VALVOLINE INC (VVV) FY 2024 MD&A

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and the accompanying Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K. Unless otherwise noted, disclosures herein relate solely to the Company’s continuing operations.

BUSINESS OVERVIEW AND PURPOSE

As the quick, easy, trusted leader in automotive preventive maintenance, Valvoline is creating shareholder value by driving the full potential of its core business, accelerating network growth and innovating to meet the needs of customers and the evolving car parc. With average customer ratings that indicate high levels of service satisfaction, Valvoline and the Company’s franchise partners keep customers moving with approximately 15-minute stay-in-your-car oil changes; battery, bulb and wiper replacements; tire rotations; and other manufacturer recommended maintenance services. The Company operates and franchises more than 2,000 service center locations through its Valvoline Instant Oil ChangeSM (“VIOC”) and Valvoline Great Canadian Oil Change (“GCOC”) retail locations and supports nearly 270 locations through its Express CareTM platform.

Valvoline's fiscal year ends on September 30 of each year.

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FISCAL 2024 OVERVIEW

Key operating highlights from continuing operations are presented below, each of which is discussed more fully in this Annual Report on Form 10-K:

Summarized below are Valvoline's trends in the results of its continuing operations Net revenues, Income from continuing operations, and Adjusted EBITDA over the last five fiscal years:

(a)Adjusted EBITDA is a non-GAAP measure, further described and defined within the “Use of Non-GAAP Measures” section below. Also refer to the “Continuing operations EBITDA and Adjusted EBITDA” section within “Results of Operations” below for a reconciliation of income from continuing operations to Adjusted EBITDA for each fiscal year presented.

Net revenues and Adjusted EBITDA trends have significantly increased over the past five fiscal years largely driven by strong system-wide same-store sales (“SSS”) growth, which benefited from increased transactions, higher average ticket, and continued non-oil change penetration, in addition to acquisitions and overall store expansion. Income from continuing operations has also followed an upward trend largely from strong top-line performance with the exception of fiscal 2022 where the decrease was primarily driven by a loss due to the remeasurement of pension and other postretirement plans, as well as higher separation-related expenses in connection with the planning and evaluation of the separation of the Company’s businesses that ultimately culminated in the sale of Global Products.

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Results for Fiscal 2023 compared to Fiscal 2022

For comparisons of Valvoline's consolidated results of operations and cash flows for the fiscal years ended

September 30, 2023 to September 30, 2022, refer to Item 7 of Part II of the Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the Securities and Exchange Commission on November 20, 2023.

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 have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, or more meaningful than, the financial statements presented in accordance with U.S. GAAP. The financial results presented in accordance with U.S. GAAP and reconciliations of non-GAAP measures included within this Annual Report on Form 10-K should be carefully evaluated.

The following are the non-GAAP measures management has included and how management defines them:

•EBITDA - net income/loss, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization;

•Adjusted EBITDA - EBITDA adjusted for the impacts 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," as further described below);

•Adjusted EBITDA margin - adjusted EBITDA divided by adjusted net revenues;

•Adjusted net revenues - reported net revenues adjusted for key items;

•Free cash flow - cash flows from operating activities less capital expenditures and certain other adjustments as applicable; and

•Discretionary free cash flow - cash flows from operating activities less maintenance capital expenditures and certain other adjustments as applicable.

Non-GAAP measures include adjustments from results based on U.S. GAAP that management believes enables comparison of certain financial trends and results between periods and provides a useful supplemental presentation of Valvoline's operating performance that allows for transparency with respect to key metrics used by management in operating the business and measuring performance. The manner used to compute non-GAAP information used by management may differ from the methods used by other companies, and may not be comparable. For a reconciliation of the most comparable U.S. GAAP measures to the non-GAAP measures, refer to the “Results of Operations” and “Financial Position, Liquidity and Capital Resources” sections below.

Management believes EBITDA measures provide a meaningful supplemental presentation of Valvoline’s operating performance between periods on a comparable basis due to the depreciable assets associated with the nature of the Company’s operations as well as income tax and interest costs related to Valvoline’s tax and capital structures, respectively. Adjusted EBITDA measures enable comparison of financial trends and results between periods where certain items may not be reflective of the Company’s underlying and ongoing operations performance or vary independent of business performance.

Management uses free cash flow and discretionary free cash flow as additional non-GAAP metrics 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. Free cash flow includes the impact of capital expenditures, providing a supplemental view of cash generation. Discretionary free cash flow includes maintenance capital expenditures, which are routine uses of cash that are necessary to maintain the Company's operations and provides a supplemental view of cash flow generation to maintain operations before discretionary investments in growth. Free cash flow and discretionary free cash flow have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash flows, such as mandatory debt repayments.

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The non-GAAP measures used by management exclude key items. Key items are often related to legacy matters or market-driven events considered by management to not be reflective of the ongoing operating performance. Key items may consist of adjustments related to: legacy businesses, including the separation from Valvoline's former parent company, the former Global Products reportable segment, and associated impacts of related activity and indemnities; non-service pension and other postretirement plan activity; restructuring-related matters, including organizational restructuring plans, the separation of Valvoline’s businesses, significant acquisitions or divestitures, debt extinguishment and modification, and tax reform legislation; in addition to other matters that management considers non-operational, infrequent or unusual in nature.

Details with respect to the description and 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.

Key Business Measures

Valvoline tracks its operating performance and manages its business using certain key measures, including system-wide, company-operated and franchised store counts and SSS; and system-wide store sales. 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 net revenues and operating income, as determined in accordance with U.S. GAAP.

Net revenues 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. For the periods presented herein, SSS is defined as net revenues of U.S. VIOC 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. Beginning in fiscal 2025, management is updating its definition of same-store sales and in connection with this change, prior periods will be recast to present SSS on a consistent basis with the new approach. The new approach will define same stores at the beginning of the month following the completion of 12 full months in operation within the system to more closely conform with common retail practice.

Net revenues are limited to sales at company-operated stores, in addition to royalties and other fees from independent franchised and Express Care stores. Although Valvoline does not recognize store-level sales from franchised stores as net revenues in its Statements of Condensed Consolidated Income, management believes system-wide and franchised SSS comparisons, store counts, and total system-wide store sales are useful to assess market position relative to competitors and overall store and operating performance.

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RESULTS OF OPERATIONS

The following summarizes the results of the Company’s continuing operations for the years ended September 30:

(a)Refer to the “Use of Non-GAAP Measures” and Continuing operations EBITDA and Adjusted EBITDA for management’s definitions of the metrics presented above and reconciliation to the corresponding GAAP measures, where applicable.

Fiscal 2024 marked the 18th consecutive year for system-wide SSS growth with 158 net store additions to the system. The table below highlights the growth over the last year:

Net revenues

Net revenues increased $175.5 million, or 12.2% over the prior year period primarily driven by improvements in volume, mix, and pricing. System-wide SSS growth increased 6.7% with the majority of the gains coming from ticket growth, driven by higher non-oil change penetration, pricing adjustments, and premiumization while transaction growth accounted for the remaining balance. Year-over-year system-wide store growth of 8.5% also contributed to net revenues and volumes through the addition of 158 net new stores. The following reconciles the year-over-year changes in Net revenues:

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Gross profit

Gross profit improved 13.6% year-over-year, largely driven by strong top-line growth from higher transaction volumes, increased average ticket, and continued store expansion. These benefits were partially offset by increased store operating costs, including depreciation, as well as higher labor and material expenses. The following reconciles the year-over-year changes in gross profit:

Gross profit margin rate improved compared to the prior year, driven by increased labor efficiency from effective management, along with lower product costs as a percentage of sales. These benefits were partially offset by business mix and higher depreciation.

Net operating expenses

Details of the components of Net operating expenses are summarized below for the years ended September 30:

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Selling, general and administrative (“SG&A”) expenses increased $40.6 million compared to the prior year period. This increase reflects ongoing investments in growth, particularly related to the expansion of the stand-alone retail services business following the sale of Global Products in fiscal 2023. The higher costs were primarily driven by investments in stand-alone technology platforms, outside services, and implementation costs which together contributed an increase in expense of $23.8 million. Additionally, increased spending on advertising to attract and retain customers as well as investments in talent combined to increase expense by $16.8 million.

Net legacy and separation-related activity was favorable compared to the prior year by $33.5 million as a result of prior year expenses that generally did not recur. In fiscal 2023, $25.7 million of expense was recognized due to the amendment of the tax matters agreement with Valvoline’s former parent company that resulted in an increased indemnity obligation for the utilization of certain legacy tax attributes. Additionally, expense was recognized in the prior year associated with the modification of certain unvested performance-based stock awards for the continuing operation in connection with the sale of Global Products.

Other income, net increased by $52.8 million primarily driven by a $41.8 million gain on sale of operations recognized from the sale of company-operated service center stores to franchisees and higher rental income of $1.7 million from subleasing portions of certain properties to Global Products, which only included a partial year of income in the prior year. The prior year also includes impairment charges of $9.2 million related to suspended operations and an investment that did not recur.

Net pension and other postretirement plan expense (income)

Net pension and other postretirement plan income decreased $39.3 million from the prior year, primarily due to a lower current year gain on pension and other postretirement plan remeasurement of $2.4 million compared to a gain of $41.6 million in the prior year. The lower remeasurement gain was primarily attributed to a decline in discount rates, which was moderated by higher actual returns on plan assets in the current year compared to the prior year.

Net interest and other financing expenses

Net interest and other financing expense increased $33.6 million during fiscal 2024, primarily due to a $26.9 million decrease in interest income following the maturity of invested net proceeds from the sale of Global Products. These investments began maturing in late fiscal 2023 and fully matured in the second quarter of fiscal 2024 and were utilized to complete the tender offer to repurchase 27.0 million shares of its common stock for $1.024 billion (the “Equity Tender Offer”) in fiscal 2023. They were also utilized in fiscal 2024 to complete a tender offer (the “Debt Tender Offer”) for $598.3 million, or 99.7%, of the outstanding principal amount tendered by the holders of the 2030 Notes. Additionally, debt modification charges and related fees were $6.2 million higher, driven by the current year’s repurchase of the 2030 Notes, which resulted in the write-off of previously capitalized debt issuance costs and discounts, as well as third-party fees associated with the execution of the Debt Tender Offer, which were higher than those recognized in the prior year modification of the Senior Credit Agreement.

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Income tax expense

The following table summarizes Income tax expense and the effective tax rate during the years ended September 30:

The higher effective tax rate in fiscal 2024 is primarily due to more normalized activity compared to the prior year period, which included a $29.0 million income tax benefit. This benefit resulted from the release of a valuation allowance due to the change in expectations regarding the utilization of certain legacy tax attributes as a result of the terms of the amended tax matters agreement with Valvoline’s former parent company.

(Loss) income from discontinued operations, net of tax

(Loss) income from discontinued operations, net of tax for the years ended September 30 are as follows:

Earnings from discontinued operations declined $1.223 billion compared to the prior year primarily due to the recognition of an after-tax gain of $1.147 billion from the sale of the Global Products business in the prior year period, along with partial-year results from the underlying business in the pre-closing period. In contrast, the current year no longer reflects operational results from the underlying business and includes certain remaining costs to facilitate the separation of processes and systems, which were partially offset by favorable tax adjustments to the gain on sale.

Continuing operations adjusted net revenues

The following reconciles Net revenues to Adjusted net revenues for the years ended September 30:

(a)Represents the results of a former Global Products business where operations were suspended during fiscal 2022 that were not included in the sale.

(b)Adjusted net revenues is defined as net revenue adjusted for key items.

(c)Represents a non-GAAP measure. Refer to “Use of Non-GAAP Measures” for management’s definitions of the metrics presented above.

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Continuing operations EBITDA and Adjusted EBITDA

The following reconciles Income from continuing operations to EBITDA and Adjusted EBITDA for the years ended September 30:

(a)EBITDA from continuing operations is defined as income from continuing operations, plus income tax expense, net interest and other financing expenses, and depreciation and amortization attributable to continuing operations. Adjusted EBITDA from continuing operations is EBITDA adjusted for key items attributable to continuing operations.

(b)Includes several elements impacted by changes in plan assets and obligations that are primarily driven by the debt and equity markets, including remeasurement gains and losses, when applicable; and recurring non-service pension and other postretirement net periodic activity, which consists of interest cost, expected return on plan assets and amortization of prior service credits. Management considers these elements are more reflective of changes in current conditions in global markets (in particular, interest rates), outside the operational performance of the business, and are also legacy amounts that are not directly related to the underlying business and do not have an impact on the compensation and benefits provided to eligible employees for current service. Refer to Note 10 in the Notes to Consolidated Financial Statements in Item 8 of Part II in this Annual Report on Form 10-K for further details.

(c)Activity associated with legacy businesses, including the separation from Valvoline’s former parent company and its former Global Products reportable segment. This activity includes the recognition of and adjustments to indemnity obligations to its former parent company; certain legal, financial, professional advisory and consulting fees; and other expenses incurred by the continuing operations in connection with and directly related to these separation transactions and legacy matters. This incremental activity directly attributable to legacy matters and separation transactions is not considered reflective of the underlying operating performance of the Company’s continuing operations. During fiscal three months ended September 30, 2023, the Company recognized $25.7 million of pre-tax expense to reflect its increased estimated indemnity obligation which also resulted in an income tax benefit of $29.0 million to reflect the release of valuations allowances in connection with the amendment of the Tax Matters Agreement with Valvoline’s former parent company.

(d)Consists of expenses incurred related to the Company’s information technology transitions, primarily related to implementing stand-alone enterprise resource planning and human resource information systems during fiscal years 2023 and 2024. These expenses include data conversion, temporary support, training, and redundant expenses incurred from duplicative technology platforms, which are incremental costs directly associated with technology transitions and are not considered to be reflective of the ongoing expenses of operating the Company’s technology platforms.

(e)Consists of activity associated with significant acquisitions, investments and divestitures, including legal, advisory and consulting fees, such as diligence costs, in addition to gains or losses recognized upon disposition and expense recognized to reduce the carrying values of investments determined to be impaired. These costs are not considered to be reflective of the underlying performance of the Company’s ongoing continuing operations.

(f)Represents the results of a former Global Products business where operations were suspended during fiscal 2022. This business was not included in the sale of the Global Products business in March 2023. It was classified as held for sale and impaired as of September 30, 2023, and subsequently sold during the first fiscal quarter of 2024. These results are not indicative of the operating performance of the Company’s ongoing continuing operations.

(g)Adjustments to employee termination benefits recognized over remaining employee service periods as a result of company-wide restructuring activities that are not considered reflective of the underlying operating performance of the Company’s ongoing operations.

(h)Adjustment associated with the Company’s change in its policy for benefits associated with compensated absences, the results of which are not indicative of the operating performance of the Company’s underlying operations.

Adjusted EBITDA increased $62.6 million, or 16.5%, for the year ended September 30, 2024 compared to the prior year. This growth was primarily attributable to strong gross profit expansion, which benefited from higher average ticket driven by non-oil change service penetration, net pricing benefits, and increased premiumization, along with increased transactions and unit growth, in addition to operational efficiencies, primarily in labor management, that

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further contributed to the increase. These benefits were partially offset by investments in SG&A expenses to support the stand-alone business and future growth.

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 business, capital expenditures, borrowing arrangements, and working capital management. Capital expenditures, acquisitions, and share repurchases 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.

Continuing operations cash flows

Valvoline’s continuing operations cash flows as reflected in the Consolidated Statements of Cash Flows are summarized as follows for the years ended September 30:

Operating activities

The decrease in cash flows provided by operating activities of $70.1 million from the prior year was primarily driven by changes in net working capital. Net working capital in the prior year period benefited approximately $70 million from the establishment of the Supply Agreement, which includes a full conversion cycle of related outstanding payables, in addition to other separation-related accruals in connection with the sale of Global Products.

Investing activities

The increase in cash flows from investing activities of $714.0 million from the prior year was substantially driven by net proceeds from investments of $346.5 million during the current year in comparison to the net purchase of investments of $360.4 million during the prior year. The Company invested a substantial portion of the net proceeds from the sale of Global Products in short-term investments in the prior year, which completely matured in the second quarter of fiscal 2024 to support the repurchase of the 2030 Notes that took place in April 2024 discussed in financing activities below. In addition, the Company received proceeds, net of cash disposed of, of $71.5 million primarily as a result of completing two refranchising transactions in the current year. These year-over-year changes in cash flows from investing activities were partially offset by increased capital expenditures of $43.9 million and an increase in acquisition activity of $16.4 million in the current year to support store growth.

Financing activities

The decrease in cash flows used in financing activities of $819.2 million from the prior year was principally driven by year over year reductions in share repurchases partially offset by higher net payments on borrowings. In the prior year, the Company completed the Equity Tender Offer to repurchase 27.0 million shares of its common stock for $1.024 billion coupled with other share repurchases of $500.6 million, which utilized a substantial portion of the net proceeds from the sale of Global Products to return cash to shareholders. In the current year, share repurchases of $226.8 million drove lower uses of cash year-over-year of $1.298 billion. Further contributing to lower uses of cash for financing activities were prior year dividend payments of $21.8 million that did not recur as the Company discontinued its dividend during the second quarter of fiscal 2023 following the sale of Global Products.

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These decreases in cash flows used in financing activities were partially offset by higher net payments on borrowings of $498.9 million. Higher net payments in the current year were driven by the Debt Tender Offer, which utilized cash and cash equivalents and borrowings of $175.0 million on the Revolver to facilitate the repurchase of the $600.0 million 2030 Notes in accordance with the asset sale covenant of the governing indenture. These net payments on borrowings in the current year compared to net inflows in the prior year associated with the modification of the Senior Credit Agreement in connection with closing the sale of Global Products.

Continuing operations free cash flow

The following table sets forth free cash flow and discretionary free cash flow from continuing operations and reconciles cash flows from operating activities to both measures. 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 “Use of Non-GAAP Measures” within this Item 7 for additional information regarding this non-GAAP measure.

The decrease in free cash flow from continuing operations over the prior year was driven primarily by lower cash flows provided by operating activities in the current year as described above. These changes, in addition to higher capital expenditures, resulted in lower free cash flow from the prior year. New store construction primarily drove increased capital expenditures during the current year, as the Company continues to focus the majority of its capital spend toward growth, which is expected to drive a high return on invested capital.

Discontinued operations cash flows

The cash flows attributable to the discontinued operation are reflected in the Consolidated Statements of Cash Flows and are summarized below for the years ended September 30:

The decrease in operating cash flows provided by discontinued operations was largely due to prior year tax payments of $300.8 million relating to the gain on sale of discontinued operations, in addition to payments of separation-related costs attributed to the sale of the Global Products business, including the success fee which coincided with the close of the Transaction on March 1, 2023. In addition, unfavorable changes in net working capital during the pre-close period in the prior year contributed to the use of cash flows that were primarily due to trade and other payables activity in the cost inflationary environment and growth in accounts receivable from increased sales. Prior year discontinued operations cash flows provided by investing activities were due to the cash consideration received, net of cash transferred, at the close of the sale of Global Products of $2.6 billion. The prior year cash flows used in financing activities were due to net repayments on borrowings driven by the extinguishment of the $175 million Trade Receivables Facility.

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Debt

The following table summarizes Valvoline’s continuing operations debt as of September 30:

Approximately 49% of Valvoline's outstanding borrowings as of September 30, 2024 had fixed rates, with the remainder bearing variable interest rates. As of September 30, 2024, Valvoline was in compliance with all covenants of its debt obligations and had borrowing capacity remaining of $346.8 million. Refer to Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional details regarding the Company’s debt instruments.

On April 16, 2024, Valvoline completed the Debt Tender Offer with 99.7% of the outstanding principal amount tendered by the holders of the 2030 Notes. The Debt Tender Offer was made to comply with the requirements of the asset sale covenant under the indenture governing the 2030 Notes in connection with the sale of Global Products and Valvoline’s use of the related net proceeds. The Company used cash and cash equivalents on hand, in addition to borrowing $175.0 million on the Revolver to facilitate the $598.3 million purchase of the 2030 Notes at par, plus accrued and unpaid interest, and cancelled the 2030 Notes accepted for purchase. The Company elected to repurchase the remaining balance outstanding of $1.7 million on April 29, 2024 pursuant to the terms and conditions of the indenture governing the 2030 Notes. In connection with the completion of the Debt Tender Offer, Valvoline recognized a loss on extinguishment of the 2030 Notes of $5.1 million within Net interest and other financing expenses in the Consolidated Statements of Comprehensive Income during the year ended September 30, 2024, comprised of the write-off of related unamortized debt issuance costs and discounts.

Material cash requirements and other commitments

The Company's material cash requirements for the continuing operations include the following contractual obligations and commitments as of September 30, 2024:

(a)Includes interest expense on both variable and fixed rate debt, assuming no prepayments. Variable interest rates have been assumed to remain constant through payment at the rates that existed as of September 30, 2024.

(b)Includes projected benefit payments through fiscal 2034 for Valvoline’s unfunded benefit plans. Excludes benefit payments from pension plan trust funds.

The Company guaranteed future lease commitments related to certain facilities in connection with the sale and disposal of certain retail stores and the Global Products business. Valvoline is obligated to perform if the buyers of the divested businesses default on the leases under the guarantees, which extend through 2037. The undiscounted

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maximum potential future payments under the guarantees were $32.8 million as of September 30, 2024. The Company has not recorded a liability for these guarantees as the likelihood of making future payments is considered remote.

Fiscal 2025 capital expenditures

Valvoline is currently forecasting approximately $230 million to $250 million of capital expenditures for fiscal 2025, funded primarily from operating cash flows.

Pension and other postretirement plan obligations

The Company makes cash and non-cash contributions and benefit payments for its pension and other postretirement plans. During fiscal 2024, the Company made $16.6 million in benefit payments for its non-qualified pension and other postretirement plans, consisting of $8.3 million of cash payments and $8.3 million of non-cash payments. Based on current data and assumptions, the Company does not anticipate the need to satisfy any minimum funding requirements to its qualified pension plans for at least the next 5 years. Refer to Note 10 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for additional information regarding the Company's U.S. pension and other postretirement plans.

Share repurchases

During the year ended September 30, 2024, the Company repurchased 6.7 million shares of its common stock for a principal amount of $226.7 million, which completed the November 2022 Board authorization to repurchase up to $1.6 billion of its common stock (the “2022 Share Repurchase Authorization”). During July 2024, the Board approved a share repurchase authorization of $400.0 million (the “2024 Share Repurchase Authorization”), which has no expiration date. As of September 30, 2024, $384.8 million remained available for repurchase under the 2024 Share Repurchase Authorization. Additionally, the Company repurchased 0.2 million shares for an aggregate amount of $9.8 million from October 1, 2024 through November 19, 2024 pursuant to the 2024 Share Repurchase Authorization, leaving $375.0 million in aggregate repurchase authority remaining as of November 19, 2024.

The timing and amount of any repurchases of common stock will be solely at the discretion of the Company and is subject to general business and market conditions, as well as other factors. The share repurchase authorization is part of a broader capital allocation framework to deliver value to shareholders by first, driving profitable growth in the business, organically and through acquisitions and franchise development; second, to remain within a ratings agency target adjusted EBITDA net leverage ratio of 2.5 to 3.5 times; and third, to continue returning excess capital to shareholders.

Summary

Valvoline’s continuing operations had cash and cash equivalents of $68.3 million, total debt of $1.1 billion, and total remaining borrowing capacity of $346.8 million as of September 30, 2024. 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 I of this Annual Report on Form 10-K.

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

NEW ACCOUNTING PRONOUNCEMENTS

For a discussion and analysis of recently issued and adopted accounting pronouncements and the impact on Valvoline, refer to Note 2 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K.

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CRITICAL ACCOUNTING ESTIMATES

The preparation of Valvoline’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses, and the disclosures of contingent matters. Significant items that are subject to such estimates and assumptions include, but are not limited to, employee benefit obligations, business combinations, and income taxes.

Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions. Valvoline’s significant accounting policies are discussed in Note 2 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K. The Company believes the accounting estimates listed below are the most critical to aid in fully understanding and evaluating the reported financial results, and require the most difficult, subjective, or complex judgments, resulting from the need to make estimates about the effects of matters that are inherently uncertain.

Employee benefit obligations

Actuarial assumptions

Significant assumptions the Company must review and set annually and at each measurement date related to its pension and other postretirement benefit obligations are:

•Expected long-term return on plan assets — The expected long-term return on plan assets assumption reflects the long-term average rate of return plan assets are expected to earn. This assumption is determined considering each plan's asset allocation targets and overall expected performance, including evaluation of the most recent long-term historical returns, as applicable. The weighted-average long-term expected rate of return on assets assumption was 5.30% for fiscal 2024. The pension plan assets generated an actual weighted-average return of 16.50% in fiscal 2024 primarily driven by the market

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performance of the plan assets of the qualified pension plans based on the Company’s investment strategy to hedge the movement in liabilities related to changes in discount rates with investments of a matched duration that provide offsetting returns aligned with changes in interest rates. The expected return on plan assets is designed to be a long-term assumption, and therefore, actual returns will be subject to year-to-year variances. For fiscal 2025, the expected rate of return on assets assumption for the qualified pension plans will be 5.20%. The expected long-term return on plan assets assumption has no impact on the reported net liability or net actuarial gains or losses upon remeasurement but does impact the recurring non-service net periodic income recognized ratably throughout the year.

Valvoline’s pension plans hold a variety of investments designed to diversify risk. Plan assets are invested in equity securities, government and agency securities, corporate debt, and other non-traditional assets such as hedge funds. The investment goal of the pension plans is to achieve an adequate net investment return to provide for future benefit payments to its participants. Target asset allocation percentages as of September 30, 2024 for the qualified pension plans were 90% fixed income and 10% equity investments. The qualified pension plans are managed by professional investment managers that operate under investment management contracts that include specific investment guidelines, requiring among other actions, adequate diversification and prudent use of risk management practices such as portfolio constraints relating to established benchmarks. Holding all other assumptions constant, a hypothetical 1.00% change in the expected long-term return on plan assets assumption for the qualified pension plans would impact fiscal 2024 recurring non-service pension income by $13.0 million.

•Discount rate — Reflects the rates at which benefits could effectively be settled and is based on current investment yields of high-quality corporate bonds. Consistent with historical practice, the Company uses an actuarially-developed full yield curve approach, the above mean yield curve, to match the timing of cash flows of expected future benefit payments from the plans by applying specific spot rates along the yield curve to determine the assumed discount rate. Valvoline’s fiscal 2024 expense, excluding actuarial gains and losses, for pension plans was determined using the spot discount rates as of the beginning of the fiscal year. The interest cost discount rates for fiscal 2024 pension expense and other postretirement expense were each 5.92%. The weighted-average discount rate at the end of fiscal 2024 was 4.94% for the pension plans and 4.89% for the postretirement health and life plans.

The following table illustrates the estimated impact on hypothetical pension and other postretirement expense that would have resulted from a one percentage point change in discount rates in isolation of impacts on other significant assumptions in the years ended September 30:

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•Mortality — The mortality assumption for Valvoline's U.S. pension and other postretirement plans is utilizes the Society of Actuaries PRI-2012 mortality base tables and a mortality improvement scale that follows the 2024 Trustees Report of the Social Security Administration Intermediate Alternative as reflected in the MSS-2024 improvement scale. Valvoline believes the updated mortality improvement scales provide a reasonable assessment of current mortality trends and is an appropriate estimate of future mortality projections.

Other assumptions, including the rate of compensation increase and healthcare cost trend rate, do not have a significant impact on Valvoline's pension and other postretirement benefit plan costs and obligations based upon current plan provisions that have generally frozen benefits and limited costs.

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Business combinations and intangible assets

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Income taxes

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