Valvoline Inc. Reports First Quarter Results
- 7.1% system-wide SSS growth
- Sales from continuing operations of $373 million, a 12% increase
- Reported income from continuing operations grew 26% to $34 million
- Earnings per diluted share (EPS) increased 73% to $0.26
- Adjusted EBITDA increased 23% to $90 million
- Adjusted EPS grew 81% to $0.29
- 38 store additions (19 franchised and 19 company-operated)
- Repurchased over $170 million of stock this quarter
- None.
Insights
The reported 12% increase in net revenues to $373.4 million and the 26% growth in income from continuing operations to $33.9 million are indicative of Valvoline's robust performance in the automotive maintenance industry. The substantial 73% rise in earnings per share (EPS) to $0.26 and 81% increase in adjusted EPS to $0.29 demonstrate significant profitability improvements, which are likely to be well-received by investors and could positively influence stock valuation. The 23% increase in adjusted EBITDA to $90.2 million suggests operational efficiency and could signal strong cash flow generation capabilities. Valvoline's aggressive share repurchase program, with $171 million already returned to shareholders, reflects a shareholder-friendly capital allocation policy that often supports share price appreciation.
Valvoline's strategy of balancing franchised and company-operated store growth, as seen in the equal addition of 19 stores each, is a scalable business model that enables expansion while mitigating direct operational risk. The 7.1% system-wide same-store sales (SSS) growth is particularly noteworthy as it represents organic growth and customer retention, which are key indicators of brand strength and market competitiveness. This metric, coupled with the total system-wide stores reaching 1,890, underscores Valvoline's market expansion and could suggest future revenue growth potential.
The automotive maintenance sector, in which Valvoline operates, is typically resilient to economic fluctuations due to the non-discretionary nature of vehicle maintenance. Valvoline's reported SSS growth of 7.1% indicates the company is not only retaining but also successfully growing its customer base. This growth is a testament to the effectiveness of Valvoline's marketing strategies and the increasing demand for quick and reliable automotive services.
The decision to return a substantial amount of net proceeds from the sale of the Global Products business to shareholders may also reflect management's confidence in the company's liquidity and future earnings potential. This action could be interpreted as a positive signal to the market, reinforcing investor confidence in the company's financial health and strategic focus on its core operations.
The reported financial results from Valvoline can be seen as a microcosm of the broader economic environment. The robust growth in sales and profitability, despite potential macroeconomic headwinds, may indicate underlying economic stability in consumer spending on essential services. The company's performance might also suggest a favorable outlook for the automotive sector, particularly in the maintenance sub-segment, which tends to be less cyclical. However, investors should also consider broader economic indicators and potential impacts of inflation, interest rates and consumer confidence on discretionary spending, which could indirectly affect companies like Valvoline.
Furthermore, the balance sheet strength, with a cash and equivalents balance of $540 million against a total debt of $1.6 billion, should be evaluated in light of current interest rate trends and the company's ability to service its debt. The free cash flow figure of $(20) million, though negative, should be contextualized within the company's growth investments and share repurchase activities.
Delivers
- Sales from continuing operations of
$373 million 12% , driven by system-wide same store sales (SSS) growth of7.1% - Reported income from continuing operations of
$34 million 26% and earnings per diluted share (EPS) of$0.26 73% - Continuing operations adjusted EBITDA of
$90 million 23% and adjusted EPS of$0.29 81% - Store additions totaled 38 (19 franchised and 19 company-operated) bringing total system-wide stores to 1,890
"I want to thank our team and franchise partners for their continued hard work to start fiscal 2024," said Lori Flees, President and CEO. "We began the year delivering another quarter of growth with a
"Our network growth is off to a great start for the year with 38 total store additions this quarter, with half coming from franchise," continued Flees. "We also continue to deliver on our commitment to return a substantial amount of the net proceeds from the sale of the Global Products business to shareholders by repurchasing over
Continuing Operations - Operating Results
(In millions, except per share amounts and store counts) | Q1 results | YoY growth |
Net revenues | $ 373.4 | 12 % |
Operating income | $ 62.8 | 114 % |
Income from continuing operations (a) | $ 33.9 | 26 % |
EPS (a) | $ 0.26 | 73 % |
Adjusted EPS (b) | $ 0.29 | 81 % |
Adjusted EBITDA (b) | $ 90.2 | 23 % |
System-wide store sales (b) | $ 722.9 | 12 % |
Q1 results | Quarter | |
System-wide stores (b) | 1,890 | +38 |
Company-operated stores | 895 | +19 |
Franchised stores (b) | 995 | +19 |
Q1 - YoY growth | ||
System-wide SSS (b) | 7.1 % | |
(a) | 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"). These key items are delineated within Table 6 - Non-GAAP Reconciliation - Income from Continuing Operations and Diluted Earnings per Share. |
(b) | Refer to Key Business Measures, Use of Non-GAAP Measures, Table 4 - Retail Stores Operating Information, Table 6 - Non-GAAP Reconciliation - Income from Continuing Operations and Diluted Earnings per Share, and Table 7 - Non-GAAP Reconciliation - Adjusted Net Revenues and EBITDA from Continuing Operations for management's definitions of the metrics presented above and reconciliation to the corresponding GAAP measures, where applicable. |
Balance Sheet and Cash Flow
- Cash, cash equivalents and short-term investments balance of
$540 million $1.6 billion - Continuing operations cash flow from operations of
$22 million $(20) million - Returned
$171 million $40 million - Included in net interest expense is income of
$8 million
Outlook
Flees added, "For the first quarter we delivered profitability results consistent with our expectations. We remain on track with our full-year guidance while continuing to make progress across our critical priorities of driving the full potential of our existing business, accelerating network growth, and expanding services to meet the needs of an evolving customer base and car parc."
Conference Call Webcast
Valvoline will host a live audio webcast of its first quarter fiscal 2024 conference call today, February 6, 2024, at 9 a.m. ET. The webcast and supporting materials will be accessible through Valvoline's website at http://investors.valvoline.com. Following the live event, an archived version of the webcast and supporting materials will be available.
Key Business Measures
Valvoline tracks its operating performance and manages its business using certain key measures, including system-wide, company-operated and franchised store counts and SSS; and system-wide 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
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 by
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.
Use of Non-GAAP Measures
The following non-GAAP measures are included herein: Adjusted net revenues; EBITDA, adjusted EBITDA, and adjusted EBITDA margin; adjusted net income and adjusted diluted earnings per share; and free cash flow and discretionary free cash flow. Refer to the tables herein for management's definition of each non-GAAP measure and reconciliation to the most comparable
Non-GAAP measures include adjustments from results based on
Refer to the Appendix at the end of this release for descriptions of the adjustments that depart from the computations in accordance with
About Valvoline Inc.
Valvoline Inc. (NYSE: VVV), is the quick, easy, trusted leader in automotive preventive maintenance. Valvoline Inc. is creating shareholder value by driving the full potential in our core business, accelerating network growth and innovating to meet the needs of customers and the evolving car parc. With nearly 1,900 service centers throughout
Forward-Looking Statements
Certain statements herein, other than statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, executing on its growth strategy to create shareholder value by driving the full potential in the Company's core business, accelerating network growth and innovating to meet the needs of customers and the evolving car parc; realizing the benefits from the sale of Global Products; and future opportunities for the remaining stand-alone retail business; and any other statements regarding Valvoline's future operations, financial or operating results, capital allocation, debt leverage ratio, anticipated business levels, dividend policy, anticipated growth, market opportunities, strategies, competition, and other expectations and targets for future periods. Valvoline has identified some of these forward-looking statements with words such as "anticipates," "believes," "expects," "estimates," "is likely," "predicts," "projects," "forecasts," "may," "will," "should," and "intends," and the negative of these words or other comparable terminology. These forward-looking statements are based on Valvoline's current expectations, estimates, projections, and assumptions as of the date such statements are made and are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. Additional information regarding these risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission (the "SEC"), including in the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures about Market Risk" sections of Valvoline's most recently filed periodic reports on Forms 10-K and 10-Q, which are available on Valvoline's website at http://investors.valvoline.com/sec-filings or on the SEC's website at http://www.sec.gov. Valvoline assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, unless required by law.
TM Trademark, Valvoline Inc., or its subsidiaries, registered in various countries
SM Service mark, Valvoline Inc., or its subsidiaries, registered in various countries
* Based on a survey of more than 900,000 Valvoline Instant Oil Change℠ customers annually
FOR FURTHER INFORMATION
Investor Inquiries
Elizabeth B. Russell
+1 (859) 357-3155
IR@valvoline.com
Media Inquiries
Angela Davied
media@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 | |||||
December 31 | |||||
2023 | 2022 | ||||
Net revenues | $ 373.4 | $ 332.8 | |||
Cost of sales | 238.6 | 214.0 | |||
Gross profit | 134.8 | 118.8 | |||
Selling, general and administrative expenses | 74.5 | 66.0 | |||
Net legacy and separation-related expenses | 0.1 | 25.4 | |||
Other income, net | (2.6) | (1.9) | |||
Operating income | 62.8 | 29.3 | |||
Net pension and other postretirement plan expenses | 3.4 | 3.7 | |||
Net interest and other financing expenses | 13.6 | 18.7 | |||
Income before income taxes | 45.8 | 6.9 | |||
Income tax expense (benefit) | 11.9 | (20.1) | |||
Income from continuing operations | 33.9 | 27.0 | |||
(Loss) income from discontinued operations, net of tax | (2.0) | 54.9 | |||
Net income | $ 31.9 | $ 81.9 | |||
Net earnings per share | |||||
Basic earnings (loss) per share | |||||
Continuing operations | $ 0.26 | $ 0.16 | |||
Discontinued operations | (0.02) | 0.31 | |||
Basic earnings per share | $ 0.24 | $ 0.47 | |||
Diluted earnings (loss) per share | |||||
Continuing operations | $ 0.26 | $ 0.15 | |||
Discontinued operations | (0.02) | 0.31 | |||
Diluted earnings per share | $ 0.24 | $ 0.46 | |||
Weighted average common shares outstanding | |||||
Basic | 131.8 | 175.2 | |||
Diluted | 132.7 | 176.3 | |||
Valvoline Inc. and Consolidated Subsidiaries | Table 2 | ||||||
Condensed Consolidated Balance Sheets | |||||||
(In millions - preliminary and unaudited) | |||||||
December 31 | September 30 | ||||||
2023 | 2023 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ 420.7 | $ 409.1 | |||||
Receivables, net | 83.5 | 81.3 | |||||
Inventories, net | 31.5 | 33.3 | |||||
Prepaid expenses and other current assets | 55.2 | 65.5 | |||||
Short-term investments | 119.7 | 347.5 | |||||
Total current assets | 710.6 | 936.7 | |||||
Noncurrent assets | |||||||
Property, plant and equipment, net | 841.5 | 818.3 | |||||
Operating lease assets | 273.1 | 266.5 | |||||
Goodwill and intangibles, net | 685.6 | 680.6 | |||||
Other noncurrent assets | 198.5 | 187.8 | |||||
Total assets | $ 2,709.3 | $ 2,889.9 | |||||
Liabilities and Stockholders' Equity | |||||||
Current liabilities | |||||||
Current portion of long-term debt | $ 23.8 | $ 23.8 | |||||
Trade and other payables | 77.2 | 118.7 | |||||
Accrued expenses and other liabilities | 216.4 | 215.9 | |||||
Current liabilities held for sale | — | 3.9 | |||||
Total current liabilities | 317.4 | 362.3 | |||||
Noncurrent liabilities | |||||||
Long-term debt | 1,556.8 | 1,562.3 | |||||
Employee benefit obligations | 169.9 | 168.0 | |||||
Operating lease liabilities | 253.9 | 247.3 | |||||
Other noncurrent liabilities | 346.5 | 346.8 | |||||
Total noncurrent liabilities | 2,327.1 | 2,324.4 | |||||
Stockholders' equity | 64.8 | 203.2 | |||||
Total liabilities and stockholders' equity | $ 2,709.3 | $ 2,889.9 | |||||
Valvoline Inc. and Consolidated Subsidiaries | Table 3 | |||||
Condensed Consolidated Statements of Cash Flows | ||||||
(In millions - preliminary and unaudited) | ||||||
Three months ended | ||||||
December 31 | ||||||
2023 | 2022 | |||||
Cash flows from operating activities | ||||||
Net income | $ 31.9 | $ 81.9 | ||||
Adjustments to reconcile net income to cash flows from operating activities: | ||||||
Loss (income) from discontinued operations | 2.0 | (54.9) | ||||
Depreciation and amortization | 24.6 | 18.5 | ||||
Deferred income taxes | — | (26.5) | ||||
Stock-based compensation expense | 2.4 | 2.9 | ||||
Other, net | 1.0 | 0.6 | ||||
Change in operating assets and liabilities | (40.0) | 26.0 | ||||
Operating cash flows from continuing operations | 21.9 | 48.5 | ||||
Operating cash flows from discontinued operations | (2.0) | (57.2) | ||||
Total cash provided by (used in) operating activities | 19.9 | (8.7) | ||||
Cash flows from investing activities | ||||||
Additions to property, plant and equipment | (42.3) | (39.9) | ||||
Acquisitions of businesses | (8.3) | (9.6) | ||||
Proceeds from maturities of short-term investments | 230.0 | — | ||||
Other investing activities, net | (7.1) | 1.1 | ||||
Investing cash flows from continuing operations | 172.3 | (48.4) | ||||
Investing cash flows from discontinued operations | — | (8.4) | ||||
Total cash provided by (used in) investing activities | 172.3 | (56.8) | ||||
Cash flows from financing activities | ||||||
Proceeds from borrowings | — | 250.0 | ||||
Repayments on borrowings | (5.9) | (119.4) | ||||
Repurchases of common stock | (171.7) | (87.4) | ||||
Cash dividends paid | — | (21.8) | ||||
Other financing activities | (7.1) | (8.9) | ||||
Financing cash flows from continuing operations | (184.7) | 12.5 | ||||
Financing cash flows from discontinued operations | — | 60.0 | ||||
Total cash (used in) provided by financing activities | (184.7) | 72.5 | ||||
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash | 0.1 | 2.1 | ||||
Increase in cash, cash equivalents and restricted cash | 7.6 | 9.1 | ||||
Cash, cash equivalents and restricted cash - beginning of period | 413.1 | 83.9 | ||||
Cash, cash equivalents and restricted cash - end of period | $ 420.7 | $ 93.0 | ||||
Valvoline Inc. and Consolidated Subsidiaries | Table 4 | |||||
Retail Stores Operating Information | ||||||
(Preliminary and unaudited) | ||||||
Three months ended December 31 | ||||||
2023 | 2022 | |||||
Sales information | ||||||
System-wide store sales - in millions (a) | $ 722.9 | $ 644.0 | ||||
Year-over-year growth (a) | 12.3 % | 16.9 % | ||||
Same-store sales growth (b) | ||||||
Company-operated | 6.1 % | 12.7 % | ||||
Franchised (a) | 8.0 % | 11.2 % | ||||
System-wide (a) | 7.1 % | 11.9 % | ||||
Number of stores at end of period | |||||||||||
First 2024 | Fourth 2023 | Third 2023 | Second 2023 | First 2023 | |||||||
Company-operated | 895 | 876 | 854 | 832 | 813 | ||||||
Franchised (a) | 995 | 976 | 950 | 949 | 933 | ||||||
December 31 | |||||||||||
2023 | 2022 | ||||||||||
System-wide store count (a) | 1,890 | 1,746 | |||||||||
Year-over-year growth (a) | 8.2 % | 6.8 % | |||||||||
(a) | Measures include Valvoline franchisees, which are independent legal entities. Valvoline does not consolidate the results of operations of its franchisees. | ||||||||||
(b) | Valvoline determines SSS growth as sales by | ||||||||||
Valvoline Inc. and Consolidated Subsidiaries | Table 5 | ||||||||||
System-wide Retail Stores | |||||||||||
(Preliminary and unaudited) | |||||||||||
Company-operated | |||||||||||
First 2024 | Fourth 2023 | Third 2023 | Second 2023 | First 2023 | |||||||
Beginning of period | 876 | 854 | 832 | 813 | 790 | ||||||
Opened | 14 | 14 | 12 | 13 | 17 | ||||||
Acquired | 5 | 8 | 8 | 6 | 5 | ||||||
Net conversions between company-operated and franchised | — | — | 2 | — | 2 | ||||||
Closed | — | — | — | — | (1) | ||||||
End of period | 895 | 876 | 854 | 832 | 813 | ||||||
Franchised (a) | |||||||||||
First 2024 | Fourth 2023 | Third 2023 | Second 2023 | First 2023 | |||||||
Beginning of period | 976 | 950 | 949 | 933 | 925 | ||||||
Opened | 19 | 26 | 3 | 16 | 11 | ||||||
Acquired (b) | — | — | — | — | — | ||||||
Net conversions between company-operated and franchised | — | — | (2) | — | (2) | ||||||
Closed | — | — | — | — | (1) | ||||||
End of period | 995 | 976 | 950 | 949 | 933 | ||||||
Total system-wide stores (a) | 1,890 | 1,852 | 1,804 | 1,781 | 1,746 | ||||||
(a) | Measures include Valvoline franchisees, which are independent legal entities. Valvoline does not consolidate the results of operations of its franchisees. | ||||||||||
(b) | Represents the acquisition of franchise stores that are new to the Valvoline system by Valvoline Inc. | ||||||||||
Valvoline Inc. and Consolidated Subsidiaries | Table 6 | ||||
Non-GAAP Reconciliation - Income from Continuing Operations and Diluted Earnings per Share | |||||
(In millions, except per share amounts - preliminary and unaudited) | |||||
Three months ended | |||||
December 31 | |||||
2023 | 2022 | ||||
Reported income from continuing operations | $ 33.9 | $ 27.0 | |||
Adjustments: | |||||
Net pension and other postretirement plan expenses | 3.4 | 3.7 | |||
Net legacy and separation-related expenses (a) | 0.1 | 25.4 | |||
Information technology transition costs | 2.7 | 0.3 | |||
Suspended operations | — | (0.2) | |||
Total adjustments, pre-tax | 6.2 | 29.2 | |||
Income tax benefit of adjustments | (1.6) | (27.8) | |||
Total adjustments, after tax | 4.6 | 1.4 | |||
Adjusted income from continuing operations (b) (c) | $ 38.5 | $ 28.4 | |||
Reported diluted earnings per share from continuing operations | $ 0.26 | $ 0.15 | |||
Adjusted diluted earnings per share from continuing operations (c) (d) | $ 0.29 | $ 0.16 | |||
Weighted average diluted common shares outstanding | 132.7 | 176.3 | |||
(a) | During the three months ended December 31, 2022, the Company recognized | ||||
(b) | Adjusted income from continuing operations is defined as income from continuing operations adjusted for the effects of key items. Refer to "Use of Non-GAAP Measures" and the Appendix for management's definition of key items. | ||||
(c) | Represents a non-GAAP measure. Refer to "Use of Non-GAAP Measures" and the Appendix for additional details. | ||||
(d) | Adjusted diluted earnings per share from continuing operations is defined as diluted earnings per share calculated using adjusted income from continuing operations. | ||||
Valvoline Inc. and Consolidated Subsidiaries | Table 7 | |||
Non-GAAP Reconciliation - Adjusted Net Revenues and EBITDA from Continuing Operations | ||||
(In millions - preliminary and unaudited) | ||||
Three months ended | ||||
December 31 | ||||
2023 | 2022 | |||
Reported net revenues | $ 373.4 | $ 332.8 | ||
Key items: | ||||
Suspended operations | — | (0.2) | ||
Adjusted net revenues (a) (b) | $ 373.4 | $ 332.6 | ||
Income from continuing operations | $ 33.9 | $ 27.0 | ||
Add: | ||||
Income tax expense (benefit) | 11.9 | (20.1) | ||
Net interest and other financing expenses | 13.6 | 18.7 | ||
Depreciation and amortization | 24.6 | 18.5 | ||
EBITDA from continuing operations (b) (c) | 84.0 | 44.1 | ||
Key items: | ||||
Net pension and other postretirement plan expenses | 3.4 | 3.7 | ||
Net legacy and separation-related expenses | 0.1 | 25.4 | ||
Information technology transition costs | 2.7 | 0.3 | ||
Suspended operations | — | (0.2) | ||
Key items - subtotal | 6.2 | 29.2 | ||
Adjusted EBITDA from continuing operations (b) (c) | $ 90.2 | $ 73.3 | ||
Net profit margin (d) | 9.1 % | 8.1 % | ||
Adjusted EBITDA margin (b) (e) | 24.2 % | 22.0 % | ||
(a) | Adjusted net revenues are reported net revenues adjusted for key items. |
(b) | Represents a non-GAAP measure. Refer to "Use of Non-GAAP Measures" and the Appendix for additional details. |
(c) | EBITDA from continuing operations is defined as Income from continuing operations, plus Income tax expense (benefit), 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. |
(d) | Net profit margin is defined as reported income from continuing operations divided by reported net revenues. |
(e) | Adjusted EBITDA margin is defined as Adjusted EBITDA from continuing operations divided by adjusted net revenues. |
Valvoline Inc. and Consolidated Subsidiaries | Table 8 | |||
Non-GAAP Reconciliation - Free Cash Flows from Continuing Operations | ||||
(In millions - preliminary and unaudited) | ||||
Free cash flow (a) | Three months ended | |||
December 31 | ||||
2023 | 2022 | |||
Total cash flows provided by operating activities from continuing operations | $ 21.9 | $ 48.5 | ||
Adjustments: | ||||
Additions to property, plant and equipment from continuing operations | (42.3) | (39.9) | ||
Free cash flow from continuing operations (b) | $ (20.4) | $ 8.6 | ||
Discretionary free cash flow (c) | Three months ended | |||
December 31 | ||||
2023 | 2022 | |||
Total cash flows provided by operating activities from continuing operations | $ 21.9 | $ 48.5 | ||
Adjustments: | ||||
Maintenance additions to property, plant and equipment from continuing operations | (7.0) | (4.3) | ||
Discretionary free cash flow from continuing operations (b) | $ 14.9 | $ 44.2 | ||
(a) | Free cash flow from continuing operations is defined as operating cash flows from continuing operations less capital expenditures of the continuing operations and certain other adjustments attributable to continuing operations, as applicable. |
(b) | Represents a non-GAAP measure. Refer to "Use of Non-GAAP Measures" and the Appendix for additional details. |
(c) | Discretionary free cash flow from continuing operations is defined as operating cash flows from continuing operations less maintenance capital expenditures of the continuing operations and certain other adjustments attributable to continuing operations, as applicable. |
Valvoline Inc. and Consolidated Subsidiaries
Appendix - Description of Non-GAAP Measures and Adjustments
EBITDA Measures
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.
Free Cash Flow and Discretionary Free Cash Flow
Management uses free cash flow and discretionary free cash flow as additional non-GAAP metrics of cash flow generation. By including capital expenditures and certain other adjustments, as applicable, management is able to provide an indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Free cash flow includes the impact of capital expenditures, providing a supplemental view of cash generation. Discretionary free cash flow includes maintenance capital expenditures, which are routine uses of cash that are necessary to maintain the Company's operations and provides a supplemental view of cash flow generation to maintain operations before discretionary investments in growth. Free cash flow and discretionary free cash flow have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash flows, such as mandatory debt repayments.
Adjusted Net Revenue and Profitability Measures
Adjusted net revenue and profitability measures (i.e., adjusted net income, diluted earnings per share and EBITDA) enable the comparison of financial trends and results between periods where certain items may not be reflective of the Company's underlying and ongoing operational performance or vary independent of business performance.
Key Items
The non-GAAP measures used by management exclude the impact of certain unusual, infrequent or non-operational activity not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods ("key items"). Key items are often related to legacy matters or market-driven events considered by management to not be reflective of the ongoing operating performance. Key items may consist of adjustments related to: legacy businesses, including the separation from Valvoline's former parent company, the former Global Products reportable segment, and 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.
Refer to the below for descriptions of the key items that comprise the adjustments which depart from the computations in accordance with
Net pension and other postretirement plan expenses: 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.
Net legacy and separation-related expenses: 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 the three months ended December 31, 2022, the Company recognized
Information technology transition costs: Consists of expenses incurred related to the Company's transition to a stand-alone enterprise resource planning software system during fiscal years 2023 and 2024, including redundant expenses incurred from duplicative technology platforms during implementation. These expenses are reflective of incremental costs directly associated with technology transitions and are not considered to be reflective of the ongoing expenses of operating the Company's technology platforms.
Suspended operations: 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 and was sold during the three months ended December 31, 2023. These results are not indicative of the operating performance of the Company's ongoing continuing operations.
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SOURCE Valvoline Inc.
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What is the ticker symbol of Valvoline Inc.?
What was the system-wide SSS growth reported by Valvoline Inc. for the first quarter of fiscal 2024?
How much did the sales from continuing operations of Valvoline Inc. grow for the first quarter of fiscal 2024?
What was the reported income from continuing operations for Valvoline Inc. in the first quarter of fiscal 2024?
What was the increase in adjusted EBITDA for Valvoline Inc. in the first quarter of fiscal 2024?
