Valvoline Inc. Reports Second Quarter Results
Delivers 7.7% system-wide SSS growth and 38 net store additions
- Sales from continuing operations of
$389 million grew 13%, driven by system-wide same store sales (SSS) growth of 7.7% - Reported income from continuing operations of
$43 million grew 32% and earnings per diluted share (EPS) of$0.33 increased 74% - Continuing operations adjusted EBITDA of
$105 million increased 21% and adjusted EPS of$0.37 increased 61% - Net store additions in the quarter totaled 38 (14 franchised and 24 company-operated) bringing total system-wide stores to 1,928
- Updating guidance to narrow the range for certain key metrics
"The second quarter saw growth of 7.7% in system-wide same-store sales, while adjusted EBITDA increased 21%," said
Flees continued, "We also repurchased
Continuing Operations - Operating Results
(In millions, except per share amounts and store counts) |
Q2 results |
YoY growth |
Net revenues |
$ 388.7 |
13 % |
Operating income (a) |
$ 76.4 |
25 % |
Income from continuing operations (a) |
$ 43.3 |
32 % |
EPS (a) |
$ 0.33 |
74 % |
Adjusted EPS (b) |
$ 0.37 |
61 % |
Adjusted EBITDA (b) |
$ 105.1 |
21 % |
System-wide store sales (b) |
$ 746.1 |
13 % |
|
Q2 results |
Quarter |
System-wide stores (b) |
1,928 |
+38 |
Company-operated stores |
919 |
+24 |
Franchised stores (b) |
1,009 |
+14 |
|
Q2 - YoY growth |
|
System-wide SSS (b) |
7.7 % |
|
|
(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 and cash equivalents balance of
$495 million ; total debt of$1.6 billion - Year-to-date continuing operations cash flow from operations of
$92 million and free cash flow of$5 million - Returned cash to shareholders via share repurchases of
$40 million during the second quarter and$212 million year-to-date, which completes the$1.6 billion share repurchase authorization - Included in net interest expense is income of
$4 million and$12 million earned during the quarter and year-to-date, respectively on invested net proceeds from the sale of the Global Products business
Outlook
Flees added, "In the first half of the year, we have delivered strong profit growth thanks to the hard work of our team and franchise partners. Our team's commitment to employee training and retention has allowed us to continue to drive the core business toward its full potential through a focus on improving delivery of additional services and management of labor costs. With the first half of the year behind us, we continue to expect strong year-over-year performance despite lapping a strong second half of fiscal year 2023. Accordingly, we are updating our guidance to narrow the range across a few key metrics."
Information regarding the Company's outlook for fiscal 2024 is provided in the table below:
|
Updated Outlook |
Prior Outlook |
||||
System-wide SSS growth |
6 |
— |
8 % |
6 |
— |
9 % |
System-wide store additions |
no |
|
change |
140 |
— |
170 |
Net revenues |
|
— |
|
|
— |
|
Adjusted EBITDA |
|
— |
|
|
— |
|
Capital expenditures |
no |
|
change |
|
— |
|
Adjusted EPS |
|
— |
|
|
— |
|
Valvoline's outlook for adjusted EBITDA and adjusted EPS are non-GAAP financial measures that are expected to be impacted by items affecting comparability. Valvoline is unable to reconcile these forward-looking non-GAAP financial measures to the comparable GAAP measures estimated for fiscal 2024 without unreasonable efforts, as the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact these GAAP measures in fiscal 2024 but would not impact non-GAAP adjusted results.
Internal Controls
The Company plans to report a material weakness related to the implementation of a new enterprise resource planning system that took place on
Notwithstanding the material weakness, the Company believes there are no material inaccuracies or omissions of material fact in the reported results, and to the best of the Company's knowledge, the condensed consolidated financial statements fairly present in all material aspects the financial condition, results of operations and cash flows in conformity with GAAP. Management developed a plan to further remediate the material weakness and has already begun these efforts. The Company expects the material weakness will be remediated by the end of fiscal 2024.
Conference Call Webcast
Valvoline will host a live audio webcast of its second quarter fiscal 2024 conference call today,
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
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
TM Trademark,
SM Service mark,
* Based on a survey of more than 900,000 Valvoline Instant Oil Change℠ customers annually
FOR FURTHER INFORMATION
Investor Inquiries
+1 (859) 357-3155
IR@valvoline.com
Media Inquiries
media@valvoline.com
|
|
|
|
|
|
|
|
Table 1 |
|
Statements of Consolidated Income |
|
|
|
|
|
|
|
|
|
(In millions, except per share amounts - preliminary and unaudited) |
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|||||
|
|
||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||
Net revenues |
|
$ 388.7 |
|
$ 344.5 |
|
$ 762.1 |
|
$ 677.3 |
|
Cost of sales |
|
242.5 |
|
217.8 |
|
481.1 |
|
431.8 |
|
Gross profit |
|
146.2 |
|
126.7 |
|
281.0 |
|
245.5 |
|
Selling, general and administrative expenses |
|
72.3 |
|
62.6 |
|
146.8 |
|
128.6 |
|
Net legacy and separation-related expenses |
|
— |
|
3.8 |
|
0.1 |
|
29.2 |
|
Other income, net |
|
(2.5) |
|
(0.9) |
|
(5.1) |
|
(2.8) |
|
Operating income |
|
76.4 |
|
61.2 |
|
139.2 |
|
90.5 |
|
Net pension and other postretirement plan expenses |
|
3.6 |
|
3.6 |
|
7.0 |
|
7.3 |
|
Net interest and other financing expenses |
|
15.5 |
|
13.3 |
|
29.1 |
|
32.0 |
|
Income before income taxes |
|
57.3 |
|
44.3 |
|
103.1 |
|
51.2 |
|
Income tax expense (benefit) |
|
14.0 |
|
11.4 |
|
25.9 |
|
(8.7) |
|
Income from continuing operations |
|
43.3 |
|
32.9 |
|
77.2 |
|
59.9 |
|
(Loss) income from discontinued operations, net of tax |
|
(1.9) |
|
1,194.4 |
|
(3.9) |
|
1,249.3 |
|
Net income |
|
$ 41.4 |
|
$ 1,227.3 |
|
$ 73.3 |
|
$ 1,309.2 |
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share |
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ 0.33 |
|
$ 0.19 |
|
$ 0.59 |
|
$ 0.35 |
|
Discontinued operations |
|
(0.01) |
|
6.96 |
|
(0.03) |
|
7.20 |
|
Basic earnings per share |
|
$ 0.32 |
|
$ 7.15 |
|
$ 0.56 |
|
$ 7.55 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share |
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ 0.33 |
|
$ 0.19 |
|
$ 0.59 |
|
$ 0.34 |
|
Discontinued operations |
|
(0.01) |
|
6.92 |
|
(0.03) |
|
7.16 |
|
Diluted earnings per share |
|
$ 0.32 |
|
$ 7.11 |
|
$ 0.56 |
|
$ 7.50 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|||
Basic |
|
129.8 |
|
171.7 |
|
130.8 |
|
173.5 |
|
Diluted |
|
130.7 |
|
172.7 |
|
131.7 |
|
174.5 |
|
|
|
|
Table 2 |
|||
Condensed Consolidated Balance Sheets |
|
|
|
|
|||
(In millions - preliminary and unaudited) |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
2024 |
|
2023 |
||||
Assets |
|
|
|
|
|||
|
Current assets |
|
|
|
|||
|
|
Cash and cash equivalents |
|
$ 494.5 |
|
$ 409.1 |
|
|
|
Receivables, net |
|
109.6 |
|
81.3 |
|
|
|
Inventories, net |
|
37.5 |
|
33.3 |
|
|
|
Prepaid expenses and other current assets |
|
59.8 |
|
65.5 |
|
|
|
Short-term investments |
|
— |
|
347.5 |
|
|
Total current assets |
|
701.4 |
|
936.7 |
||
|
|
|
|
|
|
|
|
|
Noncurrent assets |
|
|
|
|||
|
|
Property, plant and equipment, net |
|
877.9 |
|
818.3 |
|
|
|
Operating lease assets |
|
288.1 |
|
266.5 |
|
|
|
|
|
692.3 |
|
680.6 |
|
|
|
Other noncurrent assets |
|
203.3 |
|
187.8 |
|
|
Total assets |
|
$ 2,763.0 |
|
$ 2,889.9 |
||
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|||
|
Current liabilities |
|
|
|
|||
|
|
Current portion of long-term debt |
|
$ 623.8 |
|
$ 23.8 |
|
|
|
Trade and other payables |
|
118.8 |
|
118.7 |
|
|
|
Accrued expenses and other liabilities |
|
221.1 |
|
215.9 |
|
|
|
Current liabilities held for sale |
|
— |
|
3.9 |
|
|
Total current liabilities |
|
963.7 |
|
362.3 |
||
|
|
|
|
|
|
|
|
|
Noncurrent liabilities |
|
|
|
|||
|
|
Long-term debt |
|
951.3 |
|
1,562.3 |
|
|
|
Employee benefit obligations |
|
170.2 |
|
168.0 |
|
|
|
Operating lease liabilities |
|
269.0 |
|
247.3 |
|
|
|
Other noncurrent liabilities |
|
348.7 |
|
346.8 |
|
|
Total noncurrent liabilities |
|
1,739.2 |
|
2,324.4 |
||
|
|
|
|
|
|
|
|
|
Stockholders' equity |
60.1 |
|
203.2 |
|||
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
|
$ 2,763.0 |
|
$ 2,889.9 |
|
|
|
|
Table 3 |
||
Condensed Consolidated Statements of Cash Flows |
|
|
||||
(In millions - preliminary and unaudited) |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
Six months ended |
||||
|
|
|||||
|
2024 |
|
2023 |
|||
Cash flows from operating activities |
|
|
|
|
||
|
Net income |
|
$ 73.3 |
|
$ 1,309.2 |
|
|
Adjustments to reconcile net income to cash flows from operating activities: |
|
|
|
|
|
|
|
Loss (income) from discontinued operations |
|
3.9 |
|
(1,249.3) |
|
|
Depreciation and amortization |
|
50.2 |
|
39.1 |
|
|
Deferred income taxes |
|
— |
|
(26.6) |
|
|
Stock-based compensation expense |
|
4.9 |
|
5.4 |
|
|
Other, net |
|
1.4 |
|
2.3 |
|
Change in operating assets and liabilities |
|
(41.6) |
|
93.4 |
|
|
Operating cash flows from continuing operations |
|
92.1 |
|
173.5 |
|
|
Operating cash flows from discontinued operations |
|
(3.9) |
|
(63.4) |
|
|
Total cash provided by operating activities |
|
88.2 |
|
110.1 |
|
Cash flows from investing activities |
|
|
|
|
||
|
Additions to property, plant and equipment |
|
(87.2) |
|
(79.4) |
|
|
Acquisitions of businesses |
|
(21.3) |
|
(18.9) |
|
|
Proceeds from maturities of short-term investments |
|
350.0 |
|
— |
|
|
Other investing activities, net |
|
(10.9) |
|
2.0 |
|
|
Investing cash flows from continuing operations |
|
230.6 |
|
(96.3) |
|
|
Investing cash flows from discontinued operations |
|
— |
|
2,623.2 |
|
|
Total cash provided by investing activities |
|
230.6 |
|
2,526.9 |
|
Cash flows from financing activities |
|
|
|
|
||
|
Proceeds from borrowings |
|
— |
|
920.9 |
|
|
Repayments on borrowings |
|
(11.8) |
|
(909.0) |
|
|
Repurchases of common stock |
|
(212.2) |
|
(257.4) |
|
|
Cash dividends paid |
|
— |
|
(21.8) |
|
|
Other financing activities |
|
(13.6) |
|
(12.1) |
|
|
Financing cash flows from continuing operations |
|
(237.6) |
|
(279.4) |
|
|
Financing cash flows from discontinued operations |
|
— |
|
(108.1) |
|
|
Total cash used in financing activities |
|
(237.6) |
|
(387.5) |
|
|
Effect of currency exchange rate changes on cash, cash equivalents and |
|
0.2 |
|
1.1 |
|
Increase in cash, cash equivalents and restricted cash |
|
81.4 |
|
2,250.6 |
||
Cash, cash equivalents and restricted cash - beginning of period |
|
413.1 |
|
83.9 |
||
Cash, cash equivalents and restricted cash - end of period |
|
$ 494.5 |
|
$ 2,334.5 |
|
|
|
|
|
|
|
|
Table 4 |
||
Retail Stores Operating Information |
|
|
|
|
|
|
|
|
||
(Preliminary and unaudited) |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||||
|
|
Three months ended
|
|
Six months ended
|
||||||
|
|
|||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|||
Sales information |
|
|
|
|
|
|
|
|
|
|
System-wide store sales - in millions (a) |
|
$ 746.1 |
|
$ 659.9 |
|
|
|
|
||
Year-over-year growth (a) |
|
13.1 % |
|
18.5 % |
|
12.7 % |
|
17.7 % |
||
|
|
|
|
|
|
|
|
|
|
|
Same-store sales growth (b) |
|
|
|
|
|
|
|
|
||
Company-operated |
|
7.4 % |
|
14.2 % |
|
6.8 % |
|
13.5 % |
||
Franchised (a) |
|
8.0 % |
|
12.9 % |
|
8.0 % |
|
12.0 % |
||
System-wide (a) |
|
7.7 % |
|
13.5 % |
|
7.4 % |
|
12.7 % |
|
|
|
Number of stores at end of period |
||||||||
|
|
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
Company-operated |
|
919 |
|
895 |
|
876 |
|
854 |
|
832 |
|
Franchised (a) |
|
1,009 |
|
995 |
|
976 |
|
950 |
|
949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2024 |
|
2023 |
|||||||||
System-wide store count (a) |
|
|
|
|
|
|
|
1,928 |
|
1,781 |
|
Year-over-year growth (a) |
|
|
|
|
|
|
|
8.3 % |
|
7.2 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
|
|
|
|
|
|
|
Table 5 |
|||
System-wide Retail Stores |
|
|
|
|
|
|
|
|
|
||
(Preliminary and unaudited) |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||||
|
|
|
Company-operated |
||||||||
|
|
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
Beginning of period |
|
895 |
|
876 |
|
854 |
|
832 |
|
813 |
|
|
Opened |
|
14 |
|
14 |
|
14 |
|
12 |
|
13 |
|
Acquired |
|
10 |
|
5 |
|
8 |
|
8 |
|
6 |
|
Net conversions between company-operated |
|
— |
|
— |
|
— |
|
2 |
|
— |
|
Closed |
|
— |
|
— |
|
— |
|
— |
|
— |
End of period |
|
919 |
|
895 |
|
876 |
|
854 |
|
832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised (a) |
||||||||
|
|
|
Second |
|
First |
|
Fourth |
|
Third |
|
Second |
Beginning of period |
|
995 |
|
976 |
|
950 |
|
949 |
|
933 |
|
|
Opened |
|
15 |
|
19 |
|
26 |
|
3 |
|
16 |
|
Acquired (b) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Net conversions between company-operated |
|
— |
|
— |
|
— |
|
(2) |
|
— |
|
Closed |
|
(1) |
|
— |
|
— |
|
— |
|
— |
End of period |
|
1,009 |
|
995 |
|
976 |
|
950 |
|
949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total system-wide stores (a) |
|
1,928 |
|
1,890 |
|
1,852 |
|
1,804 |
|
1,781 |
|
|
|||||||||||
|
|
||||||||||
(a) |
Measures include Valvoline franchisees, which are independent legal entities. Valvoline does not consolidate the results of operations of |
||||||||||
(b) |
Represents the acquisition of franchise stores that are new to the Valvoline system by |
|
|
|
|
|
|
|
|
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
|
|
Six months ended
|
||||
|
|
|
|
||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Reported income from continuing operations |
|
$ 43.3 |
|
$ 32.9 |
|
$ 77.2 |
|
$ 59.9 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Net pension and other postretirement plan expenses |
|
3.6 |
|
3.6 |
|
7.0 |
|
7.3 |
|
Net legacy and separation-related expenses (a) |
|
— |
|
3.8 |
|
0.1 |
|
29.2 |
|
Information technology transition costs |
|
3.1 |
|
0.4 |
|
5.8 |
|
0.7 |
|
Investment and divestiture-related costs |
|
— |
|
1.0 |
|
— |
|
1.0 |
|
Debt extinguishment and modification costs |
|
— |
|
0.9 |
|
— |
|
0.9 |
|
Suspended operations |
|
— |
|
0.1 |
|
— |
|
(0.1) |
|
Total adjustments, pre-tax |
|
6.7 |
|
9.8 |
|
12.9 |
|
39.0 |
|
Income tax benefit of adjustments (a) |
|
(1.7) |
|
(2.5) |
|
(3.3) |
|
(30.3) |
|
Total adjustments, after tax |
|
5.0 |
|
7.3 |
|
9.6 |
|
8.7 |
Adjusted income from continuing operations (b) (c) |
|
$ 48.3 |
|
$ 40.2 |
|
$ 86.8 |
|
$ 68.6 |
|
|
|
|
|
|
|
|
|
|
|
Reported diluted earnings per share from continuing operations |
|
$ 0.33 |
|
$ 0.19 |
|
$ 0.59 |
|
$ 0.34 |
|
Adjusted diluted earnings per share from continuing operations (c) (d) |
|
$ 0.37 |
|
$ 0.23 |
|
$ 0.66 |
|
$ 0.39 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted common shares outstanding |
|
130.7 |
|
172.7 |
|
131.7 |
|
174.5 |
|
|
(a) |
During the six months ended |
(b) |
Adjusted income from continuing operations is defined as income from continuing operations adjusted for the effects 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. |
|
|
|
|
|
|
|
|
Table 7 |
Non-GAAP Reconciliation - Adjusted Net Revenues and EBITDA from Continuing Operations |
||||||||
(In millions - preliminary and unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
||||
|
|
|||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Reported net revenues |
$ 388.7 |
|
$ 344.5 |
|
$ 762.1 |
|
$ 677.3 |
|
Key items: |
|
|
|
|
|
|
|
|
Suspended operations |
|
— |
|
— |
|
— |
|
(0.2) |
Adjusted net revenues (a) (b) |
$ 388.7 |
|
$ 344.5 |
|
$ 762.1 |
|
$ 677.1 |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ 43.3 |
|
$ 32.9 |
|
$ 77.2 |
|
$ 59.9 |
Add: |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
14.0 |
|
11.4 |
|
25.9 |
|
(8.7) |
Net interest and other financing expenses |
|
15.5 |
|
13.3 |
|
29.1 |
|
32.0 |
Depreciation and amortization |
|
25.6 |
|
20.6 |
|
50.2 |
|
39.1 |
EBITDA from continuing operations (b) (c) |
|
98.4 |
|
78.2 |
|
182.4 |
|
122.3 |
Key items: |
|
|
|
|
|
|
|
|
Net pension and other postretirement plan expenses |
|
3.6 |
|
3.6 |
|
7.0 |
|
7.3 |
Net legacy and separation-related expenses |
|
— |
|
3.8 |
|
0.1 |
|
29.2 |
Information technology transition costs |
|
3.1 |
|
0.4 |
|
5.8 |
|
0.7 |
Investment and divestiture-related costs |
|
— |
|
1.0 |
|
— |
|
1.0 |
Suspended operations |
|
— |
|
0.1 |
|
— |
|
(0.1) |
Key items - subtotal |
|
6.7 |
|
8.9 |
|
12.9 |
|
38.1 |
Adjusted EBITDA from continuing operations (b) (c) |
|
$ 105.1 |
|
$ 87.1 |
|
$ 195.3 |
|
$ 160.4 |
|
|
|
|
|
|
|
|
|
Net profit margin (d) |
11.1 % |
|
9.6 % |
|
10.1 % |
|
8.8 % |
|
Adjusted EBITDA margin (b) (e) |
27.0 % |
|
25.3 % |
|
25.6 % |
|
23.7 % |
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
|
|
|
|
Table 8 |
Non-GAAP Reconciliation - Free Cash Flows from Continuing Operations |
|
|
||
(In millions - preliminary and unaudited) |
|
|
|
|
|
|
|
|
|
Free cash flow (a) |
|
Six months ended |
||
|
|
|||
|
2024 |
|
2023 |
|
Operating cash flows from continuing operations |
|
$ 92.1 |
|
$ 173.5 |
Adjustments: |
|
|
|
|
Additions to property, plant and equipment |
|
(87.2) |
|
(79.4) |
Free cash flow from continuing operations (b) |
|
$ 4.9 |
|
$ 94.1 |
|
|
|
|
|
Discretionary free cash flow (c) |
|
Six months ended |
||
|
|
|||
|
2024 |
|
2023 |
|
Operating cash flows from continuing operations |
|
$ 92.1 |
|
$ 173.5 |
Adjustments: |
|
|
|
|
Maintenance additions to property, plant and equipment |
|
(13.6) |
|
(9.7) |
Discretionary free cash flow from continuing operations (b) |
|
$ 78.5 |
|
$ 163.8 |
|
|
|
|
|
|
|
(a) |
Free cash flow is defined as operating cash flows less Additions to property, plant and equipment and certain other adjustments, 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 is defined as operating cash flows less Maintenance additions to property, plant and equipment and certain other adjustments, as applicable. |
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 six months ended
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 data conversion, temporary support, training, and redundant expenses incurred from duplicative technology platforms during implementation. These expenses are reflective of incremental costs directly associated with technology transitions and data migration that 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
Investment and divestiture-related costs: Expense recognized to reduce the carrying value of an investment interest determined to be impaired. This cost is not considered to be reflective of the underlying performance of the Company's ongoing continuing operations.
Debt extinguishment and modification costs: Relates to the modification of the Senior Credit Agreement and includes the accelerated amortization of previously capitalized debt issuance costs, as well as third-party fees expensed in connection with the execution of the amended Senior Credit Agreement. These expenses are not considered to be indicative of the future servicing costs of the Company's ongoing debt facilities.
View original content to download multimedia:https://www.prnewswire.com/news-releases/valvoline-inc-reports-second-quarter-results-302138985.html
SOURCE