Name: VALVOLINE INC Revenue Disclosure
Creator: VALVOLINE INC
License: https://creativecommons.org/publicdomain/mark/1.0/

REVENUE RECOGNITION

As described in Note 2, Valvoline adopted new revenue recognition accounting guidance effective October 1, 2018. 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.

Impacts on financial statements

The adoption of the new revenue accounting guidance did not have a significant impact on the Company’s consolidated financial statements. As a result of the Company’s adoption using the modified retrospective adoption approach, the Company recorded an adjustment to its Consolidated Balance Sheet as of October 1, 2018 related to the timing of certain sales to distributors.

The following table reconciles the 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
Inventory, 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 Consolidated Balance Sheet and Consolidated Statement of Comprehensive Income as of and for the year ended September 30, 2019:


Impact of Changes to Consolidated Balance Sheet
	As of September 30, 2019
(In millions)	As reported				Adjustments ^(a)				Under prior guidance
Accounts receivable, net	$	401			$	37			$	438
Inventories, net	$	194			$	(15)			$	179
Deferred income taxes	$	123			$	(6)			$	117
Accrued expenses and other liabilities			$	237			$	(1)			$	236
Retained deficit			$	284			$	(15)			$	269

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


Impact of Changes to Consolidated Statement of Comprehensive Income
	Year ended September 30, 2019
(In millions)	As reported				Adjustments				Under prior guidance
Sales	$	2,390			$	(50)			$	2,340
Cost of sales	1,580				(59)				1,521
Gross profit	$	810			$	9			$	819
Selling, general and administrative expenses			$	449			$	7			$	456
Equity and other income, net	$	40			$	1			$	41
Operating income	$	398			$	3			$	401
Income before income taxes	$	265			$	3			$	268
Income tax expense	$	57			$	1			$	58
Net income	$	208			$	2			$	210

Basic earnings per share			$	1.10			$	0.01			$	1.11
Diluted earnings per share			$	1.10			$	0.01			$	1.11

Disaggregation of revenue

The following summarizes sales by primary customer channel for the Company’s reportable segments:


	Year ended
(In millions)	September 30, 2019
Quick Lubes
Company-owned operations	$	531
Non-company owned operations	291
Total Quick Lubes	822

Core North America
Retail	543
Installer and other	451
Total Core North America	994

International	574

Consolidated sales	$	2,390

Sales by reportable segment disaggregated by geographic market follows for the year ended September 30, 2019:


(In millions)	Quick Lubes		Core North America		International		Totals
North America ^(a)	$	822	$	994	$	—	$	1,816
Europe, Middle East and Africa ("EMEA")	—		—		181		181
Asia Pacific	—		—		285		285
Latin America ^(a)	—		—		108		108
Total	$	822	$	994	$	574	$	2,390

(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:


	Year ended
(In millions)	September 30, 2019
Sales at a point in time	$	2,346
Franchised revenues transferred over time	44
Consolidated sales	$	2,390

About Revenue Disclosures

Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.

Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.

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