Document Entity Information
Document Entity Information - shares | 3 Months Ended | |
Dec. 31, 2018 | Jan. 31, 2019 | |
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 | Dec. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 188,180,577 | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q1 | |
Smaller Reporting Company | false | |
Emerging Growth Company | false |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Income - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Net Income (Loss) Attributable to Parent [Abstract] | ||
Sales | $ 557 | $ 545 |
Cost of sales | 374 | 350 |
Gross profit | 183 | 195 |
Selling, general and administrative expenses | 105 | 107 |
Legacy and separation-related expenses, net | 0 | 9 |
Equity and other income, net | (9) | (9) |
Operating income | 87 | 88 |
Net pension and other postretirement plan income | (2) | (10) |
Net interest and other financing expenses | 17 | 14 |
Income before income taxes | 72 | 84 |
Income tax expense | 19 | 94 |
Net income (loss) | $ 53 | $ (10) |
NET INCOME (LOSS) PER SHARE | ||
Basic (usd per share) | $ 0.28 | $ (0.05) |
Diluted (usd per share) | $ 0.28 | $ (0.05) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||
Basic (shares) | 188 | 202 |
Diluted (shares) | 189 | 202 |
COMPREHENSIVE INCOME (LOSS) | ||
Net income (loss) | $ 53 | $ (10) |
Other comprehensive (loss) income, net of tax | ||
Currency translation adjustments | (4) | 1 |
Amortization of pension and other postretirement plan prior service credit | (2) | (2) |
Other comprehensive loss | (6) | (1) |
Comprehensive income (loss) | $ 47 | $ (11) |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Dec. 31, 2018 | Sep. 30, 2018 |
Current assets | ||
Cash and cash equivalents | $ 99 | $ 96 |
Accounts receivable, net | 331 | 409 |
Inventories, net | 200 | 176 |
Prepaid expenses and other current assets | 38 | 44 |
Total current assets | 668 | 725 |
Noncurrent assets | ||
Property, plant and equipment, net | 428 | 420 |
Goodwill and intangibles, net | 473 | 448 |
Equity method investments | 32 | 31 |
Deferred income taxes | 134 | 138 |
Other noncurrent assets | 97 | 92 |
Total noncurrent assets | 1,164 | 1,129 |
Total assets | 1,832 | 1,854 |
Current liabilities | ||
Current portion of long-term debt | 30 | 30 |
Trade and other payables | 152 | 178 |
Accrued expenses and other liabilities | 198 | 203 |
Total current liabilities | 380 | 411 |
Noncurrent liabilities | ||
Long-term debt | 1,291 | 1,292 |
Employee benefit obligations | 330 | 333 |
Other noncurrent liabilities | 174 | 176 |
Total noncurrent liabilities | 1,795 | 1,801 |
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; 188 shares issued and outstanding at December 31, 2018 and September 30, 2018 | 2 | 2 |
Paid-in capital | 8 | 7 |
Retained deficit | (379) | (399) |
Accumulated other comprehensive income | 26 | 32 |
Total stockholders’ deficit | (343) | (358) |
Total liabilities and stockholders’ deficit | $ 1,832 | $ 1,854 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Sep. 30, 2018 |
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) | 188,000,000 | 188,000,000 |
Common stock outstanding (shares) | 188,000,000 | 188,000,000 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Deficit - USD ($) shares in Millions, $ in Millions | Total | Common Stock | Paid-in Capital | Retained deficit | Accumulated other comprehensive income |
Common stock outstanding, at beginning of period (shares) at Sep. 30, 2017 | 203 | ||||
Balance at beginning of period at Sep. 30, 2017 | $ (117) | $ 2 | $ 5 | $ (167) | $ 43 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (10) | (10) | |||
Dividends paid | (15) | (15) | |||
Stock-based compensation | 2 | 2 | |||
Repurchase of common stock (shares) | (2) | ||||
Repurchases of common stock | (39) | (39) | |||
Purchase of remaining ownership interest in subsidiary | (14) | (7) | (7) | ||
Currency translation adjustments | 1 | 1 | |||
Amortization of pension and other postretirement prior service credits in income, net of tax | (2) | (2) | |||
Common stock outstanding, at end of period (shares) at Dec. 31, 2017 | 201 | ||||
Balance at end of period at Dec. 31, 2017 | $ (194) | $ 2 | 0 | (238) | 42 |
Common stock outstanding, at beginning of period (shares) at Sep. 30, 2018 | 188 | 188 | |||
Balance at beginning of period at Sep. 30, 2018 | $ (358) | $ 2 | 7 | (399) | 32 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 53 | 53 | |||
Dividends paid | (20) | (20) | |||
Stock-based compensation | 1 | 1 | |||
Currency translation adjustments | (4) | (4) | |||
Amortization of pension and other postretirement prior service credits in income, net of tax | $ (2) | (2) | |||
Common stock outstanding, at end of period (shares) at Dec. 31, 2018 | 188 | 188 | |||
Balance at end of period at Dec. 31, 2018 | $ (343) | $ 2 | $ 8 | $ (379) | $ 26 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders' Deficit (Parenthetical) - $ / shares | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Statement of Stockholders' Equity [Abstract] | ||
Dividends paid per common share (usd per share) | $ 0.106 | $ 0.0745 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 3 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | ||
Cash flows from operating activities | |||
Net income (loss) | $ 53 | $ (10) | |
Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
Depreciation and amortization | 14 | 11 | |
Debt issuance cost and discount amortization | 0 | 1 | |
Deferred income taxes | 0 | 85 | |
Equity income from unconsolidated affiliates, net of distributions | 0 | (2) | |
Pension contributions | (2) | (3) | |
Stock-based compensation expense | 3 | 4 | |
Change in assets and liabilities | |||
Accounts receivable | [1] | 43 | (34) |
Inventories | [1] | (13) | 7 |
Payables and accrued liabilities | [1] | (19) | (40) |
Other assets and liabilities | [1] | 6 | 1 |
Total cash provided by operating activities | 85 | 20 | |
Cash flows from investing activities | |||
Additions to property, plant and equipment | (27) | (14) | |
Acquisitions, net of cash acquired | (30) | (60) | |
Other investing activities, net | 1 | 0 | |
Total cash used in investing activities | (56) | (74) | |
Cash flows from financing activities | |||
Proceeds from borrowings, net of issuance costs | 100 | 44 | |
Repayments on borrowings | (101) | (4) | |
Repurchases of common stock | 0 | (37) | |
Payments for purchase of additional ownership in subsidiary | (1) | (15) | |
Cash dividends paid | (20) | (15) | |
Other financing activities | (3) | (4) | |
Total cash used in financing activities | (25) | (31) | |
Effect of currency exchange rate changes on cash and cash equivalents | (1) | (1) | |
Increase (decrease) in cash and cash equivalents | 3 | (86) | |
Cash and cash equivalents - beginning of period | 96 | 201 | |
Cash and cash equivalents - end of period | $ 99 | $ 115 | |
[1] | Excludes changes resulting from operations acquired. |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | 3 Months Ended |
Dec. 31, 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, 2018. 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 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 2019, Valvoline adopted the following: • In May 2014, the Financial Accounting Standards Board ("FASB") issued accounting guidance which established a single comprehensive model for entities to use in accounting for revenue from contracts with customers and superseded most industry-specific revenue recognition guidance. This new guidance introduced a five-step model for revenue recognition focused on the transfer of control, as opposed to the transfer of risk and rewards under prior guidance. Valvoline adopted this new revenue recognition guidance on October 1, 2018 using the modified retrospective method applied to those contracts that were not completed at the date of adoption. Under this method, the new revenue recognition guidance has been applied prospectively from the date of adoption, while prior period financial statements continue to be reported in accordance with the previous guidance. The cumulative effect of the changes at adoption was recognized through an increase to opening retained deficit of $13 million, net of tax, related to the timing of certain sales to distributors. Revenue transactions recorded under the new guidance are substantially consistent with the treatment under prior guidance, and the impact of adoption was not material to the condensed consolidated financial statements as of and for the three months ended December 31, 2018 and is not expected to be material on an ongoing basis. As part of the adoption, Valvoline modified certain control procedures and processes, none of which had a material effect on the Company's internal control over financial reporting. Refer to Note 2 for additional information regarding Valvoline's updated accounting policy for revenue from contracts with customers and adoption of this new guidance. • In Aug ust 2016, the FASB issued new accounting guidance regarding the classification of certain cash receipts and payments in the statement of cash flows. The Company adopted the accounting guidance on October 1, 2018 using a retrospective approach and made an accounting policy election to classify distributions received from equity method investments based on the nature of the activities of the investee that generated the distribution, which is consistent with the Company's previous classification of these as cash flows from operating activities. The other cash flow classification matters addressed in this guidance were either not relevant or material to Valvoline's activities. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Statements of Cash Flows. • In Jan uary 2017, the FASB issued new accounting guidance which clarifies the definition of a business used across several areas of accounting, including the evaluation of whether a transaction should be accounted for as an acquisition (or disposal) of assets or as a business combination. The new guidance clarifies that to be a business there must also be at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in the new revenue recognition standard. Valvoline adopted this guidance on October 1, 2018 with prospective application. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements. • I n August 2018, the FASB issued new accounting guidance related to fees paid by a customer in a cloud computing arrangement, which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service arrangement with the existing capitalization guidance for implementation costs incurred to develop or obtain internal-use software. Valvoline adopted this guidance prospectively on October 1, 2018. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements. Issued but not yet adopted 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 its assessment and implementation process, including completing its process to identify all forms of its leases globally, identify changes necessary to internal controls, as well as analyzing the practical expedients and specific impacts on its condensed consolidated financial statements. At this time, the Company cannot estimate the specific quantitative impact of adopting this new guidance; however, adoption is expected to have a material impact on the Condensed Consolidated Balance Sheets as the majority of the Company’s operating leases are expected to be recognized as right of use assets and associated lease liabilities. The Company also anticipates expanded footnote disclosures related to its leases under the new guidance. |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Dec. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | REVENUE RECOGNITION As described in Note 1, Valvoline adopted new revenue recognition accounting guidance effective October 1, 2018, and accordingly, changed its accounting policy for revenue recognition prospectively from the date of adoption as described herein. Impacts on financial statements The adoption of the new revenue accounting guidance did not have a significant impact on the Company’s condensed consolidated financial statements. As a result of the Company’s adoption using the modified retrospective adoption approach, the Company recorded an adjustment to its Condensed Consolidated Balance Sheet as of October 1, 2018 related to the timing of certain sales to distributors. The following table reconciles the Condensed Consolidated Balance Sheet line items impacted by the cumulative effect of adoption of the new revenue recognition accounting guidance on October 1, 2018: (In millions) September 30, 2018 as reported Adjustments Balances at October 1, 2018 Accounts receivable, net $ 409 $ (33) $ 376 Inventories, net $ 176 $ 14 $ 190 Deferred income taxes $ 138 $ 6 $ 144 Retained deficit $ 399 $ 13 $ 412 Most revenue transactions and activities recorded under the new revenue recognition accounting guidance are substantially consistent with the treatment under prior guidance. The following tables summarize the impact of the new revenue accounting guidance on Valvoline’s Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Comprehensive Income as of and for the three months ended December 31, 2018: December 31, 2018 Impact of Changes to Condensed Consolidated Balance Sheet As reported Adjustments (a) Under prior guidance (In millions) Accounts receivable, net $ 331 $ 29 $ 360 Inventories, net $ 200 $ (12) $ 188 Deferred income taxes $ 134 $ (6) $ 128 Accrued expenses and other liabilities $ 198 $ 1 $ 199 Retained deficit $ 379 $ (12) $ 367 (a) Adjustments include the opening retained deficit adjustments as detailed in the table above. Three months ended December 31, 2018 Impact of Changes to Condensed Consolidated Statement of Comprehensive Income As reported Adjustments Under prior guidance (In millions) Sales $ 557 $ (15) $ 542 Cost of sales 374 (15) 359 Gross profit $ 183 $ — $ 183 Selling, general and administrative expenses $ 105 $ 2 $ 107 Operating income $ 87 $ (2) $ 85 Income before income taxes $ 72 $ (2) $ 70 Income tax expense $ 19 $ (1) $ 18 Net income $ 53 $ (1) $ 52 Basic earnings per share $ 0.28 $ (0.01) $ 0.27 Diluted earnings per share $ 0.28 $ (0.01) $ 0.27 Disaggregation of revenue The following summarizes sales by primary customer channel for the Company ’ s reportable segments for the three months ended December 31, 2018: (In millions) Quick Lubes Company-owned operations $ 124 Non-company owned operations 65 Total Quick Lubes 189 Core North America Retail 116 Installer and other 116 Total Core North America 232 International 136 Consolidated sales $ 557 Sales by reportable segment disaggregated by geographic market follows for the three months ended December 31, 2018: (In millions) Quick Lubes Core North America International Totals Primary geographic markets North America (a) $ 189 $ 232 $ — $ 421 Europe, Middle East and Africa (EMEA) — — 44 44 Asia Pacific — — 67 67 Latin America (a) — — 25 25 Totals $ 189 $ 232 $ 136 $ 557 ( a) Valvoline includes the United States and Canada in its North America region. Mexico is included within the Latin America region. The following disaggregates the Company ’ s sales by timing of revenue recognized for the three months ended December 31, 2018: (In millions) Timing of revenue recognized Sales at a point in time $ 547 Franchised revenues transferred over time 10 Consolidated sales $ 557 Nature of goods and services Valvoline generates all operating revenues from contracts with customers, primarily as a result of the sale and service delivery of engine and automotive maintenance products to customers. Valvoline derives its sales from its broad line of products and complementary services through three principal activities managed across its three reportable segments: (i) engine and automotive maintenance products, (ii) company-owned quick-lube operations, and (iii) franchised quick-lube operations. Valvoline’s sales are generally to retail, installer, industrial, distributor, franchise and end consumers to facilitate vehicle and equipment service and maintenance. Approximately 98% of Valvoline’s net sales are products and services sold at a point in time through either ship-and-bill performance obligations or company-owned quick lube operations. The remaining 2% of Valvoline’s net sales generally relate to franchise fees. Revenue is recognized for the amount that reflects the consideration the Company is expected to be entitled to based on when control of the promised good or service is transferred to the customer. Revenue recognition is evaluated through the following five steps: (i) identification of the contract(s) with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied. Below is a summary of the key considerations for Valvoline’s material revenue-generating activities: Engine and automotive maintenance products Engine and automotive maintenance products primarily include lubricants, antifreeze, chemicals, filters, and other complementary products for use across a wide array of vehicles and engines. The Company’s customers typically enter into a sales agreement which outlines a framework of terms and conditions that apply to all current and future purchase orders for the customer submitted under the supply agreement. In these situations, the Company’s contract with the customer is the sales agreement combined with the customer purchase order as specific products and quantities are not indicated until a purchase order is submitted. As the Company’s contract with the customer is typically for a single purchase order under the supply agreement to be delivered at a point in time, the duration of the contract is almost always one year or less. The Company’s products are distinct and separately identifiable on customer purchase orders, with each product sale representing a separate performance obligation that is generally delivered simultaneously. Valvoline is the principal to these contracts as the Company has control of the products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis. The Company determines the point in time at which control is transferred and the performance obligation is satisfied by considering when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of the product, which generally coincides with the transfer of title and risk of loss to the customer and is typically determined based on delivery terms within the underlying contract. While payment terms with customers vary by region and customer and are generally 30 to 60 days after delivery, Valvoline does not provide extended payment terms of a year or more . Company-owned quick-lube operations Performance obligations related to company-owned quick-lube operations primarily include the sale of engine and automotive maintenance products and related services. These performance obligations are distinct and are delivered simultaneously at a point in time. Accordingly, revenue from company-owned quick-lube operations is recognized when payment is tendered at the point of sale, which coincides with the completion of product and service delivery and the transfer of control and benefits from the performance obligations to the customer. Franchised quick-lube operations The primary performance obligations related to franchised quick-lube operations include product sales as described above and the license of intellectual property, which provides access to the Valvoline brand and proprietary information to operate service center stores over the term of a franchise agreement. Other franchise performance obligations do not result in material revenue. Each performance obligation is distinct, and franchisees generally receive and consume the benefits provided by the Company’s performance over the course of the franchise agreement, which typically ranges from 10 to 15 years. Billings and payments occur monthly. In exchange for the license of Valvoline intellectual property, franchisees generally remit initial fees upon opening a service center store and royalties at a contractual rate of the applicable service center store sales over the term of the franchise agreement. The license provides access to the intellectual property over the term of the franchise agreement and is considered a right-to-access license of symbolic intellectual property as substantially all its utility is derived from association with the Company’s past and ongoing activities. The license granted to operate each franchised service center store is the predominant item to which the royalties relate and represent a distinct performance obligation which is recognized over time as the underlying sales occur as this is the most appropriate measure of progress toward complete satisfaction of the performance obligation. Variable consideration The Company only offers an assurance-type warranty with regard to the intended functionality of products sold, which therefore, does not represent a distinct performance obligation within the context of the contract. Product returns and refunds are generally not material and are not accepted unless the item is defective as manufactured. Estimated product returns are recorded as a reduction in reported revenues at the time of sale based upon historical product return experience and is adjusted for known trends to arrive at the amount of consideration to which Valvoline expects to receive. The nature of Valvoline’s contracts with customers often give rise to variable consideration consisting primarily of promotional rebates and customer pricing discounts based on achieving certain levels of sales activity that generally decrease the transaction price. The Company determines the transaction price as the amount of consideration it expects to be entitled to in exchange for fulfilling the performance obligations, including the effects of any variable consideration, or amounts payable to the customer when there is a basis to reasonably estimate the amount and it is probable there will not be a significant reversal. Variable consideration is recorded as a reduction of the transaction price at the time of sale and is primarily estimated utilizing the most likely amount method that is expected to be earned as the Company is able to estimate the anticipated discounts within a sufficiently narrow range of possible outcomes based on its extensive historical experience with certain customers, similar programs and management’s judgment with respect to estimating customer participation and performance levels. Variable consideration is reassessed at each reporting date and adjustments are made, when necessary. Allocation of transaction price In each contract with multiple performance obligations, Valvoline allocates the transaction price, including variable consideration, to each performance obligation on a relative standalone selling price basis, which is generally determined based on the directly observable data of the Company’s standalone sales of the performance obligations in similar circumstances to similar customers. In the absence of directly observable standalone prices, the Company may utilize prices charged by competitors selling similar products or use an expected cost-plus margin approach. The amount allocated to each performance obligation is recognized as revenue as control is transferred to the customer. Contract balances Valvoline invoices customers once or as performance obligations are satisfied, at which point payment becomes unconditional. As the majority of the Company’s performance obligations are satisfied at a point in time and customers typically do not make material payments in advance, nor does Valvoline have a right to consideration in advance of control transfer, the Company had no contract assets or contract liabilities recorded within its Condensed Consolidated Balance Sheet at adoption or as of December 31, 2018. The Company recognizes a receivable on its Condensed Consolidated Balance Sheet when the Company performs a service or transfers a product in advance of receiving consideration, and the Company’s right to consideration is unconditional and only the passage of time is required before payment of that consideration is due. Practical expedients and accounting policies Valvoline elected the following practical expedients and policy elections in accordance with the new revenue recognition accounting guidance adopted beginning in fiscal 2019: • Significant financing component – The promised amount of consideration has not been adjusted as the Company does not have significant financing arrangements with its customers. The Company expects that the period between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service will be one year or less. • Incremental costs of obtaining a contract - The Company expenses incremental direct costs of obtaining a contract, primarily sales commissions, when incurred due to the short-term nature of individual contracts, which would result in amortization periods of one year or less. These costs are not material and are recorded in Selling, general and administrative expenses within the Condensed Consolidated Statements of Comprehensive Income. • Shipping and handling costs - Valvoline elected to account for shipping and handling activities that occur after the customer has obtained control as fulfillment activities (i.e., an expense) rather than as a performance obligation. Accordingly, amounts billed for shipping and handling are a component of the transaction price included in net sales, while costs incurred are included in cost of sales. • Sales and use-based taxes - Valvoline excludes from its revenue any amounts collected from customers for sales (and similar) taxes. These amounts are, however, reflected in accrued expenses until remitted to the appropriate governmental authority. • Disclosure o f remaining performance obligations - The Company elected to apply the practical expedient to omit disclosures of remaining performance obligations for contracts which have an initial expected term of one year or less. In addition, the Company has elected to not disclose remaining performance obligations for its franchise agreements with variable consideration based on service center store sales. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Dec. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | FAIR VALUE MEASUREMENTS The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy as of: (In millions) Fair Value Hierarchy December 31 September 30 Cash and cash equivalents Money market funds Level 1 $ 6 $ 5 Time deposits Level 2 25 22 Prepaid expenses and other current assets Currency derivatives (a) Level 2 1 1 Other noncurrent assets Non-qualified trust funds Level 1 23 25 Total assets at fair value $ 55 $ 53 Accrued expenses and other liabilities Currency derivatives (a) Level 2 $ — $ 1 Total liabilities at fair value $ — $ 1 (a) The Company had outstanding contracts with notional values of $69 million and $74 million as of December 31, 2018 and September 30, 2018, respectively. There have been no changes in the nature of inputs or valuation approaches relative to the Company’s financial assets and liabilities that are accounted for at fair value on a recurring basis from those as of September 30, 2018. There were no material gains or losses recognized in earnings during the three months ended December 31, 2018 or 2017 related to these assets and liabilities. Long-term debt The fair values of the Company’s outstanding fixed rate 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. December 31, 2018 September 30, 2018 (In millions) Fair value Carrying value Unamortized discount and Fair value Carrying value Unamortized 2024 Notes $ 366 $ 370 $ 5 $ 376 $ 370 $ 5 2025 Notes 374 395 5 376 395 5 Total $ 740 $ 765 $ 10 $ 752 $ 765 $ 10 Refer to Note 8 for more information on Valvoline’s other debt instruments that have variable interest rates, and accordingly, their carrying amounts approximate fair value. |
Acquisitions and Divestitures
Acquisitions and Divestitures | 3 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Acquisitions and Divestitures | ACQUISITIONS AND DIVESTITURES During the three months ended December 31, 2018, the Company acquired 35 service center stores for a total of $30 million. These acquisitions included 31 franchise service center stores, which were acquired from Oil Changers Inc. on October 31, 2018, and 4 former franchise service centers stores acquired in single and multi-store transactions. During the three months ended December 31, 2017, the Company acquired 56 former franchise service center stores for $60 million. 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 three months ended December 31: (In millions) 2018 2017 Inventories $ — $ 1 Property, plant and equipment 1 1 Goodwill 21 36 Intangible assets (a) Reacquired franchise rights 4 22 Customer relationships 3 — Trademarks and trade names 1 — Net assets acquired $ 30 $ 60 (a) Intangible assets acquired during the three months ended December 31, 2018 have a weighted average amortization period of 12 years. The fair values above are preliminary for up to one year from the date of acquisition as they are subject to measurement period adjustments as new information is obtained about facts and circumstances that existed as of the acquisition date. The Company does not currently expect any material changes to the preliminary purchase price allocations for acquisitions completed during the last twelve months. The incremental results of operations of the acquired stores, which were not material to the Company’s consolidated results, have been included in the condensed consolidated financial statements from the date of each acquisition, and accordingly, pro forma disclosure of financial information has not been presented. |
Accounts Receivable
Accounts Receivable | 3 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Accounts Receivable | ACCOUNTS RECEIVABLE The following summarizes Valvoline’s accounts receivable: (In millions) December 31 September 30 Trade $ 320 $ 390 Other 20 26 Accounts receivable, gross 340 416 Allowance for doubtful accounts (9) (7) Total accounts receivable, net $ 331 $ 409 |
Inventories
Inventories | 3 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | INVENTORIES Inventories are primarily carried at the lower of cost or net realizable value using the weighted average cost method. In addition, certain lubricants are valued at the lower of cost or market using the last-in, first-out method. The following summarizes Valvoline’s inventories: (In millions) December 31 September 30 Finished products $ 211 $ 189 Raw materials, supplies and work in process 33 30 Reserve for LIFO cost valuation (41) (40) Excess and obsolete inventory reserves (3) (3) Total inventories, net $ 200 $ 176 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles | 3 Months Ended |
Dec. 31, 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 three months ended December 31, 2018: (In millions) Quick Lubes Core North America International Total Balance at September 30, 2018 $ 252 $ 89 $ 40 $ 381 Acquisitions (a) 21 — — 21 Currency translation (2) — — (2) Balance at December 31, 2018 $ 271 $ 89 $ 40 $ 400 (a) Refer to Note 4 for details regarding the acquisitions during the three months ended December 31, 2018. Other intangible assets Valvoline’s purchased intangible assets were specifically identified when acquired, have finite lives, and are reported in Goodwill and intangibles, net on the Condensed Consolidated Balance Sheets. The following summarizes the gross carrying amounts and accumulated amortization of the Company’s intangible assets as of: December 31, 2018 September 30, 2018 (In millions) Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount Definite-lived intangible assets Trademarks and trade names $ 30 $ (3) $ 27 $ 29 $ (2) $ 27 Reacquired franchise rights 36 (5) 31 32 (4) 28 Customer relationships 17 (3) 14 14 (3) 11 Other intangible assets 1 — 1 1 — 1 Total definite-lived intangible assets $ 84 $ (11) $ 73 $ 76 $ (9) $ 67 |
Debt
Debt | 3 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Debt | DEBT The following table summarizes Valvoline’s total debt as of: (In millions) December 31 September 30 2018 2025 Notes $ 400 $ 400 2024 Notes 375 375 Term Loans 262 270 Revolver 164 147 Trade Receivables Facility 130 140 Other (a) (10) (10) Total debt $ 1,321 $ 1,322 Current portion of long-term debt 30 30 Long-term debt $ 1,291 $ 1,292 (a) As of December 31, 2018 and September 30, 2018, other included $11 million of debt issuance costs and discounts and $1 million of debt primarily acquired through acquisitions. Senior Notes The Company’s outstanding fixed rate senior notes consist of 4.375% senior unsecured notes due 2025 with an aggregate principal amount of $400 million issued in August 2017 (the “2025 Notes”) and 5.500% senior unsecured notes due 2024 with an aggregate principal amount of $375 million issued in July 2016 (the “2024 Notes” and together with the 2025 Notes, the “Senior Notes”). Senior Credit Agreement As of December 31, 2018 and September 30, 2018, the $875 million term loan facility (“Term Loans”) under the senior credit agreement (“Senior Credit Agreement”) had outstanding principal balances of $262 million and $270 million, respectively. Consistent with the payment schedule, during the three months ended December 31, 2018, the Company made principal payments of $8 million on the Term Loans. As of December 31, 2018 and September 30, 2018, there was $164 million and $147 million, respectively, outstanding under the $450 million revolving credit facility (“Revolver”) under the Senior Credit Agreement. During the three months ended December 31, 2018, Valvoline borrowed $57 million and made payments of $40 million on the Revolver. As of December 31, 2018, the total borrowing capacity remaining under the Revolver was $277 million due to a reduction of $9 million for letters of credit outstanding. As of December 31, 2018, Valvoline was in compliance with all covenants under the Senior Credit Agreement. Trade Receivables Facility As of December 31, 2018 and September 30, 2018, there was $130 million and $140 million, respectively, outstanding under the $175 million trade receivables securitization facility (“Trade Receivables Facility”). During the three months ended December 31, 2018, Valvoline made payments of $53 million and borrowed $43 million under the Trade Receivables Facility, using the proceeds to supplement the Company’s daily cash needs. Based on the availability of eligible receivables, the total borrowing capacity remaining under the Trade Receivables Facility at December 31, 2018 was approximately $12 million. The financing subsidiary owned $222 million and $275 million of outstanding accounts receivable as of December 31, 2018 and September 30, 2018, respectively, and these amounts are included in Accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets. |
Income Taxes
Income Taxes | 3 Months Ended |
Dec. 31, 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 December 31, 2018 was $19 million, an effective tax rate of 26.4%, compared to expense of $94 million, an effective tax rate of 111.9%, for the three months ended December 31, 2017. The decrease in income tax expense and the effective tax rate was principally driven by the enactment of tax reform legislation in the U.S. in December 2017, which resulted in a net increase in income tax expense of approximately $68 million during the three months ended December 31, 2017 and a lower federal corporate statutory income tax rate of 21% in fiscal 2019 from the blended rate of 24.5% in the prior year. The Company finalized its provisional estimates of the impacts of U.S. tax reform legislation, which resulted in no significant adjustments d uring the three months ended December 31, 2018 . |
Employee Benefit Plans
Employee Benefit Plans | 3 Months Ended |
Dec. 31, 2018 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | EMPLOYEE BENEFIT PLANS The following table summarizes the components of pension and other postretirement benefit income for the three months ended December 31: Other postretirement benefits Pension benefits (In millions) 2018 2017 2018 2017 Interest cost $ 20 $ 19 $ 1 $ — Expected return on plan assets (20) (26) — — Amortization of prior service credit — — (3) (3) Net periodic benefit income $ — $ (7) $ (2) $ (3) |
Litigation, Claims and Continge
Litigation, Claims and Contingencies | 3 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation, Claims and Contingencies | LITIGATION, CLAIMS 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. 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 | 3 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | EARNINGS PER SHARE The following summarizes basic and diluted earnings per share for the three months ended December 31: (In millions, except per share data) 2018 2017 Numerator Net income (loss) $ 53 $ (10) Denominator Weighted average common shares outstanding 188 202 Effect of potentially dilutive securities (a) 1 — Weighted average diluted shares outstanding 189 202 Earnings (loss) per share Basic $ 0.28 $ (0.05) Diluted $ 0.28 $ (0.05) (a) For the three months ended December 31, 2017, due to the net loss attributable to Valvoline common stockholders, potential common shares primarily related to stock-based compensation plans of approximately 1 million were excluded from the diluted share count because their effect would have been anti-dilutive. |
Reportable Segment Information
Reportable Segment Information | 3 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Reportable Segment Information | REPORTABLE SEGMENT INFORMATION Valvoline manages and reports within the following three segments: • Quick Lubes - services the passenger car and light truck quick lube market in the United States and Canada through company-owned and independent franchised retail quick lube service stores, as well as Express Care stores where independent operators service vehicles with Valvoline products. • Core North America - sells engine and automotive maintenance products in the United States and Canada to retailers, installers and heavy-duty customers to service vehicles and equipment. • International - sells engine and automotive maintenance 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 U.S. GAAP measures evaluated in assessing each reportable segment’s financial performance. Operating income by segment includes the allocation of shared corporate costs, which are allocated consistently based on each segment ’ s proportional contribution to various financial measures. Intersegment sales are not material, and assets are not allocated and 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 2018 2017 Sales Quick Lubes $ 189 $ 154 Core North America 232 251 International 136 140 Consolidated sales $ 557 $ 545 Operating income Quick Lubes $ 38 $ 35 Core North America 31 43 International 18 19 Total operating segments $ 87 $ 97 Unallocated and other (a) — (9) Consolidated operating income $ 87 $ 88 (a) Unallocated and other includes Legacy and separation-related expenses, net |
Guarantor Financial Information
Guarantor Financial Information | 3 Months Ended |
Dec. 31, 2018 | |
Condensed Financial Information Disclosure [Abstract] | |
Guarantor Financial Information | GUARANTOR FINANCIAL INFORMATION The Senior Notes detailed in Note 8 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. The following tables present, on a consolidating basis, the condensed statements of comprehensive income; condensed balance sheets; and condensed statements of cash flows for the parent issuer of these Senior Notes, the Guarantor Subsidiaries on a combined basis, the Non-Guarantor Subsidiaries on a combined basis and the eliminations necessary to arrive at the Company’s consolidated results. Condensed Consolidating Statements of Comprehensive Income For the three months ended December 31, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 440 $ 132 $ (15) $ 557 Cost of sales — 293 96 (15) 374 Gross profit — 147 36 — 183 Selling, general and administrative expenses 3 81 21 — 105 Equity and other (income) expenses, net — (13) 4 — (9) Operating (loss) income (3) 79 11 — 87 Net pension and other postretirement plan income — (2) — — (2) Net interest and other financing expenses 15 1 1 — 17 (Loss) income before income taxes (18) 80 10 — 72 Income tax (benefit) expense (5) 20 4 — 19 Equity in net income of subsidiaries (66) (6) — 72 — Net income $ 53 $ 66 $ 6 $ (72) $ 53 Total comprehensive income $ 47 $ 60 $ 2 $ (62) $ 47 Condensed Consolidating Statements of Comprehensive Income For the three months ended December 31, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 422 $ 134 $ (11) $ 545 Cost of sales — 263 98 (11) 350 Gross profit — 159 36 — 195 Selling, general and administrative expenses 9 76 22 — 107 Legacy and separation-related expenses, net 1 8 — — 9 Equity and other (income) expenses, net — (12) 3 — (9) Operating (loss) income (10) 87 11 — 88 Net pension and other postretirement plan income — (10) — — (10) Net interest and other financing expenses 12 1 1 — 14 (Loss) income before income taxes (22) 96 10 — 84 Income tax expense 21 70 3 — 94 Equity in net income of subsidiaries (33) (7) — 40 — Net (loss) income $ (10) $ 33 $ 7 $ (40) $ (10) Total comprehensive (loss) income $ (11) $ 32 $ 8 $ (40) $ (11) Condensed Consolidating Balance Sheets As of December 31, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Assets Current assets Cash and cash equivalents $ — $ 21 $ 78 $ — $ 99 Accounts receivable, net — 27 399 (95) 331 Inventories, net — 117 83 — 200 Prepaid expenses and other current assets — 33 5 — 38 Total current assets — 198 565 (95) 668 Noncurrent assets Property, plant and equipment, net — 387 41 — 428 Goodwill and intangibles, net — 401 72 — 473 Equity method investments — 32 — — 32 Investment in subsidiaries 832 468 — (1,300) — Deferred income taxes 67 54 13 — 134 Other noncurrent assets 2 90 5 — 97 Total noncurrent assets 901 1,432 131 (1,300) 1,164 Total assets $ 901 $ 1,630 $ 696 $ (1,395) $ 1,832 Liabilities and Stockholders’ Deficit Current liabilities Current portion of long-term debt $ 30 $ — $ — $ — $ 30 Trade and other payables 3 188 56 (95) 152 Accrued expenses and other liabilities 17 156 25 — 198 Total current liabilities 50 344 81 (95) 380 Noncurrent liabilities Long-term debt 1,160 1 130 — 1,291 Employee benefit obligations — 313 17 — 330 Other noncurrent liabilities 34 140 — — 174 Total noncurrent liabilities 1,194 454 147 — 1,795 Commitments and contingencies Stockholders’ (deficit) equity (343) 832 468 (1,300) (343) Total liabilities and stockholders’ deficit/equity $ 901 $ 1,630 $ 696 $ (1,395) $ 1,832 Condensed Consolidating Balance Sheets As of September 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Assets Current assets Cash and cash equivalents $ — $ 20 $ 76 $ — $ 96 Accounts receivable, net — 48 480 (119) 409 Inventories, net — 95 81 — 176 Prepaid expenses and other current assets 1 38 5 — 44 Total current assets 1 201 642 (119) 725 Noncurrent assets Property, plant and equipment, net — 384 36 — 420 Goodwill and intangibles, net — 396 52 — 448 Equity method investments — 31 — — 31 Investment in subsidiaries 801 509 — (1,310) — Deferred income taxes 62 63 13 — 138 Other noncurrent assets 2 85 5 — 92 Total noncurrent assets 865 1,468 106 (1,310) 1,129 Total assets $ 866 $ 1,669 $ 748 $ (1,429) $ 1,854 Liabilities and Stockholders’ Deficit Current liabilities Current portion of long-term debt $ 30 $ — $ — $ — $ 30 Trade and other payables 3 241 53 (119) 178 Accrued expenses and other liabilities 7 168 28 — 203 Total current liabilities 40 409 81 (119) 411 Noncurrent liabilities Long-term debt 1,151 1 140 — 1,292 Employee benefit obligations — 317 16 — 333 Other noncurrent liabilities 33 141 2 — 176 Total noncurrent liabilities 1,184 459 158 — 1,801 Commitments and contingencies Stockholders’ (deficit) equity (358) 801 509 (1,310) (358) Total liabilities and stockholders’ deficit/equity $ 866 $ 1,669 $ 748 $ (1,429) $ 1,854 Condensed Consolidating Statements of Cash Flows For the three months ended December 31, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Cash flows provided by operating activities $ 13 $ 29 $ 43 $ — $ 85 Cash flows from investing activities Additions to property, plant and equipment — (20) (7) — (27) Acquisitions, net of cash required — (8) (22) — (30) Other investing activities, net — 1 — — 1 Cash flows used in investing activities — (27) (29) — (56) Cash flows from financing activities Proceeds from borrowings, net of issuance costs 57 — 43 — 100 Repayments on borrowings (48) — (53) — (101) Payments for purchase of additional ownership in subsidiary — — (1) — (1) Cash dividends paid (20) — — — (20) Other financing activities (2) (1) — — (3) Cash flows used in financing activities (13) (1) (11) — (25) Effect of currency exchange rate changes on cash and cash equivalents — — (1) — (1) Increase in cash and cash equivalents — 1 2 — 3 Cash and cash equivalents - beginning of year — 20 76 — 96 Cash and cash equivalents - end of period $ — $ 21 $ 78 $ — $ 99 Condensed Consolidating Statements of Cash Flows For the three months ended December 31, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Cash flows (used in) provided by operating activities $ (2) $ 52 $ (30) $ — $ 20 Cash flows from investing activities Additions to property, plant and equipment — (13) (1) — (14) Acquisitions, net of cash required — (60) — — (60) Return of advance from subsidiary 60 — — (60) — Cash flows provided by (used in) investing activities 60 (73) (1) (60) (74) Cash flows from financing activities Proceeds from borrowings, net of issuance costs — — 44 — 44 Repayments on borrowings (4) — — — (4) Repurchases of common stock (37) — — — (37) Payments for purchase of additional ownership in subsidiary — — (15) — (15) Cash dividends paid (15) — — — (15) Other financing activities (2) — (2) — (4) Other intercompany activity, net — (60) — 60 — Total cash (used in) provided by financing activities (58) (60) 27 60 (31) Effect of currency exchange rate changes on cash and cash equivalents — — (1) — (1) Decrease in cash and cash equivalents — (81) (5) — (86) Cash and cash equivalents - beginning of year — 99 102 — 201 Cash and cash equivalents - end of period $ — $ 18 $ 97 $ — $ 115 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS Dividend declared On January 30, 2019, the Board of Directors of Valvoline declared a quarterly cash dividend of $0.106 per share of Valvoline common stock. The dividend is payable on March 15, 2019 to shareholders of record on March 1, 2019. Restructuring program |
Basis of Presentation and Sig_2
Basis of Presentation and Significant Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 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, 2018. 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 | 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 2019, Valvoline adopted the following: • In May 2014, the Financial Accounting Standards Board ("FASB") issued accounting guidance which established a single comprehensive model for entities to use in accounting for revenue from contracts with customers and superseded most industry-specific revenue recognition guidance. This new guidance introduced a five-step model for revenue recognition focused on the transfer of control, as opposed to the transfer of risk and rewards under prior guidance. Valvoline adopted this new revenue recognition guidance on October 1, 2018 using the modified retrospective method applied to those contracts that were not completed at the date of adoption. Under this method, the new revenue recognition guidance has been applied prospectively from the date of adoption, while prior period financial statements continue to be reported in accordance with the previous guidance. The cumulative effect of the changes at adoption was recognized through an increase to opening retained deficit of $13 million, net of tax, related to the timing of certain sales to distributors. Revenue transactions recorded under the new guidance are substantially consistent with the treatment under prior guidance, and the impact of adoption was not material to the condensed consolidated financial statements as of and for the three months ended December 31, 2018 and is not expected to be material on an ongoing basis. As part of the adoption, Valvoline modified certain control procedures and processes, none of which had a material effect on the Company's internal control over financial reporting. Refer to Note 2 for additional information regarding Valvoline's updated accounting policy for revenue from contracts with customers and adoption of this new guidance. • In Aug ust 2016, the FASB issued new accounting guidance regarding the classification of certain cash receipts and payments in the statement of cash flows. The Company adopted the accounting guidance on October 1, 2018 using a retrospective approach and made an accounting policy election to classify distributions received from equity method investments based on the nature of the activities of the investee that generated the distribution, which is consistent with the Company's previous classification of these as cash flows from operating activities. The other cash flow classification matters addressed in this guidance were either not relevant or material to Valvoline's activities. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Statements of Cash Flows. • In Jan uary 2017, the FASB issued new accounting guidance which clarifies the definition of a business used across several areas of accounting, including the evaluation of whether a transaction should be accounted for as an acquisition (or disposal) of assets or as a business combination. The new guidance clarifies that to be a business there must also be at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in the new revenue recognition standard. Valvoline adopted this guidance on October 1, 2018 with prospective application. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements. • I n August 2018, the FASB issued new accounting guidance related to fees paid by a customer in a cloud computing arrangement, which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service arrangement with the existing capitalization guidance for implementation costs incurred to develop or obtain internal-use software. Valvoline adopted this guidance prospectively on October 1, 2018. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements. Issued but not yet adopted 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 its assessment and implementation process, including completing its process to identify all forms of its leases globally, identify changes necessary to internal controls, as well as analyzing the practical expedients and specific impacts on its condensed consolidated financial statements. At this time, the Company cannot estimate the specific quantitative impact of adopting this new guidance; however, adoption is expected to have a material impact on the Condensed Consolidated Balance Sheets as the majority of the Company’s operating leases are expected to be recognized as right of use assets and associated lease liabilities. The Company also anticipates expanded footnote disclosures related to its leases under the new guidance. |
Revenue Recognition | Revenue is recognized for the amount that reflects the consideration the Company is expected to be entitled to based on when control of the promised good or service is transferred to the customer. Revenue recognition is evaluated through the following five steps: (i) identification of the contract(s) with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied. Below is a summary of the key considerations for Valvoline’s material revenue-generating activities: Engine and automotive maintenance products Engine and automotive maintenance products primarily include lubricants, antifreeze, chemicals, filters, and other complementary products for use across a wide array of vehicles and engines. The Company’s customers typically enter into a sales agreement which outlines a framework of terms and conditions that apply to all current and future purchase orders for the customer submitted under the supply agreement. In these situations, the Company’s contract with the customer is the sales agreement combined with the customer purchase order as specific products and quantities are not indicated until a purchase order is submitted. As the Company’s contract with the customer is typically for a single purchase order under the supply agreement to be delivered at a point in time, the duration of the contract is almost always one year or less. The Company’s products are distinct and separately identifiable on customer purchase orders, with each product sale representing a separate performance obligation that is generally delivered simultaneously. Valvoline is the principal to these contracts as the Company has control of the products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis. The Company determines the point in time at which control is transferred and the performance obligation is satisfied by considering when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of the product, which generally coincides with the transfer of title and risk of loss to the customer and is typically determined based on delivery terms within the underlying contract. While payment terms with customers vary by region and customer and are generally 30 to 60 days after delivery, Valvoline does not provide extended payment terms of a year or more . Company-owned quick-lube operations Performance obligations related to company-owned quick-lube operations primarily include the sale of engine and automotive maintenance products and related services. These performance obligations are distinct and are delivered simultaneously at a point in time. Accordingly, revenue from company-owned quick-lube operations is recognized when payment is tendered at the point of sale, which coincides with the completion of product and service delivery and the transfer of control and benefits from the performance obligations to the customer. Franchised quick-lube operations The primary performance obligations related to franchised quick-lube operations include product sales as described above and the license of intellectual property, which provides access to the Valvoline brand and proprietary information to operate service center stores over the term of a franchise agreement. Other franchise performance obligations do not result in material revenue. Each performance obligation is distinct, and franchisees generally receive and consume the benefits provided by the Company’s performance over the course of the franchise agreement, which typically ranges from 10 to 15 years. Billings and payments occur monthly. In exchange for the license of Valvoline intellectual property, franchisees generally remit initial fees upon opening a service center store and royalties at a contractual rate of the applicable service center store sales over the term of the franchise agreement. The license provides access to the intellectual property over the term of the franchise agreement and is considered a right-to-access license of symbolic intellectual property as substantially all its utility is derived from association with the Company’s past and ongoing activities. The license granted to operate each franchised service center store is the predominant item to which the royalties relate and represent a distinct performance obligation which is recognized over time as the underlying sales occur as this is the most appropriate measure of progress toward complete satisfaction of the performance obligation. Variable consideration The Company only offers an assurance-type warranty with regard to the intended functionality of products sold, which therefore, does not represent a distinct performance obligation within the context of the contract. Product returns and refunds are generally not material and are not accepted unless the item is defective as manufactured. Estimated product returns are recorded as a reduction in reported revenues at the time of sale based upon historical product return experience and is adjusted for known trends to arrive at the amount of consideration to which Valvoline expects to receive. The nature of Valvoline’s contracts with customers often give rise to variable consideration consisting primarily of promotional rebates and customer pricing discounts based on achieving certain levels of sales activity that generally decrease the transaction price. The Company determines the transaction price as the amount of consideration it expects to be entitled to in exchange for fulfilling the performance obligations, including the effects of any variable consideration, or amounts payable to the customer when there is a basis to reasonably estimate the amount and it is probable there will not be a significant reversal. Variable consideration is recorded as a reduction of the transaction price at the time of sale and is primarily estimated utilizing the most likely amount method that is expected to be earned as the Company is able to estimate the anticipated discounts within a sufficiently narrow range of possible outcomes based on its extensive historical experience with certain customers, similar programs and management’s judgment with respect to estimating customer participation and performance levels. Variable consideration is reassessed at each reporting date and adjustments are made, when necessary. Allocation of transaction price In each contract with multiple performance obligations, Valvoline allocates the transaction price, including variable consideration, to each performance obligation on a relative standalone selling price basis, which is generally determined based on the directly observable data of the Company’s standalone sales of the performance obligations in similar circumstances to similar customers. In the absence of directly observable standalone prices, the Company may utilize prices charged by competitors selling similar products or use an expected cost-plus margin approach. The amount allocated to each performance obligation is recognized as revenue as control is transferred to the customer. Contract balances Valvoline invoices customers once or as performance obligations are satisfied, at which point payment becomes unconditional. As the majority of the Company’s performance obligations are satisfied at a point in time and customers typically do not make material payments in advance, nor does Valvoline have a right to consideration in advance of control transfer, the Company had no contract assets or contract liabilities recorded within its Condensed Consolidated Balance Sheet at adoption or as of December 31, 2018. The Company recognizes a receivable on its Condensed Consolidated Balance Sheet when the Company performs a service or transfers a product in advance of receiving consideration, and the Company’s right to consideration is unconditional and only the passage of time is required before payment of that consideration is due. Practical expedients and accounting policies Valvoline elected the following practical expedients and policy elections in accordance with the new revenue recognition accounting guidance adopted beginning in fiscal 2019: • Significant financing component – The promised amount of consideration has not been adjusted as the Company does not have significant financing arrangements with its customers. The Company expects that the period between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service will be one year or less. • Incremental costs of obtaining a contract - The Company expenses incremental direct costs of obtaining a contract, primarily sales commissions, when incurred due to the short-term nature of individual contracts, which would result in amortization periods of one year or less. These costs are not material and are recorded in Selling, general and administrative expenses within the Condensed Consolidated Statements of Comprehensive Income. • Shipping and handling costs - Valvoline elected to account for shipping and handling activities that occur after the customer has obtained control as fulfillment activities (i.e., an expense) rather than as a performance obligation. Accordingly, amounts billed for shipping and handling are a component of the transaction price included in net sales, while costs incurred are included in cost of sales. • Sales and use-based taxes - Valvoline excludes from its revenue any amounts collected from customers for sales (and similar) taxes. These amounts are, however, reflected in accrued expenses until remitted to the appropriate governmental authority. • Disclosure o f remaining performance obligations - The Company elected to apply the practical expedient to omit disclosures of remaining performance obligations for contracts which have an initial expected term of one year or less. In addition, the Company has elected to not disclose remaining performance obligations for its franchise agreements with variable consideration based on service center store sales. |
Inventories | Inventories are primarily carried at the lower of cost or net realizable value using the weighted average cost method. In addition, certain lubricants are valued at the lower of cost or market using the last-in, first-out method. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Cumulative Effect and Impact of New Accounting Pronouncements | The following table reconciles the Condensed Consolidated Balance Sheet line items impacted by the cumulative effect of adoption of the new revenue recognition accounting guidance on October 1, 2018: (In millions) September 30, 2018 as reported Adjustments Balances at October 1, 2018 Accounts receivable, net $ 409 $ (33) $ 376 Inventories, net $ 176 $ 14 $ 190 Deferred income taxes $ 138 $ 6 $ 144 Retained deficit $ 399 $ 13 $ 412 Most revenue transactions and activities recorded under the new revenue recognition accounting guidance are substantially consistent with the treatment under prior guidance. The following tables summarize the impact of the new revenue accounting guidance on Valvoline’s Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Comprehensive Income as of and for the three months ended December 31, 2018: December 31, 2018 Impact of Changes to Condensed Consolidated Balance Sheet As reported Adjustments (a) Under prior guidance (In millions) Accounts receivable, net $ 331 $ 29 $ 360 Inventories, net $ 200 $ (12) $ 188 Deferred income taxes $ 134 $ (6) $ 128 Accrued expenses and other liabilities $ 198 $ 1 $ 199 Retained deficit $ 379 $ (12) $ 367 (a) Adjustments include the opening retained deficit adjustments as detailed in the table above. Three months ended December 31, 2018 Impact of Changes to Condensed Consolidated Statement of Comprehensive Income As reported Adjustments Under prior guidance (In millions) Sales $ 557 $ (15) $ 542 Cost of sales 374 (15) 359 Gross profit $ 183 $ — $ 183 Selling, general and administrative expenses $ 105 $ 2 $ 107 Operating income $ 87 $ (2) $ 85 Income before income taxes $ 72 $ (2) $ 70 Income tax expense $ 19 $ (1) $ 18 Net income $ 53 $ (1) $ 52 Basic earnings per share $ 0.28 $ (0.01) $ 0.27 Diluted earnings per share $ 0.28 $ (0.01) $ 0.27 |
Schedule of Disaggregated Revenues | The following summarizes sales by primary customer channel for the Company ’ s reportable segments for the three months ended December 31, 2018: (In millions) Quick Lubes Company-owned operations $ 124 Non-company owned operations 65 Total Quick Lubes 189 Core North America Retail 116 Installer and other 116 Total Core North America 232 International 136 Consolidated sales $ 557 Sales by reportable segment disaggregated by geographic market follows for the three months ended December 31, 2018: (In millions) Quick Lubes Core North America International Totals Primary geographic markets North America (a) $ 189 $ 232 $ — $ 421 Europe, Middle East and Africa (EMEA) — — 44 44 Asia Pacific — — 67 67 Latin America (a) — — 25 25 Totals $ 189 $ 232 $ 136 $ 557 ( a) |
Disaggregation of Sales by Timing of Revenue Recognized | The following disaggregates the Company ’ s sales by timing of revenue recognized for the three months ended December 31, 2018: (In millions) Timing of revenue recognized Sales at a point in time $ 547 Franchised revenues transferred over time 10 Consolidated sales $ 557 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities at Fair Value | The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy as of: (In millions) Fair Value Hierarchy December 31 September 30 Cash and cash equivalents Money market funds Level 1 $ 6 $ 5 Time deposits Level 2 25 22 Prepaid expenses and other current assets Currency derivatives (a) Level 2 1 1 Other noncurrent assets Non-qualified trust funds Level 1 23 25 Total assets at fair value $ 55 $ 53 Accrued expenses and other liabilities Currency derivatives (a) Level 2 $ — $ 1 Total liabilities at fair value $ — $ 1 |
Summary of Fair Value of Debt | Carrying values shown in the following table are net of unamortized discounts and issuance costs. December 31, 2018 September 30, 2018 (In millions) Fair value Carrying value Unamortized discount and Fair value Carrying value Unamortized 2024 Notes $ 366 $ 370 $ 5 $ 376 $ 370 $ 5 2025 Notes 374 395 5 376 395 5 Total $ 740 $ 765 $ 10 $ 752 $ 765 $ 10 |
Acquisitions and Divestitures (
Acquisitions and Divestitures (Tables) | 3 Months Ended |
Dec. 31, 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 three months ended December 31: (In millions) 2018 2017 Inventories $ — $ 1 Property, plant and equipment 1 1 Goodwill 21 36 Intangible assets (a) Reacquired franchise rights 4 22 Customer relationships 3 — Trademarks and trade names 1 — Net assets acquired $ 30 $ 60 |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Summary of Accounts Receivable | The following summarizes Valvoline’s accounts receivable: (In millions) December 31 September 30 Trade $ 320 $ 390 Other 20 26 Accounts receivable, gross 340 416 Allowance for doubtful accounts (9) (7) Total accounts receivable, net $ 331 $ 409 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Summary of Inventory | The following summarizes Valvoline’s inventories: (In millions) December 31 September 30 Finished products $ 211 $ 189 Raw materials, supplies and work in process 33 30 Reserve for LIFO cost valuation (41) (40) Excess and obsolete inventory reserves (3) (3) Total inventories, net $ 200 $ 176 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles (Tables) | 3 Months Ended |
Dec. 31, 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 three months ended December 31, 2018: (In millions) Quick Lubes Core North America International Total Balance at September 30, 2018 $ 252 $ 89 $ 40 $ 381 Acquisitions (a) 21 — — 21 Currency translation (2) — — (2) Balance at December 31, 2018 $ 271 $ 89 $ 40 $ 400 (a) Refer to Note 4 for details regarding the acquisitions during the three months ended December 31, 2018. |
Schedule of Definite-Lived Intangible Assets | The following summarizes the gross carrying amounts and accumulated amortization of the Company’s intangible assets as of: December 31, 2018 September 30, 2018 (In millions) Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount Definite-lived intangible assets Trademarks and trade names $ 30 $ (3) $ 27 $ 29 $ (2) $ 27 Reacquired franchise rights 36 (5) 31 32 (4) 28 Customer relationships 17 (3) 14 14 (3) 11 Other intangible assets 1 — 1 1 — 1 Total definite-lived intangible assets $ 84 $ (11) $ 73 $ 76 $ (9) $ 67 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Total Debt | The following table summarizes Valvoline’s total debt as of: (In millions) December 31 September 30 2018 2025 Notes $ 400 $ 400 2024 Notes 375 375 Term Loans 262 270 Revolver 164 147 Trade Receivables Facility 130 140 Other (a) (10) (10) Total debt $ 1,321 $ 1,322 Current portion of long-term debt 30 30 Long-term debt $ 1,291 $ 1,292 |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 3 Months Ended |
Dec. 31, 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 months ended December 31: Other postretirement benefits Pension benefits (In millions) 2018 2017 2018 2017 Interest cost $ 20 $ 19 $ 1 $ — Expected return on plan assets (20) (26) — — Amortization of prior service credit — — (3) (3) Net periodic benefit income $ — $ (7) $ (2) $ (3) |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following summarizes basic and diluted earnings per share for the three months ended December 31: (In millions, except per share data) 2018 2017 Numerator Net income (loss) $ 53 $ (10) Denominator Weighted average common shares outstanding 188 202 Effect of potentially dilutive securities (a) 1 — Weighted average diluted shares outstanding 189 202 Earnings (loss) per share Basic $ 0.28 $ (0.05) Diluted $ 0.28 $ (0.05) (a) For the three months ended December 31, 2017, due to the net loss attributable to Valvoline common stockholders, potential common shares primarily related to stock-based compensation plans of approximately 1 million were excluded from the diluted share count because their effect would have been anti-dilutive. |
Reportable Segment Information
Reportable Segment Information (Tables) | 3 Months Ended |
Dec. 31, 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 2018 2017 Sales Quick Lubes $ 189 $ 154 Core North America 232 251 International 136 140 Consolidated sales $ 557 $ 545 Operating income Quick Lubes $ 38 $ 35 Core North America 31 43 International 18 19 Total operating segments $ 87 $ 97 Unallocated and other (a) — (9) Consolidated operating income $ 87 $ 88 (a) Unallocated and other includes Legacy and separation-related expenses, net |
Guarantor Financial Informati_2
Guarantor Financial Information (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Condensed Financial Information Disclosure [Abstract] | |
Condensed Consolidating Statements of Comprehensive Income | The following tables present, on a consolidating basis, the condensed statements of comprehensive income; condensed balance sheets; and condensed statements of cash flows for the parent issuer of these Senior Notes, the Guarantor Subsidiaries on a combined basis, the Non-Guarantor Subsidiaries on a combined basis and the eliminations necessary to arrive at the Company’s consolidated results. Condensed Consolidating Statements of Comprehensive Income For the three months ended December 31, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 440 $ 132 $ (15) $ 557 Cost of sales — 293 96 (15) 374 Gross profit — 147 36 — 183 Selling, general and administrative expenses 3 81 21 — 105 Equity and other (income) expenses, net — (13) 4 — (9) Operating (loss) income (3) 79 11 — 87 Net pension and other postretirement plan income — (2) — — (2) Net interest and other financing expenses 15 1 1 — 17 (Loss) income before income taxes (18) 80 10 — 72 Income tax (benefit) expense (5) 20 4 — 19 Equity in net income of subsidiaries (66) (6) — 72 — Net income $ 53 $ 66 $ 6 $ (72) $ 53 Total comprehensive income $ 47 $ 60 $ 2 $ (62) $ 47 Condensed Consolidating Statements of Comprehensive Income For the three months ended December 31, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 422 $ 134 $ (11) $ 545 Cost of sales — 263 98 (11) 350 Gross profit — 159 36 — 195 Selling, general and administrative expenses 9 76 22 — 107 Legacy and separation-related expenses, net 1 8 — — 9 Equity and other (income) expenses, net — (12) 3 — (9) Operating (loss) income (10) 87 11 — 88 Net pension and other postretirement plan income — (10) — — (10) Net interest and other financing expenses 12 1 1 — 14 (Loss) income before income taxes (22) 96 10 — 84 Income tax expense 21 70 3 — 94 Equity in net income of subsidiaries (33) (7) — 40 — Net (loss) income $ (10) $ 33 $ 7 $ (40) $ (10) Total comprehensive (loss) income $ (11) $ 32 $ 8 $ (40) $ (11) |
Condensed Income Statement | The following tables present, on a consolidating basis, the condensed statements of comprehensive income; condensed balance sheets; and condensed statements of cash flows for the parent issuer of these Senior Notes, the Guarantor Subsidiaries on a combined basis, the Non-Guarantor Subsidiaries on a combined basis and the eliminations necessary to arrive at the Company’s consolidated results. Condensed Consolidating Statements of Comprehensive Income For the three months ended December 31, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 440 $ 132 $ (15) $ 557 Cost of sales — 293 96 (15) 374 Gross profit — 147 36 — 183 Selling, general and administrative expenses 3 81 21 — 105 Equity and other (income) expenses, net — (13) 4 — (9) Operating (loss) income (3) 79 11 — 87 Net pension and other postretirement plan income — (2) — — (2) Net interest and other financing expenses 15 1 1 — 17 (Loss) income before income taxes (18) 80 10 — 72 Income tax (benefit) expense (5) 20 4 — 19 Equity in net income of subsidiaries (66) (6) — 72 — Net income $ 53 $ 66 $ 6 $ (72) $ 53 Total comprehensive income $ 47 $ 60 $ 2 $ (62) $ 47 Condensed Consolidating Statements of Comprehensive Income For the three months ended December 31, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Sales $ — $ 422 $ 134 $ (11) $ 545 Cost of sales — 263 98 (11) 350 Gross profit — 159 36 — 195 Selling, general and administrative expenses 9 76 22 — 107 Legacy and separation-related expenses, net 1 8 — — 9 Equity and other (income) expenses, net — (12) 3 — (9) Operating (loss) income (10) 87 11 — 88 Net pension and other postretirement plan income — (10) — — (10) Net interest and other financing expenses 12 1 1 — 14 (Loss) income before income taxes (22) 96 10 — 84 Income tax expense 21 70 3 — 94 Equity in net income of subsidiaries (33) (7) — 40 — Net (loss) income $ (10) $ 33 $ 7 $ (40) $ (10) Total comprehensive (loss) income $ (11) $ 32 $ 8 $ (40) $ (11) |
Condensed Consolidating Balance Sheets | Condensed Consolidating Balance Sheets As of December 31, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Assets Current assets Cash and cash equivalents $ — $ 21 $ 78 $ — $ 99 Accounts receivable, net — 27 399 (95) 331 Inventories, net — 117 83 — 200 Prepaid expenses and other current assets — 33 5 — 38 Total current assets — 198 565 (95) 668 Noncurrent assets Property, plant and equipment, net — 387 41 — 428 Goodwill and intangibles, net — 401 72 — 473 Equity method investments — 32 — — 32 Investment in subsidiaries 832 468 — (1,300) — Deferred income taxes 67 54 13 — 134 Other noncurrent assets 2 90 5 — 97 Total noncurrent assets 901 1,432 131 (1,300) 1,164 Total assets $ 901 $ 1,630 $ 696 $ (1,395) $ 1,832 Liabilities and Stockholders’ Deficit Current liabilities Current portion of long-term debt $ 30 $ — $ — $ — $ 30 Trade and other payables 3 188 56 (95) 152 Accrued expenses and other liabilities 17 156 25 — 198 Total current liabilities 50 344 81 (95) 380 Noncurrent liabilities Long-term debt 1,160 1 130 — 1,291 Employee benefit obligations — 313 17 — 330 Other noncurrent liabilities 34 140 — — 174 Total noncurrent liabilities 1,194 454 147 — 1,795 Commitments and contingencies Stockholders’ (deficit) equity (343) 832 468 (1,300) (343) Total liabilities and stockholders’ deficit/equity $ 901 $ 1,630 $ 696 $ (1,395) $ 1,832 Condensed Consolidating Balance Sheets As of September 30, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Assets Current assets Cash and cash equivalents $ — $ 20 $ 76 $ — $ 96 Accounts receivable, net — 48 480 (119) 409 Inventories, net — 95 81 — 176 Prepaid expenses and other current assets 1 38 5 — 44 Total current assets 1 201 642 (119) 725 Noncurrent assets Property, plant and equipment, net — 384 36 — 420 Goodwill and intangibles, net — 396 52 — 448 Equity method investments — 31 — — 31 Investment in subsidiaries 801 509 — (1,310) — Deferred income taxes 62 63 13 — 138 Other noncurrent assets 2 85 5 — 92 Total noncurrent assets 865 1,468 106 (1,310) 1,129 Total assets $ 866 $ 1,669 $ 748 $ (1,429) $ 1,854 Liabilities and Stockholders’ Deficit Current liabilities Current portion of long-term debt $ 30 $ — $ — $ — $ 30 Trade and other payables 3 241 53 (119) 178 Accrued expenses and other liabilities 7 168 28 — 203 Total current liabilities 40 409 81 (119) 411 Noncurrent liabilities Long-term debt 1,151 1 140 — 1,292 Employee benefit obligations — 317 16 — 333 Other noncurrent liabilities 33 141 2 — 176 Total noncurrent liabilities 1,184 459 158 — 1,801 Commitments and contingencies Stockholders’ (deficit) equity (358) 801 509 (1,310) (358) Total liabilities and stockholders’ deficit/equity $ 866 $ 1,669 $ 748 $ (1,429) $ 1,854 |
Condensed Consolidating Statements of Cash Flows | Condensed Consolidating Statements of Cash Flows For the three months ended December 31, 2018 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Cash flows provided by operating activities $ 13 $ 29 $ 43 $ — $ 85 Cash flows from investing activities Additions to property, plant and equipment — (20) (7) — (27) Acquisitions, net of cash required — (8) (22) — (30) Other investing activities, net — 1 — — 1 Cash flows used in investing activities — (27) (29) — (56) Cash flows from financing activities Proceeds from borrowings, net of issuance costs 57 — 43 — 100 Repayments on borrowings (48) — (53) — (101) Payments for purchase of additional ownership in subsidiary — — (1) — (1) Cash dividends paid (20) — — — (20) Other financing activities (2) (1) — — (3) Cash flows used in financing activities (13) (1) (11) — (25) Effect of currency exchange rate changes on cash and cash equivalents — — (1) — (1) Increase in cash and cash equivalents — 1 2 — 3 Cash and cash equivalents - beginning of year — 20 76 — 96 Cash and cash equivalents - end of period $ — $ 21 $ 78 $ — $ 99 Condensed Consolidating Statements of Cash Flows For the three months ended December 31, 2017 (In millions) Valvoline Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Cash flows (used in) provided by operating activities $ (2) $ 52 $ (30) $ — $ 20 Cash flows from investing activities Additions to property, plant and equipment — (13) (1) — (14) Acquisitions, net of cash required — (60) — — (60) Return of advance from subsidiary 60 — — (60) — Cash flows provided by (used in) investing activities 60 (73) (1) (60) (74) Cash flows from financing activities Proceeds from borrowings, net of issuance costs — — 44 — 44 Repayments on borrowings (4) — — — (4) Repurchases of common stock (37) — — — (37) Payments for purchase of additional ownership in subsidiary — — (15) — (15) Cash dividends paid (15) — — — (15) Other financing activities (2) — (2) — (4) Other intercompany activity, net — (60) — 60 — Total cash (used in) provided by financing activities (58) (60) 27 60 (31) Effect of currency exchange rate changes on cash and cash equivalents — — (1) — (1) Decrease in cash and cash equivalents — (81) (5) — (86) Cash and cash equivalents - beginning of year — 99 102 — 201 Cash and cash equivalents - end of period $ — $ 18 $ 97 $ — $ 115 |
Basis of Presentation and Sig_3
Basis of Presentation and Significant Accounting Policies (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Oct. 01, 2018 | Sep. 30, 2018 |
Increase in retained deficit | $ 379 | $ 412 | $ 399 |
ASU 2014-09 | |||
Increase in retained deficit | $ 13 |
Revenue Recognition - Cumulativ
Revenue Recognition - Cumulative Effect and Impact of New Accounting Pronouncements (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Oct. 01, 2018 | Sep. 30, 2018 | |
Statement of Financial Position [Abstract] | ||||
Accounts receivable, net | $ 331 | $ 376 | $ 409 | |
Inventories, net | 200 | 190 | 176 | |
Deferred income taxes | 134 | 144 | 138 | |
Accrued expenses and other liabilities | 198 | 203 | ||
Retained deficit | 379 | 412 | 399 | |
Statement of Comprehensive Income [Abstract] | ||||
Sales | 557 | $ 545 | ||
Cost of sales | 374 | 350 | ||
Gross profit | 183 | 195 | ||
Selling, general and administrative expenses | 105 | 107 | ||
Operating income | 87 | 88 | ||
Income before income taxes | 72 | 84 | ||
Income tax expense | 19 | 94 | ||
Net income | $ 53 | $ (10) | ||
Basic earnings per share (usd per share) | $ 0.28 | $ (0.05) | ||
Diluted earnings per share (usd per share) | $ 0.28 | $ (0.05) | ||
Under Prior Guidance | ||||
Statement of Financial Position [Abstract] | ||||
Accounts receivable, net | $ 360 | 409 | ||
Inventories, net | 188 | 176 | ||
Deferred income taxes | 128 | 138 | ||
Accrued expenses and other liabilities | 199 | |||
Retained deficit | 367 | $ 399 | ||
Statement of Comprehensive Income [Abstract] | ||||
Sales | 542 | |||
Cost of sales | 359 | |||
Gross profit | 183 | |||
Selling, general and administrative expenses | 107 | |||
Operating income | 85 | |||
Income before income taxes | 70 | |||
Income tax expense | 18 | |||
Net income | $ 52 | |||
Basic earnings per share (usd per share) | $ 0.27 | |||
Diluted earnings per share (usd per share) | $ 0.27 | |||
ASU 2014-09 | ||||
Statement of Financial Position [Abstract] | ||||
Retained deficit | 13 | |||
ASU 2014-09 | Adjustments | ||||
Statement of Financial Position [Abstract] | ||||
Accounts receivable, net | $ 29 | (33) | ||
Inventories, net | (12) | 14 | ||
Deferred income taxes | (6) | 6 | ||
Accrued expenses and other liabilities | 1 | |||
Retained deficit | (12) | $ 13 | ||
Statement of Comprehensive Income [Abstract] | ||||
Sales | (15) | |||
Cost of sales | (15) | |||
Gross profit | 0 | |||
Selling, general and administrative expenses | 2 | |||
Operating income | (2) | |||
Income before income taxes | (2) | |||
Income tax expense | (1) | |||
Net income | $ (1) | |||
Basic earnings per share (usd per share) | $ (0.01) | |||
Diluted earnings per share (usd per share) | $ (0.01) |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Disaggregation of Revenue [Line Items] | ||
Sales | $ 557 | $ 545 |
Sales at a Point In Time | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 547 | |
Franchised Revenues Transferred Over Time | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 10 | |
North America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 421 | |
Europe, Middle East and Africa (EMEA) | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 44 | |
Asia Pacific | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 67 | |
Latin America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 25 | |
Quick Lubes | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 189 | |
Quick Lubes | North America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 189 | |
Quick Lubes | Europe, Middle East and Africa (EMEA) | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 0 | |
Quick Lubes | Asia Pacific | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 0 | |
Quick Lubes | Latin America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 0 | |
Core North America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 232 | |
Core North America | North America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 232 | |
Core North America | Europe, Middle East and Africa (EMEA) | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 0 | |
Core North America | Asia Pacific | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 0 | |
Core North America | Latin America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 0 | |
International | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 136 | |
International | North America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 0 | |
International | Europe, Middle East and Africa (EMEA) | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 44 | |
International | Asia Pacific | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 67 | |
International | Latin America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 25 | |
Company-Owned | Quick Lubes | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 124 | |
Non-Company Owned | Quick Lubes | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 65 | |
Retail | Core North America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 116 | |
Installer and Other | Core North America | ||
Disaggregation of Revenue [Line Items] | ||
Sales | $ 116 |
Revenue Recognition - Narrative
Revenue Recognition - Narrative (Details) | 3 Months Ended |
Dec. 31, 2018numberOfPrincipalActivitiesnumberOfSegments | |
Revenue from Contract with Customer [Abstract] | |
Number of principal activities | numberOfPrincipalActivities | 3 |
Number of reportable segments | numberOfSegments | 3 |
Sales at a Point In Time | |
Disaggregation of Revenue [Line Items] | |
Percentage of revenue recognized | 98.00% |
Franchised Revenues Transferred Over Time | |
Disaggregation of Revenue [Line Items] | |
Percentage of revenue recognized | 2.00% |
Minimum | |
Disaggregation of Revenue [Line Items] | |
Payment terms | 30 days |
Expected timing of satisfaction for revenue performance obligations | 10 years |
Maximum | |
Disaggregation of Revenue [Line Items] | |
Payment terms | 60 days |
Expected timing of satisfaction for revenue performance obligations | 15 years |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Assets and Liabilities at Fair Value (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions | Dec. 31, 2018 | Sep. 30, 2018 |
Other noncurrent assets | ||
Total assets at fair value | $ 55 | $ 53 |
Accrued expenses and other liabilities | ||
Total liabilities at fair value | 0 | 1 |
Level 1 | ||
Other noncurrent assets | ||
Non-qualified trust funds | 23 | 25 |
Level 1 | Money Market Funds | ||
Cash and cash equivalents | ||
Cash and cash equivalents | 6 | 5 |
Level 2 | ||
Prepaid expense and other current assets | ||
Currency derivatives | 1 | 1 |
Accrued expenses and other liabilities | ||
Currency derivatives | 0 | 1 |
Level 2 | Time Deposits | ||
Cash and cash equivalents | ||
Cash and cash equivalents | $ 25 | $ 22 |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Sep. 30, 2018 |
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 | $ 69 | $ 74 |
Fair Value Measurements - Fair
Fair Value Measurements - Fair Value of Debt (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Sep. 30, 2018 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Unamortized discount and issuance costs | $ 11 | |
Level 2 | Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 740 | $ 752 |
Level 2 | Fair Value | Senior Notes | 2024 Notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 366 | 376 |
Level 2 | Fair Value | Senior Notes | 2025 Notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 374 | 376 |
Level 2 | Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, fair value | 765 | 765 |
Unamortized discount and issuance costs | 10 | 10 |
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 | 395 |
Unamortized discount and issuance costs | $ 5 | $ 5 |
Acquisitions and Divestitures -
Acquisitions and Divestitures - Additional Information (Details) $ in Millions | 3 Months Ended | |
Dec. 31, 2018USD ($)service_center_storenumberOfFormerFranchiseCentersnumberOfFranchiseServiceCenters | Dec. 31, 2017USD ($)numberOfFormerFranchiseCenters | |
Business Acquisition [Line Items] | ||
Number of service center stores acquired | service_center_store | 35 | |
Consideration for acquisition | $ | $ 30 | $ 60 |
Number of former franchise service centers acquired | numberOfFormerFranchiseCenters | 4 | 56 |
Weighted average remaining term | 12 years | |
Oil Changers, Inc. | ||
Business Acquisition [Line Items] | ||
Number of franchise service center stores acquired | numberOfFranchiseServiceCenters | 31 |
Acquisitions and Divestitures_2
Acquisitions and Divestitures - Summary of Consideration Paid and Assets and Liabilities Acquired (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Business Acquisition [Line Items] | ||
Inventories | $ 0 | $ 1 |
Property, plant and equipment | 1 | 1 |
Goodwill | 21 | 36 |
Net assets acquired | $ 30 | 60 |
Weighted average remaining term | 12 years | |
Reacquired franchise rights | ||
Business Acquisition [Line Items] | ||
Intangible assets | $ 4 | 22 |
Customer relationships | ||
Business Acquisition [Line Items] | ||
Intangible assets | 3 | 0 |
Trademarks and trade names | ||
Business Acquisition [Line Items] | ||
Intangible assets | $ 1 | $ 0 |
Accounts Receivable - Summary o
Accounts Receivable - Summary of Accounts Receivable (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Oct. 01, 2018 | Sep. 30, 2018 |
Receivables [Abstract] | |||
Trade | $ 320 | $ 390 | |
Other | 20 | 26 | |
Accounts receivable, gross | 340 | 416 | |
Allowance for doubtful accounts | (9) | (7) | |
Total accounts receivable, net | $ 331 | $ 376 | $ 409 |
Accounts Receivable - Narrative
Accounts Receivable - Narrative (Details) $ in Millions | 3 Months Ended |
Dec. 31, 2018USD ($) | |
Receivables [Abstract] | |
Accounts receivable sold to financial institutions | $ 28 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventory (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Oct. 01, 2018 | Sep. 30, 2018 |
Inventory Disclosure [Abstract] | |||
Finished products | $ 211 | $ 189 | |
Raw materials, supplies and work in process | 33 | 30 | |
Reserve for LIFO cost valuation | (41) | (40) | |
Excess and obsolete inventory reserves | (3) | (3) | |
Total inventories, net | $ 200 | $ 190 | $ 176 |
Goodwill and Other Intangible_2
Goodwill and Other Intangibles - Summary of Goodwill by Segment (Details) $ in Millions | 3 Months Ended |
Dec. 31, 2018USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 381 |
Acquisitions | 21 |
Currency translation | (2) |
Goodwill, ending balance | 400 |
Quick Lubes | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 252 |
Acquisitions | 21 |
Currency translation | (2) |
Goodwill, ending balance | 271 |
Core North America | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 89 |
Acquisitions | 0 |
Currency translation | 0 |
Goodwill, ending balance | 89 |
International | |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | 40 |
Acquisitions | 0 |
Currency translation | 0 |
Goodwill, ending balance | $ 40 |
Goodwill and Other Intangible_3
Goodwill and Other Intangibles - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Sep. 30, 2018 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | $ 84 | $ 76 |
Accumulated amortization | (11) | (9) |
Net carrying amount | 73 | 67 |
Trademarks and trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 30 | 29 |
Accumulated amortization | (3) | (2) |
Net carrying amount | 27 | 27 |
Reacquired franchise rights | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 36 | 32 |
Accumulated amortization | (5) | (4) |
Net carrying amount | 31 | 28 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 17 | 14 |
Accumulated amortization | (3) | (3) |
Net carrying amount | 14 | 11 |
Other intangible assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross carrying amount | 1 | 1 |
Accumulated amortization | 0 | 0 |
Net carrying amount | $ 1 | $ 1 |
Debt - Schedule of Short-Term B
Debt - Schedule of Short-Term Borrowings and Long Term Debt (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Sep. 30, 2018 |
Debt Instrument [Line Items] | ||
Other | $ (10) | $ (10) |
Total debt | 1,321 | 1,322 |
Current portion of long-term debt | 30 | 30 |
Long-term debt | 1,291 | 1,292 |
Debt issuance cost discounts | 11 | |
Debt acquired through acquisitions | 1 | |
Line of Credit | Revolver | ||
Debt Instrument [Line Items] | ||
Long-term debt | 164 | 147 |
2025 Notes | Senior Notes | ||
Debt Instrument [Line Items] | ||
Debt gross | 400 | 400 |
2024 Notes | Senior Notes | ||
Debt Instrument [Line Items] | ||
Debt gross | 375 | 375 |
Term Loans | Line of Credit | Secured Debt | ||
Debt Instrument [Line Items] | ||
Debt gross | 262 | 270 |
Trade Receivables Facility | Line of Credit | Secured Debt | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 130 | $ 140 |
Debt - Senior Notes (Details)
Debt - Senior Notes (Details) - Senior Notes - USD ($) | Aug. 31, 2017 | Jul. 31, 2016 |
2025 Notes | ||
Debt Instrument [Line Items] | ||
Interest rate on senior unsecured notes | 4.375% | |
Aggregate principal amount | $ 400,000,000 | |
2024 Notes | ||
Debt Instrument [Line Items] | ||
Interest rate on senior unsecured notes | 5.50% | |
Aggregate principal amount | $ 375,000,000 |
Debt - Senior Credit Agreement
Debt - Senior Credit Agreement (Details) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Sep. 30, 2018 | |
Secured Debt | Term Loans | Line of Credit | ||
Debt Instrument [Line Items] | ||
Original principal amount of debt | $ 875,000,000 | |
Outstanding principal balance of debt | 262,000,000 | $ 270,000,000 |
Repayments of debt | 8,000,000 | |
Revolver | Line of Credit | ||
Debt Instrument [Line Items] | ||
Original principal amount of debt | 450,000,000 | |
Repayments of debt | 40,000,000 | |
Long-term debt outstanding amount | 164,000,000 | $ 147,000,000 |
Borrowings from revolving credit facility | 57,000,000 | |
Total borrowing capacity remaining | 277,000,000 | |
Letter of Credit | ||
Debt Instrument [Line Items] | ||
Letters of credit outstanding | $ 9,000,000 |
Debt - Trade Receivables Facili
Debt - Trade Receivables Facility (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Nov. 20, 2017 | |
Debt Instrument [Line Items] | ||||
Repayments of long-term debt | $ 101 | $ 4 | ||
Proceeds from borrowings | 100 | $ 44 | ||
Line of Credit | Trade Receivables Facility | Secured Debt | ||||
Debt Instrument [Line Items] | ||||
Long-term debt outstanding amount | 130 | $ 140 | ||
Original principal amount of debt | $ 175 | |||
Repayments of long-term debt | 53 | |||
Proceeds from borrowings | 43 | |||
Total borrowing capacity remaining | 12 | |||
Line of Credit | Trade Receivables Facility | Secured Debt | Financing Subsidiary | ||||
Debt Instrument [Line Items] | ||||
Accounts receivable pledged as collateral | $ 222 | $ 275 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |||
Income tax expense | $ 19 | $ 94 | |
Effective tax rate | 26.40% | 111.90% | |
Tax cuts and jobs act of 2017, income tax expense | $ 68 | ||
US federal blended income tax rate | 24.50% |
Employee Benefit Plans - Compon
Employee Benefit Plans - Components of Pension and Other Postretirement Benefit Income (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Pension benefits | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Interest cost | $ 20 | $ 19 |
Expected return on plan assets | (20) | (26) |
Amortization of prior service credit | 0 | 0 |
Net periodic benefit income | 0 | (7) |
Other postretirement benefits | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Interest cost | 1 | 0 |
Expected return on plan assets | 0 | 0 |
Amortization of prior service credit | (3) | (3) |
Net periodic benefit income | $ (2) | $ (3) |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Numerator | ||
Net income (loss) | $ 53 | $ (10) |
Denominator | ||
Weighted-average common shares outstanding (shares) | 188 | 202 |
Effect of potentially dilutive securities (shares) | 1 | 0 |
Weighted average diluted shares outstanding (shares) | 189 | 202 |
Earnings (loss) per share | ||
Basic (usd per share) | $ 0.28 | $ (0.05) |
Diluted (usd per share) | $ 0.28 | $ (0.05) |
Stock Compensation Plan | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares excluded from diluted earnings per share calculation due to anti-dilutive effect (shares) | 1 |
Reportable Segment Informatio_2
Reportable Segment Information - Narrative (Details) | 3 Months Ended |
Dec. 31, 2018numberOfSegmentsnumberOfCountries | |
Segment Reporting Information [Line Items] | |
Number of reportable segments | numberOfSegments | 3 |
International | |
Segment Reporting Information [Line Items] | |
Number of countries where our products are sold | numberOfCountries | 140 |
Reportable Segment Informatio_3
Reportable Segment Information - Sales and Operating Income by Reportable Segment (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Sales | $ 557 | $ 545 |
Operating income | 87 | 88 |
Quick Lubes | ||
Segment Reporting Information [Line Items] | ||
Sales | 189 | |
Core North America | ||
Segment Reporting Information [Line Items] | ||
Sales | 232 | |
International | ||
Segment Reporting Information [Line Items] | ||
Sales | 136 | |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Operating income | 87 | 97 |
Operating Segments | Quick Lubes | ||
Segment Reporting Information [Line Items] | ||
Sales | 189 | 154 |
Operating income | 38 | 35 |
Operating Segments | Core North America | ||
Segment Reporting Information [Line Items] | ||
Sales | 232 | 251 |
Operating income | 31 | 43 |
Operating Segments | International | ||
Segment Reporting Information [Line Items] | ||
Sales | 136 | 140 |
Operating income | 18 | 19 |
Unallocated and Other | ||
Segment Reporting Information [Line Items] | ||
Operating income | $ 0 | $ (9) |
Guarantor Financial Informati_3
Guarantor Financial Information - Condensed Consolidating Statements of Comprehensive Income (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Net Income (Loss) Attributable to Parent [Abstract] | ||
Sales | $ 557 | $ 545 |
Cost of sales | 374 | 350 |
Gross profit | 183 | 195 |
Selling, general and administrative expenses | 105 | 107 |
Legacy and separation-related expenses, net | 0 | 9 |
Equity and other (income) expenses, net | (9) | (9) |
Operating income | 87 | 88 |
Net pension and other postretirement plan income | (2) | (10) |
Net interest and other financing expenses | 17 | 14 |
Income before income taxes | 72 | 84 |
Income tax (benefit) expense | 19 | 94 |
Equity in net income of subsidiaries | 0 | 0 |
Net income (loss) | 53 | (10) |
Comprehensive income (loss) | 47 | (11) |
Eliminations | ||
Net Income (Loss) Attributable to Parent [Abstract] | ||
Sales | (15) | (11) |
Cost of sales | (15) | (11) |
Gross profit | 0 | 0 |
Selling, general and administrative expenses | 0 | 0 |
Legacy and separation-related expenses, net | 0 | |
Equity and other (income) expenses, net | 0 | 0 |
Operating income | 0 | 0 |
Net pension and other postretirement plan income | 0 | 0 |
Net interest and other financing expenses | 0 | 0 |
Income before income taxes | 0 | 0 |
Income tax (benefit) expense | 0 | 0 |
Equity in net income of subsidiaries | 72 | 40 |
Net income (loss) | (72) | (40) |
Comprehensive income (loss) | (62) | (40) |
Valvoline Inc. (Parent Issuer) | Reportable Legal Entities | ||
Net Income (Loss) Attributable to Parent [Abstract] | ||
Sales | 0 | 0 |
Cost of sales | 0 | 0 |
Gross profit | 0 | 0 |
Selling, general and administrative expenses | 3 | 9 |
Legacy and separation-related expenses, net | 1 | |
Equity and other (income) expenses, net | 0 | 0 |
Operating income | (3) | (10) |
Net pension and other postretirement plan income | 0 | 0 |
Net interest and other financing expenses | 15 | 12 |
Income before income taxes | (18) | (22) |
Income tax (benefit) expense | (5) | 21 |
Equity in net income of subsidiaries | (66) | (33) |
Net income (loss) | 53 | (10) |
Comprehensive income (loss) | 47 | (11) |
Guarantor Subsidiaries | Reportable Legal Entities | ||
Net Income (Loss) Attributable to Parent [Abstract] | ||
Sales | 440 | 422 |
Cost of sales | 293 | 263 |
Gross profit | 147 | 159 |
Selling, general and administrative expenses | 81 | 76 |
Legacy and separation-related expenses, net | 8 | |
Equity and other (income) expenses, net | (13) | (12) |
Operating income | 79 | 87 |
Net pension and other postretirement plan income | (2) | (10) |
Net interest and other financing expenses | 1 | 1 |
Income before income taxes | 80 | 96 |
Income tax (benefit) expense | 20 | 70 |
Equity in net income of subsidiaries | (6) | (7) |
Net income (loss) | 66 | 33 |
Comprehensive income (loss) | 60 | 32 |
Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
Net Income (Loss) Attributable to Parent [Abstract] | ||
Sales | 132 | 134 |
Cost of sales | 96 | 98 |
Gross profit | 36 | 36 |
Selling, general and administrative expenses | 21 | 22 |
Legacy and separation-related expenses, net | 0 | |
Equity and other (income) expenses, net | 4 | 3 |
Operating income | 11 | 11 |
Net pension and other postretirement plan income | 0 | 0 |
Net interest and other financing expenses | 1 | 1 |
Income before income taxes | 10 | 10 |
Income tax (benefit) expense | 4 | 3 |
Equity in net income of subsidiaries | 0 | 0 |
Net income (loss) | 6 | 7 |
Comprehensive income (loss) | $ 2 | $ 8 |
Guarantor Financial Informati_4
Guarantor Financial Information - Condensed Consolidating Balance Sheets (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Oct. 01, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 |
Current assets | |||||
Cash and cash equivalents | $ 99 | $ 96 | $ 115 | $ 201 | |
Accounts receivable, net | 331 | $ 376 | 409 | ||
Inventories, net | 200 | 190 | 176 | ||
Prepaid expenses and other current assets | 38 | 44 | |||
Total current assets | 668 | 725 | |||
Noncurrent assets | |||||
Property, plant and equipment, net | 428 | 420 | |||
Goodwill and intangibles, net | 473 | 448 | |||
Equity method investments | 32 | 31 | |||
Investment in subsidiaries | 0 | 0 | |||
Deferred income taxes | 134 | $ 144 | 138 | ||
Other noncurrent assets | 97 | 92 | |||
Total noncurrent assets | 1,164 | 1,129 | |||
Total assets | 1,832 | 1,854 | |||
Current liabilities | |||||
Current portion of long-term debt | 30 | 30 | |||
Trade and other payables | 152 | 178 | |||
Accrued expenses and other liabilities | 198 | 203 | |||
Total current liabilities | 380 | 411 | |||
Noncurrent liabilities | |||||
Long-term debt | 1,291 | 1,292 | |||
Employee benefit obligations | 330 | 333 | |||
Other noncurrent liabilities | 174 | 176 | |||
Total noncurrent liabilities | 1,795 | 1,801 | |||
Commitments and contingencies | |||||
Stockholders’ (deficit) equity | (343) | (358) | (194) | (117) | |
Total liabilities and stockholders’ deficit | 1,832 | 1,854 | |||
Eliminations | |||||
Current assets | |||||
Cash and cash equivalents | 0 | 0 | 0 | 0 | |
Accounts receivable, net | (95) | (119) | |||
Inventories, net | 0 | 0 | |||
Prepaid expenses and other current assets | 0 | 0 | |||
Total current assets | (95) | (119) | |||
Noncurrent assets | |||||
Property, plant and equipment, net | 0 | 0 | |||
Goodwill and intangibles, net | 0 | 0 | |||
Equity method investments | 0 | 0 | |||
Investment in subsidiaries | (1,300) | (1,310) | |||
Deferred income taxes | 0 | 0 | |||
Other noncurrent assets | 0 | 0 | |||
Total noncurrent assets | (1,300) | (1,310) | |||
Total assets | (1,395) | (1,429) | |||
Current liabilities | |||||
Current portion of long-term debt | 0 | 0 | |||
Trade and other payables | (95) | (119) | |||
Accrued expenses and other liabilities | 0 | 0 | |||
Total current liabilities | (95) | (119) | |||
Noncurrent liabilities | |||||
Long-term debt | 0 | 0 | |||
Employee benefit obligations | 0 | 0 | |||
Other noncurrent liabilities | 0 | 0 | |||
Total noncurrent liabilities | 0 | 0 | |||
Stockholders’ (deficit) equity | (1,300) | (1,310) | |||
Total liabilities and stockholders’ deficit | (1,395) | (1,429) | |||
Valvoline Inc. (Parent Issuer) | Reportable Legal Entities | |||||
Current assets | |||||
Cash and cash equivalents | 0 | 0 | 0 | 0 | |
Accounts receivable, net | 0 | 0 | |||
Inventories, net | 0 | 0 | |||
Prepaid expenses and other current assets | 0 | 1 | |||
Total current assets | 0 | 1 | |||
Noncurrent assets | |||||
Property, plant and equipment, net | 0 | 0 | |||
Goodwill and intangibles, net | 0 | 0 | |||
Equity method investments | 0 | 0 | |||
Investment in subsidiaries | 832 | 801 | |||
Deferred income taxes | 67 | 62 | |||
Other noncurrent assets | 2 | 2 | |||
Total noncurrent assets | 901 | 865 | |||
Total assets | 901 | 866 | |||
Current liabilities | |||||
Current portion of long-term debt | 30 | 30 | |||
Trade and other payables | 3 | 3 | |||
Accrued expenses and other liabilities | 17 | 7 | |||
Total current liabilities | 50 | 40 | |||
Noncurrent liabilities | |||||
Long-term debt | 1,160 | 1,151 | |||
Employee benefit obligations | 0 | 0 | |||
Other noncurrent liabilities | 34 | 33 | |||
Total noncurrent liabilities | 1,194 | 1,184 | |||
Stockholders’ (deficit) equity | (343) | (358) | |||
Total liabilities and stockholders’ deficit | 901 | 866 | |||
Guarantor Subsidiaries | Reportable Legal Entities | |||||
Current assets | |||||
Cash and cash equivalents | 21 | 20 | 18 | 99 | |
Accounts receivable, net | 27 | 48 | |||
Inventories, net | 117 | 95 | |||
Prepaid expenses and other current assets | 33 | 38 | |||
Total current assets | 198 | 201 | |||
Noncurrent assets | |||||
Property, plant and equipment, net | 387 | 384 | |||
Goodwill and intangibles, net | 401 | 396 | |||
Equity method investments | 32 | 31 | |||
Investment in subsidiaries | 468 | 509 | |||
Deferred income taxes | 54 | 63 | |||
Other noncurrent assets | 90 | 85 | |||
Total noncurrent assets | 1,432 | 1,468 | |||
Total assets | 1,630 | 1,669 | |||
Current liabilities | |||||
Current portion of long-term debt | 0 | 0 | |||
Trade and other payables | 188 | 241 | |||
Accrued expenses and other liabilities | 156 | 168 | |||
Total current liabilities | 344 | 409 | |||
Noncurrent liabilities | |||||
Long-term debt | 1 | 1 | |||
Employee benefit obligations | 313 | 317 | |||
Other noncurrent liabilities | 140 | 141 | |||
Total noncurrent liabilities | 454 | 459 | |||
Stockholders’ (deficit) equity | 832 | 801 | |||
Total liabilities and stockholders’ deficit | 1,630 | 1,669 | |||
Non-Guarantor Subsidiaries | Reportable Legal Entities | |||||
Current assets | |||||
Cash and cash equivalents | 78 | 76 | $ 97 | $ 102 | |
Accounts receivable, net | 399 | 480 | |||
Inventories, net | 83 | 81 | |||
Prepaid expenses and other current assets | 5 | 5 | |||
Total current assets | 565 | 642 | |||
Noncurrent assets | |||||
Property, plant and equipment, net | 41 | 36 | |||
Goodwill and intangibles, net | 72 | 52 | |||
Equity method investments | 0 | 0 | |||
Investment in subsidiaries | 0 | 0 | |||
Deferred income taxes | 13 | 13 | |||
Other noncurrent assets | 5 | 5 | |||
Total noncurrent assets | 131 | 106 | |||
Total assets | 696 | 748 | |||
Current liabilities | |||||
Current portion of long-term debt | 0 | 0 | |||
Trade and other payables | 56 | 53 | |||
Accrued expenses and other liabilities | 25 | 28 | |||
Total current liabilities | 81 | 81 | |||
Noncurrent liabilities | |||||
Long-term debt | 130 | 140 | |||
Employee benefit obligations | 17 | 16 | |||
Other noncurrent liabilities | 0 | 2 | |||
Total noncurrent liabilities | 147 | 158 | |||
Stockholders’ (deficit) equity | 468 | 509 | |||
Total liabilities and stockholders’ deficit | $ 696 | $ 748 |
Guarantor Financial Informati_5
Guarantor Financial Information - Condensed Consolidating Statements of Cash Flows (Details) - USD ($) $ in Millions | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Condensed Cash Flow Statements, Captions [Line Items] | ||
Cash flows (used in) provided by operating activities | $ 85 | $ 20 |
Cash flows from investing activities | ||
Additions to property, plant and equipment | (27) | (14) |
Acquisitions, net of cash required | (30) | (60) |
Other investing activities, net | (1) | 0 |
Return of advance from subsidiary | 0 | |
Total cash used in investing activities | (56) | (74) |
Cash flows from financing activities | ||
Proceeds from borrowings, net of issuance costs | 100 | 44 |
Repayments on borrowings | (101) | (4) |
Repurchases of common stock | 0 | (37) |
Payments for purchase of additional ownership in subsidiary | (1) | (15) |
Cash dividends paid | (20) | (15) |
Other financing activities | (3) | (4) |
Other intercompany activity, net | 0 | |
Total cash used in financing activities | (25) | (31) |
Effect of currency exchange rate changes on cash and cash equivalents | (1) | (1) |
Increase (decrease) in cash and cash equivalents | 3 | (86) |
Cash and cash equivalents - beginning of period | 96 | 201 |
Cash and cash equivalents - end of period | 99 | 115 |
Reportable Legal Entities | Valvoline Inc. (Parent Issuer) | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Cash flows (used in) provided by operating activities | 13 | (2) |
Cash flows from investing activities | ||
Additions to property, plant and equipment | 0 | 0 |
Acquisitions, net of cash required | 0 | 0 |
Other investing activities, net | 0 | |
Return of advance from subsidiary | 60 | |
Total cash used in investing activities | 0 | 60 |
Cash flows from financing activities | ||
Proceeds from borrowings, net of issuance costs | 57 | 0 |
Repayments on borrowings | (48) | (4) |
Repurchases of common stock | (37) | |
Payments for purchase of additional ownership in subsidiary | 0 | 0 |
Cash dividends paid | (20) | (15) |
Other financing activities | (2) | (2) |
Other intercompany activity, net | 0 | |
Total cash used in financing activities | (13) | (58) |
Effect of currency exchange rate changes on cash and cash equivalents | 0 | 0 |
Increase (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 flows (used in) provided by operating activities | 29 | 52 |
Cash flows from investing activities | ||
Additions to property, plant and equipment | (20) | (13) |
Acquisitions, net of cash required | (8) | (60) |
Other investing activities, net | (1) | |
Return of advance from subsidiary | 0 | |
Total cash used in investing activities | (27) | (73) |
Cash flows from financing activities | ||
Proceeds from borrowings, net of issuance costs | 0 | 0 |
Repayments on borrowings | 0 | 0 |
Repurchases of common stock | 0 | |
Payments for purchase of additional ownership in subsidiary | 0 | 0 |
Cash dividends paid | 0 | 0 |
Other financing activities | (1) | 0 |
Other intercompany activity, net | (60) | |
Total cash used in financing activities | (1) | (60) |
Effect of currency exchange rate changes on cash and cash equivalents | 0 | 0 |
Increase (decrease) in cash and cash equivalents | 1 | (81) |
Cash and cash equivalents - beginning of period | 20 | 99 |
Cash and cash equivalents - end of period | 21 | 18 |
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Cash flows (used in) provided by operating activities | 43 | (30) |
Cash flows from investing activities | ||
Additions to property, plant and equipment | (7) | (1) |
Acquisitions, net of cash required | (22) | 0 |
Other investing activities, net | 0 | |
Return of advance from subsidiary | 0 | |
Total cash used in investing activities | (29) | (1) |
Cash flows from financing activities | ||
Proceeds from borrowings, net of issuance costs | 43 | 44 |
Repayments on borrowings | (53) | 0 |
Repurchases of common stock | 0 | |
Payments for purchase of additional ownership in subsidiary | (1) | (15) |
Cash dividends paid | 0 | 0 |
Other financing activities | 0 | (2) |
Other intercompany activity, net | 0 | |
Total cash used in financing activities | (11) | 27 |
Effect of currency exchange rate changes on cash and cash equivalents | (1) | (1) |
Increase (decrease) in cash and cash equivalents | 2 | (5) |
Cash and cash equivalents - beginning of period | 76 | 102 |
Cash and cash equivalents - end of period | 78 | 97 |
Eliminations | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Cash flows (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 |
Other investing activities, net | 0 | |
Return of advance from subsidiary | (60) | |
Total cash used in investing activities | 0 | (60) |
Cash flows from financing activities | ||
Proceeds from borrowings, net of issuance costs | 0 | 0 |
Repayments on borrowings | 0 | 0 |
Repurchases of common stock | 0 | |
Payments for purchase of additional ownership in subsidiary | 0 | 0 |
Cash dividends paid | 0 | 0 |
Other financing activities | 0 | 0 |
Other intercompany activity, net | 60 | |
Total cash used in financing activities | 0 | 60 |
Effect of currency exchange rate changes on cash and cash equivalents | 0 | 0 |
Increase (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) - Subsequent Event - USD ($) $ / shares in Units, $ in Millions | Jan. 30, 2019 | Feb. 06, 2019 |
Subsequent Event [Line Items] | ||
Dividend per share (usd per share) | $ 0.106 | |
Minimum | ||
Subsequent Event [Line Items] | ||
Employee termination and related costs | $ 12 | |
Maximum | ||
Subsequent Event [Line Items] | ||
Employee termination and related costs | $ 17 |
Uncategorized Items - vvv-20181
Label | Element | Value |
Accounting Standards Update 2014-09 [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (13,000,000) |
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (13,000,000) |