Lease Commitments

12 Months Ended

Sep. 30, 2021

Leases [Abstract]

Lease Commitments

LEASE COMMITMENTS

The following table presents the Company's lease balances as of September 30:

(In millions)	Location in Consolidated Balance Sheets	2021		2020
Assets
Operating lease assets	Operating lease assets	$	307	$	261
Finance lease assets	Property, plant and equipment, net	198		77
Amortization of finance lease assets	Property, plant and equipment, net	(21)		(10)
Total leased assets		$	484	$	328
Liabilities
Current
Operating lease liabilities	Accrued expenses and other liabilities	$	38	$	33
Finance lease liabilities	Accrued expenses and other liabilities	9		3
Noncurrent
Operating lease liabilities	Operating lease liabilities	274		231
Finance lease liabilities	Other noncurrent liabilities	178		70
Total lease liabilities		$	499	$	337

The following table presents the components of total lease costs for the years ended September 30:

(In millions)	Location in Consolidated Statements of Comprehensive Income	2021		2020
Operating lease cost	Cost of sales and Selling, general and administrative expenses	$	52	$	45
Finance lease costs
Amortization of lease assets	Cost of sales (a)	11		4
Interest on lease liabilities	Net interest and other financing expenses	8		3
Variable lease cost	Cost of sales and Selling, general and administrative expenses (a)	10		6
Sublease income	Equity and other income, net	(8)		(6)
Total lease cost		$	73	$	52

Other information related to the Company's leases follows for the years ended September 30:

(In millions)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (a)	$	50	$	43
Operating cash flows from finance leases	$	8	$	4
Financing cash flows from finance leases	$	6	$	1
Lease assets obtained in exchange for lease obligations:
Operating leases	$	83	$	49
Finance leases	$	118	$	49

(a)Included within the change in Other assets and liabilities within the Consolidated Statements of Cash Flows offset by noncash operating lease asset amortization and liability accretion.

The following table reconciles the undiscounted cash flows for the next five fiscal years ended September 30 and thereafter to the operating and finance lease liabilities recorded within the Consolidated Balance Sheet as of September 30, 2021:

(In millions)	Operating leases		Finance leases
2022	$	50	$	18
2023	46		18
2024	42		18
2025	37		18
2026	31		19
Thereafter	174		166
Total future lease payments	380		257
Imputed interest	68		70
Present value of lease liabilities	$	312	$	187

As of September 30, 2021, Valvoline has additional leases primarily related to its retail service center stores that have not yet commenced with approximately $101 million in undiscounted future lease payments that are not included in the table above. These leases are expected to commence over the next twelve months and generally have lease terms of 15 years.

The weighted average remaining lease terms and interest rates as of September 30, 2021 were:

	Operating leases		Finance leases
Weighted average remaining lease term (in years)	9.6		13.7
Weighted average discount rate	3.98	%	5.20	%

Lease Commitments

LEASE COMMITMENTS

The following table presents the Company's lease balances as of September 30:

(In millions)	Location in Consolidated Balance Sheets	2021		2020
Assets
Operating lease assets	Operating lease assets	$	307	$	261
Finance lease assets	Property, plant and equipment, net	198		77
Amortization of finance lease assets	Property, plant and equipment, net	(21)		(10)
Total leased assets		$	484	$	328
Liabilities
Current
Operating lease liabilities	Accrued expenses and other liabilities	$	38	$	33
Finance lease liabilities	Accrued expenses and other liabilities	9		3
Noncurrent
Operating lease liabilities	Operating lease liabilities	274		231
Finance lease liabilities	Other noncurrent liabilities	178		70
Total lease liabilities		$	499	$	337

The following table presents the components of total lease costs for the years ended September 30:

(In millions)	Location in Consolidated Statements of Comprehensive Income	2021		2020
Operating lease cost	Cost of sales and Selling, general and administrative expenses	$	52	$	45
Finance lease costs
Amortization of lease assets	Cost of sales (a)	11		4
Interest on lease liabilities	Net interest and other financing expenses	8		3
Variable lease cost	Cost of sales and Selling, general and administrative expenses (a)	10		6
Sublease income	Equity and other income, net	(8)		(6)
Total lease cost		$	73	$	52

Other information related to the Company's leases follows for the years ended September 30:

(In millions)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (a)	$	50	$	43
Operating cash flows from finance leases	$	8	$	4
Financing cash flows from finance leases	$	6	$	1
Lease assets obtained in exchange for lease obligations:
Operating leases	$	83	$	49
Finance leases	$	118	$	49

(a)Included within the change in Other assets and liabilities within the Consolidated Statements of Cash Flows offset by noncash operating lease asset amortization and liability accretion.

The following table reconciles the undiscounted cash flows for the next five fiscal years ended September 30 and thereafter to the operating and finance lease liabilities recorded within the Consolidated Balance Sheet as of September 30, 2021:

(In millions)	Operating leases		Finance leases
2022	$	50	$	18
2023	46		18
2024	42		18
2025	37		18
2026	31		19
Thereafter	174		166
Total future lease payments	380		257
Imputed interest	68		70
Present value of lease liabilities	$	312	$	187

As of September 30, 2021, Valvoline has additional leases primarily related to its retail service center stores that have not yet commenced with approximately $101 million in undiscounted future lease payments that are not included in the table above. These leases are expected to commence over the next twelve months and generally have lease terms of 15 years.

The weighted average remaining lease terms and interest rates as of September 30, 2021 were:

	Operating leases		Finance leases
Weighted average remaining lease term (in years)	9.6		13.7
Weighted average discount rate	3.98	%	5.20	%