10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

______________________

FORM 10-Q

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

For the quarterly period ended March 31, 2021

OR

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

For the transition period from _________ to ___________

Commission file number 001-37884

VALVOLINE INC.

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

100 Valvoline Way

Lexington, Kentucky 40509

Telephone Number (859) 357-7777

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	VVV	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes þ     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

At April 23, 2021, there were 181,077,542 shares of the registrant’s common stock outstanding.

VALVOLINE INC. AND CONSOLIDATED SUBSIDIARIES

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Condensed Consolidated Statements of Comprehensive Income	3
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Stockholders’ Deficit	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 4.   CONTROLS AND PROCEDURES	34
PART II – OTHER INFORMATION
ITEM 1.   LEGAL PROCEEDINGS	36
ITEM 1A. RISK FACTORS	36
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	36
ITEM 6.   EXHIBITS	37
SIGNATURE	38

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

	Three months ended March 31				Six months ended March 31
(In millions, except per share amounts - unaudited)	2021		2020		2021		2020
Sales	$	701	$	578	$	1,354	$	1,185
Cost of sales	454		371		879		767
Gross profit	247		207		475		418
Selling, general and administrative expenses	129		96		246		213
Net legacy and separation-related expenses (income)	—		—		1		(1)
Equity and other income, net	(13)		(6)		(27)		(15)
Operating income	131		117		255		221
Net pension and other postretirement plan income	(14)		(9)		(27)		(18)
Net interest and other financing expenses	55		38		75		54
Income before income taxes	90		88		207		185
Income tax expense	22		25		52		49
Net income	$	68	$	63	$	155	$	136
NET EARNINGS PER SHARE
Basic	$	0.37	$	0.33	$	0.84	$	0.72
Diluted	$	0.37	$	0.33	$	0.84	$	0.72
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	182		188		184		188
Diluted	183		188		184		189
COMPREHENSIVE INCOME
Net income	$	68	$	63	$	155	$	136
Other comprehensive (loss) income, net of tax
Currency translation adjustments	(7)		(21)		11		(13)
Amortization of pension and other postretirement plan prior service credit	(2)		(2)		(4)		(4)
Unrealized gain on cash flow hedges	1		—		1		—
Other comprehensive (loss) income	(8)		(23)		8		(17)
Comprehensive income	$	60	$	40	$	163	$	119

See Notes to Condensed Consolidated Financial Statements.

3

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Balance Sheets

(In millions, except per share amounts - unaudited)	March 31 2021		September 30 2020
Assets
Current assets
Cash and cash equivalents	$	247	$	760
Receivables, net	448		433
Inventories, net	218		199
Prepaid expenses and other current assets	55		46
Total current assets	968		1,438
Noncurrent assets
Property, plant and equipment, net	741		613
Operating lease assets	299		261
Goodwill and intangibles, net	732		529
Equity method investments	45		44
Deferred income taxes	19		34
Other noncurrent assets	117		132
Total noncurrent assets	1,953		1,613
Total assets	$	2,921	$	3,051
Liabilities and Stockholders’ Deficit
Current liabilities
Current portion of long-term debt	$	1	$	—
Trade and other payables	180		189
Accrued expenses and other liabilities	267		255
Total current liabilities	448		444
Noncurrent liabilities
Long-term debt	1,719		1,962
Employee benefit obligations	286		317
Operating lease liabilities	265		231
Other noncurrent liabilities	259		173
Total noncurrent liabilities	2,529		2,683
Commitments and contingencies
Stockholders’ deficit
Preferred stock, no par value, 40 shares authorized; no shares issued and outstanding	—		—
Common stock, par value $0.01 per share, 400 shares authorized; 181 and 185 shares issued and outstanding at March 31, 2021 and September 30, 2020, respectively	2		2
Paid-in capital	29		24
Retained deficit	(103)		(110)
Accumulated other comprehensive income	16		8
Total stockholders’ deficit	(56)		(76)
Total liabilities and stockholders’ deficit	$	2,921	$	3,051

See Notes to Condensed Consolidated Financial Statements.

4

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

	Six months ended March 31, 2021
(In millions, except per share amounts - unaudited)	Common stock			Paid-in capital		Retained deficit		Accumulated other comprehensive income		Totals
	Shares	Amount
Balance at September 30, 2020	185	$	2	$	24	$	(110)	$	8	$	(76)
Net income	—	—		—		87		—		87
Dividends paid, $0.125 per common share	—	—		—		(23)		—		(23)
Stock-based compensation, net of issuances	—	—		1		—		—		1
Repurchases of common stock	(2)	—		—		(58)		—		(58)
Cumulative effect of adoption of new credit losses standard, net of tax	—	—		—		(2)		—		(2)
Other comprehensive income, net of tax	—	—		—		—		16		16
Balance at December 31, 2020	183	$	2	$	25	$	(106)	$	24	$	(55)
Net income	—	—		—		68		—		68
Dividends paid, $0.125 per common share	—	—		—		(23)		—		(23)
Stock-based compensation, net of issuances	—	—		4		—		—		4
Repurchases of common stock	(2)	—		—		(42)		—		(42)
Other comprehensive loss, net of tax	—	—		—		—		(8)		(8)
Balance at March 31, 2021	181	$	2	$	29	$	(103)	$	16	$	(56)
	Six months ended March 31, 2020
(In millions, except per share amounts - unaudited)	Common stock			Paid-in capital		Retained deficit		Accumulated other comprehensive income (loss)		Totals
	Shares	Amount
Balance at September 30, 2019	188	$	2	$	13	$	(284)	$	11	$	(258)
Net income	—	—		—		73		—		73
Dividends paid, $0.113 per common share	—	—		—		(21)		—		(21)
Stock-based compensation, net of issuances	—	—		3		—		—		3
Cumulative effect of adoption of new leasing standard, net of tax	—	—		—		1		—		1
Other comprehensive income, net of tax	—	—		—		—		6		6
Balance at December 31, 2019	188	$	2	$	16	$	(231)	$	17	$	(196)
Net income	—	—		—		63		—		63
Dividends paid, $0.113 per common share	—	—		—		(21)		—		(21)
Repurchases of common stock	(3)	—		—		(60)		—		(60)
Other comprehensive loss, net of tax	—	—		—		—		(23)		(23)
Balance at March 31, 2020	185	$	2	$	16	$	(249)	$	(6)	$	(237)

See Notes to Condensed Consolidated Financial Statements.

5

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Statements of Cash Flows

	Six months ended March 31
(In millions - unaudited)	2021		2020
Cash flows from operating activities
Net income	$	155	$	136
Adjustments to reconcile net income to cash flows from operating activities
Loss on extinguishment of debt	36		19
Depreciation and amortization	44		31
Pension contributions	(4)		(5)
Stock-based compensation expense	6		3
Other, net	2		2
Change in assets and liabilities
Receivables	(14)		44
Inventories	(13)		(20)
Payables and accrued liabilities	4		(40)
Other assets and liabilities	(26)		(16)
Total cash provided by operating activities	190		154
Cash flows from investing activities
Additions to property, plant and equipment	(74)		(57)
Repayments on notes receivable	12		—
Acquisitions of businesses, net of cash acquired	(223)		(11)
Other investing activities, net	9		(3)
Total cash used in investing activities	(276)		(71)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	546		1,132
Repayments on borrowings	(800)		(475)
Premium paid to extinguish debt	(26)		(15)
Repurchases of common stock	(100)		(60)
Cash dividends paid	(46)		(42)
Other financing activities	(5)		(3)
Total cash (used in) provided by financing activities	(431)		537
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	4		(4)
(Decrease) increase in cash, cash equivalents, and restricted cash	(513)		616
Cash, cash equivalents, and restricted cash - beginning of period	761		159
Cash, cash equivalents, and restricted cash - end of period	$	248	$	775

See Notes to Condensed Consolidated Financial Statements.

6

Index to Notes to Condensed Consolidated Financial Statements	Page
Note 1 - Basis of Presentation and Significant Accounting Policies	8
Note 2 - Fair Value Measurements	9
Note 3 - Acquisitions and Divestitures	10
Note 4 - Intangible Assets	11
Note 5 - Debt	12
Note 6 - Income Taxes	14
Note 7 - Employee Benefit Plans	14
Note 8 - Litigation, Claims and Contingencies	14
Note 9 - Earnings Per Share	15
Note 10 - Reportable Segment Information	15
Note 11 - Supplemental Financial Information	17
Note 12 - Subsequent Events	19

7

Valvoline Inc. and Consolidated Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared by Valvoline Inc. (“Valvoline” or the “Company”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Securities and Exchange Commission (“SEC”) regulations for interim financial reporting, which do not include all information and footnote disclosures normally included in annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. In the opinion of management, the assumptions underlying the condensed consolidated financial statements for these interim periods are reasonable, and all adjustments considered necessary for a fair presentation have been made and are of a normal recurring nature unless otherwise disclosed herein. The results for interim periods are not necessarily indicative of those to be expected for the entire year, particularly in light of the novel coronavirus ("COVID-19") global pandemic and its effects.

Valvoline has substantially maintained its operations throughout the COVID-19 pandemic to-date and has continued precautionary measures to protect the Company's employees and customers and manage through the currently known impacts on its business. Given the unprecedented nature of the pandemic, the extent of future impacts cannot be reasonably estimated at this time due to numerous uncertainties, including the duration and severity of the pandemic.

Recent accounting pronouncements

The following standards relevant to Valvoline were either issued or adopted in the current year, or are expected to have a meaningful impact on Valvoline in future periods upon adoption. The Financial Accounting Standards Board ("FASB") issued other accounting guidance during the period that is not currently applicable or expected to have a material impact on Valvoline’s condensed consolidated financial statements, and therefore, is not described below.

Recently adopted

In June 2016, the FASB issued updated guidance that changes the recognition of credit losses from an incurred or probable loss methodology to a current expected credit loss model that results in the immediate recognition of credit losses that are expected to occur over the life of the financial instruments that are within the scope of the guidance, principally trade and other receivables for Valvoline. The new credit loss guidance was adopted on October 1, 2020 using the required modified retrospective approach. Under this approach, the new accounting guidance is applied prospectively from the date of adoption through a cumulative effect adjustment in retained deficit, while prior period financial statements continue to be reported in accordance with the previous guidance. Adoption did not have a material impact on the Company's condensed consolidated financial statements and resulted in a $2 million, net of tax, cumulative effect of accounting change that increased retained deficit and allowances for credit losses.

In connection with and following the adoption of this guidance, Valvoline maintains allowances to estimate expected lifetime credit losses that are based on a broad range of reasonable and supportable information and factors, including the length of time receivables are past due, the financial health of its customers, macroeconomic conditions, and historical collection experience. Refer to Note 11 for additional information regarding the Company's trade and other receivables and its allowances for credit losses.

Issued but not yet adopted

In March 2020, the FASB issued guidance regarding the effects of reference rate reform intended to ease financial reporting burdens as the market transitions from the London Interbank Offered Rate ("LIBOR") and other interbank reference rates to alternative reference rates. The Company has interest rate swap hedging arrangements and long-term debt as described in Notes 2 and 5 to the Condensed Consolidated Financial Statements, respectively, for which existing payments are based on LIBOR. This guidance is available to be adopted through the end of calendar 2022 to simplify the accounting for arrangements modified for the transition to alternative reference rates.

8

The Company expects to adopt this guidance to the extent its arrangements are modified for the underlying reference rate prior to the end of calendar 2022 and does not expect adoption will have a material impact on its condensed consolidated financial statements.

NOTE 2 - FAIR VALUE MEASUREMENTS

The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy:

	As of March 31, 2021
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	13	$	13	$	—	$	—	$	—
Time deposits	74		—		74		—		—
Prepaid expenses and other current assets
Currency derivatives (b)	3		—		3		—		—
Other noncurrent assets
Non-qualified trust funds	13		—		4		—		9
Interest rate swap agreements	2				2
Total assets at fair value	$	105	$	13	$	83	$	—	$	9
Accrued expenses and other liabilities
Currency derivatives (b)	$	2	$	—	$	2	$	—	$	—
Interest rate swap agreements	1		—		1		—		—
Other noncurrent liabilities
Deferred compensation obligations	23		—		—		—		23
Total liabilities at fair value	$	26	$	—	$	3	$	—	$	23
	As of September 30, 2020
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	296	$	296	$	—	$	—	$	—
Time deposits	139		—		139		—		—
Prepaid expenses and other current assets
Currency derivatives (b)	3		—		3		—		—
Other noncurrent assets
Non-qualified trust funds	16		—		8		—		8
Total assets at fair value	$	454	$	296	$	150	$	—	$	8
Accrued expenses and other liabilities
Currency derivatives (b)	$	2	$	—	$	2	$	—	$	—
Interest rate swap agreements	1		—		1		—		—
Other noncurrent liabilities
Deferred compensation obligations	25		—		—		—		25
Total liabilities at fair value	$	28	$	—	$	3	$	—	$	25

9

(a)Funds measured at fair value using the net asset value ("NAV") per share practical expedient have not been classified in the fair value hierarchy.

(b)The Company had outstanding contracts with notional values of $173 million and $149 million as of March 31, 2021 and September 30, 2020, respectively.

There were no material gains or losses recognized in earnings for the three and six months ended March 31, 2021 or 2020 related to these assets and liabilities.

Long-term debt

The fair values of the Company’s outstanding fixed rate senior notes shown in the table below are based on recent trading values, which are considered Level 2 inputs within the fair value hierarchy. Long-term debt is included in the Condensed Consolidated Balance Sheets at carrying value, rather than fair value, and is therefore excluded from the fair value table above. Carrying values shown in the following table are net of unamortized discounts and issuance costs.

	March 31, 2021						September 30, 2020
(In millions)	Fair value		Carrying value		Unamortized discounts and issuance costs		Fair value		Carrying value		Unamortized discounts and issuance costs
2025 Notes	$	—	$	—	$	—	$	827	$	790	$	(10)
2030 Notes	613		593		(7)		613		592		(8)
2031 Notes	519		528		(7)		—		—		—
Total	$	1,132	$	1,121	$	(14)	$	1,440	$	1,382	$	(18)

Refer to Note 5 for more information on Valvoline’s other debt instruments that have variable interest rates, and accordingly, their carrying amounts approximate fair value.

NOTE 3 - ACQUISITIONS AND DIVESTITURES

Retail store acquisitions

The Company acquired 100 service center stores in single and multi-store transactions for an aggregate purchase price of $223 million during the six months ended March 31, 2021. These acquisitions expand Valvoline's retail presence in key North American and international markets, increase the Quick Lubes system to more than 650 company-operated and 1,500 system-wide service center stores, and included:

•Fourteen company-operated service center stores in Texas acquired from Kent Lubrication Centers Ltd. (doing business as Avis Lube) on October 1, 2020;

•Twenty-one former franchise locations converted to company-operated service center stores in Kansas and Missouri acquired from Westco Lube, Inc. on October 15, 2020;

•Twelve company-operated service center stores in Idaho acquired from L&F Enterprises (doing business as Einstein's Oilery) on October 30, 2020;

•Twenty-seven Mister Oil Change Express® locations (15 company-operated and 12 franchise-operated) across seven states acquired from Car Wash Partners, Inc. on December 11, 2020;

•Seven former franchise and 14 former joint venture locations converted to company-operated service center stores acquired in single and multi-store transactions; and

•Five company-operated service center stores acquired in single store transactions.

During the six months ended March 31, 2020, the Company acquired 14 service center stores in single and multi-store transactions, including six former franchise locations, for a total of $11 million.

The Company’s acquisitions are accounted for as business combinations. A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the six months ended March 31:

10

(In millions)	2021		2020
Inventories	$	2	$	—
Other current assets	1		—
Property, plant and equipment (a)	82		1
Operating lease assets	26		—
Goodwill (b)	180		5
Intangible assets (c)
Reacquired franchise rights (d)	34		5
Other	3		—
Other current liabilities (a)	(7)		—
Operating lease liabilities	(24)		—
Other noncurrent liabilities (a)	(74)		—
Net assets acquired	$	223	$	11

(a)Includes $73 million of finance lease assets in property, plant and equipment and finance lease liabilities of $3 million and $70 million in other current and noncurrent liabilities, respectively, for leases acquired during the six months ended March 31, 2021.

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

(c)Intangible assets acquired during the six months ended March 31, 2021 and 2020 have weighted average amortization periods of 11 and nine years, respectively.

(d)Prior to the acquisition of former franchise service center stores, Valvoline licensed the right to operate franchised quick lube service centers, including use of the Company’s trademarks and trade name. In connection with these acquisitions, Valvoline reacquired those rights and recognized separate definite-lived reacquired franchise rights intangible assets, which are being amortized on a straight-line basis over the weighted average remaining term of approximately 11 years for the rights reacquired in fiscal 2021. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market.

The fair values above are preliminary for up to one year from the date of acquisition as they may be subject to measurement period adjustments if new information is obtained about facts and circumstances that existed as of the acquisition date. The Company does not currently expect any material changes to the preliminary purchase price allocations for acquisitions completed during the last twelve months.

NOTE 4 - INTANGIBLE ASSETS

Goodwill

The following table summarizes changes in the carrying amount of goodwill by reportable segment and in total during the six months ended March 31, 2021:

(In millions)	Quick Lubes		Core North America		International		Total
Balance at September 30, 2020	$	316	$	89	$	40	$	445
Acquisitions (a)	178		—		2		180
Dispositions (b)	(10)		—		—		(10)
Currency translation	2		—		—		2
Balance at March 31, 2021	$	486	$	89	$	42	$	617

(a)Includes acquisitions within the Quick Lubes reportable segment of 86 service center stores and a former joint venture in the International reportable segment. Refer to Note 3 for additional details.

(b)Derecognition of goodwill associated with the sale of 12 company-owned, franchise-operated service center stores to franchisees.

Other intangible assets

Valvoline’s purchased intangible assets were specifically identified when acquired, have finite lives, and are reported in Goodwill and intangibles, net within the Condensed Consolidated Balance Sheets. The following summarizes the gross carrying amounts and accumulated amortization of the Company’s intangible assets:

11

(In millions)	March 31, 2021						September 30, 2020
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Definite-lived intangible assets
Trademarks and trade names	$	31	$	(7)	$	24	$	30	$	(6)	$	24
Reacquired franchise rights	91		(18)		73		57		(14)		43
Customer relationships	22		(8)		14		22		(7)		15
Other intangible assets	6		(2)		4		3		(1)		2
Total definite-lived intangible assets	$	150	$	(35)	$	115	$	112	$	(28)	$	84

The table that follows summarizes amortization expense (actual and estimated) for intangible assets, assuming no additional amortizable intangible assets:

	Actual		Estimated
	Six months ended March 31		Years ended September 30
(In millions)	2021		2021		2022		2023		2024		2025
Amortization expense	$	7	$	15	$	14	$	14	$	13	$	11

NOTE 5 - DEBT

The following table summarizes Valvoline’s total debt as of:

(In millions)	March 31 2021		September 30 2020
2031 Notes	$	535	$	—
2030 Notes	600		600
2025 Notes	—		800
Term Loan	475		475
Trade Receivables Facility	88		88
China Construction Facility	37		18
Debt issuance costs and discounts	(15)		(19)
Total debt	1,720		1,962
Current portion of long-term debt	1		—
Long-term debt	$	1,719	$	1,962

Senior Notes

The Company's outstanding fixed rate senior notes as of March 31, 2021 consist of 3.625% senior unsecured notes due 2031 with an aggregate principal amount of $535 million (the “2031 Notes") and 4.250% senior unsecured notes due 2030 with an aggregate principal amount of $600 million (the "2030 Notes," and collectively with the 2031 Notes, the "Senior Notes").

In January 2021, Valvoline issued the 2031 Notes in a private offering for net proceeds of $528 million (after deducting initial purchasers’ discounts and debt issuance costs). The net proceeds, along with cash and cash equivalents on hand, were used to redeem in full Valvoline's 4.375% senior unsecured notes due 2025 with an aggregate principal amount of $800 million (the “2025 Notes"), plus an early redemption premium of $26 million, accrued and unpaid interest, as well as related fees and expenses for an aggregate redemption price of approximately $840 million. A loss on extinguishment of the 2025 Notes of $36 million was recognized in Net interest and other financing expenses in the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2021, comprised of the early redemption premium and the write-off of related unamortized debt issuance costs and discounts.

12

The 2031 Notes are subject to customary events of default for similar debt securities, which if triggered may accelerate payment of principal, premium, if any, and accrued but unpaid interest. Such events of default include non-payment of principal and interest, non-performance of covenants and obligations, default on other material debt, and bankruptcy or insolvency. If a change of control repurchase event occurs, Valvoline may be required to offer to purchase the 2031 Notes from the holders thereof. The 2031 Notes are not otherwise required to be repaid prior to maturity, although they may be redeemed at the option of Valvoline at any time prior to their maturity in the manner specified in the governing indenture.

Senior Credit Agreement

As of March 31, 2021 and September 30, 2020, the term loan facility (the “Term Loan”) had an outstanding principal balance of $475 million, and there were no amounts outstanding under the $475 million revolving credit facility (the "Revolver"), both of which are senior secured credit facilities provided under the senior credit agreement (the “Senior Credit Agreement”). As of March 31, 2021, the total borrowing capacity remaining under the Revolver was $470 million due to a reduction of $5 million for letters of credit outstanding.

As of March 31, 2021, Valvoline was in compliance with all covenants under the Senior Credit Agreement.

Trade Receivables Facility

The $175 million trade receivables securitization facility (the "Trade Receivables Facility") had an outstanding balance of $88 million as of March 31, 2021 and September 30, 2020. The financing subsidiary owned $246 million and $267 million of outstanding accounts receivable as of March 31, 2021 and September 30, 2020, respectively, which are included in Receivables, net in the Company’s Condensed Consolidated Balance Sheets.

On April 27, 2021, Valvoline amended the Trade Receivables Facility to extend its maturity to April 2024 and modify the eligibility requirements for certain receivables, which had the effect of increasing the Company’s remaining borrowing capacity to $87 million as of March 31, 2021. The amendment also reduces the minimum required borrowing to the lesser of (i) 33 percent of the total facility limit or (ii) the borrowing base from the availability of eligible receivables, in addition to permitting up to a 30 consecutive day annual exemption from this requirement. Other relevant terms and conditions of Trade Receivables Facility were substantially unchanged under this amendment.

China Construction Facility

During the six months ended March 31, 2021, Valvoline borrowed $18 million under its $40 million credit agreement to finance capital expenditures associated with the preparation of the blending and packaging plant in China for production at capacity (the "China Construction Facility"). The China Construction Facility had approximately $37 million and $18 million outstanding as of March 31, 2021 and September 30, 2020, respectively. The remaining borrowing capacity under the China Construction Facility was approximately $3 million as of March 31, 2021.

China Working Capital Facility

On November 16, 2020, the Company entered into a one-year revolving credit facility of approximately $23 million to finance working capital needs for the blending and packaging plant in China (the “China Working Capital Facility”). Borrowings will bear interest at the local prime rate less the applicable interest rate margin with interest due monthly and repayment of borrowings due at maturity. As of March 31, 2021, the China Working Capital Facility had no outstanding borrowings, leaving its full borrowing capacity of approximately $23 million remaining.

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NOTE 6 – INCOME TAXES

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

	Three months ended						Six months ended
	March 31						March 31
(In millions)	2021			2020			2021			2020
Income tax expense	$	22		$	25		$	52		$	49
Effective tax rate percentage	24.4		%	28.4		%	25.1		%	26.5		%

The decreases in effective tax rates for the three and six months ended March 31, 2021 were principally driven by tax reform legislation enacted in the prior year, which resulted in lower current year taxes and unfavorable discrete activity in the prior year periods. Higher pre-tax earnings in the six months ended March 31, 2021 more than offset these benefits resulting in an increase in tax expense for the current year-to-date period.

From a combination of statute expirations and anticipated audit settlements in the next twelve months, Valvoline currently estimates a decrease in the range of $25 million to $35 million in indemnity obligations due to the Company's former parent, which is expected to include certain unrecognized tax benefits.

NOTE 7 – EMPLOYEE BENEFIT PLANS

The following table summarizes the components of pension and other postretirement benefit income:

					Other postretirement benefits
	Pension benefits
(In millions)	2021		2020		2021		2020
Three months ended March 31
Service cost	$	—	$	—	$	—	$	—
Interest cost	11		15		—		1
Expected return on plan assets	(21)		(22)		—		—
Amortization of prior service credit	—		—		(4)		(3)
Net periodic benefit income	$	(10)	$	(7)	$	(4)	$	(2)
Six months ended March 31
Service cost	$	1	$	1	$	—	$	—
Interest cost	22		31		—		1
Expected return on plan assets	(43)		(44)		—		—
Amortization of prior service credit	—		—		(6)		(6)
Net periodic benefit income	$	(20)	$	(12)	$	(6)	$	(5)

NOTE 8 – LITIGATION, CLAIMS AND CONTINGENCIES

From time to time, Valvoline is party to lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company establishes liabilities for the outcome of such matters where losses are determined to be probable and reasonably estimable. Where appropriate, the Company has recorded liabilities with respect to these matters, which were not material for the periods presented as reflected in the condensed consolidated financial statements herein. There are certain claims and legal proceedings pending where loss is not determined to be probable or reasonably estimable, and therefore, accruals have not been made. In addition, Valvoline discloses matters when management believes a material loss is at least reasonably possible.

In all instances, management has assessed each matter based on current information available and made a judgment concerning its potential outcome, giving due consideration to the amount and nature of the claim and the

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probability of success. The Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable.

Although the ultimate resolution of these matters cannot be predicted with certainty and there can be no assurances that the actual amounts required to satisfy liabilities from these matters will not exceed the amounts reflected in the condensed consolidated financial statements, based on information available at this time, it is the opinion of management that such pending claims or proceedings will not have a material adverse effect on its condensed consolidated financial statements.

NOTE 9 - EARNINGS PER SHARE

The following table summarizes basic and diluted earnings per share:

	Three months ended				Six months ended
	March 31				March 31
(In millions, except per share amounts)	2021		2020		2021		2020
Numerator
Net income	$	68	$	63	$	155	$	136
Denominator
Weighted average common shares outstanding	182		188		184		188
Effect of potentially dilutive securities (a)	1		—		—		1
Weighted average diluted shares outstanding	183		188		184		189
Earnings per share
Basic	$	0.37	$	0.33	$	0.84	$	0.72
Diluted	$	0.37	$	0.33	$	0.84	$	0.72

(a)During the three and six months ended March 31, 2020, there were approximately 1 million outstanding securities, primarily stock appreciation rights, not included in the computation of diluted earnings per share because the effect would have been antidilutive.

NOTE 10 - REPORTABLE SEGMENT INFORMATION

Valvoline manages and reports within the following three segments:

•Quick Lubes services the passenger car and light truck quick lube market in the United States and Canada through company-operated and independent franchised retail quick lube service center stores and independent Express Care stores that service vehicles with Valvoline products.

•Core North America sells engine and automotive maintenance products in the United States and Canada to retailers, installers, and heavy-duty customers to service vehicles and equipment.

•International sells engine and automotive maintenance products in more than 140 countries outside of the United States and Canada for the maintenance of consumer and commercial vehicles and equipment.

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker in assessing segment performance and in allocating resources. Sales and operating income are the primary U.S. GAAP measures evaluated in assessing each reportable segment’s financial performance. Operating income by segment includes the allocation of shared corporate costs, which are allocated consistently based on each segment’s proportional contribution to various financial measures. Intersegment sales are not material, and assets are not allocated and included in the assessment of segment performance; consequently, these items are not disclosed by segment herein.

To maintain operating focus on business performance, certain corporate and non-operational items, including adjustments related to legacy businesses that no longer are attributed to Valvoline, are excluded from the segment operating results utilized by the chief operating decision maker in evaluating segment performance and are

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separately delineated within Unallocated and other to reconcile to total reported Operating income as shown in the table below.

Segment financial results

The following table presents sales and operating income for each reportable segment:

(In millions)	Three months ended				Six months ended
	March 31				March 31
	2021		2020		2021		2020
Sales
Quick Lubes	$	285	$	212	$	539	$	430
Core North America	242		238		477		486
International	174		128		338		269
Consolidated sales	$	701	$	578	$	1,354	$	1,185
Operating income
Quick Lubes	$	63	$	40	$	106	$	78
Core North America	38		47		85		93
International	28		18		62		38
Total operating segments	129		105		253		209
Unallocated and other (a)	2		12		2		12
Consolidated operating income	$	131	$	117	$	255	$	221

(a)Unallocated and other includes net legacy and separation-related activity and certain other corporate matters not allocated to the reportable segments.

Disaggregation of revenue

The following table summarizes sales by primary customer channel for the Company’s reportable segments:

	Three months ended				Six months ended
	March 31				March 31
(In millions)	2021		2020		2021		2020
Quick Lubes
Company operations	$	204	$	140	$	382	$	282
Non-company operations	81		72		157		148
Total Quick Lubes	285		212		539		430
Core North America
Retail	142		133		277		270
Installer and other	100		105		200		216
Total Core North America	242		238		477		486
International	174		128		338		269
Consolidated sales	$	701	$	578	$	1,354	$	1,185

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Sales by reportable segment disaggregated by geographic market follows:

	Quick Lubes				Core North America				International				Total
(In millions)	2021		2020		2021		2020		2021		2020		2021		2020
Three months ended March 31
North America (a)	$	285	$	212	$	242	$	238	$	—	$	—	$	527	$	450
Europe, Middle East and Africa ("EMEA")	—		—		—		—		54		44		54		44
Asia Pacific	—		—		—		—		88		58		88		58
Latin America (a)	—		—		—		—		32		26		32		26
Totals	$	285	$	212	$	242	$	238	$	174	$	128	$	701	$	578
Six months ended March 31
North America (a)	$	539	$	430	$	477	$	486	$	—	$	—	$	1,016	$	916
EMEA	—		—		—		—		105		91		105		91
Asia Pacific	—		—		—		—		171		128		171		128
Latin America (a)	—		—		—		—		62		50		62		50
Totals	$	539	$	430	$	477	$	486	$	338	$	269	$	1,354	$	1,185

(a)Valvoline includes the United States and Canada in its North America region. Mexico is included within the Latin America region.

NOTE 11 - SUPPLEMENTAL FINANCIAL INFORMATION

Cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statements of Cash Flows to the Condensed Consolidated Balance Sheets:

(In millions)	March 31 2021		September 30 2020		March 31 2020
Cash and cash equivalents	$	247	$	760	$	774
Restricted cash (a)	1		1		1
Total cash, cash equivalents and restricted cash	$	248	$	761	$	775

(a)Included in Prepaid expenses and other current assets within the Condensed Consolidated Balance Sheets.

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Accounts and other receivables

The following table summarizes Valvoline’s accounts and other receivables in the Condensed Consolidated Balance Sheets:

(In millions)	March 31 2021		September 30 2020
Current
Trade	$	426	$	409
Other	16		14
Notes receivable from franchisees (a)	10		13
Receivables, gross	452		436
Allowance for credit losses	(4)		(3)
Receivables, net	$	448	$	433
Non-current (b)
Notes receivable from franchisees (a)	$	5	$	13
Other notes receivable	3		8
Noncurrent notes receivable, gross	8		21
Allowance for losses	(3)		(4)
Noncurrent notes receivable, net	$	5	$	17

(a)Notes receivable from franchisees were primarily issued in fiscal 2020 to provide financial assistance in response to the COVID-19 pandemic. No material balances were past due as of March 31, 2021.

(b)Included in Other noncurrent assets within the Condensed Consolidated Balance Sheets.

Inventories

Inventories are primarily carried at the lower of cost or net realizable value using the weighted average cost method. In addition, certain lubricants are valued at the lower of cost or market using the last-in, first-out ("LIFO") method.

The following table summarizes Valvoline’s inventories in the Condensed Consolidated Balance Sheets:

(In millions)	March 31 2021		September 30 2020
Finished products	$	216	$	195
Raw materials, supplies and work in process	37		30
Reserve for LIFO cost valuation	(35)		(26)
Total inventories, net	$	218	$	199

Revenue recognition

The following table disaggregates the Company’s sales by timing of recognition:

	Three months ended				Six months ended
	March 31				March 31
(In millions)	2021		2020		2021		2020
Sales at a point in time	$	689	$	569	$	1,331	$	1,165
Franchised revenues transferred over time	12		9		23		20
Total consolidated sales	$	701	$	578	$	1,354	$	1,185

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NOTE 12 – SUBSEQUENT EVENTS

Dividend declared

On April 22, 2021, the Board of Directors of Valvoline declared a quarterly cash dividend of $0.125 per share of Valvoline common stock. The dividend is payable on June 15, 2021 to shareholders of record on May 28, 2021.

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FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, including estimates, projections, and statements related to the Company’s business plans and operating results, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Valvoline has identified some of these forward-looking statements with words such as “anticipates,” “believes,” “expects,” “estimates,” “is likely,” “predicts,” “projects,” “forecasts,” “may,” “will,” “should,” and “intends” and the negative of these words or other comparable terminology. These forward-looking statements are based on Valvoline’s current expectations, estimates, projections, and assumptions as of the date such statements are made and are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures about Market Risk” in this Quarterly Report on Form 10-Q and Valvoline’s most recently filed periodic report on Form 10-K. Valvoline assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, unless required by law.

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page
Business Overview	20
Results of Operations - Consolidated Review	24
Results of Operations - Reportable Segment Review	27
Financial Position, Liquidity and Capital Resources	31
New Accounting Pronouncements	34
Critical Accounting Policies and Estimates	34

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

The following discussion and analysis should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended September 30, 2020, as well as the condensed consolidated financial statements and the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q.

BUSINESS OVERVIEW

Valvoline is a worldwide marketer and supplier of engine and automotive maintenance products and services. Established in 1866, Valvoline’s heritage spans over 150 years, during which it has developed powerful recognition across multiple product and service channels. In addition to the iconic Valvoline-branded passenger car motor oils and other automotive lubricant products, Valvoline provides a wide array of lubricants used in heavy duty equipment, as well as automotive chemicals and fluids designed to improve engine performance and lifespan. Valvoline’s premium branded product offerings enhance its high-quality reputation and provide customers with solutions that address a wide variety of needs.

In the United States and Canada, Valvoline’s products and services are sold through more than 1,500 company-operated and franchised quick lube service center stores, to retailers with over 55,000 retail outlets, and to installer customers with approximately 15,000 locations. Valvoline also has a strong international presence with products sold in more than 140 countries. Valvoline serves its global customer base through its sales force and technical support organization and leverages technology, global customer relationships, and its diverse supply chain network to meet customer demands locally. This combination of scale and strong local presence is critical to the Company’s success.

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

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BUSINESS STRATEGY

Valvoline is focused on the following key business and growth strategies in fiscal 2021:

•Aggressively growing Quick Lubes through organic service center expansion and opportunistic acquisitions, while rapidly diversifying and expanding retail service offerings and capabilities through a quick, easy and trusted customer experience delivered by hands-on experts;

•Strengthening and maintaining the foundation in Core North America by leveraging investments in technology and marketing to drive speed, efficiency and value across the business and customer interactions, while increasing penetration of Valvoline’s full product portfolio;

•Accelerating International market share growth through continued development of and investment in key emerging and high value markets;

•Expanding capabilities to serve future transport vehicles by continuing to develop relationships with electric vehicle original equipment manufacturers and leveraging innovation in the delivery of future services and products in direct and adjacent markets; and

•Building a strong foundation enabled by data and technology to make Valvoline easy to do business with.

RECENT DEVELOPMENTS

Though COVID-19 remains a headwind to miles driven, Valvoline's business has been able to substantially maintain its operations to-date and demonstrated solid performance while managing through the effects of the global pandemic. Management is unable to quantify the impact of COVID-19 on its current results due to their breadth and variability given the current stage and duration of the pandemic.

The COVID-19 pandemic has continued to evolve and its future impact on Valvoline will depend on a number of factors, including and among others, the ultimate duration and severity of the pandemic and the success of vaccinations and restrictive measures on containing the spread and resurgences of the virus. While the Company cannot predict the duration or the scale of the COVID-19 pandemic, or the effect it may continue to have on Valvoline's business, results of operations, or liquidity, management continuously monitors the situation, the sufficiency of its responses, and makes adjustments as needed.

SECOND FISCAL QUARTER 2021 OVERVIEW

The following were the significant events for the second fiscal quarter of 2021, each of which is discussed more fully in this Quarterly Report on Form 10-Q:

•Valvoline reported net income of $68 million and diluted earnings per share of $0.37 in the three months ended March 31, 2021, an increase of 8% and 12%, respectively, over the prior year.

•Quick Lubes operating income grew 58% over the prior year period driven by record system-wide same-store-sales growth of 20.2%, the addition of 129 net new stores to the system from the prior year, as well as improved margins.

•Core North America operating income decreased 19% over the prior year period primarily attributable to price cost lag due to rising raw material cost impacts, including an unfavorable LIFO inventory charge.

•International operating income increased 56% over the prior year period driven by broad-based volume growth and strong performance from unconsolidated joint ventures.

•The Company completed the issuance of the 3.625% 2031 Notes with an aggregate principal amount of $535 million and used the net proceeds, together with $312 million in cash and cash equivalents on hand, to redeem its 4.375% 2025 Notes with an aggregate principal amount of $800 million and pay related expenses and fees.

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•During the second fiscal quarter of 2021, the Company paid a $0.125 per share cash dividend and repurchased nearly 2 million shares of Valvoline common stock for $42 million.

Use of Non-GAAP Measures

To aid in the understanding of Valvoline’s ongoing business performance, certain items within this document are presented on an adjusted, non-GAAP basis. These non-GAAP measures are not defined within U.S. GAAP and do not purport to be alternatives to net income/loss or cash flows from operating activities as measures of operating performance or cash flows. The following are the non-GAAP measures management has included and how management defines them:

•EBITDA, which management defines as net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization;

•Adjusted EBITDA, which management defines as EBITDA adjusted for key items, as further described below, and net pension and other postretirement plan expense/income; and

•Free cash flow, which management defines as operating cash flows less capital expenditures and certain other adjustments as applicable.

These measures are not prepared in accordance with U.S. GAAP and management believes the use of non-GAAP measures assists investors in understanding the ongoing operating performance of Valvoline’s business by presenting comparable financial results between periods. The non-GAAP information provided is used by Valvoline’s management and may not be comparable to similar measures disclosed by other companies, because of differing methods used by other companies in calculating EBITDA, Adjusted EBITDA and free cash flow. EBITDA, Adjusted EBITDA, and free cash flow provide a supplemental presentation of Valvoline’s operating performance. For a reconciliation of non-GAAP measures, refer to the “Results of Operations” and “Financial Position, Liquidity and Capital Resources” sections below.

Due to depreciable assets associated with the nature of the Company’s operations and interest costs related to Valvoline’s capital structure, management believes EBITDA is an important supplemental measure to evaluate the Company’s operating results between periods on a comparable basis.

Management believes Adjusted EBITDA provides investors with a meaningful supplemental presentation of Valvoline’s operating performance. Adjusted EBITDA excludes the impact of the following:

•Key items - Key items consist of income or expenses associated with certain unusual, infrequent or non-operational income or expenses not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods. Key items may consist of adjustments related to: the impairment of an equity investment; legacy businesses, including the separation from Valvoline's former parent company and associated impacts of related indemnities; significant acquisitions or divestitures; restructuring-related matters; and other matters that are non-operational or unusual in nature. Key items are considered by management to be outside the comparable operational performance of the business and are also often related to legacy matters or market-driven events that are not directly related to the underlying business and do not have an immediate, corresponding impact on the Company’s ongoing performance. Details with respect to the composition of key items recognized during the respective periods presented herein are set forth below in the “EBITDA and Adjusted EBITDA” section of “Results of Operations” that follows.

•Net pension and other postretirement plan expense/income - Net pension and other postretirement plan expense/income includes several elements impacted by changes in plan assets and obligations that are primarily driven by changes in the debt and equity markets, as well as those that are predominantly legacy in nature and related to prior service to the Company from employees (e.g., retirees, former employees, current employees with frozen benefits). These elements include (i) interest cost, (ii) expected return on plan assets, (iii) actuarial gains/losses, and (iv) amortization of prior service cost/credit. Significant factors that can contribute to changes in these elements include changes in discount rates used to remeasure pension and other postretirement obligations on an annual basis or upon a qualifying remeasurement, differences between actual and expected returns on plan assets, and other changes in actuarial assumptions, such as the life expectancy of plan participants. Accordingly, management considers that

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these elements are more reflective of changes in current conditions in global financial markets (in particular, interest rates) and are outside the operational performance of the business and are also primarily legacy amounts that are not directly related to the underlying business and do not have an immediate, corresponding impact on the compensation and benefits provided to eligible employees for current service. Adjusted EBITDA will continue to include pension and other postretirement service costs related to current employee service as well as the costs of other benefits provided to employees for current service.

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

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

Key Business Measures

Valvoline tracks its operating performance and manages its business using certain key measures, including system-wide, company-operated and franchised store counts and same-store sales; lubricant volumes sold by unconsolidated joint ventures; and total lubricant volumes sold and percentage of premium lubricants sold. Management believes these measures are useful to evaluating and understanding Valvoline’s operating performance and should be considered as supplements to, not substitutes for, Valvoline's sales and operating income, as determined in accordance with U.S. GAAP.

Sales in the Quick Lubes reportable segment are influenced by the number of service center stores and the business performance of those stores. Stores are considered open upon acquisition or opening for business. Temporary store closings remain in the respective store counts with only permanent store closures reflected in the end of period store counts and activity. Same-store-sales ("SSS") is defined as sales by U.S. Quick Lubes service center stores (company-operated, franchised and the combination of these for system-wide SSS), with new stores including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation as this period is generally required for new store sales levels to begin to normalize. Differences in SSS are calculated to determine the percentage change between comparative periods. Quick Lubes revenue is limited to sales at company-operated stores, sales of lubricants and other products to independent franchisees and Express Care operators, and royalties and other fees from franchised stores. Although Valvoline does not recognize store-level sales from franchised stores as revenue in its Condensed Consolidated Statements of Comprehensive Income, management believes system-wide and franchised SSS comparisons and store counts are useful to assess the operating performance of the Quick Lube reportable segment and the operating performance of an average Quick Lubes store.

Lubricant volumes sold by unconsolidated joint ventures are used to measure the operating performance of the International operating segment. Valvoline does not record lubricant sales from unconsolidated joint ventures as International reportable segment revenue. International revenue is limited to sales by Valvoline's consolidated affiliates. Although Valvoline does not record sales by unconsolidated joint ventures as revenue in its Condensed Consolidated Statements of Comprehensive Income, management believes lubricant volumes including and sold by unconsolidated joint ventures is useful to assess the operating performance of its investments in joint ventures.

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Management also evaluates lubricant volumes sold in gallons by each of its reportable segments and premium lubricant percentage, defined as premium lubricant gallons sold as a percentage of segment U.S. branded lubricant volumes for the Quick Lubes and Core North America segments and as a percentage of total segment lubricant volume for the International segment. Premium lubricant products generally provide a higher contribution to segment profitability and the percentage of premium volumes is useful to evaluating and understanding Valvoline’s operating performance.

RESULTS OF OPERATIONS

Consolidated review

The following table summarizes the results of the Company’s operations:

	Three months ended March 31						Six months ended March 31
	2021			2020			2021			2020
(In millions)			% of Sales			% of Sales			% of Sales			% of Sales
Sales	$	701	100.0%	$	578	100.0%	$	1,354	100.0%	$	1,185	100.0%
Gross profit	$	247	35.2%	$	207	35.8%	$	475	35.1%	$	418	35.3%
Net operating expenses	$	116	16.5%	$	90	15.6%	$	220	16.2%	$	197	16.6%
Operating income	$	131	18.7%	$	117	20.2%	$	255	18.8%	$	221	18.6%
Net income	$	68	9.7%	$	63	10.9%	$	155	11.4%	$	136	11.5%

Sales

Sales for the three months ended March 31, 2021 increased $123 million, or 21%, compared to the prior year period. Sales for the six months ended March 31, 2021 increased $169 million, or 14%, compared to the six months ended March 31, 2020. The following table provides a reconciliation of the changes:

	Year over year change		Year over year change
(In millions)	Three months ended March 31, 2021		Six months ended March 31, 2021
Volume and mix	$	67	$	92
Price	26		31
Currency exchange	12		17
Acquisitions	18		29
Change in sales	$	123	$	169

The increases in sales for the three and six months ended March 31, 2021, compared to the period year periods were primarily driven by growth in the Quick Lubes and International reportable segments. Volumes and sales across all reportable segments increased from benefits of an improved macro environment, including stimulus and broader economic reopening, where the prior year was impacted unfavorably by the onset of the COVID-19 pandemic later in the quarter. For the three and six months ended March 31, 2021, lubricant gallons sold increased 15% to 48.0 million and 10% to 93.7 million, respectively. In addition, benefits from pricing, mix, acquisitions and favorable currency exchange contributed to increases in sales in the three and six months ended March 31, 2021.

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

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Gross profit

Gross profit increased $40 million for the three months ended March 31, 2021 compared to the prior year period, while gross profit increased $57 million for the six months ended March 31, 2021 compared to the six months ended March 31, 2020. The table below provides a reconciliation of the changes:

	Year over year change		Year over year change
(In millions)	Three months ended March 31, 2021		Six months ended March 31, 2021
Volume and mix	$	32	$	47
Price and cost	(2)		(4)
Currency exchange	4		6
Acquisitions	6		8
Change in gross profit	$	40	$	57

The increase in gross profit for the three and six months ended March 31, 2021 compared to the prior year periods was driven by higher volumes in the Quick Lubes and International reportable segments, favorable mix, the benefits of acquisitions in Quick Lubes, and favorable currency exchange, partially offset by rising raw material costs which led to the negative impact of LIFO adjustments, particularly in Core North America.

The declines in gross profit margins were primarily the result of year-over-year changes in raw material costs, which were declining last year and have risen this year, primarily the result of impacts from the global pandemic. These changes in raw material costs resulted in unfavorable year-over-year LIFO inventory adjustments, negatively impacting gross profit margins to more than offset mix benefits. Additionally, margin pressure is expected to continue in the near term as raw material cost increases are passed through in pricing.

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

Net operating expenses

The table below provides details of the components of net operating expenses:

	Three months ended March 31								Six months ended March 31
	2021				2020				2021				2020
(In millions)			% of Sales				% of Sales				% of Sales				% of Sales
Selling, general and administrative expenses	$	129	18.4	%	$	96	16.6	%	$	246	18.1	%	$	213	18.0	%
Net legacy and separation-related expenses (income)	—		—	%	—		—	%	1		0.1	%	(1)		(0.1)	%
Equity and other income, net	(13)		(1.9)	%	(6)		(1.0)	%	(27)		(2.0)	%	(15)		(1.3)	%
Net operating expenses	$	116	16.5	%	$	90	15.6	%	$	220	16.2	%	$	197	16.6	%

Selling, general and administrative expenses increased in the three and six months ended March 31, 2021 compared to the prior year periods. The increases were primarily driven by higher variable compensation costs where prior year expense was substantially reduced due to the expected COVID-19 impact on fiscal 2020 performance. In addition, wage and benefit inflation, increases in advertising, promotion, transaction costs from recent acquisitions of Quick Lubes service center stores, and currency exchange resulted in higher expenses in the current year and were partially offset by lower travel costs due to continued restrictions during the COVID-19 pandemic.

Net legacy and separation-related expenses increased $2 million during the six months ended March 31, 2021, compared to the prior year period primarily related to adjustments of indemnities estimated to be due to Valvoline's former parent, which increased in the current year compared to favorable activity in the prior year period.

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Equity and other income, net increased $7 million and $12 million for the three and six months ended March 31, 2021, respectively, compared to the prior year periods. These increases were primarily driven by increased equity and royalty income attributable to the improved performance of the Company's unconsolidated joint ventures, particularly in India and China, in addition to insurance recoveries.

Net pension and other postretirement plan income

Net pension and other postretirement plan income for the three and six months ended March 31, 2021 increased $5 million and $9 million, respectively, from the prior year periods. These increases are driven by lower interest cost and improved asset performance as a result of the most recent annual remeasurement of the plans.

Net interest and other financing expenses

Net interest and other financing expenses increased $17 million and $21 million during the three and six months ended March 31, 2021, respectively, compared to the prior year periods. Debt extinguishment costs, including the redemption premium and the write-off of unamortized debt issuance costs, were $17 million higher for the current year redemption of the 2025 Notes than the losses incurred in the prior year in connection with the extinguishment of the 2024 Notes.

Income tax expense

The following table summarizes income tax expense and the effective tax rate:

	Three months ended March 31						Six months ended March 31
(In millions)	2021			2020			2021			2020
Income tax expense	$	22		$	25		$	52		$	49
Effective tax rate percentage	24.4		%	28.4		%	25.1		%	26.5		%

The decreases in effective tax rates for the three and six months ended March 31, 2021 were principally driven by tax reform legislation enacted in the prior year, which resulted in lower current year taxes and unfavorable discrete activity in the prior year periods. Higher pre-tax earnings in the six months ended March 31, 2021 more than offset these benefits resulting in an increase in tax expense for the current year-to-date period.

From a combination of statute expirations and anticipated audit settlements in the next twelve months, Valvoline currently estimates a decrease in the range of $25 to $35 million in indemnity obligations due to the Company's former parent, which is expected to include certain unrecognized tax benefits.

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EBITDA and Adjusted EBITDA

The following table reconciles net income to EBITDA and Adjusted EBITDA:

	Three months ended March 31				Six months ended March 31
(In millions)	2021		2020		2021		2020
Net income	$	68	$	63	$	155	$	136
Income tax expense	22		25		52		49
Net interest and other financing expenses	55		38		75		54
Depreciation and amortization	23		15		44		31
EBITDA	168		141		326		270
Net pension and other postretirement plan income (a)	(14)		(9)		(27)		(18)
Net legacy and separation-related expenses (income)	—		—		1		(1)
Business interruption recovery	(2)		—		(3)		—
Acquisition and divestiture-related costs	—		2		—		2
Restructuring and related expenses	—		—		—		1
Adjusted EBITDA	$	152	$	134	$	297	$	254

(a)Net pension and other postretirement plan income includes remeasurement gains and losses, when applicable, and recurring non-service pension and other postretirement net periodic income, which consists of interest cost, expected return on plan assets and amortization of prior service credit. Refer to Note 7 in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q for further details.

Adjusted EBITDA increased $18 million and $43 million for the three and six months ended March 31, 2021, respectively, driven by the ongoing strength of same-store sales and store additions in Quick Lubes, as well as strong volume growth and higher contributions from unconsolidated joint ventures in International.

Reportable segment review

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

•Quick Lubes - services the passenger car and light truck quick lube market in the United States and Canada through company-operated and independent franchised retail quick lube service center stores and independent Express Care stores that service vehicles with Valvoline products.

•Core North America - sells engine and automotive maintenance products in the United States and Canada to retailers, installers, and heavy-duty customers to service vehicles and equipment.

•International sells engine and automotive maintenance products in more than 140 countries outside of the United States and Canada for the maintenance of consumer and commercial vehicles and equipment.

Valvoline’s reportable segments are measured for profitability based on operating income; therefore, Valvoline does not generally allocate items to each reportable segment below operating income, such as net pension and other postretirement plan income, net interest and other financing expenses, or income tax expense. Operating income by segment includes the allocation of shared corporate costs, which are allocated consistently based on each segment’s proportional contribution to various financial measures. Valvoline does not allocate certain significant corporate and non-operational matters, including, but not limited to, company-wide restructuring activities and costs or adjustments that relate to former businesses that Valvoline no longer operates. These matters are attributed to Unallocated and other. Results of Valvoline’s reportable segments are presented based on how operations are managed internally, including how the results are reviewed by the chief operating decision maker. The structure and practices are specific to Valvoline; therefore, the financial results of its reportable segments are not necessarily comparable with similar information for other comparable companies.

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Quick Lubes

Management believes the number of company-operated and franchised service center stores as provided in the following tables is useful to assess the operating performance of the Quick Lubes reportable segment.

	Company-operated
	Second Quarter 2021	First Quarter 2021	Fourth Quarter 2020	Third Quarter 2020	Second Quarter 2020
Beginning of period (a)	663	584	548	536	524
Opened	6	10	22	5	7
Acquired	3	42	2	2	1
Net conversions between company-operated and franchised	1	27	12	5	4
End of period	673	663	584	548	536
	Franchised (b)
	Second Quarter 2021	First Quarter 2021	Fourth Quarter 2020	Third Quarter 2020	Second Quarter 2020
Beginning of period	870	878	884	883	883
Opened	7	8	7	8	8
Acquired	—	12	—	—	—
Net conversions between company-operated and franchised	(1)	(27)	(12)	(5)	(4)
Closed	(1)	(1)	(1)	(2)	(4)
End of period (c)	875	870	878	884	883
Total stores	1,548	1,533	1,462	1,432	1,419

(a)Beginning of period service center store count for the second quarter of fiscal 2020 includes one location that was previously opened as a company-operated store, which was acquired during the second quarter of fiscal 2021.

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

(c)Included in the store counts at the end of the second, third and fourth quarters of fiscal 2020 were certain service center stores temporarily closed at the discretion of the respective independent operators due to the impacts of COVID-19. There were no service center stores temporarily closed as of March 31, 2021 and December 31, 2020. As of September 30, 2020, 1 franchised service center store was temporarily closed, 5 franchised service center stores were temporarily closed as of June 30, 2020, and 26 franchised service center stores were temporarily closed as of March 31, 2020.

The year over year change resulted in 129 net new company-operated and franchised stores as a result of 68 net openings and 61 acquired stores. Organic service center store growth was primarily related to new company-operated service center store openings and franchisee expansion in key markets.

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The following table summarizes the results of the Quick Lubes reportable segment:

	Three months ended March 31						Six months ended March 31
(In millions)	2021			2020			2021			2020
Sales	$	285		$	212		$	539		$	430
Operating income	$	63		$	40		$	106		$	78
Depreciation and amortization	$	16		$	10		$	31		$	20
Gross profit as a percent of sales (a)	39.8		%	36.6		%	37.6		%	37.0		%
Operating income as a percent of sales	22.1		%	18.9		%	19.7		%	18.1		%
Operating information
Lubricant sales gallons	8.1			7.1			15.8			14.4
Premium lubricants (percent of U.S. branded volumes)	70.6		%	67.5		%	70.0		%	67.0		%
Same-store sales growth (b) - Company-operated	19.8		%	0.3		%	12.8		%	3.3		%
Same-store sales growth (b) - Franchised (c)	20.4		%	0.9		%	13.1		%	5.3		%
Same-store sales growth (b) - Combined (c)	20.2		%	0.6		%	13.0		%	4.5		%

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

(b)Valvoline determines same-store sales growth ("SSS") as sales by U.S. Quick Lubes service center stores, with new stores, including franchise conversions, excluded from the metric until the completion of their first full fiscal year in operation. Previously, SSS was determined as sales by U.S. Quick Lubes service center stores, with stores new to the U.S. Quick Lubes system excluded from the metric until completion of their first full year in operation. Prior period measures have been revised to conform to the current basis of presentation.

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

Quick Lubes sales increased $73 million, or 34%, for the current quarter compared to the prior year quarter. Sales increased $109 million, or 25%, for the six months ended March 31, 2021 compared to the prior year period. Continued SSS growth was driven by strong operational performance, including increased transactions and average ticket from premiumization, non-oil change services, pricing, and customer base expansion, while some of the growth was related to the onset of COVID-19 in late March of the prior year. Year-over-year unit growth of 9% through the addition of 129 net new stores from acquisitions and new service center store openings also contributed to sales growth.

Gross profit margin increased 3.2% and 0.6% for the three and six months ended March 31, 2021, respectively, compared to the prior year periods as a result of premium mix growth and improved leverage from higher customer traffic.

Operating income increased $23 million and $28 million for the three and six months ended March 31, 2021, respectively, compared to the prior year periods and was driven by SSS performance, including higher transactions from the unfavorable impacts from the COVID-19 pandemic in the prior year periods, the addition of new stores, and improved margins.

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Core North America

The following table summarizes the results of the Core North America reportable segment:

	Three months ended March 31						Six months ended March 31
(In millions)	2021			2020			2021			2020
Sales	$	242		$	238		$	477		$	486
Operating income	$	38		$	47		$	85		$	93
Depreciation and amortization	$	4		$	4		$	8		$	8
Gross profit as a percent of sales (a)	34.1		%	37.2		%	35.8		%	36.7		%
Operating income as a percent of sales	15.7		%	19.7		%	17.8		%	19.1		%
Operating information
Lubricant sales gallons	22.3			20.9			43.5			42.3
Premium lubricants (percent of U.S. branded volumes)	60.9		%	57.7		%	60.3		%	56.8		%

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

Core North America sales increased $4 million, or 2%, for the three months ended March 31, 2021 compared to the prior year period driven by higher volumes that outpaced miles driven trends with balanced growth across both retail and installer channels. Retail channel volumes benefited from solid promotional performance and effective marketing, while demand in the installer channel continues to recover from the impacts of COVID-19. Sales decreased $9 million, or 2%, for the six months ended March 31, 2021 compared to the prior year period primarily due to lower volumes in the installer channel, which has experienced a slower pace of recovery from the impacts of the pandemic.

Gross profit margin decreased 3.1% and 0.9% for the three and six months ended March 31, 2021, respectively, compared to the prior year periods related to unfavorable price-cost lag due to rising raw material cost impacts, including an unfavorable LIFO charge compared to a credit in the prior year.

Operating income decreased $9 million and $8 million for the three and six months ended March 31, 2021, respectively, compared to the prior year periods primarily related to raw material cost headwinds, which included unfavorable year-over-year impacts of LIFO adjustments of $7 million and $11 million, respectively.

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International

The following table summarizes the results of the International reportable segment:

	Three months ended March 31						Six months ended March 31
(In millions)	2021			2020			2021			2020
Sales	$	174		$	128		$	338		$	269
Operating income	$	28		$	18		$	62		$	38
Depreciation and amortization	$	3		$	1		$	5		$	3
Gross profit as a percent of sales (a)	29.8		%	30.2		%	30.3		%	29.4		%
Operating income as a percent of sales	16.1		%	14.1		%	18.3		%	14.1		%
Operating information
Lubricant sales gallons (b)	17.6			13.7			34.4			28.4
Lubricant sales gallons, including unconsolidated joint ventures (c)	30.8			22.3			61.1			47.8
Premium lubricants (percent of lubricant volume)	26.5		%	27.7		%	26.8		%	26.7		%

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

(b)Excludes volumes sold by unconsolidated subsidiaries.

(c)Valvoline's unconsolidated joint ventures are distinct legal entities and Valvoline does not consolidate the result of operations of its unconsolidated joint ventures.

International sales increased $46 million, or 36%, for the three months ended March 31, 2021 and $69 million, or 26%, for the six months ended March 31, 2021 compared to the prior year periods. These increases were driven by performance across all regions, led by Asia Pacific, particularly China, which experienced a larger COVID-19 impact in the prior-year period compared to other markets. Volume growth was driven by increased marketing efforts, along with improving market conditions and some distributor restocking impacts due to COVID-19. To a lesser extent, the increases in sales were also due to favorable currency exchange and mix.

Gross profit margin decreased 0.4% for the three months compared to the prior year period primarily due to unfavorable price-cost lag resulting from rising raw material costs. Gross profit margin increased 0.9% in the six months ended March 31, 2021 as geographic and product mix benefits more than offset unfavorable price-cost lag.

Operating income increased $10 million and $24 million during the three and six months ended March 31, 2021, respectively, primarily driven by higher volumes, increased contributions from unconsolidated joint ventures and benefits from currency exchange.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Overview

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

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Cash flows

Valvoline’s cash flows as reflected in the Condensed Consolidated Statements of Cash Flows are summarized as follows for the six months ended March 31:

(In millions)	2021		2020
Cash, cash equivalents, and restricted cash - beginning of period	$	761	$	159
Cash provided by (used in):
Operating activities	190		154
Investing activities	(276)		(71)
Financing activities	(431)		537
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	4		(4)
(Decrease) increase in cash, cash equivalents, and restricted cash	(513)		616
Cash, cash equivalents, and restricted cash - end of period	$	248	$	775

Operating activities

The increase in operating cash flows provided by operating activities for the six months ended March 31, 2021 compared to the prior year was primarily due to higher cash earnings, partially offset by unfavorable changes in working capital, which included the effects of factoring $59 million of receivables in the prior year.

Investing activities

The increase in cash flows used in investing activities for the six months ended March 31, 2021 compared to the prior year was primarily due to increased investments in Quick Lubes growth through the expansion of its store network via acquisition and new company-operated service center store openings. During the six months ended March 31, 2021, Valvoline acquired 86 and opened 16 service center stores compared to 8 and 9, respectively, in the prior year period. The overall increase in cash usage for these investments compared to the prior year period was partially offset by franchisee repayments of loans and proceeds from the sale of service center stores to franchisees.

Valvoline is currently forecasting approximately $160 million to $170 million of capital expenditures for full year fiscal 2021, funded primarily from operating cash flows.

Financing activities

The increase in cash flows used in financing activities for the six months ended March 31, 2021 was primarily driven by a decrease in net borrowings from the prior year period which included increased borrowing activity to provide enhanced financial flexibility during the onset of the COVID-19 pandemic, in addition to an increase in debt extinguishment and related premiums in the current year period. The Company also resumed share repurchase activity during the current year which had been paused late in the prior year period to preserve liquidity in response to the COVID-19 pandemic.

Free cash flow and other liquidity information

The following table sets forth free cash flow and reconciles cash flows from operating activities to free cash flow. As previously noted, free cash flow has certain limitations, including that it does not reflect adjustments for certain non-

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discretionary cash flows, such as mandatory debt repayments. Refer to the “Use of Non-GAAP Measures” section included above in this Item 2 for additional information.

	Six months ended March 31
(In millions)	2021		2020
Cash flows provided by operating activities	$	190	$	154
Additions to property, plant and equipment	(74)		(57)
Free cash flow	$	116	$	97

As of March 31, 2021, working capital (current assets minus current liabilities, excluding long-term debt due within one year) was $521 million compared to $994 million as of September 30, 2020. Liquid assets (cash, cash equivalents, and receivables) were 155% of current liabilities as of March 31, 2021 and 269% at September 30, 2020. The decrease in working capital is primarily driven by cash and cash equivalents utilized to fund investments in Quick Lubes expansion through acquisition along with the redemption of the 2025 Notes.

Debt

As of March 31, 2021 and September 30, 2020, the Company had long-term debt (including the current portion and debt issuance costs and discounts) of $1.7 billion comprised of loans and revolving facilities. Approximately 86% of Valvoline's outstanding borrowings, inclusive of its interest rate swap agreements, had fixed rates as of March 31, 2021.

In January 2021, the Company completed the issuance of the 2031 Notes and used the net proceeds of $528 million, together with cash and cash equivalents on hand, to fully redeem the 2025 Notes, with a total aggregate redemption price of $840 million. These combination of these transactions reduced Valvoline's gross leverage and cost of capital and lowers ongoing interest expense.

On April 27, 2021, Valvoline amended the Trade Receivables Facility to extend its maturity to April 2024 and modify the eligibility requirements for certain receivables, which had the effect of increasing the Company’s remaining borrowing capacity as of March 31, 2021 to $87 million. The amendment also reduces the minimum required borrowing to the lesser of (i) 33 percent of the total facility limit or (ii) the borrowing base from the availability of eligible receivables, in addition to permitting up to a 30 consecutive day annual exemption from this requirement. Other relevant terms and conditions of Trade Receivables Facility were substantially unchanged under this amendment.

Valvoline was in compliance with all covenants of its debt obligations as of March 31, 2021 and had a combined total of $557 million of remaining borrowing capacity under its Revolver and Trade Receivables Facility. Credit facilities in place in China had approximately $26 million of combined borrowing capacity remaining, $23 million under the China Working Capital Facility and $3 million under the China Construction Facility. Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements for additional details regarding the Company’s debt instruments.

Dividend payments and share repurchases

During the six months ended March 31, 2021, the Company paid cash dividends of $0.250 per common share for $46 million and repurchased over 4 million shares of its common stock for $100 million to complete the Board of Directors authorization on November 12, 2020 to repurchase up to $100 million of common stock through September 30, 2021 (the "2020 Share Repurchase Authorization").

On April 22, 2021, the Board of Directors of Valvoline declared a quarterly cash dividend of $0.125 per share of Valvoline common stock. The dividend is payable on June 15, 2021 to shareholders of record on May 28, 2021.

Dividends and share repurchases are part of a broader capital allocation framework to deliver value to shareholders by first driving growth in the business, organically and through acquisitions, and then returning excess cash to shareholders through dividends and share repurchases. Future declarations of quarterly dividends are subject to approval by the Board and may be adjusted as business needs or market conditions change, while the timing and

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amount of any future share repurchases will be based on the level of Valvoline's liquidity, general business and market conditions and other factors, including alternative investment opportunities.

Off-balance sheet arrangements

As of March 31, 2021, Valvoline has no contractual obligations that are reasonably likely to have a material effect on the Company’s condensed consolidated financial statements that are not fully recorded within the Condensed Consolidated Balance Sheets or fully disclosed in the Notes to Condensed Consolidated Financial Statements in Item I of Part I of this Quarterly Report on Form 10-Q. As part of Valvoline’s normal course of business, it is a party to certain financial guarantees and other commitments, and while these arrangements involve elements of performance and credit risk, such risk is not currently considered reasonably likely to have a material effect on the Company’s condensed consolidated financial statements. The possibility that Valvoline would have to make actual cash expenditures in connection with these obligations is largely dependent on the performance of the party whose obligations Valvoline guarantees, or the occurrence of future events.

Summary

As of March 31, 2021, cash and cash equivalents totaled $247 million, total debt was $1.7 billion, and total remaining borrowing capacity was $557 million. Valvoline’s ability to generate positive cash flows from operations is dependent on general economic conditions, the competitive environment in the industry, and is subject to the business and other risk factors described in Item 1A of Part II of this Quarterly Report on Form 10-Q and Item 1A of the Annual Report on Form 10-K for the year ended September 30, 2020. If the Company is unable to generate sufficient cash flows from operations, or otherwise comply with the terms of its credit facilities, Valvoline may be required to seek additional financing alternatives.

Management believes that the Company has sufficient liquidity based on its current cash and cash equivalents position, cash generated from business operations, and existing financing to meet its required pension and other postretirement plan contributions, debt servicing obligations, tax-related and other contractual commitments, and operating requirements for the next twelve months.

NEW ACCOUNTING PRONOUNCEMENTS

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s critical accounting policies and estimates are discussed in detail in Item 7 of Part II in Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020. Management reassessed the critical accounting policies as disclosed in the Annual Report on Form 10-K and determined there were no changes to critical accounting policies and estimates in the six months ended March 31, 2021.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risks are discussed in detail in Item 7A of Part II in Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020. Management reassessed the quantitative and qualitative market risk disclosures as described in the Annual Report on Form 10-K and determined there were no material changes to market risks in the six months ended March 31, 2021.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Valvoline’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), with the assistance of management, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), and based upon such evaluation, have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were

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effective. These controls are designed to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to Valvoline’s management, including the CEO and CFO, to allow timely decisions regarding required disclosure.

Changes in Internal Control

There were no significant changes in Valvoline’s internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2021 that materially affected, or are reasonably likely to materially affect, Valvoline’s internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

From time to time, Valvoline is party to lawsuits, claims and other legal proceedings that arise in the ordinary course of business. For a description of Valvoline's legal proceedings, refer to Note 8 of the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

Information about the Company's risk factors is contained in Item 1A of Part I in Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020. Other than the addition of the risk factor set forth below, there have been no material changes to the Company's risk factors previously disclosed.

The Company’s Amended and Restated Articles of Incorporation (the “Articles”) designate the Fayette County Circuit Court of the Commonwealth of Kentucky as the sole and exclusive forum for substantially all disputes between the Company and its shareholders, which may limit a shareholder’s ability to bring a claim in a favorable judicial forum for disputes with the Company and its directors, officers or employees.

The Company’s Articles specify that the Fayette County Circuit Court of the Commonwealth of Kentucky shall be the sole and exclusive forum for any derivative action or proceeding brought on behalf of the Company, any action asserting a breach of a fiduciary duty, any action asserting a claim arising pursuant to the Kentucky Business Corporation Act, or any action asserting a claim governed by the internal affairs doctrine. 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.

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. The exclusive forum provision in the Articles, however, may have the effect of discouraging lawsuits against Valvoline's directors, officers or employees as it could increase a shareholder’s cost to bring a claim or limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for such claims. In connection with any applicable action brought against the Company, it is possible that a court could find the forum selection provisions contained in the Articles to be inapplicable or unenforceable in such action. If a court were to render such a finding, the Company may incur additional costs to resolve the action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

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

The Company repurchased 1.7 million shares of its common stock for $42 million during the three months ended March 31, 2021 pursuant to the 2020 Share Repurchase Authorization.

Share repurchase activity during the three months ended March 31, 2021 follows:

Monthly period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Dollar value of shares that may yet be purchased under the plans or programs (in millions)
January 1, 2021 - January 31, 2021	1,368,804	$	23.91	1,368,804	$	9
February 1, 2021 - February 28, 2021	370,927	$	24.06	370,927	$	—
March 1, 2021 - March 31, 2021	—	$	—	—	$	—
Total	1,739,731	$	23.94	1,739,731

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ITEM 6.  EXHIBITS

4.1*	Description of Securities.
31.1*	Certification of Samuel J. Mitchell, Jr., Chief Executive Officer of Valvoline, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Mary E. Meixelsperger, Chief Financial Officer of Valvoline, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**	Certification of Samuel J. Mitchell, Jr., Chief Executive Officer of Valvoline, and Mary E. Meixelsperger, Chief Financial Officer of Valvoline, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

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

® Register mark, Car Wash Partners, Inc., registered in United States

37

SIGNATURE

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

	VALVOLINE INC.
	(Registrant)
April 29, 2021	By:	/s/ Mary E. Meixelsperger
		Mary E. Meixelsperger
		Chief Financial Officer

38

EX-4.1

Exhibit 4.1

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

Valvoline Inc. (“Valvoline,” “we,” “us,” and “our”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): our Common Stock

DESCRIPTION OF COMMON STOCK

The following description of our Common Stock is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our Amended and Restated Articles of Incorporation (“Articles of Incorporation”) and our Amended and Restated By-laws (“By-laws”), which are filed as exhibits to our Annual Report on Form 10-K and are incorporated by reference herein. We encourage you to carefully review our Articles of Incorporation, our By-laws and the applicable provisions of the Kentucky Business Corporation Act (“KBCA”), for additional information.

Authorized Capital Stock

Our authorized capital shares consist of 400,000,000 shares of Common Stock, $0.01 par value per share (“Common Stock”) and 40,000,000 shares of preferred stock, no par value (“Preferred Stock”). The outstanding shares of our Common Stock are fully paid and nonassessable.

Voting Rights

Holders of Common Stock are entitled to one vote per share on all matters to be voted on by such holders, including the election of directors; provided, however, that, except where required by law, holders of our Common Stock are not entitled to vote on any amendment to our Articles of Incorporation relating solely to the terms of one or more outstanding series of Preferred Stock. Holders of our Common Stock are not entitled to cumulative voting rights.

Dividend Rights

Subject to the rights of the holders of outstanding shares of Preferred Stock, if any, holders of our Common Stock are entitled to receive dividends, if any, as may be declared from time to time by our Board of Directors, in its discretion, out of funds legally available for the payment of dividends.

Liquidation Rights

Subject to the rights of the holders of outstanding shares of Preferred Stock, if any, holders of our Common Stock will share ratably in all assets legally available for distribution to our shareholders in the event of our liquidation, dissolution or winding up, either voluntary or involuntary.

Other Rights and Preferences

Holders of our Common Stock have no preemptive rights and no right to convert their Common Stock into any other securities. There are no redemption or sinking fund provisions applicable to our Common Stock.

Certain Anti-Takeover Provisions of our Articles of Incorporation, By-laws and Kentucky Law

Certain provisions in our Articles of Incorporation, By-laws and under Kentucky law may have the effect of delaying, deferring or preventing a change in control of Valvoline that our shareholders may consider favorable.

These provisions include:

•Our Articles of Incorporation authorize our Board of Directors to issue shares of preferred stock and set the voting powers, designations, preferences and other rights related to that preferred stock without shareholder approval. Any such designation and issuance of shares of preferred stock could delay, defer or prevent any attempt to acquire or control us.

•Our Articles of Incorporation and By-laws limit the ability of our shareholders to remove directors without cause, change the authorized number of directors and fill director vacancies. These provisions may make it more difficult for our shareholders to change the composition of our Board of Directors.

•Our Articles of Incorporation and By-laws do not provide for cumulative voting. Accordingly, the holders of a majority of the shares of Common Stock entitled to vote in any election of directors may elect all of the directors standing for election.

•Our By-laws require shareholders to provide advance notice in order to raise business or make nominations at shareholders’ meetings, which could have the effect of delaying shareholder action until the next shareholders’ meeting that is favored by the holders of a majority of our outstanding voting securities or may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of us.

•Our Articles of Incorporation limit the ability of shareholders to adopt, amend or repeal our By-laws and to amend or repeal certain provisions in our Articles of Incorporation.

•Our Articles of Incorporation and Section 271B.12 of the KBCA prevent us from engaging in certain business combinations with an interested shareholder (generally defined as a beneficial owner of 10% or more of our outstanding voting power) for a period of five years after the date such shareholder became an interested shareholder, unless certain procedures are followed or certain conditions are satisfied.

Forum Selection Provision of our Articles of Incorporation

Our Articles of Incorporation also provide that, unless we consent in writing to the selection of an alternative forum, the Fayette County Circuit Court of the Commonwealth of Kentucky (or, if that court lacks subject matter jurisdiction, any other state or federal court located within the Commonwealth of Kentucky) shall be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any or our directors, officers or other employees or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of the KBCA or (iv) any action asserting a claim governed by the internal affairs doctrine. This forum selection 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.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum selection provision in our Articles of Incorporation.

Transfer Agent and Registrar

EQ Shareowner Services serves and the transfer agent and registrar for our Common Stock.

Exchange Listing

Our Common Stock is traded on the New York Stock Exchange under the symbol “VVV.”

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Samuel J. Mitchell, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Valvoline Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  April 29, 2021

/s/ Samuel J. Mitchell Jr.

Samuel J. Mitchell Jr.

Chief Executive Officer and Director

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Mary E. Meixelsperger, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Valvoline Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  April 29, 2021

/s/ Mary E. Meixelsperger

Mary E. Meixelsperger

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

EXHIBIT 32

VALVOLINE INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Valvoline Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, Samuel J. Mitchell, Jr., Chief Executive Officer of the Company, and Mary E. Meixelsperger, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Samuel J. Mitchell, Jr.

Samuel J. Mitchell, Jr.

Chief Executive Officer and Director

April 29, 2021

/s/ Mary E. Meixelsperger

Mary E. Meixelsperger

Chief Financial Officer

April 29, 2021

XML

Cover Page - shares	6 Months Ended
	Mar. 31, 2021	Apr. 23, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	001-37884
Entity Registrant Name	VALVOLINE INC.
Entity Incorporation, State or Country Code	KY
Entity Tax Identification Number	30-0939371
Entity Address, Address Line One	100 Valvoline Way
Entity Address, City or Town	Lexington
Entity Address, State or Province	KY
Entity Address, Postal Zip Code	40509
City Area Code	859
Local Phone Number	357-7777
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	VVV
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Smaller Reporting Company	false
Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		181,077,542
Entity Central Index Key	0001674910
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Net Income (Loss) Attributable to Parent [Abstract]
Sales	$ 701	$ 578	$ 1,354	$ 1,185
Cost of sales	454	371	879	767
Gross profit	247	207	475	418
Selling, general and administrative expenses	129	96	246	213
Net legacy and separation-related expenses (income)	0	0	1	(1)
Equity and other income, net	(13)	(6)	(27)	(15)
Operating income	131	117	255	221
Net pension and other postretirement plan income	(14)	(9)	(27)	(18)
Net interest and other financing expenses	55	38	75	54
Income before income taxes	90	88	207	185
Income tax expense	22	25	52	49
Net Income (Loss) Attributable to Parent, Total	$ 68	$ 63	$ 155	$ 136
NET EARNINGS PER SHARE
Basic (usd per share)	$ 0.37	$ 0.33	$ 0.84	$ 0.72
Diluted (usd per share)	$ 0.37	$ 0.33	$ 0.84	$ 0.72
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic (shares)	182	188	184	188
Diluted (shares)	183	188	184	189
COMPREHENSIVE INCOME
Net income	$ 68	$ 63	$ 155	$ 136
Other comprehensive (loss) income, net of tax
Currency translation adjustments	(7)	(21)	11	(13)
Amortization of pension and other postretirement plan prior service credit	(2)	(2)	(4)	(4)
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), Reclassification, after Tax	1	0	1	0
Other comprehensive (loss) income	(8)	(23)	8	(17)
Comprehensive income	$ 60	$ 40	$ 163	$ 119

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Assets, Current [Abstract]
Cash and cash equivalents	$ 247	$ 760
Receivables, Net, Current	448	433
Inventories, net	218	199
Prepaid expenses and other current assets	55	46
Total current assets	968	1,438
Noncurrent assets
Property, plant and equipment, net	741	613
Operating Lease, Right-of-Use Asset	299	261
Goodwill and intangibles, net	732	529
Equity method investments	45	44
Deferred income taxes	19	34
Other Assets, Noncurrent	117	132
Total noncurrent assets	1,953	1,613
Total assets	2,921	3,051
Current liabilities
Current portion of long-term debt	1	0
Trade and other payables	180	189
Accrued expenses and other liabilities	267	255
Total current liabilities	448	444
Noncurrent liabilities
Long-term debt	1,719	1,962
Employee benefit obligations	286	317
Operating lease liabilities, noncurrent	265	231
Other noncurrent liabilities	259	173
Total noncurrent liabilities	2,529	2,683
Commitments and contingencies
Stockholders’ deficit
Preferred stock, no par value, 40 shares authorized; no shares issued and outstanding	0	0
Common stock, par value $0.01 per share, 400 shares authorized; 181 and 185 shares issued and outstanding at March 31, 2021 and September 30, 2020, respectively	2	2
Paid-in capital	29	24
Retained deficit	(103)	(110)
Accumulated other comprehensive income	16	8
Total stockholders’ deficit	(56)	(76)
Total liabilities and stockholders’ deficit	$ 2,921	$ 3,051

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2021	Sep. 30, 2020
Statement of Financial Position [Abstract]
Preferred stock authorized (shares)	40,000,000	40,000,000
Preferred stock issued (shares)	0	0
Preferred stock outstanding (shares)	0	0
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock authorized (shares)	400,000,000	400,000,000
Common stock issued (shares)	181,000,000	185,000,000
Common stock outstanding (shares)	181,000,000	185,000,000

XML

Condensed Consolidated Statements of Stockholders' Deficit - USD ($) shares in Millions, $ in Millions	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]
Common stock outstanding, at beginning of period (shares) at Sep. 30, 2019			188
Balance at beginning of period at Sep. 30, 2019	$ (258)	$ 1	$ 2	$ 13	$ (284)	$ 11
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	73				73
Dividends paid	(21)				(21)
Stock-based compensation, net of issuances	3			3
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	6					6
Common stock outstanding, at end of period (shares) at Dec. 31, 2019			188
Balance at end of period at Dec. 31, 2019	$ (196)		$ 2	16	(231)	17
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Dividends paid per common share (usd per share)	$ 0.113
Common stock outstanding, at beginning of period (shares) at Sep. 30, 2019			188
Balance at beginning of period at Sep. 30, 2019	$ (258)	1	$ 2	13	(284)	11
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	136
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	(17)
Common stock outstanding, at end of period (shares) at Mar. 31, 2020			185
Balance at end of period at Mar. 31, 2020	(237)		$ 2	16	(249)	(6)
Common stock outstanding, at beginning of period (shares) at Dec. 31, 2019			188
Balance at beginning of period at Dec. 31, 2019	(196)		$ 2	16	(231)	17
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	63				63
Dividends paid	(21)				(21)
Repurchases of common stock	(60)				(60)
Stock Repurchased and Retired During Period, Shares			3
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	(23)					(23)
Common stock outstanding, at end of period (shares) at Mar. 31, 2020			185
Balance at end of period at Mar. 31, 2020	$ (237)		$ 2	16	(249)	(6)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Dividends paid per common share (usd per share)	$ 0.113
Common stock outstanding, at beginning of period (shares) at Sep. 30, 2020	185		185
Balance at beginning of period at Sep. 30, 2020	$ (76)	(2)	$ 2	24	(110)	8
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	87				87
Dividends paid	(23)				(23)
Stock-based compensation, net of issuances	1			1
Repurchases of common stock	(58)
Stock Repurchased and Retired During Period, Shares			2
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	16					16
Common stock outstanding, at end of period (shares) at Dec. 31, 2020			183
Balance at end of period at Dec. 31, 2020	$ (55)		$ 2	25	(106)	24
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Dividends paid per common share (usd per share)	$ 0.125
Common stock outstanding, at beginning of period (shares) at Sep. 30, 2020	185		185
Balance at beginning of period at Sep. 30, 2020	$ (76)	$ (2)	$ 2	24	(110)	8
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	155
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	$ 8
Common stock outstanding, at end of period (shares) at Mar. 31, 2021	181		181
Balance at end of period at Mar. 31, 2021	$ (56)		$ 2	29	(103)	16
Common stock outstanding, at beginning of period (shares) at Dec. 31, 2020			183
Balance at beginning of period at Dec. 31, 2020	(55)		$ 2	25	(106)	24
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	68				68
Dividends paid	(23)				(23)
Stock-based compensation, net of issuances	4			4
Repurchases of common stock	(42)				(42)
Stock Repurchased and Retired During Period, Shares			2
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	$ (8)					(8)
Common stock outstanding, at end of period (shares) at Mar. 31, 2021	181		181
Balance at end of period at Mar. 31, 2021	$ (56)		$ 2	$ 29	$ (103)	$ 16
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Dividends paid per common share (usd per share)	$ 0.125

XML

Condensed Consolidated Statements of Stockholders' Deficit (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Statement of Stockholders' Equity [Abstract]
Dividends paid per common share (usd per share)	$ 0.125	$ 0.125	$ 0.113	$ 0.113

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash flows from operating activities
Net income	$ 155	$ 136
Adjustments to reconcile net income to cash flows from operating activities
Gain (loss) on extinguishment of debt	36	19
Depreciation and amortization	44	31
Pension contributions	(4)	(5)
Stock-based compensation expense	6	3
Other, net	2	2
Change in assets and liabilities
Receivables	(14)	44
Inventories	(13)	(20)
Payables and accrued liabilities	4	(40)
Other assets and liabilities	(26)	(16)
Total cash provided by operating activities	190	154
Cash flows from investing activities
Additions to property, plant and equipment	(74)	(57)
Notes receivable, net	12	0
Acquisitions of businesses, net of cash acquired	(223)	(11)
Other investing activities, net	9	(3)
Total cash used in investing activities	(276)	(71)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	546	1,132
Repayments on borrowings	(800)	(475)
Payment for Debt Extinguishment or Debt Prepayment Cost	(26)	(15)
Repurchases of common stock	(100)	(60)
Cash dividends paid	(46)	(42)
Other financing activities	(5)	(3)
Total cash (used in) provided by financing activities	(431)	537
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	4	(4)
Increase (decrease) in cash, cash equivalents, and restricted cash	(513)	616
Cash, cash equivalents, and restricted cash - beginning of period	761	159
Cash, cash equivalents, and restricted cash - end of period	$ 248	$ 775

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Basis of Presentation and Significant Accounting Policies

6 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared by Valvoline Inc. (“Valvoline” or the “Company”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Securities and Exchange Commission (“SEC”) regulations for interim financial reporting, which do not include all information and footnote disclosures normally included in annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. In the opinion of management, the assumptions underlying the condensed consolidated financial statements for these interim periods are reasonable, and all adjustments considered necessary for a fair presentation have been made and are of a normal recurring nature unless otherwise disclosed herein. The results for interim periods are not necessarily indicative of those to be expected for the entire year, particularly in light of the novel coronavirus ("COVID-19") global pandemic and its effects.

Valvoline has substantially maintained its operations throughout the COVID-19 pandemic to-date and has continued precautionary measures to protect the Company's employees and customers and manage through the currently known impacts on its business. Given the unprecedented nature of the pandemic, the extent of future impacts cannot be reasonably estimated at this time due to numerous uncertainties, including the duration and severity of the pandemic.

Recent accounting pronouncements

The following standards relevant to Valvoline were either issued or adopted in the current year, or are expected to have a meaningful impact on Valvoline in future periods upon adoption. The Financial Accounting Standards Board ("FASB") issued other accounting guidance during the period that is not currently applicable or expected to have a material impact on Valvoline’s condensed consolidated financial statements, and therefore, is not described below.

Recently adopted

In June 2016, the FASB issued updated guidance that changes the recognition of credit losses from an incurred or probable loss methodology to a current expected credit loss model that results in the immediate recognition of credit losses that are expected to occur over the life of the financial instruments that are within the scope of the guidance, principally trade and other receivables for Valvoline. The new credit loss guidance was adopted on October 1, 2020 using the required modified retrospective approach. Under this approach, the new accounting guidance is applied prospectively from the date of adoption through a cumulative effect adjustment in retained deficit, while prior period financial statements continue to be reported in accordance with the previous guidance. Adoption did not have a material impact on the Company's condensed consolidated financial statements and resulted in a $2 million, net of tax, cumulative effect of accounting change that increased retained deficit and allowances for credit losses.

In connection with and following the adoption of this guidance, Valvoline maintains allowances to estimate expected lifetime credit losses that are based on a broad range of reasonable and supportable information and factors, including the length of time receivables are past due, the financial health of its customers, macroeconomic conditions, and historical collection experience. Refer to Note 11 for additional information regarding the Company's trade and other receivables and its allowances for credit losses.

Issued but not yet adopted

In March 2020, the FASB issued guidance regarding the effects of reference rate reform intended to ease financial reporting burdens as the market transitions from the London Interbank Offered Rate ("LIBOR") and other interbank reference rates to alternative reference rates. The Company has interest rate swap hedging arrangements and long-term debt as described in Notes 2 and 5 to the Condensed Consolidated Financial Statements, respectively, for which existing payments are based on LIBOR. This guidance is available to be adopted through the end of calendar 2022 to simplify the accounting for arrangements modified for the transition to alternative reference rates.

The Company expects to adopt this guidance to the extent its arrangements are modified for the underlying reference rate prior to the end of calendar 2022 and does not expect adoption will have a material impact on its condensed consolidated financial statements.

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Fair Value Measurements

6 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy:

	As of March 31, 2021
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	13	$	13	$	—	$	—	$	—
Time deposits	74		—		74		—		—
Prepaid expenses and other current assets
Currency derivatives (b)	3		—		3		—		—
Other noncurrent assets
Non-qualified trust funds	13		—		4		—		9
Interest rate swap agreements	2				2
Total assets at fair value	$	105	$	13	$	83	$	—	$	9
Accrued expenses and other liabilities
Currency derivatives (b)	$	2	$	—	$	2	$	—	$	—
Interest rate swap agreements	1		—		1		—		—
Other noncurrent liabilities
Deferred compensation obligations	23		—		—		—		23
Total liabilities at fair value	$	26	$	—	$	3	$	—	$	23
	As of September 30, 2020
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	296	$	296	$	—	$	—	$	—
Time deposits	139		—		139		—		—
Prepaid expenses and other current assets
Currency derivatives (b)	3		—		3		—		—
Other noncurrent assets
Non-qualified trust funds	16		—		8		—		8
Total assets at fair value	$	454	$	296	$	150	$	—	$	8
Accrued expenses and other liabilities
Currency derivatives (b)	$	2	$	—	$	2	$	—	$	—
Interest rate swap agreements	1		—		1		—		—
Other noncurrent liabilities
Deferred compensation obligations	25		—		—		—		25
Total liabilities at fair value	$	28	$	—	$	3	$	—	$	25

(a)Funds measured at fair value using the net asset value ("NAV") per share practical expedient have not been classified in the fair value hierarchy.

(b)The Company had outstanding contracts with notional values of $173 million and $149 million as of March 31, 2021 and September 30, 2020, respectively.

There were no material gains or losses recognized in earnings for the three and six months ended March 31, 2021 or 2020 related to these assets and liabilities.

Long-term debt

The fair values of the Company’s outstanding fixed rate senior notes shown in the table below are based on recent trading values, which are considered Level 2 inputs within the fair value hierarchy. Long-term debt is included in the Condensed Consolidated Balance Sheets at carrying value, rather than fair value, and is therefore excluded from the fair value table above. Carrying values shown in the following table are net of unamortized discounts and issuance costs.

	March 31, 2021						September 30, 2020
(In millions)	Fair value		Carrying value		Unamortized discounts and issuance costs		Fair value		Carrying value		Unamortized discounts and issuance costs
2025 Notes	$	—	$	—	$	—	$	827	$	790	$	(10)
2030 Notes	613		593		(7)		613		592		(8)
2031 Notes	519		528		(7)		—		—		—
Total	$	1,132	$	1,121	$	(14)	$	1,440	$	1,382	$	(18)

Refer to Note 5 for more information on Valvoline’s other debt instruments that have variable interest rates, and accordingly, their carrying amounts approximate fair value.

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Acquisitions and Divestitures

6 Months Ended

Mar. 31, 2021

Business Combinations [Abstract]

Acquisitions and Divestitures

Retail store acquisitions

The Company acquired 100 service center stores in single and multi-store transactions for an aggregate purchase price of $223 million during the six months ended March 31, 2021. These acquisitions expand Valvoline's retail presence in key North American and international markets, increase the Quick Lubes system to more than 650 company-operated and 1,500 system-wide service center stores, and included:

•Fourteen company-operated service center stores in Texas acquired from Kent Lubrication Centers Ltd. (doing business as Avis Lube) on October 1, 2020;

•Twenty-one former franchise locations converted to company-operated service center stores in Kansas and Missouri acquired from Westco Lube, Inc. on October 15, 2020;

•Twelve company-operated service center stores in Idaho acquired from L&F Enterprises (doing business as Einstein's Oilery) on October 30, 2020;

•Twenty-seven Mister Oil Change Express® locations (15 company-operated and 12 franchise-operated) across seven states acquired from Car Wash Partners, Inc. on December 11, 2020;

•Seven former franchise and 14 former joint venture locations converted to company-operated service center stores acquired in single and multi-store transactions; and

•Five company-operated service center stores acquired in single store transactions.

During the six months ended March 31, 2020, the Company acquired 14 service center stores in single and multi-store transactions, including six former franchise locations, for a total of $11 million.

The Company’s acquisitions are accounted for as business combinations. A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the six months ended March 31:

(In millions)	2021		2020
Inventories	$	2	$	—
Other current assets	1		—
Property, plant and equipment (a)	82		1
Operating lease assets	26		—
Goodwill (b)	180		5
Intangible assets (c)
Reacquired franchise rights (d)	34		5
Other	3		—
Other current liabilities (a)	(7)		—
Operating lease liabilities	(24)		—
Other noncurrent liabilities (a)	(74)		—
Net assets acquired	$	223	$	11

(a)Includes $73 million of finance lease assets in property, plant and equipment and finance lease liabilities of $3 million and $70 million in other current and noncurrent liabilities, respectively, for leases acquired during the six months ended March 31, 2021.

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

(c)Intangible assets acquired during the six months ended March 31, 2021 and 2020 have weighted average amortization periods of 11 and nine years, respectively.

(d)Prior to the acquisition of former franchise service center stores, Valvoline licensed the right to operate franchised quick lube service centers, including use of the Company’s trademarks and trade name. In connection with these acquisitions, Valvoline reacquired those rights and recognized separate definite-lived reacquired franchise rights intangible assets, which are being amortized on a straight-line basis over the weighted average remaining term of approximately 11 years for the rights reacquired in fiscal 2021. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market.

The fair values above are preliminary for up to one year from the date of acquisition as they may be subject to measurement period adjustments if new information is obtained about facts and circumstances that existed as of the acquisition date. The Company does not currently expect any material changes to the preliminary purchase price allocations for acquisitions completed during the last twelve months.

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Goodwill and Other Intangibles

6 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangibles

INTANGIBLE ASSETS

Goodwill

The following table summarizes changes in the carrying amount of goodwill by reportable segment and in total during the six months ended March 31, 2021:

(In millions)	Quick Lubes		Core North America		International		Total
Balance at September 30, 2020	$	316	$	89	$	40	$	445
Acquisitions (a)	178		—		2		180
Dispositions (b)	(10)		—		—		(10)
Currency translation	2		—		—		2
Balance at March 31, 2021	$	486	$	89	$	42	$	617

(a)Includes acquisitions within the Quick Lubes reportable segment of 86 service center stores and a former joint venture in the International reportable segment. Refer to Note 3 for additional details.

(b)Derecognition of goodwill associated with the sale of 12 company-owned, franchise-operated service center stores to franchisees.

Other intangible assets

Valvoline’s purchased intangible assets were specifically identified when acquired, have finite lives, and are reported in Goodwill and intangibles, net within the Condensed Consolidated Balance Sheets. The following summarizes the gross carrying amounts and accumulated amortization of the Company’s intangible assets:

(In millions)	March 31, 2021						September 30, 2020
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Definite-lived intangible assets
Trademarks and trade names	$	31	$	(7)	$	24	$	30	$	(6)	$	24
Reacquired franchise rights	91		(18)		73		57		(14)		43
Customer relationships	22		(8)		14		22		(7)		15
Other intangible assets	6		(2)		4		3		(1)		2
Total definite-lived intangible assets	$	150	$	(35)	$	115	$	112	$	(28)	$	84

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Debt

6 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Debt

DEBT

The following table summarizes Valvoline’s total debt as of:

(In millions)	March 31 2021		September 30 2020
2031 Notes	$	535	$	—
2030 Notes	600		600
2025 Notes	—		800
Term Loan	475		475
Trade Receivables Facility	88		88
China Construction Facility	37		18
Debt issuance costs and discounts	(15)		(19)
Total debt	1,720		1,962
Current portion of long-term debt	1		—
Long-term debt	$	1,719	$	1,962

Senior Notes

The Company's outstanding fixed rate senior notes as of March 31, 2021 consist of 3.625% senior unsecured notes due 2031 with an aggregate principal amount of $535 million (the “2031 Notes") and 4.250% senior unsecured notes due 2030 with an aggregate principal amount of $600 million (the "2030 Notes," and collectively with the 2031 Notes, the "Senior Notes").

In January 2021, Valvoline issued the 2031 Notes in a private offering for net proceeds of $528 million (after deducting initial purchasers’ discounts and debt issuance costs). The net proceeds, along with cash and cash equivalents on hand, were used to redeem in full Valvoline's 4.375% senior unsecured notes due 2025 with an aggregate principal amount of $800 million (the “2025 Notes"), plus an early redemption premium of $26 million, accrued and unpaid interest, as well as related fees and expenses for an aggregate redemption price of approximately $840 million. A loss on extinguishment of the 2025 Notes of $36 million was recognized in Net interest and other financing expenses in the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2021, comprised of the early redemption premium and the write-off of related unamortized debt issuance costs and discounts.

The 2031 Notes are subject to customary events of default for similar debt securities, which if triggered may accelerate payment of principal, premium, if any, and accrued but unpaid interest. Such events of default include non-payment of principal and interest, non-performance of covenants and obligations, default on other material debt, and bankruptcy or insolvency. If a change of control repurchase event occurs, Valvoline may be required to offer to purchase the 2031 Notes from the holders thereof. The 2031 Notes are not otherwise required to be repaid prior to maturity, although they may be redeemed at the option of Valvoline at any time prior to their maturity in the manner specified in the governing indenture.

Senior Credit Agreement

As of March 31, 2021 and September 30, 2020, the term loan facility (the “Term Loan”) had an outstanding principal balance of $475 million, and there were no amounts outstanding under the $475 million revolving credit facility (the "Revolver"), both of which are senior secured credit facilities provided under the senior credit agreement (the “Senior Credit Agreement”). As of March 31, 2021, the total borrowing capacity remaining under the Revolver was $470 million due to a reduction of $5 million for letters of credit outstanding.

As of March 31, 2021, Valvoline was in compliance with all covenants under the Senior Credit Agreement.

Trade Receivables Facility

The $175 million trade receivables securitization facility (the "Trade Receivables Facility") had an outstanding balance of $88 million as of March 31, 2021 and September 30, 2020. The financing subsidiary owned $246 million and $267 million of outstanding accounts receivable as of March 31, 2021 and September 30, 2020, respectively, which are included in Receivables, net in the Company’s Condensed Consolidated Balance Sheets.

On April 27, 2021, Valvoline amended the Trade Receivables Facility to extend its maturity to April 2024 and modify the eligibility requirements for certain receivables, which had the effect of increasing the Company’s remaining borrowing capacity to $87 million as of March 31, 2021. The amendment also reduces the minimum required borrowing to the lesser of (i) 33 percent of the total facility limit or (ii) the borrowing base from the availability of eligible receivables, in addition to permitting up to a 30 consecutive day annual exemption from this requirement. Other relevant terms and conditions of Trade Receivables Facility were substantially unchanged under this amendment.

China Construction Facility

During the six months ended March 31, 2021, Valvoline borrowed $18 million under its $40 million credit agreement to finance capital expenditures associated with the preparation of the blending and packaging plant in China for production at capacity (the "China Construction Facility"). The China Construction Facility had approximately $37 million and $18 million outstanding as of March 31, 2021 and September 30, 2020, respectively. The remaining borrowing capacity under the China Construction Facility was approximately $3 million as of March 31, 2021.

China Working Capital Facility

On November 16, 2020, the Company entered into a one-year revolving credit facility of approximately $23 million to finance working capital needs for the blending and packaging plant in China (the “China Working Capital Facility”). Borrowings will bear interest at the local prime rate less the applicable interest rate margin with interest due monthly and repayment of borrowings due at maturity. As of March 31, 2021, the China Working Capital Facility had no outstanding borrowings, leaving its full borrowing capacity of approximately $23 million remaining.

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Income Taxes

6 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

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

	Three months ended						Six months ended
	March 31						March 31
(In millions)	2021			2020			2021			2020
Income tax expense	$	22		$	25		$	52		$	49
Effective tax rate percentage	24.4		%	28.4		%	25.1		%	26.5		%

The decreases in effective tax rates for the three and six months ended March 31, 2021 were principally driven by tax reform legislation enacted in the prior year, which resulted in lower current year taxes and unfavorable discrete activity in the prior year periods. Higher pre-tax earnings in the six months ended March 31, 2021 more than offset these benefits resulting in an increase in tax expense for the current year-to-date period.

From a combination of statute expirations and anticipated audit settlements in the next twelve months, Valvoline currently estimates a decrease in the range of $25 million to $35 million in indemnity obligations due to the Company's former parent, which is expected to include certain unrecognized tax benefits.

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Employee Benefit Plans

6 Months Ended

Mar. 31, 2021

Retirement Benefits [Abstract]

Employee Benefit Plans

EMPLOYEE BENEFIT PLANS

The following table summarizes the components of pension and other postretirement benefit income:

					Other postretirement benefits
	Pension benefits
(In millions)	2021		2020		2021		2020
Three months ended March 31
Service cost	$	—	$	—	$	—	$	—
Interest cost	11		15		—		1
Expected return on plan assets	(21)		(22)		—		—
Amortization of prior service credit	—		—		(4)		(3)
Net periodic benefit income	$	(10)	$	(7)	$	(4)	$	(2)
Six months ended March 31
Service cost	$	1	$	1	$	—	$	—
Interest cost	22		31		—		1
Expected return on plan assets	(43)		(44)		—		—
Amortization of prior service credit	—		—		(6)		(6)
Net periodic benefit income	$	(20)	$	(12)	$	(6)	$	(5)

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Litigation, Claims and Contingencies

6 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Litigation, Claims and Contingencies

LITIGATION, CLAIMS AND CONTINGENCIES

From time to time, Valvoline is party to lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company establishes liabilities for the outcome of such matters where losses are determined to be probable and reasonably estimable. Where appropriate, the Company has recorded liabilities with respect to these matters, which were not material for the periods presented as reflected in the condensed consolidated financial statements herein. There are certain claims and legal proceedings pending where loss is not determined to be probable or reasonably estimable, and therefore, accruals have not been made. In addition, Valvoline discloses matters when management believes a material loss is at least reasonably possible.

In all instances, management has assessed each matter based on current information available and made a judgment concerning its potential outcome, giving due consideration to the amount and nature of the claim and the

probability of success. The Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable.

Although the ultimate resolution of these matters cannot be predicted with certainty and there can be no assurances that the actual amounts required to satisfy liabilities from these matters will not exceed the amounts reflected in the condensed consolidated financial statements, based on information available at this time, it is the opinion of management that such pending claims or proceedings will not have a material adverse effect on its condensed consolidated financial statements.

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Earnings Per Share

6 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

The following table summarizes basic and diluted earnings per share:

	Three months ended				Six months ended
	March 31				March 31
(In millions, except per share amounts)	2021		2020		2021		2020
Numerator
Net income	$	68	$	63	$	155	$	136
Denominator
Weighted average common shares outstanding	182		188		184		188
Effect of potentially dilutive securities (a)	1		—		—		1
Weighted average diluted shares outstanding	183		188		184		189
Earnings per share
Basic	$	0.37	$	0.33	$	0.84	$	0.72
Diluted	$	0.37	$	0.33	$	0.84	$	0.72

(a)During the three and six months ended March 31, 2020, there were approximately 1 million outstanding securities, primarily stock appreciation rights, not included in the computation of diluted earnings per share because the effect would have been antidilutive.

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Reportable Segment Information

6 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Reportable Segment Information

REPORTABLE SEGMENT INFORMATION

Valvoline manages and reports within the following three segments:

•Quick Lubes services the passenger car and light truck quick lube market in the United States and Canada through company-operated and independent franchised retail quick lube service center stores and independent Express Care stores that service vehicles with Valvoline products.

•Core North America sells engine and automotive maintenance products in the United States and Canada to retailers, installers, and heavy-duty customers to service vehicles and equipment.

•International sells engine and automotive maintenance products in more than 140 countries outside of the United States and Canada for the maintenance of consumer and commercial vehicles and equipment.

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker in assessing segment performance and in allocating resources. Sales and operating income are the primary U.S. GAAP measures evaluated in assessing each reportable segment’s financial performance. Operating income by segment includes the allocation of shared corporate costs, which are allocated consistently based on each segment’s proportional contribution to various financial measures. Intersegment sales are not material, and assets are not allocated and included in the assessment of segment performance; consequently, these items are not disclosed by segment herein.

To maintain operating focus on business performance, certain corporate and non-operational items, including adjustments related to legacy businesses that no longer are attributed to Valvoline, are excluded from the segment operating results utilized by the chief operating decision maker in evaluating segment performance and are

separately delineated within Unallocated and other to reconcile to total reported Operating income as shown in the table below.

Segment financial results

The following table presents sales and operating income for each reportable segment:

(In millions)	Three months ended				Six months ended
	March 31				March 31
	2021		2020		2021		2020
Sales
Quick Lubes	$	285	$	212	$	539	$	430
Core North America	242		238		477		486
International	174		128		338		269
Consolidated sales	$	701	$	578	$	1,354	$	1,185
Operating income
Quick Lubes	$	63	$	40	$	106	$	78
Core North America	38		47		85		93
International	28		18		62		38
Total operating segments	129		105		253		209
Unallocated and other (a)	2		12		2		12
Consolidated operating income	$	131	$	117	$	255	$	221

(a)Unallocated and other includes net legacy and separation-related activity and certain other corporate matters not allocated to the reportable segments.

Disaggregation of revenue

The following table summarizes sales by primary customer channel for the Company’s reportable segments:

	Three months ended				Six months ended
	March 31				March 31
(In millions)	2021		2020		2021		2020
Quick Lubes
Company operations	$	204	$	140	$	382	$	282
Non-company operations	81		72		157		148
Total Quick Lubes	285		212		539		430
Core North America
Retail	142		133		277		270
Installer and other	100		105		200		216
Total Core North America	242		238		477		486
International	174		128		338		269
Consolidated sales	$	701	$	578	$	1,354	$	1,185

Sales by reportable segment disaggregated by geographic market follows:

	Quick Lubes				Core North America				International				Total
(In millions)	2021		2020		2021		2020		2021		2020		2021		2020
Three months ended March 31
North America (a)	$	285	$	212	$	242	$	238	$	—	$	—	$	527	$	450
Europe, Middle East and Africa ("EMEA")	—		—		—		—		54		44		54		44
Asia Pacific	—		—		—		—		88		58		88		58
Latin America (a)	—		—		—		—		32		26		32		26
Totals	$	285	$	212	$	242	$	238	$	174	$	128	$	701	$	578
Six months ended March 31
North America (a)	$	539	$	430	$	477	$	486	$	—	$	—	$	1,016	$	916
EMEA	—		—		—		—		105		91		105		91
Asia Pacific	—		—		—		—		171		128		171		128
Latin America (a)	—		—		—		—		62		50		62		50
Totals	$	539	$	430	$	477	$	486	$	338	$	269	$	1,354	$	1,185

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Supplemental Financial Information

6 Months Ended

Mar. 31, 2021

Supplemental Financial Information [Abstract]

Supplemental Financial Information

SUPPLEMENTAL FINANCIAL INFORMATION

Cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statements of Cash Flows to the Condensed Consolidated Balance Sheets:

(In millions)	March 31 2021		September 30 2020		March 31 2020
Cash and cash equivalents	$	247	$	760	$	774
Restricted cash (a)	1		1		1
Total cash, cash equivalents and restricted cash	$	248	$	761	$	775

(a)Included in Prepaid expenses and other current assets within the Condensed Consolidated Balance Sheets.

Accounts and other receivables

The following table summarizes Valvoline’s accounts and other receivables in the Condensed Consolidated Balance Sheets:

(In millions)	March 31 2021		September 30 2020
Current
Trade	$	426	$	409
Other	16		14
Notes receivable from franchisees (a)	10		13
Receivables, gross	452		436
Allowance for credit losses	(4)		(3)
Receivables, net	$	448	$	433
Non-current (b)
Notes receivable from franchisees (a)	$	5	$	13
Other notes receivable	3		8
Noncurrent notes receivable, gross	8		21
Allowance for losses	(3)		(4)
Noncurrent notes receivable, net	$	5	$	17

(a)Notes receivable from franchisees were primarily issued in fiscal 2020 to provide financial assistance in response to the COVID-19 pandemic. No material balances were past due as of March 31, 2021.

(b)Included in Other noncurrent assets within the Condensed Consolidated Balance Sheets.

Inventories

Inventories are primarily carried at the lower of cost or net realizable value using the weighted average cost method. In addition, certain lubricants are valued at the lower of cost or market using the last-in, first-out ("LIFO") method.

The following table summarizes Valvoline’s inventories in the Condensed Consolidated Balance Sheets:

(In millions)	March 31 2021		September 30 2020
Finished products	$	216	$	195
Raw materials, supplies and work in process	37		30
Reserve for LIFO cost valuation	(35)		(26)
Total inventories, net	$	218	$	199

Revenue recognition

The following table disaggregates the Company’s sales by timing of recognition:

	Three months ended				Six months ended
	March 31				March 31
(In millions)	2021		2020		2021		2020
Sales at a point in time	$	689	$	569	$	1,331	$	1,165
Franchised revenues transferred over time	12		9		23		20
Total consolidated sales	$	701	$	578	$	1,354	$	1,185

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Subsequent Events

6 Months Ended

Mar. 31, 2021

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

Dividend declared

On April 22, 2021, the Board of Directors of Valvoline declared a quarterly cash dividend of $0.125 per share of Valvoline common stock. The dividend is payable on June 15, 2021 to shareholders of record on May 28, 2021.

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Basis of Presentation and Significant Accounting Policies (Policies)

6 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Valvoline Inc. (“Valvoline” or the “Company”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Securities and Exchange Commission (“SEC”) regulations for interim financial reporting, which do not include all information and footnote disclosures normally included in annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. In the opinion of management, the assumptions underlying the condensed consolidated financial statements for these interim periods are reasonable, and all adjustments considered necessary for a fair presentation have been made and are of a normal recurring nature unless otherwise disclosed herein. The results for interim periods are not necessarily indicative of those to be expected for the entire year, particularly in light of the novel coronavirus ("COVID-19") global pandemic and its effects.

Valvoline has substantially maintained its operations throughout the COVID-19 pandemic to-date and has continued precautionary measures to protect the Company's employees and customers and manage through the currently known impacts on its business. Given the unprecedented nature of the pandemic, the extent of future impacts cannot be reasonably estimated at this time due to numerous uncertainties, including the duration and severity of the pandemic.

Recent accounting pronouncements

The following standards relevant to Valvoline were either issued or adopted in the current year, or are expected to have a meaningful impact on Valvoline in future periods upon adoption. The Financial Accounting Standards Board ("FASB") issued other accounting guidance during the period that is not currently applicable or expected to have a material impact on Valvoline’s condensed consolidated financial statements, and therefore, is not described below.

Recently adopted

In June 2016, the FASB issued updated guidance that changes the recognition of credit losses from an incurred or probable loss methodology to a current expected credit loss model that results in the immediate recognition of credit losses that are expected to occur over the life of the financial instruments that are within the scope of the guidance, principally trade and other receivables for Valvoline. The new credit loss guidance was adopted on October 1, 2020 using the required modified retrospective approach. Under this approach, the new accounting guidance is applied prospectively from the date of adoption through a cumulative effect adjustment in retained deficit, while prior period financial statements continue to be reported in accordance with the previous guidance. Adoption did not have a material impact on the Company's condensed consolidated financial statements and resulted in a $2 million, net of tax, cumulative effect of accounting change that increased retained deficit and allowances for credit losses.

In connection with and following the adoption of this guidance, Valvoline maintains allowances to estimate expected lifetime credit losses that are based on a broad range of reasonable and supportable information and factors, including the length of time receivables are past due, the financial health of its customers, macroeconomic conditions, and historical collection experience. Refer to Note 11 for additional information regarding the Company's trade and other receivables and its allowances for credit losses.

Issued but not yet adopted

In March 2020, the FASB issued guidance regarding the effects of reference rate reform intended to ease financial reporting burdens as the market transitions from the London Interbank Offered Rate ("LIBOR") and other interbank reference rates to alternative reference rates. The Company has interest rate swap hedging arrangements and long-term debt as described in Notes 2 and 5 to the Condensed Consolidated Financial Statements, respectively, for which existing payments are based on LIBOR. This guidance is available to be adopted through the end of calendar 2022 to simplify the accounting for arrangements modified for the transition to alternative reference rates.

The Company expects to adopt this guidance to the extent its arrangements are modified for the underlying reference rate prior to the end of calendar 2022 and does not expect adoption will have a material impact on its condensed consolidated financial statements.

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Fair Value Measurements (Tables)

6 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities at Fair Value

The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy:

	As of March 31, 2021
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	13	$	13	$	—	$	—	$	—
Time deposits	74		—		74		—		—
Prepaid expenses and other current assets
Currency derivatives (b)	3		—		3		—		—
Other noncurrent assets
Non-qualified trust funds	13		—		4		—		9
Interest rate swap agreements	2				2
Total assets at fair value	$	105	$	13	$	83	$	—	$	9
Accrued expenses and other liabilities
Currency derivatives (b)	$	2	$	—	$	2	$	—	$	—
Interest rate swap agreements	1		—		1		—		—
Other noncurrent liabilities
Deferred compensation obligations	23		—		—		—		23
Total liabilities at fair value	$	26	$	—	$	3	$	—	$	23
	As of September 30, 2020
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	296	$	296	$	—	$	—	$	—
Time deposits	139		—		139		—		—
Prepaid expenses and other current assets
Currency derivatives (b)	3		—		3		—		—
Other noncurrent assets
Non-qualified trust funds	16		—		8		—		8
Total assets at fair value	$	454	$	296	$	150	$	—	$	8
Accrued expenses and other liabilities
Currency derivatives (b)	$	2	$	—	$	2	$	—	$	—
Interest rate swap agreements	1		—		1		—		—
Other noncurrent liabilities
Deferred compensation obligations	25		—		—		—		25
Total liabilities at fair value	$	28	$	—	$	3	$	—	$	25

(a)Funds measured at fair value using the net asset value ("NAV") per share practical expedient have not been classified in the fair value hierarchy.

(b)The Company had outstanding contracts with notional values of $173 million and $149 million as of March 31, 2021 and September 30, 2020, respectively.

Summary of Fair Value of Debt

Carrying values shown in the following table are net of unamortized discounts and issuance costs.

	March 31, 2021						September 30, 2020
(In millions)	Fair value		Carrying value		Unamortized discounts and issuance costs		Fair value		Carrying value		Unamortized discounts and issuance costs
2025 Notes	$	—	$	—	$	—	$	827	$	790	$	(10)
2030 Notes	613		593		(7)		613		592		(8)
2031 Notes	519		528		(7)		—		—		—
Total	$	1,132	$	1,121	$	(14)	$	1,440	$	1,382	$	(18)

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Acquisitions and Divestitures (Tables)

6 Months Ended

Mar. 31, 2021

Business Combinations [Abstract]

Summary of Consideration Paid and Assets and Liabilities Acquired

A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the six months ended March 31:

(In millions)	2021		2020
Inventories	$	2	$	—
Other current assets	1		—
Property, plant and equipment (a)	82		1
Operating lease assets	26		—
Goodwill (b)	180		5
Intangible assets (c)
Reacquired franchise rights (d)	34		5
Other	3		—
Other current liabilities (a)	(7)		—
Operating lease liabilities	(24)		—
Other noncurrent liabilities (a)	(74)		—
Net assets acquired	$	223	$	11

(a)Includes $73 million of finance lease assets in property, plant and equipment and finance lease liabilities of $3 million and $70 million in other current and noncurrent liabilities, respectively, for leases acquired during the six months ended March 31, 2021.

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

(c)Intangible assets acquired during the six months ended March 31, 2021 and 2020 have weighted average amortization periods of 11 and nine years, respectively.

(d)Prior to the acquisition of former franchise service center stores, Valvoline licensed the right to operate franchised quick lube service centers, including use of the Company’s trademarks and trade name. In connection with these acquisitions, Valvoline reacquired those rights and recognized separate definite-lived reacquired franchise rights intangible assets, which are being amortized on a straight-line basis over the weighted average remaining term of approximately 11 years for the rights reacquired in fiscal 2021. The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were at market.

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Goodwill and Other Intangibles (Tables)

6 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following table summarizes changes in the carrying amount of goodwill by reportable segment and in total during the six months ended March 31, 2021:

(In millions)	Quick Lubes		Core North America		International		Total
Balance at September 30, 2020	$	316	$	89	$	40	$	445
Acquisitions (a)	178		—		2		180
Dispositions (b)	(10)		—		—		(10)
Currency translation	2		—		—		2
Balance at March 31, 2021	$	486	$	89	$	42	$	617

(a)Includes acquisitions within the Quick Lubes reportable segment of 86 service center stores and a former joint venture in the International reportable segment. Refer to Note 3 for additional details.

(b)Derecognition of goodwill associated with the sale of 12 company-owned, franchise-operated service center stores to franchisees.

Schedule of Definite-Lived Intangible Assets

The following summarizes the gross carrying amounts and accumulated amortization of the Company’s intangible assets:

(In millions)	March 31, 2021						September 30, 2020
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Definite-lived intangible assets
Trademarks and trade names	$	31	$	(7)	$	24	$	30	$	(6)	$	24
Reacquired franchise rights	91		(18)		73		57		(14)		43
Customer relationships	22		(8)		14		22		(7)		15
Other intangible assets	6		(2)		4		3		(1)		2
Total definite-lived intangible assets	$	150	$	(35)	$	115	$	112	$	(28)	$	84

Schedule of Definite-Lived Intangible Assets, Actual and Estimated Amortization Expense

The table that follows summarizes amortization expense (actual and estimated) for intangible assets, assuming no additional amortizable intangible assets:

	Actual		Estimated
	Six months ended March 31		Years ended September 30
(In millions)	2021		2021		2022		2023		2024		2025
Amortization expense	$	7	$	15	$	14	$	14	$	13	$	11

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Debt (Tables)

6 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Schedule of Total Debt

The following table summarizes Valvoline’s total debt as of:

(In millions)	March 31 2021		September 30 2020
2031 Notes	$	535	$	—
2030 Notes	600		600
2025 Notes	—		800
Term Loan	475		475
Trade Receivables Facility	88		88
China Construction Facility	37		18
Debt issuance costs and discounts	(15)		(19)
Total debt	1,720		1,962
Current portion of long-term debt	1		—
Long-term debt	$	1,719	$	1,962

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Income Taxes (Tables)

6 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Schedule of Income Tax Expense and Effective Tax Rate

The following summarizes income tax expense and the effective tax rate in each interim period:

	Three months ended						Six months ended
	March 31						March 31
(In millions)	2021			2020			2021			2020
Income tax expense	$	22		$	25		$	52		$	49
Effective tax rate percentage	24.4		%	28.4		%	25.1		%	26.5		%

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Employee Benefit Plans (Tables)

6 Months Ended

Mar. 31, 2021

Retirement Benefits [Abstract]

Components of Pension and Other Postretirement Benefit Income

The following table summarizes the components of pension and other postretirement benefit income:

					Other postretirement benefits
	Pension benefits
(In millions)	2021		2020		2021		2020
Three months ended March 31
Service cost	$	—	$	—	$	—	$	—
Interest cost	11		15		—		1
Expected return on plan assets	(21)		(22)		—		—
Amortization of prior service credit	—		—		(4)		(3)
Net periodic benefit income	$	(10)	$	(7)	$	(4)	$	(2)
Six months ended March 31
Service cost	$	1	$	1	$	—	$	—
Interest cost	22		31		—		1
Expected return on plan assets	(43)		(44)		—		—
Amortization of prior service credit	—		—		(6)		(6)
Net periodic benefit income	$	(20)	$	(12)	$	(6)	$	(5)

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Earnings Per Share (Tables)

6 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

:

	Three months ended				Six months ended
	March 31				March 31
(In millions, except per share amounts)	2021		2020		2021		2020
Numerator
Net income	$	68	$	63	$	155	$	136
Denominator
Weighted average common shares outstanding	182		188		184		188
Effect of potentially dilutive securities (a)	1		—		—		1
Weighted average diluted shares outstanding	183		188		184		189
Earnings per share
Basic	$	0.37	$	0.33	$	0.84	$	0.72
Diluted	$	0.37	$	0.33	$	0.84	$	0.72

(a)During the three and six months ended March 31, 2020, there were approximately 1 million outstanding securities, primarily stock appreciation rights, not included in the computation of diluted earnings per share because the effect would have been antidilutive.

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Reportable Segment Information (Tables)

6 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Schedule of Segment Reporting Information

The following table presents sales and operating income for each reportable segment:

(In millions)	Three months ended				Six months ended
	March 31				March 31
	2021		2020		2021		2020
Sales
Quick Lubes	$	285	$	212	$	539	$	430
Core North America	242		238		477		486
International	174		128		338		269
Consolidated sales	$	701	$	578	$	1,354	$	1,185
Operating income
Quick Lubes	$	63	$	40	$	106	$	78
Core North America	38		47		85		93
International	28		18		62		38
Total operating segments	129		105		253		209
Unallocated and other (a)	2		12		2		12
Consolidated operating income	$	131	$	117	$	255	$	221

(a)Unallocated and other includes net legacy and separation-related activity and certain other corporate matters not allocated to the reportable segments.

Schedule of Disaggregated Revenues

The following table summarizes sales by primary customer channel for the Company’s reportable segments:

	Three months ended				Six months ended
	March 31				March 31
(In millions)	2021		2020		2021		2020
Quick Lubes
Company operations	$	204	$	140	$	382	$	282
Non-company operations	81		72		157		148
Total Quick Lubes	285		212		539		430
Core North America
Retail	142		133		277		270
Installer and other	100		105		200		216
Total Core North America	242		238		477		486
International	174		128		338		269
Consolidated sales	$	701	$	578	$	1,354	$	1,185

Schedule of Sales Disaggregated by Segment and Geographical Area

Sales by reportable segment disaggregated by geographic market follows:

	Quick Lubes				Core North America				International				Total
(In millions)	2021		2020		2021		2020		2021		2020		2021		2020
Three months ended March 31
North America (a)	$	285	$	212	$	242	$	238	$	—	$	—	$	527	$	450
Europe, Middle East and Africa ("EMEA")	—		—		—		—		54		44		54		44
Asia Pacific	—		—		—		—		88		58		88		58
Latin America (a)	—		—		—		—		32		26		32		26
Totals	$	285	$	212	$	242	$	238	$	174	$	128	$	701	$	578
Six months ended March 31
North America (a)	$	539	$	430	$	477	$	486	$	—	$	—	$	1,016	$	916
EMEA	—		—		—		—		105		91		105		91
Asia Pacific	—		—		—		—		171		128		171		128
Latin America (a)	—		—		—		—		62		50		62		50
Totals	$	539	$	430	$	477	$	486	$	338	$	269	$	1,354	$	1,185

(a)Valvoline includes the United States and Canada in its North America region. Mexico is included within the Latin America region.

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Supplemental Financial Information (Tables)

6 Months Ended

Mar. 31, 2021

Supplemental Financial Information [Abstract]

Schedule of Cash and Cash Equivalents

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statements of Cash Flows to the Condensed Consolidated Balance Sheets:

(In millions)	March 31 2021		September 30 2020		March 31 2020
Cash and cash equivalents	$	247	$	760	$	774
Restricted cash (a)	1		1		1
Total cash, cash equivalents and restricted cash	$	248	$	761	$	775

(a)Included in Prepaid expenses and other current assets within the Condensed Consolidated Balance Sheets

Summary of Accounts Receivable

The following table summarizes Valvoline’s accounts and other receivables in the Condensed Consolidated Balance Sheets:

(In millions)	March 31 2021		September 30 2020
Current
Trade	$	426	$	409
Other	16		14
Notes receivable from franchisees (a)	10		13
Receivables, gross	452		436
Allowance for credit losses	(4)		(3)
Receivables, net	$	448	$	433
Non-current (b)
Notes receivable from franchisees (a)	$	5	$	13
Other notes receivable	3		8
Noncurrent notes receivable, gross	8		21
Allowance for losses	(3)		(4)
Noncurrent notes receivable, net	$	5	$	17

(a)Notes receivable from franchisees were primarily issued in fiscal 2020 to provide financial assistance in response to the COVID-19 pandemic. No material balances were past due as of March 31, 2021.

(b)Included in Other noncurrent assets within the Condensed Consolidated Balance Sheets.

Summary of Inventory

The following table summarizes Valvoline’s inventories in the Condensed Consolidated Balance Sheets:

(In millions)	March 31 2021		September 30 2020
Finished products	$	216	$	195
Raw materials, supplies and work in process	37		30
Reserve for LIFO cost valuation	(35)		(26)
Total inventories, net	$	218	$	199

Disaggregation of Sales by Timing of Revenue Recognized

The following table disaggregates the Company’s sales by timing of recognition:

	Three months ended				Six months ended
	March 31				March 31
(In millions)	2021		2020		2021		2020
Sales at a point in time	$	689	$	569	$	1,331	$	1,165
Franchised revenues transferred over time	12		9		23		20
Total consolidated sales	$	701	$	578	$	1,354	$	1,185

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Basis of Presentation and Significant Accounting Policies (Details) $ in Millions	Sep. 30, 2020 USD ($)
Cumulative Effect, Period of Adoption, Adjustment
Accounts Receivable, Allowance for Credit Loss	$ 2

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Fair Value Measurements - Schedule of Assets and Liabilities at Fair Value (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Foreign Exchange Contract [Member] | Not Designated as Hedging Instrument
Liabilities, Fair Value Disclosure [Abstract]
Derivative, Notional Amount	$ 173	$ 149
Fair Value, Inputs, Level 1 [Member]
Other noncurrent assets
Assets, Fair Value Disclosure	13	296
Fair Value, Inputs, Level 2 [Member]
Other noncurrent assets
Assets, Fair Value Disclosure	83	150
Liabilities, Fair Value Disclosure [Abstract]
Financial and Nonfinancial Liabilities, Fair Value Disclosure	3	3
Fair Value Measured at Net Asset Value Per Share
Other noncurrent assets
Non-qualified trust funds	9	8
Liabilities, Fair Value Disclosure [Abstract]
Deferred compensation obligations	23	25
Fair Value, Measurements, Recurring
Prepaid Expense and Other Assets, Current [Abstract]
Currency derivatives	3	3
Other noncurrent assets
Non-qualified trust funds	13	16
Interest Rate Fair Value Hedge Asset at Fair Value	2
Assets, Fair Value Disclosure	105	454
Liabilities, Fair Value Disclosure [Abstract]
Currency derivatives	2	2
Interest rate swap agreements	1	1
Deferred compensation obligations	23	25
Financial and Nonfinancial Liabilities, Fair Value Disclosure	26	28
Fair Value, Measurements, Recurring | Money Market Funds [Member]
Cash and cash equivalents
Cash and Cash Equivalents, Fair Value Disclosure	13	296
Fair Value, Measurements, Recurring | Time deposits
Cash and cash equivalents
Cash and Cash Equivalents, Fair Value Disclosure	74	139
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1 [Member] | Money Market Funds [Member]
Cash and cash equivalents
Cash and Cash Equivalents, Fair Value Disclosure	13	296
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 [Member]
Prepaid Expense and Other Assets, Current [Abstract]
Currency derivatives	3	3
Other noncurrent assets
Non-qualified trust funds	4	8
Interest Rate Derivative Assets, at Fair Value	2
Liabilities, Fair Value Disclosure [Abstract]
Currency derivatives	2	2
Interest rate swap agreements	1	1
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 [Member] | Time deposits
Cash and cash equivalents
Cash and Cash Equivalents, Fair Value Disclosure	74	139
Fair Value, Measurements, Recurring | Fair Value Measured at Net Asset Value Per Share
Other noncurrent assets
Non-qualified trust funds	9	8
Liabilities, Fair Value Disclosure [Abstract]
Deferred compensation obligations	$ 23	$ 25

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Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Assets and Liabilities Measured on Recurring Basis, Gain (Loss) Included in Earnings	$ 0	$ 0	$ 0	$ 0

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Fair Value Measurements - Fair Value of Debt (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Unamortized discounts and issuance costs	$ 15	$ 19
Fair Value, Inputs, Level 2 [Member] | Fair value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	1,132	1,440
Fair Value, Inputs, Level 2 [Member] | Fair value | Senior Notes | 2025 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	0	827
Fair Value, Inputs, Level 2 [Member] | Fair value | Senior Notes | Senior Unsecured Notes Due 2030 [Domain]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	613	613
Fair Value, Inputs, Level 2 [Member] | Fair value | Senior Notes | Senior Unsecured Notes Due 2031 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	519	0
Fair Value, Inputs, Level 2 [Member] | Carrying value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	1,121	1,382
Unamortized discounts and issuance costs	(14)	(18)
Fair Value, Inputs, Level 2 [Member] | Carrying value | Senior Notes | 2025 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	0	790
Unamortized discounts and issuance costs	0	(10)
Fair Value, Inputs, Level 2 [Member] | Carrying value | Senior Notes | Senior Unsecured Notes Due 2030 [Domain]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	593	592
Unamortized discounts and issuance costs	(7)	(8)
Fair Value, Inputs, Level 2 [Member] | Carrying value | Senior Notes | Senior Unsecured Notes Due 2031 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	528	0
Unamortized discounts and issuance costs	$ (7)	$ 0

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Acquisitions and Divestitures - Narrative (Details) $ in Millions					6 Months Ended
	Dec. 11, 2020 service_center_store	Oct. 30, 2020 service_center_store	Oct. 15, 2020 service_center_store	Oct. 01, 2020 service_center_store	Mar. 31, 2021 USD ($) service_center_store	Mar. 31, 2020 USD ($) service_center_store
Business Acquisition [Line Items]
Number of service center stores acquired					5	14
Consideration for acquisition | $					$ 223	$ 11
Number of service center stores acquired in single and multi-store transactions					100
Business Disposition, Number of Service Centers Sold					12
Business Acquisition, Number of Former Franchise Service Centers					7	6
Number of System-wide Service Center Stores					1,500
Number of Company Owned Stores					650
Operating lease assets | $					$ 26	$ 0
Business Acquisition, Number of Former Joint Venture Locations					14
Quick Lubes
Business Acquisition [Line Items]
Number of service center stores acquired in single and multi-store transactions					86
Car Wash Partners, Inc. [Member]
Business Acquisition [Line Items]
Number of service center stores acquired	27
Number of franchise-operated service center stores acquired	12
Number of service center stores acquired in single and multi-store transactions	15
Business Acquisition, Number Of States in Which Service Center Stores Acquired	7
Kent Lubrication Centers Ltd. dba Avis Lube [Member]
Business Acquisition [Line Items]
Number of service center stores acquired				14
Westco Lube, Inc [Member]
Business Acquisition [Line Items]
Business Acquisition, Number of Former Franchise Service Centers			21
L&F Enterprises dba Einstein's Oilery [Member]
Business Acquisition [Line Items]
Number of service center stores acquired		12

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Acquisitions and Divestitures - Schedule of Aggregate Cash Consideration and Total Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Business Acquisition [Line Items]
Inventory	$ 2	$ 0
Other Current Assets	1	0
Property plant and equipment	82	1
Operating lease assets	26	0
Goodwill (b)	180	5
Other Current Liabilities	(7)	0
Operating Lease Liabilities	(24)	0
Other noncurrent liabilities	(74)	0
Net assets acquired	223	11
Consideration transferred	223	$ 11
Financing lease assets	73
Financing lease liabilities, noncurrent	70
Gain (Loss) on Contract Termination	0
Financing lease liabilities, current	$ 3
Weighted average amortization period	11 years	9 years
Reacquired franchise rights (d)
Business Acquisition [Line Items]
Weighted average amortization period	11 years
Intangible assets	$ 34	$ 5
Other
Business Acquisition [Line Items]
Intangible assets	$ 3	$ 0

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Goodwill and Other Intangibles - Summary of Goodwill by Segment (Details) $ in Millions	6 Months Ended
	Mar. 31, 2021 USD ($) service_center_store
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 445
Acquisitions	180
Goodwill, Written off Related to Sale of Business Unit	10
Currency translation	2
Goodwill, ending balance	$ 617
Number of service center stores acquired in single and multi-store transactions | service_center_store	100
Quick Lubes
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 316
Acquisitions	178
Goodwill, Written off Related to Sale of Business Unit	10
Currency translation	2
Goodwill, ending balance	$ 486
Number of service center stores acquired in single and multi-store transactions | service_center_store	86
Core North America
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 89
Acquisitions	0
Goodwill, Written off Related to Sale of Business Unit	0
Currency translation	0
Goodwill, ending balance	89
International
Goodwill [Roll Forward]
Goodwill, beginning balance	40
Acquisitions	2
Goodwill, Written off Related to Sale of Business Unit	0
Currency translation	0
Goodwill, ending balance	$ 42

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Goodwill and Other Intangibles - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	$ 150	$ 112
Finite-Lived Intangible Assets, Accumulated Amortization	(35)	(28)
Finite-Lived Intangible Assets, Net	115	84
Trademarks and trade names
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	31	30
Finite-Lived Intangible Assets, Accumulated Amortization	(7)	(6)
Finite-Lived Intangible Assets, Net	24	24
Reacquired franchise rights (d)
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	91	57
Finite-Lived Intangible Assets, Accumulated Amortization	(18)	(14)
Finite-Lived Intangible Assets, Net	73	43
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	22	22
Finite-Lived Intangible Assets, Accumulated Amortization	(8)	(7)
Finite-Lived Intangible Assets, Net	14	15
Other
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Gross	6	3
Finite-Lived Intangible Assets, Accumulated Amortization	(2)	(1)
Finite-Lived Intangible Assets, Net	$ 4	$ 2

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Goodwill and Other Intangibles (Details) - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2021	Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of Intangible Assets	$ 7
Finite-Lived Intangible Asset, Expected Amortization, Year One		$ 15
Estimated 2022		14
Estimated 2023		14
Estimated 2024		13
Estimated 2025		$ 11

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Debt - Schedule of Short-Term Borrowings and Long Term Debt (Details) - USD ($)	Mar. 31, 2021	Jan. 14, 2021	Sep. 30, 2020
Debt Instrument [Line Items]
Current portion of long-term debt	$ 1,000,000		$ 0
Long-term debt	1,719,000,000		1,962,000,000
Debt issuance costs and discounts	(15,000,000)		(19,000,000)
Total debt	1,720,000,000		1,962,000,000
Senior Unsecured Notes Due 2031 [Member] | Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount	535,000,000		0
Senior Unsecured Notes Due 2030 [Domain] | Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount	600,000,000		600,000,000
2025 Notes | Senior Notes
Debt Instrument [Line Items]
Debt gross	0		800,000,000
Aggregate principal amount		$ 800,000,000
Term Loan | Line of Credit
Debt Instrument [Line Items]
Debt gross	475,000,000		475,000,000
Term Loan | Line of Credit | Revolver
Debt Instrument [Line Items]
Debt gross	475,000,000
Long-term debt	0		0
Trade Receivables Facility | Line of Credit | Secured Debt
Debt Instrument [Line Items]
Debt gross	175,000,000
Long-term debt	88,000,000		88,000,000
Construction Credit Facility [Member] | CHINA
Debt Instrument [Line Items]
Long-term debt	$ 37,000,000		$ 18,000,000

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Debt - Senior Notes (Details) - USD ($)		6 Months Ended
	Jan. 14, 2021	Mar. 31, 2021	Mar. 31, 2020	Sep. 30, 2020
Debt Instrument [Line Items]
Payment for debt extinguishment or debt prepayment cost		$ 26,000,000	$ 15,000,000
Debt issuance costs and discounts		15,000,000		$ 19,000,000
Proceeds from borrowings, net of issuance costs		546,000,000	1,132,000,000
Gain (loss) on extinguishment of debt	$ 36,000,000	$ 36,000,000	$ 19,000,000
2025 Notes
Debt Instrument [Line Items]
Repayments of senior debt	840,000,000
Redemption Premium	26,000,000
Senior Notes | Senior Unsecured Notes Due 2031 [Member]
Debt Instrument [Line Items]
Interest rate on senior unsecured notes		3.625%
Aggregate principal amount		$ 535,000,000		0
Proceeds from borrowings, net of issuance costs	$ 528,000,000
Senior Notes | 2025 Notes
Debt Instrument [Line Items]
Interest rate on senior unsecured notes	4.375%
Aggregate principal amount	$ 800,000,000
Senior Notes | Senior Unsecured Notes Due 2030 [Domain]
Debt Instrument [Line Items]
Interest rate on senior unsecured notes		4.25%
Aggregate principal amount		$ 600,000,000		$ 600,000,000

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Debt - Senior Credit Agreement (Details) - Term Loan - Line of Credit - USD ($)	6 Months Ended
	Mar. 31, 2021	Sep. 30, 2020
Debt Instrument [Line Items]
Debt gross	$ 475,000,000	$ 475,000,000
Revolver
Debt Instrument [Line Items]
Repayments of long-term debt	5,000,000
Total borrowing capacity remaining	470,000,000
Debt gross	$ 475,000,000

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Debt - Trade Receivables Facility (Details) - Line of Credit - Trade Receivables Facility - Secured Debt - USD ($)	Apr. 27, 2021	Mar. 31, 2021	Sep. 30, 2020
Debt Instrument [Line Items]
Long-term debt outstanding amount		$ 88,000,000	$ 88,000,000
Debt gross		175,000,000
Subsequent Event
Debt Instrument [Line Items]
Total borrowing capacity remaining	$ 87,000,000
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	33.00%
Financing Subsidiary
Debt Instrument [Line Items]
Accounts receivable pledged as collateral		$ 246,000,000	$ 267,000,000

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Debt - China Credit Facility (Details) - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Nov. 16, 2020	Sep. 30, 2020	May 06, 2020
Line of Credit Facility [Line Items]
Proceeds from borrowings, net of issuance costs	$ 546	$ 1,132
CHINA | Construction Credit Facility [Member]
Line of Credit Facility [Line Items]
Original principal amount of debt					$ 40
Total borrowing capacity remaining	3
Long-term debt	37			$ 18
Proceeds from borrowings, net of issuance costs	18
CHINA | Working Capital Loan [Member]
Line of Credit Facility [Line Items]
Original principal amount of debt			$ 23
Total borrowing capacity remaining	23
Long-term debt	$ 0

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Income Taxes - Schedule of Income Tax Expense and Effective Tax Rate (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Income tax expense	$ 22	$ 25	$ 52	$ 49
Effective tax rate percentage	24.40%	28.40%	25.10%	26.50%

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Income Taxes - Narrative (Details) $ in Millions	Mar. 31, 2021 USD ($)
Minimum
Operating Loss Carryforwards [Line Items]
Liability for uncertain income tax positions	$ 25
Maximum
Operating Loss Carryforwards [Line Items]
Liability for uncertain income tax positions	$ 35

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Employee Benefit Plans - Components of Pension and Other Postretirement Benefit Income (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Pension benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 0	$ 0	$ 1	$ 1
Interest cost	11	15	22	31
Expected return on plan assets	(21)	(22)	(43)	(44)
Amortization of prior service credit	0	0	0	0
Net periodic benefit income	(10)	(7)	(20)	(12)
Other postretirement benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	0	0	0	0
Interest cost	0	1	0	1
Expected return on plan assets	0	0	0	0
Amortization of prior service credit	(4)	(3)	(6)	(6)
Net periodic benefit income	$ (4)	$ (2)	$ (6)	$ (5)

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended				6 Months Ended
	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2021	Mar. 31, 2020
Numerator
Net income	$ 68	$ 87	$ 63	$ 73	$ 155	$ 136
Denominator
Weighted-average common shares outstanding (shares)	182		188		184	188
Effect of potentially dilutive securities (shares)	1		0		0	1
Weighted average diluted shares outstanding (shares)	183		188		184	189
Earnings per share
Basic (usd per share)	$ 0.37		$ 0.33		$ 0.84	$ 0.72
Diluted (usd per share)	$ 0.37		$ 0.33		$ 0.84	$ 0.72
Shares excluded from diluted earnings per share calculation due to anti-dilutive effect (shares)			1			1

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Reportable Segment Information - Narrative (Details)	6 Months Ended
	Mar. 31, 2021 numberOfCountries numberOfSegments
Segment Reporting Information [Line Items]
Number of reportable segments | numberOfSegments	3
Non-US
Segment Reporting Information [Line Items]
Number of countries where our products are sold | numberOfCountries	140

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Reportable Segment Information - Sales and Operating Income by Reportable Segment (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Segment Reporting Information [Line Items]
Sales	$ 701	$ 578	$ 1,354	$ 1,185
Operating income	131	117	255	221
North America
Segment Reporting Information [Line Items]
Sales	527	450	1,016	916
EMEA
Segment Reporting Information [Line Items]
Sales	54	44	105	91
Asia Pacific
Segment Reporting Information [Line Items]
Sales	88	58	171	128
Latin America
Segment Reporting Information [Line Items]
Sales	32	26	62	50
Operating Segments
Segment Reporting Information [Line Items]
Operating income	129	105	253	209
Unallocated and Other
Segment Reporting Information [Line Items]
Operating income	2	12	2	12
Quick Lubes
Segment Reporting Information [Line Items]
Sales			539	430
Quick Lubes | North America
Segment Reporting Information [Line Items]
Sales	285	212	539	430
Quick Lubes | EMEA
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Quick Lubes | Asia Pacific
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Quick Lubes | Latin America
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Quick Lubes | Operating Segments
Segment Reporting Information [Line Items]
Sales	285	212	539	430
Operating income	63	40	106	78
Core North America
Segment Reporting Information [Line Items]
Sales			477	486
Core North America | North America
Segment Reporting Information [Line Items]
Sales	242	238	477	486
Core North America | EMEA
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Core North America | Asia Pacific
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Core North America | Latin America
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Core North America | Operating Segments
Segment Reporting Information [Line Items]
Sales	242	238	477	486
Operating income	38	47	85	93
International
Segment Reporting Information [Line Items]
Sales	174	128	338	269
International | North America
Segment Reporting Information [Line Items]
Sales	0	0	0	0
International | EMEA
Segment Reporting Information [Line Items]
Sales	54	44	105	91
International | Asia Pacific
Segment Reporting Information [Line Items]
Sales	88	58	171	128
International | Latin America
Segment Reporting Information [Line Items]
Sales	32	26	62	50
International | Operating Segments
Segment Reporting Information [Line Items]
Sales	174	128	338	269
Operating income	$ 28	$ 18	$ 62	$ 38

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Reportable Segment Information - Disaggregation of Revenues by Reportable Segments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Segment Reporting Information [Line Items]
Sales	$ 701	$ 578	$ 1,354	$ 1,185
Quick Lubes
Segment Reporting Information [Line Items]
Sales			539	430
Quick Lubes | Operating Segments
Segment Reporting Information [Line Items]
Sales	285	212	539	430
Quick Lubes | Company operations | Operating Segments
Segment Reporting Information [Line Items]
Sales	204	140	382	282
Quick Lubes | Non-company operations | Operating Segments
Segment Reporting Information [Line Items]
Sales	81	72	157	148
Core North America
Segment Reporting Information [Line Items]
Sales			477	486
Core North America | Operating Segments
Segment Reporting Information [Line Items]
Sales	242	238	477	486
Core North America | Retail | Operating Segments
Segment Reporting Information [Line Items]
Sales	142	133	277	270
Core North America | Installer and other | Operating Segments
Segment Reporting Information [Line Items]
Sales	100	105	200	216
International
Segment Reporting Information [Line Items]
Sales	174	128	338	269
International | Operating Segments
Segment Reporting Information [Line Items]
Sales	$ 174	$ 128	$ 338	$ 269

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Reportable Segment Information - Disaggregation of Revenues by Geographical Market (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Segment Reporting Information [Line Items]
Sales	$ 701	$ 578	$ 1,354	$ 1,185
North America
Segment Reporting Information [Line Items]
Sales	527	450	1,016	916
EMEA
Segment Reporting Information [Line Items]
Sales	54	44	105	91
Asia Pacific
Segment Reporting Information [Line Items]
Sales	88	58	171	128
Latin America
Segment Reporting Information [Line Items]
Sales	32	26	62	50
Quick Lubes
Segment Reporting Information [Line Items]
Sales			539	430
Quick Lubes | Operating Segments
Segment Reporting Information [Line Items]
Sales	285	212	539	430
Quick Lubes | Operating Segments | Company operations
Segment Reporting Information [Line Items]
Sales	204	140	382	282
Quick Lubes | North America
Segment Reporting Information [Line Items]
Sales	285	212	539	430
Quick Lubes | EMEA
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Quick Lubes | Asia Pacific
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Quick Lubes | Latin America
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Core North America
Segment Reporting Information [Line Items]
Sales			477	486
Core North America | Operating Segments
Segment Reporting Information [Line Items]
Sales	242	238	477	486
Core North America | North America
Segment Reporting Information [Line Items]
Sales	242	238	477	486
Core North America | EMEA
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Core North America | Asia Pacific
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Core North America | Latin America
Segment Reporting Information [Line Items]
Sales	0	0	0	0
International
Segment Reporting Information [Line Items]
Sales	174	128	338	269
International | Operating Segments
Segment Reporting Information [Line Items]
Sales	174	128	338	269
International | North America
Segment Reporting Information [Line Items]
Sales	0	0	0	0
International | EMEA
Segment Reporting Information [Line Items]
Sales	54	44	105	91
International | Asia Pacific
Segment Reporting Information [Line Items]
Sales	88	58	171	128
International | Latin America
Segment Reporting Information [Line Items]
Sales	$ 32	$ 26	$ 62	$ 50

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Supplemental Financial Information - Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020	Mar. 31, 2020	Sep. 30, 2019
Supplemental Financial Information [Abstract]
Cash and cash equivalents	$ 247	$ 760	$ 774
Restricted cash	1	1	1
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	$ 248	$ 761	$ 775	$ 159

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Supplemental Financial Information - Summary of Accounts Receivable (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Supplemental Financial Information [Abstract]
Accounts Receivable, Trade Receivables, Current	$ 426	$ 409
Accounts Receivable, Other Receivables, Current	16	14
Financing Receivable, before Allowance for Credit Loss, Current	10	13
Receivables Gross, Current	452	436
Allowance for Doubtful Accounts, Premiums and Other Receivables	(4)	(3)
Receivables, Net, Current	448	433
Financing Receivable, before Allowance for Credit Loss, Noncurrent	5	13
Notes Receivable, Noncurrent	3	8
Notes Receivable, Gross, Noncurrent	8	21
Accounts and Financing Receivable, Allowance for Credit Loss	(3)	(4)
Accounts and Financing Receivable, after Allowance for Credit Loss, Noncurrent	$ 5	$ 17

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Supplemental Financial Information - Inventory (Details) - USD ($) $ in Millions	Mar. 31, 2021	Sep. 30, 2020
Supplemental Financial Information [Abstract]
Inventory, Finished Goods, Gross	$ 216	$ 195
Inventory, Work in Process and Raw Materials	37	30
Inventory, LIFO Reserve	(35)	(26)
Inventories, net	$ 218	$ 199

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Supplemental Financial Information - Revenue Recognition and Deferred Revenue (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Mar. 31, 2021	Mar. 31, 2020
Inventory [Line Items]
Sales	$ 701	$ 578	$ 1,354	$ 1,185
Transferred over Time [Member]
Inventory [Line Items]
Sales	12	9	23	20
Transferred at Point in Time [Member]
Inventory [Line Items]
Sales	$ 689	$ 569	$ 1,331	$ 1,165

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Subsequent Events (Details)	Apr. 22, 2021 $ / shares
Subsequent Event
Subsequent Event [Line Items]
Dividend per share (usd per share)	$ 0.125