Employee Benefit Plans

12 Months Ended

Sep. 30, 2023

Retirement Benefits [Abstract]

Employee Benefit Plans

Pension and other postretirement plans

The components of pension and other postretirement plans net periodic benefit (income) costs and the assumptions used in this determination are summarized below for the years ended September 30:

(In millions)	Pension benefits									Other postretirement benefits
	2023			2022			2021			2023			2022			2021
Net periodic benefit (income) costs
Interest cost	$	81.8		$	43.0		$	41.2		$	1.2		$	0.7		$	0.7
Expected return on plan assets	(66.9)			(78.6)			(84.0)			—			—			—
Amortization of prior service cost (credit)	0.1			0.1			0.1			(2.2)			(2.2)			(11.9)
Actuarial (gain) loss	(35.0)			49.5			(75.1)			(6.6)			(5.6)			0.8
Net periodic benefit (income) costs	$	(20.0)		$	14.0		$	(117.8)		$	(7.6)		$	(7.1)		$	(10.4)
Weighted-average plan assumptions
Discount rate for interest cost	5.45		%	2.10		%	1.91		%	5.41		%	1.92		%	1.76		%
Expected long-term rate of return on plan assets	4.90		%	4.10		%	4.40		%	—			—			—

Valvoline recognizes the change in the fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for remeasurement. These gains and losses are reported within Net pension and other postretirement plan (income) expense in the Consolidated Statements of Comprehensive Income and included a gain of $41.6 million for the year ended September 30, 2023, a loss of $43.9 million for the year ended September 30, 2022, and a gain of $74.3 million for the year ended September 30, 2021.

The fiscal 2023 gain was primarily attributed to increase in discount rates, partially offset by lower-than-expected returns on plan assets. The fiscal 2022 loss was primarily attributed to lower-than-expected returns on plan assets, partially offset by higher discount rates. The fiscal 2021 gain was primarily attributed to higher-than-expected returns on plan assets and an increase in discount rates.

The following table summarizes the net periodic benefit income and the amortization of prior service credits recognized during the years ended September 30:

(In millions)	Pension benefits						Other postretirement benefits
	2023		2022		2021		2023		2022		2021
Amortization of prior service credits recognized in Accumulated other comprehensive income	$	(0.1)	$	(0.1)	$	(0.1)	$	2.2	$	2.2	$	11.9
Net periodic benefit loss (income)	(20.0)		14.0		(117.8)		(7.6)		(7.1)		(10.4)
Total pre-tax amount recognized in comprehensive loss (income)	$	(20.1)	$	13.9	$	(117.9)	$	(5.4)	$	(4.9)	$	1.5

Obligations and funded status

Changes in benefit obligations and the fair value of plan assets, as well as key assumptions used to determine the benefit obligations, and the amounts in the Consolidated Balance Sheets for the Company’s pension and other postretirement benefit plans are summarized below as of September 30:

(In millions)	Pension benefits				Other postretirement benefits
	2023		2022		2023		2022
Change in benefit obligations
Benefit obligations as of October 1	$	1,585.2	$	2,132.9	$	30.7	$	38.9
Interest cost	81.8		43.0		$	1.2	0.7
Benefits paid	(130.4)		(128.0)		$	(3.0)	(3.3)
Actuarial gain	(52.7)		(458.3)		$	(6.6)	(5.6)
Transfers in	4.4		0.5		$	—	—
Settlements	(10.2)		(4.9)		$	—	—
Benefit obligations as of September 30	$	1,478.1	$	1,585.2	$	22.3	$	30.7
Change in plan assets
Fair value of plan assets as of October 1	$	1,438.1	$	1,987.0	$	—	$	—
Actual return on plan assets	41.3		(429.5)		$	—	—
Employer contributions	17.8		13.0		$	3.0	3.3
Benefits paid	(130.4)		(128.0)		$	(3.0)	(3.3)
Settlements	(10.2)		(4.9)		$	—	—
Transfers in	4.4		0.5		$	—	—
Fair value of plan assets as of September 30	$	1,361.0	$	1,438.1	$	—	$	—
Unfunded status of the plans as of September 30	$	117.1	$	147.1	$	22.3	$	30.7

(In millions)	Pension benefits						Other postretirement benefits
	2023			2022			2023			2022
Amounts in the Consolidated Balance Sheets
Noncurrent benefit assets (a)	$	38.6		$	33.7		$	—		$	—
Current benefit liabilities (b)	7.7			9.1			2.6			4.4
Noncurrent benefit liabilities (c)	148.0			171.7			19.7			26.3
Total benefit liabilities	155.7			180.8			22.3			30.7
Net liabilities recognized	$	117.1		$	147.1		$	22.3		$	30.7
Balance in Accumulated other comprehensive loss
Prior service cost (credit)	$	1.1		$	1.2		$	(16.7)		$	(18.9)
Weighted-average plan assumptions
Discount rate	5.98		%	5.58		%	5.98		%	5.56		%
Healthcare cost trend rate (d)	—			—			5.5		%	5.6		%

(a)Noncurrent benefit assets are recorded in Other noncurrent assets within the Consolidated Balance Sheets,

(b)Current benefit liabilities are recorded in Accrued expenses and other liabilities within the Consolidated Balance Sheets.

(c)Noncurrent benefit liabilities are recorded in Employee benefit obligations within the Consolidated Balance Sheets.

(d)The assumed pre-65 health care cost trend rate continues to be reduced to 4.0% in 2040 and thereafter.

Accumulated benefit obligation

The accumulated benefit obligation for all pension plans was $1.5 billion and $1.6 billion as of September 30, 2023 and 2022, respectively. Pension plans with projected and accumulated benefit obligations in excess of the fair value of plan assets follows for the Company’s plans as of September 30:

(In millions)	2023				2022
	Benefit obligation		Plan assets		Benefit obligation		Plan assets
Plans with projected and accumulated benefit obligations in excess of plan assets	$	1,101.7	$	946.0	$	1,177.7	$	996.9

Plan assets

Pension plan asset investments and their level within the fair value hierarchy is summarized below as of:

(In millions)	September 30, 2023
	Total fair value		Level 1		Level 2		Level 3		Assets measured at NAV
Cash and cash equivalents	$	21.5	$	21.5	$	—	$	—	$	—
U.S. government securities and futures	63.1		—		63.1		—		—
Other government securities	33.1		—		33.1		—		—
Corporate debt instruments	1,055.4		—		1,055.4		—		—
Private equity and hedge funds	4.4		—		—		—		4.4
Collective trust funds	176.9		—		—		—		176.9
Other investments	6.6		—		6.6		—		—
Total assets at fair value	$	1,361.0	$	21.5	$	1,158.2	$	—	$	181.3

(In millions)	September 30, 2022
	Total fair value		Level 1		Level 2		Level 3		Assets measured at NAV
Cash and cash equivalents	$	56.9	$	56.9	$	—	$	—	$	—
U.S. government securities and futures	73.8		—		73.8		—		—
Other government securities	36.1		—		36.1		—		—
Corporate debt instruments	1,066.9		—		1,066.9		—		—
Private equity and hedge funds	13.3		—		—		—		13.3
Collective trust funds	190.3		—		—		—		190.3
Other investments	0.8		—		0.8		—		—
Total assets at fair value	$	1,438.1	$	56.9	$	1,177.6	$	—	$	203.6

Cash and cash equivalents

The carrying value of cash and cash equivalents approximates fair value.

Government securities

Government securities are valued based on Level 2 inputs, which include yields available for comparable securities of issuers with similar credit ratings.

Corporate debt instruments

Corporate debt instruments are valued based on Level 2 inputs that are observable in the market or may be derived principally from, or corroborated by, recently executed transactions, observable market data such as pricing for similar securities, cash flow models with yield curves, counterparty credit ratings, and credit spreads applied using the maturity and coupon interest rate terms of the debt instrument.

Private equity and hedge funds

Private equity and hedge funds primarily represent alternative investments not traded on an active market which are valued at the NAV per share determined by the manager of the fund based on the fair value of the underlying net assets owned by the fund divided by the number of shares or units outstanding. 

Collective trust funds

Collective trust funds are comprised of a diversified portfolio of investments across various asset classes, including U.S. and international equities, fixed-income securities, commodities and currencies. The collective trust funds are valued using a NAV provided by the manager of each fund, which is based on the underlying net assets owned by the fund, divided by the number of shares outstanding. 

The following summarizes investments for which fair value is measured using the NAV per share practical expedient as of September 30, 2023:

(In millions)	Fair value at NAV		Unfunded commitments		Redemption frequency (if currently eligible)	Redemption notice period
Relative value hedge funds	$	0.2	—		None (a)	None (a)
Event driven hedge funds	0.3		—		None (a)	None (a)
Collective trust funds	176.9		—		Daily	Up to 3 days
Private equity	3.9		1.6		None (b)	None (b)
	$	181.3	$	1.6

(a)These hedge funds are in the process of liquidation and the timing is unknown.

(b)These private equity instruments are estimated to be liquidated over the next 1 to 5 years.

Investments and strategy

In developing an investment strategy for its defined benefit plans, Valvoline considered the following factors: the nature of the liabilities of the plans; the allocation of liabilities between active, deferred and retired plan participants; the funded status of the plans; the applicable investment horizon; the respective size of the plans; and historical and expected investment returns. Valvoline’s pension plan assets are managed by outside investment managers,

which are monitored against investment benchmark returns and Valvoline's established investment strategy. Investment managers are selected based on an analysis of, among other things, their investment process, historical investment results, frequency of management turnover, cost structure, and assets under management. Assets are periodically reallocated between investment managers to optimize returns and maintain an appropriate asset mix and diversification of investments.

The current target asset allocation for the plans is 90% fixed income securities and 10% equity-based securities. Fixed income securities are liability matching assets that primarily include long duration, high grade corporate debt obligations. Equity-based securities are return-seeking assets that include both traditional equities as well as a mix of non-traditional assets such as hedge and commingled funds and private equity. Investment managers may employ a limited use of futures or other derivatives to manage risk within the portfolio through efficient exposure to markets. Valvoline’s pension plans hold a variety of investments designed to diversify risk and achieve an adequate net investment return to provide for future benefit payments to its participants.

The weighted-average asset allocations for Valvoline’s plans by asset category follow as of September 30:

	Target	2023		2022
Plan assets allocation
Equity securities	3-10%	7	%	7	%
Debt securities	80-100%	92	%	92	%
Other	0-10%	1	%	1	%
Total		100	%	100	%

The basis for determining the expected long-term rate of return is a combination of future return assumptions for the various asset classes in Valvoline’s investment portfolio based on active management, historical analysis of previous returns, market indices, and a projection of inflation, net of plan expenses.

Funding and benefit payments

Valvoline contributed $17.8 million and $13.0 million to its pension plans during fiscal 2023 and 2022, respectively. Valvoline does not plan to contribute to its qualified pension plans in fiscal 2024 and expects to contribute approximately $7.7 million to its non-qualified pension plans.

The following benefit payments, which reflect future service expectations, are projected to be paid in each of the next five fiscal years ended September 30 and the five fiscal years thereafter in aggregate:

(In millions)	Pension benefits		Other postretirement benefits
2024	$	139.5	$	2.7
2025	137.8		2.4
2026	135.6		2.2
2027	133.3		2.0
2028	129.5		1.9
2028 - 2032	600.0		8.7
Total	$	1,275.7	$	19.9

Other plans

Defined contribution and other defined benefit plans

Valvoline sponsors certain defined contribution savings plans that provide matching contributions. Expense associated with these plans was $12.5 million in fiscal 2023, $15.9 million in fiscal 2022 and $6.0 million in fiscal 2021.

Valvoline also sponsors a long-term disability benefit plan. Total liabilities associated with this plan were $1.0 million and $1.9 million as of September 30, 2023 and 2022, respectively.

Incentive plans

Reserves for incentive plans were $16.4 million and $13.6 million as of September 30, 2023 and 2022, respectively.