Valvoline reports fiscal Q2 net income up 19% from a year ago to US$81.0M, with sales up 26% year-over-year to US$886.0M driven by strong demand, pricing actions: retail services up 23% from a year ago, same-store sales grow 13.1% as units increase 7%

Sample article from our Automobile Industry

LEXINGTON, Kentucky , May 10, 2022 (press release) –

  • Reported net income of $81 million grew 19% and earnings per diluted share (EPS) of $0.45 increased 22%
  • Adjusted EPS of $0.48 was flat and adjusted EBITDA of $158 million improved 1%
  • Sales grew 26% to $886 million driven by strong demand and pricing actions
  • Retail Services sales grew 23% with system-wide same-store sales (SSS) increasing 13.1% and net system-wide unit additions of 7%
  • Global Products sales increased 29% primarily driven by volume growth of 9% and pricing actions
  • Returned $57 million in cash to shareholders via dividends and share repurchases
  • Reiterates full-year guidance for adjusted EBITDA of $675 to $700 million and adjusted EPS of $2.07 to $2.20

Valvoline Inc. (NYSE: VVV), a global leader in vehicle care powering the future of mobility through innovative services and products, today reported financial results for its second fiscal quarter ended March 31, 2022. All comparisons in this press release are made to the same prior-year period unless otherwise noted.

"Valvoline continues to generate outstanding top-line results, reflecting ongoing strong demand for our products and services," said Sam Mitchell, CEO. "Our performance was driven by ongoing share gains, price increases to recover cost inflation and continued strong operational execution by our team.

"Sales increased 23% in Retail Services driven by 13% same-store sales growth and a 7% increase in units. Profitability was impacted by the current inflationary environment, increasing labor and product costs. We have executed appropriate pricing actions which will improve profitability in Q3 and Q4.

"Global Products sales increased by an impressive 29%, highlighting strong volume growth of 9% and continued success in price pass-through of raw material cost increases. The volume growth we are seeing is broad-based and an indicator of continued share gains and our ability to meet customer demand despite supply chain challenges. Our unit margins continue to improve sequentially, and we are confident that we will recover cost increases with price pass-through – as we have done in prior periods of inflation."

Operating Segment Results 

(In millions)

   

YoY growth
(decline)

Retail Services

Q2 results

Segment sales

$            350

 

23%

System-wide store sales (a)

$            557

 

19%

Operating income

$              77

 

(4)%

Adjusted EBITDA (a)

$              95

 

—%

 

YoY growth

System-wide SSS (a) growth

13.1%

       

Global Products

Q2 results

 

YoY growth

Lubricant sales (gallons) (a)

43.3

 

9%

Segment sales

$            536

 

29%

Operating income

$              74

 

1%

Adjusted EBITDA (a)

$              81

 

1%

Discretionary free cash flow (a)

$              52

 

—%

(a)

Refer to Key Business Measures, Use of Non-GAAP Measures, and Tables 4 and 5, Information by Operating Segment, for a description of the metrics presented above.

Balance Sheet and Cash Flow

  • Total debt of approximately $1.7 billion and net debt of approximately $1.6 billion
  • Year-to-date cash flow from operations of $96 million and free cash flow of $29 million
  • Returned $35 million of cash to shareholders via share repurchases and $22 million via dividends during the quarter

Outlook

"We are reaffirming our full-year profitability guidance despite a challenging supply chain and raw material environment, highlighting superior execution, the quality of our business and strong pricing power," said Mitchell. "Our adjusted EBITDA guidance represents high-single digit growth driven by share gains and pricing actions.

"Both segments remain healthy, and our separation process remains on track."

Information regarding the Company's outlook for fiscal 2022 is provided in the table below:

 

Updated Outlook

Prior Outlook

Operating Items

           

Sales growth

22

24%

19

21%

Retail Services system-wide store additions

140

160

110

130

Retail Services system-wide SSS growth

12

14%

9

12%

Adjusted EBITDA

no

 

change

$675

$700 million

Corporate Items

           

Adjusted effective tax rate

no

 

change

24

25%

Adjusted EPS

no

 

change

$2.07

$2.20

Capital expenditures

no

 

change

$180

$200 million

Free cash flow (a)

$260

$280 million

$260

$300 million

(a)

Updated outlook for free cash flow excludes non-recurring cash outflows associated with the separation.

Valvoline's outlook for adjusted EBITDA, adjusted EPS, free cash flow and the adjusted effective tax rate are non-GAAP financial measures that are expected to be impacted by items affecting comparability. Valvoline is unable to reconcile these forward-looking non-GAAP financial measures to the comparable GAAP measures estimated for fiscal 2022 without unreasonable efforts, as the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact these GAAP measures in fiscal 2022 but would not impact non-GAAP adjusted results.

Conference Call Webcast

Valvoline will host a live audio webcast of its fiscal second quarter 2022 conference call at 9 a.m. ET on Tuesday, May 10, 2022. The webcast and supporting materials will be accessible through Valvoline's website at http://investors.valvoline.com. Following the live event, an archived version of the webcast and supporting materials will be available.

Key Business Measures

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

Sales in the Retail Services reportable segment are influenced by the number of service center stores and the business performance of those stores. Stores are considered open upon acquisition or opening for business. Temporary store closings remain in the respective store counts with only permanent store closures reflected in the activity and end of period store counts. SSS is defined as sales by U.S. Retail Services stores (company-operated, franchised and the combination of these for system-wide SSS), with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation as this period is generally required for new store sales levels to begin to normalize.

Retail Services sales are limited to sales at company-operated stores, sales of lubricants and other products to independent franchise and Express Care operators, in addition to royalties and other fees from franchised stores. Although Valvoline does not recognize store-level sales from franchised stores as sales in its Statements of Consolidated Income, management believes system-wide and franchised SSS comparisons, store counts, and total system-wide store sales are useful to assess market position relative to competitors and overall store and segment operating performance.

Management believes lubricant volumes sold in gallons by its consolidated subsidiaries is a useful measure in evaluating and understanding the operating performance of the Global Products segment. Volumes sold in other units of measure, including liters, are converted to gallons utilizing standard conversions.

Use of Non-GAAP Measures

To supplement the financial measures prepared in accordance with U.S. GAAP, certain items within this press release are presented on an adjusted basis. These non-GAAP measures, presented on both a consolidated and operating segment basis, have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, or more meaningful than, the financial results presented in accordance with U.S. GAAP. The financial results presented in accordance with U.S. GAAP and the reconciliations of non-GAAP measures should be carefully evaluated. The non-GAAP information used by management may not be comparable to similar measures disclosed by other companies, because of differing methods used in calculating such measures.

This press release includes the following non-GAAP measures: segment adjusted operating income, consolidated EBITDA, consolidated and segment adjusted EBITDA, consolidated adjusted net income and earnings per share, consolidated free cash flow, and consolidated and segment discretionary free cash flows. Refer to Tables 4-5 and 7-9 for management's definition of each non-GAAP measure and reconciliation to the most comparable U.S. GAAP measure.

Management believes the use of non-GAAP measures on a consolidated and operating segment basis provides a useful supplemental presentation of Valvoline's operating performance and allows for transparency with respect to key metrics used by management in operating the business and measuring performance. Management believes EBITDA measures provide a meaningful supplemental presentation of Valvoline's operating performance between periods on a comparable basis due to the depreciable assets associated with the nature of the Company's operations, as well as income tax and interest costs related to Valvoline's tax and capital structures, respectively.

Adjusted profitability measures enable comparison of financial trends and results between periods where certain items may vary independent of business performance. These adjusted measures exclude the impact of certain unusual, infrequent or non-operational activity not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods ("key items"). Key items are often related to legacy matters or market-driven events considered by management to not be reflective of the ongoing operating performance. Key items may consist of adjustments related to: legacy businesses, including the separation from Valvoline's former parent company and associated impacts of related activity and indemnities; the separation of Valvoline's businesses; significant acquisitions or divestitures; restructuring-related matters; tax reform legislation; debt extinguishment and modification costs; and other matters that are non-operational or unusual in nature, including the following: 

  • Net pension and other postretirement plan expense/income - includes several elements impacted by changes in plan assets and obligations that are primarily driven by changes in the debt and equity markets, as well as those that are predominantly legacy in nature and related to prior service to the Company from employees (e.g., retirees, former employees and current employees with frozen benefits). These elements include (i) interest cost, (ii) expected return on plan assets, (iii) actuarial gains and losses, and (iv) amortization of prior service costs and credits. Significant factors that can contribute to changes in these elements include changes in discount rates used to remeasure pension and other postretirement obligations on an annual basis or upon a qualifying remeasurement, differences between actual and expected returns on plan assets, and other changes in actuarial assumptions, such as the life expectancy of plan participants. Accordingly, management considers that these elements may be more reflective of changes in current conditions in global financial markets (in particular, interest rates), outside the operational performance of the business, and are also primarily legacy amounts that are not directly related to the underlying business and do not have an immediate, corresponding impact on the compensation and benefits provided to eligible employees for current service. Adjusted profitability measures include the costs of benefits provided to employees for current service, including pension and other postretirement service costs.
  • Changes in the last-in, first out (LIFO) inventory reserve - charges or credits recognized in Cost of sales to value certain lubricant inventories at the lower of cost or market using the LIFO method. During inflationary or deflationary pricing environments, the application of LIFO can result in variability of the cost of sales recognized each period as the most recent costs are matched against current sales, while preceding costs are retained in inventories. LIFO adjustments are determined based on published prices, which are difficult to predict and largely dependent on future events. The application of LIFO can impact comparability and enhance the lag period effects between changes in inventory costs and related pricing adjustments.

Management uses free cash flow and discretionary free cash flow as additional non-GAAP metrics of cash flow generation. By including capital expenditures and certain other adjustments, as applicable, management is able to provide an indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Free cash flow includes the impact of capital expenditures, providing a supplemental view of cash generation. Discretionary free cash flow includes maintenance capital expenditures, which are routine uses of cash that are necessary to maintain the Company's operations and provides a supplemental view of cash flow generation to maintain operations before discretionary investments in growth. Free cash flow and discretionary free cash flow have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash flows, such as mandatory debt repayments.

About Valvoline™

Valvoline Inc. (NYSE: VVV) is a global leader in vehicle care powering the future of mobility through innovative services and products for vehicles with electrichybrid and internal combustion powertrains. Established in 1866, the Company introduced the world's first branded motor oil and developed strong brand recognition and customer satisfaction ratings across multiple service and product channels over the years. The Company operates and franchises approximately 1,600 service center locations and is the No. 2 and No. 3 largest chain in the U.S. and Canada, respectively, by number of stores. With sales in more than 140 countries and territories, Valvoline's solutions are available for every engine and drivetrain, including high-mileage and heavy-duty vehicles, and are offered at more than 80,000 locations worldwide. Creating the next generation of advanced automotive solutions, Valvoline has established itself as the world's leading supplier of battery fluids to electric vehicle manufacturers, offering tailored products to help extend vehicle range and efficiency. To learn more, or to find a Valvoline service center near you, visit www.valvoline.com.

Forward-Looking Statements

Certain statements in this press release, other than statements of historical fact, including estimates, projections and statements related to Valvoline's business plans and operating results, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Valvoline has identified some of these forward-looking statements with words such as "anticipates," "believes," "expects," "estimates," "is likely," "predicts," "projects," "forecasts," "may," "will," "should," and "intends," and the negative of these words or other comparable terminology. These forward-looking statements are based on Valvoline's current expectations, estimates, projections, and assumptions as of the date such statements are made and are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. Additional information regarding these risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission (the "SEC"), including in the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures about Market Risk" sections of Valvoline's most recently filed periodic reports on Forms 10-K and 10-Q, which are available on Valvoline's website at http://investors.valvoline.com/sec-filings or on the SEC's website at http://www.sec.gov. Valvoline assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, unless required by law.

TM Trademark, Valvoline or its subsidiaries, registered in various countries
SM Service mark, Valvoline or its subsidiaries, registered in various countries

FOR FURTHER INFORMATION

Investor Inquiries
+1 (859) 357-3155
IR@valvoline.com

Media Inquiries
Michele Gaither Sparks
Sr. Director, Corporate Communications
+1 (859) 230-8097
michele.sparks@valvoline.com

Valvoline Inc. and Consolidated Subsidiaries

               

Table 1

STATEMENTS OF CONSOLIDATED INCOME

                 

(In millions, except per share amounts - preliminary and unaudited)

         
                     
   

Three months ended

   

Six months ended

 

March 31

   

March 31

 

2022

 

2021

   

2022

 

2021

Sales

 

$       886

 

$       701

   

$     1,744

 

$     1,354

Cost of sales

 

636

 

454

   

1,250

 

879

GROSS PROFIT

 

250

 

247

   

494

 

475

Selling, general and administrative expenses

 

137

 

129

   

272

 

246

Legacy and separation-related expenses

 

6

 

   

9

 

1

Equity and other income, net

 

(10)

 

(13)

   

(25)

 

(27)

OPERATING INCOME

 

117

 

131

   

238

 

255

Net pension and other postretirement plan income

 

(9)

 

(14)

   

(18)

 

(27)

Net interest and other financing expenses

 

18

 

55

   

35

 

75

INCOME BEFORE INCOME TAXES

 

108

 

90

   

221

 

207

Income tax expense

 

27

 

22

   

53

 

52

NET INCOME

 

$         81

 

$         68

   

$       168

 

$       155

                     
                     

NET EARNINGS PER SHARE

                 

         BASIC 

 

$      0.45

 

$      0.37

   

$      0.93

 

$      0.84

         DILUTED

 

$      0.45

 

$      0.37

   

$      0.93

 

$      0.84

                     

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

                 

         BASIC

 

180

 

182

   

180

 

184

         DILUTED

 

181

 

183

   

181

 

184

 

Valvoline Inc. and Consolidated Subsidiaries

     

Table 2

CONDENSED CONSOLIDATED BALANCE SHEETS

       

(In millions - preliminary and unaudited)

       
               
   

March 31

 

September 30

 

2022

 

2021

ASSETS

       
 

Current assets

       
   

Cash and cash equivalents

 

$              118

 

$              230

   

Receivables, net

 

563

 

496

   

Inventories, net

 

276

 

258

   

Prepaid expenses and other current assets

 

59

 

53

 

Total current assets

 

1,016

 

1,037

               
 

Noncurrent assets

       
   

Property, plant and equipment, net

 

843

 

817

   

Operating lease assets

   

313

 

307

   

Goodwill and intangibles, net

 

788

 

775

   

Equity method investments

 

53

 

47

   

Deferred income taxes

 

13

 

14

   

Other noncurrent assets

 

222

 

194

 

Total noncurrent assets

 

2,232

 

2,154

               
 

Total assets

 

$           3,248

 

$           3,191

               

LIABILITIES AND STOCKHOLDERS' EQUITY

       
 

Current liabilities

       
   

Current portion of long-term debt

 

$                47

 

$                17

   

Trade and other payables

 

238

 

246

   

Accrued expenses and other liabilities

 

300

 

306

 

Total current liabilities

 

585

 

569

             
 

Noncurrent liabilities

       
   

Long-term debt

 

1,648

 

1,677

   

Employee benefit obligations

 

237

 

258

   

Operating lease liabilities

 

280

 

274

   

Deferred income taxes

 

42

 

26

   

Other noncurrent liabilities

 

256

 

252

 

Total noncurrent liabilities

 

2,463

 

2,487

             
 

Stockholders' equity

 

200

 

135

             
 

Total liabilities and stockholders' equity

 

$           3,248

 

$           3,191

 

Valvoline Inc. and Consolidated Subsidiaries

     

Table 3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

   

(In millions - preliminary and unaudited)

       
             
   

Six months ended

 

March 31

 

2022

 

2021

CASH FLOWS FROM OPERATING ACTIVITIES

       
 

Net income

 

$              168

 

$              155

 

Adjustments to reconcile net income to cash flows from operating activities

       
   

Loss on extinguishment of debt

 

 

36

   

Depreciation and amortization

 

50

 

44

   

Deferred income taxes

 

15

 

   

Pension contributions

 

(1)

 

(4)

   

Stock-based compensation expense

 

7

 

6

   

Other, net

 

(3)

 

2

 

Change in operating assets and liabilities

 

(140)

 

(49)

Total cash provided by operating activities

 

96

 

190

             

CASH FLOWS FROM INVESTING ACTIVITIES

       
 

Additions to property, plant and equipment

 

(67)

 

(74)

 

Repayments of notes receivable

 

5

 

12

 

Acquisitions of businesses

 

(23)

 

(223)

 

Other investing activities, net

 

1

 

9

Total cash used in investing activities

 

(84)

 

(276)

             

CASH FLOWS FROM FINANCING ACTIVITIES

       
 

Proceeds from borrowings

 

185

 

546

 

Repayments on borrowings

 

(186)

 

(800)

 

Premium paid to extinguish debt

 

 

(26)

 

Repurchases of common stock

 

(66)

 

(100)

 

Cash dividends paid

 

(45)

 

(46)

 

Other financing activities

 

(12)

 

(5)

Total cash used in financing activities

 

(124)

 

(431)

 

Effect of currency exchange rate changes on cash, cash equivalents and
restricted cash

 

1

 

4

DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

(111)

 

(513)

Cash, cash equivalents and restricted cash - beginning of period

 

231

 

761

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD

 

$              120

 

$              248

 

Valvoline Inc. and Consolidated Subsidiaries

             

Table 4

INFORMATION BY OPERATING SEGMENT -  RETAIL SERVICES

           

(In millions - preliminary and unaudited)

               
                   
     

Three months ended

 

Six months ended

     

March 31

 

March 31

     

2022

 

2021

 

2022

 

2021

Sales information

               

Retail Services segment sales

 

$    350

 

$    285

 

$    696

 

$    539

     Year-over-year growth

 

23%

 

34%

 

29%

 

25%

                 

System-wide store sales (a)

 

$    557

 

$    468

 

$  1,108

 

$    889

     Year-over-year growth (a)

 

19%

 

29%

 

25%

 

20%

                 

Same-store sales growth (b)

               

Company-operated

 

10.0%

 

19.8%

 

15.7%

 

12.8%

Franchised (a)

 

15.5%

 

20.4%

 

20.9%

 

13.1%

System-wide (a)

 

13.1%

 

20.2%

 

18.6%

 

13.0%

                 

Profitability information

               

Operating income (c)

 

$      77

 

$      80

 

$    158

 

$    136

     Key items

 

 

 

 

Adjusted operating income (c)

 

77

 

80

 

158

 

136

     Depreciation and amortization

 

18

 

15

 

35

 

29

Adjusted EBITDA (c)

 

$      95

 

$      95

 

$    193

 

$    165

  Adjusted EBITDA margin (d)

 

27.1%

 

33.3%

 

27.7%

 

30.6%

                 

Discretionary cash flow information

               

Adjusted operating income (c)

 

$      77

 

$      80

 

$    158

 

$    136

     Income tax expense (e)

 

(19)

 

(20)

 

(37)

 

(35)

     Maintenance additions to property, plant and equipment

 

(5)

 

(4)

 

(9)

 

(7)

Discretionary free cash flow (f)

 

$      53

 

$      56

 

$    112

 

$      94

                   

(a)

Measures include Valvoline franchisees, which are independent legal entities. Valvoline does not consolidate the results of operations of its franchisees.

(b)

Valvoline determines SSS growth as sales by U.S. Retail Services stores, with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation.

(c)

Segment adjusted operating income is segment operating income adjusted for key items impacting comparability. Segment adjusted operating income is further adjusted for depreciation and amortization to determine segment adjusted EBITDA. Valvoline does not generally allocate activity below operating income to its operating segments; therefore, the table above reconciles operating income to Adjusted EBITDA.

(d)

Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by segment sales. 

(e)

Income tax expense is estimated using the adjusted effective tax rate for the period multiplied by operating segment adjusted operating income.

(f)

Segment discretionary free cash flow is defined as operating segment adjusted operating income after-tax, less maintenance capital expenditures.

        

Valvoline Inc. and Consolidated Subsidiaries

 

Table 5

INFORMATION BY OPERATING SEGMENT - GLOBAL PRODUCTS

   

(In millions - preliminary and unaudited)

               
                   
   

Three months ended

 

Six months ended

 

March 31

 

March 31

 

2022

 

2021

 

2022

 

2021

Volume information

               

Lubricant sales (gallons)

 

43.3

 

39.9

 

86.4

 

77.9

     Year-over-year growth

 

9%

 

15%

 

11%

 

10%

                   

Sales information

               

Sales by geographic region

               

     North America (a)

 

$    330

 

$    242

 

$    634

 

$    477

     Europe, Middle East and Africa ("EMEA")

 

67

 

54

 

134

 

105

     Asia Pacific

 

98

 

88

 

202

 

171

     Latin America (a)

 

41

 

32

 

78

 

62

Global Products segment sales

 

$    536

 

$    416

 

$  1,048

 

$    815

     Year-over-year growth

 

29%

 

14%

 

29%

 

8%

                   

Profitability information

               

Operating income (b)

 

$      74

 

$      73

 

$    144

 

$    161

     Key items

 

 

 

 

Adjusted operating income (b)

 

74

 

73

 

144

 

161

     Depreciation and amortization

 

7

 

7

 

14

 

13

Adjusted EBITDA (b)

 

$      81

 

$      80

 

$    158

 

$    174

     Adjusted EBITDA margin (c)

 

15.1%

 

19.2%

 

15.1%

 

21.3%

                   

Discretionary cash flow information

               

Adjusted operating income (b)

 

$      74

 

$      73

 

$    144

 

$    161

     Income tax expense (d)

 

(18)

 

(18)

 

(34)

 

(41)

     Maintenance additions to property, plant and equipment 

 

(4)

 

(3)

 

(6)

 

(5)

Discretionary free cash flow (e)

 

$      52

 

$      52

 

$    104

 

$    115

                   

(a)

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

(b)

Segment adjusted operating income is segment operating income adjusted for key items impacting comparability. Segment adjusted operating income is further adjusted for depreciation and amortization to determine segment adjusted EBITDA. Valvoline does not generally allocate activity below operating income to its operating segments; therefore, the table above reconciles operating income to Adjusted EBITDA.

(c)

Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by segment sales.

(d)

Income tax expense is estimated using the adjusted effective tax rate for the period multiplied by operating segment adjusted operating income.

(e)

Segment discretionary free cash flow is defined as operating segment adjusted operating income after-tax, less maintenance capital expenditures.

 

Valvoline Inc. and Consolidated Subsidiaries

             

Table 6

RETAIL SERVICES STORE INFORMATION

               

(Preliminary and unaudited)

                   
                 
       

System-wide stores (a)

       

Second
Quarter
2022

 

First
Quarter
2022

 

Fourth
Quarter
2021

 

Third
Quarter
2021

 

Second
Quarter
2021

                         
 

Beginning of period

 

1,635

 

1,594

 

1,569

 

1,548

 

1,533

   

Opened

 

19

 

32

 

21

 

17

 

13

   

Acquired

 

9

 

12

 

7

 

5

 

3

   

Closed

 

(2)

 

(3)

 

(3)

 

(1)

 

(1)

 

End of period

 

1,661

 

1,635

 

1,594

 

1,569

 

1,548

                         
       

Number of stores at end of period

       

Second
Quarter
2022

 

First
Quarter
2022

 

Fourth
Quarter
2021

 

Third
Quarter
2021

 

Second
Quarter
2021

                         
 

Company-operated

 

757

 

738

 

719

 

698

 

673

 

Franchised

 

904

 

897

 

875

 

871

 

875

                         
       

March 31

     

2022

 

2021

 

System-wide store count (a)

             

1,661

 

1,548

 

     Year-over-year growth

             

7%

 

9%

                         

(a)

System-wide store count includes franchised service center stores. Valvoline franchises are independent legal entities, and Valvoline does not consolidate the results of operations of its franchisees.

 

Valvoline Inc. and Consolidated Subsidiaries

             

Table 7

RECONCILIATION OF NON-GAAP DATA - NET INCOME AND DILUTED EARNINGS PER SHARE

(In millions, except per share amounts - preliminary and unaudited)

       
                   
     

Three months ended

 

Six months ended

     

March 31

 

March 31

     

2022

 

2021

 

2022

 

2021

                   

Reported net income

 

$         81

 

$         68

 

$       168

 

$       155

Adjustments:

               
 

Net pension and other postretirement plan income

 

(9)

 

(14)

 

(18)

 

(27)

 

Legacy and separation-related expenses

 

6

 

 

9

 

1

 

LIFO charge

 

3

 

5

 

9

 

9

 

Business interruption losses (recoveries)

 

5

 

(2)

 

5

 

(3)

 

Information technology transition costs

 

2

 

 

3

 

 

Debt extinguishment and modification costs

 

 

36

 

 

36

 

     Total adjustments, pre-tax

 

7

 

25

 

8

 

16

 

Income tax benefit of adjustments

 

(1)

 

(6)

 

(1)

 

(4)

 

     Total adjustments, after tax

 

6

 

19

 

7

 

12

Adjusted net income (a)

 

$         87

 

$         87

 

$       175

 

$       167

                 

Reported diluted earnings per share

 

$      0.45

 

$      0.37

 

$      0.93

 

$      0.84

Adjusted diluted earnings per share (b)

 

$      0.48

 

$      0.48

 

$      0.96

 

$      0.91

                   

Weighted average diluted common shares outstanding

 

181

 

183

 

181

 

184

                   

(a)

Adjusted net income is defined as net income adjusted for key items. Refer to "Use of Non-GAAP Measures" in this press release for management's definition of key items.

(b)

Adjusted diluted earnings per share is defined as earnings per diluted share calculated using adjusted net income.

 

Valvoline Inc. and Consolidated Subsidiaries

             

Table 8

RECONCILIATION OF NON-GAAP DATA - ADJUSTED EBITDA

           

(In millions - preliminary and unaudited)

               
                 
   

Three months ended

 

Six months ended

 

March 31

 

March 31

 

2022

 

2021

 

2022

 

2021

Adjusted EBITDA - Valvoline

               

Net income

 

$         81

 

$         68

 

$       168

 

$       155

     Add:

               

          Income tax expense

 

27

 

22

 

53

 

52

          Net interest and other financing expenses

 

18

 

55

 

35

 

75

          Depreciation and amortization

 

25

 

23

 

50

 

44

EBITDA (a)

 

151

 

168

 

306

 

326

     Key items:

               

          Net pension and other postretirement plan income

 

(9)

 

(14)

 

(18)

 

(27)

          Legacy and separation-related expenses

 

6

 

 

9

 

1

          LIFO charge

 

3

 

5

 

9

 

9

          Business interruption losses (recoveries)

 

5

 

(2)

 

5

 

(3)

          Information technology transition costs

 

2

 

 

3

 

               Key items - subtotal

 

7

 

(11)

 

8

 

(20)

Adjusted EBITDA (a)

 

$       158

 

$       157

 

$       314

 

$       306

                 

Segment Adjusted EBITDA

               

Retail Services

 

$         95

 

$         95

 

$       193

 

$       165

Global Products

 

81

 

80

 

158

 

174

     Segment Adjusted EBITDA (b)

 

176

 

175

 

351

 

339

Corporate

 

(18)

 

(18)

 

(37)

 

(33)

     Total Adjusted EBITDA (a)

 

158

 

157

 

314

 

306

Net interest and other financing expenses

 

(18)

 

(55)

 

(35)

 

(75)

Depreciation and amortization

 

(25)

 

(23)

 

(50)

 

(44)

Key items

 

(7)

 

11

 

(8)

 

20

     Income before income taxes

 

$       108

 

$         90

 

$       221

 

$       207

                 

(a)

EBITDA is defined as net income, plus income tax expense, net interest and other financing expenses, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for key items, as described in "Use of Non-GAAP Measures" within this press release.

(b)

Segment adjusted EBITDA represents the operations of the Company's two operating segments, including expenses associated with each segment's utilization of indirect resources. The costs of corporate functions, in addition to certain corporate and non-operational matters, or key items, are not included in segment adjusted EBITDA. The table above reconciles segment adjusted EBITDA to consolidated pre-tax income.

 

Valvoline Inc. and Consolidated Subsidiaries

     

Table 9

RECONCILIATION OF NON-GAAP DATA - FREE CASH FLOWS

   

(In millions - preliminary and unaudited)

       
         

Free cash flow (a)

 

Six months ended

 

March 31

 

2022

 

2021

Total cash flows provided by operating activities

 

$                        96

 

$                      190

Adjustments:

       

     Additions to property, plant and equipment

 

(67)

 

(74)

Free cash flow

 

$                        29

 

$                      116

         

Discretionary free cash flow (b)

 

Six months ended

 

March 31

 

2022

 

2021

Total cash flows provided by operating activities

 

$                        96

 

$                      190

Adjustments:

       

     Maintenance additions to property, plant and equipment

 

(16)

 

(15)

Discretionary free cash flow

 

$                        80

 

$                      175

         

(a)

Free cash flow is defined as cash flows from operating activities less capital expenditures and certain other adjustments as applicable.

(b)

Discretionary free cash flow is defined as cash flows from operating activities less maintenance capital expenditures and certain other adjustments as applicable.

 

SOURCE Valvoline Inc.

 

 

 

 

 

 

 

 

 

 

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