Reports Preliminary Financial Results for
Fiscal Third Quarter 2022
- Transaction will successfully complete separation of Global
Products and Retail Services businesses transforming Valvoline into
a pure-play automotive service provider with targeted 20%+ earnings
per share (EPS) growth
- Valvoline to capitalize on highly compelling growth
opportunities, while accelerating Retail Services evolution as
hybrid and electric vehicle (EV) population grows
- Valvoline expects to use estimated $2.25
billion in net cash proceeds from Global Products sale to
accelerate return of capital to shareholders, reduce debt and
invest in Retail Services business
- Preliminary revenue for fiscal Q3 2022 of $957 million, reported diluted EPS of
$0.55 and adjusted EPS of
$0.58
- Valvoline to host conference call at 9
am ET today
LEXINGTON, Ky., Aug. 1, 2022
/PRNewswire/ -- Valvoline Inc. (NYSE: VVV), a global leader in
vehicle care powering the future of mobility through innovative
services and products, today announced that it has reached a
definitive agreement with Aramco for the sale of Valvoline's Global
Products business for $2.65 billion
in cash.
"The sale of Global Products will represent the successful
outcome of our strategy to unlock the full, long-term value of our
strong but differentiated Retail Services and Global Products
businesses," said Sam Mitchell,
Valvoline CEO. "We have built two leading businesses that are
well-positioned for continued success as they pursue their
individual strategic priorities.
"After closing, we will focus on our market leading Retail
Services business, including further enhancing our growth
trajectory and world-class service model. Retail Services will
benefit from a strong balance sheet and a clear strategy for value
creation, including extending our world-class preventive auto
maintenance service model to EV owners, OEMs and fleets as the car
parc evolves.
"We are pleased that our Global Products team will have a
strategic new home with Aramco to further invest and grow the
business while developing the brand into a global lubricants
leader. The partnership between the world's leading energy producer
and one of the world's most trusted global lubricant brands creates
a powerful combination that delivers meaningful benefits to
employees, customers — including the Retail Services business —
suppliers and investors."
"Valvoline's Global Products business fits perfectly with
Aramco's growth strategy for lubricants as it will leverage our
global base oils production, contribute to our R&D capabilities
and strengthen our existing relationships with OEMs. Valvoline's
brand strength and global recognition will continue to be developed
and extended under Aramco's stewardship. We are also very excited
to have the outstanding people of Valvoline's Global Products join
the Aramco family as we continue to execute on our ambitious
strategy," said Mohammed Y. Qahtani,
Senior Vice President of Downstream at Aramco.
Upon completion of the sale, Valvoline expects to use the
majority of the anticipated net after-tax cash proceeds of
approximately $2.25 billion to
accelerate the return of capital to shareholders through share
repurchases, with the remaining portion used for debt reduction and
to invest in attractive growth opportunities in the Retail Services
business.
Following the closing of the transaction, Valvoline will own the
Valvoline brand for all retail services purposes globally,
excluding China and certain
countries in the Middle East and
North Africa, while Aramco will
own the Valvoline brand for all products uses globally. Valvoline
and Aramco will expand their existing partnership to ensure that
Valvoline's iconic brand is managed in a consistent and holistic
manner. In addition, Valvoline will procure motor oil and related
products from the Global Products business through a long-term
supply agreement.
Completion of the transaction is subject to customary closing
conditions and regulatory approvals. The transaction is targeted to
close in late calendar year 2022 or early 2023.
Compelling Opportunities for Standalone Retail Services
Company
The transaction will have compelling benefits for Valvoline,
including:
- Driving Retail Growth: The separation will allow
Valvoline to focus on capturing the compelling growth of Retail
Services building on 15 consecutive years of same-store sales
growth, by continued investments in expansion of its retail
footprint, with an increased emphasis on franchisee growth, and its
already superior in-store customer experience.
- Accelerating Retail Services' Evolution: Retail Services
is well-positioned to capture opportunities from an evolving car
parc by extending its world-class preventive auto maintenance
service model to EV owners, OEMs and fleets, allowing Valvoline to
leverage the strong momentum Retail Services has established long
into the future.
- Optimizing Capital Structure and Capital Allocation
Policies: The Company will have increased capital allocation
flexibility and a targeted capital structure better aligned with
Retail Services' distinct value creation propositions. The business
will benefit from a strong balance sheet to support Valvoline's
growth profile while returning capital to shareholders.
- Enhancing Corporate Governance and Focus: Operating
Retail Services as an independent company will allow the management
team to focus on unlocking the full potential of the business with
the support of its Board of Directors, who bring significant
automotive experience and a strong track record in retail services.
Valvoline, operating solely as a retail services business, will be
led by Sam Mitchell, CEO, and
Lori Flees, President.
Based on currently available information, the Company expects
Retail Services sales of approximately $1.5
billion in fiscal 2022, an increase of more than 20% from
fiscal 2021.
Preliminary Financial Results for Q3 2022
Valvoline also reported the following preliminary financial
results for the fiscal third quarter ending June 30, 2022:
- Preliminary reported net income of $99
million and diluted EPS of $0.55
- Preliminary adjusted EPS of $0.58
and adjusted EBITDA of $180
million
- Preliminary revenue of $957
million
- Preliminary Retail Services sales growth of 16% and system-wide
same store sales (SSS) growth of 9.9% and an ending net system-wide
store count of 1,690
- Preliminary Global Products sales growth of 24% and volume
growth of 9%
The Company intends to report full financial results for the
fiscal third quarter on August 3,
2022 and host an earnings conference call at 9 am ET on August 4,
2022.
Advisors
Goldman Sachs & Co. LLC is serving as financial advisor and
Cravath, Swaine & Moore LLP is serving as legal advisor to
Valvoline.
Conference Call and Webcast
Valvoline will hold a conference call today at 9 am ET to discuss the transaction. The
conference call and supporting materials will be available via live
webcast accessible on Valvoline's investor relations website at
http://investors.valvoline.com. The conference may also be accessed
via telephone at +1-844-200-6205, access code 236121. Following the
live event, an archived version of the webcast and supporting
materials will be available.
Preliminary Results
The estimates above represent the most current information
available and do not present all information necessary for an
understanding of the Company's results of operations for the three
months ended June 30, 2022. Valvoline
has provided an estimate for the preliminary and unaudited results
described above primarily because the Company's financial closing
procedures for the three months ended June
30, 2022 are not yet complete. As a result, there is a
possibility that the Company's final results will vary materially
from these preliminary estimates as a result of the completion of
normal quarter-end accounting procedures and adjustments, including
the execution of the Company's internal control over financial
reporting, the completion of the preparation and review of the
Company's financial statements for the three months ended
June 30, 2022 and the subsequent
occurrence or identification of events prior to the formal issuance
of the Company's financial results for the three months ended
June 30, 2022. Valvoline undertakes
no obligation to update or supplement the information provided
above until the Company releases its results of operations for the
three months ended June 30, 2022.
Key Business Measures
Valvoline tracks its operating performance and manages its
business using certain key measures, including system-wide store
counts and SSS as well as lubricant volumes sold. Management
believes these measures are useful to evaluating and understanding
Valvoline's operating performance and should be considered as
supplements to, not substitutes for, Valvoline's sales and
operating income, as determined in accordance with U.S. GAAP.
Sales in the Retail Services segment are influenced by the
number of service center stores and the business performance of
those stores. Stores are considered open upon acquisition or
opening for business. Temporary store closings remain in the
respective store counts with only permanent store closures
reflected in the activity and end of period store counts. SSS is
defined as sales by U.S. Retail Services stores (company-operated,
franchised and the combination of these for system-wide SSS), with
new stores, including franchised conversions, excluded from the
metric until the completion of their first full fiscal year in
operation as this period is generally required for new store sales
levels to begin to normalize.
Retail Services sales are limited to sales at company-operated
stores, sales of lubricants and other products to independent
franchise and Express Care operators, in addition to royalties and
other fees from franchised stores. Although Valvoline does not
recognize store-level sales from franchised stores as sales in its
Statements of Consolidated Income, management believes system-wide
and franchised SSS comparisons and store counts are useful to
assess market position relative to competitors and overall store
and segment operating performance.
Management believes lubricant volumes sold is a useful measure
in evaluating and understanding the operating performance of the
Global Products segment.
Use of Non-GAAP Measures
To supplement the financial measures prepared in accordance with
U.S. GAAP, certain items herein are presented on an adjusted basis.
The following non-GAAP measures are included herein: Adjusted
EBITDA and Adjusted EPS. These non-GAAP measures have limitations
as analytical tools and should not be considered in isolation from,
or as an alternative to, or more meaningful than, financial results
determined in accordance with U.S. GAAP. Refer to Tables 1 and
2 herein for management's definition of each non-GAAP measure and
reconciliation to the most comparable U.S. GAAP measures.
Adjusted profitability measures enable comparison of financial
trends and results between periods where certain items may vary
independent of business performance. These adjusted measures
exclude the impact of certain unusual, infrequent or
non-operational activity not directly attributable to the
underlying business, which management believes impacts the
comparability of operational results between periods ("key
items").
Management believes the use of non-GAAP measures provide a
useful supplemental presentation of Valvoline's operating
performance and allows for transparency with respect to key metrics
used by management in operating the business and measuring
performance.
Forward-Looking Statements
Certain statements in this press release, other than statements
of historical fact, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements may include, without limitation,
statements about the proposed transaction, the expected timetable
for completing the proposed transaction, the benefits and synergies
of the proposed transaction, future opportunities for the
standalone Retail Services company and any other statements
regarding Valvoline's and Aramco's future operations, financial or
operating results, capital allocation, debt ratio, anticipated
business levels, future earnings, dividend policy, anticipated
growth, market opportunities, strategies, competition, and other
expectations and targets for future periods. Valvoline has
identified some of these forward-looking statements with words such
as "anticipates," "believes," "expects," "estimates," "is likely,"
"predicts," "projects," "forecasts," "may," "will," "should" and
"intends" and the negative of these words or other comparable
terminology. These forward-looking statements are based on
Valvoline's current expectations, estimates, projections and
assumptions as of the date such statements are made and are subject
to risks and uncertainties that may cause results to differ
materially from those expressed or implied in the forward-looking
statements. Important factors that could cause Valvoline's actual
results to differ materially from those in the forward-looking
statements include: uncertainties as to the timing of the sale of
Global Products and the risk that the transaction may not be
completed in a timely manner or at all, the possibility that any or
all of the conditions to the consummation of the sale of Global
Products may not be satisfied or waived, the effect of the
announcement or pendency of the transaction on Valvoline's ability
to retain and hire key personnel and to maintain relationships with
customers, supplier and other business partners, risks related to
diverting management's attention from Valvoline's ongoing business
operations, uncertainties as to Valvoline's ability and the amount
of time necessary to realize the expected benefits of the
transaction, changes in the economic and financial conditions of
Valvoline's business and uncertainties and matters beyond the
control of management and other factors described in the Company's
filings with the Securities and Exchange Commission (the "SEC"),
including in the "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Quantitative and Qualitative Disclosures about Market Risk"
sections of Valvoline's most recently filed periodic reports on
Forms 10-K and 10-Q, which are available on Valvoline's website at
http://investors.valvoline.com/sec-filings or on the SEC's website
at http://sec.gov. Valvoline assumes no obligation to update or
revise these forward-looking statements for any reason, even if new
information becomes available in the future, unless required by
law.
About Valvoline™
Valvoline Inc. (NYSE: VVV) is a global leader in vehicle care
powering the future of mobility through innovative services and
products for vehicles with electric, hybrid and internal
combustion powertrains. Established in 1866, the Company introduced
the world's first branded motor oil and developed strong brand
recognition and customer satisfaction ratings over the years across
multiple service and product channels. The Company operates and
franchises approximately 1,700 service center locations and is
the No. 2 and No. 3 largest chain in the U.S. and Canada, respectively, by number of stores.
With sales in more than 140 countries and territories, Valvoline's
solutions are available for every engine and drivetrain, including
high-mileage and heavy-duty vehicles, and are offered at more than
80,000 locations worldwide. Creating the next generation of
advanced automotive solutions, Valvoline has established itself as
the world's leading supplier of battery fluids to electric vehicle
manufacturers, offering tailored products to help extend vehicle
range and efficiency. To learn more, or to find a Valvoline service
center near you, visit www.valvoline.com.
TM Trademark, Valvoline or its subsidiaries,
registered in various countries
FOR FURTHER INFORMATION
Investor Relations
Sean T.
Cornett
+1 (859) 357-3155
ir@valvoline.com
Media Relations
Michele
Gaither Sparks
+1 (859) 230-8097
michele.sparks@valvoline.com
FGS Global
Jamie Tully / Devin Broda / Warren
Rizzi
(212) 687-8080
Valvoline-SVC@sardverb.com
Valvoline Inc. and
Consolidated Subsidiaries
|
|
Table 1
|
RECONCILIATION OF
NON-GAAP DATA - NET INCOME AND DILUTED EARNINGS PER
SHARE
|
(In millions, except
per share amounts - preliminary and unaudited)
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
June 30
|
|
2022
|
Reported net
income
|
|
$
99
|
Adjustments:
|
|
|
|
Net pension and other
postretirement plan income
|
|
(10)
|
|
Legacy and
separation-related expenses
|
|
11
|
|
LIFO charge
|
|
8
|
|
Business interruption
recovery
|
|
(2)
|
|
Total adjustments,
pre-tax
|
|
7
|
|
Income tax benefit of
adjustments
|
|
(2)
|
|
Total adjustments,
after tax
|
|
5
|
Adjusted net income
(a)
|
|
$
104
|
|
|
|
Reported diluted
earnings per share
|
|
$
0.55
|
Adjusted diluted
earnings per share (b)
|
|
$
0.58
|
|
|
|
|
Weighted average
diluted common shares outstanding
|
|
180
|
|
(a)
|
Adjusted net income is
defined as net income adjusted for key items. Refer to "Use of
Non-GAAP measures" in this press release for management's
definition of key items.
|
(b)
|
Adjusted diluted
earnings per share is defined as earnings per diluted share
calculated using adjusted net income.
|
Valvoline Inc. and
Consolidated Subsidiaries
|
|
Table 2
|
RECONCILIATION OF
NON-GAAP DATA - ADJUSTED EBITDA
|
|
|
(In millions -
preliminary and unaudited)
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
June 30
|
|
|
2022
|
Net income
|
|
$
99
|
Add:
|
|
|
Income tax
expense
|
|
30
|
Net interest and other
financing expenses
|
|
19
|
Depreciation and
amortization
|
|
25
|
EBITDA
(a)
|
|
173
|
Key items:
|
|
|
Net pension and other
postretirement plan income
|
|
(10)
|
Legacy and
separation-related expenses
|
|
11
|
LIFO charge
|
|
8
|
Business interruption
recoveries
|
|
(2)
|
Key items -
subtotal
|
|
7
|
Adjusted EBITDA
(a)
|
|
$
180
|
(a)
|
EBITDA is defined as
net income, plus income tax expense, net interest and other
financing expenses, and depreciation and amortization. Adjusted
EBITDA is EBITDA adjusted for key items, as described in "Use of
Non-GAAP Measures" within this press release.
|
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SOURCE Valvoline Inc.