VALVOLINE INC (VVV)
SIC breadcrumb: Manufacturing > Petroleum Refining And Related Industries > SIC 2990 Miscellaneous Products of Petroleum & Coal
SEC company page: https://www.sec.gov/edgar/browse/?CIK=1674910. Latest filing source: 0001674910-25-000135.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 1,710,300,000 | USD | 2025 | 2025-11-21 |
| Net income | 210,700,000 | USD | 2025 | 2025-11-21 |
| Assets | 2,670,400,000 | USD | 2025 | 2025-11-21 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-11-21. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001674910.json. Derived margins are computed from the extracted annual SEC facts.
| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 2,084,000,000 | 2,285,000,000 | 2,390,000,000 | 727,000,000 | 1,037,200,000 | 1,236,100,000 | 1,443,500,000 | 1,619,000,000 | 1,710,300,000 | |
| Net income | 273,000,000 | 304,000,000 | 166,000,000 | 208,000,000 | 316,600,000 | 420,300,000 | 424,300,000 | 1,419,700,000 | 211,500,000 | 210,700,000 |
| Operating income | 396,000,000 | 394,000,000 | 395,000,000 | 398,000,000 | 160,200,000 | 240,100,000 | 220,300,000 | 247,200,000 | 367,200,000 | 389,900,000 |
| Gross profit | 748,000,000 | 776,000,000 | 806,000,000 | 810,000,000 | 301,000,000 | 432,300,000 | 476,400,000 | 544,500,000 | 618,800,000 | 658,500,000 |
| Diluted EPS | 1.60 | 1.49 | 0.84 | 1.10 | 1.69 | 2.29 | 2.35 | 8.73 | 1.61 | 1.64 |
| Assets | 1,825,000,000 | 1,915,000,000 | 1,854,000,000 | 2,064,000,000 | 3,051,000,000 | 3,191,000,000 | 3,416,800,000 | 2,889,900,000 | 2,438,700,000 | 2,670,400,000 |
| Stockholders' equity | -330,000,000 | -117,000,000 | -358,000,000 | -257,800,000 | -76,000,000 | 134,500,000 | 306,600,000 | 203,200,000 | 185,600,000 | 338,500,000 |
| Cash and cash equivalents | 172,000,000 | 201,000,000 | 96,000,000 | 159,000,000 | 639,700,000 | 122,600,000 | 23,400,000 | 409,100,000 | 68,300,000 | 51,600,000 |
| Net margin | 14.59% | 7.26% | 8.70% | 43.55% | 40.52% | 34.33% | 98.35% | 13.06% | 12.32% | |
| Operating margin | 18.91% | 17.29% | 16.65% | 22.04% | 23.15% | 17.82% | 17.13% | 22.68% | 22.80% |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001674910.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2022-Q3 | 2022-06-30 | 0.55 | reported discrete quarter | ||
| 2023-Q1 | 2022-12-31 | 0.46 | reported discrete quarter | ||
| 2023-Q3 | 2023-03-31 | 1,227,300,000 | reported discrete quarter | ||
| 2023-Q2 | 2023-03-31 | 7.11 | reported discrete quarter | ||
| 2023-Q3 | 2023-06-30 | 376,200,000 | 0.38 | reported discrete quarter | |
| 2023-Q4 | 2023-09-30 | 390,000,000 | 48,900,000 | derived Q4 = FY annual - nine-month YTD | |
| 2024-Q1 | 2023-12-31 | 373,400,000 | 31,900,000 | 0.24 | reported discrete quarter |
| 2024-Q2 | 2023-12-31 | 31,900,000 | reported discrete quarter | ||
| 2024-Q3 | 2024-03-31 | 41,400,000 | reported discrete quarter | ||
| 2024-Q2 | 2024-03-31 | 388,700,000 | 0.32 | reported discrete quarter | |
| 2024-Q3 | 2024-06-30 | 421,400,000 | 0.35 | reported discrete quarter | |
| 2024-Q4 | 2024-09-30 | 435,500,000 | 92,300,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2024-12-31 | 414,300,000 | 91,600,000 | 0.71 | reported discrete quarter |
| 2025-Q2 | 2024-12-31 | 91,600,000 | reported discrete quarter | ||
| 2025-Q2 | 2025-03-31 | 403,200,000 | 0.29 | reported discrete quarter | |
| 2025-Q3 | 2025-03-31 | 37,600,000 | reported discrete quarter | ||
| 2025-Q3 | 2025-06-30 | 439,000,000 | 0.44 | reported discrete quarter | |
| 2025-Q4 | 2025-09-30 | 453,800,000 | 25,000,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q2 | 2025-12-31 | -32,800,000 | reported discrete quarter | ||
| 2026-Q1 | 2025-12-31 | 461,800,000 | -32,800,000 | -0.26 | reported discrete quarter |
| 2026-Q2 | 2026-03-31 | 503,800,000 | 0.35 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0001674910-26-000045.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as well as the condensed consolidated financial statements and the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q. Unless otherwise noted, disclosures within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations relate solely to the Company's continuing operations.
BUSINESS OVERVIEW AND PURPOSE
As the quick, easy, trusted leader in automotive preventive maintenance, Valvoline Inc. (“Valvoline” or the “Company”) is creating shareholder value by driving the full potential of its core business, delivering sustainable network growth, and continuing to innovate to meet the evolving needs of customers and the car parc. With average customer ratings that indicate high levels of service satisfaction, Valvoline and the Company’s franchise partners simplify vehicle care so customers can do what drives them. This includes approximately 15-minute stay-in-your-car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended maintenance services. The Company operates and franchises more than 2,400 service center locations through its Valvoline Instant Oil ChangeSM (“VIOC”), Valvoline Great Canadian Oil Change, and Oil ChangersSM retail locations and supports over 240 locations through its Express CareTM platform.
BUSINESS STRATEGY
As a pure play automotive retail services provider and the trusted leader in preventive automotive maintenance, Valvoline is well positioned to create long-term shareholder value through executing the Company’s strategic initiatives, which include:
•Driving the full potential of the core business through strategic reinvestment and improving operational efficiency in existing stores by building on Valvoline’s strong foundation in marketing, technology, and data insights;
•Delivering sustainable network growth with company-operated store expansion and accelerating the momentum of franchisee store growth; and
•Innovating to meet the changing needs of customers and the car parc, targeting customer and service expansion with a focus on fleet business, and driving non-oil change service penetration.
RECENT DEVELOPMENTS
Breeze Autocare
On December 1, 2025, the Company acquired 100% of the equity interests in Breeze Autocare (“Breeze”) for total cash consideration of $637.4 million, subject to certain customary post-closing adjustments. Breeze is a provider of automotive quick lube and other preventive maintenance services operating predominantly under the Oil ChangersSM brand with stores in California, Texas, and the Midwest. The acquisition initially included 204 service
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center stores and aligns with the Company’s strategy to expand the store network in key markets. The Company funded the Breeze acquisition with an amendment to its Senior Credit Agreement to add a seven-year $740.0 million term loan facility (the “Term Loan B”) commensurate with the closing of the transaction with excess proceeds used to pay down outstanding debt.
Dispositions
Immediately following the acquisition, 45 of the acquired Breeze stores were sold in accordance with the Federal Trade Commission (“FTC”) Decision and Order that required the disposal of certain acquired locations for the Company to receive regulatory clearance to close the Breeze acquisition. The fair value of the net assets divested was $90.0 million. As a result, the Company recognized a $57.9 million pre-tax loss on sale within Other loss (income), net in the Condensed Consolidated Statement of Comprehensive Income for the six months ended March 31, 2026.
Valvoline completed the sale of 10 company-operated service center stores to a franchisee during the first fiscal quarter of 2026 and completed the sale of 39 company-operated service center stores to a new franchisee during the first fiscal quarter of 2025. Valvoline recognized pre-tax gains on sale of $14.8 million and $74.2 million within Other loss (income), net in the Condensed Consolidated Statements of Comprehensive Income related to these transactions during the six months ended March 31, 2026 and 2025, respectively. These transactions, together with executed development agreements are expected to provide significant growth in the respective markets and deliver long-term value to shareholders. The impact of these dispositions on year-over-year comparability of financial results is discussed further herein.
SECOND FISCAL QUARTER 2026 OVERVIEW
The following were the significant events for the second fiscal quarter of 2026, each of which is discussed more fully in this Quarterly Report on Form 10-Q:
•Net revenues grew 25% compared to the prior year period, primarily driven by network expansion of 331 net store additions, including the impact of acquisitions and dispositions. The increase was further supported by system-wide same-store sales ("SSS") growth of 8.2%, as well as favorable service mix and pricing.
•Income from continuing operations grew 18% to $45.3 million and Diluted earnings per share increased 17% to $0.35 compared to the prior year period. The increase was primarily driven by profit expansion from operations, partially offset by investments in Selling, general, and administrative expenses and increased interest expense associated with the Term Loan B.
•Adjusted EBITDA increased 28% over the prior year period due to strong operational performance, including improvements in mix and pricing, along with contributions from network growth. This increase more than offset the impacts of dispositions and higher Selling, general, and administrative expenses to support growth.
Use of Non-GAAP Measures
To aid in the understanding of Valvoline’s ongoing business performance, certain items within this document are presented on an adjusted, non-GAAP basis. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, or more meaningful than, the financial statements presented in accordance with U.S. GAAP. The financial results presented in accordance with U.S. GAAP and reconciliations of non-GAAP measures included within this Quarterly Report on Form 10-Q should be carefully evaluated.
The following are the non-GAAP measures management has included and how management defines them:
•EBITDA - net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization;
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•Adjusted EBITDA - EBITDA adjusted for the impacts 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," as further described below);
•Free cash flow - cash flows from operating activities less total capital expenditures, comprised of growth and maintenance, further described below;
•Free cash flow excluding growth capital expenditures - cash flows from operating activities less maintenance capital expenditures; and
•Net debt - total debt less cash and cash equivalents.
Non-GAAP measures include adjustments from results based on U.S. GAAP that management believes enables comparison of certain financial trends and results between periods and provides a useful supplemental presentation of Valvoline's operating performance that allows for transparency with respect to key metrics used by management in operating the business and measuring performance. The manner used to compute non-GAAP information used by management may differ from the methods used by other companies and may not be comparable. For a reconciliation of the most comparable U.S. GAAP measures to the non-GAAP measures, refer to the “Results of Operations” and “Financial Position, Liquidity and Capital Resources” sections below.
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 EBITDA measures enable comparison of financial trends and results between periods where certain items may not be reflective of the Company’s underlying and ongoing operations performance or vary independent of business performance.
Management uses free cash flow and free cash flow excluding growth capital expenditures as additional non-GAAP metrics of cash flow generation. By including capital expenditures, 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. Free cash flow excluding growth capital expenditures includes maintenance capital expenditures, which are uses of cash that are necessary to maintain the Company's existing business operations, including its retail service center store network, service portfolio, and support functions. Free cash flow excluding growth capital expenditures provides a supplemental view of cash flow generation before investments in growth capital, which expand future business operations, including the opening or expansion of retail service center stores and service capabilities. Free cash flow and free cash flow excluding growth capital expenditures have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash expenditures, such as mandatory debt repayments.
The non-GAAP measures used by management exclude 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, the sale of the former Global Products reportable segment, and the associated impacts of related activity and indemnities; non-service pension and other postretirement plan activity; restructuring-related matters, including organizational restructuring plans, significant acquisitions or divestitures, debt extinguishment and modification, and tax reform legislation; in addition to other matters that management considers non-operational, infrequent or unusual in nature.
Details with respect to the description and composition of key items recognized during the respective periods presented herein are set forth below in the “EBITDA and Adjusted EBITDA” section of “Results of Operations” that follows.
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 system-wide SSS and store sales. Management believes these measures are useful to evaluating and understanding Valvoline's operating performance and should be
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considered as supplements to, not substitutes for, Valvoline's net revenues and operating income, as determined in accordance with U.S. GAAP.
Net revenues 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 net revenues of U.S. VIOC system-wide stores that have been in operation for at least 12 full months
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Latest 10-K MD&A
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and the accompanying Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K. Unless otherwise noted, disclosures herein relate solely to the Company’s continuing operations.
BUSINESS OVERVIEW AND PURPOSE
As the quick, easy, trusted leader in automotive preventive maintenance, Valvoline is creating shareholder value by driving the full potential of its core business, delivering sustainable network growth, and continuing to innovate to meet the evolving needs of customers and the car parc. With average customer ratings that indicate high levels of service satisfaction, Valvoline and the Company’s franchise partners simplify vehicle care so customers can do what drives them. This includes approximately 15-minute stay-in-your-car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended maintenance services. The Company operates and franchises approximately 2,200 service center locations through its Valvoline Instant Oil ChangeSM (“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and supports over 240 locations through its Express CareTM platform.
Valvoline's fiscal year ends on September 30 of each year.
RECENT DEVELOPMENTS
Refranchising
Valvoline sold 67 company-owned stores to existing and new franchise partners through the completion of three transactions that occurred in the fourth quarter of fiscal 2024 and the first quarter of fiscal 2025 (the “Refranchising Transactions”). These conversions, combined with executed development agreements, are expected to provide accelerated growth in the respective markets and deliver long-term value to shareholders. The Refranchising Transactions impact the comparability of financial results year-over-year as further discussed further below.
During October 2025, the Company entered into an agreement and completed the sale of 10 company-owned service center stores and related net assets to a franchisee. The Company will derecognize the related net assets and expects to recognize a gain on sale in the first quarter of fiscal 2026 to reflect the completion of this transaction.
Breeze Autocare
In February 2025, Valvoline signed a definitive agreement to acquire Breeze Autocare from Greenbriar. Breeze Autocare is an independent provider of automotive quick lube and other preventive maintenance services operating predominantly under the Oil Changers brand, with an extensive footprint in California, Texas, and the Midwest.
In November 2025, Valvoline received clearance from the Federal Trade Commission (“FTC”) to close the acquisition of Breeze Autocare subject to a Decision and Order from the FTC. Valvoline will acquire 207 Breeze Autocare stores, and consistent with the Decision and Order, Valvoline will divest 45 of those locations to
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Mainstreet Auto, LLC (“Mainstreet”), for a net purchase price of $593 million, subject to (i) adjustments for store acquisitions and sale-leaseback transactions completed by Breeze Autocare since signing and (ii) customary closing adjustments. The Breeze Autocare acquisition is expected to close on December 1, 2025, with the divestiture to Mainstreet occurring shortly thereafter. The Company intends to fund the Breeze Autocare acquisition with a newly issued $740 million Term Loan B commensurate with the closing of the transaction with excess proceeds being used to pay down outstanding debt.
FISCAL 2025 OVERVIEW
Key operating highlights from continuing operations are presented below, each of which is discussed more fully in this Annual Report on Form 10-K:
6%
$389.9 million
2%
Growth in Net revenues
Operating income from continuing operations
Growth in Diluted EPS
$3.5 billion
$59.8 million
$307.1 million
System-wide store sales (a)
Returned to shareholders through share repurchases
Cash flows from operations
2,180
19 years
5.5%
System-wide stores (a) with 8.5% annual growth
of consecutive system-wide same-store sales growth (b)
Growth in adjusted EBITDA (c)
(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 the year-over-year change in net revenues of U.S. VIOC same stores (company-operated, franchised and the combination of these for system-wide SSS) with same stores defined as those that have been in operation within the system for at least 12 full months.
(c)
Represents a non-GAAP measure. Refer to “Use of Non-GAAP Measures” and the Appendix for additional details.
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Summarized below are Valvoline's trends in the results of its continuing operations Net revenues, Income from continuing operations, and Adjusted EBITDA over the last five fiscal years:
(a)Adjusted EBITDA is a non-GAAP measure, further described and defined within the “Use of Non-GAAP Measures” section below. Also refer to the “Continuing operations EBITDA and Adjusted EBITDA” section within “Results of Operations” below for a reconciliation of income from continuing operations to Adjusted EBITDA for each fiscal year presented.
(b)Includes the effects 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,” as further described below).
Net revenues and Adjusted EBITDA trends have continued to increase over the past five fiscal years largely driven by strong system-wide same-store sales (“SSS”) growth, which benefited from higher average ticket, continued non-oil change penetration and increased transactions, in addition to acquisitions and overall store expansion. Income from continuing operations has also followed an upward trend due to strong top-line performance, with the exception of fiscal 2022, where the decrease was primarily driven by a loss due to the remeasurement of pension and other postretirement plans, as well as higher separation-related expenses in connection with the planning and evaluation of the separation of the Company’s businesses that ultimately culminated in the sale of Global Products.
Results for Fiscal 2024 compared to Fiscal 2023
For comparisons of Valvoline's consolidated results of operations and cash flows for the fiscal years ended September 30, 2024 to September 30, 2023, refer to Item 7 of Part II of the Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the Securities and Exchange Commission on November 22, 2024.
Use of Non-GAAP Measures
To aid in the understanding of Valvoline’s ongoing business performance, certain items within this document are presented on an adjusted, non-GAAP basis. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, or more meaningful than, the financial statements presented in accordance with U.S. GAAP. The financial results presented in accordance with U.S. GAAP and reconciliations of non-GAAP measures included within this Annual Report on Form 10-K should be carefully evaluated.
The following are the non-GAAP measures management has included and how management defines them:
•EBITDA - net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization;
•Adjusted EBITDA - EBITDA adjusted for the impacts 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," as further described below);
•Adjusted EBITDA margin - adjusted EBITDA divided by net revenues;
•Free cash flow - cash flows from operating activities less total capital expenditures, comprised of growth and maintenance, further described below; and
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•Free cash flow excluding growth capital expenditures - cash flows from operating activities less maintenance capital expenditures.
Non-GAAP measures include adjustments from results based on U.S. GAAP that management believes enables comparison of certain financial trends and results between periods and provides a useful supplemental presentation of Valvoline's operating performance that allows for transparency with respect to key metrics used by management in operating the business and measuring performance. The manner used to compute non-GAAP information used by management may differ from the methods used by other companies, and may not be comparable. For a reconciliation of the most comparable U.S. GAAP measures to the non-GAAP measures, refer to the “Results of Operations” and “Financial Position, Liquidity and Capital Resources” sections below.
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 EBITDA measures enable comparison of financial trends and results between periods where certain items may not be reflective of the Company’s underlying and ongoing operations performance or vary independent of business performance.
Management uses free cash flow and free cash flow excluding growth capital expenditures as additional non-GAAP metrics of cash flow generation. By including capital expenditures, 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. Free cash flow excluding growth capital expenditures includes maintenance capital expenditures, which are uses of cash that are necessary to maintain the Company's existing business operations, including its retail service center store network, service portfolio, and support functions. Free cash flow excluding growth capital expenditures provides a supplemental view of cash flow generation before investments in growth capital, which expand future business operations, including the opening or expansion of retail service center stores and service capabilities. Free cash flow and free cash flow excluding growth capital expenditures have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash expenditures, such as mandatory debt repayments.
The non-GAAP measures used by management exclude 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, the former Global Products reportable segment, and the associated impacts of related activity and indemnities; non-service pension and other postretirement plan activity; restructuring-related matters, including organizational restructuring plans, the separation of Valvoline’s businesses, significant acquisitions or divestitures, debt extinguishment and modification, and tax reform legislation; in addition to other matters that management considers non-operational, infrequent or unusual in nature.
Details with respect to the description and composition of key items recognized during the respective periods presented herein are set forth below in the “EBITDA and Adjusted EBITDA” section of “Results of Operations” that follows.
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 system-wide SSS and store sales. 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 net revenues and operating income, as determined in accordance with U.S. GAAP.
Net revenues 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. For the periods presented herein, SSS is defined as net revenues of U.S. VIOC stores (company-operated, franchised and the combination of these for system-wide SSS) with same stores defined at the beginning of the month following the completion of 12 full months in operation within the system.
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Net revenues are limited to sales at company-operated stores, in addition to royalties and other fees from independent franchised and Express Care stores. Although Valvoline does not recognize store-level sales from franchised stores as net revenues in its Statements of Condensed 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 operating performance.
RESULTS OF OPERATIONS
The following summarizes the results of the Company’s continuing operations for the years ended September 30:
2025 vs. 2024
(In millions)
2025
2024
$
%
Net revenues
$
1,710.3
$
1,619.0
$
91.3
5.6
%
Gross profit
$
658.5
$
618.8
$
39.7
6.4
%
Gross profit margin
38.5
%
38.2
%
30 bps
Net operating expenses
$
268.6
$
251.6
$
17.0
6.8
%
Percentage of net revenues
15.7
%
15.5
%
20 bps
Operating income
$
389.9
$
367.2
$
22.7
6.2
%
Operating margin
22.8
%
22.7
%
10 bps
Income from continuing operations
$
214.8
$
214.5
$
0.3
0.1
%
EBITDA (a)
$
485.7
$
461.4
$
24.3
5.3
%
Adjusted EBITDA (a)
$
466.8
$
442.6
$
24.2
5.5
%
Adjusted EBITDA margin (a)
27.3
%
27.3
%
— bps
(a)Refer to the “Use of Non-GAAP Measures” and Continuing operations EBITDA and Adjusted EBITDA for management’s definitions of the metrics presented above and reconciliation to the corresponding GAAP measures, where applicable.
Fiscal 2025 marked the 19th consecutive year for system-wide SSS growth and the addition of 170 net new stores, bringing the system to 2,180 stores. The table below highlights the growth over the last year:
(In millions, except store count)
Fiscal year 2025
Growth vs.
2024
System-wide store sales (a)
$
3,453.8
11.3
%
System-wide store count (a)
2,180
8.5
%
Years ended September 30
2025
2024
System-wide SSS growth (a)
6.1
%
7.1
%
(a)
Measures include Valvoline franchisees, which are independent legal entities. Refer to the “Key Business Measures” section above for additional details on these key business measures, including management’s definitions.
35
Net revenues
Net revenues increased $91.3 million, or 5.6% over the prior year period primarily attributable to higher volume, mix, and pricing. System-wide SSS growth increased 6.1% reflecting growth in average ticket from premiumization, pricing, and non-oil change service penetration, as well as higher transactions supported by an expanding customer base. Year-over-year system-wide store growth of 8.5% also contributed to net revenues and volumes through the addition of 170 net new stores. These benefits were partially offset by reduced net revenues due to the recent Refranchising Transactions. The following reconciles the year-over-year changes in Net revenues:
Gross profit
Gross profit improved $39.7 million, or 6.4% year-over-year. The improvement was driven by higher volume, reflecting continued store expansion, and a favorable mix from continued traction in premiumization and non-oil change services. These gains were partially offset by the impacts from the recent Refranchising Transactions, and increased store operating costs, including depreciation related to ongoing store investments. The following reconciles the year-over-year changes in gross profit:
Gross profit margin rate improved compared to the prior year. This margin expansion reflects improved labor efficiency from effective management, along with benefits from service mix. These gains were partially offset by the impacts from the Refranchising Transactions, and higher operating expenses, including deprecation.
36
Net operating expenses
Details of the components of Net operating expenses are summarized below for the years ended September 30:
Variance
(In millions)
2025
2024
$
%
Selling, general and administrative expenses
$
349.9
$
305.1
$
44.8
14.7
%
Net legacy and separation-related expenses (income)
1.4
(0.7)
2.1
(300.0)
%
Other income, net
(82.7)
(52.8)
(29.9)
56.6
%
Net operating expenses
$
268.6
$
251.6
$
17.0
6.8
%
Selling, general and administrative (“SG&A”) expenses increased $44.8 million compared to the prior year period. This increase reflects continued investments to scale the business and support long-term growth. The primary contributors were technology, including outside services, talent, and advertising, which combined to increase expense by $25.8 million. Additionally, investment and divestiture activity increased SG&A expenses by $15.8 million, primarily related to consulting fees and professional services to support legal, regulatory, diligence and integration efforts.
Net legacy and separation-related activity increased $2.1 million. The increase was primarily driven by expenses associated with legacy businesses and employee related costs, as well as certain limited realignment costs incurred to support the Company’s transition to a stand-alone retail business following the sale of Global Products.
Other income, net increased by $29.9 million compared to the prior year primarily due the Refranchising Transactions whereby a larger gain on sale was recognized in the current year of $73.9 million compared to the prior year gains of $41.8 million.
Net pension and other postretirement plan expenses (income)
Net pension and other postretirement plan expenses increased $11.9 million from the prior year, primarily due to a loss on pension and other postretirement plan remeasurement of $26.6 million in the current year compared to a gain of $2.4 million in the prior year. The loss in fiscal 2025 was driven by lower-than-expected performance of plan assets in the current year, which more than offset the gain attributable to the increase in discount rates.
Net interest and other financing expenses
Net interest and other financing expenses increased $2.1 million during fiscal 2025 driven by lower interest income partially offset by reduced interest expense. Interest income in the current year declined by $13.9 million from the prior year maturity of invested net proceeds from the sale of Global Products. The proceeds from the maturity of these short-term investments were utilized to repurchase the 4.250% senior unsecured notes due 2030 with an aggregate principal amount of $600.0 million (“2030 Notes”) in the third quarter of fiscal 2024. The repurchase of the 2030 Notes drove lower interest expense of $11.8 million in the current year from reduced base interest expense of $9.7 million and lower debt modification charges and related fees of $2.1 million.
Income tax expense
The following table summarizes Income tax expense and the effective tax rate during the years ended September 30:
(In millions)
2025
2024
Income tax expense
$
77.5
$
69.1
Effective tax rate percentage
26.5
%
24.4
%
The higher effective tax rate in fiscal 2025 primarily reflects decreases in the favorable impact of return to provision adjustments and valuation allowance activity.
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(Loss) income from discontinued operations, net of tax
(Loss) income from discontinued operations, net of tax for the years ended September 30 are as follows:
(In millions)
2025
2024
Loss from discontinued operations, net of tax
$
(4.1)
$
(3.0)
Loss from discontinued operations, net of tax increased $1.1 million compared to the prior year primarily due to increased income tax expense.
Continuing operations EBITDA and Adjusted EBITDA
The following reconciles Income from continuing operations to EBITDA and Adjusted EBITDA for the years ended September 30:
(In millions)
2025
2024
2023
2022
2021
Income from continuing operations
$
214.8
$
214.5
$
199.4
$
109.4
$
200.1
Income tax expense
77.5
69.1
37.1
34.7
59.9
Net interest and other financing expenses
74.0
71.9
38.3
69.3
108.3
Depreciation and amortization
119.4
105.9
88.8
71.4
62.1
EBITDA from continuing operations (a)
485.7
461.4
363.6
284.8
430.4
Net pension and other postretirement plan expenses (income) (b)
23.6
11.7
(27.6)
6.9
(128.2)
Net legacy and separation-related expenses (income) (c)
1.4
(0.7)
32.8
20.5
(23.6)
Information technology costs (d)
11.5
10.4
3.0
2.6
—
Investment and divestiture-related (income) costs (e)
(55.4)
(40.2)
1.1
—
—
Suspended operations (f)
—
—
7.1
0.9
(1.5)
Restructuring and related adjustments (g)
—
—
—
—
(0.1)
Adjusted EBITDA from continuing operations (a)
$
466.8
$
442.6
$
380.0
$
315.7
$
277.0
(a)EBITDA from continuing operations is defined as income from continuing operations, plus income tax expense, net interest and other financing expenses, and depreciation and amortization attributable to continuing operations. Adjusted EBITDA from continuing operations is EBITDA adjusted for key items attributable to continuing operations.
(b)Includes several elements impacted by changes in plan assets and obligations that are primarily driven by the debt and equity markets, including remeasurement gains and losses, when applicable; and recurring non-service pension and other postretirement net periodic activity, which consists of interest cost, expected return on plan assets and amortization of prior service credits. Management considers these elements are more reflective of changes in current conditions in global markets (in particular, interest rates), outside the operational performance of the business, and are also legacy amounts that are not directly related to the underlying business and do not have an impact on the compensation and benefits provided to eligible employees for current service. Refer to Note 10 in the Notes to Consolidated Financial Statements in Item 8 of Part II in this Annual Report on Form 10-K for further details.
(c)Activity associated with legacy businesses, including the separation from Valvoline’s former parent company and its former Global Products reportable segment. This activity includes the recognition of and adjustments to indemnity obligations to its former parent company; certain legal, financial, professional advisory and consulting fees; and other expenses incurred by the continuing operations in connection with and directly related to these separation transactions and legacy matters. This incremental activity directly attributable to legacy matters and separation transactions is not considered reflective of the underlying operating performance of the Company’s continuing operations. During fiscal September 30, 2023, the Company recognized $25.7 million of pre-tax expense to reflect its increased estimated indemnity obligation which also resulted in an income tax benefit of $29.0 million to reflect the release of valuations allowances in connection with the amendment of the Tax Matters Agreement with Valvoline’s former parent company.
(d)Consists of expenses incurred directly related to the Company’s information technology transitions, primarily efforts related to implementing stand-alone enterprise resource planning and human resource information systems that generally began in fiscal 2023 following the sale of the former Global Products reportable segment. These expenses include data conversion, training, redundant expenses incurred from duplicative technology platforms, and temporary support, which includes consulting fees and professional services to support certain enhanced manual procedures and material weakness remediation efforts. These incremental costs are directly associated with technology transitions and are not considered to be reflective of the ongoing expenses of operating the Company’s technology platforms.
(e)Consists of activity directly associated with specific significant acquisitions, investments and divestitures, including professional and consulting fees for legal and advisory services, in addition to gains or losses recognized upon disposition, temporary financing costs directly associated with expected transactions, acquisition-related incentive compensation costs, and expense recognized to reduce the carrying values of investments determined to be impaired. This activity is not considered to be reflective of the underlying operating performance of the Company’s ongoing continuing operations.
38
(f)Represents the results of a former Global Products business where operations were suspended during fiscal 2022. This business was not included in the sale of the Global Products business in March 2023. It was classified as held for sale and impaired as of September 30, 2023, and subsequently sold during the first fiscal quarter of 2024. These results are not indicative of the operating performance of the Company’s ongoing continuing operations.
(g)Adjustments to employee termination benefits recognized over remaining employee service periods as a result of company-wide restructuring activities that are not considered reflective of the underlying operating performance of the Company’s ongoing operations.
Adjusted EBITDA increased $24.2 million, or 5.5%, for the year ended September 30, 2025 compared to the prior year. This growth was primarily attributable to strong gross profit expansion from strong operational performance including improvements in volumes and mix, in addition to efficiencies in labor management, which more than offset the impacts from refranchising and growth investments in SG&A expenses.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company closely manages its liquidity and capital resources. Valvoline’s liquidity requirements depend on key variables, including the level of investment needed to support business strategies, the performance of the business, capital expenditures, borrowing arrangements, and working capital management. Capital expenditures, acquisitions, and share repurchases are components of the Company’s cash flow and capital management strategy, which to a large extent, can be adjusted in response to economic and other changes in the business environment. The Company has a disciplined approach to capital allocation, which focuses on investing in key priorities that support Valvoline’s business and growth strategies and returning capital to shareholders, while funding ongoing operations.
Continuing operations cash flows
Valvoline’s continuing operations cash flows as reflected in the Consolidated Statements of Cash Flows are summarized as follows for the years ended September 30:
(In millions)
2025
2024
Cash provided by (used in):
Operating activities
$
307.1
$
282.9
Investing activities
$
(201.1)
$
136.8
Financing activities
$
(112.9)
$
(746.3)
Operating activities
The increase in cash flows provided by operating activities of $24.2 million from the prior year was primarily driven by higher cash earnings, that were moderated by the impact of the Refranchising Transactions, and lower interest payments of $22.1 million due to lower outstanding debt from the repurchase of the 2030 Senior Notes in the prior period. These increases were partially offset by unfavorable changes in net working capital that were attributed to a decrease in payables and accrued liabilities largely driven by acquisition and divestiture-related expenses paid during the period.
Investing activities
The decrease in cash flows from investing activities of $337.9 million from the prior year was substantially driven by a decline in net proceeds from investments of $345.0 million and an increase in current year acquisition activity of $12.3 million that was partially offset by increased net proceeds from the sale of operations of $49.5 million. Lower proceeds from investments were due to maturities in the prior year of short-term investments of the remaining net proceeds from the sale of Global Products, while higher net proceeds from the sale of operations was largely a result of completing a Refranchising Transaction in the first quarter of fiscal 2025 to sell 39 company-operated service center stores to a new franchisee. Further contributing to the increased use of investing cash flows year-over-year were higher capital expenditures of $34.8 million to support store enhancements and growth.
39
Financing activities
The decrease in cash flows used in financing activities of $633.4 million from the prior year was substantially due to lower net repayments on borrowings of $480.0 million primarily driven by the prior year debt tender offer to purchase the outstanding 2030 Notes. Also contributing to this decrease was lower share repurchase activity of $166.4 million, partially offset by excise tax payments of $16.4 million that were largely due to share repurchases completed in fiscal 2023 under the modified “Dutch auction” tender offer subject to the 1% excise tax of the Inflation Reduction Act that became effective in calendar 2023.
Continuing operations free cash flow
The following table sets forth free cash flow and free cash flow excluding growth capital expenditures reconciled to cash flows from operating activities. As previously noted, these free cash flow measures have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash expenditures, such as mandatory debt repayments. Refer to “Use of Non-GAAP Measures” within this Item 7 for additional information regarding these non-GAAP measures.
(In millions)
2025
2024
Cash flows provided by operating activities
$
307.1
$
282.9
Less: Maintenance capital expenditures
(66.1)
(35.9)
Free cash flow excluding growth capital expenditures
241.0
247.0
Less: Growth capital expenditures
(193.1)
(188.5)
Free cash flow
$
47.9
$
58.5
The decrease in free cash flow from continuing operations over the prior year was impacted by increased capital expenditures during the current year, which were partially offset by higher cash flows provided by operating activities in the current year as described above. The increase in capital expenditures over the prior year period was primarily driven by higher maintenance capital expenditures, principally attributed to facility and equipment expenditures. Higher growth capital expenditures were primarily driven by new store construction, including the timing and mix of new store additions at the end of the year. The Company continues to focus the majority of its capital spend toward growth, which is expected to drive a high return on invested capital.
Debt
The following table summarizes Valvoline’s continuing operations debt as of September 30:
(In millions)
2025
2024
2031 Notes
$
535.0
$
535.0
Term Loan
415.6
439.4
Revolver
130.0
125.0
Debt issuance costs and discounts
(6.6)
(5.6)
Total debt
1,074.0
1,093.8
Current portion of long-term debt
23.8
23.8
Long-term debt
$
1,050.2
$
1,070.0
Approximately 50% of Valvoline's outstanding borrowings as of September 30, 2025 had fixed rates, with the remainder bearing variable interest rates. As of September 30, 2025, Valvoline was in compliance with all covenants of its debt obligations and had borrowing capacity remaining of $341.6 million. Refer to Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional details regarding the Company’s debt instruments.
On April 16, 2024, Valvoline completed the Debt Tender Offer with 99.7% of the outstanding principal amount tendered by the holders of the 2030 Notes. The Debt Tender Offer was made to comply with the requirements of
40
the asset sale covenant under the indenture governing the 2030 Notes in connection with the sale of Global Products and Valvoline’s use of the related net proceeds.
The Company used cash and cash equivalents on hand, in addition to borrowing $175.0 million on the Revolver to facilitate the $598.3 million purchase of the 2030 Notes at par, plus accrued and unpaid interest, and cancelled the 2030 Notes accepted for purchase. The Company elected to repurchase the remaining balance outstanding of $1.7 million on April 29, 2024 pursuant to the terms and conditions of the indenture governing the 2030 Notes. In connection with the completion of the Debt Tender Offer, Valvoline recognized a loss on extinguishment of the 2030 Notes of $5.1 million within Net interest and other financing expenses in the Consolidated Statements of Comprehensive Income during the year ended September 30, 2024, comprised of the write-off of related unamortized debt issuance costs and discounts.
Material cash requirements and other commitments
The Company's material cash requirements for the continuing operations include the following contractual obligations and commitments as of September 30, 2025:
(In millions)
Total
Less than
1 year
1-3
years
3-5
years
5 years and more
Long-term debt
$
1,080.6
$
23.8
$
521.8
$
—
$
535.0
Interest payments (a)
191.6
52.2
82.8
38.8
17.8
Operating lease obligations
466.3
51.5
96.8
85.7
232.3
Finance lease obligations
333.5
27.6
56.2
55.9
193.8
Employee benefit obligations (b)
71.8
7.3
17.5
15.6
31.4
Total
$
2,143.8
$
162.4
$
775.1
$
196.0
$
1,010.3
(a)Includes interest on both variable and fixed rate debt, assuming no prepayments. Variable interest rates have been assumed to remain constant through payment at the rates that existed as of September 30, 2025.
(b)Includes projected benefit payments through fiscal 2035 for Valvoline’s unfunded benefit plans. Excludes benefit payments from pension plan trust funds.
The Company guaranteed future payments related to certain leases assigned in connection with the Refranchising Transactions and selling Global Products. Valvoline is obligated to perform if the buyers default on the leases, which have remaining terms ranging from three months to 15 years. The undiscounted maximum potential future payments under the lease guarantees were $63.8 million as of September 30, 2025. In addition, the Company guarantees certain outstanding franchisee debt obligations that have remaining terms ranging from one to five years and total $12.4 million as of September 30, 2025. The Company has not recorded a liability for these guarantees as the likelihood of making future payments is not considered probable.
Fiscal 2026 capital expenditures
Valvoline is currently forecasting approximately $250 million to $280 million of capital expenditures for fiscal 2026, funded primarily from operating cash flows.
Pension and other postretirement plan obligations
The Company makes cash and non-cash contributions and benefit payments for its pension and other postretirement plans. During fiscal 2025, the Company made $10.6 million in benefit payments for its non-qualified pension and other postretirement plans, consisting of $5.7 million of cash payments and $4.9 million of non-cash payments. Based on current data and assumptions, the Company does not anticipate the need to satisfy any minimum funding requirements to its qualified pension plans in the near term. Refer to Note 10 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for additional information regarding the Company's U.S. pension and other postretirement plans.
41
Share repurchases
In July 2024, the Board approved a share repurchase authorization of $400.0 million (the “2024 Share Repurchase Authorization”), which has no expiration date. During the year ended September 30, 2025, the Company repurchased 1.6 million shares of its common stock for $59.8 million. As of September 30, 2025, $325.0 million remained available for share repurchases under the 2024 Share Repurchase Authorization.
The timing and amount of any repurchases of common stock will be solely at the discretion of the Company and is subject to general business and market conditions, as well as other factors. The share repurchase authorization is part of a broader capital allocation framework to deliver value to shareholders by first, driving profitable growth in the business, organically and through acquisitions and franchise development; second, to remain within a ratings agency target adjusted EBITDA net leverage ratio of 2.5 to 3.5 times; and third, to continue returning excess capital to shareholders.
Valvoline announced in the second quarter of fiscal 2025 that it was pausing share repurchase activity in anticipation of completing the Breeze Autocare acquisition. Valvoline will fund the acquisition with a new Term Loan B issuance and accelerate debt repayment after closing the Breeze Autocare acquisition to return to a ratings agency target adjusted EBITDA net leverage ratio of 2.5 to 3.5 times.
Summary
Valvoline’s continuing operations had cash and cash equivalents of $51.6 million, total debt of $1.1 billion, and total remaining borrowing capacity of $341.6 million as of September 30, 2025. Valvoline’s ability to generate positive cash flows from operations is dependent on general economic conditions, the competitive environment in the industry, and is subject to the business and other risk factors described in Item 1A of Part I of this Annual Report on Form 10-K.
Management believes that the Company has sufficient liquidity based on its current cash, cash equivalents, cash generated from business operations and existing financing to meet its pension and other postretirement plan, debt servicing, tax-related and other material cash and operating requirements for the next twelve months.
NEW ACCOUNTING PRONOUNCEMENTS
For a discussion and analysis of recently issued and adopted accounting pronouncements and the impact on Valvoline, refer to Note 2 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.
CRITICAL ACCOUNTING ESTIMATES
The preparation of Valvoline’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses, and the disclosures of contingent matters. Significant items that are subject to such estimates and assumptions include, but are not limited to, employee benefit obligations, business combinations, and income taxes.
Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions. Valvoline’s significant accounting policies are discussed in Note 2 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. The Company believes the accounting estimates listed below are the most critical to aid in fully understanding and evaluating the reported financial results, and require the most difficult, subjective, or complex judgments, resulting from the need to make estimates about the effects of matters that are inherently uncertain.
42
Employee benefit obligations
Description
Judgments and uncertainties
Effect if actual results differ from assumptions
Valvoline sponsors defined benefit pension and other postretirement plans in the U.S. As of September 30, 2025, Valvoline’s net unfunded pension and other postretirement plan liabilities included in the Consolidated Balance Sheet totaled $151.7 million. Total pension and other postretirement net periodic benefit income recognized in fiscal 2025 was $23.6 million, inclusive of a $26.6 million remeasurement loss.
Valvoline recognizes the change in the fair value of plan assets and the net actuarial gains and losses calculated using updated actuarial assumptions as of the measurement date, which for Valvoline is September 30, and when a plan qualifies for an interim remeasurement.
Refer to Note 10 of the Notes to Consolidated Financial Statements included in Item 8 for Part II of this Annual Report on Form 10-K for additional information regarding the Company’s pension and other postretirement plans.
The Company’s pension and other postretirement benefit costs and obligations are dependent on actuarial valuations and various assumptions that attempt to anticipate future events and are used in calculating the expense and liabilities relating to these plans. These assumptions include estimates and judgments the Company makes about discount rates and mortality, among others.
Significant assumptions the Company must review and set annually and at each measurement date related to its pension and other postretirement benefit obligations are described further below.
The fair value of plan assets represents the current market value of assets held by irrevocable trust funds for the sole benefit of participants. Valvoline’s pension plans hold a variety of investments designed to diversify risk. Plan assets are invested in equity securities, government and agency securities, corporate debt, and other non-traditional assets such as hedge funds. The pension plan assets are subject to valuation risk and generated an actual weighted-average return of 2.65% in fiscal 2025 primarily driven by the market performance of the plan assets of the qualified pension plans based on the Company’s investment strategy to hedge the movement in liabilities related to changes in discount rates with investments of a matched duration that provide offsetting returns aligned with changes in interest rates.
Target asset allocation percentages as of September 30, 2025 for the qualified pension plans were 90% fixed income and 10% equity investments. The qualified pension plans are managed by professional investment managers that operate under investment management contracts that include specific investment guidelines, requiring among other actions, adequate diversification and prudent use of risk management practices such as portfolio constraints relating to established benchmarks.
Though management considers current market conditions and other relevant factors in establishing these assumptions and year-end values, the actuarial assumptions used and ultimate asset values may differ materially from current results due to changing market and economic conditions, longer or shorter life spans of participants, and differences between the actual long-term return on plan assets. These differences may result in a significant impact to the amount of pension or other postretirement benefits cost recorded or that may be recorded. Changes in assumptions or asset values may have a significant effect on the measurement of expense or income.
Actuarial assumptions
Significant assumptions the Company must review and set annually and at each measurement date related to its pension and other postretirement benefit obligations are:
•Discount rate — Reflects the rates at which benefits could effectively be settled and is based on current investment yields of high-quality corporate bonds. Consistent with historical practice, the Company uses an actuarially-developed full yield curve approach, the above mean yield curve, to match the timing of cash flows of expected future benefit payments from the plans by applying specific spot rates along the yield curve to determine the assumed discount rate. Valvoline’s fiscal 2025 expense, excluding actuarial gains and losses, for pension plans was determined using the spot discount rates as of the beginning of the fiscal year. The interest cost discount rates for fiscal 2025 pension and other postretirement plans were 4.65%
43
and 4.63%, respectively. The weighted-average discount rate at the end of fiscal 2025 was 5.22% for the pension plans and 5.14% for the postretirement health and life plans.
The following table illustrates the estimated impact on hypothetical pension and other postretirement expense that would have resulted from a one percentage point change in discount rates in isolation of impacts on other significant assumptions in the years ended September 30:
(In millions)
2025
2024
Increase (decrease) in pension and other postretirement plan expense - 1.00% decrease in discount rates:
Pension benefits
Increase in benefit obligation
$
129.8
$
142.6
Increased return on plan assets (a)
(125.8)
(138.0)
Estimated hypothetical increase in expense
4.0
4.6
Other postretirement benefits
Increase in benefit obligation
1.7
1.9
Total estimated hypothetical increase in expense
$
5.7
$
6.5
(a)
The qualified pension plans employ an investing strategy to match the duration of its obligation and investments. These plans represent approximately 96% and 95% of Valvoline’s total gross pension plan obligation as of September 30, 2025 and 2024, respectively. This strategy hedges approximately 100% of the movement in liabilities related to changes in discount rates as of September 30, 2025 and 2024. Therefore, when discount rates change, asset returns generally mirror the impacts, minimizing the net impact to the consolidated financial statements. This estimated impact does not include increased returns of other plan assets that may also benefit from increased interest rates.
•Mortality — The mortality assumption for Valvoline's pension and other postretirement plans utilizes the Society of Actuaries PRI-2012 mortality base tables and a mortality improvement scale that follows the 2025 Trustees Report of the Social Security Administration Intermediate Alternative as reflected in the MSS-2025 improvement scale. Valvoline believes the updated mortality improvement scale provides a reasonable assessment of current mortality trends and an appropriate estimate of future mortality projections.
Other assumptions, including the healthcare cost trend rate, do not have a significant impact on Valvoline's pension and other postretirement benefit plan costs and obligations based upon current plan provisions that have generally frozen benefits and limited costs.
44
Business combinations and intangible assets
Description
Judgments and uncertainties
Effect if actual results differ from assumptions
The Company completed multiple acquisitions during fiscal 2025 for an aggregate purchase price of $65.5 million. These acquisitions included 33 service center stores comprised of six former franchise and three former Express Care locations that were converted to company-operated service center stores and 24 service center stores acquired in single and multi-store transactions. The Company also acquired NuWash, Inc. (doing business as NuBrakes), which offers mobile automotive maintenance services including brake repair. The Company allocates the purchase price of an acquired business to its identifiable assets acquired and liabilities assumed at the acquisition date based upon their estimated fair values. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed is recorded as goodwill or if the fair value of the assets acquired and liabilities assumed exceed the purchase price consideration, a bargain purchase gain is recorded.
Goodwill is tested at the reporting unit level for impairment on an annual basis during the fourth fiscal quarter as of July 1 or more frequently if certain events occur indicating that the carrying value of goodwill may be impaired. At the time of the Company’s annual impairment assessment, Valvoline consisted of a singular reporting unit, Retail Services.
The Company’s gross amortizable intangible assets and accumulated amortization were $173.9 million and $91.4 million, respectively, as of September 30, 2025. Other intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Various factors are considered in determining whether a trigger requiring impairment assessment has occurred, such as, but not limited to, changes in the expected use of the assets, technology or development of alternative assets, economic conditions, operating performance, and expected future cash flows.
Purchase price allocations contain uncertainties because they require management to make significant estimates and assumptions and to apply judgment to estimate the fair value of assets acquired and liabilities assumed, particularly with respect to intangible assets.
Management estimates the fair value of assets acquired and liabilities assumed based on quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses.
Critical estimates in valuing intangible assets include, but are not limited to, estimates about: expected future cash flows from customers, including revenue and operating expenses; royalty and customer attrition rates; proprietary technology obsolescence curve; the acquired company's brand awareness and market position; the market awareness of the acquired company's branded technology solutions and services; assumptions about the period of time the brands will continue to be valuable; as well as discount rates. The Company's estimates of fair value are based upon reasonable assumptions, but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur.
If actual results are materially different than the assumptions used to determine fair value of the assets acquired and liabilities assumed through a business combination, or the useful lives of the acquired intangible assets, it is possible that adjustments to the carrying values of such assets and liabilities will have a material impact on the Company's financial position and results of operations. Furthermore, if actual results are not consistent with estimates or assumptions, the Company may be exposed to an impairment charge that could materially adversely impact its consolidated financial position and results of operations.
There were no impairments to intangible assets recognized by the Company during fiscal 2025 or 2024. Valvoline elected to perform a qualitative impairment assessment of goodwill in 2025, which indicated that it was more likely than not that the fair value of the reporting unit was in excess of the carrying amount. Though no qualitative factors were present that indicated the existence of a potential impairment, Valvoline performed a quantitative assessment during fiscal 2024 and determined that its reporting unit had a fair value that was in excess of its carrying value.
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Income taxes
Description
Judgments and uncertainties
Effect if actual results differ from assumptions
Valvoline is subject to income taxes in the United States and international jurisdictions where its businesses operate.
The provision for income taxes includes current income taxes as well as deferred income taxes. Under U.S. GAAP, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the deferred assets or liabilities are expected to be settled or realized. The effect of changes in tax rates on deferred taxes is recognized in the period in which such changes are enacted.
Once the consolidated income tax provision is computed, the tax effect of pre-tax income is determined without consideration of the current year pre-tax income or loss from other financial statement components, including discontinued operations. The portion of total income tax that remains after the attribution of tax to continuing operations is allocated to the remaining components.
The separation from Global Products resulted in a pre-tax gain of $1.572 billion during fiscal 2023 and related income tax expense recognized to-date of $419.1 million which includes federal, state, and international considerations for the jurisdictions where the proceeds were allocated and the respective tax bases of the net assets transferred. In connection with completing separation transactions, both from Valvoline’s former parent company and the sale of Global Products, the parties generally indemnify one another for various tax matters between the businesses.
Judgment in forecasting taxable income using historical and projected future operating results is required in determining Valvoline’s provision for income taxes and the related assets and liabilities.
Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be realized is based on the evaluation of positive and negative evidence, which includes historical profitability, future market growth, future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. The Company assesses deferred taxes and the adequacy or need for a valuation allowance on a quarterly basis.
The Company is subject to ongoing tax examinations and assessments in various jurisdictions. At any time, multiple tax years are subject to audit by the various tax authorities and a number of years may elapse before a particular matter, for which a liability has been established, is audited and fully resolved or clarified. In evaluating the exposures associated with various tax filing positions, the Company may record liabilities for such exposures. Valvoline generally adjusts its liabilities for unrecognized tax benefits and related indemnification obligations through earnings in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position, or when more information becomes available. Although management believes that the judgments and estimates discussed herein are reasonable, actual results could differ, and may materially increase or decrease the effective tax rate, as well as impact the Company’s operating results.
Income tax impacts associated with the gain on the sale of Global Products were complex and included a high degree of judgment due to the pre-sale restructuring transactions completed to facilitate the sale in addition to the large volume of federal, state, and international jurisdictions that were required to be evaluated.
Indemnifications among parties regarding tax matters require judgment in determining the timing and measurement of related receivables and payables to resolve these obligations.
If the Company is unable to generate sufficient future taxable income, there is a material change in the actual effective tax rates, the time period within which the underlying temporary differences become taxable or deductible, or if the tax laws change unfavorably, then Valvoline could be required to increase the valuation allowance against deferred tax assets, resulting in an increase in income tax expense and the effective tax rate.
Adjustments to indemnifications impact pre-tax results and are not directly related to the ongoing business. These adjustments may also affect the income tax provision of the continuing operation dependent on the nature of the underlying issue.
Each income tax expense change of $2.9 million would impact the fiscal 2025 effective tax rates for continuing operations and the consolidated business by one percentage point.
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