the practical expedients and determining the specific impacts on its condensed consolidated financial statements. While the Company’s evaluation of this guidance is in the early stages, adoption is expected to have a material impact on the Condensed Consolidated Balance Sheet as the majority of the Company’s operating leases are expected to be recorded by establishing right of use assets and associated lease liabilities. The Company also anticipates expanded footnote disclosures related to its leases under the new guidance. |
Inventories | INVENTORIES 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. |
Earnings Per Share | EPS is reported under the treasury stock method. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities at Fair Value | The following table sets forth, by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis: June 30, 2018 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) $ 16 $ 16 $ 46 $ 46 Foreign currency derivatives (b) — — 1 1 Non-qualified trust funds (c) 28 28 30 30 Total assets at fair value $ 44 $ 44 $ 77 $ 77 Liabilities Foreign currency derivatives (d) $ 2 $ 2 $ 1 $ 1 Total liabilities at fair value $ 2 $ 2 $ 1 $ 1 (a) Included in Cash and cash equivalents in the Condensed Consolidated Balance Sheets. (b) Included in Other current assets in the Condensed Consolidated Balance Sheets. (c) As of June 30, 2018, $3 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 expenses and other liabilities in the Condensed Consolidated Balance Sheets. |
Summary of Fair Value of Debt | Carrying values shown in the following table are net of unamortized discounts and issuance costs. June 30, 2018 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 $ 380 $ 370 $ 5 $ 401 $ 370 $ 5 2025 Notes 386 395 5 408 394 6 Total $ 766 $ 765 $ 10 $ 809 $ 764 $ 11 |
Acquisitions and Dispositions (
Acquisitions and Dispositions (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Business Combinations [Abstract] | |
Summary of Consideration Paid and Assets and Liabilities Acquired | A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the nine months ended June 30: (In millions) 2018 2017 Inventory $ 1 $ 1 Property, plant and equipment 2 — Intangible assets 68 66 Other noncurrent assets — 3 Net assets acquired $ 71 $ 70 |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Receivables [Abstract] | |
Summary of Accounts Receivable | The following summarizes Valvoline’s accounts receivable: (In millions) June 30 September 30 Trade and other accounts receivable $ 467 $ 390 Less: Allowance for doubtful accounts (6 ) (5 ) $ 461 $ 385 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Summary of Inventory | The following summarizes Valvoline’s inventories: (In millions) June 30 September 30 Finished products $ 202 $ 180 Raw materials, supplies and work in process 34 31 LIFO reserves (37 ) (33 ) Obsolete inventory reserves (3 ) (3 ) $ 196 $ 175 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The following table summarizes the changes in the carrying amount of goodwill by reportable segment and in total during the nine months ended June 30, 2018. (In millions) Core North America Quick Lubes International Total September 30, 2017 $ 89 $ 201 $ 40 $ 330 Acquisitions (a) — 36 — 36 Dispositions (b) — (1 ) — (1 ) June 30, 2018 $ 89 $ 236 $ 40 $ 365 (a) Activity associated with the acquisitions of 56 service center stores from Henley Bluewater LLC and seven other quick lubes service center stores, as well as adjustments related to prior year acquisitions. Refer to Note 3 for details regarding the acquisitions. (b) Activity associated with the derecognition of goodwill from the sale and disposition of two quick lubes service center stores. Refer to Note 3 for further details. |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Estimated amortization expense for each of the next five fiscal years, assuming no additional amortizable intangible assets, is as follows for the years ended September 30: (In millions) 2018 $ 5 2019 $ 5 2020 $ 5 2021 $ 5 2022 $ 4 |
Debt Obligations (Tables)
Debt Obligations (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Short-Term Borrowings and Long-term Debt | The following table summarizes Valvoline’s short-term borrowings and long-term debt: (In millions) June 30 September 30 2017 2025 Notes $ 400 $ 400 2024 Notes 375 375 Term Loans 274 285 Trade Receivables Facility 174 75 Revolver 44 — Other (a) (10 ) (11 ) Total debt $ 1,257 $ 1,124 Short-term debt — 75 Current portion of long-term debt 26 15 Long-term debt $ 1,231 $ 1,034 (a) At June 30, 2018, 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. |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Retirement Benefits [Abstract] | |
Components of Pension and Other Postretirement Benefit Income | The following table summarizes the components of pension and other postretirement benefit income for the three and nine months ended June 30: Other postretirement benefits Pension benefits (In millions) 2018 2017 2018 2017 Three months ended June 30 Service cost $ — $ 1 $ — $ — Interest cost 19 22 — — Expected return on plan assets (26 ) (36 ) — — Amortization of prior service credit — — (3 ) (3 ) Net periodic benefit income $ (7 ) $ (13 ) $ (3 ) $ (3 ) Nine months ended June 30 Service cost $ 1 $ 2 $ — $ — Interest cost 56 65 1 1 Expected return on plan assets (78 ) (109 ) — — Amortization of prior service credit — — (9 ) (9 ) Actuarial gain — — — (8 ) Net periodic benefit income $ (21 ) $ (42 ) $ (8 ) $ (16 ) |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following is the computation of basic and diluted earnings per share (“EPS”) for the three and nine months ended June 30, 2018 and 2017 . EPS is reported under the treasury stock method. Three months ended Nine months ended June 30 June 30 (In millions except per share data) 2018 2017 2018 2017 Numerator Net income $ 64 $ 56 $ 121 $ 199 Denominator Weighted average shares used to compute basic EPS 195 204 199 204 Dilutive effect of share-based awards (a) 1 — 1 — Weighted average shares used to compute diluted EPS 196 204 200 204 Earnings per share Basic $ 0.33 $ 0.27 $ 0.61 $ 0.97 Diluted $ 0.33 $ 0.27 $ 0.61 $ 0.97 (a) During the three and nine months ended June 30, 2017 , there was no t a significant dilutive impact from potential common shares. |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Schedule of Changes in Stockholders' Deficit | Changes in stockholders’ deficit in the nine months ended June 30, 2018 were as follows: (In millions) Balance as of September 30, 2017 $ (117 ) Net income 121 Repurchases of common stock (a) (224 ) Stock-based compensation plans 7 Dividends paid, $0.2235 per common share (45 ) Purchase of remaining ownership interest in subsidiary (b) (14 ) Accumulated other comprehensive loss, net of tax: Unrealized currency translation loss (9 ) Amortization of pension and other postretirement prior service credits in income (c) (7 ) Balance as of June 30, 2018 $ (288 ) (a) During the nine months ended June 30, 2018, the Company repurchased approximately 10 million shares of its common stock for $224 million. Upon repurchase, shares are retired. (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 nine months ended June 30, 2018. (c) 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. |
Reportable Segment Information
Reportable Segment Information (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information | The following table presents sales and operating income for each reportable segment: (In millions) Three months ended June 30 Nine months ended June 30 2018 2017 2018 2017 Sales Core North America $ 264 $ 258 $ 773 $ 748 Quick Lubes 167 139 479 394 International 146 137 439 395 Consolidated sales $ 577 $ 534 $ 1,691 $ 1,537 Operating income (loss) Core North America $ 41 $ 48 $ 130 $ 156 Quick Lubes 38 34 111 94 International 20 18 63 56 Total operating segments $ 99 $ 100 $ 304 $ 306 Unallocated and other (a) 3 (13 ) (14 ) (25 ) Consolidated operating income $ 102 $ 87 $ 290 $ 281 (a) Unallocated and other includes legacy and separation-related expenses, net. |
Guarantor Financial Informati33
Guarantor Financial Information (Tables) | 9 Months Ended |
Jun. 30, 2018 | |
Condensed Financial Information Disclosure [Abstract] | |
Condensed Consolidating Statements of Comprehensive Income | Condensed Consolidating Statements of Comprehensive Income For the three months ended June 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 456 $ 137 $ (16 ) $ 577 Cost of sales — 294 98 (16 ) 376 Gross profit — 162 39 — 201 Selling, general and administrative expenses 3 81 26 — 110 Legacy and separation-related expenses, net (3 ) — — — (3 ) Equity and other (income) expenses — (11 ) 3 — (8 ) Operating income — 92 10 — 102 Net pension and other postretirement plan non-service income and remeasurement adjustments — (10 ) — — (10 ) Net interest and other financing expenses 14 1 — — 15 (Loss) income before income taxes (14 ) 101 10 — 97 Income tax (benefit) expense (1 ) 30 4 — 33 Equity in net income of subsidiaries (77 ) (6 ) — 83 — Net income $ 64 $ 77 $ 6 $ (83 ) $ 64 Total comprehensive income (loss) $ 48 $ 61 $ (5 ) $ (56 ) $ 48 Condensed Consolidating Statements of Comprehensive Income For the three months ended June 30, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 418 $ 131 $ (15 ) $ 534 Cost of sales — 259 93 (15 ) 337 Gross profit — 159 38 — 197 Selling, general and administrative expenses 3 77 22 — 102 Legacy and separation-related expenses, net (2 ) 15 — — 13 Equity and other (income) expenses — (8 ) 3 — (5 ) Operating (loss) income (1 ) 75 13 — 87 Net pension and other postretirement plan non-service income and remeasurement adjustments — (17 ) — — (17 ) Net interest and other financing expenses 8 1 1 — 10 (Loss) income before income taxes (9 ) 91 12 — 94 Income tax (benefit) expense (2 ) 37 3 — 38 Equity in net income of subsidiaries (63 ) (9 ) — 72 — Net income $ 56 $ 63 $ 9 $ (72 ) $ 56 Total comprehensive income $ 60 $ 67 $ 19 $ (86 ) $ 60 Condensed Consolidating Statements of Comprehensive Income For the nine months ended June 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 1,319 $ 413 $ (41 ) $ 1,691 Cost of sales — 832 297 (41 ) 1,088 Gross profit — 487 116 — 603 Selling, general and administrative expenses 10 247 71 — 328 Legacy and separation-related expenses, net 4 10 — — 14 Equity and other (income) expenses — (37 ) 8 — (29 ) Operating (loss) income (14 ) 267 37 — 290 Net pension and other postretirement plan non-service income and remeasurement adjustments — (30 ) — — (30 ) Net interest and other financing expenses 39 4 2 — 45 (Loss) income before income taxes (53 ) 293 35 — 275 Income tax expense 16 128 10 — 154 Equity in net income of subsidiaries (190 ) (25 ) — 215 — Net income $ 121 $ 190 $ 25 $ (215 ) $ 121 Total comprehensive income $ 105 $ 174 $ 17 $ (191 ) $ 105 Condensed Consolidating Statements of Comprehensive Income For the nine months ended June 30, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 1,197 $ 382 $ (42 ) $ 1,537 Cost of sales — 724 275 (42 ) 957 Gross profit — 473 107 — 580 Selling, general and administrative expenses 7 218 69 — 294 Legacy and separation-related expenses, net (2 ) 27 — — 25 Equity and other (income) expenses — (29 ) 9 — (20 ) Operating (loss) income (5 ) 257 29 — 281 Net pension and other postretirement plan non-service income and remeasurement adjustments — (60 ) — — (60 ) Net interest and other financing expenses 25 2 1 — 28 (Loss) income before income taxes (30 ) 315 28 — 313 Income tax (benefit) expense (10 ) 115 9 — 114 Equity in net income of subsidiaries (219 ) (19 ) — 238 — Net income $ 199 $ 219 $ 19 $ (238 ) $ 199 Total comprehensive income $ 196 $ 216 $ 27 $ (243 ) $ 196 |
Condensed Income Statement | Condensed Consolidating Statements of Comprehensive Income For the three months ended June 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 456 $ 137 $ (16 ) $ 577 Cost of sales — 294 98 (16 ) 376 Gross profit — 162 39 — 201 Selling, general and administrative expenses 3 81 26 — 110 Legacy and separation-related expenses, net (3 ) — — — (3 ) Equity and other (income) expenses — (11 ) 3 — (8 ) Operating income — 92 10 — 102 Net pension and other postretirement plan non-service income and remeasurement adjustments — (10 ) — — (10 ) Net interest and other financing expenses 14 1 — — 15 (Loss) income before income taxes (14 ) 101 10 — 97 Income tax (benefit) expense (1 ) 30 4 — 33 Equity in net income of subsidiaries (77 ) (6 ) — 83 — Net income $ 64 $ 77 $ 6 $ (83 ) $ 64 Total comprehensive income (loss) $ 48 $ 61 $ (5 ) $ (56 ) $ 48 Condensed Consolidating Statements of Comprehensive Income For the three months ended June 30, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 418 $ 131 $ (15 ) $ 534 Cost of sales — 259 93 (15 ) 337 Gross profit — 159 38 — 197 Selling, general and administrative expenses 3 77 22 — 102 Legacy and separation-related expenses, net (2 ) 15 — — 13 Equity and other (income) expenses — (8 ) 3 — (5 ) Operating (loss) income (1 ) 75 13 — 87 Net pension and other postretirement plan non-service income and remeasurement adjustments — (17 ) — — (17 ) Net interest and other financing expenses 8 1 1 — 10 (Loss) income before income taxes (9 ) 91 12 — 94 Income tax (benefit) expense (2 ) 37 3 — 38 Equity in net income of subsidiaries (63 ) (9 ) — 72 — Net income $ 56 $ 63 $ 9 $ (72 ) $ 56 Total comprehensive income $ 60 $ 67 $ 19 $ (86 ) $ 60 Condensed Consolidating Statements of Comprehensive Income For the nine months ended June 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 1,319 $ 413 $ (41 ) $ 1,691 Cost of sales — 832 297 (41 ) 1,088 Gross profit — 487 116 — 603 Selling, general and administrative expenses 10 247 71 — 328 Legacy and separation-related expenses, net 4 10 — — 14 Equity and other (income) expenses — (37 ) 8 — (29 ) Operating (loss) income (14 ) 267 37 — 290 Net pension and other postretirement plan non-service income and remeasurement adjustments — (30 ) — — (30 ) Net interest and other financing expenses 39 4 2 — 45 (Loss) income before income taxes (53 ) 293 35 — 275 Income tax expense 16 128 10 — 154 Equity in net income of subsidiaries (190 ) (25 ) — 215 — Net income $ 121 $ 190 $ 25 $ (215 ) $ 121 Total comprehensive income $ 105 $ 174 $ 17 $ (191 ) $ 105 Condensed Consolidating Statements of Comprehensive Income For the nine months ended June 30, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 1,197 $ 382 $ (42 ) $ 1,537 Cost of sales — 724 275 (42 ) 957 Gross profit — 473 107 — 580 Selling, general and administrative expenses 7 218 69 — 294 Legacy and separation-related expenses, net (2 ) 27 — — 25 Equity and other (income) expenses — (29 ) 9 — (20 ) Operating (loss) income (5 ) 257 29 — 281 Net pension and other postretirement plan non-service income and remeasurement adjustments — (60 ) — — (60 ) Net interest and other financing expenses 25 2 1 — 28 (Loss) income before income taxes (30 ) 315 28 — 313 Income tax (benefit) expense (10 ) 115 9 — 114 Equity in net income of subsidiaries (219 ) (19 ) — 238 — Net income $ 199 $ 219 $ 19 $ (238 ) $ 199 Total comprehensive income $ 196 $ 216 $ 27 $ (243 ) $ 196 |
Condensed Consolidating Balance Sheets | Condensed Consolidating Balance Sheets As of June 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Assets Current assets Cash and cash equivalents $ — $ 7 $ 100 $ — $ 107 Accounts receivable, net 1 98 517 (155 ) 461 Inventories, net — 112 84 — 196 Other current assets — 23 3 — 26 Total current assets 1 240 704 (155 ) 790 Noncurrent assets Property, plant and equipment, net — 363 36 — 399 Goodwill and intangibles, net — 397 1 — 398 Equity method investments — 33 — — 33 Investment in subsidiaries 762 477 — (1,239 ) — Deferred income taxes 60 73 14 — 147 Other noncurrent assets 51 75 5 (49 ) 82 Total noncurrent assets 873 1,418 56 (1,288 ) 1,059 Total assets $ 874 $ 1,658 $ 760 $ (1,443 ) $ 1,849 Liabilities and Stockholders’ Deficit Current Liabilities Current portion of long-term debt $ 26 $ — $ — $ — $ 26 Trade and other payables — 280 51 (155 ) 176 Accrued expenses and other liabilities 50 135 38 — 223 Total current liabilities 76 415 89 (155 ) 425 Noncurrent liabilities Long-term debt 1,055 2 174 — 1,231 Employee benefit obligations — 285 18 — 303 Other noncurrent liabilities 31 194 2 (49 ) 178 Total noncurrent liabilities 1,086 481 194 (49 ) 1,712 Commitments and contingencies Stockholders’ (deficit) equity (288 ) 762 477 (1,239 ) (288 ) Total liabilities and stockholders’ deficit/equity $ 874 $ 1,658 $ 760 $ (1,443 ) $ 1,849 Condensed Consolidating Balance Sheets As of September 30, 2017 (In millions) Valvoline Inc. 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 | Condensed Consolidating Statements of Cash Flows For the nine months ended June 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Cash flow (used in) provided by operating activities $ (28 ) $ 287 $ (78 ) $ — $ 181 Cash flows from investing activities Additions to property, plant and equipment — (48 ) (3 ) — (51 ) Acquisitions, net of cash required — (71 ) — — (71 ) Proceeds from sale of operations — 5 — — 5 Return of advance from subsidiary 263 — — (263 ) — Total cash provided by (used in) investing activities 263 (114 ) (3 ) (263 ) (117 ) Cash flows from financing activities Proceeds from borrowings, net of issuance costs 70 — 100 — 170 Repayments on borrowings (38 ) — (1 ) — (39 ) Repurchases of common stock (220 ) — — — (220 ) Purchase of additional ownership in subsidiary — — (15 ) — (15 ) Cash dividends paid (45 ) — — — (45 ) Other financing activities (2 ) (2 ) (2 ) — (6 ) Other intercompany activity, net — (263 ) — 263 — Total cash (used in) provided by financing activities (235 ) (265 ) 82 263 (155 ) Effect of currency exchange rate changes on cash and cash equivalents — — (3 ) — (3 ) Decrease in cash and cash equivalents — (92 ) (2 ) — (94 ) Cash and cash equivalents - beginning of year — 99 102 — 201 Cash and cash equivalents - end of period $ — $ 7 $ 100 $ — $ 107 Condensed Consolidating Statements of Cash Flows For the nine months ended June 30, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Cash flows provided by (used in) operating activities $ 101 $ 112 $ (56 ) $ — $ 157 Cash flows from investing activities Additions to property, plant and equipment — (42 ) (1 ) — (43 ) Acquisitions, net of cash required — (66 ) — — (66 ) Advance from subsidiary 66 — — (66 ) — Total cash provided by (used in) investing activities 66 (108 ) (1 ) (66 ) (109 ) Cash flows from financing activities Net transfers from Ashland 5 — — — 5 Proceeds from borrowings — — 75 — 75 Repayments on borrowings (87 ) — — — (87 ) Repurchases of common stock (50 ) — — — (50 ) Cash dividends paid (30 ) — — — (30 ) Other intercompany activity, net (5 ) (61 ) — 66 — Total cash (used in) provided by financing activities (167 ) (61 ) 75 66 (87 ) Effect of currency exchange rate changes on cash and cash equivalents — — (1 ) — (1 ) (Decrease) increase in cash and cash equivalents — (57 ) 17 — (40 ) Cash and cash equivalents - beginning of year — 93 79 — 172 Cash and cash equivalents - end of period $ — $ 36 $ 96 $ — $ 132 |
Basis of Presentation and Sig34
Basis of Presentation and Significant Accounting Policies (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Percentage of inventory valued using the LIFO method | 70.00% | 70.00% | ||
Reduction to operating income as a result of adopting new accounting guidance | $ (102) | $ (87) | $ (290) | $ (281) |
Accounting Standards Update 2017-07 | ||||
Reduction to operating income as a result of adopting new accounting guidance | $ 17 | $ 60 |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Assets and Liabilities at Fair Value (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions | Jun. 30, 2018 | Sep. 30, 2017 |
Assets | ||
Cash equivalents | $ 16 | $ 46 |
Foreign currency derivatives | 0 | 1 |
Non-qualified trust funds | 28 | 30 |
Total assets at fair value | 44 | 77 |
Liabilities | ||
Foreign currency derivatives | 2 | 1 |
Total liabilities at fair value | 2 | 1 |
Quoted prices in active markets for identical assets, Level 1 | ||
Assets | ||
Cash equivalents | 16 | 46 |
Foreign currency derivatives | 0 | 1 |
Non-qualified trust funds | 28 | 30 |
Total assets at fair value | 44 | 77 |
Liabilities | ||
Foreign currency derivatives | 2 | 1 |
Total liabilities at fair value | 2 | $ 1 |
Other Current Assets | ||
Assets | ||
Non-qualified trust funds | $ 3 |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 | Aug. 31, 2017 | Jul. 31, 2016 |
Senior Notes | 2024 Notes | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Interest rate on senior unsecured notes | 5.50% | |||
Aggregate principal amount | $ 375,000,000 | |||
Senior Notes | 2025 Notes | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Interest rate on senior unsecured notes | 4.375% | |||
Aggregate principal amount | $ 400,000,000 | |||
Foreign Exchange Contract | Not Designated as Hedging Instrument | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Outstanding derivative contracts notional value | $ 100,000,000 | $ 47,000,000 |
Fair Value Measurements - Fair
Fair Value Measurements - Fair Value of Debt (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Sep. 30, 2017 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Unamortized discount and issuance costs | $ 12 | $ 13 |
Level 2 | Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 766 | 809 |
Level 2 | Fair Value | Senior Notes | 2024 Notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 380 | 401 |
Level 2 | Fair Value | Senior Notes | 2025 Notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 386 | 408 |
Level 2 | Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 765 | 764 |
Unamortized discount and issuance costs | 10 | 11 |
Level 2 | Carrying Value | Senior Notes | 2024 Notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 370 | 370 |
Unamortized discount and issuance costs | 5 | 5 |
Level 2 | Carrying Value | Senior Notes | 2025 Notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 395 | 394 |
Unamortized discount and issuance costs | $ 5 | $ 6 |
Acquisitions and Dispositions -
Acquisitions and Dispositions - Additional Information (Details) $ in Millions | Oct. 02, 2017USD ($)franchise | Dec. 31, 2017USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)service_center_storefranchise | Jun. 30, 2017USD ($)service_center_storefranchise | Nov. 30, 2017 | Sep. 30, 2017USD ($) |
Business Acquisition [Line Items] | |||||||
Number of service center stores | service_center_store | 63 | 42 | |||||
Consideration for acquisition | $ 71 | $ 70 | |||||
Number of franchise locations acquired | franchise | 60 | 14 | |||||
Goodwill acquired | $ 365 | $ 330 | |||||
Weighted average remaining term | 7 years | ||||||
Proceeds from disposal | $ 5 | $ 0 | |||||
Gain on sale | 4 | $ 0 | |||||
Henley Bluewater, LLC | |||||||
Business Acquisition [Line Items] | |||||||
Consideration for acquisition | $ 60 | ||||||
Number of franchise locations acquired | franchise | 56 | ||||||
Goodwill acquired | 42 | ||||||
Reacquired franchise rights | $ 26 | ||||||
Purchase accounting adjustment, increase in finite lived intangible assets | $ (6) | ||||||
Thailand | |||||||
Business Acquisition [Line Items] | |||||||
Equity method ownership percentage | 70.00% | ||||||
Additional ownership percentage of joint venture, purchased | 30.00% | ||||||
Consideration paid to acquire additional interest in subsidiary | $ 16 | ||||||
Quick Lubes | |||||||
Business Acquisition [Line Items] | |||||||
Number of service center stores | service_center_store | 7 | ||||||
Goodwill acquired | $ 236 | $ 201 | |||||
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Quick Lubes | |||||||
Business Acquisition [Line Items] | |||||||
Number of service center stores | service_center_store | 2 | ||||||
Proceeds from disposal | $ 5 | ||||||
Gain on sale | $ 3 |
Acquisitions and Dispositions39
Acquisitions and Dispositions - Summary of Consideration Paid and Assets and Liabilities Acquired (Details) - Henley Bluewater, LLC - USD ($) $ in Millions | Jun. 30, 2018 | Mar. 31, 2017 |
Business Acquisition [Line Items] | ||
Inventory | $ 1 | $ 1 |
Property, plant and equipment | 2 | 0 |
Intangible assets | 68 | 66 |
Other noncurrent assets | 0 | 3 |
Net assets acquired | $ 71 | $ 70 |
Accounts Receivable - Summary o
Accounts Receivable - Summary of Accounts Receivable (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Sep. 30, 2017 |
Receivables [Abstract] | ||
Trade and other accounts receivable | $ 467 | $ 390 |
Less: Allowance for doubtful accounts | (6) | (5) |
Accounts receivable | $ 461 | $ 385 |
Accounts Receivable - Narrative
Accounts Receivable - Narrative (Details) - USD ($) $ in Millions | 9 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Receivables [Abstract] | ||
Accounts receivable sold to financial institutions | $ 50 | $ 40 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventory (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Sep. 30, 2017 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 202 | $ 180 |
Raw materials, supplies and work in process | 34 | 31 |
LIFO reserves | (37) | (33) |
Obsolete inventory reserves | (3) | (3) |
Inventories | $ 196 | $ 175 |
Goodwill and Other Intangible43
Goodwill and Other Intangibles - Summary of Goodwill by Segment (Details) $ in Millions | Oct. 02, 2017franchise | Jun. 30, 2018USD ($)service_center_storefranchise | Jun. 30, 2017service_center_storefranchise |
Goodwill [Roll Forward] | |||
Goodwill, beginning balance | $ 330 | ||
Acquisitions | 36 | ||
Dispositions | (1) | ||
Goodwill, ending balance | $ 365 | ||
Number of franchise locations acquired | franchise | 60 | 14 | |
Number of service center stores | service_center_store | 63 | 42 | |
Core North America | |||
Goodwill [Roll Forward] | |||
Goodwill, beginning balance | $ 89 | ||
Acquisitions | 0 | ||
Dispositions | 0 | ||
Goodwill, ending balance | 89 | ||
Quick Lubes | |||
Goodwill [Roll Forward] | |||
Goodwill, beginning balance | 201 | ||
Acquisitions | 36 | ||
Dispositions | (1) | ||
Goodwill, ending balance | $ 236 | ||
Number of service center stores | service_center_store | 7 | ||
International | |||
Goodwill [Roll Forward] | |||
Goodwill, beginning balance | $ 40 | ||
Acquisitions | 0 | ||
Dispositions | 0 | ||
Goodwill, ending balance | 40 | ||
Henley Bluewater, LLC | |||
Goodwill [Roll Forward] | |||
Goodwill, ending balance | $ 42 | ||
Number of franchise locations acquired | franchise | 56 | ||
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Quick Lubes | |||
Goodwill [Roll Forward] | |||
Number of service center stores | service_center_store | 2 |
Goodwill and Other Intangible44
Goodwill and Other Intangibles - Additional Information (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Jun. 30, 2018USD ($) | Jun. 30, 2018USD ($) | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Other intangible assets, net of accumulated amortization | $ 40 | $ 40 |
Accumulated amortization on intangible assets | 7 | 7 |
Amortization expense on intangible assets | $ 1 | $ 3 |
Goodwill and Other Intangible45
Goodwill and Other Intangibles - Future Amortization of Other Intangible Assets (Details) $ in Millions | Jun. 30, 2018USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2,018 | $ 5 |
2,019 | 5 |
2,020 | 5 |
2,021 | 5 |
2,022 | $ 4 |
Debt Obligations - Schedule of
Debt Obligations - Schedule of Short-Term Borrowings and Long Term Debt (Details) - USD ($) | Jun. 30, 2018 | Sep. 30, 2017 |
Debt Instrument [Line Items] | ||
Short-term debt | $ 0 | $ 75,000,000 |
Other | (10,000,000) | (11,000,000) |
Total debt | 1,257,000,000 | 1,124,000,000 |
Current portion of long-term debt | 26,000,000 | 15,000,000 |
Long-term debt | 1,231,000,000 | 1,034,000,000 |
Debt issuance cost discounts | 12,000,000 | 13,000,000 |
Debt acquired through acquisitions | 2,000,000 | 2,000,000 |
Line of Credit | Revolver | ||
Debt Instrument [Line Items] | ||
Long-term debt | 44,000,000 | 0 |
2025 Notes | Senior Notes | ||
Debt Instrument [Line Items] | ||
Debt gross | 400,000,000 | 400,000,000 |
2024 Notes | Senior Notes | ||
Debt Instrument [Line Items] | ||
Debt gross | 375,000,000 | 375,000,000 |
Term Loans | Line of Credit | Secured Debt | ||
Debt Instrument [Line Items] | ||
Debt gross | 274,000,000 | 285,000,000 |
Trade Receivables Facility | Line of Credit | Secured Debt | ||
Debt Instrument [Line Items] | ||
Long-term debt | 174,000,000 | |
Line of Credit | Revolver | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 44,000,000 | 0 |
Line of Credit | Trade Receivables Facility | Secured Debt | ||
Debt Instrument [Line Items] | ||
Short-term debt | $ 75,000,000 |
Debt Obligations - Senior Notes
Debt Obligations - Senior Notes (Details) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Aug. 31, 2017 | Jul. 31, 2016 | Jun. 30, 2018 | Jun. 30, 2017 | |
Debt Instrument [Line Items] | ||||
Proceeds from borrowings | $ 170,000,000 | $ 75,000,000 | ||
Senior Notes | 2025 Notes | ||||
Debt Instrument [Line Items] | ||||
Interest rate on senior unsecured notes | 4.375% | |||
Aggregate principal amount | $ 400,000,000 | |||
Proceeds from borrowings | $ 394,000,000 | |||
Senior Notes | 2024 Notes | ||||
Debt Instrument [Line Items] | ||||
Interest rate on senior unsecured notes | 5.50% | |||
Aggregate principal amount | $ 375,000,000 | |||
Proceeds from borrowings | $ 370,000,000 |
Debt Obligations - Senior Credi
Debt Obligations - Senior Credit Agreement (Details) | 9 Months Ended | |
Jun. 30, 2018USD ($) | Sep. 30, 2017USD ($) | |
2016 Credit Facilities | ||
Debt Instrument [Line Items] | ||
Principal amount of line of credit | $ 1,325,000,000 | |
2016 Credit Facilities | LIBOR | Minimum | ||
Debt Instrument [Line Items] | ||
Spread on variable rates | 1.50% | |
2016 Credit Facilities | LIBOR | Maximum | ||
Debt Instrument [Line Items] | ||
Spread on variable rates | 2.50% | |
2016 Credit Facilities | Base Rate | Minimum | ||
Debt Instrument [Line Items] | ||
Spread on variable rates | 0.50% | |
2016 Credit Facilities | Base Rate | Maximum | ||
Debt Instrument [Line Items] | ||
Spread on variable rates | 1.50% | |
Line of Credit | 2016 Credit Facilities | ||
Debt Instrument [Line Items] | ||
Maximum consolidated interest coverage ratio | 4.5 | |
Minimum consolidated interest coverage ratio | 3 | |
Secured Debt | Term Loans | ||
Debt Instrument [Line Items] | ||
Principal amount of line of credit | $ 875,000,000 | |
Secured Debt | Line of Credit | Term Loans | ||
Debt Instrument [Line Items] | ||
Term of debt | 5 years | |
Outstanding principal balance of debt | $ 274,000,000 | $ 285,000,000 |
Quarterly installments due in fiscal 2018 | 4,000,000 | |
Quarterly installments due in fiscal 2019 | 8,000,000 | |
Quarterly installments due in fiscal 2020 | 8,000,000 | |
Quarterly installments due in fiscal 2021 | 15,000,000 | |
Revolver | ||
Debt Instrument [Line Items] | ||
Principal amount of line of credit | 450,000,000 | |
Borrowings from revolving credit facility | 70,000,000 | |
Repayments of revolving credit facility | 26,000,000 | |
Total borrowing capacity remaining | $ 395,000,000 | |
Revolver | Line of Credit | ||
Debt Instrument [Line Items] | ||
Term of debt | 5 years | |
Long-term debt outstanding amount | $ 44,000,000 | 0 |
Letter of Credit | ||
Debt Instrument [Line Items] | ||
Principal amount of line of credit | 100,000,000 | |
Line of Credit | Revolver | ||
Debt Instrument [Line Items] | ||
Long-term debt outstanding amount | $ 44,000,000 | $ 0 |
Debt Obligations - Trade Receiv
Debt Obligations - Trade Receivables Facility (Details) - USD ($) | Nov. 29, 2016 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2018 | Jun. 30, 2017 | Nov. 20, 2017 | Sep. 30, 2017 |
Debt Instrument [Line Items] | ||||||||
Proceeds from borrowings | $ 170,000,000 | $ 75,000,000 | ||||||
Repayments of long-term debt | 39,000,000 | $ 87,000,000 | ||||||
Short-term debt outstanding amount | $ 0 | 0 | $ 75,000,000 | |||||
Secured Debt | Trade Receivables Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity under the Revolover | $ 125,000,000 | $ 175,000,000 | ||||||
Secured Debt | Line of Credit | Trade Receivables Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Proceeds from borrowings | 100,000,000 | |||||||
Repayments of long-term debt | 1,000,000 | |||||||
Long-term debt outstanding amount | 174,000,000 | 174,000,000 | ||||||
Total borrowing capacity remaining (less than) | $ 1,000,000 | $ 1,000,000 | ||||||
Weighted average interest rates | 2.90% | 1.80% | 2.60% | 1.70% | ||||
Line of Credit | Secured Debt | Trade Receivables Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Term of debt | 1 year | |||||||
Proceeds from borrowings | $ 75,000,000 | |||||||
Short-term debt outstanding amount | 75,000,000 | |||||||
Financing Subsidiary | Secured Debt | Line of Credit | Trade Receivables Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Accounts receivable pledged as collateral | $ 282,000,000 | $ 282,000,000 | $ 247,000,000 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Tax Contingency [Line Items] | ||||||
Income tax expense | $ 33 | $ 38 | $ 154 | $ 114 | ||
Effective tax rate | 34.00% | 40.40% | 56.00% | 36.40% | ||
Tax cuts and jobs act of 2017, income tax expense (benefit) | $ 76 | |||||
Increase in income tax resulting from U.S. tax reform legislation | 69 | |||||
Repatriation tax on unremitted non-U.S. earnings | 4 | |||||
Estimated incremental withholding taxes | $ 2 | 2 | ||||
Net deferred tax assets | $ 281 | |||||
Gross liability | 23 | 23 | ||||
Foreign tax credits | 19 | |||||
Liability for uncertain income tax positions | 11 | 11 | ||||
Tax Matters Agreement | Ashland | ||||||
Income Tax Contingency [Line Items] | ||||||
Due to (from) related party | 78 | 78 | 74 | |||
Tax Matters Agreement | Ashland | Accrued expenses and other liabilities | ||||||
Income Tax Contingency [Line Items] | ||||||
Due to (from) related party | 3 | 3 | 2 | |||
Ashland | Tax Matters Agreement | Ashland | ||||||
Income Tax Contingency [Line Items] | ||||||
Tax cuts and jobs act of 2017, income tax expense (benefit) | (3) | |||||
Increase (decrease) in due to affiliates recognized in selling, general and administrative expense | 7 | |||||
Due to (from) related party | 65 | 65 | 62 | |||
Ashland | Tax Matters Agreement | Ashland | Accrued expenses and other liabilities | ||||||
Income Tax Contingency [Line Items] | ||||||
Due to (from) related party | 3 | 3 | $ 1 | |||
Scenario, Forecast | ||||||
Income Tax Contingency [Line Items] | ||||||
US corporate federal blended income tax rate | 24.50% | |||||
Uncertain tax positions from decreases in positions taken in the next twelve months | $ 3 | |||||
Legacy and Separation-related Expenses, net | Ashland | Tax Matters Agreement | Ashland | ||||||
Income Tax Contingency [Line Items] | ||||||
Increase (decrease) in due to affiliates recognized in selling, general and administrative expense | (3) | $ 2 | 5 | $ 2 | ||
Domestic Tax Authority | ||||||
Income Tax Contingency [Line Items] | ||||||
Increase in income tax resulting from U.S. tax reform legislation | 66 | |||||
KENTUCKY | ||||||
Income Tax Contingency [Line Items] | ||||||
Income tax expense | 3 | 3 | ||||
State income tax expense, related to change in state corporate tax rate | 7 | |||||
KENTUCKY | Ashland | Tax Matters Agreement | Ashland | ||||||
Income Tax Contingency [Line Items] | ||||||
Income tax expense | 4 | 4 | ||||
Increase (decrease) in due to affiliates recognized in selling, general and administrative expense | 4 | 4 | ||||
KENTUCKY | Legacy and Separation-related Expenses, net | Ashland | Tax Matters Agreement | Ashland | ||||||
Income Tax Contingency [Line Items] | ||||||
Increase (decrease) in due to affiliates recognized in selling, general and administrative expense | $ 4 | $ 1 |
Employee Benefit Plans - Narrat
Employee Benefit Plans - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Apr. 30, 2018 | |
Defined Benefit Plan Disclosure [Line Items] | |||||
Pension and other postretirement benefit expense (income) | $ (10) | $ (16) | $ (29) | $ (58) | |
Gain (loss) from actuarial remeasurements | 0 | 8 | |||
Estimated partial withdrawal liability | $ 30 | ||||
Pension benefits | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Pension and other postretirement benefit expense (income) | (7) | $ (13) | (21) | $ (42) | |
Pension plan contributions | 13 | ||||
Expected pension contributions for the remainder of fiscal 2018 | 5 | 5 | |||
Total expected pension contributions for fiscal 2018 | $ 18 | $ 18 |
Employee Benefit Plans - Compon
Employee Benefit Plans - Components of Pension and Other Postretirement Benefit Income (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Defined Benefit Plan Disclosure [Line Items] | ||||
Net periodic benefit income | $ (10) | $ (16) | $ (29) | $ (58) |
Pension benefits | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 0 | 1 | 1 | 2 |
Interest cost | 19 | 22 | 56 | 65 |
Expected return on plan assets | (26) | (36) | (78) | (109) |
Amortization of prior service credit | 0 | 0 | 0 | 0 |
Actuarial gain | 0 | 0 | ||
Net periodic benefit income | (7) | (13) | (21) | (42) |
Other postretirement benefits | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 0 | 0 | 0 | 0 |
Interest cost | 0 | 0 | 1 | 1 |
Expected return on plan assets | 0 | 0 | 0 | 0 |
Amortization of prior service credit | (3) | (3) | (9) | (9) |
Actuarial gain | 0 | (8) | ||
Net periodic benefit income | $ (3) | $ (3) | $ (8) | $ (16) |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Numerator | ||||
Net income | $ 64 | $ 56 | $ 121 | $ 199 |
Denominator | ||||
Weighted-average shares used to compute basic EPS (shares) | 195 | 204 | 199 | 204 |
Dilutive effect of share-based awards (shares) | 1 | 0 | 1 | 0 |
Weighted-average shares used to compute diluted EPS (shares) | 196 | 204 | 200 | 204 |
Earnings per share | ||||
Basic (usd per share) | $ 0.33 | $ 0.27 | $ 0.61 | $ 0.97 |
Diluted (usd per share) | $ 0.33 | $ 0.27 | $ 0.61 | $ 0.97 |
Stock Compensation Plan | ||||
Earnings per share | ||||
Shares excluded from diluted earnings per share calculation due to anti-dilutive effect (shares) | 0 | 0 |
Stockholders' Deficit - Schedul
Stockholders' Deficit - Schedule of Changes in Stockholders' Deficit (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Balance as of September 30, 2017 | $ (117) | |||
Net income | $ 64 | $ 56 | 121 | $ 199 |
Repurchases of common stock | (224) | |||
Stock-based compensation plans | 7 | |||
Dividends paid, $0.2235 per common share | (45) | |||
Purchase of remaining ownership interest in subsidiary | (14) | |||
Accumulated other comprehensive loss, net of tax: | ||||
Unrealized currency translation loss | (13) | 6 | (9) | 3 |
Amortization of pension and other postretirement prior service credits in income | (3) | $ (2) | (7) | $ (6) |
Balance as of June 30, 2018 | $ (288) | $ (288) | ||
Dividend per share (usd per share) | $ 0.2235 | |||
Repurchase of common stock (shares) | 10,000,000 |
Related Party Transactions - Na
Related Party Transactions - Narrative (Details) - Tax Matters Agreement - Ashland - USD ($) $ in Millions | Jun. 30, 2018 | Sep. 30, 2017 |
Related Party Transaction [Line Items] | ||
Due to (from) related party | $ 78 | $ 74 |
Accrued expenses and other liabilities | ||
Related Party Transaction [Line Items] | ||
Due to (from) related party | $ 3 | $ 2 |
Reportable Segment Informatio56
Reportable Segment Information - Narrative (Details) | 9 Months Ended |
Jun. 30, 2018countrysegment | |
Segment Reporting Information [Line Items] | |
Number of reportable segments | segment | 3 |
International | |
Segment Reporting Information [Line Items] | |
Number of countries where our products are sold | country | 140 |
Reportable Segment Informatio57
Reportable Segment Information - Sales and Operating Income by Reportable Segment (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Segment Reporting Information [Line Items] | ||||
Sales | $ 577 | $ 534 | $ 1,691 | $ 1,537 |
Operating income (loss) | 102 | 87 | 290 | 281 |
Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Operating income (loss) | 99 | 100 | 304 | 306 |
Operating Segments | Core North America | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 264 | 258 | 773 | 748 |
Operating income (loss) | 41 | 48 | 130 | 156 |
Operating Segments | Quick Lubes | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 167 | 139 | 479 | 394 |
Operating income (loss) | 38 | 34 | 111 | 94 |
Operating Segments | International | ||||
Segment Reporting Information [Line Items] | ||||
Sales | 146 | 137 | 439 | 395 |
Operating income (loss) | 20 | 18 | 63 | 56 |
Unallocated and Other | ||||
Segment Reporting Information [Line Items] | ||||
Operating income (loss) | $ 3 | $ (13) | $ (14) | $ (25) |
Guarantor Financial Informati58
Guarantor Financial Information - Condensed Consolidating Statements of Comprehensive Income (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Net Income (Loss) Attributable to Parent [Abstract] | ||||
Sales | $ 577 | $ 534 | $ 1,691 | $ 1,537 |
Cost of sales | 376 | 337 | 1,088 | 957 |
Gross profit | 201 | 197 | 603 | 580 |
Selling, general and administrative expenses | 110 | 102 | 328 | 294 |
Legacy and separation-related expenses, net | (3) | 13 | 14 | 25 |
Equity and other (income) expenses | (8) | (5) | (29) | (20) |
Operating income | 102 | 87 | 290 | 281 |
Net pension and other postretirement plan non-service income and remeasurement adjustments | (10) | (17) | (30) | (60) |
Net interest and other financing expenses | 15 | 10 | 45 | 28 |
(Loss) income before income taxes | 97 | 94 | 275 | 313 |
Income tax expense | 33 | 38 | 154 | 114 |
Equity in net income of subsidiaries | 0 | 0 | 0 | 0 |
Net income | 64 | 56 | 121 | 199 |
Comprehensive income | 48 | 60 | 105 | 196 |
Eliminations | ||||
Net Income (Loss) Attributable to Parent [Abstract] | ||||
Sales | (16) | (15) | (41) | (42) |
Cost of sales | (16) | (15) | (41) | (42) |
Gross profit | 0 | 0 | 0 | 0 |
Selling, general and administrative expenses | 0 | 0 | 0 | 0 |
Legacy and separation-related expenses, net | 0 | 0 | 0 | 0 |
Equity and other (income) expenses | 0 | 0 | 0 | 0 |
Operating income | 0 | 0 | 0 | 0 |
Net pension and other postretirement plan non-service income and remeasurement adjustments | 0 | 0 | 0 | 0 |
Net interest and other financing expenses | 0 | 0 | 0 | 0 |
(Loss) income before income taxes | 0 | 0 | 0 | 0 |
Income tax expense | 0 | 0 | 0 | 0 |
Equity in net income of subsidiaries | 83 | 72 | 215 | 238 |
Net income | (83) | (72) | (215) | (238) |
Comprehensive income | (56) | (86) | (191) | (243) |
Valvoline Inc. (Parent Issuer) | Reportable Legal Entities | ||||
Net Income (Loss) Attributable to Parent [Abstract] | ||||
Sales | 0 | 0 | 0 | 0 |
Cost of sales | 0 | 0 | 0 | 0 |
Gross profit | 0 | 0 | 0 | 0 |
Selling, general and administrative expenses | 3 | 3 | 10 | 7 |
Legacy and separation-related expenses, net | (3) | (2) | 4 | (2) |
Equity and other (income) expenses | 0 | 0 | 0 | 0 |
Operating income | 0 | (1) | (14) | (5) |
Net pension and other postretirement plan non-service income and remeasurement adjustments | 0 | 0 | 0 | 0 |
Net interest and other financing expenses | 14 | 8 | 39 | 25 |
(Loss) income before income taxes | (14) | (9) | (53) | (30) |
Income tax expense | (1) | (2) | 16 | (10) |
Equity in net income of subsidiaries | (77) | (63) | (190) | (219) |
Net income | 64 | 56 | 121 | 199 |
Comprehensive income | 48 | 60 | 105 | 196 |
Guarantor Subsidiaries | Reportable Legal Entities | ||||
Net Income (Loss) Attributable to Parent [Abstract] | ||||
Sales | 456 | 418 | 1,319 | 1,197 |
Cost of sales | 294 | 259 | 832 | 724 |
Gross profit | 162 | 159 | 487 | 473 |
Selling, general and administrative expenses | 81 | 77 | 247 | 218 |
Legacy and separation-related expenses, net | 0 | 15 | 10 | 27 |
Equity and other (income) expenses | (11) | (8) | (37) | (29) |
Operating income | 92 | 75 | 267 | 257 |
Net pension and other postretirement plan non-service income and remeasurement adjustments | (10) | (17) | (30) | (60) |
Net interest and other financing expenses | 1 | 1 | 4 | 2 |
(Loss) income before income taxes | 101 | 91 | 293 | 315 |
Income tax expense | 30 | 37 | 128 | 115 |
Equity in net income of subsidiaries | (6) | (9) | (25) | (19) |
Net income | 77 | 63 | 190 | 219 |
Comprehensive income | 61 | 67 | 174 | 216 |
Non-Guarantor Subsidiaries | Reportable Legal Entities | ||||
Net Income (Loss) Attributable to Parent [Abstract] | ||||
Sales | 137 | 131 | 413 | 382 |
Cost of sales | 98 | 93 | 297 | 275 |
Gross profit | 39 | 38 | 116 | 107 |
Selling, general and administrative expenses | 26 | 22 | 71 | 69 |
Legacy and separation-related expenses, net | 0 | 0 | 0 | 0 |
Equity and other (income) expenses | 3 | 3 | 8 | 9 |
Operating income | 10 | 13 | 37 | 29 |
Net pension and other postretirement plan non-service income and remeasurement adjustments | 0 | 0 | 0 | 0 |
Net interest and other financing expenses | 0 | 1 | 2 | 1 |
(Loss) income before income taxes | 10 | 12 | 35 | 28 |
Income tax expense | 4 | 3 | 10 | 9 |
Equity in net income of subsidiaries | 0 | 0 | 0 | 0 |
Net income | 6 | 9 | 25 | 19 |
Comprehensive income | $ (5) | $ 19 | $ 17 | $ 27 |
Guarantor Financial Informati59
Guarantor Financial Information - Condensed Consolidating Balance Sheets (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Sep. 30, 2017 | Jun. 30, 2017 | Sep. 30, 2016 |
Current assets | ||||
Cash and cash equivalents | $ 107 | $ 201 | $ 132 | $ 172 |
Accounts receivable, net | 461 | 385 | ||
Inventories, net | 196 | 175 | ||
Other current assets | 26 | 29 | ||
Total current assets | 790 | 790 | ||
Noncurrent assets | ||||
Property, plant and equipment, net | 399 | 391 | ||
Goodwill and intangibles, net | 398 | 335 | ||
Equity method investments | 33 | 30 | ||
Investment in subsidiaries | 0 | 0 | ||
Deferred income taxes | 147 | 281 | ||
Other noncurrent assets | 82 | 88 | ||
Total noncurrent assets | 1,059 | 1,125 | ||
Total assets | 1,849 | 1,915 | ||
Current liabilities | ||||
Short-term debt | 0 | 75 | ||
Current portion of long-term debt | 26 | 15 | ||
Trade and other payables | 176 | 192 | ||
Accrued expenses and other liabilities | 223 | 196 | ||
Total current liabilities | 425 | 478 | ||
Noncurrent liabilities | ||||
Long-term debt | 1,231 | 1,034 | ||
Employee benefit obligations | 303 | 342 | ||
Other noncurrent liabilities | 178 | 178 | ||
Total noncurrent liabilities | 1,712 | 1,554 | ||
Commitments and contingencies | ||||
Stockholders’ (deficit) equity | (288) | (117) | ||
Total liabilities and stockholders’ deficit | 1,849 | 1,915 | ||
Eliminations | ||||
Current assets | ||||
Cash and cash equivalents | 0 | 0 | 0 | 0 |
Accounts receivable, net | (155) | (61) | ||
Inventories, net | 0 | 0 | ||
Other current assets | 0 | 0 | ||
Total current assets | (155) | (61) | ||
Noncurrent assets | ||||
Property, plant and equipment, net | 0 | 0 | ||
Goodwill and intangibles, net | 0 | 0 | ||
Equity method investments | 0 | 0 | ||
Investment in subsidiaries | (1,239) | (1,053) | ||
Deferred income taxes | 0 | 0 | ||
Other noncurrent assets | (49) | (312) | ||
Total noncurrent assets | (1,288) | (1,365) | ||
Total assets | (1,443) | (1,426) | ||
Current liabilities | ||||
Short-term debt | 0 | |||
Current portion of long-term debt | 0 | 0 | ||
Trade and other payables | (155) | (61) | ||
Accrued expenses and other liabilities | 0 | 0 | ||
Total current liabilities | (155) | (61) | ||
Noncurrent liabilities | ||||
Long-term debt | 0 | 0 | ||
Employee benefit obligations | 0 | 0 | ||
Other noncurrent liabilities | (49) | (312) | ||
Total noncurrent liabilities | (49) | (312) | ||
Commitments and contingencies | ||||
Stockholders’ (deficit) equity | (1,239) | (1,053) | ||
Total liabilities and stockholders’ deficit | (1,443) | (1,426) | ||
Valvoline Inc. (Parent Issuer) | Reportable Legal Entities | ||||
Current assets | ||||
Cash and cash equivalents | 0 | 0 | 0 | 0 |
Accounts receivable, net | 1 | 0 | ||
Inventories, net | 0 | 0 | ||
Other current assets | 0 | 0 | ||
Total current assets | 1 | 0 | ||
Noncurrent assets | ||||
Property, plant and equipment, net | 0 | 0 | ||
Goodwill and intangibles, net | 0 | 0 | ||
Equity method investments | 0 | 0 | ||
Investment in subsidiaries | 762 | 606 | ||
Deferred income taxes | 60 | 145 | ||
Other noncurrent assets | 51 | 314 | ||
Total noncurrent assets | 873 | 1,065 | ||
Total assets | 874 | 1,065 | ||
Current liabilities | ||||
Short-term debt | 0 | |||
Current portion of long-term debt | 26 | 15 | ||
Trade and other payables | 0 | 2 | ||
Accrued expenses and other liabilities | 50 | 103 | ||
Total current liabilities | 76 | 120 | ||
Noncurrent liabilities | ||||
Long-term debt | 1,055 | 1,032 | ||
Employee benefit obligations | 0 | 0 | ||
Other noncurrent liabilities | 31 | 30 | ||
Total noncurrent liabilities | 1,086 | 1,062 | ||
Commitments and contingencies | ||||
Stockholders’ (deficit) equity | (288) | (117) | ||
Total liabilities and stockholders’ deficit | 874 | 1,065 | ||
Guarantor Subsidiaries | Reportable Legal Entities | ||||
Current assets | ||||
Cash and cash equivalents | 7 | 99 | 36 | 93 |
Accounts receivable, net | 98 | 57 | ||
Inventories, net | 112 | 94 | ||
Other current assets | 23 | 25 | ||
Total current assets | 240 | 275 | ||
Noncurrent assets | ||||
Property, plant and equipment, net | 363 | 353 | ||
Goodwill and intangibles, net | 397 | 333 | ||
Equity method investments | 33 | 30 | ||
Investment in subsidiaries | 477 | 447 | ||
Deferred income taxes | 73 | 122 | ||
Other noncurrent assets | 75 | 80 | ||
Total noncurrent assets | 1,418 | 1,365 | ||
Total assets | 1,658 | 1,640 | ||
Current liabilities | ||||
Short-term debt | 0 | |||
Current portion of long-term debt | 0 | 0 | ||
Trade and other payables | 280 | 198 | ||
Accrued expenses and other liabilities | 135 | 60 | ||
Total current liabilities | 415 | 258 | ||
Noncurrent liabilities | ||||
Long-term debt | 2 | 2 | ||
Employee benefit obligations | 285 | 321 | ||
Other noncurrent liabilities | 194 | 453 | ||
Total noncurrent liabilities | 481 | 776 | ||
Commitments and contingencies | ||||
Stockholders’ (deficit) equity | 762 | 606 | ||
Total liabilities and stockholders’ deficit | 1,658 | 1,640 | ||
Non-Guarantor Subsidiaries | Reportable Legal Entities | ||||
Current assets | ||||
Cash and cash equivalents | 100 | 102 | $ 96 | $ 79 |
Accounts receivable, net | 517 | 389 | ||
Inventories, net | 84 | 81 | ||
Other current assets | 3 | 4 | ||
Total current assets | 704 | 576 | ||
Noncurrent assets | ||||
Property, plant and equipment, net | 36 | 38 | ||
Goodwill and intangibles, net | 1 | 2 | ||
Equity method investments | 0 | 0 | ||
Investment in subsidiaries | 0 | 0 | ||
Deferred income taxes | 14 | 14 | ||
Other noncurrent assets | 5 | 6 | ||
Total noncurrent assets | 56 | 60 | ||
Total assets | 760 | 636 | ||
Current liabilities | ||||
Short-term debt | 75 | |||
Current portion of long-term debt | 0 | 0 | ||
Trade and other payables | 51 | 53 | ||
Accrued expenses and other liabilities | 38 | 33 | ||
Total current liabilities | 89 | 161 | ||
Noncurrent liabilities | ||||
Long-term debt | 174 | 0 | ||
Employee benefit obligations | 18 | 21 | ||
Other noncurrent liabilities | 2 | 7 | ||
Total noncurrent liabilities | 194 | 28 | ||
Commitments and contingencies | ||||
Stockholders’ (deficit) equity | 477 | 447 | ||
Total liabilities and stockholders’ deficit | $ 760 | $ 636 |
Guarantor Financial Informati60
Guarantor Financial Information - Condensed Consolidating Statements of Cash Flows (Details) - USD ($) $ in Millions | 9 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Condensed Cash Flow Statements, Captions [Line Items] | ||
Cash flow (used in) provided by operating activities | $ 181 | $ 157 |
Cash flows from investing activities | ||
Additions to property, plant and equipment | (51) | (43) |
Acquisitions, net of cash required | (71) | (66) |
Proceeds from sale of operations | 5 | 0 |
Return of advance from subsidiary | 0 | |
Advance from subsidiary | 0 | |
Total cash used in investing activities | (117) | (109) |
Cash flows from financing activities | ||
Net transfers from Ashland | 0 | 5 |
Proceeds from borrowings, net of issuance costs | 170 | 75 |
Repayments on borrowings | (39) | (87) |
Repurchases of common stock | (220) | (50) |
Purchase of additional ownership in subsidiary | (15) | |
Cash dividends paid | (45) | (30) |
Other financing activities | (6) | 0 |
Other intercompany activity, net | 0 | 0 |
Total cash used in financing activities | (155) | (87) |
Effect of currency exchange rate changes on cash and cash equivalents | (3) | (1) |
Decrease in cash and cash equivalents | (94) | (40) |
Cash and cash equivalents - beginning of period | 201 | 172 |
Cash and cash equivalents - end of period | 107 | 132 |
Reportable Legal Entities | Valvoline Inc. (Parent Issuer) | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Cash flow (used in) provided by operating activities | (28) | 101 |
Cash flows from investing activities | ||
Additions to property, plant and equipment | 0 | 0 |
Acquisitions, net of cash required | 0 | 0 |
Proceeds from sale of operations | 0 | |
Return of advance from subsidiary | 263 | |
Advance from subsidiary | 66 | |
Total cash used in investing activities | 263 | 66 |
Cash flows from financing activities | ||
Net transfers from Ashland | 5 | |
Proceeds from borrowings, net of issuance costs | 70 | 0 |
Repayments on borrowings | (38) | (87) |
Repurchases of common stock | (220) | (50) |
Purchase of additional ownership in subsidiary | 0 | |
Cash dividends paid | (45) | (30) |
Other financing activities | (2) | |
Other intercompany activity, net | 0 | (5) |
Total cash used in financing activities | (235) | (167) |
Effect of currency exchange rate changes on cash and cash equivalents | 0 | 0 |
Decrease in cash and cash equivalents | 0 | 0 |
Cash and cash equivalents - beginning of period | 0 | 0 |
Cash and cash equivalents - end of period | 0 | 0 |
Reportable Legal Entities | Guarantor Subsidiaries | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Cash flow (used in) provided by operating activities | 287 | 112 |
Cash flows from investing activities | ||
Additions to property, plant and equipment | (48) | (42) |
Acquisitions, net of cash required | (71) | (66) |
Proceeds from sale of operations | 5 | |
Return of advance from subsidiary | 0 | |
Advance from subsidiary | 0 | |
Total cash used in investing activities | (114) | (108) |
Cash flows from financing activities | ||
Net transfers from Ashland | 0 | |
Proceeds from borrowings, net of issuance costs | 0 | 0 |
Repayments on borrowings | 0 | 0 |
Repurchases of common stock | 0 | 0 |
Purchase of additional ownership in subsidiary | 0 | |
Cash dividends paid | 0 | 0 |
Other financing activities | (2) | |
Other intercompany activity, net | (263) | (61) |
Total cash used in financing activities | (265) | (61) |
Effect of currency exchange rate changes on cash and cash equivalents | 0 | 0 |
Decrease in cash and cash equivalents | (92) | (57) |
Cash and cash equivalents - beginning of period | 99 | 93 |
Cash and cash equivalents - end of period | 7 | 36 |
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Cash flow (used in) provided by operating activities | (78) | (56) |
Cash flows from investing activities | ||
Additions to property, plant and equipment | (3) | (1) |
Acquisitions, net of cash required | 0 | 0 |
Proceeds from sale of operations | 0 | |
Return of advance from subsidiary | 0 | |
Advance from subsidiary | 0 | |
Total cash used in investing activities | (3) | (1) |
Cash flows from financing activities | ||
Net transfers from Ashland | 0 | |
Proceeds from borrowings, net of issuance costs | 100 | 75 |
Repayments on borrowings | (1) | 0 |
Repurchases of common stock | 0 | 0 |
Purchase of additional ownership in subsidiary | (15) | |
Cash dividends paid | 0 | 0 |
Other financing activities | (2) | |
Other intercompany activity, net | 0 | 0 |
Total cash used in financing activities | 82 | 75 |
Effect of currency exchange rate changes on cash and cash equivalents | (3) | (1) |
Decrease in cash and cash equivalents | (2) | 17 |
Cash and cash equivalents - beginning of period | 102 | 79 |
Cash and cash equivalents - end of period | 100 | 96 |
Eliminations | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Cash flow (used in) provided by operating activities | 0 | 0 |
Cash flows from investing activities | ||
Additions to property, plant and equipment | 0 | 0 |
Acquisitions, net of cash required | 0 | 0 |
Proceeds from sale of operations | 0 | |
Return of advance from subsidiary | (263) | |
Advance from subsidiary | (66) | |
Total cash used in investing activities | (263) | (66) |
Cash flows from financing activities | ||
Net transfers from Ashland | 0 | |
Proceeds from borrowings, net of issuance costs | 0 | 0 |
Repayments on borrowings | 0 | 0 |
Repurchases of common stock | 0 | 0 |
Purchase of additional ownership in subsidiary | 0 | |
Cash dividends paid | 0 | 0 |
Other financing activities | 0 | |
Other intercompany activity, net | 263 | 66 |
Total cash used in financing activities | 263 | 66 |
Effect of currency exchange rate changes on cash and cash equivalents | 0 | 0 |
Decrease in cash and cash equivalents | 0 | 0 |
Cash and cash equivalents - beginning of period | 0 | 0 |
Cash and cash equivalents - end of period | $ 0 | $ 0 |
Subsequent Events (Details)
Subsequent Events (Details) | Jul. 24, 2018$ / shares | Jul. 13, 2018USD ($)service_center_storecompany-owned_and_franchised_locations | Jul. 31, 2018USD ($)shares | Jun. 30, 2018USD ($)service_center_store$ / sharesshares | Jun. 30, 2017USD ($)service_center_store | Aug. 02, 2018USD ($) | Jan. 31, 2018USD ($) |
Subsequent Event [Line Items] | |||||||
Number of service center stores acquired | service_center_store | 63 | 42 | |||||
Consideration for acquisition | $ 71,000,000 | $ 70,000,000 | |||||
Dividend per share (usd per share) | $ / shares | $ 0.2235 | ||||||
Repurchase of common stock (shares) | shares | 10,000,000 | ||||||
Repurchase of common stock | $ 224,000,000 | ||||||
Authorized shares for repurchase (up to) | $ 300,000,000 | ||||||
Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Dividend per share (usd per share) | $ / shares | $ 0.0745 | ||||||
Repurchase of common stock (shares) | shares | 2,000,000 | ||||||
Repurchase of common stock | $ 42,000,000 | ||||||
Remaining authorized repurchase amount | 134,000,000 | ||||||
Great Canadian Oil Change | Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Number of service center stores acquired | service_center_store | 73 | ||||||
Consideration for acquisition | $ 53,000,000 | ||||||
Total number of company-owned and franchised locations after acquisition (more than) | company-owned_and_franchised_locations | 1,200 | ||||||
Letter of Credit | Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Letters of credit outstanding | $ 11,000,000 | ||||||
Line of Credit | Revolver | Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Borrowings under the Revolver | $ 86,000,000 | ||||||
Remaining borrowing capacity under the Revolover | $ 309,000,000 |