Document Entity Information - shares	3 Months Ended
Document Entity Information - shares	Dec. 31, 2018	Jan. 31, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	VALVOLINE INC
Entity Central Index Key	0001674910
Document Type	10-Q
Document Period End Date	Dec. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		188,180,577
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Smaller Reporting Company	false
Emerging Growth Company	false

Condensed Consolidated Statements of Comprehensive Income - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Net Income (Loss) Attributable to Parent [Abstract]
Sales	$ 557	$ 545
Cost of sales	374	350
Gross profit	183	195
Selling, general and administrative expenses	105	107
Legacy and separation-related expenses, net	0	9
Equity and other income, net	(9)	(9)
Operating income	87	88
Net pension and other postretirement plan income	(2)	(10)
Net interest and other financing expenses	17	14
Income before income taxes	72	84
Income tax expense	19	94
Net income (loss)	$ 53	$ (10)
NET INCOME (LOSS) PER SHARE
Basic (usd per share)	$ 0.28	$ (0.05)
Diluted (usd per share)	$ 0.28	$ (0.05)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic (shares)	188	202
Diluted (shares)	189	202
COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ 53	$ (10)
Other comprehensive (loss) income, net of tax
Currency translation adjustments	(4)	1
Amortization of pension and other postretirement plan prior service credit	(2)	(2)
Other comprehensive loss	(6)	(1)
Comprehensive income (loss)	$ 47	$ (11)

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Dec. 31, 2018	Sep. 30, 2018
Current assets
Cash and cash equivalents	$ 99	$ 96
Accounts receivable, net	331	409
Inventories, net	200	176
Prepaid expenses and other current assets	38	44
Total current assets	668	725
Noncurrent assets
Property, plant and equipment, net	428	420
Goodwill and intangibles, net	473	448
Equity method investments	32	31
Deferred income taxes	134	138
Other noncurrent assets	97	92
Total noncurrent assets	1,164	1,129
Total assets	1,832	1,854
Current liabilities
Current portion of long-term debt	30	30
Trade and other payables	152	178
Accrued expenses and other liabilities	198	203
Total current liabilities	380	411
Noncurrent liabilities
Long-term debt	1,291	1,292
Employee benefit obligations	330	333
Other noncurrent liabilities	174	176
Total noncurrent liabilities	1,795	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 December 31, 2018 and September 30, 2018	2	2
Paid-in capital	8	7
Retained deficit	(379)	(399)
Accumulated other comprehensive income	26	32
Total stockholders’ deficit	(343)	(358)
Total liabilities and stockholders’ deficit	$ 1,832	$ 1,854

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2018	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

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
Repurchase of common stock (shares)		(2)
Repurchases of common stock	(39)			(39)
Purchase of remaining ownership interest in subsidiary	(14)		(7)	(7)
Currency translation adjustments	1				1
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, 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	188
Balance at end of period at Dec. 31, 2018	$ (343)	$ 2	$ 8	$ (379)	$ 26

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

Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions

3 Months Ended

Dec. 31, 2018

Dec. 31, 2017

Cash flows from operating activities

Net income (loss)

$ 53

$ (10)

Adjustments to reconcile net income (loss) to cash flows from operating activities

Depreciation and amortization

14

11

Debt issuance cost and discount amortization

0

1

Deferred income taxes

0

85

Equity income from unconsolidated affiliates, net of distributions

0

(2)

Pension contributions

(2)

(3)

Stock-based compensation expense

3

4

Change in assets and liabilities

Accounts receivable

^[1]

43

(34)

Inventories

^[1]

(13)

7

Payables and accrued liabilities

^[1]

(19)

(40)

Other assets and liabilities

^[1]

6

1

Total cash provided by operating activities

85

20

Cash flows from investing activities

Additions to property, plant and equipment

(27)

(14)

Acquisitions, net of cash acquired

(30)

(60)

Other investing activities, net

1

0

Total cash used in investing activities

(56)

(74)

Cash flows from financing activities

Proceeds from borrowings, net of issuance costs

100

44

Repayments on borrowings

(101)

(4)

Repurchases of common stock

0

(37)

Payments for purchase of additional ownership in subsidiary

(1)

(15)

Cash dividends paid

(20)

(15)

Other financing activities

(3)

(4)

Total cash used in financing activities

(25)

(31)

Effect of currency exchange rate changes on cash and cash equivalents

(1)

Increase (decrease) in cash and cash equivalents

3

(86)

Cash and cash equivalents - beginning of period

96

201

Cash and cash equivalents - end of period

$ 99

$ 115

[1]	Excludes changes resulting from operations acquired.

Basis of Presentation and Significant Accounting Policies	3 Months Ended
	Dec. 31, 2018
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 (“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 the interim periods are not necessarily indicative of results 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 months ended December 31, 2018 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 of these 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 activities. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Statements of Cash Flows. •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 to be a business there must also be at least one substantive process and narrows the definition of outputs by more closely aligning it 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 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. 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 related to lease transactions. The primary objective of this guidance is to increase transparency and comparability among organizations by requiring lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by leases and to disclose key information about leasing arrangements. This new guidance is effective for the Company in the first quarter of fiscal 2020 using a modified retrospective approach. The Company has begun its assessment and implementation process, including completing its process to identify all forms of its leases globally, identify changes necessary to internal controls, as well as analyzing the practical expedients and specific impacts on its condensed consolidated financial statements. 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 Sheets as the majority of the Company’s operating leases are expected to be recognized as right of use assets and associated lease liabilities. The Company also anticipates expanded footnote disclosures related to its leases under the new guidance.

Revenue Recognition

3 Months Ended

Dec. 31, 2018

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 Statement of Comprehensive Income as of and for the three months ended December 31, 2018:


	December 31, 2018
Impact of Changes to Condensed Consolidated Balance Sheet			As reported				Adjustments ^(a)				Under prior guidance
(In millions)
Accounts receivable, net	$	331			$	29			$	360
Inventories, net	$	200			$	(12)			$	188
Deferred income taxes	$	134			$	(6)			$	128
Accrued expenses and other liabilities			$	198			$	1			$	199
Retained deficit	$	379			$	(12)			$	367

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


	Three months ended December 31, 2018
Impact of Changes to Condensed Consolidated Statement of Comprehensive Income			As reported				Adjustments				Under prior guidance
(In millions)
Sales	$	557			$	(15)			$	542
Cost of sales	374				(15)				359
Gross profit	$	183			$	—			$	183
Selling, general and administrative expenses			$	105			$	2			$	107
Operating income	$	87			$	(2)			$	85
Income before income taxes			$	72			$	(2)			$	70
Income tax expense	$	19			$	(1)			$	18
Net income	$	53			$	(1)			$	52

Basic earnings per share			$	0.28			$	(0.01)			$	0.27
Diluted earnings per share			$	0.28			$	(0.01)			$	0.27

Disaggregation of revenue

The following summarizes sales by primary customer channel for the Company’s reportable segments for the three months ended December 31, 2018:


(In millions)
Quick Lubes
Company-owned operations	$	124
Non-company owned operations	65
Total Quick Lubes	189

Core North America
Retail	116
Installer and other	116
Total Core North America	232

International	136

Consolidated sales	$	557

Sales by reportable segment disaggregated by geographic market follows for the three months ended December 31, 2018:


(In millions)	Quick Lubes		Core North America		International		Totals
Primary geographic markets
North America ^(a)	$	189	$	232	$	—	$	421
Europe, Middle East and Africa (EMEA)	—		—		44		44
Asia Pacific	—		—		67		67
Latin America ^(a)	—		—		25		25
Totals	$	189	$	232	$	136	$	557

⁽^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 for the three months ended December 31, 2018:


(In millions)
Timing of revenue recognized
Sales at a point in time	$	547
Franchised revenues transferred over time	10
Consolidated sales	$	557

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; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; 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 the supply 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.

While payment terms with customers vary by region and customer and are generally 30 to 60 days after delivery, Valvoline does not provide extended payment terms of a year or more.

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 ranges 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 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 represent 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 December 31, 2018. 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.

Fair Value Measurements

3 Months Ended

Dec. 31, 2018

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	December 31 2018		September 30 2018
Cash and cash equivalents
Money market funds	Level 1	$	6	$	5
Time deposits	Level 2	25		22
Prepaid expenses and other current assets
Currency derivatives ^(a)	Level 2	1		1
Other noncurrent assets
Non-qualified trust funds	Level 1	23		25
Total assets at fair value		$	55	$	53

Accrued expenses and other liabilities
Currency derivatives ^(a)	Level 2	$	—	$	1
Total liabilities at fair value		$	—	$	1

(a) The Company had outstanding contracts with notional values of $69 million and $74 million as of December 31, 2018 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 months ended December 31, 2018 or 2017 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.


	December 31, 2018										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	$	366	$	370	$	5	$	376	$	370	$	5
2025 Notes	374		395		5		376		395		5
Total	$	740	$	765	$	10	$	752	$	765	$	10

Refer to Note 8 for more information on Valvoline’s other debt instruments that have variable interest rates, and accordingly, their carrying amounts approximate fair value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Acquisitions and Divestitures

3 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Acquisitions and Divestitures

ACQUISITIONS AND DIVESTITURES

During the three months ended December 31, 2018, the Company acquired 35 service center stores for a total of $30 million. These acquisitions included 31 franchise service center stores, which were acquired from Oil Changers Inc. on October 31, 2018, and 4 former franchise service centers stores acquired in single and multi-store transactions. During the three months ended December 31, 2017, the Company acquired 56 former franchise service center stores for $60 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 three months ended December 31:


(In millions)	2018		2017
Inventories	$	—	$	1
Property, plant and equipment	1		1
Goodwill	21		36
Intangible assets^(a)
Reacquired franchise rights	4		22
Customer relationships	3		—
Trademarks and trade names	1		—
Net assets acquired	$	30	$	60

(a) Intangible assets acquired during the three months ended December 31, 2018 have a weighted average amortization period of 12 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.

Accounts Receivable

3 Months Ended

Dec. 31, 2018

Receivables [Abstract]

Accounts Receivable

ACCOUNTS RECEIVABLE

The following summarizes Valvoline’s accounts receivable:


(In millions)	December 31 2018		September 30 2018
Trade	$	320	$	390
Other	20		26
Accounts receivable, gross	340		416
Allowance for doubtful accounts	(9)		(7)
Total accounts receivable, net	$	331	$	409

During the three months ended December 31, 2018, Valvoline sold $28 million of accounts receivable to a financial institution. Valvoline did not sell accounts receivable during the three months ended December 31, 2017.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References + Details

Inventories

3 Months Ended

Dec. 31, 2018

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 method.

The following summarizes Valvoline’s inventories:


(In millions)	December 31 2018		September 30 2018
Finished products	$	211	$	189
Raw materials, supplies and work in process	33		30
Reserve for LIFO cost valuation	(41)		(40)
Excess and obsolete inventory reserves	(3)		(3)
Total inventories, net	$	200	$	176

Goodwill and Other Intangibles

3 Months Ended

Dec. 31, 2018

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 three months ended December 31, 2018:


(In millions)	Quick Lubes		Core North America		International		Total
Balance at September 30, 2018	$	252	$	89	$	40	$	381
Acquisitions ^(a)	21		—		—		21
Currency translation	(2)		—		—		(2)

Balance at December 31, 2018	$	271	$	89	$	40	$	400

(a) Refer to Note 4 for details regarding the acquisitions during the three months ended December 31, 2018.

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:


	December 31, 2018										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	$	(3)	$	27	$	29	$	(2)	$	27
Reacquired franchise rights	36		(5)		31		32		(4)		28
Customer relationships	17		(3)		14		14		(3)		11
Other intangible assets	1		—		1		1		—		1
Total definite-lived intangible assets	$	84	$	(11)	$	73	$	76	$	(9)	$	67

Debt

3 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Debt

DEBT

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


(In millions)	December 31 2018		September 30 2018
2025 Notes	$	400	$	400
2024 Notes	375		375
Term Loans	262		270
Revolver	164		147
Trade Receivables Facility	130		140
Other ^(a)	(10)		(10)
Total debt	$	1,321	$	1,322

Current portion of long-term debt	30		30
Long-term debt	$	1,291	$	1,292

(a) As of December 31, 2018 and September 30, 2018, other included $11 million of debt issuance costs and discounts and $1 million of debt 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

As of December 31, 2018 and September 30, 2018, the $875 million term loan facility (“Term Loans”) under the senior credit agreement (“Senior Credit Agreement”) had outstanding principal balances of $262 million and $270 million, respectively. Consistent with the payment schedule, during the three months ended December 31, 2018, the Company made principal payments of $8 million on the Term Loans.

As of December 31, 2018 and September 30, 2018, there was $164 million and $147 million, respectively, outstanding under the $450 million revolving credit facility (“Revolver”) under the Senior Credit Agreement. During the three months ended December 31, 2018, Valvoline borrowed $57 million and made payments of $40 million on the Revolver. As of December 31, 2018, the total borrowing capacity remaining under the Revolver was $277 million due to a reduction of $9 million for letters of credit outstanding.

As of December 31, 2018, Valvoline was in compliance with all covenants under the Senior Credit Agreement.

Trade Receivables Facility

As of December 31, 2018 and September 30, 2018, there was $130 million and $140 million, respectively, outstanding under the $175 million trade receivables securitization facility (“Trade Receivables Facility”). During the three months ended December 31, 2018, Valvoline made payments of $53 million and borrowed $43 million under the Trade Receivables Facility, using the proceeds to supplement the Company’s daily cash needs.

Based on the availability of eligible receivables, the total borrowing capacity remaining under the Trade Receivables Facility at December 31, 2018 was approximately $12 million. The financing subsidiary owned $222 million and $275 million of outstanding accounts receivable as of December 31, 2018 and September 30, 2018, respectively, and these amounts are included in Accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.

Income Taxes	3 Months Ended
Income Taxes	Dec. 31, 2018
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. Income tax expense for the three months ended December 31, 2018 was $19 million, an effective tax rate of 26.4%, compared to expense of $94 million, an effective tax rate of 111.9%, for the three months ended December 31, 2017. The decrease in income tax expense and the effective tax rate was principally driven by the enactment of tax reform legislation in the U.S. in December 2017, which resulted in a net increase in income tax expense of approximately $68 million during the three months ended December 31, 2017 and a lower federal corporate statutory income tax rate of 21% in fiscal 2019 from the blended rate of 24.5% in the prior year. The Company finalized its provisional estimates of the impacts of U.S. tax reform legislation, which resulted in no significant adjustments during the three months ended December 31, 2018.

Employee Benefit Plans

3 Months Ended

Dec. 31, 2018

Retirement Benefits [Abstract]

Employee Benefit Plans

EMPLOYEE BENEFIT PLANS

The following table summarizes the components of pension and other postretirement benefit income for the three months ended December 31:


					Other postretirement benefits
	Pension benefits
(In millions)	2018		2017		2018		2017


Interest cost	$	20	$	19	$	1	$	—
Expected return on plan assets	(20)		(26)		—		—
Amortization of prior service credit	—		—		(3)		(3)

Net periodic benefit income	$	—	$	(7)	$	(2)	$	(3)

Litigation, Claims and Contingencies	3 Months Ended
Litigation, Claims and Contingencies	Dec. 31, 2018
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.

Earnings Per Share

3 Months Ended

Dec. 31, 2018

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

The following summarizes basic and diluted earnings per share for the three months ended December 31:


(In millions, except per share data)	2018		2017
Numerator
Net income (loss)	$	53	$	(10)
Denominator
Weighted average common shares outstanding	188		202
Effect of potentially dilutive securities ^(a)	1		—
Weighted average diluted shares outstanding	189		202

Earnings (loss) per share
Basic	$	0.28	$	(0.05)
Diluted	$	0.28	$	(0.05)

(a) For the three months ended December 31, 2017, due to the net loss attributable to Valvoline common stockholders, potential common shares primarily related to stock-based compensation plans of approximately 1 million were excluded from the diluted share count because their effect would have been anti-dilutive.

Reportable Segment Information

3 Months Ended

Dec. 31, 2018

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 in the United States and Canada through company-owned and independent franchised retail quick lube service stores, as well as Express Care stores where independent operators service vehicles with Valvoline products.

•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 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:


(In millions)	Three months ended December 31
			2018			2017
Sales
Quick Lubes	$	189		$	154
Core North America	232			251
International	136			140
Consolidated sales	$	557		$	545

Operating income
Quick Lubes	$	38		$	35
Core North America	31			43
International	18			19
Total operating segments	$	87		$	97
Unallocated and other ^(a)	—			(9)
Consolidated operating income	$	87		$	88

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

Guarantor Financial Information

3 Months Ended

Dec. 31, 2018

Condensed Financial Information Disclosure [Abstract]

Guarantor Financial Information

GUARANTOR FINANCIAL INFORMATION

The Senior Notes detailed in Note 8 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 December 31, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	440	$	132	$	(15)	$	557
Cost of sales	—		293		96		(15)		374
Gross profit	—		147		36		—		183

Selling, general and administrative expenses	3		81		21		—		105

Equity and other (income) expenses, net	—		(13)		4		—		(9)
Operating (loss) income	(3)		79		11		—		87
Net pension and other postretirement plan income	—		(2)		—		—		(2)
Net interest and other financing expenses	15		1		1		—		17

(Loss) income before income taxes	(18)		80		10		—		72
Income tax (benefit) expense	(5)		20		4		—		19
Equity in net income of subsidiaries	(66)		(6)		—		72		—
Net income	$	53	$	66	$	6	$	(72)	$	53

Total comprehensive income	$	47	$	60	$	2	$	(62)	$	47


Condensed Consolidating Statements of Comprehensive Income
For the three months ended December 31, 2017
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Sales	$	—	$	422	$	134	$	(11)	$	545
Cost of sales	—		263		98		(11)		350
Gross profit	—		159		36		—		195

Selling, general and administrative expenses	9		76		22		—		107
Legacy and separation-related expenses, net	1		8		—		—		9
Equity and other (income) expenses, net	—		(12)		3		—		(9)
Operating (loss) income	(10)		87		11		—		88
Net pension and other postretirement plan income	—		(10)		—		—		(10)
Net interest and other financing expenses	12		1		1		—		14
(Loss) income before income taxes	(22)		96		10		—		84
Income tax expense	21		70		3		—		94
Equity in net income of subsidiaries	(33)		(7)		—		40		—
Net (loss) income	$	(10)	$	33	$	7	$	(40)	$	(10)

Total comprehensive (loss) income	$	(11)	$	32	$	8	$	(40)	$	(11)


Condensed Consolidating Balance Sheets
As of December 31, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Assets
Current assets
Cash and cash equivalents	$	—	$	21	$	78	$	—	$	99
Accounts receivable, net	—		27		399		(95)		331
Inventories, net	—		117		83		—		200
Prepaid expenses and other current assets	—		33		5		—		38
Total current assets	—		198		565		(95)		668
Noncurrent assets
Property, plant and equipment, net	—		387		41		—		428
Goodwill and intangibles, net	—		401		72		—		473
Equity method investments	—		32		—		—		32
Investment in subsidiaries	832		468		—		(1,300)		—
Deferred income taxes	67		54		13		—		134
Other noncurrent assets	2		90		5		—		97
Total noncurrent assets	901		1,432		131		(1,300)		1,164
Total assets	$	901	$	1,630	$	696	$	(1,395)	$	1,832

Liabilities and Stockholders’ Deficit
Current liabilities

Current portion of long-term debt	$	30	$	—	$	—	$	—	$	30
Trade and other payables	3		188		56		(95)		152
Accrued expenses and other liabilities	17		156		25		—		198
Total current liabilities	50		344		81		(95)		380
Noncurrent liabilities
Long-term debt	1,160		1		130		—		1,291
Employee benefit obligations	—		313		17		—		330

Other noncurrent liabilities	34		140		—		—		174
Total noncurrent liabilities	1,194		454		147		—		1,795
Commitments and contingencies
Stockholders’ (deficit) equity	(343)		832		468		(1,300)		(343)
Total liabilities and stockholders’ deficit/equity	$	901	$	1,630	$	696	$	(1,395)	$	1,832


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 three months ended December 31, 2018
(In millions)	Valvoline Inc. (Parent Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash flows provided by operating activities	$	13	$	29	$	43	$	—	$	85
Cash flows from investing activities
Additions to property, plant and equipment	—		(20)		(7)		—		(27)

Acquisitions, net of cash required	—		(8)		(22)		—		(30)

Other investing activities, net	—		1		—		—		1

Cash flows used in investing activities	—		(27)		(29)		—		(56)
Cash flows from financing activities

Proceeds from borrowings, net of issuance costs	57		—		43		—		100
Repayments on borrowings	(48)		—		(53)		—		(101)

Payments for purchase of additional ownership in subsidiary	—		—		(1)		—		(1)
Cash dividends paid	(20)		—		—		—		(20)
Other financing activities	(2)		(1)		—		—		(3)

Cash flows used in financing activities	(13)		(1)		(11)		—		(25)
Effect of currency exchange rate changes on cash and cash equivalents	—		—		(1)		—		(1)
Increase in cash and cash equivalents	—		1		2		—		3
Cash and cash equivalents - beginning of year	—		20		76		—		96
Cash and cash equivalents - end of period	$	—	$	21	$	78	$	—	$	99

Condensed Consolidating Statements of Cash Flows

For the three months ended December 31, 2017