Valvoline (VVV) realigns business segments, announces $300 million share repurchase authorization
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Valvoline Inc. (NYSE: VVV), a leading provider of automotive services and premium branded lubricants, today announced the realignment of its global operations, including updated business segments, a new approach for allocating indirect expenses and for reporting last-in-first-out (LIFO) inventory accounting adjustments. Valvoline will host a call tomorrow, May 19, at 9 am ET to discuss these changes, including recast fiscal 2021 guidance, as well as enhancements to its capital allocation framework and growth projections through 2024 for the business and its realigned segments.
Beginning in the third quarter of fiscal 2021, Valvoline will manage its business through two operating segments: Retail Services, which renames the former Quick Lubes segment, and Global Products, which includes the operations of the former Core North America and International segments.
"Our business realignment strengthens our strategy and is the next step in our transformation to a more service-driven business model," said Sam Mitchell, CEO. "Our ongoing growth opportunities in retail services are supported by vertical product integration and strong cash generation from the global products segment.
"This realignment and related changes enhance our ability to leverage our strong brand equity and product platforms to capture opportunities in both segments, drive focus in deploying capital and provide improved transparency for investors while also positioning us for faster growth going forward."
Business Realignment and Reporting Changes
Valvoline's global operations will be managed in the following segments:
- Retail Services contains the operations of the former Quick Lubes segment. The renamed segment better reflects the broad array of existing, and potential future, preventive maintenance services performed in Valvoline's retail network, including Company-operated and independent franchise and Express Care stores that service vehicles with Valvoline products. Retail Services is a high-growth, high-margin segment with significant reinvestment opportunity.
- Global Products contains the former Core North America and International segments. The segment focuses on sales of lubricants, coolants and other preventive maintenance products for light- and heavy-duty vehicles on a global basis. Global Products is a capital-light, strong free-cash-flow-generating segment to fund Valvoline's transition to a more service-driven business model.
In addition, the Company changed its allocation approach for certain indirect expenses that previously had been fully allocated based on proportional contributions to various financial measures. Going forward, indirect expenses will be recognized in each segment based on estimated utilization of indirect resources. Costs to support corporate functions that are not directly attributable to a particular segment will be presented separately in Corporate as a reconciling item to consolidated results.
The Company will begin reporting the impact of LIFO inventory accounting within Corporate as a key item adjusted from GAAP results for purposes of its presentation of non-GAAP profitability metrics.
These reporting changes will provide visibility into the underlying operating results and comparability between periods that Valvoline's management will use to assess operating performance in connection with its segment realignment.
These changes have no impact on the Company's historical consolidated GAAP balance sheets, statements of income or cash flows. Previously issued historical financial information provided herein in Table 1 has been recast on a basis that is consistent with the realignment of Valvoline's global operations.
Share Repurchase Authorization
The Company also announced that its board of directors approved a share repurchase authorization of $300 million. The timing and amount of any purchases of common stock will be based on the level of Valvoline's liquidity, general business and market conditions as well as other factors, including alternative investment opportunities. The term of the new share repurchase authorization extends through Sept. 30, 2024. The share repurchase authorization is part of the Company's broader capital allocation framework to deliver value to shareholders by first driving growth in the business, organically and through acquisitions, and then returning excess cash to shareholders through dividends and share repurchases.
Conference Call Webcast
Valvoline will host a live call and audio webcast with analysts and investors at 9 a.m. ET on Wednesday, May 19, 2021. Investors who wish to participate in the call may dial 1-833-350-1317 (or 1-236-738-2276) approximately 10 minutes before the call begins and provide conference ID number 8889198.The webcast and supporting materials will be accessible through Valvoline's website at http://investors.valvoline.com. Following the live event, an archived version of the webcast and supporting materials will be available.
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