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Fair Value Measurements

9 Months Ended

Jun. 30, 2023

FAIR VALUE MEASUREMENTS

Recurring fair value measurements

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


	As of June 30, 2023
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	1.4	$	1.4	$	—	$	—	$	—
Time deposits	277.5		—		277.5		—		—

Prepaid expenses and other current assets
Currency derivatives (b)	0.3		—		0.3		—		—


Other noncurrent assets
Non-qualified trust funds	2.8		—		—		—		2.8
Interest rate swap agreements (c)	9.8		—		9.8		—		—
Deferred compensation investments	19.4		19.4		—		—		—
Total assets at fair value	$	311.2	$	20.8	$	287.6	$	—	$	2.8

Accrued expenses and other liabilities
Currency derivatives (b)	$	0.1	$	—	$	0.1	$	—	$	—

Other noncurrent liabilities
Deferred compensation obligations	20.2		—		—		—		20.2
Total liabilities at fair value	$	20.3	$	—	$	0.1	$	—	$	20.2


	As of September 30, 2022
(In millions)	Total		Level 1		Level 2		Level 3		NAV (a)
Cash and cash equivalents
Money market funds	$	0.4	$	0.4	$	—	$	—	$	—
Time deposits	13.3		—		13.3		—		—
Prepaid expenses and other current assets
Currency derivatives (b)	6.0		—		6.0		—		—
Interest rate swap agreements	5.2		—		5.2		—		—
Other noncurrent assets
Non-qualified trust funds	6.4		—		—		—		6.4
Interest rate swap agreements	12.6		—		12.6		—		—
Total assets at fair value	$	43.9	$	0.4	$	37.1	$	—	$	6.4

Accrued expenses and other liabilities
Currency derivatives (b)	$	5.2	$	—	$	5.2	$	—	$	—

Other noncurrent liabilities
Deferred compensation obligations	19.6		—		—		—		19.6
Total liabilities at fair value	$	24.8	$	—	$	5.2	$	—	$	19.6

(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 $27.1 million and $150.5 million as of June 30, 2023 and September 30, 2022, respectively.

(c)An interest rate swap agreement with a notional amount of $75.0 million matured during the three months ended June 30, 2023. Valvoline remains party to three interest rate swap agreements with notional amounts that aggregate to $275.0 million as of June 30, 2023.

Deferred compensation investments

The Company established an investment fund in April 2023 that is primarily comprised of mutual funds traded in active markets and valued using quoted (unadjusted) prices, which are Level 1 inputs. Gains and losses related to these investments are immediately recognized in the Condensed Consolidated Statements of Comprehensive Income within Selling, general and administrative expenses and were not material during the three and nine months ended June 30, 2023.

Fair value disclosures

The Company’s held-to-maturity U.S. treasury securities and long-term debt are reported in the Condensed Consolidated Balance Sheets at carrying value, rather than fair value, and are 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 following disclosures summarize the fair value of these assets and liabilities at each relevant balance sheet date.

U.S. treasury securities

During the three months ended June 30, 2023, the Company purchased U.S. treasury securities which are carried at amortized cost within the Condensed Consolidated Balance Sheet and classified as held-to-maturity based on the intent and ability to hold these investments to maturity. The fair value of these investments summarized below is determined utilizing quoted prices for identical securities from less active markets, which are considered Level 2 inputs within the fair value hierarchy.


	June 30, 2023
(In millions)	Amortized cost		Gross unrealized losses		Fair value
Cash and cash equivalents
U.S. treasuries (a)	$	19.9	$	—	$	19.9
Short-term investments
U.S. treasuries (b)	$	424.1	$	(0.9)	$	423.2

(a)U.S. treasury securities with original maturity dates of 90 days or less.

(b)U.S. treasury securities with original maturities greater than 90 days and less than 12 months.

Long-term debt

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.


	June 30, 2023						September 30, 2022
(In millions)	Fair value		Carrying value (a)		Unamortized discounts and issuance costs		Fair value		Carrying value (a)		Unamortized discounts and issuance costs
2030 Notes	$	590.1	$	594.3	$	(5.7)	$	568.5	$	593.7	$	(6.3)
2031 Notes	438.6		529.7		(5.3)		400.5		529.2		(5.8)
Total	$	1,028.7	$	1,124.0	$	(11.0)	$	969.0	$	1,122.9	$	(12.1)

(a)Carrying values shown are net of unamortized discounts and debt issuance costs.

Refer to Note 5 for details of these senior notes as well as Valvoline's other debt instruments that have variable interest rates with carrying amounts that approximate fair value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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