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What changed in VALVOLINE INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of VALVOLINE INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+295 added−289 removedSource: 10-K (2024-11-22) vs 10-K (2023-11-20)

Top changes in VALVOLINE INC's 2024 10-K

295 paragraphs added · 289 removed · 215 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

62 edited+11 added−15 removed32 unchanged
Biggest changeDo It For Me (“DIFM”) total addressable market depicted below demonstrates the magnitude of the opportunity in the U.S. for Valvoline: (a) VIOC oil changes in fiscal year 2023 (U.S. company and franchised stores) (b) Management estimates developed utilizing internal and industry data for U.S. passenger car and light truck quick lube and DIFM oil changes Business and growth strategies As a pure play automotive retail services provider and the trusted leader in preventive automotive maintenance, Valvoline is well positioned to create long-term shareholder value through executing the Company’s strategic initiatives, which include: • Driving the full potential of the core business through increasing market share and non-oil change revenue growth in existing stores by building on Valvoline’s strong foundation in marketing, technology, and data. • Aggressively growing the retail footprint with company-operated store growth and an increased emphasis on franchisee store growth; and • Developing capabilities to capture new customers through services expansion focused on fleet manager needs and needs of the evolving car parc. 6 Retail store development Valvoline’s network of retail service centers delivered its 17th consecutive year of system-wide same-store sales (“SSS”) growth in fiscal 2023, demonstrating the system's operational excellence.
Biggest changeDo It For Me (“DIFM”) total addressable market depicted below demonstrates the magnitude of the opportunity in the U.S. for Valvoline: (a) VIOC oil changes in fiscal year 2024 (U.S. company-operated and franchised stores) (b) Management estimates developed utilizing internal and industry data for U.S. passenger car and light truck quick lube and DIFM oil changes Business and growth strategies As a pure play automotive retail services provider and the trusted leader in preventive automotive maintenance, Valvoline is well positioned to create long-term shareholder value through executing the Company’s strategic initiatives, which include: 6 • Driving the full potential of the core business through increasing market share and improving operational efficiency in existing stores by building on Valvoline’s strong foundation in marketing, technology, and data insights. • Aggressively growing the retail footprint with company-operated store growth and an increased emphasis on franchisee store growth; and • Targeting customer and service expansion with a focus on fleet business, driving non-oil change service penetration, and meeting the needs of an evolving car parc.
In addition, Valvoline management is focused on listening understand what is on the minds of employees by regularly surveying team members to gather real-time feedback as well as identifying opportunities for continuous improvement.
In addition, Valvoline management is focused on listening to understand what is on the minds of employees by regularly surveying team members to gather real-time feedback as well as identifying opportunities for continuous improvement.
Additionally, Valvoline employees support a program that assists company employees during times of personal hardship by providing short-term financial assistance to eligible service center and corporate employees in immediate financial need because of an accident, illness, injury, death, natural disaster, or other catastrophic or emergency event.
Additionally, Valvoline employees support a program that assists Company employees during times of personal hardship by providing short-term financial assistance to eligible service center and corporate employees in immediate financial need because of an accident, illness, injury, death, natural disaster, or other catastrophic event or emergency.
Sturgeon has served as Valvoline's Chief Accounting Officer and Controller since March 2023. Ms. Sturgeon served as Vice President, Corporate Controller from March 2022 to February 2023; as Senior Director, Global Accounting, Reporting & Controls from October 2020 to March 2022; and as Director, Corporate Accounting of Valvoline from August 2016 to October 2020.
Sturgeon has served as Valvoline's Vice President, Chief Accounting Officer and Controller since March 2023. Ms. Sturgeon served as Vice President, Corporate Controller from March 2022 to February 2023; as Senior Director, Global Accounting, Reporting & Controls from October 2020 to March 2022; and as Director, Corporate Accounting of Valvoline from August 2016 to October 2020.
Flees held leadership positions at Walmart Inc., serving as Senior Vice President and Chief Operating Officer of Health & Wellness from August 2020 to March 2022; Senior Vice President and General Merchandising Manager, Sam’s Club Health & Wellness from June 2018 to August 2020; and Senior Vice President, Next Generation Retail and Principal Store No.8 from September 2017 to June 2019.
Flees held various leadership positions at Walmart Inc., serving as Senior Vice President and Chief Operating Officer of Health & Wellness from August 2020 to March 2022; Senior Vice President and General Merchandising Manager, Sam’s Club Health & Wellness from June 2018 to August 2020; and Senior Vice President, Next Generation Retail and Principal Store No.8 from September 2017 to June 2019.
Valvoline also competes for Express Care operators and customers with national branded companies that offer an independent quick lube platform with a professional signage program and limited business model support. Marketing and customer experience Valvoline places a high priority on delivering an in-store customer experience that is quick, easy, and trusted.
Valvoline also competes for Express Care operators and customers with national branded companies that offer an independent quick lube platform with a professional signage program and limited business model support. 8 Marketing and customer experience Valvoline places a high priority on delivering an in-store customer experience that is quick, easy, and trusted.
With average customer ratings that indicate high levels of service satisfaction, Valvoline and the Company’s franchise partners keep customers moving with 15-minute stay-in-your-car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended maintenance services.
With average customer ratings that indicate high levels of service satisfaction, Valvoline and the Company’s franchise partners keep customers moving with approximately 15-minute stay-in-your-car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended maintenance services.
On this website, Valvoline makes available, free of charge, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports, as well as any beneficial ownership reports of officers and directors filed on Forms 3, 4 and 5.
On this website, Valvoline makes available, free of charge, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports, as well as any beneficial ownership 13 reports of officers and directors filed on Forms 3, 4 and 5.
Valvoline owns approximately 700 domain names that are used to promote Valvoline services and provide information about the Company. 8 Product supply and price The products used in Valvoline’s retail service delivery are principally sourced from Global Products.
Valvoline owns approximately 700 domain names that are used to promote Valvoline services and provide information about the Company. Product supply and price The products used in Valvoline’s retail service delivery are principally sourced from Global Products.
In addition, the resilient North American automotive aftermarket services market is highly fragmented, which creates a significant opportunity for 5 consolidation. Based on industry surveys and management estimates, the U.S.
In addition, the resilient North American automotive aftermarket services market is highly fragmented, which creates a significant opportunity for consolidation. Based on industry surveys and management estimates, the U.S.
With the completion of the sale of Global Products, Valvoline owns the Valvoline brand for all global retail services, excluding China and certain countries in the Middle East and North Africa, while Global Products owns the Valvoline brand for all products uses globally.
With the completion of the sale of Global Products, Valvoline owns the Valvoline brand for all global retail services, excluding China and certain countries in the Middle East and North Africa, while Global Products owns the Valvoline brand for all product uses globally.
The Company is also subject to regulation by various U.S. federal regulatory agencies and by the applicable regulatory authorities in locations in which Valvoline’s services are offered. Such regulations principally relate to the operation of its service centers, advertising and marketing of Valvoline’s services. Valvoline stores lubricating and vehicle maintenance products and handles used automotive oils and filters.
The Company is also subject to regulation by various U.S. federal regulatory agencies and by the applicable regulatory authorities in locations in which Valvoline’s services are offered. Such regulations principally relate to the operation of its service centers, advertising and marketing of Valvoline’s services. Valvoline inventories lubricating and vehicle maintenance products and handles used automotive oils and filters.
Accordingly, Valvoline is subject to numerous federal, provincial, state, and local environmental laws including the Comprehensive Environmental Response Compensation and Liability Act. In addition, the U.S. Environmental Protection Agency under the Resource Conservation and Recovery Act, as well as various state and local environmental protection agencies, regulate the handling and disposal of certain waste products and other materials.
Accordingly, Valvoline is subject to numerous federal, state, local and non-U.S. environmental laws including the Comprehensive Environmental Response Compensation and Liability Act. In addition, the U.S. Environmental Protection Agency under the Resource Conservation and Recovery Act, as well as various state and local environmental protection agencies, regulate the handling and disposal of certain waste products and other materials.
Valvoline technicians utilize the Company’s proprietary SuperPro TM system to deliver a superior customer experience and make timely service recommendations based upon vehicle service history and original equipment manufacturer (“OEM”) recommendations. The SuperPro system is utilized in both company-operated and franchised service center locations, creating a consistent service experience for customers.
Valvoline technicians utilize the Company’s proprietary SuperPro TM system to deliver a superior customer experience and make timely service recommendations based upon visual inspection, vehicle service history, and original equipment manufacturer (“OEM”) recommendations. The SuperPro system is utilized in both company-operated and franchised service center locations, creating a consistent service experience for customers.
Fulcher served as Vice President, Central Operations and Customer Experience Optimization from August 2022 to September 2023. Prior to joining Valvoline, Mr. Fulcher held leadership positions at Walmart Inc., serving as Vice President Customer Strategy, Science and Journeys from October 2019 to August 2021; and Vice President Returns from February 2017 to October 2019. Dione R.
Fulcher served as Vice President, Central Operations and Customer Experience Optimization from August 2022 to September 2023. Prior to joining Valvoline, Mr. Fulcher held various leadership positions at Walmart Inc., serving as Vice President Customer Strategy, Science and Journeys from October 2019 to August 2021; and Vice President Returns from February 2017 to October 2019. 14 Dione R.
Valvoline’s matching program will match the donations given to the organizations that align with at least one of the Company’s giving pillars: (1) disadvantaged families and children, (2) education, (3) environment, (4) health care, and/or (5) diversity, equity and inclusion.
Valvoline’s matching program will match the donations given to the organizations that align with at least one of the Company’s fiscal 2024 giving pillars: (1) disadvantaged families and children, (2) education, (3) environment, (4) health care, and/or (5) diversity, equity and inclusion.
Valvoline has been presented with Training magazine’s Training APEX Award 11 times, which ranks companies that are unsurpassed in harnessing human capital and reflects the winners’ journey to attain peak performance in employee training and development and organizational success.
VIOC has been presented with Training magazine’s Training APEX Award 11 times, which ranks companies that are unsurpassed in harnessing human capital and reflects the winners’ journey to attain peak performance in employee training and development and organizational success.
The following summarizes the primary services Valvoline offers at its retail service center stores: Valvoline’s services are offered to a wide range of vehicle types, including fleets, as shown below: Industry overview Demand for automotive aftermarket services benefits from the growing number and age of vehicles in operation as well as increasing vehicle complexity and ongoing increases in miles driven.
The following summarizes the primary services Valvoline offers at most retail service center stores: 5 Valvoline’s services are offered to a wide range of vehicle types, including fleets, as shown below: Industry overview Demand for automotive aftermarket services benefits from the growing number and age of vehicles in operation as well as increasing vehicle complexity and ongoing increases in miles driven.
Dobbins served as Vice President of Information Technology of Valvoline from January 2019 to February 2023 and as Information Technology Director, Commercial Solutions from September 2016 to January 2019. Linne R. Fulcher has served as Valvoline's Senior Vice President and Chief Operating Officer since October 2023. Mr.
Dobbins served as Vice President of Information Technology of Valvoline from January 2019 to February 2023 and as Information Technology Director, Commercial Solutions from September 2016 to January 2019. Linwood R. Fulcher has served as Valvoline's Senior Vice President and Chief Operating Officer since October 2023. Mr.
Regulatory and environmental matters Valvoline operates to maintain compliance with various federal, provincial, state, and local laws and governmental regulations relating to the operation of its business, including those regarding employment and labor practices; workplace safety; building and zoning requirements; the handling, storage and disposal of hazardous substances contained in the products used in service, including used motor oil and lead-acid batteries; and the ownership, construction and operation of real property, among others.
Regulatory and environmental matters Valvoline operates to maintain compliance with various federal, state, local and non-U.S. laws and governmental regulations relating to the operation of its business, including those regarding employment and labor practices; workplace safety; building and zoning requirements; the handling, storage and disposal of hazardous substances contained in the products used in service, including used motor oil and lead-acid batteries; and the ownership, construction and operation of real property, among others.
As shown below, Valvoline operates, either directly or through its franchisees, 1,852 service center stores across the U.S. and Canada as of September 30, 2023: l Company-operated l Franchised Valvoline utilizes a three-pronged approach to grow its retail network through 1) franchisee store expansion 2) opportunistic acquisitions, and 3) new store development.
As shown below, Valvoline operates, either directly or through its franchisees, 2,010 service center stores across the U.S. and Canada as of September 30, 2024: l Company-operated l Franchised Valvoline utilizes a three-pronged approach to grow its retail network through 1) franchisee store expansion 2) opportunistic acquisitions, and 3) new store development.
Lube in Canada. Valvoline competes with other franchisors in automotive services and across other industries on the basis of the expected return on investment and the value propositions offered to franchisees.
Valvoline competes with other franchisors in automotive services and across other industries on the basis of the expected return on investment and the value propositions offered to franchisees.
Valvoline also makes available, free of charge on its website, its Amended and Restated Articles of Incorporation, By-Laws, Corporate Governance Guidelines, Board Committee Charters, Director Independence Standards and the Global Standards of Business Conduct that apply to Valvoline’s directors, officers and employees. These documents are also available in print to any shareholder who requests them.
Valvoline also makes available, free of charge on its website, its Amended and Restated Articles of Incorporation, By-Laws, Corporate Governance Guidelines, Board Committee Charters, Director Independence Standards, and Code of Conduct that apply to Valvoline’s directors, officers and employees. These documents are also available in print to any shareholder who requests them.
The retail services store network and its same-store sales growth in each of the last five years is summarized below: 7 (a) Refer to "Key Business Measures" in Item 7 of Part II of this Annual Report on Form 10-K for a description of management's use and determination of key metrics, including store counts and SSS.
The retail services store network and its same-store sales growth is summarized below: 7 (a) Refer to "Key Business Measures" in Item 7 of Part II of this Annual Report on Form 10-K for a description of management's use and determination of key metrics, including store counts and SSS.
The Company’s focus on aggressive growth, including the addition of 137 net new system-wide stores in fiscal 2023, creates a critical need for talent to operate those stores. Valvoline utilizes its tools and processes to attract qualified candidates, including providing support to franchise sourcing efforts.
The Company’s focus on aggressive growth, including the addition of 158 net new system-wide stores in fiscal 2024, creates a critical need for talent to operate those stores. Valvoline utilizes its tools and processes to attract qualified candidates, including providing support to franchise sourcing efforts.
In connection with the sale of its former reportable segment, Valvoline entered into a long-term supply agreement for the purchase of substantially all lubricant and certain ancillary products for its stores from Global Products (the “Supply Agreement”).
In connection with the sale of Global Products, Valvoline entered into a long-term supply agreement for the purchase of substantially all lubricant and certain ancillary products for its stores from Global Products (the “Supply Agreement”).
Fulcher 52 Senior Vice President and Chief Operating Officer Dione R. Sturgeon 46 Chief Accounting Officer and Controller Lori A. Flees has served as a director and President and Chief Executive Officer of Valvoline since October 2023. Ms. Flees served as President, Retail Services of Valvoline from April 2022 to September 2023. Prior to joining Valvoline, Ms.
Fulcher 53 Senior Vice President and Chief Operating Officer Dione R. Sturgeon 47 Vice President, Chief Accounting Officer and Controller Lori A. Flees has served as a director and President and Chief Executive Officer of Valvoline since October 2023. Ms. Flees served as President, Retail Services of Valvoline from April 2022 to September 2023. Prior to joining Valvoline, Ms.
As a franchisor, Valvoline is subject to various state and provincial laws, and the Federal Trade Commission (the “FTC”) regulates franchising activities in the U.S. The FTC requires that franchisors make extensive disclosure to prospective franchisees before the execution of a franchise agreement.
As a franchisor, Valvoline is subject to various federal, state, and non-U.S. franchising laws. The Federal Trade Commission (the “FTC”) regulates franchising activities in the U.S. and requires franchisors to make extensive disclosure to prospective franchisees before the execution of a franchise agreement.
For over 15 decades, Valvoline has consistently adapted to address changing technologies and customer needs and is well positioned to service evolving vehicle maintenance needs with its growing network of stores. Company background Established in 1866, Valvoline has a history of innovation spanning more than 155 years when Dr.
For over 15 decades, Valvoline has consistently adapted to address changing technologies and customer needs and is well positioned to service evolving vehicle maintenance needs with its growing network of stores. Company background Established in 1866, Valvoline has a history of innovation spanning nearly 160 years when Dr.
The SEC also maintains a website ( http://www.sec.gov ) that contains reports, proxy and other information and statements regarding issuers, including Valvoline, that file electronically with the SEC. 13 Executive officers of Valvoline The following table sets forth information concerning Valvoline's executive officers as of November 15, 2023: Name Age Title Lori A.
The SEC also maintains a website ( http://www.sec.gov ) that contains reports, proxy and other information and statements regarding issuers, including Valvoline, that file electronically with the SEC. Executive officers of Valvoline The following table sets forth information concerning Valvoline's executive officers as of November 19, 2024: Name Age Title Lori A.
This plan provides new VIOC employees 270 hours of training that is generally completed within the first 60 days of employment leading to their first certification and another 240 hours of training in the next 140 days that supports promotability.
Valvoline provides new VIOC and GCOC employees 270 hours of training that is generally completed within the first 60 days of employment leading to their first certification and another 240 hours of training in the next 140 days that supports promotability.
To both acquire and retain customers, marketing plays an important role in demonstrating the differentiated experience that Valvoline offers customers, as well as providing information on locations, pricing and services offered. Techniques utilized by the Company are intended to build awareness of and create demand for its automotive preventive maintenance services.
To both acquire and retain customers, marketing plays an important role in demonstrating the distinct experience that Valvoline offers customers, as well as providing information on locations, promotions, services offered, and wait times. Techniques utilized by the Company are intended to build awareness of and create demand for its automotive preventive maintenance services.
Department of Labor and other local regulatory agencies, which sets laws governing working conditions, paid leave, workplace safety, wage and hour standards, and hiring and employment practices.
Department of Labor and other local regulatory agencies, governing working conditions, paid leave, workplace safety, wage and hour standards, and hiring and employment practices.
In order to help reduce the number of incidents at the Company, Valvoline employs safety-specific education as part of its training programs. Employees will begin this training on day one to instill safety precautions and best practices.
To help reduce the number of incidents at the Company, Valvoline employs safety-specific education as part of its training programs for all employees. Employees begin this training on day one to instill safety precautions and best practices.
Valvoline markets through search and direct response channels and invests in advertising through social and digital media. The Company’s digital modeling marketing strategies are efficient and yield strong rates of return. Valvoline leverages its digital tools to obtain customer feedback across the retail network of stores.
Valvoline markets through search and direct response channels, invests in advertising through social and digital media, and leverages targeted sponsorships to reach specific audiences. The Company’s modeled marketing strategies are efficient and yield strong rates of return. Valvoline leverages its digital tools to obtain customer feedback across the retail network of stores.
This approach drove system-wide store growth of more than 30% over the last five years. During this period, Valvoline added 467 net new stores to the system and expanded its service centers internationally into Canada.
This approach drove system-wide store growth of over 45% over the last five years. During this period, Valvoline added 625 net new stores to the system and expanded its service centers internationally into Canada.
The Company operates and franchises more than 1,850 service center locations through its Valvoline Instant Oil Change SM (“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and supports nearly 300 locations through its Express Care TM platform.
The Company operates and franchises more than 2,000 service center locations through its Valvoline Instant Oil Change SM (“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and supports nearly 270 locations through its Express Care TM platform.
Competition The automotive aftermarket service industry is highly fragmented and Valvoline faces competition across its service categories and subcategories. Competition is based on several key criteria, including brand recognition, product selection, quality of service, price, convenience, speed, location, and customer experience, in addition to the ability to deliver innovative services to meet evolving customer needs.
Competition Valvoline faces competition across its service offerings based on several key criteria, including brand recognition, product selection, quality of service, price, convenience, speed, location, and customer experience, in addition to the ability to deliver innovative services to meet evolving customer needs.
The Company's strengths in digital marketing and data analytics are leveraged to attract new and retain existing customers, including tailored marketing campaigns directed to specific customers when their next service is estimated to be due. Intellectual property Valvoline holds approximately 260 trademarks in more than 60 countries across the world, including the Valvoline and “V” brand logo trademarks.
The Company's strengths in digital marketing and data analytics are leveraged to attract new and retain existing customers, including tailored marketing campaigns directed to specific customers when they are in the market for their next service. Intellectual property Valvoline holds approximately 390 trademarks in more than 70 countries across the world, including the Valvoline and “V” brand logo trademarks.
Certain jurisdictions require registration or specific disclosure in connection with franchise offers and sales, or have laws that limit franchisor rights with regard to the termination, renewal or transfer of franchise agreements. 9 Valvoline is subject to laws relating to information security, privacy, cashless payments and customer credit, protection and fraud.
Certain jurisdictions require registration or specific disclosure in connection with franchise offers and sales, or have laws that limit franchisor rights regarding the termination, renewal or transfer of franchise agreements. Valvoline is subject to various federal, state, local and non-U.S. laws and regulations relating to information security, privacy, cashless payments and customer credit, protection and fraud.
Throughout the year, Valvoline provides an Introduction to Management program within its VIOC stores where assistant managers who qualify as potential store managers meet for three days to interact with leadership team members and peers from other stores to learn about Valvoline's culture, share best practices, and receive management training to prepare them for career advancement.
Valvoline provides an Introduction to Management program within its VIOC and GCOC stores where assistant managers interact with leadership team members and peers from other stores to learn about Valvoline's culture, share best practices, and receive management training to prepare them for career advancement.
As of September 30, 2023, Valvoline had more than 10,000 employees (excluding contract employees) in the U.S. and Canada, including approximately 9,600 full-time employees. Valvoline operates 876 company-owned retail service center stores throughout the U.S. and Canada and supports its network of over 1,850 stores through centralized teams.
Workforce As of September 30, 2024, Valvoline had approximately 11,500 employees (excluding contract employees) in the U.S. and Canada, including approximately 10,500 full-time employees. Valvoline operates 950 company-owned 10 retail service center stores throughout the U.S. and Canada and supports its network of more than 2,000 stores through centralized teams.
Today, Valvoline operates as an independent corporation that trades on the New York Stock Exchange (“NYSE”) under the symbol “VVV,” as a pure play automotive retail services provider focused on delivering quick and convenient vehicle maintenance services to further accelerate its growth.
Today, Valvoline operates as an independent corporation that trades on the New York Stock Exchange (“NYSE”) under the symbol “VVV” as a pure play automotive retail services provider focused on delivering quick, easy, and trusted vehicle maintenance services.
In fiscal 2023, Valvoline invested heavily in the talent acquisition team to ensure the Company has the right skill set to attract and recruit exceptional diverse talent along with supporting technology to increase efficiency in staffing stores.
Valvoline continues to benefit from substantial investment in talent acquisition to ensure the Company has the right skill set to attract and recruit exceptional diverse talent along with supporting technology to increase efficiency in staffing stores.
The table below provides the Company's approximate distribution of employees, which includes its company-operated service center stores, central supporting teams, and excludes independent contractors: Number of employees Technicians 8,600 Store management 1,100 Customer service 200 Total company-operated store employees 9,900 Area and regional operations 400 Total retail services operations 10,300 Headquarter and remote corporate team members 600 Total employee headcount 10,900 Valvoline seeks to attract, develop, and retain highly qualified talent as summarized further below.
The table below provides the Company's approximate distribution of employees, which includes its company-operated service center stores, central supporting teams, and excludes independent contractors: Number of employees Company-operated store employees 10,300 Central supporting team members 1,200 Total employee headcount 11,500 Valvoline seeks to attract, develop, and retain highly qualified talent as summarized further below.
Discontinued operations On March 1, 2023, Valvoline completed the sale of its former Global Products reportable segment (“Global Products”) to Aramco Overseas Company B.V. (“Aramco” or the “Buyer”) (the “Transaction”).
Discontinued operations On March 1, 2023, Valvoline completed the sale of its former Global Products reportable segment (currently doing business as “Valvoline Global Operations” and referred to herein as “Global Products”) to Aramco Overseas Company B.V. (the “Buyer”) (the “Transaction”).
Valvoline competes for customers with automotive dealerships, automotive repair and maintenance centers, as well as other regional and independent quick lube operators. Additionally, Valvoline’s retail stores compete for consumers and franchisees with other major franchised brands that offer a turn-key operations management system, such as Jiffy Lube, Grease Monkey, Take 5 Oil Change, Express Oil Change, and Mr.
Additionally, Valvoline’s retail stores compete for consumers and franchisees with other major franchised brands that offer a turn-key operations management system, such as Jiffy Lube, Grease Monkey, Take 5 Oil Change, Express Oil Change, and Mr. Lube in Canada.
Flees 53 President and Chief Executive Officer and Director Mary E. Meixelsperger 63 Chief Financial Officer Julie M. O’Daniel 56 Senior Vice President, Chief Legal Officer and Corporate Secretary Jonathan L. Caldwell 46 Senior Vice President and Chief People Officer R. Travis Dobbins 51 Senior Vice President and Chief Technology Officer Linne R.
Flees 54 President and Chief Executive Officer and Director Mary E. Meixelsperger 64 Chief Financial Officer Julie M. O’Daniel 57 Senior Vice President, Chief Legal Officer and Corporate Secretary Jonathan L. Caldwell 47 Senior Vice President and Chief People Officer R. Travis Dobbins 52 Senior Vice President and Chief Technology Officer Linwood R.
Transaction volumes follow driving patterns of customers, which generally trend with the length of daylight hours, North American holidays, and vacation timing. Weather conditions can modestly affect transaction volumes, and geographic variation typically limits weather impacts to specific regions. As a result, the second half of the fiscal year ordinarily is more robust as miles driven tends to be higher.
As a result, the second half of the fiscal year ordinarily is more robust as miles driven tends to be higher. Weather conditions can modestly affect transaction volumes, and geographic variation typically limits weather impacts to specific regions.
Mary E. Meixelsperger has served as Valvoline's Chief Financial Officer since June 2016. Prior to joining Valvoline, Ms. Meixelsperger was Senior Vice President and Chief Financial Officer of DSW Inc. from April 2014 to June 2016. Julie M. O’Daniel has served as Senior Vice President, Chief Legal Officer and Corporate Secretary of Valvoline since January 2017. Ms.
Mary E. Meixelsperger has served as Valvoline's Chief Financial Officer since June 2016. Prior to joining Valvoline, Ms. Meixelsperger was Senior Vice President and Chief Financial Officer of DSW Inc. from April 2014 to June 2016. In October 2024, Ms. Meixelsperger announced her plans to retire. Ms.
Valvoline employees support the United Way, Red Cross, Children’s Miracle Network, Habitat for Humanity, Big Brothers Big Sisters, and many more national and local organizations.
Throughout the year, Valvoline supports its employees in volunteering their time and talents to give back to their communities. Valvoline employees support the United Way, Red Cross, Children’s Miracle Network, Habitat for Humanity, Big Brothers Big Sisters, and many more national and local organizations.
The Company has built a reputation as the quick, easy, trusted name in automotive preventive maintenance and continues to build its market share by leveraging its stay-in-your-car service model and providing each customer with service that can be seen by experts they can trust.
Valvoline continues to build its market share by leveraging its stay-in-your-car service model and providing each customer with service that can be seen by experts they can trust.
A key component of the Company’s talent development approach is to provide each team member with the necessary tools and training opportunities to develop within their area of subject matter knowledge.
A key component of the Company’s talent development approach is to provide each team member with the necessary tools and training opportunities to develop within their area of subject matter knowledge. Training is tailored to specific job roles and functions incorporating both on-the-job training as well as virtual or in-person classes and e-learning.
The Company designs, builds and operates its facilities to promote and protect the health and safety of its team members, known as its "Vamily." Valvoline strives to create workplaces and practices in all environments that team members work in to help foster a safe and secure environment for every employee and customer, which includes a sense of belonging that enables them to deliver V-class service to customers.
Health and safety The Company designs, builds and operates its facilities to promote and protect the health and safety of its employees, known as its "Vamily." Valvoline strives to create a safe and secure environment for every employee and customer and fosters a sense of belonging to promote emotional well-being that enables employees to deliver “V-Class” service to customers.
Valvoline’s strategy is to provide competitive benefit programs which align to the changing business environment and meet the needs of employees through all stages of life, which includes: • Affordable healthcare plans (medical, prescription, dental, vision, maternity, fertility, adoption and telehealth) • Life, disability, and accident insurance coverage • Health savings account (HSA) with company contributions • 401(k) retirement savings plans with generous company basic and matching contributions • Personalized well-being programs (physical, mental and financial) to support taking care of the whole employee and family • Tuition reimbursement • Paid time off, plus holiday pay, paid disability, paid maternity and family leave, and other leave programs. 12 Health and safety Valvoline is committed to a zero-incident culture for its employees, vendors, and customers.
These include: • Affordable healthcare plans (medical, prescription, dental, vision, maternity, fertility, adoption and telehealth) 12 • Life, disability, and accident insurance coverage • Health savings account (HSA) with company contributions • 401(k) retirement savings plan with generous company basic and matching contributions • Personalized employee well-being programs to support taking care of the whole employee and family • Tuition reimbursement • Paid time off, plus holiday pay, paid disability, paid maternity and family leave, and other leave programs.
Additionally, the Company is a ten-time recipient of the BEST Award from The Association for Talent Development, that recognizes organizations that are Building talent, Enterprise-wide and Strategically driving a Talent development culture that delivers results. Total rewards Taking care of the whole person is a guiding principle of Valvoline’s total rewards philosophy.
Additionally, the Company is an eleven-time recipient of the BEST Award from The Association for Talent Development, that recognizes organizations that are 11 building talent, enterprise-wide and strategically driving a talent development culture that delivers results. As an eleven-time winner of this award, the Company was also named to the association’s Best of the BEST list.
Valvoline believes employee survey results are important to evaluate areas for improved communication and are meaningful to recruit and retain top talent, believing satisfied employees are more likely to have a positive impact in the workplace and deliver great customer service. 10 Diversity, equity and inclusion (“DEI”) Valvoline is committed to creating an inclusive and welcoming environment for its employees and customers by fostering a strong sense of belonging, where diverse backgrounds are represented, engaged and empowered to inspire innovative ideas and decisions.
Diversity, equity and inclusion (“DEI”) Valvoline is committed to creating an inclusive and welcoming environment for its employees and customers by fostering a strong sense of belonging, where diverse backgrounds are represented, engaged and empowered to inspire innovative ideas and decisions. Valvoline’s goal is for the Company’s workforce to represent the diverse communities served.
Refer to Note 3 included within the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information regarding the Global Products business, including the assets and liabilities divested and income from discontinued operations. 4 Valvoline’s retail services Valvoline operates and franchises more than 1,850 service center locations through its VIOC and GCOC retail locations and supports nearly 300 locations through its Express Care platform.
Refer to Note 3 included within the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 4 10-K for additional information regarding the Global Products business, including income from discontinued operations. Unless otherwise noted, disclosures herein relate solely to the Company’s continuing operations.
The Company’s customer value proposition focuses on convenience and quality service which provides the ability to leverage pricing power to raise prices while maintaining customer loyalty. Pricing adjustments to products sold to Valvoline's independent operators are made pursuant to their contracts and are generally based on movements in published base oil indices. Seasonality Valvoline’s business is moderately impacted by seasonality.
The Company’s customer value proposition focuses on convenience and quality service which provides the ability to leverage pricing power to raise prices while maintaining customer loyalty.
As part of the broader training course, team members are required to successfully complete execution reports confirming a strong understanding of Valvoline safety measures. In response to the COVID-19 pandemic, the Company implemented additional personal safety measures in all its offices and facilities by offering expanded employee assistance, telehealth services, well-being plans, and a remote/hybrid work policy.
As part of the broader training curriculum, team members are required to successfully complete execution reports confirming a strong understanding of Valvoline safety measures.
The Company offers competitive comprehensive compensation and benefits packages designed to care for the physical, emotional, and financial well-being of its employees as well as to attract, retain and recognize its employees and is committed to aligning rewards to performance.
The Company offers competitive, comprehensive compensation and benefits programs designed to care for the physical, mental, emotional, social and financial well-being of its employees. The Company’s objective is to base compensation on employee position, experience, location, performance, and the labor market in order to not be influenced by factors such as gender, race, or ethnicity.
The Company provides a wide variety of benefits to eligible full-time and part-time employees.
Additionally, the Compensation Committee of the Board of Directors (the “Board”) and senior management are actively involved in determining the Company’s total rewards strategy to help Valvoline provide a positive employee experience. The Company provides a wide variety of benefits to eligible full-time and part-time employees.
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During fiscal 2023, the Company also surveyed employees to solicit feedback and address questions regarding the Transaction and maintained an intranet page dedicated to communicating and establishing transparency throughout the separation process.
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The operating results and cash flows associated with and directly attributed to the Global Products disposal group are reflected as discontinued operations .
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To help further promote an inclusive culture and to better serve customers, the Company is focused on: • Promoting a culture of diversity and inclusion that leverages the talents of all employees, • Implementing practices that attract, recruit and retain diverse top talent.and • Demonstrating an investment in diversity and inclusion through diverse supplier spend, depositing cash in federally-insured minority depository institutions ("MDIs") and through the Company's charitable giving efforts.
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Valvoline’s retail services Valvoline operates and franchises more than 2,000 service center locations through its VIOC and GCOC retail locations and supports nearly 270 locations through its Express Care platform.
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As part of the Company's commitment to deposit cash in MDIs, Valvoline has invested $2.5 million of its cash equivalents as of September 30, 2023 with MDIs.
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The Company has built a reputation as the quick, easy, trusted name in automotive preventive maintenance through its full-service oil changes from certified technicians in approximately 15-minutes, including a free 18-point maintenance check.
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In connection with the focus on equity, inclusion and belonging, Valvoline supports employee-led networking groups (Employee Resource Groups or “ERGs”), which are open to all employees and include the Women’s, LGBTQ+, African American/Black, and Veteran’s Networks. These ERGs provide a forum to communicate and exchange ideas, build a network of relationships across the Company, and pursue personal and professional development.
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Retail store development Valvoline’s network of retail service centers delivered its 18th consecutive year of system-wide same-store sales (“SSS”) growth in fiscal 2024, demonstrating the system's operational excellence.
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Each ERG has four purpose pillars which include Engage, Educate, Development, and Impact. The Company also actively sponsors events that promote diversity and utilizes its DEI Council, a working committee to help steer diversity and inclusion efforts across the business and its operations.
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Valvoline competes for customers in the highly fragmented automotive aftermarket service industry with automotive dealerships, automotive repair and maintenance centers, as well as other regional and independent quick lube operators.
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In fiscal 2023, Valvoline established the Environmental, Social and Governance (“ESG”) and Equality Council (the “Council”), comprised of senior leaders from the Company and a member of the Valvoline Board of Directors (the “Board”), to support continued progress on ESG initiatives.
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Pricing adjustments to products sold to Valvoline's independent operators are made pursuant to their contracts and are generally based on movements in published base oil indices. 9 Seasonality Valvoline’s business is moderately impacted by seasonality. Transaction volumes follow driving patterns of consumers, which generally trend with the length of daylight hours, North American holidays, and vacation timing.
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The Council is overseen by and reports to the Board’s Governance and Nominating Committee and works closely with Valvoline’s employee-driven DEI Council to focus on strengthening Valvoline’s commitment to diversity, equity and inclusion. The Council works to further Valvoline’s efforts to integrate sustainability into the Company’s business operations.
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Valvoline believes employee survey results are important to evaluate areas for improved communication and are meaningful to recruit and retain top talent, believing satisfied employees are more likely to have a positive impact in the workplace and deliver great customer service. Total rewards Valvoline’s total rewards philosophy is to help attract, motivate, develop and retain a qualified and diverse workforce.
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The Company follows a three-step process to career development planning, along with several resources designed to aid employees in assessing competencies and designing a development plan specific to their goals.
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Valvoline’s strategy is to provide competitive benefit programs which align to the competitive business environment and meet the needs of employees through all stages of life.
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Across the organization, 11 including within the VIOC and GCOC systems of company-operated and franchised service center stores, employees are provided voluntary and compulsory regulatory, safety, compliance, customer service, and product training opportunities. Training is based on job role and function, delivered via virtual or in-person classes and e-learning.
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The Company is committed to the inclusion of federally-insured minority depository institutions (“MDIs”) alongside larger banks and financial institutions as part of its overall cash management strategy and has $2.6 million of its cash equivalents as of September 30, 2024 with MDIs. The Company also supports employee-led networking groups (Employee Resource Groups or “ERGs”), which are open to all employees.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePandemics, epidemics or disease outbreaks, such as the novel coronavirus, may disrupt Valvoline’s business and operations, which could materially affect Valvoline’s financial condition, results of operations and forward-looking expectations. Disruptions caused by pandemics, epidemics or disease outbreaks, such as COVID-19, in the United States or Canada, could materially affect Valvoline's results of operations, financial condition and forward-looking expectations.
Biggest changeDisruptions caused by pandemics, epidemics or disease outbreaks, such as COVID-19, in the United States or Canada, could materially affect Valvoline's results of operations, financial condition and forward-looking expectations. These events could impact Valvoline's business, particularly as it relates to congestion in the supply chain and related cost, as well as disruptions in the labor market.
Although Valvoline has implemented policies and procedures to ensure compliance with these laws and regulations, it cannot be sure that its policies and procedures are sufficient or that directors, officers, employees, representatives, consultants and agents have not engaged and will not engage in conduct for which Valvoline may be held responsible, nor can Valvoline be sure that its business partners, including franchisees, have not engaged and will not engage in conduct that could materially affect their ability to perform their contractual obligations to Valvoline or even result in Valvoline being held liable for such conduct.
Although Valvoline has implemented policies and procedures to ensure compliance with these laws and regulations, it cannot be sure that its policies and procedures are sufficient or that directors, officers, employees, representatives, consultants and agents have not engaged in, and will not engage in, conduct for which Valvoline may be held responsible, nor can Valvoline be sure that its business partners, including franchisees, have not engaged in, and will not engage in, conduct that could materially affect their ability to perform their contractual obligations to Valvoline or even result in Valvoline being held liable for such conduct.
Aspects of that risk include, among others, changes to the global economy, availability of or failure to identify acquisition targets or real estate for new stores to grow the Company’s network of retail service center stores, real estate and construction costs or delays limiting new store growth, changes to the competitive landscape, including those related to automotive maintenance recommendations and customer preferences, entry of new competitors, attraction and retention of skilled employees, failure to successfully develop and implement digital platforms to support the Company’s growth initiatives, failure to comply with existing or new 16 regulatory requirements, failure to maintain a competitive cost structure and other risks outlined in greater detail in this “Risk Factors” section.
Aspects of that risk include, among others, changes to the global economy, availability of or failure to identify acquisition targets or real estate for new stores to grow the Company’s network of retail service center stores, real estate and construction costs or delays limiting new store growth, changes to the competitive landscape, including those related to automotive maintenance recommendations and customer preferences, entry of new competitors, attraction and retention of skilled employees, failure to successfully develop and implement digital platforms to support the Company’s growth initiatives, failure to comply with existing or new regulatory requirements, failure to maintain a competitive cost structure and other risks outlined in greater detail in this “Risk Factors” section.
Business disruptions, including those related to operating hazards inherent in servicing vehicles, natural disasters, severe weather conditions, climate change, supply or logistics disruptions, increasing costs for energy, temporary store and/or power outages, information technology systems and network disruptions, cybersecurity breaches, terrorist attacks, armed conflicts, war, pandemic diseases, fires, floods or other catastrophic events, could seriously harm Valvoline’s operations, as well as the operations of Valvoline’s customers and suppliers, and may adversely impact Valvoline’s financial performance.
Business disruptions, including those related to operating hazards inherent in servicing vehicles, natural disasters, severe weather conditions, climate change, supply or logistics disruptions, increasing costs for energy, temporary store and/or power outages, information technology systems and network disruptions, cybersecurity breaches, terrorist attacks, armed conflicts, war, pandemic diseases, fires, floods or other catastrophic events, could harm Valvoline’s operations as well as the operations of Valvoline’s customers and suppliers, and may adversely impact Valvoline’s financial performance.
Due to the rigorous development process and intense competition, there can be no assurance that any of the services Valvoline is currently developing, or could develop in the future, 15 will achieve substantial commercial success. Moreover, Valvoline may experience operating losses for new services after they are introduced and commercialized because of start-up costs or lack of demand.
Due to the rigorous development process and intense competition, there can be no assurance that any of the services Valvoline is currently developing, or could develop in the future, will achieve substantial commercial success. Moreover, Valvoline may experience operating losses for new services after they are introduced and commercialized because of start-up costs or lack of demand.
The Company believes that the exclusive forum provision in the Articles benefits the Company by providing increased consistency in the application of Kentucky law for the specified types of actions and may benefit the 23 Company by preventing it from having to litigate claims in multiple jurisdictions (and incur additional expenses) and be subject to potential inconsistent or contrary rulings by different courts, among other considerations.
The Company believes that the exclusive forum provision in the Articles benefits the Company by providing increased consistency in the application of Kentucky law for the specified types of actions and may benefit the Company by preventing it from having to litigate claims in multiple jurisdictions (and incur additional expenses) and be subject to potential inconsistent or contrary rulings by different courts, among other considerations.
Valvoline may not be able to refinance its debt or sell additional debt or equity 21 securities or its assets on favorable terms, if at all, and if it must sell its assets, it may negatively affect Valvoline’s ability to generate revenues. Adverse developments and instability in financial institutions and markets may adversely impact Valvoline’s business and financial condition.
Valvoline may not be able to refinance its debt or sell additional debt or equity securities or its assets on favorable terms, if at all, and if it must sell its assets, it may negatively affect Valvoline’s ability to generate revenues. Adverse developments and instability in financial institutions and markets may adversely impact Valvoline’s business and financial condition.
Any of these factors could have an adverse effect on Valvoline’s business, financial condition, results of operations, or cash flows. Operating in numerous locations in the U.S. and Canada increases the scrutiny on Valvoline’s reputation for safety, quality, friendliness, trustworthy service, integrity and business ethics.
Any of these factors could have an adverse effect on Valvoline’s business, financial condition, results of operations, or cash flows. 21 Operating in numerous locations in the U.S. and Canada increases the scrutiny on Valvoline’s reputation for safety, quality, friendliness, trustworthy service, integrity and business ethics.
This risk includes, among other things, compliance with a myriad of U.S. tax laws and regulations; franchise laws and regulations; environmental laws and regulations; labor laws and regulations; anti-competition laws and regulations; product compliance regulations; anti-corruption and anti-bribery laws, including the Foreign Corrupt Practices Act (“FCPA”); anti-money-laundering laws; and other laws governing Valvoline’s operations.
This risk includes, among other things, compliance with a myriad of U.S. tax laws and regulations; franchise laws and regulations; securities laws and regulations; environmental laws and regulations; labor laws and regulations; anti-competition laws and regulations; product compliance regulations; anti-corruption and anti-bribery laws, including the Foreign Corrupt Practices Act (“FCPA”); anti-money-laundering laws; and other laws governing Valvoline’s operations.
The loss or limited availability of the services of one or more key management personnel, or Valvoline’s inability to recruit and retain qualified diverse candidates in the future, could, at least temporarily, have an adverse effect on Valvoline’s operating results and financial condition.
The loss or limited availability of the services of one or more key management personnel, or Valvoline’s inability to recruit and retain qualified diverse candidates in the future, 19 could, at least temporarily, have an adverse effect on Valvoline’s operating results and financial condition.
Valvoline is dependent on Global Products for its product supply and certain transition services and certain indemnities have been agreed to with the Buyer, for which the Company may be negatively impacted if Global Products is unable to provide these products and services or is unable to satisfy its indemnification obligations.
Valvoline is dependent on Global Products for its product supply and certain remaining transition services and certain indemnities have been agreed to with the Buyer, for which the Company may be negatively impacted if Global Products is unable to provide these products and services or is unable to satisfy its indemnification obligations.
Valvoline also may be deemed liable for soil and/or groundwater contamination at sites to which it sent hazardous wastes for treatment or disposal, notwithstanding that the original treatment or disposal activity accorded with all applicable regulatory requirements.
Valvoline also may be deemed liable for soil and/or groundwater contamination at sites to which it sent hazardous wastes for treatment or 24 disposal, notwithstanding that the original treatment or disposal activity accorded with all applicable regulatory requirements.
If any efforts to 22 protect the intellectual property are not adequate, or if any third party infringes, misappropriates or violates Valvoline’s intellectual property, or if brand standards are not upheld in connection with the Brand Agreement, the value of its brands may be harmed.
If any efforts to protect the intellectual property are not adequate, or if any third party infringes, misappropriates or violates Valvoline’s intellectual property, or if brand standards are not upheld in connection with the Brand Agreement, the value of its brands may be harmed.
In addition to leading to a serious disruption of Valvoline’s businesses, a catastrophic event at one of Valvoline’s service center stores or involving its employees could lead to substantial legal liability to or claims by parties allegedly harmed by the event.
In addition to leading to a disruption of Valvoline’s businesses, a catastrophic event at one of Valvoline’s service center stores or involving its employees could lead to substantial legal liability to or claims by parties allegedly harmed by the event.
The size of Valvoline’s largest franchisees creates additional risk due to 17 their importance to the Company’s growth strategy, requiring their cooperation and alignment with Valvoline’s initiatives.
The size of Valvoline’s largest franchisees creates additional risk due to their importance to the Company’s growth strategy, requiring their cooperation and alignment with Valvoline’s initiatives.
The data breaches that have occurred have not resulted in a material loss to Valvoline; however, a material breach of or failure of Valvoline’s information technology systems, including systems in which data is stored or may be transferred across third-party platforms, could lead to the loss and destruction of trade secrets, confidential information, proprietary data, intellectual property, customer and supplier data, and employee personal information, and could disrupt business operations which could adversely affect Valvoline’s relationships with business partners and harm its brands, reputation and financial results.
The cyber incidents that have occurred have not resulted in a material loss to Valvoline; however, a material breach of or failure of Valvoline’s information technology systems, including systems in which data is stored or may be transferred across third-party platforms, could lead to the loss and destruction of trade secrets, confidential information, proprietary data, intellectual property, customer and supplier data, and employee personal information, and could disrupt business operations which could adversely affect Valvoline’s relationships with business partners and harm its brands, reputation and financial results.
Valvoline uses information technology systems to conduct business, and a cybersecurity threat, privacy/data breach, failure of a key information technology system, or inability to enhance its capabilities could adversely affect Valvoline’s business and reputation. Valvoline relies on its information technology systems, including systems which are managed or provided by third-party service providers, to conduct its business.
Valvoline uses information technology systems to conduct business, and a cybersecurity threat, data breach, security incident, failure of a key information technology system, or inability to enhance its capabilities could adversely affect Valvoline’s business and reputation. Valvoline relies on its information technology systems, including systems which are managed or provided by third-party service providers, to conduct its business.
In addition, during periods of declining economic conditions, including recessions, customers may defer vehicle maintenance. Similarly, increases in energy prices or other factors may cause miles driven to decline, resulting in less vehicle wear and tear and lower demand for maintenance, which may lead to customers deferring purchases of Valvoline’s services.
In addition, during periods of declining economic conditions, including recessions, customers may defer vehicle maintenance. Similarly, increases in energy prices or other factors may cause miles driven to decline, resulting in less vehicle wear and tear and reducing demand for maintenance, which may lead to customers deferring or foregoing Valvoline’s services.
However, Valvoline has limited influence over its franchisees’ operations and t he quality of franchised store operations may be diminished by a number of factors beyond the Company’s control. Valvoline ’s franchisees manage their businesses independently and are responsible for the day-to-day operations of approximately 53% of the Company’s system-wide service center stores as of September 30, 2023.
However, Valvoline has limited influence over its franchisees’ operations and t he quality of franchised store operations may be diminished by a number of factors beyond the Company’s control. Val voline ’s franchisees manage their businesses independently and are responsible for the day-to-day operations of 53% of the Company’s system-wide service center stores as of September 30, 2024.
In addition, as a smaller company, Valvoline may be unable to obtain goods or services at prices or on terms that are as favorable as those obtained by Valvoline prior to the Transaction, and Valvoline’s ability to absorb costs or unexpected expenses whether due to contingencies or other risks as described herein, may be negatively impacted.
In addition, as a smaller company, Valvoline may be unable to obtain goods or services at prices or on terms that are as favorable as those obtained by Valvoline prior to the sale of Global Products, and Valvoline’s ability to absorb costs or unexpected expenses whether due to contingencies or other risks as described herein, may be negatively impacted.
This exclusive forum provision does not apply to suits brought to enforce any duty or liability created by the Exchange Act or by the Securities Act of 1933, as amended.
This exclusive forum provision does not apply to suits brought to enforce any duty or liability created by the Securities Exchange Act of 1934, as amended, (“Exchange Act”) or by the Securities Act of 1933, as amended.
These factors include general economic conditions, including recessions, significant variations in supply and demand, pandemics, armed conflicts, war, weather conditions, currency fluctuations where Valvoline operates, commodity market speculation, labor strikes, including rail strikes, and government regulations.
These factors include general economic conditions, including recessions, significant variations in supply and demand, potential increases in taxes and tariffs, pandemics, armed conflicts, war, weather conditions, currency fluctuations where Valvoline operates, commodity market speculation, labor strikes, including rail strikes, and government regulations.
Valvoline is focused on accelerating the return of capital to shareholders through share repurchases, reductions of debt, and investments in attractive retail service growth opportunities. In connection with the completion of the sale of Global Products, Valvoline expects to drive growth and shareholder value as a best-in-class, pure-play automotive retail service provider.
Valvoline focused on accelerating the return of capital to shareholders through share repurchases, reductions of debt, and investments in attractive retail service growth opportunities. In connection with the sale of Global Products and the use of the net proceeds, Valvoline expects to drive growth and shareholder value as a best-in-class, pure-play automotive retail service provider.
The most significant of these plans, the U.S. qualified pension plans, are estimated to be underfunded by $54.2 million as of September 30, 2023. The funded status of Valvoline's pension plans is dependent upon many factors, including returns on invested assets, the level of certain market interest rates and the discount rate used to determine pension obligations.
The most significant of these plans, the U.S. qualified pension plans, are estimated to be underfunded by $51.5 million as of September 30, 2024. The funded status of Valvoline's pension plans is dependent upon many factors, including returns on invested assets, the level of certain market interest rates and the discount rate used to determine pension obligations.
Valvoline is continuing to expand, upgrade and develop its information technology capabilities, including, the Company’s core-enterprise resource planning system.
Valvoline is continuing to expand, upgrade and develop its information technology capabilities, including, the Company’s core ERP system.
Valvoline is dependent on Global Products for product supply and each party is reliant on one another for transition services. Any interruption, delay, quality issue or other failure in product supply or service could result in disputes between the parties.
Valvoline is dependent on Global Products for product supply and each party is reliant on one another for the remaining transition services. Any interruption, delay, quality issue or other failure in product supply or service could 25 adversely affect the business and results of operations and result in disputes between the parties.
Despite employee training and other measures to mitigate them, cybersecurity threats to its information technology systems, and those of its third-party service providers, are increasing and becoming more advanced and breaches have occurred and could occur as a result of denial-of-service attacks or other cyber-attacks, hacking, phishing, viruses, malicious software, ransomware, computer malware, social engineering, break-ins, security breaches due to error or misconduct by its employees, contractors or third-party service providers.
Despite employee training and other measures to mitigate them, cybersecurity threats to its information technology systems, and those of its third-party service providers, are increasing and becoming more advanced and cyber incidents have occurred and could occur as a result of unauthorized access, business email compromise, viruses, malicious code, ransomware, phishing, organized cyber-attacks, social engineering, break-ins, and security breaches due to error or misconduct by its employees, contractors or third-party service providers.
Valvoline’s substantial indebtedness may adversely affect its business, results of operations and financial condition. Valvoline has substantial indebtedness and financial obligations. As of September 30, 2023, Valvoline had outstanding indebtedness of $1.586 billion and available borrowing capacity of $471.6 million under its revolving credit facility.
Valvoline’s substantial indebtedness may adversely affect its business, results of operations and financial condition. Valvoline has substantial indebtedness and financial obligations. As of September 30, 2024, Valvoline had outstanding indebtedness of $1.094 billion and available borrowing capacity of $346.8 million under its revolving 22 credit facility.
Additionally, turnover in other key positions can disrupt progress in implementing business strategies, result in a loss of institutional knowledge, cause greater workload demands for remaining team members and divert attention away from key areas of the business, or otherwise negatively impact the Company’s growth prospects or future operating results. 18 Business disruptions from natural, operational and other catastrophic risks could seriously harm Valvoline’s operations and financial performance.
Additionally, turnover in other key positions can disrupt progress in implementing business strategies, result in a loss of institutional knowledge, cause greater workload demands for remaining team members and divert attention away from key areas of the business, or otherwise negatively impact the Company’s growth prospects or future operating results.
The extent to which these events could impact Valvoline's business results and operations depends upon the duration and severity, emerging variants, vaccine and booster effectiveness, public acceptance of safety protocols, and governmental measures, including vaccine mandates, among others. 19 Worsening conditions in the severity and spread of pandemics, epidemics, or disease outbreaks, could result in the resurgence of lockdowns or stay-at-home guidelines which could adversely affect Valvoline’s ability to implement its growth plans, including, without limitation, delay the construction or acquisition of service center stores, or negatively impact Valvoline’s ability to successfully execute plans to enter into new markets; reduce demand for Valvoline’s services; affect the ability and cost to attract and retain talent within the labor market; reduce sales or profitability; negatively impact Valvoline’s ability to maintain operations; or lead to significant disruption of financial markets in which the Company operates, and may reduce Valvoline’s ability to access capital and, in the future, negatively affect the Company’s liquidity.
Worsening conditions in the severity and spread of pandemics, epidemics, or disease outbreaks, could result in the resurgence of lockdowns or stay-at-home guidelines which could adversely affect Valvoline’s ability to implement its growth plans, including, without limitation, delay the construction or acquisition of service center stores, or negatively impact Valvoline’s ability to successfully execute plans to enter into new markets; reduce demand for Valvoline’s services; affect the ability and cost to attract and retain talent within the labor market; reduce sales or profitability; negatively impact Valvoline’s ability to maintain operations; or lead to significant disruption of financial markets in which the Company operates, and may reduce Valvoline’s ability to access capital and, in the future, negatively affect the Company’s liquidity.
However, there can be no assurance that the indemnity will be sufficient to insure Valvoline against the full amount of such liabilities, or that Ashland’s ability to satisfy its indemnification obligation will not be impaired in the future. Pursuant to the terms of the Separation Agreement and certain other agreements with Ashland, Ashland agreed to indemnify Valvoline for certain liabilities.
Risks related to Valvoline’s separation from Ashland Ashland has agreed to indemnify Valvoline for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure Valvoline against the full amount of such liabilities, or that Ashland’s ability to satisfy its indemnification obligation will not be impaired in the future.
This could hinder Valvoline’s ability to keep pace with its growth and digital initiatives for the consumer-oriented, data driven, mobility enabled nature of the business. Consequently, this might inhibit Valvoline’s ability to meet stakeholder needs and preferences.
This could hinder Valvoline’s ability to keep pace with its growth and digital initiatives for the consumer-oriented, data driven, mobility enabled nature of the business. Consequently, this might inhibit Valvoline’s ability to meet stakeholder needs and preferences. Business disruptions from natural, operational and other catastrophic risks could seriously harm Valvoline’s operations and financial performance.
A negative public perception of Valvoline’s brands, whether justified or not, could impair its reputation, involve it in litigation, damage its brand equity and have a material adverse effect on its business. In addition, damage to the reputation of Valvoline’s competitors or others in the automotive maintenance services industry could negatively impact Valvoline’s reputation and business.
A negative public perception of Valvoline’s brands, whether justified or not, could impair its reputation, involve it in litigation, damage its brand equity and have a material adverse effect on its business.
Furthermore, if the franchisees are not able to obtain the financing necessary to complete planned remodel and construction projects, they may be forced to postpone or cancel such projects, impacting the Company’s ability to grow and expand the Valvoline retail footprint. Risks related to operating Valvoline's business Changes in economic conditions that impact customer spending could harm Valvoline’s business.
Furthermore, if the franchisees are not able to obtain the financing necessary to complete planned remodel and construction projects, they may be forced to postpone or cancel such projects, impacting the Company’s ability to grow and expand the Valvoline retail footprint.
In connection with the sale of Global Products, the parties entered into a brand agreement (the “Brand Agreement”). Pursuant to the Brand Agreement, Valvoline retains ownership of the Valvoline brand for generally all retail services purposes, and Global Products owns the brand for all product uses.
Pursuant to the Brand Agreement, Valvoline retains ownership of the Valvoline brand for generally all retail services purposes, and Global Products owns the brand for all product uses.
Valvoline’s acquisitions, investments and strategic partnerships could also result in dilutive issuances of its equity securities, the incurrence of debt, contingent liabilities or amortization expenses, impairment of goodwill or purchased long-lived assets and restructuring charges, any of which could harm its financial condition, results of operations and cash flows.
In addition, the anticipated benefits of Valvoline’s acquisitions may not be realized and the process of integrating an acquired company, business, or product may create unforeseen operating difficulties or expenditures. 17 Valvoline’s acquisitions, investments and strategic partnerships could also result in dilutive issuances of its equity securities, the incurrence of debt, contingent liabilities or amortization expenses, impairment of goodwill or purchased long-lived assets and restructuring charges, any of which could harm its financial condition, results of operations and cash flows.
Rising and volatile supply costs and supply chain constraints or disruptions could adversely affect Valvoline’s results of operations. Valvoline’s service center locations require large quantities of automotive products and supplies.
In addition, competitors’ pricing decisions could compel Valvoline to decrease its prices, which could negatively affect Valvoline’s margins and profitability. Rising and volatile supply costs and supply chain constraints or disruptions could adversely affect Valvoline’s results of operations. Valvoline’s service center locations require large quantities of automotive products and supplies.
In response, Valvoline made labor investments and enhanced its recruiting programs to attract new employees. As trends in the labor market evolve, the Company may experience future challenges in recruiting and retaining talent in various locations.
As trends in the labor market evolve, the Company may experience future challenges in recruiting and retaining talent in various locations.
There can also be no assurance that Global Products can fulfill its indemnification obligations in the future. Valvoline could experience negative impacts on its business, financial position, and cash flows due to these risks.
There is no guarantee that these indemnification arrangements will sufficiently protect Valvoline from potential exposures or liability claims from third parties, including taxing authorities. Additionally, there can be no assurance that Global Products can fulfill its indemnification obligations in the future. Valvoline could experience negative impacts on its business, financial position, and cash flows due to these risks.
Valvoline's performance is highly dependent on attracting and retaining appropriately qualified employees in its service center stores and corporate offices. A tight labor market in recent years has led to challenges in staffing service center stores due to labor shortages as a number of trends conflate reflecting changing demographics, governmental policies, employee sentiment, and technological change.
A tight labor market in recent years has led to challenges in staffing service center stores due to labor shortages as a number of trends conflate reflecting changing demographics, governmental policies, employee sentiment, and technological change. In response, Valvoline made labor investments and enhanced its recruiting programs to attract new employees.
In addition, insurance related to these types of risks may not be available now or, if available, may not be available in the future at commercially reasonable rates. The limited diversification of Valvoline’s operations subjects it to risks. Historically, Valvoline has been able to take advantage of its size and global reach as a combined products and services company.
The limited diversification of Valvoline’s operations subjects it to risks. Historically, Valvoline has been able to take advantage of its size and global reach as a combined products and services company.
If Valvoline is unable to obtain and retain product supply under commercially acceptable terms, its ability to deliver services in a competitive and profitable manner or grow its business successfully could be adversely affected.
If Valvoline is unable to obtain and retain product supply under commercially acceptable terms, its ability to deliver services in a competitive and profitable manner or grow its business successfully could be adversely affected. 15 Demand for Valvoline’s services could be adversely affected by spending trends, declining economic conditions, industry trends and a number of other factors, all of which are beyond its control.
Depending on the nature of the customer data that is compromised, Valvoline may also have obligations to notify users, law enforcement or payment companies about the incident and may need to provide some form of remedy, such as refunds for the individuals affected by the incident.
Valvoline’s customer and vendor data may include names, addresses, phone numbers, email addresses and payment account information, among other information. Depending on the nature of the data that is compromised, Valvoline may also have obligations to notify individuals, regulators, law enforcement or payment companies about the incident and may need to provide some form of remedy.
The Transaction has resulted in Valvoline being a smaller, less diversified company, potentially making it more vulnerable to changing market, regulatory and economic conditions. Following completion of the Transaction, Valvoline is more concentrated geographically in the U.S. and Canada and in serving the automotive aftermarket through company-operated, independent franchise and Express Care stores that service vehicles with Valvoline products.
Following completion of the sale of Global Products, Valvoline is more concentrated geographically in the U.S. and Canada and in serving the automotive aftermarket through company-operated, independent franchise and Express Care stores that service vehicles with Valvoline products.
The global macroeconomic environment could be negatively affected by, among other things, disruptions to the banking system and financial market volatility resulting from bank failures and actions to reduce inflation.
The global macroeconomic environment could be negatively affected by, among other things, disruptions to the banking system and financial market volatility resulting from bank failures and actions to reduce inflation. The Company utilizes and maintains material balances of cash and cash equivalents, therefore is reliant on banks and financial institutions to safeguard and allow ready access to these assets.
In addition, if either party does not have in place its own systems and processes, or if there are not agreements with other providers of these services in place once transition services expire, Valvoline may not be able to operate its business effectively which could cause adverse effects to its financial condition, results of operations, or cash flows.
In addition, if either party has issues or delays with finalizing the remaining transitions, Valvoline may not be able to operate its business effectively which could cause adverse effects to its financial condition, results of operations, or cash flows.
These risk factors could cause future results to differ from those in forward-looking statements and from historical trends. 14 Risks related to the industries in which Valvoline operates Valvoline faces significant competition from other companies, which places downward pressure on prices and margins and may adversely affect Valvoline’s business and results of operations.
Risks related to the industries in which Valvoline operates Valvoline faces significant competition from other companies, which places downward pressure on prices and margins and may adversely affect Valvoline’s business and results of operations. Valvoline operates in a highly competitive market, competing against a wide variety of companies across the automotive services industry.
Regulatory, legal, and financial risks Data protection requirements could increase operating costs and requirements and a breach in information privacy or other related risks could negatively impact operations. Valvoline is subject to federal, state and local laws, and regulations relating to the collection, use, retention, disclosure, security and transfer of personal data relating to its customers and employees.
Regulatory, legal, and financial risks Data protection requirements could increase operating costs and requirements and a breach in information privacy or other related risks could negatively impact operations.
Any security breach involving the point-of-sale or other systems within the Valvoline network could result in a loss of consumer confidence or costs associated with data recovery or breaches of data security laws.
Similar software-induced interruptions or any security breach involving the point-of-sale or other systems within the Valvoline network could harm business operations, result in a loss of consumer confidence, or cause costs to be incurred associated with data recovery, investigation, remediation, and data breach notification obligations required under data privacy laws, which can be significant and vary by jurisdiction.
Complying with the CCPA and similar emerging and changing privacy and data protection requirements may cause Valvoline to incur substantial costs or disruption to its operations. Noncompliance with these legal obligations relating to privacy and data protection could damage Valvoline's reputation and affect its ability to retain and attract customers.
Failure to protect customer personal data or comply with these legal obligations relating to privacy and data protection could damage Valvoline's reputation and affect its ability to retain and attract customers.
If any of these events occur, Valvoline may have to make cash payments to its pension plans, which would reduce the cash available for its business.
If any of these events occur, 23 Valvoline may have to make cash payments to its pension plans to satisfy minimum funding requirements, which based on current data and assumptions, are not expected for at least the next five years. If such payments are required, it would reduce the cash available for Valvoline’s business.
As a result, these competitors may be better able to withstand adverse changes in conditions within the industry, market dynamics, the price of supplies or general economic conditions. In addition, competitors’ pricing decisions could compel Valvoline to decrease its prices, which could negatively affect Valvoline’s margins and profitability.
Certain competitors are larger than Valvoline and have greater financial resources and more diversified portfolios, leading to greater operating and financial flexibility. As a result, these competitors may be better able to withstand adverse changes in conditions within the industry, market dynamics, the price of supplies or general economic conditions.
In connection with the Transaction, the parties entered into a Supply Agreement and an agreement for certain transition services. Pursuant to the Supply Agreement, Valvoline purchases substantially all lubricant and certain ancillary products for its stores from Global Products. Additionally, Valvoline receives and provides certain transition services to Global Products.
In connection with the sale of Global Products in fiscal 2023, the parties entered into a Supply Agreement and an agreement for certain transition services.
Valvoline operates in a highly competitive market, competing against a wide variety of companies across the automotive services industry. Competition is based on several key criteria, including brand recognition, quality, price, customer service, and the ability to bring innovative services to the marketplace.
Competition is based on several key criteria, including brand recognition, quality, price, customer service, and the ability to bring innovative services to the marketplace. Competitors include international, national, regional and local automotive repair and maintenance shops, automobile dealerships, and oil change shops.
The Company’s point-of-sale platforms for company-operated and franchisee retail stores could be subject to cybersecurity threats or data breaches, which could cause business interruptions or negatively impact Valvoline.
The Company’s point-of-sale platforms for company-operated and franchisee retail stores could be subject to cybersecurity threats, service outages, or data breaches, such as the July 2024 software update by CrowdStrike Holdings, Inc., a cybersecurity technology company, which caused a global information technology outage. This incident required temporary manual processes to maintain operations.
These laws and regulations, and their interpretation and enforcement continue to evolve and may be inconsistent from jurisdiction to jurisdiction. For example, the California Consumer Privacy Act ("CCPA") applies to Valvoline's activities conducted 20 in the state of California.
For example, the California Consumer Privacy Act ("CCPA") applies to Valvoline's activities conducted in the state of California. Valvoline is also subject to Canada data privacy laws, such as The Personal Information Protection and Electronic Documents Act (“PIPEDA”), due to operations throughout Canada.
Specifically, the Company has $409.1 million of cash and cash equivalents and $347.5 million of short-term investments as of September 30, 2023 held by various financial institutions, the majority of which represent the remaining net proceeds from the sale of Global Products with a significant portion of such investments held in U.S. government securities.
Specifically, the Company has $68.3 million of cash and cash equivalents as of September 30, 2024 held by various financial institutions.
Removed
Competitors include international, national, regional and local automotive repair and maintenance shops, automobile dealerships, and oil change shops. Certain competitors are larger than Valvoline and have greater financial resources and more diversified portfolios, leading to greater operating and financial flexibility.
Added
These risk factors could cause future results to differ from those in forward-looking statements and from historical trends. These risks are not the only risks that Valvoline faces. Additional risks and uncertainties that are not presently known, or that Valvoline currently believes are not material, may also become meaningful and adversely affect Valvoline’s business.
Removed
Demand for Valvoline’s services could be adversely affected by spending trends, declining economic conditions, industry trends and a number of other factors, all of which are beyond its control.
Added
For example, Valvoline’s supplier for air filters experienced supply constraints in fiscal 2024 leading to delivery delays to Valvoline until the supplier was able to diversify its supply chain, which impacted non-oil change revenue in the first half of fiscal 2024.
Removed
In addition, the anticipated benefits of Valvoline’s acquisitions may not be realized and the process of integrating an acquired company, business, or product may create unforeseen operating difficulties or expenditures.
Added
Additionally, the International Longshoreman’s Association (“ILA”) union of maritime workers contract expired on September 30, 2024 without a renewed contract negotiated until early October 2024, resulting in a brief labor strike.
Removed
These events could impact Valvoline's business, particularly as it relates to congestion in the supply chain and related cost, as well as disruptions in the labor market.
Added
A more lengthy strike from the ILA could have had a negative impact on Valvoline’s suppliers resulting in an unfavorable impact to product availability and cost and negatively impacted the Company’s consolidated results of operations.
Removed
Valvoline’s customer and vendor data may include names, addresses, phone numbers, email addresses and payment account information, among other information.
Added
In addition, damage to the reputation of Valvoline’s competitors or others in the automotive maintenance services industry could negatively impact Valvoline’s reputation and business. 16 In connection with the sale of Global Products, the parties entered into a brand agreement (the “Brand Agreement”).
Removed
The Company utilizes and maintains material balances of cash, cash equivalents, and short-term investments and is therefore reliant on banks and financial institutions to safeguard and allow ready access to these assets.
Added
Another component of the Company’s network growth strategy is dependent on the success of recent refranchising activities taken during fiscal 2024 and planned for early fiscal 2025. Failure to achieve the expected benefits of the refranchising transactions could negatively impact the Company’s operating results and its overall long-term strategic growth objectives, including accelerating franchise store growth.
Removed
Also as part of the Transaction, the parties have agreed to indemnify one another for various matters. If either party is unable to satisfy their indemnification obligations, there are no guarantees that these indemnities will sufficiently protect Valvoline against these exposures or potential liability claims from third parties.
Added
In addition, if the Company’s franchise partners are unsuccessful in continuing productivity and growth objectives within their respective markets, the Company’s business results could be adversely affected.
Removed
Risks related to Valvoline’s separation from Ashland The Distribution could result in significant tax liability to Ashland, and in certain circumstances, Valvoline could be required to indemnify Ashland for material taxes pursuant to indemnification obligations.
Added
Valvoline has also guaranteed future lease commitments related to certain refranchised stores and the Company’s operating results could be negatively impacted by any increased rent obligations to the extent the franchisees default on such lease agreements. Valvoline's performance is also highly dependent on attracting and retaining appropriately qualified employees in its service center stores and supporting and corporate teams.
Removed
Ashland obtained a written opinion of counsel to the effect that the Distribution should qualify for non-recognition of gain and loss under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”). The opinion does 24 not address any U.S. state, local or non-U.S. tax consequences of the Distribution.
Added
Risks related to operating Valvoline's business The Company’s recently implemented enterprise resource planning (“ERP”) system has adversely impacted Valvoline’s internal controls and could continue to negatively impact the business if remedial efforts are not timely and effective. Valvoline relies upon its ERP application to assist in managing certain business processes and summarizing operational and financial results.
Removed
The opinion assumes that the Distribution is completed according to the terms of certain agreements entered into between Ashland and Valvoline and the accuracy of certain assumptions and representations and covenants made by the parties.
Added
Following the sale of the former Global Products reportable segment in fiscal 2023, and as part of Valvoline’s continued evolution to a standalone retail business, the Company has been in the process of separating certain business processes, information systems and applications that were previously shared to support both businesses.
Removed
The opinion is not binding on the Internal Revenue Service (the “IRS”) or the courts, and thus there can be no assurance that the IRS or a court will not take a contrary position.
Added
On January 1, 2024, Valvoline implemented a new ERP application intended to better accommodate the retail business model and support the Company’s continued growth.
Removed
If the Distribution were determined not to qualify for non-recognition of gain and loss, then Ashland would recognize a gain as if it had sold its Valvoline common stock in a taxable transaction in an amount up to the fair market value of the common stock it distributed in the Distribution.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Valvoline is headquartered in Lexington, Kentucky, where the Company leases over 157,000 square feet of office and warehouse space to support operations across its business, which excludes certain properties that the Company currently subleases to others.
Biggest changeITEM 2. PROPERTIES Valvoline is headquartered in Lexington, Kentucky, where the Company leases approximately 135,000 square feet of office and warehouse space to support operations across its business, which excludes certain properties that the Company currently subleases to others.
In addition, Valvoline owns or leases the property associated with 876 company-operated retail service center stores under the Valvoline Instant Oil Change SM and Valvoline Great Canadian Oil Change brands throughout the United States and Canada, respectively. Valvoline’s store leases typically have initial terms of up to 15 years with renewal options, exercisable at the Company’s discretion.
In addition, Valvoline owns or leases the property associated with 950 company-operated retail service center stores under the Valvoline Instant Oil Change SM and Valvoline Great Canadian Oil Change brands throughout the United States and Canada, respectively. Valvoline’s store leases typically have initial terms of up to 15 years with renewal options, exercisable at the Company’s discretion.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE SAFETY DISCLOSURES Not applicable. 25 PART II
Biggest changeMINE SAFETY DISCLOSURES Not applicable. 28 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 25 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. Reserved 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 28 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 47 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 28 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 6. Reserved 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation s 31 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 49 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFollowing the sale of Global Products, the Company discontinued its dividend after the December 2022 payment until such time, if any, as the Board may determine in its sole discretion. The Company currently does not anticipate declaring or paying any cash dividends for the foreseeable future.
Biggest changeDividend policy The Company currently does not anticipate declaring or paying any cash dividends for the foreseeable future.
In addition, the instruments governing Valvoline’s indebtedness may limit its ability to pay dividends. Therefore, no assurance are given that Valvoline will pay any dividends to its stockholders, or as to the amount of any such dividends if the Board determines to do so.
In addition, the instruments governing Valvoline’s indebtedness may limit the Company’s ability to pay dividends. Therefore, no assurance are given that Valvoline will pay any dividends to its shareholders, or as to the amount of any such dividends if the Board determines to do so.
Stock performance graph The following graph compares the cumulative total shareholder return on a $100 investment in Valvoline common stock, the S&P MidCap 400 Index, and the S&P MidCap 400 Specialty Retail Index for the period from September 30, 2018 to September 30, 2023.
Stock performance graph The following graph compares the cumulative total shareholder return on a $100 investment in Valvoline common stock, the S&P MidCap 400 Index, and the S&P MidCap 400 Specialty Retail Index for the period from September 30, 2019 to September 30, 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market information Valvoline common stock is listed on the NYSE and trades under the symbol “VVV.” As of November 15, 2023, there were approximately 7,900 registered holders of Valvoline common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market information Valvoline common stock is listed on the NYSE and trades under the symbol “VVV.” As of November 19, 2024, there were approximately 7,400 registered holders of Valvoline common stock.
Dividend policy The declaration and payment of dividends to holders of Valvoline common stock is at the discretion of Valvoline's Board of Directors (the “Board”) after taking into account various factors, including Valvoline’s financial condition, operating results, current and anticipated cash needs, cash flows, impact on Valvoline’s effective tax rate, indebtedness, legal requirements and other factors that the Board considers relevant.
The declaration, amount and payment of any future dividends to holders of Valvoline common stock is at the sole discretion of Valvoline's Board of Directors (the “Board”) after considering various factors, including Valvoline’s financial condition, operating results, current and anticipated cash needs, cash flows, impact on Valvoline’s effective tax rate, indebtedness, legal requirements and other factors that the Board considers relevant.
Removed
Valvoline has continued to return value to shareholders through share repurchases, the timing and amount of which will be at the discretion of the Company and based on Valvoline’s liquidity, general business and market conditions, and other factors, including alternative investment opportunities.
Added
This graph assumes an investment in Valvoline common stock and each index were $100 on September 30, 2019 and that all dividends were reinvested. 29 Years ended September 30 Cumulative total returns 2020 2021 2022 2023 2024 Valvoline Inc. $ 88.36 $ 147.37 $ 121.61 $ 155.32 $ 201.62 S&P MidCap 400 Index $ 97.84 $ 140.58 $ 119.14 $ 137.62 $ 174.49 S&P MidCap 400 Specialty Retail Index $ 110.75 $ 187.47 $ 126.52 $ 142.05 $ 203.20 Purchases of Company common stock Valvoline has returned value to shareholders through share repurchases, the timing and amount of which will be at the discretion of the Company and based on Valvoline’s liquidity, general business and market conditions, and other factors, including alternative investment opportunities.
Removed
This graph assumes an investment in Valvoline common stock and each index were $100 on September 30, 2018 and that all dividends were reinvested. 26 Years ended September 30 Cumulative total returns 2019 2020 2021 2022 2023 Valvoline Inc. $ 104.65 $ 92.47 $ 154.21 $ 127.26 $ 162.54 S&P MidCap 400 Index $ 97.51 $ 95.40 $ 137.07 $ 116.17 $ 134.20 S&P MidCap 400 Specialty Retail Index $ 88.44 $ 97.94 $ 165.79 $ 111.89 $ 125.62 Purchases of Company common stock Repurchases of the Company’s common stock during the three months ended September 30, 2023 pursuant to the November 15, 2022 Board authorization to repurchase up to $1.6 billion of common stock through September 30, 2024 were: Fiscal period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Dollar value of shares that may yet be purchased under the plans or programs (in millions) July 1, 2023 - July 31, 2023 — $ — — $ 340.4 August 1, 2023 - August 31, 2023 1,502,820 $ 33.89 1,502,820 $ 289.5 September 1, 2023 - September 30, 2023 2,375,942 $ 32.81 2,375,942 $ 211.5 Total 3,878,762 $ 33.23 3,878,762
Added
Repurchases of the Company’s common stock during the three months ended September 30, 2024 pursuant to the July 30, 2024 Board authorization to repurchase up to $400 million of common stock with no expiration date were: Fiscal period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Dollar value of shares that may yet be purchased under the plans or programs (in millions) July 1, 2024 - July 31, 2024 — $ — — $ 400.0 August 1, 2024 - August 31, 2024 70,886 $ 42.11 70,886 $ 397.0 September 1, 2024 - September 30, 2024 299,082 $ 40.75 299,082 $ 384.8 Total 369,968 $ 41.01 369,968

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeITEM 6. RESERVED 27 Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations Page Business Overview 28 Results of Operations - Consolidated Review 32 Financial Position, Liquidity and Capital Resources 38 New Accounting Pronouncements 41 Critical Accounting Estimates 41
Biggest changeITEM 6. RESERVED 30 Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations Page Business Overview 31 Results of Operations - Consolidated Review 35 Financial Position, Liquidity and Capital Resources 40 New Accounting Pronouncements 43 Critical Accounting Estimates 44

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIncome from continuing operations has also trended upward due to strong top-line performance except for fiscal 2022 where the decrease was 29 primarily driven by a loss recorded for remeasurement of pension and other postretirement plans, as well as higher separation-related expenses related to the separation of the Company’s businesses.
Biggest changeIncome from continuing operations has also followed an upward trend largely from strong top-line performance with the exception of fiscal 2022 where the decrease was primarily driven by a loss due to the remeasurement of pension and other postretirement plans, as well as higher separation-related expenses in connection with the planning and evaluation of the separation of the Company’s businesses that ultimately culminated in the sale of Global Products. 32 Results for Fiscal 2023 compared to Fiscal 2022 For comparisons of Valvoline's consolidated results of operations and cash flows for the fiscal years ended September 30, 2023 to September 30, 2022, refer to Item 7 of Part II of the Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the Securities and Exchange Commission on November 20, 2023.
Management considers that these elements are more reflective of changes in current conditions in global markets (in particular, interest rates), outside the operational performance of the business, and are also legacy amounts that are not directly related to the underlying business and do not have an impact on the compensation and benefits provided to eligible employees for current service.
Management considers these elements are more reflective of changes in current conditions in global markets (in particular, interest rates), outside the operational performance of the business, and are also legacy amounts that are not directly related to the underlying business and do not have an impact on the compensation and benefits provided to eligible employees for current service.
The following are the non-GAAP measures management has included and how management defines them: • EBITDA - net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization; • Adjusted EBITDA - EBITDA adjusted for the impacts of certain unusual, infrequent or non-operational activity not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods ("key items," as further described below); • Adjusted EBITDA margin - adjusted EBITDA divided by adjusted net revenues; • Adjusted net revenues - reported net revenues adjusted for key items; 30 • Free cash flow - cash flows from operating activities less capital expenditures and certain other adjustments as applicable; and • Discretionary free cash flow - cash flows from operating activities less maintenance capital expenditures and certain other adjustments as applicable.
The following are the non-GAAP measures management has included and how management defines them: • EBITDA - net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization; • Adjusted EBITDA - EBITDA adjusted for the impacts of certain unusual, infrequent or non-operational activity not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods ("key items," as further described below); • Adjusted EBITDA margin - adjusted EBITDA divided by adjusted net revenues; • Adjusted net revenues - reported net revenues adjusted for key items; • Free cash flow - cash flows from operating activities less capital expenditures and certain other adjustments as applicable; and • Discretionary free cash flow - cash flows from operating activities less maintenance capital expenditures and certain other adjustments as applicable.
Non-GAAP include adjustments from results based on U.S. GAAP that management believes enables comparison of certain financial trends and results between periods and provides a useful supplemental presentation of Valvoline's operating performance, that allows for transparency with respect to key metrics used by management in operating the business and measuring performance.
Non-GAAP measures include adjustments from results based on U.S. GAAP that management believes enables comparison of certain financial trends and results between periods and provides a useful supplemental presentation of Valvoline's operating performance that allows for transparency with respect to key metrics used by management in operating the business and measuring performance.
NEW ACCOUNTING PRONOUNCEMENTS For a discussion and analysis of recently issued and adopted accounting pronouncements and the impact on Valvoline, refer to Note 2 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. CRITICAL ACCOUNTING ESTIMATES The preparation of Valvoline’s consolidated financial statements in conformity with U.S.
NEW ACCOUNTING PRONOUNCEMENTS For a discussion and analysis of recently issued and adopted accounting pronouncements and the impact on Valvoline, refer to Note 2 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. 43 CRITICAL ACCOUNTING ESTIMATES The preparation of Valvoline’s consolidated financial statements in conformity with U.S.
Refer to Note 10 in the Notes to Consolidated Financial Statements in Item 8 of Part II in this Annual Report on Form 10-K for further details. (c) Activity associated with legacy businesses and the separation from Valvoline’s former parent company and its former Global Products reportable segment.
Refer to Note 10 in the Notes to Consolidated Financial Statements in Item 8 of Part II in this Annual Report on Form 10-K for further details. (c) Activity associated with legacy businesses, including the separation from Valvoline’s former parent company and its former Global Products reportable segment.
With average customer ratings that indicate high levels of service satisfaction, Valvoline and the Company’s franchise partners keep customers moving with 15-minute stay-in-your-car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended maintenance services.
With average customer ratings that indicate high levels of service satisfaction, Valvoline and the Company’s franchise partners keep customers moving with approximately 15-minute stay-in-your-car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended maintenance services.
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and 41 expenses, and the disclosures of contingent matters. Significant items that are subject to such estimates and assumptions include, but are not limited to, employee benefit obligations, business combinations, and income taxes.
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses, and the disclosures of contingent matters. Significant items that are subject to such estimates and assumptions include, but are not limited to, employee benefit obligations, business combinations, and income taxes.
Furthermore, if actual results are not consistent with estimates or assumptions, the Company may be exposed to an impairment charge that could materially adversely impact its consolidated financial position and results of operations. There were no impairments to intangible assets recognized by the Company during fiscal 2023 or 2022.
Furthermore, if actual results are not consistent with estimates or assumptions, the Company may be exposed to an impairment charge that could materially adversely impact its consolidated financial position and results of operations. There were no impairments to intangible assets recognized by the Company during fiscal 2024 or 2023.
Valvoline believes the updated mortality improvement scales provide a 43 reasonable assessment of current mortality trends and is an appropriate estimate of future mortality projections.
Valvoline believes the updated mortality improvement scales provide a reasonable assessment of current mortality trends and is an appropriate estimate of future mortality projections.
This estimated impact does not include increased returns of other plan assets that may also benefit from increased interest rates. • Mortality — The mortality assumption for Valvoline's U.S. pension and other postretirement plans is utilizes the Society of Actuaries PRI-2012 mortality base tables and a mortality improvement scale that follows the 2023 Trustees Report of the Social Security Administration Intermediate Alternative as reflected in the MSS-2023 improvement scale.
This estimated impact does not include increased returns of other plan assets that may also benefit from increased interest rates. 45 • Mortality — The mortality assumption for Valvoline's U.S. pension and other postretirement plans is utilizes the Society of Actuaries PRI-2012 mortality base tables and a mortality improvement scale that follows the 2024 Trustees Report of the Social Security Administration Intermediate Alternative as reflected in the MSS-2024 improvement scale.
Refer to “Use of Non-GAAP Measures” for management’s definitions of the metrics presented above. 35 Continuing operations EBITDA and Adjusted EBITDA The following reconciles Income from continuing operations to EBITDA and Adjusted EBITDA for the years ended September 30: (In millions) 2023 2022 2021 2020 Income from continuing operations $ 199.4 $ 109.4 $ 200.1 $ 69.6 Income tax expense 37.1 34.7 59.9 53.4 Net interest and other financing expenses 38.3 69.3 108.3 92.1 Depreciation and amortization 88.8 71.4 62.1 40.5 EBITDA from continuing operations (a) 363.6 284.8 430.4 255.6 Net pension and postretirement plan (income) expense (b) (27.6) 6.9 (128.2) (54.9) Net legacy and separation-related expenses (c) 32.8 20.5 (23.6) (30.0) Suspended operations (e) 7.1 0.9 (1.5) (1.3) Information technology transition costs (d) 3.0 2.6 — — Investment and divestiture-related costs (f) 1.1 — — 1.3 Restructuring and related adjustments (g) — — (0.1) 0.3 Compensated absences benefits change (h) — — — (4.9) Adjusted EBITDA from continuing operations (a) $ 380.0 $ 315.7 $ 277.0 $ 166.1 (a) EBITDA from continuing operations is defined as income from continuing operations, plus income tax expense, net interest and other financing expenses, and depreciation and amortization attributable to continuing operations.
Refer to “Use of Non-GAAP Measures” for management’s definitions of the metrics presented above. 38 Continuing operations EBITDA and Adjusted EBITDA The following reconciles Income from continuing operations to EBITDA and Adjusted EBITDA for the years ended September 30: (In millions) 2024 2023 2022 2021 2020 Income from continuing operations $ 214.5 $ 199.4 $ 109.4 $ 200.1 $ 69.6 Income tax expense 69.1 37.1 34.7 59.9 53.4 Net interest and other financing expenses 71.9 38.3 69.3 108.3 92.1 Depreciation and amortization 105.9 88.8 71.4 62.1 40.5 EBITDA from continuing operations (a) 461.4 363.6 284.8 430.4 255.6 Net pension and postretirement plan expense (income) (b) 11.7 (27.6) 6.9 (128.2) (54.9) Net legacy and separation-related (income) expenses (c) (0.7) 32.8 20.5 (23.6) (30.0) Information technology transition costs (d) 10.4 3.0 2.6 — — Investment and divestiture-related (income) costs (e) (40.2) 1.1 — — 1.3 Suspended operations (f) — 7.1 0.9 (1.5) (1.3) Restructuring and related adjustments (g) — — — (0.1) 0.3 Compensated absences benefits change (h) — — — — (4.9) Adjusted EBITDA from continuing operations (a) $ 442.6 $ 380.0 $ 315.7 $ 277.0 $ 166.1 (a) EBITDA from continuing operations is defined as income from continuing operations, plus income tax expense, net interest and other financing expenses, and depreciation and amortization attributable to continuing operations.
Holding all other assumptions constant, a hypothetical 1.00% change in the expected long-term return on plan assets assumption for the qualified pension plans would impact fiscal 2023 recurring non-service pension income by $13.7 million. • Discount rate — Reflects the rates at which benefits could effectively be settled and is based on current investment yields of high-quality corporate bonds.
Holding all other assumptions constant, a hypothetical 1.00% change in the expected long-term return on plan assets assumption for the qualified pension plans would impact fiscal 2024 recurring non-service pension income by $13.0 million. • Discount rate — Reflects the rates at which benefits could effectively be settled and is based on current investment yields of high-quality corporate bonds.
Target asset allocation percentages as of September 30, 2023 for the qualified pension plans were 90% fixed income and 10% equity investments.
Target asset allocation percentages as of September 30, 2024 for the qualified pension plans were 90% fixed income and 10% equity investments.
Other assumptions, including the rate of compensation increase and healthcare cost trend rate, do not have a significant impact on Valvoline's pension and other postretirement benefit plan costs and obligations based upon current plan provisions that have generally frozen benefits and limited costs. 44 Business combinations and intangible assets Description Judgments and uncertainties Effect if actual results differ from assumptions Valvoline acquired 31 service center stores during fiscal 2023 for an aggregate purchase price of $36.3 million.
Other assumptions, including the rate of compensation increase and healthcare cost trend rate, do not have a significant impact on Valvoline's pension and other postretirement benefit plan costs and obligations based upon current plan provisions that have generally frozen benefits and limited costs. 46 Business combinations and intangible assets Description Judgments and uncertainties Effect if actual results differ from assumptions Valvoline acquired 36 service center stores during fiscal 2024 for an aggregate purchase price of $53.3 million.
These plans represent 95% of Valvoline’s total gross pension plan obligation as of September 30, 2023 and 2022. This strategy hedges approximately 100% of the movement in liabilities related to changes in discount rates as of September 30, 2023 and 2022, respectively.
These plans represent approximately 95% of Valvoline’s total gross pension plan obligation as of September 30, 2024 and 2023. This strategy hedges approximately 100% of the movement in liabilities related to changes in discount rates as of September 30, 2024 and 2023.
The following table illustrates the estimated impact on hypothetical pension and other postretirement expense that would have resulted from a one percentage point change in discount rates in isolation of impacts on other significant assumptions in the years ended September 30: (In millions) 2023 2022 Increase (decrease) in pension and other postretirement plan expense - 1.00% decrease in discount rates: Pension benefits Increase in benefit obligation $ 126.6 $ 144.2 Increased return on plan assets (a) (122.0) $ (138.7) Estimated hypothetical increase in expense 4.6 5.5 Other postretirement benefits Increase in benefit obligation 1.7 2.3 Total estimated hypothetical increase in expense $ 6.3 $ 7.8 (a) The qualified pension plans employ an investing strategy to match the duration of its obligation and investments.
The following table illustrates the estimated impact on hypothetical pension and other postretirement expense that would have resulted from a one percentage point change in discount rates in isolation of impacts on other significant assumptions in the years ended September 30: (In millions) 2024 2023 Increase (decrease) in pension and other postretirement plan expense - 1.00% decrease in discount rates: Pension benefits Increase in benefit obligation $ 142.6 $ 126.6 Increased return on plan assets (a) (138.0) (122.0) Estimated hypothetical increase in expense 4.6 4.6 Other postretirement benefits Increase in benefit obligation 1.9 1.7 Total estimated hypothetical increase in expense $ 6.5 $ 6.3 (a) The qualified pension plans employ an investing strategy to match the duration of its obligation and investments.
As of September 30, 2023, Valvoline was in compliance with all covenants of its debt obligations and had borrowing capacity remaining of $471.6 million. Refer to Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional details regarding the Company’s debt instruments.
As of September 30, 2024, Valvoline was in compliance with all covenants of its debt obligations and had borrowing capacity remaining of $346.8 million. Refer to Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional details regarding the Company’s debt instruments.
Continuing operations adjusted net revenues The following reconciles Net revenues to Adjusted net revenues for the years ended September 30: (In millions) 2023 2022 Reported net revenues $ 1,443.5 $ 1,236.1 Key items: Suspended operations (a) (0.2) (11.6) Adjusted net revenues (b) (c) $ 1,443.3 $ 1,224.5 (a) Represents the results of a former Global Products business where operations were suspended during fiscal 2022 that were not included in the sale.
Continuing operations adjusted net revenues The following reconciles Net revenues to Adjusted net revenues for the years ended September 30: (In millions) 2024 2023 Reported net revenues $ 1,619.0 $ 1,443.5 Key items: Suspended operations (a) — (0.2) Adjusted net revenues (b) (c) $ 1,619.0 $ 1,443.3 (a) Represents the results of a former Global Products business where operations were suspended during fiscal 2022 that were not included in the sale.
Employee benefit obligations Description Judgments and uncertainties Effect if actual results differ from assumptions Valvoline sponsors defined benefit pension and other postretirement plans in the U.S. As of September 30, 2023, Valvoline’s net unfunded pension and other postretirement plan liabilities included in the Consolidated Balance Sheet totaled $139.4 million.
Employee benefit obligations Description Judgments and uncertainties Effect if actual results differ from assumptions Valvoline sponsors defined benefit pension and other postretirement plans in the U.S. As of September 30, 2024, Valvoline’s net unfunded pension and other postretirement plan liabilities included in the Consolidated Balance Sheet totaled $136.6 million.
In fiscal 2023, the pension plan assets generated an actual weighted-average return of 2.56%, primarily driven by the market performance of the plan assets of the qualified pension plans based on the Company’s investment strategy to hedge the movement in liabilities related to changes in discount rates with investments of a matched duration that provide offsetting returns aligned with changes in interest rates.
The pension plan assets generated an actual weighted-average return of 16.50% in fiscal 2024 primarily driven by the market 44 performance of the plan assets of the qualified pension plans based on the Company’s investment strategy to hedge the movement in liabilities related to changes in discount rates with investments of a matched duration that provide offsetting returns aligned with changes in interest rates.
This cost is not considered to be reflective of the underlying performance of the Company’s ongoing continuing operations. (g) Adjustments to employee termination benefits recognized over remaining employee service periods as a result of company-wide restructuring activities that are not considered reflective of the underlying operating performance of the Company’s ongoing operations. .
(g) Adjustments to employee termination benefits recognized over remaining employee service periods as a result of company-wide restructuring activities that are not considered reflective of the underlying operating performance of the Company’s ongoing operations.
The cash flows of the discontinued operation are reflected in the Consolidated Statements of Cash Flows and are summarized below for the years ended September 30: (In millions) 2023 2022 Cash provided by (used in): Operating activities $ (393.8) $ 149.8 Investing activities $ 2,620.9 $ (36.7) Financing activities $ (108.1) $ 44.0 The decrease in operating cash flows provided by discontinued operations was largely due to tax payments of $300.8 million relating to the gain on sale of discontinued operations, in addition to payments of separation-related costs attributed to the sale of the Global Products business, including the success fee which coincided with the close of the Transaction on March 1, 2023.
Discontinued operations cash flows The cash flows attributable to the discontinued operation are reflected in the Consolidated Statements of Cash Flows and are summarized below for the years ended September 30: (In millions) 2024 2023 Cash (used by) provided in: Operating activities $ (17.8) $ (393.8) Investing activities $ — $ 2,620.9 Financing activities $ — $ (108.1) The decrease in operating cash flows provided by discontinued operations was largely due to prior year tax payments of $300.8 million relating to the gain on sale of discontinued operations, in addition to payments of separation-related costs attributed to the sale of the Global Products business, including the success fee which coincided with the close of the Transaction on March 1, 2023.
The expected return on plan assets is designed to be a long-term assumption, and therefore, actual returns will be subject to year-to-year 42 variances. For fiscal 2024, the expected rate of return on assets assumption for the qualified pension plans will be 5.30%.
The expected return on plan assets is designed to be a long-term assumption, and therefore, actual returns will be subject to year-to-year variances. For fiscal 2025, the expected rate of return on assets assumption for the qualified pension plans will be 5.20%.
This assumption is determined considering each plan's asset allocation targets and overall expected performance, including evaluation of the most recent long-term historical returns, as applicable. The weighted-average long-term expected rate of return on assets assumption was 4.90% for fiscal 2023.
This assumption is determined considering each plan's asset allocation targets and overall expected performance, including evaluation of the most recent long-term historical returns, as applicable. The weighted-average long-term expected rate of return on assets assumption was 5.30% for fiscal 2024.
Valvoline elected to perform qualitative impairment assessments of goodwill in 2023 and 2022, which indicated that it was more likely than not that the fair values of the reporting unit in fiscal 2023 and the reporting units in fiscal 2022 were in excess of carrying amounts. 45 Income taxes Description Judgments and uncertainties Effect if actual results differ from assumptions Valvoline is subject to income taxes in the United States and international jurisdictions where its businesses operate.
Valvoline elected to perform a quantitative impairment assessment of goodwill in 2024 and a qualitative impairment assessment of goodwill in 2023, which indicated that it was more likely than not that the fair values of the reporting unit in fiscal 2024 and 2023 were in excess of carrying amounts. 47 Income taxes Description Judgments and uncertainties Effect if actual results differ from assumptions Valvoline is subject to income taxes in the United States and international jurisdictions where its businesses operate.
Variable interest rates have been assumed to remain constant through payment at the rates that existed as of September 30, 2023. (c) Includes projected benefit payments through fiscal 2033 for Valvoline’s unfunded benefit plans. Excludes benefit payments from pension plan trust funds.
Variable interest rates have been assumed to remain constant through payment at the rates that existed as of September 30, 2024. (b) Includes projected benefit payments through fiscal 2034 for Valvoline’s unfunded benefit plans. Excludes benefit payments from pension plan trust funds.
Management believes that the Company has sufficient liquidity based on its current cash and cash equivalents position, short-term investments, cash generated from business operations, and existing financing in place, to meet its pension and other postretirement plan requirements, debt servicing obligations, tax-related and other material cash and operating requirements for the next twelve months.
Management believes that the Company has sufficient liquidity based on its current cash, cash equivalents, cash generated from business operations and existing financing to meet its pension and other postretirement plan, debt servicing, tax-related and other material cash and operating requirements for the next twelve months.
Of specific note, the Company recognized $25.7 million of pre-tax expense during the year ended September 30, 2023 to reflect its increased estimated indemnity obligation, which also resulted in an income tax benefit of $29.0 million to reflect the release of valuation allowances in connection with the amendment of the Tax Matters Agreement with Valvoline’s former parent company.
During fiscal three months ended September 30, 2023, the Company recognized $25.7 million of pre-tax expense to reflect its increased estimated indemnity obligation which also resulted in an income tax benefit of $29.0 million to reflect the release of valuations allowances in connection with the amendment of the Tax Matters Agreement with Valvoline’s former parent company.
Fiscal 2024 capital expenditures Valvoline is currently forecasting approximately $185 million to $215 million of capital expenditures for fiscal 2024, funded primarily from operating cash flows. 40 Pension and other postretirement plan obligations The Company makes cash and non-cash contributions and benefit payments for its pension and other postretirement plans.
Fiscal 2025 capital expenditures Valvoline is currently forecasting approximately $230 million to $250 million of capital expenditures for fiscal 2025, funded primarily from operating cash flows. Pension and other postretirement plan obligations The Company makes cash and non-cash contributions and benefit payments for its pension and other postretirement plans.
Refer to “Use of Non-GAAP Measures” and the Appendix for additional details. Summarized below are Valvoline's trends in the results of its continuing operations Net revenues, Income from continuing operations, and Adjusted EBITDA over the last four fiscal years: (a) Adjusted EBITDA is a non-GAAP measure, further described and defined within the “Use of Non-GAAP Measures” section below.
Summarized below are Valvoline's trends in the results of its continuing operations Net revenues, Income from continuing operations, and Adjusted EBITDA over the last five fiscal years: (a) Adjusted EBITDA is a non-GAAP measure, further described and defined within the “Use of Non-GAAP Measures” section below.
Also refer to the “Continuing operations EBITDA and Adjusted EBITDA” section within “Results of Operations” below f or a reconciliation of income from continuing operations to Adjusted EBITDA for fiscal years 2023 and 2022.
Also refer to the “Continuing operations EBITDA and Adjusted EBITDA” section within “Results of Operations” below f or a reconciliation of income from continuing operations to Adjusted EBITDA for each fiscal year presented.
The separation from Global Products resulted in a pre-tax gain of $1.572 billion and related income tax expense of $424.3 million which includes federal, state, and international considerations for the jurisdictions where the proceeds were allocated and the respective tax bases of the net assets transferred.
The separation from Global Products resulted in a pre-tax gain of $1.572 billion during fiscal 2023 and related income tax expense recognized to-date of $419.1 million which includes federal, state, and international considerations for the jurisdictions where the proceeds were allocated and the respective tax bases of the net assets transferred.
Valvoline’s fiscal 2023 expense, excluding actuarial gains and losses, for pension plans was determined using the spot discount rates as of the beginning of the fiscal year. The interest cost discount rates for fiscal 2023 pension expense and other postretirement expense were 5.45% and 5.41%, respectively.
Valvoline’s fiscal 2024 expense, excluding actuarial gains and losses, for pension plans was determined using the spot discount rates as of the beginning of the fiscal year. The interest cost discount rates for fiscal 2024 pension expense and other postretirement expense were each 5.92%.
Goodwill is tested at the reporting unit level for impairment on an annual basis during the fourth fiscal quarter as of July 1 or more frequently if certain events occur indicating that the carrying value of goodwill may be impaired.
Goodwill is tested at the reporting unit level for impairment on an annual basis during the fourth fiscal quarter as of July 1 or more frequently if certain events occur indicating that the carrying value of goodwill may be impaired. At the time of the Company’s annual impairment assessment, Valvoline consisted of a singular reporting unit, Retail Services.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and the accompanying Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and the accompanying Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K. Unless otherwise noted, disclosures herein relate solely to the Company’s continuing operations.
Each change of $2.4 million and $18.9 million for continuing operations and consolidated income tax provisions, respectively, would impact the respective fiscal 2023 effective tax rates by one percentage point. 46
Each change of $2.8 million and $2.7 million for continuing operations and consolidated income tax provisions, respectively, would impact the respective fiscal 2024 effective tax rates by one percentage point. 48
The table below highlights the growth over the last year: (In millions, except store count) Fiscal Year 2023 Growth vs. 2022 System-wide store sales (a) $ 2,761.8 17.0 % System-wide store count (a) 1,852 8.0 % Years ended September 30 2023 2022 System-wide SSS growth (a) 11.9 % 13.7 % (a) Measures include Valvoline franchisees, which are independent legal entities.
The table below highlights the growth over the last year: (In millions, except store count) Fiscal year 2024 Growth vs. 2023 System-wide store sales (a) $ 3,104.3 12.4 % System-wide store count (a) 2,010 8.5 % Years ended September 30 2024 2023 System-wide SSS growth (a) 6.7 % 11.9 % (a) Measures include Valvoline franchisees, which are independent legal entities.
Additionally, changes in net working capital during the pre-close period drove unfavorable operating cash flows primarily due to trade and other payables activity in the cost inflationary environment and growth in accounts receivables from increased sales compared to the prior year.
In addition, unfavorable changes in net working capital during the pre-close period in the prior year contributed to the use of cash flows that were primarily due to trade and other payables activity in the cost inflationary environment and growth in accounts receivable from increased sales.
Stores are considered open upon acquisition or opening for business. Temporary store closings remain in the respective store counts with only permanent store closures reflected in the activity and end of period store counts.
Stores are considered open upon acquisition or opening for business. Temporary store closings remain in the respective store counts with only permanent store closures reflected in the activity and end of period store counts. For the periods presented herein, SSS is defined as net revenues of U.S.
FISCAL 2023 OVERVIEW 28 Key operating highlights from continuing operations are presented below, each of which is discussed more fully in this Annual Report on Form 10-K: 17% Growth in Net revenues $247.2 million Operating income from continuing operations 102% Growth in Diluted EPS $2.8 billion System-wide store sales (a) $1.5 billion Returned to shareholders through share repurchases $353.0 million Cash flows from operations 1,852 System-wide stores (a) with 8.0% annual growth 17 years of consecutive system-wide same-store sales growth (b) 20.4% Growth in adjusted EBITDA (c) (a) Measures include Valvoline franchisees, which are independent legal entities.
Valvoline's fiscal year ends on September 30 of each year. 31 FISCAL 2024 OVERVIEW Key operating highlights from continuing operations are presented below, each of which is discussed more fully in this Annual Report on Form 10-K: 12% Growth in Net revenues $367.2 million Operating income from continuing operations 33% Growth in Diluted EPS $3.1 billion System-wide store sales (a) $226.8 million Returned to shareholders through share repurchases $282.9 million Cash flows from operations 2,010 System-wide stores (a) with 8.5% annual growth 18 years of consecutive system-wide same-store sales growth (b) 16.5% Growth in adjusted EBITDA (c) (a) Measures include Valvoline franchisees, which are independent legal entities.
The weighted-average discount rate at the end of fiscal 2023 was 5.98% for the pension plans and 5.98% for the postretirement health and life plans.
The weighted-average discount rate at the end of fiscal 2024 was 4.94% for the pension plans and 4.89% for the postretirement health and life plans.
Additionally, the Company repurchased 4.2 million shares for an aggregate amount of $130.1 million from October 1, 2023 through November 15, 2023 pursuant to the 2022 Share Repurchase Authorization, leaving $81.4 million in aggregate repurchase authority remaining as of November 15, 2023.
Additionally, the Company repurchased 0.2 million shares for an aggregate amount of $9.8 million from October 1, 2024 through November 19, 2024 pursuant to the 2024 Share Repurchase Authorization, leaving $375.0 million in aggregate repurchase authority remaining as of November 19, 2024.
Valvoline does not consolidate the results of operations of its franchisees. (b) Valvoline determines same-store sales (“SSS”) growth as sales by U.S. stores, with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation. (c) Represents a non-GAAP measure.
Valvoline does not consolidate the results of operations of its franchisees. (b) Valvoline currently determines same-store sales growth as sales by U.S. VIOC stores (company-operated, franchised and the combination of these for system-wide same-store sales), with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation.
Total pension and other postretirement net periodic benefit income recognized in fiscal 2023 was $27.6 million, inclusive of a $41.6 million remeasurement gain.
Total pension and other postretirement net periodic benefit income recognized in fiscal 2024 was $11.7 million, inclusive of a $2.4 million remeasurement gain.
Net revenues and Adjusted EBITDA trends have shown a significant increase over the past four fiscal years largely due to strong system-wide SSS growth driven by contributions from increased transactions, average ticket, and non-oil change penetration in addition to acquisitions and overall store growth.
Net revenues and Adjusted EBITDA trends have significantly increased over the past five fiscal years largely driven by strong system-wide same-store sales (“SSS”) growth, which benefited from increased transactions, higher average ticket, and continued non-oil change penetration, in addition to acquisitions and overall store expansion.
The Company operates and franchises more than 1,850 service center locations through its Valvoline Instant Oil Change SM (“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and supports nearly 300 locations through its Express Care TM platform. Valvoline's fiscal year ends on September 30 of each year.
The Company operates and franchises more than 2,000 service center locations through its Valvoline Instant Oil Change SM (“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and supports nearly 270 locations through its Express Care TM platform.
Free cash flow and discretionary free cash flow have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash flows, such as mandatory debt repayments. The non-GAAP measures used by management exclude key items. Key items are often related to legacy matters or market-driven events considered by management to not be reflective of the ongoing operating performance.
Free cash flow and discretionary free cash flow have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash flows, such as mandatory debt repayments. 33 The non-GAAP measures used by management exclude key items.
During fiscal 2023, the Company made $20.8 million in benefit payments for its non-qualified pension and other postretirement plans, consisting of $6.0 million of cash payments. Based on current data and assumptions, the Company does not anticipate the need to satisfy any minimum funding requirements to its qualified pension plans for at least the next 5 years.
Based on current data and assumptions, the Company does not anticipate the need to satisfy any minimum funding requirements to its qualified pension plans for at least the next 5 years.
Net operating expenses Details of the components of Net operating expenses are summarized below for the years ended September 30: 33 Variance (In millions) 2023 2022 $ % Selling, general and administrative expenses $ 264.5 $ 244.7 $ 19.8 8.1 % Net legacy and separation-related expenses 32.8 20.5 12.3 60.0 % Other income, net — (9.1) 9.1 (100.0) % Net operating expenses $ 297.3 $ 256.1 $ 41.2 16.1 % Selling, general and administrative (“SG&A”) expenses increased $19.8 million in the current year.
Net operating expenses Details of the components of Net operating expenses are summarized below for the years ended September 30: 36 Variance (In millions) 2024 2023 $ % Selling, general and administrative expenses $ 305.1 $ 264.5 $ 40.6 15.3 % Net legacy and separation-related (income) expenses (0.7) 32.8 (33.5) (102.1) % Other income, net (52.8) — (52.8) — % Net operating expenses $ 251.6 $ 297.3 $ (45.7) (15.4) % Selling, general and administrative (“SG&A”) expenses increased $40.6 million compared to the prior year period.
Debt The following table summarizes Valvoline’s continuing operations debt as of September 30: (In millions) 2023 2022 2031 Notes $ 535.0 $ 535.0 2030 Notes 600.0 600.0 Term Loan 463.1 460.0 Trade Receivables Facility — 105.0 Debt issuance costs and discounts (12.0) (12.4) Total debt 1,586.1 1,687.6 Current portion of long-term debt 23.8 162.5 Long-term debt $ 1,562.3 $ 1,525.1 Inclusive of the Company’s interest rate swap agreements, approximately 82% of Valvoline's outstanding borrowings as of September 30, 2023 had fixed rates, with the remainder bearing variable interest rates.
The prior year cash flows used in financing activities were due to net repayments on borrowings driven by the extinguishment of the $175 million Trade Receivables Facility. 41 Debt The following table summarizes Valvoline’s continuing operations debt as of September 30: (In millions) 2024 2023 2031 Notes $ 535.0 $ 535.0 2030 Notes — 600.0 Term Loan 439.4 463.1 Revolver 125.0 — Debt issuance costs and discounts (5.6) (12.0) Total debt 1,093.8 1,586.1 Current portion of long-term debt 23.8 23.8 Long-term debt $ 1,070.0 $ 1,562.3 Approximately 49% of Valvoline's outstanding borrowings as of September 30, 2024 had fixed rates, with the remainder bearing variable interest rates.
SSS is defined as net revenues by U.S. stores (company-operated, franchised and the combination of these for system-wide SSS), with new stores, including franchised conversions, excluded from the metric until the completion 31 of their first full fiscal year in operation as this period is generally required for new store sales levels to begin to normalize.
VIOC stores (company-operated, franchised and the combination of these for system-wide SSS), with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation.
Summary Valvoline’s continuing operations had cash and cash equivalents of $409.1 million, short-term investments of $347.5 million, total debt of $1.6 billion, and total remaining borrowing capacity of $471.6 million as of September 30, 2023.
Summary Valvoline’s continuing operations had cash and cash equivalents of $68.3 million, total debt of $1.1 billion, and total remaining borrowing capacity of $346.8 million as of September 30, 2024.
(h) Adjustment associated with the Company’s change in its policy for benefits associated with compensated absences, the results of which are not indicative of the operating performance of the Company’s underlying operations.
(h) Adjustment associated with the Company’s change in its policy for benefits associated with compensated absences, the results of which are not indicative of the operating performance of the Company’s underlying operations. Adjusted EBITDA increased $62.6 million, or 16.5%, for the year ended September 30, 2024 compared to the prior year.
Other intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.
The Company’s amortizable intangible assets were $90.3 million, net of $83.2 million of accumulated amortization as of September 30, 2024. Other intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.
The dividend and share repurchase authorization is part of a broader capital allocation framework to deliver value to shareholders by first driving growth in the business, organically and through acquisitions and franchise development, and then returning excess cash to shareholders through dividends and share repurchases.
The share repurchase authorization is part of a broader capital allocation framework to deliver value to shareholders by first, driving profitable growth in the business, organically and through acquisitions and franchise development; second, to remain within a ratings agency target adjusted EBITDA net leverage ratio of 2.5 to 3.5 times; and third, to continue returning excess capital to shareholders.
In connection with completing separation transactions, both from Valvoline’s former parent company and closing of the sale of Global Products, the parties generally indemnify one another for various tax matters between the businesses that may arise following the transactions.
In connection with completing separation transactions, both from Valvoline’s former parent company and the sale of Global Products, the parties generally indemnify one another for various tax matters between the businesses. Judgment in forecasting taxable income using historical and projected future operating results is required in determining Valvoline’s provision for income taxes and the related assets and liabilities.
Continuing operations cash flows Valvoline’s continuing operations cash flows as reflected in the Consolidated Statements of Cash Flows are summarized as follows for the years ended September 30: (In millions) 2023 2022 Cash provided by (used in): Operating activities $ 353.0 $ 134.4 Investing activities $ (577.2) $ (170.9) Financing activities $ (1,565.5) $ (262.9) Operating activities The increase in cash flows provided by operating activities of $218.6 million was largely driven by higher cash earnings and favorable changes in net working capital, primarily due to timing-related growth in payables and accruals as a result of the sale of Global Products.
Continuing operations cash flows Valvoline’s continuing operations cash flows as reflected in the Consolidated Statements of Cash Flows are summarized as follows for the years ended September 30: (In millions) 2024 2023 Cash provided by (used in): Operating activities $ 282.9 $ 353.0 Investing activities $ 136.8 $ (577.2) Financing activities $ (746.3) $ (1,565.5) Operating activities The decrease in cash flows provided by operating activities of $70.1 million from the prior year was primarily driven by changes in net working capital.
(In millions) 2023 2022 Cash flows provided by operating activities $ 353.0 $ 134.4 Less: Maintenance capital expenditures (29.5) (19.3) Discretionary free cash flow 323.5 115.1 Less: Growth capital expenditures (151.0) (112.7) Free cash flow $ 172.5 $ 2.4 The increase in free cash flow from continuing operations over the prior year was driven by higher cash flow provided by operating activities, partially offset by increased capital expenditures.
(In millions) 2024 2023 Cash flows provided by operating activities $ 282.9 $ 353.0 Less: Maintenance capital expenditures (35.9) (29.5) Discretionary free cash flow 247.0 323.5 Less: Growth capital expenditures (188.5) (151.0) Free cash flow $ 58.5 $ 172.5 The decrease in free cash flow from continuing operations over the prior year was driven primarily by lower cash flows provided by operating activities in the current year as described above.
Refer to the “Key Business Measures” section above for additional details on these key business measures, including management’s definitions. Net revenues Net revenues increased 16.8% over the prior year period due to system-wide SSS growth and store acquisitions.
Refer to the “Key Business Measures” section above for additional details on these key business measures, including management’s definitions. Net revenues Net revenues increased $175.5 million, or 12.2% over the prior year period primarily driven by improvements in volume, mix, and pricing.
These expenses are reflective of incremental costs directly associated with technology transitions and are not considered to be reflective of the ongoing expenses of operating the Company’s technology platforms. (e) Represents the results of a former Global Products business where operations were suspended during fiscal 2022 that were not sold with the Global Products business.
These costs are not considered to be reflective of the underlying performance of the Company’s ongoing continuing operations. (f) Represents the results of a former Global Products business where operations were suspended during fiscal 2022. This business was not included in the sale of the Global Products business in March 2023.
RESULTS OF OPERATIONS The following summarizes the results of the Company’s continuing operations for the years ended September 30: 2023 vs. 2022 (In millions) 2023 2022 $ % Net revenues $ 1,443.5 $ 1,236.1 $ 207.4 16.8 % Gross profit $ 544.5 $ 476.4 $ 68.1 14.3 % Gross profit margin 37.7 % 38.5 % (80) bps Net operating expenses $ 297.3 $ 256.1 $ 41.2 16.1 % Percentage of net revenues 20.6 % 20.7 % (10) bps Operating income $ 247.2 $ 220.3 $ 26.9 12.2 % Operating margin 17.1 % 17.8 % (70) bps Income from continuing operations $ 199.4 $ 109.4 $ 90.0 82.3 % EBITDA (a) $ 363.6 $ 284.8 $ 78.8 27.7 % Adjusted EBITDA (a) $ 380.0 $ 315.7 $ 64.3 20.4 % Adjusted EBITDA margin (a) 26.3 % 25.8 % 50 bps (a) Refer to the “Use of Non-GAAP Measures” and Continuing operations EBITDA and Adjusted EBITDA for management’s definitions of the metrics presented above and reconciliation to the corresponding GAAP measures, where applicable.
Although Valvoline does not recognize store-level sales from franchised stores as net revenues in its Statements of Condensed Consolidated Income, management believes system-wide and franchised SSS comparisons, store counts, and total system-wide store sales are useful to assess market position relative to competitors and overall store and operating performance. 34 RESULTS OF OPERATIONS The following summarizes the results of the Company’s continuing operations for the years ended September 30: 2024 vs. 2023 (In millions) 2024 2023 $ % Net revenues $ 1,619.0 $ 1,443.5 $ 175.5 12.2 % Gross profit $ 618.8 $ 544.5 $ 74.3 13.6 % Gross profit margin 38.2 % 37.7 % 50 bps Net operating expenses $ 251.6 $ 297.3 $ (45.7) (15.4) % Percentage of net revenues 15.5 % 20.6 % (510) bps Operating income $ 367.2 $ 247.2 $ 120.0 48.5 % Operating margin 22.7 % 17.1 % 560 bps Income from continuing operations $ 214.5 $ 199.4 $ 15.1 7.6 % EBITDA (a) $ 461.4 $ 363.6 $ 97.8 26.9 % Adjusted EBITDA (a) $ 442.6 $ 380.0 $ 62.6 16.5 % Adjusted EBITDA margin (a) 27.3 % 26.3 % 100 bps (a) Refer to the “Use of Non-GAAP Measures” and Continuing operations EBITDA and Adjusted EBITDA for management’s definitions of the metrics presented above and reconciliation to the corresponding GAAP measures, where applicable.
The combination of these changes increased cash flows used in investing activities and were partially 38 offset by an increase in proceeds from maturities of short-term investments of $80.0 million and a $14.4 million reduction in current year acquisition activity and related spend.
These year-over-year changes in cash flows from investing activities were partially offset by increased capital expenditures of $43.9 million and an increase in acquisition activity of $16.4 million in the current year to support store growth.
Valvoline delivered system-wide SSS growth of 11.9% compared to the prior year from increased average ticket as a result of pricing actions, increased non-oil change service penetration and premiumization, as well as higher transactions. Year-over-year system-wide store growth of 8.0% also contributed to net revenues and volumes through the addition of 137 net new stores.
System-wide SSS growth increased 6.7% with the majority of the gains coming from ticket growth, driven by higher non-oil change penetration, pricing adjustments, and premiumization while transaction growth accounted for the remaining balance. Year-over-year system-wide store growth of 8.5% also contributed to net revenues and volumes through the addition of 158 net new stores.
Fiscal 2023 marked the 17th consecutive year for system-wide same-store-sales ("SSS") growth and added 137 net new stores to the system.
Fiscal 2024 marked the 18th consecutive year for system-wide SSS growth with 158 net store additions to the system.
Net legacy and separation-related expenses incurred in the current year were primarily related to the increased indemnity obligation of $25.7 million as a result of the amendment of the Tax Matters Agreement and certain legacy tax attributes that are payable to Valvoline’s former parent company upon utilization.
In fiscal 2023, $25.7 million of expense was recognized due to the amendment of the tax matters agreement with Valvoline’s former parent company that resulted in an increased indemnity obligation for the utilization of certain legacy tax attributes.
Net revenues are limited to sales at company-operated stores, in addition to royalties and other fees from independent franchised and Express Care stores.
The new approach will define same stores at the beginning of the month following the completion of 12 full months in operation within the system to more closely conform with common retail practice. Net revenues are limited to sales at company-operated stores, in addition to royalties and other fees from independent franchised and Express Care stores.
The fiscal 2023 gain was primarily attributed to increase in discount rates, partially offset by lower-than-expected returns on plan assets. The loss in fiscal 2022 was primarily driven by lower-than-expected performance of plan assets in the current year remeasurement, which more than offset reduced plan obligations from remeasurement at higher discount rates.
The lower remeasurement gain was primarily attributed to a decline in discount rates, which was moderated by higher actual returns on plan assets in the current year compared to the prior year .
(d) Consists of redundant expenses incurred from duplicative technology platforms required while implementing the Company’s stand-alone enterprise resource planning software system during fiscal 2023 and transitioning its data centers during fiscal 2022.
(d) Consists of expenses incurred related to the Company’s information technology transitions, primarily related to implementing stand-alone enterprise resource planning and human resource information systems during fiscal years 2023 and 2024.
Material cash requirements The Company's material cash requirements for the continuing operations include the following contractual obligations and commitments as of September 30, 2023: (In millions) Total Less than 1 year 1-3 years 3-5 years 5 years and more Long-term debt (a) $ 1,598.1 $ 23.8 $ 47.5 $ 391.8 $ 1,135.0 Interest payments (b) 430.6 71.3 139.1 123.8 96.4 Operating lease obligations 346.7 41.1 77.7 68.1 159.8 Finance lease obligations 283.8 22.5 46.0 46.4 168.9 Employee benefit obligations (c) 77.9 8.3 18.9 17.1 33.6 Total $ 2,737.1 $ 167.0 $ 329.2 $ 647.2 $ 1,593.7 (a) The bonds are classified in the table above based on the current contractual maturity.
Material cash requirements and other commitments The Company's material cash requirements for the continuing operations include the following contractual obligations and commitments as of September 30, 2024: (In millions) Total Less than 1 year 1-3 years 3-5 years 5 years and more Long-term debt $ 1,099.4 $ 23.8 $ 47.5 $ 493.1 $ 535.0 Interest payments (a) 264.7 59.0 112.9 54.0 38.8 Operating lease obligations 403.6 45.9 87.5 77.1 193.1 Finance lease obligations 296.1 24.1 50.1 50.4 171.5 Employee benefit obligations (b) 73.4 7.8 17.7 15.9 32.0 Total $ 2,137.2 $ 160.6 $ 315.7 $ 690.5 $ 970.4 (a) Includes interest expense on both variable and fixed rate debt, assuming no prepayments.
The Tender Offer utilized a substantial portion of the authorization from the Board for the Company to repurchase up to $1.6 billion of its common stock announced on November 15, 2022 (the “2022 Share Repurchase Authorization”), and in combination with other share repurchases made throughout the fiscal year, leaves $211.5 million of authorization remaining as of September 30, 2023.
Share repurchases During the year ended September 30, 2024, the Company repurchased 6.7 million shares of its common stock for a principal amount of $226.7 million, which completed the November 2022 Board authorization to repurchase up to $1.6 billion of its common stock (the “2022 Share Repurchase Authorization”).
Net interest and other financing expenses Net interest and other financing expense decreased $31.0 million during fiscal 2023 compared to the prior year. Interest income of $44.0 million earned on invested net proceeds from the sale of Global Products more than offset modestly higher interest expense due to increased variable-rate borrowings during the fiscal year.
Net interest and other financing expenses Net interest and other financing expense increased $33.6 million during fiscal 2024, primarily due to a $26.9 million decrease in interest income following the maturity of invested net proceeds from the sale of Global Products.
Income from discontinued operations, net of tax Income from discontinued operations, net of tax for the years ended September 30 are as follows: (In millions) 2023 2022 Income from discontinued operations, net of tax $ 1,220.3 $ 314.9 Income from discontinued operations, net of tax increased $905.4 million during fiscal 2023 compared to the prior year.
(Loss) income from discontinued operations, net of tax (Loss) income from discontinued operations, net of tax for the years ended September 30 are as follows: (In millions) 2024 2023 (Loss) income from discontinued operations, net of tax $ (3.0) $ 1,220.3 Earnings from discontinued operations declined $1.223 billion compared to the prior year primarily due to the recognition of an after-tax gain of $1.147 billion from the sale of the Global Products business in the prior year period, along with partial-year results from the underlying business in the pre-closing period.
These items, along with the partial period of operational results due to the sale of the business in the current year, drove the decline in year-over-year operating cash flows for the discontinued operation. 39 Cash flows provided by investing activities of discontinued operations were significantly higher in the current year period due to the aggregate cash consideration received, net of cash transferred to Global Products entities, of $2.634 billion in connection with the completion of the Transaction and sale of the business.
Prior year discontinued operations cash flows provided by investing activities were due to the cash consideration received, net of cash transferred, at the close of the sale of Global Products of $2.6 billion.
Net pension and other postretirement plan (income) expense Net pension and other postretirement plan income increased $34.5 million from the prior year primarily due to the gain on pension and other postretirement plan remeasurement of $41.6 million compared to a loss of $43.9 million in fiscal 2022, partially offset by higher interest costs recognized during the year that more than offset recurring expected returns on plan assets which are lower year-over-year based on a lower risk asset mix and prior year asset returns.
Net pension and other postretirement plan expense (income) Net pension and other postretirement plan income decreased $39.3 million from the prior year, primarily due to a lower current year gain on pension and other postretirement plan remeasurement of $2.4 million compared to a gain of $41.6 million in the prior year.
The following reconciles the year-over-year changes in Net revenues: Gross profit Gross profit improved 14.3% driven by top-line growth from increased average ticket due to pricing actions as well as non-oil change services penetration and premiumization.
The following reconciles the year-over-year changes in Net revenues: 35 Gross profit Gross profit improved 13.6% year-over-year, largely driven by strong top-line growth from higher transaction volumes, increased average ticket, and continued store expansion. These benefits were partially offset by increased store operating costs, including depreciation, as well as higher labor and material expenses.
Other income, net decreased $9.1 million primarily driven by an impairment charges related to suspended operations of $8.1 million and an investment impairment of $1.1 million, as well as an economic incentive of $0.9 million realized in the prior year that did not recur. These unfavorable impacts were partially offset by higher rental income in the current fiscal year.
The prior year also includes impairment charges of $9.2 million related to suspended operations and an investment that did not recur.
The following reconciles the year-over-year changes in Gross profit: The decline in gross profit margin rate compared to the prior year was due to the dilutive impact from passing through cost increases in company store operations, higher product costs, and increased depreciation driven by store growth and investments in new store technology.
The following reconciles the year-over-year changes in gross profit: Gross profit margin rate improved compared to the prior year, driven by increased labor efficiency from effective management, along with lower product costs as a percentage of sales. These benefits were partially offset by business mix and higher depreciation.
These results included an impairment loss of $8.1 million recognized in the fourth quarter of fiscal 2023 upon classifying the suspended operations as held for sale. These results are not indicative of the operating performance of the Company’s ongoing continuing operations. (f) Expense recognized to reduce the carrying value of an investment interest determined to be impaired.
It was classified as held for sale and impaired as of September 30, 2023, and subsequently sold during the first fiscal quarter of 2024. These results are not indicative of the operating performance of the Company’s ongoing continuing operations.
Removed
RECENT DEVELOPMENTS Sale of Global Products business On March 1, 2023, Valvoline completed the sale of its former Global Products reportable segment (“Global Products”) to Aramco Overseas Company B.V. (“Aramco”) for a cash purchase price of $2.650 billion, subject to certain customary adjustments as set forth in the Purchase Agreement (the “Transaction”).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−2 removed4 unchanged
Biggest changeInclusive of the Company's interest rate swap agreements, 82% of the Company’s outstanding borrowings had fixed rates as of September 30, 2023. The increase in interest expense for the year ended September 30, 2023 from a hypothetical 100 basis point increase in variable interest rates would be approximately $2.9 million.
Biggest changeApproximately 49% of the Company’s outstanding borrowings as of September 30, 2024 carried fixed rates. A hypothetical 100 basis point change in variable interest rates would impact the Company’s interest expense and pre-tax earnings by $5.6 million for the year ended September 30, 2024.
Valvoline may not always be able to raise prices in response to increased costs or may experience delays in passing through such costs, as its ability to do so is largely dependent upon market conditions. Interest rate risk The Company is subject to modest interest rate risk in relation to its variable-rate debt.
Valvoline may not always be able to raise prices in response to increased costs or may experience delays in passing through such costs, as its ability to do so is largely dependent upon market conditions. Interest rate risk The Company is subject to interest rate risk in relation to its variable-rate debt.
Exposure to credit risk is managed by selecting highly-rated financial institutions as counterparties to transactions and monitoring procedures. As of September 30, 2023, there was not a significant concentration of credit risk related to financial instruments.
Exposure to credit risk is managed by selecting highly-rated financial institutions as counterparties to transactions and monitoring procedures. As of September 30, 2024, there was not a significant concentration of credit risk related to financial instruments.
Decreases in the fair value of plan assets and discount rates increase net pension and other postretirement plan expense and can also result in requirements to make contributions to the plans. Pension and other postretirement plans were underfunded by $139.4 million at September 30, 2023 as the projected benefit obligation exceeded the fair value of plan assets.
Decreases in the fair value of plan assets and discount rates increase net pension and other postretirement plan expense and can also result in requirements to make contributions to the plans. Pension and other postretirement plans were underfunded by $136.6 million at September 30, 2024 as the projected benefit obligation exceeded the fair value of plan assets.
Credit risk The Company is potentially subject to concentrations of credit risk on financial instruments, such as derivative instruments, cash and cash equivalents and short-term investments. Credit risk includes the risk of nonperformance by counterparties, and the maximum potential loss may exceed the amount recognized within the Consolidated Balance Sheets.
Credit risk The Company is potentially subject to concentrations of credit risk on financial instruments for its cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties, and the maximum potential loss may exceed the amount recognized within the Consolidated Balance Sheets.
Valvoline can mitigate this risk by passing along price increases to its customers; however, the ability to pass on these price increases is largely dependent upon market conditions.
Fiscal 2024, 2023, and 2022 all experienced high rates of inflation and Valvoline mitigates this risk by passing along price increases to its customers; however, the ability to pass on these price increases is largely dependent upon market conditions. Contracts with Valvoline’s independent operators are generally indexed to accommodate changes in material prices.
Currency exchange risk Substantially all of Valvoline’s operations and sales of its continuing operation occur in the U.S., resulting in limited exposure to currency exchange. Valvoline uses derivatives not designated as hedging instruments consisting 47 primarily of forward contracts to hedge certain non-functional currency denominated balance sheet exposures.
Currency exchange risk Substantially all of Valvoline’s business and results of its continuing operations occur within the U.S., resulting in limited exposure to the effects of currency exchange.
Removed
Results were impacted by rising inflationary costs in fiscal 2022 and through the first half of fiscal 2023, a significant portion of which were passed through to customers through a series of price increases. Contracts with Valvoline’s independent operators are generally indexed to accommodate changes in material prices.
Added
The impacts from currency exchange have not been material to Valvoline’s continuing operations, and the Company will continue to monitor its exposure to determine if changes in its business and operations may warrant undertaking strategies to minimize currency exchange risk. 49
Removed
These contracts are recorded within the Consolidated Balance Sheets as assets or liabilities at fair market value. Changes in the fair value of these derivatives are recognized in income to offset the gain or loss on the hedged item. The Company utilizes derivative instruments that are purchased exclusively from highly-rated financial institutions. 48

Other VVV 10-K year-over-year comparisons