LEASE COMMITMENTS
The following table presents the Company's lease balances as of September 30:
| | | | | | | | | | | | | | | | | | | | |
| (In millions) | | Location in Consolidated Balance Sheets | | 2025 | | 2024 |
| Assets | | | | | | |
| Operating lease assets | | Operating lease assets | | $ | 331.8 | | | $ | 298.6 | |
| Finance lease assets | | Property, plant and equipment, net | | 291.2 | | | 261.7 | |
| Amortization of finance lease assets | | Property, plant and equipment, net | | (79.3) | | | (67.4) | |
| Total leased assets | | | | $ | 543.7 | | | $ | 492.9 | |
| | | | | | |
| Liabilities | | | | | | |
| Current | | | | | | |
| Operating lease liabilities | | Accrued expenses and other liabilities | | $ | 33.6 | | | $ | 31.2 | |
| Finance lease liabilities | | Accrued expenses and other liabilities | | 15.2 | | | 13.4 | |
| Noncurrent | | | | | | |
| Operating lease liabilities | | Operating lease liabilities | | 315.3 | | | 279.7 | |
| Finance lease liabilities | | Other noncurrent liabilities | | 229.3 | | | 207.3 | |
| Total lease liabilities | | | | $ | 593.4 | | | $ | 531.6 | |
The following table presents the components of total lease costs for the years ended September 30:
| | | | | | | | | | | | | | | | | | | | |
| (In millions) | | Location in Consolidated Statements of Comprehensive Income | | 2025 | | 2024 |
| Operating lease cost | | Cost of sales and Selling, general and administrative expenses | | $ | 50.3 | | | $ | 45.8 | |
| Finance lease costs | | | | | | |
| Amortization of lease assets | | Cost of sales | | 17.7 | | | 17.4 | |
| Interest on lease liabilities | | Net interest and other financing expenses | | 11.6 | | | 11.1 | |
| Variable lease cost | | Cost of sales and Selling, general and administrative expenses | | 3.2 | | | 3.7 | |
| Sublease income | | Other income, net | | (10.4) | | | (9.3) | |
| Total lease cost | | | | $ | 72.4 | | | $ | 68.7 | |
Other information related to the Company's leases follows for the years ended September 30:
| | | | | | | | | | | | | | |
| (In millions) | | 2025 | | 2024 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | |
Operating cash flows from operating leases (a) | | $ | 47.3 | | | $ | 43.1 | |
| Operating cash flows from finance leases | | $ | 11.6 | | | $ | 11.1 | |
| Financing cash flows from finance leases | | $ | 12.2 | | | $ | 12.0 | |
| Lease assets obtained in exchange for lease obligations: | | | | |
| Operating leases | | $ | 69.1 | | | $ | 63.4 | |
| Finance leases | | $ | 36.4 | | | $ | 22.4 | |
| | | | |
(a)Included within the change in Other assets and liabilities within the Consolidated Statements of Cash Flows offset by noncash operating lease asset amortization and liability accretion.
The following table reconciles the undiscounted cash flows for the next five fiscal years ended September 30 and thereafter to the operating and finance lease liabilities recorded within the Consolidated Balance Sheet as of September 30, 2025:
| | | | | | | | | | | | | | |
| (In millions) | | Operating leases | | Finance leases |
| 2026 | | $ | 51.5 | | | $ | 27.6 | |
| 2027 | | 49.7 | | | 28.0 | |
| 2028 | | 47.1 | | | 28.2 | |
| 2029 | | 44.3 | | | 27.9 | |
| 2030 | | 41.4 | | | 28.0 | |
| Thereafter | | 232.3 | | | 193.8 | |
| Total future lease payments | | 466.3 | | | 333.5 | |
| Imputed interest | | 117.4 | | | 89.0 | |
| Present value of lease liabilities | | $ | 348.9 | | | $ | 244.5 | |
As of September 30, 2025, Valvoline has additional leases primarily related to its retail service center stores that have not yet commenced with approximately $39.1 million in undiscounted future lease payments that are not included in the table above. These leases are expected to commence over the next twelve months and generally have lease terms of 15 years.
The weighted average remaining lease terms and interest rates as of September 30, 2025 were:
| | | | | | | | | | | | | | |
| | Operating leases | | Finance leases |
| Weighted average remaining lease term (in years) | | 10.3 | | 11.7 |
| Weighted average discount rate | | 5.5 | % | | 5.4 | % |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.