Vvv summary and q1 review deck v3_02_feb17

Vvv summary and q1 review deck v3_02_feb17

• 1.
  Valvoline Overview andQ1 Review Fiscal First Quarter 2017
• 2.
  2 Forward-Looking Statements This presentationcontains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, contained in the presentation, including statements regarding our industry, position, goals, strategy, operations, financial position, revenues, estimated costs, prospects, margins, profitability, capital expenditures, liquidity, capital resources, dividends, plans and objectives of management are forward-looking statements. Valvoline has identified some of these forward-looking statements with words such as “anticipates,” “believes,” “expects,” “estimates,” “is likely,” “predicts,” “projects,” “forecasts,” “may,” “will,” “should” and “intends” and the negative of these words or other comparable terminology. In addition, Valvoline™ may, from time to time, make forward-looking statements in its annual report, quarterly reports and other filings with the Securities and Exchange Commission (“SEC”), news releases and other written and oral communications. These forward-looking statements are based on Valvoline’s current expectations and assumptions regarding, as of the date such statements are made, Valvoline’s future operating performance and financial condition, including Valvoline’s separation from Ashland (the “Separation”), the expected timetable for Ashland’s potential distribution of its remaining Valvoline common stock to Ashland shareholders (the “Stock Distribution”) and Valvoline’s future financial and operating performance, strategic and competitive advantages, leadership and future opportunities, as well as the economy and other future events or circumstances. Valvoline’s expectations and assumptions include, without limitation, internal forecasts and analyses of current and future market conditions and trends, management plans and strategies, operating efficiencies and economic conditions (such as prices, supply and demand, cost of raw materials, and the ability to recover raw-material cost increases through price increases), and risks and uncertainties associated with the following: demand for Valvoline’s products and services; sales growth in emerging markets; the prices and margins of Valvoline’s products and services; the strength of Valvoline’s reputation and brand; Valvoline’s ability to develop and successfully market new products and implement its digital platforms; Valvoline’s ability to retain its largest customers; potential product liability claims; achievement of the expected benefits of the Separation; Valvoline’s substantial indebtedness (including the possibility that such indebtedness and related restrictive covenants may adversely affect Valvoline’s future cash flows, results of operations, financial condition and Valvoline’s ability to repay debt) and other liabilities; operating as a stand-alone public company; Valvoline’s ongoing relationship with Ashland; failure, caused by Valvoline, of the Stock Distribution to Ashland shareholders to qualify for tax-free treatment, which may result in significant tax liabilities to Ashland for which Valvoline may be required to indemnify Ashland; and the impact of acquisitions and/or divestitures Valvoline has made or may make (including the possibility that Valvoline may not realize the anticipated benefits from such transactions or difficulties with integration). These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including, without limitation, risks and uncertainties affecting Valvoline that are described in its most recent Form 10-K (including in Item 1A Risk Factors and “Use of estimates, risks and uncertainties” in Note 2 of Notes to Consolidated Financial Statements) filed with the SEC, which is available on Valvoline’s website at http://investors.valvoline.com/sec-filings. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although Valvoline believes that the expectations reflected in these forward-looking statements are reasonable, Valvoline cannot guarantee that the expectations reflected herein will be achieved. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by Valvoline or any other person that Valvoline will achieve its objectives and plans in any specified time frame, or at all. These forward-looking statements speak only as of the date of this presentation. Except as required by law, Valvoline assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. All forward-looking statements attributable to Valvoline are expressly qualified in their entirety by these cautionary statements as well as others made in this presentation and hereafter in Valvoline’s other SEC filings and public communications. You should evaluate all forward-looking statements made by Valvoline in the context of these risks and uncertainties. Regulation G: Non-GAAP Financial Information The information presented herein regarding certain financial measures that do not conform to generally accepted accounting principles in the United States (U.S. GAAP), including EBITDA, Adjusted EBITDA and Free Cash Flow, should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Valvoline has included this non-GAAP information to assist in understanding the operating performance of the company and its reportable segments. The non-GAAP information provided may not be consistent with the methodologies used by other companies. Information regarding Valvoline’s definition and calculations of non-GAAP measures is included in Valvoline’s most recent Form 10-K filed with the SEC, which is available on Valvoline’s website at http://investors.valvoline.com/sec-filings. Additionally a reconciliation of EBITDA and Adjusted EBITDA is included in the Appendix herein. 2
• 3.
  Who We Areand How We Win
• 4.
  4 Our Mission Statement ALUES OW ISION Weare building the world’s leading engine and automotive maintenance business by bringing Hands on Expertise for the benefit of customers every day.
• 5.
  5 Leading Engine andAuto Maintenance Brand (1) 24% Quick Lubes 51% Core North America 25% International 2016 Sales Contribution Notes: 1. All data shown are as of fiscal 2016 year-end 9/30. 2. By Volume in the United States DIY market in 2016 3. For a reconciliation of Adj. EBITDA to Net Income, see the Appendix to this presentation. 4. System-wide (i.e., company-owned and franchise) SSS growth. We have historically determined SSS growth on a fiscal year basis, with new stores excluded from the metric until the completion of the first full fiscal year in operation ~$2.0Bn In Corporate Sales 23.7% Adj. EBITDA Margin (3) Over 140 Countries With Valvoline Sales ~5,000 Employees Top 3 Premium Motor Oil Brand (2) 3 Winning Segments 10 Consecutive Years of Retail SSS Growth (4) 1,068 Valvoline Instant Oil Change Units Best-in-class Retail Model
• 6.
  6 Our Key Driversto EBITDA Growth Our Strong Cash Flow Profile ● Mix shift towards premium products: ~45% in 2016 from ~31% in 2011 (1) ● 10 Consecutive years of SSS growth in VIOC stores (2) ● Consistent volume and profit growth in international markets ● Proactive product pricing and raw material cost management Growth in Adj. EBITDA and Adj. EBITDA Margins (3)(4) $MM; % $252 $275 $342 $369 $421 $457 12.8% 13.5% 17.1% 18.1% 21.4% 23.7% 2011 2012 2013 2014 2015 2016 Adj. EBITDA Adj. EBITDA Margin Notes: 1. U.S. branded lubricants 2. Systemwide (i.e. company-owned and franchised) SSS growth. We have historically determined SSS growth on a fiscal year basis, with new stores excluded from the metric until the completion of the first full fiscal year in operation 3. For a reconciliation of Adj. EBITDA to Net Income, see the Appendix to this presentation 4. All full-year data shown in this presentation are assumed to be as of fiscal year-end 9/30 unless otherwise noted
• 7.
  7 Our Roadmap forSuccess: Valvoline’s Investment Highlights Iconic Brand With Premium Products 1 Strong and Growing Quick Lube Channel 3 History of Innovation 5 International Growth 4 Independent, Focused Organization 6 Unique Multi- Channel Route to Market 2 Strong Free Cash Flow Generation 7
• 8.
  8 “I think thedelivery system to the franchisees is bar none the best around. They’re really willing to grow their business and make yours better at the same time.” Andrew Slattery, President, Quality Automotive Services, Inc., Charlotte, NC. 35 Valvoline Instant Oil Change stores “I have used Valvoline for years and will continue to do so until the casket drops down on me…because it’s flat out the best.” Kdg 380 - Yelp We are Recognized as a Premium Brand Across Automotive Channels 1 “Valvoline represents quality we can count upon to exceed every need our customers need now and in the future.” Daniel Cohen. Central American Distributor “I will never go anywhere else ever again!” Allison B - Yelp “The bottom line for any installer is that you need to be moving oil. With Valvoline, my staff is confident in their ability to do that.” Ken Smith, Owner & President Automotive Standards “Valvoline has been a trusted partner of NAPA Auto Parts for nearly 80 years.” Dan Askey, President NAPA
• 9.
  9 Core North America 51% Quick Lubes 24% International 25% Do-It-Yourself (DIY) Do-It-For-Me (DIFM) Commercial andIndustrial (C&I) VIOC Express Care Distributors Direct Sales OEMs Our Brand Sells Across Uniquely Diverse Routes to Market 2 Note: 1. Represents fiscal 2016 sales contribution
• 10.
  10 Our Quick LubesBusiness Consistently Drives Growth and Profitability 3 Notes: 1. System-wide (i.e., company-owned and franchised) stores 2. We have historically determined same-store sales growth on a fiscal year basis, with new stores excluded from the metric until the completion of their first full fiscal year in operation 3. Company estimates for total DIFM (quick lubes) oil changes for 2015 in North America Direct-to-Consumer Relationship Large Market with Room to Capture Share Consistent Growth in Average Sales Per Store (1)(2) Avg. Sales per Store ($K) ● Strong unit economics ― Company–owned operations provide strong earnings ― Franchised operations provide high returns on capital ― Mix of company–owned and franchised operations lead to faster growth opportunities ● Brand “halo effect” from product to services ● Highly attractive franchise base ● Unique, vertically integrated model 550 579 613 649 672 713 738 774 824 882 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Average SSS:4.9% 15MM Quick Lubes ~100MM (3) Oil changes in quick Lubes market ~450MM Total oil changes last year
• 11.
  11 Our International StrategyTargets the Large and Growing Markets, Including India, China and Latin America 4 Latin America • Recent rapid growth • Aggressive new channel development • Expanding beyond passenger car products India • Strong C&I market • Very strong channels • Cummins JV • Changing emission rules • Good C&I OEM penetration China • Second largest passenger car market • Rapidly changing emission rules • Growing, consolidating DIFM channel • Good OEM penetration Notes: 1. Includes unconsolidated JV’s 2. Emerging Markets consist of all countries outside of the U.S., Canada, Australia and Europe Europe • Stable cash flow generator • Moderate growth from channel extensions Australia / Pacific • Leading market share • Strong cash flow generator 67% Emerging Markets (2) FY 2016 Sales Breakdown (1) 16 % 18 % 16 % 23 % 7% 18 % 3% Europe Australia / Pacific China India Latin America Valvoline Emerging Markets Sales Volume (1) (2) (MM Gal) 20 40 60 2009 2010 2011 2012 2013 2014 2015 2016 CAGR of 10%Rest of Asia MEA
• 12.
  12 Our 150-Year TrackRecord of Innovation Races On 5 Dr. John Ellis discovered the lubricating properties of crude oil Valvoline for combat vehicles during WWII Valvoline All-Climate Motor Oil ‘with revolutionary Chemaloy Additives’ is introduced Introduction of Valvoline Racing Valvoline acquires Rapid Oil Change Introduction of DuraBlend, the first synthetic blend Introduction of MaxLife, designed for aging cars Introduction of the environmentally friendly NextGen Launch of the Pro-V Racing line C&I launches new Grease Breakthrough Viscosity Delivery System
• 13.
  13 A Newly IndependentOrganization Focused on Valvoline’s Unique Growth Opportunities 6 Opportunity to focus on growth objectives and invest in Quick Lubes and International Further enables a unified culture with single Valvoline focus Customer-centric operations with central support infrastructure tailored to our needs Identify and deploy capital into our growth opportunities
• 14.
  14 Strong Cash FlowGeneration Similar to Other Branded Consumer Peers, Valvoline has a Robust Cash Flow Generation Profile, Even After Greater Growth Capex (1) 7 Auto Retail 75% Branded Consumer 88% Notes: 1. Cash Flow Conversion = (EBITDA – Capex) / EBITDA, 2016; shows net cash flow conversion by group median based on publically available information. 2. Excludes pension related income and separation related costs 86% (2)
• 15.
  Macro Drivers InfluencingOur Business
• 16.
  16 Solid Fundamentals andShifting Demand are Increasing Profit Pool in U.S. Increasing Demand for Synthetic Grades (1) % 27 33 36 42 51 75 0 20 40 60 80 100 2011 2012 2013 2014 2015 2020E Model Years Increasing Vehicle Ages (1) 9 9 10 10 10 10 11 12 12 0 3 6 9 12 15 2001 2005 2008 2011 2015 Avg. Age of Car and Light Truck on the Road—Age (in Years) Greater Vehicle Use Offsetting Longer Drain Intervals Growth in U.S. Vehicles on the road 1.5% CAGR '11-15 Avg drain interval in U.S. lengthening by 1.1% CAGR '11-15 Growth in U.S. Miles Driven 1.5% CAGR '11-15 Note: 1. Internal estimates based on calendar-year data from IHS Automotive.
• 17.
  17 26% 7% 1%15%18% 13% 8% 12% 15% 4% 1% 20% 30% 15% 9% 6% Global DemandQuickly Modernizing China 407MM Gal. India 91MM Gal. Australia 33MM Gal. AP-Other 516MM Gal. S. America 247MM Gal. MEA 170MM Gal. Total PC Lube Volume: 2.1B Gal. Total Market Value: >$17 Bn (4) (2) 0 2 4 6 8 10 AP N.America Europe MEA S.America Global Synthetic Semi-Synthetic Conventional Total Global PC (1) Lubricant Demand by Region Global PC (1) Demand Growth by Product Type, 2013 – 2023 CAGRs N. America 804MM Gal. CAGR (%) Note: 1. PC = Passenger Car Shift to Modern Technology Europe 391MM Gal. Global C&I Lubricant Demand by Region China 1,032MM Gal. India 257MM Gal. Australia 36MM Gal. AP-Other 576MM Gal. N. America 693MM Gal. Europe 517MM Gal. S. America 315MM Gal. MEA 454MM Gal. Total C&I Lube Volume: 3.8B Gal. Total Market Value: >$30 Bn ● Mature markets moving towards premium products to drive fuel economy gains ● Less mature markets changing rapidly to latest emissions standards, driving the need for higher performance lubricants Source: Kline
• 18.
  18 Sourcing and PricingStrategies to Manage Oil Price Fluctuations Channels Price Change Drivers Average Lag Market Based DIY/Installer Major base oil changes, competitive changes, retail pricing, Valvoline brand strength 60–120 days Index Based Installer (national/regional accounts), VIOC Franchisees Posted base oil indices 45 days Private Label/Other DIY/Warehouse Distributor, OEM, Other Major base oil changes 30 - 60 days Sourcing ● Improved pricing ● Better terms Pricing Long Base Oil Market Expected to Continue Through 2020 2000 2005 2010 2015 2020 Global base oil supply & demand (B gal) Source: Polk and Experian data, internal estimates 60% 40% Valvoline Cost Components Base Oil Additives, packaging, and operations Demand Supply
• 19.
  Segment Overview
• 20.
  20 Core North America:Overview • Top-5 retailers account for ~90% of the business • Quick lubes, auto services centers, and car dealerships • Direct and distributor sales • Diverse set of national, regional, and small accounts • Full spectrum of on and off- road customers • Trucking, bus, refuse, construction, mining, and other customers “Do-It-Yourself” (“DIY”) “Do-It-For-Me” (“DIFM”) Commercial & Industrial (“C&I”) ~50% Revenue ~50% Revenue
• 21.
  21 $1.77 $1.85 $2.19 $2.25 FY2013FY2014 FY2015 FY2016 $173 $181 $217 $228 15.6% 16.3% 20.5% 23.3% FY2013 FY2014 FY2015 FY2016 Core North America: Financial Highlights CAGR: 1.0% Volume (MM Gallons) EBITDA ($MM) and EBITDA Margin (%) (1) EBITDA (1) / Gallon Revenue ($MM) $1,107 $1,114 $1,061 $979 FY2013 FY2014 FY2015 FY2016 98 98 99 101 FY2013 FY2014 FY2015 FY2016 Note: 1. For a reconciliation of EBITDA to Net Income, see the Appendix to this presentation
• 22.
  22 • Brand strengthdrives consumers to retailers and installers across Core North America and commands a premium price, delivering strong customer margin Brand Strength Core North America: Brand Strength and Support for Customers Drive Business Support for Customers • Marketing creates excitement with consumers and store associates • Category management serves as an unbiased strategic resource DIY • Training teaches staff skills on product usage, product selection and the benefits of premium products • Digital marketing and customer support capabilities drive consumer traffic DIFM
• 23.
  23 Quick Lubes: OverviewValuePropFootprint Typical Perf. •Turnkey management system • Proprietary tools • Dedicated support Franchise • Stores: 729 • 72 franchisees • 15 year agreement • OCPD(1,2): ~38 • Store Sales: ~$870k • Royalty: ~4% Product Sales + Royalties • Premium branded sign package – Express Care • Field training resources Independent Operators • Stores: 353 • 212 independent operators • 5-10 year agreement • OCPD(1,2): ~22 Product Sales • “Hands-on” expertise • Proving ground for QL toolbox • Highest generator of cash Company-Owned • Stores(1): 347 • 3,300+ store employees • 15+ year lease terms • OCPD(1,2): ~42 • Store Sales: ~$915k Product Sales + Operating Income Note: 1. Store counts as of quarter-end FY17 Q1; OCPD as of year-end FY16 2. OCPD = Oil Changes per Day, 307 Sales Days Basis
• 24.
  24 $5.31 $5.94 $6.17 $6.70 FY2013 FY2014FY2014 FY2016 $85 $95 $111 $134 24.7% 25.7% 28.1% 29.3% FY2013 FY2014 FY2015 FY2016 $344 $370 $394 $457 FY2013 FY2014 FY2015 FY2016 Revenue ($MM) Quick Lubes: Financial Highlights EBITDA ($MM) and EBITDA Margin (%) (1) EBITDA (1) / Gallon Volume (MM Gallons) 16 16 18 20 FY2013 FY2014 FY2014 FY2016FY2015 FY2015 Note: 1. For a reconciliation of EBITDA to Net Income, see the Appendix to this presentation
• 25.
  25 5.8% 4.4% 6.8% 4.5% 2.6% 2.7% 2.1% 5.2% 7.7% 7.5% 2007 20082009 2010 2011 2012 2013 2014 2015 2016 Quick Lubes: Our Superior VIOC Business Model Operating stores strengthens business model performance ● Point of Sale System ● SuperPro Management System ● Labor and Inventory Management Proprietary Tools ● Core programs generate ~6 month payback ● Customer database enabled ● Database and Digital platforms driving car count growth Marketing Platforms ● Overall customer satisfaction 4.6 of 5 stars ● Customer retention over 70% ● #1 in best use of Voice of the Customer (3) Customer Experience ● Improved Safety Total Recordable Rate over 50% ● Reduced turnover by over 50% ● #65 on Training magazine’s Training Top 125 Talent Ten Consecutive Years of SSS Growth (1)(2) Notes: 1. System-wide (i.e., company-owned and franchise) stores 2. We have historically determined same-store sales growth on a fiscal year basis, with new stores excluded from the metric until the completion of their first full fiscal year in operation 3. International Quality Productivity Center (2016 CCW Awards) Average of 4.9% FY17 Q1 YoY SSS: +9.0% excluding estimated impact of weather and extra sales day, SSS ~ 7%
• 26.
  26 International: Overview Lube Salesby Product - 2016 Operating Profit by Region – 2016 (1) ● China and India represent the world’s largest and third largest lube markets, respectively ● Valvoline sells to customers in more than 140 countries ● In Heavy Duty, Valvoline utilizes both JVs (e.g., Cummins India and China) and relationships with OEMs to accelerate growth ● Many markets are highly fragmented, and ongoing consolidation provides significant opportunities to expand share ● Valvoline’s focus on markets such as China, India, and Mexico has resulted in annual volume growth rates ranging from high-single digits to mid-teens in these markets ● Environmental improvement is driving all markets up the tech curve 49%51% Commercial & Industrial (C&I) Passenger Car Note: 1. Excludes Lexington administrative expenses; excludes one-time JV equity impairment and certain unallocated corporate costs 13% 1% 24% 17% 5% 13% 3% 12% 12% China Ex JV Latin America ex Mexico India JV Europe MEA AustPac China JV Asia ex India JV Mexico
• 27.
  27 International: Financial Highlights ConstantCurrency Impact Note: 1. For a reconciliation of Adj. EBITDA to Net Income, see Appendix to this presentation As Reported Value $584 44 48 50 53 FY2013 FY2014 FY2014 FY2016 Volume (MM Gallons) FY2015 Adj. EBITDA ($MM) and Adj. EBITDA Margin (%) (1) Adj. EBITDA (1) / Gallon $73 $84 $84 $79 $2 $10 $14 13.4% 15.2% 16.2% 16.0% FY2013 FY2014 FY2015 FY2016 $1.66 $1.75 $1.68 $1.49 -0.25 0.25 0.75 1.25 1.75 2.25 FY2013 FY2014 FY2014 FY2016FY2015 Revenue ($MM) $545 $557 $514 $493 $8 $67 $91 0 100 200 300 400 500 600 FY2013 FY2014 FY2014 FY2016FY2015 $1.75 (1) $565 $581 $94 $93 $0.21 $0.26 $1.89$86 $1.79 $.04 (1)
• 28.
  28 International: Consistent GrowthOver Last Ten Years MM Gal Volume Growth by Geography (1) Strategies for Growth 2006 2011 2016 Mexico 2006 2011 2016 China 2006 2011 2016 India 2006 2011 2016 Other Two thirds of volume growth has come from 3 markets 2 3 11 35 3 7 20 45 5 12 23 50 0 10 20 30 40 50 60 ● Build strong channels ―Add distributors ―Build direct business in key focus markets ● Build differentiated PC and C&I platforms ―Build the brand – “Hands on Expertise” ―Develop unique, “ownable” capabilities ―“Own the mechanic” ● Expand OEM relationships ―Ready made channels ―Unique products ―Custom value proposition Note: 1. Includes unconsolidated JVs
• 29.
  29 We Have aDisciplined Approach to Value Creation ● Organic growth ● Opportunistic acquisitions focused on: − Quick Lubes − Tuck-in, complementary, non-lube product lines ● Maintain attractive dividend ● Evaluate value-creating share repurchase opportunities Strong, Stable EBITDA Growth ● Active management of gross margin ● Value enhancing quick lube expansion ● Disciplined approach to managing costs High Cash Conversion ● Disciplined working capital management ● Systematic approach to Capital Expenditure spending ● Deploy capital to high return projects Disciplined Capital Allocation Growth Opportunities ● Market share gains driven by digital investments ● Expansion of quick lube platforms ● Disproportionate gain in premium synthetics ● Expand and grow international presence, especially in Emerging Markets1 Notes: 1. Emerging Markets consist of all countries outside of the U.S., Canada, Australia and Europe
• 30.
  1Q17 Earnings Materials
• 31.
  31 First Quarter Results •Reported EPS of $0.35 up $0.03 YoY • Operating income up 25% to $120 million • Net income up 11% to $72 million • Cash from operating activities of $88 million Notes on reporting and year-over-year (YoY) impacts Separation-related items – New capital structure adds interest expense this year – Transfer of pension plans drive increase in YoY pension income Key items – OPEB 2 remeasurement based on January 1 plan changes – Separation costs EBITDA from operating segments1 – Segment operating income (Core North America, Quick Lubes, and International) plus depreciation and amortization – Excludes certain corporate items, primarily pension income 1 For a reconciliation of EBITDA to Net Income, see the Appendix to this presentation 2 Other postemployment benefits
• 32.
  32 Solid Results inQ1 • Adjusted1 EPS of $0.35 up 9% • Volume growth of 7% • EBITDA from operating segments1 increases 8% Progress on Core Priorities 1) Drive business results in each segment; growing market share and unit margins  Volume growth across all three segments  System-wide VIOC same-store sales growth of 9%  Protecting margins 2) Grow retail presence, both organically and inorganically  Store counts in Quick Lubes segment increased  Adding 28 quick lube stores from Time-It Lube  On track to add more company-owned and franchised stores in 2018 3) Invest in digital marketing and infrastructure  Enabling greater customer reach and sales force efficiency 4) Establish a strong culture of creating value for shareholders  Returning capital to shareholders via dividend 1 For a reconciliation of EBITDA to Net Income, see the Appendix to this presentation
• 33.
  33 Operating Segment Highlights • Volumeincreased in all segments • EBITDA from operating segments1 grows 8% to $109 million Core North America Volume up 2%; Premium Mix up 410 bps; EBITDA down 5%  Continued volume growth, driven by share gains and promotions  Managing raw material cost pass-through Quick Lubes SSS up 9%; EBITDA up 26%; Added 120 VIOC units YoY  Strong same-store sales growth of 9% from increased transactions  Former Oil Can Henry’s stores contributed to unit and EBITDA growth International Volume up 12%; Emerging markets up 16%; EBITDA up 24%  Strong volume growth across both mature and emerging markets driven by enhanced market penetration  Equity and royalty income contributed to EBITDA due to improved JV results 1 For a reconciliation of EBITDA to Net Income, see the Appendix to this presentation
• 34.
  34 ($ in millions) Preliminary Resultsfrom Operating Segments 2016 2015 Lubricant gallons(in millions) 43.1 40.4 7 % Sales 489$ 456$ 7 % Gross profit 185$ 174$ 7 % SG&A 95$ 87$ 9 % Equity and other income 10$ 5$ 100 % Operating income 100$ 92$ 9 % Depreciation and amortization 9$ 9$ - % Earnings before interest, taxes, depreciation and amortization (EBITDA) fromOperating Segments1 109$ 101$ 8 % EBITDA as a percent of sales 22.3 % 22.1 % 20 bp Total Adjusted 1 Results Adjusted1 EBITDA in Unallocated & Other 18$ 4$ 350 % Total Adjusted1 EBITDA 127$ 105$ 21 % Fiscal First Quarter Three months ended Dec. 31, Change 101 109 Factors affecting year-over-year EBITDA from Operating Segments1 (3) 10 (6) 4 Q1 2016 Vol/ Mix Other2 Margin SG&A Q1 2017 1 For a reconciliation of EBITDA and Adjusted EBITDA to Net Income, see the Appendix to this presentation 2 Other includes primarily equity, royalty and other income Adjusted1 Results Acq 3
• 35.
  35 Fiscal 2017 Q1Corporate Items • Effective tax rate of 34.5% • Capital expenditures totaled $9 million • Free cash flow1 generation of $79 million – YoY increase of $44 million – Ending cash balance of $236 million • Total debt of $740 million – Including $75 million of short-term debt related to our new A/R securitization facility • OPEB remeasurement led to a gain of $8 million – Net pension and OPEB obligations of ~$875 million • Recorded $6 million of separation-related costs 1 Free cash flow is defined as cash flows provided by operating activities less capital expenditures. Cash flows provided by op erating activities of $88 million less capital expenditures of $9 million gives free cash flow of $79 million
• 36.
  36 Fiscal 2017 Outlook CurrentExpectations Updated Outlook Prior Outlook Operating Segments • Lubricant gallons 3-5% 2-3% • Revenues 4-7% 3-5% • New stores • VIOC company-owned 31-33 28 acquired, 3-5 new builds 5-10 new builds • VIOC franchised no change 15-25 • VIOC same-store sales 5-7% 3-5% • EBITDA from operating segments $440-$455 million $435 million at mid-point of previous range Corporate Items • Pension income $70 million $66 million • One-time separation-related expenses no change $25-$30 million • Diluted adjusted earnings per share $1.36-$1.43 $1.31-$1.41 • Capital expenditures no change $70-$80 million • Free cash flow $130-$150 million $90-$100 million1 1 Free cash flow is defined as cash flows provided by operating activities less capital expenditures
• 37.
  37 Q1 Fiscal 2017Summary Great start to the fiscal year Progress on Core Priorities Confident in delivering updated 2017 outlook
• 38.
  38 38 Core North America ($in millions) Preliminary 2016 2015 Lubricant gallons(in millions) 24.1 23.6 2 % Sales 237$ 241$ (2) % Operating income 51$ 53$ (4) % Depreciation and amortization 3$ 4$ (25) % Earnings before interest, taxes, depreciation and amortization (EBITDA)1 54$ 57$ (5) % EBITDA as a percent of sales 22.8 % 23.7 % (90) bp Three months ended Dec. 31, Change Fiscal First Quarter 57 54 Factors affecting year-over-year EBITDA (6) 3 (1) 1 Q1 2016 Vol/ Mix Other2 Margin SG&A Q1 2017 Acq 0 1 For a reconciliation of EBITDA to Net Income, see the Appendix to this presentation 2 Other includes primarily equity, royalty and other income
• 39.
  39 39 Quick Lubes ($ inmillions) Preliminary 2016 2015 Lubricant gallons(in millions) 5.3 4.6 15 % Sales 127$ 100$ 27 % Operating income 29$ 23$ 26 % Depreciation and amortization 5$ 4$ 25 % Earningsbeforeinterest, taxes, depreciation and amortization (EBITDA) 1 34$ 27$ 26 % EBITDA asapercent of sales 26.8 % 27.0 % (20) bp Three months ended Dec. 31, Change Fiscal First Quarter 27 34 Factors affecting year-over-year EBITDA 3 3 (4) 2 Q1 2016 Vol/ Mix Other2 Margin SG&A Q1 2017ACQ 3 1 For a reconciliation of EBITDA to Net Income, see the Appendix to this presentation 2 Other includes primarily equity, royalty and other income
• 40.
  40 40 International ($ in millions) Preliminary 20162015 Lubricant gallons(in millions) 13.7 12.2 12 % Sales 125$ 115$ 9 % Operating income 20$ 16$ 25 % Depreciation and amortization 1$ 1$ - % Earningsbeforeinterest, taxes, depreciation and amortization (EBITDA) 1 21$ 17$ 24 % EBITDA asapercent of sales 16.8 % 14.8 % 200 bp Three months ended Dec. 31, Change Fiscal First Quarter 17 21 Factors affecting year-over-year EBITDA 0 4 (1) 0 1 Q1 2016 Vol/ Mix Other 2 Margin SG&A Q1 2017FX Acq 0 1 For a reconciliation of EBITDA to Net Income, see the Appendix to this presentation 2 Other includes primarily equity, royalty and other income
• 41.
  41 Investment Thesis Strong ShareholderReturns Premium Brand and Marketing Team of Hands On Experts Clear Strategies and Disciplined Financial Management
• 42.
  Appendix A: Supplemental FinancialInformation
• 43.
  43 Key Items AffectingIncome ($ in millions, except per share data) Preliminary 2017 OPEB remeasurement 8$ 8$ 5$ 0.02$ Separation Costs (6)$ (6) (4) (0.02) Total 2$ 2$ 1$ 0.00$ 2016 -$ -$ -$ -$ Total -$ -$ -$ -$ Pre-tax After-tax Earnings per Share First Quarter Impact Total Operating Income
• 44.
  44 Historical EBITDA andAdj. EBITDA Bridges ($ in millions) 2011 2012 2013 2014 2015 2016 1Q17 Net income $110 $114 $246 $173 $196 $273 $72 Income tax expense 52 58 135 91 101 148 38 Net Interest and other financing expense - - - - - 9 10 Depreciation and amortization 38 36 36 37 38 38 9 EBITDA $200 $207 $416 $302 $335 $468 $129 Adjustments Losses (gains) on pension and other postretirement plans re-measurement 52 68 (74) 61 46 (18) (8) Net Loss on Divestiture - - - - 26 1 - Impairment on Equity Investment - - - - 14 - - Restructuring/Separation Costs - - - 6 - 6 6 Adjusted EBITDA $252 $275 $342 $369 $421 $457 $127
• 45.
  45 Glossary of Terms C&I CarParc DIFM DIY DSR EHS HD MC OCPD ODI Commercial & Industrial Total Number of Cars in a Region or Market Do-It-For-Me Do-It-Yourself Distributor Sales Rep Environment, Health and Safety Heavy Duty Motorcycle Oil Changes per Day Oil Drain Interval OEM OE 4S PC PCMO PV SSS VIOC VIOCF VLS VPS Original Equipment Manufacturer Original Equipment Dealer; 4S model offers sales, showrooms, services and spare parts all under one roof Passenger Car Passenger Car Motor Oil Passenger Vehicles Same Store Sales Valvoline Instant Oil Change Valvoline Instant Oil Change Franchising Valvoline Learning Solutions Valvoline Professional Series