Valvoline Reports Second-Quarter Results, Raises Fiscal 2021 Guidance

April 28, 2021
- Reported net income of $68 million grew 8% and earnings per diluted share (EPS) of $0.37 grew 12%
- Adjusted EPS of $0.46 grew 18% and adjusted EBITDA of $152 million grew 13%
- Excluding unfavorable, non-cash changes in variable compensation and LIFO inventory totaling $30 million, adjusted EBITDA grew 38% and adjusted EPS grew 49%
- Sales grew 21% to $701 million driven by International and Quick Lubes; Quick Lubes' system-wide same-store sales (SSS) grew 20.2%
- Quick Lubes represented 52% of total company adjusted EBITDA for the quarter
- Returned $65 million of cash to shareholders via dividends and share repurchases
- Raises full-year guidance for adjusted EBITDA to $590 million to $610 million and adjusted EPS to $1.72 to $1.82

LEXINGTON, Ky., April 28, 2021 /PRNewswire/ -- Valvoline Inc. (NYSE: VVV), a leading supplier of premium branded lubricants and automotive services, today reported financial results for its second fiscal quarter ended March 31, 2021. All comparisons in this press release are made to the same prior-year period unless otherwise noted. 

"We continue to see healthy demand and loyalty to our brand from consumers and customers," said Sam Mitchell, CEO of Valvoline. "Quick Lubes had record 20% system-wide same-store sales growth and improved margins for the quarter, and International saw robust volume, top-line and earnings growth. Core North America generated top-line growth and continued to provide significant operating cash flow. This strong cash generation is a key component of our strategic transformation to a more service-driven company by funding our growth initiatives in Quick Lubes and International."

"Based on our strong results and confidence in the business, we are increasing our outlook for the year to $590 million to $610 million in adjusted EBITDA."

Second-Quarter Results

Reported second-quarter 2021 net income and EPS were $68 million and $0.37, respectively. These results included $15 million ($0.09 per diluted share) of after-tax expense primarily related to debt extinguishment costs of $27 million and were partially offset by pension and other post-employment benefit (OPEB) income of $10 million as well as a business interruption insurance recovery of $2 million. Reported second-quarter 2020 net income and EPS were $63 million and $0.33, respectively. These results included after-tax expense of $11 million ($0.06 per diluted share) primarily related to debt redemption costs of $14 million and pension and OPEB income of $7 million as well as other expenses totaling $4 million.

Second-quarter 2021 adjusted net income and adjusted EPS were $83 million and $0.46, respectively, compared to adjusted net income of $74 million and adjusted EPS of $0.39 in the prior-year period. Adjusted EBITDA in the quarter was $152 million, a 13% increase compared to the prior-year period. (See Tables 7 and 8 for reconciliations of adjusted earnings.)

The prior-year period included a reduction to variable compensation expense due to lower earnings expectations at the onset of the COVID-19 pandemic, resulting in a $21 million unfavorable impact year-over-year. Current-period earnings also included a last-in-first-out (LIFO) inventory accounting charge of $5 million versus a LIFO credit of $4 million in the prior-year period. Excluding these unfavorable impacts, adjusted EBITDA in the quarter increased 38%.

Operating Segment Results

Quick Lubes

  • Total sales growth of 34% to $285 million; SSS grew 20.2% system-wide, 19.8% for company-operated stores and 20.4% for franchised stores
  • Operating income increased $23 million or 58% to $63 million; adjusted EBITDA increased $29 million or 58% to $79 million
  • Quick Lubes ended the quarter with 1,548 total company-operated and franchised stores, a net increase of 129 new stores or 9% versus the prior year

The Quick Lubes segment continued its momentum with strong top- and bottom-line growth. For the quarter, sales grew 34% and adjusted EBITDA was up 58%. System-wide SSS grew 20.2% versus the prior-year period with strong contribution from franchised and company-operated stores and a balance between transaction and average ticket increases. This led to normalized SSS growth of more than 10% (based on average two-year growth).

Year-over-year growth in profitability in the quarter was driven by record SSS performance, the addition of 129 net new stores, a unit increase of 9%, and improved margins in line with the Company's long-term growth strategy. Gross margin expansion of 320 basis points was due primarily to improved premium mix and customer traffic versus the prior-year period.

Core Nort h America

  • Sales increased 2% to $242 million
  • Operating income decreased $9 million or 19% to $38 million; adjusted EBITDA decreased $9 million or 18% to $42 million
  • Excluding a $7 million unfavorable, non-cash year-over-year LIFO inventory impact, adjusted EBITDA declined 4%

Volume growth of 7% was balanced across both the retail and installer channels, with the retail channel continuing to benefit from solid promotional performance and effective marketing. Demand in the installer channel continues to recover from the impacts of COVID-19.

The decline in segment profitability was primarily attributable to short-term price-cost lag due to rising raw material cost impacts – including an unfavorable, non-cash, year-over-year LIFO accounting impact of $7 million. As it has done historically, the Company is executing pricing increases which are expected to offset rising raw material costs.

International

  • Sales increased 36% to $174 million; lubricant volume increased 28% to 17.6 million gallons
  • Lubricant volume from unconsolidated joint ventures increased 53% to 13.2 million gallons
  • Operating income increased $10 million or 56% to $28 million; adjusted EBITDA increased $12 million or 63% to $31 million

The International segment had another exceptional quarter with robust sales and profitability growth, including all regions contributing double-digit volume growth. The strong performance was led by the Asia-Pacific region, particularly China, which had a larger COVID-19 impact in the prior-year period compared to other markets.

Top-line growth and favorable foreign exchange impacts as well as an increased contribution from unconsolidated joint ventures contributed to the significant growth in profitability.

Balance Sheet and Cash Flow

  • Total debt of approximately $1.7 billion and net debt of approximately $1.5 billion
  • Year-to-date cash flow from operations of $190 million; discretionary cash flow (cash flow from operations less maintenance capital) of $175 million; free cash flow of $116 million
  • Repurchased $42 million or 1.7 million shares of common stock, leaving 181 million shares outstanding as of March 31, 2021

Outlook

The guidance provided in this press release is based on current expectations, including those surrounding the ongoing COVID-19 pandemic.

"Our performance in the first half of the year has been outstanding," Mitchell said. "We are seeing continued strong momentum as we have remained focused on executing our superior in-store experience and staying connected to our customers. With Quick Lubes already representing half of our adjusted EBITDA this quarter, we are accelerating our shift to a more service-centric business." 

Mitchell continued, "I have never been more optimistic about our future than I am today. We remain focused on our strategy, driving faster growth, higher margins and stronger returns as our retail services business continues to perform at a high level.

Based on our strong performance throughout the first half of the year, we are raising our fiscal 2021 guidance for adjusted EBITDA, along with our outlook for overall sales growth, same-store sales growth, adjusted EPS and free cash flow. We expect Quick Lubes to generate more than half of our adjusted EBITDA for the balance of the year and expect that this strong performance will offset any near-term margin pressure from rising raw material costs further highlighting the benefits of our multiple routes to market."

Information regarding the Company's outlook for fiscal 2021 is provided in the table below:


Updated Outlook

Prior Outlook

Operating Segments



Sales growth

23 - 25%

14 - 16%

New Quick Lube store additions (includes company-operated, franchise and acquisitions)

no change

140 - 160

Quick Lubes system-wide same-store sales growth

18 - 20%

12 - 14%

Normalized1 same-store sales growth

9 - 11%

6 - 8%

Adjusted EBITDA

$590 - $610 million

$560 - $580 million

Corporate Items



Adjusted effective tax rate

no change

25 - 26%

Adjusted EPS

$1.72 - $1.82

$1.57 - $1.67

Capital expenditures

no change

$160 - $170 million

Free cash flow

$250 - $270 million

$200 - $220 million

1 Same-store sales growth excluding estimated COVID-19 impacts in March - May 2020 period; based on average two-year same-store sales growth between fiscal 2020 and 2021 outlook.

Valvoline's outlook for adjusted EBITDA, adjusted EPS and the adjusted effective tax rate are non-GAAP financial measures that exclude or will otherwise be adjusted for items impacting comparability. Valvoline is unable to reconcile these forward-looking non-GAAP financial measures to GAAP net income and EPS for fiscal 2021 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 GAAP net income and EPS in fiscal 2021 but would not impact non-GAAP adjusted results.

Conference Call Webcast

Valvoline will host a live audio webcast of its fiscal second quarter 2021 conference call at 9 a.m. ET on Thursday, April 29, 2021. 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.

Basis of Presentation

Certain prior year amounts have been reclassified to conform to current year presentation. In addition, the Company adopted the current expected credit losses accounting standard, effective at the beginning of fiscal 2021 using the required modified retrospective approach. Under this approach, financial information related to periods prior to adoption were not adjusted and are presented as originally reported under the previous accounting guidance. The effects of adopting the new current expected credit losses standard were recognized as an adjustment that increased opening retained deficit by approximately $2 million. The Company expects the ongoing impacts will not be material to the consolidated financial statements.

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 same-store sales; Express Care store counts; lubricant volumes sold by unconsolidated joint ventures and total lubricant volumes sold; and percentage of premium lubricants 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 Quick Lubes 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. Quick Lubes service center 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. Quick Lubes sales are limited to sales at company-operated stores, sales of lubricants and other products to independent franchisees and Express Care operators and royalties and other fees from franchised stores. Although Valvoline does not recognize store-level sales from franchised or Express Care stores as sales in its Statements of Consolidated Income, management believes system-wide and franchised SSS comparisons and store counts, in addition to Express Care store counts, are useful to assess the operating performance of the Quick Lubes reportable segment and the operating performance of an average Quick Lubes store.

Lubricant volumes sold by unconsolidated joint ventures are used to measure the operating performance of the International operating segment. Valvoline does not record lubricant sales from unconsolidated joint ventures as International reportable segment revenue. International sales are limited to sales by Valvoline's consolidated affiliates. Although Valvoline does not record sales by unconsolidated joint ventures as sales in its Statements of Consolidated Income, management believes lubricant volumes including and sold by unconsolidated joint ventures is useful to assess the operating performance of its investments in joint ventures.

Management also evaluates lubricant volumes sold in gallons for each of its reportable segments and premium lubricant percentage, defined as premium lubricant gallons sold as a percentage of U.S. branded segment lubricant volumes for the Quick Lubes and Core North America segments and as a percentage of total segment lubricant volume for the International segment. Premium lubricant products generally provide a higher contribution to segment profitability and the percentage of premium volumes is useful to evaluating and understanding Valvoline's operating performance.

Use of Non-GAAP Measures

To aid in the understanding of Valvoline's ongoing business performance, 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, are not defined within U.S. GAAP and do not purport to be alternatives to net or operating income/loss, earnings/loss per share or cash flows from operating activities as a measure of operating performance or cash flows. For a reconciliation of non-GAAP measures, refer to Tables 4, 7, 8 and 9 of this press release.

The following are the non-GAAP measures management has included and how management defines them:

  • EBITDA, which management defines as net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization;
  • Adjusted EBITDA, which management defines as EBITDA adjusted for certain non-operational items, including net pension and other postretirement plan expense/income; impairment of equity investment; and other items (which can include activity related to the separation from Ashland, impact of significant acquisitions or divestitures, restructuring costs, or other non-operational income/costs not directly attributable to the underlying business);
  • Adjusted operating income, which management defines as operating income adjusted for certain key items impacting comparability as noted in the definition of Adjusted EBITDA above;
  • Free cash flow, which management defines as operating cash flows less capital expenditures and certain other adjustments, as applicable;
  • Adjusted net income, which management defines as net income/loss adjusted for certain key items impacting comparability as noted in the definition of Adjusted EBITDA above, as well as the estimated net impact of the enactment of tax reform legislation and debt extinguishment and modification costs that are not reflective of the Company's ongoing operational performance or liquidity; and
  • Adjusted EPS, which management defines as earnings per diluted share calculated using adjusted net income.

These measures are not prepared in accordance with U.S. GAAP and contain management's best estimates of cost allocations and shared resource costs. Management believes the use of non-GAAP measures on a consolidated and operating segment basis assists investors in understanding the ongoing operating performance of Valvoline's business by presenting comparable financial results between periods. The non-GAAP information provided is used by Valvoline's management and may not be comparable to similar measures disclosed by other companies, because of differing methods used by other companies in calculating EBITDA, Adjusted EBITDA, free cash flow, Adjusted net and operating income, and Adjusted EPS. These non-GAAP measures provide a supplemental presentation of Valvoline's operating performance.

Due to depreciable assets associated with the nature of the Company's operations and interest costs related to Valvoline's capital structure, management believes EBITDA is an important supplemental measure to evaluate the Company's operating results between periods on a comparable basis.

Adjusted EBITDA, Adjusted net and operating income, and Adjusted EPS generally include adjustments for unusual, non-operational or restructuring-related activities, which impact the comparability of results between periods. Management believes these non-GAAP measures provide investors with a meaningful supplemental presentation of Valvoline's operating performance. These measures include adjustments for net pension and other postretirement plan expense/income, which 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, current employees with frozen benefits). These elements include (i) interest cost, (ii) expected return on plan assets, (iii) actuarial gains/losses, and (iv) amortization of prior service cost/credit. 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 are more reflective of changes in current conditions in global financial markets (in particular, interest rates) and are 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. These measures include pension and other postretirement service costs related to current employee service as well as the costs of other benefits provided to employees for current service.

Management uses free cash flow as an additional non-GAAP metric 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. Unlike cash flow from operating activities, free cash flow includes the impact of capital expenditures, providing a supplemental view of cash generation. Free cash flow has certain limitations, including that it does not reflect adjustments for certain non-discretionary cash flows, such as mandatory debt repayments. The amount of mandatory versus discretionary expenditures can vary significantly between periods.

Valvoline's results of operations are presented based on Valvoline's management structure and internal accounting practices. The structure and practices are specific to Valvoline; therefore, Valvoline's financial results, EBITDA, Adjusted EBITDA, free cash flow, Adjusted net and operating income and Adjusted EPS are not necessarily comparable with similar information for other comparable companies. EBITDA, Adjusted EBITDA, free cash flow, Adjusted net and operating income and Adjusted EPS each have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, or more meaningful than, net and operating income and cash flows from operating activities as determined in accordance with U.S. GAAP. Because of these limitations, one should rely primarily on net and operating income and cash flows provided from operating activities as determined in accordance with U.S. GAAP and use EBITDA, Adjusted EBITDA, free cash flow, Adjusted net and operating income and Adjusted EPS only as supplements. In evaluating EBITDA, Adjusted EBITDA, free cash flow, Adjusted net and operating income and Adjusted EPS, one should be aware that in the future Valvoline may incur expenses/income similar to those for which adjustments are made in calculating EBITDA, Adjusted EBITDA, free cash flow, Adjusted net and operating income and Adjusted EPS. Valvoline's presentation of EBITDA, Adjusted EBITDA, free cash flow, Adjusted net and operating income and Adjusted EPS should not be construed as a basis to infer that Valvoline's future results will be unaffected by unusual or nonrecurring items.

About Valvoline

Valvoline Inc. (NYSE: VVV) is a leading worldwide marketer and supplier of premium branded lubricants and automotive services, with sales in more than 140 countries. Established in 1866, the Company's heritage spans more than 150 years, during which time it has developed powerful brand recognition across multiple product and service channels. Valvoline ranks as the No. 3 passenger car motor oil brand in the DIY market by volume. It operates and franchises more than 1,500 quick-lube locations, and it is the No. 2 chain by number of stores in the United States under the Valvoline Instant Oil ChangeSM brand and the No. 3 chain by number of stores in Canada under the Valvoline Great Canadian Oil Change brand. It also markets Valvoline lubricants and automotive chemicals, including Valvoline EV Performance Fluids; Valvoline Hybrid Vehicle Full Synthetic motor oil; Valvoline High Mileage with MaxLife technology motor oil for engines over 75,000 miles; Valvoline Advanced Full Synthetic motor oil; Valvoline Premium Blue™ heavy-duty motor oil; Valvoline Multi-Vehicle Automatic Transmission Fluid; and Zerex™ antifreeze. To learn more, 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 report on Form 10-K, which is available on Valvoline's website at http://investors.valvoline.com/sec-filings or on the SEC's website at http://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.

™ Trademark, Valvoline or its subsidiaries, registered in various countries

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

FOR FURTHER INFORMATION
Sean T. Cornett
Sr. Director, Investor Relations
+1 (859) 357-2798
scornett@valvoline.com  

Michele Gaither Sparks
Sr. Director, Corporate Communications
+1 (859) 230-8079
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



2021


2020


2021


2020

Sales

$

701



$

578



$

1,354



$

1,185


Cost of sales

454



371



879



767


GROSS PROFIT

247



207



475



418


Selling, general and administrative expenses

129



96



246



213


Net legacy and separation-related expenses (income)





1



(1)


Equity and other income, net

(13)



(6)



(27)



(15)


OPERATING INCOME

131



117



255



221


Net pension and other postretirement plan income

(14)



(9)



(27)



(18)


Net interest and other financing expenses

55



38



75



54


INCOME BEFORE INCOME TAXES

90



88



207



185


Income tax expense

22



25



52



49


NET INCOME

$

68



$

63



$

155



$

136




















NET EARNINGS PER SHARE








         BASIC 

$

0.37



$

0.33



$

0.84



$

0.72


         DILUTED

$

0.37



$

0.33



$

0.84



$

0.72











WEIGHTED AVERAGE COMMON SHARES OUTSTANDING







         BASIC

182



188



184



188


         DILUTED

183



188



184



189











 

Valvoline Inc. and Consolidated Subsidiaries

Table 2

CONDENSED CONSOLIDATED BALANCE SHEETS


(In millions - preliminary and unaudited)






March 31


September 30





2021


2020

ASSETS





Current assets






Cash and cash equivalents

$

247



$

760




Receivables, net

448



433




Inventories, net

218



199




Prepaid expenses and other current assets

55



46



Total current assets

968



1,438










Noncurrent assets






Property, plant and equipment, net

741



613




Operating lease assets


299



261




Goodwill and intangibles, net

732



529




Equity method investments

45



44




Deferred income taxes

19



34




Other noncurrent assets

117



132



Total noncurrent assets

1,953



1,613










Total assets

$

2,921



$

3,051









LIABILITIES AND STOCKHOLDERS' DEFICIT





Current liabilities






Current portion of long-term debt

$

1



$




Trade and other payables

180



189




Accrued expenses and other liabilities

267



255



Total current liabilities

448



444










Noncurrent liabilities






Long-term debt

1,719



1,962




Employee benefit obligations

286



317




Operating lease liabilities

265



231




Other noncurrent liabilities

259



173



Total noncurrent liabilities

2,529



2,683










Stockholders' deficit

(56)



(76)










Total liabilities and stockholders' deficit

$

2,921



$

3,051


 

Valvoline Inc. and Consolidated Subsidiaries

Table 3

STATEMENTS OF CONSOLIDATED CASH FLOWS


(In millions - preliminary and unaudited)





Six months ended




March 31




2021


2020

CASH FLOWS FROM OPERATING ACTIVITIES





Net income

$

155



$

136



Adjustments to reconcile net income to cash flows from operating activities





Loss on extinguishment of debt

36



19




Depreciation and amortization

44



31




Pension contributions

(4)



(5)




Stock-based compensation expense

6



3




Other, net

2



2



Change in operating assets and liabilities

(49)



(32)


Total cash provided by operating activities

190



154








CASH FLOWS FROM INVESTING ACTIVITIES





Additions to property, plant and equipment

(74)



(57)



Repayments on notes receivable

12





Acquisitions of businesses, net of cash acquired

(223)



(11)



Other investing activities, net

9



(3)


Total cash used in investing activities

(276)



(71)








CASH FLOWS FROM FINANCING ACTIVITIES





Proceeds from borrowings, net of issuance costs

546



1,132



Repayments on borrowings

(800)



(475)



Premium paid to extinguish debt

(26)



(15)



Repurchases of common stock

(100)



(60)



Cash dividends paid

(46)



(42)



Other financing activities

(5)



(3)


Total cash (used in) provided by financing activities

(431)



537



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

4



(4)


(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

(513)



616


Cash, cash equivalents, and restricted cash - beginning of period

761



159


CASH, CASH EQUIVALENTS, AND RESTRICTED CASH - END OF PERIOD

$

248



$

775


 

Valvoline Inc. and Consolidated Subsidiaries




Table 4

FINANCIAL INFORMATION BY OPERATING SEGMENT





(In millions - preliminary and unaudited)






Three months ended March 31


2021


2020


Sales


Operating income


Depreciation and amortization


EBITDA


Sales


Operating income


Depreciation and amortization


EBITDA

Quick Lubes

$

285



$

63



$

16



$

79



$

212



$

40



$

10



$

50


Core North America

242



38



4



42



238



47



4



51


International

174



28



3



31



128



18



1



19


 Total operating segments

701



129



23



152



578



105



15



120


Unallocated and other (a)



2





16





12





21


 Total results

701



131



23



168



578



117



15



141


Key items:
















Net pension and other postretirement plan income







(14)









(9)


Business interruption recovery



(2)





(2)










Acquisition and divestiture-related costs











2





2


Adjusted results

$

701



$

129



$

23



$

152



$

578



$

119



$

15



$

134






(a) Unallocated and other includes pension and other postretirement plan non-service income and remeasurement adjustments, net legacy and separation-related activity and certain other corporate matters not allocated to the operating segments.

 














Table 4 (continued)


















Six month ended March 31


2021


2020


Sales


Operating income


Depreciation and amortization


EBITDA


Sales


Operating income


Depreciation and amortization


EBITDA

Quick Lubes

$

539



$

106



$

31



$

137



$

430



$

78



$

20



$

98


Core North America

477



85



8



93



486



93



8



101


International

338



62



5



67



269



38



3



41


 Total operating segments

1,354



253



44



297



1,185



209



31



240


Unallocated and other (a)



2





29





12





30


 Total results

1,354



255



44



326



1,185



221



31



270


Key items:
















Net pension and other postretirement plan income







(27)









(18)


Net legacy and separation-related expenses (income)



1





1





(1)





(1)


Business interruption recovery



(3)





(3)










Acquisition and divestiture-related costs











2





2


Restructuring and related expenses











1





1


Adjusted results

$

1,354



$

253



$

44



$

297



$

1,185



$

223



$

31



$

254





(a) Unallocated and other includes pension and other postretirement plan non-service income and remeasurement adjustments, net legacy and separation-related activity and certain other corporate matters not allocated to the operating segments.

 

Valvoline Inc. and Consolidated Subsidiaries

Table 5

INFORMATION BY OPERATING SEGMENT


(In millions - preliminary and unaudited)













Three months ended


Six months ended



March 31


March 31



2021


2020


2021


2020

QUICK LUBES









Lubricant sales (gallons)

8.1



7.1



15.8



14.4



Premium lubricants (percent of U.S. branded volumes)

70.6

%


67.5

%


70.0

%


67.0

%


Gross profit as a percent of sales (a)

39.8

%


36.6

%


37.6

%


37.0

%


Same-store sales growth - Company-operated (b)

19.8

%


0.3

%


12.8

%


3.3

%


Same-store sales growth - Franchised (b) (c)

20.4

%


0.9

%


13.1

%


5.3

%


Same-store sales growth - Combined (b) (c)

20.2

%


0.6

%


13.0

%


4.5

%

CORE NORTH AMERICA









Lubricant sales (gallons)

22.3



20.9



43.5



42.3



Premium lubricants (percent of U.S. branded volumes)

60.9

%


57.7

%


60.3

%


56.8

%


Gross profit as a percent of sales (a)

34.1

%


37.2

%


35.8

%


36.7

%

INTERNATIONAL









Lubricant sales (gallons) (d)

17.6



13.7



34.4



28.4



Lubricant sales (gallons), including unconsolidated joint ventures (e)

30.8



22.3



61.1



47.8



Premium lubricants (percent of lubricant volumes)

26.5

%


27.7

%


26.8

%


26.7

%


Gross profit as a percent of sales (a)

29.8

%


30.2

%


30.3

%


29.4

%





(a)

Gross profit as a percent of sales is defined as sales, less cost of sales, divided by sales.

(b)

Beginning in fiscal 2021, Valvoline determines same-store sales (SSS) growth as sales by U.S. Quick Lubes service center stores, with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation. Previously, SSS growth was determined as sales by U.S. Quick Lubes service center stores, with stores new to the U.S. Quick Lubes system excluded from the metric until completion of their first full year in operation. Prior period measures have been revised to conform to the current basis of presentation.

(c)

Valvoline franchisees are distinct legal entities and Valvoline does not consolidate the results of operations of its franchisees.

(d)

Excludes volumes sold by unconsolidated joint ventures.

(e)

Valvoline unconsolidated joint ventures are distinct legal entities and Valvoline does not consolidate the results of operations of its unconsolidated joint ventures.

 

Valvoline Inc. and Consolidated Subsidiaries

Table 6

QUICK LUBES STORE INFORMATION


(Preliminary and unaudited)















Company-operated





Second Quarter 2021


First Quarter 2021


Fourth Quarter 2020


Third Quarter 2020


Second Quarter 2020















Beginning of period


663



584



548



536



524




Opened


6



10



22



5



7




Acquired


3



42



2



2



1




Net conversions between company-operated and franchised


1



27



12



5



4



End of period


673



663



584



548



536


















Franchised





Second Quarter 2021


First Quarter 2021


Fourth Quarter 2020


Third Quarter 2020


Second Quarter 2020















Beginning of period


870



878



884



883



883




Opened


7



8



7



8



8




Acquired




12










Net conversions between company-operated and franchised


(1)



(27)



(12)



(5)



(4)




Closed


(1)



(1)



(1)



(2)



(4)



End of period (a)


875



870



878



884



883
















Total stores


1,548



1,533



1,462



1,432



1,419



















Express Care





Second Quarter 2021


First Quarter 2021


Fourth Quarter 2020


Third Quarter 2020


Second Quarter 2020















Number of locations at end of period (a)


290



295



296



304



301






(a) Included in the store counts at the end of the second, third and fourth quarters of fiscal 2020 were certain service center stores temporarily closed at the discretion of the respective independent operators due to the impacts of COVID-19. No service center stores were temporarily closed as of March 31, 2021 and December 31, 2020. As of September 30, 2020, 1 franchised service center store was temporarily closed, 5 franchised service center stores were temporarily closed as of June 30, 2020, and 26 franchised and 12 Express Care service center stores were temporarily closed as of March 31, 2020.

 

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



2021


2020


2021


2020










Reported net income

$

68



$

63



$

155



$

136


Adjustments:









Net pension and other postretirement plan income

(14)



(9)



(27)



(18)



Net legacy and separation-related expenses (income)





1



(1)



Debt extinguishment and modification costs

36



19



36



19



Business interruption recovery

(2)





(3)





Acquisition and divestiture-related costs



2





2



Restructuring and related expenses







1



Total adjustments, pre-tax

20



12



7



3



Income tax expense of adjustments

(5)



(3)



(2)



(1)



Income tax adjustments (a)



2





2



Total adjustments, after tax

15



11



5



4


Adjusted net income

$

83



$

74



$

160



$

140










Reported diluted earnings per share

$

0.37



$

0.33



$

0.84



$

0.72


Adjusted diluted earnings per share

$

0.46



$

0.39



$

0.87



$

0.74











Weighted average diluted common shares outstanding

183



188



184



189







(a)

Income tax adjustments relate to the discrete impacts associated with tax legislation changes in India.

 

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



2021


2020


2021


2020

Adjusted EBITDA - Valvoline









Net income


$

68



$

63



$

155



$

136


Add:









Income tax expense


22



25



52



49


Net interest and other financing expenses


55



38



75



54


Depreciation and amortization


23



15



44



31


EBITDA


168



141



326



270


Key items: (a)









Net pension and other postretirement plan income


(14)



(9)



(27)



(18)


Net legacy and separation-related expenses (income)






1



(1)


Business interruption recovery


(2)





(3)




Acquisition and divestiture-related costs




2





2


Restructuring and related expenses








1


Adjusted EBITDA


$

152



$

134



$

297



$

254











Adjusted EBITDA - Quick Lubes









Operating income


$

63



$

40



$

106



$

78


Key items: (a)









N/A









Adjusted operating income


63



40



106



78


Add:









Depreciation and amortization


16



10



31



20


Adjusted EBITDA


$

79



$

50



$

137



$

98











Adjusted EBITDA - Core North America









Operating income


$

38



$

47



$

85



$

93


Key items: (a)









N/A









Adjusted operating income


38



47



85



93


Add:









Depreciation and amortization


4



4



8



8


Adjusted EBITDA


$

42



$

51



$

93



$

101


 







Table 8 (continued)












Three months ended


Six months ended



March 31


March 31



2021


2020


2021


2020

Adjusted EBITDA - International









Operating income


$

28



$

18



$

62



$

38


Key items: (a)









N/A









Adjusted operating income


28



18


62



38

Add:









Depreciation and amortization


3



1



5



3


Adjusted EBITDA


$

31



$

19



$

67



$

41











Adjusted EBITDA - Unallocated and other









Operating income


$

2



$

12



$

2



$

12


Add:









Depreciation and amortization









Net pension and other postretirement plan income


14



9



27



18


EBITDA


16



21



29



30


Key items: (a)









Net pension and other postretirement plan income


(14)



(9)



(27)



(18)


Net legacy and separation-related expenses (income)






1



(1)


Business interruption recovery


(2)





(3)




Acquisition and divestiture-related costs




2





2


Restructuring and related expenses








1


Adjusted EBITDA


$



$

14



$



$

14





(a) Key items were recorded in Unallocated and other and none were recognized in the operating segment results. The table above reconciles Unallocated and other operating income and relevant other items reported below operating income to EBITDA and Adjusted EBITDA.

 

Valvoline Inc. and Consolidated Subsidiaries

Table 9

RECONCILIATION OF NON-GAAP DATA - FREE CASH FLOWS


(In millions - preliminary and unaudited)











Six months ended




March 31

Free cash flow (a)


2021


2020

Total cash flows provided by operating activities


$

190



$

154


Adjustments:






Additions to property, plant and equipment


(74)



(57)


Free cash flow


$

116



$

97













Six months ended

March 31

Discretionary free cash flow (b)




2021

Total cash flows provided by operating activities




$

190


Adjustments:






Maintenance additions to property, plant and equipment




(15)


Discretionary free cash flow




$

175













Fiscal year

Free cash flow (a)




2021 Outlook

Total cash flows provided by operating activities




$420 - $430

Adjustments:






Additions to property, plant and equipment




(160 - 170)

Free cash flow




$250 - $270





(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. Maintenance capital expenditures are routine uses of cash that are necessary to maintain the Company's operations. Management believes discretionary free cash flow is a useful measure of the Company's operational business performance and should be used as a supplement, rather than an alternative to, the GAAP measure of cash flows from operating activities.

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/valvoline-reports-second-quarter-results-raises-fiscal-2021-guidance-301279592.html

SOURCE Valvoline Inc.

IR Contact

Sean T. Cornett

Director, Investor Relations

Valvoline

859-357-3155 (Office)