10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

______________________

FORM 10-Q

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to ___________

Commission file number 001-37884

VALVOLINE INC.

Kentucky	30-0939371
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

100 Valvoline Way

Lexington, Kentucky 40509

Telephone Number (859) 357-7777

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	VVV	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes þ     No  o

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).         Yes þ     No  o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	☑	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes  ☐    No þ

At July 30, 2019, there were 188,189,958 shares of the Registrant’s common stock outstanding.

VALVOLINE INC. AND CONSOLIDATED SUBSIDIARIES

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Condensed Consolidated Statements of Comprehensive Income	3
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Stockholders’ Deficit	5
Condensed Consolidated Statements of Cash Flows	7
Notes to Condensed Consolidated Financial Statements	8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36
ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	53
ITEM 4.   CONTROLS AND PROCEDURES	53
PART II – OTHER INFORMATION
ITEM 1.   LEGAL PROCEEDINGS	54
ITEM 1A. RISK FACTORS	54
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	55
ITEM 6.   EXHIBITS	56
SIGNATURE	57

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

	Three months ended June 30				Nine months ended June 30
(In millions, except per share data - unaudited)	2019		2018		2019		2018
Sales	$	613	$	577	$	1,761	$	1,691
Cost of sales	406		376		1,168		1,088
Gross profit	207		201		593		603
Selling, general and administrative expenses	116		110		334		328
Net legacy and separation-related (income) expenses	—		(3)		3		14
Equity and other income, net	(11)		(8)		(29)		(29)
Operating income	102		102		285		290
Net pension and other postretirement plan income	(2)		(10)		(7)		(30)
Net interest and other financing expenses	19		15		55		45
Income before income taxes	85		97		237		275
Income tax expense	20		33		56		154
Net income	$	65	$	64	$	181	$	121
NET INCOME PER SHARE
Basic	$	0.34	$	0.33	$	0.96	$	0.61
Diluted	$	0.34	$	0.33	$	0.96	$	0.61
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	189		195		189		199
Diluted	189		196		189		200
COMPREHENSIVE INCOME
Net income	$	65	$	64	$	181	$	121
Other comprehensive income (loss), net of tax
Currency translation adjustments	1		(13)		(1)		(9)
Amortization of pension and other postretirement plan prior service credit	(3)		(3)		(7)		(7)
Other comprehensive loss	(2)		(16)		(8)		(16)
Comprehensive income	$	63	$	48	$	173	$	105

See Notes to Condensed Consolidated Financial Statements.

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Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Balance Sheets

(In millions, except per share amounts - unaudited)	June 30 2019		September 30 2018
Assets
Current assets
Cash and cash equivalents	$	126	$	96
Accounts receivable, net	423		409
Inventories, net	200		176
Prepaid expenses and other current assets	52		44
Total current assets	801		725
Noncurrent assets
Property, plant and equipment, net	455		420
Goodwill and intangibles, net	490		448
Equity method investments	35		31
Deferred income taxes	113		138
Other noncurrent assets	106		92
Total noncurrent assets	1,199		1,129
Total assets	$	2,000	$	1,854
Liabilities and Stockholders’ Deficit
Current liabilities
Current portion of long-term debt	$	7	$	30
Trade and other payables	163		178
Accrued expenses and other liabilities	242		203
Total current liabilities	412		411
Noncurrent liabilities
Long-term debt	1,334		1,292
Employee benefit obligations	322		333
Other noncurrent liabilities	184		176
Total noncurrent liabilities	1,840		1,801
Commitments and contingencies
Stockholders’ deficit
Preferred stock, no par value, 40 shares authorized; no shares issued and outstanding	—		—
Common stock, par value $0.01 per share, 400 shares authorized;188 shares issued and outstanding at June 30, 2019 and September 30, 2018	2		2
Paid-in capital	13		7
Retained deficit	(291)		(399)
Accumulated other comprehensive income	24		32
Total stockholders’ deficit	(252)		(358)
Total liabilities and stockholders’ deficit	$	2,000	$	1,854

See Notes to Condensed Consolidated Financial Statements.

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Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

	Nine months ended June 30, 2019
								Accumulated other comprehensive income
(In millions, except per share amounts)	Common stock			Paid-in capital		Retained deficit
(Unaudited)	Shares	Amount								Totals
Balance at September 30, 2018	188	$	2	$	7	$	(399)	$	32	$	(358)
Net income	—	—		—		53		—		53
Dividends paid, $0.106 per common share	—	—		—		(20)		—		(20)
Stock-based compensation	—	—		1		—		—		1
Cumulative effect of adoption of new revenue standard, net of tax	—	—		—		(13)		—		(13)
Currency translation adjustments	—	—		—		—		(4)		(4)
Amortization of pension and other postretirement prior service credits in income, net of tax	—	—		—		—		(2)		(2)
Balance at December 31, 2018	188	$	2	$	8	$	(379)	$	26	$	(343)
Net income	—	—		—		63		—		63
Dividends paid, $0.106 per common share	—	—		—		(20)		—		(20)
Stock-based compensation	—	—		2		—		—		2
Currency translation adjustments	—	—		—		—		2		2
Amortization of pension and other postretirement prior service credits in income, net of tax	—	—		—		—		(2)		(2)
Balance at March 31, 2019	188	$	2	$	10	$	(336)	$	26	$	(298)
Net income	—	—		—		65		—		65
Dividends paid, $0.106 per common share	—	—		—		(20)		—		(20)
Stock-based compensation	—	—		3		—		—		3
Currency translation adjustments	—	—		—		—		1		1
Amortization of pension and other postretirement prior service credits in income, net of tax	—	—		—		—		(3)		(3)
Balance at June 30, 2019	188	$	2	$	13	$	(291)	$	24	$	(252)

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	Nine months ended June 30, 2018
								Accumulated other comprehensive income
(In millions, except per share amounts)	Common stock			Paid-in capital		Retained deficit
(Unaudited)	Shares	Amount								Totals
Balance at September 30, 2017	203	$	2	$	5	$	(167)	$	43	$	(117)
Net loss	—	—		—		(10)		—		(10)
Dividends paid, $0.0745 per common share	—	—		—		(15)		—		(15)
Stock-based compensation	—	—		2		—		—		2
Repurchases of common stock	(2)	—		—		(39)		—		(39)
Purchase of remaining ownership interest in subsidiary	—	—		(7)		(7)		—		(14)
Currency translation adjustments	—	—		—		—		1		1
Amortization of pension and other postretirement prior service credits in income, net of tax	—	—		—		—		(2)		(2)
Balance at December 31, 2017	201	$	2	$	—	$	(238)	$	42	$	(194)
Net income	—	—		—		67		—		67
Dividends paid, $0.0745 per common share	—	—		—		(15)		—		(15)
Stock-based compensation	—	—		3		(1)		—		2
Repurchases of common stock	(4)	—		—		(87)		—		(87)
Currency translation adjustments	—	—		—		—		3		3
Amortization of pension and other postretirement prior service credits in income, net of tax	—	—		—		—		(2)		(2)
Balance at March 31, 2018	197	$	2	$	3	$	(274)	$	43	$	(226)
Net income	—	—		—		64		—		64
Dividends paid, $0.0745 per common share	—	—		—		(15)		—		(15)
Stock-based compensation	—	—		3		—		—		3
Repurchases of common stock	(4)	—		—		(98)		—		(98)
Currency translation adjustments	—	—		—		—		(13)		(13)
Amortization of pension and other postretirement prior service credits in income, net of tax	—	—		—		—		(3)		(3)
Balance at June 30, 2018	193	$	2	$	6	$	(323)	$	27	$	(288)

See Notes to Condensed Consolidated Financial Statements.

6

Valvoline Inc. and Consolidated Subsidiaries

Condensed Consolidated Statements of Cash Flows

	Nine months ended June 30
(In millions - unaudited)	2019		2018
Cash flows from operating activities
Net income	$	181	$	121
Adjustments to reconcile net income to cash flows from operating activities
Depreciation and amortization	43		39
Debt issuance cost and discount amortization	2		2
Deferred income taxes	—		71
Equity income from unconsolidated affiliates, net of distributions	(4)		(4)
Pension contributions	(7)		(13)
Stock-based compensation expense	8		10
Other operating activities, net	—		(1)
Change in assets and liabilities (a)
Accounts receivable	(48)		(80)
Inventories	(11)		(23)
Payables and accrued liabilities	34		12
Other assets and liabilities	16		47
Total cash provided by operating activities	214		181
Cash flows from investing activities
Additions to property, plant and equipment	(73)		(51)
Acquisitions, net of cash acquired	(50)		(71)
Other investing activities, net	(1)		5
Total cash used in investing activities	(124)		(117)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	743		170
Repayments on borrowings	(727)		(39)
Repurchases of common stock	—		(220)
Payments for purchase of additional ownership in subsidiary	(1)		(15)
Cash dividends paid	(60)		(45)
Other financing activities	(4)		(6)
Total cash used in financing activities	(49)		(155)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	—		(3)
Increase (decrease) in cash, cash equivalents, and restricted cash	41		(94)
Cash, cash equivalents, and restricted cash - beginning of period	96		201
Cash, cash equivalents, and restricted cash - end of period	$	137	$	107

(a) Excludes changes resulting from operations acquired.

See Notes to Condensed Consolidated Financial Statements.

7

Index to Notes to Condensed Consolidated Financial Statements	Page
Note 1 - Basis of Presentation and Significant Accounting Policies	9
Note 2 - Revenue Recognition	11
Note 3 - Fair Value Measurements	18
Note 4 - Acquisitions and Divestitures	19
Note 5 - Accounts Receivable	19
Note 6 - Inventories	20
Note 7 - Goodwill and Other Intangibles	20
Note 8 - Restructuring Activities	21
Note 9 - Debt	22
Note 10 - Income Taxes	23
Note 11 - Employee Benefit Plans	24
Note 12 - Litigation, Claims and Contingencies	24
Note 13 - Earnings Per Share	25
Note 14 - Reportable Segment Information	25
Note 15 - Guarantor Financial Information	27
Note 16 - Subsequent Events	35

8

Valvoline Inc. and Consolidated Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared by Valvoline Inc. (“Valvoline” or the “Company”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Securities and Exchange Commission (“SEC”) regulations for interim financial reporting, which do not include all information and footnote disclosures normally included in annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. In the opinion of management, the assumptions underlying the condensed consolidated financial statements for these interim periods are reasonable, and all adjustments considered necessary for a fair presentation have been made and are of a normal recurring nature unless otherwise disclosed herein. The results for interim periods are not necessarily indicative of those to be expected for the entire year. Certain prior period amounts have been reclassified to conform to the current presentation.

Recent accounting pronouncements

The following standards relevant to Valvoline were either issued or adopted in the current year, or are expected to have a meaningful impact on Valvoline in future periods.

Recently adopted

In the first fiscal quarter of 2019, Valvoline adopted the following:

•In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance, which established a single comprehensive model for entities to use in accounting for revenue from contracts with customers and superseded most industry-specific revenue recognition guidance. This new guidance introduced a five-step model for revenue recognition focused on the transfer of control, as opposed to the transfer of risk and rewards under prior guidance. Valvoline adopted this new revenue recognition guidance on October 1, 2018 using the modified retrospective method applied to those contracts that were not completed at the date of adoption. Under this method, the new revenue recognition guidance has been applied prospectively from the date of adoption, while prior period financial statements continue to be reported in accordance with the previous guidance. The cumulative effect of the changes at adoption was recognized through an increase to opening retained deficit of $13 million, net of tax, related to the timing of certain sales to distributors. Revenue transactions recorded under the new guidance are substantially consistent with the treatment under prior guidance, and the impact of adoption was not material to the condensed consolidated financial statements as of and for the three and nine months ended June 30, 2019 and is not expected to be material on an ongoing basis. As part of the adoption, Valvoline modified certain control procedures and processes, none of which had a material effect on the Company’s internal control over financial reporting. Refer to Note 2 for additional information regarding Valvoline’s updated accounting policy for revenue from contracts with customers and adoption of this new guidance.

9

•In August 2016, the FASB issued new accounting guidance regarding the classification of certain cash receipts and payments in the statement of cash flows. The Company adopted the accounting guidance on October 1, 2018 using a retrospective approach and made an accounting policy election to classify distributions received from equity method investments based on the nature of the activities of the investee that generated the distribution, which is consistent with the Company’s previous classification as cash flows from operating activities. The other cash flow classification matters addressed in this guidance were either not relevant or material to Valvoline’s current activities. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Statements of Cash Flows.

•In November 2016, the FASB issued new accounting guidance, which requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Valvoline adopted this guidance retrospectively on October 1, 2018. The application of this guidance did not have a material impact on the Condensed Consolidated Statements of Cash Flows, nor did it require retrospective adjustment to the prior period financial statements as Valvoline did not have restricted cash or restricted cash equivalents in the prior periods presented. As of June 30, 2019, Valvoline had $11 million of deposits held with financial institutions, which is generally restricted for use in completing an acquisition, and is included in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet. This restricted cash has been included within the end-of-period total amounts shown within the Condensed Consolidated Statement of Cash Flows for the nine months ended June 30, 2019.

•In January 2017, the FASB issued new accounting guidance, which clarifies the definition of a business used across several areas of accounting, including the evaluation of whether a transaction should be accounted for as an acquisition (or disposal) of assets or as a business combination. The new guidance clarifies that a business must have at least one substantive process and also narrows the definition of outputs by more closely aligning with how outputs are described in the new revenue recognition standard. Valvoline adopted this guidance on October 1, 2018 with prospective application. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

•In May 2017, the FASB issued accounting guidance that amended the scope of modification accounting for share-based payment awards. The new guidance requires modification accounting if the fair value, vesting condition, or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. Valvoline adopted this guidance prospectively on October 1, 2018, and the Company did have certain modifications of share-based awards in connection with the restructuring activities described in Note 8; however, the award modifications and the adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

•In August 2018, the FASB issued new accounting guidance related to fees paid by a customer in a cloud computing arrangement, which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service arrangement with the existing capitalization guidance for implementation costs incurred to develop or obtain internal-use software. Valvoline adopted this guidance prospectively on October 1, 2018 and capitalized approximately $3 million of cloud computing arrangement implementation costs during the nine months ended June 30, 2019. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

Issued but not yet adopted

In February 2016, the FASB issued new accounting guidance, which outlines a comprehensive lease accounting model that requires lessees to recognize a right-of-use asset and a corresponding lease liability on the balance sheet. The lease liability will be measured at the present value of future lease payments, and the right-of-use asset will be measured at the lease liability amount, adjusted for prepaid lease payments, lease incentives received and the lessee’s initial direct costs (e.g., commissions). Lease expense will be recognized similar to current accounting guidance with operating leases resulting in straight-line expense and finance leases resulting in accelerated expense recognition similar to the existing accounting for capital leases.

Management will finalize its assessment and adopt the new guidance in the first fiscal quarter of 2020. This new guidance is expected to be adopted with election of the optional transition approach through recognition of the cumulative effect as an adjustment to retained deficit at adoption on October 1, 2019 without retrospective application to prior period financial statements. While the Company is finalizing its determinations, Valvoline

10

expects to elect certain practical expedients permitted by the new guidance, including the package of practical expedients that allows for previous accounting conclusions regarding lease identification and classification to be carried forward for leases which commence prior to adoption, as well as the practical expedient to not separate lease and non-lease components and account for them as a single lease component. The Company does not currently expect to elect the hindsight or short-term lease practical expedients.

The Company has made progress in its assessment and implementation efforts, including the identification and assessment of all forms of its leases, implementing an enterprise-wide lease management system, and evaluating additional changes to business processes and internal controls to ensure the reporting and disclosure requirements of the new guidance are met. At this time, the Company cannot estimate the specific quantitative impact of adopting this new guidance; however, adoption is expected to have a material impact on the Condensed Consolidated Balance Sheet as Valvoline has a significant number of operating leases, including many of its service center store locations, which will be recognized as right-of-use assets with associated lease liabilities upon adoption. The Company does not currently anticipate a material impact on the Condensed Consolidated Statements of Comprehensive Income, Cash Flows, or Stockholders’ Deficit.

NOTE 2 - REVENUE RECOGNITION

As described in Note 1, Valvoline adopted new revenue recognition accounting guidance effective October 1, 2018, and accordingly, changed its accounting policy for revenue recognition prospectively from the date of adoption as described herein.

Impacts on financial statements

The adoption of the new revenue accounting guidance did not have a significant impact on the Company’s condensed consolidated financial statements. As a result of the Company’s adoption using the modified retrospective adoption approach, the Company recorded an adjustment to its Condensed Consolidated Balance Sheet as of October 1, 2018 related to the timing of certain sales to distributors.

The following table reconciles the Condensed Consolidated Balance Sheet line items impacted by the cumulative effect of adoption of the new revenue recognition accounting guidance on October 1, 2018:

(In millions)	September 30, 2018 as reported		Adjustments		Balances at October 1, 2018
Accounts receivable, net	$	409	$	(33)	$	376
Inventories, net	$	176	$	14	$	190
Deferred income taxes	$	138	$	6	$	144
Retained deficit	$	399	$	13	$	412

Most revenue transactions and activities recorded under the new revenue recognition accounting guidance are substantially consistent with the treatment under prior guidance. The following tables summarize the impact of the new revenue accounting guidance on Valvoline’s Condensed Consolidated Balance Sheet and Condensed Consolidated Statements of Comprehensive Income as of and for the three and nine months ended June 30, 2019:

11

	June 30, 2019
Impact of Changes to Condensed Consolidated Balance Sheet	As reported		Adjustments (a)		Under prior guidance
(In millions)
Accounts receivable, net	$	423	$	37	$	460
Inventories, net	$	200	$	(15)	$	185
Deferred income taxes	$	113	$	(6)	$	107
Accrued expenses and other liabilities	$	242	$	(1)	$	241
Retained deficit	$	291	$	(15)	$	276

^(a) Adjustments include the opening retained deficit adjustments as detailed in the table above.

	Three months ended June 30, 2019
Impact of Changes to Condensed Consolidated Statement of Comprehensive Income	As reported		Adjustments		Under prior guidance
(In millions)
Sales	$	613	$	(10)	$	603
Cost of sales	406		(14)		392
Gross profit	$	207	$	4	$	211
Selling, general and administrative expenses	$	116	$	3	$	119
Equity and other income, net	$	11	$	1	$	12
Operating income	$	102	$	2	$	104
Income before income taxes	$	85	$	2	$	87
Income tax expense	$	20	$	1	$	21
Net income	$	65	$	1	$	66
Basic earnings per share	$	0.34	$	0.01	$	0.35
Diluted earnings per share	$	0.34	$	0.01	$	0.35

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	Nine months ended June 30, 2019
Impact of Changes to Condensed Consolidated Statement of Comprehensive Income	As reported		Adjustments		Under prior guidance
(In millions)
Sales	$	1,761	$	(34)	$	1,727
Cost of sales	1,168		(42)		1,126
Gross profit	$	593	$	8	$	601
Selling, general and administrative expenses	$	334	$	6	$	340
Equity and other income, net	$	29	$	1	$	30
Operating income	$	285	$	3	$	288
Income before income taxes	$	237	$	3	$	240
Income tax expense	$	56	$	1	$	57
Net income	$	181	$	2	$	183
Basic earnings per share	$	0.96	$	0.01	$	0.97
Diluted earnings per share	$	0.96	$	0.01	$	0.97

Disaggregation of revenue

The following summarizes sales by primary customer channel for the Company’s reportable segments:

(In millions)	Three months ended June 30, 2019		Nine months ended June 30, 2019
Quick Lubes
Company-owned operations	$	136	$	388
Non-company owned operations	75		212
Total Quick Lubes	211		600
Core North America
Retail	143		399
Installer and other	117		336
Total Core North America	260		735
International	142		426
Consolidated sales	$	613	$	1,761

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Sales by reportable segment disaggregated by geographic market follows for the three and nine months ended June 30, 2019:

(In millions)	Quick Lubes		Core North America		International		Totals
Three months ended
North America (a)	$	211	$	260	$	—	$	471
Europe, Middle East and Africa ("EMEA")	—		—		43		43
Asia Pacific	—		—		72		72
Latin America (a)	—		—		27		27
Total	$	211	$	260	$	142	$	613
Nine months ended
North America (a)	$	600	$	735	$	—	$	1,335
Europe, Middle East and Africa ("EMEA")	—		—		134		134
Asia Pacific	—		—		212		212
Latin America (a)	—		—		80		80
Total	$	600	$	735	$	426	$	1,761

^(a) Valvoline includes the United States and Canada in its North America region. Mexico is included within the Latin America region.

The following disaggregates the Company’s sales by timing of revenue recognized:

(In millions)	Three months ended June 30, 2019		Nine months ended June 30, 2019
Sales at a point in time	$	602	$	1,730
Franchised revenues transferred over time	11		31
Consolidated sales	$	613	$	1,761

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Nature of goods and services

Valvoline generates all operating revenues from contracts with customers, primarily as a result of the sale and service delivery of engine and automotive maintenance products to customers. Valvoline derives its sales from its broad line of products and complementary services through three principal activities managed across its three reportable segments: (i) engine and automotive maintenance products, (ii) company-owned quick-lube operations, and (iii) franchised quick-lube operations. Valvoline’s sales are generally to retail, installer, industrial, distributor, franchise, and end consumers to facilitate vehicle and equipment service and maintenance. Approximately 98% of Valvoline’s net sales are products and services sold at a point in time through either ship-and-bill performance obligations or company-owned quick lube operations. The remaining 2% of Valvoline’s net sales generally relate to franchise fees.

Revenue is recognized for the amount that reflects the consideration the Company is expected to be entitled to based on when control of the promised good or service is transferred to the customer. Revenue recognition is evaluated through the following five steps: (i) identification of the contract(s) with a customer; (ii) identification of the performance obligations in the contract(s); (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract(s); and (v) recognition of revenue when or as a performance obligation is satisfied. Below is a summary of the key considerations for Valvoline’s material revenue-generating activities:

Engine and automotive maintenance products

Engine and automotive maintenance products primarily include lubricants, antifreeze, chemicals, filters, and other complementary products for use across a wide array of vehicles and engines. The Company’s customers typically enter into a sales agreement which outlines a framework of terms and conditions that apply to all current and future purchase orders for the customer submitted under such sales agreement. In these situations, the Company’s contract with the customer is the sales agreement combined with the customer purchase order as specific products and quantities are not indicated until a purchase order is submitted. As the Company’s contract with the customer is typically for a single purchase order under the supply agreement to be delivered at a point in time, the duration of the contract is almost always one year or less. The Company’s products are distinct and separately identifiable on customer purchase orders, with each product sale representing a separate performance obligation that is generally delivered simultaneously. Valvoline is the principal to these contracts as the Company has control of the products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis.

The Company determines the point in time at which control is transferred and the performance obligation is satisfied by considering when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of the product, which generally coincides with the transfer of title and risk of loss to the customer and is typically determined based on delivery terms within the underlying contract.

Customer payment terms vary by region and customer and are generally 30 to 60 days after delivery. Valvoline does not provide extended payment terms greater than one year.

Company-owned quick-lube operations

Performance obligations related to company-owned quick-lube operations primarily include the sale of engine and automotive maintenance products and related services. These performance obligations are distinct and are delivered simultaneously at a point in time. Accordingly, revenue from company-owned quick-lube operations is recognized when payment is tendered at the point of sale, which coincides with the completion of product and service delivery and the transfer of control and benefits from the performance obligations to the customer.

Franchised quick-lube operations

The primary performance obligations related to franchised quick-lube operations include product sales as described above and the license of intellectual property, which provides access to the Valvoline brand and proprietary information to operate service center stores over the term of a franchise agreement. Other franchise performance obligations do not result in material revenue. Each performance obligation is distinct, and

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franchisees generally receive and consume the benefits provided by the Company’s performance over the course of the franchise agreement, which typically range from 10 to 15 years. Billings and payments occur monthly.

In exchange for the license of Valvoline intellectual property, franchisees generally remit initial fees upon opening a service center store and royalties at a contractual rate of the applicable service center store sales over the term of the franchise agreement. The license provides access to the intellectual property over the term of the franchise agreement and is considered a right-to-access license of symbolic intellectual property as substantially all of its utility is derived from association with the Company’s past and ongoing activities. The license granted to operate each franchised service center store is the predominant item to which the royalties relate and represents a distinct performance obligation which is recognized over time as the underlying sales occur, as this is the most appropriate measure of progress toward complete satisfaction of the performance obligation.

Variable consideration

The Company only offers an assurance-type warranty with regard to the intended functionality of products sold, which therefore, does not represent a distinct performance obligation within the context of the contract. Product returns and refunds are generally not material and are not accepted unless the item is defective as manufactured. Estimated product returns are recorded as a reduction in reported revenues at the time of sale based upon historical product return experience and is adjusted for known trends to arrive at the amount of consideration to which Valvoline expects to receive.

The nature of Valvoline’s contracts with customers often give rise to variable consideration consisting primarily of promotional rebates and customer pricing discounts based on achieving certain levels of sales activity that generally decrease the transaction price. The Company determines the transaction price as the amount of consideration it expects to be entitled to in exchange for fulfilling the performance obligations, including the effects of any variable consideration, or amounts payable to the customer when there is a basis to reasonably estimate the amount and it is probable there will not be a significant reversal. Variable consideration is recorded as a reduction of the transaction price at the time of sale and is primarily estimated utilizing the most likely amount method that is expected to be earned as the Company is able to estimate the anticipated discounts within a sufficiently narrow range of possible outcomes based on its extensive historical experience with certain customers, similar programs and management’s judgment with respect to estimating customer participation and performance levels. Variable consideration is reassessed at each reporting date and adjustments are made, when necessary.

Allocation of transaction price

In each contract with multiple performance obligations, Valvoline allocates the transaction price, including variable consideration, to each performance obligation on a relative standalone selling price basis, which is generally determined based on the directly observable data of the Company’s standalone sales of the performance obligations in similar circumstances to similar customers. In the absence of directly observable standalone prices, the Company may utilize prices charged by competitors selling similar products or use an expected cost-plus margin approach. The amount allocated to each performance obligation is recognized as revenue as control is transferred to the customer.

Contract balances

Valvoline invoices customers once or as performance obligations are satisfied, at which point payment becomes unconditional. As the majority of the Company’s performance obligations are satisfied at a point in time and customers typically do not make material payments in advance, nor does Valvoline have a right to consideration in advance of control transfer, the Company had no contract assets or contract liabilities recorded within its Condensed Consolidated Balance Sheet at adoption or as of June 30, 2019. The Company recognizes a receivable on its Condensed Consolidated Balance Sheet when the Company performs a service or transfers a product in advance of receiving consideration, and the Company’s right to consideration is unconditional and only the passage of time is required before payment of that consideration is due.

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Practical expedients and accounting policies

Valvoline elected the following practical expedients and policy elections in accordance with the new revenue recognition accounting guidance adopted beginning in fiscal 2019:

•Significant financing component – The promised amount of consideration has not been adjusted as the Company does not have significant financing arrangements with its customers. The Company expects that the period between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service will be one year or less.

•Incremental costs of obtaining a contract - The Company expenses incremental direct costs of obtaining a contract, primarily sales commissions, when incurred due to the short-term nature of individual contracts, which would result in amortization periods of one year or less. These costs are not material and are recorded in Selling, general and administrative expenses within the Condensed Consolidated Statements of Comprehensive Income.

•Shipping and handling costs - Valvoline elected to account for shipping and handling activities that occur after the customer has obtained control as fulfillment activities (i.e., an expense) rather than as a performance obligation. Accordingly, amounts billed for shipping and handling are a component of the transaction price included in net sales, while costs incurred are included in cost of sales.

•Sales and use-based taxes - Valvoline excludes from its revenue any amounts collected from customers for sales (and similar) taxes. These amounts are, however, reflected in accrued expenses until remitted to the appropriate governmental authority.

•Disclosure of remaining performance obligations - The Company elected to apply the practical expedient to omit disclosures of remaining performance obligations for contracts which have an initial expected term of one year or less. In addition, the Company has elected to not disclose remaining performance obligations for its franchise agreements with variable consideration based on service center store sales.

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NOTE 3 - FAIR VALUE MEASUREMENTS

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy as of:

(In millions)	Fair Value Hierarchy	June 30 2019		September 30 2018
Cash and cash equivalents
Money market funds	Level 1	$	3	$	5
Time deposits (a)	Level 2	34		22
Prepaid expenses and other current assets
Currency derivatives (b)	Level 2	1		1
Time deposits (a)	Level 2	1		—
Other noncurrent assets
Non-qualified trust funds	Level 1	21		25
Total assets at fair value		$	60	$	53
Accrued expenses and other liabilities
Currency derivatives (b)	Level 2	$	2	$	1
Total liabilities at fair value		$	2	$	1

(a) Time deposits with original maturities of three months or less are classified within cash equivalents and those with original maturities of one year or less are classified within Prepaid expenses and other current assets.

(b) The Company had outstanding contracts with notional values of $82 million and $74 million as of June 30, 2019 and September 30, 2018, respectively.

There have been no changes in the nature of inputs or valuation approaches relative to the Company’s financial assets and liabilities that are accounted for at fair value on a recurring basis from those as of September 30, 2018. There were no material gains or losses recognized in earnings during the three and nine months ended June 30, 2019 or 2018 related to these assets and liabilities.

Long-term debt

The fair values of the Company’s outstanding fixed rate senior notes shown in the table below are based on recent trading values, which are considered Level 2 inputs within the fair value hierarchy. Long-term debt is included in the Condensed Consolidated Balance Sheets at carrying value, rather than fair value, and is therefore excluded from the fair value table above. Carrying values shown in the following table are net of unamortized discounts and issuance costs.

	June 30, 2019						September 30, 2018
(In millions)	Fair value		Carrying value		Unamortized discount and issuance costs		Fair value		Carrying value		Unamortized discount and issuance costs
2024 Notes	$	388	$	371	$	4	$	376	$	370	$	5
2025 Notes	401		395		5		376		395		5
Total	$	789	$	766	$	9	$	752	$	765	$	10

Refer to Note 9 for more information on Valvoline’s other debt instruments that have variable interest rates, and accordingly, their carrying amounts approximate fair value.

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NOTE 4 - ACQUISITIONS AND DIVESTITURES

During the nine months ended June 30, 2019, the Company acquired 54 service center stores for $50 million. These acquisitions included 31 franchise service center stores acquired from Oil Changers Inc. on October 31, 2018, 18 service center stores acquired in single and multi-store transactions, and five former franchise service centers stores. During the nine months ended June 30, 2018, the Company acquired 63 service center stores, of which 60 were former franchise service center stores, for $71 million.

The Company’s acquisitions are accounted for such that the assets acquired and liabilities assumed are recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill. Goodwill is generally expected to be deductible for income tax purposes and is primarily attributed to the operational synergies and potential growth expected to result in economic benefits in the respective markets of the acquisitions.

A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the nine months ended June 30:

(In millions)	2019		2018
Inventories	$	—	$	1
Property, plant and equipment	3		2
Goodwill	34		42
Intangible assets (a)
Reacquired franchise rights	5		26
Customer relationships	5		—
Trademarks and trade names	1		—
Other	2		—
Net assets acquired	$	50	$	71

(a) Intangible assets acquired during the nine months ended June 30, 2019 have a weighted average amortization period of 10 years.

The fair values above are preliminary for up to one year from the date of acquisition as they are subject to measurement period adjustments as new information is obtained about facts and circumstances that existed as of the acquisition date. The Company does not currently expect any material changes to the preliminary purchase price allocations for acquisitions completed during the last twelve months.

The incremental results of operations of the acquired stores, which were not material to the Company’s consolidated results, have been included in the condensed consolidated financial statements from the date of each acquisition, and accordingly, pro forma disclosure of financial information has not been presented.

NOTE 5 - ACCOUNTS RECEIVABLE

The following summarizes Valvoline’s accounts receivable as of:

(In millions)	June 30 2019		September 30 2018
Trade	$	412	$	390
Other	16		26
Accounts receivable, gross	428		416
Allowance for doubtful accounts	(5)		(7)
Total accounts receivable, net	$	423	$	409

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During the nine months ended June 30, 2019 and 2018, Valvoline sold accounts receivable to a financial institution of $63 million and $50 million, respectively.

NOTE 6 - INVENTORIES

Inventories are primarily carried at the lower of cost or net realizable value using the weighted average cost method. In addition, certain lubricants are valued at the lower of cost or market using the last-in, first-out (“LIFO”) method.

The following summarizes Valvoline’s inventories as of:

(In millions)	June 30 2019		September 30 2018
Finished products	$	210	$	189
Raw materials, supplies and work in process	34		30
Reserve for LIFO cost valuation	(41)		(40)
Excess and obsolete inventory reserves	(3)		(3)
Total inventories, net	$	200	$	176

NOTE 7 - GOODWILL AND OTHER INTANGIBLES

Goodwill

The following table summarizes the changes in the carrying amount of goodwill by reportable segment and in total during the nine months ended June 30, 2019:

(In millions)	Quick Lubes		Core North America		International		Total
Balance at September 30, 2018	$	252	$	89	$	40	$	381
Acquisitions (a)	34		—		—		34
Balance at June 30, 2019	$	286	$	89	$	40	$	415

(a) Refer to Note 4 for details regarding acquisitions completed during the nine months ended June 30, 2019.

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Other intangible assets

Valvoline’s purchased intangible assets were specifically identified when acquired, have finite lives, and are reported in Goodwill and intangibles, net on the Condensed Consolidated Balance Sheets. The following summarizes the gross carrying amounts and accumulated amortization of the Company’s intangible assets as of:

	June 30, 2019						September 30, 2018
(In millions)	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Definite-lived intangible assets
Trademarks and trade names	$	30	$	(4)	$	26	$	29	$	(2)	$	27
Reacquired franchise rights	37		(7)		30		32		(4)		28
Customer relationships	21		(4)		17		14		(3)		11
Other intangible assets	3		(1)		2		1		—		1
Total definite-lived intangible assets	$	91	$	(16)	$	75	$	76	$	(9)	$	67

NOTE 8 - RESTRUCTURING ACTIVITIES

In the second fiscal quarter of 2019, Valvoline outlined a broad-based restructuring and cost-savings program that is expected to reduce costs, simplify processes and focus the organization’s structure and resources on key growth initiatives. Part of this program includes employee separation actions, which are expected to be generally completed by the end of 2019, with the associated termination benefits anticipated to be substantially paid by the end of 2020.

During the three and nine months ended June 30, 2019, Valvoline recognized $4 million and $10 million of expense, respectively, for employee termination benefits, which includes severance and other benefits that will be paid to employees pursuant to the restructuring program. These expenses were recognized in Selling, general and administrative expenses within the Condensed Consolidated Statements of Comprehensive Income. The Company expects that it will incur additional employee termination expenses of approximately $3 million to $5 million, primarily during the fourth fiscal quarter of 2019.

The results by segment, as disclosed in Note 14, do not include these and restructuring expenses, which is consistent with the manner by which management assesses the performance and evaluates the results of each segment. Accordingly, these expenses are included in Unallocated and other.

The following table represents the expenses recognized related to employee termination benefits during the nine months ended June 30, 2019 and the estimated remaining liability, which is included in the Condensed Consolidated Balance Sheet primarily within Accrued expenses and other liabilities:

(In millions)	Employee Termination Benefits
Balance at September 30, 2018	$	—
Expenses recognized during the period	10
Payments	(1)
Balance at June 30, 2019	$	9

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NOTE 9 - DEBT

The following table summarizes Valvoline’s total debt as of:

(In millions)	June 30 2019		September 30 2018
2025 Notes	$	400	$	400
2024 Notes	375		375
Term Loans	575		270
Revolvers	—		147
Trade Receivables Facility	—		140
Other (a)	(9)		(10)
Total debt	$	1,341	$	1,322
Current portion of long-term debt	7		30
Long-term debt	$	1,334	$	1,292

(a) Other includes debt issuance costs and discounts of $10 million and $11 million as of June 30, 2019 and September 30, 2018, respectively. In addition, Other includes $1 million of debt as of June 30, 2019 and September 30, 2018 which was primarily acquired through acquisitions.

Senior Notes

The Company’s outstanding fixed rate senior notes consist of 4.375% senior unsecured notes due 2025 with an aggregate principal amount of $400 million issued in August 2017 (the “2025 Notes”) and 5.500% senior unsecured notes due 2024 with an aggregate principal amount of $375 million issued in July 2016 (the “2024 Notes” and together with the 2025 Notes, the “Senior Notes”).

Senior Credit Agreement

In fiscal 2016, Valvoline entered into a Senior Credit Agreement (the “2016 Credit Agreement”), which provided an aggregate principal amount of $1,325 million in senior secured credit facilities, comprised of (i) a five-year $875 million term loan facility (the “2016 Term Loan”), and (ii) a five-year $450 million revolving credit facility (the “2016 Revolver”), including a $100 million letter of credit sublimit.

On April 12, 2019, Valvoline amended the 2016 Credit Agreement (the 2016 Credit Agreement, as amended, the “2019 Credit Agreement”) to extend the maturity to 2024, provide additional capacity under the revolving facility, and lower interest rates, among other modifications. This 2019 Credit Agreement provides for an aggregate principal amount of $1,050 million in senior secured credit facilities, comprised of (i) a five-year $575 million term loan facility (the “2019 Term Loan”) and (ii) a five-year $475 million revolving credit facility (the “2019 Revolver”), including a $100 million letter of credit sublimit. As a result of the amendment, the Company recognized immaterial expense related to the accelerated amortization of previously capitalized debt issuance costs, which is included in Net interest and other financing expenses in the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2019.

Prior to the amendment in fiscal 2019, the Company made payments of $15 million to the 2016 Term Loan consistent with its payment schedule and had net borrowings of $39 million under the 2016 Revolver. The 2019 Term Loan proceeds of $575 million were used to pay the outstanding principal balance of the 2016 Term Loan of $255 million, the outstanding 2016 Revolver balance of $186 million, and $120 million on the trade receivables securitization facility described below, in addition to accrued and unpaid interest and fees, as well as expenses related to the amendment. Remaining proceeds, including the remaining capacity under the 2019 Revolver, are expected to fund general corporate purposes and working capital needs. As of June 30, 2019, the total borrowing capacity remaining under the 2019 Revolver was $466 million due to a reduction of $9 million for letters of credit outstanding.

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The outstanding principal balance of the 2019 Term Loan is required to be repaid in quarterly installments of approximately $7 million beginning June 30, 2020 and approximately $14 million beginning June 30, 2021, with the balance due at maturity on April 12, 2024, and prepayment due in the amount of the net cash proceeds from certain events. Amounts outstanding under the 2019 Credit Agreement may be prepaid at any time, and from time to time, in whole or part, without premium or penalty. At Valvoline’s option, amounts outstanding under the 2019 Credit Agreement bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate fluctuates between LIBOR plus 1.375% per annum and LIBOR plus 2.000% per annum (or between the alternate base rate plus 0.375% per annum and the alternate base rate plus 1.000% per annum), based upon Valvoline’s corporate credit ratings or its consolidated net leverage ratio, whichever yields the lowest rate.

Valvoline’s existing and future subsidiaries (other than certain immaterial subsidiaries, joint ventures, special purpose financing subsidiaries, regulated subsidiaries, non-U.S. subsidiaries and certain other subsidiaries) guarantee the 2019 Credit Agreement, which is also secured by a first-priority security interest in substantially all the personal property assets, and certain real property assets, of Valvoline and the guarantors, including all or a portion of the equity interests of certain of Valvoline’s domestic subsidiaries and first-tier non-U.S. subsidiaries, and in certain cases, a portion of the equity interests of other non-U.S. subsidiaries.

The 2019 Credit Agreement contains usual and customary representations, warranties, events of default, and affirmative and negative covenants, including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as the maintenance of financial covenants as of the end of each fiscal quarter, including a maximum consolidated net leverage ratio of 4.5 and a minimum consolidated interest coverage ratio of 3.0. As of June 30, 2019, Valvoline was in compliance with all covenants under the 2019 Credit Agreement.

Trade Receivables Facility

As of June 30, 2019, there were no amounts outstanding under the $175 million trade receivables securitization facility (the “Trade Receivables Facility”), and as of September 30, 2018, there was $140 million outstanding. During the nine months ended June 30, 2019, Valvoline borrowed $82 million and made payments of $222 million, including the payment made with a portion of the proceeds from the 2019 Term Loan.

Based on the availability of eligible receivables, the full capacity of the Trade Receivables Facility was available as of June 30, 2019. The financing subsidiary owned $274 million and $275 million of outstanding accounts receivable as of June 30, 2019 and September 30, 2018, respectively, and these amounts are included in Accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.

NOTE 10 – INCOME TAXES

Income tax provisions for interim quarterly periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The following summarizes income tax expense and the effective tax rate in each interim period:

	Three months ended June 30						Nine months ended June 30
(In millions)	2019			2018			2019			2018
Income tax expense	$	20		$	33		$	56		$	154
Effective tax rate percentage	23.5		%	34.0		%	23.6		%	56.0		%

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The decreases in income tax expense and the effective tax rate from the prior year periods were principally driven by the prior year enactment of U.S. and Kentucky tax reform legislation, which resulted in the full benefit of lower corporate statutory income tax rates in fiscal 2019 and expense of approximately $6 million and $76 million recognized during the three and nine months ended June 30, 2018, respectively, primarily related to the remeasurement of net deferred tax assets at the lower corporate statutory income tax rates. Furthermore, a benefit of $5 million was recognized in the nine months ended June 30, 2019 related to the expected utilization of tax attributes as a result of the clarification of certain provisions of Kentucky tax reform legislation.

The Company finalized its provisional estimates of the impacts of U.S. tax reform legislation during the three months ended December 31, 2018, which resulted in no significant adjustments.

NOTE 11 – EMPLOYEE BENEFIT PLANS

The following table summarizes the components of pension and other postretirement benefit cost (income):

					Other postretirement benefits
	Pension benefits
(In millions)	2019		2018		2019		2018
Three months ended June 30
Service cost	$	—	$	—	$	—	$	—
Interest cost	21		19		—		—
Expected return on plan assets	(20)		(26)		—		—
Amortization of prior service credit	—		—		(3)		(3)
Net periodic benefit cost (income)	$	1	$	(7)	$	(3)	$	(3)
Nine months ended June 30
Service cost	$	1	$	1	$	—	$	—
Interest cost	61		56		1		1
Expected return on plan assets	(60)		(78)		—		—
Amortization of prior service credit	—		—		(9)		(9)
Net periodic benefit cost (income)	$	2	$	(21)	$	(8)	$	(8)

NOTE 12 – LITIGATION, CLAIMS AND CONTINGENCIES

From time to time, Valvoline is party to lawsuits, claims, and other legal proceedings that arise in the ordinary course of business. The Company establishes liabilities for the outcome of such matters where losses are determined to be probable and reasonably estimable. Where appropriate, the Company has recorded liabilities with respect to these matters, which were immaterial for the periods presented as reflected in the condensed consolidated financial statements herein. There are certain claims and legal proceedings pending where loss is not determined to be probable or reasonably estimable, and therefore, accruals have not been made. In addition, Valvoline discloses matters for which management believes a material loss is at least reasonably possible.

In all instances, management has assessed each matter based on current information available and made a judgment concerning its potential outcome, giving due consideration to the amount and nature of the claim and the probability of success. The Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable.

Although the ultimate resolution of these matters cannot be predicted with certainty and there can be no assurances that the actual amounts required to satisfy liabilities from these matters will not exceed the amounts reflected in the condensed consolidated financial statements, based on information available at this time, it is the

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opinion of management that such pending claims or proceedings will not have a material adverse effect on its condensed consolidated financial statements.

NOTE 13 - EARNINGS PER SHARE

The following table summarizes basic and diluted earnings per share for the following periods:

	Three months ended				Nine months ended
	June 30				June 30
(In millions, except per share data)	2019		2018		2019		2018
Numerator
Net income	$	65	$	64	$	181	$	121
Denominator
Weighted average common shares outstanding	189		195		189		199
Effect of potentially dilutive securities (a)	—		1		—		1
Weighted average diluted shares outstanding	189		196		189		200
Earnings per share
Basic	$	0.34	$	0.33	$	0.96	$	0.61
Diluted	$	0.34	$	0.33	$	0.96	$	0.61

(a) Approximately 1 million and 2 million outstanding stock appreciation rights were not included in the computation of diluted earnings per share because their effect would have been antidilutive for the three and nine months ended June 30, 2019, respectively.

NOTE 14 - REPORTABLE SEGMENT INFORMATION

Valvoline manages and reports within the following three segments: 

•Quick Lubes - services the passenger car and light truck quick lube market through company-owned and independent franchised retail quick lube service center stores and independent Express Care stores that service vehicles with Valvoline products, as well as through investment in a joint venture in China to pilot expansion of retail quick lube service center stores outside of North America.

•Core North America - sells engine and automotive maintenance products in the United States and Canada to retailers, installers, and heavy-duty customers to service vehicles and equipment.

•International - sells engine and automotive maintenance products in approximately 140 countries outside of the United States and Canada for the maintenance of consumer and commercial vehicles and equipment.

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker in assessing segment performance and in allocating the Company’s resources. Sales and operating income are the primary U.S. GAAP measures evaluated in assessing each reportable segment’s financial performance. Operating income by segment includes the allocation of shared corporate costs, which are allocated consistently based on each segment’s proportional contribution to various financial measures. Intersegment sales are not material, and assets are not allocated and included in the assessment of segment performance; consequently, these items are not disclosed by segment herein.

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To maintain operating focus on business performance, certain corporate and non-operational items, including restructuring and related expenses, as well as adjustments related to legacy businesses that no longer are attributed to Valvoline, are excluded from the segment operating results utilized by the chief operating decision maker in evaluating segment performance and are separately delineated within Unallocated and other to reconcile to total reported Operating income as shown in the table below.

The following table presents sales and operating income for each reportable segment:

	Three months ended				Nine months ended
(In millions)	June 30				June 30
	2019		2018		2019		2018
Sales
Quick Lubes	$	211	$	167	$	600	$	479
Core North America	260		264		735		773
International	142		146		426		439
Consolidated sales	$	613	$	577	$	1,761	$	1,691
Operating income
Quick Lubes	$	48	$	38	$	130	$	111
Core North America	38		41		109		130
International	20		20		61		63
Total operating segments	106		99		300		304
Unallocated and other (a)	(4)		3		(15)		(14)
Consolidated operating income	$	102	$	102	$	285	$	290

(a) Unallocated and other includes Legacy and separation-related expenses, net, and restructuring and related expenses.

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NOTE 15 - GUARANTOR FINANCIAL INFORMATION

The Senior Notes detailed in Note 9 are general unsecured senior obligations of Valvoline Inc. and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by the combined “Guarantor Subsidiaries.” Other subsidiaries (the “Non-Guarantor Subsidiaries”) largely represent the international operations of the Company, which do not guarantee the Senior Notes.

The following tables present, on a consolidating basis, the condensed statements of comprehensive income, condensed balance sheets, and condensed statements of cash flows for the parent issuer of these Senior Notes, the Guarantor Subsidiaries on a combined basis, the Non-Guarantor Subsidiaries on a combined basis, and the eliminations necessary to arrive at the Company’s consolidated results.

Condensed Consolidating Statements of Comprehensive Income
For the three months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	491	$	140	$	(18)	$	613
Cost of sales	—		324		100		(18)		406
Gross profit	—		167		40		—		207
Selling, general and administrative expenses	3		87		26		—		116
Net legacy and separation-related expenses	—		—		—		—		—
Equity and other (income) expenses, net	—		(16)		5		—		(11)
Operating (loss) income	(3)		96		9		—		102
Net pension and other postretirement plan income	—		(2)		—		—		(2)
Net interest and other financing expenses	17		2		—		—		19
(Loss) income before income taxes	(20)		96		9		—		85
Income tax (benefit) expense	(5)		24		1		—		20
Equity in net income of subsidiaries	(80)		(8)		—		88		—
Net income	$	65	$	80	$	8	$	(88)	$	65
Total comprehensive income	$	63	$	78	$	9	$	(87)	$	63

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Condensed Consolidating Statements of Comprehensive Income
For the three months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	456	$	137	$	(16)	$	577
Cost of sales	—		294		98		(16)		376
Gross profit	—		162		39		—		201
Selling, general and administrative expenses	3		81		26		—		110
Net legacy and separation-related income	(3)		—		—		—		(3)
Equity and other (income) expenses, net	—		(11)		3		—		(8)
Operating income	—		92		10		—		102
Net pension and other postretirement plan income	—		(10)		—		—		(10)
Net interest and other financing expenses	14		1		—		—		15
(Loss) income before income taxes	(14)		101		10		—		97
Income tax (benefit) expense	(1)		30		4		—		33
Equity in net income of subsidiaries	(77)		(6)		—		83		—
Net income	$	64	$	77	$	6	$	(83)	$	64
Total comprehensive income	$	48	$	61	$	(5)	$	(56)	$	48

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Condensed Consolidating Statements of Comprehensive Income
For the nine months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	1,396	$	415	$	(50)	$	1,761
Cost of sales	—		917		301		(50)		1,168
Gross profit	—		479		114		—		593
Selling, general and administrative expenses	8		258		68		—		334
Net legacy and separation-related expenses	3		—		—		—		3
Equity and other (income) expenses, net	—		(43)		14		—		(29)
Operating (loss) income	(11)		264		32		—		285
Net pension and other postretirement plan income	—		(7)		—		—		(7)
Net interest and other financing expenses	47		5		3		—		55
(Loss) income before income taxes	(58)		266		29		—		237
Income tax (benefit) expense	(16)		65		7		—		56
Equity in net income of subsidiaries	(223)		(22)		—		245		—
Net income	$	181	$	223	$	22	$	(245)	$	181
Total comprehensive income	$	173	$	215	$	20	$	(235)	$	173

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Condensed Consolidating Statements of Comprehensive Income
For the nine months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	1,319	$	413	$	(41)	$	1,691
Cost of sales	—		832		297		(41)		1,088
Gross profit	—		487		116		—		603
Selling, general and administrative expenses	10		247		71		—		328
Net legacy and separation-related expenses	4		10		—		—		14
Equity and other (income) expenses, net	—		(37)		8		—		(29)
Operating (loss) income	(14)		267		37		—		290
Net pension and other postretirement plan income	—		(30)		—		—		(30)
Net interest and other financing expenses	39		4		2		—		45
(Loss) income before income taxes	(53)		293		35		—		275
Income tax expense	16		128		10		—		154
Equity in net income of subsidiaries	(190)		(25)		—		215		—
Net income	$	121	$	190	$	25	$	(215)	$	121
Total comprehensive income	$	105	$	174	$	17	$	(191)	$	105

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Condensed Consolidating Balance Sheets
As of June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Assets
Current assets
Cash and cash equivalents	$	—	$	29	$	97	$	—	$	126
Accounts receivable, net	—		203		359		(139)		423
Inventories, net	—		117		83		—		200
Prepaid expenses and other current assets	1		29		22		—		52
Total current assets	1		378		561		(139)		801
Noncurrent assets
Property, plant and equipment, net	—		408		47		—		455
Goodwill and intangibles, net	—		418		72		—		490
Equity method investments	—		35		—		—		35
Investment in subsidiaries	1,158		553		—		(1,711)		—
Deferred income taxes	79		19		15		—		113
Other noncurrent assets	3		95		8		—		106
Total noncurrent assets	$	1,240	1,528		142		(1,711)		1,199
Total assets	$	1,241	$	1,906	$	703	$	(1,850)	$	2,000
Liabilities and Stockholders’ Deficit
Current liabilities
Current portion of long-term debt	$	7	$	—	$	—	$	—	$	7
Trade and other payables	97		107		98		(139)		163
Accrued expenses and other liabilities	20		188		34		—		242
Total current liabilities	124		295		132		(139)		412
Noncurrent liabilities
Long-term debt	1,333		1		—		—		1,334
Employee benefit obligations	—		305		17		—		322
Other noncurrent liabilities	36		147		1		—		184
Total noncurrent liabilities	1,369		453		18		—		1,840
Commitments and contingencies
Stockholders’ (deficit) equity	(252)		1,158		553		(1,711)		(252)
Total liabilities and stockholders’ deficit / equity	$	1,241	$	1,906	$	703	$	(1,850)	$	2,000

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Condensed Consolidating Balance Sheets
As of September 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Assets
Current assets
Cash and cash equivalents	$	—	$	20	$	76	$	—	$	96
Accounts receivable, net	—		48		480		(119)		409
Inventories, net	—		95		81		—		176
Prepaid expenses and other current assets	1		38		5		—		44
Total current assets	1		201		642		(119)		725
Noncurrent assets
Property, plant and equipment, net	—		384		36		—		420
Goodwill and intangibles, net	—		396		52		—		448
Equity method investments	—		31		—		—		31
Investment in subsidiaries	801		509		—		(1,310)		—
Deferred income taxes	62		63		13		—		138
Other noncurrent assets	2		85		5		—		92
Total noncurrent assets	865		1,468		106		(1,310)		1,129
Total assets	$	866	$	1,669	$	748	$	(1,429)	$	1,854
Liabilities and Stockholders’ Deficit
Current liabilities
Current portion of long-term debt	$	30	$	—	$	—	$	—	$	30
Trade and other payables	3		241		53		(119)		178
Accrued expenses and other liabilities	7		168		28		—		203
Total current liabilities	40		409		81		(119)		411
Noncurrent liabilities
Long-term debt	1,151		1		140		—		1,292
Employee benefit obligations	—		317		16		—		333
Other noncurrent liabilities	33		141		2		—		176
Total noncurrent liabilities	1,184		459		158		—		1,801
Commitments and contingencies
Stockholders’ (deficit) equity	(358)		801		509		(1,310)		(358)
Total liabilities and stockholders’ deficit / equity	$	866	$	1,669	$	748	$	(1,429)	$	1,854

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Condensed Consolidating Statements of Cash Flows
For the nine months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash flows (used in) provided by operating activities	$	(94)	$	98	$	210	$	—	$	214
Cash flows from investing activities
Additions to property, plant and equipment	—		(60)		(13)		—		(73)
Acquisitions, net of cash acquired	—		(28)		(22)		—		(50)
Other investing activities, net	—		1		(2)		—		(1)
Cash flows used in investing activities	—		(87)		(37)		—		(124)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	661		—		82		—		743
Repayments on borrowings	(505)		—		(222)		—		(727)
Payments for purchase of additional ownership in subsidiary	—		—		(1)		—		(1)
Cash dividends paid	(60)		—		—		—		(60)
Other financing activities	(2)		(2)		—		—		(4)
Cash flows provided by (used in) financing activities	94		(2)		(141)		—		(49)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	—		—		—		—		—
Increase in cash, cash equivalents, and restricted cash	—		9		32		—		41
Cash, cash equivalents, and restricted cash - beginning of year	—		20		76		—		96
Cash, cash equivalents, and restricted cash - end of period	$	—	$	29	$	108	$	—	$	137

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Condensed Consolidating Statements of Cash Flows
For the nine months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash flows (used in) provided by operating activities	$	(28)	$	287	$	(78)	$	—	$	181
Cash flows from investing activities
Additions to property, plant and equipment	—		(48)		(3)		—		(51)
Acquisitions, net of cash acquired	—		(71)		—		—		(71)
Other investing activities, net	—		5		—		—		5
Return of advance from subsidiary	263		—		—		(263)		—
Cash flows provided by (used in) investing activities	263		(114)		(3)		(263)		(117)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	70		—		100		—		170
Repayments on borrowings	(38)		—		(1)		—		(39)
Repurchases of common stock	(220)		—		—		—		(220)
Payments for purchase of additional ownership in subsidiary	—		—		(15)		—		(15)
Cash dividends paid	(45)		—		—		—		(45)
Other financing activities	(2)		(2)		(2)		—		(6)
Other intercompany activity, net	—		(263)		—		263		—
Total cash (used in) provided by financing activities	(235)		(265)		82		263		(155)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	—		—		(3)		—		(3)
Decrease in cash, cash equivalents and restricted cash	—		(92)		(2)		—		(94)
Cash, cash equivalents, and restricted cash - beginning of year	—		99		102		—		201
Cash, cash equivalents, and restricted cash - end of period	$	—	$	7	$	100	$	—	$	107

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NOTE 16 – SUBSEQUENT EVENTS

Acquisition activity

From July 1 through July 31, 2019, Valvoline completed four acquisitions for an aggregate purchase price of approximately $18 million. These acquisitions included three single-store acquisitions of service center stores within the Quick Lubes reportable segment and an Eastern European lubricant production company, including its manufacturing facility, within the International reportable segment. These acquisitions provide an opportunity to further grow Valvoline's Quick Lubes system of more than 500 company-owned service center stores and expand Valvoline’s presence in Eastern Europe, including additional investment in the Company’s regional European supply chain capabilities.

Dividend declared

On July 18, 2019, the Board of Directors of Valvoline declared a quarterly cash dividend of $0.106 per share of Valvoline common stock. The dividend is payable on September 16, 2019 to shareholders of record on August 30, 2019.

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FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, including estimates, projections, and statements related to the Company’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. Factors that might cause such differences include, but are not limited to, those discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures about Market Risk” in this Quarterly Report on Form 10-Q and Valvoline’s most recently filed periodic reports on Forms 10-K and 10-Q. 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.

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page
Business Overview	36
Results of Operations - Consolidated Review	39
Results of Operations - Reportable Segment Review	43
Financial Position, Liquidity and Capital Resources	48
New Accounting Pronouncements	52
Critical Accounting Policies and Estimates	52

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended September 30, 2018, as well as the Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q.

BUSINESS OVERVIEW

Valvoline Inc. (“Valvoline” or the “Company”) is a worldwide marketer and supplier of engine and automotive maintenance products and services. Established in 1866, Valvoline’s heritage spans over 150 years, during which it has developed powerful name recognition across multiple product and service channels. In addition to the iconic Valvoline-branded passenger car motor oils and other automotive lubricant products, Valvoline provides a wide array of lubricants used in heavy duty equipment, as well as automotive chemicals and fluids designed to improve engine performance and lifespan. Valvoline’s premium branded product offerings enhance its high-quality reputation and provide customers with solutions that address a wide variety of needs.

In the United States and Canada, Valvoline’s products and services are sold through more than 1,350 franchised and company-owned service center stores, to retailers with over 30,000 retail outlets, and to installer customers with over 12,000 locations. Valvoline also has a strong international presence with products sold in approximately 140 countries.

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Valvoline has three reportable segments: Quick Lubes, Core North America, and International, with certain corporate and non-operational items included in Unallocated and other to reconcile to consolidated results.

BUSINESS STRATEGY

To deliver on Valvoline’s key business and growth strategies in fiscal 2019 and beyond, the Company is focused on:

•Aggressively growing Quick Lubes through organic service center expansion and opportunistic acquisitions, while enhancing retail service capabilities through a consistent and preferred customer experience delivered by hands-on experts;

•Strengthening the foundation in Core North America by leveraging investments in technology and marketing to drive speed, efficiency and value across the business and customer interactions, while increasing penetration of Valvoline’s full product portfolio;

•Accelerating International market share growth through continued development of and investment in key emerging and high value markets where demand is growing;

•Broadening capabilities to serve future transport vehicles by developing relationships with original equipment manufacturers and leveraging innovation in the development of future products and light services in direct and adjacent markets; and

•Accelerating the shift to a services-driven business by leveraging customer relationships and experiences to develop new capabilities and expand across geographies.

THIRD FISCAL QUARTER 2019 OVERVIEW

The following were the significant events for the third fiscal quarter of 2019, each of which is discussed more fully in this Quarterly Report on Form 10-Q:

•Valvoline reported net income of $65 million and diluted earnings per share of $0.34 in the three months ended June 30, 2019. Quick Lubes had another strong quarter, Core North America improved sequentially, and International performed consistently.

•Quick Lubes delivered system-wide same-store sales growth of nearly 10% during the quarter and opened its 500th company-owned service center store and its 850th franchised service center store during the period, resulting in 198 total net new service center stores added to the system since the prior year. Service center store additions along with same-store sales growth continue to drive overall momentum in sales and earnings.

•Core North America improved performance from recent quarters, including sequential volume and sales growth from the second fiscal quarter of 2019, which reflects progress made toward addressing difficult market and competitive dynamics in the retail customer channel. Compared to the prior year quarter, volumes were lower in the retail customer channel as a result of these dynamics, and declines in the installer customer channel were primarily due to changes with certain key accounts and the timing of distributor sales. Core North America's quarterly results included unfavorable impacts related to the temporary shutdown of the Company's second largest domestic blending facility and the new revenue recognition guidance that resulted in a decline in the segment's operating income, which otherwise would have increased 5% from the prior year quarter.

•International sales and earnings decreased compared to the prior year period predominantly due to unfavorable currency movements. Continued volume gains in the EMEA region were offset by softness in Latin America and certain Asia-Pacific markets.

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•On April 12, 2019, Valvoline amended its 2016 Credit Agreement to provide additional capacity under the revolving facility, lower interest rates, and extend the maturity to 2024. Proceeds from the amendment were used to pay down balances on the 2016 Term Loan, the 2016 Revolver, and the Trade Receivables Facility, and the remaining proceeds, including the undrawn amended revolving credit facility, are primarily expected to fund general corporate purposes and working capital needs.

•Valvoline returned value to its shareholders through a $0.106 per share cash dividend paid during the quarter.

Use of Non-GAAP Measures

To aid in the understanding of Valvoline’s ongoing business performance, certain items within this document are presented on an adjusted, non-GAAP basis. These non-GAAP measures are not defined within U.S. GAAP and do not purport to be alternatives to net income/loss or cash flows from operating activities as measures of operating performance or cash flows. 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 key items, as further described below, and net pension and other postretirement plan expense/income; and

•Free cash flow, which management defines as operating cash flows less capital expenditures and certain other adjustments as applicable.

These measures are not prepared in accordance with U.S. GAAP and management believes the use of non-GAAP measures 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 and free cash flow. EBITDA, Adjusted EBITDA, and free cash flow provide a supplemental presentation of Valvoline’s operating performance. For a reconciliation of non-GAAP measures, refer to the “Results of Operations” and “Financial Position, Liquidity and Capital Resources” sections below.

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.

Management believes Adjusted EBITDA provides investors with a meaningful supplemental presentation of Valvoline’s operating performance. Adjusted EBITDA excludes the impact of the following:

•Key items - Key items consist of income or expenses associated with certain unusual, infrequent or non-operational income or expenses not directly attributable to the underlying business, which management believes impacts the comparability of operational results between periods. Key items may consist of adjustments related to: the impairment of an equity investment; legacy businesses, including the separation from Ashland and associated impacts of related indemnities; significant acquisitions or divestitures; restructuring-related matters; and other matters that are non-operational or unusual in nature. Key items are considered by management to be outside the comparable operational performance of the business and are also often related to legacy matters or market-driven events that are not directly related to the underlying business and do not have an immediate, corresponding impact on the Company’s ongoing performance. Details with respect to the composition of key items recognized during the respective periods presented herein are set forth below in the “EBITDA and Adjusted EBITDA” section of “Results of Operations” that follows.

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•Net pension and other postretirement plan expense/income - Net pension and other postretirement plan expense/income 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. Adjusted EBITDA will continue to 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 more complete picture 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 and free cash flow are not necessarily comparable with similar information for other comparable companies. EBITDA, Adjusted EBITDA and free cash flow each have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, or more meaningful than, net income and cash flows from operating activities as determined in accordance with U.S. GAAP. Because of these limitations, net income and cash flows from operating activities should primarily be relied upon as determined in accordance with U.S. GAAP, and EBITDA, Adjusted EBITDA, and free cash flow should only be used as supplements. In evaluating EBITDA, Adjusted EBITDA, and free cash flow, 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, and free cash flow. Valvoline’s presentation of EBITDA, Adjusted EBITDA, and free cash flow should not be construed as a basis to infer that Valvoline’s future results will be unaffected by unusual or nonrecurring items.

RESULTS OF OPERATIONS

Consolidated review

The following table summarizes the results of the Company’s operations:

	Three months ended June 30						Nine months ended June 30
	2019			2018			2019			2018
(In millions)			% of Sales			% of Sales			% of Sales			% of Sales
Sales	$	613	100.0%	$	577	100.0%	$	1,761	100.0%	$	1,691	100.0%
Gross profit	$	207	33.8%	$	201	34.8%	$	593	33.7%	$	603	35.7%
Net operating expenses	$	105	17.1%	$	99	17.2%	$	308	17.5%	$	313	18.5%
Operating income	$	102	16.6%	$	102	17.7%	$	285	16.2%	$	290	17.1%
Net income	$	65	10.6%	$	64	11.1%	$	181	10.3%	$	121	7.2%

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Sales

Sales for the three months ended June 30, 2019 increased $36 million, or 6%, compared to the three months ended June 30, 2018. Sales for the nine months ended June 30, 2019 increased $70 million, or 4%, compared to the nine months ended June 30, 2018. The following table provides a reconciliation of the changes:

	Year over year change		Year over year change
(In millions)	Three months ended June 30, 2019		Nine months ended June 30, 2019
Pricing	$	19	$	50
Revenue recognition adjustments	10		34
Volume	8		(7)
Product mix	5		11
Currency exchange	(8)		(25)
Acquisitions	2		7
Change in sales	$	36	$	70

Key drivers of the increase in sales for the three and nine months ended June 30, 2019 compared to the prior year periods were higher product pricing, favorable product mix, acquisitions of Quick Lubes service center stores, and the impact related to the adoption of new revenue recognition guidance, partially offset by unfavorable currency exchange. During the three months ended June 30, 2019, the effects of volume improvements in Quick Lubes more than offset declines in Core North America, favorably impacting sales during the period. For the nine months ended June 30, 2019, lubricant gallons sold decreased 2% to 132.0 million, which unfavorably impacted sales as the volume declines in Core North America and International more than offset the impact of volume gains in Quick Lubes.

The changes to reportable segment sales and the drivers thereof are discussed in further detail in the “Reportable Segment Review” section below.

Gross profit

Gross profit for the three months ended June 30, 2019 increased $6 million compared to the three months ended June 30, 2018, while gross profit decreased $10 million for the nine months ended June 30, 2019 compared to the nine months ended June 30, 2018. The table below provides a reconciliation of the changes:

	Year over year change		Year over year change
(In millions)	Three months ended June 30, 2019		Nine months ended June 30, 2019
Volume and product mix	$	10	$	2
Revenue recognition adjustments	(4)		(8)
Acquisitions	3		7
Currency exchange	(2)		(6)
Price and cost	(1)		(5)
Change in gross profit	$	6	$	(10)

The increase in gross profit for the three months ended June 30, 2019 compared to the prior year period was driven by favorable changes in volume and product mix, as well as the addition of acquired Quick Lubes service center stores. The benefit of volume improvements in Quick Lubes and broad premium product mix increases

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more than offset the volume declines in Core North America and International during the nine months ended June 30, 2019, leading to a favorable volume and mix impact on gross profit. Offsetting these favorable impacts were decreases in gross profit related to the adoption of new revenue recognition guidance, currency exchange due to the strong U.S. dollar, and costs in excess of price, which included incremental costs related to the temporary shutdown of the Company's second largest domestic blending facility due to a fire at a nearby third-party petrochemical terminal. In the three months ended June 30, 2019, these unfavorable impacts partially offset the favorable effects, while they more than offset the increases in the nine months ended June 30, 2019.

The Valvoline blending facility in Texas that was temporarily shut down near the end of the second fiscal quarter of 2019, due to a nearby third-party fire and resulting chemical releases, sustained no damage, reopened and resumed operations in late April 2019. The Company quickly addressed the shutdown by utilizing its supply chain to shift production and minimize business impacts in order to fulfill customer orders timely. These actions resulted in incremental expenses of $5 million and $6 million during the three and nine months ended June 30, 2019, respectively. Management is pursuing insurance recoveries related to the business interruption and does not expect material incremental costs to be incurred in the fourth fiscal quarter of 2019.

The decreases in gross profit margin year-over-year were largely due to certain reclassifications related to the adoption of new revenue recognition guidance, the incremental business interruption expenses related to the temporary shutdown of the blending facility, and the dilutive effect of the pass through of raw materials cost. These unfavorable impacts more than offset improvements driven by product mix, acquisitions and currency exchange.

The changes to reportable segment gross profit and the drivers thereof are discussed in further detail in the “Reportable Segment Review” section below.

Net operating expenses

The table below provides details of the components of net operating expenses:

	Three months ended June 30								Nine months ended June 30
	2019				2018				2019				2018
(In millions)			% of Sales				% of Sales				% of Sales				% of Sales
Selling, general and administrative expenses	$	116	18.9	%	$	110	19.1	%	$	334	19.0	%	$	328	19.4	%
Net legacy and separation-related (income) expenses	—		—	%	(3)		(0.5)	%	3		0.2	%	14		0.8	%
Equity and other income, net	(11)		(1.8)	%	(8)		(1.4)	%	(29)		(1.7)	%	(29)		(1.7)	%
Net operating expenses	$	105	17.1	%	$	99	17.2	%	$	308	17.5	%	$	313	18.5	%

Selling, general and administrative expenses increased $6 million in both the three and nine months ended June 30, 2019 compared to the prior year periods. These increases were largely driven by restructuring and related expenses of $4 million and $12 million recognized during the three and nine months ended June 30, 2019, respectively. In addition, acquisitions, marketing and advertising, as well as depreciation and amortization contributed to the increase in each period. During the three and nine months ended June 30, 2019, these increases were partially offset by the favorable impacts of currency exchange and certain reclassifications related to the adoption of new revenue recognition guidance in fiscal 2019. These increases were further offset by declines in employee-related costs in the nine months ended June 30, 2019.

Net legacy and separation-related income decreased $3 million for the three months ended June 30, 2019 and net expenses decreased $11 million for the nine months ended June 30, 2019 compared to the prior year periods. These changes were largely related to the effects of the enactment of U.S. and Kentucky tax reform in fiscal 2018,

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which drove adjustments to the estimated indemnities due under the Tax Matters Agreement. Furthermore, the decrease in net expenses for the nine months ended June 30, 2019 is related to a decline due to a legacy multiemployer pension plan partial withdrawal assessment recognized in the prior year period.

Equity and other income, net increased $3 million and was flat in the three and nine months ended June 30, 2019, respectively, compared to the prior year periods. Increases in the three and nine months ended June 30, 2019 compared to the prior year were primarily related to other income for fees associated with the termination of certain contracts and an incentive received for operating in a free-trade zone outside the U.S. In the nine months ended June 30, 2019, these increases, coupled with additional free-trade zone incentives received earlier in the fiscal year, were offset by a decrease in other income related to a gain recognized in the prior year due to the sale of two Quick Lubes stores and lower equity income as a result of reduced volumes from unconsolidated subsidiaries during the first half of fiscal 2019.

Net pension and other postretirement plan income

Net pension and other postretirement plan income for the three and nine months ended June 30, 2019 decreased $8 million and $23 million, respectively, from the prior year periods. These decreases were due to pension de-risking actions the Company began taking in fiscal 2017 to shift the U.S. qualified plan’s target asset allocation toward more fixed income securities and better match the asset duration to that of the pension plan obligations, which resulted in a lower expected return on plan assets and a decrease in related recurring non-service income.

Net interest and other financing expense

Net interest and other financing expense increased by $4 million and $10 million during the three and nine months ended June 30, 2019, respectively, compared to the prior year periods. These changes were generally attributed to increased borrowing transactions during the current year, including the amendment of the 2016 Credit Agreement, which resulted in additional expenses associated with executing the transaction and higher outstanding debt.

Income tax expense

The following summarizes income tax expense and the effective tax rate in each interim period:

	Three months ended June 30						Nine months ended June 30
(In millions)	2019			2018			2019			2018
Income tax expense	$	20		$	33		$	56		$	154
Effective tax rate percentage	23.5		%	34.0		%	23.6		%	56.0		%

The decreases in income tax expense and the effective tax rate from the prior year periods were principally driven by the prior year enactment of U.S. and Kentucky tax reform legislation, which resulted in the full benefit of lower corporate statutory income tax rates in fiscal 2019 and expense of approximately $6 million and $76 million recognized during the three and nine months ended June 30, 2018, respectively, primarily related to the remeasurement of net deferred tax assets at the lower corporate statutory income tax rates. Furthermore, a $5 million benefit was recognized in the nine months ended June 30, 2019 related to the expected utilization of tax attributes as a result of the clarification of certain provisions of Kentucky tax reform legislation.

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EBITDA and Adjusted EBITDA

The following table reconciles net income to EBITDA and Adjusted EBITDA:

	Three months ended				Nine months ended
	June 30				June 30
(In millions)	2019		2018		2019		2018
Net income	$	65	$	64	$	181	$	121
Income tax expense	20		33		56		154
Net interest and other financing expenses	19		15		55		45
Depreciation and amortization	15		14		43		39
EBITDA	119		126		335		359
Net pension and other postretirement plan income (a)	(2)		(10)		(7)		(30)
Net legacy and separation-related (income) expenses	—		(3)		3		14
Restructuring and related expenses	4		—		12		—
Business interruption expenses	5		—		6		—
Acquisition-related foreign currency exchange loss	—		2		—		2
Adjusted EBITDA	$	126	$	115	$	349	$	345

(a) Net pension and other postretirement plan income includes remeasurement gains and losses, when applicable, and recurring non-service pension and other postretirement net periodic income, which consists of interest cost, expected return on plan assets and amortization of prior service credit. Refer to Note 11 in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q for further details.

The increase in adjusted EBITDA of $11 million and $4 million for the three and nine months ended June 30, 2019, respectively, from the prior year periods was driven by the performance of the Quick Lubes reportable segment and its system-wide same-store sales growth from an increase in both transactions and average ticket. For the nine months ended June 30, 2019, the strong performance of the Quick Lubes reportable segment more than offset declines in the Core North America and International reportable segments. The declines in Core North America were primarily a result of volume challenges within the retail customer channel, while decreases in International were generally related to volume declines in many regions outside of EMEA.

Reportable segment review

Valvoline’s business is managed within the following three reportable segments:

•Quick Lubes - services the passenger car and light truck quick lube market through company-owned and independent franchised retail quick lube service center stores and independent Express Care stores that service vehicles with Valvoline products, as well as through investment in a joint venture in China to pilot expansion of retail quick lube service center stores outside of North America.

•Core North America - sells engine and automotive maintenance products in the United States and Canada to retailers, installers, and heavy-duty customers to service vehicles and equipment.

•International - sells engine and automotive maintenance products in approximately 140 countries outside of the United States and Canada for the maintenance of consumer and commercial vehicles and equipment.

Valvoline’s reportable segments are measured for profitability based on operating income; therefore, Valvoline does not generally allocate items to each reportable segment below operating income, such as net pension and other postretirement plan income, interest expense, or income tax expense. Operating income by segment includes the allocation of shared corporate costs, which are allocated consistently based on each segment’s proportional contribution to various financial measures. Valvoline does not allocate certain significant corporate

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and non-operational matters, including, but not limited to, company-wide restructuring activities and costs or adjustments that relate to former businesses that Valvoline no longer operates. These matters are attributed to Unallocated and other. Results of Valvoline’s reportable segments are presented based on how operations are managed internally, including how the results are reviewed by the chief operating decision maker. The structure and practices are specific to Valvoline; therefore, the financial results of its reportable segments are not necessarily comparable with similar information for other comparable companies.

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The following table presents sales, operating income and statistical operating information by reportable segment:

	Three months ended June 30						Nine months ended June 30
(In millions)	2019			2018			2019			2018
Sales
Quick Lubes	$	211		$	167		$	600		$	479
Core North America	260			264			735			773
International	142			146			426			439
Consolidated sales	$	613		$	577		$	1,761		$	1,691
Operating income
Quick Lubes	$	48		$	38		$	130		$	111
Core North America	38			41			109			130
International	20			20			61			63
Total operating segments	106			99			300			304
Unallocated and other	(4)			3			(15)			(14)
Consolidated operating income	$	102		$	102		$	285		$	290
Depreciation and amortization
Quick Lubes	$	9		$	7		$	26		$	21
Core North America	5			5			13			13
International	1			2			4			5
Consolidated depreciation and amortization	$	15		$	14		$	43		$	39
Operating information
Quick Lubes
Lubricant sales gallons	7.2			6.2			20.7			17.8
Premium lubricants (percent of U.S. branded volumes)	65.5		%	63.0		%	64.6		%	62.2		%
Gross profit as a percent of sales (a)	39.1		%	40.5		%	39.0		%	40.4		%
Core North America
Lubricant sales gallons	24.1			25.5			68.2			73.9
Premium lubricants (percent of U.S. branded volumes)	53.1		%	49.7		%	52.2		%	49.1		%
Gross profit as a percent of sales (a)	32.5		%	34.4		%	32.8		%	36.5		%
International
Lubricant sales gallons (b)	14.3			14.3			43.1			43.6
Lubricant sales gallons, including unconsolidated joint ventures	25.2			24.7			74.3			74.4
Premium lubricants (percent of lubricant volumes)	29.0		%	26.9		%	28.6		%	26.9		%
Gross profit as a percent of sales (a)	28.4		%	29.3		%	27.8		%	29.0		%

(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.

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Quick Lubes

Quick Lubes sales are influenced by the number of service center stores and the business performance of those stores. The following tables provide supplemental information regarding company-owned and franchised stores that Valvoline believes is relevant to an understanding of the Quick Lubes business and its performance.

		Company-owned
		Third Quarter 2019	Second Quarter 2019	First Quarter 2019	Fourth Quarter 2018	Third Quarter 2018
Beginning of period		483	471	462	451	445
	Opened	4	7	5	11	4
	Acquired	13	5	—	—	1
	Net conversions between company-owned and franchised	1	—	4	—	1
	Closed	—	—	—	—	—
End of period		501	483	471	462	451
		Franchised
		Third Quarter 2019	Second Quarter 2019	First Quarter 2019	Fourth Quarter 2018	Third Quarter 2018
Beginning of period		844	830	780	703	696
	Opened	11	15	24	5	10
	Acquired	—	—	31	73	—
	Net conversions between company-owned and franchised	(1)	—	(4)	—	(1)
	Closed	(3)	(1)	(1)	(1)	(2)
End of period		851	844	830	780	703
Total stores		1,352	1,327	1,301	1,242	1,154

The year over year change resulted in 198 net new company-owned and franchised stores as a result of 76 net openings and 122 acquired stores. Service center store growth was primarily related to the Company’s expansion into Canada with the acquisition of franchised service center stores from Great Canadian Oil Change and Oil Changers, as well as new company-owned service center store openings and franchisee expansion in key markets.

	Three months ended				Nine months ended
	June 30				June 30
	2019		2018		2019		2018
Same-store sales growth** - Company-owned	9.2	%	8.7	%	9.7	%	9.3	%
Same-store sales growth** - Franchised*	10.0	%	7.4	%	10.3	%	8.0	%
Same-store sales growth** - Combined*	9.7	%	7.9	%	10.1	%	8.5	%

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

** Valvoline determines same-store sales growth on a fiscal year basis, with new stores excluded from the metric until the completion of their first full fiscal year in operation.

Quick Lubes sales increased $44 million, or 26%, during the current quarter compared to the prior year quarter. Sales increased $121 million, or 25%, during the nine months ended June 30, 2019 compared to the prior year period. Volume growth increased sales by approximately $13 million and $41 million for the three and nine months ended June 30, 2019, respectively. Volume growth was driven by the increase in transactions primarily attributed

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to the Company’s marketing efforts, effective service delivery, and organic service center store growth. Implemented pricing actions, increases in premium mix, and increases in non-oil change services, led to higher average ticket, and combined to increase sales by $15 million and $34 million for the three and nine months ended June 30, 2019, respectively. The impact of the adoption of new revenue recognition guidance increased sales by $9 million and $26 million for the three and nine months ended June 30, 2019, respectively, while acquisitions increased sales by $7 million and $20 million for the three and nine months ended June 30, 2019, respectively.

Gross profit increased $14 million and $40 million for the three and nine months ended June 30, 2019, respectively, primarily due an increase in both transactions and average ticket. Increases in volumes and mix improvements combined to increase gross profit by $10 million and $23 million for the three and nine months ended June 30, 2019, respectively. Favorable pricing in excess of cost increased gross profit by $6 million for the nine months ended June 30, 2019, while acquisitions increased gross profit by $4 million and $10 million for the three and nine months ended June 30, 2019, respectively. Adoption of the new revenue recognition guidance impacted gross profit favorably by approximately $1 million for the nine months ended June 30, 2019. Gross profit margin decreased 1.4% during each of the three and nine months ended June 30, 2019 compared to the prior periods primarily resulting from the reclassification of certain costs in connection with adoption of new revenue recognition guidance.

Selling, general and administrative expenses, which includes the allocation of shared costs, increased $6 million and $19 million for the three and nine months ended June 30, 2019, respectively. These increases were primarily the result of a higher allocation of shared costs and increased operating expenses, including costs associated with acquisitions and advertising.

Equity and other income for the Quick Lubes segment in the three and nine months ended June 30, 2019 included $2 million from contract termination fees associated with certain Express Care stores, which was partially offset by a decrease in other income related to reclassifications in connection with the adoption of new revenue recognition guidance. These impacts were offset by reductions in other income in the current year-to-date as the prior year period included a $3 million gain related to the sale of two service center stores.

Core North America

Core North America sales decreased $4 million, or 2%, during the current quarter compared to the prior year quarter. During the nine months ended June 30, 2019, sales decreased $38 million, or 5% compared to the prior year period. These decreases in sales were largely driven by volume decreases of $5 million and $43 million for the three and nine months ended June 30, 2019, respectively, primarily due to ongoing competitive pressures in the retail automotive lubricant market and lower volumes in the installer customer channel from a key account that was in reorganization proceedings and the timing of certain distributor sales. The shift of Great Canadian Oil Change product sales to the Quick Lubes reportable segment also negatively impacted Core North America sales for the three and nine months ended June 30, 2019 by approximately $5 million and $13 million, respectively. Partially offsetting these declines were favorable pricing and premium product mix of $4 million and $10 million for the three and nine months ended June 30, 2019, respectively, and an increase related to adoption of new revenue recognition guidance of approximately $1 million and $8 million for the three and nine months ended June 30, 2019, respectively.

Gross profit decreased $6 million and $41 million for the three and nine months ended June 30, 2019, respectively, compared to the prior year periods. The adoption of new revenue recognition guidance resulted in certain reclassifications and impacted the timing of certain distributor sales, which decreased gross profit by approximately $4 million and $9 million for the three and nine months ended June 30, 2019, respectively. Volume declines, which included the shift of Great Canadian Oil Change to Quick Lubes, impacted gross profit by approximately $1 million and $22 million for the three and nine months ended June 30, 2019, respectively. Also negatively impacting gross profit during the three and nine months ended June 30, 2019 were costs in excess of pricing of $1 million and $10 million, respectively. These costs included $3 million and $4 million related to the recent temporary shutdown of the Company’s second largest domestic blending facility due to the fire at a nearby

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third-party petrochemical terminal for the three and nine months ended June 30, 2019, respectively. Gross profit margin decreased 1.9% and 3.7% for the three and nine months ended June 30, 2019, respectively, compared to the prior year periods. These declines were primarily the result of incremental business interruption expenses related to the temporary shutdown of the blending facility, the impact related to the adoption of new revenue recognition guidance, and the dilutive impact on margin rate of passing through cost increases. In the three months ended June 30, 2019, these declines were partially offset by improvements in product mix and pricing.

Selling, general and administrative expenses, which includes the allocation of shared costs, decreased $4 million and $20 million during the three and nine months ended June 30, 2019, respectively. These decreases were a result of lower allocated shared costs and reduced operating expenses of $1 million and $13 million, as well as reclassifications related to the adoption of new revenue recognition guidance of $3 million and $7 million during the three and nine months ended June 30, 2019, respectively.

International

International sales decreased $4 million, or 3%, during the current quarter compared to the prior year quarter. Sales decreased $13 million, or 3%, during the nine months ended June 30, 2019 compared to the prior year period. The decline in sales was largely attributable to unfavorable currency exchange of $8 million and $24 million for the three and nine months ended June 30, 2019, respectively. This reduction was partially offset by favorable pricing and product mix to increase sales by approximately $4 million and $16 million for the three and nine months ended June 30, 2019, respectively. For the three months ended June 30, 2019, volumes were flat compared to the prior year. The EMEA region had solid growth, with increased volumes of 9% in Europe attributed to ongoing channel development, which was offset by declines in Latin America and certain Asia Pacific markets primarily driven by a slower heavy-duty aftermarket in China. For the nine months ended June 30, 2019, volumes were down approximately 1% compared to the prior year period and reduced sales by $5 million.

Gross profit decreased by $2 million and $9 million for the three and nine months ended June 30, 2019, respectively. These decreases were primarily related to unfavorable currency exchange of $2 million and $6 million for the three and nine months ended June 30, 2019, respectively. During the three and nine months ended June 30, 2019, incremental costs of $2 million were recognized related to the temporary shutdown of the Company’s second largest domestic blending facility due to the fire and resulting chemical releases at a nearby third-party petrochemical terminal. Improvements in product and geographic mix offset these costs in the three months ended June 30, 2019, while these costs were coupled with lower volumes and partially offset by favorable product and geographic mix in the nine months ended June 30, 2019, and resulted in an unfavorable gross profit impact of $3 million. Gross profit margin decreased 0.9% and 1.2% for the three and nine months ended June 30, 2019, respectively, primarily related to the incremental business interruption expenses related to the temporary shutdown of the blending facility and the dilutive impact on margin rate of passing through cost increases.

Selling, general and administrative expenses, which include the allocation of shared costs, were flat during the three months ended June 30, 2019 and decreased $5 million for the nine months ended June 30, 2019. The decrease during the nine months ended June 30, 2019 was generally related to lower operating expenses, including a decline in compensation-related costs, and favorable currency exchange.

Equity and other income increased during the three and nine months ended June 30, 2019 primarily due to incentives received for operating in a free-trade zone and income from unconsolidated subsidiaries. In the nine months ended June 30, 2019, these increases were partially offset by lower equity income due to decreased volumes from unconsolidated subsidiaries during the first half of fiscal 2019.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Overview

The Company closely manages its liquidity and capital resources. Valvoline’s liquidity requirements depend on key variables, including the level of investment needed to support business strategies, the performance of the

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business, capital expenditures, borrowing arrangements, and working capital management. Capital expenditures, acquisitions, share repurchases, and dividend payments are components of the Company’s cash flow and capital management strategy, which to a large extent, can be adjusted in response to economic and other changes in the business environment. The Company has a disciplined approach to capital allocation, which focuses on investing in key priorities that support Valvoline’s business and growth strategies and returning capital to shareholders, while funding ongoing operations.

As of June 30, 2019, the Company had $137 million in cash, cash equivalents, and restricted cash, of which approximately $108 million was held by Valvoline’s non-U.S. subsidiaries and included $11 million restricted primarily for use in completing an acquisition. The Company utilizes a variety of strategies to deploy available cash in locations where it is needed. As a result of U.S. tax reform legislation, which provides the opportunity to mobilize cash with lower tax consequences, the Company does not indefinitely reinvest non-U.S. current and undistributed earnings. Withholding taxes are provided for within the income tax provision in the same period such earnings are generated. Certain other outside basis differences restricted by regulations, operational, or investing needs for non-U.S. subsidiaries remain indefinitely reinvested.

Cash flows

Valvoline’s cash flows as reflected in the Condensed Consolidated Statements of Cash Flows are summarized as follows for the nine months ended June 30:

(In millions)	2019		2018
Cash provided by (used in):
Operating activities	$	214	$	181
Investing activities	(124)		(117)
Financing activities	(49)		(155)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	—		(3)
Increase (decrease) in cash, cash equivalents, and restricted cash	$	41	$	(94)

Operating activities

The increase in cash flows provided by operating activities for the nine months ended June 30, 2019 compared to the prior year period was primarily due to increased cash earnings driven by the mix shift to a higher proportion of Quick Lubes retail sales. Cash flows from operating activities in fiscal 2019 also included $13 million in additional sales of certain customer accounts receivable.

Investing activities

Increases in capital expenditures for company-owned quick lube new store openings and the Company’s first blending and packaging plant in China were generally offset by lower cash consideration paid for acquisitions in the current year. Accordingly, the increase in cash flows used in investing activities for the nine months ended June 30, 2019 compared to the prior year was primarily due to lower proceeds related to the prior year sale of two Quick Lubes service center locations and the current year investment in a joint venture in China to pilot expansion of retail quick lube service center stores outside of North America.

From July 1 through July 31, 2019, Valvoline completed four acquisitions for an aggregate purchase price of approximately $18 million. These acquisitions included three single-store acquisitions of service center stores within the Quick Lubes reportable segment and an Eastern European lubricant production company, including its manufacturing facility, within the International reportable segment. These acquisitions provide an opportunity to further expand Valvoline’s presence, both in Quick Lubes and in Eastern Europe, including additional investment in the Company’s regional European supply chain capabilities.

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Financing activities

The decrease in cash flows used in financing activities for the nine months ended June 30, 2019 compared to the prior year period was primarily driven by decreased share repurchase activity of $220 million and lower payments of $14 million related to the purchase of the remaining ownership interest in a consolidated subsidiary, which were partially offset by lower net proceeds from borrowings of $115 million and higher dividend payments of $15 million due to the increase in the quarterly dividend in fiscal 2019.

Free cash flow and other liquidity information

The following table sets forth free cash flow and reconciles cash flows from operating activities to free cash flow. As previously noted, free cash flow has certain limitations, including that it does not reflect adjustments for certain non-discretionary cash flows, such as mandatory debt repayments. Refer to the “Use of Non-GAAP Measures” section included above in this Item 2 for additional information.

	Nine months ended June 30
(In millions)	2019		2018
Cash flows provided by operating activities	$	214	$	181
Additions to property, plant and equipment	(73)		(51)
Free cash flow	$	141	$	130

As of June 30, 2019, working capital (current assets minus current liabilities, excluding long-term debt due within one year) was $396 million compared to $344 million as of September 30, 2018. Liquid assets (cash, cash equivalents, and accounts receivable) were 133% of current liabilities as of June 30, 2019 and 123% as of September 30, 2018. The increase in working capital is primarily related to the timing of certain cash receipts and payments since year-end, in addition to increases in inventories, partially offset by an increase in accrued expenses and other liabilities.

Debt

On April 12, 2019, Valvoline amended the 2016 Credit Agreement to extend the maturity to 2024, provide additional capacity under the revolving facility, and lower interest rates. Outside of the amendment, during the nine months ended June 30, 2019, Valvoline made net repayments of $20 million under the Trade Receivables Facility, payments of $15 million to the 2016 Term Loan consistent with its payment schedule, and net borrowings of $39 million under the 2016 Revolver. The 2019 Term Loan proceeds of $575 million were used to pay the outstanding principal balance of the 2016 Term Loan of $255 million, the outstanding 2016 Revolver balance of $186 million, and $120 million on the Trade Receivables Facility, in addition to accrued and unpaid interest and fees, as well as expenses related to the amendment. Remaining proceeds from the amendment, including the 2019 Revolver capacity, are expected to fund general corporate purposes and working capital needs. Refer to Note 9 in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q for further details regarding the amendment.

As of June 30, 2019 and September 30, 2018, the Company had long-term debt (including the current portion and debt issuance costs and discounts) of $1.3 billion of loans and revolving facilities. Approximately 58% of Valvoline’s outstanding borrowings as of June 30, 2019 had fixed rates, with the remainder bearing variable interest rates. As of June 30, 2019, Valvoline was in compliance with all covenants of its debt obligations and had $641 million of remaining borrowing capacity under its revolving facilities.

Dividend payments

During the nine months ended June 30, 2019, the Company paid $60 million of cash dividends for $0.318 per common share. On July 18, 2019, the Board of Directors of Valvoline declared a quarterly cash dividend of $0.106

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per share of Valvoline common stock, which is payable on September 16, 2019 to shareholders of record on August 30, 2019. Future declarations of quarterly dividends are subject to approval by the Board of Directors and may be adjusted as business needs or market conditions change.

Restructuring and related expenses

In the second fiscal quarter of 2019, the Company outlined a broad-based restructuring and cost-savings program that is expected to reduce costs, simplify processes and focus the organization’s structure and resources on key growth initiatives. The Company’s restructuring and cost-savings actions continue to progress, and Valvoline expects such actions will be largely implemented by the end of 2019. Part of this program includes employee separation actions, which are also expected to be generally completed by the end of 2019, with the associated termination benefits anticipated to be substantially paid by the end of 2020.

As a result of this restructuring program, Valvoline recognized $4 million and $12 million of restructuring and related expenses during the three and nine months ended June 30, 2019, respectively. The Company expects that it will incur additional restructuring expenses of approximately $3 million to $5 million, primarily during the fourth fiscal quarter of 2019. Restructuring expenses include employee severance and termination benefits that will be paid to employees pursuant to the restructuring program. Restructuring-related expenses consist of those costs which are beyond those normally included in restructuring and incremental to the Company’s normal operating costs. These restructuring-related costs are expensed as incurred and are primarily related to third-party professional service fees incurred in connection with execution of the restructuring program.

Restructuring and related expenses are recorded in Selling, general and administrative expenses within the Company’s Condensed Consolidated Statements of Comprehensive Income as follows:

	Three months ended		Nine months ended
(In millions)	June 30, 2019		June 30, 2019
Restructuring expenses	$	4	$	10
Restructuring-related expenses	—		2
Total restructuring and related expenses	$	4	$	12

Results by segment do not include these restructuring and related expenses, which is consistent with the manner by which management assesses the performance and evaluates the results of each segment. Accordingly, these expenses were included in Unallocated and other.

Valvoline’s restructuring actions remain on track and are expected to generate annualized pre-tax savings of approximately $40 million to $50 million with modest benefits expected to begin to be realized in late fiscal 2019 and full savings expected to be delivered by the end of fiscal 2020. The ongoing annual savings are anticipated to benefit operating expenses, including Cost of sales and Selling, general and administrative expenses within the Condensed Consolidated Statements of Comprehensive Income, with a portion expected to be reinvested in the business to provide flexibility to address the ongoing market dynamics in Core North America and to invest in growth opportunities.

Refer to Note 8 in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q for additional details regarding this restructuring program.

Off-balance sheet arrangements and contractual obligations

Other than the matters disclosed in this Quarterly Report on Form 10-Q and in the ordinary course of business since the end of fiscal 2018, there have been no material changes in the Company’s contractual obligations.

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Summary

As of June 30, 2019, cash, cash equivalents, and restricted cash totaled $137 million and total debt was $1.3 billion. Valvoline’s ability to generate positive cash flows from operations is dependent on general economic conditions, the competitive environment in the industry, and is subject to the business and other risk factors described in Item 1A of Part II of this Quarterly Report on Form 10-Q and Item 1A of Part I of the Annual Report on Form 10-K for the year ended September 30, 2018. If the Company is unable to generate sufficient cash flows from operations, or otherwise comply with the terms of its credit facilities, Valvoline may be required to seek additional financing alternatives. The Company’s total remaining borrowing capacity was $641 million as of June 30, 2019.

Management believes that the Company has sufficient liquidity based on its current cash position, cash generated from business operations, and existing financing to meet its required pension and other postretirement plan contributions, debt servicing obligations, tax-related and other contractual commitments, and operating requirements for the next twelve months.

NEW ACCOUNTING PRONOUNCEMENTS

For a discussion and analysis of recently issued accounting pronouncements and the impacts on Valvoline, refer to Note 1 in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s critical accounting policies and estimates are discussed in detail in Item 7 of Part II in Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018. As described in Note 1 of the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q, the Company adopted various new accounting pronouncements effective October 1, 2018, most notably, the new revenue recognition accounting guidance. Refer to Note 2 of the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q for further discussion related to the new revenue recognition accounting policies.

Management reassessed the critical accounting policies as disclosed in the Annual Report on Form 10-K and determined that, other than the new revenue recognition accounting policies, there were no other changes to critical accounting policies and estimates in the nine months ended June 30, 2019.

52

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risks are discussed in detail in Item 7A of Part II in Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018. Management reassessed the quantitative and qualitative market risk disclosures as described in the Annual Report on Form 10-K and determined there were no material changes to market risks in the nine months ended June 30, 2019.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Valvoline’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), with the assistance of management, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), and based upon such evaluation, have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were effective. These controls are designed to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”), and that such information is accumulated and communicated to Valvoline’s management, including the CEO and CFO, to allow timely decisions regarding required disclosure.

Changes in Internal Control

There were no significant changes in Valvoline’s internal control over financial reporting that occurred during the three months ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, Valvoline’s internal control over financial reporting.

53

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

From time to time, Valvoline is party to lawsuits, claims, and other legal proceedings that arise in the ordinary course of business. Many of these legal matters involve complex issues of law and fact and may proceed for protracted periods of time. The Company’s legal proceedings are reviewed on an ongoing basis to establish liabilities for the outcome of such matters where losses are determined to be probable and reasonably estimable and to provide disclosure of matters for which management believes a material loss is at least reasonably possible. There are certain claims and legal proceedings pending where loss is not determined to be probable or reasonably estimable, and therefore, accruals have not been made. As disclosed within the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q, the Company believes it has established adequate accruals for losses that are probable and reasonably estimable.

Although the ultimate resolution of these matters cannot be predicted with certainty and there can be no assurances that the actual amounts required to satisfy liabilities from these matters will not exceed the amounts reflected in the condensed consolidated financial statements, based on information available at this time and taking into account established accruals for estimated losses, it is the opinion of management that such pending claims or proceedings are not reasonably likely to have a material adverse effect on its financial position, results of operations, or cash flows.

ITEM 1A. RISK FACTORS

Other than the risk factor set forth below, there were no material changes from the risk factors previously disclosed in Item 1A of Part I in Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

Valvoline may not achieve some or all of the expected benefits of its restructuring and cost-savings program and this program may adversely affect the Company’s business.

In the second fiscal quarter of 2019, Valvoline announced a broad-based restructuring and cost-savings program that is expected to reduce costs, simplify processes, and focus the organization’s structure and resources on key growth initiatives. Implementation of the program may be costly and disruptive to Valvoline’s business and the Company may not be able to realize the cost savings and benefits initially anticipated. Cost savings expectations are estimates that are inherently difficult to predict; therefore, there can be no assurance that the estimates described in this Quarterly Report on Form 10-Q will prove to be accurate or that the objectives of the program will be achieved. A variety of factors could cause the Company not to realize some or all of the expected cost savings, including, among others, delays in the anticipated timing of activities related to the program, unexpected costs associated with operating the business or executing the program, or the Company’s ability to achieve the efficiencies contemplated by the program. Further, any cost savings that the Company realizes may be offset, in whole or in part, by a reduction in net sales or through increases in other expenses. Additionally, as a result of these restructuring and cost-savings initiatives, Valvoline may experience a loss of continuity and accumulated knowledge and incur inefficiencies during transitional periods. Reorganization and restructuring can require a significant amount of management’s and other employees’ time and focus, which may divert attention from effectively operating and growing Valvoline’s business.

If Valvoline fails to achieve some or all of the expected benefits or savings of its restructuring and cost-savings program within the expected time periods, or if its transitions and plans are not effective, it could have an adverse effect on Valvoline’s business, financial condition, results of operations, or cash flows. For more information about the restructuring and cost-savings program, refer to Note 8 of the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q as well as to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 2 of Part I of this Quarterly Report on Form 10-Q.

54

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company did not repurchase any shares of common stock during the three months ended June 30, 2019 pursuant to the Board of Directors authorization on January 31, 2018 to repurchase up to $300 million of common stock through September 30, 2020. As of June 30, 2019, $75 million remained available for share repurchases under this authorization.

Share repurchase activity during the three months ended June 30, 2019 was as follows:

Monthly period	Total number of shares purchased (1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Dollar value of shares that may yet be purchased under the plans or programs (in millions)
April 1, 2019 - April 30, 2019	—	$	—	—	$	75
May 1, 2019 - May 31, 2019	—	$	—	—	$	75
June 1, 2019 - June 30, 2019	6,001	$	19.10	—	$	75
Total	6,001	$	19.10	—

⁽¹⁾ Total number of shares purchased includes shares withheld from vested restricted stock awards to satisfy withholding taxes.

55

ITEM 6.  EXHIBITS

31.1*	Certification of Samuel J. Mitchell, Jr., Chief Executive Officer of Valvoline, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Mary E. Meixelsperger, Chief Financial Officer of Valvoline, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**	Certification of Samuel J. Mitchell, Jr., Chief Executive Officer of Valvoline, and Mary E. Meixelsperger, Chief Financial Officer of Valvoline, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

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

56

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VALVOLINE INC.
	(Registrant)
August 1, 2019	By:	/s/ Mary E. Meixelsperger
		Mary E. Meixelsperger
		Chief Financial Officer

57

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Samuel J. Mitchell, Jr., certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q of Valvoline Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 1, 2019

/s/ Samuel J. Mitchell, Jr.

Samuel J. Mitchell Jr.

Chief Executive Officer and Director

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Mary E. Meixelsperger, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q of Valvoline Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 1, 2019

/s/ Mary E. Meixelsperger

Mary E. Meixelsperger

Chief Financial Officer

(Principal Financial Officer)

EX-32

EXHIBIT 32

VALVOLINE INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Valvoline Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, Samuel J. Mitchell, Jr., Chief Executive Officer of the Company, and Mary E. Meixelsperger, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Samuel J. Mitchell, Jr.

Samuel J. Mitchell, Jr.

Chief Executive Officer and Director

August 1, 2019

/s/ Mary E. Meixelsperger

Mary E. Meixelsperger

Chief Financial Officer

August 1, 2019

XML

Cover Page - shares	9 Months Ended
	Jun. 30, 2019	Jul. 30, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	001-37884
Entity Registrant Name	VALVOLINE INC
Entity Incorporation, State or Country Code	KY
Entity Tax Identification Number	30-0939371
Entity Address, Address Line One	100 Valvoline Way
Entity Address, City or Town	Lexington
Entity Address, State or Province	KY
Entity Address, Postal Zip Code	40509
City Area Code	859
Local Phone Number	357-7777
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	VVV
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Smaller Reporting Company	false
Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		188,189,958
Entity Central Index Key	0001674910
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net Income (Loss) Attributable to Parent [Abstract]
Sales	$ 613	$ 577	$ 1,761	$ 1,691
Cost of sales	406	376	1,168	1,088
Gross profit	207	201	593	603
Selling, general and administrative expenses	116	110	334	328
Net legacy and separation-related (income) expenses	0	(3)	3	14
Equity and other income, net	(11)	(8)	(29)	(29)
Operating income	102	102	285	290
Net pension and other postretirement plan income	(2)	(10)	(7)	(30)
Net interest and other financing expenses	19	15	55	45
Income before income taxes	85	97	237	275
Income tax expense	20	33	56	154
Net income	$ 65	$ 64	$ 181	$ 121
NET INCOME PER SHARE
Basic (usd per share)	$ 0.34	$ 0.33	$ 0.96	$ 0.61
Diluted (usd per share)	$ 0.34	$ 0.33	$ 0.96	$ 0.61
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic (shares)	189	195	189	199
Diluted (shares)	189	196	189	200
COMPREHENSIVE INCOME
Net income	$ 65	$ 64	$ 181	$ 121
Other comprehensive income (loss), net of tax
Currency translation adjustments	1	(13)	(1)	(9)
Amortization of pension and other postretirement plan prior service credit	(3)	(3)	(7)	(7)
Other comprehensive loss	(2)	(16)	(8)	(16)
Comprehensive income	$ 63	$ 48	$ 173	$ 105

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Current assets
Cash and cash equivalents	$ 126	$ 96
Accounts receivable, net	423	409
Inventories, net	200	176
Prepaid expenses and other current assets	52	44
Total current assets	801	725
Noncurrent assets
Property, plant and equipment, net	455	420
Goodwill and intangibles, net	490	448
Equity method investments	35	31
Deferred income taxes	113	138
Other noncurrent assets	106	92
Total noncurrent assets	1,199	1,129
Total assets	2,000	1,854
Current liabilities
Current portion of long-term debt	7	30
Trade and other payables	163	178
Accrued expenses and other liabilities	242	203
Total current liabilities	412	411
Noncurrent liabilities
Long-term debt	1,334	1,292
Employee benefit obligations	322	333
Other noncurrent liabilities	184	176
Total noncurrent liabilities	1,840	1,801
Commitments and contingencies
Stockholders’ deficit
Preferred stock, no par value, 40 shares authorized; no shares issued and outstanding	0	0
Common stock, par value $0.01 per share, 400 shares authorized;188 shares issued and outstanding at June 30, 2019 and September 30, 2018	2	2
Paid-in capital	13	7
Retained deficit	(291)	(399)
Accumulated other comprehensive income	24	32
Total stockholders’ deficit	(252)	(358)
Total liabilities and stockholders’ deficit	$ 2,000	$ 1,854

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2019	Sep. 30, 2018
Statement of Financial Position [Abstract]
Preferred stock authorized (shares)	40,000,000	40,000,000
Preferred stock issued (shares)	0	0
Preferred stock outstanding (shares)	0	0
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock authorized (shares)	400,000,000	400,000,000
Common stock issued (shares)	188,000,000	188,000,000
Common stock outstanding (shares)	188,000,000	188,000,000

XML

Condensed Consolidated Statements of Stockholders' Deficit - USD ($) shares in Millions, $ in Millions	Total	Common stock	Paid-in capital	Retained deficit	Accumulated other comprehensive income
Common stock outstanding, at beginning of period (shares) at Sep. 30, 2017		203
Balance at beginning of period at Sep. 30, 2017	$ (117)	$ 2	$ 5	$ (167)	$ 43
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(10)			(10)
Dividends paid	(15)			(15)
Stock-based compensation	2		2
Repurchases of common stock (shares)		(2)
Repurchases of common stock	(39)			(39)
Currency translation adjustments	1				1
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests	(14)		(7)	(7)
Amortization of pension and other postretirement prior service credits in income, net of tax	(2)				(2)
Common stock outstanding, at end of period (shares) at Dec. 31, 2017		201
Balance at end of period at Dec. 31, 2017	(194)	$ 2	0	(238)	42
Common stock outstanding, at beginning of period (shares) at Sep. 30, 2017		203
Balance at beginning of period at Sep. 30, 2017	(117)	$ 2	5	(167)	43
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	121
Currency translation adjustments	(9)
Amortization of pension and other postretirement prior service credits in income, net of tax	(7)
Common stock outstanding, at end of period (shares) at Jun. 30, 2018		193
Balance at end of period at Jun. 30, 2018	(288)	$ 2	6	(323)	27
Common stock outstanding, at beginning of period (shares) at Dec. 31, 2017		201
Balance at beginning of period at Dec. 31, 2017	(194)	$ 2	0	(238)	42
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	67			67
Dividends paid	(15)			(15)
Stock-based compensation	2		3	(1)
Repurchases of common stock (shares)		(4)
Repurchases of common stock	(87)			(87)
Currency translation adjustments	3				3
Amortization of pension and other postretirement prior service credits in income, net of tax	(2)				(2)
Common stock outstanding, at end of period (shares) at Mar. 31, 2018		197
Balance at end of period at Mar. 31, 2018	(226)	$ 2	3	(274)	43
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	64			64
Dividends paid	(15)			(15)
Stock-based compensation	3		3
Repurchases of common stock (shares)		(4)
Repurchases of common stock	(98)			(98)
Currency translation adjustments	(13)				(13)
Amortization of pension and other postretirement prior service credits in income, net of tax	(3)				(3)
Common stock outstanding, at end of period (shares) at Jun. 30, 2018		193
Balance at end of period at Jun. 30, 2018	$ (288)	$ 2	6	(323)	27
Common stock outstanding, at beginning of period (shares) at Sep. 30, 2018	188	188
Balance at beginning of period at Sep. 30, 2018	$ (358)	$ 2	7	(399)	32
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	53			53
Dividends paid	(20)			(20)
Stock-based compensation	1		1
Currency translation adjustments	(4)				(4)
Amortization of pension and other postretirement prior service credits in income, net of tax	(2)				(2)
Common stock outstanding, at end of period (shares) at Dec. 31, 2018		188
Balance at end of period at Dec. 31, 2018	$ (343)	$ 2	8	(379)	26
Common stock outstanding, at beginning of period (shares) at Sep. 30, 2018	188	188
Balance at beginning of period at Sep. 30, 2018	$ (358)	$ 2	7	(399)	32
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	181
Currency translation adjustments	(1)
Amortization of pension and other postretirement prior service credits in income, net of tax	$ (7)
Common stock outstanding, at end of period (shares) at Jun. 30, 2019	188	188
Balance at end of period at Jun. 30, 2019	$ (252)	$ 2	13	(291)	24
Common stock outstanding, at beginning of period (shares) at Dec. 31, 2018		188
Balance at beginning of period at Dec. 31, 2018	(343)	$ 2	8	(379)	26
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	63			63
Dividends paid	(20)			(20)
Stock-based compensation	2		2
Currency translation adjustments	2				2
Amortization of pension and other postretirement prior service credits in income, net of tax	(2)				(2)
Common stock outstanding, at end of period (shares) at Mar. 31, 2019		188
Balance at end of period at Mar. 31, 2019	(298)	$ 2	10	(336)	26
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	65			65
Dividends paid	(20)			(20)
Stock-based compensation	3		3
Currency translation adjustments	1				1
Amortization of pension and other postretirement prior service credits in income, net of tax	$ (3)				(3)
Common stock outstanding, at end of period (shares) at Jun. 30, 2019	188	188
Balance at end of period at Jun. 30, 2019	$ (252)	$ 2	$ 13	$ (291)	$ 24

XML

Condensed Consolidated Statements of Stockholders' Deficit (Parenthetical) - $ / shares	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Statement of Stockholders' Equity [Abstract]
Dividends paid per common share (usd per share)	$ 0.106	$ 0.106	$ 0.106	$ 0.0745	$ 0.0745	$ 0.0745

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions		9 Months Ended
		Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities
Net income		$ 181	$ 121
Adjustments to reconcile net income to cash flows from operating activities
Depreciation and amortization		43	39
Debt issuance cost and discount amortization		2	2
Deferred income taxes		0	71
Equity income from unconsolidated affiliates, net of distributions		(4)	(4)
Pension contributions		(7)	(13)
Stock-based compensation expense		8	10
Other operating activities, net		0	(1)
Change in assets and liabilities
Accounts receivable	[1]	(48)	(80)
Inventories	[1]	(11)	(23)
Payables and accrued liabilities	[1]	34	12
Other assets and liabilities	[1]	16	47
Total cash provided by operating activities		214	181
Cash flows from investing activities
Additions to property, plant and equipment		(73)	(51)
Acquisitions, net of cash acquired		(50)	(71)
Other investing activities, net		(1)	5
Total cash used in investing activities		(124)	(117)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs		743	170
Repayments on borrowings		(727)	(39)
Repurchases of common stock		0	(220)
Payments for purchase of additional ownership in subsidiary		(1)	(15)
Cash dividends paid		(60)	(45)
Other financing activities		(4)	(6)
Total cash used in financing activities		(49)	(155)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash		0	(3)
Increase (decrease) in cash, cash equivalents, and restricted cash		41	(94)
Cash, cash equivalents, and restricted cash - beginning of period		96	201
Cash, cash equivalents, and restricted cash - end of period		$ 137	$ 107

[1] Excludes changes resulting from operations acquired.

XML

Basis of Presentation and Significant Accounting Policies

9 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared by Valvoline Inc. (“Valvoline” or the “Company”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Securities and Exchange Commission (“SEC”) regulations for interim financial reporting, which do not include all information and footnote disclosures normally included in annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. In the opinion of management, the assumptions underlying the condensed consolidated financial statements for these interim periods are reasonable, and all adjustments considered necessary for a fair presentation have been made and are of a normal recurring nature unless otherwise disclosed herein. The results for interim periods are not necessarily indicative of those to be expected for the entire year. Certain prior period amounts have been reclassified to conform to the current presentation.

Recent accounting pronouncements

The following standards relevant to Valvoline were either issued or adopted in the current year, or are expected to have a meaningful impact on Valvoline in future periods.

Recently adopted

In the first fiscal quarter of 2019, Valvoline adopted the following:

•In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance, which established a single comprehensive model for entities to use in accounting for revenue from contracts with customers and superseded most industry-specific revenue recognition guidance. This new guidance introduced a five-step model for revenue recognition focused on the transfer of control, as opposed to the transfer of risk and rewards under prior guidance. Valvoline adopted this new revenue recognition guidance on October 1, 2018 using the modified retrospective method applied to those contracts that were not completed at the date of adoption. Under this method, the new revenue recognition guidance has been applied prospectively from the date of adoption, while prior period financial statements continue to be reported in accordance with the previous guidance. The cumulative effect of the changes at adoption was recognized through an increase to opening retained deficit of $13 million, net of tax, related to the timing of certain sales to distributors. Revenue transactions recorded under the new guidance are substantially consistent with the treatment under prior guidance, and the impact of adoption was not material to the condensed consolidated financial statements as of and for the three and nine months ended June 30, 2019 and is not expected to be material on an ongoing basis. As part of the adoption, Valvoline modified certain control procedures and processes, none of which had a material effect on the Company’s internal control over financial reporting. Refer to Note 2 for additional information regarding Valvoline’s updated accounting policy for revenue from contracts with customers and adoption of this new guidance.

•In August 2016, the FASB issued new accounting guidance regarding the classification of certain cash receipts and payments in the statement of cash flows. The Company adopted the accounting guidance on October 1, 2018 using a retrospective approach and made an accounting policy election to classify distributions received from equity method investments based on the nature of the activities of the investee that generated the distribution, which is consistent with the Company’s previous classification as cash flows from operating activities. The other cash flow classification matters addressed in this guidance were either not relevant or material to Valvoline’s current activities. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Statements of Cash Flows.

•In November 2016, the FASB issued new accounting guidance, which requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Valvoline adopted this guidance retrospectively on October 1, 2018. The application of this guidance did not have a material impact on the Condensed Consolidated Statements of Cash Flows, nor did it require retrospective adjustment to the prior period financial statements as Valvoline did not have restricted cash or restricted cash equivalents in the prior periods presented. As of June 30, 2019, Valvoline had $11 million of deposits held with financial institutions, which is generally restricted for use in completing an acquisition, and is included in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet. This restricted cash has been included within the end-of-period total amounts shown within the Condensed Consolidated Statement of Cash Flows for the nine months ended June 30, 2019.

•In January 2017, the FASB issued new accounting guidance, which clarifies the definition of a business used across several areas of accounting, including the evaluation of whether a transaction should be accounted for as an acquisition (or disposal) of assets or as a business combination. The new guidance clarifies that a business must have at least one substantive process and also narrows the definition of outputs by more closely aligning with how outputs are described in the new revenue recognition standard. Valvoline adopted this guidance on October 1, 2018 with prospective application. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

•In May 2017, the FASB issued accounting guidance that amended the scope of modification accounting for share-based payment awards. The new guidance requires modification accounting if the fair value, vesting condition, or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. Valvoline adopted this guidance prospectively on October 1, 2018, and the Company did have certain modifications of share-based awards in connection with the restructuring activities described in Note 8; however, the award modifications and the adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

•In August 2018, the FASB issued new accounting guidance related to fees paid by a customer in a cloud computing arrangement, which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service arrangement with the existing capitalization guidance for implementation costs incurred to develop or obtain internal-use software. Valvoline adopted this guidance prospectively on October 1, 2018 and capitalized approximately $3 million of cloud computing arrangement implementation costs during the nine months ended June 30, 2019. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

Issued but not yet adopted

In February 2016, the FASB issued new accounting guidance, which outlines a comprehensive lease accounting model that requires lessees to recognize a right-of-use asset and a corresponding lease liability on the balance sheet. The lease liability will be measured at the present value of future lease payments, and the right-of-use asset will be measured at the lease liability amount, adjusted for prepaid lease payments, lease incentives received and the lessee’s initial direct costs (e.g., commissions). Lease expense will be recognized similar to current accounting guidance with operating leases resulting in straight-line expense and finance leases resulting in accelerated expense recognition similar to the existing accounting for capital leases.

Management will finalize its assessment and adopt the new guidance in the first fiscal quarter of 2020. This new guidance is expected to be adopted with election of the optional transition approach through recognition of the cumulative effect as an adjustment to retained deficit at adoption on October 1, 2019 without retrospective application to prior period financial statements. While the Company is finalizing its determinations, Valvoline

expects to elect certain practical expedients permitted by the new guidance, including the package of practical expedients that allows for previous accounting conclusions regarding lease identification and classification to be carried forward for leases which commence prior to adoption, as well as the practical expedient to not separate lease and non-lease components and account for them as a single lease component. The Company does not currently expect to elect the hindsight or short-term lease practical expedients.

The Company has made progress in its assessment and implementation efforts, including the identification and assessment of all forms of its leases, implementing an enterprise-wide lease management system, and evaluating additional changes to business processes and internal controls to ensure the reporting and disclosure requirements of the new guidance are met. At this time, the Company cannot estimate the specific quantitative impact of adopting this new guidance; however, adoption is expected to have a material impact on the Condensed Consolidated Balance Sheet as Valvoline has a significant number of operating leases, including many of its service center store locations, which will be recognized as right-of-use assets with associated lease liabilities upon adoption. The Company does not currently anticipate a material impact on the Condensed Consolidated Statements of Comprehensive Income, Cash Flows, or Stockholders’ Deficit.

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Revenue Recognition

9 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue Recognition

REVENUE RECOGNITION

As described in Note 1, Valvoline adopted new revenue recognition accounting guidance effective October 1, 2018, and accordingly, changed its accounting policy for revenue recognition prospectively from the date of adoption as described herein.

Impacts on financial statements

The adoption of the new revenue accounting guidance did not have a significant impact on the Company’s condensed consolidated financial statements. As a result of the Company’s adoption using the modified retrospective adoption approach, the Company recorded an adjustment to its Condensed Consolidated Balance Sheet as of October 1, 2018 related to the timing of certain sales to distributors.

The following table reconciles the Condensed Consolidated Balance Sheet line items impacted by the cumulative effect of adoption of the new revenue recognition accounting guidance on October 1, 2018:

(In millions)	September 30, 2018 as reported		Adjustments		Balances at October 1, 2018
Accounts receivable, net	$	409	$	(33)	$	376
Inventories, net	$	176	$	14	$	190
Deferred income taxes	$	138	$	6	$	144
Retained deficit	$	399	$	13	$	412

Most revenue transactions and activities recorded under the new revenue recognition accounting guidance are substantially consistent with the treatment under prior guidance. The following tables summarize the impact of the new revenue accounting guidance on Valvoline’s Condensed Consolidated Balance Sheet and Condensed Consolidated Statements of Comprehensive Income as of and for the three and nine months ended June 30, 2019:

	June 30, 2019
Impact of Changes to Condensed Consolidated Balance Sheet	As reported		Adjustments (a)		Under prior guidance
(In millions)
Accounts receivable, net	$	423	$	37	$	460
Inventories, net	$	200	$	(15)	$	185
Deferred income taxes	$	113	$	(6)	$	107
Accrued expenses and other liabilities	$	242	$	(1)	$	241
Retained deficit	$	291	$	(15)	$	276

^(a) Adjustments include the opening retained deficit adjustments as detailed in the table above.

	Three months ended June 30, 2019
Impact of Changes to Condensed Consolidated Statement of Comprehensive Income	As reported		Adjustments		Under prior guidance
(In millions)
Sales	$	613	$	(10)	$	603
Cost of sales	406		(14)		392
Gross profit	$	207	$	4	$	211
Selling, general and administrative expenses	$	116	$	3	$	119
Equity and other income, net	$	11	$	1	$	12
Operating income	$	102	$	2	$	104
Income before income taxes	$	85	$	2	$	87
Income tax expense	$	20	$	1	$	21
Net income	$	65	$	1	$	66
Basic earnings per share	$	0.34	$	0.01	$	0.35
Diluted earnings per share	$	0.34	$	0.01	$	0.35

	Nine months ended June 30, 2019
Impact of Changes to Condensed Consolidated Statement of Comprehensive Income	As reported		Adjustments		Under prior guidance
(In millions)
Sales	$	1,761	$	(34)	$	1,727
Cost of sales	1,168		(42)		1,126
Gross profit	$	593	$	8	$	601
Selling, general and administrative expenses	$	334	$	6	$	340
Equity and other income, net	$	29	$	1	$	30
Operating income	$	285	$	3	$	288
Income before income taxes	$	237	$	3	$	240
Income tax expense	$	56	$	1	$	57
Net income	$	181	$	2	$	183
Basic earnings per share	$	0.96	$	0.01	$	0.97
Diluted earnings per share	$	0.96	$	0.01	$	0.97

Disaggregation of revenue

The following summarizes sales by primary customer channel for the Company’s reportable segments:

(In millions)	Three months ended June 30, 2019		Nine months ended June 30, 2019
Quick Lubes
Company-owned operations	$	136	$	388
Non-company owned operations	75		212
Total Quick Lubes	211		600
Core North America
Retail	143		399
Installer and other	117		336
Total Core North America	260		735
International	142		426
Consolidated sales	$	613	$	1,761

Sales by reportable segment disaggregated by geographic market follows for the three and nine months ended June 30, 2019:

(In millions)	Quick Lubes		Core North America		International		Totals
Three months ended
North America (a)	$	211	$	260	$	—	$	471
Europe, Middle East and Africa ("EMEA")	—		—		43		43
Asia Pacific	—		—		72		72
Latin America (a)	—		—		27		27
Total	$	211	$	260	$	142	$	613
Nine months ended
North America (a)	$	600	$	735	$	—	$	1,335
Europe, Middle East and Africa ("EMEA")	—		—		134		134
Asia Pacific	—		—		212		212
Latin America (a)	—		—		80		80
Total	$	600	$	735	$	426	$	1,761

^(a) Valvoline includes the United States and Canada in its North America region. Mexico is included within the Latin America region.

The following disaggregates the Company’s sales by timing of revenue recognized:

(In millions)	Three months ended June 30, 2019		Nine months ended June 30, 2019
Sales at a point in time	$	602	$	1,730
Franchised revenues transferred over time	11		31
Consolidated sales	$	613	$	1,761

Nature of goods and services

Valvoline generates all operating revenues from contracts with customers, primarily as a result of the sale and service delivery of engine and automotive maintenance products to customers. Valvoline derives its sales from its broad line of products and complementary services through three principal activities managed across its three reportable segments: (i) engine and automotive maintenance products, (ii) company-owned quick-lube operations, and (iii) franchised quick-lube operations. Valvoline’s sales are generally to retail, installer, industrial, distributor, franchise, and end consumers to facilitate vehicle and equipment service and maintenance. Approximately 98% of Valvoline’s net sales are products and services sold at a point in time through either ship-and-bill performance obligations or company-owned quick lube operations. The remaining 2% of Valvoline’s net sales generally relate to franchise fees.

Revenue is recognized for the amount that reflects the consideration the Company is expected to be entitled to based on when control of the promised good or service is transferred to the customer. Revenue recognition is evaluated through the following five steps: (i) identification of the contract(s) with a customer; (ii) identification of the performance obligations in the contract(s); (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract(s); and (v) recognition of revenue when or as a performance obligation is satisfied. Below is a summary of the key considerations for Valvoline’s material revenue-generating activities:

Engine and automotive maintenance products

Engine and automotive maintenance products primarily include lubricants, antifreeze, chemicals, filters, and other complementary products for use across a wide array of vehicles and engines. The Company’s customers typically enter into a sales agreement which outlines a framework of terms and conditions that apply to all current and future purchase orders for the customer submitted under such sales agreement. In these situations, the Company’s contract with the customer is the sales agreement combined with the customer purchase order as specific products and quantities are not indicated until a purchase order is submitted. As the Company’s contract with the customer is typically for a single purchase order under the supply agreement to be delivered at a point in time, the duration of the contract is almost always one year or less. The Company’s products are distinct and separately identifiable on customer purchase orders, with each product sale representing a separate performance obligation that is generally delivered simultaneously. Valvoline is the principal to these contracts as the Company has control of the products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis.

The Company determines the point in time at which control is transferred and the performance obligation is satisfied by considering when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of the product, which generally coincides with the transfer of title and risk of loss to the customer and is typically determined based on delivery terms within the underlying contract.

Customer payment terms vary by region and customer and are generally 30 to 60 days after delivery. Valvoline does not provide extended payment terms greater than one year.

Company-owned quick-lube operations

Performance obligations related to company-owned quick-lube operations primarily include the sale of engine and automotive maintenance products and related services. These performance obligations are distinct and are delivered simultaneously at a point in time. Accordingly, revenue from company-owned quick-lube operations is recognized when payment is tendered at the point of sale, which coincides with the completion of product and service delivery and the transfer of control and benefits from the performance obligations to the customer.

Franchised quick-lube operations

The primary performance obligations related to franchised quick-lube operations include product sales as described above and the license of intellectual property, which provides access to the Valvoline brand and proprietary information to operate service center stores over the term of a franchise agreement. Other franchise performance obligations do not result in material revenue. Each performance obligation is distinct, and

franchisees generally receive and consume the benefits provided by the Company’s performance over the course of the franchise agreement, which typically range from 10 to 15 years. Billings and payments occur monthly.

In exchange for the license of Valvoline intellectual property, franchisees generally remit initial fees upon opening a service center store and royalties at a contractual rate of the applicable service center store sales over the term of the franchise agreement. The license provides access to the intellectual property over the term of the franchise agreement and is considered a right-to-access license of symbolic intellectual property as substantially all of its utility is derived from association with the Company’s past and ongoing activities. The license granted to operate each franchised service center store is the predominant item to which the royalties relate and represents a distinct performance obligation which is recognized over time as the underlying sales occur, as this is the most appropriate measure of progress toward complete satisfaction of the performance obligation.

Variable consideration

The Company only offers an assurance-type warranty with regard to the intended functionality of products sold, which therefore, does not represent a distinct performance obligation within the context of the contract. Product returns and refunds are generally not material and are not accepted unless the item is defective as manufactured. Estimated product returns are recorded as a reduction in reported revenues at the time of sale based upon historical product return experience and is adjusted for known trends to arrive at the amount of consideration to which Valvoline expects to receive.

The nature of Valvoline’s contracts with customers often give rise to variable consideration consisting primarily of promotional rebates and customer pricing discounts based on achieving certain levels of sales activity that generally decrease the transaction price. The Company determines the transaction price as the amount of consideration it expects to be entitled to in exchange for fulfilling the performance obligations, including the effects of any variable consideration, or amounts payable to the customer when there is a basis to reasonably estimate the amount and it is probable there will not be a significant reversal. Variable consideration is recorded as a reduction of the transaction price at the time of sale and is primarily estimated utilizing the most likely amount method that is expected to be earned as the Company is able to estimate the anticipated discounts within a sufficiently narrow range of possible outcomes based on its extensive historical experience with certain customers, similar programs and management’s judgment with respect to estimating customer participation and performance levels. Variable consideration is reassessed at each reporting date and adjustments are made, when necessary.

Allocation of transaction price

In each contract with multiple performance obligations, Valvoline allocates the transaction price, including variable consideration, to each performance obligation on a relative standalone selling price basis, which is generally determined based on the directly observable data of the Company’s standalone sales of the performance obligations in similar circumstances to similar customers. In the absence of directly observable standalone prices, the Company may utilize prices charged by competitors selling similar products or use an expected cost-plus margin approach. The amount allocated to each performance obligation is recognized as revenue as control is transferred to the customer.

Contract balances

Valvoline invoices customers once or as performance obligations are satisfied, at which point payment becomes unconditional. As the majority of the Company’s performance obligations are satisfied at a point in time and customers typically do not make material payments in advance, nor does Valvoline have a right to consideration in advance of control transfer, the Company had no contract assets or contract liabilities recorded within its Condensed Consolidated Balance Sheet at adoption or as of June 30, 2019. The Company recognizes a receivable on its Condensed Consolidated Balance Sheet when the Company performs a service or transfers a product in advance of receiving consideration, and the Company’s right to consideration is unconditional and only the passage of time is required before payment of that consideration is due.

Practical expedients and accounting policies

Valvoline elected the following practical expedients and policy elections in accordance with the new revenue recognition accounting guidance adopted beginning in fiscal 2019:

•Significant financing component – The promised amount of consideration has not been adjusted as the Company does not have significant financing arrangements with its customers. The Company expects that the period between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service will be one year or less.

•Incremental costs of obtaining a contract - The Company expenses incremental direct costs of obtaining a contract, primarily sales commissions, when incurred due to the short-term nature of individual contracts, which would result in amortization periods of one year or less. These costs are not material and are recorded in Selling, general and administrative expenses within the Condensed Consolidated Statements of Comprehensive Income.

•Shipping and handling costs - Valvoline elected to account for shipping and handling activities that occur after the customer has obtained control as fulfillment activities (i.e., an expense) rather than as a performance obligation. Accordingly, amounts billed for shipping and handling are a component of the transaction price included in net sales, while costs incurred are included in cost of sales.

•Sales and use-based taxes - Valvoline excludes from its revenue any amounts collected from customers for sales (and similar) taxes. These amounts are, however, reflected in accrued expenses until remitted to the appropriate governmental authority.

•Disclosure of remaining performance obligations - The Company elected to apply the practical expedient to omit disclosures of remaining performance obligations for contracts which have an initial expected term of one year or less. In addition, the Company has elected to not disclose remaining performance obligations for its franchise agreements with variable consideration based on service center store sales.

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Fair Value Measurements

9 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy as of:

(In millions)	Fair Value Hierarchy	June 30 2019		September 30 2018
Cash and cash equivalents
Money market funds	Level 1	$	3	$	5
Time deposits (a)	Level 2	34		22
Prepaid expenses and other current assets
Currency derivatives (b)	Level 2	1		1
Time deposits (a)	Level 2	1		—
Other noncurrent assets
Non-qualified trust funds	Level 1	21		25
Total assets at fair value		$	60	$	53
Accrued expenses and other liabilities
Currency derivatives (b)	Level 2	$	2	$	1
Total liabilities at fair value		$	2	$	1

(a) Time deposits with original maturities of three months or less are classified within cash equivalents and those with original maturities of one year or less are classified within Prepaid expenses and other current assets.

(b) The Company had outstanding contracts with notional values of $82 million and $74 million as of June 30, 2019 and September 30, 2018, respectively.

There have been no changes in the nature of inputs or valuation approaches relative to the Company’s financial assets and liabilities that are accounted for at fair value on a recurring basis from those as of September 30, 2018. There were no material gains or losses recognized in earnings during the three and nine months ended June 30, 2019 or 2018 related to these assets and liabilities.

Long-term debt

The fair values of the Company’s outstanding fixed rate senior notes shown in the table below are based on recent trading values, which are considered Level 2 inputs within the fair value hierarchy. Long-term debt is included in the Condensed Consolidated Balance Sheets at carrying value, rather than fair value, and is therefore excluded from the fair value table above. Carrying values shown in the following table are net of unamortized discounts and issuance costs.

	June 30, 2019						September 30, 2018
(In millions)	Fair value		Carrying value		Unamortized discount and issuance costs		Fair value		Carrying value		Unamortized discount and issuance costs
2024 Notes	$	388	$	371	$	4	$	376	$	370	$	5
2025 Notes	401		395		5		376		395		5
Total	$	789	$	766	$	9	$	752	$	765	$	10

Refer to Note 9 for more information on Valvoline’s other debt instruments that have variable interest rates, and accordingly, their carrying amounts approximate fair value.

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Acquisitions and Divestitures

9 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Acquisitions and Divestitures

ACQUISITIONS AND DIVESTITURES

During the nine months ended June 30, 2019, the Company acquired 54 service center stores for $50 million. These acquisitions included 31 franchise service center stores acquired from Oil Changers Inc. on October 31, 2018, 18 service center stores acquired in single and multi-store transactions, and five former franchise service centers stores. During the nine months ended June 30, 2018, the Company acquired 63 service center stores, of which 60 were former franchise service center stores, for $71 million.

The Company’s acquisitions are accounted for such that the assets acquired and liabilities assumed are recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill. Goodwill is generally expected to be deductible for income tax purposes and is primarily attributed to the operational synergies and potential growth expected to result in economic benefits in the respective markets of the acquisitions.

A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the nine months ended June 30:

(In millions)	2019		2018
Inventories	$	—	$	1
Property, plant and equipment	3		2
Goodwill	34		42
Intangible assets (a)
Reacquired franchise rights	5		26
Customer relationships	5		—
Trademarks and trade names	1		—
Other	2		—
Net assets acquired	$	50	$	71

(a) Intangible assets acquired during the nine months ended June 30, 2019 have a weighted average amortization period of 10 years.

The fair values above are preliminary for up to one year from the date of acquisition as they are subject to measurement period adjustments as new information is obtained about facts and circumstances that existed as of the acquisition date. The Company does not currently expect any material changes to the preliminary purchase price allocations for acquisitions completed during the last twelve months.

The incremental results of operations of the acquired stores, which were not material to the Company’s consolidated results, have been included in the condensed consolidated financial statements from the date of each acquisition, and accordingly, pro forma disclosure of financial information has not been presented.

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Accounts Receivable

9 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Accounts Receivable

ACCOUNTS RECEIVABLE

The following summarizes Valvoline’s accounts receivable as of:

(In millions)	June 30 2019		September 30 2018
Trade	$	412	$	390
Other	16		26
Accounts receivable, gross	428		416
Allowance for doubtful accounts	(5)		(7)
Total accounts receivable, net	$	423	$	409

During the nine months ended June 30, 2019 and 2018, Valvoline sold accounts receivable to a financial institution of $63 million and $50 million, respectively.

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Inventories

9 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventories

INVENTORIES

Inventories are primarily carried at the lower of cost or net realizable value using the weighted average cost method. In addition, certain lubricants are valued at the lower of cost or market using the last-in, first-out (“LIFO”) method.

The following summarizes Valvoline’s inventories as of:

(In millions)	June 30 2019		September 30 2018
Finished products	$	210	$	189
Raw materials, supplies and work in process	34		30
Reserve for LIFO cost valuation	(41)		(40)
Excess and obsolete inventory reserves	(3)		(3)
Total inventories, net	$	200	$	176

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Goodwill and Other Intangibles

9 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangibles

GOODWILL AND OTHER INTANGIBLES

Goodwill

The following table summarizes the changes in the carrying amount of goodwill by reportable segment and in total during the nine months ended June 30, 2019:

(In millions)	Quick Lubes		Core North America		International		Total
Balance at September 30, 2018	$	252	$	89	$	40	$	381
Acquisitions (a)	34		—		—		34
Balance at June 30, 2019	$	286	$	89	$	40	$	415

(a) Refer to Note 4 for details regarding acquisitions completed during the nine months ended June 30, 2019.

Other intangible assets

Valvoline’s purchased intangible assets were specifically identified when acquired, have finite lives, and are reported in Goodwill and intangibles, net on the Condensed Consolidated Balance Sheets. The following summarizes the gross carrying amounts and accumulated amortization of the Company’s intangible assets as of:

	June 30, 2019						September 30, 2018
(In millions)	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Definite-lived intangible assets
Trademarks and trade names	$	30	$	(4)	$	26	$	29	$	(2)	$	27
Reacquired franchise rights	37		(7)		30		32		(4)		28
Customer relationships	21		(4)		17		14		(3)		11
Other intangible assets	3		(1)		2		1		—		1
Total definite-lived intangible assets	$	91	$	(16)	$	75	$	76	$	(9)	$	67

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Restructuring Activities

9 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Restructuring Activities

RESTRUCTURING ACTIVITIES

In the second fiscal quarter of 2019, Valvoline outlined a broad-based restructuring and cost-savings program that is expected to reduce costs, simplify processes and focus the organization’s structure and resources on key growth initiatives. Part of this program includes employee separation actions, which are expected to be generally completed by the end of 2019, with the associated termination benefits anticipated to be substantially paid by the end of 2020.

During the three and nine months ended June 30, 2019, Valvoline recognized $4 million and $10 million of expense, respectively, for employee termination benefits, which includes severance and other benefits that will be paid to employees pursuant to the restructuring program. These expenses were recognized in Selling, general and administrative expenses within the Condensed Consolidated Statements of Comprehensive Income. The Company expects that it will incur additional employee termination expenses of approximately $3 million to $5 million, primarily during the fourth fiscal quarter of 2019.

The results by segment, as disclosed in Note 14, do not include these and restructuring expenses, which is consistent with the manner by which management assesses the performance and evaluates the results of each segment. Accordingly, these expenses are included in Unallocated and other.

The following table represents the expenses recognized related to employee termination benefits during the nine months ended June 30, 2019 and the estimated remaining liability, which is included in the Condensed Consolidated Balance Sheet primarily within Accrued expenses and other liabilities:

(In millions)	Employee Termination Benefits
Balance at September 30, 2018	$	—
Expenses recognized during the period	10
Payments	(1)
Balance at June 30, 2019	$	9

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Debt

9 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt

DEBT

The following table summarizes Valvoline’s total debt as of:

(In millions)	June 30 2019		September 30 2018
2025 Notes	$	400	$	400
2024 Notes	375		375
Term Loans	575		270
Revolvers	—		147
Trade Receivables Facility	—		140
Other (a)	(9)		(10)
Total debt	$	1,341	$	1,322
Current portion of long-term debt	7		30
Long-term debt	$	1,334	$	1,292

(a) Other includes debt issuance costs and discounts of $10 million and $11 million as of June 30, 2019 and September 30, 2018, respectively. In addition, Other includes $1 million of debt as of June 30, 2019 and September 30, 2018 which was primarily acquired through acquisitions.

Senior Notes

The Company’s outstanding fixed rate senior notes consist of 4.375% senior unsecured notes due 2025 with an aggregate principal amount of $400 million issued in August 2017 (the “2025 Notes”) and 5.500% senior unsecured notes due 2024 with an aggregate principal amount of $375 million issued in July 2016 (the “2024 Notes” and together with the 2025 Notes, the “Senior Notes”).

Senior Credit Agreement

In fiscal 2016, Valvoline entered into a Senior Credit Agreement (the “2016 Credit Agreement”), which provided an aggregate principal amount of $1,325 million in senior secured credit facilities, comprised of (i) a five-year $875 million term loan facility (the “2016 Term Loan”), and (ii) a five-year $450 million revolving credit facility (the “2016 Revolver”), including a $100 million letter of credit sublimit.

On April 12, 2019, Valvoline amended the 2016 Credit Agreement (the 2016 Credit Agreement, as amended, the “2019 Credit Agreement”) to extend the maturity to 2024, provide additional capacity under the revolving facility, and lower interest rates, among other modifications. This 2019 Credit Agreement provides for an aggregate principal amount of $1,050 million in senior secured credit facilities, comprised of (i) a five-year $575 million term loan facility (the “2019 Term Loan”) and (ii) a five-year $475 million revolving credit facility (the “2019 Revolver”), including a $100 million letter of credit sublimit. As a result of the amendment, the Company recognized immaterial expense related to the accelerated amortization of previously capitalized debt issuance costs, which is included in Net interest and other financing expenses in the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2019.

Prior to the amendment in fiscal 2019, the Company made payments of $15 million to the 2016 Term Loan consistent with its payment schedule and had net borrowings of $39 million under the 2016 Revolver. The 2019 Term Loan proceeds of $575 million were used to pay the outstanding principal balance of the 2016 Term Loan of $255 million, the outstanding 2016 Revolver balance of $186 million, and $120 million on the trade receivables securitization facility described below, in addition to accrued and unpaid interest and fees, as well as expenses related to the amendment. Remaining proceeds, including the remaining capacity under the 2019 Revolver, are expected to fund general corporate purposes and working capital needs. As of June 30, 2019, the total borrowing capacity remaining under the 2019 Revolver was $466 million due to a reduction of $9 million for letters of credit outstanding.

The outstanding principal balance of the 2019 Term Loan is required to be repaid in quarterly installments of approximately $7 million beginning June 30, 2020 and approximately $14 million beginning June 30, 2021, with the balance due at maturity on April 12, 2024, and prepayment due in the amount of the net cash proceeds from certain events. Amounts outstanding under the 2019 Credit Agreement may be prepaid at any time, and from time to time, in whole or part, without premium or penalty. At Valvoline’s option, amounts outstanding under the 2019 Credit Agreement bear interest at either LIBOR or an alternate base rate, in each case plus the applicable interest rate margin. The interest rate fluctuates between LIBOR plus 1.375% per annum and LIBOR plus 2.000% per annum (or between the alternate base rate plus 0.375% per annum and the alternate base rate plus 1.000% per annum), based upon Valvoline’s corporate credit ratings or its consolidated net leverage ratio, whichever yields the lowest rate.

Valvoline’s existing and future subsidiaries (other than certain immaterial subsidiaries, joint ventures, special purpose financing subsidiaries, regulated subsidiaries, non-U.S. subsidiaries and certain other subsidiaries) guarantee the 2019 Credit Agreement, which is also secured by a first-priority security interest in substantially all the personal property assets, and certain real property assets, of Valvoline and the guarantors, including all or a portion of the equity interests of certain of Valvoline’s domestic subsidiaries and first-tier non-U.S. subsidiaries, and in certain cases, a portion of the equity interests of other non-U.S. subsidiaries.

The 2019 Credit Agreement contains usual and customary representations, warranties, events of default, and affirmative and negative covenants, including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as the maintenance of financial covenants as of the end of each fiscal quarter, including a maximum consolidated net leverage ratio of 4.5 and a minimum consolidated interest coverage ratio of 3.0. As of June 30, 2019, Valvoline was in compliance with all covenants under the 2019 Credit Agreement.

Trade Receivables Facility

As of June 30, 2019, there were no amounts outstanding under the $175 million trade receivables securitization facility (the “Trade Receivables Facility”), and as of September 30, 2018, there was $140 million outstanding. During the nine months ended June 30, 2019, Valvoline borrowed $82 million and made payments of $222 million, including the payment made with a portion of the proceeds from the 2019 Term Loan.

Based on the availability of eligible receivables, the full capacity of the Trade Receivables Facility was available as of June 30, 2019. The financing subsidiary owned $274 million and $275 million of outstanding accounts receivable as of June 30, 2019 and September 30, 2018, respectively, and these amounts are included in Accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.

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Income Taxes

9 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Income tax provisions for interim quarterly periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The following summarizes income tax expense and the effective tax rate in each interim period:

	Three months ended June 30						Nine months ended June 30
(In millions)	2019			2018			2019			2018
Income tax expense	$	20		$	33		$	56		$	154
Effective tax rate percentage	23.5		%	34.0		%	23.6		%	56.0		%

The decreases in income tax expense and the effective tax rate from the prior year periods were principally driven by the prior year enactment of U.S. and Kentucky tax reform legislation, which resulted in the full benefit of lower corporate statutory income tax rates in fiscal 2019 and expense of approximately $6 million and $76 million recognized during the three and nine months ended June 30, 2018, respectively, primarily related to the remeasurement of net deferred tax assets at the lower corporate statutory income tax rates. Furthermore, a benefit of $5 million was recognized in the nine months ended June 30, 2019 related to the expected utilization of tax attributes as a result of the clarification of certain provisions of Kentucky tax reform legislation.

The Company finalized its provisional estimates of the impacts of U.S. tax reform legislation during the three months ended December 31, 2018, which resulted in no significant adjustments.

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Employee Benefit Plans

9 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

Employee Benefit Plans

EMPLOYEE BENEFIT PLANS

The following table summarizes the components of pension and other postretirement benefit cost (income):

					Other postretirement benefits
	Pension benefits
(In millions)	2019		2018		2019		2018
Three months ended June 30
Service cost	$	—	$	—	$	—	$	—
Interest cost	21		19		—		—
Expected return on plan assets	(20)		(26)		—		—
Amortization of prior service credit	—		—		(3)		(3)
Net periodic benefit cost (income)	$	1	$	(7)	$	(3)	$	(3)
Nine months ended June 30
Service cost	$	1	$	1	$	—	$	—
Interest cost	61		56		1		1
Expected return on plan assets	(60)		(78)		—		—
Amortization of prior service credit	—		—		(9)		(9)
Net periodic benefit cost (income)	$	2	$	(21)	$	(8)	$	(8)

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Litigation, Claims and Contingencies

9 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Litigation, Claims and Contingencies

LITIGATION, CLAIMS AND CONTINGENCIES

From time to time, Valvoline is party to lawsuits, claims, and other legal proceedings that arise in the ordinary course of business. The Company establishes liabilities for the outcome of such matters where losses are determined to be probable and reasonably estimable. Where appropriate, the Company has recorded liabilities with respect to these matters, which were immaterial for the periods presented as reflected in the condensed consolidated financial statements herein. There are certain claims and legal proceedings pending where loss is not determined to be probable or reasonably estimable, and therefore, accruals have not been made. In addition, Valvoline discloses matters for which management believes a material loss is at least reasonably possible.

In all instances, management has assessed each matter based on current information available and made a judgment concerning its potential outcome, giving due consideration to the amount and nature of the claim and the probability of success. The Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable.

Although the ultimate resolution of these matters cannot be predicted with certainty and there can be no assurances that the actual amounts required to satisfy liabilities from these matters will not exceed the amounts reflected in the condensed consolidated financial statements, based on information available at this time, it is the

opinion of management that such pending claims or proceedings will not have a material adverse effect on its condensed consolidated financial statements.

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Earnings Per Share

9 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

The following table summarizes basic and diluted earnings per share for the following periods:

	Three months ended				Nine months ended
	June 30				June 30
(In millions, except per share data)	2019		2018		2019		2018
Numerator
Net income	$	65	$	64	$	181	$	121
Denominator
Weighted average common shares outstanding	189		195		189		199
Effect of potentially dilutive securities (a)	—		1		—		1
Weighted average diluted shares outstanding	189		196		189		200
Earnings per share
Basic	$	0.34	$	0.33	$	0.96	$	0.61
Diluted	$	0.34	$	0.33	$	0.96	$	0.61

(a) Approximately 1 million and 2 million outstanding stock appreciation rights were not included in the computation of diluted earnings per share because their effect would have been antidilutive for the three and nine months ended June 30, 2019, respectively.

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Reportable Segment Information

9 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Reportable Segment Information

REPORTABLE SEGMENT INFORMATION

Valvoline manages and reports within the following three segments: 

•Quick Lubes - services the passenger car and light truck quick lube market through company-owned and independent franchised retail quick lube service center stores and independent Express Care stores that service vehicles with Valvoline products, as well as through investment in a joint venture in China to pilot expansion of retail quick lube service center stores outside of North America.

•Core North America - sells engine and automotive maintenance products in the United States and Canada to retailers, installers, and heavy-duty customers to service vehicles and equipment.

•International - sells engine and automotive maintenance products in approximately 140 countries outside of the United States and Canada for the maintenance of consumer and commercial vehicles and equipment.

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker in assessing segment performance and in allocating the Company’s resources. Sales and operating income are the primary U.S. GAAP measures evaluated in assessing each reportable segment’s financial performance. Operating income by segment includes the allocation of shared corporate costs, which are allocated consistently based on each segment’s proportional contribution to various financial measures. Intersegment sales are not material, and assets are not allocated and included in the assessment of segment performance; consequently, these items are not disclosed by segment herein.

To maintain operating focus on business performance, certain corporate and non-operational items, including restructuring and related expenses, as well as adjustments related to legacy businesses that no longer are attributed to Valvoline, are excluded from the segment operating results utilized by the chief operating decision maker in evaluating segment performance and are separately delineated within Unallocated and other to reconcile to total reported Operating income as shown in the table below.

The following table presents sales and operating income for each reportable segment:

	Three months ended				Nine months ended
(In millions)	June 30				June 30
	2019		2018		2019		2018
Sales
Quick Lubes	$	211	$	167	$	600	$	479
Core North America	260		264		735		773
International	142		146		426		439
Consolidated sales	$	613	$	577	$	1,761	$	1,691
Operating income
Quick Lubes	$	48	$	38	$	130	$	111
Core North America	38		41		109		130
International	20		20		61		63
Total operating segments	106		99		300		304
Unallocated and other (a)	(4)		3		(15)		(14)
Consolidated operating income	$	102	$	102	$	285	$	290

(a) Unallocated and other includes Legacy and separation-related expenses, net, and restructuring and related expenses.

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Guarantor Financial Information

9 Months Ended

Jun. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Guarantor Financial Information

GUARANTOR FINANCIAL INFORMATION

The Senior Notes detailed in Note 9 are general unsecured senior obligations of Valvoline Inc. and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by the combined “Guarantor Subsidiaries.” Other subsidiaries (the “Non-Guarantor Subsidiaries”) largely represent the international operations of the Company, which do not guarantee the Senior Notes.

The following tables present, on a consolidating basis, the condensed statements of comprehensive income, condensed balance sheets, and condensed statements of cash flows for the parent issuer of these Senior Notes, the Guarantor Subsidiaries on a combined basis, the Non-Guarantor Subsidiaries on a combined basis, and the eliminations necessary to arrive at the Company’s consolidated results.

Condensed Consolidating Statements of Comprehensive Income
For the three months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	491	$	140	$	(18)	$	613
Cost of sales	—		324		100		(18)		406
Gross profit	—		167		40		—		207
Selling, general and administrative expenses	3		87		26		—		116
Net legacy and separation-related expenses	—		—		—		—		—
Equity and other (income) expenses, net	—		(16)		5		—		(11)
Operating (loss) income	(3)		96		9		—		102
Net pension and other postretirement plan income	—		(2)		—		—		(2)
Net interest and other financing expenses	17		2		—		—		19
(Loss) income before income taxes	(20)		96		9		—		85
Income tax (benefit) expense	(5)		24		1		—		20
Equity in net income of subsidiaries	(80)		(8)		—		88		—
Net income	$	65	$	80	$	8	$	(88)	$	65
Total comprehensive income	$	63	$	78	$	9	$	(87)	$	63

Condensed Consolidating Statements of Comprehensive Income
For the three months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	456	$	137	$	(16)	$	577
Cost of sales	—		294		98		(16)		376
Gross profit	—		162		39		—		201
Selling, general and administrative expenses	3		81		26		—		110
Net legacy and separation-related income	(3)		—		—		—		(3)
Equity and other (income) expenses, net	—		(11)		3		—		(8)
Operating income	—		92		10		—		102
Net pension and other postretirement plan income	—		(10)		—		—		(10)
Net interest and other financing expenses	14		1		—		—		15
(Loss) income before income taxes	(14)		101		10		—		97
Income tax (benefit) expense	(1)		30		4		—		33
Equity in net income of subsidiaries	(77)		(6)		—		83		—
Net income	$	64	$	77	$	6	$	(83)	$	64
Total comprehensive income	$	48	$	61	$	(5)	$	(56)	$	48

Condensed Consolidating Statements of Comprehensive Income
For the nine months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	1,396	$	415	$	(50)	$	1,761
Cost of sales	—		917		301		(50)		1,168
Gross profit	—		479		114		—		593
Selling, general and administrative expenses	8		258		68		—		334
Net legacy and separation-related expenses	3		—		—		—		3
Equity and other (income) expenses, net	—		(43)		14		—		(29)
Operating (loss) income	(11)		264		32		—		285
Net pension and other postretirement plan income	—		(7)		—		—		(7)
Net interest and other financing expenses	47		5		3		—		55
(Loss) income before income taxes	(58)		266		29		—		237
Income tax (benefit) expense	(16)		65		7		—		56
Equity in net income of subsidiaries	(223)		(22)		—		245		—
Net income	$	181	$	223	$	22	$	(245)	$	181
Total comprehensive income	$	173	$	215	$	20	$	(235)	$	173

Condensed Consolidating Statements of Comprehensive Income
For the nine months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	1,319	$	413	$	(41)	$	1,691
Cost of sales	—		832		297		(41)		1,088
Gross profit	—		487		116		—		603
Selling, general and administrative expenses	10		247		71		—		328
Net legacy and separation-related expenses	4		10		—		—		14
Equity and other (income) expenses, net	—		(37)		8		—		(29)
Operating (loss) income	(14)		267		37		—		290
Net pension and other postretirement plan income	—		(30)		—		—		(30)
Net interest and other financing expenses	39		4		2		—		45
(Loss) income before income taxes	(53)		293		35		—		275
Income tax expense	16		128		10		—		154
Equity in net income of subsidiaries	(190)		(25)		—		215		—
Net income	$	121	$	190	$	25	$	(215)	$	121
Total comprehensive income	$	105	$	174	$	17	$	(191)	$	105

Condensed Consolidating Balance Sheets
As of June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Assets
Current assets
Cash and cash equivalents	$	—	$	29	$	97	$	—	$	126
Accounts receivable, net	—		203		359		(139)		423
Inventories, net	—		117		83		—		200
Prepaid expenses and other current assets	1		29		22		—		52
Total current assets	1		378		561		(139)		801
Noncurrent assets
Property, plant and equipment, net	—		408		47		—		455
Goodwill and intangibles, net	—		418		72		—		490
Equity method investments	—		35		—		—		35
Investment in subsidiaries	1,158		553		—		(1,711)		—
Deferred income taxes	79		19		15		—		113
Other noncurrent assets	3		95		8		—		106
Total noncurrent assets	$	1,240	1,528		142		(1,711)		1,199
Total assets	$	1,241	$	1,906	$	703	$	(1,850)	$	2,000
Liabilities and Stockholders’ Deficit
Current liabilities
Current portion of long-term debt	$	7	$	—	$	—	$	—	$	7
Trade and other payables	97		107		98		(139)		163
Accrued expenses and other liabilities	20		188		34		—		242
Total current liabilities	124		295		132		(139)		412
Noncurrent liabilities
Long-term debt	1,333		1		—		—		1,334
Employee benefit obligations	—		305		17		—		322
Other noncurrent liabilities	36		147		1		—		184
Total noncurrent liabilities	1,369		453		18		—		1,840
Commitments and contingencies
Stockholders’ (deficit) equity	(252)		1,158		553		(1,711)		(252)
Total liabilities and stockholders’ deficit / equity	$	1,241	$	1,906	$	703	$	(1,850)	$	2,000

Condensed Consolidating Balance Sheets
As of September 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Assets
Current assets
Cash and cash equivalents	$	—	$	20	$	76	$	—	$	96
Accounts receivable, net	—		48		480		(119)		409
Inventories, net	—		95		81		—		176
Prepaid expenses and other current assets	1		38		5		—		44
Total current assets	1		201		642		(119)		725
Noncurrent assets
Property, plant and equipment, net	—		384		36		—		420
Goodwill and intangibles, net	—		396		52		—		448
Equity method investments	—		31		—		—		31
Investment in subsidiaries	801		509		—		(1,310)		—
Deferred income taxes	62		63		13		—		138
Other noncurrent assets	2		85		5		—		92
Total noncurrent assets	865		1,468		106		(1,310)		1,129
Total assets	$	866	$	1,669	$	748	$	(1,429)	$	1,854
Liabilities and Stockholders’ Deficit
Current liabilities
Current portion of long-term debt	$	30	$	—	$	—	$	—	$	30
Trade and other payables	3		241		53		(119)		178
Accrued expenses and other liabilities	7		168		28		—		203
Total current liabilities	40		409		81		(119)		411
Noncurrent liabilities
Long-term debt	1,151		1		140		—		1,292
Employee benefit obligations	—		317		16		—		333
Other noncurrent liabilities	33		141		2		—		176
Total noncurrent liabilities	1,184		459		158		—		1,801
Commitments and contingencies
Stockholders’ (deficit) equity	(358)		801		509		(1,310)		(358)
Total liabilities and stockholders’ deficit / equity	$	866	$	1,669	$	748	$	(1,429)	$	1,854

Condensed Consolidating Statements of Cash Flows
For the nine months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash flows (used in) provided by operating activities	$	(94)	$	98	$	210	$	—	$	214
Cash flows from investing activities
Additions to property, plant and equipment	—		(60)		(13)		—		(73)
Acquisitions, net of cash acquired	—		(28)		(22)		—		(50)
Other investing activities, net	—		1		(2)		—		(1)
Cash flows used in investing activities	—		(87)		(37)		—		(124)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	661		—		82		—		743
Repayments on borrowings	(505)		—		(222)		—		(727)
Payments for purchase of additional ownership in subsidiary	—		—		(1)		—		(1)
Cash dividends paid	(60)		—		—		—		(60)
Other financing activities	(2)		(2)		—		—		(4)
Cash flows provided by (used in) financing activities	94		(2)		(141)		—		(49)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	—		—		—		—		—
Increase in cash, cash equivalents, and restricted cash	—		9		32		—		41
Cash, cash equivalents, and restricted cash - beginning of year	—		20		76		—		96
Cash, cash equivalents, and restricted cash - end of period	$	—	$	29	$	108	$	—	$	137

Condensed Consolidating Statements of Cash Flows
For the nine months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash flows (used in) provided by operating activities	$	(28)	$	287	$	(78)	$	—	$	181
Cash flows from investing activities
Additions to property, plant and equipment	—		(48)		(3)		—		(51)
Acquisitions, net of cash acquired	—		(71)		—		—		(71)
Other investing activities, net	—		5		—		—		5
Return of advance from subsidiary	263		—		—		(263)		—
Cash flows provided by (used in) investing activities	263		(114)		(3)		(263)		(117)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	70		—		100		—		170
Repayments on borrowings	(38)		—		(1)		—		(39)
Repurchases of common stock	(220)		—		—		—		(220)
Payments for purchase of additional ownership in subsidiary	—		—		(15)		—		(15)
Cash dividends paid	(45)		—		—		—		(45)
Other financing activities	(2)		(2)		(2)		—		(6)
Other intercompany activity, net	—		(263)		—		263		—
Total cash (used in) provided by financing activities	(235)		(265)		82		263		(155)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	—		—		(3)		—		(3)
Decrease in cash, cash equivalents and restricted cash	—		(92)		(2)		—		(94)
Cash, cash equivalents, and restricted cash - beginning of year	—		99		102		—		201
Cash, cash equivalents, and restricted cash - end of period	$	—	$	7	$	100	$	—	$	107

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Subsequent Events

9 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

Acquisition activity

From July 1 through July 31, 2019, Valvoline completed four acquisitions for an aggregate purchase price of approximately $18 million. These acquisitions included three single-store acquisitions of service center stores within the Quick Lubes reportable segment and an Eastern European lubricant production company, including its manufacturing facility, within the International reportable segment. These acquisitions provide an opportunity to further grow Valvoline's Quick Lubes system of more than 500 company-owned service center stores and expand Valvoline’s presence in Eastern Europe, including additional investment in the Company’s regional European supply chain capabilities.

Dividend declared

On July 18, 2019, the Board of Directors of Valvoline declared a quarterly cash dividend of $0.106 per share of Valvoline common stock. The dividend is payable on September 16, 2019 to shareholders of record on August 30, 2019.

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Basis of Presentation and Significant Accounting Policies (Policies)

9 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Valvoline Inc. (“Valvoline” or the “Company”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Securities and Exchange Commission (“SEC”) regulations for interim financial reporting, which do not include all information and footnote disclosures normally included in annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. In the opinion of management, the assumptions underlying the condensed consolidated financial statements for these interim periods are reasonable, and all adjustments considered necessary for a fair presentation have been made and are of a normal recurring nature unless otherwise disclosed herein. The results for interim periods are not necessarily indicative of those to be expected for the entire year. Certain prior period amounts have been reclassified to conform to the current presentation.

Recent accounting pronouncements

The following standards relevant to Valvoline were either issued or adopted in the current year, or are expected to have a meaningful impact on Valvoline in future periods.

Recently adopted

In the first fiscal quarter of 2019, Valvoline adopted the following:

•In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance, which established a single comprehensive model for entities to use in accounting for revenue from contracts with customers and superseded most industry-specific revenue recognition guidance. This new guidance introduced a five-step model for revenue recognition focused on the transfer of control, as opposed to the transfer of risk and rewards under prior guidance. Valvoline adopted this new revenue recognition guidance on October 1, 2018 using the modified retrospective method applied to those contracts that were not completed at the date of adoption. Under this method, the new revenue recognition guidance has been applied prospectively from the date of adoption, while prior period financial statements continue to be reported in accordance with the previous guidance. The cumulative effect of the changes at adoption was recognized through an increase to opening retained deficit of $13 million, net of tax, related to the timing of certain sales to distributors. Revenue transactions recorded under the new guidance are substantially consistent with the treatment under prior guidance, and the impact of adoption was not material to the condensed consolidated financial statements as of and for the three and nine months ended June 30, 2019 and is not expected to be material on an ongoing basis. As part of the adoption, Valvoline modified certain control procedures and processes, none of which had a material effect on the Company’s internal control over financial reporting. Refer to Note 2 for additional information regarding Valvoline’s updated accounting policy for revenue from contracts with customers and adoption of this new guidance.

•In August 2016, the FASB issued new accounting guidance regarding the classification of certain cash receipts and payments in the statement of cash flows. The Company adopted the accounting guidance on October 1, 2018 using a retrospective approach and made an accounting policy election to classify distributions received from equity method investments based on the nature of the activities of the investee that generated the distribution, which is consistent with the Company’s previous classification as cash flows from operating activities. The other cash flow classification matters addressed in this guidance were either not relevant or material to Valvoline’s current activities. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Statements of Cash Flows.

•In November 2016, the FASB issued new accounting guidance, which requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Valvoline adopted this guidance retrospectively on October 1, 2018. The application of this guidance did not have a material impact on the Condensed Consolidated Statements of Cash Flows, nor did it require retrospective adjustment to the prior period financial statements as Valvoline did not have restricted cash or restricted cash equivalents in the prior periods presented. As of June 30, 2019, Valvoline had $11 million of deposits held with financial institutions, which is generally restricted for use in completing an acquisition, and is included in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet. This restricted cash has been included within the end-of-period total amounts shown within the Condensed Consolidated Statement of Cash Flows for the nine months ended June 30, 2019.

•In January 2017, the FASB issued new accounting guidance, which clarifies the definition of a business used across several areas of accounting, including the evaluation of whether a transaction should be accounted for as an acquisition (or disposal) of assets or as a business combination. The new guidance clarifies that a business must have at least one substantive process and also narrows the definition of outputs by more closely aligning with how outputs are described in the new revenue recognition standard. Valvoline adopted this guidance on October 1, 2018 with prospective application. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

•In May 2017, the FASB issued accounting guidance that amended the scope of modification accounting for share-based payment awards. The new guidance requires modification accounting if the fair value, vesting condition, or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. Valvoline adopted this guidance prospectively on October 1, 2018, and the Company did have certain modifications of share-based awards in connection with the restructuring activities described in Note 8; however, the award modifications and the adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

•In August 2018, the FASB issued new accounting guidance related to fees paid by a customer in a cloud computing arrangement, which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service arrangement with the existing capitalization guidance for implementation costs incurred to develop or obtain internal-use software. Valvoline adopted this guidance prospectively on October 1, 2018 and capitalized approximately $3 million of cloud computing arrangement implementation costs during the nine months ended June 30, 2019. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

Issued but not yet adopted

In February 2016, the FASB issued new accounting guidance, which outlines a comprehensive lease accounting model that requires lessees to recognize a right-of-use asset and a corresponding lease liability on the balance sheet. The lease liability will be measured at the present value of future lease payments, and the right-of-use asset will be measured at the lease liability amount, adjusted for prepaid lease payments, lease incentives received and the lessee’s initial direct costs (e.g., commissions). Lease expense will be recognized similar to current accounting guidance with operating leases resulting in straight-line expense and finance leases resulting in accelerated expense recognition similar to the existing accounting for capital leases.

Management will finalize its assessment and adopt the new guidance in the first fiscal quarter of 2020. This new guidance is expected to be adopted with election of the optional transition approach through recognition of the cumulative effect as an adjustment to retained deficit at adoption on October 1, 2019 without retrospective application to prior period financial statements. While the Company is finalizing its determinations, Valvoline

expects to elect certain practical expedients permitted by the new guidance, including the package of practical expedients that allows for previous accounting conclusions regarding lease identification and classification to be carried forward for leases which commence prior to adoption, as well as the practical expedient to not separate lease and non-lease components and account for them as a single lease component. The Company does not currently expect to elect the hindsight or short-term lease practical expedients.

The Company has made progress in its assessment and implementation efforts, including the identification and assessment of all forms of its leases, implementing an enterprise-wide lease management system, and evaluating additional changes to business processes and internal controls to ensure the reporting and disclosure requirements of the new guidance are met. At this time, the Company cannot estimate the specific quantitative impact of adopting this new guidance; however, adoption is expected to have a material impact on the Condensed Consolidated Balance Sheet as Valvoline has a significant number of operating leases, including many of its service center store locations, which will be recognized as right-of-use assets with associated lease liabilities upon adoption. The Company does not currently anticipate a material impact on the Condensed Consolidated Statements of Comprehensive Income, Cash Flows, or Stockholders’ Deficit.

Revenue Recognition

Revenue is recognized for the amount that reflects the consideration the Company is expected to be entitled to based on when control of the promised good or service is transferred to the customer. Revenue recognition is evaluated through the following five steps: (i) identification of the contract(s) with a customer; (ii) identification of the performance obligations in the contract(s); (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract(s); and (v) recognition of revenue when or as a performance obligation is satisfied. Below is a summary of the key considerations for Valvoline’s material revenue-generating activities:

Engine and automotive maintenance products

Engine and automotive maintenance products primarily include lubricants, antifreeze, chemicals, filters, and other complementary products for use across a wide array of vehicles and engines. The Company’s customers typically enter into a sales agreement which outlines a framework of terms and conditions that apply to all current and future purchase orders for the customer submitted under such sales agreement. In these situations, the Company’s contract with the customer is the sales agreement combined with the customer purchase order as specific products and quantities are not indicated until a purchase order is submitted. As the Company’s contract with the customer is typically for a single purchase order under the supply agreement to be delivered at a point in time, the duration of the contract is almost always one year or less. The Company’s products are distinct and separately identifiable on customer purchase orders, with each product sale representing a separate performance obligation that is generally delivered simultaneously. Valvoline is the principal to these contracts as the Company has control of the products prior to transfer to the customer. Accordingly, revenue is recognized on a gross basis.

The Company determines the point in time at which control is transferred and the performance obligation is satisfied by considering when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of the product, which generally coincides with the transfer of title and risk of loss to the customer and is typically determined based on delivery terms within the underlying contract.

Customer payment terms vary by region and customer and are generally 30 to 60 days after delivery. Valvoline does not provide extended payment terms greater than one year.

Company-owned quick-lube operations

Performance obligations related to company-owned quick-lube operations primarily include the sale of engine and automotive maintenance products and related services. These performance obligations are distinct and are delivered simultaneously at a point in time. Accordingly, revenue from company-owned quick-lube operations is recognized when payment is tendered at the point of sale, which coincides with the completion of product and service delivery and the transfer of control and benefits from the performance obligations to the customer.

Franchised quick-lube operations

The primary performance obligations related to franchised quick-lube operations include product sales as described above and the license of intellectual property, which provides access to the Valvoline brand and proprietary information to operate service center stores over the term of a franchise agreement. Other franchise performance obligations do not result in material revenue. Each performance obligation is distinct, and

franchisees generally receive and consume the benefits provided by the Company’s performance over the course of the franchise agreement, which typically range from 10 to 15 years. Billings and payments occur monthly.

In exchange for the license of Valvoline intellectual property, franchisees generally remit initial fees upon opening a service center store and royalties at a contractual rate of the applicable service center store sales over the term of the franchise agreement. The license provides access to the intellectual property over the term of the franchise agreement and is considered a right-to-access license of symbolic intellectual property as substantially all of its utility is derived from association with the Company’s past and ongoing activities. The license granted to operate each franchised service center store is the predominant item to which the royalties relate and represents a distinct performance obligation which is recognized over time as the underlying sales occur, as this is the most appropriate measure of progress toward complete satisfaction of the performance obligation.

Variable consideration

The Company only offers an assurance-type warranty with regard to the intended functionality of products sold, which therefore, does not represent a distinct performance obligation within the context of the contract. Product returns and refunds are generally not material and are not accepted unless the item is defective as manufactured. Estimated product returns are recorded as a reduction in reported revenues at the time of sale based upon historical product return experience and is adjusted for known trends to arrive at the amount of consideration to which Valvoline expects to receive.

The nature of Valvoline’s contracts with customers often give rise to variable consideration consisting primarily of promotional rebates and customer pricing discounts based on achieving certain levels of sales activity that generally decrease the transaction price. The Company determines the transaction price as the amount of consideration it expects to be entitled to in exchange for fulfilling the performance obligations, including the effects of any variable consideration, or amounts payable to the customer when there is a basis to reasonably estimate the amount and it is probable there will not be a significant reversal. Variable consideration is recorded as a reduction of the transaction price at the time of sale and is primarily estimated utilizing the most likely amount method that is expected to be earned as the Company is able to estimate the anticipated discounts within a sufficiently narrow range of possible outcomes based on its extensive historical experience with certain customers, similar programs and management’s judgment with respect to estimating customer participation and performance levels. Variable consideration is reassessed at each reporting date and adjustments are made, when necessary.

Allocation of transaction price

In each contract with multiple performance obligations, Valvoline allocates the transaction price, including variable consideration, to each performance obligation on a relative standalone selling price basis, which is generally determined based on the directly observable data of the Company’s standalone sales of the performance obligations in similar circumstances to similar customers. In the absence of directly observable standalone prices, the Company may utilize prices charged by competitors selling similar products or use an expected cost-plus margin approach. The amount allocated to each performance obligation is recognized as revenue as control is transferred to the customer.

Contract balances

Valvoline invoices customers once or as performance obligations are satisfied, at which point payment becomes unconditional. As the majority of the Company’s performance obligations are satisfied at a point in time and customers typically do not make material payments in advance, nor does Valvoline have a right to consideration in advance of control transfer, the Company had no contract assets or contract liabilities recorded within its Condensed Consolidated Balance Sheet at adoption or as of June 30, 2019. The Company recognizes a receivable on its Condensed Consolidated Balance Sheet when the Company performs a service or transfers a product in advance of receiving consideration, and the Company’s right to consideration is unconditional and only the passage of time is required before payment of that consideration is due.

Practical expedients and accounting policies

Valvoline elected the following practical expedients and policy elections in accordance with the new revenue recognition accounting guidance adopted beginning in fiscal 2019:

•Significant financing component – The promised amount of consideration has not been adjusted as the Company does not have significant financing arrangements with its customers. The Company expects that the period between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service will be one year or less.

•Incremental costs of obtaining a contract - The Company expenses incremental direct costs of obtaining a contract, primarily sales commissions, when incurred due to the short-term nature of individual contracts, which would result in amortization periods of one year or less. These costs are not material and are recorded in Selling, general and administrative expenses within the Condensed Consolidated Statements of Comprehensive Income.

•Shipping and handling costs - Valvoline elected to account for shipping and handling activities that occur after the customer has obtained control as fulfillment activities (i.e., an expense) rather than as a performance obligation. Accordingly, amounts billed for shipping and handling are a component of the transaction price included in net sales, while costs incurred are included in cost of sales.

•Sales and use-based taxes - Valvoline excludes from its revenue any amounts collected from customers for sales (and similar) taxes. These amounts are, however, reflected in accrued expenses until remitted to the appropriate governmental authority.

•Disclosure of remaining performance obligations - The Company elected to apply the practical expedient to omit disclosures of remaining performance obligations for contracts which have an initial expected term of one year or less. In addition, the Company has elected to not disclose remaining performance obligations for its franchise agreements with variable consideration based on service center store sales.

Inventories

Inventories are primarily carried at the lower of cost or net realizable value using the weighted average cost method. In addition, certain lubricants are valued at the lower of cost or market using the last-in, first-out (“LIFO”) method.

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Revenue Recognition (Tables)

9 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Schedule of Cumulative Effect and Impact of New Accounting Pronouncements

The following table reconciles the Condensed Consolidated Balance Sheet line items impacted by the cumulative effect of adoption of the new revenue recognition accounting guidance on October 1, 2018:

(In millions)	September 30, 2018 as reported		Adjustments		Balances at October 1, 2018
Accounts receivable, net	$	409	$	(33)	$	376
Inventories, net	$	176	$	14	$	190
Deferred income taxes	$	138	$	6	$	144
Retained deficit	$	399	$	13	$	412

Most revenue transactions and activities recorded under the new revenue recognition accounting guidance are substantially consistent with the treatment under prior guidance. The following tables summarize the impact of the new revenue accounting guidance on Valvoline’s Condensed Consolidated Balance Sheet and Condensed Consolidated Statements of Comprehensive Income as of and for the three and nine months ended June 30, 2019:

	June 30, 2019
Impact of Changes to Condensed Consolidated Balance Sheet	As reported		Adjustments (a)		Under prior guidance
(In millions)
Accounts receivable, net	$	423	$	37	$	460
Inventories, net	$	200	$	(15)	$	185
Deferred income taxes	$	113	$	(6)	$	107
Accrued expenses and other liabilities	$	242	$	(1)	$	241
Retained deficit	$	291	$	(15)	$	276

^(a) Adjustments include the opening retained deficit adjustments as detailed in the table above.

	Three months ended June 30, 2019
Impact of Changes to Condensed Consolidated Statement of Comprehensive Income	As reported		Adjustments		Under prior guidance
(In millions)
Sales	$	613	$	(10)	$	603
Cost of sales	406		(14)		392
Gross profit	$	207	$	4	$	211
Selling, general and administrative expenses	$	116	$	3	$	119
Equity and other income, net	$	11	$	1	$	12
Operating income	$	102	$	2	$	104
Income before income taxes	$	85	$	2	$	87
Income tax expense	$	20	$	1	$	21
Net income	$	65	$	1	$	66
Basic earnings per share	$	0.34	$	0.01	$	0.35
Diluted earnings per share	$	0.34	$	0.01	$	0.35

	Nine months ended June 30, 2019
Impact of Changes to Condensed Consolidated Statement of Comprehensive Income	As reported		Adjustments		Under prior guidance
(In millions)
Sales	$	1,761	$	(34)	$	1,727
Cost of sales	1,168		(42)		1,126
Gross profit	$	593	$	8	$	601
Selling, general and administrative expenses	$	334	$	6	$	340
Equity and other income, net	$	29	$	1	$	30
Operating income	$	285	$	3	$	288
Income before income taxes	$	237	$	3	$	240
Income tax expense	$	56	$	1	$	57
Net income	$	181	$	2	$	183
Basic earnings per share	$	0.96	$	0.01	$	0.97
Diluted earnings per share	$	0.96	$	0.01	$	0.97

Schedule of Disaggregated Revenues

The following summarizes sales by primary customer channel for the Company’s reportable segments:

(In millions)	Three months ended June 30, 2019		Nine months ended June 30, 2019
Quick Lubes
Company-owned operations	$	136	$	388
Non-company owned operations	75		212
Total Quick Lubes	211		600
Core North America
Retail	143		399
Installer and other	117		336
Total Core North America	260		735
International	142		426
Consolidated sales	$	613	$	1,761

Sales by reportable segment disaggregated by geographic market follows for the three and nine months ended June 30, 2019:

(In millions)	Quick Lubes		Core North America		International		Totals
Three months ended
North America (a)	$	211	$	260	$	—	$	471
Europe, Middle East and Africa ("EMEA")	—		—		43		43
Asia Pacific	—		—		72		72
Latin America (a)	—		—		27		27
Total	$	211	$	260	$	142	$	613
Nine months ended
North America (a)	$	600	$	735	$	—	$	1,335
Europe, Middle East and Africa ("EMEA")	—		—		134		134
Asia Pacific	—		—		212		212
Latin America (a)	—		—		80		80
Total	$	600	$	735	$	426	$	1,761

(a) Valvoline includes the United States and Canada in its North America region. Mexico is included within the Latin America region.

Disaggregation of Sales by Timing of Revenue Recognized

The following disaggregates the Company’s sales by timing of revenue recognized:

(In millions)	Three months ended June 30, 2019		Nine months ended June 30, 2019
Sales at a point in time	$	602	$	1,730
Franchised revenues transferred over time	11		31
Consolidated sales	$	613	$	1,761

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Fair Value Measurements (Tables)

9 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities at Fair Value

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy as of:

(In millions)	Fair Value Hierarchy	June 30 2019		September 30 2018
Cash and cash equivalents
Money market funds	Level 1	$	3	$	5
Time deposits (a)	Level 2	34		22
Prepaid expenses and other current assets
Currency derivatives (b)	Level 2	1		1
Time deposits (a)	Level 2	1		—
Other noncurrent assets
Non-qualified trust funds	Level 1	21		25
Total assets at fair value		$	60	$	53
Accrued expenses and other liabilities
Currency derivatives (b)	Level 2	$	2	$	1
Total liabilities at fair value		$	2	$	1

(a) Time deposits with original maturities of three months or less are classified within cash equivalents and those with original maturities of one year or less are classified within Prepaid expenses and other current assets.

(b) The Company had outstanding contracts with notional values of $82 million and $74 million as of June 30, 2019 and September 30, 2018, respectively.

Summary of Fair Value of Debt

Carrying values shown in the following table are net of unamortized discounts and issuance costs.

	June 30, 2019						September 30, 2018
(In millions)	Fair value		Carrying value		Unamortized discount and issuance costs		Fair value		Carrying value		Unamortized discount and issuance costs
2024 Notes	$	388	$	371	$	4	$	376	$	370	$	5
2025 Notes	401		395		5		376		395		5
Total	$	789	$	766	$	9	$	752	$	765	$	10

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Acquisitions and Divestitures (Tables)

9 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Summary of Consideration Paid and Assets and Liabilities Acquired

A summary follows of the aggregate cash consideration paid and the total assets acquired and liabilities assumed for the nine months ended June 30:

(In millions)	2019		2018
Inventories	$	—	$	1
Property, plant and equipment	3		2
Goodwill	34		42
Intangible assets (a)
Reacquired franchise rights	5		26
Customer relationships	5		—
Trademarks and trade names	1		—
Other	2		—
Net assets acquired	$	50	$	71

(a) Intangible assets acquired during the nine months ended June 30, 2019 have a weighted average amortization period of 10 years.

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Accounts Receivable (Tables)

9 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Summary of Accounts Receivable

The following summarizes Valvoline’s accounts receivable as of:

(In millions)	June 30 2019		September 30 2018
Trade	$	412	$	390
Other	16		26
Accounts receivable, gross	428		416
Allowance for doubtful accounts	(5)		(7)
Total accounts receivable, net	$	423	$	409

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Inventories (Tables)

9 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Summary of Inventory

The following summarizes Valvoline’s inventories as of:

(In millions)	June 30 2019		September 30 2018
Finished products	$	210	$	189
Raw materials, supplies and work in process	34		30
Reserve for LIFO cost valuation	(41)		(40)
Excess and obsolete inventory reserves	(3)		(3)
Total inventories, net	$	200	$	176

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Goodwill and Other Intangibles (Tables)

9 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following table summarizes the changes in the carrying amount of goodwill by reportable segment and in total during the nine months ended June 30, 2019:

(In millions)	Quick Lubes		Core North America		International		Total
Balance at September 30, 2018	$	252	$	89	$	40	$	381
Acquisitions (a)	34		—		—		34
Balance at June 30, 2019	$	286	$	89	$	40	$	415

(a) Refer to Note 4 for details regarding acquisitions completed during the nine months ended June 30, 2019.

Schedule of Definite-Lived Intangible Assets

The following summarizes the gross carrying amounts and accumulated amortization of the Company’s intangible assets as of:

	June 30, 2019						September 30, 2018
(In millions)	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Definite-lived intangible assets
Trademarks and trade names	$	30	$	(4)	$	26	$	29	$	(2)	$	27
Reacquired franchise rights	37		(7)		30		32		(4)		28
Customer relationships	21		(4)		17		14		(3)		11
Other intangible assets	3		(1)		2		1		—		1
Total definite-lived intangible assets	$	91	$	(16)	$	75	$	76	$	(9)	$	67

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Restructuring Activities (Tables)

9 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Schedule of Restructuring Related Liability

Accrued expenses and other liabilities:

(In millions)	Employee Termination Benefits
Balance at September 30, 2018	$	—
Expenses recognized during the period	10
Payments	(1)
Balance at June 30, 2019	$	9

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Debt (Tables)

9 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Total Debt

The following table summarizes Valvoline’s total debt as of:

(In millions)	June 30 2019		September 30 2018
2025 Notes	$	400	$	400
2024 Notes	375		375
Term Loans	575		270
Revolvers	—		147
Trade Receivables Facility	—		140
Other (a)	(9)		(10)
Total debt	$	1,341	$	1,322
Current portion of long-term debt	7		30
Long-term debt	$	1,334	$	1,292

(a) Other includes debt issuance costs and discounts of $10 million and $11 million as of June 30, 2019 and September 30, 2018, respectively. In addition, Other includes $1 million of debt as of June 30, 2019 and September 30, 2018 which was primarily acquired through acquisitions.

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Income Taxes (Tables)

9 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of Income Tax Expense and Effective Tax Rate

The following summarizes income tax expense and the effective tax rate in each interim period:

	Three months ended June 30						Nine months ended June 30
(In millions)	2019			2018			2019			2018
Income tax expense	$	20		$	33		$	56		$	154
Effective tax rate percentage	23.5		%	34.0		%	23.6		%	56.0		%

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Employee Benefit Plans (Tables)

9 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

Components of Pension and Other Postretirement Benefit Income

The following table summarizes the components of pension and other postretirement benefit cost (income):

					Other postretirement benefits
	Pension benefits
(In millions)	2019		2018		2019		2018
Three months ended June 30
Service cost	$	—	$	—	$	—	$	—
Interest cost	21		19		—		—
Expected return on plan assets	(20)		(26)		—		—
Amortization of prior service credit	—		—		(3)		(3)
Net periodic benefit cost (income)	$	1	$	(7)	$	(3)	$	(3)
Nine months ended June 30
Service cost	$	1	$	1	$	—	$	—
Interest cost	61		56		1		1
Expected return on plan assets	(60)		(78)		—		—
Amortization of prior service credit	—		—		(9)		(9)
Net periodic benefit cost (income)	$	2	$	(21)	$	(8)	$	(8)

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Earnings Per Share (Tables)

9 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table summarizes basic and diluted earnings per share for the following periods:

	Three months ended				Nine months ended
	June 30				June 30
(In millions, except per share data)	2019		2018		2019		2018
Numerator
Net income	$	65	$	64	$	181	$	121
Denominator
Weighted average common shares outstanding	189		195		189		199
Effect of potentially dilutive securities (a)	—		1		—		1
Weighted average diluted shares outstanding	189		196		189		200
Earnings per share
Basic	$	0.34	$	0.33	$	0.96	$	0.61
Diluted	$	0.34	$	0.33	$	0.96	$	0.61

(a) Approximately 1 million and 2 million outstanding stock appreciation rights were not included in the computation of diluted earnings per share because their effect would have been antidilutive for the three and nine months ended June 30, 2019, respectively.

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Reportable Segment Information (Tables)

9 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Schedule of Segment Reporting Information

The following table presents sales and operating income for each reportable segment:

	Three months ended				Nine months ended
(In millions)	June 30				June 30
	2019		2018		2019		2018
Sales
Quick Lubes	$	211	$	167	$	600	$	479
Core North America	260		264		735		773
International	142		146		426		439
Consolidated sales	$	613	$	577	$	1,761	$	1,691
Operating income
Quick Lubes	$	48	$	38	$	130	$	111
Core North America	38		41		109		130
International	20		20		61		63
Total operating segments	106		99		300		304
Unallocated and other (a)	(4)		3		(15)		(14)
Consolidated operating income	$	102	$	102	$	285	$	290

(a) Unallocated and other includes Legacy and separation-related expenses, net, and restructuring and related expenses.

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Guarantor Financial Information (Tables)

9 Months Ended

Jun. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Condensed Consolidating Statements of Comprehensive Income

The following tables present, on a consolidating basis, the condensed statements of comprehensive income, condensed balance sheets, and condensed statements of cash flows for the parent issuer of these Senior Notes, the Guarantor Subsidiaries on a combined basis, the Non-Guarantor Subsidiaries on a combined basis, and the eliminations necessary to arrive at the Company’s consolidated results.

Condensed Consolidating Statements of Comprehensive Income
For the three months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	491	$	140	$	(18)	$	613
Cost of sales	—		324		100		(18)		406
Gross profit	—		167		40		—		207
Selling, general and administrative expenses	3		87		26		—		116
Net legacy and separation-related expenses	—		—		—		—		—
Equity and other (income) expenses, net	—		(16)		5		—		(11)
Operating (loss) income	(3)		96		9		—		102
Net pension and other postretirement plan income	—		(2)		—		—		(2)
Net interest and other financing expenses	17		2		—		—		19
(Loss) income before income taxes	(20)		96		9		—		85
Income tax (benefit) expense	(5)		24		1		—		20
Equity in net income of subsidiaries	(80)		(8)		—		88		—
Net income	$	65	$	80	$	8	$	(88)	$	65
Total comprehensive income	$	63	$	78	$	9	$	(87)	$	63

Condensed Consolidating Statements of Comprehensive Income
For the three months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	456	$	137	$	(16)	$	577
Cost of sales	—		294		98		(16)		376
Gross profit	—		162		39		—		201
Selling, general and administrative expenses	3		81		26		—		110
Net legacy and separation-related income	(3)		—		—		—		(3)
Equity and other (income) expenses, net	—		(11)		3		—		(8)
Operating income	—		92		10		—		102
Net pension and other postretirement plan income	—		(10)		—		—		(10)
Net interest and other financing expenses	14		1		—		—		15
(Loss) income before income taxes	(14)		101		10		—		97
Income tax (benefit) expense	(1)		30		4		—		33
Equity in net income of subsidiaries	(77)		(6)		—		83		—
Net income	$	64	$	77	$	6	$	(83)	$	64
Total comprehensive income	$	48	$	61	$	(5)	$	(56)	$	48

Condensed Consolidating Statements of Comprehensive Income
For the nine months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	1,396	$	415	$	(50)	$	1,761
Cost of sales	—		917		301		(50)		1,168
Gross profit	—		479		114		—		593
Selling, general and administrative expenses	8		258		68		—		334
Net legacy and separation-related expenses	3		—		—		—		3
Equity and other (income) expenses, net	—		(43)		14		—		(29)
Operating (loss) income	(11)		264		32		—		285
Net pension and other postretirement plan income	—		(7)		—		—		(7)
Net interest and other financing expenses	47		5		3		—		55
(Loss) income before income taxes	(58)		266		29		—		237
Income tax (benefit) expense	(16)		65		7		—		56
Equity in net income of subsidiaries	(223)		(22)		—		245		—
Net income	$	181	$	223	$	22	$	(245)	$	181
Total comprehensive income	$	173	$	215	$	20	$	(235)	$	173

Condensed Consolidating Statements of Comprehensive Income
For the nine months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	1,319	$	413	$	(41)	$	1,691
Cost of sales	—		832		297		(41)		1,088
Gross profit	—		487		116		—		603
Selling, general and administrative expenses	10		247		71		—		328
Net legacy and separation-related expenses	4		10		—		—		14
Equity and other (income) expenses, net	—		(37)		8		—		(29)
Operating (loss) income	(14)		267		37		—		290
Net pension and other postretirement plan income	—		(30)		—		—		(30)
Net interest and other financing expenses	39		4		2		—		45
(Loss) income before income taxes	(53)		293		35		—		275
Income tax expense	16		128		10		—		154
Equity in net income of subsidiaries	(190)		(25)		—		215		—
Net income	$	121	$	190	$	25	$	(215)	$	121
Total comprehensive income	$	105	$	174	$	17	$	(191)	$	105

Condensed Income Statement

The following tables present, on a consolidating basis, the condensed statements of comprehensive income, condensed balance sheets, and condensed statements of cash flows for the parent issuer of these Senior Notes, the Guarantor Subsidiaries on a combined basis, the Non-Guarantor Subsidiaries on a combined basis, and the eliminations necessary to arrive at the Company’s consolidated results.

Condensed Consolidating Statements of Comprehensive Income
For the three months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	491	$	140	$	(18)	$	613
Cost of sales	—		324		100		(18)		406
Gross profit	—		167		40		—		207
Selling, general and administrative expenses	3		87		26		—		116
Net legacy and separation-related expenses	—		—		—		—		—
Equity and other (income) expenses, net	—		(16)		5		—		(11)
Operating (loss) income	(3)		96		9		—		102
Net pension and other postretirement plan income	—		(2)		—		—		(2)
Net interest and other financing expenses	17		2		—		—		19
(Loss) income before income taxes	(20)		96		9		—		85
Income tax (benefit) expense	(5)		24		1		—		20
Equity in net income of subsidiaries	(80)		(8)		—		88		—
Net income	$	65	$	80	$	8	$	(88)	$	65
Total comprehensive income	$	63	$	78	$	9	$	(87)	$	63

Condensed Consolidating Statements of Comprehensive Income
For the three months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	456	$	137	$	(16)	$	577
Cost of sales	—		294		98		(16)		376
Gross profit	—		162		39		—		201
Selling, general and administrative expenses	3		81		26		—		110
Net legacy and separation-related income	(3)		—		—		—		(3)
Equity and other (income) expenses, net	—		(11)		3		—		(8)
Operating income	—		92		10		—		102
Net pension and other postretirement plan income	—		(10)		—		—		(10)
Net interest and other financing expenses	14		1		—		—		15
(Loss) income before income taxes	(14)		101		10		—		97
Income tax (benefit) expense	(1)		30		4		—		33
Equity in net income of subsidiaries	(77)		(6)		—		83		—
Net income	$	64	$	77	$	6	$	(83)	$	64
Total comprehensive income	$	48	$	61	$	(5)	$	(56)	$	48

Condensed Consolidating Statements of Comprehensive Income
For the nine months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	1,396	$	415	$	(50)	$	1,761
Cost of sales	—		917		301		(50)		1,168
Gross profit	—		479		114		—		593
Selling, general and administrative expenses	8		258		68		—		334
Net legacy and separation-related expenses	3		—		—		—		3
Equity and other (income) expenses, net	—		(43)		14		—		(29)
Operating (loss) income	(11)		264		32		—		285
Net pension and other postretirement plan income	—		(7)		—		—		(7)
Net interest and other financing expenses	47		5		3		—		55
(Loss) income before income taxes	(58)		266		29		—		237
Income tax (benefit) expense	(16)		65		7		—		56
Equity in net income of subsidiaries	(223)		(22)		—		245		—
Net income	$	181	$	223	$	22	$	(245)	$	181
Total comprehensive income	$	173	$	215	$	20	$	(235)	$	173

Condensed Consolidating Statements of Comprehensive Income
For the nine months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	1,319	$	413	$	(41)	$	1,691
Cost of sales	—		832		297		(41)		1,088
Gross profit	—		487		116		—		603
Selling, general and administrative expenses	10		247		71		—		328
Net legacy and separation-related expenses	4		10		—		—		14
Equity and other (income) expenses, net	—		(37)		8		—		(29)
Operating (loss) income	(14)		267		37		—		290
Net pension and other postretirement plan income	—		(30)		—		—		(30)
Net interest and other financing expenses	39		4		2		—		45
(Loss) income before income taxes	(53)		293		35		—		275
Income tax expense	16		128		10		—		154
Equity in net income of subsidiaries	(190)		(25)		—		215		—
Net income	$	121	$	190	$	25	$	(215)	$	121
Total comprehensive income	$	105	$	174	$	17	$	(191)	$	105

Condensed Consolidating Balance Sheets

Condensed Consolidating Balance Sheets
As of June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Assets
Current assets
Cash and cash equivalents	$	—	$	29	$	97	$	—	$	126
Accounts receivable, net	—		203		359		(139)		423
Inventories, net	—		117		83		—		200
Prepaid expenses and other current assets	1		29		22		—		52
Total current assets	1		378		561		(139)		801
Noncurrent assets
Property, plant and equipment, net	—		408		47		—		455
Goodwill and intangibles, net	—		418		72		—		490
Equity method investments	—		35		—		—		35
Investment in subsidiaries	1,158		553		—		(1,711)		—
Deferred income taxes	79		19		15		—		113
Other noncurrent assets	3		95		8		—		106
Total noncurrent assets	$	1,240	1,528		142		(1,711)		1,199
Total assets	$	1,241	$	1,906	$	703	$	(1,850)	$	2,000
Liabilities and Stockholders’ Deficit
Current liabilities
Current portion of long-term debt	$	7	$	—	$	—	$	—	$	7
Trade and other payables	97		107		98		(139)		163
Accrued expenses and other liabilities	20		188		34		—		242
Total current liabilities	124		295		132		(139)		412
Noncurrent liabilities
Long-term debt	1,333		1		—		—		1,334
Employee benefit obligations	—		305		17		—		322
Other noncurrent liabilities	36		147		1		—		184
Total noncurrent liabilities	1,369		453		18		—		1,840
Commitments and contingencies
Stockholders’ (deficit) equity	(252)		1,158		553		(1,711)		(252)
Total liabilities and stockholders’ deficit / equity	$	1,241	$	1,906	$	703	$	(1,850)	$	2,000

Condensed Consolidating Balance Sheets
As of September 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Assets
Current assets
Cash and cash equivalents	$	—	$	20	$	76	$	—	$	96
Accounts receivable, net	—		48		480		(119)		409
Inventories, net	—		95		81		—		176
Prepaid expenses and other current assets	1		38		5		—		44
Total current assets	1		201		642		(119)		725
Noncurrent assets
Property, plant and equipment, net	—		384		36		—		420
Goodwill and intangibles, net	—		396		52		—		448
Equity method investments	—		31		—		—		31
Investment in subsidiaries	801		509		—		(1,310)		—
Deferred income taxes	62		63		13		—		138
Other noncurrent assets	2		85		5		—		92
Total noncurrent assets	865		1,468		106		(1,310)		1,129
Total assets	$	866	$	1,669	$	748	$	(1,429)	$	1,854
Liabilities and Stockholders’ Deficit
Current liabilities
Current portion of long-term debt	$	30	$	—	$	—	$	—	$	30
Trade and other payables	3		241		53		(119)		178
Accrued expenses and other liabilities	7		168		28		—		203
Total current liabilities	40		409		81		(119)		411
Noncurrent liabilities
Long-term debt	1,151		1		140		—		1,292
Employee benefit obligations	—		317		16		—		333
Other noncurrent liabilities	33		141		2		—		176
Total noncurrent liabilities	1,184		459		158		—		1,801
Commitments and contingencies
Stockholders’ (deficit) equity	(358)		801		509		(1,310)		(358)
Total liabilities and stockholders’ deficit / equity	$	866	$	1,669	$	748	$	(1,429)	$	1,854

Condensed Consolidating Statements of Cash Flows

Condensed Consolidating Statements of Cash Flows
For the nine months ended June 30, 2019
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash flows (used in) provided by operating activities	$	(94)	$	98	$	210	$	—	$	214
Cash flows from investing activities
Additions to property, plant and equipment	—		(60)		(13)		—		(73)
Acquisitions, net of cash acquired	—		(28)		(22)		—		(50)
Other investing activities, net	—		1		(2)		—		(1)
Cash flows used in investing activities	—		(87)		(37)		—		(124)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	661		—		82		—		743
Repayments on borrowings	(505)		—		(222)		—		(727)
Payments for purchase of additional ownership in subsidiary	—		—		(1)		—		(1)
Cash dividends paid	(60)		—		—		—		(60)
Other financing activities	(2)		(2)		—		—		(4)
Cash flows provided by (used in) financing activities	94		(2)		(141)		—		(49)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	—		—		—		—		—
Increase in cash, cash equivalents, and restricted cash	—		9		32		—		41
Cash, cash equivalents, and restricted cash - beginning of year	—		20		76		—		96
Cash, cash equivalents, and restricted cash - end of period	$	—	$	29	$	108	$	—	$	137

Condensed Consolidating Statements of Cash Flows
For the nine months ended June 30, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash flows (used in) provided by operating activities	$	(28)	$	287	$	(78)	$	—	$	181
Cash flows from investing activities
Additions to property, plant and equipment	—		(48)		(3)		—		(51)
Acquisitions, net of cash acquired	—		(71)		—		—		(71)
Other investing activities, net	—		5		—		—		5
Return of advance from subsidiary	263		—		—		(263)		—
Cash flows provided by (used in) investing activities	263		(114)		(3)		(263)		(117)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	70		—		100		—		170
Repayments on borrowings	(38)		—		(1)		—		(39)
Repurchases of common stock	(220)		—		—		—		(220)
Payments for purchase of additional ownership in subsidiary	—		—		(15)		—		(15)
Cash dividends paid	(45)		—		—		—		(45)
Other financing activities	(2)		(2)		(2)		—		(6)
Other intercompany activity, net	—		(263)		—		263		—
Total cash (used in) provided by financing activities	(235)		(265)		82		263		(155)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	—		—		(3)		—		(3)
Decrease in cash, cash equivalents and restricted cash	—		(92)		(2)		—		(94)
Cash, cash equivalents, and restricted cash - beginning of year	—		99		102		—		201
Cash, cash equivalents, and restricted cash - end of period	$	—	$	7	$	100	$	—	$	107

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Basis of Presentation and Significant Accounting Policies (Details) - USD ($)	Jun. 30, 2019	Oct. 01, 2018	Sep. 30, 2018
Increase in retained deficit	$ 291,000,000	$ 412,000,000	$ 399,000,000
Restricted cash	11,000,000		$ 0
Capitalized implementation costs	$ 3,000,000
ASU 2014-09
Increase in retained deficit		$ 13,000,000

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Revenue Recognition - Cumulative Effect and Impact of New Accounting Pronouncements (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended						9 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2019	Jun. 30, 2018	Oct. 01, 2018	Sep. 30, 2018
Statement of Financial Position [Abstract]
Accounts receivable, net	$ 423						$ 423		$ 376	$ 409
Inventories, net	200						200		190	176
Deferred income taxes	113						113		144	138
Accrued expenses and other liabilities	242						242			203
Retained deficit	291						291		412	399
Statement of Comprehensive Income [Abstract]
Sales	613			$ 577			1,761	$ 1,691
Cost of sales	406			376			1,168	1,088
Gross profit	207			201			593	603
Selling, general and administrative expenses	116			110			334	328
Equity and other income, net	11			8			29	29
Operating income	102			102			285	290
Income before income taxes	85			97			237	275
Income tax expense	20			33			56	154
Net income	$ 65	$ 63	$ 53	$ 64	$ 67	$ (10)	$ 181	$ 121
Basic earnings per share (usd per share)	$ 0.34			$ 0.33			$ 0.96	$ 0.61
Diluted earnings per share (usd per share)	$ 0.34			$ 0.33			$ 0.96	$ 0.61
Under prior guidance
Statement of Financial Position [Abstract]
Accounts receivable, net	$ 460						$ 460			409
Inventories, net	185						185			176
Deferred income taxes	107						107			138
Accrued expenses and other liabilities	241						241
Retained deficit	276						276			$ 399
Statement of Comprehensive Income [Abstract]
Sales	603						1,727
Cost of sales	392						1,126
Gross profit	211						601
Selling, general and administrative expenses	119						340
Equity and other income, net	12						30
Operating income	104						288
Income before income taxes	87						240
Income tax expense	21						57
Net income	$ 66						$ 183
Basic earnings per share (usd per share)	$ 0.35						$ 0.97
Diluted earnings per share (usd per share)	$ 0.35						$ 0.97
ASU 2014-09
Statement of Financial Position [Abstract]
Retained deficit									13
ASU 2014-09 | Adjustments
Statement of Financial Position [Abstract]
Accounts receivable, net	$ 37						$ 37		(33)
Inventories, net	(15)						(15)		14
Deferred income taxes	(6)						(6)		6
Accrued expenses and other liabilities	(1)						(1)
Retained deficit	(15)						(15)		$ 13
Statement of Comprehensive Income [Abstract]
Sales	(10)						(34)
Cost of sales	(14)						(42)
Gross profit	4						8
Selling, general and administrative expenses	3						6
Equity and other income, net	1						1
Operating income	2						3
Income before income taxes	2						3
Income tax expense	1						1
Net income	$ 1						$ 2
Basic earnings per share (usd per share)	$ 0.01						$ 0.01
Diluted earnings per share (usd per share)	$ 0.01						$ 0.01

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Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disaggregation of Revenue [Line Items]
Sales	$ 613	$ 577	$ 1,761	$ 1,691
Sales at a point in time
Disaggregation of Revenue [Line Items]
Sales	602		1,730
Franchised revenues transferred over time
Disaggregation of Revenue [Line Items]
Sales	11		31
North America
Disaggregation of Revenue [Line Items]
Sales	471		1,335
Europe, Middle East and Africa ("EMEA")
Disaggregation of Revenue [Line Items]
Sales	43		134
Asia Pacific
Disaggregation of Revenue [Line Items]
Sales	72		212
Latin America
Disaggregation of Revenue [Line Items]
Sales	27		80
Quick Lubes
Disaggregation of Revenue [Line Items]
Sales	211		600
Quick Lubes | North America
Disaggregation of Revenue [Line Items]
Sales	211		600
Quick Lubes | Europe, Middle East and Africa ("EMEA")
Disaggregation of Revenue [Line Items]
Sales	0		0
Quick Lubes | Asia Pacific
Disaggregation of Revenue [Line Items]
Sales	0		0
Quick Lubes | Latin America
Disaggregation of Revenue [Line Items]
Sales	0		0
Core North America
Disaggregation of Revenue [Line Items]
Sales	260		735
Core North America | North America
Disaggregation of Revenue [Line Items]
Sales	260		735
Core North America | Europe, Middle East and Africa ("EMEA")
Disaggregation of Revenue [Line Items]
Sales	0		0
Core North America | Asia Pacific
Disaggregation of Revenue [Line Items]
Sales	0		0
Core North America | Latin America
Disaggregation of Revenue [Line Items]
Sales	0		0
International
Disaggregation of Revenue [Line Items]
Sales	142		426
International | North America
Disaggregation of Revenue [Line Items]
Sales	0		0
International | Europe, Middle East and Africa ("EMEA")
Disaggregation of Revenue [Line Items]
Sales	43		134
International | Asia Pacific
Disaggregation of Revenue [Line Items]
Sales	72		212
International | Latin America
Disaggregation of Revenue [Line Items]
Sales	27		80
Company-owned operations | Quick Lubes
Disaggregation of Revenue [Line Items]
Sales	136		388
Non-company owned operations | Quick Lubes
Disaggregation of Revenue [Line Items]
Sales	75		212
Retail | Core North America
Disaggregation of Revenue [Line Items]
Sales	143		399
Installer and other | Core North America
Disaggregation of Revenue [Line Items]
Sales	$ 117		$ 336

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Revenue Recognition - Narrative (Details)	9 Months Ended
	Jun. 30, 2019 numberOfPrincipalActivities numberOfSegments
Revenue from Contract with Customer [Abstract]
Number of principal activities | numberOfPrincipalActivities	3
Number of reportable segments | numberOfSegments	3
Sales at a point in time
Disaggregation of Revenue [Line Items]
Percentage of revenue recognized	98.00%
Franchised revenues transferred over time
Disaggregation of Revenue [Line Items]
Percentage of revenue recognized	2.00%
Minimum
Disaggregation of Revenue [Line Items]
Payment terms	30 days
Expected timing of satisfaction for revenue performance obligations	10 years
Maximum
Disaggregation of Revenue [Line Items]
Payment terms	60 days
Expected timing of satisfaction for revenue performance obligations	15 years

XML

Fair Value Measurements - Schedule of Assets and Liabilities at Fair Value (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Other noncurrent assets
Total assets at fair value	$ 60	$ 53
Accrued expenses and other liabilities
Total liabilities at fair value	2	1
Level 1
Other noncurrent assets
Non-qualified trust funds	21	25
Level 1 | Money market funds
Cash and cash equivalents
Cash and cash equivalents	3	5
Level 2
Prepaid expenses and other current assets
Currency derivatives	1	1
Accrued expenses and other liabilities
Currency derivatives	2	1
Level 2 | Time deposits
Cash and cash equivalents
Cash and cash equivalents	34	22
Prepaid expenses and other current assets
Time deposits	$ 1	$ 0

XML

Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Foreign Exchange Contract | Not Designated as Hedging Instrument
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Outstanding derivative contracts notional value	$ 82	$ 74

XML

Fair Value Measurements - Fair Value of Debt (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Unamortized discount and issuance costs	$ 10	$ 11
Level 2 | Fair value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	789	752
Level 2 | Fair value | Senior Notes | 2024 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	388	376
Level 2 | Fair value | Senior Notes | 2025 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	401	376
Level 2 | Carrying value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	766	765
Unamortized discount and issuance costs	9	10
Level 2 | Carrying value | Senior Notes | 2024 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	371	370
Unamortized discount and issuance costs	4	5
Level 2 | Carrying value | Senior Notes | 2025 Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	395	395
Unamortized discount and issuance costs	$ 5	$ 5

XML

Acquisitions and Divestitures - Narrative (Details) $ in Millions	9 Months Ended
	Jun. 30, 2019 USD ($) service_center_store numberOfFranchiseServiceCenters numberOfFormerFranchiseCenters	Jun. 30, 2018 USD ($) service_center_store numberOfFormerFranchiseCenters
Business Acquisition [Line Items]
Number of service center stores acquired	54	63
Consideration for acquisition | $	$ 50	$ 71
Number of former franchise service centers acquired | numberOfFormerFranchiseCenters	5	60
Number of service center stores acquired in single and multi-store transactions	18
Oil Changers, Inc.
Business Acquisition [Line Items]
Number of franchise service center stores acquired | numberOfFranchiseServiceCenters	31

XML

Acquisitions and Divestitures - Summary of Consideration Paid and Assets and Liabilities Acquired (Details) - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Business Acquisition [Line Items]
Inventories	$ 0	$ 1
Property, plant and equipment	3	2
Goodwill	34	42
Net assets acquired	$ 50	71
Weighted average amortization period	10 years
Reacquired franchise rights
Business Acquisition [Line Items]
Intangible assets	$ 5	26
Customer relationships
Business Acquisition [Line Items]
Intangible assets	5	0
Trademarks and trade names
Business Acquisition [Line Items]
Intangible assets	1	0
Other
Business Acquisition [Line Items]
Intangible assets	$ 2	$ 0

XML

Accounts Receivable - Summary of Accounts Receivable (Details) - USD ($) $ in Millions	Jun. 30, 2019	Oct. 01, 2018	Sep. 30, 2018
Receivables [Abstract]
Trade	$ 412		$ 390
Other	16		26
Accounts receivable, gross	428		416
Allowance for doubtful accounts	(5)		(7)
Total accounts receivable, net	$ 423	$ 376	$ 409

XML

Accounts Receivable - Narrative (Details) - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Receivables [Abstract]
Accounts receivable sold to financial institutions	$ 63	$ 50

XML

Inventories - Schedule of Inventory (Details) - USD ($) $ in Millions	Jun. 30, 2019	Oct. 01, 2018	Sep. 30, 2018
Inventory Disclosure [Abstract]
Finished products	$ 210		$ 189
Raw materials, supplies and work in process	34		30
Reserve for LIFO cost valuation	(41)		(40)
Excess and obsolete inventory reserves	(3)		(3)
Total inventories, net	$ 200	$ 190	$ 176

XML

Goodwill and Other Intangibles - Summary of Goodwill by Segment (Details) $ in Millions	9 Months Ended
	Jun. 30, 2019 USD ($)
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 381
Acquisitions	34
Goodwill, ending balance	415
Quick Lubes
Goodwill [Roll Forward]
Goodwill, beginning balance	252
Acquisitions	34
Goodwill, ending balance	286
Core North America
Goodwill [Roll Forward]
Goodwill, beginning balance	89
Acquisitions	0
Goodwill, ending balance	89
International
Goodwill [Roll Forward]
Goodwill, beginning balance	40
Acquisitions	0
Goodwill, ending balance	$ 40

XML

Goodwill and Other Intangibles - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Millions	Jun. 30, 2019	Sep. 30, 2018
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	$ 91	$ 76
Accumulated amortization	(16)	(9)
Net carrying amount	75	67
Trademarks and trade names
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	30	29
Accumulated amortization	(4)	(2)
Net carrying amount	26	27
Reacquired franchise rights
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	37	32
Accumulated amortization	(7)	(4)
Net carrying amount	30	28
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	21	14
Accumulated amortization	(4)	(3)
Net carrying amount	17	11
Other
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	3	1
Accumulated amortization	(1)	0
Net carrying amount	$ 2	$ 1

XML

Restructuring Activities - Narrative (Details) $ in Millions	3 Months Ended	9 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)
Minimum
Restructuring Cost and Reserve [Line Items]
Expected costs for restructuring activities	$ 3	$ 3
Maximum
Restructuring Cost and Reserve [Line Items]
Expected costs for restructuring activities	5	5
Employee Termination Benefits
Restructuring Cost and Reserve [Line Items]
Expenses recognized during the period	$ 4	$ 10

XML

Restructuring Activities - Schedule of Restructuring Activity (Details) - Employee Termination Benefits - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Restructuring Reserve [Roll Forward]
Balance at September 30, 2018		$ 0
Expenses recognized during the period	$ 4	10
Payments		(1)
Balance at June 30, 2019	$ 9	$ 9

XML

Debt - Schedule of Short-Term Borrowings and Long Term Debt (Details) - USD ($)	Jun. 30, 2019	Sep. 30, 2018
Debt Instrument [Line Items]
Other	$ (9,000,000)	$ (10,000,000)
Total debt	1,341,000,000	1,322,000,000
Current portion of long-term debt	7,000,000	30,000,000
Long-term debt	1,334,000,000	1,292,000,000
Debt issuance cost discounts	10,000,000	11,000,000
Debt acquired through acquisitions	1,000,000	1,000,000
Line of Credit | Revolvers
Debt Instrument [Line Items]
Long-term debt	0	147,000,000
2025 Notes | Senior Notes
Debt Instrument [Line Items]
Debt gross	400,000,000	400,000,000
2024 Notes | Senior Notes
Debt Instrument [Line Items]
Debt gross	375,000,000	375,000,000
Term Loans | Line of Credit | Secured Debt
Debt Instrument [Line Items]
Debt gross	575,000,000	270,000,000
Trade Receivables Facility | Line of Credit | Secured Debt
Debt Instrument [Line Items]
Long-term debt	$ 0	$ 140,000,000

XML

Debt - Senior Notes (Details) - Senior Notes - USD ($)	Aug. 31, 2017	Jul. 31, 2016
2025 Notes
Debt Instrument [Line Items]
Interest rate on senior unsecured notes	4.375%
Aggregate principal amount	$ 400,000,000
2024 Notes
Debt Instrument [Line Items]
Interest rate on senior unsecured notes		5.50%
Aggregate principal amount		$ 375,000,000

XML

Debt - Senior Credit Agreement (Details)		6 Months Ended	9 Months Ended	12 Months Ended
	Apr. 12, 2019 USD ($)	Apr. 11, 2019 USD ($)	Jun. 30, 2019 USD ($)	Sep. 30, 2016 USD ($)
2016 Credit Facilities
Debt Instrument [Line Items]
Original principal amount of debt				$ 1,325,000,000
2019 Credit Facilities
Debt Instrument [Line Items]
Original principal amount of debt	$ 1,050,000,000
2019 Credit Facilities | Line of Credit
Debt Instrument [Line Items]
Maximum consolidated net leverage ratio			4.5
Minimum consolidated interest coverage ratio			3.0
2019 Revolver
Debt Instrument [Line Items]
Letters of credit outstanding			$ 9,000,000
Secured Debt | 2016 Term Loans | Line of Credit
Debt Instrument [Line Items]
Original principal amount of debt				$ 875,000,000
Term of debt				5 years
Repayments of long-term debt	255,000,000	$ 15,000,000
Secured Debt | 2019 Term Loans | Line of Credit
Debt Instrument [Line Items]
Original principal amount of debt	$ 575,000,000
Term of debt	5 years
Quarterly installments due beginning in 2020			7,000,000
Quarterly installments due beginning in 2021			14,000,000
Secured Debt | Trade Receivables Facility | Line of Credit
Debt Instrument [Line Items]
Original principal amount of debt			175,000,000
Repayments of long-term debt	$ 120,000,000
Revolvers | 2016 Revolver | Line of Credit
Debt Instrument [Line Items]
Original principal amount of debt				$ 450,000,000
Term of debt				5 years
Line of credit, sublimit				$ 100,000,000
Borrowings from revolving credit facility			39,000,000
Repayments of long-term debt	186,000,000
Revolvers | 2019 Revolver | Line of Credit
Debt Instrument [Line Items]
Original principal amount of debt	$ 475,000,000
Term of debt	5 years
Line of credit, sublimit	$ 100,000,000
Total borrowing capacity remaining			$ 466,000,000
LIBOR | Minimum | 2019 Credit Facilities
Debt Instrument [Line Items]
Spread on variable rates			1.375%
LIBOR | Maximum | 2019 Credit Facilities
Debt Instrument [Line Items]
Spread on variable rates			2.00%
Base Rate | Minimum | 2019 Credit Facilities
Debt Instrument [Line Items]
Spread on variable rates			0.375%
Base Rate | Maximum | 2019 Credit Facilities
Debt Instrument [Line Items]
Spread on variable rates			1.00%

XML

Debt - Trade Receivables Facility (Details) - USD ($)	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Debt Instrument [Line Items]
Proceeds from borrowings	$ 743,000,000	$ 170,000,000
Repayments of long-term debt	727,000,000	$ 39,000,000
Line of Credit | Trade Receivables Facility | Secured Debt
Debt Instrument [Line Items]
Original principal amount of debt	175,000,000
Long-term debt outstanding amount	0		$ 140,000,000
Proceeds from borrowings	82,000,000
Repayments of long-term debt	222,000,000
Line of Credit | Trade Receivables Facility | Secured Debt | Financing Subsidiary
Debt Instrument [Line Items]
Accounts receivable pledged as collateral	$ 274,000,000		$ 275,000,000

XML

Income Taxes - Schedule of Income Tax Expense and Effective Tax Rate (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Income tax expense	$ 20	$ 33	$ 56	$ 154
Effective tax rate percentage	23.50%	34.00%	23.60%	56.00%

XML

Income Taxes - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Contingency [Line Items]
Income tax (benefit) expense	$ 20	$ 33	$ 56	$ 154
Tax cuts and jobs act of 2017, income tax expense		$ 6		$ 76
Kentucky
Income Tax Contingency [Line Items]
Income tax (benefit) expense			$ (5)

XML

Employee Benefit Plans - Components of Pension and Other Postretirement Benefit Income (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Pension benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 0	$ 0	$ 1	$ 1
Interest cost	21	19	61	56
Expected return on plan assets	(20)	(26)	(60)	(78)
Amortization of prior service credit	0	0	0	0
Net periodic benefit cost (income)	1	(7)	2	(21)
Other postretirement benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	0	0	0	0
Interest cost	0	0	1	1
Expected return on plan assets	0	0	0	0
Amortization of prior service credit	(3)	(3)	(9)	(9)
Net periodic benefit cost (income)	$ (3)	$ (3)	$ (8)	$ (8)

XML

Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended						9 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2019	Jun. 30, 2018
Numerator
Net income	$ 65	$ 63	$ 53	$ 64	$ 67	$ (10)	$ 181	$ 121
Denominator
Weighted-average common shares outstanding (shares)	189			195			189	199
Effect of potentially dilutive securities (shares)	0			1			0	1
Weighted average diluted shares outstanding (shares)	189			196			189	200
Earnings per share
Basic (usd per share)	$ 0.34			$ 0.33			$ 0.96	$ 0.61
Diluted (usd per share)	$ 0.34			$ 0.33			$ 0.96	$ 0.61
Shares excluded from diluted earnings per share calculation due to anti-dilutive effect (shares)	1						2

XML

Reportable Segment Information - Narrative (Details)	9 Months Ended
	Jun. 30, 2019 numberOfSegments numberOfCountries
Segment Reporting Information [Line Items]
Number of reportable segments | numberOfSegments	3
Non-US
Segment Reporting Information [Line Items]
Number of countries where our products are sold | numberOfCountries	140

XML

Reportable Segment Information - Sales and Operating Income by Reportable Segment (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Sales	$ 613	$ 577	$ 1,761	$ 1,691
Operating income	102	102	285	290
Quick Lubes
Segment Reporting Information [Line Items]
Sales	211		600
Core North America
Segment Reporting Information [Line Items]
Sales	260		735
International
Segment Reporting Information [Line Items]
Sales	142		426
Operating Segments
Segment Reporting Information [Line Items]
Operating income	106	99	300	304
Operating Segments | Quick Lubes
Segment Reporting Information [Line Items]
Sales	211	167	600	479
Operating income	48	38	130	111
Operating Segments | Core North America
Segment Reporting Information [Line Items]
Sales	260	264	735	773
Operating income	38	41	109	130
Operating Segments | International
Segment Reporting Information [Line Items]
Sales	142	146	426	439
Operating income	20	20	61	63
Unallocated and Other
Segment Reporting Information [Line Items]
Operating income	$ (4)	$ 3	$ (15)	$ (14)

XML

Guarantor Financial Information - Condensed Consolidating Statements of Comprehensive Income (Details) - USD ($) $ in Millions	3 Months Ended						9 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2019	Jun. 30, 2018
Net Income (Loss) Attributable to Parent [Abstract]
Sales	$ 613			$ 577			$ 1,761	$ 1,691
Cost of sales	406			376			1,168	1,088
Gross profit	207			201			593	603
Selling, general and administrative expenses	116			110			334	328
Net legacy and separation-related (income) expenses	0			(3)			3	14
Equity and other (income) expenses, net	(11)			(8)			(29)	(29)
Operating income	102			102			285	290
Net pension and other postretirement plan income	(2)			(10)			(7)	(30)
Net interest and other financing expenses	19			15			55	45
Income before income taxes	85			97			237	275
Income tax (benefit) expense	20			33			56	154
Equity in net income of subsidiaries	0			0			0	0
Net income	65	$ 63	$ 53	64	$ 67	$ (10)	181	121
Comprehensive income	63			48			173	105
Eliminations
Net Income (Loss) Attributable to Parent [Abstract]
Sales	(18)			(16)			(50)	(41)
Cost of sales	(18)			(16)			(50)	(41)
Gross profit	0			0			0	0
Selling, general and administrative expenses	0			0			0	0
Net legacy and separation-related (income) expenses	0			0			0	0
Equity and other (income) expenses, net	0			0			0	0
Operating income	0			0			0	0
Net pension and other postretirement plan income	0			0			0	0
Net interest and other financing expenses	0			0			0	0
Income before income taxes	0			0			0	0
Income tax (benefit) expense	0			0			0	0
Equity in net income of subsidiaries	88			83			245	215
Net income	(88)			(83)			(245)	(215)
Comprehensive income	(87)			(56)			(235)	(191)
Valvoline Inc. (Parent Issuer) | Reportable Legal Entities
Net Income (Loss) Attributable to Parent [Abstract]
Sales	0			0			0	0
Cost of sales	0			0			0	0
Gross profit	0			0			0	0
Selling, general and administrative expenses	3			3			8	10
Net legacy and separation-related (income) expenses	0			(3)			3	4
Equity and other (income) expenses, net	0			0			0	0
Operating income	(3)			0			(11)	(14)
Net pension and other postretirement plan income	0			0			0	0
Net interest and other financing expenses	17			14			47	39
Income before income taxes	(20)			(14)			(58)	(53)
Income tax (benefit) expense	(5)			(1)			(16)	16
Equity in net income of subsidiaries	(80)			(77)			(223)	(190)
Net income	65			64			181	121
Comprehensive income	63			48			173	105
Guarantor Subsidiaries | Reportable Legal Entities
Net Income (Loss) Attributable to Parent [Abstract]
Sales	491			456			1,396	1,319
Cost of sales	324			294			917	832
Gross profit	167			162			479	487
Selling, general and administrative expenses	87			81			258	247
Net legacy and separation-related (income) expenses	0			0			0	10
Equity and other (income) expenses, net	(16)			(11)			(43)	(37)
Operating income	96			92			264	267
Net pension and other postretirement plan income	(2)			(10)			(7)	(30)
Net interest and other financing expenses	2			1			5	4
Income before income taxes	96			101			266	293
Income tax (benefit) expense	24			30			65	128
Equity in net income of subsidiaries	(8)			(6)			(22)	(25)
Net income	80			77			223	190
Comprehensive income	78			61			215	174
Non-Guarantor Subsidiaries | Reportable Legal Entities
Net Income (Loss) Attributable to Parent [Abstract]
Sales	140			137			415	413
Cost of sales	100			98			301	297
Gross profit	40			39			114	116
Selling, general and administrative expenses	26			26			68	71
Net legacy and separation-related (income) expenses	0			0			0	0
Equity and other (income) expenses, net	5			3			14	8
Operating income	9			10			32	37
Net pension and other postretirement plan income	0			0			0	0
Net interest and other financing expenses	0			0			3	2
Income before income taxes	9			10			29	35
Income tax (benefit) expense	1			4			7	10
Equity in net income of subsidiaries	0			0			0	0
Net income	8			6			22	25
Comprehensive income	$ 9			$ (5)			$ 20	$ 17

XML

Guarantor Financial Information - Condensed Consolidating Balance Sheets (Details) - USD ($) $ in Millions	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Oct. 01, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017
Current assets
Cash and cash equivalents	$ 126				$ 96
Accounts receivable, net	423			$ 376	409
Inventories, net	200			190	176
Prepaid expenses and other current assets	52				44
Total current assets	801				725
Noncurrent assets
Property, plant and equipment, net	455				420
Goodwill and intangibles, net	490				448
Equity method investments	35				31
Investment in subsidiaries	0				0
Deferred income taxes	113			$ 144	138
Other noncurrent assets	106				92
Total noncurrent assets	1,199				1,129
Total assets	2,000				1,854
Current liabilities
Current portion of long-term debt	7				30
Trade and other payables	163				178
Accrued expenses and other liabilities	242				203
Total current liabilities	412				411
Noncurrent liabilities
Long-term debt	1,334				1,292
Employee benefit obligations	322				333
Other noncurrent liabilities	184				176
Total noncurrent liabilities	1,840				1,801
Commitments and contingencies
Stockholders’ (deficit) equity	(252)	$ (298)	$ (343)		(358)	$ (288)	$ (226)	$ (194)	$ (117)
Total liabilities and stockholders’ deficit	2,000				1,854
Eliminations
Current assets
Cash and cash equivalents	0				0
Accounts receivable, net	(139)				(119)
Inventories, net	0				0
Prepaid expenses and other current assets	0				0
Total current assets	(139)				(119)
Noncurrent assets
Property, plant and equipment, net	0				0
Goodwill and intangibles, net	0				0
Equity method investments	0				0
Investment in subsidiaries	(1,711)				(1,310)
Deferred income taxes	0				0
Other noncurrent assets	0				0
Total noncurrent assets	(1,711)				(1,310)
Total assets	(1,850)				(1,429)
Current liabilities
Current portion of long-term debt	0				0
Trade and other payables	(139)				(119)
Accrued expenses and other liabilities	0				0
Total current liabilities	(139)				(119)
Noncurrent liabilities
Long-term debt	0				0
Employee benefit obligations	0				0
Other noncurrent liabilities	0				0
Total noncurrent liabilities	0				0
Stockholders’ (deficit) equity	(1,711)				(1,310)
Total liabilities and stockholders’ deficit	(1,850)				(1,429)
Valvoline Inc. (Parent Issuer) | Reportable Legal Entities
Current assets
Cash and cash equivalents	0				0
Accounts receivable, net	0				0
Inventories, net	0				0
Prepaid expenses and other current assets	1				1
Total current assets	1				1
Noncurrent assets
Property, plant and equipment, net	0				0
Goodwill and intangibles, net	0				0
Equity method investments	0				0
Investment in subsidiaries	1,158				801
Deferred income taxes	79				62
Other noncurrent assets	3				2
Total noncurrent assets	1,240				865
Total assets	1,241				866
Current liabilities
Current portion of long-term debt	7				30
Trade and other payables	97				3
Accrued expenses and other liabilities	20				7
Total current liabilities	124				40
Noncurrent liabilities
Long-term debt	1,333				1,151
Employee benefit obligations	0				0
Other noncurrent liabilities	36				33
Total noncurrent liabilities	1,369				1,184
Stockholders’ (deficit) equity	(252)				(358)
Total liabilities and stockholders’ deficit	1,241				866
Guarantor Subsidiaries | Reportable Legal Entities
Current assets
Cash and cash equivalents	29				20
Accounts receivable, net	203				48
Inventories, net	117				95
Prepaid expenses and other current assets	29				38
Total current assets	378				201
Noncurrent assets
Property, plant and equipment, net	408				384
Goodwill and intangibles, net	418				396
Equity method investments	35				31
Investment in subsidiaries	553				509
Deferred income taxes	19				63
Other noncurrent assets	95				85
Total noncurrent assets	1,528				1,468
Total assets	1,906				1,669
Current liabilities
Current portion of long-term debt	0				0
Trade and other payables	107				241
Accrued expenses and other liabilities	188				168
Total current liabilities	295				409
Noncurrent liabilities
Long-term debt	1				1
Employee benefit obligations	305				317
Other noncurrent liabilities	147				141
Total noncurrent liabilities	453				459
Stockholders’ (deficit) equity	1,158				801
Total liabilities and stockholders’ deficit	1,906				1,669
Non-Guarantor Subsidiaries | Reportable Legal Entities
Current assets
Cash and cash equivalents	97				76
Accounts receivable, net	359				480
Inventories, net	83				81
Prepaid expenses and other current assets	22				5
Total current assets	561				642
Noncurrent assets
Property, plant and equipment, net	47				36
Goodwill and intangibles, net	72				52
Equity method investments	0				0
Investment in subsidiaries	0				0
Deferred income taxes	15				13
Other noncurrent assets	8				5
Total noncurrent assets	142				106
Total assets	703				748
Current liabilities
Current portion of long-term debt	0				0
Trade and other payables	98				53
Accrued expenses and other liabilities	34				28
Total current liabilities	132				81
Noncurrent liabilities
Long-term debt	0				140
Employee benefit obligations	17				16
Other noncurrent liabilities	1				2
Total noncurrent liabilities	18				158
Stockholders’ (deficit) equity	553				509
Total liabilities and stockholders’ deficit	$ 703				$ 748

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Guarantor Financial Information - Condensed Consolidating Statements of Cash Flows (Details) - USD ($) $ in Millions	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Condensed Cash Flow Statements, Captions [Line Items]
Cash flows (used in) provided by operating activities	$ 214	$ 181
Cash flows from investing activities
Additions to property, plant and equipment	(73)	(51)
Acquisitions, net of cash acquired	(50)	(71)
Other investing activities, net	(1)	5
Return of advance from subsidiary		0
Total cash used in investing activities	(124)	(117)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	743	170
Repayments on borrowings	(727)	(39)
Repurchases of common stock	0	(220)
Payments for purchase of additional ownership in subsidiary	(1)	(15)
Cash dividends paid	(60)	(45)
Other financing activities	(4)	(6)
Other intercompany activity, net		0
Total cash used in financing activities	(49)	(155)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	0	(3)
Increase (decrease) in cash, cash equivalents, and restricted cash	41	(94)
Cash, cash equivalents, and restricted cash - beginning of period	96	201
Cash, cash equivalents, and restricted cash - end of period	137	107
Reportable Legal Entities | Valvoline Inc. (Parent Issuer)
Condensed Cash Flow Statements, Captions [Line Items]
Cash flows (used in) provided by operating activities	(94)	(28)
Cash flows from investing activities
Additions to property, plant and equipment	0	0
Acquisitions, net of cash acquired	0	0
Other investing activities, net	0	0
Return of advance from subsidiary		263
Total cash used in investing activities	0	263
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	661	70
Repayments on borrowings	(505)	(38)
Repurchases of common stock		(220)
Payments for purchase of additional ownership in subsidiary	0	0
Cash dividends paid	(60)	(45)
Other financing activities	(2)	(2)
Other intercompany activity, net		0
Total cash used in financing activities	94	(235)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	0	0
Increase (decrease) in cash, cash equivalents, and restricted cash	0	0
Cash, cash equivalents, and restricted cash - beginning of period	0	0
Cash, cash equivalents, and restricted cash - end of period	0	0
Reportable Legal Entities | Guarantor Subsidiaries
Condensed Cash Flow Statements, Captions [Line Items]
Cash flows (used in) provided by operating activities	98	287
Cash flows from investing activities
Additions to property, plant and equipment	(60)	(48)
Acquisitions, net of cash acquired	(28)	(71)
Other investing activities, net	1	5
Return of advance from subsidiary		0
Total cash used in investing activities	(87)	(114)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	0	0
Repayments on borrowings	0	0
Repurchases of common stock		0
Payments for purchase of additional ownership in subsidiary	0	0
Cash dividends paid	0	0
Other financing activities	(2)	(2)
Other intercompany activity, net		(263)
Total cash used in financing activities	(2)	(265)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	0	0
Increase (decrease) in cash, cash equivalents, and restricted cash	9	(92)
Cash, cash equivalents, and restricted cash - beginning of period	20	99
Cash, cash equivalents, and restricted cash - end of period	29	7
Reportable Legal Entities | Non-Guarantor Subsidiaries
Condensed Cash Flow Statements, Captions [Line Items]
Cash flows (used in) provided by operating activities	210	(78)
Cash flows from investing activities
Additions to property, plant and equipment	(13)	(3)
Acquisitions, net of cash acquired	(22)	0
Other investing activities, net	(2)	0
Return of advance from subsidiary		0
Total cash used in investing activities	(37)	(3)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	82	100
Repayments on borrowings	(222)	(1)
Repurchases of common stock		0
Payments for purchase of additional ownership in subsidiary	(1)	(15)
Cash dividends paid	0	0
Other financing activities	0	(2)
Other intercompany activity, net		0
Total cash used in financing activities	(141)	82
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	0	(3)
Increase (decrease) in cash, cash equivalents, and restricted cash	32	(2)
Cash, cash equivalents, and restricted cash - beginning of period	76	102
Cash, cash equivalents, and restricted cash - end of period	108	100
Eliminations
Condensed Cash Flow Statements, Captions [Line Items]
Cash flows (used in) provided by operating activities	0	0
Cash flows from investing activities
Additions to property, plant and equipment	0	0
Acquisitions, net of cash acquired	0	0
Other investing activities, net	0	0
Return of advance from subsidiary		(263)
Total cash used in investing activities	0	(263)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs	0	0
Repayments on borrowings	0	0
Repurchases of common stock		0
Payments for purchase of additional ownership in subsidiary	0	0
Cash dividends paid	0	0
Other financing activities	0	0
Other intercompany activity, net		263
Total cash used in financing activities	0	263
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	0	0
Increase (decrease) in cash, cash equivalents, and restricted cash	0	0
Cash, cash equivalents, and restricted cash - beginning of period	0	0
Cash, cash equivalents, and restricted cash - end of period	$ 0	$ 0

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Subsequent Events (Details) $ / shares in Units, $ in Millions		1 Months Ended	9 Months Ended
	Jul. 18, 2019 $ / shares	Jul. 31, 2019 USD ($) numberOfAquisitions service_center_store company-owned_and_franchised_locations	Jun. 30, 2019 USD ($) service_center_store	Jun. 30, 2018 USD ($) service_center_store
Subsequent Event [Line Items]
Consideration for acquisition | $			$ 50	$ 71
Number of service center stores acquired | service_center_store			54	63
Subsequent Event
Subsequent Event [Line Items]
Consideration for acquisition | $		$ 18
Number of acquisitions completed | numberOfAquisitions		4
Number of service center stores acquired | service_center_store		3
Dividend per share (usd per share) | $ / shares	$ 0.106
Number of company-owned Quick Lube locations | company-owned_and_franchised_locations		500

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Label	Element	Value
Accounting Standards Update 2014-09 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (13,000,000)
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (13,000,000)