Kentucky
|
|
001-37884
|
|
30-0939371
|
(State or other jurisdiction
of incorporation)
|
|
(Commission
File Number)
|
|
(I.R.S. Employer
Identification No.)
|
☐
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Item 2.02.
|
Results of Operations and Financial Condition
|
Item 7.01.
|
Regulation FD Disclosure
|
Item 9.01.
|
Financial Statements and Exhibits
|
(d)
|
|
Exhibits
|
99.1
|
|
News Release dated January 26, 2017.
|
VALVOLINE INC.
|
|||
Date: January 26, 2017
|
By:
|
/s/ Mary E. Meixelsperger | |
Mary E. Meixelsperger | |||
Chief Financial Officer | |||
99.1
|
|
News Release dated January 26, 2017.
|
NEWS RELEASE
|
● |
Reported net income of $72 million and reported earnings per diluted share (EPS) of $0.35
|
● |
Adjusted EPS of $0.35, up 9 percent
|
● |
Reported operating income of $120 million
|
● |
EBITDA from operating segments (Core North America, Quick Lubes and International) grew 8 percent to $109 million
|
● |
Lubricant volume growth of 7 percent to 43.1 million gallons
|
● |
Valvoline Instant Oil ChangeSM (VIOC) system-wide same-store sales (SSS) growth of 9.0 percent
|
● |
Expects full-year adjusted EPS of $1.36-$1.43, an increase from prior guidance
|
●
|
Lubricant volume grew 2% to 24.1 million gallons
|
|
●
|
Premium mix increased 410 basis points to 43.8%
|
|
●
|
Operating income declined 4% to $51 million, EBITDA declined 5% to $54 million
|
●
|
VIOC SSS increased 9.0% overall, 9.5% for company-owned stores, 8.9% for franchised stores
|
|
●
|
Operating income grew 26% to $29 million, EBITDA grew 26% to $34 million, with approximately half of the increase in EBITDA coming from the former Oil Can Henry’s stores, which were acquired in February 2016
|
|
●
|
VIOC ended the quarter with 1,076 stores, an increase of 8 during the quarter. This is an increase of 120 stores over prior year Q1, 89 of which came from Oil Can Henry’s.
|
●
|
Lubricant volume grew 12% to 13.7 million gallons
|
|
●
|
Emerging markets volume (including unconsolidated joint ventures) grew 16%; mature markets volume increased by 8%
|
|
●
|
Operating income grew 25% to $20 million, EBITDA increased 24% to $21 million
|
●
|
Total debt of $740 million, excluding capital lease obligations and including $75 million from our new accounts receivable securitization facility, which was used to repay our term loan by an equivalent amount
|
|
●
|
Net debt of $504 million
|
|
●
|
Cash provided by operating activities of $88 million, an increase of $48 million from prior year
|
|
●
|
Free cash flow of $79 million
|
Updated Outlook
|
Prior Outlook
|
|
Operating Segments
|
||
· Lubricant gallons
|
3-5%
|
2-3%
|
· Revenues
|
4-7%
|
3-5%
|
· New stores
|
||
o VIOC company-owned
|
31-33
28 acquired,
3-5 new builds
|
5-10
new builds
|
o VIOC franchised
|
no change
|
15-25
|
· VIOC same-store sales
|
5-7%
|
3-5%
|
· EBITDA from operating segments
|
$440-$455 million
|
$435 million
at mid-point of
previous range
|
Corporate Items
|
||
· Pension income
|
$70 million
|
$66 million
|
· One-time separation-related expenses
|
no change
|
$25-$30 million
|
· Diluted adjusted earnings per share
|
$1.36-$1.43
|
$1.31-$1.41
|
· Capital expenditures
|
no change
|
$70-$80 million
|
· Free cash flow
|
$130-$150 million
|
$90-$100 million
|
Valvoline Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED INCOME
(In millions except per share data - preliminary and unaudited)
|
Table 1
|
Three months ended
December 31 |
||||||||
2016
|
2015
|
|||||||
Sales
|
$
|
489
|
$
|
456
|
||||
Cost of sales (a)
|
304
|
280
|
||||||
GROSS PROFIT
|
185
|
176
|
||||||
Selling, general and administrative expense (b)
|
95
|
87
|
||||||
Non-service income and gains on pension and other postretirement plans
|
(26
|
)
|
(2
|
)
|
||||
Separation costs
|
6
|
-
|
||||||
Equity and other income
|
(10
|
)
|
(5
|
)
|
||||
OPERATING INCOME
|
120
|
96
|
||||||
Net interest and other financing expense
|
10
|
-
|
||||||
INCOME BEFORE INCOME TAXES
|
110
|
96
|
||||||
Income tax expense
|
38
|
31
|
||||||
NET INCOME
|
$
|
72
|
$
|
65
|
||||
BASIC AND DILUTED EARNINGS PER SHARE
|
$
|
0.35
|
$
|
0.32
|
||||
BASIC AND DILUTED COMMON SHARES OUTSTANDING
|
205
|
205
|
(a) |
Includes approximately $2 million of non-service pension and other postretirement plan income for the three months ended December 31, 2015.
|
(b) |
Includes approximately $20 million of corporate expenses allocated from Ashland for the three months ended December 31, 2015.
|
Valvoline Inc. and Consolidated Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions - preliminary and unaudited)
|
Table 2
|
December 31 2016
|
September 30
2016 |
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$
|
236
|
$
|
172
|
||||
Accounts receivable
|
353
|
363
|
||||||
Inventories
|
141
|
139
|
||||||
Other assets
|
29
|
56
|
||||||
Total current assets
|
759
|
730
|
||||||
Noncurrent assets
|
||||||||
Property, plant and equipment
|
||||||||
Cost
|
739
|
727
|
||||||
Accumulated depreciation
|
408
|
403
|
||||||
Net property, plant and equipment
|
331
|
324
|
||||||
Goodwill and intangibles
|
270
|
267
|
||||||
Equity method investments
|
30
|
26
|
||||||
Deferred income taxes
|
386
|
389
|
||||||
Other assets
|
89
|
89
|
||||||
Total noncurrent assets
|
1,106
|
1,095
|
||||||
Total assets
|
$
|
1,865
|
$
|
1,825
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Short-term debt
|
$
|
75
|
$
|
-
|
||||
Current portion of long-term debt
|
15
|
19
|
||||||
Trade and other payables
|
146
|
177
|
||||||
Accrued expenses and other liabilities
|
257
|
204
|
||||||
Total current liabilities
|
493
|
400
|
||||||
Noncurrent liabilities
|
||||||||
Long-term debt
|
650
|
724
|
||||||
Employee benefit obligations
|
854
|
886
|
||||||
Deferred income taxes
|
2
|
2
|
||||||
Other liabilities
|
152
|
143
|
||||||
Total noncurrent liabilities
|
1,658
|
1,755
|
||||||
Stockholders’ (deficit) equity
|
(286
|
)
|
(330
|
)
|
||||
Total liabilities and stockholders’ (deficit) equity
|
$
|
1,865
|
$
|
1,825
|
Valvoline Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In millions - preliminary and unaudited)
|
Table 3
|
Three months ended
December 31 |
||||||||
2016
|
2015
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net income
|
$
|
72
|
$
|
65
|
||||
Adjustments to reconcile net income to cash flows from operating activities
|
||||||||
Depreciation and amortization
|
9
|
9
|
||||||
Debt issuance cost amortization
|
1
|
-
|
||||||
Equity income from affiliates
|
(4
|
)
|
(3
|
)
|
||||
Distributions from equity affiliates
|
-
|
4
|
||||||
Pension contributions
|
(3
|
)
|
(1
|
)
|
||||
Gain on pension and other postretirement plan remeasurements
|
(8
|
)
|
-
|
|||||
Stock-based compensation expense
|
1
|
-
|
||||||
Change in operating assets and liabilities (a)
|
20
|
(34
|
)
|
|||||
Total cash provided by operating activities
|
88
|
40
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Additions to property, plant and equipment
|
(9
|
)
|
(5
|
)
|
||||
Purchase of operations, net of cash acquired
|
-
|
(4
|
)
|
|||||
Other investing activities
|
(1
|
)
|
-
|
|||||
Total cash used in investing activities
|
(10
|
)
|
(9
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Net transfers to parent
|
(2
|
)
|
(31
|
)
|
||||
Proceeds from borrowings
|
75
|
-
|
||||||
Repayments on borrowings
|
(79
|
)
|
-
|
|||||
Cash dividends paid
|
(10
|
)
|
||||||
Total cash used in financing activities
|
(16
|
)
|
(31
|
)
|
||||
Effect of currency exchange rate changes on cash and cash equivalents
|
2
|
-
|
||||||
INCREASE IN CASH AND CASH EQUIVALENTS
|
64
|
-
|
||||||
Cash and cash equivalents - beginning of period
|
172
|
-
|
||||||
CASH AND CASH EQUIVALENTS - END OF PERIOD
|
$
|
236
|
$
|
-
|
(a) |
Excludes changes resulting from operations acquired or sold.
|
Valvoline Inc. and Consolidated Subsidiaries
FINANCIAL INFORMATION BY OPERATING SEGMENT
(In millions - preliminary and unaudited)
|
Table 4
|
Three Months Ended
December 31 |
||||||||||||||||||||||||||||||||
2016
|
2015
|
|||||||||||||||||||||||||||||||
Sales
|
Operating Income
|
Depreciation and amortization
|
EBITDA
|
Sales
|
Operating income
|
Depreciation and amortization
|
EBITDA
|
|||||||||||||||||||||||||
Core North America
|
$
|
237
|
$
|
51
|
$
|
3
|
$
|
54
|
$
|
241
|
$
|
53
|
$
|
4
|
$
|
57
|
||||||||||||||||
Quick Lubes
|
127
|
29
|
5
|
34
|
100
|
23
|
4
|
27
|
||||||||||||||||||||||||
International
|
125
|
20
|
1
|
21
|
115
|
16
|
1
|
17
|
||||||||||||||||||||||||
Total operating segments
|
$
|
489
|
$
|
100
|
$
|
9
|
$
|
109
|
$
|
456
|
$
|
92
|
$
|
9
|
$
|
101
|
||||||||||||||||
Unallocated and other (a)
|
20
|
20
|
4
|
4
|
||||||||||||||||||||||||||||
Total results
|
$
|
489
|
$
|
120
|
$
|
9
|
$
|
129
|
$
|
456
|
$
|
96
|
$
|
9
|
$
|
105
|
||||||||||||||||
Key items:
|
||||||||||||||||||||||||||||||||
Gains on pension and other postretirement plan remeasurements
|
(8
|
)
|
(8
|
)
|
-
|
-
|
||||||||||||||||||||||||||
Separation costs
|
6
|
6
|
-
|
-
|
||||||||||||||||||||||||||||
Adjusted results
|
$
|
489
|
$
|
118
|
$
|
9
|
$
|
127
|
$
|
456
|
$
|
96
|
$
|
9
|
$
|
105
|
Valvoline Inc. and Consolidated Subsidiaries
INFORMATION BY OPERATING SEGMENT
(In millions - preliminary and unaudited)
|
Table 5
|
Three months ended
December 31 |
||||||||
2016
|
2015
|
|||||||
CORE NORTH AMERICA
|
||||||||
Lubricant sales (gallons)
|
24.1
|
23.6
|
||||||
Premium lubricants (percent of U.S. branded volumes)
|
43.8
|
%
|
39.7
|
%
|
||||
Gross profit as a percent of sales (a)
|
40.9
|
%
|
41.4
|
%
|
||||
QUICK LUBES
|
||||||||
Lubricant sales (gallons)
|
5.3
|
4.6
|
||||||
Premium lubricants (percent of U.S. branded volumes)
|
58.6
|
%
|
55.8
|
%
|
||||
Gross profit as a percent of sales (a)
|
40.1
|
%
|
40.5
|
%
|
||||
Valvoline operated same-store sales
|
9.5
|
%
|
5.6
|
%
|
||||
Franchised same store sales
|
8.9
|
%
|
7.8
|
%
|
||||
INTERNATIONAL
|
||||||||
Lubricant sales (gallons) (b)
|
13.7
|
12.2
|
||||||
Lubricant sales (gallons), including unconsolidated joint ventures
|
23.0
|
20.3
|
||||||
Premium lubricants (percent of lubricant volumes)
|
27.4
|
%
|
28.7
|
%
|
||||
Gross profit as a percent of sales (a)
|
30.7
|
%
|
30.0
|
%
|
(a) |
Gross profit as a percent of sales is defined as sales, less cost of sales divided by sales.
|
(b) |
Excludes volumes from unconsolidated joint ventures.
|
Valvoline Inc. and Consolidated Subsidiaries
QUICK LUBES STORE INFORMATION
(Preliminary and unaudited)
|
Table 6
|
Three months ended
December 31
|
||||||||||||||||||||||||
2016
|
2015
|
|||||||||||||||||||||||
Company-owned
|
Franchise
|
Total VIOC Stores
|
Company-owned
|
Franchise
|
Total VIOC Stores
|
|||||||||||||||||||
Beginning of period
|
342
|
726
|
1,068
|
279
|
663
|
942
|
||||||||||||||||||
Opened
|
-
|
10
|
10
|
-
|
11
|
11
|
||||||||||||||||||
Acquired
|
-
|
-
|
-
|
4
|
-
|
4
|
||||||||||||||||||
Conversions between company-owned and franchise
|
5
|
(5
|
)
|
-
|
-
|
-
|
-
|
|||||||||||||||||
Closed/Relocated
|
-
|
(2
|
)
|
(2
|
)
|
(1
|
)
|
-
|
(1
|
)
|
||||||||||||||
End of period
|
347
|
729
|
1,076
|
282
|
674
|
956
|
||||||||||||||||||
December 31
2016
|
September 30
2016
|
June 30
2016
|
March 31
2016
|
December 31
2015
|
||||||||||||||||||||
Number of Express Care locations at end of period
|
353
|
347
|
341
|
340
|
331
|
Valvoline Inc. and Consolidated Subsidiaries
RECONCILIATION OF NON-GAAP DATA - NET INCOME AND DILUTED EARNINGS PER SHARE
(In millions, except per share data - preliminary and unaudited)
|
Table 7
|
Three months ended
December 31
|
||||||||
2016
|
2015
|
|||||||
OPERATING INCOME (LOSS)
|
||||||||
*Gains on pension and other postretirement plan remeasurements
|
$
|
8
|
$
|
-
|
||||
*Separation costs
|
(6
|
)
|
-
|
|||||
All other operating income
|
118
|
96
|
||||||
Operating income
|
120
|
96
|
||||||
NET INTEREST AND OTHER FINANCING EXPENSE
|
||||||||
Net interest and other financing expense
|
10
|
-
|
||||||
INCOME TAX EXPENSE
|
||||||||
Income tax expense of key items*
|
1
|
-
|
||||||
All other income tax expense
|
37
|
31
|
||||||
38
|
31
|
|||||||
NET INCOME
|
$
|
72
|
$
|
65
|
||||
BASIC AND DILUTED EARNINGS PER SHARE
|
$
|
0.35
|
$
|
0.32
|
||||
Diluted earnings per share impact from key items
|
-
|
-
|
||||||
ADJUSTED DILUTED EARNINGS PER SHARE FROM NET INCOME
|
$
|
0.35
|
$
|
0.32
|
Valvoline Inc. and Consolidated Subsidiaries
RECONCILIATION OF NON-GAAP DATA - ADJUSTED EBITDA
(In millions - preliminary and unaudited)
|
Table 8
|
Three months ended
December 31
|
||||||||
2016
|
2015
|
|||||||
Adjusted EBITDA - Valvoline
|
||||||||
Net income
|
$
|
72
|
$
|
65
|
||||
Add:
|
||||||||
Income tax expense
|
38
|
31
|
||||||
Net interest and other financing expense
|
10
|
-
|
||||||
Depreciation and amortization
|
9
|
9
|
||||||
EBITDA
|
129
|
105
|
||||||
Separation costs
|
6
|
-
|
||||||
Gains on pension and other postretirement plan remeasurements
|
(8
|
)
|
-
|
|||||
Adjusted EBITDA
|
$
|
127
|
$
|
105
|
||||
EBITDA - Core North America
|
||||||||
Operating Income
|
$
|
51
|
$
|
53
|
||||
Add:
|
||||||||
Depreciation and amortization
|
3
|
4
|
||||||
EBITDA
|
$
|
54
|
$
|
57
|
||||
EBITDA - Quick Lubes
|
||||||||
Operating Income
|
$
|
29
|
$
|
23
|
||||
Add:
|
||||||||
Depreciation and amortization
|
5
|
4
|
||||||
EBITDA
|
$
|
34
|
$
|
27
|
||||
EBITDA - International
|
||||||||
Operating Income
|
$
|
20
|
$
|
16
|
||||
Add:
|
||||||||
Depreciation and amortization
|
1
|
1
|
||||||
EBITDA
|
$
|
21
|
$
|
17
|
||||
Adjusted EBITDA - Unallocated and Other
|
||||||||
Operating Income
|
$
|
20
|
$
|
4
|
||||
Add:
|
||||||||
Depreciation and amortization
|
-
|
-
|
||||||
EBITDA
|
20
|
4
|
||||||
Separation costs
|
6
|
-
|
||||||
Gains on pension and other postretirement plan remeasurements
|
(8
|
)
|
-
|
|||||
Adjusted EBITDA
|
$
|
18
|
$
|
4
|
Valvoline Inc. and Consolidated Subsidiaries
RECONCILIATION OF NON-GAAP DATA - FREE CASH FLOW
(In millions - preliminary and unaudited)
|
Table 9
|
Three months ended
December 31
|
||||||||
Free cash flow (a)
|
2016
|
2015
|
||||||
Total cash flows provided by operating activities
|
$
|
88
|
$
|
40
|
||||
Less:
|
||||||||
Additions to property, plant and equipment
|
(9
|
)
|
(5
|
)
|
||||
Free cash flows
|
$
|
79
|
$
|
35
|