Valvoline Inc., a leading worldwide supplier of premium branded lubricants and automotive services, recently provided a business update to give continued visibility into its performance during the COVID-19 crisis, including topline financial results through May 2020. 

Preliminary May 2020 results are expected to include the following:

• Significant sequential improvement in May versus April 
  • Sales increases of 38% 
  • Lubricant volume increases of 33% 
  • Sequential sales and volume improvements across all segments
• Quick Lubes’ system-wide same-store sales (SSS) improved each week in May 
  • System-wide SSS declines of 5.6% for May compared to the prior-year period 
  • System-wide SSS for last week of May were flat 
  • SSS for company-owned stores for last week of May were positive 2.4%
• Total liquidity of nearly $1.3 billion as of May 31, 2020
  • Reflects an increase of approximately $400 million since April 30
  • Reflects repayment of revolving credit facility borrowings using net proceeds of $400 million bond offering in May 2020 and cash and cash equivalents on-hand

Quick Lubes’ weekly system wide SSS improved each week for the past nine straight weeks, ending the last week of May flat to the prior year period. May weekly shipments in Core North America progressed to pre-COVID-19 levels. In the International segment, volume in China is beginning to stabilize at pre-COVID-19 trends while other regions are beginning to recover. 

“I’m proud of the way that we’ve weathered the most difficult phase of the COVID-19 crisis to date, and recent results indicate that we are firmly on the road to recovery,” said Sam Mitchell, CEO. “As we communicated during our Q2 earnings call, we have a strong and resilient business model and are seeing improving trends across our segments as miles driven rebounds. 

“I’m very encouraged by the rapid recovery in our Quick Lubes segment driven by outstanding in-store execution of our stay-in-your-car customer service experience. Looking forward, we are optimistic about continued improvements as we restore our marketing and advertising spending.”

Supplemental Materials

Supplemental materials that contain additional information about the company’s financial results for May 2020 were furnished to the SEC on a Form 8-K and are available on the company’s investor relations website at http://investors.valvoline.com.

Preliminary Results

The estimates above represent the most current information available and do not present all information necessary for an understanding of the company’s financial condition as of and the results of operations for the month ended May 31, 2020. Valvoline has provided an estimate for the preliminary and unaudited results described above primarily because the company’s financial closing procedures for the month ended May 31, 2020, are not yet complete. As a result, there is a possibility that the company’s final results will vary materially from these preliminary estimates as a result of the completion of normal quarter-end accounting procedures and adjustments, including the execution of the company’s internal control over financial reporting, the completion of the preparation and review of the company’s financial statements for the three months ended June 30, 2020, and the subsequent occurrence or identification of events prior to the formal issuance of the company’s financial results for the three months ended June 30, 2020. Valvoline undertakes no obligation to update or supplement the information provided above until the company releases its results of operations for the three months ended June 30, 2020.

Key Business Measures

Valvoline tracks its operating performance and manages its business using certain key measures, including system-wide, company-owned and franchised store counts and same-store sales; Express Care store counts; lubricant volumes sold by unconsolidated joint ventures; and total lubricant volumes sold, and percentage of premium lubricants sold. 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 sales and operating income, as determined in accordance with U.S. GAAP.

Sales in the Quick Lubes reportable segment 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 end of period store counts and activity. SSS is defined as sales by U.S. Quick Lubes service center stores (company-owned, franchised and the combination of these for system-wide SSS), with new stores excluded from the metric until the completion of their first full fiscal year in operation as this period is generally required for new store sales levels to begin to normalize. Differences in SSS are calculated to determine the percentage change between comparative periods. Quick Lubes revenue is limited to sales at company-owned stores, sales of lubricants and other products to independent franchisees and Express Care operators and royalties and other fees from franchised stores. Although Valvoline does not recognize store-level sales from franchised or Express Care stores as revenue in its Statements of Consolidated Income, management believes system-wide and franchised SSS comparisons and store counts, in addition to Express Care store counts, are useful to assess the operating performance of the Quick Lubes reportable segment and the operating performance of an average Quick Lubes store.

Lubricant volumes sold by unconsolidated joint ventures are used to measure the operating performance of the International operating segment. Valvoline does not record lubricant sales from unconsolidated joint venture as International reportable segment revenue. International revenue is limited to sales by Valvoline’s consolidated affiliates. Although Valvoline does not record sales by unconsolidated joint ventures as revenue in its Condensed Consolidated Statements of Comprehensive Income, management believes lubricant volumes including and sold by unconsolidated joint ventures is useful to assess the operating performance of its investments in joint ventures.

Management also evaluates lubricant volumes sold in gallons by each of its reportable segments and premium lubricant percentage, defined as premium lubricant gallons sold as a percentage of U.S. branded lubricant volumes for the Quick Lubes and Core North America segments and as a percentage of total segment lubricant volume for the International segment. Premium lubricant products generally provide a higher contribution to segment profitability and the percentage of premium volumes is useful to evaluating and understanding Valvoline’s operating performance.