QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
☑ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
Page | |||||
PART I – FINANCIAL INFORMATION | |||||
PART II – OTHER INFORMATION | |||||
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | |||||
Three Months Ended December 31 | ||||||||||||||
(In millions, except per share amounts - unaudited) | 2021 | 2020 | ||||||||||||
Sales | $ | $ | ||||||||||||
Cost of sales | ||||||||||||||
Gross profit | ||||||||||||||
Selling, general and administrative expenses | ||||||||||||||
Legacy and separation-related expenses | ||||||||||||||
Equity and other income, net | ( | ( | ||||||||||||
Operating income | ||||||||||||||
Net pension and other postretirement plan income | ( | ( | ||||||||||||
Net interest and other financing expenses | ||||||||||||||
Income before income taxes | ||||||||||||||
Income tax expense | ||||||||||||||
Net income | $ | $ | ||||||||||||
NET EARNINGS PER SHARE | ||||||||||||||
Basic | $ | $ | ||||||||||||
Diluted | $ | $ | ||||||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||
Basic | ||||||||||||||
Diluted | ||||||||||||||
COMPREHENSIVE INCOME | ||||||||||||||
Net income | $ | $ | ||||||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||
Currency translation adjustments | ||||||||||||||
Amortization of pension and other postretirement plan prior service credits | ( | |||||||||||||
Unrealized gain on cash flow hedges | ||||||||||||||
Other comprehensive income | ||||||||||||||
Comprehensive income | $ | $ | ||||||||||||
(In millions, except per share amounts - unaudited) | December 31 2021 | September 30 2021 | ||||||||||||
Assets | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Receivables, net | ||||||||||||||
Inventories, net | ||||||||||||||
Prepaid expenses and other current assets | ||||||||||||||
Total current assets | ||||||||||||||
Noncurrent assets | ||||||||||||||
Property, plant and equipment, net | ||||||||||||||
Operating lease assets | ||||||||||||||
Goodwill and intangibles, net | ||||||||||||||
Equity method investments | ||||||||||||||
Deferred income taxes | ||||||||||||||
Other noncurrent assets | ||||||||||||||
Total noncurrent assets | ||||||||||||||
Total assets | $ | $ | ||||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||
Current liabilities | ||||||||||||||
Current portion of long-term debt | $ | $ | ||||||||||||
Trade and other payables | ||||||||||||||
Accrued expenses and other liabilities | ||||||||||||||
Total current liabilities | ||||||||||||||
Noncurrent liabilities | ||||||||||||||
Long-term debt | ||||||||||||||
Employee benefit obligations | ||||||||||||||
Operating lease liabilities | ||||||||||||||
Deferred income taxes | ||||||||||||||
Other noncurrent liabilities | ||||||||||||||
Total noncurrent liabilities | ||||||||||||||
Commitments and contingencies | ||||||||||||||
Stockholders’ equity | ||||||||||||||
Preferred stock, no par value, | ||||||||||||||
Common stock, par value $ | ||||||||||||||
Paid-in capital | ||||||||||||||
Retained earnings | ||||||||||||||
Accumulated other comprehensive income | ||||||||||||||
Total stockholders’ equity | ||||||||||||||
Total liabilities and stockholders’ equity | $ | $ | ||||||||||||
Three months ended December 31, 2021 | ||||||||||||||||||||||||||||||||||||||
(In millions, except per share amounts - unaudited) | Common stock | Paid-in capital | Retained earnings | Accumulated other comprehensive income | Totals | |||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
Dividends paid, $ | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Stock-based compensation, net of issuances | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||
Repurchases of common stock | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Three months ended December 31, 2020 | ||||||||||||||||||||||||||||||||||||||
(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 | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||||||||||||||||||
Dividends paid, $ | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Stock-based compensation, net of issuances | — | — | — | — | ||||||||||||||||||||||||||||||||||
Repurchases of common stock | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Cumulative effect of adoption of credit losses standard, net of tax | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||
Three months ended December 31 | ||||||||||||||
(In millions - unaudited) | 2021 | 2020 | ||||||||||||
Cash flows from operating activities | ||||||||||||||
Net income | $ | $ | ||||||||||||
Adjustments to reconcile net income to cash flows from operating activities | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Deferred income taxes | ||||||||||||||
Stock-based compensation expense | ||||||||||||||
Other, net | ( | ( | ||||||||||||
Change in assets and liabilities | ||||||||||||||
Receivables | ( | |||||||||||||
Inventories | ( | ( | ||||||||||||
Payables and accrued liabilities | ( | ( | ||||||||||||
Other assets and liabilities | ( | |||||||||||||
Total cash provided by operating activities | ||||||||||||||
Cash flows from investing activities | ||||||||||||||
Additions to property, plant and equipment | ( | ( | ||||||||||||
Repayments of notes receivable | ||||||||||||||
Acquisitions of businesses | ( | ( | ||||||||||||
Other investing activities, net | ( | |||||||||||||
Total cash used in investing activities | ( | ( | ||||||||||||
Cash flows from financing activities | ||||||||||||||
Proceeds from borrowings | ||||||||||||||
Repayments on borrowings | ( | |||||||||||||
Repurchases of common stock | ( | ( | ||||||||||||
Cash dividends paid | ( | ( | ||||||||||||
Other financing activities | ( | ( | ||||||||||||
Total cash used in financing activities | ( | ( | ||||||||||||
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | ||||||||||||||
Decrease in cash, cash equivalents and restricted cash | ( | ( | ||||||||||||
Cash, cash equivalents and restricted cash - beginning of period | ||||||||||||||
Cash, cash equivalents and restricted cash - end of period | $ | $ | ||||||||||||
Index to Notes to Condensed Consolidated Financial Statements | Page | ||||
As of December 31, 2021 | ||||||||||||||||||||||||||||||||
(In millions) | Total | Level 1 | Level 2 | Level 3 | NAV (a) | |||||||||||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||||||||||||||
Money market funds | $ | $ | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Time deposits | — | — | — | |||||||||||||||||||||||||||||
Prepaid expenses and other current assets | ||||||||||||||||||||||||||||||||
Currency derivatives (b) | — | — | — | |||||||||||||||||||||||||||||
Other noncurrent assets | ||||||||||||||||||||||||||||||||
Non-qualified trust funds | — | — | ||||||||||||||||||||||||||||||
Interest rate swap agreements | — | — | — | |||||||||||||||||||||||||||||
Total assets at fair value | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||
Accrued expenses and other liabilities | ||||||||||||||||||||||||||||||||
Currency derivatives (b) | $ | $ | — | $ | $ | — | $ | — | ||||||||||||||||||||||||
Other noncurrent liabilities | ||||||||||||||||||||||||||||||||
Deferred compensation obligations | — | — | — | |||||||||||||||||||||||||||||
Total liabilities at fair value | $ | $ | — | $ | $ | — | $ | |||||||||||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||||||||||
(In millions) | Total | Level 1 | Level 2 | Level 3 | NAV (a) | |||||||||||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||||||||||||||
Money market funds | $ | $ | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Time deposits | — | — | — | |||||||||||||||||||||||||||||
Prepaid expenses and other current assets | ||||||||||||||||||||||||||||||||
Currency derivatives (b) | — | — | — | |||||||||||||||||||||||||||||
Other noncurrent assets | ||||||||||||||||||||||||||||||||
Non-qualified trust funds | — | — | ||||||||||||||||||||||||||||||
Interest rate swap agreements | — | |||||||||||||||||||||||||||||||
Total assets at fair value | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||
Accrued expenses and other liabilities | ||||||||||||||||||||||||||||||||
Currency derivatives (b) | $ | $ | — | $ | $ | — | $ | — | ||||||||||||||||||||||||
Interest rate swap agreements | — | — | — | |||||||||||||||||||||||||||||
Other noncurrent liabilities | ||||||||||||||||||||||||||||||||
Deferred compensation obligations | — | — | — | |||||||||||||||||||||||||||||
Total liabilities at fair value | $ | $ | — | $ | $ | — | $ | |||||||||||||||||||||||||
December 31, 2021 | September 30, 2021 | |||||||||||||||||||||||||||||||||||||
(In millions) | Fair value | Carrying value (a) | Unamortized discounts and issuance costs | Fair value | Carrying value (a) | Unamortized discounts and issuance costs | ||||||||||||||||||||||||||||||||
2030 Notes | $ | $ | $ | ( | $ | $ | $ | ( | ||||||||||||||||||||||||||||||
2031 Notes | ( | ( | ||||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | ( | $ | $ | $ | ( | ||||||||||||||||||||||||||||||
(In millions) | 2021 | 2020 | ||||||||||||
Inventories | $ | $ | ||||||||||||
Property, plant and equipment | ||||||||||||||
Operating lease assets | ||||||||||||||
Goodwill (a) | ||||||||||||||
Intangible assets (b) | ||||||||||||||
Reacquired franchise rights (c) | ||||||||||||||
Other | ||||||||||||||
Other current liabilities | ( | |||||||||||||
Operating lease liabilities | ( | ( | ||||||||||||
Other noncurrent liabilities | ( | |||||||||||||
Net assets acquired | $ | $ | ||||||||||||
(In millions) | December 31 2021 | September 30 2021 | ||||||||||||
2031 Notes | $ | $ | ||||||||||||
2030 Notes | ||||||||||||||
Term Loan | ||||||||||||||
Revolver (a) | ||||||||||||||
Trade Receivables Facility (b) | ||||||||||||||
China Construction Facility (c) | ||||||||||||||
China Working Capital Facility (d) | ||||||||||||||
Debt issuance costs and discounts | ( | ( | ||||||||||||
Total debt | ||||||||||||||
Current portion of long-term debt | ||||||||||||||
Long-term debt | $ | $ | ||||||||||||
Three months ended | ||||||||||||||
December 31 | ||||||||||||||
(In millions) | 2021 | 2020 | ||||||||||||
Income tax expense | $ | $ | ||||||||||||
Effective tax rate percentage | % | % |
Pension benefits | Other postretirement benefits | |||||||||||||||||||||||||
(In millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
Three months ended December 31 | ||||||||||||||||||||||||||
Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
Interest cost | ||||||||||||||||||||||||||
Expected return on plan assets | ( | ( | ||||||||||||||||||||||||
Amortization of prior service credits | ( | |||||||||||||||||||||||||
Net periodic benefit income | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||
Three months ended | ||||||||||||||
December 31 | ||||||||||||||
(In millions, except per share amounts) | 2021 | 2020 | ||||||||||||
Numerator | ||||||||||||||
Net income | $ | $ | ||||||||||||
Denominator | ||||||||||||||
Weighted average common shares outstanding | ||||||||||||||
Effect of potentially dilutive securities (a) | ||||||||||||||
Weighted average diluted shares outstanding | ||||||||||||||
Earnings per share | ||||||||||||||
Basic | $ | $ | ||||||||||||
Diluted | $ | $ | ||||||||||||
Three months ended | ||||||||||||||
December 31 | ||||||||||||||
(in millions) | 2021 | 2020 | ||||||||||||
Sales | ||||||||||||||
Retail Services | $ | $ | ||||||||||||
Global Products | ||||||||||||||
Consolidated sales | $ | $ | ||||||||||||
Adjusted EBITDA | ||||||||||||||
Retail Services | $ | $ | ||||||||||||
Global Products | ||||||||||||||
Total operating segments | ||||||||||||||
Corporate | ( | ( | ||||||||||||
Consolidated Adjusted EBITDA | ||||||||||||||
Reconciliation to income before income taxes: | ||||||||||||||
Net interest and other financing expenses | ( | ( | ||||||||||||
Depreciation and amortization | ( | ( | ||||||||||||
Key items: (a) | ||||||||||||||
Net pension and other postretirement plan income | ||||||||||||||
Legacy and separation-related expenses | ( | ( | ||||||||||||
LIFO charge | ( | ( | ||||||||||||
Information technology transition costs | ( | |||||||||||||
Business interruption recovery | ||||||||||||||
Income before income taxes | $ | $ | ||||||||||||
Three months ended | ||||||||||||||
December 31 | ||||||||||||||
(In millions) | 2021 | 2020 | ||||||||||||
Retail Services | ||||||||||||||
Company operations | $ | $ | ||||||||||||
Non-company operations | ||||||||||||||
Total Retail Services | ||||||||||||||
Global Products | ||||||||||||||
Do-It-Yourself | ||||||||||||||
Installer and other | ||||||||||||||
Total Global Products | ||||||||||||||
Consolidated sales | $ | $ |
Retail Services | Global Products | Total | ||||||||||||||||||||||||||||||||||||
(In millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||
Three months ended December 31 | ||||||||||||||||||||||||||||||||||||||
North America (a) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Europe, Middle East and Africa ("EMEA") | ||||||||||||||||||||||||||||||||||||||
Asia Pacific | ||||||||||||||||||||||||||||||||||||||
Latin America (a) | ||||||||||||||||||||||||||||||||||||||
Totals | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
(In millions) | December 31 2021 | September 30 2021 | December 31 2020 | |||||||||||||||||
Cash and cash equivalents | $ | $ | $ | |||||||||||||||||
Restricted cash (a) | ||||||||||||||||||||
Total cash, cash equivalents and restricted cash | $ | $ | $ | |||||||||||||||||
(In millions) | December 31 2021 | September 30 2021 | ||||||||||||
Trade | $ | $ | ||||||||||||
Other | ||||||||||||||
Notes receivable from franchisees (a) | ||||||||||||||
Receivables, gross | ||||||||||||||
Allowance for credit losses | ( | ( | ||||||||||||
Receivables, net | $ | $ | ||||||||||||
(In millions) | December 31 2021 | September 30 2021 | ||||||||||||
Finished products | $ | $ | ||||||||||||
Raw materials, supplies and work in process | ||||||||||||||
Reserve for LIFO cost valuation | ( | ( | ||||||||||||
Total inventories, net | $ | $ |
Three months ended | ||||||||||||||
December 31 | ||||||||||||||
(In millions) | 2021 | 2020 | ||||||||||||
Sales at a point in time | $ | $ | ||||||||||||
Franchised revenues transferred over time | ||||||||||||||
Total consolidated sales | $ | $ |
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations | Page | ||||
2021 | 2020 | Variance | ||||||||||||||||||||||||||||||||||||
(In millions) | Amount | % of Sales | Amount | % of Sales | Amount | % | ||||||||||||||||||||||||||||||||
Sales | $ | 858 | 100.0 | % | $ | 653 | 100.0 | % | $ | 205 | 31.4 | % | ||||||||||||||||||||||||||
Gross profit | $ | 244 | 28.4 | % | $ | 228 | 34.9 | % | $ | 16 | 7.0 | % | ||||||||||||||||||||||||||
Net operating expenses | $ | 123 | 14.3 | % | $ | 104 | 15.9 | % | $ | 19 | 18.3 | % | ||||||||||||||||||||||||||
Operating income | $ | 121 | 14.1 | % | $ | 124 | 19.0 | % | $ | (3) | (2.4) | % | ||||||||||||||||||||||||||
Net income | $ | 87 | 10.1 | % | $ | 87 | 13.3 | % | $ | — | — | % |
Year-over-year change | ||||||||
(In millions) | Three months ended December 31, 2021 | |||||||
Volume and mix | $ | 104 | ||||||
Price | 90 | |||||||
Acquisitions | 11 | |||||||
Change in sales | $ | 205 |
Year-over-year change | |||||
(In millions) | Three months ended December 31, 2021 | ||||
Volume and mix | $ | 50 | |||
Change in LIFO reserve | (2) | ||||
Price and cost | (33) | ||||
Acquisitions | 1 | ||||
Change in gross profit | $ | 16 |
2021 | 2020 | Variance | ||||||||||||||||||||||||||||||||||||
(In millions) | Amount | % of Sales | Amount | % of Sales | Amount | % | ||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | $ | 135 | 15.7 | % | $ | 117 | 17.9 | % | $ | 18 | 15.4 | % | ||||||||||||||||||||||||||
Legacy and separation-related expenses | 3 | 0.3 | % | 1 | 0.1 | % | $ | 2 | 200.0 | % | ||||||||||||||||||||||||||||
Equity and other income, net | (15) | (1.7) | % | (14) | (2.1) | % | (1) | 7.1 | % | |||||||||||||||||||||||||||||
Net operating expenses | $ | 123 | 14.3 | % | $ | 104 | 15.9 | % | $ | 19 | 18.3 | % |
Three months ended December 31 | ||||||||||||||
(In millions) | 2021 | 2020 | ||||||||||||
Income tax expense | $ | 26 | $ | 30 | ||||||||||
Effective tax rate percentage | 23.0 | % | 25.6 | % |
Three months ended December 31 | ||||||||||||||
(In millions) | 2021 | 2020 | ||||||||||||
Net income | $ | 87 | $ | 87 | ||||||||||
Income tax expense | 26 | 30 | ||||||||||||
Net interest and other financing expenses | 17 | 20 | ||||||||||||
Depreciation and amortization | 25 | 21 | ||||||||||||
EBITDA | 155 | 158 | ||||||||||||
Net pension and other postretirement plan income (a) | (9) | (13) | ||||||||||||
Legacy and separation-related expenses | 3 | 1 | ||||||||||||
LIFO charge | 6 | 4 | ||||||||||||
Information technology transition costs | 1 | — | ||||||||||||
Business interruption recovery | — | (1) | ||||||||||||
Adjusted EBITDA | $ | 156 | $ | 149 | ||||||||||
System-wide stores (a) | ||||||||||||||||||||||||||||||||
First Quarter 2022 | Fourth Quarter 2021 | Third Quarter 2021 | Second Quarter 2021 | First Quarter 2021 | ||||||||||||||||||||||||||||
Beginning of period | 1,594 | 1,569 | 1,548 | 1,533 | 1,462 | |||||||||||||||||||||||||||
Opened | 32 | 21 | 17 | 13 | 18 | |||||||||||||||||||||||||||
Acquired | 12 | 7 | 5 | 3 | 54 | |||||||||||||||||||||||||||
Closed | (3) | (3) | (1) | (1) | (1) | |||||||||||||||||||||||||||
End of period | 1,635 | 1,594 | 1,569 | 1,548 | 1,533 | |||||||||||||||||||||||||||
Number of stores at end of period | ||||||||||||||||||||||||||||||||
First Quarter 2022 | Fourth Quarter 2021 | Third Quarter 2021 | Second Quarter 2021 | First Quarter 2021 | ||||||||||||||||||||||||||||
Company-owned | 738 | 719 | 698 | 673 | 663 | |||||||||||||||||||||||||||
Franchised | 897 | 875 | 871 | 875 | 870 | |||||||||||||||||||||||||||
Three months ended December 31 | Favorable (Unfavorable) | ||||||||||||||||
(In millions) | 2021 | 2020 | |||||||||||||||
Financial information | |||||||||||||||||
Retail Services segment sales | $ | 346 | $ | 254 | 36 | % | |||||||||||
Operating income (b) | $ | 81 | $ | 56 | 45 | % | |||||||||||
Key items | — | — | |||||||||||||||
Depreciation and amortization | 17 | 14 | 21 | % | |||||||||||||
Adjusted EBITDA | $ | 98 | $ | 70 | 40 | % | |||||||||||
Operating margin (c) | 23.4 | % | 22.0 | % | 140 | bps | |||||||||||
Adjusted EBITDA margin (c) | 28.3 | % | 27.6 | % | 70 | bps | |||||||||||
Three months ended December 31 | |||||||||||||||||
2021 | 2020 | ||||||||||||||||
Same-store sales growth | |||||||||||||||||
Company-operated (c) | 22.1 | % | 6.1 | % | |||||||||||||
Franchised (a) (d) | 26.8 | % | 6.0 | % | |||||||||||||
System-wide (a) (d) | 24.7 | % | 6.0 | % | |||||||||||||
Three months ended December 31 | Favorable (Unfavorable) | ||||||||||||||||
(In millions) | 2021 | 2020 | |||||||||||||||
Financial information | |||||||||||||||||
Sales by geographic region | |||||||||||||||||
North America (a) | $ | $ | 29 | % | |||||||||||||
Europe, Middle East and Africa ("EMEA") | 31 | % | |||||||||||||||
Asia Pacific | 25 | % | |||||||||||||||
Latin America (a) | 23 | % | |||||||||||||||
Global Products segment sales | $ | $ | 28 | % | |||||||||||||
Operating income (b) | $ | 70 | $ | 88 | (20) | % | |||||||||||
Key items | — | — | |||||||||||||||
Depreciation and amortization | 7 | 6 | 17 | % | |||||||||||||
Adjusted EBITDA | $ | 77 | $ | 94 | (18) | % | |||||||||||
Operating margin (c) | 13.7 | % | 22.1 | % | (840) | bps | |||||||||||
Adjusted EBITDA margin (c) | 15.0 | % | 23.6 | % | (860) | bps | |||||||||||
Volume information | |||||||||||||||||
Lubricant sales (gallons) | 43.1 | 38.0 | 13 | % | |||||||||||||
(a) | Valvoline includes the United States and Canada in its North America region. Mexico is included within the Latin America region. | ||||
(b) | Valvoline does not generally allocate activity below operating income to its operating segments; therefore, the table above reconciles operating income to adjusted EBITDA. | ||||
(c) | Operating margin is calculated as operating income divided by sales, and adjusted EBITDA margin is calculated as adjusted EBITDA divided by sales. |
(In millions) | 2021 | 2020 | ||||||||||||
Cash, cash equivalents and restricted cash - beginning of period | $ | 231 | $ | 761 | ||||||||||
Cash provided by (used in): | ||||||||||||||
Operating activities | 32 | 79 | ||||||||||||
Investing activities | (46) | (245) | ||||||||||||
Financing activities | (63) | (73) | ||||||||||||
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | — | 6 | ||||||||||||
Decrease increase in cash, cash equivalents and restricted cash | (77) | (233) | ||||||||||||
Cash, cash equivalents and restricted cash - end of period | $ | 154 | $ | 528 |
Three months ended December 31 | ||||||||||||||
(In millions) | 2021 | 2020 | ||||||||||||
Cash flows provided by operating activities | $ | 32 | $ | 79 | ||||||||||
Less: Maintenance capital expenditures | (6) | (5) | ||||||||||||
Discretionary free cash flow | 26 | 74 | ||||||||||||
Less: Growth capital expenditures | (29) | (30) | ||||||||||||
Free cash flow | $ | (3) | $ | 44 |
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) | ||||||||||
October 1, 2021 - October 31, 2021 | 325,186 | $ | 33.55 | 325,186 | $ | 262 | ||||||||
November 1, 2021 - November 30, 2021 | 284,916 | $ | 35.37 | 284,916 | $ | 252 | ||||||||
December 1, 2021 - December 31, 2021 | 294,475 | $ | 35.55 | 294,475 | $ | 242 | ||||||||
Total | 904,577 | $ | 34.78 | 904,577 |
10.1* | |||||
10.2* | |||||
10.3* | |||||
31.1* | |||||
31.2* | |||||
32** | |||||
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). |
VALVOLINE INC. | ||||||||
(Registrant) | ||||||||
February 9, 2022 | By: | /s/ Mary E. Meixelsperger | ||||||
Mary E. Meixelsperger | ||||||||
Chief Financial Officer | ||||||||
Position/Band | Severance Period | ||||
Chief Executive Officer | 104 weeks of base rate of pay | ||||
VLT | 78 weeks of base rate of pay | ||||
Salary Grade 22 | 52 weeks of base rate of pay | ||||
Salary Grades 20 and 21 | 2 weeks of base rate of pay for each completed year of Continuous Service (as described below), but in any case no less than 26 weeks and no more than 52 weeks. | ||||
Salary Grade 19 | 2 weeks of base rate of pay for each completed year of Continuous Service (as described below), but in any case no less than 13 weeks and no more than 52 weeks. |
Position/Salary Grade | # of Consecutive Months | ||||
Chief Executive Officer | 24 months | ||||
VLT | 18 months | ||||
Salary Grades 21 and 22 | 12 months | ||||
Salary Grades 19 and 20 | 6 months | ||||
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. |
/s/ Samuel J. Mitchell Jr. | |||||
Samuel J. Mitchell Jr. | |||||
Chief Executive Officer and Director | |||||
(Principal Executive Officer) |
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. |
/s/ Mary E. Meixelsperger | |||||
Mary E. Meixelsperger | |||||
Chief Financial Officer | |||||
(Principal Financial Officer) |
(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 | |||||
February 9, 2022 | |||||
/s/ Mary E. Meixelsperger | |||||
Mary E. Meixelsperger | |||||
Chief Financial Officer | |||||
February 9, 2022 |
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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2021 |
Sep. 30, 2021 |
---|---|---|
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) | 180,000,000 | 180,000,000 |
Common stock outstanding (shares) | 180,000,000 | 180,000,000 |
Condensed Consolidated Statements of Stockholders' Deficit (Parenthetical) - $ / shares |
3 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Statement of Stockholders' Equity [Abstract] | ||
Dividends paid per common share (usd per share) | $ 0.125 | $ 0.125 |
Basis of Presentation and Significant Accounting Policies |
3 Months Ended |
---|---|
Dec. 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 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, 2021. Certain prior period amounts disclosed herein have been reclassified to conform to the current presentation. Use of estimates, risks and uncertainties 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. Current and future impacts as a result of the pandemic cannot be reasonably quantified or estimated due to its unprecedented nature, breadth, and uncertainties, including the ultimate duration and severity of the pandemic. Strategic separation On October 12, 2021, Valvoline announced its intention to pursue a separation of its two reportable segments, Retail Services and Global Products. Valvoline is evaluating the alternatives to accomplish the separation of these two businesses, and consummation of the separation will be subject to final approval by Valvoline's Board of Directors (the “Board”). No timetable has currently been established for completion of the separation, which is expected to enable the two businesses to enhance focus on their distinct customer bases, strategies and operational needs. Recent accounting pronouncements The following accounting guidance relevant to Valvoline was either issued or adopted in the current year, or is 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. Issued but not yet adopted In March 2020, the FASB issued guidance to simplify the accounting for arrangements modified as a result of reference rate reform as the market transitions from the London Interbank Offered Rate ("LIBOR") and other interbank reference rates to alternative reference rates. This guidance is available to be adopted on a prospective basis through the end of calendar 2022 for qualifying contract modifications and hedging arrangements. The Company has interest rate swap hedging arrangements and U.S.-based variable rate long-term debt for which existing payments are based on LIBOR tenors expected to cease in June 2023. As of December 31, 2021, 28% of Valvoline’s outstanding total long-term debt and $275 million of its interest rate swap agreements are under existing arrangements that mature following LIBOR cessation and do not contain fallback provisions to alternative reference rates. The Company is evaluating its options for these arrangements and expects to adopt this guidance to the extent there are qualifying contractual modifications prior to the end of calendar 2022. Valvoline does not expect any modifications that may apply for this guidance to have a material impact on its condensed consolidated financial statements.
|
Fair Value Measurements |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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:
(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 $143 million and $137 million as of December 31, 2021 and September 30, 2021, respectively. There were no material gains or losses recognized in earnings during the three months ended December 31, 2021 or 2020 related to these assets and liabilities. Long-term debt Long-term debt is reported in the Consolidated Balance Sheets at carrying value, rather than fair value, and is therefore excluded from the disclosure above of financial assets and liabilities measured at fair value within the condensed consolidated financial statements on a recurring basis. The fair values of the Company's outstanding fixed rate senior notes shown below are based on recent trading values, which are considered Level 2 inputs within the fair value hierarchy.
(a)Carrying values shown are net of unamortized discounts and debt issuance costs. Refer to Note 4 for details of these notes as well as Valvoline's other debt instruments that have variable interest rates with carrying amounts that approximate fair value.
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Acquisitions and Divestitures |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions and Divestitures | The Company acquired 12 service center stores in single and multi-store transactions for an aggregate purchase price of $14 million during the three months ended December 31, 2021. These acquisitions expand Valvoline's retail presence in key North American markets, increase the number of company-operated service center stores, and contributed to growing the Retail Services system to over 1,600 system-wide service center stores. During the three months ended December 31, 2020, the Company acquired 81 service center stores in single and multi-store transactions, including 27 former franchise locations converted to company-owned service center stores and 12 franchise-operated service center stores, for an aggregate purchase price of $218 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 three months ended December 31:
(a)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. (b)Intangible assets acquired during the three months ended December 31, 2020 have weighted average amortization periods of 11 years. (c)Prior to the acquisition of former franchise service center stores, the Company licensed the right to operate franchised service centers, including the use of Valvoline'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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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | DEBT The following table summarizes Valvoline’s total debt as of:
(a)As of December 31, 2021, the total borrowing capacity remaining under the $475 million revolving credit facility was $471 million due to a reduction of $4 million for letters of credit outstanding. (b)The Trade Receivables Facility had $116 million of borrowing capacity remaining and the wholly-owned financing subsidiary owned $304 million of outstanding accounts receivable as of December 31, 2021. (c)The remaining borrowing capacity under the China Construction Facility was approximately $4 million as of December 31, 2021. (d)The China Working Capital Facility had a borrowing capacity remaining of approximately $24 million as of December 31, 2021. As of December 31, 2021, Valvoline was in compliance with all covenants under its long-term borrowings.
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Income Taxes |
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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:
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Employee Benefit Plans |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans | EMPLOYEE BENEFIT PLANS The following table summarizes the components of pension and other postretirement benefit income:
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Litigation, Claims and Contingencies |
3 Months Ended |
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Dec. 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 |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | EARNINGS PER SHARE The following table summarizes basic and diluted earnings per share:
(a)There were approximately 1 million outstanding stock appreciation rights not included in the computation of diluted earnings per share for the three months ended December 31, 2020, because the effect would have been antidilutive.
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Reportable Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reportable Segment Information | REPORTABLE SEGMENT INFORMATION Valvoline manages its business through the following two reportable segments: •Retail Services - services the passenger car and light truck quick lube market in the United States and Canada with a broad array of preventive maintenance services and capabilities performed through Valvoline’s retail network of company-operated and independent franchised service center stores, in addition to independent Express Care stores that service vehicles with Valvoline products. •Global Products - sells engine and automotive preventive maintenance products in more than 140 countries and territories to mass market and automotive parts retailers, installers, and commercial customers, including original equipment manufacturers (“OEM”), to service light- and heavy-duty 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 allocating resources and evaluating performance of the business. Adjusted EBITDA is the primary measure used in making these operating decisions, which Valvoline defines as segment operating income adjusted for depreciation and amortization and certain key items impacting comparability. Certain indirect expenses are recognized within each segment based on the estimated utilization of indirect resources. Costs to support corporate functions and certain non-operational and corporate activity that is not directly attributable to a particular segment are not included in the segment operating results regularly utilized by the chief operating decision maker. This activity is separately delineated within Corporate to reconcile to consolidated results. Segment financial results The following presents sales and adjusted EBITDA for each reportable segment:
(a)Key items represent adjustments to U.S. GAAP results and consist of non-operational matters, including pension and other postretirement plan non-service income and remeasurement adjustments, legacy and separation-related activity, changes in the last-in, first-out ("LIFO") inventory reserve, and certain other corporate matters excluded from operating results that management believes impacts the comparability of operational results between periods. Disaggregation of revenue Sales by primary customer channel for the Company’s reportable segments are summarized below:
Sales by reportable segment disaggregated by geographic market follows:
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Supplemental Financial Information |
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Supplemental Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Financial Information | SUPPLEMENTAL FINANCIAL INFORMATION Cash, cash equivalents and restricted cash The following 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:
(a)Included in Prepaid expenses and other current assets within the Condensed Consolidated Balance Sheets. Accounts and other receivables The following summarizes Valvoline’s accounts and other receivables in the Condensed Consolidated Balance Sheets as of:
(a)Notes receivable from franchisees were primarily issued in fiscal 2020 to provide financial assistance in response to the COVID-19 pandemic. There were no material balances past due as of December 31, 2021. Inventories The following summarizes Valvoline’s inventories in the Condensed Consolidated Balance Sheets as of:
Revenue recognition The following disaggregates the Company’s sales by timing of recognition:
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Subsequent Events |
3 Months Ended |
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Dec. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS Dividend declared On January 24, 2022, the Board declared a quarterly cash dividend of $0.125 per share of Valvoline common stock. The dividend is payable on March 15, 2022 to shareholders of record on February 28, 2022.
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Basis of Presentation and Significant Accounting Policies (Policies) |
3 Months Ended |
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Dec. 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 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, 2021. Certain prior period amounts disclosed herein have been reclassified to conform to the current presentation. Use of estimates, risks and uncertainties 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. Current and future impacts as a result of the pandemic cannot be reasonably quantified or estimated due to its unprecedented nature, breadth, and uncertainties, including the ultimate duration and severity of the pandemic.
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Recent accounting pronouncements | The following accounting guidance relevant to Valvoline was either issued or adopted in the current year, or is 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. Issued but not yet adopted In March 2020, the FASB issued guidance to simplify the accounting for arrangements modified as a result of reference rate reform as the market transitions from the London Interbank Offered Rate ("LIBOR") and other interbank reference rates to alternative reference rates. This guidance is available to be adopted on a prospective basis through the end of calendar 2022 for qualifying contract modifications and hedging arrangements. The Company has interest rate swap hedging arrangements and U.S.-based variable rate long-term debt for which existing payments are based on LIBOR tenors expected to cease in June 2023. As of December 31, 2021, 28% of Valvoline’s outstanding total long-term debt and $275 million of its interest rate swap agreements are under existing arrangements that mature following LIBOR cessation and do not contain fallback provisions to alternative reference rates. The Company is evaluating its options for these arrangements and expects to adopt this guidance to the extent there are qualifying contractual modifications prior to the end of calendar 2022. Valvoline does not expect any modifications that may apply for this guidance to have a material impact on its condensed consolidated financial statements.
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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:
(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 $143 million and $137 million as of December 31, 2021 and September 30, 2021, respectively.
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Summary of Fair Value of Debt |
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Acquisitions and Divestitures (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Consideration Paid and Assets and Liabilities Acquired | A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the three months ended December 31:
(a)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. (b)Intangible assets acquired during the three months ended December 31, 2020 have weighted average amortization periods of 11 years. (c)Prior to the acquisition of former franchise service center stores, the Company licensed the right to operate franchised service centers, including the use of Valvoline'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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Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Total Debt | The following table summarizes Valvoline’s total debt as of:
(a)As of December 31, 2021, the total borrowing capacity remaining under the $475 million revolving credit facility was $471 million due to a reduction of $4 million for letters of credit outstanding. (b)The Trade Receivables Facility had $116 million of borrowing capacity remaining and the wholly-owned financing subsidiary owned $304 million of outstanding accounts receivable as of December 31, 2021. (c)The remaining borrowing capacity under the China Construction Facility was approximately $4 million as of December 31, 2021. (d)The China Working Capital Facility had a borrowing capacity remaining of approximately $24 million as of December 31, 2021.
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Income Taxes (Tables) |
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Dec. 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:
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Employee Benefit Plans (Tables) |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Pension and Other Postretirement Benefit Income | The following table summarizes the components of pension and other postretirement benefit income:
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table summarizes basic and diluted earnings per share:
(a)There were approximately 1 million outstanding stock appreciation rights not included in the computation of diluted earnings per share for the three months ended December 31, 2020, because the effect would have been antidilutive.
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Reportable Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information | The following presents sales and adjusted EBITDA for each reportable segment:
(a)Key items represent adjustments to U.S. GAAP results and consist of non-operational matters, including pension and other postretirement plan non-service income and remeasurement adjustments, legacy and separation-related activity, changes in the last-in, first-out ("LIFO") inventory reserve, and certain other corporate matters excluded from operating results that management believes impacts the comparability of operational results between periods.
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Schedule of Disaggregated Revenues | Sales by primary customer channel for the Company’s reportable segments are summarized below:
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Schedule of Sales Disaggregated by Segment and Geographical Area | Sales by reportable segment disaggregated by geographic market follows:
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Supplemental Financial Information (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Financial Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash and Cash Equivalents | The following 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:
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Summary of Accounts Receivable | The following summarizes Valvoline’s accounts and other receivables in the Condensed Consolidated Balance Sheets as of:
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Summary of Inventory | The following summarizes Valvoline’s inventories in the Condensed Consolidated Balance Sheets as of:
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Disaggregation of Sales by Timing of Revenue Recognized | The following disaggregates the Company’s sales by timing of recognition:
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Basis of Presentation and Significant Accounting Policies (Details) - USD ($) $ in Millions |
Dec. 31, 2021 |
Sep. 30, 2021 |
---|---|---|
Interest Rate Swap [Member] | ||
Derivative, Notional Amount | $ 275 | |
Fair Value, Measurements, Recurring | ||
Interest Rate Derivative Assets, at Fair Value | 4 | $ 2 |
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring | ||
Interest Rate Derivative Assets, at Fair Value | $ 4 | $ 2 |
LIBOR | ||
Long-term Debt, Percentage Bearing Variable Interest, Percentage Rate | 28.00% |
Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
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Fair Value Disclosures [Abstract] | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis, Gain (Loss) Included in Earnings | $ 0 | $ 0 |
Acquisitions and Divestitures - Narrative (Details) $ in Millions |
3 Months Ended | |
---|---|---|
Dec. 31, 2021
USD ($)
service_center_store
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Dec. 31, 2020
USD ($)
service_center_store
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Business Acquisition [Line Items] | ||
Number of service center stores acquired | 12 | 81 |
Number of franchise-operated service center stores acquired | 12 | |
Consideration for acquisition | $ | $ 14 | $ 218 |
Number of System-wide Service Center Stores | 1,600 | |
Business Acquisition, Number of Former Franchise Service Centers Converted | 27 |
Acquisitions and Divestitures - Schedule of Aggregate Cash Consideration and Total Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
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Business Acquisition [Line Items] | ||
Inventory | $ 0 | $ 2 |
Property plant and equipment | 3 | 79 |
Operating lease assets | 4 | 23 |
Goodwill (a) | 11 | 175 |
Other Current Liabilities | 0 | (6) |
Operating Lease Liabilities | (4) | (21) |
Other noncurrent liabilities | 0 | (70) |
Net assets acquired | 14 | 218 |
Consideration transferred | 14 | $ 218 |
Weighted average amortization period | 11 years | |
Reacquired franchise rights (c) | ||
Business Acquisition [Line Items] | ||
Intangible assets | 0 | $ 33 |
Gain (Loss) on Contract Termination | $ 0 | |
Weighted average amortization period | 11 years | |
Other | ||
Business Acquisition [Line Items] | ||
Intangible assets | $ 0 | $ 3 |
Income Taxes - Schedule of Income Tax Expense and Effective Tax Rate (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
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Income Tax Disclosure [Abstract] | ||
Income tax expense | $ 26 | $ 30 |
Effective tax rate percentage | 23.00% | 25.60% |
Employee Benefit Plans - Components of Pension and Other Postretirement Benefit Income (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
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Pension Plan [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | $ 0 | $ 1 |
Interest cost | 11 | 11 |
Expected return on plan assets | (20) | (22) |
Amortization of prior service credits | 0 | 0 |
Net periodic benefit income | (9) | (10) |
Other Postretirement Benefits Plan [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | 0 | 0 |
Interest cost | 0 | 0 |
Expected return on plan assets | 0 | 0 |
Amortization of prior service credits | 0 | (2) |
Net periodic benefit income | $ 0 | $ (2) |
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
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Numerator | ||
Net income | $ 87 | $ 87 |
Denominator | ||
Weighted-average common shares outstanding (shares) | 181 | 185 |
Effect of potentially dilutive securities (shares) | 1 | 1 |
Weighted average diluted shares outstanding (shares) | 182 | 186 |
Earnings per share | ||
Basic (usd per share) | $ 0.48 | $ 0.47 |
Diluted (usd per share) | $ 0.48 | $ 0.47 |
Shares excluded from diluted earnings per share calculation due to anti-dilutive effect (shares) | 1 |
Supplemental Financial Information - Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Millions |
Dec. 31, 2021 |
Sep. 30, 2021 |
Dec. 31, 2020 |
Sep. 30, 2020 |
---|---|---|---|---|
Supplemental Financial Information [Abstract] | ||||
Cash and cash equivalents | $ 152 | $ 230 | $ 527 | |
Restricted cash | 2 | 1 | 1 | |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | $ 154 | $ 231 | $ 528 | $ 761 |
Supplemental Financial Information - Summary of Accounts Receivable (Details) - USD ($) $ in Millions |
Dec. 31, 2021 |
Sep. 30, 2021 |
---|---|---|
Current | ||
Trade | $ 513 | $ 475 |
Other | 15 | 16 |
Notes receivable from franchisees | 7 | 10 |
Receivables, gross | 535 | 501 |
Allowance for credit losses | (5) | (5) |
Receivables, net | $ 530 | $ 496 |
Supplemental Financial Information - Inventory (Details) - USD ($) $ in Millions |
Dec. 31, 2021 |
Sep. 30, 2021 |
---|---|---|
Supplemental Financial Information [Abstract] | ||
Inventory, Finished Goods, Gross | $ 277 | $ 276 |
Inventory, Work in Process and Raw Materials | 60 | 49 |
Inventory, LIFO Reserve | (73) | (67) |
Inventories, net | $ 264 | $ 258 |
Supplemental Financial Information - Revenue Recognition and Deferred Revenue (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
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Timing of Transfer | ||
Sales | $ 858 | $ 653 |
Transferred over Time [Member] | ||
Timing of Transfer | ||
Sales | 14 | 11 |
Transferred at Point in Time [Member] | ||
Timing of Transfer | ||
Sales | $ 844 | $ 642 |
Subsequent Events (Details) |
Jan. 24, 2022
$ / shares
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Subsequent Event | |
Subsequent Event [Line Items] | |
Dividend per share (usd per share) | $ 0.125 |
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