Valvoline(VVV) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (Unaudited) Valvoline Inc.'s unaudited condensed consolidated financial statements and detailed notes are presented Condensed Consolidated Statements of Comprehensive Income | Metric (In millions) | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Nine months ended June 30, 2023 | Nine months ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net revenues | $376.2 | $317.4 | $1,053.5 | $900.7 | | Gross profit | $150.7 | $127.8 | $396.2 | $347.3 | | Operating income | $86.5 | $61.1 | $177.0 | $153.1 | | Income from continuing operations | $64.5 | $39.8 | $124.4 | $97.0 | | (Loss) income from discontinued operations | $(2.9) | $58.4 | $1,246.4 | $169.6 | | Net income | $61.6 | $98.2 | $1,370.8 | $266.6 | | Metric (Per share amounts) | Three months ended June 30, 2023 | Three months ended June 30, 2022 | Nine months ended June 30, 2023 | Nine months ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Basic earnings per share (Continuing operations) | $0.40 | $0.22 | $0.74 | $0.54 | | Basic earnings per share (Discontinued operations) | $(0.02) | $0.33 | $7.35 | $0.94 | | Basic earnings per share (Total) | $0.38 | $0.55 | $8.09 | $1.48 | | Diluted earnings per share (Continuing operations) | $0.40 | $0.22 | $0.73 | $0.53 | | Diluted earnings per share (Discontinued operations) | $(0.02) | $0.33 | $7.31 | $0.94 | | Diluted earnings per share (Total) | $0.38 | $0.55 | $8.04 | $1.47 | Condensed Consolidated Balance Sheets | Metric (In millions) | June 30, 2023 | September 30, 2022 | | :-------------------------------- | :-------------- | :----------------- | | Total current assets | $1,087.1 | $1,621.1 | | Total noncurrent assets | $1,898.4 | $1,795.7 | | Total assets | $2,985.5 | $3,416.8 | | Total current liabilities | $405.9 | $919.4 | | Total noncurrent liabilities | $2,294.2 | $2,190.8 | | Stockholders' equity | $285.4 | $306.6 | | Total liabilities and stockholders' equity | $2,985.5 | $3,416.8 | - Cash and cash equivalents increased significantly from $23.4 million at September 30, 2022, to $526.7 million at June 30, 2023, primarily due to proceeds from the sale of the Global Products business[11] - Current assets held for sale decreased from $1,464.2 million to $0, reflecting the completion of the Global Products business sale[11] Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (In millions) | Nine months ended June 30, 2023 | Nine months ended June 30, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Total cash (used in) provided by operating activities | $(48.4) | $191.2 | | Total cash provided by (used in) investing activities | $2,026.1 | $(143.6) | | Total cash used in financing activities | $(1,535.5) | $(178.0) | | Increase (decrease) in cash, cash equivalents and restricted cash | $442.8 | $(131.8) | | Cash, cash equivalents and restricted cash - end of period | $526.7 | $99.6 | - Investing cash flows significantly increased to $2,026.1 million in 2023, primarily driven by $2,621.0 million from discontinued operations, reflecting the sale of the Global Products business[13] - Financing cash flows used increased substantially to $(1,535.5) million in 2023, mainly due to $1,395.5 million in repurchases of common stock[13] Condensed Consolidated Statements of Stockholders' Equity | Stockholders' Equity (In millions) | Balance at September 30, 2022 | Balance at June 30, 2023 | | :-------------------------------- | :---------------------------- | :----------------------- | | Common stock (Amount) | $1.8 | $1.4 | | Paid-in capital | $44.1 | $44.8 | | Retained earnings | $282.0 | $222.2 | | Accumulated other comprehensive income (loss) | $(21.3) | $17.0 | | Totals | $306.6 | $285.4 | - Repurchases of common stock totaled $1,149.9 million for the three months ended June 30, 2023, significantly impacting retained earnings and common stock shares outstanding[14] - Net income for the nine months ended June 30, 2023, was $1,370.8 million, contributing to retained earnings[9][14] Notes to Condensed Consolidated Financial Statements Note 1 - Basis of Presentation and Significant Accounting Policies Valvoline's unaudited financial statements follow U.S. GAAP, detailing the Global Products sale, IRA excise tax, and LIBOR transition - Sale of Global Products business completed March 1, 2023; operations classified as discontinued[23] - Inflation Reduction Act (IRA) excise tax on share repurchases: $13.0 million recognized in Retained earnings for 35.0 million shares repurchased since January 1, 2023[26] - Transition from LIBOR to SOFR for Credit Agreement and interest rate swaps completed, with no outstanding LIBOR-based debt or swaps as of June 30, 2023[29][30] Note 2 - Discontinued Operations Valvoline sold its Global Products business to Aramco for $2.650 billion cash, recognizing a $1.572 billion pre-tax gain, and entered into post-closing supply and transition agreements - Sale of Global Products completed March 1, 2023, for $2.650 billion cash[31] - Pre-tax gain on sale: $1.572 billion recognized in Income from discontinued operations[31] | Metric (In millions) | Nine months ended June 30, 2023 | Nine months ended June 30, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net revenues | $1,174.4 | $1,953.4 | | Operating (loss) income from discontinued operations | $113.2 | $223.3 | | Gain on sale of discontinued operations | $(1,571.6) | — | | (Loss) income from discontinued operations | $1,246.4 | $169.6 | - Post-closing arrangements include a long-term supply agreement for lubricants and ancillary products and a Transition Services Agreement for IT, legal, finance, and human resources support[35] Note 3 - Fair Value Measurements Valvoline measures financial assets and liabilities at fair value using Level 1 (money market funds, deferred compensation) and Level 2 (time deposits, derivatives, swaps) inputs | Financial Assets at Fair Value (In millions) | Total (June 30, 2023) | Level 1 | Level 2 | | :-------------------------------- | :-------------------- | :------ | :------ | | Money market funds | $1.4 | $1.4 | — | | Time deposits | $277.5 | — | $277.5 | | Currency derivatives | $0.3 | — | $0.3 | | Interest rate swap agreements | $9.8 | — | $9.8 | | Deferred compensation investments